Bankia, S.A. Financial statements for the year ended 31 December 2012

Transcription

1 Bankia, S.A. Financial statements for the year ended 31 December 2012 Translation of a report originally issued in Spanish based on our work performed in accordance with the audit regulations in force in Spain and of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 1-3 and 45). In the event of a discrepancy, the Spanish-language version prevails.

2 Contents Page Bankia, S.A. Balance sheet at 31 December 2012 and Bankia, S.A. Income statement for the years ended 31 December 2012 and Bankia, S.A. Statement of recognised income and expense for the years ended 31 December 2012 and Bankia, S.A. Statement of changes in total equity for the years ended 31 December 2012 and Bankia, S.A. Statement of cash flows for the years ended 31 December 2012 and Bankia, S.A. Notes to the financial statements for the year ended 31 December to 192

3 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 1-3 and 45). In the event of a discrepancy, the Spanish-language version prevails. Bankia, S.A. Balance sheet at 31 December 2012 and 2011 ASSETS 31/12/12 31/12/11 (*) LIABILITIES AND EQUITY 31/12/12 31/12/11 (*) LIABILITIES 1. Cash and balances with central banks (Note 7) 4,563,082 6,117, Financial liabilities held for trading (Note 8) 33,610,393 26,815, Deposits from central banks Financial assets held for trading (Note 8) 35,733,950 29,061, Deposits from credit institutions Loans and advances to credit institutions Customer deposits Loans and advances to customers 28,573 16, Marketable debt securities Debt securities 314,632 1,320, Trading derivatives 33,610,393 26,303, Equity instruments 4,420 19, Short positions - 511, Trading derivatives 35,386,325 27,706, Other financial liabilities - - Memorandum item: loaned or advanced as collateral 282,966 1,320, Other financial liabilities at fair value through profit or loss Deposits from central banks Other financial assets at fair value through profit or loss (Note 9) 16,486 76, Deposits from credit institutions Loans and advances to credit institutions Customer deposits Loans and advances to customers Marketable debt securities Debt securities - 62, Subordinated liabilities Equity instruments 16,486 13, Other financial liabilities - - Memorandum item: loaned or advanced as collateral Financial liabilities at amortised cost (Note 19) 245,230, ,247, Deposits from central banks 51,954,778 22,431, Available-for-sale financial assets (Note 10) 39,997,793 24,649, Deposits from credit institutions 26,114,761 22,434, Debt securities 39,997,793 23,621, Customer deposits 117,916, ,384, Equity instruments - 1,028, Marketable debt securities 31,152,398 47,607,382 Memorandum item: loaned or advanced as collateral 8,963,941 16,474, Subordinated liabilities 15,641, , Other financial liabilities 2,449,935 1,071, Loans and receivables (Note 11) 146,602, ,238, Changes in the fair value of hedged items in portfolio hedges of interest rate risk Loans and advances to credit institutions 9,024,397 19,628, Hedging derivatives (Note 13) 2,726,923 1,961, Loans and advances to customers 135,358, ,609, Liabilities associated with non-current assets held for sale Debt securities 2,219,355 6,000, Provisions 2,434,089 1,283,242 Memorandum item: loaned or advanced as collateral 109,407,069 90,276, Provisions for pensions and similar obligations (Note 20) 486, , Provisions for taxes and other legal contingencies (Note 20) 36,721 51, Held-to-maturity investments (Note 12) 29,006,962 10,250, Provisions for contingent liabilities and commitments (Note 20) 603, ,763 Memorandum item: loaned or advanced as collateral 4,456,923 10,019, Other provisions (Note 20) 1,307, , Tax liabilities 876, , Changes in the fair value of hedged items in portfolio hedges of interest rate risk Current 8,319 41, Deferred (Note 25) 868, , Hedging derivatives (Note 13) 6,174,395 5,266, Welfare Fund Other liabilities (Note 21) 551, , Non-current assets held for sale (Note 14) 2,925,162 2,063, Capital having the nature of a financial liability - - TOTAL LIABILITIES 285,430, ,870, Investments (Note 15) 2,446,442 4,167, Associates - 692,509 EQUITY Jointly-controlled entities 54,740 84, Own funds (Note 23) (5,408,822) 12,078, Group entities 2,391,702 3,390, Capital 3,987,927 3,465, Issued 3,987,927 3,465, Insurance contracts linked to pensions (Note 36) 397, , Less: Uncalled capital Share premium 11,986,494 11,643, Tangible assets (Note 16) 1,688,299 2,064, Reserves (3,075,618) 28, Property, plant and equipment 1,574,179 1,758, Other equity instruments For own use 1,574,081 1,758, Equity component of compound financial instruments Leased out under an operating lease Non-voting equity units and associated funds Assigned to welfare projects Other equity instruments Investment property 114, , Less: treasury shares (1,182) (27,649) Memorandum item: acquired under a finance lease Profit/(loss) for the year (18,306,443) (3,030,551) 1.7. Less: dividends and remuneration Intangible assets (Note 17) 59, , Valuation adjustments (778,996) (581,440) Goodwill Available-for-sale financial assets (Note 22) (792,359) (548,145) Other intangible assets 59, , Cash flow hedges (Note 22) 4,926 (33,387) 2.3. Hedges of net investments in foreign operations Tax assets 8,655,370 5,652, Exchange differences (70) Current 34,246 84, Non-current assets held for sale 8, Deferred (Note 25) 8,621,124 5,568, Other valuation adjustments - - TOTAL EQUITY (6,187,818) 11,496, Other assets (Note 18) 975, ,896 TOTAL ASSETS 279,243, ,366,696 TOTAL LIABILITIES AND EQUITY 279,243, ,366,696 MEMORANDUM ITEM 31,533,760 43,888, Contingent exposures (Note 26.2) 10,313,773 11,871, Contingent commitments (Note 26.3) 21,219,987 32,016,264 (*) Presented solely and exclusively for comparison purposes. The accompanying Notes 1 to 45 and Appendices I to VII are an integral part of the balance sheet at 31 December

