(consolidated) Open

Transcription

(consolidated) Open

Bankia, S.A. and subsidiaries forming the
Bankia Group
__________________
Consolidated financial statements for the year ended
31 December 2015
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial
reporting framework applicable to the Group (see Notes 1.3 and 50). In the event of a discrepancy, the Spanish-language version prevails
CONTENTS
PAGE
CONSOLIDATED FINANCIAL STATEMENTS





Consolidated balance sheet ................................................................................................................................................. 1
Consolidated income statement ........................................................................................................................................... 2
Consolidated statement of recognised income and expense ............................................................................................... 3
Consolidated statement of changes in total equity ............................................................................................................... 4
Consolidated statement of cash flows .................................................................................................................................. 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of the Group, beginnings of the incorporation of Bankia, reporting framework applied to draw up the
consolidated financial statements and other information ....................................................................................................... 7
(2) Accounting policies and measurement bases .......................................................................................................................22
(3) Risk management .................................................................................................................................................................60
(4) Capital management .............................................................................................................................................................82
(5) Earnings per share and dividend policy ................................................................................................................................86
(6) Remuneration of Board members and senior executives ......................................................................................................86
(7) Proposed appropriation of profit of Bankia, S.A. ...................................................................................................................90
(8) Cash and balances with central banks ..................................................................................................................................90
(9) Financial assets and liabilities held for trading ......................................................................................................................91
(10) Other financial assets at fair value through profit or loss .....................................................................................................93
(11) Available-for-sale financial assets .......................................................................................................................................93
(12) Loans and receivables ........................................................................................................................................................95
(13) Held-to-maturity investments ............................................................................................................................................102
(14) Hedging derivatives (debtors and creditors) ......................................................................................................................104
(15) Non-current assets held for sale and Liabilities associated with non-current assets held for sale ....................................106
(16) Investments .......................................................................................................................................................................112
(17) Tangible assets .................................................................................................................................................................113
(18) Intangible assets ...............................................................................................................................................................115
(19) Other assets ......................................................................................................................................................................117
(20) Financial liabilities at amortised cost .................................................................................................................................118
(21) Liabilities under insurance contracts .................................................................................................................................121
(22) Provisions .........................................................................................................................................................................121
(23) Other liabilities...................................................................................................................................................................126
(24) Non-controlling interests ...................................................................................................................................................126
(25) Valuation adjustments .......................................................................................................................................................129
(26) Equity - Share capital and share premium, treasury share transactions, reserves and other information .........................130
(27) Fair value ..........................................................................................................................................................................133
(28) Tax matters .......................................................................................................................................................................144
(29) Other significant disclosures .............................................................................................................................................152
(30) Contribution to consolidated profit or loss by company .....................................................................................................156
(31) Interest and similar income ...............................................................................................................................................156
(32) Interest expense and similar charges ................................................................................................................................157
(33) Return on equity instruments ............................................................................................................................................157
(34) Share of profit/loss of entities accounted for using the equity method ..............................................................................157
(35) Fee and commission income ............................................................................................................................................158
(36) Fee and commission expense ..........................................................................................................................................158
(37) Gains and losses on financial assets and liabilities (net) ..................................................................................................158
(38) Exchange differences (net) ...............................................................................................................................................159
(39) Other operating income .....................................................................................................................................................159
(40) Other operating expenses .................................................................................................................................................159
(41) Administrative expenses – Staff costs...............................................................................................................................159
(42) Administrative expenses - Other general administrative expenses ...................................................................................168
(43) Amortisation ......................................................................................................................................................................169
(44) Provisions (net) .................................................................................................................................................................169
(45) Impairment losses on financial assets (net) ......................................................................................................................169
(46) Impairment losses on other assets (net) ...........................................................................................................................169
(47) Gains/(losses) on disposal of financial assets not classified as non-current assets held for sale .....................................170
(48) Gains (losses) on non-current assets held for sale not classified as discontinued operations ..........................................170
(49) Related parties ..................................................................................................................................................................171
(50) Explanation added for translation to English .....................................................................................................................174
APPENDICES
Appendix I - Separate financial statements ..............................................................................................................................175
Appendix II - Subsidiaries .........................................................................................................................................................181
Appendix III - Jointly-controlled entities ....................................................................................................................................183
Appendix IV - Jointly-controlled entities and associates classified under Non-current assets held for sale..............................184
Appendix V – Marketable Debt Securities ................................................................................................................................186
Appendix VI – Marketable debt securities and subordinated liabilities issued ..........................................................................187
Appendix VII – Movement in issues..........................................................................................................................................190
Appendix VIII – Information on the mortgage market ...............................................................................................................193
Appendix IX - Exposure to property and construction risk (transactions in Spain) ...................................................................200
Appendix X – Refinancing and restructuring operations and other requirements of Bank of Spain Circular 6/2012 ................205
Appendix XI - Detail of agents and disclosures required by Article 22 of Royal Decree 1245/1995 of 14 July .........................217
Appendix XII – Annual banking report ......................................................................................................................................220
Appendix XIII – Other information ............................................................................................................................................222
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 1.3 and 50). In the event of a discrepancy. the Spanish-language version prevails.
BANKIA, S.A. AND SUBSIDIARIES FORMING THE BANKIA GROUP
Consolidated balance sheets at 31 December 2015 and 2014
(Thousands of euros)
ASSETS
31/12/2015
31/12/2014 (*)
LIABILITIES AND EQUITY
2,978,920
2,926,782
1. Cash and balances with central banks (Note 8)
LIABILITIES
2. Financial assets held for trading (Note 9)
2.1. Loans and advances to credit institutions
2.2. Loans and advances to customers
2.3. Debt securities
2.4. Equity instruments
2.5. Trading derivatives
Memorandum item: loaned or advanced as collateral
12,202,084
53,705
72,486
12,075,893
50,834
18,605,873
83,819
73,796
18,448,258
78,840
-
-
4. Available-for-sale financial assets (Note 11)
31,088,891
31,088,891
13,412,720
34,771,723
34,771,723
11,232,480
5. Loans and receivables (Note 12)
117,775,812
6,443,436
110,569,911
762,465
82,443,791
125,227,223
10,967,462
112,691,243
1,568,518
95,415,710
23,700,899
8,505,548
26,661,330
6,332,965
3. Other financial assets at fair value through profit or loss (Note 10)
6. Held-to-maturity investments (Note 13)
7. Changes in the fair value of hedged items in portfolio hedges of interest rate risk
-
-
8. Hedging derivatives (Note 14)
4,073,473
5,538,715
9. Non-current assets held for sale (Note 15)
2,961,842
7,563,143
10. Investments (Note 16)
10.1. Associates
10.2. Jointly-controlled entities
285,124
285,124
-
297,992
297,992
-
11. Insurance contracts linked to pensions (Note 41.2)
358,628
384,132
12. Reinsurance assets
13. Tangible assets (Note 17)
13.1. Property. plant and equipment
13.1.1. For own use
13.1.2. Leased out under an operating lease
13.2. Investment property
Memorandum item: acquired under a finance lease
14. Intangible assets (Note 18)
14.1 Goodwill
14.2 Other intangible assets
15. Tax assets
15.1 Current
15.2 Deferred (Note 28)
16. Other assets (Note 19)
16.1 Inventories
16.2 Other
TOTAL ASSETS
-
-
2,057,970
1,425,973
1,425,973
631,997
-
1,861,792
1,277,202
1,277,202
584,590
-
203,085
98,162
104,923
196,582
102,162
94,420
8,356,295
273,966
8,082,329
8,547,543
195,722
8,351,821
926,610
36,085
890,525
206,969,633
1,065,773
115,597
950,176
233,648,603
1. Financial liabilities held for trading (Note 9)
1.1. Deposits from central banks
1.2. Deposits from credit institutions
1.3. Customer deposits
1.4. Marketable debt securities
1.6. Short positions
1.7. Other financial liabilities
2. Other financial liabilities at fair value through profit or loss
2.5. Subordinated liabilities
3. Financial liabilities at amortised cost (Note 20)
5. Hedging derivatives (Note 14)
6. Liabilities associated with non-current assets held for sale (Note 15)
7. Liabilities under insurance contracts (Note 21)
8. Provisions (Note 22)
8.1. Provisions for pensions and similar obligations
8.2. Provisions for taxes and legal contingencies
8.3. Provisions for contingent liabilities and commitments
8.4. Other provisions
9. Tax liabilities
9.1. Current
9.2. Deferred (Note 28)
10. Other liabilities (Note 23)
TOTAL LIABILITIES
EQUITY
1. Own funds (Note 26)
1.1. Capital
1.1.1 Issued
1.1.2 Less: Uncalled capital
1.2. Share premium
1.3. Reserves
1.3.1 Accumulated reserves (losses)
1.3.2 Reserves (losses) of entities accounted for using the equity method
1.4. Other equity instruments
1.5. Less: treasury shares
1.6. Profit/(loss) for the year attributable to the parent
1.7. Less: dividends and remuneration
2. Valuation adjustments (Note 25)
2.1. Available-for-sale financial assets
2.2. Cash flow hedges
2.3. Hedges of net investments in foreign operations
2.4. Exchange differences
2.5. Non-current assets held for sale
2.6. Entities accounted for using the equity method
2.7. Other valuation adjustments
3. Non-controlling interests (Note 24)
3.1. Valuation adjustments
3.2. Other
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
MEMORANDUM ITEM
1. Contingent exposures (Note 29.2)
2.Contingent commitments (Note 29.3)
31/12/2015
31/12/2014 (*)
12,407,705
12,394,174
13,531
176,276,080
19,474,064
23,228,124
108,701,831
22,880,901
1,045,906
945,254
977,688
1,741
2,898,322
364,368
1,911,372
386,498
236,084
881,061
274
880,787
831,029
18,123,820
18,066,227
57,593
193,081,682
36,500,033
23,965,069
106,806,698
23,349,950
1,043,356
1,416,576
2,489,930
3,604,145
1,705,687
391,308
456,643
450,127
407,609
1,179,453
20,767
1,158,686
930,552
194,273,626
221,115,269
11,933,687
9,213,863
9,213,863
1,726,334
2,199,863
(473,529)
(46,473)
1,039,963
695,875
601,961
2,026
11
3,676
57,940
30,261
66,445
1,978
64,467
12,696,007
206,969,633
23.701.438
6,984,778
16,716,660
11,331,029
11,517,329
11,517,329
4,054,700
(4,920,495)
(4,040,773)
(879,722)
(67,625)
747,120
1,215,727
1,085,401
(9,403)
(7,243)
3,410
57,231
59,649
26,682
(13,422)
634
(14,056)
12,533,334
233,648,603
22,518,009
7,270,745
15,247,264
The accompanying Notes 1 to 50 and Appendices I to XIII are an integral part of the consolidated balance sheet at 31 December 2015.
(*) Presented solely and exclusively for comparison purpose.
1
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 1.3 and 50).
In the event of a discrepancy, the Spanish-language version prevails
Consolidated income statement for the years ended 31 December 2015 and 2014
2015
2014 (*)
1. Interest and similar income (Note 31)
3,676,973
4,687,160
2. Interest expense and similar charges (Note 32)
(1,759,780)
3. Remuneration of capital having the nature of a financial liability
(936,792)
-
A. NET INTEREST INCOME
2,740,181
2,927,380
4. Return on equity instruments (Note 33)
-
5,524
4,955
31,872
1,020,607
32,297
1,035,665
(82,866)
281,133
(88,154)
217,640
8.1. Held for trading
(36,014)
(49,476)
8.2. Other financial instruments at fair value through profit or loss
410,885
244,647
(93,738)
30,134
22,469
7,774
76,739
225,920
-
14,955
3,173
73,566
34,990
175,975
(297,141)
(354,665)
-
(18,654)
(1,225)
(295,916)
(24,153)
(311,858)
5. Share of profit/(loss) of companies accounted for using the equity method (Note 34)
6. Fees and commission income (Note 35)
7. Fees and commission expenses (Note 36)
8. Gains and losses on financial assets and liabilities (net) (Note 37)
8.3. Financial instruments not measured at fair value through profit or loss
8.4. Other
9. Exchange differences (net) (Note 38)
10. Other operating income (Note 39)
10.1. Income from insurance and reinsurance contracts issued
10.2. Sales and income from the rendering of non-financial services
10.3. Other operating income
11. Other operating expenses (Note 40)
11.1. Expenses of insurance and reinsurance contracts
11.2. Change in inventories
11.3. Other operating expenses
B. GROSS INCOME
12. Administrative expenses
12.1. Staff costs (Note 41)
12.2. Other general administrative expenses (Note 42)
13. Depreciation and amortisation charge (Note 43)
14. Provisions (net) (Note 44)
15. Impairment losses on financial assets (net) (Note 45)
15.1. Loans and receivables
15.2. Other financial instruments not measured at fair value through profit or loss
C. NET OPERATING INCOME/(EXPENSE)
16. Impairment losses on other assets (net) (Note 46)
16.1. Goodwill and other intangible assets
16.2. Other assets
17. Gains/(losses) on disposal of assets not classified as non-current assets held for sale (Note 47)
18. Negative goodwill on business combinations
19. Gains/(losses) on non-current assets held for sale not classified as discontinued operations (Note 48)
D. PROFIT/(LOSS) BEFORE TAX
20. Income tax. (Note 28.3)
21. Mandatory transfer to welfare funds
E. PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS
22. Profit/(loss) from discontinued operations (net)
F. CONSOLIDATED PROFIT/(LOSS) FOR THE YEAR
F.1) Attributable to the parent
F.2) Attributable to non-controlling interests
-
3,806,183
4,008,812
(1,511,133)
(1,585,970)
(970,507)
(987,320)
(598,650)
(156,254)
(208,470)
(540,626)
(146,796)
(152,202)
(582,745)
(949,935)
(626,378)
43,633
(973,178)
1,413,307
1,108,183
28,136
(6,198)
(3,998)
32,134
36,936
(5,965)
(6,996)
23,243
(233)
-
-
(26,394)
(182,857)
1,451,985
912,132
(391,413)
(226,172)
-
-
1,060,572
685,960
-
85,328
1,060,572
771,288
1,039,963
747,120
20,609
24,168
0.09
0.09
0.07
0.07
0.09
0.09
0.06
0.06
Earnings per share (Note 5)
For continuing and discontinued operations
Basic earnings/(loss) per share (euros)
For continuing operations
(*) Presented solely and exclusively for comparison purposes.
The accompanying Notes 1 to 50 and Appendices I to XIII are an integral part of the consolidated income statement for the year ended 31 December 2015.
2
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 1.3 and 50). In
the event of a discrepancy, the Spanish-language version prevails.
Consolidated statement of recognised income and expense for the years ended 31 December 2015 and 2014
2015
A) CONSOLIDATED PROFIT/(LOSS) FOR THE YEAR
1,060,572
771,288
B) OTHER RECOGNISED INCOME AND EXPENSE
(518,508)
475,285
3,579
19,784
B.1) Items not to be reclassified to profit or loss
1. Actuarial gains/(losses) on defined-benefit pension plans
2014 (*)
5,113
28,263
2. Non-current assets held for sale
-
-
3. Companies accounted for using the equity method
-
-
4. Income tax on items not to be reclassified to profit or loss
(1,534)
(8,479)
(522,087)
455,501
1. Available-for-sale financial assets
(690,629)
543,206
1.1. Revaluation gains/(losses)
(314,879)
771,687
1.2. Amounts transferred to income statement
(375,750)
(228,481)
B.2) Items eligible to be reclassified to profit or loss
1.3. Other reclassifications
2. Cash flow hedges
-
-
16,327
12,453
16,327
12,453
-
-
2.3. Amounts transferred to initial carrying amount of hedged items
-
-
3. Hedges of net investments in foreign operations
-
-
10,347
(45,803)
10,347
(45,803)
-
-
-
-
(3,399)
5,384
(3,399)
5,384
-
-
-
-
(52,290)
30,077
4. Exchange differences
(52,290)
30,077
-
-
-
-
6. Actuarial gains/(losses) on pension plans
7. Entities accounted for using the equity method
-
-
(1,709)
48,426
(1,709)
48,426
-
-
-
-
8. Other recognised income and expense
-
-
9. Income tax on items eligible to be reclassified to profit or loss
199,266
(138,242)
C) TOTAL RECOGNISED INCOME AND EXPENSE (A+B)
542,064
1,246,573
520,111
1,221,075
21,953
25,498
C 1) Attributable to the parent
C 2) Attributable to non-controlling interests
The accompanying Notes 1 to 50 and Appendices I to XIII are an integral part of the consolidated statement of recognised income and expense for the year
ended 31 December 2015.
3
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 1,3 and 50), In the event of a discrepancy, the Spanish-language version prevails,
BANKIA, S,A. AND SUBSIDIARIES FORMING THE BANKIA GROUP
Consolidated statement of changes in total equity for the year ended 31 December 2015
EQUITY ATTRIBUTABLE TO THE PARENT
OWN FUNDS
RESERVES
Reserves
(losses) of
entities
accounted
for using
the equity
method
Other
equity
instruments
Less:
treasury
shares
Profit/(loss)
for the year
attributable
to the
parent
Less:
Dividends
and
remuneration
Share premium
Accumulated
reserves
(losses)
11,517,329
4,054,700
(4,040,773)
(879,722)
-
(67,625)
747,120
-
11,331,029
1,215,727
12,546,756
(13,422)
12,533,334
1.1 Adjustments due to accounting policy change
-
-
-
-
-
-
-
-
-
-
-
-
-
1.2 Error adjustments
-
-
-
-
-
-
-
-
-
-
-
-
-
11,517,329
4,054,700
(4,040,773)
(879,722)
-
(67,625)
747,120
-
11,331,029
1,215,727
12,546,756
(13,422)
12,533,334
-
-
-
-
-
-
1,039,963
-
1,039,963
(519,852)
520,111
21,953
542,064
(2,303,466)
(4,054,700)
6,240,636
406,193
-
21,152
(747,120)
-
(437,305)
-
(437,305)
57,914
(379,391)
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,303,466)
(4,054,700)
6,358,166
-
-
-
-
-
-
-
-
-
-
4.3 Conversion of financial liabilities into equity
-
-
-
-
-
-
-
-
-
-
-
-
-
4.4 Increase in other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
4.5 Reclassification of financial liabilities to other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
4.6 Reclassification of other equity instruments to financial liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
4.7 Remuneration to members
-
-
-
-
-
-
(201,553)
-
(201,553)
-
(201,553)
-
(201,553)
4.8 Treasury share transactions (net)
-
-
(9,736)
-
-
21,152
-
-
11,416
-
11,416
-
11,416
4.9 Transfers between equity accounts
-
-
139,374
406,193
-
-
(545,567)
-
-
-
-
-
-
4.10 Increases/(decreases) due to business combinations
-
-
-
-
-
-
-
-
-
-
-
-
-
4.11 Discretionary transfer to welfare projects and funds
-
-
-
-
-
-
-
-
-
-
-
-
-
4.12 Equity instrument-based payments
-
-
-
-
-
-
-
-
-
-
-
-
-
4.13 Other increases/(decreases) in equity
-
-
(247,168)
-
-
-
-
-
(247,168)
-
(247,168)
57,914
(189,254)
9,213,863
-
2,199,863
(473,529)
-
(46,473)
1,039,963
-
11,933,687
695,875
12,629,562
66,445
12,696,007
Share capital
1. Balance at 31 December 2014
2. Adjusted opening balance
3. Total recognised income and expense
4. Other changes in equity
4.1 Capital increases
4.2 Capital reductions
Total own
funds
VALUATION
ADJUSTMENTS
NONCONTROLLING
INTERESTS
TOTAL
TOTAL
EQUITY
The accompanying Notes 1 to 50 and Appendices I to XIII are an integral part of the consolidated statement of changes in total equity for the year ended 31 December 2015.
4
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 1.3 and 50). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated statement of changes in total equity for the year ended 31 December 2014(*)
EQUITY ATTRIBUTABLE TO THE PARENT
OWN FUNDS
RESERVES
Share premium
11,517,329
4,054,700
(4,209,024)
(1,101,390)
-
-
-
-
-
-
Share capital
Reserves (losses)
of entities
accounted for
using the equity
method
Accumulated
reserves
(losses)
Profit/(loss)
for the year
attributable
to the parent
Less:
Dividends and
remuneration
(11,758)
407,552
-
10,657,409
741,772
11,399,181
(39,664)
11,359,517
-
-
-
-
-
-
-
-
Less:
treasury
shares
Other equity
instruments
Total own
funds
VALUATION
ADJUSTMENTS
NONCONTROLLING
INTERESTS
TOTAL
TOTAL
EQUITY
-
-
-
-
-
-
-
-
-
-
-
-
-
11,517,329
4,054,700
(4,209,024)
(1,101,390)
-
(11,758)
407,552
-
10,657,409
741,772
11,399,181
(39,664)
11,359,517
-
-
-
-
-
-
747,120
-
747,120
473,955
1,221,075
25,498
1,246,573
-
-
168,251
221,668
-
(55,867)
(407,552)
-
(73,500)
-
(73,500)
744
(72,756)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,265
-
-
(55,867)
-
-
(48,602)
-
(48,602)
-
(48,602)
-
-
185,884
221,668
-
-
(407,552)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(24,898)
-
-
-
-
-
(24,898)
-
(24,898)
744
(24,154)
11,517,329
4,054,700
(4,040,773)
(879,722)
-
(67,625)
747,120
-
11,331,029
1,215,727
12,546,756
(13,422)
12,533,334
5. Balance at 31 December 31/12/2014
(*)Presented solely and exclusively for comparison purposes.
5
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory financial reporting framework applicable to the Group (see Notes 1.3 and 50). In
the event of a discrepancy. the Spanish-language version prevails.
Consolidated statement of cash flows for the years ended 31 December 2015 and 2014
A) CASH FLOWS USED IN OPERATING ACTIVITIES
1. Consolidated profit/(loss) for the year
2. Adjustments made to obtain the cash flows from operating activities
2.1. Depreciation and amortisation
2.2. Other
3. Net increase/(decrease) in operating assets
3.1. Financial assets held for trading
3.2. Other financial assets at fair value through profit or loss
3.5. Other operating assets
4. Net increase/(decrease) in operating liabilities
4.1. Financial liabilities held for trading
4.2. Other financial liabilities at fair value through profit or loss
4.3. Financial liabilities at amortised cost
4.4. Other operating liabilities
5. Income tax receipts/(payments)
2015
(3,965,110)
1,060,572
761,587
146,796
614,791
9,860,911
31,424
3,371,887
8,723,042
(2,265,442)
(15,776,617)
656,250
(16,081,057)
(351,810)
128,437
2014 (*)
(2,472,622)
771,288
1,452,164
156,254
1,295,910
9,533,910
49,591
6,701,713
5,416,211
(2,633,605)
(14,312,475)
1,494,140
(15,942,535)
135,920
82,491
1,006,665
285,428
171,812
71,062
28,271
14,283
1,292,093
7.1. Tangible assets
4,664,148
433,278
303,164
71,197
3,319
5,580
50,018
5,097,426
-
7.2. Intangible assets
7.3. Investments
7.4. Subsidiaries and other business units
7.5. Non-current assets held for sale and associated liabilities
7.6. Held-to-maturity investments
7.7. Other proceeds related to investing activities
84,924
1,534,251
3,478,251
-
114,213
873,039
204,663
-
(646,900)
5,229,163
201,553
96,611
4,930,999
4,582,263
117,763
4,464,500
944,133
129,521
129,521
1,073,654
1,000,000
73,654
-
-
-
52,138
(521,824)
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
2,926,782
3,448,606
G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR
2,978,920
2,926,782
MEMORANDUM ITEM
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF YEAR
1.1. Cash
1.2. Cash equivalents at central banks
1.3. Other financial assets
1.4. Less: Bank overdrafts refundable on demand
Total cash and cash equivalents at end of year
of which: held by consolidated entities but not drawable by the Group
740,881
2,238,039
2,978,920
-
737,607
2,189,175
2,926,782
-
B) CASH FLOWS FROM INVESTING ACTIVITIES
6. Payments
6.3. Investments
6.7. Other payments related to investing activities
7. Proceeds
C) CASH FLOWS FROM FINANCING ACTIVITIES
8. Payments
8.1. Dividends
8.3. Redemption of own equity instruments
8.4. Acquisition of own equity instruments
8.5. Other payments related to financing activities
9. Proceeds
9.2. Issuance of own equity instruments
9.3. Disposal of own equity instruments
9.4. Other proceeds related to financing activities
D) EFFECT OF EXCHANGE RATE DIFFERENCES
E) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D)
100,178
The accompanying Notes 1 to 50 and Appendices I to XIII are an integral part of the consolidated statement of cash flows for the year ended 31 December 2015.
6
Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with the regulatory
financial reporting framework applicable to the Group (see Notes 1.3 and 50). In the event of a discrepancy, the Spanishlanguage version prevails.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER 2015
(1) Description of the Group, beginnings of the incorporation of Bankia, reporting framework
applied to draw up the consolidated financial statements and other information.
(1.1) Group description
Bankia, S.A. (“the Bank” or “Entity”) is a private-law entity subject to the legislation and regulations for
banks operating in Spain. Its registered office is at calle Pintor Sorolla, 8, Valencia. At 31 December
2015, the Bank’s branch network comprised 1,944 offices. The company bylaws may be consulted,
together with other relevant legal information, at its registered office and on its website
(www.bankia.es).
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.
In addition to the operations it carries out directly, Bankia is a subsidiary of the BFA, Tenedora de
Acciones Group (hereinafter the "BFA Group”) and, in turn, the parent of a business group (the
“Group” or “Bankia Group”). At 31 December 2015, the scope of consolidation of the Bankia Group
encompassed 72 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 management.
Appendices II, III and IV list the entities that form part of the scope of consolidation of the Bankia
Group at 31 December 2015 (subsidiaries controlled by the Bank, jointly-controlled entities and
associates over which Bankia, directly or indirectly, exercises significant influence, distinguishing
those classified under “Non-current assets held for sale”, see Note 2.1), and specifying the percentage
of voting rights controlled by Bankia in each company.
The Bankia Group’s consolidated financial statements for the year 2015 were authorised for issue by
Bankia’s directors at the Board meeting held on 10 February 2016. The Bankia Group’s consolidated
financial statements for 2014 were approved by the shareholders at the general meeting held on 22
April 2015.
Appendix I presents the Bank’s balance sheet at 31 December 2015, the income statement, statement
of recognised income and expense, the statement of total changes in equity and the statement of
cash flows for the year then ended, together with the Bank’s separate financial statements for 2014 for
purposes of comparison.
7
(1.2) Restructuring plan
Bankia’s main shareholder is BFA Tenedora de Acciones, S.A.U., hereinafter “BFA” which at 31
December 2015 formalization of these consolidated financial statements held shares representing
64.23% of its share capital (64.46% including the impact of treasury shares).
Year 2012
At its meeting of 9 May 2012, BFA’s Board of Directors agreed unanimously to submit a request to the
Fondo de Restructuración Ordenada Bancaria (“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
BFA shares, which would be issued pursuant to the resolution adopted to increase capital to carry out
the conversion. After this request, the FROB’s Governing Committee, at its meeting of 14 May 2012,
agreed to accept this request.
On 23 May 2012, BFA sent communications to the Bank of Spain and the FROB notifying them of its
intention to request a capital contribution from the FROB of EUR 19,000 million. On 24 May 2012,
Bankia received replies from both institutions expressing their willingness to provide this financial
support immediately pursuant to compliance with the requirements set for in their regulations.
Under EU rules governing aid to Member States, the European Commission gave temporary
authorisation to the conversion into capital of the convertible preference shares held by the Spanish
state for EUR 4,465 million and granted the possibility of issuing debt backed by the Spanish
government for EUR 19,000 million to the BFA Group and its Bankia subsidiary.
On 27 June 2012, once the conversion of the convertible preference shares was completed (which,
inter alia, led to the prior reduction of BFA’s share capital to zero following the redemption of
27,040,000 shares), the FROB became the sole shareholder of BFA, as it controlled 100% of its share
capital, statement of this entity's sole shareholder status.
In June 2012, the results of the stress text of the Spanish banking system carried out by two
international consulting firms, which 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 BFABankia, performed by four auditing firms, one of the international consultants conducted a final stress
test in which it estimated the expected losses by 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.
In order to strengthen the BFA-Bank Group’s regulatory capital, 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 EUR 4,500 million registered
ordinary shares with a par value of EUR 1 each, fully subscribed and paid in. 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%.
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 2012-2017 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 which began in July 2012 and concluded when the
results of the stress test were released on 28 September 2012. 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 Society of Asset Management from the Banking Restructuring (SAREB) (see Note 1.15).
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 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
8
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 before mentioned Restructuring Plan, the FROB
adopted the following agreements:

The capital increase at BFA amounting to EUR 13,459 million, subscribed by the FROB and paid
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.

The issue by Bankia of convertible contingent bonds 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 2012-2015 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 2017. As a result, from the end of the
Strategic Plan until 2017, additional measures to those considered initially for the 2012-2015 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 2012-2015 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, in terms of both its branch network and 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.
Year 2013
On 8 February 2013 a labour agreement was entered into with the majority of the Bank’s union
representatives, which includes the collective dismissal of up to 4,500 Bank employees (see Note
2.13).
However, these agreements did not imply full compliance with the Restructuring Plan, as they did not
result in Bankia’s full recapitalisation, but rather temporarily enabled the bank to comply with the
solvency requirements of application legislation. Accordingly, to ensure full compliance with the
Restructuring Plan and, therefore, achieve the effective recapitalisation of the bank, on 16 April 2013,
the FROB’s Governing Committee adopted the following restructuring measures:

Reduction of Bankia’s share capital via the reduction in the par value of Bankia shares to EUR
0.01 per share and an amendment to the bylaws consisting of an increase in the par value and
grouping of the shares (reverse split).

Early redemption of the mandatory convertible shares issued by Bankia, S.A., contingent on and
simultaneous with the subscription by BFA of the capital increase explained in the following point.

Capital increase with preferential subscription rights of up to EUR 10,700 million.
9

Transactions with hybrid capital instruments and subordinated debt entailing the buy-back of all of
the BFA Group’s hybrid capital instruments and subordinated debt issues (of which 28 are retail
issues) and the simultaneous subscription of shares of Bankia or of a deposit, depending on the
issue.
Following execution of these resolutions, the Bank’s share capital increased from EUR 3,987,927
thousand at 31 December 2012, represented by 1,993,963,354 fully subscribed and paid up
registered shares, to EUR 11,517,329 thousand at 31 December 2013, represented by
11,517,328,544 fully subscribed and paid up registered shares of EUR 1 par value each.
Lastly, on 23 May 2013, the Bank, pursuant to authorisation by the FROB, repaid the EUR 4,500
million subordinated loan granted by BFA on 12 September 2012.
Year 2014
During 2014, the Group continued to implement the measures contained in the 2012-2015 Strategic
Plan.
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:
-
Its merger, into a single entity, with Bankia, S.A., or
-
Its transformation into a holding company without a banking license
In this respect, pursuant to the resolution adopted by the FROB's Governing Committee on 19
December 2013, BFA’s Board of Directors resolved to submit an application to surrender its license to
operate as a credit institution. On 23 December 2014, the Bank of Spain notified BFA that it had
approved its request to cease operating as a credit institution, effective from January 2015, becoming
from that date a holding company, mainly for the interest in Bankia and for debt portfolios, and
changing its name to “BFA, Tenedora de Acciones, S.A.U.”. This marked the completion of another
milestone in the Group's Restructuring Plan.
Year 2015
On 31 December 2015, the Group had achieved its objectives by having implemented the measures
included in the 2012-2015 Strategic Plan, which featured:
-
achieve an efficiency ratio between 40 and 45%;
reduce costs of risk to levels of between 50 and 55 basis points;
achieve a return on equity (ROE) of 10%; and,
dispose of certain investees (see Notes 15 and 16).
The authorities monitor compliance with the Group’s Restructuring Plan and to date have not
uncovered any significant matters regarding compliance with the commitments acquired.
(1.3) Reporting framework applied to draw up the consolidated 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”).
The Bankia Group’s consolidated financial statements for 2015 are presented in accordance with
IFRS-EU, taking into account 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 IFRS-EU for Spanish credit
institutions.
The Group's consolidated financial statements for the year ended 31 December 2015 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 consolidated equity and
consolidated financial position of Bankia, S.A. and subsidiaries forming the Bankia Group at 31
December 2015 and of the consolidated results of its operations and consolidated cash flows during
the financial year then ended, pursuant to the aforementioned applicable financial information
reporting framework, and in particular to the accounting principles and criteria therein.
The consolidated financial statements of the Bankia Group were prepared from the accounting
records of Bankia and of the other Group entities. However, since the accounting policies and
10
measurement bases used in preparing these consolidated financial statements may differ from those
used by certain Group entities, the required adjustments and reclassifications were made on
consolidation to unify such policies and criteria and to make them compliant with the IFRS-EU used by
the Bank.
The principal accounting policies and measurement bases applied in preparing the Group's
consolidated financial statements for 2015 are summarised in Note 2.
(1.3.1) Main regulatory changes during the period from 1 January to 31 December 2015
The main changes arising in 2015 in the laws and regulations applicable to the Bankia Group, which
were applied in the preparation of these consolidated financial statements, are as follows:
(1.3.1.1) Modifications to International Financial Reporting Standards
The main standards or amendments to IFRSs adopted by the European Union that came into force
and became mandatory in the year beginning 1 January 2015, the effects of which, if any, were
included in these consolidated financial statements, were as follows:
A) New mandatory standards, amendments and interpretations applicable in the calendar year
beginning 1 January 2015.
The adoption of the following standards has had no material impact on either the presentation or
disclosures of the consolidated financial statements or the figures reported therein:
-
Amendments to IAS 19 "Defined Benefit Plan: Employee Contributions"
The narrow scope amendments apply to contributions from employees or third parties to
defined benefit plans. The objective of the amendments is to simplify the accounting for
contributions that are independent of the number of years of employee service, for example,
employee contributions that are calculated according to a fixed percentage of salary.
-
Fifth and Sixth Annual Improvements to IFRSs 2010-2012 Cycle and Annual
Improvements to IFRSs 2011-2013 Cycle
These two documents are the fifth and sixth collection of amendments to IFRSs in response to
seven issues addressed during the 2010-2012 cycle and four issues addressed during the
2011-2013 cycle. The IASB uses the Annual Improvements process to make necessary, but
non-urgent, amendments to IFRSs that will not be included in part of any other project. The
most significant amendments affect IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24, IAS 38
and IAS 40.

IFRS 2 “Share-Based Payment”: Amends the definitions of “vesting condition” and
“market condition” and adds definitions for “performance condition” and “service
condition.”

IFRS 3 "Business Combinations": Contingent consideration that is classified as an asset
or liability shall be measured at fair value at each reporting period, irrespective of whether
it is a financial instruments or a financial asset or financial liability, with the corresponding
gain or loss recognised in profit or loss. Clarifies that this standard excludes the formation
of joint arrangements in the financial statements of the joint venture or joint arrangement
itself.

IFRS 8 "Operating Segments": The amendment requires entities to disclose the factors
that are used by Management to identify its reportable segments when operating
segments have been aggregated. In addition, the total of the reportable segments’ assets
must reconcile with the entity’s total assets.

IFRS 13 “Fair Value Measurement”: The basis for conclusions of IFRS 13 is amended to
clarify that the issue of IFRS 13 does not remove the ability to measure short-term
receivables and payables with no stated interest rate without discounting, when the effect
of not discounting is immaterial. Amends the scope exception for measuring the fair value
of a group of financial assets and liabilities on a net basis, which includes all contracts
that are within the scope of IAS 39, even if they do not meet the definitions of financial
assets or financial liabilities in IAS 32.
11

IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”: The amendment
clarifies the requirements when an item of property, plant and equipment or an intangible
asset is revalued, the gross carrying amount is restated in a manner consistent with the
revaluation of the carrying amount. The accumulated depreciation is the difference
between the gross and the carrying amount after the revaluation.

IAS 24 “Related Party Disclosures”: Amounts paid or payable to management entities or
entities that provide management personnel service should be disclosed, as these are
deemed to be related parties.

IAS 40 “Investment Property”: The amendment clarifies that IAS 40 and IFRS 3 are not
mutually exclusive and that both can be applied. Therefore, when an entity acquires
investment property, it has to determine whether it acquires investment property as
defined in IAS 40 or whether the transaction is the acquisition of a business combination
B) New mandatory standards, amendments and interpretations applicable in the years
subsequent to the calendar year beginning 1 January 2015 (applicable as of 2016)
approved by the European Union.
Following is a list of standards, amendments and interpretations issued by the International
Accounting Standard Board (“IASB”) and endorsed by the European Union effective for annual
periods beginning on or after 1 January 2015. Therefore, they have not been applied in the
preparation of these annual consolidated financial statements.
-
Amendments to IFRS 11 " Accounting for Acquisitions of an Interest in a Joint
Operation”
[Effective for annual periods beginning on or after 1 January 2016, with early adoption
permitted]
The amendments to IFRS 11 require that the relevant principles for business combinations in
IFRS 3 “Business Combinations” and other standards should be applied to the acquisition of an
interest in a joint operation in which the activity of the joint operation constitutes a business.
-
Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of Depreciation
and Amortisation”
permitted]
This amendment clarifies when the use of a revenue-based depreciation or amortisation
method may be appropriate. The amendments clarify that the use of revenue-based methods
for calculating the depreciation of an asset is not appropriate, as the revenue generated from an
activity that includes the use of the asset reflects factors other than the consumption of the
economic benefits of the asset. It indicates that, in general, revenue is not an appropriate basis
for measuring the consumption of the economic benefits of an intangible asset, but this
presumption can be rebutted in limited circumstances.
-
Amendments to IAS 27 “Equity Method in Separate Financial Statements ”
permitted]
The amendments to IAS 27 allow entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements. Therefore, an
entity may account for these investments at cost or in accordance with IFRS 9 (or IAS 39), or
using the equity method.
-
“Annual improvements to IFRSs” project (2012-2014 cycle)
permitted]
This document is the seventh collection of amendments to IFRSs in response to four issues
addressed during the 2012-2014 cycle. The IASB uses the Annual Improvements process to
make necessary, but non-urgent, amendments to IFRSs that will not be included in part of any
other project. The most significant amendments affect, IFRS 5, IFRS 7, IAS 19 and IAS 34.
12
-
IAS 1 amended - "Presentation of Financial Statements"
permitted]
The amendments to IAS 1 were designed to further encourage companies to use judgements in
determining the information to disclose in their financial statements, which line items must be
disaggregated in their financial statements and which additional headings and subtotals should
be included in the statement of financial position and the statement(s) of profit or loss and other
comprehensive income, and where and in what order the notes should be presented.
C) New mandatory standards, amendments and interpretations applicable in the years
subsequent to the calendar year beginning 1 January 2015 (applicable as of 2016) pending
approval by the European Union.
Following is a list of the main standards, amendments and interpretations issued by the International
Accounting Standards Board (“IASB”) that have yet to be adopted by the European Union and
therefore were not applied in the preparation of these consolidated annual financial statements:
-
IFRS 9 “Financial Instruments”
permitted]
The final version of IFRS 9, published on 24 July 2014, brings together the classification and
measurement, impairment and hedge accounting phases of the IASB's project to replace IAS
39.
There are important differences to the current standard regarding financial assets, including,
inter alia, approval of a new classification model based on only two categories: amortised cost
and fair value; the elimination of the current classifications of the held-to-maturity investments
and available-for-sale financial assets categories; a single impairment method only for assets
carried at amortised cost; and the non-separation of embedded derivatives in financial asset
contracts. The final version of the standard introduces an additional classification and
measurement category, FVTOCI or fair value through changes in other comprehensive
income for debt instruments that meet certain requirements.
Regarding financial liabilities, the categories proposed in IFRS 9 are the same as those
currently included in IAS 39. Therefore, there should not be any major differences except for
the change affecting liabilities that an entity chooses to measure at fair value, in which it will
present the portion of the change in fair value related to changes in its own credit risk in
valuation adjustments rather than in the income statement.
Regarding impairment, it replaces the "incurred loss" model of IAS 39 with the "expected
credit loss" model, meaning that it will no longer be necessary for a "loss event" to occur
before credit losses are recognised.
Regarding hedge accounting, the new model attempts to align the accounting treatment with
risk management, maintaining the three types of hedges in the current standard (cash flow
hedges, fair value hedges and hedges of a net investment in a foreign operation), but includes
significant changes compared to IAS 39 in various issues, such as hedged items, hedging
instruments, the time value of options and effectiveness assessment.
-
IFRS 15 "Revenue Recognition"
permitted]
The core principle of IFRS 15 is that a company should recognise revenue to depict the
transfer of promised goods or services to the consumer in an amount that reflects the
consideration to which the company expects to be entitled in exchange for those goods and
services. An entity recognises revenue in accordance with this core principle by applying five
steps, which can be summarised as follows: identify the contract(s) with the customer; identify
the performance obligations in the contract; determine the transaction price; allocate the
transaction price; and recognise revenue when a performance obligation is satisfied.
IFRS 15 includes a cohesive set of disclosure requirements that would result in an entity
providing users of financial statements with comprehensive information about the nature,
amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts
with customers.
13
Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosures of
Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures”
-
permitted]
The amendments to IFRS 10, IFRS 12 and IAS 28 provide clarifications to requirements for
accounting for investment entities in three aspects:
-

They confirm that a parent entity that is a subsidiary of an investment entity may be
exempt from preparing consolidated financial statements.

They clarify that if an investment entity has a subsidiary that is not an investment entity
and whose main purpose is to provide support services to the parent's investment
activities or of third parties, the investment entity should consolidate the subsidiary;
however, if the subsidiary is an investment entity, the parent entity must measure the
subsidiary at fair value through profit or loss.

They require a non-investment entity investor, when applying the equity method to the
investment, to retain the fair value measurement applied by the associate or joint venture
to its interests in subsidiaries.
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture"
[The effective date has been postponed indefinitely]
The amendments set out that, on a sale or contribution of assets to a joint venture or
associate or on a loss of control when joint control or significant influence is retained in a
transaction involving an associate or a joint venture, the extent of any gain or loss recognised
depends on whether the assets or subsidiary constitute a business, as defined in IFRS 3
"Business Combinations". When the assets or subsidiary constitute a business, any gain or
loss is recognised in full; when the assets or subsidiary do not constitute a business, the
entity's share of the gain or loss is eliminated.
Early adoption of the accounting standards described in letters B and C, already endorsed by the
European Union, is permitted. However, the Group elected not to adopt them for these consolidated
financial statements. However, their potential impact is being considered by Group management. A
reliable estimate of their potential impact is not possible yet; this will depend on the content of the text
finally adopted by the European Union and on the composition of the Group and its assets at the time
of application.
(1.4) Responsibility for the information and estimates made
The information in these consolidated financial statements is the responsibility of Bankia’s directors.
In the Group’s consolidated financial statements for the year ended 31 December 2015, 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 2.2 and 2.20).
–
Impairment losses on certain financial assets – considering the value of the collateral receivedand non-financial assets (chiefly property) (see Notes 2.9, 2.15, 2.16, 2.17 and 2.20).
–
The assumptions used in the actuarial calculation of the post-employment benefit liabilities and
obligations and other long-term commitments (see Note 2.13).
–
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 Group 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 2.15, 2.17 and 2.20).
–
The recoverability of recognised deferred tax assets (see Note 28).
–
The useful life and fair value of tangible and intangible assets (see Notes 2.15 and 2.16).
–
The assumptions used to quantify certain provisions and the probability of occurrence of certain
losses to which the Group is exposed due to its activity (see Notes 2.18 and 22).
14
Although these estimates were made on the basis of the best information available at 31 December
2015 and at the date of authorisation for issue of these consolidated 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 consolidated income statement in the future financial years concerned.
(1.5) Comparative information
In compliance with current legislation, the information relating to 2014 contained in these
consolidated financial statements is presented solely for comparison with the information relating to
2015 and, accordingly, does not constitute the Group's consolidated financial statements for 2014.
(1.6) Agency agreements
A list at 31 December 2015 of the Group’s agents which meet the conditions established in Article 22
of Royal Decree 1245/1995, of 14 July, is provided in Appendix XI, attached.
(1.7) Investments in the capital of credit institutions
The Group’s ownership interests of 5% or more in the capital or voting rights of other Spanish or
foreign credit institutions at 31 December 2015 are listed in Appendices II, III and IV.
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 2015 and 2014 is as follows:
Shareholding institution
Banco Popular de Ahorro de Cuba
Investee
Corporación Financiera Habana, S.A.
Ownership interest
40.00%
(1.8) Environmental impact
In view of the business activities carried on by the Group (see Note 1.1), it does not have any
environmental liability, expenses, assets, provisions or contingencies that might be material with
respect to the Group’s consolidated equity, financial position and results. Therefore, no specific
disclosures relating to environmental issues are included in these notes to the consolidated financial
statements.
(1.9) Minimum reserve ratio
At 31 December 2015, the Company complied with the minimum reserve ratio required by applicable
Spanish legislation.
(1.10) Deposit Guarantee Fund and National Resolution Fund
At 30 July 2012, the Management Committee of the Deposit Guarantee Fund of Credit Institutions
(FGDEC for its initials in Spanish) agreed to recognise a shortfall among the members, payable by
each through 10 equal annual instalments to be settled on the same day as the members must make
their ordinary annual contributions over the next 10 years. The installment paid at each date by the
member may be deducted from the member’s annual contribution payable on the same date, as
appropriate, up to the amount of this ordinary contribution. In this respect, at 31 December 2015, the
Group recognised a financial liability equal to the present value of the payment commitments assumed
and to be settled in the coming years for an amount of EUR 162,886 thousand and an asset account
for the same amount to recognise accrual of the payment in the income statement over the entire
settlement period.
Meanwhile, the fifth additional provision of Royal Decree-Law 21/2012 of 13 July, introduced by Article
2 of Royal Decree-Law 6/2013, of 22 March, established a special contribution based on the deposits
held by the entities adhered to the Fund as of 31 December 2012. The final payment is scheduled for
30 June 2016 for an amount of EUR 66,787 thousand.
15
At 12 May 2014, Directive 2014/59/EU on the recovery and resolution of credit institutions and
investment firms (the “Bank Recovery and Resolution Directive ” or "BRRD") and Directive 2014/49/EU
on deposit guarantee schemes were published in the Official Journal of the European Union:

Directive 2014/49/EU on deposit guarantee schemes (DGSs), ensures that depositors will
continue to have a coverage level for deposits of each depositor and credit institution of EUR
100,000 in the event of failure backed by funds received in advance by the banking sector. For the
first time since the introduction of the directive on DGSs in 1994, this Directive sets out financing
requirements for DGSs, whereby Member States shall ensure that, by 3 July 2024, the available
financial means of a DGS shall at least reach a target level of 0.8% of the amount of the covered
deposits of its members. Moreover, access to covered deposits will be easier and quicker, with the
maximum repayment period gradually reduced from 20 to 7 working days by 2024.

Directive 2014/59/EU on the recovery and resolution of credit institutions and investment firms
(BRRD) includes, inter alia, the financing of the banking resolution. It indicates that in order to be
effective, the resolution instruments must receive financing, so that to prevent the resolution
measures being funded by the State, additional financing will be provided through resolution
funds, which will raise contributions from banks in proportion to their liabilities and risk profile. In
this respect, the funds accumulated must be sufficient to reach 1% of covered deposits within a
period of 10 years.
In this respect, on 19 June, Law 11/2015, of 18 June, on the recovery and resolution of credit
institutions and investment firms was published in the Official State Gazette, transposing Directive
2014/59/EU on bank restructuring and resolution into Spanish legislation. Its objective is to govern the
early intervention and pre-emptive resolution phases of those entities and companies.
Law 11/2015 also includes internal recapitalisatoin instruments, which consist of the absorption of
losses by shareholders and by the creditors of the Group, and compliance with the minimum own
funds and minimum required eligible liabilities (MREL) requirements established by the pre-emptive
resolution authority.
It also created the National Resolution Fund (NRF, administered by the FROB), funded with annual
contributions by credit institutions and investment firms. Its financial resources must reach at least 1%
of the deposits guaranteed by all the institutions no later than 31 December 2024. The NRF will be
combined with the rest of the EU Member State's national funds into a Single Resolution Fund in
2016.
On 7 November 2015, Royal Decree 1012/2015, of 6 November, implementing Law 11/2015, of 18
June, on the recovery and resolution of credit institutions and investment firms and amending Royal
Decree 2606/1996, of 20 December, on deposit guarantee funds of credit institutions was published in
the Official State Gazette.
Royal Decree 1012/2015 stipulates that the FROB will determine the annual contributions to the NRF,
adjusting them to institution's risk profile. In 2015, Bankia contributed EUR 75,136 thousand (EUR 0 in
2014) to the NRF, recognised under "Other operating expenses" in the accompanying consolidated
income statement (see Note 40).
With respect to the Deposit Guarantee Fund, Royal Decree 1012/2015, of 6 November, states, inter
alia, that the Management Committee of the FGDEC will determine the Group's annual contributions,
amending the calculation basis of the contributions for guaranteed deposits and limiting the individual
amount of deposits to EUR 100 thousand.
Last 2 December, the Management Committee of the FGDEC determined that the annual contribution
to be made at 1.6 per thousand of the calculation basis for the part relating to the guarantee of
deposits and at 2 per thousand for the part relating to the guarantee of securities. Accordingly, the
amount accrued at 31 December 2015 was EUR 101,903 thousand (EUR 167,547 thousand in 2014),
recognised under "Other operating expenses" in the accompanying consolidated income statement
(see Note 40).
16
(1.11) Events after the reporting period
No other significant events took place between 31 December 2015 and the date of authorisation for
issue of these financial statements other than those mentioned in these financial statements.
(1.12) Customer care service
At its meeting on 16 June 2011, the Board of Directors of Bankia, S.A. approved the "Customer
Protection Regulations of Bankia, S.A. and its Group", which was subsequently updated at its
meeting of 25 July 2012. 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).
Information on the activities of Bankia, S.A.'s Customer Care Service at 31 December 2015 and
2014, as required under Ministerial Order ECO/734/2004, of 11 March, is included in Appendix XIII
attached hereto.
(1.13) Information on deferred payments to suppliers. Third additional provision. “Disclosure
requirement" in Law 15/2010 of 5 July
Information on the average period of payment to suppliers in commercial transactions at 31 December
2015 and 2014, as required under Law 15/2010, of 5 July, is included in Appendix XIII attached
hereto.
(1.14) Segment reporting and distribution of revenue from ordinary Group activities, by
categories of activities and geographic markets
Segment reporting is carried out on the basis of internal control, monitoring and management of the
Bankia Group’s activity and results, and developed in accordance with the various areas of business
established with regard to the Group’s structure and organisation. The Board of Directors is the
highest operational decision-making body of each business.
Business segments are defined bearing in mind the inherent risks and management characteristics of
each. For the purposes of business segment reporting of activities and income, the core business
units for which accounting and management figures are available are taken as a reference. The same
general principles are applied as those used in Group management information, and the
measurement, valuation bases and accounting principles applied are basically the same as those
used to prepare the financial statements, with no asymmetric allocations.
The itemised segments on which the information in these consolidated financial statements is
presented at 31 December 2015 and 2014 refer to the following business areas:
-
Retail Banking
-
Business Banking
-
Corporate Centre
Retail Banking includes retail banking with legal and natural persons (with annual income of less than
EUR 6 million), included Private Banking Corporate Direction and Asset Management, also Bank
Insurance Direction distributed through a large multi-channel network in Spain and operating a
customer-centric business model.
Business Banking targets legal entities with annual income in excess of EUR 6 million. Other
customers, legal entities or self-employed professionals with income below this figure fall into the
Retail Banking category.
Finally, the Corporate Centre deals with any areas other than those already mentioned, including
companies. The portfolios and assets covered by the Restructuring Plan, most of which are classified
as "Non-current assets held for sale", have been allocated to this segment.
17
Once the composition of each business segment is defined, the following management criteria are
applied to determine segment results:
 Internal transfer prices: An internal transfer price, cost or return, as appropriate, which replicates
the market interest rates for the term of the various transactions, is applied to average balances of
Private Banking and Business Banking positions. The 1-month Euribor rate is applied to average
balances of Corporate Centre positions.
 Cost allocations: direct and indirect costs, according to the activity carried out, are allocated to the
different segments.
Geographical segment reporting regarding interest and similar income for the years ended 31
December 2015 and 2014 is as follows:
Distribution of interest and similar income by
geographic areas
MARKET
2015
Domestic market
3,545,532
4,564,477
131,441
122,683
-
29
125,390
117,486
6,051
5,168
3,676,973
4,687,160
Export:
European Union
Other OECD countries
Other countries
Total
2014
Segment results for the year ended 31 December 2015 are as follows:
Retail
Banking
NET INTEREST INCOME
Business
Banking
Corporate
Centre
Group
1,194,219
392,240
1,153,722
2,740,181
Return on equity instruments
-
-
5,524
5,524
Share of profit/(loss) of companies accounted for using the
equity method
-
-
31,872
31,872
673,671
135,122
128,948
937,741
+/- Gains and losses on financial assets and liabilities and
exchange differences
12,628
18,311
280,328
311,267
+/- Other operating income and other operating expenses
(80,682)
(3,118)
(136,602)
(220,402)
GROSS INCOME
1,799,836
542,555
1,463,792
3,806,183
Administrative expenses
(802,531)
(43,997)
(664,605)
(1,511,133)
Depreciation and amortisation charge
(56,973)
(1,326)
(88,497)
(146,796)
OPERATING INCOME BEFORE PROVISIONS
940,332
497,232
710,690
2,148,254
12,989
23,447
(188,638)
(152,202)
(306,696)
(261,413)
(14,636)
(582,745)
159
(479)
38,998
38,678
646,784
258,787
546,414
1,451,985
Net fees and commissions
Provisions (net)
Impairment losses on financial assets (net)
Impairment losses on other assets (net) and other gains and
losses
PROFIT/(LOSS) BEFORE TAX
18
The table below shows the Group's ordinary income by business segments for the year ended 31
December 2015:
Retail
Banking
External customers
Business
Banking
Corporate
Centre
Group
2,150,003
809,611
2,101,362
5,060,976
Inter-segment transactions
236,257
(251,411)
15,154
-
Total ordinary income (1)
2,386,260
558,200
2,116,516
5,060,976
(1)
In the table above, "Ordinary income" is understood as the balances under "Interest and similar income", "Return on equity
instruments", "Fee and commission income", "Gains and losses on financial transactions (net)" and "Other operating income" in the
accompanying consolidated income statement for the year ended 31 December 2015, which can be regarded as comparable to
the Group's revenue from ordinary business.
No external customer individually represents 10% or more of the Group's ordinary income,
Segment results for the year ended 31 December 2014
(1)
are as follows:
Retail
Banking
Business
Banking
Corporate
Centre
Group
1,465,043
482,639
979,698
2,927,380
-
-
4,955
4,955
equity method
-
-
32,297
32,297
Net fees and commissions
680,848
151,802
114,861
947,511
+/- Gains and losses on financial assets and liabilities and
exchange differences
(17,989)
(1,424)
244,827
225,414
+/- Other operating income and other operating expenses
(128,873)
(7,382)
7,510
(128,745)
GROSS INCOME
1,999,029
625,635
1,384,148
4,008,812
(795,309)
(46,747)
(743,914)
(1,585,970)
(56,150)
(1,561)
(98,543)
(156,254)
1,147,570
577,327
541,691
2,266,588
10,771
116,169
(335,410)
(208,470)
(522,102)
(341,170)
(86,663)
(949,935)
17
(11)
(196,057)
(196,051)
636,256
352,315
(76,439)
912,132
NET INTEREST INCOME
OPERATING INCOME BEFORE PROVISIONS
Provisions (net)
Impairment losses on other assets (net) and other gains and
losses
PROFIT/(LOSS) BEFORE TAX
(1)
Minor inter-segment adjustments were made to the 2014 figures to make them consistent with the criteria applied in 2015
19
The table below shows the Group's ordinary income by business segments for the year ended 31
December 2014:
Retail
Banking
External customers
Inter-segment transactions
Total ordinary income (1)
(1)
Business
Banking
Corporate
Centre
Group
2,473,181
988,673
2,709,486
6,171,340
691,055
(290,680)
(400,375)
-
3,164,236
697,993
2,309,111
6,171,340
In the table above, "Ordinary income" is understood as the balances under "Interest and similar income", "Return on equity
instruments", "Fee and commission income", "Gains and losses on financial transactions (net)" and "Other operating income"
in the accompanying consolidated income statement for the year ended 31 December 2014, which can be regarded as
comparable to the Group's revenue from ordinary business,
Segment assets and liabilities at 31 December 2015 are as follows:
Segment balance
Loans and receivables – Loans and advances to
customers
Other assets
Retail
Banking
81,437,625
Business
Banking
Corporate
Centre
25,672,806
3,459,480
Group
110,569,911
1,111,142
130,565
95,158,015
96,399,722
Total assets
82,548,767
25,803,371
98,617,495
206,969,633
Financial liabilities at amortised cost
77,982,591
8,638,744
89,654,745
176,276,080
152,295
14,571,361
(14,723,656)
-
348,210
788,938
16,860,398
17,997,546
78,483,096
23,999,043
91,791,487
194,273,626
Net inter-segment financing
Other liabilities
Total liabilities
Amounts related to investments in associates and joint ventures accounted for using the equity
method, increases in non-current assets held for sale that are not financial instruments, deferred tax
assets are recognised in the Corporate Centre,
(1)
Segment assets and liabilities of the Bank at 31 December 2014
are as follows:
Segment balance
Loans and receivables – Loans and advances to
customers
Retail
Banking
Business
Banking
Corporate
Centre
Group
87,034,018
24,910,951
746,274
112,691,243
Other assets
1,102,698
113,534
119,741,128
120,957,360
Total assets
88,136,716
25,024,485
120,487,402
233,648,603
78,843,075
10,506,955
103,731,652
193,081,682
4,506,347
11,375,469
(15,881,816)
-
435,497
1,267,116
26,330,974
28,033,587
83,784,919
23,149,540
114,180,810
221,115,269
Net inter-segment financing
Other liabilities
Total liabilities
(1)
Minor inter-segment adjustments were made to the 2014 figures to make them consistent with the criteria applied in 2015
20
(1.15) Company for the Management of Assets proceeding from Bank Restructuring (Sociedad
de Gestión de Activos procedentes de la Reestructuración Bancaria, thereinafter SAREB).
As indicated in Note 1.2, 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 2012-2017 Restructuring
Plan.
Additional provision nine of Law 9/2012, of 14 November, on the restructuring and resolution of credit
institutions, which transposes into law Royal Decree-Law 24/2012, of 31 August, on the restructuring
and resolution of credit institutions, requires credit institutions that at the date of entry into force of said
Royal Decree-Law are majority owned by the FROB, which is the case of the BFA–Bankia Group (see
Note 1) to transfer certain assets to the asset management company Sociedad de Gestión de Activos
procedentes de la Reestructuración Bancaria (SAREB).
In November and December 2012, with the oversight of the Bank of Spain and the FROB, the scope
of the assets eligible for transfer to the SAREB was defined. On 21 December 2012, the deed for the
transfer by the BFA Group to the SAREB of a first block asset was placed on public record. The
transfer price for the BFA Group was EUR 22,317 million. The asset transfer agreement was entered
into between the SAREB, BFA and Bankia with effect from 31 December 2012.
The price was paid through the delivery of debt securities issued by the SAREB and guaranteed by
the Spanish State in amounts of EUR 2,850 million to BFA in proportion to the assets owned by BFA
and its subsidiaries, and EUR 19,467 million to Bankia in proportion to the assets owned by Bankia
and its subsidiaries.
The securities received by the Group (with original maturities of 31 December 2013, 2014 and 2015)
were recognised under “Held-to-maturity investments” and grant an annual rollover option to the
issuer, although the estimated value of the option does not result in any material differences between
the fair value of the securities and their nominal amount at the date of the transaction.
Bankia, BFA and the SAREB signed an asset management and administration agreement under
which Bankia and BFA will oversee the administration and management of the transferred assets,
which has been rescinded with effect from 31 December 2014.
The table below provides a breakdown of the Bankia Group assets transferred, distinguishing between
the gross amount and the discount applied, by nature of the transferred assets:
ITEM
Gross amount
Discount
Transfer price
Financing transactions
29,915,467
(13,510,188)
16,405,279
Real estate assets
6,729,303
(3,667,185)
3,062,118
On 4 June 2013, the deed of transfer of assets to the SAREB was corrected to adjust the scope
initially estimated to the exact scope of the transfers as at the effective transfer date.
The total assets covered by the adjustment amount to EUR 126,975 thousand, calculated by applying
the criteria of the Asset Transfer Agreement signed with the SAREB and on the basis of the
information provided by the BFA-Bankia Group entities party to said agreement. The price is
distributed as follows: EUR 6,703 thousand in respect of assets owned by BFA and its subsidiaries,
and EUR 120,272 thousand in respect of assets owned by Bankia and its subsidiaries.
On 14 June 2013, the price initially paid was returned by means of delivery to the SAREB of bonds
originally issued by the SAREB and delivered to Bankia and BFA as consideration for the transaction
executed on 21 December 2012. The impact on profit and loss was immaterial.
Furthermore, the amount calculated for the assets covered by the adjustment includes the coupon
accrued and paid by the SAREB prior to the correction settlement date. The coupon paid was
calculated on the basis of the cash value of each bond series, applying an interest rate for said
coupons to compensate the SAREB for the funds disbursed.
21
In 2013, 2014 and 2015, the SAREB carried out the ordinary or early redemption in cash of securities
for nominal amounts of EUR 762,000 thousand, EUR 528,200 thousand and EUR 701,000 thousand,
respectively. In addition, in 2013, 2014 and 2015, the SAREB carried out the redemption and delivery
of new bonds. As a result, the securities received by the Group and recognised under "Held-tomaturity investments" at 31 December 2015 were as follows:
(Thousands of euros and %)
Amount
Maturity
Interest rate
7,632,800
31.12.2016
0.30%
5,555,800
31.12.2016
0.07%
4,167,300
31.12.2018
0.26%
As the aforementioned cancellations were made by the nominal amount, there were no differences
with respect to the carrying amounts. Therefore, there was no impact on the Group's consolidated
income statement in 2013, 2014 and 2015.
On 31 December 2015, the unamortised cash amount was exchanged for other bonds with a similar
maturity (rollover option) and bearing interest at the 3-month Euribor plus a spread of 20 basis points
and the 3-month Euribor plus a spread of 39 basis points, considered equivalent to market rates of
interest for public debt with a similar term. Accordingly, the bonds were accounted for at their nominal
amount, with no impact recognised on the Bank's income statement in 2015. Rollovers of bonds
carried out in 2013 and 2014 also did not have any impact on the Bank's income statement for those
years.
On 30 December 2015, which marked the end of the three-year period established in the purchase
and sale agreement for the review of the price and scope of the transfer by the SAREB, the Asset
Transfer Agreement entered into between the SAREB, Bankia and BFA on 21 December 2012 was
adjusted for a second time. The total amount of the assets covered by the adjustment, which related
to a series of scope changes, was EUR 20,632 thousand, broken down as follows: EUR 1,414
thousand in respect of assets owned by BFA and its subsidiaries, and EUR 19,218 thousand in
respect of assets owned by Bankia and its subsidiaries.
On 14 January 2016, the price initially paid for the assets in the second adjustment was returned by
means of delivery to the SAREB of bonds it issued and delivered to BFA and Bankia as consideration
for the transaction executed on 21 December 2012, resulting in a positive impact.
The amount calculated for the assets covered by the adjustment included the coupons paid that the
company would have settled prior to the correction settlement date. The coupon paid was calculated
on the basis of the cash value of each bond series.
(2) Accounting policies and measurement bases
A summary of the main accounting policies and measurement bases applied to prepare the Bankia
Group's consolidated financial statements for the year ended 31 December 2015 is as follows:
(2.1) Business combinations and consolidation
(2.1.1) BFA-Bankia Group Restructuring Plan.
As indicated in Note 1.2, 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 2012-2017 Restructuring
Plan. The Restructuring Plan includes, inter alia, the start-up of a disposal plan for non-strategic
holdings. Following the roll-out of the disposal plan and in accordance with applicable regulations (see
Note 2.20), the Group reclassified certain equity investments to "Non-current assets held for sale".
The classification, recognition and measurement criteria applied based on the type of investments put
up for sale were as follows:
-
Investments in Group companies: subsidiaries that based on the foregoing criteria meet the
requirement for recognition as "Non-current assets held for sale" were fully consolidated, and all
their assets and liabilities were presented and measured in accordance with the criteria
established for “Disposal groups”. Assets and liabilities of disposal groups are measured following
the criteria established for non-current assets held for sale (Note 2.20).
22
The assets are presented separately on the balance sheet under "Non-current assets held for
sale" and the liabilities under "Liabilities associated with non-current assets held for sale".
Valuation adjustments to equity related to these items were classified, where appropriate, under
"Valuation adjustments - Non-current assets held for sale". Gains and losses on these assets and
liabilities, and impairment losses and recovery, where applicable, were recognised under "Gains/
(losses) on non-current assets held for sale not classified as discontinued operations", except in
the case of financial assets, assets arising from employee remuneration, deferred tax assets and
assets under insurance contracts, which are measured in accordance with the general
measurement criteria for this type of asset.
The table below provides a detail of the subsidiaries meeting the criteria for recognition as
disposal groups and whose assets and liabilities are therefore presented under "Non-current
assets held for sale" and "Liabilities associated with non-current assets held for sale",
respectively. Note 15 provides details of the amounts of these assets and liabilities.
% shareholding
Company
Navicoas Asturias, S.L.
City National Bank of Florida
CM Florida Holdings, INC.
31/12/2015
31/12/2014
95.00
60.00
-
95.00
100.00
100.00
Appendix II contains significant information on these entities.
-
Investments in jointly-controlled entities and associates: pursuant to prevailing legislation, the
equity method of accounting is no longer applied to investments in jointly-controlled entities and
associates classified under "Non-current assets held for sale"; instead, the investments are
presented and measured as "Non-current assets held for sale", that is, at the lower of fair value
less costs to sell and carrying amount at the classification date in accordance with applicable
standards (see Note 2.20). The gains and losses arising on their disposal, and impairment losses
and recovery, where appropriate, are recognised under "Gains/(losses) on non-current assets
held for sale not classified as discontinued operations". The remaining income and expenses are
classified under the related income statement items according to their nature.
All investments in jointly-controlled entities and associates at 31 December 2015 were reclassified
to "Non-current assets held for sale" except the following:
% shareholding
Company
31/12/2015
31/12/2014
Aseguradora Valenciana, S.A. de Seguros y Reaseguros (*)
49.00
49.00
Laietana Vida Compañía de Seguros de la Caja de Ahorros de Laietana, S.A. (*)
49.00
49.00
Bankia Mapfre Vida, S.A., de Seguros y Reaseguros
49.00
49.00
Note 15 details the amount of investments in jointly-controlled entities and associates that were
reclassified to "Non-current assets held for sale" and the related impairment.
Relevant information on these companies is provided in Appendix III and IV.
-
Available-for-sale financial assets: as indicated in Note 2.20, as these are financial assets, they
are not measured using the general criteria for non-current assets held for sale, but rather
applying the measurement criteria for financial assets (see Note 2.2). Previously recognises
losses in "Equity - Valuation adjustments" are considered realised and recognised in the income
statement at the date of classification. Remaining valuation adjustments recognised in equity are
classified, as appropriate, under "Valuation adjustments - Non-current assets held for sale”.
As a result of the Restructuring Plan described previously, all the investments recognised under
"Available-for-sale financial assets - Equity instruments" were reclassified to “Non-current assets
held for sale" on the accompanying consolidated balance sheet at 31 December 2015. Note 15 to
the consolidated financial statements details the amounts at which the investments are
recognised and the related impairment.
23
(2.1.2) Business combinations
A business combination is a transaction or another event in which the acquirer obtains control over
one or more businesses. For these purposes, an entity controls another entity when it has the power
to govern its financial and operating policies, as stipulated by law, the bylaws or agreement, so as to
obtain economic benefits from its activities.
Accordingly, a business is defined as an integrated set of activities and assets which can be controlled
and managed for the purpose of providing a return in the form of dividends, less costs and other
economic benefits, directly to the investors or other owners, members or ventures.
In particular, the acquisition of control over an entity is considered a business combination.
The business combinations through which the Group acquired control of an entity or economic unit are
recognised for accounting purposes using the acquisition method, the main phases of which are
summarised as follows:
-
Identify the acquirer;
-
Determine the acquisition date;
-
Recognise and measure the identifiable acquired assets, the liabilities assumed and any noncontrolling interest in the acquiree. Other than the exceptions mentioned in IFRS 3, in general the
identified assets, liabilities and contingent liabilities of the entity or business acquired are
measured at fair value when control is acquired;
-
Recognise and measure goodwill or the gain from a bargain purchase in the consolidated income
statement comparing the price paid in the business combination and the initial value of the
identified assets, liabilities and contingent liabilities of the acquired business.
In situations in which the Group obtained control of an acquiree, in which it holds equity interest
immediately prior to the acquisition date (a business combination achieved in stages), its equity
interests in the acquire, previously held at fair value at the acquisition date, are remeasured and the
resulting gains or losses, if any, are recognised in the consolidated income statement.
In the case of business combinations carried out without transferring consideration, such as business
combinations achieved by contract alone, the Group recognises, where applicable, the amount of the
net assets and liabilities of the acquiree applying the policies and bases contained in IFRS 3 (in
general and with the exceptions established in IFRS 3) at fair value in the Group’s equity, such that
any goodwill or gains arising from the purchase are not recognised in business combinations of this
type.
Mapfre agreement
On 31 January 2014, Bankia and Mapfre reached an agreement whereby Mapfre will become the
exclusive provider of life and non-life insurance for Bankia and distribute its products throughout the
Bank’s sales network. The agreement involves restructuring the bancassurance business through new
distribution agreements for life and non-life insurance with the bancassurance operator, Bankia
Mediación, as well as incorporating Aseval and Laietana Vida ’s business into Bankia’s and Mapfre’s
existing life insurance joint venture. The price for Mapfre's acquisition of 51% of Aseval y Laietana
Vida and 100% of Laietana Seguros Generales from Bankia was EUR 151.7 million, once the financial
conditions of the agreement have been taken into account, including separating Aseval ’s pensions
business and adjusting each company’s capital by distributing the capital surplus. On 30 October
2014, the Execution Agreement for the Purchase-Sale was signed after approval by the relevant
regulatory and supervisory authorities. After the signing of this agreement, Aseval and Laietana Vida
were considered associates (see Note 16.2).
(2.1.3) Basis of consolidation
For the purposes of consolidation and in accordance with the criteria set out in IFRS 10 and IFRS 11
applied by the Group since 1 January 2015, the Group comprises four types of companies:
subsidiaries, joint ventures, associates and structured entities, defined as follows:
24
(2.1.3.1) Subsidiaries
Subsidiaries are companies over which the Group has control. Control over an investee is understood
as the exposure, or rights, to variable returns from involvement with the investee and the ability to use
power over the investee to affect the amount of investor returns.
Consideration as subsidiaries requires:
a. Power: An investor has power over an investee when the investor has existing rights that give it
the current ability to direct the relevant activities; i.e. the activities that significantly affect the
investee's returns;
b. Returns: An investor is exposed, or has rights, to variable returns from its involvement with the
investee when the investor's returns from its involvement have the potential to vary as a result of
the investee's performance. The investor's returns can be only positive, only negative or both
positive and negative.
c.
Link between power and returns: An investor controls an investee if the investor not only has
power over the investee and exposure or rights to variable returns from its involvement with the
investee, but also has the ability to use its power to affect the investor's returns from its
involvement with the investee.
The financial statements of subsidiaries are fully consolidated with those of the Bank except those of
subsidiaries classified as non-current assets held for sale, which are recognised and measured as
described in Note 2.1.1.
The share of non-controlling interests of subsidiaries in the Group's consolidated equity are presented
under "Equity - Non-controlling interests" in the consolidated balance sheet, while their share of profit
and losses is presented under "Profit/(loss) for the year - Attributable to non-controlling interests" in
the consolidated income statement (see Note 24).
The results of subsidiaries acquired during the period are included in the consolidated income
statement from the date of acquisition to period end.
Similarly, the results of subsidiaries disposed of during the year are included in the consolidated
income statement from the beginning of the year to the date of disposal.
Appendix II contains significant information on these entities.
(2.1.3.2) Joint ventures
These are entities over which there is contractually agreed sharing of control. A joint arrangement is a
contractual agreement giving two or more entities, or "parties", control of an activity subject to joint
control. In a joint arrangement, no party has control over the arrangement, but rather control is shared
with the other parties, which implies, contractually, that decisions about the relevant activities require
the unanimous consent of the parties that share control. There are different types of joint
arrangements, but they can be grouped as follows:
a.
A joint operation, whereby the parties that have joint control of the arrangement have rights to the
assets, and obligations for the liabilities, relating to the arrangement. It may be structured through
a separate vehicle or not. In the consolidated financial statements, the party to joint operations
recognises, according to their nature and in accordance with applicable IFRSs:
-
b.
its assets, including its share of the jointly controlled assets;
its liabilities, including its share of any liability incurred jointly;
its revenue from the sale of its share of the output arising from joint operations;
its share of the revenue from the sale of the output by the joint operations; and
its expenses, including its share of any expenses incurred jointly.
Joint venture, in which the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. Joint ventures must necessarily by structure in a separate vehicle. A
party to a joint venture must recognise its interest in the joint venture as an investment and
account for this investment using the equity method in accordance with IAS 28 "Investments in
associates and joint ventures"
The assets and liabilities assigned to jointly-controlled operations and the assets controlled jointly with
other venturers are recognised in the consolidated balance sheet, classified according to their specific
nature. Similarly, the Group's share of the income and expenses of joint ventures is recognised in the
consolidated income statement on the basis of the nature of the related items.
25
The financial statements of the joint ventures are consolidated with those of the Bank using the equity
method, except those classified as non-current assets held for sale, which are recognised and
measured as described in Note 2.1.1. At 31 December 2015, there were no joint ventures not
classified as non-current assets held for sale. Appendix IV contains significant information on these
entities.
(2.1.3.3) Associates
“Associates” are entities over which the Bank has significant influence, but not control or joint control.
The influence is usually evidenced by a direct or indirect holding of 20% or more of the investee's
voting rights.
In the consolidated financial statements, investments in associates are accounted for using the equity
method, as defined by IAS 28. However, as indicated in Note 2.1.1., all the associates were
reclassified to "Non-current assets held for sale" in 2012, and presented and measured from then as
explained in that Note.
Relevant information on associates is provided in Appendix III and IV. The Appendix lists entities in
which the Group holds less than 20% of share capital as it considers that it has significant influence
over their financial and operating policies.
The table below shows a breakdown of these entities which, despite not holding 20% of their capital or
voting rights and despite their classification under "Non-current assets held for sale", the Group
considered to be associates as it exercises significant influence (due to significant representation on
the companies' governing bodies, or the effective ability to influence their strategic and operating
policies):
Company
Haciendas Marqués de la Concordia, S.A.
Numzaan, S.L.
% shareholding
31/12/2015
31/12/2014
16.16
14.13
16.16
14.13
The following is a list of companies in which the Group holds an interest exceeding 20% of capital but
not treated as associates in the Group's consolidated balance sheet at 31 December 2015 and 2014,
since it is considered that the Group does not exercise significant influence over them, given the
specific features of those investments: either the Group has no significant representation on those
companies’ governing bodies, or it has no effective ability to influence their strategic and operating
policies:
% shareholding
Company
31/12/2015
31/12/2014
Promociones y Gestiones Patrimoniales 1997, S.L.
48.66
48.66
Naviera Koala, A.I.E.
34.78
34.78
Aviones Carraixet Crj-200 II, A.I.E.
25.00
25.00
Aviones Turia Crj-200 I, A.I.E.
25.00
25.00
Aviones Portacoli Crj-200 III, A.I.E.
24.90
24.90
The aggregate of investments in such companies was not a significant item in the Group's
consolidated financial statements for the year ended 31 December 2015.
26
(2.1.3.4) Structured entities
An entity that has been designed so that voting or similar rights are not the dominant factor in deciding
who controls the entity, such as when any voting rights relate to administrative tasks only and the
relevant activities are directed by means of contractual arrangements. A structured entity often has
some or all of the following features or attributes:
-
-
Restricted activities.
A narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research
and development activities, provide a source of capital or funding to an entity or provide
investment opportunities for investors by passing on risks and rewards associated with the
assets of the structured entity to investors.
Insufficient equity to permit the structured entity to finance its activities without subordinated
financial support.
Financing in the form of multiple contractually linked instruments to investors that create
concentrations of credit or other risks (tranches).
Examples of entities that are regarded as structured entities include, but are not limited to:
-
Securitization vehicles
Asset-backed financings
Some investment funds
In those cases where the Group creates, or has interests in, entities designed to provide investment
opportunities for customers or to transfer risks or for other purposes, it determines whether control
exists over the investee using internal criteria and procedures and related regulations, and, therefore,
whether it should or should not be consolidated.
These methods and procedures determine the existence of control by considering how decisions are
taken regarding relevant activities and whether there is exposure to variability of returns and if there is
a link between power and returns.
Consolidated structured entities:
These entities include the so-called "asset securitization funds" and vehicles, created to provide
investments opportunities to customers or to transfer risks or for other purposes, and are fully
consolidated where, based on analysis, it is concluded that the Group has control.
In the specific case of the securitization funds to which Group entities transfer lending portfolios, when
assessing whether the Group has control, the following circumstances which indicate control are
considered:
- The activities of the securitization funds are carried out on behalf of the entity, in accordance
with the specific needs of the business, such that it obtains benefits or advantages from the
activities of the securitization funds.
- The entity retains decision-making power to obtain most of the benefits of the activities of the
securitization funds or delegates this power through an "automatic pilot" mechanism (securities
funds are structured such that all decisions and activities have been predefined before their
creation).
- The entity has rights to the majority of the benefits of the securitization funds and, therefore, is
exposed to the risks inherent in its activity. The Bank retains most of the residual benefits of the
securitization funds.
- The entity retains most of the risks of the securitization funds' assets.
If control is determined to exist on the basis of these indicators, the securitization funds are included in
the consolidated Group.
The Group determined that in none of the securitizations made from 1 January 2004, the securitised
assets could be derecognised from the consolidated balance sheet (see Note 12 and Appendix V),
and that the funds should be consolidated, as the Group manages the impairment of collateral and
retains substantially the expected credit losses and possible variations in net cash flows through
subordinated finance and credit facilities in favour of the securitization funds.
27
Unconsolidated structured entities:
The Group has vehicles that provide investment opportunities to customers or transfer risks or for
other purposes. These vehicles are not consolidated as the Group does not have control and as they
do not meet the criteria for consolidation in IFRS 10. The amount of the assets and liabilities of these
vehicles is not material in relation to the Group's consolidated financial statements.
(2.1.3.5) Changes in levels of investments in subsidiaries
Acquisitions and disposals that do not result in a change of control are accounted for as equity
transactions, and gain and loss is not recognised in the income statement. Goodwill is not
remeasured. The difference between the consideration paid or received and the decrease or increase
in the amount of non-controlling interests, respectively, is recognised in reserves. Similarly, if a parent
loses control of a subsidiary, it derecognises the assets, liabilities and non-controlling interests and
any other items that could be recognised in valuation adjustments of the former subsidiary and
recognises the fair value of the consideration received and any investment retained. The difference
between these amounts is recognised in the income statement.
(2.2) Financial instruments: initial recognition, derecognition of financial instruments, fair value
and amortised cost of financial instruments, classification and measurement and
reclassification among categories
(2.2.1) Initial recognition of financial instruments
Financial instruments are initially recognised on the consolidated balance sheet when the Group
becomes a party to the contract in accordance with the provisions thereof. Specifically, debt
instruments, such as loans and cash deposits, are recognised from the date on which the legal right to
receive or the legal obligation to pay cash arises. Derivative financial instruments are generally
recognised from the trade date.
A regular way purchase or sale of financial assets, defined as one in which the parties' reciprocal
obligations must be discharged within a time frame established by regulation or convention in the
marketplace and that may not be settled net, such as stock market and forward currency purchase
and sale contracts, is recognised on the date from which the rewards, risks, rights and duties
attaching to all owners are for the purchaser, which, depending on the type of financial asset
purchased or sold, may be the trade date or the settlement or delivery date. In particular, transactions
performed in the spot currency market are recognised on the settlement date; equity instruments
traded in Spanish secondary securities markets are recognised on the trade date, and debt
instruments traded in these markets are recognised on the settlement date.
(2.2.2) Derecognition of financial instruments
A financial asset is derecognised when one or some of these following conditions happens:
-
The contractual rights to the cash flows from the financial asset expire; or
-
The financial asset is transferred and substantially all its risks and rewards or, although these are
not substantially transferred or retained, it transfers control over the financial asset (see Note 2.7).
Financial liabilities are derecognised from the consolidated balance sheet when the obligations are
extinguished or when they are repurchased by the Group with the intention either to resell them or to
cancel them.
(2.2.3) Fair value and amortised cost of financial instruments
The fair value of a financial instrument on a specific date is the amount at which it could be delivered
or settled on that date between knowledgeable, willing parties in an arm’s length transaction. The
most objective and common reference for the fair value of a financial instrument is the price that would
be paid for it on an organised, transparent and deep market (“quoted price” or “market price”).
The Group measures daily all the positions that must be recognised at fair value based either on
available market prices for the same instrument, or on valuation techniques supported by observable
market inputs or, if appropriate, on the best available information, using assumptions that market
agents would apply to measure the asset or liability assuming they are acting in its best interest.
Note 27 provides information on the fair value of the Group's main assets and liabilities at 31
December 2015 and 2014.
28
Amortised cost is understood to be the acquisition cost of a financial asset or liability plus or minus, as
appropriate, the principal repayments and interest payments and the cumulative amortisation (as
reflected in the consolidated income statement) using the effective interest method) of any difference
between the initial cost and the maturity amount of the financial instruments. In the case of financial
assets, amortised cost furthermore includes any reductions for impairment or uncollectibility.
The effective interest rate is the discount rate that exactly matches the carrying amount of a financial
instrument to the present value of all its estimated cash flows of all kinds over its remaining life, but
disregarding future credit losses. For fixed rate financial instruments, the effective interest rate
coincides with the contractual interest rate established on the acquisition date adjusted, where
applicable, for the fees and transaction costs that, pursuant to IAS 39, must be included in the
calculation of the effective interest rate. In the case of floating rate financial instruments, the effective
interest rate is determined in a similar fashion to fixed rate transactions and is recalculated on the date
of every revision of the contractual interest rate of the transaction, taking into account any changes in
the future cash flows.
(2.2.4) Classification and measurement of financial assets and liabilities
Financial instruments are classified in the Group’s consolidated balance sheet as follows:
–
Financial assets and liabilities at fair value through profit or loss: this category includes
financial instruments classified as held for trading and other financial assets and liabilities
classified as at fair value through profit or loss:
 Financial assets held for trading include those acquired with the intention of selling them
in the short term or which are part of a portfolio of identified financial instruments that are
managed together and for which there is evidence of a recent pattern of short-term profit
taking, and derivatives not designated as hedging instruments, including those separated
from hybrid financial instruments pursuant to IAS 39.
 Financial liabilities held for trading include those that have been issued with an intention
to repurchase them in the near term or that form part of a portfolio of identified financial
instruments that are managed together and for which there is evidence of a recent pattern of
short-term profit taking; short positions arising from financial asset sales under non-optional
repurchase agreements or borrowed securities, and derivatives other than as hedging
instruments, including those separated from hybrid financial instruments pursuant to IAS 39.
 Other financial assets at fair value through profit or loss are considered as financial
assets designated as such from initial recognition, the fair value of which may be determined
reliably, which meet one of the following conditions:
 In the case of hybrid financial instruments in which the embedded derivative(s)
must be accounted for separately from the host contract, the fair value of the
embedded derivative(s) cannot be estimated reliably.

In the case of hybrid financial instruments for which it is compulsory to separate
the embedded derivative(s), the Group has elected to classify the entire hybrid
financial instrument in this category from initial recognition, since the requirements
established by current regulations are met in the sense that the embedded
derivative(s) significantly modify/modifies the cash flows that the host contract
would have had if it had been considered separately from the embedded
derivative(s) and that there is an obligation to separate the embedded derivative(s)
from the host contract for accounting purposes.

When the classification of a financial asset in this category results in more relevant
information, because it eliminates or significantly reduces a measurement or
recognition inconsistency (also referred to as an “accounting mismatch”) that would
otherwise arise from measuring assets or liabilities or recognising the gains or
losses on them on different bases.

