Banco Santander, S.A.

Auditor’s report, Annual accounts and directors’ report for the year

ended 31 December 2022

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial

reporting framework applicable to Banco Santander in Spain (see notes 1 and 49). In the event of a discrepancy, the

Spanish-language version prevails.

Banco Santander, S.A.

Financial statements for the year ended 31 December 2022

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial

reporting framework applicable to Banco Santander in Spain (see notes 1 and 49). In the event of a discrepancy, the

Spanish-language version prevails.

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain

(see notes 1 and 49). In the event of a discrepancy, the Spanish-language version prevails.

Banco Santander, S.A.

BALANCE SHEETS AS OF 31 DECEMBER 2022 AND 2021
EUR Million

ASSETS	Note	2022	2021A
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND	6	130,083	91,736
FINANCIAL ASSETS HELD FOR TRADING		103,868	86,085
Derivatives	9 & 11	54,456	42,023
Equity instruments	8	9,450	14,619
Debt securities	7	17,846	14,320
Loans and advances		22,116	15,123
Central banks	6	1,933	1,118
Credit institutions	6	9,807	6,980
Customers	10	10,376	7,025
Memorandum items: lent or delivered as guarantees with disposal or pledge rights	31	26,730	22,440
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS		3,168	2,355
Equity instruments	8	1,041	908
Debt securities	7	950	734
Loans and advances		1,177	713
Central banks	6	—	—
Credit institutions	6	—	—
Customers	10	1,177	713
Memorandum items: lent or delivered as guarantees with disposal or pledge rights	31	627	154
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS		6,641	13,403
Debt securities	7	—	—
Loans and advances		6,641	13,403
Central banks	6	—	—
Credit institutions	6	934	3,445
Customers	10	5,707	9,958
Memorandum items: lent or delivered as guarantees with disposal or pledge rights	31	—	—
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME		10,607	15,035
Equity instruments	8 & 25	1,268	1,705
Debt securities	7 & 25	4,120	9,394
Loans and advances		5,219	3,936
Central banks	6	—	—
Credit institutions	6	1	—
Customers	10	5,218	3,936
Memorandum items: lent or delivered as guarantees with disposal or pledge rights	31	1,517	2,348

1

ASSETS	Note	2022	2021A
FINANCIAL ASSETS AT AMORTIZED COST		378,147	339,053
Debt securities	7	40,182	17,208
Loans and advances		337,965	321,845
Central banks	6	94	26
Credit institutions	6	35,067	35,084
Customers	10	302,804	286,735
Memorandum items: lent or delivered as guarantees with disposal or pledge rights	31	6,019	1,513
HEDGING DERIVATIVES	32	1,450	1,648
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK	32	(125)	120
INVESTMENTS		94,214	88,549
Group entities	13	90,936	85,272
Joint venture entities		324	257
Associated entities	13	2,954	3,020
TANGIBLE ASSETS	15	6,512	6,515
Property, plant and equipment		6,270	6,244
For own-use		5,392	5,392
Leased out under an operating lease		878	852
Investment property		242	271
Of which, Leased out under an operating lease		242	271
Memorandum items: acquired in financial leasing		2,662	2,695
INTANGIBLE ASSETS	16	859	896
Goodwill		334	396
Other intangible assets		525	500
TAX ASSETS	24	11,220	9,622
Current tax assets		2,977	1,003
Deferred tax assets		8,243	8,619
OTHER ASSETS		2,680	1,940
Insurance contracts linked to pensions	14, 17 & 23	313	381
Inventories	17	—	—
Other	17	2,367	1,559
NON-CURRENT ASSETS HELD FOR SALE	12	702	993
TOTAL ASSETS		750,026	657,950

A. Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49  and appendices are an integral part of the balance sheet as of 31 December 2022.

2

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain

(see notes 1 and 49). In the event of a discrepancy, the Spanish-language version prevails.

BALANCE SHEETS AS OF 31 DECEMBER 2022 AND 2021
EUR Million

LIABILITIES	Note	2022	2021A
FINANCIAL LIABILITIES HELD FOR TRADING		86,373	56,969
Derivatives	9 & 11	52,126	40,672
Short positions	9	14,453	9,244
Deposits		19,794	7,053
Central banks	18	4,265	44
Credit institutions	18	8,949	5,718
Customers	19	6,580	1,291
Marketable debt securities	20	—	—
Other financial liabilities	22	—	—
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS		38,568	12,743
Deposits		38,479	12,743
Central banks	18	1,740	607
Credit institutions	18	2,160	1,067
Customers	19	34,579	11,069
Marketable debt securities	20	89	—
Other financial liabilities	22	—	—
Memorandum items: subordinated liabilities		—	—
FINANCIAL LIABILITIES AT AMORTIZED COST		541,679	510,272
Deposits		403,212	396,154
Central banks	18	15,728	64,649
Credit institutions	18	41,609	35,262
Customers	19	345,875	296,243
Marketable debt securities	20	125,969	104,094
Other financial liabilities	22	12,498	10,024
Memorandum items: subordinated liabilities	20 & 21	19,640	20,399
HEDGING DERIVATIVES	32	3,955	2,076
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK		(26)	—
PROVISIONS	23	3,886	4,349
Pensions and other post-retirement obligations		1,220	1,677
Other long term employee benefits		781	1,053
Taxes and other legal contingencies		622	516
Contingent liabilities and commitments		220	190
Other provisions		1,043	913
TAX LIABILITIES	24	1,796	1,697
Current tax liabilities		162	176
Deferred tax liabilities		1,634	1,521
OTHER LIABILITIES	17	3,749	3,271
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE		—	—
TOTAL LIABILITIES		679,980	591,377

A.  Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49 and appendices are an integral part of the balance sheet as of 31 December 2022.

3

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain

(see notes 1 and 49). In the event of a discrepancy, the Spanish-language version prevails.

BALANCE SHEETS AS OF 31 DECEMBER 2022 AND 2021
EUR Million

EQUITY	Note	2022	2021A
SHAREHOLDERS’ EQUITY	26	72,576	68,375
CAPITAL		8,397	8,670
Called up paid capital	27	8,397	8,670
Unpaid capital which has been called up		—	—
Memorandum items: uncalled up capital		—	—
SHARE PREMIUM	28	46,273	47,979
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL	30	688	658
Equity component of compound financial instruments		—	—
Other equity instruments issued		688	658
OTHER EQUITY INSTRUMENTS	30	175	147
ACCUMULATED RETAINED EARNINGS	29	11,910	9,683
REVALUATION RESERVES		—	—
OTHER RESERVES	29	(1,195)	(1,017)
(-) OWN SHARES	30	(614)	(841)
RESULTS FOR THE PERIOD	4	7,921	3,932
(-) INTERIM DIVIDENDS	4	(979)	(836)
OTHER COMPREHENSIVE INCOME OR LOSS		(2,530)	(1,802)
ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT OR LOSS	25	(2,062)	(1,858)
Actuarial gains or - losses in defined benefit pension plans		(1,133)	(1,329)
Non-current assets and disposal groups that have been classified as held for sale		—	—
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income		(908)	(468)
Ineffectiveness of fair value hedges of equity instruments measured at fair value with changes in other comprehensive income		—	—
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income [hedged item]		289	271
Changes in the fair value of equity instruments measured at fair value with changes in other comprehensive income [hedging instrument]		(289)	(271)
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk		(21)	(61)
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS	25	(468)	56
Hedge of net investments in foreign operations [effective part]		—	—
Currency conversion		—	—
Hedging derivatives. Cash flow hedge reserve [effective part]		(381)	(87)
Changes in the fair value of debt instruments measured at fair value with changes in other comprehensive income		(87)	143
Hedging instruments [non-designated items]		—	—
Non-current assets and disposal groups that have been classified as held for sale		—	—
TOTAL EQUITY		70,046	66,573
TOTAL LIABILITIES AND EQUITY		750,026	657,950
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS
Financial guarantees granted	31	11,956	10,489
Loan commitments granted	31	122,374	111,410
Other commitments granted	31	71,948	59,421

A.  Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49 and appendices are an integral part of the balance sheet as of 31 December 2022.

4

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain

(see notes 1 and 49). In the event of a discrepancy, the Spanish-language version prevails.

INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR Million

	(Debit) Credit
	Note	2022	2021A
Interest income	34	10,156	6,405
Financial assets at fair value through other comprehensive income		210	236
Financial assets at amortized cost		7,118	4,847
Other interest income		2,828	1,322
Interest expense	35	(5,958)	(2,785)
Expenses for capital stock repayable on demand		—	—
Interest income/(changes)		4,198	3,620
Dividend income	36	9,166	5,489
Commission income	37	3,259	3,119
Commission expense	38	(602)	(541)
Gains or losses on financial assets and liabilities not measured at fair value through profit or loss, net	39	75	318
Financial assets at amortized cost	39	(27)	19
Other financial assets and liabilities	39	102	299
Gains or losses on financial assets and liabilities held for trading, net	39	412	175
Reclassification of financial assets at fair value through other comprehensive income		—	—
Reclassification of financial assets at amortized cost		—	—
Other gains (losses)		412	175
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss, net	39	498	(45)
Reclassification of financial assets at fair value through other comprehensive income		—	—
Reclassification of financial assets at amortized cost		—	—
Other gains (losses)		498	(45)
Gains or losses on financial assets and liabilities measured at fair value through profit or loss, net	39	106	38
Gains or losses from hedge accounting, net	39	(15)	(28)
Exchange differences, net	40	(877)	(205)
Other operating income	41	451	441
Other operating expenses	41	(890)	(894)
Total income		15,781	11,487
Administrative expenses		(4,683)	(4,673)
Staff costs	42	(2,796)	(2,707)
Other general administrative expenses	43	(1,887)	(1,966)
Depreciation and amortisation cost	15 & 16	(561)	(570)
Provisions or reversal of provisions, net	23	(630)	(758)
Impairment or reversal of impairment at financial assets not measured at fair value through profit or loss and net gains and losses from changes	7 &10	(1,398)	(2,287)
Financial assets at fair value through other comprehensive income		(7)	(1)
Financial assets at amortized cost		(1,391)	(2,286)
Impairment or reversal of impairment of investments in subsidiaries, joint ventures and associates, net	44	(512)	800
Impairment or reversal on non-financial assets, net		—	(85)
Tangible assets	15	—	(85)
Intangible assets	16	—	—
Others		—	—
Gain or losses on non-financial assets and investments, net	45	7	—

5

	(Debit) Credit
	Note	2022	2021A
Negative goodwill recognised in results		—	—
Gains or losses on non-current assets held for sale not classified as discontinued operations	12 & 46	(40)	(50)
Operating profit/(loss) before tax		7,964	3,864
Tax expense or income from continuing operations	24	(43)	68
Profit/(loss) from continuing operations		7,921	3,932
Profit/(loss) after tax		—	—
Profit/(loss) for the year		7,921	3,932

A. Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49 and appendices are an integral part of the income statement the year ended  as of 31 December 2022.

6

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain

(see notes 1 and 49). In the event of a discrepancy, the Spanish-language version prevails.

STATEMENTS OF RECOGNISED INCOME AND EXPENSE  FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR Million

	Note	2022	2021A
PROFIT (LOSS) FOR THE YEAR		7,921	3,932
OTHER RECOGNISED INCOME AND EXPENSES	25	(735)	(662)
Items that will not be reclassified to profit or loss		(211)	(397)
Actuarial gains and losses on defined benefit pension plans		279	29
Other recognised income and expense of investments in subsidiaries, joint venture and associates		—	—
Changes in the fair value of equity instruments measured at fair value through other comprehensive income, net		(450)	(347)
Gains or losses resulting from the accounting for hedges of equity instruments measured at fair value through other comprehensive income, net		—	—
Changes in the fair value of equity instruments measured at fair value through other comprehensive income  (hedged item)		18	117
Changes in the fair value of equity instruments measured at fair value through other comprehensive income  (hedging instrument)		(18)	(117)
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk		58	(93)
Income tax relating to items that will not be reclassified	24	(98)	14
Items that may be reclassified to profit or loss		(524)	(265)
Hedges of net investments in foreign operations (effective portion)		—	—
Revaluation gains (losses)		—	—
Amounts transferred to income statement		—	—
Other reclassifications		—	—
Exchanges differences		—	—
Revaluation gains (losses)		—	—
Amounts transferred to income statement		—	—
Other reclassifications		—	—
Cash flow hedges (effective portion)		(420)	146
Revaluation gains or (losses)		(505)	152
Amounts transferred to income statement		85	(6)
Transferred to initial carrying amount of hedged items		—	—
Other reclassifications		—	—
Hedging instruments (items not designated)		—	—
Revaluation gains (losses)		—	—
Amounts transferred to income statement		—	—
Other reclassifications		—	—
Debt instruments at fair value with changes in other comprehensive income		(328)	(524)
Revaluation gains (losses)		(242)	(243)
Amounts transferred to income statement		(86)	(281)
Other reclassifications		—	—
Non-current assets held for sale		—	—
Revaluation gains (losses)		—	—
Amounts transferred to income statement		—	—
Other reclassifications		—	—
Income tax related to items that may be reclassified to profit or loss	24	224	113
Total recognised income and expenses for the year		7,186	3,270

A. Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49 and appendices are an integral part of the statement of recognized income and expenses for the year ended  as of

31 December 2022.

7

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain (see notes 1 and 50). In the event of a discrepancy, the Spanish-language version prevails.

STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR Million
	Capital	Share premium	Equity instruments issued (not capital)	Other equity instruments	Accumulated retained earnings	Revaluation reserves	Other reserves	(-) Own Equity shares	Result for the period	(-) Interim dividends	Other comprehensive income	Total
Balance at 31 December 2021A	8,670	47,979	658	147	9,683	—	(1,017)	(841)	3,932	(836)	(1,802)	66,573
Adjustments due to errors	—	—	—	—	—	—	—	—	—	—	—	—
Adjustments due to changes in accounting policies	—	—	—	—	—	—	—	—	—	—	—	—
Opening balance at 1 January 2022A	8,670	47,979	658	147	9,683	—	(1,017)	(841)	3,932	(836)	(1,802)	66,573
Total recognised income and expense	—	—	—	—	—	—	—	—	7,921	—	(735)	7,186
Other changes in equity	(273)	(1,706)	30	28	2,227	—	(178)	227	(3,932)	(143)	7	(3,713)
Issuance of ordinary shares	—	—	—	—	—	—	—	—	—	—	—	—
Issuance of preferred shares	—	—	—	—	—	—	—	—	—	—	—	—
Issuance of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—
Maturity of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—
Conversion of financial liabilities into equity	—	—	—	—	—	—	—	—	—	—	—	—
Capital reduction	(273)	(1,706)	—	—	—	—	273	1,706	—	—	—	—
Dividends	—	—	—	—	(869)	—	—	—	—	(979)	—	(1,848)
Purchase of equity instruments	—	—	—	—	—	—	—	(1,847)	—	—	—	(1,847)
Disposal of equity instruments	—	—	—	—	—	—	—	368	—	—	—	368
Transfer from equity to liabilities	—	—	—	—	—	—	—	—	—	—	—	—
Transfer from liabilities to equity	—	—	—	—	—	—	—	—	—	—	—	—
Transfers between equity items	—	—	—	—	3,096	—	(7)	—	(3,932)	836	7	—
Increases (decreases) due to business combinations	—	—	—	—	—	—	—	—	—	—	—	—
Share-based payment	—	—	—	(48)	—	—	—	—	—	—	—	(48)
Others increases or (-) decreases of the equity	—	—	30	76	—	—	(444)	—	—	—	—	(338)
Balance at 31 December 2022	8,397	46,273	688	175	11,910	—	(1,195)	(614)	7,921	(979)	(2,530)	70,046

A.  Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49 and appendices are an integral part of the statement of changes in total equity for the year ended  as of 31 December 2022.

8

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain (see notes 1 and 49). In the event of a discrepancy, the Spanish-language version prevails.

STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR Million
	Capital	Share premium	Equity instruments issued (not capital)	Other equity instruments	Accumulated retained earnings	Revaluation reserves	Other reserves	(-) Own Equity shares	Result for the period	(-) Interim dividends	Other comprehensive income	Total
Balance at 31 December 2020A	8,670	52,013	627	157	9,683	—	(1,095)	—	(3,557)	—	(1,561)	64,937
Adjustments due to errors	—	—	—	—	—	—	—	—	—	—	—	—
Adjustments due to changes in accounting policies	—	—	—	—	—	—	—	—	—	—	—	—
Opening balance at 1 January 2021A	8,670	52,013	627	157	9,683	—	(1,095)	—	(3,557)	—	(1,561)	64,937
Total recognised income and expense	—	—	—	—	—	—	—	—	3,932	—	(662)	3,270
Other changes in equity	—	(4,034)	31	(10)	—	—	78	(841)	3,557	(836)	421	(1,634)
Issuance of ordinary shares	—	—	—	—	—	—	—	—	—	—	—	—
Issuance of preferred shares	—	—	—	—	—	—	—	—	—	—	—	—
Issuance of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—
Maturity of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—
Conversion of financial liabilities into equity	—	—	—	—	—	—	—	—	—	—	—	—
Capital reduction	—	—	—	—	—	—	—	—	—	—	—	—
Dividends	—	(477)	—	—	—	—	—	—	—	(836)	—	(1,313)
Purchase of equity instruments	—	—	—	—	—	—	—	(1,446)	—	—	—	1,446
Disposal of equity instruments	—	—	—	—	—	—	—	605	—	—	—	605
Transfer from equity to liabilities	—	—	—	—	—	—	—	—	—	—	—	—
Transfer from liabilities to equity	—	—	—	—	—	—	—	—	—	—	—	—
Transfers between equity items	—	(3,557)	—	—	—	—	(421)	—	3,557	—	421	—
Increases (decreases) due to business combinations	—	—	—	—	—	—	—	—	—	—	—	—
Share-based payment	—	—	—	(62)	—	—	—	—	—	—	—	(62)
Other increases or (-) decreases of the equity	—	—	31	52	—	—	499	—	—	—	—	582
Balance at 31 December 2021A	8,670	47,979	658	147	9,683	—	(1,017)	(841)	3,932	(836)	(1,802)	66,573

A.Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49 and appendices are an integral part of the statements of changes in total equity for the year ended 31 December 2022.

9

Translation of annual accounts originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to Banco Santander in Spain

(see notes 1 and 49). In the event of a discrepancy, the Spanish-language version prevails.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR Million

	Note	2022	2021A
A. CASH FLOWS FROM OPERATING ACTIVITIES		36,832	20,034
Profit or loss for the year	4	7,921	3,932
Adjustments made to obtain the cash flows from operating activities		3,370	2,052
Depreciation and amortization cost	15 & 16	561	570
Other adjustments		2,809	1,482
Net increase/(decrease) in operating assets		58,102	9,622
Financial assets held-for-trading		17,783	4,648
Non-trading financial assets mandatorily at fair value through profit or loss		812	130
Financial assets designated at fair value through profit or loss		(6,762)	(20,496)
Financial assets at fair value through other comprehensive income		(3,723)	(7,166)
Financial assets at amortized cost		50,793	36,675
Other operating assets		(801)	(4,169)
Net increase/(decrease) in operating liabilities		85,367	24,024
Financial liabilities held-for-trading		29,403	(4,045)
Financial liabilities designated at fair value through profit or loss		25,881	(4,147)
Financial liabilities at amortized cost		31,847	32,660
Other operating liabilities		(1,764)	(444)
Income tax recovered/(paid)		(1,724)	(352)
B. CASH FLOWS FROM INVESTING ACTIVITIES		6,595	4,083
Payments		4,257	2,266
Tangible assets	15	404	501
Intangible assets	16	164	110
Investments	13	3,689	1,655
Subsidiaries and other business units		—	—
Non-current assets held for sale and associated liabilities		—	—
Other payments related to investing activities		—	—
Proceeds		10,852	6,349
Tangible assets	15	160	119
Intangible assets	16	—	—
Investments	13 & 36	10,338	5,959
Subsidiaries and other business units		—	—
Non-current assets held for sale and associated liabilities		354	271
Other proceeds related to investing activities		—	—
C. CASH FLOW FROM FINANCING ACTIVITIES		(5,184)	(277)
Payments		5,553	5,322
Dividends	4	1,848	1,313
Subordinated liabilities	21	1,678	2,248
Redemption of own equity instruments		—	—
Acquisition of own equity instruments		1,847	1,446
Other payments related to financing activities		180	315
Proceeds		369	5,045
Subordinated liabilities	21	—	4,440
Issuance of own equity instruments		—	—
Disposal of own equity instruments		369	605
Other proceeds related to financing activities		—	—
D. EFFECT OF FOREIGN EXCHANGE RATE CHANGES		104	335

10

	Note	2022	2021A
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		38,347	24,175
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR		91,736	67,561
G. CASH AND CASH EQUIVALENTS AT END OF THE YEAR		130,083	91,736
MEMORANDUM ITEMS
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF THE YEAR
Cash		1,257	1,184
Cash equivalents at central banks		124,577	88,268
Other financial assets		4,249	2,284
TOTAL OF CASH AND CASH EQUIVALENTS AT END OF THE YEAR		130,083	91,736

A.Presented for comparison purposes only (note 1.d).

The accompanying notes 1 to 49 and appendices are an integral part of the statement of cash flows for the year ended as of 31 December 2022.

11

Translation of annual accounts originally issued in

Spanish and prepared in accordance with the regulatory

financial reporting framework applicable to Banco

Santander in Spain (see notes 1 and 49). In case of

discrepancy, the Spanish version prevails.

Banco

Santander,

S.A.

Notes to the financial statements (annual accounts) for

the year ended 31 December 2022.

1. Introduction, basis of

presentation of the financial

statements (annual accounts)

and other information

a) Introduction

Banco Santander, S.A. ('the parent' or 'Banco

Santander'), is a private-law entity subject to the rules

and regulations applicable to banks operating in Spain,

where it was constituted and currently maintains its

legal domicile, which is paseo de Pereda, numbers 9 to

12, 39004, Santander, Spain.

The principal headquarters of Banco Santander are

located in Ciudad Grupo Santander, Avenida Cantabria s/

n, 28660, Boadilla del Monte, Madrid, Spain.

The corporate purpose of Banco Santander, S.A., mainly

entails carrying out all kinds of activities, operations and

services inherent to the banking business in general and

permitted by current legislation, and the acquisition,

holding, enjoyment and disposal of all kinds of

securities.

In addition to the operations carried on directly by it,

Banco Santander is the head of a group of subsidiaries

that engage in various business activities and which

compose, together with it, Grupo Santander ( 'Grupo

Santander' or 'the Group'). Therefore, Banco Santander is

obliged to prepare, in addition to its own separate

financial statements, the Group's consolidated financial

statements, which also include the interests in joint

ventures and investments in associates.

Banco Santander financial statements for 2021 were

approved by the shareholders at the group´s annual

general meeting on 1 April  2022. The Group's 2022

consolidated financial statements, the financial

statements of Banco Santander and of substantially all

the Group companies have not been approved yet by

their shareholders at the respective annual general

meetings. However, Banco Santander board of directors

considers that the aforementioned financial statements

will be approved without any significant changes.

Appendix VII includes the list of agents that assist Banco

Santander on the performance of its business activities in

Spain.

b) Basis of presentation of the financial statements

(annual accounts)

Banco Santander financial statements for the year ended

2022 have been formulated by Banco Santander’ s

directors (at the Board of Directors meeting on February

27, 2023) in accordance with Bank of Spain Circular

4/2017 and subsequent amendments, as well as the

commercial regulations applicable to the Bank.

Accounting principles, policies and measurement criteria

are applied by the bank as set forth in note 2, in order to

faithfully represent Banco Santander´s equity and

financial position as of 31 December 2022 and 2021,

results of its operations, recognized revenue and

expense, changes in total equity and cash flows

pertaining to financial year 2022 and 2021. These annual

accounts have been prepared using the accounting

records maintained by Banco Santander.

The notes to the financial statements contain additional

information to that presented in the balance sheet,

income statement, statement of recognised income and

expense, statement of changes in total equity and

statement of cash flows. The notes provide, in a clear,

relevant, reliable and comparable manner, narrative

descriptions and breakdowns of these statements.

The figures of the annual accounts are presented in

millions of euros unless another alternative monetary

unit is indicated, rounded to the nearest million unit.

Adoption of new standards and related interpretations

The following is a summary of the main Bank of Spain

Circulars issued that became applicable to Banco 

Santander in financial year 2022:

Bank of Spain Circular 2/2022, of March 15, on rules for

the submission to the Bank of Spain of payment statistics

by payment service providers and payment system

operators.

12

This circular determines the form and periodicity with

which payment service providers must provide Bank of

Spain with the statistical data on fraud related to

different means of payment referred to in Article 67,

paragraph 4, of Royal Decree-Law 19/2018. Because the

statistical data on fraud, related to the different means

of payment, is substantially aligned with part of the

statistical information specified in Regulation (EU)

1409/2013, payment service providers shall provide

such data to the Bank of Spain by sharing this statistical

information that matches with the terms and

assumptions specified on this regulation and aligned

with the rules on this circular.

However, in cases where a parent company

consolidates, in its statistical information on fraudulent

payment transactions, the transactions of its subsidiaries

that are payment service providers pursuant to Annex I,

Part 1.3 of Regulation (EU) 1409/2013, such parent and

subsidiaries shall also submit, on an individual basis,

their statistical data on fraud related to different means

of payment, in compliance with Article 67.4 of Royal

Decree-Law 19/2018 and in accordance with the rules

set forth in Circular 2/2022 itself.

The application of the circular has not had a significant

effect on the  Bank's annual accounts.

Circular 3/2022, of March 30, of the Bank of Spain,

amending Circular 2/2016, of February 2, to credit

institutions, on supervision and solvency; Circular 2/2014,

of January 31, to credit institutions, on the exercise of

various regulatory options contained in Regulation (EU)

No. 575/2013, of the European Parliament and of the

Council, of June 2013, on prudential requirements for

credit institutions and investment firms and amending

Regulation (EU) No. 675/2013, of the European

Parliament and of the Council, of June 2013, on

prudential requirements for credit institutions and

investment firms. No. 575/2013, of the European

Parliament and of the Council, of 26 June 2013, on

prudential requirements for credit institutions and

investment firms, and amending Regulation (EU) No.

648/2012; and Circular 5/2012, of 27 June, to credit

institutions and payment service providers, on

transparency of banking services and responsibility in the

granting of loans.

The amendments to Circular 2/2016, dated February 2,

affect rules in its nine chapters, incorporate an additional

provision, eliminate two transitory provisions, modify

three annexes and eliminate another.

In Standard 1, Chapter 1 on definitions and scope of

application, the definition of delegation has been added,

aligned with the European Banking Authority's

guidelines on outsourcing, and the equivalence of the

concept of delegation with that of outsourcing is also

clarified.

In Standard 2, on scope of application, paragraph 1, a

clarification is introduced to take into account that the

supervisory requirements or powers apply on a

consolidated or sub-consolidated basis to financial

holding companies and mixed financial holding

companies approved in accordance with Article 15 bis of

Law 10/2014.

Section 4, on suitability, clarifies that the standard is

applicable to all financial holding companies and mixed

financial holding companies, and not only to dominant

companies.

On section 5, the scope of application of the

remuneration section is modified to take into account

the exceptions established in sections 4 and 5 of article

32 of Law 10/2014, as well as the discretion for the Bank

of Spain established in section 6 of the same article. 

Section 6, on delegation of the provision of services or

the exercise of functions, the scope of application has

been revised to adjust it to the amendments made to

Article 109 of the CRD and Article 43.4 of Royal Decree

84/2015, which establish the scope of application of the

internal governance systems, procedures and

mechanisms of the entities.

And, on section 7, the scope of application of the capital

self-assessment has been modified to include some

cases that were not contemplated and that have arisen

from supervisory experience.

On section 4, on branches and provision of services

without a branch in Spain by credit institutions

headquartered in non-EU Member States, the

empowerment regarding additional information that the

Bank of Spain may request from branches of credit

institutions headquartered in non-EU Member States has

been exercised, and the content and terminology of the

rule regarding the provision of services without a branch

in Spain has been aligned with Royal Decree 84/2015, of

February 13.

On section 2, on the exercise by the Bank of Spain of

permanent regulatory options provided for in Regulation

(EU) No. 575/2013, the terminology relating to the

classification of exposures to the Administration has

been modified in order to clarify that public health

foundations may receive the same risk weighting as

exposures to the General State Administration.

Finally, on section 3, on capital buffers, has been

amended to introduce the changes incorporated in CRD

V, including the inclusion of capital requirements that

cannot be covered by capital intended to meet the

combined capital buffer requirement.

The application of the circular has not had a significant

effect on the  Bank's annual accounts.

13

c)  Use of critical estimates

The results and the determination of equity are sensitive

to the accounting policies, measurement bases and

estimates used by the directors of Banco Santander in

preparing the financial statements.

The main accounting policies and measurement bases

are set forth in note 2.

In the financial statements estimates were occasionally

made by the senior management of Banco Santander in

order to quantify certain of the assets, liabilities, income,

expenses and obligations reported herein. These

estimates, which were made on the basis of the best

information available, relate basically to the following:

•The impairment losses on certain assets: it applies to

financial assets at fair value through other

comprehensive income, financial assets at amortised

cost, non-current assets held for sale, investments,

tangible assets and intangible assets(see notes 6, 7, 

10, 12, 13, 15, 16 and 49)-.

•The assumptions used in the actuarial calculation of

the post-employment benefit liabilities and

commitments and other obligations (see note 23).

•The useful life of the tangible and intangible

assets(see notes 15 and 16).

•Assessment of the impairment of investments in

group, joint venture and associated entities (see note

13).

•The measurement of goodwill (see note 16).

•The calculation of provisions and the consideration of

contingent liabilities (see note 23).

•The fair value of certain unquoted assets and

liabilities (see notes 6, 7, 8, 9, 10, 11, 18, 19 and 20).

•The recoverability of deferred tax assets (see note

24).

•The fair value of the identifiable assets acquired and

the liabilities assumed in business combinations (see

note 3).

To update the previous estimates, the Bank's

management has taken into account the current

macroeconomic scenario resulting from the Ukrainian

war, as well as the growing level of inflation and the

difficulties in the supply chains, which is having a certain

impact on the economic evolution and is being closely

monitored, and which generates uncertainty in the

Group's estimates. For this reason, the Management of

the Group has carried out an evaluation of the current

situation in accordance with the best information

available to date, developing in the notes the main

estimates made and the potential impacts of the

Ukrainian war and the macroeconomic situation on them

during the period ended December 31, 2022 (see note

13 and 49). 

Although these estimates have been made on the basis

of the best information available at the end of the year

2022, and considering information updated at the date

of preparation of these annual accounts, it is possible

that events that may take place in the future may make

it necessary to modify them (upwards or downwards) in

the coming years, which would be done, if appropriate,

in a prospective manner, recognising the effects of the

change in estimate in the corresponding income

statement.

d) Comparative information

The information contained in the 2022 annual accounts

for the 2021 financial year is presented, solely and

exclusively, for comparison with the information relating

to 2022.

e) Capital management

i. Regulatory and economic capital

Credit institutions must meet a number of minimum

capital and liquidity requirements. These minimum

requirements are governed by the European Capital

Requirements Regulation (hereinafter CRR) and the

Capital Requirements Directive (hereinafter CRD). In June

2019, these regulations were significantly amended.

As the Directives need to be transposed into the legal

systems of the different Member States in order to be

applicable, in the case of Spain, Royal Legislative Decree

7/2021 and Royal Decree 970/2021 were published for

this purpose in 2021. In 2022, the transposition of the

CRD into Spanish law has been completed with the

publication of Bank of Spain Circular 3/2022, which

amends Circular 2/2016, on supervision and solvency;

Circular 2/2014, on the exercise of various regulatory

options of the CRR and Circular 5/2012, addressed to

credit institutions and payment service providers, on

transparency of banking services and responsibility in

the granting of loans.

The CRD introduced important modifications such as

Pillar 2G regulation ('P2 Guidance' supervisory

recommendation on Pillar 2 requirements). On 27

October 2021, the European Commission published the

draft review of the European banking legislation: CRR

and CRD.

This review completes the implementation of the Basel

III reform, which was agreed at the end of 2017 and aims

to reduce the variability of risk-weighted assets and

improve comparability between banks.

Progress was made in 2022 on discussions about the

new texts and the final proposal is expected to be

approved in 2023.

The banking package consists of the following elements:

1) Implementation of the final Basel III reforms, 2)

Contribution to sustainability and green transition and 3)

Stronger supervision: ensuring sound management of EU

banks and better protection of financial stability.

14

The first element is reflected in the Commission's

proposal to amend the text of the CRR. This proposal

contains changes concerning, among other things, key

risk factors, standardised credit risk, internal models, the

output floor and operational risk.

The second element, relating to the contribution to

sustainability and green transition, is reflected in the fact

that the legislative proposals continue to incorporate

ESG (environmental, social and governance) factors into

the various areas of prudential regulation: governance,

supervision, risk management, reporting obligations to

competent authorities and disclosure requirements,

among other topics. In this regard, it is important to note

the Commission's mandate to the European Banking

Authority (EBA) to assess whether specific prudential

treatment is required for environmental and social risks.

In line with this mandate, in 2022, the EBA issued the

first consultation on the role of environmental risks

within the prudential framework. Based on the feedback

received in said consultation, and depending on the final

wording of the        CRR/CRD, the EBA shall publish a

report on the matter.

Finally, the third element, which refers to stronger

supervision and protection of financial stability, is

expressed in a series of provisions concerning: fit-and-

proper requirements, the extension of the scope by

revising certain definitions that would cover groups

managed by fintechs, and the establishment of third-

country branches in the EU in order to achieve greater

harmonisation of rules and better supervision of this

type of entity.

The European Council's proposal on CRR and CRD was

published on 8 November 2022. During 2023, it is

expected that the Parliament makes its position text

public, which will be followed by the beginning of the

trialogues process that will eventually result in the final

versions of the regulations.

The new CRR/CRD regulations are expected to enter into

force from 1 January 2025.

With regard to the resolution framework, institutions

must have an adequate funding structure to ensure that,

in the event of financial distress, the institution has

sufficient liabilities to absorb losses in order to recover

its position or be resolved, while ensuring the protection

of depositors and financial stability. The entities must

therefore meet several minimum loss-absorbing

requirements, named Total Loss-Absorbing Capacity

(TLAC) and Minimum Requirement for own funds and

Eligible Liabilities (MREL), which are regulated by the

CRR and by the Bank Recovery and Resolution Directive

(BRRD).

In June 2019, the CRR introduced the minimum TLAC

requirement, which only applies to global systemically

important banks (G-SIBs). This requirement involves two

metrics, the first is a minimum requirement for own

funds and eligible liabilities in terms of a percentage of

the total risk exposure amount (TREA), set at 18% from 1

January 2022 once the transition period ended. The

second is a metric to set a minimum requirement for

own funds and eligible liabilities in terms of a

percentage of the average exposure to the Basel III Tier I

leverage ratio of 6.75% from 1 January 2022 once the

transition period ended.

For large banks (defined as banks with total assets of

more than EUR 100 billion) or banks deemed to be

systemically important by the resolution authority, the

BRRD sets a minimum subordination requirement that

will be higher between a 13.5% of risk-weighted assets

and 5% of the leverage ratio. For the remaining

institutions, the subordination requirement is set by the

resolution authority on a case-by-case basis.

On 25 October 2022, the regulation on prudential

treatment for global systemically important banks was

published. This modifies both the CRR and the BRRD as

regards prudential treatment of global systemically

important banks (G-SIBs) with a multiple point of entry

(MPE) resolution strategy, as well as methodologies for

the indirect subscription of instruments (Daisy Chains)

eligible for meeting the minimum requirement for own

funds and eligible liabilities.

This Regulation, known as the 'Quick Fix', covers the

following objectives:

•Inclusion in the BRRD and CRR of references to third

countries that allow adjustment of the deduction

applied for the TLAC holding instruments issued by

subsidiaries in third countries based on excess TLAC/

MREL at the said subsidiaries, as well as the

adjustment where the sum of the requirements for

own funds and eligible liabilities of G-SIBs under an

MPE strategy exceed the theoretical requirements

for the same group under a single point of entry

(SPE) strategy. In other words, the latter adjustment

is based on a comparison between the two possible

resolution strategies.

For subsidiaries in jurisdictions without a resolution

regime in place, the Regulation provides for a

transitional period until 31 December 2024. During

this transitional period the entities may adjust the

deductions based on excess above capital

requirements in subsidiaries in third countries, if they

meet certain requirements.

15

•Inclusion of a deduction scheme for MREL instrument

holdings through entities of the same resolution

group other than the resolution entity. This

Regulation sets a deduction for the intermediate

entity (Daisy Chains) that buy instruments issued by

another entity as a result of this the deduction. The

intermediate entity is obligated to issue the same

amount that is repurchasing to the Resolution Entity,

transferring internal MREL needs to the Resolution

Entity, which will finally cover the required amount

with external MREL.

This Regulation is applicable since 14 November 2022,

except for the provisions relating to Daisy Chains, which

apply since 1 January 2024.

Finally, Deposit Guarantee Schemes (DGSs) are

regulated by the Deposit Guarantee Schemes Directive

(DSGD), which has not undergone any significant

changes since its publication in 2014. It aims to

harmonise the deposit guarantee schemes of the

Member States, thus ensuring stability and balance in

different countries. It creates an appropriate framework

for depositors to have better access to DGSs than was

the case before the publication of this Directive through

clear coverage, shorter repayment periods, better

information and robust funding requirements. This

Directive is transposed into Spanish law by Royal Decree

2606/1996, with its amendments set forth in Royal

Decree 1041/2021.

To ensure that depositors' funds are secured, the DGSs

collect funds available through contributions that must

be made by their members at least once a year; a target

level of 0.8% of the guaranteed deposits total must be

met by 3 July 2024. These annual collections are set

depending on the guaranteed deposits total and the

degree of risk faced by the entities involved in the DGS.

The method for calculating contributions is stated in the

EBA Guidelines (EBA/GL/2015/10). A review and

evaluation process was opened for these Guidelines by

the EBA in 2022 (EBA/CP/2022/10).

Additionally, recent market developments have caused

substantial increases in energy prices, which have

consequently generated increases in the margins

required by central counterparty entities (CCPs) to cover

exposures. In response to this issue, Delegated

Regulation (EU) 2022/2311 was published in November

this year, amending Delegated Regulation (EU)

153/2013, which sets forth regulatory technical

standards on the requirements that CCPs must meet.

The new Regulation broadens the catalogue of

guarantees that CCPs can accept as eligible collateral

until November 2023.

At 31 December 2022, the Bank met the minimum

capital requirements established by current legislation

(see note 49.d).

ii. Plan for the roll-out of advanced approaches and

authorisation from the supervisory authorities

Banco Santander following the Group's policies, remains

committed to adopting the Basel II advanced internal

ratings-based (AIRB) approach for its banks, increasing

the amount of exposure managed using internal models.

This approach will be applied progressively over the

coming years. The commitment to the supervisory

authority means adapting the advanced approaches in

the Group's core markets.

This objective of covering IRB models in the group should

be seen in the context of the current supervisory focus

on the robustness and adequacy of existing models, as

well as the simplification strategy recently agreed with

ECB.

Grupo Santander has supervisory approval to use

advanced approaches for calculating regulatory capital

for credit risk for Banco Santander and the main

subsidiaries in Spain, the United Kingdom and Portugal,

and for some portfolios in Germany, Mexico, Brazil,

Chile, Nordic countries (Sweden, Finland and Norway),

France and the United States.

f) Environmental impact

In view of the business activities carried on by the Group

entities, and therefore the Bank, do not have any

environmental liability, expenses, assets, provisions or

contingencies that might be material with respect to its

financial position or results (see note 49.a.).

g) Customer Care Service Annual Report

As required by the Article 17 of Ministry of Economy

Order ECO/734/2004, of 11 March, on the services and

departments of Customer Service and the Customer

Ombudsmen of Financial Institutions, the annual report

presented by the Head of the department to the board

meeting held on March 2023 is summarised in the

directors' report.

h) Deposit Guarantee Fund and Resolution Fund

i.Deposit Guarantee Fund

Banco Santander participates in the Deposit Guarantee

Fund (DGF). The annual contribution to be made by the

entities to this fund, established by Royal Decree - Law

16/2011 of October 14, by which the DGF is created in

accordance with the wording given by the Tenth Final

Disposition of Law 11/2015 of June 18 on Recovery and

Resolution of credit institutions and investment services

companies (in force since June 20, 2015), is determined

by the Management Committee of the DGF and is

established based on the guaranteed deposits of each

entity and their risk profile. The annual contribution to be

made by the entities to this fund is determined by the

Management Committee of the FGD, and consists of the

contribution based on the guaranteed deposits of each

entity corrected for their risk profile, which includes the

16

phase of the economic cycle and the impact of pro-

cyclical contributions, according to section 3 of article 6

of the Royal Decree-Law 16/2011.

The purpose of the FGD is to guarantee deposits with

credit institutions up to the limit established in the

mentioned Royal Decree-Law. The expense incurred by

the contributions accrued to this organism in the year

2022 has amounted to EUR 258 million (EUR 225 million

in the year 2021), which are recorded under ‘Other

operating expenses’ in the profit and loss account

attached (see note 41).

ii. National Resolution Fund

Law 11/2015 regulates the creation of the National

Resolution Fund, whose financial resources should

reach, by 31 December 2024, at least 1% of the amount

of secured deposits, through contributions from credit

institutions and investment firms established in Spain.

The details of the calculation of contributions to this

Fund is regulated by Commission Delegated Regulation

(EU) 2015/63 of 21 October 2014 and is calculated by

the Orderly Banking Resolution Fund, on the basis of the

information provided by each entity.

iii. Single Resolution Fund

On January 1, 2016, the Single Resolution Fund (SRF),

which was implemented by Regulation (EU) No.

806/2014 of the European Parliament and of the

Council, became operational. The rules governing the

banking union provide that banks will pay contributions

to the SRF over eight years.

The Single Resolution Board (SRB) is responsible for

calculating the contributions to be made by credit

institutions and investment firms to the SRF. These

contributions are based, as of fiscal year 2016, on: (a) a

flat-rate contribution (or base annual contribution), pro

rata with respect to the total liabilities, excluding own

funds, guaranteed deposits of all institutions authorized

in the territory of the participating member states; and

(b) a risk-adjusted contribution, which will 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 structures of the

banking sector of the member states. The amount of this

contribution will accrue from the 2016 financial year, on

an annual basis.

The expenditure incurred by the contribution made to

the National Fund and the Single Resolution Fund

amounted to EUR 314 million in 2022 (EUR 307 million

in the year 2021), which are recognised under ‘Other

operating expenses’ in the accompanying income

statement (see note 41).

Likewise, in 2022 Banco Santander has recognized a

contingent liability in favor of the Single Resolution

Board (SRB) for EUR 54 million, in addition to the

expense that appears in the income statement, as an

Irrevocable Payment Commitment (IPC). This

commitment is guaranteed by constituting a cash

deposit of the same amount, delivered as a guarantee

that has been recorded in the Balance Sheet Assets.

i) Merger by absorption

Banco Santander has not entered into merger by

absorption agreements during the financial year 2022.

The mergers by absorption carried out during the

financial year 2021 are detailed below:

i. Merger by absorption between Banco Santander, S.A.

(as absorbing company) and Popular Spain Holding de

Inversiones, S.L.U., Santander Investment I, S.A.U. and

Administración de Bancos Latinoamericanos Santander,

S.L. (as absorbed companies).

On June 29, 2021, the members of the respective boards

of directors of Banco Santander, S.A. (as absorbing

company) and Popular Spain Holding de Inversiones,

S.L.U., Santander Investment I, S.A.U. and Administration

of Latin American Banks Santander, S.L. (as absorbed

companies) drafted and signed the common project for

the merger by absorption.

Under Articles 49 and 51 of Law 3/2009, of April 3, on

Structural Modifications of Commercial Companies

("LME"), it was not necessary for this merger to be

approved by the general shareholders' meetings (or, as

the case may be, by the sole shareholder) of the

absorbed companies, since Banco Santander, S.A. had a

direct holding in the case of Popular Spain Holding de

Inversiones, S.L.U. and Santander Investment I, S.A.U.,

and in the case of Administración de Bancos

Latinoamericanos Santander, S.L., partly directly and

partly indirectly through another of the absorbed

companies (Santander Investment I, S.A.U.); nor was

approval by the shareholders' meeting of Banco

Santander, S.A. necessary, since shareholders

representing at least 1% of the share capital did not

require it, in accordance with Article 51.1 of the LME.

Consequently, the board of directors of Banco Santander,

S.A. on June 29, 2021 approved both the common

merger plan and the merger that is the object of the

merger.

Once the mandatory authorization by the Minister of

Economic Affairs and Digital Transformation was

obtained (twelfth additional provision of Law 10/2014,

of June 26, on the regulation, supervision and solvency

of credit institutions), on 16 December 2021, the

corresponding merger deed was executed and, having

been registered in the Commercial Registry of Cantabria,

the dissolution without liquidation of Popular Spain

Holding de Inversiones, S.L.U. took place with effect

from 20 December 2021, Santander Investment I, S.A.U.

and Administración de Bancos Latinoamericanos

Santander, S.L. and the transfer mass, on a universal

basis, of all their respective assets and liabilities to

Banco Santander, S.A., which acquired them by universal

succession and without solution of continuity. It should

be noted that the merger, for accounting purposes, was

recorded by Banco Santander, S.A. in 2021.

17

Since the absorbed companies were fully owned by

Banco Santander, S.A., in the case of Popular Spain

Holding de Inversiones, S.L.U. and Santander Investment

I, S.A.U. and directly and indirectly in the case of

Administración de Bancos Latinoamericanos Santander,

S.L., in accordance with article 49.1, in relation to article

26, of the LME, the Bank did not increase capital. Once

the merger became effective on December 20, 2021, all

the shares and participations of the absorbed companies

were fully amortized, extinguished and cancelled.

The merger balance sheets were considered to be those

included in the financial statements for the year ended

December 31, 2020, prepared by the administrative

bodies of each of the companies participating in the

merger. The merger balance sheets of Banco Santander,

S.A., Popular Spain Holding de Inversiones, S.L.U.,

Santander Investment I, S.A.U. and Administración de

Bancos Latinoamericanos Santander, S.L. were duly

verified by their respective auditors.

In accordance with the provisions of the applicable

accounting regulations, for accounting purposes, 1

January 2021 was set as the date from which the

transactions of the absorbed companies were to be

considered as carried out by Banco Santander, S.A. for

the merger.

Likewise, the transaction constitutes a merger of those

regulated in article 76.1.c) of Law 27/2014, of November

27, on Corporate Income Tax ("LIS"). Pursuant to Article

89.1 of the LIS, the merger was subject to the tax regime

established in Chapter VII of Title VII and in the second

additional provision of the LIS, as well as in Article 45,

paragraph I.B.10 of the Consolidated Text of the Law on

Transfer Tax and Stamp Duty, approved by Royal

Legislative Decree 1/1993, of September 24.

The following are the balance sheets of companies

absorbed as of 31 December 2020:

POPULAR SPAIN HOLDING DE INVERSIONES, S.L.U.
Balance as of December 31, 2020
EUR thousands
ASSETS	2020	EQUITY AND LIABILITIES	2020
NON-CURRENT ASSETS	90,882	EQUITY	500,854
Deferred tax asset	90,882	SHAREHOLDERS EQUITY	500,854
		Capital	100
		Share premium	726,127
		Reserves	40
		Loss for the period	(225,413)
CURRENT ASSETS	410,154	CURRENT LIABILITIES	182
Clients, Group companies and Associates	60,095	Commercial creditors and other accounts payable	182
Other credits with public administrations	44
Cash and other equivalent liquid assets	350,015
TOTAL ASSETS	501,036	TOTAL EQUITY AND LIABILITIES	501,036

SANTANDER INVESTMENT I, S.A.U.
Balance as of December 31, 2020
EUR thousands
ASSETS	2020	EQUITY AND LIABILITIES	2020
NON-CURRENT ASSETS	1,857,418	EQUITY	217,897
Long term investments in Group companies and Associates	1,857,417	SHAREHOLDERS EQUITY	217,897
Other long term financial assets	1	Capital	601
		Reserves	228,318
		Loss form previous periods	(11,022)
		NON-CURRENT LIABILITIES	1,640,630
		Long term debts to Group companies and Associates	1,629,500
		Deferred tax liabilities	11,130
CURRENT ASSETS	2,682	CURRENT LIABILITIES	1,573
Long-term investments in Group companies and Associates. Loans to companies	4	Short term debts to Group companies and Associates	1,548
Cash and other equivalent liquid assets	2,678	Commercial creditors and other accounts payable	25
TOTAL ASSETS	1,860,100	TOTAL EQUITY AND LIABILITIES	1,860,100

18

ADMINISTRACIÓN DE BANCOS LATINOAMERICANOS SANTANDER, S.L.
Balance as of December 31, 2020
EUR thousands
ASSETS	2020	EQUITY AND LIABILITIES	2020
NON-CURRENT ASSETS	2,513,961	EQUITY	2,537,251
Long-term equity investments in Group companies and Associates	569,949	SHAREHOLDERS EQUITY	2,537,251
Long-term debt investments in Group companies and Associates	1,944,003	Capital	394,685
Other long-term financial assets	8	Reserves	2,176,029
Long-term debt investments in  third parties	1	Negative results from previous exercises	(24,034)
		Loss of the period	(9,429)
		NON-CURRENT LIABILITIES	22,931
		Deferred tax liabilities	22,931
CURRENT ASSETS	46,671	CURRENT LIABILITIES	450
Commercial debts receivable  and others accounts bills	2	Short term debts	19
Short-term debt investments in Group companies and Associates	843	Debts with Group companies and Associates in the short term	408
Cash and cash equivalents	45,826	Commercial debts and other accounts payable	23
TOTAL ASSETS	2,560,632	TOTAL EQUITY AND LIABILITIES	2,560,632

In accordance with the provisions of the applicable

regulations, because of the accounting record of the

merger by absorption carried out by the Bank in 2021, an

increase of EUR 1,037 million in the Bank's voluntary

reserves in that year was recorded as a result of the

decrease on the participation of the absorbed companies

(see note 29).

j) Events after the reporting period

On 28 December 2022 the Law establishing a new

temporary levy on credit institutions and financial credit

institutions was published in Spain (see note 24 for

additional information). On 1 January 2023, the tax

group in Spain, whose parent entity is Banco Santander,

has recorded  an estimated amount of EUR 225 million in

accordance with IFRIC 21 due to this new levy.

In accordance with the agreement reached by the April

2022 general shareholders’ meeting, on 1 February 2023

the board of directors approved a capital reduction,

subject to corresponding regulatory authorization from

the ECB, of EUR 170,203,286 through the redemption of

340,406,572 shares, representing 2.03% of the capital,

acquired in the first share buyback program.

2. Accounting policies

The following accounting principles, policies and

measurement criteria have been applied in the

preparation of the financial statements:

a) Foreign currency transactions

The functional currency of Banco Santander is the euro. 

Therefore, all balances and transactions denominated in

currencies other than the euro are deemed to be

denominated in foreign currency.

The balances in the financial statements whose

functional currency is not the euro are translated to

euros as follows:

•Assets and liabilities, at the closing rates.

•Income and expenses, at the average exchange rates

for the year.

•Equity items, at the historical exchange rates.

In general, balances denominated in foreign currencies,

including those branches in countries outside the

Monetary Union, have been converted to euros using the

official average exchange rates of the Spanish spot

currency market (through the US dollar's quotation on

local markets, for non-monetary currencies listed on the

Spanish market) at the end of each fiscal year.

The exchange differences arising on the translation of

foreign currency balances to the functional currency are

generally recognised at their net amount under

'Exchange differences, net' in the income statement,

except for exchange differences arising on financial

instruments at fair value through profit or loss, which

are recognised in the income statement without

distinguishing them from other changes in fair value,

and for exchange differences arising on non-monetary

items measured at fair value through equity, which are

recognised under 'Other comprehensive income–Items

that may be reclassified to profit or loss–Exchange

differences' except for exchange differences on equity

instruments, where the option to irrevocably elect to be

measured at fair value through changes in accumulated

other comprehensive income, which are recognised in

accumulated 'Other Comprehensive Income - Items not

to be reclassified to profit or loss - Changes in fair value

of equity instruments measured at fair value' through

other comprehensive income (see note 25).

b) Investments in group entities, joint ventures and

associates

Group entities are those over which the Bank has the

capacity to exercise control; capacity which is generally

but not exclusively manifested by the direct or indirect

ownership of at least 50% of the voting rights of the

investees or, even if this percentage is lower or zero, if,

as in the case of agreements with their shareholders, the

Bank is granted such control.

19

Control is understood to be the power to direct the

financial and operating policies, by law, by statute or by

agreement, of an entity in order to obtain benefits from

its activities.

Joint ventures are deemed to be entities that are not

subsidiaries but which are jointly controlled by two or

more unrelated entities. This is evidenced by contractual

arrangements whereby two or more parties have

interests in entities so that decisions about the relevant

activities require the unanimous consent of all the

parties sharing control.

Associates are entities over which Banco Santander is in

a position to exercise significant influence, but not

control or joint control. It is presumed that Banco

Santander exercises significant influence if it holds 20%

or more of the voting power of the investee.

The shareholdings in group, multi-group and associated

entities, are presented on the balance sheet at their net

acquisition cost of any impairments that, where relevant,

those shares may have suffered.

Where there is evidence of impairment of these shares,

the amount of such deterioration is equivalent to the

difference between their recoverable amount and their

book value. Impairment losses are recorded under the

heading ‘Impairment or reversal of impairment of

investments in joint ventures or associates’ in the profit

and loss account.

Appendices I and II contain significant information on

these companies. In addition, note 13 provides

information on the most significant acquisitions and

disposals in 2022 and 2021.

c) Definitions and classification of financial

instruments

i. Definitions

A financial instrument is any contract that gives rise to a

financial asset of one entity and a financial liability or

equity instrument of another entity.

An equity instrument is a contract that evidences a

residual interest in the assets of the issuing entity after

deducting all of its liabilities.

A financial derivative is a financial instrument whose

value changes in response to the change in an

observable market variable (such as an interest rate,

foreign exchange rate, financial instrument price, market

index or credit rating), whose initial investment is very

small compared with other financial instruments with a

similar response to changes in market factors, and which

is generally settled at a future date.

Hybrid financial instruments are contracts that

simultaneously include a non-derivative host contract

together with a derivative, known as an embedded

derivative, that is not separately transferable and has the

effect that some of the cash flows of the hybrid contract

vary in a way similar to a stand-alone derivative.

Compound financial instruments are contracts that

simultaneously create for their issuer a financial liability

and an own equity instrument (such as convertible

bonds, which entitle their holders to convert them into

equity instruments of the issuer).

The preference shares contingently convertible into

ordinary shares eligible as Additional Tier 1 capital

(CCPSs) -perpetual shares, which may be repurchased by

the issuer in certain circumstances, the interest on which

is discretionary, and would convert into variable number

of newly issued ordinary shares if the capital ratio of the

Bank or its consolidated group falls below a

given percentage (trigger event), as those two terms are

defined in the related issue prospectuses are recognised

for accounting purposes by the Bank 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, Banco Santander

estimates the fair value of the liability as the amount

that would have to be delivered if the trigger event were

to occur immediately and, accordingly, the equity

component, calculated as the residual amount, is zero. In

view of the aforementioned discretionary nature of the

payment of the coupons, they are deducted directly from

equity.

Capital perpetual preference shares (CPPS), with the

possibility of purchase by the issuer in certain

circumstances, whose remuneration is discretionary, and

which will be amortised permanently, totally or partially,

in the event that the Bank or its consolidated group

submits a capital ratio lesser than a certain percentage

(trigger event), as defined in the corresponding

prospectuses, are accounted for by Banco Santander as

equity instruments.

The following transactions are not treated for accounting

purposes as financial instruments:

•Investments in associates and joint ventures (see

note 13).

•Rights and obligations under employee benefit plans

(see note 23).

•Contracts and obligations relating to employee

remuneration based on own equity instruments  

(see note 30).

20

ii. Classification of financial assets for measurement

purposes

Financial assets are initially classified into the various

categories used for management and measurement

purposes, unless they have to be presented as 'Non-

current assets held for sale' or they relate to 'Cash, cash

balances at central banks and other deposits on

demand', 'Changes in the fair value of hedged items in

portfolio hedges of interest rate risk (asset side)',

'Hedging derivatives and Investments', which are

reported separately.

Classification of financial instruments: the classification

criteria for financial assets depends on the business

model for their management and the characteristics of

their contractual flows.

Banco Santander´s business models refer to the way in

which it manages its financial assets to generate cash

flows. In defining these models, the Bank takes into

account the following factors:

•How key management staff are assessed and

reported on the performance of the business model

and the financial assets held in the business model.

•The risks that affect the performance of the business

model (and the financial assets held in the business

model) and, specifically, the way in which these risks

are managed.

•How business managers are remunerated.

•The frequency and volume of sales in previous years,

as well as expectations of future sales.

The analysis of the characteristics of the contractual

flows of financial assets requires an assessment of the

congruence of these flows with a basic loan agreement.

Banco Santander determines if the contractual cash

flows of its financial assets that are only principal and

interest payments on the outstanding principal amount

at the beginning of the transaction. This analysis takes

into consideration four factors (performance, clauses,

contractually linked products and currencies).

Furthermore, among the most significant judgements

used by Banco Santander in carrying out this analysis,

the following ones are included:

•The return on the financial asset, in particular in

cases of periodic interest rate adjustments where the

term of the reference rate does not coincide with the

frequency of the adjustment. In these cases, an

assessment is made to determine whether or not the

contractual cash flows differ significantly from the

flows without this change in the time value of

money, establishing a tolerance level of 5%.

•The contractual clauses that may modify the cash

flows of the financial asset, for which the structure

of the cash flows before and after the activation of

such clauses is analysed.

•Financial assets whose cash flows have different

priority for payment due to a contractual link to

underlying assets (e.g. securitisations) require a

look-through analysis by the Bank so as to review

that both the financial asset and the underlying

assets are only principal and interest payments and

that the exposure to credit risk of the set of

underlying assets belonging to the tranche analysed

is less than or equal to the exposure to credit risk of

the set of underlying assets of the instrument.

Depending on these factors, the asset can be measured

at amortised cost, at fair value with changes in other

comprehensive income, or at fair value with changes

through profit and loss. Bank of Spain Circular 4/2017

also establishes an option to designate an instrument at

fair value with changes in profit or loss, when doing so

eliminates or significantly reduces a measurement or

recognition inconsistency (sometimes referred to as

'accounting asymmetry') that would otherwise arise

from measuring assets or liabilities or recognising gains

and losses on different bases.

Banco Santander uses the following criteria for the

classification of financial debt instruments:

•Amortised cost: financial instruments under a

business model whose objective is to collect

principal and interest flows, over which there is no

significant unjustified sales and fair value is not a key

element in the management of these assets and

contractual conditions they give rise to cash flows on

specific dates, which are only payments of principal

and interest on the outstanding principal amount. In

this sense, unjustified sales are considered to be

those other than those related to an increase in the

credit risk of the asset, unanticipated funding needs

(stress case scenarios). Additionally, the

characteristics of its contractual flows represent

substantially a 'basic financing agreement'.

•Fair value with changes in other comprehensive

income: financial instruments held in a business

model whose objective is to collect principal and

interest cash flows and the sale of these assets,

where fair value is a key factor in their management.

Additionally, the contractual cash flow

characteristics substantially represent a 'basic

financing agreement'.

21

•Fair value with changes in profit or loss: financial

instruments included in a business model whose

objective is not obtained through the above

mentioned models, where fair value is a key factor in

managing of these assets, and financial instruments

whose contractual cash flow characteristics do not

substantially represent a 'basic financing

agreement'. In this section it can be enclosed the

portfolios classified under 'Financial assets held for

trading', 'Non-trading financial assets mandatorily at

fair value through profit or loss' and 'Financial assets

at fair value through profit or loss'. In this regard,

most of the financial assets presented in the

category of 'Financial assets designated at value

reasonable with change in results' are instruments

financial services that, not being part of the portfolio

of negotiation, are contracted jointly with other

financial instruments that are recorded in the

category of 'held for trading', and that by both are

recorded at fair value with changes in results, so your

record in any other category would produce

accounting asymmetries.

Equity instruments will be classified at fair value under

Bank of Spain Circular 4/2017 with changes in profit or

loss, unless the Bank, decides, for non-trading assets, to

classify them at fair value with changes in other

comprehensive income (irrevocably) at initial

recognition.

iii. Classification of financial assets for presentation

purposes

Financial assets are classified by nature into the

following items in the balance sheet:

•Cash, cash balances at Central Banks and other

deposits on demand: cash balances and balances

receivable on demand relating to deposits with

central banks and credit institutions.

•Loans and advances: includes the debit balances of

all credit and loans granted by the Bank, other than

those represented by securities, as well as finance

lease receivables and other debit balances of a

financial nature in favour of the Bank, such as

cheques drawn on credit institutions, balances

receivable from clearing houses and settlement

agencies for transactions on the stock exchange and

organised markets, bonds given in cash, capital calls,

fees and commissions receivable for financial

guarantees and debit balances arising from

transactions not originating in banking transactions

and services, such as the collection of rentals and

similar items. They are classified, on the basis of the

institutional sector to which the debtor belongs, into:

–Central banks: credit of any nature, including

deposits and money market transactions

received from the Bank of Spain or other central

banks.

–Credit institutions: credit of any nature, including

deposits and money market transactions, in the

name of credit institutions.

–Customers: includes the remaining credit,

including money market transactions through

central counterparties.

•Debt securities: bonds and other securities that

represent a debt for their issuer, that generate an

interest return, and that are in the form of

certificates or book entries.

•Equity instruments: financial instruments issued by

other entities, such as shares, which have the nature

of equity instruments for the issuer, other than

investments in subsidiaries, joint ventures or

associates. Investment fund units are included in this

item.

•Derivatives: includes the fair value in favour of the

Bank of derivatives which do not form part of hedge

accounting, including embedded derivatives

separated from hybrid financial instruments.

•Changes in the fair value of hedged items in portfolio

hedges of interest rate risk: this item is the balancing

entry for the amounts credited to the income

statement in respect of the measurement of the

portfolios of financial instruments which are

effectively hedged against interest rate risk through

fair value hedging derivatives.

•Hedging derivatives: Includes the fair value in favour

of the Bank derivatives, including embedded

derivatives separated from hybrid financial

instruments, designated as hedging instruments in

hedge accounting.

iv. Classification of financial liabilities for measurement

purposes

Financial liabilities are initially classified into the various

categories used for management and measurement

purposes, unless they have to be presented as 'Liabilities

associated with non-current assets held for sale' or they

relate to 'Hedging derivatives' or changes in the fair

value of hedged items in portfolio hedges of interest rate

risk (liability side), which are reported separately.

In most cases, changes in the fair value of financial

liabilities designated at fair value through profit or loss,

caused by the entity's credit risk, are recognized in other

comprehensive income.

22

Financial liabilities are included for measurement

purposes in one of the following categories:

•Financial liabilities held for trading (at fair value

through profit or loss): this category includes

financial liabilities incurred for the purpose of

generating a profit in the near term from fluctuations

in their prices, financial derivatives not designated as

hedging instruments, and financial liabilities arising

from the outright sale of financial assets acquired

under reverse repurchase agreements (“reverse

repos”) or borrowed (short positions).

•Financial liabilities designated at fair value through

profit or loss: financial liabilities are included in this

category when they provide more relevant

information, either because this eliminates or

significantly reduces recognition or measurement

inconsistencies (accounting mismatches) that would

otherwise arise from measuring assets or liabilities

or recognising the gains or losses on them on

different bases, or because a group of financial

liabilities or financial assets and liabilities is

managed and its performance is evaluated on a fair

value basis, in accordance with a documented risk

management or investment strategy, and

information about the group is provided on that basis

to the Bank's key management personnel.

Liabilities may only be included in this category on

the date when they are incurred or originated.

•Financial liabilities at amortised cost: financial

liabilities, irrespective of their instrumentation and

maturity, not included in any of the above-

mentioned categories which arise from the ordinary

borrowing activities carried on by financial

institutions.

v. Classification of financial liabilities for presentation

purposes

Financial liabilities are classified by nature into the

following items in the consolidated balance sheet:

•Deposits: includes all repayable balances received in

cash by the Bank, other than those instrumented as

marketable securities and those having the

substance of subordinated liabilities (amount of the

loans received, which for credit priority purposes are

after common creditors), except for the debt

instruments. This item also includes cash bonds and

cash consignments received the amount of which

may be invested without restriction. Deposits are

classified on the basis of the creditor’s institutional

sector into:

–Central banks: deposits of any nature, including

credit received and money market transactions

received from the Bank of Spain or other central

banks.

–Credit institutions: deposits of any nature,

including credit received and money market

transactions in the name of credit institutions.

–Customer: includes the remaining deposits,

including money market transactions through

central counterparties.

During the 2019 financial year, the European Central

Bank announced a new program of longer-term

financing operations with a specific objective (TLTRO III),

which included special conditions, including a reduction

in the interest rate applicable between June 2020 and

June 2022 subject to compliance with a certain volume

of eligible loans.

Banco Santander chose to accrue interest in accordance

with the specific periods of adjustment to market rates,

so that the interest corresponding to said period (-1%)

has been recorded in the income statement from June

2020 to June 2022, having met the computable loan

threshold that gave rise to the extra rate on that date.

Subsequently, and as a result of the modifications

introduced by the European Central Bank in the

conditions of the program, which include changes in its

interest rates, the Bank has updated the effective

interest rate at which interest accrues on said financial

liability, maintaining the criterion adopted in previous

years, and considering said modifications a change in the

variable interest rate (which affects the EIR) and is

applied prospectively.

•Marketable debt securities: includes the amount of

bonds and other debt represented by marketable

securities, other than those having the substance of

subordinated liabilities (amount of the loans

received, which for credit priority purposes are after

common creditors, and includes the amount of the

financial instruments issued by the Bank which,

having the legal nature of capital, do not meet the

requirements to qualify as equity, such as certain

preferred shares issued). This item includes the

component that has the consideration of financial

liability of the securities issued that are compound

financial instruments.

▪Derivatives: includes the fair value, with a negative

balance for Banco Santander, separated from the

host contract, which do not form part of hedge

accounting.

•Short positions: includes the amount of financial

liabilities arising from the outright sale of financial

assets acquired under reverse repurchase

agreements or borrowed.

▪Other financial liabilities: includes the amount of

payment obligations having the nature of financial

liabilities not included in other items (includes,

among others, the balance of lease liabilities) and

liabilities under financial guarantee contracts, unless

they have been classified as non-performing.

23

•Changes in the fair value of hedged items in portfolio

hedges of interest rate risk: this item is the balancing

entry for the amounts charged to the income

statement in respect of the measurement of the

portfolios of financial instruments which are

effectively hedged against interest rate risk through

fair value hedging derivatives.

▪Hedging derivatives: includes the fair value of the

Bank liability in respect of derivatives, including

embedded derivatives separated from hybrid

financial instruments, designated as hedging

instruments in hedge accounting.

d) Measurement of financial assets and liabilities

and recognition of fair value changes

In general, financial assets and liabilities are initially

recognised at fair value which, in the absence of

evidence to the contrary, is deemed to be the transaction

price.

In this regard, Bank of Spain Circular 4/2017 states that

regular way purchases or sales of financial assets shall

be recognised and derecognised on the trade date or on

the settlement date. Banco Santander has opted to make

such recognition on the trading date or settlement date,

depending on the convention of each of the markets in

which the transactions are carried out. For example, in

relation to the purchase or sale of debt securities or

equity instruments traded in the Spanish market,

securities market regulations stipulate their effective

transfer at the time of settlement and, therefore, the

same time has been established for the accounting

record to be made.

The fair value of instruments not measured at fair value

through profit and loss is adjusted by transaction costs.

Subsequently, and on the occasion of each accounting

close, they are valued in accordance with the following

criteria:

i. Measurement of financial assets

Financial assets are measured at fair value are valued

mainly at their fair value without deducting any

transaction cost for their sale.

The fair value of a financial instrument on a given date is

taken to be the price that would be received to sell an

asset or paid to transfer a liability in an orderly

transaction between market participants. The most

objective and common reference for the fair value of a

financial instrument is the price that would be paid for it

on an active, transparent and deep market (quoted price

or market price). At 31 December 2022, there were no

significant investments in quoted financial instruments

that had ceased to be recognised at their quoted price

because their market could not be deemed to be active.

If there is no market price for a given financial

instrument, its fair value is estimated on the basis of the

price established in recent transactions involving similar

instruments and, in the absence thereof, of valuation

techniques commonly used by the international financial

community, taking into account the specific features of

the instrument to be measured and, particularly, the

various types of risk associated with it.

All derivatives are recognised in the balance sheet at fair

value from the trade date. If the fair value is positive,

they are recognised as an asset and if the fair value is

negative, they are recognised as a liability. The fair value

on the trade date is deemed, in the absence of evidence

to the contrary, to be the transaction price. The changes

in the fair value of derivatives from the trade date are

recorded in the income statement. Specifically, the fair

value of financial derivatives traded in organised

markets included in the portfolios of financial assets or

liabilities held for trading is deemed to be their daily

quoted price and if, for exceptional reasons, the quoted

price cannot be determined on a given date, these

financial derivatives are measured using methods similar

to those used to measure derivatives.

The fair value of derivatives is taken to be the sum of the

future cash flows arising from the instrument,

discounted to present value at the date of measurement

(present value or theoretical close) using valuation

techniques commonly used by the financial markets: net

present value, option pricing models and other methods.

The amount of debt securities and loans and advances

under a business model whose objective is to collect the

principal and interest flows are valued at their amortised

cost, as long as they comply with the 'SPPI' (Solely

Payments of Principal and Interest) test, using the

effective interest rate method in their determination.

Amortised cost refers to the acquisition cost of a

corrected financial asset or liability (more or less, as the

case may be) for repayments of principal and the part

systematically charged to the income statement of the

difference between the initial cost and the

corresponding reimbursement value at expiration. In the

case of financial assets, the amortised cost includes, in

addition, the corrections to their value due to the

impairment. In the loans and advances covered in fair

value hedging transactions, the changes that occur in

their fair value related to the risk or the risks covered in

these hedging transactions are recorded.

24

The effective interest rate is the discount rate that

exactly matches the carrying amount of a financial

instrument to all its estimated cash flows of all kinds

over its remaining life. For fixed rate financial

instruments, the effective interest rate coincides with

the contractual interest rate established on the

acquisition date plus, where applicable, the fees and

transaction costs that, because of their nature, form part

of their financial return. In the case of floating rate

financial instruments, the effective interest rate

coincides with the rate of return prevailing in all

connections until the next benchmark interest reset

date.

Equity instruments and contracts related with these

instruments are measured at fair value. However, in

certain circumstances the Bank estimates cost value as a

suitable estimate of the fair value. This can happen if the

recent event available information is not enough to

measure the fair value or if there is a broad range of

possible measures and the cost value represents the

best estimates of fair value within this range.

The amounts at which the financial assets are recognised

represent, in all material respects, the Bank´s maximum

exposure to credit risk at each reporting date. Also Banco

Santander has received collateral and other credit

enhancements to mitigate its exposure to credit risk,

which consist mainly of mortgage guarantees, cash

collateral, equity instruments and personal security,

assets leased out under finance lease and full-service

lease agreements, assets acquired under repurchase

agreements, securities loans and credit derivatives.

ii. Measurement of financial liabilities

In general, financial liabilities are measured at amortised

cost, as defined above, except for those included under

'Financial liabilities held for trading' and 'Financial

liabilities designated at fair value through profit or loss'

and financial liabilities designated as hedged items (or

hedging instruments) in fair value hedges, which are

measured at fair value. The changes in credit risk arising

from financial liabilities designated at fair value through

profit or loss are recognised in accumulated other

comprehensive income, unless they generate or increase

an accounting mismatch, in which case changes in the

fair value of the financial liability in all respects are

recognised in the income statement.

25

iii. Valuation techniques

The following table summarises the fair values, at the

end of each of the years indicated, of the financial assets

and liabilities listed below, classified according to the

different valuation methodologies used by the Bank to

determine their fair value:

EUR million
	2022			2021
	Published price quotations in active Markets (Level 1)	Internal Models (Level 2 and 3)	Total	Published price quotations in active Markets (Level 1)	Internal Models (Level 2 and 3)	Total
Financial assets held for trading	27,024	76,844	103,868	28,995	57,090	86,085
Non-trading financial assets mandatorily at fair value through profit or loss	514	2,654	3,168	454	1,901	2,355
Financial assets designated at fair value through profit or loss	—	6,641	6,641	—	13,403	13,403
Financial assets at fair value through other comprehensive income	4,615	5,992	10,607	9,857	5,178	15,035
Hedging derivatives (assets)	—	1,450	1,450	—	1,648	1,648
Financial liabilities held for trading	14,762	71,611	86,373	9,404	47,565	56,969
Financial liabilities designated at fair value through profit or loss	—	38,568	38,568	—	12,743	12,743
Hedging derivatives (liabilities)	—	3,955	3,955	—	2,076	2,076

The financial instruments at fair value determined on the

basis of published price quotations in active markets

(level 1) include government debt securities, private-

sector debt securities, derivatives traded in organised

markets, securitised assets, shares, short positions and

fixed-income securities issued.

In cases where price quotations cannot be observed,

management makes its best estimate of the price that

the market would set, using its own internal models. In

most cases, these internal models use data based on

observable market parameters as significant inputs

(level 2) and, in cases, they use significant inputs not

observable in market data (level 3). In order to make

these estimates, various techniques are employed,

including the extrapolation of observable market data.

The best evidence of the fair value of a financial

instrument on initial recognition is the transaction price,

unless the fair value of the instrument can be obtained

from other market transactions performed with the

same or similar instruments or can be measured by

using a valuation technique in which the variables used

include only observable market data, mainly interest

rates.

Grupo Santander has developed a formal process for the

systematic valuation and management of financial

instruments, which has been implemented worldwide

across all the Group´s units. The governance scheme for

this process, applicable to the Bank, distributes

responsibilities between two independent divisions:

Treasury (development, marketing and daily

management of financial products and market data) and

Risk (on a periodic basis, validation of pricing models and

market data, computation of risk metrics, new

transaction approval policies, management of market

risk and implementation of fair value adjustment

policies).

The approval of new products follows a sequence of

steps (request, development, validation, integration in

corporate systems and quality assurance) before the

product is brought into production. This process ensures

that pricing systems have been properly reviewed and

are stable before they are used.

The following subsections set forth the most important

products and families of derivatives, and the related

valuation techniques and inputs, by asset class:

26

Fixed income and inflation

The fixed income asset class includes basic instruments

such as interest rate forwards, interest rate swaps and

cross currency swaps, which are valued using the net

present value of the estimated future cash flows

discounted taking into account basis (swap and cross

currency spreads) determined on the basis of the

payment frequency and currency of each leg of the

derivative. Vanilla options, including caps, floors and

swaptions, are priced using the Black-Scholes model,

which is one of the benchmark industry models. More

exotic derivatives are priced using more complex models

which are generally accepted as standard across

institutions.

These pricing models are fed with observable market

data such as deposit interest rates, futures rates, cross

currency swap and constant maturity swap rates, and

basis spreads, on the basis of which different yield

curves, depending on the payment frequency, and

discounting curves are calculated for each currency. In

the case of options, implied volatilities are also used as

model inputs. These volatilities are observable in the

market for cap and floor options and swaptions, and

interpolation and extrapolation of volatilities from the

quoted ranges are carried out using generally accepted

industry models. The pricing of more exotic derivatives

may require the use of non-observable data or

parameters, such as correlation (among interest rates

and cross-asset), mean reversion rates and prepayment

rates, which are usually defined from historical data or

through calibration.

Inflation-related assets include zero-coupon or year-on-

year inflation-linked bonds and swaps, valued with the

present value method using forward estimation and

discounting. Derivatives on inflation indices are priced

using standard or more complex bespoke models, as

appropriate. Valuation inputs of these models consider

inflation-linked swap spreads observable in the market

and estimations of inflation seasonality, on the basis of

which a forward inflation curve is calculated. Also,

implied volatilities taken from zero-coupon and year-on-

year inflation options are also inputs for the pricing of

more complex derivatives.

Equity and foreign exchange

The most important products in these asset classes are

forward and futures contracts; they also include vanilla,

listed and OTC (Over-The-Counter) derivatives on single

underlying assets and baskets of assets. Vanilla options

are priced using the standard Black-Scholes model and

more exotic derivatives involving forward returns,

average performance, or digital, barrier or callable

features are priced using generally accepted industry

models or bespoke models, as appropriate. For

derivatives on illiquid stocks, hedging takes into account

the liquidity constraints in models.

The inputs of equity models consider yield curves, spot

prices, dividends, asset funding costs (repo margin

spreads), implied volatilities, correlation among equity

stocks and indices, and cross-asset correlation. Implied

volatilities are obtained from market quotes of European

and American-style vanilla call and put options. Various

interpolation and extrapolation techniques are used to

obtain continuous volatility for illiquid stocks. Dividends

are usually estimated for the mid and long term.

Correlations are implied, when possible, from market

quotes of correlation-dependent products. In all other

cases, proxies are used for correlations between

benchmark underlyings or correlations are obtained

from historical data.

The inputs of foreign exchange models include the yield

curve for each currency, the spot foreign exchange rate,

the implied volatilities and the correlation among assets

of this class. Volatilities are obtained from European call

and put options which are quoted in markets as of-the-

money, risk reversal or butterfly options. Illiquid

currency pairs are usually handled by using the data of

the liquid pairs from which the illiquid currency can be

derived. For more exotic products, unobservable model

parameters may be estimated by fitting to reference

prices provided by other non-quoted market sources.

Credit

The most common instrument in this asset class is the

credit default swap (CDS), which is used to hedge credit

exposure to third parties. In addition, models for first-to-

default (FTD), n-to-default (NTD) and single-tranche

collateralised debt obligation (CDO) products are also

available. These products are valued with standard

industry models, which estimate the probability of

default of a single issuer (for CDS) or the joint probability

of default of more than one issuer for FTD, NTD and

CDO.

Valuation inputs are the yield curve, the CDS spread

curve and the recovery rate. For indices and important

individual issuers, the CDS spread curve is obtained in

the market. For less liquid issuers, this spread curve is

estimated using proxies or other credit-dependent

instruments. Recovery rates are usually set to standard

values. For listed single-tranche CDO, the correlation of

joint default of several issuers is implied from the

market. For FTD, NTD and bespoke CDO, the correlation

is estimated from proxies or historical data when no

other option is available.

27

Valuation adjustment for counterparty risk or default risk

The Credit valuation adjustment (CVA) is a valuation

adjustment to over the counter (OTC) derivatives as a

result of the risk associated with the credit exposure

assumed to each counterparty.

The CVA is calculated taking into account potential

exposure to each counterparty in each future period. The

CVA for a specific counterparty is equal to the sum of the

CVA for all the periods. The following inputs are used to

calculate the CVA:

•Expected exposure: including for each transaction

the mark-to-market (MtM) value plus an add-on for

the potential future exposure for each period.

Mitigating factors such as collateral and netting

agreements are taken into account, as well as a

temporary impairment factor for derivatives with

interim payments.

•Severity: percentage of final loss assumed in a

counterparty credit event/default.

•Probability of default: for cases where there is no

market information (the CDS quoted spread curve,

etc.), proxies based on companies holding exchange-

listed CDS, in the same industry and with the same

external rating as the counterparty, are used.

•Discount factor curve.

The Debit Valuation Adjustment (DVA) is a valuation

adjustment similar to the CVA but, in this case, it arises

as a result of the Bank’s own risk assumed by its

counterparties in OTC derivatives.

The CVA at 31 December 2022, at a consolidated level,

amounted to EUR 330 million (resulting in an increase of

39.2% compared to 31 December 2021) and DVA

amounted to EUR 309 million (resulting in an increase of

90.7% compared to 31 December 2021 ). The increase is

mainly due to movements in the credit markets, whose

spread levels have increased substantially compared to

those at the end of 2021.

The CVA at 31 December 2021 amounted to EUR

237 million (decrease of 41.9% compared to 31

December 2020) and DVA amounted EUR 162 million

(decrease of 30.4% compared to 31 December 2020).

These impacts were mainly due to the continuous

improvement in credit markets, the creation of particular

credit curves for certain counterparties and the

introduction of methodological improvements in the

calculation of exposures.

At the end of December 2022, CVA adjustment of EUR

218 million (an increase of 22.48% compared to 31

December 2021) and DVA adjustment of EUR 149 million

(an increase of 136.51% compared to 31 December

2021) were recorded. The increase is mainly due to

movements in the credit markets, whose spread levels

have increased substantially with respect to those at the

end of 2021.

The CVA at 31 December 2021 amounted to EUR 178

million (resulting in a decrease of 29.36% compared to

31 December 2020) and DVA amounted to EUR 63

million (resulting in a decrease of 8.69% compared to 31

December 2020). The variations were due to a decrease

in credit spreads in percentages greater than 40% in the

most liquid terms.

In addition, the Group amounts the funding fair value

adjustment (FFVA) is calculated by applying future

market funding spreads to the expected future funding

exposure of any uncollateralised component of the OTC

derivative portfolio. This includes the uncollateralised

component of collateralised derivatives in addition to

derivatives that are fully uncollateralised. The expected

future funding exposure is calculated by a simulation

methodology, where available. The FFVA impact is not

material for the consolidated financial statements as of

31 December 2022 and 2021.

Grupo Santander and Banco Santander have not carried

out carried out significant reclassifications of financial

instruments between levels other than those disclosed

in level 3 movement table during 2022 continuing the

trend observed in  2021. The main variations over the

last few years in the Level 3 volume have been due to

purchases/sales of these instruments. There have been

no significant variations in the market observability

conditions, nor relevant changes in the criteria used for

the classification of instruments within the fair value

hierarchy.

In 2022, the amount reclassified to Level 3 by Banco

Santander is EUR 337 million (EUR 626 million in 2021).

They are mainly due to reclassifications to level 3 of loan

positions for which there has been less access to price

contributors and actual market transactions with which

to demonstrate their observability, and to a lesser extent

to certain debt instruments which, based on the Bank's

criteria, do not qualify as observable instruments.

28

Valuation adjustments due to model risk

The valuation models described above do not involve a

significant level of subjectivity, since they can be

adjusted and recalibrated, where appropriate, through

internal calculation of the fair value and subsequent

comparison with the related actively traded price.

However, valuation adjustments may be necessary when

market quoted prices are not available for comparison

purposes.

The sources of risk are associated with uncertain model

parameters, illiquid underlying issuers, and poor quality

market data or missing risk factors (sometimes the best

available option is to use limited models with

controllable risk). In these situations, the Group and the

Bank calculate and apply valuation adjustments in

accordance with common industry practice. The main

sources of model risk are described below:

•In the fixed income markets, the sources of model

risk include bond index correlations, basis spread

modelling, the risk of calibrating model parameters

and the treatment of near-zero or negative interest

rates. Other sources of risk arise from the estimation

of market data, such as volatilities or yield curves,

whether used for estimation or cash flow discounting

purposes.

•In the stock markets, the sources of model risk

include forward skew modelling, the impact of

stochastic interest rates, correlation and multi-curve

modelling. Other sources of risk arise from managing

hedges of digital callable and barrier option

payments. Also worthy of consideration as sources of

risk are the estimation of market data such as

dividends and correlation for quanto and composite

basket options.

•For specific financial instruments relating to home

mortgage loans secured by financial institutions in

the UK (which are regulated and partially financed by

the Government) and property asset derivatives, the

main input is the Halifax House Price Index (HPI). In

these cases, risk assumptions include estimations of

the future growth and the volatility of the HPI, the

mortality rate and the implied credit spreads.

•Inflation markets are exposed to model risk resulting

from uncertainty around modelling the correlation

structure among various Consumer Price Index (CPI)

rates. Another source of risk may arise from the bid-

offer spread of inflation-linked swaps.

•The currency markets are exposed to model risk

resulting from forward skew modelling and the

impact of stochastic interest rate and correlation

modelling for multi-asset instruments. Risk may also

arise from market data, due to the existence of

specific illiquid foreign exchange pairs.

•The most important source of model risk for credit

derivatives relates to the estimation of the

correlation between the probabilities of default of

different underlying issuers. For illiquid underlying

issuers, the CDS spread may not be well defined.

Set forth below are the financial instruments of Grupo

Santander at fair value whose measurement was based

on internal models (levels 2 and 3) at 31 December 2022

and 2021 :

29

EUR million
	Fair values calculated using internal models at
	2022A
	Level 2	Level 3	Valuation techniques	Main assumptions
ASSETS	142,832	8,290
Financial assets held for trading	110,721	383
Central banksB	11,595	—	Present value method	Yield curves, FX market prices
Credit institutionsB	16,502	—	Present value method	Yield curves, FX market prices
CustomersB	9,550	—	Present value method	Yield curves, FX market prices
Debt and equity instruments	6,537	43	Present value method	Yield curves, FX market prices
Derivatives	66,537	340
Swaps	54,367	139	Present value method, Gaussian Copula	Yield curves, FX market prices, HPI, Basis, Liquidity
Exchange rate options	916	4	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	2,681	39	Black's Model, multifactorial advanced models interest rate	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate futures	113	—	Present value method	Yield curves, FX market prices
Index and securities options	354	48	Black's Model, multifactorial advanced models interest rate	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends,  Liquidity
Other	8,106	110	Present value method, Advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX and EQ market prices, Dividends, Correlation, HPI, Credit, Others
Hedging derivatives	8,069	—
Swaps	6,687	—	Present value method	Yield curves, FX market prices, Basis
Interest rate options	2	—	Black's Model	Yield curves, FX market prices, Volatility surfaces
Other	1,380	—	Present value method, Advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX market prices, Credit, Liquidity, Others
Non-trading financial assets mandatorily at fair value through profit or loss	2,080	1,833
Equity instruments	643	1,269	Present value method	Market price, Interest rates curves, Dividends and Others
Debt securities	809	325	Present value method	Yield curves
Loans and receivables	628	239	Present value method, swap asset model & CDS	Yield curves and Credit curves
Financial assets designated at fair value through profit or loss	6,586	427
Credit institutions	673	—	Present value method	Yield curves, FX market prices
CustomersC	5,769	5	Present value method	Yield curves, FX market prices, HPI
Debt securities	144	422	Present value method	Yield curves, FX market prices
Financial assets at fair value through other comprehensive income	15,376	5,647
Equity instruments	9	700	Present value method	Market price, Yield curves, Dividends and Others
Debt securities	11,869	229	Present value method	Yield curves, FX market prices
Loans and receivables	3,498	4,718	Present value method	Yield curves, FX market prices and Credit curves

30

EUR million
	Fair values calculated using internal models at
	2022A
	Level 2	Level 3	Valuation techniques	Main assumptions
LIABILITIES	163,733	925
Financial liabilities held for trading	98,533	415
Central banksB	5,759	—	Present value method	FX market prices, Yield curves
Credit institutionsB	9,796	—	Present value method	FX market prices, Yield curves
Customers	12,226	—	Present value method	FX market prices, Yield curves
Derivatives	64,147	415
Swaps	51,191	235	Present value method, Gaussian Copula	Yield curves, FX market prices, Basis, Liquidity, HPI
Interest rate options	3,268	19	Black's Model, multifactorial advanced models interest rate	Yield curves, Volatility surfaces, FX market prices, Liquidity
Exchange rate options	769	—	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Index and securities options	591	42	Black's Model, multifactorial advanced models interest rate	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends,  Liquidity
Futures on interest rate and variable income	807	—	Present value method	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI
Other	7,521	119	Present value method, Advanced stochastic volatility models	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI, Credit, Others
Short positions	6,605	—	Present value method	Yield curves ,FX & EQ market prices, Equity
Hedging derivatives	9,214	14
Swaps	8,142	14	Present value method	Yield curves ,FX & EQ market prices, Basis
Other	1,072	—	Present value method, Advanced stochastic volatility models and other	Yield curves , Volatility surfaces, FX market prices, Credit, Liquidity, Other
Financial liabilities designated at fair value through profit or lossD	55,239	496	Present value method	Yield curves, FX market prices
Liabilities under insurance contracts	747	—	Present Value Method with actuarial techniques	Mortality tables and interest rate curves

A.Level 2 internal models use data based on observable market parameters, while level 3 internal models use significant non-observable inputs in market data.

B.Includes mainly short-term loans/deposits and repurchase/reverse repurchase with corporate customers (mainly brokerage and investment companies).

C.Includes, mainly, structured loans to corporate clients.

D.Includes, mainly, short-term deposits that are managed based on their fair value.

31

EUR million
	Fair values calculated using internal models at
	2021A
	Level 2	Level 3	Valuation techniques
ASSETS	121,640	7,667
Financial assets held for trading	76,738	537
Central banksB	3,608	—	Present value method
Credit institutionsB	10,397	—	Present Value method
CustomersB	6,829	—	Present Value method
Debt and equity instruments	2,312	24	Present Value method
Derivatives	53,592	513
Swaps	43,700	224	Present Value method, Gaussian Copula
Exchange rate options	539	12	Black-Scholes Model
Interest rate options	2,112	182	Black's Model, advanced multifactor interest rate models
Interest rate futures	409	—	Present Value method
Index and securities options	439	41	Black's Model, advanced multifactor interest rate models
Other	6,393	54	Present Value method, Advanced stochastic volatility models and other
Hedging derivatives	4,761	—
Swaps	4,204	—	Present Value method
Interest rate options	9	—	Black’s Model
Other	548	—	Present Value method, Advanced stochastic volatility models and other
Non-trading financial assets mandatorily at fair value through profit or loss	1,273	1,865
Equity instruments	415	1,231	Present Value method
Debt securities issued	589	366	Present Value method
Loans and receivables	269	268	Present Value method, swap asset model & CDS
Financial assets designated at fair value through profit or loss	13,426	418
Central banks	—	—	Present Value method
Credit institutions	3,152	—	Present Value method
CustomersC	10,270	18	Present Value method
Debt securities	4	400	Present Value method
Financial assets  at fair value through other comprehensive  income	25,442	4,847
Equity instruments	74	821	Present Value method
Debt securities	21,585	146	Present Value method
Loans and receivables	3,783	3,880	Present Value method

32

EUR million
	Fair values calculated using internal models at
	2021A
	Level 2	Level 3	Valuation techniques
LIABILITIES	103,807	629
Financial liabilities held for trading	68,930	160
Central banksB	1,038	—	Present Value method
Credit institutionsB	6,488	—	Present Value method
Customers	6,141	—	Present Value method
Derivatives	53,234	160
Swaps	42,438	44	Present Value method, Gaussian Copula
Interest rate options	2,720	26	Black's Model, advanced multifactor interest rate models
Exchange rate options	658	7	Black-Scholes Model
Index and securities options	446	67	Black's Model, advanced multifactor interest rate models
Interest rate and equity futures	184	—	Present Value method
Other	6,788	16	Present Value method, Advanced stochastic volatility models and other
Short positions	2,029	—	Present Value method
Hedging derivatives	5,463	—
Swaps	4,149	—	Present Value method
Interest rate options	—	—	Black’s Model
Other	1,314	—	Present Value method, Advanced stochastic volatility models and other
Financial liabilities designated at fair value through profit or lossD	28,644	469	Present Value method
Liabilities under insurance contracts	770	—	Present Value method with actuarial techniques

A.Level 2 internal models use data based on observable market parameters, while level 3 internal models use significant non-observable inputs in market data.

B.Includes mainly short-term loans/deposits and repurchase/reverse repurchase with corporate customers (mainly brokerage and investment companies).

C.Includes, mainly, structured loans to corporate clients.

D.Includes, mainly, short-term deposits that are managed based on their fair value.

33

The same information from the previous table, but referred to Banco Santander, S.A., is presented below:

EUR million
	Fair values calculated using internal models at
	2022A
	Level 2	Level 3	Valuation techniques	Main assumptions
ASSETS	87,911	5,670
Financial assets held for trading	76,360	484
Central banksB	1,933	—	Present value method	Yield curves, FX market prices
Credit institutionsB	9,807	—	Present value method	Yield curves, FX market prices
CustomersB	10,377	—	Present value method	Yield curves, FX market prices
Debt and equity instruments	397	2	Present value method	Yield curves, FX market prices
Derivatives	53,846	482
Swaps	43,841	420	Present value method, Gaussian Copula	Yield curves, FX market prices, HPI, Basis, Liquidity
Exchange rate options	6,519	3	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	2,942	39	Black’s Model, multifactorial advanced models interest rate	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate futures	160	—	Present value method	Yield curves, FX market prices
Index and securities options	341	8	Present value method, Advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends,  Liquidity
Other	43	12	Present value method, Advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX and EQ market prices, Dividends, Correlation, HPI, Credit, Others
Hedging derivatives	1,450	—
Swaps	1,250	—	Present value method	Yield curves, FX market prices, Basis
Exchange rate options	198	—	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	2	—	Black´s Model	Yield curves, FX market prices, Volatility surfaces
Non-trading financial assets mandatorily at fair value through profit or loss	2,005	649
Equity instruments	87	440	Present value method	Market price, Interest rates curves, Dividends and Others
Debt securities	760	190	Present value method	Yield curves
Loans and receivables	1,158	19	Present value method	Yield and credit curves
Financial assets designated at fair value through profit or loss	6,641	—
Credit institutions	934	—	Present value method	Interest rates curves, FX market prices
CustomersC	5,707	—	Present value method	Interest rates curves, FX market prices, HPI
Financial assets at fair value through other comprehensive income	1,455	4,537
Equity instruments	—	499	Present value method	Market price, Interest rates curves, Dividends and Others
Debt securities	274	—	Present value method	Interest rates curves, FX market prices
Loans and receivables	1,181	4,038	Present value method	Interest and credit curves, FX market prices

34

EUR million
	Fair values calculated using internal models at
	2022A
	Level 2	Level 3	Valuation techniques	Main assumptions
LIABILITIES	113,295	839
Financial liabilities held for trading	70,933	678
Central banksB	4,265	—	Present value method	Interest rates curves, FX market prices
Credit institutionsB	8,949	—	Present value method	Interest rates curves, FX market prices
Customers	6,578	—	Present value method	Interest rates curves, FX market prices
Derivatives	51,141	678	Present value method, Gaussian Copula, Black-Scholes Model, , multifactorial advanced models interest rate, advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX and EQ market prices, Dividends, Correlation, HPI, Credit, Others
Swaps	41,030	516	Present value method, Gaussian Copula	Yield curves, FX market prices, Basis, Liquidity, HPI
Exchange rate options	5,798	—	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Index and securities options	3,435	20	Black's Model, multifactorial advanced models interest rate	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	140	27	Black-Scholes Model	Yield curves, FX market prices, Volatility surfaces, Liquidity
Futures on interest rate and variable income	675	—	Present value method	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI
Other	63	115	Present value method, Advanced stochastic volatility models	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI, Credit, Others
Hedging derivatives	3,941	14
Swaps	3,111	14	Present value method	Yield curves ,FX & EQ market prices, Basis
Exchange rate options	829	—	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	1	—	Black's Model	Yield curves , Volatility surfaces, FX market prices, Liquidity
Other	—	—	Present value method, Advanced stochastic volatility models and other	Yield curves , Volatility surfaces, FX market prices, Credit, Liquidity, Other
Financial liabilities designated at fair value through profit or lossD	38,421	147	Present value method	Yield curves, FX market prices
Central banks	1,740	—	Present value method	Yield curves, FX market prices
Credit institutions	2,160	—	Present value method	Yield curves, FX market prices
Customers	34,521	147	Present value method	Yield curves, FX market prices
Liabilities under insurance contracts	—	—	Present Value Method with actuarial techniques	Mortality tables and interest rate curves

A.Level 2 internal models use data based on observable market parameters, while level 3 internal models use significant non-observable inputs in market data.

B.Includes mainly short-term loans/deposits and repurchase/reverse repurchase with corporate customers (mainly brokerage and investment companies).

C.Includes, mainly, structured loans to corporate clients.

D.Includes, mainly, short-term deposits that are managed based on their fair value.

35

EUR million
	Fair values calculated using internal models at
	2021A
	Level 2	Level 3	Valuation techniques	Main assumptions
ASSETS	74,210	5,010
Financial assets held for trading	56,612	478
Central banksB	1,118	—	Present value method	Yield curves, FX market prices
Credit institutionsB	6,980	—	Present value method	Yield curves, FX market prices
CustomersB	7,025	—	Present value method	Yield curves, FX market prices
Debt and equity instruments	120	—	Present value method	Yield curves, FX market prices
Derivatives	41,369	478
Swaps	33,316	281	Present value method, Gaussian Copula	Yield curves, FX market prices, HPI, Basis, Liquidity
Exchange rate options	5,554	9	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	2,186	183	Black’s Model, multifactorial advanced models interest rate	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate futures	10	—	Present value method	Yield curves, FX market prices
Index and securities options	210	5	Present value method, Advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends,  Liquidity
Other	93	—	Present value method, Advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX and EQ market prices, Dividends, Correlation, HPI, Credit, Others
Hedging derivatives	1,648	—
Swaps	1,447	—	Present value method	Yield curves, FX market prices, Basis
Exchange rate options	195	—	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	6	—	Black´s Model	Yield curves, FX market prices, Volatility surfaces
Non-trading financial assets mandatorily at fair value through profit or loss	1,360	541
Equity instruments	87	369	Present value method	Market price, Interest rates curves, Dividends and Others
Debt securities	585	148	Present value method	Yield curves
Loans and receivables	688	24	Present value method, swap asset model & CDS	Yield curves and Credit curves
Financial assets designated at fair value through profit or loss	13,403	—
Credit institutions	3,445	—	Present value method	Yield curves, FX market prices
CustomersC	9,958	—	Present value method	Yield curves, FX market prices, HPI
Financial assets at fair value through other comprehensive income	1,187	3,991
Equity instruments	—	753	Present value method	Market price, Yield curves, Dividends and Others
Debt securities	489	—	Present value method	Yield curves, FX market prices
Loans and receivables	698	3,238	Present value method	Yield curves, FX market prices and Credit curves

36

EUR million
	Fair values calculated using internal models at
	2021A
	Level 2	Level 3	Valuation techniques	Main assumptions
LIABILITIES	62,058	326
Financial liabilities held for trading	47,382	183
Central banksB	44	—	Present value method	Interest rates curves, FX market prices
Credit institutionsB	5,718	—	Present value method	Interest rates curves, FX market prices
Customers	1,291	—	Present value method	Interest rates curves, FX market prices
Derivatives	40,329	183
Swaps	31,529	114	Present value method, Gaussian Copula	Yield curves, FX market prices, Basis, Liquidity, HPI
Exchange rate options	5,368	7	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	2,686	33	Black's Model, advanced multifactor interest rate models	Yield curves, Volatility surfaces, FX market prices, Liquidity
Index and securities options	10	18	Present value method, Advanced stochastic volatility models and other	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends,  Liquidity
Interest rate and equity futures	494	—	Present value method	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI
Other	242	11	Present value method, Advanced stochastic volatility models	Yield curves, Volatility surfaces, FX & EQ market prices, Dividends, Correlation, Liquidity, HPI, Credit, Others
Hedging derivatives	2,076	—
Swaps	1,244	—	Present value method	Yield curves ,FX & EQ market prices, Basis
Exchange rate options	608	—	Black-Scholes Model	Yield curves, Volatility surfaces, FX market prices, Liquidity
Interest rate options	1	—	Black's Model	Yield curves , Volatility surfaces, FX market prices, Liquidity
Other	223	—	Present value method, Advanced stochastic volatility models and other	Yield curves , Volatility surfaces, FX market prices, Credit, Liquidity, Other
Financial liabilities designated at fair value through profit or lossD	12,600	143
Central banks	607	—	Present value method	Yield curves, FX market prices
Credit institutions	1,067	—	Present value method	Yield curves, FX market prices
Customers	10,926	143	Present value method	Yield curves, FX market prices
Liabilities under insurance contracts	—	—	Present Value Method with actuarial techniques	Mortality tables and interest rate curves

A.Level 2 internal models use data based on observable market parameters, while level 3 internal models use significant non-observable inputs in market data.

B.Includes mainly short-term loans/deposits and repurchase/reverse repurchase agreements with corporate customers (mainly brokerage and investment

companies).

C.Includes, mainly, structured loans to corporate clients.

D.Includes, mainly, short-term deposits that are managed based on their fair value

37

Financial Instruments (level 3)

Set forth below are the Group and the Bank´s main

financial instruments measured using unobservable

market data as significant inputs of the internal models

(level 3):

•HTC&S (Held to collect and sale) syndicated loans

classified in the fair value category with changes in

other comprehensive income, where the cost of

liquidity is not directly observable in the market, as

well as the prepayment option in favour of the

borrower.

•Illiquid equity in non-trading portfolios, classified at

fair value through profit or loss and at fair value

through equity.

•Instruments in Santander UK’s portfolio (loans, debt

securities and derivatives) linked to the House Price

Index (HPI). Even if the valuation techniques used for

these instruments may be the same as those used to

value similar products (present value in the case of

loans and debt securities, and the Black-Scholes

model for derivatives), the main factors used in the

valuation of these instruments are the HPI spot rate,

the growth and volatility thereof, and the mortality

rates, which are not always observable in the market

and, accordingly, these instruments are considered

illiquid.

•Callable interest rate derivatives (Bermudan-style

options) where the main unobservable input is mean

reversion of interest rates.

•Trading derivatives on interest rates, taking as an

underlying asset titling and with the amortization

rate (CPR, Conditional prepayment rate) as

unobservable main entry.

•Derivatives from trading on inflation in Spain, where

volatility is not observable in the market.

•Equity volatility derivatives, specifically indices and

equities, where volatility is not observable in the

long term.

•Derivatives on long-term interest rate and FX in

some units (mainly South America) where for certain

underlyings it is not possible to demonstrate

observability to these terms.

•Debt instruments referenced to certain illiquid

interest rates, for which there is no reasonable

market observability.

The measurements obtained using the internal models

might have been different if other methods or

assumptions had been used with respect to interest rate

risk, to credit risk, market risk and foreign currency risk

spreads, or to their related correlations and volatilities.

Nevertheless, the Banco Santander directors consider

that the fair value of the financial assets and liabilities

recognised in the balance sheet and the gains and losses

arising from these financial instruments are reasonable.

The net amount recorded in the results of the 2022

financial year derived from valuation models whose

significant inputs are unobservable market data (Level 3)

amounts to a loss of EUR 235 million (of which EUR 64

million are benefits already realized and EUR 299 million

correspond to losses from the valuation of operations in

force at the end of the year). In 2021 the net amount

recorded in the results was a profit of EUR 28 million.

