SEC Comment Letter for Banco Santander, S.A. (SAN, BCDRF) (CIK 0000891478) (SAN) — Sep 5, 2007
Banco Santander, S.A. (SAN, BCDRF) (CIK 0000891478)
Date: Sept. 5, 2007 · CIK: 0000891478 · Accession: 0000000000-07-043210
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-12518
Referenced dates: September 26, 2006
Letter
September 5, 2007 By U.S. Mail and facsimile to 011-34-91- 257-1282. José Antonio Alvarez Chief Financial Officer Banco Santander Central Hispano, S.A. Ciudad Grupo Santander 28660 Boadilla del Monte Madrid, Spain
Re: Banco Santander Central Hispano, S.A. Form 20-F for the Fiscal Year Ended December 31, 2006 File No. 001-12518
Dear Mr. Alvarez:
We have reviewed your filing and have the following comments. Where indicated, we think you should revise your doc ument in response to these comments in future filings. If you disagree, we will consider your explanation as to why our comments are inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In our comment, we may ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may or may not raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Consolidated Financial Statements
Note 1. Introduction, basis of presentation of the consolidated financial statements and other information b) Basis of presentation of the conso lidated financial statements, page F-7
1. In your response to comment 3 of our comment letter dated September 26, 2006, you indicated that you present a measure t itled “Net Operating Income” in your
José Antonio Alvarez Banco Santander Central Hispano, S.A. September 5, 2007 Page 2 consolidated income statement that excludes provisions and impairment losses based on the requirements of the Bank of Spain’s Circular 4/2004. Paragraph BC13 of IAS 1 expressly states that it w ould be inappropriate if items of an operating nature were excluded from net operating income. Therefore, please revise this section in future filings to explicitly disclose that the presentation required by the Bank of Spain’ s Circular 4/2004 differs from IFRS in this respect, and provide the disclosures require d by paragraph 18 of IAS 1.
2. Similarly, your response to comment 1 of our comment letter dated September 26, 2006 indicates that you are presenting a measure titled “Gross Income” on your consolidated income statement based on th e requirements of the Bank of Spain’s Circular 4/2004. However, the measure as you have computed it does not reflect gross income in the sense that it genera lly defined because it does not include all income amounts and it is reduced by certa in expenses. Therefore, please revise this section in future filings to explicitly disclose that the presentation required by the Bank of Spain’s Circular 4/2004 differs from IFRS in this respect, and provide the disclosures required by pa ragraph 18 of IAS 1.
d) Measurement of financial a ssets and liabilities and recognition of fair value changes iii) Valuation tec hniques, page F-19
3. In future filings, please revise to disclo se the assumptions used in your internal models to determine the fair value of each class of financial instruments. Refer to paragraph 27 of IFRS 7.
Note 5. Remuneration and other benefits paid to the Bank’s di rectors and senior managers e) Loans, page F-52
4. Please revise to disclose in future filings, if true, that loans to related parties were made on terms equivalent to those on an arms length basis. Refer to paragraph 21 of IAS 24. Otherwise, please revise to disclose the fa vorable terms on which such loans were made to the extent the disclosu re is applicable pursuant to paragraph 17 of IAS 24.
Note 58.3 Net Income and Stockhol ders’ Equity reconciliations Notes to the Net Income and to the Stockhol ders’ Equity Reconcil iation, Allowances for credit losses, page F-162
5. In future filings, please revise your disclo sure at the top of page F-163 regarding your use of “peer group” information pursu ant to the Bank of Spain’s Circular 4/2004 to more clearly specify the scope of your use of such data. If, as you have indicated in past correspondence an d discussions, your use of peer group information for the calculation of allowances is limited to loans made within the
José Antonio Alvarez Banco Santander Central Hispano, S.A. September 5, 2007 Page 3 Spanish market, please revise this section in to disclose that fact. Please similarly revise your allowance methodology disclosu res elsewhere in the filing, including but not limited to Note 2.g).
Note 58.5 Consolidated financ ial statements, page F-174
6. The Minority Interest of Euros 3,060,475,000 as of December 31, 2006, presented on page F-176 for EU-IFRS required to be applied under Bank of Spain’s Circular 4/2004 is not consistent with the Minority Interest amount of Euros 2,220,743,000 presented on page F-160. Please reconcile this inconsistency.