When the classification of a financial asset in this category results in more relevant
information, because a group of financial assets, liabilities or both, is managed and
its performance is evaluated on a fair value basis, in accordance with a
documented risk management or investment strategy, and information about the
group is provided on that basis to the Group’s key management personnel.
29
 Other financial liabilities at fair value through profit or loss are considered as financial
liabilities designated as such from initial recognition, the fair value of which may be
determined reliably, which meet one of the following conditions:
 In the case of hybrid financial instruments in which the embedded derivative(s)
must be accounted for separately from the host contract, the fair value of the
embedded derivative(s) cannot be estimated reliably.
 In the case of hybrid financial instruments for which it is compulsory to separate
the embedded derivative(s), the Group has elected to classify the entire hybrid
financial instrument in this category from initial recognition, since the requirements
established by current regulations are met in the sense that the embedded
derivative(s) significantly modify/modifies the cash flows that the host contract
would have had if it had been considered separately from the embedded
derivative(s) and that, pursuant to prevailing regulations, there is an obligation to
separate the embedded derivative(s) from the host contract for accounting
purposes.
 When the classification of a financial liability in this category results in more
relevant information, because it eliminates or significantly reduces a measurement
or recognition inconsistency (also referred to as an “accounting mismatch”) that
would otherwise arise from measuring assets or liabilities or recognising the gains
or losses on them on different bases.
 When the classification of a financial liability in this category results in more
relevant information, because a group of financial liabilities, assets or both is
managed and its performance is evaluated on a fair value basis, in accordance
with a documented risk management or investment strategy and information about
the group is provided on that basis to the Group’s key management personnel.
Financial instruments at fair value through profit or loss are initially measured at their fair
value. Later changes to the fair value are recognised in the consolidated income statement
under “Gains or losses on financial assets and liabilities (net)", except for changes in the fair
value attributable to income accrued on the financial instrument other than trading
derivatives, which is recognised in the consolidated income statement under either “Interest
and similar income”, “Interest expense and similar charges”, or “Return on equity
instruments”, depending on their nature. The accrued returns on debt instruments included in
this category are calculated using the effective interest method.
Notwithstanding the above, financial derivatives whose underlying assets are equity
instruments whose fair value cannot be measured reliably and which are settled by delivery
of the underlying, are measured in these consolidated financial statements at cost.
-
Held-to-maturity investments: this category includes debt securities traded on active markets
with fixed maturities and fixed or determinable cash flows for which the Group has, from
inception and any subsequent date, both the positive intention and demonstrated financial
ability to hold to maturity.
Debt securities included in this category are initially measured at fair value adjusted by the
amount of the transaction costs that are directly attributable to the acquisition of the financial
asset, which are recognised in the consolidated income statement by the effective interest
method as defined in IAS 39. Subsequent to acquisition, debt securities included in this
category are measured at amortised cost calculated using the effective interest method.
The interest accrued on these securities, calculated using the effective interest method, is
recognised under “Interest and similar income” in the consolidated income statement. Exchange
differences on securities included in this portfolio denominated in currencies other than the euro
are recognised as explained in Note 2.4. Any impairment losses on these securities are
recognised as set forth in Note 2.9.
30
-
Loans and receivables: this category includes unquoted debt securities, financing granted to
third parties in connection with ordinary lending activities carried out by the consolidated entities
and receivables from purchasers of their goods and the users of their services. This category
also includes finance lease transactions in which the consolidated entities act as the lessor.
The financial assets included in this category are initially measured at fair value adjusted by the
amount of the fees and transaction costs that are directly attributable to the acquisition of the
financial asset and which, in accordance with the provisions of the regulations applicable, must
be allocated to the consolidated income statement by the effective interest method through
maturity. Subsequent to acquisition, assets included in this category are measured at amortised
cost.
Assets acquired at a discount are measured at the cash amount paid and the difference
between their repayment value and the amount paid is recognised as finance income using the
effective interest method during the remaining term to maturity.
The consolidated entities generally intend to hold the loans and credits granted by them until
their final maturity and, therefore, they are presented in the consolidated balance sheet,
subsequent to initial recognition, at their amortised cost.
The interest accrued on these assets from their initial recognition, calculated using the effective
interest method, is recognised under “Interest and similar income” in the consolidated income
statement. Exchange differences on securities included in this portfolio denominated in
currencies other than the euro are recorded as set forth in Note 2.4. Any impairment losses on
these assets are recognised as described in Note 2.9. Debt securities included in fair value
hedges are recognised as explained in Note 2.3.
-
Available-for-sale financial assets: This category includes debt securities not classified as
held-to-maturity investments, as loans and receivables or as financial assets at fair value
through profit or loss owned by the Group and equity instruments owned by the Group relating
to entities other than subsidiaries, joint ventures or associates that are not classified as at fair
value through profit or loss.
The instruments included in this category are initially measured at fair value adjusted by the
transaction costs that are directly attributable to the acquisition of the financial asset, which are
recognised, through maturity, in the consolidated income statement by the effective interest
method (as defined in the current regulations), except for those of financial assets with no fixed
maturity, which are recognised in the income statement when these assets become impaired or
are derecognised. Subsequent to acquisition, financial assets included in this category are
measured at fair value.
However, equity instruments whose fair value cannot be determined in a sufficiently objective
manner are measured in these consolidated financial statements at cost less any impairment
losses calculated as detailed in Note 2.9.
Changes in the fair value of available-for-sale financial assets relating to accrued interest or
dividends since their initial recognition are recognised in “Interest and similar income"
(calculated using the effective interest method) and “Return on equity instruments” in the
consolidated income statement, respectively. Any impairment losses on these instruments are
recognised as described in Note 2.9. Exchange differences on financial assets denominated in
currencies other than the euro are recognised as explained in Note 2.4. Changes in the fair
value of financial assets hedged in fair value hedges are recognised as explained in Note 2.3.
Other changes in the fair value of available-for-sale financial assets from the acquisition date
are recognised in Group's equity under “Valuation adjustments - Available-for-sale financial
assets” until the financial asset is derecognised, at which time the balance recorded under this
item is recognised under “Gains or losses on financial assets and liabilities (net)” in the
consolidated income statement or, in the case of equity instruments considered to be strategic
investments for Group, under “Gains/(losses) on non-current assets held for sale not classified
as discontinued operations”.
31
-
Financial liabilities at amortised cost: this category includes financial liabilities not included in
any of the preceding categories.
The liabilities issued by the consolidated entities which, although capital for legal purposes, do
not meet the requirements for classification as equity in accordance with IAS 32, basically the
shares issued by the consolidated entities that do not carry any voting rights but entitle their
holders to receive dividends if certain conditions are met, are classified as financial liabilities at
amortised cost, unless the Group has designated them as financial liabilities at fair value
through profit or loss, if they qualify as such.
The financial liabilities included in this category are initially measured at fair value adjusted by
the amount of the transaction costs that are directly attributable to the issuance or trading of the
financial liability, which are recognised in the consolidated income statement by the effective
interest method defined in IAS 39 until maturity. Subsequently, these financial liabilities are
measured at amortised cost calculated using the effective interest method defined in IAS 39.
The interest accrued on these liabilities since their initial recognition, calculated using the
effective interest method, is recognised under “Interest expense and similar charges” in the
consolidated income statement. Exchange differences on liabilities included in this portfolio
denominated in currencies other than the euro are recognised as explained in Note 2.4.
Financial liabilities included in fair value hedges are recognised as explained in Note 2.3.
Nevertheless, financial instruments that should be considered as non-current assets held for sale in
accordance with IFRS 5 are recognised in the consolidated financial statements as explained in Note
2.20.
(2.2.5) Reclassification of financial instruments between portfolios
In 2015 and 2014, there were no reclassifications between financial instrument portfolios, nor were
there any sales of financial assets classified as "Held-to-maturity investments" for significant amounts.
(2.3) Hedge accounting and mitigation of risk
The Group uses financial derivatives as part of its strategy to reduce its exposure to interest rate,
credit, foreign exchange risk and other risks. When these transactions meet certain requirements
stipulated in IAS 39, they qualify for hedge accounting.
When the Group designates a transaction as a hedge, it does so from the initial date of the
transactions or instruments included in the hedge, and the hedging transaction is documented
appropriately. The hedge accounting documentation includes identification of the hedged item(s) and
the hedging instrument(s), the nature of the risk to be hedged and the criteria or methods used by the
Group to assess the effectiveness of the hedge over its entire life, taking into account the risk to be
hedged.
The Group only applies hedge accounting for hedges that are considered highly effective over their
entire lives. A hedge is considered to be highly effective if, during its expected life, the changes in fair
value or cash flows of the hedged item that are attributable to the risk hedged in the hedging of the
financial instrument(s) are almost completely offset by changes in the fair value or cash flows, as
appropriate, of the hedging instrument(s).
To measure the effectiveness of hedges designated as such, the Group analyses whether, from the
beginning to the end of the term defined for the hedge, it can expect, prospectively, that the changes
in the fair value or cash flows of the hedged item that are attributable to the hedged risk will be almost
fully offset by changes in the fair value or cash flows, as appropriate, of the hedging instrument and,
retrospectively, that the actual results of the hedge will have been within a range of 80% to 125% of
the results of the hedged item.
Hedging transactions performed by the Group are classified as follows:
-
Fair value hedges: hedge of the exposure to changes in fair value of financial assets or
liabilities or unrecognised firm commitments, or of an identified portion of such assets,
liabilities or firm commitments, that is attributable to a particular risk, provided that it affects
the consolidated income statement.
-
Cash flow hedges: hedge of the exposure to variability in cash flows that is attributable to a
particular risk associated with a financial asset or liability or a highly probable forecast
transaction, provided that it could affect the consolidated income statement.
-
Hedge of a net investment in foreign operations: hedge of the currency risk on
investments in subsidiaries, associates, joint ventures and branches of the Group whose
activities are based on or conducted in another country or in a functional currency than the
euro.
32
In the specific case of financial instruments designated as hedged items or qualifying for hedge
accounting, gains and losses are recognised as follows:
-
In fair value hedges, the gains or losses arising on both the hedging instruments and the
hedged items are recognised directly in the consolidated income statement.
-
In cash flow hedges, the gains or losses attributable to the portion of the hedging
instruments that qualifies as an effective hedge are recognised temporarily in consolidated
equity under "Valuation adjustments - Cash flow hedges". Financial instruments hedged in this
type of hedging transaction are recognised as explained in Note 2.2, with no change made to
the recognition criteria due to their consideration as hedged items.
-
In hedges of net investments in foreign operations, the gains or losses attributable to the
portion of the hedging instruments qualifying as an effective hedge are recognised temporarily
in consolidated equity under "Valuation adjustments - Hedges of net investments in foreign
operations". Financial instruments hedged in this type of hedging transaction are recognised
as explained in Note 2.2, with no change made to the recognition criteria due to their
consideration as hedged items.
As a general rule, in cash flow hedges, the gains or losses attributable to the effective portion of the
hedging instruments are not recognised in the consolidated income statement until the gains or losses
on the hedged item are recognised in the consolidated income statement or, if the hedge relates to a
highly probable forecast transaction that will lead to the recognition of a non-financial asset or liability,
they will be recognised as part of the acquisition or issue cost when the asset is acquired or the
liability is assumed.
In the case of hedges of net investments in foreign operations, the amounts recognised as valuation
adjustments in equity in accordance with the aforementioned criteria are recognised in the
consolidated income statement when they are disposed of or derecognised.
In cash flow hedges and hedges of net investments in foreign operations, the gains or losses on the
ineffective portion of the hedging instruments are recognised directly under “Gains or losses on
financial assets and liabilities (net)” in the consolidated income statement.
The Group discontinues hedge accounting when the hedging instrument expires or is sold, when the
hedge no longer meets the requirements for hedge accounting or it revokes the designation as a
hedge.
When, as explained in the preceding paragraph, hedge accounting is discontinued for a fair value
hedge, in the case of hedged items carried at amortised cost, the value adjustments made as a result
of the hedge accounting described above are recognised in the consolidated income statement
through maturity of the hedged items, using the effective interest rate recalculated as at the date of
discontinuation of hedge accounting.
If hedge accounting is discontinued for a cash flow hedge or a hedge of a net investment in a foreign
operation, the cumulative gain or loss on the hedging instrument recognised in equity under “Valuation
adjustments” in the consolidated balance sheet will continue to be recognised under that heading until
the forecast hedged transaction occurs, when it will be reclassified into the income statement or it will
correct the acquisition cost of the asset or liability to be recorded, if the hedged item is a forecast
transaction that results in the recognition of a non-financial asset or liability.
The Group enters into hedges on a transaction-by-transaction basis pursuant to the aforementioned
criteria by assessing the hedging instrument and the hedged item on an individual basis and
continually monitoring the effectiveness of each hedge, to ensure that changes in the value of the
hedging instrument and the hedged item offset each other.
The Group's main hedged positions and the financial hedging instruments used are as follows:
Fair value hedges
–
Available-for-sale financial assets:
o
Fixed-rate debt securities, whose risk is hedged with interest rate derivatives
(basically swaps). The Group also hedges certain positions against credit risk with
credit derivatives (basically credit default swaps).
o
Equity instruments, whose market risk is hedged with equity swaps and futures
arranged in active markets.
33
–
Loans and receivables:
o
–
Fixed-rate loans, whose risk is hedged with interest rate derivatives (basically swaps).
The Group also hedges certain positions against credit risk with credit derivatives
(basically credit default swaps).
Financial liabilities at amortised cost:
o
Long-term fixed-rate deposits and marketable debt securities issued by the Group,
whose risk is hedged with interest rate derivatives (basically swaps).
Cash flow hedges
–
Available-for-sale financial assets:
o
–
Loans and receivables:
o
–
Floating-rate debt securities, whose risk is hedged with interest rate derivatives
(basically swaps).
Floating-rate loans, whose risk is hedged with interest rate derivatives (basically
swaps).
Financial liabilities at amortised cost:
o
Marketable debt securities issued by the Group, whose risk is hedged with interest
rate derivatives (basically swaps).
34
(2.4) Foreign currency transactions
(2.4.1) Functional currency
The Group’s functional currency is the euro. Consequently, all balances and transactions
denominated in currencies other than the euro are considered to be denominated in “foreign
currency”.
The detail, by currency and item, of the equivalent euro value of the main asset and liability balances
in the consolidated balance sheet at 31 December 2015 and 2014 denominated in foreign currency is
as follows:
31/12/2015
ITEMS
Assets
31/12/2014
Liabilities
Assets
Liabilities
Balances in US dollars
Cash and balances with central banks
Financial assets and liabilities held for trading
1,225
-
1,265
-
316,539
627,381
329,406
602,465
1,268,698
-
1,287,368
-
Investments
-
-
-
-
-
603,222
-
479,317
964
-
869
-
-
-
2,170
-
Loans and receivables
Available-for-sale financial assets
Held-to-maturity investments
69,446
20,692
4,257,794
3,612,274
1,656,872
1,251,295
5,878,872
4,694,056
358
-
480
-
154,970
156,439
173,638
173,574
76,412
-
81,137
-
-
74,709
-
39,248
-
-
-
-
Other
-
158
100
183
231,740
231,306
255,355
213,005
Other (1)
Total
Balances in pounds sterling
Total
Balances in other currencies
Other
Total
Total foreign currency balances
225
-
299
-
33,456
30,926
30,170
25,824
198,855
-
225,643
-
-
28,905
-
31,571
61
14,364
2,299
14,551
232,597
74,195
258,411
71,946
2,121,209
1,556,796
6,392,638
4,979,007
(1) In 2014, related mainly to balances with City National Bank of Florida, classified as a “Disposal group”
(2.4.2) Criteria for translation of foreign currency balances
Balances in foreign currencies are translated to euros in two consecutive phases:
-
Translation of foreign currency to the functional currency of the Group entities, joint ventures
and entities accounted for using the equity method; and
-
Translation to euros of the balances of consolidated companies or companies accounted for
using the equity method whose reporting currency is not the euro.
The functional currencies of all the Group entities or entities accounted for using the equity method in
the consolidated financial statements are the same as their respective reporting currencies.
35
Translation of foreign currency to the functional currency: Foreign currency transactions performed by
consolidated entities or entities accounted for using the equity method are initially recognised in their
respective financial statements at the equivalent value in their functional currencies, translated using
the exchange rates prevailing at the transaction date. Subsequently, the consolidated entities
translate the foreign currency monetary items to their functional currencies using the exchange rates
at year end.
Furthermore:
-
Non-monetary items measured at historical cost are translated to the functional currency at the
exchange rate at the date of acquisition.
-
No-monetary items measured at fair value are translated to the functional currency at the
exchange rate at the date when the fair value was determined.
Entities whose functional currency is not the euro: The balances in the financial statements of the
consolidated entities and entities accounted for using the equity method whose functional currency is
not the euro are translated to euros as follows:
-
Assets and liabilities, at the closing rates.
-
Income and expenses and cash flows, at the average exchange rates for the year.
-
Equity items, at the historical exchange rates.
(2.4.3) Exchange rates applied
The exchange rates used by the Group in translating the foreign currency balances to euros for the
purpose of preparing the consolidated financial statements, taking into account the methods
mentioned above, were the official rates published by the European Central Bank.
(2.4.4) Recognition of exchange differences
Exchange differences arising on translating foreign currency balances into the functional currency of
consolidated entities and their branch offices are generally recognised at their net value in the
consolidated income statement under "Exchange differences (net)". As an exception to this rule,
exchange differences affecting the value of financial instruments measured at fair value through profit
or loss are recognised in the consolidated income statement together with all other changes that may
affect the fair value of the instrument, under "Gains or losses on financial assets and liabilities (net)".
However, exchange differences arising on non-monetary items measured at fair value through equity
are recognised in consolidated equity under “Valuation adjustments – Exchange differences” in the
consolidated balance sheet until they are realised.
The exchange differences arising on the translation to euros of the financial statements in the
functional currencies of the consolidated entities, whose functional currency is not the euro, are
recognised in consolidated equity under “Valuation adjustments – Exchange differences” in the
consolidated balance sheet, whereas those translated to euros of the financial statements of entities
accounted for using the equity method are recognised under “Valuation adjustments – Entities
accounted for using the equity method”.
(2.4.5) Entities and branches located in hyperinflationary economies
None of the functional currencies of the consolidated subsidiaries and associates and of their
branches located abroad relate to hyperinflationary economies as defined by IFRS-EU. Accordingly, at
the 2015 year-end it was not necessary to adjust the financial statements of any consolidated entity or
associate to correct for the effect of inflation.
36
(2.5) Recognition of income and expenses
The most significant accounting criteria used by the Group to recognise its income and expenses are
summarised as follows:
(2.5.1) Interest income, interest expense, dividends and similar items
As a general rule, interest income, interest expenses and similar items are recognised on the basis of
their period of accrual using the effective interest method defined in IAS 39. Dividends received from
companies other than those within the scope of consolidation of the Group are recognised as income
when the consolidated entities' right to receive them arises.
However, when a debt security is assessed to be impaired individually or collectively because
recovery is considered unlikely, the entity ceases to recognise the interest accrued in the consolidated
income statement.
In general, amounts received on impaired loans and credits are applied first to the oldest past-due
amount. Unpaid interest is recognised first, then any excess is applied to reduce the outstanding
principal.
(2.5.2) Commissions, fees and similar items
Fee and commission income and expenses that are not to be included in the calculation of the
effective interest rate of transactions and/or are not included in the cost of financial assets or liabilities
other than those classified as at fair value through profit or loss are recognised in the consolidated
income statement using criteria that vary according to their nature. The most significant fee and
commission items are as follows:
-
Fees and commissions linked to the acquisition of financial assets and liabilities carried at fair
value through profit or loss, which are recognised in the income statement at the settlement
date.
-
Those arising from transactions or services that are performed over a period of time, which are
recognised in the consolidated income statement over the life of these transactions or services.
-
Those relating to services provided in a single act, which are recognised in the income
statement when the single act is carried out.
(2.5.3) Non-finance income and expenses
Non-financial income and expenses are recognised on an accrual basis.
(2.5.4) Deferred income and accrued expenses
These are recognised for accounting purposes at the present value of the estimated cash flows
discounted at market rates.
(2.6) Offsetting
Asset and liability balances are offset, i.e. reported in the consolidated balance sheet at their net
amount, when, and only when, they arise from transactions in which a contractual or legal right of setoff exists and the Group intends to settle them on a net basis, or to realise the asset and settle the
liability simultaneously.
In this regard, “offsetting" is not considered when presenting the financial assets subject to valuation
adjustments for decline in value or impairment, i.e. net of these adjustments, in the consolidated
financial statements under IFRS-EU.
In addition, following application of the amendment to IAS 32 Offsetting Financial Assets and Financial
Liabilities, the Group offset the positions in trading derivatives arranged through clearing houses as
they met the criteria for offsetting a financial asset and a financial liability, as follows:
-
the entity has a legally enforceable right to set off the recognised amounts of the instruments;
and
-
the entity intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
37
The amendment to IAS 32 clarifies when a financial asset and financial liability is eligible for offset.
The criteria were considered for the aforementioned set-off. Specifically, regarding the first of the
above criteria, the right of set-off cannot be contingent on a future event and must be legally
enforceable in the following circumstances: the normal course of business, an event of default and an
event of insolvency or bankruptcy of the entity or any of the counterparties.
Regarding the second one, the settlement mechanism through clearing houses must have features
that eliminate or result in insignificant credit and liquidity risk, and that will process receivables and
payables in a single settlement process or cycle, so that the result is, effectively, equivalent to net
settlement.
Note 9 and note 14 present a detail of net positions by class of derivative. However, in accordance
with prevailing regulations, other disclosures regarding offset positions are presented at their gross
amount.
(2.7) Transfers of financial assets
The accounting treatment of transfers of financial assets depends on the extent to which the risks and
rewards associated with the transferred assets are transferred to third parties:
-
If substantially all the risks and rewards of the assets transferred are transferred to third
parties – unconditional sale of financial assets, sale of financial assets under an agreement to
repurchase them at their fair value at the date of repurchase, sale of financial assets with a
purchased call option or written put option that is deeply out of the money, securitization of
assets in which the transferor does not retain a subordinated debt or grant any credit
enhancement to the new holders, and other similar cases – the transferred financial asset is
derecognised and any rights or obligations retained or created in the transfer are recognised
simultaneously.
-
If substantially all the risks and rewards associated with the financial asset transferred are
retained - sale of financial assets under an agreement to repurchase them at a fixed price or
at the sale price plus interest, a securities lending agreement in which the borrower
undertakes to return the same or similar assets, securitization of financial assets in which a
subordinated debt or another type of credit enhancement is retained that absorbs substantially
all the expected credit losses on the securitised assets, and other similar cases – the
transferred financial asset is not derecognised and continues to be measured by the same
criteria as those used prior to the transfer. However, the following items are recognised with
no offsetting:
 An associated financial liability, for an amount equal to the consideration received; this
liability is subsequently measured at amortised cost, or, if the aforementioned
requirements for classification as other financial liabilities at fair value through profit or
loss are met, at fair value, in accordance with the aforementioned criteria for this type
of financial liability.
 The income from the financial asset transferred but not derecognised and any
expense incurred on the new financial liability.
-
If the Group neither transfers nor retains substantially all the risks and rewards associated
with the financial asset transferred – sale of financial assets with a purchased call option or
written put option that is not deeply in or out of the money, securitization of financial assets in
which the transferor retains a subordinated debt or other type of credit enhancement for a
portion of the transferred asset, and other similar cases – the following distinction is made:
 If the seller does not retain control of the transferred financial asset, the transferred
financial assets is derecognised and any right or obligation retained or created as a
result of the transfer is recognised.
 If the seller retains control of the transferred financial asset, it continues to recognise it
in the consolidated balance sheet for an amount equal to its exposure to changes in
value and recognises a financial liability associated with the transferred financial
asset. The net amount of the transferred asset and associated liability is the amortised
cost of the rights and obligations retained, if the transferred asset is measured at
amortised cost, or the fair value of the rights and obligations retained, if the
transferred asset is measured at fair value.
38
Accordingly, financial assets are only derecognised when the cash flows they generate have been
extinguished or when substantially all the inherent risks and rewards have been transferred to third
parties.
Note 29.1 contains a summary of the main circumstances of the principal transfers of assets
outstanding at 2015 and 2014 year end which did not lead to the derecognition of the related assets.
(2.8) Exchanges of assets
Exchanges of assets entail the acquisition of tangible or intangible assets in exchange for other nonmonetary assets or a combination of monetary and non-monetary assets. For the purposes of these
consolidated financial statements, the foreclosure of assets to recover amounts owed to consolidated
entities by third parties is not considered an exchange of assets.
The assets received in an exchange of assets are recognised at fair value, provided that the
transaction can be deemed to have commercial substance, as defined in IAS 16 and IAS 38, and that
the fair value of the asset received or, failing this, of the asset given up, can be estimated reliably. The
fair value of the instrument received is determined as the fair value of the asset given up plus, where
applicable, the fair value of any monetary consideration given up in exchange, unless there is clearer
evidence of the fair value of the asset received.
If the exchanges of assets do not meet the above requirements, the asset received is recognised at
the carrying amount of the asset given up plus the monetary consideration given up or assumed in the
acquisition.
(2.9) Impairment of financial assets
A financial asset is considered to be impaired – and therefore its carrying amount is adjusted to reflect
the effect of impairment – when there is objective evidence that events have occurred which:
- In the case of debt instruments (loans and debt securities), give rise to an adverse impact on
the future cash flows that were estimated at the transaction date. An instrument is considered
impaired when there are reasonable doubts that its carrying amount will be recovered and/or
the related interest will be collected for the amounts and on the dates initially agreed upon.
- In the case of equity instruments, mean that their carrying amount may not be fully recovered.
As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to
the consolidated income statement for the period in which the impairment becomes evident, and the
reversal, if any, of previously recognised impairment losses is recognised in the consolidated income
statement for the period in which the impairment is reversed or reduced.
When the recovery of any recognised amount is considered unlikely, the amount is written off, without
prejudice to any actions that the consolidated entities may initiate to seek collection until their
contractual rights are extinguished due to expiry of the statute-of-limitations period, forgiveness or any
other cause. The criteria applied by the Group to determine possible impairment losses in each of the
various financial instrument categories and the method used to calculate and recognise such
impairment losses are as follows:
Debt instruments carried at amortised cost
The amount of an impairment loss incurred on a debt instrument carried at amortised cost is equal to
the negative difference between its carrying amount and the present value of its estimated future cash
flows.
In estimating the future cash flows of debt instruments the following factors are taken into account:
- All the amounts that are expected to be obtained over the remaining life of the instrument;
including, where appropriate, those which may result from the collateral provided for the
instrument (less the costs for obtaining and subsequently selling the collateral). The impairment
loss takes into account the likelihood of collecting accrued past-due interest receivable.
- The different types of risk to which each instrument is exposed.
- The circumstances in which collections will foreseeably be made.
Specifically as regards impairment losses resulting from materialisation of the insolvency risk of the
obligors (credit risk), a debt instrument is impaired due to insolvency:
- When there is evidence of a deterioration of the obligor’s ability to pay, either because it is in
arrears or for other reasons, and/or
39
- When country risk materialises; country risk is defined as the risk that is associated with debtors
resident in a given country due to circumstances other than normal commercial risk.
Impairment losses on these assets are assessed as follows:
- Individually, for all significant debt instruments and for instruments which, although not
significant, cannot be included in any group of assets with similar risk characteristics: instrument
type, debtor's industry and geographical location, type of guarantee or collateral, age of pastdue amounts etc.
- Collectively, the Group classifies transactions on the basis of the nature of the obligors, the
conditions of the countries in which they reside, transaction status, type of guarantee or
collateral, age of past-due amounts, etc. For each risk group it establishes the impairment
losses that must be recognised in the consolidated financial statements. Additionally, the Group
recognises a loss for inherent impairments not specifically identified. This impairment is the loss
inherent to any portfolio of assets incurred at the date of the financial statements.
In addition to this process, the Group has developed a methodology to estimate the present value of
the future cash flows of assets (excluding losses not incurred) in accordance with IAS 39.
The model establishes different processes according to the classification of customers as individually
significant or individually no significant. A threshold is in place to establish this differentiation after
analysing the portfolio and the Bank's monitoring policy. With this customer selection criteria,
individualised analysis has a large weight on the total estimated impairment in the model.
Once the thresholds are determined, the process is as follows:
a) Individually significant assets. Triggers are analysed to detect customers showing Objective
Evidence of Impairment ("OEI"), distinguishing between two groups:
-
-
Customers with OEI: incurred loss is calculated based on the present value of expected future
cash flows (repayment of principal plus interest) of each of the customer's transactions
(discounted at the original effective interest rate) compared to the current carrying amount.
Both going concern and gone concern assumptions are considered.
Customers without OEI: verification is made that the customer does not present any trigger
that effectively evidences impairment and no provision is required given the customer's loan
status. A collective calculation (IBNR) is made for these customers. Their losses depend on
the PD (probability of default) related to the transaction/customers and estimated LGD (loss
given default), similar to individually insignificant assets.
b) Individually no significant assets. Impairment is calculated based on historical default data,
adjusted to reflect current (micro and macro) economic conditions, of customers that are not
individually significant, distinguishing between:
-
Customers with OEI: incurred loss depends fully on the transaction LGD (severity) of the
operation, conditioned by recovery process; due to the PD of this population is 100%.
Customers without OEI: incurred loss depends on the PD of the transaction/customer and the
estimated LGD (based on associated collateral or guarantees, or estimated recovery data).
To estimate collective impairment losses, the Group uses the same methodological framework,
sources and tools as those used to estimate IRB regulatory capital parameters and approved by the
regulator. However, as the requirements for calculating incurred loss are different to those of capital
models, a specific calibration is made to adapt it to the requirements of IAS 39.
The main difference lies in the window considered to calculate each parameter. Whereas the capital
framework establishes an approach aimed at measuring the average observed in an economic cycle
(PD Through-the-Cycle, in the case of probability of default) or in a downturn scenario (LGD Downturn
or Best Estimate in the case of loss given default or severity), the accounting framework attempts to
define an approach aimed at measuring the situation observed at each moment of the cycle ( “Point in
Time”, or “PIT”). This is the reason for the calibration process to obtain PIT parameters that better
reflect the current economic and financial characteristics.
This did not process evidence differences in relation to the overall impairment loss figure recognised
by the Group.
40
Debt instruments classified as available for sale
The amount of the impairment losses on debt securities included in the available-for-sale financial
asset portfolio is the full or partial negative difference, if any, between their fair value and their
acquisition cost (net of any principal repayment or amortisation), less any impairment loss previously
recognised in the consolidated income statement.
In the case of impairment losses arising due to the insolvency of the issuer of the debt instruments
classified as available for sale, the procedure followed by the Group for calculating such losses is the
same as the method used for debt instruments carried at amortised cost explained in the preceding
section.
When there is objective evidence that the losses arising on measurement of these assets are due to
impairment, they are removed from the equity item “Valuation adjustments – Available-for-sale
financial assets” on the Group’s consolidated balance sheet and are recognised, for their cumulative
amount, in the consolidated income statement. If all or part of the impairment losses are subsequently
recovered, the amount is recognised in the consolidated income statement for the period in which the
recovery occurs. In particular, the main events that might indicate evidence of impairment include the
following:
-
The issuer has been declared or will probably be declared bankrupt or in significant financial
difficulty.
-
A breach of the contract governing the instruments, such as default on principal or interest,
occurs.
-
The issuer is granted financing or arranges debt restructuring because it is in financial difficulty,
unless there is reasonable certainty that the customer will be able to settle its debt in the
envisaged period or new effective collateral is provided.
Similarly, any impairment losses arising on measurement of debt instruments classified as “Noncurrent assets held for sale” which are recorded in the Group’s consolidated equity are considered to
be realised and are therefore recognised in the consolidated income statement when the assets are
classified as “Non-current assets held for sale”.
Equity instruments classified as available for sale
The criteria for recognising impairment losses on equity instruments classified as available for sale are
similar to those for debt instruments explained in the preceding section, with the exception that any
recovery of these losses is recognised in equity under “Valuation adjustments – Available-for-sale
financial assets” in the consolidated balance sheet.
The main events that might constitute evidence of impairment of equity instruments include the
following:
-
The issuer has been declared or will probably be declared bankrupt or in significant financial
difficulty.
-
Significant changes in the technological, market, economic or legal environment in which the
issuer operates may have adverse effects on the recovery of the investment.
-
A significant or prolonged decline in the fair value of an equity instrument below its carrying
amount. In this regard, the objective evidence of the impairment of instruments quoted in active
markets is more pronounced in the event of a 40% fall in its market price or a fall over period of
one-and-a-half years.
Equity instruments measured at cost
The amount of the impairment losses on equity instruments carried at cost is the difference between
their carrying amount and the present value of the expected future cash flows discounted at the
market rate of return for similar securities.
Impairment losses are recognised in the consolidated income statement for the period in which they
arise as a direct reduction of the cost of the instrument. These losses can only be reversed
subsequently if the related assets are sold.
41
(2.10) Financial guarantees and provisions for financial guarantees
“Financial guarantees” are defined as contracts whereby an entity undertakes to make specific
payments on behalf of a third party if the latter fails to do so, irrespective of the various legal forms
they may take: deposits, financial guarantees, irrevocable documentary credits issued or confirmed by
the entity, etc.
In accordance with IFRS-EU, the Group generally treats financial guarantees provided to third parties
as financial instruments within the scope of IAS 39.
To determine whether a derivative sold is recognised as a financial guarantee or a trading derivative,
a financial instrument is considered a derivative financial instrument when it meets the following
conditions:
-
Its value changes in response to the changes in an observable market variable, sometimes called
the "underlying", such as an interest rate, financial instrument and commodity price, foreign
exchange rate, a credit rating or credit index, where this involves non-financial variables that are
not specific to one of the parties to the contract.
-
It requires no initial investment or one that is much smaller than would be required for other
financial instruments that would be expected to have a similar response to changes in market
factors.
-
It is settled at a future date, except where it relates to a regular way purchase or sale of financial
assets in conventional agreements, defined as one in which the parties' reciprocal obligations
must be discharged within a time frame established by regulation or convention in the market
place and that may not be settled net.
Financial guarantees are considered contracts that require or may require the Group to make specific
payments to reimburse the creditor for the loss incurred when a specific debtor fails to meet its
payment obligations under the original or amended terms of a debt instrument, regardless of its legal
form, which may be, inter alia, a deposit, financial guarantee, insurance contract or credit derivative.
Specifically, guarantee contracts related to credit risk where execution of the guarantee does not
require, as a necessary condition for payment, that the creditor is exposed to and has incurred a loss
due to a debtor's failure to pay as required under the terms of the financial asset guaranteed, as well
as in contracts where execution of the guarantee depends on changes in a specific credit rating or
credit index, are considered derivative financial instruments.
The Group initially recognises the financial guarantees provided on the liabilities side of the
consolidated balance sheet at fair value, plus the directly attributable transaction costs, which is
generally the amount of the premium received plus, where applicable, the present value of the fees,
commissions and interest receivable from these contracts over the term thereof, and it simultaneously
recognises, on the asset side of the consolidated balance sheet, the amount of the fees, commissions
and similar amounts received at the start of the transactions and the amounts receivable at the
present value of the fees, commissions and interest receivable. Subsequently, these contracts are
recognised on the liabilities side of the consolidated balance sheet at the higher of the following two
amounts:
-
The amount determined in accordance with IAS 37, taking into account that set forth in
Appendix IX of Bank of Spain Circular 4/2004 in this estimate. In this regard, financial
guarantees, regardless of the guarantor, instrumentation or other circumstances, are reviewed
periodically so as to determine the credit risk to which they are exposed and, if appropriate, to
consider whether a provision is required. The credit risk is determined by application of criteria
similar to those established for quantifying impairment losses on debt instruments carried at
amortised cost, which are described in Note 2.9 above.
-
The amount initially recognised for these instruments, less the related amortisation which, in
accordance with IAS 18, is charged to the consolidated income statement on a straight-line
basis over the contract term.
The provisions made, if applicable, for these instruments are recognised under “Provisions Provisions for contingent liabilities and commitments” on the liability side of the consolidated balance
sheet. These provisions are recognised and reversed with a charge or credit, respectively, to
“Provisions (net)” in the consolidated income statement.
If, in accordance with the foregoing, a provision is required for these financial guarantees, the
unearned commissions on these transactions, which are recognised under “Financial liabilities at
42
amortised cost – Other financial liabilities” on the liabilities side of the consolidated balance sheet, are
reclassified to the appropriate provision.
(2.11) Accounting for leases
(2.11.1) Finance leases
Finance leases are leases that transfer substantially all the risks and rewards incidental to ownership
of the leased asset to the lessee.
The factors considered by the Group to determine whether a lease agreement is a finance lease
include, inter alia, the following:
-
Whether the lease agreement covers the major part of the useful life of the asset.
-
Whether the exercise price of the purchase option is lower than the fair value of the residual
value of the asset at the end of the lease term.
-
Whether the present value of minimum lease payments at the inception of the lease is equal to
substantially all the fair value of the leased asset;
-
Whether use of the asset is restricted to the lessee.
When the consolidated entities act as lessors of an asset in a finance lease transaction, the sum of
the present values of the lease payments receivable from the lessee plus the guaranteed residual
value (which is generally the exercise price of the lessee's purchase option at the end of the lease
term) is recognised as lending to third parties and is therefore included under “Loans and receivables”
in the consolidated balance sheet based on the type of lessee.
When the consolidated entities act as the lessees in a finance lease transaction, they present the cost
of the leased assets in the consolidated balance sheet, based on the nature of the leased asset, and,
simultaneously, recognise a liability for the same amount (which is the lower of the fair value of the
leased asset and the sum of the present values of the lease payments payable to the lessor plus, if
appropriate, the exercise price of the purchase option). The depreciation policy for these assets is
consistent with that for the Group’s property, plant and equipment for own use (see Note 2.15).
In both cases, the finance income and finance charges arising under finance lease agreements are
credited and debited, respectively, to “Interest and similar income” and “Interest expense and similar
charges”, respectively, in the consolidated income statement and the accrued interest is estimated
using the effective interest method as defined in IAS 39.
(2.11.2) Operating leases
In operating leases, the ownership of the leased asset and substantially all the risks and rewards
relating to the leased asset remain with the lessor.
When the consolidated entities act as lessors in operating leases, they present the acquisition cost of
the leased assets under “Tangible assets” as “Investment property” or as “Property, plant and
equipment leased out under an operating lease”, depending on the type of assets leased. The
depreciation policy for these assets is consistent with that for similar items of property, plant and
equipment for own use, and income from operating leases is recognised on a straight-line basis under
“Other operating income - Sales and income from the provision of non-financial services” in the
consolidated income statement.
When the consolidated entities act as the lessees in operating leases, lease expenses, including any
incentives granted by the lessor, are charged to “Administrative expenses - Other general
administrative expenses” in the consolidated income statement on a straight-line basis (or using
another method, if applicable).
(2.11.3) Asset sale and leaseback transactions
Where transactions involve the sale to a third party of an asset owned by the Group that is
subsequently leased back by the Group selling the asset, the terms and conditions of the lease
agreement are analysed by the Group to determine whether it should be considered a finance lease or
an operating lease, in accordance with the criteria stipulated in Notes 2.11.1 and 2.11.2 above.
In this regard, if a sale and leaseback transaction results in a finance lease, any possible excess of
sales proceeds over the carrying amount of the sold asset shall not be immediately recognised as
income by the Group. The excess, if any, is deferred by the Group and apportioned over the lease
term.
43
However, if a sale and leaseback transaction by the Group results in an operating lease, and the
transaction was established at fair value, any profit or loss from the sale will be recognised
immediately in the consolidated income statement. If the sale price is below fair value of the asset sold
by the Group, any profit or loss shall be recognised immediately in the consolidated income statement,
except that, if the loss is offset by future lease payments at below market price, it shall be deferred
and recognised in proportion to the lease payments over the period for which the asset is expected to
be used. If the sale price of the asset sold is above fair value, the excess over fair value will be
deferred and recognised over the period for which the asset is expected to be used by the Group.
(2.12) Investment funds, pension funds, assets under management and savings insurance
policies marketed and/or managed by the Group
Assets owned by third parties and managed by the consolidated entities are not presented on the face
of the consolidated balance sheet. Management fees are included in “Fee and commission income” in
the consolidated income statement. Details of third-party assets managed by the Group at 31
December 2015 and 2014 are disclosed in Note 29.4.
The investment funds and pension funds managed and savings insurance policies marketed and
managed by the Group are not recognised on the Group's consolidated balance sheet since the
related assets are owned by third parties (see Note 29.4). The fees and commissions earned in the
year for the services rendered by the Group entities to these funds (asset management and custody
services, etc.) are recognised under “Fee and commission income” in the consolidated income
statement (see Note 35).
(2.13) Staff costs
(2.13.1) Post-employment benefits
(2.13.1.1) Types of commitments
Post-employment benefits are forms of compensation payable after completion of employment. The
Group has undertaken to pay post-employment benefits to certain employees and to their beneficiary
right holders.
Under current law, post-employment obligations are classified as defined-contribution or definedbenefit obligations, depending on the terms of the commitments assumed in each specific case. The
Group’s post-employment obligations to its employees are deemed to be “defined contribution plan
obligations” wherever the Group makes predetermined contributions to a separate entity and will have
no legal or effective obligation to pay further contributions if the separate entity cannot pay the
employee benefits relating to the service rendered in the current and prior periods. Post-employment
obligations that do not meet the aforementioned conditions are considered as defined-benefit
obligations.
All pension obligations to current and former employees of the Group are funded by pension plans,
insurance policies and the internal fund.
All pension obligations to current and former employees of the Group are covered by pension plans in
Spain.
(2.13.1.2) Description of the post-employment obligations undertaken by the Group
The post-employment obligations assumed by the Group with employees and their characteristics, as
set forth in the Pension Agreements (Acuerdos de Previsión Social) signed in 2015 at each Group
company.
 Non-accrued pensions:
A system is in place whereby Bankia makes individual, annual contributions based on a
percentage of certain remuneration items, always observing the minimums set out in the
collective bargaining agreement.
At 31 December 2015, there were 31 employees with defined-benefit obligations for
retirement (of which were pre-retired). These obligations are covered with the pension plan or
insurance policies.
On 14 April 2015, the unfunded pension at 31 December 2014 related to the Caja Insular
Rebalancing Plan was repaid early.
 Vested pensions:
All the commitments for vested pensions assumed by Bankia are externalised through the
pension plan and insurance policies.
44
In addition to these obligations, Note 6 describes the obligations with members of the Board of
Directors and senior executives of Bankia, S.A.
(2.13.1.3) Actuarial assumptions applied in calculation of post-employment benefits
As a rule, the Group measures its obligations and commitments and cover and determines coverage
evenly based on:
 the projected credit unit method (which treats each year of service as giving rise to an
additional unit of benefit entitlement and measures each unit separately); and
 actuarial assumptions, which when determined:

are not biased, and neither reckless nor excessively conservative,

are mutually compatible and adequately reflect the economic relations existing between
factors such as inflation, expected salary increases, discount rates and expected return
on plan assets, future levels of salaries and benefits based on market expectations at the
date of the consolidated financial statements for the period in which the obligations should
be settled,

the interest used to discount cash flows is based on market rates for issues of high-rated
bonds at the date of the consolidated financial statements.
(2.13.1.4) Accounting criteria for post-employment commitments
The Group classifies post-employment obligations for accounting purposes as follows:

Defined-contribution plans. Group contributions to defined contribution plans are recognised under
“Administrative expenses – Staff costs” in the consolidated income statement.
If at year-end there are any outstanding contributions to be made to the external plan funding the
post-employment benefit obligations, the related amount is recognised at its present value under
“Provisions - Provisions for pensions and similar obligations". At 31 December 2015, there were
no outstanding contributions to be made to external defined-contribution plans.

Defined-benefit plans. Under the caption “Provisions – Provisions for pensions and similar
obligations” on the liability side of the consolidated balance sheet, the Group recognises the
present value of obligations assumed net of the fair value of assets qualifying as “plan assets” (or
under “Other assets – Other” on the asset side of the consolidated balance sheet, depending on
whether the resulting difference is positive or negative and on whether or not the conditions for
recognition are satisfied).
“Plan assets” are defined as those that are related to certain defined benefit obligations, that will
be used directly to settle such obligations, and that meet the following conditions:
 they are not owned by the Group, but by a legally separate third party that is not a related
party;
 they are only available to pay or fund post-employment benefits for employees
 they cannot be returned to the Group unless the assets remaining in the plan are sufficient
to meet all the benefit obligations of the plan or of the Group to current and former
employees, or they are returned to reimburse employee benefits already paid by the Group
 they may not be non-transferable financial instruments issued by the Group if held by a
long-term post-employment benefits fund or entity.
If the Group has recourse to an insurer to pay part or all of the expenditure required to settle a
defined benefit obligation, and it is practically certain that the insurer will reimburse some or all of
the expenditure required to settle that obligation, but the insurance policy does not qualify as a
plan asset, the Group recognises its right to reimbursement, which in all other respects is treated
as a plan asset, under “Insurance contracts linked to pensions” on the asset side of the balance
sheet.
Pursuant to the provisions of IAS 19, the Bankia Group recognised in its consolidated financial
statements the liabilities (or, as the case may be, and/or the assets) related to post-employment
benefit obligations at the present value of the obligations, less the fair value of any plan assets.
45
Defined benefit post-employment payments are recognised as follows:


In the consolidated income statement:

service cost in the current period

any past service cost and gains or losses on plan settlements

the net interest on the defined benefit liability (asset), which is determined by multiplying
the net defined benefit liability (asset) by the interest rate used to estimate the present
value of the obligations at the start of the annual reporting period, taking account of any
changes in the net defined benefit liability (asset). Net interest comprises the interest
income on plan assets, interest cost on the obligation and interest from measuring plan
assets at the present value of the cash flows available to the entity from plan curtailments
or reduction in future contributions to the plan.
In the statement of changes in equity:

actuarial losses and gains, which are changes in the present value of the defined benefit
obligations resulting from the effects of changes in actuarial assumptions and experience
adjustments

the return on plan assets, excluding amounts included in net interest on the net defined
benefit liability (asset)

any change in the effect of the asset ceiling, excluding amounts included in net interest on
the net defined benefit liability (asset)
(2.13.2) Other long-term employee benefits
“Other long-term employee benefits” mainly comprises the early-retirement commitments to
employees who no longer render services but, not being retirees for legal purposes, continue to hold
economic rights against their employers until they become legal retirees. It also comprises any other
long-term or similar commitments to employees.
These long-term commitments are recognised under the same caption as defined-benefit postemployment plans, except regarding amounts recognised in the statement of changes in equity that
are recognised in the consolidated income statement, with the special features disclosed below for
each specific case.
(2.13.2.1) Pre-retirements and partial retirements
At 31 December 2015, these commitments were covered by arranging insurance policies and
recognising provisions on the consolidated balance, in accordance with current regulations.
(2.13.2.2) Commitments derived from the Labour Agreement adopted as result of the creation
of BFA
On 14 December 2010, a majority of labour union representatives at the Cajas entered into an
agreement entitled “Labour Agreement in the Framework of the Process of Integration under an IPS
entered into by Caja Madrid, Bancaja, Caja Insular de Canarias, Caja Ávila, Caixa Laietana, Caja
Segovia and Caja Rioja” (the “Labour Agreement”) and as a result of the integration of the Cajas and
the creation of BFA. (the central body of the IPS) set out in the Integration Agreement approved by the
Boards of Directors and ratified by the General Meetings of the Cajas.
The Labour Agreement set forth an array of measures offered to the “Cajas” employees on an elective
basis until 31 December 2012 so that the necessary staff restructuring could be carried out, with staff
reduced by approximately 4,594 employees. The array of measures included pre-retirements,
relocation, indemnified redundancies, contract suspension and shorter working time.
(2.13.2.3) Labour Agreement - Bankia Restructuring Plan (see Note 1.2)
On 8 February 2013, a labour agreement was entered into with the majority of the Bank’s union
representatives, which includes the collective dismissal of up to 4,500 Bank employees, with variable
termination benefits depending on the age of the worker and 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%.
46
Efficiency will also be improved by streamlining the intermediate structures of the branch network and
optimising central services.
At 31 December 2015, the Group had covered its liabilities under the aforementioned Labour
Agreement in terms of outstanding settlements to employees already on the scheme, with appropriate
provisions under “Provisions – Provisions for pensions and similar obligations” (to cover pre-retirement
commitments) and “Provisions – Other provisions” (for the remaining commitments assumed) on the
balance sheet (see Note 22).
(2.13.2.4) Death and disability
The obligations assumed for coverage of death and disability of serving employees were set out in the
Pension Agreements signed in 2015. These obligations are covered by an insurance policy under the
Pension Plan and are recognised in the income statement at an amount equal to the premiums
accrued on the insurance policies each year and the contributions made to the fund.
The amount accruing paid out in 2015 to cover these commitments, totalled EUR 4,757 thousand
(EUR 14,005 thousand at 31 December 2014), recognised under "Administrative expenses - Staff
costs" in the 2015 consolidated income statement.
(2.13.3) Financial aid for employees
The financial aid for employees is stipulated in the Savings Banks' collective wage agreement. The
various internal agreements are maintained under the same conditions as at the original “Cajas”, for
those transactions outstanding at 31 December 2012.
The general breakdown of the scheme is as follows:
a) Advance payments
This type of assistance is available to full-time employees who have undergone a trial period
of employment. The maximum sum offered is six months' gross salary with no interest
accruing.
b) Welfare loan for miscellaneous purposes
This type of assistance is available to full-time employees. The maximum amount is EUR
36,000. It may be requested for any purpose, and the interest rate applicable is Euribor to the
legal interest threshold.
c) Main home loan
This type of assistance is available to full-time employees. The maximum sum offered
depends on annual gross fixed remuneration and appraisal/purchase value. It may be
requested for purchasing, building, extending or refurbishing the employee's normal and
permanent residence, and the maximum repayment period is 35 - 40 years, up to the age of
70. The interest rate applicable is 70% of Euribor, with a ceiling of 5.25% and a floor of 1.50%.
Where appropriate, the difference between arm’s length terms and the interest rates applied
for each type of loan mentioned above is recognised as an increase in staff costs with a
balancing entry under "Interest and similar income" in the income statement.
(2.13.4) Termination benefits
Under current legislation, Spanish consolidated companies and certain foreign companies are
required to pay termination benefits to employees made redundant without just cause. Termination
benefits must be recognised when the Group is committed to terminate the employment contracts of
its employees and has a detailed formal termination plan. In addition to the commitments described in
Note 2.13.2 and as explained in Note 1.2., the Bank signed a labour agreement whose related
commitments are adequately covered with provisions recognised at 31 December 2015 (see Note 22).
(2.14) Income tax
Expenses for Spanish corporate income tax and similar taxes levied on foreign consolidated
subsidiaries are recognised in the consolidated income statement, except when it results from a
transaction recognised directly in equity. In this case, the income tax is also recognised in the Group's
equity.
Income tax expense is calculated as the tax payable on taxable profit for the year, after adjusting for
variations in assets and liabilities due to temporary differences, tax credits for tax deductions and
benefits, and tax losses (see Note 28).
47
The Group considers that a temporary difference exists when there is a difference between the
carrying amount of an asset or liability and its tax base. The tax base of an asset or liability is the
amount attributed to that asset or liability for tax purposes. A taxable temporary difference is one that
will generate a future obligation for the Group to make a payment to the relevant tax authorities. A
deductible temporary difference is one that will generate a right for the Group to a rebate or a
reduction in the amount payable to the related tax authorities in the future.
Tax credit and tax loss carryforwards are amounts that, after performance of the activity or obtainment
of the profit or loss giving entitlement to them, are not used for tax purposes in the related tax return
until the conditions for doing so established in the tax regulations are met and the Group considers it
probable that they will be used in future periods.
Current tax assets and liabilities are the taxes that are expected to be recoverable from or payable to,
respectively, the related tax authorities within 12 months of the reporting date. Deferred tax assets and
liabilities are the taxes that are expected to be recoverable from or payable to the related tax
authorities more than 12 months from the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences. In this connection, a
deferred tax liability is recognised for taxable temporary differences arising from investments in
subsidiaries and associates and from interests in joint ventures, except when the Group is in a
position to control the reversal of the temporary differences and it is probable that they will not reverse
in the foreseeable future. Nor is there any recognition of deferred tax liabilities arising from accounting
for goodwill.
The Group only recognises deferred tax assets arising from deductible temporary differences and
from tax credit and tax loss carryforwards when the following conditions are met:

Deferred tax assets are only recognised when it is considered likely that the consolidated
entities will have sufficient future taxable profit to make these effective; and, in the case of
deferred tax assets arising from tax loss carryforwards, when the carryforwards have arisen
for identified reasons that are unlikely to be repeated.

No deferred tax assets or liabilities are recognised if they arise from the initial recognition of
an asset or liability (except in the case of a business combination) that at the time of
recognition affects neither accounting profit nor taxable profit.
Deferred tax assets and liabilities are reviewed at the end of each reporting period to ascertain that
they remain in force, and the appropriate adjustments are made on the basis of the results of the
review.
In this respect, on 30 November 2013, Royal Decree-Law 14/2013, of 29 December, on urgent
measures to adapt Spanish law to European Legislation on the supervision and solvency of financial
institutions was published in the Official State Gazette (Boletín Oficial del Estado). With effect from tax
periods commencing on or after 1 January 2014, this legislation adds a twenty-second additional
provision to the Revised Text of the Corporate Income Tax Law (TRLIS), enacted by Royal DecreeLaw 4/2004, of 5 March “Conversion of deferred tax assets into credits that give rise to a receivable
from the tax authorities”. Meanwhile, on 27 November, Law 27/2014, of 27 November on Corporate
Income Tax (CIT) was enacted, repealing the TRLIS with effect from 1 January 2015 except for the
rules contained therein. Meanwhile, Article 130 of the Corporate Income Tax Law (LIS) included in the
new law the provisions of additional provision twenty-two of the Revised Text of the TRLIS.
Lastly, article 65 of Law 48/2015, of 29 October, on the General State Budgets for 2016 includes
certain amendments to article 130 of the CIT with effect for tax periods beginning on or after 1 January
2016.
Note 28.5 explains the main implications of this legislation on the recognised deferred taxes.
Constitution of the Bankia tax group
The Bankia Tax Group opted to pay taxes under the special tax consolidation scheme regulated by
Chapter VII, Title VII of the TRLIS, approved by Royal Decree-Law 4/2004, of 5 March, for the tax
period commencing on 1 January 2011, and informed the tax authorities of this decision.
Note 28 provides a breakdown of the companies making up the Tax Group headed by Bankia, S.A. in
2015.
48
(2.15) Tangible assets
(2.15.1) Property, plant and equipment for own use
Property, plant and equipment for own use include assets, owned by the Group or held under a
finance lease, for present or future administrative use or for the production or supply of goods and
services that are expected to be used for more than one economic period. This category includes,
inter alia, tangible assets received by the consolidated entities in full or partial satisfaction of financial
assets representing receivables from third parties which are intended to be held for continuing use.
Property, plant and equipment for own use are presented in the consolidated balance sheet at
acquisition cost, which is the fair value of any consideration given for the asset plus any monetary
amounts paid or committed, less:
-
the corresponding accumulated depreciation; and
any estimated impairment losses (carrying amount higher than recoverable amount).
Depreciation is calculated using the straight-line method on the basis of the acquisition cost of the
assets less their residual value. The land on which the buildings and other structures stand has an
indefinite life and, therefore, is not depreciated.
The tangible asset depreciation charge for the period is recognised under “Depreciation and
amortisation charge” in the consolidated income statement and is calculated basically using the
following depreciation rates (based on the average years of estimated useful life of the various
assets):
Annual rate
Buildings for own use
2%
Furniture and fixtures
Computer hardware
10% a 25%
25%
The consolidated entities assess at the reporting date whether there is any internal or external
indication that an asset may be impaired (i.e. that its carrying amount may exceed its recoverable
amount). If this is the case, the carrying amount of the asset is reduced to its recoverable amount and
future depreciation charges are adjusted in proportion to the revised carrying amount and to the new
remaining useful life (if the useful life has to be re-estimated). When necessary, the carrying amount of
tangible assets for own use is reduced with a charge to "Impairment losses on other assets (net) Other assets"” in the consolidated income statement.
Similarly, if there is an indication of a recovery in the value of an impaired tangible asset, the
consolidated entities recognise the reversal of the impairment loss recognised in prior periods with the
related credit to “Impairment losses on other assets (net) - Other assets” in the consolidated income
statement, and adjust the future depreciation charges accordingly. Under no circumstances may the
reversal of an impairment loss on an asset raise its carrying amount above that which it would have if
no impairment losses had been recognised in prior years.
The estimated useful lives of property, plant and equipment for own use are reviewed at least once a
year with a view to detecting significant changes therein. If changes are detected, the useful lives of
the assets are adjusted by correcting the depreciation charge to be recognised in the consolidated
income statement in future years on the basis of the new useful lives.
Upkeep and maintenance expenses on property, plant and equipment for own use are recognised as
an expense in the consolidated income statement in the period in which they are incurred.
Financial assets that require more than twelve months to be readied for use include as part of their
acquisition or production cost the borrowing costs which have been incurred before the assets are
ready for use and which have been charged by the supplier or relate to loans or other types of
borrowings directly attributable to their acquisition, production or construction. Capitalisation of
borrowing costs is suspended, if appropriate, during periods in which the development of the assets is
interrupted, and ceases when substantially all the activities necessary to prepare the asset for its
intended use have been completed.
Foreclosed assets as payment of debts which, based on their nature and intended purpose, are
classified as property, plant and equipment for own use, are recognised in accordance with the criteria
indicated below in Note 2.15.2 for assets of this type.
49
(2.15.2) Investment property
"Investment property" on the consolidated balance sheet reflects the net values of the land, buildings
and other structures held to earn rentals or for potential capital appreciation the event of sale, through
potential increases in their market value.
The criteria used to recognise the acquisition cost of investment property, to calculate its depreciation
and its respective estimated useful life and to recognise the possible impairment losses thereon are
consistent with those described in relation to property, plant and equipment for own use (Note 2.15.1).
Assets foreclosed by the Group, understood as assets which the Group receives from borrowers or
other debtors as total or partial payment of financial assets representing collection rights against those
which, regardless of the way in which the properties are acquired and, in accordance with their nature
and the use to which they are put, are classified as investment properties, are initially recognised at
their estimated cost as the lower of the carrying amount of the financial assets applied, i.e. their
amortised cost, net of any impairment losses recognised and, in any case, a minimum of 10%, and the
appraised fair value of the asset received in its current condition less the estimated costs to sell, which
under no circumstances are estimated as less than 10% of the appraisal value in its current condition.
The age of the assets received in payment of debt on the balance sheet is considered by the Group
as an unequivocal indication of impairment. Unless the offers received indicate a greater amount, the
impairment recognised on these assets is not less than the result of raising the percentage from the
aforementioned 10% to 20% if the period for acquiring the asset exceeds 12 months, to 30% if this
acquisition period exceeds 24 months and to 40% if it exceeds 3 years.
All court costs are recognised immediately in the consolidated income statement for the period of
foreclosure. Registry costs and taxes paid may be added to the value initially recognised provided
that, as a result, this does not exceed the appraisal value less the estimated costs to sell mentioned in
the preceding paragraph.
All costs incurred between the date of foreclosure and the date of sale as a result of maintaining and
protecting the asset, such as insurance, security services, etc., are recognised in the income
statement for the period in which they are incurred.
Appendix IX provides further information about foreclosed property assets and assets received by the
Group in settlement of debts and classified under this consolidated balance sheet heading on the
basis of ultimate purpose, as referred to above.
(2.15.3) Property, plant and equipment leased out under an operating lease
"Property, plant and equipment - Leased out under an operating lease" on the consolidated balance
sheet reflects the net values of the tangible assets, other than land and buildings, leased out by the
Group under an operating lease.
The criteria used to recognise the acquisition cost of assets leased out under operating leases, to
calculate their depreciation and their respective estimated useful lives and to recognise any
impairment losses thereon are consistent with those described in relation to property, plant and
equipment for own use (see Note 2.15.1).
Foreclosed assets which, based on their nature and intended purpose, are classified as property,
plant and equipment leased out under an operating lease, are generally recognised in accordance
with the criteria indicated for assets of this type in Note 2.15.2 above, taking into account for
impairment purposes the effect arising from the rent expected to be received from their lease.
50
(2.16) Intangible assets
Intangible assets are identifiable non-monetary assets without physical substance which arise as a
result of a legal transaction or which are developed internally by the consolidated entities. Only
intangible assets whose cost can be estimated reasonably objectively and from which the
consolidated entities consider it probable that future economic benefits will be generated are
recognised.
Intangible assets are recognised initially at acquisition or production cost and are subsequently
measured at cost less any accumulated amortisation and any accumulated impairment losses.
(2.16.1) Goodwill
Any differences between the cost of investments in consolidated entities accounted for by the equity
method and other forms of business combinations other than those carried out with no transfer of
consideration, carried out with respect to the net fair values of the assets and liabilities acquired,
adjusted by the acquired percentage holding of the net assets and liabilities in the event of purchase
of shareholdings, at the date of acquisition, are recognised as follows:
-
If the acquisition price exceeds the aforementioned fair value, as goodwill under "Intangible
assets - Goodwill" on the asset side of the consolidated balance sheet. In the case of acquisition
of holdings in associates or jointly-controlled entities accounted for using the equity method, any
goodwill that may arise from the acquisition is recognised as forming part of the value of the
investment and not as an individual item under "Intangible assets - Goodwill".
-
Any negative differences between the cost of acquisition less the aforementioned fair value are
recognised, once the valuation process has been completed, as income in the consolidated
income statement under "Negative goodwill on business combinations"
Positive goodwill (excess between the acquisition price of an investee or business and the net fair
value of the assets, liabilities and contingent liabilities acquired from this entity or business) - which is
only recognised on the consolidated balance sheet when acquired for consideration - thus represents
advance payments made by the acquiring entity for future economic benefits arising from the assets of
the entity or business acquired that are not individually and separately identifiable and recognisable.
Goodwill is allocated to one or more cash-generating units that are expected to benefit from the
synergies of the business combination. The cash-generating units represent the smallest identifiable
group of assets that generates cash inflows to the Group that are largely independent of the cash
inflows from other assets or groups of assets of the Group. Each unit or group of units to which the
goodwill is allocated:
-
Represents the lowest level within the entity at which the goodwill is monitored for internal
management purposes; and
-
Is not larger than an operating segment.
The cash-generating units to which goodwill has been allocated are tested for impairment (including
the amount of goodwill allocated in their carrying amount). Impairments tests are carried out at least
annually, or whenever there is any indication that an asset may be impaired.
Goodwill is not amortised, but tested for impairment regularly and written down if there is evidence of
impairment of goodwill. A cash-generating unit to which goodwill has been allocated is tested for
impairment by comparing the unit's carrying amount, excluding any goodwill attributable to noncontrolling interests if the entity has opted not to measure non-controlling interests at fair value, with
its recoverable amount.
The recoverable amount of a cash-generating unit is the higher of its fair value less costs of disposal
and its value in use. To estimate value in use, the Group generally uses models based on the
following assumptions:
-
The recoverable value is the value in use of the investment, obtained from the present value of
the cash flows that are expected to be obtained from the cash-generating unit, from its ordinary
activities (adjusted for extraordinary items) or from the possible disposal thereof.
-
Estimated cash flow projections usually have a maximum time horizon of five years and include
cyclical growth rates based on various factors such as the economic situation at the time the
assessment is performed, growth in the industry, historical rates etc. At 31 December 2015, no
estimates had been made with cash flows for longer periods.
51
-
The cash flows are discounted using specific discount rates for each asset, on the basis of a
risk-free interest rate which is increased by a risk premium for each investment based on various
capital-weighting factors (ratings, internal scorings, etc.).
If the carrying amount of the cash-generating unit is higher than its recoverable amount, the Group
recognises an impairment loss. The impairment loss is allocated, first, to reduce the carrying amount
of any goodwill allocated to the cash-generating unit, and then, for any remaining amount of the
impairment loss, to reduce the carrying amount of the other assets pro rata on the basis of the
carrying amount of each asset in the unit. If the entity has opted to measure non-controlling interests
at fair value, it would recognise the impairment of goodwill attributable to these non-controlling
interests.
Impairment losses on goodwill are recognised in “Impairment losses on other assets (net) – Goodwill
and other intangible assets” in the consolidated income statement. Impairment losses recognised on
goodwill recognised under "Intangible assets – Goodwill" as indicated in the preceding paragraph
cannot be reversed in a subsequent period.
(2.16.2) Other intangible assets
Intangible assets other than goodwill are recorded on the consolidated balance sheet at cost of
acquisition or production, net of accumulated amortisation and any impairment losses.
Intangible assets can have an indefinite useful life – when, based on an analysis of all the relevant
factors, it is concluded that there is no foreseeable limit to the period over which the asset is expected
to generate net cash inflows for the consolidated entities – or a finite useful life, in all other cases.
Intangible assets with an indefinite useful life are not amortised. At the end of each reporting period,
however, consolidated entities review the remaining useful life of each asset to confirm that it is still
indefinite and, if this is not the case, appropriate action is taken.
Intangible assets with finite useful lives are amortised over the useful lives using methods similar to
those used to depreciate tangible assets. The annual amortisation of intangible assets with a finite
useful life is recognised under "Depreciation and amortisation" in the consolidated income statement.
None of the Group’s significant intangible assets have an indefinite useful life. These intangible
assets, which were developed by non-Group companies, have an average useful life of three years.
Consolidated entities recognise any impairment loss on the carrying amount of these assets with a
charge to "Impairment losses on other assets (net) – Goodwill and other intangible assets" in the
consolidated income statement. Criteria for recognising impairment losses on these assets and any
recovery of impairment losses recognised in past years are similar to those used for property, plant
and equipment for own use (Note 2.15.1).
(2.17) Inventories
“Inventories” in the consolidated balance sheet includes non-financial assets:
-
Held for sale in the ordinary course of business,
-
In the process of production, construction or development for such sale, or
-
To be consumed in the production process or in the rendering of services.
Consequently, inventories include land and other property (other than investment properties) held for
sale or for inclusion in a property development.
Inventories are measured at the lower of cost (which comprises all costs of purchase, costs of
conversion and direct and indirect costs incurred in bringing the inventories to their present location
and condition, as well as the directly attributable borrowing costs, provided that the inventories require
more than one year to be sold, taking into account the criteria set forth above for the capitalisation of
borrowing costs relating to property, plant and equipment for own use) and net realisable value. Net
realisable value is the estimated selling price of inventories in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
The cost of inventory items that are not normally exchangeable and the cost of goods and services
produced and reserved for specific projects are determined individually for each case.
Any write-downs of inventories to net realisable value and any subsequent reversals of write-downs to
below their carrying amount are recognised under "Impairment losses on other assets (net) - Other
assets" in the consolidated income statement.
52
The carrying amount of inventories sold is derecognised and recognised as an expense under “Other
operating expenses - Changes in inventories” in the consolidated income statement.
For this purpose, the acquisition cost of foreclosed inventories or inventories otherwise acquired in
payment of debts is estimated as the lower of:
–
Gross debt, less any associated provision, with a minimum of 10%.
–
Appraisal value decreased by 10%.
Subsequently, the initial registration, the minimum percentage is 10%, the above percentages are
increased to 20% as from 12 months after initial recognition, 30% after 24 months and 40% after 3
years.
(2.18) Provisions and contingent liabilities
When preparing the consolidated financial statements, the Group's directors made a distinction
between:
-
Provisions: credit balances covering present obligations at the reporting date arising from past
events which could give rise to a loss for the Group, which is considered to be likely to occur and
certain as to its nature, but uncertain as to its amount and/or timing, and
-
Contingent liabilities: possible obligations arising from past events, whose existence will be
confirmed by the occurrence or non-occurrence of one or more future events not wholly within
the control of the consolidated entities.
The Group's consolidated financial statements include all significant provisions with respect to which it
is considered more likely than not that the obligation will have to be settled. Contingent liabilities are
not recognised in the consolidated financial statements, but rather are disclosed in accordance with
the requirements of IAS 37.
Provisions are measured based on the best information available on the consequences of the events
giving rise to them and remeasured at the end of each reporting period. They are used to meet the
specific obligations for which they were originally recognised. They may be wholly or partly reversed if
these obligations cease to exist or diminish.
In accordance with IAS 37.92, in rare cases, where disclosure of information can be expected to
prejudice seriously the Group's position, generally in a class action lawsuit, the Group does not
provide detailed information, but rather discloses the generate nature of the contingencies.
The recognition and reversal of provisions considered necessary pursuant to the foregoing criteria are
recognised with a charge or credit, respectively, to “Provisions (net)” in the consolidated income
statement, unless expressly indicated otherwise.
(2.18.1) Legal proceedings related to the 2011 IPO
-
Civil proceedings regarding the invalidity of the subscription of shares. At present, there are
claims being processed seeking the invalidity of the subscription of shares issued in 2011 in the
public offering for the stock market listing of Bankia, S.A. In application of prevailing legislation,
this contingency was recognised in accordance with the information disclosed in Note 22.
-
Processing of preliminary proceedings no. 59/2012 in the Central Court of Instruction of the
National Court (Audiencia Nacional). Criminal procedure in which the court accepted for
processing the lawsuit filed by Unión Progreso y Democracia against Bankia, BFA and former
members of their respective Boards of Directors. Subsequently, other complaints were added by
the alleged injured parties from Bankia's IPO (private accusation) and by persons without this
status (public accusation). Bankia raised a total of EUR 3,092 million in July 2011 from the IPO,
EUR 1,237 million from institutional and EUR 1,855 million from retail investors.
On 13 February 2015, the National Criminal Court issued a ruling establishing a joint bail deposit
by BFA, Bankia and four former members of Bankia's Board of Directors of EUR 800 million; i.e.
six equal parts. The 4/6 corresponding to the four former Directors corresponded to the deposit
covered with a charge to the civil liability insurance policy.
53
On 24 April 2015, the court issued a ruling partially upholding the appeal and reducing the
deposit to from EUR 800 million to EUR 34 million, which could be increase if the final monetary
damages sought exceed that amount. Subsequently, in 2015, certain requests were filed to
amend this deposit, which at 31 December 2015 was established at approximately EUR 38.3
million.
Lastly, at 31 December 2015, new requests for bail deposits had been submitted for which a
ruling by the Court is pending amounting to approximately EUR 5.8 million.
In addition, under the scope of this proceeding, three separate cases are ongoing.
The first two are investigating the issue of preferred participating securities by Caja Madrid and
Bancaja, respectively. The criminal court accepted for processing only those lawsuits regarding
the planning carried out by the individuals on the executive bodies of the companies appearing
as plaintiffs for their recapitalisation through the sale of preferred participating securities, and
rejected the lawsuits filed with respect to the specific sale of preferred participating securities and
the matching of trades. Therefore, Bankia, BFA and the issuers of the preferred participating
securities are not the defendants in these separate cases.
There is another separate case related to credit cards which, through a ruling on 23 December
2015, became a fast-track procedure. The parties were given a common deadline, which ended
on 15 January 2016, for presentation of a prosecution report or, as appropriate, request an
acquittal. On 14 January 2016, Bankia submitted its prosecution report tohe courts, along with its
preliminary conclusions.
The Group considered the lawsuit included in preliminary proceedings No. 59/2012 as a
contingent liability with an uncertain outcome. Note 22 provides additional information on the
current status of the proceeding and the criteria applied by the Group in its accounting treatment.
(2.18.2) Other court proceedings / claims in process
At the end of 2015, certain litigation and claims were in process against the Group arising from the
ordinary course of its operations. The Group's directors consider that, with the information available
and in view of the provisions made by the Group in this connection (Note 22), the outcome of litigation
and claims will not have a material effect on the consolidated financial statements for the years in
which they are settled.
The main claims against the Group with its situation are as follows:
-
Civil proceedings regarding hybrid instruments (preferred participating securities and
subordinated bonds), and injunctions on certain issues of these instruments before mercantile
courts. A provision for legal contingencies of EUR 230 million was recognised in 2013 to cover
the costs arising from these proceedings. This provision was increased in 2014 up to a total of
EUR 246 million, which had been used totally during 2015. Under the terms of the agreement
signed between Bankia and BFA, this provision covers the maximum loss derived from the costs
related to the enforcement of rulings against the Bank in the various proceedings against it
related to the aforementioned issues.
-
Three lawsuits filed by ING Belgium, S.A., BBVA, S.A., Banco Santander, Catalunya Banc and
others (banking syndicate) against Bankia S.A., Corporación Industrial Bankia, S.A –CIBSA-,
ACS, SACYR and others, in three courts of first instance in Madrid:
i) Court of 1st Instance No. 2 of Madrid: seeking enforcement of compliance with the
obligations assumed by the defendants in the support agreement signed under the
framework of the financing granted by the banking syndicate to the holder of the concession
for the construction of the R3 and R5 motorways. A favourable ruling was issued in first and
second instance. An appeal to overturn the ruling has been announced.
ii) Court of 1st Instance No. 51 of Madrid: seeking enforcement of the support agreement and
payment of the subordinated loan. The opposition was rejected in the enforcement
proceedings. An unfavourable ruling was issued against Bankia, which it appealed.
iii) Court of 1st Instance No. 48 of Madrid: against Bankia for the comfort letter issued. A
favourable ruling was issued in first instance and subsequently appealed.
The total risk assumed, in accordance with its share, is EUR 165 million.
-
Lawsuit by Habitats del Golf against, inter alia, Costa Eboris and Bankia Habitat (a wholly owned
subsidiary of Bankia) claiming EUR 9 million in expenses related to the Nuevo Mestalla project.
54
-
Lawsuit brought by the Banco de Valencia Small Shareholder Association “Apabankval”: In 2012,
Apabankval filed a lawsuit against the Board of Directors of Banco de Valencia and Deloitte S.L.
for corporate crimes. The related financial risk cannot be quantified as of yet.
The lawsuit was originally acknowledged by the Court of Instruction No. 3 of Valencia, in
preliminary proceedings No. 773/2012, but this court later recused itself in favour of Central Court
of Instruction No. 1, in its preliminary proceedings DP 65/2013-10. As part of these proceedings,
preliminary proceedings 65/2013-10, which relate to the lawsuit filed by Apabankval, were
opened. Appearing are a number of Group companies, such as Bankia Habitat and Valenciana
de Inversiones Mobiliaria, S.L., after the latter absorbed Operador de Banca-Seguros Vinculado
del Grupo Bancaja, S.L., Grupo Bancaja Centro de Estudios, S.A. and Bancaja Participaciones
S.L.
Preliminary proceedings 65/2013-10 are currently in the pre-trial phase.
-
Demands seeking invalidity of interest rate floor clauses. There are 860 legal proceedings in
progress for an amount of EUR 6.08 million. Bankia is also being sued in a class action being
processed in Madrid mercantile court 11, under case no. 471/2010. As indicated above, pursuant
to IAS 37 no additional information is disclosed regarding this contingency, although the final
outcome would not have affect the accompanying consolidated financial statements.
-
Suit filed by Dofil Dos, S.L. against Bankia and others for EUR 7.1 million. The plaintiff and
former owner of the land is seeking cancellation of the mortgage pledged on the loan granted to
the acquiring borrowers in a swap. A ruling was issued by the Court of First Instance dismissing
the case and ruling in favour of Bankia, which has been appealed.
-
Administrative appeals processed in Section 6 of the High Court filed against the FROB. The
appeals seek to render null and void the resolution issued by the FROB, of 16 April 2013,
agreeing the recapitalisation and management of hybrid instruments and subordinated debt in
execution of the BFA-Bankia Group's Restructuring Plan, governing the early redemption of the
preferred participating securities and other bonds through an exchange for shares. Bankia is
called to testify in defence of the FROB's action.
-
Lawsuit filed by Eurocarrión, S.L. against Caja Madrid, Tasamadrid S.A. and others seeking EUR
6 million in damages from failure to comply with the obligations assumed in the deed for the
developer loan dated 11 May 2007 granted to the defendant for the construction of 48 homes,
garages and store rooms in the town of Carrión de Calatrava, which were awarded to the Bank
following the foreclosure on the aforementioned mortgage. A favourable ruling was issued in 1st
instance on 5 November 2013 and in 2nd instance by the regional courts on 27 January 2015,
which was appealed by the plaintiff.
-
Lawsuit filed by Suministros Médicos y Conciertos, S.L. against Altae Banco (now Bankia)
seeking a declaration of nullity of a structured bond. Rulings in first and second instance and on
appeal have been favourable for Bankia. A further appeal has been filed to overturn the rulings
and annul the proceedings. The financial risk amounts to EUR 6.8 million.
-
Lawsuit filed with Court No. 23 of Valencia (Case 1182 /2014) by Sanahuja Escofet Inmobiliaria
S.L. against Bankia and Bankia Habitat S.L.U. seeking cancellation of the end-to-end
management and marketing contract for the development of 12 estates on file with Property
Register No. 10 of Valencia included in sector NPR1 "Benicalap Norte" and EUR 8.9 million in
damages. The financial risk amounts to EUR 1.2 million.
-
Lawsuit filed by AC AUGIMAR against Bankia Habitat, Bankia, Augimar, CISA 2011 and others
seeking reimbursement of EUR 5.8 million of assets.unduly received by Bankia Habitat in the
private purchase agreement entered into between Augimar and Actura (which was terminated)
and the sale of the plots of Augimar to CISA 2011 on the same date. The plaintiff is seeking
payment by Bankia Habitat of the difference between the selling prices and reimbursement of the
indemnity included in the agreement. An unfavourable ruling was issued in first instance and a
favourable ruling to Bankia's appeal by the Castellón regional court. AC Augimar has filed an
appeal.
-
Lawsuit filed by Activos Castellana 40, S.L., against, inter alia, Bankia, seeking the declaration of
rights derived from the contractual arrangement, the obligation to fulfill and claiming expenses
related to payment in lieu from the "Azaleas de Barriomar" development. Rulings in favour of
Bankia were issued in first and second instance, pending notification by the courts of a final ruling
or appeal by the plaintiff. The financial risk for Bankia is EUR 15.7 million.
55
-
Lawsuit filed by Grupo Rayet, S.L.U. against Bankia and other defendants for irregularities
committed in the appraisal of the land portfolio and accounting irregularities in the stock market
listing of Astroc on 26 May 2006. The claims against Bankia are based on its role as lead
manager of the company's flotation. The total financial risk is EUR 78.2 million.
-
Lawsuit filed by Fracciona Financiera Holdings, S.L.U. against Bankia S.A. seeking an amount
for discrepancies in the determination of the selling price at which Bankia sold all the shares it
held in Finanmadrid Establecimiento Financiero de Crédito, S.A.U. to Fracciona, for EUR 8.5
million. Bankia contested the claim on 29 June 2015, before the legal deadline, and made a
counterclaim for EUR 6.4 million.
-
There are currently 310 legal proceedings under way posing a financial risk of EUR 38.2 million,
including a claim against Bankia by CH Gestión, S.L. seeking the invalidation of derivatives and
by Plazapain, S.A. seeking reimbursement of EUR 5.9 million.
-
Lawsuit against Bankia filed by a Bankia shareholder, employees and third parties over extension
of a loan by Bankia to Jomaca 98. The loan was secured with shares of Zinkia Entertainment
S.A.
(2.19) Non financial guarantees provided
The guarantees or guarantee agreements in which the Group undertakes to compensate an obligee in
the event of non-compliance with a specific obligation other than a payment obligation by a particular
debtor of the obligee, such as deposits given to ensure participation in auctions or tender processes,
surety bonds, irrevocable promises to provide surety and guarantee letters which are claimable by
law, are considered, for the purpose of preparing these consolidated financial statements, to be
insurance contracts.
When the Group provides the guarantees or sureties indicated in the preceding paragraph, it
recognises them under “Other Liabilities” in the consolidated balance sheet at fair value plus the
related transaction costs, which, unless there is evidence to the contrary, is the same as the value of
the premiums received plus, if applicable, the present value of cash flows to be received for the
guarantee or surety provided, and an asset is recognised simultaneously for the present value of the
cash flows to be received. Subsequently, the present value of the fees or premiums to be received is
discounted, and the differences are recognised under “Interest and similar income” in the consolidated
income statement; and the value of the amounts initially recognised in liabilities is allocated on a
straight-line basis to the consolidated income statement (or, if applicable, using another method which
must be indicated). In the event that, in accordance with IAS 37, a provision is required for the surety
which exceeds the liability recognised, the provision is recognised using criteria similar to those
described for the recognition of impairment of financial assets and the amount recorded is reclassified
as an integral part of the aforementioned provision.
(2.20) Non-current assets held for sale
"Non-current assets held for sale" includes the carrying amount of individual items, disposal groups or
items forming part of a business unit earmarked for sale ("discontinued operations"), whose sale in
their present condition is highly likely to be completed within a year from Consolidated financial
statements.
Investments in associates and joint ventures meeting the conditions set forth in the foregoing
paragraph also qualify as non-current assets held for sale.
Therefore, the carrying amount of these items, which can be of a financial nature or otherwise, will
foreseeably be recovered from sale rather than from its use.
Specifically, property or other non-current assets received by the Group as total or partial settlement
of its debtors' payment obligations to it are deemed to be non-current assets held for sale, unless the
Group has decided to make continuing use of these assets or to hold them to earn rentals or for future
capital appreciation.
Non-current assets held for sale arising from foreclosure or otherwise acquired in settlement of debts
are initially recognised as the lower of:
–
Gross debt, less any associated provision, with a minimum of 10%.
–
Appraisal value decreased by 10%.
Subsequently, the initial registration, the minimum percentage is 10%, the above percentages are
increased to 20% as from 12 months after initial recognition, 30% after 24 months and 40% after 3
years.
56
All court costs associated with the claiming and foreclosure of these assets are recognised
immediately in the consolidated income statement for the foreclosure period. Registry costs and taxes
paid may be added to the value initially recognised provided that, as a result, such value does not
exceed the appraisal value less the estimated costs to sell mentioned in the paragraph above.
In general, non-current assets classified as held for sale are measured at the lower of their carrying
amount calculated as at the classification date and their fair value less estimated costs to sell.
Tangible and intangible assets which by their nature would otherwise be depreciable and amortisable
are not depreciated or amortised as long as they are classified as held for sale.
Similarly, “Liabilities associated with non-current assets held for sale” includes the balances payable
associated with disposal groups and the Group's discontinued operations.
If the carrying amount of the assets exceeds their fair value less costs to sell, the Group adjusts the
carrying amount of the assets by the amount of the excess with a charge to “Gains/(losses) on noncurrent assets held for sale not classified as discontinued operations” in the consolidated income
statement. If the fair value of such assets subsequently increases, the Group reverses the losses
previously recognised and increases the carrying amount of the assets without exceeding the carrying
amount prior to the impairment, with a credit to “Gains/(losses) on non-current assets held for sale not
classified as discontinued operations” in the consolidated income statement.
The gains or losses arising on the sale of non-current assets held for sale are presented under “Gains/
(losses) on non-current assets held for sale not classified as discontinued operations” in the
However, financial assets, assets arising from employee remuneration, deferred tax assets and assets
under insurance contracts that are part of a disposal group or of a discontinued operation are not
measured as described in the preceding paragraphs, but rather in accordance with the accounting
policies and rules applicable to these items, which were explained in previous sections of Note 2.
(2.21) Consolidated statement of cash flows
The following terms are used in the consolidated cash flow statement with the meanings specified:
-
Cash flows: inflows and outflows of cash and cash equivalents. Cash equivalents are short-term,
highly liquid investments that are subject to an insignificant risk of changes in value (where
applicable: and, exclusively, since they form part of cash management, bank overdrafts
repayable on demand, which reduce the amount of cash and cash equivalents).
-
Operating activities: the principal revenue-producing activities of credit institutions and other
activities that are not investing or financing activities. Operating activities also include interest
paid on any financing received, even if this financing is considered to be a financing activity.
Activities performed with the various financial instrument categories stipulated in Note 2.2 above
are classified, for the purpose of this statement, as operating activities, except for held-tomaturity investments, subordinated financial liabilities and investments in equity instruments
classified as available for sale which are strategic investments. For these purposes, a strategic
investment is that made with the intention of establishing or maintaining a long-term operating
relationship with the investee, since, inter alia, one of the circumstances that could determine
the existence of significant influence prevails, even though this influence does not actually exist.
-
Investing activities: the acquisition and disposal of long-term assets and other investments not
included in cash and cash equivalents, such as tangible assets, intangible assets, investments,
non-current assets held for sale and associated liabilities, equity instruments classified as
available for sale which are strategic investments and debt instruments included in held-tomaturity investments.
-
Financing activities: activities that result in changes in the size and composition of equity and
liabilities that are not operating activities, such as subordinated liabilities and market debt
securities
In preparing the consolidated cash flow statement, "Cash and cash equivalents" were considered to
be short-term, highly liquid investments that are subject to a low risk of changes in value. Thus, for the
purposes of drawing up the cash flow statement, the balance of "Cash and balances with central
banks" on the asset side of the consolidated balance sheet was considered as cash and cash
equivalents.
57
(2.22) Share-based payment transactions
Share-based remuneration of senior executives and Board members
When the Bank immediately delivers shares to eligible employees with no requirement of a certain
period of time before the employee becomes the unconditional owner of the shares, the total services
received are expensed under "Staff costs" in the consolidated income statement, with a balancing
entry of corresponding increase in consolidated equity.
When the shares are delivered to employees after a certain period of service, the expense is
recognised under "Staff costs" in the consolidated income statement, along with the corresponding
increase in the equity of the company making the payment.
At the grant date on which the employee is entitled to receive share-based payments (the grant date is
understood as the date on which employees and the entity agree to the share remuneration format, its
periods and conditions), the amount of the remuneration to be paid, i.e. the amount of the increase in
the equity of the company making the payment, is measured at the fair value of the shares committed.
If fair value cannot be reliably estimated, the shares are measured at their intrinsic value. Changes in
the fair value of shares between the grant date and the date on which they are delivered are not
recognised. If the shares are measured at their intrinsic value, the variation in this value between the
grant date and the date on which they are delivered is recognised with a balancing entry in the
The policy is in accordance with the best corporate governance practices and pursuant to European
regulations concerning remuneration policies at credit institutions and also to the provisions of Royal
Decree 2/2012 of 3 February, Order ECC/1762/2012, of 3 August, and Law 10/2014, of 26 June.
The new system establishes a specific format for payment of variable remuneration for directors
carrying out control functions or whose activity significantly affects the Bank's risk profile:

At least 50% of variable remuneration must be paid in Bankia shares.

At least 40% of variable remuneration, in either shares or cash, must be deferred over a period of
three years.
Thus, 50% of annual variable remuneration will be paid in shares (30% of the total will be paid
following assessment of the year's objectives, and the remaining 20% deferred in portions of onethird, over a period of three years).
The share price will be the average quoted price over the three months prior to the accrual date.
All shares delivered to directors on the aforementioned scheme as part of their annual variable
remuneration will be unavailable during the year immediately following the date on which they are
delivered. In any case, no shares were delivered in 2015 as no amounts of variable compensation
were paid.
(2.23) Treasury shares
On 28 August 2013, Bankia’s Board of Directors approved an update to the Treasury Share policy,
determining the framework for the control and management of transactions with treasury shares and
the related risk. All purchases and sales of treasury shares by Bankia or its subsidiaries must comply
with prevailing legislation and resolutions adopted at the Annual General Meeting of Shareholders.
Transactions involving treasury shares are recognised directly in equity, along with all the expenses
and potential income that may arise therefrom.
“Own funds – Less: treasury shares” in equity presents the value of Bankia, S.A. treasury shares held
by the Group at 31 December 2015 and 2014.
Note 26.2 includes the disclosures required by applicable regulations regarding transactions with
treasury shares.
58
(2.24) Consolidated statement of recognised income and expense
As indicated above, according to the options available under IAS 1, the Group has elected to present
separately, first, a statement displaying the components of consolidated profit or loss ("Consolidated
income statement") and, secondly, a statement that begins with profit or loss for the year and displays
the components of other comprehensive income for the year, which in these consolidated financial
statements, in accordance with the terminology of Bank of Spain Circular 4/2004, is termed the
"Consolidated statement of recognised income and expense".
The consolidated statement of recognised income and expense presents the income and expenses
generated by the Group as a result of its business activity in the year. A distinction is made between
income and expenses recognised in the consolidated income statement, on one hand, and, on the
other, income and expenses recognised directly in consolidated equity pursuant to prevailing laws and
regulations.
Accordingly, this statement presents:
-
Consolidated profit or loss for the years ended 31 December 2015 and 2014.
-
The net revenue or expenses temporarily recognised in consolidated equity as valuation
adjustments.
-
The net revenue or expenses definitively recognised in consolidated equity.
-
The tax accrued on the items referred to in the preceding two subparagraphs, except in relation
to impairment losses on investments in entities consolidated using the equity method, which are
presented on a net basis.
-
Total recognised consolidated income and expense for the year (calculated as the sum of four
previous amounts, showing separately the total amounts attributable to equity holders of the
parent and to non-controlling interests.
-
The amount of the income and expenses relating to entities accounted for using the equity
method recognised directly in equity is presented in this statement, irrespective of the nature of
the related items, under “Entities accounted for using the equity method”.
The changes in consolidated income and expenses recognised in consolidated equity under
“Valuation adjustments” are broken down – subject to the constraints set out above – as follows:
-
Revaluation gains/(losses): includes the amount of the income, net of the expenses incurred in
the year, recognised directly in consolidated equity. The amounts recognised in the year under
this item are maintained in this line, but in the same year are transferred to the consolidated
income statement, where they are added to the initial value of other assets and liabilities or are
reclassified to another item.
-
Amounts transferred to the income statement: includes valuation gains and losses previously
recognised in consolidated equity, even in the same year, which are taken to the consolidated
income statement.
-
Amount transferred to the initial carrying amount of hedged items: comprises the valuation gains
and losses previously recognised in consolidated equity, even in the same year, which are
recognised at the initial carrying amount of the assets and liabilities as a result of cash flow
hedges.
-
Other reclassifications: includes the amount of the transfers made in the year between valuation
adjustment items in accordance with current regulations.
As required by the amendment of IAS 1, all items of the consolidated statement of recognised income
and expense may be recognised in the consolidated income statement except “Actuarial
gains/(losses) on pension plans”.
The amounts of these items are presented gross and, except as indicated above for the items relating
to valuation adjustments of entities accounted for using the equity method, the related tax effect is
recognised in this statement under “Income tax”.
59
(2.25) Statement of changes in consolidated equity
The consolidated statement of changes in equity (which appears in these consolidated financial
statements as "Statement of changes in total equity" in accordance with the terminology used by Bank
of Spain Circular 4/2004) reflects all the changes in consolidated equity, including those due to
accounting policy changes and error corrections. This statement accordingly presents reconciliation
between the carrying amount of each component of the consolidated equity at the beginning and at
the end of the period, separately disclosing any change into the following headings:
-
Adjustments due to accounting policy changes and error adjustments: includes changes in Group
equity as a result of the retrospective restatement of financial statement balances on account of
changes in accounting policies or for correction of errors, if any.
-
Income and expense recognised in the year: represents the aggregate of all items of recognised
income and expense, as outlined above.
-
Other changes in equity: includes the remaining items recognised in equity such as capital
increases or decreases, distribution of results, treasury share transactions, equity-based
payments, transfers between equity items, and any other increase or decrease in consolidated
equity.
(3) Risk management
Risk management is a strategic pillar in the Bankia Group. The primary objective of risk management
is to safeguard the Group’s financial stability and asset base, while creating value and developing the
business in accordance with the risk tolerance levels set by the governing bodies. It involves the use
of tools for measuring, controlling and monitoring the requested and authorised levels of risk,
managing non-performing loans and recovering unpaid risks.
In 2013, a process began to transform the risk function in order to align it with best practices. All the
initiatives included in this process had been completed by the end of 2015. There were four main
cornerstones to the transformation:
1. General principles governing the risk function and its scope, covering all types of relevant
risks for the Group as a whole, independence of the risk function and the commitment of
senior management, adapting behaviour to the highest ethical standards and strict
compliance with laws and regulations. These principles are:
-
Independent and global risk function, which assures there is adequate information for
decision-making at all levels.
-
Objectivity in decision-making, taking account of all relevant (quantitative and qualitative)
risk factors.
-
Active management throughout the life of the risk, from preliminary analysis until the risk
is extinguished.
-
Clear processes and procedures, reviewed regularly as needs arise, with clearly defined
levels of responsibility.
-
Comprehensive management of all risks through identification, measurement and
consistent management based on a common measure (economic capital).
-
Individual treatment of risks, channels and procedures based on the specific
characteristics of the risk.
-
Generation, implementation and promotion of advanced tools to support decision-making
which, with efficient use of new technologies, aids risk management.
-
Decentralisation of decision-making based on the approaches and tools available.
-
Inclusion of risk in business decisions at all levels (strategic, tactical and operational).
-
Alignment of overall and individual risk targets in the Entity to maximise value creation.
60
2. A new organisational model: the risk function has been restructured to take a comprehensive
vision of risk throughout its life cycle. In this way, management of credit risk is supported by
two units, Corporate Risks and Retail Risks, with each overseeing all the functions of
authorisation, monitoring and recoveries within their domain The seven management
comprising the Corporate Risk Management are:
-
Retail Risks
-
Corporate Risks
-
Global Risk Management
-
Market and Operational Risks
-
Corporate Client Restructuring
-
Technical Secretariat of Risks, which includes the Internal Validation and Internal Control
functions
-
Risk Process Management
3. A transformation plan, articulated in specific projects carried out in 2014 and 2015, aimed
primarily at enhancing the quality of reporting and providing better risk management tools.
4. Efficient risk governance as reflected in the following improvements in 2015:
o
Risk Appetite Framework integrated with the Capital Planning Framework and thel
Recovery Plan:
Illustrating the Group's willingness to strengthen the importance of corporate governance
in risk management and following the recommendations issued by the main international
regulatory bodies, at its meeting held in September 2014 the Board of Directors approved
the Risk Appetite Framework (RAF) for the BFA-Bankia Group. The RAF sets out the
desired levels of risk and the maximum levels of risk that the Entity is willing to accept,
along with the monitoring mechanism and the system of responsibilities of the various
committees and governing bodies involved.
In February 2015, the Board of Directors approved the Capital Planning Framework
which, together with the RAF, sets out the Entity's strategic lines of action with respect to
risk and capital in a business-as-usual situation. Both processes shape the planning of
the Entity's activities and businesses.
The Recovery Plan (also approved and effective since February 2015) establishes the
potential measures to be adopted in a hypothetical crisis situation. The measures would
be triggered if the predefined level of any of the selected indicators in the plan were
exceeded. They are consistent with those determined by the tolerance levels in the RAF.
Subsequently, in July 2015, the Board of Directors approved certain amendments to the
Risk Appetite Statement, describing the relations between the RAF and the Strategic
Plan, the business model, capital planning, the recovery plan and the budget. They
entailed including a risk appetite and tolerance statement in terms of recurring and
extraordinary income and were completed with a set of additional qualitative statements
that more accurately and broadly define the risk profile the Entity is willing to assume.
One mechanism the Entity has put in place to mainstream the RAF entails a system for
determining target levels and limits in the various loan portfolios in terms of exposure and
expected loss. This system is defined to maximise risk-adjusted returns within the overall
limits established in the RAF. In fact, preparation of the 2016 budget, beyond the
requirement to be commensurate with the risk appetite statement, was drawn up
comparing business development proposals with the optimal portfolios provided by the
system.
o
Status of the CRO: In April 2015, the Board of Directors approved the new status of the
Bank's CRO (Chief Risk Officer), setting out:

The conditions necessary for proper performance of the function.

The main duties and responsibilities.