4 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 1-3 and 45). In the event of a discrepancy, the Spanish-language version prevails. Bankia, S.A. Income statement for the years ended 31 December 2012 and (*) 1. Interest and similar income (Note 27) 7,260,244 7,680, Interest expense and similar charges (Note 28) (4,510,056) (5,199,347) 3. Remuneration of capital having the nature of a financial liability - - A. NET INTEREST INCOME 2,750,188 2,481, Return on equity instruments (Note 29) 77, , Fees and commission income (Note 30) 1,065,180 1,143, Fees and commission expenses (Note 31) (130,351) (145,920) 8. Gains and losses on financial assets and liabilities (net) (Note 32) 386, , Held for trading (39,142) 157, Other financial instruments at fair value through profit or loss 2,910 (18,149) 8.3. Financial instruments not measured at fair value through profit or loss 384, , Other 38,578 12, Exchange differences (net) (Note 33) 39,211 22, Other operating income (Note 34) 43,809 65, Other operating expenses (Note 35) (530,480) (250,028) B. GROSS INCOME 3,702,093 3,786, Administrative expenses (1,821,196) (1,920,296) Staff costs (Note 36) (1,240,318) (1,289,827) Other general administrative expenses (Note 37) (580,878) (630,469) 13. Depreciation and amortisation charge (Note 38) (227,992) (246,250) 14. Provisions (net) (Note 39) (1,424,123) (156,722) 15. Impairment losses on financial assets (net) (18,116,330) (3,953,707) Loans and receivables (Note 40) (17,476,901) (3,865,313) Other financial instruments not measured at fair value through profit or loss (Note 40) (639,429) (88,394) C. NET OPERATING INCOME/(EXPENSE) (17,887,548) (2,490,509) 16. Impairment losses on other assets (net) (2,953,645) (304,276) Goodwill and other intangible assets (5,434) Other assets (Note 41) (2,948,211) (304,276) 17. Gains/(losses) on disposal of assets not classified as non-current assets held for sale (Note 42) 492 (4,186) 18. Negative goodwill on business combinations Gains/(losses) on non-current assets held for sale not classified as discontinued operations (Note 43) (704,487) (1,570,888) D. PROFIT/(LOSS) BEFORE TAX (21,545,188) (4,369,859) 20. Income tax 3,238,745 1,339, Mandatory transfer to welfare funds - - E. PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS (18,306,443) (3,030,551) 22. Profit/(loss) from discontinued operations (net) - - F. PROFIT/(LOSS) FOR THE YEAR (18,306,443) (3,030,551) (*) Presented solely and exclusively for comparison purposes. The accompanying Notes 1 to 45 and Appendices I to VII are an integral part of the income statement for the year ended 31 December

5 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 1-3 and 45). In the event of a discrepancy, the Spanish-language version prevails. BANKIA, S.A. Statement of recognised income and expense for the years ended 31 December 2012 and /12/12 31/12/11 (*) A) PROFIT/(LOSS) FOR THE YEAR (18,306,443) (3,030,551) B) OTHER RECOGNISED INCOME AND EXPENSE (197,556) (579,798) 1. Available-for-sale financial assets (348,878) (780,719) 1.1. Revaluation gains/(losses) (158,963) (697,422) 1.2. Amounts transferred to income statement (177,762) (83,297) 1.3. Other reclassifications (12,153) - 2. Cash flow hedges 54,733 (47,697) 2.1. Revaluation gains/(losses) 25,730 (49,680) 2.2. Amounts transferred to income statement 29,003 1, Amounts transferred to initial carrying amount of hedged items Other reclassifications Hedges of net investments in foreign operations Revaluation gains/(losses) Amounts transferred to income statement Other reclassifications Exchange differences (231) Revaluation gains/(losses) (231) Amounts transferred to income statement Other reclassifications Non-current assets held for sale 12, Revaluation gains/(losses) Amounts transferred to income statement Other reclassifications 12, Actuarial gains/(losses) on pension plans Other recognised income and expense Income tax 84, ,486 C) TOTAL RECOGNISED INCOME AND EXPENSE (A+B) (18,503,999) (3,610,349) (*) Presented solely and exclusively for comparison purposes. The accompanying Notes 1 to 45 and Appendices I to VII are an integral part of the statement of recognised income and expense for the year ended 31 December

6 Bankia, S.A. Statements of changes in equity: Statement of changes in total equity for the year ended 31 December 2012 OWN FUNDS Share capital Share premium Reserves Other equity instruments Less: treasury shares Profit/(loss) for the year Less: Dividends and remuneration Total own funds VALUATION ADJUSTMENTS TOTAL EQUITY 1. Balance at 1 January ,465,145 11,643,001 28,150 - (27,649) (3,030,551) - 12,078,096 (581,440) 11,496, Adjustments due to accounting policy change Error adjustments Adjusted opening balance 3,465,145 11,643,001 28,150 - (27,649) ( ) - 12,078,096 (581,440) 11,496, Total recognised income and expense (18,306,443) - (18,306,443) (197,556) (18,503,999) 4. Other changes in equity 522, ,493 (3,103,768) - 26,467 3,030, , , Capital increases 522, ,493 (1,075) , , Capital reductions (1,075) - (1,075) 4.3 Conversion of financial liabilities into equity Increase in other equity instruments Reclassification of financial liabilities to other equity instruments Reclassification of other equity instruments to financial liabilities Remuneration to members Treasury share transactions (net) - - (72,142) - 26, (45,675) - (45,675) 4.9 Transfers between equity accounts - - (3,030,551) - - 3,030, Increases/(decreases) due to business combinations Discretionary transfer to welfare projects and funds Equity instrument-based payments Other increases/(decreases) in equity Balance at 31 December ,987,927 11,986,494 (3,075,618) - (1,182) (18,306,443) - (5,408,822) (778,996) (6,187,818) The accompanying Notes 1 to 45 and Appendices I to VII are an integral part of the statement of changes in total equity for the year ended 31 December

7 Bankia, S.A. Statements of changes in equity: Statement of changes in total equity for the year ended 31 December 2011 (*) OWN FUNDS Share capital Share premium Reserves Other equity instruments Less: treasury shares Profit/(loss) for the year Less: Dividends and remuneration Total own funds VALUATION ADJUSTMENTS TOTAL EQUITY 1. Balance at 1 January ,040-11, (419) 29,927 (1,642) 28, Adjustments due to accounting policy change Error adjustments Adjusted opening balance 18,040-11, (419) 29,927 (1,642) 28, Total recognised income and expense (3,030,551) - (3,030,551) (579,798) (3,610,349) 4. Other changes in equity 3,447,105 11,643,001 16,778 - (27,649) (934) ,078,720-15,078, Capital increases 3,449,145 11,643,001 (23,400) ,068,746-15,068, Capital reductions (2,040) - 2, Conversion of financial liabilities into equity Increase in other equity instruments Reclassification of financial liabilities to other equity instruments Reclassification of other equity instruments to financial liabilities Remuneration to members Treasury share transactions (net) - - 1,507 - (27,649) - - (26,142) - (26,142) 4.9 Transfers between equity accounts (934) Increases/(decreases) due to business combinations Discretionary transfer to welfare projects and funds Equity instrument-based payments Other increases/(decreases) in equity , (141) 36,116-36, Balance at 31 December ,465,145 11,643,001 28,150 - (27,649) (3,030,551) - 12,078,096 (581,440) 11,496,656 (*) Presented solely and exclusively for comparison purposes. 5

