Banco Santander S A : 3Q21 Report

Indice EN

September 2021
Pillar 3 Disclosure Grupo Santander
KEY METRICS, CAPITAL RATIOS AND OWN FUNDS
1	Main capital figures and capital adequacy ratios	Go to Table1
KM1	Key metrics template (KM1)	Go to Table2
NIIF-9FL	IFRS 9-FL Template: Comparison of institutions' own funds and capital and leverage ratios with and without the application of transitional arrangements for IFRS 9 or analogous ECLs	Go to Table3
4	Transitional own funds disclosure template	Go to Table4
OV1	Overview of RWAs (OV1)	Go to Table5
CREDIT RISK
CR8	RWA flow statement of credit risk exposures under IRB	Go to Table6
COUNTERPARTY CREDIT RISK
CCR7	APR flow statement of counterparty risk exposures under the IMM method	Go to Table7
MARKET RISK
MR2_B	RWA flow statements of market risk exposures under IMA	Go to Table8
LIQUIDITY RISK
LIQ1	Quantitative information of LCR	Go to Table9
LIQB	Qualitative information on LCR, which complements template EU LIQ1	Go to Table10
Notes
A. TLAC information is published independently in Santander's website, section 'TLAC information', available between 'Pillar III disclosures Report' and the link 'Filings with other regulatory bodies'
B. In case of any discrepancies, Spanish version will prevail.

Table1

Main capital figures and capital adequacy ratios
CRR Fully loaded	CRR Phased-in
Million euros	Sep'21	Jun'21	Mar'21	Dec'20	Sep'21	Jun'21	Mar'21	Dec'20
Common Equity (CET1)	70,787	70,864	69,627	69,399	70,787	70,864	69,627	69,399
Tier 1	80,585	79,661	78,417	78,126	80,897	79,973	78,731	78,501
Total capital	93,240	92,270	91,466	90,933	93,537	92,539	91,550	91,015
Risk weighted assets	577,209	584,999	567,797	562,580	577,209	584,999	567,797	562,580
CET1 Ratio	12.26%	12.11%	12.26%	12.34%	12.26%	12.11%	12.26%	12.34%
Tier 1 Ratio	13.96%	13.62%	13.81%	13.89%	14.02%	13.67%	13.87%	13.95%
Total capital ratio	16.15%	15.77%	16.11%	16.16%	16.20%	15.82%	16.12%	16.18%
Leverage Ratio	5.20%	5.16%	5.06%	5.31%	5.22%	5.18%	5.08%	5.33%
2020 and 2021 figures are calculated applying the transitional arrangements of IFRS 9 unless specified otherwise.
As indicated by the consolidating supervisor, a pay-out of 50%, the maximum within the target range (40%-50%) was applied for the calculation of the capital ratios in March 2021. Previously, a 40% pay-out was considered