The rules and powers for appointment and removal.
61
The status reinforces the independence of the CRO, which must maintain constant
functional reporting with the Risk Advisory Committee and its Chairman. The CRO also
has regular, direct two-way access to Senior Management and the governing bodies.
o
Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy
Assessment Process (ILAAP) adapted to new European Central Bank criteria: In these
processes, the Entity performs a self-assessment of risks, liquidity and capital adequacy
in different scenarios (baseline and stressed). The results of the assessments were
approved by the Board of Directors in April and reported to the European supervisor. This
exercise is a core element of the new single European banking supervision process.
In view of the activity carried on by the Group, the main risks to which it is exposed are as follows:
-
Credit risk (including concentration risk), arising primarily from the business activity performed
by the Individual, Business and Treasury and Capital Markets business areas, as well as from
certain investments held by the Group.
-
Financial instrument liquidity risk, which relates to the possibility that the funds needed to
settle the Group's commitments in a timely manner and to allow its lending activity to grow will
not be available at reasonable prices.
-
Structural balance sheet interest rate risk, which relates to potential losses in the event of
adverse trends in market interest rates.
-
Market risk and foreign currency risk, which relates to the potential losses due to adverse
changes in the market prices of financial instruments with which the Group operates, primarily
through the Treasury and Capital Markets area.
-
Operational risk, which relates to possible losses arising from failures or shortcomings in
processes, personnel or internal systems, or from external events.
The Board of Directors has exclusive power to approve, or delegate the power to approve,
investments or transactions considered strategic for their amount or special characteristics.
The organisational model described is rounded off with a number of committees, including:
-
The Risk Advisory Committee of the Board of Directors. The main function of the Risk
Advisory Committee is to advise the Board of Directors regarding overall risk exposure of the
Bank, current and future, and its strategy in this regard.
-
The Delegated Risk Committee of the Board of Directors is responsible for approving risks
within the scope of delegation thereto and guiding and administering exercise of the
delegations to lesser bodies. It is also responsible for reporting to the Board of Directors on
those risks that may affect solvency, profits, operations or the reputation of the Company.
-
Management Committee. This committee is presented with the documentation analysed at
previous meetings of the organisation's various units. Under the scope of the Risk Appetite
Framework, this committee is in charge of proposing the pertinent measures when limits are
approached.
-
Capital Committee. Among this committee's responsibilities are the monitoring of the
regulatory framework and its potential impact on the Group's regulatory capital, and the
monitoring and analysis of the main capital ratios and their components, as well as the
leverage ratio. It also monitors the capital initiatives being carried out within the Entity.
-
Assets and Liabilities Committee. This committee is charged with monitoring and managing
structural balance sheet and liquidity risks, reviewing the balance sheet structure, business
performance, product profitability, earnings, etc. bearing in mind the policies and authorities
approved by the Board of Directors.
- Risk Committee. This committee oversees the operation under its remit and performs a
preliminary analysis and assessment of all credit risk which must be resolved by high-ranking
levels (Board of Directors and the Board Risk Committee). It is also in charge of designing a
risk authorisation system and interpreting regulations to improve operations in accordance
with general criteria approved by the Board of Directors.
- Corporate and Retail Banking Risk Coordination and Recovery Committees. These two
committees monitor and coordinate the commercial activities of the business units and risk
cooperative manager in order to meet targets more efficiently.
62
-
Rating Committee. This committee is tasked with ensuring the integrity of ratings and
establishing criteria to determine situations not reflected in rating models, thereby lending
stability to the Entity’s internal rating system.
-
Credit Scoring Committee. Set up in June 2014 in an advisory capacity, this committee is
designed to formalise, in a collegial body, monitoring of the credit scoring systems and
decision-making regarding the development of new models, the review of existing models and
their application.
The Internal Audit Unit, supervised by the Audit and Compliance Committee, is responsible for
overseeing the efficiency of operating processes and internal control systems and for verifying
compliance with all applicable regulations.
(3.1) Exposure to credit risk and risk concentration
(3.1.1) Credit risk management objectives, policies and processes
Credit risk, understood as the risk that the Group will assume losses in the regular course of its
banking business if its customers or counterparties fail to comply with their contractual payment
obligations, is overseen by the Corporate Risk Department (which reports to the CEO), in accordance
with the policies, methods and procedures approved by the Bank's Board of Directors.
The main objectives of credit risk management policies are as follows:
-
Responsible risk approval. Customers should be offered the financing facilities that are
tailored to their needs, for amounts and under terms and conditions that match their payment
ability. The necessary support should be provided so that borrowers of good faith can
overcome their financial difficulties.
- Stable general approval criteria, per borrower and transaction
-
Adaptation. Segment-specific criteria should combine stability with adaptation to the Entity’s
strategic targets, as well as the prevailing economic environment.
- Appropriate price/risk matching, considering the customer as a whole.
- Risk concentration limits.
- Data quality. To assess risk appropriately, sufficient and accurate data are required.
Therefore, the coherence and integrity of the data must be assured.
- Solvency. Policies should be aligned to current and future capital needs in accordance with
the risk appetite statement.
-
Compliance. Credit risk policies must be observed at all times. Exceptions to limits and
conditions are approved for customers with strong ties to the Entity and must be duly
documented and justified.
The policies include general approval criteria, underpinned by four cornerstones:
-
Responsible approval: The first step in approving credit operations is to gain an understanding
of the customer's financing needs and ability to meet them by assessing the customer's
solvency. Care should be taken to offer the financing facilities that best adapt to the
customer's needs, adjusting the terms and conditions and the amounts borrowed to the
borrower's payment ability. Moreover, in retail lending, customers must be provided with
information so that they can understand the risks inherent in the financing.
- Activity: geared toward Retail – SMEs banking in Spain through the branch network and
specialised business centres. Specifically, real estate, project, acquisition and asset finance is
restricted.
- Borrower solvency: payment ability, global view of the customer, knowledge of the customer
and the industry.
-
Operation: financing commensurate with the customer size and profile, balance with shortand long-term financing, assessment of guarantees.
63
-
Environmental and social risk: the environmental impact of the borrower’s business activity
must be taken into account. In addition, new restrictions are placed on new loans to borrowers
who do not respect human rights or do not provide decent working conditions or infringe on
related laws.
Another key issue for determining approval is the need to apply a diversification policy, setting
individual and sector-wide limits.
In addition, the Risk Policies introduce specific approval criteria according to the portfolio segment.
This could include setting rating floors or minimum coverage of guarantees or collateral.
As for risk monitoring, there is a monitoring policy for business activity. The main objective is to
involve all levels of the Group in the proactive management of risk positions with customers so that
potentially problematic situations of impairment can be foreseen before non-payment. The risks
portfolio should be monitored continuously. This responsibility falls with the Business Units, in
conjunction with the Risks Department. This policy is implemented using a risk classification tool by
monitoring levels.
A key feature of the policies is the reference to refinancing and restructuring operations. The objective
is to match financing to the customers' current ability to meet its payment commitments, affording
sufficient financial stability to ensure the continuity and operation of the borrower or its group. To do
so, certain measures must be adopted that can be adapted to the source of the problem, whether they
are systemic (affect all segments and borrowers the same, e.g. rises in interest rates) or specific
(affect individual borrowers and require individual and structural measures for each case). Appendix X
details the criteria governing loan refinancing and restructuring and their accounting classification.
At its meeting held on 23 July 2015, the Boards of Directors of Bankia and BFA approved the "Credit
Risk Policy" document. This document sets out the general policies, methods and procedures to be
applied to the authorisation, study and documentation of credit risk operations. In particular, it
establishes specific criteria for authorising risks with customers, which can be divided up into three
main segments: mortgages, consumer loans and credit cards.
In this respect, the approval policies are governed by credit scoring systems, which allow a response
to be given that is objective, consistent and coherent with the Bank's risk policies and risk appetite.
The scoring systems not only rate risk, but also produce a binding recommendation in accordance
with the most restrictive of the three following components:



Score. Cut-off points are established using risk-adjusted return (RAR) criteria or by determining
the maximum default level. Based on the rating given by the model, there are three possible
outcomes:
- Reject, if the score is below the first cut-off point.
-
Review, if the score is between the two cut-off points.
-
Accept, if the score is above the second cut-off point.
Indebtedness. The level of indebtedness is established based on the financial burden which the
transaction represents over the stated net income of the applicants. In no case can the resulting
available income after allowing for debts represent a noticeable limit to cover the living expenses
of the borrower. Specifically, in the mortgage segment, the longer the term of the loan, the higher
the maximum limit of indebtedness with a view to mitigating the increased sensitivity to
fluctuations in interest rates.
Exclusion filters. The existence of significant incidents in (internal and external) databases would
result in a rejection. Moreover, a set of criteria are in place to cap maximum loan terms, both
absolute levels and in relation to the age of the loan applicant or maximum loan amounts. At any
rate, loans are only granted in euros, thereby avoiding any currency risk.
A key issue for the mortgage segment is the set of criteria that define the eligibility of assets as
mortgage collateral and the valuation criteria. In particular, the risk assumed by the borrower may not
depend substantially on the potential return the borrower may obtain on the mortgaged property, but
rather the borrower's ability to pay the debt by other means. Meanwhile, only appraisals by Bank of
Spain authorised appraisers are accepted. These are regulated by Royal Decree 775/1997, thus
ensuring the quality and transparency of the appraisals. In addition, appraisal values must be
calculated unconditionally as set out in Ministerial Order ECO805/2003.
64
However, both Finance Ministry Order EHA/2899/2011, of 28 October, on transparency and consumer
protection in banking services, and Bank of Spain Circular 5/2012 introduce, as a feature of
responsible consumer lending, the requirement that, on the one hand, borrowers provide the entities
with complete and accurate information on their financial position and their intentions and needs
regarding the purpose, amount and other conditions of the loan or credit, and, on the other, that they
be adequately informed about the characteristics of the products that are suitable to what they are
requesting and the inherent risks. In this respect, in due compliance with regulations, the Bank
provides its customers with the following pre-contract documentation:



Pre-contract information file: A document prepared for delivery to the customer describing the
characteristics and general conditions of the product.
Personalised information file: Pre-contract information on the specific conditions of the
product, which is non-binding and adapted to the customer's application, finance needs,
financial position and preference so the borrower can compare the product with other loans
available in the market, assess the implications and make an informed decision. Appendices:
(I) Adhesion to the Code of Good Practices and (II) Additional information on variable-rate
loans (interest rate scenarios), to be delivered together with the personalised information file.
BO or binding offer: Document with all the terms and conditions of the transaction (similar to
the personalised information file) but binding for the Bank for a period of 14 calendar days
from delivery.
Pre-contract documentation given to customers must be filed together with the customer's record.
The procedures for gathering accreditation of key applicant data are set out in an internal circular
approved on 13/10/2014 by the Management Committee on "Quality of data on retail lending
transactions".
Lastly, regarding control mechanisms, the Risk Advisory Committee is informed quarterly on the
degree of compliance with credit risk policies, with details on default and justification.
Risk management is carried out within limits and according to the guidelines set out in the policies. It
is supported by the following processes and systems:
-
Risk classification
-
Risk quantification
-
Risk projection
-
Risk-adjusted return
-
Business revitalisation
-
Recovery management
-
Concentration risk management
Risk classification
Rating and scoring tools are used to classify borrowers and/or transactions by risk level. Virtually all
segments of the portfolio are classified, mostly based on statistical models. This classification not only
aids in decision-making, but allows for the addition of the appetite and tolerance of risk decided by the
governing bodies through the limits established the Policies.
The Rating Committee reviews and decides on scorings and ratings for non-retail borrowers, which as
such are subject to ratings. Its objective is to achieve consistency in decisions on the ratings of the
portfolio and include information not covered by models that could affect these decisions. The Rating
Committee also approves the Rating Methods and Procedures Mannual, which sets out the rating
system as a whole. This mannual is reviewed annually.
At the same time, the Scoring Committing ensures that the credit scoring system works properly and
proposes potential changes in criteria for decision-making to the Risk Committee. The Group has both
approval (reactive) and performance (pro-active) scoring models. Performance models form the basis
of pre-authorisation for lending to both companies and retail customers. There are also recovery
models applicable to groups in default.
65
Risk classification also includes the “Monitoring levels system”. This system aims to develop proactive management of risks related to business activities through classification into four categories:
-
Level I or high risk: risks to be extinguished in an orderly manner
-
Level II or medium-high risk: reduction of the risk
-
Level III or medium risk: maintenance of the risk
-
Other exposures deemed standard risks.
Each level is determined in accordance with rating, but also with other factors, e.g. activity, accounting
classification, existence of non-payment, the situation of the borrower’s group. The level determines
the credit risk authorisation powers.
Risk quantification
Credit risk is quantified through two measures: expected loss on the portfolio, which reflects the
average amount of losses and is related to the calculation of provisioning requirements, and
unexpected loss, which is the possibility of incurring substantially higher losses over a period of time
than expected, affecting the level of capital considered necessary to meet objectives; i.e. economic
capital.
The credit risk measurement parameters derived from internal models are exposure at default (EAD),
probability of default (PD) based on the rating and loss given default (LGD) or severity.
Expected loss, obtained as a product of the previous parameters, represents the average amount
expected to be lost on the portfolio at a given future date. This is the key metric for measuring the
underlying risks of a credit portfolio as it reflects all the features of transactions and not only the
borrower’s risk profile. Expected loss allows a constrained assessment of a specific, real or
hypothetical economic scenario or refers to a long time period during which a full economic cycle may
have been observed. Depending on the specific use, it is better to use one or the other expected loss.
With the economic capital model, extreme losses can be determined with a certain probability. The
difference between expected loss and value at risk is known as unexpected loss. The Entity must
have sufficient capital to cover potential losses therefore, the higher the cover, the higher the
solvency. This model simulates the default events, so it can quantify concentration risk.
Risk projection
Stress models are another key element of credit risk management, allowing for the risk profiles of
portfolios and the sufficiency of capital under stressed scenarios to be evaluated. The tests are aimed
at assessing the systemic component of risk, while also bearing in mind specific vulnerabilities of the
portfolios. The impact of stressed macroeconomic scenarios on risk parameters and migration
matrices are assessed, allowing expected loss under stress scenarios and the impact on profit and
loss to be determined.
Risk-adjusted return
The profitability of a transaction must be adjusted by the costs of the various related risks, not only the
cost of the credit. And it must be compared to the volume of capital that must be assigned to cover
unexpected losses (economic capital) or to comply with regulatory capital requirements (regulatory
capital).
RAR (risk-adjusted return) is a core risk management tool. In wholesale banking, pricing powers
depend on both the RAR of the new transactions proposed and the RAR of the relationship,
considering all the outstanding business with a customer. In retail banking, RAR is taken into account
to determine approval criteria (cut-off points) in accordance with the fees in effect at any given time.
The Board, through the Board Risk Committee, is informed regularly on the RARs of all the lending
portfolios, distinguishing between the total portfolio and new business.
Business revitalisation
One of Risk Management’s functions is to create value and develop the business in accordance with
the risk appetite established by the governing bodies. In this respect, the Risks Department is equally
responsible for revitalising the lending business, providing tools and establishing criteria that identify
potential customers, simplify the decision-making processes and allocate risk lines, always within predefined tolerance levels. It has tools and pre-authorisation and limit assignment processes for lending
to both companies and retail customers.
66
Recovery management
Recovery management is defined as a full process that begins even before a payment is missed,
covering all phases of the recovery cycle until a (amicable or contentious) solution is reached.
Early warning models are applied in lending to retail customers. They are designed to identify potential
problems and offer solutions, which may entail adapting the conditions of the loan. In fact, a large
number of the mortgage loan renegotiations resulted from the proposals put forward pro-actively by
the Entity.
With business loans, the system of levels described above has the same objective: pro-active nonperforming loan management. Therefore, the entire portfolio is monitored and default is always a
failure after prior negotiation.
Concentration risk management
The Bank uses a set of tools to analyse and monitor the concentration of risks. First, as part of the
calculation of economic capital, it identifies the component of specific economic capital as the
difference between systemic economic capital (assuming maximum diversification) and total economic
capital, which includes the effect of the concentration. This component provides a direct measure of
concentration risk. An approach similar to that used by ratings agencies is applied, paying attention to
the weight of the main risks on the volume of capital and income-generation ability.
(3.1.2) Exposure to credit risk by segment and activity
The maximum credit risk exposure for financial assets recognised in the accompanying consolidated
balance sheet is their carrying amount. The maximum credit risk exposure for financial guarantees
extended by the Group is the maximum amount the Group would have to pay if the guarantee were
executed.
At 31 December 2015 and 2014, the original credit risk exposure, without deducting collateral or any
other credit enhancements received, and without applying the credit conversion factors defined in
Regulation (EU) No. 575/2013 of the European Parliament and of the Council, of 26 June, grouped in
accordance with the main exposure segments and activities established , is as follows:
31 December 2015
SEGMENT AND ACTIVITY
Institutions: Government agencies
Financial
assets held
for trading
and financial
assets at fair
value through
profit or loss
Available-forsale financial
assets
Trading
derivatives
Held-tomaturity
investments
Loans and
receivables
Off-balance
sheet items
and others
Hedging
derivatives
50,427
-
24,466,018
5,855,752
5,557,468
-
359,616
-
-
4,748,568
6,443,436
17,362,848
-
464,104
3,278
-
1,874,305
29,440,648
780,583
-
15,517,291
-
-
-
76,035,976
-
-
4,278,769
Consumer
-
-
-
2,580,228
-
-
103,932
Mortgage – SMEs
-
-
-
-
-
-
-
Mortgage – Other
-
-
-
66,931,938
-
-
848,090
Retail – SMEs
-
-
-
5,798,060
-
-
674,167
Cards
-
-
-
725,750
-
-
2,652,580
Institutions: Credit institutions and others
Companies
Retail customers
Derivatives
Equity
Total
Memorandum item: Breakdown by country of
the public agency
Spanish government agencies
-
12,075,893
-
-
-
4,073,473
-
72,486
-
-
-
-
-
-
126,191
12,075,893
31,088,891
117,775,812
23,700,899
4,073,473
20,619,780
50,427
-
20,235,133
5,825,510
4,276,655
-
359,616
Greek government agencies
-
-
-
-
-
-
-
Italian government agencies
-
-
4,229,921
-
385,809
-
-
Portuguese government agencies
-
-
-
-
-
-
-
Other government agencies
TOTAL
-
-
964
30,242
895,004
-
-
50,427
-
24,466,018
5,855,752
5,557,468
-
359,616
67
31 December 2014
Companies
Retail customers
Financial
assets held
for trading
and financial
assets at fair
value through
profit or loss
assets
Trading
derivatives
Held-tomaturity
investments
Loans and
receivables
Off-balance
sheet items
and others
Hedging
derivatives
77,593
-
22,999,084
5,889,430
6,999,107
-
-
-
9,811,001
10,967,462
18,622,061
-
410,292
840,698
6,226
-
1,961,638
29,564,137
1,040,162
-
15,050,072
-
-
-
78,806,194
-
-
4,062,727
Consumer
-
-
-
2,219,949
-
-
123,687
Mortgage – SMEs
-
-
-
-
-
-
-
Mortgage - Other
-
-
-
69,301,110
-
-
839,778
Retail - SMEs
-
-
-
6,482,036
-
-
639,059
Cards
-
-
-
803,099
-
-
2,460,203
Derivatives
-
18,448,258
-
-
-
5,538,715
-
73,796
-
-
-
-
-
-
157,615
18,448,258
34,771,723
125,227,223
26,661,330
5,538,715
20,363,789
Equity
Total
Memorandum item: Breakdown by country of
the public agency
Spanish government agencies
77,593
-
20,023,534
5,877,178
4,710,535
-
410,292
Greek government agencies
-
-
-
-
-
-
-
Italian government agencies
-
-
2,974,681
-
1,387,837
-
-
Portuguese government agencies
-
-
-
-
-
-
-
Other government agencies
-
-
869
12,252
900,735
-
-
77,593
-
22,999,084
5,889,430
6,999,107
-
410,292
TOTAL
In addition, exposure to credit risk, by segment and activity, corresponding to investments in
companies classified as assets of disposal groups at 31 December 2015 and 2014
31 December 2015
DISPOSAL GROUPS
Financial
assets held
for trading
and financial
assets at fair
value through
profit or loss
assets
Trading
derivatives
Held-tomaturity
investments
Loans and
receivables
Off-balance
sheet items
and others
Hedging
derivatives
-
-
-
-
-
-
-
-
-
-
17,807
317
-
-
Companies
-
-
-
34,583
-
-
-
Retail customers
-
-
-
-
-
-
-
Derivatives
-
-
-
-
-
-
-
Rest
-
-
-
31
-
-
-
Total
-
-
-
52,421
317
-
-
Note: the maximum exposure of financial assets recognised on the balance sheet is their carrying amount, Without deducting collateral or other credit
enhancements received.
68
31 December 2014
DISPOSAL GROUPS
Financial
assets held
for trading
and financial
assets at fair
value through
profit or loss
assets
Trading
derivatives
Held-tomaturity
investments
Loans and
receivables
Off-balance
sheet items
and others
Hedging
derivatives
-
-
77,851
-
-
-
-
-
-
14,082
-
-
-
Companies
-
-
792,144
230,492
204,155
-
33,537
Retail customers
-
-
-
2,562,655
-
-
372,772
Derivatives
-
1,409
-
-
-
-
-
Rest
-
-
-
3,052
-
-
444
Total
-
1,409
869,995
2,810,281
204,155
-
406,753
-
Note: the maximum exposure of financial assets recognised on the balance sheet is their carrying amount. Without deducting collateral or other credit
enhancements received.
(3.1.3) Breakdown of original exposure by product
Original credit risk exposure at 31 December 2015 and 2014, by product (excluding equity products),
is shown in the table below. Loans and credits reflect the highest customer demand, accounting for
59.3% at 31 December 2015 (54.4% at 31 December 2014). Fixed income products represent the
second-highest customer demand, accounting for 26.6% at 31 December 2015 (27.3% at 31
December 2014).
The breakdown at 31 December 2015 is as follows:
31/12/2015
Financial assets
held for trading and
financial assets at
fair value through
profit or loss
Trading
derivatives
-
-
-
53,705
-
Interbank deposits
-
Guarantees and documentary credits
Derivatives
PRODUCT
Held-tomaturity
investments
Hedging
derivatives
110,569,911
-
-
13,635,002
31,088,891
762,465
23,700,899
-
-
-
-
6,443,436
-
-
-
-
-
-
-
-
-
6,984,778
-
12,075,893
-
-
-
4,073,473
-
53,705
12,075,893
31,088,891
117,775,812
23,700,899
4,073,473
20,619,780
Loans and credits
Fixed income
Total
Availablefor-sale
financial
assets
Loans and
receivables
Off-balance
sheet items
and others
The breakdown at 31 December 2014 is as follows:
PRODUCT
31/12/2014
Financial assets
held for trading and
financial assets at
fair value through
profit or loss
Loans and credits
Fixed income
83,819
Trading
derivatives
Availablefor-sale
financial
assets
Loans and
receivables
Held-tomaturity
investments
Hedging
derivatives
Off-balance
sheet items
and others
-
-
112,691,243
-
-
13,093,044
-
34,771,723
1,568,518
26,661,330
-
-
Interbank deposits
-
-
-
10,967,462
-
-
-
Guarantees and documentary
credits
-
-
-
-
-
-
7,270,745
-
18,448,258
-
-
-
5,538,715
-
18,448,258
34,771,723
125,227,223
26,661,330
5,538,715
20,363,789
Derivatives
Total
83,819
69
(3.1.4) Credit quality
The Group uses advanced systems to measure the credit risk inherent in certain credit portfolios to
measure exposure to credit risk by both the standardized approach and by the internal ratings-based
(IRB) approach.
Thus, at 31 December 2015, the internal ratings-based approached is used to assess approximately
68.8% of the Group's portfolio. This segment comprises both part of the corporate client portfolio
(measured using internal rating systems), and part of the retail portfolio (individual customers, microcompanies, i.e., companies with revenue under EUR 1 million per year, and self-employed
professionals: measured using points-based or scorings). Otherways, the Group's remaining portfolio
(approximately 31.2% of the original exposure) is assessed by the standard approach.
All ratings appearing in this section reflect the definitions given by the Standard & Poor’s scale.
The rating system designed by the Group primarily covers two dimensions:

Risk of default by the borrower: reflected in the probability of default (PD) by the borrower or
rating.

Specific factors in transactions: reflected in loss given default (LGD), such as guarantees or
interests in various tranches of leveraged financing. The term also constitutes a major factor.
The rating system used makes a distinction between the following:

Exposure to risk with companies, governments, institutions and banks: each exposure vis-àvis the same borrower is given the same credit quality grading (known as borrower grade),
regardless of the nature of the exposures. This is known as the borrower rating.

Retail exposures: the systems focus both on borrower risk and the characteristics of the
transactions. This is known as scoring.
The rating system has grading models for banks, large companies, companies, public institutions and
special financing. There are three different types of rating:

External rating: this refers to the ratings issued by external rating agencies (S&P's, Moody’s
and Fitch).

Automatic rating: these ratings are obtained through internal models, depending on the
segment to which the customer belongs.

Internal rating: these are the final ratings assigned to customers when all the available
information has been reviewed. The internal rating may be the external rating, the automatic
rating or the rating determined by the Rating Committee from all the information analysed.
Customers form part of the rating system, i.e. when financial information is added to the NEO
corporate system, the rating is automatically produced by the appropriate model.
Credit quality. Original exposure and average (rating/scoring), by segment
The breakdown by segment of the Group's credit risk exposure at 31 December 2015 and 2014,
excluding trading derivatives, with the average ratings per segment (excluding default), is as follows:
Breakdown at 31 December 2015
IRB
SEGMENT
Standard
Institutions
Amount
28,408,467
Companies
37,825,862
BB-
-
Retail customers
52,785,720
B+
22,155,704
2,236,866
B+
330,302
43,673,582
B+
20,032,419
Retail – SMEs
3,693,477
B
1,617,502
B+
Cards
3,181,795
BB-
175,481
BB-
119,020,049
BB-
Consumer
Mortgage – Other
Total
Average rating
BBB-
Amount
37,618,850
59,774,554
Average rating
BBB
BB
B
BB-
BB+
70
Breakdown at 31 December 2014
IRB
Standard
SEGMENT
Amount
Institutions
30,895,029
BB+
43,325,494
Companies
33,660,717
BB-
-
Retail customers
53,875,484
B+
21,974,807
1,756,675
B+
446,276
45,327,296
B+
19,358,376
BB-
Retail – SMEs
3,759,308
B
1,967,960
B+
Cards
3,032,205
BB-
202,195
BB-
118,431,230
BB-
65,300,301
BB+
Consumer
Mortgage – Other
Total
Average rating
Amount
Average rating
BBBBBB
(1) In 2014, an adjustment was made between the IRB and standardised approach in the Institutions segment to adequately reflect certain
exposures with state support.
Credit quality. Rating distribution by exposure of the institutions and corporate portfolio
The distribution of original exposure by credit ratings, differentiating between rating-based exposures
whose capital requirements are determined using the IRB approach (excluding special financing) and
exposures under the standardized approach, is as follows:
31/12/2014(1)
31/12/2015
RATING
AAA to ABBB+ to BBB+ to BCCC+ to C
Default
Total
IRB
Standard
IRB
Standard
8,826,323
1,077,623
7,281,802
4,384,220
50,365,436
36,506,784
49,683,009
36,812,596
6,509,518
34,443
6,821,902
2,128,673
533,052
-
769,033
5
7,659,201
39,902
9,224,614
15,790
73,893,530
37,658,752
73,780,360
43,341,284
1) In 2014, an adjustment was made between the IRB and standardised approach in the Institutions segment to adequately reflect certain
exposures with state support.
Credit quality, Rating distribution for exposures of the corporate portfolio
The distribution of the original exposure by credit ratings at 31 December 2015 and 2014,
differentiating between rating-based exposures whose capital requirements are determined using the
internal ratings method (excluding special financing) and exposures under the standard method, is
shown in the table below:
31/12/2015
RATING
AAA to ABBB+ to BBB+ to BCCC+ to C
Default
Total
IRB
31/12/2014
Standard
IRB
Standard
3,151,821
-
1,595,957
-
27,950,759
-
24,966,639
-
6,212,452
-
6,385,605
-
510,830
-
712,516
-
7,367,965
-
8,923,316
8,675
45,193,827
-
42,584,033
8,675
71
Credit quality. Distribution of retail exposures
The distribution of the original exposure by credit ratings at 31 December 2015 and 2014 for scoringbased exposures whose capital requirements are determined using the internal ratings method and
exposures under the standard method, is shown in the table below:
31/12/2015
RATING
IRB
AAA to A-
31/12/2014
Standard
IRB
Standard
6,184,511
-
6,073,419
72,557
BBB+ to BB-
31,275,601
15,251,941
32,248,650
14,223,442
B+ to B-
14,220,873
6,901,264
14,294,381
7,675,848
1,104,734
2,499
1,259,033
2,960
CCC+ to C
Default
Total
3,435,614
1,980,148
4,544,966
2,519,535
56,221,334
24,135,852
58,420,449
24,494,342
Credit quality. Historical default rates
The Group’s default rate, understood as the ratio between default risks at any given time and the
Group’s total credit risks stood at 10.57% at 31 December 2015 (12.87% at 31 December 2014).
(3.1.5) Concentration of risks
Appendix X provides information on risk concentration by activity and geographic area.
The table below shows information concerning the diversification of risks by business sectors,
measured as credit risk, excluding equity income and trading derivatives, in accordance with the
borrower's CNAE activity code and regardless of the purpose of the financing at 31 December 2015
and 2014:
SECTOR
Foodstuffs
31/12/2015
1,177,109
31/12/2014
1,109,913
491,674
456,169
Automotive and auto services
1,049,433
1,230,433
Wholesale
5,257,384
4,723,368
Retail
3,456,686
3,509,158
12,508,008
14,631,785
Machinery and equipment manufacturing
3,707,438
3,314,993
Manufacturing of intermediate products
3,550,929
3,303,836
36,132,431
38,342,373
Catering and tour operators
2,933,839
3,395,041
Food, beverages and tobacco industry
2,036,219
2,053,356
Basic manufacturing, textiles, furniture
802,386
785,774
5,652,245
5,740,397
33,735,737
37,257,336
Company services
6,554,067
6,906,770
Leisure, culture, health and education
5,094,855
5,299,252
Supplies: electricity, gas, steam, water
6,853,854
6,692,195
Associations
Construction and development (*)
Finance
Mining, energy and infrastructures
Public sector
Telecommunications
Transport
Other sectors
TOTAL
996,561
827,985
2,677,269
2,352,800
63,556,575
64,933,601
198,224,699
206,866,535
(*)Included financing not related to real estate development.
The Group regularly monitors major customer risk, and these are periodically reported to the Bank of
Spain.
72
(3.1.6) Netting agreements and collateral agreements
In addition to amounts that can be set off in accordance with IAS 32 (see Note 2.6), there are other
offsetting (netting) and collateral agreements that effectively reduce credit risk, but do not meet the
requirements for offsetting in the financial statements.
The table below lists these derivatives, along with the effects of the arrangements and the collateral
received and/or posted.
Amounts related to cash collateral and collateral in financial instruments are shown at their fair values.
Rights to set off are related to the guarantees and collateral in cash and financial instruments and
depend on non-payment by the counterparty:
31/12/2015
Derivatives (trading and hedging)
Gross exposure
Amount netted (Note 9 and 14)
Carrying amount
Netting agreement
Collaterals (*)
Net exposure
31/12/2014
Assets
Liabilities
Assets
Liabilities
22,440,159
19,662,655
27,621,493
24,190,677
(6,290,793)
16,149,366
(6,290,793)
13,371,862
(3,634,520)
23,986,973
(3,634,520)
20,556,157
(10,641,843)
(3,737,368)
(10,579,901)
(2,572,439)
(16,388,652)
(5,343,617)
(16,388,652)
(2,819,923)
1,770,155
219,522
2,254,704
1,347,582
(*) Guarantee value received included.
In addition, under the framework of repurchase and reverse repurchase transactions carried out by the
Group (see Note 29.1), there are other agreements entailing the receipt and/or delivery of the
following additional guarantees or collateral to the contractual guarantees in the transactions:
31/12/2015
Collateral
Cash
Securities
Total
Delivered
31/12/2014
Received
Delivered
Received
5,907
28,141
16,902
58,766
400,889
841,682
17,966
82,829
406,796
869,823
34,868
141,595
(3.1.7) Collateral received and other credit enhancements
At 31 December 2015, the distribution by segments of original exposure, excluding equities and
trading derivatives, with collateral and other credit enhancements was as follows:
Standard Approach
Mortgage
collateral
23,446,030
Other
collateral
414,300
Unsecured
guarantees
37,415,430
Other
guarantees
518,844
61,794,604
IRB Approach
54,500,634
8,390,870
73,049,645
488,946
136,430,095
SEGMENT
TOTAL
Institutions
416,063
364,631
27,916,262
2,747
28,699,703
Companies
5,939,569
7,769,017
37,478,272
322,200
51,509,058
48,145,002
257,222
7,655,111
163,999
56,221,334
48,792
65,576
2,208,566
164
2,323,098
45,844,413
-
467,774
-
46,312,187
2,251,797
191,646
1,777,603
163,835
4,384,881
-
-
3,201,168
-
3,201,168
77,946,664
8,805,170
110,465,075
1,007,790
198,224,699
Retail customers
Consumer
Mortgage - Other
Retail - SMEs
Cards
TOTAL
73
At 31 December 2014, the distribution by segments of original exposure, excluding equities and
trading derivatives, with collateral and other credit enhancements was as follows:
Standard Approach
Mortgage
collateral
23,542,903
Other
collateral
462,918
Unsecured
guarantees
43,709,732
Other
guarantees
120,072
67,835,625
IRB Approach
SEGMENT
TOTAL
58,996,095
8,775,359
70,917,010
342,444
139,030,908
Institutions
446,988
490,280
30,258,400
659
31,196,327
Companies
7,562,264
8,062,912
33,590,767
198,190
49,414,133
50,986,843
222,167
7,067,843
143,595
58,420,448
54,319
61,125
1,738,518
159
1,854,121
Retail customers
Consumer
Mortgage - Other
Retail - SMEs
Cards
TOTAL
(1)
48,430,395
-
523,131
-
48,953,526
2,502,129
161,042
1,749,991
143,436
4,556,598
-
-
3,056,203
-
3,056,203
82,538,998
9,238,277
114,626,742
462,516
206,866,533
The assumptions made to this table have been adapted to make them consistent with the criteria applied in 2015
For the purposes envisaged in the tables above, the following are explained:
-
Transactions with mortgage collateral: property mortgage, concession mortgage, chattel
mortgage, shipping mortgage and aircraft mortgage.
-
Other collateral: equity securities, fixed-income securities and other types of securities,
government securities, term deposits and other account deposits, goods and receipts,
investment funds, bills of exchange, deposit certificates, mortgage-backed securities, etc.
-
Personal guarantees: with or without guarantor, joint guarantee and insurance policy.
-
Other guarantees: endorsement by a reciprocal guarantee association, CESCE credit
insurance policy, bank guarantee and comfort letter.
From the legal viewpoint, a guarantee is a contract which provides greater security towards
compliance with an obligation or payment of a debt in such a way that, in the event of default by the
borrower, the guarantee reduces the losses arising from the transaction.
Guarantees will enjoy legal certainty so that all contracts contain the conditions legally stipulated to
make them fully valid, and so they are fully documented in such a way as to establish a clear
effective procedure to enable the guarantee to be executed rapidly.
These are the principles inspiring the functional definition of the Corporate Guarantee.
Guarantees and collateral provided in each transaction must be duly reported and measured in the
system. The Credit Risk Policy document details the main characteristics that these measurements
must have, both in terms of type of eligible appraisals and the frequency with which the appraisals
must be updated.
(3.1.8) Renegotiated financial assets
As part of its credit risk management procedures, the Group carried out renegotiations of assets,
modifying the conditions originally agreed with borrowers in terms of repayment deadlines, interest
rates, collateral given, etc.
Appendix X contains the classification and hedging policies and criteria applied by the Group in this
type of transaction, along with the amount of refinanced operations detailing their risk classification
(i.e. transactions that require special monitoring, substandard or doubtful risk) and respective
coverages of credit risk.
74
(3.1.9) Assets impaired and derecognised
Following are the changes in 2015 and 2014 in the Group’s impaired financial assets that were not
recognised on the consolidated balance sheet because their recovery was considered unlikely,
although the Group had not discontinued actions in order to recover the amounts owed (“written-off
assets”):
ITEM
Accounting balance at the beginning of the year
Additions from:
Assets unlikely to be recovered
Uncollected past-due amounts
Sum
Derecognition through:
Cash collection
Foreclosure of assets and other causes
Sum
Net change due to exchange differences
Accounting balance at the end of the year
31/12/2015
31/12/2014
1,925,526
2,197,964
308,015
59,336
367,351
379,292
87,077
466,369
(101,165)
(815,889)
(917,054)
651
1,376,474
(212,688)
(527,931)
(740,619)
1,812
1,925,526
(3.2) Liquidity risk of financial instruments
Liquidity risk can be expressed as the probability of incurring losses through insufficient liquid
resources to comply with the agreed payment obligations (both expected and unexpected) within a
certain time horizon, and having considered the possibility of the Group managing to liquidate its
assets in reasonable time and price conditions.
The Group strives to maintain a long-term financing structure that is in line with the liquidity of its
assets, with a maturity profile that is compatible with the generation of stable, recurring cash flows to
enable the Group to manage its balance sheet without short-term liquidity pressures.
For this purpose, the Group's liquidity position is identified, controlled and monitored daily. According
to the retail business model underpinning the Group's banking activity, the main funding source is
customer deposits. Bankia taps domestic and international capital markets, particular repo markets, to
raise finance so that it meets its additional liquidity needs. At the same time, and as a prudent
measure to prepare for potential stress or crises, the Group has deposited certain assets in the
European Central Bank (ECB) that it can use to raise liquidity immediatly. Through ongoing monitoring
of assets, the Group can identify those that are readily usable as liquidity reserves at times of market
stress, differentiating between assets that are considered eligible by the ECB, or by clearing houses or
other financial counterparties (e.g. insurance companies, investment funds).
The undrawn amount on the facility, coupled with the high-quality liquid asset buffer, make up the bulk
of the liquidity reserve estimated by the Group to confront internal and systemic stress events:
31/12/2015
31/12/2014
Cash (*)
2,051
2,120
Undrawn amount on the facility
5,354
5,613
27,199
28,104
Highly liquid available assets (**)
(*) Notes and coins plus balances at central banks less the amount of minimum reserves.
(**) Market value considering the ECB haircut.
Other assets have been identified which, although not considered to be highly liquid, can be converted
at relatively short notice.
Regarding the structure of roles and responsibilities, the Assets and Liabilities Committee (ALCO) is
charged with monitoring and managing liquidity risk based on recommendations, mainly by the
Corporate Finance Department, in accordance with the Liquidity Risk Appetite and Funding
Framework approved by the Board of Directors. The ALCO proposes the rules of action to secure
financing through instruments and maturities, with a view to guaranteeing at all times the availability of
funds at reasonable prices so the Bank can meet the obligations undertaken and finance the growth of
its investment business.
75
The Markets and Operational Risks Department (MORD), which operates as an independent unit,
monitors and analyses liquidity risk, among other responsibilities. It promotes the integration of these
activities in management by developing metrics and methodologies to ensure that liquidity risk
remains within the tolerance levels.
Specific liquidity risk management targets are defined for these metrics under normal market
conditions. The overriding objective is to achieve appropriate self-financing of on-balance sheet credit
activity, with a reduction in the loan-to-deposit ratio (relationship between loans and advances to
customers and customer deposits) and budgetary monitoring of the level of self-financing in the retail
and corporate businesses, as well as the commercial activity as a whole. Secondly, there are efforts to
promote appropriate diversification in the corporate funding structure, limiting the use of capital
markets in the short term, as well as in the funding mix, maturity terms and concentration of assets in
the liquidity buffer.
Alongside the monitoring of liquidity risk in normal market conditions, action guidelines have been
designed to prevent and manage situations of liquidity stress. This pivots around the Liquidity
Contingency Plan (LCP), which sets out the committees in charge of monitoring and activating the
LCP and the protocol for determining responsibilities, internal and external communication flows, and
potential action plans to, where appropriate, redirect the risk profile within the Bank's tolerance limits.
The LCP is backed by specific metrics, in the form of LCP monitoring alerts, and by complementary
metrics to liquidity risk and regulatory funding indicators, LCR and NSFR. These ratios have built-in
stress scenarios for the ability to maintain available liquidity and funding sources (Corporate and retail
deposits, funding on capital markets) and allocate them (loan renewal, unprogrammed activation of
contingent liquidity lines, etc). For the LCR, the scenario relates to a survival period of 30 days, and
the regulatory assumptions underlying the construction of the ratio are valid exclusively for this period.
In addition to the regulatory LCR, the MORD designs expanded stress scenarios in two ways:

It builds more survival horizons, which implies adapting the regulatory assumptions to these
horizons, and envisaging and adopting corrective measures to address future liquidity
vulnerabilities.

It creates varying degrees of stress for each survival horizon. This approach allows us to build the
stressed LCR calculated at different horizons using more stringent assumptions than the
regulatory assumptions, based on expert criteria, past experience or a combination of both.
Monitoring the results indicates that the Bank has a sufficient buffer of liquid assets to weather any
type of crisis.
As for the net stable funding ratio (NSFR) it is currently undergoing a review by the European Union
and, once the definition is complete, this ratio will form part of the minimum standards on 1 January
2018, with a requirement of at least 100%.
76
Maturities of issues
The following table provides information on the term to maturities of the Group's issues at 31
December 2015 and 2014, by type of founding instrument, including promissory notes and issues
placed via the network.
31 December 2015
ITEM
Mortgage-backed bonds and securities
Senior debt
Subordinate, preference and convertible
securities
2016
5,154,172
2017
555,000
2018
2,205,687
> 2018
11,806,153
555,304
897,400
75,000
1,424,985
-
-
-
1,000,000
-
-
-
3,891,790
Securitizations sold to third parties
Commercial paper
Total maturities of issues (*)
745,300
6,454,776
-
-
1,452,400
2,280,687
2016
2017
18,122,928
(*) Figures shown in nominal amounts less treasury shares and issues withheld.
31 December 2014
ITEM
Mortgage-backed bonds and securities
Senior debt
Subordinate, preference and convertible
securities
Securitizations sold to third parties
Commercial paper
Total maturities of issues (*)
2015
> 2017
2,720,289
5,152,272
555,000
11,492,690
428,050
591,469
609,600
1,560,291
-
-
-
1,000,000
-
-
-
4,429,587
706,314
-
-
-
3,854,653
5,743,741
1,164,600
18,482,568
(*) Figures shown in nominal amounts less treasury shares and issues withheld.
Issuance capacity
31/12/2015
31/12/2014
Mortgage-backed securities issuance capacity (Appendix VIII)
7,141,006
6,367,809
Territorial bond issuance capacity
1,357,071
2,012,789
77
(3.3) Residual maturities
The following table provides a breakdown of balances of certain items in the accompanying
consolidated balance sheet, by residual contractual maturity, excluding, as appropriate, valuation
adjustments and impairment losses:
31 December 2015
ITEM
On demand
Up to 1 month
3 months to 1
year
1 to 3 months
More than 5
years
1 to 5 years
Total
Assets
2,978,890
-
-
-
-
-
2,978,890
949,169
4,856,303
4,658
10,680
620,536
-
6,441,346
Loans and advances to customers
-
3,478,264
3,741,997
8,041,842
25,591,401
77,133,263
117,986,767
Financial assets held for trading and
financial assets at fair value through profit or
loss
-
2,310
7,085
28,145
502
15,663
53,705
Other portfolios - Debt securities
-
921,600
834,100
18,916,639
19,326,267
15,528,866
55,527,472
25,893
195,259
712,550
2,894,582
9,700,982
8,910,893
22,440,159
3,953,952
9,453,736
5,300,390
29,891,888
55,239,688
101,588,685
205,428,339
-
18,415,388
1,321,507
3,471,176
17,915,740
1,547,730
42,671,541
46,036,504
11,884,383
12,831,288
26,657,814
7,091,644
2,726,243
107,227,876
Marketable debt securities
-
1,012,808
406,738
4,703,074
6,013,066
9,142,405
21,278,091
Subordinated liabilities
-
-
-
-
-
1,000,000
1,000,000
945,254
-
-
-
-
-
945,254
98,393
148,067
589,646
2,547,032
9,551,162
6,728,355
19,662,655
47,080,151
31,460,646
15,149,179
37,379,096
40,571,612
21,144,733
192,785,417
294
1,054
18,128
45,659
461,226
24,868
551,229
Loans and advances to credit institutions
Derivatives (trading and hedging) (1)
Total
Liabilities
Deposits from central banks and credit
institutions
Customer deposits
Other financial liabilities (2)
Total
Contingent liabilities
Financial guarantees
(1)
Gross exposure excluding netting arrangements (see Note 3.1.6 and Notes 9 and 14).
(2)
A residual item comprising items that are generally transitory or do not have a contractual maturity, making it impossible to allocate reliably the amounts recognised
by term of maturity, and therefore classified under demand liabilities.
78
31 December 2014
ITEM
On demand
Up to 1 month
3 months to 1
year
1 to 3 months
More than 5
years
1 to 5 years
Total
Assets
2,926,760
-
-
-
-
-
2,926,760
1,425,931
6,458,342
3,004,247
487
84,139
-
10,973,146
-
2,685,250
3,456,274
7,772,799
24,884,121
82,983,106
121,781,550
Financial assets held for trading and
financial assets at fair value through profit or
loss
-
1,000
8,240
11,005
3,046
60,528
83,819
-
499,500
1,063,800
17,510,767
30,517,128
13,421,584
63,012,779
32,130
182,313
903,887
3,176,967
13,335,093
9,991,103
27,621,493
4,384,821
9,826,405
8,436,448
28,472,025
68,823,527
106,456,321
226,399,547
142,519
36,990,902
12,877,127
1,237,158
7,142,629
1,596,320
59,986,655
40,661,650
12,512,453
7,573,290
29,041,782
12,169,442
3,092,564
105,051,181
-
1,098,954
249,694
2,867,796
10,973,383
6,111,689
21,301,516
-
-
-
-
-
1,000,000
1,000,000
1,416,576
-
-
-
-
-
1,416,576
19,889
165,246
918,455
2,634,507
11,897,836
8,554,744
24,190,677
42,240,634
50,767,555
21,618,566
35,781,243
42,183,290
20,355,317
212,946,605
2,799
2,247
20,545
66,745
368,582
32,826
493,744
Total
Liabilities
Deposits from central banks and credit
institutions
Customer deposits
Other financial liabilities (2)
Total
Contingent Liabilities
Financial Guarantees
(1)
Gross exposure excluding netting arrangements (see Note 3.1.6 and Notes 9 and 14).
(2)
A residual item comprising items that are generally transitory or do not have a contractual maturity, making it impossible to allocate reliably the amounts recognised
by term of maturity, and therefore classified under demand liabilities.
(3.4) Exposure to interest rate risk
Interest rate risk reflects the probability of incurring losses because of changes in the benchmark
interest rates for asset and liability positions (or certain off-balance sheet items) that could have an
impact on the stability of the Entity’s results. Interest rate risk management is designed to lend
stability to margins, maintaining levels of solvency that are appropriate for the Entity’s level of risk
tolerance.
Interest rate risk monitoring and management at the Group is performed in accordance with the
criteria approved by the governing bodies.
Each month, information on risk in the banking book is reported to the ALCO in terms of both
economic value (sensitivities to different scenarios and VaR) and interest margin (net interest income
projections in different interest-rate scenarios for horizons of 1 and 2 years). At least quarterly, the
Board of Directors is informed through the Risk Advisory Committee on the situation and monitoring of
limits. Any excesses are reported immediately to the Board by the Board Risk Committee. In addition,
information prepared by the ALCO is reported by the Global Risk Management Division, along with
other risks, to the Bank's senior management.
According to Bank of Spain regulations, the sensitivity of the net interest margin and the value of
equity to parallel shifts in interest rates (currently ±200 basis points) is controlled. In addition, different
sensitivity scenarios are established based on implied market interest rates, comparing them to nonparallel shifts in yield curves that alter the slope of the various references of balance sheet items.
79
Sensitivity analyses performed by analysing interest rate risk scenarios from both perspectives
provide the following information:
 Impact on profit and loss. At 31 December 2015, the sensitivity of net interest income, excluding
the trading portfolio and financial activity not denominated in euros, in the most adverse
scenario of a 200 bp parallel shift over a one-year time horizon in a scenario of a stable balance
sheet is -2.02% (-4.69% at 31 December 2014).
 Impact on economic value of equity, understood as the present value of estimated cash flows
from different assets and liabilities. At 31 December 2015, the sensitivity of economic value,
excluding the trading portfolio and financial activity not denominated in euros, to a parallel
upward shift in the yield curve of 200 bp is 8.67% of consolidated equity and 4.70% of
economic value (4.87% and 2.40%, respectively, at 31 December 2014).
The sensitivity analysis was performed using static assumptions. Specifically, this means maintaining
the balance sheet structure and applying new spreads with the Euribor interest rate for the same term
to maturing transactions. Irregular deposits are presumed to be refinanced at a higher cost. A
maximum duration of non-remunerated demand deposits of 4 years is considered, less 10% for those
with nil duration as they are considered volatile.
(3.5) Exposure to other market risks
This risk arises from the possibility of incurring losses on positions in financial assets caused by
changes in market risk factors (interest rates, equity prices, foreign exchange rates or credit spreads).
It stems from Treasury and Capital Markets positions and can be managed by arranging financial
instruments.
The Board of Directors delegates proprietary trading in financial markets to the Financial Department
and its business areas, so they can exploit business opportunities using the most appropriate financial
instruments at any given time, including interest rate, exchange rate and equity derivatives. In general,
the financial instruments traded must be sufficiently liquid and entail hedging instruments.
Each year, the Board of Directors approves the risk limits and internal risk measurement procedures
for each product and market in which the various trading areas operate. The Market and Structural
Risks Area, has the independent function of measuring, monitoring and controlling the Entity's market
risk and the limits issued by the Board of Directors. VaR (value at risk) and sensitivity analysis
approaches are used, specifying different scenarios for each class of risk.
Market risks are monitored daily, with existing risk levels and compliance with the limits established for
each unit reported to the control bodies. In this way, variations in risk levels caused by changes in
prices of financial products and their volatility can be detected.
The reliability of the VaR approach used is confirmed through backtesting, verifying that the VaR
estimates are within the confidence level considered. Backtesting is extended to measure the
effectiveness of the hedging derivatives. There were no changes in the methods or assumptions
underlying the estimates included in the consolidated financial statements in 2015 compared to those
used in last year.
80
The following chart shows the trend in one day VaR with a 99% confidence level for operations in the
markets area in 2015.
The impact on equity and on the accompanying consolidated income statement of reasonable future
changes in the various market risk factors at 31 December 2015 and 2014, calculated for the Group’s
portfolio, is as follows:
Impact on equity (1)
MARKET RISK FACTORS
2015
Interest rate
Impact on profit and loss (1)
2014
2015
2014
(353,813)
(270,722)
(4,954)
104
Equity instruments
-
-
(54)
(295)
Exchange rates
Credit spread
-
-
300
214
(404,531)
(401,164)
(133)
(308)
(1) Amounts shown net of the related tax effect.
The assumptions used in the calculation of sensitivity were as follows:



Interest rates: 100 bp increase
Equities: 20% fall
Exchange rates: 10% fluctuation

Credit spreads: increase consistent with credit rating, as follows:
AAA
5 bp
AA
10 bp
A
20 bp
BBB
50 bp
<BBB
150 bp
81
In addition, at 31 December 2015 there was a structural portfolio consisting of debt securities
designed to provide stability to interest margin. The nominal value of this portfolio at 31 December
2015 is EUR 51,149,480 thousand (EUR 57,732,633 thousand at 31 December 2014). The following
table shows the sensitivity of the portfolio in which the debt securities that comprise it are classified
and the related risks:
31/12/2015
Interest rate
risk
Credit risk
(spreads)
31/12/2014
Total
Held for sale portfolio
Held-to-maturity portfolio
(354)
(404)
(758)
-
(257)
(257)
Total
(354)
(661)
(1,015)
Interest rate
risk
(271)
(271)
Credit risk
(spreads)
(401)
(196)
Total
(672)
(196)
(597)
(868)
As for the sensitivities in the preceding table:
 For debt securities classified as available-for-sale financial assets, the impact would have a
balancing entry in valuation adjustments recognised in consolidated equity.
 For debt securities classified as held-to-maturity investments, although the sensitivity shows the
theoretical impact of credit risk (default) that would require the recognition of higher credit loss
provisions (impairment losses) than presented in the accompanying consolidated annual
financial statements, this is highly unlikely given the portfolio’s composition; i.e. mainly debt
securities issued directly or guaranteed by the government.
At 31 December 2015 and 2014, the Bankia Group's net exposure to currency risk is not significant.
(4) Capital management
(4.1) Capital requirements
On 26 June 2013, Regulation 575/2013 of the European Parliament and of the Council on prudential
requirements for credit institutions and investment firms (the “CRR”), and Directive 2013/36/EU on
access to the activity of credit institutions and the prudential supervision of credit institutions and
investment firms (the “CRD”) were approved, repealing regulations on solvency in force until now.
They came into effect on 1 January 2014 and will be phased in gradually until 1 January 2019.
The CRR and CRD regulate capital requirements in the European Union and include the
recommendations set out in the Basel III capital regulatory framework or agreement, specifically:
-
The CRR, which is directly applicable to Member States, contains prudential requirements for
credit institutions and covers, inter alia, the following:
-
The definition of elements of eligible own funds, establishing requirements for hybrid
instruments to be included and limiting the eligibility of minority interests.
-
The definition of prudential filters and deductions of items in each capital levels. In this
respect, the Regulation includes new deductions compared to Basel II (deferred tax
assets, pension funds) and introduces changes to existing deductions. Nevertheless, it
notes that the Regulation establishes a phase calendar until its final full implementation l
between 5 and 10 years.
-
Establishment of minimum requirements (Pillar I), with three levels of own funds: a
Common Equity Tier I capital ratio of 4.5%, a Tier I capital ratio of 6% and a minimum
requirement total capital ratio of 8%.
-
Requirement of financial institutions to calculate a leverage ratio, defined as Tier 1 capital
divided by total exposure unadjusted for risk. The disclosure requirement will be
applicable from 2015 onwards. The final leverage ratio will be tested during the monitoring
period until 2017 when the Committee will decide on the final definition and calibration.
82
-
The aim and main purpose of the CRD, which must be transposed into national legislation by the
Member States according to their criteria, is to coordinate national legislation regarding the access
to the activity of credit institutions and investment firms and their governance and supervisory
framework. The CRD includes, inter alia, additional capital requirements to those established in
the CRR, which will be phased in gradually until 2019. Failure to comply will imply restrictions on
the discretionary distributions of profit, specifically:
-
A capital conservation buffer and a countercyclical capital buffer, extending the regulatory
framework of Basel III, to mitigate pro-cyclical effects of financial regulation. All financial
institutions must maintain a common capital buffer of 2.5% above Common Equity Tier 1
and an institution-specific countercyclical buffer above Common Equity Tier 1.
-
A systemic risk buffer. For global systemically important institutions and other systemically
important institutions to mitigate systemic or macroprudential risks; i.e. risks of disruptions
in the financial system with the potential to have serious negative consequences for the
financial system and the real economy in a specific Member State.
-
In addition, the CRD, within the oversight responsibilities, states that the Competent
Authority may require credit institutions to maintain a larger amount of own funds than the
minimum requirements set out in the CRR (Pillar II).
In the respect, following the supervisory review and evaluation process, known as "SREP", the
European Central Bank (ECB) set a minimum Common Equity Tier 1 (CET1) phase-in (including Pillar
I, Pillar II and capital conservation buffer) of 10.25%. In addition, the Bank Group has identified by the
Bank of Spain as an other systemically important institution (O-SII). Therefore, a CET1 capital buffer
was established at 0.25% of its total risk exposure on a consolidated basis. However, considering the
phase-in period provided for in Law 10/2014, in 2016, it will only be required to main 25% of this
buffer; i.e. 0.0625%. In addition, the Bank of Spain set the countercyclical buffer applicable to credit
exposures in Spain from 1 January 2016 at 0%.
Regarding Spanish regulations, the new legislation is aimed at transposing European rules at local
level:
 Bank of Spain Circular 2/2014, of 31 January, for credit institutions regarding the various
regulatory options contained in Regulation (EU) no. 575/2013. The purpose is to establish, in
accordance with the powers granted, which options of those contained in the CRR attributed
to national competent authorities will be required of consolidable groups of credit institutions
and credit institutions, whether part of a consolidable group or not, by 1 January 2014 and to
what extent. In this Circular, the Bank of Spain makes use of some of the permanent
regulatory options included in the CRR, to allow the treatment that Spanish law had been
giving to certain questions before the entry into force of the EU regulation to be continued,
justifying this by the business model that Spanish institutions have traditionally followed. This
does not preclude the exercise in future of other options for competent authorities provided for
in the CRR, in many cases mainly when they are specific for direct application of the CRR
without the requirement to be included in a Bank of Spain circular.

Law 10/2014, of 26 June, on the organisation, supervision and solvency of credit
institutions, to continue the transposition of the CRD IV initiated by Royal Decree Law
14/2013, of 29 November, and recast certain national provisions in place at the time regarding
the organisation and discipline of credit institutions. This law introduces, inter alia, an express
obligation for the first time on the part of the Bank of Spain to present an annual Supervisory
Programme setting out the content and how it will perform its supervisory activity, together
with the actions to be taken in accordance with the outcome. This programme must include a
stress test at least once a year.

Bank of Spain Circular 3/2014, of 30 July, for credit institutions and authorised appraisal
firms and services. Among other measures, this Circular amends Circular 2/2014 of 31
January on the exercise of the regulatory options contained in Regulation (EU) No. 575/2013,
on prudential requirements for credit institutions and investment firms in order to unify the
treatment of the deductions of intangible assets during the transitional period set out in
Regulation (EU) No. 575/2013, equating the treatment of goodwill to that of all other intangible
assets.
83
The Group applies the following to its minimum capital requirements:

For credit risk requirements:

For exposures to corporates, advanced internal-rating based (IRB) models approved by
the Bank of Spain.

For exposure to institutions and retail customers:


Both advanced internal-rating based (IRB) models and the standardized approach
depending on the origin of the portfolio.

Advanced internal models for all new business.
The standardized approach for all other exposures.

Requirements linked to the held-for-trading portfolio (foreign currency and market rates) were
calculated using internal models, including additional counterparty credit risk requirements to
OTC derivatives (CVA credit value adjustment).

For the equity portfolio, a simple risk-weighting and PD/LGD approach was applied in
accordance with the various subportfolios.

To calculate the capital requirements for operational risk, the standardized approach was
used.
The following table provides a detail of the Bankia Group’s capital levels at 31 December 2015 and
2014 and its capital requirements calculated in accordance with the CRR and CRDIV:
31/12/2015 (*)
ITEM
31/12/2014
Amount
10,541,314
%
13.0%
Amount
%
10,309,422
11.6%
10,541,314
13.0%
10,309,422
11.6%
1,033,446
1.2%
1,363,221
1.6%
Total capital
11,574,760
14.2%
11,672,643
13.2%
Total Risk Weighted Assets
81,303,106
Common Equity Tier i
Tier I
Tier II
(1)
(2)
(3)
88,564,601
(*) Estimate data.
(1) Includes share capital, reserves, non-controlling interests eligible for inclusion in Common Equity Tier 1 and 40% of the gains on availablefor-sale financial assets from the non-sovereign portfolio recognised as valuation adjustments in equity (0% at 31 December 2014); less
treasury shares, the first-loss tranche of securitizations (at 31 December 2014), 10% of tax credits net of liabilities (0% at 31 December
2014); 40% of the expected loss on the equity portfolio (20% at 31 December 2014), 40% of goodwill and remaining intangible assets (20% at
31 December 2014) and the negative amount of additional Tier 1 Capital.
(2) Includes Common Equity Tier 1 plus additional Tier 1 Capital (in both years the amount is negative and therefore is deducted from Common
Equity Tier 1). Additional Tier 1 capital includes 60% of intangible assets and goodwill not deducted from Common Equity Tier 1 Capital (80%
at 31 December 2014) and 30% of the expected loss on the equity portfolio (40% at 31 December 2014).
(3) Includes mainly subordinated debt, surplus provisions related to exposures calculated using the IRB approach and expected losses therein
or, as appropriate, the limit of 0.6% of RWAs, differentiating between performing and non-performing portfolios, the balance of the general
allowance for portfolios subject to the standardized approach, less 30% of expected losses on the equity portfolio (40% at 31 December
2014).
On 31 December 2015, the Bankia Group showed a surplus of EUR 2,208 million over the regulatory
minimum Common Equity Tier 1 of 10.25%.
Including the amount of net profit for 2015 earmarked for reserves, the Group would have had a
Common Equity Tier I ratio of 13.9%, a Tier I Capital ratio of 13.9%, a Tier II Capital ratio of 1.2% and
a total capital ratio of 15.1%, implying surplus Common Equity Tier 1 capital of EUR 2,956 million
above the aforementioned minimum Common Equity Tier I regulatory requirement.
(4.2) Leverage ratio
The leverage ratio was designed by the Basel Committee on Banking Supervision in its Capital Accord
of December 2010 as a supplementary measure to the capital requirements. Therefore, plans are to
make it a binding Pillar I requirement from 1 January 2018, once the review and calibration stage of the
ratio begun on 1 January 2013 is completed.
The entry into force of the CRR imposed on entities the obligation to calculate and report the ratio to
the Supervisor quarterly from January 2014, and to publicly disclose the ratio from 1 January 2015.
The CRR does not require compliance with a minimum level. There is only an indicative reference level
of 3% of the Tier 1 Capital established by the Basel Committee on Banking Supervision.
84
On 10 October 2014, Commission Delegated Regulation (EU) No. 2015/62 was approved. It became
effective from 1 January 2015 and replaced the CRR with respect to calculating the leverage ratio.
The leverage ratio is calculated as an entity's Tier 1 capital divided by its total exposure. For these
purposes, total exposure is the sum of the exposure values of assets on the balance sheet, derivatives
(with different treatment to the rest of the assets on the balance sheet), part of off-balance sheet items
and counterparty risk in repurchase transactions, securities or commodities lending or borrowing
transactions, long settlement transactions and margin lending transactions.
The Bankia Group's leverage ratio at 31 December 2015 calculated in accordance with Commission
Delegated Regulation (EU) No. 2015/62 is as follows:
ITEM
Tier I Capital
Exposure
Leverage ratio
31/12/2015 (*)
Amount
10,541,314
199,550,638
5.3%
(*) Estimates
At 31 December 2015, the leverage ratio exceeded the 3% minimum defined by the Basel Committee
on Banking Supervision. Including the amount of profit earmarked for reserves at 31 December 2015,
the leverage ratio would be 5.7%.
(4.3) 2015 transparency exercise
As part of its commitment to enhance the quality of reporting in the European banking industry and to
strengthen discipline in the Single Market, in 2015 the EBA conducted a European-wide transparency
exercise in cooperation with the National Competent Authorities and the European Central Bank
(ECB). The exercise covered 105 banking groups from 21 countries across the EU and Norway,
representing approximately 70% of total EU banking assets, excluding Greek institutions.
On 24 November 2015, the EBA published the aggregate outcome and detailed bank-by-bank data at
31 December 2014 and 30 June 2015, including the composition of their capital base and riskweighted assets, and information on asset quality (non-performing exposures), profitability, sovereign
risk, and exposure to credit and market risk.
In the case of the Bankia Group, the Group parent, BFA Group, has been assessed.
At 30 June 2015, the BFA Group presented a phase-in Common Equity Tier 1 ratio and a Tier 1
Capital ratio of 12.9%, and a Total Capital ratio of 14.5%. These ratios were above the average of the
14 Spanish banks involved in the exercise, which showed an average Common Equity Tier 1 ratio of
12.2% and an average Total Capital ratio of 14.1%.
(4.4) Capital management objectives and policies
The Bankia Group’s capital management covers two targets, a regulatory capital target and an
economic capital target.
The regulatory capital target implies amply satisfying the minimum capital requirements in applicable
regulations (Pillar I and Pillar II), including additional capital buffers applicable at all times.
The economic capital target is set internally based on the results of the internal capital adequacy
assessment process (ICAAP), which analyses the Group ’s risk profile and evaluates its internal
control and corporate governance systems.
A main cornerstone of capital management is the (short- and medium-term) Capital Planning process,
designed to assess the sufficiency of capital in relation to the minimum capital requirements for each
level of capital and to the target and optimal structure of capital determined by the governing bodies.
For this, the capital buffer requirements affecting the Group are considered, along with their direct
impact on the Bank's remuneration policy (including the distribution of dividends).
85
The capital planning exercise is based on financial planning (e.g. balance sheet, income statement,
planned corporate transactions and restrictions included in the Group's Recapitalisation Plan
approved by the European Commission and the Spanish Finance Ministry on 28 November 2012) in
the macroeconomic scenarios forecast by the Group and in the impact analysis of potential changes in
capital adequacy regulations. The Group's capital management policies are aligned with the
Corporate Risk Appetite Framework and the Group's Strategic Plan established by Senior
Management.
Differences are established between a baseline or expected scenario and at least one adverse
scenario resulting from the application of a combination of adverse impacts on the expected situation.
This process allows the Group to identify future capital needs early and, where appropriate, assess
the various alternatives to generate capital in order to meet the Group's dual objective, ensuring that
capital levels are adequate at all times to guarantee its survival over time. Capital planning also allows
for the identification of necessary remedial measures geared, inter alia, towards enterprise risk
management, corporate governance, the nature of the business, strategic planning management and
market requirements.
Capital planning is a dynamic and ongoing process. As such, actual ratios often differ from planned
ratios. Any deviations are analysed to determine whether the causes relate to one-off events or if they
are structural. In the latter case, management reviews and adopts the measures required to adjust the
level of capital to the targets set.
(5) Earnings per share and dividend policy
Basic and diluted earnings per share are calculated in accordance with the criteria stipulated in IAS
33:
-
Basic earnings per share are calculated by dividing profit for the year attributable to equity
holders of the parent by the weighted average number of shares outstanding during the
period, excluding the average number of treasury shares held in the period.
-
Diluted earnings per share are determined using a method similar to that used to calculate
basic earnings per share, by adjusting the weighted average number of shares in circulation
and, where applicable, the profit for the year attributable to equity holders of the parent, in
order to take into account the potential dilutive effect of certain financial instruments that could
generate the issue of new Bank shares (share option commitments with employees, warrants
on parent company shares, convertible debt instruments) or for discontinued operations.
The table below shows loss per share for the years ended 31 December 2015 and 2014:
ITEM
Net earnings/loss attributed to the Group (thousands of euros)
31/12/2015
31/12/2014
1,039,963
747,120
-
85,328
Of which:
Earnings/Loss for the year from discontinued operations (net) (thousands of euros)
Earnings/Loss from ordinary business (thousands of euros)
Weighted average number of shares outstanding
Basic earnings/(loss) per share (in euros)
Basic earnings/(loss) per share for discontinued operations (in euros)
Basic earnings/(loss) per share for continuing operations (in euros)
1,039,963
661,792
11,471,703,408
11,480,938,687
0.09
0.07
-
0.01
0.09
0.06
11,471,703,408
11,480,938,687
0.09
0.07
-
0.01
0.09
0.06
Dilutive effect
Entitlement to receive shares
Adjusted average number of shares for the calculation
Diluted earnings/(loss) per share (in euros)
Diluted earnings/(loss) per share for discontinued operations (in euros)
Diluted earnings/(loss) per share for continuing operations (in euros)
-
At 31 December 2015 and 2014, the Group did not have any issues convertible into Bankia shares or
other instruments conferring privileges or rights that make them convertible into shares. Therefore,
there was no dilutive effect.
86
Dividend Policy
The Bankia’s General Shareholders' Meeting held on 22 April 2015 agreed to distribute a gross
dividend of EUR 0.0175 per share out of 2014 profit. As at 31 December 2014, Bankia, S.A.'s share
capital consisted of 11,517,328,544 registered shares, the figure for the distribution of dividends
charged to 2014 profit was EUR 201,553,249.52. Payment to shareholders was made on 7 July 2015
(Note 7).
(6) Remuneration of Board members and senior executives
(6.1) Remuneration of Board members
a) Remuneration accrued at the Bank
Regarding remuneration of directors for the performance of their duties as members of the Board of
Directors, the Bank applies the provisions of Royal Decree-Law 2/2012 of 3 February, on the
reorganisation of the financial sector and Order ECC/1762/2012, of 3 August. In this respect,
remuneration at Bankia, S.A. for all items of members of the various boards of directors other than
executive chairmen, CEOs and executives of the companies is capped at EUR 100,000 per year. The
limit for executive directors is EUR 500,000.
i) Gross remuneration in cash
Salaries
Fixed Compensation
Short-term
variable
remuneration
Long-term
variable
remuneration
Remuneration
for membership
on Board
committees
Termination
benefits
2015
Mr. José Ignacio Goirigolzarri Tellaeche
500
-
-(1)
-
-
-
500
Mr. José Sevilla Álvarez
500
-
-(1)
-
-
-
500
Mr. Antonio Ortega Parra
500
-
-(1)
-
-
-
500
Mr. Joaquín Ayuso García
-
100
-
-
-
-
100
Mr. Francisco Javier Campo García
-
100
-
-
-
-
100
Mrs. Eva Castillo Sanz
-
100
-
-
-
-
100
Mr. Jorge Cosmen Menéndez-Castañedo
-
100
-
-
-
-
100
Mr. José Luis Feito Higueruela
-
100
-
-
-
-
100
Mr. Fernando Fernández Méndez de Andés
-
100
-
-
-
-
100
Mr. Alfredo Lafita Pardo
-
100
-
-
-
-
100
Mr. Álvaro Rengifo Abbad
-
100
-
-
-
-
100
Name
(1) The target variable remuneration for 2015 of the three executive directors was EUR 250 thousand per director. Executive directors waived their
rights to receive any type of variable remuneration in 2015.
ii) Golden parachute clauses in senior executive contracts
Pursuant to additional provision seven of Law 3/2012, Bankia may not pay "compensation for
termination of contract" for employment contracts of directors of Bankia in excess of the lower of the
following amounts:
EUR 1,000,000 or
Two years of the fixed compensation stipulated.
"Compensation for termination of contract" includes any amount of a compensatory nature that the
director may receive as a consequence of termination of contract, whatever the reason, origin or
purpose, so that the sum of all the amounts that may be received may not exceed the established
limits.
The contracts of three executive directors contain a termination benefit of one year of fixed
remuneration if the Company decides to terminate their employment unilaterally or in the event of a
change of control of the Company. The contracts also contain a post-contractual non-compete clause
for the one year of fixed remuneration. Pursuant to prevailing legislation, Bankia has amended these
contracts, establishing that any compensation and/or amounts received by these executive directors
must comply with Royal Decree-Law 2/2012, Law 3/2012 and Law 10/2014
iii) Share-based payment schemes.
No shares have delivered in 2015 as no amounts of variable compensation has paid.
87
iv) Long-term saving schemes
Name
Contribution in the year 2015 by the entity
-
-
-
-
-
-
-
-
-
-
-
b) Remuneration accrued for membership on the Boards of other Group companies or
investees
On 7 June 2012, the Company reported, in a material disclosure, a review of its policy for
remunerating directors in Group companies and investees. In this filing, it stated that the Bank's Board
of Directors had decided that directors representing it in investees would receive no remuneration and
that the per diems to which they are entitled would be paid by the Group.
Not applicable.
ii) Share-based payment schemes
Not applicable.
iii) Long-term saving systems
Not applicable.
iv) Other benefits
Not applicable.
c) Remuneration summary:
Name
Total remuneration in the entity
Total remuneration in the Group
Total 2015
500
-
500
500
-
500
500
-
500
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
88
(6.2) Remuneration of the Bank's senior executives (Management Committee)
a) Remuneration accrued at the Bank
For the purposes of these consolidated financial statements, the members of the Management
Committee, without taking into consideration the executive directors, were considered as senior
executives. A total of four people, Miguel Crespo Rodríguez, Amalia Blanco Lucas, Fernando Sobrini
Aburto and Gonzalo Alcubilla Povedano, were classified for these purposes as key personnel for the
Bank.
Regarding remuneration of senior executives, the Entity applies the provisions of Royal Decree-Law
2/2012, of 3 February, on urgent measures to reform the labour market, Ministry of Economy Order
ECO/1762/2012, of 3 August and Law 10/2014, of 26 June, on the organisation, supervision and
solvency of credit institutions.
The following table shows the remuneration received by the senior executives:
Senior executives
Short-term
remuneration
Post-employment
benefits
2,250
99
Termination
benefits
Total
-
2,349
ii) Golden parachute clauses in senior executive contracts
Pursuant to additional provision seven of Law 3/2012, Bankia may not pay "compensation for
termination of contract" for employment contracts of senior executives of Bankia in excess of the lower
of the following amounts:
EUR 1,000,000 or
Two years of the fixed compensation stipulated.
"Compensation for termination of contract" includes any amount of a compensatory nature that the
director may receive as a consequence of termination of contract, whatever the reason, origin or
purpose, so that the sum of all the amounts that may be received may not exceed the established
limits.
The contracts of four senior executives included clauses that set compensation for all items if they are
dismissed for legal reasons, except for disciplinary reasons considered legally valid, equivalent to two
years' fixed compensation. Pursuant to prevailing legislation, Bankia has amended these contracts,
establishing that any compensation and/or amounts received by senior executives must comply with
Royal Decree-Law 2/2012, Law 3/2012 and Law 10/2014.
iii) Share-based payment schemes
No shares were delivered as no amounts of variable compensation were paid in 2015.
(6.3) Situation of conflict of interest of Bank directors’ holdings and business activities
In accordance with the disclosure requirements under Section 229 of Royal Legislative Decree
1/2010, of 2 July, enacting the Consolidated Text of the Spanish Enterprises Act, it is hereby stated
that at 31 December 2015, directors are not in any of the situations constituting a conflict of interest
set out said article.
According to the Regulations of the Board of Directors, directors must notify the Board of Directors of
any direct or indirect conflict which they themselves or persons related to them may have with the
interests of the Company. Moreover, directors must refrain from deliberating or voting on resolutions
or decisions in which they, or persons related to them, have a direct or indirect conflict of interest.
89
In this respect, in accordance with Section 228.c) of Royal Legislative Decree 1/2010, of 2 July,
enacting the Consolidated Text of the Spanish Corporations Act, it is hereby stated that in 2015:
-
On three occasions, Bank directors (Joaquín Ayuso García and Eva Castillo Sanz) refrained from
participating in the deliberation and voting on matters at the Board of Directors' meetings regarding
transactions that they, or persons related to them, had a direct or indirect conflict of interest with
the Bank.
-
On 10 occasions, Bank directors José Ignacio Goirigolzarri Tellaeche, José Sevilla Álvarez and
Antonio Ortega Parra, as directors of Bankia, S.A. and of BFA Tenedora de Acciones, S.A.U. (the
parent of Bankia, S.A.), refrained from participating in the deliberation and voting on matters at the
Board of Directors' meetings regarding transactions considered related party transactions under
the Framework Agreement between the two entities, and on one occasion, they refrained from
participating in the deliberation and voting on the proposed BFA/Bankia cooperation protocol,
Article (2) CRR), to be signed between the two entities.
(7) Proposed distribution of profit of Bankia, S.A.
The allocation of individual profit of Bankia, S.A. for the financial year ended 31 December 2015
proposed by the Board of Directors of Bankia, S.A., to be submitted for approval at the General
Meeting of Shareholders (with data for 2014 presented for purposes of comparison), is as follows:
2015
2014
To accumulated reserves
637,734
572,020
To dividends (Note 5)
302,330
201,553
Net profit for the year
940,064
773,573
(8) Cash and balances with central banks
The detail of “Cash and balances with central banks” in the accompanying consolidated balance sheet
is as follows:
ITEM
Cash
Balances with the Bank of Spain
Balances with other central banks
Valuation adjustments
Total
31/12/2015
31/12/2014
740,881
737,607
2,238,009
2,181,653
-
7,500
30
22
2,978,920
2,926,782
90
(9) Financial assets and liabilities held for trading
Breakdown
The detail, by counterparty and type of instrument, of these items in the consolidated balance sheet at
31 December 2015 and 2014, showing the carrying amounts at that date, is as follows:
ITEM
31/12/2015
Asset positions
Liability positions
31/12/2014
Asset positions
Liability positions
By counterparty
Credit institutions
8,218,932
11,271,410
15,609,430
17,103,227
Resident public sector
224,375
-
271,931
-
Other resident sectors
3,349,323
1,010,725
2,197,440
873,409
409,454
125,570
527,072
147,184
12,202,084
12,407,705
18,605,873
18,123,820
Debt securities
53,705
-
83,819
-
Other equity instruments
72,486
-
73,796
-
12,075,893
12,394,174
18,448,258
18,066,227
-
13,531
-
57,593
12,202,084
12,407,705
18,605,873
18,123,820
Other non-resident sectors
Total
By type of instrument
Trading derivatives
Short positions
Total
Note 3.1 contains information on the credit risk assumed by the Group in relation to these financial
assets. Notes 3.2 and 3.4 contain, respectively, information relating to the liquidity risk and interest
rate risk assumed by the Group in relation to the financial assets included in this category.
Note 27 contains certain information on the fair value of these financial assets, while Note 3.1.5
discloses certain information on the risk concentration of, inter alia, certain assets included in this
category of financial instruments.
Financial assets held for trading. Debt securities
The breakdown of the balances under this heading in the accompanying consolidated balance sheet
is as follows:
ITEM
Spanish government debt securities
Other Spanish fixed-income securities
Total
31/12/2015
31/12/2014
50,427
77,593
3,278
6,226
53,705
83,819
The average effective annual interest rate of debt securities included in the trading portfolio at 31
December 2015 was 0.94% (2.38% at 31 December 2014).
Financial assets held for trading. Equity instruments
The breakdown of the balances under this heading in the accompanying consolidated balance sheet
is as follows:
ITEM
Shares of resident companies
Shares of non-resident foreign companies
Total
31/12/2015
31/12/2014
72,486
73,366
-
430
72,486
73,796
91
Financial assets held for trading. Trading derivatives
The breakdown, by type of derivative, of the fair value of the Group's trading derivatives at 31
ITEM
31/12/2015
Amount
netted
Fair Value
Carrying
amount
31/12/2014
Amount
netted
Fair Value
Carrying
amount
Debit balances:
50,914
-
50,914
71,893
-
71,893
7,916
-
7,916
17,120
-
17,120
17,837,035
(5,845,322)
11,991,713
21,967,279
(3,634,520)
18,332,759
6,202
-
6,202
8,872
-
8,872
Other
19,148
-
19,148
17,614
-
17,614
Total
17,921,215
(5,845,322)
12,075,893
22,082,778
(3,634,520)
18,448,258
32,367
-
32,367
85,127
-
85,127
Unmatured foreign currency purchases
and sales
Securities derivatives
Interest rate derivatives
Credit derivatives
Credit balances:
Unmatured foreign currency purchases
and sales
23,558
-
23,558
46,752
-
46,752
18,155,787
(5,845,322)
12,310,465
21,543,667
(3,634,520)
17,909,147
7,659
-
7,659
9,825
-
9,825
Other
20,125
-
20,125
15,376
-
15,376
Total
18,239,496
(5,845,322)
12,394,174
21,700,747
(3,634,520)
18,066,227
Credit derivatives
The detail, by maturity, of the notional amount of the trading derivatives at 31 December 2015, is as
follows:
ITEM
0 to 3 years
3 to 10 years
More than 10
years
Total
Unmatured foreign currency purchases and sales
3,240,526
368,216
2,848
3,611,590
4,178,727
1,395,646
2,145,984
7,720,357
100,308,328
149,073,130
90,017,005
339,398,463
-
342,532
-
342,532
Other
1,409,653
-
-
1,409,653
Total
109,137,234
151,179,524
92,165,837
352,482,595
Credit derivatives
The detail, by maturity, of the notional amount of the trading derivatives at 31 December 2014, is as
follows:
ITEM
Unmatured foreign currency purchases and sales
0 to 3 years
2,804,925
3 to 10 years
More than 10
years
215,974
-
Total
3,020,899
6,613,276
2,012,826
700,545
9,326,647
133,126,802
122,770,950
106,462,669
362,360,421
-
322,646
-
322,646
Other
1,363,330
-
-
1,363,330
Total
143,908,333
125,322,396
107,163,214
376,393,943
Credit derivatives
The notional amount of derivatives is the amount that is used as a basis for estimating the results
associated therewith, although, bearing in mind that a highly significant portion of these positions
offset each other, thus hedging the risks assumed, the notional amount cannot be understood to
represent a reasonable measure of the Group’s exposure to the risks associated with these products.
92
(10) Other financial assets at fair value through profit or loss
At 31 December 2015 and 2014, there were no financial assets classified in this category.
(11) Available-for-sale financial assets
Breakdown
The detail of this item, by type of counterparty and type of financial instrument in the accompanying
consolidated balance sheet, is as follows:
ITEM
31/12/2015
31/12/2014
By counterparty
Credit institutions
Non-resident public sector
Other non-resident sectors (*)
Doubtful assets
Impairment losses
Total
4,748,568
6,412,254
20,235,133
20,023,534
4,230,885
2,975,550
777,965
831,209
1,097,908
4,539,365
4,638
1,065
(6,206)
(11,254)
31,088,891
34,771,723
31,088,891
34,771,723
20,235,133
20,023,534
Debt securities
Treasury bills
37,549
20,228
19,187,387
18,889,921
1,010,197
1,113,385
Foreign government debt securities
4,230,885
2,975,550
Issued by financial institutions
4,748,568
6,412,254
Other fixed-income securities (*)
1,880,511
5,371,639
(6,206)
(11,254)
31,088,891
34,771,723
Government bonds and obligations
Regional administrations
Impairment losses
Total
(*) In 2014 includes, inter alia, securities issued by the ESM (see Note 1.2).
Note 25 provides details of the gains and losses on these financial instruments recognised under
“Valuation adjustments – Available-for-sale financial assets” in the accompanying consolidated
balance sheet.
The average effective annual interest rate of debt securities included in the available-for-sale financial
assets portfolio at 31 December 2015 was 2.16% (2.34% at 31 December 2014).
93
Past-due and/or impaired assets
At 31 December 2015 and 2014, no asset recognised under "Available-for-sale financial assets" was
past-due but not impaired.
The detail of those assets recognised under "Available-for-sale financial assets – Debt securities", that
were considered to be impaired at 31 December 2015 and 2014, is as follows:
Impaired assets
ITEM
By counterparty
31/12/2015
Credit institutions
31/12/2014
200
Total
943
1
1
4,437
4,638
121
1,065
Changes for the year in impairment losses
A summary of the changes in relation to impairment losses and fair value adjustments due to credit
risk of debt securities included in this portfolio for the year ended 31 December 2015 and 2014 are as
follows:
31 December 2015
ITEM
Balances at 31 December 2014
Impairment losses for the year charged to income
Available credit loss allowance
Net provision/(release) charged/(credited) to income statement
(Note 45)
Amount used for depreciated assets
Other changes
Of which:
Type of counterparty:
Entities resident in Spain
Entities resident abroad
Individually
assessed
1,064
3,581
(8)
Collectively
assessed
10,190
122
(8,731)
11,254
3,703
(8,739)
3,573
(8,609)
(5,036)
4,637
(11)
(1)
1,569
(11)
(1)
6,206
4,637
4,637
1,569
777
792
6,206
777
5,429
Collectively
assessed
19,381
15,639
(23,582)
20,744
15,667
(23,909)
(7,943)
(8,242)
Total
31 December 2014
ITEM
(Note 45)
Amount used for depreciated assets
Other changes
Of which:
Individually
assessed
1,363
28
(327)
(299)
Total
1,064
(271)
(977)
10,190
(271)
(977)
11,254
1,064
1,064
10,190
8,090
2,100
11,254
8,090
3,164
In addition, in 2015, the Group recognised EUR 1,102 thousand in the consolidated income statement
for impairment losses on equity instruments recognised under “Non-current assets held for sale" (EUR
1,381 thousand at 31 December 2014).
94
(12) Loans and receivables
Breakdown
The detail, by type of financial instrument, of “Loans and receivables” on the asset side of the
consolidated balance sheet is as follows:
ITEM
31/12/2015
31/12/2014
Debt securities
Subtotal
Impairment losses
Other valuation adjustments
Total
6,441,346
117,986,767
703,655
10,973,146
121,781,550
1,499,310
125,131,768
134,254,006
(7,407,972)
52,016
(9,086,839)
60,056
117,775,812
125,227,223
Loans and receivables. Loans and advances to credit institutions
The detail, by transaction counterparty type, of this caption on the consolidated balance sheet is as
follows:
ITEM
31/12/2015
31/12/2014
By counterparty
Reciprocal accounts
3,999
191,723
168,865
93,533
Reverse repurchase agreements
1,484,508
5,483,019
Other financial assets
4,783,973
5,194,862
1
10,009
6,441,346
10,973,146
(27)
(8,174)
2,117
2,490
6,443,436
10,967,462
Time deposits
Doubtful assets
Subtotal
Impairment losses
Total
The average effective annual interest rate of financial instruments included under this heading at 31
95
Loans and receivables. Loans and advances to customers
The detail, by loan type, status and counterparty, of this caption on the accompanying consolidated
balance sheet is as follows:
ITEM
By loan type and status
31/12/2015
31/12/2014
3,774,650
71,324,051
1,096,072
25,406,594
2,090,773
2,042,771
12,251,856
2,370,303
75,529,963
27,338
25,420,558
2,268,697
468,574
15,696,117
Subtotal
117,986,767
121,781,550
Impairment losses
Total
(7,407,399)
(9,457)
110,569,911
(9,077,359)
(12,948)
112,691,243
5,825,510
30,242
5,877,178
12,252
106,028,783
4,059,461
2,042,771
(7,407,399)
(9,457)
111,235,619
4,187,927
468,574
(9,077,359)
(12,948)
110,569,911
112,691,243
Commercial credit
Secured loans
Reverse repurchase agreements
Other term loans
Receivable on demand and other
Other financial assets (1)
Doubtful assets
By counterparty
Other financial assets (1)
Impairment losses
Total
(1) In 2015, includes EUR 1,104 million related to amounts to be reimbursed by BFA due to its assumption of 60% of the estimated
contingencies arising from Bankia's IPO under the terms of the agreement between BFA and Bankia (see Note 22).
The carrying amount recorded in the foregoing table, disregarding the portion relating to “Other
valuation adjustments”, represents the Group's maximum level of credit risk exposure in relation to the
financial instruments included therein.
The average effective annual interest rate of financial instruments included under this heading at 31
“Loans and receivables - Loans and advances to customers” in the accompanying consolidated
balance sheet includes certain loans with mortgage collateral which, as indicated in Appendix VIII and
under the Mortgage Market Law are considered eligible to guarantee the issue of long-term mortgagebacked securities. This item also includes certain securitised loans that have not been derecognised
from the consolidated balance sheet (see Note 2.2.2). The amounts shown in the accompanying
consolidated balance sheet related to securitised loans are:
Securitised loans
Securitised mortgage-backed assets
31/12/2015
14,013,597
31/12/2014
15,567,412
Of which:
Doubtful assets
Other securitised assets
Total securitised assets (Note 29.1.1)
2,642
3,995
963,258
1,421,612
142,456
1,990,350
14,156,053
17,557,762
Of which:
Liabilities associated with assets kept on the balance sheet (*)
4,128,670
4,733,359
(*) Recognised under "Financial liabilities at amortised cost - Marketable debt securities" in the accompanying consolidated
balance sheet.
96
Other securitised loans were derecognised from the accompanying consolidated balance sheet as the
Group did not retain substantially either the risks or rewards, as follows:
Securitised loans
Securitised mortgage-backed assets
Total securitised assets (Note 29.1.1)
31/12/2015
650,326
650,326
31/12/2014
806,567
1
806,568
As indicated in Note 1.15, in 2012 assets classified under this consolidated balance sheet heading
were transferred to the SAREB. In 2013 and 2015, an adjustment was made to the deed of transfer of
assets.
Loans and receivables. Loans and advances to credit institutions and loans and advances to
customers. Past-due and impaired assets (doubtful)
Following is a detail of assets classified as "Loans and receivables - Loans and advances to credit
institutions" and "Loans and receivables - Loans and advances to customers", considered to be
impaired at 31 December 2015 and 2014, and of the assets which, although not considered to be
impaired, include any past-due amounts as at those dates, by counterparty.
Impaired assets at 31 December 2015 and 2014
The table below shows the classification of the Bankia Group’s doubtful assets related to “Loans and
advances to customers” and “Loans and advances to credit institutions” at 31 December 2015 and
2014, by counterparty, age of the oldest past-due amount of each operation or consideration as
impaired, and the type of guarantee or collateral:
ITEM
31/12/2015
31/12/2014
By counterparty
Credit institutions
-
10,002
60,303
60,161
11,152,711
14,644,704
932,242
918,579
12,145,256
15,633,446
6,046,048
7,584,169
Between 6 and 9 months
515,711
752,863
9 to 12 months
430,155
614,216
5,153,342
6,682,198
12,145,256
15,633,446
7,567,411
10,888,971
102,467
164,295
4,475,378
4,580,180
12,145,256
15,633,446
Public sector
Total
By age
Up to 6 months
More than 12 months
Total
By type of collateral
Operation with full mortgage collateral
Operation with other collateral
Operation without collateral
Total
The decrease in impaired assets in 2015 was the result of strong efforts in monitoring and recovery
management, and in the selection and sale of portfolios of doubtful assets begun in 2013, with 7 sales
of portfolios of doubtful assets resulting in a reduction of the doubtful balance of EUR 1,885 million
(EUR 1,486 million in 2014)
97
The following table provides a breakdown of doubtful assets with collateral included in this category by
the percentage of risk in relation to the value of the collateral (“loan to value”), as the key measure for
the collateral in relation to the risks to which it is exposed:
ITEM
31/12/2015
31/12/2014
Lower than or equal to 40%
2,755,427
3,311,004
Greater than 40% and lower than or equal to 60%
2,859,458
4,394,316
841,358
1,589,201
1,213,635
1,758,745
7,669,878
11,053,266
Greater than 80%
Total
Assets including past-due amounts not considered to be impaired at 31 December 2015 and
2014
The table below shows the classification of assets past-due but not impaired related to “Loans and
advances to customers” and “Loans and advances to credit institutions” at 31 December 2015 and
2014, by counterparty, age past-due and type of guarantee or collateral:
ITEM
By counterparty
Credit institutions
Public sector
31/12/2015
31/12/2014
10
29,981
394,382
31,618
307
489,077
164,788
31,354
Total
455,991
685,526
By age
Less than one month
Between 1 and 3 months
More than 3 months (*)
343,026
62,194
50,771
585,497
35,774
64,255
Total
455,991
685,526
By type of collateral
Operation with full mortgage collateral
Operation with other collateral
Operation without collateral
35,140
6,026
414,825
52,607
5,838
627,081
Total
455,991
685,526
(*)Relates mainly to risks with the public sector
The following table provides a breakdown of assets with collateral included in this category by the
percentage of risk in relation to the value of the collateral (“loan to value”), as the key measure for the
collateral in relation to the risks to which it is exposed:
Lower than or equal to 40%
31/12/2015
31/12/2014
11,920
13,960
9,499
15,578
10,663
18,039
9,084
10,868
41,166
58,445
Greater than 80%
Total
98
The table below shows the changes for the years ended 31 December 2015 and 2014 in provisions
for impairment losses and fair value adjustments due to credit risk in relation to assets in "Loans and
advances to credit institutions" and "Loans and advances to customers" under "Loans and
receivables" on the accompanying consolidated balance sheet:
31 December 2015
ITEM
General
allowance
Country risk
allowance
144,351
Specific
allowance
Total
18,527
8,922,655
9,085,533
Individually assessed
-
-
5,486,008
5,486,008
Collectively assessed
144,351
18,527
3,436,647
3,599,525
1
22,037
2,777,097
2,799,135
(87,450)
(19,133)
(2,006,694)
(2,113,277)
(87,449)
2,904
770,403
685,858
-
-
(2,343,472)
(2,343,472)
(573)
-
(65,931)
(66,504)
-
(38)
46,049
46,011
56,329
21,393
7,329,704
7,407,426
Amounts used for depreciated assets
Other changes
Exchange differences
-
-
4,585,535
4,585,535
56,329
21,393
2,744,169
2,821,891
56,329
21,393
7,329,704
7,407,426
Of which:
-
54,112
-
6,560,437
6,614,549
2,217
21,393
769,267
792,877
31 December 2014
General
allowance
Country risk
allowance
Specific
allowance
Total
ITEM
144,260
23,984
10,539,804
10,708,048
-
-
6,043,174
6,043,174
144,260
23,984
4,496,630
4,664,874
1,806
16,264
3,626,213
3,644,283
(5,161)
(23,767)
(2,460,199)
(2,489,127)
(3,355)
(7,503)
1,166,014
1,155,156
Amounts used for depreciated assets
Other changes
-
-
(2,873,693)
(2,873,693)
3,446
-
61,478
64,924
-
2,046
29,052
31,098
144,351
18,527
8,922,655
9,085,533
-
-
5,486,008
5,486,008
144,351
18,527
3,436,647
3,599,525
144,351
18,527
8,922,655
9,085,533
137,099
-
8,234,503
8,371,602
7,252
18,527
688,152
713,931
Of which:
99
The various items recognised in 2015 and 2014 under “Impairment losses on financial assets (net) Loans and receivables” on the income statements for those years are summarised below:
ITEM
31/12/2015
31/12/2014
Net charge for the year
685,098
1,149,288
Written-off assets recovered
(58,720)
(176,110)
626,378
973,178
Impairment losses on financial assets (net) - Loans and receivables (Note 45)
Loans and receivables, Debt securities
The detail, by counterparty, of this consolidated balance sheet heading :
ITEM
By counterparty
Doubtful assets
Total
Impairment losses and fair value adjustments due to credit risk
Total
31/12/2015
31/12/2014
591,718
111,569
368
1,363,032
133,823
2,455
703,655
1,499,310
(546)
59,356
762,465
(1,306)
70,514
1,568,518
The average effective annual interest rate of debt securities included in loans and receivables portfolio
at 31 December 2015 was 3.29 % (3.27% at 31 December 2014).
ITEM
31/12/2015
31/12/2014
By counterparty
368
2,455
Total
368
2,455
At 31 December 2015 and 2014, no assets recognised under "Loans and receivables – Debt
securities" were past-due.
100
A summary of the changes in impairment losses, due to credit risk, on debt securities recognised
under "Loans and receivables" for the years ended 31 December 2015 and 2014 are as follows:
31 December 2015
ITEM
Individually
assessed
Collectively
assessed
-
1,306
-
1,828
-
(2,588)
-
(760)
-
546
546
-
-
117
Of which:
429
31 December 2014
ITEM
Individually
assessed
Collectively
assessed
-
8,092
-
2,128
-
(7,996)
-
(5,868)
Amounts used for depreciated assets and other net movements
-
(918)
-
1,306
-
1,306
-
938
-
368
Of which:
101
(13) Held-to-maturity investments
Breakdown
The breakdown of this heading in the accompanying consolidated balance sheet by type of
counterparty and financial instrument is as follows:
ITEM
31/12/2015
31/12/2014
By counterparty
Credit institutions
6,742
564,635
4,276,655
4,710,535
1,280,813
2,288,572
Other resident sectors (*)
17,789,681
18,561,761
372,429
602,793
Doubtful assets
2,400
2,196
Impairment loss
(27,821)
(69,162)
23,700,899
26,661,330
4,276,655
4,710,535
1,280,813
2,288,572
-
2,170
18,171,252
19,729,215
(27,821)
23,700,899
(69,162)
26,661,330
Total
Other fixed-income securities
Bonds and obligations (*)
Impairment loss
Total
(*) Includes debt securities received as consideration for assets transferred to the SAREB recognised at nominal
amount and backed by the Spanish government (see Note 1.15)
The average effective annual interest rate of debt securities included in the held-to-maturity
investments portfolio at 31 December 2015 was 1.70% (2.79% at 31 December 2014).
102
A summary of the changes in relation to impairment losses and fair value adjustments due to credit
risk in this portfolio for the years ended 31 December 2015 and 2014 is as follows:
31 December 2015
ITEM
Net provision/(release) charged/(credited) to income statement (Note 45)
Individually
assessed
-
Of which:
Collectively
assessed
69,162
-
2,530
-
(42,229)
-
(39,699)
-
(1,642)
-
27,821
-
27,821
-
2,029
-
25,792
31 December 2014
ITEM
Net provision/(release) charged/(credited) to income statement (Note 45)
Of which:
Individually
assessed
Collectively
assessed
-
85,941
2,242
(18,624)
(16,382)
(397)
69,162
-
69,162
1,973
67,189
Held-to-maturity investments. Past-due and impaired assets
A breakdown of assets recognised under "Held-to-maturity investments" that were considered to be
impaired at 31 December 2015 and 2014 are as shown below.
The Bank did not have any assets classified as held to maturity at 31 December 2015 and 2014 with
any past-due amount,
ITEM
31/12/2015
31/12/2014
2,400
2,196
2,400
2,196
By counterparty
Total
103
(14) Hedging derivatives (debtors and creditors)
At 31 December 2015 and 2014, the Group had entered into financial derivative hedging
arrangements with counterparties of recognised creditworthiness as the basis of an improved
management of the risks inherent to its business (see Note 3).
The Group enters into hedges on a transaction-by-transaction basis by assessing the hedging
instrument and the hedged item on an individual basis and continually monitoring the effectiveness of
each hedge, to ensure that changes in the value of the hedging instrument and the hedged item offset
each other.
Note 2.3 details the Group's main hedged positions and the financial hedging instruments.
Following is a breakdown, by type of derivative and for each type of hedge, of the fair value of
derivatives designated as hedging instruments at 31 December 2015 and 2014:
31/12/2015
ITEMS
31/12/2014
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Netting
Netting
Operations of fair value hedges
4,514,386
(445,471)
4,068,915
5,514,304
-
Operations of cash flow hedges
4,558
-
4,558
24,411
-
24,411
Total
4,518,944
(445,471)
4,073,473
5,538,715
-
5,538,715
Credit Balance:
Operations of fair value hedges
1,406,546
(445,471)
961,075
2,402,246
-
2,402,246
16,613
-
16,613
57,786
-
57,786
-
-
-
29,898
-
29,898
1,423,159
(445,471)
977,688
2,489,930
-
2,489,930
Debit Balance:
Operations of Cash flow hedges
Operations of hedges of a net investments in
foreign operations
Total
5,514,304
Operations of fair value hedges:
31/12/2015
ITEMS
Fair Value
31/12/2014
Netting
Carrying Amount
Fair Value
Netting Carrying Amount
Debit Balance:
4,514,386
(445,471)
4,068,915
3,671
5,510,633
-
3,671
5,510,633
Total
4,514,386
(445,471)
4,068,915
5,514,304
-
5,514,304
1,404,498
(445,471)
959,027
2,398,669
-
2,398,669
2,048
-
2,048
3,577
-
3,577
1,406,546
(445,471)
961,075
2,402,246
-
2,402,246
Credit Balance:
Rest
Total
Operations of cash flow hedges:
31/12/2015
ITEMS
Fair Value
31/12/2014
Netting
Carrying Amount
Fair Value
Netting Carrying Amount
Debit Balance:
4,558
-
4,558
24,411
-
24,411
Total
4,558
-
4,558
24,411
-
24,411
7,729
-
7,729
48,896
-
48,896
Rest
8,884
-
8,884
8,890
-
8,890
Total
16,613
-
16,613
57,786
-
57,786
Credit Balance:
104
The cash flow hedges relate entirely to micro-hedges. Therefore, the hedged item and hedging
derivative are perfectly identified. As a result, in 2015 and 2014, there was no ineffectiveness that,
according to applicable regulations, required recognition on the Group's income statement for that
year.
The detail of the periods after 31 December 2015 and 2014 at which it is estimated that the amounts
recognised in consolidated equity under "Valuation adjustments – Cash flow hedges" at that date will
be recognised in future consolidated income statements is as follows.
Remaining term to maturity as of 31 December 2015
Less than 1 year
Losses (*)
1 to 3 years
More than 5
years
3 to 5 years
TOTAL
-
(99)
(5)
(10,672)
(10,776)
3,841
169
8,327
465
12,802
Total
3,841
(*)Taking into consideration the related tax effect
70
8,322
(10,207)
2,026
Gains (*)
Losses (*)
Less than 1 year
1 to 3 years
More than 5
years
3 to 5 years
TOTAL
(8,876)
-
(545)
(10,943)
(20,364)
-
15
335
10,611
10,961
Total
(8,876)
(*)Taking into consideration the related tax effect
15
(210)
(332)
(9,403)
Gains (*)
The table below presents an estimate at 31 December 2015 of future receipts and payments hedged
with cash flow hedges, classified by the time as from that date that the hedges are expected to take
effect in the form of receipt or payment (figures at 31 December 2014 presented for comparison
purposes):
Receipts
Payments
Total
Less than 1 year
1 to 3 years
3 to 5 years
More than 5 years
20,348
152,939
23,299
179,319
(20,873)
(141,939)
(23,538)
(179,495)
(525)
11,000
(239)
(176)
Receipts
Payments
Total
Less than 1 year
1 to 3 years
3 to 5 years
More than 5 years
503,714
30,148
144,671
473,676
(526,837)
(32,205)
(149,057)
(478,119)
(23,123)
(2,057)
(4,386)
(4,443)
Regarding hedges of net investments in foreign operations, in 2014, there was no ineffectiveness that,
according to applicable regulations, required recognition on the Group's income statement for that
year.
105
The detail, by maturity, of the notional amount of the derivatives classified as hedging derivatives at 31
December 2015 is as follows:
ITEM
0 to 3 years
3 to 10 years
18,350,904
19,836,534
4,721,309
42,908,747
157,000
-
-
157,000
18,507,904
19,836,534
4,721,309
43,065,747
Total
More than 10 years
Total
The detail, by maturity, of the notional amount of the derivatives classified as hedging derivatives at 31
December 2014 is as follows:
ITEM
0 to 3 years
3 to 10 years
More than 10 years
Total
7,386
-
-
7,386
21,719,018
18,094,416
8,782,676
48,596,110
Other
157,000
-
-
157,000
Total
21,883,404
18,094,416
8,782,676
48,760,496
(15) Non-current assets held for sale and Liabilities associated with non-current assets held for
sale
Breakdown
The detail of “Non-current assets held for sale” on the accompanying consolidated balance sheet at
31 December 2015
ITEM
Tangible asset for own use
Foreclosed tangible asset in payment of debts
Investments
306,960
(127,841)
Carrying
Amount
179,119
3,637,115
(1,124,473)
2,512,642
Cost
Impairment losses
612,093
(430,182)
181,911
35,006
-
35,006
Assets included in disposal groups
53,164
-
53,164
4,644,338
(1,682,496)
2,961,842
Liabilities included in disposal groups
1,741
-
1,741
Total liabilities at 31 December 2015
1,741
-
1,741
Total assets at 31 December 2015
106
31 December 2014
ITEM
Tangible asset for own use
Foreclosed tangible asset in payment of debts
Investments
Assets included in disposal groups
Total assets at 31 December 2014
Liabilities included in disposal groups
Total liabilities at 31 December 2014
Cost
413,180
3,943,569
780,459
59,611
4,265,605
9,462,424
3,604,145
3,604,145
Impairment losses
(136,748)
(1,203,489)
(559,044)
(1,899,281)
-
Carrying
Amount
276,432
2,740,080
221,415
59,611
4,265,605
7,563,143
3,604,145
3,604,145
Non-current assets held for sale. Tangible asset for own use
At 31 December 2015, this item basically comprises certain buildings for the Group's own use which
have ceased to form part of its branch network and which, pursuant to current regulations, satisfy the
requirements for recognition as non-current assets held for sale given the existence of a detailed plan
for their immediate sale.
As described in Note 2.20, the Group recognises these assets at the lower of their carrying amount
and fair value less cost to sell.
As a result of the sale of buildings by the Bank in previous periods, at 31 December 2015 it was a
party to operating lease contracts with the purchasers of the buildings (investors). These contracts
have mandatory durations of 25 years, extendable for additional periods of 5 years. The present value
of the minimum future payments to be made by the Bank throughout the mandatory duration is EUR
20,510 thousand within one year, EUR 70,374 thousand within two to five years, and EUR 150,561
thousand more than five years.
Other significant features common to all the operating leases referred to above include the following:
 Rent was agreed on an arm's-length basis (similar to comparable transactions).
 The leases include update clauses for rents. Therefore, in accordance with IAS 39, it was
concluded that an embedded derivative separable from the host contract did not exist, as the
economic characteristics and risks of the theoretical embedded derivative are closely related to
the economic characteristics and risks of the host contract.
 For the purposes of analysing the accounting treatment of these transactions, it was at no point
assumed that the transfer of ownership of the properties to the Bank was reasonably assured.
 Each lease carries an option whereby the Bank may, on expiry of each lease, purchase the
property at fair value as determined by independent appraisers at that expiry date.
The Group has given no undertaking to assure or redress the purchasers for any gain or loss arising
from fluctuations in the residual fair value of the properties.
107
Non-current assets held for sale. Foreclosed tangible asset in payment of debts
Breakdown
The breakdown of assets foreclosed in settlement of debts recognised on the Group’s accompanying
ITEM
31/12/2015
31/12/2014
Property assets
Finished dwellings - borrower's primary residence
Managed rural property and offices, commercial and industrial premises
Building plots, plots and other property assets
Total
1,994,375
2,310,821
431,331
354,260
86,936
74,999
2,512,642
2,740,080
Significant changes
The changes recognised in foreclosed assets in the years ended 31 December 2015 and 2014 are as
follows:
ITEM
2015
2014
2,740,080
2,519,521
Additions during the year
553,023
772,598
Disposals during the year
(512,233)
(350,683)
Net impairment losses (Note 48)
(149,211)
(194,658)
Other changes
(119,017)
(6,698)
2,512,642
2,740,080
Sales of foreclosed assets are made on an arm's length basis. In 2015, financing was granted for an
amount of approximately EUR 277 million (EUR 127 million in 2014). On average, 84.81% of the sales
amount was financed (86.21% in 2014).
Proceeds on disposals of foreclosed assets, by type, in the years ended 31 December 2015 and 2014
were as follows:
31 December 2015
ITEM
Total
(*) Excludes fees paid to intermediaries.
Disposal of
assets at
carrying amount
462,088
38,810
11,335
512,233
Gain/(loss)
recognised on
disposal (*)
(70,560)
11,544
4,347
(54,669)
108
31 December 2014
ITEM
Total
(*) Excludes fees paid to intermediaries.
Disposal of
assets at
carrying amount
336,610
11,776
2,297
350,683
Gain/(loss)
recognised on
disposal (*)
(14,211)
6,132
6,320
(1,759)
Appendix IX provides further details on the Group's property assets at 31 December 2015 and 2014,
including the foreclosed assets referred to in the preceding paragraph.
The table below shows the net value of the foreclosed assets at 31 December 2015 and 2014, by their
estimated ages as of the date of acquisition:
Age of foreclosed assets
Less than 12 months
12 months to 24 months
More than 24 months
TOTAL
31/12/2015
424,333
31/12/2014
751,626
537,042
558,037
1,551,267
1,430,417
2,512,642
2,740,080
Non-current assets held for sale. Investments and other equity instruments
This includes balances related to investments in jointly-controlled entities and associates, and other
investments initially recognised under "Available-for-sale financial assets" that the Group reclassified,
pursuant to prevailing legislation, to "Non-current assets held for sale" (see Note 2.1). The following
table shows a breakdown of the balance by item under which the investments were recognised before
their classification under "Non-current assets held for sale":
ITEM
Investments - Jointly-controlled entities
Investments – associates
TOTAL
31/12/2015
31/12/2014
35,006
59,611
134,245
170,712
47,666
50,703
216,917
281,026
109
Changes in the impairment of investments in companies, jointly-controlled entities and associates
were as follows, in the years ended 31 December 2015 and 2014:
31 December 2015
Jointly-controlled
entities
(362,385)
117,416
-
ITEM
Provision charged to income
Recovery of provisions with a credit to income
Net provision (Note 48)
Amounts used due to losses on sales
Other movements
Associates
(196,659)
23,083
(11,637)
TOTAL
(559,044)
140,499
(11,637)
(185,213)
(430,182)
(244,969)
Total
31 December 2014
Other movements
Jointlycontrolle
dentities
(377,371)
14,986
-
Associates
(358,109)
(47,431)
(47,431)
236,934
(28,053)
TOTAL
(735,480)
(47,431)
(47,431)
251,920
(28,053)
Total
(362,385)
(196,659)
(559,044)
ITEM
Provision charged to income
Recovery of provisions with a credit to income
Net provision (Note 48)
Amounts used due to losses on sales
Disposal groups
Disposal groups primarily comprises the amount of financial assets and financial liabilities of certain
subsidiaries that following approval of the Group's Restructuring Plan met the requirements for
classification as "Non-current assets held for sale" and, therefore, were fully consolidated, and all their
assets and liabilities presented and measured in accordance with the criteria established for disposal
groups (see Note 2.1).
The following table shows a breakdown of the assets and liabilities corresponding to disposal groups
by item under which they were recognised before their classification under "Non-current assets held
for sale" at 31 December 2015 and 2014:
31/12/2015
31/12/2014
Cash and balances with central
banks
1
Financial assets held for trading
-
1,409
-
869,995
52,421
2,810,281
317
204,155
-
43,581
46
64,625
Non-current assets held for sale
Tangible assets
111,847
Intangible assets
-
34,339
Tax assets
-
124,530
379
843
53,164
4,265,605
Other assets
TOTAL ASSETS
31/12/2015
31/12/2014
185
3,590,576
Financial liabilities held for trading
-
1,373
Provisions
-
3,729
Other liabilities
1,556
8,467
TOTAL LIABILITIES
1,741
3,604,145
110
Main transactions
The main acquisitions, increases and decreases in investments in subsidiaries, joint ventures and
associates classified as "Non-current assets held for sale" carried out by the Group in the year ended
31 December 2015 are discussed below.
Disposals of non-strategic assets
The commitments assumed by the Group under the BFA-Bankia Group Restructuring Plan approved
by the Spanish and European authorities in November 2012 included the disposal of assets
considered non-strategic. The most significant transactions were as follows:
-
On 3 June 2015, Corporación Industrial Bankia, S.A.U. (a wholly owned subsidiary of Bankia)
and Inmobiliaria Carso, S.A. de C.V. completed the sale and purchase of Corporación
Industrial Bankia, S.A.U.'s entire shareholding in Realia Business, S.A. ("Realia"),
representing 24.953% of Realia's capital. The sale was made at a price of EUR 0.58 per
share, for a total of EUR 44.5 million, generating a gross gain of EUR 13.7 million, recognised
under "Gains/(losses) on non-current assets held for sale not classified as discontinued
operations" in the accompanying consolidated income statement. The transfer was carried out
upon completion of all the conditions precedent included in the sale-purchase agreement
signed by Corporación Industrial Bankia, S.A.U. and Inmobiliaria Carso on 4 March 2015.
-
On 16 October 2015, the definitive sale of City National Bank of Florida via the transfer from
investee Bankia Inversiones Financieras, S.A.U of 100% of the shares of CM Florida Holdings
Inc to Banco de Crédito e Inversiones of Chile was signed, after receiving approval from the
US Federal Reserve (the FED) at the agreed price. The sale generated a net gain for the
Bankia Group of EUR 117 million.
-
On 23 October 2015, the Group and Fomento de Construcciones y Contratas, S.A. (FCC)
signed a purchase and sale agreement with the USS, OPTrust and PGGM investment funds
for the sale of 100% of the shares of Globalvia Infraestructuras, S.A., a company in which
Bankia and FCC each own 50%. The sale was the result of the exercise of pre-emptive
acquisition rights by the funds as holders of the EUR 750 million convertible bond. The deal is
subject to a series of conditions precedent set out in the purchase and sale agreement,
including approval by certain administrations which granted administrative concessions held
by Globalvia Infraestructuras, S.A. The price of the transaction is divided into an upfront
payment of EUR 166 million, to be made when the transfer of the shares is completed, and a
deferred payment, to be made in the first half of 2017, which could reach as a high as EUR
254 million depending on the valuation of the company at the time of the bond conversion,
111
(16) Investments
(16.1) Changes in Group composition
The main data on sales of significant stakes in subsidiaries, joint ventures and/or investments in
associates are as follows:
Company name
ALIANCIA INVERSIÓN EN INMUEBLES DOS, S.L.
ALIANCIA ZERO S.L.
APARCAMIENTOS ESPOLÓN, S.A.
ASOCIACIÓN TÉCNICA DE CAJAS DE AHORROS, A.I.E.
AVANZA INVERSIONES EMPRESARIALES, SGECR, S.A.U.
CITY NATIONAL BANK OF FLORIDA / CM FLORIDA HOLDINGS, INC.
CONCESSIA, CARTERA Y GESTIÓN DE INFRAESTRUCTURAS, S.A.
Gain/(loss)
generated
(thousands
of euros)
Category
Effective
transaction
date
% of rights
sold or
derecognised
Global
December
74.25
21,092
Global
August
59.74
16,686
NCAHS-Associate
March
25.00
1,161
NCAHS-Jointly-controlled entity
June
38.00
2,464
Global
December
100.00
1,464
NCAHS-Global
October
100.00
200,909
NCAHS-Associate
March
21.31
1,341
September
50.00
(1,500)
EMERALD PLACE LLC
Global
September
76.70
8,819
HABITAT RESORTS, S.L.U.
Global
November
100.00
(4,322)
INICIATIVAS GESTIOMAT, S.L.
Global
April
57.15
(2,554)
INMOVEMU, S.L.U. / INVERÁVILA S.A.U.
Global
May
100.00
(2,396)
MACLA 2005, S.L.
Global
July
52.73
(3,649)
COSTA VERDE HABITAT, S.L.
METROPOLI BURJASOT, S.L.
NCAHS-Associate
March
50.00
4,949
MONDRASOL 1, S.L.U. - MONDRASOL 15, S.L.U
Global
April
100.00
3,530
PARQUE BIOLÓGICO DE MADRID, S.A.U.
Global
March
100.00
1,179
PROMOCIONES PARCELA H1 DOMINICANA, S.L.
REALIA BUSINESS, S.A.
URBANIZADORA MARINA COPE, S.L.
NCAHS-Associate
March
19.79
2,606
June
24.95
13,684
NCAHS-Associate
December
20.00
6,859
URBAPINAR, S.L., EN LIQUIDACIÓN, UNIPERSONAL
Global
June
100.00
4,752
VOLTPRO I, S.L.U. - VOLTPRO XX, S.L.U.
Global
September
100.00
3,264
(16.2) Investments – Associated
The detail of the investments included in “Invesvments – Associated” in the accompanying
COMPANIES
Aseguradora Valenciana S.A., Seguros y Reaseguros
Laietana Vida Compañía de Seguros de la Caja de Ahorros Laietana, S.A.
Subtotal
Goodwill
Total
31/12/2015
80,439
6,578
140,283
227,300
57,824
285,124
31/12/2014
74,920
15,977
149,271
240,168
57,824
297,992
The goodwill relates to the interest in Aseguradora Valenciana S.A., Seguros y Reaseguros. The
recoverable amount was estimated at the end of the year and did not present any indications of
impairment.
112
(17) Tangible assets
The detail of this item in the accompanying consolidated balance sheet is as follows:
ITEM
For own use
Investment
property
Total
Cost
Balances at 31/12/2013
3,661,225
1,175,253
4,836,478
Additions/disposals (net)
83,288
(30,545)
52,743
Transfers to non-current assets held for sale and other changes(1)
(91,911)
41,422
(50,489)
3,652,602
1,186,130
4,838,732
191,396
(15,426)
175,970
(36,044)
15,262
(20,782)
3,807,954
1,185,966
4,993,920
Accumulated depreciation
(2,311,290)
16,980
6,845
23,825
(87,068)
(12,164)
(99,232)
610
32,545
Depreciation for the year (Note 43)
Depreciation for the year (Note 43)
31,935
(2,349,443)
(39,014) (2,350,304)
(43,723) (2,393,166)
89
1,135
1,224
(83,363)
(11,244)
(94,607)
18,055
84,353
66,298
(2,366,419)
(35,777) (2,402,196)
Impairment losses
(Note 46)
(Note 46)
Total at 31 December 2014
(24,571)
(535,827)
(560,398)
(571)
(3,719)
(4,290)
(815)
(18,271)
(19,086)
(25,957)
(557,817)
(583,774)
66
43,541
43,607
10,329
(3,916)
6,413
(15,562)
(518,192)
(533,754)
1,277,202
584,590
1,861,792
1,425,973
631,997
2,057,970
(1) In the case of assets for own use, relates mainly to the transfer to "Non-current assets held for sale" of properties and
facilities earmarked for disposal.
The depreciation charge for tangible assets in the year ended 31 December 2015 amounted to EUR
94,607 thousand (EUR 99,232 thousand at 31 December 2014), which was recognised under
"Depreciation and amortisation charge" on the accompanying consolidated income statement for the
year (see Note 43).
Impairment losses in the year ended 31 December 2015 stood at EUR 43,607 thousand (EUR 4,290
thousand at 31 December 2014), recognised under "Impairment losses on other assets (net) - Other
assets" on the accompanying consolidated income statement for that period (see Note 46).
113
(17.1) Tangible asset for own use
The detail, by type of asset, of the balance of “Property, plant and equipment for own use” in the
accompanying consolidated balance sheet is as follows:
31 December 2015
ITEM
Cost
Accumulated
depreciation
Impairment
losses
Net balance
Buildings and other structures
Furniture and vehicles
Fixtures
Investment property under construction
1,596,316
163,209
1,113,451
934,978
(414,438)
(147,532)
(921,938)
(882,511)
(15,562)
-
1,166,316
15,677
191,513
52,467
Balance at 31 December 2015
3,807,954
(2,366,419)
(15,562)
1,425,973
31 December 2014
ITEM
Cost
Accumulated
depreciation
Impairment
losses
Net balance
Buildings and other structures
Furniture and vehicles
Fixtures
Investment property under construction
1,547,431
173,338
1,045,516
886,317
(424,775)
(157,394)
(902,013)
(865,261)
(25,957)
-
1,096,699
15,944
143,503
21,056
3,652,602
(2,349,443)
(25,957)
1,277,202
At 31 December 2015 and 2014, there were no items of property, plant and equipment for own use
of significant amounts which were:
-
Temporarily idle;
-
Fully depreciated but still in use;
-
Retired from active use but not classified as non-current assets held for sale.
(17.2) Investment property
"Investment property" includes land, buildings and other structures held either to earn rentals or for
capital appreciation.
At 31 December 2015, the Group did not have any significant contractual obligations in connection
with the future operation of the investment properties included in the balance sheet, and there were no
relevant restrictions thereon, other than those inherent to the current conditions of the property
market.
Net income from the Group's investment property in the year ended 31 December 2015 totalled EUR
9,831 thousand (EUR 31,423 thousand for the year ended 31 December 2014) (see Note 39).
On 3 October 2013, as part of the 2012-2015 Strategic Plan, Bankia reached an agreement to lease
the “Torre Foster” building owned by the Group through its investee Torre Norte Castellana S.A. The
lease agreement is for eight years, extendible for a further seven years on an annual basis.
The lease includes an update clause for the rent. Therefore, in accordance with IAS 39, it was
concluded that an embedded derivative separable from the host contract did not exist, as the
economic characteristics and risks of the theoretical embedded derivative are closely related to the
economic characteristics and risks of the host contract.
The agreement includes an option to purchase the investee in 2016 at a price that will be determined
at the time the shares are sold, in accordance with pre-agreed objective criteria. If the option is
exercised, these criteria must be fixed upon completion of the sale based on specific parameters (i.e.
capitalisation of amounts, net of discounts and similar on the exercise date).
Under applicable legislation, the market value of the leased asset was updated, to EUR 394 million.
This resulted in the partial reversal, with a debit to profit and loss, of the previously recognised
impairment loss of EUR 43 million (see Note 46)
114
The breakdown, by maturity, of the minimum lease payments receivable at 31 December 2015 and
2014 is as follows:
MATURITY
Up to 1 year
1 to 5 years
More than 5 years
Total
2015
2014
16,352
88,259
206,416
311,027
13,056
81,966
229,061
324,083
(18) Intangible assets
(18.1) Goodwill
The breakdown by company of goodwill in the accompanying consolidated balance sheet is as
follows:
COMPANY
31/12/2015
31/12/2014
Bankia Pensiones, S.A. Entidad Gestora de Fondos de Pensiones
98,162
102,162
Total
98,162
102,162
In addition to the goodwill included in the preceding table, the consolidated balance sheet also
includes goodwill in the balance of “Investments - Associates” at 31 December 2015 and 2014 (see
Note 16), which relates in full to Aseguradora Valenciana S.A., de Seguros y Reaseguros.
The movement (gross amount) by company of goodwill in the accompanying consolidated balance
sheet of 2015 and 2014 is as follows:
31/12/2015
31/12/2014
102,162
-
Additions due to business combinations
Provisions charged to the income statement (Note 46)
(4,000)
102,162
-
Accounting balance at the beginning of end year
98,162
102,162
As explained in Note 2.16.1, the cash-generating units to which goodwill has been allocated are
tested for impairment, including the amount of goodwill allocated in their carrying amount. Impairments
tests are carried out at least annually, or whenever there is any indication that an asset may be
impaired.
The goodwill corresponds fully to the stake in Bankia Pensiones, S.A., Entidad Gestora de Fondos de
Pensiones. In the analysis of goodwill carried out for the impairment test, in 2015 an impairment loss
of EUR 4 million (see Note 46) was recognised based on the trend of the business received by the
company at the date of the business combination.
115
(18.2) Other intangible assets
The breakdown of assets under this heading in the accompanying consolidated balance sheet is as
follows:
ITEM
31/12/2015
With indefinite useful life
Other assets
With a finite useful life
Computer software
Other
(Accumulated amortisation)
Total assets less accumulated amortisation
Impairment losses
Total
68
31/12/2014
68
68
104,924
68
94,450
837,451
3,186
(735,713)
788,487
9,188
(703,225)
104,992
94,518
(69)
(98)
104,923
94,420
The changes in this item on the consolidated balance sheet during the financial years ended 31
December 2015 and 2014 were as follows:
ITEM
2015
2014
With indefinite useful life Accounting balance at the beginning of the year
68
68
Closing balance
68
68
Balance at 1 January
94,352
80,563
Additions
65,743
70,350
(52,189)
(57,022)
(3,056)
485
5
(24)
104,855
94,352
Total
104,923
94,420
With finite useful life -
Amortisation recognised in income (Note 43)
Derecognition for disposal or other
Other changes
Amortisation of finite-life intangible assets
The amortisation charge for intangible assets in the year ended 31 December 2015 amounted to EUR
52,189 thousand (EUR 57,022 thousand at 31 December 2014), recognised under "Depreciation and
amortisation charge" on the accompanying consolidated income statement for the year.
116
(19) Other assets
The detail of “Other assets” in the consolidated balance sheet at 31 December 2015 and 2014 is as
follows:
ITEM
31/12/2015
Inventories
31/12/2014
36,085
115,597
Other items (1)
890,525
950,176
Total
926,610
1,065,773
(1)
Includes, inter alia, transactions in transit, accruals associated with operating income, and unaccrued prepayments
Inventories
The Group's most significant inventories at 31 December 2015 and 2014 were classified as follows:
ITEM
31/12/2015
Raw materials and goods held for conversion (land)
Of which: acquired in payment of debt
Other
Work in progress (property developments under construction)
Other
Finished products (completed property developments)
Other
Total gross
31/12/2014
158,930
299,097
14,736
114,936
144,194
184,161
34,591
68,501
-
-
34,591
68,501
17,295
69,873
1,314
28,230
15,981
41,643
210,816
437,471
Less: impairment losses
(174,731)
(321,874)
Raw materials and assets acquired for conversion (land)
(149,523)
(272,093)
(20,521)
(22,766)
Finished products (completed property developments)
(4,687)
(27,015)
Total net
36,085
115,597
Work in progress (property developments under construction)
117
The changes affecting the impairment losses of these items, which include the adjustments necessary
to reduce their cost to net realisable value, in the years ended 31 December 2015 and 2014 are as
follows:
ITEM
31/12/2015
Net provisions charged against/(credited to) profit for the year (Note 46)
Disposals during the year
Transfers to/from non-current assets held for sale
Disposals for inclusion in consolidation scope
321,874
396,161
11,102
1,113
(6,352)
(63,166)
1,777
-
(153,670)
-
-
(12,234)
174,731
321,874
Other changes
31/12/2014
Appendix IX contains information concerning foreclosed assets or assets acquired in settlement of
debts classified as inventories, as required by applicable regulations.
(20) Financial liabilities at amortised cost
Breakdown
The detail of this item in the accompanying balance sheets, based on the nature of the related
financial instruments, is as follows:
ITEM
31/12/2015
31/12/2014
Deposits from central banks
Deposits from credit institutions
Customer deposits
Other financial liabilities
Subtotal
19,465,870
23,205,671
107,227,876
21,278,091
1,000,000
945,254
36,076,850
23,909,805
105,051,181
21,301,516
1,000,000
1,416,576
173,122,762
188,755,928
3,153,318
4,325,754
176,276,080
193,081,682
Total
Financial liabilities at amortised cost - Deposits from central banks
The breakdown of assets under this heading in the accompanying consolidated balance sheet is as
follows:
ITEM
Bank of Spain
Sum
Total
31/12/2015
19,465,870
19,465,870
8,194
19,474,064
31/12/2014
36,076,850
36,076,850
423,183
36,500,033
These deposits from central banks are taken using the credit policy with a securities pledge Bankia
has set up in the ECB, which enables it to raise immediate liquidity (see Note 3.2).
118
This line item in the accompanying balance sheet includes EUR 11,465,870 thousand taken under the
framework of the programmes designed by the ECB (T-LTRO) to improve its long-term funding, with
an average maturity of 2 years and 9 months and EUR 8,000,000 thousand with an average maturity
of less then 1 month, in both cases, at 31 December 2015 (EUR 2,776,850 thousand at 3 years and 9
months and EUR 33,300,000 thousand with an average maturity of 1 month, both at 31 December
2014).
Financial liabilities at amortised cost – Deposits from credit institutions
operations, is as follows:
ITEM
Time deposits
Repos
Other accounts
Total
Total
31/12/2015
3,255,119
16,486,276
3,464,276
23,205,671
22,453
23,228,124
31/12/2014
4,809,337
11,090,442
8,010,026
23,909,805
55,264
23,965,069
This consolidated balance sheet items includes one-off non-marketable mortgage-backed securities
issued by the Group amounting to EUR 72,000 thousand at 31 December 2015 (EUR 72,000
thousand at 31 December 2014) (see Appendix VIII).
The average effective annual interest rate on deposits from central banks and other credit institutions
at 31 December 2015 was 0.41% (0.61% at 31 December 2014).
Financial liabilities at amortised cost - Customer deposits
operations, is as follows:
ITEM
Public sector
Current accounts
Savings accounts
Fixed-term deposits
Repos and other accounts
Non-residents
Repos
Other accounts
Total
Total
31/12/2015
31/12/2014
6,776,933
97,456,173
16,500,214
26,489,718
50,828,964
3,637,277
2,994,770
1,599,852
1,394,918
6,293,933
96,255,062
13,276,021
24,177,598
57,933,538
867,905
2,502,186
1,275,068
1,227,118
107,227,876
105,051,181
1,473,955
1,755,517
108,701,831
106,806,698
This consolidated balance sheet items includes one-off non-marketable mortgage-backed securities
issued by the Group amounting to EUR 6,584,012 thousand at 31 December 2015 (EUR 7,860,701
thousand at 31 December 2014) (see Appendix VIII).
The average effective annual interest rate of these instruments at 31 December 2015 was 0.59%
(1.12% at 31 December 2014).
Liabilities at amortised cost - Marketable debt securities
The detail of issues recognised under this heading in the consolidated balance sheet at 31
December 2015 and 2014 is set out in Appendix VI.
The average effective annual interest rate of these instruments at 31 December 2015 has been 0.52%
(0.95% at 31 December 2014).
119
Liabilities at amortised cost - Subordinated liabilities
The detail of issues recognised under this heading in the consolidated balance sheet at 31
December 2015 and 2014 is set out in Appendix VI.
The average effective annual interest rate of these instruments at 31 December 2015 has been 3.32%
(3.41% at 31 December 2014).
These are subordinated issues and, in terms of payment priority, they rank junior to all general
creditors of the Group's issuers.
Interest accrued on subordinated liabilities in the year ended 31 December 2015 amounted to EUR
41,603 thousand (EUR 24,748 thousand at 31 December 2014), recognised under "Interest expense
and similar charges" in the consolidated income statement for the year (Note 32).
Issuances, repurchases and repayments of debt securities and subordinated liabilities
The table below shows information on the total issuances, repurchases and repayments of debt
securities and subordinated liabilities in the years ended 31 December 2015 and 2014:
31 December 2015
TYPE OF ISSUE
Debt securities issued in an EU Member State requiring a
prospectus to be registered
Debt securities issued in an EU Member State not requiring a
31/12/2014
24,393,306
Issues
Repurchases
or
repayments
Exchange
rate
adjustments
and others
31/12/2015
4,464,500
(8,053,594)
3,122,595
23,926,807
-
-
-
-
-
-
-
-
-
-
Other debt securities issued outside the EU
Total
24,393,306
4,464,500
(8,052,771)
3,121,772
23,926,807
31 December 2014
TYPE OF ISSUE
31/12/2013
Issues
Repurchases
or repayments
Debt securities issued in an EU Member State requiring a
28,138,887
10,844,771
(17,139,256)
Debt securities issued in an EU Member State not requiring a
Other debt securities issued outside the EU
Total
Exchange rate
adjustments
and others
31/12/2014
2,548,904
24,393,306
-
-
-
-
-
-
-
-
-
-
28,138,887
10,844,771
(17,139,256)
2,548,904
24,393,306
The main issues and repurchases or redemptions in 2015 were as follows:

