SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of
Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of March, 2019
Commission File Number: 001-12518
Banco Santander, S.A.
(Exact name of registrant as specified in its charter)
Ciudad Grupo
Santander
28660 Boadilla del Monte (Madrid) Spain
(Address of principal executive office)
Indicate by check mark whether
the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(1): Yes ☐ No ☒
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule
101(b)(7): Yes ☐ No ☒
Banco Santander, S.A.
TABLE OF CONTENTS
Pillar 3
Disclosures Report
2018
|
|
|
|
|
|
|
|
|
|
|
|
Introduction (Ch.1) |
|
Capital (Ch. 2) |
|
|
|
|
7 |
|
Executive Summary |
|
21 |
|
Capital |
|
|
|
|
10 |
|
Santander Group Pillar 3 Report overview |
|
30 |
|
Pillar 1 - Regulatory Capital |
12 |
|
Scope of consolidation |
|
42 |
|
Pillar 2 - Economic Capital |
15 |
|
Regulatory framework |
|
48 |
|
Recovery and resolution plans and
special situation response framework |
|
|
|
|
50 |
|
Total Loss Absorbing Capacity (TLAC)
and Minimum Required Eligible Liabilities (MREL) |
|
|
|
|
|
2 |
|
2018 Pillar 3 Disclosures Report |
|
|
2018 Pillar 3 Disclosures
|
|
|
|
|
|
|
|
|
|
|
|
Risks (Ch. 3, 4, 5, 6, 7 and 8) |
|
Santander Group (Ch. 9 and 10) |
|
|
|
|
53 |
|
Credit Risk |
|
171 |
|
Remuneration policies |
|
|
|
|
97 |
|
Counterparty Credit Risk |
|
180 |
|
Appendices |
|
|
|
113 |
|
Credit Risk - Securitisations |
|
Other appendices available on the Santander Group website. |
139 |
|
Market Risk |
|
Pillar 2 editable format tables. |
|
|
|
|
157 |
|
Operational Risk |
|
|
|
|
|
|
|
|
161 |
|
Other Risks and Internal Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Pillar 3 Disclosures
INTRODUCTION _ 2018 Pillar 3 Disclosures Report
1. Introduction
1.1. Executive summary*
At December 2018, Santander was the largest banking group in the Eurozone by market capitalisation (EUR 64,508 million) and the 16th in the world.
The Group engages in all types of activities, operations and services that are typical of the banking business in general. Its business model is focused on
commercial banking products and services with the aim of meeting the needs of its 144 million customers, including private banking customers, SMEs, businesses and corporates.
Santanders strategy remained focus on customer loyalty. The number of loyal customers (19.9 million) rose by 2.6 million in the year (+15%), with
individuals as well as companies rising. The number of digital customers (32.0 million) rose by 6.6 million in 2018 (+26%), underscoring the strength of our multichannel strategy.
The Group operates through a global network of 13,217 branches, the largest excluding Chinese banks and Sberbank
Group, as well as digital channels, in order to provide top-quality service and flexibility. Santander is among the top three banks in customer satisfaction in seven of our main countries.
Santander has EUR 1,459,271 million assets and manages EUR 980,562 million of total customer funds across all its customer segments. It has more
than four million shareholders and over 200,000 employees. Retail Banking accounts for 87% of the Groups total income.
The Group is highly
diversified and operates mainly in 10 core units, where it maintains significant market shares.
In terms of solvency, Santander is bolstering its capital
ratios and improving credit quality, while remaining one of the most profitable banks.
We exceeded our 2018
target of 11% fully loaded CET1
|
|
|
|
|
|
|
|
|
|
|
Changes in main Capital ratios
figures
|
|
|
|
|
|
|
|
Capital ratios (Fully loaded)
Ratios% Capital ratios (Phased-in) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully loaded |
|
|
Phased-in |
|
EUR million |
|
Dec-2018 |
|
|
Dec-2017 |
|
|
Dec-2018 |
|
|
Dec-2017 |
|
Common Equity (CET1) |
|
|
66,904 |
|
|
|
65,563 |
|
|
|
67,962 |
|
|
|
74,173 |
|
Tier 1 |
|
|
75,838 |
|
|
|
73,293 |
|
|
|
77,716 |
|
|
|
77,283 |
|
Total capital |
|
|
87,506 |
|
|
|
87,588 |
|
|
|
88,725 |
|
|
|
90,706 |
|
Risk weighted assets |
|
|
592,319 |
|
|
|
605,064 |
|
|
|
592,319 |
|
|
|
605,064 |
|
CET1 Ratio |
|
|
11.30 |
% |
|
|
10.84 |
% |
|
|
11.47 |
% |
|
|
12.26 |
% |
Tier 1 Ratio |
|
|
12.80 |
% |
|
|
12.11 |
% |
|
|
13.12 |
% |
|
|
12.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital ratio |
|
|
14.77 |
% |
|
|
14.48 |
% |
|
|
14.98 |
% |
|
|
14.99 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage Ratio |
|
|
5.10 |
% |
|
|
5.02 |
% |
|
|
5.22 |
% |
|
|
5.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
2018 data has been calculated under application of IFRS9 transitory dispositions, unless otherwise indicated.
|
Note: this English version is a translation of the original in Spanish for information purposes only. In the event of discrepancy, the
original Spanish-language version prevails.
|
|
|
Capital ratios (Fully loaded) |
|
Capital ratios (Phased-in) |
The fully loaded CET1 ratio stood at 11.30%
after generating 46 bps in the year
|
|
|
|
|
|
|
2018 CET1 Fully Loaded evolution |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
Distribution of capital requirements by risk type and geography
31 Dec. 2018
|
|
|
|
|
8 |
|
2018 Pillar 3 Disclosures Report |
|
|
INTRODUCTION _ 2018 Pillar 3 Disclosures Report
We comfortably met the minimum ratios set
by the ECB on a consolidated basis
|
|
|
|
|
|
|
Regulatory Capital vs Regulatory requirement |
|
|
1. |
Global systemically important Banks buffer |
2. |
Conservation capital buffer |
3. |
Countercyclical capital buffer |
The stress test results demonstrate the sturdiness
and diversification of our model
In the adverse scenario, Santander was the Bank that destroyed the least capital (-141 bps) in its
peer group.
|
|
|
|
|
Fully loaded CET1 ratio - stress test adverse scenario |
|
|
|
2017 FL CET1 vs adverse 2020 |
% |
|
|
|
bps |
|
|
|
|
|
In the base scenario, the Group also generated the most profit among its peers.
|
|
|
|
|
Fully loaded CET1 ratio - stress test baseline scenario |
|
|
|
2017 FL CET1 vs baseline 2020 |
% |
|
|
|
bps |
|
|
|
|
|
1.2. Santander Group Pillar 3 report overview
1.2.1. Background information on Santander Group
Banco Santander, S.A. is a private-law company, subject to the rules and regulations applicable to banks operating in
Spain. In addition to its own activities, Banco Santander is the parent of a group of subsidiaries engaged in a variety of activities, which together make up Santander Group. The CRR and CRD IV and their transposition in Spain through Bank of Spain
Circular 2/2016, on supervision and solvency, apply on a consolidated level across the entire Santander Group.
Santander Group does not make use of the
exemption contemplated in article 49 of the CRR, therefore the disclosure of table INS1 (Non-deducted participations in insurance undertakings) does not apply.
As of 31 December 2018, under Article 7 and 9 of the CRR, the subsidiaries Santander Leasing S.A. EFC and
Santander Factoring y Confirming S.A. EFC are exempt from the minimum capital requirements, the limit on large exposures and the internal corporate governance obligations. No use of the exemptions under the applicable regulations has been made for
any other Santander Group subsidiaries.
Santander Group is one of the banks that have not required state aid in any of the countries in which it
operates.
For all those aspects for which disclosure is required under Part Eight of the CRR and which are not applicable to Santander Group, see
Appendix II CRR Mapping , where they are reported as N/A (not applicable).
As of 31 December 2018, none of the financial
institutions included in Santander Group consolidated had less than the minimum capital required under applicable regulation.
1.2.2. Governance:
approval and publication
Pursuant to the official disclosure policy, Santander Group publishes its annual Pillar 3 disclosures report following board
approval. Prior to the board of directors approval on 26 February 2019, the report was reviewed by the risk supervision, regulation and compliance committee at a meeting held on 25 February, and also by the capital committee at a
meeting held on 8 February 2019.
Additionally, on 21 February 2019, the report was reviewed by the audit committee.
|
|
|
|
|
10 |
|
2018 Pillar 3 Disclosures Report |
|
|
INTRODUCTION _ 2018 Pillar 3 Disclosures Report
Furthermore, a set of quarterly information has been published since March 2015 in compliance with the
EBAs: Guidelines on materiality, proprietary and confidentiality and on disclosure frequency, pursuant to article 432, sections 1 and 2 and article 433 of Regulation (EU) 575/2013.
No exceptions have been made to the publication of information considered proprietary or confidential.
Appendix II contains a list showing the location of the information disclosed in accordance with the relevant articles of Part Eight of the Regulation.
The information contained in this report has been subject to review by the external auditor (PwC), who did not find any issue with regard to the
reasonableness of the disclosures and compliance with the reporting requirements established in the CRD IV and the CRR.
Governing bodies
certification
The board of directors of Santander Group certifies that the publication of the Pillar 3 disclosures report is compliant with the
guidelines of Part Eight of Regulation (EU) 575/2013 and consistent with the Pillar 3 Disclosures Policy adopted by the board of directors.
The Pillar 3 Disclosures Report relies on a range of processes relating to the internal control framework, with duties and responsibilities having been
defined for review and certification of the information set out in the report at several levels of the organisation.
In addition, the external auditors
carry out an ex ante review, and the work plans for recurring reviews by internal audit also cover this report.
The Pillar 3 disclosures report is
available in the Shareholders and Investors section of the Santander Group website (www. santander.com), under Financial and Economic Information.
Disclosures of Santander Group subsidiaries
In addition to the information contained in this report, Santander Group subsidiaries that are considered to have significant importance for their local
market, pursuant to article 13 of the CRR (Application of disclosure requirements on a consolidated basis), publish information at individual level on their websites in relation to: own funds, capital requirements, capital buffers, credit risk
adjustments, remuneration policy and the application of credit risk mitigation techniques.
1.2.3. Transparency enhancements
In recent years, Santander Group has taken note of the recommendation issued by different international bodies with the aim of improving the transparency of
the information published each year in the Pillar 3 disclosures report.
In December 2016, the European Banking Association (EBA) published its final
guidelines on disclosure requirements under Part Eight of the Capital Requirements Regulation. These guidelines provide guidance to financial institutions on how to comply with applicable regulations.
Further, in March 2017 and December 2018 the Basel Committee published the second and third phase of its Revised Pillar 3 Disclosure Requirements.
Santander Group has now incorporated all of this years applicable enhancements. Appendix II provides a list showing the location of the information
required under the different articles of Part Eight of the CRR, while the Santander Group website includes a file containing all of the tables shown in this document in editable format to facilitate their treatment.
A detail of the applicable enhancements can be found in the Appendix I.
1.2.4. Disclosure criteria used in this report
This
report has been prepared in accordance with the applicable European Capital Requirements Regulation (CRR).
Below are the details of the type of
information that best reflects the discrepancies between the regulatory information shown in this report, and the information shown in the Annual Report and the accounting information:
|
|
|
The measures of credit risk exposure used for calculating regulatory capital requirements include: |
|
|
|
not only current exposures, but also potential future risk exposures arising from future commitments (contingent liabilities and commitments) or changes in market risk factors (derivative instruments) |
|
|
|
the mitigating factors of these exposures (netting agreements and collateral agreements for derivative exposures, and collateral and personal guarantees for on-balance-sheet
exposures). |
|
|
|
Criteria used when classifying defaulted exposures in portfolios subject to advanced approaches for calculation of regulatory capital are more conservative than those used for preparing the disaggregated information
provided in the Annual Report. |
1.3. Scope of consolidation
Santander Group companies included in the scope of consolidation for the purposes of calculating the capital adequacy ratio under the CRR are the same as those
included in the scope of consolidation for accounting purposes under Bank of Spain Circular 2/2018.
1.3.1. Differences between the consolidation
method for accounting purposes and the consolidation method for regulatory capital calculation purposes
In application of Part I (General Provisions)
of the CRR, certain Santander Group companies are consolidated using a different method to that used for accounting consolidation.
The companies for
which a different consolidation method is used, based on the regulations applied are listed in Appendix V of the 2018 Pillar 3 Appendix document available on the Santander Group website. To this day, both the participations in significant financial
institutions and insurance companies are exempt from deductions under CRRs article 48.
For the purposes of calculating the capital adequacy ratio based on the nature of their business activities,
Santander Group units included in the prudential scope of consolidation are consolidated using the full consolidation method, with the exception of jointly controlled entities, which uses proportionate consolidation. All companies that cannot be
consolidated based on their business activities are accounted for using the equity method and so are treated as equity exposures.
The basis of the
information used for accounting purposes differs from that used for the calculation of regulatory capital requirements. The measures of risk exposure may differ depending on the purpose for which they are calculated, such as financial reporting,
regulatory capital reporting or management information. The exposure data included in the quantitative disclosures in this document are used for calculating regulatory capital.
The following table shows the relationship between the various categories of the financial statements and the risk categories in accordance with prudential
requirements.
|
|
|
|
|
12 |
|
2018 Pillar 3 Disclosures Report |
|
|
INTRODUCTION _ 2018 Pillar 3 Disclosures Report
Table 1. Differences between accounting and regulatory scopes of consolidation and mapping of financial statements categories with regulatory risk categories
(LI1)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
|
|
|
|
|
|
Carrying values of items: |
|
|
|
Carrying values as reported in published financial statements |
|
|
Carrying values under scope of regulatory consolidation |
|
|
Subject to credit risk framework |
|
|
Subject to counterparty credit risk framework |
|
|
Subject to securitisation framework |
|
|
Subject to market risk framework |
|
|
Not subject to capital requirements or subject to deduction from capital |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash balances at central banks |
|
|
113,663 |
|
|
|
113,640 |
|
|
|
113,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets held for trading |
|
|
92,879 |
|
|
|
92,940 |
|
|
|
|
|
|
|
55,990 |
|
|
|
25 |
|
|
|
92,915 |
|
|
|
|
|
Financial assets designated at fair value through income statements |
|
|
68,190 |
|
|
|
65,598 |
|
|
|
|
|
|
|
34,071 |
|
|
|
|
|
|
|
56,373 |
|
|
|
|
|
Available-for-sale
financial assets |
|
|
121,091 |
|
|
|
107,811 |
|
|
|
103,720 |
|
|
|
|
|
|
|
4,091 |
|
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
946,099 |
|
|
|
949,027 |
|
|
|
928,792 |
|
|
|
17,252 |
|
|
|
2,933 |
|
|
|
|
|
|
|
50 |
|
Held-to-maturity
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Hedge accounting |
|
|
8,607 |
|
|
|
8,607 |
|
|
|
|
|
|
|
8,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value changes of the hedged items in portfolio hedge of interest rate risk |
|
|
1,088 |
|
|
|
1,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,088 |
|
Investments in subsidiaries, joint ventures and associates |
|
|
7,588 |
|
|
|
8,762 |
|
|
|
7,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,440 |
|
Reinsurance assets |
|
|
324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible assets |
|
|
26,157 |
|
|
|
23,308 |
|
|
|
23,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
28,560 |
|
|
|
28,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,551 |
|
Tax assets |
|
|
30,251 |
|
|
|
30,298 |
|
|
|
26,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,285 |
|
Other assets |
|
|
9,348 |
|
|
|
10,683 |
|
|
|
9,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,015 |
|
Non-current assets and disposal groups classified as held
for sale |
|
|
5,426 |
|
|
|
5,593 |
|
|
|
5,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
1,459,271 |
|
|
|
1,445,907 |
|
|
|
1,218,056 |
|
|
|
115,920 |
|
|
|
7,049 |
|
|
|
149,288 |
|
|
|
36,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities held for trading |
|
|
-70,343 |
|
|
|
-70,405 |
|
|
|
|
|
|
|
-55,403 |
|
|
|
|
|
|
|
-70,405 |
|
|
|
|
|
Financial liabilities designated at fair value through profit or loss |
|
|
-68,058 |
|
|
|
-49,147 |
|
|
|
|
|
|
|
-20,894 |
|
|
|
|
|
|
|
-49,147 |
|
|
|
|
|
Financial liabilities measured at amortised cost |
|
|
-1,171,630 |
|
|
|
-1,177,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-1,177,925 |
|
Derivatives Hedge accounting |
|
|
-6,363 |
|
|
|
-6,360 |
|
|
|
|
|
|
|
-6,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value changes of the hedged items in portfolio hedge of interest rate risk |
|
|
-303 |
|
|
|
-303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-303 |
|
Liabilities under insurance contracts |
|
|
-765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions |
|
|
-13,225 |
|
|
|
-13,283 |
|
|
|
-779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-12,504 |
|
Tax liabilities |
|
|
-8,135 |
|
|
|
-8,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-8,131 |
|
Other liabilities |
|
|
-13,088 |
|
|
|
-13,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-13,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
-1,351,910 |
|
|
|
-1,338,587 |
|
|
|
-779 |
|
|
|
-82,657 |
|
|
|
|
|
|
|
-119,552 |
|
|
|
-1,211,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shown below are the main differences between the carrying amounts appearing on the financial statements and the
exposures for prudential purposes:
Table 2. Main sources of differences
between regulatory exposure amounts and carrying amounts in financial statements (LI2)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
|
|
|
Items subject to: |
|
|
|
Total |
|
|
Credit risk framework |
|
|
CCR framework |
|
|
Securitisation Framework |
|
|
Market risk framework |
|
Asset carrying value amount under scope of regulatory consolidation (as per template EU
LI1) |
|
|
1,490,313 |
|
|
|
1,218,056 |
|
|
|
115,920 |
|
|
|
7,049 |
|
|
|
149,288 |
|
Liabilities carrying value amount under regulatory scope of consolidation (as per template EU
LI1) |
|
|
-202,988 |
|
|
|
-779 |
|
|
|
-82,657 |
|
|
|
|
|
|
|
-119,552 |
|
Total net amount under regulatory scope of consolidation |
|
|
1,287,325 |
|
|
|
1,217,277 |
|
|
|
33,263 |
|
|
|
7,049 |
|
|
|
29,736 |
|
Off-balance sheet amounts |
|
|
295,276 |
|
|
|
293,707 |
|
|
|
|
|
|
|
1,569 |
|
|
|
|
|
Regulatory Add-on |
|
|
74,234 |
|
|
|
|
|
|
|
74,234 |
|
|
|
|
|
|
|
|
|
Differences in valuations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences due to different netting rules, other than those already included in row 2 |
|
|
-84,244 |
|
|
|
|
|
|
|
-54,508 |
|
|
|
|
|
|
|
-29,736 |
|
Non-eligibility of the balances corresponding to
accounting hedges (derivatives) |
|
|
-8,607 |
|
|
|
|
|
|
|
-8,607 |
|
|
|
|
|
|
|
|
|
CCPs |
|
|
15,307 |
|
|
|
|
|
|
|
15,307 |
|
|
|
|
|
|
|
|
|
Securitisations with risk transfer |
|
|
-3,052 |
|
|
|
-28,211 |
|
|
|
|
|
|
|
25,159 |
|
|
|
|
|
Others |
|
|
3,104 |
|
|
|
3,229 |
|
|
|
|
|
|
|
-125 |
|
|
|
|
|
Differences due to consideration of provisions |
|
|
-16,814 |
|
|
|
-16,801 |
|
|
|
-1 |
|
|
|
-13 |
|
|
|
|
|
Differences due to CRMs |
|
|
-16,826 |
|
|
|
-5,131 |
|
|
|
-11,695 |
|
|
|
|
|
|
|
|
|
Differences due to CCFs |
|
|
-205,199 |
|
|
|
-205,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure amounts considered for regulatory purposes (EAD) |
|
|
1,340,504 |
|
|
|
1,258,871 |
|
|
|
47,993 |
|
|
|
33,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of public and non-public balance sheets is shown in
Appendix VI on the Santander Group website.
1.3.2 Substantial amendments due to a change in perimeter and corporate transactions
A breakdown is provided below of the main purchases and sales of stakes in other companies, and other major corporate transactions by Santander Group last
year:
i. Sale of the 49% stake in WiZink
On 6 November 2018, once the pertinent regulatory permits had been secured, the transactions arising from the agreement between the companies managed by
Värde Partners, Inc. (Varde) and WiZink Bank, S.A. (WiZink) disclosed by the Group on 26 March 2018 were carried out, by virtue of which:
i. Banco Santander sold Varde its 49% stake in WiZink for EUR 1,043 million, with no material impact on the Groups profit or loss; and
ii. Banco Santander and Santander Totta acquired the debit and credit card business sold through Banco Popular in Spain and Portugal that WiZink had acquired
in 2014 and 2016. The Group paid a total of EUR 681 million in the transaction, receiving net assets of EUR 306 million (mostly loans and receivables worth EUR 315 million). The business combination produced EUR 375 million of
goodwill, which will be managed by the businesses in Spain.
With these transactions Santander Group is resuming Banco Populars debit and credit
card business, which improves the marketing strategy and facilitates the integration of Banco Popular.
|
|
|
|
|
14 |
|
2018 Pillar 3 Disclosures Report |
|
|
INTRODUCTION _ 2018 Pillar 3 Disclosures Report
ii. Acquisition of the retail banking and private banking business of Deutsche Bank Polska, S.A.
On 14 December 2017, the Group announced that its subsidiary, Santander Bank Polska, S.A. (Formerly Bank Zachodni WBK S.A.), and Banco Santander, S.A.,
had reached an agreement with Deutsche Bank, A.G. to acquire (through a carve out) the retail and private banking business of Deutsche Bank Polska, S.A., excluding its foreign currency mortgage portfolio and CIB (Corporate & Investment
Banking) business, and including asset management company DB Securities, S.A. (Poland).
In November 2018, after the pertinent regulatory authorisations
were secured and approval was given at the respective annual general meetings of Santander Bank Polska, S.A. and Deutsche Bank Polska, S.A, the acquisition was completed, with EUR 298 million paid in cash and newly-issued Santander Bank Polska,
S.A. shares subscribed in full by Deutsche Bank, A.G. As consideration, it received net assets worth EUR 365 million, mainly customer loans and deposits, and loans and deposits from credit institutions, worth EUR 4,304 million and EUR
4,025 million, respectively, with negative valuation adjustments of EUR 82 million (mainly under Loans).
A gain of EUR
67 million was recognised on the difference between the fair value of the net assets acquired and the value of the transaction, recorded under negative goodwill recognised in results in the Groups consolidated income
statement.
iii. Sale agreement of Banco Populars real estate business
In relation to Banco Populars real estate business, on 8 August 2017, Banco Santander announced the transaction with the Blackstone Fund entailing
the acquisition by the fund of a 51% stake and, accordingly, control over the real estate business, which comprises the portfolio of repossessed properties, real estate asset holding companies, non-performing
loans relating to the real estate sector and other assets related to this activity of Banco Popular and its subsidiaries (including deferred tax assets) registered on certain specified dates (31 March 2017 or 30 April 2017).
The agreements were entered into following receipt of the European Commissions unconditional authorisation of the acquisition of Banco Popular by Banco
Santander for the purposes of competition law.
The transaction was completed on 22 March 2018, after the required regulatory authorisations were secured.
The transaction involved the creation of several companies, with Project Quasar Investments 2017, S.L. as parent, in which Banco Popular holds a 49% stake and Blackstone the remaining 51%, and to which Banco Popular and certain subsidiaries
transferred the business composed of the aforementioned assets and the stake in Aliseda Servicios de Gestión Inmobiliaria, S.L. The price attributed to the assets contributed was approximately EUR 10,000 million, with the vehicle funding
approximately 70% with bank borrowings. Following the contribution by shareholders of the required liquidity to the vehicle so its business could operate, the 49% stake was recognised in the Groups balance sheet at an amount of EUR 1,701
million, under Investments in joint ventures and associates - associates. The transaction did not have a material impact on the Groups income statement.
iv. Merger by absorption by Banco Santander of Banco Popular, S.A.U.
On 23 April 2018, the boards of directors of Banco Santander and Banco Popular Español approved and subscribed the planned merger by absorption of
Banco Popular, S.A.U. by Banco Santander.
On 28 September 2018, the deed of the merger by absorption of Banco Popular Español, S.A.U. by
Banco Santander, S.A. was placed on file with the Mercantile Register Office of Cantabria. As a result of the merger, Banco Santander acquired, by universal succession, all the rights and obligations of Banco Popular, including those acquired by
Banco Pastor and Popular Banca Privada through their merger with Banco Popular, which was also approved by their respective boards on 23 April 2018. This transaction did not have a significant impact on the Groups income statement.
v. Agreement with Aegon Group as business partner in several insurance lines
On 3 July 2018, the Group announced that it had reached an agreement with the Aegon Group whereby the latter will be the insurance partner in Spain in
life-risk and certain lines of general insurance. The agreement and scope under which it will be implemented are subject to several conditions and to the process of termination of the alliance between Banco Popular and its current partner.
Therefore, it is not possible to determine when the transactions will be closed. They are not inspected to have a significant impact on the Groups income statement.
1.4. Regulatory framework
On 26 June 2013 the Basel
III legal framework was incorporated in the European legal order via Directive 2013/36 (CRD IV), which repeals Directives 2006/48 and 2006/49, and Regulation 575/2013 on prudential requirements for credit institutions and investment firms (the CRR).
CRD IV was introduced into Spanish law through Law 10/2014 on the regulation, supervision and solvency of credit institutions, and its subsequent
regulatory implementation via Royal Decree 84/2015 and Circular 2/2016 of the Bank of Spain, which completes its adaptation to Spanish law.
The CRR,
which is immediately applicable in all European countries, provides for a phased-in period that will allow institutions to adapt gradually to the new requirements in the European Union. The phased-in arrangements have been introduced into Spanish law through Bank of Spain Circular 2/2014 affecting both the new deductions from capital and the instruments and elements of capital that cease to be eligible
as capital under the new regulation. In March 2016, the ECB published Regulation 2016/445/ EU, adjusting certain timelines established in Bank of Spain Circular 2/2014, especially the calendar for (Deferred Tax Assets) DTAs. The capital buffers
provided for CRD IV will also be phased-in gradually, starting in 2016 and reaching full implementation in 2019.
The review of the capital regulatory framework in force (CRR/CRD IV) by the European governance bodies is nearing completion. The new framework (CRR II/CRD
V), which is expected to be approved in early 2019, will include different Basel standards, such as the Fundamental Review of the Trading Book for market risk, the Net Stable Funding Ratio for liquidity risk, or the SA-CCR for calculation
of the EAD by counterparty credit risk or interest rate risk in the banking book (IRRBB). Amendments will also
be made relating to the treatment of central counterparties, the MDA, Pillar 2, the leverage ratio and Pillar 3 among others.
The most significant change
is the implementation of the TLAC Term Sheet, established internationally by the Financial Stability Board (FSB) within the European capital framework, known as the Minimum Requirement of Eligible Liabilities (MREL), whereby systemically important
banks will have to comply with MREL requirements under Pillar 1. Changes also include the amendment of the Resolution Directive (BRRD), which will be replaced by BRRD II establishing MREL requirements under Pillar 2 for all resolution entities, both
systemic and otherwise, whereby the resolution authority will decide the requirements on a case-by-case basis.
In 2018, the SRB set target MREL requirements based on the 2017 policy. These targets are set for each resolution group, both Multiple Point of Entry (MPE)
strategies, as is the case for Banco Santander, and Single Point of Entry (SPE) strategies.
In January 2019, the SRB published the 2018 MREL policy.
Among its key points we would highlight the hybrid approach under which eligible liabilities issued are only computed at the level of the point of entry, along with the Resolution Groups own funds. The policy also establishes that individual
requirements will be set for relevant entities of each Resolution Group and there will be guidance on internal MREL so as to align the policy with the regulatory changes to be introduced in the BRRD.
1.4.1. Regulatory changes in 2018
In 2018, significant
progress was made on the capital review and crisis management process, while issues such as sustainability and digital transformation started to take on a leading role in the regulatory agenda.
International framework
In 2018, the Basel Committee
continued to work on the following issues, among others:
|
|
|
Market risk. In March, the consultation on the Review of Minimum Capital Requirements for Market Risk was launched, to be completed in June 2018, to conclude the review of the market risk standard.
|
|
|
|
Simple, transparent and comparable short-term securitisations. In May, the Basel Committee published: i) Criteria for identifying simple, transparent and comparable short-term securitisations, together with
IOSCO; and ii) Capital treatment for simple, transparent and comparable short-term securitisations. |
|
|
|
Global systemically important banks (G-SIBs). In July, the Basel Committee published a document entitled Global Systemically Important Banks: revised assessment methodology and the higher loss absorbency
requirement, which includes the first review of the framework for global systemically important banks. This revised methodology is expected to be implemented by the national jurisdictions by 2021, when it will be revised again.
|
|
|
|
Pillar III disclosure requirements. The Basel Committee published the Third Review of its Pillar III Disclosure Requirements in December 2018. |
|
|
|
Sovereign debt. In March 2018, the consultation on the discussion paper published in 2017 reviewing the treatment of sovereign debt was completed. The main options raised in the paper involved additional
disclosure requirements (Pillar 3) and capital surcharges (Pillar 1 and Pillar 2) for sovereign debt exposures except for exposures to central banks denominated in domestic currency (of the central bank) and for exposures to central banks in
countries where monetary policy is centred on the exchange rate. |
With respect to crisis management, in 2018, the Financial Stability
Board (FSB) continued to address the definition and design of elements in the crisis management process to ensure its effectiveness and practical application. Two main sets of guidelines were released during the year:
|
|
|
Funding strategy for the implementation of a resolution plan. These guidelines covered, among others: the need for entities to have sufficient capacity to estimate and control their funding requirements in the
event of resolution; the need to have sufficient assets and private funding channels in the event of resolution; and the need to have temporary access to industry funds, in addition to funding from central banks. |
|
|
|
Bail-in implementation procedures. The aim of the guidelines is to facilitate the implementation of a resolution strategy based on the absorption of losses by creditors.
The guidelines include the obligation of the institution to disclose any instruments that may be the object of a bail-in and the need for securities regulations to contain the option of cancelling the
securities, informing creditors and issuing new securities after the resolution. |
Further, in the summer of 2018, the FSB asked for feedback
following the implementation of the Total Loss Absorbing Capacity (TLAC) process in the different jurisdictions. The objective is to assess the degree of consistency in its implementation in relation to the content and dates established in the TLAC
term sheet published in 2015. The feedback collected and the FSBs own analysis will be included in the report published by the FSB in the summer of 2019. No changes are expected with regard to the definition of the TLAC, but as a result of
this report, the FSB could issue guidelines to facilitate the implementation of the standard.
In November 2018, the Financial Stability Board (FSB)
updated the list of G-SIBs for 2020. Santander remains within the least systemic group of banks and is subject to the minimum additional capital surcharge for banks of systemic importance (1%).
In the digital arena, the fintech phenomenon and the need to review the regulatory and supervisory framework are increasingly pressing points on the
agendas of international authorities. In 2018, these authorities published several papers on this subject.
In February, the Basel Committee (BCBS)
published a report on sound practices and implications of fintech developments for banks and bank supervisors. The report looks at the challenges involved in adopting financial technologies and the appearance of new business models for banks. Among
other considerations, the BCBS proposes the supervisory framework to be developed ensuring appropriate supervision without hampering innovation.
|
|
|
|
|
16 |
|
2018 Pillar 3 Disclosures Report |
|
|
INTRODUCTION _ 2018 Pillar 3 Disclosures Report
Along these lines, in October, the International Monetary Fund (IMF) and the World Bank (WB) presented their
Bali fintech agenda. This agenda includes a set of 12 policy elements aimed at helping member countries to harness the benefits and opportunities of financial technology to develop solutions to improve financial services, mitigate risk and achieve
stable and inclusive growth.
Among other points, the agenda recommends modernising legal frameworks to enable innovation, in addition to increased
monitoring of new market participants, products and activities by the authorities. The IMF and WB suggest reviewing the competition policy framework for fintech to take account of the new business models.
The document also suggests that the determination of what constitutes a systemically important entity may need to be expanded to include non-bank financial institutions and entities providing critical fintech infrastructure, and exploring the implications of this in areas such as security networks, including deposit insurance or issues relating to
crisis management and the resolution of problems affecting these entities.
European regulation
In 2018, work continued at European level on the review of the capital framework and the resolution framework (review of CRR/ CRD/BRRD). In
December 2018, agreement was achieved in several key areas:
|
|
|
The option not to deduct software from capital resources in certain circumstances, to be determined by the EBA. |
|
|
|
The SME supporting factor will be expanded, and an infrastructure supporting factor introduced. |
|
|
|
The subordination requirement is established at a minimum of 8% of total liabilities and equity. The entity may reduce this level with a limit; but the fully subordinated requirement may also be demanded.
|
|
|
|
The M-MDA concept is created, whereby for nine months the resolution authority may decide, at its discretion, although in consultation with the competent authority, whether to
apply the restriction in the event of non-compliance with MREL. This decision is reviewed on a monthly basis. |
|
|
|
The moratorium tool may not be used before an institution is classified as Failing or Likely to Fail, and for a maximum duration of two days. |
The implementation process of the definitive Basel III framework, approved by the Group of Governors and Heads of Supervision of the Central Banks
(GHOS) on 7 December, in the European Union has commenced.
The objective of this text seeks to review the frameworks for calculating capital
requirements in relation to credit, market and operational risk, and is intended to ensure that they are more simple, readily comparable and risk-sensitive, while also reducing any variability in risk-weighted assets that is not justified with
regard to the different risk profiles.
Therefore, to progress with the draft regulation to be implemented by Basel in Europe, the European Commission
launched a Consultation on the finalisation of Basel III to be completed in April 2018. A request was also submitted to the EBA for a quantitative and qualitative assessment of the implementation of the Basel III framework, which involved a complete
analysis of the potential impact of the different elements in the reform of the banking sector and the general economy of the European Union.
Meanwhile,
the European Commission has yet to determine the equivalence of the jurisdictions of third countries, based on EBA questionnaires. The work was put on hold in 2016 but resumed in late 2017, with Argentina being one of the jurisdictions to undergo an
assessment. For the qualification of CCPs, the Commission once again extended the phased-in period until 15 June 2019.
With respect to supervision, the supervisory activity conducted by the Single Supervisory Mechanism (SSM) within the framework of the Supervisory Review and
Evaluation Process (SREP) is notable. In this area, Banco Santanders Joint Supervisory Team from the European Central Bank worked tirelessly in 2018, holding over 100 meetings with the bank, most of which were related to its inspection and
monitoring activities.
Along with a busy supervisory agenda, in 2018 the SSM continued to make great strides towards the harmonisation of supervisory
policies across countries, and improving the transparency of their expectations.
Europe also continues to make progress in the implementation of the
crisis management framework. The Single Resolution Mechanism (SRM), the second pillar of the Banking Union after the Single Supervisory Mechanism, has been operational since 1 January 2016. In January 2018, the definitive system under
which banks contribute to the administrative expenditure of the SRB came into effect, replacing the transitory system of November 2014. The Single Resolution Board, together with the national resolution authorities, have defined the framework for
establishing MREL (minimum requirement of eligible liabilities) and continue to work towards ensuring the effectiveness of the resolution framework.
Turning to the Single Resolution Fund managed by the Single Resolution Board, the period of gradual mutualisation will allow for a transition from the
national resolution funds, in place in several euro area countries until 2016, to the Single Resolution Fund, which will be fully implemented by 2024. The funding target of the Single Resolution Fund is 1% of covered deposits in 2024. The first year
was calculated at 60% nationally (BRRD perimeter) and 40% across the euro area (SRM perimeter). In 2017, these percentages were inverted, with 40% of funding in the BRRD perimeter and 60% within the SRM perimeter. In 2018, 33% was in the BRRD
perimeter and 67% in the SRM perimeter. Funding under the SRM perimeter will be steadily raised to reach 100% in 2024.
In 2018, debate continued over the
creation of a backstop for the Single Resolution Fund, after an agreement was reached on the design and allocation for funds for the European Stability Mechanism (ESM), which will act as the backstop. However, the issue of the provision of liquidity
on resolution remains unresolved.
Negotiations on Pillar 3 of the banking union, the European Deposit Insurance Scheme (EDIS), for which the
European Commission already submitted a proposal in 2015, are advancing slowly. A route map is being prepared to commence policy negotiations. For this purpose, a high-level work group will be set up, which will publish a report in June 2019.
Further, in March 2018, the Commission published a raft of measures to address the high rates of non-performing loans
(NPLs). These included a draft regulation governing minimum cover for losses deriving from NPL exposures, which is expected to be approved in early 2019.
In May 2018, the Commission published its legislative proposal for a framework to create Sovereign Bond-Backed Securities (SBBS). No progress is expected to
be made in 2019.
In the digital area, in March 2018, the Commission presented its Fintech action plan: for a more competitive and innovative
European financial sector. The plan encompasses 23 initiatives through which the Commission aims to enable the financial sector to benefit from advances in new technologies (such as artificial intelligence, blockchain or the cloud), while at the
same time ensuring that innovation is safer for customers. These initiatives, which the Commission has already started to develop, include:
|
|
|
Enabling innovative business models to scale-up across the EU through clear and consistent licensing requirements (e.g. the Commission has presented a proposal to establish a
European passporting regime for crowdfunding service providers for companies). |
|
|
|
Increasing competition and cooperation between market players through common standards and interoperable solutions (e.g. encouraging the development of APIs compatible with PSD2 and GDPR). |
|
|
|
Facilitating the emergence of innovative business models across the EU through innovation facilitators such as sandboxes, and increasing cooperation between the authorities and the industry (e.g. creation of EBA Fintech
Knowledge Hub for the purpose of exchanging knowledge and experiences with financial institutions, new entrants and technology providers). |
|
|
|
Reviewing the suitability of the rules and ensuring technology neutrality (e.g. setting up an expert group to assess whether there are regulatory obstacles to financial innovation). |
|
|
|
Removing obstacles to cloud services (e.g. setting up work groups to develop safety certification systems for providers, and facilitate data portability between providers). |
|
|
|
Enabling the development of blockchain applications (e.g. creation of the Blockchain Observatory and Forum and two special expert groups to define the policy, legal and regulatory terms required for the roll-out of applications, and assess and promote the most promising cases). |
|
|
|
Enhancing the security and integrity of the financial sector (e.g. assess barriers limiting information sharing on cyber threats in the financial markets).
|
The European Commission has also progressed in the implementation of its strategy to create a Digital Single
Market, focusing on three main issues:
|
|
|
Building a European data economy. |
|
|
|
Online platforms and how to ensure these continue contributing to the economy and to society as a whole. |
|
|
|
Strengthening cyber security. |
In regard to building a data economy, the Commission has been working on
several initiatives to protect privacy and create trust in the digital economy: the GDPR came into force in May 2018, establishing a common European framework for personal data protection. In 2018, the free flow of
non-personal data regulation was approved, which will come into force in May 2019. The draft ePrivacy regulation, which is still at the discussion phase, has yet to be approved.
Further, to address the challenges raised by the use of artificial intelligence and big data, the Commission is working on defining a suitable legal framework
for data analysis and automatic decision-making. With this aim, in 2018 it set up an expert group on artificial intelligence to draw up some ethical guidelines to govern the use of this technology and recommendations on how to enable policies for
the development of this technology.
In the area of platforms, in April the Commission submitted a draft regulation for online brokerage services to
ensure fairness and transparency for business users. The EC also set up a group of experts for the observatory on the online platform economy to monitor the legislative proposal.
In the area of cyber security, in 2018 the Commission worked on three main aspects: 1) strengthening the role of ENISA as a permanent European cyber security
agency, while also making it a key body for pan-European cyber security certification, 2) strengthening cooperation between member states to protect against potential large-scale cyber-attacks, 3) promoting
the concerted implementation of the NIS directive in the different member states.
In the last few years, and particularly from 2015 following the signing
of the Paris Agreement on climate change and sustainable financing, there has been a re-directing of environmental policies at international and European level. Specifically, key regulatory proposals
have been made given the major role that financial institutions can play in the transition to a sustainable economy.
Therefore, in 2018, the European
Commission implemented the legislative package known as EU action plan on sustainable finance which sets out the route map for reaching the EUs targets for 2030, including a 40% reduction in greenhouse gas emissions. Highlights of
the action plan, which is currently being debated by the European parliament and the council, include:
|
|
|
Establishing a common language for sustainable finance, i.e. a unified classification system (taxonomy) within the EU that defines what can be considered sustainable, and signals the areas where sustainable
investment may have the greatest impact. |
|
|
|
|
|
18 |
|
2018 Pillar 3 Disclosures Report |
|
|
INTRODUCTION _ 2018 Pillar 3 Disclosures Report
|
|
|
Establishing EU labels for green financial products based on the EU classification system: this will help investors to easily identify products that comply with green or
low-carbon criteria. |
|
|
|
Clarifying asset managers and institutional investors duties to consider sustainability in the investment process and strengthen disclosure requirements. |
|
|
|
Introducing sustainability in prudential requirements: banks and insurance companies are a major source of external financing for the European economy. The Commission will assess the viability of recalibrating the
capital requirements for banks (green supporting factor) for sustainable investors, when this is justified from the standpoint of risk. |
|
|
|
Increasing the transparency of corporate reports. |
It should also be noted that at December 2018, as part of
the European agreement to review the CRD and CRR, certain key factors exist relating to sustainable finance: the possibility of including environmental, social and corporate governance risks (ESG) in the SREP; greater transparency for companies with
regard to ESG risk and the mandate enabling the EBA to carry out an analysis to assess the viability of recalibrating the capital requirements for banks (green/brown factor).
Santander Group voices the concerns and thoughts of its corporate offices and local teams on matters relating to the financial sector where these affect its
business. The corporate and local public policy function, in coordination with the business units and support divisions concerned in each case, identifies the regulatory alerts and establishes the Santander Groups stance.
The main courses of action taken along these lines are as follows:
|
|
|
Santander Group has been a keen participant in the main banking associations worldwide and in Europe, and in the main markets in which it operates. Among other assistance, it contributes inputs to the replies drawn up
in connection with ongoing regulatory consultations. |
|
|
|
Santander Group has maintained proactive, constructive dialogue with policy-makers through the existing channels (hearings) and sends individual replies to official consultations on issues considered relevant to the
Santander Group. |
|
|
|
In particular, Santander Group has worked to consolidate and make known the sturdiness of its organisational model through subsidiaries that are fully independent when it comes to capital and liquidity. It also has the
benefits of geographic diversification and recognition of the issuance of capital instruments from third countries and equivalence of the jurisdictions of third countries where the bank operates. In addition, one of the banks main objectives
is for subsidiaries to adopt return- and advanced-capital-based management systems via internal models, given the improvements in comprehensive risk management and adequacy in the calculation of capital these provide. |
|
|
|
Santander also maintains that the regulatory framework should enable banks to play an active role in the new digital economy, and implement their transformation so that they can continue to respond to changing consumer
needs. |
CAPITAL _ 2018 Pillar 3 Disclosures Report
2. Capital
Table 3. Main capital figures and capital adequacy ratios
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully loaded |
|
|
Phased-in |
|
|
|
Dec-2018 |
|
|
Dec-2017 |
|
|
Dec-2018 |
|
|
Dec-2017 |
|
Common Equity (CET1) |
|
|
66,904 |
|
|
|
65,563 |
|
|
|
67,962 |
|
|
|
74,173 |
|
Tier 1 |
|
|
75,838 |
|
|
|
73,293 |
|
|
|
77,716 |
|
|
|
77,283 |
|
Total capital |
|
|
87,506 |
|
|
|
87,588 |
|
|
|
88,725 |
|
|
|
90,706 |
|
Risk weighted assets |
|
|
592,319 |
|
|
|
605,064 |
|
|
|
592,319 |
|
|
|
605,064 |
|
CET1 Ratio |
|
|
11.30 |
% |
|
|
10.84 |
% |
|
|
11.47 |
% |
|
|
12.26 |
% |
Tier 1 Ratio |
|
|
12.80 |
% |
|
|
12.11 |
% |
|
|
13.12 |
% |
|
|
12.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital ratio |
|
|
14.77 |
% |
|
|
14.48 |
% |
|
|
14.98 |
% |
|
|
14.99 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage Ratio |
|
|
5.10 |
% |
|
|
5.02 |
% |
|
|
5.22 |
% |
|
|
5.28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 CET1 Fully Loaded evolution
%
Regulatory Capital vs Regulatory requirement
1. |
Global systemically important Banks buffer |
2. |
Conservation capital buffer |
3. |
Countercyclical capital buffer
|
2.1. Capital
Capital management and control at Santander Group is a fully transversal process that seeks to guarantee the
banks capital adequacy, while complying with regulatory requirements and maximising profitability. It is determined by the strategic objectives and by risk appetite set by the board of directors. To achieve this, the following policies have
been established to shape the approach that the Group applies to capital management:
|
|
|
Establish adequate capital planning, so as to meet current needs and provide the necessary resources to meet the needs of the business plans, regulatory requirements and the associated risks in the short and medium
term, while maintaining the risk profile approved by the board. |
|
|
|
Ensure that the Group and its companies maintain sufficient capital to cover requirements during stress scenarios due to the increase in risks as the macroeconomic climate deteriorates.
|
Note: All figures for 2018 calculated
applying the transitional arrangements of IFRS 9 unless specified otherwise.
|
|
|
Optimise capital use through appropriate allocation of capital among the businesses, based on the relative return on regulatory and economic capital and taking the risk appetite, growth and strategic objectives into
account. |
Santander Group maintains a very comfortable capital adequacy position, well above the levels required by applicable regulations
and by the European Central Bank.
Santander Groups solvency ratios at 31 December 2018 are as shown in table 3.
Phased-in ratios are calculated applying the transitory schedules for implementation of Basel III, whereas fully loaded ratios are calculated without applying any schedules, hence, using the final regulation.
IFRS 9 became effective on 1 January 2018, implying changes in accounting that affect capital ratios. Santander decided to applying the transitional
arrangements, implying a 5-year transitional period.
Had it not applied the IFRS 9 transitional arrangements, the
total impact on the fully loaded CET 1 ratio at December would be -27 bps. For further details, see Appendix XII.
Capital and solvency ratios
In fully-loaded terms CET1 in December stood at 11.30%, increasing by 46 bps during the year and reaching the
goal at year-end which was announced at the beginning of the year. The fully-loaded capital ratio was 14.77%, up by 29 bps during the year.
2018 CET1 Fully Loaded evolution
The increase of 46 bps in the year is mainly due to profit generation and risk assets management, which put the ordinary
generation for the year at 64 bps, together with 21 bps from the perimeter (mainly Blackstones and Wizink), partially offset by -25 bps from regulatory impacts/one-offs
(mainly minorities of SC USA and restructuring costs), and another 14 bps from various causes, including the valuation of available for sale portfolios.
From a qualitative point of view, Santander Group has solid ratios that are suited to its business model, the structure of its balance sheet and its risk
profile. Santander Group exceeds the 2019 minimum regulatory capital requirements for the total ratio by 179 basis points, taking into account the surpluses and shortfalls of AT1 and T2.
|
|
|
|
|
22 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
Strategic principles of the capital function
|
|
Autonomy. The Groups corporate structure is based on a legally independent subsidiary model, each responsible for its own capital and liquidity. This provides advantages when raising funds and limits
the risk of contagion, thus reducing systemic risk. Under this structure, subsidiaries are subject to two tiers of supervision and internal control: local and global. Each unit must raise and manage its own financial resources accordingly in order
to maintain the required levels of capital at all times. Local units must have the necessary capital to carry on their activity autonomously and meet local regulatory requirements and the expectations of their local market.
|
|
|
Solvency. The Group and its subsidiaries must ensure at all times that the structure and level of their capital is suitable in view of the risks to which they are exposed. Capital must be allocated accordingly so
as to ensure the effective management of the risks assumed within the subsidiaries and it must be assigned proportionately among all those risks.
|
|
|
Efficiency. The Group and its subsidiaries must roll out mechanisms to actively seek and promote an efficient use of capital and to ensure that the value created by an investment exceeds at least the cost of the
capital invested. Capital is a scarce commodity that must be used as efficiently as possible, given the high cost of generating capital, whether organically or through the markets. Subsidiaries must have on- going monitoring mechanisms in place to
optimise their capital consumption. |
|
|
|
Centralised monitoring. The capital management model must ensure a holistic view, through a corporate
environment of global coordination and review (every business, every geography). The first level of monitoring, by the local units themselves, is supplemented by the monitoring activity of the corporate units. One of the main ways the Group achieves
this is by defining and applying standard policies, metrics, methodologies and tools across the Group, though these may be adapted accordingly to bring them in line with local regulations and supervisory requirements and to reflect the degree of
progress made by each subsidiary. |
2.1.1. Capital function
The core principles provide the basic guidelines for the Group entities in managing, monitoring and controlling capital.
2.1.1.1. Organisation
The organisational structure has
been defined with a view to achieving compliance with the principles of capital management while ensuring that the relationship between each subsidiary and the corporation in this function facilitates the subsidiarys financial autonomy,
subject to strict monitoring coordinated at Group level.
Santander Groups risk management and control model is based on three lines of defence. The
first line comprises the business functions or activities that assume or generate exposure to risk. Risks undertaken or generated within the first line of defence must be compatible with the risk appetite and limits in place. To carry out its
function, the first line of defence must have the resources to identify, measure, address and report the risks assumed. The second line of defence comprises the function of controlling and supervising risk, along with the compliance function. This
second line of defence is charged with effective control of risks and ensures that they are managed in accordance with the risk appetite defined.
Internal audit is the third line of defence and the last layer of control, and regularly assesses policies,
methods and procedures to ensure they are suitable, and also checks they are operational.
The risk control function, the compliance function and the
internal audit function are sufficiently separate and independent from each other and also regarding the other functions they control and supervise when carrying out their tasks. They likewise have access to the board of directors and/or to its
committees at the highest level.
2.1.1.2. Capital governance
To ensure the capital function operates properly when it comes to both decision-making and supervision and control, Santander Group has developed a structure
of responsive and efficient governance bodies so as to ensure the involvement of all the areas concerned and the necessary involvement of senior management. Because of the Groups hallmark subsidiary-based structure, the governance structure of
the capital function must be adapted to preserve the subsidiaries capital autonomy, while allowing centralised monitoring and coordinated management at Group level. There are also various committees that have responsibilities at regional level
and also for coordination at Group level. The local committees must report to the corporate committees as and when required on any relevant aspects of their activity that may affect capital so as to ensure proper coordination between the
subsidiaries and the corporate centre.
Governance of the Capital function
|
|
|
|
|
24 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
2.1.2. Capital management and adequacy
The goal of capital management and adequacy at Santander Group is to guarantee the entitys capital adequacy and maximise its profitability, while
ensuring compliance with internal capital goals and regulatory requirements. Capital management is a fundamental strategic tool for decision making at both local and corporate level and serves to create a common framework of action by establishing
uniform definitions of capital management criteria, policies, functions, metrics and processes.
Key capital figures
The Group works with the following variables
relating to the concept of capital:
Regulatory capital
|
|
|
Capital requirements: The minimum amount of capital the supervisory authority requires the entity to hold to safeguard its solvency, based on the amount of risk assumed, in terms of credit, market and operational
risk. |
|
|
|
Eligible capital: The capital the regulator considers eligible to meet capital requirements. The main components of eligible capital are accounting capital and reserves. |
Economic capital
|
|
|
Internal capital requirements: The minimum amount of capital that the Group needs with a specified level of probability to absorb unexpected losses deriving from its current exposure to all risks taken on by the
entity (including risks additional to those contemplated under the regulatory capital requirements). |
|
|
|
Available capital: The amount of capital the Group itself considers eligible, on management criteria, to meet capital needs. |
Cost of Capital
The minimum return required by investors
(shareholders) as compensation for the opportunity cost incurred and the risk assumed on investing their capital in the entity. This cost of capital represents a cut-off rate or minimum
return to be achieved and allows comparisons to be made between the different business units and their efficiency to be assessed.
Leverage ratio
Regulatory measure that monitors the financial solidity and strength of the Entity by linking size and capital. This ratio is calculated dividing the
Tier 1 by the leverage exposure, which takes into account the balance sheet exposure and adjustments due to derivatives, secured financing transactions (SFTs) and off-balance sheet items.
Return on risk-adjusted capital (RoRAC)
The return (understood as net profit after tax) on internally required economic capital, Therefore, the higher the economic capital, the lower the RoRAC. For
this reason, the Bank must demand a higher return from transactions or business units that consume more capital.
RoRAC takes the investment risk into
account and so provides a risk-adjusted measure of return.
The use of RoRAC allows the Bank to better manage its activities, assess the real risk-adjusted
return of businesses and be more efficient in decision-making relating to investments.
Return on Risk Weighted Asset (RoRWA)
Defined as the return (understood as net profit after tax) on a business risk-weighted assets.
The use of RoRWA allows the Bank to set up strategies to allocate regulatory capital and ensure the maximum return is obtained.
Value creation
Any profit generated above and beyond the
cost of economic capital.
The Bank will create value when the risk-adjusted return, measured by RoRAC, is higher than its cost of capital. Otherwise value
will be destroyed. It measures the risk-adjusted return in absolute terms (monetary units), supplementing the RoRAC result.
Expected loss
Average NPL losses expected by the entity over the course of an economic cycle. From the point of view of expected loss, defaults are considered a
cost that could be eliminated or reduced through appropriate selection of borrowers.
The Groups capital function is performed at two levels:
|
|
|
Regulatory capital: regulatory capital management is based on an analysis of the capital base, the capital adequacy ratios as defined by applicable regulations and the scenarios used in capital planning. The aim
is for the capital structure to be as efficient as possible, in terms of both cost and compliance with regulatory requirements. Active capital management includes strategies for capital allocation and for efficient usage of business units,
securitisation, asset sales and issuances of capital instruments (hybrid capital instruments and subordinated debt). |
|
|
|
Economic capital: the economic capital model ensures that sufficient capital is available and allocated accordingly to cover all the risks to which the Group is exposed as a result of its business activity and
according to its risk appetite. It also aims to optimise value creation at the Group and across all its business units. |
By
effectively measuring the capital needed for a given business activity, together with the return on that business, the Group is able to optimise value creation by selecting those business activities that offer the best return on capital. This
capital allocation process is carried out under different economic scenarios and with the level of capital adequacy determined by Santander Group in each case. The scenarios include those that are expected to occur and those that are far less likely
though still plausible.
2.1.3. Capital management priorities
The Groups most notable capital management activities are:
|
|
|
Establishing solvency objectives and the capital contributions aligned with the minimum regulatory requirements and internal policies, in order to guarantee a solid level of capital, coherent with the Groups risk
profile, and an efficient use of capital to maximise shareholder value. |
|
|
|
Developing a capital plan to meet the objectives coherent with the strategic plan. Capital planning is an essential part of executing the three-year strategic plan. |
|
|
|
Assessing capital adequacy in order to ensure that the capital plan is coherent with the Groups risk profile and with its risk appetite framework also in stress scenarios. |
|
|
|
Developing the annual capital budget as part of the Groups budgetary process. |
|
|
|
Monitoring and controlling budget execution and drawing up action plans to correct any deviation from the budget. |
|
|
|
Calculating capital metrics.
|
|
|
|
Drawing up internal capital reports, as well as reports for the supervisory authorities and for the market. |
Details of the most significant actions undertaken in 2018 are set out below:
Issues of financial instruments with the legal status of capital
In March 2018, Banco Santander S.A. made one issue of contingent convertible bonds (CoCos) for EUR 1,500 million in a bid to strengthen its AT1 capital.
In February, Banco Santander, S.A. carried out an issuance of subordinated debt for EUR 1,250 million, and in April, Bank Polska S.A. for EUR
229 million. These placements are intended to enhance the total capital ratio, as it qualifies as Tier 2 capital.
Dividend policy*
The board of directors intention is to distribute EUR 0.23 charged to 2018s earnings in four dividends, three of them in cash and one a scrip
dividend (Santander Dividendo Elección).
For further details, see the Corporate Governance Chapter (section 3.3: Dividend policy) on the
2018 Annual Report.
In December 2015, the European Central Bank issued a recommendation on dividend allocation policies applicable to all euro
area credit entities as of 2016. The recommendation calls for conservative dividend policies and prudent assumptions and has been fully observed by Banco Santander S.A.
Lastly, in some regions, restrictions on the payment of dividends have been implemented, such as in Poland, where the national authority (KNF) has imposed
stricter minimum restrictions on the payment of dividends, with additional limits for entities with large mortgage exposures in foreign currency, or in Argentina, where BCRA notice A6464 was issued in 2018, amending the rules on
distributing profits and coupons on perpetual instruments, making them more restrictive.
(*) |
Dividends charged to 2018 results are subject to approval of the shareholders meeting. |
|
|
|
|
|
26 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
2.1.4. Capital targets
Santander Group works towards a fully loaded CET1 ratio from 11% to 12% in the medium term.
Fully loaded CET1 Capital evolution
Note 1: Pro-forma including January 2015 capital increase
The continuous improvement seen in the capital ratios is a product of the profitable growth strategy pursued by Santander Group and a culture of active
capital management across all levels of the organisation.
Highlights:
|
|
|
The reinforcement of teams dedicated to capital management and greater coordination with the Corporate Centre and local teams. |
|
|
|
All countries and business units have drawn up individual capital plans focused on achieving a business that maximises the return on capital. |
|
|
|
Greater weighting of capital as part of incentive schemes. Certain aspects relating to capital management and returns are now taken into account when setting the variable remuneration payable to members of the senior
management. |
|
|
|
The relevant metrics include the Groups fully-loaded CET1, the capital contribution of the different countries and the return on risk-weighted assets (RoRWA). |
|
|
|
The qualitative aspects considered include the proper management of regulatory changes affecting capital, effective management of capital relating to business decisions, sustainable capital generation and effective
capital allocation. |
In tandem, the Group continues to develop a programme to ensure the ongoing improvement of infrastructure, processes
and methodologies supporting all aspects relating to capital. The aim here is to ensure more active management of capital, enable the Group to respond rapidly to the already numerous and still growing number of regulatory requirements and carry out
all associated activities more efficiently.
2.1.5. Capital buffers and eligible capital requirements
Santander Group must comply, at all times, with the combined capital buffer requirement, defined as the total CET1 capital necessary to meet the following
obligations:
|
|
|
Capital conservation buffer (CCoB): mandatory for all entities and to be phased-in from 1 January 2016. The buffer for banks in 2019 will therefore be 2.5%.
|
|
|
|
Buffers for systemically important banks: applicable from 1 January 2016. There are two types: |
|
|
|
Systemically important institutions: for entities designated as systemically important, using a common methodology. Here, there are two different surcharges. The largest buffer rate of the two is applied:
|
|
i) |
G-SIB buffer (Global Systemically Important Banks): common methodology
whereby banks are classified into buckets based on their global systemic risk. |
|
ii) |
D-SIB buffer (Domestic Systemically Important Banks)
|
|
|
|
Systemic risk buffer (SRB): The competent authority may require a systemic risk buffer, where these risks are understood to be those that could trigger a disturbance in the financial system causing serious consequences
for said system and the real economy. This buffer is discretionary and applies to all or some of an entitys exposures (domestic and/or foreign risks, risks specific to certain business sectors, etc.), as decided by the authorities.
|
If the SRB covers all types of exposures, the greatest of the three systemic buffer rates will be applied. If the SRB only
applies to a certain type of exposure, the SRB buffer will be added to the greater of the other two systemic buffers (G-SIB or D-SIB).
|
|
|
Countercyclical capital buffer (CCyB): the CCyB will be applied when the authorities deem that lending is growing excessively in a certain jurisdiction and it will be applied in order to constrain this excessive
growth. This buffer is specifically calculated for each bank or group and consists of the weighted average of percentages of countercyclical buffers applied in regions in which the banks relevant exposures are located. It is also applicable
from 1 January 2016. |
The table below summarises the required regulatory rates based on the different capital buffers to be applied
and Banco Santanders position in 2019:
|
|
|
|
|
Application |
|
Buffers (% RWAs) |
|
2019 |
All entities |
|
Conservation (CCoB) |
|
2.5% |
|
|
G-SIB entities |
|
|
Designated entities |
|
(1%-3.5%)(1) |
|
100% of the buffer |
|
|
D-SIB entities (2) |
|
100% of the buffer |
|
|
Systemic risk (SRB) (3) |
|
0%-5% |
At the discretion |
|
Countercyclical |
|
|
of competent |
|
(CCyB) (4) |
|
0% - 2.5% |
national authority |
|
|
|
|
|
|
Consolidated |
|
CCoB + CCyB + Max (5) |
|
|
combined buffer |
|
(G-SIB, D-SIB, SRB) |
(1) |
According to the list of Global Systemically Important Banks (G-SIBs) published by the FSB for 2019, a combined
buffer of 1% is required for Santander Group. |
(2) |
Domestic Systemically Important Banks. The Bank of Spain requires a 1% buffer for Santander.
|
(3) |
This requirement is 0% for Santander. |
(4) |
Applicable countercyclical buffer: |
|
a) |
Exposures to customers resident in Spain: 0%, according to Bank of Spain data for the first quarter of 2019
|
|
b) |
Exposures to customers resident in Norway and Sweden: 2% |
|
c) |
Exposures to customers resident in the UK: 1% |
|
d) |
Exposures to customers resident in Slovakia and Iceland: 1.25% |
|
e) |
Exposures to customers resident in the Czech Republic: 1% |
(5) |
The greatest of the 3 buffers applies if the SRB buffer covers all exposures. Otherwise, the higher of G-SIB
and D-SIB plus the SRB buffer applies. |
The geographic distribution of relevant lending exposures for calculating the countercyclical
capital buffer is available in Appendix XI on the Santander Group website.
Eligible capital requirements
The decision on capital resulting from the Supervisory Review and Evaluation Process (SREP) under the European Central Banks (ECB) Single Supervisory
Mechanism comprises a Pillar 2 Requirement (Pillar 2R) and Pillar 2 Guidance (Pillar 2G). Pillar 2R is binding, and failure to comply may have direct consequences for banks. Pillar 2G is not directly binding, and failure to comply has no bearing on
the Maximum Distributable Amount (MDA) threshold. Moreover, Pillar 2G does not automatically trigger action by the ECB. However, the ECB does expect compliance with Pillar 2G at all times. If a bank is not compliant with Pillar 2G, the ECB will give
careful consideration to the reasons and circumstances and may define additional supervisory control measures.
Pursuant to notification received from the ECB, in 2019, Santander Group must report a Common Equity Tier 1
(CET1) ratio of at least 9.70% on a consolidated level. This requirement includes the Pillar 1 requirement (4.5%); the Pillar 2 requirement (1.5%); the capital conservation buffer (2.5%); the requirement deriving from its status as a global
systemically important bank (1%) and the countercyclical capital buffer requirement (0.20% de CET1). Santander Group must also maintain a minimum capital ratio of 11.20% for T1 and a minimum total ratio of 13.20%.
At 31 December 2018, Banco Santander had a CET1 regulatory capital ratio of 11.47% and a total ratio of 14.98% in application of IFRS9 transitional
arrangements.
Regulatory Capital vs Regulatory requirement
1. |
Global systemically important Banks buffer |
2. |
Conservation capital buffer |
3. |
Countercyclical capital buffer
|
|
|
|
|
|
28 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
2.1.5.1. Global systemically important institutions
Santander Group is one of the 29 institutions designated as global systemically important institutions (G-SIIs).
The position of a global systemically important institution may pose a risk to financial stability.
The insolvency of a systemically important institution, or even just the expectation that it might become insolvent, is difficult to predict but could
certainly undermine the financial system and even the real economy.
This warrants special prudential treatment, which has led to the introduction of
specific capital buffer requirements for both global (G-SIIs) and domestic (D-SIIs) systemically important institutions.
This designation requires
Santander Group to meet additional requirements mainly relating to the following:
|
|
|
Its capital buffer (Santander Group is included in the group of banks with the smallest capital buffer, 1%) |
|
|
|
TLAC (Total Loss-Absorbing Capacity) requirements |
|
|
|
The requirement to publish relevant information more often than other banks |
|
|
|
Stricter regulatory requirements for the internal control bodies |
|
|
|
Requirement to submit special reports to the supervisors. |
The Basel Committee and the Financial Stability
Board decide which banks qualify as global systemically important institutions, using a method based on five indicators: size, cross-jurisdiction activity, interconnectedness with other financial institutions, substitutability of financial
services/infrastructure and complexity (with each category given an equal weighting of 20%). This methodology has been changed and will come into effect from January 2021. The main changes in the methodology are as follows: change in the definition
of cross-jurisdiction indicators, inclusion of a trading volume indicator modifying the weighting of the remaining indicators in the substitutability category and inclusion of insurance companies in the reporting scope.
Indicators for systemically important
institutions
|
|
|
|
|
Category |
|
Individual indicator |
|
Supervisor jurisdiction |
Size |
|
Exposure used for the leverage ratio calculation |
|
An indicator of the weight of the bank in the financial system |
|
|
|
Cross-jurisdictional activity |
|
Cross-jurisdictional assets |
|
Snapshot of a banks global footprint |
|
|
|
|
|
Cross-jurisdictional liabilities |
|
|
|
|
|
|
|
Intra-financial system assets |
|
|
|
|
|
Interconnectedness |
|
Intra-financial system liabilities |
|
Measures a banks interconnectedness with other financial institutions |
|
|
Securities outstanding |
|
|
|
|
|
Assets under custody |
|
|
|
|
|
Substitutability/financial infrastructure |
|
Payments activity |
|
Measures whether the banks activity can be substituted by other banks |
|
|
Transactions subscribed in debt and equity markets |
|
|
|
Complexity |
|
Notional amount of over-the-counter (OTC) derivatives |
|
Measures the complexity of a financial entity |
|
|
|
|
|
Level 3 assets |
|
|
|
|
|
|
|
Held for trading and available-for-sale securities |
|
|
The information needed to evaluate the indicators is requested yearly from banks whose leverage exposure exceeds
EUR 200,000 million, or from any other banks at the supervisors discretion (in December 2017 a total of 76 banks were considered). All these institutions are then required to publish the information before 30 April of the following year.
The information is used to draw up a global indicator. The score obtained by each bank will determine the size of the capital buffer required of it, which is
based on a set of buckets defined by the regulators (CET1 surcharge ranging from 1% to 3.5%).
In November 2018, the Financial Stability Board (FSB) published the list of global systemically important
institutions based on December 2017 data. This list applies to 2020. Compliance with these requirements gives Santander Group greater solidity than its domestic peers. Santander Group is currently subject to a systemic buffer surcharge of 1%, which
will become fully effective in 2019.
Global systemically important institutions
|
|
|
Capital buffer |
|
Entity |
5 (3.50%) |
|
(Empty) |
4 (2.50%) |
|
JP Morgan Chase |
|
|
|
|
Citigroup |
3 (2.00%) |
|
Deutsche Bank |
|
|
HSBC |
|
|
|
|
Bank of America |
|
|
Bank of China |
|
|
Barclays |
|
|
BNP Paribas |
2 (1.50%) |
|
Goldman Sachs |
|
|
Industrial and Commercial |
|
|
Bank of China Limited |
|
|
Mitsubishi UFJ FG |
|
|
Wells Fargo |
|
|
|
|
Agricultural Bank of China |
|
|
Bank of New York Mellon |
|
|
China Construction Bank |
|
|
Credit Suisse |
|
|
Group BpsCE |
|
|
Group Crédit Agricole |
|
|
ING Bank |
|
|
Mizuho FG |
1 (1.00%) |
|
Morgan Stanley |
|
|
Royal Bank of Canada |
|
|
Santander |
|
|
Société Générale |
|
|
Standard Chartered |
|
|
State Street |
|
|
Sumitomo Mitsui FG |
|
|
UBS |
|
|
Unicredit Group |
2.1.5.2. Domestic Systemically Important Institutions
When identifying Domestic Systemically Important Institutions (D-SIIs), the Bank of Spain, according to the methodology established on rule 14 of Circular
2/2016, applies a mix of guidelines based on size, importance, complexity (cross-jurisdiction activity) and the degree of interconnectedness between the institutions and the financial system. The Bank of Spain conducts a yearly review of this
classification and the following institutions are included on its list for 2019:
Systemic buffer
Domestic Systemically Important Institutions
Santander Group appears on the lists of both global and domestic systemically important institutions. The Bank
of Spain, based on rule 23 of Circular 2/2016, requires that the higher of the two buffers be applied. Since both buffers are the same for Banco Santander, the surcharge applicable in 2019 will be 1%.
2.2. Pillar 1 Regulatory capital
The current
regulatory framework for capital calculation is based on three pillars:
|
|
|
Pillar 1 sets the minimum capital requirements for credit risk, market risk and operational risk, allowing internal ratings and models to be used. The aim is to make regulatory requirements more sensitive to the risks
actually incurred by financial institutions when carrying out their business activities. |
|
|
|
Pillar 2 establishes a system of supervisory review, aimed at improving banks internal risk management and capital adequacy assessment in line with their risk profile. |
|
|
|
Pillar 3 is intended to enhance market discipline by developing a set of disclosure requirements that will allow market agents to appraise key information relating to the application of Basel II, capital, risk
exposures, risk assessment processes and, by extension, the banks capital adequacy. |
2.2.1. Eligible capital
Equity at 31 December 2018 stood at EUR 107,361 million, up EUR 529 million from the year before.
|
|
|
|
|
30 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
The reconciliation between equity and capital eligible as Tier 1 is set out below:
Table 4. Reconciliation of accounting capital with regulatory capital
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Subscribed capital |
|
|
8,118 |
|
|
|
8,068 |
|
Share premium account |
|
|
50,993 |
|
|
|
51,053 |
|
Reserves |
|
|
53,988 |
|
|
|
52,577 |
|
Treasury shares |
|
|
-59 |
|
|
|
-22 |
|
Attributable profit |
|
|
7,810 |
|
|
|
6,619 |
|
Approved dividend |
|
|
-2,237 |
|
|
|
-2,029 |
|
|
|
|
|
|
|
|
|
|
Shareholders equity on public balance sheet |
|
|
118,613 |
|
|
|
116,266 |
|
|
|
|
|
|
|
|
|
|
Valuation adjustments |
|
|
-22,141 |
|
|
|
-21,777 |
|
Non-controlling interests |
|
|
10,889 |
|
|
|
12,344 |
|
|
|
|
|
|
|
|
|
|
Total equity on public balance sheet |
|
|
107,361 |
|
|
|
106,832 |
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets |
|
|
-28,644 |
|
|
|
-28,537 |
|
Eligible preference shares and participating securities |
|
|
9,754 |
|
|
|
7,635 |
|
Accrued dividend |
|
|
-1,055 |
|
|
|
-968 |
|
Other adjustments |
|
|
-9,700 |
|
|
|
-7,679 |
|
|
|
|
|
|
|
|
|
|
Tier 1 (Phased-in) |
|
|
77,716 |
|
|
|
77,283 |
|
|
|
|
|
|
|
|
|
|
|
The following table provides a breakdown of the Groups
eligible capital and a comparison with the previous year: |
|
|
Table 5. Eligible capital |
|
EUR million |
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Common Equity Tier 1 (CET1) |
|
|
67,962 |
|
|
|
74,173 |
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
8,118 |
|
|
|
8,068 |
|
(-) Treasury shares and own shares financed |
|
|
-64 |
|
|
|
-22 |
|
Share premium |
|
|
50,993 |
|
|
|
51,053 |
|
Reserves |
|
|
55,036 |
|
|
|
52,241 |
|
Other retained earnings |
|
|
-23,022 |
|
|
|
-22,363 |
|
Minority interests |
|
|
6,981 |
|
|
|
7,991 |
|
Attributable profit net of dividends |
|
|
4,518 |
|
|
|
3,621 |
|
Deductions |
|
|
-34,598 |
|
|
|
-26,416 |
|
Goodwill and intangible assets |
|
|
-28,644 |
|
|
|
-22,829 |
|
Others |
|
|
-5,954 |
|
|
|
-3,586 |
|
|
|
|
|
|
|
|
|
|
Additional Tier 1 (AT1) |
|
|
9,754 |
|
|
|
3,110 |
|
|
|
|
|
|
|
|
|
|
Eligible instruments AT1 |
|
|
9,666 |
|
|
|
8,498 |
|
T1 excesses - subsidiaries |
|
|
88 |
|
|
|
346 |
|
Residual value of intangibles |
|
|
|
|
|
|
-5,707 |
|
Deductions |
|
|
|
|
|
|
-27 |
|
|
|
|
|
|
|
|
|
|
Tier 2 (T2) |
|
|
11,009 |
|
|
|
13,422 |
|
|
|
|
|
|
|
|
|
|
Eligible instruments T2 |
|
|
11,306 |
|
|
|
9,901 |
|
Gen. funds and surplus loan loss prov. IRB |
|
|
|
|
|
|
3,823 |
|
T2 excesses - subsidiaries |
|
|
-297 |
|
|
|
-275 |
|
Others |
|
|
|
|
|
|
-27 |
|
|
|
|
|
|
|
|
|
|
TOTAL ELIGIBLE CAPITAL |
|
|
88,725 |
|
|
|
90,706 |
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital (CET1) comprises the elements of Tier 1 capital (after applying prudential filters)
and CET1 deductions after applying the threshold exemptions specified in the CRR. The regulation provides for a phased-in period that will give institutions time to adapt to the new requirements in the
European Union. This phased-in applies to Santander Group under Regulation (EU) 2016/445 of the European Central Bank on the exercise of options and national discretions, published on 14 March 2016.
