Santander Corporate Governance · Executive committee Audit committee Appointments committee...

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1 1 October 2018 Santander Corporate Governance

Transcript of Santander Corporate Governance · Executive committee Audit committee Appointments committee...

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October 2018

Santander Corporate Governance

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1. Culture Proposition and Organization

3. Corporate Governance Framework

4. Risk Management

5. Remuneration Policy

2. Latest Advances

Index

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Culture Proposition and Organization1.

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to help people and businesses prosper

to be the best retail and commercial bank

earning the lasting loyalty of our people, customers, shareholders and

communities

OUR PURPOSE

Culture Proposition and Aim

OUR AIM

A BANK THAT IS

Aim and value creation

Customers132million

Shareholders4.1million

People189,254

employees

We have SCALE and the potential to grow

organically

PREDICTABLE GROWTH:diversification by country and

business, which contributes higher profits in a more stable manner

Focus on INNOVATION to increase customer

loyalty and operational excellence

* Figures excluding Banco Popular as of 2017, except number of employees and data on shareholders

Simple Personal Fair

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USA

Brazil

Mexico

Chile

Argentina

Uruguay

Peru

Colombia

Spain

Portugal

United Kingdom

SCF*

Poland

Asia Pacific

Representative offices

Corporate & Investment Banking / Wealth Management

* Santander Consumer Finance (SCF) with presence in Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK

Group structure

GEOGRAPHIES

UNITS AND BUSINESSES

GROUP FUNCTIONS AND CORPORATE CENTRE ACTIVITIES

• Communications, Corporate Marketing & Research

• Technology & Operations• General Secretariat & Human Resources

• Universities

• Compliance & Conduct

• Internal Audit

• Santander Digital

• Chairman’s Office & Strategy

• Risk

• Financial Accounting & Control

• Financial

• Fin. Planning & Corporate Development

• Costs

Based on 9 markets and on the consumer finance business in Europe, supported by the Corporate Center activities and other functions

* Santander Consumer Finance (SCF) with presence in Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK 5

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Parent-subsidiary governance model

The Group´s appointment and suitability assessment procedure is a key element of Governance

Presence of Grupo Santander in the subsidiaries' Board of Directors establishing guidelines for board dynamics and effectiveness

Reporting of the CEO / country heads to the GroupCEO and Group executive committee

Interaction between the Group and the subsidiaries control, management and business functions

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Group

Board of Directors

Group Executive Chairman

Group CEO

Control and Management Functions

• Compliance• Internal Audit• Risk• Finance• Financial Control /

Accounting• Other

Subsidiary B

Control and Management Functions

• Compliance• Internal Audit• Risk• Finance• Financial Control /

Accounting• Other

CEO/Country head

Board of Directors

Subsidiary A

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Latest Advances2.7

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Latest Advances

• Size of the board: 15 members

• Gender diversity: 33% female board members

• Independence: increased to 60%

• Last appointments:

− One independent member appointed every year in the last four years

− Mr. Alvaro Antonio Cardoso (2018) Independent. Member of the Risk Supervision, Regulation and Compliance

Committee

− Mr. Ramiro Mato (2017) Independent. Adds considerable value to the board thanks to his broad finance, risks

and international banking management

− Ms. Homaira Akbari (2016) Independent. Broad experience in the Internet of Things and Big Data

− Ms. Belén Romana (2015) Independent. Chairman of the Audit Committee since 2016

• Board assessment: the board assessment process in 2017 was conducted with the assistance of an external

consultant, whose independence was assessed by the Appointments Committee

• Succession plan: the Group’s succession policy and the board member selection and succession policy ensure

sufficient continuity in the board’s knowledge of the Bank, its business and the geographies in which it operates

Review of the board’s map takes place on a regular basis. The succession plan of senior executives and executive

directors has been reviewed so that at all times they are oriented towards the availability of sufficiently qualified

personnel that allows executing, without disruption, the strategic plans of the Group

• International advisory board (2016) Composed of 8 external members. Main purposes: providing strategic advice to

the Group, with a strong focus on innovation, digital transformation, cybersecurity and new technologies.

• Responsible Banking, Sustainability and Culture: New committee created in 2018

BOARD COMPOSITION

• Executive Directors variable remuneration: Some changes were made

to the policy approved at the 2018 general shareholders’ meeting.

