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
2023
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.
1
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2023 AND 2022
(EUR Thousands)
ASSETS
Note
31/12/2023
31/12/2022 (*)
Cash, cash balances at central banks
Financial assets held for trading
Derivatives
Non-trading financial assets measured at fair value through profit or loss
Equity instruments
Debt securities
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 securities
Financial assets at amortized cost
Debt securities
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 for insurance contracts
Assets under 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 intangible assets
Tax assets:
Current tax assets
Deferred tax assets
Other assets
Inventories
Other assets
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
11,278,533
6,826,225
323,898
323,898
494,664
494,664
1,543
41
844
658
—
174,863
23,526
151,337
1,876
45
1,444
387
—
748,469
21,961
726,508
121,125,887
4,189,837
116,936,050
—
1,428,325
115,507,725
113,094,548
6,185,061
106,909,487
19,736
390,306
106,499,445
390,497
1,131,071
(82,622)
825,970
325,151
500,819
—
—
4,301,096
4,295,156
370,591
3,924,565
5,940
261,736
2,253,001
1,715,714
537,287
1,542,173
866,579
675,594
1,147,368
5,437
1,141,931
(709,133)
724,777
281,915
442,862
—
—
3,163,609
3,163,609
367,958
2,795,651
—
264,104
2,097,941
1,712,426
385,515
1,675,146
1,116,612
558,534
985,164
8,880
976,284
65,281
143,347,488
45,337
130,279,694
(*) They are presented solely and exclusively for comparative purposes.
Notes 1 to 47 and Annexes I to V included in the attached consolidated report form an integral part of the consolidated balance sheet as at 31 December 2023.
2
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2023 AND 2022
(EUR Thousands)
LIABILITIES
Financial liabilities held for trading
Derivatives
Financial liabilities at fair value through profit or loss
Financial liabilities at amortized cost
Deposits
Central banks
Credit institutions
Customers
Debt securities in issue
Other financial liabilities
Memorandum items:: Subordinate liabilities
Derivatives – Hedge accounting
Changes in the fair value of covered items in a hedged portfolio
interest rate risk
Liabilities for insurance contracts
Liabilities for reinsurance contracts
Provisions
Pensions and other defined post-employment benefit obligations
Other long-term employee pay
Procedural issues and pending tax litigation
Commitments and guarantees granted
Remaining provisions
Tax liabilities
Current tax liabilities
Deferred tax liabilities
Other liabilities
Liabilities included in disposal groups of items that have been classified as held for sale
Total liabilities
Own funds
Capital
Called up Share capital
Memorandum items: uncalled: Capital
Share premium
Equity instruments issued other than capital
Equity component of hybrid securities
Other equity instruments issued
Other
Accumulated earnings
Revaluation reserves
Other reservations
Accumulated reserves or losses of investments in joint and associated ventures
Others
(-) 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
Pro-memory: Exposures out of balance
Loan commitments granted
Financial guarantees granted
Other commitments granted
Note
9
17
17
18
19
20
17, 18 and 19
29
11
21
22
16
23
24
23
25
25
4
26
26
27
28
28
28
31/12/2023
343,594
343,594
—
123,391,128
69,985,114
5,465,555
15,675,219
48,844,340
51,605,223
1,800,791
2,000,129
440,267
—
—
—
667,458
453,105
30,282
37,066
21,058
125,947
1,911,989
285,510
1,626,479
2,214,372
—
128,968,808
12,536,885
5,638,639
5,638,639
—
1,139,990
1,200,000
—
1,200,000
—
3,649,396
—
4,919
524,365
(519,446)
—
1,003,933
(99,992)
(678.242)
(50,982)
(627,260)
2,520,037
2,445
2,517,592
14,378,680
143,347,488
25,642,721
24,299,144
90,030
1,253,547
31/12/2022 (*)
466,031
466,031
—
111,077,230
70,848,070
17,900,641
11,620,202
41,327,227
38,855,760
1,373,400
1,514,223
193,787
—
—
—
610,875
414,385
31,488
10,089
28,010
126,903
1,864,753
581,279
1,283,474
1,874,830
—
116,087,506
12,219,470
5,638,639
5,638,639
—
1,139,990
1,200,000
—
1,200,000
—
3,629,337
—
20,847
439,882
(419,035)
—
1,242,860
(652,203)
(582,107)
(33,865)
(548,242)
2,554,825
(3,715)
2,558,540
14,192,188
130,279,694
27,052,044
25,756,041
84,997
1,211,006
(*) They are presented solely and exclusively for comparative purposes.
Notes 1 to 47 and Annexes I to V included in the attached consolidated report form an integral part of the consolidated balance sheet as at 31 December 2023.
3
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
CORRESPONDING TO THE COMPLETED ANNUAL FINANCIAL YEARS
31 DECEMBER 2023 AND 2022
(EUR Thousands)
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
Note
30
31
32
33
34
35
35
35
35
35
36
37
38
38
39
13 and 15
21
10
40
41
3
42
22
27
4
4
Income / (Expenses)
31/12/2023
31/12/2022 (*)
6,431,533
7,129
5,727,842
696,562
(3,006,380)
3,425,153
243
77,075
1,124,127
(394,803)
47,259
(2,265)
—
—
95,860
(4,366)
578,502
(419,380)
—
—
4,527,405
(1,884,565)
(955,293)
(929,272)
(208,791)
(55,108)
(683,873)
60
(683,933)
—
(13,654)
169
(5,337)
(8,486)
82,133
38,876
(1,677)
1,800,746
(479,596)
1,321,150
—
1,321,150
317,217
1,003,933
0.48
0.48
4,195,233
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)
—
—
4,646,491
(1,756,232)
(884,182)
(872,050)
(189,183)
(20,467)
(451,931)
285
(452,216)
—
(21,859)
(985)
(11.647)
(9,227)
1,202
—
(128)
2,207,893
(606,270)
1,601,623
—
1,601,623
358,763
1,242,860
0.62
0.62
4
(*) 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 RECOGNIZED INCOME AND EXPENDITURE FOR
THE ANNUAL YEARS ENDED 31 DECEMBER 2023 AND 2022
(EUR Thousands)
Profit or loss after tax
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
(*) Presented for comparison purposes only
Note
31/12/2023
31/12/2022 (*)
1,321,150
1,601,623
26
22
26
26
26
26
22
(100,867)
(25,247)
(33,824)
—
4
(2,354)
10,927
(75,620)
97,709
97,709
—
—
(131,637)
(137,250)
5,613
—
(85,458)
(70,512)
(14,946)
—
—
1,612
1,672
(60)
—
—
—
—
—
25,915
16,239
1,220,283
320,379
899,904
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)
—
—
—
—
—
(18,231)
(15,486)
1,659,617
352,891
1,306,726
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
2023.
5
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED TOTAL STATEMENTS OF CHANGES IN EQUITY FOR THE ANNUAL YEARS
COMPLETED ON 31 DECEMBER 2023 AND 2022
(EUR Thousands)
Sources of changes in equity
Capital
(Note 23)
Bonus of
issuance
(Note 24)
Equity
instruments
issued other
than capital
Other equity
instruments
Profits
accumulated
(Note 25)
Revaluation
reserves
Others
reserves
(-) Own
shares
Profit or loss
attributable to
shareholders
of the parent
(-)
Interim
dividends paid
Retained
earnings
Opening balance at 31-12-2022 (*)
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
Closing balance at 31-12-2023
5,638,639
—
—
5,638,639
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,638,639
1,139,990
—
—
1,139,990
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,139,990
1,200,000
—
—
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,629,337
—
—
3,629,337
—
20,059
—
—
—
—
—
—
(507,477)
—
—
—
—
527,536
—
—
—
3,649,396
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20,847
—
—
20,847
—
(15,928)
—
—
—
—
—
—
—
—
—
—
—
55,227
—
—
(71,155)
4,919
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,242,860
—
—
1,242,860
1,003,933
(1,242,860)
—
—
—
—
—
—
—
—
—
—
—
(1,242,860)
—
—
—
1,003,933
(652,203)
—
—
(652,203)
—
552,211
—
—
—
—
—
—
(99,992)
—
—
—
—
652,203
—
—
—
(99,992)
Non-controlling interests
(Note 27)
Total
Other
comprehensiv
e income
Other
—
—
2,558,540 14,192,188
—
—
2,558,540 14,192,188
1,220,283
317,217
(1,033,791)
(358,165)
—
—
—
—
—
—
—
—
—
—
—
—
(902,759)
(295,290)
—
—
—
—
—
—
—
—
—
(2,998)
(3,715)
—
—
(3,715)
3,162
2,998
—
—
—
—
—
—
—
—
—
—
—
2,998
(582,107)
—
—
(582,107)
(104,029)
7,894
—
—
—
—
—
—
—
—
—
—
—
7,894
—
—
—
(678,242)
—
—
—
2,445
(283,881)
(283,881)
—
—
152,849
224,004
2,517,592 14,378,680
(*) They are presented solely and exclusively for comparative purposes.
Notes 1 to 47 and Annexes I to V included in the attached consolidated report form an integral part of the total statement of changes in consolidated net worth for the financial year 2023.
6
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED TOTAL STATEMENTS OF CHANGES IN EQUITY FOR THE ANNUAL YEARS
COMPLETED ON 31 DECEMBER 2023 AND 2022
(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
Profit or loss
attributable to
shareholders
of the parent
(-)
Other
Interim
dividends paid
comprehensiv
e income
Non-controlling interests
(Note 27)
Total
Other
comprehensiv
e income
Other
Balance as of 31-12-2021 (*)
Effects of error correction
Effects of changes in accounting policies
Beginning of period balance at 01-01-
2022 (*)
Total overall income for the period
(Nota4)
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
Closing balance at 31-12-2022 (*)
5,638,639
—
—
5,638,639
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,638,639
1,139,990
—
—
1,139,990
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,139,990
1,200,000
—
—
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,174,689
—
—
1,174,689
1,242,860
(1,174,689)
—
—
—
—
—
—
—
—
—
—
—
(1,174,689)
—
—
—
1,242,860
(490,562)
—
—
(490,562)
—
(161,641)
—
—
—
—
—
—
(652,203)
—
—
—
—
490,562
—
—
—
(652,203)
(645,973)
—
—
(645,973)
63,866
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(582,107)
2,157
—
—
2,157
(5,872)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,715)
—
—
2,335,622 13,394,329
—
—
2,335,622 13,394,329
1,659,617
358,763
(861,758)
(135,845)
—
—
—
—
—
—
—
—
—
—
—
—
(788,040)
(135,837)
—
—
—
—
—
—
—
—
—
—
—
—
(8)
—
—
(73,718)
2,558,540 14,192,188
(*) They are presented solely and exclusively for comparative purposes.
Notes 1 to 47 and Annexes I to V included in the attached consolidated report form an integral part of the total statement of changes in consolidated net worth for the financial year 2023.
7
SANTANDER CONSUMER FINANCE, S.A. AND SUBSIDIARIES COMPOSING THE SANTANDER CONSUMER FINANCE GROUP
CONSOLIDATED CASH FLOW STATEMENTS
CORRESPONDING TO THE COMPLETED ANNUAL FINANCIAL YEARS
31 DECEMBER 2023 AND 2022
(EUR Thousands)
Note
31/12/2023
31/12/2022 (*)
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 FLOWS FROM INVESTMENT 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 FLOWS 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
6,970,387
1,321,150
1,967,556
208,791
1,758,765
(14,661,831)
110,069
331
—
581,880
(15,087,677)
(266,434)
18,702,946
(61,531)
—
18,249,458
515,019
(359,434)
(2,190,583)
(3,588,349)
(2,114,800)
(157,181)
(26,976)
(1,289,392)
—
—
1,397,766
505,719
—
46,600
841,204
4,243
—
(317,252)
(1,166,788)
(607,469)
(124,569)
—
—
(434,750)
849,536
585,280
—
—
264,256
(10,244)
4,452,308
6,826,225
11,278,533
(10,121,259)
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)
—
(21,309)
—
—
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
40,160
8,348,066
2,890,307
82,148
3,900,413
2,843,664
7, 8
6, 7, 10
13
14 and 15
12
3
14 and 15
3
17
19
23
2
(*) They are presented solely and exclusively for comparative purposes.
Notes 1 to 47 and Annexes I to V included in the attached consolidated report form an integral part of the consolidated statement of cash flows for the financial year 2023.
8
Santander Consumer Finance, S.A. And dependent companies that make up the Santander
Consumer Finance Group
Notes to the Consolidated Financial Statements for
the year ended 31 December 2023
1. Introduction, bases for presentation of consolidated annual accounts, principles of consolidation and other information
a) Introduction
Santander Consumer Finance, S.A. (The “Bank”), was established in 1963 with the name of “Banco de Fomento,
S.A.”. It is a private law entity subject to the regulations and regulations of banking entities operating in Spain,
which has its registered office in Avenida de Cantabria s/n, Edificio Dehesa, Boadilla del Monte, Madrid, where
you can consult the corporate statutes and other public information about the Bank. The Bank is registered in the
Official Register of Bank of Spain Entities under the code 0224.
Its corporate purpose is to receive funds from the public in the form of a deposit, loan, temporary transfer of
financial assets or other similar activities involving the obligation to repay them, applying them, on their own
account, to the granting of credits or operations of a similar nature. Likewise, as a holding company of a financial
group (Grupo Santander Consumer Finance, the “Group”), it manages and manages the portfolio of shares 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 annual accounts of
the Santander Group for the financial year 2022 were formulated by the Administrators of Banco Santander, S.A.,
at the meeting of its Board of Directors held on February 22, 2023, approved by its General Shareholders Meeting
held on March 14 , 2023 and deposited in the Mercantile Registry of Santander. The consolidated annual accounts
of Grupo Santander for the financial year 2023 were formulated on February 19, 2024 by its Administrators.
The Bank has one bank office located in Madrid, is not listed and, in 2023, it carried on most of its direct business
activities in Spain.
In addition, since December 2002, the Bank has been the head of a European group of entities, mainly financial,
that carry out commercial banking, consumer finance, operating and financial leasing, full-service service and
others. The Group has, as of December 31, 2023, 290 offices mainly distributed throughout the European
territory, 47 of them in Spain (311 offices as of December 31, 2022, 48 of them in Spain).
During 2020, a branch in Greece was established, once the relevant authorization was obtained, to finance
purchases of any type of consumer goods made by third parties, financial leasing, renting, and others.
During 2021, 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 give continuity to the activities that had been provided to
date.
During 2022 and after the merger of the Bank with its subsidiary Santander Consumer Banque, S.A., a branch has
been established in France in order to give continuity to the activities that have been provided to date.
As required by Article 21 of Royal Decree 84/2015, of 13 February, which develops Law 10/2014, of 26 June, on
the regulation, supervision and solvency of credit institutions, the list of the Group's agents as at 31 December
2023 is set out in annex IV.
1
b) Basis for presentation of consolidated annual accounts
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 the 2023 financial year of the Group have been drawn up by
the Bank’s Administrators (at its Board of Directors meeting of 20 February 2024) in accordance with the
provisions of the International Financial Reporting Standards adopted by the European Union, taking into account
Bank of Spain Circular 4/2017 and its subsequent amendments, as well as the commercial regulations applicable
to the Group, applying the principles of consolidation, accounting policies and valuation criteria described in Note
2, in such a way as to show the true image of the Group’s assets and financial position as at 31 December 2023
and the results of its operations, the recognised income and expenses, changes in equity and cash flows,
consolidated, which occurred in the financial year 2023. These consolidated annual accounts have been drawn up
from the accounting records maintained by the Bank and by each of the other entities within the Group, they
include the adjustments and reclassifications necessary to homogenize the accounting policies and valuation
criteria applied by the Santander Consumer Finance Group.
These notes to the consolidated annual accounts contain information in addition to that presented in the balance
sheet, in the profit and loss account, in the statement of recognized income and expenditure, in the statement of
changes in equity and in the statement of cash flows, all of them consolidated. It provides narrative descriptions
or disaggregation of such states in a clear, relevant, reliable and comparable manner.
The Group’s consolidated annual accounts for 2022 were approved by the Bank’s General Shareholders’ Meeting
held on March 14, 2023 and deposited in the Mercantile Registry of Madrid. The consolidated annual accounts of
the Group, those of the Bank and those of almost all the entities integrated in the Group for the financial year
2023 are pending approval by their respective General Shareholders Meetings. However, the Board of Directors
of the Bank understands that these annual accounts will be approved without significant changes.
Adoption of new rules and interpretations issued
During 2023 the following amendments already adopted by the European Union have entered into force:
•
IFRS 17 Insurance Contracts and Amendments to IFRS 17: New general accounting standard for insurance
contracts, including recognition, measurement, reporting and disclosure. Insurance contracts combine
financial and service delivery characteristics that, in many cases, generate variable long-term cash flows.
For the proper reflection of these, IFRS 17 combines the measurement of future cash flows with the
recording of the result of the contract during the period of provision of the service, it presents separately the
financial results of the results for the provision of the service and allows entities, by choosing an accounting
policy option, to recognize the financial results in the income statement or other comprehensive income.
Applicable since 1 January 2023 retrospectively.
The Group has carried out a project to implement the IFRS17 with all the entities of the Group and has
developed an accounting policy that establishes the accounting criterion for the registration of insurance
2
contracts. The Group has completed its analysis of the effects of this new standard without any tangible
equity impacts being identified in its consolidated financial statements.
Amendment to IAS 1 Presentation of financial statements: The amendment requires companies to disclose
material information about their accounting policies rather than their significant accounting policies. It shall
apply from 1 January 2023.
Amendment to IAS 8 Accounting policies, changes in accounting estimates and errors: The amendment
clarifies how to distinguish changes in accounting policies, generally retrospective, from changes in
accounting estimates, generally forward-looking. It shall apply from 1 January 2023.
•
•
• Modification to IAS 12 Income Tax:
i.
The amendment requires companies to recognize deferred tax on transactions that, at the time of initial
recognition, give rise to equal amounts of taxable and deductible temporary differences. In addition,
entities shall recognize deferred tax assets (to the extent that they are likely to be usable) and deferred
tax liabilities at the beginning of the first comparative period for all deductible and taxable temporary
differences associated with:
◦ Right-of-use assets and lease liabilities.
◦
Liabilities for decommissioning, restoration and the like, and the corresponding amounts
recognized as part of the acquisition cost of the related assets.
The cumulative effect of making these adjustments shall be recognized under the accrued gains
heading, or in another component of equity, as appropriate. It shall apply from 1 January 2023.
ii. The second amendment applies to taxes on profits arising from the tax law to implement the model
rules of Pillar II published by the Organization for Economic Cooperation and Development (OECD),
including the tax law that implements the qualifying national minimum supplemental taxes described
in those rules. The amendment includes the mandatory and temporary exception to the recognition and
breakdown of deferred tax assets and liabilities arising from these Pillar II model rules (applicable from
the date of publication of the amendment and with retroactive effect) and establishes additional
reporting requirements:
◦
◦
If the tax law has come into effect, the related tax expense will be disclosed separately.
If the tax law is enacted or substantially enacted but has not yet entered into force, reasonably
estimable qualitative and quantitative information will be disclosed to help users of the
financial information understand the entity’s exposure to the rules of the Pillar II model.
The Group applies the exception to recognition and disclosure of deferred tax assets and liabilities in
relation to Pillar II taxes, pursuant to the amendments to IAS 12. However, since the legislation of Pilar
II is not in force on the date of submission of these consolidated annual accounts, Grupo Santander
Consumer Finance does not have the corresponding exposure to current tax. However, at the end of
2023, there are geographies with tax laws for the implementation of the rules of the Pilar II model
substantially promulgated that have not entered into force.
From the application of the aforementioned amendments to the accounting standards and
interpretations, no significant effects have been derived in the consolidated annual accounts of Grupo
Santander Consumer Finance.
Finally, as of the date of preparation of these consolidated annual accounts, the following rules are in force, the
effective date of which is after December 31, 2023:
•
Amendment to IFRS 16 Leases: the lease liability on a leased sale requires a lessee-seller to subsequently
measure lease liabilities arising from a leaseback so that it does not recognize any amount for 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 profit or loss related to the partial or total termination of a lease. It shall apply retrospectively
from 1 January 2024.
3
•
Amendment to IAS 1 Presentation of financial statements: Considering non-current liabilities in which the
entity has the possibility of deferring payment in more than 12 months from the closing date of the
reporting period.
It also includes an additional amendment to IAS 1 on the classification of liabilities with covenants as current
or non-current, specifying that covenants to be met after the reporting date do not affect the classification
of liabilities as at that date; also requiring breakdowns on them.
They should be applied retrospectively in accordance with the normal requirements of IAS 8 Accounting
policies, changes in accounting estimates and errors. They shall apply from 1 January 2024
Finally, at the date of formulation of these consolidated annual accounts, the following rules were pending adoption
by the European Union whose effective dates of entry into force are after December 31, 2023:
•
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosure: Additional
disclosures are required for companies entering into supplier financing agreements. The purpose of the new
disclosures is to provide information on Supplier Finance Arrangements (SFA) that allows investors to assess
the effects on an entity’s liabilities, cash flows and exposure to liquidity risk. Those amendments shall apply
from 1 January 2024.
• Modification of IAS 21 Effects of Changes in Foreign Currency Exchange Rates: IAS 21 established the
requirements to be applied when there is a lack of temporary interchangeability between two currencies,
but did not give indications when this situation was not temporary. Given this scenario, IAS 21 has been
modified establishing the criteria to identify these situations, specifying how entities should estimate the
spot exchange rate, methodologies and data to be considered, as well as the associated breakdown
requirements. This amendment shall apply from the financial years beginning on 1 January 2025.
Grupo Santander Consumer Finance is currently analyzing the possible effects of these new rules and interpretations.
All accounting policies and measurement bases with a material effect on the consolidated financial statements for
2023 were applied in the preparation of these consolidated annual accounts.
Use of critical estimates
The consolidated results and the determination of the consolidated assets are sensitive to the accounting principles,
valuation criteria and estimates followed by the Administrators of the Santander Consumer Finance Group for the
preparation of the consolidated annual accounts.
The main accounting principles and policies and valuation criteria are set out 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 and disposal group that have been classified as held for sale, financial assets at amortized cost,
investments in joint and associated ventures, 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 post-employment pay liabilities and commitments and
other long-term commitments held with employees (see Notes 2-r, 2-s and 21);
4
3. The useful life of tangible and intangible assets (see Notes 13 and 15);
4. Valuation of consolidation trading funds (see Note 14);
5. Calculation of provisions and consideration of contingent liabilities (see Note 21);
6. The fair value of certain unlisted assets and liabilities (see notes 6, 7, 8, 9, 10, 11, 12, 17, 18 and 19);
7. Recoverability of deferred tax assets and corporate tax expenditure (see Notes 2-t and 22);
8. The fair value of identifiable assets acquired and liabilities assumed in business combinations according to
IFRS 3 (see Note 3).
To update the previous estimates, the Group management has taken into account the current macroeconomic
scenario resulting from the complex geopolitical situation, as well as inflation and interest rate levels and supply
chain difficulties, what is generating some impact on economic evolution and is a focus of follow-up, and that
generates uncertainty in the Group’s estimates. Therefore, the Group management has assessed in particular the
uncertainties caused by the current environment in relation to credit, liquidity and market risk, taking into account
the best available information, in order to estimate the impact on the impairment provisions of the credit portfolio,
in interest rates, and in the valuation of debt instruments, developing in the notes the main estimates made during
the period ended December 31, 2023 (see Notes 7,10,14 and 47).
Although these estimates have been made on the basis of the best information available at the end of the 2023
financial year considered updated information at the date of formulation of these consolidated annual accounts,
it may be that events that, if any, take place in the future will require modification (up or down) in the coming
years, which would be done, if any, prospectively recognizing the effects of the change in estimate on the
corresponding consolidated profit and loss account.
c) Comparability of information presented
The information contained in this report for the financial year 2022 is presented solely and exclusively for
comparative purposes with the information relating to the financial year 2023 and therefore does not constitute
the annual accounts of the Group for the financial year 2022.
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.
5
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, 2023 and 2022, 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 2023 and 2022, 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 2023.
ii.
Interests in joint ventures
Joint ventures are deemed to be ventures that, being not dependent entities, are jointly controlled by two or more
entities not related to each other. This is evidenced by contractual agreements under which two or more entities
(shareholders) participate in entities or carry out operations or hold assets in such a way that any strategic
financial or operational decision affecting them requires the unanimous consent of all members.
In the consolidated annual accounts, the joint ventures are valued by the “method of participation”; that is, by the
fraction of their equity net representing the Group’s share in its capital, once the dividends received from them
and other equity eliminations have been considered. In the case of transactions with a joint venture, the
corresponding losses or gains are eliminated in the Group’s share of its capital.
Annex II to this consolidated report provides certain relevant information on the joint ventures as of 31 December
2023.
iii. Associates
They are entities over which the Bank has the capacity to exert significant influence, although not joint control or
control. Usually, this capacity is manifested in a participation equal to or greater than 20% of the voting rights of
the participating entity.
In the consolidated annual accounts, the associated entities are valued by the “participation method”; that is, by
the fraction of their equity net representing the Group’s share in its capital, once the dividends received from them
and other equity eliminations have been considered. In the case of transactions with an associated entity, the
related losses or gains are eliminated in the Group’s share of its capital.
Annex II to this consolidated report provides certain relevant information from associated entities as of 31
December 2023.
6
iv. Structured entities
In cases where the Group constitutes or participates in entities in order to allow its clients access to certain
investments, or for the transmission of risks or other purposes, also called structured entities since voting rights
or similar rights are not the decisive factor in deciding who controls the entity, it is determined, according to
internal criteria and procedures and taking into account the provisions of the reference regulations, whether there
is control, as described above and therefore whether or not they should be consolidated. Specifically, for those
entities where it is applicable (investment funds and pension funds, mainly), the Group analyzes the following
factors:
– Percentage of participation maintained by the Group, with 20% generally established as a threshold.
–
Identification of the fund manager, verifying whether it is a company controlled by the Group as this aspect
could affect the ability to direct the relevant activities.
– The existence of agreements and/or agreements between investors that may make decision-making require
joint participation by investors, not in this case being the fund manager who makes the decisions.
– Existence of exclusion rights currently exercised (possibility of removing the manager from his position) since
the existence of these rights may be a limitation on the manager's power over the fund, concluding that the
manager acts as an agent of investors.
– Analysis of the remuneration regime of the fund manager, considering that a remuneration scheme
proportional to the service provided does not generally create an exposure of such importance as to indicate
that the manager is acting as principal. On the contrary, if the remuneration is not in accordance with the
service rendered, it could give rise to such a statement, which 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 2023.
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 proceeds to estimate the cost of the business combination, which will normally correspond to the
consideration given, defined as the fair value of the assets delivered, the liabilities incurred and the equity
instruments issued, if any, by the acquiring entity. The cost of the business combination does not include
expenses related to the business combination, including fees paid to auditors involved in the transaction, legal
advisors, investment banks and other consultants. If, prior to the business combination, the Group maintained
any investment in the capital of the acquired entity, this interest is valued at fair value, recording the
differences between that fair value and the net book value at the date of the combination of counterparties in
the profit and loss account, forming this investment measured at fair value part of the cost of the business
combination.
– The fair value of the contingent assets, liabilities and liabilities of the acquired entity or business, including
those intangible assets identified in the business combination that may not be recorded by the acquired entity,
which are incorporated into the consolidated balance sheet by those securities, is estimated; as well as the
amount of minority interests (non-controlling interests) and the fair value of previous holdings in the acquired
one.
7
– The difference between these concepts is recorded in accordance with subparagraph (k) of this Note 2 if it is
positive. In the event that this difference is negative, it is recorded in the negative trading fund recognized in
profit or loss of the consolidated profit and loss account.
The goodwill is only recorded once when acquiring control of a business.
vi. Changes in the levels of ownership interests in dependent companies
Acquisitions and disposals that do not result in a change of control are accounted for as equity transactions in
'other reserves', not recognizing any loss or gain in the consolidated profit and loss account and not re-valuing the
initially recognized goodwill. The difference between the consideration paid or received and the decrease or
increase in minority interests, respectively, is recognized in reserves.
Similarly, when control of a dependent company is lost, minority assets, liabilities and interests, as well as other
items that may be recognized in the company's 'other cumulative overall income' are removed from the
consolidated balance sheet, recording the fair value of the consideration received as well as any remaining
investment. The difference between these amounts is recognized in the consolidated profit and loss account.
vii. Acquisitions and disposals
Note 3 of this consolidated report provides information on the most significant acquisitions and disposals of
holdings that have taken place in the years 2023 and 2022.
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.
To this end, the regulatory and economic capital figures and their associated metrics -return on risk weighted
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.
As part of the Capital Self-assessment process Framework (to comply with the requirement of Pillar II Basel), the
Santander Group uses an economic capital measurement model to ensure the sufficiency of the capital to support
all the risks of its activity under different economic scenarios, with the level of solvency decided by the Santander
Group. It also evaluates the compliance with regulatory capital ratios in all the different scenarios.
In order to adequately manage the Santander Group's capital, it is essential to estimate and analyze future needs,
in anticipation of the various stages 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.
8
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:
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.
9
– 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.
e)
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).
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f) Deposit Guarantee Fund and Single Resolution Fund
The Bank and other consolidated entities are integrated into the Deposit Guarantee Fund, National Resolution
Funds or equivalent bodies of their respective countries.
i. Deposit Guarantee Fund
The Deposit Guarantee Fund (“FGD”), established by Royal Decree – Law 16/2011, of 14 October, creating the
FGD, which was modified in accordance with the wording given by the Final Provision Tenth of Law 11/2015, of
18 June, recovery and resolution of credit institutions and investment firms (in force since 20 June 2015). This Law
transposes into Spanish law Directive 2014/49/EU of 16 April on deposit guarantee systems. The annual
contribution to be made by the institutions to this fund is determined by the Managing Commission of the DGF,
and consists of the contribution based on the guaranteed deposits of each institution corrected by its risk profile,
that includes the phase of the economic cycle and the impact of procyclical contributions, according to paragraph
3 of article 6 of Royal Decree-Law 16/2011.
The purpose of the FGD is to guarantee deposits in credit institutions up to the limit contemplated in the Royal
Decree-Law. In order to meet its objectives, the FGD draws on the aforementioned annual contributions, the
spillovers that the Fund makes between the entities that join it and the resources raised in the stock markets,
loans and any other indebtedness operations.
Taking into account the foregoing and to strengthen the assets of the FGD, Royal Decree-Law 6/2013 of 22 March,
on the protection of the holders of certain savings and investment products and other financial measures, it
established a spill equivalent to 3 per thousand of the institutions’ deposits as of December 31, 2012. This spill
becomes effective in two sections:
i. Two fifths to be satisfied within twenty working days from December 31, 2013.
ii. Three fifths to be paid within a maximum period of seven years and according to the schedule of payments
established by the Managing Commission of the FGD.
Additional information on the Bank’s contributions of this type made in 2023 and 2022 can be found in the Bank’s
individual report of its annual accounts for 2023.
ii. Single Resolution Fund
In March 2014, the Parliament and the European Council reached a political agreement on the creation of the
second pillar of the banking union, the Single Resolution Mechanism (“SRM”). The main objective of the SRM is
to ensure that future bank failures in the banking union are managed efficiently, with minimal costs for the
taxpayer and the real economy. The scope of the SRM is identical to that of the SSM, i.e. a central authority, the
Single Resolution Board (“SRB”), is ultimately responsible for the decision to initiate the resolution of a bank,
while the operational decision will be implemented in cooperation with national resolution authorities. The SRB
started its work as an autonomous EU body on 1 January 2015.
The rules governing the banking union are intended to ensure that the resolutions are financed primarily by banks
and their shareholders and, if necessary, also partially by the institution's creditors. However, another source of
funding will also be available and can be used if the contributions of shareholders and creditors of the institution
are not sufficient. This is the Single Resolution Fund (“SRF”), which is administered by the SRB. The regulation
provides that banks will pay contributions to the SRF over eight years.
In this regard, on 1 January 2016, the SRF came into operation, which has been implemented by Regulation (EU)
No 806/2014 of the European Parliament and of the Council. The SRB is responsible for calculating the
contributions to be made by credit institutions and investment firms to the SRF. These contributions are based,
from the financial year 2016, on: (A) a flat-rate contribution (or basic annual contribution), pro rata with respect
to total liabilities, excluding own funds, the secured deposits of all authorized entities in the territory of the
participating Member states; and (b) a risk-adjusted contribution, which shall be based on the criteria set out in
Article 103(7) of Directive 2014/59/EU, taking into account the principle of proportionality, without creating
distortions between banking structures in the Member states. The amount of this contribution accrues from the
financial year 2016, on an annual basis.
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The amount accrued for contributions to both funds as at 31 December 2023 amounted to EUR 64,982 thousand
(as at 31 December 2022 it amounted to EUR 81,891 thousand), having been included under “Other operating
expenses” in the profit and loss account (see Note 37).
iii. National Resolution Fund
In the year 2015, Royal Decree 1012/2015, of 6 November, was published, which developed Law 11/2015, of 18
June, on recovery and resolution of credit institutions and investment services companies, and by which Royal
Decree 2606/1996, was modified. of 20 December on Deposit Guarantee Funds of Credit Institutions. The
aforementioned Law 11/2015 regulates the creation of the National Resolution Fund, whose financial resources
should reach, by December 31, 2024, 1% of the amount of guaranteed deposits, through contributions from credit
institutions and investment services companies established in Spain. The detailed form of calculation of
contributions to this Fund is regulated by Commission Delegated Regulation (EU) 2015/63 of 21 October 2014
and is calculated by the Ordered Bank Resolution Fund (“FROB”), based on the information provided by each
entity.
The expenditure incurred for the contribution made by the Bank to the National Resolution Fund in Spain in 2023
amounted to 488 thousand euros (451 thousand euros in 2022), it is recorded under “Other operating expenses”
in the attached profit and loss account (see Note 37).
g) Environmental impact
Given the activities to which the Group companies are engaged, they have no liabilities, expenses, assets or
provisions or contingencies of an environmental nature that could be significant in relation to the assets, financial
situation and consolidated results of the Group. For this reason, no specific breakdowns are included in this
consolidated report with regard to information on environmental issues.
h) Events after the reporting period
Subsequent to close of the fiscal year ended December 31, 2023 and until the date of formulation of these
Consolidated Annual Accounts for that year, no event has occurred that significantly affects or modifies the
information contained therein.
2. Accounting principles and policies and valuation criteria applied
The following accounting principles and policies and valuation criteria have been applied in the preparation of the
consolidated annual accounts:
a) Foreign currency transactions
i. Presentation currency
The functional and presentation currency of the Bank is the euro. The Group's currency of presentation is also the
euro.
ii. Criteria for the conversion of balances into foreign currency
The conversion of foreign currency balances into euros takes place in two consecutive phases:
– Conversion of the foreign currency to the presentation currency (currency of the main economic environment
in which the entity operates); and
– Conversion into euros of balances held in the functional currencies of entities whose functional currency is
not the euro.
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iii. Conversion of foreign currency to presentation currency
Foreign currency transactions carried out by consolidated entities (or valued by the equity method) not based in
countries of the Monetary Union are initially recorded in their respective currencies. Subsequently, the monetary
balances in foreign currency are converted to their respective functional currencies using the year-end exchange
rate.
Furthermore:
– Non-monetary items valued at their historical cost are converted to the currency of presentation at the
exchange rate of the date of acquisition.
– Non-monetary items measured at fair value are converted at the exchange rate on the date on which such fair
value was determined.
–
Income and expenses are converted at the average exchange rates for the period for all operations within the
period. In applying this criterion, the Panel considers whether there have been significant changes in exchange
rates during the financial year which, due to their relevance to the accounts as a whole, make it necessary to
apply exchange rates at the date of the transaction instead of such average exchange rates.
– Forward trading transactions of currencies against currencies and currencies against euros that do not cover
equity positions are converted at the exchange rates established on the closing date of the financial year by
the forward currency market for the corresponding maturity.
iv. Conversion of functional currencies into euros
The balances in the annual accounts of consolidated institutions (or valued by the equity method) whose
functional currency is other than the euro are converted into euros as follows:
– Assets and liabilities, by application of the exchange rate at year-end.
–
Income and expenditure, applying the average exchange rates for the year.
– Equity items, at historical exchange rates.
v. Recognition of exchange differences
Exchange differences arising from the translation of foreign currency-denominated balances into the reporting
currency are generally recorded at their net amount in the exchange differences chapter of the consolidated
income statement, net, with the exception of exchange differences in financial instruments classified at fair value
through profit and loss, which are recorded in the consolidated profit and loss account without differentiating
them from other changes that may occur at fair value, and exchange differences in non-monetary items whose
fair value is adjusted in equity, recorded under other cumulative comprehensive income – items that may be
reclassified to profit or loss – currency conversion, except for differences in exchange for equity instruments, in
which the option of irrevocably being measured at fair value through other cumulative comprehensive income
has been chosen, that other cumulative comprehensive income – items not to be reclassified into profit or loss –
changes in the fair value of equity instruments measured at fair value through other comprehensive income are
recognized in the chapter (see Note 26).
The exchange differences that occur when converting financial statements denominated in the functional
currencies of entities whose functional currency is other than the euro into euros are recorded under the equity
heading Other cumulative overall income – elements that can be reclassified into profit or loss – conversion of
consolidated balance sheet currencies, while those that originate in the conversion into euros of the financial
statements of entities valued by the equity method are recorded as part of the balance of the equity heading other
cumulative overall income – elements that will not be reclassified into results and elements that they can be
reclassified into profit or loss – participation in other recognized income and expenses from investments in joint
and associated ventures up to the balance sheet of the item to which they correspond, at which time they will be
recorded in profit or loss.
13
Exchange differences arising from actuarial gains or losses when converting financial statements denominated in
the functional currencies of entities whose functional currency is other than the euro into euros are recorded
under equity heading Other cumulative comprehensive income - items other than not they will be reclassified
into profit or actuarial (-) losses in defined benefit pension plans (see Note 21 and Note 26).
vi. Entities located in hyperinflationary economies
As at 31 December 2023 and 2022, none of the functional currencies of consolidated and associated entities,
located abroad, were held in economies considered highly inflationary according to the criteria established in this
regard by the International Financial Reporting Standards adopted by the European Union. Consequently, at the
close of the accounts of the last two financial years, there has been no need to adjust the financial statements of
any consolidated or associated entity to correct them for the effects of inflation.
vii. Exposure to foreign
The value in euros of the total foreign currency assets and liabilities held by the Group as at 31 December 2023
and 2022 amounts to 18,193 million euros and 11,574 million euros, respectively (20,296 million euros and
12,221 million euros, respectively). at the end of financial year 2022) –see Note 44.b–. As of December 31,
97.27% (98.80% as of December 31, 2022) of foreign currency assets and 100% (100% as of December 31, 2022)
of foreign currency liabilities were Norwegian kroner (approximately 96.82%). The rest are, in their totality, other
currencies quoted in the Spanish market. The effect on the consolidated profit and loss account and on the
consolidated net worth by percentage changes of 1 per cent in the various foreign currencies in which the Group
maintains significant balances, considering the exchange rate hedges established by the Group in this regard, it
would be insignificant.
b) Definitions and classification of financial instruments
i. Definitions
A “financial instrument” is a contract that gives rise to a financial asset in one entity and simultaneously to a
financial liability or capital instrument in another entity.
A Capital or equity instrument is a legal business that demonstrates a residual stake in the assets of the issuing
entity after all its liabilities are deducted.
A “financial derivative” is a financial instrument whose value changes in response to changes in an observable
market variable (such as an interest rate, exchange rate, the price of a financial instrument or a market index,
including credit ratings), the initial investment of which is very small relative to that which would have to be made
in other financial instruments with a similar response to changes in market conditions, and which is generally
settled at a future date.
“Hybrid financial instruments” are contracts that simultaneously include a master contract other than a derivative
together with a financial derivative, called an implied derivative, that it is not individually transferable and that it
has the effect that some of the cash flows of the hybrid contract vary in the same way as would the implicit
derivative considered in isolation.
Compound financial instruments are contracts that for their issuer generate both a financial liability and an own
capital instrument (such as convertible bonds that grant their 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
14
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.
The following transactions are not treated, for accounting purposes, as financial instruments:
–
Investments in joint ventures and associates in joint ventures and associated entities (see Note 12).
– Rights and obligations arising from employee benefit plans (see Note 21).
ii. Classification of financial assets for measurement purposes
Financial assets are presented under the different categories in which they are classified for management and
valuation purposes, unless they are to be presented as “non-current assets and disposal groups that have been
classified as held for sale”, or correspond to “cash, cash,” or “cash,” or “cash,” or “cash,” or “cash,”. cash balances in
central banks and other demand deposits”, “Derivatives – hedge accounting” or “Investments in joint ventures and
associates”, in which case, are displayed independently.
The classification criterion of financial assets depends both on the business model for their management and on
the characteristics of their contractual flows.
The Group’s business models refer to how the Group manages its financial assets to generate cash flows. In
defining them, the Group takes into account the following factors:
– How key management personnel are evaluated 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, in particular, the way in which those risks are managed.
– How business managers are rewarded.
– The frequency and volume of sales in previous years, as well as the expectations of future sales.
The analysis of the characteristics of contractual flows of financial assets requires an 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 principal amount outstanding at the
beginning of the transaction. This analysis takes into account four factors (performance, clauses, contractually
linked products and foreign exchange). In this regard, among the most significant trials employed by the Group
in carrying out this analysis, are the following:
• The return on financial assets, in particular in cases of periodic interest rate adjustment where the term of the
reference interest rate does not coincide with the frequency of adjustment. In these cases, an assessment is
carried out to determine whether contractual cash flows differ significantly from flows without this change in the
time value of money, establishing a tolerance level of 2%.
• Financial assets whose cash flows have different payment priority due to contractual linkage to underlying assets
(such as securitizations) require a look-through analysis by the Group to review that both the financial assets and
the underlying assets are payments of principal and interest only, and that the credit risk exposure of the pool of
underlying assets belonging to the analyzed tranche is less than or equal to the credit risk exposure of the
underlying asset pool of the instrument.
15
On this basis, the asset can be measured at amortized cost, at fair value through other comprehensive income, or
at fair value through changes in profit or loss for the period. The IFRS9 also provides for the option of designating
an instrument at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or
recognition inconsistency (sometimes referred to as “accounting asymmetry”) that would otherwise arise from
the measurement of assets or liabilities or from the recognition of gains and losses on different bases. The Group
uses the following criteria for the classification of debt instruments:
• Amortized cost: Financial instruments under a business model whose objective is to collect principal and
interest flows, for which there are no significant unjustified sales and fair value is not a key element in the
management of these assets and contractual conditions result in cash flows at specific dates, which are
only principal and interest payments on the outstanding principal amount. In this sense, unjustified sales
are considered those other than those related to increased asset credit risk, unforeseen financing needs
(liquidity stress scenarios). In addition, the characteristics of their contractual flows represent
substantially a “basic financing agreement”.
• Fair value with changes in other comprehensive income: Financial instruments included in a business
model whose objective is achieved through the collection of principal and interest flows and the sale of
such assets, fair value being a key element in the management of these assets. In addition, the
characteristics of their contractual flows represent substantially a “basic financing agreement”.
• Fair value with changes in profit or loss: financial instruments included in a business model whose
objective is not achieved through the aforementioned ones, fair value being a key element in the
management of these assets, and financial instruments whose characteristics of their contractual flows
do not substantially represent a “basic financing agreement”. This would include portfolios classified
under the headings “Financial assets held for trading”, “Non-trading financial assets obligatorily
measured at fair value through profit or loss” and “Financial assets designated 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 and other demand deposits: Cash balances and immediately available
debtor balances originating from deposits held in central banks and credit institutions.
– Loans and advances: Debit balances of all credits or loans granted by the Group except securities, receivables
of financial leasing transactions and other financial debtor balances in favor of the Group, such as checks by
credit institutions, balances outstanding from liquidating chambers and bodies for exchange transactions and
organized markets, cash bonds, passive dividends required, fees for financial guarantees pending collection
and debtor balances for transactions that do not originate from banking operations and services such as the
collection of rents and the like. They are classified according to the institutional sector to which the debtor
belongs in:
– Central Banks: Credits of any nature, including deposits and money market operations, in the name of the
Bank of Spain or other central banks.
– Credit institutions: Credit of any nature, including deposits and money market operations, on behalf of
credit institutions.
– Customers: Collects the remaining credits, including money market operations carried out through central
counterparties.
– Debt instruments: Bonds and other securities which recognize a debt for its issuer, which accrue remuneration
in the form of interest, and which are set in securities or account notes.
16
– Equity instruments: Financial instruments issued by other entities, such as shares, which have the nature of
equity instruments for the issuer, except for interests in dependent entities, associates and joint ventures. This
item includes investment fund holdings.
– Derivatives: Includes the fair value in favor of the Group of financial derivatives that are not part of accounting
hedges, including segregated implicit derivatives of hybrid financial instruments.
– Temporary asset acquisitions: purchases of financial instruments with the commitment of their non-optional
retrocession at a given price (repos) are recorded in the consolidated balance sheet as a financing granted
according to the nature of the corresponding debtors, under the heading 'Loans and advances' ('central banks',
'credit institutions' or 'clientele'). The difference between purchase and sale prices is recorded as financial
interest over the life of the contract.
– Changes in the fair value of covered items in a portfolio covered by interest rate risk: counterparty chapter of
amounts charged to the consolidated profit and loss account resulting from the valuation of portfolios of
financial instruments that are effectively covered by interest rate risk through fair value hedging derivatives.
– Derivatives – Hedge Accounting: Includes the fair value in favor of the Group of derivatives, including
segregated implicit derivatives of hybrid financial instruments, designated as hedging instruments in
accounting hedges.
iv. Classification of financial liabilities for valuation purposes
Financial liabilities are initially classified into the various categories in which they are classified for the purposes
of their management and valuation, unless they must be presented as liabilities associated with non-current
assets on sale, or correspond to derivatives – hedge accounting, changes in the fair value of covered items in an
interest rate risk hedged portfolio, which are shown independently.
Financial liabilities are included for valuation purposes in one of the following portfolios:
– Financial liabilities held for trading (at fair value through profit and loss): financial liabilities issued with the
aim of benefiting in the short term from changes in their prices, financial derivatives that are not considered
book-hedging, and financial liabilities arising from the firm sale of financial assets temporarily acquired or
borrowed (short positions).
– Financial liabilities designated at fair value through profit or loss: Financial liabilities are included in this
category where more relevant information is obtained either because this eliminates or significantly reduces
inconsistencies in recognition or valuation (also called accounting asymmetries) which would arise from the
valuation of assets or liabilities or from the recognition of their gains or losses under different criteria, either
because there is a group of financial liabilities, or financial assets and liabilities, and they are managed and
their performance assessed on the basis of their fair value, in accordance with a documented risk management
or investment strategy and information from that group is also provided on the basis of fair value to key staff
of the Group’s management. Liabilities may only be included in this portfolio on the date of issue or
origination.
– Financial liabilities at amortized cost: Financial liabilities that are not included in any of the above categories
and that respond to the typical fundraising activities of financial institutions, regardless of their form of
instrumentalization and their maturity.
v. Classification of financial liabilities for presentation purposes
Financial liabilities are included, for the purpose of their presentation according to their nature in the consolidated
balance sheet, under the following headings:
– Deposits: Includes amounts of repayable balances received in cash by the institution, including those in the
nature of subordinated liabilities (the amount of financing received which, for credit priority purposes, are
behind common creditors), except for debt securities. It also includes bonds and cash appropriations received
whose amount can be freely invested. Deposits are classified according to the institutional sector to which the
creditor belongs in:
• Central Banks: Deposits of any nature including credits received and money market operations received
from the Bank of Spain or other central banks.
17
• Credit institutions: Deposits of any nature, including credits received and money market transactions on
behalf of credit institutions.
• Customer: includes the remaining deposits, including the amount of money market transactions carried
out through central counterparties.
During the financial year 2019 the European Central Bank announced a new Targeted Long-Term Refinancing
Operations Program (TLTRO III), which included special conditions, including: a reduction in the interest rate
applicable between June 2020 and June 2022 subject to the fulfillment of a certain volume of computable
loans.
Grupo Santander Consumer Finance chose to accrue interest according to the specific periods of adjustment
to market rates, so it has recorded in the income statement from June 2020 to June 2022 the interest
corresponding to that period (-1%), having met the threshold for computable loans resulting from the
extratipe as at that date.
Subsequently, and following the changes made by the European Central Bank to the terms of the program,
which include changes in its interest rates, the Group has updated the effective interest rate at which the
interest accrues on that financial liability, maintaining the approach adopted in previous years, and
considering these modifications a change in the variable interest rate (affecting the TAR) and is applied
prospectively.
– Debt securities issued: Includes the amount of bonds and other debts represented by marketable securities,
including those having the nature of subordinated liabilities (the amount of financing received which, for the
purpose of credit priority, lie behind common creditors. It also includes the amount of financial instruments
issued by the Group that, 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 financial liability component of issued
securities that are composite financial instruments.
– Derivatives: Includes the fair value with unfavorable balance for the Group of derivatives, including implicit
derivatives that have been segregated from the main contract, which are not part of accounting hedges.
– Short Positions: The amount of financial liabilities arising from the firm sale of financial assets temporarily
acquired or borrowed.
– Other financial liabilities: Includes the amount of obligations payable in the nature of financial liabilities not
included elsewhere and liabilities for financial collateral contracts, unless classified as non-performing.
– Temporary assignments of assets: sales of financial instruments with the commitment of their non-optional
retrocession at a given price (repos) are recorded in the consolidated balance sheet as a financing received
according to the nature of the corresponding creditor, under the heading 'Deposits' ('Central banks', 'Credit
institutions' or 'Clientele'). The difference between purchase and sale prices is recorded as financial interest
over the life of the contract.
– Changes in the fair value of covered items in a portfolio covered by interest rate risk: counterparty chapter of
amounts charged to the consolidated profit and loss account resulting from the valuation of portfolios of
financial instruments that are effectively covered by interest rate risk through fair value hedging derivatives.
– Derivatives – Hedge Accounting: Includes the fair value against the Group of derivatives, including segregated
implicit derivatives of hybrid financial instruments, designated as hedging instruments in accounting hedges.
c) Measurement of financial assets and liabilities and recognition of fair value changes
Generally, financial assets and liabilities are initially recorded at their fair value, which, unless evidence to the
contrary, is the price of the transaction. For instruments not measured at fair value through profit and loss changes
it is adjusted to transaction costs.
In this regard, IFRS 9 provides that conventional purchases or sales of financial assets will be recognized and
discharged according to the trading date or the settlement date. The Group has chosen to record such a record on
the trading date or settlement date in accordance with the convention of each of the markets in which the
transactions are made. For example, in relation to the purchase or sale of debt securities or equity instruments
traded on the Spanish market, the securities market regulations establish their effective transfer at the time of
settlement, therefore, the same time has been established for the accounting record.
18
The fair value of instruments not measured at fair value through profit and loss is adjusted to transaction costs.
Subsequently, and at the time of each accounting closure, they are valued according to the following criteria:
i. Measurement of financial assets
Financial assets are valued primarily at fair value without deducting any transaction costs for their sale.
The fair value of a financial instrument, at a given date, is understood to be the price that would be received for
the sale of an asset or paid to transfer a liability through an orderly transaction between market participants. The
most objective and common reference to fair value of a financial instrument is the price that would be paid for it
in an active, transparent and deep market (trading price or market price). As at 31 December 2023, there is no
significant investment in listed financial instruments that has ceased to be recorded for its trading value as a result
of the fact that its market cannot be considered as active.
If there is no market price for a given financial instrument, the fair value of a financial instrument is estimated to
be that established in recent transactions of similar instruments and, failing that, to valuation models sufficiently
contrasted by the international financial community, taking into account the specific peculiarities of the
instrument to be assessed and, in particular, the different types of risk associated with the instrument.
All derivatives are recorded on the balance sheet at fair value from the date of purchase. If their fair value is positive
they will be recorded as an asset and if it is negative they will be recorded as a liability. At the date of procurement,
it is understood that, unless evidence to the contrary, its fair value is equal to the price of the transaction. Changes
in the fair value of derivatives designated as accounting hedging from the date of procurement are recorded in
return in the profit and loss account consolidated under the heading Gains or losses from hedging accounting, net.
In particular, the fair value of financial derivatives traded on organized markets included in trading portfolios is
assimilated to their daily trading and if, for exceptional reasons, their trading cannot be established on a given
date, methods similar to those used to value derivatives contracted in non-organized markets are used to value
them.
The fair value of these derivatives is assimilated to the sum of future cash flows originating in the instrument,
discounted at the valuation date (present value or theoretical closing), using methods recognized by the financial
markets in the valuation process: net present value, options pricing models, among other methods.
Balances of securities representing debt and loans and advances under a business model whose objective is to
collect principal and interest flows are valued at their amortized cost, provided they meet the SPPI test (solely
Payments of Principal and Interest) using the effective interest rate method in its determination. Amortized cost
means the acquisition cost of a corrected financial asset or liability (in more or less, as the case may be) for
principal repayments and the systematically charged portion of the difference between the initial cost and the
corresponding maturity repayment value to the consolidated profit and loss account. In the case of financial
assets, the amortized cost also includes impairment-related corrections to their value. Loans and advances
covered in fair value hedging transactions record changes in fair value related to the risk or the risks covered in
such hedging operations.
The effective interest rate is the refresh rate that exactly equates the initial value of a financial instrument to the
totality of its cash flows estimated by all concepts throughout its remaining life. For financial instruments at fixed
interest rates, the effective interest rate coincides with the contractual interest rate established at the time of their
acquisition plus, where appropriate, the transaction fees and costs which, by their nature, are part of their financial
performance. In variable interest rate financial instruments, the effective interest rate coincides with the rate of
return in effect for all items until the first revision of the benchmark interest rate to take place.
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Equity instruments and contracts related 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 newly available information is insufficient to measure such fair value, or if there is a wide range
of possible fair value measurements and the cost represents the best estimate of fair value within that range. The
amounts for which financial assets are recorded represent, in all significant respects, the Group’s highest level of
credit risk exposure at each reporting date. The Group has collateral taken and other credit improvements to
mitigate its exposure to credit risk, consisting mainly of mortgage, cash, and other credit guarantees. of equity
and personal instruments, assets transferred in leasing and renting, assets acquired with repurchase agreement,
securities loans and credit derivatives.
ii. Measurement of financial liabilities
Financial liabilities are generally valued at their amortized cost, as defined above, except those included in the
Financial liabilities held for trading chapters, financial liabilities at fair value through profit or loss and financial
liabilities designated as items covered in fair value hedges (or as hedging instruments) the book value of which is
modified by changes in fair value related to the risk or the risks covered in such hedging operations. Changes in
credit risk arising from financial liabilities designated at fair value through profit or loss shall be recorded in other
cumulative comprehensive income, unless they generate or increase accounting asymmetry, in which case,
changes in the fair value of the financial liability in all its concepts shall be recorded in the income statement.
Valuation techniques
Financial instruments at fair value and determined by published quotes on active markets (Level 1), include public
debt, private debt and derivatives traded on organized markets, securitized assets, shares and issued fixed
income.
In cases where the fair value of a financial instrument cannot be obtained from its market quotes, the Group
makes its best fair value estimate 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 limited cases, use significant
unobservable inputs in market data (Level 3). To make this estimate, various techniques are used, including
extrapolation of observable market data. The best evidence of the fair value of a financial instrument at the initial
time is the price of the transaction, unless the value of that instrument can be obtained from other transactions
made on the market with the same or similar instrument, or value it using a valuation technique where the
variables used include only observable data in the market, mainly interest rates (see note 43).
iii. Results recognision
As a general rule, changes in the carrying value of financial assets and liabilities are recorded in return in the
consolidated profit and loss account, differentiating between those originating in the accrual of interest and
similar concepts (which are recorded in the chapters Interest income or interest expense, as appropriate), and
those for other causes. The latter are recorded, at their net amount, in the chapter Gains or losses on financial
assets or liabilities.
Adjustments for changes in fair value resulting from:
– Financial assets at fair value through other cumulative comprehensive income are recorded on a transitory
basis, for debt instruments in other cumulative comprehensive income – items that may be reclassified
into profit or loss – financial assets at fair value through other comprehensive income, whereas equity
instruments are recorded in other cumulative comprehensive income – items that will not be reclassified
into profit or loss – changes in the fair value of equity instruments measured at fair value through changes
in other comprehensive income. The exchange differences of debt instruments measured at fair value
through other cumulative comprehensive income are recognized in the chapter Exchange differences, net
of the consolidated profit and loss account. Differences in exchange for equity instruments, in which the
option of irrevocably has been chosen, if measured at fair value through other cumulative comprehensive
income, the chapter recognizes other cumulative comprehensive income – Elements not to be reclassified
into profit or loss – Changes in the fair value of equity instruments measured at fair value through other
comprehensive income.
–
Items charged or paid to equity headings Other cumulative comprehensive income – items that can be
reclassified into profit or loss – financial assets at fair value through other comprehensive income and
other cumulative comprehensive income – items that can be reclassified into profit or loss – currency
conversion remain as part of the Group's consolidated net worth until the consolidated balance sheet
20
deteriorates or declines the assets from which they originate, at which point they are canceled against the
consolidated profit and loss account.
– Unrealized gains from financial assets at fair value through other comprehensive income classified as non-
current assets held for sale as part of a disposal group or a discontinued transaction are recorded in return
under equity other income cumulative global – items that can be reclassified into profit or loss – non-
current assets and disposal groups of items that have been classified as held for sale.
iv. Hedging transactions
The consolidated entities use financial derivatives to manage the risks of the Group’s own positions and their
assets and liabilities (“derivatives – hedge accounting”) or to benefit from the changes these derivatives
experience in their value.
Any financial derivative that does not meet the conditions that allow it to be considered as hedging is treated, for
accounting purposes, as a “trading derivative”.
A derivative qualifies for hedge accounting if all the following conditions are met:
1. The derivative hedges one of the following three types of risk, and therefore they can be categorized into one
of the following categories:
– Changes in the fair value of assets and liabilities due to fluctuations, inter alia, in the interest rate and/or
exchange rate at which the position or balance to be hedged is subject (“fair securities hedging”);
– Alterations in estimated cash flows originating in the financial assets and liabilities covered by the hedge,
commitments and highly probable transactions to be carried out (“cash flow hedging”);
– Net investment in a foreign business (“hedge of a net investment in a foreign operation”).
2. It is effectively offsetting exposure inherent in the hedged position throughout the intended term of coverage,
implying that:
– At the time of arrangement, it is expected that, under normal conditions, it will act with a high degree of
effectiveness (“prospective effectiveness”);
– There is sufficient evidence that coverage was actually effective throughout the life of the covered item or
position (“retrospective effectiveness”). To this end, the Group verifies that the results of the coverage
have varied within a range of 80% to 125%, with respect to the hedged item.
3. The hedging operation has been properly documented, so that there is evidence that the contracting of the
financial derivative took place specifically to cover certain balances or transactions and the way in which it
was intended to be achieved, measuring this coverage provided that this form is consistent with the risk
management carried out by the Group.
Differences in the valuation of accounting hedges are recorded according to the following criteria:
–
–
–
In fair value hedges, differences in both hedging elements and covered items (as regards the type of risk
covered) are recognized directly in the consolidated profit and loss account.
In fair value hedges of the interest rate risk of a portfolio of financial instruments, the gains or losses arising
from the valuation of hedging instruments are recognized directly in the consolidated profit and loss account;
while gains or losses due to changes in fair value of hedged amount (attributable to hedged risk) they are
recognized in the consolidated profit and loss account using as a counterpart the heading “Changes in fair
value of covered items in a portfolio covered by interest rate risk (asset or liability), as appropriate.
In cash flow hedges, the effective part of the change in the value of the hedging instrument is temporarily
recorded under the equity heading “Other cumulative overall income – elements that can be reclassified into
profit or loss – hedging derivatives. Cash flow hedges (effective portion)” until the time the planned
21
transactions occur, then recorded in the consolidated profit and loss account, unless included in the cost of the
non-financial asset or liability, in the event that the planned transactions end in the recognition of non-
financial assets or liabilities.
–
In hedges of net investments in foreign businesses, the differences in valuation arising in the effective
coverage part of the hedging elements are temporarily recorded under the equity heading “Other cumulative
overall income – items that can be reclassified into profit or loss – hedges of net investments in foreign
businesses” until they are recorded at results the gains or losses of the covered item.
– Differences in the valuation of the hedging instrument corresponding to the ineffective part of the hedging
operations of cash flows and net investments in foreign business are carried directly to the consolidated profit
and loss account, under the heading “Gains or losses from hedge accounting, net”.
Any adjustment to the carrying amount of a covered financial instrument to which the effective interest rate
method applies (or, in the case of a portfolio covered by interest rate risk, under the item under the separate
heading) it will be amortized against the result of the exercise. Depreciation may commence as soon as the
adjustment is made, and shall commence no later than the time the hedged item ceases to be adjusted for
changes in fair value attributable to the hedged risk. The adjustment shall be based on the effective interest rate,
recalculated on the date on which the amortization begins. However, in the case of fair value coverage of the
interest rate exposure of a portfolio of financial assets or financial liabilities (and only for this form of hedging),
provided that amortization using a recalculated effective interest rate is impracticable, the adjustment will be
amortized using the linear method. In any event, the adjustments shall be amortized in full at the maturity of the
financial instrument or, in the case of a portfolio covered by interest rate risk, at the expiry of the period of time
corresponding to the revision.
If a derivative assigned as hedge, either by its termination, ineffectiveness or any other cause, does not meet the
requirements indicated above, for accounting purposes, said derivative is considered as a trading derivative.
When fair value coverage is discontinued, adjustments previously recorded on the covered item are charged to
profit or loss using the effective interest rate method recalculated on the date it ceases to be covered, and must
be fully amortized upon maturity.
When cash flow hedges are discontinued, the cumulative result of the hedging instrument recognized in the
equity chapter “Other cumulative comprehensive income” (while hedging was effective) will continue to be
recognized in that chapter until the hedging transaction occurs, when it will be recorded in results, unless it is
foreseen that the transaction will not be carried out, in which case they are immediately recorded in results.
v. Derivatives embedded in hybrid financial instruments
Derivatives implicit in financial liabilities or other major contracts are separately recorded as derivatives where
their risks and characteristics are not closely related to those of the main contracts and provided that those major
contracts are not classified in the categories of financial liabilities designated at value reasonable with changes in
results.
d) Derecognition of financial assets and liabilities
The accounting treatment of transfers of financial assets is conditioned by the extent and manner in which the
risks and benefits associated with the assets being transferred are transferred to third parties:
–
–
If the risks and profits are transferred substantially to third parties - in the case of unconditional sales, of sales
with repurchase agreement at fair value on the date of repurchase, sales of financial assets with a purchase
option acquired or sale issued deeply out of money, of asset securitizations, where the assignor does not
retain subordinate financing or grant any credit enhancement to new holders and other similar cases-, the
transferred financial asset is deregulated from the consolidated balance sheet, recognizing, simultaneously,
any rights or obligations retained or created as a result of the transfer.
If the risks and benefits associated with the transferred financial asset are substantially retained - in the case
of sales of repurchase financial assets for a fixed price or for the sale price plus interest, securities loan
agreements in which the borrower is obliged to repay the same or similar assets, in the case of securitizations
of assets in which the assignor maintains some form of subordinated financing or grants some form of credit
enhancement to new holders that involves substantially assuming the credit risk of the transferred assets and
other similar cases-, the transferred financial assets are not derecognized from the consolidated balance sheet
22
and continue to be valued using the same criteria used before the transfer. On the contrary, the following are
recognized as accounting:
– An associated financial liability of an amount equal to the consideration received, which is generally
valued after its amortized cost, unless it meets the requirements to be classified as other liabilities at fair
value through profit and loss.
– Both income from the transferred (but not derecognized) financial asset and expenses from the new
financial liability.
–
If the risks and benefits associated with the transferred financial asset are not substantially transferred or
retained - in the case of sales of financial assets with an acquired or issued purchase option that are not deeply
in or out of money, for securitizations in which the assignor assumes subordinated financing or other credit
enhancements for a portion of the transferred asset and other similar cases - a distinction is made between:
–
–
If the transferring entity does not retain control of the transferred financial asset: The balance sheet is
removed and any rights or obligations retained or created as a result of the transfer are recognized.
If the transferring entity retains control over the transferred financial asset: It continues to recognize it on
the balance sheet for an amount equal to its exposure to changes in value that it may experience and
recognizes a financial liability associated with the transferred financial asset. The net amount of the
transferred asset and the associated liability shall be the amortized cost of the rights and obligations
retained, if the transferred asset is measured by its amortized cost, or the fair value of the rights and
obligations retained, if the transferred asset is measured by its fair value.
In accordance with the above, financial assets are removed from the balance sheet only when the rights on the
cash flows they generate have been extinguished or when the risks and benefits involved have been substantially
transferred to third parties. Similarly, financial liabilities are only removed from the balance sheet when the
obligations they generate have expired or when they are acquired with the intention of cancelling or relocating
them.
As regards contractual modifications to financial assets, the Group has differentiated them into two main
categories in relation to the conditions under which a modification entails a derecognition of the financial asset
(and the recognition of a new financial asset). and those under which the accounting of the original financial
instrument is maintained under the modified terms:
•
•
Contractual modifications for commercial or market reasons, which are usually conducted 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 decommission the original financial asset and recognize a new financial
asset subject to the classification and measurement requirements set out in IFRS 9. In addition, the new
financial asset shall be recorded at fair value and, if applicable, the difference between the carrying value of
the decreased asset and the fair value of the new asset shall be recognized in profit or loss.
Refinancing or restructuring modifications, in which the payment terms are modified, allowing a customer
who is experiencing financial difficulties (current or foreseeable) to meet its payment obligations and who,
in the absence of such change, there would be reasonable certainty that it would not be able to meet such
payment obligations. In this case, the change does not result in the loss of the financial asset, but rather
maintains the original financial asset and does not require a new assessment of its classification and
measurement. When assessing credit impairment, the current credit risk (considering modified cash flows)
should be compared with the credit risk at the initial recognition. Finally, the gross carrying amount of the
financial asset (the present value of renegotiated or modified contractual cash flows that are deducted at
the original effective interest rate of the financial asset) should be recalculated, recognizing a gain or loss in
profit or loss for the difference.
The Group routinely conducts securitization of financial assets in which it substantially retains the risks and
benefits associated with such financial assets. The details of the securitized assets held in the consolidated
balance sheet as at December 31, 2023 and 2022, distributed by consolidated entity, are included in Note 10 to
this report.
23
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.
As at 31 December 2023 and 2022, there are no financial assets or liabilities of significant amounts that have
been offset on the consolidated balance sheet at those dates.
f)
Impairment of financial assets
i. Definition
The Group associates an impairment correction to financial assets measured at amortized cost, debt instruments
measured at fair value through other comprehensive income, lease charges, as well as commitments and
guarantees granted not measured at fair value.
The impairment correction for expected credit losses is constituted from the consolidated profit and loss account
for the period in which the impairment is manifested. If it occurs, recoveries of previously recorded impairment
credit losses are recognized in the consolidated income statement for the period in which the impairment ceases
to exist or is reduced.
In the case of impaired credit assets originating or purchased, the Group only recognizes, at the filing date, the
accumulated changes in expected credit losses over the life of the asset since initial recognition as a correction of
value for losses. For assets measured at fair value through other comprehensive income, the share of fair value
changes due to expected credit losses is reflected in the profit and loss account for the period in which the change
occurs, reflecting the rest of the valuation in another overall result.
In general, the expected credit loss is estimated as the difference between all contractual cash flows to be
recovered under the contract and all cash flows expected to be received discounted at the original effective interest
rate. In the case of financial assets purchased or originated with credit impairment, this difference is deducted
using the effective interest rate adjusted for their credit quality.
Depending on the classification of financial instruments, referred to in the following paragraphs, the expected
credit losses may be 12 months or over the lifetime of the financial instrument:
– Expected 12-month credit losses: These are the portion of expected credit losses that result from potential
default events, as defined in the following sections, estimated to occur within 12 months of the reporting
date. These losses will be associated with financial assets classified as “normal risk” as defined in the
following sections.
– Expected credit losses over the entire life of the financial instrument: These are expected credit losses
resulting from potential default events that are estimated to occur throughout the life of the transaction.
These losses are associated with financial assets classified as “normal risk under special surveillance” or
“doubtful risk”.
For the purpose of estimating the expected life of a financial instrument, all contractual terms (e.g. advance
payments, duration, purchase options, etc.) have been taken into account, with the contractual period (including
extension options) being the maximum period to be considered to measure expected credit losses. In the case of
financial instruments with an undefined contractual maturity and an available balance component (e.g. credit
cards), the expected life is estimated by quantitative analysis to determine the period during which the institution
is exposed to credit risk, also considering the effectiveness of management practices that mitigate such exposure
(e.g. ability to unilaterally cancel such financial instruments, etc.).
24
The following guarantees are effective guarantees:
a) Mortgage guarantees on real estate, which are first charge, provided that they are duly constituted and
registered in favor of the entity. Real estate includes:
i) Buildings and elements of finished buildings distinguishing between:
– Housing;
– Offices and commercial premises and multi-purpose warehouses;
– Other buildings such as non-polyvalent warehouses and hotels.
ii) Urban and developable ordered land.
iii) Rest of property that classify as: buildings and elements of buildings under construction, such as ongoing
promotions and stopped promotions, and the rest of land, such as rustic estates would be classified.
b) Collateral on financial instruments such as cash deposits, debt securities of reputable issuers or equity
instruments.
c) Other types of collateral, including movable property received as collateral and second and successive
mortgages on immovable property, provided that the entity demonstrates its effectiveness. In order to assess
the effectiveness of second and successive mortgages on real estate, the institution will apply particularly
restrictive criteria. It will take into account, among others, whether or not the above charges are in favor of
the entity itself and the relationship between the risk guaranteed by them and the value of the property.
d) Personal guarantees, as well as the incorporation of new holders, that cover the entire amount of the
transaction and that imply direct and joint and several liability to the entity of persons or entities whose equity
solvency is sufficiently verified to ensure the reimbursement of the operation in the agreed terms.
ii. Classification of financial instruments
For the purpose of calculating the impairment correction, and in accordance with its internal policies, the Group
classifies its financial instruments (financial asset, risk or contingent commitment) measured at amortized cost
or at fair value through other comprehensive income into one of the following categories:
– Normal risk (“Stage 1”): Includes all instruments that do not meet the requirements to be classified in the
other categories.
– Normal Risk in Special Surveillance (“Stage 2”): Includes all instruments that, without meeting the criteria to
be classified as doubtful or failed risk, have significant increases in credit risk since initial recognition.
25
For the purpose of determining whether a financial instrument has increased its credit risk since initial recognition
by classifying it in stage 2, the Group considers the following criteria:
Changes in the risk of default occurring over the expected life of the financial
instrument relative to its credit level on its initial recognition are analyzed
and quantified.
In order to determine whether this change is considered significant, within
the framework of Stage 2, each unit of the Group has defined the
quantitative thresholds to be considered in each of its portfolios, taking into
account corporate guides and ensuring a consistent interpretation between
different geographies.
Within the aforementioned quantitative thresholds, two types are
considered: The relative threshold is understood to be one that compares the
current credit quality with the credit quality at the time of origination in
percentage terms of variation. In addition, an absolute threshold compares
both references in total terms, calculating the difference between the two.
These absolute/relative concepts are used homogeneously (with different
values) across 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 employed by the Group in the ordinary
management of credit risk. Irregular positions of more than 30 days and
redirections are common criteria in all units of the Group. In addition, each
unit can define other qualitative indicators, for each of its portfolios,
according to the particularities and ordinary management practices in line
with current policies (e.g. use of management alerts, etc.).
The use of these qualitative criteria is complemented by the use of an
experienced expert judgment, submitted in his case to the appropriate
government.
Quantitative criteria
Qualitative criteria
In the case of reversals, instruments classified as “normal risk under watchlist ” may generally be reclassified to
“normal risk” when the following circumstances occur: A minimum period of two years has elapsed from the date
of reclassification to that category or from the date of reclassification, that the client has paid the accrued principal
and interest accounts, and that the client has no other instrument with overdue amounts of more than 30 days.