Without considering the phased-in schedule, CET1 is made up of:
|
|
|
Subscribed share capital, which stood at EUR 8,118 million at the end of December 2018. |
|
|
|
Other tier 1 capital items: (i) paid-up share premium; (ii) effective and disclosed reserves generated against profits and those amounts that are not taken to the income
statement but are recorded under Other reserves (any item); (iii) other retained earnings, which includes certain valuation adjustments, primarily for exchange differences and for hedges of net investments in foreign operations.
|
|
|
|
The paid-up portion of any non-controlling interests arising from the issue of ordinary shares by consolidated subsidiaries, subject to the
limits set in the CRR. |
|
|
|
Profit net of dividends, which stood at EUR 4,518 million in December 2018. |
|
|
|
The prudential filters exclude any gain or loss on cash flow hedges. They also exclude gains or losses on liabilities and derivative liabilities measured at fair value resulting from changes in the institutions
own credit quality. In addition, prudential filters include the additional value adjustments considered according to art. 34 of the CRR. |
|
|
|
Deductions from CET1 items include mainly treasury shares; current-year losses; goodwill and other intangible assets recognised in the balance sheet; deferred tax assets that rely on future earnings (subject to the
limits set in the CRR); and the shortfall in allowances relative to expected loss on exposures using internal credit risk models and defined benefit pension fund assets shown on the balance sheet. |
Tier 1 Capital comprises CET1 capital plus Additional Tier 1 capital (AT1) including preferred securities issued by Santander Group.
Tier 2 capital comprises Tier 1 capital plus Tier 2 capital (T2 and includes, inter alia, capital instruments and subordinated loans where the conditions laid
down in the CRR are met.
Table 6. Regulatory capital. Changes
EUR million
|
|
|
|
|
Common Equity Tier 1 capital (CET1) |
|
|
|
|
Starting figure (31/12/2017) |
|
|
74,173 |
|
|
|
|
|
|
Shares issued during the year and share premium account |
|
|
-10 |
|
Treasury shares and own shares financed |
|
|
-42 |
|
Reserves |
|
|
-826 |
|
Attributable profit net of dividends |
|
|
4,518 |
|
Other retained earnings |
|
|
-659 |
|
Minority interests |
|
|
-1,010 |
|
Decrease/(increase) in goodwill and other intangibles |
|
|
-5,815 |
|
Other deductions |
|
|
-2,367 |
|
|
|
|
|
|
Ending figure (31/12/2018) |
|
|
67,962 |
|
|
|
|
|
|
|
|
Additional Tier 1 (AT1) |
|
|
|
|
Starting figure (31/12/2017) |
|
|
3,110 |
|
|
|
|
|
|
Eligible instruments AT1 |
|
|
1,168 |
|
T1 excesses - subsidiaries |
|
|
-258 |
|
Residual value of intangibles |
|
|
5,707 |
|
Deductions |
|
|
27 |
|
|
|
|
|
|
Ending figure (31/12/2018) |
|
|
9,754 |
|
|
|
|
|
|
|
|
Tier 2 (T2) |
|
|
|
|
Starting figure (31/12/2017) |
|
|
13,422 |
|
|
|
|
|
|
Eligible instruments T2 |
|
|
1,406 |
|
Gen. funds and surplus loan loss prov. IRB |
|
|
-3,823 |
|
T2 excesses - subsidiaries |
|
|
-22 |
|
Deductions |
|
|
27 |
|
|
|
|
|
|
Ending figure (31/12/2018) |
|
|
11,009 |
|
|
|
|
|
|
Deductions from total capital |
|
|
|
|
|
|
|
|
|
FINAL FIGURE FOR TOTAL CAPITAL (31/12/2018) |
|
|
88,725 |
|
|
|
|
|
|
Eligible capital evolution
Total eligible capital decreased by EUR 1,981 million in 2018 to EUR 88,725 million.
|
|
|
|
|
32 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
In addition to movements in equity, changes in regulatory capital reflect the dividend not distributed in 2018
of EUR 1,055 million. The impact on reserves includes the impact of applying IFRS 9, which Santander Group is doing according to the progressive phase-in regime over the
5-year transitional period under Regulation (EU) 2017/2395 of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of
the introduction of IFRS 9 on own funds.
Profit net of dividends amounted to EUR 4,518 million.
The movement in Other retained earnings reflects mainly exchange differences.
The change in minority interests, beyond accounting movements, reflects the impact of applying the transitional period provided for in Regulation (UE) No
575/2013 amounting to EUR -759 million.
Goodwill reflects the impact of exchange rate movements and
corporate activity during the year. The increase in the deduction to this item was mostly due to the expiry of this period, with an impact of EUR -5,707 million.
Similarly, the change included in deductions and prudential filters was due mainly to the expiry of the period applied to the rest of the deductions, trends
in the shortfall of provisions for expected loss and the change in deductions for defined benefit pension fund assets shown on the balance sheet.
Over
the course of 2018, instruments eligible for inclusion as both Tier 1 and Tier 2 capital increased through new issues made by Banco Santander, S.A., of preferred securities for EUR 1,500 million applicable to Tier 1 capital and of subordinated
debt for EUR 1,250 million applicable to Tier 2. Also, Santander Bank Polska, S.A. has issued subordinated debt applicable to Tier 2 capital for EUR 229 million.
Moreover, since IFRS 9 became effective, Tier 2 no longer considers the general credit risk adjustments included
previously with the limits considered in prevailing regulations, with an impact on the total ratio of EUR -3,823 million.
2.2.2. Capital requirements
This section gives details
of capital requirements by geography (see table 8).
Table 7 shows that capital requirements have barely changed from 2017, maintaining a Pillar I risk
distribution similar to that of the prior year: credit risk 86%, market risk 4% and operational risk 10%.
Capital requirements for credit risk decreased
by 2.4% compared to 2017 to EUR 40,481 million, while capital requirements for market risk increased by 3.6% and those for operational risk barely changed compared to the previous year.
RWA Evolution
Distribution of capital requirements by
risk type and geography
31 Dec. 2018
Shown below is a general overview of the total RWAs by risk.
The following sections provide additional breakdowns.
Table 7.
Overview of RWAs (OV1)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Capital |
|
|
|
|
|
RWA |
|
|
RWA |
|
|
Requirements |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
|
Credit risk (excluding CRR) |
|
|
469,074 |
|
|
|
480,221 |
|
|
|
37,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which standardised approach (SA) |
|
|
277,394 |
|
|
|
280,082 |
|
|
|
22,191 |
|
|
|
Of which the foundation IRB (FIRB) approach* |
|
|
37,479 |
|
|
|
37,207 |
|
|
|
2,998 |
|
|
Chapter 3. |
Of which the advanced IRB (AIRB) approach |
|
|
150,373 |
|
|
|
158,777 |
|
|
|
12,030 |
|
|
Credit Risk |
Of which Equity IRB under the Simple risk weight or the IMA |
|
|
3,828 |
|
|
|
4,155 |
|
|
|
306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCR |
|
|
11,987 |
|
|
|
14,668 |
|
|
|
959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which mark to market method (IRB) |
|
|
7,867 |
|
|
|
8,529 |
|
|
|
629 |
|
|
Chapter 4. |
Of which mark to market method (Standardised) |
|
|
1,795 |
|
|
|
3,586 |
|
|
|
144 |
|
|
Counterparty |
Of which risk exposure amount for contributions to the default fund of a CCP |
|
|
233 |
|
|
|
313 |
|
|
|
19 |
|
|
Credit Risk |
Of which CVA |
|
|
2,092 |
|
|
|
2,240 |
|
|
|
167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement risk |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation exposures in banking book (after cap) |
|
|
5,014 |
|
|
|
3,678 |
|
|
|
401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which IRB approach |
|
|
4,276 |
|
|
|
2,482 |
|
|
|
342 |
|
|
Chapter 5. |
Of which IRB supervisory formula approach (SFA) |
|
|
1,915 |
|
|
|
708 |
|
|
|
153 |
|
|
Credit Risk - |
Of which standardised approach |
|
|
738 |
|
|
|
1,196 |
|
|
|
59 |
|
|
Securitisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market risk |
|
|
25,012 |
|
|
|
24,161 |
|
|
|
2,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which standardised approach |
|
|
11,858 |
|
|
|
9,702 |
|
|
|
949 |
|
|
Chapter 6. |
Of which IMA |
|
|
13,154 |
|
|
|
14,459 |
|
|
|
1,052 |
|
|
Market Risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational risk |
|
|
60,043 |
|
|
|
61,217 |
|
|
|
4,803 |
|
|
Chapter 7. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which standardised approach |
|
|
60,043 |
|
|
|
61,217 |
|
|
|
4,803 |
|
|
Operational Risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts below the thresholds for deduction (subject to 250% risk weight) |
|
|
21,188 |
|
|
|
21,118 |
|
|
|
1,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floor adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
592,319 |
|
|
|
605,064 |
|
|
|
47,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Includes equities under the PD/LGD approach. |
|
|
|
|
|
34 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
The table below shows capital requirements by geography:
Table 8. Capital requirements by geographical region
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
Spain |
|
|
UK |
|
|
Rest of Europe |
|
|
Brazil |
|
|
Rest of Latin America |
|
|
USA |
|
|
Rest of world |
|
Credit risk |
|
|
38,155 |
|
|
|
9,887 |
|
|
|
5,488 |
|
|
|
7,532 |
|
|
|
4,872 |
|
|
|
4,580 |
|
|
|
5,043 |
|
|
|
753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which internal rating-based (IRB) approach (*) |
|
|
14,809 |
|
|
|
5,604 |
|
|
|
3,617 |
|
|
|
2,953 |
|
|
|
653 |
|
|
|
984 |
|
|
|
411 |
|
|
|
586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Central governments and Central Banks |
|
|
66 |
|
|
|
2 |
|
|
|
3 |
|
|
|
|
|
|
|
5 |
|
|
|
7 |
|
|
|
|
|
|
|
48 |
|
- Institutions |
|
|
737 |
|
|
|
167 |
|
|
|
130 |
|
|
|
179 |
|
|
|
12 |
|
|
|
126 |
|
|
|
54 |
|
|
|
68 |
|
- Corporates SME |
|
|
8,505 |
|
|
|
3,587 |
|
|
|
1,310 |
|
|
|
1,492 |
|
|
|
635 |
|
|
|
848 |
|
|
|
356 |
|
|
|
277 |
|
- of which Corporates - Specialised Lending |
|
|
1,148 |
|
|
|
410 |
|
|
|
289 |
|
|
|
214 |
|
|
|
2 |
|
|
|
180 |
|
|
|
17 |
|
|
|
36 |
|
- of which Corporates Other |
|
|
1,488 |
|
|
|
976 |
|
|
|
192 |
|
|
|
242 |
|
|
|
|
|
|
|
78 |
|
|
|
|
|
|
|
|
|
Retail - Secured by real estate SME |
|
|
3,051 |
|
|
|
959 |
|
|
|
1,832 |
|
|
|
253 |
|
|
|
|
|
|
|
2 |
|
|
|
1 |
|
|
|
5 |
|
Retail - Secured by real estate non-SME |
|
|
82 |
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Qualifying revolving |
|
|
319 |
|
|
|
120 |
|
|
|
171 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail - Other SME |
|
|
382 |
|
|
|
279 |
|
|
|
1 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Retail - Other non-SME |
|
|
1,667 |
|
|
|
408 |
|
|
|
171 |
|
|
|
900 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
187 |
|
Other non-credit-obligation assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which standardised approach (SA) |
|
|
22,191 |
|
|
|
3,160 |
|
|
|
1,871 |
|
|
|
4,579 |
|
|
|
4,194 |
|
|
|
3,589 |
|
|
|
4,631 |
|
|
|
167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
1,146 |
|
|
|
484 |
|
|
|
-0 |
|
|
|
11 |
|
|
|
410 |
|
|
|
231 |
|
|
|
6 |
|
|
|
4 |
|
Regional governments or local authorities |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
22 |
|
|
|
13 |
|
|
|
1 |
|
|
|
|
|
Public sector entities |
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
14 |
|
|
|
16 |
|
|
|
|
|
Multilateral Development Banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions |
|
|
470 |
|
|
|
130 |
|
|
|
9 |
|
|
|
55 |
|
|
|
95 |
|
|
|
57 |
|
|
|
122 |
|
|
|
2 |
|
Corporates |
|
|
5,585 |
|
|
|
562 |
|
|
|
930 |
|
|
|
1,233 |
|
|
|
950 |
|
|
|
886 |
|
|
|
997 |
|
|
|
27 |
|
Retail |
|
|
8,244 |
|
|
|
610 |
|
|
|
536 |
|
|
|
2,149 |
|
|
|
1,961 |
|
|
|
1,074 |
|
|
|
1,791 |
|
|
|
124 |
|
Secured by mortgages on immovable property |
|
|
3,178 |
|
|
|
308 |
|
|
|
51 |
|
|
|
705 |
|
|
|
316 |
|
|
|
843 |
|
|
|
954 |
|
|
|
|
|
Exposures in default |
|
|
730 |
|
|
|
165 |
|
|
|
13 |
|
|
|
139 |
|
|
|
141 |
|
|
|
128 |
|
|
|
142 |
|
|
|
1 |
|
Items associated with particular high risk |
|
|
185 |
|
|
|
|
|
|
|
11 |
|
|
|
9 |
|
|
|
|
|
|
|
152 |
|
|
|
11 |
|
|
|
2 |
|
Covered bonds |
|
|
38 |
|
|
|
|
|
|
|
34 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims on institutions and corporates with a short-term credit assessment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collective investments undertakings (CIU) |
|
|
22 |
|
|
|
21 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity exposures |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items |
|
|
2,503 |
|
|
|
880 |
|
|
|
285 |
|
|
|
251 |
|
|
|
299 |
|
|
|
192 |
|
|
|
591 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which Equity IRB |
|
|
1,155 |
|
|
|
1,123 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under the simple method |
|
|
212 |
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under the PD/LGD method |
|
|
849 |
|
|
|
817 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
Under internal models |
|
|
94 |
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty credit risk |
|
|
330 |
|
|
|
136 |
|
|
|
59 |
|
|
|
39 |
|
|
|
31 |
|
|
|
45 |
|
|
|
12 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which
mark-to-market method (Standard) |
|
|
144 |
|
|
|
35 |
|
|
|
20 |
|
|
|
34 |
|
|
|
22 |
|
|
|
18 |
|
|
|
11 |
|
|
|
2 |
|
Of which: risk exposure amount for contributions to the default fund of a CCP |
|
|
19 |
|
|
|
15 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which: CVA |
|
|
167 |
|
|
|
86 |
|
|
|
35 |
|
|
|
5 |
|
|
|
9 |
|
|
|
26 |
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisations exposures in banking book (after cap) |
|
|
401 |
|
|
|
215 |
|
|
|
52 |
|
|
|
90 |
|
|
|
|
|
|
|
33 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which IRB ratings-based approach (RBA) |
|
|
342 |
|
|
|
213 |
|
|
|
47 |
|
|
|
61 |
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
Of which Standardised approach (SA) |
|
|
59 |
|
|
|
2 |
|
|
|
5 |
|
|
|
29 |
|
|
|
|
|
|
|
13 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market risk |
|
|
2,001 |
|
|
|
1,037 |
|
|
|
207 |
|
|
|
21 |
|
|
|
316 |
|
|
|
411 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which Standardised approach (SA) |
|
|
949 |
|
|
|
498 |
|
|
|
21 |
|
|
|
21 |
|
|
|
316 |
|
|
|
84 |
|
|
|
9 |
|
|
|
|
|
Of which internal model approaches (IMA) |
|
|
1,052 |
|
|
|
539 |
|
|
|
186 |
|
|
|
|
|
|
|
|
|
|
|
326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operational risk |
|
|
4,803 |
|
|
|
1,034 |
|
|
|
689 |
|
|
|
852 |
|
|
|
606 |
|
|
|
714 |
|
|
|
909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which standardised Approach |
|
|
4,803 |
|
|
|
1,034 |
|
|
|
689 |
|
|
|
852 |
|
|
|
606 |
|
|
|
714 |
|
|
|
909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount below the threshold for deduction (subject to 250% risk weight) |
|
|
1,695 |
|
|
|
906 |
|
|
|
11 |
|
|
|
131 |
|
|
|
365 |
|
|
|
200 |
|
|
|
80 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floor adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
47,386 |
|
|
|
13,214 |
|
|
|
6,507 |
|
|
|
8,665 |
|
|
|
6,190 |
|
|
|
5,983 |
|
|
|
6,063 |
|
|
|
762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Including counterparty credit risk |
2.2.2.1. Plan to deploy advanced internal models and supervisory approval
Santander Group 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 assumed with the supervisor means adapting the advanced models in the core markets in which Santander Group operates.
Santander Group continued to pursue this objective during 2018 through its plan to gradually implement the necessary technology platforms and methodological
improvements to enable the progressive application of AIRB models for calculating regulatory capital at the rest of the Groups units.
Santander Group has supervisory approval to use advanced approaches for calculating regulatory capital for
credit risk for the parent and its main subsidiaries in Spain, the United Kingdom and Portugal, in addition to some portfolios in Germany, Mexico, Brazil, Chile, Nordics (Sweden, Finland and Norway), France and the United States.
The strategy to implement Basel regulations in the Group focuses on the use of advanced approaches for the main American and European banks.
The following chart shows the percentage of IRB coverage by region:
IRB coverage by region
%
Isolating sovereign bonds in local currency and non-financial assets,
which are not subject to the internal model deployment plan, as of December 2018 Santander Group reports 60% of the EAD in IRB.
By geography, the main
contributors are Spain (26%), the United Kingdom (22%), the global portfolio of companies in Chile, Brazil and the USA (3%), Portugal (3%), Germany (3%), Mexico (2%), Nordics (1%) and France (1%).
Of the remaining exposure, which is currently calculated using the standard method, 35% is subject to advanced model implementation plans, with the objective
of obtaining supervisory approval, in order to calculate requirements of capital per IRB model.
The remaining portfolios not included in the advanced
model deployment plan are subject to analysis in order to assess the suitability of including them in the plan; additionally, these other portfolios include the portfolios authorised by the supervisor to remain permanently under the standardised
approach. The distribution of exposure to credit and counterparty credit risk according to the capital requirements calculation method is shown in the chart below.
* |
To simplify: the 65% permanent SA includes those portfolios already authorised by the regulator and those
pending approval (candidates for permanent SA or roll out). |
The medium-term objective of achieving a high degree of IRB model coverage
in the main markets in which the Group operates is conditioned by the acquisition of new business as occurred in 2017 with the integration of the various established Banco Popular units or during 2018 with the acquisition of Deutsche Bank Polska
S.A. business.
|
|
|
|
|
36 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
In addition, the combination of declining business in some standard portfolios, especially in the United States,
United Kingdom and Brazil, coupled with an increase in business in some advanced model portfolios in Portugal and Spain (Popular integration) has contributed significantly to an increase in Degree of IRB coverage at a consolidated level. During
2017, exchange rate movements had a positive impact, especially the major rise of the euro against the US dollar, Brazilian real and Mexican peso, due to the ECBs monetary policy.
The following table shows the geographical scope of the internal models for credit risk (AIRB or FIRB) in the different portfolios:
List of authorised IRB models by legal
entity
|
|
|
|
|
Country |
|
Legal Entity |
|
IRB portfolio (AIRB or FIRB) |
United Kingdom |
|
Santander UK PLC |
|
Institutions, Corporates, Corporates SMEs, Corporates Project Finance, Mortgages, Qualifying Revolving, Other Retail.
|
|
|
Abbey National Treasury Services |
|
Institutions, Corporates, Corporates SMEs, Corporates Project Finance.
|
|
|
Abbey Covered Bonds LLP |
|
Institutions |
|
|
|
Spain |
|
Banco Santander, S.A. |
|
Sovereigns, Institutions, Corporates, Corporates SMEs, Corporates Project Finance, Mortgages, Qualifying Revolving, Retail SMEs, Other Retail |
|
|
|
|
|
Santander Factoring y Confirming S.A. |
|
Institutions, Corporates, Corporates SMEs, Corporates Project Finance, Mortgages, Retail SMEs, Other Retail |
|
|
|
|
|
Santander Lease, S.A. E.F.C. |
|
Institutions, Corporates, Corporates SMEs, Mortgages, Retail SMEs, Other Retail |
|
|
|
|
|
Santander Consumer EFC, S.A. |
|
Corporates, Corporates SMEs, Qualifying Revolving, Other Retail. |
|
|
|
|
|
Santander Consumer Finance, S.A. |
|
Corporates, Corporates SMEs, Qualifying Revolving, Other Retail. |
|
|
|
Portugal |
|
Banco Santander Totta |
|
Institutions, Corporates, Corporates SMEs, Corporates Project Finance, Mortgages, Qualifying Revolving, Retail SMEs, Other Retail. |
|
|
|
Brazil |
|
Banco Santander Brazil |
|
Corporates |
|
|
|
|
|
Santander Brazil EFC |
|
Corporates |
|
|
|
Germany |
|
Santander Consumer Bank AG |
|
Corporates, Corporates SMEs, Mortgages, Revolving and Other Retail |
|
|
|
Mexico |
|
Banco Santander Mexico |
|
Institutions, Corporates, Corporates SMEs, Corporates Project Finance |
|
|
|
USA |
|
Santander Bank, National Association |
|
Corporates |
|
|
|
France |
|
Société Financiére de Banque - SOFIB |
|
Corporates, Corporates SMEs, Retail SMEs, Other Retail |
|
|
|
Nordics |
|
Santander Consumer Bank A.S. |
|
Other Retail |
|
|
Santander Consumer Finance OY |
|
Other Retail |
|
|
|
Chile |
|
Banco Santander - Chile |
|
Sovereigns, Institutions and Corporates |
The following table shows the market risk internal models (IMA) of
the different portfolios distributed by geography:
List of
authorised IMA models by legal entity
|
|
|
|
|
Country |
|
Legal entity |
|
IMA portfolio (product) |
Spain |
|
Banco Santander, S.A. |
|
Trading book |
|
|
Banco Santander - Chile |
|
Trading book |
|
|
Santander Agente de Valores Limitada |
|
Trading book |
Chile |
|
Santander Investment Chile Limitada |
|
Trading book |
|
|
Santander Corredores de Bolsa Limitada |
|
Trading book |
|
|
Banco Santander México |
|
Trading book |
Mexico |
|
Casa de Bolsa Santander, S.A. de C.V. |
|
Trading book |
Portugal |
|
Banco Santander Totta |
|
Trading book |
|
|
Santander UK PLC |
|
Trading book less FX and specific interest rate risk |
United Kingdom |
|
Abbey National Treasury Services |
|
Trading book less FX and specific interest rate risk |
For operational risk, Santander Group currently uses the standardised approach for calculating regulatory capital, as set
out in the CRR. In 2017, the European Central Bank granted authorisation for the Alternative Standardised Approach to be used to calculate consolidated capital requirements at Banco Santander Mexico, following the approval granted in 2016 for
Brazil.
As additional information, Appendix XIII shows a breakdown of exposure according to the capital calculation method employed
in each region and for each portfolio.
Supervisory validation process
As established by the European Parliament, the primary element of the banking union is the Single Supervisory Mechanism (SSM). Under this mechanism, direct
banking supervision falls to the European Central Bank, thus ensuring that the largest European banks are independently supervised by just one entity and are subject to a set of standard regulations. Eurozone countries are required to participate,
while participation is voluntary for non-eurozone EU member states.
The second key element is the Single Resolution Mechanism (SRM), which oversees the preparation in the event of
worst-case scenario, meaning bank failure. The aim is to ensure that any such situation can be resolved in an orderly fashion and at a minimum cost for taxpayers. The focus on keeping taxpayers from bearing the cost of future bank resolutions led to
a change in the underlying regulations, namely the Bank Recovery and Resolution Directive (BRRD). Under the BRRD, a banks shareholders and creditors will bear the brunt of resolution costs. Under certain circumstances, banks may also obtain
supplementary financing from the recently-created Single Resolution Fund (SRF), which is financed by the banking sector.
Both the SSM and the SRM are
operational: the SSM became effective on 4 November 2014, but the SRM was not applied until 1 January 2016. Moreover, the SRF is expected to meet its target funding level by 2023.
The European Central Bank has gradually been deploying its new structure and functions to effectively become the single European supervisor. The European
Banking Authority (EBA) will continue to actively collaborate in adapting regulations. Each bodys responsibilities are as follows:
|
|
|
|
|
38 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
Supervisory validation process
The European supervisor has put in place a new governance process, involving the following steps:
|
|
|
The Joint Supervisory Team (JST), consisting of a mixed team of experts, analyses the entitys situation and issues a technical report to the ECBs Supervisory Board. |
|
|
|
The Supervisory Board then submits its preliminary decisions to the Governing Council. |
|
|
|
The Governing Council then issues its final decision authorising or not the use of the internal models. |
The
supervisor uses the documentation provided by the entity as the basis for its assessment of whether the minimum requirements for using advanced models to calculate regulatory capital have been met. This information must be sufficiently thorough and
detailed to provide a third party with a clear idea of the entitys rating systems, methodologies, technological infrastructure, capital calculation process and internal governance and must be able to replicate the outputs of the model. The
unit itself is responsible for preparing this documentation, which forms part of the formal application required for the validation process established by the supervisors of entities seeking to implement advanced models to calculate regulatory
capital.
A preparatory pre-assessment of regulatory models stage has now been
added to the supervisory validation process. This involves the entity providing the supervisor, in advance, with the documentation it needs to assess whether the minimum requirements for continuing the formal validation process have been met. If the
European Central Bank considers the entity to be initially ready, a request is sent and the supervisor begins a formal validation of the regulatory models, which may conclude with authorisation to use advanced models to calculate regulatory capital.
The supervisory validation process is made somewhat more complicated by the fact that multinational companies such as Santander are present in various
countries and regions. This requires the involvement of supervisors from different jurisdictions, which are often subject to different laws and employ different criteria and timeframes. This sometimes hinders and slows joint decisions on the
approval of advanced models to calculate regulatory capital with a consolidated scope and can also affect authorisations at a local level.
With regard to
the supervisory validation processes being organised by the ECB across the euro area, there is currently no established timeframe for processing modifications of previously approved IRB models and responding to new requests for authorisation.
However, Santander is aware that progress is being made and it expects requests will soon be answered more rapidly than is currently the case, especially when the nature of the changes does not require a detailed review of the model, unlike what
happens when formal authorisation is requested for the use of advanced approaches for calculating regulatory capital with an IRB model for the first time.
Finally, it would be good to achieve international consensus on a maximum timeline for reviewing requests for authorisation of IRB models. This should not
exceed six months, also bearing in mind all the governance required to draw up the requests.
Targeted Review on Internal Models
In 2016 and 2017, the European Central Bank (ECB) launched a review of internal regulatory capital models known as TRIM (Targeted Review of
Internal Models) with the main aim of helping restore credibility, regulating any divergences of capital requirements that do not match the risk profile of the exposures, and standardising regulatory practices through better knowledge of the models.
Throughout 2018, Banco Santander has reviewed several portfolios through on-site inspections, in which the ECB
has carried out an in-depth assessment of the credit and market risk internal models. After each on-site inspection, the ECB sends a report containing its findings,
giving the entity the option to comment on these. Lastly, the ECB issues a decision letter which may include various obligations, recommendations and/or restrictions, and the bank must prepare a plan to address these issues as and when required.
Further, in 2019, inspections are expected to be made of the low default portfolios and a horizontal analysis of the inspections already completed will
be carried out, with the final results obtained at the end of the TRIM exercise.
Pursuant to the TRIM guidelines published in 2017, in 2018, the ECB released an update of its guidelines for
internal models, aimed at ensuring a common and standardised approach for the key regulatory aspects applicable to internal models for banks supervised directly by the ECB, which will serve as the basis for future investigations. The guidelines,
which were published in two parts (the first addressing general aspects, and the second containing specific chapters for each type of risk: credit, market and counterparty), were submitted for public consultation in 2018. The final version of the
first part of the guidelines on general aspects has already been published, and the ECB is expected to publish the full version, including the final version of the second part dedicated to each risk type, in 2019.
2.2.3. Leverage ratio
Basel III established the leverage
ratio as a non-risk-sensitive measure designed to limit the excessive growth of the balance sheet relative to available capital.
The ratio is calculated as the coefficient between Tier 1 divided by the leverage exposure. This exposure is calculated as the sum of the following
components:
|
|
|
Asset value, without derivatives and without elements considered as deductions in Tier 1 (for example, the loan balance is included but not goodwill). |
|
|
|
Off-balance-sheet accounts (primarily, guarantees, undrawn credit limits, letters of credit) weighted by the conversion factors of the standard credit risk method.
|
|
|
|
Inclusion of the net value of derivatives (gains and losses against a single counterparty are netted, minus collateral - provided certain criteria are met) plus a surcharge for potential future exposure.
|
|
|
|
A surcharge for the potential risk of security financing transactions. |
|
|
|
Lastly, a surcharge is included for risk relating to credit derivatives (CDS) in the unhedged part. |
The
following tables illustrate the ratios published by Santander Group since December 2017. These show that the banks ratio is stable, and with an upward trend.
|
|
|
|
|
40 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
Fully loaded leverage ratio
Phased-in leverage ratio
The BCBS revised the definition of the leverage ratio in 2017. In particular, a series of technical adjustments
were made to the method for calculating total exposure (the denominator of the leverage ratio), mainly relating to exposure to derivatives and the treatment of off balance sheet exposure.
The definitive calibration of the leverage ratio was set at 3% for all institutions, while G-SIBs are subject to an additional surcharge of 50% of the G-SIB buffer (which depends on which systemic importance bucket the bank falls into).
Banks must implement the final
definition of the leverage ratio and comply with the new ratio calibration (the additional surcharge for G-SIBs) from January 2022.
The Groups
leverage ratio as of 31 December 2018 was as follows:
Table 9. Leverage ratio
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Fully loaded |
|
|
Phased-in |
|
Tier 1 |
|
|
75,838 |
|
|
|
77,716 |
|
Exposure |
|
|
1,488,036 |
|
|
|
1,489,094 |
|
|
|
|
|
|
|
|
|
|
Leverage Ratio |
|
|
5.10 |
% |
|
|
5.22 |
% |
|
|
|
|
|
|
|
|
|
The following table gives a breakdown of the ratio calculation:
Table 10. Leverage ratio details
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
Item |
|
Amounts Consol. Balance Sheet |
|
To be eliminated |
|
To be included |
|
Leverage exposure |
|
Comment |
Derivatives |
|
64,597 |
|
64,597 |
|
29,864 |
|
29,864 |
|
Substitution of book value by EAD netted of collateral |
Securities financing transactions |
|
76,423 |
|
|
|
2,666 |
|
79,089 |
|
Surcharge is added for these operations |
Assets deducted in Tier 1 |
|
33,999 |
|
33,999 |
|
|
|
|
|
Remove not to duplicate |
DTAs |
|
652 |
|
652 |
|
|
|
|
|
Book value of the adjusted balance sheet asset for the variation in DTAs, as a result of recognition of lower provisions account of reserves due to the transitory application of IFRS9. |
Rest of Assets |
|
1,270,238 |
|
|
|
|
|
1,270,238 |
|
Entirely included |
Total Assets |
|
1,445,908 |
|
99,247 |
|
32,530 |
|
1,379,190 |
|
|
Total Off-Balance-Sheet items |
|
304,678 |
|
194,775 |
|
|
|
109,903 |
|
Balances are weighted according to its risk |
|
|
|
|
|
|
|
|
|
|
|
Total Exposure (denominator) |
|
|
|
|
|
|
|
1,489,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 (numerator) |
|
|
|
|
|
|
|
77,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage Ratio |
|
|
|
|
|
|
|
5.22% |
|
Minimum recommended 3% |
|
|
|
|
|
|
|
|
|
|
|
The leverage ratio is calculated by the Group every month and reported to the Capital Committee and other
governance bodies, thus ensuring adequate monitoring of the risk of excessive leverage at its most restrictive measurement: fully loaded. In addition, estimations are made of the leverage ratio at a three year time horizon under different
macroeconomic scenarios, including scenarios of recession.
No significant changes occurred in the ratio in 2018. Tier 1 is stable and leverage exposure
has responded to changes in balance sheet figures, attributable to business activity and exchange rate movements.
Tables LRSum, LRCom, LRSpl y LRQua can
be found in Appendix X of the file 2018 Pillar 3 Appendices that is available on the Santander Group website.
2.3. Pillar 2 - Economic capital
Economic capital is the capital needed to support all business risks with a certain level of capital adequacy. It is sized according to an internal model. In
our case the capital adequacy level is determined by our long-term rating target of A (above Spains rating), which means applying a confidence level of 99.95% (above the regulatory 99.90%) when calculating the necessary capital.
Santanders economic capital model includes in its measurement all the significant risks incurred by the Group in its operations (concentration
risk, structural interest rate risk, business risk, pensions risk, DTA risk, goodwill risk, and other risks beyond the sphere of Pillar 1 regulatory capital). Economic capital also incorporates the diversification effect which, in the case of
Santander Group, due to its multinational nature and multi-business structure, is key when determining and properly understanding the risk and capital adequacy profile of a global group.
Santander Groups business is carried out in multiple countries by means of a structure of legally distinct entities, with a variety of customer and
product segments and exposure to different kinds of risk. This means that Santander Groups performance is less vulnerable to adverse situations in any of the specific markets, portfolios, customers or risks. Although economies are now highly
globalised, economic cycles are not identical, nor are they as intense, in the different geographies. Groups with a global presence therefore benefit from steadier performance and greater resilience when facing downturns in specific markets or
portfolios, and this translates into lower risk. Hence the risk and the related economic capital which Santander Group sustains as a whole are less than the risk and capital of the sum of all the separate parts.
Meanwhile, and in contrast to regulatory criteria, Santander Group believes that certain intangible assets, such as deferred tax assets, goodwill and
software, retain their value even in the hypothetical case of resolution, given the geographical structure of Santander
Groups subsidiaries. As such, these assets are measured and their unexpected loss estimated as part of
capital.
Economic capital is a key tool for the internal management and development of the Groups strategy, both from the standpoint of assessing
capital adequacy, as well as risk management of portfolios and businesses.
From the standpoint of capital adequacy, the Group uses, in the context of
Basel Pillar 2, its economic model for the capital adequacy self-assessment process (ICAAP). For this purpose, business development and capital needs are planned under a central scenario and alternative stress scenarios. In this planning, the Group
ensures that its capital adequacy targets are met, even in adverse scenarios.
Economic capital metrics also enable risk-return objectives to be assessed,
transaction prices to be set on the basis of risk, the economic viability of projects, units and lines of business to be evaluated, with the overriding objective of maximising the generation of shareholder value.
As a harmonised measurement of risk, economic capital can be used to explain the risk distribution throughout the Group, putting activities and different
types of risk in a comparable metric.
Given its importance for internal management, the Group includes a series of metrics relating to economic capital,
from the standpoint of capital needs and risk/return, within a conservative risk appetite framework established for both the Group and for the different regions.
The economic capital requirement at December 2018 was EUR 69,443 million, which, compared with the available economic capital of EUR 99,566 million,
implies a capital surplus of EUR 30,123 million.
The main difference with respect to regulatory CET1 comes from the treatment of the goodwill, other
intangible assets and DTAs, which we consider as another capital requirement instead of a deduction of available capital.
Table 11. Available economic
capital
EUR million
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Net capital and issue premium |
|
|
59,046 |
|
|
|
59,098 |
|
Reserves and Retained earnings |
|
|
57,939 |
|
|
|
55,862 |
|
Valuation adjustments |
|
|
-23,606 |
|
|
|
-23,108 |
|
Minority interests |
|
|
6,893 |
|
|
|
7,228 |
|
Prudential filter |
|
|
-706 |
|
|
|
-453 |
|
|
|
|
|
|
|
|
|
|
Available economic capital |
|
|
99,566 |
|
|
|
98,627 |
|
|
|
|
|
|
|
|
|
|
Economic Capital required* |
|
|
69,443 |
|
|
|
71,893 |
|
Capital surplus |
|
|
30,123 |
|
|
|
26,734 |
|
* |
To increase comparability with regulatory capital, exchange differences on goodwill are included in the
economic capital required. |
|
|
|
|
|
42 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
Table 12. Regulatory and Economic CET1
EUR million
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Net capital and issue premium |
|
|
59,046 |
|
|
|
59,098 |
|
Reserves and Retained earnings |
|
|
57,939 |
|
|
|
55,862 |
|
Valuation adjustments |
|
|
-23,606 |
|
|
|
-23,108 |
|
Minority interests |
|
|
6,893 |
|
|
|
7,228 |
|
Prudential filters |
|
|
-706 |
|
|
|
-453 |
|
|
|
|
|
|
|
|
|
|
Available economic capital |
|
|
99,566 |
|
|
|
98,627 |
|
|
|
|
|
|
|
|
|
|
(-) Deductions |
|
|
-32,662 |
|
|
|
-33,064 |
|
(-) Goodwill |
|
|
-25,630 |
|
|
|
-25,585 |
|
(-) Other intangible assets |
|
|
-3,014 |
|
|
|
-2,952 |
|
(-) Deferred tax asset |
|
|
-3,754 |
|
|
|
-3,820 |
|
(-) Other |
|
|
-264 |
|
|
|
-707 |
|
|
|
|
|
|
|
|
|
|
Regulatory capital (FL CET1) - Available capital |
|
|
66,904 |
|
|
|
65,563 |
|
|
|
|
|
|
|
|
|
|
Available economic capital |
|
|
99,566 |
|
|
|
98,627 |
|
|
|
|
|
|
|
|
|
|
Economic capital required* |
|
|
69,443 |
|
|
|
71,893 |
|
Capital surplus |
|
|
30,123 |
|
|
|
26,734 |
|
* |
To increase comparability with regulatory capital, exchange differences on goodwill are included in the
economic capital required |
The table below sets out Santander Groups distribution of economic
capital needs by region and within each region by risk type, as of 31
December 2018.
Distribution of economic capital needs by region
The distribution of economic capital among the main business
areas reflects the diversified nature of the Groups activity and
risk. Continental Europe represents 48% of capital, Latin America
including Brazil 24%, United Kingdom 13% and United States 15%.
Outside the operating areas, the corporate centre assumes, mainly, the goodwill risk and risks related to
structural foreign currency risk (risk related to holding of shares of subsidiaries abroad in currencies other than euro).
The diversification benefit
provided by the economic capital model, including both intra-risk (similar to geographic) and inter-risk diversification, amounts to approximately 30%.
Distribution of economic capital needs
2.3.1. RoRAC and value creation
Santander Group has been using RoRAC methodology as part of its credit risk management process since 1993 in order to:
|
|
|
Calculate the consumption of economic capital and the return on this capital at the Groups business units, as well as segments, portfolios and customers, in order to facilitate the optimal allocation of economic
capital. |
|
|
|
Measure the management of the Groups units via the budgetary monitoring of capital consumption and RoRAC. |
|
|
|
Analyse and set prices in the decision-taking process for transactions (approval) and customers (monitoring). |
RoRAC methodology enables comparisons to be made, on a like-for-like basis, of
the return on transactions, customers, portfolios and businesses, identifying those that obtain a risk-adjusted return that is higher than the cost of the Groups capital and aligning risk and business management in a bid to maximise value
creation; the ultimate aim of the Groups senior management.
The Group regularly assesses the level and performance of its value creation (VC) and
the risk-adjusted return (RoRAC) and those of its main business units. VC is the profit generated after the cost of the economic capital (EC) employed, and is calculated as follows:
VC = consolidated profit (average EC x cost of capital)
The profit used is obtained by making the necessary adjustments in the consolidated profit to eliminate those factors that are outside the ordinary course
performance of our business, and obtain the ordinary result that each unit obtains for its activity in the year.
The minimum return on capital that an
operation must attain is determined by the cost of capital, which is the minimum required by shareholders. It is calculated objectively by adding the premium
that shareholders demand for investing in the Group to the risk-free return. This premium depends essentially on
the degree of volatility in the price of the Banco Santander share in relation to the markets performance. The cost of capital for the Group in 2018 was 8.86% (versus 8.6% in 2017).
As well as reviewing the cost of the Groups capital for the purposes of internal management each year, the cost of capital for each business unit is
also estimated, taking into account the specific features of each market and based on the assumption that all subsidiaries are autonomous when it comes to capital and liquidity. The aim is to assess whether each business is capable of generating
value individually.
While a positive return from an operation or portfolio means it is contributing to the Groups profits, it is only creating
shareholder value when that return exceeds the cost of capital.
Value creation and RoRAC for the Groups main business areas at December 2018 are as
follows:
Table 13. RoRAC and value creation*
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec-18 |
|
|
Dec-17 |
|
Main segments |
|
RoRAC |
|
|
Value creation |
|
|
RoRAC |
|
|
Value creation |
|
Continental Europe |
|
|
18.1 |
% |
|
|
2,083 |
|
|
|
17.3 |
% |
|
|
1,716 |
|
UK |
|
|
17.3 |
% |
|
|
662 |
|
|
|
18.5 |
% |
|
|
839 |
|
Latin America |
|
|
35.1 |
% |
|
|
2,905 |
|
|
|
31.9 |
% |
|
|
2,563 |
|
US |
|
|
10.7 |
% |
|
|
39 |
|
|
|
8.1 |
% |
|
|
-120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL GROUP (1) |
|
|
12.6 |
% |
|
|
2,835 |
|
|
|
12.4 |
% |
|
|
2,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Value creation has been calculated with the cost of capital of each unit. |
(1) |
Includes operating units and the corporate centre, reflecting all the Groups economic capital as well as
the return generated. |
The decline in RWAs in the year (-7,327 million) is mainly due to
securitisation origination (-8,323 million) and improved risk parameters (-7,105 million) mostly in the mortgage segment partially offset by the calibration of models
largely in the UK (+2,922 million) and acquisitions in the year (+3,393 million) mostly due to the creation of the Holding Quasar to comprise the Popular mortgage portfolio.
2.3.2. Capital planning
Stress tests on capital have
assumed particular importance as a tool for the dynamic assessment of the risks and capital adequacy of banks.
It is a forward-looking assessment, based
on macroeconomic and idiosyncratic scenarios that are unlikely to materialise but are still plausible. To that end, it is necessary to have robust planning models in place, capable of transferring the impact defined in projected scenarios to the
different elements that influence a banks capital adequacy.
The ultimate objective of the stress tests is to carry out a full assessment of the
risks and capital adequacy of the banks, which enables possible capital requirements to be calculated if they are needed because of banks failure to meet the capital objectives set, both regulatory and internally.
|
|
|
|
|
44 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
Internally, Santander has defined a process of capital stress and planning, not only to respond to the various
regulatory exercises, but also as a key tool of the Groups management and strategy.
The goal of the internal stress and capital planning process is
to ensure sufficient current and future capital, even in the event of unlikely but plausible economic scenarios. Based on the Groups initial situation (defined by its financial statements, capital base, risk parameters and regulatory and
economic ratios), the results are estimated for different business environments (including
severe recessions as well as expected macroeconomic situations), and the Groups capital adequacy ratios
are obtained, generally for over a three-year period.
This planned process provides a comprehensive view of the Group for the time frame analysed and in
each of the scenarios defined. The analysis includes both regulatory capital and economic capital metrics.
The structure of the current process is shown
below:
This structure helps to achieve the ultimate objective of capital planning by making it an element of strategic
importance for the Group that:
|
|
|
Ensures the adequacy of current and future capital, even in adverse economic scenarios. |
|
|
|
Enables the comprehensive management of capital and incorporates an analysis of specific impacts, facilitating their integration into the Groups strategic planning. |
|
|
|
Enables capital to be used more efficiently. |
|
|
|
Supports the design of the Groups capital management strategy. |
|
|
|
Facilitates communication with the market and supervisors.
|
Further, the whole process is closely supervised and carried out with the maximum involvement of the senior
management, under a framework that optimises governance and ensures that all component elements are subject to proper scrutiny, review and analysis.
One
of the key elements in capital planning and stress analysis exercises, due to their particular importance in forecasting the income statement under defined stress scenarios, consists of calculating the provisions needed under these scenarios, mainly
those to cover losses on the credit portfolio.
Santander Group uses a methodology that ensures sufficient provisioning at all times to cover all credit
losses forecast by its internal models of expected loss, based on the parameters of exposure at default (EAD), probability of default (PD) and loss given default (LGD).
This methodology is widely accepted and is similar to that used in the European Banking Authoritys (EBA) 2018 stress test, its previous exercises in
2011, 2014 and 2016, and the stress test for the Spanish banking sector conducted in 2012.
In 2018, this methodology was adapted to include the changes
deriving from the entry into force of the international financial reporting standard known as lFRS 9, and therefore the Group has models in place to calculate balances in stages (S1, S2, S3) in addition to migrations between these and the allocation
of credit losses in accordance with the new standard.
The capital planning and stress testing process is rounded off with a capital adequacy assessment
under the different scenarios established, over the defined time horizon, in order to assess capital adequacy and ensure that the Santander Group both meets its internal capital targets in addition to all regulatory requirements.
In the event capital targets are not met, an action plan will be prepared, setting out the measures needed to be able to attain the desired minimum capital.
These measures are analysed and quantified as part of the internal exercises, although they do not need to be implemented because Santander exceeds the minimum capital thresholds.
This internal process of capital stress testing and planning is conducted transversally across the entire Group, not only at consolidated level, but also
locally at the Groups units. These units use the capital stress and planning process as an internal management tool and to meet their local regulatory requirements.
Since the 2008 economic crisis Santander Group has undergone seven stress tests, all of which demonstrated its strength and capital adequacy in the most
extreme and severe macroeconomic scenarios. All the tests showed that, thanks mainly to the business model and geographic diversification existing, Santander is capable of continuing to generate profits for its shareholders and complying with the
strictest regulatory requirements.
In the first of these (CEBS 2010), Santander Group was the institution that reported the smallest impact on its
capital adequacy ratio, with the exception of those banks that benefited from not distributing a dividend. In the second test, carried out by the EBA in 2011, Santander was not only one of the small group of
banks that improved their capital adequacy in the stress scenario, but it also earned the highest profits.
In the stress exercises conducted by Oliver Wyman on Spanish banks in 2012 (top-down and then bottom-up), Banco Santander again showed its strength to face the most extreme economic scenarios with full capital adequacy. It was the only bank that improved its core capital ratio, with a surplus of more than
EUR 25,000 million over the minimum requirement.
Lastly, in the recent stress test carried out in 2014 by the European Central Bank, in conjunction
with the European Banking Authority, Santander Group was the bank with the smallest impact on the adverse scenario among its international peers, with a capital surplus of approximately EUR 20,000 million with respect to the minimum
requirement.
The 2016 stress test marked a departure from previous tests by not insisting on a minimum level of capital. Instead, the results are to be
used as a further input for the Supervisory Review and Evaluation Process (SREP). Santander Group was the bank that destroyed the least capital among its peers. The fully loaded CET1 capital ratio fell by 199 basis points (versus an average of -335 bps).
In the 2018 stress text, the results of which were published on 2 November, Santander Group was again
the bank that destroyed the least capital among its peers, delivering better results than in 2016. The fully loaded CET1 capital ratio fell by 141 basis points (versus a system average of -395 bps).
The results of the exercises have shown that Santander Groups business model, based on retail and commercial banking and geographic diversification,
renders it more sturdy when it comes to addressing worst-case international crisis scenarios.
As already mentioned, and in addition to the regulatory
stress exercises, Santander Group has been conducting annual internal stress tests since 2008 as part of its capital self-assessment process (Pillar 2). All of them similarly showed Santander Groups capacity to stand up to the most difficult
tests, both globally as well as in the main regions in which it operates.
2.3.3. EBA / ECB 2018 stress test
As described in the section above, in November 2018, the EBA published the results of the stress tests undergone by the 48 leading EU banks.
As in previous exercises, no minimum capital threshold was set to pass the test but the results were considered as a further variable to be used by the ECB to
establish the minimum capital requirements for each bank (under the Supervisory Review and Evaluation Process SREP).
The test involved two
macroeconomic scenarios (baseline and adverse), starting from the banks balance sheets at year-end 2017 and running over a three-year time horizon, concluding in 2020.
The adverse scenario, which had a very low probability of occurrence, was marked by a sharp macroeconomic slowdown and financial market slump in both Europe
and other countries in which Banco Santander operates. For instance, for the euro area as a whole the simulated impact was a cumulative fall of 2.7%
|
|
|
|
|
46 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
GDP, with unemployment rising to 9.7% in 2020 and a cumulative decline of 19.1% in housing prices in the same
year.
In the adverse scenario, Santander was the bank that destroyed the least capital in its peer group, and also destroyed less capital than in the
previous exercise (-199bps). The CET1 fully-loaded ratio was reduced by -141 basis points (vs a system average of -395) from 10.61% in 2017 to 9.2% in 2020.
Fully loaded CET1 ratio - stress test baseline scenario
Additionally, Santander Group generated the most profit among its peers and showed no cumulative losses over the three-year
period.1
Profit after tax - stress test adverse scenario
EUR million
In the baseline scenario, Santander Group also generated the most profit among its peers2.
Fully loaded CET1 ratio - stress test baseline scenario
In sum, Santander evidences greater resilience than its European peers due to its high recurrent income and profit. This is
due to the strength and diversification of the banks business model, which enhances confidence in the Groups capital levels.
2017 FL CET1 vs
baseline 2020
bps
1. |
Fully loaded regarding both Basel III and IFRS9. |
2. |
Peers: BBVA, Intesa San Paolo, Nordea, BNP, Unicredit, Commerzbank, Société
Générale, ING, Crédit Agricole, HSBC, Deutsche Bank, RBS, Barclays and Lloyds. |
2017 FL CET1 vs adverse 2020
bps
2.4. Recovery and resolution plans and special situation response framework
This section summarises the main developments made by Santander Group in the area of crisis management. Specifically, the main developments in viability and
resolution plans, and the special situation response framework.
2.4.1. Viability plans
Overview. The ninth version of the corporate viability plan was prepared in 2018. The most relevant part of this plan addresses the measures the bank
would be able to rely on in order to fend off an extreme crisis unassisted.
The plans two primary objectives are firstly to ascertain the
feasibility, effectiveness and credibility of the recovery measures it contains, and secondly to determine the suitability of the recovery indicators and the respective thresholds which, were they to be breached, would trigger the escalation process
when making the right decisions in response to stress situations.
For these purposes, the corporate plan envisages different macroeconomic and/or
financial crisis scenarios that include Group-relevant idiosyncratic and/or systemic events that could trigger the activation of the plan. The plan was also drawn up on the premise that, once deployed, there would be no extraordinary public
financial support, as per article 5.3 of the BRRD.
1 and 2: Fully loaded both with respect to Basel III and IFRS 9.
It should be noted that the plan is not a stand-alone instrument that bears no relationship with the other
structural mechanisms in place to measure, manage and supervise the risk assumed by the Group. In fact, the plan includes the following tools, among others: the risk appetite framework (RAF), the risk appetite statement
(RAS), the risk identification assessment process (RIA), the business continuity management system (BCMS), and the internal capital adequacy assessment process and the internal liquidity adequacy assessment
process (ICAAP and ILAAP, respectively). The plan is also an integral part of the Groups wider strategic plans.
Developments in 2018. Improvement work continued during the year, in line with the requirements and expectations of the European supervisor and
reflecting best practices in the industry. This work included:
|
(i) |
Additional assessment of recovery options. More detailed descriptions of intra-group interconnectedness and the
impact that this interdependency could have on the sale of any subsidiary. |
|
(ii) |
Improvements in the escalation procedure for recovery indicators, speeding up the process.
|
|
(iii) |
Improvements in early warning indicators (EWIs), which are now almost fully harmonised thanks to the corporate
policy for liquidity EWIs. |
|
(iv) |
Analysis of Banco Popular and assessment of the implications. |
The main conclusions drawn from the analysis of the 2018 corporate plan reveal that:
|
|
|
There are no material interdependences between the Groups regions. |
|
|
|
The measures in place guarantee a broad recovery capacity for all the scenarios contemplated in the plan. The Groups geographic diversification model has proved to be an advantage from the point of view of
viability. |
|
|
|
Each subsidiary has sufficient recovery capacity to exit a recovery situation unassisted, which enhances the strength of the Groups model based on subsidiaries that are independent in terms of capital and
liquidity. |
|
|
|
The occurrence of serious financial or capital adequacy problems at any given subsidiary would not be considered sufficiently important to constitute a breach of the worst-case scenarios established for recovery
indicators, potentially triggering the activation of the corporate plan. |
|
|
|
The Group has sufficient mitigation mechanisms in place to minimise any negative economic impact that could result from damage to its reputation under various stress scenarios.
|
|
|
|
|
|
48 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
It may therefore be inferred that the Groups model and strategy of geographic diversification, based on a
model of subsidiaries that are independent in terms of capital and liquidity, remains suitably strong from a viability standpoint.
Regulation and
governance. The plan has been drawn up in accordance with the regulations applicable in the European Union1. The plan also embraces the non-binding
recommendations emanating from international bodies such as the Financial Stability Board (FSB)2.
As
with the previous versions, the Groups new plan was presented to the single supervisor in September. From that time, the authority has a period of six months in which to submit official feedback on the plan.
The Groups plan comprises both the corporate plan (relating to Banco Santander, S.A.) and the local plans for its main regions (United Kingdom, Brazil,
Mexico, United States, Germany, Argentina, Chile, Poland and Portugal), which are attached to the corporate plan. It should be noted that all regions apart from Chile are subject to local regulatory requirements in addition to the corporate
requirement to draw up a local plan.
The board of directors of Banco Santander S.A. is ultimately responsible for approving the corporate plan, although
its content and relevant data are first presented and discussed on the banks primary management and control committees (capital committee, global ALCO committee, and risk supervision, regulation and compliance committee). The local plans are
also approved by the relevant local bodies, in close coordination at all times with the Group since these plans are attached to the Groups wider corporate plan.
2.4.2. Resolution plans
Santander Group continues to
work alongside the competent authorities on preparing the resolution plans by supplying all the information required of it.
The competent authorities
belonging to the Crisis Management Group (CMG) reached consensus on the strategy to be deployed for the resolution of Santander Group, called the Multiple Point of Entry (MPE)3.
This strategy is based on the legal and business structure of Santander Group and is structured into nine Resolution Groups, all of which could be
resolved independently without involving the other parts of the Group.
In May 2018, the Single Resolution Board (SRB) notified the Bank of the preferred
resolution strategy and of the work priorities to enhance the resolvability of Santander Group.
Santander Group has continued to make progress on projects to improve resolvability. Defining four main lines of
action:
1) Ensuring the Group has a sufficient buffer of loss-absorbing instruments.
In 2018, the bank issued EUR 7,000 million in senior non-preferred debt, with which to absorb losses before any
senior debt.
To prevent legal uncertainty when resorting to a bail-in, all debt issue agreements now include a
clause whereby the bond holder recognises that the resolution authority is entitled to effect the bail-in using their instruments.
2) Ensuring the Group has reporting systems in place to guarantee rapid delivery of the necessary information in the event of resolution.
In 2018, the Group finished work on automating information on the liabilities that could be subject to a bail-in in the
event of resolution. Work is also ongoing to systematise and strengthen the governance of the rest of the information to be delivered to the resolution authority for the purpose of drawing up the resolution plan.
This process is expected to be completed in 2019.
Meanwhile,
various projects are still under way to create information repositories on:
1. |
Legal entities belong to Santander Group |
3. |
Critical infrastructure |
4. |
Financial contracts in accordance with article 71.7 of the BRRD |
3) Guaranteeing operational continuity in resolution situations
Operational continuity clauses in contracts with internal suppliers have been reinforced and the Group is currently analysing the clauses to include in
contracts with external suppliers.
The first stage of the survey completed by the Groups main market infrastructures has been completed, to
discover their policy should any member of that infrastructure be faced with resolution. In the second stage, an analysis of the policies of the infrastructures is being carried to ascertain the financial impairment of entities prior to their
resolution.
Lastly, contingency plans are being drawn up to cover any situation whereby one of those infrastructures ceases to provide service to
Santander Group in the event of resolution.
1. |
Directive 2014/59/EU (EU Crisis Management Directive); current EBA regulations on recovery plans
(EBA/RTS/2014/11, EBA/GL/2014/06 and EBA/GL/2015/02); EBA recommendations to the Commission on key lines of business and critical functions (EBA/op/2015/05); EBA regulation pending approval (EBA/CP/2015/01 on ITS templates for resolution plans); EBA
regulation not directly related to recovery, but with significant implications in this field (EBA/GL/2015/03 on triggers for use of early intervention measures); and domestic Spanish regulations: Spanish Law 11/2015, on recovery and resolution of
credit entities and investment services companies, and Royal Decree 1012/2015 implementing that law. |
2. |
FSB Key attributes of effective resolution regimes for financial institutions (15 October 2014, update of the
first publication in October 2011), guidelines on the identification of critical functions and critical shared services (15 July 2013) and guidance on recovery triggers and stress scenarios (15 July 2013). |
3. |
By way of an exception to the above, resolution plans in the United States are drawn up by the companies
individually. |
4) Fostering a culture of resolvability within the Group
The Group has been working here to increase the involvement of the senior management by making it the boards responsibility to address matters relating
to the resolvability of Santander Group and setting up a steering committee to specialise in matters relating to resolution.
2.4.3. Special situation
management framework
When it comes to the governance of crisis situations, the special situation management framework was approved and implemented in
2016 both at the corporation and across the main countries and regions of Santander Group.
This is a holistic framework governing special events or
situations that differ from what is expected or what ought to emerge from the ordinary management of business and that could compromise business or trigger a serious downturn in the financial position of the entity or of Santander Group by straying
too far from its risk appetite and limits.
The main features of this framework are as follows:
1. |
Defining a set of standardised crisis indicators. |
2. |
Defining a traffic light system based on the extent of financial impairment or risk of financial impairment and
consistent with the limits used for BAU management. |
3. |
Defining the role of Crisis Management Director to coordinate the response to a crisis situation.
|
4. |
Defining the escalation of responsibilities in crisis events. |
5. |
Creating a high-level crisis committee supported by a technical crisis committee. |
In 2018, progress was made on the implementation of the model described above in order to achieve a standardised
roll-out in the Groups main subsidiaries.
Further progress was also made during the year on developing
tools to facilitate rapid and effective crisis management (such as by automating communications in special situations and setting up specific crisis rooms) and to raise awareness and increase the training of the Groups human resources and
governing bodies involved in escalating and managing this type of incident, mainly by preparing and conducting simulations known as war games.
2.5. Total Loss Absorbing Capacity (TLAC) and Minimum Required Eligible Liability (MREL)
On 9 November 2015, the FSB published its final principles and term sheet containing an international standard to enhance the loss absorbing capacity of
G-SIIs.
The definitive standard consists of an elaboration of the principles on loss absorbing and recapitalisation capacity of G-SIIs in resolution and
a term sheet setting out a proposal for the implementation of these proposals in the form of an internationally agreed standard on total loss absorbing capacity (TLAC) for G-SIIs. Once implemented in the relevant jurisdictions, these
principles and terms will form a new minimum TLAC standard for G-SIIs, and in the case of G-SIIs with more than one resolution group, each resolution group within the G-SII. The FSB will undertake a review of the technical implementation of the TLAC
principles and term sheet by the end of 2019.
The TLAC principles and term sheet require a minimum TLAC requirement to be determined individually for
each G-SII at the greater of (a) 16% of risk weighted assets as of 1 January 2019 and 18% as of 1 January 2022, and (b) 6% of the Basel III Tier 1 leverage ratio exposure measure as of 1 January 2019, and 6.75% as of 1 January
2022.
Furthermore, the BRRD provides that member states shall ensure that institutions meet, at all times, a minimum requirement for own funds and
eligible liabilities (MREL). The MREL shall be calculated as the amount of own funds and eligible liabilities expressed as a percentage of the total liabilities and own funds of the institution. The MREL requirement was scheduled to come
into force by January 2016. However, resolution authorities were given discretion to determine appropriate transitional periods for each institution. In the specific case of Banco Santander S.A., in May 2018 formal notification was received of the
MREL requirement, which must be complied with from 1 January 2020.
The European Commission has committed to review the existing MREL rules with a
view to ensuring its full consistency with the TLAC standard. As mentioned above, although TLAC and MREL pursue the same regulatory objective, there are, nevertheless, some differences in the way they are constructed.
The European Commission is proposing to integrate the TLAC standard into the existing MREL rules and to ensure that both requirements are met with largely
similar instruments, with the exception of the subordination requirement, which will be institution-specific and determined by the resolution authority. Under these proposals, institutions such as Banco Santander would continue to be subject to an
institution-specific MREL requirement (i.e., a Pillar 2 add-on MREL requirement), which may be higher than the requirement of the TLAC standard (which would be implemented as a Pillar 1
MREL requirement for G-SIIs).
|
|
|
|
|
50 |
|
2018 Pillar 3 Disclosures Report |
|
|
CAPITAL _ 2018 Pillar 3 Disclosures Report
The EU Directive on the recovery and resolution of credit institutions (BRRD), approved in July 2014,
establishes a minimum requirement for own funds and eligible liabilities (MREL). This requirement, which came into effect in 2016, is calculated for each institution by the resolution authority on the basis of an individualized analysis. Meanwhile,
in November 2015 the FSB published the term sheet for TLAC (Total Loss Absorbing Capacity) with the same aim, to ensure that institutions have sufficient liabilities to absorb losses and to be recapitalised in case of resolution.
The rules of the TLAC term sheet are only applicable to systemic institutions (G-SIBs), while the MREL applies to over 6,000 European institutions. With the
aim of avoiding the need for systemic institutions in Europe to comply with two regulatory requirements, the European Commission proposed that the European regulations should be revised to introduce the main features of the TLAC.
The result is therefore a single requirement with one methodology to be applied by the resolution authority,
and common rules for the eligibility of liabilities. For the G-SIBs, the minimum set out in the term sheet (16%-18%) is introduced. They will have to be composed of subordinated liabilities, with the exception of a percentage of senior debt (2.5%-3.5%). For non-systemic institutions, the subordinated requirement will be determined by the resolution authority on a case-by-case basis.
In May, the Bank of Spain formally announced the binding minimum requirement for own funds and eligible liabilities (MREL) for the Banco Santander S.A.
Resolution Group at a sub-consolidated level which must be met by 1 January 2020. This MREL requirement was set at 22.90% of own funds and liabilities based on information at December 2016 and represents
24.35% of the Resolution Groups risk-weighted assets.
A new MREL requirement is expected in the third or fourth quarter of 2019 based on
information at December 2017. This will be based on the SRBs 2018 MREL policy for banking groups with a resolution college.
For further details on TLAC and MREL see
Fixed Income
Presentation available on the Santander Group website.
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
3. Credit risk
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Main figures
EUR million |
|
|
|
|
|
|
EAD |
|
|
RWA |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Credit Risk |
|
|
1,306,865 |
|
|
|
1,302,378 |
|
|
|
499,924 |
|
|
|
513,455 |
|
Of which, with standard method (SA) |
|
|
710,272 |
|
|
|
704,321 |
|
|
|
294,593 |
|
|
|
299,430 |
|
Of which, with FIRB method |
|
|
41,133 |
|
|
|
47,837 |
|
|
|
29,044 |
|
|
|
33,435 |
|
Of which, AIRB method |
|
|
544,532 |
|
|
|
542,235 |
|
|
|
156,063 |
|
|
|
164,834 |
|
Of which, IRB equities (Table 26) |
|
|
10,927 |
|
|
|
7,985 |
|
|
|
20,224 |
|
|
|
15,755 |
|
It does not include securitizations and includes Counterparty credit risk.
|
EAD Variation RWA
Variation |
EUR million EUR
million |
|
|
RWA by Geography |
* Includes Counterparty Credit risk |
|
Santander Group ensures that its risk profile remains within the defined risk appetite levels and other limits
through the advanced and comprehensive management of all risks, in a robust control environment, based on pillars aligned with its strategy.
For further
details on policies and objectives of risk management (CRR article 435) see Corporate Governance Chapter and Risk Management Report (Sections 1 and 2) in the Annual Report.
3.1. General aspects
The credit risk management process involves the identification, assessment, control and decision-making in relation to the credit risk incurred in the
Groups operations. It factors in operational aspects, in addition to customer and portfolio factors and the overall view of the credit risk cycle. The business and risk areas, and senior management are involved in the process.
Santander Groups profile is mainly retail, with an adequate diversification of credit risk between mature and emerging markets.
Table 14. Credit risk exposure and CRM effects (IRB approach) (CR4)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Exposures before CCF and CRM |
|
|
Exposures post CCF and CRM |
|
|
RWAs and RWA density |
|
|
|
On-balance- |
|
|
Off-balance- |
|
|
On-balance- |
|
|
Off-balance- |
|
|
|
|
|
|
|
|
|
sheet amount |
|
|
sheet amount |
|
|
sheet amount |
|
|
sheet amount |
|
|
RWAs |
|
|
RWA density |
|
Central governments or central banks |
|
|
2,328 |
|
|
|
1,666 |
|
|
|
2,268 |
|
|
|
275 |
|
|
|
819 |
|
|
|
32.21 |
% |
Institutions |
|
|
40,731 |
|
|
|
10,391 |
|
|
|
34,198 |
|
|
|
4,803 |
|
|
|
9,212 |
|
|
|
23.62 |
% |
Corporates |
|
|
164,360 |
|
|
|
110,884 |
|
|
|
156,915 |
|
|
|
37,825 |
|
|
|
106,307 |
|
|
|
54.59 |
% |
Of Which: Specialised Lending |
|
|
16,031 |
|
|
|
3,297 |
|
|
|
16,031 |
|
|
|
1,189 |
|
|
|
14,344 |
|
|
|
83.30 |
% |
Of Which: SME |
|
|
32,134 |
|
|
|
6,430 |
|
|
|
31,817 |
|
|
|
2,643 |
|
|
|
18,601 |
|
|
|
53.98 |
% |
Retail |
|
|
326,041 |
|
|
|
38,228 |
|
|
|
326,232 |
|
|
|
23,150 |
|
|
|
68,769 |
|
|
|
19.68 |
% |
Secured by real estate property |
|
|
269,715 |
|
|
|
13,373 |
|
|
|
270,081 |
|
|
|
8,651 |
|
|
|
39,160 |
|
|
|
14.05 |
% |
SME |
|
|
4,560 |
|
|
|
147 |
|
|
|
4,547 |
|
|
|
67 |
|
|
|
1,028 |
|
|
|
22.29 |
% |
Non-SME |
|
|
265,156 |
|
|
|
13,225 |
|
|
|
265,534 |
|
|
|
8,584 |
|
|
|
38,132 |
|
|
|
13.91 |
% |
Qualifying Revolving |
|
|
3,234 |
|
|
|
17,720 |
|
|
|
3,274 |
|
|
|
10,526 |
|
|
|
3,988 |
|
|
|
28.90 |
% |
Other Retail |
|
|
53,091 |
|
|
|
7,136 |
|
|
|
52,878 |
|
|
|
3,972 |
|
|
|
25,621 |
|
|
|
45.07 |
% |
SME |
|
|
12,673 |
|
|
|
4,130 |
|
|
|
12,437 |
|
|
|
1,922 |
|
|
|
4,777 |
|
|
|
33.27 |
% |
Non-SME |
|
|
40,418 |
|
|
|
3,006 |
|
|
|
40,441 |
|
|
|
2,050 |
|
|
|
20,843 |
|
|
|
49.05 |
% |
Equity |
|
|
10,927 |
|
|
|
|
|
|
|
10,927 |
|
|
|
|
|
|
|
20,224 |
|
|
|
185.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL IRB APPROACH |
|
|
544,388 |
|
|
|
161,169 |
|
|
|
530,541 |
|
|
|
66,052 |
|
|
|
205,331 |
|
|
|
34.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Securitisations not included. Including counterparty
credit risk. Table 15. Credit risk exposure and
CRM effects (Standardised approach) (CR4) EUR million |
|
|
|
31 Dec. 2018 |
|
|
|
Exposures before CCF and CRM |
|
|
Exposures CCF and CRM |
|
|
RWAs and RWA density |
|
|
|
On-balance- |
|
|
Off-balance- |
|
|
On-balance- |
|
|
Off-balance- |
|
|
|
|
|
|
|
|
|
sheet amount |
|
|
sheet amount |
|
|
sheet amount |
|
|
sheet amount |
|
|
RWAs |
|
|
RWA density |
|
Central governments or central banks |
|
|
232,619 |
|
|
|
10,389 |
|
|
|
241,477 |
|
|
|
5,000 |
|
|
|
30,172 |
|
|
|
12.24 |
% |
Regional governments or local authorities |
|
|
10,822 |
|
|
|
2,332 |
|
|
|
23,179 |
|
|
|
437 |
|
|
|
496 |
|
|
|
2.10 |
% |
Public sector entities |
|
|
8,964 |
|
|
|
210 |
|
|
|
8,598 |
|
|
|
148 |
|
|
|
415 |
|
|
|
4.75 |
% |
Multilateral Development Banks |
|
|
1,655 |
|
|
|
|
|
|
|
4,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
International Organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 |
% |
Institutions |
|
|
19,466 |
|
|
|
22,001 |
|
|
|
17,792 |
|
|
|
18,239 |
|
|
|
6,343 |
|
|
|
17.60 |
% |
Corporates |
|
|
68,101 |
|
|
|
29,142 |
|
|
|
63,996 |
|
|
|
8,490 |
|
|
|
70,634 |
|
|
|
97.45 |
% |
Retail |
|
|
146,704 |
|
|
|
75,402 |
|
|
|
140,832 |
|
|
|
2,743 |
|
|
|
103,086 |
|
|
|
71.80 |
% |
Secured by mortgages on immovable property |
|
|
93,374 |
|
|
|
8,963 |
|
|
|
93,031 |
|
|
|
1,170 |
|
|
|
39,721 |
|
|
|
42.17 |
% |
Exposures in default |
|
|
8,456 |
|
|
|
363 |
|
|
|
8,336 |
|
|
|
269 |
|
|
|
9,119 |
|
|
|
105.96 |
% |
Items associated with particularly high risk |
|
|
1,538 |
|
|
|
20 |
|
|
|
1,538 |
|
|
|
6 |
|
|
|
2,317 |
|
|
|
150.00 |
% |
Covered bonds |
|
|
3,480 |
|
|
|
|
|
|
|
3,480 |
|
|
|
|
|
|
|
470 |
|
|
|
13.51 |
% |
Claims on institutions and corporates with a short-term credit assessment |
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
100.00 |
% |
Collective investments undertakings (CIU) |
|
|
82 |
|
|
|
1,314 |
|
|
|
753 |
|
|
|
47 |
|
|
|
283 |
|
|
|
35.42 |
% |
Equity exposures |
|
|
221 |
|
|
|
|
|
|
|
221 |
|
|
|
|
|
|
|
221 |
|
|
|
100.00 |
% |
Other exposures |
|
|
60,717 |
|
|
|
16,995 |
|
|
|
63,359 |
|
|
|
3,090 |
|
|
|
31,312 |
|
|
|
47.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL STANDARDISED APPROACH |
|
|
656,201 |
|
|
|
167,131 |
|
|
|
670,632 |
|
|
|
39,640 |
|
|
|
294,593 |
|
|
|
41.48 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Securitisations not included. Including counterparty credit risk.
|
|
|
|
|
54 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
3.2. Capital requirements for credit risk
3.2.1. Internal ratings-based approach (IRB)
The
following table shows the main changes in capital requirements for credit risk under the IRB approach:
Table 16. RWA flow statement of credit risk
exposures under IRB (CR8)*
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
|
|
|
Capital |
|
|
|
RWA |
|
|
Requirements |
|
RWA as Dec- 2017 |
|
|
211,150 |
|
|
|
16,892 |
|
Asset size |
|
|
2,000 |
|
|
|
160 |
|
Asset quality |
|
|
|
|
|
|
|
|
Model updates |
|
|
2,922 |
|
|
|
234 |
|
Methodology and policy |
|
|
-7,105 |
|
|
|
-568 |
|
Acquisitions and disposals |
|
|
3,393 |
|
|
|
271 |
|
Foreign exchange movements |
|
|
-215 |
|
|
|
-17 |
|
Other |
|
|
-8,323 |
|
|
|
-666 |
|
|
|
|
|
|
|
|
|
|
RWA as Dec- 2018 |
|
|
203,823 |
|
|
|
16,306 |
|
|
|
|
|
|
|
|
|
|
* |
Includes capital requirements of equity. securitisations and counterparty credit risk (excluding CVA and CCP)
|
The decline in RWAs in the year (-7,327 million) is mainly due to securitisation origination (-8,323 million) and improved risk parameters (-7,105 million) mostly in the mortgage segment partially offset by the calibration of models largely in the UK (+2,922 million)
and acquisitions in the year (+3,393 million) mostly due to the creation of the Holding Quasar to comprise the Popular mortgage portfolio
The tables in
this section show, for each business segment, the distribution by rating grade (internal and Standard & Poors) of the value of exposures, credit risk parameters and capital under the IRB approach, distinguishing between foundation IRB
(FIRB) and advanced IRB (AIRB).
