SecProbe.io

September 30, 2014

Via E -mail
José Antonio Álvarez
Chief Financial Officer
Banco Santander, S.A.
Ciudad Grupo Santander
28660 Boadilla del Monte
Madrid, Spain

Re: Banco Santander,  S.A.
 Form 20-F for Fiscal Year Ended December 31, 2013
Filed April 29, 2014
File No. 1-12518

Dear Mr. Álvarez :

We have reviewed your filing an d have the following comments.  In some of our
comments, we may ask you to provide us with information so we may better understand your
disclosure.

Please respond to this letter within ten business days by amending your filing, by
providing the requested information, or by advising us when you will provide the requested
response.   If you do not believe our comme nts apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.

After reviewing any amendment to your filing and the information you provide in
response to these  comments, we may have  additio nal comments.

Item 5. Operating and Financial Review and Prospects, page 123

Critical Accounting Policies, page 123

1. Your disclosure on page 107 indicates that changes in Spanish law may impact your
ability to recover the full balance of mor tgage loans where the debtor is experiencing
financial difficulty.  Please revise your disclosure  in future filings, either here  or
elsewhere as you deem appropriate, to explain how these changes impact your severity,
exposure and probability of default as sumptions.  Additionally, discuss, and quantify
where possible, the impact these changes have had on your provisions and allowance for
loan losses.

José Antonio  Álvarez
Banco Santander, S.A.
September 30, 2014
Page 2

 Financial Condition, page 163

2. We note your disclosure that the decrease in customer loans in 2013 “was mai nly due to
the domestic component as a result of the deleveraging process in Spain and the
cancellation of the public sector financing pursuant to a government program to pay
suppliers’ pending invoices.”  In future filings, please describe in greater deta il the
government program cited and its impact on your business.

Quantitative and Qualitative Disclosures About Risk , page 235

Part 5 - Credit risk, page 243

5.3.2 Spain , page 245

3. Given the continuing declines in the value of real estate in Spain, as  well as the
continuing impairment charges and losses caused by that decline in your loan loss and
foreclosed property portfolio, please revise your tabular disclosure on page 246 in future
filings to also reflect an updated loan -to-value measure.  We note  that you previously
agreed to provide this disclosure in your correspondence filed on March 12, 2012.
Therefore, please revise future filings to provide this disclosure, or tell us why this
disclosure is no longer relevant.

Credit Risk Cycle, page 253

5.5.6 Recovery management, page 259

Forborne loan portfolio, page 260

4. Please revise your disclosure in future filings to provide the following information
regarding your forbearance program:
 Clarify whether you have any limits on the number of times a bo rrower may request a
modification of the terms of their loan.  If not, please discuss how you consider
multiple modifications in determining whether a loan has been renegotiated or
refinanced.
 We note in your correspondence filed with the Commission on Mar ch 11,  2013 that
subsequent modifications to loans that were modified are not common but your
disclosure on page 262 indicates that subsequent modifications are something you
will consider if the previous modification did not lead to improvement in the
customer’s performance.  Therefore, in future filings, separately disclose the balance
of loans that have received multiple modific ations from those that have  received only
one modification.

José Antonio  Álvarez
Banco Santander, S.A.
September 30, 2014
Page 3

  Similarly, your disclosure on page 262 indicates that in the event t hat more than one
modification is necessary, “ more stringent classification/return -to-performing
criteria ” is used.  Please revise future filings to disclose specifically the more
stringent classification and return to performing criteria that are applied to these types
of loans.
 As previously requested, and as represented in your correspondence filed with the
Commission on March 11, 2013, revise future filings to discuss how you consider the
level of loans needing more than one modification as well as the level of re -defaults
of refinanced or renegotiated loans when determining the appropriate level of
allowance for loan losses.  If you believe this disclosure is no longer meaningful,
please tell us why.

5. Your disclosure in your Form 6 -K filed July 31, 2013  discussing your financial results for
the six month period ended June 30, 2013 indicates that the change in the Bank of
Spain’s criteria for refinanced loans caused an increase in non -performing loans during
the period.  You further state that this was du e to the requirement to classify some or all
of these loans as doubtful.  However, your discussion regarding the forborne loan
portfolio discusses only the standard, substandard and impaired classifications.  Please
tell us and revise future filings to disclose, if appropriate, how these two disclosures
relate to each other and clarify to us why there is no disclosure of the doubtful loan
category within your 20 -F.  Clarify when a refinanced or renegotiated loan would be
considered doubtful, similar to t he disclosure regarding your other classifications on page
263, and quantify the balance of loans included in this classification.  Please also tell us
in more detail why reclassification of these loans did not have any additional impact on
your provisions .  For example, you have disclosure in the Form 6 -K filed July 31, 2013
that indicated that you had already set aside provisions for EUR 340  million for these
loans, in line with your internal policy , but it is un clear why this change in
reclassification w ould not affect your internal policy for calculating loss provisions.