The changes are intended to:

− Reduce the amount of the annual contributions to the pension

system, proportionally increasing the annual fixed allocation and

with no increase of the total cost of the Bank

− Allow the required changes to eliminate the complementary

pension system for the events of death (for widow and orphans)

and disability of directors, including a fixed complement of

remuneration and enhancing the life insurance cover of the

affected directors, with no increase of the total cost for the Bank

REMUNERATIONS

• The Rules and Regulations of the Board have been revised with the

aim to adapt them to several regulatory guidelines issued recently by

the European Banking Authority (EBA), the European Securities Market

Authority (ESMA), the European Central Bank (ECB) and the Spanish

National Securities Commission (CNMV). The board approved the final

amendment at its 25 June 2018 meeting

RULES AND REGULATIONS OF THE BOARD

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Announced changes at board level

• Size and diversity: The Board of Directors of Banco Santander will be composed

of 15 members, of which the majority, eight, are independent. Santander's board has

gender diversity (more than a third are women), multiple nationalities (American,

Brazilian, British, Italian, Mexican and Spanish) and broad sector representation

(financial, distribution, technology, infrastructure or the university)

• New Santander Group CEO: Andrea Orcel has been appointed by the Board of

Directors by co-option to replace Juan Miguel Villar Mir’s seat on the Board of Directors.

Mr. Villar Mir has presented his desire to leave the Board as his tenure expires

• New Banco Santander Spain Chairman: Rodrigo Echenique has confirmed

his decision to retire from his role as Executive Vice Chairman of the Group and

Chairman of Banco Santander Spain at the end of 2018, the Board of Directors of

Banco Santander today announces that José Antonio Álvarez will succeed Mr.

Echenique as Vice Chairman of the Group and Chairman of Santander Spain. Following

this appointment Mr. Álvarez and Bruce Carnegie-Brown will be the Group’s two Vice

Chairmen, with Mr. Álvarez being the only one with an executive role

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Andrea Orcel

• Born in Italy in 1963

• Graduated summa cum laude in Economics and Commerce

from ‘La Sapienza’ University of Rome and holds an MBA from

Insead

These appointments are expected to take effect in early 2019 following regulatory approvals.

Professional background

Andrea Orcel has been member of the Group Executive Board and Co-Chief Executive

Officer of the UBS Investment Banking division since July 2012. He joined UBS from

Bank of America, where he was Executive Chairman and President of Emerging Markets

(ex Asia)

Orcel was previously Head of Merrill Lynch’s Global Origination division. From 2004 he

was EMEA Head of Origination and President of Global Markets & Investment Banking

Orcel was appointed global head of the Financial Institutions Division in 2003 and EMEA

Head in 1999, having joined Merrill Lynch in 1992

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Corporate Governance Framework3.

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Corporate Governance

Respect for

shareholders´ rights

Balanced Board

composition

Maximum transparency

in remuneration

A responsible bank has clear, robust governance, in which accountabilities are well-defined; risks and opportunities are prudently

managed; and long-term strategy is designed to safeguard the interests of all stakeholders and society at large

At the forefront of best

practices and long-term

vision

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Role of Lead Independent Director

Role of Lead Independent Director:

• Request that a meeting of the board of directors be called or that new items be added to the agenda for a

meeting of the board that has already been called

• Coordinate and organise meetings and activities of the non-executive directors and voice their concerns

• Direct the regular assessment of the chairman of the board of directors and coordinate the succession plan

• Contact investors and shareholders to obtain their points of view for the purpose of gathering information on

their concerns, in particular, with regard to the Bank´s corporate governance

• Substitute the chairman in the event of absence under the terms envisaged in the Rules and Regulations of the

Board of Directors

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100%100%

100%

Executive

100%

Board of Directors

20%

80%

Executive Committee Risk Supervision, Regulation and Compliance Committee

62%

38%

Non-executive

Robust corporate governance is key for guaranteeing a sustainable business model over the long term

Annual General Meeting(Annually)

Board of Directors(typically monthly)

Board Committees(typically monthly)

Executive Committee(typically weekly)