The issue on 25 March 2015 of EUR 1,000 million of ten and a half year mortgage covered
bonds.

The full early redemption on 3 June 2015 of the “Bankia 2012-5 mortgage covered bonds" issue
for EUR 600 million and the "Caja Madrid 2011-4 mortgage covered bonds” issue EUR for 1,000
million. At the same, the partial early redemption of the “Bancaja mortgage covered bonds” issue
of EUR 1,500 million entailing 30,000 securities. The outstanding nominal amount after this
redemption stands at EUR 1,500 million, corresponding to 30,000 securities.

The issue on 5 August 2015 of EUR 1,250 million of seven years mortgage covered bonds.

The redemption at maturity on 14 December 2015 of a EUR 2,000 million issued of mortgage
covered bonds.
Appendices VI and VII provide a detail of issues comprising “Marketable debt securities” and
“Subordinated liabilities”, along with issuances, repurchases or repayments of debt securities in 2015
and 2014 by the Bank or other Group companies.
120
Other information
For credit seniority purposes, subordinated debt issues rank junior to the claims of all the general
creditors of the issuers. Issues of medium term notes are guaranteed by the issuing Group entities or
are secured by restricted deposits.
Mortgage-backed securities were issued in accordance with Mortgage Market Law 2/1981, of 25
March, of the mortgage market regulation and the disposition built.
The Group has various registration documents on record in the Official Registers of the Spanish
Securities Market Commission (CNMV) for non-participating securities, to be instrumented in
mortgage-backed bonds, territorial bonds, non-convertible bonds and debentures, subordinated
bonds and debentures, and special perpetual subordinated debentures.
Similarly, the Group has registration documents on record in the Official Registers of the CNMV for the
issuance of promissory notes.
A detail, by maturity, of the balances of the Group's main consolidated balance sheet headings is
provided in Note 3.2, “Liquidity risk of financial instruments”.
Financial liabilities at amortised cost - Other financial liabilities
The detail, by type of transaction, of “Other financial liabilities” in the accompanying consolidated
ITEM
Obligations payable
Collateral received
Tax collection accounts
Special accounts and other items
Total
31/12/2015
31/12/2014
271,577
331,571
5,746
2,428
131,085
489,444
142,280
887,384
47,402
945,254
52,913
1,416,576
(21) Liabilities under insurance contracts
At 31 December 2015 and 2014, there were no liabilities classified under “Liabilities under insurance
contracts” in the accompanying consolidated balance sheets,
121
(22) Provisions
The detail of this heading in the accompanying consolidated balance sheet at 31 December 2015 and
2014 is as follows:
ITEM
31/12/2015
31/12/2014
Provisions for pensions and similar obligations
Provisions for taxes and other legal contingencies
Provisions for contingent liabilities and commitments
Other provisions
Total
364,368
1,911,372
386,498
236,084
2,898,322
391,308
456,643
450,127
407,609
1,705,687
The changes in the provisions recognised in the consolidated balance sheet in the years ended 31
December 2015 and 2014 and the purposes thereof are as follows:
Provisions for
pensions and
similar
obligations
Provisions for
taxes and other
legal
contingencies
Provisions for
contingent
liabilities and
commitments
228,912
330,221
611,938
534,954
1,706,025
Provisions charged to the income statement
-
363,021
95,467
592
459,080
Reversals credited to the income statement
(7,367)
(187)
(232,271)
(10,785)
(250,610)
Net provisions/(reversals) charged to profit recognised for the year
(Note 44)
(7,367)
362,834
(136,804)
(10,193)
208,470
(51,743)
(246,827)
-
(201,448)
(500,018)
221,506(1)
10,415
(25,007)
84,296
291,210
391,308
456,643
450,127
407,609
1,705,687
Provisions charged to the income statement
-
231,265
157,316
17,508
406,089
Reversals credited to the income statement
(5,389)
(24,602)
(189,973)
(33,923)
(253,887)
Net provisions/(reversals) charged to profit recognised for the year
(Note 44)
(5,389)
206,663
(32,657)
(16,415)
152,202
(29,096)
(110,062)
(32,671)
(170,165)
(341,994)
7,545
1,358,128(2)
1,699
15,055
1,382,427
364,368
1,911,372
386,498
236,084
2,898,322
ITEM
Amounts used
Transfers and other movements
Amounts used
Transfers and other movements
Other provisions
Total
(1) Includes EUR 189 million related to the withdrawal from the Mapfre policies due to their consideration as linked insurance at 1 January 2014 (see Note 41.3).
(2) Includes EUR 1,104 million related to amounts to be reimbursed by BFA due to its assumption of 60% of the estimated contingencies arising from Bankia's IPO under
the terms of the agreement between BFA and Bankia (see Note 12), and a provision of EUR 240 million for the same contingency set aside with a charge to reserves.
Provisions for taxes and other legal contingencies
The balance of "Provisions for taxes and other legal contingencies" which includes, inter alia,
provisions for tax and legal proceedings, was estimated applying prudent calculations in line with the
uncertainty inherent in the contingencies covered and taking into account the estimating timing of the
outflow of resources from the Group.
The detail of "Provisions for taxes and other legal contingencies" in the accompanying consolidated
balance sheets at 31 December 2015 and 2014 is as follows:
(Millions of euros)
ITEM
Provision for lawsuits related to the sale of hybrid instruments
Provision for lawsuits related to the IPO
Others
Total
31/12/2015
31/12/2014
-
9
1,775
312
136
136
1,911
457
122
Key information on each type of provision shown in the preceding table is as follows:
Provision for lawsuits related to the sale of hybrid instruments
In 2013, a provision was recognised in the amount of EUR 230 million for legal contingencies to cover
the costs of legal claims regarding the subscription or acquisition of preferred participating securities
or other subordinated bonds issued previously by the Cajas. The amount of the provision was based
on the information available regarding lawsuits received and taking into account the resolution of the
FROB’s Governing Committee, backed by a number of legal opinions, and the signing of an
agreement between Bankia and BFA whereby Bankia assumes a maximum loss derived from the
costs related to the enforcement.
An additional provision of EUR 16 million was recognised in 2014. As at 31 December 2015, the entire
provision had been used to meet the costs of claims settled and paid.
Provision for lawsuits related to the IPO
Criminal procedures in the National Court
As indicated in Note 2.18.1 the Group is involved in various legal proceedings related to Bankia's IPO.
On 4 July 2012, the court accepted for processing the lawsuit filed by Unión Progreso y Democracia
against Bankia, BFA and former members of their respective Boards of Directors. Acceptance of the
lawsuit resulted in the processing of preliminary proceedings Nº 59/2012 in the Central Court of
Instruction of the National Court (Audiencia Nacional). After this date, other complaints were added by
the alleged injured parties from Bankia's IPO (private accusation) and by persons without this status
(public accusation).
The proceeding is currently in the pre-trial stage, with the execution of certain diligences agreed by the
court. Specifically, on 4 December 2014, expert reports by two legal experts were presented to the
courts, which concluded, inter alia, that the financial information presented at the time of Bankia's IPO
did not provide a true and fair view of the bank.
In July and November 2015, the reports of experts proposed by Bankia and BFA, and those of the
experts proposed by certain of the accused former members of the Board of Directors, respectively,
were ratified.
Moreover, Central Court of Instruction No. 4 of the National Court issued an ruling on 11 November
2015 allowing the Bank of Spain Communication dated 10 November 2015 in response to the letter
from this Court dated 14 October 2015 requesting receipt of the Resolution of the Executive
Committee of the Bank of Spain of 3 March 2015 to be attached to the proceedings and informing the
parties. This Communication, pursuant to a request by the FROB dated 25 February 2015, approved a
document addressing the consultation presented by the FROB and setting out the Bank of Spain's
technical criteria regarding a series of issues regulated by Circular 4/2004, of 22 December on Public
and Confidential Financial Reporting Rules and Formats.
Specifically, the content of this response confirms the opinion issued by the FROB in its brief of 5
March 2015 criticising the conclusions contained in the reports drafted by Bank of Spain technicians
upon the request by Central Court of Instruction No. 4 of Madrid as part of preliminary proceedings
No. 59/2012.
During this proceeding, certain accusers requested an injunction, which the court denied, and in
particular, the judicial intervention of Bankia and BFA. On 13 February 2015, the court agreed to
establish a joint bail deposit by BFA, Bankia and four members of Bankia's Board of Directors at 15
June 2011 of EUR 800 million (EUR 600 million plus a third of that amount). After the appeals filed by
the various parties, rulings by Section 3 of the Criminal Courts established this deposit at
approximately EUR 34 million, which could be increased if the monetary damages that could be
required exceed that amount. Subsequently, in 2015, certain requests were accepted to amend this
deposit, which at 31 December 2015 was established at approximately EUR 38.3 million.
Lastly, with respect to the separate civil liability part, new requests for bail deposits have been
submitted, for which a ruling by the Court is pending, amounting to EUR 5.8 million.
The procedure is presumably in the advanced pre-trial phase. However, the investigating judge may at
his/her own initiative -and at any time- agree any additional actions he/she deems fit. The Court did
precisely this by leaving it up to the legal experts to issue their findings on the expert opinions
provided by the various parties charged. These findings have yet to be issued.
123
Therefore, it is not possible at present to know precisely when the judge will conclude the pre-trial
phase, let alone what the final outcome could be, especially considering that any ruling issued is
subject -in all cases- to the general appeals regime (overrule by the same investigating judge and
appeal before the Criminal Courts). Accordingly, any ruling by the Court could be overturned
thereafter.
Meanwhile, with respect to the evidence requested by Bankia in the civil proceedings, the Bank of
Spain sent the Court, as agreed, a copy of the aforementioned communication of 3 March 2015 sent
to the FROB in response to the latter's consultation.
Similarly, the Bank of Spain's response to the subpoena issued by certain civil courts at the request of
Bankia was received. It expanded information, through a list of technical and legal questions, on
certain issues arising from the aforementioned Bank of Spain communication.
Accordingly, the Group has treated this contingency, in accordance with the criteria explained in Note
2.18, as a contingent liability with an uncertain outcome at this date.
Civil proceedings
In conjunction with this proceeding, on 31 December 2014, the Group had received 933 civil lawsuits
(individual and collective), of which 860 remain in force, and 4,312 out-of-court claims. At that date,
the number and type of rulings issued were not indicative of any future trend. However, based on the
information available, the Group recognised a charge to "Provisions” in the 2014 income statement of
EUR 312 million. This charge was based on the best estimate of the amount required to settle the
costs arising from this contingency. This estimation was considered by an independent expert and
based on assumptions that required the use of judgements regarding the nature of the customers
filing the claims, the estimated number of claims to be received, the potential outcome of the claims,
the related court costs and, as appropriate, late payment interest.
As of 31 December 2015, the Group had received 76,546 civil lawsuits (individual and collective), of
which 69,041 remain in force, and 27,448 out-of-court claims. As of 31 December 2015, a total of
24,029 rulings had been issued, of which only three were appealed, affecting institutional investors
(two individuals and one company). Subsequently, on 10 February 2016, another three judgements
were handed down which institutional investors will appeal, all three of which involved companies.
Finally, on 27 January 2016, Supreme Court Civil Chamber 1 held a plenary session to review the
appeals for judicial review and breach of procedural law against the rulings issued by the Valencia and
Oviedo regional courts over the invalidation of the 2011 IPO arising from claims filed by individual
investors in the retail tranche.
On 2 February 2016, the Bank was notified of two rulings issued by the Civil Chamber of the Supreme
Court over these appeals for judicial review, rejecting the arguments put forward in them.
The Chamber rejected that the outstanding criminal case with the National Court could block individual
actions in civil courts, ruling that the plaintiffs should not have to bear excessive delays due to the
probable complexity and duration of the criminal proceeding. The Court also ruled that neither of the
two rulings were in breach of procedural law in assessing Bankia's financial situation or determining
the relevant facts. In any event, the Court held that the causal link between the material inaccuracies
in the IPO prospectus and the errors affecting the plaintiffs who, as individual investors in the retail
tranche, unlike what may have occurred with other more qualified investors, lack other means of
obtaining information on the financial data of a company whose shares are being listed which is
crucial for the investment decision, was sufficiently reasoned in the rulings. After being notified of the
rulings, the Bank began to assess their impact on its trial strategy for the civil proceedings in which it
is involved brought by individual investors in the retail tranche.
New information regarding trends in the number and outcome of claims received prompted the Group
to reassess the estimations made at the end of 2014, resulting in an adjustment to the amount of
provisions set aside as a result of:
-
The increase in the number and type of claims arising in the second half of 2015, in addition
to certain legal reforms implemented during the year strictly involving procedural law and
modifications to court fees, as a result of which the updated estimation of the contingency
arising from the costs related to the civil proceedings and claims stands at EUR 1,840 million.
124
-
At the date of preparation of the 2014 financial statements, based on the information available
at that time, it was estimated that, as a result of court decisions, it was probable that the
Group would have to compensate customers. Accordingly, for accounting purposes, this was
considered to be a contingent liability that should be covered by a provision with a charge to
profit and loss. However, in 2015, most of the convictions issued were based on the invalidity
of the contracts arranged, giving grounds to invalidate the transactions. As a consequence,
these rulings invalidated the contracts and, therefore, the reimbursement of reciprocal benefits
from the same (ownership and price). This implies the invalidity of the legal businesses and
arrangements and, therefore, they no longer had any legal implications, with retrospective
effect to the date of signing.
-
On 26 February 2015, the FROB's Governing Committee adopted a decision regarding the
formalisation of an agreement on the aforementioned contingencies, granting BFA's Board of
Directors the power to enter into an agreement with Bankia to apportion these contingencies.
Based on this decision and in accordance with the terms and criteria set out in the decision,
on 27 February 2015, BFA and Bankia entered into an agreement whereby Bankia assumed a
first-loss tranche of 40% of the estimated cost and BFA the remaining 60% of a maximum
amount of EUR 780 million. Subsequently, as a result of the re-estimation of the amount of
the contingency, on 22 December 2015, the FROB's Governing Committee granted BFA's
Board of Directors the power to amend, via an addendum, the aforementioned agreement,
whereby the contingency could amount to a maximum of EUR 1,840 million. The other limits
set out in the agreement of 27 February 2015, including the assumption by Bankia of a firsttranche loss of 40% of the estimated cost, were unchanged.
The new estimate, of EUR 1,840 million, includes EUR 1,040 million related to the cost of reimbursing
shares pursuant to the enforcement of rulings and EUR 800 million to cover the related court costs
and, as appropriate, any late-payment interest. Pursuant to the agreement and addendum signed
between BFA and Bankia, EUR 416 million and EUR 320 million, respectively, correspond to Bankia
for each of the items indicated above (for a total of EUR 736 million). As a result, the necessary
adjustments were made, resulting in:
-
-
A net charge to “Provisions” in the 2015 consolidated income statement amounting to EUR
184 million, which is added to the provision set aside in 2014 for the amount attributable to
Bankia of court costs and late-payment interest;
the recognition of a provision with a charge to "Reserves" for EUR 240 million for the amount
attributable to Bankia of the cost arising from the reimbursement of shares;
as most of the court rulings are against Bankia, the recognition of a financial asset in the
amount of EUR 1,104 million related to the amounts recoverable from BFA as it assumes 60%
of the estimated contingencies under the aforementioned agreement and addendum.
The estimates made and assumptions used for both 2014 and 2015 were reviewed by an independent
expert. Nonetheless, these assumptions will be reviewed, updated and validated regularly. The key
assumptions and, therefore, those whose changes could have the greatest impact on the amount of
this provision are the number of claims to be received, and expectations regarding the outcome and
the profile of the claimants, given the inherent uncertainty. The effects of these changes would be
recognised in accordance with the criteria described in Note 1.4, unless expressly indicated otherwise.
In 2015, the Group used EUR 65 million of the provision set aside to meets the costs of claims settled
and paid, as well as all costs related to this contingency.
125
Other provisions
The detail of "Provisions - Other provisions" in the accompanying consolidated balance sheets at 31
December 2015 and 2014, is as follows:
ITEM
Provision for restructuring costs (*)
Others (**)
Total
31/12/2015
30,832
205,252
31/12/2014
56,288
351,321
236,084
407,609
(*) Includes the provisions estimated to carry out the measures included in the Restructuring Plan described in Note 1.2.
(**) Includes mainly estimated coverage for losses related to real estate assets and investees.
The main movements in 2015 were as follows:
-
Cancellation and use of provisions for approximately EUR 64 million for guarantees issued by the
Group to third parties related to real estate investees.
-
Use of a net EUR 25 million of provisions for costs of the Restructuring Plan concerning staff
reduction and office closures (see Notes 1.2 and 2.13.2.3).
-
Use of EUR 82 million of provisions for real estate investees and assets.
(23) Other liabilities
The detail of this heading in the consolidated balance sheet at 31 December 2015 and 2014 is as
follows:
ITEM
Transactions in transit
Other items (1)
Total
31/12/2015
59,542
771,487
831,029
31/12/2014
13,552
917,000
930,552
(1) Includes, inter alia, accruals associated with operating expenses.
(24) Non-controlling interests
The detail, by consolidated company, of “Non-controlling interests” in the accompanying consolidated
COMPANY
31/12/2015
31/12/2014
Arrendadora Aeronáutica A.I.E.
Pagumar A.I.E.
25,712
8,560
11,228
24,425
8,560
8,167
Others
20,945
(54,574)
Balances at the end of the year
66,445
(13,422)
126
The detail, by company, of "Profit/(loss) attributable to non-controlling interests" in the accompanying
consolidated income statement of the Group for 2015 and 2014 is as follows:
COMPANY
Adamar Sectors, S.L.
Aliancia Zero, S.L.
Alianza Inversiones en Inmuebles Dos, S.L.
Alquiler Jóvenes Viviendas Colmenar Viejo, S.L.
Arrendadora Aeronáutica, A.I.E.
Arrendadora Equipamientos Ferroviarios, S.A.
Bancaja-BVA VPO 1 FTA
Bancofar, S.A.
Cavaltour, Agencias de Viajes, S.A.
Emeral Place LLC
Espai Comercial Vila-Real, S.L.
Garanair, S.L.
Geoportugal - Imobiliaria, LDA.
IB Investments GmbH
Iniciativas Gestiomat, S.L.
Jardi Residencial La Garriga, S.L.
Macla 2005, S.L.
Pagumar, A.I.E.
Parque Biológico de Madrid, S.A.
Plurimed, S.A.
Viajes Caja Avila, S.A.
31/12/2015
(960)
14,276
(186)
1,022
89
1,739
(221)
(19)
43
18
(52)
4,963
(146)
50
(7)
20,609
31/12/2014
(136)
19,673
2,515
(517)
722
68
(806)
611
(121)
1,656
1,190
(1,015)
23
(108)
(7)
727
(143)
(179)
(1)
(129)
117
28
24,168
The detail, by company, of the changes in the balance of "Non-controlling interests" in the
consolidated balance sheet for the years ended 31 December 2015 and 2014 is as follows:
31 December 2015
COMPANY
Aliancia Zero, S.L.
Alquiler para Jóvenes Viviendas Colmenar Viejo, S.L.
Arrendadora Aeronaútica, AIE
Bancofar, S.A.
Cavaltour, Agencia de Viajes, S.A.
Pagumar, A.I.E.
Plurimed, S.A.
Viajes Caja Ávila, S.A.
Other companies
31/12/2014
(1,359)
(29,758)
(517)
24,425
1,643
611
647
8,167
(3,302)
(4,816)
8,560
(129)
1,939
92
(19,625)
(13,422)
Dividends paid to
non-controlling
shareholders
-
Capital increase
and other
399
44,034
517
1,287
89
(611)
(647)
3,065
3,250
9,779
129
(1,889)
(92)
20,557
79,867
31/12/2015
(960)
14,276
25,712
1,732
11,232
(52)
4,963
8,560
50
932
66,445
127
31 December 2014
31/12/2013
(1,223)
(70,703)
COMPANY
Aliancia Zero, S.L.
Dividends paid to noncontrolling shareholders
Capital increase and
other
-
(136)
40,945
31/12/2014
(1,359)
(29,758)
Alquiler para Jóvenes Viviendas Colmenar Viejo, S.L.
Arrendadora Aeronaútica, AIE
197
23,703
-
(714)
722
(517)
24,425
Bancofar, S.A.
Cobimansa Promociones Inmobiliarias, S.L.
La Caja Tours, S.A.
Pagumar, A.I.E.
1,575
35,375
767
(1,019)
5,185
(4,030)
(296)
(4,673)
8,562
(223)
-
68
(34,764)
(120)
1,019
2,982
728
296
(143)
(2)
94
1,643
611
647
8,167
(3,302)
(4,816)
8,560
(129)
1,823
(839)
(3)
(33,842)
-
116
839
95
14,217
1,939
92
(19,625)
Plurimed, S.A.
Reales Atarazanas, S.L.
Viajes Caja Ávila, S.A.
Other companies.
(39,664)
-
26,242
(13,422)
Following is a detail of the non-Group or related companies with ownership interests of 10% or more
in Group companies at 31 December 2015 and 2014:
Ownership interest
Group company
Investment holder
Aliancia Inversión en Inmuebles Dos, S.L.
Viviendas Caja Círculo, S.A.U.
-
18.69
Aliancia Zero, S.L.
Banco CAM, S.A.U.
-
14.63
Arrendadora Aeronáutica, A.I.E.
Instituto de Crédito Oficial
17.21
17.21
Arrendadora de Equipamientos Ferroviarios, S.A.
Inversiones en Concesiones Ferroviarias, S,A.
15.00
15.00
Viajes Iberia, S.A.
-
50.00
Banco Popular de Ahorro de Cuba, S.A
40.00
40.00
Garanair, S.L.
El Corte Inglés, S.A.
13.00
13.00
Gestora de Suelo de Levante, S.L.
Gestión y Transformación del Suelo, S.L.
-
33.33
Fornas Ibiza, S.L.
-
15.04
Nyesa Servicios Generales,S.L.
Caja España de Inversiones, Salamanca y Soria,
CAMP
Iniciativas Turísticas de Cajas, S.A.
-
49.00
14.55
14.55
-
30.00
Pagumar, AIE
Viajes Caja de Ávila, S.A.
31/12/2015
31/12/2014
128
(25) Valuation adjustments
This item in the accompanying consolidated balance sheet includes the net amount of the changes in
fair value of available-for-sale financial assets which must be recognised in the Group's equity. These
changes are recognised in the consolidated income statement when the assets which gave rise to
them are sold or become impaired.
The following table provides details of the gains and losses by financial instrument at 31 December
2015 and 2014:
31 December 2015
Gains
Losses
Amounts Net Of Tax Effect
Gains
914,775
(54,799)
Quoted debt securities
640,342
(38,359)
-
(31)
-
(22)
Total
914,775
(54,830)
Total
640,342
(38,381)
Total Gains (Gross)
859,945
Total Gains (Net)
601,961
Total Gross
Unquoted debt securities
Losses
31 December 2014
Total Gross
Gains
1,578,916
Losses
Amounts Net Of Tax Effect
(28,599)
256
-
Total
1,579,172
(28,599)
Total Gains (Gross)
1,550,573
Gains
Losses
1,105,241
(20,019)
179
-
Total
1,105,420
(20,019)
Total Gains (Net)
1,085,401
Cash flow hedges
This item in the accompanying consolidated balance sheet includes the effective portion of the net
gain or loss on financial derivatives designated as hedging instruments in cash flow hedges.
Hedges of net investments in foreign operations
This item in the accompanying consolidated balance sheet includes the effective portion of the net
gain or loss on hedging instruments in hedges of net investments in foreign operations (see Note 2.3).
This item in the accompanying consolidated balance sheet includes the amount of the exchange
differences arising on monetary items whose fair value is adjusted against equity and of the
differences arising on the translation to euros of the balances in the functional currencies of the
consolidated entities accounted for using the equity method whose functional currency is not the euro.
129
follows:
ITEM
31/12/2015
31/12/2014
Bankia Inversiones Financieras, S.A.
-
826
-
1,612
(11)
(9)
22
10
Habitat Usa Corporación
-
2,413
Emeral Place LLC
-
(1,434)
Other exchange differences
-
(8)
11
3,410
Beimad Investment Services Co, Ltd
Caymadrid Internacional, Ltd
Total
Entities accounted for using the equity method
This caption in the accompanying consolidated balance sheet includes the carrying amount of
valuation adjustments, of any type, recognised under equity in the consolidated financial statements of
associates and jointly-controlled entities accounted for using the equity method.
follows:
COMPANY
31/12/2015
31/12/2014
Aseguradora Valenciana, S.A., de Seguros y Reaseguros
26,893
23,423
30,997
26,905
50
9,321
57,940
59,649
Laietana Vida, Cia. Seguros de la Caja de Ahorros Laietana, S.A.
Total
This item on the consolidated balance sheet shows the cumulative amount of valuation adjustments
recognised in equity.
The consolidated statement of recognised income and expense for 2015 and 2014 show the changes
in this heading in the consolidated balance sheet for this year.
(26) Equity - Share capital and share premium, treasury share transactions, reserves and other
information
(26.1) Capital and share premium
At 31 December 2014, the Bank’s share capital amounted to EUR 11,517,329 thousand, represented
by 11,517,328,544 fully subscribed and paid up registered shares with a par value of EUR 1 each of
the same class and series.
At the General Meeting of Shareholders held on 22 April 2015, the following resolutions regarding the
Bank's share capital were adopted:

The setoff of losses against both the share premium in the amount of EUR 4,054,700 thousand,
and the legal reserve, amounting to EUR 82,683 thousand, and subsequent reduction of capital
by EUR 839,655 thousand by decreasing the par value of the Company's shares from EUR 1 to
EUR 0.92709636738224 per share, to set off losses based on the balance sheet closed at 31
December 2014,

Reduction of share capital in an amount of EUR 921,386 thousand euros to increase the legal
reserve by reduction of the par value of the shares by EUR 0.8 to EUR 0.847096367382224 per
share based on the balance sheet closed at 31 December 2014, and

Finally, reduction of capital in an amount of EUR 542,424 thousand to increase voluntary reserves
by reduction of the par value of the shares to EUR 0.8 per share based on the balance sheet
closed at 31 December 2014.
130
At 31 December 2015, the Bank’s share capital amounted to EUR 9,213,863 thousand, represented
by 11,517,328,544 fully subscribed and paid up registered shares with a par value of EUR 0.8 each of
the same class and series.
In 2015 and 2014, no transaction costs were recognised for the issuance or acquisition of own equity
instruments.
Bankia, S.A.'s main shareholders at 31 December 2015 and 2014 were as follows:
Number of shares
31/12/2015
31/12/2014
Shareholder
BFA
7,398,001,729
7,164,465,464
% Ownership interest
31/12/2015
31/12/2014
64.234%
62.206%
As explained in Note 1.2, on 27 June 2012, the FROB became the sole shareholder of BFA (the
parent company of the BFA Group, of which Bankia forms part).
(26.2) Transactions with treasury shares
In the years ended 31 December 2015 and 2014, changes to "Equity - Less: Treasury shares" on the
balance sheet, showing the amount of Bankia's equity instruments held by the Bank, were as follows:
ITEM
31/12/2015
Amount
No. Shares
(thousand
s of euros)
31/12/2014
Amount
No. Shares
(thousands
of euros)
Acount balance at the beginning of the year
+ Purchases during the year
47,778,744
84,154,937
67,625
96,611
12,305,066
90,764,082
11,758
129,521
(92,066,335)
(117,763)
(55,290,404)
(73,654)
39,867,346
46,473
47,778,744
67,625
(9,736)
-
7,265
- Sales and other changes
Acount balance at the end of the year
Net incoms on transactions with treasury shares
(reserves)
In accordance with prevailing regulations, treasury share transactions are recognised directly in
equity; no gain or loss may be recognised in respect of such transactions in the consolidated income
statement.
Certain disclosures required by applicable regulations in connection with transactions involving
treasury shares of Bankia, S.A. by the Group in 2015 and 2014 follow:
Acquisitions of treasury shares
-
Number of treasury shares acquired in 2015: 84,154,937 (90,764,082 shares at 31 December
2014).
-
Par value of treasury shares acquired in 2015: EUR 26,611 thousand of EUR 1 par value and
EUR 46,035 thousand of EUR 0.8 par value (EUR 90,764 thousand of EUR 1 par value at 31
December 2014).
-
Average price of treasury shares acquired in 2015: EUR 1,148 (2013: EUR 1,427 at 31
December 2014).
-
Total amount charged to equity in 2015: EUR 96,611 thousand (EUR 129,521 thousand at 31
December 2014).
Disposals of treasury shares
-
Number of treasury shares sold in 2015: 92,066,335 (55,290,404 shares at 31 December
2014).
-
Par value of treasury shares sold in 2015: EUR 21,584 thousand of EUR 1 par value, EUR
56,386 of EUR 0.8 par value (EUR 55,285 thousand at 31 December 2014).
-
Average selling price of treasury shares sold in 2015: EUR 1,279 (1,332 euros on 31
December 2014).
131
-
Amount charged to equity for sales in 2015: EUR 117,763 thousand (EUR 73,654 thousand at
31 December 2014).
-
Gain/(loss) recognised with a (debit)/credit to reserves for sales in 2015: EUR (9,736)
thousand (EUR 7,265 thousand at 31 December 2014).
Treasury shares held at 31 December 2015 and 2014:
-
Number of treasury shares held: 39,867,346 (47,778,744 shares at 31 December 2014).
-
Par value of treasury shares held: EUR 31,894 thousand of EUR 0.8 par value (EUR 47,779
thousand of EUR 1 par value at 31 December 2014).
-
Average acquisition price of treasury shares held: EUR 1,166 (EUR 1,415 at 31 December
2014).
-
Amount charged to equity for acquisition of treasury shares: EUR 46,473 thousand (EUR
(26.3) Reserves
The Group’s consolidated statement of changes in total equity for the year ended 31 December 2015
and 2014 includes shows the changes to consolidated equity for this item in the year.
(26.3.1) Restricted reserves
The information on the Group’s restricted reserves is disclosed below:
Legal reserve
Pursuant to the Consolidated Text of the Spanish Corporate Enterprises Act, companies must
earmark an amount at least 10% of profit for the legal reserve until such reserve represents 20% of
the capital. The legal reserve may be used to increase capital to the extent that it exceeds 10% of the
increased capital figure. Other than for this purpose, the legal reserve may be used to set off losses if
no other sufficient reserves are available for such purpose.
The amount of this reserve recognised under "Equity - Reserves" on the consolidated balance sheet
at 31 December 2015 was EUR 921,386 thousand (EUR 5,326 thousand at 31 December 2014), less
than the 20% mentioned in the preceding paragraph.
(26.3.2) Breakdown of reserves by entity
The detail, by fully or proportionately consolidated entities and those accounted for using the equity
method, of “Reserves” in the consolidated balance sheet at 31 December 2015 and 2014 is as
follows:
ITEM
Acinelav Inversiones 2006, S.L.
Aseguradora Valenciana, S.A. de Seguros y Reaseguros
Bankia Habitat, S.L.U.
Bankia Inversiones Financieras, S.A.U.
CM Florida Holdings, Inc / City National Banchares INC
Corporación Industrial Bankia, S.A.U.
Deproinmed, Urbanika, Proyectos Urbanos, S.L.
Global Vía Infraestructuras, S.A.
Inmovemu, S.L.U.
Pinar Habitat S.L.
Promociones y Propiedades Espacio-Habitat, S.L.
Proyectos y Desarrollos Hispanoamericanos, S.A. de C.V.
Realia Business, S.A.
Torre Norte Castellana, S.A.
31/12/2015
(16,273)
31/12/2014
(16,273)
18,478
(58,642)
(2,077,816)
(1,650,234)
372,829
240,244
-
13,150
(432,267)
(343,801)
-
(5,833)
(292,512)
(292,512)
-
(43,115)
(14,479)
(13,672)
-
(27,597)
-
(46,723)
12,968
12,968
-
(131,077)
(486,171)
(485,173)
132
(26.4) Other disclosures
(26.4.1) Investments in listed companies
Other than Bankia, S.A., no other Group subsidiary was listed on an active market at 31 December
2015.
(26.4.2) Other resolutions adopted at the Annual General Meeting regarding the issuance of
shares and other securities
At the Annual General Meeting held on 22 April 2015, resolutions were adopted to delegate the Board
of Directors of the Bank the following powers:
-
Capital increases: Delegation of powers to increase share capital by up to a maximum of 50% of
subscribed share capital on one or more occasions, by way of cash contributions with the
authority, if applicable, to resolve disapplication of preferential subscription rights at any time
within maximum of 20% of share capital resulting from the resolutions adopted at the beginning
of this Note.
-
The authority to issue, within a maximum term of five years, securities convertible into and/or
exchangeable for shares of the Company, as well as warrants or other similar securities that
may directly or indirectly entitle the holder to subscribe for or acquire shares of the Company, for
an aggregate amount of up to one billion five hundred million euros (EUR 1,500,000,000); as well
as the authority to increase the share capital in the requisite amount, and the authority, if
applicable, to disapply pre-emptive rights up to a maximum of 20% of share capital resulting from
the resolutions adopted at the beginning of this Note.
-
The power to issue debentures, bonds and other straight fixed income securities (including, inter
alia, mortgage notes and commercial notes, not convertible, up to a maximum of thirty billion
(30,000,000,000) euros and commercial notes up to a maximum of fifteen billion
(15,000,000,000) euros, within the limits and in compliance with the requirements established in
the Capital Enterprises Act, for a maximum term of 5 years after adoption of this resolution.
-
Authorisation for the derivative acquisition of own shares in accordance with the limits and
requirements established in the Corporations Act, expressing authorising it, if applicable, to
reduce share capital on one or more occasions in order to proceed with the redemption of own
shares acquired. Delegation of authority to the Board for implementation of this resolution.
(27) Fair value
(27.1) Fair value of financial instruments
The fair value of a financial asset or liability on a specific date is the amount at which it could be
delivered or settled, respectively, on that date between knowledgeable, willing parties acting freely
and prudently in an arm’s length transaction.
The Group generally uses the following methods to estimate the fair value of financial instruments:
-
When the market publishes closing prices, these prices are used to determine the fair value.
-
When the market publishes both bid and asking prices for the same instrument, the market price
for a purchased asset or a liability to be issued is the bid price and that for an asset to be
purchased or an issued liability is the asking price. If there is significant market-making activity or
it can be demonstrated that the positions can be closed – settled or hedged – at the average
price, the average price is used.
-
If there is no market price for a given financial instrument or for scantly active markets, its fair
value is estimated on the basis of the price established in recent transactions involving similar
instruments and, in the absence thereof, of valuation techniques sufficiently used by the
international financial community, taking into account the specific features of the instrument to be
measured and, particularly, the various types of risk associated with the instrument.
-
The valuation techniques used to estimate the fair value of a financial instrument meet the
following requirements:
 The techniques used are based on the most consistent and appropriate economic and
financial methods, which have been demonstrated to provide the most realistic estimate of
the financial instrument's price.
133
 They are those which are customarily used by market participants to measure this type of
financial instrument, such as discounting of cash flows, condition-based or non-arbitrage
option pricing models, etc.
 They maximise the use of available information, in relation to both observable data and
recent transactions of similar characteristics, and limit the use of non-observable data and
estimates as far as possible.
 They are sufficiently and amply documented, including the reasons why they were chosen in
preference to other possible alternatives.
 They are applied consistently over time so long as the reasons for choosing them do not
change.
 The validity of the models is examined periodically using recent transactions and current
market data.
 They take into account the following factors: the time value of money, credit risk, exchange
rates, commodity prices, equity prices, volatility, liquidity, prepayment risk and servicing
costs.
-
For financial instruments with no market or with a scantly active market, on initial recognition, the
fair value is obtained either on the basis of the most recent transaction price, unless another
value can be demonstrated through comparison with other recent market transactions in the
same instrument, or by using a valuation technique in which all the variables are taken solely from
observable market data.
-
The fair value of derivatives is determined as follows:

Financial derivatives included in the held-for-trading portfolios which are traded in organised,
transparent and deep markets: the fair value is deemed to be their daily quoted price and if,
for exceptional reasons, the quoted price at a given date cannot be determined, these
financial derivatives are measured using methods similar to those used to measure OTC
derivatives.

OTC derivatives or derivatives traded in scantly deep or transparent organised markets: the
fair value is taken to be the sum of the future cash flows arising from the instrument,
discounted to present value at the date of measurement (“present value” or “theoretical
close”) using valuation techniques accepted by the financial markets: “net present value”
(NPV), option pricing models, etc. Derivatives not supported by a CSA (market standard)
collateral agreement: an own or third party credit risk adjustment (CVA and DVA)
differentiated based on the internal rating of the counterparty (see Note 3.1):
o
counterparties rated CCC or higher: all components are taken directly from the
market (risk factors that affect the value of the derivative) or indirectly from the inputs
that reflect credit risk through quoted prices in markets that are closest to that of the
counterparty and of Bankia.
o
counterparties classified as "doubtful": internal expert criteria regarding recovery of
the debt are used as there are no market indices to assess their credit risk due to
the absence of a secondary market with prices and reasonable liquidity.
At 31 December 2015 and during the year, credit risk of financial liabilities measured at fair
value through profit or loss was not material.
134
Determination of fair value of financial instruments
The following table compares the amounts at which the Group's financial assets and financial liabilities
are recognised in the accompanying consolidated balance sheet and their related fair value:
2015
BALANCE
SHEET TOTAL
ITEM
2014
FAIR VALUE
BALANCE
SHEET TOTAL
FAIR VALUE
ASSETS
Held-to-maturity investment
Non-current assets held for sale – Other equity instruments
Hedging derivatives
2,978,920
2,978,920
2,926,782
2,926,782
12,202,084
12,202,084
18,605,873
18,605,873
31,088,891
31,088,891
34,771,723
34,771,723
117,775,812
128,036,574
125,227,223
136,670,590
23,700,899
24,177,040
26,661,330
27,415,975
35,006
35,006
59,611
59,611
4,073,473
4,073,473
5,538,715
5,538,715
12,407,705
12,407,705
18,123,820
18,123,820
176,276,080
177,002,775
193,081,682
195,844,434
977,688
977,688
2,489,930
2,489,930
LIABILITIES
Hedging derivatives
For financial instruments whose carrying amount differs from their theoretical fair value, this latter
value was calculated as follows:
-
The fair value of “Cash and balances with central banks” is measured at carrying amount, as the
balances are short term.
-
The fair value of “Held-to-maturity investments" is considered to be the quoted value of the
investments in active markets, with the sole exception of SAREB bonds (see Note 1.15), whose
fair value estimate was considered Level 2, which did not differ significantly from their carrying
amount (the fair value was determined using comparable based on Spanish government debt with
similar features).
-
The fair value of “Loans and receivables” and “Financial liabilities at amortised cost” is estimated
using the discounted cash flow method based on market rates at the end of each year excluding
the issuer's credit risk. The measurement is classified as Level 3 in the measurement hierarchy of
approaches described below for financial instruments whose carrying amount coincides with their
fair value.
Financial instruments whose carrying amount coincides with their fair value were measured as follows:
-
Level 1: Financial instruments whose fair value was determined by reference to their quoted price
in active markets, without making any change to these prices.
-
Level 2: Financial instruments whose fair value was estimated by reference to quoted prices on
organised markets for similar instruments or using other valuation techniques in which all the
significant inputs are based on directly or indirectly observable market data.
-
Level 3: Instruments whose fair value was estimated by using valuation techniques in which one
or another significant input is not based on observable market data. An input is deemed to be
significant when it is important for determining the fair value as a whole.
135
The following table presents the main financial instruments measured at fair value in the
accompanying consolidated balance sheet, by measurement method used to estimate fair value:
2015
Level 2
Level 1
ITEM
Level 3
2014
Level 2
Level 1
Level 3
ASSETS
Debt securities
Equity instruments
Trading derivatives
Debt securities
129,024
53,705
11,942,081
-
130,979
-
162,550
80,906
18,356,842
2,913
86,481
-
72,486
-
-
73,796
-
-
2,833
11,942,081
130,979
7,848
18,353,929
86,481
29,363,375
1,725,516
-
28,030,175
6,741,545
3
29,363,375
1,725,516
-
28,030,175
6,741,545
3
92
-
34,914
3,782
-
55,829
-
4,073,473
-
-
5,538,715
-
13,567
12,389,898
4,240
61,650
18,052,129
10,041
36
12,389,898
4,240
4,057
18,052,129
10,041
13,531
-
-
57,593
-
-
-
977,688
-
-
2,489,083
847
- Other equity instruments.
Hedging derivatives
LIABILITIES
Trading derivatives
Short positions
Hedging derivatives
Below are the amounts recognised in the consolidated income statement for 2015 and 2014 due to
changes in the fair value of the Group's financial instruments. The changes relate to unrealised gains
and losses, with a disinction made between financial instruments whose fair value is estimated using
valuation techniques whose variables are obtained from observable market inputs (Level 2) and those
for which one or more significant variables are not based on observable market inputs (Level 3). Also
shown are the cumulative unrealised changes in value at 31 December 2015 and 2014:
At 31 December 2015
ASSETS
Financial assets
Trading derivatives
UNREALISED GAINS AND LOSSES
RECOGNISED IN THE CONSOLIDATED
INCOME STATEMENT
Level 2
LIABILITIES
Trading derivatives
Hedging derivates
TOTAL LIABILITIES
Level 2
Level 3
Total
(32,883)
(4,161,691)
16,043,036
105,719
16,148,755
(4,128,808)
(32,883)
(4,161,691)
16,043,036
105,719
16,148,755
-
-
-
77,229
-
77,229
-
-
-
77,229
-
77,229
(1,033,176)
-
(1,033,176)
4,030,233
-
4,030,233
(5,161,984)
(32,883)
(5,194,867)
20,150,498
105,719
20,256,217
Debt securities
TOTAL ASSETS
Total
(4,128,808)
Hedging derivatives
Level 3
CUMULATIVE CHANGES IN FAIR VALUE
BALANCE SHEET
UNREALISED GAINS AND LOSSES RECOGNISED IN
THE CONSOLIDATED INCOME STATEMENT
Level 2
CUMULATIVE CHANGES IN FAIR
VALUE RECOGNISED IN THE
CONSOLIDATED BALANCE SHEET
Level 3
Total
Level 2
Level 3
Total
4,850,545
4,444
4,854,989
15,927,218
(9,003)
15,918,215
4,850,545
4,444
4,854,989
15,927,218
(9,003)
15,918,215
323,552
-
323,552
1,215,406
-
1,215,406
5,174,097
4,444
5,178,541
17,142,624
(9,003)
17,133,621
136
At 31 December 2014
ASSETS
Trading derivatives
INCOME STATEMENT
Level 2
LIABILITIES
Trading derivatives
Hedging derivates
TOTAL LIABILITIES
Level 2
Level 3
Total
(3,864)
2,194,366
19,956,278
64,896
20,021,174
(86)
-
(86)
(86)
-
(86)
2,198,316
(3,864)
2,194,452
19,956,364
64,896
20,021,260
-
-
-
221,250
1
221,251
-
-
-
221,250
1
221,251
1,329,060
-
1,329,060
5,108,865
-
5,108,865
3,527,290
(3,864)
3,523,426
25,286,393
64,897
25,351,290
Debt securities
TOTAL ASSETS
Total
2,198,230
Hedging derivates
Level 3
CUMULATIVE CHANGES IN FAIR VALUE
BALANCE SHEET
INCOME STATEMENT
Level 2
Level 3
Total
INCOME STATEMENT
Level 2
Level 3
Total
(2,015,629)
(1,611)
(2,017,240)
19,961,591
(5,745)
19,955,846
(2,015,629)
(1,611)
(2,017,240)
19,961,591
(5,745)
19,955,846
(809,757)
(1,524)
(811,281)
2,145,444
(517)
2,144,927
(2,825,386)
(3,135)
(2,828,521)
22,107,035
(6,262)
22,100,773
137
The following table presents the main methods, assumptions and inputs used to measure the fair
value of Level 2 and 3 financial instruments and the related balances at 31 December 2015:
(Millions of euros)
Level 2 financial
instruments
Debt securities
Equity instruments
Valuation
techniques
Main assumptions
Present value
method
(discounted cash
flows or DCF)
Calculation of the present value of
financial instruments as the present
value of the future cash flows
(discounted at market interest rates),
bearing in mind: Estimation of
prepayment rates, issuer credit risk
and current market interest rates.
Inclusion of stochastic volatilities in
LMM allows complete modelling of
the volatility area.
Present value
method
Calculation of the present value of
future cash flows. Considering
 Issuer credit spreads
 Prepayment Rates
 Yield Curves
 Risk Neutrality, non-arbitrage
Interest rate
derivatives: Black
76 and Libor
Market Model
Inputs
For inflation
derivatives:
analytical formula
For credit
derivatives:
analytical formula
Yield Curves
Credit spreads
Correlation


Yield Curves
Credit spreads
For equity, inflation,
currency or
commodity
derivatives:
 Forward
For measurement of widely traded
structure of the
instruments,
e.g.
caps,
floors,
underlying
European swaptions, etc.
 Option Volatily
 Observable
correlations
among
underlyings
Derivatives
For equity,
currency or
commodity
derivatives: Black
Scholes.