– Doubtful risk (“Stage 3”): Includes financial instruments, whether overdue or not, in which, without the
circumstances to classify them in the category of failed risk, there are reasonable doubts as to their full
reimbursement (principal and interest) by the client under the terms contractually agreed. Similarly, off-balance-
sheet exposures likely to be paid and their recovery doubtful are considered at Stage 3. Within this category, two
situations are differentiated:
– Doubtful risk due to late payment: Financial instruments, whatever their holder and guarantee, that have
some amount due by principal, interest or contractually agreed expenses, with more than 90 days of seniority.
Also, the amounts of all transactions of a client are considered in this category where transactions with
amounts due more than 90 days old are more than 20 % of the amounts outstanding.
These instruments may be reclassified to other categories if, as a result of the recovery of part of the overdue
amounts, the reasons for their classification in this category disappear and the client has no overdue amounts
more than 90 days old in other transactions.
– Doubtful risk for reasons other than late payment: This category includes doubtful recovery operations that
do not present any amount due more than 90 days old.
26
The Group finds that a transaction is doubtful for reasons other than late payment where an event, or several
events combined, has occurred with a negative impact on the estimated future cash flows of the transaction.
To this end, the following indicators are considered, among others:
a) Negative net worth or decrease as a result of losses of the client’s net worth by at least 50% during the
last financial year.
b) Continued losses or significant decline in the customer’s turnover or, in general, recurring cash flows.
c) Widespread delay in payments or insufficient cash flows to meet debts.
d) Significantly inadequate economic or financial structure, or inability to obtain additional financing from
the client.
e) Existence of credit rating, internal or external, which shows that the client is in a situation of default.
f) Existence of overdue commitments of the client of significant amount toward public bodies or employees.
These transactions may be reclassified to other categories if, as a result of an individualized study, reasonable
doubts about their full reimbursement in the terms contractually agreed and there are no amounts due more than
90 days old.
In the case of reversals, instruments classified as doubtful risk may be reclassified to the category of “normal risk
under special surveillance” where the following circumstances occur: a minimum period of one year has elapsed
from the date of referral, that the customer has paid the accrued principal and interest accounts, and that the
customer has no other instrument with overdue amounts of more than 90 days.
– Default Risk: Includes all financial assets, or the part thereof, for which after an individualized analysis their
recovery is considered remote due to a noticeable and irrecoverable deterioration of their solvency.
In any event, except for transactions with collateral that cover more than 10% of the transaction amount, the
Group generally considers as remote recovery: transactions of holders at the liquidation stage of the insolvency
proceedings are non-performing transactions due to late payment which have a seniority in this category
exceeding 2 years minimum depending on the country.
The balances for a financial asset are kept on balance sheet until they are considered as a “failed risk”, either the
whole or a portion of that financial asset, and are lowered on the balance sheet.
In the case of transactions which have only been partially derecognized, on the grounds of removal or by the fact
that a part of the total amount is considered irrecoverable, the remaining amount shall be classified in full in the
category of “doubtful risk”, except for duly justified exceptions.
The classification of a financial asset, or a portion thereof, as a “default risk” does not imply the interruption of
negotiations and legal proceedings to recover its amount.
iii. Impairment valuation assessment
The Group has policies, methods and procedures in place to cover its credit risk, both for the insolvency
attributable to counterparties and for its residence in a given country. These policies, methods and procedures are
applied in the granting, study and documentation of financial assets, risks and contingent commitments, as well
as in the identification of their impairment and in the calculation of the amounts necessary to cover their credit
risk.
The impairment model of IFRS 9 applies to financial assets measured at amortized cost, to debt instruments
measured at fair value through other comprehensive income, to lease charges, as well as commitments and
guarantees granted not measured at fair value.
27
The impairment correction represents the best estimate of the expected credit losses of the financial instrument
at balance sheet date, both individually and collectively:
–
Individually: For the purpose of carrying out estimates of credit risk provisions for insolvencies of a financial
instrument, the Group carries out an individualized estimate of the expected credit losses of those financial
instruments that are considered significant and with sufficient information to make such calculation.
The individualized estimate of the impairment correction of the financial asset is equal to the difference
between the gross carrying amount of the operation and the value of the estimate of the cash flows expected
to be collected discounted using the original effective interest rate of the operation. The estimation of such
cash flows takes into account all available information on the financial asset as well as the effective
guarantees associated with that asset.
– Collectively: The Group estimates the expected credit losses collectively in cases where they are not estimated
on an individual basis. This includes, for example, risks to individuals, individual entrepreneurs or retail
banking companies subject to standardized management.
For the purpose of collectively calculating expected credit losses, the Group has robust and reliable internal
models. For the development of such models, instruments that have similar credit risk characteristics that are
indicative of the capacity to pay of the debtors are considered.
The credit risk characteristics that are considered for grouping instruments include: type of instrument, sector of
activity of the debtor, geographical area of activity, type of guarantee, age of amounts due and any other factor
that is relevant to the estimation of future cash flows.
The Group conducts retrospective and follow-up tests on these estimates to assess the reasonableness of the
collective calculation.
On the other hand, the methodology required for the quantification of the expected loss by credit events is based
on an unbiased and weighted consideration by 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 impact
on the collection of contractual cash flows, always taking into account both the time value of the money, as well
as all available and relevant information on past events, current conditions and predictions of the evolution of the
macroeconomic factors that prove relevant for the estimation of this amount (for example: GDP (gross domestic
product), housing price, unemployment rate, etc.).
Estimating 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 forward-looking information in internal and regulatory
management processes, incorporating various scenarios leveraging the experience with such information to
ensure the consistency of processes.
Grupo Santander Consumer Finance uses forward-looking information in both internal risk management and
prudential regulation processes, so that for the calculation of the correction for impairment of value, various
scenarios are incorporated that take advantage of the experience with this information, thus ensuring consistency
in obtaining the expected loss.
The complexity of the estimate in this exercise has been derived from the current macroeconomic scenario as a
result of the war in Ukraine, as well as the increasing level of inflation and interest rates, and difficulties in supply
chains, including the economic and economic situation. this has generated some uncertainty in the economic
evolution.
Grupo Santander Consumer Finance has internally ensured the criteria to be followed on the guarantees received
by the State Administrations, both through credit lines and through other public guarantees, so that when they
are adequately reflected in each of the contracts, they are counted as mitigating factors of the potential expected
losses, and therefore of the provisions to be provided, based on the provisions of the applicable rule. Furthermore,
where appropriate, such guarantees are adequately reflected in mitigating the significant increase in risk,
considering their nature as personal guarantees.
For the estimation of the parameters used in the estimation of impairment provisions (EAD (Exposure at Default),
PD (Probability of Default), LGD (Loss Given Default), the Group has based on its experience in developing internal
28
models for the calculation of parameters both in the regulatory field and for management purposes, adapting the
development of the models of impairment provisions under IFRS9.
– Exposure to default: The amount of risk incurred estimated at the time of the counterparty analysis.
– Probability of default: Is the estimated probability that the counterparty will default on its capital and/or
interest payment obligations.
– Loss given default: Is the estimate of the severity of the loss produced in the event of a default. It depends
mainly on the updating of the guarantees associated with the operation and the future flows expected to
be recovered.
In any case, when estimating the flows expected to recover, portfolio sales are included. It should be noted that
due to the Group’s recovery policy and the experience observed in relation to past sales prices in assets classified
as Stage 3 and/or failed, there is no substantial divergence between the flows from recoveries from asset recovery
with those from the sale of asset portfolios discounting structural costs and other costs incurred.
The definition of default implemented in the other units of the Group for the purpose of calculating the
impairment provisions 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 the IFRS9, which considers that there is a “default”
in relation to a certain client / contract when at least one of the following circumstances occurs: the institution
considers that there are reasonable doubts about the payment of all its credit obligations or that the
client/contract is in an irregularity situation for more than 90 consecutive material arrears with respect to any
significant credit obligation.
Grupo Santander Consumer Finance has partially and voluntarily aligned during the 2022 financial year, both the
accounting definition of stage 3, and the calculation of the impairment provisions models, to Default's New
Definition incorporating the criteria defined by the EBA in its implementation guide of the default definition,
capturing the economic deterioration of operations (days in default - on a daily basis - and materiality thresholds
- minimum amount in arrears). The alignment of criteria has been carried out taking into account the criteria of
IFRS 9, as well as the accounting principles of fair financial reporting. Grupo Santander Consumer Finance has
recorded an expected increase in the NPL rate is estimated at around 23 basis points, with no material impact on
credit risk provision figures.
In addition, the Group considers the risk that arises in all cross-border transactions, due to circumstances other
than the usual commercial risk due to insolvency (sovereign risk, transfer risk or risks arising from international
financial activity, such as wars, natural disasters, balance of payments crises, etc.).
IFRS9 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 full and high-level implementation of the standard, and following
industry best practices, the Group does not apply these practical solutions in a generalized manner:
– Rebuttable presumption of 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 the significant increase in risk. In addition,
there are some cases in the Group, in which its use has been refuted through studies that show a low
correlation of the significant increase in risk with this threshold of delay. The refuted volume does not exceed
0.1% of the Group’s total exposure.
– Assets with low credit risk as of the reporting date: The Group analyzes the existence of a significant increase
in risk in all its financial instruments.
This information is further broken down in Note 47.II (credit risk).
g) Detail of the individualised estimate of the correction of impairment
For the individualised estimation of the impairment correction of the financial asset, the Group has a specific
methodology to estimate the value of the cash flows expected to be collected. Generally, such recovery may be
estimated on the basis of:
– Recovery via debt repayment for cash flows generated by the debtor’s ordinary activities (Going Concern
approach).
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– Recovery via repayment of the debt for the execution and subsequent sale of collateral that guarantee the
operations (Gone Concern approach).
In case of estimating the recovery using a “Gone Concern” approach, each of the Group’s units has developed its
own methodology which is based on the following methodological principles:
a. Evaluation of the effectiveness of guarantees
The Group makes an assessment of the effectiveness of all guarantees associated with the financial asset subject
to an individual impairment assessment. The following aspects are considered for this assessment:
• The time required to enforce such guarantees;
• The ability of the Group to enforce or enforce these guarantees in its favor;
• 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 itself when its valuation may be significantly affected by
a debtor’s default.
• Cross-personal guarantees: 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 real estate, which are first charge, provided that they are duly constituted and
registered in favor of the Group. Real estate includes:
– Buildings and elements of finished buildings distinguishing between: Homes; offices and commercial
premises and multipurpose warehouses; rest of buildings such as non-polyvalent warehouses and hotels.
– Urban land and land for development.
– Rest of real estate where, among others, buildings and elements of buildings under construction, such as
ongoing promotions and stopped promotions, and the rest of land, such as rustic estates would be
classified.
• Pledges on financial instruments such as cash deposits, debt securities of reputable issuers or equity
instruments.
• Other types of collateral, including movable property received as collateral and second and successive
mortgages on immovable property, provided that the entity demonstrates its effectiveness. In assessing the
effectiveness of second and successive mortgages on real estate, the Group will apply particularly restrictive
criteria. It will take into account, among others, whether or not the above charges are in favor of the Group
itself and the relationship between the risk guaranteed by them and the value of the property.
• Personal guarantees, as well as the incorporation of new holders, that cover the entire amount of the
transaction and that imply direct and joint and several liability to the entity of persons or entities whose equity
solvency is sufficiently verified to ensure the reimbursement of the operation in the agreed terms.
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b. Valuation of guarantees
In this regard, the Group will assess the guarantees associated with financial instruments according to 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 regulations. If it is not possible to obtain a complete individual valuation,
alternative assessments may be used provided that they have been carried out by duly documented and
approved internal valuation models.
• Personal guarantees shall be assessed individually on the basis of updated information from the
guarantor.
• All other guarantees will be valued based on current market values if available or based on other
management information.
c. Adjustments to the value of guarantees and estimation of future cash flow inflows and outflows
The Group applies a number of adjustments to the value of guarantees which may be positive or negative with
the aim of adjusting the benchmarks:
• Adjustments based on the historical sales experience of local units for certain asset typologies. Such
adjustments will be made in the same way if the current valuations are not up to date.
•
Individual expert adjustments based on additional management information (for example, if there is a binding
offer to acquire that asset or the asset is severely impaired).
In addition, the Group for adjusting the value of collateral shall take into account the time value of the money.
Basically for this and based on the historical experience of each of the units, it is estimated:
• Period of adjudication.
• Estimated time of sale of the asset
In addition, the Group must take into account those cash inflows and outflows that such guarantee would
generate until its sale. To this end, the Group considers in estimating the present value of future cash flows of this
guarantee:
• Possible future incomes committed to the borrower which can be accessed after the award of assets.
• Estimated award costs.
• Asset maintenance costs, taxes and community costs.
• Estimated marketing or sales costs.
Finally, in considering that the guarantee will be sold in the future, the Group applies an additional index forward
adjustment 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.
d. Scope of application of the individualized estimation of the correction for impairment of value
Grupo Santander Consumer Finance determines the perimeter on which it makes an estimation of the correction
for deterioration in an individualized way based on a threshold of relevance set by each of the geographies and
the stage in which the operations are located. In general, the Group applies the individualized calculation to those
relevant exposures classified in Stage 3.
It should be noted that, in any case and regardless of the stage in which their operations are located, for clients
who do not receive standardized treatment, a relational risk management model is applied, with treatment and
individualized follow-up by the assigned risk analyst. Within this relational management model, in addition to
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large companies, other segments of smaller companies are also included for which there is information and
capacity to perform a more personalized and expert analysis and follow-up. As indicated in the Group’s credit
model, the individualized and personalized treatment of the client facilitates the continuous updating of
information. The risk assumed must be monitored and monitored throughout its life cycle, allowing anticipation
and action in case of possible deterioration. In this way, the client's credit quality is analyzed individually,
considering the aspects that are specific to him such as his competitive position, financial performance,
management, etc. In the wholesale risk management model, every client with a credit risk position has an
assigned rating, which carries an associated probability of customer default. Thus, the individualized analysis of
the debtor triggers a specific rating for each client, which determines the appropriate parameters for the
calculation of the expected loss, so that it is the rating itself that initially modulates the necessary coverages,
adjusting the severity of the possible loss to the warranties and other mitigants that the client may have.
Additionally, if as a result of this individualized monitoring of the client, the analyst finally considers that his
coverage is not sufficient, he has the necessary mechanisms to adjust it under his expert judgment, always under
the appropriate government.
h) Repurchase agreements and reverse repurchase agreements
Purchases (sales) of financial instruments with the commitment of their non-optional retrocession at a given price
(repos) are recorded in the consolidated balance sheet as financing granted (received) according to the nature of
the corresponding debtor (creditor), under the headings "Loans and advances" (central banks, credit institutions
or customers) and "deposits" (central banks, credit institutions or customers), if they exist.
The difference between purchase and sale prices is recorded as financial interest over the life of the contract using
the effective interest rate method.
i) Assets and liabilities included in disposal groups classified as held for sale
The chapter Non-current assets and disposal groups classified as held for sale reflects the carrying value of items
that are individual or integrated into a set (disposition group) or that are part of a business unit to be disposed of
(operations in discontinuance) the sale of which is highly likely to take place, under the conditions under which
such assets are currently located, within one year of the date to which the annual accounts refer. Therefore, the
recovery of the carrying value of these items (which may be financial and non-financial in nature) is expected to
take place through the price obtained from their disposal.
Symmetrically, the chapter “Liabilities included in disposal groups that have been classified as held for sale”
includes the credit balances associated with assets or disposition groups and discontinued transactions.
Non-current assets sold, whether individual or integrated, if any, in a disposal group, are generally valued for the
smallest amount between their fair value minus selling costs and their carrying value calculated at the date of
their assignment to this category. Non-current assets for sale are not amortized while they remain in this category.
Without prejudice to the foregoing, financial instruments, employee remuneration assets, deferred tax assets and
reinsurance contract assets that may exist and are classified, in their case as “non-current assets and disposal
groups of items that have been classified as held for sale”, they continue to be valued by the same valuation
criteria detailed in this Note, without modification due to the fact that they have been classified as non-current
for sale. In the case of awarded real estate assets located in Spain, the Group determines their value taking into
account the valuation of the time of adjudication and the period of permanence of each asset in consolidated
balance sheet.
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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
This heading of the consolidated balance sheet includes, where appropriate, buildings, land, furniture, vehicles,
computer equipment and other facilities owned by consolidated entities or acquired, where appropriate, on a
financial lease basis, for own use. Tangible assets are classified, according to their destination, into:
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.
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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 of own use
Furniture
Vehicles
Computer equipment
Others
Right to use leasing
Percentage
Annual
media
1.5% - 2%
10 %
28.6 %
25 %
12 %
10 %
At each accounting closure, consolidated institutions analyze whether there are indications that the net value of
the elements of their tangible assets exceeds their corresponding recoverable amount, in which case, reduce the
carrying value of the asset in question to its recoverable amount from the consolidated profit and loss account
and adjust future depreciation charges in proportion to its adjusted carrying value and its new remaining useful
life; if a reestimation of the same is necessary.
Similarly, where there is evidence that the value of a previously impaired tangible asset has been recovered,
consolidated entities record the reversal of impairment loss recorded in prior periods by writing off to the
consolidated profit and loss account and adjust accordingly, future charges for amortization. In no case can the
reversal of the impairment loss of an asset result in an increase in its carrying value above that which it would
have if impairment losses had not been recognized in previous years.
Also, at least at the end of each financial year, the estimated useful life of the elements of fixed equipment for
own use is reviewed, in order to detect possible significant changes in them. If they occur, redemption allocations
for new useful lives are adjusted by a corresponding correction of the charge to be incurred in the consolidated
profit and loss account for future periods.
The costs of maintaining and maintaining tangible assets for own use are charged to the consolidated profit and
loss account for the period in which they are incurred.
ii.
Investment properties
“Tangible Assets – Real Estate Investments” includes, if any, the net values of the land, buildings and other
constructions that are maintained, either to exploit them on a rental basis, either to obtain a surplus value in its
sale as a result of the increases that occur in the future in their respective market prices.
The criteria applied for the recognition of the acquisition cost of real estate investments, their depreciation and
the estimation of their respective useful lives as well as for the recording of their possible impairment losses
coincide with those described in relation to tangible assets for own use.
iii. Assets transferred under operating lease
“Tangible assets – fixed material – leased on operating leases” in the consolidated balance sheets includes the
amount of assets, other than land and buildings, that are leased on operating leases.
The criteria applied for the recognition of the acquisition cost of the assets assigned under operating leasing, their
amortization and the estimation of their respective useful lives as well as for the recording of their impairment
losses are consistent with those described in relation to tangible assets for own use.
The period depreciation charge is recognised under ¨Other operating expense¨ in the consolidated income
statement.
34
k) Leases
The main aspects contained in the regulations (IFRS 16) adopted by the Group are included below: when the
Group acts as a lessee, a right-of-use asset is recognized, representing its right to use the leased asset and the
related lease liability on the date the leased asset is available for use by the Group. Each lease payment is
allocated between the liability and the financial expense. The financial expenditure is charged to profit or loss
over the lease term in such a way as to produce a constant recurring interest rate on the remaining balance of the
liability for each year. The right-of-use asset is amortized over the useful life of the asset or the lease term, the
smallest of the two, on a linear 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 valued on the basis of present value. Lease liabilities include the net present value of the following
lease payments:
– Fixed payments (including inflation-linked payments), less any lease incentive to be collected.
– Variable lease payments that depend on an index or type.
– The amounts expected to be paid by the lessee as residual value guarantees.
– The exercise price of a purchase option if the lessee has reasonable certainty that he will exercise that option.
– Payments of penalties for termination of the lease, if the term of the lease reflects the exercise by the lessee
of that option. Lease payments are deducted using the interest rate implied in the lease. Since in certain
situations this interest rate cannot be earned, the discount rate used in such cases is the lessee's incremental
borrowing interest rate to date. For these purposes, the entity has calculated this incremental interest rate
based on the listed debt instruments issued by the Group; in this regard, the Group has estimated different
rate curves depending on the currency and the economic environment in which the contracts are located.
Specifically, to build the incremental interest rate, a methodology has been developed at the corporate level; this
methodology starts from the need for each entity to consider its economic and financial situation, for which the
following factors must be considered:
– Economic and political situation (country risk).
– Credit risk of the entity.
– Monetary policy.
– Volume and seniority of the issuance of debt instruments of the entity.
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 duration of the lease and with similar security, the funds required to obtain an asset of similar value
to the right-of-use asset in a similar economic environment. The Group entities have a large stock and variety of
financing instruments issued in different currencies to the euro (pound, dollar, etc.) that provide sufficient
information to determine an all-in rate (reference rate plus adjustment for credit spread at different terms and in
different currencies). In cases where the lessee has its own financing, it has been used as a starting point for the
determination of the incremental interest rate. On the contrary, for those Group entities that do not have their
own funding, information from the financing of the consolidated subgroup to which they belong has been used
as a starting point to estimate the entity’s curve, analyzing other factors to assess whether it is necessary to make
any kind 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 start date minus any lease incentive received.
– Any initial direct cost.
– Restoration costs.
35
Payments associated with short-term leases and low-value asset leases are recognized on a linear basis as an
expense in profit or loss. Short-term leases are leases with a lease term of less than or equal to 12 months (a
purchase-option lease does not constitute a short-term lease).
l)
Intangible assets
This heading includes identifiable non-monetary assets (likely to be separated from other assets), but without
physical appearance, that arise as a result of a legal business or have been developed by consolidated entities and
goodwill other than that which may exist in the acquisition of entities valued by the equity method. Only those
intangible assets whose cost can be reliably estimated and from which consolidated entities consider it likely to
obtain future economic benefits are recognised in the accounts.
Intangible assets other than goodwill are initially recognised at the cost of acquisition or production and are
subsequently valued at their cost minus, as appropriate, their corresponding accumulated amortization and/or
impairment losses.
i. Goodwill
The positive differences between the cost of the equity shares of consolidated entities and those valued by the
equity method with respect to the corresponding theoretical and accounting values acquired, adjusted on the date
of first consolidation, are imputed as follows:
–
If they are assignable to specific assets of the acquired companies, increasing the value of assets (or reducing
that of liabilities) whose fair values were higher (lower) than the net accounting values with which they appear
on the balance sheets of the acquired entities.
– Whether they are assignable to specific intangible assets, explicitly recognizing them on the consolidated
balance sheet provided that their fair value within 12 months of the date of acquisition can be reliably
determined.
– The remaining differences are recorded as a goodwill, which is allocated to one or more cash generating units
(these are the smallest identifiable group of assets that, as a result of their continued operation, generate
cash flows in favor of the Group, regardless of those from other assets or group of assets). The cash
generating units represent the geographical and/or business segments of the Group.
Funds of trade (which are recorded only when acquired for consideration) therefore represent advance payments
made by the acquiring entity of future economic benefits derived from the assets of the acquired entity that are
not individually and separately identifiable and recognizable.
At least annually or where there are signs of impairment, an estimate is made of whether there has been any
impairment which reduces its recoverable value to an amount less than the net cost recorded and, if so,
appropriate reorganization, using as a counterpart the heading impairment losses on other assets - Fund of
Commerce and other intangible assets in the consolidated profit and loss account.
Impairment losses related to goodwill are not subject to subsequent reversal.
In the event of the sale or abandonment of an activity that forms part of a UGE, the part of the goodwill allocated
to that activity would be removed, taking as a reference the relative value of the same on the total of the UGE at
the time of sale or abandonment. In the case of applying the currency distribution of the remaining goodwill, it
shall be based on the relative values of the activity
ii. Other intangible asset
Intangible assets may be of “indefinite useful life” (when, based on analysis of all relevant factors, it is concluded
that there is no foreseeable limit on the period during which they are expected to generate net cash flows in favor
of consolidated entities) or "defined useful life" (in the remaining cases).
Intangible assets of “indefinite useful life” are not written off, but at each accounting close, consolidated entities
review their respective remaining useful lives to ensure that they remain indefinite or otherwise proceed
accordingly.
36
Intangible assets classified as “defined useful life” are amortized on the basis of the same, applying criteria similar
to those adopted for the amortization of tangible assets. The charges charged to the consolidated profit and loss
accounts for the amortization of these assets are recorded under the “amortization” chapter.
In both cases, consolidated entities recognize in the accounts any loss that may have occurred in the recorded
value of these assets resulting from impairment, using as a counterpart the heading impairment losses on other
assets (net) in the consolidated profit and loss account. The criteria for recognition of impairment losses on these
assets and, where applicable, recoveries of impairment losses recorded in prior years are similar to those applied
for tangible assets (see Note 2.j).
iii. Internally developed computer software
Internally developed software is recognized as intangible assets when, among other requirements (basically, the
ability to use or sell), such assets can be identified and their ability to generate economic benefits in the future
can be demonstrated.
The expenses incurred during the investigation stage, if any, are directly recognized in the consolidated profit and
loss account for the year in which they are incurred, and cannot subsequently be incorporated into the carrying
value of the intangible asset.
m) Other assets and other liabilities
The “Other assets” chapter of the consolidated balance sheets includes, where appropriate, the amount of assets
not recorded elsewhere, broken down into:
–
Inventory: 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 that purpose,
or they will be consumed in the production process or in the provision of services. This chapter includes the
assets that have been acquired in order to lease them to third parties, and at the date of the consolidated
balance sheets, their corresponding operating lease agreements are pending.
Inventories are valued at the lesser amount between their cost and their net realizable value, which is the
amount expected to be obtained by leasing or selling them in the ordinary course of business, less the
estimated costs to complete its production and those necessary to carry out its exploitation.
The amount of any adjustment for valuation of inventories, such as damage, obsolescence, reduction of the
sales price, to its net realizable value, as well as losses for other purposes, is recognized as expenditure for
the year in which the impairment or loss occurs. Subsequent recoveries of value are recognized in the
consolidated profit and loss account for the period in which they occur.
The carrying value of the stock is removed from the balance sheet and is recorded as an expense in the period
that the income from its sale is recognized.
– Other: Includes, where applicable, the balance of all asset deferred accounts, except those relating to interest
and financial commissions, the net amount of the difference between pension plan obligations and the value
of plan assets with favorable balance for the Group, when it is due to be presented for the net amount in the
consolidated balance sheet, as well as the amount of the remaining assets not included in other items.
The “Other liabilities” chapter of the consolidated balance sheets includes the balance of the liability deferred
accounts, other than those relating to interest, and the amount of the remaining liabilities not included in other
chapters of the consolidated balance sheet.
n) Provisions and contingent assets and liabilities
Provisions are creditor balances covering obligations present at the consolidated balance sheet date arising from
past events from which capital losses may arise for consolidated entities, which are considered likely to occur,
specific in terms of their nature but indeterminate in terms of their amount and/or time of cancelation and, to
cancel them, consolidated entities expect to dispose of resources that incorporate economic benefits.
37
Contingent liabilities are potential liabilities arising as a result of past events, the materialization of which is
conditional on the occurrence or otherwise of one or more future events independent of the will of consolidated
entities. They include the current obligations of consolidated entities, the materialization of which, although
possible, has not been considered likely to lead to a decrease in resources that incorporate economic benefits and
the amount of which cannot be quantified with sufficient reliability. The Group should not proceed to recognize
an accounting obligation of a contingent nature. On the contrary, it should report the obligation in the financial
statements, unless the outflow of resources incorporating economic benefits is unlikely.
Contingent assets are potential assets, arising as a result of past events, the existence of which is conditioned and
must be confirmed when events that are beyond the control of the Group occur or not. Contingent assets, if they
exist, are not recognized in the consolidated balance sheet or the consolidated profit and loss account, but are
reported in the consolidated report provided that increased resources incorporating economic benefits from this
cause are likely.
The Group's consolidated annual accounts reflect all significant provisions for which the likelihood of the
obligation being met is estimated to be greater than otherwise. In accordance with current regulations, contingent
liabilities are not recognized in the consolidated annual accounts, but, if they exist, are reported in the
consolidated report.
The provisions (quantified taking into account the best available information on the consequences of the event in
which they bring their cause and are reestimated at the time of each accounting closure) are used to meet the
specific obligations for which they were originally recognized and reversed; total or partial, when such obligations
cease to exist or diminish.
Provisions are classified according to the obligations covered in:
– Pensions and other defined post-employment benefit obligations: Includes the amount of provisions made
for the coverage of post-employment pay defined benefit, as well as commitments made to pre-retired staff
and similar obligations (see Note 21).
– Other long-term employee pay: Includes other commitments to pre-retired staff (see Notes 2.r. and 21).
– Procedural issues and pending tax litigation: Includes the amount of provisions created to cover contingencies
of a tax, legal and litigation nature (see Note 21). This item includes provisions for restructuring and
environmental actions, if any (see Note 21).
– Commitments and guarantees granted: Includes the amount of provisions made for contingent risk coverage,
understood as operations in which the Group guarantees obligations of a third party arising as a result of
financial guarantees granted or other contracts, and contingent commitments, understood as irrevocable
commitments that may give rise to the recognition of financial assets (see Note 21).
– Remaining provisions: Includes the amount of the remaining provisions made by the Group (see Note 21).
The accounting, or release, if any, of provisions deemed necessary in accordance with the above criteria is recorded
under or credited respectively to the “Provisions or reversal of provisions” chapter of the consolidated profit and
loss account. The criteria applied for accounting for pensions and other post-employment defined benefit
obligations are described in Notes 2-r and 2-s.
o) Court proceedings and/or claims in process
At the close of 2023 and 2022, various legal proceedings and claims were under way against consolidated entities
arising from the normal conduct of their activities. Both the legal advisers of the Group and the Bank
Administrators, as the Group's parent company, consider that the final economic loss that may arise from these
procedures and claims, if any, is adequately provisioned (see Note 21), so it will not have a significant effect on
these consolidated annual accounts.
38
p) Recognition of income and expenses
The most significant criteria used by the Group for the recognition of its income and expenditure are summarized
below:
i.
Interest income and expenses and similar items
In general, interest income and expenses and concepts assimilated thereto are recognized in the accounts on the
basis of their accrual period, by application of the effective interest method. Dividends received from companies
other than Group companies, associates or joint ventures are recognized as income at the time the right to receive
them arises.
ii. Commissions, fees and similar items
These income and expenses are recognized in the consolidated profit and loss account on different criteria
depending on their nature. The most significant are:
– Those linked to financial assets and liabilities measured at fair value through profit and loss are recognized at
the time of disbursement.
– Those eligible to be part of the initial acquisition cost of financial instruments, other than those measured at
fair value through profit and loss, are charged to the consolidated profit and loss account; applying the
effective interest rate method or at the time of its sale, taking into account its nature.
– Those that originate from transactions or services that last over time, differ during the life of such transactions
or services.
– Those who respond to a singular act, when the act that originates them occurs.
iii. Non-financial income and expenses
They are recognized on an accrual basis. To determine the amount and time of recognition, a five-step model is
followed: identification of the contract with the customer, identification of the obligations separate from the
contract, determination of the transaction price, distribution of the transaction price between the identified
obligations and finally recording the income as the obligations are satisfied.
iv. Deferred collections and payments
They are recognized accountably for the amount that results from financially updating the anticipated cash flows
at market rates.
v.
Loan arrangement fees
The financial commissions that originate from the formalization of loans, mainly the opening and study and
information commissions, are paid to the consolidated profit and loss account, following a financial criterion,
during the life of the loan.
q) Financial guarantees
“Financial guarantees” are the contracts by which an entity is obliged to pay specific amounts on behalf of a third
party in the event that it does not do so, regardless of the legal form in which the obligation is implemented: Bond,
financial guarantee, insurance or derivative of credit.
At the time of its initial registration, the Group accounts for the financial guarantees provided in the consolidated
balance sheet liability at fair value, which, in general, is equivalent to the present value of the commissions and
income to be received on such contracts over the course of their duration, taking as a counterpart, in the assets of
39
the consolidated balance sheet, the amount of commissions and similar income collected at the beginning of
operations and a credit for the accounts receivable for the present value of the commissions and income
outstanding.
Financial guarantees, regardless of their holder, instrumentation or other circumstances, are periodically analyzed
in order to determine the credit risk to which they are exposed and, where appropriate, to estimate the needs to
provide for them, that is determined by applying criteria similar to those established to quantify impairment
losses experienced by debt instruments valued at their amortized cost explained in subparagraph (f) above.
The provisions made by these transactions are accounted for under the heading “Provisions – commitments and
guarantees granted” of the consolidated balance sheet liability (see Note 21). The endowment and recovery of
such provisions is recorded in return under the section “Provisions or reversal of provisions” of the consolidated
profit and loss account.
In the event that it is necessary to make a provision for these financial guarantees, the outstanding accrual
commissions, which are recorded in the chapter “Financial liabilities at amortized cost – Other financial liabilities”
of the consolidated balance sheet, are reclassified to the corresponding provision.
r) Post-employment benefits
In accordance with the Collective Labour Agreements in force, the financial institutions integrated in the Group
and some of the other consolidated entities (national and foreign) are committed to complementing the benefits
of the public systems corresponding to certain employees, and their beneficiaries, in cases of retirement,
permanent disability or death, as well as other post-employment social care.
Post-employment commitments maintained by the Group with its employees are considered “defined
contribution plans” when contributions of a predetermined nature are made to a separate entity, it has no legal
or effective obligation to make additional contributions if the separate entity is unable to meet the remuneration
to employees related to the services rendered in the current and prior financial years. Post-employment
commitments that do not meet the above conditions are considered “defined benefit plans” (see Note 21).
i. Defined contribution plans
The Group records the contributions to the plans accrued for the year under the heading “Administration expenses
– staff costs” of the consolidated profit and loss account. In the event that, at the end of the financial year, there
is any amount to be contributed to the external plans in which the commitments are materialized, this is recorded
at its present value, under the heading “Provisions – Pensions and other post-employment defined benefit
obligations” of the consolidated balance sheet liability (see Note 21).
ii. Defined benefit plans
The Group records under the heading “Provisions – Pensions and Other Defined Post-Employment Benefits
Obligations” of the liabilities in the consolidated balance sheet (or in the asset, in the chapter “Other Assets”,
depending on the sign of the difference) the present value of the post-employment commitments of defined
benefit, net of fair value of “plan assets” (see Note 21).
“Plan assets” are those with which the obligations will be liquidated directly and meet the following conditions:
– They are not the property of the consolidated entities, but of a legally separated third party without the status
of a party linked to the Group.
– They are only available to pay or finance post-employment remuneration and cannot be returned to
consolidated entities, except where the assets remaining in such a plan are sufficient to meet all obligations
of the plan or entity relating to benefits of current or past employees or to reimburse employee benefits
already paid by the Group.
If the Group may require insurance companies to pay part or all of the disbursement required to cancel a defined
benefit obligation, it is virtually true that the insurer will reimburse any or all of the disbursements required to
cancel that obligation, but the insurance policy does not meet the conditions to be an asset of the plan, the Group
registers its right to reimbursement in the asset of the consolidated balance sheet, if any, in the chapter “Insurance
contracts linked to pensions” which, in the other aspects, it is treated as an asset of the plan.
40
Post-employment pay is recognized as follows:
– The cost of services is recognized in the consolidated profit and loss account and includes the following
components:
– The cost of services in the current period (understood as the increase in the present value of obligations
arising from the services provided in the financial year by employees) is recognized under the heading
“Administrative expenses - staff costs” (see Notes 21 and 39).
– The cost of past services, which originates from changes to existing post-employment pay or the
introduction of new benefits and includes the cost of reductions, is recognized, if any, in the chapter
“Provisions or reversal of provisions” (see Note 21).
– Any gain or loss arising from a settlement, the plan is recorded in the “Provisions or Reversals of
Provisions” chapter of the consolidated profit and loss account (see Note 21).
– The net interest on the net liability (asset) of defined benefit commitments (understood as the change
during the period in the net defined benefit liability (asset) arising over time), is recognized in the chapter
“Interest expense” (“interest income” if income is earned) from the consolidated profit and loss account
(see Notes 21 and 31).
The revaluation of the net defined benefit liability (assets) recognized in chapter “Other aggregate income
accrued. Elements that will not be reclassified into results. Actuarial gains or (–) losses on defined benefit pension
plans” of the net worth of the consolidated balance sheet includes:
– Actuarial gains and losses generated in the period, which are derived from the differences between
previous actuarial assumptions and reality and from changes in the actuarial assumptions used.
– The return on plan assets, excluding amounts included in net interest on defined benefit liabilities (assets).
– Any change in the effects of the asset limit, excluding the amounts included in the net interest on the
defined benefit liability (asset).
s) Other long-term remuneration and other obligations
The other long-term remuneration, understood as the commitments made to pre-retired staff (those who have
ceased to serve in the entity, but who, without being legally retired, continue to have economic rights against it
until it becomes the legal status of retiree), seniority awards, pre-retirement widowhood and disability
commitments that depend on the employee's seniority in the entity and other similar concepts are treated
accountably, where applicable, as set out above for post-employment defined benefit schemes; except that
actuarial gains and losses are recognized in the chapter 'Provisions or reversal of provisions' of the consolidated
profit and loss account (see Note 21).
The commitments made by certain Spanish entities of the Group for the coverage of the death and disability
contingencies of their employees, during the period in which they remain active and until their retirement age,
are kept in an internal fund with a renewable annual temporary coverage, therefore, no contributions are made
to plans.
t) Termination benefits
Severance payments are recorded when a formal and detailed plan identifying the fundamental changes to be
made is available, and provided that the plan has begun to be implemented or its main characteristics have been
publicly announced, or objective facts about its implementation are revealed.
u) Income tax
The expense for Spanish Corporate Tax and for taxes of a similar nature applicable to consolidated foreign entities
is recognized in the consolidated profit and loss account, except when they are the result of a transaction whose
results are recorded directly in equity, in which case, its corresponding tax effect is recorded in equity.
41
The profit tax expenditure for the year is calculated by the sum of the current tax resulting from the application
of the corresponding tax rate on the tax base for the year (after applying the tax deductions that are tax
admissible) and the change in deferred tax assets and liabilities recognized in the consolidated profit and loss
account.
Deferred tax assets and liabilities include temporary differences that are identified as amounts that are expected
to be payable or recoverable by differences between the carrying value of assets and their corresponding tax bases
(tax value), as well as the negative tax bases pending compensation and credits for tax deductions not applied
fiscally. These amounts are recorded by applying to the temporary difference corresponding to the type of levy at
which they are expected to be recovered or settled.
The tax assets chapter includes the amount of all assets of a tax nature, differentiating between: current (amounts
to be recovered for taxes in the next twelve months) and deferred (includes the amounts of taxes to be recovered
in future years, including those derived from negative tax bases or credits for tax deductions or bonuses to be
compensated).
The tax liabilities chapter includes the amount of all liabilities of a tax nature, except tax provisions, which are
broken down into: current (includes the amount to be paid for income tax related to the fiscal gain for the year
and other taxes in the next twelve months) and deferred (includes the amount of income tax payable in future
years).
Deferred tax liabilities in the case of temporary taxable differences associated with investments in dependent
entities, associates or joint venture holdings are recognized except when the Group is able to control the time of
reversal of the temporary difference and, in addition, it is likely that it will not reverse in the foreseeable future.
Deferred tax assets, identified as temporary differences, are recognized only if it is considered likely that
consolidated entities will in the future have sufficient tax gains against which they can be effected and are not
originally recognized (except in a business combination) of other assets and liabilities in a transaction that does
not affect either tax or accounting income. The remaining deferred tax assets (negative tax bases and deductions
to be cleared) are only recognized if it is considered likely that consolidated entities will have sufficient tax gains
against which they can be paid in the future.
The differences generated by the different accounting and tax rating of some of the income and expenses directly
recorded in the equity to be paid or recovered in the future are accounted for as temporary differences.
Deferred taxes, both assets and liabilities, are reviewed at the time of the accounting closure in order to check
whether modifications are necessary in accordance with the results of the analyzes carried out.
v) Residual maturity terms and average interest rates
Note 44 of this consolidated report provides details of the maturities of the items that make up the balances of
certain headings of the consolidated balance sheets as at 31 December 2023 and 2022, as well as their average
annual interest rates for those years.
w) Statement of consolidated recognised income and expenditure
The income and expenses generated by the Group as a result of its activity during the year are presented,
distinguishing between those recorded as results in the consolidated profit and loss account for the year and other
income and expenses recognized directly in the consolidated net worth.
The statement presents separately the items by nature, grouping them into those which, in accordance with the
implementing accounting rules, they shall not subsequently be reclassified to the consolidated profit and loss
account and those subsequently reclassified to that consolidated profit and loss account upon compliance with
the requirements of the relevant accounting standards.
Therefore, in this state is presented:
a. The consolidated result of the year.
b. The net amount of income and expenses recognized as 'other cumulative comprehensive income' in equity
that will not be reclassified into profit or loss.
42
c. The net amount of income and expenses recognized in equity that can be reclassified into profit or loss.
d. The income tax accrued on the items referred to in points b and c above, except for adjustments to other
comprehensive income originating in shares in associated undertakings or joint ventures valued by the equity
method, which are presented in net terms.
e. The total consolidated revenue and expenditure recognized, calculated as the sum of the preceding letters,
showing separately the amount attributed to the dominant entity and that corresponding to minority
interests.
The statement presents separately items by nature, grouping them into those that, in accordance with the
implementing accounting rules, will not be subsequently reclassified to profit or loss and those that will
subsequently be reclassified to profit or loss when the requirements laid down in the corresponding accounting
rules are met.
x) Total statement of changes in consolidated equity
It presents the movements that have occurred in the consolidated net worth, including those that have their origin
in changes in accounting criteria and corrections of errors, if any. This statement therefore shows a reconciliation
of the carrying value at the beginning and end of the financial year of all items forming the consolidated net worth,
grouping the movements, depending on their nature, into the following items:
a. Adjustments for changes in accounting criteria and correction of errors: includes changes in consolidated
equity arising as a result of retroactive reexpression of financial statement balances resulting from changes
in accounting criteria or correcting errors, if any.
b. Revenue and expenses recognized in the financial year: It collects, in aggregate form, the total of the items
recorded in the statement of consolidated income and expenses recognized above.
c. Other changes in equity: Includes the rest of the changes recorded in the consolidated net worth, such as,
where applicable, increases or decreases in the Bank’s capital, distribution of results, operations with own
equity instruments, payments with equity instruments, transfers between consolidated equity item and any
other increase or decrease in consolidated equity.
y) Consolidated cash flow statement
In consolidated cash flow statements, the following expressions are used in the following ways:
– Cash flows: Inflows and outflows of cash and their equivalents; these equivalents mean short-term
investments of high liquidity and low risk of alterations in their value.
– Operating activities: Typical activities of credit institutions, as well as other activities that cannot be qualified
as investment or financing.
–
Investment activities: Acquisition, disposal or other disposition of long-term assets and other non-cash
investments and their equivalents.
– Financing activities: Activities that result in changes in the size and composition of consolidated net assets
and liabilities that are not part of operating activities.
In addition, dividends received and delivered by the Group are detailed in Notes 4 and 27, including dividends paid
to minority interests (non-controlling interests).
In relation to the cash flows corresponding to the interest received and paid, it should be noted that there are no
significant differences between those and those recorded in the profit and loss account, reason why they are not
broken down separately in the consolidated cash flow statements, except for cash flow liabilities for financing
activities which, although not significant, have been broken down in Note 17.
43
For the purpose of preparing the consolidated cash flow statement, "cash and cash equivalents" have been
considered to be those short-term investments with high liquidity and low risk of changes in value. In this way,
the Group considers “cash or cash equivalents” the following financial assets and liabilities:
– The net balances held in cash and with central banks, which are recorded under the heading "Cash, cash
balances in central banks and other cash deposits" of the consolidated balance sheets as at 31 December 2023
and 2022 attached, according to their nature and currency, the following is indicated:
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
2023
40,160
82,148
6,974,338 3,900,413
1,444,566 1,585,659
2,819,469 1,258,005
11,278,533 6,826,225
11,009,456 5,960,743
865,482
11,278,533 6,826,225
269,077
Own equity instruments are those that meet the following conditions:
– They do not include any obligation for the issuing entity that involves: (i) handing over cash or other financial
assets to a third party; or (ii) exchanging financial assets or financial liabilities with third parties on terms
potentially unfavorable to the entity.
–
If they can be, or will be, liquidated with the issuer’s own equity instruments: (i) where it is a non-derivative
financial instrument, it will not entail an obligation to deliver a variable number of its own equity instruments;
or (ii) where it is a derivative, provided that it is settled for a fixed amount of cash, or other financial asset, in
exchange for a fixed number of its own equity instruments.
Business carried out with equity instruments, including their issuance and amortization, is registered directly
against net worth.
Changes in the value of instruments classified as equity shall not be recorded in the financial statements;
consideration received or delivered in exchange for such instruments shall be added or deducted directly from the
equity, including coupons associated with preferential interests contingent convertible into ordinary shares.
(aa) Assets covered by insurance or reinsurance contracts and liabilities covered by insurance or reinsurance
contracts
Group has developed the accounting policy establishing the criteria for recording insurance contracts, in
accordance with IFRS 17. This standard defines insurance contracts as contracts under which a party accepts a
significant insurance risk from another party by agreeing to compensate the policyholder if a specific uncertain
future event adversely affects the policyholder.
IFRS 17 requires a level of aggregation of contracts that the Group identifies in portfolios of contracts with similar
risks and which are jointly managed. The Group then divides each portfolio into a minimum of three groups: (i)
44
contracts that are onerous on initial recognition; (ii) contracts that, on initial recognition, have no significant
chance of becoming onerous subsequently; and (iii) any remaining contracts.
For contracts that are considered to be non-onerous, a profit margin is recognized in the profit and loss account
(called ‘Contractual Service Margin’ or ‘MSC’) over the period in which the entity performs the service. However,
if at the time of initial recognition, or during the period in which the entity performs the service, the contract is
onerous, the entity acknowledges the loss in the income statement.
The contract limits define the period up to which compliance cash flows must be considered in order to measure
an insurance contract. Compliance cash flows include an impartial and probability-weighted estimate of future
cash flows, a discount adjustment to the present value to reflect the time value of money from monetary and
financial risks, and a risk adjustment for non-financial risks. The identification of the contractual limit under IFRS
17 is critical not only for the measurement of the compliance cash flows of a group of contracts, but also for
determining the applicable measurement model, in case the contractual limits are identified in one year or more.
Cash flows are within the contractual limit of an insurance contract if they arise from substantial rights and
obligations that exist during the reporting period, in which the institution may compel the holder of the insurance
policy to pay premiums or in which the entity has a substantive obligation to provide services to the insured.
The Group has conducted a separate analysis of the limits of insurance and reinsurance contracts under IFRS 17,
applying the General Building Block Approach to all contracts, except those eligible to be valued by the simplified
model (Premium Allocation Approach), or the variable commission approach (‘ECV’ or variable Fee Approach).
The general model measures a group of contracts as the sum of Compliance Cash Flows and Contractual Service
Margin. The MSC represents the unrecorded benefits that the entity will recognize as if it provides services under
the insurance contract.
Insurance contracts with direct participation apply the CVD as a modified version of the General Model. This
should reduce the volatility of results due to the asymmetry between the accounting treatment of gains and
losses of underlying elements attributable to insured persons and the accounting treatment of liabilities against
insured persons.
Another issue considered for measuring the present value of future cash flows from a group of insurance contracts
is the discount rate applied to reflect the time value of money and the financial risks associated with those cash
flows. The Group has established a generally chosen methodology and ensures that the calculation components
have a homogeneous basis, previously approved by the Group, establishing the base curves provided by the Group
and allowing adjustments to these curves based on the expert criteria of each local management.
In addition, a risk adjustment for non-financial risk is necessary to measure compliance cash flows. Risk
adjustment for non-financial risk is the compensation necessary to withstand uncertainty about the amount and
timing of cash flows arising from non-financial risks. If a change in assumptions occurs, it could affect the income
statement or other Global Income, depending on its nature. The risks covered by the risk adjustment for non-
financial risk are insurance risk and other non-financial risks, such as interruption risk and expense risk.
Grupo Santander Consumer Finance has concluded the analysis on the effects of this new standard without having
identified material impacts on its consolidated financial statements.
45
3. Santander Consumer Finance Group
a) Santander Consumer Finance, S.A.
The Bank is the parent company of Grupo Santander Consumer Finance (see Note 1). The Bank's summary balance
sheet, summary profit and loss account, summary statement of changes in equity and summary statement of
cash flows for the years 2023 and 2022 are presented below for information purposes:
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED BALANCE SHEET AS AT 31 DECEMBER 2023 AND 2022
(EUR Thousands)
ASSETS
Exercise
2023
Exercise
2022
LIABILITIES AND EQUITY
Exercise
2023
Exercise
2022
Cash and balances at central banks
1,804,454
489,246 LIABILITIES
Financial assets held for trading
91,585
125,187 Financial liabilities held for trading
99,626
95,224
Non-trading financial assets mandatorily
at fair value through profit or loss
658
387
Financial liabilities at amortised cost
46,429,704 36,758,895
Financial assets through other
comprehensive income
Financial assets at amortised cost
Derivatives – hedge accounting
Changes of the fair value of hedged items
in an interest rate risk hedging portfolio
Investments in subsidiaries, joint
ventures and associates
Tangible assets
Intangible assets
Tax assets
Other assets
2,052,062 2,462,252 Derivatives – hedge accounting
41,185,022 31,833,829 Provisions
110,354
454,166 Tax liabilities
(103,053)
(171,757) Other liabilities
11,293,800 11,292,945
206,186
90,741
383,631
223,864
60,577
89,521
368,899
153,008
24,569
146,996
439,866
87,749
26,391 TOTAL LIABILITIES
118,289
365,721 Equity
53,964 Other comprehensive income
47,433,752 37,526,124
9,745,235 9,534,480
(7,338)
(42,430)
Assets included in disposal groups
classified as held for sale
2,495
2,646
TOTAL ASSETS
57,136,557 47,053,266 TOTAL LIABILITIES AND EQUITY
TOTAL EQUITY
9,702,805 9,527,142
57,136,557 47,053,266
Memorandum items: off balance sheet
items
Loans commitment granted
Financial guarantees granted
752,699
630,107
4,088,678 4,063,980
46
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED INCOME STATEMENTS AS AT 31 DECEMBER 2023 AND 2022
(EUR Thousands)
Income / (expenses)
Exercise
2023
Exercise
2022
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
Impairment charges and reversals from financial assets not at fair value through profit or loss
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
1,650,772
(1,149,379)
501,393
889,086
—
88,169
(65,846)
47,128
(1,724)
5,170
(3,794)
30,522
10,135
(41,253)
1,458,986
(332,941)
(31,949)
(31,925)
(108,835)
953,336
—
(2,541)
(4,773)
946,022
(28.799)
917,223
917,223
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)
(100,102)
895,686
—
(8,352)
(2,684)
884,650
(32,857)
851,793
851,793
47
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED STATEMENTS OF RECOGNISED INCOME AND EXPENSE AS
31 DECEMBER 2023 AND 2022
(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
Exercise
2023
Exercise
2022
917,223
(35,092)
(630)
(916)
—
(27)
313
(34,462)
—
—
(46,416)
(2,816)
—
—
14,770
882,131
851,793
(17,291)
1,333
4,228
—
(593)
(2,302)
(18,624)
—
—
47,023
(73,627)
—
—
7,980
834,502
48
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED STATEMENTS OF TOTAL CHANGES IN EQUITY AS AT 31 DECEMBER 2023 AND 2022
(EUR Thousands)
Capital
Share
premium
5,638,639
—
5,638,639
—
—
5,638,639
—
—
1,139,990
—
1,139,990
—
—
1,139,990
—
—
Equity
instruments
issued other
than capital
1,200,000
—
1,200,000
—
—
1,200,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,638,639
1,139,990
1,200,000
Capital
Share
premium
5,638,639
—
5,638,639
—
—
5,638,639
—
—
—
—
—
—
—
—
5,638,639
1,139,990
—
1,139,990
—
—
1,139,990
—
—
—
—
—
—
—
—
1,139,990
Equity
instruments
issued other
than capital
1,200,000
—
1,200,000
—
—
1,200,000
—
—
—
—
—
—
—
—
1,200,000
Final balance as at 31 December
2022
Fusion effect
Balance as at 01 January 2023
Effects of error correction
Effects of changes in accounting
policies
Adjusted opening balance
Total overall income for the year
Other changes in equity
Issuance of ordinary shares
Issuance of preferred shares
Issuance of other equity instruments
Dividends (or remuneration to
partners)
Transferred between components of
equity
Other increases or (-) decreases in
equity
Final balance as at 31 December
2023
Final balance as at 31 December
2021
Fusion effect
Balance as at 01 January 2022
Effects of error correction
Effects of changes in accounting
policies
Adjusted opening balance
Total overall income for the year
Other changes in equity
Issuance of ordinary shares
Issuance of preferred shares
Issuance of other equity instruments
Dividends (or remuneration to
partners)
Transferred between components of
equity
Other increases or (-) decreases in
equity
Final balance as at 31 December
2022
Other equity
instruments
Retained
earnings
Profit/(loss)
after tax
Dividends
paid
Other
comprehensi
ve income
(7,338)
—
(7,338)
—
—
(7,338)
(35,092)
—
—
—
—
—
—
—
TOTAL
9,527,142
—
9,527,142
—
—
9,527,142
882,131
(706,468)
—
—
—
(607,469)
—
(98,999)
(652,203)
—
(652,203)
—
—
(652,203)
—
552,211
—
—
—
(99,992)
652,203
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,356,261
—
1,356,261
—
—
1,356,261
—
(406,886)
—
—
—
(507,477)
851,793
—
851,793
—
—
851,793
917,223
(851,793)
—
—
—
—
199,590
(851,793)
—
(98,999)
949,375
917,223
(99,992)
(42,430)
9,702,805
Other equity
instruments
Retained
earnings
Profit/(loss)
after tax
Dividends
paid
Other
comprehensi
ve income
TOTAL
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
818,484
500,359
1,318,843
—
—
1,318,843
—
37,418
—
—
—
—
110,293
(72,875)
1,356,261
600,855
—
600,855
—
—
600,855
851,793
(600,855)
—
—
—
—
(600,855)
—
851,793
(490,562)
—
(490,562)
—
—
(490,562)
—
(161,641)
—
—
—
(652,203)
490,562
—
(652,203)
9,953
—
9,953
—
—
9,953
(17,291)
—
—
—
—
—
—
—
(7,338)
8,917,359
500,359
9,417,718
—
—
9,417,718
834,502
(725,078)
—
—
—
(652,203)
—
(72,875)
9,527,142
49
SANTANDER CONSUMER FINANCE, S.A.
CONDENSED STATEMENTS OF CASH FLOWS AS AT 31 DECEMBER 2023 AND 2022
(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
2023
2022
1,885,361
917,223
532,232
(9,010,161)
9,446,067
(168,581)
(249,166)
80,585
(401,572)
(701,572)
300,000
1,315,208
489,246
1,804,454
(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
The most significant acquisitions, constitutions and sales that have occurred, during the financial years 2023 and
2022, of shares in the capital of entities of the Group, as well as other relevant corporate transactions that have
modified the perimeter of consolidation of the Group during these periods, have been the following:
b.1) Financial year 2023
Carmine D-Services, Unipessoal, Lda. (Originally PDC Digital, Lda.)
On January 4, 2023, Santander Consumer Services, S.A, a Portuguese subsidiary of Santander Consumer Finance,
S.A, acquired 100% of the shares of PDC Digital, Lda., a Portuguese company. The share capital of PDC Digital,
Lda. it was composed of 3 shares, 1 of them with a nominal value of 3,400 euros and 2 of them with a nominal
value of 3,300 euros each. The amount corresponding to the acquisition amounts to 2.2 million euros, of which
2.0 million euros had been paid at the closing of the transaction, deferring the payment of the remaining amount
for 4 years payable every January 1 of each year with the last payment being January 1, 2027. The acquisition has
been carried out as follows:
•
•
•
Acquisition of 1 share to José Ferreira Lopes and Maria Alice Ferreira Lopes for a total amount of 0.7
million euros, having disbursed 0.6 million euros on the day of the transaction, remaining the rest
postponed as mentioned.
Acquisition of 1 share to Maria Alice da Costa Faria for a total amount of 0.7 million euros, having
disbursed 0.6 million euros on the day of the transaction, the rest remaining postponed as mentioned.
Acquisition of 1 share to Miguel José Lopes and Patrice Leite Dias de Oliveira Rosas Lopes for a total
amount of 0.7 million euros, having disbursed 0.6 million euros on the day of the transaction,
remaining the rest postponed as mentioned.
Thus, the details of the acquired business were as follows:
50
Business acquired
Main activity
Acquisition
date
Ownership
interest (voting
rights) acquired
Purchase
consideration (million
euro)
PCD Digital, Lda.
Provision
internet,
of
computer and multimedia
services
04/01/2023
100%
2.2 (*)
(*) As already indicated above, the disbursement of the price has been made and will be made at different times of time.
The details of the net assets of the acquired business were as follows:
Value in Books
(Millions of euros)
Cash
Customers
Non-current assets
Current assets
Financial liabilities at amortized cost
Non-current and current liabilities
Net assets
Purchase consideration (*)
Goodwill
(*) As already indicated above, the disbursement of the price has been made and will be made at different times of time.
2.4
53.6
21.1
56.5
(165.7)
(418.0)
(450.1)
2,230.9
2,681.0
The fair value of the acquired receivables amounts to 53.6 thousand euros and does not differ from their 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:
Millions of
Euros
Cash paid
Less: Cash and cash equivalents
Total
(*) As already indicated above, the disbursement of the price has been made and will be made at different times of time.
2,230.9
(2.4)
2,228.5
The amount contributed by this business to the Group’s net attributable profit from the date of acquisition is
intangible. Similarly, the result that this business would have brought to the group if the transaction had been
made on January 1, 2023 is also immaterial.
On September 21, 2023, the company name was changed to Carmine D-Services, Unipessoal, Lda.
In 2023, the partners provided a participative loan to the company of 550,000 euros without a fixed repayment
deadline.
Santander Consumer Mobility AS and Santander Consumer Mobility AB
On August 14, 2023, Santander Consumer Finance, S.A has acquired 100% of the shares of NFH 230521 AS from
Nytt Foretak AS for NOK 47,500 (equivalent to 4,000 euros), in Norway, in order to develop the operating leasing
activity in Nordics.
51
The share capital of this company consisted of 3,000 shares of 10 Norwegian kroner of nominal value each,
forming a capital of 30,000 Norwegian kroner (equivalent to 2,600 euros).
On September 9, 2023, the company name changed to Santander Consumer Mobility AS.
On October 6, 2023, Santander Consumer Finance, S.A transferred 10 million euros to the aforementioned
company, which was finally contributed as a capital increase on December 19, 2023. This EUR 10 million is
equivalent to NOK 113,655,000. The capital increase did not involve the issuance of new shares, as it has been
recorded as follows:
•
•
Capital increase by NOK 60,000 by increasing the nominal value of the shares from NOK 10 to NOK 30
each.
Share premium of NOK 37,865 per share forming a total of NOK 113,595,000.
At the date of issuance of these consolidated annual accounts, the company has not started its activity.
Likewise, and on October 6, 2023, Santander Consumer Mobility AS has acquired 100% of the shares of Goldcup
33672 AB in Sweden from Between Bolagsrätt Sundsvall AB for 25,000 Swedish kroner (equivalent to 2,000
euros), for the purpose of developing the operating leasing activity in Sweden.
The share capital of this company consists of 25,000 shares of 1 Swedish krona of nominal value each, forming a
capital of 25,000 Swedish krona (equivalent to 2,000 euros).
On October 20, 2023, the company name changed to Santander Consumer Mobility AB.
At the date of issuance of these consolidated annual accounts, the company has not started its activity.
Reorganization of the global agreement with Stellantis
On March 31, 2022, Santander Consumer Finance, S.A reached an agreement to strengthen its global cooperation
with Stellantis, N.V. and Stellantis Financial Services, S.A. (Formerly PSA Finance, S.A Banque.) which was
originally signed in 2014. This agreement was revised mainly due to changes in Stellantis’ corporate structure
since the initial firm.
After obtaining the corresponding regulatory and competition authorizations, on April 3, 2023, the signed
agreements were implemented. Below is a summary of the different transactions that this agreement has
involved for Santander Consumer Finance Group:
Acquisition of new business origination rights for financing products (loans, financial leasing and operational
leasing to end customers) of all Stellantis brands: Abarth, Alfa Romeo, Chrysler, Citroën, Dodge, DS, Fiat, Fiat
Professional, Jeep, Lancia, Maserati, Opel, Peugeot, Ram and Vauxhall in seven European countries: Belgium,
France, Italy, Holland, Poland, Portugal and Spain
This acquisition has been based on legal agreements signed by each joint venture with the respective Opel and
Fiat Chrysler Automobiles (FCA) companies in each country. The acquisition has been accompanied by the transfer
of certain employees in contracts signed with Opel companies and, in the case of FCA companies, only in Italy. In
addition, the transaction has involved the transfer of contracts, assets and associated liabilities, mainly, to
employees at the time of the transaction.
The acquisition of the rights of origination has involved the recognition of an intangible asset in the consolidated
balance sheet as of December 31, 2023 of 140.7 million euros, which are depreciated in the duration of the
agreement (8.5 years) counted since April 3, 2023. The amount provided as amortization as at 31 December 2023
amounts to 12.3 million euros.
52
The set of assets and liabilities that have been transferred to the joint ventures of the Santander Consumer Finance
Group represented a payment by the corresponding companies of Opel and FCA to the joint ventures of 0.3 million
euros and 6 million euros, respectively, on the closing day of the transaction, April 3, 2023, having been calculated
on estimated amounts and subject to review. At the date of issuance of these consolidated annual accounts, all
transfers of assets and liabilities have been closed which have resulted in an additional payment by the joint
ventures to the corresponding Opel companies of 0.1 million euros and an additional payment by FCA to the Italian
joint venture of 0.2 million euros.
All the above amounts incorporate transactions made by Stellantis Consumer Finance Services Polska Sp.z.o.o.,
which is an associated entity of the Santander Consumer Finance Group.
Sale of the origination rights of the Operational Lease B2B (Vision Client) business carried out by Belgium, France,
Italy, the Netherlands, Poland and Spain to Leasys companies
As part of the aforementioned reorganization, joint ventures from Belgium, France, Italy, the Netherlands, Poland
and Spain sold, on April 3, 2023, the origination rights of the operational lease business (Vision Client) B2B to the
corresponding companies of Leasys in each country for a total amount of 64.5 million euros, which have been
recorded as profit on sale in the consolidated income statement as of December 31, 2023.
The sale of these origination rights has been accompanied, in the case of Spain and France, by the transfer of
employees and their corresponding assets and liabilities associated with the aforementioned employees. This
transfer involved the payment by the joint ventures of the Santander Consumer Finance Group of a total amount
of 3.8 million euros to the corresponding companies of Leasys on the day of the closing of the transaction, on
April 3, 2023. Since the aforementioned payment based on estimated amounts was made, after obtaining the
final amounts, the company of Leasys paid the French joint venture an amount of EUR 0.4 million.
All the above amounts incorporate transactions made by Stellantis Consumer Finance Services Polska Sp.z.o.o.,
which is an associated entity of the Santander Consumer Finance Group.
Acquisition of Opel portfolios by joint ventures in Italy and Spain
In addition and as part of the aforementioned reorganization, the joint ventures of Italy and Spain have proceeded
to acquire Opel’s portfolios in the aforementioned countries as of July 3, 2023 and May 31, 2023, respectively.
Likewise, this purchase of portfolios has been accompanied by the acquisition of assets and liabilities associated
with the portfolio at the aforementioned dates. In the case of the purchase of Italy, part of the financing of the
aforementioned portfolio has also been acquired.
The detail of the portfolio acquired by Spain and registered at the initial time (date of acquisition) and after the
final adjustment after the determination of the final amounts, is as follows:
Spain
Portfolio
Net of assets and liabilities
Funding
Total amount paid
Millions of Euros
Start
Final
259.6
(0.7)
-
258.9
258.8
(0.6)
-
258.2
The amount paid on the day of the transaction was made on the basis of estimated amounts. After obtaining the
final amounts, the Opel company has paid the Spanish joint venture an amount of 0.7 million euros.
53
The detail of the portfolio acquired by Italy and recorded at the initial time (date of acquisition) and after the final
adjustment after the determination of the final amounts, is as follows:
Italy
Portfolio
Net of assets and liabilities
Funding
Total amount paid
Millions of Euros
Start
Final
879.9
(4.5)
(770.3)
105.1
896.3
(4.3)
(770.4)
121.6
The amount paid on the day of the transaction was made on the basis of estimated amounts. After obtaining the
final amounts, the Italian joint venture has paid Opel an amount of 16.5 million euros.
Sale of the shares of the joint ventures of Germany and the United Kingdom to Opel companies
Finally and as part of the aforementioned restructuring, on April 3, 2023, Stellantis Financial Services España,
E.F.C., S.A. (formerly PSA Financial Services Spain, E.F.C., S.A.) has sold its stake in 100% of the capital of PSA
Finance UK Limited to an Opel company. Stellantis Financial Services, S.A. (Formerly Banque PSA Finance S.A.)
and Santander Consumer Bank Aktiengesellschaft have sold their shares (each 50%) in the share capital of PSA
Bank Deutschland GmbH to another Opel company.
The share capital of PSA Finance UK Limited consisted of 437,280 shares of 1 pound of nominal value each. The
estimated selling price at the closing date of the transaction amounted to 368,614,513.41 pounds sterling
equivalent to 419,261,275.48 euros.
The share capital of PSA Bank Deutschland GmbH consisted of 1,464,448 shares with a nominal value of 1 euro
each. The estimated selling price at the closing date of the transaction has amounted to 613,896,021.62 euros.
The gain recorded for both transactions in the consolidated profit and loss account as at 31 December 2023 is not
significant.
Both sales prices are subject to review based on the final data corresponding to the transaction date. At the date
of issuance of these consolidated annual accounts, the review process has not been closed.
Santander Consumer Finance, Inc.
On March 17, 2023, Santander Consumer Finance, S.A. has acquired from Banco Santander, S.A., 100% of the
shares of Santander Consumer Finance, Inc., a Canadian company. Santander Consumer Finance, Inc. It also shares
100% of the share capital of Santander Consumer, Inc. The share capital of Santander Consumer Finance, Inc. it
consists of 30,451,553 actions.
The acquisition has been made for 215,747,722 Canadian dollars equivalent to 148,758,054.32 euros.
Thus, the details of the acquired business were as follows:
Business acquired
Main activity
Acquisition
date
Ownership
interest (voting
rights) acquired
Purchase
consideration (million
euro)
Grupo Santander Consumer
Finance, Inc.
(*) The acquisition was made retroactively on March 1, 2023, so the company’s results as of March 1, 2023 belong entirely to
Santander Consumer Finance.
Consumer finance
17/03/2023 (*)
100%
148.7
54
The details of the net assets of the acquired business were as follows:
Cash
Customers
Non-current assets
Current assets
Financial liabilities at amortized cost
Non-current and current liabilities
Net assets
Purchase consideration
Goodwill
Value in Books
(Millions of euros)
4.8
639.0
1.6
47.9
(512.5)
(43.0)
137.8
148.7
10.9
The fair value of the acquired receivables amounts to 639 million and does not differ from their gross contractual
amounts. The Managers of the parent company do not consider that at the date of acquisition there were
indications that they would not be collected in full.
Net cash flow on acquisition:
Cash paid
Less: Cash and cash equivalents
Total
Millions of
Euros
148.7
(4.8)
143.9
The amount contributed by this business to the Group’s net attributable profit from the date of acquisition is
intangible. Similarly, the result that this business would have brought to the group if the transaction had been
made on January 1, 2023 is also immaterial.
MCE Bank Group
In November 2022, Santander Consumer Bank AG reached an agreement to acquire 100% of the shares of MCE
Bank, GmbH effective March 31, 2023. The company’s share capital consists of 40,903,360 shares with a total
value of 40,903,360 euros, with a nominal value of 1 euros each.
MCE Bank GmbH was the captive financial institution of Mitsubishi in Germany with a bank license and dedicated
to the provision of financial services mainly related to the automotive sector and the activity of deposit-raising,
being its shareholders several companies of the Mitsubishi Group. MCE Bank GmbH in turn has the following
subsidiaries with a direct or indirect participation rate of 100%:
• MCE Verwaltung GmbH dedicated to the management of Real Estate for the Group in Germany.
• Midata Service GmbH is dedicated to the provision of IT services especially to dealers.
•
•
AMS Auto Mark am Schieferstein GmbH dedicated to remarketing activities.
TVG-Trappgroup Versicherungsvermittlungs GmbH is dedicated to the insurance intermediation of
retail customers and dealers.
55
After obtaining the corresponding authorizations from the regulatory authorities, on 31 May 2023 the acquisition
took place for a total amount of 94,768,237 euros.
The acquisition has been made as follows, with retroactive accounting effect 1 April 2023:
•
•
•
Acquisition of MC-V Beteiligung Verwaltungsgesellschaft mbH of its total equity stake (45%) consisting
of 18,406,512 shares with a nominal value of 18,406,512 euros for an amount of 40,243,434 euros.
Acquisition of MC Automobile (Europe) N.V. of its total share capital (45%) consisting of 18,406,512
shares with a nominal value of 18,406,512 euros for an amount of 40,243,434 euros.
Acquisition from Mitsubishi International GmbH of its total share capital (10%) consisting of 4,090,336
shares with a nominal value of 4,090,336 euros for an amount of 8,942,985 euros.
In this way the details of the acquired business are as follows:
Business acquired
Main activity
Acquisition date
Ownership
interest (voting
rights) acquired
Purchase
consideration (million
euro)
MCE Bank Group
Financial services
associated with the
automotive sector and
the collection of
deposits
31/05/2023 (*)
100%
95.4 (**)
(*) The acquisition was made retroactively on April 1, 2023, so the company’s results belong entirely to Santander Consumer Finance since
the aforementioned date.
(**) Includes cash disbursement of the purchase price of the shares plus other transaction costs.
The detail of the net assets of the acquired business is as follows:
Cash
Customers
Non-current assets
Current assets
Financial liabilities at amortized cost
Non-current and current liabilities
Net assets
Purchase consideration (*)
Difference in purchase
Value in Books
(Millions of euros)
61.6
881.4
56.3
22.2
(856.5)
(31.1)
133.9
95.4
38.5
(*) Includes cash disbursement of the purchase price of the shares plus other transaction costs.
At the date of issuance of these consolidated annual accounts, the accounting for the business combination has
been closed. The adjustments identified in the study conducted by the management of the Group on the
allocation of the price to the net assets acquired have not been considered significant. Accordingly, the Group
management has considered recording a purchase difference as a negative consolidation difference in the
consolidated income statement without considering such intangible fair value adjustments.
The Managers of the parent company do not consider that at the date of acquisition there were indications that
the acquired receivables would not be collected in full.
56
The amount contributed by this business to the Group’s net attributable profit from the date of acquisition is
intangible. Similarly, the result that this business would have brought to the group if the transaction had been
made on January 1, 2023 is also immaterial.
Likewise, in November 2022, Santander Consumer Bank AG entered into an agreement with Emil Frey Automobil
Holding Deutschland GmbH to sell 9.99% of its stake in MCE Bank GmbH. On August 11, 2023, the
aforementioned sale was made effective for a price amounting to 14.5 million euros.
Stellantis Financial Services Belux, S.A. (Formerly PSA Finance Belux, S.A) and Stellantis Financial Services
Nederland, B.V. (Formerly PSA Financial Services Nederland, B.V.)
On May 30, 2023, a corporate reorganization was carried out in the Group by which Banque Stellantis France, S.A.
(Former PSA Banque France, S.A. And owned 50% by Santander Consumer Banque, S.A. And 50% by Stellantis
Financial Services, S.A.) has acquired 100% of the stake of Stellantis Financial Services Belux, S.A. and Stellantis
Financial Services Nederland, B.V. prior to the acquisition, both were already controlled entities, 100% owned by
Stellantis Financial Services España, E.F.C., S.A. (formerly PSA Financial Services Spain, E.F.C., S.A.), which in turn
is 50% owned by Santander Consumer Finance S.A. and 50% owned by Stellantis Financial Services, S.A, both
transactions were carried out at consolidated accounting values after obtaining the corresponding authorizations
from the European and local authorities.