8 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 1-3 and 45). In the event of a discrepancy, the Spanish-language version prevails. Bankia, S.A. Statement of cash flows for the years ended 31 December 2012 and /12/12 31/12/11 (*) A) CASH FLOWS USED IN OPERATING ACTIVITIES (7,390,261) (1,358,492) 1. Profit/(loss) for the year (18,306,443) (3,030,551) 2. Adjustments made to obtain the cash flows from operating activities 29,349,111 4,702, Depreciation and amortisation 227, , Other 29,121,119 4,455, Net increase/(decrease) in operating assets 6,813,635 (12,643,069) 3.1. Financial assets held for trading 634,961 (370,201) 3.2. Other financial assets at fair value through profit or loss 60,157 28, Available-for-sale financial assets (5,131,508) (9,849,646) 3.4. Loans and receivables 11,651,743 3,763, Other operating assets (401,718) (6,214,921) 4. Net increase/(decrease) in operating liabilities (25,246,564) 9,613, Financial liabilities held for trading (511,752) 755, Other financial liabilities at fair value through profit or loss Financial liabilities at amortised cost (24,920,227) 5,210, Other operating liabilities 185,415 3,646, Income tax receipts/(payments) - - B) CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES 417,371 (1,477,574) 6. Payments 737,482 2,528, Tangible assets - 92, Intangible assets 26,836 70, Investments 710,314 1,148, Subsidiaries and other business units Non-current assets held for sale and associated liabilities Held-to-maturity investments - 1,216, Other payments related to investing activities Proceeds 1,154,853 1,050, Tangible assets 106, , Intangible assets Investments 9, , Subsidiaries and other business units Non-current assets held for sale and associated liabilities 378, , Held-to-maturity investments 659, Other proceeds related to investing activities - 4,544 C) CASH FLOWS FROM FINANCING ACTIVITIES 5,418,723 2,874, Payments 280, , Dividends Subordinated liabilities - 511, Redemption of own equity instruments Acquisition of own equity instruments 255,023 73, Other payments related to financing activities 25, Proceeds 5,699,141 3,459, Subordinated liabilities 4,623, , Issuance of own equity instruments 866,275 3,092, Disposal of own equity instruments 209,349 47, Other proceeds related to financing activities - 1,674 D) EFFECT OF EXCHANGE RATE DIFFERENCES E) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D) (1,554,143) 38,607 F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 6,117,225 6,078,618 G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR 4,563,082 6,117,225 MEMORANDUM ITEM COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF YEAR 1.1. Cash 794, , Cash equivalents at central banks 3,768,718 5,313, Other financial assets Less: Bank overdrafts refundable on demand - - Total cash and cash equivalents at end of year 4,563,082 6,117,225 (*) Presented solely and exclusively for comparison purposes. The accompanying Notes 1 to 45 and Appendices I to VII are an integral part of the cash flow statement for the year ended 31 December

9 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 Page (1) Description of Bankia, beginnings of the incorporation of Bankia, reporting framework applied to draw up the financial statements and other information 7 (1.1) Description of Bankia 7 (1.2) Beginnings of the incorporation of Bankia 7 (1.3) Reporting framework applied to draw up the financial statements 11 (1.4) Responsibility for the information and estimates made 13 (1.5) Comparative information 14 (1.6) Agency agreements 14 (1.7) Investments in the capital of credit institutions 14 (1.8) Environmental impact 14 (1.9) Minimum reserve ratio 14 (1.10) Deposit Guarantee Fund 14 (1.11) Events after the reporting period 15 (1.12) Customer care service 16 (1.13) Information on deferred payments to suppliers. Third additional provision. Disclosure requirement" set out in Law 15/2010 of 5 July 17 (1.14) Information on the mortgage market 18 (1.15) Segment reporting and distribution of revenue from ordinary Bank activities, by categories of activities and geographic markets 24 (1.16) Society of Asset Management from the Banking Restructuring (SAREB) 26 (2) Accounting policies and measurement bases 28 (2.1) BFA-Bankia Group Restructuring Plan 28 (2.2) Subsidiaries 28 (2.3) Joint ventures 29 (2.4) Associates 29 (2.5) Financial instruments: initial recognition, derecognition of financial instruments, fair value and amortised cost of financial instruments, classification and measurement and reclassification among categories 30 (2.6) Hedge accounting and mitigation of risk 35 (2.7) Foreign currency transactions 37 (2.8) Recognition of income and expenses 38 (2.9) Offsetting 39 (2.10) Transfers of financial assets 39 (2.11) Exchanges of assets 40 (2.12) Impairment of financial assets 40 (2.13) Financial guarantees and provisions for financial guarantees 42 (2.14) Accounting for leases 43 (2.15) Staff costs 44 (2.16) Income tax 50 (2.17) Tangible assets 51 (2.18) Intangible assets 53 (2.19) Inventories 54 (2.20) Non-financial guarantees provided 55 (2.21) Provisions and contingent liabilities 55 (2.22) Non-current assets held for sale 56 (2.23) Statement of cash flows 57 (2.24) Share-based payment transactions 58 (2.25) Transactions with treasury shares 59 (2.26) Statement of recognised income and expense and statement of total changes in equity 59 (3) Risk management 61 (3.1) Exposure to credit risk and risk concentration 61 (3.2) Liquidity risk of financial instruments 73 (3.3) Exposure to interest rate risk 76 (3.4) Exposure to other market risks 77 (3.5) Exposure to property and construction risk (transactions in Spain) 78 (4) Capital management 82 (4.1) Capital requirements established by Bank of Spain Circular 3/ (4.2) Principal capital requirements 83 (5) Remuneration of Board members and senior executives 84 (5.1) Remuneration of Board members 84 (5.2) Remuneration of the Bank's senior executives (Management Committee) 89 (5.3) Disclosures on Bank directors holdings and business activities 90

10 (6) Proposed distribution of loss of Bankia, S.A. 91 (7) Cash and balances with central banks 91 (8) Financial assets and liabilities held for trading 91 (9) Other financial assets at fair value through profit or loss 93 (10) Available-for-sale financial assets 94 (11) Loans and receivables 97 (12) Held-to-maturity investments 103 (13) Hedging derivatives (debtors and creditors) 104 (14) Non-current assets held for sale 107 (15) Investments 111 (16) Tangible assets 115 (17) Intangible assets - Other intangible assets 116 (18) Other assets 117 (19) Financial liabilities at amortised cost 119 (20) Provisions 124 (21) Other liabilities 125 (22) Valuation adjustments 126 (23) Equity - Share capital and share premium, treasury share transactions, reserves and other information 127 (24) Fair value 130 (25) Tax matters 138 (26) Other significant disclosures 153 (27) Interest and similar income 157 (28) Interest expense and similar charges 157 (29) Return on equity instruments 158 (30) Fee and commission income 158 (31) Fee and commission expense 158 (32) Gains and losses on financial assets and liabilities (net) 159 (33) Exchange differences (net) 159 (34) Other operating income 159 (35) Other operating expenses 159 (36) Administrative expenses Staff costs 160 (37) Administrative expenses - Other general administrative expenses 167 (38) Depreciation and amortisation 167 (39) Provisions (net) 168 (40) Impairment losses on financial assets (net) 168 (41) Impairment losses on other assets (net) 168 (42) Gains/(losses) on disposal of financial assets not classified as non-current assets held for sale 169 (43) Gains (losses) on non-current assets held for sale not classified as discontinued operations 169 (44) Related parties 169 (45) Explanation added for translatio to English 171 Appendices 172