For measurement of widely traded
instruments, e.g. call, put, straddle,
etc.
Absence of correlation
interest rates and inflation.
between
For interest rate
derivatives:
 Term structure
of interest rates.
 Volatility of the
underlying
Fair Value
Debt securities:
1,726
Equity
instruments: (*)
Trading
Derivatives:
Assets:11,942
Liabilities:12,390
Hedging
Derivatives:
Assets: 4,073
Risk neutrality, absence of arbitrage For credit derivatives:
opportunities
 Quoted Credit
Default Swaps
(CDS) prices
Calculation of probability of default
 Historical CDS
(PD) levels to ensure compliance with
volatility
the risk neutrality and non-arbitrage
assumptions
Liabilities: 978
(*)There were no outstanding transactions at 31 December 2015
138
(Millions of euros)
Level 3 financial
instruments
Valuation
techniques
Main assumptions
value Calculation of the present value of
financial instruments as the present
value of the future cash flows
(discounted at market interest rates),
bearing in mind: Estimation of
prepayment rates, issuer credit risk
and current market interest rates. To
measure asset backed securities
The
Gaussian (ABS),
future
prepayments
are
Copula Model
calculated based on conditional
prepayment rates provided by the
issuers. The "time-to-default" model is
used to measure the probability of
default. One of the main variables used
is
the
correlation
of
defaults
extrapolated from several index
tranches (ITRAXX and CDX) with the
underlying portfolio of our CDOs.
Libor
Market Inclusion of stochastic volatilities in
LMM allows complete modelling of the
model.
volatility area.
Present
method.
Debt securities
Inputs
Fair Value
 Prepayment rates
 Credit spread
Debt securities:
(*)
 Default correlation
 Interest
correlation
rate
 Credit spread;
Equity instruments
Present
method
value
Net asset value (NAV) for hedge funds
and for equity instruments listed in thin
or less active markets
Both methods are based on modelling
of future interest rate performance,
replicating the yield curve and volatility
surface.
For interest rate The HW model is used provided the
options: the Libor volatility smile does not affect the value
Market, Hull and of the derivative. The inclusion of
White model
stochastic volatilities in LMM allows
complete modelling of the volatility
area, making the LMM model the most
widely used to measure exotic
derivatives.
Derivatives
For equity and
The options are measured using
currency options:
generally accepted valuation models
Dupire, Heston,
and include implied volatility observed
Black.
Inflation options
The Jarrow and Yildrim model is used
for modelling inflation and nominal
rates. This model is based on the
analogy between the inflation index
and foreign exchange rates.
The Gaussian Copula measurement
Credit
baskets:
method, which is widely accepted in
Gaussian Copula
financial markets for its simplicity.
 NAV provided by Equity
the fund manager instruments: 35
or the issuer of the
securities
 Correlation
 Term structure of
volatilities based
on the underlying
 Correlation
 Term structure of
volatilities
 Dividends
Trading
Derivatives:
Assets: 131
Liabilities: 4
 Correlation
 Inflation curve
 Nominal rates
 Correlation
between defaults
 Historical
CDS
volatility
(*)There were no outstanding transactions at 31 December 2015
Any reasonably possible changes in one or more variable or other assumptions would not result in a
significant change in the fair value of Level 3 financial instruments relative to the total portfolio of
financial instruments.
139
The Group has a formal policy that sets out the procedure for assigning fair value levels and potential
changes therein.
According to this procedure, a Level is assigned to financial instruments measured at fair value,
determined based on the quality and availability of the various inputs, models, market information etc.
at the date of purchase of the position. These parameters are subsequently reviewed periodically in
accordance with their trends.
This procedure is carried out by analysing the information available to the Group to set the valuation
price, studying the necessary inputs, the sources and quality of the information, or the need to use
more complex models.
Transfers of financial instruments not classified as non-current assets held for sale between fair value
hierarchy levels in 2015 and 2014 were as follows:
At 31 December 2015
Transfers between levels
FROM:
TO:
Level 1
Level 2
Level 2
Level 3
Level 3
TO:
Level 1
Level 2
Level 3
Assets
Financial assets held for trading - Derivatives
6,868
-
-
85,172
-
5,088
-
118,170
-
-
-
-
-
-
1,073
-
210
Level 3
Level 1
Liabilities
Financial liabilities held for trading - Derivatives
At 31 December 2014
Transfers between levels
FROM:
TO:
Level 1
Level 2
Level 2
Level 3
Level 3
Level 1
Level 2
Assets
Financial assets held for trading - Derivatives
-
-
-
86,481
-
-
1,452,750
48,757
522,007
-
66,964
62,775
Financial liabilities held for trading - Derivatives
-
-
-
10,041
-
-
Hedging derivatives
-
-
-
847
-
-
Liabilities
The amount of financial instruments transferred between measurement levels in 2015 is immaterial
relative to the total value of the portfolios and relates mainly to changes in one or more characteristics
of the assets. Specifically:
-
Transfer from Level 2 to Level 3 for EUR 86 million: As relevant inputs that represent key
assumptions (credit risk) used in the valuation technique to measure certain derivatives have
become unobservable.
-
Transfer from Level 3 to Level 2 for EUR 5 million: As relevant observable inputs that
represent key assumptions (credit risk) used in the valuation technique to measure certain
derivatives have been found.
-
Transfer from Level 1 and Level 2 for a net EUR 111 million: As certain Level 1 debt
instruments were delisted and, in other cases, quoted prices in markets for Level 2 debt
instruments had become available.
140
The movement in balances financial assets and financial liabilities categorised within Level 3
excluding those classified as non-current assets held for sale shown in the accompanying
consolidated balance sheets at 31 December 2015 and 2014 is as follows:
31/12/2015
Assets
Opening balance
Gains (losses)
To profit and loss
31/12/2014
Liabilities
Assets
Liabilities
10,888
176,503
-
(21,454)
(3,442)
18,145
-
86,484
(21,454)
(3,442)
28,271
-
To equity valuation adjustments
-
-
(10,125)
-
Purchases, sales and settlements
(57,316)
(6,063)
(113,664)
-
2,857
4,240
5,499
10,888
86,484
10,888
Net inflows/(outflows) in Level 3
Closing balance
123,265
130,979
Gains and losses in 2015 and 2014 on disposals of financial instruments categorised within Level 3
recognised in the accompanying consolidated income statement were not significant.
The table below shows, for measurements of the fair value of Level 3 instruments in the fair value
hierarchy, recognised on the balance sheet, a reconciliation of balances recognised at 31 December
2015 and 2014:
31/12/2015
Opening balance
Gains or losses
To profit and loss
Other net variations (*)
Closing balance
31/12/2014
55,829
341,573
2,383
(4,676)
2,383
(4,676)
(23,298)
(281,068)
34,914
55,829
(*) At 31 December 2014, the figure relate mainly to sales and transfers to investments classified as non-current assets held for sale.
There were no significant transfers between Levels 1 and 2 in the fair value hierarchy in 2015 and
2014.
(27.2) Fair value of assets and liabilities included in disposal groups
The table below provides a comparison between the carrying amount of financial assets and financial
liabilities by line item in the accompanying consolidated balance sheet under which they were
recognised before classification under "Non-current assets held for sale - Disposal groups" and their
corresponding fair value:
2015
ASSETS
Total Balance
2014
Fair Value
Total Balance
Fair Value
1
1
111,847
-
-
1,409
1,409
-
-
869,995
869,995
52,421
52,421
2,810,281
2,809,061
317
317
204,155
208,109
-
-
39,426
39,426
Non-current assets held for sale - Other equity instruments
111,847
LIABILITIES
-
-
1,373
1,373
185
185
3,590,576
3,591,519
141
The following table presents financial assets and liabilities measured at fair value by the line item in
the consolidated balance sheet under which they were recognised before classification under "Noncurrent assets held for sale - Disposal groups" and the valuation method used to estimate their
carrying amount:
2015
2014
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
-
-
-
-
1,409
-
Trading Derivatives - Interest rate derivatives
-
-
-
-
1,409
-
-
-
-
-
869,995
-
Debt securities
-
-
-
-
869,995
-
-
-
-
-
39,426
4,132
-
-
-
-
39,426
Real State Assets
-
-
-
-
-
-
-
-
1,373
-
Trading Derivatives - Interest rate derivatives
-
-
-
-
1,373
-
ASSETS
4,132
LIABILITIES
The fair value of financial instruments classified in their entirety as Level 2 was estimated based on
quoted prices in active markets for similar instruments or the use of valuation techniques for which the
relevant inputs are based on information that is directly or indirectly observable.
The main measurement methods, assumptions and inputs used to estimate fair value of financial
instruments are detailed in Note 27.1. The latest appraisals by independent experts were used for real
estate assets.
(27.3) Fair value of other assets
(27.3.1) Real estate assets and real estate assets classified as non-current assets held for sale
The table below shows, for measurements of the fair value of instruments in the fair value hierarchy,
recognised on the balance sheet, a reconciliation of balances recognised at 31 December 2015 and
2014:
ITEM
31/12/2015
Carrying
amount
Tangible assets
Property, plant and equipment for own useBuildings and other structures
Investment property
Inventories
31/12/2014
Fair value
Carrying
amount
Fair value
1,798,313
2,027,828
1,681,289
2,042,276
1,166,316
1,305,421
1,096,699
1,404,568
631,997
722,407
584,590
637,708
36,085
36,085
115,597
115,597
The fair value of buildings was estimated taking the latest appraisal by independent experts for each
of the assets appraised.
The fair values at 31 December 31 2015 and 2014 of the Bankia Group’s property, plant and
equipment for own use classified under “Non-current assets held for sale” at those dates were EUR
223,269 thousand and EUR 347,601 thousand, respectively.
The carrying amount of the Group's foreclosed real estate assets classified under "Non-current assets
held for sale" is the same as the estimated fair value based on the latest available appraisals of the
assets, adjusted where appropriate to reflect the estimated impact of trends in the real estate market.
Fair value is based mainly on independent expert appraisals, adjusted, where appropriate, to factor in
the estimated impact from the appraisal date of certain real estate-related variables. These variables
consider mainly the age of the appraisals available.
142
These valuations are considered Level 3 inputs according to the approaches described in the
consolidated financial statements.
The reconciliation of the fair value of foreclosed assets whose measurements are included in Level 3
of the fair value hierarchy is detailed in Note 15.
As for inventories, the amounts taken to profit and loss in 2015 and 2014 were EUR 11,102 thousand
and EUR 1,113 thousand, respectively, recognised under "Impairment losses on other assets".
The amounts recognised in the 2015 and 2014 income statements relating to tangible assets were
EUR 94,607 thousand and EUR 99,232 thousand, respectively, under "Depreciation and
amortisation", and EUR 43,607 thousand and EUR 4,290 thousand, respectively, under "Impairment
losses on other assets".
Better and greater use of non-financial assets does not mean a different use, except for the real estate
assets owned by the Group, where the building and facilities are considered as assets for the purpose
of measuring land.
(27.3.2.) Investments classified as non-current assets held for sale
The following table details the fair value hierarchy for investments in joint ventures and associates
classified as non-current assets held for sale at 31 December 2015 and 2014:
2015
22014
Level 2
Level 3
Total
Level 2
Level 3
Total
-
181,911
181,911
-
221,415
221,415
The valuation techniques and inputs used were as follows:
Level 2: fair value determine using as inputs quoted prices in active markets, less estimated costs of
disposal by reference to the discount generally required by the market for the block sale of significant
shareholdings in quoted companies.
Level 3: fair value was estimated mainly using present value techniques based on net asset value
(NAV).
The reconciliation of the opening balances to the closing balances of fair value measurements
categorised within Level 3 of the fair value hierarchy is as follows:
Balances at 1 January
2015
2014
221,415
392,643
-
(47,431)
-
(47,431)
-
60
Settlements/Sales
(39,504)
(123,857)
Balances at 31 December
181,911
221,415
Gains (losses)
To impairment losses or gains (see Note 15)
Purchases
143
(28) Tax matters
(28.1) Consolidated tax group
The entities within the tax consolidation group headed by Bankia, S.A. are, in addition to the parent
itself:
ABITARIA CONSULTORIA Y GESTION, S.A.
BANKIA INVERSIONES FINANCIERAS, S.A.U.
CORPORACIÓN INDUSTRIAL BANKIA, S.A.U.
MEDIACIÓN Y DIAGNOSTICOS, S.A.
PARTICIPACIONES Y CARTERA DE INVERSIÓN, S.L.
PLURIMED, S.A.
VALORACION Y CONTROL, S.L.
ACCIONARIADO Y GESTION, S.L.
GARANAIR, S.L.
NAVIERA CATA,S.A.
SECTOR DE PARTICIPACIONES INTEGRALES, S.L.
TORRE NORTE CASTELLANA, S.A.
ARRENDADORA DE EQUIPAMIENTOS FERROVIARIOS, S.A.
ADAMAR SECTORS, S.L.
BANKIA HABITAT S.L.U.
COBIMANSA PROMOCIONES INMOBILIARIAS, S.L.
INMOVEMU, S.L.
INVERÁVILA, S.A.U.
INVERSIÓN EN ALQUILER VIVIENDAS, S.L.
URBAPINAR, S.L.
VIVIENDAS ALQUILER MOSTOLES, S.L.
CAMÍ LA MAR DE SAGUNTO, S.L.
BANKIA MEDIACIÓN, OPERADOR DE BANCA SEGUROS VINCULADO, S.A.U.
BANKIA PENSIONES, S.A. E.G.F.P.
BANKIA FONDOS, S.G.I.I.C., S.A.
MINERVA RENOVABLES, S.A.U.
BANCAJA EMISIONES, S.A SOCIEDAD UNIPERSONAL
VALENCIANA DE INVERSIONES MOBILIARIAS, S.L.U.
SEGURBANKIA, S.A.
INMOGESTION Y PATRIMONIOS, S.A.
ESPAI COMERCIAL VILA-REAL, S.L.
CENTRO DE SERVICIOS OPERATIVOS E INGENIERIA DE PROCESOS, S.L.
PROYECTO INMOBILIARIO VALIANT, S.L.
RENLOVI, S.L.
All other subsidiaries and other entities included in the scope of consolidation of the Bankia Group at
31 December 2015 file individual income tax returns.
144
(28.2) Years open for review by the tax authorities and provisions recognised
At 31 December 2015, the Bank had the last four years open to review by the tax inspection
authorities for all the taxes applicable to it.
On 13 October and 20 October 2014, tax inspections began of the Bank to verify compliance with tax
obligations and duties for the following taxes and tax periods:
ITEM
Income tax
Value added tax
Withholdings / Payments on account of earned income
Withholdings / Payments on account for investment income
Withholdings / Payments on account for leases
Withholdings on account on non-resident income
Annual statement of operations
Special tax for non-resident real estate
PERIOD
2011 to 2012
2011 to 2012
2011 to 2012
2011 to 2012
2011 to 2012
2011 to 2012
2011 to 2012
2011 to 2012
These tax inspections are still ongoing at present. No matter worthy of disclosure has arisen in this
respect.
In addition, on 20 March 2014, a tax inspection began of Altae Banco, S.A. (which changed its
corporate name in 2011 to Bankia, S.A. and carried out the private banking business) for 2010 (with
the exception of corporate income tax, in which an inspection was carried out for the years 2008 to
2010).
These tax inspections are still ongoing at present. No matter worthy of disclosure has arisen in this
respect.
Inspections performed at the “Cajas de Ahorros”
In relation to the “Cajas de Ahorros” which transferred their financial business on 16 May 2011, firstly
to BFA and subsequently to the Bank, the information is as follows:
-
On 11 March 2014, inspections were performed at Caja de Ahorros y Monte de Piedad de Madrid
in order to ascertain compliance with tax obligations and duties in respect of the following items
and periods:
ITEM
Income tax
Value added tax
Annual statement of operations
Special tax for non-resident real estate
PERIOD
2008 to 2010
2010
2010
2010
2010
2010
2010
2010
Verification and inspection activities are still ongoing to date, and no noteworthy aspects have
been singled out.
145
-
On 3 June 2014, inspections were performed at Caja Insular de Ahorros de Canarias in order to
ascertain compliance with tax obligations and duties in respect of the following items and periods:
ITEM
Income tax
Value added tax
PERÍOD
2009 to 2010
05/2010 to 12/2010
05/2010 to 12/2010
05/2010 to 12/2010
05/2010 to 12/2010
05/2010 to 12/2010
been singled out.
-
On 12 June 2012, inspections were performed at Caja de Ahorros y Monte de Piedad de Avila in
order to ascertain compliance with tax obligations and duties in respect of the following items and
periods:
ITEM
Income tax
Value added tax
PERIOD
2008 to 2010
05/2008 to 12/2010
05/2008 to 12/2010
05/2008 to 12/2010
02/2009 to 12/2011
05/2008 to 12/2010
been singled out.
-
On 20 June 2012, inspections were performed at Caja Rioja in order to ascertain compliance with
tax obligations and duties in respect of the following items and periods:
ITEM
Income tax
Value added tax
PERIOD
2008 to 2010
05/2008 to 12/2010
05/2008 to 12/2010
05/2008 to 12/2010
02/2009 to 12/2010
05/2008 to 12/2010
On 20 May 2015, assessments for the following items and amounts were signed in agreement:
ITEM
Value added tax
Withholdings on account of non-resident income
Income tax
Thousands of euros
480
3
2,822
For the remaining items at the same date, assessments were signed in agreement, with no debt
settled.
These debts were paid on 4 August 2015.
In addition, fines were issued for value added tax and income tax of EUR 6 thousand and EUR
215 thousand, respectively, which have yet to be paid.
146
-
Meanwhile, on 18 December 2012, inspections began at Caixa D'Estalvis Laietana in order to
ascertain compliance with tax obligations and duties in respect of the following items and periods:
ITEM
Income tax
Value added tax
PERIOD
2008 to 2010
11/2008 to 12/2010
11/2008 to 12/2010
11/2008 to 12/2010
2009 to 2010
11/2008 to 12/2010
been singled out.
As a result of the tax assessments appealed, and due to the varying interpretations that may arise
from fiscal regulations, the outcome of inspections by the authorities for the years inspected (for both
the Cajas and the Bank) may give rise to tax liabilities that cannot be objectively quantified at the
present time. However, it is estimated that if any contingent liability arose that was not reasonably
covered (see Note 22) this would not significantly affect the true and fair view of the Group’s equity
and financial position.
(28.3) Reconciliation of accounting profit/(loss) to taxable profit (tax loss)
The detail of income tax expense in the accompanying consolidated income statements for 2015 and
2014 to the consolidated profit/(loss) before tax for the years, each other the breakdown of the
significant losses (gains) for the income tax:
ITEM
31/12/2015
Accounting profit/(loss) before tax
31/12/2014
1,451,985
912,132
(32,188)
(15,006)
(5,524)
(4,955)
(31,872)
(32,297)
5,208
22,246
Profit before adjusted tax
1,419,797
897,126
Tax expense (Taxed income * 30%)
(425,939)
(269,138)
Adjustment to profit
Share of profit/loss of entities accounted for using the equity method
Other permanent differences
Deductions
Income tax expense
Income tax adjustments
Adjustments due to tax rates of foreign operations
25,873
13,275
(400,066)
(255,863)
(24,067)
(24,000)
(24,905)
(998)
Income Tax (1)
(391,413)
(226,172)
Income tax for the year (income/(expense))
(449,038)
(280,861)
Effective rate
Income tax for previous years (income/(expense))
Ohter movements of deferred tax (2)
30,93%
30,79%
(19,228)
-
76,853
54,689
(1) Of which approximately EUR 64,899 thousand relates to current income tax expenses and the remaining EUR 326,514 thousand to deferred tax (see Note 28.5).
(2) In 2015 corresponds to the cancellation of deferred tax assets under the framework of the new income tax regulation (see Note 28.5) of EUR 131,814 thousand and tax assets of EUR
227,041 thousand arising on unrecognised temporary differences in prior years, related mainly to the sale of equity investmen ts in 2015. The remainder relates mainly to temporary
differences for which no deferred tax assets have been recognized.
147
(28.4) Tax recognised directly in consolidated equity
In addition to the income tax recognised in the consolidated income statement for 2015 and 2014, the
Bank recognises in consolidated equity the taxes relating basically to “Valuation Adjustments" (which
includes available-for-sale financial assets, cash flow hedges, hedges of net investments in foreign
operations, and exchange differences) and to “Equity – Reserves” in the accompanying consolidated
balance sheet.
The amount of income tax related to each component of "Other comprehensive income" in 2015 and
2014 is as follows:
Actuarial gains (losses)
2015
2014
(1,534)
(8,479)
207,189
(162,962)
Cash flow hedges
(4,898)
(3,736)
Hedges of net investments in foreign operations
(3,104)
13,741
Total
79
14,715
197,732
(146,721)
(28.5) Deferred tax assets and liabilities
Royal Decree 14/2013, of 29 December
On 30 November 2013, Royal Decree-Law 14/2013, of 29 December, on urgent measures to adapt
Spanish law to European legislation on the supervision and solvency of financial institutions was
published in the Official State Gazette (Boletín Oficial del Estado). With effect for tax periods
commencing on or after 1 January 2014, this Royal Decree-Laws added a twenty-second additional
provision to the TRLIS, enacted by Royal Decree-Law 4/2004, of 5 March “Conversion of deferred tax
assets into credits that give rise to a receivable from the tax authorities”.
In light of this article, deferred tax assets related to credit loss allowances or other assets for potential
debtor insolvency not related to the taxpayer, provided that article 12.2.a) of the TRLIS is not
applicable, as well as those related to the application of articles 13.1.b) and 14.1.f) of the same law
regarding contributions to employee welfare systems or pensions schemes and, as applicable,
provisions for pre-retirement schemes, convert into credits that give rise to a receivable from the tax
authorities when any of the following circumstances arise:
a)
b)
That the taxpayer recognises accounting losses in its annual accounts (audited and
approved by the corresponding body). In this case, the amount of deferred tax assets to be
converted will be determined by applying the ratio of accounting losses to the sum of capital
and reserves to these deferred tax assets.
That the entity is in liquidation or has been legally declared insolvent.
For this conversion of deferred tax assets into a credit that gives rise to a receivable from the tax
authorities, the taxpayer may request a credit from the tax authorities or offset the credit with other tax
liabilities which the taxpayer itself generates as of the time of conversion.
In addition, these deferred tax assets may be exchanged for Spanish government debt once the legal
offset period for tax losses has elapsed (currently 18 years), to be computed as from the accounting
recognition of these tax assets.
A new section 13 of article 19 of TRLIS, Timing differences, has been added for determining taxable
income/(tax loss) for income tax purposes, with retroactive effect from tax periods commencing on or
after 1 January 2011.
In light of the new section 13 of article 19 of the TRLIS, provisions for impairment of loans or other
insolvency-related assets vis-à-vis unrelated debtors to which the deductibility limitation provided for in
article 12.2.a) of the TRLIS does not apply, as well as allowances or contributions to welfare of early
retirement schemes to which the limitations on deductibility provided for in articles 13.1.b) and 14.1.f)
of the same law apply, have generated deferred tax assets will be included in the tax base up to the
limit of the positive tax base of the year before their inclusion and the offset of tax losses.
148
As a result of the new timing criteria, the Bank calculated a different tax base for 2011 and 2012 than
declared, which it will report to the tax authorities in due time and form.
Law 27/2014, of 27 November
Law 27/2014, of 27 November on Corporate Income Tax (the CIT law or "LIS") was enacted on 27
November 2014 and came into force on 1 January 2015, repealing the Revised Text of the Income
Tax Law (TRLIS) approved by Royal Legislative Decree 4/2004, of 5 March. Article 11.12 of the new
LIS includes the text of the repealed Article 19.13 of the TRLIS, with effect from 1 January 2015,
although the new LIS introduced, inter alia, certain restrictions and the application of Article 11.12.
Meanwhile, Article 130 of the Corporate Income Tax Law (LIS) included in the new law additional
provision twenty-two of the Revised Text of the TRLIS, stating that the aforementioned deferred tax
assets may be exchanged for public debt securities after a period of 18 years from the last date of the
tax period in which the assets were recognised. For assets recognised before the enactment of the
law, the calculation period begins from the date of entry into force.
The new LIS included a change in the corporate income tax rate, setting this rate at 28% for 2015 and
25% from 2016. However, accordingly to section 5 of Article 58 of the LIS, consolidated tax groups
that include at least one credit institution will be subject to a 30% tax rate. As Bankia is the parent of
its tax group, the tax group continued to pay a CIT rate of 30% in 2015 and will maintain this rate in
2016 and beyond.
Meanwhile Article 26 of the LIS does not pose a time limit on the carryforward of unused tax losses
existing in the period beginning on or after the law takes effect on 1 January 2015. In addition,
transitional provision twenty-three does not include any time limit on availing of deductions to avoid
double taxation established in Articles 30, 31 and 32 of the TRLIS that had not been used as of the
period beginning on or after the new law becomes effective.
Law 48/2015, of 29 October, on the General State Budgets for 2016
Law 48/2015, of 29 October, on the General State Budgets for 2016 was enacted on 30 October
2015. Effective for tax periods beginning on or after 1 January 2016, this law modifies the tax regime
to establish the aforementioned conversion, sets new conditions for eligibility for the regime and
introduces certain reporting obligations with respect to the deferred tax assets affected by the
regulation. It also provides for a transitional regime applicable to deferred tax assets generated before
1 January 2016, whereby unless certain conditions are met, the right to conversion may be retained,
although to do so a financial contribution must be paid, which is regulated by the new additional
provision 13 of the LIS.
149
Deferred tax assets and liabilities
Pursuant to the tax legislation in force in the countries in which the consolidated companies are
located, certain temporary differences arose that must be taken into account when quantifying the
related income tax expense.
The sources of deferred taxes recognised in the balance sheets at 31 December 2015 and 2014,
bearing in mind the impact of the retroactive application of article 19.3 of the TRLIS, today the article
11.12 of the TRLIS, are as follows:
31/12/2015
ITEM
Deferred tax assets (prepayments) arising at the Bank from consolidation adjustments
Pre-paid taxes arising from temporary differences in the recognition of accounting and taxable income and
expense
Credit losses (*)
31/12/2014
7,476,874
7,683,702
5,205,940
4,947,108
3,927,699
3,976,219
Impairment losses recognised on financial assets with consolidation adjustments
229,192
-
Impairment losses on foreclosed assets (*)
787,469
711,875
Additions to provisions for pensions (*)
165,422
165,414
96,158
93,600
-
86,739
Others provisions
Tax assets relating to unused tax credits and tax relief
21,096
11,137
2,249,838
2,638,718
Losses on available-for-sale financial assets
Recognised unused tax losses
Deferred tax assets (prepayments) arising at Group entities (*)
Total
605,455
668,119
8,082,329
8,351,821
(*)Deferred tax assets eligible to be “monetised”.
31/12/2015
ITEM
31/12/2014
Deferred tax liabilities arising at the Bank
810,803
1,077,344
Unrealised gains on available-for-sale financial assets
663,038
903,015
Unrealised gains on properties
90,262
93,170
Other items
57,503
81,159
Deferred tax liabilities arising at other Group entities
69,984
81,342
880,787
1,158,686
Total
The movement in 2015 is as follows:
Balances at
31/12/2014
Deferred tax assets
Deferred tax liabilities
8,351,821
(1,158,686)
(Charged)/credited
Other
to the income
(Charged)/credited to equity
movements
statement
Due to valuation adjustments(*)
(**)
Balances at
31/12/2015
(405,905)
(10,287)
146,700
79,391
208,019
(9,511)
(880,787)
197,732
137,189
7,201,542
Total
7,193,135
(326,514)
(*) Does not include taxes related to non-current assets held for sale.
(**) Include expenses for tax related to non-current assets held for sale.
8,082,329
The movement in 2014 is as follows:
Deferred tax assets
Deferred tax liabilities
Total
Balances at
31/12/2013
(Charged)/credited
to the income
statement
(Charged)/credited
to equity
Due to valuation
adjustments(*)
Other
movements
8,628,513
(297,139)
(35,609)
56,056
8,351,821
(1,151,891)
94,934
(125,827)
24,098
(1,158,686)
7,476,622
(202,205)
(161,436)
80,154
7,193,135
Balances at
31/12/2014
(*) Does not include taxes related to non-current assets held for sale.
(**) Include expenses for tax related to non-current assets held for sale.
150
The detail of both recognised tax loss carryforwards of the Bank at 31 December 2015 of the Bank's
tax loss carryforwards, including the year in which they arose:
ITEM
Year giving rise to the tax loss
Amount of the tax loss available for offset
Amount of the deferred tax asset
recognised (tax credit)
Recognised amounts
2010
734,618
148,475
2011 (*)
1,229,274
362,422
2012 (*)
8,702,363
1,738,941
TOTAL
10,666,255
2,249,838
(*) As indicated above, the tax losses for 2011 and 2012 were calculated estimating the impact of article 19.13 of the TRLIS
approved by Royal Decree-Law 14/2013, of 29 December, on urgent measures to adapt Spanish law to European
legislation on the supervision and solvency of financial institutions.
The detail of recognised unused deductions and deductions available for offset by the Bank at 31
December 2015, including their year of origin, is as follows:
ITEM
Year giving rise to the tax credits
2005-Other deductions
2008-Deduction for reinvestment
2008- Deduction for R&D&I
2009- Deduction for reinvestment
Amount of the tax credits or
tax relief available for offset
Amount of the deferred tax
asset recognised
103
-
64,824
-
246
-
67,239
-
2,319
2,015
-
2009- Other deductions
419
-
35,426
-
1,872
-
1,589
-
459
-
9,146
-
2011- Deduction for internal double taxation
1,202
-
450
-
140
-
2011- Deductions for donations (Law 49/2002)
8,472
-
1,012
-
2012- Deduction for international double taxation
1,502
-
3,042
-
2013-Deduction for internal double taxation
1,143
-
3,536
-
212
-
82,397
-
1,764
-
4,367
-
150
-
2009-Deductions for donations (Law 49/2002)
2010- Deduction for reinvestment
TOTAL
295,046
-
(28.6) Other tax information
In accordance with prevailing law, Bankia's individual financial statements for 2015 and prior years
provide the following additional tax information: includes additional tax information related to
Transactions carried out in previous years pursuant to Chapter VIII of Title VII of the Revised Tax of
the Corporate Income Tax Law approved by Royal Legislative Decree 4/2004 of 5 March.
151
(28.7) Information regarding the assessment of the recoverability of tax assets
To assess the recoverability of the net deferred tax assets recognised by the Group at 31 December
2015, amounting to EUR 7,201,542 thousand (EUR 7,193,135 thousand at 31 December 2014), the
directors analysed, based on the nature of the assets, the ability to generate sufficient taxable profit
against which the deferred tax assets can be utilised. This analysis was based on the assumptions,
conditions and estimates in forecasts for 2016 and trends over the next two years. Assuming constant
growth thereafter for future periods estimated according to forecast inflation in the long term, full
recovery of the net tax assets would be enabled within a period of no more than 20 years. As with any
estimates subject to assumptions, future events may make it necessary to change them, which could
lead to a prospective change in the net tax assets recognised by the Group, pursuant to the
accounting principle explained in Note 1.4.
In addition, regarding the assessment of the recoverability of deferred tax assets, it should be noted
that, in accordance with Royal Decree-Law 14/2013, of 29 December, on urgent measures to adapt
Spanish law to European legislation on the supervision and solvency of financial institutions, and
articles 11.12 and 130 of Law 27/2014, of 27 November, on Corporate Income Tax -LIS- (see Note
28.5), at 31 December 2015, the Group had deferred tax assets amounting to EUR 5,486,046
thousand (EUR 5,521,627 thousand at 31 December 2014) that meet the requirements under this
regulation. Accordingly, their future recovery is guaranteed through the monetisation mechanisms
established in the aforementioned RDL 14/2013 and article 130 of the LIS, although this recovery is
not expected to be through the offset of future profit, bearing in mind the amendments made for tax
periods beginning on or after 1 January 2016 by Law 48/2015, of 29 October, on the General State
Budgets for 2016.
(29) Other significant disclosures(29.1) Asset transfers
(29.1.1) Securitization
Group entities performed various securitization transactions whereby they transferred loans and
credits in their portfolio to several securitization special-purpose vehicles. These assets were
derecognised when substantially all the associated risks and rewards were transferred. The
securitised assets are recognised in the consolidated balance sheet when all the associated risks
were not substantially transferred.
The consolidation of special-purpose vehicles entails the elimination of the related transactions
between Group entities, including most notably: loans to special-purpose vehicles, liabilities
associated with assets not derecognised, credit enhancements granted to special-purpose vehicles
and bonds acquired by Group entities.
"Loans and advances to customers" includes, inter alia, loans transferred to third parties through
securitization for which risk is retained, if only partially, which in accordance with applicable
accounting standards cannot be derecognised from the balance sheet. The detail of securitised loans
by nature of the underlying financial instrument and the securitised loans that meet the requirements
for derecognition from the balance sheet (see Note 2.2.2) are shown in the table below.
Derecognised out balance sheet (Note 12)
Of which mortgage assets securitised through:
Mortgage participations
Mortgage transfer certificates
Keep on balance sheet (Note 12)
Of which mortgage assets securitised through (Note 12)
Mortgage participations
Mortgage transfer certificates
Foreclosed assets from securitised mortgage assets
31/12/2015
650,326
650,326
402,128
248,198
14,525,997
14,013,597
6,645
14,006,952
142,456
369,944
31/12/2014
806,568
806,567
485,705
320,862
1
17,882,579
15,567,412
7,658
15,559,754
1,990,350
324,817
Appendix V to these consolidated financial statements shows detail of securitization transactions at 31
152
(29.1.2) Repurchase and resale agreements
At 31 December 2015 and 2014, the Group had sold financial assets under outstanding repurchase
agreements amounting to EUR 21,736,946 thousand (EUR 15,293,517 thousand at 31 December
2014), and had purchased financial assets under outstanding resale agreements amounting to EUR
2,580,580 thousand (EUR 5,510,357 thousand at 31 December 2014), as follows:
31/12/2015
ITEM
Government debt securities
Other debt securities
Repurchase
agreement
10,114,532
11,622,414
Total
21,736,946
31/12/2014
Resale agreement
2,078,545
502,035
2,580,580
Repurchase
agreement
6,628,013
8,665,504
15,293,517
Resale agreement
4,622,534
887,823
5,510,357
The sale of financial assets under a repurchase agreement inherently includes the delivery or pledge
of these assets in guarantee of the transaction. At 31 December 2015, the average term of these
repurchases and, accordingly, of the assets provided as collateral was nine months (15 days at 31
December 2014).
(29.1.3) Assets assigned to other own and third-party obligations
At 31 December 2015 and 2014, the Group had significant assets guaranteeing their own obligations
amounting to EUR 81,805 million and EUR 94,745 million, respectively. These amounts corresponded
mainly to loans linked to the issue of long-term mortgage covered bonds (see Note 12 and Appendix
VIII) which, pursuant to the Mortgage Market Law are considered eligible to guarantee the issue of
long-term mortgage covered bonds.
(29.2) Guarantees provided
Financial guarantees are amounts the consolidated entities would be obliged pay on account of third
parties if the original debtors were to default on payments pursuant to commitments assumed by
those entities in the course of their ordinary business activities.
The detail of these financial and non-financial guarantees provided at 31 December 2015 and 2014 is
as follows:
ITEM
Other guarantees and indemnities and other contingent liabilities
Irrevocable documentary credits issued
Irrevocable documentary credits confirmed
Other contingent liabilities
Total
31/12/2015
551,229
6,087,440
325,680
19,489
940
6,984,778
31/12/2014
495,976
6,502,129
242,849
21,880
7,911
7,270,745
Note 3.1 shows the maximum credit risk assumed by the Group in relation to these instruments at 31
December 2015 and 2014, and contains other information relating to the credit risk assumed by the
Group in this connection.
A significant portion of these guarantees will expire without any payment obligation materialising for
the consolidated entities. Therefore, the aggregate balance of these commitments cannot be
considered as an actual future need for financing or liquidity to be provided by the Group to third
parties.
The income generated on guarantee instruments is recognised in the consolidated income statement
under “Fee and commission income” and "Interest and similar income" (in amounts corresponding to
the present value of the fees), calculated by applying the interest rate on the underlying contract to the
face value of the guarantee.
The provisions established to cover these guarantees, which are calculated by applying similar criteria
to those used to calculate the impairment of financial assets at amortised cost, are recognised in the
consolidated balance sheet as “Provisions - Provisions for contingent liabilities and commitments”
(see Note 22).
153
(29.3) Drawable by third parties
At 31 December 2015 and 2014, the limits of the financing contracts granted and the amounts drawn
down thereon in relation to which the Group had assumed a credit commitment which was higher than
the amount recognised on the asset side of the consolidated balance sheet at that date were as
follows:
ITEM
31/12/2015
31/12/2014
Drawable by third parties
11,296,636
10,366,954
Immediately drawable
8,891,526
8,190,256
Conditionally drawable
2,405,110
2,176,698
Other commitments
Total
5,420,024
4,880,310
16,716,660
15,247,264
(29.4) Third party funds managed and marketed by the Group
The breakdown of off-balance sheet funds managed and comercialized by the Group at 31 December
2015 and 2014 is as follows:
ITEM
31/12/2015
Investment companies and funds
12,579,937
10,392,075
6,436,127
3,756,798
6,580,589
4,069,408
129,527
22,902,389
143,112
21,185,184
Pension funds
Savings insurance
Discretionally managed customer portfolios
Total
31/12/2014
In addition, the Group markets off-balance-sheet customer funds managed by third parties outside the
Group. These amounted to EUR 3,633,108 thousand at 31 December 2015 (EUR 3,507,184 at 31
December 2014).
(29.5) Leases
(29.5.1) Finance leases
In the normal course of its business the Group acts as lessor in transactions which, pursuant to the
provisions of the regulations applicable, are classified as finance leases, Arrangements drawn up in
this regard are performed in accordance with general market practices for such transactions.
Finance leases granted by the Group amounted to EUR 1,207,563 thousand at 31 December 2015
(EUR 1,378,044 thousand at 31 December 2014), recognised under "Loans and receivables - Loans
and advances to customers" in the consolidated balance sheet at that date, Impairment losses
recognised on these transactions amounted to EUR 170,932 thousand at 31 December 2015 (EUR
The gross investment in the lease is the sum of: the minimum payments receivable from the finance
lease plus any unsecured residual value corresponding to the lessor. It should be remembered that
the assets leased under finance leases are recognised at the present value of the lease payments
payable by the lessee, plus the guaranteed and non-guaranteed residual value, excluding interest
expenses and value-added tax.
154
The breakdown of these items is as follows:
ITEM
31/12/2015
Present value of minimum lease payments receivable (1)
Residual values not guaranteed
Total gross investment in finance leases
31/12/2014
1,038,588
1,194,918
168,975
183,126
1,207,563
1,378,044
(1) Includes the value of the purchase option whose collection is guaranteed for the Bank.
Unearned finance income from the Bank’s finance leases amounted to EUR 84,110 thousand at 31
December 2015 (EUR 102,790 thousand at 31 December 2014).
The breakdown, by maturity, of gross investment and the present value of minimum payments
receivable is as follows:
31 December 2015
MATURITY
Up to 1 year
1 to 5 years
More than 5 years
Total
Gross investment
315,262
428,966
463,335
1,207,563
Present value of minimum
payments receivable
305,769
386,351
346,468
1,038,588
31 December 2014
MATURITY
Up to 1 year
1 to 5 years
More than 5 years
Total
Gross investment
355,743
495,775
526,526
1,378,044
Present value of minimum
payments receivable
348,345
450,517
396,056
1,194,918
The Group does not act as lessee in finance lease transactions.
(29.5.2) Operating leases
In relation to lease transactions which, pursuant to the provisions of prevailing regulations, must be
considered as operating leases and in which the Group acts as the lessee, the amount of leases and
subleases recognised as an expense in the consolidated income statement amounted to EUR 67,932
thousand for the year ended 31 December 2015 (79,644 thousand at 31 December 2014).
(29.6) Exchanges of assets
In the years ended 31 December 2015 and 2014, the Group did not carry out any significant
exchanges of assets. In this regard, the acquisition by any means of tangible assets in payment of
debts arising with the Group's debtors is not considered an exchange of assets. Information
concerning this type of transaction is shown in Note 2.8 above.
155
(30) Contribution to consolidated profit or loss by company
The contribution by entity within the scope of consolidation of the Bankia Group to consolidated
profit/(loss) for the years ended 31 December 2015 and 2014 is as follows:
COMPANY
Bankia, S.A.
Alianza Inversiones en Inmuebles Dos, S.L.
31/12/2015
31/12/2014
Fully
consolidated
entities of
the Group
Share of
profit/(loss)
of entities
accounted
for using the
equity
method
Fully
consolidated
entities of
the Group
Share of
profit/(loss)
of entities
accounted
for using
the equity
method
790,382
-
573,409
-
(721)
-
7,249
-
11,113
-
29,186
-
121,311
-
(21,245)
-
Bankia Fondos, S.G.I.I.C., S.A.
14,382
-
13,355
-
Bankia Pensiones, S.A., E.G.F.P
18,437
-
28,296
-
Aliancia Zero, S.L.
Bankia Inversiones Financieras, S.A.U.
Aseguradora Valenciana, S,A. de Seguros y Reaseguros
-
7,374
85,337
(2,893)
Mapfre Caja Madrid Vida, S.A., Sdad. de Seguros y Reaseguros
-
24,039
-
35,258
(535)
-
478
-
Jardi Residencial la Garriga, S.L.
10,129
-
(291)
-
Torre Norte Castellana, S.A.
34,979
-
(998)
-
8,614
459
47
(68)
1,008,091
31,872
714,823
32,297
Urbapinar, S.L.
Other companies
TOTAL
(31) Interest and similar income
The breakdown of this item in the accompanying consolidated income statement for the years ended
ITEM
Loans and advances to central banks
Public sector
Resident sector
Non-resident sector
Debt securities
Doubtful assets
Rectification of income as a result of hedging transactions
Finance income from non-financial activities
Other interest
Total
(Expenses) / Income
31/12/2015
31/12/2014
651
1,786
11,826
31,326
2,108,953
2,539,272
110,030
151,527
1,823,827
2,208,707
175,096
179,038
1,550,035
2,131,347
290,920
260,499
(325,464)
(373,601)
1,953
638
38,099
95,893
3,676,973
4,687,160
156
(32) Interest expense and similar charges
(Expenses) / Income
ITEM
31/12/2015
31/12/2014
(16,927)
(76,185)
(106,581)
(181,142)
Customer deposits
(880,257)
(1,465,904)
(20,756)
(33,035)
(832,776)
(1,402,595)
(26,725)
(30,274)
(785,699)
(980,441)
(41,603)
901,709
(24,748)
992,615
645
(3,830)
(8,079)
(936,792)
(20,145)
(1,759,780)
Public sector
Resident sector
Non-resident sector
Subordinated liabilities (Note 20)
Rectification of expenses as a result of hedging transactions
Finance expenses of non-financial activities
Other interest
Total
(33) Return on equity instruments
Income
ITEM
31/12/2015
Non-current assets held for sale – Investments and other equity instruments
Total
31/12/2014
558
213
4,966
5,524
4,742
4,955
(34) Share of profit/loss of entities accounted for using the equity method
ITEM
Associates
Total
(Expenses) / Income
31/12/2015
31,872
31,872
31/12/2014
32,297
32,297
This caption includes the share of attributable profit after tax of each associate and jointly-controlled
entity of the Bankia Group (see Appendices III and IV). Thus, the Group's income tax expense
shown in the consolidated income statement does not reflect any tax effect in respect of profits or
losses from entities accounted for using the equity method.
The detail of the contribution to profit or loss of entities accounted for using the equity method for the
main companies is disclosed in Note 30 above.
157
(35) Fee and commission income
Income
ITEM
Contingent commitments
Collection and payment services
Securities services
Non-banking financial product sales
Other fees and commissions
Total
31/12/2015
31/12/2014
64,469
28,421
345,674
53,818
285,086
243,139
1,020,607
72,275
33,155
408,349
52,367
258,909
210,610
1,035,665
(36) Fee and commission expense
ITEM
(Expenses)
31/12/2015
Brokerage fees on asset and liability transactions
Fees and commissions assigned to other entities and correspondents
Fee and commission expenses on securities transactions
Total
31/12/2014
(40,427)
(18,669)
(23,770)
(82,866)
(54,266)
(6,671)
(27,217)
(88,154)
(37) Gains and losses on financial assets and liabilities (net)
31 December 2015 and 2014, by financial instrument portfolio, is as follows:
ITEM
(Expenses) / Income
31/12/2015
Results of hedging instruments
Results of hedged items
Other
Total
31/12/2014
(36,014) (49,476)
375,750 228,481
85
(857)
2,486
3,638
32,564
13,385
(709,624)
517,779
616,340 (553,587)
58,277
(454)
281,133
217,640
The most significant gains and losses were:
-
In 2015, EUR 376 million from the sale of available-for-sale financial assets related to public
and private debt securities
-
In 2014, EUR 228 million from the sale of available-for-sale financial assets related to public
and private debt securities.
158
(38) Exchange differences (net)
The breakdown of this item in the accompanying consolidated income statement for the year ended
(Expenses) / Income
ITEM
Commercial transactions
Total
31/12/2015
30,134
30,134
31/12/2014
7,774
7,774
(39) Other operating income
ITEM
Income
31/12/2015
Income from investment property (Note 17.2)
Income from operating leases
Sales and income from the rendering of non-financial services
Financial fees and commissions offsetting direct costs
Income on insurance contracts
Other Items
9,831
16,946
3,173
20,727
26,062
Total
76,739
31/12/2014
31,423
14,143
34,990
18,018
14,955
112,391
225,920
(40) Other operating expenses
ITEM
(Expenses)
31/12/2015
Insurance business
Contribution to deposit guarantee fund and Resolution Fund (Note 1.10)
Expenses from investment property
Change in inventories
Other operating expenses
Total
(177,039)
(4)
(1,225)
(118,873)
(297,141)
31/12/2014
(18,654)
(167,547)
(3,959)
(24,153)
(140,352)
(354,665)
(41) Administrative expenses – Staff costs
The detail of this item in the accompanying consolidated income statement for the years ended 31
December 2015 and 2014, by type of cost, is as follows:
(Expenses) / Income
ITEM
Wages and salaries
31/12/2015
(723,800)
31/12/2014
(746,281)
Social security costs
(174,680)
(179,327)
Contributions to defined contribution pension plans
(37,412)
(28,149)
Contributions to defined benefit pension plans
(4,757)
-
Termination benefits
(8,404)
(5,309)
Training costs
(7,774)
(7,864)
Other staff costs (*)
Total
(13,680)
(20,390)
(970,507)
(987,320)
(*) Of which EUR 14,005 thousand accrued to cover death or disability at 31 December 2014.
159
(41.1) Composition and distribution by gender of employees
The numbers of Group employees, by gender and professional category (including executive directors
and senior executives at the Bank), at 31 December 2015 and 2014, and the average headcount for
the years ended 31 December 2015 and 2014 are as follows:
Headcount at 31 December 2015
REMUNERATION LEVELS
Directors
Senior executives
Other employees by
remuneration
level
Level
I
Level II
Level III
Level IV
Level V
Level VI
Level VII
Level VIII
Level IX
Level X
Level XI
Level XII
Level XIII
Group 2 and others
Total Bankia, S.A.
Other Group companies
Total
Men
Women
Year-end headcount
3
3
6,061
121
454
825
1
7,250
10
105
257
3
4
13,311
131
559
1,082
3
4
13,452
137
570
1,101
933
734
993
269
331
262
177
948
10
4
6,067
115
6,182
645
750
1,452
469
744
513
463
1,819
21
1
1
7,251
138
7,389
1,578
1,484
2,445
738
1,075
775
640
2,767
31
1
5
13,318
253
13,571
1,605
1,503
2,499
741
1,082
773
638
2,768
30
5
13,459
599
14,058
Headcount at 31 December 2014
REMUNERATION LEVELS
Directors
Senior executives
Other employees by
remuneration
level
Level
I
Level II
Level III
Level IV
Level V
Level VI
Level VII
Level VIII
Level IX
Level X
Level XI
Level XII
Level XIII
Group 2 and others
Total Bankia, S.A.
Other Group companies
Total
Average headcount for
2015
Average headcount for
2014
Men
Women
Year-end headcount
3
3
6,271
131
471
852
1
7,407
11
107
266
3
4
13,678
142
578
1,118
3
4
13,965
156
606
1,155
968
757
1,001
279
301
263
207
1,018
19
4
6,277
298
6,575
662
769
1,471
479
675
448
517
1,962
39
1
7,408
430
7,838
1,630
1,526
2,472
758
976
711
724
2,980
58
5
13,685
728
14,413
1,663
1,542
2,531
768
977
716
729
3,052
64
1
5
13,972
833
14,805
Note: Does not include partially-retired employees (3 at 31 December 2015 and 31 at 31 December 2014).
160
(41.2) Provisions for pensions and similar obligations (obligations to employees) and
insurance contracts linked to pensions
As described in Note 2.13, the Group has defined post-employment benefit obligations with certain
employees. Following is a detail of these pension obligations and long-term commitments, which are
recognised in the Group’s consolidated balance sheet:
ITEM
Post-employment benefits
31/12/2015
31/12/2014
606,194
689,314
96,538
135,826
89,241
114,620
Other long-term employee benefits
Obligations assumed from the labour agreement entered into as a result of the incorporation of the BFA
Group
Other long-term benefits
(Less) – Plan assets
Total obligations net of associated assets
7,297
21,206
(346,074)
(449,204)
356,658
375,936
Other obligations
Total obligations for pensions funds and similar obligations
-
-
356,658
375,936
of which:
Debit balances - Assets (1)
Credit balances - Liabilities (2)
Insurance contracts linked to pensions (defined-benefit)
(7,710)
(15,352)
364,368
391,288
330,357
334,227
28,271
49,905
358,628
384,132
Insurance contracts linked to other long-term obligations
Total insurance contracts (3)
(1)
Included in "Other assets" in the accompanying consolidated balance sheet.
(2)
Recognised under “Provisions - Provisions for pensions and similar obligations” in the accompanying consolidated balance sheet. (Note
22).
(3)
The Group has a range of insurance policies covering the portion of the aforementioned obligations that do not satisfy the conditions for
classification as plan assets, irrespective of the provisions included in the consolidated balance sheet in accordance with current legislation,
which were recognised under "Insurance contracts linked to pensions" on the asset side of the balance sheet.
The tables below provide a breakdown at 31 December 2015 and 2014 of total obligations for
qualifying assets, distinguishing between those that exceed the value of plan assets and are therefore
recognised under “Provisions - Provisions for pensions and similar obligations” in the consolidated
balance sheet, and those for which the obligations covered by plan assets exceeds the present value
of the obligation which, under current regulations, are recognised at their net amount in "Other assets
- Other" in the consolidated balance sheet:
31 December 2015:
Pre-retirement and other long-term
commitments
Value of
the
obligation
(I)
Value of
plan assets
(II)
Commitments for which the value of the
obligations exceeds the value of the
plan
assets
recognised
under
“Provisions – Provisions for pension and
similar obligations”
583,204
248,199
335,005
96,538
obligations is less than the value of the
plan assets recognised under “Other
assets – Other”
22,990
30,689
(7,699)
606,194
278,888
327,306
Total
(III = I –
II)
Value of
the
obligation
(IV)
Value of
plan
assets
(V)
Total
(VI = IV –
V)
Total (III
+ VI)
67,175
29,363
364,368
-
11
(11)
(7,710)
96,538
67,186
29,352
356,658
161
31 December 2014:
Pre-retirement and other long-term
commitments
Value of
the
obligation
(I)
Value of
plan assets
(II)
obligations exceeds the value of the
plan
assets
recognised
under
“Provisions – Provisions for pension and
similar obligations”
644,121
303,405
340,716
135,826
85,254
50,572
391,288
obligations is less than the value of the
plan assets recognised under “Other
assets – Other”
45,193
59,277
(14,084)
-
1,268
(1,268)
(15,352)
689,314
362,682
326,632
135,826
86,522
49,304
375,936
Total
(III = I –
II)
Value of
the
obligation
(IV)
Value of
plan
assets
(V)
Total (III
+ VI)
Total
(VI = IV –
V)
(41.3) Post-employment benefits
Details of the various post-employment benefit obligations, under both defined benefit and defined
contribution plans, assumed by the Group are as follows:
Defined-contribution plans
As indicated in Note 2.13 above, the consolidated entities have assumed the obligation of making
certain contributions to their employees' external pension schemes that qualify as "definedcontribution" plans under applicable law.
The Group made contributions to external pension funds in the amount of EUR 37,412 thousand in
2015 (EUR 26,594 thousand in 2014), recognised under "Administrative expenses” – Staff costs" in
the consolidated income statement for that year. As a result of the labour agreement reached on 18
July 2012 and 8 February 2013, the contributions to pension plans were suspended in the second half
of 2012 and in 2013. In 2014 and 2015, the contributions resumed at 50% and at 70% of the
obligation, respectively.
Defined-benefit plans
The table below shows the reconciliation between the present value of defined-benefit pension
obligations assumed by the Group with its employees at 31 December 2015 and 2014, the fair value
of plan assets and the fair value of reimbursement rights that do not qualify as plan assets, in all cases
within Spain, along with the amounts recognised on the consolidated balance sheet at those dates:
ITEM
Present value of the obligations
Obligations covered by plan assets
Obligations covered by non-qualifying assets
Less - Fair value of plan assets
Recognised under "Provisions – Provisions for pensions and similar
obligations" on the consolidated balance sheet
Recognised under "Other Assets" on the consolidated balance sheet
Fair value of non-qualifying assets
31/12/2015
31/12/2014
606,194
275,837
330,357
(278,888)
689,314
355,546
333,768
(362,682)
335,005
340,716
(7,699)
(14,084)
330,357
334,227
“Fair value of non-qualifying assets” in the above table includes the fair value of insurance policies
arranged with ASEVAL (EUR 114,916 thousand) to cover employee obligations arising at Caja de
Ahorros de Valencia, Castellón y Alicante, Bancaja and the fair value of the insurance coverage
arranged with MAPFRE (EUR 215,441 thousand) to cover the obligations assumed with employees
from Caja Madrid and Madrid Leasing. The fair value of these insurance policies was calculated in
accordance with the provisions applicable in section 13 of Rule Thirty-Six of Bank of Spain Circulars
4/2004 and 6/2008 and paragraph 115 of IAS 19, the fair value of the insurance was taken to be the
present value of the insured pensions. The expected return on these policies was calculated using a
2.08% interest rate, established in accordance with IAS 19 and the actuarial assumptions specified in
Spanish legislation as they entail obligations with employees subject to Spanish labour laws covered
162
with funds set up in accordance with Royal Decree 1588/1999, of 15 October, as required by rule 35,
indent 11 c) of Bank of Spain Circular 5/2013.
The fair value of plan assets stated in the above table is presented on the consolidated balance sheet
as a reduction of the present value of the Group's obligations.
The present value of the obligations was determined by qualified actuaries using the following
techniques:

Valuation method: “projected unit credit method”, which sees each period of service as giving rise
to an additional unit of benefit entitlement and measures each unit separately.

The estimated retirement age of each employee is the earliest at which the employee is entitled to
retire.

Actuarial assumptions used: unbiased and mutually compatible. Specifically, the most significant
actuarial assumptions used in the calculations were as follows:
Actuarial assumptions
Technical interest rate (1)
2015
2014
2.08%
2.21%
PERMF-2000
GRMF-95
Estimated return on reimbursement rights recognised as assets
2.08%
2.21%
Expected return on plan assets
2.08%
2.21%
Annual pension increase
2%
2%
Cumulative inflation
2%
2%
Annual salary increases (2)
3%
3%
Mortality tables
1)
Assumptions based on the duration of the post-employment obligations, which for this group is approximately 11.5 years (13.9 years for 2014), and in line with the
yield on AA and AAA rated corporate bonds in the euro area.
2)
2% for pre-retired employees who do not accrue seniority wage increases every three years.
The reconciliation of the balances recognised at 31 December 2015 and 2014 for the present value of
the Group's defined-benefit obligations is as follows:
ITEM
Current year’s service cost
Expected interest on obligation
Gains and losses on settlement
Gains and losses recognised immediately in equity (*):
a) (Gain)/loss arising from changes in financial assumptions
b) (Gain)/loss from changes in demographic assumptions
c) Others (Gain)/loss arising from changes
Benefits paid
Risk premium
Plan settlements
Balance at 31 December
31/12/2015
689,314
4
14,464
(1,802)
(17,099)
9,641
(7,794)
(18,946)
(37,398)
3
(41,292)
606,194
31/12/2014
660,942
1,418
21,198
44,179
91,770
(47,591)
(35,526)
(4)
(2,893)
689,314
(*) Since 2013, these amounts are recognised directly in “Valuation adjustments” in equity in the consolidated balance sheets
(see Note 2.13).
163
The reconciliation of the fair value at 31 December 2015 and 2014 of plan assets in defined-benefit
obligations is as follows:
ITEM
Fair value at 1 January
Other movements (1)
Changes in consolidation scope
Gains and losses on settlement
a) Expected return on plan assets,
excluding interest on the plan
Contributions by entity (2)
Benefits paid
31/12/2015
31/12/2014
362,682
7,479
(2,484)
(24,770)
536,054
(189,799)
11,099
30,876
(24,770)
(918)
(21,809)
30,876
(769)
(21,885)
Risk premium
-
Plan settlements
(41,292)
Fair value at 31 December
278,888
(*)
(1)
(2)
(2,894)
362,682
Since 2013, these amounts are recognised directly in “Valuation adjustments” in equity in the consolidated balance
sheets (see Note 2.13).
Withdrawal from the Mapfre policies due to their consideration as linked insurance at 01/01/2014.
Contributions/(reimbursements) imply a change in the fair value of plan assets and, therefore, do not have any impact on
the income statement.
The reconciliation of the fair value at 31 December 2015 and 2014 of reimbursement rights recognised
on the consolidated balance sheet as assets under "Insurance contracts linked to pensions" is as
follows:
ITEM
Other movements (1)
Expected interest on insurance contracts linked to pensions
Losses or gains for settlement
a)
31/12/2015
31/12/2014
334,227
112,967
-
189,799
7,197
9,730
(468)
-
12,784
41,566
12,784
41,566
(7,801)
(6,547)
(15,585)
(13,284)
3
(4)
330,357
334,227
Expected return on insurance contracts, excluding interest on
insurance contracts linked to pensions
Net contributions/(reimbursements) (2)
Benefits paid
Risk premium
(*)
Since 2013, these amounts are recognised directly in “Valuation adjustments” in equity in the consolidated balance
sheets (see Note 2.13).
(1)
(2)
Addition of the Mapfre policies due to their consideration as linked insurance at 01/01/2014.
Contributions/(reimbursements) imply a change in the fair value of "Insurance contracts linked to pensions" and,
therefore, do not have any impact on the income statement.
164
The detail of the fair values of the main plan assets at 31 December 2015 and 2014 is as follows:
ITEM
Insurance policies
Other assets(*)
31/12/2015
32,852
246,036
31/12/2014
60,123
302,559
(*) The fair value of plan assets classified as "Other assets", quantified at EUR 246 million, included assets covered by
employee pension plans or insured by insurance policies that do not fit into the categories set out in paragraph 142 of IAS
19.
The criteria used to determine the total expected return on plan assets are based on the duration of
the post-employment obligations, which for this group is approximately 11.5 years, and in line with the
yield on AA and AAA rated corporate bonds in the euro area.
(41.4) Pre-retirement commitments and other long-term commitments
The table below shows the reconciliation between the present value of pre-retirement commitments
and other long-term obligations assumed by the Group with its employees at 31 December 2015 and
2014, the fair value of plan assets and the fair value of reimbursement rights that do not qualify as
plan assets, in all cases within Spain, along with the amounts recognised on the consolidated balance
sheet at those dates:
ITEM
31/12/2015
31/12/2014
96,538
66,565
29,973
(67,186)
135,826
85,164
50,662
(86,522)
Recognised under "Provisions – Provisions for pensions and similar
obligations" on the consolidated balance sheet
29,363
50,572
Recognised under "Other Assets" on the consolidated balance sheet
(11)
(1,268)
Fair value of hedge assets for pre-retirement commitments and other
long-term commitments
28,271
49,905
Present value of the obligations
Obligations covered by plan assets
Obligations covered by non-qualifying assets
Less - Fair value of plan assets
The present value of the obligations was determined by qualified actuaries using the following
techniques:



Valuation method: projected unit credit method, which sees each period of service as giving
rise to an additional unit of benefit entitlement and measures each unit separately.
The estimated retirement age of each employee is the earliest at which the employee is
entitled to retire.
Actuarial assumptions used.
Actuarial assumptions
Technical interest rate (1)
2015
2014
0.52%
0.59%
PERMF-2000
GRMF-95
0.52%
0.59%
0.52%
0.59%
Annual pension increase
2%
2%
2%
2%
Annual salary increases
2%
2%
Healthcare variation cost increase
2%
2%
Mortality tables
Estimated return on reimbursement rights recognised as
assets
Expected return on plan assets
(1)
Assumptions based on the duration of other long-term commitments, which for this group is approximately 2.2 years (2.4
years in 2014), and in line with the yield on AA and AAA rated corporate bonds in the euro area.
165
Reconciliation of the balances recognised at 31 December 2015 and 2014 for the present value of
obligations relating to pre-retirements and other long-term obligations assumed by the Group is as
follows:
ITEM
Expected interest on the obligation
Gains and losses recognised immediately
a) (Gains)/losses arising on changes in financial assumptions
b) (Gains)/losses arising on changes in demographic assumptions
a) (Gains)/losses arising from other changes (data, experience, etc.)
Benefits paid
31/12/2015
31/12/2014
135,826
689
(9,354)
132
528
(10,014)
(30,623)
96,538
196,679
2,322
(8,700)
2,442
(11,142)
(54,475)
135,826
The table below shows the reconciliation of the fair value at 31 December 2015 and 2014 of plan
assets in pre-retirement commitments and similar defined-benefit obligations (all for Spanish
companies):
ITEM
Expected interest on the plan
Gains and loss recognised immediately
a)
Expected return on plan assets, excluding interest on the plan
Net contributions/(reimbursements) (1)
Benefits paid
(1)
Plan assets
31/12/2015
31/12/2014
86,522
461
(2,252)
98,691
1,299
276
(2,252)
276
(7,904)
(9,641)
67,186
(4,390)
(9,354)
86,522
Contributions/(reimbursements) imply a change in the fair value of plan assets and, therefore, do not have any impact on
the income statement.
The table below shows the reconciliation between 1 January and 31 December 2015 and 2014 of the
fair value of reimbursement rights recognised as assets under "Insurance contracts linked to
pensions" on the consolidated balance sheet for pre-retirement and other long-term obligations (all
corresponding to the Group's Spanish entities):
Insurance contracts linked to
pensions
ITEMS
31/12/2015
Expected interest on insurance contracts linked to pensions
Gains and losses recognised immediately
a)
Expected return on insurance contracts, excluding interest on insurance
contracts linked to pensions
Contributions by entity (1)
Benefits paid
31/12/2014
49,905
229
(563)
89,158
947
(1,609)
(563)
(1,609)
(755)
(20,545)
28,271
(1,322)
(37,269)
49,905
(1) Contributions/(reimbursements) imply a change in the fair value of "Insurance contracts linked to pensions" and, therefore,
do not have any impact on the income statement.
166
The table below shows the fair values of the main plan assets at 31 December 2015 and 2014 for
early-retirement and similar obligations:
ITEM
Insurance policies
31/12/2015
31/12/2014
67,186
86,522
(41.5) Estimate of future payments for defined-benefit obligations
The following table shows the estimate of payments for defined-benefit obligations over the next 10
years:
FUTURE PAYMENTS
2016
2017
2018
2019
2020
2021-2026
Pension commitments
33,985
33,769
33,516
33,223
32,828
186,317
Other long-term commitments
25,831
26,503
23,042
14,486
5,666
143
The best actuarial estimate used by the Group indicates that the amount of contributions to be made
in respect of the pension and similar obligations assumed by the Group in 2016 will not be material
with respect to the profit and etiquity esmated for the Group at the end of the year.
(41.6) Sensitivity analysis
The table below shows an analysis of the sensitivity of defined-benefit obligations at 31 December
2015 corresponding to pension commitments and other long-term commitments (pre-retirements) to
changes in the main actuarial assumptions:
Pension
commitments
Technical interest rate
50bp increase
50bp decrease
Annual salary increases (*)
50bp increase
50bp decrease
Annual pension increase (**)
50bp increase
50bp decrease
50bp increase
50bp decrease
Pre-retirement
commitments
569,230
647,342
95,602
97,487
-
-
645,995
571,021
97,073
95,992
645,995
571,021
97,073
95,992
(*) Annual salary increases only affect assets. As there were no defined-benefit assets at 31 December 2015, this change is not
applicable.
(**)The annual pension increase is based on inflation (CPI), so the sensitivity is the same as for the compound annual CPI.
These changes in actuarial assumptions would not have a significant impact, as 99.28% of the
obligations are guaranteed.
(41.7) Remuneration in kind
The Group's remuneration policy includes certain remuneration in kind, mainly financial assistance
and life and health insurance policies, taxed, as appropriate, in accordance with prevailing regulations.
167
(41.8) Share-based payment schemes
The direct remuneration policy in accordance with the best corporate governance practices and
pursuant to European regulations concerning remuneration policies at credit institutions and RDL
2/2012 of 3 February, Order ECC/1762/2012 of 3 August and Law 10/2014 of 26 June.
The system sets out a specific scheme for settling variable compensation for directors who, in keeping
with the principle of proportionality, perform control functions or whose activity has a significant impact
on the risk profile:

At least 50% of variable remuneration must be paid in Bankia shares.

At least 40% of variable remuneration, in either shares or cash, must be deferred over a
period of three years.
Thus, 30% of annual variable remuneration will be paid in shares following assessment of the year's
objectives. In addition, 20% of annual variable remuneration will be deferred in portions of one third
over a period of three years.
The share price will be the average quoted price over the three months prior to the accrual date.
All shares delivered to directors as part of their annual variable remuneration will be unavailable
during the year immediately following the date on which they are delivered.
(42) Administrative expenses - Other general administrative expenses
The detail, by nature, of this item in the accompanying consolidated income statement for the financial
years ended 31 December 2015 and 2014 is as follows:
ITEM
From property, fixtures and supplies
IT and communications
Advertising and publicity
Technical reports
Surveillance and security courier services
Levies and taxes
Insurance and self-insurance premiums
Other expenses
Total
(Expenses)
31/12/2015
31/12/2014
(122,666)
(161,387)
(50,371)
(40,904)
(14,709)
(59,500)
(4,899)
(86,190)
(540,626)
(139,527)
(174,490)
(62,992)
(54,574)
(16,455)
(60,060)
(6,138)
(84,414)
(598,650)
The detail of the fees paid by the various Bankia Group companies to firms belonging to the worldwide
organisation of Ernst & Young (the auditor of Bankia, S.A. and the Bankia Group) in 2015 is as
follows:
-
For the audit of the annual financial statements of Bankia, S.A. and of the consolidated interim
and annual financial statements of the Bankia Group for 2015: EUR 1,433 thousand (2014: EUR
1,433 thousand)
-
For the audit and review of the financial statements of foreign subsidiaries and companies
comprising the Bankia Group, all for 2015: EUR 224 thousand (2014: EUR 238 thousand)
-
For other assurance and services similar to auditing required by regulations or supervisory
authorities 2015: EUR 300 thousand. (2014: EUR 406 thousand)
-
For other professional services rendered: EUR 193 thousand, of which EUR 5 thousand related to
tax advice. (EUR 118 thousand and EUR 68 thousand in 2014)
Meanwhile, in 2015, the various Bankia Group companies did not pay audit fees to firms other than
the Parent's auditor (EUR 408 thousand in 2014) or fees for other assurance and services similar to
auditing or other professional services (EUR 68 thousand and EUR 2,081 thousand, respectively, in
2014).
The services engaged by the Bankia Group meet the requirements of independence stipulated in
Royal Legislative-Decree 1/2011 of 1 July approving the Consolidated Tax of the Accounting Law and
do not include any work that is incompatible with the auditing function.
168
(43) Amortisation
ITEM
Depreciation of tangible assets (Note 17)
Amortisation of intangible assets (Note 18.2)
Total
(Expenses)
31/12/2015
31/12/2014
(94,607)
(99,232)
(52,189)
(57,022)
(146,796)
(156,254)
(44) Provisions (net)
ITEM
Provision for contingent liabilities (Note 22)
Provision for pension commitments and similar obligations (Note 22)
(Expenses) / Income
31/12/2015
31/12/2014
32,657
136,804
5,389
7,367
Provision for tax contingencies and other legal contingencies (Note 22)
Other provisions (Note 22)
(206,663)
16,415
(362,834)
10,193
Total
(152,202)
(208,470)
(45) Impairment losses on financial assets (net)
The net provision recognised for this item of the consolidated income statement for the years ended
31 December 2015 and 2014 relates to the following financial instruments, by category:
ITEM
Loans and receivables (Note12)
Held-to-maturity investments (Note 13)
Available-for-sale financial assets (Note 11)
Total
(Expenses) / Income
31/12/2015
31/12/2014
(626,378)
(973,178)
39,699
16,382
3,934
6,861
(582,745)
(949,935)
(46) Impairment losses on other assets (net)
The detail by nature of the amount recognised for this item in the accompanying consolidated income
statement for the years ended 31 December 2015 and 2014 is as follows:
ITEM
Impairment losses (net) on goodwill (Notes 18.1 and 16.2)
Impairment losses (net) on investment property (Note 17)
Impairment losses (net) on property, plant and equipment for own use (Note 17)
Impairment losses (net) on inventories
Of which: recognised in “Provisions for impairment losses” (Note 19)
Other assets
Total
(Expenses) / Income
31/12/2015
31/12/2014
(4,000)
43,541
(3,719)
66
(571)
(11,102)
(1,113)
(11,102)
(1,113)
(369)
(795)
28,136
(6,198)
169
(47) Gains/(losses) on disposal of financial assets not classified as non-current assets held for
sale
ITEM
Gain/(loss) on disposal of tangible assets
Gain/(loss) on disposal of investment properties
Gain/(loss) on disposal of investments
Other items
Total
(Expenses) / Income
31/12/2015
(4,813)
(1,768)
43,391
126
31/12/2014
(3,865)
10,609
(13,944)
204
36,936
(6,996)
(48) Gains (losses) on non-current assets held for sale not classified as discontinued
operations
ITEM
(Expenses) / Income
31/12/2015
31/12/2014
(202,248)
(376,412)
(149,211)
(194,658)
(52,427)
(60,897)
-
(47,431)
(610)
(73,426)
Other gains (losses)
175,854
193,555
Total
(26,394)
(182,857)
Impairment losses
Foreclosed tangible assets (Note 15)
Non-current assets - Tangible assets for own use
Investments (Note 15)
Other impairments
170
(49) Related parties
In addition to the disclosures made in Note 6 regarding the remuneration earned by members of the
Board of Directors and senior executives of the Group, following is a detail of the balances
recognised in the consolidated balance sheet at 31 December 2015 and the gains and losses
recognised in the consolidated income statement for the year ended 31 December 2015 arising from
transactions with related parties:
ITEM
Board of
JointlyDirectors
controlled Significant
and senior
Associates entities
shareholders executives
Other
related
parties
ASSETS
281,855
389,550
2,006,310
1,305
615
(120,884)
(52,997)
-
-
-
-
-
1,383,893
-
-
160,971
336,553
3,390,203
1,305
615
174,847
154,871
1,356,609
2,044
62,950
Debt securities
-
-
-
-
-
Other liabilities
-
-
146,565
-
-
174,847
154,871
1,503,174
2,044
62,950
12,697
32,421
5,991
9
3
770
9,348
-
78
83
13,467
41,769
5,991
87
86
Impairment of financial assets
Other assets
Total
LIABILITIES
Customer deposits
Total
OTHER
Commitments
Total
PROFIT OR LOSS
Finance income (*)
3,617
5,906
171,066
14
5
(Finance expense) (*)
equity method
Net fee and commission income
(1,828)
(336)
(75,094)
(7)
(478)
31,872
-
-
-
-
1,135
1,454
54,012
61
(7)
Net provision for impairment of financial assets
(*)Finance income and expenses shown at their gross amounts.
(3,881)
8,045
-
-
-
171
The detail of balances recognised in the Group’s consolidated balance sheet at 31 December 2014
and the gains and losses recognised in the consolidated income statement arising from transactions
with related parties is as follows:
Board of
JointlyDirectors
controlled Significant
and senior
Associates entities
shareholders executives
ITEM
ASSETS
Credit institutions
Impairment of financial assets
Other assets
Total
-
Other
related
parties
-
5,546,023
-
-
480,014
160,390
-
1,317
220
(166,266)
(59,770)
-
-
-
-
-
2,310,153
-
-
313,748
100,620
7,856,176
1,317
220
LIABILITIES
Credit institutions
-
-
1,524,723
-
-
235,508
140,608
-
1,220
82,853
Debt securities
26,723
-
-
-
-
Other liabilities
-
-
197,552
-
-
262,231
140,608
1,722,275
1,220
82,853
38,046
17,980
5,114
9
3
1,756
3,748
-
150
90
39,802
21,728
5,114
159
93
6,988
3,917
103,615
16
3
(4,648)
(645)
(1,448)
(28)
(643)
Customer deposits
Total
OTHER
Commitments
Total
PROFIT OR LOSS
Finance income (*)
(Finance expense) (*)
equity method
Net fee and commission income
Net provision for impairment of financial assets
32,297
-
-
-
-
2,333
131
20,200
38
(52)
(2,088)
17,635
-
-
-
Appendices III and IV to these consolidated financial statements show the details of associates and
jointly-controlled entities, “Other related parties” includes balances held by close family relations of
Bank directors (inter alia, directors' spouses and their own and their spouses' ancestors,
descendants and siblings) other related parties to them, as well as the Employee Pension Fund, to
the best of the Bank's knowledge.
All the transactions between the Group and its related parties were performed on an arm's-length
basis.
At 31 December 2015, the FROB, through BFA, held a 64.23% (64.46% taking treasury share policy
in consideration) stake in Bankia, S. A. The FROB carries on its activity in accordance with Law
9/2012, of 14 November 2012. It is wholly owned by the Spanish government and its purpose is to
oversee the restructuring and resolution of credit institutions. Given the indirect stake held by the
FROB in Bankia, S.A., the Spanish government is a related party under prevailing regulations.
Balances with public administrations at 31 December 2015 are disclosed in the following notes to the
consolidated financial statements:
-
Note 12 Loans to the Spanish public sector.
-
Notes 9, 11 and 13 Investments in Spanish government debt securities.
-
Note 20 Spanish public sector deposits.
-
Appendix VI Securities issued with an irrevocable guarantee of the Spanish State (which, in
the year of issue, include payment of a fee).
172
The income and expense recognised in the consolidated income statements for 2015 and 2014 are as
follows:
ITEM
31/12/2015
31/12/2014
Finance income (*) (Note 31)
110,030
151,527
(Finance expense)(* ) (Note 32)
(20,756)
(33,035)
There were no significant individual transactions with the Spanish public sector outside the ordinary
course of the Group’s business.
Transactions carried out, balances held and contracts entered into with BFA
The main balances held by the Bank with BFA (significant shareholder) at 31 December 2015
include:

“Loans and advances to customers" on the asset side of the balance sheet includes EUR 1,104
million related to amounts to be reimbursed by BFA due to its assumption of 60% of the
estimated contingencies arising from Bankia's IPO under the terms of the agreement between
BFA and Bankia. The balance of Reverse repurchase agreements" with BFA, for EUR 899
million; the balance arising from guarantees provided as collateral under the master agreement
entered into with the main shareholder to cover operations involving derivatives and fixedincome repo agreements, for EUR 1 million;

"Credit institutions" on the liability side of the balance sheet includes the amount arising from the
guarantees received from BFA as collateral in connection with the transactions mentioned in the
preceding paragraph, totalling EUR 1,267 million, This item also includes a demand deposit
(interest-bearing) made by BFA for EUR 90 million;

“Other assets” includes mainly receivables related to the fair value of derivatives entered into by
it for EUR 1,374 million, as well as the balance related to the accrual of fees and commissions
explained below;

“Other liabilities” includes mainly payables related to the fair value of transactions with
derivatives entered into by BFA;

“Contingent liabilities” and “Commitments” include amounts drawn and drawable, respectively,
on the line of guarantees granted by Bankia to BFA;

"Net fee and commission income" in the income statement includes income from services
rendered by the Bank to recover BFA assets completely deteriorated and assests written off,
calculated in accordance with the total amount recovered and from guarantees issued/received;

The table above showing related-party figures at 31 December 2015 includes finance costs and
income, respectively, in connection with the loan and deposit transactions mentioned under the
above headings.
Bankia and BFA have also entered into the following contracts and agreements:

A framework agreement governing relations between the two institutions.

A Service Level Agreement that enables BFA to correctly perform its activity by using
Bankia's human and material resources, while avoiding redundancies.

A CMOF “(Contrato Marco de Operaciones Financieras)” Master Agreement on derivatives
trading between the two institutions.

A Global Master Repurchase Agreement (GMRA) and a Collateral Assignment Agreement
linked to fixed-income asset sale and repurchase transactions.

A European Master Financial Transactions Agreement (EMFTA) covering securities loans
and fixed-income repo agreements.

A guarantee line in favour of BFA amounting to EUR 14 million to back the limits on
guarantee lines and temporary guarantees issued in respect of liabilities from lawsuits
requiring the guarantee of a financial institution, in addition to other types of claims.
173

A cost-sharing agreement for lawsuits related to preferred participating securities and
subordinated bonds.

An agreement establishing an access mechanism allowing BFA, through the Bank, to avail of
the liquidity and funding mechanisms set up by the ECB for credit institutions, as well as
private deals inherent in the business of credit institutions.

An agreement to apportion the cost of civil proceedings and claims filed in relation to
Bankia's IPO.