The table below shows the effect, at 31 December 2022

and 2021 on the fair value of the main financial

instruments classified as level 3 of a reasonable change

in the assumptions used in the valuation. This effect was

determined by applying the probable valuation ranges of

the main unobservable inputs detailed in the following

table:

38

2022
Portfolio/Instrument	Valuation technique	Main unobservable inputs	Range	Weighted average	Impacts (EUR million)
(Level 3)					Unfavourable scenario	Favourable scenario
Financial assets held for trading
Debt securities
Corporate debt	Discounted Cash Flows	Credit spread	0%-20%	10.07%	(1.38)	1.40
Corporate debt	Price based	Market price	85%-115%	100.00%	—	—
Government debt	Discounted Cash Flows	Discount curve	0%-10%	4.92%	(8.34)	8.07
Derivatives
CCS	Discounted Cash Flows	Interest rate	(0.7)% - 0.7%	0.00%	—	—
CCS	Forward estimation	Interest rate	(4)bps - 4bps	0.42bps	(0.06)	0.07
CDS	Discounted Cash flows	Credit Spread	14.9bps - 42.1bps	21.99bps	(0.05)	0.02
EQ Options	EQ option pricing model	Volatility	0% - 90%	61.30%	(0.23)	0.48
EQ Options	Local volatility	Volatility	10% - 90%	50.00%	(1.05)	1.05
FRAs	Asset Swap model	Interest rate	0% - 6%	2.71%	(1.16)	0.95
Fx Swap	Others	Others	n.a.	n.a	(1.37)	1.37
Inflation Derivatives	Asset Swap model	Inflation Swap Rate	0% - 10%	3.41%	(0.21)	0.11
Inflation Derivatives	Volatility option model	Volatility	0% - 40%	17.37%	(0.14)	0.11
IR Options	IR option pricing model	Volatility	0% - 60%	35.82%	(0.30)	0.44
IRS	Asset Swap model	Interest rate	0% - 15.00%	9.20%	(0.05)	0.08
IRS	Discounted Cash Flows	Credit spread	1.25% - 6.29%	3.89%	(2.25)	2.47
IRS	Discounted Cash Flows	Swap rate	8.6% - 9.1%	8.84%	(0.02)	0.03
IRS	Forward estimation	Interest rate	(6)bps - 6.1bps	0.13bps	(0.04)	0.04
IRS	Others	Others	5% - n.a.	n.a	(11.58)	—
IRS	Prepayment modelling	Prepayment rate	2.5% - 6.2%	4.17%	(0.06)	0.05
Others	Forward estimation	Price	0% - 2%	0.62%	(0.53)	0.24
Property derivatives	Option pricing model	Growth rate	(5)% - 5%	0.00%	(5.75)	5.75
Financial assets designated at fair value through profit or loss
Loans and advances to customers
Loans	Discounted Cash Flows	Credit spreads	0.1% - 2%	1.05%	(0.18)	0.18
Mortgage portfolio	Black Scholes model	Growth rate	(5)%- 5%	0.00%	(0.79)	0.79
Debt securities
Other debt securities	Others	Inflation Swap Rate	0% - 10%	4.74%	(4.25)	3.83

39

2022
Portfolio/Instrument	Valuation technique	Main unobservable inputs	Range	Weighted average	Impacts (EUR million)
(Level 3)					Unfavourable scenario	Favourable scenario
Non-trading financial assets mandatorily at fair value through profit or loss
Debt securities
Corporate debt	Discounted Cash Flows	Margin of a reference portfolio	(1)bp - 1bp	0.01bps	(0.33)	0.33
Property securities	Probability weighting	Growth rate	(5)% - 5%	0.00%	(0.68)	0.68
Equity instruments
Equities	Price Based	Price	90% - 110%	100.00%	(126.87)	126.87
Financial assets at fair value through other comprehensive income
Loans and advances to customers
Loans	Discounted Cash Flows	Credit spread	n.a.	n.a	(24.10)	—
Loans	Discounted Cash Flows	Interest rate curve	0.8% - 1.0%	0.88%	(0.08)	0.08
Loans	Discounted Cash Flows	Margin of a reference portfolio	(1)bp - 1bp	0bp	(17.51)	17.51
Loans	Forward estimation	Credit spread	2.56% - 3.4%	2.56%	(0.49)	—
Debt securities
Government debt	Discounted Cash Flows	Interest rate	(0.4)% - 1.6%	0.63%	(0.01)	0.01
Equity instruments
Equities	Price Based	Price	90% - 110%	100.00%	(70.04)	70.04
Financial liabilities held for trading
Derivatives
Cap&Floor	Volatility option model	Volatility	10% - 90%	40.73%	(0.29)	0.18
Financial liabilities designated at fair value through profit or loss
Loans and advances to customers
Repos/Reverse repos	Others	Long-term repo spread	n.a.	n.a.	(0.13)	—

40

2021
Portfolio/ Instrument	Valuation technique	Main unobservable inputs	Range	Weighted average	Impacts (EUR million)
(Level 3)					Unfavourable scenario	Favourable scenario
Financial assets held for trading
Derivatives
Cap&Floor	Volatility option model	Volatility	10% - 90%	36.30%	(0.50)	0.43
CCS	Discounted Cash Flows	Interest rate	(0.7)% - 0.7%	0.73%	(0.11)	0.11
CCS	Forward estimation	Interest rate	4bps - (4)bps	(0.09)bps	(0.03)	0.03
Convertibility curve - inputs: NDFs Offshore	Forward estimation	Price	0% - 2%	0.61%	(0.65)	0.28
EQ Options	EQ option pricing model	Volatility	0% - 90%	61.20%	(0.24)	0.52
EQ Options	Local volatility	Volatility	10% - 90%	40.00%	(6.82)	6.82
FRAs	Asset Swap model	Interest rate	0% - 4%	1.78%	(0.91)	0.73
FX Options	FX option pricing model	Volatility	0% - 50%	32.14%	(0.28)	0.50
Inflation Derivatives	Asset Swap model	Inflation Swap Rate	(50)% - 50%	50.00%	(0.56)	0.28
Inflation Derivatives	Volatility option model	Volatility	0% - 40%	13.29%	(0.47)	0.24
IR Futures	Asset Swap model	Interest rate	0% - 15%	5.91%	(1.09)	0.71
IR Options	IR option pricing model	Volatility	0% - 60%	36.28%	(0.20)	0.31
IRS	Asset Swap model	Interest rate	(6)% - 12.80%	10.36%	(0.07)	0.13
IRS	Discounted Cash Flows	Credit spread	1.03% - 3.75%	2.02%	(7.21)	4.16
IRS	Discounted Cash Flows	Inflation Swap Rate	(0.8)% - 6.5%	1.81%	(0.04)	0.01
IRS	Discounted Cash Flows	Swap Rate	7.7% -8.2%	(2.87)%	(0.23)	0.10
IRS	Forward estimation	Interest rate	TIIE91 (8.98)bps -TIIE91 +11.12bps	n.a.	(0.27)	0.17
IRS	Forward estimation	Prepayment rate	6% - 12%	n.a.	—	—
IRS	Others	Others	0.05%	n.a.	(1.49)	—
IRS	Prepayment modelling	Prepayment rate	2.5% - 6.2%	0.44%	(0.09)	0.05
Property derivatives	Option pricing model	Growth rate	0% - 5%	2.50%	(2.62)	2.62
Swaptions	IR option pricing model	Volatility	0% - 40%	26.67%	(0.13)	0.27
Debt securities
Corporate debt	Price based	Market price	85% - 115%	100.00%	—	—
Financial assets designated at fair value through profit or loss
Loans and advances to customers
Loans	Discounted Cash Flows	Credit spreads	0.1% - 1.4%	0.66%	(0.26)	0.26
Mortgage portfolio	Black Scholes model	Growth rate	0% - 5%	2.50%	(1.90)	1.90

41

2021
Portfolio/ Instrument	Valuation technique	Main unobservable inputs	Range	Weighted average	Impacts (EUR million)
(Level 3)					Unfavourable scenario	Favourable scenario
Debt securities
Corporate debt	Discounted Cash Flows	Credit spread	0% - 20%	9.88%	(1.23)	1.20
Government debt	Discounted Cash Flows	Discount curve	0% - 10%	8.33%	(4.14)	20.69
Other debt securities	Others	Inflation Swap Rate	0% - 10%	4.74%	(5.47)	4.92
Non-trading financial assets mandatorily at fair value through profit or loss
Debt securities
Corporate debt	Discounted Cash Flows	Margin of a reference portfolio	(1)bp - 1bp	1bp	(0.56)	0.60
Property securities	Probability weighting	Growth rate	0% - 5%	2.50%	(1.19)	1.19
Equity instruments
Equities	Price Based	Price	90% - 110%	10.00%	(123.10)	123.10
Financial assets at fair value through other comprehensive income
Loans and advances to customers
Loans	Discounted Cash Flows	Credit spread	n.a.	n.a.	(19.84)	—
Loans	Discounted Cash Flows	Interest rate curve	(0.1)% - 0.1%	0.12%	(0.07)	0.07
Loans	Discounted Cash Flows	Margin of a reference portfolio	(1)bps - 1bps	1bp	(13.12)	13.04
Loans	Forward estimation	Credit spread	0.77% - 2.42%	n.a.	—	—
Debt securities
Government debt	Discounted Cash Flows	Interest rate	0.6% - 0.8%	0.09%	(0.01)	0.01
Equity instruments
Equities	Price Based	Price	90% - 110%	10.00%	(82.13)	82.13
Financial liabilities held for trading
Derivatives
Cap&Floor	Volatility option model	Volatility	10% -  90%	36.30%	(0.50)	0.43
Financial liabilities designated at fair value through profit or loss
Loans and advances to customers
Repos/Reverse repos	Asset Swap Repo Model	Long-term repo spread	n.a	n.a.	(0.36)	—

42

Lastly, the changes in the financial instruments classified as Level 3, at Grupo Santander, in 2022 and 2021:

	01/01/2022		Changes							31/12/2022
EUR million	Fair value calculated using internal models (Level 3)		Purchases/ Issuances	Sales/ Settlements	Changes in fair value recognised in profit or loss	Changes in fair value recognised in equity	Level reclassifications	Other		Fair value calculated using internal models (level 3)
Financial assets held for trading	537		91	(99)	(116)	—	(15)	(15)		383
Debt securities	22		2	(2)	15	—	2	3		42
Equity instruments	2		—	—	—	—	(1)	—		1
Trading derivatives	513		89	(97)	(131)	—	(16)	(18)		340
Swaps	224		1	(47)	(20)	—	4	(23)		139
Exchange rate options	12		—	(9)	2	—	—	(1)		4
Interest rate options	182		—	—	(142)	—	(1)	—		39
Index and securities options	41		27	(28)	29	—	(26)	5		48
Other	54		61	(13)	—	—	7	1		110
Financial assets at fair value through profit or loss	418		—	(9)	(31)	—	—	49		427
Loans and advances to customers	18		—	(9)	(5)	—	—	1		5
Debt securities	400		—	—	(26)	—	—	48		422
Non-trading financial assets mandatorily at fair value through profit or loss	1,865		521	(579)	98	—	(22)	(50)		1,833
Customers	268		276	(280)	(25)	—	—	—		239
Debt instruments	366		51	(33)	(31)	—	(27)	(1)		325
Equity instruments	1,231		194	(266)	154	—	5	(49)		1,269
Financial assets at fair value through other comprehensive income	4,847		8,564	(8,029)	—	(172)	417	20		5,647
Loans and advances	3,880		8,471	(7,988)	—	1	349	5		4,718
Debt securities	146		91	(23)	—	—	—	15		229
Equity instruments	821		2	(18)	—	(173)	68	—		700
TOTAL ASSETS	7,667		9,176	(8,716)	(49)	(172)	380	4		8,290
Financial liabilities held for trading	160		328	(97)	35	—	(2)	(9)		415
Trading derivatives	160		328	(97)	35	—	(2)	(9)		415
Swaps	44		32	(16)	189	—	9	(23)		235
Exchange rate options	7		6	(14)	1	—	—	—		—
Interest rate options	26		56	(44)	(19)	—	—	—		19
Index and securities options	67		23	(19)	(32)	—	(11)	14		42
Securities and interest rate futures	—		—	—	—	—	—	—		—
Others	16		211	(4)	(104)	—	—	—		119
Hedging derivatives (Liabilities)	—		—	—	14	—	—	—		14
Swaps	—		—	—	14	—	—	—		14
Financial liabilities designated at fair value through profit or loss	469		—	(3)	(8)	—	—	38		496
TOTAL LIABILITIES	629		328	(100)	41	—	(2)	29		925

43

	01/01/21		Changes							31/12/2020
EUR million	Fair value calculated using internal models (level 3)		Purchases /Issuances	Sales/ Settlements	Changes in fair value recognized in profit or loss	Changes in fair value recognized in equity	Level reclassifications	Other		Fair value calculated using internal models (level 3)
Financial assets held for trading	740		136	(124)	(181)	—	(15)	(19)		537
Debt securities	7		20	(2)	(2)	—	—	(1)		22
Equity instruments	3		—	(1)	—	—	—	—		2
Trading derivatives	730		116	(121)	(179)	—	(15)	(18)		513
Swaps	272		5	(33)	(35)	—	33	(18)		224
Exchange rate options	22		14	(27)	3	—	—	—		12
Interest rate options	241		7	(39)	(27)	—	—	—		182
Index and securities options	94		18	(12)	(51)	—	(8)	—		41
Other	101		72	(10)	(69)	—	(40)	—		54
Financial assets at fair value through profit or loss	649		59	(120)	(11)	—	(163)	4		418
Credit entities	163		—	—	—	—	(163)	—		—
Loans and advances to customers	19		—	(2)	—	—	—	1		18
Debt securities	467		59	(118)	(11)	—	—	3		400
Non-trading financial assets mandatorily at fair value through profit or loss	934		534	(251)	127	—	485	36		1,865
Customers	295		122	(149)	—	—	(3)	3		268
Debt securities	134		206	(28)	28	—	17	9		366
Equity instruments	505		206	(74)	99	—	471	24		1,231
Financial assets at fair value through other comprehensive income	6,220		5,681	(6,588)	—	(228)	(241)	3		4,847
Loans and advances	4,791		5,597	(6,298)	—	(37)	(173)	—		3,880
Debt securities	206		75	(25)	—	(43)	(68)	1		146
Equity instruments	1,223		9	(265)	—	(148)	—	2		821
TOTAL ASSETS	8,543		6,410	(7,083)	(65)	(228)	66	24		7,667
Financial liabilities held for trading	295		85	(42)	(138)	—	(21)	(19)		160
Trading derivatives	295		85	(42)	(138)	—	(21)	(19)		160
Swaps	81		4	(10)	(36)	—	3	2		44
Exchange rate options	1		2	—	4	—	—	—		7
Interest rate options	49		26	(19)	(8)	—	—	(22)		26
Index and securities options	97		23	(5)	(27)	—	(22)	1		67
Securities and interest rate futures	2		—	(2)	—	—	—	—		—
Others	65		30	(6)	(71)	—	(2)	—		16
Financial liabilities designated at fair value through profit or loss	610		143	—	—	—	(289)	5		469
TOTAL LIABILITIES	905		228	(42)	(138)	—	(310)	(14)		629

44

The same information on the movement of financial instruments classified in Level 3, but referred to Banco Santander, S.A., in 2022  and 2021, is presented below:

	01/01/2022	Changes						31/12/2022
EUR million	Fair value calculated using internal models (Level 3)	Purchases/ Issuances	Sales/ Settlements	Changes in fair value recognised in profit or loss	Changes in fair value recognised in equity	Level reclassifications	Other	Fair value calculated using internal models (level 3)
Financial assets held for trading	478	3	(58)	109	—	(10)	(38)	484
Debt instruments and equity instrument	—	—	—	—	—	2	—	2
Trading derivatives	478	3	(58)	109	—	(12)	(38)	482
Swaps	281	1	(47)	232	—	(9)	(38)	420
Exchange rate options	9	—	(9)	3	—	—	—	3
Interest rate options	183	—	—	(143)	—	(1)	—	39
Index and securities options	5	2	(2)	5	—	(2)	—	8
Other	—	—	—	12	—	—	—	12
Hedging derivatives (Assets)	—	—	—	—	—	—	—	—
Swaps	—	—	—	—	—	—	—	—
Financial assets at fair value through profit or loss	—	—	—	—	—	—	—	—
Credit entities	—	—	—	—	—	—	—	—
Loans and advances to customers	—	—	—	—	—	—	—	—
Debt securities	—	—	—	—	—	—	—	—
Non-trading financial assets mandatorily at fair value through profit or loss	541	134	(41)	14	—	6	(5)	649
Customers	24	—	(3)	(2)	—	—	—	19
Debt securities	148	66	(30)	—	—	6	—	190
Equity instruments	369	68	(8)	16	—	—	(5)	440
Financial assets at fair value through other comprehensive income	3,991	8,090	(7,625)	—	(267)	348	—	4,537
Loans and advances	3,238	8,090	(7,617)	—	(21)	348	—	4,038
Debt securities	—	—	—	—	—	—	—	—
Equity instruments	753	—	(8)	—	(246)	—	—	499
TOTAL ASSETS	5,010	8,227	(7,724)	123	(267)	344	(43)	5,670
Financial liabilities held for trading	183	307	(105)	340	—	(7)	(40)	678
Trading derivatives	183	307	(105)	340	—	(7)	(40)	678
Swaps	114	32	(41)	451	—	—	(40)	516
Exchange rate options	7	6	(14)	1	—	—	—	—
Interest rate options	33	57	(44)	(20)	—	(6)	—	20
Index and securities options	18	—	(2)	12	—	(1)	—	27
Securities and interest rate futures	—	—	—	—	—	—	—	—
Others	11	212	(4)	(104)	—	—	—	115
Hedging derivatives (Liabilities)	—	—	—	14	—	—	—	14
Swaps	—	—	—	14	—	—	—	14
Financial liabilities designated at fair value through profit or loss	143	—	—	4	—	—	—	147
TOTAL LIABILITIES	326	307	(105)	358	—	(7)	(40)	839

45

	01/01/2021	Changes						31/12/2021
EUR million	Fair value calculated using internal models (level 3)	Purchases /Issuances	Sales/ Settlements	Changes in fair value recognized in profit or loss	Changes in fair value recognized in equity	Level reclassifications	Other	Fair value calculated using internal models (level 3)
Financial assets held for trading	592	27	(86)	(65)	—	30	(20)	478
Debt instruments and equity instrument	—	2	—	—	—	—	(2)	—
Trading derivatives	592	25	(86)	(65)	—	30	(18)	478
Swaps	326	6	(21)	(45)	—	33	(18)	281
Exchange rate options	19	13	(27)	4	—	—	—	9
Interest rate options	241	6	(38)	(26)	—	—	—	183
Index and securities options	6	—	—	2	—	(3)	—	5
Other	—	—	—	—	—	—	—	—
Hedging derivatives (Assets)	—	—	—	—	—	—	—	—
Swaps	—	—	—	—	—	—	—	—
Financial assets at fair value through profit or loss	163	—	—	—	—	(163)	—	—
Credit entities	163	—	—	—	—	(163)	—	—
Loans and advances to customers	—	—	—	—	—	—	—	—
Debt securities	—	—	—	—	—	—	—	—
Non-trading financial assets mandatorily at fair value through profit or loss	342	208	(17)	2	—	5	1	541
Customers	26	4	(4)	(2)	—	—	—	24
Debt securities	131	18	(6)	—	—	5	—	148
Equity instruments	185	186	(7)	4	—	—	1	369
Financial assets at fair value through other comprehensive income	5,407	5,046	(5,959)	—	(263)	(240)	—	3,991
Loans and advances	4,405	4,972	(5,951)	—	(14)	(174)	—	3,238
Debt securities	—	74	(8)	—	—	(66)	—	—
Equity instruments	1,002	—	—	—	(249)	—	—	753
TOTAL ASSETS	6,504	5,281	(6,062)	(63)	(263)	(368.00)	-19	5,010
Financial liabilities held for trading	195	55	(39)	(35)	—	29	(22)	183
Trading derivatives	195	55	(39)	(35)	—	29	(22)	183
Swaps	128	6	(8)	(45)	—	33	—	114
Exchange rate options	1	2	—	4	—	—	—	7
Interest rate options	50	26	(19)	(2)	—	—	(22)	33
Index and securities options	14	—	(9)	17	—	(4)	—	18
Securities and interest rate futures	—	—	—	—	—	—	—	—
Others	2	21	(3)	(9)	—	—	—	11
Hedging derivatives (Liabilities)	—	—	—	—	—	—	—	—
Swaps	—	—	—	—	—	—	—	—
Financial liabilities designated at fair value through profit or loss	289	143	—	—	—	(289)	—	143
TOTAL LIABILITIES	484	198	(39)	(35)	—	(260)	(22)	326

46

iv. Recognition of fair value changes

As a general rule, changes in the carrying amount of

financial assets and liabilities are recognised in the

consolidated income statement. A distinction is made

between the changes resulting from the accrual of

interest and similar items, (which are recognised under

Interest income or Interest expense, as appropriate), and

those arising for other reasons, which are recognised at

their net amount under 'Gains/losses on financial assets

and liabilities'.

Adjustments due to changes in fair value arising from:

•'Financial assets at fair value with changes in other

comprehensive income' are recorded temporarily, in

the case of debt instruments in 'Other

comprehensive income - Elements that can be

reclassified to profit or loss - Financial assets at fair

value with changes in other comprehensive income',

while in the case of equity instruments are recorded

in 'other comprehensive income - Elements that will

not be reclassified to line item - Changes in the fair

value of equity instruments valued at fair value with

changes in other comprehensive income'.

Exchange differences on debt instruments measured

at fair value with changes in other comprehensive

income are recognised under 'Exchange Differences,

net' of the income statement. Exchange differences

on equity instruments, in which the irrevocable

option of being measured at fair value with changes

in other comprehensive income has been chosen, are

recognised in 'Other comprehensive income - Items

that will not be reclassified to profit or loss -

Changes in the fair value of equity instruments

measured at fair value with changes in other

comprehensive income'.

•Items charged or credited to 'Items that may be

reclassified to profit or loss – Financial assets at fair

value through other comprehensive income' and

'Other comprehensive income – Items that may be

reclassified to profit or loss – Exchange differences in

equity' remain in the Bank´s equity until the asset

giving rise to them is impaired or derecognised, at

which time they are recognised in the income

statement.

•Unrealized capital gains on financial assets at fair

value through other comprehensive income

classified as 'Non-current assets held for sale'

because they form part of a disposal group or a

discontinued operation that  are recorded in the

equity balancing entry 'Other accumulated

comprehensive income - Items that can be

reclassified in income - Non-current assets as held

for sale.

v. Hedging transactions

Banco Santander uses financial derivatives for the

following purposes: i) to facilitate these instruments to

customers who request them in the management of

their market and credit risks; ii) to use these derivatives

in the management of the risks of the Group entities’

own positions and assets and liabilities (hedging

derivatives); and iii) to obtain gains from changes in the

prices of these derivatives (derivatives).

Financial derivatives that do not qualify for hedge

accounting are treated for accounting purposes as

trading derivatives.

A derivative qualifies for hedge accounting if all the

following conditions are met:

1.The derivative hedges one of the following three

types of exposure:

a.Changes in the fair value of assets and liabilities

due to fluctuations, among others, in the interest

rate and/or exchange rate to which the position

or balance to be hedged is subject (fair value

hedge).

b.Changes in the estimated cash flows arising from

financial assets and liabilities, commitments and

highly probable forecast transactions (cash flow

hedge).

c.The net investment in a foreign operation (hedge

of a net investment in a foreign operation).

2.It is effective in offsetting exposure inherent in the

hedged item or position throughout the expected

term of the hedge, which means that:

a.At the date of arrangement the hedge is

expected, under normal conditions, to be highly

effective (prospective effectiveness).

b.There is sufficient evidence that the hedge was

actually effective during the whole life of the

hedged item or position (retrospective

effectiveness). To this end, the Bank checks that

the results of the hedge were within a range of

80% to 125% of the results of the hedged item.

3.There must be adequate documentation evidencing

the specific designation of the financial derivative to

hedge certain balances or transactions and how this

hedge was expected to be achieved and measured,

provided that this is consistent with the Bank’s

management of own risks.

47

The changes in value of financial instruments

qualifying for hedge accounting are recognised as

follows:

a.In fair value hedges, the gains or losses arising on

both the hedging instruments and the hedged

items attributable to the type of risk being

hedged are recognised directly in the income

statement.

In fair value hedges of interest rate risk on a

portfolio of financial instruments, the gains or

losses that arise on measuring the hedging

instruments are recognised directly in income

statement, whereas the gains or losses due to

changes in the fair value of the hedged amount

(attributable to the hedged risk) are recognised in

income statement with a balancing entry under

Changes in the fair value of hedged items in

portfolio hedges of interest rate risk on the asset

or liability side of the balance sheet, as

appropriate.

b.In cash flow hedges, the effective portion of the

change in value of the hedging instrument is

recognised temporarily in Other comprehensive

income – under Items that may be reclassified to

profit or loss – Hedging derivatives – Cash flow

hedges (effective portion) until the forecast

transactions occur, when it is recognised in the

income statement, unless, if the forecast

transactions result in the recognition of non-

financial assets or liabilities, it is included in the

cost of the non-financial asset or liability.

c.In hedges of a net investment in a foreign

operation, the gains or losses attributable to the

portion of the hedging instruments qualifying as

an effective hedge are recognised temporarily in

Other comprehensive income under Items that

may be reclassified to profit or loss – Hedges of

net investments in foreign operations until the

gains or losses – on the hedged item are

recognised in profit or loss.

d.The ineffective portion of the gains or losses on

the hedging instruments of cash flow hedges and

hedges of a net investment in a foreign operation

is recognised directly under 'Gains/losses on

financial assets and liabilities (net)' in the

consolidated income statement, in Gains or

losses from hedge accounting, net.

If a derivative designated as a hedge no longer meets the

requirements described above due to expiration,

ineffectiveness or for any other reason, the derivative is

classified for accounting purposes as a trading

derivative.

When fair value hedge accounting is discontinued, the

adjustments previously recognised on the hedged item

are amortised to profit or loss at the effective interest

rate recalculated at the date of hedge discontinuation.

The adjustments must be fully amortised at maturity.

When cash flow hedge accounting is discontinued, any

cumulative gain or loss on the hedging instrument

recognised in equity under other comprehensive income

'Items that may be reclassified to profit or loss' (from the

period when the hedge was effective) remains in this

equity item until the forecast transaction occurs, at

which time it is recognised in profit or loss, unless the

transaction is no longer expected to occur, in which case

the cumulative gain or loss is recognised immediately in

profit or loss.

vi. Derivatives embedded in hybrid financial instruments

Derivatives embedded in other financial instruments or

in other host contracts are accounted for separately as

derivatives if their risks and characteristics are not

closely related to those of the host contracts, provided

that the host contracts are not classified as financial

assets/liabilities designated at fair value through profit

or loss or as 'Financial assets/liabilities held for trading'.

e) Derecognition of financial assets and liabilities

The accounting treatment of transfers of financial assets

depends on the extent to which the risks and rewards

associated with the transferred assets are transferred to

third parties:

1.If the Bank transfers substantially all the risks and

rewards to third parties unconditional -sale of

financial assets, sale of financial assets under an

agreement to repurchase them at their fair value at

the date of repurchase, sale of financial assets with a

purchased call option or written put option that is

deeply out of the money, securitisation of assets in

which the transferor does not retain a subordinated

debt or grant any credit enhancement to the new

holders, and other similar cases-, the transferred

financial asset is derecognised and any rights or

obligations retained or created in the transfer are

recognised simultaneously.

2.If the Bank retains substantially all the risks and

rewards associated with the transferred financial

asset -sale of financial assets under an agreement to

repurchase them at a fixed price or at the sale price

plus interest, a securities lending agreement in

which the borrower undertakes to return the same or

similar assets, and other similar cases-, the

transferred financial asset is not derecognised and

continues to be measured by the same criteria as

those used before the transfer. However, the

following items are recognised:

48

a.An associated financial liability, which is

recognised for an amount equal to the

consideration received and is subsequently

measured at amortised cost, unless it meets the

requirements for classification under 'Financial

liabilities designated at fair value through profit

or loss'.

b.The income from the transferred financial asset

not derecognised and any expense incurred on

the new financial liability, without offsetting.

3.If the Bank neither transfers nor retains substantially

all the risks and rewards associated with the

transferred financial asset -sale of financial assets

with a purchased call option or written put option

that is not deeply in or out of the money,

securitisation of assets in which the transferor

retains a subordinated debt or other type of credit

enhancement for a portion of the transferred asset,

and other similar cases- the following distinction is

made:

a.If the transferor does not retain control of the

transferred financial asset, the asset is

derecognised and any rights or obligations

retained or created in the transfer are recognised.

b.If the transferor retains control of the transferred

financial asset, it continues to recognise it for an

amount equal to its exposure to changes in value

and recognises a financial liability associated

with the transferred financial asset. The net

carrying amount of the transferred asset and the

associated liability is the amortised cost of the

rights and obligations retained, if the transferred

asset is measured at amortised cost, or the fair

value of the rights and obligations retained, if the

transferred asset is measured at fair value.

Accordingly, financial assets are only derecognised when

the rights to the cash flows they generate have expired

or when substantially all the inherent risks and rewards

have been transferred to third parties. Similarly, financial

liabilities are only derecognised when the obligations

they generate have been extinguished or when they are

acquired with the intention either to cancel them or to

resell them.

Regarding contractual modifications of financial assets,

the Bank has differentiated them into two main

categories in relation to the conditions under which a

modification leads to a derecognition or disposal of the

financial asset (and the recognition of a new financial

asset) and those under which the accounting of the

original financial instrument with the modified terms is

maintained:

•Contractual modifications for commercial or market

reasons, which are generally carried out at the

request of the debtor to apply current market

conditions to the debt. The new contract is

considered a new transaction and, consequently, it is

necessary to derecognize the original financial asset

and recognize a new financial asset subject to the

classification and measurement requirements

established by Bank of Spain Circular 4/2017.  Also,

the new financial asset will be recorded at fair value

and, if applicable, the difference between the

carrying amount of the asset derecognized and the

fair value of the new asset will be recognized in

profit or loss.

•Modifications due to refinancing or restructuring, in

which the payment conditions are modified to allow

a customer that is experiencing financial difficulties

(current or foreseeable) to meet its payment

obligations and that, if such modification had not

been made, it would be reasonably certain that it

would not be able to meet such payment obligations.

In this case, the modification does not result in the

derecognition of the financial asset, but rather the

original financial asset is maintained and does not

require a new assessment of its classification and

measurement. When assessing credit impairment,

the current credit risk (considering the modified cash

flows) should be compared with the credit risk at

initial recognition. Finally, the gross carrying amount

of the financial asset (the present value of the

renegotiated or modified contractual cash flows that

are discounted at the original effective interest rate

of the financial asset) should be recalculated, with a

gain or loss recognized in profit or loss for the

difference.

49

f) Offsetting of financial instruments

Financial asset and liability balances are offset, i.e.

reported in the balance sheet at their net amount, only if

Banco Santander currently has a legally enforceable

right to off set the recognised amounts and intends to

either settle on a net basis, or to realise the asset and

settle the liability simultaneously.

On the table below is the detail of financial assets and

liabilities that were offset on the balance sheet as of 31

December 2022 and 2021:

EUR million
	2022
Assets	Gross amount of financial assets	Gross amount of financial assets offset on the balance sheet	Net amount of financial assets presented on the balance sheet
Derivatives	152,830	(96,924)	55,906
Repos	61,580	(22,379)	39,201
Total	214,410	(119,303)	95,107

EUR million
	2021
Assets	Gross amount of financial assets	Gross amount of financial assets offset on the balance sheet	Net amount of financial assets presented on the balance sheet
Derivatives	83,426	(39,755)	43,671
Repos	39,517	(11,298)	28,219
Total	122,943	(51,053)	71,890

EUR million
	2022
Liabilities	Gross amount of financial liabilities	Gross amount of financial liabilities offset on the balance sheet	Net amount of financial liabilities presented on the balance sheet
Derivatives	153,005	(96,924)	56,081
Repos	65,023	(22,379)	42,644
Total	218,028	(119,303)	98,725

EUR million
	2021
Liabilities	Gross amount of financial liabilities	Gross amount of financial liabilities offset on the balance sheet	Net amount of financial liabilities presented on the balance sheet
Derivatives	82,503	(39,755)	42,748
Repos	26,036	(11,298)	14,738
Total	108,539	(51,053)	57,486

At December 31, 2022 the balance sheet amounts EUR

101,488 million on derivatives and temporary

acquisition of assets and EUR 105,378 million on

derivatives and repos as liabilities that are subject to

netting and collateral arrangements (EUR 69,151 million

and EUR 54,875 million in 2021, respectively).

g) Impairment of financial assets

i. Definition

Banco Santander associates an impairment in the value

to financial assets measured at amortised cost, debt

instruments measured at fair value with changes in

other comprehensive income, lease receivables and

commitments and guarantees granted that are not

measured at fair value.

The impairment for expected credit losses is recorded

with a charge to the income statement for the period in

which the impairment arises. In the event of occurrence,

the recoveries of previously recognised impairment

losses are recorded in the income statement for the

period in which the impairment no longer exists or is

reduced.

In the case of purchased or originated credit-impaired

assets, the Bank only recognizes at the reporting date

the changes in the expected credit losses during the life

of the asset since the initial recognition as a credit loss.

In the case of assets measured at fair value with changes

in other comprehensive income, the changes in the fair

value due to expected credit losses are charged in the

consolidated income statement of the year where the

change happened, reflecting the rest of the valuation in

other comprehensive income.

As a rule, the expected credit loss is estimated as the

difference between the contractual cash flows to be

recovered and the expected cash flows discounted using

the original effective interest rate. In the case of

purchased or originated credit-impaired assets, this

difference is discounted using the effective interest rate

adjusted by credit rating.

Depending on the classification of financial instruments,

which is mentioned in the following sections, the

expected credit losses may be along 12 months or during

the life of the financial instrument:

•12-month expected credit losses: arising from the

potential default events, as defined in the following

sections that are estimated to be likely to occur

within the 12 months following the reporting date.

These losses will be associated with financial assets

classified as 'normal risk' as defined in the following

sections.

50

•Expected credit losses over the life of the financial

instrument: arising from the potential default events

that are estimated to be likely to occur throughout

the life of the financial instruments. These losses are

associated with financial assets classified as 'normal

risk under watchlist' or 'doubtful risk'.

With the purpose of estimating the expected life of the

financial instrument all the contractual terms have been

taken into account (e.g. prepayments, duration, purchase

options, etc.), being the contractual period (including

extension options) the maximum period considered to

measure the expected credit losses. In the case of

financial instruments with an uncertain maturity period

and a component of undrawn commitment (e.g.: credit

cards), the expected life is estimated through

quantitative analyses to determine the period during

which the entity is exposed to credit risk, also

considering the effectiveness of management

procedures that mitigate such exposure (e.g. the ability

to unilaterally cancel such financial instruments, etc.).

The following constitute effective guarantees:

a.Mortgage guarantees on housing as long as they are

first duly constituted and registered in favour of the

entity. The properties include:

i.Buildings and building elements,

distinguishing among:

–Houses.

–Offices, stores and multi-purpose

premises.

–Rest of buildings such as non-multi-

purpose premises and hotels.

ii.Urban and developable ordered land.

iii.Rest of properties that classify as: buildings

and building elements under construction,

such as property development in progress

and halted development, and the rest of land

types, such as rustic lands.

b.Collateral guarantees on financial instruments in the

form of cash deposits and debt securities issued by

creditworthy issuers.

c.Other types of real guarantees, including properties

received in guarantee and second and subsequent

mortgages on properties, as long as the entity

demonstrates its effectiveness. When assessing the

effectiveness of the second and subsequent

mortgages on properties the entity will implement

particularly restrictive criteria. It will take into

account, among others, whether the previous

charges are in favour of the entity itself or not and

the relationship between the risk guaranteed by

them and the property value.

d.Personal guarantees, as well as the incorporation of

new owners, covering the entire amount of the

financial instruments and implying direct and joint

liability to the entity of persons or other entities

whose solvency is sufficiently proven to ensure the

repayment of the loan on the agreed terms.

The different aspects that the Bank considers for the

evaluation of effective guarantees are set out below in

relation to the individual analysis.

ii. Financial instruments presentation

For the purposes of estimating the impairment amount,

and in accordance with its internal policies, the Bank

classifies its financial instruments (financial assets,

commitments and guarantees) measured at amortised

cost or fair value through other comprehensive income

in one of the following categories:

•Normal Risk ('stage 1'): includes all instruments that

do not meet the requirements to be classified in the

rest of the categories.

•Normal risk under watchlist ('stage 2'): includes all

instruments that, without meeting the criteria for

classification as doubtful or default risk, have

experienced significant increases in credit risk since

initial recognition.

In order to determine whether a financial instrument has

increased its credit risk since initial recognition and is to

be classified in stage 2, the Group and the Bank consider

the following criteria:

Quantitative criteria	Changes in the risk of a default occurring through the expected life of the financial instrument are analysed and quantified with respect to its credit level in its initial recognition. With the purpose of determining if such changes are considered as significant, with the consequent classification into stage 2, each Group, and therefore the Bank, unit has defined the quantitative thresholds to consider in each of its portfolios taking into account corporate guidelines ensuring a consistent interpretation in all units. Within the quantitative thresholds, two types are considered: A relative threshold is those that compare current credit quality with credit quality at the time of origination in percentage terms of change. In addition, an absolute threshold compares both references in total terms, calculating the difference between the two. These absolute/relative concepts are used homogeneously (with different values) in all geographies. The use of one type of threshold or another (or both) is determined in accordance with the process described in note 49, below, and is marked by the type of portfolio and characteristics such as the starting point of the average credit quality of the portfolio.
Qualitative criteria	In addition to the quantitative criteria indicated, various indicators are used that are aligned with those used by the Bank in the normal management of credit risk. Irregular positions of more than 30 days and renewals are common criteria applied by the Bank and common to all the Group's  units. Also, each unit can define other qualitative indicators, for each of its portfolios, according to the particularities and normal management practices in line with the policies currently in force (i.e. use of management alerts, etc.). The use of these qualitative criteria is complemented with the use of an expert judgement, under the corresponding governance.

51

In the case of forbearances, instruments classified as

'normal risk under watchlist' may be generally

reclassified to 'normal risk' in the following

circumstances: at least two years have elapsed from the

date of reclassification to that category or from its

forbearance date, the client has paid the accrued

principal and interest balance, and the client has no

other instruments with more than 30 days past due

balances.

•Doubtful Risk ('stage 3'): includes financial

instruments, overdue or not, in which, without

meeting the circumstances to classify them in the

category of default risk, there are reasonable doubts

about their total repayment (principal and interests)

by the client in the terms contractually agreed.

Likewise, off-balance-sheet exposures whose

payment is probable and their recovery doubtful are

considered in stage 3. Within this category, two

situations are differentiated:

–Doubtful risk for non-performing loans: financial

instruments, irrespective of the client and

guarantee, with balances more than 90

consecutive days on material arrears for

principal, interest or expenses contractually

agreed.

This category also includes all loan balances for a

client  when the operations with more than 90

consecutive days on material arrears are greater

than 20% of the amounts pending collection.

These instruments may be reclassified to other

categories if, as a result of the collection of part

of the past due balances, the reasons for their

classification in this category do not remain and

the client does not have balances more than 90

consecutive days on material arrears in other

loans.

–Doubtful risk for reasons other than non-

performing loans: this category includes doubtful

recovery financial instruments that are not more

than 90 consecutive days on material arrears.

Banco Santander considers that a financial instrument to

be doubtful for reasons other than delinquency when

one or more combined events have occurred with a

negative impact on the estimated future cash flows of

the financial instrument. To this end, the following

indicators, among others, are considered:

a)Negative net equity or decrease because of losses of

the client's net equity by at least 50% during the last

financial year.

b)Continued losses or significant decrease in revenue

or, in general, in the client's recurring cash flows.

c)Generalised delay in payments or insufficient cash

flows to service debts.

d)Significantly inadequate economic or financial

structure or inability to obtain additional financing by

the client.

e)Existence of an internal or external credit rating

showing that the client is in default.

f)Existence of overdue customer commitments with a

significant amount to public institutions or

employees.

These financial instruments may be reclassified to other

categories if, as a result of an individualised study,

reasonable doubts do not remain about the total

repayment under the contractually agreed terms and the

client does not have balances of 90 consecutive days on

material arrears.

In the case of forbearances, instruments classified as

doubtful risk may be reclassified to the category of

'normal risk under watchlist' when the following

circumstances are present: a minimum period of one

year has elapsed from the forbearance date, the client

has paid the accrued principal and interest amounts, and

the client has no other loan balances of 90 consecutive

days on material arrears.

•Default Risk: includes all financial assets, or part of

them, for which, after an individualised analysis,

their recovery is considered remote due to a

notorious and irrecoverable deterioration of their

solvency.

In any case, except in the case of operations with real

guarantees that cover more than 10% of the amount of

the operation, in general the Bank considers as remote

recovery: the operations of holders that are in the

liquidation phase of the insolvency creditors, doubtful

operations due to delinquency that have been in this

category for more than 4 years and doubtful operations

due to delinquency whose part not covered by real

guarantees has been maintained with 100% credit risk

coverage. for more than two years.

A financial asset amount is maintained in the balance

sheet until they are considered as a "default risk", either

all or a part of it, and the write-off is registered against

the balance sheet.

In the case of operations that have only been partially

derecognised, for forgiveness reasons or because part of

the total balance is considered unrecoverable, the

remaining amount shall be fully classified in the

category of 'doubtful risk', except where duly justified.

The classification of a financial asset, or part of it, as a

'default risk' does not involve the disruption of

negotiations and legal proceedings to recover the

amount.

52

iii. Impairment valuation assessment

Banco Santander has policies, methods and procedures

in place to hedge its credit risk, both due to the

insolvency attributable to counterparties and its

residence in a specific country.

These policies, methods and procedures are applied in

the concession, study and documentation of financial

assets, commitments and guarantees, as well as in the

identification of their impairment and in the calculation

of the amounts needed to cover their credit risk.

The asset impairment model in Bank of Spain Circular

4/2017 and subsequent modifications applies to

financial assets measured at amortised cost, debt

instruments at fair value with changes in other

comprehensive income, lease receivables and

commitments and guarantees granted that are not

measured at fair value.

The impairment represents the best estimation of the

financial assets expected credit losses at the balance

sheet date, assessed both individually and collectively.

•Individually: for the purposes of estimating the

provisions for credit risk arising from the insolvency

of a financial instrument, the Bank individually

assesses impairment by estimating the expected

credit losses on those financial instruments that are

considered to be significant and with sufficient

information to make such an estimate.

Therefore, this classification mostly includes

wholesale banking customers —Corporations,

specialised financing— as well as some of the largest

companies —Chartered and real estate developers—

from retail banking. The determination of the

perimeter in which the individualised estimate is

applied is detailed in a later section.

The individually assessed impairment estimate is

equal to the difference between the gross carrying

amount of the financial instrument and the

estimated value of the expected cash flows

receivable discounted using the original effective

interest rate of the transaction. The estimate of these

cash flows takes into account all available

information on the financial asset and the effective

guarantees associated with that asset. This

estimation process is detailed below.

•Collectively: the Bank also assesses impairment by

estimating the expected credit losses collectively in

cases where they are not assessed on an individual

basis. This includes, for example, loans with

individuals, sole proprietors or businesses in retail

banking  subject to a standardised risk management.

For the purposes of the collective assessment of

expected credit losses, the Bank has consistent and

reliable internal models. For the development of

these models, instruments with similar credit risk

characteristics that are indicative of the debtors'

capacity to pay are considered.

The credit risk characteristics used to group the

instruments are, among others: type of instrument,

debtor's sector of activity, geographical area of

activity, type of guarantee, aging of past due

balances and any other factor relevant to estimating

the future cash flows.

Banco Santander performs retrospective and

monitoring tests to evaluate the reasonableness of

the collective estimate.

On the other hand, the methodology required to

estimate the expected credit loss due to credit events is

based on an unbiased and weighted consideration by the

probability of occurrence of a series of scenarios,

considering a range of three to five possible future

scenarios, depending on the characteristics of each unit,

which could have an impact on the collection of

contractual cash flows, always taking into account the

time value of money, as well as all available and

relevant information on past events, current conditions

and forecasts of the evolution of macroeconomic

scenarios that are shown to be relevant for the

estimation of this amount (for example: GDP (Gross

Domestic Product), housing price, unemployment rate,

etc.)

The estimation of expected losses requires expert

judgment and the support of historical, current and

future information. The probability of loss is measured

considering past events, the present situation and future

trends of macroeconomic scenarios.

Banco Santander uses forward-looking information in

both internal risk management and prudential

regulation processes, so that for the calculation of the

impairment loss allowance, various scenarios are

incorporated that take advantage of the experience with

such information, thus ensuring consistency in obtaining

the expected loss.

The complexity of the estimation in this exercise has

been derived from the current macroeconomic scenario

as a consequence of the war in Ukraine, as well as the

increasing level of inflation and interest rates, and the

difficulties in the supply chains, which has generated

some uncertainty in the evolution of the economy.

53

Banco Santander has internally ensured the criteria to be

followed for guarantees received from government

bodies, both through credit lines and other public

guarantees, so that when they are adequately reflected

in each of the contracts, they are recognised as

mitigating factors of the potential expected losses, and

therefore of the provisions to be recognised, based on

the provisions of the applicable standard. Furthermore,

where applicable, these guarantees are appropriately

reflected in the mitigation of the significant increase in

risk, considering their nature as personal guarantees.

For the estimation of the parameters used in the

estimation of impairment provisions -EAD (exposure at

default), PD (probability of default), LGD (loss given

default)-, the Bank based their experience in developing

internal models for the estimation of parameters both in

the regulatory area and for management purposes,

adapting the development of the impairment provision

models under Bank of Spain Circular 4/2017 and

subsequent modifications.

•Exposure at default: is the amount of estimated risk

incurred at the time of the counterparty's analysis.

•Probability of default: is the estimated probability

that the counterparty will default on its principal

and/or interest payment obligations.

•Loss given default: is the estimate of the severity of

the loss incurred in the event of non-compliance. It

depends mainly on the updating of the guarantees

associated with the operation and the future cash

flows that are expected to be recovered.

In any case, when estimating the flows expected to be

recovered, portfolio sales are included. It should be

noted that due to the Bank's recovery policy and the

experience observed in relation to the prices of past

sales of assets classified as stage 3 and/or default risk,

there is no substantial divergence between the flows

obtained from recoveries after performing recovery

management of the assets with those obtained from the

sale of portfolios of assets discounting structural

expenses and other costs incurred.

The definition of default implemented by the Bank for

the purpose of calculating the impairment provision

models is based on the definition in Article 178 of

Regulation 575/2013 of the European Union (CRR),

which is fully aligned with the requirements of IFRS9,

which considers that a 'default' exists in relation to a

specific customer/contract when at least one of the

following circumstances exists: the entity considers that

there are reasonable doubts about the payment of all its

credit obligations or that the customer/contract is in an

irregular situation for more than 90 consecutive days

past due material balances with respect to any

significant credit obligation.

Banco Santander has partially and voluntarily aligned

during 2022 the accounting definition of Stage 3, as well

as the calculation of impairment provision models, to the

New Definition of Default, incorporating the criteria

defined by the EBA in its implementation guide of the

definition of default, capturing the economic

deterioration of the operations (days in default - on a

daily basis - and materiality thresholds - minimum

amount in arrears). The alignment of criteria has been

done taking into account the criteria of IFRS 9 as well as

the accounting principles of unbiased presentation of

financial information. Grupo Santander has registered an

increase in the default rate at around 19 basis points,

with no material impact on the provision figures for

credit risk.

In addition, the Bank considers the risk generated in all

cross-border transactions due to circumstances other

than the usual commercial risk of insolvency (sovereign

risk, transfer risk or risks arising from international

financial activity, such as wars, natural catastrophes,

balance of payments crisis, etc.).

Bank of Spain Circular 4/2017 includes a series of

practical solutions that can be implemented by entities,

with the aim of facilitating its implementation. However,

in order to achieve a complete and high-level

implementation of the standard, and following the best

practices of the industry, the  Bank does not apply these

practical solutions in a generalised manner:

•Rebuttable presumption that the credit risk has

increased significantly, when payments are more

than 30 days past due: this threshold is used as an

additional, but not primary, indicator of significant

risk increase. Additionally, there may be cases in

Grupo Santander where its use has been rebutted as

a result of studies that show a low correlation of the

significant risk increase with this past due threshold.

The volume rebutted does not exceed 0.1% of the

Group's total exposure.

•Assets with low credit risk at the reporting date: the

Bank assesses the existence of significant risk

increase in all its financial instruments.

This information is provided in more detail in note 49.b.

54

iv. Detail of individual estimate of impairment

For the individual estimate of the assessment for

impairment of the financial asset, the Bank has a specific

methodology to estimate the value of the cash flows

expected to be collected:

•Recovery through the debtor's ordinary activities

(going approach).

•Recovery through the execution and sale of the

collateral guaranteeing the operations (gone

approach).

Gone approach:

a. Evaluation of the effectiveness of guarantees

Banco Santander the effectiveness of all the guarantees

associated considering the following:

•The time required to execute these guarantees.

•Banco Santander's ability to enforce or assert these

guarantees in its favour.

•The existence of limitations imposed by each local

unit´s regulation on the foreclosure of collateral.

Under no circumstances the Bank considers that a

guarantee is effective if its effectiveness depends

substantially on the solvency of the debtor, as could be

the case:

•Promises of shares or other securities of the debtor

himself when their valuation may be significantly

affected by a debtor's default.

•Personal cross-collateralisation: when the

guarantor of a transaction is, at the same time,

guaranteed by the holder of that transaction.

On the basis of the foregoing, the following types of

guarantees are considered to be effective:

•Mortgage guarantees on properties, which are first

charge, duly constituted and registered. Real estate

includes:

–Buildings and finished building elements.

–Urban and developable land in order.

–Other real estate, including buildings under

construction, developments in progress or at

a standstill, and other land, such as rural

properties.

•Pledges on financial instruments such as cash

deposits, debt securities of reputable issuers or

equity instruments.

•Other types of security interests, including

movable property received as security and second

and subsequent mortgages on real state , provided

that they are proven to be effective under

particularly restrictive criteria.

•Personal guarantees, including new holders,

covering the entire amount and involving direct

and joint liability to the entity, from persons or

entities whose equity solvency ensures repayment

of the transaction under the agreed terms.

b.Valuation of guarantees

Banco Santander assesses the guarantees on the basis of

their nature in accordance with the following:

•Mortgage guarantees on properties associated

with financial instruments, using a complete

individual valuations carried out by independent

valuation experts and under generally accepted

valuation standards. If this is not possible,

alternative valuations are used with duly

documented and approved internal valuation

models.

•Personal guarantees are valued individually on the

basis of the guarantor´s updated information.

•The rest of the guarantees are valued based on

current market values.

c.Adjustments to the value of guarantees and

estimation of future cash flow inflows and outflows.

Banco Santander applies a series of adjustments to the

value of the guarantees in order to improve the

reference values:

•Adjustments based on the historical sales

experience for certain types of assets.

•Individual expert adjustments based on additional

management information.

Likewise, to adjust the value of the guarantees, the time

value of money is taken into account based on the

historical experience, estimating:

•Period of adjudication.

•Estimated time of sale of the asset.

In addition, the Bank takes into account all those cash

inflows and outflows linked to that guarantee until it is

sold:

•Possible future income commitments in favour of

the borrower which will available after the asset is

awarded.

•Estimated foreclosure costs.

•Asset maintenance costs, taxes and community

costs.

•Estimated marketing or sales costs.

Finally, since it is considered that the guarantee will be

sold in the future, the Bank applies an additional

adjustment ('index forward') in order to adjust the value

of the guarantees to future valuation expectations.

55

v. Impairment individual assessment scope

Banco Santander determines the perimeter over which it

makes an estimate of the assessment for impairment on

an individual basis based on a relevance threshold and

the stage in which the operations are located. In general,

the Group applies the individualised calculation of

expected losses to the significant exposures classified in

stage 3, although Banco Santander, S.A. has also

extended its analyses to some of the exposures

classified in stage 2.

It should be noted that, in any case and irrespective of

the stage in which their transactions are carried out, for

customers who do not receive standardised treatment, a

relational risk management model is applied, with

individualised treatment and monitoring by the assigned

risk analyst. In addition to wholesale customers

(Santander Corporate & Investment Banking or SCIB) and

large companies, this relational management model

also includes other segments of smaller companies for

which there is information and capacity for more

personalised and expert analysis and monitoring.  As

indicated in the Bank's wholesale credit model, the

individual treatment of the client facilitates the

continuous updating of information. The risk assumed

must be followed and monitored throughout its life

cycle, enabling anticipation and action to be taken in the

event of possible impairments. In this way, the

customer's credit quality is analysed individually, taking

into account specific aspects such as his competitive

position, financial performance, management, etc. In the

wholesale risk management model, every customer with

a credit risk position is assigned a rating, which has an

associated probability of customer default. Thus,

individual analysis of the debtor triggers a specific rating

for each customer, which determines the appropriate

parameters for calculating the expected loss, so that it is

the rating itself that initially modulates the necessary

coverage, adjusting the severity of the possible loss to

the guarantees and other mitigating factors that the

customer may have available. In addition, if as a result of

this individualised monitoring of the customer, the

analyst finally considers that his coverage is not

sufficient, he has the necessary mechanisms to adjust it

under his expert judgement, always under the

appropriate governance.

h) Repurchase agreements and reverse repurchase

agreements

Purchases (sales) of financial instruments under a non-

optional resale (repurchase) agreement at a fixed price

(repos) are recognised in the balance sheet as financing

granted (received), based on the nature of the debtor

(creditor), under 'Loans and advances with central

banks', 'Loans and advances to credit institutions' or

'Loans and advances to customers' (Deposits from

central banks, Deposits from credit institutions or

Customer deposits).

Differences between the purchase and sale prices are

recognised as interest over the contract term.

i) ‘Non-current assets’ and ‘liabilities associated

with non-current assets held for sale’

Non-current assets held for sale' includes the carrying

amount of individual items, disposal groups or items

forming part of a business unit earmarked for disposal

(discontinued operations), whose sale in their present

condition is highly likely to be completed within one year

from the reporting date. Therefore, the recovery of the

carrying amount of these items -which can be of a

financial nature or otherwise- will foreseeably be

effected through the proceeds from their disposal.

Specifically, property or other non-current assets

received by Banco Santander as total or partial

settlement of their debtors’ payment obligations to them

are deemed to be 'Non-current assets held for sale',

unless the Bank has decided to make continuing use of

these assets. In this connection, for the purpose of its

consideration in the initial recognition of these assets,

the Bank obtains, at the foreclosure date, the fair value

of the related asset through a request for appraisal by

external appraisal agencies.

Banco Santander has in place a corporate policy that

ensures the professional competence and the

independence and objectivity of the external appraisal

agencies, in accordance with the regulations, which

require appraisal agencies to meet independence,

neutrality and credibility requirements, so that the use of

their estimates does not reduce thereliability of its

valuations. This policy establishes that all the appraisal

companies and agencies with which the Bank 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 2022 are as follows: Gloval Valuation,

S.A.U., Tinsa Tasaciones Inmobiliarias, S.A.U., CBRE

Valuation Advisory, S.A., Valoraciones Mediterráneo, S.A.

y Sociedad de tasación, S.A.

56

'Liabilities associated with non-current assets held for

sale' includes the balances payable arising from the

assets held for sale or disposal groups and from

discontinued operations.

'Non-current assets and disposal groups of items that

have been classified as held for sale' are generally

recognised at the date of their allocation to this category

and are subsequently valued at the lower of their fair

value less costs to sell or its book value. 'Non-current

assets and disposal groups of items that are classified as

held for sale' are not amortised as long as they remain in

this category.

At 31 December 2022 the fair value minus the costs to

sell of non-current assets held for sale exceeded their

carrying amount by EUR 298 million (EUR 229 million in

2021); however, in accordance with the applicable

legislation, this unrealised gain could not be recognised.

The valuation of the portfolio of non-current assets held

for sale has been made in compliance with the

requirements of Bank of Spain Circular 4/2017 and

subsequent modifications in relation to the estimate of

the fair value of tangible assets and the value-in-use of

financial assets.

The value of the portfolio is determined as the sum of

the values of the individual elements that compose the

portfolio, without considering any total or batch

grouping in order to correct the individual values.

Banco Santander, in compliance with Bank of Spain

Circular 4/2017, and subsequent amendments, on public

and private financial reporting standards and financial

statement models, has developed a methodology that

enables it to estimate the fair value and costs of sale of

assets foreclosed or received in payment of debts. This

methodology is based on the classification of the

portfolio of foreclosed assets into different segments.

Segmentation enables the intrinsic characteristics of

Banco Santander's portfolio of foreclosed assets to be

differentiated, so that assets with homogeneous

characteristics are grouped by segment. Thus, the

portfolio is segmented into (i) finished assets of a

residential and tertiary nature, (ii) developments in

progress and (iii) land1.

In determining the critical segments in the overall

portfolio, assets are classified on the basis of the nature

of the asset and its stage of development. This

segmentation is made in order to seek the liquidation of

the asset (which should be carried out in the shortest

possible time).

When making decisions, the situation and/or

characteristics of the asset are fundamentally taken into

account, as well as the evaluation of all the determining

factors that favour the recovery of the debt. For them,

the following aspects are analyzed, among others:

•The time that has elapsed since the adjudication.

•The transferability and contingencies of the

foreclosed asset.

•The economic viability from the real estate point of

view with the necessary investment estimate.

•The expenses that may arise from the marketing

process.

In the case of real estate assets foreclosed in Spain,

which represent 90% of the Group’s total non-current

assets held for sale, the valuation of the portfolio is

carried out by applying the following models:

•Market Value Model used in the valuation of finished

properties of a residential nature (mainly homes and

car parks) and properties of a tertiary nature (offices,

commercial premises and multipurpose buildings).

For the valuation of finished assets whose

availability for sale is immediate, a market sale value

provided by a third party external to Banco Santander

is considered, calculated under the AVM

methodology by the comparable properties method

adjusted by our experience in selling similar assets,

given the term, price, volume, trend in the value of

these assets and the time elapsing until their sale

and discounting the estimated costs of sale.

The market value is determined on the basis of the

definition established by the International Valuation

Standards drawn up by the IVSC (International Valuation

Standards Council), understood as the estimated amount

for which an asset or a liability should be exchanged on

the measurement date between a willing buyer and a

willing seller, in an arm's length transaction, after

appropriate marketing, and in which the parties have

acted with sufficient information, prudently and without

coercion.

The current market value of the properties is estimated

on the basis of automated valuations obtained by taking

comparable properties as a reference; simulating the

procedure carried out by an appraiser in a physical

valuation according to Order ECO 805/2003: selection of

properties and obtaining the unit value by applying

homogenisation adjustments. The selection of the

properties is carried out by location within the same real

estate cluster and according to the characteristics of the

properties, filtering by type2, surface area range and age.

The model enables a distinction to be made within the

municipality under study as to which areas are similar

57

1 The assets in a situation of 'stopped development' are included under 'land

2 Assets qualified as protected housing are taken into account. The maximum legal value of these assets is determined by the VPO module, obtained from the

result of multiplying the State Basic Module (MBE) by a zone coefficient determined by each autonomous community. To carry out the valuation of a protected

property, the useful surface area is used in accordance with current regulations.

and comparable and therefore have a similar value in the

property market, discriminating between which

properties are good comparators and which are not.

Adjustments to homogenize the properties are made

according to: (i) the age of the property according to the

age of the property to be valued, (ii) the deviation of the

built area from the common area with respect to the

property to be valued and (iii) by age of the date of

capture of the property according to the price evolution

index of the real estate market.

In addition, for individually significant assets, complete

individual valuations are carried out, including a visit to

the asset, market analysis (data relating to supply,

demand, current sale or rental price ranges and supply-

demand and revaluation expectations) and an estimate

of expected income and costs.

For this segmentation of assets, when they are

completed, the real costs are known and the actual

expenses for the marketing and sale of the asset

must be taken into account. Therefore, Banco

Santander uses the actual costs in its calculation

engine or, failing that, those estimated on the basis

of its observed experience.

•Market Value Model according to Evolution of

Market Values used to update the valuation of

developments in progress. The valuation model

estimates the current market value of the properties

based on complete individual valuations by third

parties, calculated from the values of the feasibility

studies and development costs of the promotion, as

well as the selling costs, distinguishing by location,

size and type of property. The inputs used in the

valuation model for residential assets under

construction are actual revenues and costs.

For this purpose, in order to calculate the investment

flows, Banco Santander considers, on the basis of the

feasibility studies, the expenditure required for

construction, the professional fees relating to the

project and to project management, the premiums

for mandatory building insurance, the developer's

administrative expenses, licenses, taxes on new

construction and fees, and urban development

charges.

With respect to the calculation of income flows,

Banco Santander takes into account the square

metres built, the number of homes under

construction and the estimated selling price over 1.5

years.

The market value will be the result of the difference

between the income flows and the investment flows

estimated at each moment.

•Land Valuation model. The methodology followed by

the Bank regarding land valuation consists of

updating the individual reference valuation of each

of the land on an annual basis, through updated

valuation valuations carried out by independent

professionals and following the methodology

established in the OM (Ministerial Order)

ECO/805/2003, of 27 March, whose main

verifications in the case of land valuation, regardless

of the degree of urbanisation of the land, correspond

to:

–Visual verification of the assessed property.

–Registry description.

–Urban planning.

–Visible easements.

–Visible state of occupation, possession, use and

exploitation.

–Protection regime.

–Apparent state of preservation.

–Correspondence with cadastral property..

–Existence of expropriation procedure,

expropriation plan or project, administrative

resolution or file that may lead to expropriation.

–Expiry of the urbanization or building deadlines.

–Existence of a procedure for failure to comply

with obligations.

–Verification of surfaces.

For the purposes of valuation, the land will be classified

in the following levels:

–Level I: It will include all the lands that do not

belong to level II.

–Level II: It shall include land classified as

undeveloped where building is not allowed for

uses other than agriculture, forestry, livestock or

linked to an economic exploitation permitted by

the regulations in force. Also included are lands

classified as developable that are not included in

a development area of urban planning or that, in

such an area, the conditions for its development

have not been defined.

58

In those cases where Banco Santander does not have an

updated reference value through an ECO valuation for

the current year, we use as a reference value the latest

available ECO valuation reduced or corrected by the

average annual coverage ratio of the land on which we

have obtained an updated reference value, through an

ECO valuation.

Banco Santander applies a discount to the

aforementioned reference values that takes into account

both the discount on the reference value in the sales

process and the estimated costs of marketing or selling

the land:Discount on reference value = % discount on

sales + % marketing costs being:

–% discount on Sales: = 100 - (sales price /

updated appraisal value).

–marketing costs: calculated on the basis of our

historical experience in sales and in accordance

with the marketing management fees negotiated

with our suppliers of this type of service.

In this way Banco Santander obtains the corrected

market value, an amount that we compare with the net

cost of each piece of land to determine its correct

valuation and conclude with our valuation process.

In addition, in relation to the previously mentioned

valuations, less costs to sell, are contrasted with the

sales experience of each type of asset in order to confirm

that there is no significant difference between the sale

price and the valuation.

Impairment losses on an asset or disposal group arising

from a reduction in its carrying amount to its fair value

(less costs to sell) are recognised under 'Gains or (losses)

on non-current assets held for sale not classified as

discontinued operations' in the income statement.

The gains on a non-current asset held for sale resulting

from subsequent increases in fair value (less costs to

sell) increase its carrying amount and are recognised in

the consolidated income statement up to an amount

equal to the impairment losses previously recognised.

j) Insurance contracts linked to pensions

The item 'Insurance contracts linked to pensions',

included within the heading 'Other assets' (see note 2.n),

will include the fair value of the insurance policies to

cover pension commitments that must be recorded as a

Separate asset for not meeting the requirements

established in regulation 35 of Bank of Spain Circular

4/2017 and subsequent modifications, to be considered

plan assets.

k) Tangible assets

Tangible assets includes the amount of buildings, land,

furniture, vehicles, computer hardware and other

fixtures owned by Banco Santander or acquired under

finance leases. Tangible assets are classified by use as

follows:

i. Property, plant and equipment for own use

Property, plant and equipment for own use – including

tangible assets received by the Bank in full or partial

satisfaction of financial assets representing receivables

from third parties which are intended to be held for

continuing use and tangible assets acquired under

finance leases– are presented at acquisition cost, less

the related accumulated depreciation and any estimated

impairment losses (carrying amount higher than

recoverable amount).

Depreciation is calculated, using the straight-line

method, on the basis of the acquisition cost of the assets

less their residual value. The land on which the buildings

and other structures stand has an indefinite life and,

therefore, is not depreciated.

The annual tangible asset depreciation charge is

recognised in the income statement and are essentially

equivalent to the following amortization percentages

(determined based on the years of estimated useful life,

on average, of the different elements):

	Average annual rate
Buildings for own use	2.0%
Furniture	10.0%
Fixtures	5.0%
IT equipment	25.0%
Vehicles	16.0%
Other	5.0%
Lease use rights	Less than the lease term or the useful life of the underlying asset

At the end of each reporting period, Banco Santander

assesses whether there is any indication that the

carrying amount of an asset exceeds its recoverable

amount, in which case they write down the carrying

amount of the asset to its recoverable amount and

adjust future depreciation charges in proportion to its

adjusted carrying amount and to its new remaining

useful life, if the useful life needs to be re-estimated.

Similarly, if there is an indication of a recovery in the

value of a tangible asset, Banco Santander recognises

the reversal of the impairment loss recognised in prior

periods and adjust the future depreciation charges

accordingly. In no circumstances may the reversal of an

impairment loss on an asset raise its carrying amount

above that which it would have if no impairment losses

had been recognised in prior years.

59

The estimated useful lives of the items of property, plant

and equipment for own use are reviewed at least at the

end of the reporting period with a view to detecting

significant changes therein. If changes are detected, the

useful lives of the assets are adjusted by correcting the

depreciation charge to be recognised in the income

statement in future years on the basis of the new useful

lives.

Upkeep and maintenance expenses relating to property,

plant and equipment for own use are recognised as an

expense in the period in which they are incurred, since

they do not increase the useful lives of the assets.

ii. Investment property

'Investment property' reflects the net values of the land,

buildings and other structures held either to earn rentals

or for obtaining profits by sales due to future increase in

market prices.

The criteria used to recognise the acquisition cost of

investment property, to calculate its depreciation and its

estimated useful life and to recognise any impairment

losses thereon are consistent with those described in

relation to property, plant and equipment for own use.

In order to evaluate the possible impairment Banco

Santander determines periodically the fair value of its

investment property so that, at the end of the reporting

period, the fair value reflects the market conditions of

the investment property at that date. This fair value is

determined annually, taking as benchmarks the

valuations performed by independent experts. The

methodology used to determine the fair value of

investment property is selected based on the status of

the asset in question; thus, for properties earmarked for

lease, the valuations are performed using the sales

comparison approach, whereas for leased properties the

valuations are made primarily using the income

capitalisation approach and, exceptionally, the sales

comparison approach.

In the sales comparison approach, the property market

segment for comparable properties is analysed, inter

alia, and, based on specific information on actual

transactions and firm offers, current prices are obtained

for cash sales of those properties. The valuations

performed using this approach are considered as level 2

valuations.

In the income capitalisation approach, the cash flows

estimated to be obtained over the useful life of the

property are discounted taking into account factors that

may influence the amount and actual obtainment

thereof, such as: (i) the payments that are normally

received on comparable properties; (ii) current and

probable future occupancy; (iii) the current or

foreseeable default rate on payments. The valuations

performed using this approach are considered as Level 3

valuations, since significant unobservable inputs are

used, such as current and probable future occupancy

and/or the current or foreseeable default rate on

payments.

iii. Assets leased out under an operating lease

'Property, plant and equipment' - Leased out under an

operating lease reflects the amount of the tangible

assets, other than land and buildings, leased out by the

Bank under an operating lease.

The criteria used to recognise the acquisition cost of

assets leased out under operating leases, to calculate

their depreciation and their respective estimated useful

lives and to recognise the impairment losses thereon are

consistent with those described in relation to property,

plant and equipment for own use.

l) Accounting for leases

The main aspects contained in the regulation Bank of

Spain Circular 2/2018 adopted by the Bank are included

below:

When the Bank acts as lessee, it recognises a right-of-

use asset representing its right to use the underlying

leased asset with a corresponding lease liability on the

date on which the leased asset is available for use by the

Bank. Each lease payment is allocated between the

liability and the finance charge. The finance charge is

allocated to the income statement during the term of the

lease in such a way as to produce a constant periodic

interest rate on the remaining balance of the liability for

each year. The right-of-use asset is depreciated over the

useful life of the asset or the lease term, whichever is

shorter, on a straight-line basis. If the Bank is reasonably

certain to exercise a purchase option, the right-of-use

asset is amortized over the useful life of the underlying

asset.

Assets and liabilities arising from a lease are initially

measured at present value. Lease liabilities include the

net present value of the following lease payments:

•Fixed payments (including inflation-linked

payments), less any lease incentive receivable.

•Variable lease payments that depend on an index or

rate.

•The amounts expected to be paid by the lessee under

residual value guarantees.

•The exercise price of a purchase option if the lessee

is reasonably certain that it will exercise that option.

•Lease termination penalty payments, if the term of

the lease reflects the lessee's exercise of that option.

Lease payments are discounted using the interest rate

implicit in the lease. Given in certain situations this

interest rate cannot be obtained, the discount rate used

in this cases, is the lessee's incremental borrowing rate

at the related date. For this purpose, the entity has

calculated this incremental borrowing rate taking as

reference the listed debt instruments issued by the Bank.

60

in this regard, the Bank has estimated different interest

rate curves depending on the currency and economic

environment in which the contracts are located.

In order to construct the incremental borrowing rate, a

methodology has been developed at the corporate level.

This methodology is based on the need for each entity to

consider its economic and financial situation, for which

the following factors must be considered:

•Economic and political situation (country risk).

•Credit risk of the company.

•Monetary policy.

•Volume and seniority of the company’s debt

instrument issues.

The incremental borrowing rate is defined as the interest

rate that a lessee would have to pay for borrowing, given

a similar period to the duration of the lease and with

similar security, the funds necessary to obtain an asset

of similar value to the right-of-use asset in a similar

economic environment. The Group entities have a wide

stock and variety of financing instruments issued in

different currencies to that of the euro (pound, dollar,

etc.) that provide sufficient information to be able to

determine an "all in rate" (reference rate plus

adjustment for credit spread at different terms and in

different currencies). In circumstances, where the Bank,

has its own financing, this has been used as the starting

point for determining the incremental borrowing rate.

Right-of-use assets are valued at cost which includes the

following:

•The amount of the initial measurement of the lease

liability.

•Any lease payment made at or before the

commencement date less any lease incentive

received.

•Any initial direct costs.

•Restoration costs.

Banco Santander recognises the payments associated

with short-term leases and leases of low-value assets on

a straight-line basis as an expense in the income

statement. Short-term leases are leases with a lease

term less than or equal to 12 months (a lease that

contains a purchase option is not a short term lease).

m) Intangible assets

Intangible assets are identifiable non-monetary assets

(separable from other assets) without physical

substance which arise as a result of a legal transaction or

which are developed internally by Banco Santander.

Only assets whose cost can be estimated reliably and

from which the Bank considers it probable that future

economic benefits will be generated are recognised.

Intangible assets are recognised initially at acquisition or

production cost and are subsequently measured at cost

less any accumulated amortisation and any accumulated

impairment losses.

i. Goodwill

Any excess of the cost of the investments in the

subsidiaries, joint ventures and associates accounted for

using the equity method over the corresponding

underlying carrying amounts acquired, adjusted at the

date of first-time consolidation, is allocated as follows:

•If it is attributable to specific assets and liabilities of

the companies acquired, by increasing the value of

the assets (or reducing the value of the liabilities)

whose fair values were higher (lower) than the

carrying amounts at which they had been recognised

in the acquired entities’ balance sheets.

•If it is attributable to specific intangible assets, by

recognising it explicitly in the balance sheet provided

that the fair value of these assets within twelve

months following the date of acquisition can be

measured reliably.

▪The remaining amount is recognised as goodwill,

which is allocated to one or more cash-generating

units (CGU) (a cash-generating unit is the smallest

identifiable group of assets that, as a result of

continuing operation, generates cash inflows that are

largely independent of the cash inflows from other

assets or groups of assets). The cash-generating

units represent the Banco Santander’s geographical

and/or business segments.

Goodwill (only recognised when it has been acquired by

consideration) represents, therefore, a payment made by

the acquirer in anticipation of future economic benefits

from assets of the acquired entity that are not capable of

being individually identified and separately recognised.

Goodwill, in accordance with Bank of Spain Circular

4/2017, is to be amortized over a 10-year period unless

otherwise stated. The debits to the income statements

for the amortisation of these assets are recorded under

the section ‘Amortisation’ in the income statement.

61

At the end of each annual reporting period or whenever

there is any indication of impairment goodwill is

reviewed for impairment (i.e. a reduction in its

recoverable amount to below its carrying amount) and, if

there is any impairment, the goodwill is written down

with a charge to 'Impairment or reversal of impairment

on non-financial assets, net - Intangible assets' in the 

income statement.

An impairment loss recognised for goodwill is not

reversed in a subsequent period.

In the event of sale or departure of an activity that is part

of a CGU, the part of the goodwill that can be assigned to

said activity would be written-off, taking as a reference

the relative value of the same over the total of the CGU

at the time of sale or abandonment. If applicable, the

distribution by currency of the remaining goodwill will

be performed based on the relative values of the

remaining activities.

ii. Other intangible assets

Other intangible assets includes the amount of

identifiable intangible assets, such as purchased

customer lists and computer software.

In accordance with Rule Twenty Eight of Bank of Spain

Circular 4/2017, for the financial statements (individual

and consolidated) not subject to the framework of

International Financial Reporting Standards, intangible

assets will be considered assets with a limited useful

life.

An intangible assets useful life may not exceed the

period during which the entity is entitled to use the

asset. If the right of use is for a limited period that can be

renewed, the useful life will include the renewal period

only when there is evidence that the renewal will be

carried out without significant cost.

Intangible assets shall be amortized in accordance with

their useful life. Banco Santander reviews, at least at the

end of each year, the amortisation period and the

amortisation method of each of its intangible assets and,

if it considers that they are not appropriate, the impact

will be treated as a change in its accounting estimates.

The intangible asset amortisation charge is recognised

under 'Depreciation and amortisation' in the income

statement.

In both cases Banco Santander recognises any

impairment loss on the carrying amount of these assets

with a charge to 'Impairment or reversal of impairment

on non-financial assets, net - Intangible assets in the

income statement.

The criteria used to recognise the impairment losses on

these assets and, where applicable, the reversal of

impairment losses recognised in prior years are similar

to those used for tangible assets (see note 2.k).

Internally developed computer software

Internally developed computer software is recognised as

an intangible asset if, among other requisites (basically

the Bank’s ability to use or sell it), it can be identified and

its ability to generate future economic benefits can be

demonstrated.

Expenditure on research activities is recognised as an

expense in the year in which it is incurred and cannot be

subsequently capitalised into the carrying amount of the

intangible asset.

n) Other assets

Other assets' in the balance sheet includes the amount

of assets not recorded in other items, the breakdown

being as follows:

•Inventories: this item includes the amount of assets,

other than financial instruments, that are held for

sale in the ordinary course of business, that are in the

process of production, construction or development

for such purpose, or that are to be consumed in the

production process or in the provision of services.

Inventories include land and other property held for

sale in the property development business.

Inventories are measured at the lower of cost and

net realisable value, which is the estimated selling

price of the inventories in the ordinary course of

business, less the estimated costs of completion and

the estimated costs required to make the sale.

Any write-downs of inventories -such as those due to

damage, obsolescence or reduction of selling price-

to net realisable value and other impairment losses

are recognised as expenses for the year in which the

impairment or loss occurs. Subsequent reversals are

recognised in the income statement for the year in

which they occur.

The carrying amount of inventories is derecognised

and recognised as an expense in the period in which

the revenue from their sale is recognised.

▪Other: this item includes the balance of all

prepayments and accrued income (excluding accrued

interest, fees and commissions), the net amount of

the difference between pension plan obligations and

the value of the plan assets with a balance in the

entity’s favour, when this net amount is to be

reported in the balance sheet, and the amount of any

other assets not included in other items.

62

o) Other liabilities

'Other liabilities' includes the balance of all accrued

expenses and deferred income, excluding accrued

interest, and the amount of any other liabilities not

included in other categories.

p) Provisions and contingent liabilities (assets)

When preparing the financial statements of the Bank,

Banco Santander’s directors made a distinction between:

•Provisions: credit balances covering present

obligations at the reporting date arising from past

events which could give rise to a loss for the Banco

Santander, which is considered to be likely to occur

and certain as to its nature but uncertain as to its

amount and/or timing.

▪Contingent liabilities: possible obligations that arise

from past events and whose existence will be

confirmed only by the occurrence or non-occurrence

of one or more future events not wholly within the

control of the Bank .They include the present

obligations of the Bank when it is not probable that

an outflow of resources embodying economic

benefits will be required to settle them. Banco

Santander does not recognise the contingent liability.

The Bank will disclose a contingent liability, unless

the possibility of an outflow of resources embodying

economic benefits is remote.

▪Contingent assets: possible assets that arise from

past events and whose existence is conditional on,

and will be confirmed only by, the occurrence or non-

occurrence of one or more uncertain future events

not wholly within the control of the Bank. Contingent

assets are not recognised in the balance sheet or in

the income statement, but rather are disclosed in the

notes, provided that it is probable that these assets

will give rise to an increase in resources embodying

economic benefits.

Banco Santander´s financial statements include all the

material provisions with respect to which it is considered

that it is more likely than not the obligation will have to

be settled. In accordance with accounting standards,

contingent liabilities must not be recognised in the

consolidated financial statements, but must rather be

disclosed in the Notes.

Provisions (which are quantified on the basis of the best

information available on the consequences of the event

giving rise to them and are reviewed and adjusted at the

end of each year) are used to cater for the specific

obligations for which they were originally recognised.

Provisions are fully or partially reversed when such

obligations cease to exist or are reduced.

Provisions are classified according to the obligations

covered as follows (see note 23):

•Provision for pensions and similar obligations:

includes the amount of all the provisions made to

cover post-employment benefits, including

obligations to pre-retirees and similar obligations.

•Provisions for contingent liabilities and

commitments: include the amount of the provisions

made to cover contingent liabilities -defined as those

transactions in which the Bank guarantees the

obligations of a third party, arising as a result of

financial guarantees granted or contracts of another

kind- and contingent commitments -defined as

irrevocable commitments that may give rise to the

recognition of financial assets.

•Provisions for taxes and other legal contingencies

and Other provisions: include the amount of the

provisions recognised to cover tax and legal

contingencies and litigation and the other provisions

recognised by Banco Santander. Other provisions

includes, inter alia, any provisions for restructuring

costs and environmental measures.

q) Court proceedings and/or claims in process

At the end of 2022 certain court proceedings and claims

were in process against Banco Santander arising from

the ordinary course of their operations (see note 23).

r) Own equity instruments

Own equity instruments are those meeting both of the

following conditions:

▪The instruments do not include any contractual

obligation for the issuer (i) to deliver cash or another

financial asset to a third party; or (ii) to exchange

financial assets or financial liabilities with a third

party under conditions that are potentially

unfavourable to the issuer.

▪The instruments will or may be settled in the issuer’s

own equity instruments and are: (i) a non-derivative

that includes no contractual obligation for the issuer

to deliver a variable number of its own equity

instruments; or (ii) a derivative that will be settled by

the issuer through the exchange of a fixed amount of

cash or another financial asset for a fixed number of

its own equity instruments.

Transactions involving own equity instruments, including

their issuance and cancellation, are charged directly to

equity.

Changes in the value of instruments classified as own

equity instruments are not recognised in the financial

statements. Consideration received or paid in exchange

for such instruments, including the coupons on

preference shares contingently convertible into ordinary

shares and the coupons associated with CCPP, is directly

added to or deducted from equity.

63

s) Equity-instrument-based employee remuneration

Own equity instruments delivered to employees in

consideration for their services, if the instruments are

delivered once the specific period of service has ended,

are recognised as an expense for services (with the

corresponding increase in equity) as the services are

rendered by employees during the service period. At the

grant date the services received (and the related increase

in equity) are measured at the fair value of the equity

instruments granted. If the equity instruments granted

are vested immediately, Banco Santander recognises in

full, at the grant date, the expense for the services

received.

When the requirements stipulated in the remuneration

agreement include external market conditions (such as

equity instruments reaching a certain quoted price), the

amount ultimately to be recognised in equity will

depend on the other conditions being met by the

employees (normally length of service requirements),

irrespective of whether the market conditions are

satisfied. If the conditions of the agreement are met but

the external market conditions are not satisfied, the

amounts previously recognised in equity are not

reversed, even if the employees do not exercise their

right to receive the equity instruments.

t) Recognition of income and expenses

The most significant criteria used by Banco Santander to

recognise its income and expenses are summarised as

follows:

i. Interest income, interest expenses and similar items

Interest income, interest expenses and similar items are

generally recognised on an accrual basis using the

effective interest method. Dividends received from other

companies are recognised as income when the Banco

Santander right to receive them arises.

ii. Commissions, fees and similar items

Fee and commission income and expenses are

recognised in the income statement using criteria that

vary according to their nature. The main criteria are as

follows:

•Fee and commission income and expenses relating to

financial assets and financial liabilities measured at

fair value through profit or loss are recognised when

paid.

•Those arising from transactions or services that are

performed over a period of time are recognised over

the life of these transactions or services.

•Those relating to services provided in a single act are

recognised when the single act is carried out.

iii. Non-finance income and expenses

They are recognised for accounting purposes when the

good is delivered or the non-financial service is rendered.

To determine the amount and timing of recognition, a

five-step model is followed: identification of the contract

with the customer, identification of the separate

obligations of the contract, determination of the

transaction price, distribution of the transaction price

among the identified obligations and finally recording of

income as the obligations are satisfied.

iv. Deferred collections and payments

These are recognised for accounting purposes at the

amount resulting from discounting the expected cash

flows at market rates.

v. Loan arrangement fees

Loan arrangement fees, mainly loan origination,

application and information fees, are accrued and

recognised in income over the term of the loan.

u) Financial guarantees

Financial guarantees are considered contracts that

require the issuer to make specific payments to

reimburse the creditor for the loss it incurs when a

specific debtor defaults on its due date payment

obligation in accordance with the original or modified

conditions of debt instrument, regardless of its legal

form, which may be, among others, a deposit, financial

guarantee, insurance contract or credit derivative.

Banco Santander initially recognises the financial

guarantees provided on the liability side of the balance

sheet at fair value, which is generally the present value

of the fees, commissions and interest receivable from

these contracts over the term thereof, and

simultaneously the Bank recognises the amount of the

fees, commissions and similar interest received at the

inception of the transactions and a credit on the asset

side of the balance sheet for the present value of the

fees, commissions and interest outstanding.

Financial guarantees, regardless of the guarantor,

instrumentation or other circumstances, are reviewed

periodically so as to determine the credit risk to which

they are exposed and, if appropriate, to consider

whether a provision is required. The credit risk is

determined by application of criteria similar to those

established for quantifying impairment losses on debt

instruments carried at amortised cost (described in note

2.g above).

The provisions made for these transactions are

recognised under 'Provisions - Provisions for

commitments and guarantees given in the consolidated

balance sheet' (see note 23). These provisions are

recognised and reversed with a charge or credit,

respectively, to 'Provisions or reversal of provisions', net,

in the consolidated income statement.

64

If a specific provision is required for financial guarantees,

the related unearned commissions recognised under

'Financial liabilities at amortised cost - Other financial

liabilities in the balance sheet', are reclassified to the

appropriate provision.

v) Post-employment benefits

Under the collective agreements currently in force and

other arrangements, the Spanish banks included in the

Group and certain other Spanish and foreign

consolidated entities have undertaken to supplement

the public social security system benefits accruing to

certain employees, and to their beneficiary right holders,

for retirement, permanent disability or death, and the

post-employment welfare benefits.

Banco Santander’s post-employment obligations to its

employees are deemed to be defined contribution plans

when the Bank makes pre-determined contributions

(recognised under Personnel expenses in the income

statement) to a separate entity and will have no legal or

effective obligation to make further contributions if the

separate entity cannot pay the employee benefits

relating to the service rendered in the current and prior

periods. Post-employment obligations that do not meet

the aforementioned conditions are classified as defined

benefit plans (see note 23).

Defined contribution plans

The contributions made in this connection in each year

are recognised under 'Personnel expenses' in the income

statement.

The amounts not yet contributed at each year-end are

recognised, at their present value, under 'Provisions -

Provision for pensions' and similar obligations on the

liability side of the balance sheet.

Defined benefit plans

Banco Santander recognises under 'Provisions - Provision

for pensions and similar obligations on the liability side

of the balance sheet' (or under 'Other assets' on the

asset side, as appropriate) the present value of its

defined benefit post-employment obligations, net of the

fair value of the plan assets.

Plan assets are defined as those that will be directly

used to settle obligations and that meet the following

conditions:

•They are not owned by Banco Santander, but by a

legally separate third party that is not a party related

to the  Bank.

•They are only available to pay or fund post-

employment benefits and they cannot be returned to

the Bank unless the assets remaining in the plan are

sufficient to meet all the benefit obligations of the

plan and of the entity to current and former

employees, or they are returned to reimburse

employee benefits already paid by the Bank.

If Banco Santander can look to an insurer to pay part or

all of the expenditure required to settle a defined benefit

obligation, and it is practically certain that said insurer

will reimburse some or all of the expenditure required to

settle that obligation, but the insurance policy does not

qualify as a plan asset, the Bank recognises its right to

reimbursement -which, in all other respects, is treated as

a plan asset- under 'Insurance contracts linked to

pensions' on the asset side of the balance sheet.

Banco Santander will recognise the following items in

the income statement:

•Current service cost, (the increase in the present

value of the obligations resulting from employee

service in the current period), is recognised under

'Staff costs'.

•The past service cost, which arises from changes to

existing post-employment benefits or from the

introduction of new benefits and includes the cost of

reductions, is recognised under 'Provisions or

reversal of provisions'.

•Any gain or loss arising from a liquidation of the plan

is included in the Provisions or reversion of

provisions.

•Net interest on the net defined benefit liability

(asset), i.e. the change during the period in the net

defined benefit liability (asset) that arises from the

passage of time, is recognised under 'Interest

expense' and similar charges ('Interest and similar

income' if it constitutes income) in the income

statement.

The remeasurement of the net defined benefit liability

(asset) is recognised in 'Other comprehensive income'

under Items not reclassified to profit or loss and

includes:

•Actuarial gains and losses generated in the year,

arising from the differences between the previous

actuarial assumptions and what has actually

occurred and from the effects of changes in actuarial

assumptions.

•The return on plan assets, excluding amounts

included in net interest on the net defined benefit

liability (asset).

•Any change in the effect of the asset ceiling,

excluding amounts included in net interest on the net

defined benefit liability (asset).

65

w) Other long-term employee benefits

Other long-term employee benefits, defined as

obligations to pre-retirees -taken to be those who have

ceased to render services at the entity but who, without

being legally retired, continue to have economic rights

vis-à-vis the entity until they acquire the legal status of

retiree-, long-service bonuses, obligations for death of

spouse or disability before retirement that depend on

the employee’s length of service at the entity and other

similar items, are treated for accounting purposes,

where applicable, as established above for defined

benefit post-employment plans, except that actuarial

gains and losses are recognised under 'Provisions or

reversal of provisions', net, in the income statement (see

note 23).

x) Termination benefits

Termination benefits are recognised when there is a

detailed formal plan identifying the basic changes to be

made, provided that implementation of the plan has

begun, its main features have been publicly announced

or objective facts concerning its implementation have

been disclosed.

y) Income tax

The income tax expense is recognised in the income

statement, except when they arise from a transaction

whose results are recognised directly in equity.

The current income tax expense is calculated as the sum

of the current tax resulting from application of the

appropriate tax rate to the taxable profit for the year (net

of any deductions allowable for tax purposes), and of the

changes in deferred tax assets and liabilities recognised

in the income statement.

'Deferred tax assets' and liabilities include temporary

differences, which are identified as the amounts

expected to be payable or recoverable on differences

between the carrying amounts of assets and liabilities

and their related tax bases, and tax loss and tax credit

carryforwards. These amounts are measured at the tax

rates that are expected to apply in the period when the

asset is realised or the liability is settled.

'Tax assets' include the amount of all tax assets, which

are broken down into current -amounts of tax to be

recovered within the next twelve months- and deferred -

amounts of tax to be recovered in future years, including

those arising from tax loss or tax credit carryforwards.

Tax liabilities' includes the amount of all tax liabilities

(except provisions for taxes), which are broken down

into current -the amount payable in respect of the

income tax on the taxable profit for the year and other

taxes in the next twelve months- and deferred -the

amount of income tax payable in future years.

Deferred tax liabilities are recognised in respect of

taxable temporary differences associated with

investments in subsidiaries, associates or joint ventures,

except when  the Bank is able to control the timing of the

reversal of the temporary difference and, in addition, it is

probable that the temporary difference will not reverse

in the foreseeable future.

Deferred tax assets are only recognised for temporary

differences to the extent that it is considered probable

that the  Bank  will have sufficient future taxable profits

against which the deferred tax assets can be utilised, and

the deferred tax assets do not arise from the initial

recognition (except in a business combination) of other

assets and liabilities in a transaction that affects neither

taxable profit nor accounting profit. Other deferred tax

assets (tax loss and tax credit carryforwards) are only

recognised if it is considered probable that the Bank

entities will have sufficient future taxable profits against

which they can be utilised.

Differences generated by the different accounting and

tax treatment of any of the income and expenses

recorded directly in equity to be paid or recovered in the

future are accounted for as temporary differences.

The deferred tax assets and liabilities are reassessed at

the reporting date in order to ascertain whether any

adjustments need to be made on the basis of the

findings of the analyses performed.

z) Residual maturity periods

In note 48 it is provided on analysis of the maturities of

the balances of certain items in the balance sheet.

aa) Statement of recognised income and expenses

This statement presents the income and expenses

generated by the Bank as a result of its business activity

in the year, and a distinction is made between the

income and expenses recognised in the income

statement for the year and the other income and

expenses recognised directly in equity.

Accordingly, this statement presents:

a.The profit for the year.

b.The net amount of the income and expenses

recognised in 'Other comprehensive income' under

items that will not be reclassified to profit or loss.

c.The net amount of the income and expenses

recognised in Other comprehensive income under

items that may be reclassified subsequently to profit

or loss.

d.The income tax incurred in respect of the items

indicated in b and c above, except for the valuation

adjustments arising from investments in associates

or joint ventures accounted for using the equity

method, which are presented net.

e.Total recognised income and expense, calculated as

the sum of a) to d) above,

66

The statement presents the items separately by nature,

grouping together items that, in accordance with the

applicable accounting standards, will not be reclassified

subsequently to profit and loss since the requirements

established by the corresponding accounting standards

are met.

ab) Statement of changes in total equity

This statement presents all the changes in equity,

including those arising from changes in accounting

policies and from the correction of errors. Accordingly,

this statement presents a reconciliation of the carrying

amount at the beginning and end of the year of all the

equity items, and the changes are grouped together on

the basis of their nature into the following items:

a.Adjustments due to changes in accounting policies

and to errors: include the changes in equity arising as

a result of the retrospective restatement of the

balances in the financial statements, distinguishing

between those resulting from changes in accounting

policies and those relating to the correction of errors.

b.Income and expense recognised in the year: includes,

in aggregate form, the total of the aforementioned

items recognised in the statement of recognised

'Income and expense'.

c.Other changes in equity: includes the remaining

items recognised in equity, including, inter alia,

increases and decreases in capital, distribution of

profit, transactions involving own equity

instruments, equity-instrument-based payments,

transfers between equity items and any other

increases or decreases in equity.

ac) Statement of cash flows

The following terms are used in the statements of cash

flows with the meanings specified:

•Cash flows: inflows and outflows of cash and cash

equivalents, which are short-term, highly liquid

investments that are subject to an insignificant risk

of changes in value, irrespective of the portfolio in

which they are classified.

Banco Santander classifies as cash and cash

equivalents the balances recognised under 'Cash,

cash balances at central banks' and 'Other deposits

on demand' in the balance sheet.

•Operating activities: the principal revenue-producing

activities of credit institutions and other activities

that are not investing or financing activities.

•Investing activities: the acquisition and disposal of

long-term assets and other investments not included

in cash and cash equivalents.

•Financing activities: activities that result in changes

in the size and composition of the equity and

liabilities that are not operating activities.

During 2022, Banco Santander received interest

amounting to EUR 9,563 million and paid interest

amount to EUR 5,205 million (EUR 6,242 and 3,424

million, respectively, in 2021).

Also, the dividends received and paid by Banco

Santander are detailed in notes 4 and 36.

3. Grupo Santander

a) Banco Santander, S.A. and international Group

structure

The growth of Grupo Santander in the last decades has

led Banco Santander to also act, in practice, as a holding

entity of the shares of the various companies in its

Group, and its results are becoming progressively less

representative of the performance and earnings of the

Group. Therefore, each year the bank determines the

amount of the dividends to be distributed to its

shareholders on the basis of the consolidated net profit,

while maintaining the Group’s objectives of

capitalisation and taking into account that the

transactions of the Bank and of the rest of the Group are

managed on a consolidated basis (notwithstanding the

allocation to each company of the related net worth

effect).

At the international level, the various banks and other

subsidiaries, joint ventures and associates of the Group

are integrated in a corporate structure comprising

various holding companies which are the ultimate

shareholders of the banks and subsidiaries abroad.

The purpose of this structure, all of which is controlled

Banco Santander, is to optimise the international

organisation from the strategic, economic, financial and

tax standpoints, since it makes it possible to define the

most appropriate units to be entrusted with acquiring,

selling or holding stakes in other international entities,

the most appropriate financing method for these

transactions and the most appropriate means of

remitting the profits obtained by the group’s various

operating units to Spain.

The Appendices provide relevant data on the

consolidated group companies and on the companies

accounted for using the equity method.

b)  Acquisitions and disposals

Following is a summary of the main acquisitions and

disposals of ownership interests in the share capital of

other entities and other significant corporate

transactions performed in the last two years or pending

to be completed:

i. Tender offer for shares of Banco Santander México,

S.A., Institución de Banca Múltiple, Grupo Financiero

Santander México

67

On 21 October 2022, Banco Santander, S.A. ('Banco

Santander') announced that it intends to make

concurrent cash tender offers to acquire all of the shares

of Banco Santander México, S.A., Institución de Banca

Múltiple, Grupo Financiero Santander México

('Santander Mexico') in Mexico (Series B shares) and

United States (American Depositary Shares ('ADSs'))

which are not owned by Grupo Santander, which amount

to approximately  3.76% of Santander Mexico’s share

capital.

The offers were launched on 7 February 2023 and will be

settled on 13 March, 2023. The shareholders who tender

their shares in the offer will receive 24.52 Mexican pesos

(approximately 1.20 euro) in cash per Santander Mexico

share (and the US dollar equivalent of 122.6 Mexican

pesos in cash per ADS based on the US dollar/Mexican

peso exchange rate on the expiration date of 8 March,

2023), which corresponds to the book value of each

Santander Mexico Share in accordance with Santander

Mexico’s quarterly report for the fourth quarter of 2022

according to applicable law.

Following the tender offers, Banco Santander intends to

(a) cancel the registration of the Series B Shares in the

National Securities Registry of the Mexican National

Banking and Securities Commission ('CNBV') and delist

such Series B Shares from the Mexican Stock Exchange

('BMV'), and (b) remove the ADSs from listing on the

New York Stock Exchange and the Series B Shares from

registration with the US Securities and Exchange

Commission ('SEC') in the United States. Such

cancellation has been approved by Santander Mexico's

share capital at an extraordinary general shareholders'

meeting held on 30 November 2022, with the favourable

vote of the holders of the shares representing more than

95% of Santander Mexico’s shares, as required by

applicable law.

Consummation of the offers is subject to certain

conditions, including the absence of any material

adverse change in the financial condition, results of

operations or prospects of Santander Mexico.

ii. Agreement to acquire a significant holding in Ebury

Partners Limited

On 28 April 2020, the investment announced on 4

November 2019 in Ebury, a payments and foreign

exchange platform for SMEs, was completed. The

transaction involved a total disbursement of GBP

357 million (EUR 409 million) of which GBP 70 million

(approximately EUR 80 million) was for new shares. By

the end of 2019, the Group had already acquired 6.4% of

the company for GBP 40 million (approximately EUR

45 million). Following the disbursement made in April

2020, which gave the Group 50.38% of the economic

rights of the company, without the conditions to obtain

control being met, this interest was recorded under

'Investments  - Associated entities' in the consolidated

balance sheet.

In April 2022 Grupo Santander acquired a new package

of shares for GBP 113 million (EUR 135 million) and

subscribed in full to a new capital increase, paying an

additional GBP 60 million (EUR 72 million). Following

these transactions, the Group holds 66.54% of the

economic rights and control of the company.

The total value of the net assets identified in the

business combination amounted to EUR 413 million,

mainly intangible assets (IT developments, customer

lists and brand) and resulted in the recognition of

goodwill of EUR 316 million.

No gain or loss was recorded for the difference between

the book value and the fair value of the previous holding

as this difference was not significant.

The amount contributed by this business to the Group's

net attributable profit since the date of acquisition is

immaterial. Similarly, the result that this business would

have contributed to the Group if the transaction had

been carried out on 1 January 2022 would also have

been immaterial.

iii. Purchase by SHUSA for shares of Santander Consumer

USA

In August 2021 Santander Holdings USA, Inc. ('SHUSA')

and Santander Consumer USA Holdings Inc. ('SC')

entered into a definitive agreement pursuant to which

SHUSA acquired all outstanding shares of common stock

of SC not already owned by SHUSA via an all-cash tender

offer (the 'Tender Offer') for USD 41.50 per SC common

share (the 'Offer Price'), followed by a second-step

consisting of a merge (together with the Offer, the

'Transaction') in which a wholly owned subsidiary of

SHUSA was merged with and into SC, with SC surviving

as a wholly owned subsidiary of SHUSA, and all

outstanding shares of common stock of SC not tendered

in the Tender Offer were converted into the right to

receive the Offer Price in cash. The Offer Price

represented a 14% premium to the closing price of SC

common stock of USD 36.43 as of 1 July 2021, the last

day prior to the announcement of SHUSA’s initial offer to

acquire the remaining outstanding shares of SC’s

common stock.

On 31 January 2022, after completion of the customary

closing conditions, the Transaction was performed and

SHUSA increased its share up to the 100% of SC's

common stock. The transaction has meant a

disbursement of USD 2,510 million (around EUR

2,239 million) for the Group, with a decrease of reserves

of EUR 487 million and a decrease of EUR 1,752 million

of minority interests.

iv. Acquisition of Amherst Pierpont Securities LLC, a US

fixed-income broker dealer

68

On 15 July 2021, Santander Holdings USA, Inc. reached

an agreement to acquire Amherst Pierpont Securities

LLC, a market-leading independent fixed-income and

structured products broker dealer, through the

acquisition of its parent holding company, Pierpont

Capital Holdings LLC, for a total consideration of

approximately USD 450 million (around EUR

405 million). The operation was closed on 11 April 2022

once the pertinent regulatory approvals have been

obtained. Immediately after the acquisition, SHUSA has

lent financing to the company for an amount of USD

163 million (approximately EUR 147 million), which the

company will use to cancel debt with third parties.

Amherst Pierpont Securities LLC will become part of

Santander Corporate & Investment Banking (Santander

CIB) Global business line.

The business combination meant the recognition of a

goodwill of EUR 158 million and EUR 24 million of

intangible assets (mainly relationships with customers)

identified in the purchase price allocation, without other

relevant value adjustments to net assets of the business.

The amount contributed by this business to the group

net attributable profit since the date of acquisition is not

material. Similarly, the result that this business would

have brought to the group if the transaction had been

carried out on January 1, 2022 is also immaterial.

v. Tender offer for shares of Banco Santander México,

S.A., Institución de Banca Múltiple, Grupo Financiero

Santander México

On 26 March 2021, Banco Santander, S.A. announced its

intention to make a tender offer for all shares of Banco

Santander Mexico, S.A., Institución de Banca Múltiple,

Grupo Financiero Santander México ('Santander México')

that were not owned by Grupo Santander (8.3% of the

share capital of Santander México at that time). The

announcement was subsequently supplemented by

other publications on 24 May, 8 June and 28 October

2021, in which amendments to some of the terms of the

offer were announced.

The offer was finally launched on 3 November 2021 and

was settled on 10 December. Banco Santander accepted

all of the Santander Mexico Shares and Santander

Mexico American Depositary Share (ADS) (securities

listed on the New York Stock Exchange, each

representing 5 shares of Santander Mexico) tendered

and not withdrawn representing approximately 4.5% of

the share capital of Santander México. After the

transaction, Grupo Santander holds approximately

96.2% of Santander México share capital.

The shareholders who tendered their shares in the offer

received MXN 26.5 (approximately EUR 1) per share of

Santander México and USD 6.2486 in cash per each ADS

(the USD equivalent of MXN 132.50 per ADS based on

the USD/MXN exchange rate on the expiration date of 7

December 2021) which meant a disbursement of

approximately EUR 335 million.

This transaction entailed a decrease of reserves of EUR

41 million and a decrease of EUR 294 million of minority

interests.

c) Offshore entities

Spanish regulation

According to current Spanish regulation (Law 11/2021,

of 9 July, Royal Decree 1080/1991, of 5 July and Order

HFP/115/2023, of 9 February), Santander has one

subsidiary and three branches in the non-cooperative

jurisdictions of Jersey, the Isle of Man and the Cayman

Islands (offshore entities). Santander also has two other

subsidiaries incorporated in non-cooperative

jurisdictions that are tax resident in the UK and subject to

British tax law.

i.Offshore subsidiaries

At the reporting date, Grupo Santander has only one

subsidiary resident in Jersey, Abbey National

International Limited, with activity of services. In 2022,

this subsidiary has contributed to Santander’s

consolidated profit with immaterial losses and has no

employees.

ii.Offshore branches

Grupo Santander also has three offshore branches in the

Cayman Islands, the Isle of Man and Jersey. They report

to, and consolidate balance sheets and income

statements with, their foreign headquarters. They are

taxed either with their headquarters (the Cayman Islands

branch in Brazil) or in the territories they are located in

(Jersey and Isle of Man, pertain to the UK).

These three offshore branches have a total of 155

employees as of December 2022.

iii. Subsidiaries in non-cooperative jurisdictions that are

tax resident in the United Kingdom

Grupo Santander also has two subsidiaries that were

incorporated in offshore jurisdictions (one in Bermuda

without activity and one in Guernsey with leasing

activity) but are not deemed offshore entities because

they only operate from and are tax resident in the UK

and, thus, are subject to British tax law.

Additionally, a subsidiary incorporated in Guernsey but

tax resident in the UK was liquidated in 2022.

iv. Other offshore holdings

From Brazil, Grupo Santander manages Santander Brazil

Global Investment Fund SPC, a segregated portfolio

company located in the Cayman Islands. Grupo

Santander also has other non-controlling financial

interest of a reduced amount in entities located in non-

cooperative jurisdictions.

69

The European Union (EU)

As of February 2023, the EU blacklist comprises 16

jurisdictions where Santander is only present in The

Bahamas. In this jurisdiction, Santander has two banks

without third-party activity, Santander Bank & Trust Ltd.

and Santander Investment Bank Limited, and one branch

of the Swiss bank Banco Santander International SA.

These three entities have a total of 27 employees as of

December 2022.

Additionally, the EU grey list comprises 18 jurisdictions

which have sufficiently committed to adapt their

legislation to international standards, subject to

monitoring by the EU. Within these jurisdictions,

Santander is mainly present in Hong Kong through a

branch.

Organization for Economic Cooperation and

Development (OECD)

Grupo Santander is not present in any jurisdictions non-

compliant with both OECD standards on transparency

and exchange of information for tax purposes

(Automatic exchange of information standard -AEOI- and

Exchange of information on request standard -EOIR-)

according to the last annual report of the OECD Global

forum on transparency and exchange of information for

tax purposes released in November 2022.

However, the Group is present in The Bahamas and

Chile. Although these territories have complete legal and

regulatory frameworks in place for the application of the

AEOI standard, they need to improve the effectiveness of

this standard.

The Group's presence in offshore territories at the end of

2022 is as follows:

Presence of the Group in non- cooperative jurisdictions	Spanish legislation		Council of the EU blacklist		OECDA
	Sub.	Branch	Sub.	Branch	Sub.	Branch
Jersey	1	1
Isle of Man		1
GuernseyB
BermudaB
Cayman Islands		1
The Bahamas			2	1
2022	1	3	2	1	—	—
2021c	1	3	3	1	—	—

AJurisdictions non-compliant with both OECD standards on

transparency and exchange of information for tax purposes (AEOI and

EOIR). Jersey, the Isle of Man and the Cayman Islands continue to fully

comply with both OECD standards.

BAdditionally, there is one subsidiary constituted in Guernsey and one

in Bermuda, but residents for tax purposes in the UK.

CIn 2021 The Bahamas was not included in the EU blacklist. One

subsidiary in The Bahamas was merged in 2022.

Grupo Santander has the right mechanisms (risk

management, supervision, verification and review plans,

and regular reporting) to prevent reputational, tax and

legal risk in entities resident in non-cooperative

jurisdictions. Grupo Santander also maintains its policy

of reducing the number of these entities.

