Annual report 2009 - Santander

163B. Credit risk by activities in financial marketsThis section covers credit risk generated in treasury activitieswith clients, mainly credit institutions. This is developed throughfinancing products in the money market with different financialinstitutions, as well as derivatives with our clients.Risk is controlled through an integrated system and in real timewhich enables us to know at any moment the exposure limitavailable with any counterparty, in any product and maturity andin all of the Group’s units.Risk is measured by its prevailing market as well as potentialvalue (value of risk positions taking into account the futurevariation of underlying market factors in contracts). TheEquivalent Credit Risk (ECR) is the Net Replacement Value plusthe Maximum Potential Value of these contracts in the future.The capital at risk or unexpected loss is also calculated (i.e. theloss which, once the expected loss is subtracted, constitutes theeconomic capital, net of guarantees and recovery).The total exposure to credit risk from activities in the financialmarkets was 70.1% with credit institutions. By product type, theexposure to derivatives was 48.6%, mainly products withoutoptions, and 51.4% to liquidity products and traditionalfinancing.Derivative operations are concentrated in high credit qualitycounterparties; 68.4% of risk with counterparties has a ratingequal to or more than A-. The total exposure in 2009 in terms ofequivalent credit risk amounted to EUR 38,704 million.Risk management Annual Report 2009