Vizolution
As of December 31, 2022, Santander Consumer Finance, S.A held a 10.99% share (3,239,956 shares) in the share
capital of Vizolution Limited, a British company whose corporate purpose was to create software products that
would facilitate the closure of online financing operations. This share was acquired at the end of 2018 for a value
of £6,500 thousand.
During the first half of 2023, Lightico, Ltd. (Based in Israel) submitted an offer to the shareholders of Vizolution
for the acquisition of all shares of the company Vizolution in exchange for shares of the company Lightico, Ltd.
As a result of the agreements reached on June 12, 2023, during the month of July 2023, Santander Consumer
Finance, S.A has assumed 2.28% (29,070 shares) of the company Lightico worth 2,380 thousand US dollars, in
exchange for participation in Vizolution Limited. At the time of the transaction, Santander Consumer Finance, S.A
adjusted the value of the stake in Vizolution Limited, having recorded a loss of a non-significant amount for the
purposes of the 2023 consolidated annual accounts.
Santander Consumer Leasing Belgium Branch
On July 20, 2023, Santander Consumer Leasing, B.V (formerly Riemersma Leasing, B.V) has established a branch
in Belgium, called Santander Consumer Leasing Belgium Branch for the development of the operating leasing
activity in Belgium. The branch began its activity in July 2023.
Ethias Lease N.V.
On June 19, 2023, Santander Consumer Leasing B.V. (formerly Riemersma Leasing, B.V) it signed a Memorandun
of Understanding with Ethias Lease Corporation N.V. a company dedicated to the insurance business in Belgium
to set up a Joint Venture in Belgium to develop the business of operational leasing of electric cars in Belgium.
After obtaining the corresponding regulatory authorizations, on September 13, 2023, Santander Consumer
Leasing B.V. (through its branch in Belgium constituted on July 20, 2023) and Ethias Lease Corporation N.V.
constituted Ethias Lease, a company that was incorporated into the company Ethias Lease. N.V. By issuing
4,500,000 fully subscribed and disbursed shares that make up a capital of 4,500,000 euros:
57
•
•
Santander Consumer Leasing B.V., through its Belgian branch, subscribed 2,250,000 shares disbursing
2,250,000 euros holding a share of 50%.
Ethias Lease Corporation N.V. subscribed 2,250,000 shares disbursing 2,250,000 euros holding a
share of 50%.
The company began its activity in the same month of September 2023.
Drive, S.r.l. and Santander Consumer Renting, S.r.l.
On May 31, 2023, Santander Consumer Bank, S.p.A reached an agreement with the companies Agba, S.p.A, and
AutoTorino S.p.A. to enter these companies into the share capital of Drive, s.r.l. To do this, it was agreed to carry
out a capital increase of 7 million euros that was subscribed and disbursed as follows, without issuing new shares:
•
•
•
Santander Consumer Bank, S.p.A contributed 5 million, of which 4 million euros are contributed
through the conversion of the capital increase made in 2022 mentioned above into share capital and
disbursed 1 million euros.
Agba, S.p.A disbursed 1 million euros.
AutoTorino S.p.A disbursed 1 million euros.
After the capital increase, the share capital of Drive, S.r.l. is 8 million euros, holding Santander Consumer Bank,
S.p.A 75% of the share capital and Agba, S.p.A and AutoTorino S.p.a, each hold 12.5% of the share capital.
Also, in December 2023, in Santander Consumer Renting, S.r.l, a capital increase was carried out directly under
the heading RESERVES and without issuing any shares amounting to 4.5 million euros.
Drive Revel, S.L
In June 2022, Andaluza de Inversiones, S.A. entered to participate in the share capital of Drive Revel, S.L., through
a capital increase of 386 shares made by the aforementioned company, through the acquisition of 192 shares of
1 euro of nominal value each and an assumption premium of 5,196.51 euros per share, disbursing a total of
997,921 euros and going to hold 2.98% of the aforementioned company.
The main corporate purpose of this company is the leasing and subleasing of cars and light motor vehicles.
In August 2023, Andaluza de Inversiones, S.A. signed the second capital increase already agreed in 2022 by Drive
Revel, S.L. 770 shares of 1 euro of nominal value each and an assumption premium of 5,196.51 euros per share,
having paid a total of 4,002,079 euros, held after this extension a total of 962 shares representing 10.76% of the
share capital of the aforementioned company.
Athlon Sweden AB
On 20 December 2023, the Group, through the norwegian subsidiary Santander Consumer Mobility AS, has
signed an agreement to acquire 100% of the shares representing the share capital of Athlon Sweden AB, owned
by Athlon Beheer International B.V. (Dutch company). Athlon Sweden AB is located in Sweden, its main focus being
the multi-brand provision of operating leasing and associated services as well as fleet management, for private
vehicles and commercial vehicles.
The sale transaction is subject to certain suspensive conditions, including the approval of the transaction by the
competition authorities in Sweden. It is expected that the suspensive conditions will be fulfilled during the first
quarter of 2024, at which time the closure of the operation and the taking of control of the indicated participation
will occur.
58
There have been no other significant changes in the Group’s consolidation perimeter during 2023.
b.2) Financial Year 2022
Santander Consumer Leasing, B,V.. (Formerly Riemersma Leasing, B.V.)
On April 15, 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., consisting of 45,400 shares of 1 euro
of nominal value. The main purpose of this company was to provide, through its platform, operational leasing
services on the Dutch market.
After obtaining the corresponding authorizations from the Dutch authorities, on 9 June 2022 the acquisition took
place for a total amount of 21,308,805 euros.
The acquisition took place as follows:
• Acquisition from Lathouwers Beheer B.V. of its total share capital (66.67%) consisting of 30,268 shares for
an amount of 14,206,496 euros.
• Acquisition of ING Corporate Investments Participations B.V., of its total share capital (33.33%) formed by
15,132 shares for an amount of 7,102,309 euros.
Thus the details of the acquired business were as follows:
Company acquired
Core business
Acquisition
date
% shareholding
(voting rights)
acquired
Purchase
consideration
(million euro)
Riemersma Leasing, B.V.
Operational leasing services
9/06/2022 (*)
100%
21.3
(*) The acquisition was made retroactively on January 1, 2022, so that the company’s results for the financial year 2022 belonged entirely to
Santander Consumer Finance from the aforementioned date with the exception of the agreed dividend.
The details of the net assets of the acquired business were as follows:
Customers
Non-current assets
Current assets
Financial liabilities at amortized cost
Non-current and current liabilities
Provisions
Net assets
Agreed dividend (*)
Net assets after dividend
Purchase consideration
Goodwill
Value in Books
(Millions of euros)
0.4
63.7
1.2
(49.6)
(2.7)
(2.0)
11.0
(3.6)
7.4
21.3
13.9
(*) corresponds to the dividend agreed with the sellers before the closing of the transaction
The fair value of the acquired receivables amounts to 0.4 million and does not differ from their gross contractual
amounts. The Managers of the parent company do not consider that at the date of acquisition there were
indications that they would not be collected in full.
Net cash flow on acquisition:
59
Cash paid
Less: Cash and cash equivalents.
Total
Millions of
Euros
21.3
-
21.3
As of December 31, 2022, this company contributed a profit of €2.3 million to the consolidated Group’s profit.
On May 11 , 2023, the company name of Riemersma Leasing, B.V was changed to Santander Consumer Leasing,
B.V.
Drive, S.r.l. and Santander Consumer Renting, S.r.l.
On April 26, 2022 and March 30, 2022, respectively, Santander Consumer Bank, S,p.A, constituted two companies
for the development of the activity of operational leasing, DRIVE, S.r.l. and Santander Consumer Renting, S.r.l. By
issuing 1,000,000 of shares and 2,000,000 of shares, respectively, of 1 euro of nominal value each. Both
companies began their activity at the end of the second quarter of 2022.
In December 2022, capital increases were carried out in both companies directly under the heading reserves and
without issuing any shares:
• Drive. S.r.l.: Extension of 4 million euros.
•
Santander Consumer Renting, S.r.l.: Extension of 2 million euros.
Vinturas Group
In 2020 and 2021, Santander Consumer Finance, S.A., participated in several capital increases of the Dutch
company Vinturas Holding, B.V. (whose corporate purpose consisted, among others, of in having shares in
companies that developed the establishment of a logistics platform following the blockchain technology that
intended to digitize the supply chain) reaching a stake of 14.75% at december 31, 2021, for a total amount of
500,000 euros.
During the financial year 2022, an impairment of the total amount of the participation was made.
Merger Santander Consumer Finance, S.A. and Santander Consumer Banque, S.A. (France)
On February 22 and 24, 2022, the members of the Boards of Directors of Santander Consumer Banque, S.A. And
Santander Consumer Finance, S.A. Approved the joint draft of merger between Santander Consumer Finance, S.A.
(As an absorbing company) and Santander Consumer Banque, S.A. (As an absorbed company).
Consequently, on the occasion of the registration of this merger, and with effect date on October 14, 2022, there
was the extinction without liquidation of Santander Consumer Banque, S.A and the transmission in block of all its
assets to Santander Consumer Finance, S.A., that acquired it by universal succession and without solution of
continuity. Also, on that same date, the assets of Santander Consumer Banque, S.A were automatically assigned
to the branch that Santander Consumer Finance, S.A had established in the framework of the merger in France.
In accordance with the provisions of the implementing accounting regulations, for accounting purposes, 1 January
2022 was set as the date from which the transactions of the company being acquired were to be considered to
have been carried out by the acquiring company.
There were no other significant changes in the Group’s consolidation perimeter during 2022.
60
4. Bank´s profit distribution and earnings per share
a) Bank´s profit distribution
The distribution of the Bank's net profit for 2023 that the Board of Directors will propose to the General
Shareholders’ Meeting for approval and the proposal approved for the financial year 2022 by the Bank’s General
Shareholders’ Meeting, held on March 31, 2023, it is as follows:
Distributable profit:
Balance per the income statement
Appropriation:
To dividends paid
To legal reserve
To voluntary reserve
Total
EUR Thousands
2023
2022
917,223
851,793
99,992
91,722
725,509
917,223
652,203
85,179
114,411
851,793
On March 14, 2023, the Extraordinary General Shareholders Meeting agreed, on a proposal from the Board of
Directors, to pay a dividend from freely available reserves of 507,477 thousand euros. This dividend was paid on
29 March 2023.
On October 9, 2023, in view of the Company’s liquidity statement, the Board of Directors agreed to a distribution
of dividends on account of the profit or loss of 2023 of 99,992 thousand euros. This dividend was paid on
November 13, 2023.
The provisional accounting statement, which, in accordance with article 277 of the consolidated text of the Capital
Companies Act, was formulated by the Bank’s Administrators, showing the existence of sufficient resources for
the distribution of the dividend on account, 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)
31/08/2023
ros
570,973
(20,475)
(55,050)
—
495,448
0.05
(*) Estimated with the number of Bank shares existing at the date of approval of the dividend on account.
b) Basic and diluted earnings per action
The basic profit per share (EPS) is determined by dividing the net income for the year attributable to the parent
entity adjusted by the after-tax amount corresponding to the equity remuneration of the contingent convertible
preferential units (see Note 23), between the weighted average number of Bank shares in circulation in that
financial year, excluding, where appropriate, the average number of own shares held therein.
61
Accordingly:
(EUR Thousands)
2023
2022
Consolidated profit attributable to the parent
1,003,933
1,242,860
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
Profit or loss from continuing operations (net of
noncontrolling interests)
noncontrolling interests)
Weighted average number of shares outstanding
Adjusted number of shares
Basic and diluted EPS (Euro)
Of which:
From continued operations
From continuing operations (Euro)
Consolidated profit attributable to the parent
(94,103)
(72,875)
909,830
1,169,985
—
—
—
—
909,830
1,169,985
1,879,546,172
1,879,546,172
0.4840
1,879,546,172
1,879,546,172
0.6225
0.4840
0.6225
62
5. Remuneration and other benefits to the Board of Directors and the Bank’s senior management
a) Bylaw-stipulated emoluments and other fees
In accordance with the criteria established on the proposal of the Remuneration Committee, certain criteria are
established for fixing the remuneration of directors. Those who perform executive functions in any of the companies
of the Santander Group, will not receive any amount as remuneration for the performance of their positions in the
Board of Directors and in their commissions. Directors not affiliated to the Santander Group and Independents will
receive remuneration for the performance of their position as Director, as well as for each of the positions held in the
different Commissions.
In 2023 the members of the Board of Directors of the Bank received 1,326 thousand euros in respect of statutory care
and subsistence allowance (656 thousand euros in 2022), all of them corresponding to eight and six directors not
related to the Santander Group and independent as of December 31, 2023 and 2022, respectively, according to the
following detail:
Antonio Escamez Torres
Jean Pierre Landau
Benita Ferrero-Waldner (**)
Luis Alberto Salazar-Simpson Bos
José Manuel Robles
Javier Monzon de Caceres
Marta Elorza Trueba
Emma Fernandez Alonso
Michael Rhodin
(EUR Thousands)
2023 (*)
301
112
—
112
192
429
62
60
58
2022
150
112
82
112
97
103
—
—
—
(*) In the financial year 2023 the form of payment to the Board of Directors has been modified, going from
annual to expired financial year, to monthly. The amounts accrued in the financial year 2022, as well as in the
financial year 2023, have been settled for the directors appointed on 22 May 2023.
(**) The amount actually accrued by this director has not been settled in the financial year 2023.
b) Post-employment and other long-term benefits
The obligations assumed by the Santander Group in respect of supplementary pensions to all its staff, both active and
retired, include those corresponding to the current and previous Directors of the Bank, who perform (or have
performed) executive functions in the Santander Group. Those directors who perform these functions in any of the
companies of the Santander Group, will not receive any amount in post-employment benefits and other benefits as
remuneration for the performance of their positions in Santander Consumer Finance, S.A.
In 2023, pension payments to members of the Board of Directors of the Bank amounted to 775 thousand euros in
2023 (775 thousand euros in 2022) and were made, mainly, by other entities of the Santander Group not belonging
to the Santander Consumer Finance Group.
c) Loans and deposits
The balances corresponding to the direct risks of the bank and other entities of the Santander Group as of December
31, 2023 and 2022 in respect of loans, credits and guarantees provided to directors of the Bank are included in Note
47.
In all cases, the transactions with the Group have been carried out on market terms or the corresponding
remuneration in kind has been charged.
63
d) Senior management
The remuneration received by the members (non-directors) of the Bank's senior management (15 persons in 2023
and 14 persons in 2022, respectively) amounted to 8,947 thousand euros and 9,417 thousand euros in 2023 and
2022, respectively, and they have been fully paid by other entities of the Santander Group other than the Consumer
Group. In addition, no compensation has been received in 2023 for non-competition agreements of any member of
the senior management.
In-kind remuneration paid to members (non-Directors) of the Bank’s senior management amounted to 180 thousand
euros in 2023, which were paid by other Santander Group entities other than the Group (99 thousand euros in 2022).
In 2023, contributions were made to the members (non-Directors) of the Bank’s senior management to defined
contribution pension plans amounting to 908 thousand euros (1,023 thousand euros in 2022). These contributions
have been made by other entities of the Santander Group other than the Group. No payments have been made in
2023 and 2022.
The amount of share payments to senior management members during the 2023 financial year amounted to 379,792
shares corresponding to 1,410 thousand euros and 291,132 options amounting to 232 thousand euros. The total
number of shares during the 2022 financial year was 465,858 corresponding to 1,738 thousand euros.
In all cases, the transactions with the Group have been carried out on market terms or the corresponding
remuneration in kind has been charged.
e) Termination of contract compensation
The contracts of executive directors and senior managers with entities of the Santander Group are of indefinite
duration. The termination of the relationship by breach of its obligations by the director or manager or by his free will
not give right to any financial compensation. In the event of termination of the contract for any other reason, they will
be entitled only to the legal compensation that, if applicable, corresponds.
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 they are in a situation of conflict of interest of those
established in article 229 of the Law of Capital Company, direct or indirect, that they or people linked to them could
have with the interest of Santander Consumer Finance, S.A.
6. Loans and advances – credit institutions
The breakdown of the balance under the heading “Loans and advances – credit institutions” of the consolidated balance
sheets as at 31 December 2023 and 2022 attached, according to their nature and currency, is as follows:
Type:
Time deposits
Reverse repurchase agreements
Other accounts
Currency:
Euro
Foreign currency
(EUR Thousands)
2022
2023
1,080,763
60,531
287,031
1,428,325
62,135
67,249
260,922
390,306
1,350,852
77,473
1,428,325
283,237
107,069
390,306
64
As of December 31, 2023, the balances held under this heading correspond mainly to Santander Consumer Finance, S.A
(Spain) and Santander Consumer Bank A.S. (Nordics) for an amount of 1,254,706 thousand euros and 74,560 thousand
euros respectively (as at December 31, 2022, at the same time, the following year: 96,768 thousand euros for Santander
Consumer Bank A.S. and 73,439 thousand euros for PSA Bank Deutschland GmbH).
Note 44 of this consolidated report shows a detail of the maturity of these assets at the end of financial years 2023 and
2022 and their estimated fair value as at 31 December 2023 and 2022.
A significant part of deposits in credit institutions corresponds to balances with associates and entities of the Santander
Group (see Note 46).
The breakdown as of December 31, 2023 of the exposure by impairment stage of the assets recorded under IFRS9 is
1,431,021 thousand euros, all of which are recorded in stage 1 (392,325 thousand euros in stage 1 in the financial year
2022) and of the provision fund per deterioration stage is 2,696 thousand euros, all of which are registered in stage 1
(2,130 thousand euros in stage 1 in 2022).
This section also includes: irrevocable payment commitments to the Single Resolution Fund made in accordance with
Article 70.3 of Regulation 806/2014 laying down uniform rules and a uniform procedure for the resolution of credit
institutions and certain investment firms within the framework of a single resolution mechanism and a Single Resolution
Fund, for which, according to the rule, no provision has been recorded, these commitments being not significant in
relation to the consolidated annual accounts.
7. Debt securities
The breakdown of the “debt securities” balance of the accompanying consolidated balance sheets as at 31 December
2023 and 2022, based on their classification, nature and currency, is as follows:
(EUR Thousands)
2023
2022
Classification:
Financial assets at fair value through other comprehensive income
151,337
726,508
Non-trading financial assets mandatorily measured at fair value
through profit or loss
Financial assets at amortised cost
844
1,444
4,189,837 6,185,061
4,342,018 6,913,013
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
786,697
921,128
3,180,400 5,347,062
141,587
503,362
(126)
4,342,018 6,913,013
128,337
246,653
(69)
3,640,332 6,582,093
331,046
4,342,087 6,913,139
701,755
(69)
(126)
4,342,018 6,913,013
As of 31 December 2023 and 2022, the entire impairment exposure balance for “debt securities” and the impairment
provision fund were in stage 1.
65
The balance as of December 31, 2023 and 2022 of the Account “Spanish Public Debt” in the previous table corresponds,
mainly, to other annotated debts issued by the Spanish State, acquired by Santander Consumer Finance, S.A.
The balance as at December 31, 2023 of the “Foreign Public Debt” account in the table above corresponds mainly to
Italian bonds acquired by Santander Consumer Finance, S.A, for 1,179,112 thousand euros by Santander Consumer Bank
AG for 732,030 thousand euros, by Santander Consumer Bank S.p.A. for 350,542 thousand euros and Stellantis Financial
Services Italia S.p.A. for 101,671 thousand euros. In addition, Danish and Swedish bonds purchased by Santander
Consumer Bank AS for 110,062 thousand euros and 414,237 thousand euros, respectively.
The balance as at 31 December 2022 of the “Foreign Public Debt” account in the table above corresponds mainly to Italian
bonds acquired by Santander Consumer Finance, S.A, for 1,157,907 thousand euros, to Finnish Treasury bonds, Belgian
and Norwegian acquired by the dependent entity Santander Consumer Bank AS (Norway) for about 43,672 thousand
euros, 72,477 thousand euros and 70,896 thousand euros, respectively, German, Italian, Luxembourg, and Italian
Treasury bonds. Belgian and French acquired by the German subsidiary Santander Consumer Bank AG for 1,583,068
thousand euros, 718,290 thousand euros, 222,574 thousand euros, 316,592 thousand euros and 268,148 thousand
euros respectively, and Italian Treasury bonds acquired by Italian subsidiaries Santander Consumer Bank S.p.A. and
Stellantis Financial Services Italia S.p.A. for about 448,845 thousand euros.
Note 44 of this consolidated report shows a detail of the maturity of these financial assets at the close of financial years
2023 and 2022.
8. Equity instruments
The corresponding balance “equity instruments” of the consolidated balance sheets as at 31 December 2023 and 2022
accompanying, taking into account their classification and nature, is as follows:
Classification:
Financial assets at fair value through other comprehensive
income
Mandatory to VR with results changes
Type:
Spanish companies
Foreign companies
Foreign companies
TOTAL
Spans
(EUR Thousands)
2023
2022
23,526
21,961
41
45
23,567
22,006
5,000
18,567
23,567
998
21,008
22,006
23,567
22,006
The movement under the heading “Financial assets at fair value through other comprehensive income – equity
instruments” as at 31 December 2023 and 2022 of the accompanying consolidated balance sheet is as follows:
66
Balance at beginning of period
Net additions (disposals)
Valuation adjustments
Currency translation and other differences
Balance at end of period
9. Financial assets and liabilities held for trading
a) Derivatives held for trading
(EUR Thousands)
2023
2022
21,961
3,919
(2,354)
—
23,526
22,591
337
(967)
—
21,961
The following is a breakdown of the fair value of derivatives contracted by the Group, as at 31 December 2023
and 2022, classified according to inherent risks:
Interest rate risk
Exchange rate risk
(EUR Thousands)
2023
2022
Balance
Debtor
322,498
1,400
323,898(*)
Balance
Creditor
335,101
8,493
343,594(*)
Balance
Debtor
463,159
31,505
494,664(*)
Balance
Creditor
466,009
22
466,031(*)
(*) Of which, as at 31 December 2023, 223,678 thousand euros and 241,094 thousand euros of debtor and
creditor balances, respectively, correspond to amounts held with companies of the Santander Group (334,747
thousand euros and 307,105 thousand euros of debtor and creditor balances, respectively, it corresponded to
entities of the Santander Group as of December 31, 2022) -see Note 46.
The table above shows the maximum level of credit risk exposure for debtor balances.
67
b) Notional and market value of trading derivatives
The following is a breakdown of the notional and market value of trading derivatives contracted by the Group as
at 31 December 2023 and 2022, 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 Thousands)
2023
Notional value Market value
2022
Market value
Notional
value
—
23,739,116
2,396,571
—
—
—
519,695
—
76,425
—
26,731,807
—
(12,582)
(21)
—
—
—
19,353,32
8
3,414,24
9
—
—
—
(7,093)
—
—
—
—
1,797,74
0
1
9
48,62
8
—
(19,696) 24,613,96
4
—
(4,682)
1,832
—
—
—
31,489
(6)
—
—
28,633
68
10. Loans and advances - clientele
a) Composition of the balance
The composition of the balance under this heading of the consolidated balance sheets, according to their
classification, is:
(EUR Thousands)
2022
2023
Financial assets at amortized cost
Non-trading financial assets mandatorily measured at fair valor
through profit or loss
Which:
Value corrections for impairment
Loans and advances to customers without considering
value corrections for impairment
115,507,725 106,499,445
658
387
(2,133,317)
(1,956,054)
117,641,700 108,455,886
Note 44 shows the details of the maturity of financial assets at amortized cost, as well as their average interest
rates.
Note 47 shows the Group's total exposure, depending on the issuer's geographical origin. There are no credits to
customers of indefinite duration for significant amounts.
69
b) Detail
The following is the breakdown of loans and advances granted to the Group’s clients, which reflect the Group’s
credit risk exposure in its core business, without taking into account the balance of the impairment value
corrections, taking into account the modality and situation of the operations, the geographical area of their
residence and the mode of the interest rate of the operations:
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)
2023
2022
489,498
358,983
24,921,345
20,956,543
62,641,060
56,323,555
23,608,177
25,347,169
1,453,272
2,015,430
2,512,918
1,139,088
2,150,500
2,180,048
117,641,700
108,455,886
16,158,921
14,951,535
15,541,847
10,351,612
19,411,560
15,940,474
44,171,926
42,099,289
17,390,189
17,815,074
—
2,819,118
4,967,257
4,478,784
117,641,700
108,455,886
87,335,953
79,507,813
30,305,747
28,948,073
117,641,700
108,455,886
101,748,489
15,893,211
90,628,942
17,826,944
117,641,700 108,455,886
(2,133,317)
(1,956,054)
115,508,383 106,499,832
As of December 31, 2023 and 2022, the Group had EUR 860 and EUR 919 thousand, respectively, of loans and
advances granted to Spanish Public Administrations with a rating of A and EUR 204,713 and EUR 198,952
thousand, respectively, granted to the public sector in other countries (as of December 31, 2023, this amount was
composed, depending on the rating of the issuer, as follows: 63% AAA, 32% AA, 0% A and, 5% BBB and 0%
without rating).
Without considering the Public Administrations, the amount of loans and advances as of December 31, 2023 and
2022 amounts to 117,436,127 and 108,256,015 thousand euros.
70
On May 22, 2014, the Bank subscribed 4,152 mortgage shares issued by Banco Santander, S.A., for an amount of
424,397 thousand euros, they were recorded under the heading “Loans and receivables – clientele” of the balance
sheet and are included under the heading “Secured debtors” in the table above. These mortgage shares
correspond to loans with maturities between 3 and 39 years and accrue annual interest between 0.20% and
4.523%.
On April 26, 2012, the Bank subscribed 3,425 mortgage shares, issued by Banco Santander, S.A., for an amount
of 416,625 thousand euros, they were recorded under the heading “Loans and receivables – clientele” of the
balance sheet and are included under the heading “Secured debtors” in the table above. These mortgage shares
correspond to loans with maturities between 1 and 38 years and accrue annual interest between 0.002% and
3.273%. The outstanding balance of these shares amounts to 244,518 thousand euros as of December 31, 2023
(eur 303,311 thousand as at 31 december 2022 ).
As of 31 December 2023 and 2022, there were no indefinite claims to clients for significant amounts.
Note 46 includes certain information regarding the restructured/refinanced portfolio, as well as the distribution
of the loan to the client by activity, net of impairment, as at 31 December 2023 and 2022.
The movement of gross exposure by impairment stage of loans and customer advances recorded under the
headings “Financial assets at amortized cost” for 2023 and 2022 is then broken down:
2023
Balance at beginning of period
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
(EUR Thousands)
Stage 1
102,230,428
Stage 2
4,045,023
Stage 3
2,180,048
Total
108,455,499
(2,210,312)
2,210,312
—
—
(908,358)
—
1,265,864
—
47,154
17,070,169
—
(6,412,303)
—
(571,731)
(1,265,864)
149,575
—
(236,639)
—
(285,194)
908,358
571,731
—
(149,575)
(47,154)
(266,392)
(629,361)
(54,737)
—
—
—
—
—
16,567,138
(629,361)
(6,752,234)
111,082,642
4,045,482
2,512,918
117,641,042
71
In addition, the group has 25,642,721 thousand euros of commitments and financial guarantees granted subject
to impairment, of which 25,528,907 thousand euros are in Stage 1, 85,960 thousand euros in Stage 2 and 27,854
thousand euros in Stage 3.
2022
Balance at beginning of period
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
(EUR Thousands)
Stage 1
96,229,354
Stage 2
3,412,057
Stage 3
2,033,052
Total
101,674,463
(2,549,410)
(721,064)
—
1,140,767
—
28,108
8,935,179
—
(832,506)
102,230,428
2,549,410
—
(514.371)
(1,140,767)
137,777
—
(366,402)
—
(32,681)
4,045,023
—
721,064
514,371
—
(137,777)
(28,108)
(153,166)
(749,860)
(19,528)
2,180,048
—
—
—
—
—
—
8,415,611
(749,860)
(884,715)
108,455,499
As of December 31, 2022, the group had 27,052,044 thousand euros of commitments and financial guarantees
granted subject to impairment, of which 26,865,725 thousand euros were in phase 1, 127,214 thousand euros in
stage 2 and 59,105 thousand euros in stage 3.
c)
Impairment losses on loans and advances to clients at amortized cost and at fair value through other comprehensive
income
Next, it shows the movement that has occurred in the balance of provisions covering impairment losses on the
assets that make up the balance of the headings Financial assets at amortized cost and at fair value through
changes in other comprehensive income in the clientele line:
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
Balance at beginning of period
(EUR Thousands)
2023
2022
1,956,054
840,662
2,258,845
(1,418,183)
(37,452)
(629,361)
3,414
2,133,317
1,413,375
719,942
149,221
1,984,096
2,115,180
641,332
2,334,407
(1,693,075)
—
(749,860)
(50,598)
1,956,054
1,228,609
727,445
143,520
1,812,534
72
The following is the breakdown of the movement of the gross amount of the fund for loan insolvencies and client
advances recorded under the heading “Financial assets at amortized cost” under IFRS9 for the financial years 2023
and 2022:
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
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
2023
(EUR Thousands)
Stage 1
Stage 2
476,717
250,728
Stage 3
1,228,609
Total
1,956,054
373,723
—
(195,080)
(195,500)
21,633
—
(15,315)
—
26,048
266,237
—
270,096
406,693
—
(86,968)
(19,454)
318,102
308,884
251,504
211,613
(152,021)
(65,335)
(18,335)
304,352
(629,361)
(74,342)
1,413,375
(629,361)
(34,038)
2,133,317
(64,839)
(18,592)
—
43,479
—
1,119
1,565
—
14,256
453,705
2022
Millions of euros
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
—
—
226,461
400,045
—
245,255
207,840
209,001
—
(101,868)
(96,059)
(13,340)
(75,839)
(12,459)
(9,044)
(28,753)
207,199
169,402
(2,133)
(10,047)
(749,860)
(38,418)
(749,860)
(50,598)
476,717
250,728
1,228,609
1,956,054
As at 31 December 2023 and 2022, the Group did not present significant amounts in impaired assets purchased
with impairment.
In 2023, a reversal of 56 thousand euros (endowment of 272 thousand euros in 2022) and income on assets in
hold recovered of 156,733 thousand euros (189,129 thousand euros in 2022) was recorded in fixed income. In
addition, no amounts have been recognized for renegotiation or contractual modification during the years 2023
and 2022. This includes the amount recorded under impairment or reversal of impairment of financial assets not
measured at fair value through profit or loss or net gain on change in: financial assets at fair value through other
comprehensive income and financial assets at amortized cost (IFRS9) and, in loans and receivables (NIC39);
amounts to 683,873 thousand euros (451,931 thousand euros in 2022).
73
In the years 2023 and 2022, the Group has sold the following portfolios of bad loans:
Society
Santander Consumer Bank AG (Germany)
Santander Consumer Bank S.p.A. (Italy)
Santander Consumer Bank A.S. (Norway)
Santander Consumer Finance OY (Finland)
Santander Consumer Bank GmbH (Austria)
Financiera El Corte Inglés, E.F.C., S.A. (Spain)
Banque Stellantis France (France)
Stellantis Financial Services España, E.F.C., S.A. (Spain)
Stellantis Bank Deutschland GmbH (Germany)
Santander Consumer Finance Inc. (Canada)
Transolver Finance EFC, S.A.
Santander Consumer Finance, S.A. (Spain)
Of which:
Spanish subsidiary in Portugal (*)
Spanish subsidiary in Netherlands (*)
(*) See note 1.A.
(EUR Thousands)
31/12/2023 31/12/2022
Nominal
Nominal
85,000
258,000
40,000
105,000
23,000
44,000
68,000
—
—
—
19,000
1,407
16,600
58,700
10,600
41,800
—
40,000
64,300
21,400
—
—
144,900
151,300
17,300
25,400
8,500
7,900
530,307
662,700
The sale price of the failed loan portfolios made in 2023 was 127,000 thousand euros (145,600 thousand euros
as of December 31, 2022). The profit or loss obtained from such sales (profit) has been recorded by credit to the
chapter “Impairment of the value or reversing impairment of financial assets not measured at fair value through
profit or loss – financial assets at amortized cost” in the attached consolidated profit and loss account.
Home purchase loans granted to those households by the main business in Spain
The quantitative information regarding the credit granted by the Group to households for the acquisition of homes
by the main businesses in Spain, as of December 31, 2023 and 2022, is as follows:
31-12-2023
(EUR Thousands)
31-12-2022
(EUR Thousands)
Gross amount
Of which:
Of which:
Doubtful
Gross amount
Doubtful
Loans for housing acquisition
- No mortgage guarantee
- With mortgage guarantee
—
—
—
1,056,134
1,056,134
50,420 1,216,220
50,420 1,216,220
—
55,421
55,421
74
The breakdown of the Group’s loans with mortgage guarantee to households for home acquisition in Spain,
according to the percentage of total risk on the amount of the last available valuation (loan to value), as of
December 31, 2023 and 2022, are as follows:
2023
Risk on last available valuation amount
(value of debt)
More than 40
More than 60
More than 80
Not more than
per cent and
per cent and
per cent and
40 per cent
less than or
less than or
less than or
Above 100%
TOTAL
In millions of Euros
Gross amount
equal to 60
equal to 80
equal to 100
278
per cent
268
per cent
182
per cent
148
- Of which: Doubtful
4
8
8
9
180
21
1,056
50
2022
Risk on last available valuation amount
(value of debt)
More than 40
More than 60
More than 80
Not more than
per cent and
per cent and
per cent and
40 per cent
less than or
less than or
less than or
Above 100%
TOTAL
In millions of Euros
Gross amount
- Of which: Doubtful
equal to 60
equal to 80
equal to 100
299
5
per cent
315
9
per cent
218
11
per cent
169
8
215
22
1,216
55
75
Securitisations
The balance of financial assets classified as financial assets at amortized cost – clientele in the consolidated
balance sheets as of December 31, 2023 and 2022 attached includes, among others, those loans transmitted to
third parties by securitization on which risk is maintained, even partially, this is why, according to current
regulations, they cannot cancel the consolidated balance sheet. The details of the amounts securitized as at 31
December 2023 and 2022, classified according to the dependent entity that originated the securitized portfolio,
and whether or not they have met the requirements for cancelation of the consolidated balance sheet, as
described in Note 2-d of this consolidated report, the following is indicated:
Derecognized
Held on the 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.
Stellantis Financial Services Italia S.p.A.
Financiera El Corte Inglés, E.F.C., S.A.
Santander Consumer Bank GmbH
Santander Consumer Finance Oy
Stellantis Financial Services, Spain, E.F.C., S.A.
PSA Bank Deutschland GmbH
PSA Finance UK Limited
Hyundai Capital Bank Europe GmbH
Allane SE
Total
(EUR Thousands)
2022
2023
—
—
28,138,864 32,479,951
8,694,299 11,985,025
5,772,604
6,938,694
2,362,857
2,878,783
2,346,467
2,253,650
1,391,508
1,711,197
1,342,660
1,375,104
1,341,132
1,290,471
1,196,631
1,079,807
1,121,800
645,536
1,673,300
—
1,252,528
—
379,537
861,190
313,902
410,133
28,138,864 32,479,951
The nature of the securitised assets is essentially vehicle financing and consumer financing.
In the financial years 2023 and 2022, the dependent entities indicated in the table above have securitized claims
amounting to EUR 8,827,500 thousand and EUR 5,026,660 thousand, respectively. As the risks and benefits
associated with these credit rights have not been substantially transferred, they have not been removed from the
consolidated balance sheet.
Note 19 of this consolidated report reports liabilities associated with securitization operations.
76
Impaired assets
The movement that has occurred in the balance of financial assets classified as financial assets at amortized cost
– clientele and considered as impaired due to their credit risk (non-performing assets) is as follows:
Balance at the beginning of the year
Additions net of recoveries
Written-off assets
Perimeter changes
Exchange differences and other movements (net)
Balance at year-end
(EUR Thousands)
2022
2023
2,180,048 2,033,052
916,383
1,016,968
(749,860)
(629,336
(41,499)
—
1)
(19,527)
(13,238)
2,512,918 2,180,048
This amount, after deducting its corresponding provisions, represents the Group’s best estimate of the discounted
value of the flows expected to be recovered from impaired assets.
The delinquency rate calculated as the result of dividing the financial assets at amortized cost (clientele) in stage
3 and contingent risks recorded in the consolidated balance sheets as at 31 December of this year by the total
balance of financial assets at amortized cost (clientele and contingent risks), it stood at 2.15 per cent as at 31
december 2023 (2.06 per cent as at 31 december 2022).
11. Assets and liabilities in disposal groups classified as held for sale
The balance of the chapter “Non-current assets and disposal groups classified as held for sale” in the consolidated
balance sheets as at 31 December 2023 and 2022 attached, it includes the amount of assets awarded and recovered
by consolidated entities from non-performing claims, net of impairment value corrections, as well as the assets of
those dependent entities that have been classified as interrupting operations, according to the following detail:
Enclosed tangible assets
Of which Foreclosed tangible assets in Spain
Other tangible assets held for sale
(EUR Thousands)
31/12/2023 31/12/2022
5,199
2,399
60,082
65,281
8,477
2,568
36,860
45,337
The balance of provisions as at 31 December 2023 is 15,491 thousand euros (15,534 thousand euros in December
2022). The allocations made during the financial years 2023 and 2022 amounted to 3,210 and 753 thousand euros
respectively and the recoveries made during these periods amounted to 2,622 and 1,405 thousand euros (see Note
42).
Disclosures on assets received by the businesses in Spain in payment of debts
77
The details of the origin of the assets awarded by the Group’s Spanish businesses according to the destination of the loan
or credit initially granted from which they originate, as of December 31, 2023 and 2022, are as follows:
EUR Thousand
31/12/2023
31/12/2022
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
14,214
12,025
8,874
2,189
14,744
12,364
8,973
2,380
1,287
15,501
1,077
13,102
1,060
9,934
210
2,399
1,267
16,011
1,079
13,443
1,062
10,035
188
2,568
78
12. Investments in joint ventures and associates
The details of the balance of this heading of the consolidated balance sheets as of December 31, 2023 and 2022 attached,
taking into account the company that originates it, are as follows:
Associates:
Santander Consumer Bank S.A. (Poland)
Santander Consumer Multirent Sp. z o.o. (Poland)
Stellantis Financial Services Polska Sp. z o.o. (Poland)
Santander Consumer Finanse Sp. z o.o. (Poland)
Ethias Lease (Belgium)
Payever GmbH (Germany)
Stellantis Consumer Financial Services Polska Sp. z o.o. (Poland)
Santander Consumer Financial Solutions Sp. z o.o. (Poland)
Other associated entities
Of which goodwill:
Payever GmbH (Germany)
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 joint ventures
(EUR Thousands)
2023
2022
454,754
29,765
12,194
—
1,988
1,548
807
(237)
—
500,819
1,238
104,674
105,912
254,178
52,582
18,072
319
325,151
825,970
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
The movement in the balance under this heading of the accompanying consolidated balance sheets during the years 2023
and 2022 is shown below:
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
Balance at beginning of period
(EUR Thousands)
2023
2022
724,777
1,988
—
(38,468)
77,075
—
—
60,598
825,970
682,414
—
—
(3,894)
96,736
—
—
(50,479)
724,777
79
Impairment value corrections
In the years 2023 and 2022 there is no evidence of significant deterioration in the Group’s shares.
A summary of the financial information of associates and joint ventures is as follows:
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
Millions of Euros
2022
2023 (*)
10,981
(9,154)
(1,827)
720
106
826
1,712
129
77
8,589
(6,932)
(1,657)
626
99
725
1,585
194
97
(*) This information has been obtained from the annual accounts of each of the entities, which were pending
approval by their respective Control Bodies at the date of formulation of these consolidated annual accounts.
However, the Bank Administrators consider that they will be approved without modification.
80
Other information
A summary of the financial information as at 31 December 2023 for major associates and joint ventures (derived from
information available at the date of formulation of the consolidated annual accounts) is as follows:
(EUR Thousands)
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
13. Tangible assets
Joint ventures
Associated entities
SANTANDER CONSUMER BANK
SPOLKA AKCYJNA
192,448
4,434,657
4,627,105
355,119
3,345,424
3,700,543
14,677
(30,176)
942,061
926,562
4,627,105
FORTUNE AUTO FINANCE CO.,
LTD.
186,401
2,035,859
2,222,260
20,858
1,693,047
1,713,905
50,955
(18,952)
476,352
508,355
2,222,260
485,501
14,745
—
218,454
50,955
—
The movement in the balance of this chapter in the consolidated balance sheets as at 31 December 2023 and 2022
attached, during the years 2023 and 2022, was as follows:
81
Tangible assets
Of which: Right of use for the operating lease
(EUR Thousands)
Of own use
Other assets
transferred
under
Real estate
investments
Total
Of own use
Cost:
Balances as at 31 December 2021
Additions/Disposals(net)
Additions
Disposals
Net Additions/disposals due to changes in
the consolidation perimeter
Currency Transaction differences
Transfers and other
Balances as at 31 December 2022
Additions/Disposals (net)
Additions
Disposals
Net Additions/disposals due to changes in
the consolidation perimeter
Currency Transaction differences
Transfers and other
Balances as at 31 December 2023
Accrued amortization:
Balances as at 31 December 2021
Net Additions/disposals due to changes in
the consolidation perimeter
Charges
Disposals and retirements
Currency translation differences
Transfers and others
Balances as at 31 December 2022
Net Additions/disposals due to changes in
the consolidation perimeter
Charges
Disposals and retirements
Currency translation differences
Transfers and others
Balances as at 31 December 2023
operating
lease
2,091,073
736,533
1,129,494
(392,961)
59,504
2,922
388,298
3,278,330
1,436,388
2,089,156
(652,768)
47,554
6,186
105,497
4,873,955
(180,641)
—
—
139,519
(1,358)
(436,889)
(479,369)
(10,621)
—
150,931
(1,944)
(605,667)
(946,670)
765,006
15,435
24,652
(9,217)
2,419
(3,112)
(40,345)
739,403
50,282
72,304
(22,022)
4,636
(1,389)
6,783
799,715
(363,641)
(1,383)
(71,061)
6,402
1,871
57,298
(370,514)
(5,660)
(72,609)
11,492
826
7,466
(428,999)
—
—
—
—
—
—
—
—
—
—
5,940
—
—
5,940
2,856,079
751,968
1,154,146
(402,178)
61,923
(190)
347,953
—
4,017,733
1,486,670
2,161,460
(674,790)
58,130
4,797
112,280
5,679,610
—
—
—
—
—
—
—
—
—
—
—
—
—
(544,282)
(1,383)
(71,061)
145,921
513
(379,591)
(849,883)
(16,281)
(72,609)
162,423
(1,118)
(598,201)
(1,375,669)
429,145
2,964
8,222
(5,258)
1,048
(2,446)
2,092
432,803
35,695
46,660
(10,965)
(13,224)
(1,103)
7,557
461,728
(138,511)
291
(42,523)
3,787
1,333
7,854
(167,769)
6,853
(45,682)
4,314
631
1,785
(199,868)
Other assets
transferred
under
operating
lease
Real estate
investments
Total
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
429,145
2,964
8,222
(5,258)
1,048
(2,446)
2,092
432,803
35,695
46,660
(10.965)
(13,224)
(1,103)
7,557
461,728
(138,511)
291
(42,523)
3,787
1,333
7,854
(167,769)
6,853
(45,682)
4,314
631
1,785
(199.868)
(1,034)
(1,034)
(1,035)
—
(968)
18
1,025
29
(931)
422
(552)
104
855
(23)
(125)
Impairment losses
—
Balances as at 31 December 2021
—
Net Additions/disposals due to changes in
the consolidation perimeter
—
Charges
—
Releases
—
Disposals and retirements
—
Transfers and other
—
Balances as at 31 December 2022
—
Net Additions/disposals due to changes in
the consolidation perimeter
—
Charges
—
Releases
—
Disposals and retirements
—
Transfers and other
—
Balances as at 31 December 2023
—
Net tangible assets:
—
Balances as at 31 December 2022
Balances as at 31 December 2023
—
(1) The depreciation appropriations are made under the heading “depreciation” of the consolidated profit and loss account.
The balance of tangible assets acquired through the execution of leases amounts to 261,736 thousand as at 31 December
2023 (264,104 thousand as at 31 December 2022). The Group's policy is to formalize insurance policies to cover the
possible risks to which the various elements of its fixed material are subject.
(4,423)
—
(1,397)
1,362
805
343
(3,310)
—
(1,874)
2,491
105
(132)
(2,720)
(5,458)
—
(2,365)
1,380
1,830
372
(4,241)
422
(2,426)
2,595
960
(155)
(2,845)
(353)
18
416
23
(930)
422
(156)
104
443
(7)
(124)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(353)
18
416
23
(930)
422
(156)
104
443
(7)
(124)
—
—
—
—
—
—
—
—
—
—
—
—
—
2,795,651
3,924,565
3,163,609
4,301,096
264,104
261,736
367,958
370,591
264,104
261,736
—
5,940
82
The Group has earned net gains of EUR 143 thousand in 2023 (EUR 570 thousand of net losses in 2022) on sales of plant
and equipment (Note 42).
The breakdown, according to their nature, of the items in the balance under the heading “Tangible assets – fixed assets
– tangible assets – for own use” as at 31 December 2023 and 2022 is as follows:
(EUR Thousands)
Cost
Accumulated
depreciation
Fund
Carrying
amount
Of which:
Right-of-use for
operating lease
Buildings
Furniture
Computer equipment
Others
Balances as at 31 December 2022
Buildings
Furniture
Computer equipment
Others
Balances as at 31 December 2023
436,328
195,987
88,724
18,364
739,403
485,639
203,918
92,296
17,862
799,715
(164,762)
(123,586)
(70,748)
(11.418)
(370,514)
(211,392)
(129,306)
(75,880)
(12,421)
(428,999)
—
—
—
(931)
(931)
—
—
—
(125)
(125)
271,566
72,401
17,976
6,015
367,958
274,247
74,612
16,416
5,316
370,591
261,036
4,017
—
(949)
264,104
259,649
2,186
—
(99)
261,736
The net balance of tangible assets for own use as of December 31, 2023, includes approximately 342,114 thousand euros
(337,732 thousand euros as of December 31, 2022) corresponding to fixed assets owned by the Group’s foreign
subsidiaries.
14. Goodwill
The balance of this heading of the consolidated balance sheets as at 31 December 2023 and 2022 attached, depending
on the cash generating units that originate it, is as follows:
(EUR Thousands)
2022
2023
1,297,469 1,297,469
Germany
98,074
Austria
215,443
Nordics (Scandinavia)
Netherlands
13,897
Spain
87,543
—
Portugal (*)
Canada (*)
—
1,715,714 1,712,426
Total
(*) corresponds to the goodwill originated by the acquisition of Camine D - Services,
Unipessoal Lda. In Portugal and acquisition of Carfinco in Canada (see note 3).
98,074
205,561
13,897
87,123
2,681
10,909
The Group, at least annually (and whenever there are signs of impairment), conducts an analysis of the potential loss of
value of the goodwill it has registered in respect of its recoverable value. The first step in carrying out this analysis requires
the identification of the cash generating units, which are the Group’s smallest identifiable asset groups that generate
cash inflows that are, to a large extent, independent of cash flows from other assets or groups of assets.
83
The carrying value of each cash-generating unit is determined by taking into account the book value (including any fair
value adjustment arising in the business combination) of all assets and liabilities; of the set of independent legal entities
that make up the cash generating unit, together with the corresponding goodwill.
This carrying value to be recovered from the cash generating unit is compared with its recoverable amount in order to
determine if there is impairment.
The Group’s managers evaluate the existence of any evidence that could be considered as evidence of deterioration of the
cash generating unit by reviewing certain information, including: (i) various macro-economic variables that may affect
your investment (including, among others, population data, data, and data). political situation and economic situation –
including the degree of banking –) and (ii) various micro-economic variables that compare the Group’s investment with
the financial sector of the country where the cash generating unit mainly carries out its activities (balance sheet
composition, total managed resources, results, efficiency ratio, etc.) ratio of solvency and return on own resources,
among others).
Irrespective of the existence or otherwise of signs of impairment, the Group annually calculates the recoverable amount
of each cash generating unit that it has allocated goodwill for which it uses quotations, if available, market references
(multiples), internal estimates, o assessments made by independent experts other than external auditors.
First, the Group determines the recoverable amount by calculating the fair value of each cash generating unit from the
quotation of the cash generating units, if available, and the Price Earnings Ratio of comparable local entities.
In addition, the Group makes estimates of the recoverable amount of certain cash generating units by calculating their
value in use by discounting cash flows. The main assumptions used in this calculation are: (i) Projections of results based
on the financial budgets approved by the Administrators that usually cover a period of between 3 and 5 years (unless
there is a justification for the use of a longer time horizon), (ii) discount rates determined as the cost of capital taking into
account the risk-free rate plus a risk premium according to the market and business in which they operate; and (iii)
constant growth rates in order to estimate the results in perpetuity, which do not exceed the long-term average growth
rate for the market in which the cash-generating unit in question operates.
The cash flow projections used by the Group Management in obtaining the values in use are based on the financial
budgets approved by both the local directorates of the respective units and the Group administrators. The Group's budget
estimation process is common for all cash-generating units. Local bureaus prepare their budgets based on the following
key assumptions:
a) Micro-economic variables of the cash generating unit: The existing balance sheet structure, the mix of
products offered and the business decisions taken by local directorates in this regard are taken into account.
b) Macroeconomic variables: The estimated growth is based on the evolution of the environment considering
the expected evolutions in the gross domestic product of the geographical location of the unit and the
forecasts of the behavior of interest rates and exchange rates. Such data is provided by the Group’s Research
Service, which is based on external information sources.
c) Variables of past behavior: Additionally, the projection considers the past differential behavior (both positive
and negative) of the cash generating unit with respect to the market.
During the 2023 period, the Group has not recorded any impairment losses.
84
The following are the main assumptions used in determining the recoverable amount, at the close of 2023 and 2022, of
the most significant cash generating units that have been valued by discounting cash flows:
2023
Projected
period
Discount
rate (*)
Austria
Germany
Nordics (Scandinavia)
(*) Discount rate after tax in order to be uniform with the projections of results used.
9.8 %
9.7%
11.2 %
3 years
5 years
5 years
2022
Projected
period
Discount
rate (*)
Austria
Germany
Nordics (Scandinavia)
(*) Discount rate after tax in order to be uniform with the projections of results used.
9.4%
9.4%
11.0 %
3 years
5 years
5 years
Growth rate
at nominal
perpetuity
2.3 %
2.3%
2.5%
Growth rate
at nominal
perpetuity
2.3%
2.3%
2.5%
The changes reflected in the assumptions used in the 2023 period are mainly a consequence of the current
macroeconomic scenario, as well as the rising level of inflation and difficulties in supply chains, which have led to a rapid
increase in central bank reference interest rates in the main countries where the Group’s GEU are located.
Given the degree of uncertainty of the main assumptions mentioned above on which the recoverable amount of the cash
generating units is based, the Group carries out a sensitivity analysis consisting of adjusting the discount rate +/- 50 basis
points, adjust +/-50 basis points the growth rate in perpetuity and reduce cash flow projections by 5%. These changes in
key assumptions in isolation mean that the recoverable amount of all cash generating units continues to exceed their
carrying value and have been considered by the Group as reasonably possible in a stable and non-performing economic
environment they contemplate non-recurring events and unrelated to the operation of the business of the cash
generating units.
The movement in the balance sheet under this heading of the consolidated balance sheets as at 31 December 2023 and
2022 attached during the years 2023 and 2022 was as follows:
Balance at beginning of period
Acquisitions
Additions
Impairment value (Note 41)
Currency translation differences and other
Balance at year-end
(EUR Thousands)
2023
2022
1,712,426 1,707,480
13,897
—
—
(8,951)
1,715,714 1,712,426
13,590
—
—
(10,302)
85
Grupo Santander Consumer Finance has trading funds 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 2023
financial year there has been a decrease due to exchange differences and other concepts amounting to 10,302 thousand
euros (decrease of 8,951 million euros in 2022), which, in accordance with the current regulations, they have been
recorded under the heading 'Other cumulative comprehensive income - items that can be reclassified to profit or loss -
currency conversion from equity', through the attached consolidated statement of recognized income and expenditure.
15. Other intangible assets
The balance under this heading of the consolidated balance sheets as at 31 December 2023 and 2022 appended is as
follows:
With defined useful life:
Client portfolio
Computer developments
Others
Useful life
Estimated
(EUR Thousands)
2023
2022
2 years
3 years
8.5 years
19,929
391,384
125,974
537,287
23,349
360,170
1,996
385,515
The balance included under the heading “Other” includes 124,071 thousand euros corresponding to the acquisition on
April 3, 2023 of the new business origination rights for financing products of all Stellantis brands. This acquisition has
taken place in the context of the reorganization of the global agreement with Stellantis (see Note 3).
The movement in the balance sheet under this heading of the consolidated balance sheets as at 31 December 2023 and
2022 attached was as follows:
(EUR Thousands)
2023
2022
385,515
Balance at the beginning of the year
Net additions and others
Depreciation allowance (1)
Impairment losses (Note 40)
Balance at year-end
385,515
(1) The depreciation appropriations are accounted for under the heading “depreciation” of the
consolidated profit and loss account.
537,287
(135,762)
(117,702)
(11,647)
292,871
356,033
158,831
(5,337)
Most of the additions in 2023 and 2022 relate to the implementation of computer applications in certain Group
companies in Germany, Spain, Italy and Norway, as well as the acquisition of the origination rights of new business by
Stellantis. In 2022, there were additions amounting to 64,542 thousand euros corresponding in part to the incorporation
of the branches in De Santander Consumer Finance S.A.
During the 2023 financial year, the Group has removed elements of the intangible assets that have generated losses
amounting to 5,337 thousand euros (11,647 thousand euros in the 2022 financial year) due to obsolescence. recorded
under the heading “Impairment or reversal of impairment of financial assets not measured at fair value through profit or
loss” of the consolidated profit and loss accounts (see Note 40).
86
16. Other assets and other liabilities
The composition of the balance of these chapters of the accompanying consolidated balance sheets, as at 31 December
2023 and 2022, is as follows:
(EUR Thousands)
Active
Liabilities
2023
2022
2023
2022
Inventories
Prepaid expenses
Accrued expenses
Transactions in transit
Other
5,437
190,133
—
8,216
943,582
1,147,368
17. Deposits of central banks and credit institutions
8,880
200,307
—
—
—
—
— 1,120,997
967,856
76,225
92,975
830,749
772,083 1,000,400
985,164 2,214,372 1,874,830
3,894
The composition of the balance under the heading “Financial liabilities at amortized cost – Deposits – Credit institutions”
of the consolidated balance sheets as at 31 December 2023 and 2022 attached, taking into account their nature and
currency, is as follows:
Central banks
Type:
Term deposits
Credit institutions
Nature:
Demand deposits
Term deposits
Reverse repurchase agreements
Subordinated deposits
Currency:
Euro
Foreign currency
(EUR Thousands)
2022
2023
5,465,555
17,900,641
5,465,555
17,900,641
527,637
273,895
14,388,006
10,890,128
83,910
—
675,666
456,179
15,675,219
11,620,202
20,838,668
29,452,984
302,106
67,859
21,140,774
29,520,843
As of 31 December 2023, the balance of the European Central Bank TLTRO (Targeted Longer-Term Refinancing Operation)
amounts to EUR 5,329 million, with the balance totaling under the TLTRO III program.
As at 31 December 2023, the expenditure recognized in the consolidated profit and loss account for TLTRO III amounts to
395,714 thousand euros (83,202 thousand euros of income as at 31 December 2022).
87
A significant part of these deposits at 31 December 2023 and 2022 in credit institutions corresponds to transactions with
entities of the Santander Group (see Note 46).
Note 44 of this consolidated report shows a detail of the maturity of these financial liabilities at amortized cost at the
close of financial years 2023 and 2022 and their estimated fair values for those financial years.
As of 31 December 2023 and 2022, consolidated institutions had outstanding credit lines amounting to EUR 568,017
thousand and EUR 368,650 thousand respectively.
The details of the liabilities subordinated to 31 December 2023 and 2022 according to their currency of issue are as
follows:
(EUR Thousands)
2023
2022
Currency of issue
2023
2022
Outstanding
Annual interest
Outstanding
Annual interest
amount
rate
amount
rate
(millions)
(31/12/2023)
(millions)
(31/12/2022)
Euros
675,666
456,179
648,500
5.73 %
431,000
2.34 %
Balance at year-end
675,666
456,179
The details of the balance of subordinated liabilities denominated in euros per company as at 31 December 2023 and
2022 are as follows:
Company
Santander Consumer Finance S.A.
Santander Consumer Finance S.A.
Stellantis Financial Services S.P.A.
Stellantis Financial Services S.P.A.
Stellantis Financial Services S.P.A.
Stellantis Financial Services Spain EFC SA
Banque Stellantis France
Banque Stellantis France
More- Adjustments by valuation
Total
(1)
(2)
It cannot be canceled in advance.
It may be canceled in advance.
Financial year 2023
(EUR
Thousands)
Counterparty
Date
Early
Cancellatio
n
Maturity date
200,000 Banco Santander, S.A.
200,000 Banco Santander, S.A.
11,000 Stellantis Financial Services
22,500 Stellantis Financial Services
45,000 Stellantis Financial Services
20,000 Stellantis Financial Services
105,000 Stellantis Financial Services
45,000 Stellantis Financial Services
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
06/06/2029
08/05/2029
22/11/2029
13/12/2027
27/07/2033
19/12/2027
28/02/2033
20/12/2033
27,166
675,666
88
Society
Financial year 2022
(EUR
Thousands)
Counterpart
Date of
Early
Cancellatio
nn
Expiration date
Santander Consumer Finance S.A.
Santander Consumer Finance S.A.
Stellantis Financial Services Italia S.p.A. (*)
Stellantis Financial Services España, E.F.C., S.A. (*)
200,000 Banco Santander, S.A.
200,000 Banco Santander, S.A.
11,000 Banque Stellantis France (*)
20,000 Banque Stellantis France (*)
(2)
(2)
(2)
(2)
06/06/2029
08/05/2029
22/11/2029
19/12/2027
More- Adjustments by valuation
Total
25,179
456,179
It cannot be canceled in advance.
It may be canceled in advance.
(1)
(2)
(*) previously called Banca PSA Italia S.p.A., PSA Financial Services Spain, E.F.C., S.A. and Banque PSA France
The movement in the balance of the consolidated balance sheets under this heading as at 31 December 2023 and 2022
is as follows:
(EUR Thousands)
2022
2023
455,224
Balance at the beginning of the year
—
Additions
—
Banque Stellantis France
—
Stellantis Financial Services S.P.A.
—
Amortisations (*)
—
Net additions / withdrawals due to modifications of the consolidation
perimeter.
955
Differences of change and others
Balance at year-end
456,179
(*) During the financial year 2023 and 2022 there have been no depreciations. The interest paid in remuneration of these issues
is 31,132 thousand euros (10,627 thousand euros in the financial year 2022). The balance relating to amortizations and interest
paid is reflected in the cash flow of financing activities.
456,179
217,500
150,000
67,500
—
(89)
6,576
680,166
89
18. Customer deposits
The composition of the balance under this heading of the consolidated balance sheets as at 31 December 2023 and 2022
attached, taking into account their nature, geographical area and currency of operations, is as follows:
Type:
In sight-
Current accounts
Savings accounts
Other funds in sight
Term deposits
Fixed-term and other deposits
Term deposits
Geographical area:
Spain and Portugal
Germany
Italy
France
Scandinavia
Austria
Rest
(EUR Thousands)
2022
2023
20,695,019
20,183,923
13,877,669
12,490,865
2,328
1,453
14,176,650
8,510,920
92,674
140,066
48,844,340
41,327,227
4,285,564
2,070,991
28,071,751
25,201,401
1,505,041
4,282,987
7,898,486
2,741,311
1,357,795
3,387,033
7,217,679
2,060,958
59,200
31,370
48,844,340
41,327,227
Within the account “Taxes and other term deposits” as of December 31, 2022, in the table above, there were registered
single mortgage bonds issued by the Bank on July 20, 2007 for a nominal amount of 150,000 thousand euros that
matured on July 20 from 2022 and which were secured by mortgages registered in favor of the Bank (see Notes 10 and
19). These ballots were signed by Santander Investment Bolsa, Sociedad de Valores, S.A., which gave them, in turn, to
the Asset Securitisation Fund, Independent Mortgage Securitisation Programme. The annual interest rate on these ballot
cards was 5.135% and their maturity on July 20, 2022. There were no early repayment options for either the Bank or the
holder, excluding legally established assumptions.
Likewise, on December 31, 2023, this heading includes bonds received in the amount of 95,238 thousand euros (141,255
thousand euros as of December 31, 2022) and other installment debits in the amount of 21,722 thousand euros (eur
18,625 thousand as at 31 december 2022).
Note 44 of this consolidated report shows a detail of the maturity of these financial liabilities at amortized cost at the end
of the financial years 2023 and 2022, as well as their average annual interest rates for those years as well as their fair
value estimate as at 31 december 2023 and 2022.
19. Debt securities issued
The composition of the balance under this heading of the consolidated balance sheets as at 31 December 2023 and 2022
attached, taking into account their nature, is as follows:
.
Bonds and debentures outstanding
circulation
Promissory notes and other securities
Subordinates
(EUR Thousands)
2022
2023
37,145,196 31,242,461
13,228,238 6,695,321
917,978
1,231,789
51,605,223 38,855,760
90
Bonds and obligations in circulation
The balance of “Bonds and Debentures Outstanding” account in the table above includes, among other things, the
outstanding balance of the Bonds and Obligations issued by the Group’s subsidiaries – Banque Stellantis France, S.A.
(France), Santander Consumer Bank AG (Germany) and Santander Consumer Bank AS (Norway), for an amount of EUR
6,643 million as at 31 December 2023 (EUR 6,112 million as at 31 December 2022) and the balance, as at that date, of
the financing obtained by the Group in securitization operations carried out by the Group’s subsidiaries, for an amount of
eur 15,037 million (eur 12,584 million as at 31 december 2022).
The General Meeting of the Bank’s Shareholders, at its meeting held on March 14, 2023, agreed to empower the Board
of Directors of the Bank to issue multi-currency fixed income securities up to an amount of 45,000 million euros. For its
part, the Board of Directors, at its meeting held on May 22, 2023, delegated these powers to the Executive Committee of
the Bank. The Executive Committee, at its meeting held on 12 June 2023, agreed to issue a Euro Medium Term Notes
Programme, replacing the one described above, with a nominal maximum outstanding balance that could not exceed
25,000 million euros. The Programme was listed on the Irish Stock Exchange on 14 June 2023.
As at 31 December 2023, the outstanding balance of these notes amounted to 16,019,535 thousand euros (12,942,874
thousand euros as at 31 December 2022), with their maturity from 27 February 2024 to 29 March 2033. The annual
interest rate on these financial liabilities ranged from 0 to 6.080 per cent (0 to 4.110 per cent as at 31 December 2022).
Promissory notes and other securities
The balance of the “promissory notes and effects” account in the table above corresponds to issues made by the Bank,
admitted to trading, which have accrued an average annual interest of 3.55% in 2023 (0.19% in 2022), according to the
following detail:
– During the year 2023, the Bank’s Executive Committee, at its meeting held on June 19, 2023, agreed to issue a “Euro
Commercial Paper” Issuance Program, replacing the current one, for a nominal maximum outstanding balance that may
not exceed eur 10,000 million. These fixed income securities have a maturity ranging from a minimum of one day to a
maximum of 364. The Programme was listed on the Irish Stock Exchange on 14 June 2023.
As at 31 December 2023, the outstanding balance of these promissory notes amounted to EUR 6,890,500 thousand (EUR
4,408,500 thousand as at 31 December 2022).
– During the year 2023, the Bank’s Executive Committee, at its meeting held on October 18, 2023, agreed to issue a
“Notes Program”, replacing the current one, with a nominal maximum outstanding balance that may not exceed 5,000
million euros. These promissory notes, whose unit nominal value amounts to 100,000 euros, have a maturity ranging
from a minimum of 3 working days to a maximum of 731 calendar days (two years and one day). This program was
registered in the official registers of the National Securities Market Commission on November 16, 2023.
The balance of promissory notes quoted on the AIAF market amounted to 1,751,200 thousand euros as at 31 December
2023 (523,300 thousand euros as at 31 December 2022).
- On December 14, 2023, Santander Consumer SA issued Credit Link Notes (CLNS) for the amount of 1,262,612 thousand
Danish kroner (169,379 thousand euros). These notes refer to a vehicle financing loan portfolio originating from
Santander Consumer Bank AS (Danish branch) of DKK 13,649,857 thousand. The annual interest rate of the notes issued
is a variable interest rate of Cibor at 3 months plus a spread of 8.50%. As at 31 December 2023, the outstanding balance
of notes issued by third parties outside the Group amounts to DKK 1,262,612 thousand (EUR 169,404 thousand). This
issue was authorized by the Bank’s Executive Committee at its meeting held on November 15, 2023.
Likewise, on December 31, 2023, Santander Consumer Bank, A.G., Banque Stellantis France and Santander Consumer
Bank AS (Norway) maintained issues in promissory notes and negotiable securities amounting to 4,744 million euros
(1,815 million euros as at December 31, 2022).
91
Subordinated negotiable securities
The program includes three subordinated notes with outstanding balance of EUR 1,200,000 thousand with an average
maturity of September 1, 2031 and an average annual interest rate of 3.76%.
Other information
As of December 31, 2023 and 2022, none of the issues indicated are convertible into shares of the Bank, nor do they grant
privileges or rights that may, in the event of any contingency, make them convertible into shares.
Note 44 of this consolidated report shows a detail of the maturity of these financial liabilities at amortized cost at the end
of the financial years 2023 and 2022, as well as their average annual interest rates for those years as well as their fair
value estimate as at 31 december 2023 and 2022.
Information on issues, repurchases or redemptions of debt securities
The following is a detail, as at December 31, 2023 and 2022, of the outstanding balance of the debt securities issued by
the Bank or any other entity of the Group, at those dates, depending on the market in which they are traded, if any. A
detailed account of the movement in this balance during the years 2023 and 2022 is also shown:
(EUR Thousands)
Financial year 2023
Balance at 01-
01-2023
31,242,461
31,242,461
6,695,321
917,978
38,855,760
Perimeter
Issuances
(1,467,263)
(1,467,263)
—
—
(1,467,263)
13,842,012
13,842,012
14,095,471
300,000
28,237,483
Repurchases or
refunds
(6,588,276)
(6,588,276)
(7,457,300)
—
(14,045,576)
Adjustments for
Exchange Rate
and Others
116,262
116,262
(105,254)
13,811
24,819
Balance at 31-
12-2023
37,145,196
37,145,196
13,228,238
1,231,789
51,605,223
Santander Consumer Finance
Bonds and obligations in
circulation
Total bonds and outstanding
obligations
Promissory notes and other
securities
Subordinates
Total
Santander Consumer Finance
(EUR Thousands)
Financial year 2022
Balance at 01-
01-2022
Perimeter
Issuances
Repurchases or
refunds
Bonds and obligations in
circulation
Mortgage bonds
Total bonds and outstanding
obligations
Promissory notes and other
securities
Subordinates
Total
34,756,330
450,012
35,206,342
5,142,670
303,219
40,652,231
Other issues guaranteed by the Group
—
—
—
—
—
—
5,330,095
—
5,330,095
7,331,200
600,000
13,261,295
(8,589,994)
(450,000)
(9,039,994)
(5,720,600)
—
(14,760,594)
Adjustments for
Exchange Rate
and Others
(253,970)
(12)
(253,982)
(57,949)
14,759
(297,172)
Balance at 31-
12-2022
31,242,461
—
31,242,461
6,695,321
917,978
38,855,760
As of December 31, 2023 and 2022, the Group guarantees certain debt securities issued by Group companies.
92
Information required by Royal Decree 716/2009
Article 21 of Royal Decree 716/2009, of 24 April, establishes that institutions issuing bonds or mortgage bonds shall keep
a special accounting record of loans and mortgage credits that serve as collateral for such issues, the replacement assets
that support them and the derivative financial instruments linked to each issue. This special accounting record must also
indicate whether loans and mortgage credits are eligible or not in accordance with Article 3 of the aforementioned Royal
Decree 716/2009. The Bank of Spain will determine the essential data of the aforementioned register that must be
incorporated into the annual accounts of the issuing entity, having defined several statements of public information on
the mortgage market in Circular 4/2017 of the Bank of Spain.
C Mortgage relief
The mortgage bonds issued by the Bank were securities whose capital and interest were especially secured by mortgage,
without registration, without prejudice to the Bank's universal patrimonial responsibility. All the mortgage bonds issued
matured during the 2022 financial year.
20. Other financial liabilities
The composition of the balance under this heading “‘Financial liabilities at amortized cost – other financial liabilities’ in
the consolidated balance sheets as at 31 December 2023 and 2022 accompanying, is as follows:
(EUR Thousands)
2023
2022
Declared dividends payable
Trade payables
Collection accounts
Other financial liabilities (*)
—
180,029
25,934
1,560,010 1,167,437
1,800,791 1,373,400
(*) As of December 31, 2023, the balance includes 37,954 thousand euros, corresponding to credit balances for fiscal
consolidation with Banco Santander, S.A., being the amount recorded for this concept 3,718 thousand euros as of
December 31, 2022.
—
195,565
45,216
Note 44 of this consolidated report shows a detail of the maturity of these financial liabilities at the end of financial years
2023 and 2022 and the estimate of their fair value as at 31 December 2023 and 2022.
Lease liabilities
The cash outflow per lease 2023 was 45,357 thousand euros (37,017 thousand euros in 2022).
The maturity analysis for lease liabilities as at 31 December 2023 and 2022 is as follows:
Maturity Analysis – Discounted payments
discounted
Within 1 year
Between 1 year and 3 years
Between 3 years and 5 years
More than 5 years
Recognised lease liabilities as of December 31
(EUR Thousands)
2023
2022
32,483
78,374
49,435
98,916
259,208
45,351
93,687
43,577
75,522
258,137
During the years 2023 and 2022, no significant variable payments have been made not included in the valuation of lease
liabilities.
93
Information on the average payment period to suppliers. Additional provision third “duty of information” of Law 15/2010,
of July 5
The Third Additional Provision of Law 15/2010, of July 5, amending Law 3/2004, of December 29, establishing measures
to combat late payment of commercial transactions, modified by Final Provision Second of Law 31/2014, of December 3,
it establishes the duty of information to commercial companies to expressly include in the report of their annual accounts
their average payment period to suppliers and that the Institute of Accounting and Audit of Accounts (“ICAC”), by
resolution, will indicate the adaptations that are necessary, in accordance with the provisions of this Law, so that
commercial companies not framed in article 2.1 of Organic Law 2/2012, of April 27, on budgetary stability and financial
sustainability, properly apply the methodology for calculating the average payment period to suppliers determined by
the Ministry of Finance and Public Administrations. In the case of companies that formulate consolidated annual
accounts, this duty of information is also extended for consolidated annual accounts, but in this case, exclusively for
companies based in Spain that are consolidated by the method of global integration.
The ICAC resolution referred to in the previous paragraph (resolution of 29 January 2016 on the information to be
incorporated in the annual accounts report in relation to the average payment period to suppliers in commercial
transactions), which was published in the Official State Gazette of February 4, 2016, develops, among other aspects, the
methodology to be applied for the calculation of the average payment period to suppliers, which has been applied,
therefore, by the Bank for the purpose of preparing the information on this subject included in these consolidated annual
accounts.
For the purpose of the proper understanding of the information contained in this Note, in accordance with the provisions
of the applicable regulations indicated above, note that “suppliers” are understood exclusively to be those suppliers of
goods and services to the Spanish companies of the Group whose expenditure is accounted for, mainly, under the heading
“Administrative expenses – other administrative expenses” of the consolidated profit and loss account, not including in
this Note, therefore, information on payments in financial transactions that constitute the object and main activity of the
Group or to fixed assets suppliers, that, where appropriate, may exist, which have been carried out in any case, in
accordance with the deadlines established in the corresponding contracts and in the current legislation.