PwC (PricewaterhouseCoopers) member firms audited

the financial statements of Grupo Santander’s offshore

entities in 2022 and 2021.

d) Consolidated balance sheet, income statement,

statement of recognized income and expenses,

statement of changes in total equity and cash-flow

statement

PwC (PricewaterhouseCoopers) member firms audited

the financial statements of Grupo Santander’s offshore

entities in 2022 and 2021:

70

CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2022 AND 2021
EUR million

ASSETS	2022	2021A
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEPOSITS ON DEMAND	223,073	210,689
FINANCIAL ASSETS HELD FOR TRADING	156,118	116,953
Derivatives	67,002	54,292
Equity instruments	10,066	15,077
Debt securities	41,403	26,750
Loans and advances	37,647	20,834
Central banks	11,595	3,608
Credit institutions	16,502	10,397
Customers	9,550	6,829
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS	5,713	5,536
Equity instruments	3,711	4,042
Debt securities	1,134	957
Loans and advances	868	537
Central banks	—	—
Credit institutions	—	—
Customers	868	537
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	8,989	15,957
Debt securities	2,542	2,516
Loans and advances	6,447	13,441
Central banks	—	—
Credit institutions	673	3,152
Customers	5,774	10,289
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME	85,239	108,038
Equity instruments	1,941	2,453
Debt securities	75,083	97,922
Loans and advances	8,215	7,663
Central banks	—	—
Credit institutions	—	—
Customers	8,215	7,663
FINANCIAL ASSETS AT AMORTIZED COST	1,147,044	1,037,898
Debt securities	73,554	35,708
Loans and advances	1,073,490	1,002,190
Central banks	15,375	15,657
Credit institutions	46,518	39,169
Customers	1,011,597	947,364
HEDGING DERIVATIVES	8,069	4,761
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK	(3,749)	410
INVESTMENTS	7,615	7,525
Joint venture entities	1,981	1,692
Associated entities	5,634	5,833
ASSETS UNDER INSURANCE OR REINSURANCE CONTRACTS	308	283

71

ASSETS	2022	2021A
TANGIBLE ASSETS	34,073	33,321
Property, plant and equipment	33,044	32,342
For own-use	13,489	13,259
Leased out under an operating lease	19,555	19,083
Investment properties	1,029	979
Of which leased out under an operating lease	804	839
INTANGIBLE ASSETS	18,645	16,584
Goodwill	13,741	12,713
Other intangible assets	4,904	3,871
TAX ASSETS	29,987	25,196
Current tax assets	9,200	5,756
Deferred tax assets	20,787	19,440
OTHER ASSETS	10,082	8,595
Insurance contracts linked to pensions	104	149
Inventories	11	6
Other	9,967	8,440
NON-CURRENT ASSETS HELD FOR SALE	3,453	4,089
TOTAL ASSETS	1,734,659	1,595,835

A. Presented for comparison purposes only.

72

CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2022 AND 2021
EUR million

LIABILITIES	2022	2021A
FINANCIAL LIABILITIES HELD FOR TRADING	115,185	79,469
Derivatives	64,891	53,566
Short positions	22,515	12,236
Deposits	27,779	13,667
Central banks	5,757	1,038
Credit institutions	9,796	6,488
Customers	12,226	6,141
Marketable debt securities	—	—
Other financial liabilities	—	—
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	55,947	32,733
Deposits	50,520	27,279
Central banks	1,740	607
Credit institutions	1,958	1,064
Customers	46,822	25,608
Marketable debt securities	5,427	5,454
Other financial liabilities	—	—
Memorandum items: subordinated liabilities	—	—
FINANCIAL LIABILITIES AT AMORTIZED COST	1,423,858	1,349,169
Deposits	1,111,887	1,078,587
Central banks	76,952	139,757
Credit institutions	68,582	52,235
Customers	966,353	886,595
Marketable debt securities	274,912	240,709
Other financial liabilities	37,059	29,873
Memorandum items: subordinated liabilities	25,926	26,196
HEDGING DERIVATIVES	9,228	5,463
CHANGES IN THE FAIR VALUE OF HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK	(117)	248
LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS	747	770
PROVISIONS	8,149	9,583
Pensions and other post-retirement obligations	2,392	3,185
Other long term employee benefits	950	1,242
Taxes and other legal contingencies	2,074	1,996
Contingent liabilities and commitments	734	733
Other provisions	1,999	2,427
TAX LIABILITIES	9,468	8,649
Current tax liabilities	3,040	2,187
Deferred tax liabilities	6,428	6,462
OTHER LIABILITIES	14,609	12,698
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE	—	—
TOTAL LIABILITIES	1,637,074	1,498,782

A. Presented for comparison purposes only.

73

CONSOLIDATED BALANCE SHEETS AS OF 31 DECEMBER 2022 AND 2021
EUR million

EQUITY	2022	2021A
SHAREHOLDERS´ EQUITY	124,732	119,649
CAPITAL	8,397	8,670
Called up paid capital	8,397	8,670
Unpaid capital which has been called up	—	—
SHARE PREMIUM	46,273	47,979
EQUITY INSTRUMENTS ISSUED OTHER THAN CAPITAL	688	658
Equity component of the compound financial instrument	—	—
Other equity instruments issued	688	658
OTHER EQUITY	175	152
ACCUMULATED RETAINED EARNINGS	66,702	60,273
REVALUATION RESERVES	—	—
OTHER RESERVES	(5,454)	(4,477)
Reserves or accumulated losses in joint venture investments	1,553	1,572
Others	(7,007)	(6,049)
(-) OWN SHARES	(675)	(894)
PROFIT OR LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT	9,605	8,124
(-) INTERIM DIVIDENDS	(979)	(836)
OTHER COMPREHENSIVE INCOME OR LOSS	(35,628)	(32,719)
Items that will not be reclassified to profit or loss	(4,635)	(4,241)
Items that may be reclassified to profit or loss	(30,993)	(28,478)
NON-CONTROLLING INTEREST	8,481	10,123
Other comprehensive income or loss	(1,856)	(2,104)
Other items	10,337	12,227
TOTAL EQUITY	97,585	97,053
TOTAL LIABILITIES AND EQUITY	1,734,659	1,595,835
MEMORANDUM ITEMS: OFF BALANCE SHEET AMOUNTS
Loan commitments granted	274,075	262,737
Financial guarantees granted	12,856	10,758
Other commitments granted	92,672	75,733

74

CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR million

	(Debit) Credit
	2022	2021A
Interest income	71,430	46,463
Financial assets at fair value through other comprehensive income	5,479	2,582
Financial assets at amortized cost	59,214	40,471
Other interest income	6,737	3,410
Interest expense	(32,811)	(13,093)
Interest income/(charges)	38,619	33,370
Dividend income	488	513
Income from companies accounted for using the equity method	702	432
Commission income	15,867	13,812
Commission expense	(4,077)	(3,310)
Gain or losses on financial assets and liabilities not measured at fair value through profit or loss, net	149	628
Financial assets at amortized cost	34	89
Other financial assets and liabilities	115	539
Gain or losses on financial assets and liabilities held for trading, net	842	1,141
Reclassification of financial assets at fair value through other comprehensive income	—	—
Reclassification of financial assets at amortized cost	—	—
Other gains (losses)	842	1,141
Gains or losses on non-trading financial assets and liabilities mandatorily at fair value through profit or loss	162	132
Reclassification of financial assets at fair value through other comprehensive income	—	—
Reclassification of financial assets at amortized cost	—	—
Other gains (losses)	162	132
Gain or losses on financial assets and liabilities measured at fair value through profit or loss, net	968	270
Gain or losses from hedge accounting, net	74	(46)
Exchange differences, net	(542)	(562)
Other operating income	1,510	2,255
Other operating expenses	(2,803)	(2,442)
Income from assets under insurance and reinsurance contracts	2,698	1,516
Expenses from liabilities under insurance and reinsurance contracts	(2,540)	(1,305)
Total income	52,117	46,404
Administrative expenses	(20,918)	(18,659)
Staff costs	(12,547)	(11,216)
Other general administrative expenses	(8,371)	(7,443)
Depreciation and amortisation cost	(2,985)	(2,756)
Provisions or reversal of provisions, net	(1,881)	(2,814)
Impairment or reversal of impairment at financial assets not measured at fair value through  profit or loss and net gains and losses from changes	(10,863)	(7,407)
Financial assets at fair value through other comprehensive income	(7)	(19)
Financial assets at amortized cost	(10,856)	(7,388)
Impairment or reversal of impairment of investments in subsidiaries, joint ventures and associates, net	—	—
Impairment or reversal of impairment on non-financial assets, net	(239)	(231)
Tangible assets	(140)	(150)
Intangible assets	(75)	(71)
Others	(24)	(10)
Gain or losses on non-financial assets and investments, net	12	53
Negative goodwill recognized in results	—	—

75

	(Debit) Credit
	2022	2021A
Gains or losses on non-current assets held for sale not classified as discontinued operations	(4,486)	(43)
Operating profit/(loss) before tax	10,764	14,547
Tax expense or income from continuing operations	—	(4,894)
Profit/(loss) from continuing operations	10,764	9,653
Profit/(loss) after tax from discontinued operations	1,159	—
Profit/(loss) for the year	9,605	9,653
Profit/(loss) attributable to non-controlling interests	1,159	1,529
Profit/(loss) attributable to the parent	—	8,124
Earnings/(losses) per share
Basic	0.54	0.44
Diluted	0.54	0.44

A.Presented for comparison purposes only).

76

CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSE FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR million

	2022	2021A
CONSOLIDATED PROFIT/(LOSS) FOR THE YEAR	10,764	9,653
OTHER RECOGNISED INCOME AND EXPENSE	(2,660)	(220)
Items that will not be reclassified to profit or loss	(399)	754
Actuarial gains and losses on defined benefit pension plans	(56)	1,567
Non-current assets held for sale	—	—
Other recognised income and expense of investments in subsidiaries, joint ventures and associates	17	(1)
Changes in the fair value of equity instruments measured at fair value through other comprehensive income	(497)	(171)
Gains or losses resulting from the accounting for hedges of equity instruments measured at fair value through other comprehensive income, net	—	—
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedged item)	18	117
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedging instrument)	(18)	(117)
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk	88	(99)
Income tax relating to items that will not be reclassified	49	(542)
Items that may be reclassified to profit or loss	(2,261)	(974)
Hedges of net investments in foreign operations (effective portion)	(2,467)	(1,159)
Revaluation gains (losses)	(2,467)	(1,159)
Amounts transferred to income statement	—	—
Other reclassifications	—	—
Exchanges differences	3,658	3,082
Revaluation gains (losses)	3,658	3,082
Amounts transferred to income statement	—	—
Other reclassifications	—	—
Cash flow hedges (effective portion)	(3,016)	(938)
Revaluation gains (losses)	(1,762)	(1,739)
Amounts transferred to income statement	(1,254)	801
Transferred to initial carrying amount of hedged items	—	—
Other reclassifications	—	—
Hedging instruments (items not designated)	—	—
Revaluation gains (losses)	—	—
Amounts transferred to income statement	—	—
Other reclassifications	—	—
Debt instruments at fair value with changes in other comprehensive income	(2,086)	(3,250)
Revaluation gains (losses)	(2,591)	(3,063)
Amounts transferred to income statement	(99)	(545)
Other reclassifications	604	358
Non-current assets held for sale	—	—
Revaluation gains (losses)	—	—
Amounts transferred to income statement	—	—
Other reclassifications	—	—
Share of other recognised income and expense of investments	85	19
Income tax relating to items that may be reclassified to profit or loss	1,565	1,272
Total recognised income and expenses for the year	8,104	9,433
Attributable to non-controlling interests	1,410	1,255
Attributable to the parent	6,694	8,178

A.Presented for comparison purposes only.

77

CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2022 AND 2021
EUR million

												Non-controlling interest
	Capital	Share premium	Equity instruments issued (not capital)	Other equity instruments	Accumulated retained earnings	Revaluation reserves	Other reserves	(-) Own shares	Profit attributable to shareholders of the parent	(-) Interim dividends	Other comprehensive income	Other comprehensive income	Other items	Total
Balance at 31 December 2021A	8,670	47,979	658	152	60,273	—	(4,477)	(894)	8,124	(836)	(32,719)	(2,104)	12,227	97,053
Adjustments due to errors	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Adjustments due to changes in accounting policies	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Opening balance at 1 January 2022A	8,670	47,979	658	152	60,273	—	(4,477)	(894)	8,124	(836)	(32,719)	(2,104)	12,227	97,053
Total recognised income and expense	—	—	—	—	—	—	—	—	9,605	—	(2,911)	251	1,159	8,104
Other changes in equity	(273)	(1,706)	30	23	6,429	—	(977)	219	(8,124)	(143)	2	(3)	(3,049)	(7,572)
Issuance of ordinary shares	—	—	—	—	—	—	—	—	—	—	—	—	9	9
Issuance of preferred shares	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Issuance of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Maturity of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—	(756)	(756)
Conversion of financial liabilities into equity	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Capital reduction	(273)	(1,706)	—	—	—	—	273	1,706	—	—	—	—	—	—
Dividends	—	—	—	—	(869)	—	—	—	—	(979)	—	—	(500)	(2,348)
Purchase of equity instruments	—	—	—	—	—	—	—	(2,050)	—	—	—	—	—	(2,050)
Disposal of equity instruments	—	—	—	—	—	—	7	563	—	—	—	—	—	570
Transfer from equity to liabilities	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Transfer from liabilities to equity	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Transfers between equity items	—	—	—	—	7,298	—	(12)	—	(8,124)	836	2	(3)	3	—
Increases (decreases) due to business combinations	—	—	—	—	—	—	—	—	—	—	—	—	31	31
Share-based payment	—	—	—	(49)	—	—	—	—	—	—	—	—	—	(49)
Others increases or (-) decreases in equity	—	—	30	72	—	—	(1,245)	—	—	—	—	—	(1,836)	(2,979)
Balance at 31 December 2022	8,397	46,273	688	175	66,702	—	(5,454)	(675)	9,605	(979)	(35,628)	(1,856)	10,337	97,585

A.Presented for comparison purpose only .

78

CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY FOR THE YEARS ENDED 31 DECEMBER 2021 AND 2020
EUR million

												Non-controlling interest
	Capital	Share premium	Equity instruments issued (not capital)	Other equity instruments	Accumulated retained earnings	Revaluation reserves	Other reserves	(-) Own shares	Profit attributable to shareholders of the parent	(-) Interim dividends	Other comprehensive income	Other comprehensi ve income	Other items	Total
Balance at 31 December 2020A	8,670	52,013	627	163	65,583	—	(3,596)	(69)	(8,771)	—	(33,144)	(1,800)	11,646	91,322
Adjustments due to errors	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Adjustments due to changes in accounting policies	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Opening balance at 1 January 2021A	8,670	52,013	627	163	65,583	—	(3,596)	(69)	(8,771)	—	(33,144)	(1,800)	11,646	91,322
Total recognised income and expense	—	—	—	—	—	—	—	—	8,124	—	54	(274)	1,529	9,433
Other changes in equity	—	(4,034)	31	(11)	(5,310)	—	(881)	(825)	8,771	(836)	371	(30)	(948)	(3,702)
Issuance of ordinary shares	—	—	—	—	—	—	—	—	—	—	—	—	17	17
Issuance of preferred shares	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Issuance of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Maturity of other financial instruments	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Conversion of financial liabilities into equity	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Capital reduction	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Dividends	—	(477)	—	—	—	—	—	—	—	(836)	—	—	(648)	(1,961)
Purchase of equity instruments	—	—	—	—	—	—	—	(1,645)	—	—	—	—	—	(1,645)
Disposal of equity instruments	—	—	—	—	—	—	23	820	—	—	—	—	—	843
Transfer from equity to liabilities	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Transfer from liabilities to equity	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Transfers between equity items	—	(3,557)	—	—	(5,310)	—	(275)	—	8,771	—	371	(30)	30	—
Increases (decreases) due to business combinations	—	—	—	—	—	—	—	—	—	—	—	—	(5)	(5)
Share-based payment	—	—	—	(62)	—	—	—	—	—	—	—	—	—	(62)
Others increases or (-) decreases in equity	—	—	31	51	—	—	(629)	—	—	—	—	—	(342)	(889)
Balance at 31 December 2021A	8,670	47,979	658	152	60,273	—	(4,477)	(894)	8,124	(836)	(32,719)	(2,104)	12,227	97,053

A. Presented for comparison purposes only .

79

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 2022 AND 2021
EUR million

	2022	2021A
A. CASH FLOWS FROM OPERATING ACTIVITIES	27,706	56,691
Profit or loss for the year	10,764	9,653
Adjustments made to obtain the cash flows from operating activities	23,970	21,363
Depreciation and amortisation cost	2,985	2,756
Other adjustments	20,985	18,607
Net increase/(decrease) in operating assets	108,774	27,258
Financial assets held-for-trading	30,837	2,064
Non-trading financial assets mandatorily at fair value through profit or loss	218	969
Financial assets at fair value through profit or loss	(7,083)	(32,746)
Financial assets at fair value through other comprehensive income	(22,358)	(9,152)
Financial assets at amortized cost	105,618	73,181
Other operating assets	1,542	(7,058)
Net increase/(decrease) in operating liabilities	107,244	56,945
Financial liabilities held-for-trading	29,533	(1,386)
Financial liabilities designated at fair value through profit or loss	25,595	(14,316)
Financial liabilities at amortized cost	55,595	79,114
Other operating liabilities	(3,479)	(6,467)
Income tax recovered/(paid)	(5,498)	(4,012)
B. CASH FLOWS FROM INVESTING ACTIVITIES	(3,898)	(3,715)
Payments	11,776	11,669
Tangible assets	9,066	10,015
Intangible assets	1,774	1,388
Investments	152	126
Subsidiaries and other business units	784	140
Non-current assets held for sale and associated liabilities	—	—
Other payments related to investing activities	—	—
Proceeds	7,878	7,954
Tangible assets	5,558	6,382
Intangible assets	—	—
Investments	533	672
Subsidiaries and other business units	734	6
Non-current assets held for sale and associated liabilities	1,053	894
Other proceeds related to investing activities	—	—
C. CASH FLOW FROM FINANCING ACTIVITIES	(9,964)	(1,322)
Payments	10,665	7,741
Dividends	1,848	1,313
Subordinated liabilities	2,291	2,684
Redemption of own equity instruments	—	—
Acquisition of own equity instruments	2,050	1,645
Other payments related to financing activities	4,476	2,099
Proceeds	701	6,419
Subordinated liabilities	119	5,340
Issuance of own equity instruments	—	—
Disposal of own equity instruments	573	854
Other proceeds related to financing activities	9	225
D. EFFECT OF FOREIGN EXCHANGE RATE DIFFERENCES	(1,460)	5,196
E. NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	12,384	56,850

80

	2022	2021A
F. CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR	210,689	153,839
G. CASH AND CASH EQUIVALENTS AT END OF THE YEAR	223,073	210,689
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF THE YEAR
Cash	8,929	8,142
Cash equivalents at central banks	200,830	193,102
Other financial assets	13,314	9,445
Less, bank overdrafts refundable on demand	—	—
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR	223,073	210,689
In which, restricted cash	—	—

A. Presented for comparison purposes only .

81

4. Distribution of Banco

Santander's profit, shareholder

remuneration scheme and

earnings per share

a) Distribution of Banco Santander’s profit and

shareholder remuneration scheme

The distribution of the Bank's current annual results that

the board of directors will propose for approval by the

shareholders at the annual general meeting is as

follows:

EUR million
To dividends	1,942
Dividend paid at 31 December 2022A	979
Complementary dividendB	963
To voluntary reservesC	5,979
Net profit for the year	7,921

A.Total amount paid as interim dividend, at the rate of EUR 5.83 fixed

cents per eligible share (recorded in 'Shareholders' equity - Interim

dividends').

B.Fixed dividend of EUR 5.95 gross cents per eligible share, payable in

cash as from 2 May 2023. The total amount has been estimated on the

assumption that, after the implementation of the second buyback

program charged to the results of 2022, the number of the Bank's

outstanding shares eligible for the dividend will be 16,190,866,119.

Therefore, the total dividend may be higher if fewer shares are acquired

in the buyback program than expected, and it will be lower in the

opposite case.

C.Estimated amount corresponding to a final dividend of EUR

963,356,534. To be increased or reduced by the same amount by which

the final dividend is lower or higher, respectively, than that amount.

The transcribed proposal comprises the part of the 2022

shareholder remuneration policy that is implemented

through cash dividends (the interim dividend paid in

November 2022 of EUR 5.83 cents per share with

dividend entitlement, approved by the board of directors

on 27 September 2022, and the complementary

dividend expected to be paid as of 2 May 2023, of EUR

5.95 cents per share with the dividend entitlement,

proposed by the board of directors on 27 February 2023,

and therefore subject to approval by the General

Meeting of Shareholders.

In addition, the 2022 remuneration policy also includes

expected shareholder remuneration through the

implementation of share buyback programs, which are

not reflected in the above-transcribed proposal for the

appropriation of earnings. The first of these programs

charged to the results of 2022, amounting to

approximately EUR 979 million, was completed between

November 2022 and January 2023. A second share

buyback program charged to 2022 results amounting to

approximately EUR 921 million is planned to be

deployed. A capital reduction resolution has been also

submitted to the General Meeting of Shareholders to

redeem the shares acquired in the buyback program,

subject to the relevant regulatory authorization.

The provisional accounting statement, prepared by the

Bank pursuant to legal requirements, evidencing the

existence of sufficient liquidity for the payment of the

interim dividend on the date and for the amount

mentioned above, is as follows:

EUR million
	31 August 2022
Profit before taxes	3,829
Tax expense	(69)
Dividends paid in cash	—
Distributable maximum amount	3,760
Available liquidity	130,519

Finally, and although it is not part of the remuneration

charged to the 2022 financial year, it should be noted

that pursuant to the resolution of the Bank's General

Meeting of Shareholders held on 1 April 2022, on 2 May

2022 the Bank paid a complementary cash dividend of

EUR 5.15 cents per share charged to the results of the

2021 financial year for an amount of EUR 869 million

(see Statement of Changes in total Equity). Finally, also

charged to the results of 2021, the Bank implemented a

repurchase program for an approximate amount of EUR

865 million, which ended on 18 May 2022.

82

b) Earnings/loss per share from continuing and

discontinued operations

i. Basic earnings / loss per share

Basic earnings/loss per share are calculated by dividing

the net profit attributable to the Group, adjusted by the

after-tax amount of the remuneration of contingently

convertible preference shares (PPCC) recognised in

equity and the capital perpetual preference shares

(PPCA) (see note 21), if applicable, by the weighted

average number of ordinary shares outstanding during

that period, excluding the average number of own

shares held through that period.

Accordingly:

	2022	2021
Profit (Loss) attributable to the Parent (EUR million)	9,605	8,124
Remuneration of PPCC and PPCA (EUR million) (note 21)	(529)	(566)
	9,076	7,558
Of which:
Profit (Loss) from discontinued operations (non controlling interest net) (EUR million)	—	—
Profit (Loss) from continuing operations (non-controlling interest and PPCC and PPCA net) (EUR million)	9,076	7,558
Weighted average number of shares outstanding	16,848,344,667	17,272,055,430
Adjusted number of shares	16,848,344,667	17,272,055,430
Basic earnings (Loss) per share (euros)	0.539	0.438
Of which, from discounted operations (euros)	—	—
Basic earnings (Loss) per share from continuing operations (euros)	0.539	0.438

ii. Diluted earnings / loss per share

Diluted earnings/loss per share are calculated by

dividing the net profit attributable to the Group, adjusted

by the after-tax amount of the remuneration of

contingently convertible preference shares recognised in

equity (PPCC) recognised in equity and the capital

perpetual preference shares (PPCA) (see note 21), by the

weighted average number of ordinary shares

outstanding during the year, excluding the average

number of treasury shares and adjusted for all the

dilutive effects inherent to potential ordinary shares

(share options, and convertible debt securities).

Accordingly, diluted earnings/loss per share were

determined as follows:

	2022	2021
Profit (Loss) attributable to the Parent (EUR million)	9,605	8,124
Remuneration of PPCC and PPCA (EUR million) (note 21)	(529)	(566)
Dilutive effect of changes in profit for the period arising from potential conversion of ordinary shares	—	—
	9,076	7,558
Of which:
Profit (Loss) from discontinued operations (net of non-controlling interests) (EUR million)	—	—
Profit (Loss) from continuing operations (net of non- controlling interests and PPCC and PPCA) (EUR million)	9,076	7,558
Weighted average number of shares outstanding	16,848,344,667	17,272,055,430
Dilutive effect of options/rights on shares	55,316,206	48,972,459
Adjusted number of shares	16,903,660,873	17,321,027,889
Diluted earnings (Loss) per share (euros)	0.537	0.436
Of which, from discounted operations (euros)	—	—
Diluted earnings (Loss) per share from continuing operations (euros)	0.537	0.436

83

5. Remuneration and other

benefits paid to the Bank's

directors and senior managers

The following section contains qualitative and

quantitative disclosures on the remuneration paid to the

members of the board of directors —both executive and

non-executive directors— and senior managers for 2022

and 2021:

a) Remuneration of Directors

i. Bylaw-stipulated emoluments

The annual general meeting held on 22 March 2013

approved an amendment to the Bylaws, whereby the

remuneration of directors in their capacity as board

members became an annual fixed amount determined

by the annual general meeting. This amount shall

remain in effect unless the shareholders resolve to

change it at a general meeting. However, the board of

directors may elect to reduce the amount in any years in

which it deems such action justified.

The maximum remuneration established by the annual

general meeting was EUR 6 million in 2022 (EUR

6 million in 2021), with two components: (a) an annual

emolument and (b) attendance fees.

The specific amount payable for the above-mentioned

items to each of the directors is determined by the board

of directors. For such purpose, it takes into consideration

the positions held by each director on the board, their

membership of the board and the board committees and

their attendance to the meetings thereof, and any other

objective circumstances considered by the board.

The total Bylaw-stipulated emoluments earned by the

directors in 2022 amounted to EUR 4.7 million (EUR

4.8 million in 2021).

Annual allotment

In accordance with the remuneration policy approved at

the general shareholders' meeting on 1 April 2022, the

amounts for serving and holding roles on the board and

committees was the same amount as initially approved

for 2021, with the exception of the yearly amount for

serving on the board of directors, which was modified

from EUR  90,000 to EUR  95,000. The annual amounts

received individually by the directors in 2022 and 2021

based on the positions held by them on the board and

their membership of the board committees were as

follows:

Amount per director in euros	2022	2021
Members of the board of directors	95,000	90,000
Members of the executive committee	170,000	170,000
Members of the audit committee	40,000	40,000
Members of the appointments committee	25,000	25,000
Members of the remuneration committee	25,000	25,000
Members of the risk supervision, regulation and compliance committee	40,000	40,000
Members of the responsible banking, sustainability and culture committee	15,000	15,000
Members of the innovation and technology committee	25,000	25,000
Chair of the audit committee	70,000	70,000
Chair of the appointments committee	50,000	50,000
Chair of the remuneration committee	50,000	50,000
Chair of the risk supervision, regulation and compliance committee	70,000	70,000
Chair of the responsible banking, sustainability and culture committee	50,000	50,000
Chair of the innovation and technology committee	70,000	70,000
Lead independent directorA	110,000	110,000
Non-executive Vice Chair	30,000	30,000

A.Bruce Carnegie-Brown, in view of the positions held on the board and

its committees, in particular as Chair of the appointments and

remuneration committees and as lead independent director, and the

time and dedication required to properly perform such positions, has

been assigned a minimum total annual remuneration of EUR 700,000

since 2015, including the annual allowance for the items

corresponding to him of those indicated above and attendance fees.

Attendance fees

The directors receive fees for attending board and

committee meetings, excluding executive committee

meetings, where no attendance fees are received.

For 2022 the board voted to keep the same amounts set

out in the 2021 policy.

The fees for 2022 and 2021 are as follows:

Attendance fees per director per meeting in euros
	2022	2021
Board of directors	2,600	2,600
Audit committee and risk supervision, regulation and compliance committee	1,700	1,700
Other committees (excluding executive committee)	1,500	1,500

84

ii. Salaries

The executive directors receive salaries. In accordance

with the policy approved by the annual general meeting,

salaries are composed of a fixed annual remuneration

and a variable one, which consists in a unique incentive,

which is a deferred variable remuneration plan linked to

multi-year objectives, which establishes the following

payment scheme:

•40% of the variable remuneration amount,

determined at year-end on the basis of the

achievement of the established objectives, is paid

immediately.

•The remaining 60% is deferred over five years, to be

paid in five portions, provided that the conditions of

permanence in the Group and non-concurrence of

the malus clauses are met, and subject to long term

metrics, taking into account the following accrual

scheme:

–The accrual of the first and second portion

(payment in 2024 and 2025) will be conditional

on none of the malus clauses being triggered.

–The accrual of the third, fourth, and fifth portion

(payment in 2026, 2027 and 2028), is linked to

objectives related to the period 2022—2024 and

the metrics and scales associated with these

objectives. The fulfilment of the objectives

determines the percentage to be paid of the

deferred amount in these three annuities, and

these targets can reduce these amounts and the

number of deferred instruments, or increase

them up to a maximum achievement ratio of

125%, so executives have the incentive to exceed

their targets.

•In accordance with current remuneration policies, the

amounts already paid will be subject to a possible

recovery (clawback) by the Bank during the period

set out in the policy in force at each moment.

The immediate payment (or short-term), as well as each

deferred payment (linked to long term metrics and not

linked to long-term metrics) will be settled 50% in cash

and the remaining 50% in instruments, consisting of

Banco Santander, S.A. shares, Banco Santander, S.A.

share options and restricted stock units (RSUs) of

PagoNxt, split as:

•the amount of PagoNxt RSUs set for each year; and

•the rest, shares and share options in equal parts,

unless the director chooses to receive options only.

Comparative of executive remuneration (Chair and CEO)

The board voted to maintain the same benchmark

incentive for Ana Botín and José Antonio Álvarez in 2022

as in 2021.Variable contributions to pensions were not

modified in 2022, so the amounts are the 22% of the

30% of the last three assigned bonus' average.

In 2022, the good business performance (which enabled

Banco Santander to reach a 13.37% underlying RoTE,

above the end of 2021), the excellent execution of our

strategy (with the highest attributable profit ever), and

the efficient capital management, boosted the bonus

pool once again and thus the variable remuneration of

corporate centre employees, (including executive

directors).

iii. Detail by director

The detail, by bank director, of the short-term

(immediate) and deferred (not subject to long-term

goals) remuneration for 2022 and 2021 is provided

below:

85

EUR thousand
	2022																		2021
	Bylaw-stipulated emoluments															Pension contribution	Other remuneration	Total	Total
	Annual emolument									Short-term and deferred (not subject to long-term goals) salaries of executive directors
	BoardF	Executive committee	Audit committee	Appointments committee	Remuneration committee	Risk supervision, regulation and compliance oversight committee	Responsible banking, sustainability and culture committee	Innovation and technology committee	Attendance fees and commissions	Fixed	Variable- immediate payment		Deferred variable		Total
											In cash	In instru ments	In cash	In instru ments
Ana Botín	95	170	—	—	—	—	—	74	41	3,176	1,688	1,689	1,013	1,013	8,579	1,081	961	11,001	11,436
José Antonio Álvarez	95	170	—	—	—	—	—	25	39	2,541	1,139	1,140	684	684	6,188	811	1,758	9,086	9,160
Bruce Carnegie-Brown	280	170	—	75	75	—	—	25	75	—	—	—	—	—	—	—	—	700	700
Homaira Akbari	95	—	40	—	—	—	15	25	69	—	—	—	—	—	—	—	—	244	248
Javier BotínA	95	—	—	—	—	—	—	—	34	—	—	—	—	—	—	—	—	129	129
Álvaro CardosoB	24	—	—	—	—	—	4	—	11	—	—	—	—	—	—	—	—	39	183
R.Martín ChávezC	48	—	—	13	8	11	—	29	40	—	—	—	—	—	—	—	—	147	374
Sol Daurella	95	—	—	25	25	—	15	—	70	—	—	—	—	—	—	—	—	230	239
Henrique de Castro	95	—	40	—	25	—	—	25	76	—	—	—	—	—	—	—	—	261	267
Gina Díez Barroso	95	—	—	25	—	—	—	—	52	—	—	—	—	—	—	—	—	172	130
Luis Isasi1	95	170	—	—	25	40	—	—	82	—	—	—	—	—	—	—	1,000	1,412	1,406
Ramiro Mato	95	170	40	—	—	40	65	—	90	—	—	—	—	—	—	—	—	500	499
Sergio Rial	95	—	—	—	—	—	—	—	36	—	—	—	—	—	—	—	—	131	879
Belén Romana	95	170	40	—	—	110	15	25	94	—	—	—	—	—	—	—	—	549	533
Pamela Walkden	95	—	110	—	—	40	—	—	78	—	—	—	—	—	—	—	—	323	303
Germán de la FuenteD	66	—	31	—	—	—	—	—	40	—	—	—	—	—	—	—	—	137	—
Glenn HutchinsE	3	—	—	1	1	—	—	1	4	—	—	—	—	—	—	—	—	10	—
Total 2022	1,561	1,020	301	139	159	241	114	229	930	5,717	2,827	2,829	1,697	1,697	14,767	1,892	3,719	25,071	—
Total 2021	1,536	1,020	270	126	175	268	125	245	1,036	6,467	3,079	3,079	1,847	1,848	16,320	1,824	3,542		26,487

A.All amounts received were reimbursed to Fundación Botín.

B.Stepped down as director on 1 April 2022.

C.Stepped down as director on 1 July 2022.

D.Director since 1 April 2022.

E.Director since 20 December 2022.

F.Also includes emoluments for other roles in the board.

1. Includes EUR 1,000 thousand for his role as non-executive Chair of Santander España and for Santander España board and committees meetings

86

Following is the detail by executive director of the

salaries linked to multi-year objectives at their fair Value,

which will only be received if the conditions of

permanence in the Group, non-applicability of malus

clauses and achievement of the established objectives

are met (or, as the case may be, of the minimum

thresholds thereof, with the consequent reduction of

amount agreed-upon at the end of the year) in the terms

described in Note 42.

EUR thousand
	2022					2021
	Variable subject to Long-term objectives1
	In cash	In shares	In share options	In RSUs	Total	Total
Ana Botín	1,064	404	404	255	2,128	2,316
José Antonio Álvarez	718	273	273	172	1,436	1,563
Total	1,782	677	677	428	3,564	3,880

1.Corresponds with the fair value of the maximum amount they are

entitled to in a total of 3 years: 2026, 2027 and 2028, subject to

conditions of continued service, with the exceptions provided, and to

the non-applicability of malus clauses and achievement of the

objectives established.

The fair value has been determined at the grant date

based on the valuation report of an independent expert,

Willis Towers Watson. Based on the design of the plan

for 2022 and the levels of achievement of similar plans

in comparable entities, the fair value considered is 70%

of the variable remuneration subject to long-term

objectives. (see note 42).

Note 5.e below includes disclosures on the shares

delivered from the deferred remuneration schemes in

place in previous years and for which delivery conditions

were met, as well as on the maximum number of shares

that may be received in future years in connection with

the aforementioned 2022 and 2021 variable

remuneration plans.

b) Remuneration of the board members as

representatives of the Bank

By resolution of the executive committee, all the

remuneration received by the Bank’s directors who

represent the Bank on the boards of directors of listed

companies in which the Bank has a stake, paid by those

companies and relating to appointments made on or

after 18 March, 2002, accrues to the Group. In 2022 and

2021 the Bank’s directors did not receive any

remuneration in respect of these representative duties.

On the other hand, in their personal capacity, in 2022

Álvaro Cardoso was paid BRL 150 thousand (EUR

28 thousand) as member of the sustainability committee

of Banco Santander Brasil S.A., Homaira Akbari was paid

USD 169 thousand (EUR 161 thousand) as member of

the board of Santander Consumer USA Holdings, Inc. and

EUR 200 thousand as member of the board of PagoNxt

S.L., and Henrique de Castro and R. Martín Chávez were

each paid the same EUR 200 thousand as members of

the board of PagoNxt S.L. Likewise, Pamela Walkden

was paid GBP 125 thousand (EUR 147 thousand) as

member of Santander UK plc and Santander UK Group

Holdings. And Sergio Rial, as non-Executive Chair of

Ebury Partners Limited received a total pay of GBP

244 thousand (EUR 286 thousand) and as Chair of board

of directors of Banco Santander Brasil S.A. was paid BRL

10,981 thousand (EUR 2,000 thousand). 

Likewise, Luis Isasi was paid EUR 1,000 thousand  as

non-Executive Chair of the board of Santander España

and for attending its board and committee meetings

(amounts paid by Banco Santander, S.A.).

Additionally, Héctor Grisi has received at the end of 2022

a payment of EUR 2,500 thousand as relocation

expenses, for settling in Spain to carry out his CEO role

with effect from 1 January 2023.Because the payment is

based on his annual allowance capitalized over five

years, in accordance with corporate practices and

policies, if the CEO terminates his contract before said

period, he will reimburse the proportional share of that

amount.

c) Post-employment and other long-term benefits

In 2012, the contracts of Ana Botín and José Antonio

Alvarez (and other members of the Bank's senior

management) with defined benefit pension

commitments were modified to transform these

commitments into a defined contribution system, which

covers the contingencies of retirement, disability and

death. From that moment on, the Bank makes annual

contributions to their pension system for their benefit.

This system gives them the right to receive benefits upon

retirement, regardless of whether or not they are active

at the Bank at such time, based on contributions to the

system, and replaced their previous right to receive a

pension supplement in the event of retirement.

87

The initial balance for each of them in the new defined

benefits system corresponded to the market value of the

assets from which the provisions corresponding to the

respective accrued obligations had materialised on the

date on which the old pension commitments were

transferred into the new benefits system.

Since 2013, the Bank has made annual contributions to

the benefits system for executive directors and senior

executives, in proportion to their respective pensionable

bases, until they leave Grupo Santander or until their

retirement within the Group, death, or disability.

The benefit plan system is outsourced to Santander

Seguros y Reaseguros, Compañía Aseguradora, S.A., and

the economic rights of the foregoing directors under this

plan belong to them regardless of whether or not they

are active at the Bank at the time of their retirement,

death or disability.

In accordance with the provisions of the remuneration

regulations, contributions made calculated on variable

remuneration are subject to the discretionary pension

benefits regime. Under this regime, contributions are

subject to malus clauses and clawback according to the

policy in force at any given time and during the same

period in which the variable remuneration is deferred.

Furthermore, they must be invested in bank shares for a

period of five years from the date when the executive

director leaves the Group, regardless of whether or not

they leave to retire. Once that period has elapsed, the

amount invested in shares will be reinvested, along with

the remainder of the cumulative balance corresponding

to the executive director, or it will be paid to the

executive director or to their beneficiaries in the event of

a contingency covered by the benefits system.

As per the director´s remuneration policy approved at the

23 March 2018 general shareholder´s meeting, the

system was changed with a focus on:

•Aligning the annual contributions with practices of

comparable institutions.

•Reducing future liabilities by eliminating the

supplementary benefits scheme in the event of death

(death of spouse or parent) and permanent disability

of serving directors.

•Not increasing total costs for the Bank.

The changes to the system were the following:

•Fixed and variable pension contributions were

reduced to 22% of the respective pensionable bases.

The gross annual salaries and the benchmark

variable remuneration were increased in the

corresponding amount with no increase in total costs

for the Bank. The pensionable base for the purposes

of the annual contributions for the executive

directors is the sum of fixed remuneration plus 30%

of the average of their last three variable

remuneration amounts.

•The death and disability supplementary benefits

were eliminated since 1 April 2018. A fixed

remuneration supplement (included in other

remuneration in section a.iii in this note) was

implemented the same date.

•The total amount insured for life and accident

insurance was increased.

The provisions recognised in 2022 and 2021 for

retirement pensions were as follows:

EUR thousand
	2022	2021
Ana Botín	1,081	1,041
José Antonio Álvarez	811	783
Total	1,892	1,825

Following is a detail of the balances relating to each of

the executive directors under the welfare system as of 

31 December 2022 and 2021:

EUR thousand
	2022	2021
Ana Botín	46,725	48,075
José Antonio Álvarez	18,958	18,821
Total	65,683	66,896

d) Insurance

The Group pays for life insurance policies for the Bank’s

directors, who will be entitled to receive benefits if they

are declared disabled. In the event of death, the benefits

will be payable to their heirs. The premiums paid by the

Group are included in the 'Other remuneration' column

of the table shown in Note 5.a.iii above. Also, the

following table provides information on the sums

insured for the Bank’s executive directors:

Insured capital
EUR thousand
	2022	2021
Ana Botín	20,988	21,489
José Antonio Álvarez	17,345	18,028
Total	38,333	39,517

The insured capital has been modified in 2018 for Ana

Botín and José Antonio Alvarez as part of the pension

systems transformation set out in note 5.c) above, which

has encompassed the elimination of the supplementary

benefits systems (death of spouse and death of parent)

and the increase of the life insurance annuities.

88

During 2022 and 2021, the Group has disbursed a total

amount of EUR 48.2 million and EUR 25.5 million,

respectively, for the payment of civil-liability insurance

premiums. These premiums correspond to several civil-

liability insurance policies that hedge, among others,

directors, senior executives and other managers and

employees of the Group and the Bank itself, as well as

its subsidiaries, in light of certain types of potential

claims. For this reason, it is not possible to disaggregate

or individualize the amount that correspond to the

directors and executives.

As of 31 December 2022 and 2021, no life insurance

commitments exist for the Group in respect of any other

directors.

e) Deferred variable remuneration systems

The following information relates to the maximum

number of shares to which the executive directors are

entitled at the beginning and end of 2022 and 2021 due

to their participation in the deferred variable

remuneration systems, which instrumented a portion of

their variable remuneration relating to 2022 and prior

years, as well as on the deliveries, in shares or in cash,

made to them in 2022 and 2021 once the conditions for

the receipt thereof had been met (see note 42):

i. Deferred conditional variable remuneration plan

From 2011 to 2015, the bonuses of executive directors

and certain executives (including senior management)

and employees who assume risk, who perform control

functions or receive an overall remuneration that puts

them on the same remuneration level as senior

executives and employees who assume risk (all of whom

are referred to as identified staff) have been approved by

the board of directors and instrumented, respectively,

through various cycles of the deferred conditional

variable remuneration plan. Application of these cycles,

insofar as they entail the delivery of shares to the plan

beneficiaries, was authorized by the related annual

general meetings.

The purpose of these plans was to defer a portion of the

bonus of the plan beneficiaries (60% in the case of

executive directors) over a period of five years (three

years for the plans approved up to 2014) for it to be paid,

where appropriate, in cash and in Santander shares. The

remaining 40% portion of the bonus is paid in cash and

Santander shares (in equal parts), upon commencement

of this plan, in accordance with the rules set forth below.

In addition to the requirement that the beneficiary

remains in Grupo Santander’s employ, the accrual of the

deferred remuneration was conditional upon none of the

following circumstances existing in the opinion of the

board of directors -following a proposal of the

remuneration committee-, in relation to the

corresponding year, in the period prior to each of the

deliveries: (i) poor financial performance of the Group;

(ii) breach by the beneficiary of internal regulations,

including, in particular, those relating to risks; (iii)

material restatement of the Group’s consolidated

financial statements, except when it is required pursuant

to a change in accounting standards; or (iv) significant

changes in the Group’s economic capital or its risk

profile. All the foregoing shall be subject in each case to

the regulations of the relevant plan cycle.

Similarly, Banco Santander can claw back any paid

variable amounts in the scenarios and for the period

dictated by the terms and conditions in the said policy.

On each delivery, the beneficiaries are paid an amount in

cash equal to the dividends paid for the amount deferred

in shares and the interest on the amount deferred in

cash. If the Santander Dividendo Elección scrip dividend

scheme is applied, payment will be based on the price

offered by the Bank for the bonus share rights

corresponding to those shares.

The maximum number of shares to be delivered is

calculated taking into account the daily volume-

weighted average prices for the 15 trading sessions prior

to the date on which the board of directors approves the

bonus for the Bank’s executive directors for each year.

This plan and the Performance Shares (ILP) plan

described below have been integrated for the executive

directors and other senior managers in the deferred

variable compensation plan linked to multiannual

objectives, in the terms approved by the General

Meeting of Shareholders held on March 18, 2016.

2021 was the last financial year in which a payment was

made in application of this plan.

ii. Deferred variable compensation plan linked to

multiannual objectives

In the annual shareholders meeting of 18 March 2016,

with the aim of simplifying the remuneration structure,

improving the ex-ante risk adjustment and increasing

the incidence of long-term objectives, the bonus plan

(deferred and conditioned variable compensation plan)

and ILP were replaced by one single plan.

The variable remuneration of executive directors and

certain executives (including senior management)

corresponding to 2022 has been approved by the board

of directors and implemented through the seventh cycle

of the deferred variable remuneration plan linked to

multi-year objectives. The application of the plan was

authorised by the annual general meeting of

shareholders, as it entails the delivery of shares to the

beneficiaries.

89

As indicated in section a.ii of this note, 60% of the

variable remuneration amount is deferred over five years

for executive directors, to be paid, where appropriate, in

five portions, provided that the conditions of

permanence in the Group, according to the following

accrual scheme:

•The accrual of the first and second parts (instalments

in 2024 and 2025) is conditional on none of the

malus clauses being triggered.

•The accrual of the third, fourth and fifth parts

(instalments in 2026,  2027 and 2028) is linked to

non-concurrence of malus clauses and the fulfilment

of certain objectives related to the 2022‑2024

period. These objective and their respective weights

are:

–Banco Santander’s consolidated Return on

tangible equity (RoTE) target in 2024 (weight of

40%).

–Relative performance of Banco Santander's total

shareholder return (TSR) in 2022-2024 in respect

of the weighted TSR of a peer group comprising 9

credit institutions, with the appropriate TSR ratio

based on the group’s TSR among its peers

(weight of 40%).

–Five ESG (environmental, social and governance)

metrics. Each of the five Responsible banking

targets have the same weighting (and total

weight of ESG objective, 20%).

The degree of compliance with the above objectives

determines the percentage to be applied to the deferred

amount in these three annuities, with a maximum

achievement ratio of 125%, so executives have the

incentive to exceed their targets.

Both the immediate (short-term) and each of the

deferred (long-term and conditioned) portions are paid

50% in cash and the remaining 50% in instruments.

The accrual of deferred amounts (whether or not subject

to performance measures) is conditioned, in addition to

the permanence of the beneficiary in the Group, to non-

occurrence, during the period prior to each of the

deliveries, of any the circumstances giving rise to the

application of malus as set out in the Group’s

remuneration policy in its chapter related to malus and

clawback. Likewise, the amounts already paid of the

incentive will be subject to clawback by the Bank in the

cases and during the term foreseen in said policy,  and in

accordance with the terms and conditions foreseen in it.

Malus and clawback clauses are triggered by poor

financial performance of Banco Santander, a division or

area, or exposures from staff as a result of an

executive(s)’s management of, at least, one of these

factors:

(i)Significant failures in risk management committed

by the entity, or by a business unit or risk control.

(ii)The increase suffered by the entity or by a business

unit of its capital needs, not foreseen at the time of

generation of the exposures.

(iii)Regulatory sanctions or judicial sentences from

events that could be attributable to the unit or the

personnel responsible for those. Also, the breach of

internal codes of conduct of the entity.

(iv)Irregular conduct, whether individual or collective.

In this regard, the negative effects derived from the

marketing of inappropriate products and the

responsibilities of the people or bodies that made

those decisions will be specially considered.

And among the specific cases that could lead to the

application of these clauses, of note the restatement of

the annual financial statements that does not result

from a regulatory change, but from incorrect application

of accounting regulations or criteria, as appreciated by

supervisors and as long as it results in a lower variable

remuneration to be settled than that initially accrued or

where no remuneration would have been paid in

accordance with the variable remuneration system of

the Entity or a specific unit.

The maximum number of shares to be delivered is

calculated by taking into account the  average weighted

daily volume of the average weighted listing prices

corresponding to the fifteen trading sessions prior to the

previous Friday (excluded) to the date on which the

bonus is agreed by the board of executive directors of

the Bank.

iii. Shares assigned by deferred variable remuneration

plans

The following table shows the number of Santander

shares assigned to each executive director and pending

delivery as of 1 January 2021, 31 December 2021 and

31 December 2022, as well as the gross shares that

were delivered to them in 2021 and 2022, either in the

form of an immediate payment or a deferred payment.

In this case after having been appraised by the board, at

the proposal of the remuneration committee, that the

corresponding one-fifth of each plan had accrued. They

come from the deferred conditional and linked to multi-

year objectives in 2016, 2017, 2018, 2019, 2020, 2021

and 2022 were formalized.

90

Share-based variable remuneration
	Maximum number of shares to be delivered at January 1,2021	Shares delivered in 2021 (immediate payment 2020 variable remuneration)	Shares delivered in 2021 (deferred payment 2019 variable remuneration)	Shares delivered in 2021 (deferred payment 2018 variable remuneration)	Shares delivered in 2021 (deferred payment 2017 variable remuneration)	Shares delivered in 2021 (deferred payment 2016 variable remuneration)	Variable remuneration 2021 (Maximum number of shares to be delivered)
2016 variable remuneration
Ana Botín	110,029	—	—	—	—	(55,014)	—
José Antonio Álvarez	74,264	—	—	—	—	(37,133)	—
	184,293					(92,147)
2017 variable remuneration
Ana Botín	94,083	—	—	—	(31,361)	—	—
José Antonio Álvarez	62,919	—	—	—	(20,973)	—	—
	157,001				(52,334)
2018 variable remuneration
Ana Botín	413,215	—	—	(103,304)	—	—	—
José Antonio Álvarez	276,129	—	—	(69,032)	—	—	—
	689,344			(172,336)
2019 variable remuneration
Ana Botín	532,316	—	(106,463)	—	—	—	—
José Antonio Álvarez	355,749	—	(71,150)	—	—	—	—
	888,065		(177,613)
2020 variable remuneration
Ana Botín	310,615	(124,246)	—	—	—	—	—
José Antonio Álvarez	168,715	(67,486)	—	—	—	—	—
	479,330	(191,732)
2021 variable remuneration
Ana Botín	—	—	—	—	—	—	1,480,622
José Antonio Álvarez	—	—	—	—	—	—	999,259
	—	—	—	—	—	—	2,479,881
2022 variable remuneration1
Ana Botín	—	—	—	—	—	—	—
José Antonio Álvarez	—	—	—	—	—	—	—

1.For each director, 40% of the shares indicated correspond to the short-term variable (or immediate payment). The remaining 60% is deferred for delivery,

where appropriate, by fifths in the next five years, the last three being subject to the fulfilment of multiannual objectives.

Sergio Rial's has the right to a maximum of 51,483 Santander shares and 269,148 options over Santander shares for his participation in the 2019 Digital

Transformation Award.

In addition, as of 31 December 2022, Rodrigo Echenique maintains the right to a maximum of 150,979 shares arising from his participation in the

corresponding plans during his term as executive director.

91

                           

Share-based variable remuneration
Maximum number of shares to be delivered at December 31, 2021	Instruments matured but not consolidated at January 1, 20222	Shares delivered in 2022 (immediate payment 2021 variable remuneration)	Shares delivered in 2022 (deferred payment 2020 variable remuneration)	Shares delivered in 2022 (deferred payment 2019 variable remuneration)	Shares delivered in 2022 (deferred payment 2018 variable remuneration)	Shares delivered in 2022 (deferred payment 2017 variable remuneration)	Shares delivered in 2022 (deferred payment 2016 variable remuneration)	Variable remuneration 2022 (Maximum number of shares to be delivered)	Maximum number of shares to be delivered at December 31, 2022
55,015	—	—	—	—	—	—	(55,015)	—	—
37,131	—	—	—	—	—	—	(37,131)	—	—
92,146							(92,146)
62,722	—	—	—	—	—	(31,361)	—	—	31,361
41,946	—	—	—	—	—	(20,973)	—	—	20,973
104,668						(52,334)			52,334
309,911	(206,618)	—	—	—	(34,431)	—	—	—	68,862
207,097	(138,072)	—	—	—	(23,008)	—	—	—	46,017
517,008	(344,689)				(57,440)				114,879
425,853	—	—	—	(106,463)	—	—	—	—	319,390
284,599	—	—	—	(71,150)	—	—	—	—	213,449
710,452				(177,613)					532,839
186,369	—	—	(37,274)	—	—	—	—	—	149,095
101,229	—	—	(20,246)	—	—	—	—	—	80,983
287,598			(57,520)						230,078
1,480,622	—	(592,249)	—	—	—	—	—	—	888,373
999,259	—	(399,704)	—	—	—	—	—	—	599,555
2,479,881		(991,953)							1,487,928
—	—	—	—	—	—	—	—	585,079	585,079
—	—	—	—	—	—	—	—	394,916	394,916
								979,995	979,995

2.After reviewing the results of the 3rd cycle of the deferred variable remuneration plan linked to multi-year targets (2018), the board of directors confirmed in

2022, upon recommendation from the remuneration committee, a 33.3% achievement of the long-term metrics of the plan (as the following level of

achievement was met during 2018-2020 period: CET1 at 100% at 2020 year-end (the target was 11.30%); underlying EPS growth at 0% (the target was a

25% growth); and TSR metric at 0% (33% minimum target not reach), with a 33% weight each one) and the amounts of the pending deliveries for each

executive director, payable in February 2022, 2023 and 2024 in connection with this plan. Therefore, regarding the maximum number of shares to be

delivered at December 31 of 2021 in relation with the last three payments of the 2018 variable remuneration (309,911 and 207,097 shares in the case of

Ana Botín and José Antonio Álvarez, respectively) only one third have been delivered (corresponding to the 33.3% of the achievement mentioned above), with

the rest of shares definitively not collected as "matured but not consolidated".This applies to all persons under this plan.

92

Furthermore, the maximum number of share options to

be delivered regarding the 2022 variable remuneration

plan is 1,575,335 options in the case of Ana Botín, and

1,063,316 options in the case of José Antonio Álvarez.

Meanwhile, the maximum number of RSUs of PagoNxt,

S.L. to be delivered under the current plan is 12,646 and

8,527 units for Ana Botín and José Antonio Álvarez,

respectively.

In addition, the table below shows the cash delivered in

2022 and 2021, by way of either immediate payment or

deferred payment, in the latter case once the Board had

determined, at the proposal of the remuneration

committee, that one-fifth relating to each plan had

accrued:

EUR thousand
	2022		2021
	Cash paid (immediate payment 2021 variable remuneration)	Cash paid (deferred payments from 2020, 2019, 2018 and 2017 variable remuneration)	Cash paid (immediate payment 2020 variable remuneration)	Cash paid (deferred payments from 2019, 2018, 2017 and 2016 variable remuneration)
Ana Botín	1,838	1,102	334	1,550
José Antonio Álvarez	1,241	726	181	1,037
Total	3,079	1,827	515	2,586

iv. Information on former members of the board of

directors

The chart below includes  information on the maximum

number of shares to which former members of the board

of directors who ceased in office prior to 1 January 2021

are entitled for their participation in the various deferred

variable remuneration systems, which instrumented a

portion of their variable remuneration relating to the

years in which they were executive directors. Also set

forth below is information on the deliveries, whether in

shares or in cash, made in 2022 and 2021 to former

board members, upon achievement of the conditions for

the receipt thereof (see note 42):

Maximum number of shares to be delivered
	2022	2021
Deferred conditional variable remuneration plan (2015)	—	—
Deferred conditional variable remuneration plan and linked to objectives (2016)	—	60,251
Deferred conditional variable remuneration plan and linked to objectives (2017)	33,783	64,659
Deferred conditional variable remuneration plan and linked to objectives (2018)	36,543	164,462
Deferred conditional variable remuneration plan and linked to objectives (2019)	98,092	130,790
Deferred conditional variable remuneration plan and linked to objectives (2020)	—	—

93

Number of shares delivered
	2022	2021
Deferred conditional variable remuneration plan (2015)	—	92,557
Performance shares plan ILP (2015)	—	—
Deferred conditional variable remuneration plan and linked to objectives (2016)	60,251	60,254
Deferred conditional variable remuneration plan and linked to objectives (2017)	33,783	32,330
Deferred conditional variable remuneration plan and linked to objectives (2018)	18,272	54,821
Deferred conditional variable remuneration plan and linked to objectives (2019)	32,698	32,698
Deferred conditional variable remuneration plan and linked to objectives (2020)	—	—

In addition, EUR 702 thousand and EUR 1,213 thousand

relating to the deferred portion payable in cash of the

aforementioned plans were paid each in 2022 and 2021.

f) Loans

Grupo Santander’s direct risk exposure to the bank’s

directors and the guarantees provided for them are

detailed below. These transactions were made on terms

equivalent to those that prevail in arm’s-length

transactions or the related compensation in kind was

recognized:

EUR thousand
	2022				2021
	Loans and credits	Guarantees	Total		Loans and credits	Guarantees	Total
Mrs Ana Botín-Sanz de Sautuola y O´Shea	20	—	20		25	—	25
Mr José Antonio Álvarez Álvarez	7	—	7		4	—	4
Mr Bruce Carnegie-Brown	—	—	—		—	—	—
Mr Javier Botín-Sanz de Sautuola y O´Shea	23	—	23		16	—	16
Mrs Sol Daurella Comadrán	49	—	49		69	—	69
Mrs Belén Romana García	1	—	1		—	—	—
Mr Ramiro Mato García-Ansorena	—	—	—		—	—	—
Mrs Homaira Akbari	—	—	—		—	—	—
Mr Álvaro Cardoso de Souza	—	—	—		—	—	—
Mr Henrique de Castro	—	—	—		—	—	—
Mrs Pamela Ann Walkden	—	—	—		—	—	—
Mr Luis Isasi Fernández de Bobadilla	—	—	—		—	—	—
Mr Sergio Agapito Lires Rial	5	—	5		1	—	1
Mr R. Martín Chávez Márquez	—	—	—		—	—	—
Mrs Gina Lorenza Díez Barroso	—	—	—		—	—	—
Mr Germán de la Fuente Escamilla	—	—	—		—	—	—
	105	—	105		115	—	115

94

g) Senior managers

The table below includes the amounts relating to the

short-term remuneration of the members of senior

management at 31 December 2022 and those at 31

December 2021, excluding the remuneration of the

executive directors, which is detailed above. This amount

has been reduced by 35% compared to that reported in

2014 (EUR 80,792 thousand):

EUR thousand
		Short-term salaries and deferred remuneration
			Variable remuneration (bonus) - Immediate payment			Deferred variable remuneration
Year	Number of persons	Fixed	In cash	In shares2		In cash	In shares3	Pensions	Other remuneration1	Total
2022	14	18,178	7,733	7,733		3,398	3,399	5,339	6,956	52,736
2021	15	19,183	8,402	8,402		3,648	3,648	5,542	5,055	53,880

1.Includes other remuneration items such as life and medical insurance premiums and localization aids and lastly RSUs from PagoNxt S.L., for his work as a

director in said entity.

2.The amount of immediate payment in shares for 2022 is 2,504,000 shares (2,706,819 Santander shares in 2021).

3.The deferred amount in shares not linked to long-term objectives for 2022 is 1,101,000  shares (1,175,191 Santander shares in 2021).

The board of directors approved the 2022 Digital

Transformation Incentive which is a variable

remuneration scheme split in two different blocks:

•the first one, with the same design as in previous

years, that delivers Santander shares and share

options if the group hits major milestones on its

digital roadmap. It is aimed at a group of up to 250

employees whose functions are deemed essential to

Santander’s growth. No senior executives are

included within this plan in 2022 and 2021.

•And the second one, which delivers PagoNxt, S.L.

RSUs and premium priced options (PPOs), and is

aimed at up to 50 employees whose roles are

considered key to PagoNxt’s success, including 1

senior executive who will receive EUR 500 thousand.

See note 42 to the 2022, Bank’s financial statements for

further information on the Digital Transformation

Incentive.

In 2022, the ratio of variable to fixed pay components

was 120% of the total for senior managers, well within

the maximum limit of 200% set by 2022 AGM.Also, the

detail of the breakdown of the remuneration linked to

long-term objectives of the members of senior

management at 31 December 2022 and 31 December

2021 is provided below. These remuneration payments

shall be received, as the case may be, in the

corresponding deferral periods, upon achievement of the

conditions stipulated for each payment (see note 42):

.

EUR thousand
		Variable remuneration subject to long-term objectives1
Year	Number of  people	Cash  payment	Share payment	Total
2022	14	3,568	3,569	7,137
2021	15	3,830	3,830	7,660

1.Relates to the fair value of the maximum annual amounts for years

2026, 2027 and 2028 of the seventh cycle of the deferred conditional

variable remuneration plan (2025, 2026 and 2027 for the sixth cycle

of the deferred variable compensation plan linked to annual

objectives for the year 2021).

Additionally, senior executives who stepped down from

their roles in 2022 consolidated salary remuneration and

other remuneration for a total amount of EUR 3,691

thousand (EUR 5,294 thousand in 2021). They also have

the right to receive, in total, EUR 447 thousand in

variable pay subject to long-term objectives (this right

has been generated in 2021 for a total amount of EUR

55 thousand).

The maximum number of Santander shares that the

members of senior management at each plan grant date

(excluding executive directors) were entitled to receive

as of 31 December 2022 and 31 December 2021 relating

to the deferred portion under the various plans then in

force is the following (see note 42):

95

Maximum number of shares to be delivered
	2022	2021
Deferred conditional variable remuneration plan (2015)	—	—
Deferred conditional variable remuneration plan (2017)	—	—
Deferred conditional variable remuneration plan (2018)	—	3,475
Deferred conditional variable remuneration plan and linked to objectives (2016)	18,500	150,445
Deferred conditional variable remuneration plan and linked to objectives (2017)	76,053	164,428
Deferred conditional variable remuneration plan and linked to objectives (2018)	155,758	803,056
Deferred conditional variable remuneration plan and linked to objectives (2019)	949,917	1,274,450
Deferred conditional variable remuneration plan and linked to objectives (2020)	1,438,437	1,829,720
Deferred conditional variable remuneration plan and linked to objectives (2021)	2,711,926	—

Since the conditions established in the corresponding

deferred share-based remuneration schemes for prior

years had been met, the following number of Santander

shares was delivered in 2022 and 2021 to the senior

management, in addition to the payment of the related

cash amounts:

Number of shares delivered
	2022	2021
Deferred conditional variable remuneration plan (2015)	—	146,930
Deferred conditional variable remuneration plan (2017)	—	2,786
Deferred conditional variable remuneration plan (2018)	—	3,474
Deferred conditional variable remuneration plan and linked to objectives (2016)	114,006	131,938
Deferred conditional variable remuneration plan and linked to objectives (2017)	107,891	79,104
Deferred conditional variable remuneration plan and linked to objectives (2018)	79,037	267,686
Deferred conditional variable remuneration plan and linked to objectives (2019)	288,041	321,006
Deferred conditional variable remuneration plan and linked to objectives (2020)	360,614	1,742,419
Deferred conditional variable remuneration plan and linked to objectives (2021)	2,556,117	—

As indicated in note 5.c above, senior management

participate in the benefit system created in 2012, which

covers the contingencies of retirement, disability and

death. Banco Santander makes annual contributions to

the benefit plans of its senior managers. In 2012, the

contracts of the senior managers with benefit pension

commitments were amended to transform them into a

contribution system. The system, which is outsourced to

Santander Seguros y Reaseguros, Compañía

Aseguradora, S.A., gives senior managers the right to

receive benefits upon retirement, regardless of whether

or not they are active at Banco Santander at such time,

based on contributions to the system. This new system

replaced their previous right to receive a pension

supplement in the event of retirement. In the event of

pre-retirement, and up to the retirement date, senior

managers appointed prior to September 2015 are

entitled to receive an annual allowance.

In addition, further to applicable remuneration

regulations, from 2016 (inclusive), a discretionary

pension benefit component of at least 15% of total

remuneration  in contributions to the pension system has

been included. Under the regime corresponding to these

discretionary benefits, the contributions that are

calculated on variable remunerations are subject to

malus and clawback clauses, subject to policies

applicable at each time, and during the same period in

which the variable remuneration is deferred.

Likewise, the annual contributions calculated on variable

remunerations must be invested in Bank shares for a

period of five years from the date that the senior

manager leaves the Group, regardless of whether or not

they leave to retire. Once that period has elapsed, the

amount invested in shares will be reinvested, along with

the remainder of the cumulative balance corresponding

to the senior manager, or it will be paid to the senior

manager or to their beneficiaries in the event of a

contingency covered by the benefits system.

The contracts of some senior executives were modified

at the beginning of 2018 with the same objective and

changes indicated in section c of this note for Ana Botín

and José Antonio Álvarez. The modifications, which are

aimed at aligning the annual contributions with the

practices of comparable institutions and reducing the

risk of future obligations by eliminating the

supplementary scheme for death (widowhood and

orphanhood) and permanent disability in service without

increasing the costs to the bank, are as follows:

•Contributions to the pensionable bases were

reduced. Gross annual salaries were increased in the

corresponding amount.

96

•The death and disability supplementary benefits

were eliminated since January 1, 2018 for some

senior executives and since April 1, 2018 for

executive directors. A fixed remuneration

supplement reflected in other remuneration in the

table above was implemented on the same date.

•The amounts insured for life and accident insurance

were increased.

All of the above was done without an increase in total

cost for the Bank.

The balance as of 31 December 2022 in the pension

system for those who were part of senior management

at year end amounted to EUR  54 million (EUR 57 million

at 31 December 2021).

The net charge to income corresponding to pension

amounted to EUR 5.3 million  in 2022 (EUR 5.5 million in

31 December 2021).

In 2022 and 2021 there have been no payments in the

form of a single payment of the annual voluntary pre-

retirement allowance.

Additionally, the capital insured by life and accident

insurance at 31 December 2022 of this group amounts

to EUR 98 million (EUR 100 million at 31 December

2021).

h) Post-employment benefits to former Directors 

and former senior executive vice presidents

The post-employment benefits and settlements paid in

2022 to former directors of the Bank, other than those

detailed in note 5.c amounted to EUR 5.6 million and

EUR 5.6 million in 2021, respectively. Also, the post-

employment benefits and settlements paid in 2022 to

former executive vice presidents amounted to EUR

4.8 million and EUR 51.6 million  in 2021, respectively.

Contributions to insurance policies that hedge pensions

and complementary widowhood, orphanhood and

permanent disability benefits to previous members of

the Bank’s board of directors, amounted to EUR

0.17 million in 2022 (EUR 0.17 million in 2021).

Likewise, contributions to insurance policies that hedge

pensions for previous senior managers amounted to EUR

3.1 million in 2022 (EUR 4.4 million in 2021).

During the 2022 financial year, no releases or charges

were recorded in the consolidated income statement for

pension commitments and similar obligations held by

the Group with previous former members of the bank's

board of directors or former senior managers in 2022

and 2021.

In addition, 'Provisions - Pension Fund and similar

obligations' in the consolidated balance sheet as at 31

December 2022 included EUR 48 million in respect of the

post-employment benefit obligations to former

Directors of the Bank (EUR 50 million at 31 December

2021) and EUR 99 million corresponding to former

senior managers (EUR 114 million at 31 December

2021).

i) Pre-retirement and retirement

The board of directors approved an amendment to the

contracts of the executive directors whereby Ana Botín

and José Antonio Álvarez ceased to have the right to pre-

retire in case of termination of his contract.

j) Contract termination

The executive directors and senior managers have

indefinite-term employment contracts. Executive

directors or senior managers whose contracts are

terminated voluntarily or due to breach of duties are not

entitled to receive any economic compensation. If Banco

Santander terminates the contract for any other reason,

they will be entitled to the corresponding legally-

stipulated termination benefit, without prejudice to any

compensation that may  for non-competition

obligations, as detailed in the directors' remuneration

policy.

If Banco Santander were to terminate her contract, Ana

Botín would have to remain at Banco Santander’s

disposal for a period of 4 months in order to ensure an

adequate transition, and would receive her fixed salary

during that period.

k) Information on investments held by the directors

in other companies and conflicts of interest

None of the members of the board of directors have

declared that they or persons related to them may have

a direct or indirect conflict of interest with the interests

of Banco Santander, S.A., as set forth in article 229 of the

Corporate Enterprises Act.

97

6. Loans and advances to central

banks and credit institutions

The detail by classification, type and currency, of loans

and advances to central banks and credit institutions in

the balance sheet is as follows:

EUR million
	2022	2021
CENTRAL BANKS
Classification
Financial assets held for trading	1,933	1,118
Financial assets at amortized cost	94	26
	2,027	1,144
Type
Reverse repurchase agreements	1,933	1,118
Other term loans	25	25
Advances different from loans	69	1
Of which, impaired assets	—	—
Of which, valuation adjustments for impairment	—	—
	2,027	1,144
Currency
Euro	2,027	1,143
US Dollars	—	1
	2,027	1,144
CREDIT INSTITUTIONS
Classification
Financial assets held for trading	9,807	6,980
Financial assets designated at fair value through profit or loss	934	3,445
Financial assets designated at fair value through other comprehensive income	1	—
Financial assets at amortized cost	35,067	35,084
	45,809	45,509
Type
Reverse repurchase agreements	16,684	13,602
Other term loans	14,876	21,192
Non-loans advances	14,249	10,715
Of which, impaired assets	—	—
Of which, valuation adjustments for impairment	(2)	(4)
	45,809	45,509
Currency
Euro	27,841	32,341
Pound sterling	4,196	1,493
US dollar	13,428	11,395
Chilean pesos	12	3
Brazilian real	1	—
Other currencies	331	277
	45,809	45,509
TOTAL	47,836	46,653

98

The loans and advances classified in the 'Financial assets

held for trading' portfolio correspond to temporary

acquisitions of assets from Spanish and foreign

institutions.

Deposits in credit institutions classified as 'Financial

assets at amortized cost' are mainly term accounts and

guarantees given in cash to credit institutions.

In addition, at 31 December 2022, there were

outstanding balances with central banks and credit

institutions of EUR 124,577 million and EUR 4,249

million, respectively (88,268 and 2,284 million EUR  at 

31 December 2021). The increase occurs due to the

liquidity management carried out by the Bank. These

balances are included under 'Cash, cash balances at

central banks and other deposits on demand'.

Note 48 shows the details of the maturity terms of

'Financial assets at amortized cost' and 'Cash, cash 

balances at central banks and other deposits on

demand'.

The breakdown at 31 December 2022 of the exposure

and the provision fund for fiancial assets at amortized

cost is EUR 35,163 million and EUR 2 million,

respectively, all in Phase 1 (EUR 35,114 million and EUR

4 million, also Phase 1, in 2021).

99

7. Debt securities 

The detail, by classification, sector and currency, of ‘Debt

instruments’ in the accompanying balance sheets is as

follows:

EUR millon
	2022	2021
Classification
Financial assets held for trading	17,846	14,320
Non-trading financial assets mandatorily at fair value through profit or loss	950	734
Financial assets designated at fair value through other comprehensive income	4,120	9,394
Financial assets at amortized cost	40,182	17,208
	63,098	41,656
Sector
Central banks	894	892
Public sector	31,618	13,358
Credit institutions	16,237	14,771
Other financial institutions	12,858	11,356
Non-financial institutions	1,491	1,279
Of which, impaired assets	154	144
Of which, value adjustments for impairment	(255)	(148)
	63,098	41,656
Currency
Euro	47,037	27,246
US dollar	8,339	7,764
Pound sterling	4,913	4,161
Brazilian real	1,059	1,245
Other currencies	1,750	1,240
	63,098	41,656

The increase in the debt securities portfolio under the

heading ‘Financial assets at amortized cost’ of EUR

22,974 million during the year in mainly due to the

origination of two new business models whose goal is to

hold financial assets to collect contractual cash flows.

These news business models pursue mainly two

different strategies:

Optimisation of excess liquidity through management

aimed at making the liquidity held on the balance sheet

profitable in order to comply with regulatory metrics by

investing in HQLAs (High Quality Liquid Assets), basically

very short-term public debt instruments or central bank

bills (terms of no more than 2 years) that offer higher

returns than the alternative of keeping cash on deposit

at the central bank, in order to generate margin at

maturity.

Management of the duration of the balance sheet

through the reconstruction of ALCO portfolios that

contribute to the generation of financial margin to offset,

at least partially, the higher financial cost derived from

the increase in the cost of customer deposits and

medium/long-term wholesale financing in the face of

rising interest rates, while at the same time constituting

a hedging position of the balance sheet/long-term

financial margin in the face of potential future falls in

interest rates. This investment is also made mainly

through liquid assets, sovereign debt, but at longer

maturities (3, 5, 7, 10 years).

At 31 December 2022, the nominal amount of the debt

securities subject to own obligations, mostly as

collateral for financing lines received by the Bank,

amounts to EUR 19,293 million (EUR 14,877 million at

31 December 2021), of which EUR 10,222 million

correspond to Spanish Public Debt (EUR 8,607 million at

31 December, 2021)

100

The breakdown at 31 December 2022 of the exposure,

by phase of impairment, of the assets subject to

impairment is EUR 44,403 million in phase 1 and EUR

154 million in phase 3. In 2021 it was EUR 26,606

million in phase 1 and EUR 144 million in phase 3.

The breakdown at 31 December 2022 of the provision

fund by phase of impairment of assets subject to

impairment is EUR 129 million in phase 1 and EUR 126

million in phase 3. In 2021 it was EUR 33 million in phase

1 and EUR 115 million in phase 3.

Note 25.e) shows the details of ‘Other comprehensive

income‘ recognized in Equity for the  ‘Financial Assets

designated at fair value through other comprehensive

income‘.

Note 48 contains details of the maturity periods of ´Debt

securities` classified in the ´financial assets at fair value

through other comprehensive income` and `financial

assets at amortized cost` portfolios.

8. Equity instruments

a) Breakdown

The detail, by classification and type, of Equity

instruments in the accompanying balance sheets is as

follows:

EUR million
	2022	2021
Classification
Financial assets held for trading	9,450	14,619
Non-trading financial assets mandatorily at fair value through profit or loss	1,041	908
Financial assets designated at fair value through other comprehensive income	1,268	1,705
	11,759	17,232
Type
Shares of Spanish companies	3,215	3,818
Shares of foreign companies	8,071	12,843
Shares of investments funds	473	571
	11,759	17,232

Note 25.c) contains a detail of the ‘Other comprehensive

income’, recognized in equity, on ‘Financial assets

designated at fair value through other comprehensive

income’.

b) Changes

The changes in ‘Non-trading financial assets mandatorily

at fair value through profit or loss’ and ‘Financial assets

at fair value through other comprehensive income’

during 2022 and 2021 were as follows:

EUR million
	2022	2021
Balance at beginning of the year	1,705	1,942
Purchases and capital increases	1	2
Disposals and capital reductions	(13)	(4)
Of which
JC Flowers I, LP	(10)	—
Epi Interim Company SE	(2)	—
Other comprehensive income and other conceptsA	(425)	(235)
Balance at end of the year	1,268	1,705

A.During 2022 and 2021 there were significant changes in value due,

among others, to the fall in the prices of the listed companies

included under this heading.

During 2022 and 2021, the fair value of the investment

in Project Quasar Investments 2017, S.L. was reduced by

EUR 250 million on both years, as a result of the

valuation update of the assets of this company.

In January 2022, Banco Santander has exercised its

preferential acquisition right, set out in the shareholders'

agreement dated June 27, 2016 of shares in Bizum, S.L.

for EUR 1 million. As a result, significant influence was

achieved in the company and the share was reclassified

from this heading to "Investments in subsidiaries, joint

ventures and associates - Associates" (see note 13.a.ii).

c) Notifications of acquisitions of investments

The notifications of the acquisitions and disposals of

holdings in investees made by the Bank in 2022, in

compliance with Article 155 of the Spanish Limited

Liability Companies Law and Article 125 of Spanish

Securities Market Law 24/1998, are listed in appendix IV.

101

9. Trading Derivatives (assets

and liabilities) and short

positions

a) Trading derivatives

The detail, by type of inherent risk, of the fair value of

the trading derivatives arranged by Banco Santander at

31 December 2022 and 2021 is as follows:

EUR million
	2022		2021
	Debit balance	Credit balance	Debit balance	Credit balance
Interest rate	34,453	31,011	26,763	23,483
Equity instruments	1,416	851	1,393	955
Currency and gold	18,230	19,783	13,739	15,911
Credit	178	197	104	252
Commodities	—	—	—	—
Others	179	284	24	71
Total	54,456	52,126	42,023	40,672

b) Short positions

The following is a breakdown of  short positions

(liabilities):

EUR million
	2022	2021
Borrowed Securities
Equity instruments	934	318
Short sales
Debt instruments	13,519	8,926
Total	14,453	9,244

10. Loans and advances to

customers

a) Detail

The detail, by classification, of ‘Loans and advances to

customers’ on the balance sheets is as follows:

EUR million
	2022	2021
Financial assets held for trading	10,376	7,025
Non-trading financial assets mandatorily at fair value through profit or loss	1,177	713
Financial assets designated at fair value through profit or loss	5,707	9,958
Financial assets at fair value through other comprehensive income	5,218	3,936
Financial assets at amortized cost	302,804	286,735
Loans and advances to customers (carrying amount)	325,282	308,367
Of which
Impairment losses	(4,729)	(6,899)
Loans and advances to customers disregarding impairment losses	330,011	315,266

‘Note 48 shows the details of the maturity periods of

financial assets at amortized cost.’

At 31 December 2022 and 2021, there were no loans

and advances to customers for material amounts

without fixed maturity dates.

102

b) Breakdown

The following is a breakdown of the loans and advances

granted to Banco Santander´s customers, which, reflect

the bank´s exposure to credit task in it´s main activity

without considering the balance of impairment losses

taking into account the type and situation of the

transactions, the geographical area of their residence

and type of interest rate on the transactions:

EUR million
	2022	2021
Loan type and status
On demand and with a short prior period	3,060	3,167
Credit cards receivables	1,342	1,269
Commercial credit	35,212	27,423
Finance leases	2,698	2,965
Reverse repurchase agreements	10,399	6,459
Other term loans	260,357	255,799
Non loans advances	12,214	11,285
Of which
Impaired assets	9,017	12,882
Impairment losses	(4,729)	(6,899)
Book value	35,067	308,367
Gross book value	330,011	315,266
Geographical area
Spain	204,994	211,525
European Union (excluding Spain)	41,435	28,469
United States of America and Puerto Rico	28,757	25,065
Other OECD countries	31,248	28,186
Latin America (non-OECD)	10,643	9,548
Rest of the world	12,934	12,473
	330,011	315,266
Interest rate:
Fixed rate	180,745	143,101
Floating rate	149,266	172,165
	330,011	315,266

At 31 December 2022 and 2021 the Bank had EUR

14,269 million and EUR 13,819 million, respectively, of

loans and advances granted to Spanish public

administrations whose rating at 31 December 2022 is A

(rating at 31 December 2021 was A ) and with  EUR

4,579 million and EUR 2,085 million, respectively,

granted to the Public Sector of other countries (at 31

December 2022 this amount was composed, based on

the rating of the issuer as follows: 7% AAA, 21% AA, 0%

A, 53% BBB and 18% lower than BBB).

The above-mentioned ratings were obtained by

converting the internal ratings awarded to customers by

Banco Santander (see note 49) into the external ratings

classification established by Standard & Poor's, in order

to make them more readily comparable.

Without considering Public Administrations, the amount

of loans and advances at 31 December 2022 amounts to

EUR 311,163 million, of which EUR 302,146 million are

in a non-doubtful situation (at 31 December 2021, they

amounted to EUR 299,362 million and EUR 286,480

million respectively).

103

The following is a detail, by activity, of the loans to customers at 31 December 2022, net of impairment losses:

EUR million
	Total*	Without collateral	Secured loans
			Net exposure		Loan-to-value ratioC
			Of which, property collateral	Of which, other collateral	Less than or equal to 40%	More than 40% and less than or equal to 60%	More than 60% and less than or equal to 80%	More than 80% and less than or equal to 100%	More than 100%
Public sector	16,620	15,625	148	847	60	68	16	850	1
Other financial institutions and individual traders (business financial activity)	63,969	37,130	1,732	25,107	604	973	314	24,544	404
Non-financial companies and individual entrepreneurs (non-financial business activity) (broken down by purpose)	152,255	112,219	19,667	20,369	8,648	7,214	3,925	15,749	4,500
Of which
Construction and property development        (including land)	2,209	11	2,182	16	1,056	796	246	39	61
Civil engineering construction	1,947	1,197	26	724	16	77	4	634	19
Large companies	101,320	80,886	5,622	14,812	2,653	2,074	1,354	11,181	3,172
SMEs and individual traders	46,779	30,125	11,837	4,817	4,923	4,267	2,321	3,895	1,248
Other households (broken down by purpose)	80,224	10,298	68,437	1,489	20,132	22,415	21,568	4,097	1,714
Of which
Residential	63,669	788	62,718	163	18,093	20,520	20,057	3,136	1,075
Consumer loans	8,404	7,559	412	433	208	159	213	203	62
Other purposes	8,151	1,951	5,307	893	1,831	1,736	1,298	758	577
TotalA	313,068	175,272	89,984	47,812	29,444	30,670	25,823	45,240	6,619
Memorandum item
Refinanced and restructured transactionsB	12,620	6,714	4,521	1,385	1,161	1,144	959	1,409	1,232

A.Not including loan advances.

B.Includes the net balance of value adjustments associated with impaired assets.

C.The ratio is the carrying amount of the transactions at 31 December 2022 calculated using  the latest available appraisal value of the collateral.

104

Note 49 contains information relating to the forborne

loan portfolio.

Below is a breakdown of the movement in gross

exposure by impairment stage of loans and advances

from customers recorded under the headings ‘Financial

assets at amortized cost’ and ‘Financial assets at fair

value through other comprehensive income’ under Bank

of Spain Circular 4/2017 to 31 December 2022 and

2021:

2022
EUR million
	Stage 1	Stage 2	Stage 3	Total
Balance at beginning of the year	267,980	16,708	12,882	297,570
Movements
Transfers
Transfer to Stage 2 from Stage 1	(3,919)	3,919		—
Transfer to Stage 3 from Stage 1	(654)		654	—
Transfer to Stage 3 from Stage 2		(1,674)	1,674	—
Transfer to Stage 1 from Stage 2	3,478	(3,478)		—
Transfer to Stage 2 from Stage 3		574	(574)	—
Transfer to Stage 1 from Stage 3	23		(23)	—
Net changes on financial assets	23,195	(2,418)	(2,400)	18,377
Write-offs	—	—	(3,196)	(3,196)
Differences in change and other movements
Balance at end of the year	290,103	13,631	9,017	312,751

A..The movement of Phase 3 includes portfolio sales for EUR 2,583

million

2021
EUR million
	Stage 1	Stage 2	Stage 3	Total
Balance at the beginning of year	252,388	12,031	13,524	277,943
Movements
Transfers
To stage 2 from stage 1	(8,873)	8,873		—
To stage 3 from stage 1	(1,368)		1,368	—
To stage 3 from stage 2		(1,116)	1,116	—
To stage 1 from stage 2	1,386	(1,386)		—
To stage 2 from stage 3		357	(357)	—
To stage 1 from stage 3	36		(36)	—
Net changes on financial assets	24,411	(2,051)	(278)	22,082
Write-offs			(2,455)	(2,455)
Differences in change and other movements
Balance at end of the year	267,980	16,708	12,882	297,570

A.The movement of Phase 3 includes portfolio sales for EUR 1,713

million

At 31 December 2022, the total net exposure of loans

and advances to the Bank's customers is EUR 308,022

million, of which EUR 289,616 million correspond to

phase 1, EUR 12,973 million to phase 2 and EUR 5,433

million to phase 3 (EUR 267,471 million, EUR 16,002

million and EUR 7,198 million respectively at 31

Decembe, 2021). This exposure includes EUR 104 million

(EUR 233 million at 31 December 2021) in impaired

assets purchased with impairment, classified in phase 3,

which correspond mainly to the business combination

carried out by the Bank.

105

c) Impairment losses on loans and advances to

customers at amortized cost and at fair value

through other comprehensive income

The changes in the impairment losses on the assets

making up the balances of financial assets at amortized

cost and at fair value through other comprehensive

income ‘Loans and advances to customers’:

EUR million
	2022	2021
Balance at beginning of the year	6,899	6,981
Net impairment losses charged to income for the year	1,404	2,304
Of which
Impairment losses charged to profit or loss	2,492	3,535
Impairment losses reversed with a credit to profit or loss	(1,088)	(1,231)
Write-off of impaired balances against recorded impairment allowance	(3,196)	(2,455)
Exchange differences and other changes	(378)	69
Balance at end of the year	4,729	6,899
Of which	—	—
By status of the asset
Impaired assets	3,584	5,684
Of which, due to country risk	5	7
Other assets	1,140	1,208
Balance at end of the year	4,729	6,899
Of which
Individually calculated	867	881
Collective calculated	3,862	6,018

The net provision that has an impact on the results for

the year includes provisions for renegotiation or

contractual modification of EUR 23 million (EUR 75

million at 31 December 2021).

Taking into account the assets in suspense recovered,

which amount to EUR 111 million at 31 December,2022

(EUR 89 million at 31 December, 2021) and adding to the

net provision of the previous table, the impairment of

'Credit Entities  and Debt Securities' (see notes 6 and 7),

the amount recorded under the heading 'Impairment or

reversal of impairment of financial assets not measured

at fair value through profit or loss and net gains or

losses' , due to changes in 'Financial assets at fair value

with changes in other comprehensive income' and

'Financial assets at amortized cost', amounts to EUR

1,398 million at 31 December, 2022 (EUR 2,287 million

at 31 December, 2021).

The following is the movement of impairment losses 

broken down by impairment stage of loans and advances

to customers, during 2022 and 2021:

2022
EUR million
	Stage 1	Stage 2	Stage 3	Total
Balance at beginning of the year	509	706	5,684	6,899
Transfers
Transfer to Stage 2 from Stage 1	(25)	139		114
Transfer to Stage 3 from Stage 1	(5)		193	188
Transfer to Stage 3 from Stage 2		(93)	315	222
Transfer to Stage 1 from Stage 2	22	(84)		(62)
Transfer to Stage 2 from Stage 3		73	(119)	(46)
Transfer to Stage 1 from Stage 3	—		(18)	(18)
Net changes of the exposure and modifications in the credit risk	42	(83)	1,047	1,006
Changes due to update in the methodology of estimates of the entity
Write-offs			(3,196)	(3,196)
FX and other movements	(56)	—	(322)	(378)
Gross carrying amount at end of the year	487	658	3,584	4,729

106

2021
EUR million
	Stage 1	Stage 2	Stage 3	Total
Balance at beginning of the year	485	714	5,782	6,981
Transfers
Transfer to Stage 2 from Stage 1	(19)	248		229
Transfer to Stage 3 from Stage 1	(52)		240	188
Transfer to Stage 3 from Stage 2		(119)	384	265
Transfer to Stage 1 from Stage 2	4	(76)		(72)
Transfer to Stage 2 from Stage 3		23	(77)	(54)
Transfer to Stage 1 from Stage 3	1		(13)	(12)
Net changes of the exposure and modifications in the credit risk	71	(84)	1,773	1,760
Changes due to update in the methodology of estimates of the entity
Write-offs			(2,455)	(2,455)
FX and other movements	19	—	50	69
Gross carrying amount at end of the year	509	706	5,684	6,899

d) Impaired assets

The detail of the movement in the balance of financial

assets classified as ‘Loans and advances to customers’

and considered to be impaired by reason of their credit

risk during 2022 and 2021 is:

EUR million
	2022	2021
Balance at beginning of the year	12,882	13,524
Net additions	(669)	1,813
Written-off assets	(3,196)	(2,455)
Other changes	—	—
Balance at end of the year	9,017	12,882

This amount, once the corresponding provisions have

been deducted, is Banco Santander´s best estimate of

the discounted value of the  cashflows that are expected

to be recovered from impaired assets.

At 31 December 2022, the balance of the assets written-

off amounted to EUR 6,732 million (8,198 millon EUR at

31 of december 2021).

The following are the credit impaired financial assets

and related guarantees maintained to mitigate potential

losses as of 31 December 2022:

EUR million
	Gross amount	Allowance recognized	Estimated collateral value*
Without associated real collateral	3,106	1,641	—
With associated real collateral	4,790	1,562	2,942
With other collateral	1,121	381	452
Total	9,017	3,584	3,394

A. Collects the estimated value of the collateral associated with each loan.

Consequently, it does not include any other cash flow that could be

obtained, such as those from the personal guarantees of the accredited.

When classifying assets in the previous table, the main

factors considered by Banco Santander to determine

whether an asset has become impaired are the existence

of amounts past due -assets impaired due to arrears- or

other circumstances may be arise which will not result in

all contractual cash flow being recovered, such as a

deterioration of the borrower's financial situation, the

worsening of its capacity to generate funds or difficulties

experienced by it in accessing credit.

e) Transferred credits

The heading 'Loans and advances to customers' includes,

among others, those loans transferred to third parties by

securitisation on which risks and profits are maintained,

albeit partially, which is why and in accordance with the

accounting regulations that apply, they cannot be

removed from the balance sheet. This is mainly due to

mortgage loans, loans to companies and consumer

loans. The breakdown of securitised loans held on the

balance sheet, taking into account the nature of the

financial instrument from which they originate, is shown

below:

EUR million
	2022	2021
Retained on the balance sheetA	13,171	15,347
Of which, mortgage assets are securitized through:
Mortgage transfer certificates (nota 20.c)A	9,769	11,133
TotalA	13,171	15,347

A.Note 19 reports the liabilities associated with securitization operations,

discounting the bonds of the securitization funds repurchased by the

Bank.

107

The evolution of this activity responds to its use as a

regulatory capital management tool and as a resource

for the diversification of Banco Santander's liquidity

sources. During 2022 and 2021 the Bank didn't

derecognized any of the securitizations carried out in

years mentioned before, and the balance derecognized

at those dates corresponds to securitizations carried out

in previous years and portfolio sales.

On the other hand, at 31 December 2022, Banco

Santander has credits derecognized from the balance

sheet and on which the administration maintains for an

amount of EUR 3,383 million. (EUR 2,397 millon at 31

December 2021). Within the total loans written off the

balance sheet, at 31  December 2022, there are EUR 721

million (EUR 845 million in 2021) of securitized assets.

f) Guarantee

Below is the breakdown of the liabilities issued

guaranteed by assets, discounting own values as of 31

December 2022 and 2021:

EUR million
	2022	2021
Liabilities secured by assets:
Mortgage-backed bonds	22,106	22,274
Asset-backed securities	1,995	2,290
Territorial bonds	345	625
Total	24,446	25,189

The mortgage-backed bonds (‘cédulas hipotecarias’) are

secured by mortgage loans with average maturities of

more than ten years. In order to calculate the amount of

the qualifying assets in accordance with Royal Decree-

Law 24/2021 transposing the European Union directive

on covered bonds, the following transactions are

excluded from the total base of the unsecuritized

mortgage portfolio:

–Transactions classified as at pre-action stage and

procedural stage.

–Transactions without appraisal by a specialist

valuer.

–Transactions exceeding 80% of the appraized

value in residential financing and 60% in the case

of other assets.

–Second mortgages or mortgages with insufficient

collateral.

–Transactions without insurance or with

insufficient insurance.

The asset-backed securities, including asset-backed

securities and notes issued by special-purpose vehicles

(SPVs), are secured by:

–Mortgage loans to individuals to finance the

acquisition and refurbishment of homes with an

average maturity of more than ten years.

–Personal consumer finance loans with no specific

guarantee and unsecured loans with an average

maturity of five years.

–Loans to SMEs (non-financial small and medium-

sized enterprises) secured by State guarantees,

and loans to companies (SMEs -self-employed,

microbusinesses, small and medium-sized

enterprises- and large companies) secured by

property mortgages, the borrower's personal

guarantee, guarantees and other collateral other

than property mortgages, with an average

maturity of 7 years.

–Mortgage and non-mortgage loans to finance

municipalities, autonomous communities and

subsidiaries with an average maturity of more

than 10 years.

–Commercial credit of Banco Santander (ordinary

and occasional invoice discounting and advances

to customers on legitimate receivables) with an

average maturity of 45 days.

Additionally, Banco Santander issues internationalization

bonds, which are securities whose capital and interest

are guaranteed by loans and credits that are linked to the

financing of export contracts or the internationalization

of companies. These internationalization bonds have

been repurchased in their entirety by Banco Santander.

The fair value of the guarantees received by Banco

Santander (financial and non-financial assets) which the

Bank is authorized to sell or pledge even if the owner of

the guarantee has not defaulted is scantly material

taking into account the Bank's financial statements as a

whole.

108

11. Trading derivatives

The detail of the notional and/or contractual amounts

and the market values of the trading derivatives held by

the Bank in 2022 and 2021 is as follows:

EUR million
	2022		2021
	Notional value	Market value	Notional value	Market value
Held for trading:
Interest rate	4,962,408	3,442	4,163,388	3,280
Options	212,704	(488)	203,013	(304)
Other	4,749,704	3,930	3,960,375	3,584
Equity instruments	54,947	566	55,548	439
Options	37,770	(267)	36,920	(231)
Other	17,177	833	18,628	670
Currency and gold	737,276	(1,554)	687,473	(2,172)
Options	42,382	227	43,666	48
Other	694,894	(1,781)	643,807	(2,220)
Credit	13,669	(18)	12,856	(147)
Hedging default derivative and total through out	13,669	(18)	12,856	(147)
Securities and commodities derivatives and other	5,683	(106)	5,518	(49)
	5,773,983	2,330	4,924,783	1,351

12. Non-current assets held for

sale

The detail of non-current assets held for sale in the

balance sheets is as follows:

EUR million
	2022	2021
Foreclosed assets	668	966
Other assets leased out under an operating lease	34	27
Investment property	—	—
Total	702	993

At 31 December 2022, reducing the balance of this

heading, there were EUR 575 million corresponding to

value adjustments due to impairment of those assets,

which entails a coverage of 45% of them (EUR 644

million, with a coverage of 39.3%, in the 2021 financial

year) of which EUR 68 million have been recorded during

the 2022 financial year (EUR 70 million in the 2021

financial year) under the heading 'Gains or losses from

non-current assets and groups disposal of items

classified as held for sale not eligible as discontinued

operations' (see Note 46).

At 31 December 2022 and 2021 there are no liabilities

associated in disposable groups of items that have been

classified as held for sale associated with other 'non-

current assets and alienable groups of items that have

been classified as held for sale'

13. Investments

a) Associated entities

‘Investments - Associates’ in the accompanying balance

sheets includes Banco Santander`s ownership interests

in associates (see note 2.b).

Appendix II contains a detail of these companies,

indicating the percentages of direct or indirect ownership

and other relevant information.

At 31 December 2022, there were no capital increases in

progress at any associated company.

i. Breakdown

The detail of the balance of this heading of the attached

balances, based on the contracting currency and the

admission or non-listing of the securities, is as follows:

EUR million
	2022	2021
Currency:
Euro	2,954	3,020
Foreign Currency	—	—
	2,954	3,020
Listing status:
Listed	1,844	1,917
Unlisted	1,110	1,103
	2,954	3,020

109

ii. Changes

The changes in 2022 and 2021 in ‘Investments -

Associates’’, disregarding impairment losses, were as

follows, (see note 13.a.iii):

EUR million
	2022	2021
Balance at the beginning of the year	3,312	3,363
Purchases, capital increases and mergers	1	20
Of which
Merlín Properties, SOCIMI, S.A.	—	6
Redsys Servicios de Procesamiento, S.L.	—	10
Disposals, reductions and mergers:	(112)	(78)
Of which
Merlin Properties, SOCIMI, S.A.	(4)	(25)
Metrovacesa, S.A.	(107)	(52)
Transfers	1	—
Other changes (net)	19	7
Balance at end of the year	3,221	3,312

During 2022, Banco Santander has sold shares in Merlin

Properties, SOCIMI, S.A. for a net total of EUR 4 million

through various transactions on the stock market.

In May and December 2022, Metrovacesa, S.A. has made

dividend distributions charged to the unrestricted

reserve (issue premium), and Banco Santander received

two payments of EUR 29 million and EUR 51 million,

respectively. These transactions resulted in a reduction

in the cost of the participations of EUR 107 million and

an impairment loss of EUR 27 million (see note 13.a.iii).

In April 2021, the company Merlin Properties, SOCIMI,

S.A. made a distribution of dividends charged to the issue

premium, with Banco Santander which receivied an

amount of EUR 27 million, which has led to the recording

of a reduction in the cost of the participation of EUR 25

million and the recording of an income of EUR 2 million.

Additionally, during the 2021 financial year, Banco

Santander acquired, through various purchases in the

stock market, shares of the entity Merlin Properties,

SOCIMI, S.A. for a net total of EUR 6 million.

In May and December 2021, Metrovacesa, S.A. made 

distributions of dividends charged to the unrestricted

reserve (issue premium), with Banco Santander receiving

two payments of EUR 19 million. These operations ment

a reduction in the cost of the participation of EUR 52

million and an impairment application of EUR 14 million.

In July 2021 and September 2021, as a result of changes

in the composition of the Spanish banking sector, Banco

Santander exercised its preferential acquisition right,

included in the partners' agreement dated on 29 June

2021, of shares in Redsys Servicios of Procesamiento,

S.L. for amounts of EUR 2 million and EUR 8 million,

respectively, until reaching the maximum established

share of 24.9%.

iii. Impairment losses

The changes in the balance of this item were as follows:

EUR million
	2022	2021
Balance at the beginning of the year	292	281
Net impairment losses (reversals) (note 44)	2	24
Other changes	(27)	(13)
Balance at end of the year	267	292

b) Group entities

‘Investments - Group entities’ includes the equity

instruments owned by Banco Santander and issued by

subsidiaries belonging to Grupo Santander.

Relevant information on these companies is provided in

Appendix I.

i. Breakdown

The detail, by currency and listing status, of ‘Investments

- Subsidiaries’ on the balance sheets at 31 December

2022 and 2021 is as follows:

EUR million
	2022	2021
Currency:
Euro	48,952	45,780
Pound Sterling	13,737	13,303
Other currencies	28,247	26,189
	90,936	85,272
Listing status:
Listed	6,552	6,338
Unlisted	84,384	78,934
	90,936	85,272

110

ii. Changes

The changes in 2022 and 2021 in ‘Investments - Group

entities’, disregarding impairment losses, were as

follows:

EUR million
	2022	2021
Balance at beginning of the year	96,724	93,918
Acquisitions, contributions, capital increase payments and mergers	4,107	6,593
Of which
Deuda contingentemente convertibles (AT1)	1,314	996
PagoNXT, S.L.	627	917
Altamira Santander Real Estate, S.A.	550	—
Santander Global Services, S.L.	320	—
Tresmares Santander Direct Lending, SICC, S.A.	274	274
Santander Fintech Holdings, S.L.	250	62
Blecno Investments, S.L. Unipersonal	209	—
Open Bank, S.A.	91	170
Munduspar Participações S.A.	73	—
Santander Global Technology and Operations, S.L. Unipersonal	68	—
Open Digital Services, S.L.	50	161
Deva Capital Holding Company, S.L. Unipersonal	13	96
Ablasa Participaciones, S.L. Unipersonal	—	616
Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México	—	343
PagoNXT Merchant Solutions, S.L. (antes Santander Merchant Platform Solutions, S.L.)	—	296
Retail Company 2021, S.L.U.	—	262
Banco Santander de Negocios Colombia S.A.	—	178
Disposals, capital reductions and mergers	(405)	(4,841)
Of which
Santander Fintech Limited (UK)	(144)	—
Deuda contingentemente convertibles (AT1)	(119)	(1,157)
Santander Tecnología y Operaciones España, S.L. Unipersonal	(68)	—
Popular Spain Holding de Inversiones S.L.U. (Antes Allianz Popular, S.A.)	—	(542)
PagoNXT Merchant Solutions, S.L. (antes Santander Merchant Platform Solutions, S.L.)	—	(296)
Sterrebeeck B.V.	—	(264)
Getnet Europe, Entidad de Pago, S.L. Unipersonal	—	(185)
Grupo Empresarial Santander, S.L.	—	(141)
Transfers	—	—
FX and other movements	2,450	1,054
Balance at end of the year	102,876	96,724

111

At 7 March 2022, the Bank acquired 80% of Brazil's

Munduspar Participações S.A. owner of the 100% of

Waycarbon Soluções Ambientais e Projetos de Carbono

S.A., for EUR 73 million.

In July 2022, the Bank has acquired Blecno Investments,

S.L. Unipersonal,  the owner of a portfolio of assets

comprising 381 bank branches leased to Banco

Santander since 2007 (purchased from Uro Property

Holdings, SOCIMI, S.A. (Actually Uro Property Holdings,

S.A.) in 2015). The amount of this purchase was EUR 209

million.

At 1 December 2022, the merger by absorption of

Santander Tecnología y Operaciones España, S.L.

Unipersonal (absorbed company) into Santander Global

Technology and Operations, S.L. Unipersonal (absorbing

company) was made public, with dissolution without

liquidation of the absorbed company and transfer en

bloc of its assets and liabilities to the absorbing

company.

At 20 December 2022, Santander Fintech Limited S.L. 

has approved a dividend for practically all of its net

assets, having recorded part of the same as a return of

the capital contributed, in the amount of EUR 144

million. On that date, Banco Santander, S.A. and

Santander Fintech Limited signed a contract for the

transfer of assets and liabilities to the Bank as payment

of the dividend and for the subsequent liquidation of the

company. Subsequently, at 23 December 2022, the non-

monetary contribution of the credit rights acquired from

Santander Fintech Limited to Santander Fintech

Holdings, S.L. in the amount of EUR 229 million took

place.

In addition, in July 2022, Banco Santander made a cash

contribution of EUR 21 million to Santander Fintech

Holdings, S.L.".

Also, throughout 2022 Banco Santander has subscribed

capital increases and made contributions from

shareholders, the most relevant being: EUR 627 million

to PagoNxt, S.L., EUR 550 million to Altamira Santander

Real Estate, S.A., EUR 320 million to Santander Global

Services, S.L., EUR 274 million to Tresmares Santander

Direct Lending, SICC, S.A., EUR 91 million to Open Bank,

S.A., EUR 13 million to Deva Capital Holding Company,

S.L. Unipersonal, and EUR 50 million to Open Digital

Services, S.L.

In June 2021, the companies PagoNxt Merchant

Solutions, S.L. (formerly Santander Merchant Platform

Solutions, S.L.), Grupo Empresarial Santander, S.L. and

Sterrebeeck B.V. drafted two partial spin-off projects

pursuant to which the spun-off companies (Grupo

Empresarial Santander, S.L. and Sterrebeeck B.V.) has

transferred at once and by universal succession part of

their assets consisting of all the shares representing the

share capital of Getnet Adquirência e Serviços para

Meios de Pagamento S.A.- Instituiçao de Pagamento

(Getnet Brasil) of its ownership to the beneficiary

company (PagoNxt Mechant Solutions, S.L.). This has led

to a capital increase of PagoNxt Merchant Solutions, S.L.

and a decrease, for the same amount, in Grupo

Empresarial Santander, S.L. and Sterrebeeck B.V. the

amounts were EUR 141 million and EUR 264 million,

respectively. The Bank, as shareholder of the spun-off

companies, has received social participations of PagoNxt

Merchant Solutions, S.L.

On the other hand, throughout the 2021 financial year,

Banco Santander made various monetary contributions

to the equity of the company PagoNxt, S.L. (formerly

Santander Digital Businesses, S.L.) amounting EUR 407

million. Likewise, during the 2021 financial year it has

also subscribed non-monetary contributions to this

company for a total of EUR 510  million, through the

contribution of its participation in the following

companies: EUR 215 million by Getnet Europe, Entidad

de Pago, S.L. Unipersonal (formerly Santander España

Merchant Services, Entidad de Pago, S.L.) and EUR 295

million for PagoNxt Merchant Solutions, S.L. (formerly

Santander Merchant Platform Solutions, S.L.).

At 5 July 2021, the merger by absorption of Santander

Global Operations, S.A. was signed (absorbed company)

by Santander Global Tecnhnology, S.L. (absorbing

company), with dissolution without liquidation of the

absorbed company and en bloc transfer of its assets to

the absorbing company. The new company resulting

from the merger is renamed Santander Global

Technology and Operations, S.L. Unipersonal.

At 21 October 2021, within the process of rationalizing

and optimizing the corporate structure of Grupo

Santander, a segregation project was signed by virtue of

which Banco Santander has segregated the autonomous

economic unit that integrates the branch management

business empty bank offices, with closure project or

leased to third parties not linked to the banking activity

of Banco Santander (split company), including the

contracts linked to them and the employees currently in

charge of their management, in favor of a newly creation

called Retail Company 2021, S.L.U (beneficiary

company). The amount of the segregation has risen to

EUR 262 million.

On December 7, 2021, within the framework of the

Public Offer for the Acquisition of shares of Banco

Santander México, S.A., Institución de Banca Múltiple,

Grupo Financiero Santander México, for up to all of the

Series B shares representing the capital stock, Banco

Santander acquired 4.51% of the shares of these

company, both in Mexico and in the United States. This

meant a disbursement of EUR 343 million, including the

expenses of the operation.

112

On December 16, 2021, the deed of merger by

absorption by the Bank of the companies Popular Spain

Holding de Inversiones, S.L.U. (formerly Allianz Popular,

S.L.), Santander Investment I, S.A.U. and Administration

of Bancos Latinoamericanos Santander, S.L.,

incorporating, among other assets, the companies

Ablasa Participaciones, S.L. Unipersonal and Banco

Santander de Negocios Colombia S.A. The net amount

registered under this heading for this operation was EUR

223 million, with a credit in reserves of  EUR 1,039

million.

Also, throughout the 2021 financial year Banco

Santander subscribed capital increases and made

partner contributions, the most relevant being: EUR 274

million  to Tresmares Santander Direct Lending, SICC,

S.A., EUR 170 million to Open Bank, S.A., EUR 161 million

to Open Digital Services, S.L., EUR 96 million to Deva

Capital Holding Company, S.L. Unipersonal and EUR 62

million to Santander Fintech Holdings, S.L.

iii. Impairment losses

The changes in the balance of this item were as follows:

EUR million
	2022	2021
Balance at beginning of the year	11,452	12,358
Net impairment losses (reversals) (note 44)	503	(851)
Other changes	(15)	(55)
Balance at end of the year	11,940	11,452

The Management carries out an analysis of the potential

loss of value of the investments in subsidiaries, joint

ventures and associates that it has registered with

respect to their book value. Said analysis is carried out

using different parameters, such as equity value, listed

value and recoverable value, which is obtained from

estimates of expected cash flows or net worth corrected

by tacit capital gains existing on the date of the

valuation.

In accordance with the foregoing, Banco Santander

carried out the evaluation of its investees in December

2022. The impairment allowances made by the Bank

during 2022 include 550 million euros corresponding to

the impairment of the stake held in Altamira Santander

Real Estate, S.A., as a consecuence of a EUR 550 million

contribution from the shareholders in order to restore

the equity balance of the company. Additionally, during

the year impairment releases have been made, including

119 million euros from PagoNxt, S.L.

As it was previously stated Banco Santander carried out

in December 2021 the evaluation of its investees. The

provisions for impairment made by the Bank during the

2021 financial year include EUR 144 million

corresponding to the impairment of the stake held in

Open Digital Services, S.L. Additionally, during the year

impairment releases have been made that include EUR

887 million corresponding to the stake in Santander UK

Group Holdings plc, derived from the results obtained by

the group of entities of which it is the parent and the

positive evolution of the interest rate of exchange

affected.

c) Joint venture entities

The cost of the investees recorded under this heading at

31 December 2022 amounts to EUR 525 million, while

the impairment provisions recorded at that date are EUR

201 million (EUR 451 million and EUR 194 million in

2021).

In March 2022 and December 2022, UCI, S.A. has

approved capital increases of EUR 50 million and EUR 24

million, respectively, corresponding to Banco Santander.

In December 2021, UCI, S.A. approved a capital increase,

corresponding to Banco Santander an amount of EUR 30

million.

In 2022, Banco Santander made impairment charges of

EUR 7 million (EUR 27 million in 2021) for the entities

included under this heading, mainly UCI, S.A., while in

2021 it made impairment charges of EUR 25 million for

the same company.