Table2

Key metrics template (KM1)
Million euros	Sep. 2021	Jun. 2021	Mar. 2021	Dec. 2020	Sep. 2020
Available own funds (amounts)
Common Equity Tier 1 (CET 1) capital	70,787	70,864	69,627	69,399	66,528
Tier 1 capital	80,897	79,973	78,731	78,501	75,492
Total capital	93,537	92,539	91,550	91,015	86,479
Risk-weighted exposure amounts
Total risk-weighted exposure amount	577,209	584,999	567,797	562,580	555,122
Capital ratios (as a percentage of risk-weighted exposure amount)
Common Equity Tier 1 ratio (%)	12.26%	12.11%	12.26%	12.34%	11.98%
Tier 1 ratio (%)	14.02%	13.67%	13.87%	13.95%	13.60%
Total capital ratio (%)	16.20%	15.82%	16.12%	16.18%	15.58%
Additional own funds requirements to address risks other than the risk of excessive leverage (as a percentage of risk-weighted exposure amount)
Additional own funds requirements to address risks other than the risk of excessive leverage (%)	1.50%	1.50%	1.50%	1.50%	1.50%
of which: to be made up of CET1 capital (percentage points)	0.84%	0.84%	0.84%	0.84%	0.84%
of which: to be made up of Tier 1 capital (percentage points)	1.13%	1.13%	1.13%	1.13%	1.13%
Total SREP own funds requirements (%)	9.50%	9.50%	9.50%	9.50%	9.50%
Combined buffer requirement (as a percentage of risk-weighted exposure amount)
Capital conservation buffer (%)	2.50%	2.50%	2.50%	2.50%	2.50%
Conservation buffer due to macro-prudential or systemic risk identified at the level of a Member State (%)	0.00%	0.00%	0.00%	0.00%	0.00%
Institution specific countercyclical capital buffer (%)	0.01%	0.01%	0.01%	0.01%	0.01%
Systemic risk buffer (%)	0.00%	0.00%	0.00%	0.00%	0.00%
Global Systemically Important Institution buffer (%)	1.00%	1.00%	1.00%	1.00%	1.00%
Other Systemically Important Institution buffer	1.00%	1.00%	1.00%	1.00%	1.00%
Combined buffer requirement (%)	3.51%	3.51%	3.51%	3.51%	3.51%
Overall capital requirements (%)	13.01%	13.01%	13.01%	13.01%	13.01%
CET1 available after meeting the total SREP own funds requirements (%)	36,715	35,975	37,609
Leverage ratio
Total exposure measure*	1,549,988	1,543,833	1,549,821	1,471,480	1,459,771
Leverage ratio (%)*	5.05%	5.01%	4.91%	5.13%	5.00%
Additional own funds requirements to address risks of excessive leverage (as a percentage of leverage ratio total exposure amount)
Additional own funds requirements to address the risk of excessive leverage (%)	0.00%	0.00%	0.00%	0.00%	0.00%
of which: to be made up of CET1 capital (percentage points)	0.00%	0.00%	0.00%	0.00%	0.00%
Total SREP leverage ratio requirements (%)****	3.06%	3.06%	0.00%	0.00%	0.00%
Leverage ratio buffer and overall leverage ratio requirement (as a percentage of total exposure measure)
Leverage ratio buffer requirement (%)	0.00%	0.00%	0.00%	0.00%	0.00%
Overall leverage ratio requirements (%)****	3.06%	3.06%	0.00%	0.00%	0.00%
Liquidity Coverage Ratio
Total high-quality liquid assets (HQLA) (Weighted value - average)	272,334	269,735	264,802	250,857	239,572
Cash outflows - Total weighted value	218,089	211,076	206,796	204,842	202,016
Cash inflows - Total weighted value	52,161	50,190	49,371	49,980	50,949
Total net cash outflows (adjusted value)	165,928	160,886	157,426	154,862	151,068
Liquidity coverage ratio (%)**	164%	168%	168%	162%	158%
Net Stable Funding Ratio
Total available stable funding***	1,085,522	1,083,953	1,061,729	1,029,104	1,009,861
Total required stable funding***	868,570	874,940	874,195	854,193	847,093
NSFR ratio (%)***	125%	124%	121%	120%	119%
CRR Phased in-Phased in IFRS9
* Leverage ratio version is fully CRR, fully IFRS9 ** Liquidity coverage ratio is the average of 12 months including June'21 *** NSFR on periods T-1 to T-4 calculated according to BIS principles
**** Modified according to FAQs on ECB supervisory measures in reaction to the coronavirus of 23 July 2021 regarding to the recalibration of the 3% leverage ratio requirement

Table3

Comparison of institutions' own funds and capital and leverage ratios with and without the application of transitional arrangements for IFRS 9 or analogous ECLs (IFRS 9-FL)
Million euros	September 2021	June 2021	March 2021
Available capital (amounts)
1	Common Equity Tier 1 (CET1) capital	70,787	70,864	69,627
2	Common Equity Tier 1 (CET1) capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	68,467	68,510	67,255
3	Tier 1 capital	80,897	79,973	78,731
4	Tier 1 capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	78,577	77,618	76,358
5	Total capital	93,537	92,539	91,550
6	Total capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	91,721	90,529	89,177
Risk-weighted assets (amounts)
7	Total risk-weighted assets	577,209	584,999	567,797
8	Total risk-weighted assets as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	577,790	585,379	567,342
Capital ratios
9	Common Equity Tier 1 (as a percentage of risk exposure amount)	12.26%	12.11%	12.26%
10	Common Equity Tier 1 (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	11.85%	11.70%	11.85%
11	Tier 1 (as a percentage of risk exposure amount)	14.02%	13.67%	13.87%
12	Tier 1 (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	13.60%	13.26%	13.46%
13	Total capital (as a percentage of risk exposure amount)	16.20%	15.82%	16.12%
14	Total capital (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	15.87%	15.47%	15.79%
Leverage ratio
15	Leverage ratio total exposure measure	1,551,130	1,545,183	1,548,789
16	Leverage ratio	5.22%	5.18%	5.08%
17	Leverage ratio as if IFRS 9 or analogous ECLs transitional arrangements had not been applied*	5.07%	5.03%	4.93%
CRR phased-in Grupo Santander applies the transitional provisions of IFRS 9 defined in art.473 a of Regulation 2013/575 (introduced in art.1 of Regulation 2395/2017 and amended in 2020 in response to COVID-19 pandemic), mitigating the impact of the adoption of IFRS9 when applying a static and dynamic phased-in on his capital ratios. In this way, Grupo Santander adds to its CET 1 the amounts calculated in accordance with sections 1 and following (included section 4, 473bis article) Grupo Santander has not applied article 468 of the CRR on the temporary treatment of unrealised gains and losses measured at fair value through other comprehensive income in view of the ongoing COVID-19 pandemic.
* Correction of the ratio as of Jun'21 to phased-in CRR, fully IFRS9