Table 17. AIRB approach. Central banks and central governments (CR6)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
PD scale |
|
S&P Levels |
|
|
Original on-balance-sheet gross exposures |
|
|
Off-balance-sheet exposures pre-CCF |
|
|
Average CCF |
|
|
EAD |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
|
EL |
|
|
Value adjustments and provisions |
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
457 |
|
|
|
753 |
|
|
|
34.53 |
% |
|
|
2,070 |
|
|
|
0.04 |
% |
|
|
20 |
|
|
|
46.94 |
% |
|
|
1,648 |
|
|
|
549 |
|
|
|
26.51 |
% |
|
|
0.3 |
|
|
|
|
|
0,15 to <0,25 |
|
|
BBB+ to BBB |
|
|
|
751 |
|
|
|
12 |
|
|
|
31.93 |
% |
|
|
97 |
|
|
|
0.15 |
% |
|
|
8 |
|
|
|
49.99 |
% |
|
|
562 |
|
|
|
34 |
|
|
|
35.20 |
% |
|
|
0.1 |
|
|
|
|
|
0,25 to <0,50 |
|
|
BBB to BB+ |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.37 |
% |
|
|
1 |
|
|
|
50.00 |
% |
|
|
360 |
|
|
|
|
|
|
|
51.69 |
% |
|
|
|
|
|
|
|
|
0,50 to <0,75 |
|
|
BB+ to BB |
|
|
|
13 |
|
|
|
0.001 |
|
|
|
23.50 |
% |
|
|
13 |
|
|
|
0.58 |
% |
|
|
3 |
|
|
|
50.00 |
% |
|
|
360 |
|
|
|
9 |
|
|
|
66.19 |
% |
|
|
|
|
|
|
|
|
0,75 to <2,50 |
|
|
BB to B+ |
|
|
|
1,308 |
|
|
|
27 |
|
|
|
22.03 |
% |
|
|
81 |
|
|
|
1.10 |
% |
|
|
9 |
|
|
|
46.67 |
% |
|
|
1,604 |
|
|
|
117 |
|
|
|
144.17 |
% |
|
|
0.4 |
|
|
|
|
|
2,50 to <10,00 |
|
|
B+ to B- |
|
|
|
382 |
|
|
|
3 |
|
|
|
12.80 |
% |
|
|
28 |
|
|
|
6.13 |
% |
|
|
7 |
|
|
|
70.18 |
% |
|
|
463 |
|
|
|
66 |
|
|
|
240.41 |
% |
|
|
1.2 |
|
|
|
-1 |
|
10,00 to <100,00 |
|
|
B- to C |
|
|
|
|
|
|
|
1 |
|
|
|
100.00 |
% |
|
|
2 |
|
|
|
22.50 |
% |
|
|
3 |
|
|
|
60.86 |
% |
|
|
1,373 |
|
|
|
6 |
|
|
|
353.95 |
% |
|
|
0.2 |
|
|
|
|
|
100,00 (default) |
|
|
D |
|
|
|
33 |
|
|
|
30 |
|
|
|
12.80 |
% |
|
|
37 |
|
|
|
100.00 |
% |
|
|
3 |
|
|
|
69.88 |
% |
|
|
1,700 |
|
|
|
9 |
|
|
|
24.05 |
% |
|
|
25.3 |
|
|
|
-25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
2,954 |
|
|
|
825 |
|
|
|
33.31 |
% |
|
|
2,328 |
|
|
|
1.77 |
% |
|
|
54 |
|
|
|
47.72 |
% |
|
|
1,580 |
|
|
|
789 |
|
|
|
33.92 |
% |
|
|
27 |
|
|
|
-27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
2,156 |
|
|
|
852 |
|
|
|
32.98 |
% |
|
|
2,019 |
|
|
|
3.00 |
% |
|
|
36 |
|
|
|
45.58 |
% |
|
|
1,536 |
|
|
|
686 |
|
|
|
34.00 |
% |
|
|
29 |
|
|
|
-37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89% of the portfolio is rated A+. Average portfolio consumption is 34%. Average PD falls due to NPL exits mainly
at Spain. Exposure increased by 15% compared to 2017 due to increased business in this segment.
|
|
|
|
|
56 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 18. AIRB approach. Institutions (CR6)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
PD scale |
|
S&P Levels |
|
|
Original on-balance-sheet gross exposures |
|
|
Off-balance-sheet exposures pre-CCF |
|
|
Average CCF |
|
|
EAD |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
|
EL |
|
|
Value adjustments and provisions |
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
23,487 |
|
|
|
9,315 |
|
|
|
36.59 |
% |
|
|
29,075 |
|
|
|
0.05 |
% |
|
|
1,178 |
|
|
|
43.92 |
% |
|
|
451 |
|
|
|
4,455 |
|
|
|
15.32 |
% |
|
|
6 |
|
|
|
-6 |
|
0,15 to <0,25 |
|
|
BBB+ to BBB |
|
|
|
1,769 |
|
|
|
644 |
|
|
|
45.84 |
% |
|
|
1,745 |
|
|
|
0.20 |
% |
|
|
282 |
|
|
|
42.71 |
% |
|
|
494 |
|
|
|
702 |
|
|
|
40.24 |
% |
|
|
1 |
|
|
|
-1 |
|
0,25 to <0,50 |
|
|
BBB to BB+ |
|
|
|
3,258 |
|
|
|
155 |
|
|
|
30.32 |
% |
|
|
583 |
|
|
|
0.37 |
% |
|
|
122 |
|
|
|
43.04 |
% |
|
|
711 |
|
|
|
387 |
|
|
|
66.32 |
% |
|
|
1 |
|
|
|
-1 |
|
0,50 to <0,75 |
|
|
BB+ to BB |
|
|
|
983 |
|
|
|
98 |
|
|
|
18.72 |
% |
|
|
894 |
|
|
|
0.63 |
% |
|
|
122 |
|
|
|
56.67 |
% |
|
|
1,398 |
|
|
|
1,168 |
|
|
|
130.68 |
% |
|
|
3 |
|
|
|
-3 |
|
0,75 to <2,50 |
|
|
BB to B+ |
|
|
|
3,988 |
|
|
|
840 |
|
|
|
32.03 |
% |
|
|
1,902 |
|
|
|
1.53 |
% |
|
|
320 |
|
|
|
21.95 |
% |
|
|
1,342 |
|
|
|
1,065 |
|
|
|
56.00 |
% |
|
|
6 |
|
|
|
-6 |
|
2,50 to <10,00 |
|
|
B+ to B- |
|
|
|
429 |
|
|
|
38 |
|
|
|
45.13 |
% |
|
|
104 |
|
|
|
4.79 |
% |
|
|
44 |
|
|
|
25.59 |
% |
|
|
1,252 |
|
|
|
97 |
|
|
|
93.48 |
% |
|
|
1 |
|
|
|
-1 |
|
10,00 to <100,00 |
|
|
B- to C |
|
|
|
15 |
|
|
|
2 |
|
|
|
43.48 |
% |
|
|
2 |
|
|
|
24.22 |
% |
|
|
7 |
|
|
|
44.65 |
% |
|
|
903 |
|
|
|
6 |
|
|
|
258.92 |
% |
|
|
|
|
|
|
|
|
100,00 (default) |
|
|
D |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
100 |
% |
|
|
134 |
|
|
|
23.96 |
% |
|
|
1,365,0 |
|
|
|
8 |
|
|
|
49.38 |
% |
|
|
3 |
|
|
|
-3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
33,945 |
|
|
|
11,093 |
|
|
|
36.6 |
% |
|
|
34,321 |
|
|
|
0.22 |
% |
|
|
2,209 |
|
|
|
42.90 |
% |
|
|
535 |
|
|
|
7,888 |
|
|
|
22.98 |
% |
|
|
22 |
|
|
|
-22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
35,109 |
|
|
|
8,540 |
|
|
|
37.6 |
% |
|
|
31,868 |
|
|
|
0.20 |
% |
|
|
2,549 |
|
|
|
42.40 |
% |
|
|
573 |
|
|
|
7,820 |
|
|
|
24.54 |
% |
|
|
19 |
|
|
|
-98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The portfolios average consumption is 22.98%, 156 bp less than in 2017. Its exposure increased by 7.7%,
causing RWAs to rise by EUR 68 million.
Table 19. AIRB approach. Corporates (CR6)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
PD scale |
|
S&P Levels |
|
|
Original on-balance-sheet gross exposures |
|
|
Off-balance-sheet exposures pre-CCF |
|
|
Average CCF |
|
|
EAD |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
|
EL |
|
|
Value adjustments and provisions |
|
0.00 to <0.15 |
|
|
AAA to BBB+ |
|
|
|
37,658 |
|
|
|
47,787 |
|
|
|
38.15 |
% |
|
|
53,528 |
|
|
|
0.08 |
% |
|
|
2,606 |
|
|
|
42.63 |
% |
|
|
863 |
|
|
|
13,739 |
|
|
|
25.67 |
% |
|
|
19 |
|
|
|
-19 |
|
0.15 to <0.25 |
|
|
BBB+ to BBB |
|
|
|
15,348 |
|
|
|
14,328 |
|
|
|
32.68 |
% |
|
|
20,829 |
|
|
|
0.22 |
% |
|
|
5,772 |
|
|
|
43.78 |
% |
|
|
734 |
|
|
|
9,242 |
|
|
|
44.37 |
% |
|
|
20 |
|
|
|
-20 |
|
0.25 to <0.50 |
|
|
BBB to BB+ |
|
|
|
27,797 |
|
|
|
14,834 |
|
|
|
31.75 |
% |
|
|
32,936 |
|
|
|
0.37 |
% |
|
|
16,384 |
|
|
|
43.73 |
% |
|
|
733 |
|
|
|
18,090 |
|
|
|
54.92 |
% |
|
|
53 |
|
|
|
-52 |
|
0.50 to <0.75 |
|
|
BB+ to BB |
|
|
|
16,869 |
|
|
|
6,710 |
|
|
|
31.33 |
% |
|
|
12,955 |
|
|
|
0.67 |
% |
|
|
7,067 |
|
|
|
42.88 |
% |
|
|
637 |
|
|
|
9,410 |
|
|
|
72.64 |
% |
|
|
36 |
|
|
|
-36 |
|
0.75 to <2.50 |
|
|
BB to B+ |
|
|
|
22,168 |
|
|
|
5,838 |
|
|
|
33.85 |
% |
|
|
19,938 |
|
|
|
1.30 |
% |
|
|
32,184 |
|
|
|
41.64 |
% |
|
|
685 |
|
|
|
15,185 |
|
|
|
76.16 |
% |
|
|
106 |
|
|
|
-104 |
|
2.50 to <10.00 |
|
|
B+ to B- |
|
|
|
9,226 |
|
|
|
3,384 |
|
|
|
50.94 |
% |
|
|
8,587 |
|
|
|
5.05 |
% |
|
|
12,411 |
|
|
|
36.95 |
% |
|
|
869 |
|
|
|
9,407 |
|
|
|
109.56 |
% |
|
|
157 |
|
|
|
-154 |
|
10.00 to <100.00 |
|
|
B- to C |
|
|
|
1,983 |
|
|
|
442 |
|
|
|
40.96 |
% |
|
|
1,750 |
|
|
|
18.67 |
% |
|
|
4,051 |
|
|
|
38.19 |
% |
|
|
1,138 |
|
|
|
3,115 |
|
|
|
177.95 |
% |
|
|
121 |
|
|
|
-118 |
|
100.00 (default) |
|
|
D |
|
|
|
7,672 |
|
|
|
1,298 |
|
|
|
27.14 |
% |
|
|
7,978 |
|
|
|
100.00 |
% |
|
|
7,782 |
|
|
|
39.13 |
% |
|
|
1,079 |
|
|
|
429 |
|
|
|
5.38 |
% |
|
|
3,095 |
|
|
|
-3.046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
138,721 |
|
|
|
94,621 |
|
|
|
35.89 |
% |
|
|
158,501 |
|
|
|
5.86 |
% |
|
|
88,256 |
|
|
|
42.37 |
% |
|
|
792 |
|
|
|
78,617 |
|
|
|
49.60 |
% |
|
|
3,607 |
|
|
|
-3.550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
136,678 |
|
|
|
83,847 |
|
|
|
37.52 |
% |
|
|
156,426 |
|
|
|
8.70 |
% |
|
|
90,330 |
|
|
|
40.23 |
% |
|
|
828 |
|
|
|
76,723 |
|
|
|
49.05 |
% |
|
|
5,292 |
|
|
|
-6.150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The portfolio increased, bringing the following rise in RWAs:
|
|
|
In the UK in the first quarter there was a considerable increase, mainly due to the extension to utilise MRL portfolio. |
|
|
|
This increase was partially compensated mainly in Spain due to the NANSA securitisation which also affected exposure and expected loss. |
|
|
|
Despite the higher exposure, the portfolios expected loss declined due to an improvement in the PD.
|
|
|
|
|
|
58 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 20. AIRB approach. Retail portfolios (CR6)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
PD scale |
|
S&P Levels |
|
|
Original on-balance-sheet gross exposures |
|
|
Off-balance-sheet exposures pre-CCF |
|
|
Average CCF |
|
|
EAD |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
RWA |
|
|
RWA density |
|
|
EL |
|
|
Value adjustments and provisions |
|
Residential Mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
31,710 |
|
|
|
1,136 |
|
|
|
98.93 |
% |
|
|
32,870 |
|
|
|
0.07 |
% |
|
|
511,768 |
|
|
|
12.81 |
% |
|
|
859 |
|
|
|
2.61 |
% |
|
|
3 |
|
|
|
-3 |
|
0,15 to <0,25 |
|
|
BBB+ to BBB |
|
|
|
33,671 |
|
|
|
3,647 |
|
|
|
63.26 |
% |
|
|
36,073 |
|
|
|
0.2 |
% |
|
|
325,202 |
|
|
|
9.0 |
% |
|
|
1,337 |
|
|
|
3.71 |
% |
|
|
6 |
|
|
|
-6 |
|
0,25 to <0,50 |
|
|
BBB to BB+ |
|
|
|
59,039 |
|
|
|
5,417 |
|
|
|
59.60 |
% |
|
|
62,357 |
|
|
|
0.38 |
% |
|
|
530,677 |
|
|
|
9.22 |
% |
|
|
3,667 |
|
|
|
5.88 |
% |
|
|
21 |
|
|
|
-19 |
|
0,50 to <0,75 |
|
|
BB+ to BB |
|
|
|
16,340 |
|
|
|
1,229 |
|
|
|
79.09 |
% |
|
|
17,333 |
|
|
|
0.63 |
% |
|
|
123,827 |
|
|
|
13.06 |
% |
|
|
2,111 |
|
|
|
12.18 |
% |
|
|
14 |
|
|
|
-11 |
|
0,75 to <2,50 |
|
|
BB to B+ |
|
|
|
76,421 |
|
|
|
1,628 |
|
|
|
52.70 |
% |
|
|
77,371 |
|
|
|
1.22 |
% |
|
|
590,923 |
|
|
|
9.28 |
% |
|
|
10,424 |
|
|
|
13.47 |
% |
|
|
89 |
|
|
|
-80 |
|
2,50 to <10,00 |
|
|
B+ to B- |
|
|
|
32,549 |
|
|
|
232 |
|
|
|
60.96 |
% |
|
|
32,705 |
|
|
|
4.35 |
% |
|
|
245,871 |
|
|
|
12.14 |
% |
|
|
13,247 |
|
|
|
40.50 |
% |
|
|
183 |
|
|
|
-145 |
|
10,00 to <100,00 |
|
|
B- to C |
|
|
|
11,645 |
|
|
|
44 |
|
|
|
31.12 |
% |
|
|
11,676 |
|
|
|
27.6 |
% |
|
|
109,565 |
|
|
|
11.50 |
% |
|
|
6,918 |
|
|
|
59.26 |
% |
|
|
356 |
|
|
|
-305 |
|
100,00 (default) |
|
|
D |
|
|
|
8,340 |
|
|
|
40 |
|
|
|
17.06 |
% |
|
|
8,347 |
|
|
|
100 |
% |
|
|
87,370 |
|
|
|
29.81 |
% |
|
|
598 |
|
|
|
7.16 |
% |
|
|
2,442 |
|
|
|
-1,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
269,716 |
|
|
|
13,373 |
|
|
|
64.69 |
% |
|
|
278,732 |
|
|
|
5.16 |
% |
|
|
2,525,203 |
|
|
|
10.93 |
% |
|
|
39,160 |
|
|
|
14.05 |
% |
|
|
3,114 |
|
|
|
-2,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
270,449 |
|
|
|
14,754 |
|
|
|
65.52 |
% |
|
|
280,480 |
|
|
|
5.40 |
% |
|
|
2,587,817 |
|
|
|
13.09 |
% |
|
|
48,319 |
|
|
|
17.23 |
% |
|
|
3,662 |
|
|
|
-2,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualifying revolving |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
517 |
|
|
|
5,006 |
|
|
|
48.21 |
% |
|
|
2,930 |
|
|
|
0.09 |
% |
|
|
2,466,449 |
|
|
|
59.29 |
% |
|
|
100 |
|
|
|
3.41 |
% |
|
|
2 |
|
|
|
-1 |
|
0,15 to <0,25 |
|
|
BBB+ to BBB |
|
|
|
109 |
|
|
|
4,192 |
|
|
|
84.74 |
% |
|
|
3,661 |
|
|
|
0.17 |
% |
|
|
6,342,192 |
|
|
|
67.99 |
% |
|
|
246 |
|
|
|
6.72 |
% |
|
|
4 |
|
|
|
-3 |
|
0,25 to <0,50 |
|
|
BBB to BB+ |
|
|
|
99 |
|
|
|
3,312 |
|
|
|
38.23 |
% |
|
|
1,365 |
|
|
|
0.31 |
% |
|
|
2,143,147 |
|
|
|
48.66 |
% |
|
|
105 |
|
|
|
7.70 |
% |
|
|
2 |
|
|
|
-2 |
|
0,50 to <0,75 |
|
|
BB+ to BB |
|
|
|
41 |
|
|
|
573 |
|
|
|
69.5 |
% |
|
|
440 |
|
|
|
0.66 |
% |
|
|
607,206 |
|
|
|
63.71 |
% |
|
|
82 |
|
|
|
18.61 |
% |
|
|
2 |
|
|
|
-1 |
|
0,75 to <2,50 |
|
|
BB to B+ |
|
|
|
741 |
|
|
|
2,914 |
|
|
|
58.24 |
% |
|
|
2,444 |
|
|
|
1.45 |
% |
|
|
2,834,352 |
|
|
|
58.94 |
% |
|
|
762 |
|
|
|
31.19 |
% |
|
|
21 |
|
|
|
-16 |
|
2,50 to <10,00 |
|
|
B+ to B- |
|
|
|
1,059 |
|
|
|
1,434 |
|
|
|
68.07 |
% |
|
|
2,045 |
|
|
|
5.07 |
% |
|
|
2,219,809 |
|
|
|
60.12 |
% |
|
|
1,545 |
|
|
|
75.54 |
% |
|
|
63 |
|
|
|
-47 |
|
10,00 to <100,00 |
|
|
B- to C |
|
|
|
530 |
|
|
|
254 |
|
|
|
85.56 |
% |
|
|
770 |
|
|
|
24.95 |
% |
|
|
768,644 |
|
|
|
60.20 |
% |
|
|
1,130 |
|
|
|
146.65 |
% |
|
|
116 |
|
|
|
-86 |
|
100,00 (default) |
|
|
D |
|
|
|
138 |
|
|
|
35 |
|
|
|
17.91 |
% |
|
|
145 |
|
|
|
100.00 |
% |
|
|
107,047 |
|
|
|
77.79 |
% |
|
|
19 |
|
|
|
12.98 |
% |
|
|
112 |
|
|
|
-83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
3,234 |
|
|
|
17,720 |
|
|
|
59.41 |
% |
|
|
13,801 |
|
|
|
3.57 |
% |
|
|
17,488,846 |
|
|
|
60.99 |
% |
|
|
3,988 |
|
|
|
28.90 |
% |
|
|
321 |
|
|
|
-239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
3,031 |
|
|
|
17,291 |
|
|
|
61.22 |
% |
|
|
13,654 |
|
|
|
3.48 |
% |
|
|
17,189,648 |
|
|
|
60.77 |
% |
|
|
4,141 |
|
|
|
30.33 |
% |
|
|
299 |
|
|
|
-152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
1,284 |
|
|
|
490 |
|
|
|
47.42 |
% |
|
|
1,694 |
|
|
|
0.08 |
% |
|
|
168,393 |
|
|
|
38.10 |
% |
|
|
134 |
|
|
|
7.92 |
% |
|
|
1 |
|
|
|
|
|
0,15 to <0,25 |
|
|
BBB+ to BBB |
|
|
|
3,157 |
|
|
|
879 |
|
|
|
52.07 |
% |
|
|
3,776 |
|
|
|
0.18 |
% |
|
|
559,304 |
|
|
|
43.51 |
% |
|
|
613 |
|
|
|
16.24 |
% |
|
|
3 |
|
|
|
-3 |
|
0,25 to <0,50 |
|
|
BBB to BB+ |
|
|
|
7,817 |
|
|
|
587 |
|
|
|
56.12 |
% |
|
|
8,182 |
|
|
|
0.33 |
% |
|
|
897,035 |
|
|
|
39.05 |
% |
|
|
1,802 |
|
|
|
22.02 |
% |
|
|
10 |
|
|
|
-9 |
|
0,50 to <0,75 |
|
|
BB+ to BB |
|
|
|
6,696 |
|
|
|
862 |
|
|
|
74.56 |
% |
|
|
7,303 |
|
|
|
0.59 |
% |
|
|
1,164,379 |
|
|
|
45.58 |
% |
|
|
2,633 |
|
|
|
36.06 |
% |
|
|
19 |
|
|
|
-16 |
|
0,75 to <2,50 |
|
|
BB to B+ |
|
|
|
18,966 |
|
|
|
2,547 |
|
|
|
61.73 |
% |
|
|
20,231 |
|
|
|
1.27 |
% |
|
|
2,821,776 |
|
|
|
45.7200 |
% |
|
|
9,997 |
|
|
|
49.41 |
% |
|
|
118 |
|
|
|
-98 |
|
2,50 to <10,00 |
|
|
B+ to B- |
|
|
|
11,148 |
|
|
|
1,032 |
|
|
|
58.42 |
% |
|
|
11,192 |
|
|
|
4.01 |
% |
|
|
1,354,396 |
|
|
|
48.22 |
% |
|
|
7,486 |
|
|
|
66.89 |
% |
|
|
217 |
|
|
|
-182 |
|
10,00 to <100,00 |
|
|
B- to C |
|
|
|
2,674 |
|
|
|
163 |
|
|
|
41.26 |
% |
|
|
2,704 |
|
|
|
27.35 |
% |
|
|
1,191,717 |
|
|
|
45.78 |
% |
|
|
2,622 |
|
|
|
96.98 |
% |
|
|
344 |
|
|
|
-286 |
|
100,00 (default) |
|
|
D |
|
|
|
1,701 |
|
|
|
222 |
|
|
|
30.13 |
% |
|
|
1,767 |
|
|
|
100.00 |
% |
|
|
287,589 |
|
|
|
68.62 |
% |
|
|
333 |
|
|
|
18.86 |
% |
|
|
1,203 |
|
|
|
-1,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
53,444 |
|
|
|
6,783 |
|
|
|
58.56 |
% |
|
|
56,850 |
|
|
|
5.79 |
% |
|
|
8,444,589 |
|
|
|
45.57 |
% |
|
|
25,621 |
|
|
|
45.07 |
% |
|
|
1,915 |
|
|
|
-1,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
53,735 |
|
|
|
6,890 |
|
|
|
62.23 |
% |
|
|
57,789 |
|
|
|
6.15 |
% |
|
|
8,090,618 |
|
|
|
46.04 |
% |
|
|
27,144 |
|
|
|
46.97 |
% |
|
|
2,054 |
|
|
|
-1,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail portfolios. Residential mortgages.
47% of mortgage exposure is rated above BB+. The average RW in this segment decreased due mainly to the improvement in the average PD and LGD parameters.
Retail portfolios. Qualifying revolving
58% of exposure
is rated above BB+. The improved average CCF caused a slight reduction in RWAs.
Retail other
Exposure in the portfolio declined, due mainly to the new securitisations: Santorini, Esparta, FT Pymes Magdalena 2, and KIMI VII. Recalibration of parametres
in Spain also helped lower the segments RWAs.
|
|
|
|
|
60 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 21. FIRB approach. Sovereign (CR6)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
PD scale |
|
S&P Levels |
|
|
Original on-balance-sheet gross exposures |
|
|
Off-balance-sheet exposures pre-CCF |
|
|
Average CCF |
|
|
EAD |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
|
EL |
|
|
Value adjustments and provisions |
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
215 |
|
|
|
0.03 |
% |
|
|
1 |
|
|
|
45.00 |
% |
|
|
900 |
|
|
|
30 |
|
|
|
13.78 |
% |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
215 |
|
|
|
0.03 |
% |
|
|
1 |
|
|
|
45.00 |
% |
|
|
900 |
|
|
|
30 |
|
|
|
13.78 |
% |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
202 |
|
|
|
0.03 |
% |
|
|
2 |
|
|
|
45.00 |
% |
|
|
900 |
|
|
|
28 |
|
|
|
13.78 |
% |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio fairly stable with a slight increase in exposure and associated RWAs.
Table 22. FIRB approach. Institutions (CR6)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2017 |
|
PD scale |
|
S&P Levels |
|
|
Original on-balance-sheet gross exposures |
|
|
Off-balance-sheet exposures pre-CCF |
|
|
Average CCF |
|
|
EAD |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
|
EL |
|
|
Value adjustments and provisions |
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
2,943 |
|
|
|
1,796 |
|
|
|
31.66 |
% |
|
|
3,610 |
|
|
|
0.06 |
% |
|
|
624 |
|
|
|
44.72 |
% |
|
|
486 |
|
|
|
692 |
|
|
|
19.17 |
% |
|
|
1 |
|
|
|
-1 |
|
0,15 to <0,25 |
|
|
BBB+ to BBB |
|
|
|
289 |
|
|
|
203 |
|
|
|
41.85 |
% |
|
|
375 |
|
|
|
0.20 |
% |
|
|
100 |
|
|
|
44.87 |
% |
|
|
718 |
|
|
|
172 |
|
|
|
45.72 |
% |
|
|
|
|
|
|
|
|
0,25 to <0,50 |
|
|
BBB to BB+ |
|
|
|
540 |
|
|
|
159 |
|
|
|
39.48 |
% |
|
|
603 |
|
|
|
0.36 |
% |
|
|
123 |
|
|
|
44.94 |
% |
|
|
849 |
|
|
|
382 |
|
|
|
63.47 |
% |
|
|
1 |
|
|
|
-1 |
|
0,50 to <0,75 |
|
|
BB+ to BB |
|
|
|
43 |
|
|
|
30 |
|
|
|
64.96 |
% |
|
|
62 |
|
|
|
0.66 |
% |
|
|
41 |
|
|
|
45.00 |
% |
|
|
887 |
|
|
|
54 |
|
|
|
87.54 |
% |
|
|
|
|
|
|
|
|
0,75 to <2,50 |
|
|
BB to B+ |
|
|
|
1 |
|
|
|
38 |
|
|
|
20.36 |
% |
|
|
9 |
|
|
|
1.02 |
% |
|
|
39 |
|
|
|
44.49 |
% |
|
|
474 |
|
|
|
11 |
|
|
|
124.47 |
% |
|
|
|
|
|
|
|
|
2,50 to <10,00 |
|
|
B+ to B- |
|
|
|
|
|
|
|
11 |
|
|
|
24.25 |
% |
|
|
3 |
|
|
|
2.51 |
% |
|
|
12 |
|
|
|
45.00 |
% |
|
|
460 |
|
|
|
4 |
|
|
|
157.32 |
% |
|
|
|
|
|
|
|
|
10,00 to <100,00 |
|
|
B- to C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,00 (default) |
|
|
D |
|
|
|
|
|
|
|
|
|
|
|
45.40 |
% |
|
|
|
|
|
|
100.00 |
% |
|
|
2 |
|
|
|
31.74 |
% |
|
|
913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative treatment |
|
|
|
|
|
|
18 |
|
|
|
12 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
3,835 |
|
|
|
2,250 |
|
|
|
33.36 |
% |
|
|
4,679 |
|
|
|
0.12 |
% |
|
|
941 |
|
|
|
44.76 |
% |
|
|
557 |
|
|
|
1,324 |
|
|
|
28.30 |
% |
|
|
3 |
|
|
|
-3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
4,133 |
|
|
|
2,232 |
|
|
|
35.07 |
% |
|
|
5,010 |
|
|
|
0.13 |
% |
|
|
1,216 |
|
|
|
43.55 |
% |
|
|
546 |
|
|
|
1,412 |
|
|
|
28.19 |
% |
|
|
3 |
|
|
|
-15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77% of the portfolio is rated above BBB+. There are no significant changes in the segment compared to 2017.
RWAs declined compared to the previous year, largely due to the inclusion of certain investment projects in a securitisation issued in Spain, which also
affected exposure.
|
|
|
|
|
62 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 23. FIRB approach. Corporates (CR6)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
PD scale |
|
S&P Levels |
|
|
Original on-balance- sheet gross exposures |
|
|
Off-balance- sheet exposures pre-CCF |
|
|
Average CCF |
|
|
EAD |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
|
EL |
|
|
Value adjustments and provisions |
|
0,00 to <0,15 |
|
|
AAA to BBB+ |
|
|
|
2,327 |
|
|
|
2,202 |
|
|
|
47.56 |
% |
|
|
4,092 |
|
|
|
0.09 |
% |
|
|
95 |
|
|
|
44.96 |
% |
|
|
847 |
|
|
|
1,197 |
|
|
|
29.24 |
% |
|
|
2 |
|
|
|
-2 |
|
0,15 to <0,25 |
|
|
BBB+ to BBB |
|
|
|
1,517 |
|
|
|
623 |
|
|
|
19.72 |
% |
|
|
1,381 |
|
|
|
0.21 |
% |
|
|
1,076 |
|
|
|
44.29 |
% |
|
|
787 |
|
|
|
603 |
|
|
|
43.69 |
% |
|
|
1 |
|
|
|
-1 |
|
0,25 to <0,50 |
|
|
BBB to BB+ |
|
|
|
2,083 |
|
|
|
893 |
|
|
|
26.02 |
% |
|
|
2,264 |
|
|
|
0.38 |
% |
|
|
373 |
|
|
|
44.22 |
% |
|
|
835 |
|
|
|
1,407 |
|
|
|
62.14 |
% |
|
|
4 |
|
|
|
-4 |
|
0,50 to <0,75 |
|
|
BB+ to BB |
|
|
|
1,656 |
|
|
|
471 |
|
|
|
74.32 |
% |
|
|
1,987 |
|
|
|
0.63 |
% |
|
|
879 |
|
|
|
44.56 |
% |
|
|
896 |
|
|
|
1,607 |
|
|
|
80.88 |
% |
|
|
6 |
|
|
|
-6 |
|
0,75 to <2,50 |
|
|
BB to B+ |
|
|
|
3,849 |
|
|
|
1,240 |
|
|
|
44.83 |
% |
|
|
4,223 |
|
|
|
1.47 |
% |
|
|
1,245 |
|
|
|
43.62 |
% |
|
|
833 |
|
|
|
4,265 |
|
|
|
100.99 |
% |
|
|
27 |
|
|
|
-27 |
|
2,50 to <10,00 |
|
|
B+ to B- |
|
|
|
3,097 |
|
|
|
552 |
|
|
|
52.09 |
% |
|
|
3,143 |
|
|
|
4.20 |
% |
|
|
2,740 |
|
|
|
40.90 |
% |
|
|
895 |
|
|
|
3,599 |
|
|
|
114.50 |
% |
|
|
54 |
|
|
|
-52 |
|
10,00 to <100,00 |
|
|
B- to C |
|
|
|
289 |
|
|
|
47 |
|
|
|
73.92 |
% |
|
|
323 |
|
|
|
13.63 |
% |
|
|
287 |
|
|
|
28.79 |
% |
|
|
901 |
|
|
|
406 |
|
|
|
125.71 |
% |
|
|
13 |
|
|
|
-13 |
|
100,00 (default) |
|
|
D |
|
|
|
943 |
|
|
|
126 |
|
|
|
18.90 |
% |
|
|
967 |
|
|
|
100.00 |
% |
|
|
224 |
|
|
|
42.78 |
% |
|
|
910 |
|
|
|
|
|
|
|
|
|
|
|
414 |
|
|
|
-408 |
|
Alternative treatment |
|
|
|
|
|
|
618 |
|
|
|
40 |
|
|
|
|
|
|
|
639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
262 |
|
|
|
41.02 |
% |
|
|
|
|
|
|
-2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
16,379 |
|
|
|
6,195 |
|
|
|
42.85 |
% |
|
|
19,019 |
|
|
|
6.71 |
% |
|
|
6,919 |
|
|
|
43.37 |
% |
|
|
855 |
|
|
|
13,346 |
|
|
|
70.17 |
% |
|
|
520 |
|
|
|
-514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
18,309 |
|
|
|
8,008 |
|
|
|
38.76 |
% |
|
|
21,432 |
|
|
|
7.29 |
% |
|
|
7,235 |
|
|
|
43.35 |
% |
|
|
815 |
|
|
|
14,221 |
|
|
|
67.01 |
% |
|
|
654 |
|
|
|
-798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41% of the exposure is rated above BB+. The portfolios average PD improved slightly. The new Santa Fe
securitisation in Mexico brought savings in RWAs, EAD and EL.
In 2018, EAD rose with a corresponding increase in RWAs mainly due to the integration of
Banco Popular holdings. Some holdings with a high materiality such as Testa Residencial underwent a change in parameters using a more conservative LGD, which directly impacted RW calculation. Accounting criteria changed in the year which led to
higher capital consumption.
The distribution of exposures and average parameters by segment and geography is as follows:
Table 24. Exposures and parameters by
segment and geography*
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Central governments and central banks |
|
|
Institutions |
|
|
Corporates |
|
|
Retail Mortgages |
|
|
Retail SME |
|
|
Retail Other |
|
|
Retail Qualifying Revolving |
|
|
TOTAL |
|
Santander Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
2,506 |
|
|
|
38,984 |
|
|
|
168,575 |
|
|
|
270,385 |
|
|
|
13,683 |
|
|
|
41,400 |
|
|
|
13,656 |
|
|
|
549,189 |
|
Average LGD in % |
|
|
46.83 |
% |
|
|
43.10 |
% |
|
|
42.38 |
% |
|
|
10.14 |
% |
|
|
40.50 |
% |
|
|
45.48 |
% |
|
|
60.69 |
% |
|
|
27.22 |
% |
Average PD in % |
|
|
0.16 |
% |
|
|
0.17 |
% |
|
|
0.67 |
% |
|
|
2.23 |
% |
|
|
2.69 |
% |
|
|
2.79 |
% |
|
|
2.54 |
% |
|
|
1.66 |
% |
Spain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
2,290 |
|
|
|
28,684 |
|
|
|
85,649 |
|
|
|
50,805 |
|
|
|
3,667 |
|
|
|
6,025 |
|
|
|
4,324 |
|
|
|
181,445 |
|
Average LGD in % |
|
|
47.01 |
% |
|
|
44.13 |
% |
|
|
44.32 |
% |
|
|
16.41 |
% |
|
|
51.15 |
% |
|
|
46.89 |
% |
|
|
60.17 |
% |
|
|
37.11 |
% |
Average PD in % |
|
|
0.17 |
% |
|
|
0.10 |
% |
|
|
1.03 |
% |
|
|
1.52 |
% |
|
|
3.73 |
% |
|
|
4.26 |
% |
|
|
1.74 |
% |
|
|
1.19 |
% |
Rest of Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
|
|
|
|
4,768 |
|
|
|
49,152 |
|
|
|
219,580 |
|
|
|
10,016 |
|
|
|
35,374 |
|
|
|
9,332 |
|
|
|
328,222 |
|
Average LGD in % |
|
|
|
|
|
|
44.27 |
% |
|
|
38.27 |
% |
|
|
8.68 |
% |
|
|
36.60 |
% |
|
|
45.23 |
% |
|
|
60.92 |
% |
|
|
19.90 |
% |
Average PD in % |
|
|
|
|
|
|
0.21 |
% |
|
|
1.42 |
% |
|
|
2.40 |
% |
|
|
2.31 |
% |
|
|
2.54 |
% |
|
|
2.92 |
% |
|
|
2.25 |
% |
Latam |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
215 |
|
|
|
5,532 |
|
|
|
28,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,379 |
|
Average LGD in % |
|
|
45.00 |
% |
|
|
36.74 |
% |
|
|
43.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42.14 |
% |
Average PD in % |
|
|
0.03 |
% |
|
|
0.50 |
% |
|
|
0.57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.55 |
% |
Rest of world |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
|
|
|
|
|
|
|
|
5,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,143 |
|
Average LGD in % |
|
|
|
|
|
|
|
|
|
|
44.94 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44.94 |
% |
Average PD in % |
|
|
|
|
|
|
|
|
|
|
0.29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.29 |
% |
* |
EAD and parameters without default. |
* |
EAD does not include neither equities nor specialised lending. |
|
|
|
|
|
64 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
The following chart depicts exposures using the IRB approach approved in December 2018 (excluding Specialised
Lending), based on the internal credit quality associated with its external rating.
Distribution of IRB exposures associated
with its external rating (Dec. 2018)
EUR
million
Note: Does not include exposures with alternative treatment in FIRB Institution and FIRB Corporates (EUR 657 million).
For EAD distribution including guarantees, expected losses have been assigned to the different tranches of PD
taking a LGD of 45% in each bucket. It shows that the risk profile of the whole portfolio improves significantly when factoring in guarantees, especially mortgage collateral.
Table 25. Specialised lending (CR10)
EUR Million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Regulatory categories |
|
Remaining maturity |
|
|
On-balance- sheet amount |
|
|
Off-balance- sheet amount |
|
|
RW |
|
|
EAD |
|
|
RWA |
|
|
Expected Loss |
|
Category 1 |
|
|
< 2.5 years |
|
|
|
256 |
|
|
|
123 |
|
|
|
50 |
% |
|
|
294 |
|
|
|
139 |
|
|
|
|
|
|
|
|
>= 2.5 years |
|
|
|
2,793 |
|
|
|
429 |
|
|
|
70 |
% |
|
|
2 889 |
|
|
|
1,999 |
|
|
|
12 |
|
Category 2 |
|
|
< 2.5 years |
|
|
|
1,968 |
|
|
|
980 |
|
|
|
70 |
% |
|
|
2,418 |
|
|
|
1,691 |
|
|
|
10 |
|
|
|
|
>= 2.5 years |
|
|
|
8,919 |
|
|
|
1,486 |
|
|
|
90 |
% |
|
|
9,455 |
|
|
|
8,478 |
|
|
|
75 |
|
Category 3 |
|
|
< 2.5 years |
|
|
|
201 |
|
|
|
19 |
|
|
|
115 |
% |
|
|
204 |
|
|
|
228 |
|
|
|
5 |
|
|
|
|
>= 2.5 years |
|
|
|
689 |
|
|
|
55 |
|
|
|
115 |
% |
|
|
707 |
|
|
|
811 |
|
|
|
20 |
|
Category 4 |
|
|
< 2.5 years |
|
|
|
57 |
|
|
|
|
|
|
|
250 |
% |
|
|
57 |
|
|
|
144 |
|
|
|
5 |
|
|
|
|
>= 2.5 years |
|
|
|
326 |
|
|
|
181 |
|
|
|
250 |
% |
|
|
364 |
|
|
|
855 |
|
|
|
27 |
|
Category 5 |
|
|
< 2.5 years |
|
|
|
43 |
|
|
|
4 |
|
|
|
|
|
|
|
43 |
|
|
|
|
|
|
|
22 |
|
|
|
|
>= 2.5 years |
|
|
|
781 |
|
|
|
20 |
|
|
|
|
|
|
|
787 |
|
|
|
|
|
|
|
394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
< 2.5 years |
|
|
|
2,525 |
|
|
|
1,127 |
|
|
|
|
|
|
|
3,017 |
|
|
|
2,202 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
>= 2.5 years |
|
|
|
13,506 |
|
|
|
2,170 |
|
|
|
|
|
|
|
14,202 |
|
|
|
12,143 |
|
|
|
527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RWAs declined compared to the previous year, largely due to the inclusion of certain investment projects in a
securitisation issued in Spain, which also affected exposure.
|
|
|
|
|
66 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
3.2.2. Equity investments and capital instruments not included in the trading book
This section provides definitions of investments in associates, equity instruments classified as other financial assets at fair value through other
comprehensive income, and financial assets with mandatory classification at fair value through profit or loss. It also defines the accounting policies and measurement methods applied. Information is also provided on the amounts of those equity
instruments not included in the held for trading portfolio.
Investments in associates are those stakes affording Santander Group significant influence,
but not control or joint control. This capacity is usually observed with 20% or more of the voting power at the investee.
Capital instruments not held
for trading issued by entities other than subsidiaries, jointly controlled entities and associates are required to be classified at fair value through profit or loss, unless the entity opts to classify them as financial assets at fair value through
other comprehensive income, irrevocably, on initial recognition.
Investments in associates are recognised at cost and are periodically tested for
impairment.
Capital instruments classified as other financial assets at fair value through other comprehensive income are recognised and measured at fair
value with a corresponding entry in equity, under valuation adjustments. Instruments classified as financial assets with mandatory recognition at fair value through profit or loss are recognised and measured at fair value with a corresponding entry
in profit or loss.
Table 26. Equities (CR10)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Tranches |
|
|
Weighted average PD |
|
|
Original exposure |
|
|
EAD |
|
|
EAD-weighted average LGD |
|
|
RWA |
|
|
PE/EAD |
|
|
RWA/EAD |
|
PD/LGD approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
0.14 |
% |
|
|
1,013 |
|
|
|
1,013 |
|
|
|
89.9 |
% |
|
|
1,218 |
|
|
|
0.13 |
% |
|
|
120 |
% |
|
|
|
2 |
|
|
|
0.14 |
% |
|
|
1,425 |
|
|
|
1,425 |
|
|
|
88.8 |
% |
|
|
1,705 |
|
|
|
0.13 |
% |
|
|
120 |
% |
|
|
|
3 |
|
|
|
0.27 |
% |
|
|
1,587 |
|
|
|
1,587 |
|
|
|
87.3 |
% |
|
|
2,448 |
|
|
|
0.23 |
% |
|
|
154 |
% |
|
|
|
4 |
|
|
|
1.38 |
% |
|
|
2,570 |
|
|
|
2,570 |
|
|
|
65.0 |
% |
|
|
5,242 |
|
|
|
0.90 |
% |
|
|
204 |
% |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Default |
|
|
|
100.00 |
% |
|
|
9 |
|
|
|
9 |
|
|
|
65.0 |
% |
|
|
|
|
|
|
65.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
0.79 |
% |
|
|
6,603 |
|
|
|
6,603 |
|
|
|
79.3 |
% |
|
|
10,612 |
|
|
|
0.54 |
% |
|
|
161 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
0.99 |
% |
|
|
4,089 |
|
|
|
4,089 |
|
|
|
77.7 |
% |
|
|
6,243 |
|
|
|
0.67 |
% |
|
|
153 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Simple-risk weighted approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure in private equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure in equity traded in organised markets |
|
|
|
|
|
|
|
|
|
|
1,270 |
|
|
|
1,270 |
|
|
|
|
|
|
|
2,412 |
|
|
|
0.80 |
% |
|
|
190 |
% |
Other exposures in equities |
|
|
|
|
|
|
|
|
|
|
83 |
|
|
|
83 |
|
|
|
|
|
|
|
242 |
|
|
|
0.80 |
% |
|
|
290 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
|
|
|
|
1,353 |
|
|
|
1,353 |
|
|
|
|
|
|
|
2,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
|
|
|
|
1,164 |
|
|
|
1,164 |
|
|
|
|
|
|
|
2,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal models approach 2018 |
|
|
|
|
|
|
|
|
|
|
658 |
|
|
|
658 |
|
|
|
|
|
|
|
1,174 |
|
|
|
|
|
|
|
178 |
% |
Internal models approach 2017 |
|
|
|
|
|
|
|
|
|
|
589 |
|
|
|
589 |
|
|
|
|
|
|
|
1,513 |
|
|
|
|
|
|
|
257 |
% |
Financial participations Dec. 2018 |
|
|
|
|
|
|
|
|
|
|
2,313 |
|
|
|
2,313 |
|
|
|
|
|
|
|
5,784 |
|
|
|
|
|
|
|
250 |
% |
Financial participations Dec. 2017 |
|
|
|
|
|
|
|
|
|
|
2,143 |
|
|
|
2,143 |
|
|
|
|
|
|
|
5,357 |
|
|
|
|
|
|
|
250 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2018 |
|
|
|
|
|
|
|
|
|
|
10,927 |
|
|
|
10,927 |
|
|
|
|
|
|
|
20,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL 2017 |
|
|
|
|
|
|
|
|
|
|
7,985 |
|
|
|
7,985 |
|
|
|
|
|
|
|
15,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2018, EAD rose with a corresponding increase in RWAs mainly due to the integration of Banco Popular holdings.
Some holdings with a high materiality such as Testa Residencial underwent a change in parameters using a more conservative LGD, which directly impacted RW calculation. Accounting criteria changed in the year which led to higher capital consumption.
The total unrealised losses of equity and capital instruments not included in the trading book included in CET1 as of December 18 were EUR -872 million.
|
|
|
|
|
68 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 27. Equity instruments through other comprehensive income
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Carrying value |
|
|
Fair value |
|
|
Valuation adjustment |
|
Quoted |
|
|
1,943 |
|
|
|
1,943 |
|
|
|
844 |
|
Unquoted |
|
|
725 |
|
|
|
725 |
|
|
|
-172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
2,668 |
|
|
|
2,668 |
|
|
|
672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 28. Equity instruments mandatorily at fair value through profit and loss
EUR million
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Fair value |
|
Quoted |
|
|
342 |
|
Investment funds |
|
|
495 |
|
Unquoted |
|
|
1,043 |
|
|
|
|
|
|
TOTAL |
|
|
1,880 |
|
|
|
|
|
|
Refer to notes 2.d.iii and 8 of the Auditors Report and Financial Statements in the Annual Report for further
information on the portfolio of capital instruments classified as other financial assets at fair value through other comprehensive income and with mandatory classification at fair value through profit or loss.
Table 29. Equity instruments through other comprehensive income. Consolidated gross valuation adjustments
EUR million
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Prior-year balance |
|
|
1,008 |
|
Revaluation gains and losses |
|
|
-336 |
|
|
|
|
|
|
Current-year balance |
|
|
672 |
|
|
|
|
|
|
Refer to note 29.c of the Auditors Report and Financial Statements in the Annual Report for further information on the
portfolio of capital instruments classified as other financial assets at fair value through other comprehensive income.
With respect to holdings accounted for using the equity method at year-end 2018,
the amounts for associates and jointly controlled entities were EUR 6,619 million and EUR 404 million respectively.
There are also investments
in Group entities totalling EUR 1,739 million which are accounted for using the full consolidation method in the public perimeter.
The Group tests
these investments for impairment on a regular basis. No evidence of significant impairment was found in 2018.
3.2.3. Standardised approach
For the calculation of regulatory capital under the standardised approach, Santander Group uses the external rating agencies designated as eligible by the Bank
of Spain. The agencies used for the capital calculation as of 31 December 2018 are Fitch, Moodys, DBRS and Standard & Poors.
Additionally, for the central government and central banks category, if the requirements of article 137 of the CRR are met, Santander Group uses the
OECDs Country Risk Classification of the Participants to the Arrangement on Officially Supported Export Credits.
Different risk weights are applied to credit exposures, depending on the rating assigned by the credit rating
agencies (e.g. Fitch, Moodys and Standard & Poors for the segments approved under Part III, Title II, Chapter II of the CRR) or the minimum export insurance premium rating (e.g. OECD for the central government and central bank
segment, as explained above).
The assignment of weights according to credit ratings complies with the regulatory requirements, aligning the alphanumeric
scale of each agency used with the credit quality steps set down in Chapter II, Section II of the CRR, as follows:
|
|
|
|
|
|
|
|
|
Credit quality step |
|
S&P |
|
Moodys |
|
Fitch |
|
DBRS |
1 |
|
AAA to AA- |
|
AAA to AA3 |
|
AAA to AA- |
|
AAA to AAL |
2 |
|
A+ to A- |
|
A1 to A3 |
|
A+ to A- |
|
AH to AL |
3 |
|
BBB+ to BBB- |
|
BAA1 to BAA3 |
|
BBB+ to BBB- |
|
BBBH to BBBL |
4 |
|
BB+ to BB- |
|
BA1 to BA3 |
|
BB+ to BB- |
|
BBH to BBL |
5 |
|
B+ to B- |
|
B1 to B3 |
|
B+ to B- |
|
BH to BL |
6 |
|
Inferior to B- |
|
Inferior to B3 |
|
Inferior to B- |
|
CCCH and inferior |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit quality step |
|
Central governments and central banks |
|
|
Public sector entities |
|
|
Institutions £ 3 months rated |
|
|
Institutions > 3 months rated |
|
|
Institutions not rated |
|
|
Corporates |
|
1 |
|
|
0 |
% |
|
|
20 |
% |
|
|
20 |
% |
|
|
20 |
% |
|
|
20 |
% |
|
|
20 |
% |
2 |
|
|
20 |
% |
|
|
50 |
% |
|
|
20 |
% |
|
|
50 |
% |
|
|
50 |
% |
|
|
50 |
% |
3 |
|
|
50 |
% |
|
|
100 |
% |
|
|
20 |
% |
|
|
50 |
% |
|
|
100 |
% |
|
|
100 |
% |
4 |
|
|
100 |
% |
|
|
100 |
% |
|
|
50 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
5 |
|
|
100 |
% |
|
|
100 |
% |
|
|
50 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
150 |
% |
6 |
|
|
150 |
% |
|
|
150 |
% |
|
|
150 |
% |
|
|
150 |
% |
|
|
150 |
% |
|
|
150 |
% |
At present, Santander Group has no process in place for assigning the credit ratings of publicly issued
securities to comparable assets that are not included in the trading book.
In accordance with art. 150 of the CRR, Santander Group always uses the
standardised approach for sovereign exposures denominated and funded in the member states local currency, applying a 0% risk weighting.
The tables
below show the value of the net exposure after impairment loss allowances after risk mitigation, by segment and credit quality grade. Guarantees are applied by reallocating exposures to the corresponding asset categories and risk weightings.
|
|
|
|
|
70 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 30. Standardised approach (including a breakdown of exposures post conversion factor and post mitigation techniques) (CR5)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Risk weight |
|
0% |
|
|
2% |
|
|
4% |
|
|
10% |
|
|
20% |
|
|
35% |
|
|
50% |
|
|
70% |
|
|
75% |
|
|
100% |
|
|
150% |
|
|
250% |
|
|
370% |
|
|
1250% |
|
|
Others |
|
|
Deduc. |
|
|
Total |
|
Central governments or central banks |
|
|
216,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,526 |
|
|
|
|
|
|
|
2,338 |
|
|
|
|
|
|
|
|
|
|
|
12,869 |
|
|
|
|
|
|
|
6.162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241,707 |
|
Regional government or local authorities |
|
|
22,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
260 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,615 |
|
Public sector entities |
|
|
7,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,190 |
|
|
|
|
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,614 |
|
Multilateral development banks |
|
|
4,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,036 |
|
International organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions |
|
|
127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,729 |
|
|
|
|
|
|
|
819 |
|
|
|
|
|
|
|
|
|
|
|
2,070 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,751 |
|
Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89 |
|
|
|
|
|
|
|
184 |
|
|
|
|
|
|
|
|
|
|
|
71,236 |
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,615 |
|
Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,363 |
|
Secured by mortgages on immovable property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,508 |
|
|
|
12,073 |
|
|
|
|
|
|
|
4,428 |
|
|
|
6,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,201 |
|
Exposures in default |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,580 |
|
|
|
1,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,606 |
|
Higher-risk categories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,545 |
|
Covered bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,259 |
|
|
|
1,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480 |
|
Institutions and corporates with a short-term credit assessment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Collective investment undertakings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
|
|
|
|
787 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221 |
|
Other items |
|
|
21,404 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
10,992 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
139 |
|
|
|
28,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
272,514 |
|
|
|
5,000 |
|
|
|
|
|
|
|
2,259 |
|
|
|
33,711 |
|
|
|
71,508 |
|
|
|
15,469 |
|
|
|
|
|
|
|
147,930 |
|
|
|
129,654 |
|
|
|
2,683 |
|
|
|
6,162 |
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
|
|
|
|
686,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3. Distribution of exposures
The tables below show information on the Santander Groups exposures to credit and dilution risk, broken down as follows:
It also contains information on defaulted exposures, impairment loss allowances, and
provisions for contingent liabilities and commitments.
The amounts shown in the tables in this section include the amounts for counterparty credit risk
excluding securitisations.
|
|
|
|
|
72 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 31. Credit quality of exposures by exposure classes and instruments (CR1-A)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Gross carrying values of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defaulted exposures |
|
|
Non- defaulted exposures |
|
|
Specific credit risk adjustment |
|
|
Accumulated write-offs |
|
|
Credit risk adjustment charges of the period |
|
|
Net values |
|
IRB approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
63 |
|
|
|
3,931 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
3,967 |
|
Institutions |
|
|
16 |
|
|
|
51,106 |
|
|
|
24 |
|
|
|
2 |
|
|
|
1 |
|
|
|
51,098 |
|
Corporates |
|
|
10,888 |
|
|
|
264,356 |
|
|
|
4,595 |
|
|
|
1,463 |
|
|
|
465 |
|
|
|
270,649 |
|
Of Which: Specialised Lending |
|
|
847 |
|
|
|
18,480 |
|
|
|
531 |
|
|
|
6 |
|
|
|
65 |
|
|
|
18,797 |
|
Of Which: SME |
|
|
3,707 |
|
|
|
34,858 |
|
|
|
1,490 |
|
|
|
262 |
|
|
|
139 |
|
|
|
37,075 |
|
Retail |
|
|
10,478 |
|
|
|
353,792 |
|
|
|
4,335 |
|
|
|
984 |
|
|
|
713 |
|
|
|
359,934 |
|
Secured by real estate property |
|
|
8,381 |
|
|
|
274,707 |
|
|
|
2,476 |
|
|
|
357 |
|
|
|
159 |
|
|
|
280,612 |
|
SME |
|
|
1,391 |
|
|
|
3,317 |
|
|
|
464 |
|
|
|
82 |
|
|
|
6 |
|
|
|
4,243 |
|
Non-SME |
|
|
6,990 |
|
|
|
271,391 |
|
|
|
2,012 |
|
|
|
275 |
|
|
|
153 |
|
|
|
276,369 |
|
Qualifying Revolving |
|
|
173 |
|
|
|
20,781 |
|
|
|
239 |
|
|
|
42 |
|
|
|
76 |
|
|
|
20,715 |
|
Other Retail |
|
|
1,923 |
|
|
|
58,304 |
|
|
|
1,620 |
|
|
|
585 |
|
|
|
478 |
|
|
|
58,607 |
|
SME |
|
|
977 |
|
|
|
15,826 |
|
|
|
622 |
|
|
|
371 |
|
|
|
98 |
|
|
|
16,181 |
|
Non-SME |
|
|
947 |
|
|
|
42,478 |
|
|
|
998 |
|
|
|
214 |
|
|
|
380 |
|
|
|
42,426 |
|
Equity |
|
|
9 |
|
|
|
10,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IRB approach |
|
|
21,454 |
|
|
|
684,103 |
|
|
|
8,981 |
|
|
|
2,449 |
|
|
|
1,179 |
|
|
|
696,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
2 |
|
|
|
243,017 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
243,008 |
|
Regional governments or local authorities |
|
|
4 |
|
|
|
13,200 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
13,153 |
|
Public sector entities |
|
|
1 |
|
|
|
9,180 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
9,175 |
|
Multilateral Development Banks |
|
|
|
|
|
|
1,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,655 |
|
International Organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions |
|
|
9 |
|
|
|
41,471 |
|
|
|
4 |
|
|
|
20 |
|
|
|
1 |
|
|
|
41,467 |
|
Corporates |
|
|
3,639 |
|
|
|
97,797 |
|
|
|
554 |
|
|
|
1,792 |
|
|
|
1,048 |
|
|
|
97,243 |
|
of which: SME |
|
|
1,164 |
|
|
|
23,895 |
|
|
|
126 |
|
|
|
363 |
|
|
|
446 |
|
|
|
23,768 |
|
Retail |
|
|
8,939 |
|
|
|
228,214 |
|
|
|
6,108 |
|
|
|
7,932 |
|
|
|
9,044 |
|
|
|
222,106 |
|
of which: SME |
|
|
2,216 |
|
|
|
32,536 |
|
|
|
644 |
|
|
|
912 |
|
|
|
558 |
|
|
|
31,892 |
|
Secured by mortgages on immovable property |
|
|
4,907 |
|
|
|
102,912 |
|
|
|
575 |
|
|
|
348 |
|
|
|
379 |
|
|
|
102,337 |
|
of which: SME |
|
|
1,514 |
|
|
|
18,285 |
|
|
|
169 |
|
|
|
45 |
|
|
|
89 |
|
|
|
18,116 |
|
Items associated with particularly high risk |
|
|
|
|
|
|
1,583 |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
1,558 |
|
Covered bonds |
|
|
|
|
|
|
3,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480 |
|
Claims on institutions and corporates with a short-term credit assessment |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Collective investments undertakings (CIU) |
|
|
|
|
|
|
1,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,397 |
|
Equity exposures |
|
|
|
|
|
|
221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221 |
|
Other exposures |
|
|
47 |
|
|
|
78,458 |
|
|
|
747 |
|
|
|
37 |
|
|
|
40 |
|
|
|
77,712 |
|
Total Exposures in default (SA Approach only)* |
|
|
17,548 |
|
|
|
|
|
|
|
8,729 |
|
|
|
90 |
|
|
|
|
|
|
|
8,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Standardised approach |
|
|
17,548 |
|
|
|
822,586 |
|
|
|
16,802 |
|
|
|
10,219 |
|
|
|
10,513 |
|
|
|
823,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
39,002 |
|
|
|
1,506,689 |
|
|
|
25,783 |
|
|
|
12,668 |
|
|
|
11,692 |
|
|
|
1,519,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
The row of Total Exposures in default (SA approach only) is the sumatory of all the defaulted exposures and is
included to show the defaulted exposures Specific credit risk adjustment. |
The following two tables show all exposures by industry and geographical area.
Table 32. Credit quality of exposures by
industry or counterparty type (CR1-B)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Gross carrying values of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit risk |
|
|
|
|
|
|
|
|
|
Non- |
|
|
Adjustment |
|
|
|
|
|
adjustment |
|
|
|
|
|
|
Defaulted |
|
|
defaulted |
|
|
for specific |
|
|
Accumulated |
|
|
charges of |
|
|
|
|
|
|
exposures |
|
|
exposures |
|
|
Credit risk |
|
|
write-offs |
|
|
the period |
|
|
Net values |
|
Agriculture, forestry and fishing |
|
|
933 |
|
|
|
14,586 |
|
|
|
561 |
|
|
|
67 |
|
|
|
239 |
|
|
|
14,958 |
|
Mining and quarrying |
|
|
351 |
|
|
|
7,773 |
|
|
|
156 |
|
|
|
28 |
|
|
|
85 |
|
|
|
7,967 |
|
Manufacturing |
|
|
3,242 |
|
|
|
59,327 |
|
|
|
1,521 |
|
|
|
404 |
|
|
|
510 |
|
|
|
61,048 |
|
Electricity, gas, steam and air conditioning supply |
|
|
540 |
|
|
|
25,739 |
|
|
|
341 |
|
|
|
46 |
|
|
|
150 |
|
|
|
25,938 |
|
Water supply |
|
|
26 |
|
|
|
1,613 |
|
|
|
11 |
|
|
|
7 |
|
|
|
1 |
|
|
|
1,628 |
|
Construction |
|
|
2,338 |
|
|
|
21,507 |
|
|
|
1,024 |
|
|
|
312 |
|
|
|
409 |
|
|
|
22,821 |
|
Wholesale and retail trade |
|
|
3,714 |
|
|
|
63,758 |
|
|
|
2,110 |
|
|
|
927 |
|
|
|
930 |
|
|
|
65,361 |
|
Transport and storage |
|
|
1,107 |
|
|
|
15,268 |
|
|
|
455 |
|
|
|
100 |
|
|
|
202 |
|
|
|
15,920 |
|
Accommodation and food service activities |
|
|
950 |
|
|
|
10,873 |
|
|
|
337 |
|
|
|
41 |
|
|
|
114 |
|
|
|
11,486 |
|
Information and communication |
|
|
281 |
|
|
|
11,677 |
|
|
|
184 |
|
|
|
94 |
|
|
|
87 |
|
|
|
11,774 |
|
Real estate activities |
|
|
791 |
|
|
|
46,828 |
|
|
|
511 |
|
|
|
205 |
|
|
|
249 |
|
|
|
47,108 |
|
Professional, scientific and technical activities |
|
|
667 |
|
|
|
12,252 |
|
|
|
477 |
|
|
|
54 |
|
|
|
183 |
|
|
|
12,443 |
|
Administrative and support service activities |
|
|
804 |
|
|
|
10,579 |
|
|
|
463 |
|
|
|
266 |
|
|
|
227 |
|
|
|
10,920 |
|
Public administration and defence, compulsory social security |
|
|
73 |
|
|
|
263,170 |
|
|
|
96 |
|
|
|
60 |
|
|
|
5 |
|
|
|
263,147 |
|
Education |
|
|
142 |
|
|
|
6,131 |
|
|
|
120 |
|
|
|
12 |
|
|
|
64 |
|
|
|
6,154 |
|
Human health services and social work activities |
|
|
621 |
|
|
|
16,018 |
|
|
|
216 |
|
|
|
206 |
|
|
|
101 |
|
|
|
16,423 |
|
Arts, entertainment and recreation |
|
|
96 |
|
|
|
3,230 |
|
|
|
64 |
|
|
|
8 |
|
|
|
32 |
|
|
|
3,261 |
|
Other services |
|
|
22,325 |
|
|
|
916,360 |
|
|
|
17,136 |
|
|
|
9,830 |
|
|
|
8,103 |
|
|
|
921,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
39,002 |
|
|
|
1,506,689 |
|
|
|
25,783 |
|
|
|
12,668 |
|
|
|
11,692 |
|
|
|
1,519,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 33. Credit quality of exposures by geography (CR1-C)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. |
|
|
|
Gross carrying values of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit risk |
|
|
|
|
|
Credit risk |
|
|
|
|
|
|
|
|
|
Non- |
|
|
adjustment |
|
|
|
|
|
adjustment |
|
|
|
|
|
|
Defaulted |
|
|
defaulted |
|
|
charges of |
|
|
Accumulated |
|
|
charges of |
|
|
Net |
|
|
|
exposures |
|
|
exposures |
|
|
the period |
|
|
write-offs |
|
|
the period |
|
|
values |
|
Spain |
|
|
18,986 |
|
|
|
416,977 |
|
|
|
8,629 |
|
|
|
2,814 |
|
|
|
1,183 |
|
|
|
427,335 |
|
United Kingdom |
|
|
2,711 |
|
|
|
339,021 |
|
|
|
966 |
|
|
|
717 |
|
|
|
159 |
|
|
|
340,766 |
|
European Union ex Spain |
|
|
5,699 |
|
|
|
245,983 |
|
|
|
4,180 |
|
|
|
1,661 |
|
|
|
1,171 |
|
|
|
247,502 |
|
EEUU and Puerto Rico |
|
|
5,673 |
|
|
|
168,004 |
|
|
|
5,371 |
|
|
|
2,565 |
|
|
|
1,735 |
|
|
|
168,305 |
|
Rest of OCDE |
|
|
3,195 |
|
|
|
145,491 |
|
|
|
2,701 |
|
|
|
1,672 |
|
|
|
1,546 |
|
|
|
145,986 |
|
LatAm (no OCDE) |
|
|
2,523 |
|
|
|
155,295 |
|
|
|
3,746 |
|
|
|
3,152 |
|
|
|
5,819 |
|
|
|
154,071 |
|
Rest of world |
|
|
214 |
|
|
|
35,918 |
|
|
|
189 |
|
|
|
88 |
|
|
|
79 |
|
|
|
35,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
39,002 |
|
|
|
1,506,689 |
|
|
|
25,783 |
|
|
|
12,668 |
|
|
|
11,692 |
|
|
|
1,519,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the age of exposures with past due balances, by product type.
Table 34. Ageing of past-due exposures (CR1-D)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying values. 31 Dec. 2018 |
|
|
|
|
|
|
> 30 days £ |
|
|
> 90 days £ |
|
|
> 180 days |
|
|
|
|
|
|
£ 30 days |
|
|
90 days |
|
|
180 days |
|
|
£ 1year |
|
|
> 1year |
|
Loans |
|
|
24,526 |
|
|
|
12,435 |
|
|
|
4,426 |
|
|
|
3,807 |
|
|
|
12,703 |
|
Debt Securities |
|
|
3 |
|
|
|
9 |
|
|
|
11 |
|
|
|
39 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EXPOSURES |
|
|
24,529 |
|
|
|
12,444 |
|
|
|
4,437 |
|
|
|
3,846 |
|
|
|
12,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Does not include portfolios of assets held for trading or assets at fair value through profit or loss.
The following table shows the volume of NPLs and debt restructurings.
Table 35.
Non-performing and forborne exposures (CR1-E)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Carrying values of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collaterals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated impairment and |
|
|
and financial |
|
|
|
Carrying amount of performing |
|
|
provisions and negative fair value |
|
|
guarantees |
|
|
|
and non-performing exposures |
|
|
adjustments due to credit risk |
|
|
received |
|
|
|
|
|
|
|
|
|
|
|
|
Of which non- performing |
|
|
On performing exposures |
|
|
On non-performing exposures |
|
|
|
|
|
|
|
|
|
|
|
|
Of which: performing but past due >30 days and <=90 days |
|
|
of which: performing forborne |
|
|
|
|
|
of which: impaired |
|
|
of which: forborne |
|
|
|
|
|
of which: forborne |
|
|
|
|
|
of which: forborne |
|
|
On non-performing exposures |
|
|
of which: forborne exposures |
|
Debt securities |
|
|
147,438 |
|
|
|
5 |
|
|
|
81 |
|
|
|
889 |
|
|
|
870 |
|
|
|
812 |
|
|
|
-39 |
|
|
|
-7 |
|
|
|
-610 |
|
|
|
-556 |
|
|
|
43 |
|
|
|
43 |
|
Loans and advances |
|
|
1,097,977 |
|
|
|
9,820 |
|
|
|
21,147 |
|
|
|
35,047 |
|
|
|
34,997 |
|
|
|
20,196 |
|
|
|
-8,480 |
|
|
|
-2,161 |
|
|
|
-15,126 |
|
|
|
-8,221 |
|
|
|
14,970 |
|
|
|
21,628 |
|
Off-balance sheet exposures |
|
|
304,678 |
|
|
|
|
|
|
|
418 |
|
|
|
1,462 |
|
|
|
|
|
|
|
18 |
|
|
|
-513 |
|
|
|
|
|
|
|
-265 |
|
|
|
|
|
|
|
263 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1,550,093 |
|
|
|
9,825 |
|
|
|
21,646 |
|
|
|
37,398 |
|
|
|
35,867 |
|
|
|
21,026 |
|
|
|
-9,032 |
|
|
|
-2,168 |
|
|
|
-16,001 |
|
|
|
-8,777 |
|
|
|
15,276 |
|
|
|
21,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the annual change in impairment losses on financial assets
Table 36. Changes in stock of general and
specific credit risk adjustments (CR2-A)
EUR million
|
|
|
|
|
|
|
|
|
|
|
Stage 3 |
|
|
Stage 1 and 2 |
|
Opening balance |
|
|
17,496 |
|
|
|
9,540 |
|
|
|
|
|
|
|
|
|
|
Increases due to amounts set aside for estimated loan losses during the period |
|
|
14,499 |
|
|
|
3,605 |
|
Decreases due to amounts reversed for estimated loan losses during the period |
|
|
-4,400 |
|
|
|
-3,239 |
|
Decreases due to amounts taken against accumulated credit risk adjustments |
|
|
-12,668 |
|
|
|
|
|
Impact of exchange rate differences |
|
|
-592 |
|
|
|
-157 |
|
Business combinations, including acquisitions and disposals of subsidiaries |
|
|
|
|
|
|
|
|
Other adjustments |
|
|
1,359 |
|
|
|
-1,229 |
|
|
|
|
|
|
|
|
|
|
Closing balance |
|
|
15,694 |
|
|
|
8,520 |
|
|
|
|
|
|
|
|
|
|
Recoveries on credit risk adjustments recorded directly to the statement of profit or
loss |
|
|
1,585 |
|
|
|
|
|
Specific credit risk adjustments recorded directly to the statement of profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
76 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
The following table shows the lending stock and debt instruments classified as
non-performing between the close of the previous year and the year in progress.
Table 37. Changes in stock of non-performing loans and debt securities (CR2-B)
EUR million
|
|
|
|
|
|
|
Gross book value of non-performing exposures |
|
Opening balance |
|
|
38,194 |
|
|
|
|
|
|
Loans and debt securities in non-performing status since
the last reporting period 1 |
|
|
10,653 |
|
Returned to performing status |
|
|
|
|
Amounts written off |
|
|
-12,668 |
|
Other changes |
|
|
-243 |
|
|
|
|
|
|
Closing balance |
|
|
35,936 |
|
|
|
|
|
|
1 |
Figures are referred to net new non-performing. |
Table 38. Net amount of exposures (CRB-B)
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Net exposure at the end of the period |
|
|
Average exposure over the period |
|
Central governments or central banks |
|
|
3,967 |
|
|
|
4,117 |
|
Institutions |
|
|
51,098 |
|
|
|
52,468 |
|
Corporates |
|
|
270,649 |
|
|
|
269,473 |
|
Of Which: Specialised Lending |
|
|
18,797 |
|
|
|
20,908 |
|
Of Which: SME |
|
|
37,075 |
|
|
|
37,215 |
|
Retail |
|
|
359,934 |
|
|
|
363,481 |
|
Secured by real estate property |
|
|
280,612 |
|
|
|
282,670 |
|
SME |
|
|
4,243 |
|
|
|
4,344 |
|
Non-SME |
|
|
276,369 |
|
|
|
278,325 |
|
Qualifying Revolving |
|
|
20,715 |
|
|
|
20,697 |
|
Other Retail |
|
|
58,607 |
|
|
|
60,114 |
|
SME |
|
|
16,181 |
|
|
|
15,973 |
|
Non-SME |
|
|
42,426 |
|
|
|
44,141 |
|
Equity |
|
|
10,927 |
|
|
|
11,498 |
|
|
|
|
|
|
|
|
|
|
Total IRB approach |
|
|
696,576 |
|
|
|
701,036 |
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
243,008 |
|
|
|
244,909 |
|
Regional governments or local authorities |
|
|
13,153 |
|
|
|
10,841 |
|
Public sector entities |
|
|
9,175 |
|
|
|
10,965 |
|
Multilateral Development Banks |
|
|
1,655 |
|
|
|
1,614 |
|
International Organisations |
|
|
|
|
|
|
|
|
Institutions |
|
|
41,467 |
|
|
|
42,530 |
|
Corporates |
|
|
97,243 |
|
|
|
95,245 |
|
of which: SME |
|
|
23,768 |
|
|
|
20,778 |
|
Retail |
|
|
222,106 |
|
|
|
214,767 |
|
of which: SME |
|
|
31,892 |
|
|
|
32,707 |
|
Secured by mortgages on immovable property |
|
|
102,337 |
|
|
|
99,604 |
|
of which: SME |
|
|
18,116 |
|
|
|
17,850 |
|
Exposures in default |
|
|
8,819 |
|
|
|
8,747 |
|
Items associated with particularly high risk |
|
|
1,558 |
|
|
|
1,539 |
|
Covered bonds |
|
|
3,480 |
|
|
|
3,392 |
|
Claims on institutions and corporates with a short-term credit assessment |
|
|
2 |
|
|
|
2 |
|
Collective investments undertakings (CIU) |
|
|
1,397 |
|
|
|
1,133 |
|
Equity exposures |
|
|
221 |
|
|
|
221 |
|
Other exposures |
|
|
77,712 |
|
|
|
68,444 |
|
|
|
|
|
|
|
|
|
|
Total Standardised approach |
|
|
823,332 |
|
|
|
803,953 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1.519.908 |
|
|
|
1.504.989 |
|
|
|
|
|
|
|
|
|
|
Note: Securitisations not included.