11 Translation of financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Company (see Notes 1-3 and 45). In the event of a discrepancy, the Spanish-language version prevails. BANKIA, S.A. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (1) Description of Bankia, beginnings of the incorporation of Bankia, reporting framework applied to draw up the financial statements and other information (1.1) Description of Bankia Bankia, S.A. ("the Bank" or Bankia ) is a financial institution incorporated under the name Altae Banco, S.A. (initially under code 0099 in the Bank of Spain's financial institution register) and on record with the companies register (Registro Mercantil). In the first half of 2011, the Bank was assigned code 2038 in the Bank of Spain's financial institutions register. As a credit institution, the Bank is subject to the supervisory authority of the Bank of Spain. On 16 June 2011, Bankia's registered office was transferred to calle Pintor Sorolla, 8, Valencia. The company bylaws may be consulted, together with other relevant legal information, at Bankia's registered office and on its website ( Bankia s bylaws stipulate the activities it may engage in, which are those commonly carried on by credit institutions and, in particular, satisfy the requirements of Law 26/1988, of 29 July, on the Discipline and Intervention in Credit Institutions. (1.2) Beginnings of the incorporation of Bankia On 30 July 2010, Caja de Ahorros y Monte de Piedad de Madrid (until that date, the majority shareholder of Altae Banco, S.A.), Caja de Ahorros de Valencia, Castellón y Alicante (Bancaja), Caja Insular de Ahorros de Canarias, Caja de Ahorros y Monte de Piedad de Ávila, Caixa d Estalvis Laietana, Caja de Ahorros y Monte de Piedad de Segovia and Caja de Ahorros de La Rioja (referred to collectively as the Cajas ) signed an integration agreement (the Integration Agreement ) calling for the incorporation of a contractually-based consolidable group of credit institutions. The Integration Agreement made provision for the creation of a group comprising the Cajas and implemented as an Institutional Protection Scheme ( IPS ) in accordance with the requirements and conditions set out in Directive 2006/48/EC (implemented in Spanish law under Article 26.7 of Royal Decree 216/2008 and rule 15 of Bank of Spain Circular 3/2008 to Credit Institutions on the calculation and control of minimum capital requirements) and in Law 13/1985 of 25 May on the investment ratios, capital and reporting requirements of financial intermediaries). The Integration Agreement originally sought to arrange the Group arising from the Integration Agreement as an integrated organisation that qualifies as a consolidable group for accounting and regulatory purposes and as a concentration vehicle for the purposes of competition law. The Agreement set out integrated management and ownership within the confines of law and without prejudice to the rights of the owners of non-controlling interests of the Group s business investments (barring certain exceptions established in the Agreement itself) and therefore centralises the decision-making process in respect of existing and future portfolio investments and divestments. On 3 December 2010, the Central Body of the IPS was incorporated under the name Banco Financiero y de Ahorros, S.A. ( BFA ). The entity was entered in the Valencia Companies Register on 7 December 2010 and placed on the Bank of Spain Savings Banks Register on 13 December Also on 13 December 2010, the Board of Directors of BFA ratified its adhesion to the Integration Agreement as the parent of the group arising from the Integration Agreement. On the same date, the Cajas contributed to BFA the right to receive 100% of the results of all their businesses, carried out in all regions as from 1 January 2011 (the Mutuality Right ), subject to a statement from the Bank of Spain indicating that no objections are made to the arrangement. At the Annual General Meeting held on 3 December 2010, the shareholders of BFA approved the issue of convertible preference shares amounting to EUR 4,465 million, which were subscribed and paid exclusively by the Fund for Orderly Bank Restructuring (FROB). On 30 December 2010, the Cajas and BFA signed an addendum to the Integration Agreement whereby the Cajas undertook to assign the voting rights in their subsidiaries, so that the policies through which BFA will exercise control over the entities, as established in the Integration Agreement, could be designed and implemented. For accounting purposes, the Integration Agreement sets up BFA as the parent of the Banco Financiero y de Ahorros Group, whereas the Cajas and their subsidiaries are 7

12 Group subsidiaries, insofar as BFA had the power to oversee the financial and operational policies of the other Group entities. On 28 January 2011, the Cajas and BFA signed a second addendum to the Integration Agreement, whereby the Cajas assigned all the assets and liabilities of their retail banking businesses to BFA. The Cajas will continue to manage the retail banking businesses in their native territory, to the extent of the powers delegated to them by BFA. Subsequently, between 14 February 2011 and 17 February 2011, the boards of directors of the Cajas and of BFA approved the projects to de-merge the banking and banking-related assets and liabilities of the Cajas for integration in BFA (the "De-Merger Projects" or the "First De-Merger Project"). These projects were duly filed in the corresponding Companies Registers. Under the De-Merger Projects, the contribution of the Cajas de-merged assets and liabilities to BFA would be compensated through the aforementioned Mutuality Right. Accordingly, the Cajas will not receive any compensation for the contribution other than the obligations set out under the Mutuality Right. The balance sheets of the Cajas at 31 December 2010 were deemed to be the de-merger balance sheets, with the exceptions set out in the De-Merger Projects of assets and liabilities other than those stipulated above which were not de-merged. The de-merger is effective for accounting purposes as of 1 January On 17 February 2011, the Cajas and BFA signed a third addendum to the Integration Agreement in order to allow BFA to adopt the most appropriate structure for its flotation. On 18 February 2011, the Spanish Cabinet approved Royal Decree-Law 2/2011 of 18 February 2011 to strengthen the financial system ( RDL 2/2011 ). This decree-law introduced and defined a new solvency requirement to be met by the institutions ("principal capital") and, among other provisions, established that: (i) credit institutions must have a principal core capital ratio of at least 8% of their total risk-weighted exposures, calculated in accordance with Law 13/1985 of 25 May, on the investment ratios, capital and reporting requirements of financial intermediaries and the related implementing regulations; and (ii) those credit institutions that have secured over 20% of funding from the wholesale market and that have placed less than 20% of capital or voting rights with third parties must have a principal core capital ratio of 10%. On 5 April 2011, the board of directors and the shareholders of BFA, in their general meeting, approved a second de-merger project for the contribution by BFA to its subsidiary Bankia of a significant portion of BFA s banking and financial businesses received from the Cajas in the course of the de-mergers carried out previously (the "Second De-Merger Project"). This Second De-Merger Project was likewise approved on 6 April 2011 by the Board of Directors and the shareholders of Bankia, a BFA Group company, at the general meeting (attended by all shareholders). On 29 April 2011, the Cajas and BFA signed a novation to the Integration Agreement to adapt it to Royal Decree-Law 2/2011 of 18 February, to strengthen the financial system, approving, with effect from 1 January 2011, the mutual support system and the mutual profit-sharing system set out under the Integration Agreement. In connection with the flotation, on 16 June 2011, BFA agreed to apply for admission to trading on the Madrid, Barcelona, Bilbao and Valencia Stock Exchanges and inclusion on the Stock Exchange Interconnection System (Continuous Market) of all outstanding shares representing the share capital of Bankia. On 28 June 2011, the General Meeting of Shareholders and Board of Directors of BFA and, subsequently, the General Meeting of Shareholders and Board of Directors of Bankia, adopted the necessary agreements to implement Bankia's market listing by means of a public share offering and admission to trading (IPO). The related prospectus was registered with the Spanish Securities Market Commission ("CNMV") on 29 June Among the agreements implemented, Banco Financiero y de Ahorros, S.A. resolved to increase Bankia's share capital by EUR 1,649,144,506 through the issue of 824,572,253 new shares, and to authorise the Board of Directors, in the event of an incomplete subscription, to declare share capital increased by the amount of the subscriptions actually made during the public share offering. BFA waived its preferential subscription rights with regard to the shares associated with the capital increase. Following approval of Bankia's market listing prospectus, on 20 July 2011, the Bank completed the IPO and the new shares were officially admitted for trading. The initial share price was EUR Pursuant to the IPO, the Bank issued 824,572,253 new shares at a par value of EUR 2 each, with an issue premium per share of EUR 1.75, producing a total share capital increase of EUR 1,649,145 thousand, and an issue premium of EUR 1,443,001 thousand. On 10 February 2012, the Bank's Board of Directors decided to carry out a monetary capital increase excluding preferential subscription rights, through the issue and circulation of a maximum of four hundred and fifty-four million ordinary Bankia, S.A. shares (454,000,000). The capital increase forms part of the 8