Table4

Transitional own funds disclosure template
Sep-21
Million euros	CRR Phased-in amount	CRR Fully Loaded amount
Common Equity Tier 1 (CET1): capital before regulatory adjustments	88,871	88,871
Total regulatory adjustments to Common Equity Tier 1 (CET1)	-18,084	-18,084
Common Equity Tier 1 (CET1) capital	70,787	70,787
Additional Tier 1 (AT1) capital before regulatory adjustments	10,140	9,827
Total regulatory adjustments to Additional Tier 1 (AT1) capital	-30	-30
Additional Tier 1 (AT1) capital	10,110	9,797
Tier 1 capital (T1 = CET1 + AT1)	80,897	80,585
Tier 2 (T2) capital before regulatory adjustments	13,360	13,375
Total regulatory adjustments to Tier 2 (T2) capital	-720	-720
Tier 2 (T2) capital	12,639	12,655
Total capital (TC = T1 + T2)	93,537	93,240
Total risk weighted assets	577,209	577,209
Capital Ratios and buffers
Common Equity Tier 1 (as a percentage of total risk exposure amount)	12.26%	12.26%
Tier 1 (as a percentage of total risk exposure amount)	14.02%	13.96%
Total capital (as a percentage of total risk exposure amount)	16.20%	16.15%
Phased-in IFRS9

Table5

Overview of RWAs (OV1)
RWA	Minimum Capital Requirements
Million euros	Sep'21	Jun'21	Sep'21
Credit risk (excluding CCR)	479,618	485,259	38,369
Of which, standardised approach (SA)	267,589	269,625	21,407
Of which, the foundation IRB (FIRB) approach	7,799	8,298	624
Of which: slotting approach*	14,621	14,263	1,170
Of which: equities under the simple riskweighted approach	2,282	1,905	183
Of which, the advanced IRB (AIRB) approach	170,622	174,191	13,650
Counterparty credit risk - CCR	14,798	14,927	1,184
Of which the standardised approach**	12,867	12,853	1,029
Of which internal model method (IMM)	- 0	- 0	- 0
Of which exposures to a CCP	270	256	22
Of which credit valuation adjustment - CVA	1,662	1,818	133
Of which other CCR	- 0	- 0	- 0
Empty set in the EU
Empty set in the EU
Empty set in the EU
Empty set in the EU
Empty set in the EU
Settlement risk	1	1	0
Securitisation exposures in the banking book (after the cap)	9,182	8,537	735
Of which, SEC-IRBA approach	4,180	3,794	334
Of which, SEC-ERBA approach	1,283	1,407	103
Of which, SEC-SA approach***	2,344	2,257	188
Of which 1250%/ deduction	1,374	1,079	110
Position, foreign exchange and commodities risks (Market risk)	19,088	20,893	1,527
Of which, standardised approach	6,388	6,667	511
Of which, IMA	12,700	14,226	1,016
Large exposures	- 0	- 0	- 0
Operational risk	55,896	56,461	4,472
Of which basic indicator approach	- 0	- 0	- 0
Of which, standardised approach	55,896	56,461	4,472
Of which advanced measurement approach	- 0	- 0	- 0
Amounts below the thresholds for deduction (subject to 250% risk weight)	24,295	24,802	1,944
Empty set in the EU
Empty set in the EU
Empty set in the EU
Empty set in the EU
Total****	577,209	584,999	46,177
It includes equities under the PD/LGD approach
Fully CRR, phased-in IFRS9
* Correction from the mapping to {C 08.01, r0020, c0260, s0010} + {C 08.01, r0030, c0260, s0010}
**Correction from the mapping to {C 34.02, r0030, c0200, s0002} - RWEA pertaining to exposures to CCPs that are not QCCPs
***Correction from the mapping to the one apperaing in tables SEC3+SEC4
**** Correction from the mapping, 1250% deductions are not included in the total