The Groups average EAD increased by 1,2%, mainly due to the growth of exposure in the categories of central governments or central banks under the
standard method, and to the increase of the EAD in the corporate, and retailers segments under the IRB method.
The following graph shows the distribution, by geographical area, of Santander Groupss exposure to credit and dilution risk.
|
|
|
|
|
78 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 39. Geographical breakdown of exposures (CRB-C)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Net original exposure |
|
Spain |
|
|
UK |
|
|
Continental Europe |
|
|
Brazil |
|
|
Rest of Latam |
|
|
EEUU |
|
|
Rest of world |
|
|
Total |
|
IRB approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
2,764 |
|
|
|
115 |
|
|
|
45 |
|
|
|
65 |
|
|
|
315 |
|
|
|
330 |
|
|
|
334 |
|
|
|
3,967 |
|
Institutions |
|
|
17,993 |
|
|
|
8,249 |
|
|
|
8,651 |
|
|
|
491 |
|
|
|
6,008 |
|
|
|
4,859 |
|
|
|
4,847 |
|
|
|
51,098 |
|
Corporates |
|
|
99,474 |
|
|
|
42,819 |
|
|
|
49,947 |
|
|
|
19,342 |
|
|
|
21,825 |
|
|
|
21,460 |
|
|
|
15,781 |
|
|
|
270,649 |
|
Retail |
|
|
107,302 |
|
|
|
196,757 |
|
|
|
49,919 |
|
|
|
48 |
|
|
|
175 |
|
|
|
71 |
|
|
|
5,662 |
|
|
|
359,934 |
|
Equity |
|
|
10,706 |
|
|
|
|
|
|
|
|
|
|
|
176 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
10,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IRB approach |
|
|
238,239 |
|
|
|
247,939 |
|
|
|
108,563 |
|
|
|
20,122 |
|
|
|
28,369 |
|
|
|
26,720 |
|
|
|
26,625 |
|
|
|
696,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
88,473 |
|
|
|
39,585 |
|
|
|
31,197 |
|
|
|
43,907 |
|
|
|
21,463 |
|
|
|
10,717 |
|
|
|
7,667 |
|
|
|
243,008 |
|
Regional governments or local authorities |
|
|
11,454 |
|
|
|
1 |
|
|
|
596 |
|
|
|
698 |
|
|
|
375 |
|
|
|
24 |
|
|
|
5 |
|
|
|
13,153 |
|
Public sector entities |
|
|
798 |
|
|
|
|
|
|
|
591 |
|
|
|
873 |
|
|
|
295 |
|
|
|
6,618 |
|
|
|
|
|
|
|
9,175 |
|
Multilateral Development Banks |
|
|
1 |
|
|
|
1,600 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,655 |
|
International Organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions |
|
|
15,889 |
|
|
|
1,886 |
|
|
|
3,620 |
|
|
|
7,192 |
|
|
|
3,546 |
|
|
|
9,208 |
|
|
|
125 |
|
|
|
41,467 |
|
Corporates |
|
|
11,571 |
|
|
|
14,440 |
|
|
|
25,629 |
|
|
|
14,305 |
|
|
|
14,599 |
|
|
|
16,672 |
|
|
|
28 |
|
|
|
97,243 |
|
Retail |
|
|
20,547 |
|
|
|
18,458 |
|
|
|
49,603 |
|
|
|
59,092 |
|
|
|
35,405 |
|
|
|
37,631 |
|
|
|
1,369 |
|
|
|
222,106 |
|
Secured by mortgages on immovable property |
|
|
10,476 |
|
|
|
1,159 |
|
|
|
20,687 |
|
|
|
9,285 |
|
|
|
25,988 |
|
|
|
34,644 |
|
|
|
96 |
|
|
|
102,337 |
|
Exposures in default |
|
|
2,048 |
|
|
|
147 |
|
|
|
1,613 |
|
|
|
1,559 |
|
|
|
1,664 |
|
|
|
1,771 |
|
|
|
16 |
|
|
|
8,819 |
|
Items associated with particularly high risk |
|
|
|
|
|
|
98 |
|
|
|
82 |
|
|
|
|
|
|
|
1,287 |
|
|
|
92 |
|
|
|
|
|
|
|
1,558 |
|
Covered bonds |
|
|
|
|
|
|
3,011 |
|
|
|
469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480 |
|
Claims on institutions and corporates with a short-term credit assessment |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Collective investments undertakings (CIU) |
|
|
74 |
|
|
|
8 |
|
|
|
|
|
|
|
5 |
|
|
|
1,309 |
|
|
|
|
|
|
|
|
|
|
|
1,397 |
|
Equity exposures |
|
|
|
|
|
|
|
|
|
|
217 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
221 |
|
Other exposures |
|
|
27,763 |
|
|
|
12,432 |
|
|
|
4,581 |
|
|
|
11,268 |
|
|
|
11,682 |
|
|
|
9,973 |
|
|
|
11 |
|
|
|
77,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SA approach |
|
|
189,096 |
|
|
|
92,827 |
|
|
|
138,940 |
|
|
|
148,183 |
|
|
|
117,617 |
|
|
|
127,351 |
|
|
|
9,318 |
|
|
|
823,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
427,335 |
|
|
|
340,766 |
|
|
|
247,502 |
|
|
|
168,305 |
|
|
|
145,986 |
|
|
|
154,071 |
|
|
|
35,943 |
|
|
|
1,519,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Securitisations not included.
The geographical distribution of standard portfolios is concentrated mainly in Brazil, Continental Europe and
Spain. The most important segments remain central administrations (with strong presence in Spain, the United Kingdom and Brazil), retailers and corporates, which have a prominent presence in Continental Europe (excluding Spain).
Regarding the IRB portfolios, most of the exposure is concentrated in retailers and corporates segments from Spain and UK.
Exposures by geographical area
Table 40. Concentration of exposures by industry or counterparty type (CRB-D)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Net original exposure |
|
Real estate activities |
|
|
Professional Services |
|
|
Accommodation and food service activities |
|
|
Construction |
|
|
Manufacturing |
|
|
Other services |
|
|
Other Retail (Individuals) |
|
|
Primary Sector |
|
|
PublicSector |
|
|
Utilities |
|
|
Transport and storage |
|
|
Total |
|
IRB Approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215 |
|
|
|
|
|
|
|
3,967 |
|
Institutions |
|
|
855 |
|
|
|
3,024 |
|
|
|
1,166 |
|
|
|
2,436 |
|
|
|
34,751 |
|
|
|
|
|
|
|
174 |
|
|
|
523 |
|
|
|
3,205 |
|
|
|
4,199 |
|
|
|
764 |
|
|
|
51,098 |
|
Corporates |
|
|
18,269 |
|
|
|
23,786 |
|
|
|
7,602 |
|
|
|
31,862 |
|
|
|
146,609 |
|
|
|
|
|
|
|
8,474 |
|
|
|
6,077 |
|
|
|
6,689 |
|
|
|
14,302 |
|
|
|
6,980 |
|
|
|
270,649 |
|
Retail |
|
|
856 |
|
|
|
7,334 |
|
|
|
2,621 |
|
|
|
4,904 |
|
|
|
1,204 |
|
|
|
334,191 |
|
|
|
2,937 |
|
|
|
1,520 |
|
|
|
2,405 |
|
|
|
381 |
|
|
|
1,580 |
|
|
|
359,934 |
|
Equity |
|
|
3,111 |
|
|
|
|
|
|
|
364 |
|
|
|
50 |
|
|
|
7,026 |
|
|
|
|
|
|
|
|
|
|
|
288 |
|
|
|
1 |
|
|
|
8 |
|
|
|
80 |
|
|
|
10,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IRB approach |
|
|
23,091 |
|
|
|
34,145 |
|
|
|
11,753 |
|
|
|
39,252 |
|
|
|
193,341 |
|
|
|
334,191 |
|
|
|
11,585 |
|
|
|
8,408 |
|
|
|
12,299 |
|
|
|
19,106 |
|
|
|
9,403 |
|
|
|
696,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardised Approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,510 |
|
|
|
|
|
|
|
|
|
|
|
234,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243,008 |
|
Regional governments or local authorities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,153 |
|
Public sector entities |
|
|
28 |
|
|
|
|
|
|
|
25 |
|
|
|
4 |
|
|
|
5 |
|
|
|
|
|
|
|
1 |
|
|
|
8,424 |
|
|
|
22 |
|
|
|
448 |
|
|
|
217 |
|
|
|
9,175 |
|
Multilateral Development Banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,655 |
|
International Organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,467 |
|
Corporates |
|
|
3,181 |
|
|
|
19,844 |
|
|
|
4,811 |
|
|
|
13,009 |
|
|
|
26,737 |
|
|
|
|
|
|
|
7,246 |
|
|
|
7,151 |
|
|
|
6,062 |
|
|
|
5,917 |
|
|
|
3,284 |
|
|
|
97,243 |
|
Retail |
|
|
514 |
|
|
|
14,784 |
|
|
|
2,765 |
|
|
|
3,569 |
|
|
|
1,694 |
|
|
|
189,276 |
|
|
|
2,063 |
|
|
|
2,688 |
|
|
|
2,513 |
|
|
|
408 |
|
|
|
1,832 |
|
|
|
222,106 |
|
Secured by mortgages on immovable property |
|
|
19,852 |
|
|
|
3,999 |
|
|
|
1,301 |
|
|
|
2,758 |
|
|
|
69,426 |
|
|
|
|
|
|
|
1,459 |
|
|
|
1,323 |
|
|
|
1,339 |
|
|
|
202 |
|
|
|
678 |
|
|
|
102,337 |
|
Exposures in default |
|
|
94 |
|
|
|
1,470 |
|
|
|
784 |
|
|
|
980 |
|
|
|
3,891 |
|
|
|
|
|
|
|
515 |
|
|
|
398 |
|
|
|
349 |
|
|
|
102 |
|
|
|
236 |
|
|
|
8,819 |
|
Items associated with particularly high risk |
|
|
160 |
|
|
|
8 |
|
|
|
1,357 |
|
|
|
9 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
3 |
|
|
|
3 |
|
|
|
0 |
|
|
|
1,558 |
|
Covered bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,480 |
|
Claims on institutions and corporates with a short-term credit assessment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Collective investments undertakings (CIU) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,397 |
|
Equity exposures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221 |
|
Other exposures |
|
|
189 |
|
|
|
2,597 |
|
|
|
25 |
|
|
|
1,467 |
|
|
|
67,426 |
|
|
|
|
|
|
|
56 |
|
|
|
3,527 |
|
|
|
775 |
|
|
|
1,380 |
|
|
|
270 |
|
|
|
77,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total standardised approach |
|
|
24,017 |
|
|
|
42,703 |
|
|
|
11,068 |
|
|
|
21,796 |
|
|
|
225,928 |
|
|
|
189,276 |
|
|
|
11,340 |
|
|
|
271,163 |
|
|
|
11,064 |
|
|
|
8,460 |
|
|
|
6,517 |
|
|
|
823,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
47,108 |
|
|
|
76,848 |
|
|
|
22,821 |
|
|
|
61,048 |
|
|
|
419,270 |
|
|
|
523,467 |
|
|
|
22,925 |
|
|
|
279,571 |
|
|
|
23,363 |
|
|
|
27,566 |
|
|
|
15,920 |
|
|
|
1,519,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Securitisations not included.
|
|
|
|
|
80 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
In order to simplify the exposures analysis, some sectors have been grouped from 19 to 11 based on its
representability:
|
|
|
Primary sector: Agriculture, forestry and fishing; Mining and quarrying. |
|
|
|
Utilities: Electricity, gas, steam and air conditioning supply; Water supply. |
|
|
|
Trade, Accommodation and food service activities; Wholesale and retail trade.
|
|
|
|
Professional Services: Professional, scientific and technical activities; Administrative and support service activities. |
|
|
|
Other services: Information and communication; education; arts, entertainment & recreation and another services. |
|
|
|
Public sector: Public administration and defense, compulsory social security; human health services and social work activities. |
For the Standard Approach the business sectors with greater exposure are: individuals, public sector and other services. As for IRB, the sectors with the
highest exposure are: real estate activities; individuals and other services.
Table 41. Maturity of exposures (CRB-E)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Net original exposure |
|
On demand |
|
|
£ 1 year |
|
|
r > 1 year £ 5 years |
|
|
> 5 years |
|
|
No stated maturity |
|
|
Total |
|
IRB Approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
|
|
|
|
225 |
|
|
|
3,742 |
|
|
|
|
|
|
|
|
|
|
|
3,967 |
|
Institutions |
|
|
45 |
|
|
|
18,204 |
|
|
|
31,933 |
|
|
|
868 |
|
|
|
48 |
|
|
|
51,098 |
|
Corporates |
|
|
424 |
|
|
|
125,112 |
|
|
|
115,192 |
|
|
|
28,888 |
|
|
|
1,033 |
|
|
|
270,649 |
|
Retail |
|
|
4,882 |
|
|
|
13,547 |
|
|
|
108,857 |
|
|
|
229,206 |
|
|
|
3,442 |
|
|
|
359,934 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
10,927 |
|
|
|
|
|
|
|
|
|
|
|
10,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IRB approach |
|
|
5,351 |
|
|
|
157,089 |
|
|
|
270,651 |
|
|
|
258,962 |
|
|
|
4,523 |
|
|
|
696,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardised Approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
53,753 |
|
|
|
121,948 |
|
|
|
26,228 |
|
|
|
32,663 |
|
|
|
8,416 |
|
|
|
243,008 |
|
Regional governments or local authorities |
|
|
7 |
|
|
|
9,709 |
|
|
|
2,468 |
|
|
|
799 |
|
|
|
169 |
|
|
|
13,153 |
|
Public sector entities |
|
|
|
|
|
|
1,273 |
|
|
|
777 |
|
|
|
7,029 |
|
|
|
95 |
|
|
|
9,175 |
|
Multilateral Development Banks |
|
|
|
|
|
|
70 |
|
|
|
1,271 |
|
|
|
315 |
|
|
|
|
|
|
|
1,655 |
|
International Organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions |
|
|
3,412 |
|
|
|
18,812 |
|
|
|
5,260 |
|
|
|
12,316 |
|
|
|
1,667 |
|
|
|
41,467 |
|
Corporates |
|
|
3,589 |
|
|
|
35,669 |
|
|
|
39,292 |
|
|
|
14,853 |
|
|
|
3,840 |
|
|
|
97,243 |
|
Retail |
|
|
17,214 |
|
|
|
50,302 |
|
|
|
119,296 |
|
|
|
30,176 |
|
|
|
5,117 |
|
|
|
222,106 |
|
Secured by mortgages on immovable property |
|
|
315 |
|
|
|
9,334 |
|
|
|
25,336 |
|
|
|
64,158 |
|
|
|
3,194 |
|
|
|
102,337 |
|
Exposures in default |
|
|
286 |
|
|
|
3,145 |
|
|
|
1,952 |
|
|
|
3,100 |
|
|
|
336 |
|
|
|
8,819 |
|
Items associated with particularly high risk |
|
|
21 |
|
|
|
290 |
|
|
|
537 |
|
|
|
709 |
|
|
|
1 |
|
|
|
1,558 |
|
Covered bonds |
|
|
|
|
|
|
554 |
|
|
|
2,617 |
|
|
|
309 |
|
|
|
|
|
|
|
3,480 |
|
Claims on institutions and corporates with a short-term credit assessment |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Collective investments undertakings (CIU) |
|
|
|
|
|
|
|
|
|
|
1,397 |
|
|
|
|
|
|
|
|
|
|
|
1,397 |
|
Equity exposures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221 |
|
|
|
221 |
|
Other exposures |
|
|
5,697 |
|
|
|
43,849 |
|
|
|
12,682 |
|
|
|
5,424 |
|
|
|
10,059 |
|
|
|
77,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total standardised approach |
|
|
84,297 |
|
|
|
294,955 |
|
|
|
239,112 |
|
|
|
171,853 |
|
|
|
33,116 |
|
|
|
823,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
89,647 |
|
|
|
452,044 |
|
|
|
509,763 |
|
|
|
430,815 |
|
|
|
37,639 |
|
|
|
1,519,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Securitisations not included.
3.4. Internal rating systems
Since 1993 Santander Group has been using its own internal rating and scoring models to measure the credit quality of customers and transactions. Each rating
or score indicates a probability of default, measured on the basis of the banks historical default experience (except in the case of low default portfolios). More than 400 internal rating models are used in the Groups credit approval and
risk monitoring process.
The global rating tools are those used for SCIB segments: corporates, sovereigns, financial institutions and specialised
funding, which are managed centrally at the Santander Group, in terms of both allocating the rating and risk monitoring. The rating these tools assign to each customer is obtained using an expert-judgement model, which relies on an analysts
opinion, supported by a quantitative or automatic module based on balance sheet ratios or macroeconomic variables.
In the global models, the quantitative
module is calibrated using the market price of credit default swaps. A model is constructed that relates the market-implied probability of default (PD) extracted from the CDS spreads to country macroeconomic data or company balance sheet data.
Consequently, this data can be used to estimate PD even for entities for which no liquid CDS quotes are available.
The analyst takes this information as
a reference but will revise and adjust it to obtain the final rating, which therefore is decisively expert judgement-based. Occasionally, as in the case of SCIB, the rating is also adjusted where the company belongs to a group from which it receives
explicit support.
For the Corporates and Institutions segment (including SMEs with the highest turnover), the parent of Santander Group has established a
single methodology for constructing a rating in each country. In this case the rating is determined by an automatic module which uses initial analyst input and which may or may not be supplemented at a later stage. The automatic module determines
the rating in two phases: a quantitative phase and a qualitative phase. The qualitative phase is based on a corrective questionnaire, which allows the analyst to modify the automatic score by a limited number of rating points. Santander Group is
moving towards a new rating methodology that aims to incorporate all available information (internal behaviour, external sources, etc.) in a more structured manner, so as to statistically assign a weight to the (automatic) objective score and the
(expert) subjective score in accordance with a customers characteristics and analysts view of its capacity to add value, thus simplifying and improving the assignment of ratings.
Customer ratings are reviewed at periodic intervals to take account of new available information. Ratings are reviewed more frequently when certain automatic
alerts are triggered and in the case of customers placed on special watch. The rating tools themselves are also reviewed in order to fine-tune the ratings they generate.
For the retail segment (Natural Persons and SMEs), Santander Group has scoring tools that automatically assign a score to transactions submitted for approval.
These credit approval systems are supplemented by behavioural rating models, which provide greater
predictability of the risks assumed and are used not only when accepting new risks but also when monitoring risk setting limits.
The models committee has
approved the following list of internal ratings and their probability of default for the global portfolios
Mapping of internal ratings and PD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santander
Corporate &
Investment
Banking |
|
|
Banks |
|
|
Financial institutions non banks |
|
Rating |
|
PD |
|
|
Rating |
|
|
PD |
|
|
Rating |
|
|
PD |
|
|
|
|
|
|
|
|
|
|
|
9.3 |
|
|
0.008 |
% |
|
|
9.3 |
|
|
|
0.008 |
% |
|
|
9.3 |
|
|
|
0.002 |
% |
9.2 |
|
|
0.008 |
% |
|
|
9.2 |
|
|
|
0.009 |
% |
|
|
9.2 |
|
|
|
0.002 |
% |
9.0 |
|
|
0.010 |
% |
|
|
9.0 |
|
|
|
0.011 |
% |
|
|
9.0 |
|
|
|
0.003 |
% |
8.5 |
|
|
0.017 |
% |
|
|
8.5 |
|
|
|
0.018 |
% |
|
|
8.5 |
|
|
|
0.006 |
% |
8.0 |
|
|
0.029 |
% |
|
|
8.0 |
|
|
|
0.030 |
% |
|
|
8.0 |
|
|
|
0.012 |
% |
7.5 |
|
|
0.049 |
% |
|
|
7.5 |
|
|
|
0.050 |
% |
|
|
7.5 |
|
|
|
0.024 |
% |
7.0 |
|
|
0.083 |
% |
|
|
7.0 |
|
|
|
0.083 |
% |
|
|
7.0 |
|
|
|
0.050 |
% |
6.5 |
|
|
0.140 |
% |
|
|
6.5 |
|
|
|
0.138 |
% |
|
|
6.5 |
|
|
|
0.103 |
% |
6.0 |
|
|
0.236 |
% |
|
|
6.0 |
|
|
|
0.229 |
% |
|
|
6.0 |
|
|
|
0.212 |
% |
5.5 |
|
|
0.397 |
% |
|
|
5.5 |
|
|
|
0.378 |
% |
|
|
5.5 |
|
|
|
0.437 |
% |
5.0 |
|
|
0.668 |
% |
|
|
5.0 |
|
|
|
0.624 |
% |
|
|
5.0 |
|
|
|
0.900 |
% |
4.5 |
|
|
1.122 |
% |
|
|
4.5 |
|
|
|
1.030 |
% |
|
|
4.5 |
|
|
|
1.853 |
% |
4.0 |
|
|
1.879 |
% |
|
|
4.0 |
|
|
|
1.694 |
% |
|
|
4.0 |
|
|
|
3.814 |
% |
3.5 |
|
|
3.128 |
% |
|
|
3.5 |
|
|
|
2.776 |
% |
|
|
3.5 |
|
|
|
7.853 |
% |
3.0 |
|
|
5.166 |
% |
|
|
3.0 |
|
|
|
4.515 |
% |
|
|
3.0 |
|
|
|
16.169 |
% |
2.5 |
|
|
8.415 |
% |
|
|
2.5 |
|
|
|
7.264 |
% |
|
|
2.5 |
|
|
|
33.289 |
% |
2.0 |
|
|
13.418 |
% |
|
|
2.0 |
|
|
|
11.483 |
% |
|
|
2.0 |
|
|
|
45.000 |
% |
1.5 |
|
|
20.723 |
% |
|
|
1.5 |
|
|
|
17.687 |
% |
|
|
1.5 |
|
|
|
45.000 |
% |
1.0 |
|
|
30.600 |
% |
|
|
1.0 |
|
|
|
26.248 |
% |
|
|
1.0 |
|
|
|
45.000 |
% |
These PDs are applied uniformly across the whole Santander Group in line with the global management of the portfolios. As we
can observe, the PD assigned to any given internal rating is not exactly the same in different portfolios. Regulatory requirements require a differentiated PD calibration.
3.5. Rating assignment process and parameter estimation
Measuring the credit risk of a transaction involves calculating both the expected and the unexpected loss on the transaction. The unexpected loss is the basis
for the calculation of both regulatory and economic capital and refers to a very high, albeit improbable, level of loss that is not considered a recurring cost but must be absorbed by capital. Measuring risk involves two separate steps: estimating
the risk, and then assigning the credit risk parameters: PD, LGD and EAD.
|
|
|
|
|
82 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
PD, or probability of default, estimates the likelihood that a customer or a contract will default within 12
months. PD used for regulatory capital is long-term, or TTC (through-the-cycle) PD, which is not linked to a specific point in the cycle.
The default event being modelled is based on the definition given in article 178 of the Capital Requirements Regulation (CRR)1, which considers that default
is defined for a customer/contract when at least one of the following circumstances arises:
|
|
|
The institution considers there is a reasonable doubt that the obligor will not pay its credit obligations in full. |
|
|
|
The customer/contract is past due by more than 90 days on any material credit obligation. |
The event to be
modelled in corporate portfolios is customer default, whereas PD is estimated on the basis of the contract in retail portfolios.
Calculations of PD are
based on the entitys own internal experience, i.e. on past observations of defaults in ratings or scorings.
LGD or Loss Given Default is defined as
the mathematical expectation of the percentage of economic loss in the event of a default event. Calculations of LGD are based on internal data concerning income and expense incurred by the institution during the recovery process once the default
event has arisen, discounted at the date of commencement of default.
LGD calculated to determine regulatory capital is downturn LGD, i.e.
considered for a worst-case scenario in the economic cycle.
In addition to the estimation of downturn LGD to be used for normal operations, a specific
loss estimate is made for operations in default. This is determined using LGD and ELBE (Expected Loss Best Estimate) parameters. ELBE attempts to provide, at any given time, the best estimate of economic loss based mainly on the time during which
the operation has been in default, with due regard to the prevailing economic situation, while LGD for transactions in default is increased by any further unexpected losses that may be reported during the recovery period 2.
Lastly, EAD, or exposure at default, is calculated, defined as the value of the debt at the time of default. For lending products or any product with no off-balance-sheet amount, EAD equals the balance of the transaction plus any interest accrued but not yet payable. For facility type products, however, it is necessary to estimate any future drawdowns that will be
made between the present time and the eventual future default event. The CCF or Credit Conversion Factor is calculated for this reason, to show the percentage of the balance not currently utilised
(off-balance-sheet amount) that would be utilised at the time of default.
Past information on portfolios is
essential for estimating regulatory parameters, as established in the Capital Requirements Regulation (CRR)2. The minimum data periods to be used in estimates is five or seven years, depending on the parameter and the portfolio, although the period
used in the estimate can be broader, in line with the historical information available. The bank has an internal data model containing past information on portfolios, which is subject to review by the internal supervisory divisions (Validation and
Audit) and by the supervisory authorities.
The method used to estimate the credit risk parameters will be updated accordingly pursuant to the new
regulatory guidelines, set down mainly in the Guidelines on PD estimation, LGD estimation and treatment of defaulted assets, as well as the RTS relating to the definition of default so as to incorporate the requirements and interpretations deriving
from these articles.
As already mentioned, for regulatory purposes, observations of frequency of default and the associated losses must be averaged out
over an entire economic cycle, in the case of PD, or represent a downturn situation in the case of LGD or EAD, or represent the current economic cycle in the case of ELBE for default transactions.
For this reason, recent observations are not directly comparable to regulatory parameters, and backtesting exercises should be treated with due caution. As
explained in section 3.9 that the default frequencies (FDOs) recently observed are below regulatory PDs in regions with growth rates above the average for the cycle. Conversely, in regions where economic growth falls short of the average, default
observations may exceed regulatory PDs.
The risk parameters must be estimated separately for each entity, country and segment and need to be reviewed at
least once a year.
The parameters are then assigned to the transactions recorded on each units balance sheet, so as to calculate the expected
losses and capital requirements associated with the units exposure.
In certain portfolios there is so little default experience that alternative
approaches to parameter estimation must be adopted. These are known as low default portfolios.
Low default portfolios: GCB corporates, Banks, Non-bank financial institutions and Central governments Estimates of PD and LGD in low default portfolios rely chiefly on studies performed by external rating agencies, which reflect the pooled experience of the
large numbers of entities and countries rated by the agencies. These databases contain in-depth historical information to help identify complete economic cycles and analyse downturn situations.
The definition of default employed by the agencies is compared in detail with the regulatory requirements. Even if this does not produce a perfect match, the
process has sufficient items in common to enable it to be used.
For PD, the agencies do not directly report Through the Cycle (TTC) estimates, but rather
the number of annual default observations. The observations are averaged out over an economic cycle by external ratings in order to obtain the TTC PD. This TTC PD is assigned to all counterparties with external ratings, which later helps to
calibrate the internal rating. Therefore, the PD will not depend on the counterpartys external rating, but on its internal rating, and may also be applied to customers with no external rating.
The parameters estimated for global portfolios are the same for all the Groups units. Thus, a financial institution with a rating of 8.5 will have the
same PD, regardless of the unit in which the exposure is booked.
Notes 1 and 2: Regulation (EU) 575/2013 of
the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.
Corporates (including SMEs, specialised lending and receivables)
For portfolios of customers that have an account manager assigned to them with sufficient experienced in internal defaults, the estimation is based on the
entitys own internal experience. The PD is calculated for customers by observing new NPLs in the portfolio and relating these to the ratings assigned to the customers concerned. To this end, long-run
observed default frequencies (FDO LR) are calculated for a rating or a group of ratings, and are adjusted to the average PD observed for each portfolio over a complete economic cycle.
In contrast to low default portfolios, Corporates portfolios have specific rating systems in each Santander Group unit, requiring specific PD calibrations in
each case.
In Corporates portfolios, LGD is calculated on the basis of observed recoveries of defaulted transactions. This calculation takes into account
not only the cash inflows and outflows associated with the recovery process but also the timing of these flows, so as to calculate their present value. As well as the direct and indirect costs of recovery. For regulatory use, LGD estimates must be
associated with a period of economic crisis or downturn. The existence of major variables (known as drivers) is modelled to explain the emergence of different LGDs for different groups of operations. The main drivers used are the
seniority of the transactions, whether there are any guarantees in place, the type of guarantee, the loan to value, etc. These explanatory variables must be of statistical significance and make good business sense. Estimated ELBE and LGD are also
calculated for operations in default.
Lastly, EAD, or exposure at default, is estimated by comparing the percentage of use of committed facilities at the
time of default and in normal circumstances, in order to estimate the extent to which customers make more use of their credit facilities as they approach default. To estimate CCF, information on past defaults is gathered from databases and balances
(on and off the balance sheet) are compared between the time of default and previously, when the downturn in a customers credit quality had yet to be observed.
Retail
In portfolios where customers do not have an
account manager assigned to them but are treated on a pooled or standardised basis, PDs are also estimated based on the entitys internal experience, although the data unit for assigning PDs is the transaction, not the customer.
PDs are calculated by observing new NPLs and relating each new NPL to the score assigned to the transaction at the time of approval or, for transactions
beyond a certain seniority, to the customer rating. As with the Corporates portfolios, LGD is calculated on the basis of an observed recovery process, adjusted to downturn conditions. Estimated ELBE and LGD are also calculated for operations in
default. The EAD estimation is also similar to that of Corporates.
For further details, see Appendix XIV, which contains several tables summarizing the
parameter models by region.
3.6. Uses of internal parameter estimates
One major application of the PD, LGD and EAD credit risk parameters is to determine minimum capital requirements within the CRR framework.
The CRR states that these parameters and their associated metrics, including expected and unexpected loss, are to be used not only for regulatory purposes but
also for internal credit risk management.
The Group has adapted its projection methodology to IFRS 9 standards, resulting in an impact on the estimation
of the expected loss in each of the IFRS 9 stages associated with scenarios put forward, as well as with other important credit risk metrics deriving from the parameters obtained (NPLs, provisions, allowances, etc.).
For Santander Group, the internal credit risk parameter estimates are used in a variety of management tools, including
pre-classifications, economic capital allocation, RoRAC (return on risk-adjusted capital) calculation, stress testing, IFRS 9, and scenario analyses, the results of which are reported to senior management
through various internal committees.
The pre-classification tool is used to assign limits to customers based on
their risk characteristics. For the Corporate Investment Banking (SCIB) segment, limits are established for capital at risk (CaR), nominal CAP and with maximum terms according to the type of transaction (limits for financial institutions are managed
using REC models).
Through the calculation and allocation of economic capital, all the different types of risks arising from the lending business are
integrated in a single measurement, combining credit risk measurement with the measurement of other risks, including market, operational, business and on-balance-sheet interest rate risk. The economic capital
allocation at the business unit level provides a view of the distribution of risk by business activity and geographical area, taking the benefits of diversification into account. By relating economic capital to financial results, it is possible to
calculate the risk-adjusted return (RoRAC), which can be compared with the cost of capital to get an idea of how each unit contributes to value creation at Santander Group.
The use of economic capital figures in determining management compensation and setting capital and RoRAC-related targets for the business units further
reinforces the integration of economic capital in management.
In scenario analyses, the credit risk parameters (including provisions for IFRS 9) are
related to economic variables such as the unemployment rate, GDP growth, interest rates, etc, using statistical models. This allows credit risk to be quantified under different macroeconomic scenarios, and in particular, to assess potential risk
levels in stress situations.
For further details on credit risk key metrics, see the Risk Management Chapter (section 3.3) on the 2018 Annual
Report
|
|
|
|
|
84 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
3.7. Credit risk mitigation techniques
Santander Group applies various credit risk mitigation techniques based on customer type and product type, among other factors. Some are inherent in specific
operations (such as real estate collateral) while others apply to a series of transactions (such as netting and collateral).
The various mitigation
techniques can be grouped into the following categories:
Personal guarantees
A personal guarantee is an agreement that makes one person liable for another persons obligations as before the Group. Examples include sureties,
guarantees, stand-by letters of credit etc. Only personal guarantees provided by persons who meet the minimum requirements established by the supervisor can be recognised for capital calculation purposes.
Guarantees arising on credit derivatives
Credit
derivatives are financial instruments that are used mainly to hedge credit risk. By buying protection from a third party, the Bank transfers the risk of the issuer of the underlying instrument. Credit derivatives are
over-the-counter (OTC) instruments that are traded in non-organised markets. Hedging with credit derivatives, mainly through
credit default swaps, is contracted with front-line financial institutions.
In compliance with one of the transparency recommendations originally issued
by the Basel Committee, the distribution of personal guarantees and credit derivatives for the corporates, banks, non-financial institutions and sovereigns segments by rating grade is shown below.
Table 42. Guarantees by external rating
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Corporates |
|
Exposures in default |
|
|
Exposures not in default |
|
AAA/AA |
|
|
|
|
|
|
|
|
A |
|
|
|
|
|
|
5,842 |
|
BBB |
|
|
|
|
|
|
13,225 |
|
BB |
|
|
6 |
|
|
|
2,745 |
|
B |
|
|
48 |
|
|
|
314 |
|
Rest |
|
|
48 |
|
|
|
220 |
|
Unrated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
102 |
|
|
|
22,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks |
|
Exposures in default |
|
|
Exposures not in default |
|
AAA/AA |
|
|
|
|
|
|
5,207 |
|
A |
|
|
|
|
|
|
7,437 |
|
BBB |
|
|
|
|
|
|
379 |
|
BB |
|
|
|
|
|
|
|
|
B |
|
|
|
|
|
|
|
|
Rest |
|
|
|
|
|
|
|
|
Unrated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
13,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial institutions |
|
Exposures in default |
|
|
Exposures not in default |
|
AAA/AA |
|
|
|
|
|
|
329 |
|
A |
|
|
|
|
|
|
3,762 |
|
BBB |
|
|
|
|
|
|
155 |
|
BB |
|
|
|
|
|
|
|
|
B |
|
|
|
|
|
|
|
|
Rest |
|
|
|
|
|
|
|
|
Unrated |
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
4,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sovereign |
|
Exposures in default |
|
|
Exposures not in default |
|
AAA/AA |
|
|
|
|
|
|
8,619 |
|
A |
|
|
|
|
|
|
5,632 |
|
BBB |
|
|
|
|
|
|
3,182 |
|
BB |
|
|
|
|
|
|
16 |
|
B |
|
|
|
|
|
|
|
|
Rest |
|
|
|
|
|
|
|
|
Unrated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
17,449 |
|
|
|
|
|
|
|
|
|
|
Specifically, approximately 99.6% of operations were accounted for by 15 credit institutions, all of them with a BBB+ rating
or better (96.5% with an A- rating or better) on the Standard & Poors scale.
Collateral
Collateral is property pledged by a customer or third party to secure the guaranteed obligation. Collateral assets may be financial (cash, securities
deposits, gold, etc.) or non-financial (property, other moveable property, etc.). Therefore, the different types of security will be:
|
|
Collateral pledged by a third party: This collateral grants the creditor a personal right or entitlement that affects the equity of the guarantor. Such a guarantee is provided by third parties other than the debtor in
either the credit agreement or in a separate agreement. |
|
|
Collateral pledged by the customer: This is collateral pledged on assets (movable or immovable) or rights that are specific and determinate. They are rights that secures for the creditor performance of the main
obligation via the special attachment of an asset. As a result of this special attachment, in the event of default on the secured obligation, the creditor may realise the economic value of the asset through a regulated procedure and collect the
proceeds, where preference in this method of collection may be upheld against other creditors. Collateral may also be classified as follows: |
|
|
Real estate guarantees implemented as first charge real estate mortgages. There are regular appraisal processes, based on real market values, for the different types of property, which meet the requirements established
by local and Group regulators. |
|
|
Pledges on financial instruments (cash deposits, debt instruments). |
A very important example of a real
financial guarantee is the collateral, which is used for the purpose (as with the netting technique) of reducing counterparty credit risk. Collateral consists of instruments with economic value and high liquidity that are deposited or transferred by
one party in favour of another in order to guarantee or reduce any counterparty credit risk arising from portfolios of risk-bearing transactions between the two. Transactions backed by collateral are marked to market periodically (usually daily) and
the parameters defined in the collateral agreement are applied, so as to obtain an amount of collateral (usually cash or securities) to be called from, or returned to, the counterparty.
|
|
Other collateral (second and successive mortgages). |
As a general rule, and from a risk acceptance
perspective, lending criteria are linked to the borrowers capacity to fulfil, in due time and proper form, all financial obligations, although this is no impediment to seeking the highest level of collateral or personal guarantees.
Payment capacity will be assessed on the basis of the funds or net cash flows from their businesses or usual sources of income, without depending on
guarantors or assets delivered as a security. These must always be taken into account when considering the granting of the transaction as a second and exceptional method of recovery when the first method has failed. As a general rule, a security is
defined as a reinforcement that is added to a credit operations for the purpose of mitigating any loss arising from non-performance of the payment obligation.
Effective securities, for these purposes, are collateral and personal guarantees for which their validity is shown as mitigating the credit risk and whose
valuation is compliant with the policies and procedures set out in this document. An analysis of a security must take into account, among other things, the time necessary for the execution of the security and its capacity of realisation.
Only collateral that meets the minimum qualitative requirements specified in the Basel agreements is taken into account for regulatory capital calculation
purposes.
Implementation of the mitigation techniques follows the minimum requirements established in the guarantee management policy: legal certainty
(possibility of legally requiring the settlement of
guarantees at all times), the lack of substantial positive correlation between the counterparty and the value of
the collateral, the correct documentation of all guarantees, the availability of the documented methodologies used for each mitigation technique and appropriate monitoring, traceability and regular control of the goods/assets used for the guarantee.
Establishing a net balance by counterparty
The
concept of netting involves offsetting gains and losses on multiple transactions of the same type under the umbrella of a master agreement such as ISDA or similar (CSA, OSLA, ISMA, GMRA, etc.).
Market gains and losses on derivative transactions entered into with a given counterparty are offset against one another, so that if the counterparty
defaults, the settlement figure is a single net amount, rather than a large number of positive and negative amounts relating to the individual transactions entered into with that counterparty.
An important feature of a master netting agreement is that it entails a single legal obligation, encompassing all the transactions covered by the agreement.
This is what makes it possible to offset the risks of all the transactions covered by the agreement with a given counterparty.
For the measurement of
exposure there are two methodologies: a Mark to Market (MtM) methodology (replacement cost in the case of derivatives), plus an add-on for potential future exposure, and another methodology for certain regions
and some products, which includes a calculation of exposure using Montecarlo simulation. The capital at risk or unexpected loss, i.e. the loss which, once the expected loss is subtracted, constitutes the economic capital, net of guarantees and
recoveries, is also calculated.
The exposures are recalculated at market close, adjusting all transactions to their new time horizon. The potential
future exposure is adjusted and mitigation measures (netting, collateral, etc.) are applied, so that the exposures can be checked on a daily basis against the limits approved by senior management. Risk is controlled using an integrated system that
provides real-time information on exposures to any counterparty, product or maturity and in any Group unit.
3.7.1. Recognition of credit risk
mitigation
When calculating regulatory capital, credit risk mitigation techniques affect the value of the risk parameters used to determine capital.
Identifying and valuing the security associated with the contracts is key here and a distinction is drawn between type of guarantee: collateral and personal guarantees. This mitigation process is carried out whenever the validity of the guarantee
has been checked and it is believed they may be enforced. The mitigation process is described in the following section.
Firstly, in portfolios where PD
is assigned at customer level, personal guarantees are assessed. Personal guarantees affect the final PD value by effectively replacing the counterpartys PD under the transaction with the guarantors PD. Here, we compare the Risk Weight
(RW) of the transaction obtained by applying the customers PD with the RW of the transaction calculated by employing the guarantors PD. The final PD is the one that generates the lowest RW value.
|
|
|
|
|
86 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Secondly, the existence of any associated collateral is verified for all transaction types (retail and non-retail). Under the IRB approach, the existence of collateral impacts the final value of the LGD used to calculate the capital. The process also factors in potentially significant factors such as product type and
transaction balance. In the case of mortgage collateral, the LGD of the transaction will depend on the loan-to-value (LTV) ratio, as well as the length of time the loan
has been on the banks balance sheet.
Mitigation with collateral is carried out by securing part of the EAD with one or more guarantees.
Accordingly, the final LGD on the transaction will be the average LGD obtained by adding the LGD of each guarantee divided by the amount covered by the guarantee, to the original LGD divided by the part of the exposure not secured by guarantees.
This sum is then divided by the full original exposure and the result is the final adjusted LGD.
The tables below show the original hedged exposure by
collateral type and exposure category for cases where the collateral could be used to reduce capital requirements.
Table 43. Credit risk mitigation
techniques - IRB and SA (CR3)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Exposures unsecured Carrying amount |
|
|
Exposures to be secured |
|
|
Exposures secured by collateral |
|
|
Exposures secured by financial guarantees |
|
|
Exposures secured by credit derivatives |
|
Total IRB exposures |
|
|
371,058 |
|
|
|
314,590 |
|
|
|
310,566 |
|
|
|
4,024 |
|
|
|
|
|
of which: default |
|
|
4,989 |
|
|
|
9,111 |
|
|
|
9,044 |
|
|
|
67 |
|
|
|
|
|
Total SA exposures |
|
|
794,973 |
|
|
|
28,359 |
|
|
|
8,732 |
|
|
|
19,627 |
|
|
|
|
|
of which: default |
|
|
8,695 |
|
|
|
124 |
|
|
|
111 |
|
|
|
13 |
|
|
|
|
|
Note: Net original exposure. Equity not included.
Table 44. IRB approach. Credit risk mitigation techniques: credit derivatives and personal guarantees
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Original hedged exposure by collateral
type and exposure category |
|
Financial guarantees |
|
|
Personal guarantees |
|
|
Financial guarantees |
|
|
Personal guarantees |
|
IRB Approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central administrations and banks |
|
|
|
|
|
|
3,095 |
|
|
|
|
|
|
|
1,901 |
|
Institutions |
|
|
|
|
|
|
12,414 |
|
|
|
|
|
|
|
13,425 |
|
Corporates |
|
|
5,170 |
|
|
|
25,156 |
|
|
|
3,999 |
|
|
|
24,275 |
|
Retail |
|
|
|
|
|
|
1,623 |
|
|
|
|
|
|
|
1,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
5,170 |
|
|
|
42,288 |
|
|
|
3,999 |
|
|
|
41,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the impact of the credit derivatives used as credit mitigation techniques in RWAs.
Table 45. Effect on RWA of credit
derivatives used as CRM techniques (CR7)
EUR
million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Pre-credit derivatives RWAs |
|
|
Actual RWAs |
|
Exposures under Foundation IRB |
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
30 |
|
|
|
30 |
|
Institutions |
|
|
1,325 |
|
|
|
1,324 |
|
Corporates - SME |
|
|
3,647 |
|
|
|
3,647 |
|
Corporates - Specialised Lending |
|
|
14,344 |
|
|
|
14,344 |
|
Corporates - Other |
|
|
9,699 |
|
|
|
9,699 |
|
Exposures under Advanced IRB |
|
|
|
|
|
|
|
|
Central governments or central banks |
|
|
789 |
|
|
|
789 |
|
Institutions |
|
|
7,888 |
|
|
|
7,888 |
|
Corporates - SME |
|
|
14,954 |
|
|
|
14,954 |
|
Corporates - Specialised Lending |
|
|
|
|
|
|
|
|
Corporates - Other |
|
|
63,662 |
|
|
|
63,662 |
|
Retail - Secured by real estate SME |
|
|
1,028 |
|
|
|
1,028 |
|
Retail - Secured by real estate non-SME |
|
|
38,132 |
|
|
|
38,132 |
|
Retail - Qualifying revolving |
|
|
3,988 |
|
|
|
3,988 |
|
Retail - Other SME |
|
|
4,777 |
|
|
|
4,777 |
|
Retail - Other non-SME |
|
|
20,843 |
|
|
|
20,843 |
|
Equity IRB |
|
|
20,224 |
|
|
|
20,224 |
|
Other non credit-obligation assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
205,332 |
|
|
|
205,331 |
|
|
|
|
|
|
|
|
|
|
* |
It does not include CCPs. |
3.8. Internal rating system control
A fundamental part of the process carried out by Santander Group to implement advanced models entails establishing robust control and review mechanisms by the
Internal Validation and Internal Audit areas so as to effectively monitor and validate the valuation models and their integration in risk management, risk parameters, integrity and quality of information, documentation of the capital calculation
process, governance, risk model, technological environment, etc.
The functional segregation model applicable to Santander Group involves a model with
different levels of control structured around three lines of defence with an organisational structure and independent, clearly defined functions:
|
|
1st line (model owner and methodology), |
|
|
2nd line (Model Risk, Internal Validation, Capital Risk, and Risk Control and Supervision Units) and |
|
|
3rd line (Internal Audit).
|
This separate organisational and functional structure ensures compliance with the regulatory requirements
established in the IRB models:
a) |
Existence of a strong governance model. |
b) |
Existence, separation and independence of the Risk Control and Supervision, Internal Validation and Internal
Audit areas. |
c) |
Independent annual reviews by Internal Validation and Internal Audit. |
d) |
Communication procedures with management, which ensure all associated risks are reported.
|
3.8.1. Model risk
1.
Introduction
Santander Group has wide experience in the use of models to help make all kinds of decisions, especially risk management decisions.
A model is defined as a system, approach or quantitative method that applies theories, techniques and statistical, economic,
|
|
|
|
|
88 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
financial and mathematical facts to transform input data into quantitative estimates. Models are simplified
representations of real-world relationships between characteristics, values and observed facts. This simplification allows for focusing attention on specific aspects considered to be the most important for the application of a given model.
The use of models exposes the Bank to model risk, which is defined as the potential adverse consequences of decisions based on incorrect, inadequate or
improperly used models.
According to this definition, the sources of this risk are as follows:
|
|
The model itself, due to the use of incorrect or incomplete data, or due to the modelling method used and its implementation in systems. |
|
|
Improper use of the model. |
Model risk may result in financial loss, inappropriate commercial or strategic
decisions or damage to the Groups reputation.
Santander Group has been working on the definition, management and control of model risk in recent
years, and in 2015 a specific department was set up within its risks division to control this risk.
Management and control functions are performed at
both the Corporate Centre and at the Groups main companies and entities. To properly regulate the risk management model there are a series of policies and procedures in place which establish the principles, responsibilities and processes to be
following throughout the models life cycle, detailing aspects relating to the organisation, governance, model management and validation, among others.
The supervision and control of the risk model is proportional to the importance of each one. For this purpose, a tiering structure is defined as the attribute
to synthesise the level of importance or significance of a model, which is used to determine the intensity of the model risk management processes to be followed.
At the end of 2017, Santander launched a strategic plan, Model Risk Management 2.0 (MRM 2.0), as an anticipatory measure to strengthen model risk management,
revisiting each of the governance steps in the models, and suitably addressing the new supervisory expectations set down in the ECB guidelines for internal models.
MRM 2.0, which is currently being developed, has three phases (2018, 2019 and 2020) and encompasses ten initiatives structured into four lines:
|
|
Key aspects: Initiatives relating to governance, risk appetite, risk management and policies. |
|
|
Processes: Initiatives relating to the life cycle phases of the models. |
|
|
Communication: Internal and external communication (monitoring, reports, training
) |
|
|
Model risk facilitators: Infrastructure, tools and resources. |
2. Governance
The model risk control committee, chaired by the Chief Risk Officer, is the collegiate body tasked with supervising and controlling
model risk at Santander Group. The purpose of the committee is to effectively control model risk, while advising
the head of the risk function and the risk control committee and ensuring that model risk is monitored and remains within the Groups risk appetite approved by the board of directors. This process requires the committee to identify and track
both existing and emerging model risk and determine its impact on the Groups risk profile.
The model approval corporate sub-committee is largely responsible for authorising use of the models. However, there is a system in place for delegating powers whereby models with the least relative importance are approved locally and reported
periodically to the model approval corporate sub-committee.
The senior management at Santander Group possesses in-depth knowledge of the more important models. It also regularly monitors model risk through a set of reports that provide a consolidated view of the risk and enable the right decisions to be taken.
3. Risk management
The task of managing and controlling
model risk is structured around a set of processes spanning the models life cycle. The following diagram shows the various phases of the model life cycle at Santander Group.
1. Identification
As
soon as a model is identified, it must be included within the model risk control process.
To ensure proper management of model risk, a complete and
exhaustive inventory of all models in use is essential.
Santander Group keeps a centralised inventory, created on the basis of a uniform taxonomy for all
models used at the various business units. The inventory contains all relevant information on each of the models, enabling all of them to be properly monitored according to their tiering.
The inventory enables transversal analyses to be conducted on the information (by geographic area, model type,
importance, etc.), thus facilitating the task of making strategic decisions in relation to the models.
2. Planning
Planning is an annual corporate exercise, approved by the local governance bodies and validated at the corporate centre, aimed at establishing a strategic
action plan for all models included in the management of the model risk function. It identifies the resource requirements relating to the models to be developed, reviewed and implemented over the year.
3. Development
This is essentially the models
construction phase, based on the needs laid down in the models plan and the relevant information provided by specialists.
Development takes the form of a
standard process defined by the corporation for the entire Group. This effectively guarantees the quality of the models used for decision-making.
4.
Internal validation
Independent model validation is not only a regulatory requirement in certain cases, but also a key element to ensure the proper
management and control of model risk at Santander Group.
The Group has therefore set up a specialised unit that is fully independent of both developers
and users. This unit issues an expert opinion on the fitness for purpose of the internal models and a set of conclusions on their robustness, utility and effectiveness. The validation opinion takes the form of a rating that summarises the model risk
associated with the model.
Internal validation brings all models within the model risk control process, ranging from the models used in the risk function
(models for credit risk, market risk, structural or operational risk, models for economic and regulatory capital risk, models for provisions, stress test models, etc.) to other types used in different functions that support decision making.
The scope of the validation extends not only to the more theoretical or methodological aspects, but also technological systems and the quality of the data
relied on to ensure their effectiveness. All relevant aspects are typically included in the management process: controls, reporting, uses, involvement of the senior management, etc.
This corporate internal validation environment at Santander Group is fully aligned with the internal validation criteria of advanced models emanating from the
Groups various supervisors. This maintains the criterion of a separation of functions for units developing and using the models (first line of defence), internal validation units (second line of defence) and internal audit (third line of
defence) as the ultimate layer of control, checking the effectiveness of the function and its compliance with internal and external policies and procedures, and commenting on its level of effective independence.
The internal validation function is decentralised through five validation units. The coordination of the validation work and harmonisation of validation
practices and processes is ensured through a specific initiative, reinforced by the MRM 2.0 project that includes ten basic action pillars to guarantee this objective is met.
One of these pillars is the consistency analysis process performed by the validation units, which involves a
review of the recommendations issued, loss given default and the rating allocated. It therefore acts as an important point of control for the consistency and comparability of the validation work. Validation work will only be finalised after the
consistency stage has been completed.
5. Approval
Before being implemented and used, a model must be submitted for approval at the relevant bodies, in accordance with the internal regulations in effect and
approved delegation processes.
6. Implementation and use
In this phase the newly developed model is implemented within the system in which it is to be used. As already mentioned, the implementation phase is another
possible source of model risk, and it is therefore essential that tests are conducted by technical units and the owners of the model so as to certify that it has been implemented in accordance with the methodological definition and to check that it
functions as expected.
7. Monitoring and control
Models must be regularly reviewed to ensure that they continue to function correctly and that they remain fit for purpose. If they are not, they must be
adapted or redesigned accordingly.
In addition, control teams ensure that model risk is being managed in accordance with the principles and standards
laid down in the model risk framework and related internal rules and regulations.
4. Key metrics
The risk level of a model is reflected in the rating allocated to it, which in most cases is generated by an independent validation of the model.
Risk appetite at Group and local level establishes thresholds based on the average rating of the models.
Changes in the distribution of the ratings is also monitored, with a focus on the lowest scores.
Another key metric is model coverage, which synthetically quantifies the level of use of the models for decision-making, in addition to the management of the
different risks.
Appetite metrics therefore focus on the quality of the models, based on internal validation ratings. Appetite levels differ according to
the relevance of the models, and are the most demanding for the main models.
The metrics are monitored on a monthly basis, and action plans are required
if there are any deviations from established levels. Additionally, the proper monitoring of recommendations and the inclusion of the impact on metrics in the planning process are a natural management process to align the quality of the models with
the appetite trends established in the event of deviation.
The following table summarises the scores assigned to the credit risk models as a result of
Internal Validations review of credit risk parameters and rating models during 2018.
|
|
|
|
|
90 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
PD
LGD
EAD
Scoring
Rating
The quality of the model is shown by its final rating, which indicates the models risk on the following
scale:
1) |
Low: model is used correctly and performs adequately. The quality of the data used in developing the model is
good. The methodology employed complies with the defined standards and best practices. The documentation on regulatory aspects and processes relating to the model is clear and complete. Any deficiency is immaterial and does not affect the
models performance. |
2) |
Moderate-low: model is used correctly and performs adequately. The
assumptions used in developing the model are reasonable. There are aspects that need to be improved but they are not crucial or material. There are not thought to be any problems affecting implementation and use of the model. The benefits of any
changes to the model must be considered in relation to the costs of the changes. |
3) |
Moderate: model is used correctly and performs adequately. The assumptions used in developing the model are
reasonable. There are aspects of the model that need to be improved. Any deficiencies should be made good in the medium term or based on a cost-benefit analysis. |
4) |
Moderate-high: there are deficiencies in the models performance or use. The models assumptions, the
quality of the data in the development sample or the models predictions are questionable. It is highly advisable that certain shortcomings be remedied or plans be made to remedy them in the short term, before the model is implemented or used.
Other alternatives in the development to mitigate model risk should be considered. |
5) |
High: the model is not performing properly, the model is not being used for its intended purpose or the
models assumptions are incorrect. Certain aspects must be corrected immediately. It is inadvisable to implement or use the model as presented. |
3.8.2. Internal Audit
Internal Audit is part of the
third line of defence. The analysis carried out by this independent team covers five main areas of activity:
1) |
Reviewing compliance with the Santander Group internal governance model and supervisory requirements for the
approval and maintenance of advanced models. Assessing the existence and sufficiency of an organisational and control structure, in addition to a governance model, committee structure and reporting framework, which enable the proper management of
IRB models and the calculation of regulatory capital and ensure the involvement of senior executives in management and decision-making tasks. |
2) |
Managing models and their adequacy and integration. Analysing compliance with requirements for managing model
life cycles so as to identify and minimise the risks associated with building and using models and making them part of the management and also determining the sufficiency of the controls in place.
|
3) |
Analysing correct risk management. |
Analysis and testing of the consistency and completeness of data bases and information sources used in model construction.
A review is made to ensure the methodology used in the construction of risk model parameters is consistent with the projected uses and that, overall, the
corporate standards and regulatory requirements are followed, in addition to the replication of the calculations made.
Reviewing the reporting control
environment and the quality and integrity of the data contained in Basel databases (corporate datamart).
4) |
Reviewing the capital calculation and reporting process. |
5) |
Analysing the technical aspects and applications of the technological environment. Examining the robustness,
reliability and security of the infrastructure and processes that support the estimation of risk parameters and the calculation of capital within the BDR-Corporate Calculation Engine.
|
After finishing its review, Internal Audit issues a report containing recommendations and observations arising
from the review process signed by the unit and/or areas involved. These will stipulate a deadline in which to submit the relevant action and resolution plans.
The auditors and the affected areas both regularly monitor that the improvements are carried out. It should be noted that the IRB model review reports are
submitted directly to senior management at Santander Group and are available to supervisors (European Central Bank, Bank of Spain and other local supervisors).
Internal Audit also reports at the same time to the Groups autonomous audit committee on those recommendations that have not been suitably implemented
so that the underlying causes can be examined and their implementation effectively enforced. Last but not least, Internal Audit remains in direct contact with the supervisors and does so completely independently of the Risk Control and Supervision
functions.
3.9. Impairment losses: influencing factors and comparative analysis
In addition to the advanced approaches described above (details of which are given in the section on economic capital), other standard metrics are employed to
help ensure prudent and effective credit risk management based on an assessment of losses on the portfolios.
Credit risk should be monitored continuously and holistically, in order to ensure the early identification of
incidents arising in the area of risk, which could affect customers credit ratings. This monitoring is carried out through the periodic review of all customers, the allocation of a monitoring score, the establishment of pre-defined actions associated with each category and the implementation of specific measures (predefined or ad-hoc) to correct potential deviations that could have negative
impact on the entity.
In the analysis of credit risk, its performance compared to budgets, limits and standards are continuously and systematically
assessed,
|
|
|
|
|
92 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
with an evaluation of the effects of future external events or strategic decisions, to establish measures that
ensure the profile and volume of the risk profile falls within the established and are aligned with the appetite established by the Group.
To measure and
control the cost of credit risk at Santander Group, the following key metrics are used, among others:
|
|
Cost of Credit: obtained by dividing credit risk provisions net of NPL recoveries over 12 months by average loans and advances to customers, gross, as shown on the balance sheet in those same 12 months. Monitoring and
controlling this metric reveals a direct relationship between the Groups risk appetite and that of its units, allowing it to achieve a medium-low risk profile. |
|
|
Concentration: for individuals and SMEs, the monitoring of high risk profile portfolios prevents concentration in portfolios with a risk profile that does not correspond to the Groups medium-low risk target. For SCIB segments, corporates and institutions concentration limits are monitored for sectors, single names, large exposures, underwriting, specialised lending and counterparties with ratings
of < 5.0. |
|
|
EL (expected loss): estimation, at a specific point of time, of the economic loss the current portfolio is expected to sustain during the following year. It is a further business cost that must be reflected in the
transaction price. |
The recovery function also includes the management of non-productive assets
(NPAs) relating to the forbearance portfolio, doubtful loans and foreclosed assets in addition to NPLs. Here, the Bank is able to use accelerated reduction mechanisms for these portfolios, such as by selling portfolios of loans or foreclosed assets.
While these metrics measure the same reality and therefore converge in the long term, differences may exist at certain points in time and these become
especially significant at the start of a change of cycle. These differences may be down to applicable accounting law and regulations (mortgages, for example, have a different write-off timeline than consumer
loans), shifting policies (such as coverage or write-off), changes in portfolio composition, doubtful assets acquired from new investees, changes in accounting law (such as IFRS 9), sales of portfolios, etc.
An overview of the main performance metrics from the activity with customers can be found in the Annual Report.
For further details on credit risk key metrics, see the Risk Management Chapter (section 3.3) on the 2018 Annual Report.
3.10. Backtesting of IRB parameters
3.10.1. PD backtest
The aim of the PD backtest is to
assess the suitability of regulatory PDs by comparing them with the Observed Default Frequencies (ODFs) during the most recent period.
The most important
Retail and Commercial Banking IRB portfolios were selected:
|
|
Santander Spain: Individualised Corporates, Mortgages, Consumer, Cards and Loans to Individuals. |
|
|
Santander Totta: Corporates and Mortgages. |
|
|
Santander UK: Personal mortgages. |
|
|
Santander Consumer Spain: Corporates, Cards, Consumer and New Auto. |
|
|
Santander Consumer Germany: Corporates, Mortgages, Retail Qualifying Revolving, other Retail. |
|
|
Santander Consumer Nordics: Finland, Norway and Sweden auto. |
|
|
Santander Mexico: Corporates. |
For each portfolio, regulatory PD buckets are established and for each of these
the average PD assigned for regulatory capital purposes is compared with the ODF. To observe defaults, a sample of transactions and customers that were not in default at a reference date is selected, and the rate of new NPLs among this sample over
the subsequent 12-month period is observed.
Regulatory PD is a through-the-cycle (TTC) PD, meaning a long-term average that is not tied to any particular point in the cycle. Default frequency, in contrast, is observed at a particular point in time (2018). Given the
different nature of these two measurements, the comparison cannot be used to test the predictive capacity of the regulatory PDs, but it can be useful to gauge the size of the cycle adjustment used to determine TTC PD.
Results of the PD backtesting can be found in Appendix XV. A summary of the conclusions drawn from the results obtained can be found below.
CORPORATES ODF VS. PD
Corporate portfolios are showing
volatile behaviour due to the low number of defaults. Nevertheless, a significant pattern can be seen in all geographies. These portfolios present, to a greater or lesser extent, PD TTC levels that are higher than the default frequencies observed in
2017. This is a reflection of the currently favourable economic situation, as new defaults are either below or quite near average levels of the cycle. As an exception to this behaviour, the Mexico portfolio shows certain ODFs that are slightly
higher than the estimated TTC PDs.
MORTGAGES ODF VS. PD
Mortgages show a similar performance to corporates: new NPLs are typically lower than the cycle average. The UK shows far higher TTC PDs than ODFs. Meanwhile,
amid the ongoing recovery in Spain, the ODF series is closer to long-term PDs, but well above the previous years levels.
CONSUMER AND CREDIT
CARDS ODF VS. PD
In the consumer finance and cards portfolios, the situation is highly similar to that seen in Corporates and Mortgages. In Spain,
these portfolios show the same trend, with a certain widening between ODF and average PD levels of the cycle, except in loans, where the results are similar to last years, with levels slightly below TTC PDs. In Santander Consumer (Germany,
Spain and Nordics), TTC PDs remain above observed defaults, particularly in the highest PD buckets.
Complementary to the above analyses, confidence
intervals have been calculated for the PIT PD and the upper and lower limits of the forecasts have been compared with the defaults actually observed. The larger the number of transactions considered, the narrower the intervals, thus reflecting the
greater accuracy of the estimates.
CORPORATES ODF VS. LIMIT
As noted, corporate portfolios are show the highest degree of volatility due to the relatively low number of defaults. This is reflected in the wide confidence
intervals in all cases except Spain. For Santander Consumer Spain, Santander Consumer Germany and Mexico, ODFs are very centrally located within confidence intervals except in PD buckets with fewer observations and, therefore, greater volatility.
Spain and Totta generate far narrower intervals due to higher transaction volumes. ODFs are close to the lower limit for most buckets of both portfolios, with greater volatility in buckets with higher PDs and a lower number of observations.
MORTGAGES ODF VS. LIMIT
In mortgages, the intervals are
very narrow due to the high number of transactions. In all cases, ODFs typically concentrate around the defined confidence intervals apart from SC Germanys lower credit quality buckets, where they are near the upper limit, and in the UK, where
they are slightly below the lower limit in the most populated buckets.
CONSUMER AND CREDIT CARDS ODF VS. LIMIT
Confidence intervals are typically narrow among the rest of the retail portfolios, especially in the cards portfolio in Spain due to the high number of
transactions. As an exception, intervals are wide in the SC Spain Auto-New portfolio, where ODF values are concentrated in those intervals, apart from the occasional lower credit quality bucket with a lower
number of observations.
Specifically, for Santander Consumer Germany, the ODFs of the two portfolios analysed are above the upper limit in high PD
buckets, but slightly below the lower limit in lower PD and more populated buckets.
All Santander Spain portfolios show the same trend, with extremely
narrow intervals due to the high number of observations. ODFs are typically within the confidence intervals, with some exceptions in the less populated and lower credit quality buckets.
As noted, in Santander Consumer Spain intervals are far wider in Auto-Net, although ODFs are still within the interval
in most buckets. The rest of the portfolios show no exceptions worth
commenting, since the ODFs are concentrated within intervals that tend to be narrow, except Cards, where the ODF
is slightly below the lower limit in buckets with average PDs.
Lastly, Santander Consumer Nordics shows a similar trend, with narrower intervals due to
the high number of observations, but with ODFs within or slightly below confidence intervals except in less populated buckets, which show greater volatility.
For further details on PD backtesting, see Appendix XV.
Transparency improvement from the Basel Committee (CR9)
The analysis above may be supplemented with the quantitative study required by the European Banking Authority (EBA) in its document, Guidelines on disclosure
requirements under part eight of the capital requirements regulation (EU) number 575/2013, of August 2017.
Detailed information for PD backtesting,
reported in the table CR9, can be found in Appendix XVI. Main conclusions derived from the obtained results are described below:
1) |
There is no major difference between the average exposure-weighted PD and the simple average in each band,
indicating that exposure is distributed fairly uniformly among the different transactions. This result is quite typical of retail portfolios, but may be less so in the case of corporate portfolios, where certain borrowers may have significant
exposures. Nevertheless, and as can be seen in the results shown in the previously mentioned Appendix, the corporate portfolios (of SAN Spain, Mexico and Santander Consumer) do not reveal any appreciable differences either. |
2) |
Additionally, for a set of the Groups significant portfolios, in general regulatory PDs are fairly
similar to actual default rates, though the following aspects should be noted: |
In general, regulatory PDs are higher than actual
default rates. However, there are some exceptions to this rule. For example, Mortgage and Corporate portfolios in Spain. This is because the adjustment applied to obtain regulatory TTC PDs covers a longer period than the last five years.
In the case of Mortgages and Corporates in Spain, the situation in recent years is a product of the economic crisis, which has taken actual default rates
above their cyclical averages, although if we compare these results with those reported in previous years, we can begin to discern a convergence towards mid-range values in the cycle. In retail, however, the
situation is similar to that of the portfolios of Germany or the UK, with observed rates below the cyclical averages. These are portfolios with a higher rotation which, together with stricter credit policies, have brought down observed delinquency
rates.
|
|
|
|
|
94 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK _ 2018 Pillar 3 Disclosures Report
For further details on PD backtesting, according to table CR9, see Appendix XVI.
3.10.2. EAD backtest
To test Credit Conversion Factors (CCF), the balance at which transactions defaulted was compared with the regulatory EAD assigned 12 months prior to the
default occurring.
The ratio of estimated EAD to actual EAD, known as the coverage ratio, gives an idea of the accuracy of the EAD estimate.
The following tables and diagrams provide a comparison between estimated EAD and actual EAD for the following portfolios with committed limits.
|
|
Cards and Loans for Individualised and Standardised Corporates of Santander Spain; |
|
|
Cards and Loans to individuals of Santander Spain; |
|
|
United Kingdom mortgages; and |
|
|
Cards and Credit facilities of Standardised Corporates of Santander Totta. |
Detailed information for EAD
backtesting, can be found in Appendix XVII. Derived from this analysis the following can be concluded:
Coverage ratios in general are broadly accurate,
and only in a few cases above 100%, indicating slightly conservative EAD estimates. All buckets show similar coverage ratios, with the highest levels in tranches with the lowest utilisation and more so in Cards portfolios, both Micro-enterprises
(Standardised Corporates) and Non-Standard Corporates. The tranche with the highest off-balance sheet exposure of UK Mortgages also shows a high coverage ratio.
For further details on EAD backtesting, see Appendix XVII.
3.10.3. Backtest of expected loss (Santander Spain)
To compare regulatory Expected Loss with actual losses on the portfolio, a procedure has been devised to compare observed loss figures with estimated losses
under regulatory parameters.
This exercise allows us to reach conclusions on the following points:
|
|
Stability of estimated losses over the life of the study. |
|
|
Volatility of the observed losses based on the macroeconomic environment, meaning the extent to which these values exceed estimated losses in periods of economic recession and fall short of the estimates in periods of
expansion. |
Following on from the previous point, it is important to note that study period (2008 to 2018) was largely characterised as
being a period of economic recession, whereas the estimated losses are based on parameters that embrace a longer period in which the years of recession and expansion better reflect the typical life of an economic cycle.
The tables and charts in Appendix XVIII refer to Santander Spains key portfolios: Personal mortgages and Individualised corporates. Main conclusions,
derived from its analysis, are described below:
RETAIL MORTGAGES
Estimated losses based on regulatory parameters remain stable in the period under analysis. In the case of observed losses, the results are more volatile, as
expected. Aside from the fluctuations caused by the macroeconomic climate, it is important to note that this comparison is highly sensitive to any one-off or sporadic collection policies that may be pursued in
a given year, where the losses observed in that year can be attributed to default events originating in previous years. This occurred, for instance, in the case of the peak losses observed in 2012 and 2013.
In the early years of the analysis (2008 to 2011), levels of expected loss exceeded actual observed losses. However, expected losses can be seen to rise from
2010 onward and exceed estimated losses. This is largely down to the large number of defaults that occurred during the period of economic recession. Lastly, and for the more recent periods (2016, 2017 and 2018), we can observe a certain convergence
towards observed average levels of loss, which are even slightly below estimated losses in 2018, increasing its distance in relation to 2017, reflecting the general upturn in the countrys economy.
NON STANDARDISED CORPORATES
In the case of
individualised Corporates, levels of observed losses fluctuate by year but are roughly in line with the levels of estimated losses based on regulatory parameters. In the first few years of the study (2008 to 2010), observed losses are similar to
(slightly below) estimated losses. For following years, observed losses exceed estimated levels, in line with the worst years of economic crisis. Lastly, in the most recent periods observed (2017), observed losses can be seen to converge towards the
estimated values. This is partly down to the improved level of severity that can be seen in the cases resolved in recent periods and also because levels of default in the last year are better than in previous years.
For further details on Expected Loss backtesting, see Appendix XVIII.
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
4. Counterparty credit risk
|
RWA by geography |
|
Note: Does not include CCPs or CVA. |
|
|
Main figures
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
RWA |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Counterparty credit risk |
|
|
46,181 |
|
|
|
48,024 |
|
|
|
11,987 |
|
|
|
14,668 |
|
Of which, market appreciation |
|
|
32,691 |
|
|
|
34,460 |
|
|
|
9,662 |
|
|
|
12,115 |
|
Of which, CCP default |
|
|
284 |
|
|
|
398 |
|
|
|
233 |
|
|
|
313 |
|
Of which, CVA |
|
|
13,206 |
|
|
|
13,166 |
|
|
|
2,092 |
|
|
|
2,240 |
|
|
|
|
EAD variation |
|
RWA variation* |
EUR million |
|
EUR million |
|
|
|
|
|
|
|
Note: Does not include CCPs or CVA. |
|
Note: Does not include CCPs or CVA. |
|
|
|
|
* Basically due to an improvement in the risk profile of all units. |
4.1. Counterparty credit risk
definition and framework
Chapter 6 of the CRR (Regulation (EU) No 575/2013) describes counterparty credit risk as the risk a counterparty
to a transaction could default before the final settlement of the transactions cash flows. It includes the following transaction types: derivative instruments, repurchase agreements, securities or commodities lending, long settlement
transactions and lending transactions with margin replacement.
Santander Group includes counterparty credit risk in its credit risk framework. For
management purposes, it also has a specific counterparty credit risk model and policy in place.
Risk is controlled using an integrated system that allows
daily exposures vs the limits approved by senior management to be controlled in real time for any counterparty. product or maturity and in any Group unit.
For the measurement of management exposure (CRE or credit risk equivalent), there are two methodologies: a mark-to-market (MtM) methodology (replacement cost in the case of derivatives), plus an add-on for potential future exposure, and
another methodology for certain regions and some products, which includes a calculation of exposure using Monte Carlo simulation.
The capital at risk or
unexpected loss, i.e., the loss which, once the expected loss is subtracted, constitutes the economic capital, net of guarantees and recoveries, is also calculated.
4.2. Collateral agreements and guarantees
Transactions subject to collateral agreements are marked to market daily and the parameters agreed in the collateral agreement are applied, giving an amount of
collateral to be called from, or returned to, the counterparty.
The counterparty that receives the margin call checks the valuation, at which point
discrepancies may arise.
A monitoring committee (discrepancies committee) meets weekly to analyse transactions in which significant discrepancies have
been detected.
Currently, most collateral as part of collateral agreements is posted and received in cash. However, the current market trend shows that
the use of non-cash collateral is increasing. Santander Group is taking this trend into account in its active collateral management.