*All members of this committee are independents

Corporate Governance Framework

Audit Committee*

Appointments CommitteeRemuneration Committee Innovation and Technology Committee

71%

29%

13* All members of this committee are independents ** Created in 2018

Responsible Banking, Sustainability and Culture

Committee**

86%

14%

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Executive3

Other non-executive3

Independent non-executive

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Board Composition

• 15 Directors

• 3 Executive Directors

• 9 Independent Directors with 1 Lead Independent Director

• 60% of the board members are independent

• 33% women in the board

• Office term: 3 years

• Annual re-election/renewal of the board by thirds

BOARD AND BOARD’S COMMITTEES NUMBER OF MEETINGSNUMBER OF DIRECTORS

2011 2012 2013 2014 2015 2016 2017

1816 16

14 15 15 14

Appointments and remunerations committees were combined until October 2014 14

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Mr. Bruce Carnegie-BrownVice chairmanLead Independent Director

Ana Patricia Botín San de Sautuola O´SheaGroup executive Chairman

Mr. Guillermo de la Dehesa RomeroVice chairmanNon-executive director

Ms. Belén Romana GarcíaIndependent director

Ms. Sol Daurella ComadránIndependent director

Mr. Juan Miguel Villar MirIndependent director

Mr. Javier Botín Sanz de Sutuola O´SheaNon-executive director

Ms. Homaira AkbariIndependent director

Mr. José Antonio Alvarez AlvarezCEO

Executive director

Executive committee Audit committee Appointments committee Remunerations committee Risk supervision, regulation and compliance committee Innovation and technology committee

Responsible Banking, Sustainability and Culture committee

Mr. Rodrigo EcheniqueVice chairman

Executive director

Mr. Ignacio Benjumea Cabeza de VacaNon-executive director

Ms. Esther Giménez-Salinas i ColomerIndependent director

Mr. Ramiro Mato García-AnsorenaIndependent director

Mr. Carlos Fernández GonzálezIndependent director

Board Composition

Mr. Alvaro Antonio CardosoIndependent director

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100%

79%

64%

79%

50%

79%86%

79%

36%

50% 50%

71%

50%

71% 71%64%

43%

71%64%

79%

36%

86%

21% 21%

93%

71%79%

50%

79%71%

High Level Management

Financial Services Experience

General Banking

International Experience

Others Accounting / Financial

Background

Other commercial

Risk Government / AcademicResearch

IT / Digital Strategy Regulation / Regulatory relations

Corporate Governance experience

Skills Matrix

Board skills matrix (%) *

Skills obtained as an Executive Skills obtained as a Non-Executive

Data as of 2017

* Skill matrix data as of Dec. 2017 16

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Directors’ nationality

Spain11

UK1

USA1Portugal

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Financial background

Independent directors: Average years on board Gender DiversityWomen % in the Board

Board Diversity and Expertise

2011 2013 2015 2017

11,19,5

3,52,25

11%

33%

19%

36%

2011 2013 2015 2017

Spain Latam UK / US Others

International experience in Group’s main markets

Banking12

Other3

13 13

1110Mexico

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Board of directors

• Born in Madrid (Spain) in 1941

• Government Economist and head of office of the

Bank of Spain (on leave of absence)

• Other positions: Non-executive vice-chairman of

Amadeus IT Holding, S.A., honorary chairman of the

Centre for Economic Policy Research (CEPR) of

London, non-executive chairman of Aviva Vida y

Pensiones, S.A. de Seguros y Reaseguros, chairman

of Aviva Grupo Corporativo, S.L.

• Committees: Executive, Appointments,

Remunerations, Innovation and technology

• Born in Santander (Spain) in 1960

• Degree in Economics from the University Bryn Mawr College

(Pennsylvania, United States)

• Other positions: Member of the board of directors of The Coca-Cola

Company, member of the advisory board of the Massachusetts

Institute of Technology (MIT’s CEO Advisory Board), founder and

president of the CyD Foundation and the Empieza por Educar

Foundation

• Committees: Executive(P), Innovation and technology(P),

Responsible Banking, Sustainability and Culture

Chairman Executive

First appointment 1989

Board attendance 100%

Ana Patricia Botín José Antonio Álvarez

Chief Executive Officer

First appointment 2015

Board attendance 100%

• Born in León (Spain) in 1960

• Graduate in Economics and Business Administration. MBA from the

University of Chicago

• Other positions: Member of the boards of Banco Santander (Brasil),

S.A. and SAM Investment Holding Limited, member of the supervisory

boards of Santander Consumer AG, Santander Consumer Holding

GMBH and Bank of Zachodni WBK, S.A.