Table6

RWA flow statements of credit risk exposures under the IRB approach (CR8)
30th Sep. 2021
Million euros	RWA
RWA as June 2021	205,828	Comment	Regarding RWA variations from IRB Credit Risk (-3.615 MM RWA) mainly in Europe, North America and Brazil
Asset size	-3,147
Asset quality
Model updates
Methodology and policy
Acquisitions and disposals	-479
Foreign exchange movements	12
Other
RWA as Sep. 2021	202,213
It includes capital requirements of equity.
CRR Fully phased-in IFRS9

Table7

RWEA flow statements of CCR exposures under the IMM (CCR7)
30 thSep. 2020
Million euros	RWEA
RWEA as at the end of the previous reporting period	0
Asset size	0	Comment	Banco Santander does not have advanced approach to calculate counterparty EAD.
Credit quality of counterparties	0
Model updates (IMM only)	0
Methodology and policy (IMM only)	0
Acquisitions and disposals	0
Foreign exchange movements	0
Other	0
RWEA as at the end of the current reporting period	0

Table8

RWA flow statements of market risk exposures under the IMA (MR2-B)
30th Sep. 2021
Million euros	VaR	SVaR	IRC	Comprehensive risk measure	Other*	Total RWAs	Total capital requirements
RWA Jun. 2021	2,361	5,973	4,513	1,379	14,226	1,138	Comment	The changes in the capital are mainly in the IRC and in Spain, due to the general reduction of the portfolio, because of the acquisition of hedges positions. Total exposure was also reduced in 960M during September compared to August. In addition, the Others raw, which contains the RNIV, increase due to methodological changes in Spain's models, exceeding the materiality thresholds. On the other side, VaR increase mainly in Mexico, because of the movements in the bonds and Swaps position and MXN/USD exchange rate position. No significant changes in SVAR.
Regulatory adjustment	877	3,780	2,613	0	7,270	582
RWAs at the previous quarter-end (end of the day)	1,485	2,193	1,900	1,379	6,956	556
Movement in risk levels	405	-301	-1,897	266	-1,526	-122
Model updates/changes
Methodology and policy
Acquisitions and disposals
Foreign exchange movements
Other
RWAs at the end of the reporting period (end of the day)	771	1,667	377	1,645	4,460	357
Regulatory adjustment	1,996	4,005	2,239	0	8,240	659
RWA Sep. 2021	2,767	5,672	2,616	1,645	12,700	1,016
* Other includes Risks not in Model not included in Var or Svar