14. Insurance contracts linked to

pensions

The detail of Insurance contracts linked to pensions in

the balance sheets are as follows:

EUR million
	2022	2021
Assets relating to insurance contracts covering post-employment benefit plan obligations (notes 17 and 23)	313	381
Total	313	381

113

15. Tangible assets

a) Changes

The changes in ‘Tangible assets’ in the balance sheet 

were as follows:

EUR million
	Tangible assets				Of which: For leasing
	For own use	Leased out under an operating lease	Investment property	Total	For own use	Leased out under an operating lease	Investment property	Total
Cost
Opening balance at 1 January 2021	8,316	976	327	9,619	2,954	—	—	2,954
Additions/disposals (net)	110	147	(2)	255	(51)	—	—	(51)
Transfers and other	(627)	—	55	(572)	(8)	—	—	(8)
Balance at 31 December 2021	7,799	1,123	380	9,302	2,895	—	—	2,895
Additions/disposals (net)	89	36	—	125	(12)	—	—	(12)
Transfers and others	243	—	(10)	233	253	—	—	253
Balance at 31 December 2022	8,131	1,159	370	9,660	3,136	—	—	3,136
Accumulated depreciation
Opening balance at 1 January 2021	(2,513)	(229)	(16)	(2,758)	(502)	—	—	(502)
Charge for the year	(404)	(114)	(4)	(522)	(192)	—	—	(192)
Disposals	142	72	—	214	133	—	—	133
Transfers and others	506	—	(2)	504	—	—	—	—
Balance at 31 December 2021	(2,269)	(271)	(22)	(2,562)	(561)	—	—	(561)
Charge for the year	(383)	(124)	(4)	(511)	(227)	—	—	(227)
Disposals	28	114	—	142	27	—	—	27
Transfers and others	3	—	(10)	(7)	—	—	—	—
Balance at 31 December 2022	(2,621)	(281)	(36)	(2,938)	(761)	—	—	(761)
Impairment losses
Opening balance at 1 January 2021	(88)	—	(93)	(181)	—	—	—	—
Charge for the year	(85)	—	—	(85)	—	—	—	—
Disposals	—	—	—	—	—	—	—	—
Transfers and others	35	—	6	41	—	—	—	—
Balance at 31 December 2021	(138)	—	(87)	(225)	—	—	—	—
Charge for the year	—	—	—	—	—	—	—	—
Disposals	—	—	—	—	—	—	—	—
Transfers and others	20	—	(5)	15	—	—	—	—
Balance at 31 December 2022	(118)	—	(92)	(210)	—	—	—	—
Tangible assets, net
Balance at 31 December 2021	5,392	852	271	6,515	2,334	—	—	2,334
Balance at 31 December 2022	5,392	878	242	6,512	2,375	—	—	2,375

114

b) Property, plant and equipment for own use

The detail, by class of asset, of ‘Property, plant and

equipment - For own use’ on the balance sheets in 2022

and 2021 sheets is as follows:

EUR million
	Cost	Accumulated depreciation	Impairment losses	Carrying amount	Of which, right-of- use for operating lease
Land and buildings	5,389	(740)	(138)	4,511	2,334
Furniture, fixtures and vehicles	2,037	(1,278)	—	759	—
Computer hardware	326	(251)	—	75	—
Other	47	—	—	47	—
Balance at 31 December 2021	7,799	(2,269)	(138)	5,392	2,334
Land and buildings	5,632	(990)	(118)	4,523	2,375
Furniture, fixtures and vehicles	2,092	(1,343)	—	749	—
Computer hardware	348	(287)	—	61	—
Other	59	(1)	—	59	—
Balance at 31 December 2022	8,131	(2,621)	(118)	5,392	2,375

The carrying amount at 31 December 2022 in the table

above includes the following approximate amounts:

•EUR 4 million (EUR 3 million at 31 december 2021)

relating to property, plant and equipment owned by

Banco Santander's branches located abroad.

•EUR 422 million (EUR 484 million at 31 December

2021) relating to property, plant and equipment held

under finance leases by Banco Santander, of which

EUR 287 million related to leases in effect as of 31

December 2022 (EUR 360 million at 31 December

2021)

c) Tangible assets - Leased out under an operating

lease

Banco Santander has assets assigned under operating

lease where the company is the lessor and they do not

meet the accounting requirements to be classified as

financial leases. The net cost of these leases is recorded

as an asset and is depreciated on a straight-line basis

over the contractual term of the lease up to the expected

residual value.

The expected residual value and, consequently, the

monthly depreciation expense may change during the

term of the lease. The Bank estimates expected residual

values using independent data sources and internal

statistical models. Likewise, it evaluates the estimate of

the residual value of said leases and adjusts the

depreciation rate based on the change in the expected

value of the asset at the end of the lease.

Banco Santander periodically evaluates its investment in

operating leases and whenever there are indications of

impairment, such as a systemic and material decrease in

the values of the assigned assets. If assets leased under

operating leases are considered to be impaired,

impairment is measured as the amount by which the

assets' carrying amount exceeds fair value as estimated

by discounted cash flows. During the years 2022 and

2021, the Bank has not recorded any material

impairment for this concept.

During the years 2022 and 2021, no significant variable

payments have been made not included in the valuation

of lease assets.

d) Tangible assets - Investment property

The fair value of the investment property at 31

December 2022 and 2021 amounts to EUR 327 million

and EUR 332 million, respectively. A comparison of the

fair value of investment property at 31 December 2022

and 2021 with the net book value results in gross

unrealised gains of EUR 85 million and EUR 61 million

for each of these years, respectively, attributed to the

Bank in full.

Rental income from investment properties and direct

expenses related to both investment properties that

generated income during 2022 and 2021 and those

investment properties that did not generate income

during 2022 and 2021 are not material in the context of

the entity's annual accounts.

115

16. Intangible assets

a) Goodwill

The detail of the 'Goodwill', on the balance sheets is as

follows:

EUR million
	2022	2021
Santander España	623	623
Amortization charge	(289)	(227)
Balance at end of year	334	396

The movement during the years 2022 and 2021 has

been as follows:

EUR million
	2022	2021
Balance at beginning of the year	396	458
Additions (note 3)	—	—
Amortization charge	(62)	(62)
Impairment losses	—	—
Disposals or changes in scope	—	—
Balance at end of year	334	396

Neither in 2022, nor in 2021 has goodwill been

generated.

All of the goodwill recorded at the end of the 2022 and

2021 financial years comes from the following corporate

operations that were carried out in the 2018 financial

year:

•Merger by absorption of Banco Popular Español,

S.A.U. On June 7, 2017, Banco Santander acquired

100% of the share capital of Banco Popular Español,

S.A.U. Subsequently, on September 28, 2018, the

deed of merger by absorption of Banco Popular

Español, S.A.U. was registered in the Mercantile

Registry of Cantabria by Banco Santander, S.A. with

accounting effects January 1, 2018, transferring to

the books of Banco Santander a gross goodwill of

EUR 248 million.

•Repurchase of the credit and debit card business

marketed by Grupo Banco Popular in Spain and

Portugal generating the business combination a

goodwill of EUR 375 million.

In accordance with Bank of Spain Circular 4/2017, the

goodwill is amortized within a period of ten years. In

addition, the Bank periodically reviews the term and

method of amortization and, if deemed inappropriate,

the impact will be treated as a change in accounting

estimates.

As of 31 December 2022 the amount of goodwill

recorded by Banco Santander, net of accumulated

depreciation, amounted to EUR 334 million and EUR 396

million, respectively.

Banco Santander, at least annually and whenever there

are indicators of impairment, conducts an analysis of the

potential loss of value of the trade funds it has recorded

in respect of their recoverable value.

The first step in carrying out this analysis requires the

identification of the cash-generating units, which are the

smallest identifiable groups of assets in Banco

Santander  that generate cash inflows and are largely

independent of the cash flows of other assets or asset

groups.

For the purposes of those mentioned in the preceding

paragraph, the Bank's administrators have identified the

commercialbanking business in Spain as the cash-

generating unit to which to allocate goodwill arising

both by the acquisition and subsequent merger by

absorption of Banco Popular Español, S.A.U. and by the

repurchase of the credit and debit cards from Grupo

Banco Popular.

Its carrying value is determined taking into account the

book value of all the assets and liabilities that make up

the commercial banking business in Spain, together with

the corresponding goodwill. Said book value is compared

with its recoverable amount in order to determine if

there is impairment.

The recoverable amount of Santander España cash-

generating unit has been determined as the fair value of

such cash-generating unit obtained using quotes, market

references (multiples) or internal estimates. At the end

of the fiscal year said value exceeded the book value.

Based on previous data, and in accordance with the

estimates of the Bank's administrators, during the years

2022  and 2021 the Bank has not recorded any amount

under the heading 'Impairment in value or reversal of

impairment in value of non-financial assets - intangible

assets' in concept of impairment of goodwill.

b) Other intangible assets

i. Breakdown

The detail of Intangible assets  ‘Other intangible assets’

on the balance sheets is as follows:

EUR million
	2021	2020
With finite useful life
IT Developments	1,243	1,106
Accumulated amortization	(718)	(606)
Balance at end of year	525	500

116

ii. Changes

The changes in Intangible assets ‘Other intangible

assets’ on the balance sheets were as follows:

EUR million
	2022	2021
Balance at end of prior year	500	490
Net additions and disposals	137	110
Amortization charge	(112)	(100)
Impairments losses	—	—
Balance at end of year	525	500

17. Other assets and Other

liabilities

The detail of ‘Other assets and Other liabilities’ on the

accompanying balance sheets is as follows:

EUR million
	Assets		Liabilities
	2022	2021	2022	2021
Transactions in transit	—	11	5	—
Insurance contracts linked to pensions (note 14)	313	381	—	—
Inventory	—	—	—	—
Prepayments and accrued income	479	504	2,560	2,133
OtherA	1,888	1,044	1,184	1,138
Total	2,680	1,940	3,749	3,271

A.Includes, mainly, unsettled transactions.

117

18. Deposits from central banks

and credit institutions

The detail by classification, type and currency of

‘Deposits from central banks’ and ‘Deposits from credit

institutions’ on the accompanying balance sheets is as

follows:

EUR million
	2022	2021
CENTRAL BANKS
Classification
Financial liabilities held for trading	4,265	44
Financial liabilities designated at fair value through profit or loss	1,740	607
Financial liabilities at amortized cost	15,728	64,649
	21,733	65,300
Type
Time deposits	15,471	63,161
Deposits available with prior notice	—	—
Repurchase agreements	6,262	2,139
	21,733	65,300
Currency
Euro	15,571	60,343
US dollar	3,274	2,809
Pound Sterling	2,596	2,110
Other currencies	292	38
	21,733	65,300
CREDIT INSTITUTIONS
Classification
Financial liabilities held for trading	8,949	5,718
Financial liabilities designated at fair value through profit or loss	2,160	1,067
Financial liabilities at amortized cost	41,609	35,262
	52,718	42,047
Nature
Current accounts / Intraday deposits	12,930	15,989
Time deposits	22,242	15,698
Deposits available with prior notice	—	—
Repurchase agreements	17,546	10,360
	52,718	42,047
Currency
Euro	35,711	31,067
US dollar	12,406	7,737
Pound Sterling	3,807	2,577
Other currencies	794	666
	52,718	42,047
Total	74,451	107,347

Banco Santander, following the various long-term

financing programmes of the European Central Bank

(TLTRO, targeted longer-term refinancing operation),

mantain deposits at amortized cost from the TLTRO III

programme amounting to EUR 11,278 million as of 31

December 2022 (EUR 61,183 million at 31 December

2021 from TLTRO III). At December 2022, the income

recognized in the profit and loss account, corresponding

to TLTRO III, is EUR 348 million (EUR 608 millions at 31

December 2021).

118

The deposits classified in the 'Liabilities held for trading'

portfolio correspond to temporary transfers of assets of

Spanish and foreign institutions.

Note 48 contains a detail of the residual maturity periods

of financial liabilities at amortized cost.

19. Customer deposits

The detail by classification, type, sector and geographical

area, of ‘Customer deposits’ is as follows:

EUR million
	2022	2021
Classification
Financial liabilities held for trading	6,580	1,291
Financial liabilities designated at fair value through profit or loss	34,579	11,069
Financial liabilities at amortized cost	345,875	296,243
	387,034	308,603
Type
Current accounts / Intraday deposits	279,219	269,721
Time depositsA	88,979	36,644
Deposits available with prior notice	—	—
Repurchase agreements	18,836	2,238
Of which, subordinated deposits	—	—
Of which, issued securities	1,995	2,290
	387,034	308,603
Sector
Public sector	28,845	23,231
Other financial companies	77,363	43,610
Non-financial companies	125,577	95,810
Households	155,249	145,952
	387,034	308,603
Geographical area
Spain	266,672	262,261
European Union (excluding Spain)	73,007	25,002
United States and Puerto Rico	26,504	9,027
Other OECD countries	10,622	6,699
Latin America (non-OECD)	5,856	2,796
Rest of the world	4,373	2,818
	387,034	308,603

A.Of the total time deposits, EUR 25,883 million correspond to

branches of the entity abroad (EUR 8,012 million in 2021).

The item issued securities in the table above include the

liabilities associated with securitisation transactions (see

note 10.e).

Note 48 contains a detail of the residual maturity periods

of financial liabilities at amortized cost.

119

20. Marketable debt securities

a) Breakdown

The detail by classification and type, of ‘Marketable debt

securities’ in the accompanying balance sheets is as

follows:

EUR million
	2022	2021
Classification:
Financial liabilities at amortized cost	125,969	104,094
Financial liabilities designated at fair value through profit or loss	89	—
	126,058	104,094
Type:
Certificates of deposit	11,611	4,444
Guaranteed bonds	48,161	62,454
Mortgage-backed bonds	39,520	49,764
Others mortgage-backed bonds and guaranteed bonds	8,641	12,690
Other issued securities (note 21)	93,192	76,890
Of which, subordinated liabilities	19,640	20,399
Treasury sharesA	(26,149)	(41,018)
Valuation adjustments	(757)	1,324
	126,058	104,094

A.At 31 December  2022 y 2021, the registered balance corresponds mainly to guaranteed bonds.

Note 48 contains a detail of the residual maturity periods

of financial liabilities at amortized cost.

b) Certificates of deposit

The detail of certificates of deposits by currency of

issuance is as follows:

			2022
	EUR million		Outstanding issue amount in foreign currency (million)	Annual interest rateA
Currency of issuance	2022	2021
US dollar	8,303	1,564	8,866	2.52%
Hong Kong Dollars	3,260	2,880	2,891	3.36%
Pound Sterling	48	—	397	3.66%
Balance at end of the year	11,611	4,444

A. Average interest rates for different issue based on their nominal values.

120

i. Changes

The changes in certificate of deposit on the balance

sheet for the years 2022 and 2021 are  as follows:

EUR million
	2022	2021
Balance at end of the prior year	4,444	3,921
Issues	31,582	15,684
Redemptions	(24,476)	(15,386)
Exchange differences and other changes	61	225
Balance at end of the year	11,611	4,444

At 31 December 2022, the Bank  issued certificates of

deposit amounting to EUR 31,582 million (EUR 15,648

million as at 31 December 2021), with an average

maturity of 3 months (3 months during the 2021

financial year), of which EUR 24,476 million have been

amortized (EUR 15,386 million at December 2021).

c) Marketable Mortgage- backed securities 

The detail by currency of issuance, of ‘Marketable

mortgage-backed securities’ is as follows:

			2022
	EUR million		Annual interest rateA
Currency of issuance	2022	2021
Euros	39,520	49,764	1.18%
Balance at end of the year	39,520	49,764	1.18%

A. Average interest rate of the various issues based on their nominal

values.

i. Changes

The changes in 2022 and 2021 in ‘Marketabl1e

mortgage-backed securities’ were as follows:

EUR million
	2022	2021
Balance at the end of the prior year	49,764	44,343
Reclassification of deposits	—	—
Issues	13,500	12,720
Of which
June 2021	—	6,000
July 2021	—	4,970
September 2021	—	1,000
December 2021	—	750
February 2021	1,000	—
March 2021	1,500	—
June 2021	5,000	—
July 2021	6,000	—
Transfers	(44)	1
Amortizations on maturity	(23,700)	(7,300)
Balance at end of the year	39,520	49,764

The members of the board of directors state that Banco

Santander operates in the field of issuances in the

Spanish mortgage market, has and has established

express policies and procedures that cover all the

activities carried out and that guarantee strict

compliance with the mortgage market regulations

applicable to these activities for the purposes of the

provisions of Bank of Spain Circular 4/2017.

The risk policies applicable to mortgage market

transactions envisage maximum loan-to-value (LTV)

ratios, and specific policies are also in place adapted to

each mortgage product, which occasionally require the

application of stricter limits.

Banco Santander’s general policies in this respect require

the repayment capacity of each potential customer (the

effort ratio in loan approval) to be analysed using

specific indicators that must be met. This analysis must

determine whether each customer’s income is sufficient

to meet the repayments of the loan requested. In

addition, the analysis of each customer must include a

conclusion on the stability over time of the customer’s

income considered with respect to the life of the loan.

The aforementioned indicator used to measure the

repayment capacity (effort ratio) of each potential

customer takes into account mainly the relationship

between the potential debt and the income generated,

considering on the one hand the monthly repayments of

the loan requested and other transactions and, on the

other, the monthly salary income and duly supported

income.

Grupo and Banco Santander have specialised document

comparison procedures and tools for verifying customer

information and solvency (see note 49).

Grupo and Banco Santander procedures envisage that

each mortgage originated in the mortgage market must

be individually valued by an appraisal company not

related to the Group.

In accordance with Articles 18.1 and 21 of RDL 24/2021,

any appraisal company approved by the Bank of Spain

may issue valid appraisal reports. However, as permitted

by this same article, the Group and the Bank perform

several checks and select, from among these companies,

a small group with which they enter into cooperation

agreements with special conditions and automated

control mechanisms. The Group’s and the Bank’s internal

regulations specify, in detail, each of the internally

approved companies, as well as the approval

requirements and procedures and the controls

established to uphold them. In this connection, the

regulations establish the functions of an appraisal

company committee on which the various areas of the

Group and the Bank related to these companies are

represented. The aim of the committee is to regulate and

adapt the internal regulations and the activities of the

appraisal companies to the current market and business

situation (see note 2.i).

121

Basically, the companies wishing to cooperate with the

Group and the Bank must have a significant level of

activity in the mortgage market in the area in which they

operate, they must pass a preliminary screening process

based on criteria of independence, technical capacity and

solvency -in order to ascertain the continuity of their

business- and, lastly, they must pass a series of tests

prior to obtaining definitive approval.

In order to fully comply with the legislation, any

appraisal provided by the customer is reviewed,

irrespective of which appraisal company issues it, to

check that the requirements, procedures and methods

used to prepare it are formally adapted to the valued

asset pursuant to current legislation and that the values

reported are customary in the market.

Mortgage-backed bonds

The mortgage bonds issued by Banco Santander are

securities that, without prejudice to the universal

patrimonial responsibility of the issuer, and in

accordance with the provisions of RDL 24/2021, are

specially guaranteed, together with the rest of the

issuer's obligations under a preferential right on all the

assets that make up the Mortgage Bonds Coverage Set

at any time without the need to affect said assets as

collateral by means of a public deed, or any registration

in any public registry or any other formality.

The Mortgage Bonds Coverage Set is made up of: (i)

admissible mortgage loans in accordance with the

provisions of article 23 of RDL 24/2021, although it may

also be made up of, likewise, (ii) admissible liquid assets

in accordance with the contained in article 11 of RDL

24/2021, (iii) admissible substitution assets in

accordance with the provisions of the third section of

article 23 of RDL 24/2021 and (iv) admissible derivative

instruments in accordance with the provisions of article

12 of the RDL 24/2021, in the quantity and with the

characteristics provided for in RDL 24/2021.

Mortgage bonds incorporate the credit right of their

holder against the issuing entity, guaranteed in the

manner indicated in the previous paragraph, and are

accompanied by execution to claim payment from the

issuer after its expiration. The holders of these titles

have the character of singularly privileged creditors, with

the preference currently indicated in numbers 8 of article

1,922 and 6 of article 1,923 of the Civil Code over any

other creditors, in relation to all the assets that integrate

the Mortgage Bonds Coverage Set. Pursuant to current

regulations, all holders of the Issuer's covered bonds,

regardless of their issuance date, will have the same

priority over the assets included in the Mortgage Bonds

Coverage Set.

In the event of bankruptcy, holders of identity cards, as

long as they are not considered 'persons specially

related' to the issuing entity in accordance with Royal

Legislative Decree 1/2020, of May 5, which approves the

consolidated text of the Bankruptcy Law (the

'Bankruptcy Law'), would enjoy the special privilege

established in number 7 of article 270 of the

aforementioned Bankruptcy Law, which will only apply

to the part of the bankruptcy credit that does not exceed

the value of the guarantee (calculated in accordance

with article 44 of RDL 24/2021). Pursuant to the

provisions of said Chapter, in the event of bankruptcy of

the Issuer, the coverage assets of the Mortgage Bonds

Coverage Set individualized and identified in the special

register where the Mortgage Bonds Coverage Set is

segregated in accordance with the certification issued by

the mortgage bond control body will be materially

segregated from the issuer's equity and will form a

separate equity that will operate in legal transactions

represented by a special administrator.

Once the segregation has been carried out, in accordance

with the provisions of article 44.2 of RDL 24/2021, if the

total value of the assets that make up each separate

patrimony is greater than the total value of the liabilities

guaranteed by said separate patrimony plus the legal

over-guarantee, contractual or voluntary and the

liquidity requirement, the special administrator may

decide whether to continue with the current

management of the corresponding separate equity until

its maturity or make a total or partial assignment of the

separate equity to another entity issuing guaranteed

bonds. Otherwise, the special administrator will request

the liquidation of said separate patrimony following the

ordinary bankruptcy procedure. The request for

liquidation of the separate patrimony will produce (a)

the early maturity of all the issuer's securities

guaranteed by the assets that make up the separate

patrimony and (b) the beginning of the liquidation of the

assets of the separate patrimony. With the amount

obtained in the liquidation of the separate patrimony,

after deducting the expenses and costs derived from the

liquidation of the same, including the remuneration of

the special administrator, the holders of the mortgage

bonds and the counterparties of derivative contracts

included in the Mortgage Bonds Coverage Set (if

applicable), in proportion to their credits regardless of

the age of the debt. If, once the liquidation of the

separate equity has been completed or all its liabilities

have expired, there is a remainder, this will correspond

to the active mass of the issuer's bankruptcy. If, on the

contrary, full satisfaction of the credit is not achieved, in

accordance with the provisions of article 42.1 of RDL

24/2021, the unsatisfied part will be recognized in the

issuer's bankruptcy with the same priority as that of the

rights. of credit of the ordinary unsecured creditors of

the issuer.

The issuing entity may repay the mortgage bonds early,

if this has been expressly established in the final

conditions of the issue in question and in the conditions

established there.

None of the mortgage bonds issued by Banco Santander

have replacement assets involved.

122

The following is a detail, by their main features and

nominal amounts, of the marketable mortgage-backed

bonds outstanding at 31 December 2022 and 2021:

	Code ISIN	EUR million			Annual interest rate (%)
		2022	2021	Nominal amount
Issues:
Euros
Issue February 2006	ES0413900129	1,500	1,500	1,500	3.87%
Issue May 2007	ES0413900160	1,500	1,500	1,500	4.63%
Issue January 2010	ES0413900194	—	100
Issue November 2014	ES0413900368	1,750	1,750	1,750	1.13%
Issue November 2014	ES0413900376	1,250	1,250	1,250	2.00%
Issue September 2015	ES0413900384	—	1,000
Issue January 2016	ES0413900392	1,000	1,000	1,000	1.50%
Issue February 2016	ES0413900400	907	907	907	2.04%
Issue March 2016	ES0413900418	100	100	100	1.52%
Issue June 2017	ES0413900475	—	350
Issue June 2017	ES0413900491	—	2,000
Issue November 2017	ES0413900509	12	12	12	2.53%
Cedula Pitch		—	300
Issue July 2013	ES0413790264	15	15	15	5.28%
Issue July 2013	ES0413790280	—	400
Issue July 2013	ES0413790298	—	500
Issue July 2013	ES0413790306	—	1,500
Issue February 2014	ES0413790330	—	1,000
Issue March 2014	ES0413790348	—	200
Issue March 2014	ES0413790389	—	250
Issue April 2015	ES0413790397	1,000	1,000	1,000	1.00%
Issue June 2015	ES0413790405	575	575	575	0.41%
Issue March 2016	ES0413790439	—	1,500
Issue December 2016	ES0413790462	250	250	250	1.13%
Issue March 2017	ES0413790470	—	1,000
Issue April 2017	ES0413790488	—	1,600
Issue July 2014 (Banco Pastor)	ES0405035009	—	1,000
Issue June 2018	ES0413900517	350	350	350	1.27%
Issue October 2018	ES0413900533	1,000	1,000	1,000	1.12%
Issue October 2018	ES0413900525	—	2,000
Issue November 2018	ES0413900541	200	200	200	0.40%
Issue May 2019	ES0413900558	1,500	1,500	1,500	0.88%
Issue July 2019	ES0413900566	1,500	1,500	1,500	0.25%
Issue December 2019	ES0413900574	1,750	1,750	1,750	0.13%
Issue February 2020	ES0413900590	1,250	1,250	1,250	0.01%
Issue February 2020	ES0413900608	1,250	1,250	1,250	0.10%
Issue February 2020	ES0413900582	250	250	250	0.05%
Issue March 2020	ES0413900616	—	1,000
Issue April 2020	ES0413900624	—	2,000
Issue October 2020	ES0413900699	500	500	500	0.01%
Issue June 2021	ES0413900723	4,000	4,000	4,000	0.18%
Issue June 2021	ES0413900731	2,000	2,000	2,000	0.19%
Issue July 2021	ES0413900749	4,000	4,000	4,000	0.18%

123

	Code ISIN	EUR million			Annual interest rate (%)
		2022	2021	Nominal amount
Issue July 2021	ES0413900756	220	220	220	0.18%
Issue July 2021	ES0413900764	750	750	750	0.02%
Issue September 2021	ES0413900772	—	1,000
Issue December 2021	ES0413900780	750	750	750	2.64%
Issue February 2022	ES0413900806	1,000	—	1,000	0.79%
Issue March 2022	ES0413900814	1,500	—	1,500	1.39%
Issue September 2022	ES0413900848	2,250	—	2,250	2.38%
Issue September 2022	ES0413900855	1,250	—	1,250	2.75%
Issue September 2022	ES0413900863	1,000	—	1,000	2.03%
Issue September 2022	ES0413900871	1,000	—	1,000	2.08%
Issue September 2022	ES0413900889	500	—	500	2.11%
Balance at end of the year		39,629	49,829	39,629

The detail of the principal amount of Banco Santander

mortgage securities outstanding at 31 December 2022

and 2021 is as follows:

EUR million
	Principal amount
	2022	2021
1. Mortgage bonds outstanding	—	—
2. Mortgage-backed bonds issued (note 10.f)	39,629	49,829
Of which, recognized in liabilities	22,106	22,274
2.1. Debt instruments. Issued through a public offering	39,629	49,829
- Term to maturity of up to one year	1,125	7,700
-Term to maturity of one to two years	2,000	1,125
-Term to maturity of two to three years	2,250	3,000
-Term to maturity of three to five years	6,250	7,150
-Term to maturity of five to ten years	25,347	26,947
-Term to maturity of more than ten years	2,657	3,907
2.2. Debt instruments. Other issues	—	—
2.3 Deposits	—	—
3. Mortgage transfer certificates issued (1)	—	—
4. Mortgage transfer certificates issued (1) (2)	9,769	11,133
4.1.  Issued through a public offering (note 10.e)	9,769	11,133

(1) Relating solely to mortgage loans and credits not derecognized.

(2) The average term to maturity weighted by amount, expressed in months, rounded up, was 489 months .

124

Asset transactions

According  to Bank of Spain Circular 4/2017, on the

implementation of certain aspects of the mortgage

market, the table below details: the principal amount of

all the mortgage loans and credits, those that are

eligible pursuant to Royal Degree 716/2009 on the

regulation of the Spanish mortgage market for the

purposes of calculating the limit of mortgage-backed

bond issues, the mortgage loans and credits covering

mortgage bond issues, those that have been transferred

through mortgage participation certificates or mortgage

transfer certificates, and the uncommitted transactions

relating to Banco Santander. The breakdown of the

mortgage loans at 31 December 2022 and 2021

indicating their eligibility and computability for

mortgage market regulatory purposes, is as follows:

EUR million
	Principal amount
	2022	2021
Total mortgage loans and credits (1)	93,917	94,975
Mortgage participation certificates issued	1,442	1,699
Of which, loans recognized in assets	—	—
Mortgage transfer certificates issued	11,529	11,590
Of which, loans recognized in assets (note 10.e)	9,769	11,133
Mortgage loans and credits backing mortgage and mortgage-backed bond issues (2)	80,946	81,686
i) Non-eligible mortgage loans and credits (3)	15,167	17,744
-  Which comply with the eligibility requirements, except for the limit established  in Article 5.1 of Royal Decree 716/2009	7,699	11,357
-  Other non-eligible loans	7,468	6,387
ii) Eligible mortgage loans and credits (4)	65,779	63,942
-  Un-measurable amounts (5)	—	—
-  Measurable amounts	65,779	63,942
a)   Mortgage loans and credits covering mortgage bond issues	—	—
b)   Mortgage loans and credits eligible to cover mortgage-backed bond issues	65,779	63,942

(1) Including mortgage loans and credits acquired through mortgage participation certificates and mortgage transfer certificates, irrespective of whether they

have been derecognized.

(2) Total loans less mortgage participation certificates issued, mortgage transfer certificates issued and mortgage loan securing borrowings.

(3) Due to non-compliance with the requirements of Art. 3 of Royal Decree 716/2009.

(4) Pursuant to Art. 3 of Royal Decree 716/2009, without taking into account the measurement limits established in Art. 12 of Royal Decree 716/2009.

(5) Pursuant to Art. 12 of Royal Decree 716/2009.

125

In accordance with Bank of Spain Circular 4/2017 in

force, the nominal value of mortgage loans and credits

and the nominal value of loans and credits that are

eligible, are shown below, without considering the

measurement limits established under Article 12 of

Royal Decree 716/2009, by origin, currency, payment

status, average term to maturity, interest rate, borrower

and type of guarantee:

EUR million
	Principal amount
	2022		2021
	Mortgage loans and credits backing mortgage and mortgage-backed bond issues	Of which, eligible loansA	Mortgage loans and credits backing mortgage and mortgage-backed bond issues	Of which, eligible loansA
By origin of transactions
Originated by the entity	80,354	65,206	80,951	63,246
From subrogations	592	573	735	696
	80,946	65,779	81,686	63,942
By currency
Euro	80,328	65,779	80,984	63,942
Other currencies	618	—	702	—
	80,946	65,779	81,686	63,942
By payment status
Current	76,289	64,729	73,299	62,148
Past due	4,657	1,050	8,387	1,794
	80,946	65,779	81,686	63,942
By term to maturity
Less than 10 years	22,923	14,082	25,460	15,418
10 to 20 years	28,849	25,824	30,185	26,059
20 to 30 years	28,644	25,872	25,125	22,125
More than 30 years	530	1	916	340
	80,946	65,779	81,686	63,942
By interest rate
Fixed-rate loans	26,704	23,513	20,601	17,944
Floating-rate loans	54,242	42,266	61,085	45,998
	80,946	65,779	81,686	63,942
By borrower
Legal entities and individual traders	21,612	11,332	23,554	12,877
Of which, property developments(including land)	2,411	482	2,572	—
Other individuals and non-profit institutions serving households	59,334	54,447	58,132	51,065
	80,946	65,779	81,686	63,942
By type of guarantee
Completed buildings – residential	64,100	57,165	63,465	53,989
Of which, officially sponsored housing	7,515	6,640	8,837	6,419
Completed buildings – commercial	4,956	3,017	5,744	3,652
Completed buildings – other	8,516	4,505	9,035	5,212
Buildings under construction – residential	1,222	1	1,031	—
Of which, officially sponsored housing	49	—	33	—
Buildings under construction – commercial	10	—	67	—
Buildings under construction – other	22	5	46	5
Land – developed consolidated land	1,136	534	1,110	382
Land – other	984	552	1,188	702
	80,946	65,779	81,686	63,942

A,    Pursuant to Art. 3 of Royal Decree 716/2009, without taking into account measurement limits established in Art. 12 of Royal Decree 716/2009.

126

In accordance with the provisions of Bank of Spain

Circular 4/2017 in force, the following is a detail, by

loan-to-value ratio, of the principal amount of the

eligible mortgage loans and credits pursuant to Royal

Decree 716/2009, without considering the measurement

limits established in Article 12 of Royal Decree

716/2009:

EUR million
	31 December 2022
	Principal amount by LTV range
	<=40%	>40%, <= 60%	>60%, <= 80%	>80%	TOTAL
Mortgage loans and credits for mortgage and mortgage-backed bond issues	18,127	24,435	23,217	—	65,779
Home property	14,178	19,773	23,217	—	57,168
Other property	3,949	4,662	—	—	8,611

A.    Pursuant to Art. 3 of Royal Decree 716/2009, without taking into account measurement limits established in Art. 12 of Royal Decree 716/2009.

The following is a detail of the changes in 2022 (in

accordance with Bank of Spain Circular 4/2017 in force)

in the principal amount of eligible and non-eligible

mortgage loans and credits pursuant to Royal Decree

716/2009:

EUR million
	Eligible mortgage loans and creditsA	Non-eligible mortgage loans and creditsB
Balance at 31 December  2021	63,942	17,744
Period additions:	12,243	6,285
Originated by Banco Santander	10,185	2,949
Subrogations from other entities	—	1
Other	2,058	3,335
Period disposals:	(10,406)	(8,862)
Repayments on maturity	(211)	(996)
Early repayments	(3,357)	(1,229)
Other	(6,838)	(6,637)
Balance at 31 December 2022	65,779	15,167

A.Pursuant to Art. 3 of Royal Decree 716/2009, without taking into

account the measurement limits established in Art. 12 of Royal

Decree 716/2009.

B.That do not comply with the requirements of Art. 3 of Royal Decree

716/2009.

Below is a breakdown of the available balances of the

mortgage loans and credits that back the issuance of

mortgage bonds and mortgage backed-bonds in accordance

with Bank of Spain Circular 4/2017 in force:

EUR million
	Principal amountA
	2022	2021
Potentially eligible B	630	662
Non-eligible	2,188	1,608

A.Amounts committed less amounts drawn down, including amounts

delivered to property developers only when the housing units are

sold.

B. Pursuant to Art. 3 of Royal Decree 716/2009.

d) Other mortgage bonds and guaranteed bonds

The balance of ‘Other mortgage bonds and guaranteed

bonds’ relates to the rest of covered bonds and

certificates. The breakdown, by issue currency and

interest rate, is as follows:

			2022
Currency of issuance	EUR million		Annual interest rateA
	2022	2021
Euro	4,145	8,452	1.64%
US dollar	4,496	4,238	4.78%
Balance at end of the year	8,641	12,690

A.Average interest rate of the various securities at 31 December 2022

based on their nominal amounts.

127

i. Changes

The following movement in 2022 and 2021 in the ‘Other

non-convertible marketable securities’ account was as

follows:

			2022
	EUR million		Annual interest rate (%)**	Maturity date
	2022	2021
Balance at end of the prior year	12,690	10,767
Issues	1,000	1,851
Of which
March, 2021	—	851	0.26%	mar-26
May, 2021	—	1,000	0.20%	may-31
January, 2022	500	—	0.80%	jan-32
September, 2022	500	—	2.06%	sept-32
Amortizations	(5,307)	(218)
Exchange differences	258	290
Balance at end of the year	8,641	12,690

In May, June and July 2022, Banco Santander redeemed

outstanding territorial bonds as of December 2021

amounting to EUR 172 million, EUR 135 million and EUR

5,000 million, respectively.

In January and September 2022, two issues of covered

bonds were made for EUR 500 million each one.

In May 2021, Banco Santander has amortized the

outstanding territorial bonds at December 2020 for an

amount of EUR 218 million.

In March 2021, Internalization bonds were issued for an

amount of USD 1,000 million (EUR 851 million) and in

May, Territorial bonds were issued for an amount of EUR

1,000 million.

ii. Territorial bonds

The members of the board of directors have stated that

in the territorial bond issuances Banco Santander has

established specific policies and procedures in relation to

the financing activities of public entities pursuant to

Bank of Spain Circular 4/2017, of 27 November.

The following is a detail of the total principal amount of

the loans used to secure the territorial bonds

outstanding at 31 December 2022:

EUR million
	Principal amountA
Central governments	23
Autonomous or regional governments	3,416
Local governments	524
Total	3,963

A.    Unrepaid portion of the loan nominal amounts.

The following is a detail of the territorial bonds issued on

the balance sheet at 31 December 2022:

EUR million
	Principal amount
Issued through a public offering	—
Other emissions	1,845
Of which,treasury shares	1,500
Term to maturity of up to one year	95
Term to maturity of one to two years	250
Term to maturity of two to three years	—
Term to maturity of three to five years	500
Term to maturity of five to ten years	1,000
Term to maturity of more than ten years	—

The coverage ratio of the territorial bonds with respect to

the loans was 46.55% at 31 December 2022 (55.50% at

31 December 2021).

iii. Internationalization bonds

The following is a detail of the face value of all loans

that serve as collateral to live internationalization bonds

at 31 December  2022:

	Nominal value (EUR million)
Eligible loans under Article 34.6 and 7 of Law 14/2013	12,720
Less: loans that support the issuance of internationalization bonds	—
Less: loans in arrears to be deducted in the calculation of the emission limit, in accordance with Article 13 of Royal Decree 579/2014	—
Total loans included in the base of the emission limit	12,720

128

Below is a detail of the internationalization bonds issued

in the balance sheet  on December 31, 2022:

	Nominal value (EUR million)
(1) Debt securities. Issued by public offer	—
(2) Debt securities. Other emissions	6,796
Of which, own values	6,796
Residual maturity up to one year
Residual maturity greater than one year and up to two years	—
Residual maturity greater than two and up to three years	—
Residual maturity greater than two and up to three years	1,100
Residual maturity greater than three and up to five years	5,696
Residual maturity greater than five and up to ten years	—
Residual maturity greater than ten years	—
(3) Deposits	—
Residual maturity up to one year	—
Residual maturity greater than one year and up to two years	—
Residual maturity greater than two and up to three years	—
Residual maturity greater than three and up to five years	—
Residual maturity greater than five and up to ten years	—
Residual maturity greater than ten years	—
TOTAL	6,796

The coverage ratio of internationalization bonds on loans

is a 53.42% at 31 December 2022 (55.38% at 31

December 2021).

21. Other issuances

a) Breakdown

The following is a breakdown of the balance under this

heading on the attached balance sheets, taking into

account their nature and currency of the transactions:

EUR millionA
	2022	2021
Type
Other issuances	93,192	76,890
Of which, subordinated liabilities	19,640	20,399
	93,192	76,890
Currency
Euro	43,470	39,266
US dollar	39,972	27,628
Pound Sterling	4,731	5,240
Other currenciesB	5,019	4,756
	93,192	76,890

A. This amount includes the principal, in other currencies.

B. At 31 December 2022, the most significant currencies are yen (EUR

1,187 million), Swiss Francs (EUR 1,712 million) and Australian Dollar (EUR

1,340 million). At 31 December 2021, the most significant currencies were

yen (EUR 1,283 million), Swiss Francs (EUR 1,431 million) and Australian

Dollar (EUR 1,310 million).

b) Changes

The changes in ‘Other issuances ’ in the foregoing table

for the years 2022 and 2021 are as follows:

EUR million
	2022	2021
Balance at the end of prior year	76,890	59,209
Issues	44,065	43,474
Redemptions	(28,840)	(28,107)
Exchange differences	1,077	2,314
Balance at end of the year	93,192	76,890

129

Within the sub-heading ’Other issuances’ there are

commercial paper issues as well as other issuances

made by Banco Santander.

•Commercial paper

On 15 April 2022, Banco Santander approved the annual

renewal of the "European Commercial Paper Issuance

Programme" for an overall maximum nominal amount

of up to EUR 15,000 million. On 17 November, 2022, the

"American Commercial Paper Issuance Program" was

renewed for a global nominal amount of up to 25,000

million US dollars.

At 31 December 2022 the interest rate is 1.77% p.a. At

year-end 2021 the interest rate was between -0.88%

and 0.33% per annum, the average nominal interest rate

being 0.125% per annum.

As regards renewals in 2021, on April 15, 2021, Banco

Santander approved the annual renewal of the

"European commercial paper programme" for a

maximum aggregate nominal amount of up to EUR

15,000 million. On November 22, 2021, the "American

commercial paper programme" was renewed for an

aggregate nominal amount of up to USD 25,000 million.

•Remaining emissions

During the 2022 fiscal year, Banco Santander, S.A. has

reported 41 issues for a nominal amount of EUR 16,406

million (no perpetual issues were made in 2022, see

note 21.c), of which the Bank has repurchased a balance

of EUR 74 million. The average remuneration of these

issues has been set at 3.45% per year.

During the 2021 fiscal year, Banco Santander, S.A. has

reported 37 issues for a nominal amount of EUR 11,846

million (without considering perpetual issues amounting

to EUR 2,568 million , see note 21.c), of which the Bank

has repurchased a balance of EUR 74 million. The

average remuneration of these issues has been set at

1.30% per year.

c)  Other disclosures

This caption includes contingent convertible preferred

participations, as well as other subordinated financial

instruments issued ,which do not qualify as equity

(preferred shares).

Preferred shares do not have voting rights and are non-

cumulative. They have been subscribed by third parties

outside the Group and are redeemable by decision of the

issuer, according to the terms of each issue.

Banco Santander's contingently convertible preferred

participations are subordinated debentures and rank

after common creditors and any other subordinated

credit that by law and/or by their terms, to the extent

permitted by Spanish law, ranks higher than the

contingently convertible preferred participations. Their

remuneration is conditioned to the obtainment of

sufficient distributable profits, and to the limitations

imposed by the regulations on shareholders' equity, and

they have no voting rights. The other issues of Banco

Santander, S.A. mentioned in this caption are also

subordinated debentures and, for credit ranking

purposes, they rank behind all the common creditors of

the issuing entities and ahead of any other subordinated

credit that ranks pari passu with the Bank's contingently

convertible preferred participations.

The main issues of subordinated debt securities issued,

broken down by company, are detailed below:

Issues by Banco Santander, S.A.

On July 6, 2022 and July 20, 2022, two subordinated

issues matured for a nominal amount of EUR 114 million

and EUR 25 million, respectively.

At 25 April 2022, Banco Santander, S.A. proceeded to

prepay all the Tier 1 Contingently Convertible Preferred

Securities with ISIN code XS1602466424 and common

code 160246642 in circulation, for a total nominal

amount of EUR 750 million and which were traded on

the Irish Stock Market 'Global Exchange Market' (the

'PPCC').

At  22  November 2021, Banco Santander, S.A. issued

subordinated debentures for a term of eleven years, with

a redemption option on the tenth anniversary of the

issue date, in the amount of USD 1,000 million (EUR

1,007 million at the exchange rate on the day of issue).

The issue bears interest at an annual rate of 3.225%,

payable semi-annually, for the first ten years (then

repricing at a margin of 160 points over the one-year US

government bond).

At 4 October 2021, Banco Santander, S.A. issued

subordinated debentures for a term of eleven years, with

a redemption option on the sixth anniversary of the issue

date, amounting to GBP 850 million (EUR 887 million at

the exchange rate on the day of issue). The issue bears

interest at an annual rate of 2.25%, payable annually for

the first six years (then repricing at a margin of 165

points over the 5-year UK government bond).

130

At 21 September 2021, Banco Santander, S.A. carried out

a placement of preferential shares contingently

convertible into newly issued ordinary shares of the

Bank ('PPCC') for a nominal amount of EUR 1,000 million

(issue placed on the market EUR 997 million). The

issuance was carried out at par and the remuneration of

the PPCC, whose payment is subject to certain conditions

and is also discretionary, was set at 3.625% per year for

the first eight years, being reviewed every five years

applying a margin of 376 basis points over the 5-year

Mid-Swap Rate.

At 11 September 2021, Banco Santander, S.A. proceeded

to redeem early and voluntarily the entire issue made on

11 September 2014 of tier 1 contingently convertible

preference shares (PPCC) with ISIN code XS110729154

which are traded in the Irish Stock Exchange Market

'Global Exchange Market', for a total nominal amount of

EUR 1,500 million.

At 12 May 2021, Banco Santander placed the issue of

preference shares contingently convertible into newly

issued ordinary shares of the Bank, previously

announced, for a total nominal amount of  EUR

1,578 million, issued in a Series in Dollars of  USD

1,000 million (EUR 828 million at the exchange rate on

the day of issue) and a Series in Euros for an amount of

EUR 750 million. The issuance is carried out at par and

the remuneration of the PPCC, whose payment is subject

to certain conditions and is also discretionary, has been

set (i) for the Series in Dollars at 4.750% per annum for

the first six years, being revised every five years applying

a margin of 375.3 basis points over the 5-year UST rate

and (ii) for the Series in Euros by 4.125% per annum for

the first seven years, being revised every five years

applying a margin of 431.1 basis points over the

applicable 5-year euro mid-swap.

At 3 December 2020, Banco Santander, S.A. issued

subordinated debentures with a ten-year term of USD

1,500 million (EUR 1,222 million at the date of issue).

The issue bears interest at an annual rate of 2.749%,

payable semiannually.

At 22 October 2020, it carried out a ten-year

subordinated debenture issue for an amount of EUR

1,000 million. The issue bears interest at an annual rate

of 1.625%, payable annually.

At 12 March 2020, it proceeded to redeem early and

voluntarily the entire outstanding issue of Tier 1

Contingently Convertible Preferred Participations Series

I/2014, for a total nominal amount of EUR 1,500 million.

At 14 January 2020, it carried out a placement of

contingently convertible preferred participations into

newly issued ordinary shares of the Bank (the 'PPCCs'),

excluding the pre-emptive subscription rights of its

shareholders and for a nominal amount of  EUR

1,500 million (the 'Issue' and the 'PPCCs'). The Issue was

made at par and the remuneration of the PPCCs, the

payment of which is subject to certain conditions and is

also discretionary, was set at 4.375% per annum for the

first six years, revised every five years thereafter by

applying a margin of 453.4 basis points over the 5-year

Mid-Swap Rate (5-year Mid-Swap Rate).

At 8 February 2019, Banco Santander, S.A, carried out an

issue of PPCC for a nominal amount of USD 1,200 million

(EUR 1,056 million). The remuneration of the issues

whose payment is subject to certain conditions and is

also discretionary was set at 7.50% per annum, for the

first five years (revised thereafter by applying a margin

of 498.9 points over the mid-swap rate).

At 19 March 2018, a 'PPCC' issue was carried out, for a

nominal amount of EUR 1,500 million. The remuneration

of the issue, the payment of which is subject to certain

conditions and is also discretionary, was set at 4.75% per

annum, payable quarterly, for the first seven years

(revised thereafter by applying a margin of 410 basis

points over the Mid-swap rate).

At 8 February 2018, a ten-year subordinated debenture

issue of EUR 1,250 million was carried out. The issue

accrues annual interest of 2.125% payable annually.

At 29 September 2017, Banco Santander, S.A. carried out

issues of 'PPCCs', for a nominal amount of EUR

1,000 million. The remuneration of the PPCC, the

payment of which is subject to certain conditions and is

also discretionary, was set at 5.25% per annum for the

first six years (revised thereafter by applying a margin of

499.9 basis points over the 5 years Mid-Swap Rate.

131

22. Other financial liabilities

a) Breakdown

The following is a detail of ‘Other financial liabilities’ on

the accompanying balance sheets:

EUR million
	2022	2021
Trade payables	839	888
Payment obligations	2,797	2,711
Public agency revenue collection accounts	4,996	4,506
Unsettled financial transactions	1,104	617
Other accounts	2,762	1,302
Total	12,498	10,024

b) Average payment period to suppliers

Set forth below are the disclosures required by

Additional Provision Three of Law 15/2010, of 5 July

(amended by Final Provision Two of Law 31/2014, of 3

December), prepared in accordance with the Spanish

Accounting and Audit Institute (ICAC) Resolution of 29

January 2016 on the disclosures to be included in notes

to financial statements in relation to the average period

of payment to suppliers in commercial transactions.

	2022	2021
	Days
Average period of payment to suppliers	10	10
Ratio of transactions paid	10	10
Ratio of transactions pending payments	19	—
	EUR million
Total payments made	2,652	2,848
Total payments outstanding	17	—

Additionally, the data for Grupo Santander in Spain, in

the financial year 2022, are as follows:

	2022
	Days
Average period of payment to suppliers	15
Ratio of transactions paid	14
Ratio of transactions pending payments	100
	EUR million
Total payments made	7,083
Total payments outstanding	45

In accordance with the ICAC Resolution, the average

period of payment to suppliers was calculated by taking

into account commercial transactions relating to the

supply of goods or services for which payment has

accrued since the date of issuance of Law 31/2014, of

December, 3.

Additionally, in accordance with Law 18/2022 of

September 28, listed commercial companies must report

the average payment period to suppliers, the monetary

volume and number of invoices paid in a period less than

the maximum established in the delinquency

regulations. and the percentage that it represents over

the total number of invoices and over the total monetary

payments to its suppliers.

Payments to suppliers made sooner than maximum  period established by the regulations	2022	2021
Average payment period to suppliers (days)	9	9
Number of invoices paid	160,245	136,706
Invoices paid in a period sooner than the maximum established over the total number of invoices paid	98.37%	94.09%
Total payments made (EUR million)	2,634	2,827
Invoices paid in a period less than the maximum on the total amount of invoices paid	99.32%	99.26%

132

Additionally, the data for Grupo Santander in Spain, in

the financial year 2022, are as follows:

Payments to suppliers made sooner than maximum  period established by the regulations	2022
Average payment period to suppliers (days)	13
Number of invoices paid	340,899
Invoices paid in a period sooner than the maximum established over the total number of invoices paid	98.28%
Total payments made (EUR million)	6,990
Invoices paid in a period less than the maximum on the total amount of invoices paid	98.69%

For the sole purpose of the disclosures provided in the

Resolution, suppliers are considered to be commercial

creditors for debts with suppliers of good and services.

“Average period of payment to suppliers” is taken to be

the period that elapses from the delivery of the goods of

the provision of the services by the supplier to the

effective payment of the operation.

Note 48 contains a detail of the maturity periods of

‘Other financial liabilities’ at each year-end.

c) Lease liabilities

The cash outflow of leases in 2022  was EUR 307 million

(in 2021 it was EUR 301 million). The analysis of the

maturities corresponding to the lease liabilities at 31

December 2022 and 2021, is as follows:

EUR million
	2022	2021
Maturity Analysis – Discounted payments
Within 1 year	386	351
Between 1 and 3 years	442	445
Between 3 and 5 years	330	317
Later than 5 years	1,361	1,336
Total Discounted payments at 31 December 2022	2,519	2,449

During 2022 and 2021, no significant variable payments

have been made not included in the valuation of lease

liabilities.

133

23. Provisions

a) Breakdown

The detail of ‘Provisions’ in the balance sheets at 31

December 2022 and 2021 is as follows:

EUR million
	2022	2021
Provision for pensions and similar obligations	2,001	2,730
Of which
Pensions and similar defined benefit obligations post-employment	1,220	1,677
Other long-term remunerations to employees	781	1,053
Restructuring	422	439
Provisions for taxes and other legal contingencies	622	516
Provisions for commitments and guarantees given	220	190
Other provisions	621	474
Total	3,886	4,349

b) Changes

The changes in ‘Provisions’ in 2022 and 2021 were as

follows:

EUR million
	2022					2021
	Post- employment	Long – Term	Contingent liabilities and commitments	Other provisions	Total	Post- employment	Long - Term	Contingent liabilities and commitments	Other provisions	Total
Balance at end of prior year	1,677	1,053	190	1,429	4,349	1,849	1,581	157	1,420	5,007
Changes in value recognized in equity	(279)	—	—	—	(279)	(29)	—	—	—	(29)
Additions charged to income	27	41	33	585	686	(9)	24	24	747	786
(Interest income)/ Interest expense (notes 34 and 35)	31	23	—	—	54	12	11	—	—	23
Staff costs (note 42)	1	1	—	—	2	4	1	—	—	5
Provisions or reversal of  provision	(5)	17	33	585	630	(25)	12	24	747	758
Payments to pensioners and pre-retirees	(178)	(313)	—	—	(491)	(164)	(552)	—	—	(716)
Amounts used and other changes	(27)	—	(3)	(349)	(379)	30	—	9	(738)	(699)
Balances at end of year	1,220	781	220	1,665	3,886	1,677	1,053	190	1,429	4,349

134

c) Provision for pensions and similar obligations

The detail of ‘Provision for pensions and similar

obligations’ at 31 December 2022 and 2021 is as

follows:

EUR million
	2022	2021
Provisions for pensions and similar defined benefit plan obligations	2,001	2,730
Of which
Provisions for pensions	1,220	1,677
Provisions for similar obligations	781	1,053
Of which, pre-retirements	771	1,041
Provisions for pensions and similar defined contribution plan obligations	—	—
Total provisions for pensions and similar obligations	2,001	2,730

i. Defined contribution plans

At the end of 2012, Banco Santander reached an

agreement with workers' representatives to transform

the defined benefit commitments derived from the

collective agreement into defined contribution plans.

Similarly, the contracts for senior management staff

with pension commitments in the defined benefit

modality were amended to transform them into a

defined contribution provision system.

Almost all of the pension commitments with active

personnel correspond to defined contribution plans. The

total contributions made to these plans during 2022

amounted to EUR 88 million (EUR 77 million during

2021) (see nota 42).

ii. Defined Benefit Plans

In addition to the previous defined contribution plans, at

31 December 2022, Banco Santander maintained

definite service commitments. Below is the present

value of the Bank`s commitments in post-employment

remuneration for defined benefit programs, as well as

the value of the reimbursement entitlements for

insurance contracts linked to those obligations at 31

December 2022 and preceding years:

EUR million
	2022	2021	2020
Present value of the obligations
To current employees	34	42	78
To retired employees	2,009	2,806	3,304
Other	—	—	—
	2,043	2,848	3,382
Fair value of plan assets	(851)	(1,205)	(1,537)
Assets not recognized	6	5	4
Provisioned assets on the balance sheet	22	29	—
Provisions - Provisions for pensions	1,220	1,677	1,849
Of which
Internal provisions for pensions	907	1,296	1,426
Insurance contracts linked to pensions (note 14)	313	381	423
Of which
Group insurance entities	209	232	249
Other insurers	104	149	174

On July 8, 2021, the Bank reached an agreement with

the employees' representatives for the transformation of

the defined benefit pension commitments into defined

contribution for certain retired personnel from Banco

Popular and Banco Pastor.

Through the previously mentioned Collective

Agreement, an aggrement has been to carry out an offer

to replace the annuities that the passive personnel

included in the scope of application of said Collective

Agreement had been receiving with a capitalization fund

in the Santander Employees pension plan.

The number of beneficiaries who exercised the voluntary

option to accept the substitution of the life annuity for a

capitalization fund in the Santander Employees pension

plan amounted to 1,468 people. The effect of the

reduction of the aforementioned commitments is shown

in the tables below under the headings 'Benefits paid by

settlement' amounting to EUR 166 million and 'Effect

reduction / settlement' amounting to EUR 38 million.

135

The amount of the defined benefit obligations was

determined on the basis of the work performed by

independent actuaries using the following actuarial

techniques:

1.Valuation method: projected unit credit method,

which sees each period of service as giving rise to an

additional unit of benefit entitlement and measures

each unit separately.

2.Actuarial assumptions used: unbiased and mutually

compatible. Specifically, the most significant

actuarial assumptions used in the calculations were

as follows:

EUR million
	2022	2021
Annual discount rate	3.80%	0.90%
Expected return on plan assets rate	3.80%	0.90%
Mortality tables	PE2020 M/F Col. Orden 1	PE2020 M/F Col. Orden 1
Cumulative annual CPI growth	2.00%	1.00%
Annual salary increase rate	1.25%	1.25%
Annual pension increase rate	2.00%	1.00%

3.The discount rate used for the flows was determined

referencing to high-quality corporate bonds.

4.The estimated retirement age of each employee is

the first at which the employee is entitled to retire or

the agreed-upon age, as appropriate.

5.The fair value of insurance contracts was determined

as the present value of the related payment

obligations, taking into account the following

assumptions:

EUR million
	2022	2021
Expected rate of return on plan assets	3.80%	0.90%
Expected rate of return on  reimbursement rights	3.80%	0.90%

The amounts recognized in the accompanying income

statements in relation to the aforementioned defined

benefit obligations are as follows:

EUR million
	2022	2021
Service cost:
Current service cost (note 42)	1	4
Past service cost (including reductions)	3	13
Pre-retirement cost	—	—
Reductions/liquidations	(8)	(38)
Net interest (note 35)	48	24
Expected return on insurance contracts linked to pensions (note 34)	(17)	(12)
Total	27	(9)

In addition, in 2022 ‘Other comprehensive income –

items not reclassified to profit or loss - Actuarial gains or

(-) losses on defined benefit pension plans, has led to an

actuarial gain of 279 million euros with respect to

benefit commitments defined (actuarial gain of EUR 30

million in the year 2021).

The changes in 2022 and 2021 of the present value of

the accrued defined benefit obligations were as follows:

EUR million
	2022	2021
Present value of the obligations at beginning of the year	2,848	3,382
Current service cost (note 42)	1	4
Interest cost	77	36
Pre-retirement cost	—	—
Reductions/liquidations	(8)	(60)
Benefits paid for settlements	—	(166)
Other benefits paid	(254)	(245)
Past service cost	3	13
Actuarial (gains)/lossesA	(623)	(122)
Exchanges rate differences and others	(1)	6
Present value of the obligations at end of the year	2,043	2,848

A.Included  in 2022 are demographic actuarial losses of EUR 2 million

and financial actuarial profits of EUR 625 million (2021: demographic

actuarial losses of EUR 9  million and financial actuarial losses of EUR

131 million).

136

The changes in 2022 and 2021 in the fair value of the

plan assets are as follows:

EUR million
	2022	2021
Fair value of plan assets at beginning of year	1,205	1,537
Expected return on plan assets	29	12
Benefits paid	(77)	(262)
Contributions payable by the employer	1	14
Settlements gains/(losses)	—	(22)
Exchange rate differences and others	(7)	5
Actuarial gains/(losses)	(300)	(79)
Fair value of plan assets at end of year	851	1,205

The changes in 2022 and 2021 in the fair value of the

insurance contracts linked to pensions are as follows:

EUR million
	2022	2021
Fair value of insurance contracts linked to pensions at beginning of the year	381	423
Expected return on insurance contracts (note 34)	17	12
Actuarial gains/(losses)	(43)	(12)
Premiums paid/(surrenders)	(1)	—
Benefits paid	(40)	(42)
Exchange rate differences and others	(1)	—
Fair value of insurance contracts linked to pensions at end of the year (note 14)	313	381

Plan assets and pension insurance contracts linked to

pensions are mainly based in insurance policies.

iii. Other long-term employee benefits

In various years, Banco Santander offered to some

certain of its employees, the possibility of leaving its

employ prior to their retirement. Therefore, provisions

are recognized to cover the obligations to pre-retirees -in

terms of salaries and other employee benefit costs- from

the date of their pre-retirement to the date of their

effective retirement.

The present value of the aforementioned obligations and

the fair value of the assets arising from insurance

contracts linked to these obligations at 31 December

2022 and for the previous  exercises are as follows:

EUR million
	2022	2021	2020
Present value of the obligations:
Early retirement	779	1,052	1,580
Long-service bonuses and other benefits	10	11	13
	789	1,063	1,593
Fair value of plan assets	(8)	(10)	(12)
Provisions - Provisions for pensions	781	1,053	1,581
Insurance plans linked to pensions	—	—	—
Group insurers	—	—	—
Other insurance entities	—	—	—

In December 2020, Banco Santander reached an

agreement with the workers' representatives to

implement an early retirement and voluntary

redundancy plan to which 3,572 employees were

expected to take advantage during 2021, setting up a

provision to cover these commitments amounting to EUR

674 million. In addition to the above, the provision made

to cover the departures of employees who took early

retirement and incentive retirement offers during 2020

amounted to EUR 84 million. In 2021, a provision of EUR

139 million  was made to complete the plan announced

in 2020, bringing the number of early retirements and

voluntary redundancies to 3,643 employees over the

entire period. In 2022, the provisions made to cover

commitments to 357 employees under early retirement

and voluntary severance plans amounted to EUR 76

million.

The amount of the other long-term remuneration

commitments defined benefit has been determined on

the basis of work performed by independent actuaries,

applying the following criteria to quantify them:

1.Valuation method: projected unit credit method.

2.Actuarial assumptions used: unbiased and mutually

compatible. Specifically, the most significant

actuarial assumptions used in the calculations were

as follows:

137

EUR million
	2022	2021
Annual discount rate	3.80%	0.90%
Expected return on plan assets rate	3.80%	0.90%
Mortality tables	PE2020 M/F Col. Orden 1	PE2020 M/F Col. Orden 1
Cumulative annual CPI growth	2.00%	1.00%
Annual benefit increase rate	Between 0% and 1.5%	Between 0% and 1.5%

3.The discount rate used for the flows was determined

by reference to high-quality corporate bonds.

4.The estimated retirement age of each employee is

the first at which the employee is entitled to retire or

the agreed-upon age, as appropriate.

5.The amounts recognised in the income statement in

relation to the aforementioned defined benefit

obligations are as follows:

EUR million
	2022	2021
Service cost:
Current service cost (note 42)	1	1
Interest cost (note 35)	23	11
Extraordinary charges	—	—
Actuarial (gains)/losses recognized in the year	(59)	(14)
Pre-retirement cost	76	81
Other	—	(55)
Total	41	24

The changes in 2022 and 2021 in the present value of

the accrued obligations for other long-term benefits

were as follows:

EUR million
	2022	2021
Present value of the obligations at beginning of the year	1,063	1,593
Current service cost	1	1
Cost per interest (note 35)	23	11
Past service cost	—	—
Pre-retirement cost	76	81
Effect of curtailment/settlement	—	(55)
Benefits paid	(314)	(554)
Actuarial (gains)/losses	(59)	(14)
Other	(1)	—
Present value of the obligations at end of the year	789	1,063

The movement that has occurred, during the years 2022

and 2021, in the fair value of the assets of the plan, has

been as follows:

EUR million
	2022	2021
Fair value of plan assets at the beginning of the year	10	12
Expected return on plan assets	—	—
Benefits paid	(2)	(2)
Contributions by the employer	—	—
Contributions by the employee and others	—	—
Actuarial gains / (losses)	—	—
Present value of the obligations at end of the year	8	10

iv. Sensitivity analysis

Variations in the main assumptions may affect the

calculation of commitments. At 31 December 2022, in

the event that the discount interest rate had decreased

or increased by 50 basis points, there would have been

an increase or decrease in the current value of post-

employment obligations of 3.8% and 3.6% respectively,

and an increase or decrease in the current value of long-

term obligations of 1.04% and -1.02%. These variations

would be partially offset by increases or decreases in the

fair value of assets and insurance contracts linked to

pensions.

The following table shows the estimate of benefits to be

paid as of December 31, 2022 for the next ten years:

EUR Million
2023	463
2024	396
2025	332
2026	286
2027	237
2028 to 2032	788

d) Provisions for taxes and other legal contingencies

and Other provisions

'Provisions - Provisions for taxes and other legal

contingencies' and 'Provisions - Other provisions', which

include, inter alia, provisions for restructuring costs and

tax-related and non-tax-related proceedings, were

estimated using prudent calculation procedures in

keeping with the uncertainty inherent to the obligations

covered. The definitive date of the outflow of resources

embodying economic benefits for the Bank depends on

each obligation. In certain cases, these obligations have

no fixed settlement period and, in other cases, depend

on the legal proceedings in progress.

138

‘Provisions for taxes and other legal contingencies’

include proceedings and other legal proceedings such as

judicial, arbitral or administrative proceedings initiated

against Banco Santander. Qualitative information on the

main disputes is provided in note 23.e. For their part, the

provisions for restructuring include only costs arising

from restructuring processes incurred at Banco

Santander.

The Bank general policy is to record provisions for tax

and legal proceedings in which the Group assesses the

chances of loss to be probable and the Group does not

record provisions when the chances of loss are possible

or remote. Banco Santander determines the amounts to

be provided for as its best estimate of the expenditure

required to settle the corresponding claim based, among

other factors, on a case-by-case analysis of the facts and

the legal opinion of internal and external counsel or by

considering the historical average amount of the loss

incurred in claims of the same nature. The definitive date

of the outflow of resources embodying economic

benefits for the Bank depends on each obligation. In

certain cases, the obligations do not have a fixed

settlement term and, in others, they depend on legal

proceedings in progress.

As for the 'Other provisions' contains very atomized and

individually insignificant provisions, such as the

provisions corresponding to cover other operational risks

of the Bank.

e) Litigation and other matters

i. Tax-related litigation

At 31 December 2022 the main tax-related proceedings

concerning the Group and the Bank were as follows:

•Legal actions filed by Banco Santander (Brasil) S.A.

and other Group entities to avoid the application of

Law 9.718/98, which modifies the basis to calculate

Programa de Integraçao Social (PIS) and Contribuição

para Financiamento da Seguridade Social (COFINS),

extending it to all the entities income, and not only to

the income from the provision of services. In relation

of Banco Santander (Brasil) S.A. process, in May 2015

the Federal Supreme Court (FSC) admitted the

extraordinary appeal filed by the Federal Union

regarding PIS, and dismissed the extraordinary

appeal lodged by the Brazilian Public Prosecutor's

Office regarding COFINS contribution, confirming the

decision of Federal Regional Court favourable to

Banco Santander (Brasil) S.A. of August 2007. The

appeals filed by the other entities before the Federal

Supreme Court, both for PIS and COFINS, are still

pending and fully provisioned.

•Banco Santander (Brasil) S.A. and other Group

companies in Brazil have appealed against the

assessments issued by the Brazilian tax authorities

questioning the deduction of loan losses in their

income tax returns (Imposto sobre a Renda das

Pessoas Jurídicas - IRPJ - and Contribuçao Social

sobre o Lucro Liquido -CSLL-) in relation to different

administrative processes of various years on the

ground that the requirements under the applicable

legislation were not met. The appeals are pending

decision in the administrative Court, the Conselho

Adminisitrativo de Recursos Fiscais (CARF). No

provision was recognised in connection with the

amount considered to be a contingent liability.

•Banco Santander (Brasil) S.A. and other Group

companies in Brazil are involved in administrative

and legal proceedings against several municipalities

that demand payment of the Service Tax on certain

items of income from transactions not classified as

provisions of services. There are several cases in

different judicial instances. A provision was

recognised in connection with the amount of the

estimated loss.

•Banco Santander (Brasil) S.A. and other Group

companies in Brazil are involved in administrative

and legal proceedings against the tax authorities in

connection with the taxation for social security

purposes of certain items which are not considered

to be employee remuneration. There are several

cases in different judicial instances. A provision was

recognised in connection with the amount of the

estimated loss.

•In May 2003 the Brazilian tax authorities issued

separate infringement notices against Santander

Distribuidora de Títulos e Valores Mobiliarios, Ltda.

(DTVM, actually Santander Brasil Tecnología S.A.)

and Banco Santander (Brasil) S.A. in relation to the

Provisional Tax on Financial Movements

(Contribuição Provisória sobre Movimentação

Financeira) of the years 2000 to 2002. The

administrative discussion ended unfavourably for

both companies, and on July 3, 2015, filed a lawsuit

requesting the cancellation of both tax assessments.

The lawsuit was judged unfavourably in first

instance. Therefore, both plaintiffs appealed to the

court of second instance. On December 2020, the

appeal was decided unfavourably. Against the

judgment, the bank filed a motion for clarification

which has not been accepted. Currently it is 

appealed to higher courts. There is a provision

recognized for the estimated loss.

139

•In December 2010 the Brazilian tax authorities 

issued an infringement notice against Santander

Seguros S.A. (Brazil), currently Zurich Santander

Brasil Seguros e Previdência S.A., as the successor by

merger to ABN AMRO Brasil dois Participações S.A.,

in relation to income tax (IRPJ and CSLL) for 2005,

questioning the tax treatment applied to a sale of

shares of Real Seguros, S.A. The administrative

discussion ended unfavourably, and the CARF

decision has been appealed at the Federal Justice. As

the former parent of Santander Seguros S.A. (Brasil),

Banco Santander (Brasil) S.A. is liable in the event of

any adverse outcome of this proceeding. No

provision was recognised in connection with this

proceeding as it is considered to be a contingent

liability.

•In November 2014 the Brazilian tax authorities

issued an infringement notice against Banco

Santander (Brasil) S.A. in relation to corporate

income tax (IRPJ and CSLL) for 2009 questioning the

tax-deductibility of the amortisation of the goodwill

of Banco ABN AMRO Real S.A. performed prior to the

absorption of this bank by Banco Santander (Brasil)

S.A., but accepting the amortisation performed after

the merger. Actually it is appealed before the Higher

Chamber of CARF. No provision was recognised in

connection with this proceeding as it was considered

to be a contingent liability.

•Banco Santander (Brasil) S.A. has also appealed

against infringement notices issued by the tax

authorities questioning the tax deductibility of the

amortisation of the goodwill arising on the

acquisition of Banco Comercial e de Investimento

Sudameris S.A from years 2007 to 2012. No

provision was recognised in connection with this

matter as it was considered to be a contingent

liability.

•Banco Santander (Brasil) S.A. and other companies of

the Group in Brazil are undergoing administrative

and judicial procedures against Brazilian tax

authorities for not admitting tax compensation with

credits derived from other tax concepts, not having

registered a provision for the amount considered to

be a contingent liability.

•Banco Santander (Brasil) S.A. is involved in appeals in

relation to infringement notices initiated by tax

authorities regarding the offsetting of tax losses in

the CSLL of year 2009. The appeal is pending decision

in CARF. No provision was recognised in connection

with this matter as it is considered to be a contingent

liability. 

•Banco Santander (Brasil) S.A. filed a suspensive

judicial measure aiming to avoid the withholding

income tax (Imposto sobre a Renda Retido na Fonte -

IRRF),  on payments derived from technology

services provided by Group foreign entities. A

favorable decision was handed down and an appeal

was filed by the tax authority at the Federal Regional

Court, where it awaits judgment. No provision was

recognized as it is considered to be a contingent

liability.

•Brazilian tax authorities have issued infringement

notices against Getnet Adquirência e Serviços para

Meios de Pagamento S.A and Banco Santander

(Brasil) S.A. as jointly liable in relation to corporate

income tax (IRPJ and CSLL) for 2014 to 2018

questioning the tax-deductibility of the amortization

of the goodwill from the acquisition of Getnet

Tecnologia  Proces S.A., considering that  the

company would not have complied with the legal

requirements for such amortization. A defense

against the tax assessment notices were submitted,

and the appeal is pending decision in CARF. No

provision was recognized as it is considered to be a

contingent liability.

The total amount for the aforementioned Brazil

lawsuits that are fully provisioned is EUR 691 million,

and for lawsuits that qualify as contingent liabilities

is EUR 4,977 million.

•Banco Santander appealed before European Courts

the Decisions 2011/5/CE of 28 October 2009 (First

Decision), and 2011/282/UE of 12 January 2011

(Second Decision) of the European Commission,

ruling that the deduction of the financial goodwill

regulated pursuant to Article 12.5 of the Corporate

Income Tax Law constituted illegal State aid. On

October 2021 the Court of Justice definitively

confirmed these Decisions. The dismissal of the

appeal, that only affects these two decisions, had no

impact on results.

At the date of approval of these annual accounts, there

are other less significant tax disputes.

ii. Non-tax-related proceedings

At 31 December 2022 the main non-tax-related

proceedings concerning the Group and the Bank were as

follows:

•Payment Protection Insurance (PPI): In recent years

Santander UK plc has processed customer claims

associated with the sale of payment protection

insurance (PPI), derived from the Financial Conduct

Authority guidelines. As of 31 December 2022 there

is no provision related to those claims as the

deadline for presenting them has already expired.

However, customers can still commence in-court

litigation for the mis-sale of PPI  and a provision for

the best estimate of any obligation to pay

compensation in respect of current and future claims

is recognized for this purpose.

140

•In addition, there is a legal dispute regarding

allocation of liability for pre-2005 PPI policies that

two entities of the Axa Group (hereinafter "Axa

France" acquired from Genworth Financial

International Holdings, Inc. in September 2015. The

dispute involves Santander Cards UK Limited

(formerly known as GE Capital Bank Limited which

was acquired by Banco Santander, S.A. from GE

Capital group in 2008) which was the distributor of

the policies in dispute and Santander Insurance

Services UK Limited (the Santander Entities).

In July 2017, the Santander Entities notified Axa

France that they did not accept liability for losses on

PPI policies relating to the referred period. 

Santander UK plc entered in a Complaints Handling

Agreement –that included a standstill agreement-

agreeing to handle complaints on Axa France, whilst

Axa France accepted paying redress assessed to be

due to relevant policyholders on a without prejudice

basis.

After the termination of the Complaints Handling

Agreement, on 30 December 2020 Axa France

provided written notice to the Santander Entities to

terminate the standstill agreement. On 5 March

2021, the Santander Entities were served with a

Claim Form and Brief Details of Claim by Axa France,

claiming that the Santander Entities are liable to

reimburse Axa France for pre-2005 PPI mis-selling

losses, currently estimated at GBP 636 million (EUR

717.2 million). On 22 March 2021, the Santander

Entities acknowledged service of the claim and

notified the court of their intention to defend the

claim in full and issued an application for Axa

Frances’s claim to be struck out/summarily

dismissed, which was heard by the Commercial

Court on 22 and 23 February 2022 with judgement

reserved. Judgment was handed down by the

Commercial Court on 12 July 2022. The Commercial

Court upheld a significant part of the Santander

Entities’ strike-out plead. The Santander Entities

have sought permission to appeal aspects of the

strike out decision on which they were unsuccessful. 

Axa France updated the amount of losses claimed

from GBP 636 million (EUR 717.2 million) to GBP

670 million (EUR 755.5 million) in their Amended

Particulars of Claim dated 21 October 2022.

Regarding those claims admitted or those that may

eventually be made in the aforementioned appeal,

there are factual issues that will be resolved during

the processing of the trial that may have legal

consequences including in relation to liability.  These

issues create uncertainties which mean that it is

difficult to reliably predict the outcome or the timing

of the resolution of the matter. The provision

includes our best estimate of the Santander Entities’

liability for this matter.

•Delforca:  dispute arising from equity swaps entered

into by Gaesco (now Delforca 2008, S.A.) on shares

of Inmobiliaria Colonial, S.A. Banco Santander, S.A. is

claiming to Delforca before the Court of Barcelona in

charge of the bankruptcy proceedings, a total of EUR

66 million from the liquidation resulting from the

early termination of financial transactions due to

Delforca's non-payment of the equity swaps. In the

same bankruptcy proceedings, Delforca and

Mobiliaria Monesa have in turn claimed the Bank to

repay EUR 57 million, which the Bank received for

the enforcement of the agreed guarantee, as a result

of the aforementioned liquidation.  On 16 September

2021 the Commercial Court Number 10 of Barcelona

has ordered Delforca to pay the Bank EUR 66 million

plus EUR 11 million in interest and has dismissed the

claims filed by Delforca. This decision has been

appealed by Delforca, Mobiliaria Monesa and the

bankruptcy administrator. The appeal which the

Bank has already opposed to will be resolved by the

Provincial Court of Barcelona.

Separately, Mobiliaria Monesa, S.A. (parent of

Delforca) filed in 2009 a civil procedure with the

Courts of Santander against the Bank claiming

damages that have not been specified to date. The

procedure is suspended.

•Former employees of Banco do Estado de São Paulo

S.A., Santander Banespa, Cia. de Arrendamiento

Mercantil:  claim initiated in 1998 by the association

of retired Banespa employees (AFABESP) requesting

the payment of a half-yearly bonus contemplated in

the by-laws of Banespa in the event that Banespa

obtained a profit and that the distribution of this

profit were approved by the Board of Directors. The

bonus was not paid in 1994 and 1995 since Banespa

had not made a profit during those years. Partial

payments were made from 1996 to 2000, as

approved by the Board of Directors. The relevant

clause was eliminated in 2001. The Tribunal Regional

do Trabalho (Regional Labour Court) and the High

Employment Court (TST) ordered Santander Brazil,

as successor to Banespa, to pay this half-yearly

bonus for the period from 1996 to the present. On 20

March 2019, the Supreme Federal Court (STF)

rejected the extraordinary appeal filed by Santander

Brazil.

Santander Bank Brazil filed a rescissory action before

the TST to nullify the decisions of the main

proceedings and suspend the execution of the

judgment, which was deemed inadmissible,

therefore its execution was suspended.  The

rescissory action was dismissed and a motion for

clarification was filed, due to the absence of an

explicit argument to deny the rescissory action filed

by Santander Brazil. After the decision of the motion

for clarification, Santander Brazil filed an

extraordinary appeal in the rescissory action in

February 2021, which was denied in an interlocutory

141

decision in June 2021 by the TST. As Santander Brazil

understands there is a conflict between the TST

decision and the doctrine set by the STF, Santander

Brazil appealed this decision. This appeal is pending.

In August 2021, a first instance court ruled that the

enforcement of the TST decision shall be carried out

individually, at the jurisdiction pertaining to each

person. AFABESP appealed this decision.  In

December 2021, the Regional Labor Court denied the

appeal filed by AFABESP.  This decision has  not been 

appealed by AFABESP, and therefore it has become

firm.Santander Brazil external advisers have

classified the risk as probable. The recorded

provisions are considered sufficient to cover the risks

associated with the legal claims that are being

substantiated as of 31 December 2022.

•'Planos Económicos': like the rest of the banking

system in Brasil, Santander Brazil has been the

target of customer complaints and collective civil

suits stemming mainly from legislative changes and

its application to bank deposits ('economic plans'). At

the end of 2017, an agreement between regulatory

entities and the Brazilian Federation of Banks

(Febraban) with the purpose of closing the lawsuits

was reached and was approved by the Supremo

Tribunal Federal. Discussions focused on specifying

the amount to be paid to each affected client

according to the balance in their notebook at the

time of the Plan. Finally, the total value of the

payments will depend on the number of adhesions

there may be and the number of savers who have

demonstrated the existence of the account and its

balance on the date the indexes were changed. In

November 2018, the STF ordered the suspension of

all economic plan proceedings for two years from

May 2018. On 29 May 2020, the STF approved the

extension of the agreement for 5 additional years

starting from 3 June 2020. Condition for this

extension was to include in the agreement actions

related to the 'Collor I Plan'. On 31 December 2022,

the provision recorded for the economic plan

proceedings amounts to EUR 220 million.

•Floor clauses:  as a consequence of the acquisition of

Banco Popular Español, S.A.U. ('Banco Popular'), the

Group has been exposed to a material number of

transactions with floor clauses. The so-called "floor

clauses" are those under which the borrower accepts

a minimum interest rate to be paid to the lender,

regardless of the applicable reference interest rate.

Banco Popular included "floor clauses" in certain

asset-side transactions with customers. In relation to

this type of clauses, and after several rulings made

by the Court of Justice of the European Union and the

Spanish Supreme Court, and the extrajudicial process

established by the Spanish Royal Decree-Law

1/2017, of 20 January, Banco Popular made

provisions that were updated in order to cover the

effect of the potential return of the excess interest

charged for the application of the floor clauses

between the contract date of the corresponding

mortgage loans and May 2013. At 31 December

2022, after having processed most of the customer

requests, the potential residual loss associated with

ongoing court proceedings is estimated at EUR

60.1 million, amount which is fully covered by

provisions.

•Banco Popular´s acquisition:  After the declaration of

the resolution of Banco Popular, some investors filed

claims against the EU’s Single Resolution Board

decision, and the FROB's resolution executed in

accordance to the aforementioned decision.

Likewise, numerous appeals were filed against

Banco Santander, S.A. alleging that the information

provided by Banco Popular was erroneous and

requesting from Banco Santander, S.A. the restitution

of the price paid for the acquisition of the investment

instruments or, where appropriate, the

corresponding compensation.

In relation to these appeals, on the one hand, the

General Court of the European Union (“GCUE”)

selected 5 appeals from among all those filed before

the European courts by various investors against the

European institutions and processed them as pilot

cases. On 1 June 2022, the GCUE has rendered five

judgements in which it has completely dismissed the

appeals, (i) supporting the legality of the resolution

framework applied to Banco Popular, (ii) confirming

the legality of the action of the European institutions

in the resolution of Banco Popular and (iii) rejecting,

in particular, all the allegations that there were

irregularities in the sale process of Banco Popular to

Banco Santander, S.A. Four of these judgments have

been appealed before the Court of Justice of the

European Union ("CJEU").

On the other hand, in relation to the lawsuits

initiated by investors directly against Banco

Santander, S.A. derived from the acquisition of Banco

Popular, on 2 September 2020, the Provincial Court

of La Coruña submitted a preliminary ruling to the

CJEU in which it asked for the correct interpretation

of the Article 60, section 2 of Directive 2014/59/EU

of the European Parliament and of the Council of 15

May, establishing a framework for the restructuring

and resolution of credit institutions and investment

services companies. Said article establishes that, in

the cases of redemption of capital instruments in a

bank resolution, no liability will subsist in relation to

the amount of the instrument that has been

redeemed. On 5 May 2022, the CJEU has rendered its

judgement confirming that Directive 2014/59/EU of

the European Parliament and of the Council does not

allow that, after the total redemption of the shares

of the share capital of a credit institution or an

investment services company subject to a resolution

procedure, the shareholders who have acquired

shares within the framework of a public subscription

142

offer issued by said company before the start of such

a resolution procedure, exercise against that entity or

against its successor, an action for liability for the

information contained in the prospectus, under

Directive 2003/71/EC of the European Parliament

and of the Council, or an action for annulment of the

subscription contract for those shares, which, taking

into account its retroactive effects, gives rise to the

restitution of the equivalent value of said shares,

plus the interest accrued from the date of execution

of said contract.  In respect to this judgement, in

December 2022 the Spanish Supreme Court

submitted pre-judicial issues before the CJEU in

respect of its applicability to subordinated

obligations amortized with the resolution and to

subordinated obligations and/or preferred shares

converted into shares before resolution.

Separately, the Central Court of Instruction 4 is

currently conducting preliminary proceedings

42/2017, in which, amongst other things, is being

investigated the following: (i) the accuracy of the

prospectus for the capital increase with subscription

rights carried out by Banco Popular in 2016; and (ii)

the alleged manipulation of the share price of Banco

Popular until the resolution of the bank, in June

2017. During the course of the proceedings, on 30

April 2019, the Spanish National Court, ruled in

favour of Banco Santander, S.A. declaring that Banco

Santander, S.A. cannot inherit Banco Popular’s

potential criminal liability. This ruling was appealed

before the Supreme Court, which rejected it. In these

proceedings, Banco Santander, S.A. could potentially

be subsidiarily liable for the civil consequences. In

view of the CJEU ruling of 5 May 2022, the Bank has

requested confirmation of the exclusion of its

subsidiary civil liability status in this criminal

proceeding. On 26 July 2022, the Court has rejected

this request stating that it is a matter to be

determined at a later procedural time. This decision

has been confirmed on appeal by the Chamber of the

National Court by sentence of 5 October 2022.  The

estimated cost of any compensation to shareholders

and bondholders of Banco Popular recognized in the

2017 accounts amounted to EUR 680 million, of

which EUR 535 million were applied to the

commercial loyalty program. The CJEU judgement of

5 May represents a very significant reduction in the

risk associated with these claims.

•German shares investigation: the Cologne Public

Prosecution Office is conducting an investigation

against the Bank, and other group entities based in

UK - Santander UK plc, Santander Financial Services

Plc and Cater Allen International Limited -, in relation

to a particular type of tax dividend linked

transactions known as cum-ex transactions. The

Group is cooperating with the German authorities.

According to the state of the investigations, the

result and the effects for the Group, which may

potentially include the imposition of material

financial penalties, cannot be anticipated.  For this

reason, the Bank has not recognized any provisions

in relation to the potential imposition of financial

penalties. 

•Banco Santander, S.A.  was sued in a legal

proceeding in which the plaintiff alleges that the

Bank breached his contract as CEO of the institution.

In the lawsuit, the claimant mainly requested a

declaratory ruling that upholds the existence, validity

and effectiveness of such contract and its

enforcement together with the payment of certain

amounts. If the main request is not granted, the

claimant sought a compensation for a total amount

of approximately EUR 112 million or, an alternative

relief for other minor amounts. Banco Santander,

S.A. answered to the legal action stating that the

conditions to which the appointment of that position

was subject to were not met; that the executive

services contract required by law was not concluded;

and that in any case, the parties could terminate the

contract without any justified cause.  On 17 May

2021, the plaintiff reduced his claims for

compensation to EUR 61.9 million.

On 9 December 2021, the Court upheld the claim and

ordered the Bank to compensate the claimant in the

amount of EUR 67.8 million. By court order of 13

January 2022, the Court corrected and supplemented

its judgment, reducing the total amount to be paid by

the Bank to EUR 51.4 million and clarifying the part

of this amount (buy out) was to be paid under the

terms of the offer letter, i.e., entirely in Banco

Santander shares, within the deferral period for this

type of remuneration at the plaintiff's former

employer and subject to the performance metrics or

parameters of the plan in force at the Bank, which

was that of 2018. As explained in note 5 of the

report, the degree of performance of these objectives

was 33.3%.

The Bank filed an appeal against the judgment

before the Madrid Court of Appeal, which was

opposed by the plaintiff. At the same time, the

plaintiff filed an application for provisional

enforcement of the judgment in the first instance

court. A court order was issued ordering enforcement

of the judgment, and the Bank deposited in the court

bank account the full amount provisionally awarded

to the claimant, including interest, for an

approximate sum of EUR. 35.5 million, within the

voluntary compliance period.

143

On 6 February 2023, Banco Santander was notified

of the judgment of 20 January 2023 by which the

Madrid Court of Appeal partially upheld the appeal

filed by the Bank. The judgment has reduced the

amount to be paid by EUR 8 million, which, to the

extent that this amount was already paid in the

provisional partial enforcement of the judgement of

first instance court, must be returned to the Bank

together with other amounts for interest, which the

appeal judgement also rejects.

The Bank has submitted a brief requesting a

supplement to the Madrid Court of Appeal’s

judgment, as it understands that it has not ruled on

some substantial allegations over the merits of the

case made in the Bank’s appeal. The Bank will file an

extraordinary appeal for procedural infringement

and an appeal in cassation against the Madrid Court

of Appeal’s judgment before Spanish Supreme Court. 

Existing provisions cover the estimated risk of loss.

•Universalpay Entidad de Pago, S.L. has filed a lawsuit

against Banco Santander, S.A. for breach of the

marketing alliance agreement (MAA) and claim

payment (EUR 1,050 million). The MAA was

originally entered into by Banco Popular and its

purpose is the rendering of acquiring services (point

of sale payment terminals) for businesses in the

Spanish market. The lawsuit was mainly based on

the potential breach of clause 6 of the MAA, which

establishes certain obligations of exclusivity, non-

competition and customer referral. On 16 December

2022, the Court ruled in favour of the Bank and

dismissed the plaintiff's claim in its entirety.  The

decision has been appealed. 

Taking into account the decision at first instance and

following the analysis carried out by the Bank's

external lawyers, with the best information available

to date, it is considered that no provision needs to be

registered.

•CHF Polish Mortgage Loans: On 3 October 2019, the

CJEU rendered its decision in relation to a judicial

proceeding against an unrelated bank in Poland

considering that certain contractual clauses in CHF-

Indexed loan agreements were abusive. The CJEU

has left to Polish courts the decision on whether the

whole contract can be maintained once the abusive

terms have been removed, which should in turn

decide whether the effects of the annulment of the

contract are prejudicial to the consumer. In case of

maintenance of the contract, the court may only

integrate the contract with subsidiary provisions of

national law and decide, in accordance with those

provisions, on the applicable rate.

•In 2021, the Supreme Court was expected to take a

position regarding the key issues in disputes

concerning loans based on foreign currency,

clarifying the discrepancies and unifying case law.

The Supreme Court met several times, with the last

session taking place on 2 September 2021. However,

the resolution was not adopted and instead, the

Supreme Court referred questions to the CJEU on

constitutional issues of the Polish judiciary system.

No new date for consideration of the issue has been

set and no comprehensive decision by the Supreme

Court of the issue is expected in the near future. In

the absence of a comprehensive position of the

Supreme Court, it is difficult to expect a full

unification of judicial decisions, and decisions of the

Supreme Court and CJEU issued on particular issues

may be important for shaping further case law on

CHF matters.

At the date of the Group's consolidated financial

statements, it is not possible to predict the Supreme

Court’s and CJEU decisions on individual cases.

Santander Bank Polska and Santander Consumer

Bank Poland estimate legal risk using a model which

considers different possible outcomes and regularly

monitor court rulings on foreign currency loans to

verify changes in case law practice.

As of 31 December 2022, Santander Bank Polska S.A.

and Santander Consumer Bank S.A. maintain a

portfolio of mortgages denominated in or indexed to

CHF for an approximate gross amount of PLN

8,393.7 million (EUR 1,791.8 million). As of 1 January

2022, in accordance with IFRS 9 and based on the

new best available information, the accounting

methodology was adapted so that the gross carrying

amount of mortgage loans denominated and indexed

in foreign currencies is reduced by the amount in

which the estimated cash flows are not expected to

cover the gross amount of loans, including as a result

of legal controversies relating to these loans.  In the

absence of exposure or insufficient gross exposure, a

provision according to IAS 37 is recorded. 

As of 31 December 2022, the total value of

adjustment to gross carrying amount in accordance

with IFRS9 as well as provisions recorded under

IAS37, amount to PLN 3,557.3 million (EUR

759.4 million) of which PLN 3,136.3 million (EUR

669.5 million) corresponds to adjustment to gross

carrying amount under IFRS 9 and PLN 421 million

(EUR 89.9 million) to provisions recognized in

accordance with IAS 37. Throughout 2022, the

adjustment to gross carrying amount in accordance

with IFRS9 amounted to PLN 1,283.3 million (EUR

274 million), the additional provisions under IAS37

amounted to PLN 236.8 million (EUR 50.6 million)

and other costs related to the dispute amounted to

PLN 218.1 million (EUR 46.6 million).

144

These provisions represent the best estimate as at 31

December 2022.  Santander Bank Polska and

Santander Consumer Bank Poland will continue to

monitor and assess appropriateness of those

provisions.

In December 2020, the Chairman of the Polish

Financial Supervision Authority ('KNF') presented a

proposal for voluntary settlements between banks

and borrowers under which CHF loans would be

retrospectively settled as PLN loans bearing an

interest rate based on WIBOR plus margin. The Bank

has been testing such settlements in relation to

different customer groups in parallel with own

settlement solutions. The results of the current tests

have been incorporated into the provision calculation

model.

On February 16, 2023, the CJEU General Advocate

(“AG”) issued his opinion in case no. C-520/21

pending before the CJEU, where it considers that

Directive 93/13/EEC does not oppose national

legislative provisions, or the national jurisprudence

that interprets them, that allow the consumer to

exercise claims that go beyond the reimbursement of

the loan instalments disbursed under the mortgage

loan contract that is declared null and the payment

of default interest at the legal rate accrued from the

date of the payment request. However, it

corresponds to the Polish courts to verify, in the light

of their national law, whether consumers have the

right to exercise this type of claim and, where

appropriate, rule on its admissibility. With regard to

banks, the opinion of the AG is that the Directive

prevents a bank from exercising claims against a

consumer that go beyond the repayment of the

principal of the loan granted declared null and the

payment of default interest at the legal rate accrued

from the date of the payment request. The opinion is

non-binding, so it does not definitively resolve these

issues, which will be decided in the CJEU ruling that

is expected in 2023. At the date of the consolidated

annual accounts, it is not possible to predict a

reliable estimate of the potential impact for the

Group if the CJEU assumed the opinion of the AG,

since this would also depend on the criterion

adopted by the national courts.

On 17 February 2023, the KNF has issued a

statement in which upholds in full the opinion

expressed by the Chairman of the KNF before the

CJEU on 12 October 2022, disagreeing with the

conclusions of the AG.

•Banco Santander Mexico. Dispute regarding a

testamentary trust constituted in 1994 by Mr.

Roberto Garza Sada in Banca Serfin (currently

Santander Mexico) in favor of his four sons in which

he affected shares of Alfa, S.A.B. de C.V.

(respectively, "Alfa" and the "Trust"). During 1999,

Mr. Roberto Garza Sada instructed Santander México

in its capacity as trustee to transfer 36,700,000

shares from the Trust's assets to his sons and

daughters and himself. These instructions were

ratified in 2004 by Mr. Roberto Garza Sada before a

Notary Public.   

Mr. Roberto Garza Sada passed away on 14 August

2010 and subsequently, in 2012, his daughters filed

a complaint against Santander Mexico alleging it had

been negligent in its trustee role. The lawsuit was

dismissed at first instance in April 2017 and on

appeal in 2018. In May 2018, the plaintiffs filed an

appeal (recurso de amparo) before the First

Collegiate Court of the Fourth Circuit based in Nuevo

León, which ruled in favor of the plaintiffs on 7 May 

2021, annulling the 2018 appeal judgment and

condemning Santander Mexico to the petitions

claimed, consisting of the recovery of the amount of

36,700,000 Alfa shares, together with dividends,

interest and damages.  

Santander Mexico has filed various constitutional

review and appeals against the recurso de amparo

referred to above, which have been dismissed by the

Supreme Court of Justice of the Nation. As of this

date, an amparo review filed by the Bank is pending

to be resolved in the Collegiate Courts in the State of

Nuevo León, thus the judgment is not final. On 29

June 2022, Santander México, within the framework

of the amparo review filed by the Bank, requested

the First Collegiate Court in Civil Matters of the

Fourth Circuit of Nuevo León the recusal of two of

the three Magistrates who rendered against

Santander Mexico, which has been resolved in favour

of Santander Mexico. Plaintiffs have requested the

recusal of the third Magistrate who ruled with a

dissenting vote against the recurso de amparo

referred above.

Santander México believes that the actions taken

should prevail and reverse the decision against it.

The impact of a potential unfavorable resolution for

Santander México will be determined in a

subsequent proceeding and will also depend on the

additional actions that Santander México may take in

its defense, so it is not possible to determine it at this

time. At the current stage of the proceedings, the

provisions recorded are considered to be sufficient to

cover the risks deriving from this claim.

145

•URO Property Holdings, SOCIMI SA on 16 February

2022, legal proceedings were commenced in the

Commercial Court of London against Uro Property

Holdings SOCIMI SA (“Uro”), a subsidiary of Banco

Santander, S.A., by BNP Paribas Trust Corporation UK

Limited (“BNP”) in its capacity as trustee on behalf of

certain bondholders and beneficiaries of security

rights. The litigation concerns certain terms of a

financing granted to Uro which was supported by a

bond issue in 2015. The claimant seeks a declaration

by the Court and a monetary award against Uro, in

connection with an additional premium above the

nominal value of the financing repayment as a

consequence of Uro having lost its status as SOCIMI

(Sociedad Anónima Cotizada de Inversión

Inmobiliaria), such loss causing the prepayment of

the bond issue and, in the opinion of the claimant

BNP, also the obligation to pay the additional

premium by Uro. Uro denies being liable to pay that

additional premium and filed its defense statement

and announced a counterclaim against the claimant. 

The trial hearing has not been scheduled yet. 

Furthermore, Uro filed a summary judgement

application for BNP's claim to be dismissed before

trial.  The Commercial Court dismissed the

application and Uro is seeking permission to appeal

this decision. It is estimated that the maximum loss

associated with this possible contingency, amounts

to approximately EUR 250 million.

•Banco Santander and the other Group companies are

subject to claims and, therefore, are party to certain

legal proceedings incidental to the normal course of

their business including those in connection with lending

activities, relationships with employees and other

commercial or tax matters additional to those referred to

here.

With the information available to it, the Bank considers

that, at 31 December 2022, it had reliably estimated the

obligations associated with each proceeding and had

recognized, where necessary, sufficient provisions to

cover reasonably any liabilities that may arise as a result

of these tax and legal risks. Disputes in which provisions

have been registered but are not disclosed is justified on

the basis that it would be prejudicial to the proper

defense of the Group and the Bank. Subject to the

qualifications made, it also believes that any liability

arising from such claims and proceedings will not have,

overall, a material adverse effect on the Group’s and the

Bank’s business, financial position, or results of

operations.

24. Tax matters

a) Consolidated Tax Group

Pursuant to current legislation, the Consolidated Tax

Group includes Banco Santander, S.A. (as the parent) and

the Spanish subsidiaries that meet the requirements

provided for in Spanish legislation regulating the

taxation of the consolidated profits of corporate groups

(as the controlled entities).

b) Years open for review by the tax authorities

In June and November 2021 Spanish tax authorities

formalized acts with agreement, conformity and non-

conformity relating to the corporate income tax financial

years 2012 to 2015. The adjustments signed in

conformity and with agreement  had not impact on

results and, in relation to the concepts signed in

disconformity both in this year and in previous years

(corporate income tax 2003 to 2011), Banco Santander,

S.A., as the Parent of the Consolidated Tax Group,

considers, in accordance with the advice of its external

lawyers, that the adjustments made should not have a

significant impact on the financial statements, as there

are sound arguments as proof in the appeals filed

against them pending at the National Appellate Court

(tax years 2003 to 2011) and Central Economic

Administrative Court (tax years 2012-2015).

Consequently, no provision has been recorded for this

concept. It should also be noted that, in those cases

where it has been considered appropriate, the

mechanisms available to avoid international double

taxation have been used. At the date of approval of these

accounts, the Corporate Income Tax and other taxes

audit for periods 2017 to 2019 are ongoing, and

subsequent years up to and including 2022, are subject

to review.

Because of the possible different interpretations which

can be made of the tax regulations, the outcome of the

tax audits of the rest of years subject to review might

give rise to contingent tax liabilities which cannot be

objectively quantified. However, the Group and the

Bank’s tax advisers consider that it is unlikely that such

tax liabilities will materialize, and that in any event the

tax charge arising therefrom would not materially affect

the Bank’s financial statements.

146

c) Reconciliation

The reconciliation between the income tax expense at

the applicable tax rate (30%) and the income tax

expense recorded (in EUR millions) is shown below:

EUR million
	2022	2021
Profit before taxes	7,964	3,864
Corporate tax at the applicable rate of 30%	2,389	1,159
Dividends and capital gains	(2,431)	(1,454)
Impairment of non-deductible shares	154	(240)
Remaining permanent differences and others	(69)	467
Expense/(Incomes) taxes recorded	43	(68)

d) Tax recognized in equity

Regardless of the income tax incurred in profit and loss

accounts, Banco Santander has passed on the net worth

the following amounts during 2022 and 2021:

EUR million
	Amounts receivable/ (Amounts payable)
	2022	2021
Fair value changes of debt instruments measured at fair value with changes in other comprehensive income	98	156
Equity instruments valued at fair value with changes in other comprehensive income	3	(4)
Cash flow hedges	126	(44)
Other valuation adjustments (note 25)	(101)	19
Total	126	127

e) Deferred taxes

The balance under the heading 'Deferred tax assets' of

the balance sheets includes the debtor balances against

the Public Treasury for Advance Tax; in turn, the balance

under the heading 'Deferred tax liabilities' includes the

liabilities corresponding to the different deferred taxes

of Banco Santander.

In accordance with the Basel III legal framework

introduced into European law through Directive 2013/36

(CRD IV) and EU Regulation 575/2013 on prudential

requirements for credit institutions and investment firms

(CRR), and subsequently amended by Regulation (EU)

2019/876 of the European Parliament and of the

Council, deferred tax assets whose utilisation does not

depend on the realisation of future profits (hereinafter

referred to as monetizable tax assets) and which were

generated before 23 November 2016, should not be

deducted from regulatory capital.

The following are the breakdown of tax assets and

liabilities as of December 31, 2022 and 2021:

EUR million
	2022	2021
Tax assets:	11,220	9,622
CurrentA	2,977	1,003
Deferred	8,243	8,619
Of which
Relating to pensions	2,920A, B	3,540A, B
Relating to allowances for loan losses	3,002A, B	3,023A, B
Relating to deductions and negative tax bases	778	632
Tax liabilities:	1,796	1,697
Of which, deferred tax liabilities	1,634	1,521

A.The increase in current tax assets corresponds mainly to the

installment payments made to the Corporation Tax account for the

year 2022.

B.Banco Popular Español, S.A.U. considered that part of its monetizable

assets were converted into credit against the Tax Administration in

2017 Income Tax return, as the circumstances which determined

such conversion were met at the end of that year (EUR 995 million).

The Spanish tax authorities have expressly confirmed the nature of

these assets as monetizables, but they considered that conditions for

conversion were not met at the end of 2017, without prejudice to the

conversion in future years. The Tax Administration position is being

discussed at the Courts. Besides, due to losses incurred in 2020, the

Consolidated Tax Group in Spain converted EUR 642 million of

monetizable tax assets into credit against the Tax Administration in its

corporate income tax return.

At the end of the fiscal year, deferred taxes, both assets

and liabilities, are reviewed in order to verify whether

adjustments are necessary to be made in accordance

with the results of the analyses carried out.

These analyses take into account all the positive and

negative evidence of the recoverability of such assets,

including (i) the results generated in previous years, (ii)

the projections of results, (iii) the estimate of the

reversal of the various temporary differences depending

on their nature and (iv) the period and limits established

in current legislation for the recovery of the various

deferred tax assets, thus concluding on Banco

Santander’s ability to recover its deferred tax assets.

The results projections used in this analysis are based on

the financial budgets approved by both the local bureaux

of the respective units and by Banco Santander

managers. Grupo Santander budget estimation process

is common for all units, including the Bank. The Grupo

Santander management prepares its financial budgets

based on the following key assumptions.

a.Microeconomic variables of the entities that make up

the tax group at each location: consideration is taken

of the existing balance sheet structure, the mix of

products offered and the commercial strategy at any

time defined by the local authorities in this regard

based on the competition, regulatory and market

environment.

147

b.Macroeconomic variables: The estimated growth is

based on the evolution of the economic environment

considering the expected developments in the Gross

Domestic Product of each location and the forecasts

on behaviour of interest rates, inflation and exchange

rates. This data is provided by Grupo Santander's

Studies Service, and based on external sources of

information.

In addition, Grupo Santander performs retrospective

reviews (backtesting) on the variables projected in the

past. The differential performance of these variables

with respect to the actual market data is considered in

the estimated projections for each financial year. Thus, in

relation to Spain, the deviations identified by

Management in recent years are due to non-recurring

events that are not related to the business's operations,

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 the

assumptions regarding those variables, Grupo Santander

conducts a sensitivity analysis of the most significant

ones used in the analysis of the recoverability of

deferred tax assets, considering reasonable changes in

the key assumptions upon which the projections of

results of each tax entity or group and the estimate of

the reversal of the various temporary differences. In

relation to Spain, the sensitivity analysis consisted of

adjusting 50 basis points for growth (gross domestic

product) and adjusting 50 basis points for inflation.

Following this analysis, the maximum recovery period of

deferred tax assets recorded at 31 December 2022 is

maintained for 15 years.

In addition, the Spanish Tax Group, of which Banco

Santander, S.A. is the dominant entity, has not

recognized deferred tax assets in respect of tax losses,

investment deductions and other incentives amounting

to approximately EUR 10,700 million, of which EUR 400

million are subject, among other requirements, to time

limits.

f) Regulatory changes

In Spain in 2020, the General State Budget Law for 2021

was approved, which, among other tax measures,

established the non-deductibility in the Corporation Tax

of the management expenses of capital holdings whose

dividends or capital gains are exempt. of taxes, setting

the amount of these non-deductible expenses at 5% of

the dividend or positive income obtained. In 2021, the

General State Budget Law for 2022 was approved, which

establishes a minimum tax rate of 15% (18% for

financial entities) on the tax base in Corporation Tax.

In addition, Law 38/2022 was approved during 2022,

which establishes a non-tax asset tax benefit payable by

credit institutions and financial credit institutions in 2023

and 2024, the amount of which will be 4.8% of the sum

of net interest income and net fee and commission

income for the previous year derived from the activity

carried out in Spain. The payment obligation will arise on

the first day of each year (see Note 1.j). The

aforementioned Law also establishes a 50% limitation

on the inclusion of individual tax losses in the taxable

income of the Consolidated Tax Group. This limitation is

only expected to be in force in 2023, and a period of 10

years is set for the reversal of this positive adjustment.

g ) Other information

In compliance with the disclosure requirement

established in the listing rules instrument 2005

published by the UK Financial Conduct Authority, it is

hereby stated that shareholders of the Bank resident in

the United Kingdom will be entitled to a tax credit for

taxes paid abroad in respect of withholdings that the

Bank has to pay on the dividends to be paid to such

shareholders if the total income of the dividend exceeds

the amount of exempt dividends of GBP 2,000 for

the year 2022/23. The shareholders of the Bank resident

in the United Kingdom who hold their ownership interest

in the Bank through Santander Nominee Service will be

informed directly of the amount thus withheld and of

any other data they may require to complete their tax

returns in the United Kingdom. The other shareholders of

the Bank resident in the United Kingdom should contact

their bank or securities broker.

Banco Santander, S.A., is part of the Large Business

Forum and has adhered to the Code of Good Tax

Practices in Spain since 2010, actively participating in the

cooperative compliance programmes being developed

by the tax administration.

148

25. Other comprehensive

income

The balances of 'Other comprehensive income' include

the amounts, net of the related tax effect, of the

adjustments to assets and liabilities recognised in equity

through the statement of recognised income and

expense. The amounts arising from subsidiaries are

presented, on a line by line basis, in the appropriate

items according to their nature.

Respect to items that may be reclassified to profit or

loss, the statement of recognised income and expense

includes changes in other comprehensive income as

follows:

•Revaluation gains (losses): includes the amount of

the income, net of the expenses incurred in the year,

recognised directly in equity. The amounts

recognised in equity in the year remain under this

item, even if in the same year they are transferred to

the income statement or to the initial carrying

amount of the assets or liabilities or are reclassified

to another line item.

•Amounts transferred to income statement: includes

the amount of the revaluation gains and losses

previously recognised in equity, even in the same

year, which are recognised in the income statement.