Part 7 - Liquidity and funding risk, page 294

7.2.2  Balance Sheet Analysis and Liquidity Risk Measurement, page 296

6. Please revise your future filings to disclose the weighted average  of your structural
liquidity surplus, if it differs or fluctuates materially from the period end balance.  We
note that you represented you would provide this disclosure in your  correspondence filed
with the C ommission on October 5, 2012.  Please also pro vide a summary of encumbered
and unencumbered assets in a tabular format by balance sheet categories, including
collateral received that can be rehypothecated or otherwise redeployed so that readers
may understand the extent to which you maintain unrestric ted assets that are available to
support potential funding needs.

José Antonio  Álvarez
Banco Santander, S.A.
September 30, 2014
Page 4

 Notes to the Consolidated Financial Statements, page F -9

Note 2 - Accounting Policies, page F -19

i) Non -Current A ssets Held For Sale and Liabilities Associated with Non -Current Assets Hel d
For S ale, page F -49

7. Please revise your future filings to disclose whether your policy for obtaining appraisals
for properties outside of Spain is consistent with your policies disclosed here  for
properties inside Spain.  If not, disclose the similar pol icies for obtaining appraisals for
properties outside of Spain.  Additionally, please revise future filings to disclose whether
your collateral valuations for construction or development projects that are in process
contemplate collateral values “as is” or  “as complete/developed” consistent with your
representation to provide this disclosure in your correspondence filed on October 5, 2012.

u) Assets Under Management and I nvestment and  Pension Funds M anaged by the Group, page
F-60

8. Please revise future fili ngs to describe the criteria used for determining whether you have
control over structured entities.  We note your reference to Note 2.b.iv on page F -23
where you discuss that you determine which entities you control using internal criteria
and procedures and taking into consideration the applicable legislation, but we could not
locate the specific assumption and judgments regarding the criteria considered in
concluding you either control or do not control certain structured entities.   Please refer to
paragraphs 7 -9 of IFRS 12.

Note 8 - Equity I nstruments, page F -104

b) Changes, page F -105

9. We note your disclosure regarding the investment in the Spanish Bank Restructuring
Asset Management Company (Sareb), consisting of an approximate 17% equity stake an d
subordinated debt.  We also note your disclosure on page 163 that appears to indicate that
in 2013, you began to manage a separate unit for run -off real estate activity in Spain,
which has a specialized management model, and includes stakes in real estat e companies
(Metrovacesa and Sareb).   Clarify how you considered the factors in paragraph 7 of IFRS
10 when concluding that accounting for the investment in Sareb as an available for sale
equity investment was appropriate.  Please also address the followin g:
 Identify the relevant activities of Sareb, and clarify your management role in
relationship to these activities.  Tell us how you considered your management role in
determining whether you have met the criteria in paragraphs 7(a) and 7(c) of IFRS
10.

José Antonio  Álvarez
Banco Santander, S.A.
September 30, 2014
Page 5

  Discuss the nature and structure of any fee agreements you have entered into in
connection with the management of Sareb and how you contemplated these fees in
your conclusion to account for this investment as an available for sale security.
 Clarify the signi ficance of gaining the ability to appoint two directors to the board of
directors in light of the total number of seats on the board of directors.

Note 12 - Non-Current Assets H eld fo r Sale, page F -115

10. Your disclosure indicates that you realized EUR 99  million of losses related to sales of
properties that had a valuation allowance of EUR 402 million.  Please revise your
disclosure beginning on page 243 to disclose how you considered the fact that you
experienced losses on these properties that were appr oximately 25% in excess of your
recorded provisions for these properties.  As part of your response, please tell us whether
you have made any changes to your appraisal process or types of appraisals obtained.