In addition, note that, in application of the provisions of the aforementioned ICAC Resolution, only transactions for goods
or services received accrued since the entry into force of Law 31/2014 have been taken into account and that, given the
nature of the services received by the Spanish entities of the Group consolidated, the period between the date of receipt
of invoices and the date of payment has been considered as “payment days” for the purpose of the preparation of this
information.
The information required by the regulations indicated above is presented below for the financial years 2023 and 2022, in
the format required by the ICAC resolution, which has been mentioned in the preceding paragraphs for the Spanish
companies of the Consolidated Group in these consolidated annual accounts:
Average period of payment to suppliers
Ratio of transactions settled
Ratio of transactions not yet settled
Total payments made
Total payments outstanding
Financial year 2023 Financial year 2022
Days
Days
24.37
24.30
27.89
(EUR Thousands)
523,082
10,144
20.82
20.80
21.26
(EUR Thousands)
349,897
12,410
Indicate that although according to Law 3/2014, of December 29, the maximum payment term to suppliers is 60 days,
Law 11/2013, of July 26, established the maximum payment term in 30 days, expandable, by agreement between the
parties, a maximum of 60 days.
The average period and ratios of paid and unpaid transactions included in the table above have been calculated according
to the definitions and methodology defined in the resolution of 29 January 2016 of the ICAC mentioned above.
In addition, in accordance with Law 18/2022 of September 28, listed companies must inform in the average payment
period to suppliers, in addition, the monetary volume and number of invoices paid in a period less than the maximum
established in the late payment regulations and the percentage it assumes on the total number of invoices and on the
total monetary payments to its suppliers.
94
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)
2023
(EUR Thousands)
2022
43,156
97.35 %
475,810
99.02 %
39,693
98.97 %
400,925
96.71 %
Commercial creditors are considered suppliers, for the sole purpose of providing the information provided for in this
resolution, for debts to suppliers of goods or services.
“Average period of payment to suppliers” means the period from the delivery of the goods or the provision of services by
the supplier and the material payment for the transaction.
21. Provisions
The composition of the balance of this chapter of the consolidated balance sheets as at 31 December 2023 and 2022 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
Provision for pensions and other employment defined benefit obligations
(EUR Thousands)
2022
2023
453,105
30,282
37,066
21,058
125,947
667,458
414,385
31,488
10,089
28,010
126,903
610,875
95
The following shows the movement in the balance of these headings in the accompanying consolidated balance sheets
during the years 2023 and 2022:
2023
Pensions and
Other long
Taxes and
Contingent
similar
term
other legal
liabilities and
obligations
employee
benefits
contingencies
commitments
Other
provisions
(****)
Total
414,385
(4,140)
22,986
16,534
—
6,435
17
433,231
34,383
31,488
(93)
7,237
1,011
—
1,117
5,109
38,632
—
(16,372)
(8,313)
(1,983)
—
3,846
—
—
(37)
10,089
1,041
13,010
—
—
—
13,010
24,140
—
—
—
(3,124)
16,050
28,010
—
(6,350)
—
—
—
(6,350)
21,660
—
—
—
—
(602)
126,903
1,048
43,322
—
—
—
43,322
171,273
—
610,875
(2,144)
80,205
17,545
—
7,552
55,108
688,936
34,383
—
(24,685)
—
(54,184)
8,858
(1,983)
(57,308)
28,115
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
(8,350)
Balances at end of year
30,282
(*) The balance of net allowances (applications) for pension provisions and other post-employment defined benefit obligations, as well
as long-term employee allowances related to the years 2023 and 2022 is broken down as follows.
(**) The balance of payments to pensioners and pre-retired staff from internal funds is broken down as follows:
(***) This amount is recorded under the heading “Provisions or reversal of provisions” of the consolidated profit and loss account.
(****) Includes provisions provided in the various companies of the Group, derived from their usual operations.
19,874
453,105
(45,326)
125,947
(21,478)
667,458
12,926
37,066
(602)
21,058
96
2022
Pensions and
Other long
Taxes and
Contingent
similar
term
other legal
liabilities and
obligations
employee
benefits
contingencies
commitments
Other
provisions
(****)
Total
598,456
—
17,850
8,105
—
11,999
(2,254)
616,306
(177,950)
44,442
—
(2,447)
575
—
1,313
(4,335)
41,995
—
9,576
—
12,939
—
—
—
12,939
22,515
—
39,403
—
134,033
—
825,910
—
(11,332)
—
—
—
(11,332)
28,071
—
25,449
—
—
—
25,449
159,482
—
42,459
8,680
—
13,312
20,467
868,369
(177,950)
(25,425)
(15,232)
(10,193)
—
—
—
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
—
changes
Amounts used
Transfers, exchange differences and other
—
—
(314)
(10,507)
Balances at end of year
31,488
(*) The balance of net allowances (applications) for pension provisions and other post-employment defined benefit obligations, as well
as long-term employee allowances related to the years 2023 and 2022 is broken down as follows.
(**) The balance of payments to pensioners and pre-retired staff from internal funds is broken down as follows:
(***) This amount is recorded under the heading “Provisions or reversal of provisions” of the consolidated profit and loss account.
(****) Includes provisions provided in the various companies of the Group, derived from their usual operations.
(2,935)
—
(5,804)
(201,921)
414,385
(61,070)
9,886
(257,494)
610,875
(47,964)
15,385
(32,579)
126,903
(13,106)
680
(12,426)
10,089
—
—
(61)
(61)
28,010
—
(2,935)
Post-employment remuneration – Spanish entities:
Past service cost
Pre-retirements
Curtailments/settlements
Return premiums received on defined contribution pension plans
Other long-term remuneration – 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
(EUR Thousands)
2023
2022
Expenses / (income)
—
—
—
—
—
(181)
5,298
490
—
5,607
(43)
97
—
(536)
(482)
5,125
—
—
—
—
—
—
(1,370)
—
45
—
(1,325)
(4,804)
—
—
(459)
(5,263)
(6,588)
97
The balance of payments to pensioners and pre-retired staff from internal funds is broken down as follows:
Post-employment remuneration – Spanish entities
Other long-term remuneration – Spanish entities
Foreign entities
(EUR Thousands)
2022
2023
1,998
7,626
15,061
24,686
2,024
9,712
13,689
25,425
a) Provisions for pensions and similar obligations
i. Post-employment remuneration: Defined contribution plans – Spanish entities
The Group guarantees the following post-employment commitments of defined contribution:
Santander Consumer Finance, S.A.
Commitments guaranteed from effective retirement after May 1996, which are insured in an externalization
policy signed with an unrelated entity (Generali Spain, Sociedad de Seguros y Reaseguros). At present, the entire
insured group is already receiving the retirement benefit.
No premiums have been paid to the insurance company in 2023 and 2022 (see Note 2-r).
Spanish entities
The Collective Agreement of the Spanish entities of the Group, signed on February 2, 2012, has established a
supplementary social security system for active staff who meet certain conditions, which has been implemented
through a defined contribution pension plan. This Pension Plan covers the following contingencies: Retirement,
death, and permanent disability (total, absolute or great 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 the
financial year 2023, contributions were made for this concept in the amount of 707 thousand euros (716 thousand
euros in the financial year 2022), recorded under the heading “Administrative expenses – staff costs” in the
attached consolidated profit and loss account (see Note 39).
In addition, some of the branches abroad have defined contribution plans (mainly Santander Consumer Holanda,
Santander Consumer Benelux). The contributions made to these plans, in the years 2023 and 2022 amounted to
3,099 and 3,034 thousand euros, respectively, which are recorded under the heading “Administration expenses
- personnel expenses” of the consolidated profit and loss account for both years (see Note 39).
ii. Post-employment remuneration: Defined benefit plans – Spanish entities
The Group guarantees as defined provision the following commitments of the Spanish entities:
Santander Consumer Finance, S.A.
– Pension commitments arising from the Collective Banking Agreement with active staff, pre-retired staff
(including future life risk insurance premiums) and passive staff, in addition to other commitments made to
pre-retired staff and liabilities prior to May 1996, fully covered by internal fund.
– Life insurance guaranteed to passive personnel from Banco de Fomento, S.A., insured in a policy that does not
meet the requirements of externalization, subscribed with an unrelated entity (Axa España, S.A.). The present
value of future premiums is covered by internal fund.
– Commissary and coal gas guaranteed to pensioners under the Internal Regime Regulations of the Banking
Labour Commissary, covered in domestic fund.
98
In addition, post-employment commitments of defined benefit have branches abroad: Belgium, France and
Greece.
Autodescuento, S.L.
– Commitment consisting of a retirement benefit included in the Collective Agreement of Offices and Offices.
The present value of the commitments made by the Spanish consolidated entities in the field of post-employment
remuneration, as of December 31, 2023 and 2022, is 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
2023
—
16,411
—
16,411
—
21,006
—
21,006
The present value of liabilities has been determined by independent actuaries, who have applied the following
criteria to quantify them:
Method of calculation: “Of the projected unit of credit”, which contemplates each year of service as generator of
an additional unit of entitlement to benefits and values each unit separately.
Actuarial assumptions used: Not biased and compatible with each other. Specifically, the most significant actuarial
assumptions they considered in their calculations were:
Annual discount rate
Mortality tables
Cumulative annual CPI growth
Annual salary increase rate
Annual social security pension increase rate
2023
2022
3.35 %
3.70 %
PERM/F-2020 PERM/F-2020
2 %
N/A.
2 %
2 %
N/A.
2 %
(*) Maximum quotation base growth 2024: 5% / 3% according to exit agreement; rest of years CPI + 1.2% / 3%
The interest rate used to update flows has been determined by reference to high-quality corporate bonds.
The estimated retirement age of each employee is the first to which they are entitled to retire or the agreed, if
any.
99
The amounts recognized in the consolidated profit and loss accounts in respect of these pension commitments
for the financial years 2023 and 2022 are shown below:
Current service cost (Notes 2-r and 39)
Net interest cost (Note 31)
Expected return on assets
Extraordinary charges
Cost of past services/early retirements
Other interests
Amount recognised in the financial year
(EUR Thousands)
2022
2023
Expenses / (income)
242
752
(188)
—
—
(174)
632
374
369
—
—
—
—
743
In addition, during the 2023 financial year the heading “Another cumulative comprehensive income – actuarial
gains or losses on defined benefit pension plans” recorded a net payment of 875 thousand euros in respect of
defined benefit commitments (net charge of 1,945 thousand euros in 2022).
The movement that has occurred, during the years 2023 and 2022, in the present value of the obligation accrued
by commitments of defined provision of the Spanish entities of the Group, has been as follows:
(EUR Thousands)
2023
2022
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
27,513
418
374
429
—
—
(2,429)
—
(5,097)
115
21,323
(*) In 2023 it includes actuarial losses of 377 thousand euros and actuarial losses by financial assumptions of 354
thousand euros (actuarial losses of 185 thousand euros and actuarial financial gains of 5,283 thousand euros in
post-employment plans in 2022).
21,323
—
242
752
—
—
(2,261)
—
731
(252)
20,535
100
The movement in the fair value of assets affected by defined provision commitments of the Spanish entities of
the Group during the financial years 2023 and 2022 was as follows:
Present value of the obligations at beginning of year
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 remuneration – Spanish entities
(EUR Thousands)
2023
2022
5,424
—
188
(185)
272
(263)
—
5,436
6,341
—
59
(874)
408
(405)
(105)
5,424
The long-term commitments, other than post-employment remuneration, guaranteed by the Group’s Spanish
subsidiaries and classified as defined benefit are as follows:
Santander Consumer Finance, S.A.
– Commitments to pre-retired staff up to the effective date of retirement, covered by an internal fund.
– Life insurance guaranteed to pre-retired staff, under the Group’s Collective Agreement, signed with an
unrelated entity (Generali Spain, Sociedad de Seguros y Reaseguros). The present value of future premiums
is covered by an internal fund.
– Health insurance guaranteed to pre-retired staff under the Group's Collective Agreement. The present value
of future premiums is covered by an internal fund.
– Seniority award guaranteed to active staff under the Group's Collective Agreement, covered by an internal
fund.
Santander Consumer Renting, S.L.
– Commitments to pre-retired staff up to the effective date of their retirement, covered by internal funds.
– Life insurance guaranteed to pre-retired staff, under the Group’s Collective Agreement, signed with an
unrelated entity (Generali Spain, Sociedad de Seguros y Reaseguros). The present value of future premiums
is covered by internal fund.
– Health insurance guaranteed to pre-retired staff under the Group's Collective Agreement. The present value
of future premiums is covered by internal fund.
Transolver Finance, E.F.C.
– Commitments to pre-retired staff up to the effective date of their retirement, covered by internal funds.
– Life insurance guaranteed to pre-retired staff, under the Group’s Collective Agreement, signed with an
unrelated entity (Generali Spain, Sociedad de Seguros y Reaseguros). The present value of future premiums
is covered by internal fund.
– Health insurance guaranteed to pre-retired staff under the Group's Collective Agreement. The present value
of future premiums is covered by internal fund.
101
Santander Consumer Finance Global Services, S.L.
– Commitments to pre-retired staff up to the effective date of retirement, covered by an internal fund.
The present value of the above-mentioned obligations as at 31 December 2023 and 2022 is shown below:
Present value of the obligations:
To pre-retirees
Long-service
Provisions - Pensions and similar obligations for
defined contribution plans (Note 2-r)
(EUR Thousands)
2023
2022
19,574
144
19,718
20,921
145
21,066
The present value of liabilities has been determined by independent qualified actuaries, who have applied the
following criteria to quantify them:
Method of calculation: “Of the projected unit of credit”.
Actuarial assumptions used: Unbalanced and mutually compatible. Specifically, the most significant actuarial
assumptions they considered in their calculations were:
Annual discount rate
Mortality tables
Cumulative annual CPI growth
Annual salary increase rate
2023
2022
3.35 %
PERM/F-2020
2 %
N/A.
3.70 %
PERM/F-2020
2 %
N/A.
Annual social security pension increase rate
2 %
2 %
(*) Maximum quotation base growth 2024: 5% / 3% according to exit agreement; rest of years CPI + 1.2% / 3%
The interest rate used to update flows has been determined by reference to high-quality corporate bonds.
The estimated retirement age of each employee is the first to which he or she is entitled to retire or the agreed
age, if any.
102
The amounts recognized in the consolidated profit and loss account for the years 2023 and 2022 in respect of
these long-term commitments are shown below:
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)
2022
2023
Expenses /(income)
8
663
—
—
(181)
490
5,298
—
6,278
26
472
—
—
(1,370)
45
—
—
(827)
The movement that has occurred, during the years 2023 and 2022, in the present value of the obligation accrued
for other long-term remuneration in the Spanish entities of the Group has been 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)
2023
2022
21,066
8
663
5,298
(79)
(7,626)
239
151
(2)
19,718
31,657
26
472
—
—
(9,712)
45
(1,370)
(52)
21,066
The following table shows the estimated benefits payable as of December 31, 2023 for the next ten years:
2024
2025
2026
2027
2028
2029-2033
(EUR Thousands)
9,194
8,313
6,146
4,402
4,212
8,194
iv. Post-employment remuneration - Other foreign dependent entities
Some of the consolidated foreign entities have commitments with their staff similar to post-employment pay and
other long-term defined benefit pay. The technical bases applied by these entities (interest rates, mortality tables,
and cumulative annual CPI) in their actuarial estimates of these commitments are consistent with the economic
and social conditions in the countries in which they are based.
103
The present value of these commitments as of December 31, 2023 and 2022, net of the assets that meet the
requirements established in the applicable regulations to be considered as assets of the plan, is presented below:
Present value of obligations:
Of which:
Germany
Nordics (Scandinavia)
Less-
Plan assets
Provisions - Pensions and Other Defined Post-Employment
Benefit Obligations (Note 2-r)
Of which:
Internal Pension Funds
Net assets of the Plan
(EUR Thousands)
2022
2023
494,122
502,741
420,481
24,601
404,410
27,576
(53,614)
440,508
(111,764)
390,977
446,198
(5,690)
406,972
(15,995)
The main categories of plan assets as a total percentage of plan assets of foreign entities are as follows:
Equity instruments
Debt instruments
Investment property
Other
2023
2022
16 %
27 %
13 %
43 %
9 %
47 %
18 %
26 %
The most significant actuarial assumptions, used by Group companies based in Germany in estimating the value
of their commitments, are detailed below:
Annual technical interest rate
Mortality tables
Annual cumulative I.P.C.
Annual growth rate of LOS
Annual rate of revision of Social
Security pensions
Estimated retirement age
2023
2022
3.57 %
Heubeck RT
2018
1.90 %
2.75 %
4.21 %
Heubeck RT
2018
1.90 %
2.75 %
2.00 %
2.00 %
60/63(M/F) 60/63(M/F)
The interest rate used to update flows has been determined by reference to high-quality corporate bonds.
104
The amounts recognized in the consolidated profit and loss account in respect of these defined benefit pension
commitments held by foreign entities in Germany during the financial years 2023 and 2022 are 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
2023
Expenses / (income)
5,356
15,608
—
—
—
—
(450)
—
—
20,514
9,486
8,271
—
(2,530)
—
—
(134)
(417)
—
14,676
The movement in the present value of the obligation accrued for defined performance commitments of foreign
entities in Germany during the years 2023 and 2022:
(EUR Thousands)
2023
2022
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
583,341
—
9,486
7,854
(134)
(13,720)
(182,821)
404
404,410
(*) In 2023 it includes demographic losses amounting to 2,209 thousand euros (demographic losses amounting
to 15,024 thousand euros in 2022) and actuarial financial losses of 31,895 thousand euros (actuarial financial
gains of 197,845 thousand euros in 2022).
404,410
(25,198)
5,356
15,608
(450)
(13,268)
34,104
(81)
420,481
The movement in the fair value of the plan assets associated with these defined benefit commitments of foreign
entities dependent on Germany during the financial years 2023 and 2022 was 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)
2023
2022
20,965
(20,965)
—
—
—
—
30,057
417
(9,199)
786
(1,096)
20,965
105
The following table shows the estimated benefits payable as of December 31, 2023 for the next ten years:
2024
2025
2026
2027
2028
2029-2033
(EUR Thousands)
14,751
euros
15,975
17,291
18,853
19,810
113,195
The amounts recognized in the consolidated profit and loss account in respect of these defined benefit pension
commitments held by the Group’s foreign entities, excluding Germany, during the years 2023 and 2022 are shown
below:
(EUR Thousands)
2022
2023
Expenses / (income)
3,426
2,357
1,945
1,562
Current service cost (Note 39)
Net interest cost (*)
Extraordinary endowments
Actuarial Gains/losses during period
(2,274)
—
Past service cost
(325)
Effect of curtailments/settlements
(2,371)
Expected return on plan assets (*)
—
Other interests
813
Amount 106ecognized in the year
(*) These items are recorded for their net amount (883 thousand euros in 2023 and 15 thousand euros in 2022) under
the heading “Interest expenses” of the consolidated profit and loss accounts for those years (see Note 31).
(43)
97
(86)
(679)
—
2,796
106
The movement during the years 2023 and 2022 in the present value of the obligation accrued for defined
performance commitments of foreign companies excluding Germany, as well as in the assets of the plan, has
been as follows:
(EUR Thousands)
2022
2023
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
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
151,034
—
3,426
2,357
—
(325)
(5,111)
(2,040)
—
(48,281)
(2,730)
98,330
(*) In 2023 it includes demographic actuarial earnings of 1,477 thousand euros (demographic actuarial
earnings of 5,665 thousand euros in 2022) and financial actuarial earnings of 5,665 thousand euros
(financial actuarial earnings of 42,616 thousand euros in 2022).
98,330
(23,810)
1,945
1,562
(86)
—
(2,911)
(471)
—
(4,162)
3,245
73,642
The movement in the fair value of the plan assets associated with these defined performance commitments of
foreign entities not including Germany during the financial years 2023 and 2022 was 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)
2023
2022
90,799 138,679
—
(36,572)
2,371
679
(43.372)
(3,526)
2,383
1,687
(4,045)
(1,590)
(5,217)
2,137
90,799
53,614
The following table shows the estimated benefits payable as of December 31, 2023 for the next ten years:
2024
2025
2026
2027
2028
2029-2033
(EUR Thousands)
2,710
2,282
2,385
3,546
9,856
20,615
107
In addition, 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 2023 and 2022 amounted to 38,553 and 37,868 thousand euros
respectively, which are recorded under the heading “Administration expenses - personnel costs” of the
consolidated profit and loss account for both years (see Note 38).
In addition, during the financial year 2023, the heading “Other cumulative overall income – items not to be
reclassified into profit or loss – actuarial gains or losses in defined benefit pension plans” has recorded a net
charge change of 22,316 thousand euros in respect of benefit commitments defined for the Group’s foreign
companies (net payment of 119,532 thousand euros in 2022).
v.
Sensitivity analysis
Changes in the main assumptions used in the valuation may affect the calculation of commitments. As of
December 31, 2023, if the discount interest rate had been decreased or increased by 50 p.b., there would have
been an increase or decrease in the present value of post-employment obligations of +6.81% and -7.64%,
respectively.
vi. Status of the pension fund for the current and four preceding years
The position of the defined benefit commitments for the financial year 2023 and the four preceding financial
years, at the end of each financial year, is shown below:
1. Spanish entities
2023
Post-employment remuneration
2021
2022
2020
(EUR Thousands)
2019
2023
Other long-term remuneration
2020
2021
2022
2019
Present value of the obligation:
To current employees
Vested obligations to retired
employees
To pre-retirees
Long-service bonuses and other
obligations
Other
Fair value of plan assets
Provisions for pensions
Of which:
Internal pension funds
Net pension assets
2. Foreign entities
—
—
—
—
—
—
—
—
20,535 21,006 27,512 25,023 25,601 19,574 20,921 31,527
—
—
—
—
—
—
—
—
— 31,527 33,766
141
130
130
—
—
—
—
—
—
—
—
—
6,341
—
—
—
5,424
—
—
—
5,436
—
144
—
—
—
—
113
—
—
145
—
—
15,099 15,582 21,171 25,023 25,714 19,718 21,066 31,657 31,657 33,907
16,411 16,997 22,360
(1,312)
(1,415)
(1,188)
—
—
— 19,718 21,066
—
—
—
—
—
—
—
—
—
Present value of obligations less-
Fair value of plan assets
Provisions – Pension funds
Of which:
Internal pension funds
Net pension assets
2023
2022
(EUR Thousands)
2021
2020
2019
494,122
(53,614)
440,508
502,741
(111,764)
390,977
734,375
(168,735)
565,640
725,050
(98,721)
626,329
687,925
(95,192)
592,733
446,198
(5,690)
406,972
(15,995)
588,520
(22,880)
—
—
—
—
108
b) Other provisions
The balance under the headings “Procedural issues and pending tax disputes” and “Remaining provisions” in the
chapter “Provisions”, which, inter alia, include those relating to restructuring provisions and tax and legal disputes,
have been estimated using prudent calculation procedures consistent with the uncertainty conditions inherent in
the obligations they cover, determining the final time of the departure of resources that incorporate economic
benefits for the Group for each of the obligations in some cases without a fixed cancelation period, and in other
cases, depending on the ongoing disputes.
The balance of these headings by geographical area is broken down as follows:
Recognised in Spanish companies
Recognised in other foreign companies
(EUR Thousands)
2023
2022
66,015
96,998
55,779
81,212
163,013 136,991
The following is the breakdown of the balance as at 31 December 2023 and 2022 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:
Tax provisions
Provision for other legal processes
Provision for operational risks
Provision for restructuring
Other
(EUR Thousands)
2022
2023
20,505
16,560
49,559
32,038
44,351
163,013
7,862
2,227
65,107
18,097
43,698
136,991
Likewise, below, relevant information is broken down for each of the types of provision shown in the previous table:
–
–
Tax provisions include provisions for processes of a tax nature.
The provisions for other legal proceedings include provisions for judicial, arbitral or administrative
proceedings (other than those included in other categories or types of provision separately broken down)
initiated against the companies of the Santander Consumer Finance Group.
As of December 31, 2023, the main legal processes affecting the Group are as follows:
Mortgage Portfolio in Swiss Francs (CHF) in Poland: on 3 October 2019, the Court of Justice of the European Union
(CJEU) decided a preliminary ruling in connection with a legal proceeding brought against a bank not affiliated with
the Santander Group, declaring certain clauses in the loan contracts indexed to CHF to be unfair. The CJEU has left
to the Polish courts the decision on whether the contract can survive without the unfair clause, for which they must
in turn decide whether the effects of the cancelation of the contract are harmful to the consumer. In the event of the
continuation of the contract, the court may only integrate it with supplementary provisions of national law and
decide, in accordance with them, the applicable rate.
109
In 2021, the Supreme Court was expected to take a position on key issues in foreign-currency-based loan disputes,
clarifying discrepancies and unifying jurisprudence. The Supreme Court met several times, with the last sitting
taking place on 2 September 2021. However, the Supreme Court did not resolve the issue and instead submitted to
the CJEU preliminary questions on certain constitutional aspects of the Polish judicial system. No new hearing has
been scheduled and a full Supreme Court ruling on this matter is not expected in the short term. In the absence of a
ruling by the Supreme Court, it is difficult to expect a full unification of the decisions issued by the courts, so it will
be the decisions of the Supreme Court and the CJEU on individual issues, which will shape the jurisprudence on this
matter, although the case law of the Polish courts has not yet been consolidated, the majority trend is toward the
declaration of nullity of loan contracts.
On 15 June 2023, the CJEU delivered its judgment in Case C-520/21 in which it confirmed that, in order to determine
the effects of the declaration of invalidity of a contract, national law must be applied in the light of the principles
derived from Directive 93/13/EEC. Likewise, the CJEU ruled that, in the event of termination of a loan contract for
the cancelation of an unfair clause, claims by the bank that exceed the repayment of the nominal amount of the
principal of the loan and, where appropriate, the payment of interest on late payment, they are contrary to the
objectives of Directive 93/13/EEC as they would make it possible to obtain a benefit similar to that intended to be
obtained from the normal performance of the contract and thus eliminate the deterrent effect.
At the same time, the CJEU ruled that, in accordance with European law, there is no objection to the consumer being
able to claim compensation from the bank in excess of the refund of the fees paid, although, stipulated that such a
claim must be assessed in the light of all the circumstances of the case, so that the possible benefits of the consumer
arising from the nullity of the contract do not exceed what is necessary to restore the factual and legal situation in
which he would have found himself if the defective contract had not been concluded, and do not constitute an
excessive sanction for the professional (principle of proportionality).
On 17 February and 15 June 2023, the Polish Financial Supervision Authority (KNF) disagreed with the Advocate
General’s findings prior to the judgment of the CJEU of 15 June 2023 and subsequently also in relation to the
judgment in question, stating that it is contrary to the principles of proportionality and balance between the
protection of securities protected by Directive 93/13 and higher values such as the stability and security of the
financial system.
The case law of national courts in application of the CJEU rulings (including the judgment of 15 June 2023) and the
potential position of the Supreme Court will be crucial for the final assessment of the legal risk associated with this
case.
As of the date of these consolidated annual accounts, it is not possible to predict the decisions to be taken by the
Supreme Court and the CJEU in the individual cases raised. Santander Consumer Bank S.A. (Poland) estimates the
legal risk using a model that considers different possible outcomes and regularly reviews judgments on this matter
in order to verify changes in jurisprudence.
As of December 31, 2023, Santander Consumer Bank S.A. (Poland) presents a portfolio of mortgages denominated
in or indexed to CHF for an amount of approximately PLN 1,521 million (EUR 350 million). On the same date, there
is a provision of PLN 991 million (EUR 228 million) to cover the mortgage portfolio in CHF.
As of December 31, 2022, Santander Consumer Bank S.A. presented a portfolio of mortgages denominated in or
indexed to CHF for an amount of approximately PLN 1,891 million (EUR 404 million). On the same date, there is a
provision of PLN 745 million (EUR 159 million) to cover the mortgage portfolio in CHF.
The Group integrates its participation in Santander Consumer Bank, S.A (Poland) by the method of putting in
equivalence, with its percentage of participation in it as of December 31, 2023 and 2022 being 40%.
In addition, provisions for other operational risks mainly include provisions for the risks arising from the business
operations of the Group companies, corresponding to the most significant amounts as of December 31, 2023 to
those registered with Santander Consumer S.A. for an amount of 30,604 thousand euros (27,107 thousand euros
as of December 31, 2022), Santander Consumer Bank GmbH (Austria) for an amount of 5,958 thousand euros (1,023
thousand euros as of December 31, 2022), Santander Consumer Bank, A.G. (Germany) for an amount of 8,080
thousand euros (12,367 thousand euros as of December 31, 2022). Santander Consumer Bank A.S. (Norway)
presented an amount of 14,400 thousand euros as of December 31, 2022.
110
The provisions for restructuring include only expenses arising from restructuring processes carried out by the
various entities of the Group. During 2020, 2021 and 2023 the Group has carried out different restructuring
processes in some companies to adapt the business to current market conditions in these geographies. In these
cases, the Group companies offer their employees the possibility of ceasing through offers of early retirement and
incentive discounts. As at 31 December 2023, the outstanding balance for this item is mainly held by Santander
Consumer Bank S.P.A. (Italy), amounting to 9,371 thousand euros; Stellantis Italia, amounting to 6,075 thousand
euros, Santander Consumer Bank, A.G (Germany), amounting to 9,600 thousand euros (15,678 thousand euros as
of 31 December 2022), and Compagnie Generale de Credit Aux particuliers - Credipar S.A. (France), amounting to
1,745 thousand euros (1,898 thousand euros as of 31 December 2022).
The Group’s general policy is to record provisions for tax and legal processes in which the risk of loss is assessed as
likely and no provisions are recorded when the risk of loss is possible or remote. The amounts to be provisioned are
calculated on the basis of the best estimate of the amount required to settle the relevant claim, based, inter alia, on
in an individualized analysis of the facts and legal opinions of internal and external advisers or taking into account
the historical average figure of losses arising from claims of this nature. The final date of the departure of resources
incorporating economic benefits for the Group depends on each of the obligations. In some cases, obligations do
not have a fixed settlement period and in other cases depend on ongoing legal processes.
111
22. Tax matters
a) Current tax receivables and payables
The balance under the heading “Tax assets – Current tax assets” of the consolidated balance sheets as of
December 31, 2023 and 2022 includes, basically, payments on account of the income tax made by the
consolidated entities to the Public Administrations of the countries where they reside. The balance under the
heading “Tax liabilities – current tax liabilities” in that consolidated balance includes the liability for the different
taxes that are applicable to the Group.
b) Reconciliation of the accounting profit to the income tax expense recognised in the consolidated income statement
The reconciliation between the consolidated accounting income and the profit tax expense in the corresponding
consolidated profit and loss account for the financial years 2023 and 2022 is as follows:
Consolidated income before tax
Accounting result by Corporate Tax Rate (*)
Differences, permanent adjustments (**)
Consolidated Corporate Tax Expenditure
Effective tax rate
(*) Calculated by applying the nominal rate applicable to the Bank (30%)
EUR Thousands
2023
Continued
2022
Continued
operations
operations
1,800,746
540,224
2,207,893
662,368
(60,628)
479,596
26.63%
(56,098)
606,270
27.46%
(**) Includes the net tax effect of permanent differences in consolidated entities as well as differences arising from the
existence of different tax rates in the countries in which the Group operates, the effects derived from consolidation, tax
adjustments from previous years, and the effect of considering existing exemptions, deductions, bonuses according to
the corresponding tax jurisdictions where the Group companies operate.
c) Years open for review by the Tax Authorities
The Bank is part of the Tax Group whose head is Banco Santander, S.A.According to current legislation, taxes
cannot be considered definitively settled until the tax returns submitted have been inspected by the tax
authorities or the limitation period of four years has elapsed.
With respect to the party signed in disagreement both for these years and for the previous years (corporate tax
for the years 2003 to 2015), Banco Santander, S.A., as the dominant entity of the Consolidated Tax Group,
considers, in accordance with the advice of its external lawyers, that the regularizations carried out should not
have a significant impact on the consolidated annual accounts, since there are solid arguments of defense in the
appeals filed against them before the National High Court (financial years 2003 to 2011) and before the Central
Administrative Economic Court (financial years 2012 to 2015), as well as in relation to the minutes that are still
pending review by the Tax Administration (financial years 2017-2019). Consequently, no provision has been made
for this concept. Moreover, it should be noted that, in those cases where it has been considered appropriate, the
mechanisms empowered to avoid international double taxation have been used.
At the date of formulation of these consolidated annual accounts, subsequent years up to 2023, including, are
subject to review.
The rest of the entities are subject to inspection for the corresponding years in accordance with the tax rules that
apply to them in each country.
The individual annual accounts of the companies consolidated in the Group include other relevant information on
tax aspects affecting these companies.
112
Due to the possible different interpretations that may be given to tax rules, the results of tax inspections by the
tax authorities for the remaining years subject to verification may give rise to contingent tax liabilities the amount
of which cannot be quantified objectively. However, in the opinion of the Group’s tax advisors, the possibility of
such tax liabilities materializing is remote and, in any event, the tax debt arising therefrom would not significantly
affect the Group’s consolidated annual accounts.
113
f) Deferred taxes
The detail of deferred taxes as of December 31, 2023 and 2022 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
241,866
—
241,866
—
—
195,194
34,655
12,017
—
—
2023
Other
433,728
9,898
423,830
45,798
85,224
32,312
99,918
82,352
1,626,479
1,626,479
Total
675,594
9,898
665,696
45,798
85,224
227,506
134,573
94,369
1,626,479
1,626,479
Monetisable
263,740
—
263,740
—
—
217,068
34,655
12,017
—
—
2022
Other
294,794
8,569
286,225
48,333
23,419
20,054
107,431
75,435
1,283,474
1,283,474
Total
558,534
8,569
549,965
48,333
23,419
237,122
142,086
87,452
1,283,474
1,283,474
—
—
—
—
224,589
876,815
—
140,752
224,589
876,815
—
140,752
—
—
—
—
181,899
690,442
—
134,495
181,899
690,442
—
134,495
(*) as at 31 December 2023 and 2022, 148 million euros in both years are considered monetizable tax assets corresponding to Spanish companies and 93 million euros and 136 million
euros is considered monetizable tax assets corresponding to an Italian entity as of december 31, 2023 and 2022, respectively.
114
The movement in the balance of deferred tax assets and liabilities over the past two years is as follows:
(debit)/
Balance as
credit to
at
31-12-2022
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 at
31-12-23
Active deferred taxes
BIN's and deductions
Temporary differences
of which monetizable
558,534
8,569
549,965
263,740
185,619
1,338
184,281
(22,481)
Passive deferred taxes
Temporary differences
(1,283,474)
(1,283,474)
(386,562)
(386,562)
8,381
(9)
8,390
—
4,398
4,398
11,110
—
11,110
608
2,318
2,318
(88,050)
—
(88,050)
—
36,841
36,841
675,594
9,898
665,696
241,867
(1,626,479)
(1,626,479)
Total
(724.940)
(200,943)
12,779
13,428
(51.209)
(950.885)
(debit)/
Conversion
Balance as at
31-12-2021
credit to
differences on
foreign currency
the income
statement
(24,177)
2,872
(27,049)
(20.131)
587,912
5,546
582,366
283,871
balances and
other items
(1,439)
151
(1,590)
—
Active deferred taxes
BIN's and deductions
Temporary differences
of which monetizable
Passive deferred taxes
Temporary differences
(1,072,514)
(1,072,514)
(167,717)
(167,717)
Total
(484,602)
(191,894)
18,685
18,685
17,246
(debit) / credit to
asset and liability
valuation reserve
Acquisitions
(net) for the
year
Balance as at
31-12-22
(3,762)
—
(3,762)
—
(61,928)
(61,928)
(65,690)
—
—
—
—
—
—
—
558,534
8,569
549,965
263,740
(1,283,474)
(1,283,474)
(724,940)
The balance under the heading “Tax assets – deferred tax assets” of the consolidated balance sheets includes the debtor
balances against the Public Treasury corresponding to taxes on anticipated profits; in turn, the balance under the heading
“Tax liabilities” in these consolidated balance sheets includes the liability for the different deferred taxes of the Group.
On June 26, 2013, the Basel III legal framework was incorporated into European law through Directive 2013/36 (CRD IV)
and Regulation 575/2013 on prudential requirements for credit institutions and investment firms (CRR) which are directly
applicable in Member states from 1 January 2014, while establishing a gradual timetable for the implementation and
implementation of the various requirements.
This regulation states that deferred tax assets that depend on their use for future profits must be deducted from
regulatory capital.
In this regard, in recent years various countries under the umbrella of Basel III, they have modified their tax regimes with
respect to certain deferred tax assets so that they could continue to count as regulatory capital since their use does not
depend on the future profits of the entities that generate them (hereinafter referred to as monetizable tax assets). Thus,
Italy has a regime in this regard introduced by Decree Legge No. 225 of 29 December 2010 as amended by Legge No. 10
of 26 February 2011.
Likewise, during 2013 in Spain, through Royal Decree-Law 14/2013, of November 29, and confirmed by Law 27/2014 of
November 27, a tax regime was established by which certain assets for deferred taxes -derived from endowments of
insolvencies provisions, endowments of provisions for awarded goods, commitments for pensions and early retirement,
may be converted, under certain circumstances, into credits against the Public Treasury, not depending on their use of the
future profits of the entities and being, therefore, exempt from their deduction from regulatory capital.
During 2015 Spain completed its regulation on monetizable tax assets by introducing a wealth benefit that will involve
the payment of an annual amount of 1.5% for maintaining the right to monetization and will be applied on part of the
deferred tax assets that meet the requirements legal requirements to be considered monetizable generated before 2016.
115
Similarly, Italy, by decree of 3 May 2016, has introduced a 1.5% annual fee to maintain monetization of part of deferred
tax assets.
The Group only recognizes deferred tax assets arising from temporary differences or negative tax bases and deductions
pending compensation when it considers it likely that the consolidated entities that generated them will have sufficient
tax gains against which they can be paid in the future.
Deferred taxes, both assets and liabilities, are reviewed at the time of the accounting closure in order to check whether
modifications are necessary in accordance with the results of the analyzes carried out.
These analyzes take into account, among others, (i) the results generated by the different entities in previous years, (ii)
the projections of results of each fiscal entity or group, (iii) the estimation of the reversal of the different temporary
differences according to their nature and (iv) the period and limits established in the legislation of each country for the
recovery of the different deferred tax assets, concluding in this way on the ability of each entity or tax group to recover its
assets for registered deferred taxes.
The results projections used in this analysis are based on the financial budgets approved by both the local directorates of
the respective units and the Group managers. The Group's budget estimation process is common for all units. The Group
management draws up its financial budgets based on the following key assumptions:
a) Microeconomic variables of the entities that make up the tax group in each location: it takes into account the
existing balance sheet structure, the mix of products offered and the commercial strategy at all times defined by
the local directorates in this sense based on the competition, regulatory and market environment.
b) Macroeconomic variables: The estimated growth is based on the evolution of the economic environment
considering the expected evolutions in the gross domestic product of each location and the forecasts of behavior
of interest rates, inflation and exchange rates. Such data is provided by the Group’s Research Service, which is
based on external information sources.
In addition, the Group performs retrospective contrasts (back testing) on the variables projected in the past. The
differential behavior of these variables with respect to the actual market data is considered in the estimated projections
in each year. Thus, in relation to Spain, the deviations identified by the management in recent past years are due to non-
recurrent events and outside the operation of the business, such as the impacts for the first application of new applicable
regulations, the costs incurred for accelerating restructuring plans and the changing effect of the current macroeconomic
environment.
Finally, and given the degree of uncertainty of these assumptions, the Group carries out a sensitivity analysis of the most
significant ones considered in the analysis of the recoverability of deferred tax assets, considering reasonable changes in
the key assumptions on which the income projections of each fiscal entity or group and the estimate of the reversal of
the different temporary differences are based. 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.
Regardless of the income tax on the consolidated profit and loss accounts, in the years 2023 and 2022, the Group has
applied the following amounts to its consolidated net worth for the following:
EUR Thousands
Credits (Charges) to Consolidated
Equity
2023
2022
Actuarial gains and losses on pension plans
Coverage of cash flows
Debt instruments measured at fair value through other
comprehensive income
Others
Total
(9,951)
(15,846)
(523)
2,994
(23,326)
12,289
5,036
677
(2,910)
15,092
116
23. Registered share capital and equity instruments other than capital
a)
Paid-up capital
As of December 31, 2023 and 2022, the Bank's capital stock consisted of 1,879,546,172 registered shares, each with a
par fair value of 3 euros, fully subscribed and paid up, with identical political and economic rights.
On December 20, 2019, Holneth, B.V. sold the registered shares held over the Bank, of which 469,886,523 registered
shares were acquired by Banco Santander, S.A. And 20 by Cantabro Catalana de Inversiones, S.A.. Thus, as of December
31, 2023 and 2022 Banco Santander, S.A owned 1,879,546,152 shares and Cantabrian Catalana de Inversiones, S.A. 20
shares.
b)
Non-capital equity instruments
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
117
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, as at 31 December 2023 and 31 December 2022, amounted to EUR 419,478
thousand and EUR 325,375 thousand euros 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.
24. Share premium
The balance under this heading of the accompanying consolidated balance sheets as of December 31, 2023 and 2022
includes the amount disbursed by the Bank’s shareholders in capital issues made above the nominal. The recast text of
the Capital Companies Act expressly allows the use of the issue premium balance to expand the share capital of the
entities in which it is registered and does not establish any specific restriction as to its availability.
25. Retained earnings and other reserves
The balance of “Shareholders’ Equity - Reserves - Retained Earnings” of the accompanying consolidated balance sheets
includes the net amount of the accumulated income attributed to the Group recognized in prior years through the
consolidated profit and loss account which, in the distribution of profit, they were used for consolidated net worth, as
well as, where appropriate, the costs of issuing own equity instruments and the differences between the amount for
which own securities are sold and their acquisition price, in the event of such operations and distributions of profits to
Bank shareholders made from reserves.
The balance under the heading “Own funds – Other reserves – Reserves or accumulated losses on investments in joint
and associated ventures” in the accompanying consolidated balance sheets, includes the net amount of accumulated
results in previous years, generated by entities valued by the equity method and corresponding to the Group, recognized
through the consolidated profit and loss account, which have not been distributed.
The composition of the balance under both headings of the consolidated balance sheets, as at 31 December 2023 and
2022, 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
Others
Reserves or accumulated losses from investments in:
Joint ventures and associates
EUR Thousands
2023
2022
804,803
536,899
(194,085)
716,069
575,350
166,373
2,501,779 2,171,545
3,649,396 3,629,337
(519,446)
(419,035)
524,365
4,919
439,882
20,847
Legal reserve
According to the consolidated text of the Capital Companies Act, Spanish entities that obtain profits in the financial year
must provide 10% of the net profit for the financial year to the legal reserve. These endowments must be made until the
reserve reaches 20% of the share capital. The legal reserve may be used to increase the share capital in the part of its
118
balance that exceeds 10% of the share capital already increased. Except for this purpose, and as long as it does not exceed
20% of the share capital, this reserve may only be used for loss compensation, provided that there are no other reserves
available sufficient for this purpose.
Reserves of subsidiaries
The breakdown by company of this balance, based on the contribution of the same to the Group (considering the effect
of the consolidation adjustments), is as follows:
Santander Consumer Holding GmbH
Santander Consumer Bank S.p.A.
Auto ABS UK Loans Plc.
Stellantis Financial Services UK Limited
Santander Consumer Bank GmbH
Compagnie Generale de Credit Aux particuliers - Credipar S.A.
Stellantis Financial Services España, E.F.C., S.A.
Santander Consumer Finance OY
Santander Consumer Leasing GmbH
Santander Consumer Bank A.S.
Santander Consumer Bank AG
Banque Stellantis France
Financiera El Corte Inglés, E.F.C., S.A.
Stellantis Financial Services Italia S.p.A.
Stellantis Bank Deutschland GmbH
Santander Consumer Finance Inc.
Santander Consumer Finance Schweiz AG
Santander Consumer Technology Services GmbH
Other companies
EUR Thousands
2023
2022
(1,332,792) (1,243,743)
134,787
(65,982)
57,518
—
—
281,488
470,063
42,647
304,131
17,195
90,913
213,468
321,492
37,253
255,561
21,013
1,411,970 1,391,900
575,757
106,062
52,359
42,528
85,985
—
23,941
31,129
97,124
2,501,779 2,171,547
776,815
136,084
63,208
76,839
—
104,965
29,793
27,655
34,200
119
26. Other comprehensive income
The balances in the other comprehensive accumulated income chapter include the amounts, net of tax effect, of
adjustments made to assets and liabilities recorded in equity through the statement of consolidated recognized income
and expenses. The amounts from the dependent entities are presented, line by line, in the corresponding items according
to their nature.
With respect to items that may be reclassified to profit or loss, the Statement of Recognized Consolidated Revenue and
Expenditure includes variations in the Valuation Adjustments, as follows:
– Valuation gains (losses): This includes the amount of income, net of expenses incurred in the financial year,
recognized directly in equity. The amounts recognized in equity for the year are maintained under this heading,
although in the same period they are either transferred to the profit and loss account or to the initial value of
assets or liabilities or reclassified to another item.
– Amounts transferred to the profit and loss account: This includes the amount of valuation gains (losses) previously
recognized in equity, even in the same financial year, which are recognized in the profit and loss account.
– Amounts transferred to the initial value of hedged items: This includes the amount of valuation gains (losses)
previously recognized in equity, even in the same financial year, recognized in the initial value of assets and
liabilities as a result of cash flow hedges.
– Other reclassifications: Includes the amount of transfers made in the year between the different items of other
cumulative overall income.
The amounts of these items are recorded in their gross amount and include the amount of other aggregate income
accumulated for minority interest (non-controlling interests), with their corresponding tax effect shown in a separate
item, except for those for entities valued by the equity method, that are presented net of the tax effect.
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
31-12-2023
31-12-2022
(678,242)
(50,982)
(61.399)
(582,107)
(33,865)
(41,487)
—
199
10,218
(627,260)
37,543
(634,720)
(2,512)
(60)
—
—
—
195
7,427
—
(548,242)
(46,397)
(495,612)
62,111
(1,149)
—
—
Share in other recognised income and expenses in investments in joint ventures and
associates
(27,511)
(67,195)
120
b) Other cumulative comprehensive income - items that will not be reclassified into profit or loss - actuarial gains or (-)
losses on defined benefit pension plans
The balance under the heading “Other cumulative comprehensive income-items not reclassified into profit or loss
– actuarial gains or losses on defined benefit pension plans” includes actuarial gains and losses and the return on
the plan’s assets, less administration costs and plan taxes, and any change in the effects of the asset limit,
excluding the amounts included in the net interest on the net liability (asset) for post-employment commitments
of defined benefit of consolidated companies.
Its variation is shown in the statement of consolidated recognized income and expenses. The most significant
changes during the 2023 financial year correspond mainly to the evolution experienced by the main actuarial
assumptions of the entities dependent in Germany – actuarial losses due to a decrease in interest rates from
4.21% to 3.57% – , as well as mainly financial actuarial gains in Nordics (Scandinavia) – interest rate increase
from 3.50% to 4.10% in Sweden - and actuarial losses in Spanish entities - interest rate decrease from 3.70% to
3.35% (in 2022, mainly, the following year: a The evolution of the main actuarial assumptions of the German
dependent entities Actuarial gains from experience and interest rate increase from 1.45 per cent to 4.21 per cent,
as well as actuarial earnings mainly financial in Nordics (Scandinavia) – interest rate increase from 2.00% to
3.50% in Sweden) and actuarial earnings in Spanish entities).
c) Elements that can be reclassified into results
c.1) Coverage of net investments in foreign business (effective portion)
The balance under the heading “Other cumulative comprehensive income – items that can be reclassified into
profit or loss – coverage of net investments in foreign businesses (effective portion)” of the consolidated net
worth includes the net amount in the variation in the derivatives contracted by the Group and designated as
hedging instruments considered effective in hedging of this type. His movement during exercises 2023 and 2022,
is as follows:
Balance at beginning of period
Valuation gains/(losses)
Transferred to the income statement
Balance at end of period
c.2) Currency conversion
EUR Thousands
2023
2022
46,397
(83,940)
100,443
(54,046)
—
—
(37,543)
46,397
The balance under the heading reflects the amount of exchange differences originating in non-monetary items
whose fair value is adjusted in return for equity and in those that occur when the balances of consolidated entities
whose currency is different are converted into euros of the euro (see note 2-a).
c.3) Coverage derivatives. Cash flow hedges (effective portion)
The balance under this heading reflects the net amount of changes in the value of financial derivatives designated
as cash flow hedge instruments, in the part of those changes considered as “effective hedging”.
121
Its movement, during exercises 2023 and 2022, is presented as follows:
Balance at the beginning of the year
Valuation gains / (losses)
Amounts transferred to the profit and loss account
Taxes on profits
Balance at year-end (Note 29)
EUR Thousands
2023
2022
62,112
(70,512)
(14,946)
20,835
(2,511)
10,170
41,409
31,593
(21,060)
62,112
c.4) Changes in the fair value of debt instruments at fair value through other comprehensive income
The balance under this heading reflects the net amount of unrealized changes in fair value of financial assets
classified as items that can be reclassified into profit or loss – changes in the fair value of debt instruments
measured at fair value through other comprehensive income.
Its movement, without considering valuation adjustments attributed to minority interests, during the years 2023
and 2022, is presented as follows:
Balance at the beginning of the year
Valuation gains / (losses)
Amounts transferred to the consolidated profit and
loss account
Taxes on profits
Balance at year-end
EUR Thousands
2023
2022
(1,149)
1,672
(60)
(523)
(60)
256
(1,797)
(285)
677
(1,149)
122
27. Non-controlling interests
This chapter of the accompanying consolidated balance sheets as of December 31, 2023 and 2022 includes the net
amount of the net worth of dependent entities attributable to equity instruments not directly or indirectly belonging to
the Group, including the share attributed to them of the consolidated income for the financial year.
The details, by company of the Group, of the balance of this chapter of the consolidated balance sheets as of December
31, 2023 and 2022 annexed, are presented below:
123
Banque Stellantis France
Hyundai Capital Bank Europe GmbH
Stellantis Financial Services Italia S.p.A.
Stellantis Financial Services España, E.F.C.,
Financiera El Corte Inglés, E.F.C., S.A.
Transolver Finance E.F.C., S.A.
TIMFin S.p.A.
MCE BANK GMBH
Suzuki Servicios Financieros, S.L.
Stellantis Renting Italia S.p.A.
Allane SE
Santander Consumer Bank AG
Stellantis Financial Services Nederland B.V.
Stellantis Financial Services Belux SA
Stellantis Bank Deutschland GmbH
STELLANTIS FINANCE UK LIMITED
Other companies
Result of the exercise attributed to the
minority:
Banque Stellantis France
Stellantis Financial Services España, E.F.C.,
Stellantis Financial Services Italia S.p.A.
Financiera El Corte Inglés, E.F.C., S.A.
Santander Consumer Bank AG
Stellantis Financial Services Belux SA
Hyundai Capital Bank Europe GmbH
Stellantis Renting Italia S.p.A.
Stellantis Financial Services Nederland B.V.
Allane SE
Transolver Finance EFC, S.A.
Suzuki Servicios Financieros, S.L.
TIMFin S.p.A.
MCE BANK GMBH
Stellantis Finance UK Limited
Stellantis Bank Deutschland GmbH
Other companies
EUR Thousands
2023
2022
994,824
458,998
343,743
235,886
131,346
36,459
30,343
13,740
6,671
6,443
(40,406)
(12,890)
(2,764)
(1,214)
—
—
1,641
2,202,820
173,470
40,559
27,256
20,020
12,890
9,769
9,696
8,590
7,889
4,252
2,592
543
5
(186)
—
—
(128)
317,217
2,520,037
884,248
352,332
196,277
340,674
136,517
34,813
22,233
—
5,668
3,581
(41,627)
—
(6,253)
(10,273)
276,059
1,847
(34)
2,196,062
180,290
24,200
30,922
28,639
—
7,362
8,108
5,706
6,279
3,501
1,646
1,003
(1,690)
—
36,685
26,080
32
358,763
2,554,825
124
The movement in the balance of this chapter of the consolidated balance sheets during the years 2023 and 2022 is as
follows:
EUR Thousands
2023
2022
Balance at the beginning of the year
Dividends
Exchange and other differences (*)
Result of the exercise attributed to the
minority
Balance at year-end
2,554,826
(*) The variation mainly corresponds to the exit of the perimeter of PSA Bank Deutschland GmbH (see
note 3).
2,554,826
(295,290)
(56,716)
317,217
2,337,779
(135,837)
(5,876)
358,760
2,520,037
28. Memorandum items
The details of the balances recorded under the headings “Pro-Memoria” of the consolidated balance sheets as at 31
December 2023 and 2022 are as follows:
Loan commitments granted
24,299,144
25,756,041
EUR Thousands
31/12/2023
31/12/2022
Memorandum item: of which,
doubtful
Financial guarantees granted
Memorandum item: of which,
Financial guarantees
doubtful
Credit derivatives sold
Other commitments granted
Memorandum item: of which,
Technical guarantees
doubtful
Other commitments
26,138
56,500
90,030
—
90,030
—
84,997
—
84,997
—
1,253,547
1,716
597,501
656,046
1,211,006
2,604
552,398
658,608
The breakdown as at 31 December 2023 of the exposures and the provisioning fund (see note 10) off-balance sheet by
impairment stage under IFRS 9 is EUR 25,528,907 thousand and EUR 17,299 thousand in stage 1, 85,960 thousand euros
and 1,270 thousand euros in stage 2 and 27,854 thousand euros and 2,489 thousand euros in stage 3, respectively as at
31 december 2023 (26,865,725 thousand euros and 21,000 thousand euros in stage 1,127,214 thousand euros and
1,570 thousand euros in stage 2 and 59,105 thousand euros and 5,440 thousand euros in stage 3, respectively as of
december 31, 2022).
A significant part of these amounts will expire without any payment obligation for consolidated companies materializing,
therefore, the combined balance of these commitments cannot be considered as a real future need for financing or
liquidity to be granted to third parties by the Group.
The income earned from the guarantee instruments is recorded in the commission income chapter of the consolidated
profit and loss accounts and is calculated by applying the rate established in the contract for which they cause on the
nominal amount of the guarantee.
i. Loan commitments granted
125
Firm commitments to grant credit on pre-established terms and conditions, except those that meet the definition of
derivatives by being able to be settled in cash or by the delivery or issuance of another financial instrument. They
include those available on credit lines and future deposits.
ii. Financial guarantees granted
Includes financial collateral contracts such as financial collateral, credit derivatives sold, derivative risks
contracted on behalf of third parties and others.
iii. Other commitments granted
They include all commitments that could result in the recognition of financial assets not included in the preceding
headings, such as technical guarantees and those 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, contracts derivatives of hedges on interest risk, exchange rate or equity, depending on the nature of the
risk covered.
Based on its objective, the Group classifies its coverages into the following categories:
– Cash flow hedges: These cover exposure to the change in cash flows associated with an asset, liability or a highly
probable expected transaction. This covers variable-rate issues in foreign currencies, fixed-rate issues in non-local
currencies, interbank financing at variable rates and variable-rate assets (bonds, trade credits, etc.).
– Fair value hedges: Cover exposure to change in the fair value of assets or liabilities, attributable to an identified
and covered risk. This covers the interest risk of assets or liabilities (bonds, loans, bills, issues, deposits, etc.).
(etc.) with coupons or fixed interest rates, interests in entities, foreign currency issues and deposits or other fixed-
rate liabilities.
– Hedging of net investments abroad: Cover the exchange rate risk of investments in dependent entities with a
functional currency other than the Euro.
126
Fair value hedges
Interest rate risk
Interest Rate Swap
Exchange rate risk
FX Forward
Interest rate and exchange risk
Currency Swap
Hedges Cash flows
Interest rate risk
Interest Rate Swap
Exchange rate risk
Currency swap
Interest rate and exchange risk
Currency swap
Hedges of net investments in foreign operations
Exchange rate risk
FX Forward
Deposits taken
Fair value hedges
Type of interest risk
Interest Rate Swap
Exchange rate risk
FX Forward
Interest rate and exchange risk
Currency Swap
Hedges Cash flows
Type of interest risk
Interest Rate Swap
Exchange rate risk
Currency swap
Interest rate and exchange risk
Currency swap
NOMINAL
VALUE
20,674,973
18,978,957
18,978,957
339,788
339,788
1,356,228
1,356,228
5,224,393
1,230,360
1,230,360
1,516,937
1,516,937
2,477,096
2,477,096
2,104,843
2,104,843
2,104,843
—
28,004,209
NOMINAL
VALUE
20,979,888
19,694,967
19,694,967
456,210
456,210
828,710
828,710
5,646,185
1,663,660
1,663,660
695,276
695,276
3,287,249
3,287,249
Hedges of net investments in foreign operations
Exchange rate risk
FX Forward
Deposits taken
45,080
1,960,672
45,080
1,960,672
45,080
1,960,672
—
—
28,586,744 1,131,071
778
778
778
—
193,787
EUR Thousands
2023
MARKET VALUE
Changes in fair
value used to
calculate hedge
ineffectiveness
Balance sheet line items
ASSETS
280,270
264,393
264,393
247
247
15,630
15,630
LIABILITIES
242,220
204,415
204,415
13,259
13,259
24,546
24,546
108,189
19,346
19,346
27,939
27,939
60,904
60,904
2,038
2,038
2,038
—
390,497
127,466
7,554
7,554
67,037
67,037
52,875
52,875
70,581
70,581
70,581
—
440,267
(560,695)
(448,671)
(448,671) Derivatives - hedge
—
accounting
— Derivatives - hedge
(112,024)
accounting
(112,024) Derivatives - hedge
accounting
(80,098)
(83,589)
(83,589) Derivatives - hedge
(2,505)
accounting
(2,505) Derivatives - hedge
5,996
accounting
5,996 Derivatives - hedge
accounting
(2,669)
(2,669)
(2,669) Deposits
— Derivatives - hedge
accounting
(643,462)
EUR Thousands
2022
MARKET VALUE
Changes in fair
value used to
calculate hedge
ineffectiveness
ASSETS
876,855
869,796
869,796
7,059
7,059
—
—
LIABILITIES
143,425
113,915
113,915
1,259
1,259
28,251
28,251
209,136
51,038
51,038
2,406
2,406
155,692
155,692
49,584
3,000
3,000
46,137
46,137
3,444
3,444
Balance sheet line items
679,319
705,127
705,127 Derivatives - hedge
—
accounting
— Derivatives - hedge
(25,808)
accounting
(25,808) Derivatives - hedge
accounting
74,001
84,861
84,861 Derivatives - hedge
2,787
accounting
2,787 Derivatives - hedge
(13,647)
accounting
(13,647) Derivatives - hedge
accounting
20
20
163 Derivatives - hedge
(143) Deposits
accounting
753,341
127
Group entities mainly have long-term loan portfolios at fixed interest rates and are therefore exposed to fair value
changes due to movements in market interest rates. Institutions manage this risk by contracting Interest Rate Swaps in
which they pay fixed rate and receive variable rate. Only interest rate risk is covered and therefore other risks, such as
credit risk, are managed but not covered by institutions. The interest rate risk component is determined as the change in
the fair value of fixed-rate loans arising only from changes in a reference rate. This strategy is designated as fair value
hedging and its effectiveness is measured by comparing changes in the fair value of loans attributable to changes in
reference interest rates with changes in the fair value of interest rate swaps.
In addition, some entity of the Group, in order to access international markets in order to obtain sources of financing,
issues debt at fixed rate in its own currency and in currencies other than its functional currency. Therefore, it is exposed
to changes in both interest rates and exchange rates, which mitigate with derivatives (Interest Rate Swaps, Fx Forward
and Cross Currency Swaps) in which they receive fixed interest rate and pay variable interest rate and which they
instrumentalize with fair value coverage.
The cash flow hedges of Consumer Group entities cover exchange rate risk of loans and financing. These hedges are
mainly carried out through 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 contemplates the following
causes:
• Possible economic events affecting the entity (e.g.: Default).
• For movements and possible market-related differences in collateralized and non-collateralized curves used
in the valuation of derivatives and covered headings, respectively.
• Possible differences between the nominal value, settlement/repricing dates and credit risk of the hedged item
and the hedging element.
Finally, it has hedges of net investments abroad, to cover the exchange risk of the participation in the currencies NOK and
CNY.
In the case of this type of coverage, the ineffectiveness scenarios are considered low probability, since the hedging
instrument is designated considering the determined position and the spot rate at which it is located.
Below, we show a table with the expiration profile of the Group’s hedging instruments’ nominals:
EUR Thousands
2023
Fair value hedges
Type of interest risk
Interest Rate Swap
Exchange rate risk
FX Forward
Interest rate and exchange risk
Currency Swap
Hedges Cash flows
Type of interest risk
Interest Rate Swap
Exchange rate risk
Currency swap
Interest rate and exchange risk
Currency swap
Hedges of net investments in foreign
operations
Exchange rate risk
FX Forward
Up to 1
month
Between 1
and 3 months
1,095,935
1,051,026
1,051,026
44,909
44,909
—
—
645,705
445,767
445,767
199,938
199,938
—
—
Between 3
Between 1
and 5 years
and 12
4,546,656 13,686,998
months
4,301,668 12,480,817
4,301,668 12,480,817
—
—
1,206,181
1,206,181
94,941
94,941
150,047
150,047
Total
More than 5
years
699,678 20,674,972
699,678 18,978,956
699,678 18,978,956
339,788
339,788
1,356,228
1,356,228
—
—
—
—
360,513
51,846
51,846
30,071
30,071
278,596
278,596
616,113
93,243
93,243
54,768
54,768
468,102
468,102
2,017,914
447,769
447,769
289,539
289,539
1,280,606
1,280,606
2,204,917
612,566
612,566
1,142,559
1,142,559
449,792
449,792
24,936
24,936
24,936
—
—
—
—
5,224,393
1,230,360
1,230,360
1,516,937
1,516,937
2,477,096
2,477,096
265,664
265,664
265,664
1,271,882
408,592
408,592
408,592
2,120,640
—
1,430,587
—
1,430,587
1,430,587
—
7,995,157 15,891,915
—
—
—
2,104,843
2,104,843
2,104,843
724,614 28,004,208
128
Fair value hedges
Interest rate risk
Interest rate swap
Exchange rate risk
FX forward
Interest rate and exchange risk
Currency swap
Hedges Cash flows
Interest rate risk
Interest rate swap
Exchange rate risk
Currency swap
Interest rate and exchange risk
Currency swap
Hedges of net investments in foreign
operations
Exchange rate risk
FX forward
EUR Thousands
2022
Up to 1
month
Between 1
and 3 months
905,355
595,102
595,102
109,944
109,944
200,308
200,308
524,237
310,862
310,862
213,375
213,375
—
—
Between 3
Between 1
and 5 years
and 12
3,602,301 15,247,675
months
3,469,411 14,619,273
3,469,411 14,619,273
—
132,891
—
132,891
628,402
—
628,402
—
Total
More than 5
years
700,319 20,979,887
700,319 19,694,967
700,319 19,694,967
456,210
456,210
828,710
828,710
—
—
—
—
285,796
40,180
40,180
63,332
63,332
182,284
182,284
181,047
181,047
181,047
991,080
625,702
92,465
92,465
27,332
27,332
505,905
505,905
2,373,983
629,612
629,612
283,388
283,388
1,460,983
1,460,983
2,360,704
901,403
901,403
321,223
321,223
1,138,077
1,138,077
—
—
—
—
—
—
—
5,646,185
1,663,660
1,663,660
695,275
695,275
3,287,249
3,287,249
648,059
648,059
648,059
2,179,116
—
1,131,566
—
1,131,566
1,131,566
—
7,107,850 17,608,379
—
—
—
1,960,672
1,960,672
1,960,672
700,319 28,586,744
Additionally, we show both the maturity profile and the average interest and exchange rates of the hedging instruments
by maturity buckets:
129
Fair value hedges
Interest rate risk
Instruments of type of interest
Nominal
Average fixed interest rate (%) EUR.
Average fixed interest rate (%) CHF
Average fixed interest rate (%) CAD
Exchange rate risk
Exchange rate instruments
Nominal
Average exchange rate NOK/EUR.
Average CAD/EUR exchange rate
Average exchange rate PLN/ EUR.
Average exchange rate CNH/ EUR.
Exchange rate and interest risk
Instruments of type of interest
Nominal
Average exchange rate DKK/EUR.
Average fixed interest rate (%) DKK
Average fixed interest rate (%) SEK
Cash flow hedges
Interest rate risk
Instruments of type of interest
Nominal
Average fixed interest rate (%) EUR.
Average fixed interest rate (%) CAD
Exchange rate risk
Exchange rate instruments
Nominal
Average exchange rate NOK/EUR.
Average exchange rate CHF/EUR.
Average CAD/EUR exchange rate
Average exchange rate JPY/EUR.
Exchange rate and interest risk
Exchange rate instruments
Nominal
Average exchange rate SEK/EUR.
Average exchange rate NOK/EUR.
Average exchange rate DKK/EUR.
Average fixed interest rate (%) SEK
Hedges of net investments in foreign
operations
Exchange rate risk
Exchange rate instruments
Nominal
Average exchange rate NOK/EUR.
Average exchange rate CNY/EUR.
Average CAD/EUR exchange rate
Average exchange rate CHF/EUR.
Average exchange rate PLN/EUR.
2023
EUR Thousands
Up to 1 month Between 1 and
3 months
Between 3
and 12
months
Between 1
and 5 years
More than 5
years
Total
445,767
0.760
1.470
—
199,938
11.842
—
—
—
—
—
—
—
1,051,026
0.570
1.380
—
4,301,668
0.650
1.500
3.870
12,480,817
2.300
1.580
3.710
699,678
1.020
—
4.000
18,978,957
44,909
11.81
—
—
—
94,941
—
1.487
4.439
7.793
—
—
—
—
—
—
—
—
—
150,047
7.451
2.880
—
1,206,181
7.451
2.880
4.880
339,788
1,356,228
—
—
—
—
—
—
—
—
—
51,846
8.543 %
— %
93,240
7.170 %
— %
447,769
5.691 %
— %
612,566
4.682 %
4.370 %
24,936
— %
4.660 %
1,230,357
30,071
—
1.047
1.440
—
278,596
11.130
11.580
7.450
—
265,664
11.465
—
1.461
0.940
—
54,768
—
1.075
1.421
—
289,539
—
1.080
1.458
121.570
1,142,559
10.590
0.977
1.412
157.278
468,102
11.680
11.470
7.450
—
1,280,606
11.270
11.100
7.460
1.660
449,792
10.690
10.230
—
1.940
408,592
11.715
—
—
—
—
1,430,587
11.651
7.704
—
—
4.659
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,516,937
2,477,096
2,104,843
130
Fair value hedges
Interest rate risk
Instruments of type of interest
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 exchange rate NOK/EUR.
Average exchange rate CHF/EUR.
Average exchange rate SEK/EUR.
Average CAD/EUR exchange rate
Average GBP/EUR exchange rate
Exchange rate and interest risk
Instruments of type of interest
Nominal
Average exchange rate DKK/EUR.
Average fixed interest rate (%) DKK
Average fixed interest rate (%) SEK
Cash flow hedges
Interest rate risk
Instruments of type of interest
Nominal
Average fixed interest rate (%) EUR.
Exchange rate risk
Exchange rate instruments
Nominal
Average exchange rate NOK/EUR.
Average exchange rate CHF/EUR.
Average CAD/EUR exchange rate
Average exchange rate JPY/EUR.
Exchange rate and interest risk
Exchange rate instruments
Nominal
Average exchange rate SEK/EUR.
Average exchange rate NOK/EUR.
Average exchange rate CHF/EUR.
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
2022
EUR Thousands
Up to 1
month
Between 1
Between 3
and 3
months
and 12
months
Between 1
and 5 years
More than 5
years
Total
310,862
(0.002)
(0.627)
0.015
595,102
—
(0.628)
0.014
3,469,411 14,619,273
0.006
1.419
0.019
0.002
1.200
0.013
700,319 19,694,967
—
—
—
0.002
—
—
213,375
—
—
1.034
—
—
—
109,944
—
—
—
1.027
—
1.412
132,891
7.000
—
—
0.992
10.767
—
—
—
—
—
—
—
—
—
—
—
—
200,308
—
—
—
—
—
—
—
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
—
—
27,332
—
1.084
—
—
283,388
—
1.064
1.454
—
321,223
10.590
1.059
1.427
121.570
—
—
—
—
—
695,276
—
—
—
—
182,284
10.360
9.600
—
—
—
—
— %
— %
505,905
10.390
9.940
—
—
—
—
— %
— %
1,460,983
10.580
10.310
—
—
7.410
4.290
— %
— %
1,138,077
10.700
10.280
1.090
1.370
—
—
— %
2.000 %
—
—
—
—
—
—
—
— %
— %
3,287,249
—
—
—
—
—
—
—
—
Hedges of net investments in foreign operations
Exchange rate risk
Exchange rate instruments
Nominal
Average exchange rate NOK/EUR.
Average exchange rate CNY/EUR.
181,047
10.225
—
648,059
10.084
7.059
1,131,566
10.458
—
—
—
—
—
—
—
1,960,672
—
—
131
For the part of the items covered, in the following table we have the detail of the type of coverage, the risk that is covered
and what products are being covered as of December 31, 2023:
EUR Thousands
2023
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
Assets
Liabilities
Assets
Fair value hedges
Interest rate risk
Exchange rate risk
Interest rate risk and Exchange rate
risk
18,662,557
18,310,467
352,090
—
2,425,182
1,071,138
—
1,354,044
(120,782)
(120,782)
—
—
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
—
—
—
—
—
—
—
—
—
—
—
—
Loans and
advances
Equity portfolio
Financial liabilities
at amortized cost
75,182
71,138
—
4,044
—
—
—
—
2,423,022
2,423,022
21,085,579
—
—
2,425,182
—
—
(120,782)
instruments
— Heritage
—
75,182
653,865
544,469
—
109,396
13,708
7,826
1,195
4,686
—
—
667,573
—
—
—
—
(13,265)
(3,591)
(1,195)
(8,478)
2,505
2,505
(10,760)
—
—
—
—
14,454
14,377
—
77
—
—
14,454
The cumulative amount of adjustments for fair value hedging instruments remaining on the balance sheet for hedged
items that have no longer been hedging loss and gain adjustments as at 31 December 2023 is (41) million euros.
EUR Thousands
2022
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
Assets
Liabilities
Assets
Fair value hedges
Interest rate risk
Exchange rate risk
Interest rate risk and Exchange rate risk
18,103,217
17,635,515
467,703
—
4,288,729
3,460,019
—
828,710
(766,024)
(766,024)
—
—
151,263
104,224
—
47,039
Cash flow hedges
Interest rate risk
Exchange rate risk
Interest rate risk and Exchange rate risk
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Loans and
advances
Equity portfolio
Financial liabilities
at amortized cost
Hedges of net investments in foreign
operations
Exchange rate risk
1,958,236
1,958,236
20,061,454
—
—
4,288,729
—
—
(766,024)
instruments
— Heritage
—
151,263
(568,406)
(615,816)
—
47,409
(112,488)
18,087
43,731
(174,307)
—
—
(680,894)
—
—
—
—
43,197
51,093
3,980
(11,876)
—
—
43,197
—
—
—
—
43,450
43,416
—
34
—
—
43,451
132
The cumulative amount of adjustments for fair value hedging instruments remaining on the balance sheet for hedged
items that have no longer been hedging loss and gain adjustments as at 31 December 2022 is (4) million euros.
The net impacts of hedges are seen in the following table:
EUR Thousands
2023
Fair value hedges
Interest rate risk
Interest rate and exchange risk
Hedges Cash flows
Interest rate risk
Exchange rate risk
Interest rate and exchange risk
Hedges of net investments in foreign
operations
Exchange rate risk
Gains/(losses)
recognised in
other
comprehensive
income
—
—
—
Ineffective
coverage
recognised in
the
93,170
income
statement
95,798
(2,628)
Income statement line item that
includes the ineffectiveness of
cash flows
Asset gains or losses/financial
liabilities
(85,458)
(83,723)
(5,175)
3,440
2,505
2,505
(82,953)
2,690
134
—
2,556
—
—
95,860
Asset gains or losses/financial
liabilities
Asset gains or losses/financial
liabilities
Amount reclassified to profit or loss due to:
Income statement line that includes
reclassified items
Interest margin/lost earnings
Assets/liabilities FIN.