13 Repurchase Offer of certain preference shares and subordinated debt by BFA (the parent entity), the results of which, following expiry of the acceptance period on 23 March 2012, were as follows: the total nominal amount of the securities repurchased in the Repurchase Offer was EUR 1,155 million; the total amount of initial payments (totalling 75% of the aforementioned repurchase amounts) made on 30 March 2012 was EUR 866 million; the latter amount was applied to the subscription of the Bank's shares circulated pursuant to the aforementioned share capital increase. A total of 261,391,101 shares were issued, at a price of EUR lastly, under the framework of the Loyalty Plan linked to the Repurchase Offer, the deferred payments for 15 June and 14 December 2012, which were paid by BFA to the investors, amounted to EUR 92 million and EUR 91 million, respectively. These amounts were reinvested automatically and simultaneously in 43,797,889 and 45,341,616 additional shares of Bankia from its treasury shares, at prices of EUR and EUR 2.000, respectively. At year-end 2012, as a result of the aforementioned share capital increases, the Bank's share capital amounted to EUR 3,987,927 thousand, represented by 1,993,963,354 fully subscribed and paid up registered shares (see Note 23). Bankia's main shareholder is Banco Financiero y de Ahorros, S.A.U., which at the date of authorisation for issue of these financial statements held % of its share capital including the impact of treasury shares. On 9 May 2012, the board of directors of Banco Financiero y de Ahorros, S.A.U. unanimously resolved to submit a share conversion request to the Fund for Orderly Bank Restructuring ("FROB") through the Bank of Spain to convert the EUR 4,465 million of convertible preference shares issued by BFA and subscribed by the FROB into shares of BFA, which would be issued on executing the capital issue agreement permitting this conversion. At its meeting on 14 May 2012, the FROB board resolved to accept the request. On 23 May 2012, Banco Financiero y de Ahorros, S.A.U. sent communiqués to the Bank of Spain and the FROB notifying them of its intention of requesting a capital contribution from the FROB of EUR 19,000 million. On 24 May 2012, both institutions indicated that they were prepared to immediately provide the said financial support pursuant to compliance with the requirements set forth in their regulations. The European Commission temporarily authorised, in accordance with EU State aid rules, the conversion of convertible preference shares held by the Spanish government for an amount of EUR 4,465 million, and the possibility of issuing liabilities with a guarantee by the Spanish government amounting to EUR 19,000 million in favour of the BFA Group and its subsidiary Bankia. On 27 June 2012, after conversion of the convertible preference shares (which, inter alia, led to the prior reduction of BFA s share capital to zero following the redemption of the 27,040,000 shares held prior to the conversion process by the Cajas ), the FROB became the sole shareholder of Banco Financiero y de Ahorros, S.A.U., as it controlled 100% of its share capital, warranting disclosure of BFA s single member status. In addition, as a result of the above and under the framework of the conversion process mentioned previously, the Cajas did not belong to the BFA Group at 31 December In June 2012, the results of the stress test of the Spanish banking system carried out by two international consulting firms that assessed the system s capital deficit under a severely adverse stress scenario were released. Under this scenario, the system-wide capital buffer requirement estimated by the consultants was between EUR 51,000 million and EUR 62,000 million. Subsequently, based on the analysis of the credit portfolios of 14 Spanish banks, including BFA-Bankia, performed by four auditing firms, one of the international consultants conducted a final stress test in which it estimated the expected losses of these banks, including those of BFA-Bankia. The result of this stress test was released on 28 September 2012, showing capital needs for the BFA Bankia Group of EUR 13,230 million in the baseline scenario and EUR 24,743 million in the adverse scenario. On 12 September 2012, while the restructuring process was being completed, the FROB agreed to the capital increase of BFA through the non-monetary contribution of EUR 4,500 million through the issue of 4,500 million registered ordinary shares with a par value of EUR 1 each, fully subscribed and paid in, in order to strengthen the BFA-Bankia Group's regulatory capital. On the same date, BFA granted Bankia, S.A. a subordinated loan in the amount of EUR 4,500 million with an unspecified maturity and an interest rate of 8% (see Note 19). 9

14 Lastly, on 28 November 2012, the BFA Bankia Group received approval by the European Commission, the Bank of Spain and the FROB for the Bank's Restructuring Plan (the Restructuring Plan ). This final approval marked the completion of the joint analysis and work by the entities, the European Commission, the FROB and the Bank of Spain begun last July and concluded when the results of the stress test were released on 28 September The capital requirements identified in the stress tests were reduced by EUR 24,552 million due to the impact of the transfer of real estate assets to the asset management company created for the bank restructuring (SAREB) (see Note 1.16). The estimates of public assistance required by the BFA Group set out in the Restructuring Plan to comply with regulatory capital and cash adequacy requirements in applicable regulations include approximately EUR 6,500 million related to the positive impact estimated for certain management actions with the BFA Group's hybrid instruments (preference shares and subordinated debt) to be carried out within the scope of the principles and targets regarding the burden-sharing of bank restructuring costs set out in Law 9/2012, of 14 November, on the restructuring and resolution of credit institutions ( Law 9/2012 ). As of the date of authorisation for issue of these financial statements for 2012, management actions entailing the conversion of hybrid instruments to capital provided for in the Restructuring Plan had yet to begin. As a result, the amount of public assistance required by the BFA Group in the Restructuring Plan was finally estimated at EUR 17,959 million. The Bankia Group's capital requirements, which should be considered as part of the BFA Group's requirements indicated above, were estimated at EUR 15,500 million. Of this amount, approximately EUR 4,800 million is expected to be covered through the conversion of hybrid instruments mentioned above and EUR 10,700 million through contributions by the Bank's shareholders, with Bankia's capital increase fully guaranteed by BFA. In this respect, on 26 December 2012, as part of the aforementioned Restructuring Plan, the FROB adopted the following agreements: The capital increase at Banco Financiero y de Ahorros, S.A.U. amounting to EUR 13,459 million, subscribed by the FROB and paid by that entity through the non-monetary contribution of securities of the European Stability Mechanism (EMS). The increase comes in addition to that of EUR 4,500 million carried out on 12 September 2012 through the non-monetary payment of treasury bills. These bills were also swapped for securities of the ESM. As indicated previously, the issue by Bankia of convertible contingent bonds (CoCos) without preferential subscription rights in an amount of EUR 10,700 million subscribed in full by BFA through the contribution of fixed-income securities issued by the ESM. The BFA Group's Restructuring Plan defines the framework that will allow the BFA Bankia Group to implement a Strategic Plan for the period. This plan establishes the measures that will be adopted during the period within the framework of the limitations imposed and commitments assumed by the BFA Group with EU and Spanish authorities in the Restructuring Plan that will enable the BFA Group to meet all the commitments assumed with them by As a result, from the end of the Strategic Plan until 2017, additional measures to those considered initially for the period will likely be adopted with the overriding goal of strengthening the Bank's competitive position, rebalancing its balance sheet, improving efficiency and reducing the risk premium. The main measures included in the Strategic Plan are as follows: The disposal of non-earning assets and non-strategic equity investments. Between the transfer of assets to the SAREB, the sale of investees and other portfolios and the disposal of loan portfolios, Bankia expects to shed EUR 50,000 million (down from EUR 90,000 million to EUR 40,000 million). A change in the composition of the loan portfolio, resulting in a greater proportion of lending to businesses and practically zero exposure to the real estate business. Reduction in the Bank's capacity, both in terms of its branch network and in terms of its workforce, to ensure its future viability. The number of branches will be reduced by approximately 39%, from 3,117 to around 1,900-2,000. The workforce will be cut by 28%, from 20,589 to around 14,500 employees. This retrenchment will guarantee the Bank's viability and the preservation of 72% of existing jobs. In this respect, on 8 February 2013 a labour agreement was entered into with the majority of the Bank's union representatives (see Note 1.11). Efficiency will also be improved by streamlining the intermediate structures of the branch network and optimising central services. Elsewhere, the commitments agreed with the authorities in the framework of the Restructuring Plan include the adoption, by BFA, of the following measures by 31 December 2013: 10

