On April 4, Spain’s Santander (SAN.MC) said that from the first quarter of 2022 it would change the group’s financial reporting of segments. The firm is now redistributing certain costs to the business units from the corporate center segment with no impact on the group’s targets or its consolidated financial figures.
To better allocate the cost of the eligible debt issuances to the business units, the lender said that its goal was to provide further clarity and “more transparency” regarding its total loss-absorbing capacity (TLAC) and minimum requirement for own funds and eligible liabilities (MREL).
There will be a negative impact of 766 million euros ($841 million) on the country units’ net interest income, a measure of earnings on loans minus the deposit and wholesale funding costs, caused by the change in the group’s financial reporting.
Nonetheless, transferring a positive contribution in the same amount to the corporate center will offset this shortcoming, according to the lender.
Other financial costs had been reassigned accordingly to the units especially the cost of funding the excess capital held by the business unit above the group’s core tier-1 ratio.
Furthermore, to reflect how the business will be managed and supervised, the investment and corporate banking branches of Santander in Europe and other business lines have been integrated into the Spain unit.
The role of regulators is to guarantee that banks’ liability structures provide eligible liabilities and sufficient TLAC or funds to absorb losses and facilitate the recapitalization of the bank per European Union regulations.
To guide banking institutions as they strive to comply with their disclosure and reporting obligations, and to make that information available to investors and authorities, the European Banking Authority has developed TLAC and MREL reporting and disclosure requirements.
($1 = 0.9113 euros)