BFA/Bankia cooperation protocol. Article (2) CRR, designed to regulate relations between
BFA and Bankia with respect to defining and implementing the necessary mechanisms and
procedures to comply with the obligations imposed by article 11.2 of Regulation (EU) No
575/2013 and, in particular, to verify that BFA complies with the capital requirements imposed
by applicable legislation.
All transactions between the two entities are carried out on normal market terms.
(50) Explanation added for translation to English
These consolidated financial statements are presented on the basis of the regulatory financial
reporting framework applicable to the Group (see Note 1.3). Certain accounting practices applied by
the Group that conform with that regulatory framework may not conform with other generally accepted
accounting principles and rules.
174
APPENDICES
Appendix I - Separate financial statements
Bankia, S.A.
Balance sheet at 31 December 2015 and 2014
ASSETS
1. Cash and balances with central banks
31/12/2015
2,978,909
31/12/2014
2,926,779
2. Financial assets held for trading
12,143,851
50,834
4,896
12,088,121
50,834
18,555,388
80,506
10,576
18,464,306
78,840
3. Other financial assets at fair value through profit or loss
-
31,260,635
31,260,635
13,412,720
35,153,700
35,153,700
11,232,480
5. Loans and receivables
118,167,198
5,476,889
111,739,569
950,740
82,443,791
125,599,760
9,506,291
114,524,952
1,568,517
95,415,710
23,705,906
8,505,548
26,659,160
6,332,965
6. Held-to-maturity investments
-
-
8. Hedging derivatives
4,061,048
2,483,197
10. Investments
10.1. Associates
10.2. Jointly-controlled entities
10.3. Group entities
3,225,445
124,748
3,100,697
5,518,913
2,772,050
3,189,586
148,278
3,041,308
11. Insurance contracts linked to pensions
13. Tangible assets
13.1. Property, plant and equipment
13.1.1. For own use
13.1.2. Leased out under an operating lease
13.1.3. Assigned to welfare projects
13.2. Investment property
Memorandum item: acquired under a finance lease
14. Intangible assets
14.1 Goodwill
14.2 Other intangible assets
15. Tax assets
15.1 Current
15.2 Deferred
16. Other assets
TOTAL ASSETS
1,654,907
1,421,005
1,421,005
233,902
-
358,628
384,132
1,443,646
1,264,615
1,264,615
179,031
-
101,866
101,866
87,189
87,189
7,714,143
247,201
7,466,942
365,083
208,220,816
7,856,484
134,128
7,722,356
540,812
230,687,599
LIABILITIES AND EQUITY
LIABILITIES
1. Financial liabilities held for trading
1.6. Short positions
2. Other financial liabilities at fair value through profit or loss
3. Financial liabilities at amortised cost
5. Hedging derivatives
6. Liabilities associated with non-current assets held for sale
8. Provisions
8.1. Provisions for pensions and similar obligations
8.2. Provisions for taxes and legal contingencies
8.3. Provisions for contingent liabilities and commitments
8.4. Other provisions
9. Tax liabilities
9.1. Current
9.2. Deferred
10. Welfare Fund
11. Other liabilities
12. Capital having the nature of a financial liability
TOTAL LIABILITIES
EQUITY
1. Own funds
1.1. Capital
1.1.1 Issued
1.1.2 Less: Uncalled capital
1.2. Share Premium
1.3. Reserves
1.4. Other equity instruments
1.4.1. Equity component of compound financial instruments
1.4.2. Non-voting equity units and associated funds
1.4.3. Other equity instruments
1.5. Less: treasury shares
1.6. Profit/(loss) for the year attributable to the parent
1.7. Less: dividends and remuneration
2. Valuation adjustments
2.2. Cash flow hedges
2.3. Hedges of net investments in foreign operations
2.4. Exchange differences
2.5. Non-current assets held for sale
2.7. Other valuation adjustments
TOTAL EQUITY
MEMORANDUM ITEM
1. Contingent exposures
2. Contingent commitments
31/12/2015
31/12/2014
12,428,660
12,415,129
13,531
178,534,410
19,474,064
23,093,076
115,176,798
18,759,949
1,045,906
984,617
974,506
2,732,687
364,368
1,883,987
387,179
97,153
810,966
163
810,803
779,807
196,261,036
18,148,988
18,091,395
57,593
194,760,450
36,500,033
23,670,120
113,025,298
18,704,802
1,043,359
1,816,838
2,437,602
1,456,769
391,288
416,146
419,019
230,316
1,077,805
461
1,077,344
877,194
218,758,808
11,325,470
9,213,863
9,213,863
1,218,016
(46,473)
940,064
634,310
605,823
(1,813)
39
30,261
11,959,780
208,220,816
26,721,870
7,365,636
19,356,234
10,811,603
11,517,329
11,517,329
4,054,700
(5,466,374)
(67,625)
773,573
1,117,188
1,091,531
(1,239)
214
26,682
11,928,791
230,687,599
25,382,597
7,645,716
17,736,881
175
Bankia, S.A.
Income statement for the years ended 31 December 2015 and 2014
31/12/2015
1. Interest and similar income
2. Interest expense and similar charges
3. Remuneration of capital having the nature of a financial liability
A. NET INTEREST INCOME
31/12/2014
3,622,819
4,520,592
(1,005,304)
(1,817,140)
-
-
2,617,515
2,703,452
4. Return on equity instruments
52,007
295,048
6. Fees and commission income
931,664
965,033
7. Fees and commission expenses
(73,570)
(72,755)
8. Gains and losses on financial assets and liabilities (net)
271,588
175,250
8.1. Held for trading
(30,165)
(20,187)
8.2. Other financial instruments at fair value through profit or loss
-
-
8.3. Financial instruments not measured at fair value through profit or loss
395,037
231,245
8.4. Other
(93,284)
(35,808)
9. Exchange differences (net)
28,173
6,161
10. Other operating income
54,488
97,928
(269,533)
(275,380)
11. Other operating expenses
B. GROSS INCOME
3,612,332
3,894,737
(1,418,511)
(1,473,418)
12.1. Staff costs
(912,555)
(926,832)
12.2. Other general administrative expenses
(505,956)
(546,586)
13. Depreciation and amortisation charge
(137,162)
(142,268)
14. Provisions (net)
(129,994)
(200,300)
15. Impairment losses on financial assets (net)
(589,013)
(793,453)
(632,646)
(821,611)
12. Administrative expenses
15.2. Other financial instruments not measured at fair value through profit or loss
C. NET OPERATING INCOME/(EXPENSE)
16. Impairment losses on other assets (net)
16.1. Goodwill and other intangible assets
43,633
28,158
1,337,652
1,285,298
96,275
(16,563)
-
-
16.2. Other assets
96,275
(16,563)
17. Gains/(losses) on disposal of assets not classified as non-current assets held for sale
16,493
(2,442)
-
-
18. Negative goodwill on business combinations
19. Gains/(losses) on non-current assets held for sale not classified as discontinued operations
(243,741)
(257,226)
D. PROFIT/(LOSS) BEFORE TAX
1,206,679
1,009,067
20. Income tax
(266,615)
(235,494)
-
-
940,064
773,573
21. Mandatory transfer to welfare funds
E. PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS
22. Profit/(loss) from discontinued operations (net)
F. CONSOLIDATED PROFIT/(LOSS) FOR THE YEAR
-
-
940,064
773,573
176
BANKIA, S.A.
Statement of recognised income and expense for the years ended 31 December 2015 and 2014
A) CONSOLIDATED PROFIT/(LOSS) FOR THE YEAR
31/12/2015
31/12/2014
940,064
773,573
(482,878)
397,742
3,579
19,784
5,113
28,263
-
-
(1,534)
(8,479)
(486,457)
377,958
(693,869)
547,757
(320,220)
776,120
(373,649)
(228,363)
-
-
(820)
(6,589)
(820)
(6,589)
-
-
2.3. Amounts transferred to initial carrying amount of hedged items
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(250)
(1,229)
(250)
(1,229)
-
-
-
-
-
-
9. Income tax on items that could be reclassified to profit or loss
208,482
(161,981)
C) TOTAL RECOGNISED INCOME AND EXPENSE (A+B)
457,186
1,171,315
B) OTHER RECOGNISED INCOME AND EXPENSE
B.1) Items not to be reclassified to profit or loss
1. Actuarial gains/(losses) on defined-benefit pension plans
4. Companies accounted for using the equity method
B.2) Items eligible to be reclassified to profit or loss
2. Cash flow hedges
3. Hedges of net investments in foreign operations
4. Exchange differences
8. Other recognised income and expense
177
Bankia, S.A.
Statement of changes in total equity for the year ended 31 December 2015
OWN FUNDS
Share capital
1. Balance at 01 January 2015
Share
premium
Less:
treasury
shares
Other equity
instruments
Reserves
Profit/(loss) for
the year
Less: Dividends
and
remuneration
Total own funds
VALUATION
ADJUSTMENTS
TOTAL EQUITY
11,517,329
4,054,700
(5,466,374)
-
(67,625)
773,573
-
10,811,603
1,117,188
11,928,791
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,517,329
4,054,700
(5,466,374)
-
(67,625)
773,573
-
10,811,603
1,117,188
11,928,791
-
-
-
-
-
940,064
-
940,064
(482,878)
457,186
(2,303,466)
(4,054,700)
6,684,390
-
21,152
(773,573)
-
(426,197)
-
(426,197)
-
-
-
-
-
-
-
-
-
-
(2,303,466)
(4,054,700)
6,358,166
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(201,553)
-
(201,553)
-
(201,553)
-
-
(9,736)
-
21,152
-
-
11,416
-
11,416
-
-
572,020
-
-
(572,020)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(236,060)
-
-
-
-
(236,060)
-
(236,060)
9,213,863
-
1,218,016
-
(46,473)
940,064
-
11,325,470
634,310
11,959,780
178
Bankia, S.A.
Statement of changes in total equity for the year ended 31 December 2014
OWN FUNDS
Share capital
Share
premium
Less:
treasury
shares
Other equity
instruments
Reserves
Less: Dividends
and
remuneration
Profit/(loss)
for the year
4,054,700
(5,532,242)
-
11,753
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,517,329
4,054,700
(5,532,242)
-
11,753
67,683
-
10,095,717
719,446
10,815,163
-
-
-
-
-
773,573
-
773,573
397,742
1,171,315
-
-
65,868
-
55,872
(67,683)
-
(57,687)
-
(57,687)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,265
-
55,872
-
-
(48,607)
-
(48,607)
-
-
67,683
-
-
(67,683)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9,080)
-
-
-
-
(9,080)
-
(9,080)
11,517,329
4,054,700
(5,466,374)
-
67,625
773,573
-
10,811,603
1,117,188
11,928,791
10,095,717
VALUATION
ADJUSTMENTS
11,517,329
-
VALUATION
ADJUSTMENTS
1. Balance at 01 January 2014
67,683
Total own funds
719,4466
10,815,163
-
179
Bankia, S.A.
Statement of cash flows for the years ended 31 December 2015 and 2014
A) CASH FLOWS USED IN OPERATING ACTIVITIES
1. Consolidated profit/(loss) for the year
2. Adjustments made to obtain the cash flows from operating activities
2.1. Depreciation and amortisation
2.2. Other
3. Net increase/(decrease) in operating assets
3.1. Financial assets held for trading
3.2. Other financial assets at fair value through profit or loss
3.5. Other operating assets
4. Net increase/(decrease) in operating liabilities
4.1. Financial liabilities held for trading
4.2. Other financial liabilities at fair value through profit or loss
4.3. Financial liabilities at amortised cost
4.4. Other operating liabilities
5. Income tax receipts/(payments)
2015
31/12/2014
(3,542,722)
(1,890,921)
940,064
830,547
137,162
693,385
10,521,431
35,352
3,576,529
8,179,842
(1,270,292)
(15,963,201)
655,857
(16,264,917)
(354,141)
773,573
1,410,340
142,268
1,268,072
10,088,332
85,517
6,716,860
4,887,785
(1,601,830)
(14,245,657)
1,520,657
(16,061,549)
295,235
128,437
82,491
B) CASH FLOWS FROM INVESTING ACTIVITIES
3,720,350
636,969
6. Payments
6.3. Investments
6.7. Other payments related to investing activities
7. Proceeds
7.3. Investments
7.7. Other proceeds related to investing activities
424,462
302,746
65,593
2,225
3,880
50,018
4,144,812
71,178
595,383
3,478,251
265,020
173,521
69,756
7,503
14,240
901,989
65,369
10,787
624,577
201,256
-
-
C) CASH FLOWS FROM FINANCING ACTIVITIES
(125,498)
732,153
8. Payments
8.1. Dividends
8.3. Redemption of own equity instruments
8.4. Acquisition of own equity instruments
8.5. Other payments related to financing activities
9. Proceeds
9.2. Issuance of own equity instruments
9.3. Disposal of own equity instruments
9.4. Other proceeds related to financing activities
4,707,761
201,553
96,611
4,409,597
4,582,263
117,763
341,496
129,521
211,975
1,073,649
1,000,000
73,649
4,464,500
-
-
-
52,130
(521,799)
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
2,926,779
3,448,578
G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR
2,978,909
2,926,779
D) EFFECT OF EXCHANGE RATE DIFFERENCES
E) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D)
MEMORANDUM ITEM
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF YEAR
1.1. Cash
1.2. Cash equivalents at central banks
1.3. Other financial assets
1.4. Less: Bank overdrafts refundable on demand
740,870
2,238,039
-
-
Total cash and cash equivalents at end of year
2,978,909
2,926,779
737,604
2,189,175
-
180
Appendix II - Subsidiaries
The key details on subsidiaries, including those classified under "Non-current assets held for sale" at 31 December 2015 are as
follows:
% Ownership interest owned by the Group
% Current interest
Company
Business activity
Location
Direct
Indirect
% Current
interest
ABITARIA CONSULTORÍA Y GESTIÓN, S.A.
Other independent services
Madrid - SPAIN
-
100.00
100.00
ARRENDADORA AERONÁUTICA, AIE
Purchase and lease of aircraft
Madrid - SPAIN
68.17
-
68.17
ARRENDADORA DE EQUIPAMIENTOS FERROVIARIOS, S.A.
Purchase and lease of trains
Barcelona - SPAIN
85.00
-
85.00
BANCAJA EMISIONES, S.A.U.
Financial brokerage
Castellón - SPAIN
100.00
-
100.00
BANKIA FONDOS, S.G.I.I.C., S.A.
Manager of collective investment undertakings
Madrid - SPAIN
100.00
-
100.00
BANKIA HABITAT, S.L.U.
Real estate
Valencia - SPAIN
100.00
-
100.00
BANKIA INVERSIONES FINANCIERAS, S.A.U.
Corporate management
Madrid - SPAIN
100.00
-
100.00
BANKIA MEDIACIÓN, OPERADOR DE BANCA SEGUROS
VINCULADO, S.A.U.
Insurance intermediary-Bancassurance operator
Madrid - SPAIN
100.00
-
100.00
BANKIA PENSIONES, S.A., ENTIDAD GESTORA DE FONDOS
DE PENSIONES
Pension fund manager
Madrid - SPAIN
35.74
64.26
100.00
BEIMAD INVESTMENT SERVICES COMPANY LIMITED
Business management advisory services
Beijing – PEOPLE´S REPUBLIC OF CHINA
100.00
-
100.00
CAYMADRID INTERNACIONAL, LTD.
CENTRO DE SERVICIOS OPERATIVOS E INGENIERIA DE
PROCESOS, S.L.
Financial brokerage
Great Cayman – CAYMAN ISLANDS
100.00
-
100.00
Madrid - SPAIN
100.00
-
100.00
CORPORACIÓN FINANCIERA HABANA, S.A. (1)
Industry, commerce and services financing
La Habana – REPUBLIC OF CUBA
60.00
-
60.00
CORPORACIÓN INDUSTRIAL BANKIA, S.A.U.
Madrid - SPAIN
100.00
-
100.00
COSTA EBORIS, S.L.U.
Real estate
Valencia - SPAIN
-
100.00
100.00
ENCINA LOS MONTEROS, S.L.U.
Real estate
Valencia - SPAIN
-
100.00
100.00
ESPAI COMERCIAL VILA REAL,S.L.
Real estate
Castellón - SPAIN
48.48
46.18
94.66
FINCAS Y GESTIÓN INMOBILIARIA 26001, S.L.U.
Real estate
Valencia - SPAIN
100.00
-
100.00
GARANAIR, S.L.
Madrid - SPAIN
87.00
-
87.00
GEOPORTUGAL - IMOBILIARIA, LDA.
Real Estate development
Povoa du Varzim - PORTUGAL
-
100.00
100.00
IB INVESTMENTS GMBH
Real Estate development
Berlín - GERMANY
-
94.50
94.50
INMOGESTIÓN Y PATRIMONIOS, S.A.
Madrid - SPAIN
0.10
99.90
100.00
INVERSIONES Y DESARROLLOS 2069 MADRID, S.L.U.
Real estate
Madrid - SPAIN
100.00
-
100.00
MEDIACIÓN Y DIAGNÓSTICOS, S.A.
Madrid - SPAIN
100.00
-
100.00
MINERVA RENOVABLES S.A.U.
Photovoltaic energy
Madrid - SPAIN
100.00
-
100.00
NAVICOAS ASTURIAS, S.L. (1)
Real estate
Madrid - SPAIN
-
95.00
95.00
181
% Current interest
Company
Business activity
Location
Indirect
% Current
interest
100.00
-
100.00
-
100.00
100.00
Direct
NAVIERA CATA, S.A.
Acquisition, leases and operation of ships
Las Palmas de Gran Canarias - SPAIN
OCIO LOS MONTEROS, S.L.U.
Real estate
Valencia - SPAIN
PAGUMAR, A.I.E.
Acquisition, leases and operation of ships
Las Palmas de Gran Canarias - SPAIN
85.45
-
85.45
PARTICIPACIONES Y CARTERA DE INVERSIÓN, S.L.
Madrid - SPAIN
0.01
99.99
100.00
SECTOR DE PARTICIPACIONES INTEGRALES, S.L.
SEGURBANKIA, S.A. CORREDURÍA DE SEGUROS DEL GRUPO
BANKIA
Madrid - SPAIN
100.00
-
100.00
Insurance intermediary
Madrid - SPAIN
0.02
99.98
100.00
TORRE NORTE CASTELLANA, S.A.
Real estate
Madrid - SPAIN
100.00
-
100.00
VALENCIANA DE INVERSIONES MOBILIARIAS, S.L.U.
Valencia - SPAIN
100.00
-
100.00
VALORACIÓN Y CONTROL, S.L.
Madrid - SPAIN
0.01
99.99
100.00
(1)
Classified under "Non-current assets held for sale”.
182
Appendix III - Jointly-controlled entities
The key details on jointly-controlled entities at 31 December 2015 are as follows:
% Ownership interest owned by the
Group
Thousands of euros
Investee information(*)
% Current interest
Company
Business activity
Business activity
ASEGURADORA VALENCIANA, S.A. DE SEGUROS Y REASEGUROS
Underwriter
Majadahonda (Madrid) - SPAIN
BANKIA MAPFRE VIDA, S.A. DE SEGUROS Y REASEGUROS
Life insurance
Madrid - SPAIN
LAIETANA VIDA COMPAÑÍA DE SEGUROS DE LA CAJA DE AHORROS LAIETANA, S.A.
Underwriter
Majadahonda (Madrid) - SPAIN
2015
Indirect
Total
ownership
interest
Assets (*)
Liabilities
(*)
Profit/(loss)
49.00
-
49.00
2,729,885
2,558,547
7,463
-
49,00
49.00
5,824,995
5,541,655
51,081
49,00
-
49,00
247.936
233,740
908
Direct
(*) Latest available data, unaudited.
183
Appendix IV - Jointly-controlled entities and associates classified under Non-current assets held for sale
The key details on jointly-controlled entities and associates classified under "Non-current assets held for sale" at 31 December 2015
are as follows:
Thousands of euros
Investee information (*)
2015
% Current interest
Company
Business activity
Location
Direct
Indirect
Total ownership
interest
Assets
Liabilities
Profit/(loss)
(13,227)
Jointly controlled entities
GLOBAL VIA INFRAESTRUCTURAS, S.A.
Development and operation of public infrastructure
Madrid - SPAIN
-
50.00
50.00
3,764,645
3,063,220
IB OPCO HOLDING, S.L.
Madrid - SPAIN
-
43.59
43.59
2,612,005
2,662
(13)
MADRID DEPORTE AUDIOVISUAL, S.A.
Madrid - SPAIN
47.50
-
47.50
73,530
73,373
(1,653)
ACINELAV INVERSIONES 2006, S.L.
Real estate
Valencia - SPAIN
-
25.40
25.40
280,178
304,435
(8,220)
AGRUPACIÓN DE LA MEDIACION ASEGURADORA DE LAS ENTIDADES
FINANCIERAS AIE
Services
Madrid - SPAIN
-
33.33
33.33
459
714
168
ALAZOR INVERSIONES, S.A.
Other activities related to road transport
Villaviciosa de Odon (Madrid)- SPAIN
-
20.00
20.00
1,403,122
1,297,341
(25,023)
ARRENDADORA FERROVIARIA, S.A.
Purchase and lease of trains
Barcelona - SPAIN
29.07
-
29.07
384,269
384,855
3
AVALMADRID, S.G.R.
SME financing
Madrid - SPAIN
27.37
-
27.37
106,616
64,185
-
BAJA CALIFORNIA INVESTMENTS, B.V.
Real estate
Holland - NETHERLANDS
-
40.00
40.00
76,860
4
(51)
COSTA BELLVER, S.A.
Real estate
Castellón - SPAIN
-
46.40
46.40
8,936
8,536
(420)
FERROMOVIL 3000, S.L.
Purchase and lease of railway stock
Madrid - SPAIN
30.00
-
30.00
519,738
489,826
165
FERROMOVIL 9000, S.L.
Madrid - SPAIN
30.00
-
30.00
336,749
314,707
(6)
FOMENTO DE INVERSIONES RIOJANAS, S.A.
Holding company
Logroño (La Rioja) - SPAIN
-
40.00
40.00
11,296
8
81
HACIENDAS MARQUÉS DE LA CONCORDIA, S.A.
Winemaking
Alfaro (La Rioja) - SPAIN
-
16.16
16.16
9,697
574
(2,373)
MAQUAVIT INMUEBLES, S.L.
Property holdings
Madrid - SPAIN
-
43.16
43.16
50,323
4,705
(284)
NEWCOVAL, S.L.
Real estate
Valencia - SPAIN
-
50.00
50.00
746
659
(7)
NUEVAS ACTIVIDADES URBANAS, S.L.
Real estate
Valencia - SPAIN
-
48.62
48.62
287,886
117,487
(81,247)
NUMZAAN, S.L. IN LIQUIDATION
Real estate
Zaragoza - SPAIN
14.13
-
14.13
1,381
66,399
(859)
PARQUE CENTRAL AGENTE URBANIZADOR, S.L.
Real estate
Valencia - SPAIN
10.83
17.10
27.93
55,432
56,207
(1,910)
PLAN AZUL 07, S.L.
Madrid - SPAIN
31.60
-
31.60
377,998
356,638
3,480
PORTUNA INVESTMENT, B.V.
Real estate
-
40.00
40.00
48,668
17
(175)
RENOVABLES SAMCA S.A.
Electricity generation
Badajoz - SPAIN
-
33.33
33.33
587,626
348,348
10,843
RESIDENCIAL NAQUERA GOLF, S.A.
Real estate
Valencia - SPAIN
-
23.75
23.75
-
-
-
Associates
184
Thousands of euros
Investee information (*)
2015
% Current interest
Company
Business activity
Location
Direct
Indirect
Total ownership
interest
Assets
Liabilities
Profit/(loss)
(5)
RIVIERA MAYA INVESTMENT, B.V.
Real estate
Holland – NETHERLANDS
-
40.00
40.00
18,212
4
ROYACTURA, S.L.
Real estate
Las Rozas de Madrid (Madrid) - SPAIN
-
45.00
45.00
46,680
54,530
-
SERALICAN S.L.
Foodstuffs
Ingenio (Las Palmas de Gran Canarias) - SPAIN
40.00
-
40.00
6,972
5,883
(479)
SHARE CAPITAL, S.L.
Real estate
Paterna (Valencia) - SPAIN
-
43.02
43.02
15,630
80,243
(3,642)
-
-
-
50.00
50.00
-
9.90
15.56
25.46
72,543
81,680
(3,835)
-
50.00
50.00
16,279
17,724
(748)
-
50.00
50.00
9,681
(17)
314
40.00
23,108
4
50
107,527
118,419
-
9,942
40,325
(1,203)
SOCIETE CASA MADRID DEVELOPMENT
Equity investments
Casablanca – MOROCCO
URBANIZADORA FUENTE SAN LUIS, S.L.
Real estate
Valencia – SPAIN
VALDEMONTE PROYECTOS, S.L.
Residential leasing
VALDEMONTE RENTAS, S.L.
Residential leasing
VARAMITRA REAL ESTATES, B.V.
Real estate
VEHÍCULO DE TENENCIA Y GESTIÓN 9, S.L.
Real estate development
Madrid - SPAIN
VILADECAVALLS PARK, CENTRO INDUSTRIAL, LOGÍSITICO Y
COMERCIAL, S.A.
Real estate development
Barcelona - SPAIN
-
40.00
22.87
19.79
42.66
-
34.73
34.73
(*) Latest available unaudited data.
185
Appendix V – Securitization funds
ITEM
CIBELES III
AyT 2 loan securitization
BANCAJA 3 loan securitization
FTPYME BANCAJA 2 loan securitization
AyT HIPOTECARIO IV loan securitization
AYT 1 TIT FONDO TIT HIPOTECARIA
Total derecognised
ITEM
AyT COLATERALES GLOBAL loan securitization
AyT FTPYME II loan securitization
FTPYME II loan securitization
FTPYME I loan securitization
RMBS I loan securitization
RMBS II loan securitization
RMBS III loan securitization
RMBS IV loan securitization
ICO-FTVPO I loan securitization
MADRID RESIDENCIAL I loan securitization
MADRID RESIDENCIAL II loan securitization
CORPORATIVOS V loan securitization
MBS BANCAJA 1 loan securitization
CM BANCAJA 1 loan securitization
CONSUMO BANCAJA 1 loan securitization
PYME BANCAJA 5 loan securitization
BANCAJA 13
loan securitization
BANCAJA-BVA VPO 1 loan securitization
FTGENVAL BANCAJA 1 loan securitization
BANCAJA LEASING 1 loan securitization
BANKIA PYME I loan securitization
AYT HIPOTECARIO MIXTO II
AYT ICO-TFVVPO III FTA
Total balance
31/12/2015
78,481
112,336
134,493
312,728
12,288
650,326
31/12/2015
Total
Maturity
57,238
2048
23,868
2032
869,981
2049
773,873
2049
1,481,179
2050
1,151,739
2050
139,953
2050
496,864
2051
443,956
2049
59,566
2033
397,289
2034
29,618
2034
442,758
2034
162,609
2035
656,815
2040
236,121
2040
79,898
2035
1,219,597
2046
660,114
2050
1,030,391
2047
119,664
2041
1,862,117
2048
527,182
2048
185,023
2047
197,088
2048
607,056
2059
314,378
2060
9,177
2036
59,312
2052
231,573
2049
14,525,997
31/12/2014
21,469
3,964
99,378
131,497
155,287
20,346
359,206
14,637
784
806,568
31/12/2014
Total
65,930
28,324
276,753
340,110
934,380
833,658
1,580,002
1,211,820
155,185
524,810
467,267
718,342
74,390
453,601
36,995
502,807
190,941
42,090
755,102
271,929
44,986
96,668
1,351,399
767,122
1,139,232
140,307
2,020,155
596,883
208,722
213,204
357,311
664,417
344,847
394,526
10,624
67,740
17,882,579
Maturity
2048
2032
2042
2046
2049
2049
2050
2050
2050
2051
2049
2040
2033
2034
2034
2034
2035
2036
2040
2040
2018
2035
2046
2050
2047
2041
2048
2048
2047
2048
2032
2059
2060
2049
2036
2052
186
Appendix VI – Marketable debt securities and subordinated liabilities issued
The breakdown of this item on the accompanying consolidated balance sheet is as follows:
2015
2014
Currency
Latest
maturity
BN CM 27/07/16
euro
2016
32,000
EUR 3M+0.20%
32,000
BB+
Bankia Personal Guarantee
BN BANCAJA 25/01/16
euro
2016
500,000
EUR 3M+0.20%
500,000
BB+
Bankia 2014-1 ICO facility bonds
euro
2016
2,007 EUR 6M+2.30% Semi-annual interest
6,019
-
euro
2016
5,625
-
euro
2016
25,450
-
euro
2016
5,450
-
euro
2016
33,225
-
euro
2016
3,300
-
euro
2016
4,450
-
euro
2016
40,925
-
euro
2016
9,825
-
BN BANCAJA 14/02/17
euro
2017
500,000
4.38%
500,000
BB+
BN BANKIA 2015-1
euro
2017
125,300
1.5% annual
-
BB+
BN BANKIA 2015-2
euro
2017
158,900
1.5% annual
-
BB+
BN CM EMTN 2008-2 14/05/18
euro
2018
25,000
EUR 3M+0.98%
25,000
BB+
BN BANCAJA 22/05/18
euro
2018
50,000
1.50%
50,000
BB+
euro
2018
3,041
-
euro
2018
2,172 EUR 6M+ 2.75% Semi-annual interest
3,041
-
euro
2018
2,625
-
euro
2018
10,025
-
euro
2018
4,900
-
euro
2018
5,850
-
euro
2018
7,750
-
euro
2018
4,025
-
BN Bankia 2014-1
euro
2019
1,000,000
BB+
euro
2020
5,725
-
euro
2020
9,350
-
euro
2020
3,975
-
TYPE OF DEBT SECURITY
Nominal amount
Annual nominal interest rate
Nominal amount
Credit rating
Issuer/Issue(1)
Type of guarantee extended
1,000,000
3.50%
187
2015
2014
Currency
Latest
maturity
BN CM 16/06/23
euro
2023
172,000
5.75%
172,000
BB+
BN CM 29/12/28
euro
2028
65,000
4.76%
65,000
BB+
Securitization bonds
euro
-
-
4,424,198
-
CH CM 14/12/15
Euro
2015
-
3.50%
2,000,000
AA Mortgage Portfolio-Mortgage Law
CH BANCAJA 28/01/15
Euro
2015
-
4.38%
250,000
CH CM 05/07/16
Euro
2016
124,050
4.25%
124,050
CH CM 29/06/16
Euro
2016
1,000,000
5.75%
1,000,000
CH CM 05/10/16
Euro
2016
1,750,000
3.63%
1,750,000
CH CM 05/07/16
euro
2016
2,520,000
4.25%
2,520,000
CH CM 10/11/17
euro
2017
-
EUR 1M+2.50%
1,000,000
CH CM 25/05/18
euro
2018
2,060,000
4.25%
2,060,000
CH BANKIA 2012-5
euro
2018
-
600,000
CH CM 28/06/19
euro
2019
1,600,000
5.00%
1,600,000
CH BANCAJA 10/01/19
euro
2019
1,500,000
EUR 1M+2.50%
3,000,000
CH CM 26/04/22
euro
2022
1,500,000
4.50%
1,500,000
CH BANKIA 2015-2
euro
2022
1,250,000
1.125% annual
-
CH BANKIA 2014-1
euro
2023
2,500,000
EUR 1M+1.40%
2,500,000
CH CM 03/02/25
euro
2025
2,000,000
4.00%
2,000,000
CH BANKIA 2015-1
euro
2025
1,000,000
1% annual
-
CH BANKIA 2014-2
euro
2027
2,500,000
EUR 1M+1.40%
2,500,000
CH BANKIA 2014-3
euro
2028
2,500,000
EUR 1M+1.40%
2,500,000
CH CM 24/03/36
euro
2036
2,000,000
4.13%
2,000,000
Promissory notes
euro
2015
745,300
CM 2010-7 02/06/15 Structured bond
euro
2015
euro
Total
Own shares
Valuation adjustments and other
Balances at the end of the year (amortised cost)
Nominal amount
Annual nominal interest rate
3,891,790
EUR 1M+3.50%
Nominal amount
Credit rating
Issuer/Issue(1)
Type of guarantee extended
-
(2)
706,314
B
-
COUPON 0%
20,000
BB+
2015
-
COUPON 0%
20,000
BB+
euro
2015
-
COUPON 0%
70,000
BB+
euro
2015
-
COUPON 0%
70,000
BB+
33,164,044
36,753,138
(11,886,776)
(15,451,622)
1,603,633
2,048,434
22,880,901
23,349,950
(1) GGB issue backed by the Spanish government. Latest credit rating assigned by DBRS is from 19 October 2015.
Rating of remain issues by Fitch Ratings on 19 May 2015.
(2) Promissory notes issued an at average rate of 0.169% and for an average term of 99 days.
188
The breakdown of subordinated liabilities issued on the accompanying consolidated balance sheet is as follows:
2015
BN SUB BANKIA2014
Total
Valuation adjustments and other
Balances at the end of the year (amortised cost)
Currency
Latest maturity
EUR
2024
Nominal
amount
1,000,000
2014
Annual nominal
interest rate
4.00%
Nominal
amount
1,000,000
1,000,000
1,000,000
45,906
43,356
1,045,906
1,043,356
Credit rating
Issuer/Issue
Type of guarantee
extended
BB
189
Appendix VII – Movement in issues
Details of issues, repurchases and repayments of debt securities in 2015 and 2014 by the Bank or Group companies:
31/12/2015
(Millions of euros)
Issuer information
Data concerning issuances, repurchases and repayments in 2015
Transaction date
Maturity date
Market where listed
Issue
currency
Amount of
issue/repurchase
or repayment
Balance
outstandi
ng
Coupon
Type of guarantee issued
CH BANKIA 2015-1
25/03/15
25/09/25
AIAF
euro
1,000
1,000
1.00%
Mortgage Portfolio-Mortgage Law
ES0413307101
CH BANKIA 2015-2
05/08/15
05/08/22
AIAF
euro
1,250
1,250
1.13%
ES0313307185
BN BANKIA 2015-1
09/10/15
09/10/17
AIAF
euro
125
125
1.5%
BB+
ES0313307193
BN BANKIA 2015-2
10/11/15
10/11/17
AIAF
euro
159
159
1.5%
Repayment
-
ES0313307011
10/05/14
10/05/16
AIAF
euro
4
2
EUR 6M+2.30%
Repayment
-
ES0313307029
10/05/14
10/05/18
AIAF
euro
0.8
3
EUR 6M+3.50%
Spain
Repayment
-
ES0313307037
10/06/14
10/06/16
AIAF
euro
4
2
EUR 6M+1.85%
Spain
Repayment
-
ES0313307045
10/06/14
10/06/18
AIAF
euro
0,9
2
EUR 6M+2.75%
Country of
residence
Transaction
Credit rating
Issuer/Issue(1)
Spain
Issue
AA
ES0413307093
Spain
Issue
AA
Spain
Issue
BB+
Spain
Issue
Spain
Spain
ISIN code
Type of security
Spain
Repayment
-
ES0313307052
10/06/14
10/06/18
AIAF
euro
1
2
EUR 6M+3.00%
Spain
Repayment
-
ES0313307060
10/07/14
10/07/16
AIAF
euro
18
7
EUR 6M+1.85%
Spain
Repayment
-
ES0313307078
10/07/14
10/07/18
AIAF
euro
3
8
EUR 6M+ 2.75%
Spain
Repayment
-
ES0213307012
10/07/14
10/07/20
AIAF
euro
2
3
EUR 6M+ 2.75%
Spain
Repayment
-
ES0313307086
11/08/14
10/08/16
AIAF
euro
2
3
EUR 6M+2.24%
Spain
Repayment
-
ES0313307094
11/08/14
10/08/16
AIAF
euro
16
17
EUR 6M+1.85%
Spain
Repayment
-
ES0313307102
11/08/14
10/08/18
AIAF
euro
3
3
EUR 6M+ 2.75%
Spain
Repayment
-
ES0313307110
10/09/14
10/09/16
AIAF
euro
2
2
EUR 6M+1.85%
Spain
Repayment
-
ES0313307128
10/10/14
10/10/16
AIAF
euro
2
2
EUR 6M+1.85%
Spain
Repayment
-
ES0313307136
10/10/14
10/10/18
AIAF
euro
4
2
EUR 6M+ 2.35%
Spain
Repayment
-
ES0213307020
10/10/14
10/10/20
AIAF
euro
3
6
EUR 6M+ 2.35%
Spain
Repayment
-
ES0313307144
10/11/14
10/11/16
AIAF
euro
20
20
EUR 6M+1.55%
Spain
Repayment
-
ES0313307151
10/11/14
10/11/18
AIAF
euro
2
6
EUR 6M+ 2.35%
Spain
Repayment
-
ES0313307169
10/12/14
10/12/16
AIAF
euro
8
1
EUR 6M+ 1.55%
Spain
Repayment
-
ES0313307177
10/12/14
10/12/18
AIAF
euro
1
3
EUR 6M+ 2.35%
Spain
Repayment
-
ES0213307038
10/12/14
10/12/20
AIAF
euro
1
3
EUR 6M+ 2.35%
Spain
Repayment
AA
ES0414977258
CH BANCAJA 28/01/15
28/01/08
28/01/15
AIAF
euro
250
-
4.38%
Spain
Repayment
BB+
ES0314950603
BN CM 2010-4 30/04/15 structured bond
30/04/10
30/04/15
AIAF
euro
70
-
COUPON 0%
Spain
Repayment
BB+
ES0314950611
BN CM 2010-5 30/04/15 structured bond
30/04/10
30/04/15
AIAF
euro
70
-
COUPON 0%
Spain
Reembolso
AA
ES0414977407
CH BANCAJA 10/01/19
10/05/11
10/01/2019
AIAF
euro
1,500
1,500
EUR 1M+2.50%
Spain
Repayment
AA
ES0414950867
CH CM 10/11/17
10/05/11
10/11/2017
AIAF
euro
1,000
-
EUR 1M+2.50%
Spain
Repayment
AA
ES0413307051
CH BANKIA 2012-5
15/06/12
15/06/2018
AIAF
euro
600
-
EUR 1M +3.50%
Spain
Repayment
AA
ES0414950636
CH CM 14/12/15
14/12/05
14/12/15
AIAF
euro
2,000
-
3.50%
Spain
Repayment
BB+
ES0314950629
BN CM 2010-7 02/06/15 Structured bond
02/06/10
02/06/15
AIAF
euro
20
-
COUPON 0%
Spain
Repayment
BB+
ES0314950637
BN CM 2010-8 02/06/2015 Structured bond
02/06/10
02/06/15
AIAF
euro
20
-
COUPON 0%
Spain
Issue
B
Varios
Promissory notes and ECPs
Varios
Varios
Varios
euro
1,930
745
Miscellaneuos
Spain
Repayment
B
Varios
Varios
Varios
Varios
Varios
1,891
-
Miscellaneuos
Varios
Varios
Varios
Varios
532
-
-
-
Varios
Repayment
Varios
Securitization bonds
(1) GGB issue backed by the Spanish government. Latest credit rating assigned by DBRS is from 19 October 2015.
Rating of remain issues by Fitch Ratings on 19 May 2015.
190
31/12/2014
(Millions of euros)
Issuer information
Country of residence
Transaction
Credit rating
Issuer/Issue(1)
Spain
Issue
BBB-
Spain
Issue
Spain
Repayment
Spain
Amount of
issue/repurchase Balance
or repayment outstanding
Transaction
date
Maturity date
Market where listed
Issue currency
Coupon
ES0313307003 BN BANKIA 2014-1
17/01/14
17/01/19
AIAF
euro
1,000
1,000
3.50%
-
ES0313307011 Bankia 2014-1 ICO facility bonds
10/05/14
10/05/16
AIAF
euro
8
6
EUR 6M+2.30%
-
10/05/14
10/05/16
AIAF
euro
2
6
EUR 6M+2.30%
Issue
-
10/05/14
10/05/18
AIAF
euro
3
3
EUR 6M+3.50%
Spain
Issue
-
10/06/14
10/06/16
AIAF
euro
8
6
EUR 6M+1.85%
Spain
Repayment
-
10/06/14
10/06/16
AIAF
euro
2
6
EUR 6M+1.85%
Spain
Issue
-
10/06/14
10/06/18
AIAF
euro
3
3
EUR 6M+2.75%
Spain
Issue
-
10/06/14
10/06/18
AIAF
euro
3
3
EUR 6M+3.00%
ISIN code
Type of security
Spain
Issue
-
10/07/14
10/07/16
AIAF
euro
25
25
EUR 6M+1.85%
Spain
Issue
-
10/07/14
10/07/18
AIAF
euro
10
10
EUR 6M+2.75%
Spain
Issue
-
10/07/14
10/07/20
AIAF
euro
5
5
EUR 6M+2.75%
Spain
Issue
-
11/08/14
10/08/16
AIAF
euro
5
5
EUR 6M+2.24%
Spain
Issue
-
11/08/14
10/08/16
AIAF
euro
33
33
EUR 6M+1.85%
Spain
Issue
-
11/08/14
10/08/18
AIAF
euro
6
6
EUR 6M+2.75%
Spain
Issue
-
10/09/14
10/09/16
AIAF
euro
3
3
EUR 6M+1.85%
Spain
Issue
-
10/10/14
10/10/16
AIAF
euro
4
4
EUR 6M+1.85%
Spain
Issue
-
10/10/14
10/10/18
AIAF
euro
6
6
EUR 6M+2.35%
Spain
Issue
-
10/10/14
10/10/20
AIAF
euro
9
9
EUR 6M+2.35%
Spain
Issue
-
10/11/14
10/11/16
AIAF
euro
41
41
EUR 6M+1.55%
Spain
Issue
-
10/11/14
10/11/18
AIAF
euro
8
8
EUR 6M+2.35%
Spain
Issue
-
10/12/14
10/12/16
AIAF
euro
10
10
EUR 6M+1.55%
Spain
Issue
-
10/12/14
10/12/18
AIAF
euro
4
4
EUR 6M+2.35%
Spain
Issue
-
10/12/14
10/12/20
AIAF
euro
4
4
EUR 6M+2.35%
Spain
Issue
A (high)
ES0413307069 CH BANKIA 2014-1
26/05/14
26/05/23
AIAF
euro
2,500
2,500
EUR 1M+1.40%
Spain
Issue
A (high)
ES0413307077 CH BANKIA 2014-2
26/05/14
26/05/27
AIAF
euro
2,500
2,500
EUR 1M+1.40%
Spain
Issue
A (high)
ES0413307085 CH BANKIA 2014-3
26/05/14
26/05/28
AIAF
euro
2,500
2,500
EUR 1M+1.40%
Spain
Issue
B+
ES0213307004 Bankia 2014-1 Subordinated bond
22/05/14
22/05/24
AIAF
euro
1,000
1,000
4.00%
Spain
Repayment
A (high)
ES0413307002 CH BANKIA 2011-1
24/11/11
24/11/16
AIAF
euro
3,000
-
EUR 1M+2.85%
Spain
Repayment
A (high)
ES0414950859 CH CM 2011-3
10/05/11
10/05/17
AIAF
euro
1,000
-
EUR 1M+2.50%
Spain
Repayment
A (high)
ES0413307044 CH BANKIA 2012-4
31/05/12
31/05/17
AIAF
euro
3,500
-
EUR 1M+3.50%
Spain
Repayment
A (high)
ES0413307051 CH BANKIA 2012-5
15/06/12
15/06/18
AIAF
euro
1,400
600
EUR 1M+3.50%
Spain
Repayment
Baa3
ES0414950677 CM 07-1 Territorial bonds
21/02/07
21/02/14
AIAF
euro
1,250
-
4.25%
Public Sector Portfolio
Spain
Repayment
Baa3
ES0414950677 Retap CM 07-1 territorial bonds
21/02/07
21/02/14
AIAF
euro
275
-
4.25%
Public Sector Portfolio
Spain
Repayment
A (high)
ES0413307028 CH BANKIA 2012-2
29/02/12
28/02/14
AIAF
euro
500
-
4.00%
Spain
Repayment
A (high)
ES0414950842 CH CM 2011-2
31/03/11
31/03/14
AIAF
euro
750
-
4.88%
Spain
Repayment
BBB-
ES0314950553 BN CM 2010-1
15/03/10
17/03/14
AIAF
euro
50
-
COUPON 0%
Spain
Spain
Repayment
Repayment
BBBBBB-
ES0314950561 BN CM 2010-2
ES0214977151 BANCAJA 14th non-convertible bond issue
15/03/10
23/04/07
17/03/14
23/04/14
AIAF
AIAF
euro
euro
52
850
-
COUPON 0%
EUR 3M+0.175%
191
(Millions of euros)
Issuer information
Country of residence
Transaction
Credit rating
Issuer/Issue(1)
Spain
Repayment
BBB-
ES0214977060 BANCAJA 200 EM180915
Spain
Repayment
A (high)
ES0414950594 Mortgage-covered bonds
Spain
Repayment
A (high)
ES0414950784 Mortgage-covered bonds
Spain
Issue
F3
Miscellaneuos
Miscellaneous Miscellaneous
Spain
Repayment
F3
Miscellaneuos
ISIN code
Type of security
Amount of
issue/repurchase Balance
or repayment outstanding
Transaction
date
Maturity date
Market where listed
Issue currency
Coupon
18/06/03
18/09/15
AIAF
euro
210
-
EUR 12M+1.35%
30/10/02
30/10/14
AIAF
euro
1,500
-
5.00%
13/11/09
13/11/14
AIAF
euro
1,750
-
3.50%
Miscellaneous
euro
1,146
706
Miscellaneuos
Miscellaneous
Miscellaneous
640
-
Miscellaneuos
Miscellaneous
Miscellaneous
408
-
-
-
Others
Miscellaneuos Securitization bonds
Repayment
(1) Ratings of mortgage-covered bonds by DBRS on 17 December 2014.
Repayment
Ratings of territorial bonds assigned by Moody's Investors Service on 13 December 2013, even though they are "non-participating" securities of Bankia.
Ratings of other issues by Repayment
Fitch Ratings on 15 April 2014.
192
Appendix VIII – Information on the mortgage market
Mortgage-backed securities bonds, marketable and non-marketable, issued by the Group and
outstanding at 31 December 2015 are recognised in the consolidated balance sheet under "Financial
liabilities at amortised cost" (Note 20). The Group has no mortgage-backed debentures in issue. These
mortgage securities are governed chiefly by Mortgage Market Law 2/1981, of 25 March, as amended by
Law 41/2007, of 7 December, and by Royal Decree 716/2009, of 24 April, implementing certain
provisions of the aforementioned Law.
Declarations by the Board of Directors of Bankia, S.A. concerning the existence of policies and
procedures required by applicable regulations
In compliance with the requirements of applicable regulations, Bankia's Board of Directors declares that
the Entity has express policies and procedures in relation to its mortgage market business, and that the
Board of Directors is responsible for compliance with mortgage market regulations applicable to this
business. These policies and procedures include, inter alia, (i) the criteria applied concerning the
relationship that must exist between the amount of the loan and the appraisal value of the mortgaged
property, and the influence of the existence of other additional collateral and the criteria applied in the
selection of the appraisers; (ii) the relationship between the debt and the income of the borrower and
the existence of procedures aimed at assuring the information supplied by the borrower and the
borrower's solvency; (iii) the prevention of imbalances between flows from the hedging portfolio and
those arising from making the payments owed on the securities.
Regarding mortgage market laws and regulations, Bankia has in place suitable mortgage risk policies
and procedures in the two major areas – assets and liabilities – to monitor and quantify the mortgage
portfolio and the related borrowing limits.
In terms of assets, mortgage risk exposure policy takes the form of multilevel decision-making in the
Bank by means of a system of authorities and delegated powers.
Credit risk policies were approved by the entity's Board of Directors on 23 July 2015 to stabilise the
general approval criteria, including specific criteria by segments, such as portfolios associated with the
mortgage market.
General approval criteria include those associated with borrower risk, mainly the ability of the borrower
to repay, with no reliance on guarantors or assets delivered as collateral, which are considered as
alternative methods of collection.
Consideration is also given to criteria associated with the transaction, mainly the suitability of financing
in accordance with the customer's risk profile and adaptation of the product to the intended purpose.
Specific policies for the mortgage portfolio establish considerations concerning the appraisal value
associated with the loan as a cut-off point for the approval proposal.
Risk management of this portfolio is based on a mandatory scoring methodology approved by the
Supervisor, with specific monitoring of the cut-off points associated with the decision-making structure.
Other basic criteria are the maximum timelines of the transactions and the type of products sold by the
Bank.
The guidelines laid out in the credit risk policies acknowledge property-based collateral subject to
certain requirements, such as a first-charge requirement, and compliance with measurement criteria in
accordance with the stipulations of prevailing regulations.
Any imbalance between mortgage portfolio flows and issued securities is managed by a regular review
of key portfolio parameters followed by a report to credit rating agencies for the purpose of monitoring
issued securities.
IT systems are in place to record, monitor and quantify these elements and to assess the degree of
compliance with mortgage market requirements for the purposes of portfolio eligibility for covering the
Bank's related borrowings.
193
In terms of liabilities, in line with its financing strategy in place at each given time in the light of the
outstanding mortgage portfolio, the Bank makes mortgage-backed security issuance decisions on the
basis of records that enable it to keep its issued securities within the bounds of eligibility for covering
borrowings in compliance with mortgage market laws and regulations.
Disclosures on the security and privileges enjoyed by holders of mortgage-backed instruments
issued by Bankia
Pursuant to current legislation, the principal and interest of the mortgage-backed bonds issued by
Bankia are specially secured (entry in the Property Register is not required) by mortgages on all the
mortgage-backed bonds that are registered in the Group's name at any time, without prejudice to its
unlimited liability. The mortgage-backed bonds entitle the holders not only to the aforementioned
guaranteed financial claim but also to claim payment from the issuer after maturity, and confer on the
holders the status of special preferential creditors vis-à-vis all other creditors in relation to all the
mortgage loans and credits registered in the issuer’s name.
In the event of insolvency, the holders of these bonds will enjoy the special privilege established in
Article 90, Section 1, Number 1 of Insolvency Law 22/2003 of 9 July. Without prejudice to the foregoing,
in accordance with Article 84, Section 2, Number 7 of Insolvency Law 22/2003, during the solvency
proceedings the payments relating to the repayment of the principal and interest of the mortgagebacked securities issued and outstanding at the date of the insolvency filing will be settled, as preferred
claims, up to the amount of the income received by the insolvent party from the mortgage loans and
credits and, where appropriate, from the replacement assets backing the securities and from the cash
flows generated by the financial instruments associated with the issues.
If, due to a timing mismatch, the income received by the insolvent party is insufficient to meet the
payments described in the preceding paragraph, the administrative receivers must settle them by
realising the replacement assets, if any, identified to cover the issue and, if this is not sufficient, they
must obtain financing to meet the mandated payments to the holders of the mortgage-backed
securities, and the finance provider must be subrogated to the position of the security-holders.
In the event that the measure indicated in Article 155, Number 3 of Insolvency Law 22/2003, of 9 June,
is required, the payments to all holders of the mortgage-backed bonds issued would be made on a pro
rata basis, irrespective of the issue dates of the bonds.
Disclosures on mortgage market security issues
Note 20 disclose the outstanding balances of non-marketable (one-off) mortgage-backed securities
issued by the Bankia. In addition, Appendix VI individually itemises the outstanding balances of
marketable mortgage-backed securities issued by Bankia with their maturities, currencies and reference
rates.
The following table itemises the aggregate nominal value of marketable and non-marketable mortgagebacked securities outstanding at 31 December 2015 and 2014 issued by the Bankia , regardless of
whether or not they are recognised as consolidated liabilities of the Bank (in the latter case, due to the
fact that they were not placed with third parties or because they were repurchased by the Bankia),
based on their residual maturity period, with a distinction made, in the case of those recognised by the
Bankia as debt securities, between those issued through a public offering and with no public offering,
along with the aggregate nominal values of mortgage participation certificates and mortgage transfer
certificates issued by the Bankia and outstanding at 31 December 2015 and 2014, with their average
residual maturity period.
194
NOMINAL VALUE OF MORTGAGE-BACKED SECURITIES
31/12/2015
31/12/2014
Average
residual
maturity period
Nominal value
(months)
Average
residual
maturity
period
(months)
Nominal value
1. Mortgage-backed securities issued
32,460,062
84
36,836,751
83
Of which: not recognised on the liability side of the balance sheet
11,801,550
98
15,369,000
96
1.1 Debt securities. Issued through a public offering (1)
16,560,000
73
16,560,000
72
5,250,000
7
2,250,000
10
-
5,250,000
19
Residual maturity up to one year
Residual maturity over one year but not more than two years
-
Residual maturity over two years but not more than three years
2,060,000
29
-
Residual maturity over three years but not more than five years
1,500,000
43
3,560,000
Residual maturity over five years but not more than ten years
5,750,000
97
1,500,000
89
Residual maturity over ten years
2,000,000
246
4,000,000
191
1.2 Debt securities. Other issues (1)
9,244,050
109
12,344,050
102
144,050
6
-
-
144,050
18
-
-
1,000,000
35
1,600,000
37
3,700,000
48
2,500,000
90
2,500,000
102
5,000,000
145
5,000,000
157
6,656,012
76
7,932,701
75
1,377,222
5
1,276,697
8
715,000
20
1,377,222
17
738,387
31
715,000
32
1.3 Deposits (2)
-
47
-
617,412
48
1,028,924
50
1,812,991
95
1,092,422
87
1,395,000
185
2,442,436
160
6,645
126
7,658
134
2. Mortgage participation certificates issued
2.1 Debt securities. Issued in a public offering
2.2 Debt securities. Other issues
3. Mortgage transfer certificates issued
3.1 Debt securities. Issued in a public offering
3.2 Debt securities. Other issues
-
-
-
-
6,645
126
7,658
134
14,006,952
259
15,559,754
266
14,006,952
259
15,559,754
266
(1)
These securities are recognised under "Financial liabilities at amortised cost - Marketable debt securities" in the
accompanying consolidated balance sheet at 31 December 2015 and 2014 (see Note 20).
(2)
These securities are recognised under "Financial liabilities at amortised cost - Deposits from credit institutions" and
"Financial liabilities at amortised cost - Customer deposits" in the accompanying consolidated balance sheet at 31
195
The nominal value at 31 December 2015 and 2014 of the amounts available (committed amounts not
drawn down) of all mortgage loans and credits, with a distinction made between those potentially
eligible and those that are not eligible, is shown in the table below:
Undrawn balances (nominal value) (2)
31/12/2015
Mortgage loans that back the issuance of mortgage-backed securities (1)
Of which:
Potentially eligible (3)
Not eligible
31/12/2014
423,556
524,985
303,195
120,361
394,658
130,327
(1) At 31 December 2015, Bankia had no mortgage bonds in issue.
(2) Committed amounts (limit) less amounts drawn down on all loans with mortgage collateral, irrespective of the
percentage of total risk on the amount of the last appraisal (Loan to Value), not transferred to third parties or relating
to financing received. Also includes balances that are only delivered to developers when the dwellings are sold.
(3) Loans potentially eligible for issuance of mortgage-backed securities under Article 3 of Royal Decree 716/2009.
With regard to lending operations, the table below shows the breakdown at 31 December 2015 and
2014 of the nominal value of mortgage loans and credit facilities that back the issue of mortgagebacked securities issued by Bankia (as already mentioned, as at the reporting date the Bankia had no
mortgage bonds in issue), indicating the total eligible loans and credit facilities, without regard to the
limits under Article 12 of Royal Decree 716/2009 of 24 April, and those that are eligible which, pursuant
to the criteria of the aforementioned Article 12 of Royal Decree 716/2009, are eligible for issuance of
mortgage securities.
This amount is presented, as required by applicable legislation, as the difference between the nominal
value of the entire portfolio of loans and credits secured through mortgages registered in favour of the
Group and pending collection (including, where applicable, those acquired through mortgage
participation certificates and mortgage transfer certificates), even if they have been derecognised,
irrespective of the proportion of the risk of the loan to the last available appraisal for purposes of the
mortgage market, less the mortgage loans and credits transferred through mortgage participation
certificates and mortgage transfer certificates, regardless of whether or not they were derecognised
from the balance sheet, and those designated as security for financing received (the amount recognised
on the asset side of the consolidated balance sheet is also indicated for mortgage loans and credits
transferred):
Nominal value
31/12/2015
31/12/2014
81,543,248
90,341,759
408,773
493,363
6,645
7,658
3. Mortgage transfer certificates issued
14,255,144
15,880,878
Of which: loans maintained on the balance sheet
14,006,952
15,559,754
-
-
5. Loans that back the issue of mortgage-backed securities (1-2-3-4)
66,879,331
73,967,518
5.1 Loans not eligible
17,202,196
19,777,346
7,006,412
8,052,410
5.1.2 Other
10,195,784
11,724,936
5.2 Eligible loans
49,677,135
54,190,172
175,799
184,472
49,501,336
54,005,700
1. Total loans
2. Mortgage participation certificates issued
Of which: loans maintained on the balance sheet
4. Mortgage loans pledged as security for financing received
5.1.1 Loans that meet the requirements to be eligible except for the limit established in Article 5.1 of
Royal Decree 716/2009
5.2.1 Ineligible amounts (1)
5.2.2 Eligible amounts (loans eligible to cover mortgage-backed security issues)
(1)
Amount of the eligible loans which, pursuant to the criteria laid down in Article 12 of Royal Decree 716/2009, are not eligible to cover issuance
of mortgage bonds and mortgage-backed securities.
196
The reconciliation of eligible loans to mortgage-backed securities issued, along with issuance capacity and
percentage of overcollateralization, is as follows:
Nominal value
31/12/2015
31/12/2014
Mortgage loans and credits which, pursuant to the criteria laid down in
Article 12 of RD 716/2009, are eligible to cover issuance of mortgagebacked securities.
49,501,336
54,005,700
Issue limit = 80% of eligible mortgage loans and credits
39,601,069
43,204,560
Mortgage-backed securities issued
32,460,062
36,836,751
7,141,006
6,367,809
Percentage of overcollateralization of the portfolio
206%
201%
Percentage of overcollateralization of the eligible portfolio
152%
147%
Mortgage-backed securities issuance capacity (1)
Memorandum item:
(1) At 31 December 2015, EUR 11,801,550 thousand of mortgage-backed securities remained on the balance sheet consolidated. Therefore, the
issuance capacity would be EUR 18,942,556 thousand. (EUR 15,369,000 thousand at 31 December 2014 with a EUR 21,736,809 thousand
issuance capacity).
The table below shows the detail at 31 December 2015 and 2014 of the nominal value of the loans and
credits that back mortgage-backed securities issued by the Group and of those loans and credits that
are eligible, without taking into consideration the restrictions on their eligibility established in Article 12
of Royal Decree 716/2009, based on (i) if they arose from the Group or from creditor subrogations and
other cases; (ii) if they are denominated in euros or in other currencies; (iii) if they have a normal
payment situation and other cases; (iv) their average residual maturity; (v) if the interest rate is fixed,
floating or mixed; (vi) if the transactions are aimed at legal entities or individuals that are to use the loan
proceeds for the purpose of their business activity (with a disclosure of the portion related to property
development) and transactions aimed at households; (vii) if the guarantee consists of assets/completed
buildings (with a distinction made between those used for residential, commercial and other purposes),
assets/buildings under construction (with a disclosure similar to that of the finished buildings) or land
(with a distinction made between developed land and other land), indicating the transactions that are
secured by government-subsidised housing, even that under development:
197
Loans that back mortgage-backed
securities
Of which: eligible loans
Total
31/12/2015
1. Origin of operations
66,879,331
73,967,518
49,677,135
54,190,172
63,000,500
69,814,550
45,920,910
50,170,237
781,622
883,101
768,041
861,581
1.1 Originated by Bankia
1.2. Subrogated to other entities
31/12/2014
31/12/2015
31/12/2014
1.3 Other
3,097,209
3,269,867
2,988,184
3,158,354
2. Currency
66,879,331
73,967,518
49,677,135
54,190,172
2.1 Euro
66,419,700
73,580,534
49,677,135
54,190,172
2.2 Other currencies
459,631
386,984
-
-
3. Payment situation
66,879,331
73,967,518
49,677,135
54,190,172
59,515,848
63,358,197
48,025,419
51,451,140
3.1 Normal payment situation
3.2 Other situations
4. Average residual maturity
4.1 Up to ten years
7,363,483
10,609,321
1,651,716
2,739,032
66,879,331
73,967,518
49,677,135
54,190,172
9,890,583
11,093,645
6,135,300
6,413,749
4.2 More than ten years and up to 20 years
20,464,752
21,396,621
17,165,027
17,525,266
4.3 More than 20 years and up to 30 years
21,166,278
24,583,528
17,792,428
20,321,178
4.4 More than 30 years
15,357,718
16,893,724
8,584,380
9,929,979
66,879,331
73,967,518
49,677,135
54,190,172
5. Interest rates
5.1 Fixed
5.2 Floating
670,204
992,958
253,789
490,166
58,104,509
63,919,802
43,586,454
47,260,608
5.3 Mixed
8,104,618
9,054,758
5,836,892
6,439,398
6. Owners
66,879,331
73,967,518
49,677,135
54,190,172
6.1 Legal entities and natural person
entrepreneurs
20,391,331
24,428,197
11,482,358
13,525,671
1,524,468
2,521,247
722,391
1,194,321
6.2 Other individuals and non-profit institutions
serving households (NPISH)
46,488,000
49,539,321
38,194,777
40,664,501
7. Type of collateral
66,879,331
73,967,518
49,677,135
54,190,172
7.1 Assets/completed buildings
66,430,579
73,191,609
49,677,080
54,102,469
7.1.1 Residential
54,896,658
59,195,242
45,348,641
48,889,959
1,487,176
2,996,120
1,004,576
1,838,943
52,816
94,964
33,189
73,328
Of which: property developments
Of which: government-subsidised housing
7.1.2 Commercial
7.1.3 Other
11,481,105
13,901,403
4,295,250
5,139,182
7.2 Assets/buildings under construction
41,533
129,834
55
87,703
7.2.1 Residential
37,048
125,996
55
87,223
167
-
-
-
-
-
-
-
4,485
3,838
-
480
407,219
646,075
-
-
1,352
-
-
-
405,867
646,075
-
-
Of which: government-subsidised housing
7.2.2 Commercial
7.2.3 Other
7.3 Land
7.3.1 Developed
7.3.2 Other
198
The nominal value of eligible mortgage loans and credits at 31 December 2015 and 2014, broken down
by the ratios of the amount of the transactions to the last available appraisal of the mortgaged assets
(Loan to Value), is shown in the table below:
31 December 2015
Risk in relation to the last available appraisal for the mortgage market (Loan to Value)
Less than
or equal to
40%
More than 40%
and less or equal
to 60%
More than 60%
and less than or
equal to 80%
Loans eligible for issuance of mortgagebacked securities and mortgage bonds
14,365,025
18,887,238
16,424,872
-
49,677,135
Housing
11,840,983
17,082,841
16,424,872
-
45,348,696
2,524,042
1,804,397
-
-
4,328,439
Other assets
More than
80%
Total
31 December 2014
Risk in relation to the last available appraisal for the mortgage market (Loan to Value)
Less than
or equal
to 40%
More than 40%
and less or equal
to 60%
More than 60%
and less than or
equal to 80%
More than
80%
Total
Loans eligible for issuance of
mortgage-backed securities and
mortgage bonds
14,350,397
19,974,980
19,864,795
-
54,190,172
Housing
11,551,940
17,560,446
19,864,795
-
48,977,181
-
5,212,991
Other assets
2,798,457
2,414,534
-
Finally, at 31 December 2015 and 2014 there were no replacement assets backing the Bank's
mortgaged-backed issues.
199
Appendix IX - Exposure to property and construction risk (transactions in
Spain)
1.
Disclosures on exposure to property development and construction
The table below shows cumulative figures on the financing granted by the Group at 31
December 2015 and 2014 for the purposes of construction and property development and the
respective credit risk coverage in place at that date (1):
31 December 2015
Excess over value of
collateral (2)
Specific coverage
1,161,187
410,413
507,239
723,135
321,526
475,295
86,513
24,178
31,944
Total
gross
1. Loans recognised by credit institutions comprising the
Group (transactions in Spain)
1.1. Of which: Doubtful
1.2. Of which: Substandard
Memorandum item:
326,901
Assets written off (4)
Memorandum item (Consolidated Group figures):
Item
Carrying amount
1. Total loans and advances to customers, excluding the public sector (transactions in Spain) (5)
102,435,833
2, Total consolidated assets (all transactions)
206,969,633
3. Total general coverage (all transactions) (3)
66,265
(1) For the purposes of this table, credits are classified by purpose rather than the borrower's CNAE code. If the
borrower is a property company but uses the financing received for a purpose other than construction or property
development, the transaction is excluded from this table. Conversely, if the borrower is a company whose core
business is not construction or property development-related but uses the financing received for property
development purposes, the transaction is included in this table.
(2) The excess of the gross amount of the financing over the value of any property rights received as collateral,
calculated pursuant to Annex IX of Circular 4/2004. Thus the value of such property rights is the lower of the cost of
the asset and its appraised value in its present condition, weighted by a percentage ranging from 70% to 50%, in
accordance with the nature of the mortgaged asset.
(3) Includes all types of financing in the form of loans credits, with and without mortgage collateral, and debt securities
for real estate construction and development, corresponding to Spanish activity (businesses in Spain).
(4)Gross amount of financial for the purpose of construction and property development granted by Group credit
institutions (transactions in Spain) and assets written off.
(5) The carrying amount is the value at which the assets are recognised on the balance sheet after deduction of any
amount allocated to cover such assets.
200
31 December 2014
Total gross
1. Loans recognised by credit institutions comprising the
Group (transactions in Spain)
1.1. Of which: Doubtful
1.2. Of which: Substandard
Excess over value of
collateral (2)
Specific coverage
1,812,665
585,998
735,575
1,062,745
447,294
673,542
180,151
56,883
62,033
Memorandum item:
704,024
Assets written off (4)
Memorandum item (Consolidated Group figures):
Item
Carrying amount
1. Total loans and advances to customers, excluding the public sector (transactions in Spain) (5)
103.478.379
2. Total consolidated assets (all transactions)
233.648.603
233.648.603
157.626
157,626
3. Total general coverage (all transactions) (3)
(1) For the purposes of this table, credits are classified by purpose rather than the borrower's CNAE code. If the
borrower is a property company but uses the financing received for a purpose other than construction or property
development, the transaction is excluded from this table. Conversely, if the borrower is a company whose core
business is not construction or property development-related but uses the financing received for property
development purposes, the transaction is included in this table.
(2) The excess of the gross amount of the financing over the value of any property rights received as collateral,
calculated pursuant to Annex IX of Circular 4/2004. Thus the value of such property rights is the lower of the cost of
the asset and its appraised value in its present condition, weighted by a percentage ranging from 70% to 50%, in
accordance with the nature of the mortgaged asset.
(3) Includes all types of financing in the form of loans credits, with and without mortgage collateral, and debt securities
for real estate construction and development, corresponding to Spanish activity (businesses in Spain).
(4) Gross loans to fund real estate construction and development recognised by the Group (businesses in Spain)
derecognised from asset due to classification as “writte-off assets”.
(5)The carrying amount is the value at which the assets are recognised on the balance sheet after deduction of any
amount allocated to cover such assets.
The table below breaks down construction and property development financing granted by
Group credit entities at 31 December 2015 and 2014:
Finance intended for construction and property development (gross)
31/12/2015
31/12/2014
133,671
144,323
1,027,516
1,668,342
824,910
1,160,107
2.1.1. Housing
353,064
429,838
2.1.2. Other
471,846
730,269
44,238
51,047
40,801
44,364
1. Not mortgage-secured
2. Mortgage-secured (1)
2.1. Finished buildings (2)
2.2. Buildings under construction (2)
2.2.1. Housing
2.2.2. Other
2.3. Land
2.3.1. Urban land
2.3.2. Other land
Total
3,437
6,683
158,368
457,188
122,696
230,937
35,672
226,251
1,161,187
1,812,665
(1) Includes all mortgage-secured transactions regardless of ratio of outstanding amount to the latest appraised value.
(2) If a building is used for both residential (housing) and commercial (offices and/or premises) purposes, the related
financing is classified under the category of the predominant purpose.
201
2. Loans to households for home purchases. Transactions recognised by credit
institutions (transactions in Spain)
The table below presents the detail at 31 December 2015 and 2014 of financing granted by the
credit institutions comprising the Group for the purpose of home purchase (business in Spain):
Total gross
Of which: Doubtful
Total gross
31/12/2015
Loans for home purchases
Non-mortgage-secured
Mortgage-secured
65,037,574
Of which: Doubtful
31/12/2014
4,397,513
69,749,503
6,433,323
615,428
1,995
668,837
2,797
64,422,146
4,395,518
69,080,666
6,430,526
The table below presents the detail of mortgage-secured loans to households for home
purchases mortgage-secured at 31 December 2015 and 2014, classified by the ratio of the
outstanding amount to the latest available appraised value (LTV) in respect of transactions
recognised by Group credit institutions (transactions in Spain):
31 December 2015
LTV ranges (1)
Total gross
Less than or
equal to 40%
More than 40%
and less than
or equal to
60%
More than 60%
and less than
or equal to
80%
More than 80%
and less than or
equal to 100%
13,972,295
19,930,594
22,500,833
6,554,916
1,463,508
64,422,146
590,855
723,725
1,591,904
1,049,130
439,903
4,395,517
Of which: doubtful
(1)
More than
100%
Total
LTV (loan-to-value) is the ratio of the amount outstanding at the reporting date to the latest available appraised
value.
31 December 2014
LTV ranges (1)
Less than or
equal to 40%
Total gross
Of which: doubtful
(1)
More than 40% More than 60% More than 80%
and less than
and less than and less than or
or equal to 60% or equal to 80% equal to 100%
More than
100%
Total
13,473,764
20,071,324
25,797,206
8,141,940
1,596,432
69,080,666
622,972
900,767
2,333,696
1,824,247
748,844
6,430,526
LTV (loan-to-value) is the ratio of the amount outstanding at the reporting date to the latest available appraised
value.
202
3. Information concerning foreclosed property assets or received in payment of debts
(transactions in Spain)
In order to dispose of its foreclosed assets with the smallest impact possible on the income
statement, the Group engaged HAYA R.E. to manage, administer and sell its foreclosed assets
under the supervision of the Corporate Investees Division.
In order to maintain assets in the best possible conditions for sale and ensure efficient control of
the expenditure incurred in the process, technical maintenance procedures are deployed along
with control and management of turnover arising from the assets remaining on the portfolio.
Consideration is also given to maintaining lease contracts on assets in the portfolio and
management of occupancy situations concerning the assets.
Attention is also paid to activities arising from the marketing process: customer care, review of
the assets published and management of offers through various sales channels: branch
network, brokers, web, events and trade fairs, etc.
Progress was made in 2015 on a number of proejcts and initiatives, affording better and deeper
knowledge of the portfolio. This, coupled with stronger sales efforts, led to the first net reduction
in the stock of real estate assets.
The Group's general policies for managing its foreclosed assets are summarised as follows:
-
-
-
The volume of foreclosed assets, irrespective of the owner(on the balance sheets of
entities, in companies created for this purpose, in vehicles etc.) makes it necessary at
the outset to address the necessary measures for management purposes with the
single aim of disposal of assets at the least possible detriment to the income statement.
To unlock the value of foreclosed assets, the focus is first on sales and second on
rentals in specific circumstances related to the Housing Social Fund and/or special
rentals. In the case of unique assets (specific buildings, offices, commercial premises,
industrial buildings and land), the general policy is to sell these assets.
Policy of transparency in all transactions to guarantee public offering of the asset.
Policies to set prices for assets and delegated powers. Sales in accordance with an
authorisation system valid at all times.
General policy of non-exclusivity in mediation on sales of assets.
Assessment of asset sale offers in any situation.
The marketing process will be carried out through all the channels established: network
branches, web, property sales desks at certain branches, brokers with or without keys,
trade fairs and events, etc.
The pricing policies and principles for the property portfolio may be summarised as follows:
-
-
-
-
Transparency: all assets available for sale are published exclusively on the Real Estate
Portal with their retail prices www.haya.es.
References to set prices: the price references will be those of comparable assets, the
appraisal value of each asset, reports by mediators and book value.
Unique assets: the primary reference of unique assets will be the latest appraisal
value, although the complex nature of sales of these assets will require individual
negotiations, using the same references as cited above.
Adaptation to changes in the housing market: dynamic adaptation and review of
prices in accordance with changes on the property market. Prices will be reviewed
regularly, with updates of appraisals and observance of regulations and consideration of
changes to the official housing market indexes.
Special events: at trade fairs, real estate fairs or other temporary events, more
attractive prices may be published for that period only.
Leases: property assets will be leased with a rent approved by the appropriate
committee, which will at all times contemplate a minimum return in accordance with the
value of the asset to be leased.
Employees of the Bank: employees will have the benefits agreed on each occasion.
203
The table below presents the detail of foreclosured assets acquired by the Group through
(transactions in Spain) at 31 December 2015 and 2014, classified by type (1):
Of which:
impairment
allowance
Carrying
amount
31/12/2015
1. Property assets from financing intended for construction and
property development
Carrying
amount
Of which:
impairment
allowances
31/12/2014
288,209
141,934
315,612
234,602
1.1. Finished buildings
226,061
78,955
241,972
84,128
1.1.1. Housing
174,622
60,903
195,389
68,129
51,439
18,052
46,583
15,999
19,146
22,962
23,977
20,220
18,510
21,925
23,253
19,270
1.1.2. Other
1.2. Buildings under construction
1.2.1. Housing
1.2.2. Other
636
1,037
724
950
43,002
40,017
49,663
130,254
1.3.1 Urban land
31,815
31,488
33,183
90,528
1.3.1 Other land
11,187
8,529
16,480
39,726
1,955,151
882,760
2,153,720
960,226
445,495
160,484
407,355
153,543
154,444
492
154,705
1.3. Land
2. Property assets from mortgage-secured financing granted to
households for home purchases
3. Other property assets received in settlement of debt (2)
4. Equity instruments, investments and financing to companies holding
such assets (3).
-
(1) Includes foreclosed assets and assets acquired, purchased or exchanged for debt in connection with financing
granted by Group entities (transactions in Spain), as well as investments in and financing to non-consolidated
entities holding these assets.
(2) Includes property assets not arising in connection with loans to construction and property development companies,
regardless of the economic sector to which the company or entrepreneur belongs, or to households for home
purchases.
(3) Includes all assets of this type, such as equity instruments, investments in and financing to entities holding the
property assets referred to in lines 1 to 3 of this table and equity instruments of and investments in construction or
property companies accepted in settlement of debts.
The above tables set out property assets acquired through foreclosure or in settlement of debts,
other than the exception referred to in the foregoing sub-paragraph(1), and classified by the
Group on the basis of ultimate purpose, mainly under “Non-current assets held for sale” and
“Property, plant and equipment – Investment property” and, to a lesser extent, under “Other
assets” in the accompanying consolidated balance sheet consolidated for those dates.
204
Appendix X – Refinancing and restructuring operations and other
requirements of Bank of Spain Circular 6/2012
Refinancing and restructuring operations
As part of its credit risk management policy, the Group has carried out loan refinancing
operations, modifying the original conditions agreed with the borrowers (e.g. interest rate, term,
grace period, collateral or guarantee).
Loan refinancing and restructuring is designed to match financing to the customers' current
ability to meet its payment commitments, affording sufficient financial stability to ensure the
continuity and operation of the borrower or its group. To do so, certain measures must be
adopted that adapt to the source of the problem, whether they are systemic (affect all segments
and borrowers the same, e.g. rises in interest rates) or specific (affect individual borrowers and
require individual and structural measures for each case).
The general policies regarding loan refinancing can be summarised as follows:
-
Loan refinancing, restructuring, rollover or negotiation should always aim to resolve the
problem and never to hide or delay it. Delays should only be based on a realistic
probability that the borrower can improve their financial situation in the future.
-
Decisions on these types of operations require analysis of the borrower’s and
guarantor’s current economic and financial situations so that the new conditions of the
loan are in accordance with borrower’s real ability to pay. In addition to ability, equally
important is the assessment of the customer’s willingness and commitment to continue
meeting its payment obligations. In the case of companies, for instance, contributions of
funds from shareholders or additional guarantees or collateral may be required.
-
The amounts estimated to be irrecoverable should be recognised immediately.
-
The refinancing or restructuring of loans whose payment is not up to date does not
interrupt their arrears until the customer can make payment on schedule or unless new
effective guarantees or collateral are provided.
From a management viewpoint, where loan refinancing is offered, particularly with retail loans,
the operations are channeled through specific products that:
-
Perfectly identify the refinancing operations
-
Establish standardised financial conditions across the branch network within limits
considered acceptable and consistent with the Risk Policies.
To ensure the success of the refinancing or restructuring, identifying the problem even before it
arises is of paramount importance. This requires pro-active management, backed by the
following instruments:
-
For companies, customers are classified by monitoring levels, applying both objective
and subjective criteria and taking account of the customer's particular situation or that of
the sector to which it belongs. The level determines the management model and
authorities, gearing the monitoring activity towards the most vulnerable customers. In
this way, loan refinancing can become a crucial tool for a finance problem that
guarantees the customer's viability when it has yet to become unable to meet its
payment obligations.
-
For individuals, behaviour and early warning models are applied. These not only identify
potentially vulnerable loans although payment is up to date, but they also put forward
specific refinancing solutions in accordance with the customer’s situation, following a
ranking that responds to the Group's preference among the various potential refinancing
possibilities (e.g. avoiding the inclusion of grace periods).
The Group accounts for loan restructuring and refinancing operations in accordance with Bank
of Spain Circular 6/2012 and its recommendations, which in general are compatible with those
of the ESMA and the EBA. These criteria set out certain rules for classification at source, as well
as general criteria for a restructured or refinanced exposure to be considered cured, and
therefore, reclassified to a lower risk level. As a general rule, all refinancings and restructurings
should be classified as substandard risk when they are arranged, unless there are objective
circumstances for them to be classified as doubtful or standard risks.
205
Application of the new criteria results in the review and classification of the entire refinanced or
restructured portfolio, from two different approaches:

According to objective criteria: For retail and SME loans, there is a set of objective
criteria covering the conditions of the new loan (grace period, interest deferral, financing
of past-due interest, additional effective guarantees or collateral), as well as the
financial efforts implied for the customer in accordance with their current income. Each
combination of criteria determines the corresponding accounting treatment at source, as
shown in the following table:
Financing of past-due
interest
LTV over
updated
appraisal
<= 100%
NO
> 100%
<= 100%
YES
> 100%
<= 50%
Grace period
Between
13 and 30 months > 30 months
<= 12 months
Standard
Standard
Standard
> 50%
Standard
Standard
Substandard
<= 50%
Standard
Standard
Substandard
> 50%
Substandard
Substandard
Doubtful
<= 50%
Standard
Substandard
Substandard
> 50%
Substandard
Substandard
Doubtful
<= 50%
Substandard
Substandard
Doubtful
> 50%
Doubtful
Doubtful
Doubtful
Financial
effort
The following table is applied to the refinancing of a previously refinanced loan, which
always entails a higher risk level than in the preceding table:
Financing of past-due
interest
LTV over
updated
appraisal
<= 100%
NO
> 100%
<= 100%
YES
> 100%
<= 50%
Grace period
Between
13 and 30 months > 30 months
<= 12 months
Substandard Substandard
Doubtful
> 50%
Substandard
Doubtful
Doubtful
<= 50%
Substandard
Doubtful
Doubtful
> 50%
Doubtful
Doubtful
Doubtful
<= 50%
Substandard
Doubtful
Doubtful
> 50%
Doubtful
Doubtful
Doubtful
<= 50%
Doubtful
Doubtful
Doubtful
> 50%
Doubtful
Doubtful
Doubtful
Financial
effort
206
Similarly, certain objective criteria are established that determine the minimum “curing”
period (generally one year, but this can be reduced to six months for a home mortgage on a
primary residence) before the refinanced or restructured operation can be reclassified to a
lower risk level. These criteria are summarised in the following table:
Grace Period
NO
Deferred
interest and
second
mortgage
Classification
up to 3 months
after grace
period
Classification
12 months
after the end
of grace
period
Substandard
Standard
Standard
Standard
Doubtful
Standard
Standard
Standard
Substandard
Substandard
Standard
Standard
Doubtful
Substandard
Standard
Standard
Doubtful
Doubtful
Doubtful
Standard
NO
NO
YES
YES

Risk
classification
Classification
up to 12
months after
arrangement
According to individual analysis: for the rest of the portfolio, the accounting treatment and
subsequent “curing” are based on a detailed analysis of the customer's situation and the
conditions of the loan. However, the general criteria set out in the Circular letter are taken
as a reference.
As indicated above, the Group carries out refinancing operations to provide borrowers with
financial stability to continue their activity, adapting the operations to their ability to pay.
In no circumstances does loan refinancing delay or reduce the impairment losses to be
recognised on the loans when they have not been renegotiated. Therefore, all operations that
under current regulations should be impaired have been considered impaired before any
refinancing. Recognised impairment losses are not reversed merely because the operations
may be refinanced.
Therefore, after making the corresponding changes to the contractual terms, there is no
evidence of significant impairment requiring the recognition of additional losses in accordance
with IAS 39. In this respect, the provision for insolvency maintained or increased on refinanced
operations offsets any potential loss arising from the difference between the carrying amount of
the refinanced assets before and after the renegotiation.
207
The table below shows the gross amount of refinancing operations, with a breakdown between
their classification as transactions that require special monitoring, substandard risk or doubtful
risk, and their respective coverages of credit risk at 31 December 2015 and 2014:
At 31 December 2015
Standard (1)
Full mortgage guarantee
No. of transactions
Government agencies
Other collateral (2)
Gross amount
No. of transactions
320
41,275
7
4,543
919,553
936
1,019
119,493
58
Other natural persons
69,292
8,535,385
Total
74,155
Other legal persons and sole proprietors
Of which: Financing for construction
and property developmen
9,496,213
Without collateral
No. of
transactions
Gross amount
Gross amount
44,513
58
1,142,744
4,217
195,464
4,800
136
9,209
989,317
26,215
127,195
10,152
2,176,574
30,490
1,046,871
724,212
5,343
Substandard
No. of
transactions
Government agencies
Other legal persons and sole
proprietors
Of which: Financing for
construction and property
developmen
Gross amount
No. of transactions
Without collateral
Gross amount
Gross
amount
No. of transactions
Specific
allowance
1
10,170
-
-
5
5,325
(2,034)
702
598,458
281
506,966
957
460,762
(280,260)
62
16,320
12
1,536
16
627
(4,183)
3,434
486,796
1,494
93,056
12,163
85,515
(48,075)
Total
4,137
1,095,424
1,775
600,022
13,125
551,602
(330,369)
Doubtful
No. of transactions
Government agencies
Other legal persons and sole
proprietors
Of which: Financing for
construction and property
developmen
Gross amount
Without collateral
No. of transactions
Gross amount
Gross
amount
No. of transactions
Specific
allowance
1,771
39,712
4
2,199
13
30,683
(24,566)
4,692
1,687,194
2,330
1,803,395
5,797
1,959,849
(3,202,939)
1,603
239,035
614
189,725
2,275
417,580
(695,387)
14,248
2,065,089
8,231
580,091
10,259
55,695
(848,100)
Total
20,711
3,791,995
10,565
2,385,685
16,069
2,046,227
(4,075,605)
Total
No. of
transactions
Gross
amount
No. of
transactions
Gross
amount
Without collateral
No. of
transactions
Specific
allowance
Gross
amount
Total
No. of
transactions
Gross
amount
Specific
allowance
Government agencies
2,092
91,157
11
46,712
76
231,472
(26,600)
2,179
369,341
(26,600)
9,937
3,205,205
3,547
3,453,105
10,971
3,144,823
(3,483,199)
24,455
9,803,133
(3,483,199)
2,684
374,848
684
196,061
2,427
423,550
(699,570)
5,795
994,459
(699,570)
86,974
11,087,270
18,934
1,662,464
48,637
268,405
(896,175)
154,545
13,018,139
(896,175)
Total
99,003
14,383,632
22,492
5,162,281
59,684
3,644,700
(4,405,974)
181,179
23,190,613
(4,405,974)
Of which: Financing for construction and property
development
(1) Standard risks classified as special monitoring as per Section 7 of Appendix IX of Circular 4/2004.
(2) Includes transactions with partial mortgage collateral, i.e. with an LTV of over 1, and other transactions with collateral other than a
mortgage, regardless of the LTV.
208
At 31 December 2014
Standard (1)
No. of transactions
Government agencies
development
Gross amount
No. of transactions
Without collateral
Gross amount
No. of transactions
Gross amount
7
8,886
7
42,550
67
220,641
4,344
1,055,715
1,005
874,412
4,737
880,381
1,081
237,345
72
30,584
208
16,641
61,790
7,585,796
6,234
751,116
33,286
177,246
Total
66,141
8,650,397
7,246
1,668,078
38,090
1,278,268
Substandard
No. of transactions
Government agencies
development
Gross amount
No. of transactions
Without collateral
Gross amount
No. of transactions
Gross amount
Specific
allowance
-
-
-
-
5
6,253
-
887
534,877
340
1,108,687
936
697,511
(387,317)
101
52,744
75
2,578
41
9,733
(13,704)
5,177
835,893
3,941
155,625
6,535
38,346
(73,306)
Total
6,064
1,370,770
4,281
1,264,312
7,476
742,110
(460,623)
Thousands of euros)
Doubtful
No. of transactions
Government agencies
Gross amount
No. of transactions
Without collateral
Gross amount
No. of transactions
Gross amount
Specific
allowance
240
23,257
1
759
12
7,340
(13,209)
6,503
2,408,171
1,926
1,818,807
7,308
1,985,712
(3,425,524)
3,259
420,546
453
230,339
3,022
479,585
(870,056)
19,096
3,053,662
8,450
728,207
12,619
67,484
(1,244,203)
Total
25,839
5,485,090
10,377
2,547,773
19,939
2,060,536
(4,682,936)
development
Government agencies
development
Total
Total
No. of
transaction
Gross amount
s
247
32,143
11,734
3,998,763
No. of
transaction
Gross amount
s
8
43,309
3,271
3,801,906
Without collateral
No. of
Gross
transaction
amount
s
84
234,234
12,981
3,563,604
Specific
allowance
Total
(13,209)
No. of
transaction
s
339
(3,812,841)
27,986
Gross
amount
Specific
allowance
309,686
(13,209)
11,364,273
(3,812,841)
4,441
710,635
600
263,501
3,271
505,959
(883,760)
8,312
1,480,095
(883,760)
86,063
11,475,351
18,625
1,634,948
52,440
283,076
(1,317,509)
157,128
13,393,375
(1,317,509)
98,044
15,506,257
21,904
5,480,163
65,505
4,080,914
(5,143,559)
185,453
25,067,334
(5,143,559)
(1) Standard risks classified as special monitoring as per Section 7 of Appendix IX of Circular 4/2004.
(2) Includes transactions with partial mortgage collateral, i.e. with an LTV of over 1, and other transactions with collateral other than a
mortgage, regardless of the LTV.
209
The movements in 2015 and 2014 were as follows:
At 31 December 2015 :
Items
Balance 31 December 2014
Standard
Balance
Substandard
Balance
Doubtful
Provision
Total
Balance
Provision
Balance
Provision
11,596,743
3,377,191
(460,623)
10,093,399
(4,682,936)
25,067,333
(5,143,559)
Additions
875,945
303,937
(35,680)
1,155,651
(459,580)
2,335,533
(495,260)
Disposals
(740,533)
(551,749)
92,997
(1,742,257)
921,185
(3,034,540)
1,014,182
Reclassifications:
1,587,874
(749,860)
28,842
(838,015)
395,500
-
424,342
To/(from) Normal risk
2,265,066
(919,291)
80,191
(1,345,775)
344,151
-
424,342
To/(from) Substandard risk
(122,230)
626,763
(168,765)
(504,533)
168,765
-
-
To/(from) Doubtful risk
(554,962)
(457,332)
117,416
1,012,293
(117,416)
-
-
(600,370)
(132,473)
44,096
(444,871)
(249,774)
(1,177,714)
(205,678)
12,719,659
2,247,046
(330,368)
8,223,907
(4,075,605)
23,190,612
(4,405,973)
Net variation in balances
At 31 December 2014 :
Items
Standard
Substandard
Balance
Balance
Balance 31 December 2013
9,599,084
3,990,990
Additions
1,476,198
Disposals
Reclassifications:
Doubtful
Provision
Total
Balance
Provision
Balance
Provision
(619,351)
11,288,923
(4,947,975)
24,878,997
(5,567,326)
539,526
(73,223)
997,773
(436,893)
3,013,497
(510,116)
(321,671)
(251,017)
39,454
(1,478,875)
840,712
(2,051,563)
880,166
1,049,684
(806,488)
142,838
(243,196)
226,124
-
368,962
To/(from) Normal risk
1,843,159
(607,624)
54,895
(1,235,535)
314,067
-
368,962
To/(from) Substandard risk
(161,485)
446,868
(70,270)
(285,383)
70,270
-
-
To/(from) Doubtful risk
(631,990)
(645,732)
158,213
1,277,722
(158,213)
-
-
(206,551)
(95,819)
49,659
(471,227)
(364,904)
(773,597)
(315,245)
11,596,744
3,377,192
(460,623)
10,093,398
(4,682,936)
25,067,334
(5,143,559)
Net variation in balances
210
Other requirements of Bank of Spain Circular 6/2012
The table below shows information concerning sector and geographical concentration risk:
At 31 December 2015:
31/12/2015
TOTAL(*)
Spain
ITEM
Other European Union
country
America
Rest of the world
Credit institutions
21,037,248
10,571,017
10,223,335
197,687
45,209
Government agencies
36,163,338
30,621,791
5,518,738
963
21,846
29,397,011
23,855,464
5,518,738
963
21,846
6,766,327
6,766,327
-
-
-
Other financial institutions
30,745,493
23,183,396
7,454,390
95,207
12,500
Non-financial institutions and sole proprietors
2,284,115
774,889
226,110
4,747
Central administration
Other
35,517,926
32,232,812
Construction and property development
1,957,126
1,902,380
5,955
44,044
Civil engineering construction
2,937,041
2,527,154
365,883
43,683
321
30,623,759
27,803,278
1,912,277
687,162
221,042
Large enterprises
19,752,044
17,786,000
1,481,603
371,144
113,297
SMEs and sole proprietors
10,871,715
10,017,278
430,674
316,018
107,745
72,710,023
71,586,353
803,840
61,541
258,289
66,296,997
65,201,965
783,813
57,733
253,486
Consumer
2,521,677
2,518,204
1,442
949
1,082
Other
3,891,349
3,866,184
18,585
2,859
3,721
196,174,028
168,195,369
26,284,418
1,130,287
563,954
Other
Other households and NPISH
Housing
Subtotal
Less: Valuation adjustments due to impairment of assets not attributable to specific transactions
TOTAL
(62,967)
196,111,061
(*) The definition of risk includes the following items of the public balance sheet: “Loans and advances to credit institutions”, “Loans and advances to customers”, “Debt securities”, “Equity instruments”, “Trading derivatives”, “Hedging derivatives·”, “Investments” and
“Contingent exposures”. The amounts included in the table are net of impairment losses.
211
31/12/2015
Autonomous communities
ITEM
Total(*)
Andalucía
Credit institutions
10,571,017
390,492
21
Government agencies
30,621,791
72,771
23,855,464
-
Other
Canarias
Castilla-León
Cataluña
Madrid
91
188,251
7,452,233
Valencia community
1,852,417
La Rioja
28
Others
687,484
102,652
71,280
531,418
5,152,884
477,379
17,466
340,477
-
-
-
-
-
-
6,766,327
72,771
102,652
71,280
531,418
5,152,884
477,379
17,466
340,477
23,183,395
2,404
2,767
1,007
285,134
22,666,230
212,845
292
12,716
32,232,813
1,906,541
1,028,943
1,045,952
4,150,571
15,731,089
4,283,905
338,961
3,746,851
1,902,380
144,382
88,863
100,665
210,988
617,962
404,814
23,590
311,116
2,527,160
59,934
14,738
17,687
162,484
2,098,631
43,168
1,502
129,016
Other
27,803,273
1,702,225
925,342
927,600
3,777,099
13,014,496
3,835,923
313,869
3,306,719
Large enterprises
17,785,997
730,122
265,255
316,680
2,112,008
11,557,430
915,419
81,049
1,808,034
10,017,276
972,103
660,087
610,920
1,665,091
1,457,066
2,920,504
232,820
1,498,685
71,586,353
3,562,856
3,400,116
2,476,508
8,504,783
32,775,103
11,901,919
806,051
8,159,017
Housing
65,201,965
3,354,897
3,020,768
2,240,992
7,918,396
29,752,818
10,572,430
718,488
7,623,176
Consumer
2,518,204
93,430
226,660
112,069
154,154
1,070,007
555,013
29,283
277,588
Other
3,866,184
114,529
152,688
123,447
432,233
1,952,278
774,476
58,280
258,253
Subtotal
168,195,369
5,935,064
4,534,499
3,594,838
13,660,157
83,777,539
18,728,465
1,162,798
12,946,545
Less: Valuation adjustments due to impairment of assets not
attributable to specific transactions (**)
TOTAL
(*)
(62,967)
168,132,402
The definition of risk includes the following items of the public balance sheet: “Loans and advances to credit institutions”, “Loans and advances to customers”, “Debt securities”, “Equity instruments”, “Trading derivatives”, “Hedging derivatives·”, “Investments” and
(**) Includes the total amount of valuation adjustments for impairment of assets not attributable to specific transactions.
212
At 31 December 2014:
ITEM
31/12/2014
TOTAL(*)
Spain
Other European Union
country
America
Rest of the world
Credit institutions
37,724,723
23,876,732
13,223,756
585,830
38,405
Government agencies
33,866,045
28,590,895
5,263,692
991
10,467
26,838,656
21,563,506
5,263,692
991
10,467
Other
7,027,389
7,027,389
-
-
-
33,159,542
26,428,525
5,867,430
851,087
12,500
37,819,262
34,175,035
2,517,078
906,867
220,282
2,688,179
2,611,995
9,938
51,405
14,841
3,362,532
2,878,988
417,836
58,159
7,549
31,768,551
28,684,052
2,089,304
797,303
197,892
Large enterprises
20,237,829
17,905,033
1,782,811
456,641
93,344
11,530,722
10,779,019
306,493
340,662
104,548
75,967,604
74,721,901
909,892
55,419
280,392
Other
Housing
70,688,420
69,479,290
884,049
51,357
273,724
Consumer
2,773,513
2,763,114
4,012
3,263
3,124
Other
2,505,671
2,479,497
21,831
799
3,544
218,537,176
187,793,088
27,781,848
2,400,194
562,046
Subtotal
Less: Valuation adjustments due to impairment of assets not attributable to specific transactions
TOTAL
(*)
(163,575)
218,373,601
213
ACTIVITY
Autonomous communities
Total (*)
Andalucía
Canarias
Castilla-León
Cataluña
Madrid
Valencia community
La Rioja
Others
Credit institutions
23,876,732
442,817
68
199
427,352
21,216,397
976,771
31
813,097
Government agencies
28,590,895
95,050
120,280
111,339
1,116,172
4,495,935
660,953
25,969
401,691
21,563,506
-
-
-
-
-
-
-
7,027,389
95,050
120,280
111,339
1,116,172
4,495,935
660,953
25,969
401,691
26,428,521
5,125
5,880
1,343
120,464
25,932,310
345,897
969
16,533
34,175,040
1,951,188
979,922
1,050,914
4,415,331
17,296,914
4,694,335
347,111
3,439,325
2,611,998
159,804
111,546
128,086
263,122
980,559
609,910
22,738
336,233
Other
2,878,988
82,733
17,674
24,695
192,271
2,353,472
62,425
1,372
144,346
28,684,054
1,708,651
850,702
898,133
3,959,938
13,962,883
4,022,000
323,001
2,958,746
Large enterprises
17,905,033
750,314
227,665
273,196
2,181,893
10,672,767
2,479,670
71,718
1,247,810
10,779,021
958,337
623,037
624,937
1,778,045
3,290,116
1,542,330
251,283
1,710,936
74,721,900
4,351,482
3,540,442
2,656,611
9,290,513
32,438,415
12,640,907
865,177
8,938,353
69,479,290
4,134,421
3,177,380
2,418,298
8,624,542
30,716,787
11,234,518
775,125
8,398,219
2,763,114
96,562
193,355
102,394
380,308
1,068,049
617,863
29,040
275,543
Other
Housing
Consumer
Other
Subtotal
Less: Valuation adjustments due to impairment of assets not
attributable to specific transactions (**)
TOTAL
(*)
2,479,496
120,499
169,707
135,919
285,663
653,579
788,526
61,012
264,591
187,793,088
6,845,662
4,646,592
3,820,406
15,369,832
101,379,971
19,318,863
1,239,257
13,608,999
(163,575)
187,629,513
(**) Includes the total amount of valuation adjustments for impairment of assets not attributable to specific transactions.
214
The following table shows the total amount of secured financing by the percentage of the carrying amount of the financing to the latest available appraisal or the
valuation of the available guarantee or collateral (loan to value) at 31 December 2015 and 2014.
At 31 December 2015
ITEM
TOTAL
Of which: Mortgage
loans
Of which: Other
secured loans
Less than or equal
to 40%
Secured loans. Loan to value
More than 40% and
More than 60% and More than 80% and
less than or equal to less than or equal to
less than or equal
60%
80%
to 100%
More than 100%
Government agencies
5,853,890
218,497
247,051
32,641
70,071
101,170
185
261,481
3,634,551
32,905
148,689
8,664
8,466
63,043
-
101,421
28,549,213
8,186,822
6,090,404
4,004,871
2,175,302
1,262,031
375,138
6,459,884
862,889
664,301
7,020
337,471
170,439
61,113
61,604
40,694
2,937,041
2,495,556
337,329
1,315,017
688,366
345,053
61,124
423,325
24,749,283
5,026,965
5,746,055
2,352,383
1,316,497
855,865
252,410
5,995,865
Large enterprises
13,877,761
831,396
5,005,893
457,992
154,855
148,131
104,749
4,971,562
10,871,522
4,195,569
740,162
1,894,391
1,161,642
707,734
147,661
1,024,303
72,593,455
67,638,955
74,539
14,201,629
22,000,369
22,624,990
5,982,632
2,903,874
66,296,997
65,830,632
-
13,565,780
21,419,356
22,352,835
5,901,878
2,590,783
Consumer
2,518,595
163,529
55,602
62,932
28,828
12,487
2,333
112,551
Other
3,777,863
1,644,794
18,937
572,917
552,185
259,668
78,421
200,540
110,631,109
76,077,179
6,560,683
18,247,805
24,254,208
24,051,234
6,357,955
9,726,660
Other
Housing
Subtotal
Less: Valuation adjustments due to impairment
of assets not attributable to specific transactions
TOTAL
MEMORANDUM ITEM
Refinancing, refinanced and restructured
operations
61,198
110,569,911
18,784,084
14,658,057
2,580,299
2,509,256
3,793,387
4,780,853
2,342,819
3,812,041
215
At 31 December 2014
ITEM
TOTAL
Of which: Mortgage
loans
Of which: Other
secured loans
Less than or equal
to 40%
More than 40% and
less than or equal to
60%
Secured loans. Loan to value
More than 60% and More than 80% and
less than or equal to
less than or equal
80%
to 100%
More than 100%
Government agencies
5,896,809
255,547
247,638
37,628
93,117
68,539
13,068
290,833
3,985,453
38,638
169,529
11,643
21,730
58,473
-
116,321
28,506,700
9,684,669
5,825,585
4,554,266
3,061,372
1,472,697
429,330
5,992,589
1,532,097
1,098,662
8,083
478,524
233,554
111,147
198,834
84,686
3,362,532
2,855,427
170,951
1,438,915
886,525
352,909
68,463
279,566
23,612,071
5,730,580
5,646,551
2,636,827
1,941,293
1,008,641
162,033
5,628,337
Large enterprises
13,287,603
707,482
5,003,045
466,854
434,382
217,537
19,118
4,572,636
10,324,468
5,023,098
643,506
2,169,973
1,506,911
791,104
142,915
1,055,701
74,452,581
72,189,066
101,924
13,958,231
22,991,987
25,647,531
6,900,988
2,792,253
70,688,420
70,167,145
-
13,283,715
22,307,335
25,340,261
6,810,809
2,425,025
Consumer
1,258,490
183,711
66,982
70,140
32,160
19,178
3,348
125,867
Other
2,505,671
1,838,210
34,942
604,376
652,492
288,092
86,831
241,361
112,841,543
82,167,920
6,344,676
18,561,768
26,168,206
27,247,240
7,343,386
9,191,996
15,453,402
2,565,389
2,806,464
4,535,528
4,583,950
2,535,061
3,557,787
Other
Housing
Subtotal
Less: Valuation adjustments due to impairment
of assets not attributable to specific transactions
TOTAL
150,300
112,691,243
MEMORANDUM ITEM
Refinancing, refinanced and restructured
operations
19,923,705
216
Appendix XI - Detail of agents and disclosures required by Article 22 of Royal Decree 1245/1995 of 14 July
Information at 31 December 2015
Bankia, S.A. agents authorised to enter into and/or negotiate transactions on behalf of the entity (under Bank of Spain Circular 4/2010, rule 1, section 1)
Name or corporate name of
Registered address
Mapfre Familiar, Compañía de Seguros y Reaseguros, s.a.
Crta. Pozuelo a Majadahonda, 52 – 28220 (Majadahonda -Madrid)
Miguel Illueca Ribes
C/ Maestro Aguilar, 5 - 46006 (Valencia)
Juan Carlos Castro Balsera
C/ Sant Felip Neri, 1 – 08740 (Sant Andreu de la Barca – Barcelona)
María Carmen Manzana Mondragón
Av. País Valencia, 7 – 12528 (Eslida – Castellón)
Moisés Sánchez Expósito
Av. Pais Valencia, 40 – 12500 (Vinarós – Castellón)
Fabra i Verge, SLL.
Av. Nostra Senyora l'Assumpci, 170 - 43580 (Deltebre-Tarragona)
Saturno Javier Rodríguez Tarno
C/ Casimiro Sanz, 4 - 39059 (Reinosa - Cantabria)
Axos Gestión y Medioambiente, S.L.
C/ Góngora, 12 – 03012 (Alicante)
Alejandro&Rubén Consultores Asesores, S.L.
C/ Francisco Navacerrada, 8 - 28028 (Madrid)
Pablo Luis Bolaños León
C/ San Lucas, 22 – 35411 (Santidad-Las Palmas)
Bankia, S.A. agents authorised only to market products and services; not authorised to enter into and/or negotiate transactions on behalf of the entity (under Bank of Spain
Circular 4/2010, rule 1, section 2)
Registered address
Rentacubas, S.L.
C/ Seseña, 56 - 28024 (Madrid)
Rubén José Sogorb Pons
C/ Alcalde Lorenzo Carbonell, 35 - 03008 (Alicante)
José Alarcón Mir
C/ Gaieta Vinzia, 13 - 08100 (Mollet - Barcelona)
Ali Abed
C/ Pdta Baya baja Pol II, 90 - 03292 (Las Bayas - Alicante)
Vicente Jesús Ferriol Aparicio
C/ Alt Maestrat, 14 - 46160 (La Coma - Valencia)
José Antonio Cambrón Martínez
Av.Doctor Gómez Ferrer, 8 - 46910 (Alfafar - Valencia)
Colin George Stallwood
C/ Esparterola, 30 - 46758 (Barx - Valencia)
José Manuel Fontenla Redondo
C/ Rua Montes, 10 - 36004 (Pontevedra)
Martorell i Cantacorps Associats, S.L.
Av. Catalunya, 64 - 08290 (Cerdanyola del Valles-Barcelona)
Eurofinances Malgrat, S.L.
Av. Verge de Montserrat, 21 - 08380 (Malgrat de Mar-Barcelona)
217
Registered address
Jaime Huguet Figueras
Est. Mossen Josep Mas, 28 - 08338 (Premiá de Dalt-Barcelona)
Servicios Empresariales Polar, S.L.
Av. Catalunya, 4 - 08930 (Sant Adriá de Besós-Barcelona)
Profema 2010
C/ Mallorca, 295 - 08037 (Barcelona)
Robfincas, S.L.
C/ Pi i Margall, 17 - 08930 (Sant Adriá de Besós-Barcelona)
Rafael Henri León Van Camp
Av. España, 24 - 12598 (Peñíscola - Castellón)
Ricardo González Parra
C/ José Alix y Alix, 14 - 28830 (San Fernando de Henares - Madrid)
Boiza & Elvira S.L.
C/ Goleta, 7 - 28140 (Fuente el Saz del Jarama - Madrid)
Sanjuan Abogados Consultores de Empresa
C/ Gamazo, 33 - 47004 (Valladolid)
Francisco SanchÍs Palomar
Av. Emilio Baró, 8 - 46020 (Valencia)
Ángel Villa Fernández
C/ Macías Picavea, 9 - 47003 (Valladolid)
Gabinete Técnico Jurídico Eivissa, S.L.
P. Juan Carlos I, 39 - 07800 (Ibiza - Baleares)
José Millán Blanco
C/ Navarro y Ledesma, 5 - 28807 (Alcalá de Henares - Madrid)
Hugo Gabriel Prisiallni Wisnivesky
C/ Estanislao Gómez, 55 - 28042 (Madrid)
Orbis Consiliarii Corporacion, S.L.
Av. Maria de Molina, 26 - 28006 (Madrid)
ESF Consultores 2010, S.L.
C/ Antonio Belón, 1 - 29602 (Marbella - Málaga)
Juan de Dios Martínez Rubio
C/ La Cerámica 36 - 28038 (Madrid)
Fan Yang
lg. Gran Vía, 69 - 28013 (Madrid)
Beatriz Ruiz Jiménez
C/ Montes Pirineos, 26 - 28018 (Madrid)
Fernando Expósito Trabalón
C/ Ercilla, 12 - 28005 (Madrid)
Asesores, Consultores y Abogados Independientes S.L.
C/ San Agustin, 31 - 46340 (Requena - Valencia)
Shunli Universal Consulting, S.L.
C/ Vía Complutense, 44 - 28805 (Alcalá de Henares - Madrid)
Tomás Sanz Asesores, S.L.
C/ Numancia, 21 - 46930 (Quart de Poblet - Valencia)
Vicente García Patón
C/ Profesor Blanco, 14 - 46014 (Valencia)
Zongqi Ge
C/ Mayor, 58 - 28801 (Alcalá de Henares - Madrid)
Aseygem 2007, S.L.U.
C/ República Argentina, 2 - 46021 (Valencia)
Eduardo Fabado Agustí
C/ Cardenal Benlloch, 4 - 46980 (Paterna - Valencia)
Sugestión Integral Sierra Norte, S.L.
C/ La Calzada, 17 - 28440 (Guadarrama - Madrid)
218
Registered address
Espacio Asesor, Soluciones Empresariales, S.L.
C/ Ciutat de Querétaro, 4 - 07007 (Palma de Mallorca-Baleares)
Ana María Sánchez Cirer
C/ Cega, 9 - 07013 (Palma de Mallorca - Baleares)
Antonio Chacón González-Nicolás
C/ Blasco de Garay, 16 - 28015 (Madrid)
Francisco Simo Burguera
C/ Alejandro Rosselló, 24 - 07002 (Palma de Mallorca - Baleares)
Consorcio Mercantil Hernandez & Serrano, S.L.
C/ General Pereira, 44 - 46340 (requena-valencia)
Ángel Pérez Sanz
C/ Colón, 74 - 46004 (Valencia)
Castellnou House, S.L.
C/ Muntaner, 172 - 08036 (Barcelona)
Catalina de Loreto Lleonart Carbonell
C/ Francisco Villalonga, 8 - 07007 (Palma de Mallorca - Baleares)
Javier Casas Mártinez
C/ Rei en Jaume, 251 - 08440 (Cardedeu-Barcelona)
Novillo e Hijos Asesores, S.L.
C/ Gran Avenida - 28041 (Madrid)
Rosa Maria Rivera Lozano
C/ Pda Tossals, 121 - 03760 (Ondara - Alicante)
Daisa Pimi, S.L.
C/ Hermandad, 5 - 28025 (Madrid)
Xu Chen
C/ Castro de Oro, 11 - 28019 (Madrid)
Atle Moreno y Redondo, S.L.
C/ Francisco Garfias, 12 - 21800 (Moguer - Huelva)
Valero & Araujo Servicios, S.L.
P. del Pinar Bloque 4, 11 - 28230 (Las Rozas de Madrid- Madrid)
Ángel Guevara Robles
C/ Toledo, 171 - 28005 (Madrid)
JM 2004 Empresistes, S.L.
C/ Francesc Macia Torre Mile, 60 - 08208 (Sabadell-Barcelona)
Lanak Consultores ETT, S.L.
Avenida Gasteiz, 62 - 01012 (Vitoria - Alava)
Francisco Gambero Bernal
C/ Loma de los Riscos, 32 - 29620 (Torremolinos - Málaga)
Crespo & Gonzaga, S.L.
Avenida M40, 17 – 28925 (Alcorcón - Madrid)
219
Appendix XII – Annual banking report
On 27 June 2014, Law 10/2014 of 26 June 2014 on regulation, supervision and solvency of credit
institutions was published in the Spanish Official State Gazette (Boletín Oficial del Estado), thereby
transposing into Spanish law article 89 of Directive 2013/36/EU of the European Parliament and of the
Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of
credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives
2006/48/EC and 2006/49/EC.
In compliance with article 87 and the Twelfth Transitional Provision of Law 10/2014, as from 1 July
2014 credit institutions will be obliged to disclose for the first time, specifying the countries where they
have an establishment, the following information on a consolidated basis for the last financial year
closed:
a) Name, nature of activities and geographical location.
b) Turnover and number of full-time employees.
c) Gross profit before tax and income tax
d) Government grants and assistance received
Pursuant to the above, the aforesaid required information is set out below:
a) Name, nature of activities and geographical location.
Bankia, S.A. was incorporated for an unlimited term under the name “Banco de Córdoba, S.A.” in a
public deed executed on 5 December 1963, amended by subsequent deeds (which changed the name
and adapted its bylaws) and changed its registered company name to “Altae Banco, S.A.” and
relocated its registered office to Madrid at Calle Montesquinza, 4.
Its registered company name was changed to the current name of “Bankia, S.A.” in a public deed
executed on 16 May 2011. Its bylaws were also amended with the approval of a new consolidated
text, and its registered office was relocated to Valencia, at Calle Pintor Sorolla, number 8, in a public
deed executed in Madrid on 16 June 2011.
The company is registered in the Commercial Register of Valencia in volume 9,341, book 6,623, folio
104, page V-17274, 183rd entry and in the Registry of Banks and Bankers of the Bank of Spain under
number 2038.
It holds taxpayer identification number A-14010342.
Bankia, S.A.'s registered corporate objects are pursuit of banking activity and it is subject to the rules
and regulations that apply in Spain.
In addition to the activities carried on directly, the Bank is the parent company of a group of
subsidiaries engaged in diverse activities and which, together with the Bank, constitute the Bankia
Group. Consequently, in addition to its own individual annual accounts, the Bank is required to
prepare consolidated annual accounts for the Group.
The consolidated Group fundamentally carries on its activity in Spain. Appendices II, III and IV detail
the companies operating in each jurisdiction, along with their name, geographic location and the
nature of their business.
220
b) Turnover and number of full-time employees.
This includes information on turnover and the number of full-time employees at the end of 2015 and
2014, on a consolidated basis. The turnover has been taken to be the gross income as reported in
consolidated income statement of the Group for the years ended 31 December 2015 and 2014:
Number of employees (fulltime)
Turnover
31/12/2015
SPAIN
USA
3,673,262
128,780
31/12/2014
3,886,358
31/12/2015
118,982
13,557
-
31/12/2014
13,924
474
Portugal
(579)
(554)
-
-
Rest of countries
4,720
4,026
14
15
3,806,183
4,008,812
13,571
14,413
TOTAL
c) Gross profit before tax and income tax
This item discloses information on profit before tax and income tax as they appear in the Group's
consolidated income statement for the years ended 31 December 2015 and 2014
Profit before tax
Income tax
31/12/2015
31/12/2014
1,383,346
837,345
(370,363)
(204,869)
USA
65,357
71,923
(20,372)
(20,657)
Portugal
(1,345)
(1,034)
-
-
4,627
3,898
(678)
(646)
(391,413)
(226,172)
SPAIN
Rest of countries
TOTAL
1,451,985
912,132
31/12/2015
31/12/2014
d) Government grants or assistance received
See Note 1.2 on the BFA-Bankia Group Restructuring Plan.
221
Appendix XIII – Other information
Customer care service
At its meeting on 16 June 2011, the Board of Directors of Bankia, S.A. approved the "Customer
Protection Regulations of Bankia, S.A. and its Group", which was subsequently updated at its meeting
of 25 July 2012. 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.
BFA, Tenedora de Acciones de Acciones, S.A.U. (1)
Bankia Pensiones, S.A.., E.G.F.P.
Segurbankia, S.A., Correduría de Seguros del Grupo Bankia
(1) No longer adhered to the Customer Care Service.
The Bankia Group 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 on customer claims in 2015 for Group entities subject to these duties and obligations
are as follows:
Company
Bankia, S.A.
Bankia Pensiones, S.A., E.G.F.P.
Segurbankia, S.A.
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
67,703
49,318
18,385
13,136
22,693
68
66
2
38
21
147
145
2
102
28
0
0
0
0
0
222
The breakdown by type of all claims resolved and dismissed in 2015 is as follows:
Type of claim
Number of claims
Mortgage loans and credits
5,246
Other loans and credits
364
Other lending transactions
41
Current accounts
21,387
Other deposit transactions
3,395
Cards, ATMs and POS terminals
4,200
Other banking products
153
Direct debits
1,213
Transfers
1,001
Bills and cheques
307
Other collection and payment services
875
Relations with collective investment institutions
175
Other investment services
24,733
Life insurance
368
Damage insurance
328
Pension funds
248
Other insurance
184
Miscellaneous
4,836
69,054
Total
Claims pending resolution by Group entities subject to these obligations at 31 December 2015 are as
follows:
Company
Number of claims pending resolution
Bankia, S.A.
1,668
9
14
The main data on customer claims in 2014 for Group entities subject to these duties and obligations
are as follows:
Company
Bankia, S.A.
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
43,773
42,847
926
14,305
19,298
1
1
-
1
-
65
64
1
33
19
145
138
7
78
15
Bancofar, S.A. (1)
138
136
2
166
29
BFA
(1) The Group sold Bancofar, S.A. in 2014.
223
The breakdown by type of all claims resolved and dismissed in 2014 is as follows:
Type of claim
Mortgage loans and credits
Other loans and credits
Other lending transactions
Current accounts
Other deposit transactions
Cards, ATMs and POS terminals
Other banking products
Direct debits
Transfers
Bills and cheques
Other collection and payment services
Relations with collective investment institutions
Other investment services
Life insurance
Damage insurance
Pension funds
Other insurance
Miscellaneous
Total
Number of claims
6,726
328
67
16,789
4,540
5,469
258
1,573
1,255
391
957
125
3,953
292
381
276
188
4,730
48,298
Claims pending resolution by Group entities subject to these obligations at 31 December 2014 are as
follows:
Company
Bankia, S.A.
Number of claims pending resolution
2,722
23
29
Bancofar, S.A.(1)
7
(1) The Group sold Bancofar, S.A. in 2014.
224
Average period of payment to suppliers. Third
“Disclosure requirement" in Law 15/2010 of 5 July
additional
provision.
In compliance with the provisions of Law 15/2010, of 5 July, amending Law 3/2004, of 29 December,
establishing measures to combat late payment on commercial transactions, implemented by Spanish
Accounting and Audit Institute (ICAC) Resolution of 29 January 2016, on the information to be
included in the notes to financial statements with regard to deferred payments to suppliers in
commercial transactions, it is disclosed that:
-
Due to the nature the business activities in which the Group mainly engages (financial activities),
the information provided in this Note concerning deferred payments exclusively concerns
payments to suppliers for the provision of various services and supplies to the Group’s entities
resident in Spain and to payments to suppliers made by Spanish Group entities that carry out nonfinancial activities, other than payments to depositors and holding companies of securities issued
by Group entities, which were made, in all cases, in strict compliance with the contractual and
legal periods established in each case, irrespective of whether or not they were payable in cash or
by instalment. Nor is any information provided concerning payments to suppliers excluded from
the scope of this mandatory disclosure pursuant to the provisions of the aforementioned ICAC
Resolution, such as suppliers of fixed assets that are not considered to be trade creditors.
-
In connection with the information required by Law 15/2010 of 5 July in relation to Group's
commercial and service providers, and in due consideration the Article 6 of ICAC Resolution of 29
January 2016, there follows the information required by this regulation, to the scope defined in the
preceding paragraph:
(days)
2015
Average payment period (days)
11.64
Average late-payment (days)
14.03
Average period of payment to suppliers
11.66
2015
Total payments
Total outstanding payments
747,673
7,440
Payments for payables and receivables among Spanish entities of the Bankia Group have been
excluded from the above data
In accordance with this single additional provision of 29 January 2016, comparative information for
2014 is not provided in the 2015 financial statements.
225
BANKIA, S.A. AND SUBSIDIARIES
FORMING THE BANKIA GROUP
MANAGEMENT REPORT
DECEMBER 2015
MANAGEMENT REPORT BANKIA GROUP
DECEMBER 2015
Contents
1.- KEY EVENTS OF 2015.......................................................................................... 2
2.- ORGANISATIONAL STRUCTURE .......................................................................... 5
2.1.- Overview of Bankia Group and its organisational structure .............................. 5
2.2.- Corporate governance ........................................................................................ 6
2.3.- Responsible management ................................................................................ 12
2.4. - Business model ................................................................................................ 13
3.- ACTIVITY AND RESULTS ................................................................................... 20
3.1.- Economic and financial backdrop ..................................................................... 20
3.2.- Financial performance in 2015 ......................................................................... 21
3.3.- Key figures ........................................................................................................ 23
3.4.- Highlights of the balance sheet ........................................................................ 24
3.5.- Highlights of the income statement ................................................................. 33
4.- FUNDING STRUCTURE AND LIQUIDITY ............................................................. 41
5.- CAPITAL MANAGEMENT, SOLVENCY AND LEVERAGE RATIO ............................. 43
6.- RISK MANAGEMENT ........................................................................................ 49
7.- FORECLOSED REAL ESTATE ASSETS ................................................................... 64
8.- INFORMATION ON CREDIT RATINGS ................................................................ 64
9.- SHARE PRICE PERFORMANCE AND SHAREHOLDER STRUCTURE ........................ 67
10.- INFORMATION ON TREASURY SHARES ........................................................... 69
11.- DIVIDEND POLICY .......................................................................................... 69
12.- ORGANISATION AND PEOPLE ......................................................................... 70
13.- ENVIRONMENTAL DISCLOSURES .................................................................... 73
14.- RESEARCH, DEVELOPMENT AND TECHNOLOGY .............................................. 76
15.- FORECASTS AND BUSINESS OUTLOOK ............................................................ 78
16.- EVENTS AFTER THE REPORTING PERIOD ......................................................... 80
17.- ANNUAL CORPORATE GOVERNANCE REPORT ................................................ 80
1
DECEMBER 2015
This report was prepared following the recommendations of the “Guidelines for the
preparation of management reports of listed companies" issued by the CNMV in September
2013.
1.- KEY EVENTS OF 2015
Bankia Group delivered a positive performance in 2015. The key highlights are as
follows:
1.1.- Good earnings performance
Profit attributable to the Group amounted to EUR 1,040 million, an increase of 39.2%
from 2014. Driving this growth were the strengths that shaped the business performance
during 2015:
-
The resistance of the Group's net interest income to extraordinarily low market
interest rates.
-
The maintenance of a cost-containment policy following the completion of the
Group's restructuring process, which helped stabilise earnings amid an overall
challenging environment for the banking industry. The Bankia Group's efficiency ratio
at year-end 2015 stood at 43.6%, ranking among the best of Spain's largest financial
institutions.
-
The focus on risk management, which resulted in a sharp decrease in non-performing
loan (NPL) provisions and write-downs of real estate assets.
-
Execution of the Group's disposal plan, which culminated in the sale of City National
Bank of Florida in October, strengthening profit generation in 2015.
The Group's ability to generate earnings, organically and via disposals, which fed through
to further improvement in profitability, achieving a ROE at 9% at the end of 2015. Also in
2015, the Group earmarked EUR 424 million to bolster provisions for potential future costs
arising from the various legal proceedings related to Bankia's 2011 IPO. Part of the amounts
set aside in this respect (EUR 184 million) was recognised in the consolidated income
statement, with the remainder (EUR 240 million) charged to own funds in the consolidated
balance sheet.
1.2.- Capital strength
The Bankia Group continued to raise its solvency levels in 2015, achieving a CET 1
phased-in ratio of 13.9% which marked an improvement from 2014 and was underpinned
mainly by capital generation through earnings and, to a lesser extent, by the positive impact
of balance-sheet deleveraging and the better quality of the loan portfolio. This enabled the
Group to maintain a healthy surplus of capital above the minimum regulatory requirement
despite the provisions recognised in relation to the 2011 IPO. These levels make the Bankia
Group one of the banking groups with the strongest capital in Spain.
2
DECEMBER 2015
1.3.- Growth in activity
On the investment front, there was further growth in 2015 new lending to strategic
segments, such as business, SMEs and consumer lending. This growth, coupled with the
slowdown in private sector deleveraging in Spain, helped stabilise the volume of the Group's
lending, which decreased by 1.9% in the year, a far smaller drop than in 2014. Moreover, part
of this decline in lending was concentrated in non-performing loans (NPLs).
In customer funds, meanwhile, noteworthy in 2015 was the positive trend of strict
customer deposits and off-balance sheet funds (mainly investment funds). Combined, these
increased by 3.3% (EUR 3,811 million) from 2014.
1.4.- Focus on risk management
The Group's main risk metrics improved further in 2015. NPLs were down 21.5%, by
containing inflows of NPLs and by stepping up recovery efforts and selling loan portfolios.
This positive performance drove the NPL ratio down by 2.3 pp from previous year to 10.6%,
improving the NPL coverage ratio up to 60%, 2.4 pp more than in 2014.
Moreover, the improvement in portfolio credit quality has enabled the Group to scale
back NPL provisions, resulting in a considerable improvement in the cost of credit risk, which
at 31 December 2015 stood at 0.42%, 18 basis points lower than last year.
1.5.- Sound funding and liquidity structure
According to the retail business model underpinning the Bankia Group's banking activity,
the funding structure is based on customer deposits. The Group taps capital markets to meet
its additional liquidity needs. In this respect, in the wake of the improvement in the
commercial gap achieved over the past two years, the Bankia Group's LTD ratio at endDecember 2015 stood at 102.9%, bearing out the good balance between loans and deposits.
Meanwhile, thanks to the low-interest-rate market environment, alongside the support
of the Group's management and solvency, Bankia successfully placed EUR 2,250 million in
two issues of mortgage covered bonds, one in March and one in August. This marked the first
issues by the Group of these instruments since February 2012.
In addition, the Group held sufficient liquid assets on its balance sheet at 31 December
2015 to easily cover the corporate issues falling due.
1.6.- First payment of dividends by the Group
Solid earnings the year before, alongside favourable trends in the balance sheet and key
solvency indicators, enabled the Group to pay its first ever dividend in 2015. Pursuant to
resolutions adopted at the General Shareholders Meeting held on 22 April 2015, on 7 July
2015 Bankia paid shareholders a EUR 201.6 million cash dividend out of 2014 profit. This was
one of the key highlights of Bankia's transformation process and underscores the
achievements made since embarking on the 2012-2015 Strategic Plan.
3
DECEMBER 2015
1.7.- Disposals of non-strategic assets
The Group carried out sizable disposals in 2015, complying with the commitments
assumed in the Restructuring Plan and the Strategic Plan, one of the main cornerstones of
which was the disposal of equity investments and assets considered non-strategic for the
Group's business. The main disposals during 2015 have been as follows:
-
Realia: on 4 March 2015, Corporación Industrial Bankia, a wholly owned subsidiary of
Bankia, S.A., signed an agreement with Inmobiliaria Carso, S.A. de C.V. to sell its
entire stake in Realia Business, S.A., representing 24.953% of Realia's share capital.
The sale was carried out on 3 June 2015 for a total amount of EUR 44.5 million,
equivalent to a selling price of EUR 0.58 per share and generating a gross gain of EUR
13.7 million.
-
Globalvia Infraestructuras: on 30 June 2015, the Group and Fomento de
Construcciones y Contratas, S.A. (FCC) signed a purchase and sale agreement with
the government of Malaysia's strategic investment fund, Malasia Khazanah Nasional
Berhad, for the sale of 100% of the shares of Globalvia Infraestructuras, S.A., a
company in which Bankia and FCC each own 50%. Completion of the deal was
contingent on compliance with the conditions precedent set in out in the purchase
and sale agreement, which included relinquishment by the investment funds USS,
OPTrust and PGGM funds, holders of a EUR 750 million convertible bond, of the right
to acquire shares of Globalvía Infraestructuras, S.A.
As a result of the exercise of the pre-emptive rights held by these funds, on 23
October 2015, the Group and Fomento de Construcciones y Contratas, S.A. (FCC)
entered into a purchase and sale agreement with USS, OPTrust and PGGM for the
sale of 100% of the shares of Globalvia Infraestructuras, S.A. The deal will be carried
out after the conditions precedent set out in the purchase and sale agreement are
met. The selling price entails an upfront payment of EUR 166 million, to be made
when the transfer of the shares is completed, and a deferred payment, to be made in
the first half of 2017, which could reach as high as EUR 254 million depending on the
company's valuation at conversion of the bond.
-
City National Bank of Florida: in May 2013, the Board of Directors of Bankia
authorised the sale of City National Bank of Florida via the transfer from investee
Bankia Inversiones Financieras, S.A.U. of 100% of the shares of CM Florida Holdings
Inc to Banco de Crédito e Inversiones of Chile (BCI).
On 21 September 2015, the United States Federal Reserve (Federal Reserve Board)
authorised the acquisition of the shares by BCI. As a result, the sale was carried out
on 16 October 2015, generating a net gain for the Bankia Group of EUR 117 million.
-
Sale of loan portfolios: in 2015, the Bankia Group sold NPL loan portfolios for an
aggregate amount of EUR 1,885 million, including both non-performing corporate
4
DECEMBER 2015
and retail loans. These sales enabled the Group to improve the quality of its balance
sheet and free up funds for new loans in strategic segments.
2.- ORGANISATIONAL STRUCTURE
2.1.- Overview of Bankia Group and its organisational structure
Bankia is a financial group with operations throughout Spain, focusing mainly on the
traditional retail banking, corporate banking, asset management and private banking
businesses. Its corporate objects include all manner of activities, operations, acts, contracts
and services related to the banking sector in general or directly or indirectly related thereto,
permitted to it by current legislation, including the provision of investment services and
ancillary services and performance of the activities of an insurance agency.
Bankia mainly does business in Spain; the Group had total assets at 31 December 2015 of
around EUR 206,970 million, of which Bankia, S.A. held EUR 208,221 million. Section 2.4
below provides a breakdown of the branch office network by region.
Investments in companies included in the scope of consolidation are held directly in
Bankia's portfolio, or indirectly through different holding companies. The main ones are as
follows:
Organisationally, Bankia is the Group’s parent. At 31 December 2015, the consolidation
scope comprised 72 companies between subsidiaries, associates and jointly-controlled
5
DECEMBER 2015
entities engaging in a range of activities, including the provision of finance, insurance, asset
management, services, and real estate development and management. Of these, 35 are
Group companies, 3 are jointly-controlled entities and 34 are associates. Moreover, following
the start of the approved disposal plan, 36 of the 72 companies in the Group’s consolidation
scope are classified as non-current assets for sale.
2.2.- Corporate governance
Bankia's governing bodies are the General Shareholders Meeting and the Board of
Directors.
-
The General Shareholders Meeting is the highest decision-making authority within
the scope attributed to it by law or by the bylaws; e.g. the appointment and removal
of Directors, the approval of the annual financial statements, the distribution of
dividends or the approval of the Director remuneration policy.
-
The Board of Directors is responsible for representation of the Company and has the
broadest authority to administer the Company except for matters reserved for the
General Shareholders Meeting. Its responsibilities include, inter alia, approving the
strategic or business plan, management objectives and annual budgets, and the
investment and financing, corporate social responsibility and dividend policies. There
are five Board committees, whose members are appointed in accordance with their
suitability based on their knowledge, aptitudes, experience and the duties of each
committee.
Board of Directors
The Board of Directors held 18 meetings between 1 January and 31 December 2015.
(8 independent directors and 3 executive directors)











Mr. José Ignacio Goirigolzarri Tellaeche. Executive Chairman
Mr. José Sevilla Álvarez. Chief Executive Officer
Mr. Alfredo Lafita Pardo. Lead Independent Director
Mr. Antonio Ortega Parra. Executive Director
Mr. Joaquín Ayuso García. Independent Director
Mr. Francisco Javier Campo García. Independent Director
Mrs. Eva Castillo Sanz. Independent Director
Mr. Jorge Cosmen Menéndez-Castañedo. Independent Director
Mr. José Luis Feito Higueruela. Independent Director
Mr. Fernando Fernández Méndez de Andés. Independent Director
Mr. Álvaro Rengifo Abbad. Independent Director
6
DECEMBER 2015
Audit and Compliance Committee
The Audit and Compliance Committee monitors the effectiveness
of internal control, the internal audit and the risk management
systems, and the preparation of regulated financial information. Its
responsibilities also include, among others, proposing the
appointment of, and establishing the appropriate relationships
with, the external auditors, and reviewing compliance with the
Company’s governance and compliance rules.
Four external independent directors
- Mr. Alfredo Lafita Pardo (Chairman)
- Mr. Joaquín Ayuso García
- Mr. Jorge Cosmen Menéndez-Castañedo
- Mr. José Luis Feito Higueruela
The Audit and Compliance Committee held 16 meetings
between 1 January and 31 December 2015.
Appointments Committee
The Appointments Committee has general authority to propose
and report on appointments and removals of directors and senior
managers. It is also responsible for assessing the ability, diversity
and experience required for the Board of Directors, and the
necessary time and dedication to carry out their duties in an
effective manner. It defines the necessary functions and abilities
for candidates wishing to cover vacancies. It examines and
organises the succession plan for governance bodies.
- Mr. Joaquín Ayuso García (Chairman)
- Mr. Francisco Javier Campo García
- Mr. Alfredo Lafita Pardo
- Mr. Álvaro Rengifo Abbad
The Appointments Committee held 10 meetings
Remuneration Committee
The Remuneration Committee has general authority to propose
and report on remuneration and other contractual terms and
conditions of directors and senior managers, and must periodically
review the remuneration programmes, considering their
appropriateness and utility, and ensuring transparency of
remuneration and compliance with the remuneration policy set by
the Company.
- Mrs. Eva Castillo Sanz (Chairwoman)
- Mr. Joaquín Ayuso García
- Mr. Jorge Cosmen Menéndez-Castañedo
- Mr. Alfredo Lafita Pardo
The Remuneration Committee held 10 meetings
Risk Advisory Committee
The Risk Advisory Committee advises on the overall propensity of
risk and the risk strategy, overseeing the pricing policy, presenting
risk policies and proposing to the Board the company's and group's
risk control and management policy through the Internal Capital
Adequacy Assessment Process (ICAAP).
Three external independent directors
- Mr. Francisco Javier Campo García (Chairman)
- Mr. Fernando Fernández Méndez de Andés
- Mrs. Eva Castillo Sanz
The Risk Advisory Committee held 36 meetings
Board Risk Committee
The Board Risk Committee adopts decisions regarding risks within
the authority delegated to it by the Board of Directors.
One chief executive and three external independent
directors
The Board Risk Committee is responsible for establishing and
overseeing compliance with the Bank’s risk control mechanisms,
approving the most important operations and establishing overall
limits.
- Mr. José Sevilla Álvarez (Chairman)
It is also responsible for reporting to the Board of Directors on risks
that may affect the Company's capital adequacy, recurring results,
operations or reputation.
- Mr. Francisco Javier Campo García
- Mrs. Eva Castillo Sanz
- Mr. Fernando Fernández Méndez de Andés
The Board Risk Committee held 35 meetings between 1
January and 31 December 2015.
7
DECEMBER 2015
The Management Committee was then composed of Bankia’s Executive Chairman, Mr.
José Ignacio Goirigolzarri, CEO Mr. José Sevilla, Executive Director and General Manager of
People, Resources and Technology Mr. Antonio Ortega, Board Director´s Secretary Mr.
Miguel Crespo, Deputy General Director of Communication and External Relations Mrs.
Amalia Blanco, and the Deputy General Directors of Retail, Mr. Fernando Sobrini and
Business Banking Mr. Gonzalo Alcubilla.