15 its merger, into a single entity, with Bankia, S.A., or its transformation into a holding company without a banking license At the date of authorisation for issue of these financial statements, the directors had yet to take a decision in this respect. Nevertheless, the potential impact of any decision would not be material for the Bankia Group's equity and, in any case, neutral for the BFA Group. As a result, Bankia is a subsidiary of the Banco Financiero y de Ahorros Group and, in turn, the parent of a business group (the "Group" or Bankia Group ). At 31 December 2012, the scope of consolidation of the Bankia Group encompassed 330 companies, including subsidiaries, associates and jointly-controlled entities. These companies engage in a range of activities, including among others insurance, asset management, financing, services, and property development and management. Appendices I and II list the entities that form part of the scope of consolidation of the Bankia Group at 31 December 2012 (subsidiaries controlled by the Bank and jointly-controlled entities). Appendix III list the entities that form part of the scope of consolidation of the Bankia Group at 31 December 2012 that were reclassified to "Non-current assets held for sale" (subsidiaries controlled by the Bank, jointly-controlled entities and associates over which Bankia directly or indirectly exercises significant influence, see Note 2.1), and specifying the percentage of voting rights controlled by Bankia in each company. Bankia s 2012 financial statements were authorised for issue by Bankia's Board of Directors at the meeting held on 20 March In addition to these separate financial statements, Bankia's Board of Directors authorised for issue the Bankia Group's consolidated financial statements for the year ended 31 December 2012, prepared in accordance with the International Financial Reporting Standards as adopted by the European Union. (1.3) Reporting framework applied to draw up the financial statements In accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, all companies governed by the laws of a member state of the European Union and whose securities are traded on a regulated market in any European Union country must file consolidated financial statements for periods beginning on or after 1 January 2005 in accordance with the International Financial Reporting Standards as adopted by the European Union ( IFRS-EU ). Bankia's financial statements for the year ended 31 December 2012 are presented in accordance with the provisions of Bank of Spain Circular 4/2004 of 22 December on public and confidential financial reporting rules and formats for credit institutions ("Circular 4/2004") and subsequent amendments thereto, which implements and adapts the International Financial Reporting Standards endorsed by the European Union to Spanish credit institutions. The other general Spanish business and accounting standards and other applicable Bank of Spain Circulars and standards were used in the preparation of these financial statements, including, where appropriate, the disclosures required by these standards in these notes to the financial statements. Bankia's financial statements for the year ended 31 December 2012 were prepared taking into account all accounting principles and standards and mandatory measurement criteria applicable in order to give a true and fair view, in all material respects, of the equity and financial position of Bankia, S.A. at 31 December 2012 and of the results of its operations and cash flows during the year then ended, pursuant to the aforementioned applicable financial information reporting framework, and in particular to the accounting principles and criteria therein. The principal accounting policies and measurement bases applied in preparing the Bank s financial statements for the year ended 31 December 2012 are summarised in Note 2. Main regulatory changes during the period from 1 January to 31 December 2012 The main changes arising in 2012 in the laws and regulations applicable to Bankia, which were applied in the preparation of these financial statements, are as follows: Bank of Spain Circular 2/2012 of 29 February amending Circular 4/2004 of 22 December on public and confidential financial reporting rules and formats for credit institutions. Bank of Spain Circular 2/2012 of 29 February was published on 6 March The primary objective of this Circular is to adapt Circular 4/2004 to Royal Decree-Law 2/2012, of 3 February, on the reorganisation of the financial sector. The main modifications to this Circular are: - It adapts loan loss reserve (provisions) requirements for financing and assets foreclosed or assets received as payment of debts in connection with land for development and with property construction or development for credit institutions in Spain existing at 31 December 2011 and 11

16 those arising from refinancing subsequent to that date, as set out in the aforementioned Royal Decree-Law. - It amends the general rules regarding the accounting of foreclosed assets or assets received as payment of debts, determining the value at which these real estate assets should be initially recognised and subsequently measured. In terms of subsequent measurement, the percentage cover increases to 20%, 30% and 40% in accordance with the date of inclusion of the assets in the balance sheet (over 1, 2 and 3 years, respectively). The measures established in Royal Decree-Law 2/2012 of 3 February on the reorganisation of the financial sector and those included in this Circular were met prior to 31 December Bank of Spain Circular 6/2012, of 28 September, for credit institutions amending Circular 4/2004 of 22 December, on public and confidential financial reporting rules and formats. On 2 October, Bank of Spain Circular 6/2012, of 28 September, on credit institutions was published in the Spanish National Gazette (Boletín Oficial del Estado). The main purpose is to adapt Circular 4/2004 to Royal Decree-Law 18/2012, of 11 May, on the reorganisation and sale of real estate assets in the financial sector with respect to additional provisioning requirements for assets related to the real estate activity. The main modifications to this Circular are: - It establishes, in the same vein as Royal Decree-Law 2/2012, additional provisioning requirements for the impairment of loans to the real estate sector classified as "Non-troubled". As with the previous regulations, these new requirements are stipulated separately for one time only, depending on the different classes of finance. - It introduces new disclosure requirements for credit institutions in their separate and consolidated annual financial statements regarding refinancing and restructuring operations, and industry and geographic risk concentration. - It adds transparency requirements regarding exposures to real estate construction and development, with disclosure of assets foreclosed or received in payment of debts transferred to companies for management of these assets. The impacts of these two regulations (Circulars 2/2012 and 6/2012) were recognised fully in 2012, both with respect to assets remaining on the Bank's balance sheet at 31 December 2012 and those transferred to the SAREB (see Note 1.16) which, prior to their transfer, were measured, through the additional charges required, at the transfer price. Royal Decree-Law 24/2012 of 31 August on the restructuring and resolution of credit institutions On 31 August 2012, the Spanish cabinet approved a Royal Decree-Law on the restructuring and resolution of credit institutions, designed to safeguard the stability of the financial system as a whole. It includes six types of measures: - An enhanced framework for the management of crisis situations at banks. - New regulation of the FROB which defines its powers and significantly enhances the tools for intervention. - Stronger protection for retail investors, introducing restrictions on the sale of investment products. - A legal framework for the creation of an Asset Management Company (AMC), that can take the status of a public limited company (sociedad anónima) or a trust fund, pursuant to the pending implementing regulations. - A burden-sharing system for restructuring costs between the public and private sector, whereby holders of hybrid capital instruments, preference shares and subordinated debt may be obliged to bear part of the losses of a bank in a crisis situation. - Other aspects, such as: exemption from the grounds for mandatory winding-up set out in Section 363, 1. e) of the Spanish Corporate Enterprises Act (Ley de Sociedades de Capital) for credit institutions in which the FROB holds a controlling interest or those whose governing body is controlled by the FROB. Likewise, the aforementioned institutions and directors thereof are exempt from the system provided for in Section 2 of Title X of the Spanish Corporate Enterprises Act. 12