•Amounts transferred to initial carrying amount of

hedged items: includes the amount of the

revaluation gains and losses previously recognised in

equity, even in the same year, which are recognised

in the initial carrying amount of assets or liabilities as

a result of cash flow hedges.

•Other reclassifications: includes the amount of the

transfers made in the year between the various

valuation adjustment items.

149

a) Breakdown of Other accumulated comprehensive

income - Items that will not be reclassified in results

and Items that can be classified in results

EUR million
	2022	2021
Other accumulated comprehensive income	(2,530)	(1,802)
Items that will not be reclassified in results	(2,062)	(1,858)
Actuarial gains and losses on defined benefit pension plans	(1,133)	(1,329)
Non-current assets held for sale	—	—
Other recognized income and expense of investments in subsidiaries, joint ventures and associates	—	—
Rest of valuation adjustments	—	—
Changes in the fair value of equity instruments measured at fair value through other comprehensive income	(908)	(468)
Ineffectiveness  of fair value hedges of equity instruments measured at fair value with changes in other comprehensive income	—	—
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedged item)	289	271
Changes in the fair value of equity instruments measured at fair value through other comprehensive income (hedging instrument)	(289)	(271)
Changes in the fair value of financial liabilities at fair value through profit or loss attributable to changes in credit risk	(21)	(61)
Items that can be classified in results	(468)	56
Hedges of net investments in foreign operations (effective portion)	—	—
Exchange differences	—	—
Cash flow hedges (effective portion)	(381)	(87)
Changes in the fair value of debt instruments measured at fair value through changes in other comprehensive income	(87)	143
Hedging instruments (items not designated)	—	—
Non-current assets held for sale	—	—

b) Other accumulated comprehensive income-

Items not reclassified to profit or loss – Actuarial

gains or (-) losses on defined benefit pension plans

‘Other comprehensive income – Items not reclassified to

profit or loss – Actuarial gains or (-) losses on defined

benefit pension plans’ include the actuarial gains and

losses and the return on plan assets, less the

administrative expenses and taxes inherent to the plan,

and any change in the effect of the asset ceiling,

excluding amounts included in net interest on the net

defined benefit liability (asset).

Its variation is shown in the statement of recognised

income and expense.

150

c) Other accumulated comprehensive income -

Items that will not be reclassified in results -

Changes in the fair value of equity instruments

measured at fair value with changes in other

comprehensive income.

Includes the net amount of unrealized fair value changes

of equity instruments at fair value with changes in other

comprehensive income.

The following is a breakdown of the composition of the

balance as of 31 December 2022 and 2021 under ‘Other

accumulated comprehensive income - Items that will not

be reclassified to profit or loss - Changes in the fair value

of equity instruments measured at fair value with

changes in other global result‘ (see note 8):

EUR million
	2022				2021
	Capital gains by valuation	Capital losses by valuation	Net gains/ losses by valuation	Fair value	Capital gains by valuation	Capital losses by valuation	Net gains/ losses by valuation	Fair value
Equity instruments	48	(956)	(908)	1,268	178	(646)	(468)	1,705

Since the entry into force of Bank of Spain Circular

4/2017, no impairment analysis is performed on equity

instruments measured at fair value through other

comprehensive income. Bank of Spain Circular 4/2017

eliminates the need to estimate the impairment of this

type of equity instruments and the reclassification to

profit or loss of gains and losses on derecognition of

these assets, which are recognised at fair value through

equity.

d) Other accumulated comprehensive income -

Items that may be reclassified to profit or loss -

Hedging derivatives – Cash flow hedges (Effective

portion)

‘Other comprehensive income – Items that may be

reclassified to profit or loss - Cash flow hedges’ includes

the gains or losses attributable to hedging instruments

that qualify as effective hedges. These amounts will

remain under this heading until they are recognized in

the income statement in the periods in which the hedged

items affect it (see note 11).

151

e) Other accumulated comprehensive income -

Items that may be reclassified to profit or loss –

Changes in the fair value of debt instruments

measured at fair value with changes in other

comprehensive income

Includes the net amount of unrealized changes in the fair

value of assets classified as items than can be

reclassified in results ‘Changes in the fair value of debt

instruments measured at fair value with changes in

other comprehensive income‘ (see note 7).

Below is a breakdown of the balance composition as of

December 31, 2022 and 2021 of ‘Other accumulated

global income - Items that can be reclassified in results -

Changes in the fair value of the instruments of debt

valued at fair value with changes in other comprehensive

income’ depending on the type of instrument:

EUR million
	2022				2021
	Revaluation gains	Revaluation losses	Net revaluation gains/ (losses)	Fair value	Revaluation gains	Revaluation losses	Net revaluation gains/ (losses)	Fair value
Debt instruments	7	(94)	(87)	4,120	172	(29)	143	9,394

As of December 31, 2022 and 2021, the handicaps

recorded in the ‘Other cumulative comprehensive

income - Elements that can be reclassified into profit or

loss - Changes in the fair value of debt instruments

measured at fair value through other comprehensive

income’ are not significant.

26. Shareholders’ equity

The changes in ‘Shareholders' equity’ are presented in

the statement of changes in total equity. Significant

information on certain items of ‘Shareholders' equity’

and the changes therein in 2022 are set forth below.

152

27. Issued capital

a) Changes

Banco Santander's share capital at 31 December 2021

consisted of EUR 8,670 million, represented by

17,340,641,302 shares of EUR 0.50 of nominal value

each and all of them of a unique class and series.

On 1 April 2022, there was a capital reduction

amounting to EUR 129,965,136.50 through the

redemption of 259,930,273 shares, corresponding to the

share buyback program carried out in 2021.

Likewise, on 28 June 2022, Banco Santander decreased

its capital by an amount of EUR 143,154,722.50 through

the redemption of 286,309,445 shares, corresponding to

the share buyback program carried out during the first

half of 2022.

Both operations have not entailed the return of

contributions to the shareholders as Banco Santander

was the owner of the redeemed shares.

Therefore, Banco Santander's share capital at 31

December 2022 consisted of EUR 8,397 million,

represented by 16,794,401,584 shares of EUR 0.50 of

nominal value each and all of them of a unique class and

series. It includes 340,406,572 shares corresponding to

the first 2022 share buyback program  (see note 1j).

Banco Santander’s shares are listed on the Spanish Stock

Market Interconnection System and on the New York,

London, Mexico and Warsaw Stock Exchanges, and all of

them have the same features and rights. Santander

shares are listed on the London Stock Exchange under

Crest Depository Interest (CDI), each CDI representing

one Bank’s share. They are also listed on the New York

Stock Exchange under American Depositary Receipts

(BDR), each BDR representing one share. During 2019

and 2018 the number of markets where the Bank is

listed was reduced; the Bank's shares was delisted from

Buenos Aires, Milan, Lisboa and São Paulo's markets.

As of 31 December 2022, Norges Bank was registered

with the CNMV with a direct significant shareholding of

3.006% of voting shares of Banco Santander (3% is the

commonly lowest threshold provided under Spanish law

to disclose a significant holding in a listed company), as

it had announced on 5 May 2022. Even though at 31

December 2022, certain custodians appeared in our

shareholder registry as holding more than 3% of our

share capital, we understand that those shares were

held in custody on behalf of other investors, none of

whom exceeded that threshold individually. These

custodians were State Street Bank (14.23%),Chase

Nominees Limited (6.88%),  The Bank of New York

Mellon Corporation (4.82%), Citibank New York (3.90%),

BNP (3.28%) and  EC Nominees Limited (3.04%).

At 31 December 2022, neither Banco Santander's

shareholder registry nor the CNMV's registry showed

any shareholder residing in a non-cooperative

jurisdiction with a shareholding equal to, or greater than,

1% of our share capital (which is the other threshold

applicable under Spanish regulations).

b) Other considerations 

Under Spanish law, only shareholders at the general

meeting have the authority to increase share capital.

However, they may delegate the authority to approve or

execute capital increases to the board of directors. Banco

Santander´s Bylaws are fully aligned with Spanish law

and do not establish any different conditions for share

capital increases.

At 31 December 2022 the shares of the following

companies were listed on official stock markets: Banco

Santander Argentina S.A.; Banco Santander México, S.A.,

Institución de Banca Múltiple, Grupo Financiero

Santander México; Banco Santander - Chile; Banco

Santander (Brasil) S.A., Santander Bank Polska S.A. and

Getnet Adquirência e Serviços para Meios de Pagamento

S.A. - Instituição de Pagamento.

At 31 December 2022 the number of Banco Santander

shares owned by third parties and managed by Group

management companies (mainly portfolio, collective

investment undertaking and pension fund managers) or

jointly managed was 50 million shares, which

represented 0.30% of Banco Santander’s share capital

(45 million shares, representing 0.26% of the share

capital in 2021). In addition, the number of Banco

Santander shares owned by third parties and received as

security was 232 million shares (equal to 1.38% of the

Bank’s share capital).

153

28. Share premium

Share premium includes the amount paid up by the

Bank’s shareholders in capital issues in excess of the par

value.

The Corporate Enterprises Act expressly permits the use

of the share premium account balance to increase capital

at the entities at which it is recognised and does not

establish any specific restrictions as to its use.

The change in the balance of share premium

corresponds to the capital increases detailed in note

27.a).

The decreased produced in 2021 for an amount of EUR

4,034 million was the consequence of applying the

result obtained by Banco Santander during the financial

year 2020, consisting of losses of EUR 3,557 million, as

reflected in the consolidated statements of changes in

total equity, and the charge of the dividend for the fiscal

year 2020 for an amount of EUR 477 million (see note

27).

The decreased produced in 2022 by an amount of EUR

1,433 million has been the consequence of the

difference between the purchase value of the redeemed

shares (EUR  1,706 million) and the par value of said

shares (EUR 273 million) (see note 4.a and consolidated

statements of changes in total equity) as a consequence

of the capital decreases described in note 31.a.

Likewise, in accordance with the applicable legislation, a

reserve has been provided for amortized capital charged

to the issue premium for an amount equal to the

nominal value of said amortized shares (EUR

273 million).

29. Accumulated retained

earnings

a) Definitions

The balance of 'Equity - Accumulated gains and Other

reserves' includes the net amount of the accumulated

results (profits or losses) recognised in previous years

through the income statement which in the profit

distribution were allocated in equity, the expenses of

own equity instrument issues, the differences between

the amount for which the treasury shares are sold and

their acquisition price, as well as the net amount of the

results accumulated in previous years, generated by the

result of non-current assets held for sale, recognised

through theincome statement.

b) Breakdown

The detail of ‘Shareholders' equity - reserves’ at 31

December 2022 and 2021 is as follows:

EUR million
	2022	2021
Restricted reserves	2,798	2,543
Legal reserveA	1,734	1,734
Own shares	737	755
Revaluation reserve Royal Decree-Law 7/1996	43	43
Reserve for retired capital	284	11
Unrestricted reserves	7,917	6,123
Voluntary reserves	7,917	6,123
Total	10,715	8,666

A.The board of directors has proposed to the general shareholders'

meeting the reclassification of the excess that the amount of the

balance of the legal reserve account shows over the figure that is

equivalent to 20% of the resulting share capital after the executed

capital reductions, to be included in the voluntary reserves account.

i. Legal reserve

Under the Consolidated Spanish Corporate Enterprises

Act, 10% of net profit for each year must be transferred

to the legal reserve. These transfers must be made until

the balance of this reserve reaches 20% of the share

capital. The legal reserve can be used to increase capital

provided that the remaining reserve balance does not

fall below 10% of the increased share capital amount.

During the 2022 and 2021 financial years, Banco

Santander has not allocated any amount to Legal

Reserve (see note 28).

The amount of the Legal Reserve complied with the

percentage of 20% of the share capital figure as of

December 31, 2022.

ii. Reserve for equity shares

According to the Consolidated Text of the Corporate

Enterprises Act, an unavailable reserve equivalent to the

amount for which Banco Santander's shares owned by

subsidiaries are recorded. This reservation shall be freely

available when the circumstances which have obliged its

constitution disappear. In addition, this reserve covers

the outstanding balance of loans granted by the Group

with Banco Santander's share guarantee and the amount

equivalent to the credits granted by the Group

companies to third parties for the acquisition of own

shares.

iii. Revaluation reserve Royal Decree Law 7/1996, of 7

June

The balance of Revaluation reserve Royal Decree-Law

7/1996 can be used, free of tax, to increase share capital.

From 1 January 2007, the balance of this account can be

taken to unrestricted reserves, provided that the

monetary surplus has been realised. The surplus will be

154

deemed to have been realised in respect of the portion

on which depreciation has been taken for accounting

purposes or when the revalued assets have been

transferred or derecognised.

If the balance of this reserve were used in a manner

other than that provided for in Royal Decree law 7/1996,

of 7 June, it would be subject to taxation.

iv. Voluntary Reserve

During the 2022 financial year there has been an

increase in voluntary reserves amounting EUR 1,794

million; which correspond to an increase in voluntary

reserves from the application of the result of the

financial year 2021 for EUR 2,227 million, a decrease of

EUR 18 million due to the constitution of reserves for

own shares, a decrease of EUR 413 million due to the

interests on the PPCC (see note 21), a decrease of EUR 7

million due to losses on the sale of equity instruments

valued at fair value charged to other accumulated

comprehensive income and a decrease of EUR 13 million

due to transfers between equity items and other

concepts.

30. Other equity instruments

and own shares

a) Equity instruments issued not capital and other

equity instruments

It includes the amount corresponding to compound

financial instruments with a nature of net worth, the

increase in staff remuneration, and other items not

recorded in other items of own funds.

On July 13, 2017, Banco Santander and Banco Popular

Español, S.A.U. (hereinafter, Banco Popular)

communicated that they had decided to launch a

commercial action with the purpose of building loyalty

among retail customers of their networks affected by

the resolution of Banco Popular (the ‘Loyalty Action’).

Under the Loyalty Action, customers who met certain

conditions and have been affected by Banco Popular's

decision could receive, without disbursement by their

part, marketable securities issued by Banco Santander

for a nominal amount equivalent to the investment in

shares or in certain bonds subordinates of Banco Popular

(with certain limits) of which they held at the date of

Banco Popular's resolution. In order to avail itself of such

action, it was necessary for the client to waive legal

action against the Group.

The Loyalty Action would be carried out by providing the

customer with contingently amortizable perpetual

obligations ('Loyalty Bonds’) of Banco Santander, S.A.

Loyalty Bonds will accrue a cash coupon, discretionary,

non-cumulative, payable for completed quarters.

This issuance was made by Banco Santander, S.A. on 8

September 2017 for a nominal amount of EUR 981

million, fully subscribed by Banco Popular Español,

S.A.U. As at 31 December 2022, the cost recorded under

the heading 'Equity instruments' issued other than

capital on Banco Santander balance sheet amounts to

EUR 688 million (EUR 658 million as at 31 December

2021).

Loyalty Bonds are perpetual securities; however, they

may be fully amortized at the will of Banco Santander,

S.A., with prior authorization from the European Central

Bank, on any of the dates of payment of the coupon,

seven years after its issuance.

b) Own shares

‘Shareholders' equity - Own shares’ includes the amount

of equity instruments held by Banco Santander.

Transactions involving own ‘Equity instruments’,

including their issuance and cancellation, are recognised

directly in equity, and no profit or loss may be recognised

on these transactions. The costs of any transaction

involving own equity instruments are deducted directly

from equity, net of any related tax effect.

The Bank’s shares owned by the consolidated companies

accounted for 1.451% of issued share capital at 31

December 2022 (December 31, 2021 1.60%)

During the 2022 financial year, 638,526,258 Bank shares

have been acquired at an average price of EUR 2.893 per

share, of which 286,309,445 correspond to the share

repurchase program carried out during the first half of

2022 and 220,942,806 shares correspond to to the new

buy-back program started on November 22. Likewise,

546,239,718 shares (note 27) have been redeemed and

131,274,007 shares have been transferred (of which

36,700,000 shares correspond to two donations that

Banco Santander has made to Fundación Banco

Santander) at an average price of EUR 2.81 per share

(excluding in the calculation of the average price

transmissions made by Banco Santander in the

aforementioned donations).

In 2021, the average price per share of the Bank was EUR

3.16 per share and the average transfer price EUR 3.09

per share. Of the shares acquired in the period,

259,930,273 shares (1.499% of the issued share capital)

are from the First Share Repurchase Program at a

weighted average price of EUR 3.24.

155

31. Memorandum items

Memorandum items relate to balances representing

rights, obligations and other legal situations that in the

future may have an impact on net assets, as well as any

other balances needed to reflect all transactions even

though they may not impinge on its net assets.

a) Guarantees and contingent commitments

granted

Guarantees include transactions for which an entity

secures obligations of a third party arising from financial

guarantees granted by the entity or other types of

contracts. ‘Contingent liabilities’ include all transactions

under which an entity guarantees the obligations of a

third party and which result from financial guarantees

granted by the entity or from other types of contract. The

detail is as follows:

EUR million
	2022	2021
Loans commitment granted	122,374	111,410
Available in lines of credit	122,374	111,246
Deposits in the future	—	164
Financial guarantees granted	11,956	10,489
Financial guarantees	190	179
Credit derivatives sold	11,766	10,310
Other commitments granted	71,948	59,421
Irrevocable documentary credits	4,628	3,330
Other guarantees and guarantees granted	36,725	29,971
Other	30,595	26,120
Of which:
Subscribed securities pending disbursement	1	1
Conventional asset acquisition contracts	10,123	6,265
Other contingent commitments	20,471	19,854
Total Other guarantees and commitments	206,278	181,320

The breakdown at December 31, 2022 of off-balance

sheet exposures and allowance fund (see note 23) by

impairment phase under Bank of Spain Circular 4/2017

are EUR 201,654 million and EUR 55 million in phase 1,

EUR 3,700 million and EUR 83 million in phase 2 and EUR

924 million and EUR 82 million in phase 3, respectively.

In addition the breakdown at December 31, 2021 of

exposures and the allowance fund were EUR  175,871 

million and EUR 48 million in phase 1, EUR 4,403 million

and EUR 60 million in phase 2 and EUR 1,046 million and

EUR 82 million in phase 3, respectively.

A significant part of these amounts will mature without

any payment obligation material for the Bank; therefore,

the aggregate balance of these commitments cannot be

considered as a real future need for financing or liquidity

to be granted to third parties by Banco Santander.

Income from guarantee instruments is recognized under

‘Fee and commission income’ in the income statements

and is calculated by applying the rate established in the

related contract to the nominal amount of the

guarantee.

i. Loan commitments granted

Firm commitments to provide credit under pre-

established conditions and terms, except for those that

meet the definition of derivatives because they may be

settled in cash or through the delivery or issuance of

another financial instrument. They include those

available in lines of credit and forward deposits.

ii. Financial guarantees granted

Include financial guarantee contracts such as financial

guarantees, credit derivatives sold, derivative risks

contracted on behalf of third parties and others.

iii. Other commitments granted

Other contingent liabilities include all commitments that

could give rise to the recognition of financial assets not

included in the above items, such as technical

guarantees and guarantees for the import and export of

goods and services.

b) Other information

i. Assets advanced as collateral

In addition to collateral assets, there are assets owned

by Banco Santander which guarantee both transactions

carried out by the Bank or by third parties and various

contingent liabilities and liabilities over which the

assignee has the right, by contract or custom, to re-

transfer and pledge them.

The carrying value of Banco Santander's financial assets

delivered as collateral for such contingent and

assimilated liabilities or liabilities is the following:

EUR million
	2022	2021
Financial assets held for trading	26,730	22,440
Of which	—	—
Public debt Public Sector Agencies	5,300	3,785
Fix rent instruments	13,551	9,284
Equity instruments	7,879	9,371
Non-trading financial assets mandatorily at fair value through profit or loss	627	154
Financial assets at fair value through other comprehensive income	1,517	2,348
Financial assets at amortized cost	6,019	1,513
Total	34,893	26,455

156

32. Hedging derivatives

Banco Santander, within its financial risk management

strategy, and in order to reduce asymmetries in the

accounting treatment of its operations, enters into

hedging derivatives on interest, exchange rate, credit risk

or variation of stock prices, depending on the nature of

the risk covered.

Based on its objective, Banco Santander classifies its

hedges in the following categories:

•Cash flow hedges: cover the exposure to the variation

of the cash flows associated with an asset, liability or

a highly probable forecast transaction. This cover the

variable-rate issues in foreign currencies, fixed-rate

issues in non-local currency, variable-rate interbank

financing and variable-rate assets (bonds, commercial

loans, mortgages, etc.).

•Fair value hedges: cover the exposure to the variation

in the fair value of assets or liabilities, attributable to

an identified and hedged risk. This covers the interest

risk of assets or liabilities (bonds, loans, bills, issues,

deposits, etc.) with coupons or fixed interest rates,

interests in entities, issues in foreign currencies and

deposits or other fixed rate liabilities.

•Hedging of net investments abroad: cover the

exchange rate risk of the investments in subsidiaries

domiciled in a country with a different currency from

the functional one of the Bank.

Due to the replacement of the current rates by the

alternative rates defined in the note 49 of this report, in

the Bank of Spain Circular 6/2021 on reference interest

rates (IBOR Reform Phase I and II)',the nominal amount

of hedging instruments corresponding to the hedging

relationships directly affected by the uncertainties

related to the IBOR reforms is shown below. The

percentage of the nominal amount of derivatives

affected with a maturity date after the transition date of

the reform represents 10.44% of the total hedging

derivatives:

EUR million
	USD LIBOR
Total hedging instruments affected
Fair value hedges	12,506
Interest rate risk	11,546
Interest and exchange rate risk	960
Cash flow hedges	—
Interest rate risk	—
TOTAL	12,506
Post-transition date agreement
Fair value hedges	10,384
Interest rate risk	9,424
Interest and exchange rate risk	960
Cash flow hedges	—
Interest rate risk	—
TOTAL	10,384

As for the hedged items directly affected by the

uncertainties related to the IBOR reforms, their nominal

amount is shown below, which represents of the total

notional amount hedged:

EUR million
	USD LIBOR
Total hedge items directly affected
Fair value hedges	—
Interest rate risk	—
Cash flow hedges	88
Interest rate risk	88
TOTAL	88
Post-transition date agreement
Fair value hedges	—
Interest rate risk	—
Cash flow hedges	88
Interest rate risk	88
TOTAL	88

157

The details of the coverage derivatives of Banco

Santander, S.A. according to the type of coverage, the

risk they cover and the product, can be found in the

following table:

EUR million
	31 December 2022
	Notional Value	Carrying amount		Changes in fair value used for calculating hedge ineffectiveness	Balance sheet items
		Assets	Liabilities
Fair Value Hedges	47,626	1,181	(2,563)	(2,065)
Interest rate risk	37,575	879	(2,323)	(1,872)	Hedging derivatives
Of which:
Interest Rate Swap	37,220	873	(2,321)	(1,870)
Exchange rate risk	3,214	137	(24)	(36)	Hedging derivatives
Of which:
Fx forward	3,214	137	(24)	(36)
Interest rate and exchange risk	6,781	165	(216)	(158)	Hedging derivatives
Of which:
Interest Rate Swap	905	4	(80)	(79)
Currency Swap	5,876	160	(136)	(79)
Credit Risk	56	—	—	1	Hedging derivatives
Of which:
CDS	56	—	—	1
Cash flow Hedges	31,267	70	(563)	(420)
Interest rate risk	28,200	1	(462)	(443)	Hedging derivatives
Of which:
Interest Rate Swap	28,200	1	(462)	(443)
Exchange rate risk	132	—	(3)	(3)	Hedging derivatives
Of which:
Fx forward	132	—	(3)	(3)
Interest rate and exchange risk	2,235	69	(97)	25	Hedging derivatives
Of which:
Currency exchange	2,171	69	(90)	30
Inflation rate risk	700	—	(1)	1	Hedging derivatives
Of which
Interest Rate Swap	—	—	—	—	Hedging derivatives
Floor	350	—	(1)	1	Hedging derivatives
Net Investments hedges abroad	20,570	199	(829)	(2,432)
Exchange rate risk	20,570	199	(829)	(2,432)	Hedging derivatives
Of which:
Fx forward	20,570	199	(829)	(2,432)
Total	99,463	1,450	(3,955)	(4,917)

158

EUR million
	31 December 2021
	Notional Value	Carrying amount		Changes in fair value used for calculating hedge ineffectiveness	Balance sheet line items
		Assets	Liabilities
Fair value hedges	55,470	1,379	(1,141)	(618)
Interest rate risk	36,099	1,143	(581)	(610)
Of which:
Interes Rate Swap	35,745	1,136	(580)	(608)	Hedging derivatives
Exchange rate risk	13,073	1	(416)	22
Of which:
Fx forward	13,073	1	(416)	22	Hedging derivatives
Interest rate and exchange rate risk	6,125	235	(142)	(31)
Of which:
Interest Rate Swap	1,650	12	(9)	(7)	Hedging derivatives
Currency Swap	4,475	223	(133)	(24)	Hedging derivatives
Credit risk	173	—	(2)	1
Of which:
CDS	173	—	(2)	1	Hedging derivatives
Cash flow hedges	51,218	74	(328)	146
Interest rate risk	47,721	12	(111)	145
Of which:
Interest rate swap	45,441	12	(33)	(36)	Hedging derivatives
Exchange rate risk	85	—	—	—
Of which:
Fx forward	85	—	—	—	Hedging derivatives
Interest rate and exchange rate risk	3,412	62	(217)	1
Of which:
Currency swap	3,348	61	(215)	3	Hedging derivatives
Net investment hedges abroad	23,357	195	(607)	(894)
Exchange rate risk	23,357	195	(607)	(894)
Of which:
Fx forward	23,357	195	(607)	(894)	Hedging derivatives
Total	130,045	1,648	(2,076)	(1,366)

Banco Santander covers the risks of its balance sheet in a

variety of ways. On the one hand, documented as fair

value hedges, it covers the interest rate, foreign currency

and credit risk of fixed-income portfolios at a fixed rate

(REPOs are included in this category). Resulting, in an

exposure to changes in their fair value due to variations

in market conditions based on the various risks hedged,

which has an impact on Banco Santander's income

statement.To mitigate these risks, Banco Santander

contracts derivatives, mainly Interest Rate Swaps, Cross

Currency Swaps, Cap&floors, Forex Forward y Credit

Default Swaps.

On the other hand, the interest and exchange rate risk of

loans granted to corporate clients at a fixed rate is

generally covered. These hedges, are carried out through

Interest Rate Swaps, Cross Currency Swaps and

exchange rate derivatives (Forex Swaps and Forex

Forward). 

In addition, Banco Santander, S.A. manages the interest

and exchange risk of debt issues in its various categories

(issuing covered bonds, perpetual, subordinated and

senior bond) and in different currencies, denominated at

fixed rates, and therefore subject to changes in their fair

value. These issues are covered through Interest Rate

Swaps, Cross Currency Swaps or a mix of both by

applying differentiated fair value hedging strategies for

interest rate risk and cash flow hedging strategies to

hedge foreign exchange risk.

159

The methodology used by Banco Santander  to measure

the effectiveness of fair value hedges is based on

comparing the market values of the hedged items (based

on the objective risk of the hedge) and of the hedging

instruments in order to analyse whether the changes in

the market value of the hedged items are offset by the

market value of the hedging instruments, thereby

mitigating the hedged risk and minimizing volatility in

the income statement. Prospectively, the same analysis

is performed, measuring the theoretical market values in

the event of parallel variations in the market curves of a

positive basis point.

There is a macro hedge of structured loans in which the

interest rate risk of fixed-rate loans (mortgage, personal

or with other guarantees) granted to legal entities in

commercial or corporate banking and wealth clients in

the medium-long term is hedged. This hedge is

instrumented as a macro hedge of fair value, the main

hedging instruments being Interest Rate Swap and

Cap&floors. In case of total or partial cancellation or

early repayment, the customer is obliged to pay/receive

the cost/income of the cancellation of the interest rate

risk hedge managed by the Bank.

Regarding cash flow hedges, the objective is to hedge

the cash flow exposure to changes in interest rates and

exchange rates.

For retrospective purposes, the hypothetical derivative

methodology is used to measure effectiveness. By

means of this methodology, the hedged risk is modelled

as a derivative instrument -not real-, created exclusively

for the purpose of measuring the effectiveness of the

hedge, and which must comply with the fact that its

main characteristics coincide with the critical terms of

the hedged item throughout the period for which the

hedging relationship is designated. This hypothetical

derivative does not incorporate characteristics that are

exclusive to the hedging instrument. Additionally, it is

worth mentioning that any risk component not

associated with the hedged objective risk and effectively

documented at the beginning of the hedge is excluded

for the purpose of calculating the effectiveness. The

market value of the hypothetical derivative that

replicates the hedged item is compared with the market

value of the hedging instrument, verifying that the

hedged risk is effectively mitigated and that the impact

on the income statement due to potential

ineffectiveness is residual.

Prospectively, the variations in the market values of the

hedging instrument and the hedged item (represented

by the hypothetical derivative) are measured in the event

of parallel shifts of a positive basis point in the affected

market curves.

There is another macro-hedge, this time of cash flows,

the purpose of which is to actively manage the risk-free

interest rate risk (excluding credit risk) of a portion of the

floating rate assets of Banco Santander, S.A., through

the arrangement of interest rate derivatives whereby the

bank exchanges floating rate interest flows for others at

a fixed rate agreed at the time the transactions are

arranged. The items affected by the Macro-hedging have

been designated as those in which their cash flows are

exposed to interest rate risk, specifically the floating rate

mortgages of the Banco Santander, S.A. network

referenced to Euribor 12 Months or Euribor Mortgage,

with annual renewal of rates, classified as sound risk and

which do not have a contractual floor (or, if not, this floor

is not activated). The hedged position affecting the

Macro Cash Flow Hedge at the present time is EUR

28,200 million.

Regarding net foreign investments hedges, basically,

they are allocated in Banco Santander, S.A. and

Santander Consumer Finance Group. Grupo Santander

assumes as a priority risk management objective to

minimize -to the limit determined by the Group's

Financial Management- the impact on the calculation of

the capital ratio of its permanent investments included

within the Group's consolidation perimeter, and whose

shares or equity interests are legally denominated in a

currency other than that of the Group's parent company.

For this purpose, financial instruments (generally

derivatives) are contracted to hedge the impact on the

capital ratio of changes in forward exchange rates. 

Grupo Santander mainly hedges the risk for the

following currencies: BRL, CLP, MXN, CAD, COP, CNY,

GBP, CHF, NOK, USD, and PLN. The instruments used to

hedge the risk of these investments are Forex Swaps,

Forex Forward and Spot Currency purchases/sales.

For this type of hedges, ineffectiveness scenarios are

considered to be of low probability, given that the

hedging instrument is designated considering the

position determined and the spot rate at which the

position is located.

160

Additionally, the profile information of maturities and

the price/average rate for Banco Santander is shown:

EUR million
	31 December 2022
	Up to one month	One to three months	Three months  to one year	One year to five years	More than five years	Total
Fair value hedges	2,194	2,194	5,521	27,920	9,797	47,626
Interest rate risk
Interest rate instruments
Nominal	1,032	1,248	2,348	24,115	8,809	37,552
Average fixed interest rate (%) GBP	—	2.04	2.04	1.86	2.04
Average fixed interest rate (%) EUR	0.57	(0.41)	0.28	2.40	1.67
Avarage  fixed interest rate (%)  CZK	—	—	—	1.65	—
Avarage  fixed interest rate (%) NOK	—	—	—	—	2.33
Avarage  fixed interest rate (%) AUD	—	1.07	—	—	—
Average fixed interest rate (%) CHF	—	—	—	0.53	—
Average fixed interest rate (%) JPY	—	—	—	0.46	—
Average fixed interest rate (%) RON	—	—	—	3.61	—
Average fixed interest rate (%) USD	2.89	3.12	3.83	3.18	3.37
Exchange rate risk
Exchange rate instruments
Nominal	250	899	2,064	—	—	3,213
GBP/EUR average exchange rate	—	—	0.88	—	—
USD/EUR average exchange rate	1.04	—	0.99	—	—
COP/USD average exchange rate	—	—	—	—	—
PEN/USD average exchange rate	—	—	—	—	—
AUD/EUR average exchange rate	—	1.59	—	—	—
SAR/EUR average exchange rate	—	—	—	—	—
CNY/EUR average exchange rate	7.17	7.25	7.16	—	—
JPY/EUR average exchange rate	—	—	—	—	—
MXN/EUR average exchange rate	—	21.53	—	—	—
Interest rate and exchange risk
Instruments of exchange rate and interest
Nominal	912	38	1,101	3,767	988	6,806
Average fixed interest rate (%) AUD/EUR	4.00	—	—	4.80	3.82
Average fixed interest rate (%) EUR/USD	—	—	—	(0.14)	—
Average fixed interest rate (%) CZK/EUR	—	—	0.86	—	—
Average fixed interest rate (%) EUR/COP	—	—	—	—	—
Average fixed interest rate (%) RON/EUR	—	4.52	—	5.13	—
Average fixed interest rate (%) HKD/EUR	—	—	—	2.58	—
Average fixed interest rate (%) JPY/EUR	0.57	—	—	1.44	1.36
Average fixed interest rate (%) NOK/EUR	—	—	—	3.01	3.76
Average fixed interest rate (%) CHF/EUR	—	—	—	1.24	—
Average fixed interest rate (%) USD/CLP	—	—	—	3.45	—
Average fixed interest rate (%) USD/COP	—	—	15.45	13.61	7.15
Average  fixed interest rate (%) EUR/GBP	—	5.17	—	—	—
Average  fixed interest rate (%) NZD/EUR	—	—	—	—	—
Average  fixed interest rate (%) USD/MXN	—	—	12.98	—	—
AUD/EUR average exchange rate	1.50	—	—	1.50	1.55
NZD/EUR average exchange rate	—	—	—	—	1.67

161

EUR million
	31 December 2022
	Up to one month	One to three months	Three months  to one year	One year to five years	More than five years	Total
CZK/EUR average exchange rate	—	—	25.41	25.68	—
EUR/GBP average exchange rate	—	1.16	—	—	—
EUR/COP average exchange rate	—	—	—	—	—
EUR/USD average exchange rate	—	—	—	0.94	—
HKD/EUR average exchange rate	—	—	—	8.85	—
JPY/EUR average exchange rate	133.84	—	—	130.23	118.18
MXN/EUR average exchange rate	—	—	—	—	—
NOK/EUR average exchange rate	—	—	—	9.49	9.69
RON/EUR average exchange rate	—	4.75	—	4.84	4.93
CHF/EUR average exchange rate	—	—	1.09	1.11	—
USD/CLP average exchange rate	—	—	—	—	—
USD/COP average exchange rate	—	—	—	—	—
USD/MXN average exchange rate	—	—	0.05	—	—
Credit risk
Credit Risk Instruments
Nominal	—	9	8	38	—	55
Cash flow hedges	2,261	4,525	12,846	11,451	184	31,267
Interest rate and exchange rate risk
Interest rate and exchange instruments
Nominal	—	3	597	1,451	184	2,235
Average fixed interest rate (%) AUD/EUR	—	—	—	0.30	—
Average fixed interest rate (%) USD/COP	—	—	15.40	—	—
Average fixed interest rate (%) EUR/PEN	—	—	6.50	—	—
Average fixed interest rate (%) EUR/AUD	—	3.21	—	—	—
EUR / PEN average exchange rate	—	—	0.25	—	—
EUR / USD average exchange rate	—	—	—	—	—
AUD / EUR average exchange rate	—	—	—	1.60	1.56
RON / EUR average exchange rate	—	—	—	4.89	—
JPY / EUR average exchange rate	—	—	—	120.57	—
CHF / EUR average exchange rate	—	—	—	1.10	—
EUR / GBP average exchange rate	—	—	1.08	1.17	—
NOK / EUR average exchange rate	—	—	—	—	10.24
CZK / EUR average exchange rate	—	—	—	26.13	—
EUR / AUD average exchange rate	—	0.65	—	—	—
Interest rate risk
Interest Rate Swaps
Nominal	2,250	4,500	11,450	10,000	—	28,200
Average fixed interest rate (%) EUR	(0.43)	(0.40)	(0.35)	(0.01)	—
Average fixed interest rate (%) USD	—	—	—	—	—
Average fixed interest rate (%) AUD	—	—	—	—	—
Bond Forward Instruments
Nominal	—	—	—	—	—
Inflation rate risk
Interest Rate Swaps
Nominal	—	—	700	—	—	700
Average fixed interest rate (%) EUR	—	—	0.32	—	—
Exchange rate risk

162

EUR million
	31 December 2022
	Up to one month	One to three months	Three months  to one year	One year to five years	More than five years	Total
FX Swap
Nominal	11	22	99	—	—	132
GBP/EUR average exchange rate	1.16	1.15	1.14	—	—
Net investment hedges abroad	2,020	4,711	13,839	—	—	20,570
Exchange rate risk
Exchange rate instruments
Nominal	2,020	4,711	13,839	—	—	20,570
BRL / EUR average exchange rate	6.55	5.80	5.87	—	—
CLP / EUR average exchange rate	953.55	955.79	994.11	—	—
COP / EUR average exchange rate	—	4,935.12		—	—
GBP / EUR average exchange rate	0.87	0.87	0.88	—	—
MXN / EUR average exchange rate	25.13	23.97	22.16	—	—
PLN / EUR average exchange rate	4.83	4.84	4.99	—	—
Total	6,475	11,430	32,206	39,371	9,981	99,463

163

EUR million
	31 December 2021
	Up to one month	One to three months	Three months to one year	One year to five years	More than five years	Total
Fair value hedges	633	4,584	13,475	25,468	11,310	55,470
Interest rate risk
Interest rate instruments
Nominal	14	1,822	3,038	21,507	10,031	36,412
Average fixed interest rate (%) GBP	—	—	—	2.14	1.75
Average fixed interest rate (%) EUR	3.86	0.99	(0.03)	1.21	1.53
Average fixed interest rate (%) CHF	—	—	—	0.83	0.40
Average fixed interest rate (%) JPY	—	—	—	0.46	—
Average fixed interest rate (%) RON	—	—	—	4.21	3.20
Average fixed interest rate (%) USD	4.75	1.45	3.46	2.74	3.37
Exchange rate risk
Exchange rate instruments
Nominal	503	1,634	10,350	586	—	13,073
GBP / EUR average exchange rate	—	0.88	0.86	0.88	—
USD / EUR average exchange rate	1.19	1.17	1.18	—	—
COP / USD average exchange rate	—	—	—	—	—
PEN / USD average exchange rate	—	4.00	—	—	—
AUD / EUR average exchange rate	—	—	—	—	—
SAR / EUR average exchange rate	—	—	—	—	—
CNY / EUR average exchange rate	7.86	7.72	7.41	—	—
JPY / EUR average exchange rate	132.69	130.74	—	—	—
Interest rate and exchange risk
Instruments of exchange rate and interest
Nominal	116	1,109	53	3,255	1,279	5,812
Average fixed interest rate (%) AUD/EUR	—	—	—	4.00	4.66
Average fixed interest rate (%) EUR/USD	—	—	—	(0.14)	—
Average fixed interest rate (%) CZK/EUR	—	—	—	0.86	—
Average fixed interest rate (%) EUR/COP	—	—	—	—	—
Average fixed interest rate (%) RON/EUR	—	—	—	4.85	—
Average fixed interest rate (%) HKD/EUR	—	—	—	2.58	—
Average fixed interest rate (%) JPY/EUR	—	—	—	0.73	1.14
Average fixed interest rate (%) NOK/EUR	—	—	—	—	3.61
Average fixed interest rate (%) CHF/EUR	—	—	—	0.76	1.24
Average fixed interest rate (%) USD/CLP	—	—	—	3.45	—
Average fixed interest rate (%) USD/COP	—	5.14	9.47	6.79	7.15
AUD/EUR average exchange rate	—	—	—	1.50	1.53
COP/USD average exchange rate	—	—	—	—	1.67
CZK/EUR average exchange rate	—	—	—	25.51	—
EUR/GBP average exchange rate	—	1.18	—	—	—
EUR/COP average exchange rate	—	—	—	—	—
EUR/USD average exchange rate	—	—	—	0.89	—
HKD/EUR average exchange rate	—	—	—	8.78	—
JPY/EUR average exchange rate	—	—	—	132.97	126.60
MXN/EUR average exchange rate	—	—	14.70	—	—

164

EUR million
	31 December 2021
	Up to one month	One to three months	Three months to one year	One year to five years	More than five years	Total
NOK/EUR average exchange rate	—	—	—	—	9.61
RON/EUR average exchange rate	—	—	—	4.82	4.93
CHF/EUR average exchange rate	—	—	—	1.09	1.11
USD/CLP average exchange rate	—	—	—	—	—
USD/COP average exchange rate	—	—	—	—	—
USD/MXN average exchange rate	—	—	—	0.05	—
Credit risk
Credit Risk Instruments
Nominal	—	19	34	120	—	173
Cash flow hedges	4,279	9	6,360	40,162	408	51,218
Interest rate and exchange rate risk
Interest rate and exchange instruments
Nominal	—	9	1,169	1,848	408	3,434
EUR / GBP average exchange rate	—	—	1.10	1.11	—
EUR / USD average exchange rate	—	—	—	0.88	—
AUD / EUR average exchange rate	—	—	—	1.60	1.56
RON / EUR average exchange rate	—	—	—	4.89	—
JPY / EUR average exchange rate	—	—	—	120.57	—
CHF / EUR average exchange rate	—	—	—	—	1.10
Interest rate risk
Interest Rate Swaps
Nominal	4,279	—	5,191	38,314	—	47,784
Average fixed interest rate (%) EUR	—	—	(0.47)	(0.26)	—
Bond Forward Instruments
Nominal	—	—	—	—	—	—
Net investment hedges abroad	560	1,397	11,280	10,120	—	23,357
Exchange rate risk
Exchange rate instruments
Nominal	560	1,397	11,280	10,120	—	23,357
BRL / EUR average exchange rate	6.66	6.76	6.84	—	—
CLP / EUR average exchange rate	943.35	929.69	949.61	—	—
COP / EUR average exchange rate	—	—	4,539	—	—
GBP / EUR average exchange rate	0.85	0.86	0.85	0.88	—
MXN / EUR average exchange rate	25.54	25.33	25.19	—	—
PLN / EUR average exchange rate	4.59	4.58	4.63	—	—
Total	5,472	5,990	31,115	75,750	11,718	130,045

165

Regarding the hedged items, 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, 2022 and 2021, mainly they are loaned

deposits, financial and corporate bonds and corporate

repos:

EUR million
	31 December 2022
	Amount in books of the item covered		Cumulative amount of fair value adjustments on the covered line		Change in the fair value of the item covered for inefficiency assessment	Cash flow hedge reserve / foreign currency conversion
	Assets	Liabilities	Assets	Liabilities		Coverage continues	Discontinuous coverage
Fair value hedges	13,021	29,812	(597)	(1,834)	2,051	—	—
Interest rate risk	10,237	26,865	(306)	(1,711)	1,881	—	—
Exchange rate risk	2,189	—	(284)	—	16	—	—
Interest rate and exchange rate risk	453	2,947	(7)	(123)	156	—	—
Credit risk	142	—	—	—	(2)	—	—
Cash flow hedges	—	—	—	—	420	(542)	(3)
Interest rate risk	—	—	—	—	443	(557)	(3)
Exchange rate risk	—	—	—	—	3	(3)	—
Interest rate and exchange rate risk	—	—	—	—	(25)	17	—
Inflation rate risk	—	—	—	—	(1)	1	—
Net investment hedges abroad	20,570	—	2,432	—	2,432	—	—
Exchange rate risk	20,570	—	2,432	—	2,432	—	—
Total	33,591	29,812	1,835	(1,834)	4,903	(542)	(3)

EUR million
	31 December 2021
	Amount in books of the item covered		Cumulative amount of fair value adjustments on the covered line		Change in the fair value of the item covered for inefficiency assessment	Cash flow hedge reserve / foreign currency conversion
	Assets	Liabilities	Assets	Liabilities		Coverage continues	Discontinuou s coverage
Fair value hedges	22,469	27,060	(232)	575	590	—	—
Interest rate risk	8,769	24,188	65	551	613	—	—
Exchange rate risk	11,972	—	(282)	—	(48)	—	—
Interest rate and exchange rate risk	1,549	2,872	(17)	24	27	—	—
Credit risk	179	—	2	—	(2)	—	—
Cash flow hedges	—	—	—	—	(146)	(109)	(16)
Interest rate risk	—	—	—	—	(145)	(101)	(16)
Interest rate and exchange rate risk	—	—	—	—	(1)	(8)	—
Net investment hedges abroad	23,357	—	894	—	894	—	—
Exchange rate risk	23,357	—	894	—	894	—	—
Total	45,826	27,060	662	575	1,338	(109)	(16)

166

The cumulative amount of adjustments of the fair value

hedging instruments that remain in the balance for

hedges items that are no longer adjusted by profit and

loss of coverage as at 31 December 2022 is EUR 46

million (EUR 115 million in 2021).

The following table contains information regarding the

effectiveness of the hedging relationships designated by

Banco Santander, as well as the impacts on profit or loss

and other comprehensive income as of 31 December

2022 and 2021:

EUR million
	31 December 2022
	Earnings / (losses) recognized in Other accumulated global income	Coverage inefficiency recognized in the income statement	Line of the income statement that includes ineffective coverage	Reclassified amount of reserves to the income statement due to:
				Covered transaction that affects the income statement	Line of the income statement that includes reclassified amounts
Fair value hedges	—	(15)		—
Interest rate risk	—	7	Gain or losses of financial assets/liabilities	—	N/A
Exchange rate risk	—	(20)	Gain or losses of financial assets/liabilities	—	N/A
Interest and Exchange rate risk	—	(1)	Gain or losses of financial assets/liabilities	—	N/A
Credit risk	—	(1)	N/A	—	N/A
Cash flow hedges	(420)	—		85
Interest rate risk	(443)	—	Gain or losses of financial assets/liabilities	46	Net interest income/ Gains or losses of financial assets/liabilities
Exchange rate risk	(3)	—	Gain or losses of financial assets/liabilities	—	Net interest income/ Gains or losses of financial assets/liabilities
Interest rate and exchange rate risk	25	—	Gain or losses of financial assets/liabilities	10	Net interest income/ Gains or losses of financial assets/liabilities
Inflation rate risk	1	—	Gain or losses of financial assets/liabilities	29	Net interest income/ Gains or losses of financial assets/liabilities
Total	(420)	(15)		85

167

EUR million
	31 December 2021
	Earnings / (losses) recognized in Other accumulated global income	Coverage inefficiency recognized in the income statement	Line of the income statement that includes ineffective coverage	Reclassified amount of reserves to the income statement due to:
				Covered transaction that affects the income statement	Line of the income statement that includes reclassified amounts
Fair value hedges	—	(28)		—
Interest rate risk	—	4	Gains or losses of financial assets/liabilities	—	N/A
Exchange rate risk	—	(27)	Gains or losses of financial assets/liabilities	—	N/A
Interest and Exchange rate risk	—	(5)	Gains or losses of financial assets/liabilities	—	N/A
Credit risk	—	—	N/A	—	N/A
Cash flow hedges	146	—		(7)
Interest rate risk	145	—	Gains or losses of financial assets/liabilities	(32)	Net interest income/Gains or losses of financial assets/liabilities
Interest rate and exchange rate risk	1	—	Gains or losses of financial assets/liabilities	25	Net interest income/Gains or losses of financial assets/liabilities
Total	146	(28)		(7)

The following table shows a reconciliation of each

component of equity and an analysis of other

comprehensive income in relation to hedge accounting

at 31 December 2022 and 2021:

EUR million
	2022	2021
Balance at the end of the previous year	(87)	(189)
Amount recognized in Other accumulated global income
Cash flow hedges	(420)	146
Interest rate risk and interest rate and exchange rate risk	(420)	146
Changes in equity by discharge at P&L	85	(6)
Remains of equity movements	(505)	152
Taxes	126	(44)
Balance at year end	(381)	(87)

33. Off-balance-sheet funds

under management

As of 31 December 2022, Banco Santander held off-

balance-sheet funds under management, namely

investment funds and assets under management,

amounting to EUR 82,446 million (31 December 2021,

EUR 88,123 million). marketed but not held under

management amounted to EUR 22,907 million (31

December 2021, EUR 25,172 million).

168

34. Interest income

Interest and similar income in the accompanying income

statements comprises the interest accruing in the year

on all financial assets with an implicit or explicit return,

calculated by applying the effective interest method,

irrespective of measurement at fair value, and the

rectifications of income as a result of hedge accounting.

Interest is recognized gross, without deducting any tax

withheld originally.

The detail of the main items of interest and similar

income earned in 2022 and 2021 is as follows:

EUR million
	2022	2021
Derivatives - Trading	32	—
Of which: Interest income derived from economic hedges	32	—
Debt instruments	1,337	723
Central Banks	12	3
Public sector	437	190
Credit entities	559	316
Other financial companies	267	178
Non-financial companies	62	36
Loans and advances	7,157	4,811
Central Banks	28	25
Public sector	182	122
Credit entities	423	156
Other financial companies	1,546	580
Non-financial companies	3,548	2,634
Households	1,430	1,294
Other assets	1,086	77
Of which, insurance contracts linked to pensions (note 23.c)	17	12
Deposits	449	727
Central Banks	259	618
Public sector	4	12
Credit entities	158	64
Other financial companies	21	22
Non-financial companies	7	11
Households	—	—
Hedging derivatives - Interest rate risk	45	38
Other financial liabilities	5	19
Debt securities issued	45	10
Total	10,156	6,405

Most of the interest and similar income was generated

by Banco Santander's financial assets that are measured

either at amortized cost or at fair value through Other

comprehensive income.

35. Interest expense

Interest expense and similar charges in the

accompanying income statements includes the interest

accruing in the year on all financial liabilities with an

implicit or explicit return, including remuneration in kind,

calculated by applying the effective interest method,

irrespective of measurement at fair value; the

rectifications of cost as a result of hedge accounting; and

the interest cost attributable to provisions recorded for

pensions.

The detail of the main items of interest expense and

similar charges accrued in 2022 and 2021 is as follows:

EUR million
	2022	2021
Derivatives - Trading	138	41
Of which: interest income from derivatives in economic hedges	138	41
Debt securities Issued	2,251	1,432
Debt securities	68	66
Central Banks	—	—
Public sector	40	46
Credit entities	18	13
Other financial companies	9	6
Non-financial companies	1	1
Loans and advances	304	479
Central Banks	118	239
Public sector	4	1
Credit entities	139	162
Other financial companies	38	72
Non-financial companies	5	5
Households	—	—
Deposits	2,595	689
Central Banks	124	12
Public sector	179	156
Credit entities	541	220
Other financial companies	1,100	239
Non-financial companies	581	54
Households	70	8
Other financial liabilities	313	197
Hedging derivatives - Interest rate risk	218	(154)
Pensions and other obligations of defined post-employment benefits (note 23)	71	35
Others	—	—
Total	5,958	2,785

Most of the interest expense and similar charges was

generated by Banco Santander's financial liabilities that

are measured at amortized cost.

169

36. Dividend income

‘Dividend income’ includes the dividends and payments

on equity instruments out of profits generated by

investees after the acquisition of the equity interest.

The detail of income from equity instruments is as

follows:

EUR million
	2022	2021
Financial assets held for trading	355	355
Non-trading financial assets mandatorily at fair value through profit or loss	11	7
Financial assets at fair value through other comprehensive income	57	55
Investments in subsidiaries, jointly controlled entities and associates	8,743	5,072
Group entities	8,460	4,765
Associates	283	307
Total	9,166	5,489

Investments in subsidiaries, jointly controlled entities

and associates

The detail of the main items of interest expense and

similar charges accrued in 2022 and 2021 is as follows:

EUR million
	2022	2021
Detail of the companies:
SANTANDER HOLDINGS USA, Inc.	4,101	423
SANTANDER TOTTA, SGPS, S.A.	1,208	32
SANTANDER UK GROUP HOLDINGS PLC	908	1,229
SANTANDER CONSUMER FINANCE, S.A.	652	1,876
GRUPO FINANCIERO SANTANDER MÉXICO, S.A. de C.V.	634	153
BANCO SANTANDER MEXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO SANTANDER MÉXICO	179	33
ZURICH SANTANDER INSURANCE AMÉRICA, S.L.	160	230
MERLIN PROPERTIES, SOCIMI, S.A.	107	15
SANTANDER INVESTMENT, S.A.	107	70
SANTANDER UK GROUP HOLDINGS PLC (AT1)	98	72
SANTANDER FINTECH LIMITED	77	—
SANTANDER CONSUMER FINANCE, S.A. (AT1)	73	73
TEATINOS SIGLO XXI INVERSIONES S.A.	69	49
BANCO SANTANDER S.A. (Uruguay)	50	33
SANTANDER FACTORING Y CONFIRMING, S.A. UNIPERSONAL, E.F.C	49	—
SANTANDER BANK POLSKA S.A.	39	33
SANTANDER CHILE HOLDING S.A.	32	41
PEREDA GESTION, S.A.	28	—
BANCO SANTANDER PERÚ S.A.	20	—
SANTANDER TOTTA, SGPS, S.A. (AT1)	20	28
BANCO SANTANDER ARGENTINA S.A.	18	—
SANTADER GLOBAL TECHNOLOGY AND OPERATIONS, S.L. UNIPERSONAL	16	14
CNP SANTANDER INSURANCE LIFE DESIGNATED ACTIVITY COMPANY	15	60
SAM INVESTMENT HOLDINGS, S.L.	14	32
SANTANDER TOWARZYSTWO FUNDUSZY INWESTYCYJNYCH S.A.	12	13
SANTANDER LEASE, S.A. E.F.C.	11	—
SOCUR S.A.	10	18
AVIACION TRITON, A.I.E.	10	—
SANTANDER HOLDING INTERNACIONAL, S.A.	—	500
Other companies	26	45
Total	8,743	5,072

170

37. Commission income

Fee and commission income comprise the amount of all

fees and commissions accruing in favour of Banco

Santander in the year, except those that form an integral

part of the effective interest rate on financial

instruments.

The detail of fee and commission income in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
Collection and payment services:
Current Accounts	305	374
Credit and debit cards	184	155
Transfers and other payment orders	100	91
Other commission income in connection with payment services	76	67
	665	687
Marketing of non-banking financial products:
Collective Investment	496	512
Insurance	270	281
Other	1	1
	767	794
Securities services:
Securities underwriting and placement	123	125
Transfer orders	17	18
Other	93	72
	233	215
Clearing and settlement	66	74
Asset management	120	88
Custody	72	75
Structured finance	286	266
Loan granted commitments granted	343	283
Financial granted guarantees granted	246	223
Other:
Foreign currency exchange	126	100
Other concepts	335	314
	461	414
Total	3,259	3,119

38. Commission expense

Fee and commission expense show the amount of all

fees and commissions paid or payable by Banco

Santander in the year, except those that form an integral

part of the effective interest rate on financial

instruments.

The detail of fee and commission expense in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
Clearing and settlement	32	71
Loan commitments received	—	—
Financial guarantees received	117	100
Custody	—	—
Other A	453	370
Total	602	541

AOther Includes mainly commissions paid for financial and mediation

services, as well as credit cards.

39. Gains or losses on financial

assets and liabilities

The following information is presented below regarding

the gains or losses on financial assets or liabilities:

a) Breakdown

The detail, by classification of the related instrument, of

Gains/losses on financial assets and liabilities in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
Gains or losses on financial assets and liabilities not measured at fair value through profit or loss, net	75	318
Financial assets at amortized cost	(27)	19
Other financial assets and liabilities	102	299
Of which, debt instruments	102	286
Of which, equity instruments	—	—
Gains or losses on financial assets and liabilities held for trading, netA	412	175
Gains or losses on non-trading financial assets and liabilities mandatory at fair value through profit or loss	498	(45)
Gains or losses on financial assets and liabilities measured at fair value through profit or loss, netA	106	38
Gains or losses from hedge accounting, net	(15)	(28)
Total	1,076	458

A.Includes the net income obtained from transactions with debt

securities, capital instruments, derivatives and short positions

included in this portfolio when the Banco Santander jointly manages

its risk in those instruments.

171

b) Financial assets and liabilities at fair value

through profit or loss

The detail of the amount of the asset balances is as

follows:

EUR million
	2022	2021
Loans and receivables	29,934	29,239
Central Banks	1,933	1,118
Credit institutions	10,741	10,425
Customers	17,260	17,696
Debt instrumentsA	18,796	15,054
Equity instruments	10,491	15,527
Derivatives	54,456	42,023
Total	113,677	101,843

A.Include EUR 14,509  million related to Spanish and foreign

government debt securities at 31 December 2022 (31 December

2021, EUR 10,307 million).

The foregoing table shows the maximum credit risk

exposure of these assets at 31 December 2022 and

2021, respectively, Banco Santander mitigates and

reduces this exposure as follows.

With respect to derivatives, Banco Santander has

entered into framework agreements with a large

number of credit institutions and customers for the

netting-off of asset positions and the provision of

collateral for non-payment.

Loans and receivable' to credit institutions and loans and

receivable to 'customers' included reverse repos

amounting to EUR 39,201 million at 31 December 2022

(31 December 2021: EUR 28,219 million).

In addition, assets amounting to EUR 919 million have a

mortgage guarantee at 31 December 2022 (31

December 2021: EUR 1,134 million).

At 31 December 2022 and 2021, the amount of the

change in the year in the fair value of financial assets at

fair value through profit or loss attributable to variations

in their credit risk (spread) was not material.

The detail of the amount of the liability balances is as

follows:

EUR million
	2022	2021
Deposits	58,273	19,796
Central Banks	6,005	651
Credit Institutions	11,109	6,785
Customers	41,159	12,360
Marketable debt instruments	89	—
Short positions	14,453	9,244
Derivatives	52,126	40,672
Total	124,941	69,712

At 31 December 2022 and 2021, the amount of the

change in the fair value of financial liabilities at fair value

through profit or loss attributable to changes in their

credit risk during the year is not material.

40. Exchange differences, net

This chapter basically includes the results obtained in the

purchase and sale of currencies, the differences that

arise when converting monetary items in foreign

currency to functional currency and those from non-

monetary assets in foreign currency at the time of

disposal.

The detail of ‘Exchange differences (net)’ in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
Exchange differences, net	(877)	(205)

Banco Santander manages the currencies to which it is

exposed together with the arrangement of derivative

instruments and, accordingly, the changes in this line

item should be analyzed together with those recognized

under Gains/losses on financial assets and liabilities (see

note 39).

41. Other operating income and

other operating expenses

The detail of ‘Other operating income’ in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
Exploitation of real estate investments and operating leases	252	256
Others	199	185
Total	451	441

The detail of ‘Other operating expenses’ in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
Contribution to Deposit Guarantee Fund (note 1.h)	(258)	(225)
Contribution to Resolution FundA (note 1.h)	(314)	(307)
Other operating expenses	(318)	(362)
Total	(890)	(894)

A.Includes the expense incurred by contribution to the National

Resolution Fund and to the Single Resolution Fund.

172

42. Staff costs

a) Breakdown

The detail of ‘Staff costs’ in 2022 and 2021 is as follows:

EUR million
	2022			2021
	Of which, in Spain	Of which, foreign branches	Total	Of which, in Spain	Of which, foreign branches	Total
Wages and salaries	1,708	433	2,141	1,728	323	2,051
Social security costs	325	46	371	343	33	376
Additions to provisions for defined benefit pension plans (note 23)	2	—	2	5	—	5
Contributions to defined contribution pension funds	73	15	88	67	10	77
Equity-instrument-based remuneration	—	—	—	—	—	—
Other staff costs	167	27	194	169	29	198
Total	2,275	521	2,796	2,312	395	2,707

b) Headcount

The average number of employees at the Bank, by

professional category, is as follows:

Average number of employees
	2022	2021
Executive and Senior management	17	19
Other line personnel	21,872	23,343
Staff at branches abroad	1,521	1,150
Total	23,410	24,512

The number of employees, as of December 31, 2022 and

December 31, 2021, is 23,788 and 23,311, respectively.

The functional breakdown, by gender, at 31 December

2022 is as follows:

	Breakdown by gender
	Executives		Other line personnel
	Men	Women	Men	Women
Breakdown by gender	75%	25%	50%	50%

The labour relations between employees and the various

Group companies and, therefore, the Bank are governed

by the related collective agreements or similar

regulations.

The number of employees with disabilities greater than

or equal to 33%, distributed by professional categories

at December 31, 2022 and 2021, is as follows:

	2022	2021
Senior management	—	—
Other management	29	27
Other staff	415	280
Total	444	307

The average number of employees of Banco Santander

with a disability greater than or equal to 33%, during the

year 2022 was 331 (288 at 2021).

c) Share-based payments

The main share-based payments granted by the Group in

force at 31 December, 2022, 2021 and 2020 are

described below.

i. Bank

The variable remuneration policy for the Bank’s

executive directors and certain executive personnel of

the Bank and of other Group companies includes Bank

share-based payments, the implementation of which

requires, in conformity with the law and the Bank’s

Bylaws, specific resolutions to be adopted by the general

meeting.

Were it necessary or advisable for legal, regulatory or

other similar reasons, the delivery mechanisms

described below may be adapted in specific cases

without altering the maximum number of shares linked

to the plan or the essential conditions to which the

delivery thereof is subject.

These adaptations may involve replacing the delivery of

shares with the delivery of cash amounts of an equal

value.

The plans that include share-based payments are as

follows: (i) Deferred and Conditional Variable

Remuneration Plan; (ii) Deferred Multiyear Objectives

Variable Remuneration Plan; (iii) Digital Transformation

Award and (iv) Digital Transformation Award 2022. The

characteristics of the plans are set forth below:

173

Deferred variable remuneration systems	Description and plan beneficiaries	Conditions	Calculation Base
(i) Deferred and conditional variable remuneration plan (2015, 2016, 2017, 2018, 2019, 2020, 2021 and 2022)	The purpose of these cycles is to defer a portion of the variable remuneration of the beneficiaries over a period of three years for the sixth cycles, over three or five years for the fifth, seventh, eighth, ninth, tenth and eleventh cycles, and over four or five years for the twelfth cycle, for it to be paid, where appropriate, in cash and in Santander shares. The other portion of the variable remuneration is also to be paid in cash and Santander shares, upon commencement of the cycles, in accordance with the rules set forth below. Beneficiaries: •Executive directors and certain executives (including senior management) and employees who assume risk, who perform control functions or receive an overall remuneration which puts them on the same remuneration level as senior executives and employees who assume risks (fifth cycle) •In the case of the sixth, seventh, eighth, ninth, tenth, eleventh and twelfth cycle, the beneficiaries are Material Risk Takers (Identified staff) that are not beneficiaries of the Deferred Multiyear Objectives Variable Remuneration Plan.	For the fifth and sixth cycles (2015 to 2016), the accrual of the deferred compensation is conditioned, in addition to the requirement that the beneficiary remains in the Group's employ, with the exceptions included in the plan regulations on none of the following circumstances existing during the period prior to each delivery, pursuant to the provisions set forth in each case in the plan regulations: i.Poor financial performance of the Group. ii. breach by the beneficiary of internal regulations, including, in particular, those relating to risks. iii.material restatement of the Group's consolidated financial statements, except when it is required pursuant to a change in accounting standards. iv.Significant changes in the Group’s economic capital or risk profile In the case of the seventh, eighth, ninth, tenth, eleventh and twelfth cycles (2017 to 2021), the accrual of deferred compensation is conditioned, in addition to the permanence of the beneficiary in the Group, with the exceptions contained in the plan's regulations, to non-ocurrence of a poor performance of the entity as a whole or of a specific division or area of the entity or of the exposures generated by the personnel: v.significant failures in risk management by the entity , or by a business unit or risk control unit. vi.the increase suffered by the entity or by a business unit of its capital needs, not foreseen at the time of generation of the exposures. vii.Regulatory sanctions or judicial sentences for events that could be attributable to the unit or the personnel responsible for those. Also, the breach of internal codes of conduct of the entity. viii.Irregular behaviours, whether individual or collective, considering in particular the negative effects derived from the marketing of inappropriate products and the responsibilities of the persons or bodies that made those decisions.	Fifth cycle (2015): •Executive directors and members of the Identified Staff with total variable remuneration higher than 2.6 million euros: 40% paid immediately and 60% deferred over 5 years deferral period. •Division managers, country heads (of countries which represent at least 1% of Group's economic capital), other executives of the Group with a similar profile and members of the Identified Staff  with total variable remuneration between 1.7 million euros (1.8 million in fourth cycle) and 2.6 million euros: 50% paid immediately and 50% deferred over  5 years (fifth cycle) •Other beneficiaries: 60% paid immediately and 40% deferred over 3 years. Sixth cycle (2016): •60% of bonus will be paid immediately and 40%  deferred over a three years period. Seventh, eighth, ninth, tenth and eleventh cycle (2017, 2018, 2019, 2020 and 2021): •Beneficiaries of these plans with target total variable remuneration higher or equal to 2.7 million euros: 40%  paid immediately and 60% deferred over 5 years •Beneficiaries of these plans with target total variable remuneration between 1.7 million euros and 2.7 million euros: 50% paid immediately and 50%paid over 5 years •Other beneficiaries of these plans: 60% paid immediately and 40% deferred over 3 years. Twelfth cycle (2022): •Beneficiaries of these plans with target total variable remuneration higher or equal to 2.7 million euros: 40% paid immediately and 60% deferred over 5 years •Beneficiaries of these plans with target total variable remuneration between 1.7 million euros and 2.7 million euros: 50% paid immediately and 50% paid over 5 years •Other beneficiaries of these plans: 60% paid immediately and 40% deferred over 4 years . T

174

Deferred variable remuneration systems	Description and plan beneficiaries	Conditions	Calculation Base
(ii)Deferred Multiyear Objectives Variable Remuneration Plan (2016, 2017, 2018, 2019, 2020, 2021 and 2022)	The aim is simplifying the remuneration structure, improving the ex ante risk adjustment and increasing the impact of the long- term objectives on the Group’s most relevant roles. The purpose of these cycles is to defer a portion of the variable remuneration of the beneficiaries over a period of three or five years (four or five years for the seventh cycle) for it to be paid, where appropriate, in cash and in Santander shares; the other portion of the variable remuneration is also to be paid in cash and Santander shares (regarding the instruments part, executive directors in the seventh cycle have the opportunity to choose all in share options or half in share options and half in shares), upon commencement of the cycles, in accordance with the rules set forth below. The accrual of the last third of the deferral (in the case of 3 years deferral), the last 2 fourths (in the case of 4 years deferral) and the last three fifths (in the case of 5 years deferral) is also subject to long-term objectives. Beneficiaries Executive directors, senior managers and certain executives of the Group’s first lines of responsibility.	In 2016 the accrual is conditioned, in addition to the permanence of the beneficiary in the Group, with the exceptions contained in the plan’s regulations, to non- ocurrence of the following circumstances during the period prior to each of the deliveries in the terms set forth in each case in the plan’s regulations: i.Poor performance of the Group. ii.breach by the beneficiary of the internal regulations, including in particular that relating to risks. iii.material restatement of the Group’s consolidated financial statements, except when appropriate under a change in accounting regulations. iv.Significant changes in the Group’s economic capital or risk profile. In 2017, 2018, 2019, 2020 and 2021 the accrual is conditioned, in addition to the beneficiary' permanence in the Group, with the exceptions contained in the plan’s regulations, to the non-occurrence of poor financial performance from the entity as a whole or of a specific division or area thereof or of the exposures generated by the personnel, taking into account the following factors: v.Significant failures in risk management committed by the entity, or by a business unit or risk control unit. vi.the increase suffered by the entity or by a business unit of its capital needs, not foreseen at the time of generation of the exposures. vii.Regulatory sanctions or court rulings for events that could be attributable to the unit or the  personnel responsible for those. Also, the breach  of internal codes of conduct of the entity. viii.Irregular behaviours, whether individual or collective, considering in particular negative effects derived from the marketing of inappropriate products and responsibilities of persons or bodies that made those decisions. Paid half in cash and half in shares. In the seventh cycle, and only for executive directors: half in cash and 25% in share options and 25% in shares (unless the director chooses to receive options only). The maximum number of shares to be delivered is calculated by taking into account the weighted average daily volume of weighted average prices for the fifteen trading sessions prior to the previous Friday (excluding) on the date on which the board decides the bonus for the Executive directors of the Bank.	First cycle (2016): •Executive directors and members of the Identified Staff with total variable remuneration higher than or equal to 2.7 million euros: 40% paid immediately and 60% deferred over a 5 years  period. •Senior managers, country heads of countries representing at least 1% of the Group´s capital and other members of the identified staff whose total variable remuneration is between 1.7 million and 2.7 million euros: 50% paid immediately and 50% deferred over a 5 years period. •Other beneficiaries: 60% paid immediately and 40% deferred over a 3 years period. The second, third, fourth, fifth and sixth cycles (2017, 2018, 2019,2020 and 2021 respectively) are under the aforementioned deferral rules, except that the  variable remuneration considered is the target for each executive and not the actual award. In 2016 the metrics for the deferred portion subject to long-term objectives (last third or last three fifths, respectively, for the cases of three years and five years deferrals) are: •Earnings per share (EPS) growth in 2018 over 2015. •Relative Total Shareholder Return (TSR) in the 2016-2018 period measured against a group of credit institutions. •Compliance with the fully-loaded common equity tier 1 (“CET1”) ratio target for financial year 2018. •Compliance with Grupo Santander’s underlying return on risk-weighted assets (“RoRWA”) growth target for financial year 2018 compared to financial year 2015. In the second, third, fourth fifth and sixth cycle (2017, 2018, 2019, 2020 and 2021) the metrics for the deferred portion subject to long-term objectives (last third or last three fifths, respectively, for the cases of three years and five years deferrals) are: •EPS growth in 2019, 2020, 2021, 2022 and 2023 (over 2016, 2017, 2018, 2019 and 2020, for each respective cycle) •Relative Total Shareholder Return (TSR) measured against a group of 17 credit institutions (second and third cycles) in the periods 2017-2019 and 2018-2019, respectively, and against a group of 9 entities (fourth, fifth and sixth cycle) for the 2019-2021, 2020-2022 and 2010-2023  period. •Compliance with the fully-loaded common equity tier 1 (“CET1”) ratio target for financial years 2019, 2020, 2021,2022 and 2023, respectively. In the seventh cycle (2022), the metrics for the deferred portion subject to long-term objectives (two last fourths and last three fifths, for the cases of four years and five years deferrals) are: •Banco Santander's consolidated Return on tangible equity (RoTE) target in 2024. •Relative Total Shareholder Return (TSR) measured against a group of 9 credit institutions for the period 2022-2024. •Five ESG metrics linked to our public targets of our Responsible Banking agenda.

175

Deferred variable remuneration systems	Description and plan beneficiaries	Conditions	Calculation Base
(iii) Digital Transformation Award (2019, 2020 and 2021)	The 2019, 2020 and 2021 Digital Transformation Incentive (the “Digital Incentive”) is a variable remuneration system that includes the delivery of Santander shares and share options. The aim of the Digital Incentive is to attract and retain the critical skill sets to support and accelerate the digital transformation of the Group. By means of this program, the Group offers a remuneration element which is competitive with the remuneration systems offered  by other market operators who also compete for digital talent. The number of beneficiaries is limited to a maximum of 250 employees and the total amount of the incentive is limited to 30 million euros.	The funding of this incentive is subject to meeting important milestones that are aligned with the Group´s digital roadmap and have been approved by the board of directors, taking into account the digitalization strategy of the Group, with the aim of becoming the best open, responsible global financial services platform. Performance of 2019 incentive was measured based on achievement of the following milestones: (i) Launch of a Global Trade Services (GTS) platform; (ii) launch of a Global Merchant Services (GMS) platform; (iii) migration of our fully digital bank, OpenBank, to a "next generation" platform and launch in 3 markets; (iv) extension of SuperDigital in Brazil to at least one other country; (v) and launch of our international payments app based on blockchain Pago FX to non- Santander customers. The milestones for the 2020 Digital Transformation Award were: (i) rolling out the global merchant services (GMS) platform in 3 new geographies, enhancing the platform functionality and achieving volume targets for transactions and participating merchants; (ii) doing the commercial rollout of the global trade services (GTS) platform in 8 new geographies, enhancing platform functionality, and achieving  volume targets for on- boarded clients and monthly active users; (iii) launching OpenBank in a new market and migrating the retail banking infrastructure to “new-mode” bank; (iv) launch the global platform SuperDigital in at least 4 countries, driving target active user growth; (v) deploying machine learning across pre-defined markets for 4 priority use cases, rolling out Conversion Rate Optimization (Digital marketing) for at least 40 sales programs, delivering profit targets, and driving reduction of agent handled calls in contact centers; (vi) successfully implementing initiatives related to on- board and identity services, common API (application programming interface) layer, payment hubs, mobile app for SMEs and virtual assistant services; and (vii) launching the PagoFX global platform in at least 4 countries. The milestones for 2021 were: (i)in relation to Pago Nxt Consumer payment platform: implementation of Superdigital platform in seven countries, acquisition of over 1.5 million active customer base and accelerating growth through B2B (business to business) and B2B2C (business to business to customer) partnerships, acquiring more than 50% of the new customers through these channels, which are more cost-effective; (ii)in relation to Digital Consumer Bank: launching online API for checkout lending in the European Union and completion of controllable items for Openbank launch in USA; (iii)in relation to One Santander strategy: implementation in Europe of One Common Mobile Experience and, specifically, implementation of Europe ONE app for individual customers in at least three of the four countries by December 2021; and be among the three-top rated entities in terms of Mobile NetPromoter Score (Mobile NPS) in at least two of the four countries by December 2021; (iv) In relation to cloud adoption: host 75% of migratable virtual machines on cloud technology (either public cloud or OHE) by December 2021. For these purposes, mainframes, physical servers and servers with non-x86 operating systems will be considered non-migratable. .	The Digital Incentive is structured 50% in Santander shares and 50% in options over Santander shares, taking into account the fair value of the option at the moment in which they are granted. For Material Risk Takers subject to five years deferrals, the Digital Incentive (shares and options over shares) shall be delivered in thirds, on the third, fourth and fifth anniversary from their granting. For Material Risk Takers subject to three years deferrals and employees not subject to deferrals, delivery shall be done on the third anniversary from their granting. Any delivery of shares, either directly or via exercise of options overs shares, will be subject generally to the Group’s general malus & clawback provisions as described in the Group’s remuneration policy and to the continuity of the beneficiary within the Group Santander. In this regard, the board may define specific rules for non-Identified Staff. Vested share options can be exercised until maturity, with all options lapsing after ten years (for granting the 2019 incentive) and eight years (for granting the 2020 and 2021 incentive). The total achievement for 2021 Digital Incentive was 77.5% (85% en 2020 and 83% en 2019).

176

Deferred variable remuneration systems	Description and plan beneficiaries	Conditions	Calculation base
(iv) Digital Transformation Award (2022)	The board of directors approved the 2022 Digital Transformation Incentive. It is a variable remuneration scheme splits in two different blocks: • The first one, with the same mechanism than previous years, that delivers Santander shares and share options if the group hits major milestones on its digital roadmap. This is aimed at a group of up to 250 (is limited to 30 million euros)employees whose functions are deemed essential to Santander’s growth. • And the second one, which delivers PagoNxt, S.L. RSUs and premium prices options (PPOs), and is aimed at up to 50 employees (and limited to 15 million euros) whose roles are considered key to PagoNxt’s success. The aim of the Digital Incentive is to attract and retain the critical skill sets to support and accelerate the digital transformation of the Group. By means of this program, the Group offers a remuneration element which is competitive with the remuneration systems offered  by other market operators who also compete for digital talent.	Performance of the first block of the  incentive shall be measured based on achievement of the following milestones: i. Edelweiss: Our Santander future retail architecture EDELWEISS will mean moving from our current Core centric banking architecture towards a Customer and Data-Centric Core supported by lean Record Processing engines. ii. Simplification: Speed up the simplification of our technology platform and business model by Reducing the total number of applications in production and reducing number of products in the regions. iii. Agile: Agile ways of working enable a better and faster reaction to customers’ needs and is based on a value-driven delivery that increases efficiency by reducing time-to-market and development costs, and increasing quality. People working in Agile are more collaborative, engaged, empowered and creative. iv. In Digital Consumer Bank: a) To create the BNPL platform connected to at least one merchant in Netherlands and Germany, and to make sure the platform is ready to connect in Spain. b) To support the definition of Openbank US’s IT digital strategy and achieve 2022 milestones in it. c) To have the new leasing platform connected to dealers in Italy. d) To expand the Wabi B2B online business to Germany. To execute the first B2B deal with an Original Equipment Manufacturer or mobility player in at least one country. To expand coches.com business and platform to Portugal. And in regard to the second block of digital incentive: the consolidation of PagoNxt Core Perimeter.	The first block of thee Digital Incentive is structured 50% in Santander shares and 50% in options over Santander shares, taking into account the fair value of the option at the moment in which they are granted. For Material Risk Takers subject to five years deferrals, the Digital Incentive (shares and options over shares) shall be delivered in thirds, on the third, fourth and fifth anniversary from their granting. For Material Risk Takers subject to three years deferrals and employees not subject to deferrals, delivery shall be done on the third anniversary from their granting. Any delivery of shares, either directly or via exercise of options overs shares, will be subject generally to the Group’s general malus & clawback provisions as described in the Group’s remuneration policy and to the continuity of the beneficiary within the Grupo Santander. In this regard, the board may define specific rules for non-Identified Staff. Vested share options can be exercised until maturity, with all options lapsing after ten years . The total achievement for 2022 Digital Incentive was 96.5%. The second block of Digital Incentive is structures in restricted stock units (RSUs) and premium priced Options (PPOs) of PagoNxt, S.L. in a percentage determined by the internal category of the beneficiary. The total achievement for 2022 was 100%.

iii. Fair value

The fair value of the performance share plans was

calculated as follows:

–Deferred variable compensation plan linked to multi-

year objectives 2020, 2021 and 2022:

The Group calculates at the grant date the fair value of

the plan based on the valuation report of an independent

expert, Willis Towers Watson. According to the design of

the plan for 2021 and 2022 and the levels of

achievement of similar plans in comparable entities,it

has been considered that the fair value is 70%.

177

43. Other general

administrative expenses

a) Breakdown

The detail of Other general administrative expenses in

the accompanying income statements for 2022 and

2021 is as follows:

EUR million
	2022	2021
Technology and systems	695	705
Fixtures and supplies	190	207
Other administrative expenses	574	619
Technical reports	165	180
Advertising	90	88
Per diems and travel expenses	41	16
Surveillance and cash courier services	36	37
Communications	7	9
Taxes other than income tax	65	79
Insurance premiums	24	26
Total	1,887	1,966

b) Technical reports and other

Technical reports includes the fees paid by the various

Group companies (detailed in the accompanying

appendices) for the services provided by their respective

auditors, the detail being as follows:

EUR million
	2022A	2021A
Audit	113.4	104.6
Audit-related services	6.4	6.0
Tax services	0.5	0.7
All other	4.8	2.4
Total	125.1	113.7

A.Of those corresponding to Banco Santander, SA, EUR 30.7 million,

EUR 1.8 million, EUR 0 million and EUR 2.4 million, respectively, as of

December 31, 2022 (EUR 30.6 million, EUR 2.3 million, EUR 0 million

and EUR 0.5 million, respectively, as of December 31, 2021); and

Branches of Banco Santander, SA, EUR 2.5  million, EUR 0 million, EUR

0 million and EUR 0.1 million, respectively, as of December 31, 2022

(EUR 2.5 million, EUR 0.1 million, EUR 0 million and EUR 0 million,

respectively as of December 31, 2021).

The 'Audit' heading mainly includes audit fees for the

individual and consolidated financial statements of

Banco Santander and its subsidiaries of which PwC is the

statutory auditor; for interim consolidated financial

statements of Banco Santander; for integrated audits

prepared in order to file Form 20-F for the annual report

with the SEC in the US regarding required entities; the

internal control audit (SOx) for required Group's entities;

the limited review of the financial statements; and the

regulatory auditor's reports on Grupo Santander's

geographies.

The main fees under 'Audit-related services' include,

comfort letters, verifying financial and non-financial

information (as required by regulators), and other

reviews of documents that, due to their nature, the

external auditor provides to be submitted to domestic or

foreign authorities.

The fees included under the heading 'Tax services'

mainly related to tax compliance and advisory services

provided to Group companies outside Spain, which are

permitted in accordance with independence regulations;

none were for tax planning advice.

The 'Audit' heading includes the fees for the year's audit,

regardless of the date the audit was completed. Any

subsequent adjustments, which are not significant, and

for purposes of comparison, are shown in this note for

each year. The fees corresponding to the rest of the

services are shown by when the audit committee

approved them.

The services commissioned from the Group's auditors

meet the independence requirements under applicable

European and Spanish law, the SEC rules and the Public

Company Accounting Oversight Board (PCAOB),

applicable to the Group, and they did not involve in any

case the performance of any work that is incompatible

with the auditor's role.

Lastly, the Group commissioned services from audit

firms other than PwC amounting to EUR 185.5 million in

2022 (EUR 263.8 million in 2021).

c) Number of branches

The number of offices at 31 December 2022 and 2021 is

as follows:

Number of branches
	Group
	2022	2021
Spain	1,966	1,998
Group	7,053	7,231
	9,019	9,229

Number of branches
	Of which, Banco Santander
	2022	2021
Spain	1,908	1,916
International	10	9
Total	1,918	1,925

178

44. Impairment or reversal of

the impairment of investments

in joint ventures and associates

The detail of ‘Impairment losses on other assets (net)’ in

the accompanying income statements for 2022 and

2021 is as follows:

EUR million
	2022	2021
Investments in subsidiaries, joint ventures or  associates (note 13)	(512)	800
Total	(512)	800

45. Gains or losses on non-

financial assets and

investments, net

The detail of ‘Gains/(losses) on disposal of assets not

classified as non-current assets held for sale’ in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
On disposal of tangible assets	2	4
On disposal of investments in subsidiaries, jointly controlled entities and associates	5	(4)
Total	7	—

46. Gains or losses on non-

current assets held for sale not

classified as discontinued

operations

The detail of ‘Gains/(losses) on non-current assets held

for sale not classified as discontinued operations’ in the

accompanying income statements for 2022 and 2021 is

as follows:

EUR million
	2022	2021
Impairment of non-current assets held for sale (note 12)	(68)	(70)
Gain / (loss) on disposal	28	20
Total	(40)	(50)

179

47. Related parties

The parties related to Banco Santander are deemed to

include, in addition to its subsidiaries, associates and

jointly controlled entities, Banco Santander's key

management personnel (the members of its Board of

Directors and the executive vice presidents, together

with their close family members) and the entities over

which the key management personnel may exercise

significant influence or control.

Following is a detail of the transactions performed by

Banco Santander with its related parties at 31 December

2022 and 2021, distinguishing between group entities,

joint venture entities and associated entities, members

of Banco Santander's board of directors, Banco

Santander's executive vice presidents, and other related

parties, Related party transactions were made on terms

equivalent to those that prevail in arm's-length

transactions or, when this was not the case, the related

compensation in kind was recognized.

EUR million
	2022
	Subsidiaries, associates and jointly controlled entities	Members of the Board of DirectorsA	Executive vice presidentsA	Other related partiesA
Assets	153,372	—	13	455
Equity instruments	94,698	—	—	—
Debt instruments	15,851	—	—	—
Loans and advances	42,823	—	13	455
From which: impaired financial assets	330	—	—	—
Liabilities	24,099	11	11	109
Deposits credit institution and clients	22,712	11	11	109
Marketable debt securities	1,387	—	—	—
Income statement	10,314	—	—	2
Interest and similar income	968	—	—	1
Interest expense and similar charges	(244)	—	—	—
Interest from equity instruments	8,745	—	—	—
Gains / (Losses) on financial instruments and other	750	—	—	—
Fee and commission income	89	—	—	1
Fee and commission expense	6	—	—	—
Other	501,498	2	2	79
Contingent liabilities	6,758	1	1	23
Contingent commitments	8,255	1	1	13
Financial instruments - derivatives	486,485	—	—	43

A. Includes transactions carried out with both Banco Santander and with other entities of Grupo Santander.

180

EUR million
	2021
	Subsidiaries, associates and jointly controlled entities	Members of the board of directorsA	Executive vice presidentsA	Other related partiesA
Assets	150,489	—	14	384
Equity instruments	88,997	—	—	—
Debt instruments	14,352	—	—	—
Loans and advances	47,140	—	14	384
From which: impaired financial assets	270	—	—	—
Liabilities	24,498	8	11	197
Deposits credit institution and clients	24,277	8	11	197
Marketable debt securities	221	—	—	—
Income statement	6,551	—	—	1
Interest and similar income	715	—	—	1
Interest expense and similar charges	(80)	—	—	—
Interest from equity instruments	5,072	—	—	—
Gains / (Losses) on financial instruments and other	781	—	—	—
Fee and commission income	86	—	—	—
Fee and commission expense	(23)	—	—	—
Other	471,034	2	2	76
Contingent liabilities	6,447	1	1	17
Contingent commitments	5,371	1	1	13
Financial instruments - derivatives	459,216	—	—	46

A.Includes transactions carried out with both Banco Santander and with other entities of Grupo Santander.

Additionally, the above-mentioned breakdown shows

pension insurance contracts with Grupo Santander

insurance companies amounting to EUR 209 million on

December 31 of 2022 (EUR 232 million on December 31

of 2021).

181

48. Other disclosures

a) Residual maturity periods

The detail, by maturity, of the balances of certain items

in the balance sheets as of 31 December 2022 and 2021

is as follows:

EUR million
	31 December 2022
	On demand	Within 1 month	1 to 3 months	3 to 12 months	1 to 5 years	More than 5 years	Total
Assets
Cash, cash balances at central banks and other demand deposits	130,083	—	—	—	—	—	130,083
Financial assets at fair value with changes in other comprehensive income
Representative values of debt	—	690	1,154	331	816	1,129	4,120
Financial assets at amortized cost
Representative values of debt	—	100	150	1,344	12,775	25,813	40,182
Loans and advances
Central banks	—	25	—	69	—	—	94
Credit institutions	211	20,947	2,812	3,576	6,043	1,478	35,067
	8,763	52,608	22,620	38,599	86,492	93,722	302,804
	139,057	74,370	26,736	43,919	106,126	122,142	512,350
Liabilities:
Financial liabilities at amortized cost
Deposits
Central banks	—	908	1,597	5,749	7,474	—	15,728
Credit institutions	12,847	15,643	3,670	1,740	7,117	592	41,609
Customer deposits	286,017	32,505	11,054	11,754	3,461	1,084	345,875
Marketable debt securities	—	7,027	12,314	17,145	48,473	41,010	125,969
Other financial liabilities	8,080	2,880	4	394	677	463	12,498
	306,944	58,963	28,639	36,782	67,202	43,149	541,679
Difference (assets less liabilities)	(167,887)	15,407	(1,903)	7,137	38,924	78,993	(29,329)

182

EUR million
	2021
	On demand	Within 1 month	1 to 3 months	3 to 12 months	1 to 5 years	More than 5 years	Total
Assets:
Cash, cash balances at Central Banks and other deposits on demand	91,736	—	—	—	—	—	91,736
Financial assets at fair value through other comprehensive income
Representative values of debt	—	653	600	278	2,278	5,585	9,394
Financial assets at amortized cost
Loans and advances	—	236	360	451	6,225	9,936	17,208
Loans and advances
Central banks	—	25	—	1	—	—	26
Credits institutions	212	15,859	2,048	6,949	7,056	2,960	35,084
Customers	5,701	37,915	17,853	32,304	70,133	122,829	286,735
	97,649	54,688	20,861	39,983	85,692	141,310	440,183
Liabilities:
Financial liabilities at amortized cost
Deposits
Central banks	64	1,215	850	144	62,376	—	64,649
Credit institutions	25,263	1,880	2,052	606	3,469	1,992	35,262
Customer	270,745	4,023	5,251	8,867	5,256	2,101	296,243
Debt securities issued	—	5,323	9,028	8,580	33,145	48,018	104,094
Other financial liabilities	3,370	980	109	3,784	893	888	10,024
	299,442	13,421	17,290	21,981	105,139	52,999	510,272
Difference (assets less liabilities)	(201,793)	41,267	3,571	18,002	(19,447)	88,311	(70,089)

183

b)  Equivalent euro value of assets and liabilities

The detail of the main foreign currency balances in the

balance sheets as of 31 December 2022 and 2021, based

on the nature of the related items, is as follows:

Countervalue in EUR million
	2022	2021
Assets	231,109	183,507
Cash, cash balances at central banks and other deposits on demand	44,073	13,775
Financial assets held for trading	35,337	32,947
Non-trading financial assets mandatorily at fair value through profit or loss	1,562	1,279
Financial assets designated at fair value through profit or loss	137	293
Financial assets at fair value through other comprehensive income	5,211	4,785
Financial assets at amortized cost	102,078	90,011
Hedging derivatives	283	668
Changes in the fair value of hedged items in portfolio hedges of interest rate risk	—	—
Investments	41,984	39,492
Tangible assets	17	16
Intangible assets	9	4
Tax assets	90	99
Other assets	328	138
Non-current assets held-for-sale	—	—
Liabilities	186,057	114,567
Financial liabilities held for trading	27,286	23,869
Financial liabilities designated at fair value through profit or loss	17,391	5,888
Financial liabilities at amortized cost	138,895	83,923
Hedging derivatives	1,671	391
Changes in the fair value of hedged items in portfolio hedges of interest risk rate	—	—
Provisions	130	120
Tax liabilities	43	21
Refundable equity on demand	—	—
Other liabilities	641	355
Liabilities associated with non-current assets held-for-sale	—	—

c) Fair value of financial assets and liabilities not

measured at fair value

Financial assets are measured at fair value in the

accompanying balance sheets, except for loans and

receivables under a business model whose objective is to

collect the flows of principal and interest , equity

instruments whose market value cannot be estimated

reliably and derivatives that have these instruments as

their underlying and are settled by delivery thereof.

Similarly, financial liabilities except for financial

liabilities held for trading, those measured at fair value

and derivatives having equity instruments whose market

value cannot be estimated reliably as their underlying-

are measured at amortized cost in the accompanying

balance sheets.

The following is a comparison between the value of

Grupo Santander's financial instruments valued using

other criteria rather than fair value and their

corresponding fair value at year-end:

Financial assets and liabilities measured at other than

fair value

184

The fair value of financial instruments measured at

amortized cost as of 31 December 2022 was as follows:

a.The fair value of debt securities is 2.25% lower

than the carrying amount.

b.The fair value of the loans and advances is 1.58% 

lower than the carrying amount.

c.The fair value of deposits is 0.23% lower than the

carrying amount.

d.The fair value of marketable debt securities is

6.74%  lower than the carrying amount.

Set forth below are the main valuation methods and

inputs used in the estimates made at 31 December 2022

to determine the fair values of the financial assets and

liabilities recognized at cost detailed above:

•Loans and receivables: The fair value has been

estimated using the present cost method, the

estimation has considered factors such as the

expected maturity of the portfolio, market interest

rates, spreads of new concession of operations, or

market spreads – If these were available.

•Held to maturity portfolio: The fair value has been

determined based on market prices for those

instruments.

•Financial liabilities at amortized cost:

a.The fair value of deposits at Central Banks has

been assimilated to their carrying amount

because they are mainly short-term balances.

b.Credit Institutions: Fair value has been obtained

using the present value technique by applying

interest rates and market spreads.

c.Customer deposits: Fair value has been

estimated using the present value technique. The

estimation has considered factors such as the

expected maturity of the operations and the

current financing cost of Grupo Santander in

similar operations. On demand accounts are not

valued.

d.Marketable debt securities: Fair value has been

determined based on market prices for these

instruments, when available, or using the

present value technique, by applying interest

rates and market spreads.

Additionally, the fair value of Cash, Cash Balances at

central banks and other deposits on demand has been

assimilated to its carrying amount, mainly because of

short-term balances.

49. Risk management             

a) Risk principles and culture

The principles on which Grupo and Banco Santander's

risk management and control are based are detailed

below. They take into account regulatory requirements,

best market practices and are mandatory:

1.All employees are risk managers who must

understand the risks associated with their functions

and not assume risks that will exceed the Bank’s risk

appetite or have an unknown impact.

2.Senior managers must make sure the Bank keeps its

risk profile within risk appetite, with consistent risk

conduct, action, communications, and oversight of

our risk culture.

3.Independent risk management and control functions,

according to the three lines of defence model of

Grupo and Banco Santander.

4.Grupo and Banco Santander take a forward-looking,

comprehensive approach towards all businesses and

risk types.

5.Grupo and Banco Santander keep thorough and

timely reporting to properly pinpoint, assess,

manage and disclose risks.

1. Key risk types

Grupo and Banco Santander’s risks categorization

ensures effective risk management, control and

reporting. The risk framework distinguishes these risk

types:

•Credit risk relates to financial loss arising from the

default or credit quality deterioration of a customer

or counterparty, to which Grupo and Banco

Santander have directly provided credit or assumed a

contractual obligation.

•Market risk results from changes in interest rates,

exchange rates, equities, commodities and other

market factors, and from their effect on profit or

capital. It includes the structural risk relates to

market movements or balance sheets behaviour will

change the value or profit generation of assets or

liabilities in the banking book.

•Liquidity risk occurs if liquid financial resources are

insufficient or too costly to obtain in order to meet

liabilities when they fall due.

•Capital risk is the risk that arises from the possibility

of having an inadequate quantity or quality of capital

to meet internal business objectives, regulatory

requirements or market expectations in the area of

structural risk.

185

Grupo and Banco Santander also take into account, on an

ongoing basis in its management of the risk function,

operational (includes fraud, technological, cyber, legal

and conduct risks), financial crime (includes, among

others, money laundering, terrorism financing, violation

of international sanctions, corruption, bribery and tax

evasion), model, structural (includes risks associated

with insurance and pensions), reputational and strategic

risks.

Besides, environmental and climate-related risk drivers

are considered as factors that could impact the existing

risks in the medium-to-long-term. These elements

include, on the one hand, those derived from the

physical effects of climate change, generated by one-off

events as well as by chronic changes in the environment

and, on the other hand, those derived from the process

of transition to a development model with lower

emissions, including legislative, technological or

behaviour of economic agents changes.

Climate change and environmental risk could affect

other risks in different time horizons on account of

physical damage, as well as factors relating to the

transition to a more sustainable economy, such as

legislative reform, technology and economic agents.

Given the nature of its operations, the Group has no

environment-related liabilities, expenses, assets or

contingencies of a material relevance to its consolidated

equity, financial situation and results.

Most exposures in sectors potentially affected by climate

change risk are with wholesale clients, whose

preliminary reviews, credit approval and credit ratings

take such risk into account. Customers’ ratings

determine the parameters for calculating loan loss

(typically in terms of probability of default or “PD”).

Thus, when climate factors are relevant, in conjunction

with other elements of analysis, they have an impact on

the loan loss calculations which support capital and

provisions.

The Group and the Bank also passed the recent

regulatory climate stress tests, which had been classified

as learning exercises for the industry. Results showed

that the Group’s and therefore the Bank’s coverage for

potential losses would be sufficient in view of portfolio

maturity over time.

Therefore, based on the best information available at the

time these annual financial statements were prepared,

the Group and the Bank see no additional environmental

or climate change risk having a substantial impact on its

equity, financial situation and results in 2022.

Still, this matter is constantly changing, and, like other

banks, the Group and the Bank are working on

developing more methodologies to better measure

potential loan loss in line with new management needs,

best practice, and regulators’ and supervisors’

requirements.

2. Risk and compliance governance

Grupo and Banco Santander robust risk and compliance

governance structure allows us to conduct effective

oversight in line with our risk appetite. Grupo and Banco

Santander stand on three lines of defence, a structure of

committees and strong Group-subsidiary relations,

guided by our risk culture, Risk Pro.

2.1 Lines of defence

Grupo and Banco Santander’s model of three lines of

defence effectively manages and controls risks:

•First line: formed by business and support areas,

which are primarily accountable for managing the

risk exposure they originate, recognizes, measures,

monitors and reports on risks according to risk

management policies, models and procedures. Risk

origination must be consistent with the approved risk

appetite and related limits.

•Second line: formed by risk and compliance &

conduct functions, independently oversees and

challenges risk management at the first line of

defence to make sure Grupo Santander keeps risks

within risk appetite approved by senior management

and promote Risk Pro in the Group and the Bank.

•Third line: Internal audit function, is fully

independent to give the board and senior managers

assurance of high-quality and efficient risk

governance and management to preserve our value,

solvency and reputation.  

Risk, compliance & conduct, and internal audit are

sufficiently separate and autonomous functions, with

direct access to the board and its committees.

2.2 Risk committee structure

The board of directors has final oversight of risk

management and compliance promoting a sound risk

culture and reviewing and approving risk appetite and

frameworks, with support from its risk, regulation and

compliance committee and its executive committee. The

Group and the Bank's risk governance keeps risk control

and risk-taking areas separate.

The Group chief risk officer (Group CRO), who leads the

application and execution of risk strategy and promotes

proper risk culture, is in charge of overseeing all risks

and challenging and advising business lines on risk

management.

The Group chief compliance officer (Group CCO), who

handles compliance risk and leads the application and

execution of the compliance and conduct risk strategy

and provides the Group CRO with a complete overview

on the situation of risks being monitored.

The Group CRO and the Group CCO report directly to

both the risk supervision, regulation and compliance

committee and the board of directors.

186

The executive risk, risk control and compliance and

conduct committees are executive committees with

powers delegated from the board.

Furthermore, risk functions have forums and regular

meetings to manage and control the risks within their

purview. Executive committees also delegate some

duties to subordinate forums.

Their responsibilities include:

•Inform the Group CRO, the Group CCO, the risk

control committee and the compliance and conduct

committee if risks are being managed within risk

appetite;

•Regularly monitor each key risk type; and

•Overseeing measures to meet supervisors and

auditors' expectations.

Besides, Grupo and Banco Santander, in order to

establish an adequate control environment for the

management of each risk types, the Risk and Compliance

and Conduct functions have effective internal regulation

to create the right environment to manage and control

all risks.

Grupo and Banco Santander can also implement extra

governance measures for special situations, as it did with

Brexit and the covid-19 crisis. Since the beginning of the

war in Ukraine, Santander has strengthened the

monitoring of all risks, with special attention to the

situation in Poland, monitoring of macroeconomic

performance, vulnerable sectors/customers,

cybersecurity, among other. In addition, the compliance

team have continuously reviewed the application of the

sanctions. Santander has no presence in, or hardly any

direct exposure to, Russia and Ukraine. Our special

situations governance enabled the Group and the Bank

to remain resilient against the consequences of the war

in Ukraine.

2.3 The Group's relationship with subsidiaries

Grupo Santander subsidiaries have a model for

managing risk, compliance and conduct that is consistent

with the frameworks approved by the group’s board of

directors, which they adhere to through their own boards

and can only adapt to higher standards according to local

law and regulation.

Furthermore, the Group's aggregate oversight area

advises and validates subsidiaries on internal regulation

and operations. This reinforces a common risk

management model across Santander.

In 2022, Grupo Santander continued to build on our

Group-subsidiaries’ model through a regional approach,

benefiting from the Group's global scale to find synergy

for standard operations and platforms; to streamline

processes; and tighten control mechanisms to grow our

business.

The Group CRO, the Group CCO and regional heads of

risk are involved in appointing, setting objectives for,

reviewing and compensating their country-unit

counterparts to promote proper risk management. Each

subsidiary CRO/CCO interacts regularly with the regional

head of risk, the Group CRO and the Group CCO in

regional or country control meetings.

Local and global risk and compliance areas also meet to

address special matters. Country and regional units work

closely to effectively strengthen group-subsidiary

relations through these common initiatives:

•Restructuring based on subsidiary benchmarks,

strategic vision, and advanced risk

management infrastructures and practices.

•Exchange of best practices that will strengthen

processes, drive innovation and result in a

quantitative impact.

•Search for talent in risk and compliance teams

with internal mobility through the global risk

talent programme and strong succession plans.

3. Management processes and tools

Grupo and Banco Santander have these effective risk

management processes and tools:

3.1 Risk appetite and structure of limits

Risk appetite is the aggregate level and types of risk that

Grupo Santander deems prudent for our business

strategy, even in unforeseen circumstances. In Grupo

and Banco Santander, these principles influence risk

appetite:

•Risk appetite is part of the board's duties. It prepares

the risk appetite statement (RAS) for the whole

Group and the Banks every year. In a cascading down

process, each subsidiary's board also sets its own

risk appetite.

•Comprehensiveness and forward-looking approach.

The Bank’s appetite includes of all material risks that

Santander are exposed to and defines our target risk

profile for the current and medium term with a

forward-looking view considering stress scenarios.

•Common standards and embedding in the day-to-

day risk management. Common standards and

embedding in the day-to-day risk management. The

Group and the Bank share the same risk appetite

model, which sets common requirements for

processes, metrics, governance bodies, controls and

standards.. It also ensures an effective and traceable

embedding of our appetite into more granular

management policies and limits across the Group’s

subsidiaries, and therefore the Bank.

187

•Continuous adaptation to market best practices,

regulatory requirements and supervisors’

expectations.

•Aligning with business plans and strategy. The risk

appetite is a key point of reference for strategic and

business planning. Grupo Santander The Group and

the Bank verify that the three-year strategic plans,

the annual budget and capital and liquidity planning

are within the limits set in the RAS before Santander

approves them.

Grupo and Banco Santander’s risk appetite and business

model rest on the following elements:

•A medium-low, predictable target risk profile,

centred on  retail and commercial banking,

internationally diversified operations and a strong

market share;

•Stable, recurrent earnings and shareholder

remuneration, sustained by a sound base of capital,

liquidity and sources of funding;

•Autonomous subsidiaries that are self-sufficient in

terms of capital and liquidity to ensure their risk

profiles won't compromise the Group and the Bank’s

solvency;

•An independent Risk function and a senior

management actively engaged in supporting a

robust control environment and risk culture; and

•A conduct model that protects our customers and our

Simple, Personal and Fair culture.

The risk appetite is expressed through qualitative

statements and limits on metrics representative of the

bank’s risk profile at present and under stress. Those

metrics cover all risk types  according to our corporate

risk framework. Grupo Santander articulates them in five

axes that provide the Bank with a holistic view of all risks

it incurs in the development of its business model. These

five axes are applicable to all Santander's key risk types,

and comprise:

•P&L volatility: Control of P&L volatility of business

plan under baseline and stressed conditions (aligned

with ICAAP stress test)

•Solvency: Control of capital ratios under baseline and

stressed scenarios (aligned with ICAAP)

•Liquidity: Control of liquidity ratios under base and

stress scenarios (aligned with ILAAP) 

•Concentration: Control of credit concentration on top

clients, portfolios and industries

•Non financial: Control on non financial risks aimed to

minimize events which could lead to financial loss,

operative, technological, legal and regulatory

breaches, conduct issues or reputational damage.

b) Credit risk

1.  Introduction to the credit risk treatment

Credit risk is the risk of financial loss due to the failure to

pay or impaired credit of a customer or counterparty

Grupo and Banco Santander have financed or maintains a

contractual obligation with. It includes counterparty risk,

country risk and sovereign risk. It is the Bank’s most

significant risk in terms of exposure and capital

consumption.

Credit risk management

Grupo and Banco Santander take a holistic view of the

credit risk cycle, including the transaction, the customer

and the portfolio, in order to identify, analyse, control

and decide on credit risk.

Credit risk identification facilitates active and effective

portfolio management and control. Grupo and Banco

Santander classify external and internal risk in each

business to adopt any corrective or mitigating measures

through:

1.1. Planning

Grupo and Banco Santander´s planning helps to set

business targets and draw up action plans within our risk

appetite statement.

Strategic commercial plans (SCP) are a management and

control tool the business and risk areas prepare for

Grupo and Banco Santander's credit portfolios. They

determine commercial strategies, risk policies, resources

and infrastructure, ensuring a holistic view of the

portfolios.

They provide managers with an updated view of

portfolio credit quality to measure credit risk, run

internal controls to regularly monitor credit strategy

detect significant risk deviation and potential impacts,

and take corrective action.

They are suited to the Grupo and the Bank's risk appetite

and subsidiaries’ capital targets, having been reviewed

and pre-approved by senior managers before Group

management revises and validates them.

1.2. Risk assessment and credit rating

Risk approval generally depends on the applicant’s

ability to repay the debt, regardless of any collateral or

personal guarantees the Bank requires. Grupo and Banco

Santander reviews their regular sources of income,

including funds and net cash flows from any businesses. 

Grupo and Banco Santander monitor credit rating drivers

to calibrate the decisions and ratings that the Group’s

and the Bank´s credit quality assessment models

determine. Risk management uses these ratings for

many things like applying approval limits, pre-approvals,

monitoring risk, and policies on pricing credit.

188

The Group and the Bank then use rating models to

measure ability to pay. Depending on each segment,

credit rating drivers can be

•Rating: from mathematical algorithms that have a

quantitative model based on balance sheet ratios or

macroeconomic variables, and a qualitative module

supplemented by the credit analyst’s expert

judgement. It is used for SCIB, corporate,

institutional and SME segments (with individualised

treatment).

•Scoring: system of automatic evaluation of loan

applications. It automatically assigns customers an

individual score retail on which the subsequent

decision is based. It is used for SME segments

without an assigned analyst.

Grupo and Banco Santander's parameter estimation

models, based on econometric models of past defaults

and losses, calculate economic and regulatory capital as

well as Bank of Spain circular 4/2017 provisions for each

customer portfolio.

Grupo and Banco Santander regularly monitors and

evaluates models'  suitability, predictive capacity,

performance, granularity, and compliance with policy,

among other factors. Grupo and Banco Santander review

ratings with the latest financial and other relevant

information to assess credit risk due to depreciation

caused by customers’ lower creditworthiness and

manage credit portfolios according to the risk appetite

and profile target set out in SCPs, with exposure limits

adjusted to an acceptable level for each portfolio and

counterparty and for new loan originations.