Table9

Quantitative information of LCR (LIQ1)
Million euros
Scope of consolidation (consolidated)	Total unweighted value (average)	Total weighted value (average)
Currency and units (Million euros)
Quarter ending on (DD Month YYY)	30 September 2021	31 June 2021	31 March 2020	30 December 2020	30 September 2021	31 June 2021	31 March 2020	30 December 2020
Number of data points used in the calculation of averages	12	12	12	12	12	12	12	12
HIGH-QUALITY LIQUID ASSETS
Total high-quality liquid assets (HQLA), after application of haircuts in line with Article 9 of regulation (EU) 2015/61	272,334	269,735	264,802	250,857
CASH - OUTFLOWS	0	0	0
Retail deposits and deposits from small business customers, of which:	547,332	538,698	529,254	522,981	39,231	38,307	37,590	37,082
Stable deposits	328,635	322,790	315,291	305,053	16,432	16,139	15,765	15,253
Less stable deposits	195,880	190,507	187,760	187,942	22,733	22,099	21,755	21,754
Unsecured wholesale funding	237,321	229,467	224,989	219,570	112,891	107,332	103,919	102,346
Operational deposits (all counterparties) and deposits in networks of cooperative banks	47,055	52,681	56,238	56,626	10,903	12,359	13,242	13,323
Non-operational deposits (all counterparties)	182,736	169,590	162,060	155,391	94,457	87,778	83,986	81,470
Unsecured debt	7,531	7,196	6,691	7,553	7,531	7,196	6,691	7,553
Secured wholesale funding	4,970	4,839	4,784	4,588
Additional requirements	200,935	198,989	198,666	196,226	41,998	42,473	43,477	43,597
Outflows related to derivative exposures and other collateral requirements	20,647	21,370	22,212	22,725	20,315	21,259	22,157	22,650
Outflows related to loss of funding on debt products	1,769	1,690	1,975	1,776	1,769	1,690	1,975	1,776
Credit and liquidity facilities	178,518	175,930	174,480	171,725	19,914	19,525	19,345	19,171
Other contractual funding obligations	11,711	11,164	10,314	10,534	11,192	10,651	9,825	10,062
Other contingent funding obligations	122,381	117,851	114,190	110,841	7,806	7,473	7,203	7,168
TOTAL CASH OUTFLOWS	218,089	211,076	206,796	204,842
CASH - INFLOWS	0	0	0
Secured lending (e.g. reverse repos)	42,582	40,990	44,203	43,796	1,985	1,755	1,607	1,578
Inflows from fully performing exposures	53,654	51,985	51,907	52,911	37,381	36,032	35,522	35,502
Other cash inflows	15,230	14,550	14,114	14,902	12,795	12,403	12,242	12,900
(Difference between total weighted inflows and total weighted outflows arising from transactions in third countries where there are transfer restrictions or which are denominated in non-convertible currencies)	0	0	0	0	0	0	0	0
(Excess inflows from a related specialised credit institution)	0	0	0	0	0	0	0	0
TOTAL CASH INFLOWS	111,466	107,525	110,224	111,609	52,161	50,190	49,371	49,980
Fully exempt inflows	0	0	0	0	0	0	0	0
Inflows subject to 90% cap	0	0	0	0	0	0	0	0
Inflows subject to 75% cap	108,359	104,366	107,003	108,593	52,161	50,190	49,371	49,980
TOTAL ADJUSTED VALUE	0	0	0
LIQUIDITY BUFFER	272,334	269,735	264,802	250,857
TOTAL NET CASH OUTFLOWS	165,928	160,886	157,426	154,862
LIQUIDITY COVERAGE RATIO	164%	168%	168%	162%

Table10

Qualitative information on LCR, complementing LIQ1 (LIQB)
in accordance with Article 451a(2) CRR
30th sep. 2021
Qualitative information - Free format
Explanations on the main drivers of LCR results and the evolution of the contribution of inputs to the LCR's calculation over time	The Group LCR in September 2021 was 165,62%, comfortably exceeding the internal and regulatory requirements. Key to this levels was the size of the HQLA buffers upheld by all subsidiaries. Group´s strong stable retail deposits base and low dependence on short-term funding make the movements in the commercial gap and the issuances maturities as key drivers of the LCR.
Explanations on the changes in the LCR over time	The evolution of the Group's LCR showed an upward trend in first half of 2020 and remained quite stable since then with a moderate reduction driven by optimization initiatives carried out mainly in the Parent Company. This improvement has been generalized in almost all geographies. Compared with 2020 year-end, levels for both ratios have not substantially changed so far this year 2021.
Explanations on the actual concentration of funding sources	Achieving a diversified funding base is a key element of Santander's liquidity risk management. The principle of prudence states that the Board expects subsidiaries to provide effective diversification in the sources, products and funding tenors while limiting the recourse to short-term wholesale funds. The Group has a set of additional metrics in order to identify and monitor those counterparties that are of such significance that withdrawal of the funding they are providing to the entity could trigger liquidity problems. At the end of 2020 and the remainder of 2021, the Group levels of concentration risk were within management limits, ensuring diversity of wholesale funding at subsidiary level.
High-level description of the composition of the institution`s liquidity buffer.	The Group buffer is mainly composed by Level 1 assets: cash and sovereign debt, well diversified between different issuers. Additionally to the regulatory buffer, the Group has an internal buffer with a set of unencumbered liquid resources that are available for immediate use as collateral to obtain additional funding.
Derivative exposures and potential collateral calls	Other contingent exposures are limited as (i) the derivatives position is covered by collateral, and (ii) credit and liquidity lines are monitored daily with a limited impact.
Currency mismatch in the LCR	Regarding the composition by currency, the units present a consistent position between buffer composition and net outflows. Occasionally some units in Latino America present higher positions on USD buffers in order to optimize the position while ensuring strong currency convertibility.
Other items in the LCR calculation that are not captured in the LCR disclosure template but that the institution considers relevant for its liquidity profile	There are no other relevant items in the LCR calculation not captured in the LCR disclosure template