4.3. Wrong-way risk
Wrong-way risk exists when the potential exposure of a transaction with a counterparty is highly and positively
(adversely) correlated with the credit rating of said counterparty, and therefore if the counterpartys credit rating deteriorates, its fair value increases.
In regard to wrong way risk (WWR), the criterion used by Santander for calculating the credit exposure to derivatives with specific WWR is very conservative,
given than the exposure to the derivatives with WWR resembles the exposure to a basic financing. In very specific exceptions, with the aim of providing incentives for short-term transactions, with customers with a good rating, liquid underlying and
which include collateralisation mechanisms in the derivatives, a decision may be taken to calculate a stressed credit exposure of the derivative.
The
Corporate Centre is working to develop a broader method for measuring and managing both specific and generic adverse correlation risk and a system of governance.
Where most collateral is in cash, there is practically no risk of adverse effects arising from specific
correlations between the collateral and the collateral provider. Any adverse effects arising from correlations in non-cash collateral are immaterial since issuances from the same counterparty and its
subsidiaries are excluded from the collateral eligibility policies.
4.4. Credit rating downgrade
It is estimated that in the event the Groups credit rating was downgraded and the Group required to post additional collateral the impact of that
collateral would be relatively limited. This is because the Groups credit rating affects only a small percentage of its current collateral agreements. In the event of a hypothetical one-notch downgrade
in the parents credit rating, it is estimated that the resulting impact of the collateral it would have to post would be EUR 97.5 million.
4.5. Credit value adjustment (CVA)
The team responsible
for managing counterparty credit risk in each region charges the corresponding treasury desk a credit premium at the start of each transaction, in exchange for assuming the credit risk involved. The team can then cover the CVA sensitivities through
a combination of credit derivatives, interest rate derivatives, currency derivatives and other instruments.
Additionally. CVA regulatory capital is also
calculated. The purpose of this charge is to improve banks resilience to potential losses of market value associated with a reduction in the solvency of the counterparty in derivatives transactions that are not settled through clearing houses.
The following table shows the credit value adjustment (CVA) for the counterparty.
|
|
|
|
|
98 |
|
2018 Pillar 3 Disclosures Report |
|
|
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 46. Credit valuation adjustment (CVA) capital charge (CCR2)*
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Exposure value |
|
|
RWAs |
|
Total portfolios subject to the Advanced Method |
|
|
|
|
|
|
|
|
(i) VaR component (including the 3×multiplier) |
|
|
|
|
|
|
|
|
(ii) Stressed VaR component (including the 3×multiplier) |
|
|
|
|
|
|
|
|
All portfolios subject to the Standardised Method |
|
|
13,206 |
|
|
|
2,092 |
|
Based on Original Exposure Method |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SUBJECT TO THE CVA CAPITAL CHARGE |
|
|
13,206 |
|
|
|
2,092 |
|
|
|
|
|
|
|
|
|
|
* Figures
applying 1 year floor. |
|
|
|
|
|
|
|
|
4.6. Central counterparties
Clearing transactions through central counterparties is a habitual market practice for Santander Group. As a member of the clearing houses with which it
operates, the bank contributes to their risk management framework through payments into the default fund, in addition to daily margin calls.
The risk
associated with this type of counterparty is managed through the credit risk framework.
The following tables show central counterparty (CCP) exposure
following risk mitigation techniques.
Table 47. Exposures to central
counterparties (CCR8)
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
EAD (post CRM) |
|
|
RWA |
|
TOTAL EXPOSURES TO QCCPS |
|
|
15,590 |
|
|
|
539 |
|
|
|
|
|
|
|
|
|
|
Exposures for trades at QCCPs (excluding initial margin and default fund contributions); of
which |
|
|
11,714 |
|
|
|
234 |
|
(i) OTC derivatives |
|
|
8,581 |
|
|
|
172 |
|
(ii) Exchange-traded derivatives |
|
|
|
|
|
|
|
|
(iii) Securities financing transactions |
|
|
3,132 |
|
|
|
63 |
|
(iv) Netting sets where cross-product netting has been approved |
|
|
|
|
|
|
|
|
Segregated initial margin |
|
|
|
|
|
|
|
|
Non-segregated initial margin |
|
|
3,593 |
|
|
|
72 |
|
Pre-funded default fund contributions |
|
|
284 |
|
|
|
233 |
|
Alternative calculation of own funds requirements for exposures |
|
|
|
|
|
|
|
|
4.7. Credit counterparty credit risk indicators
The information in the tables below relates exclusively to exposures subject to counterparty credit risk.
Table 48. Total exposure to counterparty credit risk
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
TOTAL |
|
|
32,691 |
|
|
|
34,460 |
|
|
|
|
|
|
|
|
|
|
Of which: derivatives |
|
|
24,813 |
|
|
|
23,894 |
|
The above table does not include exposures with central counterparty entities to a sum of EUR 15,590 million.
The following table contains information on the gross positive fair value of the derivative contracts, the potential future exposure, the effect of netting
and collateral agreements, and the final exposure value.
Table 49. Derivatives exposure*
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Gross positive fair value of contracts (public balance sheet scope) |
|
|
64,546 |
|
|
|
65,780 |
|
Gross positive fair value of contracts (non-public balance
sheet scope) |
|
|
64,597 |
|
|
|
65,836 |
|
Netting benefits |
|
|
45,286 |
|
|
|
48,187 |
|
Netted fair value after netting effect |
|
|
19,311 |
|
|
|
17,649 |
|
Collateral held |
|
|
10,983 |
|
|
|
7,688 |
|
Netted fair value after netting effect and collateral held |
|
|
8,328 |
|
|
|
9,961 |
|
Regulatory net add-on |
|
|
16,485 |
|
|
|
13,932 |
|
EAD |
|
|
24,813 |
|
|
|
23,894 |
|
* |
Note: does not include CCPs. |
|
|
|
|
|
100 |
|
2018 Pillar 3 Disclosures Report |
|
|
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
The following table contains information on the gross positive fair value of the derivative contracts, the
potential future exposure, the effect of netting and collateral agreements, and the final exposure value.
Derivatives exposure by product
%
Derivatives exposure by geography
%
In 2018, derivative transactions were concentrated in counterparties with high credit quality, so that around 63% of the
exposure was to counterparties rated A or better.
The distribution by type of counterparty was 60% Institutions and 38% Corporates.
As regards the geographic distribution, 31% of the exposure was accounted for by UK counterparties (mainly Santander UKs operations) and, among the
other country groupings, mostly by Spain (14%), rest of Europe (24%), the US (15%) and Latin America (10%).
Derivatives exposure by category
%
Derivatives exposure by rating
%
The following table shows exposure to counterparty credit risk based on the calculation methodology employed.
Table 50. Analysis of the counterparty
credit risk (CCR) exposure by approach (CCR1)*
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Notional |
|
|
Replacement cost/Current market value |
|
|
Potential future exposure |
|
|
EEPE |
|
|
Multiplier |
|
|
EAD post CRM |
|
|
RWA |
|
Mark to market |
|
|
|
|
|
|
191,517 |
|
|
|
31,217 |
|
|
|
|
|
|
|
|
|
|
|
26,664 |
|
|
|
9,052 |
|
Original exposure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standardised approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internal Model Method (for derivatives and SFTs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial collateral simple method (for SFTs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial collateral comprehensive method (for SFTs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,027 |
|
|
|
304 |
|
VaR for SFTs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102 |
|
2018 Pillar 3 Disclosures Report |
|
|
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
The following table details the breakdown of counterparty credit risk exposures. calculated using the
standardised approach, by portfolio (counterparty type) and risk weighting (by risk grade attributed to the standardised approach):
Table 51. Standardised approach CCR
exposures by regulatory portfolio and risk (CCR3)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Risk weight |
|
|
|
0% |
|
|
2% |
|
|
4% |
|
|
10% |
|
|
20% |
|
|
35% |
|
|
50% |
|
|
70% |
|
|
75% |
|
|
100% |
|
|
150% |
|
|
Deduc. |
|
|
Total |
|
Central governments or central banks |
|
|
4,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
4,770 |
|
Regional government or local authorities |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Public sector non-profit entities |
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133 |
|
Multilateral development banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International organisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutions |
|
|
|
|
|
|
16,116 |
|
|
|
|
|
|
|
|
|
|
|
715 |
|
|
|
|
|
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
17,280 |
|
Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
862 |
|
|
|
5 |
|
|
|
|
|
|
|
870 |
|
Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212 |
|
Institutions and corporates with a short-term credit assessment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exposure against collective investment institutions (CIIs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
Other items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
4,848 |
|
|
|
16,116 |
|
|
|
|
|
|
|
|
|
|
|
756 |
|
|
|
|
|
|
|
413 |
|
|
|
|
|
|
|
212 |
|
|
|
948 |
|
|
|
5 |
|
|
|
|
|
|
|
23,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows more detailed information on exposure to counterparty credit risk (does not include
CCPs) by counterparty region, category and rating:
Table 52. IRB approach. CCR exposures by
portfolio and PD scale (CCR4)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Brazil |
|
PD Scale |
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
AIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
270 |
|
|
|
0.10 |
% |
|
|
66 |
|
|
|
45.00 |
% |
|
|
1.73 |
|
|
|
77 |
|
|
|
28.39 |
% |
|
|
0.15 % < 0.25% |
|
|
51 |
|
|
|
0.24 |
% |
|
|
34 |
|
|
|
45.00 |
% |
|
|
0.81 |
|
|
|
19 |
|
|
|
37.31 |
% |
|
|
0.25 % < 0.50% |
|
|
95 |
|
|
|
0.41 |
% |
|
|
72 |
|
|
|
45.00 |
% |
|
|
1.17 |
|
|
|
54 |
|
|
|
56.32 |
% |
|
|
0.50 % < 0.75% |
|
|
39 |
|
|
|
0.68 |
% |
|
|
70 |
|
|
|
45.00 |
% |
|
|
1.56 |
|
|
|
31 |
|
|
|
79.48 |
% |
|
|
0.75 % < 2.50% |
|
|
14 |
|
|
|
1.15 |
% |
|
|
23 |
|
|
|
45.00 |
% |
|
|
3.21 |
|
|
|
18 |
|
|
|
123.73 |
% |
|
|
2.50 %< 10.00% |
|
|
2 |
|
|
|
5.27 |
% |
|
|
2 |
|
|
|
45.00 |
% |
|
|
0.03 |
|
|
|
3 |
|
|
|
143.42 |
% |
|
|
10.00 % < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
7 |
|
|
|
100.00 |
% |
|
|
1 |
|
|
|
45.00 |
% |
|
|
1.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
478 |
|
|
|
1.77 |
% |
|
|
268 |
|
|
|
45.00 |
% |
|
|
1.54 |
|
|
|
200 |
|
|
|
41.92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Chile |
|
PD Scale |
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
AIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
181 |
|
|
|
0.10 |
% |
|
|
38 |
|
|
|
45.00 |
% |
|
|
0.95 |
|
|
|
38 |
|
|
|
21.18 |
% |
|
|
0.15 % < 0.25% |
|
|
55 |
|
|
|
0.24 |
% |
|
|
26 |
|
|
|
45.00 |
% |
|
|
0.73 |
|
|
|
20 |
|
|
|
36.40 |
% |
|
|
0.25 % < 0.50% |
|
|
13 |
|
|
|
0.41 |
% |
|
|
15 |
|
|
|
45.00 |
% |
|
|
2.88 |
|
|
|
10 |
|
|
|
78.66 |
% |
|
|
0.50 % < 0.75% |
|
|
14 |
|
|
|
0.68 |
% |
|
|
6 |
|
|
|
45.00 |
% |
|
|
2.68 |
|
|
|
14 |
|
|
|
95.45 |
% |
|
|
0.75 % < 2.50% |
|
|
0 |
|
|
|
1.15 |
% |
|
|
1 |
|
|
|
45.00 |
% |
|
|
1.00 |
|
|
|
0 |
|
|
|
90.55 |
% |
|
|
2.50 %< 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00 % < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
263 |
|
|
|
0.17 |
% |
|
|
86 |
|
|
|
45.00 |
% |
|
|
1.10 |
|
|
|
82 |
|
|
|
31.22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRB. Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
1,643 |
|
|
|
0.05 |
% |
|
|
13 |
|
|
|
45.00 |
% |
|
|
1.20 |
|
|
|
253 |
|
|
|
14.36 |
% |
|
|
0.15 % < 0.25% |
|
|
136 |
|
|
|
0.20 |
% |
|
|
27 |
|
|
|
45.00 |
% |
|
|
3.23 |
|
|
|
57 |
|
|
|
41.51 |
% |
|
|
0.25 % < 0.50% |
|
|
49 |
|
|
|
0.36 |
% |
|
|
16 |
|
|
|
45.00 |
% |
|
|
2.91 |
|
|
|
25 |
|
|
|
55.31 |
% |
|
|
0.50 % < 0.75% |
|
|
31 |
|
|
|
0.65 |
% |
|
|
15 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
28 |
|
|
|
0.00 |
% |
|
|
0.75 % < 2.50% |
|
|
0 |
|
|
|
0.69 |
% |
|
|
2 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
0 |
|
|
|
137.51 |
% |
|
|
2.50 %< 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00 % < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
1,859 |
|
|
|
0.08 |
% |
|
|
73 |
|
|
|
45.00 |
% |
|
|
1.42 |
|
|
|
363 |
|
|
|
19.54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
2,122 |
|
|
|
0.07 |
% |
|
|
159 |
|
|
|
45.00 |
% |
|
|
1.38 |
|
|
|
445 |
|
|
|
20.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
2018 Pillar 3 Disclosures Report |
|
|
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Mexico |
|
PD Scale |
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
FIRB. Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
632 |
|
|
|
0.07 |
% |
|
|
33 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
201 |
|
|
|
31.74 |
% |
|
|
0.15 % < 0.25% |
|
|
23 |
|
|
|
0.23 |
% |
|
|
11 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
16 |
|
|
|
69.42 |
% |
|
|
0.25 % < 0.50% |
|
|
9 |
|
|
|
0.39 |
% |
|
|
6 |
|
|
|
45.00 |
% |
|
|
1.36 |
|
|
|
5 |
|
|
|
57.50 |
% |
|
|
0.50 % < 0.75% |
|
|
0 |
|
|
|
0.64 |
% |
|
|
3 |
|
|
|
45.00 |
% |
|
|
2.47 |
|
|
|
0 |
|
|
|
92.82 |
% |
|
|
0.75 % < 2.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.50 % < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
664 |
|
|
|
0.08 |
% |
|
|
53 |
|
|
|
45.00 |
% |
|
|
2.49 |
|
|
|
222 |
|
|
|
33.40 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
207 |
|
|
|
0.11 |
% |
|
|
18 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
73 |
|
|
|
35.49 |
% |
|
|
0.15 % < 0.25% |
|
|
6 |
|
|
|
0.24 |
% |
|
|
11 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
4 |
|
|
|
56.59 |
% |
|
|
0.25 % < 0.50% |
|
|
20 |
|
|
|
0.41 |
% |
|
|
11 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
15 |
|
|
|
73.65 |
% |
|
|
0.50 % < 0.75% |
|
|
17 |
|
|
|
0.68 |
% |
|
|
5 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
16 |
|
|
|
92.91 |
% |
|
|
0.75 % < 2.50% |
|
|
0 |
|
|
|
1.15 |
% |
|
|
1 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
0 |
|
|
|
112.90 |
% |
|
|
2.50 % < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
251 |
|
|
|
0.18 |
% |
|
|
46 |
|
|
|
45.00 |
% |
|
|
2.50 |
|
|
|
108 |
|
|
|
43.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
915 |
|
|
|
0.11 |
% |
|
|
99 |
|
|
|
45.00 |
% |
|
|
2.49 |
|
|
|
330 |
|
|
|
36.06 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Mexico |
|
PD Scale |
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
AIRB. Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.15 % < 0.25% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.25 % < 0.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.50 % < 0.75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.75 % < 2.50% |
|
|
13 |
|
|
|
1.76 |
% |
|
|
8 |
|
|
|
45 |
% |
|
|
3.34 |
|
|
|
16 |
|
|
|
129 |
% |
|
|
2.50 % < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
13 |
|
|
|
1.76 |
% |
|
|
8 |
|
|
|
45.00 |
% |
|
|
3.34 |
|
|
|
16 |
|
|
|
128.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.15 % < 0.25% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.25 % < 0.50% |
|
|
11 |
|
|
|
0.27 |
% |
|
|
41 |
|
|
|
40.83 |
% |
|
|
3.13 |
|
|
|
6 |
|
|
|
53.61 |
% |
|
|
0.50 % < 0.75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.75 % < 2.50% |
|
|
11 |
|
|
|
1.19 |
% |
|
|
594 |
|
|
|
40.83 |
% |
|
|
3.01 |
|
|
|
10 |
|
|
|
88.41 |
% |
|
|
2.50 % < 10.00% |
|
|
2 |
|
|
|
4.66 |
% |
|
|
77 |
|
|
|
40.83 |
% |
|
|
3.45 |
|
|
|
2 |
|
|
|
120.47 |
% |
|
|
10.00% < 100% |
|
|
0 |
|
|
|
24.20 |
% |
|
|
1 |
|
|
|
40.83 |
% |
|
|
1.95 |
|
|
|
0 |
|
|
|
144.92 |
% |
|
|
100% |
|
|
0 |
|
|
|
100.00 |
% |
|
|
12 |
|
|
|
40.83 |
% |
|
|
4.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
24 |
|
|
|
1.42 |
% |
|
|
725 |
|
|
|
40.83 |
% |
|
|
3.10 |
|
|
|
18 |
|
|
|
74.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
37 |
|
|
|
1.54 |
% |
|
|
733 |
|
|
|
42.27 |
% |
|
|
3.18 |
|
|
|
34 |
|
|
|
92.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Portugal |
|
PD Scale |
|
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
AIRB. Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% < 0.15% |
|
|
|
50 |
|
|
|
0.03 |
% |
|
|
3 |
|
|
|
39.98 |
% |
|
|
2.97 |
|
|
|
2 |
|
|
|
4.85 |
% |
|
|
|
0.15% < 0.25% |
|
|
|
1 |
|
|
|
0.23 |
% |
|
|
1 |
|
|
|
45.00 |
% |
|
|
1.00 |
|
|
|
0 |
|
|
|
38.66 |
% |
|
|
|
0.25% < 0.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.50% < 0.75% |
|
|
|
91 |
|
|
|
0.60 |
% |
|
|
1 |
|
|
|
47.54 |
% |
|
|
5.00 |
|
|
|
107 |
|
|
|
118.33 |
% |
|
|
|
0.75% < 2.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.50% < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
|
142 |
|
|
|
0.40 |
% |
|
|
5 |
|
|
|
44.86 |
% |
|
|
4.25 |
|
|
|
110 |
|
|
|
77.66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% < 0.15% |
|
|
|
9 |
|
|
|
0.07 |
% |
|
|
60 |
|
|
|
22.50 |
% |
|
|
4.02 |
|
|
|
5 |
|
|
|
57.04 |
% |
|
|
|
0.15% < 0.25% |
|
|
|
1 |
|
|
|
0.24 |
% |
|
|
4 |
|
|
|
45.00 |
% |
|
|
1.53 |
|
|
|
1 |
|
|
|
45.52 |
% |
|
|
|
0.25% < 0.50% |
|
|
|
89 |
|
|
|
0.38 |
% |
|
|
27 |
|
|
|
46.33 |
% |
|
|
3.92 |
|
|
|
76 |
|
|
|
84.77 |
% |
|
|
|
0.50% < 0.75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.75% < 2.50% |
|
|
|
11 |
|
|
|
1.10 |
% |
|
|
52 |
|
|
|
47.28 |
% |
|
|
4.17 |
|
|
|
11 |
|
|
|
103.10 |
% |
|
|
|
2.50% < 10.00% |
|
|
|
0 |
|
|
|
5.21 |
% |
|
|
15 |
|
|
|
47.54 |
% |
|
|
1.47 |
|
|
|
0 |
|
|
|
140.91 |
% |
|
|
|
10.00% < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
0 |
|
|
|
100.00 |
% |
|
|
3 |
|
|
|
47.54 |
% |
|
|
4.37 |
|
|
|
0 |
|
|
|
25.05 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
111 |
|
|
|
0.86 |
% |
|
|
161 |
|
|
|
46.10 |
% |
|
|
3.94 |
|
|
|
93 |
|
|
|
83.87 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
253 |
|
|
|
0.60 |
% |
|
|
166 |
|
|
|
45.40 |
% |
|
|
4.11 |
|
|
|
203 |
|
|
|
80.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
UK |
|
PD Scale |
|
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
AIRB. Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% < 0.15% |
|
|
|
1,898 |
|
|
|
0.05 |
% |
|
|
40 |
|
|
|
44.99 |
% |
|
|
2.08 |
|
|
|
527 |
|
|
|
27.76 |
% |
|
|
|
0.15% < 0.25% |
|
|
|
32 |
|
|
|
0.23 |
% |
|
|
1 |
|
|
|
46.70 |
% |
|
|
0.03 |
|
|
|
9 |
|
|
|
28.77 |
% |
|
|
|
0.25% < 0.50% |
|
|
|
26 |
|
|
|
0.39 |
% |
|
|
1 |
|
|
|
47.18 |
% |
|
|
1.98 |
|
|
|
23 |
|
|
|
89.93 |
% |
|
|
|
0.50% < 0.75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.75% < 2.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.50% < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
|
1,956 |
|
|
|
0.06 |
% |
|
|
42 |
|
|
|
45.05 |
% |
|
|
2.04 |
|
|
|
560 |
|
|
|
28.61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% < 0.15% |
|
|
|
526 |
|
|
|
0.07 |
% |
|
|
38 |
|
|
|
45.46 |
% |
|
|
4.45 |
|
|
|
135 |
|
|
|
25.68 |
% |
|
|
|
0.15% < 0.25% |
|
|
|
9 |
|
|
|
0.24 |
% |
|
|
9 |
|
|
|
46.80 |
% |
|
|
2.15 |
|
|
|
5 |
|
|
|
58.18 |
% |
|
|
|
0.25% < 0.50% |
|
|
|
39 |
|
|
|
0.58 |
% |
|
|
25 |
|
|
|
47.53 |
% |
|
|
1.34 |
|
|
|
29 |
|
|
|
74.33 |
% |
|
|
|
0.50% < 0.75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.75% < 2.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.50% < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
|
574 |
|
|
|
0.25 |
% |
|
|
72 |
|
|
|
46.22 |
% |
|
|
3.32 |
|
|
|
169 |
|
|
|
29.52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
2,530 |
|
|
|
0.10 |
% |
|
|
114 |
|
|
|
45.00 |
% |
|
|
2.33 |
|
|
|
729 |
|
|
|
28.81 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106 |
|
2018 Pillar 3 Disclosures Report |
|
|
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
SAN Spain |
|
PD Scale |
|
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
AIRB. Sovereign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% < 0.15% |
|
|
|
28 |
|
|
|
0.03 |
% |
|
|
10 |
|
|
|
42.35 |
% |
|
|
2.63 |
|
|
|
3 |
|
|
|
9.72 |
% |
|
|
|
0.15% < 0.25% |
|
|
|
0 |
|
|
|
0.18 |
% |
|
|
2 |
|
|
|
46.61 |
% |
|
|
3.68 |
|
|
|
0 |
|
|
|
31.75 |
% |
|
|
|
0.25% < 0.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.50% < 0.75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.75% < 2.50% |
|
|
|
7 |
|
|
|
1.43 |
% |
|
|
1 |
|
|
|
0.00 |
% |
|
|
1.00 |
|
|
|
8 |
|
|
|
106.00 |
% |
|
|
|
2.50% < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
|
0 |
|
|
|
37.34 |
% |
|
|
1 |
|
|
|
66.53 |
% |
|
|
1.00 |
|
|
|
2 |
|
|
|
364.82 |
% |
|
|
|
100% |
|
|
|
0 |
|
|
|
100.00 |
% |
|
|
1 |
|
|
|
10.74 |
% |
|
|
1.00 |
|
|
|
0 |
|
|
|
27.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
|
36 |
|
|
|
0.91 |
% |
|
|
15 |
|
|
|
34.25 |
% |
|
|
2.29 |
|
|
|
12 |
|
|
|
33.52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRB. Institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00% < 0.15% |
|
|
|
10,077 |
|
|
|
0.06 |
% |
|
|
678 |
|
|
|
44.20 |
% |
|
|
3.04 |
|
|
|
1,214 |
|
|
|
12.05 |
% |
|
|
|
0.15% < 0.25% |
|
|
|
359 |
|
|
|
0.22 |
% |
|
|
78 |
|
|
|
44.08 |
% |
|
|
2.84 |
|
|
|
116 |
|
|
|
32.36 |
% |
|
|
|
0.25% < 0.50% |
|
|
|
281 |
|
|
|
0.37 |
% |
|
|
70 |
|
|
|
42.52 |
% |
|
|
7.25 |
|
|
|
205 |
|
|
|
73.08 |
% |
|
|
|
0.50% < 0.75% |
|
|
|
60 |
|
|
|
0.66 |
% |
|
|
29 |
|
|
|
42.78 |
% |
|
|
0.17 |
|
|
|
35 |
|
|
|
58.78 |
% |
|
|
|
0.75% < 2.50% |
|
|
|
95 |
|
|
|
1.37 |
% |
|
|
67 |
|
|
|
40.52 |
% |
|
|
2.08 |
|
|
|
76 |
|
|
|
80.67 |
% |
|
|
|
2.50% < 10.00% |
|
|
|
9 |
|
|
|
3.38 |
% |
|
|
17 |
|
|
|
40.31 |
% |
|
|
1.25 |
|
|
|
10 |
|
|
|
117.16 |
% |
|
|
|
10.00% < 100% |
|
|
|
0 |
|
|
|
23.28 |
% |
|
|
2 |
|
|
|
39.40 |
% |
|
|
0.23 |
|
|
|
0 |
|
|
|
248.40 |
% |
|
|
|
100% |
|
|
|
4 |
|
|
|
100.00 |
% |
|
|
5 |
|
|
|
46.05 |
% |
|
|
5.00 |
|
|
|
3 |
|
|
|
77.93 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
|
10,884 |
|
|
|
0.13 |
% |
|
|
946 |
|
|
|
44.11 |
% |
|
|
3.15 |
|
|
|
1,661 |
|
|
|
15.26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
|
3,835 |
|
|
|
0.09 |
% |
|
|
207 |
|
|
|
45.00 |
% |
|
|
4.42 |
|
|
|
1,299 |
|
|
|
33.86 |
% |
|
|
|
0.15 % < 0.25% |
|
|
|
554 |
|
|
|
0.24 |
% |
|
|
340 |
|
|
|
41.55 |
% |
|
|
4.19 |
|
|
|
312 |
|
|
|
56.26 |
% |
|
|
|
0.25 % < 0.50% |
|
|
|
689 |
|
|
|
0.38 |
% |
|
|
1,065 |
|
|
|
23.20 |
% |
|
|
4.47 |
|
|
|
574 |
|
|
|
83.35 |
% |
|
|
|
0.50 % < 0.75% |
|
|
|
255 |
|
|
|
0.68 |
% |
|
|
438 |
|
|
|
42.99 |
% |
|
|
4.79 |
|
|
|
239 |
|
|
|
93.85 |
% |
|
|
|
0.75 % < 2.50% |
|
|
|
181 |
|
|
|
1.71 |
% |
|
|
2,018 |
|
|
|
35.39 |
% |
|
|
6.36 |
|
|
|
266 |
|
|
|
146.97 |
% |
|
|
|
2.50% < 10.00% |
|
|
|
75 |
|
|
|
4.81 |
% |
|
|
939 |
|
|
|
1.86 |
% |
|
|
7.34 |
|
|
|
81 |
|
|
|
107.69 |
% |
|
|
|
10.00% < 100% |
|
|
|
4 |
|
|
|
16.34 |
% |
|
|
143 |
|
|
|
2.55 |
% |
|
|
4.59 |
|
|
|
5 |
|
|
|
113.97 |
% |
|
|
|
100% |
|
|
|
19 |
|
|
|
100.00 |
% |
|
|
281 |
|
|
|
3.25 |
% |
|
|
6.18 |
|
|
|
0 |
|
|
|
0.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
|
5,612 |
|
|
|
0.62 |
% |
|
|
5,431 |
|
|
|
40.83 |
% |
|
|
4.86 |
|
|
|
2,775 |
|
|
|
49.46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRB. Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
|
1 |
|
|
|
0.12 |
% |
|
|
104 |
|
|
|
36.43 |
% |
|
|
0.00 |
|
|
|
0 |
|
|
|
5.99 |
% |
|
|
|
0.15 % < 0.25% |
|
|
|
1 |
|
|
|
0.20 |
% |
|
|
126 |
|
|
|
34.66 |
% |
|
|
0.00 |
|
|
|
0 |
|
|
|
11.23 |
% |
|
|
|
0.25 % < 0.50% |
|
|
|
1 |
|
|
|
0.39 |
% |
|
|
181 |
|
|
|
36.39 |
% |
|
|
0.00 |
|
|
|
0 |
|
|
|
17.78 |
% |
|
|
|
0.50 % < 0.75% |
|
|
|
0 |
|
|
|
0.65 |
% |
|
|
74 |
|
|
|
37.02 |
% |
|
|
0.00 |
|
|
|
0 |
|
|
|
23.38 |
% |
|
|
|
0.75 % < 2.50% |
|
|
|
1 |
|
|
|
1.32 |
% |
|
|
252 |
|
|
|
36.86 |
% |
|
|
0.00 |
|
|
|
0 |
|
|
|
34.59 |
% |
|
|
|
2.50% < 10.00% |
|
|
|
3 |
|
|
|
6.92 |
% |
|
|
110 |
|
|
|
35.82 |
% |
|
|
0.00 |
|
|
|
1 |
|
|
|
44.21 |
% |
|
|
|
10.00% < 100% |
|
|
|
23 |
|
|
|
11.70 |
% |
|
|
9,765 |
|
|
|
39.95 |
% |
|
|
3.39 |
|
|
|
15 |
|
|
|
63.23 |
% |
|
|
|
100% |
|
|
|
6 |
|
|
|
100.00 |
% |
|
|
109 |
|
|
|
40.03 |
% |
|
|
5.00 |
|
|
|
1 |
|
|
|
13.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
|
|
|
|
35 |
|
|
|
24.43 |
% |
|
|
10,721 |
|
|
|
39.28 |
% |
|
|
3.71 |
|
|
|
17 |
|
|
|
49.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
|
16,567 |
|
|
|
0.35 |
% |
|
|
17,113 |
|
|
|
42.97 |
% |
|
|
3.50 |
|
|
|
4,465 |
|
|
|
26.95 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
USA |
|
PD Scale |
|
EAD post CRM |
|
|
Average PD |
|
|
Number of obligors |
|
|
Average LGD |
|
|
Average maturity |
|
|
RWA |
|
|
RWA density |
|
AIRB. Corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.00 % < 0.15% |
|
|
9 |
|
|
|
0.09 |
% |
|
|
8 |
|
|
|
45 |
% |
|
|
2.90 |
|
|
|
3 |
|
|
|
36.84 |
% |
|
|
0.15 % < 0.25% |
|
|
1 |
|
|
|
0.24 |
% |
|
|
3 |
|
|
|
45 |
% |
|
|
1.00 |
|
|
|
0 |
|
|
|
39.50 |
% |
|
|
0.25 % < 0.50% |
|
|
0 |
|
|
|
0.41 |
% |
|
|
1 |
|
|
|
45 |
% |
|
|
1.00 |
|
|
|
0 |
|
|
|
54.15 |
% |
|
|
0.50 % < 0.75% |
|
|
0 |
|
|
|
0.68 |
% |
|
|
1 |
|
|
|
45 |
% |
|
|
1.00 |
|
|
|
0 |
|
|
|
71.53 |
% |
|
|
0.75 % < 2.50% |
|
|
5 |
|
|
|
1.15 |
% |
|
|
1 |
|
|
|
45 |
% |
|
|
1.00 |
|
|
|
5 |
|
|
|
90.55 |
% |
|
|
2.50 % < 10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.00% < 100% |
|
|
1 |
|
|
|
24.33 |
% |
|
|
1 |
|
|
|
45 |
% |
|
|
1.00 |
|
|
|
2 |
|
|
|
270.18 |
% |
|
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
16 |
|
|
|
1.45 |
% |
|
|
15 |
|
|
|
45 |
% |
|
|
2.06 |
|
|
|
10 |
|
|
|
64.61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the effects of netting agreements and collateral for exposure to counterparty credit
risk. in addition to the type of collateral exchanges in derivatives transactions and SFTL.
Table 53. Impact of netting and collateral
held on exposure values (CCR5-A)*
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Gross positive fair value or net carrying amount1 |
|
|
Add-on |
|
|
Netting benefits |
|
|
Netted current credit exposure |
|
|
Collateral held |
|
|
EAD |
|
Derivatives |
|
|
64,597 |
|
|
|
30,796 |
|
|
|
59,596 |
|
|
|
35,796 |
|
|
|
10,983 |
|
|
|
24,813 |
|
SFTs |
|
|
150,543 |
|
|
|
3,397 |
|
|
|
27,437 |
|
|
|
126,502 |
|
|
|
118,624 |
|
|
|
7,878 |
|
Cross-product netting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
215,139 |
|
|
|
34,192 |
|
|
|
87,034 |
|
|
|
162,298 |
|
|
|
129,607 |
|
|
|
32,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Gross positive fair value before applying any mitigation technique. In case of securities financing operations,
information is included on the value of the securities or cash delivered to the counterparty. |
|
|
|
|
|
108 |
|
2018 Pillar 3 Disclosures Report |
|
|
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
Table 54. IRB approach. Composition of collateral for exposures to counterparty credit risk (CCR5-B)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Collateral used in derivative transactions |
|
|
Collateral used in SFTs |
|
|
|
Fair value of collateral received |
|
|
Fair value of posted collateral |
|
|
Fair value of collateral |
|
|
Fair value of |
|
|
|
Segregated |
|
|
Unsegregated |
|
|
Segregated |
|
|
Unsegregated |
|
|
received |
|
|
posted collateral |
|
Cash - domestic currency |
|
|
88 |
|
|
|
4,466 |
|
|
|
|
|
|
|
7,001 |
|
|
|
37,278 |
|
|
|
66,333 |
|
Cash - other currencies |
|
|
|
|
|
|
3,943 |
|
|
|
|
|
|
|
2,210 |
|
|
|
7,443 |
|
|
|
28,356 |
|
Domestic sovereign debt |
|
|
20 |
|
|
|
1,124 |
|
|
|
166 |
|
|
|
218 |
|
|
|
40,786 |
|
|
|
32,896 |
|
Other sovereign debt |
|
|
151 |
|
|
|
652 |
|
|
|
552 |
|
|
|
621 |
|
|
|
15,295 |
|
|
|
15,904 |
|
Government agency debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
172 |
|
|
|
170 |
|
|
|
113 |
|
|
|
|
|
|
|
12,865 |
|
|
|
17,254 |
|
Shares |
|
|
199 |
|
|
|
|
|
|
|
339 |
|
|
|
|
|
|
|
4,958 |
|
|
|
2,510 |
|
Other collateral |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
629 |
|
|
|
10,354 |
|
|
|
1,171 |
|
|
|
10,050 |
|
|
|
118,624 |
|
|
|
163,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables show the notional amount of the credit derivatives bought and sold, in addition to the
perfectly hedged credit derivatives that are used for risk mitigation in the capital calculation and the exposure of the hedged transactions, broken down by exposure category.
Table 55. Credit derivatives hedge under IRB
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
EAD of hedged transactions |
|
|
Notional amount of credit derivative hedges |
|
Institutions |
|
|
|
|
|
|
2,403 |
|
Corporates |
|
|
1,916 |
|
|
|
|
|
Securitisation positions or exposures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1,916 |
|
|
|
2,403 |
|
|
|
|
|
|
|
|
|
|
Table 56. Counterparty credit risk. Credit derivative classification. Bought protection*
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bought protection. 31 Dec. 2018 |
|
|
Bought protection. 31 Dec. 2017 |
|
Portfolio type |
|
CDS |
|
|
TRS |
|
|
CDS |
|
|
TRS |
|
Banking book |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
521 |
|
Trading book |
|
|
9,916 |
|
|
|
|
|
|
|
13,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
9,970 |
|
|
|
|
|
|
|
13,019 |
|
|
|
521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Bought credit derivatives do not include loan coverage. |
Table 57. Counterparty credit risk. Classification sold protection
EUR million
|
|
|
|
|
|
|
|
|
|
|
Sold protection. 31 Dec. 2018 |
|
|
Sold protection. 31 Dec. 2017 |
|
Portfolio type |
|
CDS |
|
|
CDS |
|
Banking book |
|
|
|
|
|
|
|
|
Trading book |
|
|
8,966 |
|
|
|
12,117 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
8,966 |
|
|
|
12,117 |
|
|
|
|
|
|
|
|
|
|
Table 58. Credit derivatives exposures (CCR6)*
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Protection bought |
|
|
Protection sold |
|
Notionals |
|
|
|
|
|
|
|
|
Single-name credit default swaps |
|
|
6,928 |
|
|
|
2,385 |
|
Index credit default swaps |
|
|
6,571 |
|
|
|
6,581 |
|
Total return swaps |
|
|
|
|
|
|
|
|
Credit options |
|
|
|
|
|
|
|
|
Other credit derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NOTIONALS |
|
|
13,498 |
|
|
|
8,966 |
|
|
|
|
|
|
|
|
|
|
Fair values |
|
|
|
|
|
|
|
|
Positive fair value (asset) |
|
|
7 |
|
|
|
123 |
|
Negative fair value (liability) |
|
|
-187 |
|
|
|
-5 |
|
* |
Bought credit derivatives do include loan coverage. |
For further details, see the Risk Management Chapter (sections 3.2 and 3.5) on the 2018 Annual Report.
|
|
|
|
|
110 |
|
2018 Pillar 3 Disclosures Report |
|
|
COUNTERPARTY CREDIT RISK _ 2018 Pillar 3 Disclosures Report
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
5. Credit risk - Securitisations
Main figures
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
RWA |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Securitisation exposures in banking book |
|
|
33,639 |
|
|
|
19,933 |
|
|
|
5,014 |
|
|
|
3,678 |
|
Of which IRB approach |
|
|
32,025 |
|
|
|
16,763 |
|
|
|
4,276 |
|
|
|
2,482 |
|
Of which IRB supervisory formula approach (SFA) |
|
|
14,701 |
|
|
|
4,907 |
|
|
|
1,915 |
|
|
|
708 |
|
Of which standardised approach (SA) |
|
|
1,614 |
|
|
|
3,170 |
|
|
|
738 |
|
|
|
1,196 |
|
RWA by calculation method
RWA by geography
EAD variation
EUR million
RWA variation
EUR million
5.1. Theoretical considerations on securitisation
At Santander Group, securitisation is given the treatment stipulated in chapter five of the CRR. The assessment of the characteristics to determine whether or
not a securitisation exists, and consequently a transaction that has to be processed under the conditions described in this section, is performed in compliance with the legal format and economic basis of the transaction.
Pursuant to the CRR, the following concepts shall be interpreted using the following regulatory definitions:
Securitisation: a financial transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having
both of the following characteristics:
a. |
Payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures.
|
b. |
Subordination of tranches determines the distribution of losses during the ongoing life of the transaction or
scheme. |
Securitisation position: exposures arising from securitisations. For these purposes, the providers of credit risk hedges
for a specific securitisation position are considered to hold positions in the securitisation.
Tranche: contractually established segment of the
credit risk associated with an exposure or a number of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in each other such segment, without taking account of credit
protection provided by third parties directly to the holders of positions in the segment or in other segments. In this respect, the whole securitisation position either forms part of a tranche or is a trance in itself. The following terms can also
be defined:
|
|
First loss tranche: this tranche is given a weighting of 1,250%. |
|
|
Mezzanine tranche: this is the tranche, other than the first loss tranche, that ranks below the most senior position in the securitisation and below any position in the securitisation assigned a credit
rating of 1 in the case of securitisations under the standardised approach or a rating of 1 or 2 in the case of securitisations under the IRB approach. |
|
|
Senior tranche: All tranches other than the first loss or mezzanine tranches. Within the senior tranche, the super senior tranche is the top tranche in the priority of payments, without taking into account for
these purposes any amounts owed under interest rate or currency derivatives, brokerage charges or similar payments. |
Traditional
securitisations: means a securitisation involving the economic transfer of the exposures being securitised to a securitisation special purpose vehicle that issues securities. This may be accomplished by the transfer of ownership of the
securitised exposures from the originator institution to an SSPE or through sub-participation by an SSPE, which shall include, for this purpose, mortgage participations mortgage transfer certifications and
similar securities. The securities issued do not represent payment obligations of the originator institution.
Synthetic securitisations: means a securitisation where the transfer of risk is achieved by the use of
credit derivatives or guarantees, and the exposures being securitised remain exposures of the originator institution.
Resecuritisations: means
securitisation where the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation position.
Asset-backed commercial paper (ABCP) programme: means a programme of securitisations the securities issued by which predominantly take the form of
commercial paper with an original maturity of one year or less.
Investment entity: any institution or subject, other than the originator or
sponsor institution, holding a securitisation position.
Originator institution: Means an institution that:
a. |
Itself or through related entities, directly or indirectly, was involved in the original agreement which
created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised; or... |
b. |
...Purchases a third partys exposures for its own account and then securitises them.
|
Sponsor institution: institution other than the originator that establishes and manages an asset-backed commercial paper
programme, or other securitisation scheme that purchases exposures from third-party entities and to which liquidity or credit facilities or other credit enhancements are generally granted.
|
|
|
|
|
114 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
5.2. Securitisation accounting policies
The rule for derecognising securitised assets is that set by IFRS 9 Financial Instruments for the derecognition of a financial asset. 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. |
Where substantially all the risks and rewards are transferred to third parties, e.g. in asset securitisations
in which the transferor neither retains subordinated debt nor grants any credit enhancement to the new holders, the transferred financial assets are derecognised and any rights or obligations retained or created in the transfer are recognised
simultaneously. The result is recognised in the accounts. |
2. |
Where substantially all the risks and rewards associated with the transferred financial asset are retained (as
in securitisations in which subordinated debt or some other type of credit enhancements are retained that absorb substantially all of the expected losses for the transferred asset or the probable variation of its net cash flows), the transferred
financial asset is not derecognised and continues to be measured by the same criteria as before the transfer. The following is also recognised in the accounts: |
|
a. |
An associated financial liability in an amount equal to the consideration received, thereafter measured at
amortised cost, unless the requirements for classification as liabilities at fair value through profit or loss are met, in which case it is measured at fair value. |
|
b. |
The income from the financial asset that has been transferred but not derecognised and any expense incurred on
the new financial liability, without netting.
|
3. |
Where substantially all the risks and rewards associated with the transferred financial asset are neither
transferred nor retained, e.g. in securitisations in which the transferor takes on subordinated debt or some other type of credit enhancement for a portion of the transferred asset and thus significantly but not substantially reduces its exposure to
the variation in the present value of future net cash flows, the following distinction is made: |
|
a. |
Where the transferor does not retain control, the transferred financial asset is derecognised and any right or
obligation retained or created in the transfer is recognised. |
|
b. |
Where the transferor retains control of the transferred financial asset, it continues to recognise the
transferred financial asset on its balance sheet for an amount equal to its exposure to possible changes in value and recognises a financial liability associated with the transferred financial asset. The net amount of the transferred asset and
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 expire or when substantially all
the inherent risks and rewards have been transferred to third parties and when substantially all the risks and rewards are neither transferred nor retained but control of the assets is transferred.
There have been no changes with respect to the previous year in the methods, assumptions and key data used to assess securitised exposures.
There is no specific accounting treatment for synthetic securitisations or assets awaiting securitisation
5.3. Management of the securitisation activity at Santander Group
5.3.1. Santander Group securitisation objectives and management
Through its securitisation activity Santander Group has several objectives:
|
|
Manage and diversify its credit risk: securitisation transactions and the subsequent sale of the securitisation bonds in the market serve to reduce the credit risk concentrations that can arise naturally from the
Groups commercial activity. The effective transfer of risks achieved through these transactions enables the Group to optimise its credit risk exposure and contributes to value creation by reducing the banks need to retain own funds.
|
|
|
Obtain liquidity: securitisation enables the Group to mobilise its balance sheet by transforming illiquid assets into liquid assets and obtain wholesale funding by selling or collateralising those transformed assets.
Also, the retained securitisation positions can be used as collateral for to obtain ECB funding. |
|
|
Diversify funding sources: the liquidity obtained from securitisation allows the Group to diversify its funding sources in terms of duration and product. |
|
|
Optimise capital consumption: eight new securitisations were originated in 2018, all involving a significant transfer of risk. |
Each year, based on the liquidity plan and taking into account certain prudential limits on raising short-term market funding, Santander Group establishes a
yearly issue and securitisation plan for each subsidiary/global business. This task is carried out by financial management.
5.3.2. Santander Group securitisation functions
Santander Groups role in the securitisation process is mainly that of originator of the underlying assets being securitised. Nevertheless, in addition to
originating the underlying payments, the Group also plays a role in servicing the loans and granting subordinated loans. It also acts as counterparty, when needed, to the interest rate swap agreement for the SSPE that acquires the loans.
Santander Group also acts as an investor, acquiring positions in SSPEs originated by non-Group entities and/or
retaining a portion of the positions originated by the bank itself.
Santander Group is sponsor of a securitisation transaction whose underlying consists
of loans granted by various financial institutions to SSPEs of mortgage-backed bonds to cover the reserve fund.
Santander Group also structures and
places its own securitisations, as it does for third parties, and leads and promotes new structures in different jurisdictions for both funding and risk transfer purposes. This activity is situated in the context of a revival of securitisation as a
tool for channelling credit to the real economy, with a special focus on SMEs.
|
|
|
|
|
116 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
The following diagram depicts the geographical distribution of Santander Groups securitisation activity as
of 31 December 2018.
Distribution of the groups
securitisation function
|
|
|
The information on the securitisation positions of the investment and trading portfolio of Santander Group is included. In originator activity, Rest includes Austria (0.3%), the Netherlands (0.3%), Norway (0.3%), Poland (0.6%) and
Sweden (0.5%). |
|
The information on the securitisation positions of the investment and trading portfolio of Santander Group is included. In investor activity, Rest includes Luxembourg (0.1%), Austria (0.2%), Finland (0.1%), Ireland (0.2%), Mexico
(0.2%), the Netherlands (0.4%), Norway (0.3%), Poland (0.2%), Sweden (0.1%) and Brazil (0.2%). |
As indicated in the graph, originator activity accounts for more than 90% of Santander Group securitisation
activity, with investment activity accounting for 9.48% and sponsoring accounting for 0.05% (the latter being concentrated in Spain).
87% of the volume
of securitisations originated by Santander Group is concentrated Spain, the United States, the United Kingdom and Germany.
On the investment side, 93% of
acquisitions of investment positions are concentrated in Spain (59%) and the United Kingdom (34%) as shown in the next graph.
Furthermore, regarding the
distribution of positions by country from the debtor, it can be seen that 43.70% of the final risk is in UK (because the positions that are invested from the United Kingdom are located in the same), 19.65% is in the United States; 10.87% in France,
7.23% in Spain and the rest are essentially distributed throughout Europe, as it can be seen in the investor activity graph on the previous page:
Distribution by investor country
5.3.3. Risk inherent to the securitisation activity at Santander Group
Securitisation offers advantages in terms of lower funding costs and better risk management. However, it exposes investors to certain inherent risks. Santander
Group is not exposed to any additional risk by acting as originator or sole investor in any given SSPE. In fact, doing so reduces liquidity risk by transforming illiquid assets (originated loans) into liquid assets (securitisation bonds).
When Santander Group acts as originator and as one of the investors in the issue, it is subject to the following risks:
|
|
Credit risk: the risk that borrowers will fail to meet their contractual obligations in due time and form, with the consequent impairment of the underlying assets backing the securitisation positions.
Credit risk is assessed by external credit rating agencies, which assign ratings to the securitisation positions. At Santander Group, the maximum exposure in the banking book is limited by rating (AAA, AA, A, BBB, BB) and by type of underlying. In
addition, the Group continuously monitors published data on default of the underlying, credit quality of the originator and mandatory minimum ratios and ratings in the structure, as well as data on granularity, geographical distribution and type of
underlying. |
|
|
Prepayment risk: the risk of early repayment of all or part of the assets underlying the securitisation, so that the securitisation positions mature before the contractual maturity date of the underlyings.
The calculation of the average life, return and duration of the securitisation positions is subject, among other things, to assumptions about the rate at which the underlying loans will be prepaid, which may vary. This risk is practically
non-existent at Santander Group as the contractual maturity of the securities issued is usually longer than that of any underlying. |
|
|
Basis risk: this risk arises when there is a mismatch between the interest rates or maturities of the securitised assets and those of the securitisation positions. At Santander Group this risk is usually
hedged with swaps. |
|
|
Exchange rate risk: comes into play in securitisations where the securitised assets and the securitisation positions are denominated in a different currencies. At Santander Group, the risk arising from the
currency mismatch between the underlying and the issue is usually hedged in the structure via a swap. The risk to PnL assumed in non-euro bonds is managed by the Active Credit Portfolio Management (ACPM) area.
|
|
|
Liquidity risk: is diminished through the securitisation process, whereby naturally illiquid assets are transformed into debt securities that can be traded on exchanges. In some securitisations, however,
such as those which issue commercial paper, liquidity risk is still significant and is manifested in the need to cover potential timing mismatches between interest payments on the underlying assets and payments of interest on the securities. At
Santander Group this risk tends to be very small and is mitigated by liquidity lines included in the structure. The liquidity risk associated with bond positions is also managed by establishing maximum holding periods. |
5.4. Credit risk - Securitizations
5.4.1.
Methodology for calculating risk-weighted exposures in securitisation activities
Santander Group calculates regulatory capital under the
securitisation approach only if the securitisation special purpose entity (SSPE) meets the regulatory conditions established in the CRR for significant risk transfer. Otherwise, capital is calculated for the securitised exposures as if they had
never been securitised. Capital is also calculated for investment positions in securitisation funds originated by third parties.
Capital requirements for
securitisation positions are calculated by applying the appropriate risk weight to the exposure value of each position, depending on the approach (standardised or IRB) used by the entity to calculate the risk-weighted exposure amounts of the
securitised portfolio. If the entity uses both approaches for the various securitised exposures that make up the underlying portfolio, the method that applies to the predominant proportion of exposures in the portfolio is used.
Entities that use the standardised approach to calculate capital requirements apply the risk weights stipulated in the CRR (see following table), based on the
credit quality level assigned to the external credit ratings issued by eligible External Credit Assessment Institutions (ECAIs) for each securitisation or re-securitisation position:
|
|
|
|
|
118 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
RW of securitisations for the standardised approach
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term ratings |
|
|
Long-term ratings |
|
|
Securitisation positions |
|
|
Resecuritisation positions |
|
1 |
|
|
A-1+, A-1 |
|
|
|
AAA to AA- |
|
|
|
20 |
% |
|
|
40 |
% |
2 |
|
|
A-2 |
|
|
|
A+ to A- |
|
|
|
50 |
% |
|
|
100 |
% |
3 |
|
|
A-3 |
|
|
|
BBB+ to BBB- |
|
|
|
100 |
% |
|
|
225 |
% |
4 |
|
|
N/A |
|
|
|
BB+ to BB- |
|
|
|
350 |
% |
|
|
650 |
% |
Other levels |
|
|
|
|
|
|
|
|
|
|
1250 |
% |
|
|
1250 |
% |
Where no external credit rating is available, the entity assigns the weighted-average risk weight applied to
securitised exposures, multiplied by the concentration ratio (look through method). If the entity has insufficient information on the underlying portfolio, a risk weight of 1,250% is assigned.
Entities that adopt the IRB approach when calculating capital requirements use the external-ratings-based approach, applying the risk weights stipulated in
the CRR (see following tables). These weights ultimately depend on whether it is a securitisation or re-securitisation, whether it is the most senior position in the securitisation or not, the effective number
of exposures (granularity of the underlying) and the credit quality level assigned to the external credit ratings issued by eligible ECAIs or the ratings inferred from each securitisation position. These risk weights are multiplied by 1.06 to
calculate the risk-weighted exposure amounts, except for tranches that already have the maximum weighting of 1,250%.
Where no external credit rating is
available but PD and LGD estimates are available, the supervisory formula method may be used. The inputs for this method are tranche thickness, average capital charge and expected loss on the underlying (KIRB), the average LGD of the underlying and
the effective number of exposures.
As for the external ratings method, the relationship is as follows when the ratings are long-term:
RWs of securitisations with long-term
rating (RBA-IRB approach)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation positions |
|
|
Resecuritisation positions |
|
Credit quality
levels |
|
Long-term ratings |
|
|
Senior tranche and effective no. of positions >6 |
|
|
Effective no. Of positions >6 and junior tranche |
|
|
Effective no. of positions <6 |
|
|
Senior tranche |
|
|
Junior tranche |
|
1 |
|
|
AAA |
|
|
|
7 |
% |
|
|
12 |
% |
|
|
20 |
% |
|
|
20 |
% |
|
|
30 |
% |
2 |
|
|
AA+, AA, AA- |
|
|
|
8 |
% |
|
|
15 |
% |
|
|
25 |
% |
|
|
25 |
% |
|
|
40 |
% |
3 |
|
|
A+ |
|
|
|
10 |
% |
|
|
18 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
50 |
% |
4 |
|
|
A |
|
|
|
12 |
% |
|
|
20 |
% |
|
|
35 |
% |
|
|
40 |
% |
|
|
65 |
% |
5 |
|
|
A- |
|
|
|
20 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
60 |
% |
|
|
100 |
% |
6 |
|
|
BBB+ |
|
|
|
35 |
% |
|
|
50 |
% |
|
|
50 |
% |
|
|
100 |
% |
|
|
150 |
% |
7 |
|
|
BBB |
|
|
|
60 |
% |
|
|
75 |
% |
|
|
75 |
% |
|
|
150 |
% |
|
|
225 |
% |
8 |
|
|
BBB- |
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
200 |
% |
|
|
350 |
% |
9 |
|
|
BB+ |
|
|
|
250 |
% |
|
|
250 |
% |
|
|
250 |
% |
|
|
300 |
% |
|
|
500 |
% |
10 |
|
|
BB |
|
|
|
425 |
% |
|
|
425 |
% |
|
|
425 |
% |
|
|
500 |
% |
|
|
650 |
% |
11 |
|
|
BB- |
|
|
|
650 |
% |
|
|
650 |
% |
|
|
650 |
% |
|
|
750 |
% |
|
|
850 |
% |
Other levels |
|
|
|
|
|
|
1250 |
% |
|
|
1250 |
% |
|
|
1250 |
% |
|
|
1250 |
% |
|
|
1250 |
% |
While for securitisation positions with short-term external ratings the relationship is as follows:
RWs of securitisations with short-term
rating (RBA-IRB approach)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation positions |
|
|
Resecuritisation positions |
|
Credit quality
levels |
|
Long-term ratings |
|
|
Senior tranche and effective no. of positions >6 |
|
|
Effective no. Of positions >6 and junior tranche |
|
|
Effective no. of positions <6 |
|
|
Senior tranche |
|
|
Junior tranche |
|
1 |
|
|
A-1+, A-1 |
|
|
|
7 |
% |
|
|
12 |
% |
|
|
20 |
% |
|
|
20 |
% |
|
|
30 |
% |
2 |
|
|
A-2 |
|
|
|
12 |
% |
|
|
20 |
% |
|
|
35 |
% |
|
|
40 |
% |
|
|
65 |
% |
3 |
|
|
A-3 |
|
|
|
60 |
% |
|
|
75 |
% |
|
|
75 |
% |
|
|
150 |
% |
|
|
225 |
% |
Other levels |
|
|
|
|
|
|
1250 |
% |
|
|
1250 |
% |
|
|
1250 |
% |
|
|
1250 |
% |
|
|
1250 |
% |
|
|
|
|
|
120 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
The following table shows positions in securitisations with risk transfer and in investment and sponsoring
positions on the banking book, based on the approach used to calculate regulatory capital:
Table 59. Breakdown of repurchased
positions in SSPE with risk transfer, distributed by function and approach used
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
|
|
Onbalance sheet amount |
|
|
Offbalance sheet amount |
|
|
EAD |
|
|
EAD after capital reductions |
|
|
RWA |
|
|
Onbalance sheet amount |
|
|
Offbalance sheet amount |
|
|
EAD |
|
|
EAD after capital reductions |
|
|
RWA |
|
Originator standardised approach |
|
|
1,163 |
|
|
|
|
|
|
|
1,150 |
|
|
|
1,150 |
|
|
|
450 |
|
|
|
2,816 |
|
|
|
|
|
|
|
2,810 |
|
|
|
2,810 |
|
|
|
963 |
|
Originator RBA approach |
|
|
10,581 |
|
|
|
|
|
|
|
10,581 |
|
|
|
10,581 |
|
|
|
1,702 |
|
|
|
5,776 |
|
|
|
|
|
|
|
5,776 |
|
|
|
5,776 |
|
|
|
1,019 |
|
Originator SFA approach |
|
|
13,415 |
|
|
|
1,286 |
|
|
|
14,701 |
|
|
|
14,701 |
|
|
|
1,915 |
|
|
|
4,907 |
|
|
|
|
|
|
|
4,907 |
|
|
|
4,907 |
|
|
|
708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total originator |
|
|
25,159 |
|
|
|
1,286 |
|
|
|
26,432 |
|
|
|
26,432 |
|
|
|
4,067 |
|
|
|
13,499 |
|
|
|
|
|
|
|
13,493 |
|
|
|
13,493 |
|
|
|
2,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor standardised approach |
|
|
464 |
|
|
|
|
|
|
|
464 |
|
|
|
464 |
|
|
|
288 |
|
|
|
360 |
|
|
|
|
|
|
|
360 |
|
|
|
360 |
|
|
|
233 |
|
Investor RBA approach |
|
|
6,420 |
|
|
|
284 |
|
|
|
6,703 |
|
|
|
6,703 |
|
|
|
633 |
|
|
|
4,264 |
|
|
|
1,775 |
|
|
|
6,039 |
|
|
|
6,039 |
|
|
|
729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investor |
|
|
6,884 |
|
|
|
284 |
|
|
|
7,168 |
|
|
|
7,168 |
|
|
|
921 |
|
|
|
4,624 |
|
|
|
1,775 |
|
|
|
6,399 |
|
|
|
6,399 |
|
|
|
962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsor standardised approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsor RBA approach |
|
|
|
|
|
|
40 |
|
|
|
40 |
|
|
|
40 |
|
|
|
25 |
|
|
|
|
|
|
|
40 |
|
|
|
40 |
|
|
|
40 |
|
|
|
26 |
|
Total sponsor |
|
|
|
|
|
|
40 |
|
|
|
40 |
|
|
|
40 |
|
|
|
25 |
|
|
|
|
|
|
|
40 |
|
|
|
40 |
|
|
|
40 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
32,043 |
|
|
|
1,609 |
|
|
|
33,640 |
|
|
|
33,640 |
|
|
|
5,014 |
|
|
|
18,123 |
|
|
|
1,815 |
|
|
|
19,933 |
|
|
|
19,933 |
|
|
|
3,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which: traditional securitisations |
|
|
15,493 |
|
|
|
1,609 |
|
|
|
17,090 |
|
|
|
17,090 |
|
|
|
2,741 |
|
|
|
9,547 |
|
|
|
1,659 |
|
|
|
11,199 |
|
|
|
11,199 |
|
|
|
2,253 |
|
Of which: synthetic securitisations |
|
|
16,550 |
|
|
|
|
|
|
|
16,550 |
|
|
|
16,550 |
|
|
|
2,273 |
|
|
|
8,577 |
|
|
|
157 |
|
|
|
8,733 |
|
|
|
8,733 |
|
|
|
1,425 |
|
On and off-balance sheet totals before provisions and after outflows to other
regulatory reports.
EAD IRB (RBA & SFA): exposures net of collateral, before provisions and deductions and after outflows to other regulatory
reports.
EAD SA: exposures net of collateral, before deductions and after provisions and outflows to other regulatory reports.
RWA IRB (RBA & SFA): after provisions, deductions and outflows to other regulatory reports and before application of the limit.
RWA SA: after provisions, deductions and outflows to other regulatory reports and before application of the limit.
It should be noted that for all securitisations which qualify for a risk weight of 1,250%, the entity has opted
to calculate its risk-weighted exposures instead of deducting the exposure amount from equity. Accordingly, the EAD before and after the deductions is the same.
As shown in Table 59, exposure has increase in an 68% due to both the increase in exposures in securitisations originated by Santander and in investment
positions in third parties. In 2018, eight new securitisations with risk transfer were originated with the main goal of optimizing capital consumption.
Meanwhile, securitisation positions in the trading book are eliminated from the regulatory capital calculation
based on an internal market risk model and are included in the calculation of capital for specific risk, in accordance with art. 335 of the CRR. The correlation trading portfolio is also included among these positions. This portfolio consists of
securitisation positions and nth-to-default derivatives that meet all the criteria stated in art. 338.1 of the CRR. Therefore, none of these positions are taken into
consideration in the VaR spread and IRC calculation, although they are included in the interest rate VaR calculation (general risk). Capital requirements for these securitisation positions are calculated as if the positions were in the banking book,
distinguishing between:
|
|
Securitisation positions that are rated by an external rating agency, for which capital requirements are calculated using the external-ratings-based approach described above, and |
|
|
Unrated securitisation positions, to which the risk weight resulting from the supervisory formula method is applied. |
Lastly, from 1 January 2019, Regulation (EU) 2017/2402 on securitisations came into force, to which all new positions from that date will be required to
comply with, and there will be a one-year grandfathering period for existing positions. This regulation will change the prudential requirements for credit institutions and investment firms, establishing a new
treatment for securitisation positions. One of the most significant changes is that positions in preferential securitisation tranches may not consume more capital than the loan portfolio. It also establishes more favourable treatment for
preferential tranches of STS securitisation tranches or those which, with certain conditions, favour funding for SMEs.
5.4.2. Securitisation funds
with risk transfer
Santander Group, as an originator institution, retains positions in the funds with the transfer of risks issued by Group entities.
The Group also acquires positions in SSPEs originated by non-Group entities and is the sponsor of one securitisation fund. The following tables contain information on the balances of securitisation positions
purchased from third parties and retained in funds originated by Santander Group with risk transfer, both in the banking book and in the trading book.
|
|
|
|
|
122 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
Table 60. Aggregate amount of securitisation positions purchased and retained with risk transfer. Banking book IRB approach
EUR million
31 Dec. 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD |
|
|
RWA |
|
|
|
Securitisations |
|
|
Resecuritisations |
|
|
Total RWA |
|
|
Securitisations |
|
|
Resecuritisations |
|
|
Total RWA |
|
IRB approach. Distribution
by exposure type
and risk weight |
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
TOTAL |
|
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
TOTAL |
|
Investor positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7-10% |
|
|
5,387 |
|
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
5,641 |
|
|
|
382 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
402 |
|
12-18% |
|
|
743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
743 |
|
|
|
119 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
121 |
|
20-35% |
|
|
234 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
264 |
|
|
|
50 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
57 |
|
40-75% |
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,420 |
|
|
|
284 |
|
|
|
|
|
|
|
|
|
|
|
6,703 |
|
|
|
606 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originator positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7-10% |
|
|
21,578 |
|
|
|
1,286 |
|
|
|
|
|
|
|
|
|
|
|
22,863 |
|
|
|
1,580 |
|
|
|
90 |
|
|
|
|
|
|
|
|
|
|
|
1,670 |
|
12-18% |
|
|
1,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,119 |
|
|
|
141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141 |
|
20-35% |
|
|
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
687 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143 |
|
40-75% |
|
|
286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
286 |
|
|
|
216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216 |
|
100% |
|
|
113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
425% |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
650% - 850% |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224 |
|
1250% |
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
188 |
|
|
|
1,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
23,996 |
|
|
|
1,286 |
|
|
|
|
|
|
|
|
|
|
|
25,282 |
|
|
|
3,527 |
|
|
|
90 |
|
|
|
|
|
|
|
|
|
|
|
3,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsor positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40-75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL IRB APPROACH |
|
|
30,416 |
|
|
|
1,569 |
|
|
|
|
|
|
|
40 |
|
|
|
32,025 |
|
|
|
4,132 |
|
|
|
118 |
|
|
|
|
|
|
|
25 |
|
|
|
4,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD IRB: exposures net of collateral, before provisions and deductions and after outflows to other regulatory reports.
RWA IRB: after provisions, deductions and outflows to other regulatory reports and before application of the limit.
As shown in Table 60, with the IRB approach, more than 88% of the exposures have a risk weight lower than 10%,
which reflects an improvement compared to the previous years.
This portfolio distribution reflects the good quality of the investments made by Santander
Group.
Table 61. Aggregate amount of securitisation positions purchased and retained with risk transfer. Investment portfolio. Standardised approach
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
EAD |
|
|
RWA |
|
|
|
Securitisations |
|
|
Resecuritisations |
|
|
Total EAD |
|
|
Securitisations |
|
|
Resecuritisations |
|
|
Total EAD |
|
IRB approach. Distribution by
exposure type
and risk weight |
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
TOTAL |
|
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
On- balance sheet exposures |
|
|
Off- balance sheet and derivative exposures |
|
|
TOTAL |
|
Investor positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40-75% |
|
|
353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
353 |
|
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176 |
|
100% |
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111 |
|
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
464 |
|
|
|
288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originator positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20-35% |
|
|
1,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,024 |
|
|
|
205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205 |
|
40-75% |
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
100% |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29 |
|
350% |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
1250% |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,150 |
|
|
|
450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SA APPROACH |
|
|
1,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,614 |
|
|
|
738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAD SA: exposures net of collateral, before deductions and after provisions and outflows other regulatory reports.
RWD SA: after provisions, deductions and outflows to other regulatory reports and before application of the limit.
Note: Under the standardised approach, the investment positions with no rating, which use capital based on the average RW of the underlying net multiplied by
the concentration coefficient, are kept in the balance sheet.
As shown in Table 61, within the standardised approach, we can see that 63% of the exposures have a risk weight
equal or less than 35% (rating between AAA and AA-), reflects the good quality of the investments made by Santander Group, despite the decrease when compared to the previous year.
|
|
|
|
|
124 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
Table 62. Aggregate amount of securitisation positions purchased and retained. Trading book
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Investor positions |
|
|
Originator positions |
|
|
Sponsor positions |
|
ABS PORTFOLIO
RBA approach |
|
Mark to market |
|
|
RWA |
|
|
Mark to market |
|
|
RWA |
|
|
Mark to market |
|
|
RWA |
|
20-35% |
|
|
0.91 |
|
|
|
0.24 |
|
|
|
0.28 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
100% |
|
|
0.10 |
|
|
|
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ABS Portfolio |
|
|
1.01 |
|
|
|
0.35 |
|
|
|
0.28 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORRELATION PORTFOLIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RBA approach |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supervisory formula method |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total correlation portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
1.01 |
|
|
|
0.35 |
|
|
|
0.28 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: The table does not include the RWA of short position correlation, since it does not consume capital.
As it can be observed in the Table 62, in the trading portfolio, more than 92% of the Mark to Market have risk
weight equal or less than 35% (rating above A-).
The following table gives a breakdown of the securitisation positions purchased or retained by securitised asset
class and the Banks role in the securitisation.
Table 63. Securitisation positions
purchased and retained with risk transfer by exposure type in the banking book
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
|
|
Exposure |
|
|
RWA |
|
|
EAD |
|
|
RWA |
|
|
|
Originator |
|
|
Investor |
|
|
Sponsor |
|
|
Originator |
|
|
Investor |
|
|
Sponsor |
|
|
Originator |
|
|
Investor |
|
|
Sponsor |
|
|
Originator |
|
|
Investor |
|
|
Sponsor |
|
Traditional securitisations |
|
|
9,882 |
|
|
|
7,168 |
|
|
|
|
|
|
|
1,795 |
|
|
|
921 |
|
|
|
|
|
|
|
5,086 |
|
|
|
6,069 |
|
|
|
|
|
|
|
1,338 |
|
|
|
887 |
|
|
|
|
|
Residential mortgages |
|
|
13 |
|
|
|
3,367 |
|
|
|
|
|
|
|
18 |
|
|
|
365 |
|
|
|
|
|
|
|
27 |
|
|
|
4,066 |
|
|
|
|
|
|
|
49 |
|
|
|
440 |
|
|
|
|
|
Commercial mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
|
|
|
|
164 |
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
Leasing |
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
4,159 |
|
|
|
2,134 |
|
|
|
|
|
|
|
374 |
|
|
|
375 |
|
|
|
|
|
|
|
|
|
|
|
1,008 |
|
|
|
|
|
|
|
|
|
|
|
285 |
|
|
|
|
|
Mortgage covered bonds |
|
|
5,710 |
|
|
|
573 |
|
|
|
|
|
|
|
1,403 |
|
|
|
61 |
|
|
|
|
|
|
|
5,058 |
|
|
|
411 |
|
|
|
|
|
|
|
1,290 |
|
|
|
44 |
|
|
|
|
|
Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation positions |
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
Others |
|
|
|
|
|
|
857 |
|
|
|
|
|
|
|
|
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
374 |
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
|
|
Resecuritisations |
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
5 |
|
|
|
40 |
|
|
|
|
|
|
|
1 |
|
|
|
26 |
|
Securitisation positions |
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
5 |
|
|
|
40 |
|
|
|
|
|
|
|
1 |
|
|
|
26 |
|
Synthetic securitisations |
|
|
16,550 |
|
|
|
|
|
|
|
|
|
|
|
2,273 |
|
|
|
|
|
|
|
|
|
|
|
8,408 |
|
|
|
326 |
|
|
|
|
|
|
|
1,351 |
|
|
|
74 |
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
10,105 |
|
|
|
|
|
|
|
|
|
|
|
1,490 |
|
|
|
|
|
|
|
|
|
|
|
2,717 |
|
|
|
|
|
|
|
|
|
|
|
487 |
|
|
|
|
|
|
|
|
|
Mortgage covered bonds |
|
|
3,310 |
|
|
|
|
|
|
|
|
|
|
|
334 |
|
|
|
|
|
|
|
|
|
|
|
3,688 |
|
|
|
|
|
|
|
|
|
|
|
555 |
|
|
|
|
|
|
|
|
|
Others |
|
|
3,134 |
|
|
|
|
|
|
|
|
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
2,003 |
|
|
|
326 |
|
|
|
|
|
|
|
309 |
|
|
|
74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
26,432 |
|
|
|
7,168 |
|
|
|
40 |
|
|
|
4,067 |
|
|
|
921 |
|
|
|
25 |
|
|
|
13,493 |
|
|
|
6,399 |
|
|
|
40 |
|
|
|
2,690 |
|
|
|
962 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As shown in Table 63, more than 99% of the retained positions are in securitisations (not resecuritisations).
In comparison with the previous year, main increase is related to the originator exposure.
|
|
|
|
|
126 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
The increase of originator positions is motivated by the origination of eight new securitisations in 2018.
Turning to originated securitisations with risk transfer, the following table shows the current situation of the underlying portfolio and the changes compared
to 2017.
Table 64. Securitisation structures with
risk transfer
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Traditional SPVs |
|
Outstanding balance |
|
|
of which: in default |
|
|
of which: write-offs |
|
|
Value adjustments in the period |
|
|
RWA |
|
|
Outstanding balance |
|
|
of which: in default |
|
|
of which: write-offs |
|
|
Value adjustments in the period |
|
|
RWA |
|
Residential mortgages |
|
|
921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
1,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
Commercial mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
4,150 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage covered bonds |
|
|
7,025 |
|
|
|
5 |
|
|
|
96 |
|
|
|
-25 |
|
|
|
1,403 |
|
|
|
5,698 |
|
|
|
90 |
|
|
|
6 |
|
|
|
-9 |
|
|
|
1,290 |
|
Others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resecuritizations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitisation position |
|
|
33 |
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
25 |
|
|
|
33 |
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total traditional SPVs |
|
|
12,128 |
|
|
|
7 |
|
|
|
114 |
|
|
|
-25 |
|
|
|
1,820 |
|
|
|
6,773 |
|
|
|
90 |
|
|
|
23 |
|
|
|
-9 |
|
|
|
1,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synthetic securitisation SPVs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
9,672 |
|
|
|
5 |
|
|
|
|
|
|
|
-1 |
|
|
|
1,490 |
|
|
|
2,767 |
|
|
|
6 |
|
|
|
|
|
|
|
-3 |
|
|
|
487 |
|
Mortgage covered bonds |
|
|
3,705 |
|
|
|
9 |
|
|
|
59 |
|
|
|
|
|
|
|
334 |
|
|
|
4,100 |
|
|
|
66 |
|
|
|
|
|
|
|
-32 |
|
|
|
555 |
|
Others |
|
|
2,845 |
|
|
|
87 |
|
|
|
|
|
|
|
-22 |
|
|
|
448 |
|
|
|
2,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
309 |
|
Synthetic securitisation SPVs |
|
|
16,222 |
|
|
|
101 |
|
|
|
59 |
|
|
|
-23 |
|
|
|
2,273 |
|
|
|
9,021 |
|
|
|
72 |
|
|
|
|
|
|
|
-35 |
|
|
|
1,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
28,350 |
|
|
|
108 |
|
|
|
172 |
|
|
|
-49 |
|
|
|
4,093 |
|
|
|
15,794 |
|
|
|
162 |
|
|
|
23 |
|
|
|
-44 |
|
|
|
2,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: The value adjustments in the period include the value adjustments by asset and provision (generic and specific)
deterioration.