Grupo and Banco Santander use SCPs to manage credit

portfolios, defining limits for each of them and for new

originations, in line with the Group and the Banks´s

credit risk appetite and its target risk profile. Transposing

the risk appetite to portfolio management strengthens

controls over our credit portfolios.

Grupo and Banco Santander´s limits, pre-classifications

and pre-approvals processes, which are highly

automated and digitalized, determine the risk Grupo and

Banco Santander can assume with each customer. Limits

are approved by the executive risk committee (or

delegated committees) and should reflect a transaction’s

expected risk-return. The Group and the Bank also uses

risk-based pricing tools to make sure portfolio growth is

sustainable.

Grupo and Banco Santander apply various limits models

to each segment:

•Large corporate groups are subject to a pre-

classification model based on a system for measuring

and monitoring economic capital. Pre-classification

models express the level of risk Grupo and Banco

Santander are willing to assume in transactions with

customers/groups.

•Corporates and institutions that meet certain

requirements (strong relationships, rating, etc.) are

subject to a simpler pre-classification model that sets

a recommended risk level for each customer.

Transactions above certain limits or with special

characteristics could require approval from a senior

credit analyst or a committee.

Transactions with large corporates, corporates and

institutions above certain limits or with special

characteristics could require approval from a senior

credit analyst or a committee.

•For individual customers and SMEs with low turnover,

Grupo Santander manages large volumes of credit

transactions with automatic decision models to

classify customers and transactions.

1.3. Scenario analysis

Grupo and Banco Santander’s scenario analyses

determine the potential risks in its credit portfolios and

provide a better understanding of our portfolios'

performance under various macroeconomic conditions.

They allow us to anticipate management strategies that

will avoid future deviations from defined plans and

targets. They simulate the impact of alternative

scenarios in portfolios’ credit parameters (PD, LGD) and

expected credit losses. Grupo Santander compares

findings with  portfolios’ credit profile indicators to find

the right measures for managers to take. Credit risk

management of portfolios and SCPs incorporate scenario

analyses.

1.4. Monitoring

Regularly monitoring business performance and

comparing it to pre-defined plans is key to our

management of risk. Grupo and Banco Santander's

holistic monitoring of customers helps detect impacts on

risk performance and credit quality early.

189

The monitoring process considers projections on the

performance of the operations and their characteristics,

in addition to any variation in their classification.

Anticipation and preventive monitoring uses

transactional data sources and advanced analytics (early

warning engine) which determines specific actions at the

client level, based on the assigned monitoring

classification.

Monitoring is performed by local and global risk teams

and is based on customer segmentation:

•For SCIB, monitoring is initially  a function of

business managers and risk analysts which provide

an up-to-date view of customers’ credit quality to

predict a potential customer's deterioration.

•For commercial banking, institutions and SMEs

assigned a credit analyst, Grupo and Banco

Santander track customers requiring closer

monitoring and review their ratings based on

relevant indicators.

•Monitoring of individual customers, businesses and

smaller SMEs  follows a system of automatic alerts

to detect shifts in portfolios’ performance.

Monitoring uses the Santander Customer Assessment

Note (SCAN) tool. Grupo and Banco Santander fully

rolled it out in our subsidiaries in 2019. It helps set

individual monitoring levels and frequencies, policies,

and actions for customers based on credit quality and

particular circumstances.

In addition to monitoring customer credit quality, Grupo

and Banco Santander defines control procedures to

analyse portfolios and performance, as well as any

deviations from planning or approved alert levels.

1.5. Credit risk mitigation techniques

Grupo and Banco Santander generally approves risk

according to a borrower’s ability to make due payment,

regardless of any additional collateral or personal

guarantees Santander may require to modulate

exposure.

To determine ability to pay, the Group and the Bank

analyse funds or cash flows from businesses or other

regular income, not including guarantors or loan

collateral which are always considered as a secondary

means of recourse.

In general, guarantees are to reinforce a credit

transaction and mitigate a loss if the borrower defaults.

The Group and the Bank techniques to mitigate credit

risk cover various types of customer and product. Some

are for specific transactions (e.g. property) or a series of

transactions (e.g. derivatives netting and collateral). The

Group and the Bank groups them by personal

guarantees (with a solvent guarantor), collateral (mainly

in primary residence mortgages) and hedges with credit

derivatives.

The correct acceptance of these mitigation techniques is

established by ensuring their legal enforceability in all

jurisdictions. The entire process is subject to internal

control and effective monitoring of the valuation of the

guarantees, especially mortgages.

1.6. Collections & recoveries management

Collections & recoveries, an important area in risk

management, develops a global management strategy

based on local economic conditions, business models

and other recovery-related particulars, with a full

approach and general action lines for our subsidiaries.

Recovery management follows regulatory requirements

set out in the EBA Guidelines on the management of

non-performing and forborne exposures.

For effective and efficient recoveries management, the

area segments customers based on certain aspects,

using new digital channels that help create value in

Collections & Recoveries. It follows hi-tech, digital

procedures to handle large groups of similar customer

profiles and products; but it also adapts management for

customers who need an assigned manager and tailored

approach.

Collections & Recoveries splits recoveries into four

phases: arrears/early delinquency, default, write-offs

and foreclosed assets. To recover debt, the Group and

the Bank always seek alternatives to court action, like

forbearance and other arrears management techniques.

Grupo and Banco Santander also review debt

instruments individually and treat them as write-offs

(even when they’re not past due) if the Group and the

Bank sees signs of irreversible impairment that suggest

recovery to be remote. Though this may lead us to cancel

all or part of the gross carrying amount, the Group and

the Bank never interrupt negotiations and legal

proceedings to recover debt.

In markets where the real estate risk exposure is high,

Grupo and Banco Santander can take action to quickly

dispose of assets, like selling off portfolios or foreclosed

assets with efficient sales instruments to recover as

many on-balance-sheet assets as possible.

190

2. Main aggregates and variations

Following are the main aggregates relating to credit risk

from our activities with customers:

Main credit risk performance metrics from activity with customersA
December data
	Credit risk with customers        (EUR million)B			Credit impaired loans (EUR million)			NPL ratio (%)
	2022	2021		2022	2021		2022	2021
Europe	639,996	636,123		15,186	19,822		0.02	0.03
Spain	293,197	283,953		9,598	13,403		0.03	0.05
UK	253,455	262,869		3,059	3,766		0.01	0.01
Portugal	41,755	41,941		1,247	1,442		0.03	0.03
Poland	33,350	33,497		1,268	1,210		0.04	0.04
North America	185,614	149,792		5,629	3,632		0.03	0.02
US	140,452	112,808		4,571	2,624		0.03	0.02
Mexico	45,107	36,984		1,047	1,009		0.02	0.03
South America	167,348	141,874		10,381	6,387		0.06	0.05
Brazil	101,801	85,702		7,705	4,182		0.08	0.05
Chile	47,811	41,479		2,384	1,838		0.05	0.04
Argentina	5,844	5,481		122	198		0.02	0.04
Digital Consumer Bank	125,339	116,989		2,583	2,490		0.02	0.02
Corporate Centre	5,824	6,337		894	903		0.15	0.14
Total Group	1,124,121	1,051,115		34,673	33,234		0.03	0.03

A.  Management perimeter according to the reported segments

B.  Includes gross lending to customers, guarantees and documentary credits.

Key figures by geographic region are described below at

31 December 2022:

•Europe: The NPL ratio fell 75 bps to 2.37% from

2021 because impaired loans decreased significantly

in the UK, and in Spain and Portugal due to the NPL

portfolio sales.

•North America: The NPL ratio increased 61 bps to

3.03% from 2021, mainly due to increases at SC USA

motivated by the new definition of default.

•South America: The NPL ratio rose 170 bp from 2021

to 6.20%, due to increases in Brazil (mainly due to

the retail unsecured portfolio performance and a

single name in SCIB) and Chile, offset by the

decrease in Argentina.

•Digital Consumer Bank: The NPL ratio decreased 7

bps to 2.06%, despite the decrease in automobile

financing.

All support measures (moratoria) that the Group and the

Bank took in response to the covid-19 pandemic have

expired, with positive behaviour thanks to economic

recovery in 2021,and improved sanitary-health

environment in our main geographies. Government

liquidity programmes also remained in force in 2022, of

which 77% of total credit granted was in Spain (77% was

secured by the Instituto de Crédito Oficial - ICO), and

12% of total credit was in the UK, with 98%

government-secured.

In the case of delinquent operations with ICO guarantee,

the transfer of the overdue guaranteed amounts will

take place as the guarantee is executed, regardless of

whether the guarantor is subrogated to the right to

receive said amounts, according to the regulation of

these guarantees. The derecognition of the transferred

guaranteed amounts will entail the recognition, at its fair

value, of a collection right against the guarantor.

In addition, the Group and the Bank are following the

measures launched by the governments of Spain,

Portugal and Poland, aimed at relieving the mortgage

payment burden for vulnerable customers after the

increase in interest rates.

Information on the estimation of impairment losses

The calculation of credit risk provisions is performed at

financial asset level, estimating potential credit losses

through the difference between the expected cash flows

and the contractual cash flows, ensuring that the results

are adequate considering the status of the transaction,

economic conditions and available forward-looking

information.

The Bank of Spain circular 4/2017 impairment model

applies to financial assets valued at amortized cost; debt

instruments valued at fair value with changes in other

191

comprehensive income; leasing receivables; and

commitments and guarantees not valued at fair value.

The portfolio of financial instruments subject to the Bank

of Spain circular 4/2017 has three credit risk categories

(or stages) according to the status of each instrument in

relation to its level of credit risk:

•Stage 1: financial instruments with no significant

increase in risk since initial recognition – the

impairment provision reflects expected credit losses

from defaults over the twelve months from the

reporting date.

•Stage 2: financial instruments with a significant

credit risk increase since initial recognition but no

materialized impairment event – the impairment

provision reflects expected losses from defaults over

the financial instrument’s residual life.

•Stage 3: financial instruments with true signs of

impairment as a result of one or more events

resulting in a loss – the impairment provision reflects

expected losses for credit risk over the instrument’s

expected residual life.

The classification of financial instrument in the Bank of

Spain circular 4/2017 stages is carried out in accordance

with the guidelines through the  risk management

policies of the Bank, which are consistent with the

Group's policies.

Estimation of expected loss

Grupo and Banco Santander calculate impairment losses

using parameters (mainly EAD, PD, LGD and discount

rate) based on internal models, the stage in which each

financial asset is classified, and regulatory and

management expertise. Far from being a simple

adaptation, the Bank defined and validated them

according to specific requirements of  Bank of Spain

Circular 4/2017 and other guidelines by regulators,

supervisors and other international organizations (EBA,

NCAs, BIS, GPPC, etc.), such as forward-looking

information, point-in-time (PiT) vision, multiple

scenarios, calculation of losses for the entire life of the

transaction through lifetime PD, etc.

Determination of significant increase in credit risk

In order to determine the classification in stage 2, the

Group and the Bank assess 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 Bank 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 Bank 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 and Bank of Spain Circular

4/2017: the approach must take into consideration

IFRS 9 and Bank of Spain Circular 4/2017

characteristics, focusing on a comparison with credit

risk at initial recognition, as well as considering

forward-looking information.

•Risk management integration: the criteria must be

consistent with those metrics considered in the day-

to-day risk management.

•Documentation: Appropriate documentation must be

prepared.

The techniques are summarised below:

•Stability of stage 2: in the absence of significant

changes in the portfolios credit quality, the volume

of assets in stage 2 should maintain a certain

stability as a whole.

•Economic reasonableness: at transaction level, stage

2 is expected to be a transitional rating for exposures

that could eventually move to a deteriorating credit

status at some point or stage 3, as well as for

exposures that have suffered credit deterioration and

whose credit quality is improving and returns to

stage 1.

•Predictive power: it is expected that the SICR

definition avoids, as far as possible, direct migrations

from stage 1 to stage 3 without having been

previously classified in stage 2.

•Time in stage 2: it is expected that the exposures do

not remain categorized as stage 2 for an excessive

time.

The application of the aforementioned techniques,

conclude in the setting of one or several thresholds for

each portfolio in each geography. Likewise, these

thresholds are subject to a regular review by means of

calibration tests, which may entail updating the

thresholds types or their values.

192

Identifying a significant increase in credit risk: when

classifying financial instruments under stage 2, Banco

Santander considers:

•Quantitative criteria: Banco Santander reviews and

quantifies changes in the risk of default during their

expected life based on their credit risk level on initial

recognition.

•To recognize significant changes so instruments can

be classified in stage 2, each subsidiary set

quantitative thresholds for its portfolios based on

Santander's guidelines for consistent interpretation

across all our footprint.

Of those quantitative thresholds, Banco Santander

considers two: the relative threshold, which shows

the difference in credit quality since the transaction

was approved as a percentage of change; and the

absolute threshold, which calculates the total

difference in credit quality. All subsidiaries apply

them (with different values) in the same manner.

The use of one or both depends on portfolio type and

other aspects, such as the starting point for average

credit quality.

•Qualitative criteria: Several indicators aligned with

ordinary credit risk management indicators (e.g. past

due for over 30 days, forbearance, etc.). Each

subsidiary defined these criteria for its portfolios. The

Bank 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: Grupo and Banco Santander

incorporated the new definition to provisions

calculation according to the EBA’s guidelines; the

Bank 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 and the Bank apply the default criteria to

all exposures of the impaired client. Where an

obligor belongs to a group, the default criteria may

also be applied to all exposures of the group.

The default classification is maintained during the 3-

month test period following the disappearance of all

default indicators described above, and this period is

extended to one year for forbearances that have

been classified as default.

•Expected life of financial instruments: Grupo and

Banco Santander estimate 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), the Group and the Bank estimates

their expected life based on the total exposure period

and effective management practices to mitigate

exposure.

The context and monitoring of the expected credit loss

was analysed and reviewed during the health crisis by

covid-19 , and was reinforced with collective analysis,

monitoring of government measures, monitoring of the

evolution of the Group and the Bank's customers, as well

as remedial management actions if necessary. In terms

of classification, Grupo and Banco Santander have

maintained the criteria and thresholds for classification

applied prior to the start of the pandemic, eliminating

regulatory criteria of the effect of moratorium

classification as they have expired, as well as the

collective analyses associated with these groups of

loans.

Regarding moratorium measures, a rigorous

identification and periodic monitoring of the credit

quality of the clients and their payment behaviour have

been carried out and, through a specific individual or

collective evaluation, the timely detection of the

significant increase in credit risk.

At the end of December 2022 the credit risk provisions

not included any special measures or adjustments in

relation to health crisis by covid-19.

1. Forward-looking vision

To estimate expected losses, Grupo and Banco

Santander require a great deal of expert analysis as well

as past, present and future data. The Group and the Bank

quantify expected losses from credit events using an

unbiased, weighted consideration of up to five future

scenarios that could affect our ability to collect

contractual cash flows. 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).

193

Grupo and Banco Santander use forward-looking

information in internal management and regulatory

processes under several scenarios. The Bank's guidelines

and governance ensure synergy and consistency

between these different processes.

2. Additional elements

Additional elements will be required when necessary

because they have not been captured under the two

previous elements. This has included, among others, the

analysis of sectors most affected if their impacts are not

sufficiently captured by the macroeconomic scenarios.

Also collective analysis techniques, when the potential

impairment in a group of clients cannot be identified

individually.

With the elements indicated above, Grupo and Banco

Santander have evaluated the evolution of the credit

quality of its customers, for the purposes of their

classification in  Grupo  Santander financial statements.

Management overlays

During the 2022, the Group has used, through its process

of updating forward looking information and

recalibration of parameters, the overlay related to

government support measures in various countries that

the Group had established as of December 31, 2021 for

an amount of 1,232 millions of euros. At the end of

2022, Grupo Santander has EUR  1,471 million as

management overlays that include, among others, those

destined to cover the uncertainties resulting from the

war in Ukraine and the current macroeconomic context.

Exposure and impaired losses

Then, considering the most relevant units of the Group

(United Kingdom, Spain, United States, Brazil, also Chile,

Mexico, Portugal, Poland, Argentina and Santander

Consumer Finance), which represent approximately 96%

of the total Group's provisions. The table below shows

the impairment losses associated with each stage as of

31 December 2022, 2021 and 2020. In addition,

depending on the transactions credit quality, the

exposure is divided into four categories according to

Standard & Poor's rating scale:

Exposure and impairment losses by stage
EUR million
	2022
Credit qualityA	Stage 1	Stage 2	Stage 3	Total
From AAA to AA-	172,440	1,506	—	173,946
From A+ to BB	394,084	10,601	—	404,685
From BB- to B-	272,456	32,653	—	305,109
CCC and below	11,799	21,436	32,608	65,843
Total exposure B	850,779	66,196	32,608	949,583
Impairment lossesC	3,807	5,195	13,852	22,854

Exposure and impairment losses by stage
EUR million
	2021
Credit qualityA	Stage 1	Stage 2	Stage 3	Total
From AAA to AA-	188,434	1,844	—	190,278
From A+ to BB	377,008	11,954	—	388,962
From BB- to B-	233,779	44,292	—	278,071
CCC and below	3,746	11,878	30,711	46,335
Total exposureB	802,967	69,968	30,711	903,646
Impairment lossesC	4,149	5,103	12,873	22,125

A.Detail of credit quality ratings calculated for Group management

purposes.

B.Total exposure includes loan balances (drawn amounts) and off

balance (letters of credit + guarantees) and excludes REPOs, FV

portfolio, trading portfolio and undrawn commitments.

C.Includes provisions for undrawn authorized lines (loan commitments).

The remaining units that form the totality of the Group

exposure, contributed EUR 123,796 million in stage 1;

EUR 2,902 million in stage 2, and EUR 2,064 million in

stage 3 (in 2021 EUR 102,631 million in stage 1; EUR

1,870 million in stage 2, and EUR 2,522 million in stage

3), and impairment losses of EUR 147 million in stage 1;

EUR 123 million for stage 2, and EUR 294 million in

stage 3 (in 2021, EUR 408 million, EUR 322 million and

EUR 841 million in stage 1, stage 2 and stage 3,

respectively).

The remaining exposure, including all financial

instruments not included before, amounts to EUR

538,364 million (EUR 349,228 million in 2021) and it

includes all undrawn authorized lines (loan

commitments).

As of 31 December 2022, the Group had EUR 322 million

net of provisions (EUR 420 million and EUR 497 million

at 31 December 2021) of purchased credit-impaired

assets, which relate mainly to the business combinations

carried out by the Group.

Regarding the evolution of credit risk provisions, Grupo

and Banco Santander, in collaboration with the main

geographical areas, monitors them by carrying out

sensitivity analyses considering changes in

macroeconomic scenarios and main variables that have

an impact on the financial assets distribution in the

different stages and calculating credit risk provisions.

194

Additionally, based on consistent macroeconomic

scenarios, Grupo and Banco Santander also perform

stress tests and sensitivity analysis in a regular basis,

such as ICAAP, strategic plans, budgets and recovery and

resolution plans. In this sense, a prospective view of the

sensitivity of each of the Group’s loan portfolio is created

in relation to the possible deviation from the base

scenario, considering both the macroeconomic

developments in different scenarios and the three year

evolution of the business. These tests include potentially

adverse and favourable scenarios.

3.Detail of the main geographical areas

Following is the risk information relating to the

geography of Grupo España portfolio in terms of

exposure and risk allowances.

This information includes sensitivity analysis, consisting

on simulations of +/-100 bp in the main macroeconomic

variables. A set of specific and complete scenarios is

used in each geography, where different shocks that

affect both the reference variable as well as the rest of

the parameters is simulated. These shocks collect mainly

the most relevant risks and may be originated by

productivity, tax, wages or exchange and interest rates

factors.

Sensitivity is measured as the average variation on

expected loss corresponding to the aforementioned

movement of +/-100 bp. Following a conservative

approach, the negative movements take into account

one additional standard deviation in order to reflect  the

potential higher variability of losses.

3.1. Spain

Portfolio overview

Santander España’s credit risk totalled EUR

293,197 million (26% of Grupo Santander’s total). It is

appropriately diversified among products and customer

segments.

The macroeconomic outlook is marked by an

environment of high uncertainty, where there are also

factors that have an opposite influence. Positive factors,

such as the reactivation of tourism after the end of the

pandemic was declared together with a better than

expected macro economic performance, and negative

factors such as high inflation and the rise in interest

rates that will affect the purchasing power of families.

In this context, the activity had a different behaviour

between segments, since it grew significantly in

consumer credit and large corporates, but it remained

stable in mortgages and decreased significantly in SMEs,

as customer positions were maintained in the support

and liquidity programs (financing lines of the Official

Credit Institute - ICO) without having to require new

financing.

Total credit risk increased 3.3%from December 2021.

The ICO loans that were granted as a result of the

pandemic (EUR 25,428 million) maintain a high weight

in this segment.

The credit portfolio’s NPL ratio was 3.27%, 145 lower

than in December 2021. This better overall portfolio

performance was driven by customer support

programmes, the regularization of several restructured

positions and portfolio sales.

The NPL coverage ratio remained at  51%. The cost of

credit was reduced to 0.61% (-31 bps vs. December

2021).

Information on the estimation of impairment losses

The detail of Santander Spain exposure and impairment

losses associated with each of the stages at 31

December, 2022, 2021 and 2020, is shown below. In

addition, the exposure is divided in four tranches of the

Standard & Poor's rating scale, according to their current

credit quality:

Exposure and impairment losses by stage
EUR million
	2022
Credit qualityA	Stage 1	Stage 2	Stage 3	Total
From AAA to AA-	37,133	447	—	37,580
From A+ to BB	107,667	282	—	107,949
From BB- to B-	46,296	6,388	—	52,684
CCC and below	253	5,234	8,893	14,380
Total exposureB	191,349	12,351	8,893	212,593
Impairment lossesC	507	666	3,472	4,645

Exposure and impairment losses by stage
EUR million
	2021
Credit qualityA	Stage 1	Stage 2	Stage 3	Total
From AAA to AA-	43,978	352	—	44,330
From A+ to BB	109,142	555	—	109,697
From BB- to B-	33,104	11,716	—	44,820
CCC and below	129	3,024	12,761	15,914
Total exposureB	186,353	15,647	12,761	214,761
Impairment lossesC	422	580	5,005	6,007

A.Detail of credit quality ratings calculated for Group management

purposes. Excluding the SCIB branches business

B.Total exposure includes loan balances (drawn amounts) and off

balance (letters of credit + guarantees) and excludes REPOs, FV

portfolio, trading portfolio and undrawn commitments.

C.Includes provisions for undrawn authorized lines (loan

commitments).

195

From the information detailed above, Banco Santander,

S.A. reaches a total gross exposure of EUR 342,681

million in the heading of financial assets at amortized

cost (see note 6 and 10) and EUR 122,374 million in loan

commitments granted for off-balance sheet exposures

(see note 31) Impairment losses amount to EUR 4.716

and EUR 220 million, respectively. (The amount of losses

due to impairment of off-balance sheet exposures

includes the coverage of financial guarantees and other

commitments granted in addition to the aforementioned

loan commitments).

For the estimation of the expected losses, the

prospective information is taken into account.

Specifically, Santander Spain considers three

macroeconomic scenarios, which are updated

periodically. The projected evolution for a period of five

years of the main macroeconomic indicators used by

Santander Spain for estimating expected losses as of

2022, is presented below:

	2023-2027
Variables	Pessimistic scenario	Base scenario	Optimistic scenario
Interest rate	2.6%	2.3%	2.0%
Unemployment rate	16.6%	12.2%	10.7%
Housing price change	2.3%	3.3%	3.8%
GDP growth	0.5%	2.0%	3.3%

Each macroeconomic scenarios is associated with a given

weight. As for its allocation, Santander Spain associates

the Base scenario with the highest weight, while

associating the lower weights to the most extreme

scenarios:

	2022	2021
Pessimistic scenario	30%	30%
Base scenario	40%	40%
Optimistic scenario 1	30%	30%

The sensitivity analysis of the main portfolios expected

loss to variations of +/-100 bp for the macroeconomic

variables used in the construction of the scenarios is as

follows:

	Change in Provision
	Mortgages	Corporates	Others
GDP Growth
-100 bp	10.9%	4.7%	3.9%
100 bp	(5.4)%	(2.9)%	(2.7)%
Housing price change
-100 bp	4.4%	2.6%	3.4%
100 bp	(3.6)%	(2.0)%	(2.3)%

In relation to the previously mentioned management

overlays, Spain has constituted EUR 274 million.

With regards to the stage 2 classification determination,

the quantitative criteria applied in Santander Spain are

based on identifying whether an increase in the PD for

the expected lifetime of the transaction when compared

to the one at its origination is greater than an absolute

threshold. The threshold established is different for each

portfolio based on the transactions characteristics,

considering that a transaction is above this threshold

when the PD for the life of the transaction increases by a

certain quantity over the initial recognized PD. The

values of these thresholds depend on their calibration,

carried out periodically as indicated in the preceding

paragraphs, which currently ranges from  25% to 1%,

depending on the type of product and estimated

sensitivity. Regarding the relative threshold, all

operations that exceed 200% belonging to customers

with good credit quality (internal rating greater than 4)

will be classified in stage 2 if they also exceed the

absolute threshold. On the other hand, those customer

contracts with a worse credit quality will be classified in

stage 2 if it exceeds the relative threshold or the

absolute threshold.

In the case of non-retail portfolios, Santander Spain uses

the transaction's rating as a reference for its PD, taking

into account its rating at the time of origination and its

current rating, setting absolute thresholds for the

different rating bands that depend on each portfolio

characteristics. A SICR implies changes in the rating

value between 0.1 and 4, depending on the portfolio and

the estimated sensitivity (from lower to higher credit

quality, the rating range goes from 1 to 9.3).

In addition, for each portfolio, a series of specific

qualitative criteria are defined indicating that the

exposure experienced a significant increase in credit risk,

regardless of the evolution of its PD since the time of

initial recognition. Santander Spain, among other

criteria, considers that an operation presents a

significant increase in credit risk when positions have

been past due for more than 30 days. These criteria

depend on the risk management practices of each

portfolio.

196

Residential mortgage portfolio

Residential mortgages in Spain, including Santander

Consumer Finance business, amounted to EUR

63,688 million in 2022 (EUR 62,324 million in 2021)

99.55% of which have a mortgage guarantee ( 99% in

2021).

EUR million
	2022
	Santander Group Spain		Of Which, Banco Santander, S.A.
	Gross amount	Of which: impaired	Gross amount	Of which: Non- performing
Home purchase loans to families	63,688	1,088	62,472	1,032
Without mortgage guarantee	288	24	289	24
With mortgage guarantee	63,400	1,064	62,183	1,008

EUR million
	2021
	Santander Group Spain		Of Which, Banco Santander, S.A.
	Gross amount	Of which: impaired	Gross amount	Of which: Non- performing
Home purchase loans to families	62,324	1,860	60,947	1,798
Without mortgage guarantee	419	115	418	115
With mortgage guarantee	61,905	1,745	60,529	1,683

The mortgage portfolio for the acquisition of homes in

Spain is characterised by its medium-low risk profile,

which limits expectations of any potential additional

impairment:

•Principal is repaid on all mortgages from the start.

•Early repayment is common so the average life of the

transaction is well below that of the contract.

•High quality of collateral, concentrated almost

exclusively in financing for first homes.

•The average affordability rate stood at 26% (27% in

2021).

•The 93% of the portfolio has a LTV below 80%

calculated as total risk/latest available house

appraisal.

197

Breakdown of the credit with mortgage guarantee to

households for house acquisition, according to the

percentage that the total risk represents on the amount

of the latest available valuation (loan to value):

EUR million
	2022
	Loan to value ratio
	Less than or equal to 40%	More than 40% and less than 60%	More than 60% and less than 80%	More than 80% and less than or equal to 100%	More than 100%	Total
Santander Group
Gross amount	17,877	20,617	20,225	3,294	1,387	63,400
Of which impaired	132	192	220	181	339	1,064
Of which, Banco Santander, S.A.
Gross amount	17,577	20,302	20,007	3,125	1,172	62,183
Of which,  impaired	128	183	209	172	316	1,008

In November 2022, Royal Decree-Law 19/2022 was

published, which establishes a Code of Good Practices in

response to the rise in interest rates on mortgage loans

for primary residences and Royal Decree-Law 6/2012 of

protection measures for mortgage debtors without

resources. The entity is analysing the plausible impact

based on different adherence hypotheses. The code of

good practices is focused on extending the term of the

operations (aids ranging between 2 and 7 years of

extension).

Corporate & SME financing

Credit risk with SME and corporates in commercial

banking amounted to EUR 112,255 million, 2.3% lower

than in December 2021, mainly due to the fall in the

portfolio of SMEs of 4.3%. This is Santander Spain's main

lending segment, accounting for 39% of the total, at the

level of CIB portfolio, which in 2022 has come to include

branches in Europe.

Most of the portfolio corresponds to clients who have

been assigned a credit analyst, who performs continuous

management of said clients during all phases of the risk

cycle.

The portfolio is broadly diversified and not concentrated

by sector of activity. 2021 was a year of stability in the

portfolio figures after the significant growth in 2020 due

to the liquidity support programmes (ICO), which after

the initial grace period have begun to be amortised.

The portfolio’s NPL ratio stood at 5.79% in December

2022. The NPL ratio decreased by 171 bps compared to

December 2021, due to a reduction in the delinquency

stock in SMEs, due to the proactive management of

delinquent positions with the support of portfolio sales.

Real estate activity

Santander has specialized teams that are in charge of

managing real estate business production and risk areas

that cover the entire life cycle of these operations.

The changes in gross property development loans to

customers were as follows:

EUR million
	2022	2021
Balance at beginning of year	2,625	2,871
Foreclosed assets	—	(1)
Reductions*	(295)	(230)
Written-off assets	(3)	(15)
Balance at end of year	2,327	2,625

The NPL ratio of this portfolio ended the year at 4.04%

(compared with 5.07% and 6.13% at December 2021

and 2020, respectively) due to the decrease of non-

performing assets in the troubled loan portfolio and, in

particular, to the sharp reduction in lending in this

segment. The table below shows the distribution of the

portfolio. The coverage ratio of the real estate doubtful

exposure in Spain stands at 35.11% (30.08% and 

32.95% in 2021 and 2020, respectively).

198

EUR million
	2022
	Santander Group			Of which,  Banco Santander, S.A.
EUR Million	Gross amount	Excess of gross exposure over maximum recoverable amount of effective collateral	Specific allowance	Gross amount	Excess of gross exposure over maximum recoverable amount	Specific allowance
Financing for construction and property development (including land) (business in Spain)	2,327	211	44	2,337	211	44
Of which impaired	94	21	33	94	21	33
Memorandum items written-off assets	487	—	—	487

Memorandum items: Data from the public balance sheet
EUR million
	2022
	Carrying amount
	Santander Group	Of which, Banco Santander, S.A.
Total loans and advances to customers excluding the Public sector (business in Spain) (Book value)	250,702	246,748
Total consolidated assets (Total business) (Book value)	1,734,659	750,026
Impairment losses and credit risk allowances. Coverage for unimpaired assets (business in Spain)	1,311	1,328

At year-end, the distribution of this portfolio was as

follows:

EUR Million
	Loans: Gross amount
	Santander Group	Of which,  Banco Santander, S.A.
1. Without mortgage guarantee	43	42
2. With mortgage guarantee	2,285	2,295
2.1 Completed buildings	1,138	1,139
2.1.1 Residential	674	674
2.1.2 Other	464	465
2.2 Buildings and other constructions under construction	1,110	1,119
2.2.1 Residential	1,103	1,112
2.2.2 Other	7	7
2.3 Land	37	37
2.3.1 Developed consolidated land	25	25
2.3.2 Other land	12	12
Total	2,328	2,337

Policies and strategies in place for the management of

these risks

The policies in force for the management of this portfolio

are periodically reviewed and approved on a regular

basis by Santander's senior management.

As has already been disclosed in this section, the Group

and the Bank’s anticipatory management of these risks

enabled it to significantly reduce its exposure, and it has

a granular, geographically diversified portfolio in which

the financing of second residences accounts for a very

small proportion of the total.

Mortgage lending on non-urban land represents a low

percentage of mortgage exposure to land, while the

remainder relates to land already classified as urban or

approved for development.

199

The significant reduction of exposure in the case of

residential financing projects in which the construction

work has already been completed was based on various

actions. As well as the specialised marketing channels

already in existence, campaigns were carried out with

the support of specific teams of managers for this

function who, in the case of the Santander network,

were directly supervised by the recoveries business area.

These campaigns, which involved the direct

management of the projects with property developers

and purchasers, reducing sale prices and adapting the

lending conditions to the buyers’ needs, enabled loans

already in force to be subrogated. These subrogations

enable  to diversify its risk in a business segment that

displays a clearly lower non-performing loans ratio.

In the case of construction-phase projects that are

experiencing difficulties of any kind, the policy adopted

is to ensure completion of the construction work so as to

obtain completed buildings that can be sold in the

market. To achieve this aim, the projects are analysed on

a case-by-case basis in order to adopt the most effective

series of measures for each case (structured payments to

suppliers to ensure completion of the work, specific

schedules for drawing down amounts, etc.).

For the real estate business production, the admission

processes are managed by specialized teams that work

in direct coordination with the commercial teams, with

clearly defined policies and criteria:

•Property developers with a robust solvency profile

and a proven track record in the market.

•Medium-high level projects, conducting to

contracted demand and significant cities.

•Strict criteria regarding the specific parameters of the

transactions: exclusive financing for the construction

cost, high percentages of accredited sales, principal

residence financing, etc.

•Support of financing of government-subsidised

housing, with accredited sales percentages.

•Restricted financing of land purchases dealt with

exceptional nature.

In addition to the permanent control performed by its

risk monitoring teams, the Group has a specialist

technical unit that monitors and controls this portfolio

with regard to the stage of completion of construction

work, planning compliance and sales control, and

validates and controls progress billing payments. The

Group has created a set of specific tools for this function.

All mortgage distributions, amounts drawn down of any

kind, changes made to the grace periods, etc. are

authorised on a centralised basis.

Foreclosed properties

At 31 December 2022, the net balance of these assets

amounted to EUR 2,971 million (gross amount of EUR 

6,422 million; recognised allowance of EUR 3,451

million, of which EUR 2,526 million related to

impairment after the foreclosure date).

At 31 December 2021, the net balance of these assets

amounted to EUR 3,591 million (gross amount: EUR

7,364 million; recognised allowance: EUR 3,773 million,

of which EUR 2,729 million related to impairment after

the foreclosure date). At 31 December, 2020, the net

balance of these assets amounted to EUR 3,962 million

(gross amount of EUR 7,937 million; recognised

allowance of EUR 3,975 million, of which EUR 2,834

million related to impairment after the foreclosure date).

200

The following table shows the detail of the assets

foreclosed by the businesses in Spain at the end of 2022:

EUR million
	2022
	Gross carrying amount	Valuation adjustments	Of which impairment losses on assets since time of foreclosure	Net Carrying amount
Property assets arising from financing provided to construction and property development companies	5,587	3,097	2,275	2,490
Of which:
Completed buildings	1,456	713	583	743
Residential	341	157	127	184
Other	1,115	556	456	559
Buildings under construction	92	44	32	48
Residential	25	7	4	18
Other	67	37	28	30
Land	4,039	2,340	1,660	1,699
Developed land	1,286	689	415	597
Other land	2,753	1,651	1,245	1,102
Property assets from home purchase mortgage loans to households	659	274	190	385
Other foreclosed property assets	176	80	61	96
Total property assets	6,422	3,451	2,526	2,971

The same information in the previous table reference to Banco Santander, S.A. is presented below:

EUR million
	2022
	Gross carrying amount	Valuation adjustments	Of which impairment losses on assets since time of foreclosure	Carrying amount
Property assets arising from financing provided to construction and property development companies	781	347	280	434
Of which:
Completed buildings	735	336	270	399
Residential	169	70	58	99
Other	565	265	212	300
Buildings under construction	—	—	—	—
Residential	—	—	—	—
Other	—	—	—	—
Land	46	11	10	35
Developed land	39	10	9	29
Other land	8	2	1	6
Property assets from home purchase mortgage loans to households	603	246	170	357
Other foreclosed property assets	148	67	53	81
Total property assets	1,532	660	503	872

201

In addition, the Group has shareholdings in entities

holding foreclosed assets amounting to EUR  439 million

(mainly Project Quasar Investment 2017, S.L. with EUR

405 million), and equity instruments foreclosed or

received in payment of debts amounting to EUR

15 million.

In recent years,  the Group and the Bank have considered

foreclosure to be a more efficient method for resolving

cases of default than legal proceedings. The Group and

the Bank initially recognise foreclosed assets at the

lower of the carrying amount of the debt (net of

provisions) and the fair value of the foreclosed asset

(less estimated costs to sell). Subsequent to initial

recognition, the assets are measured at the lower of fair

value (less costs to sell) and the amount initially

recognised.

The fair value of this type of assets is determined by the

Group and the Bank’s directors based on evidence

obtained from qualified valuers or evidence of recent

transactions.

The management of real estate assets on the balance

sheet is carried out through companies specializing in

the sale of real estate that is complemented by the

structure of the commercial network. The sale is realised

with at prices in accordance with the market situation

and the offer of wholesale buyers.

The gross movement in foreclosed properties were as

follows (EUR billion):

	2022	2021
Gross additions	0.2	0.4
Disposals	(1.3)	(1.1)
Difference	(1.1)	(0.7)

4. Other credit risk aspects

4.1. Credit risk by activity in the financial markets

This section covers credit risk from treasury, with money

market financing and counterparty risk products to

satisfy the needs of customers (especially credit

institutions) and the Bank.

Counterparty credit risk is the risk that a customer will

default before the final settlement of a transaction’s

cash flows. It creates a bilateral credit risk because it can

affect both parties to a transaction. It is also uncertain

because it depends on market factors, which can be

volatile.

Grupo and Banco Santander manages counterparties

with several credit risk models based on their

characteristics and needs. Model segmentation is by

business and risk treatment and based on counterparty

disclosures as well as the credit risk cycle. The exposure

that the counterparty credit risk model covers includes

derivatives contracts, repurchase agreements, securities

and commodities lending, long settlements and margin

lending.

An infrastructure that can quickly and dynamically

measure current and potential exposure with various

degrees of aggregation and granularity to generate

detailed reports is important for decision-making.

To measure exposure, Santander uses two methods:

“Mark-to-market” (MtM) (replacement cost of

derivatives), plus potential future exposure (“add-on”);

and the Monte Carlo simulation for certain countries and

products. In addition, Santander calculates capital at risk

and unexpected loss (e.g. economic capital, net of

collateral and recoveries, after deducting expected loss).

At market close, Santander recalculates its exposure by

adjusting transactions to a new time horizon, adapting

potential future exposure, and applying netting,

collateral and other mitigants. That way, Santander can

check exposure daily against the limits approved by

senior management within risk appetite. For risk control,

the Group uses a real-time integrated system that shows

the exposure limit with a counterparty, for any product

and term, in all subsidiaries.

Counterparty credit risk can also give rise to “wrong-

way” risk if exposure to a portfolio or a counterparty

increases but credit quality declines. It can happen when

rising default risk increases exposure to a counterparty.

Another risk called “settlement risk” occurs if a party

might fail to hold their end of a contract and deliver the

cash or security needed to settle the transaction.

4.2. Concentration risk

Concentration risk control is a vital part of our

management. the Group and the Bank continuously

monitors the degree of concentration of its credit risk

portfolios using various criteria: geographic areas and

countries, economic sectors and groups of customers.

The board, via the risk appetite framework, determines

the maximum levels of concentration.

In line with these maximum levels and limits, the

executive risk committee establishes the risk policies

and reviews the appropriate exposure levels for the

effective management of the degree of concentration in

Santander’s credit risk portfolios.

Grupo and Banco Santander must adhere to the

regulation on large risks contained in the CRR, according

to which the exposure contracted by an entity with a

customer or group of associated customers will be

considered a large exposure when its value is equal to or

greater than 10% of eligible capital.

In addition, in order to limit large exposures, no entity

may assume exposures exceeding 25% of its eligible

capital with a single customer or group of associated

customers, having factored in the credit risk mitigation

effect contained in the regulation.

At the end of December, after applying risk mitigation

techniques, no group reaches the above-mentioned

thresholds.

202

Regulatory credit exposure with the 20 largest groups

within the scope of large risks represented 5.6% of the

outstanding credit risk with customers (lending to

customers plus off-balance sheet risks) as of December

2022.

The detail, by activity and geographical area of  the

Group's risk concentration at 31 December 2022 is as

follows:

EUR million
	2022A
	Total	Spain	Other EU countries	America	Rest of the world
Central banks and Credit institutions	367,620	98,405	61,138	119,005	89,072
Public sector	177,063	41,871	37,936	89,458	7,798
Of which:
Central government	151,300	30,209	34,681	79,016	7,394
Other central government	25,763	11,662	3,255	10,442	404
Other financial institutions (financial business activity)	152,881	15,271	45,092	54,232	38,286
Non-financial companies and individual entrepreneurs (non- financial business activity) (broken down by purpose)	440,137	114,556	96,354	165,017	64,210
Of which:
Construction and property development	22,797	3,278	3,569	8,149	7,801
Civil engineering construction	5,178	2,502	1,415	1,113	148
Large companies	267,976	53,355	56,243	111,912	46,466
SMEs and individual entrepreneurs	144,186	55,421	35,127	43,843	9,795
Households – other (broken down by purpose)	566,559	90,597	99,133	141,266	235,563
Of which:
Residential	361,377	65,077	36,552	45,611	214,137
Consumer loans	185,097	17,074	60,497	90,609	16,917
Other purposes	20,085	8,446	2,084	5,046	4,509
Total	1,704,260	360,700	339,653	568,978	434,929

A.For the purposes of this table, the definition of risk includes the following items in the public balance sheet: 'Loans and advances to credit institutions', 'Loans

and advances to Central Banks', 'Loans and advances to Customers', 'Debt securities', 'Equity Instruments', 'Trading Derivatives', 'Hedging derivatives',

'Investments and financial guarantees given'.

203

The same information in the previous table referring to Banco Santander, S.A. it is presented below:

EUR million
	2022A
	Total	Spain	Other EU countries	America	Rest of the world
Central banks and Credit institutions	254,259	119,945	42,684	57,840	33,790
Public sector	51,805	30,724	12,126	3,492	5,463
Of which:
Central government	38,981	19,129	11,519	3,458	4,875
Other central government	12,824	11,595	607	34	588
Other financial institutions (financial business activity)	182,731	52,272	52,673	44,462	33,324
Non-financial companies and individual entrepreneurs (Non- financial business activity) (broken down by purpose)	212,734	108,455	35,480	31,417	37,382
Of which:
Construction and property development	2,210	2,194	15	—	1
Civil engineering construction	3,817	2,209	604	855	149
Rest of purposes	206,707	104,052	34,861	30,563	37,232
Large companies	152,930	53,837	33,983	29,323	35,787
SMEs and individual entrepreneurs	53,777	50,215	878	1,239	1,445
Households – other (broken down by purpose)	80,548	78,905	440	455	748
Of which:
Residential	63,669	62,314	377	329	649
Consumer loans	8,405	8,345	8	16	36
Other purposes	8,474	8,246	55	110	63
Total	782,077	390,301	143,403	137,666	110,707

A.For the purposes of this table, the definition of risk includes the following items in the public balance sheet: 'Loans and advances to credit institutions', 'Loans

and advances to Central Banks', 'Loans and advances to Customers', 'Debt securities', 'Equity Instruments', 'Trading Derivatives', 'Hedging derivatives',

'Investments and financial guarantees given'.

4.3 Vulnerable sectors identification

Grupo and Banco Santander carry out quarterly

monitoring of exposure to customers operating in

sectors that could be affected by macroeconomic

conditions. The monitoring involves the use of internal

tools to forecast customer behaviour and trends in each

sector under several macro scenarios, as well as this

information:

•Market information: Industries’ stock market

performance.

•Analysts’ EBITDA forecasts for the coming years.

•Internal information: Changes in credit exposure,

defaults (in different timelines) and stagings.

•Our industry experts’ opinion, based on specific

details about our exposures and our relationships

with customers

Following the effects of the pandemic, in the second

quarter of 2022, Grupo Santander adapted our definition

of 'affected sectors' to the current backdrop of rising

energy and commodity prices and high inflation, mindful

of internal and external factors.

4.4. Sovereign risk and exposure to other public sector

entities

Sovereign risk occurs in transactions with a central bank.

It includes the regulatory cash reserve, issuer risk with

the Treasury (public debt portfolio) and risk from

transactions with government institutions whose

funding only come from the state’s budgetary revenue

and not commercial operations.

Grupo Santander's standard for sovereign risk differs

somewhat from the European Banking Authority's (EBA)

standard for regular stress testing. In particular, the EBA

does not consider deposits with central banks, exposures

with insurance companies or indirect exposures from

guarantees and other financial instruments. However, its

standard does generally include entities run by regional,

local and central governments.

204

Grupo and Banco Santander continue to track and

manage transactions with sovereign risk based on

available information, such as reports by rating agencies

and international organizations. Grupo and Banco

Santander monitor each country where the Group and

the Bank have cross-border3 and sovereign risk. The

Group and the Bank analyse events that could affect the

country’s political or institutional stability and assign its

government or central bank a credit rating. This helps us

set limits for transactions with sovereign risk.

At the end of December, Grupo and Banco Santander´s

local sovereign exposure, in currencies other than the

official currency of the country of issuance, is not

significant (EUR 6,039 million, 1.4% of total sovereign

risk) according to our management criteria. Furthermore,

exposure to non-local sovereign issuers involving cross-

border risk is even less significant4 (EUR 8,867 million,

2.1% of total sovereign risk).

Sovereign exposure in Latin America is mostly in local

currency, and is recognised in the local accounts and

concentrated in short- term maturities.

Over the past few years, total exposure to sovereign risk

has remained in line with regulatory requirements and

our strategy to manage this portfolio.

The shifts observed in the different countries exposure is

due to our liquidity management strategy and the

hedging of interest and exchange rates risks. Santander's

exposure spreads among countries with varied

macroeconomic outlooks and dissimilar scenarios in

terms of growth, interest and exchange rates.

Our investment strategy for sovereign risk considers

country’s credit quality to set the maximum exposure

limitsA:

	2022	2021
AAA	27%	15%
AA	19%	32%
A	34%	26%
BBB	11%	11%
Less than BBB	9%	16%

A.    Internal ratings are applied.

205

3 Risk with domestic public or private borrowers in foreign currency and originated outside the country.

4 Countries that are not considered low risk by Banco de España.

Sovereign exposure at the end of 31 December 2022 is

shown in the table below (data in million euros):

	2022						2021
	Portfolio
Country	Financial assets designated at fair value through profit or loss	Financial assets at fair value through other comprehensive income	Financial assets at amortized cost	Non-trading financial assets mandatorily at fair value through profit or loss	Total net direct exposure		Total net direct exposure
Spain	2,666	240	26,189	—	29,095		19,557
Portugal	(299)	2,005	3,750	—	5,456		6,544
Italy	(1,055)	301	8,169	—	7,415		884
Greece	—	—	—	—	—		—
Ireland	—	—	—	—	—		9
Rest Eurozone	205	789	4,657	—	5,651		3,629
UK	53	315	1,738	—	2,106		366
Poland	4	7,754	957	—	8,715		11,293
Rest of Europe	(7)	14	125	—	132		1,368
US	3,503	8,938	10,857	—	23,298		22,469
Brazil	8,017	9,969	5,742	—	23,728		28,559
Mexico	2,627	11,303	3,376	—	17,306		13,509
Chile	175	818	5,492	—	6,485		6,071
Rest of America	123	1,211	630	—	1,964		1,425
Rest of the World	1	2,012	1,529	—	3,542		3,337
TOTAL	16,013	45,669	73,211	—	134,893		119,020

206

5. Forborne loan portfolio

Grupo and Banco Santander's The customer debt

redirection policy incorporates the regulatory

requirements of the EBA guidelines on the management

of non-performing exposures, refinancing and

restructuring. This policy acts as a reference for the

transposition in our subsidiaries and shares the

applicable supervisory expectations

This policy also sets down rigorous criteria for

evaluating, classifying and monitoring forbearances to

ensure the strictest possible care and diligence in

recovering due amounts. Thus, it dictates that Grupo and

Banco  Santander must adapt payment obligations to

customers' current circumstances. Our forbearance

policy also defines classification criteria to ensure Grupo

and Banco Santander recognize risks appropriately. They

must remain classified as non-performing or in watch-

list for a prudential period for reasonable certainty of

repayment. In no case will repayments be used to delay

the immediate recognition of losses or so that their use

distorts the timely recognition of the risk of non-

payment.

Forbearances may never be used to delay the immediate

recognition of losses or hinder the appropriate

recognition of risk of default.

After several years where the stock had fallen as a result

of the positive economic situation in the main

geographies, 2021 was a year of inflection with a growth

of 24% to address the financial difficulties of our clients

as a result of the situation generated by the pandemic.

During 2022 the stock of readjustments has decreased

lightly, and has stood at EUR 34,173 million. In terms of

credit quality, 44% of the loans  is classified as credit

impaired, with a coverage ratio of 44%. In addition, 56%

of the portfolio is classified as performing.

The following terms are used with the meanings

specified below:

•Refinancing transaction: transaction that is granted

or used, for reasons relating to current or

foreseeable financial difficulties of the borrower, to

repay one or more of the transactions granted to it,

or through which the payments on such transactions

are brought fully or partially up to date, in order to

enable the borrowers of the cancelled or refinanced

transactions to repay their debt (principal and

interest) because they are unable, or might

foreseeably become unable, to comply with the

conditions there of in due time and form.

•Restructured transaction: transaction with respect to

which, for economic or legal reasons relating to

current or foreseeable financial difficulties of the

borrower, the financial terms and conditions are

modified in order to facilitate the payment of the

debt (principal and interest) because the borrower is

unable, or might foreseeably become unable, to

comply with the aforementioned terms and

conditions in due time and form, even if such

modification is envisaged in the agreement.

207

Current refinancing and restructuring balances
Amounts in EUR million, except number of transactions that are in units
	2022
	Total							Of which, non-performing/Doubtful
	Without real guarantee		With real guarantee					Without real guarantee		With real guarantee
					Maximum amount of the actual collateral that can be considered		Impairment of accumulated value or accumulated losses in fair value due to credit risk					Maximum amount of the actual collateral that can be considered		Impairment of accumulated value or accumulated losses in fair value due to credit risk
	Number of transactions	Gross amount	Number of transactions	Gross amount	Real estate guarantee	Rest of real guarantees		Number of transactions	Gross amount	Number of transactions	Gross amount	Real estate guarantee	Rest of real guarantees
Credit entities	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Public sector	6,679	227	31	7	2	—	6	6,679	227	31	7	2	—	6
Other financial institutions and: individual shareholder	1,210	321	785	339	88	86	61	1,210	321	785	339	88	86	61
Non-financial institutions and individual shareholder	312,934	9,578	60,003	8,419	4,790	1,834	3,912	312,934	9,578	60,003	8,419	4,790	1,834	3,912
Of which financing for constructions and property development	15,578	125	1,890	570	423	48	208	15,578	125	1,890	570	423	48	208
Other warehouses	5,878,455	5,790	492,232	9,492	4,835	3,502	4,287	5,878,455	5,790	492,232	9,492	4,835	3,502	4,287
Total	6,199,278	15,916	553,051	18,257	9,715	5,422	8,266	6,199,278	15,916	553,051	18,257	9,715	5,422	8,266
Financing classified as non-current assets and disposable groups of items that have been classified as held for sale	—	—	—	—	—	—	—	—	—	—	—	—	—	—

208

The same information in the previous table referring to Banco Santander, S.A. it is presented below:

Current refinancing and restructuring balances
Amounts in EUR million, except number of transactions that are in units
								2022
	Total							Of which, non-performing/Doubtful
	Without real guarantee		With real guarantee					Without real guarantee		With real guarantee
					Maximum amount of the actual collateral that can be considered		Impairment of accumulated value or accumulated losses in fair value due to credit risk					Maximum amount of the actual collateral that can be considered		Impairment of accumulated value or accumulated losses in fair value due to credit risk
	Number of transactions	Gross amount	Number of transactions	Gross amount	Real estate guarantee	Rest of real guarantees		Number of transactions	Gross amount	Number of transactions	Gross amount	Real estate guarantee	Rest of real guarantees
Credit entities	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Public sector	6,674	226	20	4	2	—	2	4	2	6	2	2	—	2
Other financial companies and sole proprietorships (financial business activity)	364	315	147	322	76	83	56	105	6	102	132	22	5	51
Non-financial corporations and sole proprietorships (non-financial business activity)	76,687	6,768	20,256	5,174	3,274	915	1,969	21,759	1,754	16,650	3,192	2,037	476	1,745
Of which, financing for construction and real estate development (including land)	14	5	302	146	120	19	32	13	5	219	78	53	19	30
Other warehouses	19,651	270	42,731	2,034	1,761	24	466	4,821	72	30,802	1,160	962	5	391
Total	103,376	7,579	63,154	7,534	5,113	1,022	2,493	26,689	1,834	47,560	4,486	3,023	486	2,189
Financing classified as non-current assets and disposable groups of items that have been classified as held for sale	—	—	—	—	—	—	—	—	—	—	—	—	—	—

209

In 2022, the amortised cost of financial assets whose

contractual cash flows were modified during the year

when the corresponding loss adjustment was valued at

an amount equal to the expected credit losses over the

life of the asset amounted to EUR 2,379 million (2,480

million in 2021), without these modifications having a

material impact on the income statement. Also, during

2022, the total of financial assets that have been

modified since the initial recognition, and whose

correction for expected loss has gone from being valued

during the entire life of the asset to the following twelve

months, amounts to EUR 1,677 million (1,868 million in

2021).

In 2022, the amortised cost of financial assets owned by

the Bank whose contractual cash flows were modified

during the year when the corresponding loss adjustment

was valued at an amount equal to the expected credit

losses over the life of the asset amounted to EUR 711

million, without these modifications having a material

impact on the income statement. Also, during 2022, the

total of financial assets owned by the Bank that have

been modified since the initial recognition, and whose

correction for expected loss has gone from being valued

during the entire life of the asset to the following twelve

months, amounts to EUR 645 million.

The transactions presented in the foregoing tables were

classified at 31 December 2022 by nature, as follows:

•Credit impaired: Operations that rest on an

inadequate payment scheme will be classified within

the non-performing category, regardless they

include contract clauses that delay the repayment of

the operation throughout regular payments or

present amounts written off the balance sheet for

being considered irrecoverable.

•Performing: Operations not classifiable as non-

performing will be classified within this category.

Operations will also be classified as normal if they

have been reclassified from the non-performing

category for complying with the specific criteria

detailed below:

aA period of a year must have passed from the

refinancing or restructuring date.

bThe owner must have paid for the accrued

amounts of the capital and interests, thus

reducing the rearranged capital amount, from the

date when the restructuring of refinancing

operation was formalised.

cThe owner must not have any other operation

with amounts past due by more than 90

consecutive days of material delay  on the date of

the reclassification to the normal risk category. 

Attending to the credit attention 56% of the forborne

loan transactions are classified as other than non-

performing. Particularly noteworthy are the level of

existing guarantees 44% of transactions are secured by

collateral) and the coverage provided by specific

allowances (representing 24% of the total forborne loan

portfolio and 44% of the non-performing portfolio).

c) Market, structural and liquidity risk

1. Activities subject to market risk and types of market

risk

Activities exposed to market risk encompass transactions

where risk is assumed as a consequence of potential

changes in interest rates, inflation rates, exchange rates,

stock prices, credit spreads, commodity prices, volatility

and other market factors; the liquidity risk from our

products and markets, and the balance-sheet liquidity

risk. Therefore, they include trading risks and structural

risks.

•Interest rate risk arises from movements in interest

rates that reduce the value of a financial instrument,

a portfolio or the Group or the Bank. It can affect

loans, deposits, debt securities, most assets and

liabilities held for trading, and derivatives.

•Inflation rate risk arises from movements in inflation

that can reduce the value of a financial instrument, a

portfolio or the Group or the Bank. It can affect loans,

debt securities and derivatives (e.g. inflation swaps

and futures) whose profitability is linked to inflation.

•Exchange rate risk is the possibility of loss because

the currency of a long or open position will

depreciate against the base currency. It can affect

debt in subsidiaries whose local currency is not the

euro, as well as loans denominated in a foreign

currency.

◦Equity risk is the possibility of loss from open

positions in securities if their market price or

expected future dividends fall. It affects shares, stock

market indices,  convertible bonds and derivatives

with shares as the underlying asset (put, call, equity

swaps, etc.).

•Credit spread risk is the possibility of loss from open

positions in fixed-income securities or credit

derivatives if their yield curve, or the recovery rate of

their issuer or type change. A spread is the yield

difference between financial instruments against a

benchmark (e.g. the internal rate of return (IRR) of

government bonds and interbank interest rates).

•Commodity price risk is the possibility of loss from

movements in commodity prices. Grupo and Banco

Santander's commodity exposure is minor and stems

mainly from commodity derivatives.

210

•Volatility risk is the possibility of loss caused by

movements in interest rates, exchange rates, the

stock market, credit spreads and other risk factors

affecting portfolio value. It is inherent to all financial

instruments whose value considers volatility

(especially options contracts).

Derivative contracts (such as options, futures, forwards

and swaps) can mitigate market risks partially or fully.

Additionally, other more complex coverage market risks

are considered, such as correlation risk, market liquidity

risk, prepayment or cancellation risk and subscription

risk.

•Correlation risk is the possibility of loss due to an

adverse correlation between risk variables that affect

portfolio value. Risk variables could be the same (e.g.

two FX rates) or different (e.g. an interest rate and a

commodity price).

•Market liquidity risk is the possibility that fewer

market makers or institutional investors, a large

number of transactions, market instability and other

factors will cause the Group or a subsidiary to exit a

position at a worse market price or trade cost.

Exposure to different products and currencies can

also increase this risk.

•Pre-payment or cancellation risk originates when

mortgages, deposits and other on-balance-sheet

instruments give holders the option to buy or sell

them, thus altering future cash flows. Potential

mismatches on the balance sheet pose a risk since

cash flows may have to be reinvested at an interest

rate that is potentially lower (assets) or higher

(liabilities).

•Underwriting risk is the possibility that the bank will

have to hold part of a debt issue it has underwritten

or agreed to place if it cannot all be placed among

potential buyers.

Balance sheet liquidity risk (unlike market liquidity risk)

is the possibility of loss caused by forced disposal of

assets or cash flow imbalance if the bank meets its

payment obligations late or at excessive cost. It can

cause losses by forced asset sales or impacts on margins

due to the mismatch between expected cash inflows and

outflows.

Pension and actuarial risks (explained at the end of this

section) also depend on market variables.

Grupo and Banco Santander aim to comply with the

Basel Committee’s Fundamental Review of the Trading

Book (FRTB) and the EBA’s Guidelines on the

management of interest rate risk arising from non-

trading book activities. The purpose of several projects

Grupo Santander runs is to provide risk control managers

and teams with the best market risk management tools

under the right governance framework for the models

Grupo Santander uses for metric reporting; and to

comply with regulation on the risks mentioned above.

2. Trading market risk management

Setting market risk limits in a dynamic process according

to the risk appetite in the annual limits plan prepared by

senior management and extended to all subsidiaries.

The standard methodology for risk management and

control in trading, measures the maximum expected loss

with a specific level of confidence and time frame. The

standard for historical simulation is a confidence level of

99% over one day.

Grupo and Banco Santander apply statistical

adjustments efficiently to incorporate recent

developments affecting our levels of risk. Our time

frame is two years or at least 520 days from the

reference date of the VaR calculation.

211

The balance sheet items in the Group’s consolidated

position that are subject to market risk are shown below,

distinguishing those positions for which the main risk

metric is VaR from those for which risk monitoring is

carried out using other metrics:

EUR million
		Main market risk metric
	Balance sheet amount	VaR	Other	Main risk factor for 'Other' balance
Assets subject to market risk
Cash, cash balances at central banks and other deposits on demand	223,073		223,073	Interest rate
Financial assets held for trading	156,118	156,118
Non-trading financial assets mandatorily at fair value through profit or loss	5,713	3,711	2,002	Interest rate, spread
Financial assets designated at fair value through profit or loss	8,989	815	8,174	Interest rate, spread
Financial assets designated at fair value through other comprehensive income	85,239	1,941	83,298	Interest rate, spread
Financial assets at amortized cost	1,147,044		1,147,044	Interest rate, spread
Hedging derivatives	8,069		8,069	Interest rate, exchange rate
Changes in the fair value of hedged items in portfolio hedges of interest risk	(3,749)		(3,749)	Interest rate
Other assets	104,163
Total assets	1,734,659
Liabilities subject to market risk
Financial liabilities held for trading	115,185	115,185
Financial liabilities designated at fair value through profit or loss	55,947	—	55,947	Interest rate, spread
Financial liabilities at amortized cost	1,423,858		1,423,858	Interest rate, spread
Hedging derivatives	9,228		9,228	Interest rate, exchange rate
Changes in the fair value of hedged items in portfolio hedges of interest rate risk	(117)		(117)	Interest rate
Other liabilities	32,973
Total liabilities	1,637,074
Equity	97,585

212

The following table displays the latest and average VaR

values at 99% by risk factor over the last three years. It

also shows the minimum and maximum VaR values in

2022 and 97.5% ES at the end of December 2022:

VaR statistics and expected shortfall by risk factorA
EUR million. VaR at 99% and ES at 97.5% with one day time horizon
	2022					2021
	VaR (99%)				ES (97.5%)	VaR
	Min	Average	Max	Latest	Latest	Average	Latest
Total Trading	9.2	14.1	21.5	11.6	10.8	10.5	12.3
Diversification effect	(7.8)	(14.6)	(30.5)	(15.5)	(15.6)	(12.9)	(13.4)
Interest rate	8.1	12.6	21.5	9.9	9.8	9.6	9.1
Equities	2.4	4.2	7.3	5.5	5.5	3.5	5.1
Exchange rate	2.5	4.8	10.3	3.6	3.2	4.2	5.7
Credit spread	3.4	5.4	8.5	5.8	4.9	4.8	5.1
Commodities	0.6	1.7	4.4	2.3	3.0	1.3	0.7
Total Europe	7.9	12.2	21.9	10.5	9.2	9.3	9.9
Diversification effect	(5.1)	(10.4)	(16.8)	(14.2)	(12.0)	(9.3)	(12.6)
Interest rate	5.5	10.2	18.4	10.1	7.8	7.7	7.1
Equities	2.2	3.6	5.8	5.5	5.5	3.3	5.8
Exchange rate	1.9	3.4	5.8	3.3	3.0	2.8	4.5
Credit spread	3.4	5.4	8.7	5.8	4.9	4.8	5.1
Commodities	—	—	—	—	—	—	—
Total North America	1.5	2.3	4.7	2.7	2.2	2.5	2.7
Diversification effect	0.7	(0.8)	(4.0)	(1.1)	(1.3)	(0.7)	(0.6)
Interest rate	0.7	2.2	5.7	2.7	2.4	2.5	2.7
Equities	—	0.1	1.0	0.1	0.1	0.1	0.0
Exchange rate	0.1	0.8	2.0	1.0	1.0	0.6	0.6
Total South America	5.2	8.0	14.2	6.2	6.5	5.9	6.3
Diversification effect	(1.3)	(5.0)	(19.8)	(4.2)	(4.4)	(4.9)	(5.1)
Interest rate	4.5	7.0	14.9	5.5	5.7	5.5	5.8
Equities	0.7	1.6	4.8	1.7	1.6	1.2	1.1
Exchange rate	0.7	2.7	9.9	0.9	0.6	2.8	3.8
Commodities	0.6	1.7	4.4	2.3	3.0	1.3	0.7

A. In South and North America, VaR levels of credit spreads and commodities are not shown separately due to their low or null materiality.

At the end of 2022, VaR was slightly lower (EUR

0.7 million) than at the end of 2021, consequence of an

update in calculation model and a lighter pressure in

markets as inflation started to moderate in some

regions, as the Eurozone.

Although by risk factor, VaR has followed a generally

stable trend in recent years, in 2022 the average VaR

rose by EUR 3.6 million compared to 2021. By risk factor,

average VaR was greater in all of them, specially in

interest rate due to a higher market volatility. The

temporary increases in VaR are due more to short-term

price volatility than to significant changes in positions.

By region, average VaR grew for all risk types in Europe

and South America, which have the highest market risk

exposure.

Backtesting

Actual losses can differ from predicted losses because of

the VaR’s limitations. Grupo Santander measures the

accuracy of the VaR calculation model to make sure it is

reliable. The most important tests Grupo Santander

runs involve backtesting:

•Backtesting of hypothetical P/L and of the entire

trading book showed no exceptions to 99% VaR in

2022. Regarding to 99% VaE, there was an exception

the 15th of December as a consequence of market

213

volatility concurrent with the last ECB's year meeting

where a 50 bp interest rate hike was confirmed.

•The exceptions observed in the past year are

consistent with the assumptions of the VaR

calculation model.

IBOR reform

Since 2013, different organizations and supranational

authorities (IOSCO and FSB) have promoted and

monitored initiatives aimed at carrying out reforms to

strengthen interest rate indices. In this context, in order

to execute the transition in a non-disruptive and

progressive manner, central banks and regulators from

various jurisdictions have organized working groups to

recommend risk-free indices.

The objective was mainly to facilitate the transition to

risk-free indices identified in different jurisdictions,

highlighting the SONIA index as a replacement for the

Libor in pounds, the SOFR for Libor in dollars, and the

€STR for Libor in euros.

In this sense, and as a result of the joint effort of

authorities and market participants, this transaction

process has materialized in different milestones during

the period between 2019 and 2022, remaining only in

2023 the execution of the substitution plans for GBP

LIBOR and USD LIBOR.

According with the regulatory milestones of the

transition, the USD LIBOR terms (overnight, 1M, 3M, 6M

and 12M) will continue to be calculated using the

contributions of panel banks until mid-2023, although

their use for new operations was limited. from the end

2021. The last date of publication of the USD LIBOR for

the overnight and 12M terms will be June 30, 2023. For

the 1, 3 and 6 month terms, on November 23, 2022, the

FCA announced an inquiry of its proposal to require the

LIBOR administrator, IBA, to continue to publish these

USD LIBOR terms under a non-representative "synthetic"

methodology until the end of September 2024. After

that date, publication would cease permanently .

Regarding the GBP LIBOR, its publication is confirmed

under the synthetic methodology for the 3-month term

until the end of March 2024, while the 1- and 6-month

terms will cease to be published in March 2023.

In accordance with the milestones indicated, the Group

and its entities have focused on making all the

contractual, commercial, operational and technological

changes necessary to undertake the transition from

these reference indices. In 2023, the following transition

milestones will continue to be met in the different

jurisdictions where the Grupo Santander operates.

214

Following is a detail of the carrying amount at 31

December 2022 of financial assets, financial liabilities,

derivatives and loan commitments that continue to be

referenced to the pending transition ratios:

EUR Million
Gross Carrying amount	Loans and advances	Debt securities acquired (Assets)	Deposits	Debt securities issued (Liabilities)	Derivatives (Assets)	Derivatives (Liabilities)	Loan Commitments
Referenced to EONIA	—	—	—	—	—	—	—
of which mature after 2021	—	—	—	—	—	—	—
Referenced to LIBOR	9,374	1,071	106	2,087	10,603	9,639	550
of which USD	9,165	696	106	2,087	10,348	9,619	550
of which GBP	209	375	0	0	255	20	0
TOTAL	9,374	1,071	106	2,087	10,603	9,639	550

Additionally, see information included in notes 32.

3. Structural balance sheet risks

3.1. Main aggregates and variations

Consistent with previous years, the market risk profile of

Grupo and Banco Santander’s balance sheet remained

moderate in 2022 in terms of asset, shareholders’ equity

and NII volumes, each subsidiaries.

To measure interest rate risk, Grupo Santander uses

statistical models based on strategies to mitigate

structural risk with interest-rate instruments (such as

bonds and derivatives) to keep risk profile within risk

appetite.

The NII and EVE sensitivities below are based on

scenarios of parallel interest rate movements from -100

to +100 basis points.

Structural VaR

With such a homogeneous metric as VaR, Grupo

Santander can fully monitor market risk in the banking

book (excluding SCIB trading activity). The Bank

differentiates fixed income based on interest rates and

credit spreads in ALCO portfolios, FX rates and shares.

In general, the structural VaR of Grupo and Banco

Santander total assets and equity is minor.

Structural VaR
EUR million. Structural VaR 99% with a temporary horizon of one day.
	2022				2021		2020
	Min	Average	Max	Latest	Average	Latest	Average	Latest
Structural VaR	538.5	664.0	1,084.4	538.5	993.7	1,011.9	911.0	903.1
Diversification effect	(323.5)	(417.1)	(489.5)	(422.4)	(327.3)	(240.2)	(349.8)	(263.4)
VaR Interest RateA	266.2	350.8	577.0	304.5	400.7	287.8	465.1	345.5
VaR Exchange Rate	400.4	493.4	682.3	461.0	600.6	655.2	499.9	502.6
VaR Equities	195.4	236.9	314.6	195.4	319.7	309.1	295.9	318.5

A. Includes credit spread VaR on ALCO portfolios.

215

Structural interest rate risk

–Europe

At the end of December, the sensitivity of NII on our core

balance sheets and of Santander España’s EVE to interest

rate hikes was positive; but at Santander UK it was

negative.

Across our footprint, exposure was moderate in relation

to annual budget and capital levels in 2022.

At the end of December, under the scenarios previously

described, significant risk of NII sensitivity to the euro

amounted to EUR 1,009 million; to the pound sterling,

EUR 191 million; to the US dollar, EUR 51 million; and to

the Polish złoty, EUR 64 million, all with risk of rate cuts.

Significant risk of EVE sensitivity to yield curves of the

euro was EUR 2,820 million; of the pound sterling, EUR

440 million; of the US dollar, EUR 11 million euros; and

of the Polish złoty, EUR 91 million euros, mostly with

risk of rate cuts.

–North America

At the end of December, significant risk to NII was

mainly in the US and amounted to EUR 151 million.

The most significant risk to EVE was in the US and

amounted to EUR 763 million.

–South America

EVE and NII on our main South American balance sheets

are positioned for interest rate cuts.

Exposure in all countries was moderate in relation to the

annual budget and capital levels in 2022.

At the end of December, most significant risk to NII was

mainly in Chile (EUR 72 million) and in Brazil (EUR

169 million).

Most significant risk to EVE was recorded in Chile (EUR

309 million) and in Brazil (EUR 386 million).

Structural foreign currency rate risk/results hedging

Grupo Santander's structural FX risk stems mainly from

the income and hedging of foreign currency transactions

for permanent financial investments. In the dynamic

management of this risk, Grupo Santander aims to limit

the impact of FX rate movements on the core capital

ratio. In 2022, the hedged of the different currencies that

have an impact on our core capital ratio was close to

100%.

In December 2022, our permanent exposures (with

potential impact on shareholders’ equity) were, from

largest to smallest, in US dollars, Brazilian reais, British

pounds sterling, Mexican pesos, Chilean pesos and

Polish złoty.

Grupo and Banco Santander use FX derivatives to hedge

part of those permanent positions. The Finance division

manages FX risk and hedging for the expected profits

and dividends of subsidiaries whose base currency is not

the euro.

Structural equity risk

Grupo Santander holds equity positions in its banking

and trading books. They are either equity instruments or

stock, depending on the share of ownership or control.

At the end of December 2022, the equities and

shareholdings in the banking book were diversified

among Spain, China, Morocco, Poland and other

countries. Most of them invest in the financial and

insurance sectors. Grupo Santander has minor equity

exposure to property and other sectors.

Structural equity positions are exposed to market risk.

The Group calculates its VaR with a set of market prices

and proxies. At the end of the year 2022, VaR at a 99%

confidence level over a one-day horizon was EUR

195 million (EUR 309 million and EUR 319 million in

2021).

3.2.Methodologies

Structural interest rate risk

Grupo Santander measures the potential impact of

interest rate movements on EVE and NII. Because

changing rates may generate impacts, Grupo Santander

must manage and control many subtypes of interest rate

risk, such as repricing risk, curve risk, basis risk and

option risk (e.g. behavioural or automatic).

Interest rate risk in the balance sheet and market

conditions and outlooks could necessitate certain

financial measures to achieve Grupo Santander's desired

risk profile (such as selling positions or setting interest

rates on products Grupo Santander markets).

The metrics Grupo Santander uses to monitor IRRBB

include NII and EVE sensitivity to interest rate

movements.

•Net interest income sensitivity

Net interest income (NII) is the difference between

interest income from assets and the interest cost of

liabilities in the banking book over a typical one- to

three-year horizon (one year being standard in Grupo

Santander). Because NII sensitivity is the difference in

income between a selected scenario and the base

scenario, its values can be as many as considered

scenarios. It enables us to see short-term risks and

supplement economic value of equity (EVE) sensitivity.

216

•Economic value of equity sensitivity

Economic value of equity (EVE) is the difference between

the current value of all assets minus the current value of

all liabilities in the banking book. It does not include

shareholders’ equity and non-interest-bearing

instruments.

Because EVE sensitivity is the difference in EVE between

a selected scenario and the base scenario, it can have as

many values as considered scenarios. It enables us to

see long-term risks and supplement NII sensitivity.

Structural exchange-rate risk/hedging of results

Every day, Grupo Santander measures FX positions, VaR

and P/L.

Structural equity risk

Grupo Santander measures equity positions, VaR and P/

L.

4. Liquidity risk

Structural liquidity management aims to fund the Group

and the Bank’s recurring activity optimising maturities

and costs, while avoiding taking on undesired liquidity

risks. Grupo and Banco Santander’s liquidity

management is based on the following principles:

•Decentralised liquidity model.

•Medium- and long-term (M/LT) funding needs must

be covered by medium- and long-term instruments.

•High contribution from customer deposits due to the

retail nature of the balance sheet.

•Diversification of wholesale funding sources by

instruments/ investors, markets/currencies and

maturities.

•Limited recourse to short-term funding.

•Availability of sufficient liquidity reserves, including

standing facilities/discount windows at central banks

to be used in adverse situations.

•Compliance with regulatory liquidity requirements

both at Group and subsidiary level, as a new factor

conditioning management.

The effective application of these principles by all

institutions comprising the Group required the

development of a unique management framework built

upon three fundamental pillars:

•A solid organisational and governance model that

ensures the involvement of the subsidiaries’ senior

management in decision-taking and its integration

into the Group’s global strategy. The decision-

making process for all structural risks, including

liquidity and funding risk, is carried out by local Asset

and Liability Committees (ALCOs) in coordination

with the global ALCO, which is the body empowered

by the Bank's board in accordance with the corporate

Asset and Liability Management (ALM) framework.

This governance model has been reinforced as it has

been included within Santander's Risk Appetite

Framework. This framework meets demands from

regulators and market players emanating from the

financial crisis to strengthen banks’ risk management

and control systems.

•In-depth balance sheet analysis and measurement of

liquidity risk, supporting decision-taking and its

control. The objective is to ensure the Group and the

Bank maintain adequate liquidity levels necessary to

cover its short- and long-term needs with stable

funding sources, optimising the impact of their costs

on the income statement. Grupo and Banco

Santander’s liquidity risk management processes are

contained within a conservative risk appetite

framework established in each geographic area in

accordance with its commercial strategy. This risk

appetite establishes the limits within which the

subsidiaries and, therefore, the Bank can operate in

order to achieve their strategic objectives.

•Management adapted in practice to the liquidity needs

of each business. Every year, based on business needs,

a liquidity plan is developed which seeks to achieve:

–a solid balance sheet structure, with a diversified

presence in the wholesale markets;

–the use of liquidity buffers and limited

encumbrance of assets;

–compliance with both regulatory metrics and

other metrics included in each entity’s risk

appetite statement.

217

Over the course of the year, all dimensions of the plan

are monitored.

Grupo Santander continues to develop the ILAAP

(Internal Liquidity Adequacy Assessment Process), an

internal self-assessment of liquidity adequacy which

must be integrated into the Group’s other risk

management and strategic processes. It focuses on both

quantitative and qualitative matters and is used as an

input to the SREP (Supervisory Review and Evaluation

Process). The ILAAP evaluates the liquidity position both

in ordinary and stressed scenarios.

i. Liquidity risk measurement

Grupo Santander uses the Basel regulatory definition

and calculates a set of metrics and stress scenarios in

relation to intraday liquidity risk to maintain a high level

of management and control. On the one hand, the

regulatory liquidity metrics (LCR, NSFR, etc.) are

prepared following the regulatory criteria established in

the CRR-II and CRD IV. Regarding internal metrics,

liquidity scenarios are determined using a combination

of behavioral observation in actual liquidity crises

occurred at other banks, regulatory assumptions (e.g.

the assumptions in the LiST) and expert judgment.

a) Liquidity buffer

The liquidity buffer is the total liquid assets a bank has to

cope with cash outflows during periods of stress. The

assets are free of encumbrances and can be used

immediately to generate liquidity without losses or

excessive discounts. The liquidity buffer is a tool for

calculating most liquidity metrics. It is also a metric with

defined limits for each subsidiary.

b) Liquidity Coverage Ratio (LCR)

The liquidity coverage ratio (LCR) is a regulatory metric.

Its purpose is to promote the short-term resilience of a

bank’s liquidity profile and make sure it has enough

high-quality liquid assets to withstand a considerable

idiosyncratic or market stress scenario over 30 calendar

days.

c) Wholesale liquidity metric

The wholesale liquidity metric measures the number of

days Grupo and Banco Santander would survive if it

used liquid assets to cover lost liquidity from a

wholesale deposit run-off (without possible renewal)

over a set time horizon. Grupo and Banco Santander

also uses it as an internal short-term liquidity metric to

reduce risk from dependence on wholesale funding.

d) Net Stable Funding Ratio (NSFR)

The net stable funding ratio (NSFR) is a regulatory metric

we use to measure long-term liquidity risk. It is the ratio

of available stable funding to required stable funding. It

requires banks to keep a robust balance sheet, with off-

balance-sheet assets and operations financed by stable

liabilities.

e) Asset Encumbrance metrics

Grupo and Banco Santander calculate two metrics to

measure asset encumbrance risk. On the one hand, the

asset encumbrance ratio gives the proportion of

encumbered assets to total assets; on the other, the

structural asset encumbrance ratio gives the proportion

of encumbered assets by structural funding transaction

(namely long-term collateralized issues and credit

transactions with central banks).

f) Other additional liquidity indicators

In addition to traditional tools to measure short and

long-term liquidity and funding risk, Grupo and Banco

Santander have a set of additional liquidity indicators to

complement those and to measure other non-covered

liquidity risk factors. These include concentration

metrics, such as the main and the five largest funding

counterparties, or the distribution of funding by

maturity.

In addition, Santander calculates a number of metrics on

the institution’s ability to generate liquidity through

collateralized financing, such as overcollateralization,

eligibility ratios assets without charges and deadlines for

their placement.

g) Liquidity scenario analysis

As liquidity stress tests, Grupo and Banco Santander

have four standard scenarios have been defined:

i.An idiosyncratic scenario of events detrimental only

to the Group and the Bank;

ii.a local market scenario of events highly detrimental

to a base country’s financial system or real economy;

iii.a global market scenario of events highly detrimental

to the global financial system; and

iv.combined scenario consisting of a combination of

more severe idiosyncratic and market events (local

and global) occurring simultaneously and

interactively.

v.climate scenarios where different stress cases derived

from the effects that climate change could have on

the economy are collected.

Grupo and Banco Santander use these stress test

outcomes as tools to determine risk appetite and

support business decision-making.

h) Liquidity early warning indicators

The system of early warning indicators (EWI) consists of

quantitative and qualitative liquidity indicators that help

predict stress situations and weaknesses in the funding

and liquidity structure of Grupo, and therefore, Banco

Santander entities. External indicators relate to market-

based financial variables; internal indicators relate to our

own performance.

218

i) Intraday liquidity metrics

Grupo and Banco Santander follows Basel regulation and

calculates several metrics and stress scenarios for

intraday liquidity risk to maintain a high level of control.

ii. Liquidity coverage ratio and net stable financing ratio

As regards the liquidity coverage ratio (LCR), the

regulatory requirement for this ratio, set at 100%, has

been at its maximum level since 2018.

Below is a breakdown of the composition of the Group's

liquid assets under the criteria set out in the supervisory

prudential reporting (Commission Implementing

Regulation (EU) 2017/2114 of 9 November 2017) for the

determination of high quality liquid assets for the

calculation of the LCR ratio (HQLA):

EUR million
	2022	2021
	Amount weighted applicable	Amount weighted applicable
High-quality liquid assets-HQLAs
Cash and reserves available at central banks	127,285	206,507
Marketable assets Level 1	177,887	81,925
Marketable assets Level 2A	3,308	3,422
Marketable assets Level 2B	3,562	5,446
Total high-quality liquid assets	312,042	297,300

In relation to the net stable funding ratio (NSFR), its

definition was approved by the Basel Committee in

October 2014. The transposition of this requirement to

the European regulation took place in June 2019 with

the publication in the Official Gazette of the European

Union of Regulation (EU) 2019/876 of the European

Parliament and of the Council of 20 May 2019. The

Regulation establishes that entities must have a net

stable financing ratio, as defined in the Regulation,

higher 100% from June 2021.

The liquidity coverage ratio, broken down by component,

and the net stable funding ratio for the Group at year-

ends 2022 and 2021 are presented below:

EUR million
	2022	2021
High-quality liquid assets-HQLAs (numerator)	312,042	297,300
Total net cash outflows (denominator)	204,759	181,953
Cash outflows	270,748	233,294
Cash inflows	65,989	51,341
LCR ratio (%)	152%	163%
NSFR ratio  (%)	121%	126%

As regards the funding structure, given the

predominantly commercial nature of the Group's

balance sheet, the loan portfolio is mainly financed by

customer deposits.

In the last quarter of 2022, Grupo Santander has begun

to repay in advance a significant part of the financing

received under the TLTRO-III program launched by the

European Central Bank, which originally matured in

2023. The replacement of these funds has been carried

out after having strengthened the balance sheet through

a combination of growth in customer deposits, an

increase in short-term instruments and greater activity in

medium and long-term issuances, which has allowed

Grupo Santander to maintain liquidity coverage ratios

(LCR ) and net stable funding (NSFR) at prudent levels

after the repayment.

The movement in the composition of the buffer between

'Cash and reserves available at central banks' to 'Level 1

marketable assets' corresponds to a reclassification of

deposits with the Central Bank, due to the change in the

remuneration of deposits with the European Central

Bank.

Note 22 of the consolidated annual accounts and Note

20 of the individual accounts, under the name, 'Debt

securities' shows the composition of these liabilities on

the basis of their nature and classification, the

movements and maturity profile of the debt securities

issued by the Group, reflecting the strategy of

diversification by products, markets, issuers and

maturities followed by the Group in its approach to the

wholesale markets.

iii.Asset encumbrance 

Finally, the moderate use of assets by Grupo Santander

as collateral in the sources of structural financing of the

balance sheet should be highlighted.

In accordance with the guidelines established by the

European Banking Authority (EBA) in 2014 on committed

and uncommitted assets, the concept of assets

committed in financing transactions (asset

encumbrance) includes both on-balance sheet assets

provided as collateral in transactions to obtain liquidity

and off-balance sheet assets that have been received

and reused for similar purposes, as well as other assets

associated with liabilities for reasons other than

financing.

219

The residual maturities of the liabilities associated with

the assets and guarantees received and committed are

presented below, as of 31 of December of 2022 (EUR

thousand million):

Residual maturities of the liabilities	Unmatured	<=1month	>1 month <=3 months	>3 months <=12 months	>1 year <=2 years	>2 years <=3 years	3 years <=5 years	5 years <=10 years	>10 years	Total
Committed assets	44.6	32.3	10.6	49.7	39.2	50.1	51.6	20.1	10.7	308.9
Guarantees received committed	29.2	37.5	13.3	21.4	0.6	1.3	1.0	—	—	104.3

The reported Group information as required by the EBA

at 2022 year-end is as follows:

On-balance-sheet encumbered assets
EUR billion
	Carrying amount of encumbered assets	Fair value of encumbered assets	Fair value of non- encumbered assets	Carrying amount of non- encumbered assets
Loans and advances	197.3		1,143.5
Equity instruments	8.3	8.3	7.4	7.4
Debt securities	71.7	71.7	122.0	125.8
Other assets	31.6		152.8
Total assets	308.9		1,425.7

Encumbrance of collateral received
EUR billion
	Fair value of encumbered collateral received or own debt securities issued	Fair value of collateral received or own debt securities issued available for encumbrance
Collateral received	104.3	29.4
Loans and advances	1.3	—
Equity instruments	4.8	6.8
Debt securities	98.2	22.5
Other collateral received	—	0.1
Own debt securities issued other than own covered bonds or ABSs	—	0.5

Encumbered assets and collateral received and matching liabilities
EUR billion
	Matching liabilities, contingent liabilities or securities lent	Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered
Total sources of encumbrance (carrying amount)	313.2	413.2

On-balance-sheet encumbered assets amounted to EUR

 308,900 million, of which 64% are loans (mortgage

loans, corporate loans, etc.). Guarantees received

committed amounted to EUR 104,300 million, relating

mostly to debt securities received as security in asset

purchase transactions and re-used.

Taken together, these two categories represent a total of

EUR 413,200 million of encumbered assets, which give

rise to EUR 313,200 million matching liabilities.

As of December 2022, total asset encumbrance in

funding operations represented 22.1% of the Group’s

extended balance sheet under EBA criteria (total assets

plus guarantees received: EUR 1,868,400 million as of

December 2022). This percentage has decreased from

26.1% that presented the Group as of December 2021,

mainly as a result of the early repayment of

collateralized financing with central banks, especially

the European Central Bank (TLTRO) and the Bank of

England (TFSME).

220

d) Capital risk

In the second line of defence, capital risk management

can independently challenge business and first-line

activities by:

•Supervising capital planning and adequacy exercises

through a review of the main components affecting

the capital ratios.

•Identifying key metrics to calculate the Group’s

regulatory capital, setting tolerance levels and

analysing significant variations, as well as single

transactions with impact on capital.

•Reviewing and challenging the execution of capital

actions proposed in line with capital planning and

risk appetite.

Grupo Santander commands a sound solvency position,

above the levels required by regulators and by the

European Central bank.

Regulatory capital

At 1 January 2023, at a consolidated level, the Group

must maintain a minimum capital ratio of 9.07% of CET1

(4.50% being the requirement for Pillar I, 0.89% being

the requirement for Pillar 2R (requirement),2.50% being

the requirement for capital conservation buffer, 1%

being the requirement for global systemically entity (G-

SIB) and 0.18% being the requirement for anti-cyclical

capital buffer).

Grupo Santander must also maintain a minimum capital

ratio of 10.87% of tier 1 and a minimum total ratio of

13.26%.

In 2022, the solvency target set was achieved.

Santander’s CET1 ratio stood at 12.18%5 at the close of

the year, demonstrating its organic capacity to generate

capital. The key regulatory capital figures are indicated

below:

Reconciliation of accounting capital with regulatory capital
EUR million
	2022	2021
Subscribed capital	8,397	8,670
Share premium account	46,273	47,979
Reserves	62,111	56,606
Treasury shares	(675)	(894)
Attributable profit	9,605	8,124
Approved dividendC	(979)	(836)
Shareholders’ equity on public balance sheet	124,732	119,649
Valuation adjustments	(35,628)	(32,719)
Non-controlling interests	8,481	10,123
Total Equity on public balance sheet	97,585	97,053
Goodwill and intangible assets	(17,272)	(16,132)
Eligible preference shares and participating securities	8,831	10,050
Accrued dividendC	(942)	(895)
Other adjustmentsA	(5,169)	(7,624)
Tier 1B	83,033	82,452

A.Fundamentally for non-computable non-controlling interests and

deductions and reasonable filters in compliance with CRR.

B.Figures calculated by applying the transitional provisions of IFRS 9.

C.Assumes 20% of ordinary profit, see note 4.a for proposed

distribution of results.

Note: Certain figures presented in this capital note have been rounded for

ease of presentation. Consequently, the amounts corresponding to the

rows or columns of totals in the tables presented in this note may not

coincide with the arithmetic sum of the concepts or items that make up

the total.

The following table shows the capital coefficients and a

detail of the eligible internal resources of the Group:

Capital coefficients
	2022	2021
Level 1 ordinary eligible capital (EUR million)	74,202	72,402
Level 1 additional eligible capital (EUR million)	8,831	10,050
Level 2 eligible capital (EUR million)	14,359	14,865
Risk-weighted assets (EUR million)	609,266	578,930
Level 1 ordinary capital coefficient (CET 1)	12.18%	12.51%
Level 1 additional capital coefficient (AT1)	1.45%	1.73%
Level 1 capital coefficient (TIER1)	13.63%	14.24%
Level 2 capital coefficient (TIER 2)	2.36%	2.57%
Total capital coefficient	15.99%	16.81%

221

5 Figures calculated by applying the transitional provisions of IFRS 9

Eligible capital
EUR million
	2022	2021
Eligible capital
Common Equity Tier I	74,202	72,402
Capital	8,397	8,670
(-) Treasure shares and own shares financed	(60)	(966)
Share Premium	46,273	47,979
Reserves	62,246	58,157
Other retained earnings	(37,439)	(34,784)
Minority interests	7,416	6,736
Profit net of dividends	7,684	6,394
Deductions	(20,315)	(19,784)
Goodwill and intangible assets	(17,182)	(16,064)
Others	(3,133)	(3,720)
Additional Tier I	8,831	10,050
Eligible instruments AT1	8,344	10,102
AT1-excesses-subsidiaries	487	(52)
Tier II	14,359	14,865
AT1-excesses-subsidiaries	487	(52)
Eligible instruments T2	14,770	15,424
Gen. funds and surplus loans loss prov. IRB	—	75
T2-excesses -  subsidiaries	(411)	(634)
Total eligible capital	97,392	97,317

Note: Banco Santander, S.A. and its affiliates had not taken part in any

State aid programmes.

Leverage ratio

Basel III established the leverage ratio as a non-risk

sensitive measure aimed at limiting excessive balance

sheet growth relative to available capital.

The Group performs the calculation in accordance with

Regulation (EU) 2019/876 of 20 May 2019 amending

Regulation (EU) No 575/2013 as regards the leverage

ratio.

This ratio is calculated as tier 1 capital divided by

leverage exposure. Exposure is calculated as the sum of

the following items:

•Accounting assets, excluding derivatives and items

treated as deductions from tier 1 capital (for

example, the balance of loans is included, but not

that of goodwill) further excluding the exposures

referred to in Article 429.a (1) of the regulation.

•Off-balance-sheet items (mainly guarantees, unused

credit limits granted and documentary credits)

weighted using credit conversion factors.

•Inclusion of net value of derivatives (gains and losses

are netted with the same counterparty, minus

collaterals if they comply with certain criteria) plus a

charge for the future potential exposure.

•A charge for the potential risk of security funding

transactions.

•Lastly, it includes a charge for the risk of credit

derivative swaps (CDS).

With the publication of Regulation (EU) 2019/876 of 20

May, 2019, amending Regulation (EU) n.º 575/2013 as

regards the leverage ratio, the final calibration of the

ratio is set at 3% for all entities and, for systemic entities

G-SIB, an additional surcharge is also established which

will be 50% of the cushion ratio applicable to the EISM.

In addition, modifications are included in its calculation,

including the exclusion of certain exposures from the

total exposure measure: public loans, transfer loans and

officially guaranteed export credits.

Banks implemented this final definition of the leverage

ratio in June 2021, however, the new calibration of the

ratio (the additional surcharge for G-SIBs) will take

effect from January 2023.

EUR million
	2022	2021
Leverage
Level 1 Capital	83,033	82,452
Exposure	1,750,626	1,536,516
Leverage Ratio	4.74%	5.37%

Global systemically important banks

Grupo Santander is one of 30 banks designated as global

systemically important banks (G-SIBs).

The designation as a globally systemic entity comes

from a measurement established by the regulators (FSB

and BCBS) that they have implemented based on five

indicators (size, interjurisdictional activity,

interconnection with other financial entities,

substitutability and complexity). The application

methodology has been modified in December 2021,

incorporating, among other things, an additional score

considering the Member States of the SRM as a single

jurisdiction.

This definition means it has to fulfil certain additional

requirements, which consist mainly of a capital buffer

(1%), in TLAC requirements (total loss absorbing

capacity), that Grupo Santander has to publish relevant

information more frequently than other banks, greater

regulatory requirements for internal control bodies,

special supervision and drawing up of special reports to

be submitted to supervisors.

The fact that Grupo Santander has to comply with these

requirements makes it a more solid bank than its

domestic rivals.