Interest margin/lost earnings
Assets/liabilities FIN.
Interest margin/lost earnings
Assets/liabilities FIN.
Covered
transaction
affecting
the income
—
statement
—
—
14,872
36,449
(9,092)
(12,485)
—
—
14,872
2022
EUR Thousands
Amount reclassified to profit or loss due to:
Income statement line
which includes reclassified elements
Covered
Fair value hedges
Interest rate risk
Interest rate and exchange risk
Hedges Cash flows
Interest rate risk
Exchange rate risk
Interest rate and exchange risk
Hedges of net investments in foreign
operations
Exchange rate risk
Gains/(losses)
recognised in
other
comprehensive
income
—
—
—
Ineffective
coverage
recognised in
the
86,252
income
statement
89,020
(2,768)
Income statement line item that
includes the ineffectiveness of
cash flows
Asset gains or losses/financial
liabilities
transaction
affecting
the income
statement
—
—
—
Asset gains or losses/financial
liabilities
Asset gains or losses/financial
liabilities
73,003
84,513
2,645
(14,155)
—
—
73,003
348
348
—
—
—
—
86,600
(31,593)
5,650
(7,705)
(29,538)
—
—
(31,593)
Interest margin/gains or losses
assets/financial liabilities
Interest margin/gains or losses
assets/financial liabilities
Interest margin/gains or losses
assets/financial liabilities
133
The impact in shareholder’s equity in 2023 is as follows
EUR Thousands
Balance at the beginning of 2022
Cash flow hedges
Interest rate risk
Transferred to results
Other reclassifications
Exchange rate risk
Transferred to results
Other reclassifications
Interest rate and exchange risk
Transferred to results
Other reclassifications
Non-controlling interests
Taxes
Balance at year-end 2022
Hedges Cash flows
Interest rate risk
Transferred to results
Other reclassifications
Exchange rate risk
Transferred to results
Other reclassifications
Interest rate and exchange risk
Transferred to results
Other reclassifications
Non-controlling interests
Taxes
Balance at year-end 2023
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
(85,458)
(83,723)
(36,523)
(47,200)
(5,175)
9,092
(14,267)
3,440
12,485
(9,045)
4,989
15,846
(2,511)
30. Interest income
The balance in this chapter of the consolidated profit and loss accounts for the financial years 2023 and 2022 includes
interest earned in the financial year on all financial assets whose return, implicit or explicit, is derived from the application
of the effective interest rate method, regardless of whether they are valued at fair value, except for trading derivatives; as
well as corrections of products as a result of accounting hedges. Interest is recorded on the gross amount, without
deducting, where applicable, tax withholdings made at source.
134
The origin of the most significant interest income earned by the Group in the years 2023 and 2022 is as follows:
EUR Thousands
2023
2022
Loans and advances, central banks
Loans and advances, credit institutions
Debt securities
Loans and advances, clientele
Of doubtful assets
Rectification of income for hedging operations and
other interests
—
220,153
67,436
—
26,960
39,031
5,443,476 4,018,879
3,548
4,778
695,690
106,815
6,431,533 4,195,233
Most of the interest income has been generated by the Group’s financial assets measured at amortized cost or at fair value
through other cumulative comprehensive income.
31. Interest expense
The balance in this chapter of the consolidated profit and loss accounts for the financial years 2023 and 2022 includes
interest earned in the financial year on all financial liabilities with return, implicit or explicit, including those arising from
remuneration in kind, they are obtained by applying the effective interest rate method, irrespective of whether they are
valued at fair value, with the exception of trading derivatives; as well as the cost rectifications as a result of accounting
hedges, and the interest cost attributable to the pension funds constituted.
The origin of the most significant interest expenses accrued by the Group in the years 2023 and 2022 is as follows:
Bank of Spain and other central banks
Credit institutions
Customer deposits
Debits represented by negotiable securities
Subordinated liabilities
Pension funds (Notes 2-r, 2-s and 21) (*)
Rectification of expenses for operations
EUR Thousands
2023
2022
395,714
561,755
734,131
29,514
55,488
165,595
1,212,303
318,350
36,498
17,545
(5,633)
13,633
8,680
801
coverage
Other interests
31,965
624,026
(*) Includes interest on post-employment and other long-term remuneration of Spanish entities
in the amount of 390 and 663 thousand euros, respectively, in the financial year 2023 (369 and
472 thousand euros, respectively, in the financial year 2022) and of foreign entities for 16,492
thousand euros (7,837 thousand euros in the financial year 2022) - see Note 21-.
54,067
3,006,380
Most of the interest expenses have been generated by the Group’s financial liabilities that are valued at amortized cost.
135
32. Income from entities accounted for using the equity method
The balance in this chapter of the consolidated profit and loss accounts for the years 2023 and 2022 includes the amount
of profits or losses generated in the year by the associated entities and joint ventures, attributable to the Group.
The breakdown of the balance in this chapter as at 31 December 2023 and 2022 is as follows (see Note 12):
Santander Consumer Bank S.A. (Poland)
Fortune Auto Finance Co., Ltd.
Stellantis Insurance Europe, Ltd.
Stellantis Life Insurance Europe Ltd.
Santander Consumer Multirent, S.A.
Stellantis Finance Polska Sp. Z O.O.
Other companies
EUR Thousands
2023
2022
5,886
25,478
29,623
11,643
3,434
1,926
(915)
77,075
32,941
28,335
20,260
12,032
2,093
1,060
15
96,736
33. Income from commissions
The balance in this chapter of the consolidated profit and loss accounts for the financial years 2023 and 2022 includes
the amount of commissions accrued in the financial year, except those that form an integral part of the effective interest
rate of financial instruments, included in the “Interest income” chapter of the attached consolidated profit and loss
accounts.
The breakdown of the balance in this chapter of the consolidated profit and loss account for the financial years 2023 and
2022 is as follows:
136
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
EUR Thousands
2023
2022
4,333
17,454
77,450
28,334
127,571
5,543
17,794
65,237
25,240
113,814
845,220
876,323
845,220
876,323
32,571
1,018
8,669
42,258
24,261
1,046
8,599
33,906
7,572
7,115
94,391
109,078
6,065
4,899
98,018
108,982
1,124,127 1,133,025
34. Commission expenses
The balance in this chapter of the consolidated profit and loss accounts for the financial years 2023 and 2022 reflects the
amount of commissions paid or payable in the financial year, except those that form an integral part of the effective
interest rate of financial instruments, included in the “Interest expense” chapter of the attached consolidated profit and
loss accounts.
The breakdown of the balance in this chapter of the consolidated profit and loss accounts for the years 2023 and 2022 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
2023
2022
948
24,544
8,432
15,646
13,135
26,009
67,690
192,653
45,746
394,803
771
15,928
7,640
16,275
11,084
17,045
71,782
164,298
44,666
349,489
137
35. Gains and losses associated with financial assets and liabilities
The breakdown of the balance in this chapter of the consolidated profit and loss accounts for the years 2023 and 2022,
according to the origin of the items that make up it, 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)
36. Currency translation differences (net)
EUR Thousands
2023
2022
Income/(Expenditure)
47,259
—
47,259
807
2
805
(2,265)
(10,077)
—
—
—
—
95,860
86,600
140,854
77,330
The balance in this chapter of the consolidated profit and loss accounts for the financial years 2023 and 2022 basically
reflects the results obtained in the sale of foreign exchange, the differences that arise when converting currency items in
foreign currency to the functional currency and those from non-monetary assets in foreign currency at the time of their
disposal.
37. Other operating income and other operating expenses
The breakdown of the balance in these chapters of the consolidated profit and loss accounts for the years 2023 and 2022
is as follows:
Other operating income
Income from non-financial services
Other exploitation products, others
Other operating expenses
Non-financial service expenses
Deposit guarantee fund and single resolution fund
Other operating loads, others
Other operating charges
EUR Thousands
2023
2022
578,502
342,293
236,209
551,078
356,959
194,119
(419,380)
(219,422)
(64,982)
(134,976)
—
159,122
(415,988)
(218,459)
(81,891)
(115,638)
—
135,090
138
38. Staff costs
The balance under this heading in the consolidated profit and loss accounts for the years 2023 and 2022 reflects the
remuneration of staff on payroll, fixed or contingent, irrespective of their function or activity, accrued in the period
whatever its concept.
The composition of staff costs as at 31 December 2023 and 2022 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
2023
2022
704,265
112,271
7,552
42,359
3,806
38,553
—
85,553
3,293
955,293
649,661
101,065
13,312
40,902
3,034
37,868
7
77,280
1,955
884,182
(*) of which:
– 242 thousand euros in 2023 (374 thousand euros in 2022) correspond to the “Cost of services of the current
period of post-employment pay of defined benefit – Spanish entities” (see Notes 2-r and 21).
– 5,356 thousand euros in the financial year 2023 (9,486 thousand euros in the financial year 2022) correspond to
the “Service cost of the current period of long-term remuneration and post-employment pay of defined benefit –
Germany” (see Notes 2-r and 21).
– 1,945 thousand euros in the financial year 2023 (3,426 thousand euros in the financial year 2022) correspond to
the “service cost of the current period of long-term remuneration and post-employment remuneration of defined
benefit – other foreign entities” (see Notes 2-r and 21).
– 8 thousand euros in the financial year 2023 (26 thousand euros in the financial year 2022), correspond to the
“Cost of services of the current period of other long-term remuneration of defined benefit – Spanish entities” (see
Notes 2-s and 21).
The average number of employees of the Group in the years 2023 and 2022, distributed by professional categories, was
as follows:
139
The Bank:
Senior executives
Middle management
Clerical staff
Other companies
Average number of
employees
2023
2022
41
234
867
1,142
10,831
11,973
43
237
829
1,109
10,168
11,277
The functional and gender distribution of the number of employees in the Group as at 31 December 2023 and 2022 is as
follows:
Total
2023
Men
Women
Total
2022
Men
Women
Senior executives
Middle
management
Clerical staff and
other
98
74
24
97
2,005
1,283
722
1,262
73
772
24
490
9,948
4,723
5,225
10,061
4,914
5,147
12,051
6,080
5,971
11,420
5,759
5,661
As at 31 December 2023, the Board of Directors of the Bank consisted of 10 Directors, of whom 4 were women (10 as at
31 December 2022, of whom one was a woman).
The employment relations between the employees and the different companies of the Group are regulated in the
corresponding collective agreements or related rules.
As of December 31, 2023 and 2022, certain employees of subsidiaries of the Group are beneficiaries of the remuneration
plans described in Note 5.
140
39. Other administrative expenses
The breakdown of the balance under this heading in the consolidated profit and loss accounts for the years 2023 and
2022 is as follows:
EUR Thousands
2023
2022
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
49,426
47,427
35,296
58,732
46,235
8,408
37,325
55,737
329,949 319,454
80,634
13,436
223,334 214,419
86,194
7,584
2,624
929,272 872,050
80,032
7,617
3,513
76,941
17,005
Included in the balance of technical reports, fees for the services provided by LOS are reflected
Auditors to the different companies of the Santander Consumer Finance Group (detailed in the attached annexes), as
follows:
Audit
Audit-related services
Tax services
Other services
Total
Millions of Euros
2022
2023
16.3
0.8
—
0.1
17.2
17.4
0.6
—
0.2
18.2
The audit services and major non-audit services included, where appropriate, under each concept in the table above are
detailed below:
•
•
•
Audit services: Audit of the individual and consolidated annual accounts of Santander Consumer Finance and the
companies that are part of the Group in which PricewaterhouseCoopers Auditores, S.L or another firm in the
PwC network is an external auditor; audit of the interim consolidated financial statements of Santander
Consumer Finance; reporting for the purposes of the integrated audit of the consolidated financial statements
and the internal control over financial information (SOx) of Banco Santander, S.A; for those Group entities that
are required to do so; limited reviews of financial statements; E Regulatory reports required to the auditor for
different entities of the Group.
Audit-related services: Issuance of comfort letters, financial and non-financial information verification services
required by regulators or other documentation reviews to be submitted to supervisory bodies, both domestic
and foreign, which by their very nature are normally provided by the external auditor.
Tax services: Tax advice and compliance services allowed in accordance with the applicable independence
regulations and that have no direct impact on the audited financial statements, provided to Group companies
outside Spain.
141
• Other services: Issuance of reports of agreed procedures, assurance reports and special reports, made under
accepted standards of the profession; as well as other reports required by the regulator.
The concept ‘Audit’ includes the fees corresponding to the audit of the year, regardless of its end date. In the event of
subsequent adjustments to these, which are not significant in any case, for the purpose of facilitating comparison, they
are presented in this note in the year for which the audit is concerned. The rest of the services are included depending on
the time of their approval by the audit committee.
The services contracted to the auditors comply with the independence requirements established in the applicable
European and Spanish regulations, as well as by the rules of the SEC and the Public Accounting Oversight Board (PCAOB)
that apply to the Group and, in no case, they include the performance of work incompatible with the role of the auditor.
40. Impairment or reversal of impairment of non-financial assets
The breakdown of the balance in this chapter of the consolidated profit and loss accounts for the years 2023 and 2022 is
as follows:
EUR Thousands
2023
2022
Tangible assets (*)
Intangible assets (Note 15)
Others
985
11,647
9,227
21,859
(*) As at 31 December 2023 and 2022, no amounts have been recorded for loss of valuation corrections
due to impairment of tangible property for own use (see Note 13).
(169)
5,337
8,486
13,654
The amount recorded in the chapter “Impairment or reversal of impairment of non-financial assets – intangible assets”
as at 31 December 2023 corresponds mainly to impairments due to obsolescence of elements of the intangible asset –
(see note 15).
41. Gains or (losses) on deregistration of non-financial assets and equity accounts, net
The breakdown of the balance in this chapter of the consolidated profit and loss accounts for the years 2023 and 2022 is
as follows:
EUR Thousands
2023
2022
Income/(Expenditure)
Gains:
Tangible and intangible fixed assets (Notes 13 and 15)
Participations
Losses:
Tangible and intangible fixed assets (Notes 13 and 15)
837
81,990
82,827
(694)
(694)
82,133
791
632
1,423
(221)
(221)
1,202
The amount recorded in the chapter “Earnings or (losses) on cancelation of non-financial assets and equity accounts, net”
as of December 31, 2023 corresponds mainly to the result obtained in the sale of the origination rights of the Operational
Lease business by the joint ventures of Belgium, France, Italy, the Netherlands, Poland and Spain in the context of the
142
reorganization of the Stellantis agreement - (see note 3). It also includes the result obtained in the sale of the shares of
the joint ventures of Germany and United Kingdom A within the framework of the aforementioned agreement.
42. Gains or (losses) from non-current assets and disposal groups classified as held for sale not eligible as discontinued
activities
The breakdown of the balance in this chapter of the consolidated profit and loss accounts for the years 2023 and 2022 is
as follows:
Net gains (losses) on sales
Endowment of impairment losses (net) (Note
11)
EUR Thousands
2023
2022
Income/(Expenditure)
(1,089)
(780)
(588)
(1,677)
652
(128)
43. Fair value of financial instruments
The following table summarizes the fair values, as at 31 December 2023 and 2022, of the financial instruments
(assets and liabilities) that, according to the above criteria, are presented as measured in these consolidated
annual accounts at fair value, classified according to the different valuation methodologies followed by the Group
to determine their fair value:
31/12/2023
Internal
models
(*)
Published
quotes
In active
markets
(Level 1)
EUR Thousands
Total
Published
quotes
In active
markets
(Level 1)
31/12/2022
Internal
models
(*)
Total
—
323,898
323,898
—
494,664
494,664
4
1,539
1,543
6
1,870
1,876
165,936
8,927
174,863
735,775
12,694
748,469
—
—
390,497
390,497
343,594
343,594
—
—
1,131,071
1,131,071
466,031
466,031
Financial assets held for trading
Non-trading financial assets obligatorily
measured at fair value through profit or
loss
Financial assets designated at fair value
through other comprehensive income
Derivatives – Coverage Accounting
(Assets)
Financial liabilities held for trading
Financial liabilities designated at fair
value through profit or loss
Derivatives – Hedge Accounting
193,787
(Liabilities)
(*) In their entirety, the main variables (inputs) used by the models are derived from observable market data (Level 2, according to IFRS 7 – Financial Instruments:
Disclosure).
440,267
193,787
440,267
—
—
—
—
—
—
—
—
During the years 2023 and 2022, the Group has not made significant transfers of financial instruments between
the different valuation methodologies. No changes have been made to the valuation techniques of financial
instruments. Moreover, the movement of Tier 3 financial assets was not significant during the years 2023 and
2022.
143
General evaluation criteria
The Santander Group, of which the Group is part, has developed a formal process for the systematic valuation and
management of financial instruments, implemented globally in all units, including the Group’s units. The
governance scheme of this process The Group distributes responsibilities between two independent divisions:
Financial Management (responsible for the daily management of financial products) and Risk (which assumes the
periodic validation of valuation models and market data, the process of calculating risk metrics, approving policies
for new operations, managing market risk and implementing valuation adjustment policies).
The approval of a new product involves a sequence of several steps (application, development, validation,
integration into corporate systems and quality review) before its commissioning into production. This process
ensures that the valuation systems have been properly reviewed and are stable before they can be used.
The following sections detail the most important products and instrument families, together with their respective
valuation techniques and inputs by asset type. 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 type of interest rate assets includes simple instruments, such as interest rate forwards, interest rate swaps
and cross currency swaps, valued at the net present value of estimated future flows discounted on spreads basis
(swap and cross currency). determined according to the frequency of payments and the currency of each leg of the
derivative. In general, in Grupo Santander, simple options (vanilla), including caps and floors and swaptions, are
valued using the Black-Scholes model, which is one of the reference models in the industry. For the valuation of
more exotic derivatives, more complex models generally accepted as standard among institutions are used,
although in Grupo Santander Consumer derivatives are generally simple (plain vanilla).
These valuation models are fed with observable market data such as deposit interest rates, futures rates, cross
currency swaps and constant maturity swaps, as well as spreads basis, from which different interest rate curves
are calculated, as well as the exchange rates. depending on the frequency of payments, and discount curves for
each currency. In the case of options, implicit volatilities are also inputs to the model. These volatilities are
observable in the market, both for caps and floors options and for swaptions, making interpolations and
extrapolations of volatilities from the quoted ranges using models generally accepted in the industry. The valuation
of more exotic derivatives may require the use of unobservable data or parameters, such as correlation (between
interest rates and between asset classes), reversal rates to the average and prepayment rates, which are generally
defined from historical data or by calibration.
Inflation-related assets include bonds and swaps linked to zero or annual coupon inflation, valued using the
present value method through forward estimation and discount. Inflation index derivatives are valued with
standard models or more complex models as appropriate. The valuation inputs of these models consider the swap
spreads linked to observable inflation in the market and estimates of seasonality in inflation, from which a
forward inflation curve is calculated. Likewise, the implicit volatilities extracted from zero and annual coupon
inflation options are also inputs for the valuation of more complex derivatives.
Fixed income instruments include products such as bonds, bills or promissory notes whose valuation, as
described above, can be done by observing their price in listed markets, models constructed from observable data
or other techniques in cases where neither of the above two alternatives is possible.
Equities and exchange rate
The most important products in these asset classes are forward and futures contracts, as well as simple
derivatives (vanilla), listings and OTC (Over-The-Counter), on individual underlying and asset baskets. Simple
options (vanilla) are valued using the standard Black-Scholes model, while more exotic derivatives, involving
future yields, average performance or digital characteristics, barrier or repurchase possibility (callable) are valued
using generally accepted industry models or custom models, as appropriate. For derivatives on illiquid shares, the
hedging is done considering the liquidity restrictions in the models.
Equity model inputs generally consider interest rate curves, spot prices, dividends, repo margin spreads, implicit
volatilities, stock-index correlation, and cross-asset correlation. The implicit volatilities are obtained from market
quotes of simple options (vanilla) call and put of European and American type. Through various interpolation and
extrapolation techniques, continuous volatility surfaces for illiquid stocks are obtained. Dividends are generally
estimated in the medium and long term. As for correlations, they are obtained, where possible, implicitly from
144
market quotes of products dependent on the correlation, in other cases, proxies are made to correlations between
reference underlying or obtained from historical data.
As for the inputs of the exchange rate models include the interest rate curve of each currency, the spot exchange
rate and the implied volatilities and the correlation between assets of this class. Volatilities are obtained from
European call and put options that are listed on the markets such as at-the-money, risk reversal or butterfly
options. Illiquid currency pairs are usually treated using liquid pair data from which the illiquid currency can be
broken down.
Credit
The most common instrument of this class is the Credit Default Swap (CDS), which is used to cover credit exposure
against a third game. In addition, models are also available for First-to-Default (FTD), N-to-Default (NTD) and
Single-tranche Collateralized Debt Obligation (CDO) products. These products are valued with industry standard
models, which estimate the probability of default of an individual issuer (for CDS) or the probability of joint default
of more than one issuer for FTDs, NTDs and CDOs.
The valuation inputs are the interest rate curve, the CDS spread curve and the recovery rate. The CDS spread curve
is obtained in the market for major individual indices and issuers. For less liquid issuers, the spread curve is
estimated using proxies or other credit-linked instruments. Recovery rates are usually set to standard values. For
CDO listings of individual tranches, the joint default correlation of several issuers is implicitly obtained from the
market. For custom FTD, NTD and CDO, the correlation is estimated by proxies (quoted instruments similar to the
instruments to be valued) or historical data when there is no other possible alternative.
Adjustment to the counterparty risk or non-compliance valuation
Credit Valuation Adjustment (CVA) is an adjustment to the valuation of OTC (Over The Counter) derivatives as a
consequence of the risk associated with the credit exposure assumed with each counterparty.
The calculation of AVC is made taking into account the potential exposure with each counterparty in each future
term. The AVC for a given counterpart is equal to the sum of AVC for all deadlines. For its calculation the following
inputs are taken into account:
– Expected exposure: Including, for each trade, the current market value (MTM) as well as the potential future
risk (ADD-ON) to each term. Mitigants such as collateral and netting contracts are taken into account, as well
as a temporary decay factor for derivatives with intermediate payments.
– Severity: Percentage of final loss assumed in case of credit/default event of the counterparty.
– Probability of default/default: For cases where there is no market information (spread curve quoted by CDS,
etc.) probabilities are used from ratings, preferably internal.
– Discount factor curve.
The Debt Valuation Adjustment (DVA) is an adjustment to the valuation similar to AVC, but in this case as a result
of the Group’s own risk assumed by its counterparties in OTC derivatives.
At the end of December 2023 and 2022, no CVA and DVA adjustments have been recorded for significant amounts.
In addition, in the Santander Group the Financing Fair Value Adjustment (FFVA) is calculated by applying the
market’s future financing margins to the expected future financing exposure of any unsecured component of the
OTC derivatives portfolio. This includes the unsecured component of guaranteed derivatives, in addition to
derivatives that are not fully guaranteed. The expected future financing exposure is calculated using a simulation
methodology, when available. The impact of the FFVA on the Group is not significant for the consolidated financial
statements as of December 31, 2023 and 2022.
Valuation adjustments for model risk
The fair value of financial instruments derived from previous internal models takes into account, inter alia, the
terms of contracts and observable market data, including interest rates, credit risk, exchange rates and
prepayments.
145
The valuation models described above do not incorporate significant subjectivity, since such methodologies can
be adjusted and calibrated, where appropriate, by internal calculation of fair value and subsequent comparison
with the corresponding actively traded price, however, valuation adjustments may be necessary when quoted
market prices are not available for comparison purposes.
The sources of risk to consider are generally associated with uncertain model parameters, illiquid underlying
issuers, low-quality market data or unavailable risk factors (sometimes the best possible alternative is to use
limited models with controllable risk). In these situations, the Group calculates and applies valuation adjustments
in accordance with general industry practice. The following are the main sources of model risk that could exist:
–
In fixed income markets, model risks include correlation between fixed income indices, basis modeling, model
parameter calibration risk, and treatment of near-zero or negative interest rates. Other sources of risk stem
from the estimation of market data, such as volatilities or interest rate curves, both estimation and flow
discount. The price disparity depending on different market contributors, or the concentration of the asset in it,
could also be sources of risk to consider in the fixed income market.
– Currency markets are exposed to model risk by modeling forward skew, and the impact of stochastic interest
rate modeling and correlation for multi-asset instruments. Market data risk may also arise, from the illiquidity
of specific currency pairs or different price contributors in the composition of the curve.
– The most important source of model risk in credit derivatives comes from estimating the correlation between
odds of default of different underlying issuers. For illiquid underlying issuers, the CDS spread may not be well
defined.
146
The financial instruments at fair value whose valuation is based on internal models (Tier 2 and Tier 3) as at 31 December
2023 and 2022 are shown below:
147
EUR Thousands
Reasonable values
Reasonable values
calculated using
calculated using
internal models as of
internal models as of
31/12/2023
31/12/2023
(Level 2)
(Level 3)
Valuation Techniques
Main assumptions
ASSETS:
Financial assets held for trading
Derivatives
Swaps
Interest rate options
Others
Non-trading financial assets
obligatorily measured at fair value
through profit or loss
Heritage Instruments
Debt securities
Loans and advances
Derivatives - hedge accounting
Swaps
Others
Financial assets designated at fair
value through other comprehensive
income
323,898
323,898
274,279
48,219
1,400
—
—
—
—
390,497
363,717
26,780
1,772
Heritage Instruments
1,772
TOTAL ASSETS
LIABILITIES:
Financial liabilities held for trading
Derivatives
Swaps
716,167
343,594
343,594
286,862
—
—
— Method of the present
value
—
Black Sholes SLN
— Method of the present
value
1,539
Interest rate curves,
market prices Fx, Basis
Interest rate curves,
volatilities
Interest rate curves,
volatility surface
36 Method of the present
value
Interest rate curves,
market prices Fx, Basis
845 Method of the present
value
Interest rate curves,
market prices Fx, Basis
658 Method of the present
value
Interest rate curves,
market prices Fx, Basis
—
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
7,155
7,155 Method of the present
value
Interest rate curves,
market prices Fx, Basis
8,694
—
—
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
Exchange rate options
—
—
Black Sholes SLN
Interest rate curves,
volatilities
Interest rate options
48,240
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
Derivatives - hedge accounting
TOTAL LIABILITIES
Others
Swaps
Others
8,492
440,267
331,881
108,386
783,861
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
—
148
EUR Thousands
Reasonable values
Reasonable values
calculated using
calculated using
internal models
31/12/2022
(Level 2)
internal models
31/12/2022
(Level 3)
Valuation Techniques
Main assumptions
ASSETS:
Financial assets held for trading
Derivatives
Swaps
Interest rate options
Others
Non-trading financial assets
obligatorily measured at fair value
through profit or loss
Heritage Instruments
Debt securities
Loans and advances
494,664
494,664
425,843
37,316
31,505
—
—
—
—
—
—
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
—
— Method of the present
value
Interest rate curves,
volatility surface
1,870
39 Method of the present
value
1,444
387
—
Interest rate curves, FX
and EQ market prices,
dividends, others
Derivatives - hedge accounting
1,131,071
Swaps
1,068,242
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
Others
62,829
Financial assets designated at fair
value through other comprehensive
income
Heritage Instruments
TOTAL ASSETS
LIABILITIES:
Financial liabilities held for trading
Derivatives
Swaps
Exchange rate options
Interest rate options
Others
Derivatives - hedge accounting
Swaps
Others
TOTAL LIABILITIES
1,205
1,205
1,626,940
466,031
466,031
430,526
6
35,484
15
193,787
163,493
30,294
659,818
— Method of the present
value
Interest rate curves,
volatility surface, market
prices Fx
11,489 Method of the present
value
Interest rate curves, FX
and EQ market prices,
dividends, credit, others
11,489
13,359
—
—
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
—
—
—
— Method of the present
value
Interest rate curves,
market prices Fx, Basis
— Method of the present
value
Interest rate curves,
volatility surface, market
prices Fx
—
149
44. Other information
a) Residual deadlines for operations
The breakdown, by maturity, of the balances of certain headings of the consolidated balance sheets as at 31
December 2023 and 2022 is as follows:
2023
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
Debt instruments (Note 7)
Loans and advances
Central banks
Credit institutions (Note
6)
Customers (Note 10)
Liabilities:
Financial assets at amortised
cost-Deposits
Deposits
Central banks (Note 17)
Credit institutions (Note
17)
Customers (Note 18)
Debt instruments in issue
(Note 19)
Other financial liabilities
(Note 20)
Difference (assets –
liabilities)
11,278,533
—
—
—
—
—
49,983
49,983
50,828
50,828
49,525
49,525
—
—
—
—
11,278,533
1,001
1,001
151,337
151,337
4,923,370
6,217,335
9,171,609
26,004,145
65,666,609
9,142,819 121,125,887
—
4,923,370
—
147,235
4,776,135
16,201,903
583,658
5,633,677
—
232,768
5,400,909
6,267,318
850,126
8,321,483
—
210,788
8,110,695
9,222,437
1,086,388
24,917,757
—
637,865
24,279,892
26,053,670
1,669,665
63,996,944
—
199,663
63,797,281
65,666,609
—
4,189,837
9,142,819 116,936,050
—
1,428,325
9,142,813 115,507,725
9,143,820 132,555,757
—
6
35,731,940
—
261,352
35,470,588
—
988,808
36,720,748
(20.518.845)
2,178,794
4
556,110
1,622,680
2,444,016
592,178
5,214,988
1,052,330
4,828,020
2,007,603
568,297
2,252,120
3,940,929
15,530
8,784,479
437,958
10,956,154
3,365,682
2,049,167
5,541,305
13,251,301
21,937
24,229,392
1,824,278
14,557,349
89,287
10,910,182
3,557,880
20,258,188
101,687
34,917,224
30,749,385
1,732,857
2,979
1,330,111
399,767
11,710,789
69,985,114
5,465,555
15,675,219
48,844,340
51,605,223
80,651
1,800,791
13,524,297 123,391,128
9,164,629
(4,380,477)
150
2022
EUR Thousands
On demand Up to 1 month
1-3 Months
3-12 Months
1-5 Years
5+ Years
Total
6,826,225
—
—
—
—
—
19,144
409,678
296,686
19,144
409,678
296,686
—
—
—
— 6,826,225
1,000
726,508
1,000
726,508
6,957,723 5,517,489 7,836,587 22,883,416 56,688,948 13,210,385 113,094,548
—
105,025 1,086,118 2,106,033 2,887,885
— 6,185,061
6,957,723 5,412,464 6,750,469 20,777,383 53,801,063 13,210,385 106,909,487
19,736
390,306
—
248,388
—
18,282
—
98,279
—
11,483
19,736
13,777
—
97
6,709,335 5,378,951 6,738,986 20,759,101 53,702,784 13,210,288 106,499,445
13,783,948 5,536,633 8,246,265 23,180,102 56,688,948 13,211,385 120,647,281
31,982,008
2,789,937
3,198,629
12,254,331
20,370,972
252,193
70,848,070
—
13
66
9,140,720
8,750,588
9,254
17,900,641
487,358
31,494,650
330,687
2,459,237
1,558,296
1,640,267
788,927
2,324,684
8,304,618
3,315,766
150,316
92,623
11,620,202
41,327,227
—
274,496
4,272,678
7,616,878
17,583,722
9,107,986
38,855,760
426,276
32,408,284
750,831
3,815,264
602
7,471,909
30,698
19,901,907
87,623
38,042,317
77,370
1,373,400
9,437,549 111,077,230
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)
Customers (Note 10)
Liabilities:
Financial assets at amortised
cost-Deposits
Deposits
Central banks (Note 17)
Credit institutions (Note 17)
Customers (Note 18)
Debt instruments in issue
(Note 19)
Other financial liabilities
(Note 20)
Difference (assets – liabilities)
(18.624.336)
1,721,369
774,356
3,278,195
18,646,631
3,773,836
9,570,051
For the purpose of an adequate understanding of the information shown in the above tables, note that they have been
constructed considering the contractual maturity of the financial instruments included therein, and that they do not take
into account, therefore, the stability of certain liabilities such as customer current accounts and the renewal capacity
historically shown by the Group’s financial liabilities. Since they exclusively include financial instruments at the balance
sheet date, they do not include participations, nor the cash flows generated by them, nor the cash flows from the results
generated by the Bank.
151
b) Euro value of assets and liabilities
The breakdown of the euro equivalent of the main balances of the consolidated balance sheets as at 31 December
2023 and 2022 attached held in foreign currency, taking into account the nature of the items comprising it, 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
Equivalent value in EUR millions
2022
2023
Assets
Liabilities
Assets
Liabilities
269
—
1
18
8
751
208
226
140
—
—
—
33
—
—
—
—
278
865
38
1
63
7
686
104
221
261
—
39
—
31
—
—
—
—
212
Financial instruments at amortised cost
16,494
11,016
17,999
11,650
Liabilities included in disposal groups
—
—
—
—
classified as held for sale
Provisions
Others
—
78
18,193
6
241
11,574
—
51
20,296
25
264
12,221
c) Fair value of unrecorded financial assets and liabilities at fair value
Financial assets owned by the Group are recorded in the accompanying consolidated balance sheets at fair value,
except for items included under cash headings, cash balances in central banks and other demand deposits,
financial assets at amortized cost - loans and advances - clients, equity instruments whose market value, where
applicable, cannot be reliably estimated and financial derivatives which have these instruments as their
underlying asset and are settled through delivery thereof, if any.
Similarly, except for financial liabilities in the trading book and financial derivatives, the Group’s financial liabilities
are recorded in the consolidated balance sheets attached to their amortized cost.
152
i. Financial assets measured on a non-fair value basis
The following is a comparison between the value of the Group's financial assets measured on a basis other than
fair value as at 31 December 2023 and 2022 and their corresponding fair value at the close of those years:
Active
Carrying
amount
Fair Value
2023
Level 1
EUR Thousands
Level 2
Level 3
Carrying
amount
Fair Value
2022
Level 1
Level 2
Level 3
Financial
assets at
amortised cost
Loans and
advances
Debt
instruments
116,936,050 115,589,091
—
1,294,702 114,294,389 106,909,487 104,883,727
—
246,580 104,637,147
4,189,837
4,154,302
4,154,302
—
—
6,185,061
6,097,660
6,097,660
—
—
121,125,887 119,743,393
4,154,302
1,294,702 114,294,389 113,094,548 110,981,387
6,097,660
246,580 104,637,147
ii. Financial liabilities measured other than fair value
The following is a comparison between the value of the Group's liabilities measured on a non-fair value basis and
their corresponding fair value at year-end:
Amount
Carrying
amount
Value
Fair Value
2023
EUR Thousands
Level 1
Level 2
Level 3
Amount
Carrying
amount
Value
Fair Value
2022
Level 1
Level 2
Level 3
69,985,114 69,993,948
— 30,769,147 39,224,801 70,848,070 69,483,115
— 33,413,317 36,069,798
51,605,223 51,579,484
4,845,601 43,743,689
2,990,194 38,855,760 37,826,675
4,979,748 29,533,203
3,313,724
121,590,337 121,573,432
4,845,601 74,512,836 42,214,995 109,703,830 107,309,790
4,979,748 62,946,520 39,383,522
Liabilities
Financial
liabilities at
amortized cost
Deposits
Debt securities
in issue and
other financial
liabilities (*)
(*) In addition, other financial liabilities amounting to EUR 1,800,791 and EUR 1,373,400 thousand are recorded in December
2023 and December 2022 respectively
iii. Valuation methods and inputs used
The main measurement methods and inputs used in the 31 December 2023 and 2022 estimates of the fair value
of financial assets and liabilities in the above tables are as follows:
– Financial assets at amortized cost - loans and advances: Fair value has been estimated using the present value
technique. Factors such as expected maturity of the portfolio, market interest rates, spreads of new
concession of trades, or market spreads – if available – have been considered in the estimate.
– Financial liabilities at amortized cost:
i) The fair value of central bank deposits has been assimilated to their carrying value as they are mainly
short-term balances.
ii) Deposits of credit institutions: Fair value has been obtained by the present value technique by applying
interest rates and market spreads.
153
iii) Customer deposits: Fair value has been estimated using the present value technique. Factors such as the
expected maturity of operations and the Group's current financing cost in similar operations have been
considered in the estimate.
iv) Debt securities issued: Fair value has been determined on the basis of market quotes for such instruments
– where available – or by the present value technique, applying interest rates and market spreads.
45. Information segmented by geographic areas and by business
a) Geographical areas
In the main level of segmentation, derived from the management of the Group, six segments are presented,
corresponding to five operational areas, each of them collecting the totality of businesses that the Group develops
in them: Spain, Italy, Germany, Nordics (Scandinavia), France and the rest.
The preparation of the financial statements of each operating segment is made from the aggregation of the units
that exist in the Group. The basic information corresponds both to the accounting data of the legal units that are
integrated in each segment and to that available from the management information systems. In all cases, the
financial statements are consistent with the accounting criteria used in the Group. Consequently, the sum of the
profit and loss accounts of the different segments coincides with the consolidated profit and loss accounts. As for
the balance sheet, the necessary process of opening the different business units, which are integrated into a single
consolidated balance sheet, implies reflecting the different amounts borrowed and taken between them as a
greater volume of the assets and liabilities of each business. These amounts, corresponding to inter-group
liquidity, are eliminated in the column Intergroup eliminations of the following table, in order to reconcile the
amounts contributed by each business unit to the balance sheet of the consolidated Group.
In addition, and for presentation purposes, each geographical unit is maintained as its own resources
corresponding to its individual financial statements, offsetting them as a capital endowment made by the Spain
area that acts as the holding of the rest of the businesses; reflecting, therefore, the Group’s total own resources.
The balance sheet and profit and loss account, summarized, for the different geographical areas are as follows:
154
Consolidated balance sheet (Condensed)
Spain
Italy
Germany
Nordics
2023
France
Rest
EUR Thousands
Total
Spain
Italy
Germany
Nordics
2022
France
Rest
Intra-group
eliminations
(*)
29,092,539 15,409,421 45,897,181 18,643,312 18,913,021 21,703,111
30,568
1,000
1,050,885
271,606
2,997,479
(34,150,860) 115,507,725 13,435,196 10,180,074 38,654,354 17,394,410 16,353,163
3,394
105,746
249,295
4,771,162
209,173
15,710,622
31,549
320,110
14,532,746
1,711,537
64,532,925 18,166,969 78,413,070 20,692,445 37,741,011 26,054,649 (102,253,581) 143,347,488 19,312,088 12,166,052 50,980,770 20,921,617 18,558,111
323,898
(1)
4,342,018
(12,655,147)
1,428,325
(35,846,805)
1,663,917
6,554,097
(21,264,685) 15,191,425
65,756
97,049
6,160,791
452,212
91,259 10,843,405
208,429
3,736,548
1,939,892 11,678,096
120,854
3,619,344
2,451,564
2,990,795
3,143,859
21,280
4,664,444
9,471,122
106,185
4,564,959
9,916
492,215
1,807,037
129,642
1,088,397
3,540
1,926,404
2,444,141
150,372
1,352,435
3,500
947,556
107,837
247,302
742,938
—
450,751
944,262
71,370
519,595
5,794,708
—
1,000
853,300
55,075
657,028
7,361,111
Intra-group
eliminations
Total
(*)
6,643,981 108,455,886
356,960
494,664
6,913,013
174,004
(8,299,435)
410,042
5,261,550
1,832,747
271,688
8,744,539
979,945 130,279,694
1,507,115 42,911,768
5,112,359
27,601,048
5,487,778
3,218,110
19,504,388 10,429,607 15,993,283
1,136,119
3,014,656
1,876,017 11,005,583
3,386,021
4,775,402
7,175,670
1,272,925
2,573,047
647,970
11,042,203
64,532,923 18,166,968 78,413,068 20,692,444 37,741,011 26,054,649 (102,253,575) 143,347,488 19,312,088 12,166,052 50,980,771 20,921,616 18,558,110
304,790
(18,390,685) 48,844,340
(13,301,402) 51,605,223
1,791,678
(49,892,137) 21,140,774 15,490,700
1,258,558
(1,172,488)
9,220,266
466,362
(19,496,863) 12,536,885
8,978,293
4,442,503
4,282,987
2,931,184 11,974,532 13,693,973
4,708,483
5,403,084 14,994,066
1,685,159
3,220,030
1,524,531
3,269,396
1,390,953 25,209,910
684,647
6,901,467
8,172,755 11,124,669
2,816,140
749,020
4,928,585
1,168,677
7,217,679
4,476,361
5,904,385
478,134
2,845,057
63,865
3,316,018
3,899,821
(81,947) 41,327,227
384,083 19,842,122 38,855,760
(20,177,820) 29,520,843
1,830,484
236,943
244,552
8,356,394
1,160,648 12,219,470
1,002,171
979,946 130,279,694
7,361,111
Spain
521,664
14,368
71,147
(2,290)
7,094
611,982
(233,372)
(99,233)
(134,139)
(19,157)
(186,763)
172,691
157,245
—
157,245
109,042
Italy
361,279
4,300
91,816
10,371
1,016
468,782
(188,151)
(97,532)
(90,618)
(28,916)
(62,371)
189,344
130,729
—
130,729
93,191
Germany
781,217
32,119
381,122
17,669
159,139
1,371,266
(709,259)
(424,992)
(284,267)
(91,340)
(206,325)
364,342
257,135
—
257,135
234,676
2023
Nordics
674,063
855
26,918
(363)
15,385
716,859
(278,317)
(138,968)
(139,349)
(29,388)
(93,342)
315,811
241,183
—
241,183
241,183
France
553,671
13,160
104,368
5,759
(7,839)
669,119
(209,944)
(89,885)
(120,059)
(11,361)
(6,951)
440,863
318,413
—
318,413
144,618
Rest (*)
533,259
12,273
53,953
105,342
(15,430)
689,397
(265,522)
(104,683)
(160,840)
(28,629)
(77,551)
317,695
216,445
—
216,445
181,223
Total
3,425,153
77,075
729,324
136,488
159,365
4,527,405
(1,884,565)
(955,293)
(929,272)
(208,791)
(633,303)
1,800,746
1,321,150
—
1,321,150
1,003,933
Spain
540,404
16,049
62,799
8,244
9,618
637,114
(229,462)
(92,691)
(136,771)
(14,150)
(118,174)
275,329
205,405
—
205,405
149,887
Italy
357,183
3,489
80,755
12,277
(5,564)
448,140
(145,216)
(72,383)
(72,833)
(16,716)
(47,661)
238,547
165,600
—
165,600
129,422
Germany
1,025,770
28,486
439,316
12,215
152,164
1,657,950
(708,889)
(418,797)
(290,092)
(101,587)
(157,005)
690,470
469,856
—
469,856
433,407
2022
Nordics
668,299
1,865
36,344
(3,273)
(1,972)
701,262
(242,502)
(134,750)
(107,752)
(25,451)
(73,645)
359,664
272,881
—
272,881
272,881
France
532,357
10,115
104,558
48,989
(15,614)
680,405
(194,244)
(87,748)
(106,496)
(8,003)
(48,466)
429,692
340,528
—
340,528
160,238
Rest (*)
447,194
36,732
59,764
(18,766)
(3,306)
521,620
(235,919)
(77,813)
(158,106)
(23,276)
(48,232)
214,191
147,353
—
147,353
1,241,714
Total
3,571,207
96,736
783,536
59,686
135,326
4,646,491
(1,756,232)
(884,182)
(872,050)
(189,183)
(493,183)
2,207,893
1,601,623
—
1,601,623
2,387,549
Financial assets at amortised cost – Central banks and credit
Financial assets at amortised cost – Customers
Financial assets held-for-trading
Debt instruments
institutions
Tangible and intangible assets
Cash and other
Total assets
Customer deposits
Debt securities in issued
Deposits from central banks and credit institutions
Other liabilities and equity accounting
Shareholders’ equity
Total funds under management
Consolidated income statement (Condensed)
NET INTEREST INCOME
Income from entities accounted for using the equity method
Net commissions
Profit/(loss) from financial operations
Other operating income/(expense)
OPERATING INCOME
Administrative and general expenses
Provisions or reversal from provisions and impairment loss
Staff costs
Other
Amortisation
charges (net)
PROFIT OR LOSS BEFORE TAX
OPERATIONS
Profit or loss in respect of discontinued operations
CONSOLIDATED PROFIT OR LOSS
Attributable to the parent
PROFIT OR LOSS IN RESPECT OF CONTINUING
(*) Includes reconciliation between the Group’s segmented information and consolidated financial statements, as well as corporate activities.
147
Also, in accordance with the requirements of the regulations applicable to the Bank, the following is broken down:
1. For the geographical areas indicated in the aforementioned regulations, the balance of “interest income”
recorded in the consolidated profit and loss accounts for the years 2023 and 2022:
Internal market
Export:
European Union
OECD countries
Other countries
Total
EUR Thousands
2023
2022
1,332,389
761,812
3,839,028 1,546,563
886,859
1,167,979
—
—
5,007,007 2,433,422
6,339,396 3,195,234
2. A distribution of revenue (interest income, dividend income, commission income, gains or (-) losses on
derecognition of financial assets and liabilities, gains or losses on financial assets held for trading, gains or
losses on non-trading financial assets obligatorily measured at fair value through profit or loss, gains or (-)
losses resulting from hedge accounting and other operating income) by the geographical segments used by
the Group. For the purposes of the following table, 2023 and 2022:
Revenue from external
customers
Revenue (EUR Thousands)
)
Inter-segment revenue
Total Revenue
2023
2022
2023
2022
2023
2022
1,600,435
927,805
2,397,860
1,252,932
1,177,556
771,190
969,368
599,648
806,354
206,602
2,406,789
1,175,970
33,923
23,652
961,728
623,300
2,051,454
565,810
441,713
2,963,670
2,493,167
845,036
798,404
702,770
35,700
94,663
1,288,632
590,707
322,004
523,491
256,753
1,768,263
1,093,194
939,699
1,321,895
959,523
—
—
(2,354,498)
(1,546,874)
(2,354,498)
(1,546,874)
8,127,778
5,966,680
—
—
8,127,778
5,966,680
Spain and Portugal
Italy
Germany
Scandinavia
France
Rest
Adjustments and
eliminations of
regular income
between
segments
Total
b) Business segments
At the secondary level of segmented information, the Group is organized into 2 main business lines and a grouping
of other smaller businesses.
The "Automotive" area contains all businesses associated with financing new and used vehicles including
operating and financial leasing, as well as the contribution to the consolidated profit or loss of all the activities
carried out by the Group related to the financing granted with collateral received as well as the stock credit of
vehicles marketed by the distributors.
148
The area of “Consumer Financing” reflects the returns derived from the business of financing consumer products,
the results derived from direct financing to consumers, by any of the distribution channels, whether physical or
online and including all the products marketed for it: fixed-term loans, credit cards, etc.
The area of “Other business” includes the operation that is not included in any of the above categories, mainly
mortgages and corporate loans.
The summary consolidated profit and loss accounts, distributed by business, for the years 2023 and 2022 are
presented below:
Consolidated profit and loss account (summarized)
NET INTEREST INCOME
Income from entities accounted for using the equity method
Net commissions
Profit/(loss) from financial operations
Other operating income
OPERATING INCOME
Administrative and general expenses
Staff cost
Other
Depreciation
Provisions, Impairment losses on financial assets
PROFIT/(LOSS) BEFORE TAX
PROFIT/(LOSS) IN RESPECT OF CONTINUING OPERATIONS
Profit(/loss) in respect of discontinued operations
CONSOLIDATED PROFIT/(LOSS)
Consolidated income statement (Condensed)
NET INTEREST INCOME
Income from entities accounted for using the equity method
Net commissions
Profit/(loss) from financial operations
Other operating income
OPERATING INCOME
Administrative and general expenses
Staff cost
Other
Depreciation
Provisions, Impairment losses on financial assets
Vehicles
2,266,995
82,869
439,709
4,639
252,561
3,046,773
(1,089,706)
(562,469)
(527,237)
(81,421)
(179,469)
1,696,176
1,232,646
—
1,232,646
Vehicles
2,263,273
71,275
450,423
16,649
202,696
3,004,316
(961,574)
(453,899)
(507,675)
(65,290)
(171,312)
EUR Thousands
2023
Other (*)
Consumer
Financing
923,330
14,352
234,995
3
15,343
1,188,023
(438,106)
(219,889)
(218,217)
(44,692)
(404,560)
300,666
212,251
—
212,251
234,828
(20,146)
54,620
131,846
(108,539)
292,609
(356,753)
(172,935)
(183,818)
(82,678)
(49,274)
(196,096)
(123,747)
—
(123,747)
EUR Thousands
2022
Other (*)
Consumer
Financing
972,172
12,293
282,422
6,878
8,648
1,282,413
(472,428)
(229,598)
(242,830)
(43,210)
(283,029)
335,762
13,168
50,691
36,159
(76,018)
359,762
(322,230)
(200,685)
(121,545)
(80,683)
(38,842)
Total
3,425,153
77,075
729,324
136,488
159,365
4,527,405
(1,884,565)
(955,293)
(929,272)
(208,791)
(633,303)
1,800,746
1,321,150
—
1,321,150
Total
3,571,207
96,736
783,536
59,686
135,326
4,646,491
(1,756,232)
(884,182)
(872,050)
(189,183)
(493,183)
PROFIT/(LOSS) BEFORE TAX
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
(*)
It mainly includes the results of the deposits and managed assets business, which are not individually significant in the context of the Group,
as well as those derived from the Group’s financial management activity.
149
46. Related parties
The following are the transactions made by the Group with the parties linked to it, distinguishing between associated
entities, entities of the Santander Group, members of the Board of Directors of the Bank and members of the Bank’s
senior management, as of December 31, 2023 and 2022, as well as the income and expenses derived from the
transactions made with those related parties in the years 2023 and 2022. The terms of related party transactions are
equivalent to those of market-based transactions.
2023
EUR Thousands
2022
Associates
Santander
group
entities
Board
Members
(*)
Senior
manageme
nt (**)
Associates
Santander
Group
Entities
Board
Members
(**)
Senior
Manageme
nt (**)
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
—
—
666,386
—
181,615 1,206,895
158,415
10,659
23,200 1,196,236
223,678
—
154,742
—
6,817
8,533
37,873 12,264,841
10,003 12,188,919
75,922
27,870
— 9,447,056
64,653
241,094
296,706
50,041
24,643
—
—
16
3,053
(38)
133,575
—
—
—
—
—
590
—
(3,939)
—
245,480
(595,366)
39,015
(10,202)
5,285
(6,868)
(237,240)
124,838
7,434
(78)
(170,292)
—
—
—
—
38,197
—
749,846
—
—
13
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
5
—
—
—
—
213
—
213
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
727,896
—
—
—
584,591
58,675
341,326
37,111
243,265
21,564
334,747
—
580,245
—
9,710
7,369
59,398 9,827,561
— 9,761,171
66,390
— 6,720,540
17,327
307,105
150,346
42,959
25,603
—
—
1,989
59,398
5,160
—
135,902
(2)
—
—
—
—
353
—
(3,386)
—
7,908
(105,415)
158,051
(5,758)
—
1,161
319,060
152,469
10,735
(3)
(167,230)
—
—
—
—
29,298
—
750,238
—
—
14
14
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
7
—
—
—
—
259
—
259
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(*)
Excluding those entities belonging to the Santander Group that have been considered as associates in this consolidated report,
(**)
See Notes 5-b and 5-c,
150
47. Risk management
I. Risk management
Corporate principles
Grupo Santander, of which Santander Consumer Finance is a part, has set itself as a strategic objective to achieve
excellence in risk management, It has always been a priority axis of action throughout its more than 150 years of
experience.
In recent years, it has accelerated its evolution to anticipate and respond to the great challenges of an ever-changing
economic, social and regulatory environment.
Consequently, the risk function is more important than ever for Grupo Santander to remain a solid, safe and
sustainable bank, an example for the entire financial sector and a benchmark for all those who aspire to turn
leadership into risks into a competitive advantage.
Santander Consumer Finance aims to build the future through early management of all risks and to protect the
present through a robust control environment. Thus, it has determined that the risk function is based on the following
pillars, which are aligned with the strategy and business model of the Santander Group and take into account the
recommendations of the supervisory bodies, regulators and best market practices:
1. The business strategy is defined within the risk appetite. The Board of Santander Consumer Finance determines
the amount and typology of the risks it considers reasonable to assume in the execution of its business strategy
and its development in objective limits, verifiable and consistent with the risk appetite for each relevant activity.
2. All risks must be managed by the units that generate them through advanced models and tools integrated into
the different businesses. Santander Consumer Finance is promoting advanced risk management with innovative
models and metrics, in addition to a control, reporting and scaling framework, which allow to identify and
manage risks from different perspectives.
3. Anticipatory vision for all types of risks must be integrated into the processes of risk identification, assessment
and management.
4. The independence of the risk function encompasses all risks and provides an adequate separation between the
risk generating units and those responsible for their control. It implies that it has sufficient authority and direct
access to the management and governance bodies responsible for setting and overseeing risk strategy and
policies.
5. Risk management needs to have the best processes and infrastructures. Santander Consumer Finance aims to be
the reference model in the development of infrastructures and processes to support risk management.
6. A risk culture integrated throughout the organization, comprising a series of attitudes, values, skills and
guidelines for action against all risks. Santander Consumer Finance understands that advanced risk management
cannot be achieved without a strong and constant risk culture that is present in each and every one of its activities.
151
Risk map
Santander Consumer Finance has a recurring process for the identification of the material risks to which it is or may
be exposed, which is reflected in the risk map. Material risks should be incorporated into risk appetite, risk strategy,
risk profile assessment exercise and ICAAP/ILAAP. Below is the latest update of the Santander Consumer Finance risk
map.
In its first level the risk map includes the following (General Risk Framework):
• Credit risk is the risk of financial loss caused by the default or impairment of the credit quality of a client or
other third party, to which Santander Consumer Finance has financed or for which a contractual obligation has
been assumed.
• Market risk is the risk incurred as a result of changes in market factors affecting the value of positions in
trading portfolios. This risk is not relevant in Santander Consumer Finance because it is not a trading
institution.
• Liquidity risk is the risk that Santander Consumer Finance does not have the liquid financial assets necessary
to meet its obligations at maturity, or can only obtain them at a high cost.
• Structural risk is the risk derived from the management of the different balance sheet items, both in the bank
portfolio and in relation to insurance and pension activities.
• Capital Risk is the risk that Santander Consumer Finance 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, personnel and
systems or due to external events. This definition includes legal risk.
152
• Financial crime risk is the risk arising from actions or the use of the group’s means, products and services in
criminal or illegal activities. These activities include, inter alia, money laundering, terrorist financing, violation
of international sanctions programs, corruption, bribery and tax evasion.
• Strategic Risk is the risk of loss or damage arising from strategic decisions, or their poor implementation,
affecting the long-term interests of our main stakeholders, or an inability to adapt to the evolving
environment.
• Reputational risk is defined as the risk of a negative economic impact, current or potential, due to an
impairment in the perception of the bank by employees, customers, shareholders/investors and society in
general.
• Model risk is the risk of loss derived from inaccurate predictions, which may result in the bank making sub-
optimal decisions, or from improper use of a model.
The material risks in Santander Consumer Finance are: Credit, default (including concentration and migration),
liquidity and funding, structural, structural interest rate, capital, operational, financial and strategic crime.
The relevant risks in Santander Consumer Finance are: Direct residual value, structural exchange rate, pensions, legal,
fraud, IT and cyber risk, suppliers, operational resilience, transformation, people, data, processes, regulatory
compliance, conduct, reputational, model and ESG risks (related to environmental and climate, social and governance
factors).
There are two types of risk whose relevance is increasing in recent times and for which Santander Consumer Finance
is strengthening its management and control: Direct residual value risk and ESG/climate risks.
Direct residual value risk is defined as the risk of loss that an entity may have if at any time during the life of an
automobile contract (loan, lease, etc.) the customer has the option or obligation to return the vehicle as a full and
final settlement, due to uncertainty about the sale price of the vehicle made at that time.
ESG factors (environmental and climate, social and governance) can influence traditional risk types (credit, liquidity,
operational, reputational, etc.) arising from the physical effects of climate change, generated by specific events as
well as chronic changes in the environment, such as environmental and environmental factors. or the process of
transition to a model of development of lower emissions, including legislative, technological or behavioral changes
of economic agents, as well as the failure to meet the expectations and commitments acquired.
Corporate Risk Governance
The objective of the governance of the risk function is to establish adequate and efficient risk decision-making as well
as effective risk control and to ensure that risks are managed according to the level of risk appetite approved by the
Board of administration of Santander Consumer Finance.
To this end, the following principles are established:
• Segregation of decision-making and risk control.
• Strengthening the responsibility of risk-generating functions in decision-making.
• Ensure that all risk decisions have a formal approval process.
• Ensure an aggregate view of all types of risks.
• Strengthen risk control committees.
• Maintain an agile and efficient committee structure, ensuring:
– Participation and involvement in risk decisions, as well as in their supervision and control, of
management bodies and senior management.
– Coordination between the different lines of defense that configure the functions of risk management
and control.
153
– Alignment of objectives, monitoring of compliance and implementation of corrective measures when
necessary.
– Existence of an adequate environment for managing and controlling all risks.
In order to achieve these objectives, the Model Governance Committees scheme must ensure adequate:
• Structure, which implies, at least, stratification according to levels of relevance, balanced delegation capacity
and incident elevation protocols.
• Composition, with members of sufficient level of interlocution and sufficient representation of the business
and support areas.
• Operability, that is, frequency, minimum attendance level and appropriate procedures.
The governance of risk activity should establish and facilitate the channels of coordination between the units and
Santander Consumer Finance , as well as the alignment of risk management and control models.
The governing bodies of Santander Consumer Finance units will be structured according to local regulatory and legal
requirements and the size and complexity of each unit.
There are special situations committees (Gold, Silver and Bronze) that will be activated to follow up immediately on
any event that may affect the business and activity of the entity.
Roles and responsibilities
The risk function is structured in three lines of defense, according to corporate policy, to manage and control risks
effectively:
–
–
–
First line of defense: Business functions that take or generate risk exposure constitute the first line of defense.
The first line of defense identifies, measures, controls, monitors and reports the risks that arise and applies the
internal regulations that regulate risk management. Risk generation should be adjusted to the approved risk
limits.
appetite
associated
and
Second line of defense: Formed by the risk functions, which independently supervise and question the risk
management activities carried out by the first line of defense. This second line of defense should ensure, within
their respective areas of responsibility, that risks are managed according to the risk appetite defined by senior
organization.
management
throughout
promote
culture
strong
and
risk
the
a
Third line of defense: The Internal Audit function is independent to assure the board of directors, and senior
management, the quality and effectiveness of internal controls, government and risk management systems,
helping to safeguard our value, solvency and reputation.
Structure of Risk Committees
Responsibility for risk control and management lies ultimately with the Board of Directors, from which the powers
delegated to commissions and committees emanate. At Santander Consumer Finance, the Board relies on the Risk
Supervision, Regulation and Compliance committee, as an independent risk control and oversight committee. In
addition, the Executive Committee devotes special attention to risk management. These statutory bodies form the
highest level of risk governance.
Bodies for independent control
– Risk, Regulation and Compliance Supervision Commission (CSRRC):
The Commission's mission is to assist the Board of Directors in the supervision and control of risks, in the definition
and evaluation of risk policies, as well as in the determination of risk propensity and risk strategy.
It is composed of external or non-executive directors, with a majority representation of independent directors and
chaired by an independent director.
154
The functions of the Risk, Regulation and Compliance Supervision Commission are:
– Support and advise the Board of Directors in the definition and evaluation of risk policies affecting Santander
Consumer Finance and in the determination of risk propensity and risk strategy.
– Ensure that the pricing policy for assets and liabilities offered to clients takes full account of the business
model and risk strategy.
– Know and evaluate management tools, improvement initiatives, project evolution and any other relevant
activity related to risk control.
– Determine, together with the Management Board, the nature, quantity, format and frequency of risk
information to be received by the Commission and the Management Board.
– Collaborate to establish sound remuneration policies and practices. For this purpose, the Risk Supervision,
Regulation and Compliance Commission shall examine, without prejudice to the functions of the
Remuneration Commission, whether the incentive policy provided for in the remuneration system takes into
account risk, capital, liquidity and probability and opportunity of profits.
– Risk Control Committee (CCR):
This collegiate body is responsible for the supervision and global risk control of Santander Consumer Finance in
accordance with the powers assigned to it by the Board of Directors of Santander Consumer Finance, S.A.
Its objectives are:
• To be the instrument for effective risk control, ensuring that risks are managed according to the Bank’s level
of risk appetite approved by the Board of Directors of Santander Consumer Finance, S.A., and allowing a
comprehensive view of all the risks identified in the risk map of the general risk framework, including the
identification and monitoring of both current and emerging risks and their impact on the risk profile of the
Santander Consumer Finance Group.
• Ensure the best estimate of the provision and its proper registration.
This committee is chaired by the Chief Risk Officer (CRO) of Santander Consumer Finance and is composed of
executives of Santander Consumer Finance. They are represented, at least, among others, the risk function, which
the presidency exercises, and the functions of compliance, financial and management control, as well as
representatives of the business areas. The CROs of local entities may participate periodically in order to report,
among others, the risk profile of the different entities.
The Risk Control Committee reports to the Risk Supervision, Regulation and Compliance Committee and assists it
in its role of supporting the Board of Directors.
– Provisions Committee:
The Provisions Committee is the collegiate decision-making body responsible for the global management of the
provisions in accordance with the powers delegated by the Executive Committee of Risks of Santander Consumer
Finance S.A. and will supervise, within its area of action and decision, all topics related to Santander Consumer
Finance provisions. Its objective is to be the instrument for decision-making, ensuring that they are within the
government of provisions established in Santander Consumer Finance, as well as to inform the Board of Directors
or its committees of their activity when necessary.
Decision-making bodies
– Executive Risk Committee (ERC):
The Risk Executive Committee is the collegiate decision-making body responsible for global risk management in
accordance with the powers assigned to it by the Board of Directors of Santander Consumer Finance, S.A., and will
continue, in its scope of action and decision, all risks identified by the Bank.
155
Its objective is to be the instrument for making risk-taking decisions at the highest level, ensuring that they are
within the limits set in the risk appetite of the Santander Consumer Finance Group, as well as report its activity to
the Council or its commissions when required.
This committee is chaired by the Head of Santander Consumer Finance and is composed of executive directors,
and other executives of Santander Consumer Finance, being represented, among others, the functions of risk,
financial, management control and compliance. The CRO of Santander Consumer Finance has the right of veto
over the decisions of this committee.
• Proposal Sub-committee (RPSc):
Santander Consumer Finance’s Sub-Committee on Risk Proposals is the collegiate decision-making body
responsible for making decisions relating to business operations and countries, in terms of credit, market,
liquidity and structural risk (or any other type of risk if necessary), ensuring that they are within the limits set in
Santander Consumer Finance’s risk appetite as well as reporting their activity to the Risk Executive Committee
when required.
This committee is chaired by the CRO of Santander Consumer Finance, and is composed of executives of Santander
Consumer Finance, being represented, among others, the functions of risk, financial, management control and
compliance.
The Risk Committee structure of the Western Hub branches:
Under the merger agreements and for the purpose of ensuring proper governance and continuity of the risk function
of the branches of the Western Hub by Santander Consumer Finance, S.A (absorbing company):
•
As many powers, powers and attributions in matters of risk were granted individually or collectively in the
branches, they will remain in force under the same terms and conditions.
• What is particularly established in its approval and risk control committees shall remain in force with the same
functions, unless one or more powers are expressly claimed by a higher-ranking body.
•
Any discrepancy in the understanding of the powers and competence of the committees shall be interpreted in
the sense that it best favors the governance functions of the company as a whole and, in any case, subject to
the practices and uses of the bodies of higher 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.
156
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.
• 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 2023
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 2023, the default rate was 2.15%, based on controlled risk, despite the upward trend due to
adverse situations that have been experienced throughout 2023, the measures applied in the units and the
157
Santander Consumer Finance risk appetite. Doubtful loans (2,477 million euros) are distributed by units as follows:
Nordics represents 21% of the total, Spain and Portugal 26%, Germany and Austria 37%, France 8% and Italy 8%.
Regarding the type of portfolio, Auto represents 46% of the total, Direct 35%, Cards 7%, Stock Finance 1%,
Mortgages 3%, Durables 3% and others 5%.
Despite the macroeconomic environment due to interest rate hikes, inflation and the war between Russia and
Ukraine, the non-performing loan ratio has closed slightly above the December 2022 data (9 basis points).
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 2023 was 0.59%.
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.
Global Credit Risk Map 2023
The following table details the global map of Santander Consumer Finance's gross credit exposure by geographic
area:
a) Global Credit Risk Map 2023
The following table details the global map of gross credit exposure by geographical area:
Group- Gross exposure to credit risk
2023 (million euros) Variation December
2022
% Portfolio
Spain and Portugal (*)
Italy
France
Germany and Austria
Nordics (Scandinavia)
United Kingdom
Rest
Total
16,159
15,542
19,412
44,172
17,390
—
4,967
117,642
8.07 %
50.14 %
21.78 %
4.92 %
(2.39) %
— %
10.90 %
8.47 %
13.74 %
13.21 %
16.50 %
37.55 %
14.78 %
— %
4.22 %
100.00 %
In terms of vision by products at the end of December 2023, Auto represents 62% of the total gross exposure, direct
11%, mortgages 3%, durables 2%, Stock Finance 14%, cards 2% and others 6%. Germany concentrates the largest
percentage of the portfolio with 38% along with Austria. On the other hand Nordics (Scandinavia) represents 15%,
and includes the units of Norway, Denmark, Sweden and Finland. France, including Stellantis Joint Ventures, accounts
for 17% of the total. Spain, Portugal and their respective units resulting from cooperation with Stellantis, account for
14% of the total.
Estimation of impairment losses
Calculation of expected credit losses:
158
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.
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
159
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 geographies These
thresholds can be expressed as an absolute or relative increase in the probability of default.
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 variation; 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
160
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.
–
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 2023, the Group has updated the macroeconomic scenarios included in the provision models with the most up-
to-date information on the current environment. Consequently, the Group uses a prospective vision to estimate expected
losses.
–
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
161
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.
The detail of the exposure and the impairment losses associated with each of the phases as of December 31, 2023 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 2023
(Millions of Euros)
Credit quality (*)
Degree of investment
Degree of speculation
Non-payment
Total risk (**)
Impairment losses
Stage 1
123,604
13,008
—
136,612
454
Stage 2
—
4,131
—
4,131
266
Exposure and impairment losses by stage 2022
(Millions of Euros)
Credit quality (*)
Degree of investment
Degree of speculation
Non-payment
Total risk (**)
Impairment losses
Stage 1
116,422
12,674
—
129,096
477
Stage 2
—
4,172
—
4,172
250
(*) Detail of credit quality grades calculated for Group management purposes.
(**) assets at amortized cost, loans and advances, clientele + credit commitments granted.
Stage 3
—
—
2,541
2,541
1,413
Stage 3
—
—
2,239
2,239
1,229
Total
123,604
17,139
2,541
143,284
2,133
Total
116,422
16,846
2,239
135,508
1,956
As at 31 December 2023 and 2022, the Group did not present significant amounts in 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
162
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 estimate of impairment losses
Below is the details of the exposure and impairment losses associated with each of the stages as of December 31,
2023 of Santander Consumer Bank AG and Santander Consumer Leasing, GmbH. In addition, depending on the
current credit quality of the transactions, the exposure is divided into three degrees (investment, speculation and
default):
Credit quality(*)
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
Credit quality(*)
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2023
(Millions of Euros)
Stage 1
39,935
—
—
39,935
104
Stage 2
79
834
—
913
56
Stage 3
—
—
722
722
374
Exposure and impairment losses by stage 2022
(Millions of Euros)
Stage 1
37,009
—
—
37,009
88
Stage 3
—
—
566
566
272
Stage 2
12
1,145
—
1,157
38
Total
40,014
834
722
41,570
534
Total
37,021
1,145
566
38,732
398
(*) Detail of credit quality grades calculated for Group management purposes.
(**) assets at amortized cost, loans and advances, clientele + credit commitments granted.
The default rate for Germany stood at 2.06% at the end of December 2023 (1.78% at the end of 2022).
Forward-looking information should be taken into account when estimating expected losses. Specifically, in the
case of the most significant units in Germany (Santander Consumer Bank AG and Santander Consumer Leasing,
GmbH) they consider five prospective macroeconomic scenarios, which are updated periodically, over a time
horizon of 5 years.
163
The following is the projected evolution in 2023 of the main macroeconomic indicators used to estimate expected
losses at Santander Consumer Bank AG and Santander Consumer Leasing, GmbH:
Magnitudes
Interest rate (interbank 12m)
Unemployment rate
GDP growth
Growth in housing prices
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
Base-case
Better-case
scenario
scenario
scenario
4.33%
7.00%
(0.18%)
(2.66%)
3.86%
6.08%
0.31%
(0.99%)
3.11%
5.18%
1.29%
2.35%
2.84%
4.83%
2.22%
4.52%
Best-case
scenario
2.70%
4.46%
2.69%
5.61%
The following is 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:
Magnitudes
Interest rate (interbank 12m)
Unemployment rate
GDP growth
Growth in housing prices
Scenario at 5 years (2023-2027)
Worst-case
scenario
Worse-case
Base-case
Better-case
scenario
scenario
scenario
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%
Best-case
scenario
1.09%
4.54%
2.80%
5.80%
Each macroeconomic scenario is associated with a given probability of occurrence. In terms of their allocation,
Santander Consumer AG and Santander Consumer Leasing, GmbH associate the base scenario with the highest
weights, while associating the lower weights with the most extreme scenarios. The weights used in both 2023 and
2022 were as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5%
20%
50%
20%
5%
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of the expected
losses at the end of 2023 for the most relevant portfolios in Germany is shown:
Change in expected loss (IFRS9)
Vehicles
New
1.33%
(0.62%)
Vehicles
New
1.36%
(0.63%)
Vehicles
New
10.29%
(2.92%)
Direct
7.18%
(3.08%)
(1.17%)
1.34%
(1.19%)
1.36%
(2.41%)
4.88%
(6.44%)
10.15%
GDP growth:
(100) p.b.
100 p.b.
Unemployment rate:
(100) p.b.
100 p.b.
In relation to the determination of the classification in stage 2, the quantitative criteria applied in the institution are
based on identifying whether any increase in the PD for the entire expected life of the operation exceeds a number of
absolute and relative thresholds. Each portfolio has a set of thresholds according to the characteristics and credit risk
profile of the products that make it up.
164
In addition, for each portfolio, a number of specific qualitative criteria are defined indicating that the exposure has
had a significant increase in credit risk, regardless of the evolution of its PD since the time of initial recognition. The
institution, among other criteria, considers that an operation presents a significant increase in risk when it presents
irregular positions > of 30 days. These criteria depend on the risk management practices of each portfolio.
• Nordics (Scandinavia)
Information on the estimate of impairment losses
Below is the detail of the exposure and impairment losses associated with each of the stages as of December 31,
2023 of the most significant unit of Nordics (Santander Consumer Bank AS). In addition, depending on the current
credit quality of the transactions, the exposure is divided into three degrees (investment, speculation and default):
Exposure and impairment losses by stage 2023
(Millions of Euros)
Credit quality(*)
Stage 1
Stage 2
Stage 3
Total
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
14,176
1,492
—
15,667
78
—
408
—
408
40
—
—
419
419
236
14,176
1,900
419
16,494
355
Exposure and impairment losses by stage 2022
(Millions of Euros)
Credit quality(*)
Stage 1
Stage 2
Stage 3
Total
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
14,738
1,701
—
16,439
77
6
575
—
581
57
—
—
391
391
222
14,744
2,276
391
17,411
356
(*) Detail of credit quality grades calculated for Group management purposes.
(**) assets at amortized cost, loans and advances, clientele + credit commitments granted.
Nordics (Scandinavia) default rate stood at 2.94% at the end of December 2023 (2.70% at the end of 2022).
Forward-looking information should be taken into account when estimating expected losses. In particular, Santander
Consumer Bank AS considers five prospective macroeconomic scenarios, which are updated periodically, over a time
horizon of 5 years.