As shown in Table 64, during 2018, the outstanding balance of the originated securitisations has increased due
to the securitisations with risk transfer originated in the year.
5.4.3. Securitisation funds without risk transfer
As Santander Group retains most of the positions in the originated securitisation funds, they do not meet the regulatory conditions for significant risk
transfer. For these funds, capital is calculated for the securitised exposures is calculated as if the exposures had not been securitised.
The following table gives a breakdown, by type of underlying asset, of the outstanding balance of the
securitised exposures in funds without risk transfer as of 31 December 2018:
Table 65. Securitisation structures without risk transfer
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
|
|
Outstanding balance |
|
|
Outstanding balance |
|
Traditional SPVs |
|
Outstanding balance |
|
|
of which in default |
|
|
Value adjustments in the period |
|
|
RWA |
|
|
Outstanding balance |
|
|
of which in default |
|
|
Value adjustments in the period |
|
|
RWA |
|
Residential mortgages |
|
|
37,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases |
|
|
2,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
7,806 |
|
|
|
|
|
|
|
|
|
|
|
593 |
|
|
|
3,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
31,297 |
|
|
|
|
|
|
|
|
|
|
|
597 |
|
|
|
41,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage covered bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,111 |
|
|
|
1,111 |
|
|
|
|
|
|
|
|
|
Securitisation positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
79,140 |
|
|
|
|
|
|
|
|
|
|
|
1,190 |
|
|
|
88,519 |
|
|
|
1,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As shown in Table above, the underlying securitised assets in the SPVs originated by Santander Group continue to
be comprised of residential mortgages and consumer loans. The securitisation exposure with no risk transfer suffers a slight reduction with regard to 2017.
5.5. Santander Group securitisation activity
Santander
Group originated eight securitisations in 2018 with the aim of achieving a significant transfer of risk.
Furthermore, Santander Group originates and
holds positions in traditional securitisation funds whose underlying portfolios are composed mainly of mortgages, consumer and corporate loans. The Group is also the originator of eleven synthetic securitisation funds (six originated in 2018) whose
underlying assets comprise project finance loans refinancing one fund, in one case a loan to SMEs, in two cases, loans to corporates, commercial mortgage loans in the fifth case and auto loans in the last case.
For each of these traditional structures, and no matter the underlying product, Santander Group is awarded a rating by one or more of the following external
rating agencies: Standard & Poors, Moodys, Fitch, DBRS, Arc and Scope. Where a traditional securitisation is placed on the market, the Group obtains ratings from at least two of those agencies.
For three of the synthetic securitisations, two external ratings have been requested.
As for investment activity, Santander Group holds positions in securitisation funds originated by entities outside Santander Group
whose underlying assets mainly comprise corporate loans, SME loans and mortgage. As Santander Group limits its
maximum exposure by rating (AAA,AA, A, BBB, BB), it does not commonly employ hedging techniques to mitigate the risk.
Monitoring changes in associated
risk:
|
|
Securitisation positions originated: periodic monitoring is the responsibility of the different securitisation fund managers (trustees/management companies) that prepare regular reports containing an update of the
rating performance of the bonds underlying portfolios. |
|
|
Inverse securitisation positions: published NPL metrics (90+, default, recoveries) and prepayments are monitored regularly using specialised software, which additionally checks whether the established rating-based
limits are being met. |
The processes mentioned above serve to monitor changes in credit and market risks of both securitisation and re-securitisation exposures.
The performance of the underlying assets particularly affects the duration of the tranches
and it is unlikely that this will affect the principal bearing in mind the high levels of subordination and continuous monitoring.
The following tables
show the distribution, by type of underlying asset, of the securitisation positions issued and repurchased by Santander Group as originator, as investor and as sponsor as of 31 December 2018, in both the banking book and trading portfolio.
As of 31 December 2018, there are no assets awaiting securitisation.
|
|
|
|
|
128 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
The following table shows new securitisations by
type of
securitisation and type of exposure being securitised:
Table 66. Securitisation positions purchased or retained. Banking book
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
|
|
Originator |
|
|
Investor |
|
|
Sponsor |
|
|
Originator |
|
|
Investor |
|
|
Sponsor |
|
|
|
Issued positions |
|
|
Retained positions |
|
|
Purchased positions |
|
|
Purchased positions |
|
|
Issued positions |
|
|
Retained positions |
|
|
Purchased positions |
|
|
Purchased positions |
|
Traditional securitisations |
|
|
88.623 |
|
|
|
50.815 |
|
|
|
7.168 |
|
|
|
|
|
|
|
85.541 |
|
|
|
53.293 |
|
|
|
6.069 |
|
|
|
|
|
Residential mortgages |
|
|
32,886 |
|
|
|
23,571 |
|
|
|
3,367 |
|
|
|
|
|
|
|
30,976 |
|
|
|
23,974 |
|
|
|
4,066 |
|
|
|
|
|
Commercial mortgages |
|
|
66 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
75 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
|
|
|
|
|
|
|
|
164 |
|
|
|
|
|
|
|
468 |
|
|
|
468 |
|
|
|
117 |
|
|
|
|
|
Finance leases |
|
|
2,547 |
|
|
|
218 |
|
|
|
22 |
|
|
|
|
|
|
|
2,713 |
|
|
|
1,231 |
|
|
|
38 |
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
9,714 |
|
|
|
9,283 |
|
|
|
2,134 |
|
|
|
|
|
|
|
3,510 |
|
|
|
2,722 |
|
|
|
1,008 |
|
|
|
|
|
Consumer loans |
|
|
43,410 |
|
|
|
17,707 |
|
|
|
573 |
|
|
|
|
|
|
|
44,351 |
|
|
|
21,413 |
|
|
|
411 |
|
|
|
|
|
Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,449 |
|
|
|
3,449 |
|
|
|
|
|
|
|
|
|
Mortgage covered bonds |
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54 |
|
|
|
|
|
Others |
|
|
|
|
|
|
|
|
|
|
857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
374 |
|
|
|
|
|
Resecuritisations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
40 |
|
Residential mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
40 |
|
Synthetic securitisations |
|
|
19.575 |
|
|
|
17.621 |
|
|
|
|
|
|
|
|
|
|
|
9.183 |
|
|
|
8.408 |
|
|
|
326 |
|
|
|
|
|
Residential mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to corporates or to SMEs treated as corporates |
|
|
11,850 |
|
|
|
10,618 |
|
|
|
|
|
|
|
|
|
|
|
2,954 |
|
|
|
2,717 |
|
|
|
|
|
|
|
|
|
Consumer loans |
|
|
4,175 |
|
|
|
3,868 |
|
|
|
|
|
|
|
|
|
|
|
3,936 |
|
|
|
3,688 |
|
|
|
|
|
|
|
|
|
Others |
|
|
3,550 |
|
|
|
3,134 |
|
|
|
|
|
|
|
|
|
|
|
2,293 |
|
|
|
2,003 |
|
|
|
326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
108,198 |
|
|
|
68,436 |
|
|
|
7,168 |
|
|
|
40 |
|
|
|
94,725 |
|
|
|
61,701 |
|
|
|
6,399 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the exposure of all securitisations in the banking book, distinguishing between
wholesale and retail underlying:
Table 67. Securitisation exposures in the
banking book (SEC1)*
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
|
|
Bank acting as originator |
|
|
Bank acting as sponsor |
|
|
Bank acting as investor |
|
|
|
|
|
Traditional |
|
|
Synthetic |
|
|
Subtotal |
|
|
Traditional |
|
|
Synthetic |
|
|
Subtotal |
|
|
Traditional |
|
|
Synthetic |
|
|
Subtotal |
|
|
|
Retail (total) |
|
|
41,279 |
|
|
|
3,868 |
|
|
|
45,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,104 |
|
|
|
|
|
|
|
4,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages |
|
|
23,571 |
|
|
|
|
|
|
|
23,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,276 |
|
|
|
|
|
|
|
3,276 |
|
|
|
Credit card |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164 |
|
|
|
|
|
|
|
164 |
|
|
|
Other retail exposures |
|
|
17,707 |
|
|
|
3,868 |
|
|
|
21,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
664 |
|
|
|
|
|
|
|
664 |
|
|
|
Resecuritisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesales (total) |
|
|
9,537 |
|
|
|
13,752 |
|
|
|
23,289 |
|
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
|
3,063 |
|
|
|
|
|
|
|
3,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate loans |
|
|
|
|
|
|
513 |
|
|
|
513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
373 |
|
|
|
|
|
|
|
373 |
|
|
|
Commercial mortgage |
|
|
36 |
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases and receivables |
|
|
218 |
|
|
|
|
|
|
|
218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
22 |
|
|
|
Other wholesale exposures |
|
|
9,283 |
|
|
|
13,239 |
|
|
|
22,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,668 |
|
|
|
|
|
|
|
2,668 |
|
|
|
Resecuritisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
50,815 |
|
|
|
17,621 |
|
|
|
68,436 |
|
|
|
40 |
|
|
|
|
|
|
|
40 |
|
|
|
7,168 |
|
|
|
|
|
|
|
7,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
The securitisation portfolio has been considered as a whole (positions bought and retained).
|
As shown in Table 67, regardless of the role played by the Bank, the securitisation portfolio is predominantly
focused on retail.
Meanwhile, the following table shows the distribution of the trading portfolio, where we can see a large concentration in mortgage
securitisations and other (both retail and wholesale).
|
|
|
|
|
130 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
Table 68. Securitisation exposures in the trading book (SEC2)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
|
|
Bank acting as originator |
|
|
Bank acting as sponsor |
|
|
Bank acting as investor |
|
|
|
|
|
Traditional |
|
|
Synthetic |
|
|
Subtotal |
|
|
Traditional |
|
|
Synthetic |
|
|
Subtotal |
|
|
Traditional |
|
|
Synthetic |
|
|
Subtotal |
|
|
|
Retail (total) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages |
|
|
0.06 |
|
|
|
|
|
|
|
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.74 |
|
|
|
|
|
|
|
0.74 |
|
|
|
Credit card |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other retail exposures |
|
|
0.22 |
|
|
|
|
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.28 |
|
|
|
|
|
|
|
0.28 |
|
|
|
Resecuritisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesales (total) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases and receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other wholesale exposures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resecuritisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Correlation portfolios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
0.28 |
|
|
|
|
|
|
|
0.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.01 |
|
|
|
|
|
|
|
1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The positions held on the trading portfolio are monitored continuously to identify any significant variations.
The following table shows securitisations originated by Santander Group with the highest outstanding balance as
of 31 December 2018:
Table 69. Inventory of originated
securitisations with largest outstanding balance
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Balance issued |
|
|
Repurchased balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance issued |
|
|
|
|
Securitisation fund |
|
Type |
|
Senior tranches |
|
|
Mezzanine tranches |
|
|
First loss tranches |
|
|
Senior tranches |
|
|
Mezzanine tranches |
|
|
First loss tranches |
|
|
Off-balance sheet exposures |
|
NANSA |
|
Other assets |
|
|
5,242 |
|
|
|
372 |
|
|
|
23 |
|
|
|
5,242 |
|
|
|
20 |
|
|
|
23 |
|
|
|
|
|
Red 2 |
|
Commercial mortgages |
|
|
2,560 |
|
|
|
313 |
|
|
|
249 |
|
|
|
2,560 |
|
|
|
313 |
|
|
|
|
|
|
|
|
|
STAR 2016-1 |
|
Loans to corporates or to SMEs treated as corporates |
|
|
2,311 |
|
|
|
200 |
|
|
|
50 |
|
|
|
2,311 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
FT PYMES MAGDALENA 2 |
|
Other assets |
|
|
2,185 |
|
|
|
166 |
|
|
|
23 |
|
|
|
2,185 |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
RENEW PROJECT FINANCE CLO 2017-1 |
|
Other assets |
|
|
1,646 |
|
|
|
527 |
|
|
|
120 |
|
|
|
1,646 |
|
|
|
357 |
|
|
|
1 |
|
|
|
|
|
Santander Drive Auto Receivables Trust 2018-3 |
|
Consumer loans |
|
|
439 |
|
|
|
701 |
|
|
|
619 |
|
|
|
|
|
|
|
77 |
|
|
|
64 |
|
|
|
|
|
SC Germany Consumer 2018-1 |
|
Consumer loans |
|
|
1,304 |
|
|
|
155 |
|
|
|
148 |
|
|
|
1,304 |
|
|
|
79 |
|
|
|
32 |
|
|
|
|
|
Grafton |
|
Loans to corporates or to SMEs treated as corporates |
|
|
1,076 |
|
|
|
210 |
|
|
|
110 |
|
|
|
1,076 |
|
|
|
210 |
|
|
|
|
|
|
|
1,286 |
|
Santa Fe |
|
Loans to corporates or to SMEs treated as corporates |
|
|
1,230 |
|
|
|
95 |
|
|
|
14 |
|
|
|
1,230 |
|
|
|
|
|
|
|
14 |
|
|
|
|
|
FITZROY 2018-1 CLO |
|
Other assets |
|
|
1,131 |
|
|
|
63 |
|
|
|
63 |
|
|
|
1,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Santander Retail Auto Lease Funding 2018-A |
|
Leasing |
|
|
938 |
|
|
|
166 |
|
|
|
|
|
|
|
|
|
|
|
166 |
|
|
|
|
|
|
|
|
|
GoldenBarStandAlone2016-1 |
|
Consumer loans |
|
|
902 |
|
|
|
66 |
|
|
|
132 |
|
|
|
902 |
|
|
|
66 |
|
|
|
132 |
|
|
|
|
|
SECUCORFINANCE2013- ILIMITED |
|
Consumer loans |
|
|
600 |
|
|
|
|
|
|
|
491 |
|
|
|
|
|
|
|
|
|
|
|
491 |
|
|
|
|
|
RED ONE |
|
Loans to corporates or to SMEs treated as corporates |
|
|
856 |
|
|
|
100 |
|
|
|
69 |
|
|
|
441 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
FTA Santander Consumer Spain Synthetic Auto 2018-1 |
|
Consumer loans |
|
|
939 |
|
|
|
61 |
|
|
|
10 |
|
|
|
939 |
|
|
|
|
|
|
|
10 |
|
|
|
|
|
FT CONSUMO SANTANDER 2 |
|
Consumer loans |
|
|
865 |
|
|
|
122 |
|
|
|
15 |
|
|
|
865 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
Provided below is a breakdown of all securitisations in the banking book together with its corresponding capital
consumption arranged by RW interval (risk weight) and calculation method employed when Santander Group acts as originator or sponsor:
|
|
|
|
|
132 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
Table 70. Securitisation exposures in the banking book and associated regulatory capital requirements (bank acting originator or sponsor) (SEC3)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Value of the exposure (by RW interval) |
|
|
Value of the exposure (by regulator method) |
|
|
RWA (by regulator method) |
|
|
Capital requirement after ceiling |
|
|
|
<= 20% RW |
|
|
> 20% a 50% RW |
|
|
> 50% a 100% RW |
|
|
> 100% a 1250% RW |
|
|
1250% RW |
|
|
IRB RBA |
|
|
IRB SFA |
|
|
SA |
|
|
1250% |
|
|
IRB RBA |
|
|
IRB SFA |
|
|
SA |
|
|
1250% |
|
|
IRB RBA |
|
|
IRB SFA |
|
|
SA |
|
|
1250% |
|
Total exposure |
|
|
25,708 |
|
|
|
122 |
|
|
|
427 |
|
|
|
28 |
|
|
|
186 |
|
|
|
10,621 |
|
|
|
14,701 |
|
|
|
1,150 |
|
|
|
|
|
|
|
1,728 |
|
|
|
1,915 |
|
|
|
450 |
|
|
|
|
|
|
|
138 |
|
|
|
153 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traditional securitisation |
|
|
6,670 |
|
|
|
122 |
|
|
|
171 |
|
|
|
6 |
|
|
|
81 |
|
|
|
4,613 |
|
|
|
1,286 |
|
|
|
1,150 |
|
|
|
|
|
|
|
996 |
|
|
|
90 |
|
|
|
450 |
|
|
|
|
|
|
|
80 |
|
|
|
7 |
|
|
|
36 |
|
|
|
|
|
Of which, securitisation |
|
|
6,670 |
|
|
|
82 |
|
|
|
171 |
|
|
|
6 |
|
|
|
81 |
|
|
|
4,573 |
|
|
|
1,286 |
|
|
|
1,150 |
|
|
|
|
|
|
|
970 |
|
|
|
90 |
|
|
|
450 |
|
|
|
|
|
|
|
78 |
|
|
|
7 |
|
|
|
36 |
|
|
|
|
|
Of which, retail underlying |
|
|
4,654 |
|
|
|
82 |
|
|
|
171 |
|
|
|
6 |
|
|
|
81 |
|
|
|
3,843 |
|
|
|
|
|
|
|
1,150 |
|
|
|
|
|
|
|
886 |
|
|
|
|
|
|
|
450 |
|
|
|
|
|
|
|
71 |
|
|
|
|
|
|
|
36 |
|
|
|
|
|
Of which, wholesale underlying |
|
|
2,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730 |
|
|
|
1,286 |
|
|
|
|
|
|
|
|
|
|
|
85 |
|
|
|
90 |
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
Of which, resecuritisation |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which, preference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which, non-preference |
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Synthetic securitisation |
|
|
19,039 |
|
|
|
|
|
|
|
256 |
|
|
|
22 |
|
|
|
106 |
|
|
|
6,007 |
|
|
|
13,415 |
|
|
|
|
|
|
|
|
|
|
|
732 |
|
|
|
1,825 |
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
146 |
|
|
|
|
|
|
|
|
|
Of which, securitisation |
|
|
19,039 |
|
|
|
|
|
|
|
256 |
|
|
|
22 |
|
|
|
106 |
|
|
|
6,007 |
|
|
|
13,415 |
|
|
|
|
|
|
|
|
|
|
|
732 |
|
|
|
1,825 |
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
146 |
|
|
|
|
|
|
|
|
|
Of which, retail underlying |
|
|
939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Of which, wholesale underlying |
|
|
18,100 |
|
|
|
|
|
|
|
256 |
|
|
|
22 |
|
|
|
95 |
|
|
|
6,007 |
|
|
|
12,466 |
|
|
|
|
|
|
|
|
|
|
|
732 |
|
|
|
1,652 |
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
132 |
|
|
|
|
|
|
|
|
|
Of which, resecuritisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which, preference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which, non-preference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 71. Securitisation exposures in the banking book and associated regulatory capital requirements (bank acts as an investor) (SEC4)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Value of the exposure (by RW interval) |
|
|
Value of the exposure (by regulator method) |
|
|
RWA (by regulator method |
|
|
Capital requirement after ceiling |
|
|
|
<= 20% RW |
|
|
> 20% to 50% RW |
|
|
> 50% to 100% RW |
|
|
> 100% to 1250% RW |
|
|
1250% RW |
|
|
IRB RBA |
|
|
IRB SFA |
|
|
SA |
|
|
1250% |
|
|
IRB RBA |
|
|
IRB SFA |
|
|
SA |
|
|
1250% |
|
|
IRB RBA |
|
|
IRB SFA |
|
|
SA |
|
|
1250% |
|
Total exposure |
|
|
6,428 |
|
|
|
577 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
6,703 |
|
|
|
|
|
|
|
464 |
|
|
|
|
|
|
|
633 |
|
|
|
|
|
|
|
288 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
Traditional securitisation |
|
|
6,428 |
|
|
|
577 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
6,703 |
|
|
|
|
|
|
|
464 |
|
|
|
|
|
|
|
633 |
|
|
|
|
|
|
|
288 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
Of which, securitisation |
|
|
6,428 |
|
|
|
577 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
6,703 |
|
|
|
|
|
|
|
464 |
|
|
|
|
|
|
|
633 |
|
|
|
|
|
|
|
288 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
Of which, retail underlying |
|
|
3,949 |
|
|
|
112 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
4,013 |
|
|
|
|
|
|
|
91 |
|
|
|
|
|
|
|
397 |
|
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
Of which, wholesale underlying |
|
|
2,479 |
|
|
|
465 |
|
|
|
119 |
|
|
|
|
|
|
|
|
|
|
|
2,690 |
|
|
|
|
|
|
|
373 |
|
|
|
|
|
|
|
237 |
|
|
|
|
|
|
|
242 |
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
|
|
|
|
Of which, resecuritisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which, preference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of which, non-preference |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synthetic securitisation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As shown in Table 71, nearly 93% of the securitisations in which Santander Group invests belong to entities
where capital requirements are calculated under the advanced IRB models. This is mainly the case of Santander Spain and Santander UK.
|
|
|
|
|
134 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
On the other hand, the standardised approach is relevant in the US and Mexico.
Lastly, in its role as originator and investment entity for securitisations, Santander Group complies with the requirements of Part Five of the CRR relating
to the retention of economic interest and requirements established in procedure and control policies for all securitisation funds issued later than 1 January 2011. Therefore, for all securitisations originated after 1 January 2011:
|
|
Santander Group consistently retains a minimum of 5% of the net economic interest. |
|
|
Santander Group makes available to investors all the necessary information to ensure the risks of the investment are fully known before purchase and to allow the performance of the investment to be monitored on a
regular basis. This information includes details of the risk criteria applied to the securitised exposures, which in all cases are the same as for the non-securitised exposures in the originators balance
sheet. |
Similarly, for investor positions in securitisations originated after 1 January 2011, Santander Group:
|
|
Santander Group carries out due diligence to ensure that the investment risks are known before purchase and to be able to monitor the performance of the investment on a regular basis. |
|
|
Checks that the originator of the securitisations retains a net economic interest of no less than 5%. |
As
Santander Group complies with these requirements, no capital surcharge is applied.
Santander Group securitisation activity in 2018.
Out of the total issues carried out in 2018, Santander Group retains 55% of the securitisation positions.
The accompanying table gives a breakdown of initial balance of the securitisation positions issued and retained by Santander Group in 2018 on their date of
origination.
Table 72. Initial balance of securitisation funds by type of securitised asset
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Type of underlying asset |
|
Securitised exposures at the origination date |
|
|
Repurchased balance |
|
|
Securitised exposures at the origination date |
|
|
Repurchased balance |
|
Traditional securitisation |
|
|
35.264 |
|
|
|
15.068 |
|
|
|
18.688 |
|
|
|
4.272 |
|
Residential mortgages |
|
|
2,694 |
|
|
|
2,510 |
|
|
|
805 |
|
|
|
161 |
|
Commercial mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
|
|
|
|
|
|
|
|
519 |
|
|
|
468 |
|
Finance leases |
|
|
2,656 |
|
|
|
218 |
|
|
|
2,380 |
|
|
|
895 |
|
Loans to corporates or to SMEs treated as corporates |
|
|
8,258 |
|
|
|
8,502 |
|
|
|
510 |
|
|
|
510 |
|
Consumer loans |
|
|
21,656 |
|
|
|
3,546 |
|
|
|
14,475 |
|
|
|
2,238 |
|
Others |
|
|
|
|
|
|
291 |
|
|
|
|
|
|
|
|
|
Synthetic securitisation |
|
|
11.743 |
|
|
|
10.818 |
|
|
|
4.256 |
|
|
|
3.823 |
|
Loans to corporates or to SMEs treated as corporates |
|
|
9,476 |
|
|
|
8,738 |
|
|
|
1,962 |
|
|
|
1,820 |
|
Others |
|
|
2,267 |
|
|
|
2,081 |
|
|
|
2,293 |
|
|
|
2,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
47,007 |
|
|
|
25,886 |
|
|
|
22,944 |
|
|
|
8,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This originator activity was concentrated in the United States (38.92%) and Spain (35.26%). For further
information, see Appendix IX, which includes the list of special purpose vehicles within the scope of regulatory consolidation.
In 2018, Santander Group originated 35 securitisations whose underlying portfolios comprised consumer loans (48.2% of total
issues), loans to corporates (37.7%), residential mortgages (5.7%) leasing (5,6%) and mortgages bonds (2.7%). More detail about this securitisations is provided by Table 73, included below:
Origination by country
|
|
|
|
|
136 |
|
2018 Pillar 3 Disclosures Report |
|
|
CREDIT RISK - SECURITISATIONS _ 2018 Pillar 3 Disclosures Report
Table 73. List of new securitisations originated in 2018, organised by country and originating institution and ordered by initial issue volume
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of securitisation |
|
Type of underlying asset |
|
Originator |
|
Initial issue |
|
|
Country |
|
Santander Drive Auto ReceivablesTrust 2018-3 |
|
Consumer loans |
|
SC USA |
|
|
2,574 |
|
|
|
|
|
Drive Auto ReceivablesTrust 2018-4 |
|
Consumer loans |
|
SC USA |
|
|
1,475 |
|
|
|
|
|
DRIVE Auto Receivables Trust 2018-2 |
|
Consumer loans |
|
SC USA |
|
|
1,420 |
|
|
|
|
|
Santander Retail Auto Lease Trust 2018-A |
|
Leasing |
|
SC USA |
|
|
1,411 |
|
|
|
|
|
SANT PRIME AUTO ISSUANCES NOTES TRUST 2018-A |
|
Consumer loans |
|
SC USA |
|
|
1,288 |
|
|
|
|
|
Santander Retail Auto Lease Funding 2018-A |
|
Leasing |
|
SC USA |
|
|
1,245 |
|
|
|
|
|
SANTANDER DRIVE AUTO RECEIVABLES TRUST 2018-1 |
|
Consumer loans |
|
SC USA |
|
|
1,195 |
|
|
|
|
|
DRIVE AUTO RECEIVABLES TRUST 2018-5 |
|
Consumer loans |
|
SC USA |
|
|
1,138 |
|
|
|
|
|
Santander Drive Auto Receivables Trust 2018-5 |
|
Consumer loans |
|
SC USA |
|
|
1,101 |
|
|
|
USA |
|
SANTANDER DRIVE AUTO RECEIVABLES TRUST 2018-2 |
|
Consumer loans |
|
SC USA |
|
|
1,039 |
|
|
|
|
|
DRIVE Auto Receivables Trust 2018-1 |
|
Consumer loans |
|
SC USA |
|
|
1,015 |
|
|
|
|
|
SANT PRIME AUTO ISSUANCES NOTES TRUST 2018-b |
|
Consumer loans |
|
SC USA |
|
|
962 |
|
|
|
|
|
Santander Drive Auto Receivables Trust 2018-4 |
|
Consumer loans |
|
SC USA |
|
|
855 |
|
|
|
|
|
Santander Prime Auto Issuance Notes 2018-EDesigna |
|
Consumer loans |
|
SC USA |
|
|
750 |
|
|
|
|
|
Santander Prime Auto Issuance Notes |
|
Consumer loans |
|
SC USA |
|
|
589 |
|
|
|
|
|
Santander Prime Auto Issuance |
|
Consumer loans |
|
SC USA |
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,296 |
|
|
|
38.92 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
NANSA |
|
Corporate loans |
|
BANCO SANTANDER |
|
|
5,637 |
|
|
|
|
|
FT Pymes SANTANDER 13 |
|
Corporate loans |
|
BANCO SANTANDER |
|
|
2,835 |
|
|
|
|
|
FT Pymes MAGDALENA 2 |
|
Corporate loans |
|
BANCO SANTANDER |
|
|
2,500 |
|
|
|
|
|
FT Pymes SANTANDER 14 |
|
Corporate loans |
|
BANCO SANTANDER |
|
|
2,310 |
|
|
|
|
|
FITZROY 2018 |
|
Mortgage covered bonds |
|
BANCO SANTANDER |
|
|
1,257 |
|
|
|
Spain |
|
FTA Santander Consumer Spain Synthetic Auto
2018-1 |
|
Consumer loans |
|
SC ESPAÑA |
|
|
1,010 |
|
|
|
|
|
AUTO ABS 2018 FTA |
|
Consumer loans |
|
PSA ESPAÑA |
|
|
600 |
|
|
|
|
|
FTA-PRADOVI |
|
Residential mortgages |
|
UCI |
|
|
428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,576 |
|
|
|
35.26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
RED 2 |
|
Corporate loans |
|
SC UK |
|
|
3,113 |
|
|
|
UK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,113 |
|
|
|
6.62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
SC Germany Consumer 2018-1 |
|
Consumer loans |
|
SC GERMANY |
|
|
1,600 |
|
|
|
|
|
PBD Germany Auto 2018 UG |
|
Consumer loans |
|
PSA ALEMANIA |
|
|
667 |
|
|
|
Germany |
|
SC Germany Auto 2018-1 |
|
Consumer loans |
|
SC GERMANY |
|
|
600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,867 |
|
|
|
6.10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Hipototta nº13 |
|
Residential mortgages |
|
TOTTA |
|
|
2,266 |
|
|
|
Portugal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,266 |
|
|
|
4.82 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Santa FE |
|
Corporate loans |
|
MÉXICO |
|
|
1,339 |
|
|
|
Mexico |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,339 |
|
|
|
2.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
AUTO ABS ITALIAN LOANS 2018-1 |
|
Consumer loans |
|
PSA ITALIA |
|
|
742 |
|
|
|
Italy |
|
Golden Bar Stand Alone 2018-1 |
|
Consumer loans |
|
SC ITALIA |
|
|
478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,220 |
|
|
|
2.60 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
SCF Rahoituspalvelut VII DAC |
|
Consumer loans |
|
SC NORDICS |
|
|
665 |
|
|
|
Nordics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
665 |
|
|
|
1.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Second Auto Finance ABS of Xin rong |
|
Consumer loans |
|
SC CHINA |
|
|
376 |
|
|
|
China |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
376 |
|
|
|
0.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Santander Leasing Poland Securitization 01DAC |
|
Consumer loans |
|
SANTANDER LEASING |
|
|
288 |
|
|
|
Poland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288 |
|
|
|
0.61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
47,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
6. Market risk
Main figures
EUR million
|
|
|
|
|
|
|
|
|
|
|
RWA |
|
|
RWA |
|
|
|
2018 |
|
|
2017 |
|
Market risk |
|
|
25,013 |
|
|
|
24,161 |
|
Of which standardised approach |
|
|
11,858 |
|
|
|
9,702 |
|
Of which IMA |
|
|
13,154 |
|
|
|
14,459 |
|
RWA by calculation method
RWA by geography
6.1. Activities subject to market risk
The measurement, control and monitoring of market risk extends to all operations exposed to changes in market
prices. This risk arises from changes in the risk factors (interest rate, exchange rate, equities, credit spread, commodity prices and the volatility of each of these factors) and from the liquidity risk of the various products and markets in which
Santander Group operates.
The activities are segmented according to the purpose of the risk taken:
a) |
Trading: includes financial services for customers, trading and the taking of positions, mainly in fixed
income, equities and currency products. |
b) |
Structural risks: these are composed of the market risks inherent in the balance sheet, not including
the trading portfolio. Namely: |
|
|
Structural interest rate risk: this risk arises from mismatches in the maturities and repricing of all the balance sheet assets and liabilities. |
|
|
Structural foreign exchange risk (hedges of results): foreign currency risk arising from the currency in which investments in the consolidated and non-consolidated companies are
made (structural exchange rate). This category also includes the positions taken to hedge the foreign currency risk on future results generated in currencies other than the euro (hedges of results). |
|
|
Structural equity risk: this includes equity investments in non-consolidated financial and non-financial companies, and the available-for-sale portfolios of equity positions.
|
6.2. Capital requirements for market risk
This section provides more detailed information on changes in capital requirements for market risk through both
internal and standardised models. The Groups consumption of regulatory capital for market risk at the end of December 2018 breaks down as follows:
Table 74. Regulatory capital requirements for market risk
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Position risk - Trading book* - Standardised approach |
|
|
436 |
|
|
|
331 |
|
Commodity Risk - Standardised approach |
|
|
15 |
|
|
|
17 |
|
Specific risk in the correlation trading risk portfolio |
|
|
|
|
|
|
|
|
Currency risk - Standardised approach |
|
|
498 |
|
|
|
428 |
|
Position and currency risk - Tradingbook - Internal models |
|
|
1,052 |
|
|
|
1,157 |
|
Spain |
|
|
539 |
|
|
|
563 |
|
United Kingdom |
|
|
58 |
|
|
|
293 |
|
Santander London Branch |
|
|
129 |
|
|
|
|
|
Chile |
|
|
109 |
|
|
|
113 |
|
Portugal |
|
|
0 |
|
|
|
0 |
|
Mexico |
|
|
218 |
|
|
|
187 |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
2,001 |
|
|
|
1,933 |
|
|
|
|
|
|
|
|
|
|
* |
Includes structural equity considered as business. |
At year-end 2018 Santander Group had authorisation from the Bank of Spain for the use of the internal market risk
model for the calculation of regulatory capital in the trading books of the units in Spain, Chile, Mexico, the UK and Portugal. The Group aims to gradually extend this approval to the rest of the units.
Consolidated regulatory capital under the internal market risk model for Santander Group is computed as the sum of the regulatory capital of the units that
have the necessary approval from Bank of Spain. This is a conservative criterion when consolidating the Groups capital, as it takes no account of the capital savings arising from the geographical diversification effect.
As a result of this approval, regulatory capital of the trading activity for the perimeter concerned is
calculated with advanced approaches, using VaR, Stressed VaR and IRC (incremental risk charge) as the fundamental metrics, in line with the new bank capital requirements under the Basel Accords and, specifically, the CRR.
The Group works closely with the European Central Bank to extend the perimeter of authorisation of internal models (at geographical and operational level) and
to analyse the impact of new requirements, in line with the documents published by the Basel Committee to strengthen the capital of financial institutions.
|
|
|
|
|
140 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
A breakdown of capital requirements in the units that use the internal model is shown below, by geography and
component, at year-end:
Table 75. Capital requirements for market
risk. Internal model
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
CR (VaR) |
|
|
CR (SVaR) |
|
|
IRC |
|
|
Risk Not in VaR |
|
|
Add-On |
|
|
TOTAL |
|
Spain |
|
|
68 |
|
|
|
336 |
|
|
|
135 |
|
|
|
|
|
|
|
|
|
|
|
539 |
|
United Kingdom |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
58 |
|
Chile |
|
|
26 |
|
|
|
83 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
129 |
|
Santander London Branch |
|
|
21 |
|
|
|
81 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
109 |
|
Portugal |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
Mexico |
|
|
77 |
|
|
|
130 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
193 |
|
|
|
629 |
|
|
|
173 |
|
|
|
|
|
|
|
58 |
|
|
|
1,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A breakdown of capital requirements in the units that use the internal model is shown below, by geography and
component, at year-end:
Table 76. Market risk under IMA approach (MR2-A)
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
RWA |
|
|
Capital requirements |
|
VaR (higher of values a and b) |
|
|
2,647 |
|
|
|
212 |
|
(a) Previous days VaR [Article 365(1) of the CRR
(VaRt-1)] |
|
|
414 |
|
|
|
33 |
|
(b) Average of the daily VaR [Article 365(1)] of the CRR on each of the preceding 60 business days
(VaRavg) x multiplication factor (mc) in accordance with Article 366 of the CRR |
|
|
2,647 |
|
|
|
212 |
|
SVaR (higher of values a and b) |
|
|
8,105 |
|
|
|
648 |
|
(a) Latest SVaR [Article 365(2) of the CRR
(SVaRt-1)] |
|
|
1,527 |
|
|
|
122 |
|
(b) Average of the SVaR [Article 365(2) of the CRR] during the preceding 60 business days
(SVaRavg) x multiplication factor (ms) (Article 366 of the CRR) |
|
|
8,105 |
|
|
|
648 |
|
IRC (higher of values a and b) |
|
|
2,402 |
|
|
|
192 |
|
(a) Most recent IRC value (incremental default and migration risks calculated in accordance with
Article 370 and Article 371 of the CRR) |
|
|
1,800 |
|
|
|
144 |
|
(b) Average of the IRC number over the preceding 12 weeks |
|
|
2,402 |
|
|
|
192 |
|
Comprehensive risk measure (higher of values a, b and c) |
|
|
|
|
|
|
|
|
(a) Most recent risk number for the correlation trading portfolio (Article 377 of the
CRR) |
|
|
|
|
|
|
|
|
(b) Average of the risk number for the correlation trading portfolio over the preceding 12
weeks |
|
|
|
|
|
|
|
|
8% of the own funds requirement in the standardised approach on the most recent risk number for
the correlation trading portfolio (Article 338(4) of the CRR) |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
13,154 |
|
|
|
1,052 |
|
|
|
|
|
|
|
|
|
|
Table 77. RWA flow statements of market risk exposures under IMA (MR2-B)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
VaR |
|
|
SVaR |
|
|
IRC |
|
|
Comprehensive risk measure |
|
|
Other |
|
|
Total RWAs |
|
|
Total capital requirements |
|
RWAs Dec. 2017 |
|
|
2,635 |
|
|
|
9,196 |
|
|
|
1,838 |
|
|
|
|
|
|
|
790 |
|
|
|
14,459 |
|
|
|
1,157 |
|
Regulatory adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RWAs at the previous quarter-end (end of the day) |
|
|
2,635 |
|
|
|
9,196 |
|
|
|
1,838 |
|
|
|
|
|
|
|
790 |
|
|
|
14,459 |
|
|
|
1,157 |
|
Movement in risk levels |
|
|
228 |
|
|
|
1,332 |
|
|
|
323 |
|
|
|
|
|
|
|
68 |
|
|
|
1,304 |
|
|
|
104 |
|
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) |
|
|
2,407 |
|
|
|
7,864 |
|
|
|
2,161 |
|
|
|
|
|
|
|
723 |
|
|
|
13,154 |
|
|
|
1,052 |
|
Regulatory adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RWAs Dec. 2018 |
|
|
2,407 |
|
|
|
7,864 |
|
|
|
2,161 |
|
|
|
|
|
|
|
723 |
|
|
|
13,154 |
|
|
|
1,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
Table 78. Market risk under standardised approach (MR1)
EUR million
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
RWA |
|
|
Capital requirements |
|
Outright products |
|
|
|
|
|
|
|
|
Interest rate risk (general and specific) |
|
|
4,639 |
|
|
|
371 |
|
Equity risk (general and specific) |
|
|
796 |
|
|
|
64 |
|
Foreign exchange risk |
|
|
6,221 |
|
|
|
498 |
|
Commodity risk |
|
|
184 |
|
|
|
15 |
|
Options |
|
|
|
|
|
|
|
|
Simplified approach |
|
|
|
|
|
|
|
|
Delta-plus method |
|
|
18 |
|
|
|
1 |
|
Scenario approach |
|
|
|
|
|
|
|
|
Securitisation (specific risk) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
11,858 |
|
|
|
949 |
|
|
|
|
|
|
|
|
|
|
Changes in capital requirements and RWAs for market risk using approved standardised models from 2017 to 2018
are shown below:
Table 79. Capital requirements for market risk. Standardised approach
EUR million
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
RWAs |
|
Starting figure (31/12/2017) |
|
|
776 |
|
|
|
9,702 |
|
|
|
|
|
|
|
|
|
|
Changes in business |
|
|
173 |
|
|
|
2,156 |
|
|
|
|
|
|
|
|
|
|
Ending figure (31/12/2018) |
|
|
949 |
|
|
|
11,858 |
|
|
|
|
|
|
|
|
|
|
Prudent Valuation Adjustments (PVA)
Additionally, a breakdown of the constituent elements of the banks PVA for all assets measured at fair value (marked to market or marked to model) and
for which PVA are required can be found in Appendix XIX.
This information is published according to the requirements for Template PV1 contained in the
document Pillar 3 disclosure requirements - consolidated and enhanced framework, published by the BCBS in March 2017.
6.3. Trading activity
The basic metric used to control market risk in trading operations at Santander Group in 2018 was value at risk (VaR). VaR measures the maximum expected loss
for a given confidence level and time horizon.
VaR is used because it is easy to calculate and because it provides a good reference for the level of risk
incurred. Other measures are also used to give greater control over the risks in the markets in which the Group operates.
One of these other measures is
scenario analysis, which consists of defining alternative behaviours for various financial variables and determining the impact on results when these scenarios are applied to the Groups activities. The scenarios may replicate past events (such
as crises) or, conversely, they may describe plausible scenarios unrelated to past events. At least three types of scenarios are defined: plausible, severe and extreme. Together with VaR, these three types of scenario provide a much more complete
understanding of the risk profile.
In line with the principle of business unit independence, the market risk area monitors positions daily, both at the
level of the individual unit and globally, exhaustively controlling for changes in portfolios so as to detect any incidents and correct them immediately. Preparing a daily income statement is an excellent risk indicator because it helps to identify
the impact that changes in financial variables have had on the portfolios.
Lastly, derivatives and credit management activities, being atypical, are
controlled daily using specific measures. In the case of derivatives, controls are conducted of sensitivity to fluctuations in the price of the underlying (delta and gamma), volatility (vega) and time (theta). For credit management activities,
measures such as spread sensitivity, jump-to-default and exposure concentrations by rating level are all systematically reviewed.
6.3.1. Value at Risk
Santander Groups VaR calculation methodology consists of historical simulation with a 99% confidence level and a
one-day horizon for internal risk management, and a ten-day horizon when calculating own funds market risk. Statistical adjustments are made to enable swift and
efficient incorporation of the most recent events affecting the levels of risk assumed. Currently, all units use historical simulation with full revaluation, except for Market Risk Spain, which, while using this methodology for certain portfolios,
applies historical simulation using a Taylor series approximation for the bulk of its portfolios.
The Group uses a
two-year window, or 520 daily readings, backwards in time from the VaR calculation reference date. Two figures are calculated each day, one by applying an exponential decline factor that gives a smaller
weighting to the earliest readings, and another with uniform weightings for all observations. The reported VaR is the higher of these two figures.
At the
end of December 2018, Santander Group had authorisation from the Bank of Spain to use the internal market risk model for calculating regulatory capital in the trading portfolios of the Spain, Chile, Portugal, United Kingdom and Mexico units.
The Groups aim is to gradually extend this approval to the other units that have a trading portfolio, in line with the gradual implementation plan
submitted to the Bank of Spain. The total regulatory capital figure using the internal model is calculated as the linear sum of the individual regulatory capital figures of the units that have Bank of Spain approval, that is, without considering
diversification between units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom |
|
2018 |
|
|
2017 |
|
|
Variation |
|
VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Maximum |
|
|
14.6 |
|
|
|
13.4 |
|
|
|
9 |
% |
2 |
|
Average |
|
|
4.8 |
|
|
|
9.2 |
|
|
|
-48 |
% |
3 |
|
Minimum |
|
|
|
|
|
|
6.7 |
|
|
|
-100 |
% |
4 |
|
End of period |
|
|
|
|
|
|
9.4 |
|
|
|
-100 |
% |
Stressed VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
5 |
|
Maximum |
|
|
93.1 |
|
|
|
76.7 |
|
|
|
21 |
% |
6 |
|
Average |
|
|
22.4 |
|
|
|
51.9 |
|
|
|
-57 |
% |
7 |
|
Minimum |
|
|
|
|
|
|
33.4 |
|
|
|
-100 |
% |
8 |
|
End of period |
|
|
|
|
|
|
73.3 |
|
|
|
-100 |
% |
Incremental Risk Charge (99.9%) |
|
|
|
|
|
|
|
|
|
9 |
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
Minimum |
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
End of period |
|
|
|
|
|
|
|
|
|
|
|
|
At year-end 2018, VaR by region was as follows:
Table 80. VaR, Stressed VaR and IRC by geography (MR3)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain |
|
2018 |
|
|
2017 |
|
|
Variation |
|
VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Maximum |
|
|
41 |
|
|
|
37.6 |
|
|
|
10 |
% |
2 |
|
Average |
|
|
17 |
|
|
|
20.1 |
|
|
|
-18 |
% |
3 |
|
Minimum |
|
|
9 |
|
|
|
13.0 |
|
|
|
-28 |
% |
4 |
|
End of period |
|
|
19 |
|
|
|
18.1 |
|
|
|
5 |
% |
Stressed VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
5 |
|
Maximum |
|
|
103 |
|
|
|
142.0 |
|
|
|
-27 |
% |
6 |
|
Average |
|
|
76 |
|
|
|
81.2 |
|
|
|
-7 |
% |
7 |
|
Minimum |
|
|
49 |
|
|
|
60.3 |
|
|
|
-19 |
% |
8 |
|
End of period |
|
|
92 |
|
|
|
82.1 |
|
|
|
12 |
% |
Incremental Risk Charge (99.9%) |
|
|
|
|
|
|
|
|
|
9 |
|
Maximum |
|
|
165 |
|
|
|
516.9 |
|
|
|
-68 |
% |
10 |
|
Average |
|
|
136 |
|
|
|
360.5 |
|
|
|
-62 |
% |
11 |
|
Minimum |
|
|
98 |
|
|
|
136.6 |
|
|
|
-28 |
% |
12 |
|
End of period |
|
|
129 |
|
|
|
136.6 |
|
|
|
-6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Santander London Branch |
|
2018 |
|
|
2017 |
|
|
Variation |
|
VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Maximum |
|
|
9.4 |
|
|
|
|
|
|
|
|
|
2 |
|
Average |
|
|
5.9 |
|
|
|
|
|
|
|
|
|
3 |
|
Minimum |
|
|
2.5 |
|
|
|
|
|
|
|
|
|
4 |
|
End of period |
|
|
6.8 |
|
|
|
|
|
|
|
|
|
Stressed VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
5 |
|
Maximum |
|
|
27.7 |
|
|
|
|
|
|
|
|
|
6 |
|
Average |
|
|
17.0 |
|
|
|
|
|
|
|
|
|
7 |
|
Minimum |
|
|
6.2 |
|
|
|
|
|
|
|
|
|
8 |
|
End of period |
|
|
22.2 |
|
|
|
|
|
|
|
|
|
Incremental Risk Charge (99.9%) |
|
|
|
|
|
|
|
|
|
9 |
|
Maximum |
|
|
53.4 |
|
|
|
|
|
|
|
|
|
10 |
|
Average |
|
|
12.6 |
|
|
|
|
|
|
|
|
|
11 |
|
Minimum |
|
|
0.5 |
|
|
|
|
|
|
|
|
|
12 |
|
End of period |
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chile |
|
2018 |
|
|
2017 |
|
|
Variation |
|
VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Maximum |
|
|
13.7 |
|
|
|
15.6 |
|
|
|
-12 |
% |
2 |
|
Average |
|
|
5.4 |
|
|
|
8.4 |
|
|
|
-36 |
% |
3 |
|
Minimum |
|
|
3.3 |
|
|
|
4.7 |
|
|
|
-29 |
% |
4 |
|
End of period |
|
|
4.5 |
|
|
|
12.4 |
|
|
|
-63 |
% |
Stressed VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
5 |
|
Maximum |
|
|
23.7 |
|
|
|
25.7 |
|
|
|
-8 |
% |
6 |
|
Average |
|
|
16.2 |
|
|
|
17.3 |
|
|
|
-6 |
% |
7 |
|
Minimum |
|
|
11.0 |
|
|
|
8.9 |
|
|
|
23 |
% |
8 |
|
End of period |
|
|
20.5 |
|
|
|
19.9 |
|
|
|
3 |
% |
Incremental Risk Charge (99.9%) |
|
|
|
|
|
|
|
|
|
9 |
|
Maximum |
|
|
16.5 |
|
|
|
13.9 |
|
|
|
19 |
% |
10 |
|
Average |
|
|
4.5 |
|
|
|
6.4 |
|
|
|
-30 |
% |
11 |
|
Minimum |
|
|
0.6 |
|
|
|
1.5 |
|
|
|
-64 |
% |
12 |
|
End of period |
|
|
2.4 |
|
|
|
1.5 |
|
|
|
54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portugal |
|
2018 |
|
|
2017 |
|
|
Variation |
|
VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Maximum |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
139 |
% |
2 |
|
Average |
|
|
|
|
|
|
|
|
|
|
-40 |
% |
3 |
|
Minimum |
|
|
|
|
|
|
|
|
|
|
-74 |
% |
4 |
|
End of period |
|
|
|
|
|
|
|
|
|
|
-54 |
% |
Stressed VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
5 |
|
Maximum |
|
|
0.3 |
|
|
|
0.1 |
|
|
|
162 |
% |
6 |
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
Minimum |
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
End of period |
|
|
|
|
|
|
|
|
|
|
|
|
Incremental Risk Charge (99.9%) |
|
|
|
|
|
|
|
|
|
9 |
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
Minimum |
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
End of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexico |
|
2018 |
|
|
2017 |
|
|
Variation |
|
VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Maximum |
|
|
55.0 |
|
|
|
19.8 |
|
|
|
178 |
% |
2 |
|
Average |
|
|
17.0 |
|
|
|
14.0 |
|
|
|
21 |
% |
3 |
|
Minimum |
|
|
9.7 |
|
|
|
8.8 |
|
|
|
10 |
% |
4 |
|
End of period |
|
|
9.7 |
|
|
|
17.3 |
|
|
|
-44 |
% |
Stressed VaR (10 days - 99%) |
|
|
|
|
|
|
|
|
|
5 |
|
Maximum |
|
|
43.9 |
|
|
|
38.3 |
|
|
|
15 |
% |
6 |
|
Average |
|
|
29.2 |
|
|
|
26.3 |
|
|
|
11 |
% |
7 |
|
Minimum |
|
|
17.2 |
|
|
|
14.0 |
|
|
|
23 |
% |
8 |
|
End of period |
|
|
30.6 |
|
|
|
21.5 |
|
|
|
42 |
% |
Incremental Risk Charge (99.9%) |
|
|
|
|
|
|
|
|
|
9 |
|
Maximum |
|
|
16.2 |
|
|
|
33.7 |
|
|
|
-52 |
% |
10 |
|
Average |
|
|
9.5 |
|
|
|
23.0 |
|
|
|
-59 |
% |
11 |
|
Minimum |
|
|
2.7 |
|
|
|
7.5 |
|
|
|
-64 |
% |
12 |
|
End of period |
|
|
11.4 |
|
|
|
7.5 |
|
|
|
52 |
% |
By way of a summary, the Groups average VaR for the trading business in 2018 was EUR 9.7 million,
despite the continued high market volatility caused by Brexit, the resurgence of protectionism and the increase in global trade tariffs. It could also be said that the Groups trading risk profile is low in comparison to other similar financial
groups. Dynamic management of risk enables Santander Group to adopt changes in strategy to unlock opportunities in an uncertain environment.
For further
details, see the Risk Management Chapter (section 4) on the 2018 Annual Report
6.3.2. Stressed VaR
The methodology for calculating stressed VaR is the same as that used to calculate VaR, but with two differences:
|
|
Historical window for observing factors: in the stressed VaR calculation a window of 260 data readings is used, instead of the 520 used for computing the ordinary VaR measurement. |
|
|
Unlike the method used for the ordinary VaR calculation: stressed VaR is not obtained as the higher of the uniformly weighted percentile and the exponentially weighted percentile; instead, the uniformly weighted
percentile is used directly. |
All other aspects of the methodology and inputs for calculating the stressed VaR are the same as for the VaR.
When determining the observation period, the methodology area has analysed the history of a subset of market risk factors picked on the basis of expert
analysis of the most significant positions
in the books. The scope considered comprises the treasury departments for which Bank of Spain approval has been
obtained for the use of the internal model at 31 December 2018: Spain, United Kingdom, Chile, Portugal and Mexico.
The windows currently used to
calculate stressed VaR are:
Table 81. Stress window
|
|
|
|
|
Period |
Spain |
|
16/09/2008 - 17/09/2009 |
UK |
|
14/07/2008 - 01/07/2009 |
Chile |
|
16/09/2008 - 17/09/2009 |
Brazil |
|
18/11/2008 - 30/11/2009 |
Mexico |
|
12/06/2012 - 24/06/2013 |
Portugal |
|
04/09/2008 - 10/09/2009 |
These stress windows are regularly reviewed, and a daily check is run on the validity of the window to compare both VaR and
stressed VaR. This check may determine that an analysis is required of the loss and gain vectors used to calculate the VaR values in order to determine the positions and market movement that made VaR exceed stressed VaR over a continuous period of
time.
The aim of the analysis is to identify and attempt to separate the causes of the exceptions into two basic categories:
|
|
Market movements: it may be necessary to review the window. |
|
|
Significant changes in the composition of the portfolio: in this case an analysis will need to be conducted with the Business department so as to ascertain whether the new positions will be permanent, or if they
are one-off transactions, and thus decide whether the window should be reviewed. |
If the analysis of
the exceptions of percentile VaR with respect to stressed VaR reveals that the current window used to calculate daily VaR covers a period with greater market volatility than the stress window used to calculate stressed VaR, then the stress window
will be reviewed.
6.3.3. Incremental risk charge
Following the recommendations of the Basel Committee on Banking Supervision and applicable regulations, an additional metric is calculated in relation to the
credit risk inherent in the trading portfolios: the incremental risk charge (IRC).
The IRC is intended to measure both rating migration risk and any
incremental default risk that is not captured by VaR through changes in the corresponding credit spreads. The IRC metric is calculated, where applicable, for public and private fixed-income bonds, bond
derivatives and credit derivatives.
The method used to calculate the IRC, which is essentially similar to that applied to the credit risk of non-trading portfolio exposures, is based on the Merton structural model, which dictates that the default event occurs when the assets of a company fall below a certain level of its debts. This internally developed
model
comprises direct measurements on the distribution queues of losses caused by the different credit events it
contemplates, i.e. default risk and migration of credit quality subject to a confidence interval of 99.9% and a capital horizon of one year for all positions.
The assumed liquidity horizon coincides with the one-year capital horizon, there being no other liquidity horizons of
less than one year. The IRC calculation methodology uses a loss distribution generated via Montecarlo simulation, using two transition matrices; one for corporate issues and the other for sovereign issues. The transition matrices used in the IRC
model are based on the historical probabilities of transition, published by the rating agencies. These probabilities are processed to remove the non-rated category and adjusted to include the internally
estimated probability of default.
This calibration process is run once a year to incorporate the latest information. The model does not assume the
periodical renewal of positions (roll-over); but rather a model of constant positions along the one-year capital and liquidity horizon, which consists of maintaining the same positions along this horizon
independently of the maturity of each of them.
It is a corporate model that incorporates the portfolios from the different regions in which the IRC has
been approved to calculate independent IRC figures.
6.3.4. Stress testing
Various types of stress test scenarios are currently applied:
|
|
VaR scenarios: these consist of a new VaR calculation whenever there are changes in risk factors. These scenarios help define a portfolios risk profile. |
|
|
IRC scenarios: scenarios defined specifically to stress default risk and the risk of ratings migration in the credit positions in the trading portfolio. |
|
|
Historical scenarios: scenarios are constructed on the basis of relevant historical events and are used to forecast maximum losses that would occur were these events to repeat themselves. |
|
|
Severe crisis scenarios: extreme scenarios based on movements in market variables that have no known historical precedent. |
|
|
Plausible scenarios: another alternative is to conduct the stress test using scenarios based on expectations of future market performance. These expectations are based on scenarios that are not as extreme as the
stressed scenarios. |
When defining the scenarios in which the portfolios are to be tested a distinction is drawn between the following:
|
|
Global scenarios: affecting all units. These are defined globally and each unit is responsible for calculating the movements of the variables that apply to them. |
|
|
Abrupt crisis: ad hoc scenario with sudden market jolts. Rise in interest rate curves, sharp falls in stock markets, strong appreciation of the dollar against other currencies, rise in volatility and in credit
spreads. |
|
|
|
|
|
146 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
Subprime crisis: historical scenario of the crisis triggered in the market on the heels of the subprime mortgage crisis in the United States. The analysis seeks to capture the impact on results of the liquidity
crunch in the markets. The scenarios will have two different time horizons: 1 day and 10 days. Both scenarios posit plunges in stock markets, interest rate declines in the core markets and increases in emerging markets, and dollar appreciation
against all other currencies. |
|
|
Adverse scenario: reflects the systemic threats which are currently considered to be the most serious threats to the stability of the banking sector in the European Union. Events occurring in this scenario take
account of increases in global bond yields along with an incremental fall in the creditworthiness of countries with low demand; stagnation of political reforms jeopardising the sustainability of public finances and a lack of the adjustments
necessary to maintain reasonable market funding. |
|
|
Reverse stress test scenarios: those scenarios that can compromise the Banks ongoing viability. Here, the potential vulnerabilities of the business are identified, along with hidden risks and interactions
between the different risk factors. |
These inverse scenarios start from a known stress result (such as
non-compliance with certain ratios relating to capital, liquidity or capital adequacy) and from there they identify the extreme
scenarios in which the movements of the market variables can cause those events that compromise the viability of
the business.
|
|
Forward-looking scenarios: where the aim is to anticipate possible negative consequences of changes in market variables and come up with options to prevent the ensuing impacts. They help to detect signs of change
in the positioning of portfolios and provide better support for decision-making. |
A consolidated monthly stress test is prepared, under the
supervision of the global market risk committee, with explanations of the main variations in the results for the different scenarios and units. An alert mechanism is also in place, so that when a scenario returns a loss that is high by historical
standards or in terms of the capital consumed by the portfolio in question, the relevant business head is notified. The stress test is performed by applying the same methodologies for all sub-portfolios
covered by the internal market risk model.
The table below shows the results as of 31 December 2018, broken down by risk factor (interest rate,
equities, foreign currency, credit spread, commodities and the volatility for each), in a scenario in which volatility equivalent to six standard deviations in a normal distribution is applied. The scenario is defined by taking for each risk factor
the change that produces the highest potential loss in the global portfolio.
Table 82. Stress scenario: Maximum
volatility (worst case)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
|
Interest rate |
|
|
Equities |
|
|
Foreign currency |
|
|
Credit spread |
|
|
Commo- dities |
|
|
Total |
|
|
Interest rate |
|
|
Equities |
|
|
Foreign currency |
|
|
Credit spread |
|
|
Commo- dities |
|
|
Total |
|
TOTAL TRADING |
|
|
-18.9 |
|
|
|
-13.1 |
|
|
|
-29.4 |
|
|
|
-12.8 |
|
|
|
|
|
|
|
-74.3 |
|
|
|
-32.5 |
|
|
|
-8.7 |
|
|
|
-5.3 |
|
|
|
-18.7 |
|
|
|
|
|
|
|
-65.2 |
|
Europe |
|
|
-7.9 |
|
|
|
-3.8 |
|
|
|
-9.2 |
|
|
|
-11.1 |
|
|
|
|
|
|
|
-32.0 |
|
|
|
-10.3 |
|
|
|
-3.3 |
|
|
|
-1.9 |
|
|
|
-18.2 |
|
|
|
|
|
|
|
-33.7 |
|
Latin America |
|
|
-2.1 |
|
|
|
-9.3 |
|
|
|
-15.8 |
|
|
|
-0.1 |
|
|
|
|
|
|
|
-27.3 |
|
|
|
-21.0 |
|
|
|
-5.4 |
|
|
|
-3.0 |
|
|
|
|
|
|
|
|
|
|
|
-29.4 |
|
USA |
|
|
-8.5 |
|
|
|
|
|
|
|
-3.8 |
|
|
|
|
|
|
|
|
|
|
|
-12.3 |
|
|
|
-0.1 |
|
|
|
|
|
|
|
-0.3 |
|
|
|
|
|
|
|
|
|
|
|
-0.4 |
|
Global Activities |
|
|
-0.2 |
|
|
|
|
|
|
|
-0.2 |
|
|
|
-1.7 |
|
|
|
|
|
|
|
-2.1 |
|
|
|
-0.1 |
|
|
|
|
|
|
|
|
|
|
|
-0.5 |
|
|
|
|
|
|
|
-0.6 |
|
Asia |
|
|
-0.2 |
|
|
|
|
|
|
|
-0.4 |
|
|
|
|
|
|
|
|
|
|
|
-0.5 |
|
|
|
-1.0 |
|
|
|
|
|
|
|
-0.1 |
|
|
|
|
|
|
|
|
|
|
|
-1.1 |
|
The stress test reveals that the economic loss suffered by Santander Group in its trading portfolios, in terms
of the mark to market (MtM) result, would be, if the stress movements defined in the scenario materialised in the market, EUR 74.3 million. This loss would be concentrated in Europe (in the following order: interest rates, credit spread and
equities) and Latin America (in the following order: interest rates, exchange rates and equities).
6.3.5. Backtesting (MR4)
The general aim of backtesting is to verify the accuracy of the Value at Risk (VaR) calculation model. In other words, whether to accept or reject the model
used to estimate the maximum loss on a portfolio with a given level of confidence, over a certain period of time.
Backtesting is analysed at local level
by the local market risk control units. The market risk consolidation unit is responsible for backtest reporting at consolidated level. It is important to note that the backtesting methodology is applied identically to all the sub-portfolios covered by the internal market risk model.
The backtesting exercise consists of comparing the VaR
forecasts, given a certain confidence level and time horizon, with the actual losses incurred over a time horizon equal to the VaR time horizon.
Three
types of backtesting have been defined:
|
|
Clean backtesting: the daily VaR is compared with the results obtained without taking into consideration intra-day results or the changes in the positions of the portfolio.
This method is used to check the accuracy of the individual models used for valuing and measuring the risks of various positions. |
|
|
Dirty backtesting: the daily VaR is compared with the net results for the day, including the results of intraday operations and results from fees and commissions. |
|
|
Dirty backtesting without mark ups or commissions: the daily VaR is compared with the net results for the day, including the results of intraday operations but excluding results from mark ups and fees and
commissions. This method seeks to provide an idea of the intraday risk assumed by the Groups treasury departments. |
In order to
calibrate and control the effectiveness of the internal market risk measurement and management systems, Santander Group regularly performed the required benchmark tests and analyses throughout 2018, with the conclusion that the model was reliable.
Number of exceptions
An exception occurs whenever
the losses or gains observed in a day exceed the VaR estimate. The number (or percentage) of exceptions recorded is one of the most intuitive indicators for establishing a models accuracy.
The confidence level for the VaR calculation is a measure of the number of exceptions expected to occur in a given time window. For example, if the daily VaR
is calculated with a confidence level of 99%, the percentiles of interest are the 1st and the 99th percentiles of the P&L distribution, so we should expect 2% of exceptions during the days studied (1% due to excess profit and 1% due to excess
loss).
If there are significantly more, or fewer, exceptions, this might be a sign of problems in the VaR model
employed. With the observed P&L and estimated VaR data it is possible to construct a hypothesis test to check the validity of the VaR/P&L relationship.
Time between exceptions
The confidence level for the VaR
is also a measure of the number of days that can be expected to elapse between two successive exceptions. For instance, if the daily VaR is calculated at 99% confidence (1st and 99th percentiles), we may expect a mean time of approximately 50 days
between exceptions.
Similarly to what was explained in relation to the frequency of exceptions, hypothesis-testing can be done based on the time between
exceptions as a means of validating the VaR model.
Breadth between exceptions
Whereas the VaR predicts with a certain probability the risk that is assumed, the average excess (or expected shortfall) is a predictor, for that probability,
of the average loss once the VaR has been exceeded. This study should be included when analysing the backtesting report in order to obtain the size of the potential losses that exceed the VaR level.
Daily VaR/P&L relationship
To validate the VaR
model, it is not enough to analyse the number and type of exceptions that occur in a given time frame. Other indicators must be observed in order to ensure the models consistency. One such indicator is the daily VaR/P&L relationship. This
relationship is defined as follows:
|
|
The P&L figure, as a percentage of VaR, on all the days on which there are no exceptions (losses or gains). |
|
|
Calculation of the arithmetic mean of these figures. |
The percentage should be close to a value determined by
the VaR confidence level, because the higher the chosen confidence level, the higher the VaR estimate (and the smaller the P&L results as a percentage of that estimate).
If the percentage observed is much higher than expected, the risk is being underestimated, and the model should be reviewed. Conversely, if the percentage is
significantly smaller, then the risk is being overestimated and the VaR model should be adjusted. The latter outcome may be desirable, however, if the aim is to maintain conservative risk estimates.
The following diagram shows the annual backtest at the end of December 2018 for each unit with internal model approval:
|
|
|
|
|
148 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
MIR Spain Group
EUR million
Mexico
EUR million
Santander London Branch
EUR million
Chile
EUR million
|
|
|
|
|
150 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
The following table includes backtesting exceptions for units that account for over 3% of total RWAs for market
risk. The number of exceptions at 31 December 2018 for the main units with internal model approval are shown below:
Table 83. Exceptions at units with internal model
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
|
Exceptions |
|
|
Model Status |
|
Spain |
|
|
4 |
|
|
|
VALID |
|
SLB |
|
|
2 |
|
|
|
VALID |
|
Chile |
|
|
3 |
|
|
|
VALID |
|
Mexico |
|
|
3 |
|
|
|
VALID |
|
Exceptions in Spain relate mainly to movements in the interest rates curve, credit spreads and exchange rates.
Exceptions in Mexico relate to abrupt movements in the MXN/USD exchange rate, which also affect movements in the dollar interest rate curve, as in the
exception of 20 November.
Exceptions in Chile are mainly the result of movements in the USD/ CLP exchange rate, and the dollar interest rate curve.
Valuation adjustments
The fair value of a financial
instrument is calculated using the appropriate valuation model. Valuation adjustments may be needed, however, when no market quotations are available for price comparison purposes.
Sources of risk include uncertain model parameters, illiquid issuers of underlying assets, poor quality market data or unavailable risk factors (sometimes the
best alternative is to use limited models with controllable risk). In such situations, calculating and applying adjustments to the valuation is a common practice in the industry. It is done by Santander to take account of the sources of model risk
described below:
|
|
For fixed-income markets, examples of model risk include correlation between fixed-income indices, the absence of modelling of stochastic
basis spreads, calibration risk and modelling volatility. Other sources of risk arise from the estimation of market data. |
|
|
In equity markets, examples of model risk include modelling the forward skew and the impact of stochastic interest rates, correlation and multi-curve modelling. |
Risk may also derive from managing hedges of digital payments, callables and barriers. Also relevant are risk sources that arise from the estimation of market
data such as dividends and correlations for quanto options and composites on baskets.
For specific financial instruments pegged to home mortgage loans
guaranteed by financial institutions in the United Kingdom (which are regulated and partly financed by the government) and derivatives on underlying property assets, the Halifax House Price Index (HPI) is the main input. In these cases, the
assumptions include estimates regarding the future growth and volatility of the HPI, the mortality rate and implicit credit spreads.
|
|
Inflationary markets are exposed to model risk due to uncertainty regarding modelling of the correlation structure between different inflation rates (consumer price indices). Another source of risk may arise from the bid-offer spread of inflation-linked swaps. |
|
|
Currency markets are exposed to model risk in their modelling of forward skew and the impact of modelling stochastic interest rates and correlation for multi-asset instruments. Risk may also arise from market data, due
to the existence of specific illiquid foreign exchange pairs. |
6.3.6. Internal validation of the models
GLOBAL [PFE (REC), CVA, DVA and IRC]
Santander Group
currently uses an advanced model based on Monte Carlo simulations and an analytical model for calculating potential exposure to counterparty credit risk - PFE (REC). In Spain, Mexico and Portugal and at the US subsidiary (Santander New York Branch)
and Santander Bank North America (SBNA), the two models coexist (mixed model), whereas the other units only use the analytical model.
The development and
validation project was continued in 2018 to replace the existing aggregation systems. This plan will continue to be implemented in 2019.
With regard to
corporate CVA and DVA models, which take the expected positions of the PFE (REC) models, the recurring validation process currently in progress is due to finish in early 2019.
The recurring validation process for the model of calculating regulatory capital for issuer risk (Incremental Risk Charge) is nearing completed, and various
proposed changes to the current model are being reviewed, in order to improve compliance with the regulatory expectations established in the TRIM.
The
objectives of Internal Validation for 2019 will be focused on:
|
|
Recurring validation of REC, CVA/DVA metrics. |
|
|
Monitoring of the recommendations associated with the models. |
GLOBAL [setting of price of Front XVA]
Work continued throughout 2018 on the process of developing and validating products and improvements to the Quantia environment Framework (QeF) for
the construction of the Mark-to-Future bucket. This model is one of the main inputs when calculating valuation adjustments (XVA).
The objectives of Internal Validation for 2019 will be focused on the review of new products and the metrics of the new aggregation engine.
GLOBAL [setting of fixed income prices by Front Office]
In 2018, the Group continued to work on validating market input models (Murex 3 curve module, long-term repo curve, rating transition matrices for the
calculation of RVA) and model input models.
Validation documents for native Murex models were improved, and the revalidation process was continued.
Validations were also made of new in-house developments for the
operational migration of SANPRO to the trading book (cancellable deposits, swaps and quanto vanilla options) and a new FX model for specific products.
FVAs related to SANPRO models and the long-term repo curve were also validated, in addition to the RVA (replacement valuation adjustment) calculation
methodology.
The objectives of Internal Validation for 2019 will be focused on:
|
|
Validating new pay-offs and improving existing ones. |
|
|
Validating more sophisticated models for management and valuation adjustments. |
|
|
Validating model input and market input models. |
|
|
Completing the revalidation of native Murex models. |
|
|
Completing the validation of the definitions for risk factor sensitivities. |
GLOBAL [setting of FX price by
Front Office]
The Group continued its process of validating market inputs models in 2018 and meanwhile the validation documentation for the native
Murex models was improved and the new implementation of local volatility models was validated.
The objectives of Internal Validation for 2018 will be
focused on:
|
|
Validating input models and new pay-offs. |
|
|
Validating more sophisticated models for management and valuation adjustments. |
GLOBAL [setting of Equity
and Inflation prices by Front Office]
In 2018, the Group continued to work on validating market input models (correlations for equity indices and
single stocks, inflation volatility curves and surfaces) and model input models (seasonality of inflation indices).
Validation documents for native Murex
models were improved, and the revalidation process was continued.
The definitions of risk factor sensitivities were also validated, in accordance with
the Group-wide official pricing systems. This exercise, which is very far advanced, will be completed in 2019.
Lastly, various improvements and new
developments for in-house models were reviewed (dynamic basked product; improvements in the treatment of dividends in hybrid equity- interest rate models; autocallables with differing dates).
The objectives of Internal Validation for 2019 will be focused on:
|
|
Validating new pay-offs and improving existing ones. |
|
|
Validating more sophisticated models for management and valuation adjustments. |
|
|
Completing the revalidation of native Murex models. |
|
|
Completing the validation of the definitions for risk factor sensitivities. |
GLOBAL [setting of Risk price]
In 2018, the valuation models used to calculate VaR in the risks system were revalidated in accordance with the plan established at year-end 2017. The models with higher materiality used to calculate VaR in Brazil were also validated. A plan was drawn up for 2019 and 2020 to validate the remaining valuation models used in the risks system.
Dashboard [VaR and SVaR]
In 2018, work continued on the
quarterly validation dashboard for the Market VaR and SVaR models in Spain, the UK, Brazil, Mexico, Chile and Portugal. The dashboard incorporates a number of key indicators used to monitor the quality of models, namely the SVaR/VaR ratio, the
number of backtesting exceptions, the degree of consistency of P&L Front Risks and the publication use test. These indicators are included in recurring validations, and their early monitoring constitutes proactive control of the model
function.
SPAIN [VaR and SVaR]
In 2018, the
recurring validation of internal VaR and SVaR models was completed for Spain in line with TRIM guidelines (targeted review of internal models).
Tests
were run during this validation process based on a review of p-values and the validity of VaR re-scaling assumptions. The validity of the development models associated
with risk factors, in addition to the decline factor applied to weight the different scenarios was also reviewed.
The Group continued to carry out
validation exercises based on hypothetical portfolios intended to identify weaknesses in the models. Lastly, a detailed review was commenced of the accuracy of the metrics obtained using the simplified valuation models in the risks system compared
to Front platform models, as part of the process to identify risks not contemplated in the models.
The objectives of Internal Validation for 2019 will be
focused on:
|
|
Validating new improvements deriving from new regulatory requirements. |
CHILE [VaR and SVaR]
In December 2018, the recurring validation of internal VaR and SVaR models was completed for Chile in line with TRIM guidelines. During this validation several
recommendations were made to align the model with the regulatory requirements established in the guidelines.