222

Appendix I

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
2 & 3 Triton Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Real estate	40	1	12
A & L CF (Guernsey) Limited (n)	Guernsey	0.00%	100.00%		100.00%	100.00%	Leasing	0	0	0
A & L CF June (2) Limited (e)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
A & L CF June (3) Limited (e)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Leasing	0	0	0
A & L CF March (5) Limited (d)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	1	0	0
A & L CF September (4) Limited (f)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	20	0	0
A3T Luxco 1 S.A. (c)	Luxembourg	0.00%	100.00%		100.00%	100.00%	Holding company	4	(1)	4
A3T Luxco 2 S.A. (c)	Luxembourg	100.00%	0.00%		100.00%	100.00%	Holding company	(20)	21	0
Abbey Business Services (India) Private Limited (d)	India	0.00%	100.00%		100.00%	100.00%	Holding company	0	0	0
Abbey Covered Bonds (Holdings) Limited	United Kingdom	—	(b)		—	—	Securitizati on	0	0	0
Abbey Covered Bonds (LM) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitizati on	0	0	0
Abbey Covered Bonds LLP	United Kingdom	—	(b)		—	—	Securitizati on	231	159	0
Abbey National Beta Investments Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0

223

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Abbey National Business Office Equipment Leasing Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Abbey National International Limited	Jersey	0.00%	100.00%		100.00%	100.00%	Financial services	4	0	4
Abbey National Nominees Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Abbey National PLP (UK) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Abbey National Property Investments	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	278	(1)	156
Abbey National Treasury Services Investments Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Abbey National Treasury Services Overseas Holdings	United Kingdom	0.00%	100.00%		100.00%	100.00%	Holding company	0	0	0
Abbey National UK Investments	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Abbey Stockbrokers (Nominees) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Abbey Stockbrokers Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securities company	0	0	0
Abent 3T, S.A.P.I de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	Electricity production	52	(86)	0
Ablasa Participaciones, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	233	48	894
Aduro S.A.	Uruguay	0.00%	100.00%		100.00%	100.00%	Payments and collection services	1	(1)	3
Aevis Europa, S.L.	Spain	96.34%	0.00%		96.34%	96.34%	Cards	1	0	1

224

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
AFB SAM Holdings, S.L.	Spain	1.00%	99.00%		100.00%	100.00%	Holding company	0	0	0
Afisa S.A.	Chile	0.00%	100.00%		100.00%	100.00%	Fund manageme nt company	4	0	4
Allane Leasing GmbH	Austria	0.00%	46.95%		100.00%	100.00%	Renting	(2)	0	0
Allane Location Longue Durée S.a.r.l.	France	0.00%	46.95%		100.00%	100.00%	Renting	14	3	0
Allane Mobility Consulting AG	Switzerland	0.00%	46.95%		100.00%	100.00%	Consulting services	1	0	0
Allane Mobility Consulting B.V.	Netherlands	0.00%	46.95%		100.00%	100.00%	Consulting services	(3)	0	0
Allane Mobility Consulting GmbH	Germany	0.00%	46.95%		100.00%	100.00%	Consulting services	1	1	0
Allane Mobility Consulting Österreich GmbH	Austria	0.00%	46.95%		100.00%	100.00%	Consulting services	(1)	0	0
Allane Mobility Consulting S.a.r.l	France	0.00%	46.95%		100.00%	100.00%	Consulting services	(1)	0	0
Allane Schweiz AG	Switzerland	0.00%	46.95%		100.00%	100.00%	Renting	14	0	0
Allane SE	Germany	0.00%	46.95%		92.07%	92.07%	Renting	192	4	175
Allane Services GmbH & co. KG	Germany	0.00%	46.95%		100.00%	100.00%	Services	1	0	0
Allane Services Verwaltungs GmbH	Germany	0.00%	46.95%		100.00%	100.00%	Manageme nt of portfolios	0	0	0
Alliance & Leicester Cash Solutions Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0

225

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Alliance & Leicester Commercial Bank Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Alliance & Leicester Investments (Derivatives) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Alliance & Leicester Investments (No.2) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Alliance & Leicester Investments Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Alliance & Leicester Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Alliance & Leicester Personal Finance Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	(228)	0	0
Altamira Santander Real Estate, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Real estate	20	(109)	0
Alternative Leasing, FIL (Compartimento B)	Spain	100.00%	0.00%		100.00%	100.00%	Investment fund	108	6	105
Amazonia Trade Limited	United Kingdom	100.00%	0.00%		100.00%	100.00%	Holding company	0	0	0
Amherst ASG Holdings, LLC	United States	0.00%	100.00%		100.00%	—	Holding company	225	(50)	175
Amherst Pierpont Commercial Mortgage Securities LLC	United States	0.00%	100.00%		100.00%	—	Securitizati on	0	0	0
Amherst Pierpont International Ltd.	Hong-Kong	0.00%	100.00%		100.00%	—	Intermedia tion	3	0	3
Amherst Pierpont Securities LLC	United States	0.00%	100.00%		100.00%	—	Securities Investment	366	(43)	323
AN (123) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Holding company	0	0	0

226

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Andaluza de Inversiones, S.A. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	37	1	27
ANITCO Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
AP Acquisition Trust I	United States	0.00%	100.00%		100.00%	—	Trust company	0	0	0
AP Asset Acquisition LLC	United States	0.00%	100.00%		100.00%	—	Financial services	1	0	1
Apê11 Tecnologia e Negócios Imobiliários S.A.	Brazil	0.00%	81.26%		90.00%	90.00%	Real estate	7	(1)	5
APSG GP LLC	United States	0.00%	100.00%		100.00%	—	Holding company	0	0	0
Aquanima Brasil Ltda.	Brazil	0.00%	100.00%		100.00%	100.00%	E- commerce	2	0	0
Aquanima Chile S.A.	Chile	0.00%	100.00%		100.00%	100.00%	Services	3	0	0
Aquanima México S. de R.L. de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	E- commerce	3	1	2
Aquanima S.A.	Argentina	0.00%	100.00%		100.00%	100.00%	Services	4	(1)	4
Artarien S.A. (o)	Uruguay	100.00%	0.00%		100.00%	100.00%	Insurance auxiliary services	0	0	1
Asto Digital Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	12	(2)	0
Athena Corporation Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Financial services	(8)	0	0
Atlantes Mortgage No. 2	Portugal	—	(b)		—	—	Securitizati on	0	0	0

227

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Atlantes Mortgage No. 3	Portugal	—	(b)		—	—	Securitizati on	0	0	0
Atlantes Mortgage No. 4	Portugal	—	(b)		—	—	Securitizati on	0	0	0
Atual - Fundo de Invest Multimercado Crédito Privado Investimento no Exterior	Brazil	0.00%	90.28%		100.00%	100.00%	Investment fund	433	49	436
Auto ABS Belgium Loans 2019 SA/NV	Belgium	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS DFP Master Compartment France 2013	France	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS French Leases 2021	France	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS French Leases Master Compartment 2016	France	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS French Loans Master	France	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS French LT Leases Master	France	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS Italian Balloon 2019-1 S.r.l.	Italy	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS Italian Loans 2018-1 S.r.l.	Italy	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS Italian Rainbow Loans 2020-1 S.r.l.	Italy	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS Spanish Loans 2018-1, Fondo de Titulización	Spain	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS Spanish Loans 2020-1, Fondo de Titulización	Spain	—	(b)		—	—	Securitizati on	0	0	0

228

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Auto ABS Spanish Loans 2022-1, Fondo de Titulización	Spain	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS UK Loans 2017 Holdings Limited	United Kingdom	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS UK Loans 2019 Holdings Limited	United Kingdom	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS UK Loans 2019 Plc	United Kingdom	—	(b)		—	—	Securitizati on	(3)	2	0
Auto ABS UK Loans Holdings Limited	United Kingdom	—	(b)		—	—	Securitizati on	0	0	0
Auto ABS UK Loans PLC	United Kingdom	—	(b)		—	—	Securitizati on	(7)	40	0
Autodescuento, S.L.	Spain	0.00%	93.89%		93.89%	93.89%	Vehicles purchased by internet	2	0	18
Autohaus24 GmbH	Germany	0.00%	46.95%		100.00%	100.00%	Internet	(3)	1	0
Auttar HUT Processamento de Dados Ltda.	Brazil	0.00%	97.10%		100.00%	100.00%	IT services	6	0	6
Aviación Antares, A.I.E.	Spain	99.99%	0.01%		100.00%	100.00%	Renting	53	6	28
Aviación Británica, A.I.E.	Spain	99.99%	0.01%		100.00%	100.00%	Renting	26	5	6
Aviación Centaurus, A.I.E.	Spain	99.99%	0.01%		100.00%	100.00%	Renting	0	1	0
Aviación Comillas, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Renting	8	0	8
Aviación Intercontinental, A.I.E.	Spain	99.97%	0.03%		100.00%	100.00%	Renting	42	(11)	31

229

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Aviación Laredo, S.L.	Spain	99.00%	1.00%		100.00%	100.00%	Air transport	3	0	3
Aviación Oyambre, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Renting	1	(4)	1
Aviación Santillana, S.L.	Spain	99.00%	1.00%		100.00%	100.00%	Renting	5	1	2
Aviación Suances, S.L.	Spain	99.00%	1.00%		100.00%	100.00%	Air transport	8	1	3
Aviación Tritón, A.I.E.	Spain	99.99%	0.01%		100.00%	100.00%	Renting	0	2	0
Aymoré Crédito, Financiamento e Investimento S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Finance company	7,414	312	6,974
Azor Mortgages PLC (j)	Ireland	—	(b)		—	—	Securitizati on	0	0	0
Banca PSA Italia S.p.A.	Italy	0.00%	50.00%		50.00%	50.00%	Banking	393	69	153
Banco Bandepe S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Banking	902	78	885
Banco de Albacete, S.A. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Banking	14	0	9
Banco Hyundai Capital Brasil S.A.	Brazil	0.00%	45.14%		50.00%	50.00%	Banking	65	12	35
Banco PSA Finance Brasil S.A.	Brazil	0.00%	45.14%		50.00%	50.00%	Banking	42	5	21
Banco Santander - Chile	Chile	0.00%	67.13%		67.18%	67.18%	Banking	3,920	889	3,860
Banco Santander (Brasil) S.A.	Brazil	0.04%	90.25%		90.90%	90.50%	Banking	12,320	2,187	10,795

230

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México como Fiduciaria del Fideicomiso 100740	Mexico	0.00%	96.24%		100.00%	100.00%	Finance company	168	18	128
Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México como Fiduciaria del Fideicomiso 2002114	Mexico	0.00%	96.58%		100.00%	100.00%	Finance company	5	1	5
Banco Santander (México), S.A., Institución de Banca Múltiple, Grupo Financiero Santander México como Fiduciaria del Fideicomiso GFSSLPT	Mexico	0.00%	96.64%		100.00%	100.00%	Finance company	22	1	22
Banco Santander Argentina S.A.	Argentina	0.00%	99.82%		99.77%	99.26%	Banking	1,851	390	578
Banco Santander de Negocios Colombia S.A.	Colombia	94.90%	5.10%		100.00%	100.00%	Banking	120	5	127
Banco Santander International	United States	0.00%	100.00%		100.00%	100.00%	Banking	1,226	134	1,360
Banco Santander International SA	Switzerland	0.00%	100.00%		100.00%	100.00%	Banking	1,215	39	837
Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander México	Mexico	21.19%	75.04%		96.24%	96.24%	Banking	6,708	1,270	8,165
Banco Santander Perú S.A.	Peru	99.90%	0.10%		100.00%	100.00%	Banking	236	41	122
Banco Santander S.A.	Uruguay	97.75%	2.25%		100.00%	100.00%	Banking	480	106	191
Banco Santander Totta, S.A.	Portugal	0.00%	99.87%		99.96%	99.96%	Banking	2,887	604	3,815
Bansa Santander S.A.	Chile	0.00%	100.00%		100.00%	100.00%	Real estate	23	4	27
BEN Benefícios e Serviços Instituição de Pagamento S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Payment services	12	(1)	9
Bilkreditt 6 Designated Activity Company (j)	Ireland	—	(b)		—	—	Securitizati on	0	0	0

231

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Bilkreditt 7 Designated Activity Company (j)	Ireland	—	(b)		—	—	Securitizati on	0	0	0
Blecno Investments, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	—	Real estate	172	10	202
BRS Investments S.A.	Argentina	5.10%	94.90%		100.00%	100.00%	Finance company	76	12	75
Cántabra de Inversiones, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	126	0	115
Cántabro Catalana de Inversiones, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	275	(2)	267
Canyon Multifamily Impact Fund IV LLC (c)	United States	0.00%	98.00%		98.00%	98.00%	Real estate	0	0	0
Capital Street Delaware LP	United States	0.00%	100.00%		100.00%	100.00%	Holding company	0	0	0
Capital Street Holdings, LLC	United States	0.00%	100.00%		100.00%	100.00%	Holding company	14	0	14
Capital Street REIT Holdings, LLC	United States	0.00%	100.00%		100.00%	100.00%	Holding company	1,184	15	1,200
Capital Street S.A.	Luxembourg	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Casa de Bolsa Santander, S.A. de C.V., Grupo Financiero Santander México	Mexico	0.00%	99.97%		99.97%	99.97%	Securities company	62	4	66
Cater Allen Holdings Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Cater Allen International Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Cater Allen Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Banking	343	56	251

232

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Cater Allen Lloyd's Holdings Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Holding company	0	0	0
Cater Allen Syndicate Management Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
CCAP Auto Lease Ltd.	United States	0.00%	100.00%		100.00%	100.00%	Leasing	365	42	407
Centro de Capacitación Santander, A.C.	Mexico	0.00%	96.24%		100.00	100.00%	Non-profit institute	1	0	1
Certidesa, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Aircraft rental	(64)	(8)	0
Chrysler Capital Auto Funding II LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	0	37	0
Chrysler Capital Master Auto Receivables Funding 2 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	(258)	0	0
Chrysler Capital Master Auto Receivables Funding LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	116	3	0
Cobranza Amigable, S.A.P.I. de C.V.	Mexico	0.00%	85.00%		100.00%	100.00%	Collection services	4	0	3
Community Development and Affordable Housing Fund LLC (c)	United States	0.00%	96.00%		96.00%	96.00%	Asset manageme nt	(1)	(1)	1
Compagnie Generale de Credit Aux Particuliers - Credipar S.A.	France	0.00%	50.00%		100.00%	100.00%	Banking	460	22	428
Compagnie Pour la Location de Vehicules - CLV	France	0.00%	50.00%		100.00%	100.00%	Banking	22	(1)	26
Compartment German Auto Loans 2021-1	Luxembourg	—	(b)		—	—	Securitizati on	0	0	0
Consulteam Consultores de Gestão, Unipessoal, Lda.	Portugal	100.00%	0.00%		100.00%	100.00%	Real estate	0	0	0

233

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Consumer Totta 1	Portugal	—	(b)		—	—	Securitizati on	0	0	0
Crawfall S.A. (g) (j)	Uruguay	100.00%	0.00%		100.00%	100.00%	Services	0	0	0
Credileads S.A.	Uruguay	0.00%	100.00%		100.00%	—	Advertising	0	0	4
Darep Designated Activity Company	Ireland	100.00%	0.00%		100.00%	100.00%	Reinsuranc es	7	0	7
Decarome, S.A.P.I. de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	Finance company	50	3	52
Deva Capital Advisory Company, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Advisory services	2	1	2
Deva Capital Holding Company, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	227	(17)	235
Deva Capital Investment Company, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	117	6	111
Deva Capital Management Company, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Advisory services	21	(13)	8
Deva Capital Servicer Company, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	99	(10)	90
Digital Procurement Holdings N.V.	Netherlands	0.00%	100.00%		100.00%	100.00%	Holding company	5	0	1
Diglo Servicer Company 2021, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Real estate manageme nt	19	1	19
Diners Club Spain, S.A. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Cards	9	1	10
Dirección Estratega, S.C.	Mexico	0.00%	100.00%		100.00%	100.00%	Services	0	0	0

234

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Drive Auto Receivables Trust 2018-5	United States	—	(b)		—	—	Securitizati on	44	37	0
Drive Auto Receivables Trust 2019-1	United States	—	(b)		—	—	Securitizati on	57	40	0
Drive Auto Receivables Trust 2019-2	United States	—	(b)		—	—	Securitizati on	49	46	0
Drive Auto Receivables Trust 2019-3	United States	—	(b)		—	—	Securitizati on	71	66	0
Drive Auto Receivables Trust 2019-4	United States	—	(b)		—	—	Securitizati on	60	72	0
Drive Auto Receivables Trust 2020-1	United States	—	(b)		—	—	Securitizati on	37	79	0
Drive Auto Receivables Trust 2020-2	United States	—	(b)		—	—	Securitizati on	50	80	0
Drive Auto Receivables Trust 2021-1	United States	—	(b)		—	—	Securitizati on	(122)	185	0
Drive Auto Receivables Trust 2021-2	United States	—	(b)		—	—	Securitizati on	(329)	264	0
Drive Auto Receivables Trust 2021-3	United States	—	(b)		—	—	Securitizati on	(292)	172	0
Drive Auto Receivables Trust 2022-1	United States	—	(b)		—	—	Inactive	0	0	0
Drive Auto Receivables Trust 2022-2	United States	—	(b)		—	—	Inactive	0	0	0
Drive Auto Receivables Trust 2022-3	United States	—	(b)		—	—	Inactive	0	0	0
Drive Auto Receivables Trust 2022-4	United States	—	(b)		—	—	Inactive	0	0	0

235

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Drive S.r.l.	Italy	0.00%	100.00%		100.00%	—	Renting	5	(1)	5
Ductor Real Estate, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Real estate	25	1	20
Ebury Brasil Consultoria Ltda. (q)	Brazil	0.00%	66.54%		100.00%	—	Consulting services	1	0	0
Ebury Brasil Participacões Ltda. (q)	Brazil	0.00%	66.54%		100.00%	—	Holding company	2	0	3
Ebury Facilitadora De Pagamentos Ltda. (q)	Brazil	0.00%	66.54%		100.00%	—	Software	0	0	0
Ebury Finance Belgium NV (q)	Belgium	0.00%	66.54%		100.00%	—	Finance company	0	0	0
Ebury Mass Payments Holdco Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	Holding company	0	0	17
Ebury Mass Payments Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	Payment services	5	3	0
Ebury Partners Australia Pty Ltd. (q)	Australia	0.00%	66.54%		100.00%	—	Finance company	1	0	1
Ebury Partners Belgium NV (q)	Belgium	0.00%	66.54%		100.00%	—	Payment services	60	21	82
Ebury Partners Canada Limited (q)	Canada	0.00%	66.54%		100.00%	—	Finance company	3	0	7
Ebury Partners China Limited (q)	China	0.00%	66.54%		100.00%	—	Inactive	5	0	0
Ebury Partners Finance Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	Finance company	(8)	(2)	0
Ebury Partners Holdings Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	Holding company	0	0	0

236

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Ebury Partners Hong Kong Limited (q)	Hong-Kong	0.00%	66.54%		100.00%	—	Finance company	3	0	3
Ebury Partners Limited (q)	United Kingdom	0.00%	66.54%		66.54%	51.28%	Holding company	250	(6)	531
Ebury Partners Markets Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	Finance company	5	0	0
Ebury Partners SA (Pty) Ltd. (q)	Republic of South Africa	0.00%	66.54%		100.00%	—	Inactive	0	0	0
Ebury Partners Switzerland AG (q)	Switzerland	0.00%	66.54%		100.00%	—	Finance company	5	0	5
Ebury Partners UK Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	Electronic money	56	(31)	148
Ebury Payments PTE Ltd. (q)	Singapur	0.00%	66.54%		100.00%	—	Payment services	0	0	0
Ebury Technology Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	Software	(48)	(5)	0
EDT FTPYME Pastor 3 Fondo de Titulización de Activos	Spain	—	(b)		—	—	Securitizati on	0	0	0
Elcano Renovables, S.L.	Spain	0.00%	70.00%		70.00%	70.00%	Holding company	0	0	0
Electrolyser, S.A. de C.V.	Mexico	0.00%	96.24%		100.00%	100.00%	Services	0	0	0
Elevate Tech Platforms, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	—	Holding company	2	0	2
Entidad de Desarrollo a la Pequeña y Micro Empresa Santander Consumo Perú S.A.	Peru	100.00%	0.00%		100.00%	100.00%	Finance company	33	4	34
Erestone S.A.S.	France	0.00%	90.00%		90.00%	90.00%	Inactive	1	0	1

237

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Esfera Fidelidade S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Services	126	110	213
Evidence Previdência S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Insurance	134	2	121
Eyemobile Tecnologia S.A.	Brazil	0.00%	58.26%		60.00%	60.00%	IT services	2	(1)	0
F1rst Tecnologia e Inovação Ltda.	Brazil	0.00%	90.28%		100.00%	100.00%	IT services	52	8	54
Financeira El Corte Inglés, Portugal, S.F.C., S.A.	Portugal	0.00%	51.00%		100.00%	100.00%	Finance company	8	1	4
Financiera El Corte Inglés, E.F.C., S.A.	Spain	0.00%	51.00%		51.00%	51.00%	Finance company	278	58	140
Finsantusa, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	1,257	(2)	1,020
First National Motor Business Limited (j)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Leasing	0	0	0

238

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
First National Motor Contracts Limited (j)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Leasing	0	0	0
First National Motor plc	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
First National Tricity Finance Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	6	0	6
Fondation Holding Auto ABS Belgium Loans	Belgium	—	(b)		—	—	Securitization	0	0	0
Fondo de Titulización de Activos Santander Consumer Spain Auto 2014-1	Spain	—	(b)		—	—	Securitization	0	0	0
Fondo de Titulización PYMES Santander 15	Spain	—	(b)		—	—	Securitization	0	0	0
Fondo de Titulización Santander Consumer Spain Auto 2016-1	Spain	—	(b)		—	—	Securitization	0	0	0
Fondo de Titulización Santander Consumer Spain Auto 2016-2	Spain	—	(b)		—	—	Securitization	0	0	0
Fondo de Titulización Santander Financiación 1	Spain	—	(b)		—	—	Securitization	0	0	0
Fondo de Titulización, RMBS Santander 7	Spain	—	(b)		—	—	Securitization	0	0	0
Fondos Santander, S.A. Administradora de Fondos de Inversión (en liquidación) (j)	Uruguay	0.00%	100.00%		100.00%	100.00%	Fund management company	0	0	0
Foreign Exchange Solutions (UK) Limited (q)	United Kingdom	0.00%	66.54%		100.00%	—	IT services	0	0	0
Foreign Exchange Solutions S.L. (q)	Spain	0.00%	66.54%		100.00%	—	IT services	0	(1)	0
Fortensky Trading, Ltd.	Ireland	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Fosse (Master Issuer) Holdings Limited	United Kingdom	—	(b)		—	—	Securitization	0	0	0
Fosse Funding (No.1) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	1	81	0
Fosse Master Issuer PLC	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	(1)	0	0

239

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Fosse Trustee (UK) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	0	0	0
Freedom Depository Holdings, LLC	United States	0.00%	100.00%		100.00%	—	Holding company	0	0	0
Freedom Depository, LLC	United States	0.00%	100.00%		100.00%	—	Securitization	0	0	0
FTPYME Banesto 2, Fondo de Titulización de Activos	Spain	—	(b)		—	—	Securitization	0	0	0
Fundo de Investimento em Direitos Creditórios Atacado - Não Padronizado	Brazil	0.00%	90.28%		100.00%	—	Investment fund	83	11	85
Fundo de Investimentos em Direitos Creditórios Multisegmentos NPL Ipanema VI – Não padronizado	Brazil	0.00%	90.28%		100.00%	—	Investment fund	350	38	350
Gamma, Sociedade Financeira de Titularização de Créditos, S.A.	Portugal	0.00%	99.87%		100.00%	100.00%	Securitization	7	0	8
GC FTPYME Pastor 4 Fondo de Titulización de Activos	Spain	—	(b)		—	—	Securitization	0	0	0
Gesban México Servicios Administrativos Globales, S.A. de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	Services	1	0	0
Gesban Santander Servicios Profesionales Contables Limitada	Chile	0.00%	100.00%		100.00%	100.00%	Accounting services	1	0	0
Gesban Servicios Administrativos Globales, S.L.	Spain	99.99%	0.01%		100.00%	100.00%	Services	5	1	1
Gesban UK Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Payments and collection services	1	0	0
Gestión de Inversiones JILT, S.A. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Services	15	0	15
Gestora de Procesos S.A. en liquidación (j)	Peru	0.00%	100.00%		100.00%	100.00%	Holding company	(1)	0	0
Getnet Adquirência e Serviços para Meios de Pagamento S.A. - Instituição de Pagamento	Brazil	0.04%	97.07%		97.10%	89.91%	Payment services	444	102	356
Getnet Argentina S.A.U.	Argentina	0.00%	100.00%		100.00%	100.00%	Payment methods	26	(10)	16
Getnet Europe, Entidad de Pago, S.L. Unipersonal	Spain	—	100.00%		100.00%	100.00%	Payment services	215	2	207

240

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Getnet Fundo de Investimento em Direitos Creditórios	Brazil	0.00%	90.28%		100.00%	—	Investment fund	1	0	1
Getnet Merchant Solutions UK Ltd	United Kingdom	0.00%	100.00%		100.00%	—	Financial services	0	0	0
Getnet Sociedade de Credito Direto S.A.	Brazil	0.00%	97.10%		100.00%	100.00%	Finance company	14	7	21
Gira, Gestão Integrada de Recebíveis do Agronegócio S.A. (e)	Brazil	0.00%	72.23%		80.00%	80.00%	Consulting services	1	(3)	0
GNXT Serviços de Atendimento Ltda.	Brazil	0.00%	97.10%		100.00%	—	Telemarketing	4	(1)	3
Golden Bar (Securitisation) S.r.l.	Italy	—	(b)		—	—	Securitization	0	0	0
Golden Bar Stand Alone 2016-1	Italy	—	(b)		—	—	Securitization	0	0	0
Golden Bar Stand Alone 2018-1	Italy	—	(b)		—	—	Securitization	0	0	0
Golden Bar Stand Alone 2019-1	Italy	—	(b)		—	—	Securitization	0	0	0
Golden Bar Stand Alone 2020-1	Italy	—	(b)		—	—	Securitization	0	0	0
Golden Bar Stand Alone 2020-2	Italy	—	(b)		—	—	Securitization	0	0	0
Golden Bar Stand Alone 2021-1	Italy	—	(b)		—	—	Securitization	0	0	0
Golden Bar Stand Alone 2022-1	Italy	—	(b)		—	—	Securitization	0	0	0
Gravity Cloud Technology, S.L.	Spain	100.00%	0.00%		100.00%	—	IT services	33	1	31
Grupo Empresarial Santander, S.L.	Spain	99.62%	0.38%		100.00%	100.00%	Holding company	3,985	571	2,861
Grupo Financiero Santander México, S.A. de C.V.	Mexico	100.00%	0.00%		100.00%	100.00%	Holding company	5,093	954	5,164
Guaranty Car, S.A. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Automotive	3	0	2

241

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Hipototta No. 13	Portugal	—	(b)		—	100.00%	Securitization	0	0	0
Hipototta No. 4 FTC	Portugal	—	(b)		—	100.00%	Securitization	(53)	(1)	0
Hipototta No. 4 plc	Ireland	—	(b)		—	100.00%	Securitization	(4)	2	0
Hipototta No. 5 FTC	Portugal	—	(b)		—	—	Securitization	(46)	0	0
Hipototta No. 5 plc	Ireland	—	(b)		—	—	Securitization	(13)	2	0
Holbah Santander, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	563	157	820
Holmes Funding Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	8	58	0
Holmes Holdings Limited	United Kingdom	—	(b)		—	—	Securitization	0	0	0
Holmes Master Issuer plc	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	(11)	(1)	0
Holmes Trustees Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	0	0	0
Hyundai Capital Bank Europe GmbH	Germany	0.00%	51.00%		51.00%	51.00%	Banking	701	17	391
Ibérica de Compras Corporativas, S.L.	Spain	97.17%	2.83%		100.00%	100.00%	E-commerce	7	1	6
Independence Community Bank Corp.	United States	0.00%	100.00%		100.00%	100.00%	Holding company	3,596	53	3,649
Insurance Funding Solutions Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Interfinance Holanda B.V.	Netherla nds	100.00%	0.00%		100.00%	100.00%	Holding company	0	0	0
Inversiones Capital Global, S.A. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	98	(1)	109
Inversiones Marítimas del Mediterráneo, S.A.	Spain	0.00%	100.00%		100.00%	100.00%	Inactive	4	(1)	0

242

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Isar Valley S.A.	Luxembo urg	—	(b)		—	—	Securitization	8	0	0
Isla de los Buques, S.A.	Spain	99.98%	0.02%		100.00%	100.00%	Finance company	1	0	1
Klare Corredora de Seguros S.A.	Chile	0.00%	33.63%		50.10%	50.10%	Insurance brokerage	4	(3)	0
Landcompany 2020, S.L.	Spain	17.66%	82.34%		100.00%	100.00%	Real estate management	1,701	(22)	1,689
Langton Securities (2008-1) plc (j)	United Kingdom	—	(b)		—	100.00%	Securitization	0	0	0
Laparanza, S.A.	Spain	61.59%	0.00%		61.59%	61.59%	Agricultural holding	28	0	16
Lerma Investments 2018, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	—	Real estate	10	2	13
Liderança Serviços Especializados em Cobranças Ltda.	Brazil	0.00%	90.28%		100.00%	100.00%	Collection services	46	1	42
Liquetine, S.L. Unipersonal	Spain	0.00%	70.00%		100.00%	100.00%	Renewable energies	1	0	2
Liquidity Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Factoring	(1)	0	0
Luri 6, S.A. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Real estate investment	1,358	13	1,390
Lynx Financial Crime Tech, S.A. Unipersonal	Spain	0.00%	100.00%		100.00%	—	IT services	2	0	2
MAC No. 1 Limited	United Kingdom	—	(b)		—	—	Mortgage credit company	0	0	0
Master Red Europa, S.L.	Spain	96.34%	0.00%		96.34%	96.34%	Cards	1	0	1
Mata Alta, S.L. Unipersonal	Spain	0.00%	61.59%		100.00%	100.00%	Agricultural holding	0	0	0
Mercadotecnia, Ideas y Tecnología, S.A. de C.V.	Mexico	0.00%	70.00%		70.00%	70.00%	Payment methods	1	7	14
Merciver, S.L.	Spain	99.90%	0.10%		100.00%	100.00%	Financial advisory	1	0	1

243

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Mercury Trade Finance Solutions S.A.S.	Colombia	0.00%	50.10%		100.00%	100.00%	IT services	0	0	0
Mercury Trade Finance Solutions SpA	Chile	0.00%	50.10%		100.00%	100.00%	IT services	0	0	0
Mercury Trade Finance Solutions, S.A. de C.V.	Mexico	0.00%	50.10%		100.00%	100.00%	IT services	0	0	0
Mercury Trade Finance Solutions, S.L.	Spain	0.00%	50.10%		50.10%	50.10%	IT services	10	1	22
Merlion Aviation One Designated Activity Company	Ireland	—	(b)		—	—	Renting	32	(3)	0
Mob Soluções em Tecnologia Ltda. - EPP	Brazil	0.00%	56.88%		100.00%	—	Advertising	0	0	0
Mobills Corretora de Seguros Ltda.	Brazil	0.00%	56.88%		100.00%	—	Insurance brokerage	1	0	0
Mobills Labs Soluções em Tecnologia Ltda. - EPP	Brazil	0.00%	56.88%		100.00%	—	IT services	2	1	2
Monetus Investimentos S.A.	Brazil	0.00%	56.88%		100.00%	—	Securities Investment	2	(1)	1
Motor 2016-1 Holdings Limited	United Kingdom	—	(b)		—	—	Securitization	0	0	0
Motor 2016-1 PLC	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	0	0	0
Motor 2017-1 Holdings Limited	United Kingdom	—	(b)		—	—	Securitization	0	0	0
Motor 2017-1 PLC (j)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Securitization	0	0	0
Motor Securities 2018-1 Designated Activity Company	Ireland	—	(b)		—	—	Securitization	(2)	(1)	0
Mouro Capital I LP	United Kingdom	0.00%	100.00%		100.00%	100.00%	Investment fund	822	(84)	305
Multiplica SpA	Chile	0.00%	100.00%		100.00%	100.00%	Payment services	5	(1)	4
Munduspar Participações S.A.	Brazil	80.00%	0.00%		80.00%	—	Holding company	27	(1)	74

244

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Navegante Américo Vespucio SpA	Chile	0.00%	100.00%		100.00%	—	Real estate	73	(1)	105
Naviera Mirambel, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Naviera Trans Gas, A.I.E.	Spain	99.99%	0.01%		100.00%	100.00%	Renting	34	(2)	38
Naviera Trans Iron, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Leasing	26	0	21
Naviera Trans Ore, A.I.E.	Spain	99.99%	0.01%		100.00%	100.00%	Renting	28	9	17
Naviera Transcantábrica, S.L.	Spain	100.00%	0.00%		100.00%	100.00%	Leasing	5	0	4
Naviera Transchem, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Leasing	1	0	1
NeoAuto S.A.C.	Peru	0.00%	55.00%		55.00%	55.00%	Vehicles purchased by internet	1	0	1
Newcomar, S.L., en liquidación (j)	Spain	40.00%	40.00%		80.00%	80.00%	Real estate	1	0	0
Novimovest – Fundo de Investimento Imobiliário	Portugal	0.00%	78.64%		78.74%	78.74%	Investment fund	217	3	174
NW Services CO.	United States	0.00%	100.00%		100.00%	100.00%	E-commerce	7	2	2
One Mobility Management GmbH	Germany	0.00%	46.95%		100.00%	—	Services	0	0	0
Open Bank Argentina S.A.	Argentina	0.00%	99.91%		100.00%	100.00%	Banking	46	(23)	24
Open Bank, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Banking	550	15	566
Open Digital Market, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Commerce	0	0	0
Open Digital Services Argentina S.A.U. en liquidación (j)	Argentina	0.00%	100.00%		100.00%	100.00%	IT services	0	0	0
Open Digital Services, S.L.	Spain	99.97%	0.03%		100.00%	100.00%	Services	116	(87)	0

245

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Open Mx Servicios Administrativos, S.A. de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	Financial services	0	(1)	0
Openbank Santander México, S.A. de C.V., S.O.F.O.M., E.R., Grupo Financiero Santander México	Mexico	0.00%	96.24%		100.00%	—	Inactive	0	0	0
Operadora de Carteras Gamma, S.A.P.I. de C.V.	Mexico	100.00%	0.00%		100.00%	100.00%	Holding company	10	1	8
Optimal Investment Services SA	Switzerla nd	100.00%	0.00%		100.00%	100.00%	Fund management company	44	(1)	29
Optimal Multiadvisors Ireland Plc / Optimal Strategic US Equity Ireland Euro Fund (m) (p)	Ireland	0.00%	0.00%		0.00%	—	Fund management company	0	0	0
Optimal Multiadvisors Ireland Plc / Optimal Strategic US Equity Ireland US Dollar Fund (m) (p)	Ireland	0.00%	0.00%		0.00%	—	Fund management company	0	0	0
Paga Después, S.A. de C.V.	Mexico	0.00%	100.00%		100.00%	—	Financial services	4	0	4
PagoFX Europe S.A. (c)	Belgium	0.00%	100.00%		100.00%	100.00%	Inactive	2	(1)	1
PagoFX UK Ltd	United Kingdom	0.00%	100.00%		100.00%	100.00%	Payment services	6	(2)	4
PagoNxt Ltd	United Kingdom	100.00%	0.00%		100.00%	100.00%	Holding company	6	(3)	6
PagoNxt Merchant SoluçõesTecnológicas Brasil Ltda.	Brazil	0.00%	100.00%		100.00%	100.00%	IT services	85	(30)	54
PagoNxt Merchant Solutions FZ- LLC	United Arab Emirates	0.00%	100.00%		100.00%	100.00%	Financial services	2	1	2
PagoNxt Merchant Solutions India Private Limited	India	0.00%	100.00%		100.00%	100.00%	Financial services	1	0	1
PagoNxt Merchant Solutions, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	1,098	(93)	1,175
PagoNxt One Trade UK Ltd	United Kingdom	0.00%	100.00%		100.00%	100.00%	Financial services	0	0	0
PagoNxt OneTrade España, E.D.E., S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Financial services	2	(1)	1
PagoNxt Payments Platform México, S.A. de C.V.	Mexico	0.00%	100.00%		100.00%	—	IT services	0	0	0

246

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
PagoNxt Solutions, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Payment services	36	(16)	21
Pagonxt Trade Brasil Ltda.	Brazil	0.00%	100.00%		100.00%	—	Financial services	0	0	0
PagoNxt Trade Chile SpA	Chile	0.00%	100.00%		100.00%	—	Services	0	0	0
PagoNxt Trade Services, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Services	231	(87)	144
PagoNxt Trade, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	IT services	277	(101)	180
PagoNxt, S.L.	Spain	100.00%	0.00%		100.00%	100.00	Holding company	2,289	(229)	2,616
Parasant SA	Switzerla nd	100.00%	0.00%		100.00%	100.00%	Holding company	1,212	(3)	969
Paytec Logística e Armazém Ltda.	Brazil	0.00%	97.10%		100.00%	100.00%	Logistic services	0	0	0
Paytec Tecnologia em Pagamentos Ltda.	Brazil	0.00%	97.10%		100.00%	100.00%	Commerce	3	2	5
PBD Germany Auto 2018 UG (Haftungsbeschränkt) (j)	Germany	—	(b)		—	—	Securitization	0	0	0
PBD Germany Auto Lease Master 2019	Luxembo urg	—	(b)		—	—	Securitization	0	0	0
PBD Germany Auto Lease Master S.A., Compartment 2021-1	Luxembo urg	—	(b)		—	—	Securitization	0	0	0
PBD Germany Auto Loan 2021 UG (Haftungsbeschränkt)	Germany	—	(b)		—	—	Securitization	0	0	0
PBE Companies, LLC	United States	0.00%	100.00%		100.00%	100.00%	Real estate	117	0	117
Pereda Gestión, S.A.	Spain	99.99%	0.01%		100.00%	100.00%	Securities brokerage	52	11	4
Phoenix C1 Aviation Designated Activity Company	Ireland	—	(b)		—	—	Renting	18	1	0
Phoenix S.A.	Uruguay	0.00%	100.00%		100.00%	100.00%	Payment methods	0	0	4

247

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Pierpont Advisory Management LLC	United States	0.00%	100.00%		100.00%	—	Administrative services	0	0	0
Pierpont Capital Holdings LLC	United States	0.00%	100.00%		100.00%	—	Holding company	301	(57)	244
Pierpont Financial Services LLC	United States	0.00%	100.00%		100.00%	—	Financial services	(3)	0	0
Pingham International, S.A. (j)	Uruguay	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Pony S.A.	Luxembo urg	—	(b)		—	—	Securitization	0	0	0
Portal Universia Argentina S.A.	Argentina	0.00%	75.75%		75.75%	75.75%	Internet	0	0	0
Portal Universia Portugal, Prestação de Serviços de Informática, S.A.	Portugal	0.00%	100.00%		100.00%	100.00%	Internet	0	0	0
Prime 16 – Fundo de Investimentos Imobiliário	Brazil	0.00%	90.28%		100.00%	100.00%	Investment fund	22	(2)	16
PSA Bank Deutschland GmbH	Germany	0.00%	50.00%		50.00%	50.00%	Banking	497	47	229
PSA Banque France	France	0.00%	50.00%		50.00%	50.00%	Banking	1,142	62	881
PSA Consumer Finance Polska Sp. z o.o.	Poland	0.00%	40.22%		100.00%	100.00%	Finance company	3	1	0
PSA Finance Belux S.A.	Belgium	0.00%	50.00%		100.00%	100.00%	Finance company	95	14	47
PSA Finance Polska Sp. z o.o.	Poland	0.00%	40.22%		50.00%	50.00%	Finance company	38	5	10
PSA Finance UK Limited	United Kingdom	0.00%	50.00%		100.00%	100.00%	Finance company	323	28	159
PSA Financial Services Nederland B.V.	Netherla nds	0.00%	50.00%		100.00%	100.00%	Finance company	58	18	26
PSA Financial Services Spain, E.F.C., S.A.	Spain	0.00%	50.00%		50.00%	50.00%	Finance company	684	60	363
PSA Renting Italia S.p.A.	Italy	0.00%	50.00%		100.00%	100.00%	Renting	13	12	3

248

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Punta Lima Wind Farm, LLC	United States	0.00%	100.00%		100.00%	100.00%	Renewable energies	45	(6)	39
Punta Lima, LLC	United States	0.00%	100.00%		100.00%	100.00%	Leasing	45	(6)	39
Retail Company 2021, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Real estate	259	(4)	255
Retop S.A. (f)	Uruguay	100.00%	0.00%		100.00%	100.00%	Finance company	19	7	61
Return Capital S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Collection services	1,131	12	1,031
Riemersma Leasing B.V.	Netherla nds	0.00%	100.00%		100.00%	—	Renting	7	2	21
Riobank International (Uruguay) SAIFE (p)	Uruguay	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Roc Aviation One Designated Activity Company	Ireland	—	(b)		—	—	Renting	(4)	(1)	0
Roc Shipping One Designated Activity Company	Ireland	—	(b)		—	—	Renting	(4)	0	0
Rojo Entretenimento S.A.	Brazil	0.00%	85.41%		94.60%	94.60%	Real estate	23	2	21
SAFO Alternative Lending, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	—	Finance company	0	0	0
SALCO, Servicios de Seguridad Santander, S.A.	Spain	99.99%	0.01%		100.00%	100.00%	Security	2	0	1
SAM Asset Management, S.A. de C.V., Sociedad Operadora de Fondos de Inversión	Mexico	0.00%	100.00%		100.00%	100.00%	Fund management company	35	26	188
SAM Investment Holdings, S.L.	Spain	92.37%	7.63%		100.00%	100.00%	Holding Company	1,373	92	1,597
SANB Promotora de Vendas e Cobrança S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Finance company	3	(3)	0
Sancap Investimentos e Participações S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Holding company	125	112	192
Santander (CF Trustee Property Nominee) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0

249

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander (CF Trustee) Limited (d)	United Kingdom	—	(b)		—	—	Inactive	0	0	0
Santander (UK) Group Pension Schemes Trustees Limited (d)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Santander Ahorro Inmobiliario 1, S.A.	Spain	98.53%	0.00%		98.53%	98.53%	Real estate rental	1	0	1
Santander Asesorías Financieras Limitada	Chile	0.00%	67.44%		100.00%	100.00%	Financial advisory	58	5	43
Santander Asset Finance (December) Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Leasing	74	4	0
Santander Asset Finance Opportunities	Luxembo urg	100.00%	0.00%		100.00%	—	Investment fund	42	0	42
Santander Asset Finance plc	United Kingdom	0.00%	100.00%		100.00%	100.00%	Leasing	282	18	164
Santander Asset Management - S.G.O.I.C., S.A.	Portugal	0.00%	100.00%		100.00%	100.00%	Fund management company	9	4	12
Santander Asset Management Chile S.A.	Chile	0.00%	100.00%		100.00%	100.00%	Securities Investment	0	0	0
Santander Asset Management Luxembourg, S.A.	Luxembo urg	0.00%	100.00%		100.00%	100.00%	Fund management company	4	4	0
Santander Asset Management S.A. Administradora General de Fondos	Chile	0.00%	100.00%		100.00%	100.00%	Fund management company	3	12	132
Santander Asset Management UK Holdings Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Holding company	221	14	186
Santander Asset Management UK Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Management of funds and portfolios	40	8	157
Santander Asset Management, S.A., S.G.I.I.C.	Spain	0.00%	100.00%		100.00%	100.00%	Fund management company	260	52	393
Santander Auto Lease Titling Ltd.	United States	0.00%	100.00%		100.00%	—	Leasing	0	0	0
Santander Back-Offices Globales Mayoristas, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Services	2	0	1
Santander Banca de Inversión Colombia, S.A.S.	Colombia	100.00%	0.00%		100.00%	100.00%	Advisory services	1	0	2

250

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Bank & Trust Ltd.	Bahamas	0.00%	100.00%		100.00%	100.00%	Banking	374	3	332
Santander Bank Polska S.A.	Poland	67.41%	0.00%		67.41%	67.41%	Banking	5,091	523	4,361
Santander Bank, National Association	United States	0.00%	100.00%		100.00%	100.00%	Banking	10,201	276	10,475
Santander Brasil Administradora de Consórcio Ltda.	Brazil	0.00%	90.28%		100.00%	100.00%	Services	179	77	232
Santander Brasil Gestão de Recursos Ltda.	Brazil	0.08%	99.92%		100.00%	100.00%	Securities Investment	445	39	520
Santander Capital Structuring, S.A. de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	Investment Company	13	(1)	0
Santander Capitalização S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Insurance	(17)	92	67
Santander Cards Ireland Limited	Ireland	0.00%	100.00%		100.00%	100.00%	Cards	(8)	0	0
Santander Cards Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Cards	95	0	95
Santander Cards UK Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	154	2	109
Santander Chile Holding S.A.	Chile	22.11%	77.75%		99.86%	99.84%	Holding company	1,579	271	1,522
Santander Consulting (Beijing) Co., Ltd.	China	0.00%	100.00%		100.00%	100.00%	Advisory services	9	1	4
Santander Consumer (UK) plc	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	947	146	294
Santander Consumer Auto Receivables Funding 2013-B2 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	(88)	84	0
Santander Consumer Auto Receivables Funding 2018-L1 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	273	22	0
Santander Consumer Auto Receivables Funding 2018-L3 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	119	20	0
Santander Consumer Auto Receivables Funding 2018-L5 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	161	31	0

251

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Consumer Auto Receivables Funding 2019-B1 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	53	85	0
Santander Consumer Auto Receivables Funding 2020-B1 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	(18)	33	0
Santander Consumer Auto Receivables Funding 2020-L1 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	117	10	0
Santander Consumer Auto Receivables Funding 2020-L2 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	18	9	0
Santander Consumer Auto Receivables Funding 2022-B1 LLC	United States	0.00%	100.00%		100.00%	—	Finance company	0	(134)	0
Santander Consumer Auto Receivables Funding 2022-B2 LLC	United States	0.00%	100.00%		100.00%	—	Finance company	0	(162)	0
Santander Consumer Auto Receivables Funding 2022-B3 LLC	United States	0.00%	100.00%		100.00%	—	Finance company	0	(267)	0
Santander Consumer Auto Receivables Funding 2022-B4 LLC	United States	0.00%	100.00%		100.00%	—	Finance company	0	(183)	0
Santander Consumer Auto Receivables Funding 2022-B5 LLC	United States	0.00%	100.00%		100.00%	—	Inactive	0	0	0
Santander Consumer Auto Receivables Grantor Trust 2021- D	United States	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Santander Consumer Auto Receivables Trust 2021-D	United States	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Santander Consumer Bank AG	Germany	0.00%	100.00%		100.00%	100.00%	Banking	3,313	469	5,070
Santander Consumer Bank AS	Norway	0.00%	100.00%		100.00%	100.00%	Banking	2,403	211	2,251
Santander Consumer Bank GmbH	Austria	0.00%	100.00%		100.00%	100.00%	Banking	424	58	363
Santander Consumer Bank S.A.	Poland	0.00%	80.44%		100.00%	100.00%	Banking	744	77	478
Santander Consumer Bank S.p.A.	Italy	0.00%	100.00%		100.00%	100.00%	Banking	833	92	603
Santander Consumer Credit Services Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	(37)	0	0

252

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Consumer Finance Global Services, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	IT	6	3	5
Santander Consumer Finance Inc.	Canada	100.00%	0.00%		100.00%	96.42%	Holding company	91	0	140
Santander Consumer Finance Limitada	Chile	49.00%	34.24%		100.00%	100.00%	Finance company	88	23	52
Santander Consumer Finance Oy	Finland	0.00%	100.00%		100.00%	100.00%	Finance company	368	49	163
Santander Consumer Finance Schweiz AG	Switzerla nd	0.00%	100.00%		100.00%	100.00%	Leasing	56	10	60
Santander Consumer Finance, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Banking	9,328	852	10,025
Santander Consumer Financial Solutions Sp. z o.o.	Poland	0.00%	80.44%		100.00%	100.00%	Leasing	2	(1)	2
Santander Consumer Finanse Sp. z o.o. w likwidacji (j)	Poland	0.00%	80.44%		100.00%	100.00%	Services	15	0	12
Santander Consumer Holding Austria GmbH	Austria	0.00%	100.00%		100.00%	100.00%	Holding company	364	0	518
Santander Consumer Holding GmbH	Germany	0.00%	100.00%		100.00%	100.00%	Holding company	5,564	317	6,077
Santander Consumer Inc.	Canada	0.00%	100.00%		100.00%	100.00%	Finance company	82	13	48
Santander Consumer Leasing GmbH	Germany	0.00%	100.00%		100.00%	100.00%	Leasing	70	93	151
Santander Consumer Mobility Services, S.A.	Spain	0.00%	100.00%		100.00%	100.00%	Renting	12	(4)	12
Santander Consumer Multirent Sp. z o.o.	Poland	0.00%	80.44%		100.00%	100.00%	Leasing	58	5	26
Santander Consumer Operations Services GmbH	Germany	0.00%	100.00%		100.00%	100.00%	Services	12	1	18
Santander Consumer Receivables 10 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	1,113	(1)	0
Santander Consumer Receivables 11 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	653	(95)	0

253

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Consumer Receivables 15 LLC	United States	0.00%	100.00%		100.00%	—	Finance company	0	(71)	0
Santander Consumer Receivables 16 LLC	United States	0.00%	100.00%		100.00%	—	Finance company	0	(48)	0
Santander Consumer Receivables 17 LLC	United States	0.00%	100.00%		100.00%	—	Inactive	0	0	0
Santander Consumer Receivables 3 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	397	5	0
Santander Consumer Receivables 7 LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	713	(211)	0
Santander Consumer Receivables Funding LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	4	2	0
Santander Consumer Renting S.r.l.	Italy	0.00%	100.00%		100.00%	—	Renting	4	(1)	4
Santander Consumer Renting, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Renting	38	3	38
Santander Consumer S.A.	Argentina	0.00%	99.82%		100.00%	100.00%	Finance company	18	(3)	15
Santander Consumer S.A. Compañía de Financiamiento	Colombia	79.02%	20.98%		100.00%	100.00%	Finance company	22	(1)	23
Santander Consumer Services GmbH	Austria	0.00%	100.00%		100.00%	100.00%	Services	0	0	0
Santander Consumer Services, S.A.	Portugal	0.00%	100.00%		100.00%	100.00%	Finance company	13	1	6
Santander Consumer Spain Auto 2019-1, Fondo de Titulización	Spain	—	(b)		—	—	Securitization	0	0	0
Santander Consumer Spain Auto 2020-1, Fondo de Titulización	Spain	—	(b)		—	—	Securitization	0	0	0
Santander Consumer Spain Auto 2021-1, Fondo de Titulización	Spain	—	(b)		—	—	Securitization	0	0	0
Santander Consumer Spain Auto 2022-1, Fondo de Titulización	Spain	—	(b)		—	—	Securitization	0	0	0
Santander Consumer Technology Services GmbH	Germany	0.00%	100.00%		100.00%	100.00%	IT services	24	3	22

254

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Consumer USA Holdings Inc.	United States	0.00%	100.00%		100.00%	80.22%	Holding company	3,816	1,203	6,067
Santander Consumer USA Inc.	United States	0.00%	100.00%		100.00%	100.00%	Finance company	4,300	1,007	5,307
Santander Consumo 4, F.T.	Spain	—	(b)		—	—	Securitization	0	0	0
Santander Consumo, S.A. de C.V., S.O.F.O.M., E.R., Grupo Financiero Santander México	Mexico	0.00%	96.24%		100.00%	100.00%	Cards	1,490	312	1,734
Santander Corredora de Seguros Limitada	Chile	0.00%	67.21%		100.00%	100.00%	Insurance brokerage	78	9	59
Santander Corredores de Bolsa Limitada	Chile	0.00%	83.24%		100.00%	100.00%	Securities company	52	4	46
Santander Corretora de Câmbio e Valores Mobiliários S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Securities company	142	22	148
Santander Corretora de Seguros, Investimentos e Serviços S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Insurance brokerage	816	250	960
Santander Customer Voice, S.A.	Spain	99.50%	0.50%		100.00%	100.00%	Services	2	0	2
Santander de Titulización, S.G.F.T., S.A.	Spain	81.00%	19.00%		100.00%	100.00%	Fund management company	5	3	2
Santander Distribuidora de Títulos e Valores Mobiliários S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Securities company	100	(17)	75
Santander Drive Auto Receivables Grantor Trust 2022- A	United States	0.00%	100.00%		100.00%	—	Inactive	0	0	0
Santander Drive Auto Receivables LLC	United States	0.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Santander Drive Auto Receivables Trust 2019-1	United States	—	(b)		—	—	Securitization	46	24	0
Santander Drive Auto Receivables Trust 2019-2	United States	—	(b)		—	—	Securitization	60	35	0
Santander Drive Auto Receivables Trust 2019-3	United States	—	(b)		—	—	Securitization	50	39	0
Santander Drive Auto Receivables Trust 2020-1	United States	—	(b)		—	—	Securitization	24	58	0

255

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Drive Auto Receivables Trust 2020-2	United States	—	(b)		—	—	Securitization	47	76	0
Santander Drive Auto Receivables Trust 2020-3	United States	—	(b)		—	—	Securitization	32	114	0
Santander Drive Auto Receivables Trust 2020-4	United States	—	(b)		—	—	Securitization	(9)	101	0
Santander Drive Auto Receivables Trust 2021-1	United States	—	(b)		—	—	Securitization	(46)	138	0
Santander Drive Auto Receivables Trust 2021-2	United States	—	(b)		—	—	Securitization	(171)	196	0
Santander Drive Auto Receivables Trust 2021-3	United States	—	(b)		—	—	Securitization	(279)	259	0
Santander Drive Auto Receivables Trust 2021-4	United States	—	(b)		—	—	Securitization	(288)	199	0
Santander Drive Auto Receivables Trust 2022-1	United States	—	(b)		—	—	Securitization	0	(139)	0
Santander Drive Auto Receivables Trust 2022-2	United States	—	(b)		—	—	Securitization	0	(193)	0
Santander Drive Auto Receivables Trust 2022-3	United States	—	(b)		—	—	Securitization	0	(195)	0
Santander Drive Auto Receivables Trust 2022-4	United States	—	(b)		—	—	Securitization	0	(267)	0
Santander Drive Auto Receivables Trust 2022-5	United States	—	(b)		—	—	Securitization	0	(314)	0
Santander Drive Auto Receivables Trust 2022-6	United States	—	(b)		—	—	Securitization	0	(323)	0
Santander Drive Auto Receivables Trust 2022-7	United States	—	(b)		—	—	Securitization	0	(156)	0
Santander Drive Auto Receivables Trust 2022-A	United States	—	(b)		—	—	Inactive	0	0	0
Santander Drive Auto Receivables Trust 2023-1	United States	—	(b)		—	—	Inactive	0	0	0
Santander Equity Investments Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	28	6	33

256

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander España Servicios Legales y de Cumplimiento, S.L.	Spain	99.97%	0.03%		100.00%	100.00%	Services	9	1	8
Santander Estates Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Real estate	(6)	(1)	0
Santander European Hospitality Opportunities	Luxembo urg	100.00%	0.00%		100.00%	100.00%	Investment fund	23	(4)	20
Santander F24 S.A.	Poland	0.00%	67.41%		100.00%	100.00%	Finance company	2	0	2
Santander Facility Management España, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Real estate	415	(1)	392
Santander Factoring S.A.	Chile	0.00%	99.86%		100.00%	100.00%	Factoring	8	1	15
Santander Factoring Sp. z o.o.	Poland	0.00%	67.41%		100.00%	100.00%	Financial services	37	11	1
Santander Factoring y Confirming, S.A. Unipersonal, E.F.C.	Spain	100.00%	0.00%		100.00%	100.00%	Factoring	208	73	126
Santander Finance 2012-1 LLC	United States	0.00%	100.00%		100.00%	100.00%	Financial services	3	0	3
Santander Financial Exchanges Limited	United Kingdom	100.00%	0.00%		100.00%	100.00%	Inactive	0	0	0
Santander Financial Services plc	United Kingdom	0.00%	100.00%		100.00%	100.00%	Banking	351	45	436
Santander Financiamientos S.A.	Peru	100.00%	0.00%		100.00%	100.00%	Finance company	18	(4)	15
Santander Financing S.A.S.	Colombia	100.00%	0.00%		100.00%	100.00%	Financial advisory	0	(1)	0
Santander Finanse Sp. z o.o.	Poland	0.00%	67.41%		100.00%	100.00%	Financial services	66	7	19
Santander Fintech Holdings, S.L.	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	327	(13)	357
Santander Fintech Limited	United Kingdom	100.00%	0.00%		100.00%	100.00%	Finance company	(21)	22	0
Santander Fundo de Investimento Santillana Multimercado Crédito Privado Investimento No Exterior (e)	Brazil	—	(b)		—	—	Investment fund	455	23	478

257

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Fundo de Investimento SBAC Referenciado di Crédito Privado (h)	Brazil	0.00%	90.28%		100.00%	100.00%	Investment fund	1,638	187	1,586
Santander Gestión de Recaudación y Cobranzas Ltda.	Chile	0.00%	99.86%		100.00%	100.00%	Financial services	6	2	8
Santander Global Cards & Digital Solutions Brasil S.A.	Brazil	0.00%	100.00%		100.00%	100.00%	IT consulting	36	(1)	40
Santander Global Cards & Digital Solutions, S.L.	Spain	100.00%	0.00%		100.00%	100.00%	IT services	25	(4)	17
Santander Global Consumer Finance Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	7	0	7
Santander Global Facilities, S.A. de C.V.	Mexico	100.00%	0.00%		100.00%	100.00%	Services	143	5	152
Santander Global Services S.A. (j)	Uruguay	0.00%	100.00%		100.00%	100.00%	Services	0	0	0
Santander Global Services, S.L.	Spain	100.00%	0.00%		100.00%	100.00%	Real estate	393	(1)	394
Santander Global Sport, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Sports activity	19	(2)	18
Santander Global Technology and Operations Brasil Ltda.	Brazil	0.00%	100.00%		100.00%	100.00%	IT services	4	0	1
Santander Global Technology and Operations Chile Limitada	Chile	0.00%	100.00%		100.00%	100.00%	IT services	21	2	20
Santander Global Technology and Operations, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	IT services	454	36	438
Santander Green Investment, S.L.	Spain	99.97%	0.03%		100.00%	100.00%	Holding company	32	0	32
Santander Guarantee Company	United Kingdom	0.00%	100.00%		100.00%	100.00%	Leasing	4	0	3
Santander Hipotecario 2 Fondo de Titulización de Activos	Spain	—	(b)		—	—	Securitization	0	0	0
Santander Hipotecario 3 Fondo de Titulización de Activos	Spain	—	(b)		—	—	Securitization	0	0	0
Santander Holding Imobiliária S.A.	Brazil	0.00%	90.28%		100.00%	100.00%	Real estate	81	4	77

258

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Holding Internacional, S.A.	Spain	99.95%	0.05%		100.00%	100.00%	Holding company	4,057	67	2,432
Santander Holdings USA, Inc.	United States	100.00%	0.00%		100.00%	100.00%	Holding company	15,477	1,316	13,468
Santander Inclusión Financiera, S.A. de C.V., S.O.F.O.M., E.R., Grupo Financiero Santander México	Mexico	0.00%	96.24%		100.00%	100.00%	Finance company	14	(7)	7
Santander Innoenergy Climate VC I, S.C.R., S.A. (i)	Spain	0.00%	100.00%		100.00%	—	Inactive	—	—	—
Santander Innoenergy Climate VC II, S.C.R., S.A. (i)	Spain	0.00%	100.00%		100.00%	—	Inactive	—	—	—
Santander Insurance Agency, U.S., LLC	United States	0.00%	100.00%		100.00%	100.00%	Insurance	1	0	1
Santander Insurance Services UK Limited	United Kingdom	100.00%	0.00%		100.00%	100.00%	Asset management	42	1	43
Santander Intermediación Correduría de Seguros, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Insurance brokerage	26	3	18
Santander International Products, Plc. (l)	Ireland	99.99%	0.01%		100.00%	100.00%	Finance company	1	0	0
Santander Inversiones S.A.	Chile	0.00%	100.00%		100.00%	100.00%	Holding company	1,237	198	1,032
Santander Investment Bank Limited	Bahamas	0.00%	100.00%		100.00%	100.00%	Banking	468	5	583
Santander Investment Chile Limitada	Chile	0.00%	100.00%		100.00%	100.00%	Finance company	508	41	321
Santander Investment Securities Inc.	United States	0.00%	100.00%		100.00%	100.00%	Securities company	517	(2)	516
Santander Investment, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Banking	1,309	8	245
Santander Investments GP 1 S.à.r.l.	Luxembo urg	0.00%	100.00%		100.00%	100.00%	Fund management company	1	0	1
Santander Inwestycje Sp. z o.o.	Poland	0.00%	67.41%		100.00%	100.00%	Securities company	20	0	7
Santander ISA Managers Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Management of funds and portfolios	43	5	6

259

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Lease, S.A., E.F.C.	Spain	100.00%	0.00%		100.00%	100.00%	Leasing	61	7	51
Santander Leasing Poland Securitization 01 Designated Activity Company (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
Santander Leasing S.A.	Poland	0.00%	67.41%		100.00%	100.00%	Leasing	152	15	36
Santander Leasing S.A. Arrendamento Mercantil	Brazil	0.00%	90.28%		100.00%	100.00%	Leasing	1,964	101	1,864
Santander Leasing, LLC	United States	0.00%	100.00%		100.00%	100.00%	Leasing	2	(1)	1
Santander Lending Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Mortgage credit company	239	8	234
Santander Mediación Operador de Banca-Seguros Vinculado, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Insurance intermediary	50	1	3
Santander Merchant Platform Operations, S.A. de C.V.	Mexico	0.00%	98.16%		100.00%	100.00%	Financial services	2	0	2
Santander Merchant Platform Services, S.A. de C.V.	Mexico	0.00%	98.16%		100.00%	100.00%	Financial services	1	0	1
Santander Merchant Platform Solutions México, S.A. de C.V.	Mexico	0.00%	98.16%		100.00%	100.00%	Holding company	148	32	150
Santander Merchant Platform Solutions Uruguay S.A.	Uruguay	0.00%	100.00%		100.00%	100.00%	Payment methods	8	(3)	5
Santander Merchant S.A.	Argentina	5.10%	94.90%		100.00%	100.00%	Finance company	1	0	2
Santander Mortgage Holdings Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Holding company	(23)	1	0
Santander Paraty Qif PLC	Ireland	0.00%	90.28%		100.00%	100.00%	Investment Company	(39)	414
Santander Pensiones, S.A., E.G.F.P.	Spain	0.00%	100.00%		100.00%	100.00%	Pension fund management company	85	14	184
Santander Pensões - Sociedade Gestora de Fundos de Pensões, S.A.	Portugal	100.00%	0.00%		100.00%	100.00%	Pension fund management company	3	0	3
Santander Prime Auto Issuance Notes 2018-A Designated Activity Company	Ireland	—	(b)		—	—	Securitization	(4)	2	0

260

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Prime Auto Issuance Notes 2018-B Designated Activity Company	Ireland	—	(b)		—	—	Securitization	(31)	(7)	0
Santander Prime Auto Issuance Notes 2018-C Designated Activity Company	Ireland	—	(b)		—	—	Securitization	(7)	(1)	0
Santander Prime Auto Issuance Notes 2018-D Designated Activity Company	Ireland	—	(b)		—	—	Securitization	(28)	(11)	0
Santander Prime Auto Issuance Notes 2018-E Designated Activity Company	Ireland	—	(b)		—	—	Securitization	(15)	(6)	0
Santander Private Banking Gestión, S.A., S.G.I.I.C.	Spain	100.00%	0.00%		100.00%	100.00%	Fund management company	64	10	35
Santander Private Banking s.p.a. in Liquidazione (j)	Italy	100.00%	0.00%		100.00%	100.00%	Finance company	13	1	7
Santander Private Banking UK Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Holding company	288	338	392
Santander Private Real Estate Advisory & Management, S.A.	Spain	99.99%	0.01%		100.00%	100.00%	Real estate	4	0	4
Santander Private Real Estate Advisory, S.A.	Spain	100.00%	—		100.00%	100.00%	Real estate	15	1	16
Santander Real Estate, S.A.	Spain	100.00%	—		100.00%	100.00%	Inactive	1	0	1
Santander Retail Auto Lease Funding LLC	United States	100.00%	100.00%		100.00%	100.00%	Finance company	0	0	0
Santander Retail Auto Lease Trust 2020-A	United States	—	(b)		—	—	Securitization	87	30	0
Santander Retail Auto Lease Trust 2020-B	United States	—	(b)		—	—	Securitization	70	43	0
Santander Retail Auto Lease Trust 2021-A	United States	—	(b)		—	—	Securitization	67	53	0
Santander Retail Auto Lease Trust 2021-B	United States	—	(b)		—	—	Securitization	67	52	0
Santander Retail Auto Lease Trust 2021-C	United States	—	(b)		—	—	Securitization	93	48	0
Santander Retail Auto Lease Trust 2022-A	United States	—	(b)		—	—	Securitization	0	14	0

261

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Retail Auto Lease Trust 2022-B	United States	—	(b)		—	—	Securitization	0	22	0
Santander Retail Auto Lease Trust 2022-C	United States	—	(b)		—	—	Inactive	0	0	0
Santander Revolving Auto Loan Trust 2019-A	United States	—	(b)		—	—	Securitization	(1)	32	0
Santander Revolving Auto Loan Trust 2021-A	United States	—	(b)		—	—	Inactive	0	0	0
Santander Río Asset Management Gerente de Fondos Comunes de Inversión S.A.	Argentina	0.00%	100.00%		100.00%	100.00%	Fund management company	16	8	3
Santander RMBS 6, Fondo de Titulización	Spain	—	(b)		—	—	Securitization	0	0	0
Santander S.A. Sociedad Securitizadora	Chile	0.00%	67.25%		100.00%	100.00%	Fund management company	1	0	1
Santander Secretariat Services Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Holding company	0	0	0
Santander Securities LLC	United States	0.00%	100.00%		100.00%	100.00%	Securities company	27	(2)	26
Santander Seguros y Reaseguros, Compañía Aseguradora, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Insurance	1,473	128	1,188
Santander Servicios Corporativos, S.A. de C.V.	Mexico	0.00%	96.24%		100.00%	100.00%	Services	12	0	12
Santander Servicios Especializados, S.A. de C.V.	Mexico	0.00%	96.24%		100.00%	100.00%	Services	3	0	3
Santander Technology USA, LLC	United States	0.00%	100.00%		100.00%	100.00%	IT services	73	(11)	62
Santander Tecnología Argentina S.A.	Argentina	0.00%	99.83%		100.00%	100.00%	IT services	7	7	10
Santander Tecnología México, S.A. de C.V.	Mexico	0.00%	96.24%		100.00%	100.00%	IT services	52	0	50
Santander Totta Seguros, Companhia de Seguros de Vida, S.A.	Portugal	0.00%	99.91%		100.00%	100.00%	Insurance	92	15	47
Santander Totta, SGPS, S.A.	Portugal	99.91%	0.00%		99.91%	99.91%	Holding company	3,008	1,508	5,352

262

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
Santander Towarzystwo Funduszy Inwestycyjnych S.A.	Poland	50.00%	33.70%		100.00%	100.00%	Fund management company	4	16	10
Santander Trade Services Limited	Hong- Kong	0.00%	100.00%		100.00%	100.00%	Inactive	24	2	16
Santander Trust S.A.	Argentina	0.00%	99.99%		100.00%	100.00%	Services	0	0	0
Santander UK Group Holdings plc	United Kingdom	77.67%	22.33%		100.00%	100.00%	Holding company	13,935	1,359	17,015
Santander UK Investments	United Kingdom	100.00%	0.00%		100.00%	100.00%	Finance company	48	(2)	45
Santander UK Operations Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Finance company	7	0	17
Santander UK plc	United Kingdom	0.00%	100.00%		100.00%	100.00%	Banking	13,075	956	14,913
Santander UK Technology Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	IT services	40	1	6
Santander Valores S.A.	Argentina	5.10%	94.73%		100.00%	100.00%	Securities company	4	0	4
Santander Wealth Management International SA, en liquidation (j)	Switzerla nd	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Santusa Holding, S.L.	Spain	69.76%	30.24%		100.00%	100.00%	Holding company	8,940	273	6,504
SC Austria Consumer Loan 2021 Designated Activity Company	Ireland	—	(b)		—	—	Securitization	0	0	0
SC Austria Finance 2020-1 Designated Activity Company	Ireland	—	(b)		—	—	Securitization	0	0	0
SC Germany Auto 2014-2 UG (haftungsbeschränkt) (j)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Germany Auto 2016-2 UG (haftungsbeschränkt)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Germany Auto 2018-1 UG (haftungsbeschränkt) (j)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Germany Auto 2019-1 UG (haftungsbeschränkt)	Germany	—	(b)		—	—	Securitization	0	0	0

263

Subsidiaries of Banco Santander, S.A. 1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Capital + reserves	Net results	Carrying amount
SC Germany Consumer 2014-1 UG (haftungsbeschränkt) (j)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Germany Consumer 2018-1 UG (haftungsbeschränkt)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Germany Mobility 2019-1 UG (haftungsbeschränkt)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Germany S.A.	Luxembo urg	—	(b)		—	—	Securitization	0	0	0
SC Germany S.A., Compartment Consumer 2020-1	Luxembo urg	—	(b)		—	—	Securitization	0	0	0
SC Germany S.A., Compartment Consumer 2021-1	Luxembo urg	—	(b)		—	—	Securitization	0	0	0

264

Subsidiaries of Banco Santander, S.A.1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2021	Year 2020	Activity	Capital + reserves	Net results	Carrying amount
SC Germany S.A., Compartment Consumer 2022-1	Luxembourg	—	(b)		—	—	Securitization	0	0	0
SC Germany S.A., Compartment Mobility 2020-1	Luxembourg	—	(b)		—	—	Securitization	0	0	0
SC Germany Vehicles 2013-1 UG (haftungsbeschränkt) (j)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Germany Vehicles 2015-1 UG (haftungsbeschränkt) (j)	Germany	—	(b)		—	—	Securitization	0	0	0
SC Poland Consumer 15-1 Sp. z.o.o. (j)	Poland	—	(b)		—	—	Securitization	0	0	0
SC Poland Consumer 16-1 Sp. z o.o.	Poland	—	(b)		—	—	Securitization	0	0	0
SC Poland Consumer 23-1 Designated Activity Company	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Ajoneuvohallinto I Limited (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Ajoneuvohallinto II Limited (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Ajoneuvohallinto IX Limited	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Ajoneuvohallinto KIMI VI Limited (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Ajoneuvohallinto VII Limited (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Ajoneuvohallinto VIII Limited	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Ajoneuvohallinto X Limited	Ireland	—	(b)		—	—	Securitization	0	0	0

265

Subsidiaries of Banco Santander, S.A.1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2021	Year 2020	Activity	Capital + reserves	Net results	Carrying amount
SCF Ajoneuvohallinto XI Limited	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Eastside Locks GP Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Real estate management	0	0	0
SCF Rahoituspalvelut I Designated Activity Company (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Rahoituspalvelut II Designated Activity Company (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Rahoituspalvelut IX DAC	Ireland	—	(b)		—	—	Securitization	11	0	0
SCF Rahoituspalvelut KIMI VI Designated Activity Company (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Rahoituspalvelut VII Designated Activity Company (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Rahoituspalvelut VIII Designated Activity Company	Ireland	—	(b)		—	—	Securitization	2	0	0
SCF Rahoituspalvelut X DAC	Ireland	—	(b)		—	—	Securitization	0	0	0
SCF Rahoituspalvelut XI Designated Activity Company	Ireland	—	(b)		—	—	Securitization	0	0	0
SCM Poland Auto 2019-1 DAC	Ireland	—	(b)		—	—	Securitization	0	0	0
SDMX Superdigital, S.A. de C.V., Institución de Fondos de Pago Electrónico	Mexico	0.00%	100.00%		100.00%	100.00%	Payment platform	4	(1)	3
Secucor Finance 2021-1, DAC	Ireland	—	(b)		—	—	Securitization	0	0	0
Services and Promotions Delaware Corp.	United States	0.00%	100.00%		100.00%	100.00%	Holding company	64	2	66

266

Subsidiaries of Banco Santander, S.A.1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2021	Year 2020	Activity	Capital + reserves	Net results	Carrying amount
Services and Promotions Miami LLC	United States	0.00%	100.00%		100.00%	100.00%	Real estate	57	3	60
Servicios de Cobranza, Recuperación y Seguimiento, S.A. de C.V.	Mexico	0.00%	85.00%		85.00%	85.00%	Finance company	39	2	32
Sheppards Moneybrokers Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Shiloh III Wind Project, LLC	United States	0.00%	100.00%		100.00%	100.00%	Renewable energies	344	1	345
Silk Finance No. 5	Portugal	—	(b)		—	—	Securitization	9	42	0
SMPS Merchant Platform Solutions México, S.A de C.V	Mexico	0.00%	98.16%		100.00%	100.00%	Payments and collection services	145	32	173
Sociedad Integral de Valoraciones Automatizadas, S.A. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Appraisals	1	2	1
Sociedad Operadora de Tarjetas de Pago Santander Getnet Chile S.A.	Chile	0.00%	67.13%		100.00%	100.00%	Payments and collection services	12	4	11
Socur S.A. (f)	Uruguay	100.00%	0.00%		100.00%	100.00%	Finance company	58	13	59
Solarlaser Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Solution 4Fleet Consultoria Empresarial S.A.	Brazil	0.00%	72.23%		80.00%	80.00%	Vehicle rental	3	(1)	1
Sovereign Community Development Company	United States	0.00%	100.00%		100.00%	100.00%	Holding company	41	1	42
Sovereign Delaware Investment Corporation	United States	0.00%	100.00%		100.00%	100.00%	Holding company	143	4	147
Sovereign Lease Holdings, LLC	United States	0.00%	100.00%		100.00%	100.00%	Financial services	235	1	236

267

Subsidiaries of Banco Santander, S.A.1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2021	Year 2020	Activity	Capital + reserves	Net results	Carrying amount
Sovereign REIT Holdings, Inc.	United States	0.00%	100.00%		100.00%	100.00%	Holding company	8035	159	8194
Sovereign Spirit Limited (n)	Bermudas	0.00%	100.00%		100.00%	100.00%	Leasing	0	0	0
SSA Swiss Advisors AG	Switzerland	0.00%	100.00%		100.00%	100.00%	Asset management	1	0	4
Sterrebeeck B.V.	Netherlands	100.00%	0.00%		100.00%	100.00%	Holding company	4771	633	10840
Suleyado 2003, S.L. Unipersonal	Spain	0.00%	100.00%		100.00%	100.00%	Securities Investment	31	(1)	28
Summer Empreendimentos Ltda.	Brazil	0.00%	90.28%		100.00%	100.00%	Real estate management	4	1	4
Superdigital Argentina S.A.U.	Argentina	0.00%	100.00%		100.00%	100.00%	IT services	3	(2)	2
Superdigital Colombia S.A.S.	Colombia	0.00%	100.00%		100.00%	100.00%	IT services	1	0	0
Superdigital Holding Company, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	144	(12)	132
Superdigital Instituição de Pagamento S.A.	Brazil	0.00%	100.00%		100.00%	100.00%	Payment services	46	(11)	100
Superdigital Perú S.A.C.	Peru	0.00%	100.00%		100.00%	100.00%	Financial services	1	(1)	0
Suzuki Servicios Financieros, S.L.	Spain	0.00%	51.00%		51.00%	51.00%	Intermediation	12	2	0
Svensk Autofinans WH 1 Designated Activity Company	Ireland	—	(b)		—	—	Securitization	0	0	0
Swesant SA	Switzerland	0.00%	100.00%		100.00%	100.00%	Holding company	63	42	0

268

Subsidiaries of Banco Santander, S.A.1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2021	Year 2020	Activity	Capital + reserves	Net results	Carrying amount
SX Negócios Ltda.	Brazil	0.00%	90.28%		100.00%	100.00%	Telemarketing	13	2	14
SX Tools Soluções e Serviços Compartilhados Ltda.	Brazil	0.00%	90.28%		100.00%	0.00%	Services	33	1	31
Tabasco Energía España, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	1	0	0
Taxagest Sociedade Gestora de Participações Sociais, S.A.	Portugal	0.00%	99.87%		100.00%	100.00%	Holding company	56	0	0
Taxos Luz, S.L. Unipersonal	Spain	0.00%	70.00%		100.00%	100.00%	Renewable energies	0	0	9
Teatinos Siglo XXI Inversiones S.A.	Chile	50.00%	50.00%		100.00%	0.00%	Holding company	1869	285	2136
The Alliance & Leicester Corporation Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Real estate	14	0	14

269

Subsidiaries of Banco Santander, S.A.1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2021	Year 2020	Activity	Capital + reserves	Net results	Carrying amount
The Best Specialty Coffee, S.L. Unipersonal	Spain	100.00%	0.00%		100.00%	100.00%	Restaurant services	2	(1)	1
Time Retail Finance Limited (j)	United Kingdom	0.00%	100.00%		100.00%	100.00%	Services	0	0	0
TIMFin S.p.A.	Italy	0.00%	51.00%		51.00%	51.00%	Finance company	45	(4)	28
Tonopah Solar I, LLC	United States	0.00%	100.00%		100.00%	100.00%	Holding company	5	0	5
Tornquist Asesores de Seguros S.A. (j)	Argentina	0.00%	99.99%		99.99%	99.99%	Inactive	0	0	0
Toro Corretora de Títulos e Valores Mobiliários Ltda.	Brazil	0.00%	56.88%		63.00%	60.00%	Securities company	53	1	31
Toro Investimentos S.A.	Brazil	0.00%	56.88%		91.32%	100.00%	Securities company	38	0	22
Totta (Ireland), PLC (h)	Ireland	0.00%	99.87%		100.00%	100.00%	Finance company	451	5	450
Totta Urbe - Empresa de Administração e Construções, S.A.	Portugal	0.00%	99.87%		100.00%	100.00%	Real estate	98	(10)	100
Trabajando.com Mexico, S.A. de C.V. en liquidación (j)	Mexico	0.00%	100.00%		100.00%	100.00%	Services	0	0	0
Trade Maps 3 Ireland Limited (j)	Ireland	—	(b)		—	—	Securitization	0	0	0
Trans Rotor Limited (j)	United Kingdom	100.00%	0.00%		100.00%	100.00%	Renting	0	0	0
Transolver Finance EFC, S.A.	Spain	0.00%	51.00%		51.00%	51.00%	Leasing	71	3	17
Tresmares Growth Fund Santander, S.C.R., S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	53	(1)	53

270

Subsidiaries of Banco Santander, S.A.1
		% of ownership held by Banco Santander			Percentage of voting power (k)			EUR million (a)
Company	Location	Direct	Indirect		Year 2021	Year 2020	Activity	Capital + reserves	Net results	Carrying amount
Tresmares Santander Direct Lending, SICC, S.A.	Spain	99.60%	0.00%		99.60%	99.60%	Fund management company	685	19	678
Tuttle and Son Limited	United Kingdom	0.00%	100.00%		100.00%	100.00%	Inactive	0	0	0
Universia Brasil S.A.	Brazil	0.00%	100.00%		100.00%	100.00%	Internet	0	0	0
Universia Chile S.A.	Chile	0.00%	86.84%		86.84%	86.84%	Internet	0	0	0
Universia Colombia S.A.S.	Colombia	0.00%	100.00%		100.00%	100.00%	Internet	0	0	0
Universia España Red de Universidades, S.A.	Spain	0.00%	89.45%		89.45%	89.45%	Internet	2	0	2
Universia Holding, S.L.	Spain	100.00%	0.00%		100.00%	100.00%	Holding company	20	(5)	17
Universia México, S.A. de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	Internet	0	0	0
Universia Perú, S.A.	Peru	0.00%	99.76%		99.76%	99.76%	Internet	0	0	0
Universia Uruguay, S.A.	Uruguay	0.00%	100.00%		100.00%	100.00%	Internet	0	0	0
Uro Property Holdings, S.A.	Spain	99.99%	0.00%		99.99%	99.99%	Real estate investment	178	(22)	179
Verbena FCVS - Fundo de Investimentos em Direitos Creditórios (e)	Brazil	—	(b)		—	—	Investment fund	-3	3	0
Wallcesa, S.A.	Spain	100.00%	0.00%		100.00%	100.00%	Financial services	(928)	6	0
Wave Holdco, S.L.	Spain	0.00%	100.00%		100.00%	100.00%	Holding company	0	0	0
Waycarbon Soluções Ambientais e Projetos de Carbono S.A.	Brazil	0.00%	80.00%		100.00%	100.00%	Consulting services	27	(1)	21
Waypoint Insurance Group, Inc.	United States	0.00%	100.00%		100.00%	100.00%	Holding company	9	0	9
WIM Servicios Corporativos, S.A. de C.V.	Mexico	0.00%	100.00%		100.00%	100.00%	Advisory services	0	0	0
WTW Shipping Designated Activity Company	Ireland	100.00%	0.00%		100.00%	100.00%	Leasing	16	(3)	9

271

a.Amount according to the provisional books of each company as of the date of publication of these annexes, generally referring to December 31, 2022

without considering, where appropriate, interim dividends that have been made during the year. In the book value (net provision cost), the percentage

of ownership of the Group has been applied to the figure of each of the holding companies, without considering the impairment of goodwill made in

the consolidation process. The data for foreign companies are converted into euros at the exchange rate at the end of the year.

b.Companies over which effective control is maintained.

c.Data as at 31 December 2021, latest available accounts.

d.Data as at 31 March 2022, latest accounts available.

e.Data as at 30 June 2022, last accounts available.

f.Data as at 30 September 2022, last accounts available.

g.Data as at 31 July 2021, last accounts available.

h.Data as at 30 November 2022, last accounts available.

i.Recently created company, with no available financial information.

j.Company in liquidation as at 31 December 2022.

k.Pursuant to Article 3 of Royal Decree 1159/ 2010, of 17 September, approving the rules for the preparation of consolidated annual accounts, in order to

determine the voting rights, voting rights held directly by the parent company have been added to those held by companies controlled by the parent

company or by other persons acting in their own name but on behalf of a Group company. For these purposes, the number of votes corresponding to

the parent company, in relation to the companies indirectly dependent on it, is that corresponding to the dependent company that directly participates

in the share capital of the latter.

l.Company resident for tax purposes in Spain.

m.Data as of 30 June 2021, latest available accounts.

n.Company resident for tax purposes in the United Kingdom.

o.Data as at 28 February 2022, last accounts available.

p.Companies in liquidation. Pending registration.

q.Data as at 30 April 2022, latest available accounts.

(1) Companies issuing preference shares are listed in Annex III, together with other relevant information.

272

Appendix II

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Abra 1 Limited (k)	Cayman Island	—	(h)		—	—	Leasing	Joint ventures	—	—	—
Achmea Tussenholding, B.V. (b)	Netherlands	8.89%	0.00%		8.89%	8.89%	Holding company	—	356	356	20
Administrador Financiero de Transantiago S.A.	Chile	0.00%	13.43%		20.00%	20.00%	Payments and collection services	Associated	67	20	4
Aegon Santander Portugal Não Vida - Companhia de Seguros, S.A.	Portugal	0.00%	48.96%		49.00%	49.00%	Insurance	Joint ventures	64	12	12
Aegon Santander Portugal Vida - Companhia de Seguros Vida, S.A.	Portugal	0.00%	48.96%		49.00%	49.00%	Insurance	Joint ventures	139	19	20
Aeroplan - Sociedade Construtora de Aeroportos, Lda. (e)	Portugal	0.00%	19.97%		20.00%	20.00%	Inactive	—	0	0	0
Aguas de Fuensanta, S.A. (e) (k)	Spain	36.78%	0.00%		36.78%	36.78%	Food	—	—	—	—
Alcuter 2, S.L. (k)	Spain	37.23%	0.00%		37.23%	37.23%	Technical services	—	—	—	—
Alma UK Holdings Ltd (b)	United Kingdom	30.00%	0.00%		30.00%	30.00%	Holding company	Joint ventures	4	4	0
Altamira Asset Management, S.A. (consolidado)	Spain	0.00%	15.00%		15.00%	15.00%	Real estate	—	171	2	(21)
Apolo Fundo de Investimento em Direitos Creditórios	Brazil	0.00%	30.09%		33.33%	33.33%	Investment fund	Joint ventures	405	343	63
Attijariwafa Bank Société Anonyme (consolidado) (b)	Morocco	0.00%	5.10%		5.10%	5.10%	Banking	—	53,452	4,898	461
AutoFi Inc. (b)	United States	0.00%	19.75%		19.75%	—	E-commerce	—	7	7	(8)
Autopistas del Sol S.A. (b)	Argentina	0.00%	14.17%		14.17%	14.17%	Motorway concession	—	156	77	(3)

273

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Avanath Affordable Housing IV LLC	United States	0.00%	7.27%		7.27%	—	Investment Company	—	258	188	1
Banco RCI Brasil S.A.	Brazil	0.00%	36.02%		39.89%	39.89%	Banking	Joint ventures	1,945	215	37
Banco S3 Caceis México, S.A., Institución de Banca Múltiple	Mexico	0.00%	50.00%		50.00%	50.00%	Banking	Joint ventures	244	79	8
Bank of Beijing Consumer Finance Company	China	0.00%	20.00%		20.00%	20.00%	Finance company	Associated	1,430	125	12
Bank of Shanghai Co., Ltd. (consolidado) (b)	China	6.54%	0.00%		6.54%	6.54%	Banking	—	360,213	24,944	2,993
Bizum, S.L. (b)	Spain	20.92%	0.00%		20.92%	—	Payment services	Associated	11	2	1
CACEIS (consolidado)	France	0.00%	30.50%		30.50%	30.50%	Custody services	Associated	124,340	4,182	278
Campo Grande Empreendimentos Ltda. (k)	Brazil	0.00%	22.86%		25.32%	—	Inactive	—	—	—	—
Cantabria Capital, SGEIC, S.A.	Spain	50.00%	0.00%		50.00%	50.00%	Venture capital	Associated	0	0	0
Car10 Tecnologia e Informação S.A.	Brazil	0.00%	42.13%		46.67%	46.67%	Internet	Joint ventures	13	0	(2)
CCPT - ComprarCasa, Rede Serviços Imobiliários, S.A.	Portugal	0.00%	49.98%		49.98%	49.98%	Real estate services	Joint ventures	0	0	0
Centro de Compensación Automatizado S.A.	Chile	0.00%	22.38%		33.33%	33.33%	Payments and collection services	Associated	21	11	5
Centro para el Desarrollo, Investigación y Aplicación de Nuevas Tecnologías, S.A. (b)	Spain	0.00%	49.00%		49.00%	49.00%	Technology	Associated	3	3	0
CIP S.A.	Brazil	0.00%	16.13%		17.87%	—	Financial services	Associated	468	354	49
CNP Santander Insurance Europe Designated Activity Company	Ireland	49.00%	0.00%		49.00%	49.00%	Insurance	Associated	1,075	189	40

274

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
CNP Santander Insurance Life Designated Activity Company	Ireland	49.00%	0.00%		49.00%	49.00%	Insurance	Associated	1,226	119	52
CNP Santander Insurance Services Ireland Limited	Ireland	49.00%	0.00%		49.00%	49.00%	Services	Associated	26	5	1
Comder Contraparte Central S.A	Chile	0.00%	8.37%		12.47%	12.47%	Financial services	Associated	37	11	3
Companhia Promotora UCI	Brazil	0.00%	25.00%		25.00%	25.00%	Financial services	Joint ventures	1	0	0
Compañia Española de Financiación de Desarrollo, Cofides, S.A., SME (b)	Spain	20.18%	0.00%		20.18%	20.18%	Finance company	—	179	152	21
Compañía Española de Seguros de Crédito a la Exportación, S.A., Compañía de Seguros y Reaseguros (consolidado) (b)	Spain	23.33%	0.55%		23.88%	23.88%	Credit insurance	—	1,078	431	96
Compañía Española de Viviendas en Alquiler, S.A.	Spain	24.07%	0.00%		24.07%	24.07%	Real estate	Associated	556	353	27
Compañía para los Desarrollos Inmobiliarios de la Ciudad de Hispalis, S.L., en liquidación (d) (e)	Spain	21.98%	0.00%		21.98%	21.98%	Real estate promotion	—	38	(325)	0
Connecting Visions Ecosystems, S.L.	Spain	19.90%	0.00%		19.90%	19.90%	Consulting services	Joint ventures	1	1	(1)
Corkfoc Cortiças, S.A. (c)	Portugal	0.00%	27.55%		27.58%	27.58%	Cork industry	—	3	20	0
CSD Central de Serviços de Registro e Depósito Aos Mercados Financeiro e de Capitais S.A.	Brazil	0.00%	18.06%		20.00%	—	Financial services	Associated	38	37	0
Desarrollo Eólico las Majas VI, S.L.	Spain	45.00%	0.00%		45.00%	45.00%	Renewable energies	Joint ventures	52	6	1
Energias Renovables de Ormonde 25, S.L.	Spain	0.00%	55.00%		55.00%	55.00%	Renewable energies	Joint ventures	1	1	0
Energias Renovables de Ormonde 26, S.L.	Spain	0.00%	55.00%		55.00%	55.00%	Renewable energies	Joint ventures	1	1	0

275

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Energias Renovables de Ormonde 27, S.L.	Spain	0.00%	55.00%		55.00%	55.00%	Renewable energies	Joint ventures	1	1	0
Energias Renovables de Ormonde 30, S.L.	Spain	0.00%	55.00%		55.00%	55.00%	Renewable energies	Joint ventures	1	1	0
Energias Renovables de Titania, S.L.	Spain	0.00%	55.00%		55.00%	55.00%	Renewable energies	Joint ventures	1	1	0
Energias Renovables Gladiateur 45, S.L.	Spain	0.00%	55.00%		55.00%	55.00%	Renewable energies	Joint ventures	1	1	0
Energias Renovables Prometeo, S.L.	Spain	0.00%	55.00%		55.00%	55.00%	Renewable energies	Joint ventures	1	1	0
Euro Automatic Cash Entidad de Pago, S.L.	Spain	50.00%	0.00%		50.00%	50.00%	Payment services	Associated	54	35	(6)
European Hospitality Opportunities S.à r.l. (b)	Luxembourg	0.00%	49.00%		49.00%	49.00%	Holding company	Joint ventures	1	1	0
Evolve SPV S.r.l.	Italy	—	(h)		—	—	Securitization	Joint ventures	91	0	0
FAFER- Empreendimentos Urbanísticos e de Construção, S.A. (b) (e)	Portugal	0.00%	36.57%		36.62%	36.62%	Real estate	—	0	1	0
Federal Home Loan Bank of Pittsburgh (b)	United States	0.00%	6.05%		6.05%	—	Banking	—	35,264	2,482	81
Federal Reserve Bank of Boston (b)	United States	0.00%	19.12%		19.12%	20.09%	Banking	—	214,885	1,640	7
Fondo de Titulización de Activos UCI 11	Spain	—	(h)		—	—	Securitization	Joint ventures	113	0	0
Fondo de Titulización de Activos UCI 14	Spain	—	(h)		—	—	Securitization	Joint ventures	269	0	0
Fondo de Titulización de Activos UCI 15	Spain	—	(h)		—	—	Securitization	Joint ventures	337	0	0

276

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Fondo de Titulización de Activos UCI 16	Spain	—	(h)		—	—	Securitization	Joint ventures	454	0	0
Fondo de Titulización de Activos UCI 17	Spain	—	(h)		—	—	Securitization	Joint ventures	397	0	0
Fondo de Titulización Hipotecaria UCI 12	Spain	—	(h)		—	—	Securitization	Joint ventures	154	0	0
Fondo de Titulización, RMBS Prado IX	Spain	—	(h)		—	—	Securitization	Joint ventures	479	0	0
Fondo de Titulización, RMBS Prado V	Spain	—	(h)		—	—	Securitization	Joint ventures	277	0	0
Fondo de Titulización, RMBS Prado VI	Spain	—	(h)		—	—	Securitization	Joint ventures	311	0	0
Fondo de Titulización, RMBS Prado VII	Spain	—	(h)		—	—	Securitization	Joint ventures	467	0	0
Fondo de Titulización, RMBS Prado VIII	Spain	—	(h)		—	—	Securitization	Joint ventures	422	0	0
Fondo de Titulización, RMBS Prado X	Spain	—	(h)		—	—	Securitization	Joint ventures	566	0	0
Fortune Auto Finance Co., Ltd	China	0.00%	50.00%		50.00%	50.00%	Finance company	Joint ventures	2,039	434	54
Fremman limited	United Kingdom	33.00%	0.00%		4.99%	4.99%	Finance company	Associated	10	2	(1)
Gestora de Inteligência de Crédito S.A.	Brazil	0.00%	14.05%		10.00%	20.00%	Collection services	Joint ventures	277	84	(14)
Gire S.A.	Argentina	0.00%	58.22%		58.33%	58.33%	Payments and collection services	Associated	157	76	4
HCUK Auto Funding 2017-2 Ltd	United Kingdom	—	(h)		—	—	Securitization	Joint ventures	395	0	0

277

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
HCUK Auto Funding 2022-1 Limited (m)	United Kingdom	—	(h)		—	—	Securitization	Joint ventures	456	0	0
Healthy Neighborhoods Equity Fund I LP (b)	United States	0.00%	22.37%		22.37%	22.37%	Real estate	—	13	12	(1)
Hyundai Capital UK Limited	United Kingdom	0.00%	50.01%		50.01%	50.01%	Finance company	Joint ventures	4,658	381	65
Hyundai Corretora de Seguros Ltda.	Brazil	0.00%	45.14%		50.00%	50.00%	Insurance brokerage	Joint ventures	1	0	0
Imperial Holding S.C.A. (e) (i)	Luxembourg	0.00%	36.36%		36.36%	36.36%	Securities investment	—	0	(112)	0
Imperial Management S.à r.l. (b) (e)	Luxembourg	0.00%	40.20%		40.20%	40.20%	Holding company	—	0	0	0
Innohub S.A.P.I. de C.V.	Mexico	0.00%	40.84%		40.84%	20.00%	IT services	Associated	2	4	(2)
Inverlur Aguilas I, S.L.	Spain	0.00%	50.00%		50.00%	50.00%	Real estate	Joint ventures	0	0	0
Inverlur Aguilas II, S.L.	Spain	0.00%	50.00%		50.00%	50.00%	Real estate	Joint ventures	1	1	0
Inversiones Ibersuizas, S.A. (b)	Spain	25.42%	0.00%		25.42%	25.42%	Venture capital	—	11	11	0
Inversiones ZS América Dos Ltda.	Chile	0.00%	49.00%		49.00%	49.00%	Real estate and securities investment	Associated	285	285	36
Inversiones ZS América SpA	Chile	0.00%	49.00%		49.00%	49.00%	Real estate and securities investment	Associated	395	395	34
J.C. Flowers I L.P. (b) (l)	United States	0.00%	0.00%		0.00%	0.00%	Holding company	—	2	3	(1)
LB Oprent, S.A. (b)	Spain	40.00%	0.00%		40.00%	40.00%	Industrial machinery rent	Associated	4	1	1

278

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Loop Gestão de Pátios S.A.	Brazil	0.00%	32.23%		35.70%	35.70%	Business services	Joint ventures	8	0	(2)
Mapfre Santander Portugal - Companhia de Seguros, S.A.	Portugal	0.00%	49.94%		49.99%	49.99%	Insurance	Associated	17	7	0
Massachusetts Business Development Corp. (consolidado) (b)	United States	0.00%	21.61%		21.61%	21.61%	Finance company	—	75	14	3
MB Capital Fund IV, LLC (b)	United States	0.00%	21.51%		21.51%	21.51%	Finance company	—	27	27	2
Merlin Properties, SOCIMI, S.A. (consolidado) (b)	Spain	19.01%	5.63%		24.64%	24.77%	Real estate investment	Associated	14,273	6,585	512
Metrovacesa, S.A. (consolidado) (b)	Spain	31.94%	17.50%		49.44%	49.44%	Real estate promotion	Associated	2,777	2,061	18
Niuco 15, S.L. (k)	Spain	57.10%	0.00%		57.10%	37.23%	Technical services	—	—	—	—
Ocyener 2008, S.L.	Spain	0.00%	45.00%		45.00%	45.00%	Holding company	Associated	2	2	0
Operadora de Activos Beta, S.A. de C.V.	Mexico	49.99%	0.00%		49.99%	49.99%	Finance company	Associated	0	0	0
Pag10 Fomento Mercantil Eireli	Brazil	0.00%	42.13%		46.67%	46.67%	Factoring	Joint ventures	0	0	0
Payever GmbH	Germany	0.00%	10.00%		10.00%	10.00%	Software	Associated	3	2	0
Platinum Care, S.A.	Spain	0.00%	50.00%		50.00%	—	Holding company	Joint ventures	5	5	(3)
Play Digital S.A.	Argentina	0.00%	15.35%		15.38%	15.70%	Payment platform	Associated	23	42	(24)
POLFUND - Fundusz Poręczeń Kredytowych S.A.	Poland	0.00%	33.70%		50.00%	50.00%	Management company	Associated	29	20	0
Portland SPV S.r.l.	Italy	—	(h)		—	—	Securitization	Joint ventures	195	0	0

279

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Procapital - Investimentos Imobiliários, S.A. (b) (e)	Portugal	0.00%	39.97%		40.00%	40.00%	Real estate	—	0	13	0
Project Quasar Investments 2017, S.L. (consolidado) (b)	Spain	49.00%	0.00%		49.00%	49.00%	Holding company	—	5,861	679	(317)
Promontoria Manzana, S.A. (consolidado) (b)	Spain	20.00%	0.00%		20.00%	20.00%	Holding company	Associated	953	279	(55)
PSA Corretora de Seguros e Serviços Ltda.	Brazil	0.00%	45.14%		50.00%	50.00%	Insurance brokerage	Joint ventures	1	0	0
Redbanc S.A.	Chile	0.00%	22.44%		33.43%	33.43%	Services	Associated	34	11	2
Redsys Servicios de Procesamiento, S.L. (consolidado)	Spain	24.90%	0.06%		24.96%	24.96%	Cards	Associated	126	75	4
Relevante e Astuto, S.A.	Portugal	0.00%	70.00%		70.00%	70.00%	Real estate management	Joint ventures	0	0	0
Retama Real Estate, S.A. Unipersonal	Spain	0.00%	50.00%		50.00%	50.00%	Real estate	Joint ventures	21	(46)	(1)
Rías Redbanc S.A.	Uruguay	0.00%	25.00%		25.00%	25.00%	Services	—	4	1	0
RMBS Belém No.2	Portugal	—	(h)		—	—	Securitization	Joint ventures	333	0	0
RMBS Green Belém No. 1	Portugal	—	(h)		—	—	Securitization	Joint ventures	241	0	0
S3 Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A.	Brazil	0.00%	50.00%		50.00%	50.00%	Securities company	Joint ventures	237	168	28
S3 Caceis Brasil Participações S.A.	Brazil	0.00%	50.00%		50.00%	50.00%	Holding company	Joint ventures	199	170	28
San Preca Federal I Fundo de Investimento em Direitos Creditorios Não-Padronizados	Brazil	0.00%	45.14%		50.00%	—	Investment fund	Joint ventures	10	10	0

280

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Sancus Green Investments II, S.C.R., S.A. (b)	Spain	0.00%	41.60%		41.60%	43.29%	Venture capital	—	4	5	0
Santander Allianz Towarzystwo Ubezpieczeń na Życie S.A.	Poland	0.00%	33.03%		49.00%	49.00%	Insurance	Associated	303	12	27
Santander Allianz Towarzystwo Ubezpieczeń S.A.	Poland	0.00%	33.03%		49.00%	49.00%	Insurance	Associated	82	36	9
Santander Assurance Solutions, S.A.	Spain	0.00%	66.67%		66.67%	66.67%	Insurance intermediary	Joint ventures	14	5	1
Santander Auto S.A.	Brazil	0.00%	45.14%		50.00%	50.00%	Insurance	Associated	39	6	5
Santander Caceis Colombia S.A. Sociedad Fiduciaria	Colombia	0.00%	50.00%		50.00%	50.00%	Finance company	Joint ventures	6	6	0
Santander Caceis Latam Holding 1, S.L.	Spain	0.00%	50.00%		50.00%	50.00%	Holding company	Joint ventures	731	722	10
Santander Caceis Latam Holding 2, S.L.	Spain	0.00%	50.00%		50.00%	50.00%	Holding company	Joint ventures	2	2	0
Santander Generales Seguros y Reaseguros, S.A.	Spain	0.00%	49.00%		49.00%	49.00%	Insurance	Joint ventures	770	185	44
Santander Mapfre Seguros y Reaseguros, S.A.	Spain	0.00%	49.99%		49.99%	49.99%	Insurance	Associated	123	65	(1)
Santander Vida Seguros y Reaseguros, S.A.	Spain	0.00%	49.00%		49.00%	49.00%	Insurance	Joint ventures	1,023	333	44
Sepacon 31, S.L. (k)	Spain	37.23%	0.00%		37.23%	37.23%	Technical services	—	—	—	—
Servicios de Infraestructura de Mercado OTC S.A	Chile	0.00%	8.38%		12.48%	12.48%	Services	Associated	39	14	1
SIBS-SGPS, S.A. (consolidado) (b)	Portugal	0.00%	16.53%		16.55%	16.55%	Management of portfolios	—	396	67	44

281

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Siguler Guff SBIC Fund LP (b)	United States	0.00%	20.00%		20.00%	20.00%	Investment company	—	28	14	1
Sistema de Tarjetas y Medios de Pago, S.A. (b)	Spain	20.61%	0.00%		20.61%	20.61%	Payment methods	Associated	749	5	0
Sistemas Técnicos de Encofrados, S.A. (consolidado) (b)	Spain	27.15%	0.00%		27.15%	27.15%	Construction materials	—	102	15	4
Sociedad Conjunta para la Emisión y Gestión de Medios de Pago, E.F.C., S.A.	Spain	45.70%	0.00%		45.70%	45.70%	Payment services	Joint ventures	112	36	1
Sociedad de Garantía Recíproca de Santander, S.G.R. (b)	Spain	25.35%	0.25%		25.60%	25.60%	Financial services	—	17	11	0
Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria, S.A. (b)	Spain	22.21%	0.00%		22.21%	22.21%	Financial services	—	25,311	586	(1,626)
Sociedad Interbancaria de Depósitos de Valores S.A.	Chile	0.00%	19.66%		29.29%	29.29%	Securities deposits	Associated	8	7	2
Solar Maritime Designated Activity Company (b)	Ireland	—	(h)		—	—	Leasing	Joint ventures	148	(1)	0
STELLANTIS Insurance Europe Limited	Malta	0.00%	50.00%		50.00%	50.00%	Insurance	Joint ventures	245	60	28
STELLANTIS Life Insurance Europe Limited	Malta	0.00%	50.00%		50.00%	50.00%	Insurance	Joint ventures	110	11	16
Stephens Ranch Wind Energy Holdco LLC (consolidado) (b)	United States	0.00%	20.50%		20.50%	17.10%	Renewable energies	—	220	176	(2)
Tbforte Segurança e Transporte de Valores Ltda.	Brazil	0.00%	17.13%		18.98%	18.98%	Security	Associated	111	74	(3)
Tbnet Comércio, Locação e Administração Ltda.	Brazil	0.00%	17.13%		18.98%	18.98%	Telecommunic ations	Associated	107	79	(2)
Tecban Serviços Integrados Ltda.	Brazil	0.00%	17.13%		18.98%	18.98%	IT services	Associated	4	1	0

282

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
Tecnologia Bancária S.A.	Brazil	0.00%	17.13%		18.98%	19.81%	ATM	Associated	527	160	9
Tonopah Solar Energy Holdings I, LLC (k)	United States	0.00%	26.80%		26.80%	26.80%	Holding company	Joint ventures	—	—	—
Trabajando.com Chile S.A.	Chile	0.00%	33.33%		33.33%	33.33%	Services	Associated	2	(1)	1
Transbank S.A.	Chile	0.00%	16.78%		25.00%	25.00%	Cards	Associated	1,648	93	29
Tresmares Growth Fund II, S.C.R., S.A.	Spain	40.00%	0.00%		40.00%	40.00%	Holding company	—	54	42	12
Tresmares Growth Fund III, S.C.R., S.A.	Spain	40.00%	0.00%		40.00%	40.00%	Holding company	—	41	32	9
Tresmares Growth Fund Santander, S.C.R., S.A. (n)	Spain	100.00%	0.00%		100.00%	100.00%	Holding Company	—	59	53	(1)
U.C.I., S.A.	Spain	50.00%	0.00%		50.00%	50.00%	Holding company	Joint ventures	794	261	(2)
UCI Hellas Credit and Loan Receivables Servicing Company S.A.	Greece	0.00%	50.00%		50.00%	50.00%	Financial services	Joint ventures	1	1	0
UCI Holding Brasil Ltda.	Brazil	0.00%	50.00%		50.00%	50.00%	Holding company	Joint ventures	2	0	0
UCI Mediação de Seguros Unipessoal, Lda.	Portugal	0.00%	50.00%		50.00%	50.00%	Insurance brokerage	Joint ventures	0	0	0
UCI Servicios para Profesionales Inmobiliarios, S.A. Unipersonal	Spain	0.00%	50.00%		50.00%	50.00%	Real estate services	Joint ventures	1	0	0
Unicre-Instituição Financeira de Crédito, S.A.	Portugal	0.00%	21.83%		21.86%	21.86%	Finance company	Associated	452	110	24
Unión de Créditos Inmobiliarios, S.A. Unipersonal, EFC	Spain	0.00%	50.00%		50.00%	50.00%	Mortgage credit company	Joint ventures	11,247	1,080	(53)

283

Societies of which Grupo Santander owns more than 5% (g) , entities associated with Grupo Santander and jointly controlled entities
		% of ownership held by Banco Santander			Percentage of voting power (f)				EUR million (a)
Company	Location	Direct	Indirect		Year 2022	Year 2021	Activity	Type of company	Asset	Capital + reserves	Net results
VCFS Germany GmbH	Germany	0.00%	50.00%		50.00%	50.00%	Marketing	Joint ventures	1	0	0
Venda de Veículos Fundo de Investimento em Direitos Creditórios	Brazil	—	(h)		—	—	Securitization	Joint ventures	217	196	20
Volvo Car Financial Services UK Limited	United Kingdom	0.00%	50.01%		50.01%	50.01%	Leasing	Joint ventures	1,755	107	16
Webmotors S.A.	Brazil	0.00%	63.20%		70.00%	70.00%	Services	Joint ventures	70	41	14
Zurich Santander Brasil Seguros e Previdência S.A.	Brazil	0.00%	48.79%		48.79%	48.79%	Insurance	Associated	15,099	359	183
Zurich Santander Brasil Seguros S.A.	Brazil	0.00%	48.79%		48.79%	48.79%	Insurance	Associated	189	(14)	44
Zurich Santander Holding (Spain), S.L. Unipersonal	Spain	0.00%	49.00%		49.00%	49.00%	Holding company	Associated	937	936	193
Zurich Santander Holding Dos (Spain), S.L. Unipersonal	Spain	0.00%	49.00%		49.00%	49.00%	Holding company	Associated	384	382	101
Zurich Santander Insurance América, S.L.	Spain	49.00%	0.00%		49.00%	49.00%	Holding company	Associated	1,497	1,490	322
Zurich Santander Seguros Argentina S.A. (j)	Argentina	0.00%	49.00%		49.00%	49.00%	Insurance	Associated	60	36	6
Zurich Santander Seguros de Vida Chile S.A.	Chile	0.00%	49.00%		49.00%	49.00%	Insurance	Associated	254	24	37
Zurich Santander Seguros Generales Chile S.A.	Chile	0.00%	49.00%		49.00%	49.00%	Insurance	Associated	326	60	26
Zurich Santander Seguros México, S.A.	Mexico	0.00%	49.00%		49.00%	49.00%	Insurance	Associated	1,169	45	158
Zurich Santander Seguros Uruguay S.A.	Uruguay	0.00%	49.00%		49.00%	49.00%	Insurance	Associated	42	18	8

284

a.Amount according to the provisional books at the date of publication of these annexes of each company, generally referring to 31 December 2022, except

where otherwise indicated due to the fact that the annual accounts are pending formulation. The data for foreign companies are converted into euros at

the exchange rate at the end of the year.

b.Data as at 31 December 2021, latest available accounts.

c.Data as at 31 December 2019, latest available accounts.

d.Data as at 30 November 2021, latest available accounts.

e.Company in liquidation as at 31 December 2022.

f.Pursuant to Article 3 of Royal Decree 1159/ 2010, of 17 September, approving the rules for the preparation of consolidated annual accounts, in order to

determine the voting rights, voting rights held directly by the parent company have been added to those held by companies controlled by the parent

company or by other persons acting in their own name but on behalf of a group company. For these purposes, the number of votes corresponding to the

parent company, in relation to the companies indirectly dependent on it, is that corresponding to the dependent company that directly participates in the

share capital of the latter.

g.Excluding the Group companies listed in Appendix I, as well as those which are of negligible interest with respect to the true and fair view that the

consolidated financial statements must give (in accordance with articles 48 of the Commercial Code and 260 of the Spanish Companies Act).

h.Companies over which joint control is maintained.

i.Data as at 31 October 2021, latest available accounts.

j.Data as at 30 June 2022, latest available accounts.

k.Company with no financial information available.

l.Company in liquidation. Pending registration.

m.Data as at 30 September 2022, latest available accounts

n..Investment managed discretionally by a manager outside the Santander Group, the voting rights not being, in this case, decisive in determining control

of the entity.

285

Appendix III

Issuing subsidiaries of shares and preference shares
		% of ownership held by Banco Santander			EUR million (a)
Company	Location	Direct	Indirect	Activity	Capital	Reserves	Cost of preferred	Net results
Emisora Santander España, S.A. Unipersonal	Spain	100.00%	0.00%	Finance company	2	0	0	0
Santander UK (Structured Solutions) Limited	United Kingdom	0.00%	100.00%	Finance company	0	0	0	0
Sovereign Real Estate Investment Trust	United States	0.00%	100.00%	Finance company	5,231	(3,477)	55	13

a.Amount according to the books of each interim company as at 31 December 2022, converted into euro (in the case of foreign companies) at the year-end

exchange rate.

 

286

Appendix IV

Notifications of acquisitions and disposals of

investments in 2022

Details of the notifications of acquisitions and

disposals of participations for 2022 in accordance with

Article 125 of the Securities Market Law may be found

below:

On May 13, 2022, Banco Santander, S.A. disclosed to

the CNMV the decrease of its stake in REPSOL, S.A.

below the 3% threshold, keeping a stake of 2.291%,

as of May 9, 2022.

With respect to compliance with Article 125 of the

Securities Market Law, no communications required

under this article were made in 2020. In relation to the

information required by 155 of the Corporate

Enterprises Act, on the shareholdings in which Grupo

Santander owns more than 10% of the capital of

another company, and the successive acquisitions of

more than 5% of the share capital, see appendices I, II

and III.

287

Appendix V

List of Transactions subject to the Special Regime

for Mergers, Divisions, Assets Contributions and

Exchange of Securities in which the company has

acted as an Acquiring Entity or Partner

In compliance with the reporting obligations

established in Article 86 of Law 27/2014, of 27

November, on Corporate Tax (LIS), the following

information is provided on the transactions subject to

the tax regime of mergers, divisions, contributions of

assets and exchange of securities, provided for in

Chapter VII of Title VII of the LIS, in which BANCO

SANTANDER, S.A. has intervened during 2021:

I.  In accordance with the provisions of section 2 of

article 86 of the LIS, it is reported that the company

BANCO SANTANDER, S.A. has intervened as a partner

in the following transactions:

–Merger by absorption of SANTANDER TECNOLOGÍA

Y OPERACIONES ESPAÑA, S.L.U. by SANTANDER

GLOBAL TECHNOLOGY AND OPERATIONS, S.L.U.

This transaction constitutes a merger as regulated

in article 76.1 a) of the LIS. BANCO SANTANDER,

S.A. had a full shareholding in the capital of both

the absorbed company and the absorbing

company. The book value of the securities

delivered from SANTANDER TECNOLOGÍA Y

OPERACIONES ESPAÑA, S.L.U. was

€68,001,505.96, while their tax value amounted to

€68,001,505.96. The value at which BANCO

SANTANDER, S.A. has accounted for the securities

received at SANTANDER GLOBAL TECHNOLOGY

AND OPERATIONS, S.L.U. is €68,001,505.96.

–Non-monetary contribution, in financial year 2021,

to equity without capital increase by BANCO

SANTANDER, S.A. to DEVA CAPITAL HOLDING

COMPANY, S.L.U. This transaction took the form of

the contribution by BANCO SANTANDER, S.A. to the

equity of DEVA CAPITAL HOLDING COMPANY,

S.L.U.. of a credit right against YERA SERVICER

COMPANY 2021, S.L.U. (currently DIGLO SERVICER

COMPANY 2021, S.L.U.) in the amount of

13,819,919,921, S.L.U. (currently DIGLO SERVICER

COMPANY 2021, S.L.U.), of a credit right against

YERA SERVICER COMPANY 2021, S.L.U. (currently

DIGLO SERVICER COMPANY 2021, S.L.U.) in the

amount of 13,819,975.27 €, being recorded in the

"Other contributions from shareholders or owners"

account (account 118) of DEVA CAPITAL HOLDING

COMPANY, S.L.U. The aforementioned operation

was carried out by BANCO SANTANDER, S.A. to the

shareholders' equity of DEVA CAPITAL HOLDING

COMPANY, S.L.U. The aforementioned operation

was carried out by BANCO SANTANDER, S.A., S.L.U.

L.U. The aforementioned non-monetary

contribution to equity without capital increase

constitutes a special non-monetary contribution as

regulated in article 87 of the LIS and was not

covered by the regime provided for in article 77.1

of the aforementioned law.

II. In compliance with the provisions of article 86.3 of

the LIS, it is hereby stated that the information

required by sections 1 and 2 of article 86, relating to

transactions subject to the tax regime for mergers,

spin-offs, contributions of assets and exchange of

securities, provided for in Chapter VII of Title VII of the

LIS, in which BANCO SANTANDER, S.A. has intervened

as acquirer or partner during previous years, is

included in the first approved annual report of the

acquirers after each of the aforementioned

transactions.

288

Appendix VI

Information regarding mergers by absorption

carried out in the financial year 2022 pursuant to

Article 86.1 of the Corporate Income Tax Law

27/2014.

Banco Santander has not carried out any merger by

absorption agreements during 2022. For this reason,

the information required by article 86.1 of Law

27/2014 on Corporate Income Tax is not disclosed.

289

Appendix VII

Agent network - Collaborating agents, Agents empowered at 31 of December 2022.

NEOBAN SL

MARIA ARANZAZU DOMEZAIN GRANADOS

ANGEL EDUARDO  RODRIGUEZ REY

HOPE FINANCE SL

BERCAMLU S.L.

JESUS MARTINEZ CAÑAVATE GOMEZ MILLAN

MARIA ISABEL RAMIREZ RODRIGUEZ

ALBERTO LOPEZ CARDENAS

JUAN CARLOS MALDONADO HODAR

SALVADOR CEA PEREZ

JULUM FINANZAS, S.L.U.

J&M INVERSIONES Y FINANCIACIÓN EMPRESARIAL S.L.

FRANCISCO JAVIER MARTINEZ FERNANDEZ

AM SERVICIOS FINANCIEROS SL

MARIA PAZ IBARRA RECHE

ANTONIO GUILLEN RAMIREZ

JUCAR ASESORES, S.L.

MARIA DE LOS ANGELES ESCUDERO ORTEGA

ALVARO FABREGAS SANTAMARIA

ASESORAMIENTO Y COACHING FINANCIERO S.L.

EFEROR ASOCIADOS S.L.

JOSE PABLO CASTELLANO GARCIA- DONAS

FINANSANDO S.L

FRANCISCA MARQUEZ CONTRERAS

NUÑEZ MONTES FINANCIEROS S.L.

JOLUANCA 2006 S.L.

ALBERTO SANTIAGO LLORENTE MARTINEZ

JOSE ANTONIO ESCUDERO ORTEGA

JOAQUIN GALVEZ RODRIGUEZ

JUAN JERONIMO TIMERMANS NUÑEZ

IVAN PEREZ VARGAS

SIMO CONSULTORIA SL

ALICIA MATILDE LOPEZ FRANCO

RAFAEL JESUS VILLARREAL ARIZA

SARA GIL LECHADO

FANDILA GARCIA ZAMORA

CARBALLO & CARO 2019, S.L.

ERNESTO MARTINEZ FERNANDEZ

ISAMAR ORDOÑEZ MUÑOZ

BRIGIDA MARIA ROMERO SALADO

FRANCISCA MARIA LOPEZ PEREZ

JOSE MANUEL MARTINEZ MILLAN

BERNABE JOSE VALLECILLO MUÑOZ

ASESORAMIENTO FINANCIERO Y ANALISIS DE MERCADOS SLU

MAYKA GONZALEZ HEREDIA

JUAN RAMON BENITEZ GOMEZ

LIDIA MONTILLA GONZALEZ

LUIS RISQUETE REQUENA

PEDRO ANGEL LUPIAÑEZ RODRIGUEZ

JOSEFA SIMON YEBENES

CASTOR INVERYSER S.L

MANUEL BARRIGA DORADO

FERNANDO GONZALEZ SANCHEZ

CORDOBESA DE INVERSIONES PUNTAS LEÓN S.L.

AAFF RUTE S.L.

FINANTOR 2017, S.L.

ROLARG SERVICIOS FINANCIEROS, S.L.

BURMA AGENTES FINANCIEROS S.L.

MONICA CARRANZA S.L.U.

TINTO SANTA ROSA S.L.

BOPECON INVERSIONES S.L.

CHARUMA S.L.

CETINVE, S.L.

TREZAVILLA SLU

SANPIBO SL

290

NUBARPOL S.L.

SERVICIOS FINANCIEROS SANLO, S.L.

GRANDERSAN SLU

VINUESA & MOCHON 2014, S.L.L.

ISAMER FINANCIEROS S.L.

MARTA DOLORES CASTRO HIDALGO

ABU ROAD, S.L.

RODRIGUEZ CALS FINANCIERA S.L.

GESTIÓN FINANCIERA MALACITANA 2007 S.L.

RC 2007 FINANCIEROS SL

ESTEPONA FINANCIEROS, S.L.