• Committees: Executive, Innovation and technology

Bruce Carnegie-Brown

• Born in Freetown (Sierra Leone) in 1959

• Master of Arts in English Language and

Literature from the University of Oxford

• Other positions: Non-executive chairman at

Moneysupermarket.com Group plc and at

Lloyd´s of London

• Committees: Executive, Appointments(P),

Remunerations(P), Risk Supervision(P),

Regulation and Compliance, Innovation and

technology

Vice Chairman & Lead

Independent director

First appointment 2015

Board attendance 100%

Vice Chairman

First appointment 1988

Board attendance 93%

Rodrigo Echenique

• Born in Madrid (Spain) in 1946

• Graduate in Law and Government

Attorney

• Other positions: Non-executive director

at Inditex

• Committees: Executive

Guillermo de la Dehesa

Vice Chairman

First appointment 2002

Board attendance 100%

Board attendance data as of 2017

18Attendance data as of 2017 (P) President

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• Born in Santander (Spain) in

1973

• Degree in Law

• Other positions: Executive

chairman and chief executive

officer of JB Capital Markets,

Sociedad de Valores, S.A.U.

Chairman of the Botín

Foundation and trustee of the

Princess of Girona

• Born in Madrid (Spain) in 1952

• Degree in law from Deusto University,

ICADE E-3 and Government Attorney

• Other positions: Vice-chairman of the

Financial Studies Foundation and

member of the board of trustees and the

executive committee of the Banco

Santander Foundation

• Committees: Executive, Remunerations,

Risk supervision, regulation and

compliance, Innovation and technology,

Responsible Banking, Sustainability and

Culture

Ignacio BenjumeaJavier Botín Juan Miguel Villar

Non-executive

First appointment 2015

Board attendance 100%

• Born in Madrid (Spain) in 1931

• Doctorate in Civil Engineering, graduate

in Law and degree in Industrial

Organization

• Other positions: Chair of Villar Mir

Group, Professor of Business

Organization at Universidad Politécnica

de Madrid, member of the Royal

Academy of Engineering and the Royal

Academy of Moral and Political

Sciences, and honorary member of the

Royal Academy of Doctors and

supernumerary of the Royal Academy of

Economics and Finance

Independent

First appointment 2013

Board attendance 87%

Non-executive

First appointment 2004

Board attendance 93%

Independent

First appointment 2015

Board attendance 93%

• Born in Barcelona (Spain) in 1966

• Degree in Business and MBA from

ESADE

• Other positions: Executive chairman

at Olive Partners, S.A., and holds

several positions at companies

belonging to the Cobega Group. She

is also chairman of Coca Cola

European Partners, Plc

• Committees: Appointments,

Remunerations, Responsible Banking,

Sustainability and Culture

Carlos Fernández

• Born in México City (México) in 1966

• Industrial Engineer, graduate studies in

business administration at the Instituto

Panamericano de Alta Dirección de

Empresas

• Other positions: chairman of the board of

directors of Finaccess, S.A.P.I, non-

executive director of Inmobiliaria Colonial,

S.A. and member of the Supervisory Board

of AmRest Holdings, SE.

• Committees: Audit, Appointments,

Remunerations

• Born in Tehran (Iran) in 1961

• Doctorate in Experimental Particle

Physics from Tufts University and MBA

from Carnegie Mellon University.

• Other positions: CEO of AKnowledge

Partner, LLC., non-executive director

of Gemalto NV, Landstar System, Inc.

and Veolia Environment S.A

• Committees: Audit, Innovation and

technology, Responsible Banking,

Sustainability and Culture

Homaira AkbariSol Daurella

Independent

First appointment 2015

Board attendance 100%

Independent

First appointment 2016

Board attendance 93%

Board attendance data as of 2017

Board of directors

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Esther Giménez-Salinas

• Born in Barcelona (Spain) in 1949

• PhD in Law and degree in Psychology

• Other positions: Professor Emeritus at

Ramon Llull University, director of the

Chair of Restorative Social Justice,

director of Unibasq and Aqu and of Gawa

Capital Partners, S.L.