The objectives of Internal Validation for
2019 will be focused on:
|
|
Validating market data models (curves, surfaces, dividends, etc.). |
|
|
Validation of improvements deriving from new regulatory requirements. |
PORTUGAL [VaR and SVaR]
In December 2018, the recurring validation of internal VaR and SVaR models was completed for Portugal in line with TRIM guidelines. During this validation
several recommendations were made to align the model with the regulatory requirements established in the guidelines.
|
|
|
|
|
152 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
The objectives of Internal Validation for 2019 will be focused on:
|
|
Validation of improvements deriving from new regulatory requirements. |
MEXICO [VaR and SVaR]
In December 2018, the recurring validation of internal VaR and SVaR models was completed for Mexico in line with TRIM guidelines. During this validation
several recommendations were made to align the model with the regulatory requirements established in the guidelines.
The objectives of Internal
Validation for 2019 will be focused on:
|
|
Validation of improvements deriving from new regulatory requirements. |
6.4. Structural balance sheet risks
Structural risk is defined as risk caused by management of different balance sheet items. This risk includes both losses from price changes affecting available-for-sale and held-to-maturity portfolios (banking book), and losses arising from
management of assets and liabilities carried at amortised cost of Santander Group.
Specifically, structural risk measures the probability of losses in
different balance sheet figures deriving from a change in the levels of different market variables, specifically interest rates and foreign exchange rate.
The principles governing the control of structural risk at Santander Group are as follows:
|
|
Autonomy in management, whereby each entity autonomously manages its balance sheet structure and its capital. |
|
|
Control and supervision, which means control and oversight mechanisms of risks must exist. |
|
|
Using like-for-like and aggregatable metrics. |
|
|
Using like-for-like and documented methodologies. |
|
|
Setting limits and ensuring these can be adjusted accordingly. |
|
|
Adjusting to the global regulatory environment. |
For further details, see the Risk Management Chapter (section
4.4) on the 2018 Annual Report
6.4.1. Main interest rate risk in the banking book (IRRBB) metrics
The market risk profile inherent in the Groups balance sheet, in relation to its asset volumes and shareholders funds, as well as the budgeted net
interest margin, remained moderate in 2018, in line with previous years.
The interest rate risk originated by retail and commercial banking is
transferred for management through an internal risk transfer system to the local Financial Division that is ultimately responsible for management of the subsidiarys structural risk generated by interest rate fluctuations. The
Groups usual practice is to measure interest rate risk by using statistical models, relying on mitigation strategies for structural risk using interest rate instruments, such as fixed income bond portfolios and derivative instruments to
maintain the risk profile at levels that are appropriate to the risk appetite approved by senior management.
In cases where derivatives are used to hedge
interest rate risk, these are accounted for as fair value hedges or cash flow hedges according to the flows arising from these hedges, in line with accounting standards.
For further details, see the Risk Management Chapter (section 4.5: Structural Interest Rate Risk) on the 2018 Annual Report.
System for controlling limits
In the framework of the annual limits plan, limits are set for IRRBB (interest rate risk in the banking book), responding to the Groups risk appetite
levels. The main limits are:
|
|
Interest rate risk in the banking book: |
|
|
Limit on the sensitivity of the net interest margin to 1 year. |
|
|
Limit on the sensitivity of the market value of equity. |
In the event of that one of these limits or their sub
limits is exceeded, the heads of risk management must explain the reasons and facilitate a corrective action plan.
Methodologies
a) |
Structural interest rate risk |
The Group analyses the sensitivity of its net interest margin and market value of equity to changes in interest rates. This sensitivity arises from date and
interest rate repricing gaps in the various balance sheet items.
Taking into consideration the balance-sheet interest rate position and the market
situation and outlook, the necessary financial measures are adopted to align this position with that desired by the Group. These measures can range from taking positions on the markets to defining the interest rate features of
commercial products. The metrics used by the Group to control interest rate risk in these activities are the
repricing gap, the sensitivity of the net interest margin and market value of equity to changes in interest rates, the duration of capital and value at risk (VaR), for the purpose of calculating economic capital.
The internal metrics used to monitor interest rate risk are based on the sensitivity of economic value and net interest margin to interest rate shocks
(-100bps, -75bps, -50bps, -25bps, +25bps, +50bps, +75bps and +100bps), to provide a harmonised overview of the risk in the different Group entities. To calculate the VaR used to estimate economic capital, a range of historic scenarios is applied
comprising variations in different sections of different rate curves to estimate the potential impact on the Groups economic value and net interest margin.
b) |
Interest rate gap on assets and liabilities |
This is the basic concept for identifying the entitys interest rate risk profile and measures the difference between the volume of sensitive assets and
liabilities on and off the balance sheet that re-price (i.e. that mature or are subject to rate revisions) at certain moments in time (called, buckets). This provides an immediate approximation of the
sensitivity of the entitys balance sheet and its net interest margin and market value of equity to changes in interest rates.
c) |
Net interest margin (NIM) sensitivity |
This is a key measure of the profitability of balance sheet management. It is calculated as the difference which arises in the net interest margin during a
certain period of time due to a parallel movement in interest rates. The standard period for measuring net interest margin sensitivity is one year. To aggregate sensitivities in the different currencies of each local unit, volatilities and
correlations obtained from historical data of a sufficiently significant period of time are used.
d) |
Market value of equity (MVE) sensitivity |
This measures the interest rate risk implicit in the market value of equity (which for the purposes of interest rate risk is defined as the difference between
the present value of assets and the present value of liabilities outstanding), based on the impact that a change in interest rates would have on those present values. For MVE, the internal metrics include credit spreads on transactions in the
calculation of profit margins. Risk-free discount curves are used to discount cash flows. As mentioned above, to aggregate the sensitivities of the different currencies of each local unit, volatilities and correlations obtained from historical data
of a sufficiently significant period of time are used.
e) |
Treatment of liabilities without defined maturity |
In the corporate model, the total volume of account balances without maturity is divided into stable balances and unstable balances. This division is performed
using a model based on the relationship between the balances and their moving averages. This simplified model is used to obtain the monthly cash flows with which to calculate NIM and MVE sensitivities.
The model requires a variety of inputs, summarised below:
|
|
Parameters inherent in the product.
|
|
|
Performance parameters of the customer (in this case analysis of historic data is combined with the expert business view). |
|
|
Historic data of the portfolio. |
The internal policies establish the need to review the prices assigned to the
NMDs on an annual basis; more frequently if required by market conditions. The most recent review of the parameters used in the valuation of NMDs in the different Group units has an average of five months.
f) |
Pre-payment treatment for certain assets |
The pre-payment issue mainly affects fixed-rate mortgages in units where the
relevant interest rate curves for these portfolios are at low levels. This risk is modelled in these units, and this can also be applied, with some modifications, to assets without defined maturity (credit card businesses and similar).
The usual techniques used to value options cannot be applied directly because of the complexity of the factors that determine borrower pre-payments. As a result, the valuation models for options must be combined with empirical statistical models that seek to capture pre-payment performance. Some of the
factors conditioning this performance are:
|
|
Interest rate: the differential between fixed rates on the mortgage and the market rate at which it could be refinanced, net of cancellation and opening costs. |
|
|
Seasoning: trend whereby the pre-payment is downward at the beginning of the instrument life-cycle (contract signature) and then increases, stabilising as time passes.
|
|
|
Seasonality: redemptions or early cancellations tend to take place at specific dates. |
|
|
Burnout: decreasing trend in the speed of pre-payment as the instruments maturity approaches, which includes: |
a) Age: defines low rates of pre-payment.
b) Cash pooling: defines those loans that have already been through various cycles of downward movements in interest rates as more stable. In other words,
when a loan portfolio has been through one or more cycles of downward rates and thus high levels of pre-payment, the surviving loans have a significantly lower
pre-payment probability.
c) Other: geographic mobility, demographic, social and available income factors, etc.
The series of econometric relations that seek to capture the impact of all these factors is the probability of
pre-payment of a loan or pool of loans, and is denominated the pre-payment model.
For balance sheet activity and investment portfolios, this is defined as the 99% percentile of the distribution function of losses in market value of equity,
calculated based on the current
|
|
|
|
|
154 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
market value of positions and returns over the last two years, at a statistical confidence level over a certain
time horizon. The Group uses a two-year window, or 520 daily readings, backwards in time from the VaR calculation reference date.
The Group is working on implementing the guidelines published by the EBA on management of Interest Rate Risk in the Banking Book (IRRBB), published in July
2018, applicable in 2019.
The following tables show the banks changes in the Economic Value of Equity (EVE) and Net Interest Income (NII) for every
interest rate prescribed scenario and for every currency.
Table 84. Quantitative information on IRRBB (IRRBB1)
EUR Millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
DEVE |
|
|
DNII |
|
Period |
|
Dec 18 |
|
|
Dec 17 |
|
|
Dec 18 |
|
|
Dec 17 |
|
Parallel up |
|
|
1,905 |
|
|
|
2,691 |
|
|
|
1,447 |
|
|
|
904 |
|
Parallel down |
|
|
-7,966 |
|
|
|
-8,188 |
|
|
|
-804 |
|
|
|
-535 |
|
Steepener |
|
|
1,636 |
|
|
|
1,908 |
|
|
|
|
|
|
|
|
|
Flattener |
|
|
-3,025 |
|
|
|
-4,003 |
|
|
|
|
|
|
|
|
|
Short rate up |
|
|
-1,477 |
|
|
|
-2,107 |
|
|
|
|
|
|
|
|
|
Short rate down |
|
|
-126 |
|
|
|
-554 |
|
|
|
|
|
|
|
|
|
Maximum |
|
|
-7,966 |
|
|
|
-8,188 |
|
|
|
-804 |
|
|
|
-535 |
|
Period |
|
Dec 18 |
|
|
Dec 17 |
|
Tier 1 capital |
|
|
75,838 |
|
|
|
|
|
|
|
73,293 |
|
|
|
|
|
Note: The scenarios assume the shocks established by Basel for each currency before applying management floors limiting their
impact on currencies with negative or extremely low interest rates.
The aggregation of EVE sensitivities used follows the criteria set out in the
EBA/GL/2018/02 Guidelines on the management of interest rate risk arising from non-trading book activities. For each interest-rate scenario, the positive and negative changes occurring in each currency are added linearly, with a 50% weighting for
positive changes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro |
|
DEVE |
|
|
DNII |
|
Period |
|
Dec 18 |
|
|
Dec 17 |
|
|
Dec 18 |
|
|
Dec 17 |
|
Parallel up |
|
|
11,204 |
|
|
|
10,918 |
|
|
|
2,369 |
|
|
|
1,771 |
|
Parallel down |
|
|
-7,065 |
|
|
|
-6,511 |
|
|
|
-330 |
|
|
|
-201 |
|
Steepener |
|
|
1,901 |
|
|
|
2,023 |
|
|
|
|
|
|
|
|
|
Flattener |
|
|
132 |
|
|
|
-1,056 |
|
|
|
|
|
|
|
|
|
Short rate up |
|
|
3,642 |
|
|
|
2,559 |
|
|
|
|
|
|
|
|
|
Short rate down |
|
|
-1,868 |
|
|
|
-1,995 |
|
|
|
|
|
|
|
|
|
Maximum |
|
|
-7,065 |
|
|
|
-6,511 |
|
|
|
-330 |
|
|
|
-201 |
|
Note: The scenarios assume the shocks established by Basel for each currency before applying management floors limiting their
impact on currencies with negative or extremely low interest rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD |
|
DEVE |
|
|
DNII |
|
Period |
|
Dec 18 |
|
|
Dec 17 |
|
|
Dec 18 |
|
|
Dec 17 |
|
Parallel up |
|
|
-1,088 |
|
|
|
71 |
|
|
|
5 |
|
|
|
15 |
|
Parallel down |
|
|
-959 |
|
|
|
-1,465 |
|
|
|
-40 |
|
|
|
-66 |
|
Steepener |
|
|
230 |
|
|
|
586 |
|
|
|
|
|
|
|
|
|
Flattener |
|
|
-1,019 |
|
|
|
-714 |
|
|
|
|
|
|
|
|
|
Short rate up |
|
|
-883 |
|
|
|
-221 |
|
|
|
|
|
|
|
|
|
Short rate down |
|
|
800 |
|
|
|
531 |
|
|
|
|
|
|
|
|
|
Maximum |
|
|
-1,088 |
|
|
|
-1,465 |
|
|
|
-40 |
|
|
|
-66 |
|
The scenarios assume the shocks established by Basel for each currency before applying management floors limiting their impact
on currencies with negative or extremely low interest rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GBP |
|
DEVE |
|
|
DNII |
|
Period |
|
Dec 18 |
|
|
Dec 17 |
|
|
Dec 18 |
|
|
Dec 17 |
|
Parallel up |
|
|
643 |
|
|
|
335 |
|
|
|
1,020 |
|
|
|
907 |
|
Parallel down |
|
|
-1,767 |
|
|
|
-1,866 |
|
|
|
-411 |
|
|
|
-271 |
|
Steepener |
|
|
1,073 |
|
|
|
947 |
|
|
|
|
|
|
|
|
|
Flattener |
|
|
-1,144 |
|
|
|
-1,162 |
|
|
|
|
|
|
|
|
|
Short rate up |
|
|
-477 |
|
|
|
-1,107 |
|
|
|
|
|
|
|
|
|
Short rate down |
|
|
431 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
Maximum |
|
|
-1,767 |
|
|
|
-1,866 |
|
|
|
-411 |
|
|
|
-271 |
|
Note: The scenarios assume the shocks established by Basel for each currency before applying management floors limiting their
impact on currencies with negative or extremely low interest rates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRL |
|
DEVE |
|
|
DNII |
|
Period |
|
Dec 18 |
|
|
Dec 17 |
|
|
Dec 18 |
|
|
Dec 17 |
|
Parallel up |
|
|
-1,531 |
|
|
|
-1,906 |
|
|
|
-166 |
|
|
|
-350 |
|
Parallel down |
|
|
1,920 |
|
|
|
2,337 |
|
|
|
166 |
|
|
|
350 |
|
Steepener |
|
|
594 |
|
|
|
586 |
|
|
|
|
|
|
|
|
|
Flattener |
|
|
-856 |
|
|
|
-921 |
|
|
|
|
|
|
|
|
|
Short rate up |
|
|
-1,325 |
|
|
|
-1,525 |
|
|
|
|
|
|
|
|
|
Short rate down |
|
|
1,582 |
|
|
|
1,817 |
|
|
|
|
|
|
|
|
|
Maximum |
|
|
-1,531 |
|
|
|
-1,906 |
|
|
|
-166 |
|
|
|
-350 |
|
Note: The scenarios assume the shocks established by Basel for each currency before applying management floors limiting their
impact on currencies with negative or extremely low interest rates.
For further details, see the Risk Management Chapter (section 4) on the 2018 Annual
Report.
OPERATIONAL RISK _ 2018 Pillar 3 Disclosures Report
7. Operational risk
Main figures
EUR million
|
|
|
|
|
|
|
|
|
|
|
RWA |
|
|
RWA |
|
|
|
2018 |
|
|
2017 |
|
Operational risk |
|
|
60,043 |
|
|
|
61,217 |
|
Of which standardised approach |
|
|
60,043 |
|
|
|
61,217 |
|
RWA by geography
%
RWA variation
EUR million
* |
Does not include CCPs or CVA.
|
7.1. Definition and objectives
The Groups objective when it comes to controlling and managing operational risk is to identify, measure/assess, monitor, control, mitigate and
communicate the risk. Santander Group expressly recognises that while a certain volume of expected operational losses may indeed arise, unexpected severe losses as the result of failures in business controls are unacceptable.
In 2018, the improvement in risk assessment should be noted, thanks to various initiatives such as enhancing data quality, the inclusion of additional risk
appetite metrics relating to internal fraud in the area of markets and cybersecurity risk, in addition to improvements in the process to establish, identify and assess the critical theoretical controls and improved integration of operational risk in
the Groups strategic exercises.
For the management of key risks, mitigation plans have been rolled out in key areas (fraud, data security and
cybersecurity, control over providers, etc), focusing on the implementation of corrective measures and the proper monitoring and management of projects in progress. Additionally, improvements have been made to business contingency and continuity
plans, and to crisis management in general (initiative linked to viability and resolution plans).
For further details, see the Risk Management Chapter
(section 6) on the 2018 Annual Report
7.2. Capital requirements for Operational Risk
Santander Group uses the standardised method to calculate capital requirements for operational risk, as established by the CRR. The agreement was made by the
board of directors on 22 June 2007 and reported to the Bank of Spains general supervisory department by the second vice-chairman and CEO on 29 June 2007.
Under the standardised approach, capital requirements are calculated on the basis of relevant income, which is defined as the sum of the following components
of the income statement:
The following table shows the construction criterion for the public areas of the business lines:
|
|
Interest and similar income |
|
|
Interest expense and similar charges |
|
|
Return on equity instruments |
|
|
Fee and commission income |
|
|
Fee and commission expense |
|
|
Exchange differences (net) |
For this method, the CRR also defines the following segmentation of business lines:
f) |
Payment and settlement |
Relevant income
Under the standardised approach, capital
requirements are calculated as the simple average over the last three years of the summation, for each year, of the greater of zero and the sum of relevant income across each of the business lines, multiplied by the weight assigned to each business
line.
The mathematical expression of these requirements will be as follows:
Where:
RI1-8 = Relevant income of each business line, with the appropriate sign, in accordance with the CRR.
ß1-8 = Weight applicable to each business line, in accordance with the CRR.
Obtaining data on relevant
income, allocating it to the various business lines and calculating capital requirements is the responsibility of Financial Accounting and Control.
Santander Group obtains the figure for relevant income from the consolidated management information by business line. This information is generated from
accounting data, the quality of which is assured by the SOX procedure,
- |
Income statements and balance sheet preparation by business area. |
- |
Operational risk calculation process. |
Consolidated management information is published quarterly in aggregate form and is the basis on which the businesses budgetary compliance is measured.
It is prepared by the Management Control department, which regulates the business lines of all the Groups units based on certain corporate criteria, which all units must apply when drawing up their management information.
1) Primary or geographical level:
|
a) |
Continental Europe: all retail and commercial banking businesses and Santander Global Corporate. Includes
Spain, Santander Consumer Finance, Poland, Portugal and Asia. |
|
c) |
Latin America: all the Groups activities through subsidiary companies. Includes Chile, Uruguay, Peru,
Mexico, Colombia, Argentina, Brazil and Paraguay. |
2) Global businesses. The activity of the operating units can be broken down by type of business among Retail and Commercial Banking, Santander Global
Corporate Banking, Wealth Management and the Real Estate Management unit in Spain.
|
a) |
Retail and Commercial Banking. Contains all customer banking businesses, including consumer banking, with the
exception of corporate banking, which is managed through SCIB. |
|
b) |
Santander Corporate & Investment Banking (SCIB). Reflects the returns deriving from the global
corporate banking business, investment banking and markets across the world, including globally-managed treasury departments (following the corresponding pay-out to Retail and Commercial banking customers), in
addition to the equities business. |
|
|
|
|
|
158 |
|
2018 Pillar 3 Disclosures Report |
|
|
OPERATIONAL RISK _ 2018 Pillar 3 Disclosures Report
|
c) |
Wealth Management. A global business that includes the corporate Private Banking unit, which comprises all
advisory and asset management activity for a selection of customers and the Santander Asset Management business. |
In addition to the
operating businesses, the Financial Management area includes the businesses of the financial and industrial holdings, the financial management of the parent companys currency and interest rate risk structural position, and the management of
liquidity and capital through issues and securitisations.
The following table shows the construction criterion for the public areas of the business
lines:
As a supplement to the Management Control areas aggregated business unit-level information, Santander Group uses
business area information broken down by segment, product, etc. to distribute relevant income among the business lines defined by the CRR.
Any difference
between the total figure of relevant income and the Groups published consolidated information is allocated to the business line with the highest capital consumption.
The following chart shows the distribution of capital by business line as of 31 December 2018.
Capital distribution by business line
%
Shown below is the geographical distribution of capital for operational risk:
Geographical distribution of capital for operational risk
%
Changes in capital requirements and RWAs for operational risk from 2017 to 2018 are shown below:
Table 85. Changes in capital requirements for operational risk
EUR million
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
RWAs |
|
Starting figure (31/12/2017) |
|
|
4,897 |
|
|
|
61,217 |
|
|
|
|
|
|
|
|
|
|
Wizink perimeter |
|
|
-15 |
|
|
|
-183 |
|
Totalbank perimeter |
|
|
-10 |
|
|
|
-124 |
|
Deutsche Bank perimeter |
|
|
25 |
|
|
|
307 |
|
Exchange rate effect |
|
|
-113 |
|
|
|
-1,407 |
|
Change in business |
|
|
18 |
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
Ending figure (31/12/2018) |
|
|
4,802 |
|
|
|
60,043 |
|
|
|
|
|
|
|
|
|
|
The standardised approach imposes higher capital requirements for financial institutions operating in jurisdictions with high
net interest margins, which are often linked to a high sovereign credit spread but not necessarily with increased operational risk. To avoid this undesired effect, EU legislation (Regulation 575/2013/EU) provides for the use of the alternative
standardised approach by businesses that meet certain conditions, subject to approval by the European Central Bank.
This method uses a normalised
indicator which is calculated by multiplying certain balances by 3.5% and thereby providing an average which is more in line with the banks operational risk.
On 3 February 2016, the European Central Bank issued authorisation for the Alternative Standardised Approach to be used to calculate consolidated capital
requirements for operational risk at Banco Santander Brasil, S.A.
Similarly, on 12 July 2017, the European Central Bank issued authorisation for the
Alternative Standardised Approach to be used to calculate consolidated capital requirements for operational risk at Banco Santander México SA.
OTHER RISKS AND INTERNAL CONTROL _ 2018 Pillar 3 Disclosures Report
8. Other risks and internal control
8.1. Liquidity and funding risk
Liquidity risk entails the potential losses that may be incurred by an entity as a result of its inability to secure funding on the market and/or the higher
borrowing costs of new sources of finance.
The aim of liquidity risk management is to guarantee that funds shall be available at the right time and cost
to enable the entity to meet obligations and carry out its operations.
Risk profile:
|
|
|
Management of liquidity and funding is an essential component of business strategy. |
|
|
|
The liquidity and funding model is decentralised, and is based on autonomous subsidiaries responsible for covering their own liquidity needs. |
|
|
|
Needs arising from business activity in the medium/long term must be funded by medium-term and long-term instruments. |
|
|
|
A large proportion of customer deposits from an essentially retail banking balance sheet. |
|
|
|
Diversification of sources of wholesale funding in terms of instruments/investors, markets/currencies and timelines. |
|
|
|
Limited calls on short-term wholesale funding. |
|
|
|
Availability of a sufficient liquidity reserve, including a discount capacity with central banks to be used in adverse situations. |
For further details, see the Risk Management Chapter (section 4) on the 2018 Annual Report.
8.1.1. Liquidity Coverage Ratio (LCR)
The table below shows quantitative information of LCR which complements Article 435(1)(f) of Regulation (EU) No
575/2013:
Table 86. LCR disclosure template*
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unweighted value |
|
|
Total weighted value |
|
Quarter ending on (DD Month YYYY) |
|
|
31/12/18 |
|
|
|
31/12/18 |
|
Number of data points used in the calculation of averages |
|
|
12 |
|
|
|
12 |
|
High-quality liquid assets |
|
|
|
|
|
|
|
|
1 |
|
Total high-quality liquid assets (HQLA) |
|
|
|
|
|
|
191,181 |
|
Cash-outflows |
|
|
|
|
|
|
|
|
2 |
|
Retail deposits and deposits from small business customers, of which: |
|
|
449,312 |
|
|
|
33,000 |
|
3 |
|
Stable deposits |
|
|
290,806 |
|
|
|
14,540 |
|
4 |
|
Less stable deposits |
|
|
158,456 |
|
|
|
18,411 |
|
5 |
|
Unsecured wholesale funding |
|
|
192,625 |
|
|
|
88,692 |
|
6 |
|
Operational deposits (all counterparties) and deposits in networks of cooperative banks |
|
|
55,212 |
|
|
|
12,956 |
|
7 |
|
Non-operational deposits (all counterparties) |
|
|
131,503 |
|
|
|
69,825 |
|
8 |
|
Unsecured debt |
|
|
5,911 |
|
|
|
5,911 |
|
9 |
|
Secured wholesale funding |
|
|
|
|
|
|
5,140 |
|
10 |
|
Additional requirements |
|
|
161,771 |
|
|
|
36,422 |
|
11 |
|
Outflows related to derivative exposures and other collateral requirements |
|
|
23,784 |
|
|
|
20,846 |
|
12 |
|
Outflows related to loss of funding on debt products |
|
|
1,157 |
|
|
|
1,157 |
|
13 |
|
Credit and liquidity facilities |
|
|
136,829 |
|
|
|
14,419 |
|
14 |
|
Other contractual funding obligations |
|
|
8,136 |
|
|
|
7,530 |
|
15 |
|
Other contingent funding obligations |
|
|
85,361 |
|
|
|
7,144 |
|
16 |
|
Total cash outflows |
|
|
|
|
|
|
177,927 |
|
Cash-inflows |
|
|
|
|
|
|
|
|
17 |
|
Secured lending (eg reverse repos) |
|
|
45,108 |
|
|
|
1,811 |
|
18 |
|
Inflows from fully performing exposures |
|
|
54,424 |
|
|
|
34,825 |
|
19 |
|
Other cash inflows |
|
|
13,569 |
|
|
|
11,460 |
|
EU-19a |
|
(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) |
|
|
|
|
|
|
|
|
EU-19b |
|
(Excess inflows from a related specialised credit institution) |
|
|
|
|
|
|
|
|
20 |
|
TOTAL CASH INFLOWS |
|
|
113,101 |
|
|
|
48,096 |
|
EU-20a |
|
Fully exempt inflows |
|
|
|
|
|
|
|
|
EU-20b |
|
Inflows Subject to 90% Cap |
|
|
|
|
|
|
|
|
EU-20c |
|
Inflows Subject to 75% Cap |
|
|
103,927 |
|
|
|
48,096 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ADJUSTED VALUE |
|
21 |
|
Liquidity buffer |
|
|
|
|
|
|
191,181 |
|
22 |
|
Total net cash outflows |
|
|
|
|
|
|
129,831 |
|
23 |
|
Liquidity coverage ratio (%) |
|
|
|
|
|
|
147 |
% |
* |
Information calculated as the consolidated LCR simple averages of
month-end observations over the twelve months of 2018. |
|
|
|
|
|
162 |
|
2018 Pillar 3 Disclosures Report |
|
|
OTHER RISKS AND INTERNAL CONTROL _ 2018 Pillar 3 Disclosures Report
A description of the degree of centralisation of liquidity management and interaction between the
groups units
The Group has adopted a decentralised financing model through a structure of autonomous subsidiaries that are self-sufficient when
it comes to liquidity. Each subsidiary is responsible for covering the liquidity needs arising from its current and future business, either through deposits captured from its customers in its area of influence or through recourse to the wholesale
markets in which it operates, within a framework of management and supervision coordinated at Group level Therefore, each subsidiary manages and monitors its own LCR ratio, ensuring that it remains at all times within the limits specifically
established for that subsidiary. These individual limits are more stringent than regulatory requirements and are reflected in the risk appetite of each subsidiary.
This financing model has proven itself to be highly effective during times of high market stress, since it effectively prevents problems at one division from
impacting the borrowing capacity of other areas and therefore of the Group as a whole; this being a definite threat in the case of centralised financing models.
The LCR ratio shown here is essentially the sum of the individual ratios at each Group unit, stripping out any one-off
intra-group transactions.
Concentration of funding and liquidity sources
To ensure sound liquidity management, the Group seeks to diversify its sources of wholesale financing, meaning diversification by instrument, investor, market,
currency and terms. The Groups model relies on its presence in major markets, affording it a large degree of diversification. Since most Group units are commercially-oriented, they obtain a large part of their funding from deposits secured
from retail customers, which are inherently more stable than wholesale sources of funding.
In view of all these considerations, there is no significant
risk of concentration of funding. Even so, the Group is continuing to implement metrics and limits to control any concentration of funding sources.
Derivative exposures and potential collateral calls
Most
transactions with derivatives carried out by Group entities are subject to collateral contracts covering the market value of those transactions. Group units include liquidity risk involving the impact of an adverse market scenario leading to
changes in the market values of those derivatives and therefore generating additional liquidity needs due to the need to post collateral in their LCR ratio using the historical look-back approach, in which the most significant net
change in 30 days over the preceding 24 months is calculated and then added as further liquidity needs.
Currency mismatch in the LCR
Santander Group prepares its consolidated LCR ratio for each of its significant currencies, which reflect the regions in which the Groups different units
operate: US dollar (USD), pound sterling (GBP), Brazilian real (BRL), Mexican peso (MXN) and Chilean peso (CLP). Individually, each of the entities draws up its own LCR ratio for its significant currency. The main risk here comes from the positions
held in Latin American countries, where the local currencies are not directly convertible. Therefore, the positions held in foreign currency are monitored closely; a process that includes currency-specific stress scenarios.
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
Santander Groups consolidated ratio is largely shaped by the individual ratios of its three main units: Santander Parent, Santander UK and
Santander Brazil. These units acquire most of their funding from retail deposits, which are much more stable liabilities that generate potentially fewer outflows from the LCR ratio. Most cash outflows from the LCR ratio stem from wholesale funding,
which is considerably more unstable, although the Group typically minimises and diversifies the maturities. Meanwhile, the Group has a high quality stock of liquid assets, on average, approximately 93% of the assets that are part of the LCR
numerator are Level 1; of which are Level 1 on average. This is because the units asset portfolios mainly comprise the public debt of the countries in which the Group operates or countries with a good credit rating.
For further details, see the Economic and Financial Report Chapter (section 3.4: Liquidity and funding management) and the Risk Management Chapter (section
4.6) on the 2018 Annual Report.
8.1.2. Asset Encumbrance
In line with the guidelines established by the European Banking Authority (EBA), the concept of asset encumbrance includes both
on-balance sheet assets pledged as collateral in operations to obtain liquidity as well as those off-balance sheet assets received and
re-used for a similar purpose, in addition to other assets associated with liabilities other than for funding reasons.
Disclosures on Santander Group required by Commission Delegated Regulation (EU) 2017/2295.
The scope used for the disclosures in this report is the same as the liquidity management scope on a consolidated basis, as regulated in CRR 575/2013.
The amount of exposure shown in the tables below was calculated as the median of the values disclosed in the regulatory information for the four quarters of
the year, in line with European Banking Authority guidelines.
Table 87. Encumbered and unencumbered
assets (AE1)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount of encumbered assets |
|
|
Fair value of encumbered assets |
|
|
Carrying amount of unencumbered assets |
|
|
Fair value of unencumbered assets |
|
Assets of the reporting institution |
|
|
325,473 |
|
|
|
|
|
|
|
1,102,185 |
|
|
|
|
|
Equity instruments |
|
|
7,549 |
|
|
|
|
|
|
|
11,292 |
|
|
|
|
|
Debt securities |
|
|
83,203 |
|
|
|
83,080 |
|
|
|
90,410 |
|
|
|
91,924 |
|
of which: covered bonds |
|
|
797 |
|
|
|
805 |
|
|
|
929 |
|
|
|
924 |
|
of which: asset-backed securities |
|
|
6,573 |
|
|
|
6,161 |
|
|
|
2,457 |
|
|
|
2,198 |
|
of which: issued by general governments |
|
|
72,145 |
|
|
|
71,808 |
|
|
|
56,009 |
|
|
|
57,939 |
|
of which: issued by financial corporations |
|
|
4,784 |
|
|
|
5,231 |
|
|
|
22,725 |
|
|
|
22,353 |
|
of which: issued by non-financial corporations |
|
|
1,022 |
|
|
|
1,026 |
|
|
|
9,431 |
|
|
|
8,977 |
|
Other assets |
|
|
238,500 |
|
|
|
|
|
|
|
999,751 |
|
|
|
|
|
of which: loans |
|
|
218,257 |
|
|
|
|
|
|
|
839,226 |
|
|
|
|
|
|
|
|
|
|
164 |
|
2018 Pillar 3 Disclosures Report |
|
|
OTHER RISKS AND INTERNAL CONTROL _ 2018 Pillar 3 Disclosures Report
Table 88. Collateral received (AE2)
EUR million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unencumbered |
|
|
|
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 by the reporting institution |
|
|
81,545 |
|
|
|
45,002 |
|
Loans on demand |
|
|
|
|
|
|
17 |
|
Equity instruments |
|
|
3,792 |
|
|
|
6,243 |
|
Debt securities |
|
|
75,832 |
|
|
|
38,936 |
|
of which: covered bonds |
|
|
619 |
|
|
|
515 |
|
of which: asset-backed securities |
|
|
277 |
|
|
|
2,524 |
|
of which: issued by general governments |
|
|
68,812 |
|
|
|
30,560 |
|
of which: issued by financial corporations |
|
|
6,341 |
|
|
|
7,071 |
|
of which: issued by non-financial corporations |
|
|
467 |
|
|
|
753 |
|
Loans and advances other than loans on demand |
|
|
|
|
|
|
4 |
|
Other collateral received |
|
|
1,736 |
|
|
|
23 |
|
Own debt securities issued other than own covered bonds or asset-backed securities |
|
|
3 |
|
|
|
2,810 |
|
Own covered bonds and asset-backed securities issued and not yet pledged |
|
|
|
|
|
|
7,279 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS, COLLATERAL RECEIVED AND OWN DEBT SECURITIES ISSUED |
|
|
407,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As table 87 shows, the vast majority of unencumbered assets includes loans that can be pledged as collateral.
The main sources and types of encumbrances and the level of over-collateralisation are set out in the following table
Table 89. Sources of encumbrance (AE3)
EUR million
|
|
|
|
|
|
|
|
|
|
|
Matching liabilities, contingent liabilities or securities lent |
|
|
Assets, collateral received and own debt securities issued other
than covered bonds and ABSs encumbered |
|
Carrying amount of selected financial liabilities |
|
|
273,497 |
|
|
|
353,608 |
|
of which: Derivatives |
|
|
20,447 |
|
|
|
21,064 |
|
of which:
Over-The-Counter |
|
|
13,204 |
|
|
|
13,399 |
|
of which: Deposits |
|
|
172,944 |
|
|
|
212,590 |
|
of which: Repurchase agreements |
|
|
96,156 |
|
|
|
122,925 |
|
of which: central banks |
|
|
2,015 |
|
|
|
1,837 |
|
of which: Collateralised deposits other than repurchase agreements |
|
|
76,422 |
|
|
|
98,368 |
|
of which: central banks |
|
|
67,415 |
|
|
|
83,082 |
|
of which: Debt securities issued |
|
|
78,175 |
|
|
|
114,020 |
|
of which: covered bonds issued |
|
|
43,304 |
|
|
|
54,732 |
|
of which: asset-backed securities issued |
|
|
34,612 |
|
|
|
60,121 |
|
Other sources of encumbrance |
|
|
42,947 |
|
|
|
54,182 |
|
of which: Nominal of loan commitments received |
|
|
1,969 |
|
|
|
2,620 |
|
of which: Nominal of financial guarantees received |
|
|
896 |
|
|
|
1,124 |
|
of which: Fair value of securities borrowed with non cash-collateral |
|
|
25,672 |
|
|
|
27,746 |
|
Other |
|
|
10,941 |
|
|
|
16,852 |
|
|
|
|
|
|
|
|
|
|
TOTAL SOURCES OF ENCUMBRANCE |
|
|
315,317 |
|
|
|
407,022 |
|
|
|
|
|
|
|
|
|
|
The table below shows the amount of own covered bonds and asset-backed securities retained and not used as
collateral and the value of the related underlying assets.
Table 90. Own covered bonds and
asset-backed securities issued
EUR million
|
|
|
|
|
|
|
|
|
|
|
Non-encumbered |
|
|
|
Carrying amount of the underlying pool of assets |
|
|
Fair value of debt securities issued available for encumbrance |
|
Own covered bonds and asset-backed securities issued |
|
|
9,195 |
|
|
|
7,279 |
|
Retained covered bonds issued |
|
|
2,285 |
|
|
|
1,832 |
|
Retained asset-backed securities issued |
|
|
6,995 |
|
|
|
5,407 |
|
Where the own covered bonds and asset-backed securities retained are used, the pledged asset is included in
table 87 under loans and the related liability in table 89.
The contribution to the Groups level of asset encumbrance on a consolidated basis by
the various units is uneven across geographies. European units contribute similarly to the Group, while the United States is the largest contributor given the high weight of the consumer lending business (Santander Consumer USA). The contribution by
Latin American units is smaller, as their covered bond and asset-backed securities markets are less developed. Moreover, intra-group asset encumbrance is not material.
In each unit, the encumbered assets are denominated in the same currency as the encumbrance, normally the units functional currency.
For further details on encumbered assets (article 433 of the CRR), see the Economic and Financial Report Chapter (section 3.4: Liquidity and funding
management) on the 2018 Annual Report.
8.2. Compliance and conduct risk
According to the configuration of lines of defence at Santander Group, especially within the compliance and conduct function, primary responsibility for
management of this functions risks lies with the first line of defence, jointly with the business units that directly originate those risks and the compliance and conduct function. The function is managed by allocating compliance activities or
tasks to this first line of defence, or is carried out directly by compliance and conduct. The compliance and conduct function comprises all matters related to regulatory compliance, anti-money laundering and counter-terrorist financing, product
governance and consumer protection, as well as reputational risk.
The compliance function fosters adherence by Santander Group to rules, supervisory
requirements and principles and values of good
conduct by setting standards, discussing, advising and reporting in the interests of employees, customers, shareholders and the wider community.
Santander Groups risk appetite in this area essentially takes the form of a statement of zero appetite for risks of this type, with the clear objective
of minimising any economic, regulatory or reputational impact on Santander Group. To this end, units are systematically monitored through a common methodology that establishes a number of compliance risk indicators and assessment matrices that are
prepared for each local unit. With this objective, in 2018 as in previous years, the annual process of preparing the risk appetite was completed towards the end of the year, with the aim of verifying that the current model is fit for measuring the
functions risk appetite. Here, the corporate thresholds for certain indicators were lowered so as to provide a truer view and to show proper alignment with the functions strategy and risk tolerance. The calculation method of the other
indicator was updated with respect to the original calculation to reflect the increasing maturity of the Conduct and Compliance function. These adjustments were approved by the relevant committees and passed on to the units concerned.
For further details on compliance and conduct risk, see the Risk Management Chapter (section 7) on the 2018 Annual Report
8.3. Capital risk
Capital risk means the risk of Santander Group not having a sufficient quantity or quality of capital to fulfil its internal business targets, regulatory
requirements, or market expectations.
The capital risk function controls and supervises first line activities and lays down an independent challenge to
these mainly through the following processes:
|
|
Supervision of capital planning and adequacy for all component elements (balance sheet, income statement, risk-weighted assets and available capital).
|
|
|
|
|
|
166 |
|
2018 Pillar 3 Disclosures Report |
|
|
OTHER RISKS AND INTERNAL CONTROL _ 2018 Pillar 3 Disclosures Report
|
|
Continuous supervision of capital measurements at Santander Group by identifying the relevant calculation metrics, establishing tolerance levels for the metrics identified, reviewing their consumption and consistency in
the calculations. Including sole transactions with a capital impact. |
|
|
Definition of the methodology to assess Significant Risk Transfer (SRT) in securitisations together with the supervision and coordination of the assessments made by local units. |
The function aims to provide complete and regular monitoring of capital risk by verifying that capital coverage and adequacy reflect the risk profile of
Santander Group.
Capital risk control revolves around the capital management model in place at Santander Group, which brings together different processes
such as capital planning and adequacy and the resulting implementation and monitoring of the budget, along with the continuous measurement of capital and reporting and disclosure of information on capital, as shown below:
For further details on capital risk, see the Risk Management Chapter (section 5) on the 2018 Annual Report
8.4. Santander Groups internal control model
8.4.1. Description of Santander Groups internal control model
Santander Groups internal control model (ICM) comprises processes and procedures by senior management and the rest of the Groups employees to
provide reasonable assurance that the goals set by Santander Group, including goals regarding control of corporate strategy, effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and
regulations, are actually met.
Santander Groups ICM complies with all legal and regulatory requirements and is in accordance with the guidelines
set by the Committee of Sponsoring Organisations of the Treadway
Commission (COSO) on its last Framework published in 2013 (Internal Control Integrated Framework) and the
Framework for Internal Control Systems in Banking Organisations issued by the Bank for International Settlements (BIS) in Basel.
The Groups
internal control model is based on the following principles:
1. Culture of senior management control and supervision. This culture is embodied in the
following aspects:
|
|
The board of directors takes ultimate responsibility for ensuring that an adequate and effective internal control system is in place and is kept up to date. |
|
|
Senior management is responsible for establishing appropriate internal control policies, and ensuring they are put into effect and monitored. |
|
|
The board of directors and senior management are responsible for making all levels of the organisation aware of the importance of internal control. All employees of the organisation involved in internal control
processes must have clearly defined responsibilities. |
2. Identification and assessment of the control environment. The Groups
internal control system ensures that all the necessary controls to achieve objectives are properly identified and assessed, and that new controls are assessed on a continuous basis.
3. Establishment of adequate controls and separation of functions. A clear structure of control and allocation of responsibilities has been established
and control functions are an intrinsic part of the organisations business and support activities, ensuring sufficient separation of functions to avoid any conflict of responsibilities.
4. Reporting and communication. The Groups procedures and systems ensure accurate and comprehensible reporting and communication.
5. Monitoring of the control system. In addition to the continuous review of business and operations, control activities undergo regular assessments,
the conclusions of which are reported to senior management and the board, along with any matters for special monitoring.
Proper documentation of the
Groups ICM is a vital component for achieving these objectives. To that end, those responsible for the organisational structure use a standard methodology to describe their processes through documentation on tasks and controls.
Controls that must be documented in the ICM are identified on the basis of senior managements knowledge and understanding of the business and
operational processes, taking into account both criteria of proportions and also qualitative criteria relating to the nature, complexity or actual structure of the business.
Santander Group has a catalogue of theoretical controls in order to guarantee the sufficiency and completeness of the internal controls established by the
different functions involved in relation to the Groups control model.
8.4.2. Documentation and updating
The following are some of the main features of Santander Groups ICM documentation:
|
|
The documentation of the corporate model involves every member of the organisation with control responsibilities, through a framework of direct responsibilities that are individually assigned. |
|
|
Internal control is a decentralised process and is therefore managed at the Groups various units. A corporate unit also coordinates all Group units and provides general criteria and guidelines for standardising
documentation of procedures, tests for assessing controls, classification criteria for potential deficiencies and regulatory adaptations. |
|
|
The documented model is broad and therefore includes not only activities related to the generation of consolidated financial reporting, but also any other procedures carried out in the business and support areas of each
entity which, while they may have no direct impact on accounting, could nevertheless give rise to losses or risks in the event of incidents, errors, infringements of regulations and/or fraud.
|
|
|
The ICM is a forward-looking model and evolves by adapting to the reality of the Groups business and support activities at any given time, clearly identifying any risks that might prevent the achievement of goals
and the controls that mitigate such risks. |
|
|
It includes detailed descriptions of transactions, criteria for assessing the functioning of controls and the conclusions of an assessment of their functioning. |
All the ICM documentation at each Group company is stored in a corporate computer application. This application allows processes, risks and controls to be
consulted and updated by users in real time, and reviewed by external auditors or supervisory bodies. It also serves as a support tool for the internal control model assessment and certification process, automatically ensuring the models
integrity.
The chart below shows documentation and responsibilities within the Groups internal control model:
Santander groups internal control
model structure
Keeping descriptions of processes (tasks and controls) and identifying the persons responsible for them up to
date is a key aspect of Santander Groups ICM.
In 2018 Santander Groups ICM documentation evolved to meet the new regulatory requirements
affecting banks procedures and to reflect the changes in the organisation, including changes to the businesses and operational processes and changes to the Groups organisational and corporate structure.
The ICM is not only documented and updated at the business units; it is also key to identifying, documenting and assessing the risks and controls associated
with operational processes outsourced to Santander Group companies.
|
|
|
|
|
168 |
|
2018 Pillar 3 Disclosures Report |
|
|
OTHER RISKS AND INTERNAL CONTROL _ 2018 Pillar 3 Disclosures Report
ICM documentation and its assessment process support compliance with certain regulatory measures such as SOx,
Fatca, the Criminal Liability of Legal Entities, Dodd-Frank or Volcker, among others.
Ultimately, the ICM is examined by the Groups auditor, who
reports to the audit committee and issues an opinion on the effectiveness of the internal controls applied to the generation of financial reporting in the consolidated financial statements of Santander Group as of 31 December 2018.
The corporate scope of Santander Groups ICM also imposes an obligation to constantly ensure that those involved in the ICM at all levels of the
organisation are kept up to date, coordinated and trained as appropriate. The corporate coordination team organises online and classroom training activities and keeps the methodology up to date, and sends proper instructions to Group entities.
8.4.3. Assessment and integration in management
Santander Group has an assessment and certification process for reviewing the performance of the ICM and the effectiveness of the established controls,
processes and activities. This process starts with an assessment of the control activities by those responsible for them. Based on the conclusions of this assessment, the various tasks, areas and divisions relating to the control environment are
certified (including the generation of financial information), so that following the analysis of all these certifications, the effectiveness of the ICM process is certified by the CEO, finance manager and head of accounting.
Since 2017, the Group has worked to integrate the operational risk control and self-assessment (RCSA) with the process for assessing and certifying the
control model. Combining both processes makes the exercise more efficient, consistent and robust and enables the certification process to be brought fully within the Groups risk management.
The annual exercise identifies and assesses the criticality of the risks and the effectiveness of the controls in place across Santander Group.
Moreover, the system that supports the integrated risk control and self-assessment exercise also integrates relevant information from other instruments used
to manage operational risk: loss events and the readings of indicators tracked by the specialised first and second lines of defence functions.
Lastly,
during 2018, the Group has worked to strengthen the identification and documentation of the most relevant controls for the Group (special monitoring controls) in order to ensure an adequate internal control system over financial information.
Likewise, in order to continue strengthening the Santander Group MCI, it has been decided that from 2019 the Internal Audit function, within its audits, perform independent testing on these controls.
9 Remuneration policies 9.1. Relevant information contained 171 in other documents 9.2. Remuneration policy applicable 172 to categories
of staff that may have a material impact on the risk profile of Santander Group 9.3. Main characteristics of the criteria 172 for identifying categories of staff that may have a material impact on the risk profile of Santander Group 9.4. Specific
features of the 173 remuneration policy applicable to Identified Staff members 9.5. Application of the remuneration 174 policy for the Identified Staff in 2018 9.6. Total remuneration of the 175 Identified Staff in 2018 9.7. Remuneration policy for
2019 178 and following years REMUNERATION POLICIES _ 2018 Pillar 3 Disclosures Report
REMUNERATION POLICIES _ 2018 Pillar 3 Disclosures Report
9. Remuneration policies
9.1. Relevant information contained in other documents
The 2018 remuneration policy for directors and senior management, focusing especially on variable remuneration and how it was applied in the year.
|
|
|
The functions of the remuneration committee regarding the remuneration of directors, members of senior management and other executives whose work could have a material impact on the Groups risk profile.
|
|
|
|
The composition of the remuneration committee, directors attendance at meetings, the involvement of board members on other committees, the approximate time dedicated to each function and how the committee
operates. |
|
|
|
The remuneration policy for both executive and non-executive board members and the corporate governance principles regulating the subject of remuneration. |
|
|
|
The 2018 remuneration policy for directors and senior management, focusing especially on variable remuneration and how it was applied in the year. |
The board of directors is responsible for approving director and senior management remuneration, as well as the core payment terms of other executives or
employees who, while not belonging to senior management, take on risks, carry out control functions (i.e. internal audit, risk management and compliance) or who receive global remuneration that places them in the same remuneration bracket as senior
management and employees who take on risk and whose professional activities may have a material impact on the Groups risk profile (all of these together with the senior management and the Companys board of directors comprise the so-called Identified Staff or Material Risk Takers).
The corporate governance chapter of the annual report also includes the following Pillar 3 significant
information:
|
|
|
The decision-making process for setting the remuneration policy of directors, senior managers and the core elements of the remuneration of the Identified Staff. |
|
|
|
The basic features of the various compensation policies. |
|
|
|
Information on the criteria applied for assessing the metrics that determine director and senior management variable remuneration and their adjustment according to risk, as well as the results of director metrics.
|
|
|
|
The deferral policy and other conditions linked to the payment of variable remuneration, including the application of malus and clawback provisions. |
For further details, see the Corporate Governance Chapter on the 2018 Annual Report.
9.2. Remuneration policy applicable to categories of staff that may have a material impact on the risk
profile of Santander Group
Santander Group has specific guidelines in its remuneration policy in regard to those professionals qualified internally as
Identified Staff or Material Risk Takers. These guidelines contain:
|
|
|
The principles and criteria that determine which people have a material impact on the Groups risk profile, based on Commission Delegated Regulation (EU) 604/2014 of 4 March 2014, as explained in section 8.3
below. |
|
|
|
The specifics that modify the general remuneration policy for its application to this staff, taking into account all applicable rules and European Banking Authority (EBA) guidelines are described below.
|
|
|
|
The mandate to apply the Groups remuneration policy, as adapted in each case so as to comply with local regulatory requirements and recommendations issued by supervisory bodies. |
The remuneration of the Identified Staff in 2018 is in line with the criteria set out in the Groups remuneration policy, which is reviewed annually to
ensure that it is aligned with the long-term interests of shareholders, the Groups strategic targets and regulatory requirements.
The subsidiaries
formally adhere to the Group´s corporate remuneration policy, which implies the alignment of their practices with the principles recognized therein.
9.3. Main characteristics of the criteria for identifying categories of staff that may have a material impact on the risk profile of Santander Group
The Identified Staff of the firm have been defined according to the provisions of Law 10/2014, of 26 June, on the restructuring, supervision and
solvency of credit institutions, (Law 10/2014 or LOSS), transposing into Spanish law the text of Directive 2013/36/EU of the European Parliament and Council of 26 June 2013 on access to the activity of credit institutions and the prudential
supervision of credit institutions and investment firms (CRD IV).
In accordance with the LOSS, professionals that may have a material impact on the
banks risk profile will be deemed to include senior management, employees that assume risks, employees that exercise control functions, and all employees that receive global remuneration that includes them in the same remuneration bracket as
senior management and employees that assume risks. In addition to the previous definition, European legislation, through the publication of Commission Delegated
Regulation (EU) No 604/2014, of 4 March, supplementing CRD IV with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to
identify categories of staff whose professional activities have a material impact on an institutions risk profile (hereinafter, Delegated Regulation 604/2014), has established a closed list of specific criteria that entities must take into
consideration in the identification process.
The Group has implemented the quantitative and qualitative criteria provided in the regulation in order to
determine the members of the Identified Staff and has further supplemented these criteria with additional internal criteria. The following persons generally qualify as Identified Staff based on this set of criteria:
|
|
|
Based on qualitative criteria, staff members who work at a material business unit, such as: |
|
|
|
Members of management, executive or supervisory committees. |
|
|
|
The first line of the unit. |
|
|
|
Heads of material business sub-units in that country or business. |
|
|
|
Heads of risk, audit and compliance and their direct superiors, who effectively perform control functions. |
|
|
|
Heads of legal or tax advisory services, audit, budget, human resources, compensation and technology and operations. |
|
|
|
Members of senior risk committees, executives with powers to approve risk proposals and those responsible for making significant risk proposals. |
|
|
|
Traders authorised to take substantial positions in market risk. |
|
|
|
Members of the new products committee. |
|
|
|
By quantitative criteria: |
|
|
|
Executives receiving total remuneration of over EUR 500 thousand in 2017. |
|
|
|
Executives whose remuneration falls within the top 0.3% band at the Group or in their country. |
|
|
|
Executives who in the past year earned more than the member of the Identified Staff who earned the least remuneration, factoring in the business positions identified in the qualitative criteria. |
|
|
|
Executives with significant responsibility for representing the Group at non-material units. |
|
|
|
Executives with a given level of credit or market risk responsibility at certain non-material units.
|
|
|
|
|
|
172 |
|
2018 Pillar 3 Disclosures Report |
|
|
REMUNERATION POLICIES _ 2018 Pillar 3 Disclosures Report
Additional criteria have also been defined to identify and classify the units to which the above criteria are
applied. These criteria are based on simple and widely recognised parameters, such as capital and gross income, and reflect the relative importance of each identified unit that has an impact on the risk profile of Santander Group.
Current legislation, best practices and market trends are taken into account when defining the proportionality standards. These apply to both the relative
importance of the units, as well as the different degrees of responsibility of the positions occupied by the individuals, and facilitate its implementation.
According to these criteria, the Identified Staff comprised 1,384 executives across Santander Group at year-end 2017,
accounting for approximately 0.68% of total staff.
9.4. Specific features of the remuneration policy applicable to Identified Staff members
In general:
|
|
|
Fixed remuneration must represent a significant proportion of total compensation. |
|
|
|
Variable remuneration shall not exceed 100% of the fixed remuneration, in any event, of the members of the independent control functions, and generally for the rest, unless the general Shareholders Meeting has
authorised a higher percentage for these, which may not exceed 200%. |
Variable remuneration will typically comprise:
|
|
|
An incentive to be received partly in cash and partly in shares or other eligible financial instruments. Payment of this incentive is deferred for a period of three to five years (up to seven years in the United
Kingdom). |
|
|
|
Performance measurement elements in line with the strategy and long-term interests of shareholders. These elements, which are both short term and, for certain categories, long term oriented, take into consideration
quantitative and qualitative criteria that reflect the entitys results, return, capital performance, conduct in respect of customers and quality of the services provided thereto, risk management and compliance with legislation.
|
|
|
|
Malus and clawback clauses, which are triggered in situations in which there is poor financial performance of either, the bank as a whole, a specific division or area thereof, or the exposure generated. Following
factors should, at least, be taken into account: |
|
(i) |
Significant failures in risk management by the bank, or by a business or risk control unit.
|
|
(ii) |
An increase in capital requirements at the bank or one of its business units not planned at the time that
exposure was generated. |
|
(iii) |
Regulatory penalties or legal convictions for events that might be attributable to the unit or staff
responsible for them. Likewise, failure to comply with the Banks internal codes of conduct. |
|
(iv) |
Improper conduct, whether individual or collective. Negative effects deriving from the marketing of unsuitable
products and the liability of persons or bodies making such decisions will be considered especially significant. |
|
|
|
Ban on hedging deferred or retained shares or instruments and on transferring these in the twelve months following their delivery. |
For control functions, the total remuneration package must be competitive within the market in order to attract sufficiently qualified and experienced
employees. The individual objectives of these positions must be pegged to the performance of the control function rather than business results. Performance of the control function must be assessed by staff members who are independent of the
supervised business units.
9.5. Application of the remuneration policy for the Identified Staff in 2018
The remuneration policy and the essential remuneration conditions of the individuals who belong to the Identified Staff have been approved by Banco
Santanders board of directors on a proposal from the remuneration committee. The human resources function, jointly with the risk and compliance functions of each Group company, have duly confirmed that this policy and their remuneration
practices comply with applicable law and regulations, as confirmed in a third independent report issued in application of article 33.2 of Act 10/2014 of 26 June on the ordering, supervision and solvency of credit institutions. The board risk
committee supervises the remuneration policy and large-impact
remuneration schemes so as to ensure that they are suitably aligned with risk management.
With
regard to variable remuneration, the essential elements include:
|
|
Metrics for determining the variable remuneration of the senior management and other top executives. These metrics are described in section 6.3.B.ii) of the chapter on corporate governance in the 2018 annual report.
|
|
|
Deferral percentages and periods for the Identified Staff based on their category: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage paid immediately |
|
|
Deferred percentage |
|
|
Deferred periods (*) |
|
Executive directors and members of the material risk takers group with total variable remuneration
of ³ EUR 2.7 million |
|
|
40 |
% |
|
|
60 |
% |
|
|
5 years |
|
Executive vice-presidents and country heads of countries accounting for at least 1% of the
Groups economic capital and other members of the material risk takers with total variable remuneration of over ³ EUR 1.7 million (< EUR 2.7 million) |
|
|
50 |
% |
|
|
50 |
% |
|
|
5 years |
|
Other members belonging to the material risk takers |
|
|
60 |
% |
|
|
40 |
% |
|
|
3 years |
|
* |
Up to 7 years in certain jurisdictions. |
Note: |
Variable reference remuneration for standard compliance (100% of objectives). |
|
|
|
Pegging a part of the deferred amounts to fulfilment of multi-year objectives for executive directors, senior management and other executives based on their category. These metrics are described in section 6.3.B.iV) of
the chapter on corporate governance in the 2018 annual report. |
|
|
|
The suitability of financial instruments used for the portion of deferred remuneration in financial instruments: use of shares in Banco Santander S.A. or in any of its listed subsidiaries (such as Brazil, Chile, Mexico
and Santander Consumer USA) or equivalent instruments (Poland); as well as the ratio between different instruments. |
|
|
|
Defining the events that might trigger the application of malus and clawback provisions on the variable remuneration accruing in 2018. These events, which apply to all members of the Identified Staff, are described
above in this chapter. |
|
|
|
No discount is applied to deferred variable remuneration when calculating the ratio of variable to fixed components. |
In addition to the general scheme of variable remuneration metrics, the corporate and investment banking
business (Santander Corporate & Investment Banking or SCIB) follows a model that is widely applied across all regions in which the division operates. The model provides remuneration for achieving results using a partial pay-out system, pegging variable remuneration to the divisions ordinary net profit, including provisions and other assimilated costs, as well as the previously established budgetary objectives. The model
includes the same categories of metrics including capital, risks and customers as those used for the senior management, although they may be adapted accordingly to the needs and requirements of the individual business.
For further details, see the Corporate Governance Chapter on the 2018 Annual Report.
|
|
|
|
|
174 |
|
2018 Pillar 3 Disclosures Report |
|
|
REMUNERATION POLICIES _ 2018 Pillar 3 Disclosures Report
9.6. Total remuneration of the Identified Staff in 2018
The following table shows the total remuneration of the Identified Staff in 2018:
Table 91. Total remuneration
EUR Thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Identified Staff |
|
Admin. Executives |
|
|
Other senior managers(5) |
|
Rest of staff(6) |
|
Total |
|
|
Admin. Executives |
|
Other senior managers(5) |
|
Rest of staff (6) |
|
Total |
|
Number of persons |
|
|
3 |
|
|
18 |
|
1,363 |
|
|
1,384 |
|
|
4 |
|
19 |
|
1,232 |
|
|
1,255 |
|
Total fixed remuneration(1) |
|
|
12,916 |
|
|
34,904 |
|
413,262 |
|
|
461,082 |
|
|
14,923 |
|
36,222 |
|
408,761 |
|
|
459,907 |
|
Total variable
remuneration(2) and (3) |
|
|
14,515 |
|
|
32,023 |
|
375,180 |
|
|
421,717 |
|
|
16,495 |
|
34,084 |
|
364,213 |
|
|
414,792 |
|
Payable immediately |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In cash |
|
|
3,254 |
|
|
8,300 |
|
117,825 |
|
|
129,380 |
|
|
3,699 |
|
8,786 |
|
111,404 |
|
|
123,888 |
|
In instruments(4) |
|
|
3,254 |
|
|
8,300 |
|
112,196 |
|
|
123,750 |
|
|
3,699 |
|
8,786 |
|
109,634 |
|
|
122,118 |
|
Deferred payment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in cash |
|
|
4,003 |
|
|
7,711 |
|
72,579 |
|
|
84,294 |
|
|
4,549 |
|
8,256 |
|
71,588 |
|
|
84,393 |
|
In instruments(4) |
|
|
4,003 |
|
|
7,711 |
|
72,579 |
|
|
84,294 |
|
|
4,549 |
|
8,256 |
|
71,588 |
|
|
84,393 |
|
Payments for new contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total guaranteed remuneration |
|
|
|
|
|
633 |
|
7,484 |
|
|
8,117 |
|
|
|
|
2,800 |
|
5,062 |
|
|
7,862 |
|
Number of beneficiaries |
|
|
|
|
|
1 |
|
16 |
|
|
17 |
|
|
|
|
1 |
|
10 |
|
|
11 |
|
(1) |
Includes fixed salary and supplements, attendance fees and by law-stipulated allotments for executive
directors, as well as benefits (including pensions classified as fixed in nature). |
(2) |
The variable remuneration of the executive directors and the rest of senior management does not include EUR
2,516 thousand in variable component pensions; the variable remuneration of other employees does not include EUR 6,605 thousand in buyouts or sign on amounts; the variable remuneration does not include EUR 25,282 thousand corresponding to the 2015
LTI accrued at 31 December 2018. |
(3) |
Variable remuneration is included at its fair value. Fair value has been determined on the date it was awarded,
based on an expert assessment report and taking account of different possible scenarios for the performance of the different variables set out in the plan during the measurement periods. |
(4) |
The following charts show the distribution of instruments according to the companies of the Santander Group to
which they correspond. |
(5) |
This column includes the remuneration of the members of senior management (excluding executive directors) as of
31 December 2018. |
(6) |
This column includes the remuneration of senior management who resigned their duties during 2018.
|
The following table shows the distribution of deferred instruments among qualifying Santander Group companies:
∎ |
Distribution of the deferral instruments according to the company of Gantander Group to which they correspond
|
|
|
|
The total amount of severance payments and other benefits associated with contract termination, including lump-sum early retirement payments, awarded during the year to members of the
Identified Staff amounted to EUR 21 million for a total of 52 people with an average time spent in the company of 13 years. Out of that total, 11 people were awarded severance payments and other benefits associated with contract termination
that exceeded 2 times their fixed remuneration. No severance payments have been made to executive directors active in 2018. The maximum amount of a single pay item amounted to EUR 2 million. |
|
|
The breakdown of total remuneration by area of activity is as follows:
∎ |
Table 92. Remuneration by activity area |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Admin. Executives |
|
|
Non- executive directors |
|
|
Investment banking |
|
|
Commercial Banking |
|
|
Asset Management |
|
|
Corporate functions |
|
|
Independent control functions |
|
|
Other |
|
|
Total |
|
No. of persons |
|
|
3 |
|
|
|
12 |
|
|
|
291 |
|
|
|
668 |
|
|
|
46 |
|
|
|
89 |
|
|
|
275 |
|
|
|
0 |
|
|
|
1,384 |
|
Top-Management |
|
|
3 |
|
|
|
0 |
|
|
|
1 |
|
|
|
5 |
|
|
|
0 |
|
|
|
8 |
|
|
|
4 |
|
|
|
0 |
|
|
|
21 |
|
Rest of Identified Staff |
|
|
0 |
|
|
|
12 |
|
|
|
290 |
|
|
|
663 |
|
|
|
46 |
|
|
|
81 |
|
|
|
271 |
|
|
|
0 |
|
|
|
1,363 |
|
Total Remuneration |
|
|
27,431 |
|
|
|
3,799 |
|
|
|
200,406 |
|
|
|
400,812 |
|
|
|
21,457 |
|
|
|
86,568 |
|
|
|
142,326 |
|
|
|
0 |
|
|
|
882,799 |
|
Top-Management |
|
|
27,431 |
|
|
|
0 |
|
|
|
3,906 |
|
|
|
19,211 |
|
|
|
0 |
|
|
|
29,125 |
|
|
|
14,684 |
|
|
|
0 |
|
|
|
94,358 |
|
Rest of Identified Staff |
|
|
0 |
|
|
|
3,799 |
|
|
|
196,500 |
|
|
|
381,601 |
|
|
|
21,457 |
|
|
|
57,442 |
|
|
|
127,642 |
|
|
|
0 |
|
|
|
788,442 |
|
Areas fix/variable average ratio |
|
|
131 |
% |
|
|
0 |
% |
|
|
122 |
% |
|
|
99 |
% |
|
|
73 |
% |
|
|
95 |
% |
|
|
70 |
% |
|
|
|
|
|
|
96 |
% |
The investment banking area includes those professionals that give support to businesses related to corporate
and investment banking (Santander Corporate & Investment Banking).
The commercial banking area covers all customer banking businesses, including
all their supported teams in the diverse geographies, whether they are local management of the related local units or other categories.
The independent
control function includes all functions related to risk management, internal audit, compliance or accounting and financial control, as well as others associated to the control of regulatory capital requirements.
|
|
|
|
|
176 |
|
2018 Pillar 3 Disclosures Report |
|
|
REMUNERATION POLICIES _ 2018 Pillar 3 Disclosures Report
Corporate functions include employees involved in both the corporate support areas (such as human resources,
technology and operations, communication, general secretariat, strategy, finance planning, etc.) as well as executive directors.
The sum of variable
components in 2018 for each member of the Identified Staff did not exceed the limit established in each case for 2018, which was either 100% or 200% when authorised by the General Shareholders Meeting. Specifically, the ratio of
variable components of remuneration to fixed components for the entire Identified Staff collective was 96% and
the limits prescribed for each component were duly observed in all cases.
The following table shows the remuneration schemes for Identified Staff members
in which the right to receive shares originated in previous years and for which the vesting targets and/or conditions were fulfilled in 2018 or are pending fulfilment. The following table shows remuneration by salary band for members of the
Identified Staff across the entire Group.
Table 93. Vested rights
EUR Thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Remuneration entitlement
from previous years: consolidated and unpaid (to be consolidated from 2018) |
|
Admin. Executives |
|
|
Other senior managers |
|
|
Rest of staff |
|
|
Total |
|
|
Admin. Executives |
|
|
Other senior managers |
|
|
Rest of staff |
|
|
Total |
|
Cash |
|
|
2,230 |
|
|
|
4,073 |
|
|
|
50,593 |
|
|
|
56,896 |
|
|
|
979 |
|
|
|
2,417 |
|
|
|
54,400 |
|
|
|
57,796 |
|
Number of Santander shares(1) |
|
|
713,893 |
|
|
|
1,337,934 |
|
|
|
12,933,190 |
|
|
|
14,985,017 |
|
|
|
201,713 |
|
|
|
500,884 |
|
|
|
7,698,915 |
|
|
|
8,401,512 |
|
Number of Santander Brazil shares |
|
|
|
|
|
|
|
|
|
|
1,639,748 |
|
|
|
1,639,748 |
|
|
|
|
|
|
|
|
|
|
|
2,120,698 |
|
|
|
2,120,698 |
|
Number of Santander Chile shares |
|
|
|
|
|
|
|
|
|
|
62,005,861 |
|
|
|
62,005,861 |
|
|
|
|
|
|
|
|
|
|
|
27,895,424 |
|
|
|
27,895,424 |
|
Number of Santander Mexico shares |
|
|
|
|
|
|
|
|
|
|
3,051,500 |
|
|
|
3,051,500 |
|
|
|
|
|
|
|
|
|
|
|
1,529,930 |
|
|
|
1,529,930 |
|
Number of Santander Poland shares* |
|
|
|
|
|
|
|
|
|
|
2,289 |
|
|
|
2,289 |
|
|
|
|
|
|
|
|
|
|
|
2,289 |
|
|
|
2,289 |
|
Number os Santander Consumer USA |
|
|
|
|
|
|
|
|
|
|
80,850 |
|
|
|
80,850 |
|
|
|
|
|
|
|
|
|
|
|
55,916 |
|
|
|
55,916 |
|
(1) |
Includes shares corresponding to 2015 LTI. |
* |
An instrument of Santander Poland (Zachodni WBK) has a value equal to one share of the company.
|
Table 94. Unvested rights
EUR Thousand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
Other remuneration entitlement from previous years:
Non- consolidated and unpaid (to be consolidated from 2018) |
|
Admin. Executives |
|
|
Other senior managers |
|
|
Rest of staff |
|
|
Total |
|
|
Admin. Executives |
|
|
Other senior managers |
|
|
Rest of staff |
|
|
Total |
|
Cash |
|
|
7,047 |
|
|
|
12,996 |
|
|
|
82,199 |
|
|
|
102,242 |
|
|
|
2,473 |
|
|
|
5,667 |
|
|
|
83,031 |
|
|
|
91,171 |
|
Number of Santander shares |
|
|
1,352,055 |
|
|
|
2,481,736 |
|
|
|
10,956,258 |
|
|
|
14,790,049 |
|
|
|
1,095,768 |
|
|
|
2,126,614 |
|
|
|
21,327,509 |
|
|
|
24,549,891 |
|
Number of Santander Brazil shares |
|
|
|
|
|
|
|
|
|
|
2,027,550 |
|
|
|
2,027,550 |
|
|
|
|
|
|
|
|
|
|
|
2,291,971 |
|
|
|
2,291,971 |
|
Number of Santander Chile shares |
|
|
|
|
|
|
|
|
|
|
51,756,078 |
|
|
|
51,756,078 |
|
|
|
|
|
|
|
|
|
|
|
73,881,690 |
|
|
|
73,881,690 |
|
Number of Santander Mexico shares |
|
|
|
|
|
|
|
|
|
|
3,420,941 |
|
|
|
3,420,941 |
|
|
|
|
|
|
|
|
|
|
|
3,431,283 |
|
|
|
3,431,283 |
|
Number of Santander Poland shares* |
|
|
|
|
|
|
|
|
|
|
2,292 |
|
|
|
2,292 |
|
|
|
|
|
|
|
|
|
|
|
4,581 |
|
|
|
4,581 |
|
Number os Santander Consumer USA |
|
|
|
|
|
|
|
|
|
|
137,044 |
|
|
|
137,044 |
|
|
|
|
|
|
|
|
|
|
|
96,191 |
|
|
|
96,191 |
|
* |
An instrument of Santander Poland (Zachodni WBK) has a value equal to one share of the company.
|
Table 95. Remuneration by salary band
EUR Thousand
|
|
|
|
|
|
|
31 Dec. 2018 |
|
Salary band |
|
No. of persons |
|
1.0 - 1.5 |
|
|
88 |
|
1.5 - 2.0 |
|
|
30 |
|
2.0 - 2.5 |
|
|
21 |
|
2.5 - 3.0 |
|
|
12 |
|
3.0 - 3.5 |
|
|
5 |
|
3.5 - 4.0 |
|
|
6 |
|
4.0 - 4.5 |
|
|
3 |
|
4.5 - 5.0 |
|
|
3 |
|
5.0 - 6.0 |
|
|
4 |
|
6.0 - 7.0 |
|
|
1 |
|
7.0 - 8.0 |
|
|
|
|
8.0 - 9.0 |
|
|
1 |
|
9.0 - 10.0 |
|
|
1 |
|
10.0 - 11.0 |
|
|
|
|
|
|
|
|
|
11.0 - 12.0 |
|
|
1 |
|
|
|
|
|
|
Note: |
Does not include the deferred part of the 2018 incentive subject to multi-year objectives, the performance and
attainment of which will be reviewed at the end of 2020. Payment will be made from 2022 onward, but may be zero, depending on the extent to which the objectives have been met. Notes 5 and 47 of the Group´s annual report contain further
information on how the plan works, and amount of the deferred remuneration. |
Includes 2015 LTI accrued at 31 December 2018.
9.7. Remuneration policy for 2019 and following years
The 2019 remuneration policy for directors is described in section 6.4 of the chapter on corporate governance of the annual report.
The main principles of the policy, along with the fixed and variable remuneration components and the variable remuneration policy for members of the Identified
Staff, will follow the rules and procedures for executive directors as set out in the report just mentioned. In particular, as regards the variable remuneration policy:
|
|
|
The existence of a single incentive, which will be determined by a set of quantitative and qualitative metrics. |
|
|
|
Short-term metrics, which include customer, capital, risk and profitability elements. |
|
|
|
Long-term metrics for senior managers: earnings per share, total shareholder return and capital ratio (fully-loaded CET1). |
|
|
|
Part payment in cash and in shares or other instruments. |
|
|
|
Continued-employment, malus and clawback provisions. |
|
|
|
Other conditions, such as the ban on hedging and transferring shares in the twelve months following their delivery. |
In 2019, a share option plan (Digital Transformation Award) will be launched as a tool for attracting and retaining the best digital and technological talent.
It will help accelerate and extend the Groups digital transformation. Receipt will be subject to compliance with certain strategic objectives during 2019, and delivery will be in shares and share options as of 2020. It will be subject to the
deferral rules and other regulatory restrictions such as malus and clawback provisions.