MANUEL GUERRERO VERDEJA

MIGUEL ANGEL CASASOLA CASASOLA

AGUEDA MARTIN RAMIREZ

FRANCISCO JOSE LOPEZ SILVENTE

SOLEDAD LAMBERTO GARCIA

IGNACIO IÑARETA MARQUEZ

JESUS RAMOS NIETO

ALVARO DELGADO DE MENDOZA CORTES

VC SERVICIOS FINANCIEROS SL

SEFIAL 2021, S.L.

SERVICIOS BANCARIOS BERJA SL

ONUBA FINANCIEROS SL

DANIEL MARTI RODRIGUEZ

GESTIONES MORENO E HIJOS S.L.

SANPUEBLA SL

GABRIEL MENENDEZ NOTARIO

ANTONIO MARIN VALIENTE

ANTONIO ALFONSO HERRERA RAMIREZ

MILAGROSA ESTUDILLO CEPILLO

ANTONIO  CEREZUELA RUIZ

SERVICIOS BANCARIOS CANTORIA S.L.

MULTIALGAIDA, S.L.

MARIA LUISA PEREZ GUILLEN

CRISTINA NADALES PEREZ

NATALIA FERNANDEZ SANCHEZ

SERVICIOS FINANCIEROS PEDRO ABAD, S.L.

JOSE MARIN PEREZ

JUAN CARLOS GOMEZ GARCIA

ANGEL LOPEZ RODRIGUEZ

JOSE MANUEL GUEVARA GONZALEZ

SERVICIOS FINANCIEROS DEL CONDADO S.L.U.

ASESORIA GESTION GLOBAL S.L.

ANA MARIA DIAZ SANTANA

NURIA MONTERO GONZALEZ

MARIA ISABEL GARCIA GONZALEZ

FRANCISCO JAVIER ORTIZ CASTILLO

MARIA ANTONIA POZA GARCIA

BEATRIZ GOMARIZ LOPEZ

MARIA DEL PILAR PLAZA MUÑOZ

MARIA JOSE CHARNECO HERRERO

ANTONIO ESCUDERO VILLAREJO

CARMEN PINTO DIAZ

LOURDES ROMERO LOPEZ

REQUERTILLO, S.L.

JUAN LEON NAVARRETE

SERVICIOS INTEGRALES DOÑANA S.L.

MARIA DOLORES MORIANA RODRIGUEZ

RICARDO PIÑERO GARCIA

FRANCISCO CASTILLO CONTRERAS

MANUEL SALGADO KAITTANI

MARIA JESUS MARTIN RODRIGUEZ

JOSE CABRERA COSANO

JOMICACE, S.L.

MANUEL DOMINGUEZ BEATO

SEBASTIAN PAVON CAMPOY

JUAN PEDRO BENITEZ GARCIA

MARIA BELEN GONZALEZ RAMIREZ

MARIA CONCEPCION TELLEZ RUIZ

291

GRUPO ALMARES 2015 S.L.

SERGIO MUÑOZ  RAMIREZ

ROCIO BELTRAN  ZAFRA

FERNANDO POLO MATEOS

MARIA DEL MAR CARRETERO FERNANDEZ

JORGE BARRERA PEREZ

JUAN MANUEL MAYORGA BELLOSO

MARIA DEL CARMEN ZAMBRANO MONGE

FATIMA DEL PINO ARIZA

JUAN DAVID PEREZ VALENZUELA

MARIA ASUNCION PALOMARES RUIZ

JUAN MANUEL PEREZ PRADO

FINANCIACIONES LAS CABEZAS SL

PLAZA SERVICIOS FINANCIEROS SL

CARLOS GAVIN LORIENTE

MARIA ESCRIBANO PAVON

JOSE ANTONIO GARCIA CHINCHETRU

MARIA MORATALLA RUIZ

MIGUEL ANGEL MARTIN ISERTE

MARIA EUGENIA BOZAL HUGUET

MARIA PILAR UROZ PASCUAL

HECTOR EDO ALEGRE

ALCARRAZ PERALTA, S.L.

ANA BELEN PAMPLONA CALAHORRA

JAVIER GURIDI EZQUERRO

JAVIER DOMINGO PASCUAL JIMENEZ

LUIS FERNANDO ANDRES VILLALBA

MARIA ELENA TREMPS ALDEA

LIDYA FERNANDEZ AMURRIO

JULIA MARIA SEGURA VICENTE

MAXIMO PLUMED LUCAS

NAVARRETE GESTION 2018 SL

JOAN FELIU PUIGVERT

ROSA ANA FATAS LAPLANA

MARIA TERESA MARTIN MUNIESA

MARIA DEL CARMEN NIEVES MARTINEZ

MARIA DEL PILAR RAMIREZ DIEZ

MARIA DOLORES FOLLA-CISNEROS GARCIA

MARIA HERNANDEZ ALONSO

LANZA MENDOZA GESTION FINANCIERA, S.L.

LOURDES GIMENO TIRADO

GEMMA ARRUFAT RAFALES

JOSE GABRIEL PASTOR MANZANO

DIEGO CARCAS SANCHEZ

ELSA TORRES MOLINA

IRENE ABIZANDA VAL

JOSE JIMENEZ OVEJAS

MARIA GEMA GARCIA BUIL

VERONICA PUEY MUÑOZ

JOSE GABRIEL BALLESTERO FERNANDEZ

USTARIZ ZUBIRI ASOCIADOS SL

MARIA JOSE AUSEJO MARTINEZ

MARIA AURORA TORRES GARCIA

LAURA MARTINEZ ZUBIRI

ALVARO MOLINER ABADIA

SERGIO URDANIZ GARBAYO

IGNACIO SAGÜETA URTASUN

FEDERICO SOROLLA LLAQUET

ANA ISABEL MONTULL CACHO

SONIA BRAZO BOSQUE

MIRIAM GARCIA ALFARO

SARA MORALES ECHEVERRIA

VERONICA REMIRO BASANTA

RAUL LANGA GOMEZ

OIHANE AICUA RODRIGUEZ

JAVIER ROYO HERRANZ

MANUEL GARCIA MONTOLIO

BELEN PALACIO TORRES

FLORENTINO LARA NOTIVOLI

292

OSCAR ADAN CABEZON

MARIA EUGENIA GONZALEZ SANCHEZ

MARIA DANIELA URUÑUELA NAJERA

JOSE JAVIER MAZUELA CREGO

VICTOR JIMENEZ VERANO

Oliver Labarta S.L.

ANA MARIA RUBIO PALACIOS

ROSA MARIA POBLADOR ASENSIO

FINANZAS ALLOZA S.L

JOSE DANIEL GARCES VIRGOS

ADRIAN MILIAN GONZALEZ

INTERMEDIACION NASARRE S.L.

JESUS QUINTANA MAULEON

PASCUAL HIGINIO DOMINGO PEÑA

CLARA URGEL CASEDAS

LAURA COMENGE HIGUERAS

MARIA MERCEDES SALAS BAENA

MARIA ESTHER FERRANDEZ PARDOS

PRISCILA CRISTOBAL MALO

SERGIO BUIL GARCIA

ALEJANDRO IBAÑEZ LERA

JOSE JAVIER SALAVERRI MARTINEZ

BEATRIZ SERRANO SAN PEDRO

RAUL RIVAS VAL

AGENTES FINANCIEROS AOIZ S.L.

SHEILA DEL BARRIO SAENZ

CRISTINA ZABALA USTARIZ

FRANCISCO JOSE VIEJO GONZALEZ

FERNANDEZ DEL VALLE NOE 046869184C S L N E

GUILLERMO FOS ALZAMORA

ANGELA FIGAROLA TARDIU

JUAN ROSSELLO AMENGUAL

JORDI JUAN RIBAS

ALBERTO BARTOLOME DE BLAS GUASP

GUILLEM GENOVARD CALDENTEY

CECILIA MARIA ROSSELLO FLORIT

MARMA MALLORCA, S.L.

ANTONIO MANUEL SALCES FERNANDEZ

ELISENDA ARIMANY BALLART

AGFINAND SL

MARIA JOSE DE LA DUEÑA FUSTER

ERNESTO DOMINGUEZ SLU

PEDRO FERRAGUT DIAGO

MARIA ANTONIA BARCELO AMENGUAL

JUAN CARBONELL SOCIAS S.L.

JUAN MANUEL ALARCON GARCIA

LUIS DA COSTA FERNANDEZ

MALULA SERVICIOS FINANCIEROS SL

TEROR VP INVERSION SL

OMAR PEREZ GARCIA

LUIS FERRERAS GRANADO

LETICIA INES MARTIN SANGUINO

ANA BEBI SL

FRANCISCO JAVIER SANTIAGO ALEMAN

PEDRO JAVIER SANCHEZ RODRIGUEZ

JOSE MANUEL PERERA QUINTANA

FRANCISCO JAVIER CABRERA LLAMAS

EDUARDO HERNANDEZ HERNANDEZ

PEDRO ROMAN SANMARTI

RUBEN TORIJANO BUENO

JOSE ANDRES HERNANDEZ FALCON

GORKA PEREZ DIAGO

JON DIEZ DE DIEGO

SARA SANCHEZ GONZALEZ

ENRIQUE MARCOS ORTEGA

AGUSTIN RUIZ SAIZ

ALEJANDRO FERNANDEZ GARCIA

ALEJANDRO MARTIN KARLSSON

CARLOS  MESA DIEZ

293

ANGEL MOLLEDA VELEZ

MIGUEL SUAREZ RODRIGUEZ

JORGE ESCAPA ESPINEL

MARIA DE LOS ANGELES RODRIGO GUTIERREZ

MARIA FERNANDEZ DE LA UZ

EFREN PEREZ ILLAS

LUCAS RIVAS PORTILLO

EMMANUEL GRANDA TARRAZO

POSADA GESTION FINANCIERA SLU

PEDRO CONDE DIEZ

PATRICIA RODRIGUEZ ALONSO

RAQUEL RIVERA PALACIO

JAVIER COBO GARCIA

CARLA SANJULIAN MENDEZ

BUSINESS AND PERSONAL SERVICE S.A.

LAP ASTURIAS S.L.

GONZALEZ Y NAVES, S.L.

DAVID GARCIA-ARCICOLLAR RODRIGUEZ

SERFISAN SERVICIOS FINANCIEROS S.L.

DAVID INCHAUSPE PEÑA

TAMARA CANTERO SANCHEZ

ENRIQUE ARAUJO IRUSTA

IGNACIO SORDO AGÜERO

JOSE IGNACIO UBILLA BOLADO

ENRIQUE FOMPEROSA RUIZ

SERVICIOS FINANCIEROS MAZA Y VILAR SL

CLARA POO GARCIA

JESUS ANTONIO AMO FERNANDEZ

SERGIO GONZALEZ PALACIO

YOLANDA ALVAREZ RODRIGUEZ

ALVARO DIAZ ASTARLOA

AOMAR NUÑEZ APARICIO

JONATHAN AGUSTIN COLODRO DIAZ

JUAN MARIA VALDES MARTIN

JOSE MARIA ANTON GARCIA

ALMUDENA GONZALEZ GALLEGO

VICTOR GONZALEZ CABO

NOELIA MARTIN BOLIVAR

ALBERTO SUTIL FERNANDEZ

JAVIER TERAN CAMUS

DAVID GONZALEZ SANZ

OLGA LLORENTE DA COSTA

HELLEN JANETH MENDEZ MURCIA

OSCAR MANUEL ALFAGEME MARTIN

HECTOR DIAZ DIEZ

MARIA VISITACION BECARES MARTINEZ

LUIS MIGUEL VEGA JANILLO

EMILIO MARTIN LANCHAS

MARIA SASTRE GONZALEZ

0880 SANTANDER SANTIBAÑEZ, S.L.

MARIA MANUELA SANCHEZ CASTAÑO

DAVID LOPEZ-GAVELA GAGO

ALBERTO RIAÑO MOROCHO

ARCADIO SAEZ SANZ

RAUL DE PABLO DEL OLMO

FRANCISCO ALBARRÁN PELAYO

INES PINDADO SAEZ

JAIME RIVERO CALVO

1321 SANTANDER LA ALBERCA S.L.

MARIA VICTORIA IGLESIAS MATEOS

MONICA CUBAS HERNANDEZ

A C CARRIZO DE LA RIBERA SL

RAQUEL GAVELA SANCHEZ

JUAN MANUEL CASTRO FANEGO

ÓRDAS CASADO S.L.

MARTA ISABEL MARTINEZ ESCOBAR

FERNANDO ENRIQUE RODRIGUEZ PEREZ

MARIA TERESA SALGADO RODRIGUEZ

MARIA VICTORIA DURAN ALVEZ

294

ALBERTO GONZALEZ MONTES

MADRIGAL FINANCIERO SL

BEATRIZ GALLEGO MARTIN

JESUS CANTON GONZALEZ

VANESA VEGA BLANCO

NOELIA PEÑALVO MARINA

MARIA SALOME DE LA ROSA DIEZ

SONSOLES RIVERO HERNANDEZ

FERNANDO AREVALO GOMEZ

JORGE ALONSO ARRIBAS

ASUNCION MATEOS PASCUAL

MARIA ELENA BRAVO SAN INOCENTE

40165 AGENTE COLABORADOR PRADENA, S.L.

ALBA SANCHEZ MATEOS

MARIA INES VALCUENDE GARMON

AGUSTINA AGUDO FRANCIA

IGNACIO MARIA ANTOLIN FERNANDEZ

JULIANA BERLANA DEL POZO

MARIA VICTORIA SAN ROMAN FERNANDEZ

NOELIA SANZ VILLARREAL

JORGE APARICIO GONZALEZ

MARIA ELISA SAEZ JIMENEZ

ANGELA MAGDALENO GONZALEZ

ALBERTO MORAN PEREZ

EDUARDO GONZALEZ MARTIN

ALBARRAN FIGAL S.L.

GONZALO PEREZ JOSE

MARIA ELISA ROSON FERRERO

MARTA HERNANDEZ PEREZ

ANA MARIA SIERRA HERNANDEZ

AC LA CISTERNIGA 2022 SL

A.C. SANTOVENIA DE PISUERGA SL.

LEAGENSA S.L.

BEATRIZ GARRIDO SANTANDER S.L.

24198 SANTANDER LA VIRGEN DEL CAMINO, S.L.

JOSE MARIA CABERO MATA

GESBANCYL, S.L.

JOSE  BERZAL MIGUEL

MARIA GONZALEZ MUNICIO

MARIA JESUS MONROY CARNERO

PEDRO MARIA MARINA MEDRANO

JOSE ANGEL TIERNO ARANDA

JESUS ANGEL GUTIERREZ QUINTANILLA

MANUEL JAVIER DELBOY RODRIGUEZ

A.C. PAREDES DE NAVA S.L.

SERGIO SANCHEZ RODRIGUEZ

A.C. CIGUEÑA SL

PEDRO CUESTA BAUTISTA

A.C. VILLARCAYO S.L.

6155 SANTANDER LEDESMA, S.L.

SUSANA CASADO FERRERO

CLARA HERNANDEZ NOVOA

MARCIAL SANTOS SANCHEZ

6395 Poyales del Hoyo Agente Colaborador S.L.

JOANA LOPEZ  ROZAS

ANA MARIA SAN MILLAN COBO

IGNACIO ARROYO RODRIGUEZ

SANTOS BOL GARCIA

MARIA DEL CARMEN CAMUS SAN EMETERIO

SANTANDER VEGUELLINA DE ORBIGO, S.L.

A.C. LAGUNA DE NEGRILLOS S.L.

MERINO LOBATO S.L.

MARIA MERCEDES GUZON LIEBANA

JACINTO MANUEL PALOMERO PALOMERO

MARIA DEL SOCORRO BENAVIDES SANCHEZ

GESTION SANTANDER CARBAJOSA, S.L.

MIKEL ANDRES SANCHEZ CASTILLO

BENEDICTO GUTIERREZ BERNAL

MARIA AUXILIADORA PEREZ SERRADA

295

ANNA LOURDES MATEOS SANCHEZ

ARACELI GONZALEZ MEJIAS

ANA MARIA MARTIN LOBO

MARCOS ASENJO HERNANDO

AREVALO Y MONGE, S.L.

EDUARDO LERONES AGUADO

MIRIAM CARRO HERNANDO

JUAN ANTONIO SALGADO HERNANDEZ

ALICIA FADRIQUE PICO

IVAN LLAMAS PÉREZ

GESTION INTEGRAL SANTANDER, S.L.

ENRIQUE Y SINDE ASOCIADOS SL

MARIA TERESA RODRIGUEZ FUENTES

LORENA HERNANDEZ ATIENZA

SARA MARTINEZ GONZALEZ

ANGEL ARMENTEROS CUESTA

JUAN BAUTISTA HIDALGO IÑIGO

YUBERO MORENO AGENTES FINANCIEROS SL

JESUS BERZAL MIGUEL

MARIA DEL MAR TELLEZ ALVAREZ

MARIA ANTONIA ROVIROSA PIÑOL

MIGUEL JOSE MALAVE FERNANDEZ

GERENCIA & DESARROLLO DE SUCURSALES S.L.

JOSE ENRIQUE ARBONAS MAS

MARIA SOLE RIBERA

NAROBESA INV SL

OLGA MARIA SANCHO ARASA

SERGIO LORENZO RODRIGUEZ

MARIA DOLORES MORERA SOLA

ANTONI MONSO BONET

JORDI RIBALTA ARIAS

MANUELA BUERA GILABERT

MATEU & SANTANDER, S.L.

MARIA AFRICA CARDIEL COLL

CARLOS DE PABLO LOPEZ

VICENT MORE CAMPS

ROSA MARIA HOMEDES PERIS

JORGE TORTA BELBIS

GROUP CLOP INVERSIO SL

JUAN JOSE GISBERT FERRERES

ALEJANDRO LLERA FERNANDEZ

MONTSERRAT  SABATE  BORRELL

JORDI ROSA ARIZA

ERIC NADAL GRIFOL

ALEXANDRE COLL QUINTANA

ISABEL OLMO VIBORAS

PABLO GODAYOL RUIZ

DAVID RIDER JIMENEZ

MARC OLIVA VIDAL

MARIA PILAR  ALMARAZ FERNANDEZ

ANNA  BATALLA  FARRE

AINOA LORAS COLL

AGUSTI MONTANE DELCOR

MARIA GLORIA TENA BISTUE

MARIA ROSA BERTRAN CASALS

BERTA RIERA FERRAN

IVAN GUIU FARRE

MARIA TERESA BORRELL MICOLA

AMALIA GEMMA AGUILAR CASAS

OSCAR BLANCO CID

ESTEVE UTSET BADIELLA

EDUARD RAMON NADEU ABENOZA

VIRGINIA LEDESMA ARCOS

JIA AGENTS SL

DANIEL MASSA I RAMIREZ

SAUSOLUCIONS SL

NESTOR GALIMANY SANROMA

ISIDRE CALBO PELLICER

POL  MIR  MARTINEZ

296

KMB FINANCES SOCIEDAD LIMITADA

MARIA DOLORES ROCA BLANCH

DAMIÁ RIERA ALBAREDA

DIPTOS, S.L.

JAVIER BLANCO LOPEZ

GESTION INVERGARA S.L.

MARTI FORTUNY PLANAS

ENRIC CORTADA GUTIERREZ

FINANZAS SAN ANDRÉS S.L.

ALEXANDRE UTSET BADIELLA

ALBALATE SERVICIOS FINANCIEROS Y DE GESTION

EVA CASAHUGA FUSET

SISMOINT, S.L.

EMA VILATORRADA 2007, S.L.

MATARÓ ASESORES LEGALES Y TRIBUTARIOS, S.L.

BANEST BLANES, S.L.

Glinkgo Biloba Properties S.L.

SERVEIS FINANCERS DE BANYOLES, S.L.

PUNT FINANCER GESTIO I ASSESSORAMENT, S.L.

DAVID OLMO FORTE

ANA MARIA JIMENEZ AGUAYO

CRISTINA HUERTOS CABEZA

ROSA MARIA  PADROS  ANGUITA

INVERSIONES TERRA FERMA, S.L.

FINANCERES ARO, S.L.

FRANQUICIES FINANCERES LLEIDA S.L.

GRUP BBR GESTIO PRIVADA, S.L.

MARC TARRES MALE

ALEIX SUBIRA SOLER

OSCAR MUSTE ROIG

MONTSERRAT OLIVA MANDAÑA

FINANCIAL VALUE INVESTMENT, SL

LORENZO BARREIRA VIA

AA FF NV FINANCERA 2018 SL

EDUARD MAS POMES

JOSE MARIA BALTASAR TOMAS

INMACULADA SAHUN JOVE

INVERSORA TUCKERTON SLU

ESTHER NOGUES FERNANDEZ

LUIS LOPEZ SIRER

INVERSIONS RIBAGORÇA S.L.

TANIA GELPI ESCANDIL

JORDI BRULL MARGALEF

BBR BATEA GROUP S.L.

AAFF OLESA 2019,S.L.

SUSANA MARIA JOVANI BELTRAN

INGRID QUILES SANCHEZ

SANDRA MULERO MARTINEZ

ELOY HARO ROMERO

MYRIAM ALPAÑEZ PINO

FELIPE PARRA CARRERA

JAUME VEGAS BAUTISTA

MARESFIN MARESME S.L.

JAVIER COMA PALOU

DANIEL TORRES MUIXI

DANIEL LIENAS GRANDE

OSCAR PLANES NOVAU

ANTONIO DE PADUA BELLAUBI MIRO

MARC MAYORAL SERRET

ANNA SANS GARDEÑES

SONIA ROIGE VIDAL

ANTONIO FORNOS ISERN

PALMIRA RODRIGUEZ PEREZ

ANTONIO  VICO  ARCE

ABEL ISERN ROIG

GUADALUPE FORNE TENA

JOAQUIN SERRA BERTRAN

MARIA BELEN GARCIA  BLANCO

JORDI ALUJA OSSO

297

OFICINA 6788, S.L.

ENRIC PUJOL ROVIRA

CRISTINA PURROY CASTELLO

MARIA LUISA VALIENTE LORENZO

LARA & RAUL ASOCIADOS S.L.

SOLEDAD GALAN FREJO

ROBERTO MARTIN RIVERO

SAUL ANTONIO TOVAR ASENSIO

MONICA  LIBERAL  CAMISÓN

JUAN JOSE SANCHEZ ACEDO

CARMEN MARIA MARTINEZ BOHORQUEZ

BARBARA FERNANDES DIAS

ANABEL SANCHEZ MARTIN

MARIA EVA NUÑEZ GONZALEZ

CECILIO ALVARADO GARCIA

ANA MARIA LOPEZ OVEJERO

JOSE IGNACIO BORDALLO MEDINA

PATRICIA GUIJO LOZANO

RAQUEL BARRERO GORDILLO

OSCAR RODRIGUEZ ROMERO

MERCEDES GARCIA DURAN

LOURDES IGLESIAS ALONSO

RAFAEL SALGUERO VARGAS

ALBERTO VAZQUEZ OLMEDA

MARIA ROSA AMPARO BLAZQUEZ FRAILE

JUAN MARIA DOMINGUEZ GARCIA

SATURNINO QUIÑONES GARCIA

ISMAEL PALACIOS AGUDO

ENRIQUE JONATAN EXPOSITO CAÑA

FELIX ALFONSO TORRADO DIAZ

VICTOR MANUEL DIAZ MARRON

VICTOR TOME LLANOS

ALICIA ESTEBAN GARRIDO

ANGELICA MONTEJO ASENSIO

ELENA PUERTO GALVEZ

VIRGINIA CASTAÑO GONZALEZ

JOSE MARIA MANZANO CIDONCHA

ALEJANDRO GOMEZ CORRALES

MARIA ANGELICA RODRIGUEZ OLIVEROS

CARLOS MIGUEL GIJON MELENDEZ

SERVICIOS FINANCIEROS CERES SL

MARIA MERCEDES GARCIA SANTANA

JUAN MIGUEL ALFARO GONZALEZ

REYES MARTIN MORENO

ANA MARIA GARCIA  DOMINGUEZ

ROBERTO CABALLERO MARTIN

MARIA DEL CARMEN LEDESMA COUTO

JULIAN HERNANDEZ RANZ

JOSE CARLOS VENERO TANCO

MIGUEL  RODRIGUEZ GARCIA

ARCADIO PAREDES ROMERO

PEDRO MANUEL BALSERA GARCIA

JOSE CARLOS GARCIA SANCHEZ

ELENA LAJA MONTES

ELENA DIAZ FERNANDEZ

ANA MARIA MORALES NUÑEZ

ANGEL LUIS GIL PEÑA

NOEMI VIVAS SANCHEZ

ALMUDENA GARCIA SANCHEZ

PATRICIA ACOSTA SERRADILLA

JUAN HERNANDEZ DE TORRES

MARIA SAZO SALGUERO

LAURA MARTIN PALOMO

OLMO JULIAN PUERTO FERNANDEZ

SERVICIOS FINANCIEROS AHIGAL, S.L.

CARLOS RUIZ BURDALO

VIRGINIA VELASCO MAJADA

LAURA FERNANDEZ TORIBIO

AMBROSIO TORNAVACAS VINAGRE

298

BELEN GONZALEZ BERMEJO

DAMIAN CEBALLOS SORIA

MARIA TRINIDAD BRIEVA DOMINGUEZ

MARIA MARTIN  SANCHEZ

MARIA INMACULADA LUENGO MARIN

VALENZUELA MARTIN ASESORES S.L.

ANSELMO HERNANDEZ RANZ

JOSE GAMERO MUÑIZ

ASEVAL ASESORES S.L

LUIS MARCELINO NARVAEZ MACIAS

VERONICA GOMEZ MONTERO

MARIA JOSE SALGADO ALVAREZ

OSCAR SOTELO SALINAS

MONICA ALVAREZ ALVAREZ

CESAR RODRIGUEZ SOTELO

JUAN MIGUEL GOMEZ LOPEZ

ALEJANDRO PIÑOL PEREZ

MARIA LUZ IMIA RIVERA

JOSE LUIS EXPOSITO PITA

PAULA EIRIZ OTERO

LAURA MACIA GONZALEZ

CONCEPCION ISOLINA SOMOZA CALVIÑO

PATRICIA SOUTO LOPEZ

OSCAR PARDAL ANIDO

JOSE LUIS COUCEIRO DORELLE

SERBAN AGUIÑO S.L.

JOSE ALFONSO FUENTE PARGA

NATALIA DIOS OUTEDA

ARACELI GONZALEZ GONZALEZ

MARIA DEL CARMEN CARBALLO GOMEZ

MARTA MARIA COPA PEREZ

HECTOR PIÑEIRO MARTIN

JOSE RAMON DOMONTE RODRIGUEZ

INTERMEDIACION FINANCIERA DEL NOROESTE SL

SONIA LANDROVE MARTINEZ

SUSANA FARIÑA FERNANDEZ

CARLOTA  RODRIGUEZ VARELA

JOSE MANUEL CAPON FERNANDEZ

MARIA CARMEN GONZALEZ BARRAL

SILVA&RUA ASOCIADOS SLU

ANGELA MUÑIZ ARROJO

SOLFIN CONSULTORIA DE MERCADOS SL

SONIA LOPEZ AZNAR

ANXO VAZQUEZ BLANCO

JOSE MANUEL AMEAL MAS

MARIA LUISA VALIÑO IGLESIAS

MARTA GARRIDO FERNANDEZ

GAGO Y SOUTO FINANCIAL SERVICES S.L.

JAVIER PONTANILLA MARTINEZ

AGENCIA FINANCIERA ULLOA S.L.

SERCOM ASFICO AGENTES FINANCIEROS, S.L.

MEDA FINANCIERA, S.L.

INTERMEDIACION FINANCIERA RIAS BAIXAS, SLL

MARIA MARTINA GONZALEZ ANDRADE

ÓSCAR NÚÑEZ PUGA

PILAR VILA AYERBE

DAVID GONZALEZ BECEIRO

JOSE MANUEL FURELOS FERREIRA

ANGELINA CUESTA BERAMENDI

TANIA ARAUJO SOTO

BORJA MENDEZ VAZQUEZ

BARBARA FARIÑA REBOREDO

SERVICIOS FINANCIEROS FORCAREI, S.L.

DANIEL VIEIROS  CAMPOS

LUCIA MARTIN GRANDE

ANGEL LUIS GONZALEZ CASTRO

ASESORES FINANCIEROS VIANA SL

MARIA ROCIO LOPEZ TABOADA

MARIA CRISTINA SANCHEZ UZAL

299

OFILAR 2020 S.L.

CELIA MONICA MARTINEZ OTERO

MARIA ELISA CAMBEIRO CAAMAÑO

MONICA GARCIA CAAMAÑO

FRANCISCO FERREIROS LOPEZ

MANUEL MARIA GARCIA FERNANDEZ

MANUEL ARTURO DOVALE VAZQUEZ

IVAN GONZALEZ MARTINEZ

ADRIAN TELLA VILLAMARIN

LUCIA ALVAREZ GONZALEZ

QUIRINO MASCITTI

OSCAR JUSTO ALVAREZ

AS NEVES & ARBO S.L.

CANDIDO JUNCAL RUA

CELAVEDRA S.L

NIEVES NUÑEZ PUGA

BLANCA FERNANDEZ MURAS

MIRIAM SAMPAYO IGLESIAS

RICARDO CORREA FOLGAR

GHG COPERNICO, S.L.L.

SERVIBAN OURENSE, S.L.

ANA BELEN DUARTE FIGUEIRAS

SERVICIOS FINANCIEROS SOUTELO SL

PABLO SEIJO NOVOA

ANDREA SAYANS RIVEIRO

FABIAN MANTEIGA VARELA

ALEJANDRO GIADANES TORREIRA

MARIA CARMEN CEREIJO VARGAS

TATIANA RODRIGUEZ FERNANDEZ

MIGUEL ANGEL  FUENTE  REGO

CARLOS GONZALEZ FERNANDEZ

DAVID VALIN ANTON

ADRIÁN MONTERO VARELA

BRAIS MIDON LOPEZ

JOSE MANUEL SOBREDO SIGUEIRO

JOSE MANUEL VAZQUEZ BERTOA

ANABEL PALLAS FUENTES

NATALIA LOPEZ LOPEZ

JAVIER NOVIO MIDON

GREGORIO LEAL MORALEDA

PEDRO JESUS ROLDAN PRIETO

MARIA JIMENEZ GONZALEZ

CRISTINA GOMEZ GUTIERREZ

JOSE JUAN SANCHEZ SORIANO

RAFAEL ROMERO RODRIGUEZ

ANTONIO SANCHEZ ARGÜELLES

EQUITY CONSULTING FINANCIERO, S.L.

JOSE LUIS BECERRA QUIROS

ELVIRA DE CASTRO FERNANDEZ

LUIS ALFONSO MARTINEZ JIMENEZ

FRANCISCO JAVIER ARTEAGA LOPEZ

JOSE ANTONIO LOPEZ LOPEZ

MARIA ANGELICA CORTES CORTES

FRANCISCO FLORES ROMERO

ARREAZA SERVICIOS FINANCIEROS, S.L.

JUAN JOSE TAMUREJO CARDOSO

CARLOS ARCAS CHECA

ANA MARIA RODRIGUEZ MORENO

SERGIO GONZALEZ RUISECO

DIEGO FERNANDEZ MARCOTE

MARIA ANGELES GONZÁLEZ IBÁÑEZ

PEDRO LUIS CORTES BLANCO

JUAN ANGEL ALCAZAR VERGARA

GEMMA GUTIERREZ BAJO

ALFONSO ILLAN GARCIA ROJAS

MARIA LOPEZ MARTINEZ

JAVIER GUTIERREZ ARAGON

RUBEN LOPEZ CARMONA

MIGUEL ANGEL GARCIA RODRIGUEZ

300

ARACELI CARAVANTES CASTILLO

CARMELO PACHECO MARIN

ROSA ARCE LANDETE

BEATRIZ ARROYO AVILA

TERESA ROLDAN QUINQUER

FELIPE CHILLARON CASTILLO

MONICA CANO CANO

ASIS DE FEREZ S.L.

VILLASEQUILLA AP SL

NURIA DEL AMO LETON

CARLOS MORENO LOPEZ SOLORZANO

YEBEGEST S.L.

ARANCHA LOPEZ SANTOS

INMACULADA TORRES BERMUDEZ

ANA MARIA RODRIGUEZ VARGAS

CRISTOBAL NAVARRO DE VEGA

BNT 2008 AGENTES FINANCIEROS SL

ASESORAMIENTOS FINANCIEROS TEM 2012, S.L.L.

EVA LEON BELINCHON

PAULA  MARTINEZ GARCIA

IVAN QUINTANA ROJAS

PEDRO CARO CANO

DIANA DIAZ ANGELINA

CRISTINA TORIJA PRIETO

SONIA ARNAO VILLANUEVA

JOSE LUIS HERNANDEZ-SONSECA MIRANDA

FRANCISCO DAVID SAIZ CANO

CECILIO PARRO CORTES

LETICIA MARÍA MARTINEZ ABAD

JOSE CARLOS LOZANO CANO

LUIS JAVIER NAVARRO SIMON

MARIA TRINIDAD SORIANO RAMIREZ

JUAN MONTERO RODENAS

SANDRA ORTEGA QUILON

MARIA PAZ CULEBRAS RAMOS

LUCIA PEREZ CUELLAR

DAVID MOYA LUCAS

AROA GOMEZ LOZANO

MARTA TRIGUERO RUIZ

DIEGO GALLEGO VALVERDE

ANGELA ZURITA MARTINEZ

MARIA DEL PILAR MUÑOZ GONZALEZ

MARTA LUJAN FERNANDEZ

MARIA EUGENIA DE LA CRUZ DE LA ROSA

SARA PULIDO PANADERO

JESUS ALVARADO CAMARA

HECTOR CANO DEL SAZ

MIGUEL MORENO ALONSO

MARIA LUISA SANGUINO GUTIERREZ

MIGUEL GARCIA TAPIA

JESUS MATEO HIDALGO MARTIN

BEATRIZ LOPEZ MONTEJO

JOSE LUIS BLAZQUEZ FERNANDEZ

VICENTE CANO CAMARA

LUCIA CARO  ESPARCIA

JUAN FRANCISCO GARCIA JUNCOS

JESSICA MARIA SEGADOR RISCO

BRAULIO ALMENA AMARO

BEATRIZ BLANES RUIZ

MARIA JOSE PACHECO GALLEGO

EMPRESA GESTORA JUAN JOSE MUÑOZ S.L.

ESTHER PEIRO ORTEGA

ANA CRISTINA MUÑOZ ALVAREZ

ANTONIO MOTOS RECUENCO

PATRICIA MONTERO DURAN

MARIA TERESA OLMEDA PICAZO

JAVIER MONGE LOPEZ

JUAN CARLOS LAZARO BERDEJO

BARRIOS DE LA CRUZ, S.L.

301

AGUADO Y ORTEGA ASESORES S L

JAIME VALDES BRAVO

JOSE ANTONIO REAL MUÑOZ

ROSA ISABEL BENEITEZ SALINERO

ALFONSO RODRIGUEZ MADROÑAL

MARIA CARMEN SANCHEZ PEÑA

SANDRA COFRADES SANCHEZ

FERNANDO GARCIA BARATAS

MARIA DEL CARMEN PALMERO MORENO CID

NURIA BRAOJOS SANCHEZ

SONIA MELGUIZO BEJAR

CARMEN CARLA PEREZ CUESTA

SAGRARIO MAQUEDA RUIZ

JOSE MARIA FERNANDEZ RAMIREZ

MARCOS GARCIA-DIES PASTRANA

MIGUEL ANGEL ORTIZ DE MIGUEL

LUIS ALBERTO MASEDO DEL CASTILLO

ALEJANDRA SANCHEZ JUAN

DAVID RUIZ MARCHESE

ALEJANDRO GARCIA GUERRERO

TAGOAN JUAREZ SL

ALBERTO ANDION ACEDOS

LUIS CARLOS SEPULVEDA SANCHEZ

RAUL VEGA ROMERO

MARIA LETICIA GUTIERREZ SANZ

CARLOS ALBERTO PALACIOS MARTIN

AYZA FINANZAS S.L.

ANTONIO BERNAL MERINO

MARIA DEL PILAR MARTIN SANCHEZ

ALVARO FERNANDEZ ROCAMORA

JUAN CARLOS FUSTER DE CACERES

FERNANDO DOMINGUEZ RUIZ

MARTA ZAMBRANO PEREZ

DANIEL NAVAS ALONSO

LASTRAS AGENTE FINANCIERO SLP

FINANZAS NUEVA ERA S.L.

ZONA 4 SERVICIOS FINANCIEROS S.R.L.

BUZABRIN, S.L.

DE-TWO Y MAS INVESTMENT SERVICES S.L.

COFARESA SERVICIOS FINANCIEROS COMPLEMENTARIOS, S.A.U.

G.S.G. GRUPO CORPORATIVO DE SERVICIOS S.L.

BANFORTUNIA S.L.

SOLUCIONES DE PATRIMONIO E INVERSIÓN, S.L.

TABULA AGO,S.L.

OFISFIN S.L.

MARIA FERNANDEZ RUFO

MARIA DE LAS NIEVES CALDERON IZQUIERDO

MARIA TERESA PEREZ PEREZ DE LAS VACAS

PAOLA GARCIA NUÑEZ

ANDREA PRATS SEGURA

CRISTINA HIDALGO GARCIA

ANGELA MARTIN PUENTES

JESUS MAILLO NIETO

FINANCIAL ADVANTAGES SL.

EDUARDO GOMES HORCAJUELO

MARIA PILAR PEREZ NAVARRO

MARIA LUZ SANZ DELGADO

ROBERTO BLANCO GARCIA

JESSICA LIMA BLANCO

ANPADU INVERSIONES, S.L.

MARIA-TERESA JIMENEZ  PACIOS

BEATRIZ TORREÑO NIETO

ALFONSOCRIADO SL

DIEGO CAÑAMERO NAVARRO

RUBEN BERNALDO DE QUIROS DE DOMPABLO

PATRICIA CONDE GARCIA BLANCO

LUCIA DIAZ PRUDENCIO

JOSE MANUEL TORRES MIGUEL

PALOMA MILAGROS BLANCO GONZALEZ

302

FRANCISCO JAVIER RIVAS VALENZUELA

MARIA TERESA GUTIERREZ GALERON

MARIA ALMUDENA MORENO NAVARRO

IEA SERVICIOS FINANCIEROS S.L.U.

IMANOL IPARRAGUIRRE JAUREGUI

MKS GESTION FINANCIERA S.L.

UNAI LEKUBE ARAMBERRI

MAIALEN SAEZ SEGUROLA

MIGUEL LLANO ABAITUA

ALFREDO ROLDAN FERNANDEZ

MARIA MANUELA GONZALEZ CUESTA

JUAN JOSE ARAGONESES MARTINEZ

JESUS RAMON HERNANDEZ GARCIA

NEREA SOBRADILLO TRUEBA

AGURTZANE ITZIAR AGUIRRE COLECHA

JAVIER COBO MENA

IÑIGO MARTINEZ GARCIA

JOSE MANUEL MUÑOZ EZQUERRO

CRISTINA NAVARRO MACHIN

BRUNO MARTIN GARCIA

OSCAR CAÑIBANO ALVAREZ

XUELING HOU

AZAHARA MAGARIN CADARSO

EDER SERVICIOS FINANCIEROS SL

OSCAR CAUDELI BOLO

FRANCISCO JAVIER MORALES MURCIA

JOAN MARÍA MANSANET RIPOLL

ENRIQUE SATURNINO MORENO

BASKY INVERSIONES FINANCIERAS SL

FORUM 20 S.L.

ALEXANDRA FRANCH CANALDA

MANSANET RIPOLL SL

CASTEL GANDOLFO S.L

VIVANCOS ROS SL

FINANZAS E INVERSIONES ALBAL S.L.

ROSA CARRERES LUCAS

ENRIQUE CHACON FERNANDEZ

JEC INVERSIONES EN CAPITAL SOCIEDAD LIMITADA

ALICANTE VALLEY SERVICIOS FINACIEROS S.L.

RUBEN MARTI CALATAYUD

VICENTE MANUEL MARTI SEGARRA

JOSE IGNACIO CANTO PEREZ

RAFAEL BELLMUNT BELLMUNT

CONCEPCION MORATA HOMBRIA

FERNANDO DONET ALBEROLA

MARIA JOSE CABALLERO GRAU

YOLANDA CASTILLO VILA

MARIA TERESA BROCH RUBERT

SILVANA JAIME GARCES

LIDIA CARRASCO MARIN

MIRIAM PEREZ SORIA

TRAKZIONA INVEST SL

ENRIQUE MARTINEZ MORENO

JOSE ANTONIO SANCHEZ NAVARRO

PIC LLOCH MONTGO SOCIEDAD LIMITADA

RUBEN TRAVER SALES

ANDRES RIVERO JIMENEZ

JUAN ANTONIO CANTERO SANCHEZ

MR2 Servicios Financieros S.L.

SONIA BELLMUNT SAURA

JOSE MANUEL AYALA ARNALDOS

JOAN ANDREU GABARRI LLOP

JAVIER GONZALVEZ BOTELLA

JUANA MARTINEZ MARTINEZ

SONIA ZAPLANA VERGARA

BENISSA C M SERVICES S.L.

INMACULADA LATORRE CANA

ALBERTO SAEZ CLEMENTE

MISTERA BUSINESS SOLUTIONS S.L.

303

SAMAI FINANZAS S.L.U.

LUBESAGA SL

ALBERO PAYA FINANCIEROS, S.L.

VANESSA SORO GINER

ROSA MARIA BLAY PASCUAL

SANDRA CHOVER GOMEZ

NURIA MANUEL CERVERA

JOSE FERMIN MOMPO VIDAL

MARGARITA LUZ BOLINCHES IBAÑEZ

DRIMTY S.L.

VERIS SERVICIOS FINANCIEROS S.L.

TRAMYGEST FINANCIERA S.L.

SAVINGS ELX 2014, S.L.

C M FINANCIAL SERVICES S.L.

ANDRES MINGUEZ LUJAN

ASEMAR FINANCIERA, S.L.

GESTIONES FINANCIERAS FERRER Y GARCIA 2015, S.L.

AGENTES XIRIVELLA, S.L.

HOTRARESCON SL

VIMAGARMA A.F. SL

CAROLINA GARCIA BELMONTE

EUGENIA DURAN HERNANDEZ

JOSE SANTAMARIA CABRERA

VANESA GONZALEZ VILA

FERNANDO GABARRON FERNANDEZ

ROCIO NAVARRETE MARTÍNEZ

ARANTXA CARDENAL FERNANDEZ

MIGUEL ANGEL RIOS MUT

RAMON DANIEL MUNUERA SANZ

MARIA MERCEDES SABATER JIMENEZ

SANMAFRAILES SL

GRATIANA TORRES ROSA

SERGIO VIVANCOS ALVARO

IVÁN LÓPEZ DURÁ

IVAN GODINEZ GUERRERO

SUSANA DONAT DE LA CRUZ

MUNICH FINANZ S.L

CARMEN RODRIGUEZ-BUSTELO GONZALEZ

JOSE JOAQUIN APARISI GRAU

ISABEL CARMEN DOMINGUEZ ZANON

CARLES ROYO DELPOZO

BEATRIZ GARCIA ESTELLER TORRES

MIGUEL ANGEL FERNANDEZ MENDEZ

MIREYA GARCIA MARTINEZ

ALEJANDRO SANCHEZ BERMUDEZ

ANA MARIA LOPEZ MARTINEZ

DIEGO MARTINEZ OTON

MARIA DELS DESAMPARATS ROSELLO MORELL

MIGUEL ANGEL VIDAL JOVER

VEGUILLAS Y VEGUILLAS SL

JOSE ALFONSO TARI ESCLAPEZ

MAGDALENA JOVER SELLER

PAULA GRACIA CABRERA COLONQUES

GESFINPRO, S.L

BEATRIZ PEREZ GARCIA

MIGUEL ALCALDE PITARCH

ANTONIO LUIS CASTELLO APARISI

MARTA FAUS BLANES

JUAN ANTONIO ALCAIDE NAVARRO

MIGUEL GARCIA ABAD

VICENTE MOSCARDO TORRES

JUAN JOSE MONTEAGUDO MARTINEZ

SEMAGERA, S.L.L.

ALESA CAPITAL, S.L.

AYALA MARTINEZ MELERO, SLL

ISABEL CARBONELL SERNA

ALEJANDRO SANTAELLA FERRER

JOSE JUAN FERRANDEZ SANCHEZ

BEATRIZ SALA GARCIA

304

LAURA ERES FUENTES

MARTA HERREROS LOPEZ

ANA DURAN HERNANDEZ

SILVIA GARCIA SENDRA

EMILIO SANCHEZ ALCARAZ

NURIA  FERNANDEZ REYES

MADIVISAN S.L.U.

FRANCISCO JOSE GARCIA MORA

JAVIER VENEGAS LAGUENS

SR SANTANDER GESTION SL

MARTA MARIA GARCINUÑO CASELLES

CARLOS GARCIA RODRIGUEZ

SILVIA SAURET VENTOSA

XAVIER RAMOS ANGLADA

ELISABET PUGA JODAR

PAU FONT RODES

JOSE LUIS PRIETO PARADA

JOSE ANGEL RODRIGUEZ PRIETO

JOSE LUIS FARIÑAS PEREZ

ANA VANESA VILLASECA GARCIA

FRANCISCO RICARDO BELLO GOMEZ

DAVID ALMIÑANA ESCODA

MARÍA CRUZ GARCÍA-ESTELLER TORRES

305

Directors’ report

Banco Santander, S.A.

1. Introduction

Banco Santander, S.A. ('the Bank' or 'Banco Santander')

is a Spanish bank, incorporated as a sociedad anónima in

Spain and is the parent company of Grupo Santander or

Santander. Banco Santander, S.A. operates under the

commercial name Santander.

Banco Santander operates through a branch network

distributed in Spain and abroad.

On 7 June 2017, Banco Santander acquired the entire

share capital of Banco Popular Español, S.A.U. (‘Banco

Popular’) in an auction in connection with a resolution

plan adopted by the European Single Resolution Board

(the European banking resolution authority) and

executed by the FROB (the Spanish banking resolution

authority) following a determination by the European

Central Bank that Banco Popular was failing or likely to

fail, in accordance with Regulation (EU) 806/2014

establishing a framework for the recovery and resolution

of credit institutions and investment firms. On 24 April

2018, Banco Santander announced that the boards of

directors of Banco Santander, S.A. and Banco Popular

Español, S.A.U. had agreed to an absorption of Banco

Popular by Banco Santander. The legal absorption was

effective on 28 September 2018.

The directors’ report has been prepared based on the

accounting and Management records of Banco

Santander, S.A.

The financial information included in this directors’

report has been prepared in conformity with the Bank of

Spain Circular 4/2017 of 27 November on Public and

Reserved Financial Information Regulations and

Financial Statements Forms, and subsequent

modifications.

2. Situation of Banco Santander

Santander is one of the largest banks in the eurozone. At

the end of 2022, we had EUR 1,734,659 million in assets

and EUR 1,255,660 million in total customer funds.

Santander was the second largest financial entity in the

eurozone by market capitalization at EUR 47,066 million

as of 30 December 2022.

Our purpose remains the same; to help people and

businesses prosper in a way that is Simple, Personal and

Fair. We do not merely meet our legal and regulatory

obligations, but also aspire to exceed expectations. We

strive to support our customers in their green transitions,

while promoting financial inclusion at the same time.

We engage in all types of typical banking activities,

operations and services. Our track record, business

model and strategic execution drive our aim to be the

best open digital financial services platform, by acting

responsibly and earning the lasting loyalty of our

stakeholders (customers, shareholders, people and

communities).

2022 was another challenging year, as certain adverse

social and economic effects of the covid-19 pandemic

continue to impact the macroeconomic environment and

Santander. Moreover, the current context, in part as a

result of the war in Ukraine, is geopolitically and

economically more complex, volatile and uncertain. In

2022, we continued to play an active role in economic

recovery and continued to support our 160 million

customers and society.

Regarding our 206,462 employees at the year end, we

continue to work towards our goal of being an employer

of choice, chosen for our purpose, culture and

responsible way to achieve results. Our strategic

priorities pivot around Talent and Culture, ensuring we

have the talent we need, encouraging and empowering

them, while developing their skills and providing an

excellent experience.

In 2022, we launched our new T.E.A.M.S. corporate

behaviours, and adopted a new "Your Voice" model to

provide a tool for our employees to share their thoughts,

ideas and experiences. Throughout this first year, Your

Voice has addressed issues such as engagement,

flexibility, relationships between peers, inclusion,

wellbeing and culture. The global response eNPS

(employee Net Promoter Score) rate of Santander's

employees stood well above the companies’ average in

this global engagement survey.

306

We interact with our customers through several

channels to ensure access to financial services. At the

year end, we have 9,019 branches which we have been

improved in recent years. These include specialist

centres or branches, for example, Work Café, SmartBank

and Ágil branches, as well as, for certain customer

segments, such as businesses, Private Banking or

universities. We are also promoting new collaborative

spaces with greater digital capabilities.

Additionally, our contact centres, which provide best-in-

class service quality, continue to serve our customers.

Amid faster digitalization, our aim, now more than ever,

is to continue to offer customers digital products and

services that will meet their needs and support them in

their digital journey.

Santander continues to invest in ensuring access to

financial services for our customers who prefer in-

person access to banking services, but also for those

who do not have an office nearby or do not know or feel

comfortable using mobile phones or new digital

channels. Our priority is to ensure that no one is left

behind and everyone has the opportunity to access our

products and services offered.

Some examples of our commitment to financial inclusion

are our initiatives in rural Spain. Through our branches,

ATMs and network of financial agents in communities

with under 10,000 inhabitants and Correos Cash, we

provide access to financial services to customers in these

rural areas that might otherwise have been left off the

grid. In 2022, we also joined the Asociación Española de

Banca's (AEB) agreement to make further headway in

financial inclusion. In Mexico, around 80% of our Tuiio

(our microfinance programme) customers were able to

grow their business through our loans and 48% of them

were able to hire more employees.

As another example, Santander has been working on

enhancing services for our elderly customers and on

preventing digitalization from becoming an obstacle to

accessing financial services. Our cross-functional team

has put in place measures that include extending the

hours of counter/teller services and creating senior

ambassadors to make sure senior citizens receive the

best possible service.

In addition to these improvements in the way we serve

our customers, we are simplifying our retail and

commercial banking products and automating

processes, while working to lower our cost to serve and

increase our local competitiveness.

This is reflected in customer growth and enhanced

customer experience and satisfaction. In terms of NPS,

we are one of the top three banks in eight markets

(including ranking first in Chile and Argentina).

The number of digital and loyal customers as well as

digital activity continued to increase. We now have more

than 27 million loyal customers (+8% year-on-year),

mainly due to the increase in individuals. Digital

customers rose 8% to over 51 million. Digital sales

accounted for 55% of total sales (54% in 2021, 44% in

2020 and 36% in 2019) and 80% of transactions carried

out were digital (+4 pp in 2022).

We promote financial inclusion as part of our ESG

strategy, in a society that is increasingly aware of its

importance. Because we have an opportunity and a

responsibility to do things the right way, we embed ESG

factors in all our businesses.

At the core of our success is our effort and ability to

attract a diverse and talented workforce, our culture of

teamwork and our promotion of financial inclusion.

Grupo Santander has a balanced diversification in three

geographical between mature and emerging markets,

and operates mainly in 10 core units, where it has

significant market shares.

307

3. Financial performance

3.1 Economic outlook:

In 2022, Santander operated in an environment marked

by global inflation picking up to levels not seen in

decades. The war in Ukraine fanned geopolitical tensions

and global supply chain bottlenecks and disruptions

stemming from the covid-19 pandemic and geopolitical

situation waned but, nonetheless, persisted.

In response, the major central banks raised interest rates

to try to contain inflationary pressures; some countries

are expected to consolidate monetary policy in 2023,

which may lead to a gradual slowdown in global

economic activity.

Economic performance in the Eurozone and Spain was as

follows:

•Eurozone (GDP: +3.5% in 2022). The end of pandemic

restrictions in Q2'22 boosted services sector activity,

but the war in Ukraine, which caused energy and basic

food prices to rise, hampered post-pandemic recovery

and created a recession risk. The labour market was

resilient, as the unemployment rate continued to fall

to historical lows (6.6%). Inflation rose steadily to

above 10% after the summer, although ended the

year at 9.2%. The European Central Bank (ECB)

responded by beginning to raise interest rates in July,

increasing the official interest rate from -0.50% to 2%

at year end.

•Spain (GDP: +5.5% in 2022). Normalization of the

service sector and tourism activity following the

pandemic boosted growth in 2022. Despite economic

deceleration, the labour market remained robust and

the number of part-time contracts fell. Inflation

peaked above 10% but declined to 5.8% in December,

due to falls in energy prices. However, core inflation

continued to rise (7.5% in December).

•To complete the information with the performance

indicators of the rest of geographies where the Group

is present, see the Consolidated Directors’ Report.

3.2 Balance sheet and results:

Banco Santander, S.A. is the Parent Bank of a financial

group that operates in different countries through

different businesses therefore its financial statements

not only reflect its commercial activity in Spain, but also

the activity derived from being the head of the Group.

This last aspect makes it difficult to analyse its evolution

without distinguishing the results obtained from the

commercial activity from those more directly related to

its holding nature.

Despite the challenging macro-economic environment,

we increased our customer base more than 700

thousand customers in 2022, recording growth in every

quarter.

In individuals, we saw record new mortgage lending in

Q3 and sustained business dynamics in consumer

finance and insurance during the year. In wholesale

banking, we consolidated our leadership in the

syndicated and leveraged finance market. In corporate

lending, short term financing reached record highs while

demand for long-term loans contracted.

Regarding the balance sheet, as of 31 December 2022,

the total assets of Banco Santander stood at EUR

750,026 million, with an increase of 13.99% over the

previous year.

Loans and advances to customers at the end of the year

stood at EUR 325,282 million, with an increase of 5.49%

over the previous year driven by the growth of

mortgages and consumer loans.

Customer deposits, at the end of the year, stood at EUR

387,304 million with an increase of 25.41% over the

previous year. Demand deposits increased by 3.52% and

time deposits increased by 142.82% with growth in both

corporates and households.

Net interest income in 2022 stood at EUR 4,198 million,

15.97% higher than the previous year due to the positive

evolution of the balance sheet and interest rates.

Income from equity instruments amounted to EUR

9,166 million in 2022. This line includes dividends

received from the Group subsidiaries.

Net fee income increased by 3.06% compared to 2021

to 2,657 million euros, highlighting the strong growth in

commissions from wholesale banking.

Gains/losses on financial transactions (including

exchange differences) reflected gains of EUR 199 million

as compared to 253 million in the previous year, due to

the higher sales results of ALCO portfolios produced in

2021.

General administrative expenses (personnel and other

administrative expenses) were EUR 4,683 million,

increasing only 0.21% as compared to the previous year,

thanks to continuous efficiencies measures and despite

high inflation.

308

Impairment losses on financial assets (net) in 2022

accounted for EUR 1,397 million, 0.36% of financial

assets at fair value with changes in other comprehensive

income plus financial assets at amortized cost.

On the other hand, the impairment of investments in

subsidiaries, joint ventures or associates and non-

financial assets in 2022 amounted to EUR 512 million

and losses of non-current assets held for sale

amounted to EUR 40 million.

Distribution proposal of the Bank’s profit

The board applied for the 2022 results a shareholder

remuneration policy consisting in paying out

approximately 40% of the Group's underlying profit,

split approximately in equal parts in cash dividend

payments and share buybacks. 

•Interim remuneration. On 27 September 2022 the

board agreed to:

•Pay an interim cash dividend of 5.83 euro cents per

share (equivalent to approximately 20% of the

Group's underlying profit in H1'22), charged against

2022 results; it was paid on 2 November 2022; and

•Implement the First 2022 Buyback Programme

worth approximately 979 million euros

(approximately 20% of the Group's underlying profit

in H1'22) which was approved by the ECB on 17

November 2022. It ran from 22 November 2022 to

31 January 2023. Banco Santander bought back

340,406,572 shares, which was 2.03% of its share

capital at that time. The First 2022 Buyback

Programme aimed to reduce share capital by

cancelling the shares that were acquired. Under he

share capital reduction agreement approved at the

AGM, on 1 February 2023 the board agreed to reduce

the share capital by EUR 170,203,286 (cancelling the

340,406, 572 shares acquired).

•Final remuneration. On 27 February 2023, per the

2022 shareholder remuneration policy, the board of

directors decided to:

•Submit a resolution at the 2023 AGM to approve a

final cash dividend in the gross amount of 5.95 euro

cents per share entitled to receive dividends. If

approved at the AGM, the dividend would be payable

from 2 May 2023.

•Implement a Second 2022 Buyback Programme

worth 921 million euros, for which the appropriate

regulatory authorization has already been obtained

and that will be executed from 1 March 2023.

Once the above mentioned actions are completed, the

shareholder remuneration for 2022 will have been 3,842

million euros (approximately 40% of the underlying

profit in 2022) split in approximately equal parts in cash

dividends (1,942 million euros) and share buybacks

(1,900 million euros). These amounts have been

estimated assuming that, after the execution of the

Second 2022 Buyback Programme, the number of

outstanding shares entitled to receive the final dividend

will be 16,190,866,119. Therefore, the total dividend

will be higher if fewer shares than planned are acquired

in the buyback programme and will be lower in the

opposite scenario.

See more information in section 9.2 Dividend policy.

309

4. Trend information

This director’s report contains certain prospective

information on the directors’ plans, forecasts and

estimates, based on what they consider to be reasonable

assumptions. Readers of this report should take into

account that such prospective information must not be

considered a guarantee of our future performance. As

the plans, forecasts and estimates are subject to

numerous risks and uncertainties, our future

performance may not match initial expectations. These

risks and uncertainties are described in the Risk

management chapter of this report and in note 49 of the

consolidated financial statements.

Despite considerable factors of uncertainty in 2023

economic outlooks (such as geopolitics, in particular its

impact on the supply of energy in Europe, and the

restoration of global supply chains), our base scenario

assumes inflation will begin to decelerate gradually in

2023 as a result of more restrictive central bank

monetary policies and the easing of geopolitical tensions

and global supply chain bottlenecks.

The expected economic cooling should slow down

economic growth. This could result in a mild recession in

some countries. We do not expect the slowdown to

affect unemployment significantly. Until inflation shows

clear signs of slowing down, we believe that central

banks will continue to trend towards tighter monetary

policy, and that interest rates in 2023 will remain around

current levels. The only exception could be in Latin

America, where some countries could start to cut rates in

the second half of the year.

The macroeconomic forecast for 2023 by country/region

is as follows:

Eurozone

A high inflationary environment that is eroding

household purchasing power, monetary policy that still

needs tightening, and the war in Ukraine (which seems

unlikely to be resolved in the near future) are shaping

2023. However, concerns regarding the security of

energy supply have subsided and global supply chain

functioning has improved. As a result, although we

expect slower economic growth in 2023 than in 2022,

the outlook is better than it was a few months ago. The

euro area's GDP is expected to grow modestly, around

1%. Inflation should fall but is likely to remain far from

the ECB's 2% target. We therefore expect tighter

monetary policy with higher official interest rates and

measures to reduce the ECB's balance sheet.

Fiscal policy could turn slightly expansive as

governments are extending some measures

implemented in 2022 to offset the impact of higher

energy prices. Consistency between monetary and fiscal

policy will be a challenge. Eurozone tax reforms

(suspended due to the pandemic) are underway, but

won't take effect until 2024.

Geopolitics will be particularly important in the

eurozone. Economic growth might be affected by the

war in Ukraine and the EU's response to energy security

and defence challenges.

Spain

We expect growth to slow down in 2023 due to lower

household consumption as real incomes are squeezed.

Energy price uncertainty and tighter financial conditions

may delay some investment. We expect inflation to

decrease, though we believe core inflation will take

longer to do so. The unemployment rate may increase

due to economic slowdown at the beginning of the year,

but we expect it to be transitory.

Our strategy in Europe is to continue maintaining the

focus on customer experience and service quality, while

continuing to deliver a more common operating model.

Our key priorities for 2023 are to deliver:

•Sustainable top line growth by being customer

centric, achieving best-in-class customer experience

in all countries through simpler and better

propositions, end-to-end delivery channel

transformation and by leveraging our scale (e.g.

global businesses growth and improved

connectivity).

•Strong cost discipline by containing cost growth

below inflation and improving efficiency, by

delivering a more common operating model (e.g.

common shared services and platforms).

•Excellent risk management by continuing to lower

the CoR and NPL ratio.

•Active capital management by focusing on capital

deductions and reducing portfolios with lower

profitability.

•Green finance leadership for retail and corporates;

and

•Attract and retain the best talent and continue

improving employee engagement to be a reference

in the sector.

Our strategy in Spain remains centred on our customers.

We want to attract more customers and increase

engagement. We will focus on:

•Improving customer experience, with the aim of

being market leaders in NPS, by developing new

products and grater connectivity with the other

countries.

•Growing our business in high-value segments by

leveraging our global and regional scale.

•Achieving operational excellence through simple and

digital end-to-end processes that enable us to

structurally reduce our cost to serve.

310

•Developing our customer relationship model that

offers a unique omni-channel experience and better

service more efficiently.

•Continuing active and forward looking cost of risk

management.

See more information in the Consolidated Directors’

Report.

5. Non-financial information

This Statement of Non-Financial Disclosures of Banco

Santander, S.A., which is part of the Separate Directors'

Report, contains the non-financial disclosures set out in

the Consolidated Directors' Report of Grupo Santander

together with other material useful comparative

information for Banco Santander, S.A. that is appropriate

for an understanding of the trends, results, status and

impact of the activities of Banco Santander, S.A.,

including information on matters of the environment,

society, human rights, the fight against corruption and

bribery, and personnel.

When drawing up the non-financial information

contained in this Separate Statement Of Non-Financial

Disclosures, Banco Santander performed a materiality

analysis, in line with the international reporting

framework developed by the Global Reporting Initiative

(GRI), which enabled it to identify the most important

aspects about which to inform its stakeholders in

accordance with the GRI standards.

General information

The purpose of Santander Group is to help people and

businesses prosper.

Our business model is based on three pillars:

•Customer focus: Deepening the relationships with our

customers through a simpler value proposition,

superior customer experience and our digital

proposition

•Our scale: Local scale and leadership.

•Diversification. Our geographic and business

diversification allow us to overcome regional

challenges in our footprint and business lines.

Building on our technology to further strengthen our

customers’ loyalty.

As a responsible bank, we focus on areas where our

activity can have the greatest impact and support an

inclusive and sustainable growth.

To achieve this, and in compliance with the international

best practices regarding sustainability and responsible

banking, Banco Santander has a sound corporate

governance structure, with the board of directors as the

maximum decision-making body of the Banco

Santander, with the exclusive power to approve Grupo

and Banco Santander general policies and strategies,

including those regarding sustainability.

It also has a Responsible banking and sustainability

policy that defines our general sustainability principles

and our voluntary commitments with the aim of

generating long-term value for our stakeholders, and

with a new environmental and social risk management

policy that governs the Groups's financial activity in

sectors such as energy, mining/metals and soft

311

commodities (e.g. palm oil, soya and timber). It also has

a defence sector policy outlining the criteria for the

group's operations with companies that perform

defence-related activities. Likewise, the Bank has a

sensitive sector policy that sets down guidelines for

assessment and decision making about Banco

Santander's participation in certain sectors, whose

potential impact could lead to reputational risks. These

policies are reviewed annually.

Banco Santander's responsible banking strategy is also

underpinned by other internal regulations such as the

general code of conduct, the corporate culture policy

(which includes principles of diversity and inclusion

governing the Group), the conduct risk with customers

management model, the cybersecurity policy, or the

Third-party certification policy (which includes the

principles on the responsible behaviour of suppliers).

Moreover, Banco Santander has a sound corporate

governance, both to ensure it is compliant and to help

address it ESG agenda.

The responsible banking, sustainability and culture

committee (RBSCC) has been created which will help the

board of directors to comply with its responsibilities

regarding the definition and supervision of the

responsible banking, sustainability and culture strategy.

The committee is supported by the Responsible banking

forum. It executes the responsible banking agenda

across the Group, drives decision-making on responsible

banking issues and, ensures the execution of any

mandates from the RBSCC, other Board committees and

the board of directors. It also ensures alignment on key

issues, including the review and escalation of reports to

the RBSCC.

The Group‘s responsible banking corporate unit and RB

network work jointly to deliver on our strategy in a co-

ordinated way across the Group

In addition, metrics and medium and long-term public

commitments have been established to drive Santander

´s ESG agenda and embed sustainability into the heart of

Group business strategy (these public commitments are

carved out throughout the report).

The identification of non-financial risks associated with

its activity is a priority for Banco Santander.

Banco Santander has procedures in place for their

identification, analysis and assessment in transactions

subject to Group policies and to external commitments

such as Equator Principles, an initiative the Bank joined

in 2009.

In this sense, Banco Santander recognises the right of

communities to a clean and healthy environment and

undertakes to minimise the environmental impact of its

operations, which means:

•Assuming, in line with the bank's commitment to the

Equator Principles, the obligation to analyse, identify

and correct, during the analysis of the risks of financing

activities and consistently with the guidelines

approved by the International Finance Corporation, the

negative social and environmental impacts, including

those affecting local communities.

•During due diligence prior to signing agreements for

financing or of any other kind and complying with the

Equator Principles and social and environmental risk

management policies, Santander undertakes, as part

of its analysis, to assess the human rights policies and

practices of its counterparties.

•Establish specific policies governing the requirements

for offering financing to those sectors, activities or

potential customers that present a special risk in

respect of social, environmental or human rights

issues.

Banco Santander is part of the main initiatives at

international level regarding sustainability (United

Nations World Agreement, Banking Environment

Initiative, World Business Council for sustainable

Development, UNEP FI, Equator Principles, Responsible

Banking Principles, CEO Partnership for Financial

Inclusion, etc.). In addition, we are one of the founding

signatories of the United Nations Principles of

Responsible Banking. The aim is to contribute to the fight

against climate change and the achievement of the

United Nations' Sustainable Development Goals.

In 2021 we also joined the Glasgow Financial Alliance for

Net Zero, Net Zero Asset Management and were co-

founders to the Net Zero Banking Alliance. Within

GFANZ, we co-led the Net Zero Public Policy and their

call to action launched in October.

In Spain, we are member of Foretica, of the Green

Growth Spanish Group as well as Fundación SERES.

In addition, Banco Santander  forms part of the main

stock market indices that analyse and evaluate

companies' actions on sustainability.

2022 highlights:

•CDP. We were placed in the highest score band

(Climate Change A List - Leadership level), improving

on governance, risk disclosure, targets and portfolio

impact.

•Sustainalytics We improved to 22.4 points,

maintaining on "medium risk", improving on business

ethics, ESG integration, data privacy and human

capital.

•ESG Corporate Rating by ISS. We improved to 55.6

points, maintaining the ESG performance on “C”, above

the sector-specific “Prime” threshold;

•Bloomberg Gender Equality Index (BGEI). We

improved to 92.87 points, above the financial sector

average (74.11). Highest ranked among banks and

second company overall.

312

•We maintained our positioning on the MSCI World

Index. And we’ve consecutively featured in the S&P

DJSI World and Europe indices since 2002 and in the

FTSE4Good since 2003.

Information about environmental issues

At Santander, we want to play our part in supporting our

customers and the global economy to be zero by 2050.

We are offering our customers decarbonization solutions

to help them fulfil their climate goals. We are aligning

our portfolios with the Paris Agreement Goals and

keeping our operations carbon-neutral. Integrating

climate within our risk management is key to tracking

our plan’s robustness.

We have a four-pronged climate strategy and public

commitments to:

1) align our portfolio with the Paris Agreement Goals

and set sector portfolio alignment targets in line with

the NZBA and with the NZAMi: to ensure projected

carbon emissions will contribute to limiting warming to

a 1.5ºC rise above pre-industrial levels.

2) help customers transition to a low-carbon economy,

with the commitment to raise EUR 120bn in green

finance between 2019 and 2025 and EUR 220bn by

2030; offer our customers guidance, advice and specific

business solutions; and enable them to invest in a wide-

ranging ESG proposition according to their sustainability

preferences.

Some environmental products and services delivered by

Banco Santander in Spain are:

•Funding renewable energy projects.

•Management of credit lines in relation to energy

efficiency in collaboration with multilateral institutions

such as the European Investment Bank (EIB) and the

European Bank for Reconstruction and Development

(EBRD).

•Financing of low-emission vehicles, Banco Santander

offers Ecological Car loans for the purchase of hybrid

or electric cars with reduced interest rates.

3) reduce our impact on the environment by remaining

carbon neutral and sourcing all our electricity from

renewable energy by 2025.

Banco Santander continues to hold the ISO 14001

environmental certificate for the Santander Group City in

Boadilla, the bank's headquarters. It has also obtained

the LEED GOLD certificate for the new headquarters of

Santander España (Luca de Tena), the Abelias building

and the DPC in Santander.

4) embed climate in risk management; understand and

manage the sources of climate change risks in our

portfolios.

In 2022 we continued to make progress in meeting the

public targets:

•Financing or facilitating the mobilisation of EUR 120

billion up to 2025 and EUR 220 billion up to 2030.

Since 2019 we have already mobilised EUR 94.5

billion.

•Since 2020 we are carbon neutral in our own

operations.

•That 100% of the electricity we use comes from

renewable sources by 2025. At the end of 2022, 88%

of the energy consumed in the Group (10 main

geographies) came from renewable sources. In Spain

it is 100%.

Information about labour questions and employees

Banco Santander aims to be one of the best banks to

work for, able to attract and retain the best global talent,

enabling it to accelerate the transformation and helping

people and society prosper.

Human resources strategy is based on:

•Ensuring that we have the best culture, and a great

employee experience – delivered through initiatives

such as diversity, equity & inclusion, culture, health

& wellbeing

•Attracting and engaging the best talent and

encouraging our people to learn through great

leadership, a strong focus on development and having

a strong employee value proposition

•Having the best organisation design, making data

driven decisions, and, utilizing new ways of working to

drive value for all stakeholders

a) Employment

At 31 December 2022, Banco Santander, S.A., had a

headcount of 22,105 employees, with an average age of

45, of whom 49.7% were women and 50.3% men.

Some 99.9% of labour contracts are permanent full-

time.

The gender pay gap at Banco Santander S.A. in Spain  is

15.1% (in median) and the difference in compensation

for identical positions is 4.3%. The difference in

comparison with the Group (1%) is due mainly to the

legacy of the mergers carried out in recent years and to

changes in functions or the fact that some positions are

not equivalent.

Employees with a disability account for 2% of the total

(+0.6 vs 2021).

b) Work organisation

At Santander  we believe our diverse organization must

adapt to the  needs and characteristics of its teams.

We enabled managers to take charge of deciding where

their people can work, each area and business has

implemented new ways of working based on the

characteristics of the team and its needs.

313

In addition, the Banco Santander has measures aimed at

facilitating the work-life balance of its employees

through the different agreements signed with the

relevant unions´ representatives. Santander has

committed to promoting a rational management of

working time and its flexible application, as well as the

use of technologies that allow a better organisation of

the work of our professionals, specifically addressing the

employees´ right to digital disconnection.

c) Health and safety

The health of its employees is a priority for the bank. In

2022, we published our Global Health, Safety and Well-

being policy, which can be found on our corporate

website.

Our health and well-being strategy sets out how we

protect the health, safety and well-being of all

employees, associates and customers; promote a

healthy lifestyle; and create long-term value.

It includes a set of common guidelines to ensure a

consistent, group-wide approach to mental and

emotional health, digital downtime, nutrition and

obesity and other matters. 

We have collective agreements at bank and sector level,

under which employee health and occupational risk

prevention are considered.

The BeHealthy initiative aims to make Banco Santander

one of the healthiest companies in the world and to offer

employees health and wellbeing benefits.

In 2022, we adapted our Covid-19 strategy to address

the severity of the Omicron variant early in the year

before the pandemic began to subside.

We undertook a gradual process to normalize our

operations and return to the office, cutting back our

COVID-related measures strictly within the labour laws

in each country.

Banco Santander has a plan for the prevention of

workplace risks that is available to all employees on the

corporate intranet.

Banco Santander also promotes a healthy work/life

balance through flexible work policies and services to

satisfy employees' personal and family needs. The

general code of conduct highlights our ethical principles,

including the importance of encouraging a working

environment that is compatible with employees'

personal and family life.

d) Labour relations

Banco Santander has made a formal commitment to

foster workforce labour relations in its code of conduct.

The code of conduct stablishes the obligation to respect

the internationally recognised rights of unionisation,

association and collective bargaining, and the activities

carried out by the unions that represent employees, in

accordance with the functions and areas of responsibility

legally attributed to them.

In addition, the responsible banking and sustainability

policy describes Banco Santander's principles and

commitments with respect to relations with the Bank's

employees. These commitments are fostered through

social dialogue and include:

•Preventing discrimination and practices that are

harmful to people's dignity.

•Rejecting forced and child labour.

•Respecting freedom of association and collective

bargaining.

•Protecting employees' health.

•Offering decent work

Also, in meetings of the European Works Committee,

various declarations have been signed together with

legal representatives of employees in the main European

countries in which the Group Santander operates (Spain,

Portugal, Germany, the UK, Italy, Poland and Nordics).

In addition, the collective labour agreement for the

banking sector, negotiated and signed by the bank,

contains various declarations about promoting labour

dialogue.

The dialogue with employees' representatives is

maintained through numerous bilateral meetings and

specific committees.

These specific meetings with the unions are held to

inform them about significant Banco Santander projects

and to obtain their feedback, in the understanding that

their support is necessary and is directly related to the

satisfactory implementation of these projects.

In Spain, practically 100% of the workforce is covered by

a collective labour agreement.

e) Training

We value continuous learning so our employees can

adapt to an ever-changing environment and help

accelerate our transformation.

Our Global learning and development policy sets the

standards for designing, reviewing, launching,

overseeing and enhancing training and development

programmes.

We are developing a common catalogue of learning

solutions that focuses on the most critical skills our

business demands, based on input from strategic

workforce planning tool, the employees' skills gap

assessment and the business challenges identified with

subsidiaries’ L&D teams and business stakeholders

through the learning needs assessment.

We encourage our employees to take the lead in their

own learning development and we ensure that their

skills and knowledge stay relevant.

314

We promote employee learning on our digital ecosystem

for lifelong learning, with a vast array of study plans and

“roadmaps” for employees to upskill and reskill and be

in charge of their training and personal development.

Furthermore, each subsidiary’s Learning and

Development team pinpoints specific learning needs

relating to its geography and designs training courses

consistent with Dojo’s standards.

f) Accessibility

Improving access to our products and services is a key

aspect of Banco Santander's commitment to be a bank

that is Simple, Personal and Fair.

The corporate works manual includes minimum

accessibility criteria based on Design for All (DfA)

principles. These criteria, which refer to office

architecture, furniture, lighting, signage and the

functional allocation of spaces, are applied by default in

new offices and in those upgrades in which this is

technically possible.

Banco Santander also wants to provide maximum

accessibility for all the users of its various websites. In

this respect, both in the development and maintenance

of its websites, the bank applies the accessibility

guidelines established by the Web Accessibility Initiative

(WAI) working group of the World Wide Web

Consortium (W3C), at level AA.

g) Equality

Banco Santander believes that diversity enriches human

capital, resulting in an inclusive and diverse work

environment that achieves better solutions and offers

added value.

The board of directors of Banco Santander is a clear

example of diversity in all its aspects. It has diversity of

gender (40% of board members are women) and

nationality (Spanish, British, American and Mexican) and

a broad industry representation (finance, retail,

technology, infrastructure and academia).

In managing employee talent, Santander considers all

existing sources of diversity, including gender, race, age,

national origin, disability, culture, education, and

professional and life experience.

Our commitment to a diverse and inclusive work

environment is a cornerstone of our corporate strategy.

Our global D&I executive working group and D&I expert

network of local representatives perform a vital role in

driving and cascading the importance of diversity and

inclusion across Grupo Santander.

Our public targets are:

•To have between 40% - 60% women members on our

Group Board. We have closed 2022 with 40% women

on the board.

•To have 30% women in senior leadership positions by

2025. We have closed 2022 with 29.3% women on

senior leadership positions at group level.

Banco Santander is one of the leading companies in the

Bloomberg Gender-Equality Index 2022, We are the first 

bank, and the second highest rated company.

Information about Human Rights

In line with its corporate culture, Banco Santander

undertakes to respect and promote human rights in its

sphere of operations, and to prevent or minimise any

violation directly caused by its activity.

Banco Santander has a responsible banking and

sustainability policy that includes commitment to human

rights, in accordance with the strictest international

standards, especially the UN's Guiding Principles on

Business and Human Rights of 2011.

This policy is in line with Banco Santander's General

Code of Conduct and its other policies in respect of

sustainability.

Information about the fight against corruption

Banco Santander is staunchly committed to fighting any

kind of corruption in the public and private sectors alike.

In order to comply with this pledge, Banco Santander has

drawn up this Anti-Corruption Policy which lays down all

the anti-corruption elements which the Grupo Santander

must comply with.

Banco Santander considers it a strategic objective to

have a system for the prevention of money-laundering

and terrorist financing that is advanced and effective,

permanently adapted to the latest international

regulations and able to deal with new techniques

employed by criminal organisations.

It also has a corporate framework that lays down

principles for acting in this respect and sets minimum

standards applicable to local units. The latter are

responsible for directing and co-ordinating procedures

for the prevention of money-laundering and terrorist

financing, and for investigating and issuing alerts about

suspicious transactions and responding to requests for

information from the supervisors.

As a signatory of the ten principles of the UN's Global

Compact, Banco Santander undertakes to work against

corruption in all its forms, including extortion and

bribery.

In addition, Banco Santander has whistle-blowers'

channels for employees, which form part of the general

code of conduct, and for suppliers, designed for

reporting inappropriate behaviour by bank employees in

matters regarding corruption and bribery that are

contrary to internal regulations, to the compliance

function.

By category, the main concerns reported related to

issues of workplace harassment, breaches of corporate

315

behaviour (SPF) and labour regulations, as well as

internal fraud and marketing of products and services. 

In 2022, 93 equal opportunity and non-discrimination

complaints were received in the Group, 11 of which

resulted in disciplinary action, including 8 dismissals. In

Banco Santander SA only 4 equal opportunity and non-

discrimination complaints were received, none resulted

in disciplinary action.

We also received reports of 18 alleged cases of

corruption in the year, resulting in 1 dismissal. In Banco

Santander SA only 4 cases were received, with no

disciplinary action.

Information about society

a) The bank's commitments to sustainable development

Banco Santander contributes to economic and social

development through initiatives and programmes that

promote education, entrepreneurship, employability and

social wellbeing.

Banco Santander has, as one of its priority lines of action

to contribute to sustainable development, the financial

empowerment of people. Our goal is to include and

financially empower 10 million people by 2025. Three

main focuses of action:

•We help unbanked, underbanked and vulnerable

people to access and use basic financial services.

•We offer specific products and services to low-

income people, people with financial problems, and

vulnerable groups.

•We promote financial education programs

In total, by 2022 we financially empowered more than 5

million people (over 600,000 people in Spain). And we

have met our public target three years ahead of

schedule.

Through Santander Universities, a unique initiative in the

world, we focus our efforts on supporting education,

employability and entrepreneurship. Banco Santander

developed the largest scholarship programme ever

launched by a private entity.

Grupo Santander has over 1,300 agreements with

universities and academic institutions in 25 countries.

Banco Santander SA has agreements with 108 academic

institutions.

During 2022 Banco Santander invested a total of EUR

100 million to support higher education. Of which 62

million was disbursed by Santander Spain and the

Corporate Centre.

The bank also supports the communities where it

operates through numerous local programmes,

encouraging the participation of bank employees as a

way of promoting solidarity, motivation and pride in

belonging, maintaining proximity and ties with their

surroundings. In total, in 2022, Banco Santander

invested more than EUR 63 million, EUR 16 million in

social programs in Spain, helping more than 680,000

people.

Also, through the Banco Santander Foundation, the bank

works to build a fair, inclusive and sustainable society by

financing and developing various cultural, educational,

social and environmental projects.

b) Outsourcing and suppliers

Banco Santander has a supplier management model and

policy that establishes a common methodology for all

units about the selection, certification and assessment of

suppliers. In addition to price, quality of service and

other traditional criteria, it includes ESG factors, such as

diversity and inclusion, human rights and sustainability.

The third-party certification policy include the

responsible behaviour principles for suppliers.  These

principles lay down the minimum conditions that Banco

Santander expects of its suppliers around ethics (ethics

and conduct), labour matters (human rights, health and

safety, and diversity and inclusion) and the environment.

Similarly, Banco Santander has a whistle-blowers'

channel for suppliers through which suppliers who

provide services to the Bank or any of its subsidiaries in

Spain can report inappropriate conduct by Group

Santander employees which does not conform to the

framework of the contractual relationship between the

supplier and the general principles of conduct of the

Banco Santander.

c) Consumers

For Banco Santander a key characteristic of a responsible

bank is that it manages and oversees the marketing and

commercialization of products and services and

consumer protection appropriately.

Our customer conduct risk model sets out the lines of

action and standards for managing and mitigating

conduct risk in service design, sales, post-sales and

execution.

Our Product Governance & Consumer Protection

function, is responsible for ensuring appropriate

management and control in relation to products and

services and consumer protection.

Within this function, the Product Governance Forum

protects the customers by validating products and

services and preventing the launch of inappropriate

ones.

In addition, we have a vulnerable customer and special

case management model.

Appropriate management of complaints is another

important aspect of a responsible banking strategy.

Banco Santander has a procedure for complaint

management and root cause analysis whose objective is

to issue standards to all the units for proper complaint

management, ensuring compliance with the local and

316

industry-wide regulations applicable in each case, and

offering the best possible service to customers. In 2022

Banco Santander received a total of 76,272 complaints,

36.9% lower than in 2021.

Banco Santander also constantly monitors its customers'

opinions and their experiences. This information reveals

how the range of services offered can be improved and

helps to measure customer loyalty. To measure

customer loyalty and satisfaction, Banco Santander uses

the Net Promoter Score (NPS). In 2022 we have

performed well, maintaining our 2nd position in Spain,

and being top 3 in 8 of the main markets in which we

operate at a group level..

d) Tax information

Banco Santander pays its fair share in taxes in every

jurisdiction where we operate. Our tax strategy, which

has been approved by the Board, sets out the principles

by which the entire Group Santander operates. It is

published on our website.

Banco Santander contributes economically and socially

to the countries in which it operates by paying all taxes

borne directly by the Grupo Santander (taxes paid by the

Group6) and collecting or withholding taxes from third

parties generated through business activity, cooperating

as required with the local tax authorities (taxes from

third parties7).

The total taxes collected and paid by Banco Santander in

Spain in 2022 amounted to EUR 4,258 million, of which

2,892 million were the bank's own taxes and EUR 1,366

million were third-party taxes.

6. Research, development and

innovation

Research, development and innovation activities

Innovation and technological development are crucial to

Santander's strategy. We focus on operational

excellence and customer experience to meet the

challenges that stem from digitalization.

The information we gather on new technology platforms

helps us better understand the customer journey and

design a more accurate digital profile which boosts

confidence and increases customer loyalty.

In addition to competition from other banks, we must be

mindful of new entrants to the financial system that use

new technology to stand out from the crowd and gain a

competitive advantage.

Developing a sound strategic technology plan must

provide:

•greater capacity to adapt to customers’ needs

(customized products and services, full availability and

excellent, secure service on all channels);

•enhanced processes for Santander’s professionals to

ensure greater reliability and productivity; and

•proper risk management that provides teams with the

means to spot and assess all business, operational,

reputational, regulatory and compliance risks.

As a global systemically important bank, Santander and

its  subsidiaries face increasing regulatory demands that

impact  system models and underlying technology,

which require considerable investments to guarantee

compliance and legal certainty.

As in previous years, the European Commission's 2022

EU Industrial R&D Investment Scoreboard (based on

2021 data) recognized our technological effort, we were

best company in Spain, and our R&D investment where

we were the second best bank globally.

The equivalent investment in R&D&I to that considered

in the ranking was EUR 1,325 million.

Technological strategy

To aid the Group's strategy to become the best open

digital platform for financial services, our technology

must boost efficiency and minimize risk through

optimization, growth and value creation.

Our IT strategy is based on simplification, reusable

components and composable architecture. It is

317

6 Including net corporation tax payments, VAT and other non-recoverable indirect taxes, employer's social security contributions and other withholding taxes, as

well as other charges and tariffs.

7 Including net payments for salary withholdings and employees' social security contributions, recoverable VAT, tax deducted at source on capital, non-resident

taxes and others.

consistent with the Group's strategic initiatives, global

business and operating models.

To ensure our technology strategy is consistent in all

Group entities, the Santander Architecture Review Board

(SARB) holds monthly meetings that bring together

units' chief technology officers (CTOs) to actively make

key architecture decisions. It oversees the analysis of

potential assets, migration to the cloud and the review

of data lake reference architectures.

Consequently, Santander Common Architecture is

flexible for the Group and enables the use of a global

front- and back-end technology stack. It guides

technological development and integration with such

new digital capabilities as agile methodologies, the

public and private Cloud, core systems development, and

advanced technological skills (API - application

programming interface-, artificial intelligence, robotics,

blockchain, etc.) and data.

To implement our technology strategy, we use internal

regulation, the Group's commitment and experience in

working with our entities, and a governance model that

defines projects and initiatives to shape the strategy

across our footprint.

The development of our technology and operations

(T&O) model will help us cultivate new business, with a

particular focus on global products and digital services.

Some 6,000 Santander Global Technology & Operations

professionals (SGTO) in Spain, the UK, Portugal, Poland,

the US, Mexico, Brazil and Chile are gradually

incorporating the global product portfolio agreed by the

Group's entities, our global businesses and the T&O

division. They guarantee not only the quality of digital

services and products, but also their security.

SGTO has reaffirmed its commitment to R&D&I with

technology that enables us to transform and modernize

complex systems, such as core banking, to help

Technological infrastructure

Santander has a network of high-quality data centres

(CPDs) interconnected by a redundant communications

system. They are spread across strategic markets to

support and develop our operations. They combine

traditional IT systems with the capabilities of a private,

on-site cloud, which, thanks to its swift adoption,

enables us to integrate management of the business

areas’ technology, accelerate digitalization and achieve

significant cost savings.

Santander has migrated more than 90% of its

technology infrastructure to the cloud and expects to

complete migration in 2023. Our cloud strategy enables

us to enhance processes, innovate quickly and improve

service quality. Our local Cloud Centres of Excellence

(CCoEs), coordinated by Global CCoE, guarantee

consistent and rigorous Cloud adoption across our

entities. This minimizes risk in accordance with our

Public Cloud policy. Migration will also contribute

towards Santander's responsible banking goals as we

expect it to reduce the energy our technology

infrastructure consumes by 70%.

Cybersecurity

Cybersecurity is one of Santander’s main priorities. It is

crucial to support our purpose of helping people and

businesses prosper, and to offer customers excellent

digital services.

The new cyber services and capabilities we created

under our three-year Security Transformation Plan

(completed in 2020) have become business as usual

(BAU) operations in line with the Group’s Cybersecurity

Framework.

We must continuously adapt cyber defences against

more sophisticated threats and attack techniques. In

2021, we established key strategic cyber security pillars

and initiatives to develop our cyber defences and avert

new threats with cutting-edge technology.

In 2022, Santander took preventive measures to

strengthen defence capabilities in a complex geopolitical

backdrop. In particular, we developed control

frameworks for Ransomware and Distribution Denial of

Service (DDoS) threats, which dominated the external

cyber threat landscape. We also adopted measures to

make supply chains more secure, prevent data

exfiltration and build up internal controls.

Internal and external auditors periodically review our

information systems. The Group proactively identifies IT

assets, systems and information (even those of third

parties) and assesses their risk and protection levels to

detect and remedy any potential weaknesses by using

vulnerability scanning, penetration testing and red team

simulations of real cyber-attacks.

Santander takes part in coordinated cyber exercises with

public and private organizations. In September,

Santander and FS-ISAC organized a “Capture the

Flag" (CTF) competition among 35 teams - including two

from Santander -  from 28 organizations and financial

institutions around the world.

In addition to regular testing and reviews, independent

certification authorities, such as the International

Organization for Standardization (ISO) 27001 and the

Statement on Standards for Attestation Engagements

(SSAE) 18, review us regularly and have certified our

critical cyber security services.

Investing in specialized cybersecurity companies to drive

technology and innovation is fundamental to our mission

to generate value and trust in society and help create a

more secure ecosystem. In 2022, Santander and

Forgepoint Capital, a leading venture capital firm

specializing in cybersecurity, announced a strategic

alliance to drive investment and innovation in

cybersecurity in Europe and Latin America.

318

See more information in the Consolidated Directors’

Report.

7. Customer service and

customer defence

Customer Service Annual Report

In accordance with article 17 of order ECO / 734/2004 of

March 11 of the Ministry of Economy on the

departments and services of Customer Service and the

Customer Ombudsman of Financial Institutions, the

directors’ report summarizes the Annual Report to be

presented by the holder of the Service on the Board of

Directors in March 2023.

Customer service and customer defence service

In compliance with Law 44/2002 on Measures for the

Reform of the Financial System of the 734/2004 Order of

the Ministry of Economy on Departments and Services of

Customer Service and the Customer Ombudsman of

Financial Institutions and in accordance with Article 37

Of the Regulations of the Customer Claims and Attention

and Defence Service in Grupo Santander, below is a

summary of the activity developed by the said Service

during 2022, in relation to the management of

complaints and claims.

This complaint and customer service department has

managed during 2022 the claims of 20 companies of

Grupo Santander in Spain, after the approval by the

Board of Directors of the group on November 29, 2022 of

the adhesion of the companies Banco de Albacete, SA y

Pagonxt Onetrade España, EDE, SL.

Global evolution of complaints and claims received by

Banco Santander in 2022

In 2022, 86,664 claims were accepted in the complaint

and customer service department. Of these, 1,996 came

through the Customer Ombudsman, 2,367 through the

Bank of Spain, 173 through the National Securities

Market Commission (CNMV) and 105 through the

General Directorate of Insurance and Pension Funds

(DGSFP).

Analysis of claims by affected products

The following is the classification of complaints received

in 2022 according to the type of product:

Number of complaints	2022	2021
Assets	25,031	47,442
Liabilities	15,151	31,314
Services	16,513	18,063
Insurances	1,615	2,178
Funds and Plans	1,529	1,407
Payment methods	22,995	23,503
Securities / Capital Markets / Treasury	1,853	5,326
Others	1,977	1,736
	86,664	131,029

Resolution of claims and complaints

As of 31 December2022, 96.5% of the complaints and

claims received had been resolved.

The average resolution time in 2022 was 19 calendar

days. 53% of the complaints and claims resolved have

required a processing time of more than 15 calendar

days.

In 28% of cases, the resolutions have been favourable to

customers.

Entities

The following are the companies adhering to the

Regulation of the Customer Service of Complaints, Care

and Defence of Grupo Santander and their corresponding

number of complaints and claims received.

319

Entities	Admitted to processing	Non-admitted to processing
BANCO SANTANDER, S.A.	70,204	6,460
SANTANDER CONSUMER FINANCE, S.A.	10,392	2,363
OPEN BANK, S.A.	2,708	32
SANTANDER SEGUROS Y REASEGUROS CÍA. ASEGURADORA,SA	1,598	110
SANTANDER ASSET MANAGEMENT, S.A., S.G.I.I.C.	666	55
SANTANDER PENSIONES, S.A., E.G.F.P.	550	28
GETNET EUROPE, EP, SL	264	5
ALTAMIRA SANTANDER REAL ESTATE, S.A.	192	35
SANTANDER LEASE, S.A., E.F.C.	33	1
SANTANDER FACTORING Y CONFIRMING, S.A., E.F.C.	32	—
EURO AUTOMATIC CASH	18	—
TRANSOLVER FINANCE, E.F.C., S.A.	7	—
PAGONXT ONETRADE ESPAÑA, EDE, SL	—	—
SANTANDER REAL ESTATE, S.A.	—	—
SANTANDER INTERMEDIACIÓN CORREIDURÍA DE SEGUROS, S.A.	—	—
LURI 6, S.A.U.	—	—
SANTANDER INVESTMENT, S.A.	—	—
SANTANDER PRIVATE BANKING GESTIÓN, S.A., S.G.I.I.C	—	—
SANTANDER CAPITAL DESARROLLO, S.G.E.I.C., S.A.U.	—	—
BANCO DE ALBACETE, SA	—	—
Total	86,664	9,089

The network of branches and the different channels of

relationship solve, in the first instance, the requests,

disconformities or incidents that the clients

communicate to Banco Santander, trying to avoid that

they become complaints to other instances.

8. Risk management, solvency

and capital

See notes 49 and 1.e) on risk and capital to the Bank

Annual Accounts. See more information in the

Consolidated Directors’ Report.

320

9. Other relevant information

9.1 Treasury shares:

See note 30 to the Bank Annual Accounts.

The acquisition of treasury shares was last authorized at

our April 2020 AGM, for five years and subject to these

provisions:

•Treasury shares held at any time cannot exceed 10% of

Banco Santander's share capital, which is the legal

limit set under the Spanish Companies Act. 

•The purchase price cannot be lower than the nominal

value of the shares nor exceed 3% of the last price on

the Spanish market for any trades in which Banco

Santander does not act on its own behalf.

•The board may establish its purposes and the

procedures in which it may apply.

The board put to a vote at the 2023 AGM the renewal of

the authorization for the acquisition of treasury shares.

On 27 October 2020, the board approved the current

treasury shares policy, which dictates that treasury share

transactions may be carried out for these purposes:

•Provide liquidity or supply of securities in the market

for Banco Santander shares, which gives this market

depth and minimizes any temporary imbalances in

supply and demand.

•Take advantage, (for the benefit of all shareholders, of

weakness in the share price due to its medium-term

outlook.

•Meet our obligations to deliver shares to our

employees and directors.

•Serve any other purpose authorized by the board

within the limits set at the general meeting. In this

regard, Banco Santander has made during the year the

donations to Fundación Banco Santander indicated

below in the context of its Responsible Banking Policy.

Among other things, the policy also provides for:

•The principles to uphold in treasury share trades,

which include protecting financial markets' integrity

and prohibiting market manipulation and insider

trading.

•The rules on how treasury share trades must be carried

out, unless in exceptional circumstances as per the

policy. These rules include: 

•Responsibility for execution of these trades, which

falls on the Investments and Holdings department,

which is kept separate from the rest of Santander.

•Venues and types of trades. Trades must generally

be carried out in the orders market of the mercado

continuo (continuous market) of Spanish stock

exchanges.

•Volume limits, which in general must not exceed

15% of the average daily trading volume for Banco

Santander shares in the previous 30 sessions in the

mercado continuo.

•Price limits. In general, (a) buy orders should not

exceed the greater of the price of the last trade in the

market between independent parties and the highest

buy order price in the order book; and (b) sell orders

should not be lower than the lesser of the price of

the last trade in the market by independent parties

and the lowest sell order price in the order book.

•Time limits, including a 15-day black-out period that

applies before each quarterly results presentation.

•Disclosure to the markets of treasury shares trading.

The policy applies to the discretionary trading of treasury

shares irrespective of whether they are carried out in

regulated markets, in multilateral trading facilities,

outside the orders market, either through blocks or

through special transactions, or under buy-back

programmes. Furthermore, buy-back programmes shall

comply with all the applicable specific regulations, such

as regulation on market abuse and their relevant

implementing rules. The policy does not apply to

transactions on Banco Santander's shares carried out to

hedge market risks or provide brokerage or hedging for

customers.

The full treasury shares policy is available on Banco

Santander's corporate website.

Execution of the buyback programmes charged against

2021 results

According to the 2021 shareholder remuneration policy,

the April 2022 AGM agreed to reduce Banco Santander’s

share capital by cancelling the repurchased shares in the

first buyback programme of 2021, for an amount of EUR

129,965,136.50. It was based on authorization by

shareholders at the April 2020 AGM. On 25 April 2022,

the capital reduction was registered with the

Commercial Registry.

In the second buyback programme of 2021 (from 15

March to 6 May 2022), once the required European

Central Bank (ECB) regulatory authorization was

obtained, we acquired 286,309,445 treasury shares —

1.676% of Banco Santander’s share capital at such time

— at a weighted average price per share of EUR 3.0212.

On 1 July 2022 the public deed of capital reduction

through the cancellation of repurchased shares, in the

terms agreed by the April 2022 AGM and for an amount

of EUR 143,154,722.50, was registered with the

Commercial Registry.

First 2022 Buyback Programme

Under the 2020 AGM approval and  according to 2022

shareholder remuneration policy, on 27 September 2022

the board resolved that it would execute a new share

buyback programme worth EUR 979 million

(approximately 20% of the Group’s underlying

321

attributable profit in H1 2022) as shareholder

remuneration charged against 2022 results once it had

obtained the required regulatory authorization.

In the First 2022 Buyback Programme (from 22

November 2022 to 31 January 2023), once the required

regulatory authorization was obtained, we acquired

340,406,572  treasury shares —2.03% of Banco

Santander’s share capital at such time, at a weighted

average price per share of EUR 2.8754.

The purpose of the First 2022 Buyback Programme 2022

was to reduce Banco Santander’s share capital by

cancelling the repurchased shares in the terms agreed by

the April 2022 AGM.  On 1 February 2023, the board

resolved to reduce, subject to the required regulatory

authorization from the ECB, the share capital in the

amount of EUR 170,203,286, by cancelling the

340,406,572 repurchased shares.

Second 2022 Buyback Programme

Under the same AGM approval, on 27 February 2023 the

board resolved that it would execute a new share

buyback programme worth EUR 921 million as

shareholder remuneration charged against 2022 results

for which the appropriate regulatory authorization has

already been obtained. The execution of the Second

2022 Buyback Programme will start on 1 March 2023.

The purpose of the Second 2022 Buyback Programme is

to reduce Banco Santander’s share capital by cancelling

purchased shares , for which the board submitted a

resolution for a vote at the 2023 AGM.

As of 31 December 2022, Banco Santander and its

subsidiaries held 243,689,025 shares, which accounted

for 1.45% of the share capital (compared to

277,591,940, 1.601% of the share capital, at 31

December 2021).

9.2 Dividend policy:

As required in Banco Santander’s by-laws, each year the

shareholder remuneration policy is submitted for

approval by the AGM.

Distribution charged against 2022 results

The board applied for the 2022 results a shareholder

remuneration policy consisting in paying out

approximately 40% of the Group's underlying profit,

split approximately in equal parts in cash dividend

payments and share buybacks. 

•Interim remuneration. On 27 September 2022 the

board agreed to:

•Pay an interim cash dividend of 5.83 euro cents per

share (equivalent to approximately 20% of the

Group's underlying profit in H1'22), charged against

2022 results; it was paid on 2 November 2022; and

•Implement the First 2022 Buyback Programme

worth approximately 979 million euros

(approximately 20% of the Group's underlying profit

in H1'22) which was approved by the ECB on 17

November 2022. It ran from 22 November 2022 to

31 January 2023. Banco Santander bought back

340,406,572 shares, which was 2.03% of its share

capital at that time. The First 2022 Buyback

Programme aimed to reduce share capital by

cancelling the shares that were acquired. Under he

share capital reduction agreement approved at the

AGM, on 1 February 2023 the board agreed to reduce

the share capital by EUR 170,203,286 (cancelling the

340,406, 572 shares acquired).

•Final remuneration. On 27 February 2023, per the

2022 shareholder remuneration policy, the board of

directors decided to:

•Submit a resolution at the 2023 AGM to approve a

final cash dividend in the gross amount of 5.95 euro

cents per share entitled to receive dividends. If

approved at the AGM, the dividend would be payable

from 2 May 2023.

•Implement a Second 2022 Buyback Programme

worth 921 million euros, for which the appropriate

regulatory authorization has already been obtained

and that will be executed from 1 March 2023.

Once the above mentioned actions are completed, the

shareholder remuneration for 2022 will have been 3,842

million euros (approximately 40% of the underlying

profit in 2022) split in approximately equal parts in cash

dividends (1,942 million euros) and share buybacks

(1,900 million euros). These amounts have been

estimated assuming that, after the execution of the

Second 2022 Buyback Programme, the number of

outstanding shares entitled to receive the final dividend

will be 16,190,866,119. Therefore, the total dividend

will be higher if fewer shares than planned are acquired

in the buyback programme and will be lower in the

opposite scenario.

9.3 Stock market information:

Banco Santander shares are listed on Spanish stock

exchanges (Madrid, Barcelona, Bilbao and Valencia,

under the trading symbol 'SAN'), the New York Stock

Exchange (NYSE) as American Depositary Shares (ADS)

under the trading symbol 'SAN' (each ADS represents

one Banco Santander share), the London Stock Exchange

as Crest Depositary Interests (CDI) under the trading

symbol 'BNC' (each CDI represents one Banco Santander

share), the Mexican Stock Exchange under the trading

symbol 'SAN', and the Warsaw Stock Exchange under the

trading symbol 'SAN'.

322

2022 was marred by the war in Ukraine, strong

inflationary pressure, central banks’ tightening of

monetary policy to halt rising prices, slow growth in

China, by covid outbreaks and lockdowns, and fears of an

upcoming global recession.

Central banks continued to raise interest rates that

began in 2021, albeit more moderately. The European

Central Bank set its official interest rate at 2%,

suggesting that it may surpass 3%. The Bank of England

left its official interest rate at 3.5%; but it is expected to

peak at 4%. The Federal Reserve raised its fed funds rate

to 4.25%-4.50% and expects to take it to 5-5.25% or

even higher.

In this context, main indices closed the year in the red,

despite a strong rebound in Q4. European banking

indices closed the year positively, having benefited from

interest rate hikes. Banco Santander’s share ended Q4

with a positive total return of 19.5%, slightly above the

18.5% of Europe’s main banking index, the DJ Stoxx

Banks.

Our share price ended the year with a return of -0.8%,

slightly below the eurozone’s main banking index, the

EuroStoxx Banks (up 1.8%) and the DJ Stoxx Banks (up

2.5%). Meanwhile, the MSCI World Banks fell 9.4%, the

Ibex 35 2.0% and the DJ Stoxx 50 1.1%.

By 30 December 2022, Banco Santander’s market

capitalization of EUR 47,066 million was the second

largest in the eurozone and 36th largest in the world

among financial institutions.

14,217 million Banco Santander shares traded in the

year for an effective value of EUR 40,2625 million and a

liquidity ratio of 84%.

The Santander share closed 2022 at 2.803 euros.

9.4 Average period of payment to suppliers:

The average period of payment to suppliers during 2022

is 10 days, term which is below the maximum

established in applicable regulations.

10. Events after the reporting

period

No significant events occurred from 1 January 2023 to

the date on which these financial statements were

authorized for issue, other than those described in these

annual accounts.

11. Annual corporate

governance report and Annual

report on directors’

remuneration

According to articles 540 and 541 of the Spanish

Companies Act, Banco Santander, S.A. has prepared the

annual corporate governance report and the annual

report on directors’ remuneration for the year ended 31

December 2022 (that are part of the directors’ report of

that financial year) with the contents determined by

Order ECC/461/2013, of 20 March, and by Circular

3/2021, of 28 September, of the National Securities

Market Commission (CNMV), that modifies Circular

5/2013, of 12 June, that defines the annual corporate

governance report model for listed companies, and

Circular 4/2013, of 12 June, that defines the annual

report on directors’ remuneration model for listed

companies.

The annual corporate governance report includes a

section that refers to the compliance of the corporate

governance recommendations in Spain.

The annual corporate governance report and the annual

report on directors’ remuneration are included, as a

separate section, in the individual directors’ report in

accordance with the provisions of article 538 of the

Corporate Enterprise Act. The aforementioned reports

are sent individually, as other relevant information, to

the CNMV, and are included in the consolidated

directors’ report as a separate section. They are available

on the Bank's corporate website (www.santander.com)

and on the CNMV website (www.cnmv.es).

323

Pursuant to Article 253, section 1 of the revised Spanish Companies Act (Ley de Sociedades de Capital), the

board of directors of Banco Santander, S.A. draws up the individual financial statements (comprising the

balance sheet, the income statement, the statement of recognized income and expense, the statement of

changes in total equity, the statement of cash flows and the notes to the individual financial statements) and

the individual directors’ report for the 2022 fiscal year in eXtensible HyperText Markup Language (XHTML)

format, which conforms to the single electronic reporting format required under Directive 2004/109/EC and

Delegated Regulation (EU) 2019/815.

The directors of Banco Santander, S.A., listed below with an indication of their respective positions, declare

that, to the best of their knowledge, the company's individual financial statements for the 2022 financial year

were drawn up in accordance with the applicable accounting principles and give a true and fair view of the

assets, liabilities, financial position and profit or loss of the company, and that the directors’ report includes a

fair review of the development, performance and position of the company, together with a description of the

principal risks and uncertainties that it faces.

Boadilla del Monte (Madrid), 27 February 2023

ANA PATRICIA BOTÍN-SANZ DE SAUTUOLA Y O’SHEA		HÉCTOR BLAS GRISI CHECA
Chair		Chief Executive Officer

BRUCE CARNEGIE-BROWN		JOSÉ ANTONIO ÁLVAREZ ÁLVAREZ
Vice Chair		Vice Chair

324

MEMBERS:

HOMAIRA AKBARI		FRANCISCO JAVIER BOTÍN-SANZ DE SAUTUOLA Y O’SHEA
SOL DAURELLA COMADRÁN		HENRIQUE MANUEL DRUMMOND BORGES CIRNE DE CASTRO
GERMÁN DE LA FUENTE ESCAMILLA		GINA LORENZA DÍEZ BARROSO
GLENN HOGAN HUTCHINS		LUIS ISASI FERNÁNDEZ DE BOBADILLA
RAMIRO MATO GARCÍA-ANSORENA		BELÉN ROMANA GARCÍA
PAMELA ANN WALKDEN

325