• Committees: Risk supervision, regulation

and compliance, Responsible Banking,

Sustainability and Culture

Independent

First appointment 2012

Board attendance 100%

• Born in Madrid (Spain) in 1952

• Degree in Economics from the

Complutense University of Madrid

and the Management Development

Programme of the Harvard Business

School

• Committees: Executive, Audit, Risk

supervision, regulation and

compliance, Responsible Banking,

Sustainability and Culture(P)

Independent

First appointment 2017

Board attendance 100%1

Ramiro Mato

Board attendance data as of 2017 1 Director since 28 November 2017 2 Director since 28 April 2018

• Born in Madrid (Spain) in 1965

• Graduate in Economics and Business

Administration from Universidad Autónoma

de Madrid, and Government Economist.

• Other positions: Non-executive director at

Aviva plc, London and at Aviva Italia

Holding SpA, member of the advisory board

of the Rafael del Pino Foundation

• Committees: Executive, Audit(P), Risk

supervision, regulation and compliance,

Innovation and technology, Responsible

Banking, Sustainability and Culture

Independent

First appointment 2015

Board attendance 100%

Belén Romana

Alvaro Antonio Cardoso

Independent

First appointment 2018 2

• Born in Cidade da Guarda (Portugal) in 1948

• Degree in Economics and Business

Administration from Pontificia Universidade

Católica de Sao Paulo, Master of Business

Administration (MBA - Management Program

for Executives) from the University of

Pittsburgh and a graduate of the Investment

Banking Marketing Program from Wharton

Business School

• Other positions: Non-executive chairman of

Banco Santander (Brasil), S.A.

• Committees: Risk supervision, regulation

and compliance

Board of directors

Attendance data as of 2017 (P) President (1) Director since 28 Nov 2017 (2) Director since 23 Mar 2018 20

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Risk management4.21

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• This model is based in 3 lines of defense:

1. The business functions and all support functions that generate exposure to a risk make up the first line of defense

2. The second line of defense is composed by the risk control function, and the compliance and conduct function

3. Internal audit is the third line of defense and the last layer of control, regularly assesses policies, methods and procedures

• The function of risk supervision and control (2nd line) is composed by various committees and units (management of risks is separated from control)

• Control bodies

- Risk Supervision, Regulation and Compliance Committee (highest level in the Group)

- Risk Control Committee (RCC)

• Decision-making bodies

- Executive Committee (EC)

- Executive Risk Committee (ERC)

- Risk Approval Committee (RAC)

- Local Committees

Waterfall of Credit Committees

EC

ERC

RAC

Local committees

Corporate Governance in Risk Management

Governance Model

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Remuneration Policy5.

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Variable Remuneration

New variable remuneration policy for Executive Directors and senior management in place since 2016 in line with our Simple, Personal,Fair business culture

Variable remuneration aligned with our strategic goals and stakeholders: Annual bonus subject to meeting a range of financial and non-financial metrics: customer satisfaction; loyal customers; risk goals;

creation of regulatory capital; and risk-adjusted profitability. Long-term targets conditions related to earning per share growth, relative Total Shareholder Return and regulatory capital.

Alignment with shareholder interests: Long-term deferral with 50% of all variable remuneration paid in shares Share holding policy (200% of net annual basic salary)

Alignment with regulatory requirements, including malus and clawback policy

2017 VARIABLE REMUNERATION FOR EXECUTIVE DIRECTORS * (STRUCTURE)

2018 2019 2020 2021 2022 2023

24*For Senior Management the structure is 50% up-front / 50% deferred s 50% up-front / 50% deferred

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0,70%

1,12%

0,50%0,41%

0,45% 0,42% 0,42%

0,00%

0,20%

0,40%

0,60%

0,80%

1,00%

1,20%

2011 2012 2013 2014 2015 2016 2017

Executive Directors´ total remuneration as % of attributable net profit

Executive Directors: total and variable remuneration

1,06% 1,07%1,17% 1,17%

0,65% 0,60% 0,56%

0,00%

0,20%

0,40%

0,60%

0,80%

1,00%

1,20%

1,40%

2011 2012 2013 2014 2015 2016 2017

Executive Directors´ variable remuneration as % of cash dividends

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Annexes.26

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Main duties of the Board Committees

• Review the selection policy and the succession plan of directors and senior executives• Evaluate the balance among the components of knowledge, capabilities, qualifications, diversity and experience of the board• Review the structure, size, composition and activities of the board of directors and the fitness and properness of the board members and of the

board as a whole• Prepare the proposals for appointment, re-election, ratification and removal of directors