165
• Norway
The following is the projected evolution in 2023 for the next five years of the main macroeconomic indicators used to
estimate expected losses in Santander Consumer Bank AS:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Worst-case
scenario
4.24%
4.33%
(0.49%)
0.29%
Scenario at 5 years (2024-2028)
Base-case
Better-case
Worse-case
scenario
scenario
scenario
3.75%
4.09%
0.12%
0.98%
3.15%
3.90%
1.24%
1.80%
2.63%
3.55%
2.07%
2.42%
Best-case
scenario
2.34%
3.40%
3.22%
2.97%
The following is the projected evolution in 2023 for the next five years of the main macroeconomic indicators used to
estimate expected losses in Santander Consumer Bank AS:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2023-2027)
Base-case
Better-case
Worse-case
scenario
scenario
scenario
Worst-case
scenario
4.23%
5.24%
4.05%
4.82%
(1.22%)
(0.49%)
0.36%
1.06%
3.30%
3.85%
0.22%
1.90%
3.10%
3.39%
0.55%
2.52%
Best-case
scenario
2.80%
3.03%
1.06%
3.10%
Each macroeconomic scenario is associated with a given probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base scenario with the highest weight, while associating the lower weights with
the most extreme scenarios. The weights used in both 2023 and 2022 were as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5%
20%
50%
20%
5%
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of expected
losses at the end of 2023 for the most relevant portfolios in Norway is shown:
GDP growth:
(100) p.b.
100 p.b.
Housing price growth:
(100) p.b.
100 p.b.
Expected loss variation IFRS9
Auto Physical persons
2.00%
(1.55%)
4.84%
(2.32%)
166
• Denmark
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2023 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
4.53%
6.57%
(2.50%)
(0.14%)
3.95%
5.66%
(0.03%)
0.50%
3.48%
4.52%
3.19%
1.32%
3.10%
4.13%
5.16%
1.86%
2.81%
3.75%
7.08%
2.40%
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2022 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2023-2027)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
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%
Each macroeconomic scenario is associated with a given probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base scenario with the highest weight, while associating the lower weights with
the most extreme scenarios. The weights used in both 2023 and 2022 were as follows:
GDP growth:
(100) p.b.
100 p.b.
Housing price growth:
(100) p.b.
5 %
20 %
50 %
20 %
5%
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of expected
losses at the end of 2023 for the most relevant portfolios in Denmark is shown:
GDP growth:
(100) p.b.
100 p.b.
Expected loss variation IFRS9
Auto Physical persons
2.90%
(2.18%)
167
• Sweden
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2023 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
3.94%
7.80%
(1.18%)
0.35%
3.61%
7.46%
0.60%
1.04%
2.98%
7.01%
4.52%
1.97%
2.69%
6.81%
5.40%
2.56%
2.41%
6.61%
8.16%
3.19%
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2022 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2023-2027)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
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%
Each macroeconomic scenario is associated with a given probability of occurrence. In terms of its allocation,
Santander Consumer AS associates the base scenario with the highest weights, while associating the lower weights
with the most extreme scenarios. The weights used in both 2023 and 2022 were as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of expected
losses at the end of 2023 for Sweden’s most relevant portfolios is shown:
GDP growth:
(100) p.b.
100 p.b.
Expected loss variation IFRS9
Direct
Auto Individuals
6.70%
(0.19%)
1.88%
(0.79%)
In relation to the determination of the classification in stage 2, the quantitative criteria applied in the institution are
based on identifying whether any increase in the PD for the entire expected life of the operation exceeds a number of
relative thresholds. Each portfolio has a set of thresholds according to the characteristics and credit risk profile of the
products that make it up.
In addition, for each portfolio, a number of specific qualitative criteria are defined indicating that the exposure has
had a significant increase in credit risk, regardless of the evolution of its PD since the time of initial recognition. The
entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
irregular positions more than 30 days. These criteria depend on the risk management practices of each portfolio.
168
• Spain
Information on the estimate of impairment losses
Below is the detail of the exposure and impairment losses associated with each of the stages as of December 31,
2023 of the most significant units in Spain (Santander Consumer Finance S.A.). In addition, depending on the current
credit quality of the transactions, the exposure is divided into three degrees (investment, speculation and default):
Credit quality(*)
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2023
Stage 1
4,316
11,017
—
15,333
97
(Millions of Euros)
Stage 2
—
268
—
268
45
Stage 3
—
—
509
509
303
(*) Detail of credit quality grades calculated for Group management purposes.
(**) Asset at amortized cost, loans and advances - clientele + credit commitments granted.
Exposure and impairment losses by stage 2022
Credit quality(*)
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
Stage 1
4,069
10,967
—
15,035
121
(Millions of Euros)
Stage 2
5
236
—
241
32
Stage 3
—
—
477
477
288
(*) Detail of credit quality grades calculated for Group management purposes.
(**) Asset at amortized cost, loans and advances - clientele + credit commitments granted.
Total
4,316
11,285
509
16,110
445
Total
4,074
11,203
477
15,753
441
The default rate in the case of the geography of Spain stood at 3.47% at the end of December 2023 (3.46% at the end
of 2022).
For the estimation of expected losses, forward-looking information should be taken into account. Specifically, for
Santander Consumer Finance, S.A’s portfolio in Spain, five prospective macroeconomic scenarios are considered,
which are updated periodically, over a time horizon of 5 years.
The following is the projected evolution for the coming years of the main macroeconomic indicators used in 2023 for
the estimation of the expected losses in the portfolios in Spain of Santander Consumer Finance, S.A.
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
4.54%
16.40%
(0.20%)
(0.88%)
4.00%
14.28%
0.54%
(0.04%)
3.48%
10.97%
2.09%
1.54%
3.34%
9.52%
2.64%
2.71%
3.11%
7.96%
3.38%
3.56%
The following is the projected evolution for the coming years of the main macroeconomic indicators used in 2022 for
the estimation of the expected losses in the portfolios in Spain of Santander Consumer Finance, S.A.
169
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Worst-case
scenario
3.39%
19.43%
1.72%
(0.57%)
Scenario at 5 years (2023-2027)
Base-case
scenario
Better-case
scenario
Worse-case
scenario
2.98%
16.61%
2.34%
0.53%
2.59%
12.20%
3.31%
2.05%
2.25%
10.65%
3.83%
3.34%
Best-case
scenario
2.00%
9.46%
4.29%
4.15%
Each macroeconomic scenario is associated with a given probability of occurrence. As for their allocation, Santander
Consumer Finance, S.A’s portfolios of business in Spain associate the base scenario with the highest weights, while
associating the lower weights with the most extreme scenarios. The weights used in both 2023 and 2022 were as
follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5%
20%
50%
20%
5%
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of the expected
losses at the end of 2023 for the most relevant portfolios in Spain is shown:
GDP growth:
(100) p.b.
100 p.b.
New car
Expected loss variation IFRS9
Mortgages
Used car
Cards
4.33%
(3.28%)
2.50%
(2.00%)
1.15%
(0.87%)
3.20%
(2.56%)
In relation to the determination of the classification in stage 2, the quantitative criteria applied in the institution are
based on identifying whether any increase in the PD for the entire expected life of the operation exceeds a number of
absolute and relative thresholds. Each portfolio has a set of thresholds according to the characteristics and credit risk
profile of the products that make it up.
As an example in the case of Santander Consumer Finance S.A., for its main portfolios, an operation shall be
considered to be classified in Stage 2 when the PD of the entire expected life of the operation at any given time
exceeds that it had at the time of initial recognition in absolute and relative terms, depending on the sub-segment.
In addition, for each portfolio, a number of specific qualitative criteria are defined indicating that the exposure has
had a significant increase in credit risk, regardless of the evolution of its PD since the time of initial recognition. The
entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
irregular positions more than 30 days. These criteria depend on the risk management practices of each portfolio.
II. Credit risk
a. Evolution of magnitudes in 2023
The evolution of arrears and the cost of credit reflect the impact of the deterioration of the economic environment
mitigated by prudent risk management, which has, in general, allowed us to maintain such data at levels below that
of our competitors in recent years. As a result, Santander Consumer Finance maintains an adequate hedge level to
address the expected loss of the credit risk portfolios it manages.
170
The following is the distribution of the loan to customers by activity as of December 31, 2023(*):
Net exposure
EUR Thousands
Secured credit
Loan to Value (***)
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
122,426
578,406
18,378,937
88,025
—
8,381,720
9,909,192
—
2,164
61,106
—
—
32,954
28,152
20,791
170,271
21,013,088
164,289
7,797
7,944,459
12,896,543
70
4,351
160,740
180
—
76,223
84,337
289
4,882
461,534
940
—
225,889
234,705
961
14,624
6,464
45,465
13,007
103,113
143,217
750,841
1,220,743
12,625,794
6,605,383
39,453,131
3,998
—
601,618
615,127
155,723
7,797
4,447,121
8,015,153
3,448
—
2,626,562
3,975,373
252,314
7,797
16,359,133
22,833,887
45,346,923
3,444,475
25,571,024
2,010,447
2,305,166
2,483,399
12,222,343
9,994,144
74,362,422
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
374,477
44,872,031
100,415
64,426,692
3,319,727
36,326
88,422
3,507,745
1,638
25,131,415
437,971
46,775,174
1,457,749
465,936
86,762
2,175,608
793,289
1,501,212
10,665
2,771,871
Total (*)
Memorandum item
Refinancing, refinanced and restructured
transactions (**)
(*) The credit distribution does not include an amount of 798,772 thousand euros corresponding to advances to customers.
(**) Includes the net balance of accumulated impairment or accumulated fair value losses due to credit risk.
(***) Ratio resulting from dividing the carrying value of transactions as at 31 December 2023 on the amount of the last available valuation or valuation of the guarantee.
283,675
21,570
82,181
3,540
7,478
508,492
1,945,527
29,380
3,719,727
13,631
337,038
11,518,443
366,862
24,900,066
224,797
9,736,623
32,724
16,715,647
3,695,842
70,039,772
626,808
114,709,611
36,654
42,448
387,426
171
The following is the distribution of the loan to customers by activity as of December 31, 2022(*):
Net exposure
EUR Thousands
Secured credit
Loan to Value (***)
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
14,235,811
79,637
—
6,087,747
8,068,427
43,632,578
335,960
43,225,042
71,576
58,715,827
—
736
100,505
—
—
45,847
54,658
3,618,739
3,373,757
76,473
168,509
3,719,980
12,683
156,638
19,145,123
131,929
6,675
6,191,419
12,815,100
24,165,622
2,018
23,971,430
192,174
43,480,066
37
2,344
180,124
180
—
76,711
103,233
1,959,454
1,356,494
447,471
155,489
2,141,959
305
5,835
455,899
638
—
200,148
255,113
2,380,446
902,311
1,459,818
18,317
2,842,485
1,040
15,755
1,184,261
2,819
—
510,680
670,762
2,463,870
501,296
1,944,024
18,550
3,664,926
5,074
53,936
12,289,895
125,203
6,675
3,369,847
8,788,170
12,275,055
343,124
11,773,101
158,830
24,623,960
6,227
79,504
5,135,449
3,089
—
2,079,880
3,052,480
8,705,536
272,550
8,423,489
9,497
13,926,716
149,028
868,467
33,481,439
211,566
6,675
12,325,013
20,938,185
71,416,939
3,711,735
67,272,945
432,259
105,915,873
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
(**)
(*) The credit distribution does not include an amount of 583,959 thousand euros corresponding to advances to customers.
(**) Includes the net balance of accumulated impairment or accumulated fair value losses due to credit risk.
(***) Ratio resulting from dividing the carrying value of transactions as at 31 December 2022 on the amount of the last available valuation or valuation of the guarantee.
314,772
97,304
23,693
3,947
7,074
17,549
53,987
38,440
435,769
172
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:
– A restricted use of this practice should be made, avoiding actions that entail postponing recognition of the
deterioration.
– The main objective should be the recovery of the amounts due, recognizing as soon as possible the amounts
deemed irrecoverable.
– The maintenance of existing guarantees should always be considered and, if possible, improved. Effective
safeguards can not only serve as mitigants of severity, but may reduce the likelihood of non-compliance.
– This practice should not involve the granting of additional financing, or serve to refinance debt of other entities,
or be used as a cross-selling instrument.
– It is necessary to evaluate all alternatives to the redirection and its impacts, ensuring that the results of the
same exceed those that would be expected if not performed.
– More stringent criteria are applied for the classification of redirected transactions, which, prudentially, ensure
the restoration of the customer’s capacity to pay, from the moment of the redirection and for an appropriate period
of time.
– In addition, in the case of those clients who have assigned a risk analyst, it is of particular relevance the
individualized analysis of each case, both for its correct identification and for its subsequent classification,
monitoring and adequate provision.
It also sets out various criteria related to the determination of the perimeter of operations considered as a referral, by
defining a detailed set of objective indicators to identify situations of financial difficulty.
Thus, transactions that are not classified as doubtful at the date of the recoupment are generally considered to be financially
difficult if they were not paid for more than one month at that date. In the event that there is no default or that it does not
exceed the month of seniority, other indicators are taken into account, including:
– Operations of customers who already have difficulties with other operations.
– When the modification becomes necessary prematurely without a previous and satisfactory experience with
the customer.
– In the event that the necessary modifications involve the granting of special conditions such as the need to
establish a temporary deficiency in payment or when these new conditions are considered more favorable for the
client than would have been granted in an ordinary admission.
– Request for successive modifications at unreasonable time intervals. In the case of Consumer Finance, a
maximum of 1 restructuring agreement is established in a year or 3 in a 5-year period.
173
– In any case, once the modification has been made, if there is any irregularity in the payment during a certain
period of observation, even if there are no other symptoms, the operation within the perimeter of the
reconductions (‘backtesting’) will be considered.
Once it has been determined that the reasons for the modification of the client’s debt conditions are due to
financial difficulties of the client, regardless of whether or not the client has overdue payments and the number
of days of payment arrears present, the client will be considered a customer redirected for all purposes and as
such will be managed based on the criteria established in this policy.
Where the referral has been carried out, where those transactions must remain classified as a doubtful risk
because they do not comply at the time of the referral with the regulatory requirements for their reclassification
to another category, they must comply with a prudential continuous payment schedule to ensure a reasonable
certainty of the recovery of capacity to pay, called a cure period (in this case, it will be 12 months).
Once this period has passed, conditioned by the situation of the client and the characteristics of the operation
(term and guarantees provided), the operation is no longer considered doubtful, although it remains subject to a
trial period in which a special follow-up is carried out.
This monitoring is maintained as long as a number of requirements are not met, including: A minimum
observation period of 24 months, in the case of operations restructured in stage 2 and 12 months in stage 3;
amortization of a substantial percentage of the outstanding amounts and, to satisfy the unpaid amounts at the
time of the recertification. If it is justified that, while a transaction is in the 24-month cure period of Stage 2, there
is no longer a significant increase in its credit risk, that transaction can be reclassified to Stage 1 and Non-Default
risk, no need to complete the aforementioned cure period. However, it is important to note that restructuring at
the time of origination can only be classified in stage 2 or stage 3, never in stage 1.
The original dates of non-compliance are still considered for all purposes in the conduct of a non-performing
transaction, irrespective of whether the transaction is up to date as a result of such a transaction. Likewise, the
re-conduct of a dubious operation does not result in any release of the corresponding provisions.
Reconductions can be long-term or short-term (less than two years). Redirections with terms not exceeding two
years shall be taken into account when the borrower meets the following criteria:
– Experiencing temporary liquidity restrictions, for which the client’s recovery will be evidenced in the short term.
– The application of long-term recertification measures is not effective given the temporary financial uncertainty
of a general or specific nature of the customer.
– That it has been fulfilling the contractual obligations before the recertification
– Demonstrate a clear willingness to cooperate with the entity.
As a result of the analysis to be carried out, both of the client’s situation and of the characteristics of the
forwarding operation used, it must be ensured that the forwarding will facilitate the reduction of the client’s debt,
and therefore will be viable. In this regard, the feasibility of the operation will be assessed by:
a. That can be demonstrated with evidence that the proposed redirection is within the reach of the client,
that is, that the full refund is expected.
b. Payment by the customer of outstanding amounts, in full or for the most part, and a considerable
reduction in exposure in the medium to long term.
c.
d.
The absence of repeated non-compliance with payment plans resulting in successive recourses (more
than three recourses over a three-year period).
In the temporary application of short-term relief measures, it can be proved by evidence that the client
has sufficient capacity to pay to meet the debt, principal and interest, once the term of application of
the temporary relief has expired.
e. The measure does not result in the successive application of several refinancing or restructuring
measures for the same exposure.
174
In the event that operations are carried out that do not comply with the foregoing, they will be considered non-
viable operations and will form part of the category of Non-performing Conductions.
The quantitative information required by Bank of Spain is shown below, in relation to the restructured operations in force
as of December 31, 2023 and 2022, taking into account the above criteria:
175
Current restructuring balances as at 31 December 2023:
REFINANCING AND RESTRUCTURING
1. Credit entities
2. Public sector
3. Other financial institutions and:
individual shareholder
4. Non-financial institutions and individual
Of which: Financing for constructions and
shareholder
property development
5. Other warehouses
6. Total
ADDITIONAL INFORMATION
Financing classified as non-current assets and
disposable groups of items that have been
classified as held for sale
received (not real)
Off balance sheet: value of other guarantees
With real guarantee
Number of
transactions
Gross
amount
TOTAL
Impairment
of
accumulated value or
accumulated losses in fair value due to credit risk.
Number of transactions
amount
carrying
Gross
Maximum
amount of
the actual
collateral
that can be
considered.
Property
guarantee
Other
security
rights
With real guarantee
Of which: Non-performing/Doubtful
With real guarantee
Gross
carrying
amount
Maximum
amount of
the actual
collateral that
can be
considered.
Number of
transactions
Gross
amount
Maximum amount of
be considered.
the actual collateral that can
Property
guarantee
Other
security
rights
Impairment
of
value or
accumulated
accumulated
losses in fair
value due to
credit risk.
TOTAL
Without real guarantee
Of which: Non-performing/Doubtful
With real guarantee
Number of
transactions Gross amount
Maximum
amount of
the actual
collateral that
can be
considered.
Carrying
value (net)
Gross
carrying
amount
TOTAL
GUARANTEES
Accumulated
impairment or
accumulated
fair value
losses due to
credit risk
Carrying
value (net)
Without real
guarantee
amount
Gross
—
—
23
3,784
32
57,258
61,065
—
—
—
267
42,470
293
413,742
456,479
—
—
—
—
—
19
3,525
4
4,858
8,402
—
—
—
—
227
55,673
26
74,729
130,629
—
—
—
—
3,238
—
17,621
20,859
—
—
—
183
32,909
7
36,839
69,931
—
—
—
197
22,186
131
177,299
199,682
—
—
—
19
2,301
17
32,960
35,280
—
—
—
216
20,573
130
228,412
249,201
—
—
—
—
—
12
165
1,677 14,955
12
2,293 39,802
3,982 54,922
—
—
3
—
—
—
—
—
—
—
—
—
—
—
1,897
—
6,908
8,805
—
—
—
—
126
5,026
7
14,297
19,449
—
—
—
194
20,377
119
153,766
174,337
—
—
—
494
98,143
319
488,471
587,108
—
—
—
—
—
—
183
36,147
7
54,460
90,790
—
—
—
—
197
22,186
131
177,299
199,682
—
—
—
297
75,957
188
311,172
387,426
—
—
—
381
35,528
142
268,214
304,123
—
—
—
—
—
—
126
6,923
7
21,205
28,254
—
—
—
—
194
20,377
119
153,766
174,337
—
—
—
187
15,151
23
114,448
129,786
—
—
—
176
Current restructuring balances as at 31 December 2022
REFINANCING AND RESTRUCTURING
1. Credit entities
2. Public sector
3. Other financial institutions and:
individual shareholder
4. Non-financial institutions and individual
shareholder
development
5. Other warehouses
6. Total
ADDITIONAL INFORMATION
Of which: Financing for constructions and property
Financing classified as non-current assets and
disposable groups of items that have been
classified as held for sale
received (not real)
Off balance sheet: value of other guarantees
With real guarantee
Number of
transactions
Gross
amount
TOTAL
Impairment
of
accumulated value or
accumulated losses in fair value due to credit risk.
Number of transactions
amount
amount of
Maximum
carrying
Gross
the actual
collateral that
can be
considered.
Property
guarantee
Other
security
rights
With real guarantee
Of which: Non-performing/Doubtful
With real guarantee
Gross
carrying
amount
Maximum
amount of
the actual
collateral that
can be
considered.
Number of
transactions
Gross
amount
Maximum amount of
be considered.
the actual collateral that can
Property
guarantee
Other
security
rights
Impairment
of
d value or
accumulate
accumulate
d losses in
fair value
due to credit
risk.
TOTAL
Without real guarantee
Of which: Non-performing/Doubtful
With real guarantee
Number of
transactions Gross amount
Maximum
amount of
the actual
collateral that
can be
considered.
Carrying
value (net)
Gross
carrying
amount
TOTAL
GUARANTEES
Accumulated
impairment
or
accumulated
fair value
losses due to
credit risk
Carrying
value (net)
Without real
guarantee
amount
Gross
—
—
63
7,632
299
107,193
114,888
—
—
—
—
699
76,197
2,740
418,382
495,278
—
—
—
—
20
6,055
26
4,224
10,299
—
—
—
—
276
77,004
285
71,992
149,272
—
—
—
—
—
3,209
—
19,844
23,053
—
—
—
—
200
39,386
213
30,641
70,228
—
—
—
—
344
33,122
805
175,315
208,780
—
—
—
—
24
2,519
36
—
—
289
22,466
364
51,861 215,346
54,404 238,101
—
—
—
—
—
—
8
1,631
7
1,954
3,593
—
—
—
—
85
17,156
41
34,282
51,523
—
—
—
—
—
1,611
—
6,869
8,480
—
—
—
—
67
6,408
23
11,582
18,057
—
—
—
—
256
24,171
323
152,590
177,017
—
—
—
—
975
153,201
3,025
490,374
644,550
—
—
—
—
200
42,595
213
50,485
93,281
—
—
—
—
344
33,122
805
175,315
208,780
—
—
—
—
631
120,079
2,220
315,059
435,770
—
—
—
—
374
39,622
405
249,628
289,624
—
—
—
—
67
8,019
23
18,451
26,537
—
—
—
—
256
24,171
323
152,590
177,017
—
—
—
—
118
15,451
82
97,038
112,607
—
—
177
The operations presented in the table above are classified, as of 31 December 2023 and 2022, according to their
characteristics as follows:
• Non-performing: Transactions are based on an inadequate payment plan, include contractual clauses that delay
the reimbursement of the transaction through regular payments or have amounts removed from the balance
sheet as they are considered irrecoverable.
• Normal: Transactions in which they are not classified as non-performing or because they have been reclassified
from the non-performing risk category by meeting the specific criteria set out below shall be classified within
the normal risk category:
a) A period of one year has elapsed from the date of refinancing or restructuring.
b) The incumbent has paid the accrued principal and interest contributions, reducing the renegotiated
principal, from the date on which the restructuring or refinancing operation was formalized.
c) The holder does not have any other transactions with amounts due more than 90 days on the date of
reclassification to the normal risk category.
c) Metrics and measurement 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.
Apart from the scoring models used in the admission and portfolio management stages (rating of the operations that
make up them for the assessment of their credit quality and estimation of their potential losses), there are also tools
for evaluating existing accounts or clients that are used in the recovery or recovery stage of defaults. In this way, we
try to provide coverage on the entire “credit cycle” (admission, follow-up and recovery) through statistical rating
models based on the Group’s internal historical information.
For the segments of Companies and Institutions that, in the Group, mainly include prescribers, the assessment of the
level of credit risk is based on expert rating models that combine in the form of variables the most relevant aspects to
take into account when evaluating, so that the allocation process generates consistent valuations, comparable
between customers and summarizing all relevant information. Throughout 2023 all units have carried out reviews of
these portfolios where all areas of the Group have participated. These meetings included the largest exposures,
special surveillance firms and the main credit indicators of this portfolio.
The ratings given to the client are reviewed periodically, incorporating the new financial information available and
the experience in the development of the banking relationship. The frequency of reviews is increased in the case of
clients who reach certain levels in automatic alert systems and in those qualified as special monitoring. Similarly, the
qualification tools themselves are also reviewed to adjust the accuracy of the rating they grant.
In a more residual way, the global rating tools that cover the Global Wholesale Banking segment are also applied to
certain exposures, whose management is carried out centrally in the Risks Division of the Santander Group, both in
determining your rating and in monitoring risk. These tools assign a rating to each client resulting from a quantitative
or automatic module, based on balance sheet ratios or macroeconomic variables, which is complemented by the
expert judgment provided by the analyst.
178
The Group’s portfolio of carterized companies is very unrepresentative of the total risks managed, mostly
corresponding to stock financing risks to vehicle dealers.
d) Credit risk parameters
The valuation of the client or the transaction, by rating or scoring, constitutes a judgment of its credit quality, which
is quantified through the probability of default (probability of default or PD in Basel terminology).
In addition to the client’s assessment, the quantification of credit risk requires the estimation of other parameters
such as exposure at default (EAD) and the percentage of the EAD that cannot be recovered (LGD). Other relevant
aspects of the risk of the operations are included, such as the quantification of the off-balance sheet exposures, which
depends on the type of product or the analysis of the expected recoveries related to the existing guarantees and other
properties of the operation: type of product, term, etc.
These factors make up the main parameters of credit risk. Its combination allows the calculation of the probable loss
or expected loss (PE). This loss is considered as an additional cost of the activity, which reflects the risk premium and
must be passed on to the price of the transactions.
The risk parameters also allow the calculation of regulatory capital according to the rules derived from the new Basel
Capital Agreement (BIS II). Regulatory capital is determined as the difference between the unexpected loss and the
expected loss.
Unexpected loss is the basis for capital calculation and refers to a very high but unlikely level of loss, which is not
considered recurring and must be met with own resources.
Observed loss: Credit cost measurements
In addition to the predictivity provided by the advanced models previously described, other common metrics are used
that allow prudent and effective management of credit risk based on the observed loss.
In terms of loss recognition, the cost of credit risk at Santander Consumer Finance is measured through different
approaches: VMG - Variation of the Management Loan (late entries - cures - recovery of failures), DNI - net
endowment for insolvencies (gross provisions - recovery of failures), net failures (passes to failures - recovery of
failures) 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 allow the
manager to form a complete idea about the evolution and future prospects of the portfolio.
It should be noted that, unlike delinquency, the VMG (final doubtful – initial doubtful + failed – recovery of failures)
refers to the total of the deteriorated portfolio in a period, regardless of the situation in which it is located (doubtful
and failed). This makes the metric a primary driver when establishing measures for portfolio management.
The two approaches measure the same reality, and therefore approach in the long run although they represent
successive moments in the measurement of the cost of credit risk: Delinquency flows (VMG) and doubtful coverage
(DNIS), respectively. Although they converge in the long term within the same economic cycle, at certain times they
may present differences as observed in this period. These differences are explained by the different time of calculation
of losses, which is basically determined by accounting regulations (for example, mortgages have a coverage schedule
and pass to failure more “slower” than consumer portfolios). In addition, the analysis can be complicated by changes
in hedging policy and passing to failures, portfolio composition, changes in accounting regulations (IFRS9), portfolio
sale and parameter adjustments for the calculation of expected loss etc.
e) Credit risk cycle
The risk management process consists of identifying, measuring, analyzing, controlling, negotiating and deciding,
where applicable, the risks incurred by the Group’s operations. During the process, both risk-taking areas and senior
management intervene, as well as the risk function.
179
Being the member group of the Santander Group, the process starts from the senior management, through the Board
of Directors and the Executive Committee of Risks, who establishes the risk policies and procedures, the limits and
delegations of powers, and approves and monitors the risk function framework.
In the risk cycle three phases are differentiated: Pre-sale, sale and after-sale. The process is constantly fed back,
incorporating the results and conclusions of the after-sales phase into the risk study and pre-sale planning.
–
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.
180
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.
–
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.
–
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.
181
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 behavior 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.
182
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 behavior 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.
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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 collaborates closely with the Financial Division in the
active management of credit portfolios, which, among its axes of action, includes the reduction of the
concentration of exposures through various techniques, such as: such as the contracting of hedge credit
184
derivatives or securitization operations, with the ultimate purpose of optimizing the return-to-risk ratio of the
total portfolio.
The breakdown as at 31 December 2023 and 2022 of the Group’s risk concentration (*) by activity and geographical
area of counterparties is as follows:
2023
Spain
Rest of EU
EUR Thousands
America
4,813,326 9,350,967
789,243 3,346,864
—
—
Total
Rest of the
world
153,241 14,317,534
44,007 4,180,114
Central banks and credit institutions
Public administrations
Of which:
Central Administration
Other Public Administrations
787,327 2,095,936
1,916 1,250,928
Other financial institutions
993,739
40,028
Non-financial corporations and individual traders 4,012,908 34,601,493
Of which:
Construction and real estate promotion
Construction of civil works
Large companies
SMEs and individual entrepreneurs
Other households and non-profit institutions
252,314
7,800
1,435,847 14,869,913
2,577,061 19,471,466
10,023,439 58,983,648
—
—
serving households
Of which:
Housing
Consumer loans
Other purposes
1,190,283 2,506,878
8,785,337 55,894,838
581,932
47,819
—
—
15,074
— 2,883,263
44,007 1,296,851
386,172 1,435,013
— 1,802,545 40,416,946
—
—
252,314
—
7,800
—
436,022 16,741,782
—
— 1,366,523 23,415,050
734,671 4,722,813 74,464,571
—
— 3,697,161
734,671 4,722,813 70,137,659
629,751
Total 134,814,178
—
—
(*) The definition of risk for the purposes of this table includes the following items in the consolidated public balance sheet: 'Loans and advances:
In credit institutions', 'loans and advances: Central banks', 'loans and advances: to customers', 'debt securities', 'equity instruments', 'derivatives',
'derivatives - hedge accounting', 'shares and guarantees granted'.
Central banks and credit institutions
Public administrations
Of which:
Central Administration
Other Public Administrations
Other financial institutions
Non-Financial corporations and individual
entrepreneurs
Of which:
Construction and real estate promotion
Construction of civil works
Large companies
SMEs and individual entrepreneurs
Other households and non-profit institutions
serving households
Of which:
Housing
Consumer loans
Other purposes
2022
Spain
Rest of the
European
Union
2,940,703 6,497,642
924,475 5,504,140
EUR Thousands
America
Total
Rest of the
world
242,744 9,681,089
42,951 6,471,566
—
—
921,804 4,255,960
2,671 1,248,180
10,863 1,145,014
3,171,286 28,351,567
—
—
338,628
60 5,177,824
42,891 1,293,742
246,749 1,741,254
— 2,673,489 34,196,342
—
—
211,566
6,678
1,034,445 10,699,079
2,136,841 17,434,244
10,121,975 54,814,108
1,318,606 2,394,903
8,714,320 52,074,766
344,439
89,049
—
—
211,566
—
6,678
—
—
986,488 12,720,012
— 1,687,001 21,258,086
14 6,575,205 71,511,302
—
— 3,713,509
14 6,575,205 67,364,305
433,488
—
—
Total 123,601,553
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(*) The definition of risk for the purposes of this table includes the following items in the consolidated public balance sheet: cash balances in
central banks and other demand deposits, deposits in credit institutions, customer credit, debt securities, trading derivatives, hedging derivatives,
investments in joint and associated ventures, equity instruments - and guarantees granted.
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II. Market, Structural and liquidity risk
– 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.
187
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.
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.
– Measurement and methods
1. Structural interest-rate risk
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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.
e.3) 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
189
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.
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
190
Santander Consumer Finance applies the Liquidity Coverage Ratio (LCR) and the net stable funding ratio (NSFR),
according to the European Banking Authority (EBA) for the consolidated sub-group on a monthly 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 at Santander Group level, as part of the general corporate procedures of the
Santander Group, trying to avoid impacts in CET1 ratio.
•
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 2023, these limits applied to eight scenarios of interest rates
191
upwards and downwards between minus 100 basis points and plus 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 2023, 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 2% 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 2023, 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.
– 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
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IV. 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.
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.
193
b. Operational risk management and control model
Operational risk management cycle
The different stages of the operational risk management and control model involve:
–
Identify the operational risk inherent in all Bank activities, products, processes and systems. This process is
performed through the exercise of Risk and Control Self-assesment (RCSA)
– Define the objective operational risk profile, with specification of strategies by unit and time horizon, by
establishing the appetite and tolerance of RO, budget and monitoring.
–
Promote the involvement of all employees with the culture of operational risk, through appropriate training at
all areas and levels of the organization.
– Measure and assess operational risk objectively, continuously and consistently with regulatory standards
(Basel, Bank of Spain, etc.) and the sector.
–
Continuously monitor operational risk exposures, implement control procedures, improve internal knowledge
and mitigate losses.
Establish mitigation measures that eliminate or minimize operational risk.
–
– Generate periodic reports on operational risk exposure and its level of control for senior management and Bank
areas/units, as well as inform the market and regulatory bodies.
– Define and implement the necessary methodology to estimate the capital calculation in terms of expected and
unexpected loss.
Each of the key processes listed above is based on:
–
The existence of a system that allows reporting and controlling exposures to operational risk, integrated into
the daily management of the Bank.
To this end, the Bank implemented in 2016 a unique tool for the management and control of operational risk, compliance
and internal control, called HERACLES. HERACLES is considered the Golden Source for Risk Data Aggregation (RDA).
The internal regulations containing the principles for the management and control of operational risk, consistent with the
regulations and best practices, have been defined and approved according to the established government.
In 2015, the Bank adhered to the relevant corporate framework and subsequently the model, policies and procedures, as
well as the rules of the Operational Risk Committee, have been approved and implemented.
194
The operational risk management and control model implemented by the Group provides the following advantages:
–
–
–
Promotes the development of a culture of operational risk.
It enables comprehensive and effective management of operational risk (identification, measurement /
assessment, control / mitigation, and information).
It improves knowledge of operational risks, both effective and potential, and their allocation to business and
support lines.
– Operational risk information helps to improve processes and controls, reduce losses and revenue volatility.
–
Facilitates the establishment of operational risk appetite limits.
c. Risk identification, measurement and assessment model
Since November 2014, the Group adopted the new management system of Grupo Santander, having defined three lines
of defense:
–
1st line of defense: Integrated in the business or support areas. Its tasks are to identify, measure or evaluate,
control (primary control), mitigate and communicate the risks inherent in the activity or function for which it is
responsible.
Given the complexity and heterogeneous nature of operational risk within a large-scale organization with diverse lines
of business, adequate 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 in its scope, as well as for its management. This particularly affects the heads of 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 typically manage specialized
controls for certain risks in which they have greater visibility and specialization. These functions have an overview of
exposure specific operational risks in all areas. We can also refer to them as Subject Matter Experts or SME.
OR Managers:
195
Operational risk management is the responsibility of all staff in their respective areas of activity. Accordingly, the Head of
each division or area has ultimate responsibility for operational risk within its scope.
OR Coordinators:
RO coordinators are actively involved in operational risk management and support 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 a deep knowledge of activities within their scope. Their roles and responsibilities
include:
•
•
•
•
Interaction Undertake interaction with the second line of defense in daily operations and communication to the
management of operational risk in its scope.
Facilitate integration into RO management in each area.
Support the implementation of qualitative and quantitative methodologies and tools for the management and
control of operations.
Provide support and advice on operational risk within its scope.
• Maintain an overview of risk exposure in its scope.
•
•
•
Ensure the quality and consistency of data and information notified to the 2LoD, identifying and monitoring the
implementation of relevant controls.
Review and monitor results provided by business units and support functions related to control testing.
Support in the signing 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 defense: Exercised by the Department of Non-Financial Risks 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 over the first line of operational risk defense. His 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 proper design, maintenance and implementation of operational risk regulations.
Drive business units to effectively monitor identified risks.
Ensure that each key risk affecting the institution is identified and properly managed by the relevant units.
Ensure that the Group has implemented effective RO management processes.
Prepare proposals for operational risk appetite tolerance and monitor risk limits in the Group and in the different
local units.
196
•
Ensure that Top Management receives a global view of all relevant risks, ensuring adequate communication and
reports to senior management and the Board of Directors, through established governing bodies.
In addition, the 2LoD will provide the necessary information for its consolidation, along with the remaining risks, to the
risk monitoring and consolidation function.
To ensure proper oversight, 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 Capacity and Capability Local
Plan. In that context, the RO control function (2LOD function) needs to leverage specific profiles that can support the
implementation of the RO framework in the 1LOD, but also provide trade and exposure information to specific risks,
including the implementation of the RO framework in the 3LOD. to ensure that the related RO profile is well managed
and reported. Business Risk Managers (BRMs), as business knowledge specialists (e.g. Global Corporate Banking) and
Specialized Risk Managers (SRM) as OR control specialists (e.g. IT and cyber risks) they perform these functions within
OR 2LOD and position themselves as key touchpoints for 1LOD business units and operations management support
functions.
–
•
3rd line of defense: Exercised by Internal Audit, which evaluates the compliance of all the activities and units of
the entity with its policies and procedures. His main responsibilities include:
Verify that the risks inherent in the Group’s activity are sufficiently covered, complying with the policies
established by the senior management and the internal and external procedures and regulations that are
applicable.
• Monitor the compliance, effectiveness and efficiency of the internal control systems of operations in the Group,
as well as the quality of accounting information.
•
•
•
Conduct an independent review and challenge OR controls, as well as operational risk management processes
and systems.
Evaluate the implementation status of the RO management and control model in the Group.
Recommend continuous improvement for all functions involved in operations management.
197
The management of the Bank is carried out according to the following elements:
To carry out the identification, measurement and assessment of operational risk, a set of corporate, quantitative and
qualitative techniques / tools have been defined, they are combined to make a diagnosis from the identified risks and
obtain an assessment through the measurement / evaluation of the area / unit.
The quantitative analysis of this risk is mainly carried out using tools that record and quantify the level of losses
associated with operational risk events.
–
Internal event database, which aims to capture all the operational risk events of the Bank. The capture of events
related to operational risk is not restricted by setting thresholds, i.e. no exclusions are made on the basis of
amount, and contains both events with accounting impact (including positive impacts) and non-accounting.
There are accounting reconciliation processes that guarantee the quality of the information collected in the database. The
most relevant events of the Bank and each operational risk unit of the Bank are especially documented and reviewed.
–
–
External event database, since the Bank through the Santander Group participates in international consortia,
such as ORX (operational risk exchange). In 2016, the use of external databases that provide quantitative and
qualitative information and allow a more detailed and structured analysis of relevant events that have occurred
in the sector was strengthened.
Analysis of RO scenarios. Expert opinion is obtained from business lines and risk and control managers, which
aims to identify potential events with a very low probability of occurrence, but which, in turn, can represent 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 by operational risk based on the Advanced Model (LDA).
198
The tools defined for qualitative analysis try to evaluate aspects (coverage / exposure) linked to the risk profile, allowing
to capture the existing control environment. These tools are fundamentally:
–
RCSA: Methodology for the evaluation of operational risks, based on the expert criteria of the managers, serves
to obtain a qualitative view of the main sources of risk of the Bank, regardless of whether they have materialized
previously.
Advantages of RCSA:
i.
ii.
iii.
iv.
Incentivize the responsibility of the first lines of defense: The figures of risk owner and control owner
in the front line are determined.
Encourage the identification of the most relevant risks: Risks that are not pre-defined, but arise from
the areas that generate the risk.
Improve integration of RO tools: Root cause analysis is incorporated.
Improve exercise validation. It
questionnaires.
is developed through workshops or workshops,
instead of
v.
Making exercises more forward-looking: Financial impact by risk exposure is assessed.
–
–
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 risk exposure. These indicators are periodically reviewed to alert you to changes that may reveal
problems with risk.
Recommendations from regulators, Internal Audit and External Auditor. It provides relevant information about
inherent risk due to internal and external factors and allows the identification of weaknesses in controls.
– Other specific instruments that allow a more detailed analysis of technological risk, such as the control of critical
incidents in cyber-security systems and events.
d. Operational risk information system
HERACLES is the corporate operational risk information system. This system has modules for risk self-assessment, event
registration, risk map and evaluation, indicators of both operational risk and internal control, mitigation and reporting
systems and scenario analysis being applicable to all entities of the Consumer Group, including the 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.
199
This basic objective is to:
– Minimize the possible damage to people and adverse financial and business impacts for the Bank, resulting
from an interruption of the normal operations of the business.
–
–
–
Reduce the operational impact of a disaster by providing a set of predefined and flexible guidelines and
procedures for use in the resumption and recovery of processes.
Resume business operations and associated, time-sensitive support functions in order to achieve business
continuity, profit stability and planned growth.
Restoring technological operations and supporting business operations, sensitive to time, in case of non-
operability of existing technologies.
–
Protect the public image and trust in the Bank.
– Meet the Bank’s obligations to its employees, customers, shareholders and other interested third parties.
f. Corporate information
The Santander Group’s corporate operational risk control area, of which the Santander Group is a part, has an operational
risk management information system that provides data on the Bank’s main risk elements. The information available for
each country/unit in the operational risk area is consolidated so that a global view is obtained with the following
characteristics:
–
Two levels of information: One corporate with consolidated information and one individualized for each
country/unit.
– Dissemination of best practices among the countries/units of Santander Group, obtained through the combined
study of the results derived from qualitative and quantitative analysis of operational risk.
Specifically, information is prepared on the following aspects:
– Operational risk management model in the Bank and the main units and geographies of the Group.
– Operational risk management perimeter.
–
–
–
Tracking appetite metrics.
Analysis of the internal database of relevant events and external events.
Analysis of the most relevant risks, detected through different sources of information, such as operational and
technological risk self-assessment exercises.
–
Evaluation and analysis of risk indicators.
– Mitigating measures/active management.
–
Business continuity plans and contingency plans.
This information serves as the basis for meeting the reporting needs to the Delegated Risk Committee, Risk Supervision
Committee, Regulation and Compliance, Operational Risk Committee, senior management, regulators, rating agencies,
etc.
200
g. Insurance in operational risk management
Grupo Santander Consumer Finance considers insurance a key element in operational risk management. Since 2014,
common coordination guidelines have been established between the various functions involved in the insurance
management cycle that mitigate operational risk; mainly the areas of own insurance and operational risk control but also
the different areas of risk management in the front line.
These guidelines include the following activities:
–
–
–
–
Identification of all risks in the Group that may be the subject of insurance coverage, including also the
identification of new insurance coverage on risks already identified in the market.
Establishment and implementation of criteria to quantify insurable risk, relying on loss analysis and loss
scenarios to determine the Group’s exposure level to each risk.
Analysis of the coverage available in the insurance market, as well as preliminary design of the conditions that
best fit the needs previously identified and evaluated.
Technical assessment of the level of protection provided by the policy, cost and levels of withholding that the
Group will assume (franchises and other elements in charge of the insured) in order to decide on its hiring.
– Negotiation with suppliers and adjudication according to the procedures established for this purpose by the
Bank.
–
–
–
–
–
Follow-up of incidents declared in policies, as well as those undeclared or unrecovered by an incorrect
statement.
Analysis of the adequacy of group policies to the risks covered, taking appropriate corrective measures to the
deficiencies detected.
Close collaboration of local operational risk managers with local insurance coordinators to strengthen
operational risk mitigation.
Regular meetings to report on specific activities, status statements and projects in both areas.
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 results in financial loss, business interruption or
damage to Santander Consumer’s reputation resulting 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 composed of three elements:
– Unauthorized access to or misuse of information or systems (e.g., theft of commercial or personal information).
–
Theft and financial fraud.
–
Business service interruption (e.g. sabotage, extortion, denial of service).
As in previous years, the Bank has continued to maintain full attention to cybersecurity-related risks. This situation, which
generates concern in entities and regulators, encourages the adoption of preventive measures to be prepared for attacks
of this nature.
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The Bank has evolved its cyber regulations with the approval of a new cybersecurity framework and the cyber risk
monitoring model, as well as different policies related to this matter.
Similarly, a new organizational structure has been defined and the government has been strengthened for the
management and control of this risk. 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 for the control of cybersecurity risk are:
–
–
–
Compliance with cyber risk appetite The aim of this process is to ensure that the cyber risk profile is in line with
the risk appetite. Cyber risk appetite is defined by a number of metrics, risk statements and indicators with their
corresponding tolerance thresholds and where existing governance structures are used to track and scale up,
including risk committees as well as cybersecurity committees.
Cybersecurity risk identification and assessment: The process of identifying and assessing cyber risk is a key
process to anticipate and determine risk factors that could estimate its likelihood and impact. Cyberrisks are
identified and classified in line with the control categories defined in the latest industry-relevant security
standards (such as ISO 27k, NIST Cybersecurity Framework, etc.). The methodology includes the methods used
to identify, qualify and quantify cyber risks, as well as to evaluate controls and corrective measures developed
by the front-line defense function. The cyber risk assessment exercises are the fundamental tool to identify and
assess cyber security risks in the Bank. The cybersecurity and technological risk assessment shall be updated
where reasonably necessary taking into account changes in the information systems, confidential or business
information, as well as the business operations of the entity.
Cyber risk control and mitigation: Processes related to the evaluation of the effectiveness of controls and risk
mitigation. Once the cyber risks have been evaluated and mitigation measures defined, these measures are
included in a cybersecurity risk mitigation plan of Santander Consumer Finance and the residual risks identified
are formally accepted. Due to the nature of cyber risks, a periodic assessment 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 management and disaster recovery 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 a control
and monitoring of cyber risk in order to periodically analyze the available information on the risks assumed in
the development of the Bank’s activities. For this purpose, the KRIs and KPIs are monitored and monitored to
assess whether the risk exposure is in line with the agreed risk appetite. Scaling and reporting: Adequate scaling
and communication of cyber threats and cyber attacks is another key process. Santander Consumer Finance has
tools and processes for detecting in its infrastructure, servers, applications and databases signals of internal
threats and potential compromises. Communication includes reporting and reporting to relevant committees of
the information needed to assess the exposure to cyber risk and cyber risk profile and to take the necessary
decisions and actions. To do this, reports on the cyberrisk situation are prepared for the steering committees.
There are also mechanisms for internal scaling independent of the bank's management team of technological
and cybersecurity incidents and, if necessary, the relevant regulator.
Other emerging risks
In addition to the aforementioned Cyber risk, the Santander Consumer Group is increasingly strengthening the
supervision of other operational risks arising from 1) supplier management and 2) transformation projects.
– With regard to supplier management risks, the focus is on the quality and continuity of services provided to SCF,
but also in ensuring compliance with the new EBA Guidelines and Regulations such as DORA through the
implementation of specific risk instruments throughout the different phases of the supplier’s life cycle
–
The operational risk of transformation is that derived from material changes in the organization, the 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 day-to-day (BAU). Transformation is a root cause, which
can manifest itself in a variety of risks and impacts, not restricted to operational risk, (e.g. credit, market,
financial crimes…)
202
Risk of compliance and conduct
The compliance function covers all matters related to regulatory compliance, prevention of money laundering and
terrorist financing, product governance and consumer protection, and reputational risk according to the provisions of
the General Corporate Framework of Compliance and Conduct.
The compliance function promotes Santander Consumer Finance, S.A’s adherence (hereinafter “SCF”) to standards,
supervisory requirements, and principles and values of good conduct by establishing standards, debating, advising
and informing, in the interest of employees, customers, and the public. shareholders and the community at large.
According to the current corporate configuration of the three lines of defense of the Santander Group, the compliance
function is configured as an independent second-line control function and reporting directly to the board of directors
and their commissions through the Chief Compliance Officer (CCO). This configuration is aligned with the
requirements of banking regulation and with the expectations of supervisors.
Santander Consumer Finance’s objective in terms of compliance risk and conduct is to minimize the likelihood of non-
compliance and irregularities, and in the event that they occur, they are identified, valued, reported and resolved
quickly.
Santander Consumer Finance aims to continue working to maintain maximum alignment with Grupo Santander
standards in terms of policies, procedures and management methodologies in all its units.
The tools available to the compliance function to identify and manage the risks under its responsibility are:
a. Annual Risk Assessment exercises of conduct, regulation, prevention of money laundering and reputational risk.
b.
Implementation by each entity of an annual compliance plan that reflects the corporate initiatives of Grupo
Santander, the local initiatives necessary to comply with local regulation and good sectoral practices, the
deficiencies identified in the Risk Assessment exercises and the potential recommendations of internal audit as
a third line of defense and any other requirements of local supervisors.
c. Regular follow-up meetings with units and periodic reporting process on compliance risks.
Climate and Environmental Risk
Santander Consumer Finance’s ESG (environmental and climate, social and governance factors) strategy 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 governance standards.
On the other hand, ESG factors can lead to traditional types of risk (e.g. 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. Therefore, they are included in the risk map of
Santander Consumer Finance as relevant risk factors.
In recent times, climate risks (physical risks and transition risks) are becoming very important, and therefore
Santander Consumer Finance is strengthening its management and control in coordination with the corporate teams
of the Santander Group within the framework of the Climate Project, some of the priorities are as follows:
EWRM (Enterprise-Wide Risk Management) approach, which gives a holistic and anticipatory view of climate
a.
aspects as a basis for proper management.
Availability of relevant data (e.g. CO2 emissions of funded assets, green asset financing ratio, sectoral
b.
classification and location of companies, energy efficiency certificates and collateral location, etc.).
c.
Integration of climate risks into day-to-day risk management and control.
The relevance of the data and its quality is, if possible, even greater in this area than in the rest, since some data that
until recently were not very relevant and perhaps not collected have become essential for issues such as aligning
portfolios with environmental objectives, disclosing information or managing climate risks. Therefore, one of the
pillars of the Climate project is to collect such data with the required quality.
203
With regard to the EWRM approach, a fundamentally qualitative assessment of the implications and materiality of
climate aspects for Santander Consumer Finance has been carried out, with a special focus on the auto portfolio,
which is summarized in the following paragraphs.
As mentioned above, for Banking in general, climate is a cross-cutting issue with multiple angles, but with two main
dimensions related to each other:
1. Banks play a key role in mitigating climate change and transitioning to a new green economy.
2. Climate 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: Aligning our portfolios with the ambition of net zero emissions is occurring in
a natural and gradual way 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 customers
become more sustainable. The efforts being made in the area of data and information dissemination are crucial
in this direction.
2. Potential impacts of climate risks in Santander Consumer Finance: From the materiality analysis carried out, it
is concluded that the types of risk most affected for SCF are reputational/regulatory, strategic (business model),
residual value and credit. The potential impacts are greatly mitigated thanks to the context (gradual
transformation of the automotive industry) and the business model of Santander Consumer Finance (whose
portfolios are mainly retail, 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 cross-sectional risk, included as such since 2021,
Risk profile assessment: Through a qualitative assessment,
Risk appetite: Through stress metrics, as well as the opening of the residual value by the type of engine, and
currently working on a new metric related to the target (range) of decarbonization for 2030 (for the passenger
car portfolio of our sixteen main units).
Risk strategy, with a specific section on these risks.
Strategic risk, as a driver of changes in market trends,
Capital risk and stress tests. Stress tests included in Santander Consumer Finance’s strategic plans and ICAAP
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 to a low-emission economy. The results of these
stress exercises are part of the entity’s risk appetite.
Stress testing scenarios and methodologies will become more sophisticated as more information becomes available.
In 2022, Santander Consumer Finance participated, together with the teams of the Santander Group, in the first
climate stress test of the ECB and in the thematic review of climate risks.
Finally, with regard to the integration into the day-to-day management and control of risks, Santander Consumer
Finance’s EWRM team produces a quarterly internal report to monitor climate risks, in which the results of the Pillar
III ESG exercise will also be incorporated from its publication.
204
This report includes, among other aspects, the following:
a. Materiality analysis: Currently most of the portfolio has a low physical risk and moderate transition risk. It is
essential to keep in mind that the portfolio consists basically of loans to private clients, of good quality, very
diversified and short term.
b. Kris tracking (Key Risk Indicators): For each type of risk affected (e.g. reputational), potential risks (e.g.
inadequate speed of portfolio alignment to decarbonization objectives), main driver (physical or transition), the
period in which the risk can materialize (short, medium, long) and the Kris with which the evolution of the risk
is followed (e.g. percentage of the entity’s electric car vs. the whole market).
c. Main focus areas in the quarter (news, relevant projects, etc.).
At the same time, work is under way to integrate climate risks at all stages of the risk cycle, ensuring compliance with
commitments made and supervisory expectations. It is worth noting the progress being made in relation to the
corporate model “The Climate Race” to integrate climate factors in the process of granting and monitoring credit risk.
As noted above, the SCF risk map includes climate risks, as risk elements related to the environment and climate
change are considered to be factors that could affect the different types of risks existing in all relevant time horizons.
These elements cover, on the one hand, those derived from the physical effects of climate change and, on the other
hand, those derived from the process of transition to a more sustainable economy, including legislative, technological
or behavioral changes of economic agents.
In view of the activities of the companies of the SCF Group, the SCF Group does not have any liabilities, expenses,
assets or contingencies of an environmental nature that could be material in relation to equity, financial position and
consolidated results.
Exposures in the sectors potentially most affected by climate factors in accordance with the market consensus and
the execution of our materiality analysis correspond mainly to wholesale customers. The wholesale activity of SCF is
very limited (it accounts for less than 2% of the total portfolio), since the fundamental activity is consumer financing,
but in any case, within the framework of the implementation of the corporate model “The Climate Race”, we are
working on the consideration of climate aspects in the analysis of wholesale customers.
In addition, SCF has participated (within the Santander Group as a whole) in the different regulatory exercises on
climate stress carried out recently, which have been classified as learning exercises in the industry. The results of
these exercises show that, overall, the current coverage of potential losses would be adequate in the time horizons
of the maturities of our portfolios. SCF also includes a climate scenario in its ICAAP exercise to assess the adequacy
of domestic capital.
In view of the above, SCF considers that, with the best information available at the time of the formulation of these
consolidated annual accounts, there is no significant additional impact arising from climate and environmental risk
on the assets, financial situation and results in the financial year 2023.
This integration in management is also part of the emission calculation initiatives, as a basis for the commitments of
Net Zero Banking Alliance.
g) Adaptation to the new regulatory framework
In 2023, at a consolidated level, Santander Consumer Finance Group must maintain a minimum capital ratio of 8.51%
of CET1 phase-in (4.5% being the requirement by Pilar I, 1.5% the requirement by Pilar II, a 2.5% requirement for
capital conservation buffer and 0.67% countercyclical buffer). This requirement includes: (i) Common Equity Tier 1
minimum requirement that must be maintained at all times under Article 92(1)(a) of Regulation (EU) No 575/2013
(ii) the Common Equity Tier 1 required to overhold at all times in accordance with Article 16(2)(a) of Regulation (EU)
No. 1024/2013; and (iii) the capital conservation buffer under Article 129 of Directive 2013/36/EU. In addition,
Santander Consumer Finance Group must maintain a minimum capital ratio of 10.30% of T1 phase-in as well as a
minimum total ratio of 12.67% phase-in.
As of December 31, 2023, the Bank meets the minimum capital requirements required by current regulations.
205
Reconciliation of accounting capital with regulatory capital (millions of Euros)
2023
2022
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
3,654
1,200
1,004
—
(100)
12,537
(678)
2,520
14,379
(1,889)
(1,004)
—
(118)
11,368
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
(*) Fundamentally for non-computable minority interest and other prudential deductions and filters under CRR.
The following are the capital ratios and a detail of the Group’s computable own resources:
Capital ratios
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 ratio
2023
9,903
1,465
2,005
78,958
12.54%
1.86%
14.40%
2.54%
16.94%
2022
9,706
1,427
1,669
77,480
12.53%
1.84%
14.37%
2.15%
16.52%
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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
2023
9,903
5,639
1,140
3,654
(655)
1,631
904
(521)
(1,889)
—
1,465
1,200
265
—
—
2,005
1,913
—
92
—
13,373
2022
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
On credit risk, the Bank is continuing its plan to implement Basel’s Advanced Internal Model Approach (AIRB). This
progress is also conditioned by the acquisitions of new entities, as well as by the need for coordination among
supervisors of the validation processes of internal models.
Santander Consumer Finance Group is present mainly in geographies where the legal framework between
supervisors is the same, as happens in Europe through the Capital Requirements Directive and Regulation.
Currently, Santander Consumer Finance Group has the supervisory authorization for the use of advanced approaches
to the calculation of regulatory capital requirements for credit risk for its main portfolios in Spain, certain portfolios
in Germany, Nordics and France.
In terms of operational risk, the Santander Consumer Finance Group currently uses the standard regulatory capital
calculation approach provided for in the European Capital Directive.
In relation to the rest of the 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, using the standard approach.
Leverage ratio
The leverage ratio has been established within the Basel III regulatory framework as a non-risk-sensitive measure of
the capital required of financial institutions. The Group performs the calculation in accordance with CRD IV and its
subsequent amendment to Regulation (EU) No. 575/2013 as of 17 January 2015, the aim of which was to harmonize
the calculation criteria with those specified in the document Basel III leverage ratio framework and disclosure Basel
Committee requirements.
This ratio is calculated as the ratio 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 loans is included but not funds of commerce).
207
• Order accounts (guarantees, credit limits granted unused, documentary credits, mainly) weighted by credit
conversion factors.
•
Inclusion of the net value of derivatives (capital gains and handicaps are net with the same counterparty, less
collateral if they meet criteria) plus a surcharge for future potential exposure.
• A surcharge for the potential risk of securities financing transactions.
• Finally, a credit derivatives risk surcharge (CDS) is included.
Below is the breakdown of the leverage ratio at sub consolidated level ‘fully loaded’:
Millions of euros
Leverage
Level 1 capital
Exhibition
Leverage ratio
Economic Capital
31-12-2023
31-12-2022
11,368
133,370
8.52%
11,133
124,648
8.93%
From the standpoint of solvency, Santander Consumer Finance Group uses, in the context of Basel Pillar II, its
economic model for the capital self-assessment process (PAC or ICAAP). To do this, the evolution of the business and
capital needs is planned under a central scenario and under alternative stress scenarios. In this planning, the Group
ensures that it maintains its solvency objectives even in adverse economic scenarios.
Economic capital is the necessary capital, according to a model developed internally, to withstand all the risks of our
activity with a certain level of solvency. In our case the solvency level is determined by the long-term objective rating
of ‘A’ (two steps above the rating of Spain), 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 the significant risks incurred by the Group in its
operations, so it considers risks such as concentration, structural interest, business, pensions and others that are
outside the scope of the so-called Regulatory Pillar 1. In addition, economic capital incorporates the diversification
effect, which in the case of the Group is key, due to the multinational and multi-business nature of its activity, to
determine the overall risk and solvency profile.
Santander Consumer Finance Group uses RORAC methodology in its risk management to calculate the consumption
of economic capital and return on it of the Group’s business units, as well as segments, portfolios or customers, as
well as the company’s business units. in order to periodically analyze value creation and to facilitate an optimal
allocation of capital.
The RORAC methodology makes it possible to compare, on a homogeneous basis, the performance of operations,
customers, portfolios and businesses, identifying those who obtain a risk-adjusted return higher than the Group’s
cost of capital, thus aligning risk and business management with the intention of maximizing value creation, ultimate
objective of Santander Consumer Finance’s senior management.
208
Annex I
Dependent entities
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Andaluza de Inversiones, S.A. Unipersonal
Allane Leasing GmbH
Allane Location Longue Durée S.a.r.l.
Allane Mobility Consulting AG
Allane Mobility Consulting B.V.
Allane Mobility Consulting GmbH
Allane Mobility Consulting Österreich GmbH
Allane Mobility Consulting S.a.r.l
Allane Schweiz AG
Allane SE
Allane Services GmbH & co. KG
Allane Services Verwaltungs GmbH
AMS Auto Markt am Schieferstein GmbH
Auto ABS Belgium Loans 2019 SA/NV (d)
Auto ABS DFP Master Compartment France 2013 (d)
Auto ABS French leases 2021 (d)
Auto ABS French leases 2023 (d)
Auto ABS French Leases Master Compartment 2016
(d)
Auto ABS French Loans Master (d)
Auto ABS French LT Leases Master (d)
Auto ABS italian Balloon 2019-1 S.R.L. (d)
Auto ABS Italian Rainbow Loans S.r.l. (d)
Auto ABS Spanish Loans 2018-1, Securitisation Fund
(d)
Ciudad Grupo Santander, Av. Cantabria, 28660,
Boadilla del Monte - Madrid
Ortsstraße 18a – Vösendorf – Austria
1 Rue Francois Jacob - France
Grossmattstrasse 9-Urdorf – Switzerland
Kruisweg 791 - Netherlands
Dr.-Carl-von-Linde-Str. 2, Pullach i. Isartal –
Germany
Tuchlauben 7th – Austria
Rue Francois Jacob – France
Grossmattstrasse 9-Urdorf – Switzerland
Dr.-Carl-von-Linde-Str. 2, Pullach i. Isartal –
Germany
Grubenstrasse, 27 - Germany
Grubenstraße, 27 - Germany
Schieferstein, 9, Flörsheim
-
-
-
-
-
-
-
-
-
-
Spain
Austria
France
Switzerland
Netherlands
Germany
Austria
France
Switzerland
Germany
Germany
Germany
Germany
Belgium
France
France
France
France
France
France
Italy
Italy
Spain
100 %
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— %
—
47 %
47 %
47 %
47 %
47 %
47 %
47 %
47 %
47 %
47 %
47 %
90 %
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
100 %
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— %
— %
— %
— %
— %
— %
— %
100 %
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— %
— %
— %
— %
— %
— %
— %
Line of
business
Holding
company
Renting
Renting
Consultancy
Consultancy
Consultancy
Consultancy
Consultancy
Renting
Leasing
Services
Portfolio
management
Automotive
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
EUR Millions
Net results (a)
Direct
Capital and
Reserves (A)
37
(2)
17
1
(3)
11
(1)
(1)
12
212
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4
(1)
—
1
—
—
—
6
—
—
—
—
—
—
—
—
—
—
—
—
—
27
—
—
—
—
11
—
—
—
343
—
—
—
—
—
—
—
—
—
—
—
—
—
1
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Auto ABS Spanish Loans 2020-1, Securitisation Fund
(d)
Auto ABS Spanish Loans 2022-1, Securitisation Fund
(d)
Autodescuento S.L.
Autohaus24 GmbH
Banque Stellantis France
Walk D-Services, Unipessoal Lda.
Compagnie Generale de Credit Aux particuliers -
Credipar S.A.
Compagnie Pour La Location de Vehicules - CLV
Drive S.r.l.
Financeira El Corte Inglés, Portugal, S.F.C., S.A.
Financiera El Corte Inglés, E.F.C., S.A.
Fondation Holding Auto ABS Belgium Loans (d)
Asset Securitisation Fund Santander Consumer
Spain Auto 2014-1 (d)
Santander Consumer Spain Auto 2016-2 (d)
Golden Bar (SECURITIZATION) S.r.l. (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)
Golden Bar Stand Alone 2023-1 (d)
Golden Bar Stand Alone 2023-2 (d)
Guaranty Car, S.A.
Hyundai Capital Bank Europe GmbH
Isar Valley S.A. (d)
MCE Bank GmbH
MCE Verwaltung GmbH
-
Spain
— %
(d)
-
Calle Alcala nº4, 5th floor 28014 Madrid, Spain
Dr.-Carl-von-Linde-Str. 2, Pullach – Germany
9 rue Henri Barbusse 92330 Gennevilliers
Rua Urbanização Bracara Augusta, sn - freguesia
de Nogueira, Fraião e Lamaçães
9 rue Henri Barbusse 92330 Gennevilliers
9 rue Henri Barbusse 92330 Gennevilliers
Via Giovanni Caproni 1, Bolzano
Av. Antonio Augusto Aguiar, 31 1069-413 Lisbon
C/ Hermosilla 112, 28009, Madrid
-
-
-
-
-
-
-
-
-
-
-
Nacional II, km 16.500 – 28830 San Fernando de
Henares (Madrid)
Friedrich-Ebert-Anlage 35-37 · 60327 Frankfurt
am Main
-
Schieferstein, 9, Flörsheim
Schieferstein, 9, Flörsheim
Spain
Spain
Germany
France
Portugal
France
France
Italy
Portugal
Spain
Belgium
Spain
Spain
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Spain
Germany
Luxembourg
Germany
Germany
—
—
—
—
—
—
— %
—
—
—
—
—
—
— %
— %
— %
— %
— %
—
— %
— %
—
— %
— %
— %
— %
(d)
94 %
47 %
50 %
100 %
50 %
50 %
100 %
51 %
— %
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
100 %
51 %
(d)
90 %
90 %
— %
— %
94 %
—
—
—
—
—
—
51 %
51 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
100 %
51 %
— %
90 %
90 %
— %
— %
94 %
—
—
—
—
—
—
51 %
51 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
100 %
51 %
— %
— %
— %
Line of
business
Securitisation
Securitisation
Financial
Renting
Banking
Services
Banking
Financial
Leasing
Financial
Financial
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Automotive
Financial
Securitisation
Banking
Real estate
rental
EUR Millions
Net results (a)
Direct
Capital and
Reserves (A)
—
—
3
(2)
1,058
—
1,682
35
7
8
267
—
—
—
—
—
—
—
—
—
—
—
3
938
—
140
10
—
—
—
—
129
—
343
2
(1)
1
41
—
—
—
—
—
—
—
—
—
—
—
—
(35)
—
(2)
—
—
—
18
—
881
3
855
52
6
8
140
—
—
—
—
—
—
—
—
—
—
—
2
493
—
86
10
2
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Midata Service GmbH
One Mobility Management GmbH
Pony S.A. (d)
Pony S.A., Compartment German Auto Loans 2021-
1 (d)
Pony S.A., Compartment German Auto Loans 2023-
1 (d)
Santander Consumer Bank A.S.
Santander Consumer Bank AG
Santander Consumer Bank GmbH
Santander Consumer Bank S.p.A.
Santander Consumer Finance Global Services, S.L.
Santander Consumer Finance Inc.
Santander Consumer Finance Oy
Santander Consumer Finance Schweiz AG
Santander Consumer Holding Austria GmbH
Santander Consumer Holding GmbH
Santander Consumer Inc.
Santander Consumer Leasing B.V.
Santander Consumer Leasing S.A
Santander Consumer Leasing GmbH
Santander Consumer Mobility Services, S.A.
Santander Consumer Operations Services GmbH
Santander Consumer Renting S.R.L.
Santander Consumer Renting, S.L.
Santander Consumer Services GmbH
Santander Consumer Services, S.A.
Santander Consumer Spain Auto 2019-1,
Securitisation Fund (d)
Schieferstein, 9, Flörsheim
Dr.-Carl-von-Linde-Straße,2 - Pullach i.Isartal
-
-
-
Strandveien 18, 1366 Lysaker, 0219 (Baerum)
Santander Platz I, 41061 (Mönchengladbach)
Andromeda Tower, Donan City. Strow-Wien
Via Nizza 262, I-10126 (Turin)
Ciudad Grupo Santander, Av Cantabria, 28660,
Boadilla del Monte - Madrid
855-2 STREET SW, SUITE 3500. CALGARY
Hermannin Rantatie 10, 00580 (Helsinki)
Brandstrasse 24, 8952 Schlieren
Rennweg 17, A 1030 (Wien)
Santander Platz I, 41061 (Mönchengladbach)
855-2 STREET SW, SUITE 3500. CALGARY
Waterman 7th, ‘s-Hertogenbosch
Quai Charles Pasqua, 26
Santander Platz I, 41061 (Mönchengladbach)
Ciudad Grupo Santander Av. Cantabria s/n,
28660 Boadilla del Monte
Madrider Strabe, 1D – 41069, Monchengladbach
(Germany)
Via Caproni 1, Bolzano
Santa Barbara 1, 28180, Torrelaguna - Madrid
Thomas Alva Edison Str. I, Eisendstadt
Rua Gregorio Lopez Lote 1596 B-1400 195
Lisbon – Portugal
-
Germany
Germany
Luxembourg
Luxembourg
Luxembourg
Norway
Germany
Austria
Italy
Spain
Canada
Finland
Switzerland
Austria
Germany
Canada
Netherlands
France
Germany
Spain
Germany
Italy
Spain
Austria
Portugal
Spain
— %
— %
— %
— %
— %
100 %
— %
— %
100 %
100 %
— %
— %
100 %
100 %
100 %
100 %
100 %
100 %
— %
— %
— %
— %
100 %
— %
100 %
— %
90 %
47 %
(d)
(d)
(d)
— %
100 %
100 %
— %
— %
100 %
100 %
— %
— %
— %
— %
— %
— %
100 %
100 %
100 %
100 %
— %
100 %
— %
(d)
90 %
— %
— %
— %
— %
100 %
100 %
100 %
100 %
99 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
— %
100 %
100 %
100 %
100 %
— %
Line of
business
Other services
Management
services
Securitisation
Securitisation
Securitisation
Financial
Banking
Banking
Banking
Other services
Automotive
Financial
Leasing
Holding
company
Holding
company
Banking
Leasing
Leasing
Leasing
Renting
Other services
Renting
Leasing
Services
Financial
Capital and
Reserves (A)
—
—
—
—
—
2,638
3,529
539
926
7
113
416
76
364
5,599
95
10.00
3.00
82.00
16.00
23.00
8.00
41.00
—
13.00
— %
— %
— %
— %
— %
100 %
100 %
100 %
100 %
99 %
— %
100 %
100 %
100 %
100 %
— %
— %
— %
100 %
100 %
— %
— %
100 %
100 %
100 %
— %
Securitisation
—
EUR Millions
Net results (a)
—
—
—
—
—
205
286
80
43
3
—
42
10
—
153
3
3
—
50
(4)
1
(2)
2
—
1
—
Direct
—
—
—
—
—
1,980
5,145
363
603
5
149
161
60
518
6,077
47
21.00
3.00
151.00
20.00
18.00
9.00
38.00
—
10.00
—
3
EUR Millions
Net results (a)
Capital and
Reserves (A)
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
Santander Consumer Spain Auto 2020-1,
Securitisation Fund (d)
Santander Consumer Spain Auto 2021-1,
Securitisation Fund (d)
Santander Consumer Spain Auto 2022-1,
Securitisation Fund (d)
Santander Consumer Technology Services GmbH
SC Austria Consumer Loan 2021 Designated Activity
Company (d)
SC Austria Finance 2020-1 Designated Activity
Company (d)
SC Canada Asset Securitization Trust
SC Germany Auto 2019-1 UG (haftungsbeschränkt)
(d)
SC Germany Consumer 2018-1 UG
(haftungsbeschränkt) (d)
SC Germany S.A. (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., Compartment Consumer 2023-1
(d)
SC Germany S.A., Compartment Consumer Private
2023-1 (d)
SC Germany S.A., Compartment Leasing 2023-1 (d)
SC Germany S.A., Compartment Mobility 2020-1 (d)
SC Mobility AB
SC Mobility AS
SCF Ajoneuvohallinto IX Limited (d)
SCF Ajoneuvohallinto VIII Limited (d)
SCF Ajoneuvohallinto X Limited (d)
SCF Ajoneuvohallinto XI Limited (d)
SCF Ajoneuvohallinto XII Limited (d)
-
-
-
Kaiserstr 74, 41061, Monchengladbach
(Germany)
-
-
-
-
-
-
-
-
-
-
-
-
-
Hemvärnsgatan ,9 – Solna
Strandveien 18
-
-
-
-
-
Spain
Spain
Spain
Germany
Ireland
Ireland
Canada
Germany
Germany
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Sweden
Norway
Ireland
Ireland
Ireland
Ireland
Ireland
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
(d)
(d)
(d)
100 %
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
100 %
100 %
(d)
(d)
(d)
(d)
(d)
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
— %
Line of
business
Securitisation
Securitisation
Securitisation
—
—
—
Other services
24.00
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Renting
Renting
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10
—
—
—
—
—
—
—
—
(2)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Direct
—
—
—
22.00
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10
—
—
—
—
—
4
Entity
Domicile
Country
Bank's ownership
interest (%)
Voting rights (%) (c)
Direct
Indirect
2022
2021
SCF Rahoituspalvelut IX DAC (d)
SCF Rahoituspalvelut VIII DAC (d)
SCF Rahoituspalvelut X DAC (d)
SCF Rahoituspalvelut XI DAC (d)
SCF Rahoituspalvelut XII DAC (d)
Secucor Finance 2021-1, DAC (d)
Silk Finance No. 5 (d)
Stellantis Financial Services Belux SA
Stellantis Financial Services España, E.F.C., S.A.