17 exemption from Section 327 of the Spanish Corporate Enterprises Act on the mandatory reduction of capital when losses incurred lower equity to below two-thirds of capital for the aforementioned entities. However, these sections of the Corporate Enterprises Act will become applicable, as appropriate, once the FROB ceases to hold a controlling position or control of the governing body of the subject entity, at which time the periods set out in Sections 327 and of the Corporate Enterprises Act, respectively, will be opened. strengthening of principal capital requirements, to 9%, for all banks as from 1 January 2013, with changes in the definition of principal capital to adapt to the definition of the EBA. new limits on director compensation of banks receiving assistance, with a cap on fixed compensation for all items of EUR 500,000; transfer of authorisation and sanctioning competencies from the Ministry of Finance and Competitiveness to the Bank of Spain. This Royal Decree was transposed into law with Law 9/2012 of 14 November on the restructuring and resolution of credit institutions. Lastly, on 16 November 2012, Royal Decree 1559/2012, of 15 November, establishing the legal regime applicable for asset management companies and implementing Law 9/2012, of 14 November, on the restructuring and resolution of credit institutions, was published. The purpose of this Royal Decree is to develop the framework for the organisation and functioning of asset management companies, as well as the powers of the FROB and the Bank of Spain with respect to them. It is also designed to implement additional provisions seven to ten of the law regulating the legal framework for the SAREB, the assets to be transferred to it, the institutions required to transfer assets, and the groupings of assets and liabilities (see Note 1.16). (1.4) Responsibility for the information and estimates made The information contained in these financial statements is the responsibility of Bankia s directors. In the Bank s financial statements for the year ended 31 December 2012, estimates were made in order to quantify certain of the assets, liabilities, income, expenses and obligations reported therein. These estimates relate basically to the following: - The fair value of certain financial and non-financial assets and liabilities (see Notes 2.5 and 2.22). - Impairment losses on certain financial and non-financial assets (chiefly property) (see Notes 2.12, 2.17, 2.18, 2.19 and 2.22). - The assumptions used in the actuarial calculation of the post-employment benefit liabilities and obligations and other long-term commitments (see Note 2.15). - Estimate of the costs to sell and of the recoverable amount of non-current assets held for sale, investment property and inventories based on their nature, state of use and purpose for which they are intended, acquired by the Bank as payment of debts, regardless of the legal format pursuant to which they were acquired, applied on a consistent basis in accordance with Bank of Spain Circular 4/2004 (see Notes 2.17, 2.19 and 2.22). - The recoverability of deferred tax assets recognised (see Note 25). - The useful life, fair value and recoverable amount of tangible and intangible assets (see Notes 2.17 and 2.18). - The probability of occurrence of certain losses to which the Bank is exposed due to its activity. Although these estimates were made on the basis of the best information available at 31 December 2012 and at the date of authorisation for issue of these financial statements on the events analysed, future events may make it necessary to change these estimates (upwards or downwards) in the years ahead. Changes to accounting estimates would be applied prospectively in accordance with the applicable standards, recognising the effects of the change in estimates in the related income statement in the future financial years concerned. 13

18 (1.5) Comparative information In compliance with current legislation, the information relating to 2011 contained in these financial statements is presented solely for comparison with the information relating to 2012 and, accordingly, does not constitute the Bank's financial statements for (1.6) Agency agreements A list at 31 December 2012 of Bankia's Agents which meet the conditions established in Article 22 of Royal Decree 1245/1995 of 14 July is provided in Appendix VI, attached. (1.7) Investments in the capital of credit institutions Bankia s ownership interests of 5% or more in the capital or voting rights of other Spanish or foreign credit institutions at 31 December 2012 are listed in Appendices I, II and III. In addition to the stake in Bankia held by BFA (see Note 23), the breakdown of ownership interests of more than 5% held by non-group Spanish or foreign credit institutions in the share capital or voting rights of credit institutions forming part of the Bankia Group at 31 December 2012 and 2011 is as follows: Shareholding institution Investee Ownership interest Banco Popular de Ahorro de Cuba Corporación Financiera Habana, S.A. 40% (1.8) Environmental impact In view of the business activities carried on by Bankia (see Note 1.1), it does not have any environmental liabilities, expenses, assets, provisions or contingencies that might be material with respect to its equity, financial position and results. Therefore, no specific disclosures relating to environmental issues are included in these notes to the financial statements. (1.9) Minimum reserve ratio At 31 December 2012 and throughout 2012 Bankia met the minimum reserve ratio requirements stipulated by Spanish legislation. (1.10) Deposit Guarantee Fund Pursuant to the Ministry of Economy and Finance Order 3515/2009 of 29 December establishing the contributions to be made by banks and savings banks to the Deposit Guarantee Fund (Spanish "FGD"), and at the proposal of the Bank of Spain, the amount of the contributions by credit institutions was set at 1 per mille of the deposits covered by the guarantee. The following regulations were published in 2012 and 2011 in amendment to the system for contributions to the Deposit Guarantee Fund: - Royal Decree-Law 16/2011 of 14 October creating the Credit Institutions' Deposit Guarantee Fund, merging the three deposit guarantee funds that had existed hitherto (the Savings Banks' Deposit Guarantee Fund, the Banking Establishments' Deposit Guarantee Fund and the Credit Cooperatives' Deposit Guarantee Fund) into a single fund termed the Fondo de Garantía de Depósitos de Entidades de Crédito (Credit Institution Deposit Guarantee Fund), which continues the role of its three predecessor funds to guarantee deposits with credit institutions - and is designed, in addition, to support a further purpose: reinforcement of banks' solvency and operational effectiveness, also known as the "resolving role", to ensure that the new comprehensive Fund can operate flexibly. - Royal Decree-Law 19/2011 of 2 December to amend Royal Decree-Law 16/2011 of 14 October creating the Credit Institution Deposit Guarantee Fund. This Royal Decree-Law completes and enhances the reform of the system conducted by Royal Decree-Law 16/2011, with a review of the legal threshold for the annual contributions that must be made to the fund by entities, raising it from 2 per mille to 3 per mille in order to guarantee a maximum operating capacity for the Fund. Additionally, provision is made for the express derogation of ministerial orders which, pursuant to the prevailing system, established a circumstantial optional reduction of contributions by entities, including Ministry of Economy and Finance Order 3515/2009 of 29 December setting the contributions by the Bank at 1 per mille of the deposits covered by the guarantee. The result of both these changes is the establishment, within a regulation considered as law, of a threshold of 3 per mille of contributions of guaranteed deposits and the establishment of an actual contribution of 2 per mille instead of the aforementioned percentages. - Royal Decree 771/2011 was introduced on 4 June 2011 and amended, among others, Royal Decree 2606/1996 governing deposit guarantee funds at credit institutions. The new regulation 14