7. Please revise future filings to provide a condensed Statement of Cash Flows for your parent company. Refer to Rule 12-04 of Regulation S-X.
Note 59.4 Derivative Financial Instruments, page F-197
8. Please address the following regarding your use of intercompany derivatives which you briefly describe on page F-198: a. Please tell us in more detail the pr ocess by which deriva tive instruments are obtained by your lines of business for hedge accounting purposes. For example, tell us which group or groups (i.e. Treasury, Trading Desk, etc.) are responsible for obtaining these deriva tive instruments, and describe the process by which they are obtained. b. Tell us if the responsible groups obtai n the derivative instruments from internal or external sources or both. c. Tell us who is responsible for determ ining whether the conditions for hedge accounting are achieved for IAS 39 and how they make that determination. Additionally, tell us how th ey specifically consider the internal and external hedging instruments. d. Tell us who is responsible for determ ining whether the conditions for hedge accounting are achieved for SFAS 133 and how they make that determination. Additionally, tell us how th ey specifically consider the internal and external hedging instruments. e. In connection with the above, tell us in detail how the lines of business determine whether the conditions for hedge accounting are achieved for purposes of IAS 39. f. Similarly, tell us in detail how the lines of business determine whether the conditions for hedge accounting are achieved for purposes of SFAS 133.
José Antonio Alvarez Banco Santander Central Hispano, S.A. September 5, 2007 Page 4
* * * * *
Please revise your document in response to these comments within 10 business days or tell us when you will provide us with a response. Please provide us with your proposed disclosures and furnish a cover lette r that keys your response to our comments, indicates your intent to incl ude the requested revisions in your future filings and provides any requested supplemental information. Pleas e understand that we may have additional comments after reviewing your responses to our comments.
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing review ed by the staff to be certain that they have provided all information investors require for an info rmed decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comme nts as a defense in any proceeding initiated by the Commission or any person under the federal secu rities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
You may contact Rebekah M oore at (202) 551-3463 or me at (202) 551-3494 if you have questions.
Sincerely,
Kevin W. Vaughn
Branch Chief
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Mail Stop 4561 September 5, 2007 By U.S. Mail and facsimile to 011-34-91- 257-1282. José Antonio Alvarez Chief Financial Officer Banco Santander Central Hispano, S.A. Ciudad Grupo Santander 28660 Boadilla del Monte Madrid, Spain Re: Banco Santander Central Hispano, S.A. Form 20-F for the Fiscal Year Ended December 31, 2006 File No. 001-12518 Dear Mr. Alvarez: We have reviewed your filing and have the following comments. Where indicated, we think you should revise your doc ument in response to these comments in future filings. If you disagree, we will consider your explanation as to why our comments are inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In our comment, we may ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may or may not raise additional comments. Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter. Consolidated Financial Statements Note 1. Introduction, basis of presentation of the consolidated financial statements and other information b) Basis of presentation of the conso lidated financial statements, page F-7 1. In your response to comment 3 of our comment letter dated September 26, 2006, you indicated that you present a measure t itled “Net Operating Income” in your José Antonio Alvarez Banco Santander Central Hispano, S.A. September 5, 2007 Page 2 consolidated income statement that excludes provisions and impairment losses based on the requirements of the Bank of Spain’s Circular 4/2004. Paragraph BC13 of IAS 1 expressly states that it w ould be inappropriate if items of an operating nature were excluded from net operating income. Therefore, please revise this section in future filings to explicitly disclose that the presentation required by the Bank of Spain’ s Circular 4/2004 differs from IFRS in this respect, and provide the disclosures require d by paragraph 18 of IAS 1. 