Advances in corporate governance
One of Bankia's main priorities is to align its corporate governance with Spanish and
international best practice.
In particular, in compliance with requirements in domestic and European banking
regulations and the recommendations and principles of good governance contained in the
Code of Best Practices of supervisors and regulators, in 2015, the Board of Directors
approved the Corporate Governance System as a general framework for internal organisation
affecting the bank and all the companies that make up the Bankia Group.
The system of corporate governance covers and guarantees the proper functioning of
internal governance, thereby assuring healthy, prudent management of the Entity and its
Group, the core objective being to satisfy the corporate interest, understood as the common
interest of all shareholders of an independent, public limited company focused on the
profitable and sustainable pursuit of its objects and the creation of long-term value. The
main priorities are:
-
To ensure a correct distribution of functions within the organisation
To prevent and resolve conflicts of interest
To establish a transparent framework for relations between Bankia and its
shareholders
The system embodies the Group's corporate values with respect to business ethics and
corporate social responsibility, and is backed by the principles of good governance developed
by the Company based on the recommendations of the Good Governance Code.
A key part of the system of corporate governance is the set of rules and regulations,
which provides a Group-wide internal control framework. They comprise internal rules that
regulate the Entity's corporate governance and the operational functioning, basically made
up of corporate texts and policies, as well as internal procedures or rules of conduct.
Specifically, the body of work includes:
-
Bylaws and regulations. These include the Corporate Bylaws, which set out the
general lines of governance, the regulations of the governing bodies (General
Meeting Shareholder Regulations and Board of Directors Regulations) and other rules
and codes, such as the Code of Ethics or the Customer Ombudsman regulations, the
8
DECEMBER 2015
Rules of Conduct in Securities Markets and the Regulations of the Confidential
Whistleblowing Channel.
Over the course of 2015, Bankia approved a raft of amendments to its Bylaws, its
General Shareholders Meeting Regulations and its Board of Directors Regulations to
adapt them to the provisions on corporate governance set forth in certain laws
enacted in 2014 and 2015 (e.g. Law on Regulation, Supervision and Solvency of
Credit Institutions, the Corporations Act, the Audit Act) and the Good Governance
Code of Listed Companies approved by the Board of the National Securities Market
Commission, the CNMV, in February 2015.
The amendments formalise and unlock the value of the good corporate governance
practices already followed by the Entity, with respect to, inter alia, transparency and
responsiveness to bank shareholders in Bankia's governing bodies, reinforcing
appropriate information channels with shareholders and ensuring that Bankia has in
place, and facilitates, the channels and mechanisms necessary for shareholders to
delegate votes, determining the rules applicable in circumstances of conflict of
interest, doubts surrounding voting instructions and the granting of proxies on items
included on the agenda (as appropriate).
Meanwhile, the rules contained in corporate texts regarding the duties and
obligations of members of the Board of Directors, in particular with respect to
conflicts of interest, were strengthened, while new issues were added, such as
stipulations regarding the composition, functions and rules of operation of the Board
of Directors, the Director charter and positions on the Board and board committees.
These amendments complement the advances made on the corporate governance
front in recent years and which play a crucial role in the Entity's transformation.
Specifically, in 2013, a Lead Independent Director was appointed, to reinforce the
influence of independent directors on the Board of Directors and counterbalance the
Chairman's executive profile. The Lead Independent Director oversees the evaluation
of the Chairman's performance, channels initiatives of external directors, and may
request that a meeting of the Board of Directors be convened and that items be
included in the Agenda.
In addition to the creation of the Lead Independent Director, the term of office of
directors has been reduced in recent years, while the requirements of independence
have been reinforced, in line with regulations. Moreover, external independent
directors have been given greater representation on the Board of Directors and
Board committees.
-
Corporate policies. These set out guidelines and principles governing functions,
activities and processes, ensuring internal control and providing legal security. They
are general guidelines for the long term. Specifically, the Board of Directors approved
9
DECEMBER 2015
seven new corporate policies in line with related legal requirements, such as
corporate governance recommendations:
o
The Group’s structure and corporate governance policy. This policy sets forth
the Group's general implementation guidelines and principles through the
various subsidiaries and their respective governance bodies, as well as
coordination among companies.
o
Bankia, S.A. corporate governance policy. This policy sets forth the principles
and core elements of the Company's corporate governance structure.
o
Director selection policy. This policy establishes the requirements and criteria
which the Board of Directors and the Appointments Committee must consider
when selecting new members of the Board of Directors, as well as in the reelection and ratification of existing directors. This policy seeks a balance of
diversity of knowledge, experience and gender in the Board's membership.
o
Senior management selection and appointment policy. This policy defines the
requirements and criteria for selecting and appointing Bankia's senior officers.
o
Dividend policy. This policy lays out the basic principles and criteria that should
govern proposed resolutions to distribute dividends submitted by the Board of
Directors for approval at the General Shareholders Meeting or, where
appropriate, resolutions regarding the interim dividends approved by the Board.
It also contains the disclosure obligations regarding dividends based on the
principle of transparency.
o
Conflicts of interest policy. The policy sets out the procedures for preventing
conflicts of interest between shareholders and members of the Board of
Directors, as well as employees of Bankia Group companies, with the interests of
the Company, its parent, other companies of its group and customers.
o
Policy of communication and contact with shareholders, institutional investors
and proxy advisors. This policy encourages discussion and ongoing dialogue with
all of the Company's stakeholder groups, particularly shareholders, institutional
investors and proxy advisors, in order to forge stable and long-term trust-based
relationships and to promote transparency in the framework of corporate
interest.
-
Powers and proxies. These govern the delegation of decision-making abilities over
certain activities. They may supplement specific policies and, in some cases, be
temporary or tacit.
-
Circulars. Circulars provide a simple, easily understandable summary of the
regulations that all Bank professionals are required to know. They highlight the issues
with the greatest impact on operations and functions.
10

DECEMBER 2015
Conflicts of interest
Among the top priorities of the corporate governance policy is to detect and manage
potential conflicts of interest. The Entity has a number of reporting and decision-making
mechanisms in place in this respect, such as:

-
Directors must disclose to the Board of Directors any direct or indirect conflict either
they or persons related thereto have with the interest of Bankia and must refrain
from attending meetings and participating in deliberations on matters which affect,
directly or indirectly, them or persons related to them.
-
Directors must adopt the necessary measures to avoid situations in which their
interests, on their own behalf or on behalf of another, can be in conflict with the
Company's interests and their duties to it. In addition, they must perform their
functions in accordance with the principle of personal responsibility, exercising their
own judgement, independently of any instructions from or ties to third parties.
-
All directors must make a first declaration of potential conflicts at the time of taking
office. This declaration must be updated immediately in the event of a change in any
of the circumstances declared or if new circumstances appear.
Compliance and control systems
Bankia Group has numerous internal controls in place, set up to mitigate specific risks
related to the business and/or to comply with various financial and internal control
regulations (Crime Prevention and Detection Model, Policies and Procedures regarding Antimoney Laundering, Market Abuse, MiFID, personal data protection, IT security, etc.).
Bankia also has an Internal Audit unit, whose activity is overseen by the Audit and
Compliance Committee. Internal audit is an independent, objective assurance and consulting
activity designed to add value and improve the Group’s operations. It helps the organisation
accomplish its objectives by bringing a systematic, disciplined approach to evaluate and
improve the effectiveness of risk management, internal control, corporate governance and
information systems. It also works together with external auditors in audit service
engagements and with supervisory bodies to ensure compliance with regulations.
In addition, Bankia Group has a Code of Ethics and Conduct, approved by the Board of
Directors in August 2013, which sets forth the rules and guidelines of conduct all Bankia
employees must assume and guides their behaviour and professional conduct. The Code of
Ethics and Conduct is mandatory for anyone with a professional relationship with Bankia
Group.
11
DECEMBER 2015
To help enforce the Code and facilitate the internal flow of information, the Audit and
Compliance Committee approved the launch of the Confidential Whistleblowing Channel,
through which any breaches of the Code can be reported through an inhouse digital platform
or by email. In line with the latest best practices, Bankia has outsourced management of this
channel to a specialist firm outside the Group (currently PwC), which is overseen by the
Ethics and Conduct Committee, guaranteeing anonymity, that all reports are evaluated
independently and treated confidentially, and that only those people who are strictly
necessary to the investigation and resolution are notified.
The Code of Ethics and Conduct and the Confidential Whistleblowing Channel not only
set high standards of ethical conduct by employees and directors, but they also allow for the
detection and management of situations that infringe on the rules and criteria of
professional conduct and help prevent criminal activity.
2.3.- Responsible management
Following the approval by the Board of Directors of the Responsible Management Policy
in early 2015, work has been carried out on drawing up the 2016-2018 Responsible
Management Plan. The Plan revolves around the Entity's values (professionalism, integrity,
commitment, closeness and achievement orientation) and is underpinned by two key
cornerstones. The first entails listening to and maintaining dialogue with stakeholders; the
second entails ongoing supervision and performance assessment of the planned actions. The
Plan will be approved by the Board of Directors, which is also in charge of ensuring its
management, monitoring and control.
The final text of the 2016-2018 Responsible Management Plan and approval by the Board
of Directors is expected for the first quarter of 2016. Its main objectives are:
STRATEGIC LINE
Corporate governance
Customers
Employees
Society
OBJECTIVES
Integrate and encourage responsible management
to help foster a culture of transparency and
integrity that safeguards the interests of all
stakeholders
Maintain respectful relationships tailored to the
customer's needs so Bankia stands out for the
service received and the trust built as a respectful
and transparent entity
Consolidate the corporate identity through a
project in which Bankia's success is everyone's
success and the responsible management culture is
present in every area of the business
Be recognised as a driver of social and economic
development in the areas near the business, proactively addressing the main concerns of society
12
Shareholders and
investors
Suppliers
Environment
DECEMBER 2015
and seeking to maximise the positive impact
Reinforce transparency with analysts and investors
regarding the Entity's non-financial performance,
disclosing transparent and clear extra-financial
information
Promote responsible management in the supply
chain,
assessing
counterparty
risks
and
encouraging improvement plans to help spread
responsible committment and drive economic
development in other sectors of production
Minimise impact and reduce costs through more
efficient use of resources and correct
environmental management in all processes
The objectives of Bankia's Responsible Management Plan are aligned with the 10
principles of the UN Global Compact and the Sustainable Development Goals approved by
UN members in September 2015. This alignment helps advance both frameworks as part of
the Bank's duty as a leading company.
The implementation of the plan will bring about a change in the Responsible
Management Committee, made up of executive directors with closer relationships with
stakeholder groups. Since its creation in 2014, this committee has been chaired by the
Deputy General Director of Communications and External Relations, who is also a member of
the Management Committee.
In the early months of 2016, as an indelegable power of the Board of Directors, all
matters related to the responsible management of the Bank will fall to the Audit and
Compliance Committee. A member of this committee will then chair the the Responsible
Management Committee.
2.4. - Business model
Bankia Group is a national company, with a stronger presence in its natural markets,
focused on customers and businesses that can provide the bank the greatest returns and
enable it to better leverage its competitive advantages.
Bankia Group's business lines are as follows:
– Retail Banking
– Business Banking
– Corporate Centre
13
DECEMBER 2015
Retail Banking
Retail Banking includes retail banking with legal and natural persons with annual income
of less than EUR 6 million, distributed through a large multi-channel network in Spain and
operating a customer- satisfaction and asset management profitability business model.
Retail customers are a strategic business for Bankia, as one of Spain’s largest financial
institutions in this area. The Entity focuses on traditional banking products such as salary
direct deposit, mortgages, term deposits, credit cards, insurance, investment and pension
funds, and other asset management services, which it offers to high net-worth customers
who need specialised financial and tax advice.
This area focuses on retail activity following a universal banking model. Its objective is to
forge relationships with and retain customers, providing them with added value in products
and services, and in advisory, and service quality. To achieve this, it segments customers in
accordance with the need for specialised service and the needs of each customer type. This
segmentation classifies its customers in 5 big categories (Private Banking, Personal, High
Potential, SME and microenterprise and Rest of Retailers). Customer segmentation allows
Bankia to assign specific customers to specialist managers, who are in charge of the
customer's relationship with the Bank. This approach yields greater customer satisfaction and
generates new sources of business.
In 2015, Retail Banking focused most of its efforts on boosting consumer lending,
granting more than EUR 1,000 million in the year, 25% more than in 2014. In addition, most
customers remained exempt from paying any fees or commissions, and were offered
financing though the "Commission-free Banking" scheme. This scheme is a key pillar of
Bankia's CR strategy for retail customers, self-employed professionals and SMEs. It takes a
holistic view of customers, where loyal customers are exempt from paying commissions on
any of their accounts or basic debit cards they hold, as well as on cashing cheques or making
transfers in euros issued by the Bank's channels (up to EUR 3,000).
Bankia’s distribution network is composed of a finely meshed branch network, a
complementary agency network (spearheaded by Mapfre) that gives the bank a valuable
competitive advantage, and a low-cost multi-channel distribution network (e.g. ATMs,
Internet, mobile and telephone banking). Regarding the latter, the bank has a complete array
of technological channels (Internet Office, Mobile Office and Telephone Office) that allows
customers to carry out their transactions, contract and manage products and use the online
broker service.
With the aim of strengthening its competitive positioning, grounded in its relationship
with customers, since 2013 Bankia has been driving a new commercial model based on a
segmented branch network in which universal branches, business branches, private banking
centres and the new ‘agile’ branches coexist. Agile branches are a new type of branch
launched by Bankia in a pioneering move in the Spanish financial system that allow it to
deliver quality, fast service to the customers who execute the most transactions. The offices
14
DECEMBER 2015
have longer opening hours and are equipped with a large number of ATMs and quick service
cashier positions, covering the areas with the largest concentration of transaction-intensive
customers.
In addition, Plus+ offices were set up in 2015. These are offices located around the agile
branches which, due to their size in terms of customers and business, require greater
commercial specialisation. All Plus+ offices customers are segmented and managed by
financial advisors. The rollout of the Plus+ offices started in Madrid and Valencia, where new
regional divisions have been created with a view to unifying the offices' divisional and
management model.
At 31 December 2015, the Retail Banking network comprised 1,903 offices located across
Spain. . At the same date, Retail Banking had a number of Recovery Centres, specialised in
managing NPLs, and offices exclusively dedicated to managing developers (business in
liquidation).
The following map shows the distribution of the branch network and the number of
offices per region at the end of the year.
Within Retail Banking, the private banking business is geared towards the high- wealth
or high-income individual customers, investment companies or foundations. Bankia offers
these customers a comprehensive range of products and services with highly personalised,
professional and reliable treatment, providing them with solutions that are tailored to their
financial or tax needs. The main private banking business lines are wealth management and
15
DECEMBER 2015
advisory, the sale of third-party financial products, intermediation in the trading of securities
and advisory regarding the securities market.
Within Retail Banking, the Bancassurance area is responsible for distributing life and
general insurance in all of the Group companies. This business line was established in the
bank’s Strategic Plan to provide specialised support for the network, offering a wide range of
products for individuals, businesses and professionals. After the agreement reached in
January 2014 with Mapfre, the insurer became Bankia's exclusive insurance provider, for
both life and non-life insurance. The only policies excluded were those for companies with
annual revenue of over EUR 2 million.
The distribution model is as follows:
-
Non-life insurance: distribution agreement with Mapfre
-
Life insurance: distribution agreement through the Bankia Mapfre Vida joint venture
(51% Mapfre Vida – 49% Bankia), which resulted from the integration of the
insurance companies in which Bankia had a shareholding (Mapfre Caja Madrid Vida,
Aseval and Laietana Vida).
Net premiums written in 2015 totaled EUR 484 million (+11% new policies compared to
2014). Mathematical provisions for life-savings plans amounted to EUR 5,780 million.
Bankia Fondos and Bankia Pensiones are responsible for assets management which
provide financial products to the net.
Bankia owns 100% of Bankia Fondos SGIIC, and has marketing agreements with
international fund managers for certain niche products. At the end of December 2015, Bankia
Fondos managed EUR 11,965 million in investment funds, up from EUR 9,700 million at 31
December 2014. This represents an increase in assets under management of 23.34% and
gives Bankia a 5.44% market share, according to data provided by Inverco. This makes Bankia
Spain's fifth largest fund manager by volume of assets under management.
In pension plans, significant efforts were made to encourage long-term saving,
highlighting the need to address the situation of savings to supplement future pensions
sufficiently in advance. Pension fund advisory services and simulation tools are the main
marketing tools for these retirement saving products. Bankia Pensiones, a wholly owned
subsidiary of Bankia, is the Group's pension fund management company. It is engaged in the
management of all types of pension plans (individual, employment and related), focusing on
meeting unitholders' needs and offering products that are suitable for their investment
profile and the time horizon established by the retirement age. At 31 December 2015,
Bankia's pension funds had a total value of EUR 6,857 million, of which 71.96% corresponded
to individual schemes and the remaining 28.04% to employee pension plans. Bankia ranks
fourth in the Spanish pension fund industry, according to data released by Inverco.
16
DECEMBER 2015
The main short- and medium-term objectives and strategies for Bankia Group to
continue driving activity include improving margins and profitability, increasing lending especially to SMEs- managing non-performing loans and boosting cross-selling. SMEs play a
major role within this objective; in 2013 the Group put a specific plan in action (“SMEs Plan”)
to boost its market share in this segment. The strategy pivots on offering financing and
supporting SMEs in the development of their business projects, designating managers
specialised in small and medium businesses who are qualified to provide individualised
advising and tailor-made responses in all areas of SME business: investment projects and
financing, both short and long term, treasury management, tax advising, internationalisation
processes, and more.
Moreover, in 2014 Bankia launched a new line of loans (“Préstamos Dinamización”) for
self-employed and professionals, SMEs and corporates, which passes on to customers all of
the saving resulting from the cheaper financing obtained by Bankia from the ECB, resulting in
an average 30% reduction in the rate applied to the rest of the loans offered by the Bank.
Demand for the new loans has been strong since they were first marketed in September last
year. The main objectives are to attract new customers, and increase the loyalty of and retain
existing customers. A total of EUR 2,862 million worth of these new loans had been extended
from their launch until the end of 2015.
Business Banking
Business Banking targets legal entities with annual income in excess of EUR 6 million.
(Other customers, legal entities or self-employed professionals with income below this figure
fall into the Retail Banking category). Now, more than 20,000 active customers within large
companies, measured by the number of customers doing business with Bankia, which
positions the Entity like one of the most relevant in the national market in this business
segment.
The customer basis is highly diversified between different productive and economic
sectors, especially service sector, construction, manufacturing, followed by commerce and
supply. The Entity has traditionally had a large number of customers in the medium and large
company segment in two of the three biggest business markets: Madrid and Valencia. Bankia
also has good penetration among companies in other regions where it is a strong player such
as, La Rioja, the Canary Islands, Castilla la Mancha.
Bankia Group business model in this segment is customer-oriented and strongly
supported by specialist teams, which focus on long-term profitability and customer
management. The model distinguishes between different segments and distribution
channels.
-
Business Banking. Business Banking targets growth in the banking business of
companies with annual revenue of over EUR 6 million (including those belonging to
the corporate segment). It has a network of 59 centres throughout Spain,
concentrated in the regions with the greatest business activity. A network of
17
DECEMBER 2015
specialist managers are responsible for serving customers and bringing in business.
They are assigned a limited number of customers -structuring portfolios where the
region's critical mass allows based on the business's revenues- so that they can
provide personalised service. The managers also receive support by a team of experts
in legal, tax, risk approval and management, marketing and specialised products.
-
Corporate Banking. This segment caters to Bankia's largest accounts, which have
several common denominators: the size of the businesses (over EUR 300 million in
annual sales), groups comprising a large number of companies, and the demand for
more complex and sophisticated financial services. Commercial coverage of
Corporate Banking customers is provided by two centres, in Madrid and Barcelona,
staffed by industry specialists, working in conjuntion with the Capital Markets
products teams.
-
Capital Markets. The Capital Markets segment consists of a number of areas
specialising in products, offering specific financial products demand mainly by
Business Banking and Corporate Banking customers.
These segments and distribution channels come in addition to a powerful online banking
service, which allows client companies to carry out practically all their transactional
operations, and the business of different areas specialised in Capital Markets, which offer
bespoke products demanded mainly by Business Banking and Corporate Banking clients.
Other initiatives designed to support Spanish businesses, both domestically and
internationally, are ICO facilities (EUR 557 million arranged in 2015), foreign trade credits and
guarantees (EUR 8,733 million drawdowns in 2015) and loans to SMEs supported by
European Investment Bank (EIB) lines (EUR 810 million granted in 2015).
The following map shows the distribution by region of the Business Centres and
Corporate Banking Centres at 31 December 2015:
18
DECEMBER 2015
The commercial strategy is predicated on active management of total returns for clients,
combining a price discipline that sets floor prices based on the cost of funds and the client’s
risk (assessed using Bank of Spain-approved internal models) and the active search for crossselling opportunities, efficiency in capital consumption by including the RaR approach to
transactions.
To control and manage risk, there are Business Banking teams that report hierarchically
and functionally to the Corporate Risk Department, whose objective is to analyse risks, admit
them as appropriate, and monitor them as needed. Meanwhile, centralised teams provide
support to transactions with large corporations and institutions.
Corporate Centre
The Corporate Centre includes the rest of the businesses and activities other than Retail
Banking and Business Banking, including, among others, Investees and affected assets or
portfolios by the Restructuration, mostly of them are classified by Non-current assets held
for sale.
Bankia also has a large and diverse portfolio of investees, including subsidiaries, as well
as associates and jointly-controlled entities. It is currently divesting itself of the holdings in
accordance with the Restructuring Plan and the Strategic Plan. Disposals are being carried
out in an orderly fashion, taking into consideration business and profitability criteria.
19
DECEMBER 2015
3.- ACTIVITY AND RESULTS
3.1.- Economic and financial backdrop
The economic landscape in 2015 was shaped by the plunge in commodity prices, fears of
a hard landing in China, capital flight from emerging economies and the change in the US
monetary policy cycle: the Fed hiked interest rates for the first time in nearly 10 years.
Against this backdrop, performance by the main economies and regions was mixed. Most net
commodity-exporting countries suffered from inflationary pressures due to considerable
currency depreciation, tighter financial conditions and a sharp slowdown in activity.
Meanwhile, other economies for the most part registered extremely low inflation rates and a
slight pick-up in activity (e.g. developed economies), or maintained fairly robust growth
rates. On balance, global economic growth was somewhat disappointing in 2015, advancing
just 2.6%, lagging the 2.7% reached in 2014.
The highlight regarding the main central banks was the confirmation of diverging trends
in monetary policies. The ECB expanded the asset purchase programme it initiated in the
fourth quarter of 2014 to include sovereign, agency and regional government debt and
increased its target volume to EUR 60,000 million a month until 2017. It also raised the cost
to banks of holding their surplus liquidity by lowering the deposit facility rate from -0.20% to
-0.30%, pushing yields all along the Euribor curve into negative territory except the 12-month
rate, which moved closed to 0%. Meanwhile, the Fed embarked on its rate-tightening
campaign, raising its target range to 0.25%-0.50%. At any rate, central banks’ cautious
stance, coupled with the sharp drop in crude prices, which brought inflation down, enabled
government debt to end last year better than expected at the beginning of the year. Spain’s
risk premium ended 2015 at around 115bp after peaking at 160bp in the summer, driven up
by the Greek crisis (there were even fears Greece might exit the euro).
During the year, the Spanish economy consolidated the recovery begun around mid2013, posting its highest GDP growth (+3.2% vs +1.4% in 2014) in eight years. Drivers
included both internal expansionary stimuli (e.g. personal income tax cuts, improved
competitiveness and better credit conditions, strong job creation) and external stimuli (the
ECB’s QE programme, cheaper oil, a weaker euro, economic recovery in Europe). The impact
of some of these drivers wore off as the year progressed, causing quarterly growth GDP rates
to slow. Domestic demand was the main economic growth driver, fuelled by stronger
investment and, above all, household spending. This was compatible with increased financing
capacity thanks to the spike in savings.
20
DECEMBER 2015
GDP Evolution
1.5
USA
SPAIN
(%) Quarterly
1.0
0.5
WORLD
0.0
EMU
-0.5
-1.0
3Q 15
2Q 15
1Q 15
4Q 14
4Q 15 (f)
Source: Thomson Reuters and Bankia´ Research Department. (f) Forecast
3Q 14
2Q 14
1Q 14
4Q 13
3Q 13
2Q 13
1Q 13
4Q 12
3Q 12
2Q 12
1Q 12
-1.5
Domestic economic growth further the recovery of the banking sector. Growing financing
needs of Spanish businesses and households were met by a sustained increase in new
lending by banks, allowing the total volume of private sector lending to continue recovering.
Also contributing was the improvement in asset quality, as illustrated by the fall in the NPL
ratio, bringing the cost of risk back towards normal levels. Nevertheless, the squeeze on
profitability has become more severe. The low-interest-rate environment pushed yield
spreads down to all-time lows, eroding the banking business's basic margins, while 2015
featured a series of regulatory and supervisory milestones, largely shaping banks’ strategy
and performance.
3.2.- Financial performance in 2015
The Bankia Group reported net attributable profit of EUR 1,040 million in 2015, up 39.2%
from 2014. A number of factors were behind this positive result, led by reductions in
operating expenses, NPL provisions and impairment losses on real estate assets. This,
coupled with income from disposals of non-strategic assets, enabled the Group to temper
the negative impact of the low-interest-rate environment, which has basically affected net
interest income, and shore up the results from the banking business.
Profit growth boosted the Group's return on equity (ROE) to 9% at 31 December 2015
from 6.6% at 31 December 2014. At the same time, prudent balance sheet management led
to a further reduction in NPLs and improvements in both solvency and liquidity.
Elsewhere, the Group earmarked EUR 424 million last year to bolster provisions for
potential future costs arising from the various legal proceedings related to Bankia's IPO in
2011. Part of the amounts set aside in this respect (EUR 184 million) were recognised in the
consolidated income statement, with the remainder (EUR 240 million) charged to own funds
in the consolidated balance sheet.
21
DECEMBER 2015
Sections 3.3, 3.4 and 3.5 below include a summary of basic data and comments on trends
in Bankia's main balance sheet and income statement items in 2015.
Noteworthy was the sale of City National Bank of Florida (CNBF), completed in October
2015, which resulted in changes to amounts in balance sheet items at 31 December 2015, as
its assets and liabilities were recognised under "Non-current assets held for sale" and
"Liabilities associated with non-current assets held for sale" in the Bankia Group's balance
sheet. In contrast, year-on-year comparisons of the consolidated income statement were
impacted less by CNBF's departure, as the company's results up to the date of sale (16
October 2015) were included. Therefore, when analysing the Bankia Group's income
statement trends, it should be noted that CNBF contributed a full 12 months to consolidated
profit and loss in 2014, but 10.5 months in 2015. The following sections includes comments
on the impact of the sale of CNBF on balance sheet and income statement trends where the
impact is material on some of the related items.
22
DECEMBER 2015
3.3.- Key figures
KEY FIGURES DATA - BANKIA GROUP
(*)
Balance (Millions of euros)
Total assets
Net loans and advances to customers
Gross loans and advances to customers
Balance sheet customer funds
Customer deposits
(1)
Total customer managed funds
(2)
Total turnover
Equity
(*)
Solvency (%)
Commom Equity Tier I (CET 1) - BIS III Phase In
Solvency ratio - Ratio Total capital ratio
Risk weighted assets BIS III
Leverage ratio Phase In (Delegated Regulation 2015/62)
Risk management (Millions of euros and %)
Total risk
Non preforming loans
Provisions for credit lose
NPL ratio
Hedging ratio
Profit / Losses (Millions of euros)
Net interest income
Gross income
Operating income /(expenses) before provisions
Operating income /(expenses)
Profit/ Losses before tax
Profit/ Losses after tax
Profit/ Losses attributed to group
Key ratio (%)
Efficiency
(3)
R.O.A. (Profit/(Losses) after tax / ATAs)
(4)
R.O.E. (Profit/(Losses) attributed / Own funds)
Bankia's share
Weighted average number of shares (millions)
Market price at close
Additional information
Numbers of employees
Dec-15
206,970
110,570
117,977
132,629
108,702
22,881
1,046
155,402
265,971
12,696
Dec-14
233,649
112,691
121,769
131,200
106,807
23,350
1,043
152,242
264,933
12,533
Variation
(11.4%)
(1.9%)
(3.1%)
1.1%
1.8%
(2.0%)
0.2%
2.08%
0.4%
1.3%
Dec-15
13.9%
15.1%
81,303
5.7%
Dec-14
12.3%
13.8%
88,565
-
Variation
+1.6 pp
+1.3 pp
(8.2%)
-
Dec-15
122,929
12,995
7,794
10.6%
60.0%
Dec-15
2,740
3,806
2,148
1,413
1,452
1,061
1,040
Dec-15
43.6%
0.5%
9.0%
Dec-15
11.472
1.07
Dec-14
128,584
16,547
9,527
12.9%
57.6%
Dec-14
2,927
4,009
2,267
1,108
912
771
747
Dec-14
43.5%
0.3%
6.6%
Dec-14
11.481
1.24
Variation
(4.4%)
(21.5%)
(18.2%)
(2.3) pp
+2.4 pp
Variation
(6.4%)
(5.1%)
(5.2%)
27.5%
59.2%
37.5%
39.2%
Variation
+0.1 pp
+0.2 pp
+2.4 pp
Variation
(0.1%)
(13.2%)
Dec-15
13,571
Dec-14
14,413
Variation
(5.8%)
(*) Financial Statement amounts rounded to millions of euros
(1) Comprises customer deposits, marketable debt securities , subordinated liabilities and off balance sheet funds
managed
(2) Comprises net loans and advances to customer, on and off balance sheet funds managed
(3) Profit after tax/ average total assets
(4) Profit attributable /average own founds
23
DECEMBER 2015
3.4.- Highlights of the balance sheet
CONSOLIDATED BALANCE SHEET - BANKIA GROUP
(Millions of euros) (*)
Financial assets and liabilities held for training
Off which: loans and advances to
customers
Off which: debt securities
Available for sales financial assets
Debt securities
Equity instruments
Others
Held to maturity investments
Hedging derivatives
Non current assets held for sale
Investments
Tangible and intangible assets
Other assets, accruals and tax assets
TOTAL ASSETS
Deposit from central banks
Deposit from credit institutions
Customer deposits
Others financial liabilities
Hedging derivatives
Liabilities under insurance contracts
Provisions
Other liabilities, accruals and tax liabilities
TOTAL LIABILITIES
Non controlling interests
Own funds
TOTAL EQUITY
Change on Dec-14
Amount
%
52
1.8%
(6,404)
(34.4%)
Dec-15
2,979
12,202
Dec-14
2,927
18,606
-
-
-
-
54
31,089
31,089
117,776
6,443
110,570
762
23,701
4,073
2,962
285
2,261
9,642
206,970
12,408
176,276
19,474
23,228
108,702
22,881
1,046
945
978
2,898
1,714
194,274
66
696
11,934
12,696
206,970
84
34,772
34,772
125,227
10,967
112,691
1,569
26,661
5,539
7,563
298
2,058
9,997
233,649
18,124
193,082
36,500
23,965
106,807
23,350
1,043
1,417
2,490
1,706
5,714
221,115
(13)
1,216
11,331
12,533
233,649
(30)
(3,683)
(3,683)
(7,451)
(4,524)
(2,121)
(806)
(2,960)
(1,465)
(4,601)
(13)
203
(356)
(26,679)
(5,716)
(16,806)
(17,026)
(737)
1,895
(469)
3
(471)
(1,512)
1,193
(4,000)
(26,842)
80
(520)
603
163
(26,679)
(35.9%)
(10.6%)
(10.6%)
(6.0%)
(41.2%)
(1.9%)
(51.4%)
(11.1%)
(26.5%)
(60.8%)
(4.3%)
9.8%
(3.6%)
(11.4%)
(31.5%)
(8.7%)
(46.6%)
(3.1%)
1.8%
(2.0%)
0.2%
(33.3%)
(60.7%)
69.9%
(70.0%)
(12.1%)
(42.8%)
5.3%
1.3%
(11.4%)
24

DECEMBER 2015
Summary of Group Activities
The Bankia Group had total assets and total liabilities at 31 December 2015 of EUR
206,970 million, a decrease of 11.4% from 2014. The sale of City National Bank of Florida
accounts for approximately a 2% reduction (EUR 4,253 million) as its assets and liabilities
were recognised under "Non-current assets held for sale" and "Liabilities associated with
non-current assets held for sale". At year-end 2015, "Loans and receivables", under assets,
and "Loans and advances to customers" under liabilities, made up slightly over half of the
total balance sheet.
The Group's activity in 2015 continued to reflect the private sector deleveraging in Spain,
which was less robust than the year before, and the Bank's strategy of promoting new
lending to strategic segments, such as consumers and SMEs, the reduction in NPLs and
ongoing efforts to bolster solvency and liquidity.
In terms of customer funds under management, the positive trend in strict customer
deposits and off-balance sheet funds continued last year; growth since December 2014 (EUR
3,811 million combined) was fuelled by efforts to attract funds in the retail and business
banking networks, as well as by organic growth in assets managed, mainly in investment
funds.
Movements in the main balance sheet items in 2015 are discussed below.

Note 3 and Appendices IX and X of the notes to the Bankia Group's consolidated financial
statements provide details on loan approval policies, NPL monitoring, debt refinancing and
recovery of the Bankia Group with respect to credit risk. Also provided in this note and
appendices is the breakdown of credit risk by geographical market and product, as well as
the distribution of Loan to Value (LTV) of secured loans, the market profile, the detail of
refinancing and restructuring operations, along with additional information on loans for
property development, home purchases and property assets foreclosed or received in
payment of debts. Therefore, from a management perspective, this point looks at trends in
loans and receivables in 2015 and the main movements therein.
Loans and receivables ended 2015 at EUR 117,776 million, down EUR 7,451 million or
(-6%) from 2014.
The main change in deposits at credit institutions, which decreased by EUR 4,524 million
owing to the outflow of balances held by Bankia with its parent, BFA (mainly assets held
under reverse purchase agreements), which in 2015 was included under loans and advances
to customers due to the accounting change of BFA.
Meanwhile, loans and advances to customers at year-end 2015 stood at EUR 110,570
million net (EUR 117,977 million gross; i.e. before provisions), down EUR 2,121 million euros
25
DECEMBER 2015
or (-1.9%). Stripping out the impact of including loans and advances to customers from the
balances with BFA which, in addition to reverse repurchase agreements, includes EUR 1,104
million recognised in 2015 for Bankia's collection right vis-à-vis BFA in respect of the
contingency related to lawsuits over the IPO of 2011 (see "Provisions" below), the decrease
would have been EUR 4,125 million or (-3.7%.) This is smaller than the decrease in the
Group's loans and advances to customers in 2014 (of EUR -6,424 million) and mostly entails
NPLs following the sale of loan portfolios and the organic reduction of NPLs.
The slowdown in the pace of decline in lending reflects, on the one hand, the market
context, with an ease in household and business deleveraging and the start of growth in
demand for finance, and on the other, the Bank's strategy to increase the flow of new
lending, mainly to SMEs and consumer loans. However, these factors were not enough to
offset the maturities in the Group's stock of loans.
The following tables show year-on-year trends in loans and advances to customers of
Bankia Group by loan and counterparty type:
(*) Financial Statement amounts rounded to millions of euros.
LOANS AND ADVANCE TO CUSTOMERS OF GROUP BANKIA BY LOAN TYPE AND STATUS
(Millions de euros) (*)
Commercial credit
Security loans
Reserve repurchase agreement
Other term loans
Doubtful assets
Credit loss allowance
Dec-15
3,775
71,324
1,096
25,407
2,091
2,043
12,252
(9)
117,977
(7,407)
110,570
Dec-14
2,370
75,530
27
25,421
2,269
469
15,696
(13)
121,769
(9,077)
112,691
Change on Dec-2014
Amount
%
1,404
59.2%
(4,206)
(5.6%)
1,069
(14)
(0.1%)
(178)
(7.8%)
1,574
336.0%
(3,444)
(21.9%)
3
(27.0%)
(3,791)
(3.1%)
1,670
(18.4%)
(2,121)
(1.9%)
LOANS AND ADVANCES TO CUSTOMERS BANKIA GROUP BY COUNTERPARTY
Non resident public sector
Other resident sector
Non resident sector
Credit loss allowance
Dec-15
5,826
30
106,029
4,059
2,043
(9)
117,977
(7,407)
110,570
Dec-14
5,877
12
111,236
4,188
469
(13)
121,769
(9,077)
112,691
Change on Dec -2014
Amount
%
(52)
(0.9%)
18
146.8%
(5,207)
(4.7%)
(128)
(3.1%)
1,574
336.0%
3
(27.0%)
(3,791)
(3.1%)
1,670
(18.4%)
(2,121)
(1.9%)
26
DECEMBER 2015
By sector classification, secured loans, which make up the bulk of mortgages for home
purchases, sustained the sharpest absolute decline, of EUR 4,206 million or (-5.6%) from
2014. This trend reflects the Bank's strategy to drive a shift in the lending mix to include a
greater weight of consumer finance, SME and business lending. These are the segments in
which Bankia continued to increase the volume of new loans in 2015. Growth in new lending
during 2015 was evident in the EUR 1,404 million increase in "Commercial credit" under
loans and advances to customers.
Also noteworthy was the fresh drop in NPLs in 2015 (of EUR -3,444 million, gross), due to
both an organic reduction, thanks to the lower volume of NPL inflows and the reinforcement
of recovery activity, and to the sale of doubtful loan portfolios, which amounted to slightly
over EUR 1,800 million in 2015. As a result, the Group's NPL ratio fell by 2.3 percentage
points in the year to 10.6% at year-end 2015.

Debt securities
The Group’s management of the securities portfolio is based on prudence and
profitability regarding the type of bonds included, their liquidity, credit quality and
investment horizon. Debt securities at 31 December 2015, recognised under available-forsale financial assets, financial assets held for trading, loans and receivables and held-tomaturity investments amounted to EUR 55,606 million, a decrease of EUR 7,479 million from
31 December. SAREB bonds received make up a large portion of this amount (EUR 17,356
million), coming the transfers of assets by the Bank to the SAREB in 2012. The remainder
comprises sovereign debt, mainly Spanish, and debt from other private issuers.
The Group uses part of the debt securities on the balance sheet, mainly sovereign bonds
issued by the Spanish treasury and other European countries, to manage interest rate risk
through ALCO portfolios. These portfolios, which amount to approximately EUR 29,000
million, are designed to help hedge interest rate risk in the banking book, providing recurring
income which is included in net interest income. Moreover, as the assets are highly liquid,
they help maintain the Entity’s liquidity reserves.
The debt securities held by Bankia Group in the “Available-for-sale financial assets”,
“Loans and receivables” and “Held to maturity investments portfolios”, by type of
instrument, at 31 December 2014 and 2015 are as follows:
27
DECEMBER 2015
BANKIA GROUP- DEBT SECURITIES
Financial institutions
Other straight fixed income securities (**)
Impairment losses and other fair value
adjustments
Total portfolio at 31 December 2015
Financial
assets held
for trading
50
Financial institutions
Other straight fixed income securities(**)
Impairment losses and other fair value
adjustments
Total portfolio at 31 December 2014
704
Held to
maturity
investments
4,277
1,281
7
18,165
(6)
59
(28)
25
54
31,089
762
23,701
55,606
78
20,024
2,976
6,412
5,372
1,499
4,711
2,289
565
19,167
24,812
5,264
6,977
26,044
(11)
69
(69)
(11)
34,772
1,569
26,661
63,085
3
6
84
Available for
sale financial
assets
20,235
4,231
4,749
1,881
Loans and
receivables
TOTAL
PORTFOLIOS
24,562
5,512
4,755
20,752
(**) Available for sales financial assets includes, interalia, securities issues by SAREB.
The main movements in the year were in available-for-sale financial assets and held-tomaturity investments, which at 31 December 2015 stood at EUR 31,089 million in 2015,
down EUR 3,683 million or (-10,6%) from December 2014, thanks to maturities in the year
(primarily ESM bonds). Meanwhile, the held-to-maturity portfolio amounted to EUR 23,701
million at the end of 2015, EUR 2,960 million lower than at the end of 2014. The difference
reflects the maturities of public debt and private fixed income issues in the year.

Non-current assets held for sale at 31 December 2015 included mainly foreclosed assets
in payment of debts (EUR 2,513 million), property, plant and equipment for own use, for
which there is a detailed sales plan (EUR 179 million) and investments which the Group has
earmarked for disposal in accordance with the Restructuring Plan.
The balance of this item at the end of 2015 was EUR 2,962 million, a decrease of EUR
4,601 million from 2014. This is explained mostly by the sale in October of City National Bank
of Florida. The decrease had equivalent movement in liabilities under "Liabilities associated
with non-current assets held for sale" under "Other liabilities, accruals and deferred income,
and tax liabilities" in the summarised consolidated balance sheet included in this report.
28

DECEMBER 2015
Financial liabilities at amortised at the end of 2015 stood at EUR 176,276 million, down
EUR 16,806 million (-8.7%) from 2014. The movement was the result of the decline in volume
of ECB financing, which was largely replaced by alternate funding sources, mainly from the
reduction in the commercial gap, the liquidity obtained by sales of fixed-income securities
and investees, the decrease in funding granted to BFA and the increase in wholesale financial
activity, mainly via short-term repos.
FINANCIAL LIABILITIES AT AMORTISED COST - BANKIA GROUP
Customer deposits
Public sector
Current accounts
Savings accounts
Fixed term deposits
Repos and other accounts
Non residents
Valuations adjustments
Others financial liabilities
Total liabilities at amortised cost
Dec-15
19,474
23,228
108,702
6,777
97,456
16,500
26,490
50,829
3,637
2,995
1,474
22,881
1,046
945
176,276
Dec-14
36,500
23,965
106,807
6,294
96,255
13,276
24,178
57,934
868
2,502
1,756
23,350
1,043
1,417
193,082
Change on Dec -14
Amount
%
(17,026)
(46.6%)
(737)
(3.1%)
1,895
1.8%
483
7.7%
1,201
1.2%
3,224
24.3%
2,312
9.6%
(7,105)
(12.3%)
2,769
319.1%
493
19.7%
(282)
(16.0%)
(469)
(2.0%)
3
0.2%
(471)
(33.3%)
(16,806)
(8.7%)
Deposits from central banks and deposits from credit institutions
As indicated above, ECB financing decreased last year to EUR 19,474 million at 31
December 2015, causing a drop in deposits from central banks of EUR 17,026 million (46.6%) in the year. This decrease came on the back of maturities and early redemptions of
the ECB's LTRO auctions by the Group in 2015, which were replaced, at a lower amount, with
liquidity raised in the new TLTRO auctions. At the end of the year, 59% of ECB financing (EUR
11,466 million) comprised amounts taken in TLTRO auctions. The remainder was financing
raised in short-term auctions (MRO).
Meanwhile, deposits from credit institutions barely changed from the end of the year
before (EUR -737 million). However, until December 2014, this line item included all of BFA's
deposits and repo activity with Bankia. In 2015, these balances were transferred to customer
deposits, as BFA surrendered its banking license in January 2015. Nevertheless, this transfer
was counterbalanced by the increased volume in repos with other entities during the year.
The net result was an immaterial change.
29
DECEMBER 2015
Customer deposits
Customer deposits ended 2015 at EUR 108,702 million, up EUR 1,895 million (+1.8%)
from 2014. The increase was mainly the result of the good performance of strict customer
deposits during the year, the inclusion of BFA balances (as indicated above) and the increase
in funding raised through repos.
Within customer deposits, strict customer deposits (i.e. excluding private public and
private repurchase agreements and one-off non-marketable mortgage-back securities ended
2015 at EUR 96,881 million, an increase of EUR 2,080 million or (+2.2%) from the year-ago
figure. The increase was driven above all by the funds received from the public sector, which
soared by 57.8% during the year. As for retail customer funds, noteworthy were the
increases in current and savings accounts, of 24.3% and 9.6%, respectively, attracting part of
the balances that customers are transferring out of term deposits, which are yielding
increasingly lower interest as market interest rates decline.
In this respect, with interest rates near their lowest levels ever, the Bankia Group opted
for a commercial policy aimed at offering customers higher-yielding off-balance sheet
products. As a result, off-balance sheet funds managed grew by 8.2%, led by a 21.1% jump in
investment funds, extending the upward trajectory seen in 2014. This increase, coupled with
the growth of current and savings accounts, offset the decline in term deposits (-12.3%) in
2015.
30
DECEMBER 2015
As a result, the total balance of strict customer deposits and off-balance sheet funds
managed in investment funds grew EUR 3,811 million in 2015.
CUSTOMER DEPOSITS-BANKIA GROUP
Strict customer deposit
Public sector
Private-sector resident
Current accounts
Saving accounts
Fixed-term deposits
Non-resident
One-off mortgage-backed securities
Repos
Private sector resident and non-resident
Public sector
Total customer deposits
Investment funds
Pension funds
Insurances
Total off balance funds resources
Dec-15
96,881
6,779
88,677
16,500
26,490
45,687
1,425
6,584
5,237
5,237
0
108,702
12,580
6,436
3,757
22,773
Dec-14
94,801
4,297
89,236
13,276
24,178
51,783
1,268
7,861
4,145
2,143
2,003
106,807
10,392
6,581
4,069
21,042
Change on Dec-14
Amount
%
2,080
2.2%
2,482
57.8%
(559)
(0.6%)
3,224
24.3%
2,312
9.6%
(6,096)
(11.8%)
157
12.4%
(1,277)
(16.2%)
1,092
26.3%
3,094
144.4%
(2,003)
(100.0%)
1,895
1.8%
2,188
21.1%
(144)
(2.2%)
(313)
(7.7%)
1,731
8.2%
(*) Financial Statements amounts rounded to millions of euros
Marketable debt securities and subordinated liabilities
Along with attracting customer deposits, in 2015 the Bankia Group continued to,
selectively, tap the fixed-income markets with issues, striving to adapt deal sizes to its
structural liquidity needs and maintaining an appropriate funding structure. This way, taking
advantage of the lower-interest-rate market environment and the support of the Group's
management and solvency, it successfully placed EUR 2,250 million in two issues of mortgage
covered bonds, one in March and one in August 2015. This marked the Group’s first issue by
of these instruments since February 2012.
The total balance of debt and subordinated liabilities at end-December 2015 stood at
EUR 23,927 million, down a slight EUR 466 million from the year before. Included in this
amount were the new issues of mortgage covered bonds carried out in the year, net of
maturities during the year.

Provisions
Provisions recognised on the Group's balance sheet at 31 December 2015 amounted to
EUR 2,898 million, an increase of EUR 1,193 million from the prior-year figure as the Group
set aside additional funds during the year to cover the contingencies that could arise in
future from the various legal proceedings in which it is involved in relation to Bankia's 2011
IPO.
In this respect, at its meeting of 23 December 2015, the Board of Directors approved an
amendment to the Transactional Agreement (Convenio Transaccional) between Bankia and
31
DECEMBER 2015
its parent, BFA Tenedora de Acciones (“BFA”), entered into on 27 February 2015 over the
sharing of the contingencies derived from civil lawsuits brought by retail shareholders in
relation to Bankia's IPO, carried out in 2011. The amendment sets the costs to be shared at a
maximum of EUR 1,840 million, with Bankia assuming under a first liability up to 40%; i.e.
EUR 736 million, of which it had already recognised a provision of EUR 312 million in 2014,
and BFA the remaining 60%; i.e. EUR 1,104 million, for which it had already recognised a
provision of EUR 468 million in 2014.
Therefore, by virtue of the amendment to the initial agreement, in December 2015,
Bankia increased the total amount of provisions set aside in this connection by an additional
EUR 424 million, to reach this EUR 736 million. Of the EUR 424 million set aside in 2015, EUR
240 million was charged to reserves in the balance sheet and EUR 184 million was recognised
with a charge to net provisions in the 2015 consolidated income statement.
In addition, as most of the court rulings are against Bankia, it recognised this in 2015 by
adding to the provision set up in this connection by the amount which BFA assumed in the
Transactional Agreement (EUR 1,104 million). At the same time, it recognised a financial
asset for the same amount under "Loans and advances to customers - Other financial assets"
related to the amounts recoverable from BFA as it assumes 60% of the estimated
contingencies under the aforementioned agreement and addendum.
These movements in the provision for the IPO less provisions released in the year for
contingent liabilities and commitments and the unwinding or use of other provisions set
aside to carry out the measures included in the Restructuring Plan, cover taxes, legal
contingencies and other losses related to real estate assets and investees, resulted in a total
increase of EUR 1,193 million in "Provisions" in the balance sheet in 2015.

Equity
The Group’s equity at 31 December 2015 amounted to EUR 12,696 million, up 1.3% from the
end of the previous year after including retained earnings.
Included are EUR 696 million of valuation adjustments, EUR 520 million less than at 31
December 2014 due to the drop in unrealised gains on fixed-income securities classified as
available-for-sale.
Non-controlling interests ended 2015 at a positive EUR 66 million, compared to a
negative EUR 13 million the year before. The difference was due to accumulated profits in
2015 at certain companies that are fully consolidated by the Group, but in which Bankia does
not own all of the shares.

Other balance sheet items
32
DECEMBER 2015
As for other line items in the balance sheet not discussed above, the most noteworthy
movement was in the held-for-trading portfolio, composed mainly of trading derivatives. At
31 December 2015, financial assets held for trading amounted to EUR 12,202 million and
financial liabilities held for trading to EUR 12,408 million, implying decreases of EUR 6,404
million and EUR 5,716 million, respectively, from the end of 2014. The fall was the result of
the various netting arrangements entered into and the compression trades arranged with
various counterparties included in this portfolio and the unwinding and changes in value of
certain positions during the year.
3.5.-Highlights of the income statement
BANKIA GROUP CONSOLIDATED INCOME STATEMENT
Net interest income
Dividends
Share of profit/loss of companies accounted for using the equity method
Total net fees and commissions
Gain and losses on financial assets and liabilities
Other operating income and other operating expenses
Gross income
Operating expenses
Staff costs
Other general administrative costs
Pre impairment income
Provisions (net)
Net operating income/ (expenses)
Impairment losses on other assets (net)
Other gain and losses
Profit/ (loss) before tax
Income tax
Profit/ (losses) for the year from continuing operations
Profit/(loss)from discounted operations (net)
Profit/ (loss) after tax
Profit/ (loss) attributable to non- controlling interests
Profit/ (loss) attributable to the Group
Main ratios
Efficiency ratio (1)
ROA (2)
ROE (3)
(*)
(1)
(2)
(3)
Dec-15
Dec-14
Change on Dec-14
Amount
%
2,740
6
32
938
281
30
(220)
3,806
(1,658)
(1,511)
(971)
(541)
(147)
2,148
(152)
(583)
1,413
28
11
1,452
(391)
1,061
0
1,061
21
1,040
2,927
5
32
948
218
8
(129)
4,009
(1,742)
(1,586)
(987)
(599)
(156)
2,267
(208)
(950)
1,108
(6)
(190)
912
(226)
686
85
771
24
747
(187)
1
(10)
63
22
(92)
(203)
84
75
17
58
9
(118)
56
367
305
(10)
200
540
(165)
375
(85)
289
(4)
293
(6.4%)
11.5%
(1.0%)
29.2%
287.6%
71.2%
(5.1%)
(4.8%)
(4.7%)
(1.7%)
(9.7%)
(6.1%)
(5.2%)
(27.0%)
(38.7%)
27.5%
59.2%
73.1%
54.6%
(100.0%)
37.5%
(100.0%)
39.2%
43.6%
0.5%
9.0%
43.5%
0.3%
6.6%
+0.1 pp
+0.2 pp
+2.4 pp
0.2%
53.8%
35.8%
Financial Statement amounts rounded to millions of euros
(Administration expenses + Depreciation and Amortizations) / Gross margin
Profit after tax / Average total net assets
Profit attributable to the group/average own funds
33
DECEMBER 2015
BANKIA GROUP CONSOLIDATE INCOME STATEMENT- QUARTERLY TREND
Net interest income
Dividends
Share of profit/loss of companies accounted for using the equity method
Total net fees and commissions
Gain and losses on financial assets and liabilities
Other operating income and other operating expenses
Gross income
Operating expenses
Staff costs
Other general administrative costs
Pre impairment income
Provisions (net)
Net operating income/ (expenses)
Other gain and losses
Profit/ (loss) before tax
Income tax
Profit/ (losses) for the year from continuing operations
Profit/(loss)from discounted operations (net)
Profit/ (loss) after tax
Profit/ (loss) attributable to non- controlling interests
Profit/ (loss) attributable to the Group
4Q 2015
3Q 2015
2Q 2015
1Q 2015
665
0
8
229
57
9
(192)
776
(401)
(361)
(234)
(127)
(39)
375
(192)
(70)
113
42
141
296
(110)
185
0
185
1
185
688
1
7
228
73
10
(4)
1,001
(414)
(376)
(242)
(134)
(38)
587
5
(156)
436
(4)
(29)
403
(90)
314
0
314
14
300
695
3
12
248
78
13
(11)
1,037
(420)
(384)
(244)
(140)
(36)
617
12
(159)
470
(9)
(45)
417
(105)
312
0
312
1
311
693
1
6
233
73
(1)
(13)
992
(423)
(390)
(250)
(140)
(33)
569
23
(198)
394
(2)
(57)
336
(86)
250
0
250
5
244
BANKIA GROUP CONSOLIDATE INCOME STATEMENT- HIGHLIGHTS
Net income interest
Gross income
Operating expenses
Depreciation and amortization charge
Provisions (net)
Net operating income/ expense
Other gains or losses
Profit/loss before tax
Income tax
Profit /losses for the year from continuing
operating
Profit/loss from discounted operations (net)
Profit/loss after tax
Profit/loss attributable to non controlling
interests
Profit/loss attributable to the Group
December 2015
% of
% of average
Amount
gross
total net
income
assets
December 2014
Amount
% of gross
income
% of average
total net assets
2,740
3,806
(1,658)
(1,511)
(147)
(152)
(583)
1,413
28
11
1,452
(391)
72.0%
(43.6%)
(39.7%)
(3.9%)
(4.0%)
(15.3%)
37.1%
0.7%
0.3%
38.1%
(10.3%)
1.2%
1.7%
(0.7%)
(0.7%)
(0.1%)
(0.1%)
(0.3%)
0.6%
0.0%
0.0%
0.7%
(0.2%)
2,927
4,009
(1,742)
(1,586)
(156)
(208)
(950)
1,108
(6)
(190)
912
(226)
73.0%
(43.5%)
(39.6%)
(3.9%)
(5.2%)
(23.7%)
27.6%
(0.2%)
(4.7%)
22.8%
(5.6%)
1.2%
1.6%
(0.7%)
(0.6%)
(0.1%)
(0.1%)
(0.4%)
0.4%
(0.0%)
(0.1%)
0.4%
(0.1%)
1,061
27.9%
0.5%
686
17.1%
0.3%
0
1,061
0.0%
27.9%
0.0%
0.5%
85
771
2.1%
19.2%
0.0%
0.3%
21
0.5%
0.0%
24
0.6%
0.0%
1,040
27.3%
0.5%
747
18.6%
0.3%
34

DECEMBER 2015
Overview of Group earnings
The Bankia Group reported profit attributable to the parent of EUR 1,040 million in
2015, up EUR 293 million (+39,2%) from 2014..
This result has achieved against a backdrop of ongoing loan deleveraging in the
system, which continued in 2015, albeit at a slower place than the year before, and
extremely low market interest rates. Despite these negative factors, the Group earned more
in 2015 thanks to the cost-containment policy and risk management, which resulted in a
sharp decrease in NPL provisions and write-downs of real estate assets. The Group obtained
these results despite earmarking EUR 424 million in the year to bolster provisions for
potential costs of civil lawsuits related to Bankia's IPO. Of this amount, EUR 184 million de
euros was recognised as an increase in provisions in the income statement.
Movements in the Group’s main income statement items in 2015 are discussed below.

Net interest income
Net interest income for the Group totalled EUR 2,740 million in 2015, down a slight EUR
187 million (-6.4%) from 2014. Of this amount, approximately EUR 33 million arose from the
exclusion of City National Bank of Florida from the Group's consolidation scope, as the sale
was completed on 16 October. Therefore, this company contributed only 10 months to
consolidated net interest income in 2015 compared to a full 12 months in 2014. Stripping out
this negative impact, net interest income would have decreased by EUR 154 million (-5.3%).
With the Euribor having set new all-time lows, this resistance shown by the Group's net
interest income was noteworthy, with lower deposit costs making up for the lower income
from lending and fixed-income portfolios.
The following table shows trends in net interest income in 2015 and 2014, with average
balances of income and expenses for the various items comprising total investment and
funds, and the impact of changes in volumes and prices on the overall trend in net interest
income in 2015.
35
DECEMBER 2015
STRUCTURE OF INCOME AND EXPENSES - BANKIA GROUP
(Millions of euros and %) (*)
Finance income
Net loans and advances to customers (a)
Debt securities
Other interest bearing assets
Other non interest bearing assets
Total assets (b)
Financial expenses
CEB and Interbank (2)
Customer deposits (c)
Strict customer deposits
Repos
Singular bonds
Marketable debt security
Other interest bearing liabilities
Other non interest bearing liabilities
Equity
Total Liabilities and Equity
Customers margin (a-c)
Interest margin (b-d)
December 2015
Average
Income/
Yield
balance
Expenses
/ Cost
(1)
(2)
December 2014
Average
balance (1)
Income/
Expenses
Yield /
Cost
Variation
Average
Income /
balance
Expenses
(1)
Effect
Yield /
Cost
Volume
7,536
115,563
61,907
369
37,022
222,397
9
2,428
1,233
8
3,677
0.11%
2.10%
1.99%
2.11%
1.65%
17,090
118,593
69,649
190
43,224
248,746
30
2,885
1,767
5
4,687
0.18%
2.43%
2.54%
2.50%
1.88%
(9,554)
(3,030)
(7,742)
179
(6,202)
(26,349)
(21)
(457)
(535)
3
(1,010)
(11)
(394)
(380)
(1)
(575)
(11)
(64)
(154)
4
(436)
51,751
110,089
99,008
3,815
7,265
23,675
1,039
1,234
21,837
12,771
222,397
116
655
573
0.3
82
124
35
8
937
0.22%
0.59%
0.58%
0.01%
1.13%
0.52%
3.32%
0.65%
0.42%
71,257
110,323
95,570
6,239
8,514
26,280
639
1,466
26,575
12,206
248,746
241
1,237
1,113
13
111
249
22
11
1,760
0.34%
1.12%
1.16%
0.22%
1.30%
0.95%
3.41%
0.76%
0.71%
(19,505)
(234)
3,438
(2,423)
(1,249)
(2,605)
400
(231)
(4,738)
565
(26,349)
(126)
(582)
(540)
(13)
(29)
(125)
13
(3)
(823)
(82)
(581)
(560)
(13)
(15)
(111)
(1)
(2)
(712)
(44)
(1)
20
(0)
(14)
(14)
13
(2)
(111)
1,773
2,740
1.51%
1.23%
1,648
2,927
1.31%
1.18%
125
(187)
187
137
(62)
(325)
(*) Financial Statement amounts rounded to millions of euros.
(1) Average balances include interest- bearing liabilities of City National Bank of Florida y Bancofar in the latter case until the
date of its sale.(See Note 15 of consolidate financial Statement of Bankia Group).
(2) Includes central banks and credit institutions.
Interest on loans and advances to customers fell EUR 457 million to EUR 2,428 million at
31 December 2015. The reason behind this was the continued downward repricing of the
mortgage portfolio on the back of further declines in Euribor rates in 2015 (the 12-month
Euribor ended the year at 0.059% compared to 0.329% the year before), although there were
other factors: e.g. the smaller contribution of interest by City following its stale in October,
loan deleveraging, the removal of floor clauses and the pass-through of lower deposit costs
to loans, which limited the prices of new loans. All of these factors resulted in an average
interest rate on lending portfolios in 2015 of 2.10%, down 33bp from 2014. Nevertheless, as
discussed later, the Group was able to counterbalance this lower return on loans by reducing
funding costs; the decline in deposit costs left the customer margin at 1.51%, 20bp higher
than at end-December 2014.
Another factor, but to a lesser extent, that also caused net interest income to fall was the
lower volume of finance income on fixed-income securities, which fell EUR 535 million in
2015, mainly due to the reduction in average balances and the decrease in profitability
caused by the maturity of certain references and the rotation of government debt portfolios
during the year.
As a result of all these factors, the Group's average return on assets in 2015 was 1.65%,
23bp lower than in 2014.
The lower cost of funding was what enabled the Group to make up for the fall in returns
on assets and extend the trend of growth in net interest income in 2015. By the end of 2015,
the average cost of the liabilities had come down, by 47% (EUR 823 million) from 2014. Most
of the reduction was in the cost of customer deposits (EUR -582 million), the average rate of
which was 53bp lower than in 2014 thanks to the sharp reduction in the average price of new
term deposits arranged, in line with the overall situation of financial markets.
36
DECEMBER 2015
Meanwhile, low market interest rates, coupled with Bankia's greater financial
wherewithal, improved access to funding and better liability management enabled the Group
to slash finance charges on corporate funds (marketable debt securities and subordinated
liabilities) by 41% (EUR 112 million) from 2014, basically through lower interest rates. In
addition, the interest-rate cut carried out by the European Central Bank since the second half
of 2014, on top of the lower cost of financing in repo markets, helped reduce the cost of the
Bankia Group's cash deposits in 2015, resulting in a EUR 126 million (-12bp) fall in ECB and
interbank financial expenses.
As a result of all these factors, the average cost of the Group’s liabilities decreased by
29bp from 2014 to 0.42% at year-end 2015.
In sum, positive trends in funding costs in 2015 helped ease the pressure caused by low
interest rates on returns from loans and lower income from the fixed-income portfolios,
resulting in a 5 bp increase in net interest margin to 1.23% at 31 December 2015.

Gross income
Gross income for Bankia Group in 2015 amounted to EUR 3,806 million, down 5.1% from
2014 (EUR 4,009 million). The breakdown shows a significant weight of income from the core
banking business, i.e. net interest income, and fee and commission income, which combined
represented nearly 97% of the Group's gross income in 2015.
Net fees and commissions amounted to EUR 938 million, broadly unchanged from the
year before (-1% interannual). By type, fees and commissions from the administration and
marketing of investment funds (+17%) and insurance (+30.2%) performed best. In the case of
insurance, this was due to the integration of fees and commissions ceded to Bankia by
Laietana Vida and Mapfre for marketing its products. NPL portfolio management fees also
increased significantly (by EUR 34 million) due to the sale of doubtful loan portfolios in the
year.
37
DECEMBER 2015
NET FEES AND COMISSIONS - BANKIA GROUP
Traditional banking
Contingent liabilities and commitments
Collection and payment services
Non banking financial product sales
Investment funds
Pensions funds
Insurance and others
Total fees and commissions and non banking financial product sales
Others fees and commissions income
Security services
Operations design and framing
Recovered written off assets
Others
Fees and commission income
Fees and commission expenses
Total net commissions
Dec -15
439
93
346
285
109
60
116
724
297
54
38
54
151
1,021
83
938
Dec-14
514
105
408
259
93
77
89
773
263
52
36
20
154
1,036
88
948
Change on Dec -4
Amount
%
(75)
(13)
(63)
26
16
(17)
27
(49)
34
1
2
34
(3)
(15)
(5)
(10)
(14.6%)
(11.9%)
(15.3%)
10.1%
17.0%
(21.6%)
30.2%
(6.3%)
12.9%
2.8%
4.7%
167.3%
(1.9%)
(1.5%)
(6.0%)
(1.0%)
The good performance of these items, coupled with the decrease in fees and
commissions paid compared to 2014, enabled the Group to offset the decline in fees and
commissions that are more closely related to the core banking business (collection and
payment services, and contingent liabilities and commitments). Fee and commission income
from the marketing of pension funds is EUR 17 million lower due to the inclusion last year of
all the fees and commissions from Aseval's pension business (both those obtained in 2013
and those generated in 2014), which was transferred to Bankia Pensiones in March 2014.
Dividends were steady compared to 2014, contributing EUR 6 million to the Bankia
Group's earnings. Meanwhile, the share of profit and loss of companies accounted for using
the equity method amounted to EUR 32 million, the same as in the year before.
Gains and losses on financial assets and liabilities (Net Trade Income) contributed EUR
281 million to the Group’s consolidated income statement in 2015, compared to EUR 218
million in 2014 with most of the income generated through the rotation of debt portfolios.
Exchange differences produced a gain of EUR 30 million compared to the increase of EUR
8 million registed in 2014, which reflected the impact of the change in the EUR/USD
exchange rate on the currency hedge during 2015, , which affected the hedge of foreign
currency risk kept on the Group's balance sheet.
Other operating income and expenses showed a net expense of EUR 220 million in 2015,
an increase of EUR 92 million from the figure reported in 2014. This is mainly the result of the
smaller contribution to income in 2015 of the bank's non-financial and real estate
management activities. This item includes the Group's contributions to the Deposit
Guarantee Fund and, for the first time in 2015, the National Resolution Fund created by the
government in line with European legislation.

Operating expenses
38
DECEMBER 2015
Despite completing the Group's restructuring, operating expenses (administrative
expenses, and depreciation and amortisation) continued to fall in 2015, by 4.8% to EUR 1,658
million. This underscores the effectiveness of the Bankia Group's policy of reining in costs and
optimising resources. Particularly noteworthy was the fall in general expenses, of 9.7%, while
personnel expenses and depreciation and amortisation fell by 1.7% and 6.1%, respectively.
The efficiency ratio (operating expenses/gross income) at 31 December 2015 stood at
43.6%, which measures up well with the ratios of the main Spanish and European
competitors.
ADMINISTRATIVE EXPENSES - BANKIA GROUP
(Millions de euros) (*)
Staff costs
Wages and salaries
Social security costs
Pension plans
Others
General administrative expenses
From property fixtures and supplies
IT and communications
Advertising and publicity
Technical reports
Surveillance and security courier services
Levies and taxes
Insurance and self insurance premiums
Other expensives
Total administrative expensives
Efficiency ratio
Dec-15
971
724
175
42
30
541
123
161
50
41
15
60
5
86
1,511
43.6%
Dec-14
987
746
179
28
34
599
140
174
63
55
16
60
6
84
1,586
43.5%
Changes on Dec-2014
Amount
%
(17)
(1.7%)
(22)
(3.0%)
(5)
(2.6%)
14
49.8%
(4)
(11.0%)
(58)
(9.7%)
(17)
(12.1%)
(13)
(7.5%)
(13)
(20.0%)
(14)
(25.0%)
(2)
(10.6%)
(1)
(0.9%)
(1)
(20.2%)
2
2.1%
(75)
(4.7%)
+0.1 pp
0.2%

Pre-provision operating income
The evolution of operating income and expenses placed pre-provision profit´s margin in
EUR 2,148million under the EUR 2,267 million of euros from the last year 2014.

Provisions and write-downs
As with operating expenses, both NPL provisions and provisions for impairment of real
estate assets were lower in 2015. At the same time, the Group bolstered provisions set aside
to cover costs that could arise in future from the various legal proceedings in which it is
involved. Total provisions for the Group, including provisions for the impairment of financial
assets, non-financial assets, non-current assets held for sale (included in “Other gains and
losses”) and other net charges performed well in 2015, totalled EUR 909 million. This marked
a 41% reduction from the figure reported for 2014 and was the result of the positive trend in
the quality of the Group's assets and the reinforcement of recovery activity.
Of this amount, impairment losses on financial assets, mainly provisions for credit
losses, fell the sharpest, by EUR 367 million (-38.7%) from the year before. As a result, the
39
DECEMBER 2015
Bankia Group's cost of risk (measured as impairment losses on loans and contingent risks in
the last 12 months divided by the average balance of loans and advances to customers and
contingent liabilities) stood at 0.42% marking a significant improvement (-18bp) from the
year-earlier figure. Excluding loans and advances to the parent, BFA, the cost of risk would be
0.43%.
Impairment losses on non-financial assets, mainly property and equipment, and
inventories, was a positive EUR 28 million in 2015 compared to a negative EUR 6 million in
2014 due to the update of the market value of certain leased assets, which led to the partial
reversal of previously-recognised impairment losses. Meanwhile, impairment losses on noncurrent assets held for sale totalled EUR 208 million, EUR 106 million less than in 2014 due
to lower impairment losses on foreclosed real estate assets and equity share of the Group.
“Provisions (net)” in the income statement, which includes mainly provisions for
contingent liabilities and commitments, taxes and other legal contingencies, showed a
negative balance of EUR 152 million in 2015, down EUR 56 million from EUR 208 million in
2014. This movement was basically the result of the release of provisions for contingent
liabilities and other commitments during the year, which made up for the additional
allowance of EUR 184 million made in December 2015 to cover costs that could arise in
future from the various legal proceedings related to Bankia's 2011 IPO (see section on
"Provisions" in 3.4 above).

Other gains and losses
Bankia Group obtained gains in 2015 on the sale of shareholdings as part of the nonstrategic asset disposal plan, generating an amount of EUR 283 million mostly on the sale of
the stakes held in City National Bank of Florida to Banco de Crédito e Inversiones, which
generated a gross gain for the Group of EUR 201 million. Proceeds from the sale of equity
investments are recognised in “Other gains and losses” in the income statement presented
in this report, which was a positive EUR 11 million. In 2014, “Other gains and losses” showed
a negative balance of EUR 190 million because it included smaller gains on the sale of equity
investments and higher write-downs of non-current assets held for sale (EUR 376 million)
which, as indicated above, are included in “Other gains and losses”.
Elsewhere, "Profit/(loss) from discontinued operations" at 31 December 2015 had no
balance due to the sale 51% of Aseval in October 2014, after which the Group ceased to fully
consolidate its share of the profit and loss of this company and began accounting for Bankia's
49% stake in Aseval under "Share of profit/(loss) of companies accounted for using the equity
method". Meanwhile, the profit from discontinued operations in 2014 amounted to EUR 29
million, as it included the profit of Aseval up to the date of sale of the stake in October 2014.
40

DECEMBER 2015
Profit before tax and profit attributable to the parent
The Bankia Group reported profit for tax of EUR 1,452 million in 2015, up 59.2% from
2014. After income tax and profit attributable to non-controlling interests, profit attributable
to the Group was EUR 1,040 million, an increase of 39.2% from the year before.
4.- FUNDING STRUCTURE AND LIQUIDITY
The Group’s goal is to maintain a long-term financing structure that is in line with the
liquidity of its assets and whose maturity profiles are compatible with the generation of
stable, recurring cash flows. In line with this goal, in 2015 the Group achieved improvement
in both its liquidity metrics and liability structure.
Notes 3.2 and 3.3 to the consolidated financial statements for the year ended 31
December 2015 describe Bankia Group’s liquidity management policies and provide details
on maturities of financial assets and financial liabilities used to project its liquidity balance at
different maturities. Accordingly, this section deals with trends in the Group’s main liquidity
indicators and funding sources in 2015.
The Group's funding structure places priority on attracting retail liabilities, which lend
stability to the balance sheet. Therefore, the Bankia Group’s main external funding source is
customer deposits, basically term deposits and savings accounts. The Group also taps the
market for finance through repos with clearing houses and the interbank market, issues
made on capital markets, issues distributed through the network and balances with the ECB.
Bankia Group's External funding December 2015
4%
Customer deposits
12%
Centarl bank
17%
11%
55%
Corporate funding
Clearing houses and
market repos
Retail issues
Customer funds raised continued to perform strongly in 2015, with an absolute increase
of EUR 2,080 million and a relative increase in the weight on the balance sheet funding mix.
Strict customer deposits at 31 December 2015 represented 55.3% of the Group's borrowings,
compared to 49.5% in December 2014, broken down as follows: (i) 26.1% term deposits, (ii)
15.1% savings accounts, (iii) 9.4% current accounts, (iv) 3.9% public sector deposits and (v)
41
DECEMBER 2015
0.8% non-resident customer funds. Noteworthy was the positive trend of customer funds in
2015, with an increase in current and savings accounts of EUR 5,536 million, attracting part of
the balances that customers are transferring out of longer-term deposits, whose yields have
fallen in line with trends in market interest rates.
The growth of retail funding sources, alongside a reduction in lending, helped narrow the
commercial gap; i.e. the difference between loans (excluding reverse repos) and strict
customer deposits, plus funds received from the EIB and ICO for the grant of second-floor
loans. The commercial gap at 31 December 2015 stood at EUR 9,665 million, down EUR 4,116
million from the end of 2014. The performance by the commercial gap had a positive impact
on the Group's main liquidity ratios. Specifically, the “Loan to deposits” or LTD ratio (net
loans/strict customer deposits plus funds raised through second-floor loans and one-off nonmarketable mortgage-backed securities) at the end of 2015 stood at 102.9%, a 2.6pp
reduction from 2014, reflecting the balance achieved between the Group's loans and
deposits.
Wholesale funding, which comprises mainly mortgage covered bonds and deposits from
credit entities, decreased by EUR 6,599 million in 2015 due to maturities during the year and
represented 17,5% of borrowings. However, in 2015, the Bankia Group took advantage of the
support of the Group's management and solvency and a window for tapping the corporate
market with long-term issues and placed EUR 2,250 million in two new issues of mortgage
covered bonds, in March and August. This marked its first issue by the Group of these
instruments since February 2012.
Meanwhile, market repo activity (repos through clearing houses and bilateral repos with
other banks) increased by EUR 8,490 million, representing 12.4% of the Bankia Group's
borrowings at 31 December 2015. This activity forms part of the Group's strategy to diversify
its funding sources and reduct costs, increasing the sources of liquidity secured by liquid
assets other than those of the ECB.
Meanwhile, retail issues (one-off non-marketable mortgage-backed securities) declined
by EUR 1,277 million, representing 3.8% of the Bankia Group's borrowings at 31 December
2015. Repos with the public sector had a zero balance at the end of the year and therefore
did not form part of the Group's external funding sources in December 2015.
The reduction in the commercial gap, in addition to the liquidity obtained from disposals
of fixed-income securities and equity investments, the decrease in financing granted to BFA
and the increase in market repo activity all helped reduce the reliance on the ECB, by 46.6%,
to EUR 19,474 million at 31 December 2015. Accordingly, the weight of central banks on the
Bankia Group's funding structure decreased considerably, to 11.1% of borrowings compared
to 19% in December 2014. Total funding from central banks held by the Bankia Group at endDecember 2015 stood at EUR 19,474 million and includes the liquidity obtained by the bank
in the two new auctions held by the ECB as part of its TLTRO programme, in March and June
2015 (EUR 8,689 million), as well as the EUR 2,777 million obtained by the Bankia Group in
the September and December 2014 auctions.
42
DECEMBER 2015
The net result of all these changes was a EUR 16,334 million reduction in the level of
external funding sources in 2015. The following chart shows trends in the Group's funding
structure:
FUNDING SOURCES- BANKIA GROUP
Strict customer deposits
Public sector
Current accounts
Saving accounts
Fixed term deposits
Non residents
Wholesales funding
(1)
Deposits and credit institutions
Retail issues
Clearing houses and market repos
Public treasury assignment
Central banks
Total external funding sources
Dec-15
96,881
6,779
88,677
16,500
26,490
45,687
1,425
30,669
6,742
22,881
1,046
6,584
21,723
0
19,474
175,331
Dec-14
94,801
4,297
89,236
13,276
24,178
51,783
1,268
37,268
12,875
23,350
1,043
7,861
13,233
2,003
36,500
191,665
Changes on Dec -14
Amount
%
2,080
2.2%
2,482
57.8%
(559)
(0.6%)
3,224
24.3%
2,312
9.6%
(6,096)
(11.8%)
157
12.4%
(6,599)
(17.7%)
(6,133)
(47.6%)
(469)
(2.0%)
3
0.2%
(1,277)
(16.2%)
8,490
64.2%
(2,003)
(100.0%)
(17,026)
(46.6%)
(16,334)
(8.5%)
Percentage
Dec-15
Dec-14
55.3%
49.5%
3.9%
2.2%
50.6%
46.6%
9.4%
6.9%
15.1%
12.6%
26.1%
27.0%
0.8%
0.7%
17.5%
19.4%
3.8%
6.7%
13.1%
12.2%
0.6%
0.5%
3.8%
4.1%
12.4%
6.9%
0.0%
1.0%
11.1%
19.0%
100.0%
100.0%
(1) Includes interbank deposits, collateral posted and other loans and deposits from credit institutions
The Group has a comfortable maturity profile, with EUR 6,455 million of corporate issues
falling due in 2016 and EUR 1,452 million in 2017, of which just over EUR 5,700 million are
bonds and mortgage covered bonds. To meet these maturities and scheduled redemptions in
the coming years, the Group had EUR 34,604 million of liquid assets at 31 December 2015.
Therefore, with scant concentration of significant maturities and a favourable capital
market environment, the Bankia Group has a great deal of flexibility to meet its short- or
medium-term funding needs.
LIQUIDITY RESERVE - BANKIA GROUP
(1)
Highly liquid available assets
Undrawn amount on the facility
(2)
Treasury account and deposit facility
TOTAL
Dec-15
27,199
5,354
2,051
34,604
Dec-14
28,104
5,613
2,120
35,837
(1) Market value haircut by ECB
(2) Cash and Central Banks accounts reduced minimal reserves
5.- CAPITAL MANAGEMENT, SOLVENCY AND LEVERAGE RATIO
Capital management geared at all times to complying with minimum regulatory
requirements and with the risk appetite target or level established by the Group is a key
cornerstone of the Group's Corporate Risk Appetite and Tolerance Framework.
The entry into force of the solvency requirements known as BIS III on 1 January 2014,
which then marked a change and entailed tougher quality and minimum capital
43
DECEMBER 2015
requirements, has led to a raft of regulatory changes impacting the solvency of financial
institutions. By adequately managing its capital, the Bankia Group has been able to bolster its
solvency and minimise the impact of these regulatory changes.
Capital management pivots on capital planning, understood as the process designed to
assess the adequacy of current and future capital -even in adverse economic scenarios- with
respect to the minimum regulatory requirements (Pillar I and Pillar II) and the target capital
and optimum capital structure established by the governing bodies.
The capital planning process is a holistic process involving all levels of the Entity. Senior
management and the Board of Directors play a key role in designing and monitoring capital
planning. In this respect, regulatory and risk appetite indicators and metrics have been
determined and are monitored regularly. Moreover, capital contingency plans have been
drawn up that include the measures necessary to address the situation where needed. The
Capital Committee is mainly in change of controlling the evolution of real and projected
solvency ratios on a monthly basis, allowing the Entity to perform an active and agile capital
management. It also monitors the solvency framework to ensure that the Group
continuously adapts to any changes that may occur.
Capital planning is aligned and coherent with the Entity's strategic planning. It also
includes hypothetically adverse scenarios, quantifying potential impacts on results and
solvency according to an economic crisis scenario. The Group has mitigation plans in place to
offset impacts in adverse economic scenarios.
In 2015, in response to the recommendations issued by the various consultative bodies in
the industry and the regulatory changes made with respect to the European Banking Union,
the Bankia Group strengthened its capital planning and management framework, formally
documenting or updating existing documentation on these processes in a series of reports
approved by the Entity's Board of Directors. These documents are:
-
The Corporate Risk Appetite and Tolerance Framework, which defines the level of
risk appetite (internal capital target) and tolerance with respect to capital. This
framework is reviewed at least annually. In this respect, the internal capital target
and tolerance levels were revised up in 2015 to adapt to the increase in the minimum
regulatory requirements of Pillar II described below.
-
The Corporate Capital Planning Framework, which sets out a clear governance
framework to reinforce the capital planning process function and ensures that the
involvement of the various divisions is geared towards achieving a common objective
and that this objective fits in the Group's Risk Appetite and Tolerance Framework.
-
Capital Planning Policies, which include Management's guidelines regarding capital
preservation and correct risk measurement, as well as the corrective measures for
potential deviations included in the Capital Contingency Plan.
-
Recovery Plan, which sets out the solvency indicator levels below the Entity's
tolerance level which, prior to potential non-compliance with regulations, would
44
DECEMBER 2015
trigger the corrective measures in crises situations, as well as the range of measures
and execution of each. Recovery Plan levels were revised up in 2015 to adapt to the
increase in the minimum regulatory capital requirements of Pillar II described below.
Solvency levels
As a result of the supervisory review and evaluation process ("SREP"),the European
Central Bank set a minimum Common Equity Tier I (CET1) for the Bankia Group of 10.25%.
This minimum CET1 phase-in requirement includes Pillar I, Pillar II and the capital
conservation buffer.
Bankia Group's CET1 ratio at 31 December 2015 stood at 13.9%, including the net profit
for the year it intends to allocate to reserves, with CET1 generation in the year of 161bps
(12.3% at 31 December 2014, including net profit earmarked for reserves). The level of CET1
implies a surplus of EUR 2,956 million above the aforementioned 10.25% regulatory
minimum requirement.
The total capital ratio (BIS III) at 31 December 2015 was 15.1% including the net profit for
the year it intends to allocate to reserves (13.8% at 31 December 2014).
The following table provides a detail of capital levels, as well as risk-weighted assets
calculated in accordance with the CRR and CRD IV at 31 December 2015 and 2014 applying
the phase-in schedule for each period.
45
DECEMBER 2015
BANKIA GROUP Solvency Basilea III
(Millions of € and %)
Eligible capital
Dec. 2015 (*) (**)
Common Equity Tier I
Equity tier I
Equity tier II
Total Equity BIS III
Risk weighted assets BIS III
Credit risk
Operational risk
Market risk and CVA
Total weighed assets BIS III
Excess/(Minimal regulatory defects)
Total Equity Bis III
11,289
11,289
1,034
12,323
Dec. 2014 (*)
13.9%
13.9%
1.2%
15.1%
Dec. 2015
10,874
10,874
1,363
12,237
12.3%
12.3%
1.5%
13.8%
Dec. 2014
80,233
7,128
1,204
88,565
73,216
7,128
959
81,303
Dec. 2015 (*)
2,956
minimum
10.25%
(*) Including the amount of net profit for 2015 earmarked for reserves. In 2015, EUR 759 million (EUR 1,061 million of
profit minus EUR 302 million of proposal dividend). In 2014, EUR 570 million (EUR 772 millionof profit minus EUR 202
million of paid dividend).
(**) In 2015, including the amount of net profit earmarked for reserves, the Group would have had a Common Equity
Tier 1 ratio and Tier 1 Capital Ratio of 13.0%, a Tier 1 Capital ratio of 13.9%, and a total capital ratio of 14.2%.
In 2015, the Bankia Group strengthened its CET1 by EUR 996 million (+161bps) and its
total capital base by EUR 667 million (+134bps), which shows the consolidation of a selfsustainable model of higher quality capital generation.
The positive trend in capital in 2015 was driven mainly by organic CET1 generation, in
line with the Group’s objective of reinforcing CET1 given its permanence, availability and
greater loss-absorption capacity in accordance with Basel III capital requirements. Capital
trends in 2015 were shaped by:
-
Organic capital generation (CET1 +138bps and total capital +108bps) through:
o
Net profit for the year (EUR 1,061 million) less expected dividend (EUR 302
million) and other minor impacts on the numerator with an impact in 2015 of
+101bps in CET1 and +66bps in total capital. In addition, the calendar effect
had an impact on both CET1 and total capital of -11bp.
o
Decrease in risk-weighted assets (RWA) of EUR 3,057 million, mainly credit
risk related to balance sheet deleveraging and active management of the
composition and improvement in quality of the Group’s loan portfolio. The
fall in RWAs drove a 48bp increase in capital in CET1)( 53bp in terms of total
solvency)
46
-
DECEMBER 2015
Other extraordinary impacts (+23bps in CET1 and +26bps in total capital):
o
Sale of 100% of City National Bank of Florida, with positive impacts of +75bps
in CET1 and +78bps in the total capital base.
o
Recognition of an additional provision to the amounts set aside in 2014
related to civil lawsuits brought by retail shareholders in relation to Bankia's
IPO. The net amount of the provision was EUR 424 million, with an impact of
-52bps on both CET1 and the total capital base.
The trend is as follows:
The reconciliation of equity in the balance sheet to regulatory capital, including profit for
the year earmarked for reserves, is shown below. Data at 31 December 2014 are included for
comparison purposes.
47
DECEMBER 2015
BANKIA GROUP reconciliation between Equity and Eligible Capital BIS III
(Millions of € and %)
Eligible elements
Own funds
Total Equity (Public Balance)
Adjustment between public and regulatory balance
Total Equity (Regulatory balance)
Ineligible equity elements
Ineligible valuation adjustments as CE T-1
Regulatory capital deductions
Goodwill and other intangible assets (regulatory balance)
Other deductions
Dividend
Common Equity Tier I
Additional Equity Tier I
Equity Tier II
TOTAL REGULATORY EQUITY
Dec 2015
11,934
696
66
Dec 2014
11,331
1,216
(13)
Variation
603
(520)
79
% Variation
5%
(43%)
(595%)
12,696
12,534
162
1%
(10)
5
(15)
(291%)
12,687
12,539
148
1%
(685)
(1,165)
480
(41%)
(663)
(22)
(1,166)
1
503
(23)
(43%)
0%
(712)
(500)
(212)
42%
(260)
(150)
(302)
(283)
(15)
(202)
24
(135)
(101)
(8%)
883%
50%
11,289
10,874
416
4%
0
0
0
0%
1,034
1,363
(330)
12,323
12,237
85
(24%)
1%
(*) It includes the net consolidated profit for the year, expected to be allocated to reserves. In 2015, EUR 759 million
(EUR 1.061 million less EUR 302 million. proposed dividend €). In 2014, EUR 570 million (EUR 772 million result least EUR
202 million paid dividend).
The minimum capital requirements cover credit, foreign currency, market and
operational risks.
The requirements for credit risk, including equity price risk, amounted to EUR 5,857
million at 31 December 2014 (EUR 6,419 million at 31 December 2014. This requirement is
calculated using both the standardised approach (34% of the portfolio) and the internal
rating-based (IRB) approach (66% of the portfolio). In 2014, after receiving authorisation
from the Bank of Spain, the Entity began to apply the IRB approach to all its exposures to
corporates. Both calculation methods still coexist for exposures to institutions and retail
exposures. The remaining on-balance-sheet exposures are calculated using the standard
method.
Currency and market risk exposures, and CVA were calculated using internal models, and
at 31 December 2015 amounted to EUR 77 million (EUR 96 million at 31 December 2014).
Finally, Bankia´s Group has used the standard model for operational risk, and broadly in
line with the year before.
Leverage ratio
The leverage ratio arose in the December 2010 Capital Framework of the Basel
Committee on Banking Supervision (BCBS), which introduced this new metric as a
supplementary ratio to solvency requirements but unrelated to risk measurement. The aim is
48
DECEMBER 2015
to include the leverage ratio as a binding Pillar I requirement from 1 January 2018, after
conclusion of the review and calibration period that started on 1 January 2013.
At 31 December 2015, the Bankia Group's (phase-in) leverage ratio was 5.7%, including
the amount of profit earmarked for reserves in Tier 1 capital, above the 3% minimum
reference level set by the BCBS.
The leverage ratio performed positively in 2015, increasing thanks mainly to Tier 1 capital
generation in the year of EUR +415 million and the decrease in exposure, due above all to the
reduction in total assets on the Bankia Group's balance sheet.
The following table provides a breakdown of the leverage ratio at 31 December 2015,
along with a reconciliation of total assets on the balance sheet and leverage exposure
measure:
BANKIA GROUP leverage ratio
Items (Millions of € and %)
Tier 1 Capital
Exposure
Leverage ratio
Reconciliation between Public Balance sheet and exposure for leverage ratio
Total Assets Public Balance
(+/-) Adjustments difference between Public and Regulatory Balance
(-) Items already deducted from Tier 1 capital
(-) On-balance sheet derivatives assets
(+) Derivative exposure
(+) Add-ons for counterparty risk in securities financing transactions (SFTs)
(+) Off-balance sheet items (including use of CCFs)
Total exposure leverage ratio
Dec 2015 (*)
11,289
199,551
5.7%
206,970
116
(410)
(16,149)
664
822
7,538
199,551
(*) The data has been estimated based on Delegated Regulation 2015/62. Tier I Capital includes consolidated net profit
earmarked for reserves non including mentioned profit the ratio would have been 5.3%
In 2015, the BCBS, in conjunction with the European Banking Authority (EBA), carried out
more than one QIS (Quantitative Impact Study). The BFA Group, to which the Bankia Group
belongs, was one of the financial institutions invited to participate actively in the leverage
ratio monitoring process.
6.- RISK MANAGEMENT
Risk management is a strategic cornerstone in the organisation. The primary objective of
risk management is to safeguard the Group’s financial stability and asset base, while creating
value and developing the business in accordance with the risk tolerance levels set by the
governing bodies. It involves the use of tools for measuring, controlling and monitoring the
requested and authorised levels of risk, managing non-performing loans and recovering
unpaid risks.
Bankia Group's risk function has undergone a transformation process over the past two
years to achieve management excellence by adopting best practices. Guidelines needed to be
established to provide a foundation for the risk function, which must be independent and
49
DECEMBER 2015
comprehensive, considering all relevant factors objectively, but also aligned with the
business in order to achieve the Entity's objectives, maximising value creation. At the same
time, the organisational structure was adapted, with the creation of two new departments,
Retail Risks and Corporate Risks, to support the business structure. A policy framework was
designed consistent with the risk appetite and tolerance levels defined by the Entity's
governing bodies.
The transformation process is still ongoing, involving a number of initiatives, such as the
industrialisation and specialisation of the recoveries model, the extension of the use of riskadjusted return (RAR), the improvement in the representation of guarantees and collateral
and the review of levels and rating schemes. Moreover, risk training initiatives will be
strengthened. The overall aim is to aid the development of the business with controlled risks,
which is crucial to providing stability and sustainability to value creation.
One of the key features of European regulations implementing the capital agreements
known as BIS III is the introduction of corporate governance as a core element of risk
management. This regulation establishes the need for entities to have sound corporate
governance procedures, including a clear organisational structure, effective risk
identification, management, control and communication procedures, and remuneration
policies and procedures that are compatible with appropriate and effective risk
management.
Illustrating its willingness to strengthen the importance of corporate governance in risk
management and following the recommendations issued by the main international
regulatory bodies, at its meeting in September 2014 the Board of Directors approved the Risk
Appetite Framework (RAF) for the BFA-Bankia Group. The RAF is the set of elements that
allow the governing bodies to define risk appetite and tolerance levels, and compares these
with the Entity's risk profile at any given time.
Efficient risk governance led to improvements in 2015, such as the integration of the Risk
Appetite Framework with the Capital Planning Framework and the Recovery Plan,
reinforcement of the independence of the Chief Risk Officer (CRO), approval by the Board of
Directors of the new status of the CRO and implementation of the Internal Capital Adequacy
Assessment Process (ICAAP) and the Internal Adequacy Liquidity Assessment Process (ILAAP).
Note 3 to Bankia Group’s financial statements for the year ended 31 December 2015
provides details on the governing bodies responsible for supervising and controlling the
Group’s risks, as well as the general principles, organisational model, policies and methods to
control and measure the risks to which the Group is exposed through its business.
Accordingly, this section provides an overview of the performance and main indicators used
to assess the trends in risks in 2015.
50
DECEMBER 2015
6.1.- Credit risk
Credit risk is the risk of loss assumed by Bankia Group in the regular course of its banking
business if its customers or counterparties fail to comply with their contractual payment
obligations. Given its activity and business model, Bankia’s risk profile shows far greater
exposure to credit risk than the other risks to which its business is inherently exposed.
Credit risk management is an end-to-end process, running from loan or credit approval to
elimination of exposure, either at maturity or through recovery and sale of assets in the
event of foreclosure upon default. It involves identifying, analysing, measuring, monitoring,
integrating and valuing credit risk-bearing transactions on a differentiated basis for each
segment of the Bank's customers.
The variables the Bank uses to measure credit risk are derived from internal models:
probability of default, exposure at default and loss given default (severity). These variables
allow ex-ante analysis of the credit portfolio's risk profile by calculating the expected loss and
economic capital required.
51

DECEMBER 2015
Risk profile and composition of assets
Given its activity and business model, Bankia’s risk profile shows far greater exposure to
credit risk than the other risks to which its business is inherently exposed. The following table
shows the distribution by portfolio of expected loss and regulatory capital for credit risk at 31
December 2015.
(Millions of €)
Sector
Public sector
Banks and financial intermediaries
Companies
Property
Retail:
Mortgage
Consume
Cards
Micro-companies and self-employed professional
Equity
TOTAL
Regulatory
Equity
179.5
Expected
Loss
175.3
292.1
60.6
1,760.5
3,266.3
88.6
656.6
2,379.5
2,830.1
1,964.8
2,086.3
123.2
89.6
64.6
37.4
226.9
616.8
40.9
2.1
4,741.2
6,991.0
The main characteristics of the Group’s credit risk profile and its trends in 2015 according
to data from the audited portfolio (does not include positions in financial investees) are as
follows:
-
The breakdown of loans and advances to customers is 31% corporate segment,
including the public sector, and 69% retail.
-
The weight of the real estate development portfolio over total loans and receivables
has fallen to 1% of total assets and is heavily provisioned.
-
The mortgage portfolio accounts for 61% of total loans and receivables. The second
largest portfolio is business loans, representing 19% of the total, followed by loans to
public institutions and bodies (6% of the total portfolio).
-
The breakdown of NPLs by segment at 31 December 2015 was similar to that at 31
December 2014. 45% of assets were classified in the doubtful category for subjective
criteria or are in the cured period, compared to 39% in 2014. Accordingly, no loans in
this portfolio are past-due that imply subjective arrears, or refinancing agreements
have been reached with the customers and, therefore, there is an apparent
willingness to pay. This must be verified over a period of at least six months, but can
be extended to the entire grace period where applicable.
52
Consume and
cards 3%
DECEMBER 2015
Microcompanies
and self
employees
professional
5%
Companies 19%
Public sector 6%
Special finances
4%
Construction and
development
1%
Mortgage 61%
Financial
instituction
1%
The maturity profile of credit exposure is detailed in Note 3.3 to the consolidated
financial statements for the year ended 31 December 2015 (table on residual maturities). A
significant portion of loans and advances to customers (65%) mature beyond five years given
the large volume of mortgage loans to homebuyers, which are generally for long periods.