For further details, see the Corporate Governance Chapter on the
2018 Annual Report.
|
|
|
|
|
178 |
|
2018 Pillar 3 Disclosures Report |
|
|
REMUNERATION POLICIES _ 2018 Pillar 3 Disclosures Report
Deferral periods for members of the Identified Staff will be as follows:
Deferral of the identified collective
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 Dec. 2018 |
|
|
31 Dec. 2017 |
|
|
|
Percentage paid immediately |
|
|
Deferred percentage |
|
|
Deferred periods(*) |
|
|
Percentage paid immediately |
|
|
Deferred percentage |
|
|
Deferred periods(*) |
|
Executive directors and members of the material risk takers of the group with total target
variable remuneration of ³ EUR 2.7 million (**) |
|
|
40 |
% |
|
|
60 |
% |
|
|
5years |
|
|
|
40 |
% |
|
|
60 |
% |
|
|
5years |
|
Executive vice-presidents and country heads of countries accounting for at least 1% of the
Groups economic capital and other members of the material risk takers with total target variable remuneration of over |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
³ EUR 1.7 million (< EUR 2.7 million)
(**) |
|
|
50 |
% |
|
|
50 |
% |
|
|
5years |
|
|
|
50 |
% |
|
|
50 |
% |
|
|
5years |
|
Other members belonging to the material risk takers |
|
|
60 |
% |
|
|
40 |
% |
|
|
3years |
|
|
|
60 |
% |
|
|
40 |
% |
|
|
3years |
|
* |
Up to 7 years in certain jurisdictions. |
** |
Variable remuneration not denominated in Euros is calculated using the average closing exchange rates in the
fifteen trading sessions immediately prior to the Friday, exclusive, of the week before the date on which the board of directors agrees the variable remuneration of the Banks executive directors for 2018. |
10 Appendices I. Transparency enhancements 181 II. CRR Mapping 184 III. List of tables 192 IV. Glossary 194 Appendices avaible in the
Santander Group website: V. Outline of the differences in the scopes of consolidation (Table LI3) VI. Reconciliation: balance under accounting consolidation / balance under regulatory consolidation VII. Capital instruments
main features template VIII. Transitional own funds disclosure template IX. List of specialised management companies within the scope of regulatory consolidationSPVs X. Leverage Ratio (LRSum, LRCom and LRSpl tables) XI.
Countercyclical capital buffer (institution-specific amount and geographical distribution) XII. 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 XIII. Breakdown of exposure by approach to calculating capital employed XIV. IRB parameter models by region XV. Backtesting PD XVI. Backtesting
PDCR9 XVII. Backtesting EAD XVIII. Backtesting Expected Loss XIX. Prudent Valuation Adjustments (PVA) (PV1) Appendices Access files 2018 available Pillar on 3 the Santander Group website.
MARKET RISK _ 2018 Pillar 3 Disclosures Report
Appendix I Transparency enhancements
GUIDELINES ON
DISCLOSURE REQUIREMENTSEBA/GL/2016/11
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
OV1 |
|
Overview of RWAs |
|
|
Table 7 |
|
|
|
|
LI1 |
|
Differences between accounting and regulatory scopes of consolidation and mapping of financial statements categories with regulatory risk categories |
|
|
Table 1 |
|
|
|
|
LI2 |
|
Main sources of differences between regulatory exposure amounts and carrying amounts in financial statements |
|
|
Table 2 |
|
|
|
|
LI3 |
|
Outline of the differences in the scopes of consolidation |
|
|
Appendix V |
|
|
|
|
INS1 |
|
Non-deducted participations in insurance undertakings |
|
|
N/A |
|
|
|
|
CRB-B |
|
Net amount of exposures |
|
|
Table 38 |
|
|
|
|
CRB-C |
|
Geographical breakdown of exposures |
|
|
Table 39 |
|
|
|
|
CRB-D |
|
Concentration of exposures by industry or counterparty type |
|
|
Table 40 |
|
|
|
|
CRB-E |
|
Maturity of exposures |
|
|
Table 41 |
|
|
|
|
CR1-A |
|
Credit quality of exposures by exposure classes and instruments |
|
|
Table 31 |
|
|
|
|
CR1-B |
|
Credit quality of exposures by industry or counterparty type |
|
|
Table 32 |
|
|
|
|
CR1-C |
|
Credit quality of exposures by geography |
|
|
Table 33 |
|
|
|
|
CR1-D |
|
Ageing of past-due exposures |
|
|
Table 34 |
|
|
|
|
CR1-E |
|
Non-performing and forborne exposures |
|
|
Table 35 |
|
|
|
|
CR2-A |
|
Changes in stock of general and specific credit risk adjustments |
|
|
Table 36 |
|
|
|
|
CR2-B |
|
Changes in stock of defaulted and impaired loans and debt securities |
|
|
Table 37 |
|
|
|
|
CR3 |
|
Credit risk mitigation techniquesIRB and SA |
|
|
Table 43 |
|
|
|
|
CR4 |
|
Credit risk exposure and CRM effects (IRB & Standardised approach) |
|
|
Tables 14 and 15 |
|
|
|
|
CR5 |
|
Standardised approach (including a breakdown of exposures post conversion factor and post mitigation techniques) |
|
|
Table 30 |
|
|
|
|
CR6 |
|
Exposure to Credit risk by portfolio and PD interval |
|
|
Tables 17 to 23 |
|
|
|
|
CR7 |
|
Effect on RWA of credit derivatives used as CRM techniques |
|
|
Table 45 |
|
|
|
|
CR8 |
|
Exposures to central counterparties |
|
|
Table 46 |
|
|
|
|
CR9 |
|
Backtesting PD by geography and portfolio |
|
|
Appendix XVI |
|
|
|
|
CR10 |
|
Specialised lending & equities |
|
|
Tables 25 and 26 |
|
|
|
|
CCR1 |
|
Analysis of the counterparty credit risk (ccr) exposure by approach |
|
|
Table 50 |
|
|
|
|
CCR2 |
|
Credit valuation adjustment (CVA) capital charge |
|
|
Table 46 |
|
|
|
|
CCR3 |
|
Standardised approach ccr exposures by regulatory portfolio and risk |
|
|
Table 51 |
|
|
|
|
CCR4 |
|
IRB approach. Ccr exposures by portfolio and PD scale |
|
|
Table 52 |
|
|
|
|
CCR5-A |
|
Impact of netting and collateral held on exposure values |
|
|
Table 53 |
|
|
|
|
CCR5-B |
|
IRB approach. Composition of collateral for exposures to counterparty credit risk |
|
|
Table 54 |
|
|
|
|
CCR6 |
|
Credit derivatives exposures |
|
|
Table 58 |
|
|
|
|
CCR7 |
|
RWA flow statements of CCR exposures under Internal Model Method (IMM) |
|
|
N/A |
|
|
|
|
|
|
|
|
CCR8 |
|
Exposures to central counterparties |
|
|
Table 47 |
|
|
|
|
MR1 |
|
Market risk under standardised approach |
|
|
Table 78 |
|
|
|
|
MR2-A |
|
Market risk under IMA approach |
|
|
Table 76 |
|
|
|
|
MR2-B |
|
WA flow statements of market risk exposures under IMA |
|
|
Table 77 |
|
|
|
|
MR3 |
|
VaR, Stressed VaR and IRC by geography |
|
|
Table 80 |
|
|
|
|
MR4 |
|
Comparison of VaR estimates with gains/losses |
|
|
Section 6.3.5 |
|
|
|
REVISED PILLAR 3 DISCLOSURES REQUIREMENTSBCBS |
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
SEC1 |
|
Securitisation exposures in the banking book |
|
|
Table 67 |
|
|
|
|
SEC2 |
|
Securitisation exposures in the trading book |
|
|
Table 68 |
|
|
|
|
SEC3 |
|
Securitisation exposures in the banking book and associated regulatory capital requirements (bank acting originator or sponsor) |
|
|
Table 70 |
|
|
|
|
SEC4 |
|
Securitisation exposures in the banking book and associated regulatory capital requirements (bank acts as an investor) |
|
|
Table 71 |
|
|
|
|
PV1 |
|
Prudent Valuation Adjustments (PVA) |
|
|
Appendix XIX |
|
|
|
|
IRRBB1 |
|
Quantitative information on IRRBB |
|
|
Table 84 |
|
|
|
GUIDELINES ON LCR DISCLOSUREEBA/GL/2017/01 |
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
LCR |
|
LCR disclosure template |
|
|
Table 86 |
|
|
|
GUIDELINES ON DISCLOSURE OF ENCUMBERED AND UNENCUMBERED ASSETSEBA/GL/2014/03 |
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
AE1 |
|
Encumbered and unencumbered assets |
|
|
Table 87 |
|
|
|
|
AE2 |
|
Collateral received |
|
|
Table 88 |
|
|
|
|
AE3 |
|
Sources of encumbrance |
|
|
Table 89 |
|
|
|
|
|
|
182 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
LEVERAGE RATIOCOMMISSION IMPLEMENTING REGULATION (UE) 2016/200 |
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
LRSum |
|
Summary reconciliation of accounting assets and leverage ratio exposures |
|
|
Appendix X |
|
LRCom |
|
Leverage ratio common disclosure |
|
|
Appendix X |
|
LRSpl |
|
Split-up of on balance sheet exposures (excluding derivatives and SFTs) |
|
|
Appendix X |
|
|
|
OWN FUNDS REQUIREMENTSCOMMISSION IMPLEMENTING REGULATION (UE) 1423/2013 |
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
Template 1 |
|
Capital instruments main features |
|
|
Appendix VII |
|
Template 2 |
|
Transitional own funds disclosure template |
|
|
Appendix VIII |
|
|
|
COUNTERCYCLICAL CAPITAL BUFFERCOMMISSION IMPLEMENTING REGULATION (UE) 2015/1555 |
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
Frame 1 |
|
Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital buffer |
|
|
Appendix XI |
|
Frame 2 |
|
Amount of institution-specific countercyclical capital buffer |
|
|
Appendix XI |
|
|
|
GUIDELINES ON UNIFORM DISCLOSURES UNDER ARTICLE 473A OF REGULATION (EU) |
|
|
|
|
NO 575/2013 AS REGARDS THE TRANSITIONAL PERIOD FOR MITIGATING |
|
|
|
|
THE IMPACT OF THE INTRODUCTION OF IFRS 9 ON OWN FUNDSEBA/GL/2018/01 |
|
|
|
|
|
|
|
Table |
|
Table title |
|
2018 Pillar 3 Location |
|
IFRS 9-FL
Template |
|
Comparison of equity, capital ratios and leverage of entities with or without the application of the transitory dispositions of NIIF 9 or analog ECL |
|
|
Appendix XII |
|
Appendix IICRR Mapping
The following table links the CRRs articles on divulging information (Part 8) to the various sections of the document that provide the information
required. The Location column specifies the section of Pillar 3 or other public document in which the information is dealt with, in whole or in part. This information may be distributed throughout the document on a piecemeal basis.
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
Tables |
|
2018 Annual
Report Location |
431. |
|
Scope of disclosures requirements |
|
|
|
|
|
|
|
|
|
|
|
431.1 |
|
Requirement to publish Pillar 3 disclosures. |
|
Pillar 3 Disclosures Report (Santander corporate website) |
|
|
|
|
|
|
|
|
|
431.2 |
|
Firms with permission to use specific operational risk methodologies must disclose operational risk information. |
|
Section 7.2 |
|
|
|
|
|
|
|
|
|
431.3 |
|
Institution must have a policy covering the frequency of disclosures, their verification, comprehensiveness and appropriateness, as well as policies for assuring the overall comprehension of their risk profile by market
participants. |
|
Sections 1.2.2 and 1.2.3 |
|
|
|
|
|
|
|
|
|
431.4 |
|
Explanation of SMEs ratings decision upon request. |
|
N/A: Section 3.4 |
|
|
|
|
|
|
|
|
|
432. |
|
Non-material, proprietary or confidential information |
|
|
|
|
|
|
|
|
|
|
|
432.1 |
|
Institutions may omit information that is not |
|
N/A: Sections |
|
|
|
|
|
|
|
|
|
|
|
material if certain conditions are respected. |
|
1.2.1 and 1.2.2 |
|
|
|
|
|
|
|
|
|
432.2 |
|
Institutions may omit information that is proprietary or confidential if certain conditions are respected. |
|
N/A: Section 1.2.2 |
|
|
|
|
|
|
|
|
|
432.3 |
|
Where 432.2 applies this must be stated in the disclosures, and more general information must be disclosed. |
|
N/A |
|
|
|
|
|
|
|
|
|
432.4 |
|
Use of 432.1, 432.2 or 432.3 is without prejudice to scope of liability for failure to disclose material information. |
|
N/A |
|
|
|
|
|
|
|
|
|
433. |
|
Frequency of disclosure |
|
|
|
|
|
|
|
|
|
|
|
433 |
|
Disclosures must be published on an annual basis at a minimum, and more frequently if necessary. |
|
Section 1.2.2 |
|
|
|
|
|
|
|
|
|
434. |
|
Means of disclosure |
|
|
|
|
|
|
|
|
|
|
|
434.1 |
|
To include all disclosures in one appropriate medium, or provide clear cross-references to the synonymous information in the other media. |
|
Section 1.2.1 |
|
|
|
|
|
|
|
|
|
434.2 |
|
Disclosures made under other requirements (e.g. accounting, listing) can be used to satisfy Pillar 3 requirements, if appropriate. |
|
Section 1.2.1 |
|
|
|
|
|
|
|
|
|
435. |
|
Risk management objectives and policies |
|
|
|
|
|
|
|
|
|
|
|
435.1 |
|
Disclose information for each separate category of risk: |
|
|
|
|
|
|
|
|
|
|
|
435.1.a |
|
The strategies and processes to manage risks. |
|
Chapters 3 to 8 |
|
|
|
Risk Management Chapter 1. Risk Management
and Control Model |
|
|
|
|
|
435.1.b |
|
Structure and organization of the risk management function. |
|
Chapters 3 to 8 |
|
|
|
Risk Management Chapter 1. Risk Management
and Control Model |
|
|
|
|
|
184 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
Tables |
|
2018 Annual Report Location |
435.1.c |
|
Risk reporting and measurement systems. |
|
Chapters 3 to 8 |
|
|
|
Risk Management Chapter 1. Risk Management
and Control Model |
|
|
|
|
|
435.1.d |
|
Hedging and mitigating riskpolicies, strategies and processes. |
|
Chapters 2 to 8 |
|
|
|
Risk Management Chapter 3.2. Credit risk
management 3.5. Other credit risk aspects 4. Trading market risk, structural and liquidity risk
5. Capital risk 6. Operational risk
7. Compliance and conduct risk 8. Model risk
9. Strategic risk |
|
|
|
|
|
435.1.e |
|
A declaration of adequacy of risk management arrangements approved by the Board. |
|
Section 1.2.2 |
|
|
|
Risk Management Chapter 1. Risk Management
and Control Model 2. Risk map and risk profile |
|
|
|
|
|
435.1.f |
|
Inclusion of a concise risk statement approved by the Board. |
|
Section 1.2.2 |
|
|
|
Risk Management Chapter 1. Risk Management
and Control Model 2. Risk map and risk profile |
|
|
|
|
|
435.2 |
|
Information on governance arrangements, including information on Board composition and recruitment, and risk committees. |
|
|
|
|
|
|
|
|
|
|
|
435.2.a |
|
Number of directorships held by Board members. |
|
|
|
|
|
Corporate Governance Chapter |
|
|
|
|
|
435.2.b |
|
Recruitment policy for the selection of Board members, their actual knowledge, skills and expertise. |
|
|
|
|
|
Corporate Governance Chapter |
|
|
|
|
|
435.2.c |
|
Policy on diversity of Board membership, objectives, and achievement status. |
|
|
|
|
|
Corporate Governance Chapter |
|
|
|
|
|
435.2.d |
|
Existence of a dedicated risk committee, and number of meetings during the year. |
|
Section 2.1.1.2 |
|
|
|
Corporate Governance Chapter Risk Management Chapter |
|
|
|
|
|
435.2.e |
|
Description of the information flow on risk to the Board. |
|
Section 2.1.1.2 |
|
|
|
Corporate Governance Chapter Risk Management Chapter |
|
|
|
|
|
436. |
|
Scope of application of the requirements |
|
|
|
|
|
|
|
|
|
|
|
436 |
|
Institutions shall disclose the following information regarding the scope of application of the requirements of this Regulation in accordance with Directive 2013/36/EU: |
|
|
|
|
|
|
|
|
|
|
|
436.a |
|
Name of institution to which the requirements of this Regulation applies. |
|
Section 1.2.1 |
|
|
|
|
|
|
|
|
|
436.b |
|
Difference in the basis of consolidation for accounting and prudential purposes, briefly describing entities that are:
(i) fully consolidated (ii) proportionally consolidated
(iii) deducted from own funds (iv) neither consolidated nor
deducted |
|
Sections 1.2.1, 1.2.4 and 1.3 |
|
Table 1 (LI1) Table 2 (LI2)
Appendix V (LI3) Appendix VI |
|
|
|
|
|
|
|
436.c |
|
Impediments to transfer of own funds between parent and subsidiaries. |
|
Section 2.1.3 |
|
|
|
|
|
|
|
|
|
436.d |
|
Capital shortfalls in any subsidiaries outside the scope of consolidation. |
|
N/A: Section 1.2.1 |
|
|
|
|
|
|
|
|
|
436.e |
|
The circumstance of making use of articles on derogations from:
a) Prudential requirements b) Liquidity requirements for
individual subsidiaries/entities. |
|
Section 1.2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
|
Tables |
|
2018 Annual Report Location |
|
437. Own funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437.1 |
|
Institutions shall disclose the following information regarding their own funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437.1.a |
|
A full reconciliation of Common Equity Tier 1 items, Additional Tier 1 items, Tier 2 items and filters and deductions applied pursuant to Articles 32 to 35, 36, 56, 66 and 79 to own funds of the institution and the balance sheet in
the audited financial statements of the institution. |
|
|
Section 2.2.1 |
|
|
Tables 4 and 5 Appendix VIII |
|
|
|
|
|
|
|
|
|
437.1.b |
|
Description of the main features of the Common Equity Tier 1 and Additional Tier 1 instruments and Tier 2 instruments issued by the institution. |
|
|
Section 2.2.1 |
|
|
Appendix VII |
|
|
|
|
|
|
|
|
|
437.1.c |
|
Dull terms and conditions of all Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments. |
|
|
Section 2.2.1 |
|
|
Appendix VII |
|
|
|
|
|
|
|
|
|
437.1.d |
|
Disclosure of the nature and amounts of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437.1.d.i |
|
Each prudential filter applied pursuant to Articles 32 to 35; |
|
|
Section 2.2.1 |
|
|
Appendix VIII |
|
|
|
|
|
|
|
|
|
437.1.d.ii |
|
Each deduction made pursuant to Articles 36, 56 and 66; |
|
|
Section 2.2.1 |
|
|
Appendix VIII |
|
|
|
|
|
|
|
|
|
437.1.d.iii |
|
Items not deducted in accordance with Articles 47, 51, 56, 66 and 79. |
|
|
Section 2.2.1 |
|
|
Appendix VIII |
|
|
|
|
|
|
|
|
|
437.1.e |
|
Description of all restrictions applied to the calculation of own funds in accordance with this Regulation and the instruments, prudential filters and deductions to which those restrictions apply. |
|
|
Section 2.2.1 |
|
|
Appendix VIII |
|
|
|
|
|
|
|
|
|
437.1.f |
|
Explanation of the calculation basis of the disclosed capital ratios estimated using elements of own funds determined, on a basis other than that laid down in this Regulation. |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
438. Capital requirements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438 |
|
Institutions shall disclose the following information regarding the compliance by the institution with the requirements laid down in Article 92 of this Regulation and in Article 73 of Directive 2013/36/EU: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438.a |
|
Summary of the institutions approach to assessing adequacy of capital levels. |
|
|
Sections 2.1 and 2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
438.b |
|
Result of ICAAP on demand from authorities. |
|
|
Sections 2.1.5 and 2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
438.c |
|
Capital requirements for each Standardised approach credit risk exposure class. |
|
|
Sections 2.2.2, 3.2.3, 4.7, 5.4 and 5.5 |
|
|
Tables 7 (OV1) and 8
Tables 15 (CR4) and 30 (CR5) Tables 70 (SEC3)
and Table 71 (SEC4) |
|
|
|
|
|
|
|
|
|
438.d |
|
Capital requirements for each Internal Ratings Based Approach credit risk exposure class. |
|
|
Sections 2.2.2, 3.2.1, 4.7, 5.4 and 5.5 |
|
|
Tables 7 (OV1) and 8 Tables 14, 16 (CR8), 17 to 23 (CR6), 24, and 25 to 26 (CR10) Tables 70 (SEC3) and 71 (SEC4) Appendix XIII |
|
|
|
|
|
|
|
|
|
438.e |
|
Capital requirements for market risk or settlement risk. |
|
|
Sections 2.2.2 and 6.2 |
|
|
Table 7 (OV1) Tables 74 to 75, 76 (MR2-A), 77 (MR2-B), 78 (MR1) and 79 |
|
|
|
|
|
|
|
|
|
438.f |
|
Capital requirements for operational risk, separately for the Basic Indicator Approach, the Standardised Approach, and the Advanced Measurement Approaches as applicable. |
|
|
Sections 2.2.2 and 7.2 |
|
|
Tables 7 (OV1) and 85 |
|
|
|
|
|
|
|
|
|
438 last paragraph |
|
Requirement to disclose specialised lending exposures and equity exposures in the banking book falling under the simple risk weight approach. |
|
|
Section 3.2.2 |
|
|
Tables 25 and 26 (CR10) |
|
|
|
|
|
|
|
|
439. Exposure to counterparty credit risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439 |
|
Institutions shall disclose the following information regarding the institutions exposure to counterparty credit risk as referred to in Part Three, Title II, Chapter 6: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439.a |
|
Description of process to assign internal capital and credit limits to CCR exposures. |
|
|
Chapter 4 |
|
|
|
|
|
|
|
|
|
|
|
|
186 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
|
Tables |
|
2018 Annual Report Location |
439.b |
|
Discussion of policies for securing collateral and establishing credit reserves. |
|
|
Chapter 4 |
|
|
|
|
|
|
|
|
|
|
439.c |
|
Discussion of management of wrong-way risk exposures. |
|
|
Chapter 4 |
|
|
|
|
|
|
|
|
|
|
439.d |
|
Disclosure of collateral to be provided (outflows) in the event of a ratings downgrade. |
|
|
Chapter 4 |
|
|
|
|
|
|
|
|
|
|
439.e |
|
Derivation of net derivative credit exposure. |
|
|
Chapter 4 |
|
|
Tables 46 (CCR2), 47 (CCR8), 50
(CCR1), 53 (CCR5-A) and 54 (CCR5-B) |
|
|
|
|
|
|
|
439.f |
|
Exposure values for mark-to-market, original exposure, standardised and internal model methods. |
|
|
Chapter 4 |
|
|
Tables 46 (CCR2), 47 (CCR8) and 50 (CCR1) |
|
|
|
|
|
|
|
439.g |
|
Notional value of credit derivative hedges and distribution of current credit exposure by type of exposure. |
|
|
Chapter 4 |
|
|
Table 58 (CCR6) |
|
|
|
|
|
|
|
439.h |
|
Notional amounts of credit derivative transactions. |
|
|
Chapter 4 |
|
|
Table 58 (CCR6) |
|
|
|
|
|
|
|
439.i |
|
Estimate of alpha, if applicable. |
|
|
N/A |
|
|
Table 50 (CCR1) |
|
|
|
|
|
|
440. Capital buffers |
|
|
|
|
|
|
|
|
|
|
|
|
|
440 |
|
Disclosure of the following information in relation to its compliance with the requirement for a countercyclical capital buffer referred to in Title VII, Chapter 4 of Directive 2013/36/EU: |
|
|
|
|
|
|
|
|
|
|
|
|
|
440.a |
|
Geographical distribution of credit exposures relevant for the calculation of countercyclical capital buffer. |
|
|
Section 2.1.5 |
|
|
Appendix XI |
|
|
|
|
|
|
|
440.b |
|
Amount of the specific countercyclical capital buffer. |
|
|
Section 2.1.5 |
|
|
Appendix XI |
|
|
|
|
|
|
441. Indicators of global systemic importance |
|
|
|
|
|
|
|
|
|
|
|
|
|
441 |
|
Disclosure of the indicators of global systemic importance. |
|
|
Section 2.1.5 |
|
|
|
|
|
|
|
|
|
442. Credit risk adjustments |
|
|
|
|
|
|
|
|
442 |
|
Institutions shall disclose the following information regarding the institutions exposure to
credit risk and dilution risk: |
|
|
|
|
|
|
|
|
|
|
|
|
|
442.a |
|
Definitions, for accounting purposes, of past due and impaired exposures. |
|
|
Section 3.3 |
|
|
|
|
Risk Management Chapter 3.3. Credit risk -
Key metrics |
|
|
|
|
|
442.b |
|
Description of the approaches adopted for calculating specific and general credit risk adjustments. |
|
|
Section 3.3 |
|
|
|
|
Risk Management Chapter 3.3. Credit risk - Key
metrics |
|
|
|
|
|
442.c |
|
Disclosure of pre-CRM EAD by exposure class. |
|
|
Section 3.3 |
|
|
Table 31 (CR1-A) Table 38 (CRB-B) |
|
|
|
|
|
|
|
442.d |
|
Disclosure of pre-CRM EAD by geography and exposure class. |
|
|
Section 3.3 |
|
|
Table 39 (CRB-C) |
|
Risk Management Chapter 3.3. Credit risk - Key
metrics |
|
|
|
|
|
442.e |
|
Disclosure of pre-CRM EAD by industry and exposure class. |
|
|
Section 3.3 |
|
|
Table 40 (CRB-D) |
|
Risk Management Chapter 3.3. Credit risk - Key
metrics |
|
|
|
|
|
442.f |
|
Disclosure of pre-CRM EAD by residual maturity and exposure class. |
|
|
Section 3.3 |
|
|
Table 41 (CRB-E) |
|
|
|
|
|
|
|
442.g.
(i-iii) |
|
Breakdown of impaired, past due, specific and general credit risk adjustments, and impairment charges for the period, by industry. |
|
|
Section 3.3 |
|
|
Table 31 (CR1-A) Table 32 (CR1-B) Table 33 (CR1-C) Table 34 (CR1-D)
Table 35 (CR1-E) |
|
Risk Management Chapter 3.3. Credit risk - Key
metrics |
|
|
|
|
|
442.h |
|
Impaired and past due exposures, broken down by geographical area, and the amounts of specific and general credit risk adjustments related to each geographical area. |
|
|
Section 3.3 |
|
|
Table 31 (CR1-A) Table 32 (CR1-B) Table 33 (CR1-C) Table 34 (CR1-D)
Table 35 (CR1-E) |
|
Risk Management Chapter 3.3. Credit risk - Key
metrics |
|
|
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
|
Tables |
|
2018 Annual Report Location |
442.i.(i-v) |
|
Reconciliation of changes in specific and general credit risk adjustments for impaired exposures. |
|
|
Section 3.3 |
|
|
Table 35 (CR1-E) Table 36 (CR2-A) Table 37 (CR2-B) |
|
|
442 last
paragraph |
|
Specific credit risk adjustments recorded to income statement are disclosed separately. |
|
|
Section 3.3 |
|
|
Table 35 (CR1-E) Table 36 (CR2-A) Table 37 (CR2-B) |
|
|
443. Unencumbered assets |
|
|
|
|
|
|
|
|
443 |
|
Disclosures of unencumbered assets. |
|
|
Section 8.1.2 |
|
|
Tables 87 (AE1), 88 (AE2) and 89 (AE3) |
|
Economic and Financial Report Chapter 3. Group financial performance (Liquidity and funding management) |
444. Use of ECAIs |
|
|
|
|
|
|
|
|
444 |
|
For institutions calculating the risk-weighted exposure amounts in accordance with Part Three, Title II, Chapter 2, the following information shall be disclosed for each of the exposure classes specified in Article 112: |
|
|
|
|
|
|
|
|
444.a |
|
Names of the ECAIs used in the calculation of Standardised approach risk-weighted assets and reasons for any changes. |
|
|
Section 3.2.3 |
|
|
|
|
|
444.b |
|
Exposure classes associated with each ECAI. |
|
|
Section 3.2.3 |
|
|
|
|
|
444.c |
|
Description of the process used to transfer credit assessments to non-trading book items. |
|
|
N/A: Section 3.2.3 |
|
|
|
|
|
444.d |
|
Mapping of external rating to credit quality steps (CQS). |
|
|
Sections 3.2.1 and 3.2.3 |
|
|
Tables 17 to 23 (CR6) |
|
|
444.e |
|
Exposure value pre and post-credit risk mitigation, by CQS. |
|
|
Sections 3.2.3, 3.3 and 4.7 |
|
|
Tables 14 and 15 (CR4) Tables 30 (CR5) and 51 (CCR3) |
|
|
445. Exposure to market risk |
|
|
|
|
|
|
|
|
445 |
|
Disclosure of position risk, large exposures exceeding limits, FX, settlement and commodities risk. |
|
|
Section 6.2 |
|
|
Table 77 (MR2-B) and 78 (MR1) |
|
|
|
|
|
|
446. Operational risk |
|
|
|
|
|
|
|
|
446 |
|
Scope of approaches used to calculate operational risk. |
|
|
Section 7.2 |
|
|
|
|
|
|
|
|
|
447. Exposures in equities not included in the trading book |
|
|
|
|
|
|
|
|
|
|
|
|
|
447 |
|
Institutions shall disclose the following information regarding the exposures in equities not included in the trading book: |
|
|
|
|
|
|
|
|
|
|
|
|
|
447.a |
|
Differentiation of exposures based on their objectives and an overview of accounting techniques and valuation methodologies used. |
|
|
Section 3.2.2 |
|
|
Tables 26 (CR10) and 27 to 29 |
|
|
|
|
|
|
|
447.b |
|
The balance sheet value, the fair value and, for those exchange-traded, a comparison to the market price where it is materially different from the fair value. |
|
|
Section 3.2.2 |
|
|
Tables 26 (CR10) and 27 to 29 |
|
|
|
|
|
|
|
447.c |
|
The types, nature and amounts of exchange-traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures. |
|
|
Section 3.2.2 |
|
|
Tables 26 (CR10) and 27 to 29 |
|
|
|
|
|
|
|
447.d |
|
Cumulative realised gains or losses arising from sales and liquidations in the period. |
|
|
Section 3.2.2 |
|
|
Tables 26 (CR10) and 27 to 29 |
|
|
|
|
|
|
|
447.e |
|
Total unrealised gains or losses, the total latent revaluation gains or losses, and any of these amounts included in the original or additional own funds. |
|
|
Section 3.2.2 |
|
|
Tables 26 (CR10) and 27 to 29 |
|
|
|
|
448. Exposure to interest rate risk on positions not included in the trading
book |
|
|
448 |
|
Institutions shall disclose the following information on their exposure to interest rate risk on positions not included in the trading book: |
|
|
|
|
|
|
|
|
|
|
|
|
|
448.a |
|
Nature of the interest rate risk and the key assumptions, and frequency of measurement of the interest rate risk. |
|
|
Section 6.4 |
|
|
Table 84 |
|
Risk Management Chapter 4.4. Structural balance sheet risks management |
|
|
|
|
|
448.b |
|
Variation in earnings, economic value or other relevant measure used by the bank for upward and downward rate shocks according to the banks method for measuring the interest rate risk, broken down by currency. |
|
|
Section 6.4 |
|
|
Table 84 |
|
Risk Management Chapter 4.4. Structural balance sheet risks management |
|
|
|
|
|
188 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
|
Tables |
|
|
2018 Annual Report Location |
|
|
|
|
449. Exposure to securitisation positions |
|
|
|
|
|
|
|
|
|
|
449 |
|
Institutions calculating risk weighted exposure amounts in accordance with Part Three, Title II, Chapter 5 or own funds requirements in accordance with Article 337 or 338 shall disclose the following information, where relevant,
separately for their trading and non-trading book: |
|
|
|
|
|
|
|
|
|
|
449.a |
|
Objectives in relation to securitisation activity. |
|
|
Section 5.3.1 |
|
|
|
|
|
|
|
449.b |
|
Nature of other risks in securitised assets, including liquidity. |
|
|
Section 5.3.3 |
|
|
|
|
|
|
|
449.c |
|
Risks in re-securitisation activity stemming from seniority of underlying securitisations and ultimate underlying assets. |
|
|
Sections 5.4 and 5.5 |
|
|
|
Tables 60, 61, 63 to 66, 67 (SEC1), 68 (SEC2), 70 (SEC3) and 71 (SEC4) |
|
|
|
449.d |
|
Roles played by the institution in the securitisation process. |
|
|
Section 5.3.2 |
|
|
|
|
|
|
|
449.e |
|
Extent of the institutions involvement in each of the securitisation roles |
|
|
Section 5.5 |
|
|
|
Tables 59 to 63, 66, 67 (SEC1) and 68 (SEC2) |
|
|
|
449.f |
|
Processes in place to monitor changes in credit and market risks of securitisation exposures, and how the processes differ for re-securitisation exposures. |
|
|
Section 5.5 |
|
|
|
|
|
|
|
449.g |
|
Description of the institutions policies with respect to hedging and unfunded protection, and identification of material hedge counterparties, by relevant type of risk exposure. |
|
|
N/A: Section 5.5 |
|
|
|
N/A: Table 2 (LI2) |
|
|
|
449.h |
|
Approaches to the calculation of risk-weighted assets for securitisations mapped to types of exposures. |
|
|
Section 5.4 |
|
|
|
Tables 59 to 63 |
|
|
|
449.i |
|
Types of SSPEs used to securitise third-party exposures as a sponsor. |
|
|
Sections 5.4, 5.3.2 and 5.5 |
|
|
|
Tables 59 to 63, 66, 67 (SEC1), 68 (SEC2), 69, 70 (SEC3) Appendix IX |
|
|
|
449.j |
|
A summary of the institutions accounting policies for securitisation activities, including: |
|
|
|
|
|
|
|
|
|
|
449.j.i |
|
whether the transactions are treated as sales or financings; |
|
|
Section 5.2 |
|
|
|
|
|
|
|
449.j.ii |
|
the recognition of gains on sales; |
|
|
Section 5.2 |
|
|
|
|
|
|
|
449.j.iii |
|
the methods, key assumptions, inputs and changes from the previous period for valuing securitisation positions; |
|
|
Section 5.2 |
|
|
|
|
|
|
|
449.j.iv |
|
the treatment of synthetic securitisations if not covered by other accounting policies; |
|
|
Section 5.2 |
|
|
|
|
|
|
|
449.j.v |
|
how assets awaiting securitisation are valued and whether they are recorded in the institutions non-trading book or the trading book; |
|
|
Section 5.2 |
|
|
|
|
|
|
|
|
|
|
|
|
449.j.vi |
|
policies for recognising liabilities on the balance sheet for arrangements that could require the institution to provide financial support for securitised assets. |
|
|
Section 5.2 |
|
|
|
|
|
|
|
|
|
|
|
|
449.k |
|
Names of ECAIs used for securitisations and type. |
|
|
Section 5.5 |
|
|
|
|
|
|
|
|
|
|
|
|
449.l |
|
Full description of Internal Assessment Approach. |
|
|
N/A: Section 5.4 |
|
|
|
Table 7 (OV1) |
|
|
|
|
|
|
|
|
449.m |
|
Explanation of significant changes in quantitative disclosures, since the last reporting period. |
|
|
Sections 5.4 and 5.5 |
|
|
|
|
|
|
|
|
|
|
|
|
449.n |
|
As appropriate, separately for the Banking and trading book securitisation exposures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
449.n.i |
|
amount of outstanding exposures securitised; |
|
|
Sections 5.4 and 5.5 |
|
|
|
Tables 59 to 66, 67 (SEC1), 68 (SEC2), 70 (SEC3) and 71 (SEC4) |
|
|
|
449.n.ii |
|
on balance sheet securitisation retained or purchased, and off balance sheet exposures; |
|
|
Section 5.4 |
|
|
|
Tables 59 to 61 |
|
|
|
449.n.iii |
|
amount of assets awaiting securitisation; |
|
|
N/A: Section 5.5 |
|
|
|
|
|
|
|
|
|
|
|
|
449.n.iv |
|
early amortisation treatment, aggregate drawn exposures and capital requirements for securitised facilities; |
|
|
N/A: Section 5.3.3 |
|
|
|
|
|
|
|
|
|
|
|
|
449.n.v |
|
Deducted or 1,250%-weighted securitisation positions; |
|
|
Sections 5.4 and 5.5 |
|
|
|
Tables 60, 61, 70 (SEC3) and 71 (SEC4) |
|
|
|
|
|
|
|
|
449.n.vi |
|
summary of the securitisation activity of the current period. |
|
|
Sections 5.4 and 5.5 |
|
|
|
Tables 59 to 66, 67 (SEC1), 68 (SEC2), 70 (SEC3) and 71 (SEC4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
|
Tables |
|
|
2018 Annual Report Location |
|
|
|
|
|
|
449.o |
|
Banking and trading book securitisations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
449.o.i |
|
Retained and purchased positions and associated capital requirements, broken down by risk-weight bands; |
|
|
Sections 5.4 and 5.5 |
|
|
|
Tables 60, 61, 70 (SEC3) and 71 (SEC4) |
|
|
|
|
|
|
|
|
|
|
449.o.ii |
|
Retained and purchased re-securitisation positions before and after hedging and insurance; exposure to financial guarantors broken down by guarantor credit worthiness. |
|
|
N/A: Sections 5.4 and 5.5 |
|
|
|
Tables 60, 61, 63 to 66, 67 (SEC1), 68 (SEC2), 70 (SEC3) and 71 (SEC4) |
|
|
|
|
|
|
|
|
|
|
449.p |
|
Impaired assets and recognised losses related to banking book securitisations, by exposure type. |
|
|
Section 5.4 |
|
|
|
Table 64 |
|
|
|
|
|
|
|
|
|
|
449.q |
|
Exposure and capital requirements for trading book securitisations, separated into traditional and synthetic, and exposure type. |
|
|
Sections 5.4 and 5.5 |
|
|
|
Tables 62 and 68 (SEC2) |
|
|
|
|
|
|
|
|
|
|
449.r |
|
Whether the institution has provided non-contractual financial support to securitisation vehicles. |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
450. Remuneration policy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450 |
|
Remuneration disclosures (Material Risk Takers): |
|
|
Chapter 9 |
|
|
|
|
|
|
|
Corporate Governance Chapter |
|
|
|
|
|
451. Leverage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
451.1. (a,b) |
|
Leverage ratio, and breakdown of the total exposure measures, including the reconciliation to financial statements. |
|
|
Section 2.2.3 |
|
|
|
Tables 9 and 10 Appendix X |
|
|
|
|
|
|
|
|
|
|
451.c |
|
If applicable, the total amount of the derecognized fiduciary items. |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
451.(d,e) |
|
Description of the processes used to manage the risk of excessive leverage, and factors that impacted the leverage ratio during the year. |
|
|
Section 2.2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
452. Use of the IRB Approach to credit risk |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452 |
|
Institutions calculating the risk-weighted exposure amounts under the IRB Approach shall disclose the following information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452.a |
|
Permission for use of the IRB approach from the competent authority. |
|
|
Section 2.2.2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452.b |
|
Explanation and review of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452.b.i |
|
Structure of internal rating systems and relation between internal and external ratings; |
|
|
Sections 3.2.1, 3.4 and 3.10 |
|
|
|
Tables 17 to 23 (CR6), 24, and 25 to 26 (CR10) |
|
|
|
|
|
|
|
|
|
|
452.b.ii |
|
Use of internal ratings for purposes other than capital requirement calculations; |
|
|
Section 3.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452.b.iii |
|
Management and recognition of credit risk mitigation process; |
|
|
Section 3.7.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452.b.iv |
|
Controls mechanisms for rating systems; |
|
|
Section 3.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
452.c.(i-v) |
|
Description of ratings processes for each IRB asset class, provided separately. |
|
|
Sections 3.2.1 and 3.5 |
|
|
|
Tables 17 to 20 (CR6), 22 to 23 (CR6), and 25 to 26 (CR10) |
|
|
|
|
|
|
|
|
|
|
452.d |
|
Exposure values by IRB exposure class, separately for Advanced and Foundation IRB. |
|
|
Section 3.2.1 |
|
|
|
Tables 17 to 23 (CR6), 24, and 25 to 26 (CR10) |
|
|
|
|
|
|
|
|
|
|
452.e.(i-iii) |
|
For each exposure class, disclosed separately by obligor grade, institutions shall disclose: total exposure, separating loans and undrawn exposures where applicable, and exposure-weighted average risk weight. |
|
|
Section 3.2.1 |
|
|
|
Tables 17 to 23 (CR6), 24, and 25 to 26 (CR10) |
|
|
|
|
|
|
|
|
|
|
452.f |
|
For the retail exposure class, the disclosures outlined in article 452.e, to allow for a meaningful differentiation of credit risk on a pooled basis. |
|
|
Section 3.2.1 |
|
|
|
Table 20 (CR6) |
|
|
|
|
|
452.g |
|
Actual specific risk adjustments for the period and explanation of changes. |
|
|
Sections 3.1 and 3.2.1 |
|
|
|
Tables 17 to 23 (CR6) and 31 (CR1-A) |
|
|
|
|
|
452.h |
|
Description of the factors that impacted on the loss experience in the preceding period. |
|
|
Sections 3.2.1, 3.7.1, 3.9 and 4.7 |
|
|
|
Tables 17 to 23 (CR6), 24, 25 to 26 (CR10) and 51 (CCR3) |
|
|
|
|
|
452.i |
|
Analysis of the historical estimates of losses against actual losses in each exposure, to help assess the performance of the rating system over a sufficient period. |
|
|
Section 3.10 |
|
|
|
Appendices XV to XVIII |
|
|
|
|
|
452.j |
|
For all IRB exposure classes: |
|
|
|
|
|
|
|
|
|
|
|
|
452.j.(i-ii) |
|
Where applicable, PD and LGD by each country where the bank operates. |
|
|
Section 3.2.1 |
|
|
|
Table 24 |
|
|
|
|
|
|
|
|
|
|
190 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
|
|
Article |
|
Brief Description |
|
2018 P3DR Location |
|
Tables |
|
2018 Annual Report Location |
|
|
|
|
453. Use of credit risk mitigation techniques |
|
|
|
|
|
|
453 |
|
Institutions applying credit risk mitigation techniques shall disclose the following information: |
|
|
|
|
|
|
453.a |
|
Use of on and off-balance sheet netting. |
|
Sections 3.7 and 4.7 |
|
|
|
Risk Management Chapter 3.2. Credit risk management |
453.b |
|
How collateral valuation is managed. |
|
Sections 3.7 and 4.7 |
|
|
|
Risk Management Chapter 3.2. Credit risk management |
453.c |
|
Description of types of collateral used by the institution. |
|
Sections 3.7 and 4.7 |
|
|
|
Risk Management Chapter 3.2. Credit risk management |
453.d |
|
Main types of guarantor and credit derivative counterparty, creditworthiness. |
|
Sections 3.7 and 4.7 |
|
|
|
Risk Management Chapter 3.2. Credit risk management |
453.e |
|
Market or credit risk concentrations within risk mitigation exposures. |
|
Sections 3.7 and 4.7 |
|
Table 42 |
|
|
453.f |
|
Standardised or Foundation IRB Approach, exposure value covered by eligible collateral. |
|
Sections 3.3, 3.7.1 and 4.7 |
|
Tables 14 to 15 (CR4) Table 43 (CR3) Tables 53 (CCR5-A), 54 (CCR5-B), 55 to 57, and 58 (CCR6) |
|
|
453.g |
|
Exposures covered by guarantees or credit derivatives. |
|
Sections 3.3, 3.7 and 4.7 |
|
Tables 14 to 15 (CR4) Table 43 (CR3) Table 45 (CR7) Tables 53 (CCR5-A), 54 (CCR5-B), 55 to 57, and 58 (CCR6) |
|
|
|
454. Use of the Advanced Measurement Approaches to operational risk |
454 |
|
Description of the use of insurance or other risk transfer mechanisms to mitigate operational risk. |
|
N/A: Sections 2.2.2 and 7.2 |
|
Table 7 (OV1) |
|
|
|
|
|
|
455. Use of Internal Market Risk Models |
|
|
|
|
|
|
455 |
|
Institutions calculating their capital requirements in accordance with Article 363 shall disclose the following information: |
|
|
|
|
|
|
455.a |
|
For each sub-portfolio covered: |
|
|
|
|
|
|
455.a.i |
|
Disclosure of the characteristics of the market risk models used; |
|
Sections 2.2.2.1, 6.2 and 6.3 |
|
|
|
|
455.a.ii |
|
Disclosure of the methodologies used to measure incremental default and migration risk; |
|
Sections 2.2.2.1, 6.2 and 6.3 |
|
|
|
|
455.a.iii |
|
Descriptions of stress tests applied to the portfolios; |
|
Sections 6.2 and 6.3.4 |
|
|
|
|
455.a.iv |
|
Methodology for back-testing and validating the models. |
|
Sections 6.2, 6.3.5 and 6.3.6 |
|
|
|
|
455.b |
|
Scope of permission for use of the models. |
|
Sections 2.2.2.1, 6.2 and 6.3.5 |
|
|
|
|
455.c |
|
Policies and processes to determine trading book classification, and to comply with prudential valuation requirements. |
|
Section 6.3 |
|
|
|
|
|
|
|
|
|
455.d.(i-iii) |
|
High/Low/Mean values over the year of VaR, SVaR and incremental risk charge. |
|
Section 6.3.1 |
|
Table 80 (MR3) |
|
|
|
|
|
|
|
455.e |
|
The elements of the own fund calculation. |
|
Sections 2.2.2 and 6.2 |
|
Tables 7 (OV1), 75, 76 (MR2-A) and 77 (MR2-B) |
|
|
|
|
|
|
|
455.f |
|
Weighted average liquidity horizons for each sub-portfolio covered by internal models. |
|
Section 6.3 |
|
|
|
|
|
|
|
|
|
455.g |
|
Comparison of end-of-day value-at-risk (VaR) measures compared with one-day changes in the portfolios value. |
|
Section 6.3.5 |
|
Graph MR4 |
|
|
|
|
|
|
|
Appendix III List of tables |
|
|
|
|
|
|
|
|
|
|
|
Num. |
|
Name |
|
Page |
|
|
|
CHAPTER 1. INTRODUCTION |
|
|
|
|
Table 1 |
|
Differences between accounting and regulatory scopes of consolidation and mapping of financial statements categories with regulatory risk categories (LI1) |
|
|
13 |
|
Table 2 |
|
Main sources of differences between regulatory exposure amounts and carrying amounts in financial statements (LI2) |
|
|
14 |
|
|
|
CHAPTER 2. CAPITAL |
|
|
|
|
Table 3 |
|
Main capital figures and capital adequacy ratios Reconciliation of accounting capital |
|
|
21 |
|
Table 4 |
|
with regulatory capital |
|
|
31 |
|
Table 5 |
|
Eligible capital |
|
|
31 |
|
Table 6 |
|
Regulatory capital. Changes |
|
|
32 |
|
Table 7 |
|
Overview of RWAs (OV1) |
|
|
34 |
|
Table 8 |
|
Capital requirements by geographical region |
|
|
35 |
|
Table 9 |
|
Leverage ratio |
|
|
41 |
|
Table 10 |
|
Leverage ratio details |
|
|
41 |
|
Table 11 |
|
Available economic capital |
|
|
42 |
|
Table 12 |
|
Regulatory and Economic CET1 |
|
|
43 |
|
Table 13 |
|
RoRAC and value creation |
|
|
44 |
|
|
|
CHAPTER 3. CREDIT RISK |
|
|
|
|
Table 14 |
|
Credit risk exposure and CRM effects (IRB approach) (CR4) |
|
|
54 |
|
Table 15 |
|
Credit risk exposure and CRM effects (Standardised approach) (CR4) |
|
|
54 |
|
Table 16 |
|
RWA flow statement of credit risk exposures under IRB (CR8) |
|
|
55 |
|
Table 17 |
|
AIRB approach. Central banks and central governments (CR6) |
|
|
56 |
|
Table 18 |
|
AIRB approach. Institutions (CR6) |
|
|
57 |
|
Table 19 |
|
AIRB approach. Corporates (CR6) |
|
|
58 |
|
Table 20 |
|
AIRB approach. Retail portfolios (CR6) |
|
|
59 |
|
Table 21 |
|
FIRB approach. Sovereign (CR6) |
|
|
61 |
|
Table 22 |
|
FIRB approach. Institutions (CR6) |
|
|
62 |
|
Table 23 |
|
FIRB approach. Corporates (CR6) |
|
|
63 |
|
Table 24 |
|
Exposures and parameters by segment and geography |
|
|
64 |
|
Table 25 |
|
Specialised lending (CR10) |
|
|
65 |
|
Table 26 |
|
Equities (CR10) |
|
|
68 |
|
Table 27 |
|
Equity instruments through other comprehensive income |
|
|
69 |
|
Table 28 |
|
Equity instruments mandatorily at fair value through profit and loss |
|
|
69 |
|
Table 29 |
|
Equity instruments through other comprehensive income. Consolidated gross valuation adjustments |
|
|
69 |
|
|
|
|
|
|
|
|
Num. |
|
Name |
|
Page |
|
Table 30 |
|
Standardised approach (including a breakdown of exposures post conversion factor and post mitigation techniques) (CR5) |
|
|
71 |
|
Table 31 |
|
Credit quality of exposures by exposure classes and instruments (CR1-A) |
|
|
73 |
|
Table 32 |
|
Credit quality of exposures by industry or counterparty type (CR1-B) |
|
|
74 |
|
Table 33 |
|
Credit quality of exposures by geography (CR1-C) |
|
|
75 |
|
Table 34 |
|
Ageing of past-due exposures (CR1-D) |
|
|
75 |
|
Table 35 |
|
Non-performing and forborne exposures (CR1-E) |
|
|
76 |
|
Table 36 |
|
Changes in stock of general and specific credit risk adjustments (CR2-A) |
|
|
76 |
|
Table 37 |
|
Changes in stock of non-performing loans and debt securities (CR2-B) |
|
|
77 |
|
Table 38 |
|
Net amount of exposures (CRB-B) |
|
|
78 |
|
Table 39 |
|
Geographical breakdown of exposures (CRB-C) |
|
|
79 |
|
Table 40 |
|
Concentration of exposures by industry or counterparty type (CRB-D) |
|
|
80 |
|
Table 41 |
|
Maturity of exposures (CRB-E) |
|
|
81 |
|
Table 42 |
|
Guarantees by external rating |
|
|
85 |
|
Table 43 |
|
Credit risk mitigation techniques - IRB and SA (CR3) |
|
|
87 |
|
Table 44 |
|
IRB approach. Credit risk mitigation techniques: credit derivatives and personal guarantees |
|
|
87 |
|
Table 45 |
|
Effect on RWA of credit derivatives used as CRM techniques (CR7) |
|
|
88 |
|
|
|
CHAPTER 4. COUNTERPARTY CREDIT RISK |
|
|
|
|
Table 46 |
|
Credit valuation adjustment (cva) capital charge (CCR2) |
|
|
99 |
|
Table 47 |
|
Exposures to central counterparties (CCR8) |
|
|
99 |
|
Table 48 |
|
Total exposure to counterparty credit risk |
|
|
100 |
|
Table 49 |
|
Derivatives exposure |
|
|
100 |
|
Table 50 |
|
Analysis of the counterparty credit risk (CCR) exposure by approach (CCR1) |
|
|
102 |
|
Table 51 |
|
Standardised approach CCR exposures by regulatory portfolio and risk (CCR3) |
|
|
103 |
|
Table 52 |
|
IRB approach. CCR exposures by portfolio and PD scale (CCR4) |
|
|
104 |
|
Table 53 |
|
Impact of netting and collateral held on exposure values (CCR5-A) |
|
|
108 |
|
Table 54 |
|
IRB approach. Composition of collateral for exposures to counterparty credit risk (CCR5-B) |
|
|
109 |
|
Table 55 |
|
Credit derivatives hedge under IRB |
|
|
109 |
|
Table 56 |
|
Counterparty credit risk. Credit derivative classification. Bought protection |
|
|
109 |
|
Table 57 |
|
Counterparty credit risk. Classification sold protection |
|
|
110 |
|
Table 58 |
|
Credit derivatives exposures (CCR6) |
|
|
110 |
|
|
|
|
|
|
192 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
|
|
|
|
|
|
|
Num. |
|
Name |
|
Page |
|
|
|
CHAPTER 5. SECURITISATIONS |
|
|
|
|
Table 59 |
|
Breakdown of repurchased positions in SSPE with risk transfer, distributed by function and approach used |
|
|
121 |
|
Table 60 |
|
Aggregate amount of securitisation positions purchased and retained with risk transfer. Banking book IRB approach |
|
|
123 |
|
Table 61 |
|
Aggregate amount of securitisation positions purchased and retained with risk transfer. Investment portfolio. Standardised approach |
|
|
124 |
|
Table 62 |
|
Aggregate amount of securitisation positions purchased and retained. Trading book |
|
|
125 |
|
Table 63 |
|
Securitisation positions purchased and retained with risk transfer by exposure type in the banking book |
|
|
126 |
|
Table 64 |
|
Securitisation structures with risk transfer |
|
|
127 |
|
Table 65 |
|
Securitisation structures without risk transfer |
|
|
128 |
|
Table 66 |
|
Securitisation positions purchased or retained. Banking book |
|
|
129 |
|
Table 67 |
|
Securitisation exposures in the banking book (SEC1) |
|
|
130 |
|
Table 68 |
|
Securitisation exposures in the trading book (SEC2) |
|
|
131 |
|
Table 69 |
|
Inventory of originated securitisations with largest outstanding balance |
|
|
132 |
|
Table 70 |
|
Securitisation exposures in the banking book and associated regulatory capital requirements (bank acting originator or sponsor) (SEC3) |
|
|
133 |
|
Table 71 |
|
Securitisation exposures in the banking book and associated regulatory capital requirements (bank acts as an investor) (SEC4) |
|
|
134 |
|
Table 72 |
|
Initial balance of securitisation funds by type of securitised asset |
|
|
136 |
|
Table 73 |
|
List of new securitisations originated in 2018, organised by country and originating institution and ordered by initial issue volume |
|
|
137 |
|
|
|
CHAPTER 6. MARKET RISK |
|
|
|
|
Table 74 |
|
Regulatory capital requirements for market risk |
|
|
140 |
|
Table 75 |
|
Capital requirements for market risk. Internal model |
|
|
141 |
|
Table 76 |
|
Market risk under IMA approach (MR2-A) |
|
|
142 |
|
Table 77 |
|
RWA flow statements of market risk exposures under IMA (MR2-B) |
|
|
142 |
|
Table 78 |
|
Market risk under standardised approach (MR1) |
|
|
143 |
|
Table 79 |
|
Capital requirements for market risk. Standardised approach |
|
|
143 |
|
Table 80 |
|
VaR, Stressed VaR and IRC by geography (MR3) |
|
|
144 |
|
Table 81 |
|
Stress window |
|
|
146 |
|
Table 82 |
|
Stress scenario: Maximum volatility (worst case) |
|
|
147 |
|
Table 83 |
|
Exceptions at units with internal model |
|
|
151 |
|
Table 84 |
|
Quantitative information on IRRBB (IRRBB1) |
|
|
155 |
|
|
|
|
|
|
|
|
Num. |
|
Name |
|
Page |
|
|
|
CHAPTER 7. OPERATIONAL RISK |
|
|
|
|
Table 85 |
|
Changes in capital requirements for operational risk |
|
|
159 |
|
|
|
CHAPTER 8. OTHER RISKS AND INTERNAL CONTROL |
|
|
|
|
Table 86 |
|
LCR disclosure template |
|
|
162 |
|
Table 87 |
|
Encumbered and unencumbered assets (AE1) |
|
|
164 |
|
Table 88 |
|
Collateral received (AE2) |
|
|
165 |
|
Table 89 |
|
Sources of encumbrance (AE3) |
|
|
165 |
|
|
|
Own covered bonds and asset- |
|
|
|
|
Table 90 |
|
backed securities issued |
|
|
166 |
|
|
|
CHAPTER 9. REMUNERATION POLICIES |
|
|
|
|
Table 91 |
|
Total remuneration |
|
|
175 |
|
Table 92 |
|
Remuneration by activity area |
|
|
176 |
|
Table 93 |
|
Vested rights |
|
|
177 |
|
Table 94 |
|
Unvested rights |
|
|
177 |
|
Table 95 |
|
Remuneration by salary band |
|
|
178 |
|
Appendix IVGlossary
Advanced IRB approach: all the credit risk parameters are estimated internally by the entity, including
the CCFs for calculating the EAD.
AMA (Advanced Measurement Approach): an operational risk measurement technique set forth in Basel capital
adequacy norms, based on an internal modelling methodology.
AQR (Asset Quality Review): asset quality review exercise performed by the European
Central Bank.
Asset liability management (ALM): a series of techniques and procedures to ensure correct decision-making on investments and funding
at the entity, taking into consideration the interrelation between the various on- balance-sheet and off-balance-sheet items.
Asset securitisation: a financial mechanism that consists of converting certain assets into fixed-income
securities that can be traded on a secondary securities market.
AT1 (Additional Tier 1): capital which consists primarily of hybrid instruments.
Backtesting: the use of historical data to monitor the performance of the risk models.
Basel III: a set of amendments to the Basel II regulations published in December 2010, scheduled to take effect in January 2013 and to be gradually
implemented until January 2019.
Basic IRB approach: all the risk parameters are determined by the regulator except for the probability of default,
which is estimated internally by the bank. The CCFs required to calculate EAD are determined by the regulator.
BCBS: Basel Committee on Banking
Supervision.
BIS: Bank for International Settlements.
BRRD (Bank Recovery and Resolution Directive): approved in 2014, the BRRD establishes the framework for the recovery and resolution of banks with the
objective of minimising the costs for taxpayers.
CBE 2/2016: Bank of Spain Circular of 2 February 2016 on the supervision and solvency of
credit institutions, which completes the adaptation to Spanish law of Directive 2013/36/EU and Regulation (EU) No 575/2013. The new Circular repeals Bank of Spain Circular 3/2008 to credit institutions on the determination and control of minimum own
funds (except the parts referred to in Circular 5/2008 regarding the regime established therein) and section 11 of Bank of Spain Circular 2/2014.
CBE
3/2008: Bank of Spain Circular of 22 May 2008 on the calculation and control of minimum capital requirements.
CBE 4/2004: Bank of Spain Circular of 22 December 2004 on public and confidential financial
reporting standards and model financial statement forms.
CBE 9/2010: Bank of Spain Circular of 22 December 2010 amending Circular 3/2008.
CCAR (Comprehensive Capital Analysis Review): a framework introduced by the Federal Reserve to review the capital planning and adaptation
processes of the main US financial institutions.
CCF (Credit conversion factor): a conversion factor used for converting off-balance-sheet credit risk balances into credit exposure equivalents. Under the AIRB approach Santander Group applies the CCFs in order to calculate the EAD value of the items representing contingent liabilities
and commitments.
CCoB (Conservation Buffer): a capital buffer equal to 2.5% of risk-weighted assets (and comprised fully of high-quality liquid
assets) to absorb losses generated from the business.
CCP (Central Counterparty Clearing House): entity defined in article 2.1 of Regulation (EU)
no. 648/2012.
CCyB (Counter Cyclical Buffer): a buffer whose objective is to mitigate or prevent cyclical risks arising from excessive credit
growth at aggregate level. Accordingly, the CCB is designed to build up capital buffers during expansionary phases with a dual objective: to enhance the solvency of the banking system and to stabilise the credit cycle.
CET1 (Common Equity Tier 1): the highest quality capital of a bank.
CoCos (Contingent Convertible Bonds): debt securities that are convertible into capital if a specified event occurs.
Common equity: a capital measure that considers, among other components, ordinary shares, the share premium and retained profits. It does not include
preference shares.
Concentration risk: the risk of loss due to large exposures to a small number of debtors to which the entity has lent money.
Confidence level: in the context of value at risk (VaR) and economic capital, this is the level of probability that the actual loss will not
exceed the potential loss estimated by value at risk or economic capital.
Counterparty credit risk: the risk that a counterparty will default on a
derivatives contract before its maturity. The risk could arise from derivatives transactions in the trading portfolio or the banking portfolio and, as with other credit exposures, it is subject to a credit limit.
|
|
|
|
|
194 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
Credit default swap: a derivatives contract that transfers the credit risk of a financial instrument from
the buyer (who receives the credit protection) to the seller (who guarantees the solvency of the instrument).
Credit risk: the risk that customers
are unable to meet their contractual payment obligations. Credit risk includes default, country and settlement risk.
Credit risk mitigation: a
technique for reducing the credit risk of a transaction by applying coverage such as personal guarantees or collateral.
CRM (Comprehensive Risk
Measure): the estimate of risk in the correlation trading portfolio.
CRR (Capital Requirements Regulation) and CRD IV (Capital Requirements
Directive): directive and regulation transposing the Basel II framework into European Union law.
CSP: Commercial strategic plan.
CVA (Credit Valuation Adjustment): the difference between the value of the risk-free portfolio and the true portfolio value, taking into account
counterparty credit risk.
DEBA: European Banking Authority. Created in 2010, it entered into operation in 2011. The EBA acts as a coordinator
between the national entities responsible for safeguarding values such as the stability of the financial system, transparency of markets and financial products, and the protection of bank customers and investors.
Default risk: the risk that counterparties will not meet their contractual payment obligations.
Derivatives: financial instruments that derive their value from one or more underlying assets, e.g. bonds or currencies.
DLGD (Downturn LGD): the LGD estimated in adverse economic conditions.
DTA: deferred tax assets.
D-SIIs: Domestic Systemically Important Institutions.
EAD (Exposure at Default): the amount that the entity
could lose in the event of counterparty default.
ECAI: External Credit Assessment Institution, such as Moodys Investors Service,
Standard & Poors Ratings Group and Fitch Group.
ECB Governing Council: the main decision-making body of the ECB, consisting of all
members of the Executive Board and the governors of the national central banks of the Euro area countries.
ECB Supervisory Board: the body which undertakes the planning and execution of the ECBs supervisory
tasks, carrying out preparatory work and making proposals for decisions for approval by the ECB Governing Board.
Economic capital: the figure that
demonstrates to a high degree of certainty the quantity of capital resources that Santander Group needs at a given point in time to absorb unexpected losses arising from its current exposure.
EDTF (Enhanced Disclosure Task Force): task force that issues recommendations to enhance the transparency of financial institution disclosures to the
market.
EL (Expected loss): a regulatory calculation of the average amount expected to be lost on an exposure, using a 12-month time horizon. EL is calculated by multiplying probability of default (a percentage) by exposure at default (an amount) and LGD (a percentage).
EPS (earnings per share): an indicator used to measure a companys profitability over a specified period of time. EPS is calculated by dividing
the companys profit for the period by the number of shares comprising its share capital.
ESRB (European Systemic Risk Board): the body that
has been charged with macroprudential supervision of the financial system in the European Union in order to contribute to preventing or mitigating to systemic risks to financial stability.
Exposure: the gross amount that the entity could lose if the counterparty is unable to meet its contractual payment obligations, without taking into
consideration any guarantees, credit enhancements or credit risk mitigation transactions.
FSB (Financial Stability Board): international
institution that monitors and makes recommendations on the global el financial system.
Fully-Loaded: denotes full compliance with Basel III
solvency requirements (which become mandatory in 2019).
GHOS (Group of Governors and Heads of Supervision): supervisory body of the Basel
Committee.
Global rating tools: these assign a rating to each customer using a quantitative or automatic module.
G-SIB (Global Systemically Important Bank) or SIFI (Systemically Important Financial Institution): financial
institutions which, because of their size, complexity and systemic interconnectedness, if allowed to fail could cause major disruptions to the financial system and economic activity.
HQLA: High Quality Liquid Assets.
HVCRE: High
Volatility Commercial Real Estate.
ICAAP: internal capital adequacy assessment process.
IFRS: International Financial Reporting Standards.
ILAAP (Internal Liquidity Adequacy Assessment Process): process for the identification, measurement, management and control of liquidity implemented by
the entity in compliance with article 86 of Directive 2013/36/EU.
Implicit LGD: this is used to back-test the regulatory LGD estimates. It is
based on taking NPLMV as proxy for the Observed Loss, and then dividing the Observed Loss by the PD gives an implicit or observed LGD that can be compared to the regulatory LGD.
Interest rate risk: exposure of the banks financial position to adverse movements in interest rates. Acceptance of this risk is a normal part of
the banking business and can be a source of significant returns and creation of shareholder value.
Internal ratings-based approach (IRB): an
approach based on internal ratings for the calculation of risk-weighted exposures.
Internal validation: a
pre-requisite for the supervisory validation process. A sufficiently independent specialised unit of the entity obtains an expert opinion on the adequacy of the internal models for the relevant internal and
regulatory purposes, and issues a conclusion on their usefulness and effectiveness.
IRC (Incremental Risk Charge): an estimate of the credit risk
associated with unsecuritised positions in the trading book.
IRP: This report, titled Pillar III Disclosures in the English version. (the acronym
is for the Spanish Informe de Relevancia Prudencial).
IRRBB: Interest Rate Risk in the Banking Book.
ISDA (International Swaps and Derivatives Association): OTC derivative transactions between financial institutions are usually carried out under a
master agreement established by this organisation which details the definitions and general terms and conditions of the contract.
ITS:
Implementing Technical Standards.
JST (Joint Supervisory Team): one of the main forms of cooperation between the ECB and the national supervisors.
LCR (Liquidity Coverage Ratio): a ratio that ensures that a bank has an adequate stock of unencumbered high quality liquid assets that can be
converted, easily and immediately, into cash in private markets, to meet its liquidity needs for a 30 calendar day liquidity stress scenario.
LDP:
low-default portfolio.
Leverage Ratio: a complementary
(non-risk based) regulatory capital measure that attempts to guarantee banks financial resilience. The ratio is calculated by dividing eligible Tier 1 capital by exposure.
LGD (Loss Given Default): the portion of EAD not recovered at the end of the loan recovery process. It is equal to 1 minus the recovery rate (i.e.: LGD
= 1 recovery rate). The definition of loss used to estimate LGD must be a definition of economic loss, not an accounting loss.
Liquidity risk: the risk that Santander Group might be unable to meet all its payment obligations when
they fall due or might only be able to meet them at an excessive cost.
LTV (Loan to value): amount of credit extended / value of guarantees and
collateral.
Mark-to-market approach: in regulatory terms, an
approach for calculating the value of the credit risk exposure of counterparty derivatives (present market value plus a margin, i.e. the amount that takes into consideration the potential future increase in market value).
Market risk: the risk arising from uncertainty regarding changes in market prices and rates (including interest rates, share prices, exchange rates and
commodity prices), the correlations between them and their levels of volatility.
MDA: Maximum Distributable Amount.
Model validation: the process of assessing the effectiveness of a credit risk model using a pre-defined set of
criteria, such as the models discriminatory power, the appropriateness of the inputs and expert opinions.
MPE (Multiple Point of Entry): a
resolution approach based on multiple points of entry.
MREL (Minimum Requirement of Eligible Liabilities): the final loss absorption requirement
established in European legislation for institutions based on an assessment of their resolution plans.
Netting: a banks ability to reduce
its credit risk exposure by setting off the value of its rights against its obligations with the same counterparty.
Non-standardised customers:
customers who have been assigned a risk analyst due to the risk assumed. This category includes wholesale banking customers, financial institutions and certain enterprises in retail banking.
NSFR (Net Stable Funding Ratio): a ratio designed to ensure a bank has a balanced balance sheet structure, in which stable funding requirements are
funded by stable liabilities.
Operational risk: the risk of incurring losses with regard to employees, contractual specifications and
documentation, technology, infrastructure failures and disasters, projects, external influences and customer relations. This definition includes legal and regulatory risk but does not include business and reputational risk.
Over-the-counter (OTC):
off-exchange, that is, trading done between two parties (in derivatives, for example) without the supervision of an organised exchange.
Phased-in: refers to compliance with current solvency requirements bearing in mind the transitional period for
Basel III implementation.
Pillar 1 Minimum Capital Requirements: the part of the New Basel Capital Accord that establishes the minimum
regulatory capital requirements for credit, market and operational risk.
Pillar 2 Supervisory Review Process: an internal capital adequacy
assessment process reviewed by the supervisor with possible additional capital requirements for risk that are not included in Pillar I and the use of more sophisticated methodologies than Pillar I.
|
|
|
|
|
196 |
|
2018 Pillar 3 Disclosures Report |
|
|
MARKET RISK _ 2018 Pillar 3 Disclosures Report
Pillar 3Market Discipline: this pillar is designed to complete the minimum capital requirements and
the supervisory review process and, accordingly, enhance market discipline through the regulation of public disclosure by the entities.
Point-in-time (PIT) PD: the probability of default at a particular point in time or in particular state of the economic cycle.
Probability of default (PD): this represents the likelihood that a customer or a transaction will fall into default. It is the probability that an
event (the default) will occur within a given time horizon.
QIS (Quantitative Impact Study): ad-hoc
requests by the EBA for studies analysing and calibrating the impact of new changes in regulation.
Qualifying central counterparty (QCCP): a
central counterparty that has either been authorised under article 14 of Regulation (EU) no. 648/2012, or been recognised under article 25 of said Regulation.
Rating: the result of the objective assessment of the counterparties future economic situation based on current characteristics and assumptions.
The methodology for assigning the ratings depends largely on the type of customer and the available data. A wide range of methodologies for assessing credit risk is applied, such as expert systems and econometric methods.
RDL: Royal Decree Law.
Risk appetite: the amount
and type of risks considered reasonable to assume in the execution of its business strategy, so that Santander Group can maintain its ordinary activity in the event of unexpected circumstances. Severe scenarios are taken into account that could have
a negative impact on the levels of capital, liquidity, profitability and/or the share price.
Risk limits: approval tools for certain risk types
and levels.
Risk-weighted assets (RWA): calculated by assigning a level of risk, expressed as a percentage (risk weighting), to an exposure in
accordance with the relevant rules under the standardised approach or the IRB approach.
RoRAC: Return on Risk Adjusted Capital.
RoRWA: Return on Risk-Weighted Assets.
RTS:
Regulatory Technical Standards.
RWA density: ratio that compares institutions total weighted assets and their total balance sheet, and
can be interpreted as an average relative risk measure -according to regulatory criteria- of a banks overall operations.
SFT (Securities
Financing Transactions): any transaction where securities are used to borrow cash, or vice versa. They mostly include repurchase agreements (repos), securities lending activities and sell/buy-back
transactions.
Slotting Criteria: an approach used for calculating risk weights for specialised lending exposures, which consists of mapping
the internal ratings to five supervisory categories, each with its own specific risk weight.
Special-purpose vehicle (SPV): a company created for the sole purpose of acquiring certain assets or derivative exposures and of issuing liabilities
that are associated solely with these assets or exposures.
SRB (Single Resolution Board): the single resolution authority, which is the second
pillar of the Banking Union after the Single Supervisory Mechanism.
SRB: Systemic Risk Buffer.
SREP (Supervisory Review and Evaluation Process): a review of the systems, strategies, processes and mechanisms applied by credit institutions and of
their risks.
SRF: Single Resolution Fund.
SRM:
Single Resolution Mechanism.
SSM (Single Supervisory System): the system of banking supervision in Europe. It comprises the ECB and the
competent supervisory authorities of the participating EU countries.
Standardised approach: an approach for calculating credit risk capital
requirements under Pillar I of Basel II. Under this approach, the risk weightings used in the capital calculation are determined by the regulator.
Standardised customers: customers which have not been expressly assigned a risk analyst. This category generally includes individuals, individual
entrepreneurs and retail banking enterprises not classified as non-standardised customers.
Stress testing: used to describe various techniques for
measuring the potential vulnerability to exceptional but plausible events.
Stressed VaR: measures the level of risk in stressed historical or
simulated market situations.
Synthetic securitisation: transactions that involve a basket of credit swap agreements and bonds serving as
collateral. They are called synthetic as rather than containing physical bonds, they carry credit derivatives, also known as synthetic contracts.
Through-the-cycle (TTC) PD: probability of default adjusted to a full economic cycle. It may be taken as a long-term average of the point-in-time PD.
Tier 1: core capital less hybrid instruments.
Tier 2: supplementary capital instruments, mainly subordinated debt and general loan loss allowances, which contribute to the robustness of financial
institutions.
TLAC (Total Loss Absorbency Capacity): an additional requirement to the minimum capital requirements set out in the Basel III
framework for the absorption of total losses and effecting a recapitalisation that minimises any impact on financial stability, ensures the continuity of critical functions and avoids exposing taxpayers to losses. This requirement is applicable to
all G-SIBs.
TLTRO: Targeted Longer-Term Refinancing Operations.
TRIM: Targeted Review of Internal Models.
TSR (Total Shareholder Return): relative performance of total shareholder returns. An indicator of the returns obtained by owners of a company over a
period of one year on capital provided to the company.
Unexpected loss: unexpected losses (not covered by allowances) must be covered by capital.
VaR (Value at Risk): estimate of the potential losses that could arise in risk positions as a result of movements in market risk factors within a
given time horizon and for a specific confidence level.
|
|
|
|
|
198 |
|
2018 Pillar 3 Disclosures Report |
|
|
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
Banco Santander, S.A. |
|
|
|
|
Date: March 4, 2019 |
|
|
|
By: |
|
/s/ José García Cantera |
|
|
|
|
|
|
Name: José García Cantera |
|
|
|
|
|
|
Title: Chief Financial Officer |