2. Similarly, your response to comment 1 of our comment letter dated September 26, 2006 indicates that you are presenting a measure titled “Gross Income” on your consolidated income statement based on th e requirements of the Bank of Spain’s Circular 4/2004. However, the measure as you have computed it does not reflect gross income in the sense that it genera lly defined because it does not include all income amounts and it is reduced by certa in expenses. Therefore, please revise this section in future filings to explicitly disclose that the presentation required by the Bank of Spain’s Circular 4/2004 differs from IFRS in this respect, and provide the disclosures required by pa ragraph 18 of IAS 1. d) Measurement of financial a ssets and liabilities and recognition of fair value changes iii) Valuation tec hniques, page F-19 3. In future filings, please revise to disclo se the assumptions used in your internal models to determine the fair value of each class of financial instruments. Refer to paragraph 27 of IFRS 7. Note 5. Remuneration and other benefits paid to the Bank’s di rectors and senior managers e) Loans, page F-52 4. Please revise to disclose in future filings, if true, that loans to related parties were made on terms equivalent to those on an arms length basis. Refer to paragraph 21 of IAS 24. Otherwise, please revise to disclose the fa vorable terms on which such loans were made to the extent the disclosu re is applicable pursuant to paragraph 17 of IAS 24. Note 58.3 Net Income and Stockhol ders’ Equity reconciliations Notes to the Net Income and to the Stockhol ders’ Equity Reconcil iation, Allowances for credit losses, page F-162 5. In future filings, please revise your disclo sure at the top of page F-163 regarding your use of “peer group” information pursu ant to the Bank of Spain’s Circular 4/2004 to more clearly specify the scope of your use of such data. If, as you have indicated in past correspondence an d discussions, your use of peer group information for the calculation of allowances is limited to loans made within the José Antonio Alvarez Banco Santander Central Hispano, S.A. September 5, 2007 Page 3 Spanish market, please revise this section in to disclose that fact. Please similarly revise your allowance methodology disclosu res elsewhere in the filing, including but not limited to Note 2.g). Note 58.5 Consolidated financ ial statements, page F-174 6. The Minority Interest of Euros 3,060,475,000 as of December 31, 2006, presented on page F-176 for EU-IFRS required to be applied under Bank of Spain’s Circular 4/2004 is not consistent with the Minority Interest amount of Euros 2,220,743,000 presented on page F-160. Please reconcile this inconsistency. 7. Please revise future filings to provide a condensed Statement of Cash Flows for your parent company. Refer to Rule 12-04 of Regulation S-X. Note 59.4 Derivative Financial Instruments, page F-197 8. Please address the following regarding your use of intercompany derivatives which you briefly describe on page F-198: a. Please tell us in more detail the pr ocess by which deriva tive instruments are obtained by your lines of business for hedge accounting purposes. For example, tell us which group or groups (i.e. Treasury, Trading Desk, etc.) are responsible for obtaining these deriva tive instruments, and describe the process by which they are obtained. b. Tell us if the responsible groups obtai n the derivative instruments from internal or external sources or both. c. Tell us who is responsible for determ ining whether the conditions for hedge accounting are achieved for IAS 39 and how they make that determination. Additionally, tell us how th ey specifically consider the internal and external hedging instruments. d. Tell us who is responsible for determ ining whether the conditions for hedge accounting are achieved for SFAS 133 and how they make that determination. Additionally, tell us how th ey specifically consider the internal and external hedging instruments. e. In connection with the above, tell us in detail how the lines of business determine whether the conditions for hedge accounting are achieved for purposes of IAS 39. f. Similarly, tell us in detail how the lines of business determine whether the conditions for hedge accounting are achieved for purposes of SFAS 133. José Antonio Alvarez Banco Santander Central Hispano, S.A. September 5, 2007 Page 4 * * * * * Please revise your document in response to these comments within 10 business days or tell us when you will provide us with a response. Please provide us with your proposed disclosures and furnish a cover lette r that keys your response to our comments, indicates your intent to incl ude the requested revisions in your future filings and provides any requested supplemental information. Pleas e understand that we may have additional comments after reviewing your responses to our comments. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing review ed by the staff to be certain that they have provided all information investors require for an info rmed decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that: the company is responsible for the adequacy and accuracy of the disclosure in the filing; staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the company may not assert staff comme nts as a defense in any proceeding initiated by the Commission or any person under the federal secu rities laws of the United States. In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing. You may contact Rebekah M oore at (202) 551-3463 or me at (202) 551-3494 if you have questions. Sincerely, Kevin W. Vaughn Branch Chief