Stellantis Financial Services Italia S.p.A.
Stellantis Financial Services Nederland B.V.
Stellantis Renting Italia S.p.A.
Suzuki Servicios Financieros, S.L.
Svensk Autofinans WH 1 Designated Activity
Company (d)
TIMFin S.p.A.
Transolver Finance EFC, S.A.
TVG-Trappgroup Versicherungsvermittlungs-GmbH
-
-
-
-
-
-
-
Parc L’Alliance Avenue Finlande 4-8 1420 Braine
Lalleud Belgium
C/ Eduardo Barreiros No. 110. 28041, Madrid
Via Gallarate 199, 20151 Milano
Hoofdweg 256, 3067 GJ Rotterdam
Via Nizza 262, I-10126 - Turin
C/Carlos Sainz 35, Pol. City of the automobile,
Leganés - Madrid
-
Corso Massimo D’Azeglio n. 33/E – 20126 Turin
Av. Aragon 402, Madrid
Schieferstein, 9, Flörsheim
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Portugal
Belgium
Spain
Italy
Netherlands
Italy
Spain
Ireland
Italy
Spain
Germany
— %
— %
— %
— %
— %
— %
— %
— %
50 %
— %
— %
— %
— %
— %
— %
51 %
— %
(d)
(d)
(d)
(d)
(d)
(d)
(d)
50 %
— %
50 %
50 %
50 %
51 %
(d)
51 %
— %
— %
— %
— %
— %
— %
— %
— %
— %
50 %
50 %
50 %
50 %
50 %
51 %
— %
51 %
51 %
— %
— %
— %
— %
— %
— %
— %
— %
50 %
50 %
50 %
50 %
50 %
51 %
— %
51 %
51 %
— %
Line of
business
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Securitisation
Financial
Financial
Banking
Financial
Renting
Intermediation
Securitisation
Financial
Leasing
Insurance
Capital and
Reserves (A)
—
—
—
—
—
—
—
105
479
741
—
—
—
—
—
—
—
EUR Millions
Net results (a)
—
—
—
—
—
—
—
19
93
61
16
17
1
—
—
5
—
Direct
—
—
—
—
—
—
—
113
283
293
77
6
—
—
38
17
2
(a)
(b)
(c)
(d)
Data obtained from the annual accounts of each dependent entity corresponding to the financial year 2023. These annual accounts are pending approval by their respective Control Bodies. The Bank Administrators consider that they will be ratified without modification.
The amount for which the shares of each dependent entity are recorded in the books of the holding company, net, where appropriate, of its corresponding depreciation provision.
In accordance with Article 3 of Royal Decree 1159/2010, of 17 September, approving the rules for the formulation of consolidated annual accounts, to determine the voting rights have been added to those directly owned by the dominant company, those that correspond
to the companies dominated by this or to other persons acting in their own name but on behalf of a company of the Group. For this purpose, the number of votes that corresponds to the dominant company, in relation to the companies in which it indirectly participates, is
that corresponding to the dependent company that participates directly in the share capital of these companies.
Vehicles over which effective control is maintained.
5
Annex II.
Associated Entities and Joint Business Entities
Name
Entity
Country
Bank’s ownership interest (%)
Voting rights (%) (b)
Direct
Indirect
2022
Bank of Beijing Consumer Finance Company
Ethias Lease
Fortune Auto Finance Co., Ltd.
Payever GmbH
Santander Consumer Bank S.A.
Santander Consumer Financial Solutions Sp. Z O.O.
Santander Consumer Multirent Sp. z o.o.
Stellantis Consumer Finance Polska sp.zo.o.
Stellantis Finance Polsja sp.z o.o
Stellantis Insurance Europe Limited
Stellantis Life Insurance Europe Limited
VCFS Germany GmbH
Associate
Associate
Multigroup
Associate
Associate
Associate
Associate
Associate
Associate
Multigroup
Multigroup
Multigroup
China
Netherlands
China
Germany
Poland
Poland
Poland
Poland
Poland
Malta
Malta
Germany
20 %
50 %
50 %
10 %
40 %
—
—
—
—
50 %
50
—
—
—
—
—
—
40 %
40 %
20 %
20 %
— %
— %
50 %
20 %
50 %
50 %
10 %
40 %
40 %
40 %
20 %
20 %
50 %
50 %
50 %
Line of
business
Financial
Leasing
Financial
Other services
Banking
Leasing
Leasing
Financial
Financial
Insurance
Insurance
Marketing
EUR Million(a)
Active
Capital and
Direct
1,694
5
2,222
4
4,625
57
996
52
696
422
208
1
Reservatio
103
ns
5
476
2
942
2
67
4
52
74
20
1
—
(1)
51
1
15
(2)
9
—
10
31
16
—
2021
20 %
— %
50 %
10 %
40 %
40 %
40 %
20 %
20 %
50 %
50 %
50 %
(a)
(b)
Data obtained from the annual accounts of each associated entity and/or joint ventures corresponding to the financial year 2023. These annual accounts are pending approval by their respective Control Bodies. The Bank Administrators consider that they will be ratified
without modification.
In accordance with Article 3 of Royal Decree 1159/2010, of 17 September, approving the rules for the formulation of consolidated annual accounts, to determine the voting rights have been added to those directly owned by the dominant company, those that correspond
to the companies dominated by this or to other persons acting in their own name but on behalf of a company of the Group. For this purpose, the number of votes that corresponds to the dominant company, in relation to the companies in which it indirectly participates, is
that corresponding to the company that participates directly in the share capital of these companies.
1
Annex III.
Changes and notifications on the acquisition and sale of equity shares in the financial
year 2023
(Art. 155 of the consolidated text of the Capital Companies Act and Art. 125 of Royal Legislative Decree 4/2015, of 23
October, approving the consolidated text of the Securities Market Law).
Investee
Line of business
Net ownership interest (%)
Purchased/(sold)
In the exercise
At the end of the
financial year
Effective date of the
transaction (or date of
notification if
appropriate)
Acquisitions in 2023:
Ethias Lease
SC Mobility AS
SC Mobility AB
MCE Bank Group
Santander Consumer Finance Inc.
Santander Consumer Inc.
Camine D - Services, Unipessoal
Lda.
Operating lease
Operating lease
Operating lease
Financial services
associated with the
automotive sector
and the collection of
deposits
Consumer finance
Consumer finance
Provision of internet,
computer and
multimedia services
50 %
100 %
100 %
50 %
September 13, 2023
100 %
100 %
August 14, 2023
October 20, 2023
100 %
100 %
April 1, 2023
100 %
100 %
100 %
100 %
100 %
March 17, 2023
March 17, 2023
100 %
4 January 2023
1
Annex IV
List of agents in accordance with the provisions of article 21 of Royal Decree 84/2015, of February 13,
which develops Law 10/2014, of June 26, on the regulation, supervision and solvency of credit institutions
as of December 31, 2023
Name
Palma del Río
Finance, S.L.
Domicile
POGL. IND EL
GARROTAL EDF
SARA BENITEZ C/
JARA 17 -1
(14700) Palma
del Rio
Gestión Financiera
Villalba, S.L.U.
C/ Consuelo
Vega, 23 A -
Juan Jiménez
Gestión Financiera,
S.L.
EFINCAR FLEET
SERVICES , S.L.
A(11600)
Ubrique
C/ BARTOLOME
DE MEDINA ,
Local 18 (41004)
SEVILLA
RONDA DE LOS
MOLINOS, 35
LOCAL, ECIJA (
SEVILLA)
Financiaciones
C/ del Mar, 27 1º-
Costa del Sol
Oriental, SCA
C, Jaime Building,
29740 Torre del
Mar
INSEMA
INVERSIONES, S.L.
Av. de Andalucia,
11 (14500)
Puente Genil
Carrasco Agentes,
S.L.
C/ BETULA Nº 9
FLOOR 1º A
(23400)UBEDA
Ramsa Serv. End. Y
Empresarial, S.L.
C/ Blas Infante,
7A (21440) Lepe
Martín & Castilla
Servicios
Financieros, S.L.
C/ Fray Diego de
Cadiz, 163
(41530) Moron
de la Frontera
Date of
Employer/Na
tional
identification
number
granting
powers
Post
Code
14700 B09987843 13-07-2022 Almodovar del Rio, Fuente Palmera,
Palma del Rio, Posadas, Lora del Rio,
Penaflor, Carmona, La Campana, La
Puebla de los Infantes, Mairena del
Alcor, El Viso del Alcor
Geographical area of activity
11600 B011517620 15-12-2020 Ubrique,
del
Alcala
Valle,
Algodonales, Arcos de la Frontera,
Benaocaz, Bornos, El Bosque, El
Gastor, wait, Grazalema, Olivera,
Prado del Rey, Setenil, Torre
Alhaquine, Villanueva del Rosario,
Villa Martin, Puerto Serrano
41004 B91167973 01-02-2002 Bormujos, Coria del Rio, Gelves,
la Mayor,
la
Gines, Pilas, Sanlucar
Umbrete, Villamanrique de
Condesa, Villanueva del Ariscal.
41400 B91958363 01-01-2012 Écija, Fuentes de Andalucia, La
Luisina, Canada Rosal, La Carlota.
Alfarnate,
Archez,
29740 F093385102 15-12-2020 Alcaucin,
Algarrobo,
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 Malaga,
Vinuela.
14500 B14840896 19-12-2008 Aguilar de la Frontera, Benameji,
Castro del Rio, Espejo, Fernan Nunez,
Cordoba,
de
Montalbal
Montemayor, Montilla, Monturque,
Moriles, Palenciana, Puente Genil, La
Rambla and Santaella
Scope of representation
finance,
Automotive
leasing,
automotive
renting,
automotive
consumer
loan policies,
cobranded cards, generalist
cards.
finance,
Automotive
leasing,
automotive
renting,
automotive
consumer
loan policies,
cobranded cards, generalist
cards.
finance,
Automotive
leasing,
automotive
renting,
automotive
consumer
loan policies,
cobranded cards, generalist
cards.
finance,
Automotive
leasing,
automotive
renting,
automotive
consumer
loan policies,
cobranded cards, generalist
cards.
finance,
Automotive
leasing,
automotive
renting,
automotive
consumer
loan policies,
cobranded cards, generalist
cards.
finance,
Automotive
leasing,
automotive
renting,
automotive
consumer
loan policies,
cobranded cards, generalist
cards.
23400 B023478704 02-01-2004 Alblanchez de Ubeda, Almenara,
Arquillos, Baeza, Beas de Segura,
Bedmar and Garciez, Begijar,
Belmez de la Moraleda, Benatae,
Cabra de Santo Cristo, Cambil,
Canena, Castellar, Cazorla, Chiclana
de Segura, Chilluevar, Escanuela,
Genave, Guarroman, Figuera de
21440 B021347190 15-12-2020 Punta Umbria, Cartaya, Lepe, Isla
Cristina and Ayamonte
Calatrava, Hinojares, Ovens, Huesa,
Ibros, Iznatoraz, Jabalquinto,
Jimena, Jodar, La Iruela, La Puerta
del Calerro, Pozoalcon, Puente de
Genave, Quesada, Rus, Sabiote,
Santiago de Pontones, Santiesteban
del Puerto, Santo Tome, Segura de
41530 B091369231 15-12-2020 Algamitas, Arahal, Caripe, El Coronil,
la Sierra, Siles, Sorihuela del
Marchena, Montellano, Moron de la
Guadalimar, Torreperogil, Torres,
Frontera, Paradas, Pruna, La Puebla
Torres del Alblanche,
de Cazalla, Villanueva de San Juan
Torresblancopedro, Ubeda, Vilchez,
Villarcarrillo, Villanueva del
Archbishop, Villarodrigo.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
1
Name
Fromán
Consultores, S.L.U.
Domicile
Av. Del
Mantecado, 21
(41560) Estepa
Geyba Servicios
Financieros, S.L.
Avda. La Libertad
No. 2 Local
(41980) La
Algaba
Fincar Gestiones
Avda. Buenos
Hermanos P.Q.
Servicios
Financieros,
S.L. Financieras,
S.L.
Hermanos P.Q.
Servicios
Financieros, S.L.
SERVITAL
ASESSORS, S.L.
FINANCIACEUTA,
S.L.U.
Aires, 32 18500
Guadix
Pasaje Neptuno,
Local 7 (next to
BBVA) Vera
(04620).
Pza. Nuestro
Padre Jesús, 3
(21700) La Palma
del Condado
C/ Cervantes,
gallery "La
Riojana", 2nd
floor, local No.
26 (51001) Ceuta
Gª y Trinidad
Asesoramiento y
Financiación S.L.
C/ Rosario Nº
46(04800) Albox
Antonio Gana
C/ Jara, nº1 local,
Fdez. Servicios
Financieros S.L.
DONAT FINANCE
SERVICE, S.L.
esquina doctor
Antonio Cabrera
(14400)
Pozoblanco
Pza. Velazquez,
11 - bass (52004)
Melilla
Date of
Employer/Na
tional
identification
number
Post
Code
Geographical area of activity
41560 B041969767 15-12-2020 Aguadulce, Badolatosa, Casariche,
granting
powers
Los Corrales, Estepa, Gilena,
Herrera, The Sequin, Lora de Estepa,
Marinaleda, Martin de la Jara,
Osuna, Pedrea, La Roda de
Andalucia, 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 Madroyo, Navas
de la Concepcion, El Pedroso, La
Roda de Andalucia, La Rinconada
18500 B21507751 01-02-2012 Guadix, Baza, Huescar, Cullar,
Country Caves, Iznalloz and
Guadahortuna.
04620 B004678348 15-12-2020 Vera
21700 B021261177 15-12-2020 Almonte, Bollullos Par del Condado,
Bonares, Chucena, Escacena del
Campo, Finojos, Lucena del Puerto,
Manzanilla, Niebla, La Palma del
Condado, Paterna del Campo,
51001 B051017101 15-12-2020 Ceuta
Rociana del Condado, Villalba del
Alcor, Villarrasa
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.
Belmez, Los Blázquez, Cardenas,
Conquista, Dos Torres, Espiel,
Fuente La Lancha, Fuente Obejuna,
El Guijo, Hinojosa del Duque,
Pedroche, Peñarroya-Pueblonuevo,
Pozoblanco
14400 B014771554 15-12-2020 Alcaracejos, Añora, Belalcazar,
52004 B052015435 01-02-2007 Melilla
Scope of representation
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
2
Name
Domicile
ASEDIME
C/ Doctor
SERVICIOS
FINANCIEROS, S.L.
Dorronsoro, 2
(21600) Valverde
del Camino
SERVICIOS
c/plaza del
FINANCIEROS
JIENENSES, SL.
camping 4 local
10 23740 anduja
FINANRONDA
SERVICIOS
FINANCIEROS, S.L.
C/ Molino, 82
(29400) Ronda
128INNOVA24H,
S.L.
c/Oasis, 17
Elejido Almeria
Finangi Cat
Av. de la Rapita,
33 1º (43870)
Amposta
Scope of representation
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Date of
Employer/Na
tional
identification
number
Post
Code
21600 B021380746 01-04-2008 Alajar, Almonaster La Real, Aracena,
Geographical area of activity
granting
powers
Aroche, Arroyo Molinos de Leon,
Beas, Berrocal, Cala, Calanas, El
Campillo, Campofrio, Canaveral de
Leon, Oak Chestnut,
Corteconcepcion, Cortegana,
Cortelazor, Summit in the Middle,
Summits of San Bartolomé,
Summits Major, Encinasola,
Fuenteheridos, Galaroza, La
Granada de Ritinto, 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 and Zufre.
23740 B86340767 01-12-2011 Aldeaquemada, Andújar, Arjona,
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
29400 B92963388 02-01-2009 Agatocin, Alpendeire, Arriate,
Atajate, Benalid, Benalauria,
Benaojan, Benarraba, El Burgo,
Canete la Real, Cartajima, Cortes de
la Frontera, Cuevas del
Becerro,Faraja, Gaucin, Genalquacil,
Igualeja, Jimera de Libas, Jubrique,
Juzcar, Montecorto, Montejaque,
Parauta, Pujerra, Ronda and
Yunquera.
04700 B92999846 01-03-2011 El Ejido, ADTA and Berja
43870 B043571660 15-12-2020 Alcanar, Aldover, Alfara de Carles,
Amposta, Arboli, Arnes, Asco, Falset,
Fix, Freginals, Gandesa, Garcia,
Ginestar, Godall, Masdenverge,
Miravent, Mora DÉbre, Mora la
Nova, Pauls, Poboleda, Porrera,
Batea, Bellmunt de Falset, Benicaro,
Benifallet, Benissanet, Bot,
Cabassers, Camarles, Capcanes,
Caseres, Corbera dÉbre, Cormudella
del Montsant, Deltebre, El Lloar, El
Masroig, El Molar, El Perello, El
Pinell de Bray, Els Guiaments,
Gratallops, Horta de Sant Joan,
Aldea, Lametro 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 Rapita, 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 finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
3
Name
Noguer Bau, S.L.
Domicile
C/ Sant Fidel, 5 -
1º (08500) Vic
Gestió de
Finançament i
Inversions de
Ponent, S.L.
Avda. Pau, 49
(25230)
Mollerusa
Gestió de
Finançament i
Inversions de
Ponent, S.L.
Avda. Alcalde
Porqueras, 10
(25008) Lérida
Date of
Employer/Na
tional
identification
number
Post
Code
08500 B064018179 15-12-2020 Aiguafreda, Alpens, El Brull,
Geographical area of activity
granting
powers
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
25230 B025539123 01-10-2006 Comarcas del Pla D´urgel, la
Noguera, L´urgell y La Segarra
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; Rosello, Seros,
El Soleras, Soses, Tarres, Els TOrms,
Torrebesses, Torrefarrera, Torres de
Segre, Torre Serona, Vilanova de
Segria, Vilosell, Vilanova de la Barca
and Vinaixa.
BERGA GESTIÒ,
S.L.
C/ Gran Via, 46
(08600) Berga
08600 B064396476 15-12-2020 Berga, Navas, Cardona and Nou de
la Bergueda.
M&G figueres
Associats, S.L.
c/Col. Legi nº 54
basses (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,
Llado, Masarac, Mollet de Peralado,
Pont de Mollins and Crespia.
Orges-Fin
SA ROVELLADA
07702 B55733471 25-12-2020 Island of Menorca
gestiones 2018,
s.l. Unipersonal
Consultoría
Financiera de la
Mancha, S.L.
DE DALT 38 bajos
izq (07702)
MAHONMENORC
A (Illes
C/ Ramiro
Balears) (Balearic
Ledesma, s/n
Islands)
bloque 5 Local 3
(13630)
Socuéllamos
13630 B013354303 15-12-2003 We overlook, Tomelloso,
Argamasilla de Alba, Pedro Munoz,
Campo de Criptana, Alcazar de San
Juan, Las Pedroneras, Monta del
Cuervo, Villanueva de los Infantes
Scope of representation
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
4
Name
Estudios y Análisis
de Riesgos, S.L.
Domicile
Plaza de los
Carros, 2, 16001
Cuenca.
Date of
Employer/Na
tional
identification
number
Post
Code
16001 B016156598 30-06-2007 Cuenca
granting
powers
Geographical area of activity
Intermediación y
Servicios Junval,
S.L
Services
Financieros
Quintanar, S.L.
Medifirent, S.L.
C/ BEBRICIO , 39,
26500 B026319178 15-12-2020 Calahorra
Pasaje Local nº 7
(26500)
Calahorra
C/ Vicente Galvez
Villarejo, 12.
(45800)
Quintanar of the
Order
C/Carretil, 2, 3ºD
26007. Logrono
(La Rioja)
45800 B045545167 15-12-2020 Quintanar de la Orden, Madridejos
26007 B009410572 15-12-2020 Miranda de Ebro and Logrono
Soluciones
C/ Mariano
28521 B084418904 15-12-2020 Arganda del Rey, Rivas –
Financieros del
Este, S.L.
Barbacid, 5 - 2nd
- 3 (28521) Rivas
Vaciamadrid
Vaciamadrid
Servicios
C/Del Ferial , 4
4200 B042180927 15-12-2020 Soria
Financieros
Sorianos
Oficina 3 B2
4200 Soria
Finanduero 2007,
S.L.U.
GASTEIZ FINANCE,
SLU
CALLE EL CARRO,
9, 3ºB -09400
ARANDA DE
DUERO
(BURGOS)
Avda. De los
Huetos, 79 Ed.
Sugar company.
Vitoria 01010
(Alava)
FINANCESTHER
S.L.
AVENIDA
CENTRAL
NUMERO 1
OFICINA 1
(31500) TUDELA
Plaza Aita Arrupe
NAVARRA
3 Office No. 2
.NAVARRA.
(48100)
Mungia_Bizkaia
Inversiones
Financieras Bilegi,
S.L.
09400 B009480013 02-11-2007 Aranda de Duero, Lerma, Huerta del
Rey, Salas de los Infantes and Roa.
01010 B10818698 02-03-2021 Alava
31500 B71392179 15-12-2020 Tudela
48100 B95659579 01-10-2012 Eibar, Mondragon, Genika - Lumo
Scope of representation
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
5
Name
PRAGA SERVICES
64, S.L.
ALANA CONSUMER
SERVICES,SL
Domicile
C/ Patrimonio
Mundial, 7 1ª
planta Oficina
13, 28300
Aranjuez
C/ SOL, 32-2ºC
(45600) Talavera
de la Reina
Gestión de
Servicios
Financieros
Artimar
Av. de Canarias,
344 (35110)
Vecindario
Date of
Employer/Na
tional
identification
number
Post
Code
28300 B85464402 01-03-2014 Aranjuez
granting
powers
Geographical area of activity
45600 B72754914 01-04-2023 TALAVERA DE LA REINA AND ZONE
INFLUENCE
35110 B035496777 15-12-2020 Agüimes, Santa Lucía de Tirajana,
San Bartolomé de Tirajana
TENERIFELAPALMA
AVDA/ DE LAS
38700 B13639406 01-05-2023 Island of La Palma
INVERSIONES
2023, S.L.
NIEVES, 6, 1º C,
Santa Cruz de la
Palma (La Palma)
L´Eliana Finance,
S.L.
Av. Cortes
Valencianas, 35 L
46183 B097639462 01-10-2005 Riba - Roja de Turia, Lliria, Betera,
Bunol, Requena, Utiel, L'Eliana, La
Pobla de Vallbona
A2 (46183)
L´Eliana
CENTRO ADVISOR
The street is
44004 B44224947 02-06-2008 Teruel.
DE TERUEL
FINANCIAL, S.L.
Ronda Ambeles
n. 52 (44004)
Teruel
Lual Soluciones y
Gestion, S.L.
AVILA CONSUMER
SERVICES SL
Alvarez y Garros,
S.L.U.
C/ Isabel La
Catolica Nº 6
03803 Alcoy (
Aliacante)
CENTRO DE
NEGOCIOS
ANDAMUR,
POL.IND
SAPRELORCA, C/
MANUEL JÓDAR
MARTÍNEZ
Av. A Coruna, 439
(30817) LORCA /
Bajo (27003)
MURCIA
Lugo
03803 B01612019 15-12-2020 Villena, Sax, Biar, Benejama, Salinas,
Canada, Campo de Mirra, Alcoy, Ibi,
Castalla, Onil, Swimsuits, Tibi,
PenEagle, Benifallim, Cocentaina,
Muro de Alcoy, Beniarrés, Benilloba,
Planes, Lorcha, Agres, Alqueria de
Aznar, Gayanes, Alfafara,
Benimarfull, Gorga. Millena, Alcocer
30817 B05265764 15-12-2020 Hellin, Jumilla, Albacete
de Planes, Alcolecha, Benasau,
Balones, Cuatretondeta, Almudaina,
Benimasot, Facheca, Benillup,
Tollos, Famorca, Onteniente,
Olleria, Albaida, Ayelo de Malferit,
Bocairente, Fontanares, AGULLENT
and Benissoda belonging to the
Province of ALICANTE and VALENCIA
27003 B027274216 15-12-2020 Lugo.
AMP FINANSERVIC
S.L.
C/ RIO TERA 30,
OFFICE 7 (05004)
AVILA
05004 B44584761 01-02-2023 Avila
Scope of representation
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
6
Name
Domicile
Asesoramiento
Financiero Zafra,
S.L.
Avenida Antonio
Chacon nº 17
Local. C.P. 06300
Zafra ( Badajoz )
Alvarez and
Garrúes Dos, S.L.U. Av. de Vigo, 65
(36003)
Pontevedra
SOLUCIONES
FINANCIEROS
GRIGEM S.L.
Asfinza Badajoz,
S.L.
Alvarez y Garrues
Tres, S.L.U.
Cámara de
Comercio
GijonVivero de
Empresas
Carretera de
Somio 652
Despacho
Av. Sinforiano
3.1(33203) Gijon
Madronero, nº 15
Edificio Paraiso 3
Mezzanine 4
premises A-B.
06011 Badajoz –
Badajoz.
c/Salvador Dali,
12 (32002)
Orense
Date of
Employer/Na
tional
identification
number
Post
Code
06300 B006433973 15-12-2020 Zafra, Villanueva del Fresno,
Geographical area of activity
granting
powers
Higuera de Vargas, Zahinos, Oliva de
la Frontera, Barcarrota, Matamoros
Valley, 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
Leon, Calera de Leon, Monesterlo,
36003 B027380799 01-08-2008 Pontevedra, Villagarcia de Arosa, O
Fuente de Cantos, Los Santos de
Malmona, Villafranca de los Barros,
Grove, Sanxenxo, Cambados, Lalin,
Ribera del Fresno, Hornachos, Llera,
La Estrada, Silleda and Caldas de
Rey
Valencia de las Torres, Usagre,
Welcome, Llerena, Berlanga,
Azuaga, Farm of Torrehermosa,
Peraleda de Zauecejo, Campillo de
Llerena, Higuera de la Serena,
Zalamea de la Serena, Monterrubio
33203 B05256375 01-04-2017 Gijon, Cabrales, Cangas de Onis,
de la Serena.
Caravia, Caso, Colunga, Llanes,
Nava, Onis, Parres, Penamellera
Alta, Penamellera Baja, Pesoz,
Piloha, Ponga, Ribadedeva,
Rivadesella, Villaviciosa.
06011 B06580708 01-06-2010 Badajoz.
32002 B27412816 01-11-2010 Ourense, Barco de Valdeorras and
Rua.
European Finantial
Consumer, S.L
Parc.ET-8
Complejo
40194 B86080280 03-01-2011 Segovia.
FINZAMORA
SERVICES, SL.
Quitapesares,
Carretera CL-601
Km 7
Edificio Vicam
40194
C\ Juan II, 23. 1°
Palazuelos de
Dcha. 49011.
Eresma
Zamora.
( Segovia
) Palazuelos de
Eresma ( Segovia
)
49011 B49282403 01-01-2015 Zamora/Palencia
Scope of representation
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
Automotive finance,
automotive leasing,
automotive renting,
consumer loan policies,
cobranded cards,
generalist cards.
7
Annex V.
Annual Banking Report
This Annual Banking Report has been prepared in compliance with the provisions of Article 87 of Law 10/2014, of 26 June,
on the Regulation, Supervision and Solvency of Credit Institutions.
In accordance with that article, from 1 January 2015, credit institutions must submit to the Bank of Spain and publish
annually, as an annex to the financial statements audited in accordance with the regulatory regulations on auditing
accounts, specifying by country where they are established, the following information on a consolidated basis for each
year:
a) Name, nature and geographical location of the activity.
b)
Turnover.
c) Number of full-time equivalent employees.
d) Gross result before tax.
e)
f)
Taxes on the result.
Subsidies or public aid received.
The criteria used for the preparation of the annual bank report for the financial year 2023 are detailed below:
a) Name, nature and geographical location of the activity
The aforementioned information is available in Annexes I and II to the Group’s consolidated annual accounts, which
detail the companies operating in each jurisdiction, including, among other information, their name, geographical
location and nature of their activity.
As can be seen from these Annexes, the main activity developed by the Group in the different jurisdictions in which
it operates is commercial banking. The Group operates mainly in 15 markets through a model of autonomous
subsidiaries in capital and liquidity, which has clear strategic and regulatory advantages, as it limits the risk of
contagion between units of the Group, it imposes a double layer of global and local supervision and facilitates crisis
management and resolution. The total number of Group offices is 290, which provide our clients with all their basic
financial requirements.
b) Turnover
For the purposes of this report, turnover at gross margin is considered as defined and presented in the consolidated
profit and loss account that is part of these consolidated annual accounts of the Group.
The turnover data by country have been obtained from the statutory accounting records of the Group companies with
the corresponding geographical location and have been converted into euros. It is therefore aggregated information
of the individual financial statements of the entities operating in each jurisdiction, the reconciliation of which with
the information in the Group’s consolidated annual accounts requires a series of adjustments for homogenization
and elimination of transactions between the various companies of the Group, such as those relating to the
distribution of dividends from the subsidiaries to their respective matrices.
c) Number of employees on a full-time equivalent basis
Full-time equivalent employee data have been obtained from the average staffing of each jurisdiction.
d) Taxes on the result
In the absence of a specific criterion, the amount actually paid for those taxes whose effect is recorded under the
income tax heading of the consolidated income and loss account has been included.
1
The taxes actually paid in the year by each of the entities of each jurisdiction include:
• Supplementary payments relating to income tax settlements, usually from previous years.
• Advances, payments on account and withholdings paid or incurred in relation to the tax on the profit or loss of the
financial year itself. In the case of taxes borne abroad, given their scarcely representative amount, it has been
decided to include them in the jurisdiction of the entity that has borne them.
• The refunds collected in the year relating to liquidations of previous years whose result was to be returned.
• Where applicable, settlements by inspection minutes and disputes related to these taxes.
The above amounts are part of the statement of cash flows (359,529 thousand euros in the financial year 2023,
which represents an effective rate of 20%) and therefore differ from the expenditure on income tax recorded in the
consolidated income and loss account (433,953 thousand euros in the financial year 2022 which represents an
effective rate of 19.7%) This is because the tax regulations of each country establish:
The time when taxes must be paid. Normally, payment dates have a time lag from the date of generation of the tax-
taxed income.
Their own criteria for calculating the tax, establishing temporary or permanent restrictions on the deduction of
expenses, exemptions, bonuses or deferrals of certain income, etc., generating the corresponding differences
between the accounting result and the tax result that is finally taxed, to which should be added the compensation of
tax losses of previous years, deductions and / or rebates of the quota, etc. Also, in some cases special regimes are
established, such as the tax consolidation of companies of the same jurisdiction, etc.
e) Public subsidies received
In the context of the information requested by the current legislation, this term has been interpreted as any aid or
grant in line with the provisions of the European Commission’s State Aid Guide and, in that context, the companies
that make up the Group have not received any subsidies or public aid in 2023.
The details of the information for the financial year 2023 (in millions of euros) are 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
Canada
Spain
Denmark
Finland
France
Greece
Ireland
Italy
Luxembourg
Norway
Netherlands
Portugal
United Kingdom
Sweden
Switzerland
Total
1,350
218
62
67
777
216
101
733
6
2
464
(22)
243
87
41
—
153
29
4,527
4,855
333
179
235
1,746
224
157
863
30
—
1,190
—
516
277
249
928
275
67
13,694
395
104
30
7
233
112
51
508
(2)
(2)
169
(23)
118
40
5
1
44
12
1,802
143
16
5
1
62
34
8
22
—
—
30
—
5
12
1
—
19
—
360
As of December 31, 2023, the Group’s return on assets (ROA) was estimated at 0.92%.
3
Santander Consumer Finance, S.A. And companies that make up the
Santander Consumer Finance Group (consolidated)
Consolidated Management Report for the financial year 2023
General external framework
Economic, regulatory and competitive context
In 2023, Santander operated in an environment dominated by geopolitical tensions and higher interest rates as central
banks looked to contain inflation, which gradually eased during the year. The world's major economies withstood
monetary policy tightening well, although there was a gradual slowdown in activity.
Our core regions' economies performed as follows:
–
–
–
–
–
–
Eurozone (GDP: Estimated +0.5% in 2023). The positive start of the year, supported by the normalization of
global supply chains and the less uncertainty about energy supply, was slowed in the second half of the year by
the rise in interest rates, the difficulties of industry in adapting to rising energy costs and the caution of
households with regard to consumption. Inflation fell (2.9% in December) as a result of the ECB’s interest rate
hike of 450 bp in this monetary cycle (the deposit facility from -0.5% to 4%).
Spain (GDP: +2.5% estimated in 2023). During the first half, GDP growth was driven by the external sector,
especially tourism. In the second half of the year, private consumption takes over as an engine of growth. The
labor market has remained solid, with record number of affiliates. Inflation closes the year at 3.1% (3.6% on
average) with a decrease in all components and a moderation of the underlying higher than expected (3.8% in
December from 4.5% in November)
Germany (GDP: -0.1% estimated in 2023). The German economy went into recession in 4T23. Consumer
spending suffered due to the collapse of real incomes due to still high inflation (it ended the year at 3.6%, but
the year average is 6%). Rising interest rates weighed investment in construction, while exports fell by almost
2% due to weak global demand and structural problems with industry competitiveness. The labor market
remained strong, employment continued to be created, but the unemployment rate increased (5.7%).
France (GDP: +0.9% estimated in 2023). Domestic demand has been led by investment while private
consumption has also grown (less than in 2022) as the year progressed thanks to the recovery of household
income. The contribution of the external sector is being positive, but exports are growing much less than in
2022. Inflation ends the year at 3.7% and the underlying at 3.4%, with food growing above 7%.
Norway (GDP: +1.0% estimated in 2023). Activity growth has remained low, following a slowdown in the first
half of the year, GDP remained virtually unchanged. The worst performance was recorded by private
consumption and investment. The labor market remains tight, but somewhat looser, with stable employment
and a very low unemployment rate (3.6% in 3T23). Inflation has slowed due to lower energy prices (3.8% in
December) but remains high and well above the Central Bank target (2%). For this reason, the Norges bank
raised interest rates to 4.5% in December.
Finland (GDP: -0.4% average annual estimated for 2023). Activity in Finland began to recover, albeit slowly, in
the first part of the year from the declines in GDP in the second half of 2022. However, in the third quarter it fell
again (-0.9% quarterly) and the data known so far, indicate that the weakness has continued in the latter part
of the year. The weakness of the Finnish economy is widespread, with declines in private consumption,
investment and the external sector, although thanks to the weaker domestic demand, its contribution to GDP
will be positive. Inflation has fallen throughout the year since the peak reached in December 2022 (9.5% year-
on-year), thanks mainly to the fall in energy prices. The labor market has slowly worsened with 2023, with the
unemployment rate rising to 7.6% (it closed 2022 at 6.9%). Vacancies remain very high, although they have
been reduced.
1
–
–
–
–
Italy: (GDP: Estimated 0.7% in 2023). Economic activity in 2023 has registered moderate and very stagnant
growth in the last half of the year. Private consumption has been progressively affected by high inflation,
although in the last quarter it registered a significant reduction (0.6% in December and 3.1% the underlying)
due to lower energy prices. Tighter financial conditions have also dragged investments down. Weak external
demand has affected exports. Despite poor growth, unemployment has been declining to 7.6% in 3T23, due to
the increase in employment. The commitment to fiscal consolidation seems more lax for the future, although
by 2023 we expect the debt and deficit to have fallen, the latter from -8% of GDP to -5.3%.
Poland (GDP: +0.6% estimated in 2023). Growth has shown an upward path supported by domestic demand.
Consumption has been supported by a strong labor market with full employment and a sharp increase in real
household income. Strong wage growth, coupled with the fall in inflation (6.5% in November), has allowed this
boost. Faced with this, the Central Bank has slowed its monetary easing, leaving the official rate at 5.75%
Portugal (GDP: +2.1% estimated in 2023). Growth has slowed over the year due to the continued cooling of
demand in the rest of the European Union. Despite this, the labor market is still in full employment (6.1% in 3
23) and inflation has moderated rapidly (1.4% in December). Noteworthy is the improvement in Moody’s rating
until A3, supported by economic and fiscal reforms, private sector deleveraging and the continued
strengthening of the banking sector.
Austria. It is estimated that the Austrian economy will close 2023 with a fall in GDP. It grew slightly in the first
quarter, after falls in the second half of 2022, but in the second quarter it fell significantly (1.1% quarterly) and
in the third quarter it continued in negative terrain. The sharp slowdown has been explained by the significant
drop in investment and exports, accompanied by weak private consumption. Inflation has slowed from the peak
it reached in January (11.2% year-on-year) and, although it remains at very high levels and above the average
for the euro area (it closed the year at 5.6% year-on-year). Despite the economic slowdown, the impact on the
labor market has been limited.
Information on expected developments in 2024
The management report contains certain forward-looking information reflecting plans, forecasts or estimates
of the administrators, which are based on assumptions that are considered reasonable by them. However, the user of this
report should bear in mind that forward-looking information should not be considered as a guarantee of the institution's
future performance, in the sense that such plans, forecasts or estimates are subject to numerous risks and uncertainties
that imply that the future performance of the entity does not have to coincide with that originally anticipated. Such risks
and uncertainties are described in the 'Risk Management and Compliance' chapter of this Management Report and in note
47 to the consolidated annual accounts.
The outlook for 2024 is for a moderate economic slowdown, in an environment that will continue to be of relative
uncertainty, due to global geopolitical tensions. Inflation, meanwhile, will continue to slow toward the central bank
target, allowing regions such as Europe to start reducing rates slowly, particularly during the second half of the year. We
do not expect this slowdown to have a marked impact in terms of rising unemployment, due to the narrowness of most
labor markets. In a detail by geography, the macroeconomic forecast for 2024 is as follows:
Eurozone
Following the economic stagnation in 2023, we expect the weaker tone to continue in 2024 (GDP forecast at 0.7%).
However, the eurozone can avoid going into recession because we expect a revival of private consumption and external
demand. Inflation will continue to decline, but not linearly, as the withdrawal of fiscal measures will lead to transient
rebounds. The unemployment rate is expected to rise slightly in the labor market, but it will remain close to historic lows.
Fiscal policy, we believe, will take a restrictive tone as the Stability Pact is revived. On the other hand, the reduction in
inflation may open the way to lower interest rates in the second half of 2024.
Spain
Growth is expected to slow down in 2024 to 1.4%, which will go from less to more. Private consumption will be the main
driver of growth as household disposable income will remain high (less inflation and a predictable rate drop in 2024 and
a stable labor market). Inflation (general and underlying) is expected to end the year at around 3%. Energy will no longer
subtract further inflation and the withdrawal of measures against the energy crisis will be a step in inflation. Despite this,
the underlying pressures will be moderated and we do not expect second-round effects.
2
Germany
Average growth of 0.6% is expected for 2024. A recovery in German growth is expected for 2024, in a year that will go
from less to more. The main driver will be private consumption, which will be favored by an environment of lower prices
and interest rates that have already hit the ceiling. Investment will also improve in 2024, but the industry continues to
face significant structural challenges. The contribution of the external sector will be negative in 2024 due to the higher
growth of imports in line with stronger domestic demand. Inflation will continue to decline in 2024 (both general and
underlying) gradually, ending the year at around 2.5 per cent.
France
GDP growth will accelerate in 2024, but will remain below 1% (we estimate 0.8%). As inflation slows and households’
purchasing power increases, consumer spending will recover, driving economic growth from less to more. We expect
business investment to remain resilient, although it should grow a little slower than activity. Job creation will continue,
but at a slower pace than in 2023. Inflation should fall by 3% by mid-2024, and end the year by about 2.5% (also the
underlying).
Norway
Activity will remain strong, but continental GDP growth will be moderate in 2024 (around 1%). This will keep core
inflation high, forcing the Central Bank to maintain the strict financial conditions that will weigh on household
consumption (households continue to maintain a high level of indebtedness) and investment, especially the housing
construction industry. The expected gradual acceleration in Europe will affect Norway’s exports, and so far the depreciated
krone has helped the dynamism of tourism that could continue to support services exports. The scarcity of the labor
market together with the slowdown in inflation in the second half of the year will allow some growth in consumption.
The labor market has already begun to show signs of slack (greater labor supply and lower employment growth), so the
unemployment rate will increase from the current 3.6% to about 4% of the working population. Inflation will slow as the
krona appreciates and could reach 2% in September when we expect Norges Bank to begin its monetary easing process
with the first cut of 25 pb (up to 4.25%) that would continue in the last meeting in december with another cut that would
bring the official interest rate to 4%.
Finland
Activity will gain dynamism as the year progresses, but it will do so slowly and already the drag effect of poor performance
at the end of 2023 will make the average GDP growth in the year limited or we could even see a new, although lower,
cession of the activity. The labor market will notice the economic weakness, where we will see a fall in the employment
rate and an increase in unemployment, although the deterioration will be limited. Labour shortages in some sectors will
continue to be a problem. Inflation, both general and underlying, will continue to moderate in 2024, although, on
average, it will still be at levels above 2%.
Italy
The economy is expected to grow by 0.6% this year as activity progressively recovers thanks to an improvement in private
consumption driven by an increase in real household income - we expect an average inflation of 2% - and the maintenance
of job creation that it will allow the unemployment rate to remain at 7.7%. Public spending will be supported by EU Next
Generation Recovery Funds, investment will be undermined by still tight financing conditions and the disappearance of
incentive effects for the construction sector, effects partly offset by the European Recovery and Resilience Funds. The
external sector will improve as the year progresses as a result of the gradual improvement of world trade and activity in
Europe. With regard to public accounts, the deficit is expected to decrease to 4.4% of GDP thanks to the elimination of
measures aimed at helping families cope with the energy cost and the elimination of tax credits for housing.
Poland
The economy began to rebound in 3T23 and GDP growth in 2024 is expected to be more pronounced, around 3%, driven
by private consumption. We expect the strong labor market and rising real incomes to support domestic demand. The
external situation will contribute less to this scenario of economic recovery. We expect further falls in inflation to 4%
3
year-on-year in the first quarter and then rebound around 6%, all depending on the measures of the new government.
We assume that the central bank’s benchmark interest rate could remain unchanged at 5.75% until the fourth quarter of
2024.
Portugal
After a year of moderation, 2024 is expected to be a year of stagnation (0.2% GDP growth). If core inflation continues to
moderate longer, monetary policy will need to remain restrictive for a longer period. In addition, increasing geoeconomic
risks and renewed energy shock also increase fears of increased inflationary pressures in 2024. In this context, the
Portuguese economy will not be immune to the gradual improvement in external demand, where companies will try to
keep their margins high as domestic demand loses momentum, which may consequently contribute to a deterioration in
labor market conditions. Unemployment is expected to rise to its natural level (7.8%) and inflation is expected to remain
above 2%. We expect the fiscal deficit to be close to equilibrium, after the 2023 surplus, as fiscal revenues lose traction
driven by a weaker labor market and economic activity. The fiscal budget must maintain a path of fiscal consolidation,
essential for achieving a sustainable trend in public debt.
Austria
Activity will gain dynamism as 2024 progresses and return to growth, leaving behind the poor performance accumulated
by the Austrian economy since mid-2022, where private consumption will be the driver of growth. The labor market will
remain robust, but the weakness of economic activity will be reflected in 2023 with lower employment growth and a
slight increase in the unemployment rate. Inflation will continue to slow down, but will remain high in the medium term.
Economic outlook
Financial markets
Financial markets ended 2023 up optimistically trading an upcoming turn in monetary policies in advanced countries.
Periods of monetary policy easing, and more in the early stages, historically often lead to a downward correction in long-
term debt returns. This pattern of behavior repeat itself in 2024, although with a larger track record in US debt than in
German debt. Another trend in the sovereign debt market will be a gradual normalization of the slopes of the yield curves
once official rates begin to decline.
The expected narrowing of interest rate differentials and the narrower cyclical gap between the US economies and the
eurozone advocate a slow and gradual depreciation of the dollar.
The smooth landing of the economy we believe will support equity markets. The global environment suggests positive
but low absolute returns for equities in 2024. The slowdown in activity, the higher interest burden and the lower capacity
to translate costs to prices mean greater pressure on profit margins
In emerging economies, a major focus of uncertainty remains the Chinese economy and the measures it takes to solve its
problems in the real estate sector.
The risk in this central scenario would be that central banks in the advanced ones would delay the start of their Y cuts
or the Chinese economy slowing further, with adverse effects on investor appetite.
The banking environment will be marked by a change of bias in monetary policy, the gradual withdrawal of excess
liquidity and economic cooling, which will have an impact on the interest margin and the evolution of portfolio quality.
Risks are biased downwards and may come from non-bank financial players, with the risk of disorderly asset price
adjustments and market liquidity disruptions. Still, for the moment, most entities are in a position of solid solvency to
face such a scenario.
In addition to the economic environment, banks must cope with the acceleration of the business digitalization process
and the knowledge and management of the risks associated with climate change.
4
Financial regulation
In 2024, a greater weight of the sustainability, digital and retail banking agenda is expected. As happens every five years,
the June 2024 European Parliament elections could slow down the adoption and submission of new proposals.
Prudential and resolution
Following the 2023 agreement in Europe on Basel 3 reform, the final framework is expected to be published in early
2024 and its implementation from 1 January 2025. The Basel Committee will continue to work on lessons from the fall
of Silicon Valley Bank and Credit Suisse, and on further developments of the prudential framework for crypto asset
exposures. On the other hand, we expect to discuss specific issues such as the framework for capital buffers in Europe as
well as the framework for securitizations at international level. We do not expect much progress in the revision of the
crisis management framework in Europe, given the absence of consensus on issues that are considered highly political
and sensitive.
Sustainability
Agreements are expected on the due diligence directive, energy efficiency directive and ESG ratings in Europe. During
2024 the European Commission will work on its commitment to reduce the reporting burden, which involves reducing
requirements by 20%. The EBA, EIOPA and ESMA are expected to publish their proposal for the definition of greenwashing
in the European financial sector. In addition, the EBA will consider the desirability of revising the Pillar 1 framework to
ensure that climate and environmental risks are properly integrated into the prudential framework. In parallel, we expect
you to start working on the content guides of the transition plans for banks. The Basel Committee will reach an agreement
to complement the transparency requirements of Pillar 3, with environmental risk management information.
Digital
It is expected that all discussions in the field of artificial intelligence (AI) will be further intensified, in the heat of the
manifestations of opportunities and risks of the use of generative artificial intelligence. It is this issue that has prevented
the adoption in 2023 of the AI regulation in Europe, which is now expected in 2024. We will also see the development of
more international principles from different forums, along with those of the G7, recently adopted. Discussions in the
world of data, payments and CBDCs will continue very intensively. The Financial Stability Board (FSB) approved different
frameworks of recommendations for the regulation of crypto assets and stablecoins during 2023 that are expected to be
implemented by some jurisdictions during 2024.
Retail banking
The debate will focus heavily on the European Commission's Retail Investment Strategy and on specific issues in specific
jurisdictions linked to the debate on consumer protection and rising cost of living.
Business evolution
After a difficult environment in 2022, 2023 was also a complex year due to rising interest rates that affected new business
profitability, cost of risk and customers' credit appetite. Some of the headwinds were: i) the change of TLTRO contractual
conditions, ii) rising interest rates that put pressure on consumer finance monoliners' margins, compressing them while
loan books reprice, added to a time when the Auto and Consumer industries are transforming towards more sustainable
businesses (from a mobility and consumption perspective), iii) provisioning for the Swiss franc mortgage portfolio in
Poland, and iv) normalization from a very low cost of risk towards the average across the cycle.
5
After a 2022 in which new market registrations in Europe fell by 4% compared to 2021 and -29% compared to 2019, in
2023 they grew by +14% compared to 2022. New business volumes increased by 13% in new cars and fell 4% in used
cars, both year-on-year, slightly below the transactions of our market, as we prioritize profitability over volume. The new
business is also being actively revalued to compensate for the higher financing costs resulting from the rise in interest
rates in recent quarters.
The stock of loans and advances to customers reached 117,642 million euros, 8% more than in 2022 rose by 8%.
Portfolios continue to be monitored to prevent the impact of deterioration on activity. In addition, the balance of assets
transferred under operating leases reached 3,925 million euros, increasing by 29% compared to the previous year.
Customer deposits increased by 18% in euros, to 48,844 million euros. Access to wholesale finance markets remains
strong and diversified. New operations are being actively revalued to offset higher financing costs.
Results
Santander Consumer Finance obtained an attributable profit in 2023 of 1,003.9 million euros less than 2022 by 238.9
million euros and being able to compensate for the negative impacts of a macro environment marked by high inflation,
the rise in interest rates and the impact of certain regulatory changes that have impacted several of the geographies in
which Santander Consumer Finance is present. Likewise, the year 2023 is impacted by the change of perimeter derived
from the renewal of the agreement with Stellantis.
By heading of the income statement, the following impacts are:
•
•
•
•
Interest margin decreased by 4.1% compared to the previous year, impacted by the sharp increase in financing
costs, higher interest rates that have impacted during the full year and the change in TLTRO conditions. In 2023,
the margin is also particularly impacted by the change of perimeter resulting from the renewal of the agreement
with Stellantis that involved the sale of the joint ventures of the UK and Germany (including the branch in
Austria). These impacts have been partially mitigated by active margin management and price review initiatives
on new loans.
The liquidity position has remained strong at all times and no additional liquidity stresses have been generated,
thanks to the evolution of deposits and wholesale line arrangements. 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 357% and the NSFR (Net Stable Funding Ratio) for the same
perimeter was 111% maintaining comfortable levels throughout the year.
The commissions were 6.9% lower than the previous year affected by the new regulations that impact
insurance commissions in Germany and partially compensated by improvements in the rest of the geographies.
Financial Transaction Results reflect the positive result of hedging operations and write-off assets and
liabilities at amortized cost.
The other operating results increased by 17.8% with the growth of the results of the leasing activity and the
lower contribution to the Single Bank Resolution Fund, which offset the negative impact of the new bank tax in
Spain paid in 2023.
• Operating and amortization costs stand at €2,093 million, up 7.6% from 2022 due to inflation, strategic and
transformation investments to increase future revenues and reduce operating expenses of new businesses. It
also includes the impact of perimeter changes due to the renewal of the agreement with Stellantis and the
acquisition of MCE Bank. The efficiency ratio stood at 46.2%, increasing compared to the previous year due to
the impact of the fall in revenue mentioned in the previous paragraphs.
•
Provisions for bad debts were 51.3% higher than the previous year due to the normalization of credit quality
and a very low comparison base. The cost of credit stood at 0.59%, 17 bp higher than the previous year and a
default ratio of 2.15% very similar to 2022 (2.06%).
6
• Other results grow significantly, especially due to the gains generated by the renewal of the agreement with
Stellantis in 2023.
In summary, Santander Consumer Finance continues to generate high revenues and results while maintaining high
profitability, efficiency and a low cost of credit in a year marked by inflation and strong rise in interest rates
consolidated in 2023. Expectations for 2024 are positive in all the markets in which it operates.
Strategy
SCF is a European leader in consumer finance, is present in 18 countries (16 in Europe, China and Canada) and works
through more than 130,000 associated points of sale. It offers its customers and partners a value proposition to improve
their sales capabilities by financing products and developing advanced technologies that give them a competitive
advantage. SCF aims to become the best provider of automotive finance and digital mobility services in Europe.
SCF’s goal is to offer competitive financing solutions to maintain our European leadership in Profitability and scale in car
and consumer loans, taking advantage of our own platforms in mobility, leasing, subscription and BNPL.
The strategy developed in 2023 is based on the following priorities:
–
Strengthen leadership in digital consumer lending, focused on growth and transformation:
▪
▪
Auto: Reinforce the leading position in car finance, gain market share, strengthen the leasing business
and develop subscription services. SCF focuses on providing advanced digital financing capabilities to
its partners to support their sales growth strategy and the best customer experience.
Consumer (not auto): Gain market share by specializing and developing
Technology platforms leveraging Europe’s leading position in buy now, pay later (BNPL), credit cards
and direct loans.
▪
Retail: focus on digital banking.
–
Continue the transformation of the operating model in Europe while maintaining efficiency and being a
reference in the sector, through:
▪
▪
▪
A simplified operational structure, using common technological platforms; redesign and automation
of processes.
Reducing sensitivity to rate increases by boosting deposit collection and accelerating the revaluation
of new loans.
Increase profit through strategic operations such as Stellantis (auto), the launch of auto leasing and
subscription; the development of BNPL.; and the acquisition of Mitsubishi Bank Germany.
–
Promote technological transformation projects in Europe, with new agreements with manufacturers, the car
leasing platform
– At ESG, the transition to a greener economy is taking place by doing business sustainably. SCF supports the
green transition of its customers through the financing of clean vehicles, solar Groups, bicycles, heating
systems and energy solutions.
SCF has been recognized as a Top Employer or Great Place to Work (GPTW) in four countries.
7
Alternative performance measures (APMs)
In addition to financial information prepared under the 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 published by the European Securities and Markets Authority (ESMA) on 5 October
2015, as well as non-IFRS measures.
These APMs and non-IFRS measures have been used to plan, monitor and assess our evolution. We believe that these
APMs and non-IFRS measures are useful for management and investors since they facilitate the comparison of operating
performance between periods. Although we believe that these APMs and non-IFRS measures allow for a better
assessment of the evolution of our business, this information should be considered only as additional information, and
in no case substitute for financial information prepared under IFRS. In addition, the way Santander Group defines and
calculates these APMs 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:
Indicators of profitability and efficiency
The efficiency ratio allows to measure how many administrative overheads (staff and others) and depreciation expenses
are needed to generate income.
Roa ratios have been incorporated, considering that they better reflect the evolution of the underlying business.
Ratio
Formula
Relevance of use
RoA (return on assets)
Profit /loss of the year
Average of total assets
Efficiency ratio
(cost to income)
Operating expense (*)
Gross margin
(*) Operating costs: Administrative overhead + 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.
8
Profitability and efficiency (EUR Thousands)
Roa
and %)
Profit / loss for the year
Total assets
Efficiency ratio (cost to income)
Operating expenses
Administrative expenses
Amortization
Gross margin
Credit risk indicators
2023
0.92 %
1,321,150
143,347,488
(46.24%)
(2,093,356)
(1,884,565)
(208,791)
4,527,405
2022
1.23 %
1,601,623
130,279,694
(41.87%)
(1,945,415)
(1,756,232)
(189,183)
4,646,491
Credit risk indicators measure the quality of the credit portfolio and the percentage of the delinquent portfolio that is
covered by insolvency 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
and
for
granted,
contingent risks.
customers
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
9
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 the
portfolio of loans granted to customers, and
therefore serves to measure the Group's
credit quality.
(*1) Total risk = normal and doubtful balances of loans and client advances and client guarantees + normal and doubtful
balances of contingent client commitments.
(*2) Provisions for hedging losses on loans and advances to customers, guarantees to customers and commitments
granted 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 or (-) net gains on modification.
Credit risk (EUR Thousands) and %
Delinquency rate
and %)
Impaired assets
Commitments and guarantees granted
Loans and advances to customers without considering impairment adjustments
Commitments and guarantees granted total
2023
2.15 %
2,512,918
27,854
2022
2.06 %
2,180,048
59,106
117,641,700 108,455,886
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
84.79 %
88.61 %
2,154,375
1,984,064
2,512,918
27,854
2,180,048
59,106
Cost of credit
Impairment
Loans and advances - Customers
Corporate principles
0.59 %
(683,873)
0.42 %
(451,931)
115,508,383 106,499,832
Grupo Santander, of which Santander Consumer Finance is a part, has set itself as a strategic objective to achieve
excellence in risk management. It has always been a priority axis of action throughout its more than 150 years of
experience.
In recent years, it has accelerated its evolution to anticipate and respond to the great challenges of an ever-changing
economic, social and regulatory environment.
Consequently, the risk function is more important than ever for Grupo Santander to remain a solid, safe and
sustainable bank, an example for the entire financial sector and a benchmark for all those who aspire to turn
leadership into risks into a competitive advantage.
10
Santander Consumer Finance aims to build the future through early management of all risks and to protect the
present through a robust control environment. Thus, it has determined that the risk function is based on the following
pillars, which are aligned with the strategy and business model of the Santander Group and take into account the
recommendations of the supervisory bodies, regulators and best market practices:
1. The business strategy is defined within the risk appetite. The Board of Santander Consumer Finance determines
the amount and typology of the risks it considers reasonable to assume in the execution of its business strategy
and its development in objective limits, verifiable and consistent with the risk appetite for each relevant activity.
2. All risks must be managed by the units that generate them through advanced models and tools integrated into
the different businesses. Santander Consumer Finance is promoting advanced risk management with innovative
models and metrics, in addition to a control, reporting and scaling framework, which allow to identify and
manage risks from different perspectives.
3. Anticipatory vision for all types of risks must be integrated into the processes of risk identification, assessment
and management.
4. The independence of the risk function encompasses all risks and provides an adequate separation between the
risk generating units and those responsible for their control. It implies that it has sufficient authority and direct
access to the management and governance bodies responsible for setting and overseeing risk strategy and
policies.
5. Risk management needs to have the best processes and infrastructures. Santander Consumer Finance aims to be
the reference model in the development of infrastructures and processes to support risk management.
6. A risk culture integrated throughout the organization, comprising a series of attitudes, values, skills and
guidelines for action against all risks. Santander Consumer Finance understands that advanced risk management
cannot be achieved without a strong and constant risk culture that is present in each and every one of its activities.
11
Risk map
Santander Consumer Finance has a recurring process for the identification of the material risks to which it is or may be
exposed, which is reflected in the risk map. Material risks should be incorporated into risk appetite, risk strategy, risk
profile assessment exercise and ICAAP/ILAAP. Below is the latest update of the Santander Consumer Finance risk map.
In its first level the risk map includes the following (General Risk Framework):
• Credit risk is the risk of financial loss caused by the default or impairment of the credit quality of a client or
other third party, to which Santander Consumer Finance has financed or for which a contractual obligation has
been assumed.
• Market risk is the risk incurred as a result of changes in market factors affecting the value of positions in
trading portfolios. This risk is not relevant in Santander Consumer Finance because it is not a trading
institution.
• Liquidity risk is the risk that Santander Consumer Finance does not have the liquid financial assets necessary
to meet its obligations at maturity, or can only obtain them at a high cost.
• Structural risk is the risk derived from the management of the different balance sheet items, both in the bank
portfolio and in relation to insurance and pension activities.
• Capital Risk is the risk that Santander Consumer Finance 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, personnel and
systems or due to external events. This definition includes legal risk.
• Financial crime risk is the risk arising from actions or the use of the group’s means, products and services in
criminal or illegal activities. These activities include, inter alia, money laundering, terrorist financing, violation
of international sanctions programs, corruption, bribery and tax evasion.
12
• Strategic Risk is the risk of loss or damage arising from strategic decisions, or their poor implementation,
affecting the long-term interests of our main stakeholders, or an inability to adapt to the evolving
environment.
• Reputational risk is defined as the risk of a negative economic impact, current or potential, due to an
impairment in the perception of the bank by employees, customers, shareholders/investors and society in
general.
• Model risk is the risk of loss derived from inaccurate predictions, which may result in the bank making sub-
optimal decisions, or from improper use of a model.
The material risks in Santander Consumer Finance are: Credit, default (including concentration and migration),
liquidity and funding, structural, structural interest rate, capital, operational, financial and strategic crime.
The relevant risks in Santander Consumer Finance are: Direct residual value, structural exchange rate, pensions, legal,
fraud, IT and cyber risk, suppliers, operational resilience, transformation, people, data, processes, regulatory
compliance, conduct, reputational, model and ESG risks (related to environmental and climate, social and governance
factors).
There are two types of risk whose relevance is increasing in recent times and for which Santander Consumer Finance
is strengthening its management and control: Direct residual value risk and ESG/climate risks.
Direct residual value risk is defined as the risk of loss that an entity may have if at any time during the life of an
automobile contract (loan, lease, etc.) the customer has the option or obligation to return the vehicle as a full and
final settlement, due to uncertainty about the sale price of the vehicle made at that time.
ESG factors (environmental and climate, social and governance) can influence traditional risk types (credit, liquidity,
operational, reputational, etc.) arising from the physical effects of climate change, generated by specific events as
well as chronic changes in the environment, such as environmental and environmental factors. or the process of
transition to a model of development of lower emissions, including legislative, technological or behavioral changes
of economic agents, as well as the failure to meet the expectations and commitments acquired.
Corporate Risk Governance
The objective of the governance of the risk function is to establish adequate and efficient risk decision-making as well
as effective risk control and to ensure that risks are managed according to the level of risk appetite approved by the
Board of administration of Santander Consumer Finance.
To this end, the following principles are established:
• Separation of decision-making and risk control.
• Strengthening the responsibility of risk-generating functions in decision-making.
• Ensure that all risk decisions have a formal approval process.
• Ensure an aggregate view of all types of risks.
• Strengthen risk control committees.
• Maintain an agile and efficient committee structure, ensuring:
– Participation and involvement in risk decisions, as well as in their supervision and control, of
management bodies and senior management.
– Coordination between the different lines of defense that configure the functions of risk management
and control.
– Alignment of objectives, monitoring of compliance and implementation of corrective measures when
necessary.
13
– Existence of an adequate environment for managing and controlling all risks.
In order to achieve these objectives, the Model Governance Committees scheme must ensure adequate:
• Structure, which implies, at least, stratification according to levels of relevance, balanced delegation capacity
and incident elevation protocols.
• Composition, with members of sufficient level of interlocution and sufficient representation of the business
and support areas.
• Operability, that is, frequency, minimum attendance level and appropriate procedures.
The governance of risk activity should establish and facilitate the channels of coordination between the units and
Santander Consumer Finance , as well as the alignment of risk management and control models.
The governing bodies of Santander Consumer Finance units will be structured according to local regulatory and legal
requirements and the size and complexity of each unit.
There are special situations committees (Gold, Silver and Bronze) that will be activated to follow up immediately on
any event that may affect the business and activity of the entity.
14
Roles and responsibilities
The risk function is structured into three lines of defense, according to corporate policy, to manage and control risks
effectively:
•
•
•
First line of defense: Business functions that take or generate risk exposure constitute the first line of defense.
The first line of defense identifies, measures, controls, monitors and reports the risks that arise and applies the
internal regulations that regulate risk management. Risk generation should be adjusted to the approved risk
appetite and associated limits.
Second line of defense: Formed by the risk functions, which independently supervise and question the risk
management activities carried out by the first line of defense. This second line of defense should ensure, within
their respective areas of responsibility, that risks are managed according to the risk appetite defined by senior
management and promote a strong risk culture throughout the organization.
Third line of defense: The Internal Audit function is independent to assure the board of directors, and senior
management, the quality and effectiveness of internal controls, government and risk management systems,
helping to safeguard our value, solvency and reputation.
Structure of Risk Committees
Responsibility for risk control and management lies ultimately with the Board of Directors, from which the powers
delegated to commissions and committees emanate. At Santander Consumer Finance, the Board relies on the Risk
Supervision, Regulation and Compliance committee, as an independent risk control and oversight committee. In addition,
the Executive Committee devotes special attention to risk management. These statutory bodies form the highest level of
risk governance.
Bodies for independent control
– Risk, Regulation and Compliance Supervision Commission (CSRRC):
The Commission's mission is to assist the Board of Directors in the supervision and control of risks, in the definition
and evaluation of risk policies, as well as in the determination of risk propensity and risk strategy.
It is composed of external or non-executive directors, with a majority representation of independent directors and
chaired by an independent director.
The functions of the Risk, Regulation and Compliance Supervision Commission are:
– Support and advise the Board of Directors in the definition and evaluation of risk policies affecting Santander
Consumer Finance and in the determination of risk propensity and risk strategy.
– Ensure that the pricing policy for assets and liabilities offered to clients takes full account of the business
model and risk strategy.
– Know and evaluate management tools, improvement initiatives, project evolution and any other relevant
activity related to risk control.
– Determine, together with the Management Board, the nature, quantity, format and frequency of risk
information to be received by the Commission and the Management Board.
– Collaborate to establish sound remuneration policies and practices. For this purpose, the Risk Supervision,
Regulation and Compliance Commission shall examine, without prejudice to the functions of the
Remuneration Commission, whether the incentive policy provided for in the remuneration system takes into
account risk, capital, liquidity and probability and opportunity of profits.
– Risk Control Committee (CCR):
This collegiate body is responsible for the supervision and global risk control of Santander Consumer Finance in
accordance with the powers assigned to it by the Board of Directors of Santander Consumer Finance, S.A.
15
Its objectives are:
• To be the instrument for effective risk control, ensuring that risks are managed according to the Bank’s level
of risk appetite approved by the Board of Directors of Santander Consumer Finance, S.A., and allowing a
comprehensive view of all the risks identified in the risk map of the general risk framework, including the
identification and monitoring of both current and emerging risks and their impact on the risk profile of the
Santander Consumer Finance Group.
• Ensure the best estimate of the provision and its proper registration.
This committee is chaired by the Chief Risk Officer (CRO) of Santander Consumer Finance and is composed of
executives of Santander Consumer Finance. They are represented, at least, among others, the risk function, which
the presidency exercises, and the functions of compliance, financial and management control, as well as
representatives of the business areas. The CROs of local entities may participate periodically in order to report,
among others, the risk profile of the different entities.
The Risk Control Committee reports to the Risk Supervision, Regulation and Compliance Committee and assists it
in its role of supporting the Board of Directors.
– Provisions Committee:
The Provisions Committee is the collegiate decision-making body responsible for the global management of the
provisions in accordance with the powers delegated by the Executive Committee of Risks of Santander Consumer
Finance, S.A. and will supervise, within its area of action and decision, all topics related to Santander Consumer
Finance provisions. Its objective is to be the instrument for decision-making, ensuring that they are within the
government of provisions established in Santander Consumer Finance, as well as to inform the Board of Directors
or its committees of their activity when necessary
Decision-making bodies
– Executive Risk Committee (CER):
The Risk Executive Committee is the collegiate decision-making body responsible for global risk management in
accordance with the powers assigned to it by the Board of Directors of Santander Consumer Finance, S.A., and will
continue, in its scope of action and decision, all risks identified by the Bank.
Its objective is to be the instrument for making risk-taking decisions at the highest level, ensuring that they are
within the limits set in the risk appetite of the Santander Consumer Finance Group, as well as report its activity to
the Council or its commissions when required.
This committee is chaired by the Head of Santander Consumer Finance and is composed of executive directors,
and other executives of Santander Consumer Finance, being represented, among others, the functions of risk,
financial, management control and compliance. The CRO of Santander Consumer Finance has the right of veto
over the decisions of this committee.
– Sub-Committee on Proposals (RPSc):
Santander Consumer Finance’s Sub-Committee on Risk Proposals is the collegiate decision-making body
responsible for making decisions relating to business operations and countries, in terms of credit, market,
liquidity and structural risk (or any other type of risk if necessary), ensuring that they are within the limits set in
Santander Consumer Finance’s risk appetite as well as reporting their activity to the Risk Executive Committee
when required.
This committee is chaired by the CRO of Santander Consumer Finance, and is composed of executives of Santander
Consumer Finance, being represented, among others, the functions of risk, financial, management control and
compliance.
The Risk Committee structure of the Western Hub branches:
16
Under the merger agreements and for the purpose of ensuring proper governance and continuity of the risk function
of the branches of the Western Hub by Santander Consumer Finance, S.A (absorbing company):
•
As many powers, powers and attributions in matters of risk were granted individually or collectively in the
branches, they will remain in force under the same terms and conditions.
• What is particularly established in its approval and risk control committees shall remain in force with the same
functions, unless one or more powers are expressly claimed by a higher-ranking body.
•
Any discrepancy in the understanding of the powers and competence of the committees shall be interpreted in
the sense that it best favors the governance functions of the company as a whole and, in any case, subject to
the practices and uses of the bodies of higher hierarchy of the entity Santander Consumer Finance S.A.
Organizational structure of the risk function
The Group Chief Risk Officer (GCRO) is responsible for the risk function at Santander Consumer Finance and reports to the
Head of Santander Consumer Finance, who is a member of the Board of Directors.
The GCRO, which provides advice and challenges to the executive line, reports in addition and independently to the Risk
Supervision, Regulation and Compliance Commission as well as to the Board of Directors.
Advanced risk management has a holistic and anticipatory view of risks, based on intensive model use, aimed at building
a strong control environment while meeting the requirements of the regulator and supervisor.
The risk management and control model shares, in Santander Consumer Finance, basic principles through corporate
frameworks. These emanate from the Group itself and Santander Consumer Finance has joined them through their
respective management bodies, shaping the relations between the subsidiaries and Santander Consumer Finance,
including its participation in the making of relevant decisions through their validation.
The Group-Subsidiaries and Good Governance Practices model for subsidiaries recommends that each subsidiary have a
statutory risk committee and another executive risk committee, chaired by the Chief Executive Officer (CEO), in line with
the best standards of corporate governance, homogeneous to those existing in the Group and collected through the
corporate framework, to which Santander Consumer Finance is adhering.
The administrative bodies of Santander Consumer Finance, according to the internal governance framework established
by the Group, have their own risk faculties model (quantitative and qualitative), it must follow the principles of action
contained in the models and frameworks of reference that are developed at the corporate level.
Given its ability to provide a comprehensive and aggregated view of all risks, the corporation reserves the powers to
validate and challenge operations and management policies in the different units, insofar as they affect the Group’s risk
profile.
The identification and assessment of all risks is a cornerstone for their control and management. The Group’s main types
of risk are described below: Credit Risk, Market Risk, Operational Risk, and Compliance and Conduct Risk.
Santander Consumer Finance has undertaken several initiatives to improve the relationship between Santander
Consumer Finance and its subsidiaries, and to improve the advanced risk management model.
17
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.
Evolution of magnitudes in 2023
The evolution of arrears and the cost of credit reflect the impact of the deterioration of the economic environment
mitigated by prudent risk management, which has, in general, allowed us to maintain such data at levels below that
of our competitors in recent years. As a result, Santander Consumer Finance maintains an adequate hedge level to
address the expected loss of the credit risk portfolios it manages.
As of December 2023, the NPL rate was 2.15%, based on controlled risk, despite the upward trend due to adverse
situations experienced throughout 2023, to the measures applied in the units and to the risk appetite of Santander
Consumer Finance. Non-performing loans (2,477 million euros) are distributed by units as follows: Nordics accounts
for 21% of the total, Spain and Portugal 26%, Germany and Austria 37%, France 8% and Italy 8%. As for the type of
portfolio, Auto represents 46% of the total, Direct 35%, Cards 7%, Stock Finance 1%, Mortgages 3%, Durable 3% and
others 5%.
Despite the macroeconomic environment due to interest rate hikes, inflation, the war between Russia and Ukraine,
the default ratio has closed slightly above the December 2022 figure (9 basis points).
In terms of the cost of credit, this ratio has a low risk profile thanks to the granularity and predictability of Santander
Consumer Finance portfolios. The cost of 12-month credit at the end of December 2023 was 0.59%.
Main magnitudes and evolution
The credit risk portfolio profile of Santander Consumer Finance is characterized by a diversified geographical
distribution and the predominance of retail banking activity.
18
Global Credit Risk Map 2023
The following table details the global map of gross credit exposure by geographical area:
SCF Group - Gross Credit risk exposure
2023 (million euros) Variation December
2022
Spain and Portugal (*)
Italy
France
Germany and Austria
Nordics (Scandinavia)
United Kingdom
Rest
Total
16,159
15,542
19,412
44,172
17,390
—
4,967
117,642
8.07 %
50.14 %
21.78 %
4.92 %
(2.39) %
— %
10.90 %
8.47 %
% Portfolio
13.74 %
13.21 %
16.50 %
37.55 %
14.78 %
— %
4.22 %
100.00 %
In terms of vision by products at the end of December 2023, Auto represents 62% of the total gross exposure, direct
11%, mortgages 3%, durables 2%, Stock Finance 14%, cards 2% and others 6%. Germany concentrates the largest
percentage of the portfolio with 38% along with Austria. On the other hand Nordics (Scandinavia) represents 15%,
and includes the units of Norway, Denmark, Sweden and Finland. France, including Stellantis Joint Ventures, accounts
for 17% of the total. Spain, Portugal and their respective units resulting from cooperation with Stellantis, account for
14% of the total.