19 created a new system of additional contributions to the funds based on remuneration from the deposits themselves. Meanwhile, Bank of Spain Circular 3/2011 of 30 June was published and entered into force on 4 July It implemented the new system of contributions to deposit guarantee funds, requiring additional contributions (payable quarterly) from entities which arrange term deposits or settle demand accounts with remuneration that exceeds certain interest rates published by the Bank of Spain, depending on term or demand status. - On 31 August 2012, Royal Decree-Law 24/2012, of 31 August, on the restructuring and resolution of credit institutions took effect, repealing Sections 2 bis and 2 ter of Article 3 of Royal Decree 2606/1996, of 20 December, on the credit institution deposit guarantee fund, governing additional quarterly contributions by the banks involved that had taken deposits or settled current accounts at rates above the official benchmark rates published by the Bank of Spain (see previous paragraph). - Lastly, on 30 July 2012, the governing body of the deposit guarantee fund (FGDEC for its initials in Spanish) agreed to an extraordinary contribution by member entities payable by each in ten equal annual instalments on the same day that the entities must make their ordinary annual contributions, over the next ten years. The contribution to be deposited by each member may be deducted from the annual contribution which, as appropriate, is paid by the entity on the same date, and up to the amount of the ordinary contribution. The Bank's contributions to the Deposit Guarantee Fund amounted to EUR 420,067 thousand in 2012 (EUR 124,648 thousand in 2011) and were recognised under "Other operating expenses" in the accompanying income statement (see Note 35). (1.11) Events after the reporting period On 8 February 2013, an agreement was signed with the majority of the Bank's union representatives (CCOO, UGT, ACCAM, SATE and CSICA, which combined represent 97.86% of represented employees) regarding a series of measures on redundancies, changes to working conditions, and functional and geographic mobility, which are intended to help ensure the future viability of the Bank while complying with the requirements of the Strategic Plan and the Recapitalisation Plan approved by the European Commission on 28 November This agreement includes the following measures that will remain in place until 31 December 2015: Redundancies for a maximum of 4,500 employees, with redundancy packages depending on the age of those affected. Changes to the working conditions of employees that continue to work at the Bank, through measures to eliminate or reduce fixed remuneration conditions, variable remuneration conditions, pension plan contributions, entitlements for risk and promotion measures. The agreement encourages voluntary redundancies and employability with the creation of an employment pool for those affected, while also enabling the Bank to move towards an efficiency ratio below 50%. The commitments derived from these agreements are adequately covered with provisions recognised for this purpose at 31 December 2012 (see Note 20). On 1 March 2013, within the framework of the active management of its debt issues, Bankia, S.A. announced a tender offer to all holders of certain mortgage-covered bonds (cédulas hipotecarias) under the following terms: The tender offer securities were purchased pursuant to an unmodified Dutch auction procedure. The purchase price paid by the Bank to holders of the tender offer securities whose offers were accepted was equal to the price specified by the holders in their tender instructions. Holders of tender offer securities whose tenders were accepted received, together with the purchase price described above, an amount equal to the accrued unpaid interest on the tender offer securities from the last interest payment date (inclusive) until the date of settlement of the offer (exclusive). The deadline for submitted tender instructions was 12 March 2013, with acceptances to purchase securities for a nominal amount of EUR 1,217,650,000. The objective of the tender offer was to optimise the Bank's funding structure in the wholesale market, as well as the duration and cost of future debt, and to strengthen its balance sheet, all this in a context of prudent liquidity management. 15

20 No other significant events took places between 31 December 2012 and the date of authorisation for issue of these financial statements other than those mentioned above in these financial statements. (1.12) Customer care service At its meeting on 16 June 2011, the Bank's Board of Directors approved the "Customer Protection Regulations of Bankia, S.A. and its Group", which was subsequently updated at its meeting of 25 July Among other aspects, the Regulations stipulate that the Bankia, S.A. Customer Care Service must handle and resolve any complaints or claims submitted by those in receipt of financial services from all BFA Group finance companies one of which is the Bank covered by the scope of the service (Bankia, S.A. and Group entities subject to Order ECO/734/2004 of 11 March governing Customer Care Departments and Services and Customer Ombudsmen of Financial Institutions). Pursuant to Order ECO/734/2004 of 11 March governing Customer Care Departments and Services and Customer Ombudsmen of Financial Institutions, the following BFA Group entities are subject to the obligations and duties required by the Order in this connection, with claim procedures and solutions centralised through the Bankia, S.A. Customer Care Service: Company Bankia, S.A. Banco Financiero y de Ahorros, S.A.U. Bankia Fondos, S.G.I.I.C., S.A. Bankia Banca Privada, S.A. Bancofar, S.A. Bankia Bolsa, S.V., S.A. Caja de Madrid de Pensiones, S.A. E.G.F.P. Finanmadrid, S.A.U., E.F.C. Madrid Leasing Corporación, S.A.U., E.F.C. Bankia Banca Privada Gestión S.G.I.I.C., S.A. Laietana Generales, Compañía de Seguros de la Caja de Ahorros Laietana, S.A.U. Laietana Vida, Compañía de Seguros de la Caja de Ahorros Laietana, S.A.U. Segurcaja, S.A., Correduría de Seguros The Bank fulfils these obligations and duties in accordance with Law 44/2002, of 22 November, on Financial System Reform Measures, and with Ministry of Economy Order ECO/734/2004, of 11 March, on Customer Care Departments and Services and Customer Ombudsmen of Financial Institutions. The main data concerning Bank customer claims in 2012 and 2011 are as follows: Company No. of claims received No. of claims admitted for processing No. of claims dismissed No. of claims resolved against the customer No. of claims resolved in favour of the customer Bankia, S.A. 28,226 27, ,153 5, December 2011 Company No. of claims received No. of claims admitted for processing No. of claims dismissed No. of claims resolved against the customer No. of claims resolved in favour of the customer Bankia, S.A. 18,061 16,154 1,907 7,663 6,878 16