APPOINTMENTS COMMITTEE

• Propose the appointment of the external auditor and annually evaluate its independence• Review the accounts of the Company and the Group, monitor compliance with legal requirements and generally accepted accounting principles• Supervise the internal audit function and, in particular, ensure its independence and effectiveness• Supervise the financial reporting relating to the Company and the Group

AUDIT COMMITTEE

• Prepare and propose to the Board the decisions relating to remuneration (remuneration policy applicable to directors and senior executives, individual remuneration of directors, senior management and other identified employees)

REMUNERATION COMMITTEE

• Support to the board in defining risk policies and in determining the Group’s risk appetite and strategy. Supervise the risk function• Assist the board in the capital and liquidity strategy and performance of stress tests• Supervise and evaluate the Company’s compliance function• Support to the board regarding relations with supervisors and regulators• Supervise the strategy for communication and relations with shareholders and investors• Evaluate the Company’s corporate and internal governance system

RISK SUPERVISION, REGULATION

AND COMPLIANCE COMMITTEE

• Review and report on plans and activities relating to technology and innovation• Evaluate the quality of the technological service and the capabilities for innovation at a Group and country level• Supervise technological and security risks and management of cybersecurity

INNOVATIONAND

TECNOLOGY COMMITTEE

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• Advice to the board on the formulation of the corporate culture and values, including the strategy on responsible business practices and sustainability, monitoring the strategy and practices in this field

• Advice to the board on the formulation of the Group’s strategy on relations with stakeholders• Overseeing and monitoring the corporate reputation and engagement with stakeholders in relation to the activities of the committee• Assist the board in the promotion of, and in embedding the corporate culture and values across the Group• Liaise and coordinate with the committees of the board in relation to issues concerning responsible banking practices and sustainability

RESPONSIBLE BANKING,

SUSTAINABILITY AND CULTURE

COMMITTEE

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Word Business Council for Sustainable Development

Banking Environment Initiative (BEI)

UNEP Finance Initiative (Pilot Project to implement TCFD Recommendations and Principles for Responsible Banking)

Responsible Banking ManagementSUSTAINABILITY AND CULTURE POLICIES

General Sustainability Policy This defines the Bank´s general sustainability principles, and its voluntary commitments toits main stakeholders. It sets out the main regulatory recommendations.

Sector Policies (energy, defence, soft commodities and metals and mining)

Policies that lay down the criteria governing financial activity related to the defence andenergy, mining and sectors involved with soft commodities.

They prohibit financing certain activities and establish restrictions for others. They gobeyond that established in the Equator Principles, as they are applied to more activities ineach sector and to more clients.

Climate Change and Environmental management policy

This policy explains the action framework and initiatives in place to protect theenvironment and contribute to mitigating the effects of climate change.

Human Rights Policy This policy sets out Santander´s position on protecting human rights in its dealings withstakeholders.

Corporate Volunteering Policy

This policy encourages employee participation in volunteer initiatives and sets out thepriority areas for action, focusing mainly on education.

INTERNATIONAL INITIATIVES IN WICH SANTANDER PATICIPATES

CEO Partnership for Financial Inclusion

Equator Principles

Working Group on Sustainable Livestock

Climate Leadership Council

NEW RESPONSIBLE BANKING GOVERNANCE STRUCTURE

Board of Directors

Executive Committee

Responsible Banking, Sustainability & Culture

Committee

Inclusive & SustainableBanking Steering Culture Steering

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The Wolfsberg Group

Round Table on Responsible SoyPrinciples for Responsible Investment

CDP (before Carbon Disclosure Project)

United Nations Global Compact

Culture Policy This policy establishes the guidelines and required standards to be followed ensuring aconsistent culture is formed and embedded throughout the Santander Group.

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Important informationi.