Information on the estimate of impairment losses
Calculation of expected credit losses:
The expected credit losses are calculated, in the Santander Consumer Finance group, based on parameters (mainly PD
and LGD) that are obtained from models developed internally following the specific requirements of IFRS 9, as well as
other guidelines issued by regulators, supervisors and other international bodies (EBA, NCA, BIS, GPPC). The models are
constructed using internal information with historical depth and granularity sufficiently representative, the experience
acquired in the regulatory and management field, as well as forward-looking information based on macroeconomic
scenarios, and allow to estimate losses throughout the life of the operation. The models follow a clearly defined life cycle
that includes, among others, an internal validation process, monitoring and governance, to ensure their robustness and
suitability for use.
Determination of the significant increase in risk:
For the determination of the classification in Stage 2, it is evaluated if there is a significant increase in credit risk (SICR)
since the initial recognition of the transactions, considering a set of common principles across the Group that ensure that
all financial instruments are subject to this assessment, which considers the particularities of each portfolio and product
type from various indicators, quantitative and qualitative. All this, subject to the expert judgment of analysts, who set the
thresholds under an adequate integration in management, and implemented according to the approved government. The
judgments and criteria used by the Group to establish the thresholds are based on a set of principles and develop a set of
techniques. The principles are as follows:
•
•
Universality: All financial instruments under a credit rating must be evaluated by their possible SICR.
Proportionality: The definition of the SICR must take into account the particularities of each portfolio.
• Materiality: Its implementation must also be consistent with the relevance of each portfolio so as not to incur
unnecessary cost or effort.
• Holistic view: The selected approach should be a combination of the most relevant aspects of credit risk (i.e.
quantitative and qualitative).
19
•
•
•
Application of IFRS 9: The approach should consider the characteristics of IFRS 9, focusing on a comparison with
credit risk on initial recognition, in addition to considering forward-looking information.
Integration of risk management: The criteria must be consistent with those metrics considered in the day-to-
day life of risk management.
Documentation: Appropriate documentation must be prepared. The techniques are summarized below:
–
–
–
–
Stage 2 stability: In the absence of significant changes in the credit quality of portfolios, the volume
of assets in Stage 2 should maintain some stability as a whole.
Economic reasonableness: At the transaction level, stage 2 is expected to be a transitional
classification for exposures that could eventually move into a credit impairment statement at some
point or stage 3, as well as for exposures that have suffered credit impairment and whose credit quality
is improving and return to stage 1.
Predictive power: The SICR definition is expected to avoid as far as possible direct migrations from
stage 1 to stage 3 without having been previously classified in stage 2.
Time in Stage 2: Exposures are not expected to remain marked as Stage 2 for an excessive amount of
time.
The application of several of the above techniques results in the setting of one or more thresholds for each portfolio in
each geography. In addition, these thresholds are subject to periodic review by calibration tests, which may lead to the
updating of threshold types or their values. To classify financial instruments in stage 2, we consider the following criteria:
• Quantitative Criteria: Changes in the risk of default occurring over the expected life of the financial instrument
are analyzed and quantified in relation to its level of credit risk at the initial time. In order to consider significant
changes when financial instruments are classified in Stage 2, each subsidiary has defined the quantitative
thresholds of its portfolios in accordance with the guidelines of the group, ensuring a consistent interpretation
across our geographies. These thresholds can be expressed as an absolute or relative increase in the probability
of default.
Within the aforementioned quantitative thresholds, we consider two types: The relative threshold is
understood to be one that compares the current credit quality with the credit quality at the time of the
concession of the transaction in percentage terms of variation. In addition, an absolute threshold compares both
references in total terms, calculating the difference between the two. These absolute/relative concepts are used
homogeneously (with different values) across all geographies. The use of one type of threshold or another is
determined according to the type of portfolio and characteristics such as the starting point of the average credit
quality of the portfolio.
• Qualitative criteria: Various indicators are used that are aligned with those employed in the ordinary
management of credit risk and in accordance with current regulations (e.g. irregular with more than 30 days,
refinancing, etc.). Each subsidiary has defined these indicators for its portfolios, with special attention to
reinforce these qualitative criteria through expert judgment. When the presumption of significant impairment
of credit risk is eliminated, due to a sufficient improvement of the credit rating, the debtor can be re-classified
in Stage 1, without any trial period in Stage 2.
•
Definition of default; the new definition of the EBA Guidelines is incorporated into the calculation of provisions,
considering their application to the prudential field, and they have also been aligned with the definitions of
default and stage 3. This definition leads to the application of the following criteria to classify exposures as
Stage 3: one or more payments unpaid for 90 consecutive days, representing at least 1% of the customer’s total
exposure or identification of other criteria showing, even in the absence of defaults, that the counterparty is
unlikely to be able to meet all its financial obligations. The Group applies the principle of contagion of
deterioration to all customer exposures marked in arrears. Where a debtor belongs to a group, the principle of
contagion of impairment may also apply to all Group exposures. The default rating is maintained during the 3-
month trial period following the disappearance of all of the default indicators described above, and this period
is extended to one year for restructured loans that have been classified as default.
20
•
Expected life of the financial instrument: The expected life of a financial instrument is estimated taking into
account all contractual terms (e.g. advance payments, duration, purchase options, etc.). The contract period
(including extension options) is the maximum period for measuring expected credit losses. In the case of
financial instruments with undefined contractual maturity and with an available balance component (e.g. credit
cards), the expected life shall be estimated taking into account the period during which the institution is exposed
to credit risk and the effectiveness of the management practices that mitigate such exposure.
1. Prospective vision
Estimating expected losses requires a high degree of expert judgment and the support of historical, current and future
information. In this sense, the estimates of expected loss are based on an unbiased and weighted probability of
occurrence of up to five possible future scenarios that could affect the capacity to collect contractual cash flows. These
scenarios take into account the time value of money, relevant information available on past events and current
conditions and projections of macroeconomic factors that are considered important for estimating this amount (e.g.,
GDP, house price, unemployment rate, etc.).
The use of forward-looking information through macroeconomic scenarios is common to various internal management
processes and regulatory requirements. The guidelines and governance of the Group ensure synergy and coherence
between the different processes.
During 2023, the Group updated the macroeconomic scenarios included in the provisioning models with the most up-to-
date information on the current environment. Accordingly, the Group uses a forward-looking view to estimate the
expected losses.
2. Additional elements
When necessary because they have not been captured under the two above elements, they include, among others, the
analysis of sectors, or other axes of credit profile analysis, if their impacts are not sufficiently collected by the
macroeconomic scenarios. Also the collective analysis techniques, when the potential deterioration in a group of
customers is not possible to identify it individually.
With the elements indicated above, Santander Consumer Finance Group evaluates in each of the geographies the
evolution of the credit quality of its customers, for the purposes of its classification in stages and consequently the
calculation of the expected loss.
Quantification of additional provisions by the current macroeconomic environment
At the end of 2022, additional provisions were included, where necessary, to cover potential impacts related to the
scenario of persistent inflation and high interest rates. Adjustments have been continuously monitored, recalculated or
reformulated throughout 2023. In total, at the end of 2023, the additional adjustments recorded by the Santander
Consumer Finance Group on the basis of macroeconomic aspects amount to 3.51 million euros and are mainly due to the
inclusion of additional effects derived from inflation and interest rates, that do not respond to the historical casuistry
included in the projection models. The Group geographies affected by these additional adjustments are the Netherlands
and France.
21
The details of the exposure and impairment losses associated with each of the stages as of 31 December 2023 are shown
below. In addition, depending on the current credit quality of the transactions, the exposure is divided into three degrees
(investment, speculation and default):
Credit quality (*)
Degree of investment
Degree of speculation
Default
Total risk (**)
Impairment losses
Credit quality (*)
Degree of investment
Degree of speculation
Default
Total risk (**)
Impairment losses
Exposure and impairment losses by stage 2023
(Millions of Euros)
Stage 1
123,604
13,008
—
136,612
454
Stage 2
—
4,131
—
4,131
266
Stage 3
—
—
2,541
2,541
1,413
Total
123,604
17,139
2,541
143,284
2,133,000
Exposure and impairment losses by stage 2022
(Millions of Euros)
Stage 1
116,422
12,674
—
129,096
477
Stage 2
—
4,172
—
4,172
250
Stage 3
—
—
2,239
2,239
1,229
Total
116,422
16,846
2,239
135,508
1,956
(*) Detail of credit quality grades calculated for Group management purposes.
(**) assets at amortized cost, loans and advances, clientele + credit commitments granted.
As at 31 December 2023 and 2022, the Group did not present significant amounts in impaired assets purchased with
impairment.
Exercise of sensitivity of provisions
With regard to the evolution of credit risk losses, the Group conducts a sensitivity analysis using simulations in which
immediate variations (shocks) of +/- 100 bps occur in the main macroeconomic variables, constantly assuming the current
distribution of stages of each portfolio of financial assets. In this way, a set of specific and complete scenarios is used,
where different impacts affecting both the reference variable and the rest of macroeconomic variables are simulated.
These impacts can have their origin in productivity factors, taxes, wages or exchange rates and interest rates. Sensitivity
is measured as the average variation of expected loss corresponding to the mentioned 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, in the
use of statistical models of scenario analysis, the advances and delays of the model are eliminated, thus avoiding that
only part of the simulated shock is captured.
In addition, the Group conducts 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 is created of
the sensitivity of each of the Group’s portfolios to the possible deviation from the base scenario, considering both the
macroeconomic evolution materialized in different scenarios, as well as the evolution of business to three years. These
exercises include potentially more adverse scenarios as well as more plausible scenarios.
22
Detail of main geographies
The following is the risk information for the most relevant segments of the Group, both in terms of exposure and credit
risk provisions.
• Germany
Information on the estimate of impairment losses
Below is the details of the exposure and impairment losses associated with each of the stages as of December 31,
2023 of Santander Consumer Bank AG and Santander Consumer Leasing, GmbH. In addition, depending on the
current credit quality of the transactions, the exposure is divided into three degrees (investment, speculation and
default):
Credit quality(*)
Degree of investment
Degree of speculation
Default
Total exposure (**)
Impairment losses
Credit quality(*)
Degree of investment
Degree of speculation
Default
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2023
(Millions of Euros)
Stage 1
39,935
—
—
39,935
104
Stage 2
79
834
—
913
56
Stage 3
—
—
722
722
374
Exposure and impairment losses by stage 2022
(Millions of Euros)
Stage 1
37,009
—
—
37,009
88
Stage 3
—
—
566
566
272
Stage 2
12
1,145
—
1,157
38
Total
40,014
834
722
41,570
534
Total
37,021
1,145
566
38,732
398
(*) Detail of credit quality grades calculated for Group management purposes.
(**) assets at amortized cost, loans and advances, clientele + credit commitments granted.
The NPL for Germany stood at 2.06% at the end of December 2023 (1.78% at the end of 2022).
Forward-looking information should be taken into account when estimating expected losses. Specifically, in the
case of the most significant units in Germany (Santander Consumer Bank AG and Santander Consumer Leasing,
GmbH) they consider five prospective macroeconomic scenarios, which are updated periodically, over a time
horizon of 5 years.
23
The following is the projected evolution in 2023 of the main macroeconomic indicators used to estimate expected
losses at Santander Consumer Bank AG and Santander Consumer Leasing, GmbH:
Magnitudes
Interest rate (interbank 12m)
Unemployment rate
GDP growth
Growth in housing prices
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
Base-case
Better-case
scenario
scenario
scenario
4.33%
7.00%
(0.18%)
(2.66%)
3.86%
6.08%
0.31%
(0.99%)
3.11%
5.18%
1.29%
2.35%
2.84%
4.83%
2.22%
4.52%
Best-case
scenario
2.70%
4.46%
2.69%
5.61%
The following is 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:
Magnitudes
Interest rate (interbank 12m)
Unemployment rate
GDP growth
Growth in housing prices
Scenario at 5 years (2023-2027)
Worse-case
Base-case
Better-case
scenario
scenario
scenario
3.19 %
6.42 %
0.45 %
(2.55 %)
2.33 %
5.14 %
1.36 %
1.70 %
1.71 %
4.84 %
2.08 %
3.73 %
Best-case
scenario
1.09 %
4.54 %
2.80 %
5.80 %
Worst-case
scenario
4.04 %
7.70 %
(0.45 %)
(4.54 %)
Each macroeconomic scenario is associated with a given probability of occurrence. In terms of their allocation,
Santander Consumer AG and Santander Consumer Leasing, GmbH associate the base scenario with the highest
weights, while associating the lower weights with the most extreme scenarios. The weights used in both 2023 and
2022 were as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of the expected
losses at the end of 2023 for the most relevant portfolios in Germany is shown:
Expected loss variation IFRS9
New car
Used car
1.33%
(0.62%)
1.36%
(0.63%)
Leasing
new
10.29%
(2.92%)
Direct
7.18%
(3.08%)
(1.17%)
1.34%
(1.19%)
1.36%
(2.41%)
4.88%
(6.44%)
10.15%
GDP growth:
(100) p.b.
100 p.b.
Unemployment rate:
(100) p.b.
100 p.b.
24
In relation to the determination of the classification in stage 2, the quantitative criteria applied in the institution are
based on identifying whether any increase in the PD for the entire expected life of the operation exceeds a number of
absolute and relative thresholds. Each portfolio has a set of thresholds according to the characteristics and credit risk
profile of the products that make it up.
In addition, for each portfolio, a number of specific qualitative criteria are defined indicating that the exposure has
had a significant increase in credit risk, regardless of the evolution of its PD since the time of initial recognition. The
institution, among other criteria, considers that an operation presents a significant increase in risk when it presents
irregular positions > of 30 days. These criteria depend on the risk management practices of each portfolio.
• Nordics (Scandinavia)
Information on the estimate of impairment losses
Below is the detail of the exposure and impairment losses associated with each of the stages as of December 31,
2023 of the most significant unit of Nordics (Santander Consumer Bank AS). In addition, depending on the current
credit quality of the transactions, the exposure is divided into three degrees (investment, speculation and default):
Credit quality(*)
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2023
(Millions of Euros)
Stage 1
14,176
1,492
—
15,667
78
Stage 2
—
408
—
408
40
Stage 3
—
—
419
419
236
Credit quality(*)
Degree of investment
Degree of speculation
Non-payment
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2022
(Millions of Euros)
Stage 1
14,738
1,701
—
16,439
77
Stage 2
6
575
—
581
57
Stage 3
—
—
391
391
222
(*) Detail of credit quality grades calculated for Group management purposes.
(**) assets at amortized cost, loans and advances, clientele + credit commitments granted.
Total
14,176
1,900
419
16,494
354
Total
14,744
2,276
391
17,411
356
Nordics (Scandinavia) NPL stood at 2.94% at the end of December 2023 (2.70% at the end of 2022).
Forward-looking information should be taken into account when estimating expected losses. In particular, Santander
Consumer Bank AS considers five prospective macroeconomic scenarios, which are updated periodically, over a time
horizon of 5 years.
25
• Norway
The following is the projected evolution in 2023 for the next five years of the main macroeconomic indicators used to
estimate expected losses in Santander Consumer Bank AS:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Worst-case
scenario
4.24%
4.33%
(0.49%)
0.29%
Scenario at 5 years (2024-2028)
Base-case
Better-case
Worse-case
scenario
scenario
scenario
3.75%
4.09%
0.12%
0.98%
3.15%
3.90%
1.24%
1.80%
2.63%
3.55%
2.07%
2.42%
Best-case
scenario
2.34%
3.40%
3.22%
2.97%
The following is the projected evolution in 2023 for the next five years of the main macroeconomic indicators used to
estimate expected losses in Santander Consumer Bank AS:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Worst-case
scenario
4.23 %
5.24 %
(1.22 %)
0.36 %
Scenario at 5 years (2023-2027)
Base-case
Better-case
Worse-case
scenario
4.05 %
4.82 %
(0.49 %)
1.06 %
scenario
scenario
3.30 %
3.85 %
0.22 %
1.90 %
3.10 %
3.39 %
0.55 %
2.52 %
Best-case
scenario
2.80 %
3.03 %
1.06 %
3.10 %
Each macroeconomic scenario is associated with a given probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base scenario with the highest weight, while associating the lower weights with
the most extreme scenarios. The weights used in both 2023 and 2022 were as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of expected
losses at the end of 2023 for the most relevant portfolios in Norway is shown:
GDP growth:
(100) p.b.
100 p.b.
Housing price growth:
(100) p.b.
100 p.b.
Expected loss variation IFRS9
Auto Physical persons
2.00%
(1.55%)
4.84%
(2.32%)
26
• Denmark
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2023 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
4.53%
6.57%
(2.50%)
(0.14%)
3.95%
5.66%
(0.03%)
0.50%
3.48%
4.52%
3.19%
1.32%
3.10%
4.13%
5.16%
1.86%
2.81%
3.75%
7.08%
2.40%
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2022 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2023-2027)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
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 %
Each macroeconomic scenario is associated with a given probability of occurrence. As for its allocation, Santander
Consumer Bank AS associates the base scenario with the highest weight, while associating the lower weights with
the most extreme scenarios. The weights used in both 2023 and 2022 were as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of expected
losses at the end of 2023 for the most relevant portfolios in Denmark is shown:
GDP growth:
(100) p.b.
100 p.b.
Expected loss variation IFRS9
Auto Physical persons
2.90%
(2.18%)
27
• Sweden
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2023 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
3.94%
7.80%
(1.18%)
0.35%
3.61%
7.46%
0.60%
1.04%
2.98%
7.01%
4.52%
1.97%
2.69%
6.81%
5.40%
2.56%
2.41%
6.61%
8.16%
3.19%
The projected evolution of the main macroeconomic indicators used for estimating expected losses in 2022 is
presented below:
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2023-2027)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
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%
Each macroeconomic scenario is associated with a given probability of occurrence. In terms of its allocation,
Santander Consumer AS associates the base scenario with the highest weights, while associating the lower weights
with the most extreme scenarios. The weights used in both 2023 and 2022 were as follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of expected
losses at the end of 2023 for Sweden’s most relevant portfolios is shown:
GDP growth:
(100) p.b.
100 p.b.
Expected loss variation IFRS9
Auto Physical
persons
6.70%
(0.19%)
Direct
1.88%
(0.79%)
In relation to the determination of the classification in stage 2, the quantitative criteria applied in the institution are
based on identifying whether any increase in the PD for the entire expected life of the operation exceeds a number of
relative thresholds. Each portfolio has a set of thresholds according to the characteristics and credit risk profile of the
products that make it up.
In addition, for each portfolio, a number of specific qualitative criteria are defined indicating that the exposure has
had a significant increase in credit risk, regardless of the evolution of its PD since the time of initial recognition. The
entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
irregular positions more than 30 days. These criteria depend on the risk management practices of each portfolio.
28
• Spain
Information on the estimate of impairment losses
Below is the detail of the exposure and impairment losses associated with each of the stages as of December 31, 2023
of the most significant units in Spain (Santander Consumer Finance S.A.). In addition, depending on the current credit
quality of the transactions, the exposure is divided into three degrees (investment, speculation and default):
Credit quality(*)
Degree of investment
Degree of speculation
Default
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2023
Stage 1
4,316
11,017
—
15,333
97
(Millions of Euros)
Stage 2
—
268
—
268
45
Stage 3
—
—
509
509
303
(*) Detail of credit quality grades calculated for Group management purposes.
(**) Asset at amortized cost, loans and advances - clientele + credit commitments granted.
Credit quality(*)
Degree of investment
Degree of speculation
Default
Total exposure (**)
Impairment losses
Exposure and impairment losses by stage 2022
(Millions of Euros)
Stage 1
4,069
10,967
—
15,036
121
Stage 2
5
236
—
241
32
Stage 3
—
—
477
477
288
Total
4,316
11,285
509
16,110
445
Total
4,074
11,203
477
15,754
441
(*) Detail of credit quality grades calculated for Group management purposes.
(**) Asset at amortized cost, loans and advances - clientele + credit commitments granted.
The NPL in the case of the geography of Spain stood at 3.47% at the end of December 2023 (3.46% at the end of
2022).
For the estimation of expected losses, forward-looking information should be taken into account. Specifically, for
Santander Consumer Finance, S.A’s portfolio in Spain, five prospective macroeconomic scenarios are considered,
which are updated periodically, over a time horizon of 5 years.
The following is the projected evolution for the coming years of the main macroeconomic indicators used in 2023 for
the estimation of the expected losses in the portfolios in Spain of Santander Consumer Finance, S.A.
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Scenario at 5 years (2024-2028)
Worst-case
scenario
Worse-case
scenario
Base-case
scenario
Better-case
scenario
Best-case
scenario
4.54%
16.40%
(0.20%)
(0.88%)
4.00%
14.28%
0.54%
(0.04%)
3.48%
10.27%
2.09%
1.54%
3.34%
9.52%
2.64%
2.71%
3.11%
7.96%
3.38%
3.56%
The following is the projected evolution for the coming years of the main macroeconomic indicators used in 2022 for
the estimation of the expected losses in the portfolios in Spain of Santander Consumer Finance, S.A.
29
Magnitudes
Interest rate
Unemployment rate
Growth in housing prices
GDP growth
Worst-case
scenario
Scenario at 5 years (2023-2027)
Base-case
scenario
Better-case
scenario
Worse-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%
Each macroeconomic scenario is associated with a given probability of occurrence. As for their allocation, Santander
Consumer Finance, S.A’s portfolios of business in Spain associate the base scenario with the highest weights, while
associating the lower weights with the most extreme scenarios. The weights used in both 2023 and 2022 were as
follows:
Worst-case scenario
Worse-case scenario
Base-case scenario
Better-case scenario
Best-case scenario
5 %
20 %
50 %
20 %
5 %
Following, based on the details in the Provisions Sensitivity Exercise section, the estimated sensitivity of the expected
losses at the end of 2023 for the most relevant portfolios in Spain is shown:
GDP growth:
(100) p.b.
100 p.b.
New car
Expected loss variation IFRS9
Mortgages
Used car
Cards
4.33%
(3.28%)
2.50%
(2.00%)
1.15%
(0.87%)
3.20%
(2.56%)
In relation to the determination of the classification in stage 2, the quantitative criteria applied in the institution are
based on identifying whether any increase in the PD for the entire expected life of the operation exceeds a number of
absolute and relative thresholds. Each portfolio has a set of thresholds according to the characteristics and credit risk
profile of the products that make it up.
As an example in the case of Santander Consumer Finance S.A., for its main portfolios, an operation shall be
considered to be classified in Stage 2 when the PD of the entire expected life of the operation at any given time
exceeds that it had at the time of initial recognition in absolute and relative terms, depending on the sub-segment.
In addition, for each portfolio, a number of specific qualitative criteria are defined indicating that the exposure has
had a significant increase in credit risk, regardless of the evolution of its PD since the time of initial recognition. The
entity, among other criteria, considers that an operation presents a significant increase in risk when it presents
irregular positions more than 30 days. These criteria depend on the risk management practices of each portfolio.
Credit risk
a.
Evolution of magnitudes in 2023
The evolution of arrears and the cost of credit reflect the impact of the deterioration of the economic environment
mitigated by prudent risk management, which has, in general, allowed us to maintain such data at levels below that of
our competitors in recent years. As a result, Santander Consumer Finance maintains an adequate hedge level to address
the expected loss of the credit risk portfolios it manages.
Portfolio redirected
The term "Returned Portfolio" refers to the Group's risk management purposes to all transactions in which the Client
has submitted, or it is expected that it may present financial difficulties that could prevent the fulfillment of its
30
payment obligations under the contractual terms in force with Santander Consumer Finance and, for this reason, it
has proceeded to modify, cancel and / or even formalize a new transaction.
Grupo Santander, of which Grupo Santander Consumer Finance is a part, has a robust policy of redirecting customer
debts that acts as a reference in the different local transpositions of all the financial institutions that are part of the
Group. This policy is in line with the banking regulations established by the EBA, in accordance with the "Guidelines
on the management of non-performing and restructured or refinanced exposures" (EBA/GL/2018/06) of 31 October
2018. It is also adapted to Circular 6/2021, of Bank of Spain, which modifies Circular 4/2017.
This policy establishes strict prudent criteria in the assessment of these risks:
–
–
–
–
–
A restricted use of this practice should be made, avoiding actions that entail postponing recognition of the
deterioration.
The main objective should be the recovery of the amounts due, recognizing as soon as possible the amounts
deemed irrecoverable.
The maintenance of existing guarantees should always be considered and, if possible, improved. Effective
safeguards can not only serve as mitigants of severity, but may reduce the likelihood of non-compliance.
This practice should not involve the granting of additional financing, or serve to refinance debt of other entities,
or be used as a cross-selling instrument.
It is necessary to evaluate all alternatives to the redirection and its impacts, ensuring that the results of the
same exceed those that would be expected if not performed.
– More stringent criteria are applied for the classification of redirected transactions, which, prudentially, ensure
the restoration of the customer’s capacity to pay, from the moment of the redirection and for an appropriate
period of time.
–
In addition, in the case of those clients who have assigned a risk analyst, it is of particular relevance the
individualized analysis of each case, both for its correct identification and for its subsequent classification,
monitoring and adequate provision.
It also sets out various criteria related to the determination of the perimeter of operations considered as a referral, by
defining a detailed set of objective indicators to identify situations of financial difficulty.
Thus, transactions that are not classified as doubtful at the date of the recoupment are generally considered to be
financially difficult if they were not paid for more than one month at that date. In the event that there is no default or
that it does not exceed the month of seniority, other indicators are taken into account, including:
– Operations of customers who already have difficulties with other operations.
– When the modification becomes necessary prematurely without a previous and satisfactory experience with
the customer.
–
–
–
In the event that the necessary modifications involve the granting of special conditions such as the need to
establish a temporary deficiency in payment or when these new conditions are considered more favorable for
the client than would have been granted in an ordinary admission.
Request for successive modifications at unreasonable time intervals. In the case of Consumer Finance, a
maximum of 1 restructuring agreement is established in a year or 3 in a 5-year period.
In any case, once the modification has been made, if there is any irregularity in the payment during a certain
period of observation, even if there are no other symptoms, the operation within the perimeter of the
reconductions (‘backtesting’) will be considered.
Once it has been determined that the reasons for the modification of the client’s debt conditions are due to financial
difficulties of the client, regardless of whether or not the client has overdue payments and the number of days of
31
payment arrears present, the client will be considered a customer redirected for all purposes and as such will be
managed based on the criteria established in this policy.
Where the referral has been carried out, where those transactions must remain classified as a doubtful risk because
they do not comply at the time of the referral with the regulatory requirements for their reclassification to another
category, they must comply with a prudential continuous payment schedule to ensure a reasonable certainty of the
recovery of capacity to pay, called a cure period (in this case, it will be 12 months).
Once this period has passed, conditioned by the situation of the client and the characteristics of the operation (term
and guarantees provided), the operation is no longer considered doubtful, although it remains subject to a trial period
in which a special follow-up is carried out.
This monitoring is maintained as long as a number of requirements are not met, including: A minimum observation
period of 24 months, in the case of operations restructured in stage 2 and 12 months in stage 3; amortization of a
substantial percentage of the outstanding amounts and, to satisfy the unpaid amounts at the time of the
recertification. If it is justified that, while a transaction is in the 24-month cure period of Stage 2, there is no longer a
significant increase in its credit risk, that transaction can be reclassified to Stage 1 and Non-Default risk, no need to
complete the aforementioned cure period. However, it is important to note that restructuring at the time of origination
can only be classified in stage 2 or stage 3, never in stage 1.
The original dates of non-compliance are still considered for all purposes in the conduct of a non-performing
transaction, irrespective of whether the transaction is up to date as a result of such a transaction. Likewise, the re-
conduct of a dubious operation does not result in any release of the corresponding provisions.
Reconductions can be long-term or short-term (less than two years). Redirections with terms not exceeding two years
shall be taken into account when the borrower meets the following criteria:
–
–
–
Experiencing temporary liquidity restrictions, for which the client’s recovery will be evidenced in the short term.
The application of long-term recertification measures is not effective given the temporary financial uncertainty
of a general or specific nature of the customer.
That it has been fulfilling the contractual obligations before the recertification
– Demonstrate a clear willingness to cooperate with the entity.
As a result of the analysis to be carried out, both of the client’s situation and of the characteristics of the forwarding
operation used, it must be ensured that the forwarding will facilitate the reduction of the client’s debt, and therefore
will be viable. In this regard, the feasibility of the operation will be assessed by:
a. That can be demonstrated with evidence that the proposed redirection is within the reach of the client, that is,
that the full refund is expected.
b. Payment by the customer of outstanding amounts, in full or for the most part, and a considerable reduction in
exposure in the medium to long term.
c.
d.
The absence of repeated non-compliance with payment plans resulting in successive recourses (more than
three recourses over a three-year period).
In the temporary application of short-term relief measures, it can be proved by evidence that the client has
sufficient capacity to pay to meet the debt, principal and interest, once the term of application of the temporary
relief has expired.
e. The measure does not result in 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 foregoing, they will be considered non-viable
operations and will form part of the category of Non-performing Conductions.
32
The following is the quantitative information required by the Bank of Spain, in relation to the restructured operations
in force as of December 31, 2023 and 2022, taking into account the above criteria:
c) Metrics and measurement 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.
33
d) Credit risk parameters
The valuation of the client or the transaction, by rating or scoring, constitutes a judgment of its credit quality, which
is quantified through the probability of default (probability of default or PD in Basel terminology).
In addition to the client’s assessment, the quantification of credit risk requires the estimation of other parameters
such as exposure at default (EAD) and the percentage of the EAD that cannot be recovered (LGD). Other relevant
aspects of the risk of the operations are included, such as the quantification of the off-balance sheet exposures, which
depends on the type of product or the analysis of the expected recoveries related to the existing guarantees and other
properties of the operation: type of product, term, etc.
These factors make up the main parameters of credit risk. Its combination allows the calculation of the probable loss
or expected loss (PE). This loss is considered as an additional cost of the activity, which reflects the risk premium and
must be passed on to the price of the transactions.
The risk parameters also allow the calculation of regulatory capital according to the rules derived from the new Basel
Capital Agreement (BIS II). Regulatory capital is determined as the difference between the unexpected loss and the
expected loss.
Unexpected loss is the basis for capital calculation and refers to a very high but unlikely level of loss, which is not
considered recurring and must be met with own resources.
Observed loss: Credit cost measurements
In addition to the predictivity provided by the advanced models previously described, other common metrics are used
that allow prudent and effective management of credit risk based on the observed loss.
In terms of loss recognition, the cost of credit risk at Santander Consumer Finance is measured through different
approaches: VMG - Variation of the Management Loan (late entries - cures - recovery of failures), DNI - net
endowment for insolvencies (gross provisions - recovery of failures), net failures (passes to failures - recovery of
failures) 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 allow the
manager to form a complete idea about the evolution and future prospects of the portfolio.
It should be noted that, unlike delinquency, the VMG (final doubtful – initial doubtful + failed – recovery of failures)
refers to the total of the deteriorated portfolio in a period, regardless of the situation in which it is located (doubtful
and failed). This makes the metric a primary driver when establishing measures for portfolio management.
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.
34
e) Credit risk cycle
The risk management process consists of identifying, measuring, analyzing, controlling, negotiating and deciding,
where applicable, the risks incurred by the Group’s operations. During the process, both risk-taking areas and senior
management intervene, as well as the risk function.
Being the member group of the Santander Group, the process starts from the senior management, through the Board
of Directors and the Executive Committee of Risks, who establishes the risk policies and procedures, the limits and
delegations of powers, and approves and monitors the risk function framework.
In the risk cycle three stages are differentiated: Pre-sale, sale and after-sale. The process is constantly fed back,
incorporating the results and conclusions of the after-sales stage into the risk study and pre-sale planning.
e.1) Pre-sale
- Risk study and credit rating process
In general, the risk study consists of analyzing the client’s ability to meet its contractual commitments with the Group
and other creditors. This involves analyzing the credit quality of the same, its risk operations, its solvency and the
profitability to obtain depending on the risk assumed.
To this end, the Group has been using since 1993 models for assigning solvency ratings to customers, known as rating.
These mechanisms are used both in the wholesale segment (sovereign, financial institutions and corporate banking), as
well as in other companies and institutions.
The rating is the result of a quantitative module based on balance sheet ratios or macroeconomic variables, which is
complemented by the expert judgment provided by the analyst.
The ratings given to the client are reviewed periodically, incorporating the new financial information available and the
experience in the development of the banking relationship. The frequency of reviews is increased in the case of clients
who reach certain levels in automatic alert systems and in those qualified as special monitoring. Similarly, the
qualification tools themselves are also reviewed to adjust the accuracy of the rating they grant.
Compared to the use of rating in the wholesale world and other companies and institutions, in the segment of individuals
and small companies predominate scoring techniques, which in general automatically assign a customer assessment for
decision making, as explained in the Operations Decision section.
-
Planning and setting limits
This stage aims to limit, in an efficient and comprehensive manner, the levels of risk that the Group assumes. The credit
risk planning process serves to establish budgets and limits at the portfolio level of subsidiaries. The planning is
implemented through a dashboard, ensuring the combination of the business plan, credit policy and the necessary means
35
to achieve it. It is born, therefore, as a joint initiative between the commercial area and risks and it is not only a
management tool, but a form of teamwork.
An important aspect in planning is the consideration of the volatility of macroeconomic variables that affect the evolution
of portfolios. The Group carries out simulations of this evolution in different adverse and stress scenarios (stress test)
that allow to evaluate the solvency of the Group in certain future circumstances.
The analysis of scenarios allows senior management to have a better understanding of the evolution of the portfolio in
the face of changing market conditions and circumstances, and is a fundamental tool to evaluate the sufficiency of the
provisions constituted in the face of stress scenarios.
The planning and setting of limits is carried out through documents agreed between the business and risk areas and
approved by the Group in which the expected results of the business are reflected in terms of risk and profitability, as
well as the limits to which this activity should be subject and the associated risk management by group / client.
e.1) Sale
- Decision of operations
The sale stage is constituted by the decision process, which aims at the analysis and resolution of transactions, with risk
approval being a prerequisite before contracting any risk operation. This process must take into account defined
transaction approval policies and take into account both risk appetite and those elements of the transaction that are
relevant in the search for a balance between risk and profitability
In the field of standardized clients (individuals, businesses and SMEs with lower turnover), the management of large
volumes of credit transactions will be facilitated with the use of automatic decision models that qualify the
client/transaction binomial. With them, the investment is classified into homogeneous risk groups based on the
qualification that the model gives to the operation, based on information on the characteristics of that operation and
characteristics of its holder.
e.1) After-sales
- Follow-up
The monitoring function is based on a continuous observation process, which allows to detect in advance the variations
that may occur in the credit quality of customers in order to take action to correct deviations that impact negatively.
Monitoring is based on customer segmentation, and is carried out through dedicated local and global risk teams,
complemented by internal audit work.
The role is, among other tasks, in the identification and monitoring of signatures under special surveillance, ratings
reviews and continuous monitoring of indicators.
Monitoring is based on customer segmentation, and is carried out through dedicated local and global risk teams,
complemented by internal audit work.
The role is, among other tasks, in the identification, monitoring and allocation of policies at the client level that allow
anticipating surprises and managing them in the most appropriate way to their situation, credit policies, ratings reviews
and the continuous monitoring of indicators.
The system called Santander Customer Assessment Notes (SCAN) distinguishes four degrees according to the level of
concern of the circumstances observed (specialized follow-up, intensive follow-up, regular follow-up, not attending). The
inclusion of a position in SCAN does not imply that there have been breaches but the desirability of adopting a specific
policy with it, determining responsibility and time frame in which it must be carried out. Qualified customers in SCAN are
reviewed at least semi-annually, such review being quarterly and/or monthly for those of the most severe grades. The
ways by which a firm is qualified in SCAN are the monitoring work itself, review carried out by the internal audit, decision
36
of the commercial manager who guards the signature or entry into operation of the established system of automatic
alarms.
Reviews of assigned ratings are performed at least annually, but if weaknesses are detected, or depending on the rating
itself, they are carried out more regularly.
For the risks of individuals, businesses and SMEs with lower turnover, a task of monitoring the main indicators is carried
out in order to detect deviations in the behavior of the credit portfolio with respect to the forecasts made in the strategic
commercial programs - Pecs.
f) Measurement and control
In addition to monitoring the credit quality of customers, the Group establishes the necessary control procedures
to analyze the current credit risk portfolio and its evolution, through the different phases of credit risk.
The function is developed by assessing the risks from different complementary perspectives, establishing as main
axes the control by geographies, business areas, management models, products, etc., facilitating the early
detection of specific focus areas, as well as the development of action plans to correct any deterioration.
Each control axis supports two types of analysis:
1.- Quantitative and qualitative analysis of the portfolio
In the portfolio analysis, the evolution of risk with respect to budgets, limits and reference standards is monitored
permanently and systematically, evaluating the effects on future situations, both exogenous and those arising
from strategic decisions, in order 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 stage, the following are used, among others and in addition to traditional metrics:
a. MDV (variation in management arrears)
The VMG measures how arrears vary over a period, discounting failures and taking into account recoveries. It
is an aggregate measure at the portfolio level that allows to react to deterioration observed in the evolution
of late payment.
b. EL (expected loss) and capital
The expected loss is the estimate of the economic loss that will occur during the next year of the existing
portfolio at any given time. It is an additional cost of the activity, and must be passed on to the price of the
operations.
2.- Evaluation of control processes
It includes the systematic and periodic review of procedures and methodology, developed throughout the entire
credit risk cycle, to ensure their effectiveness and validity.
In 2006, within the corporate framework established in the Group for compliance with the Sarbanes Oxley Law,
a corporate methodology was established for the documentation and certification of the Control Model, defined
in tasks, operational risks and controls. The risk division assesses annually the efficiency of internal control of its
activities.
Moreover, the internal validation function, within its mission of overseeing the quality of the Group’s risk
management, it ensures that the models used in the admission and management of different risks meet the most
demanding criteria and best practices observed 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.
37
g) rRecoveries
Recovery activity is a relevant function within the Group’s risk management area. This function is developed by
the area of recovery and recoveries that defines a global strategy and a comprehensive approach to recovery
management.
The Group combines a global model with a local execution considering the peculiarities of the business in each
area.
The main objective of the recovery activity is the recovery of outstanding obligations by managing our clients,
contributing to reduce the need for provisions and reduce the cost of risk.
This is how the specific objectives of the recovery process are oriented:
– To obtain the collection or regularization of the outstanding balances, so that an account returns to its normal
state; if this is not possible the objective is the total or partial recovery of the debts, in any of the accounting
or management situations in which they may be found.
– Maintain and strengthen our relationship with the client taking care of their behavior of and with an offer of
management levers such as refinancing products according to their needs and in accordance with the careful
corporate policies of admission and control, established from 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.
The management is articulated through a multichannel strategy of relationship with customers. customers and
follow-up of payment agreements, prioritizing and adapting the arrangements based on the status of progress
of their situation of delay, doubtful or delinquent, their balance sheet, and their payment commitments.
The commercial network of recovery management, is a complementary channel to the telephone, which is
oriented as a way of proximity relationship to selected customers, and is composed of teams of agents with high
commercial orientation, specific training and high negotiation capabilities, performing personalized management
of their own high impact customer portfolios (high balance sheets, special products, special management clients).
Recovery activities in advanced stages of the non-payment situation are guided by dual judicial and non-judicial
management, maintaining commercial and follow-up activities through telephone channels and networks of
agents, applying strategies and practices specific to the state of progress.
The management model encourages proactivity, and oriented management, through continuous recovery
campaigns with specific designs to customer groups and states of default, acting with predefined objectives
through specific strategies and intensive activities through the appropriate channels in limited time periods.
An adequate local production and analysis of daily and monthly management information, aligned with corporate
models, have been defined as the basis of business intelligence for continuous decision-making in the
management orientation and for the monitoring of its results.
38
h) Risk of concentration
Concentration risk, within the scope of credit risk, is an essential element of management. The Santander Group,
of which Grupo Santander Consumer Finance is part, continuously monitors the degree of concentration of credit
risk portfolios under different relevant dimensions: Geographical areas and countries, economic sectors, products
and customer groups.
The board of Directors, through risk appetite, determines maximum concentration levels, the Executive Risk
committee establishes risk policies and reviews appropriate exposure levels for the proper management of the
degree of concentration of credit risk portfolios.
Santander Consumer Finance is subject to the regulation on ‘big risks’ contained in Part Four of the CRR (EU
Regulation No.575/2013), according to which the exposure incurred by an entity to a client or a group of related
customers shall be considered ‘large exposure’ when its value is equal to or greater than 10% of its computable
capital. In addition, to limit large exposures, no entity may assume an exposure to a client or group of related
clients whose value exceeds 25% of its eligible capital, after taking into account the effect of the credit risk
reduction contained in the standard.
At the end of December 2023, after applying risk mitigation techniques, no group reaches the above-mentioned
thresholds.
The Santander Consumer Finance Group’s Risk Division collaborates closely with the Financial Division in the
active management of credit portfolios, which, among its axes of action, includes the reduction of the
concentration of exposures through various techniques, such as: such as the contracting of hedge credit
derivatives or securitization operations, with the ultimate purpose of optimizing the return-to-risk ratio of the
total portfolio.
The breakdown as at 31 December 2023 and 2022 of the Group’s risk concentration (*) by activity and geographical
area of counterparties is as follows:
Central banks and credit institutions
Public administrations
Of which:
Central Administration
Other Public Administrations
Other financial institutions
Non-Financial corporations and individual
entrepreneurs
Of which:
Construction and real estate promotion
Construction of civil works
Large companies
SMEs and individual entrepreneurs
Other households and non-profit institutions
serving households
Of which:
Housing
Consumption
Other purposes
2023
Spain
Rest of the
European
Union
EUR Thousands
America
4,813,326 9,350,967
789,243 3,346,864
—
—
Total
Rest of the
world
153,241 14,317,534
44,007 4,180,114
787,327 2,095,936
1,916 1,250,928
993,739
40,028
4,012,908 34,601,493
—
—
15,074
— 2,883,263
44,007 1,296,851
386,172 1,435,013
— 1,802,545 40,416,946
—
—
252,314
7,800
1,435,847 14,869,913
2,577,061 19,471,466
10,023,439 58,983,648
—
—
252,314
—
7,800
—
—
436,022 16,741,782
— 1,366,523 23,415,050
734,671 4,722,813 74,464,571
1,190,283 2,506,878
8,785,337 55,894,838
581,932
47,819
—
— 3,697,161
734,671 4,722,813 70,137,659
629,751
Total 134,814,178
—
—
39
(*) The definition of risk for the purposes of this table includes the following items in the consolidated public balance sheet: 'Loans and advances:
In credit institutions', 'loans and advances: Central banks', 'loans and advances: to customers', 'debt securities', 'equity instruments', 'derivatives',
'derivatives - hedge accounting', 'shares and guarantees granted'.
Central banks and credit institutions
Public administrations
Of which:
Central Administration
Other Public Administrations
Other financial institutions
Non-Financial corporations and individual
entrepreneurs
Of which:
Construction and real estate promotion
Construction of civil works
Large companies
SMEs and individual entrepreneurs
Other households and non-profit institutions
serving households
Of which:
Housing
Consumption
Other purposes
2022
(EUR Thousands)
Spain
Rest of the
European
Union
America
Rest of the
world
Total
2,940,703 6,497,642
924,475 5,504,140
—
—
242,744 9,681,089
42,951 6,471,566
921,804 4,255,960
2,671 1,248,180
10,863 1,145,014
3,171,286 28,351,567
—
—
338,628
60 5,177,824
42,891 1,293,742
246,749 1,741,254
— 2,673,489 34,196,342
—
—
211,566
6,678
1,034,445 10,699,079
2,136,841 17,434,244
10,121,975 54,814,108
1,318,606 2,394,903
8,714,320 52,074,766
344,439
89,049
—
—
211,566
—
6,678
—
—
986,488 12,720,012
— 1,687,001 21,258,086
14 6,575,205 71,511,302
—
— 3,713,509
14 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 in the consolidated public balance sheet: cash balances in
central banks and other demand deposits, deposits in credit institutions, customer credit, debt securities, trading derivatives, hedging derivatives,
investments in joint and associated ventures, equity instruments - and guarantees granted.
40
Market risk, structural risk and liquidity
a. Scope and definitions
The perimeter of measurement, control and monitoring of the market risk function covers those operating where
equity risk is assumed, as a result of changes in market factors.
These risks are generated through two types of fundamental 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 itself in fixed income products, equities
and currency mainly.
Santander Consumer Finance does not carry out trading activities, limiting its treasury activity to managing the
structural risk of its balance sheet and its coverage, as well as managing the liquidity necessary to finance its
business.
–
The balance sheet management activity or ALM, which involves the management of the risks inherent in the
balance sheet of the entity, excluding the trading book.
The risks generated in these activities are:
– Market: Risk incurred as a result of the possibility of changes in market factors affecting the value of the
positions that the entity holds in its trading books.
–
–
Structural: Risk caused by the management of the different items in the balance sheet. This risk includes both
losses due to price changes affecting the portfolios available for sale and at maturity (banking book), as well as
losses arising from the management of the assets and liabilities valued at amortized cost of the Group.
Liquidity: Risk of not meeting payment obligations on time or doing so at excessive cost, as well as the ability
to finance the growth of your asset volume. Among the typologies of losses caused by this risk are losses due
to forced sales of assets or impacts in margin due to the mismatch between outflows and cash inflows
forecasts.
Trading market and structural risks, depending on the market variable that generates them, can be classified as:
–
–
–
–
–
Interest rate risk: Identifies the possibility that changes in interest rates may adversely affect the value of a
financial instrument, a portfolio or the Group as a whole.
Credit spread risk: Identifies the possibility that variations in credit spread curves associated with specific issuers
and debt types may adversely affect the value of a financial instrument, a portfolio or the Group as a whole. The
spread is a differential between financial instruments trading with a margin over other reference instruments,
mainly IRR (Internal Rate of Return) of state securities and interbank interest rates.
Exchange rate risk: Identifies the possibility that changes in the value of a position in currency other than the
base currency may adversely affect the value of a financial instrument, a portfolio, or the Group as a whole.
Inflation risk: Identifies the possibility that changes in inflation rates may adversely affect the value of a
financial instrument, a portfolio or the Group as a whole.
Volatility risk: Identifies the possibility that changes in the quoted volatility of market variables may adversely
affect the value of a financial instrument, a portfolio or the Group as a whole.
– Market liquidity risk: Identifies the possibility that an entity or the Group as a whole is not able to undo or close
a position on time without impacting the market price or transaction cost.
41
–
Pre-payment or cancelation risk: Identifies the possibility that early cancelation without negotiation, in
transactions 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 affect exclusively market risk (and not structural risk), so that it can be classified
additionally in:
–
–
–
–
Equity risk: Identifies the possibility that changes in the value of prices or dividend expectations of equity
instruments may adversely affect the value of a financial instrument, a portfolio or the Group as a whole.
Commodity risk: Identifies the possibility that changes in the value of the prices of goods may adversely affect
the value of a financial instrument, a portfolio or the Group as a whole.
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 as a whole.
Insurance risk: Identifies the possibility that the objectives of placement of securities or other debt are not met
when the entity participates in the insurance of the same.
Liquidity risk can also 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 differences between the maturity structures of assets and liabilities
will result in an overrun to the institution.
–
Contingency risk: Identifies the possibility of not having adequate management elements to obtain liquidity as
a result of an extreme event that involves greater financing or collateral needs to obtain it.
a. Measurement and methodologies
1. Structural interest rate risk
The Group conducts sensitivity analyzes of financial margin and equity to interest rate variations. This sensitivity is
conditioned by the mismatches in the maturity dates and revision of the interest rates of the different items in the
balance sheet.
Depending on the position of interest rate of the balance sheet, and considering the situation and prospects of the
market, the financial measures are agreed to adapt this positioning to the desired by the Group. These measures can
range from taking market positions to defining the interest rate characteristics of commercial products.
The measures used to control interest risk in these activities are the interest rate gap, the sensitivity of financial margin
and equity to changes in interest rate levels.
–
Interest rate gap
The analysis of interest rate gap deals with the mismatches between the revaluation periods of equity masses within
the items, both of the balance sheet (assets and liabilities) and of the standby accounts (off-balance sheet). It
facilitates a basic representation of the balance sheet structure and allows for the detection of interest risk
concentrations over the different timeframes. It is also a useful tool for the estimation of possible impacts of possible
movements in interest rates on the financial margin and on the equity value of the entity.
All balance sheet and off-balance sheet masses must be spread out in their flows and placed at the repricing/maturity
point. In the case of those masses that do not have a contractual maturity, the internal model of Santander Group of
analysis and estimation of the durations and sensitivities of the same is used.
–
Financial Margin Sensitivity (NII)
42
The sensitivity of the financial margin measures the change in expected accruals for a given term (12 months) in the
face of a shift in the interest rate curve.
–
Equity Value Sensitivity (EVE)
Measures the interest rate risk implied in equity, which for interest rate risk purposes is defined as the difference
between the net present value of assets minus the net present value of liabilities due; based on the impact of interest
rate changes on these current values.
2. Liquidity risk
Structural liquidity management aims to finance the recurring activity of Santander Consumer Finance Group under
optimal terms of time and cost, avoiding unwanted liquidity risks.
The measures used to control liquidity risk are the liquidity gap, liquidity ratios, structural liquidity chart, liquidity
stress tests, financial plan, 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 Grupo Santander Consumer Finance operates. It measures the need or net excess of
funds on a date and reflects the level of liquidity maintained under normal market conditions.
In the contractual liquidity gap, all the masses that provide cash flows are analyzed, placed at their contractual
maturity point. For those assets and liabilities without contractual maturity, the internal model of Santander Group
analysis is used, based on the statistical study of the historical series of products, and what is called stable and
unstable balance for liquidity purposes is determined.
–
Liquidity ratios
The Minimum Liquidity Ratio compares liquid assets available for sale or assignment (once applicable discounts and
adjustments are applied) and assets less than 12 months with liabilities up to 12 months.
The Structural Financing Ratio measures the extent to which assets requiring structural financing are being financed
with structural liabilities.
–
Structural liquidity table
The purpose of this analysis is to determine the structural liquidity position based on the liquidity profile (greater or
lesser stability) of the different asset and liability instruments.
–
Liquidity stress tests
The liquidity stress tests developed by the Santander Consumer Finance Group aim to determine the impact in the
face of a severe, but plausible, liquidity crisis. In these stressful scenarios, internal factors that may affect the Group’s
liquidity are simulated, such as the fall in the institutional credit rating, the value of assets on balance sheet, banking
crises, regulatory factors, change in consumption trends and / or loss of trust of depositors, etc. among others.
Through the stress of these factors, four scenarios of liquidity stress are simulated monthly (banking crisis in Spain,
idiosyncratic crisis of Santander Consumer Finance Group, Global Crisis, as well as a combined scenario) establishing,
on its result, a minimum level of liquid assets.
–
Financial Plan
43
The liquidity plan is prepared annually, based on the financing needs derived from the business budgets of all the
Group’s subsidiaries. Based on these liquidity needs, the limitations of appeal to new securitizations are analyzed
based on the possible eligible assets available, as well as the possible growth of client deposits. On the basis of this
information, the issuances and securitizations plan for the financial year is established. The actual evolution of
funding requirements is regularly monitored throughout the year, resulting in subsequent updates to the plan.
–
Liquidity contingency plan
The Liquidity Contingency Plan aims to foresee the processes (governance structure) that should be followed in the
event of a liquidity crisis, whether potential or real, as well as the analysis of the contingency actions or levers
available for the management of the entity in such a situation.
The Liquidity Contingency Plan is based on, and should be designed in line with, two key elements: Liquidity Stress
Testing and the Early Warning Indicator System (EWI). Stress tests and their different scenarios serve as a basis for
analyzing available contingency actions as well as determining their sufficiency. The EWIs system is used to monitor
and potentially trigger the scaling mechanism to activate the plan and monitor the evolution of the situation once
activated
–
Regulatory reporting
Santander Consumer Finance performs the Liquidity Coverage Ratio (LCR) of the European Banking Authority (EBA)
for the Consolidated Group, as well as the Net Stable Funding Ratio (NSFR).
In addition, Santander Consumer Finance annually produces the report corresponding to the ILAAP (Internal Liquidity
Adequacy and Assessment Process) to be integrated into the consolidated document of the Santander Group, despite
not being required by the Supervisor at the level of Liquidity Management Subgroup.
3. Structural Change Risk.
Structural change risk is managed within the general corporate procedures, with the aim of maintaining the CET1 ratio
constant, both at Grupo Santander and Grupo Santander Consumer Finance.
a. Control environment
The structural risk and liquidity control environment in the Santander Consumer Finance group is based on the
framework of the annual limits plan, where the limits for these risks are established, responding to the level of risk
appetite of the Group.
The boundary structure requires a process that takes into account, among others, the following aspects:
–
Identify and delimit, efficiently and comprehensively, the main types of market risks incurred, so that they are
consistent with business management and defined strategy.
– Quantify and communicate to business areas the levels and risk profile that senior management considers to
be acceptable, to avoid incurring unwanted risks.
– Give flexibility to business areas in taking financial risks efficiently and timely according to changes in the
market, and in business strategies, and always within the levels of risk that are considered acceptable by the
entity.
–
Allow business generators to take prudent but sufficient risk to achieve the budgeted results.
– Define the range of products and underlying in which each Treasury unit can operate, taking into account
characteristics such as the model and valuation systems, the liquidity of the instruments involved, etc.
In the event of an excess over one of these limits, the market, structural and liquidity risk function shall report such
excess, requesting the reasons and an action plan from those responsible for risk management.
In terms of structural risk, the main management limits at Santander Consumer Finance consolidated level are:
44
–
–
Limit of sensitivity of the financial margin to one year.
Sensitivity limit of equity value.
The limits are compared with the sensitivity of a greater loss among those calculated for different parallel rise and
fall scenarios of the interest rate curve. During 2023 these limits applied on the most adverse loss between 8 parallel
rise and fall scenarios up to 100 basic points. In addition, other parallel and non-parallel scenarios are calculated,
including those defined by the European Banking Authority (EBA). Using several scenarios allows for better control of
interest rate risk. Negative interest rates are contemplated in downward scenarios.
During 2023, the level of exposure at consolidated level in the SCF Group, both on 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 2%
throughout the year, and within the established limits.
With respect to liquidity risk, the main limits at Grupo Santander Consumer Finance level include regulatory liquidity
metrics such as the LCR and the NSFR, as well as liquidity stress tests under different adverse scenarios discussed
above.
At the end of December 2023, all liquidity metrics are above the internal limits in force, as well as regulatory
requirements. For both the LCR and the NSFR at the consolidated Group level, it has been at levels above 115% and
103% throughout the year.
a. Management
Balance sheet management involves the analysis, projection and simulation of structural risks along with the design,
proposal and execution of transactions and strategies for their management. The Financial Management area is
responsible for this process and in the performance of this function follows a projective approach, as long as this is
applicable or feasible.
The following is a high-level description of the main processes and/or responsibilities in managing structural risks:
–
Analysis of the balance sheet and its structural risks.
– Monitoring the evolution of the most relevant markets for asset and liability management (ALM) in the Group.
–
–
–
Planning. Design, maintenance and monitoring of certain planning instruments. Financial Management is
responsible for developing, following and maintaining the Financial Plan, the Financing Plan and the Liquidity
Contingency Plan.
Strategy proposals. Design of strategies to finance the SCF Subgroup business through better available market
conditions or through balance sheet management and exposure to structural risks, avoiding unnecessary risks;
preserving financial margin and protecting the market value of equity and capital.
Implementation. To achieve an adequate positioning of ALM, the Financial Management area uses different
tools, the main ones being the issuances in debt / capital markets, securitizations, deposits and hedges of
interest rates and / or currency, as well as the management of ALCO portfolios and the minimum liquidity buffer.
–
Compliance with limits and risk appetite
45
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
46
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 minimize 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..
47
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
defense are defined:
– 1st line of defense: 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:
48
(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 defense: 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:
49
•
•
•
•
•
•
•
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.
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 (e.g. Global Corporate Banking) and Specialized Risk Managers (SRM) as OR control specialists (e.g. 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 defense: 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.
50
•
•
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.
51
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
52
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:
o
o
o
o
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.
o 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.
53
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:
• Minimizing possible injury to persons, as well as adverse financial and business impacts for the Bank, resulting
from an interruption of normal business operations.
54
•
•
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.
55
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.
– 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
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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 (e.g. theft of business or personal information).
– Theft and financial fraud.
– Interruption of business service (e.g., sabotage, extortion, denial of service).
As in previous years, 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.
–
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
57
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 stages of the supplier's life cycle
– The operational risk of transformation is that arising from material 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-
58
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.
The Compliance function applies the Regulatory framework (corporate frameworks, models, policies and procedures)
of Banco Santander and adapts it when necessary according to the specificities of the SCF business, being approved by
the business units.
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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 over to 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 a relevant risk factor.
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. EWRM (Enterprise-Wide Risk Management) approach, which provides a holistic and anticipatory vision of
climatic aspects as a basis for their proper management.
b. 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.
2.
Banks have a key role in mitigating climate change and the transition towards a new green economy.
Climate 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.
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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: with a qualitative assessment based on concentration and exposure,
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.
This report includes, among other aspects, the following:
a. Materiality analysis: Currently most of the portfolio has a low physical risk and moderate transition risk. It is
essential to keep in mind that the portfolio consists basically of loans to private clients, of good quality, very
diversified and short term.
b.
Kris tracking (Key Risk Indicators): For each type of risk affected (e.g. reputational), potential risks (e.g.
inadequate speed of portfolio alignment to decarbonization objectives), main driver (physical or transition), the
period in which the risk can materialize (short, medium, long) and the Kris with which the evolution of the risk
is followed (e.g. percentage of the entity’s electric car vs. the whole market).
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c. Main focus areas in the quarter (news, relevant projects, etc.).
At the same time, work is under way to integrate climate risks at all stages of the risk cycle, ensuring compliance with
commitments made and supervisory expectations. It is worth noting the progress being made in relation to the
corporate model “The Climate Race” to integrate climate factors in the process of granting and monitoring credit risk.
As noted above, the SCF risk map includes climate risks, as risk elements related to the environment and climate
change are considered to be factors that could affect the different types of risks existing in all relevant time horizons.
These elements cover, on the one hand, those derived from the physical effects of climate change and, on the other
hand, those derived from the process of transition to a more sustainable economy, including legislative, technological
or behavioral changes of economic agents.
In view of the activities of the companies of the SCF Group, the SCF Group does not have any liabilities, expenses,
assets or contingencies of an environmental nature that could be material in relation to equity, financial position and
consolidated results.
Exposures in the sectors potentially most affected by climate factors in accordance with the market consensus and
the execution of our materiality analysis correspond mainly to wholesale customers. The wholesale activity of SCF is
very limited (it accounts for less than 2% of the total portfolio), since the fundamental activity is consumer financing,
but in any case, within the framework of the implementation of the corporate model “The Climate Race”, we are
working on the consideration of climate aspects in the analysis of wholesale customers.
In addition, SCF has participated (within the Santander Group as a whole) in the different regulatory exercises on
climate stress carried out recently, which have been classified as learning exercises in the industry. The results of
these exercises show that, overall, the current coverage of potential losses would be adequate in the time horizons
of the maturities of our portfolios. SCF also includes a climate scenario in its ICAAP exercise to assess the adequacy
of domestic capital.
In view of the above, SCF considers that, with the best information available at the time of the formulation of these
consolidated annual accounts, there is no significant additional impact arising from climate and environmental risk
on the assets, financial situation and results in the financial year 2023.
This integration in management is also part of the emission calculation initiatives, as a basis for the commitments of
Net Zero Banking Alliance.
Proposal for distribution of results
The distribution of the profit obtained by the Bank in the financial year 2023 for 917,223 thousand euros, will be
submitted to the approval of the General Meeting of Shareholders in accordance with the following proposal:
A Legal reserve: 91,722 thousand euros.
A Voluntary reserve: 725,509 thousand euros.
Dividend on account: 99,992
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Capital and own shares
The Group has not carried out any operations with its own shares during the 2023 financial year. Likewise, there is no
self-portfolio balance in its balance sheet as of December 31, 2023.
Research and Development
The Santander Group understands innovation and technological development as a key anchor point of corporate strategy,
and tries to take advantage of the opportunities offered by digitalization. Aligned with the technological and innovation
strategy of the Santander Consumer Finance Group, it takes advantage of global capabilities and incorporates local
particularities to maximize the development of its business and remain at the forefront of its competitors.
It is crucial to support Technology and Operations to the needs of the business, with specific value-added proposals for
the supply of consumer finance value, with a focus on the point of sale, customer management and the design of
specialized products, ensuring optimal process management to maintain good efficiency ratios and ensure control of
technological and operational safety.
On the other hand, like the rest of the units of the Santander Group, Santander Consumer Finance is receiving increasing
pressure from the increasingly demanding regulatory requirements that impact on the systems model and the underlying
technology. and they require additional investments to ensure compliance and legal certainty.
Relevant events that occurred after the end of the year
The relevant events after the end of the 2023 financial year are detailed in Note 1-i of the Consolidated Report.
Adaptation to the regulatory framework
In 2014, Basel III came into force, setting new global standards for capital, liquidity and leverage in financial institutions.
From a capital point of view, Basel III redefines what is considered to be available capital in financial institutions (including
new deductions and raising the requirements of computable equity instruments), raises the required capital minimums,
and raises the capital requirements. it requires financial institutions to operate permanently with excess capital (capital
buffers), and adds new requirements on the risks considered.
In Europe, the regulation was implemented through Directive 2013/36/EU, known as ‘CRD IV’, and its regulation
575/2013 (CRR) that is directly applicable in all EU states (Single Rule Book). In addition, these standards are subject to
regulatory developments commissioned by the European Banking Authority (EBA).
CRD IV was transposed into Spanish legislation through Law 10/2014 on the regulation, supervision and solvency of credit
institutions and its subsequent regulatory development Royal Decree 84/2015. The CRR is directly applicable in the
Member states as of 1 January 2014 and repeals those lower-ranking rules that entail additional capital requirements.
The RRC envisages a gradual implementation schedule that allows a progressive adaptation to the new requirements in
the European Union. These calendars have been incorporated into the Spanish regulation through Circular 2/2014 of the
Bank of Spain affecting both new deductions, as well as those issues and elements of own funds that with this new
regulation are no longer eligible as such. The capital buffers provided for in CRD IV are also subject to gradual
implementation, being applicable for the first time in 2016 and should be fully implemented in 2019.
In 2023, at a consolidated level, Santander Consumer Finance Group must maintain a minimum capital ratio of 8.51% of
CET1 phase-in (4.5% being the requirement by Pilar I, 1.5% the requirement by Pilar II, a 2.5% requirement for capital
conservation buffer and 0.67% countercyclical buffer). This requirement includes: (i) Common Equity Tier 1 minimum
requirement that must be maintained at all times under Article 92(1)(a) of Regulation (EU) No 575/2013 (ii) the Common
Equity Tier 1 required to overhold at all times in accordance with Article 16(2)(a) of Regulation (EU) No. 1024/2013; and
(iii) the capital conservation buffer under Article 129 of Directive 2013/36/EU. In addition, Santander Consumer Finance
Group must maintain a minimum capital ratio of 10.30% of T1 phase-in as well as a minimum total ratio of 12.67%
phase-in.
63
At the end of 2023, the Bank exceeded the prudential requirement defined by the ECB, standing at a CET1 (Fully Loaded)
ratio of 12.54% and a total capital ratio of 16.94% (Fully Loaded).
On credit risk, the Bank is continuing its plan to implement Basel’s Advanced Internal Model Approach (AIRB). This
progress is also conditioned by the acquisitions of new entities, as well as by the need for coordination among supervisors
of the validation processes of internal models.
Santander Consumer Finance Group is present mainly in geographies where the legal framework between supervisors is
the same, as happens in Europe through the Capital Directive.
Currently, Santander Consumer Finance Group has the supervisory authorization for the use of advanced approaches to
the calculation of regulatory capital requirements for credit risk for its main portfolios in Spain, certain portfolios in
Germany, Nordic countries and France.
In terms of operational risk, the Santander Consumer Finance Group currently uses the standard regulatory capital
calculation approach provided for in the European Capital Directive.
In relation to the rest of the 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, using the standard approach.
Leverage ratio
The leverage ratio has been established within the Basel III regulatory framework as a non-risk-sensitive measure of the
capital required from financial institutions. The Group performs the calculation in accordance with CRD IV and its
subsequent amendment to Regulation (EU) No. 575/2013 as of 17 January 2015, the aim of which was to harmonize the
calculation criteria with those specified in the document Basel III leverage ratio framework and disclosure Basel
Committee requirements. This ratio is calculated as the ratio between Tier 1 divided by the leverage exposure.
This ratio is calculated as the ratio 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 loans is included but not funds of commerce).
• Order accounts (guarantees, credit limits granted unused, documentary credits, mainly) weighted by credit
conversion factors.
•
Inclusion of the net value of derivatives (capital gains and handicaps are net with the same counterparty, less
collateral if they meet criteria) plus a surcharge for future potential exposure.
• A surcharge for the potential risk of securities financing transactions.
• Finally, a credit derivatives risk surcharge (CDS) is included.
Santander Consumer Finance maintains a fully loaded sub-consolidated leverage ratio of 8.52% at the end of 2023 over
a benchmark ratio of 3%.
Economic Capital
From the standpoint of solvency, Santander Consumer Finance Group uses, in the context of Basel Pillar II, its economic
model for the capital self-assessment process (PAC or ICAAP). To do this, the evolution of the business and capital needs
is planned under a central scenario and under alternative stress scenarios. In this planning, the Group ensures that it
maintains its solvency objectives even in adverse economic scenarios.
Economic capital is the necessary capital, according to a model developed internally, to withstand all the risks of our
activity with a certain level of solvency. In our case the solvency level is determined by the long-term objective rating of
64
‘A’ (two steps above the rating of Spain), 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 the significant risks incurred by the Group in its
operations, so it considers risks such as concentration, structural interest, business, pensions and others that are outside
the scope of the so-called Regulatory Pillar 1. In addition, economic capital incorporates the diversification effect, which
in the case of the Group is key, due to the multinational and multi-business nature of its activity, to determine the overall
risk and solvency profile.
Santander Consumer Finance Group uses RORAC methodology in its risk management to calculate the consumption of
economic capital and return on it of the Group’s business units, as well as segments, portfolios or customers, as well as
the company’s business units. in order to periodically analyze value creation and to facilitate an optimal allocation of
capital.
The RORAC methodology makes it possible to compare, on a homogeneous basis, the performance of operations,
customers, portfolios and businesses, identifying those who obtain a risk-adjusted return higher than the Group’s cost of
capital, thus aligning risk and business management with the intention of maximizing value creation, ultimate objective
of Santander Consumer Finance’s senior management.
65
Annual corporate governance report
The Bank, an entity domiciled in Spain, whose voting rights correspond, directly and/or indirectly, to Banco Santander,
S.A., in compliance with the provisions of Article 9.4 of Order ECC/461/2013, of March 20, of the Ministry of Economy
and Competitiveness, does not prepare an Annual Corporate Governance Report, that is prepared and presented to the
CNMV by Banco Santander, S.A., as the head company of the Santander Group.
Non-financial information
On 28 December 2018, the Council of Ministers adopted Law 11/2018 amending the Commercial Code, the consolidated
text of the Capital Companies Act approved by Royal Legislative Decree 1/2010 of 2 July and Law 22/2015 of 20 July on
Audit of Accounts, in the field of non-financial information and diversity.
The statement of non-financial information shall contain the following aspects: A brief description of the group’s business
model, the group’s policies on those issues and their implementation results, the main risks associated with its activities;
as well as information on key indicators of non-financial performance on environmental, personnel, human rights, anti-
corruption and bribery issues and diversity issues.
This Directive applies to institutions whose average number of employees in the financial year exceeds 500 and which
are either considered to be public interest entities in accordance with the auditing legislation; or for two consecutive years
they meet at the closing date of each of them, at least two of the circumstances indicated in the said Law. However, a
dependent undertaking belonging to a group shall be exempt from the above obligation if the undertaking and its
dependents are included in the consolidated management report of another undertaking.
In this regard, as a subsidiary entity of Banco Santander S.a., Santander Consumer Finance, S.A., and the companies that
make up the Santander Consumer Finance Group (consolidated), it incorporates the content of this information in the
Management Report of Banco Santander S.A. and subsidiaries of the annual year ended December 31, 2023 that together
with the consolidated annual accounts of Banco Santander Group and subsidiaries, as indicated in note 1 of the attached
report, they are deposited in the Mercantile Registry of Santander and is also available at www.santander.com
Capital Structure and Significant Participations
Banco Santander, S.A.
Cantabro Catalana de Inversiones, S.A.
1,879,546,152 Percentage 99.99%
20 Percentage 0.00000106%
Total number of shares
Nominal value
Share Capital
1,879,546,172
3.00
5,638,638,516
As of December 31, 2023, the Bank's share capital was formalized in 1,879,546,172 nominal shares, each of which had
a nominal value of 3 euros, fully subscribed and paid up, with identical political and economic rights.
Restrictions on the transferability of values
Not applicable
Restrictions on voting rights
Attendees to the General Shareholders Meeting will have one vote for each share they own or represent.
Only holders of twenty or more shares shall be entitled to attend the General Shareholders' Meeting, provided that they
are registered in their name in the Register of Nominative Shares.
Side agreements
66
Not applicable
Appointment and replacement of the members of the Board of Directors and modification of social statutes
The representation of the Bank corresponds to the Board of Directors, which shall be composed of a number of members
not less than five or more than fifteen, who shall be appointed by the General Shareholders' Meeting for a term of three
years and who may, however, be re-elected, as many times as desired, for periods of equal duration.
To be a Director, you do not have to be a shareholder of the Bank
Powers of the members of the Board of Directors
On December 17, 2020, the Board of Directors of SCF, S.A. approved the appointment of 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, in solidarity, all the powers of the Board,
except those legally indelegable.
However, in view of the fact that Mr Ezequiel Szafir resigned for personal reasons at the Council of 27 July 2023 as a
member of the Board and as CEO of the company, all the powers of the Board conferred on him were revoked.
On the occasion of his re-election as Director, agreed by the General Shareholders Meeting of February 24, 2022, the
Board of Directors, on that date, agreed to the re-election of Don José Luis de Mora as CEO, attributing, again, in solidarity,
to him, all the powers of the Board of Directors, except those which are legally or by statute or under the Regulation of
the Board are non-delegable. The powers qualified as non-delegable in the Council Regulation are as follows:
a. The adoption of the Company's general policies and strategies, and the monitoring of their implementation.
b. The formulation of the annual accounts and their submission to the general meeting.
c.
The formulation of any kind of report required by law to the board of directors provided that the operation to
which the report relates cannot be delegated.
d. The convening of the general meeting of shareholders and the preparation of the agenda and the proposal of
agreements.
e. The definition of the structure of the Group of Companies of which the Company is the dominant entity.
f. Monitoring, monitoring and periodic evaluation of the effectiveness of the corporate governance and internal
governance system and of regulatory compliance policies, as well as the adoption of appropriate measures to
address, where appropriate, their deficiencies.
g. The approval, within the framework of the provisions of the Statutes of Companies and in the remuneration
policy of directors approved by the general meeting, of the remuneration that corresponds to each director.
h. The approval of contracts regulating the provision by directors of functions other than those that correspond to
them in their capacity as such and the remuneration that corresponds to them for the performance of functions
other than the supervision and collegial decision that they carry out in their capacity mere members of the
council.
i.
j.
The design and supervision of the policy of selection of directors, as well as the succession plans of directors.
The selection and continuous evaluation of the directors.
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k. Supervision of the development of the Responsible Banking Agenda.
l.
The powers delegated by the general meeting to the board of directors, unless it had been expressly authorized
by the board to sub-delegate them.
m. The determination of its organization and functioning and, in particular, the adoption and amendment of the
rules of procedure of the Council
Significant agreements that are modified or terminated in case of change of control of the Company
Not applicable.
Agreements between the Company, directors, directors or employees that provide for compensation at the end of the
relationship with the Company due to a public takeover offer
Not applicable.
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