Note 27 - Tax M atters, page F -161

e) Deferred  Taxes, page F -163

11. Your disclosure on page 104 indicates that the tax laws in Spain have changed during the
reported periods due to a number of new tax measures; however the tax rate used in the
income tax reconciliation has remained the same.  Please tel l us how the tax measure
changes disclosed on page 104 have impacted your tax rate for both the statutory and
effective tax rates disclosed and clarify how these changes have impacted your financial
results.  If these changes did not materially impact your  financial results, please clearly
state that fact in similar disclosure in future filings when applicable.

12. We note your disclosure that certain of your deferred tax assets may be considered
monetiz able tax assets due to a change in several countries’ tax regimes.   Please tell us
how this mechanism works so that they remain realizable and not dependent on future
income and therefore includable for regulatory capital purposes.  Also, revise future
filings to disclose the circumstances under which the def erred tax assets will convert into
tax receivables.

Note 47 - Personnel E xpenses, page F -193

(iv) Deferred Conditional Variable R emuneration P lan, page F -197

13. We note your disclosure on page F -198 that participants in this plan receive payments in
cash equal to the dividends paid on the deferred shares.  Please tell us the following
information regarding these instruments:
 Clarify whether you consider these shares as immediately vested or whether you
believe that these shares are subject to service cond itions for the purposes of applying
the accounting policy disclosed on page F -58.

José Antonio  Álvarez
Banco Santander, S.A.
September 30, 2014
Page 6

  If you believe these shares are immediately vested and not subject to service
conditions, clarify how you consider these shares in your determination of earnings
per share.
 If the shares are considered to be subject to service conditions and therefore not
considered to be vested or outstanding until the date those service conditions are
satisfied, please tell us whether the dividends required to be paid on these instruments
during the vesting period are forfeitable.  If not, tell us how you have applied the
guidance in paragraphs A13 and A14 of IAS 33 when presenting your measure of
earnings per share.

Form 6 -K Filed May 1, 2014

Loan Loss Provisions, page 10

14. You disclose on page 10 of the Form 6 -K filed on May 1, 2014 that provisions were
maintained in Poland and were higher in Mexico due to greater lending and the change to
the expected loss in the commercial portfolio.   In the same Form 6 -K, you state that the
Committee ve rified that the financial information presented therein was based on the
same principles and practices as those used to draw up the annual financial statements.
However , on page F -47 of your Form 20 -F for the period ended December 31, 2013, your
accounti ng policies indicate that you are determining your impairment provisions based
on an incurred loss model.  Therefore, please tell us and revise your future filings as
applicable to specifically discuss how your change to an expected loss model for the
comm ercial portfolios complies with the guidance in IAS 39, quantify the effect of the
change to the expected loss model, and clarify whether the change was only made for
certain commercial loan portfolios, or all of them.

15. In your earnings call held on May 3,  2014 , you noted you had higher provisioning at
Santander Consumer USA (SCUSA) resulting from an upfront recognition of provisions
based on “expected loss ,” which has a big impact in periods of strong growth of new
lending.  Also during the call, it was no ted that provisions doubled in the United States,
which was mainly in line with the rise of new lending at SCUSA “and due to the
expected loss of one year .”  In your Form 6 -K filed August 5, 2014, you disclosed the
significant increase in provisions at SCU SA in recent quarters, and discussed how they
were linked to SCUSA’s growth in lending after signing the agreement with Chrysler.
Additionally, you disclosed a substantially higher coverage ratio (282% at June 30, 2014)
and that loan -loss provisions fell 8% in a comparison between Q1 and Q2 due to
“SCUSA’s lower needs.”  Please respond to the following:
 Clarify the references to “expected  loss” it relates to the SCUSA loan portfolio and
explain how this is methodology complies with the guidance in IAS 39.
 Explain in more detail why substantial growth in Q1 2014 drove the provision level
so significantly in Q1 2014.   For example, tell us in more detail whether there is a
difference in allowance methodology for newly original loans versus more seasoned
loans .

José Antonio  Álvarez
Banco Santander, S.A.
September 30, 2014
Page 7

  Tell us how the consolidation of SCUSA in the first quarter of 2014 affected the
required provision levels at SCUSA.

We urge all persons who are responsible for the accuracy and adequacy of the disclosure
in the filing to be certain that the filing incl udes the information the Securities Exchange Act of
1934 and all applicable Exchange Act rules require.   Since the company and its management are
in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy
and adequ acy of the disclosures they have made.

 In responding to our comments, please provide  a written statement from the co