In addition to the financial information prepared under International Financial Reporting Standards(“IFRS”), this presentation certain alternative performance measures (“APMs”) as defined in theGuidelines on Alternative Performance Measures issued by the European Securities and MarketsAuthority on 5 October 2015 (ESMA/2015/1415en) as well as non-IFRS measures (“Non-IFRSMeasures”). The APMs and Non-IFRS Measures are performance measures that have been calculatedusing the financial information from the Santander Group but that are not defined or detailed in theapplicable financial information framework and therefore have neither been audited nor are capableof being completely audited. These APMs and Non-IFRS Measures are been used to allow for a betterunderstanding of the financial performance of the Santander Group but should be considered only asadditional information and in no case as a replacement of the financial information prepared underIFRS. Moreover, the way the Santander Group defines and calculates these APMs and Non-IFRSMeasures may differ to the way these are calculated by other companies that use similar measures,and therefore they may not be comparable. For further details of the APMs and Non-IFRS Measuresused, including its definition or a reconciliation between any applicable management indicators andthe financial data presented in the consolidated financial statements prepared under IFRS, please seeQ2 2018 Financial Report, published as Relevant Fact on 25 July 2018, Section 26 of the Documentode Registro de Acciones for Banco Santander, S.A. (“Santander”) filed with the Spanish SecuritiesExchange Commission (the “CNMV”) on 28 June 2018 (the “Share Registration Document”) and Item3A of the Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission of theUnited States of America (the “SEC”) on 28 March 2018 (the “Form 20-F”). These documents areavailable on Santander’s website (www.santander.com).

The businesses included in each of our geographic segments and the accounting principles underwhich their results are presented here may differ from the included businesses and local applicableaccounting principles of our public subsidiaries in such geographies. Accordingly, the results ofoperations and trends shown for our geographic segments may differ materially from those of suchsubsidiaries.

Santander cautions that this presentation contains statements that constitute “forward-looking

statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expect”, “project”, “anticipate”, “should”,“intend”, “probability”, “risk”, “VaR”, “RoRAC”, “RoRWA”, “TNAV”, “target”, “goal”, “objective”,“estimate”, “future” and similar expressions. These forward-looking statements are found in variousplaces throughout this presentation and include, without limitation, statements concerning ourfuture business development and economic performance and our shareholder remuneration policy.While these forward-looking statements represent our judgment and future expectations concerningthe development of our business, a number of risks, uncertainties and other important factors couldcause actual developments and results to differ materially from our expectations. These factorsinclude, but are not limited to: (1) general market, macro-economic, industry, governmental andregulatory trends; (2) movements in local and international securities markets, currency exchangerates and interest rates; (3) competitive pressures; (4) technological developments; and (5) changesin the financial position or credit worthiness of our customers, obligors and counterparties.Numerous factors, including those reflected in the Form 20-F– under “Key Information-Risk Factors”-and in the Share Registration Document–under “Risk Factors”- could affect the future results ofSantander and could result in other results deviating materially from those anticipated in theforward-looking statements. Other unknown or unpredictable factors could cause actual results todiffer materially from those in the forward-looking statements.

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Important informationi.

Forward-looking statements speak only as of the date of this presentation and are based on theknowledge, information available and views taken on such date; such knowledge, information andviews may change at any time. Santander does not undertake any obligation to update or revise anyforward-looking statement, whether as a result of new information, future events or otherwise.

The information contained in this presentation is subject to, and must be read in conjunction with, allother publicly available information, including, where relevant any fuller disclosure documentpublished by Santander. Any person at any time acquiring securities must do so only on the basis ofsuch person’s own judgment as to the merits or the suitability of the securities for its purpose andonly on such information as is contained in such public information having taken all such professionalor other advice as it considers necessary or appropriate in the circumstances and not in reliance onthe information contained in this presentation. No investment activity should be undertaken on thebasis of the information contained in this presentation. In making this presentation availableSantander gives no advice and makes no recommendation to buy, sell or otherwise deal in shares inSantander or in any other securities or investments whatsoever.

Neither this presentation nor any of the information contained therein constitutes an offer to sell orthe solicitation of an offer to buy any securities. No offering of securities shall be made in the United

States except pursuant to registration under the U.S. Securities Act of 1933, as amended, or anexemption therefrom. Nothing contained in this presentation is intended to constitute an invitationor inducement to engage in investment activity for the purposes of the prohibition on financialpromotion in the U.K. Financial Services and Markets Act 2000.

Note: Statements as to historical performance or financial accretion are not intended to mean thatfuture performance, share price or future earnings (including earnings per share) for any period willnecessarily match or exceed those of any prior year. Nothing in this presentation should be construedas a profit forecast.

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