Asset quality: trends in doubtful balances and NPL coverage
The Group pro-actively manages and anticipates credit risk with a view to containing the
inflow of non-performing loans (NPLs) and raising NPL coverage. This management, coupled
with a better economic environment in Spain, led to an extremely positive performance by
the Bankia Group's credit quality indicators in 2015.
To illustrate, total doubtful assets (including loans and advances to customers and
contingent liabilities) at 31 December 2015 stood at EUR 12,995 million, down EUR 3,551
million from 31 December 2014. This improvement was the result of stronger efforts in
monitoring and recovery management, and in the selection and sale of portfolios of doubtful
and extremely doubtful assets, which began in 2013 and continued in 2015, with seven sales
of portfolios of doubtful assets for a combined amount of slightly over EUR 1,800 million. The
reduction in the doubtful loan portfolio left the NPL ratio at 10.6%, 2.3pp less than at 31
December 2014.
The decline in NPLs in 2015 extended the positive trend in the Group's NPL ratio begun in
2014. In this respect, one of the Bankia Group’s key management objectives over the next
few years is to continue reducing the NPL ratio.
The Group follows a prudent provisioning policy, which allows it to achieve high NPL
coverage ratios. In this way, to cover these doubtful exposures, the Group's total allowance
53
DECEMBER 2015
for insolvency at 31 December 2015 amounted to EUR 7,794 million, leaving an NPL coverage
ratio of 60%, 2.4pp higher than at the end of 2014.
The improvement in the portfolio risk profile and satisfactory levels of provision
coverage leave the Group in a good position to achieve one of the main objectives in the
Strategic Plan: to increase profitability and curtail risk in the coming years.
NPL and Coverage - BANKIA GROUP
(Millions of euros and %) (*)
NPLs
Total risk
(1)
Total NPL Ratio
Total provisions
Standard
Specific
Country risk
Coverage ratio
Dec-15
12,995
122,929
10.6%
7,794
60
7,713
21
60.0%
Dec -14
16,547
128,584
12.9%
9,527
153
9,356
19
57.6%
Change on Dec -14
Amount
%
(3,551)
(21.5%)
(5,655)
(4.4%)
(2.3) pp
(17.8%)
(1,734)
(18.2%)
(93)
(61.0%)
(1,643)
(17.6%)
3
13.4%
+2.4 pp
4.2%
(1) NPL ratio: non- performing loans and advances to customers and contingent liabilities/risk assets consisting of loans
and advances to customers and contingent liabilities.
 Credit risk of trading in derivatives
The Group is exposed to credit risk through its activity in financial markets, specifically its
exposure to OTC (over the counter) derivatives. This exposure is called counterparty risk.
The method used to estimate counterparty risk entails calculating EAD (“exposure at
default”) as the sum of the current market exposure and the potential future exposure. This
method aims to obtain the maximum expected loss for each transaction.
However, in order to migrate most of these risks, the Bankia Group has, inter alia, tools
that mitigate risk, such as early redemption agreements (break clause), netting of credit and
debit positions (netting), collateralisation for the market value of the derivatives or offsetting
of derivatives.
At 31 December 2015, there were 887 netting and 212 guarantee agreements (129
derivatives, 74 repos and 9 securities loans). The main figures regarding quantification of the
derivatives activity at that date are as follows:
-
Original or maximum exposure: EUR 26,109 million.
Exposure applying mitigation techniques through netting: EUR 7,715 million.
Net exposure after applying all mitigation techniques: EUR 1,699 million.
As shown, counterparty risk in derivatives trading is reduced by 93.49% by applying
derivatives netting and guarantee agreements.
54
DECEMBER 2015
6.2.- Liquidity risk
Liquidity risk can be expressed as the probability of incurring losses through insufficient
liquid resources to comply with the agreed payment obligations, both expected and
unexpected, within a certain time horizon, and having considered the possibility of the Group
managing to liquidate its assets in reasonable time and price conditions.
The Entity's approach to monitoring liquidity risk is based on three cornerstones:
-
The first one is the liquidity gap, classifying asset and liability transactions by term to
maturity. The liquidity gap is calculated for the recurring retail business, as well as for
the funding needs of the Entity’s structural portfolios.
-
The second is the funding structure, identifying both self-financing of the lending
activity (establishing a downward trend in the Loan-to-deposit -LTD- ratio), and the
relationship between short- and long-term funding and the diversification of the
funding mix by asset type, counterparty and other categorisations.
-
Third, in keeping with the future regulatory approach, the Entity uses metrics that
enable it to measure the resilience of the bank's liquidity risk profile in different time
horizons of above mentioned regulatory ratios.
As a supplement to the various metrics, the Entity has a well-defined Contingency Plan,
which identifies alert mechanisms and sets out the procedures to be followed if the plan
needs to be activated.
Notes 3.2 and 3.3 to Bankia Group's 2015 financial statements provide information on
remaining term to maturity of the Bank's issues by funding instrument, along with a
breakdown of financial assets and liabilities by contractual residual maturity at 31 December
2014 and 2015.
Alongside the monitoring of liquidity risk in normal market conditions, action guidelines
have been designed to prevent and manage situations of liquidity stress. This pivots around
the Liquidity Contingency Plan (LCP), which sets out the committees in charge of monitoring
and activating the LCP and the protocol for determining responsibilities, internal and external
communication flows, and potential action plans to redirect the risk profile within the Bank's
tolerance limits.
The LCP is backed by specific metrics, in the form of LCP monitoring alerts, and by
complementary metrics to liquidity risk and regulatory funding indicators, LCR (Liquidity
Coverage Ratio) and NSFR (Net Stable Funding Ratio). These ratios have built-in stress
scenarios for the ability to maintain available liquidity and funding sources (corporate and
retail deposits, funding on capital markets) and allocate them (loan renewal, unprogrammed
activation of contingent liquidity lines, etc). For the LCR, the scenario relates to a survival
period of 30 days, and the regulatory assumptions underlying the construction of the ratio
are valid exclusively for this period.
55
DECEMBER 2015
As for regulatory requirements, starting in October the calculation of the Group's LCR
was adapted to Delegated Regulation (EU) 2015/61 of the European Commission, which
became effective on 1 October. The net stable funding ratio (NSFR) is currently undergoing a
review by the European Union and, once the definition is complete, this ratio will form part
of the minimum standards on 1 January 2018, with a requirement of at least 100%.
6.3.- Market risk
Market risks arise from the possibility of incurring losses on positions in financial assets
caused by changes in market risk factors (interest rates, equity prices, foreign exchange rates
or credit spreads).
Limits are established in accordance with a number of metrics: value at risk (VaR)
calculated using the historical simulation method, sensitivity, maximum loss (stop-loss limit)
and the size of the position.
The Markets and Operational Risks Department is independent of the business units and
it is integrated in the Corporate Risks Department, which with respect to market risk in
trading performs the following functions: control and monitoring of positions with market
risk and counterparty lines; daily calculation of the results of the various desks and portfolios;
independent valuation of all market positions; periodic reporting on the various market risks
to the pertinent committee; and, lastly, control of model risk.

Interest rate risk
Interest rate risk reflects the probability of incurring losses because of changes in the
benchmark interest rates for asset and liability positions (or certain off-balance sheet items)
that could have an impact on the stability of the Entity’s results. Rate fluctuations affect both
the Group's net interest income in the short and medium term, and its economic value in the
long term. The intensity of the impact depends largely on different schedules of maturities
and repricing of assets, liabilities and off-balance sheet transactions. Interest rate risk
management is designed to lend stability to interest margins, maintaining levels of solvency
that are appropriate for the Company’s level of risk tolerance.
Interest rates remained at historically low levels in the 2015 and 2014. Long-term rates
eased, in line with the unorthodox monetary policies adopted, which sought, inter alia, to
stimulate growth in the euro area and overcome the economic slowdown of the past few
years. The market scenario was managed by the Assets and Liabilities Committee (ALCO),
which aims to maximise the economic value of the banking book and support net interest
income, thereby ensuring recurring profit generation for the Entity.
According to Bank of Spain regulations, the sensitivity of the net interest margin and the
value of equity to parallel shifts in interest rates (currently ±200 basis points) is controlled. In
addition, different sensitivity scenarios are established based on implied market interest
56
DECEMBER 2015
rates, comparing them to non-parallel shifts in yield curves that alter the slope of the various
references of balance sheet items.

Other market risks
Other market risks arise from the possibility of incurring losses in value of positions in
financial assets and liabilities caused by changes in market risk factors other than interest
rate risk (equity prices, foreign exchange rates or credit spreads). These risks arise from cash
and capital markets positions and can be managed by arranging other financial instruments.

Market risk measurement and monitoring
The methodologies used to measure, monitor and control the Company’s market risk are
VaR (value at risk), sensitivity analysis by way of specifying different scenarios for each type
of risk, and stress testing to quantify the economic impact on the portfolio of extreme
movements in market factors. These metrics are complemented by an analysis of scenarios,
which consists of evaluating the economic impact of extreme movements in market factors
on trading activity.
a) Value at Risk (VaR) and back-testing
VaR is measured by the historical simulation method using a 1-day time horizon and a
99% confidence level. It takes at least one year of observations of market data.
The accuracy of the model is verified daily through subsequent controls (backtesting),
which compare actual losses with the estimated loss measured using VaR. As required by
regulations, two tests are conducted, one applying hypothetical changes in the value of the
portfolio by comparing the daily VaR with the results obtained, without considering changes
in the positions of the portfolio, and one applying actual changes comparing daily VaR with
net daily results excluding commissions.
57
DECEMBER 2015
Millions
Theoretical Back-testing
6
4
2
0
-2
-4
-6
Millions
Real Back-testing
6
4
2
0
-2
-4
-6
The backtest of the regulatory metric applied to hypothetical changes showed one
occurrence in 2015. Since a 99% confidence level and 1-year observation period is used in the
model, the occurrence relates to the model's expected performance, which means that the
model consistently and prudently predicted the losses. This also means that own funds
calculated using regulatory criteria based on internal models are sufficient to cover any
extraordinary losses that may arise.
b) Sensitivity
Sensitivity quantifies changes in the economic value of a portfolio due to given
movements and determinants of the variables affecting this value.
In the case of non-linear movements, such as derivatives activities, sensitivity analysis is
supported by an evaluation of other risk parameters, such as sensitivity to movements in the
price of the underlying (delta and gamma), volatility (vega), time (theta) and interest rate
(rho). For share or index options, elasticity to changes in dividend yield is calculated.
Sensitivity analysis by tranche is also used to measure the impact of non-parallel movements
in the term structures of interest rates or volatilities, and to obtain the distribution of risk in
each tranche.
58
DECEMBER 2015
c) Stress-testing
Periodically, stress-testing is performed to quantify the economic impact of extreme
movements in market factors on the portfolio.
Sensitivity, VaR and IRC measures are supported by stress-testing applying different
types of scenarios:

-
Historical scenario: scenarios built based on movements observed in previous crises
(e.g. Asian crisis of 1998, the tech bubble of 2000/2001, the financial crisis of
2007/2008). These scenarios are reviewed annually to reflect the key events
occurring in the year.
-
Crisis scenario: applies extreme movements in risk factors that may not necessarily
have been observed.
-
Last-year scenario: maximum expected daily loss over a 1-year observation period
with a 100% confidence level.
-
Sensitivity analysis: designed to measure the impact on the metric of slight changes
in the parameters used to calculate the IRC, the estimate of the metric excluding
transitions to default and the impact on the metric of parallel movements in loss
rates in the event of default.
-
Credit crisis scenario: devised by two separate analysis; 1) based on a matrix of credit
margins built using variations observed, and 2) based on a transition matrix related
to credit risk stress scenarios.
-
Worst case: default by all issuers in the portfolio.
Trends and distribution of market risk in 2015
Bankia Group maintained an average VaR in 2015 of EUR 1.84 million, with a maximum of
EUR 3.87 million and a minimum of EUR 1.11 million.
VaR
Average
Maximum
Minimum
(Millions of euros)
1.84
3.87
1.11
59
DECEMBER 2015
Distribution of VaR by risk category (Millions of euros)
Risk category
Interest rate
Equity instrument
Exchange rate
Credit spread
Other

31/12/2015
Average
Maximum
Minimum
2.33
0.04
0.1
0.02
0.29
0.99
0.06
0.05
0.08
0.66
2.38
0.2
0.55
0.49
2.44
0.25
0.01
0.01
0.01
0.23
Trading in derivatives
Bankia’s trading in derivatives arises mainly from the management of market and
interest rate risks, and from market making and distribution activities.
Risk of the derivatives trading activity measured in terms of VaR remains extremely low,
as this activity is based on transactions with customers carried out in the market under the
same terms as opposite transactions.
VaR of derivatives activity
(Millions of euros)
Average
Maximum
Minimum

Fixed
income
1.42
3.56
0.60
Equity
Exchange rate
Total
0.16
0.35
0.05
0.09
0.56
0.01
1.67
3.82
0.82
Country risk
Country risk is defined as the risk of incurring losses on exposures with sovereigns or
residents of a country due to reasons inherent to the country’s sovereignty or economic
situation; i.e. reasons other than normal commercial risk, including sovereign risk, transfer
risk and other risks related to international financial activity (war, expropriation,
nationalisation, etc.).
The Bankia Group's country risk management principles are grounded on criteria of
maximum prudence, whereby this risk is assumed on a highly selective basis.
Bankia Group’s exposure to country risk at 31 December 2015 was marginal, recognising
a provision in this connection of EUR 21 million.
60
DECEMBER 2015
6.4.- Operational risks

Customer concentration risk
Bankia is subject to Bank of Spain concentration limits, such that the exposure to any
single non-consolidated economic group or borrower must not exceed 25% of eligible capital.
In this respect, the Group regularly monitors large exposures with customers, which are
reported periodically to the Bank of Spain. At 31 December 2015, there were no exposures
that exceeded these limits.Appendix X to the consolidated financial statements for year
ended 31 December 2015 provides details on the Bankia Group's concentration risk by
business and geographic area.

Operational risk
Operational risk is the risk of loss due to inadequate or failed internal processes, people
and systems of the Bank or from external events. This definition includes legal risk, but
excludes reputational risk.
Bankia Group has the following operational risk management objectives:
-
To foster an operational risk management culture, geared particularly to awareness
raising, assuming responsibility, commitment and quality of service.
-
To ensure operational risks are identified and measured in order to prevent potential
losses affecting results.
-
To reduce losses caused by operational risks by implementing continuous
improvement systems for processes, a control structure and mitigation plans.
-
To encourage the use of risk transfer mechanisms that limit exposure to operational
risk.
-
To verify that contingency and business continuity plans are in place.
The Operational Risk Department falls within the Market and Operational Risks
Department in the Corporate Risk Department. The Operational Risk Committee, whose
responsibilities include approving policies and methods, is the natural channel for senior
management participation in operational risk management. This committee met in person 4
times in 2015, once each quarter, at which trends in real and expected loss data, and
operational risk management actions carried out and regulatory changes affecting the area
were presented. Among other issues, the committee addressed the new proposed procedure
for entities using the basic indicator or standardised methods for calculating capital
requirements, emerging regulations on conduct risk, cyber risk and insurance applied to
mitigate operational risk.
61
DECEMBER 2015
The capital requirement to cover operational risk is rooted in Basel II. European
Regulation No. 575/2013 of the European Parliament and of the Council, of 26 June 2013
(CRR) regulates the treatment of this type of risk in the area of credit institutions.
In 2015, for the third year in a row, the Bankia Group used the standardised approach to
measure its operational risk, strengthening the related management aspects to implement
this approach. This approach requires the disaggregation of the relevant revenues of the past
three reporting periods by business line and the application of a percentage to each, as set
out in the regulations, based on the related risk.
Updates were also made to the Guidelines for the Application of the Standardised
Approach for Operational Risk approved by the Board of Directors on 18 December 2013.
This 36-point report contains available information so that the supervisor can verify
compliance with regulatory requirements.

Changes in regulatory frameworks and regulatory risk
The financial services industry is characterized for being tightly regulated. Bank
operations are subject to specific regulation and Bankia Group’s operations are exposed to
risks that could arise from changes in the regulatory framework.
Changes in the regulatory framework due to modifications in government policies, the
banking union process or of any other type could give rise to new regulatory requirements
that affect the Bankia Group's solvency levels, ability to generate future profit, business
model, dividend policy, and capital and liability structure.
Regulatory developments have been much more profound since the new prudential
requirements known as BIS III became effective. For Europe, this consisted of Directive
2013/36/EU, of 26 June 2013 (“CRD IV”) and Regulation (EU) 575/2013, of 26 June 2013
("CRR"). The framework continues to expand through new regulatory and implementing
technical standards.
Additionally, the configuration of the European Banking Union is based on two key
cornerstones: the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism
(SRM). Both have brought with them additional regulatory developments, such as the Bank
Recovery and Resolution Directive (BRRD) and the Directive on Deposit Guarantee Schemes.
The Regulatory Monitoring Committee, composed of senior executives, identifies the
potential impact and influence of regulatory changes on the Entity, anticipating any adverse
effect. The Committee pays particular attention to certain areas, such as business,
accounting, risk management, solvency, liquidity, compliance and internal audit. Meanwhile,
it establishes appropriate criteria for adapting the business model to the new regulatory
paradigm, subsequently performing periodic and exhaustive monitoring of each adaptation
project.
62

DECEMBER 2015
Reputational risk
Reputational risk is defined as the risk of failure to meet stakeholder expectations to the
point that this undermines the level of recognition obtained or prevents the desired level
from being reached, resulting in an adverse attitude and/or behaviour that could have a
negative impact on the business. This risk must be managed well, through identification,
evaluation, prevention and permanent control.
There has been a push lately to demarcate more clearly and reinforce reputational risk
requirements by the main international regulators (the BIS, EBA, ECB, PRA and FED),
highlighting the importance of identifying and managing reputational risk events and
integrating them in banks' risk management systems. This requires adopting a dual
perspective when facing this event type: the risk itself and the reputation.
The first step in this case would be to define the keys to Bankia's reputation; i.e. the main
elements it wishes to protect, including its reputational view, the reputational attributes for
which it wishes to be recognised and the map of stakeholders with which they are related.
The margin for reputational risk tolerance differs depending on the stakeholder. Therefore,
reputational risks are identified through: interaction between the Entity and the stakeholder
or stakeholders, mainly through bidirectional communications channels (e.g. corporate mail,
customer care service, shareholder offices, forums and presence on social networks, the
supplier portal, the confidential whistleblowing channel, focus groups with employees, etc.);
customer and supplier satisfaction surveys; and direct contact in the day-to-day work of the
Entity (employee-customer or procurement manager-supplier).
In addition, the environment must be monitored continuously in order to know what
issues become critical for the Society. Similarly, the Entity's performance appraisal and
comparison with practices at other banks helps discern the potential level of tolerance that
could exist to reputational risk.
Bankia held focus groups with all its stakeholders (customers, shareholders, suppliers and
employees), personal interviews, with academic, institutional, investors and third sector CSR
experts to gain greater insight into their strengths and threats, thereby expanding the
identification of reputational risks. Moreover, an analysis was conducted of the situation,
sector disputes and practices of other financial institutions around the world.
By pinpointing reputational risks, Bankia can align its behaviour with the expectations of
each stakeholder groups, thereby achieving a dual objective: mitigating risks and detecting
opportunities.
Reputational risk events can stem from a number of risk categories (e.g. credit, market,
counterparty, operational, structural, liquidity, strategic, legal). Therefore, Bankia analysed
its corporate risk map to identify the risks with the greatest impact on reputation.
Bankia's objective when managing reputational risks is to generate trust, loyalty and the
best opinion possible among its stakeholders as a means of becoming more competitive.
63
DECEMBER 2015
Sustainable management of reputational risk is crucial for carrying out the Bank's long-term
plans and achieving its objectives. It considers reputation not only as past performance, but
as a possibility and future opportunity.
7.- FORECLOSED REAL ESTATE ASSETS
The net balance of the Bankia Group's property assets foreclosed or received in payment
of debt ended 2015 at EUR 2,689 million (EUR 3,874 million gross), representing just 1.3% of
the Group's assets. Most of the foreclosed properties are held by Bankia, S.A. and entail
liquid assets (81% of the total), mainly existing and newly built homes, which makes the
disposal easier.
The Entity’s policy helps borrowers meet their obligations, so that foreclosure is always
the last solution. It has several initiatives in place to ease the impact: adapting debts and
renegotiations, offering to extend maturities or grace periods, among others. Only when it
believes there are no real chances of recovering the amount financed does it acquire the
mortgaged asset.
In this respect, Bankia Group’s objective regarding this type of asset is to dispose of it
with the smallest possible impact on the income statement through sale or rental, with or
without a purchase option related to the Housing Social Fund and/or special rentals. With
this objective, the Group engaged HAYA R.E. to manage, administer and sell its foreclosed
assets under the supervision of the Corporate Investees Division. Accordingly, Bankia Group
has an active provisioning policy for these assets based on appraisal updates and the outlook
for the real estate market. Provisions recognised at the end of 2015 for foreclosed assets
from Bankia Group’s business in Spain amounted to EUR 1.185 million, implying coverage of
30.6%.
Property market has shown the first positive signs in relation to prices and sales, in 2015
Bankia Group has sold EUR 512 million of foreclosed assets.
FORECLOSED AND ACQUIRED ASSETS OF BANKIA GROUP- SPAIN BUSINESS
(Millions of euros)
Real estate assets from construction and
development
Of which finished buildings
Of which buldings under constructions
Of which land
Property assets from loan for house purchase
Other real estate assets
Total foreclosed assets
Carrying
amount
Dec-15
Valuation
Gross
adjustments amount
Coverage
(%)
288
142
430
33.0%
226
19
43
1,955
445
2,689
79
23
40
883
160
1,185
305
42
83
2,838
606
3,874
25.9%
54.5%
48.2%
31.1%
26.5%
30.6%
(*) Financial statment amounts rounded to millions of euros
64
DECEMBER 2015
8.- INFORMATION ON CREDIT RATINGS
At 31 December 2015 the ratings granted to Bankia Group by different rating agencies
include the following:
Issuer Rating
Long term
BB
BB+
Short term
B
B
Perspective
Positive
Positive
Date
02/12/2015
19/05/2015
Mortgage Covered Bonds Rating
Rating
A+
A-
AA
Perspective
Stable
Positive
---
Date
13/10/2015
16/09/2015
19/10/2015
Regarding ratings by Moody’s, in October 2013, Bankia announced that it had decided to conclude its
contractual relationship with this agency. Accordingly, ratings still published on Bankia by Moody’s are “Nonparticipating Ratings”; i.e. Bankia does not participate in the agency’s rating review, with the agency basing its
decisions strictly on public information about the Entity. It is up to the agency itself to decide when it wishes to stop
publishing ratings on Bankia.
Key issues regarding credit ratings in 2015 include the following:
-
Ratings of European institutions during the year were shaped by the entry into
force of Directive 2014/59/EU on bank restructuring and resolution (the "Bank
Recovery and Resolution Directive" or “BRRD”). The rating agencies modified their
approaches to reflect the reducing propensity of state support in the event of a
rescue of a financial institution experiencing difficulties, which had a negative
impact on the long-term ratings of banks in the European Union. In general, the
removal of the sovereign support brought down the entities' long-term ratings to
converge with their intrinsic ratings.
-
In Bankia's case, ongoing progress in execution of the Entity’s Strategic Plan, well
ahead of schedule, coupled with the positive performance of the banking business,
the reduction in NPLs and the improvement in capitalisation, had a positive impact
on the Entity’s ratings of late.
Highlights regarding S&P's rating for Bankia include:
65
DECEMBER 2015
-
On 3 December, after concluding its review of the withdrawal of government support
to ratings of European banks, Standard & Poor’s (“S&P”) affirmed its “BB/B” rating
for Bankia, raising the outlook from Stable to Positive. The withdrawal of one notch
of sovereign support was offset by an improvement in Bankia's risk profile, triggering
a one-notch upgrade in its stand-alone credit profile (SACP) from “bb-“ to “bb”. With
this rating action, the agency recognised Bankia's successful build-up of a stronger
risk management and the accelerated clean-up of its deteriorated loan book through
growing recoveries and higher disposal of deteriorated asset portfolios. The positive
outlook reflects the possibility that the agency could raise the rating in 2016 if Bankia
continues to enhance its solvency and/or reduce its reliance on ECB and other shortterm funding.
-
Previously, on 22 April, the agency affirmed its “BB-“ long-term rating and raised its
outlook from Negative to Positive, reflecting the progress made in reducing exposure
to problem assets and the potential benefits of transforming the risk management
model on the behaviour of asset quality.
-
In three separate rating actions in 2015, the agency moved Bankia's mortgage
covered bond rating from “A/Negative" to “A+/Stable”. First, on 5 February, the
agency affirmed its "A/Negative" rating after applying a new approach that takes into
account the new status of covered bonds in the BRRD. Then, on 27 April, S&P raised
the outlook to Stable after concluding the action on Bankia's long-term credit rating.
Finally, on 13 October, S&P upgraded its rating of the covered bonds to “A+” after
revising up its sovereign rating for Spain from “BBB” to “BBB+” on 2 October.
Fitch Ratings ("Fitch") took the following rating actions on Bankia in 2015:
-
On 1 April, Fitch Ratings (“Fitch”) upgraded Bankia's Viability Rating (“VR”) by two
notches, from “bb-” to “bb+”, reflecting improvements at the Entity. At the same
time, it affirmed the long-term rating of “BBB-“, with a Negative outlook, reflecting
the pressure on the rating of a reduction in state support after adapting and
implementing the approach.
-
On 19 May, Fitch excluded government support in all its ratings of financial
institutions. It downgraded Bankia's rating by one notch, from “BBB-” and “BB+”
bringing it into line with its “bb+” VR. Fitch raised Bankia's outlook from Negative to
Positive, reflecting upside rating potential in the short and medium term as the Bank
continues to reduce the stock of problem assets and further strengthen capital.
-
Meanwhile, it upgraded its rating of Bankia's mortgage covered bonds from
“BBB+/Stable” to “A-/Stable” on 6 April. The upgrade was supported by the review of
the VR and an improved level of collateralisation.
-
Subsequently, on 16 September, Fitch affirmed its covered bond rating of “A-” and
raised the outlook from Stable to Positive to match the outlook for Bankia's longterm rating (BB+/Positive).
66
DECEMBER 2015
DBRS Ratings (“DBRS”) initiated coverage of Bankia's mortgage covered bonds in 2014.
Changes in 2015 were as follows:
-
On 26 March, following the EUR 1,000 million issue of mortgage covered bonds, the
agency affirmed its “A (high)” rating of these securities.
-
Subsequently, on 26 May, following the announced review of its methodology for
rating mortgage covered bonds, DBRS placed the issuance programmes of the
European issuers it rates under review. This included Bankia. The updated
methodology for mortgage covered bonds aims to adapt to the framework for bank
resolution, under which these securities are exempt from absorbing losses. In this
respect, all the agencies afford beneficial treatment, in terms of rating, to these
relative to senior long-term debt.
-
On 24 September, after a full rating review of Bankia's covered bonds, the agency
affirmed its "A (high)" rating.
-
On 19 October, after concluding its review of government support and considering its
new approach to mortgage covered bonds, DBRS upgraded its rating for Bankia's
mortgage covered bonds by two notches, from “A (high)” to “AA”.
9.- SHARE PRICE PERFORMANCE AND SHAREHOLDER STRUCTURE

Bankia share price
In 2015, international financial markets were faced with a moderate pick-up in activity in
advanced economies, slowdown in emerging economies and the first hike in US interest since
June 2006. In this setting, oil prices plummeted and stock markets became increasingly
volatile. The Ibex shed -7.15%, with relative underperformance by the financial sector.
Bankia's share price followed suit, falling by -13.25% in the year to EUR 1.07 per share. An
average of around 34.3 million shares changed hands daily, equivalent to an average cash
amount of EUR 41.3 million per share.
130%
120%
110%
100%
90%
80%
70%
60%
Bankia
IBEX
Euro Stoxx Banks
67
DECEMBER 2015
Actions affecting Bankia's share capital carried out in the first half of the year pursuant to
resolutions adopted at the General Shareholders Meeting held in April 2015 included:
-
Offset of the negative reserve with a charge to the share premium account and
capital reduction.
-
Capital reduction to increase the legal reserve.
-
Capital reduction to increase the voluntary reserves.
These operations left the par value of the shares at EUR 0.80/share. They were designed
to better adapt the equity structure, but did not change the accounting value of the shares
for shareholders.

Payment of Bankia's first-ever dividend
Following approval at the General Shareholders Meeting, Bankia paid the first dividend in
its history, all in cash and out of 2014 profit. The amount was EUR 0.0175 per share, with
payment made on 7 July 2015. The total payment was EUR 202 million, implying a payout of
27%.

Analysts' consensus
At 31 December 2015, there were 31 equity analysts covering the stock actively and
issuing target prices for Bankia, two more than in 2014. At year-end, Bankia's consensus
target price was EUR 1.23 per share, implying 15% upside from the market price.
45.16% of analysts had "buy" recommendations vs. 20.7% at the end of 2014, 22.58%
had "hold" recommendations and 32.26% rated the stock “sell”.
68

DECEMBER 2015
Capital and shareholder structure
Bankia had 435,755 shareholders at 31 December 2015. The number of shares in issue
remained unchanged during the year at EUR 11,517 million. At the end of the year, BFA
owned 64.23% of Bankia, with the remaining being 35.77% free float.
Non-resident
Institutional
17.78%
Retail
12.72%
BFA
64.23%
Resident
Institutional
5.27%
10.- INFORMATION ON TREASURY SHARES
At 31 December 2015, the Group held EUR 46.5 million in treasury shares.
Bankia held 47,778,744 treasury shares at 31 December 2014 worth EUR 67.6 million. In
2015, it bought 84,154,937 shares, for EUR 96.6million, and sold 92,066,335 shares, for EUR
117.8 million, leaving it with a balance at 31 December 2015 of EUR 46.5 million, as indicated
above.
11.- DIVIDEND POLICY
Bankia did not pay shareholders any dividends in 2011, 2012 or 2013. For 2014, at the
Ordinary General Shareholders Meeting of Bankia held on 22 April 2015, a resolution was
adopted to distribute a gross dividend of EUR 201,553,249.52 charged to the Company's
2014 profit. This dividend was paid on 7 July 2015. This was the first dividend paid by Bankia
since it was incorporated.
The dividend distribution out of 2015 profit of Bankia, S.A. proposed by the Board of
Directors and which will be put before the General Shareholders Meeting for approval is EUR
302.3 million.
Underpinned by stable earnings, the reinforcement of the more traditional banking
business and an increasingly stronger balance sheet, the Bankia Group's goal in the coming
years is to maintain shareholder remuneration as another step towards getting the business
back to normal and repaying the public assistance received.
69
DECEMBER 2015
12.- ORGANISATION AND PEOPLE
12.1.- People
Bankia Group has a workforce of 13,571 professionals, of which 13,318 work at Bankia
S.A. Note 41 to the consolidated financial statements for the year ended 31 December 2015
provides a breakdown of Group employees by gender and professional category.
In 2015 was a busy year in terms of personnel management as two circumstances
coincided. First, there was the implementation of the voluntary redundancy programme in
May, with take-up by 245 employees. Second, there was the development and consolidation
of new commercial customer relationship and distribution models, which gave rise to:
-
The opening of sixteen "Agile Branches", with a staff of 102.
-
The creation of the Advisory Branches, for which 227 financial consultants were
selected.
-
The start-up of the new Multi-channel Branches, which led to 133 hirings.
-
The reinforcement of the SMEs segment, with 105 new professionals in regional
branches and the review of the profiles of another 153 employees at branch offices.
-
The conclusion of activity of the Liquidation and Recovery centres, which were
replaced with Recoveries Centres, resulting in the reallocation of staff and functions.
All of this led to 3,700 relocations to match jobs, with a particular focus on management
positions.
Bankia’s development as a bank is dependent on the consolidation of a new corporate
culture and an employment policy predicated on promoting talent and providing equal
opportunities for all.
One of the cornerstones of the Entity’s human resources policy is to identify and manage
talent across the entire organisation. Furthering the trend begun in 2014 towards promoting
the professional and career development of employees, a total of 294 appointments were
made in 2015: 35 managers (including 11 regional managers), 166 branch managers, 45
central services managers (including two team coordinators) and 48 assistant branch
managers.
A number of initiatives targetting professional development were also designed and
implemented in the year, led by:
-
Management Skills Development Programme
-
Senior Management Programme for corporate managers
-
Career Development Plans
-
Advances in the Mentoring Programme
70
DECEMBER 2015
-
Implementation of "Talent pool" plans for staff with pre-management functions
-
Advances in the programme identifying candidates to receive training for positions in
the organisation that require a greater degree of specialisation and that, given their
nature, are difficult to fill internally.
As for training, the training plan in 2015 was focused on developing technical skills
related to the job map, synchronising training actions with priorities on the Bank and relating
processes for measuring the transfer to results and training certification. A total of 774,677
hours of training were given in the year, up 15.75% from 2014.
Particularly important was the launch of training plans to hone the skills of managers, as
part of a cultural rebuilding and repositioning process based on values and optimisation of
the Bank's competitive advantages. The first plans targeted Plus+ Branch managers,
managers of branches with a specialist team, retail banking sales managers, business banking
sales managers, business centre managers and private banking managers.
Bankia also enhanced employees' knowledge and skills by embarking on the key
initiatives in a number of areas to:
-
Continue training plans for personal banking and SME managers in order to shore up
the knowledge and skills related to their function.
-
Synchronise new programmes for specialist managers (financial advisors, corporate
managers and asset managers) with plans designed for their managers.
-
Foster long-term customer relationships (especially SMEs, micro-enterprises and selfemployed professionals) and advised sales.
-
Assess the level of knowledge in the retail and business banking in credit risk in order
to draw up personalised programmes to address weaknesses.
-
Implement a specific training plan for multi-channel managers related to changes in
the Bank's distribution models.
-
Teach employees about P&L management, foreign trade, operational management,
insurance and anti-money laundering regulations.
In respect of occupational health and safety, Bankia places special emphasis on
occupational risk prevention, through the development of a coherent policy and a
coordinated occupational risk prevention. The Risk Prevention Management System
encompasses all measures taken to mitigate and control occupational risks. These measures
are carried out through an Annual Programme of Preventive Measures, approved by the
State Health and Safety Committee.
Several agreements have been signed by the Bank and workers’ representatives to
improve working conditions. These include action protocols in situations of external violence
and robbery, which are executed immediately and in a coordinated manner to provide
support and assistance to employees.
71
DECEMBER 2015
Moreover, preventive campaigns continue to promote good health, along with
collaborative actions with the Spanish Cancer Association, which seek to raise awareness and
inform all members of the organisation. Blood drives were also carried out in collaboration
with different public organisations.
Main indicators (1)
Absenteeism (%)
(2)
Work hours lost due to absenteeism
Injury rate (%)
(3)
Working hours lost due to work-related injuries
Number of work-related fatalities
Number of employees taking maternity/paternity leave
Number of employees taking sick leave
(1)
2015
2014
2013
6.12
5.64
5.96
1,360,867
1,312,578
1,687,023
0.29
0.23
0.23
6,916
2,918
4,314
0
0
0
851
863
835
3,571
3,042
3,797
Data for Bankia, S.A.
(2)
Percentage of lost days/total day in the related period (work day for average employee).
(3)
Percentage of work-related injuries (excluding travel to and from work)/average workforce in the related period.
12.2.- Suppliers
In 2015, Bankia was the first bank to have its procurement management system certified
according to the UNE-CWA 15896 standard, issued to address the increasing impact of supply
chains on risk at companies. The main goal is to achieve excellence in organisations'
purchasing or procurement departments through a standard quality commitment that adds
value to the company and ensures that environmental, ethical and sustainability aspects are
observed.
The Bank also establishes its own criteria for the procurement function in accordance
with the Code of Ethics and Conduct approved by the Board of Directors and with the
provisions of the International Federation of Purchasing and Supply Management (IFPSM).
These criteria are based on mutual benefits, loyalty and honestly, objectivity in decisionmaking, transparency and equal opportunities, confidentiality, integrity and independence in
relations and corporate social responsibility, among others.
The supplier certification process is a pre-requisite for establishing commercial dealings
with Bankia. This process assesses areas to indicate economic, social and environmental risk.
In addition to imposing stricter supplier selection criteria, Bankia has undertaken
commitments to speed up the process and aid in the fulfilment of the obligations it has
assumed, such as implementing electronic contracts and invoices.
Thanks to initiatives to improve relations between Bankia and its suppliers, 75.8% of
suppliers rated their satisfaction with the Bank at seven or higher (on a scale of 0 to 10). This
figure was obtained from the satisfaction surveys sent to over a thousand suppliers seeking
72
DECEMBER 2015
their perception of Bankia on friendliness, responsiveness to claims, negotiations and
compliance with payment commitments.
The average period of payment to Bankia Group suppliers in 2015 was 11.66 days.
13.- ENVIRONMENTAL DISCLOSURES
Bankia integrates environmental impact in the organisation's decision-making, aligning it
with the business strategies and including environmental governance in its overall
management. As a result of this commitment, in 2015, it reviewed and redefined the Entity's
environmental policy in order to adapt to the demands of its stakeholder groups, to the
commitments assumed and to the new ISO 14001 standard. The new core principles,
approved by the Management Committee in March are:
-
Commitment to combatting climate change, eco-efficiency and prevention of waste
generation, all under the framework of a certified environmental management
system.
-
Professionalism, through training and awareness raising among all employees to
bring them on board and through competent, objective-based management.
-
Achievement orientation, with continuous improvement in environmental
management. The aim is to observe best practices and implement environmental
performance indicator systems, such as measurement of the corporate footprint.
-
Integrity, based on ethical, responsible and transparent behaviour focused on
complying with prevailing legislation.
-
Closeness to suppliers in order to encourage responsible environmental conduct.
Bankia sees measuring the environmental impact of its activity as fundamental, and
works proactively to mitigate any such effect. It focuses efforts on the environmental
management of its work centres, boosting eco-efficiency vis-à-vis the use of natural
resources, helping to tackle climate change, and fostering environmentally-responsible
attitudes among its staff, suppliers and customers.
In this respect, in order to encourage employees to take a more pro-active stance, an
online course was given to 1,649 professionals in 2015 reminding them of the main
environmental problems and the actions undertaken by Bankia to mitigate these problems.
Those attending also received training on easy-to-follow good practices for the professional
and personal environment.
As part of the staff awareness-raising process, internal forums were created to help
foster dialogue, discuss proposals and encourage employees to sign up for initiatives
supported at corporate level by Bankia. For the first time, Bankia's blog and the Bankia
Online magazine covered key events in relation to the environment, such as the Climate
Change Summit held in Paris.
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DECEMBER 2015
Over the course of 2016, new content will be added to the web and Intranet, with the
objective of getting all employees involved in environmental protection.
Regarding suppliers, a specific assessment of suppliers’ environmental performance and
management is carried out as part of the supplier approvals process (including the carbon
footprint of the product or service offered). Suppliers are informed of the principles
governing their relationship with Bankia and provided guidelines on environmental best
practices.
Suppliers with the greatest impact are offered the opportunity of participating in
workshops that help contribute to continuous improvement, which makes Bankia a more
sustainable and committed organisation each day.
Looking ahead to 2016, one of the challenges is to incorporate environmental criteria in
the Entity's contracting terms and conditions.
Regarding environmental management, Bankia has a management model for its work
centres based on the international ISO 14001:2004 standard. Bankia's head offices in
Valencia and its centre of operations in Madrid and in Las Rozas building, where the Data
Processing Centre is which has a certified environmental management system. The objective
in 2016 is the documentary adaption of the environmental management system to the ISO
14001:2004 new requirements.
Regarding the eco-efficiency of activities, Bankia has an Energy Efficiency Plan 2015-2019
rooted in the analysis and diagnosis of the situation of the branch network and buildings in
2013. This affects the majority of the work centres and the objective is to reduce electricity
and fuel consumption (natural gas and diesel) by 19% compared to the base year. To ensure
this objective is achieved, plans are to invest EUR 10 million over the five years of the plan to,
inter alia, implement smart metering in offices and for IT equipment, renew air
conditioning/heating equipment and carry out internal awareness-raising campaigns.
Thanks to its commitment to clean energies, since 2013 Bankia has eliminated all indirect
emissions associated with electricity consumption in all of its buildings and across the
commercial market. Bankia also has two photovoltaic solar energy capture systems, of which
one is installed on the Pintor Sorolla building in Valencia (the bank's headquarters) and the
other in the Canary Islands. The objective for 2016 is to remain committed to purchasing all
of its electricity from clean and renewable energy sources (green energy).
In the area of consumption and waste management, the strategy aims to prevent waste
and promote recycling. In line with these objectives, a number of initiatives were carried out
in 2015 to reduce paper and water consumption, e.g. digital contract signing, invoice
management through a digital platform to prevent paper generation and the installation of
water saving systems in the taps in all of the Bank's branches and buildings.
In the area of waste management, the strategy aims to prevent waste and promote
recycling. In the last 3 years Bankia made more than 268 donations of electric and
74
DECEMBER 2015
technological equipment to educational centres and NGOs devoted to social purposes. This,
is making a valuable contribution to the social work of these organisations, while also
avoiding these items being thrown away.
CONSUMPTION OF MATERIALS 1
2015 2
2014
Units
Total paper consumption (DIN A4)
655,24
658,9
Tons
1.47
1.3
Tons
100.0
100.0
Percentage
Consumption of toners
13,244
13,328
Toners
Printer cartridges used
99.8
99.7
Percentage
653.76
657.6
Tons
Consumption of paper produced using virgin pulp with a low
environmental impact (DIN A4) 2
Consumption of paper produced using ECF virgin pulp(DIN A4) 2
Recycled paper consumption (DIN A4)
1 Data on Bankia, S.A.
2 Consolidated data up to 30 November 2015, estimating the consumption data for December
3 Paper supplied by manufacturers with FSC and PEFC certification, which guarantee materials used come from sustainably-managed
forests.
ENERGY CONSUMPTION 1
Electricity consumption
2
1S 2015 2
369,727
2014
369,051
Units
GJ
1 Data on Bankia, S.A.
2 Consolidated data up to 30 November 2015, estimating the consumption data for December
Climate change is one of the greatest challenges faced in the field of environmental
management. Inside the strategy to combat climate change, with the 2015-2019 Energy
Efficiency Plan provides continuity to Bankia commitment with clean energies.
With regard to renewable energies, Bankia has six solar photovoltaic arrays installed on
Valencia and in the Canary Islands, with a total capacity of 2,586.60 kW. In addition, efforts
to promote the use of video conferencing rather than making trips for meetings have
continued this year to minimise fuel consumption and reduce the emissions of air pollutants
associated with transport. In 2015, these services received 4,464 requests and were used by
79,431 people.
Geared towards continuous improvement and to have a holistic view, the protocol to
measure the carbon footprint was strengthened and a complete inventory of emission
sources was taken, expanding the scope of the information considered.
Each year, Bankia takes the Global Climate Change Report questionnaire from the CDP
(Carbon Disclosure Project), which analyses its climate change strategy and management.
In 2015, Bankia's result was 100 B (vs. the financial sector average of 84 C), making it
Spain's second best bank and a global benchmark for its inclusion in the CDP Climate
Disclosure Leadership Index 2015 (CDLI).
75
DECEMBER 2015
Bankia achieved the highest mark possible (100) for its corporate transparency with
respect to climate change, raising its score by three points from 2014. In this respect, the
completeness, accuracy and quality of the responses to the questionnaire are scored and
assessed.
Bankia was also awarded the second highest score (B) in the assessment of its
performance for actions undertaken to reduce carbon emissions and mitigate the risks to the
business arising from climate change. The level of actions taken is evaluated based on the
information provided in the questionnaire with respect to mitigation of and adaptation to
climate change, and transparency
14.- RESEARCH, DEVELOPMENT AND TECHNOLOGY
In 2015, investment to develop software focused on projects related to the Bank's
transformation: Redesign of Operating Processes and Multi-channel Transformation
The Redesign of Operating Processes Plan, which began in 2014 and runs through 2018,
pivoted in 2015 on “efficiency”: “operational rationalisation” to make branches more flexible
and decrease administrative red tape, "document management", to help comply with
regulatory requirements, and "multi-channeling", as a strategy to enable branches and
customers to interact through digital channels for documentation sharing and signing (e.g.
contracts, pre-contract documentation).
Process redesign in 2015 included: POS terminal and store management, outstanding
transactions management (at branches and online through the bills management service for
customers), contract arrangement of all products to attract customers (accounts and
deposits, mutual funds, pension plans and securities accounts), trusts and loan arrangement.
All included the new document management system and multi-channel transaction
signature.
A cornerstone of the process redesign is the centralisation of administrative tasks related
to product processing in the back office. Specifically, in the fourth quarter of 2015, a pilot
test began of new loan data input and check through a newly created company by the Bank
for this purpose, CSO. This required development of a set of tools which, together with the
process design itself, enables each end-to-end participant in the process (branches, CSO,
management companies and risk officers) to perform their duties: the back office system,
task trays, document processing and digitisation and the Extranet for Management
Companies.
In addition, centralised a contract digitisation model was implemented in a specialist,
external centre. In 2015, this centre processed around 600,000 documents received across
the commercial network, from individuals as well as business centres and private banking
branches.
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DECEMBER 2015
Under the framework of the “digital transformation”, the necessary adaptations were
made in 2015 to systems in order to scale the implementation of the remote managers
model, which began in 2014:
-
In 2015, the model was scaled for 100,000 customers.
-
Meanwhile, in July 2015, the Management Committee approved the Multi-channel
Transformation Plan, which establishes the road map, guidelines and the set of
initiatives behind Bankia's digital transformation in the 2016-2018 period. Work
began in the fourth quarter on detailing and programming the various lines of action:
o
Upgrade of digital channels (single portal, OIP, mobility, wall, self-assessment
tools, on boarding and enrolment)
o
Business intelligence (commercial sorting and big data system)
o
Digital marketing
o
Remote relationship
Beyond these two programmes, the rest of investment in 2015 was spread out among
projects on a number of fronts: business with individuals and companies, risks and
recoveries, regulations and technology
On the Business with Individuals and Companies front, the main projects focused on
insurance, marketing and foreign trade. In insurance, highlights include the redesign of the
insurance sales interface, which started in 2014. The aim is to replace the insurance sales
model, based initially on multiple portals and systems, with a unified model in Bankia's
systems. In 2015, commercial operations in life, liability, life-saving, accident, burial and
home insurance were integrated. In the second half of the year, the immediate P2P
payments project on Cecabank's Ealia mobile payments platform was initiated.
In business banking, developments focused on driving the operational capabilities of
foreign trade and currency at the Oficina Internet Empresas (business internet branch) and
the confirming. Also in 2015, exchange insurance activity was covered from the Oficina
Internet Empresas and a new supplier was integrated for quoting exchange insurance and
cash transactions at both the online and physical branches, while a series of improvements
were made in international reverse confirming (e.g. prompt payment, possibility of sharing
the margin and commission received with the holder of the funds, reverse confirming offers
with different prices under the same line).
In risk management and recovery of NPLs, the collection agency and lawyers
management project continued last year with the implementation of the lawsuit and
bankruptcy modules and the pre-litigation modules in the recovery tool. Elsewhere,
migration of the entire market risk platform, developed by Kondor, to MUREX began last
year. The migration project will continue in both 2016 and 2017. Other investments in risks
and recoveries went to the corporate guarantee system (evolution of the evaluation and
collateral procedure, and the alert generation and management system), the financial
77
DECEMBER 2015
programmes (implementation of specific finance processing and risk management operations
at corporate group level) and the migration systems (tool for analysing and signalling the
suitability of collateral and coverage for use in credit risk mitigation for calculating regulatory
capital).
Investment remained strong in the areas of regulatory reporting and compliance in the
light of increasingly stringent requirements of regulators and supervisors. Noteworthy were
technological developments for the implementation of the Bank of Spain FINREP statements,
the new CIRBE (Bank of Spain risk information centre), FATCA, EMIR, new anti-money
laundering regulations, the tax reform, the law on the promotion of business financing and
internet payments security regulations.
Meanwhile, in July 2015, in the wake of the new regulatory requirements arising with the
SSM, changes were made to the plan to build a corporate data repository (CDR) as part of the
IT system redesign project. Priority was placed first on the regulatory aspects (versus
analytical aspects as were being addressed) so that SSM vocabulary is introduced from the
outset as a cross-cutting and mandatory requirement.
In 2015 on the technological front, a host of medium-term projects focused on
upgrading operational systems and improving the evolution and maintenance capabilities
were undertaken (redesign of payment methods, the collection and payment system,
renewal of asset systems, and migration of SWIFT) with varying degrees of progress.
Looking at emerging trends in big data management and after the pilots for big data
technologies begun in 2014 to obtain target publics for sales campaigns were completed, in
2015, the Bank began building proprietary big data architecture based on a variety of suites
available in the market (Cloudera, Elasticsearch, MongoDB, etc.).
Lastly, in the area of IT infrastructure management, the operation and maintenance of
which were outsourced to WedoIT (central infrastructure) in 2013 and Telefónica
(communications infrastructure and workstation management) in 2014, respectively,
highlights in 2015 included consolidation of the initiatives to regulate the supplier
relationship models and the services management and governance model.
15.- FORECASTS AND BUSINESS OUTLOOK
The outlook for economic growth in 2016 is relatively upbeat, with prospects for
improvement more than a continuation of the current situation: global growth slightly ahead
of 2015 –acceleration expected for Europe and Japan should be offset by lower growth in the
US– and still too low levels of inflation in the main developed economies. Economic trends in
China, alongside divergent monetary policies applied by the Fed and the ECB, are likely to be
the main factors shaping financial markets. The Fed should continue its normalisation of
interest rates in 2016 –we expect 25bp rate hikes at every other meeting, taking them to
between 1.25% and 1.50% by the end of the year– while the ECB continues to expand its
78
DECEMBER 2015
balance sheet, with a chance of the monetary authority lowering deposits rates a touch
further, though this is not the most probable scenario.
In Spain, we see scope for the economic expansion to continue in 2016 thanks to positive
inertia from the resilience of consumption, investment and job creation. Accordingly, GDP
could remain at cruising speed at around 0.7%/0.8% quarterly, putting average growth for
the year at around 2.8%. At any rate, downside risks to the scenario have heightened due to
the weakness of emerging economies, the prolonged decline in crude prices and geopolitical,
as well as internal, tension owing to political uncertainty.
Even with the recovery expected to consolidate in Spain, the financial sector is still facing
some major challenges, as institutions' business margins in 2016 are likely to remain under
pressure due to the low level of interest rates and a still tenuous rebound in economic
activity. However, the growth path for the Spanish economy should spur new lending, which
in 2015 registered significant growth, especially in loans to households and SMEs.
Against this backdrop, in 2016, the Bankia Group will continue to work on consolidating
the business, with the overriding aim of becoming more competitive and profitable, and
expanding the more recurring business so it can generate capital organically. To do so, it will
focus targets on the following:
-
Focus on the customer and improve service quality, as one of the key strategies. In
this respect, one of the Bankia Group's top priorities in 2016 will be to strengthen the
loyalty of existing customers and lay foundations for Bankia to bolster their
relationship and loyalty.
-
Continue making improvements in profitability and maintain efficiency levels that are
among the highest in the Spanish financial sector.
-
Increase lending to self-employed professionals and businesses as a means of
boosting revenue and improving margins, with the objective of gaining market share
while controlling the cost of risk.
-
Continue reducing the stock of problem assets organically and through the sale of
NPL portfolios in order to free up liquidity and funds so new loans can be granted in
strategic segments.
To achieve these objectives, the Bankia Group is working on a new strategic plan for the
2016-2018 period, in which it will establish a new, medium-term dividend distribution policy
and new forecasts for value creation in the coming years. The Bankia Group will embark on
this new plan from a solid financial position, strong capitalisation and an ability to enhance
solvency organically and on a recurring basis, with a healthy efficiency ratio and a
considerable level of profitability. These strengths will be crucial for the Group in a period
that will still be challenging for the banking sector as interest rates look set to remain low
over the next two years, while competition should remain fierce.
79
DECEMBER 2015
16.- EVENTS AFTER THE REPORTING PERIOD
No other significant events took place between 31 December 2015 and the date of
authorisation for issue of Bankia Group's consolidated annual financial statements with a
significant impact on those financial statements.
17.- ANNUAL CORPORATE GOVERNANCE REPORT
In accordance with article 61 bis of the Spanish Securities Market Act (Ley del Mercado
de Valores), the 2015 Annual Corporate Governance Report was prepared. It forms part of
this director's report and is attached as a separate document. It includes a section on the
degree of compliance by the Bank with the corporate governance recommendations existing
in Spain.
80
This English version is a translation of the original in Spanish for information purposes
only. In case of a discrepancy, the Spanish original will prevail
APPENDIX I
ANNUAL CORPORATE GOVERNANCE REPORT
FOR LISTED COMPANIES
ISSUER’ S PARTICULARS
12/31/2015
END OF RELATIVE FINANCIAL YEAR
COMPANY TAX ID NO.
(CIF): A-14010342
Corporate Name: BANKIA, S.A.
Registered office: PINTOR SOROLLA 8, VALENCIA (46002)
1
ANNUAL CORPORATE GOVERNANCE REPORT FOR LISTED COMPANIES
A
OWNERSHIP STRUCTURE
A.1 Complete the following table on the company’s share capital:
Date of last
modification
04/22/2015
Share capital (€)
Number of shares
9,213,862,835.20
11,517,328,544
Number of
voting rights
11,517,328,544
Indicate whether different types of shares exist with different associated
rights:
Yes 
No X
A.2 List the direct and indirect holders of significant ownership interests in your
organisation at year-end, excluding Board members:
the shareholder
FONDO DE REESTRUCTURACIÓN
ORDENADA BANCARIA (FROB)
Number of
Number of indirect
% of total voting
direct voting rights
voting rights
rigths
0
7.398.001.729
64,23%
Name or corporate name
Through: Name or corporate name of
Number of voting
of indirect
direct shareholder
rights
shareholder
FONDO DE REESTRUCTURACIÓN
ORDENADA BANCARIA (FROB)
BFA, TENEDORA DE ACCIONES S.A.U
7.398.001.729
Indicate the most significant movements in the shareholding structure during
the financial year:
Personal or
corporate name of
shareholder
Transaction
Description of
date
transaction
CAPITAL RESEARCH
AND MANAGEMENT
COMPANY
02/05/2015
Fell to below 5%
of share capital
CAPITAL RESEARCH
AND MANAGEMENT
COMPANY
02/26/2015
Fell to below 3%
of share capital
2
A.3 Complete the following tables detailing the members of the Board of
directors who own voting shares in the company:
Name or corporate name of director
Number of direct
Number of indirect
% of total
voting rights
voting rights
voting rigths
DON JOSÉ IGNACIO GOIRIGOLZARRI
TELLAECHE
DON JOSÉ SEVILLA ÁLVAREZ
DON ANTONIO ORTEGA PARRA
DON JOAQUÍN AYUSO GARCÍA
DON FRANCISCO JAVIER CAMPO GARCÍA
DOÑA EVA CASTILLO SANZ
DON JORGE COSMEN MENÉNDEZCASTAÑEDO
DON JOSÉ LUIS FEITO HIGUERUELA
DON FERNANDO FERNÁNDEZ MÉNDEZ
DE ANDÉS
DON ALFREDO LAFITA PARDO
DON ÁLVARO RENGIFO ABBAD
Name or corporate name of indirect
1.036.680
0
0,01%
220.050
300.000
220.060
201.260
100.000
0
0
0
0
0
0,00%
0,00%
0,00%
0,00%
0,00%
86
121.075
0,00%
197.808
0
0,00%
65.434
0
0,00%
217.060
72.950
0
0
0,00%
0,00%
Through: Name or corporate name of
Number of voting
direct shareholder
rights
shareholder
DON JORGE COSMEN MENÉNDEZCASTAÑEDO
QUINTOJORGE S.L.
121.075
% total of voting rights held by board of directors
0,02 %
Complete the following tables on members of the company’s Board of
Directors that hold rights over company shares:
A.4 Indicate, as applicable, any family, commercial, contractual or corporate
relationships between owners of significant shareholdings, insofar as these
are known by the company, unless they are insignificant or arise from
ordinary trading or exchange activities:
A.5
Indicate, as applicable, any commercial, contractual or corporate
relationships between owners of significant shareholdings, and the company
and/or its group, unless they are insignificant or arise from ordinary trading
or exchange activities:
3
Personal or corporate name
Type of
of related party
relationship
BFA, TENEDORA DE
ACCIONES, S.A.U.
CONTRACTUAL
BANKIA, S.A.
BFA, TENEDORA DE
ACCIONES, S.A.U.
CONTRACTUAL
BANKIA, S.A.
BFA, TENEDORA DE
ACCIONES, S.A.U.
CONTRACTUAL
BANKIA, S.A.
BFA, TENEDORA DE
ACCIONES, S.A.U.
Cost-sharing agreement for lawsuits
related to preferred participating securities
and subordinated bonds.
CONTRACTUAL
Agreement
establishing an access
mechanism allowing BFA, through
Bankia, to avail of the liquidity and
funding mechanisms set up by the ECB
for credit institutions, as well as private
deals inherent in the business of credit
institutions.
CONTRACTUAL
Cost-sharing agreement
related to the IPO.
CONTRACTUAL
Master Agreement between BFA and
Bankia. Article 11 (2) of the CRR, to
govern the relations between BFA and
Bankia with respect to defining and
implementing the necessary mechanisms
and procedures so that Bankia can comply
with the obligations laid down in 11.2 of
Regulation (EU) No 575/2013 and, in
particular, verify that BFA complies with
the capital requirements imposed in
applicable legislation.
BANKIA, S.A.
BFA, TENEDORA DE
ACCIONES, S.A.U.
Framework agreement governing the
relations between BFA, Tenedora de
Acciónes S.A.U. (BFA) and Bankia,
setting out the mechanisms necessary to,
within the legal limits, ensure at all times
an appropriate level of coordination
between Bankia and BFA and group
companies, and to manage and minimise
any situations that may give rise to
potential conflicts of interest between the
two entities, while ensuring due
observance and protection of the rest of
the shareholders in an atmosphere of
transparency in relations between the two
entities.
Service level agreement, development of
the framework agreement, enabling BFA
to manage its activity adequately using
Bankia’s human and material resources to
prevent duplications.
Guarantee line in favour of BFA
amounting to EUR 14 million to back the
limits on guarantee lines and temporary
guarantees issued in respect of liabilities
from administrative proceedings requiring
the guarantee of a financial institutions, in
addition to other types of claims
CONTRACTUAL
BANKIA, S.A.
BFA, TENEDORA DE
ACCIONES, S.A.U.
Brief description
for
lawsuits
BANKIA, S.A.
BFA, TENEDORA DE
ACCIONES, S.A.U.
BANKIA, S.A.
A.6 Indicate whether the company has been notified of any shareholders’
agreements affecting the company in accordance with Article 530 and 531 of
the Corporations Act (“LSC”). If so, provide a brief description and list the
shareholders bound by such agreement:
Yes 
4
No X
Indicate whether the company is aware of the existence of any concerted
actions among its shareholders. Give a brief description as applicable:
Yes 
No X
Expressly indicate any amendments to or termination of such agreements or
concerted actions during the year:
Not applicable.
A.7 Indicate whether any individual or bodies corporate currently exercise control
over the company pursuant to Article 5 of the Spanish Securities Market Act
(Ley del Mercado de Valores). If so, please identify:
No 
Yes X
BFA, TENEDORA DE ACCIONES, S.A.U.
Comments
At 31 December 2015, BFA, Tenedora de Acciones, S.A.U. held shares representing 64.23% of
Bankia, S.A.'s share capital. Fondo de Reestructuración Ordenada Bancaria (FROB) held shares
representing 100% of BFA, Tenedora de Acciones, S.A.U.'s share capital.
A.8 Complete the following tables on the company’s treasury stock:
At financial year-end:
Number of direct shares
Number of indirect shares (*)
% of total capital stock
39,867,346
0
0.35%
(*) Held through:
Give details of any significant changes during the year, in accordance with
Royal Decree 1362/2007:
Not applicable.
A.9 Give details of the applicable conditions and time periods governing any
resolutions of the General Shareholders’ Meeting to issue, buy back and/or
transfer treasury stock.
On 22 April 2015, a resolution was adopted at the General Shareholders’ Meeting of Bankia, S.A. to
grant authorisation to the Board of directors for the derivative acquisition of treasury stock in
accordance with the limits and requirements established in the Corporations Act, expressly authorising
it, if applicable, to reduce share capital on one or more occasions in order to proceed with redemption
of the own shares acquired and delegation of authority to implement this resolution.
5
Authorisation for the Board of Directors, in the broadest terms possible, to engage in the derivative
acquisition of treasury stock of Bankia, directly or through companies in its Group, subject to the
following limits and requirements:
a. Forms of acquisition: acquisition by way of purchase, by way of any other "intervivos" act for
consideration or any other transaction permitted by law, including out of profits for the fiscal year
and/or unrestricted reserves.
b. Maximum number of shares to be acquired: the acquisitions may be made, from time to time, on
one or more occasions, up to the maximum permitted by law.
c. The price or consideration will vary from a minimum equal to the lesser of par value or 75% of the
stock market price on the date of acquisition, and a maximum equal to up to 5% more than the
maximum price achieved by the shares in free trading (including the block market) in the Continuous
Market session on the date of acquisition.
d. Duration of the authorisation: five (5) years from the date of this resolution.
The conduct of these transactions also will be in compliance with the rules in this regard contained in
the Bankia Internal Code of Conduct.
To authorise the Board of Directors so that it may sell or redeem the shares acquired or use the
treasury stock acquired, in whole or in part, for implementation of remuneration schemes that have
delivery of shares or option rights on shares as their purpose or result therein, in accordance with the
provisions of section 1 a) of article 146 of the Corporations Act.
This delegation of authority to the Board of Directors replaces the delegation granted by the General
Meeting of Shareholders of the Company held on 21 March 2014, which will therefore be rendered
void.
The Board of Directors is authorised, on the broadest terms, to use the authorisation covered by this
resolution for full implementation and development thereof, being entitled to delegate this authority,
without distinction, to the Executive Chairman, to any of the directors, to the General Secretary and to
the Board or any other person the Board expressly authorises for this purpose, with such breadth as it
deems to be appropriate.
A.9 Bis Estimated free float
%
Estimated free float
35.43%
A.10 Give details of any restriction on the transfer of securities or voting rights.
Indicate, in particular, the existence of any restrictions on the takeover of the
company by means of share purchases on the market.
Yes X
No 
Description of legal restrictions
There are no restrictions on the transfer of securities of the entity except for legal restrictions.
Pursuant to article 17 of Law 10/2014 of 26 June 2014, on Governance, Supervision and Solvency
of Credit Institutions any natural person or body corporate which, acting alone or in collaboration
with others, decides to directly or indirectly acquire a significant share in a Spanish credit
institution or directly or indirectly increase its interest therein whereby the percentage of voting
rights or capital held therein equals or exceeds 20%, 30% or 50%, or where control of the credit
institution is gained through the acquisition, must first notify the Bank of Spain, indicating the
amount of the expected investment and any other information required by regulations. This
information must be relevant for the evaluation, and proportional and appropriate to the nature of
the potential acquirer and the proposed acquisition.
6
There are no legal or bylaw restrictions on the exercise of voting rights. Article 32.2 of the Bylaws
states that those attending the general meeting will be entitled to one vote for each share.
A.11 Indicate whether the General Shareholders’ Meeting has agreed to take
neutralisation measures to prevent public takeovers bid by virtue of the
provisions of Act 6/2007.
Yes 
No X
If applicable, explain the measures adopted and the terms under which
these restrictions may be lifted:
A.12 Indicate whether the company has issued securities not traded in a regulated
market of the European Union.
Yes 
No X
If applicable, indicate the different types of shares, and the rights and
obligations they confer.
B
GENERAL SHAREHOLDERS’ MEETING
B.1 Indicate and detail the differences, if any, between the required quorum and
that set forth in the Corporations Act (LSC) for convening the General
Shareholders’ Meeting.
Yes 
No X
B.2 Indicate and, as applicable, describe any differences between the
company’s system of adopting corporate resolutions and the framework
established in the LSC:
Yes 
No X
Detail differences with regards to the system contemplated in the LSC.
B.3 Indicate the rules governing amendments to the company’s Bylaws. In
particular, indicate the majorities required to amend the Bylaws and, if
applicable, the rules for protecting shareholders’ rights when changing the
Bylaws .
The rules governing amendments to the Company's Bylaws are those set forth in the Corporations Act.
Any amendment to the Bylaws is the responsibility of the General Meeting of Shareholders and will
require, at first call, shareholders holding at least fifty percent of the share capital conferring voting
rights to be present in person or by proxy. At second call, shareholders representing twenty-five
percent of the share capital shall be sufficient.
7
B.4 Indicate the attendance figures for General Shareholders’ Meetings held
during the current and previous year:
Attendance data
Date of
General
Shareholders’
% of absentee voting
% in person
% by proxy
Electronic
voting
Other
Total
Meeting
03/21/2014
61.30%
8.29%
0.00%
0.16%
69.75%
04/22/2015
63.44%
12.42%
0.00%
0.80%
76.66%
B.5 Indicate whether there are any restrictions in the Bylaws establishing a
minimum number of shares needed to attend the General Shareholders’
Meetings:
Yes X
No 
Number of shares required to attend the General
500
Shareholders’ Meeting
B.6 SECTION REMOVED
B.7 Indicate the address of and how to access the company’s website to obtain
corporate governance and General Shareholders’ Meeting information that
should be made available to the shareholders through the Company’s
website.
In accordance with article 52 of the Bylaws of Bankia, S.A., the Company will have, for the purposes
envisaged in the applicable, laws, a website (www.bankia.com) through which its shareholders,
investors and the market will be generally advised of material or significant matters related to the
Company, and the notices legally required to be published.
On the web www.bankia.com website, upon call of general meetings, there must be an electronic
shareholder forum, to which both individual shareholders and such voluntary associations as they may
establish on the terms contemplated by law may have appropriately secure access, to facilitate their
communication prior to the holding of general meetings.
In this respect, the www.bankia.com home page includes a menu entitled “Shareholders and Investors”
with a "Corporate governance" section containing information on the entity's corporate governance.
This section contains a specific sub-section providing access to the entity’s annual corporate
governance reports, and one providing access to documentation regarding the general meeting of
shareholders.
The Company’s website is available in Spanish and English.
8
C
STRUCTURE OF COMPANY MANAGEMENT
C.1
Board of Directors
C.1.1 Indicate the maximum and minimum number of Board members
stipulated in the company Bylaws:
Maximum number of Board members
15
Minimum number of Board members
5
C.1.2
Complete the following table with Board members details:
Personal or corporate name of
director
Representative
Category of
Board member
Seat on the
Board
Date of first
appointment
Date of last
appointment
Election
procedure
MR. JOSÉ IGNACIO
GOIRIGOLZARRI TELLAECHE
-
EXECUTIVE
05/09/2012
05/09/2012
CO-OPTION
MR. JOSÉ SEVILLA ÁLVAREZ
-
MR. ANTONIO ORTEGA PARRA
MR. JOAQUÍN AYUSO GARCÍA
MR. FRANCISCO JAVIER
CAMPO GARCÍA
MRS. EVA CASTILLO SANZ
MR. JORGE COSMEN
MENÉNDEZ-CASTAÑEDO
MR. JOSÉ LUIS FEITO
HIGUERUELA
MR. FERNANDO FERNÁNDEZ
MÉNDEZ DE ANDÉS
MR. ALFREDO LAFITA PARDO
MR. ÁLVARO RENGIFO ABBAD
-
CHIEF
EXECUTIVE
OFFICER
EXECUTIVE
DIRECTOR
INDEPENDENT
DIRECTOR
05/25/2012
05/25/2012
CO-OPTION
06/25/2012
05/25/2012
06/25/2012
05/25/2012
CO-OPTION
CO-OPTION
-
INDEPENDENT
DIRECTOR
05/25/2012
05/25/2012
CO-OPTION
-
INDEPENDENT
DIRECTOR
05/25/2012
05/25/2012
CO-OPTION
-
INDEPENDENT
DIRECTOR
05/25/2012
05/25/2012
CO-OPTION
-
INDEPENDENT
DIRECTOR
05/25/2012
05/25/2012
CO-OPTION
-
INDEPENDENT
DIRECTOR
05/25/2012
05/25/2012
CO-OPTION
-
INDEPENDENT
INDEPENDENT
DIRECTOR
DIRECTOR
06/08/2012
06/08/2012
06/08/2012
06/08/2012
CO-OPTION
CO-OPTION
CHAIRMAN
EXECUTIVE
Total number of Board Members
11
Indicate the removals/dismissals that occurred on the Board of
directors during the period being reported:
C.1.3 Complete the following tables on the Board members and their different
conditions:
EXECUTIVE BOARD MEMBERS
Personal or corporate name of director
MR. JOSÉ IGNACIO GOIRIGOLZARRI
TELLAECHE
9
Position within the company structure
EXECUTIVE CHAIRMAN
CHIEF EXECUTIVE OFFICER
EXECUTIVE DIRECTOR, GENERAL
MR. ANTONIO ORTEGA PARRA
MANAGER OF PERSONNEL, RESOURCES
AND TECHNOLOGY
Total number of executive Board
3
members
Total % of Board
27.27%
EXTERNAL PROPRIETARY DIRECTORS
EXTERNAL INDEPENDENT DIRECTORS
Profile
director
He holds a degree in Road, Canal and Port Engineering from
the Universidad Politécnica de Madrid. He is member of
Bankia's Board of Directors, Chairman of the Appointments
Committee and member of Remuneration Committee and of
the Audit and Compliance Committee.
He is also the Deputy Chairman of Ferrovial, where he has
built his professional career, and is a member of its executive
committee. He is Chairman of Autopista del Sol,
Concesionaria Española and he holds directorships at National
Express Group PLC and Hispania Activos Inmobiliarios. He
is a member of the Executive Board of Círculo de
Empresarios and sits on the Advisory Board of the Benjamin
Franklin Institute at the Universidad de Alcalá de Henares of
Madrid.
In addition, he is a member of the AT Kearney Advisory
Council.
He holds a degree in industrial engineering from the
Universidad Politécnica de Madrid. He is a member of
Bankia's Board of Directors, Chairman of the Risk Advisory
Committee and member of the Appointments Committee and
the Board Risk Committee.
MR. FRANCISCO JAVIER CAMPO
GARCÍA
He is Chairman of Cortefiel, Chairman of Asociación
Española del Gran Consumo (AECOC) and a Director of
Meliá Hotels International. He is also a member of the AT
Kearney Advisory Council.
He began his professional career at Arthur Andersen, was
worldwide chairman of the Día Group and a member of the
Worldwide Executive Committee of the Carrefour Group.
She holds a degree in Law and Business Studies from the
Universidad Pontificia de Comillas (E-3) of Madrid. She has
been a member of Bankia's Board of directors since May 2012
and the Chairman of the Remuneration Committee and
member of the Board Risk Committee and of the Risk
Advisory Committee.
She is a member of the Board of directors of Telefónica, S.A.,
the Chairman of the Supervisory Board of Telefónica
Deutschland and counsellor of Visa Europe.
She is a member of the Board of Trustees of the ComillasICAI Foundation, a member of Patronato de la Fundación
Telefónica and the Patronato de Entreculturas.
She previously worked at Merrill Lynch, where she chaired its
Spanish subsidiary.
10
He holds a degree in Business Administration and an MBAI
Master from the Instituto de Empresa. He is a member of
Bankia's Board of Directors and he is also member of the
Audit and Compliance Committee and Remuneration
Committee.
MR. JORGE COSMEN MENÉNDEZCASTAÑEDO
He is the Chairman of ALSA, Co-chairman of National
Express Group PLC, and is a member of the Spain China
Council Foundation and of Fundación Integra.
He has previously worked in companies in the tourism,
banking and international trade sectors in Spain, Switzerland,
Hong Kong and China.
He holds a degree in Economics and Business Studies from
the Complutense University of Madrid. He has been a member
of Bankia's Board of Directors and the Audit and Compliance
Committee since June 2012.
MR. JOSÉ LUIS FEITO HIGUERUELA
Qualified as a State Trade Expert and Economist and former
ambassador of the Kingdom of Spain, at present he is
chairman of the economic and financial policy committee of
the CEOE and is Chairman of the Instituto de Estudios
Económicos (IEE). He is also an independent director of Red
Eléctrica Corporación.
He previously worked at the Ministry of Economy, the
International Monetary Fund, OCDE, the Bank of Spain and
AB Asesores Bursátiles.
He holds a Doctorate in Economics. He is a member of
Bankia's Board of Directors and of the Board Risk Committee
and the Risk Advisory Committee. He has been member of
BFA, Tenedora de Acciones, S.A.U.’s Board of Directors and
member of its Audit and Compliance Committee and
Appointments Committee.
MÉNDEZ DE ANDÉS
Professor of Economy at IE Business School
specialised/skilled
in
Macroeconomics,
International
Economy and Financial Stability and a director of Red
Eléctrica.
He has been the IMF's main economist and the chief
economist and head of economic research at Banco Central
Hispano and Banco Santander.
A state attorney, he is a member of Bankia's Board of
directors was recently appointed as Lead Independent Director
on October 2013. Chairman of the Audit and Compliance
Committee since June 2012, appointed financial expert for
this committee, and is a member of the Appointments
Committee and the Remuneration Committee of the company.
He has been a director at BFA, Tenedora de Acciones, S.A.U.
and a member of its Audit and Compliance Committee.
He is also a Director-secretary of the Juan March Foundation
and sits on the Board of Trustees of the Foundation for Aid
against Drug Addition.
He was formerly the Executive Vice Chairman of Banca
March, chairman of Banco de Asturias and Banco NatWest
España, vice chairman of Banco Guipuzcoano, and held
directorships at Signet Bank of Virginia, Corporación
Financiera Alba, Philip Morris España, FG de Inversiones
Bursátiles, Larios and the Zeltia Group, as well as director and
founder of the Cambio 16 Group.
MR. ALVARO RENGIFO ABBAD
He holds a degree in Economics and Business Studies from
CUNEF. He is a member of Bankia's Board of Directors and
the Appointments Committee.
He is a member of the State Corps of Trade Experts and
11
Economists and is the Chairman of the Bombardier Group in
Spain. He is also a trustee of the AMREF Foundation – Flying
Doctors of Africa and a member of the Advisory Board of the
Instituto Superior de Negociación at the Universidad
Francisco de Vitoria.
He was formerly the general manager of international trade at
the Isolux Corsán Group, general manager for international
operations at the Leche Pascual Group and executive director
and director of the Inter-American Development Bank.
Total number of independent
8
directors
% of the Board
72.73%
Indicate whether any director classified as independent receives any
amount or benefit from the company or from his/her own group, in
any concept other than the remuneration as a Board member, or
whether he/she maintains or has maintained a business relation with
the company or with any company within its group during the last
financial year, in his/her own name or as significant shareholder,
Board member or top executive of a company that maintains or has
maintained such relationship.
Yes
As the case may be, the Board shall include a statement outlining the
reasons why it deems that said Board member can perform his/her
duties in the capacity as independent Board member.
Personal or
corporate name of
Description of the
relationship
director
MR. JOAQUÍN AYUSO
GARCÍA
Financing agreements
between Bankia and the
Ferrovial Group and Service
agreements between Bankia
and the Group Alsa (Group
National Express).
12
Reasons
The Board of Directors of
Bankia, S.A., based on a report
by the Appointments
Committee considers that
Joaquín Ayuso García, member
of the Board of Directors of
Ferrovial, S.A, Autopista del
Sol Concesionaria Española
S.A. -AUSOL- (Ferrovial
Group) and National Express
Group PLC, can continue to be
classified as an independent
director of Bankia S.A. despite
the commercial relations
between Bankia, S.A. and the
Ferrovial Group and Alsa
(National Express Group),
given (i) the ordinary nature of
the relations, with business
conducted under general market
terms; (ii) Bankia, S.A.’s
generally rigorous procedures
MR. FRANCISCO
JAVIER CAMPO
GARCÍA
MR. EVA CASTILLO
SANZ
Groups Cortefiel, Meliá
Hotels International, Food
Service Projects and Group
Empresarial Palacios
Alimentación.
Financing and service
and Telefonica Group.
13
for engaging construction and
services, which were applied in
this case; (iii) the nonintervention by this director in
the negotiations and decisionmaking processes of either
party; and (iv) the express
intervention of the Board of
directors and the Audit and
Compliance Committee given
the related-party nature of the
relationship.
Bankia, S.A., based on report
by the Appointments
Committee considers that Mr.
Francisco Javier Campo García,
member of the Board of
Directors of Cortefiel, Meliá
Hotels International, Food and
Group Empresarial Palacios
Alimentación (until
27.06.2014), can continue to be
classified as an independent
director of Bankia, S.A. and
Cortefiel, Meliá Hotels
International, Food Services
Projects and Group Empresarial
Palacios Alimentación, and the
companies of the Group, given
(i) the ordinary nature of the
relations, with business
terms;(ii) Bankia, S.A.’s
party.
by the Appointments
Committee considers that Mrs.
Eva Castillo Sanz, member of
the Board of Directors of
Telefónica, S.A., can continue
to be classified as an
independent director of Bankia,
S.A. despite the commercial
relations between Bankia. and
Telefónica S.A or group
companies, given (i) the
ordinary nature of the relations,
with business conducted under
general market terms; (ii)
Bankia, S.A.’s generally
rigorous procedures for
engaging construction and
MR. JORGE COSMEN
MENÉNDEZCASTAÑEDO
ALSA Group. (Group
National Express).
HIGUERUELA
and Mundigestión.
MR. ALVARO
RENGIFO ABBAD
and Bombardier European
Holdings S.L.U. and the
ownership asset operation
(mortgage loan).
14
Directors and the Audit and
relationship.
by the Appointments
Committee, considers that Mr.
Jorge Cosmen MenéndezCastañedo, a member of the
Board of Directors of the
National Express Group PLC, ,
can continue to be classified as
an independent director of
Bankia, S.A. despite the
commercial relations between
Bankia, S.A. and the ALSA
Group (group National
Express), given (i) the ordinary
nature of the relations, with
business conducted under
general market terms; (ii)
Bankia, S.A.’s generally
rigorous procedures for
engaging construction and
Directors and the Audit and
relationship.
by the Appointment Committee
considers that Mr. José Luis
Feito Higueruela, significant
shareholder of Mundigestión,
can continue to be classified as
an independent director of
Bankia, S.A. despite the
commercial relations between
Bankia, S.A. and Mundigestión,
party.
by the Appointment Committee
considers that Mr. Alvaro
Rengifo Abbad, executive
chairman of Bombardier
European Holdings S.L.U., can
continue to be classified as an
independent director of Bankia,
S.A. despite the commercial
relations between Bankia, S.A.
and Bombardier European
Holdings S.L.U., and between
Bankia, S.A. and the director,
party.
OTHER EXTERNAL BOARD MEMBERS
Indicate the variations, if applicable, that occurred during the period
in the typology of each Board member:
C.1.4 Complete the following table with the information on the number of
female Board members for the last four financial years and their
category:
Number of female Board members
% of total of Board members in each
typology
Year
Year
Year
Year
Year
Year
Year
Year
2015
0
2014
0
2013
0
2012
0
2015
0.00%
2014
0.00%
2013
0.00%
2012
0.00%
Proprietary
0
0
0
0
0.00%
0.00%
0.00%
0.00%
Independent
1
1
1
1
12.50%
12.50%
12.50%
12.50%
0
0
0
0
0.00%
0.00%
0.00%
0.00%
1
1
1
1
9.09%
9.09%
10.00%
10.00%
Executive
Other
external
Total:
C.1.5 Explain the measures, if applicable, taken by the company to ensure
the inclusion of females onto the Board of Directors in an amount that
may ensure the male/female equilibrium.
Explanation of the measures
To ensure a sufficient number of female directors on the Board of Directors to guarantee an
even balance between men and women, the Board of Directors, at the proposal of the
Appointments and Remunerations Committee, approved at its meeting of 29 August 2012,
and its meeting of 22 October 2014 an amendment to article 15 of the Board of Directors
Regulations, as explained in the following section (C.1.6.).
In addition, during 2015 article 8 of the Board of Directors Regulations was amended to
ensure that the selection procedures for directors encourage diversity of experience and
knowledge, facilitate the selection of female directors and, in general, are not subject to
15
implicit biases that may lead to discrimination.
Moreover, the director selection policy approved in 2015, which forms part of Bankia's
corporate governance system, stipulates that selection procedures shall avoid any implicit
bias that could imply discrimination and, in this respect, it shall not establish any
requirements and/or apply any criteria that in any way could result in any type of
discrimination.
C.1.6 Explain the measures taken, if applicable, by the Appointments
Committee to ensure that the selection processes are not subject to
implicit bias that would make it difficult to select female directors, and
whether the company makes a conscious effort to search for female
candidates who have the required profile:
Explanation of the measures
Article 15 of the Board of Directors Regulations stipulates that the Appointments
Committee shall identify candidates and make recommendations and proposals to the
Board of directors for the appointment of independent directors by co-option or, if
applicable, by vote of the shareholders in general meeting, and make proposals for the reelection or removal of such directors by the General Meeting.
The Appointments Committee's tasks include setting a target for the level of representation
of the less well represented gender on the Board of directors and draw up guidelines on
how to increase the number of people of the less well represented gender so as to meet that
target. The committee will also take steps to ensure that the selection procedures used to fill
vacancies do not have implicit biases that prevent the selection of people of the less well
represented gender.
In addition, article 8 of the Board of Directors Regulations was amended to ensure
that the selection procedures for directors encourage diversity of experience and
knowledge, facilitate the selection of female directors and, in general, are not subject to
implicit biases that may lead to discrimination.
Moreover, the director selection policy approved in 2015, which forms part of Bankia's
corporate governance system, stipulates the selection procedures shall avoid any implicit
bias that could imply discrimination and, in this respect, it shall not establish any
requirements and/or apply any criteria that in any way could result in any type of
discrimination.
If albeit the measures implemented, as the case may be, the number
of female Board members is still scarce or non-existent, explain the
reasons to justify such scarcity:
Explanation of reasons
Article 15 of the Board of Directors Regulations stipulates that the Appointment Committee
is responsible for setting a target for the level of representation of the less well represented
gender on the Board of directors and draw up guidelines on how to increase the number of
people of the less well represented gender so as to meet that target. The committee will also
take steps to ensure that the selection procedures used to fill vacancies do not have implicit
biases that prevent the selection of people of the less well represented gender.
16
C.1.6.bis
Explain the conclusions of the Appointments Committee on the
verifiability of the director selection policy. In particular, explain how
this policy pursues the goal of having at least 30% of total Board
places occupied by women directors before the year 2020.
On 26 November 2015, the Board of Directors approved the Director Selection Policy.
As set forth in the Director Selection Policy and pursuant to the Board of Directors
Regulations, the Appointments Committee is the body responsible for periodically reviewing
the policy, submitting to the Board of Directors its findings or making the proposals for
amendments or improvements it deems appropriate. The Appointments Committee is also
responsible for running an annual check, based on the report submitted to the Personnel,
Resources and Technology Department, on compliance with the policy.
A review of compliance will be conducted one year following approval of the Policy.
The Company shall report on compliance with the Director Selection Policy in the Company's
Annual Corporate Governance Report.
C.1.7 Explain how shareholders with significant shares are represented on
the Board.
There are no proprietary directors on Bankia, S.A.’s Board of Directors. Of the 11 directors
making up the Board, three are executive and eight are independent.
At 31 December 2015, BFA, Tenedora de Acciones S.A.U (BFA) held 7,398,001,729 shares
of Bankia, representing 64.23% of its share capital.
Since 27 June 2012, BFA is wholly owned by Fondo de Reestructuración Ordenada Bancaria
(FROB), an institution under public law with its own legal personality and full public and
private capacity to pursue its objectives, which is to manage credit institution restructuring
and resolution processes.
At any rate, at the General Meeting of Shareholders of Bankia, S.A. held on 29 June 2012, on
item 3 of the Agenda, the proposed appointments and ratification of directors were approved
with 95% votes in favour of all valid votes and abstentions, equivalent to 57% of Bankia,
S.A.’s share capital at the date of the meeting.
C.1.8 Explain, if applicable, the reasons why proprietary members were
appointed upon the request of shareholders with stakes amounting to
less than 3 % of the share capital:
Detail any failure to address formal requests for Board representation
from shareholders with stakes equal to or exceeding that of others at
whose request proprietary members were appointed. If so, explain
the reasons why the request was not entertained:
Yes 
No X
C.1.9 Indicate whether any Board member has resigned from his/her post
before the end of his/her term of office, whether reasons were given
to the Board and how, and, if in writing to the entire Board, at least
explain the reasons given by the Board member:
17
C.1.10 Indicate, if any, the powers delegated by any Chief Executive
Officers:
Personal or corporate name of director
MR. JOSÉ IGNACIO GOIRIGOLZARRI
TELLAECHE
Brief description
The Chairman of the Board of
Directors has broad powers of
representation and administration in
accordance with the characteristics and
requirements of the position of
executive chairman of the entity, with
all authority vested in him except for
those that cannot be delegated by law
or the Bylaws.
Mr. Sevilla has been delegated jointly
and severally all authorities than can
be delegated to him by law or the
Bylaws in the areas of financial and
risk management, financial control and
internal audit, as well as real estate and
investees.
C.1.11 Identify, if any, the Board members that hold administrator or
directive positions in other companies making up the group of
companies listed on the stock market:
C.1.12 List if any company Board members who likewise sit on the Boards
of other non-group entities that are listed on the Spanish Stock
Exchange, of which the company is aware:
Corporate name of the
of the Board member
listed company
FERROVIAL, S.A.
NATIONAL EXPRESS
GROUP, PLC.
HISPANIA ACTIVOS
INMOBILIARIOS, S.A.
MELIÁ
HOTELS
INTERNATIONAL,
S.A.
TELEFÓNICA, S.A.
TELEFONICA
DEUTSCHLAND
GMBH
MR. JOAQUÍN AYUSO
GARCÍA
MR.
JAVIER
GARCÍA
FRANCISCO
CAMPO
MRS. EVA CASTILLO
SANZ
MR. JORGE COSMEN
MENÉNDEZCASTAÑEDO
HIGUERUELA
MR.
FERNANDO
FERNÁNDEZ MÉNDEZ
DE ANDÉS
18
Post or duties
DEPUTY
CHAIRMAN
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
CHAIRMAN
NATIONAL EXPRESS
GROUP, PLC.
CO-CHAIRMAN
RED
ELÉCTRICA
CORPORACIÓN, S.A.
DIRECTOR
RED
ELÉCTRICA
CORPORACIÓN, S.A.
DIRECTOR
C.1.13 Indicate and, where appropriate, explain whether the Board
regulations establishes rules about the number of Boards on which
its Directors may sit:
Yes X
No 
Explanation of rules
Bankia, S.A., as a credit institution, is subject to the restrictions contained in Law 10/2014, of
26 June, on the regulation, supervision and solvency of credit institutions, which sets out the
rules for incompatibilities and restrictions to which members of the Board of directors and
general managers or similar of a credit institution are subject, and which regulates the number
of Boards on which the directors of credit institutions may sit at the same time.
In this respect, article 8 of the Board of Directors Regulations states that the number of
Boards on which directors may sit at the same time shall not exceed that set out in banking
and company laws applicable at any given time.
C.1.14
SECTION REMOVED
C.1.15 Indicate the total remuneration of the Board of Directors in the year:
Comprehensive remuneration of the Board of Directors (in
thousands of Euros)
Amount of the comprehensive remuneration for the concept of
accumulated pension entitlements (in thousands of Euros)
Total remuneration of the Board of Directors (in thousands of
2,300
0
1,390
Euros)
C.1.16 Identify any senior management staff that is not also an executive
Board member, and indicate the total remunerations paid to them
staff during the financial year:
MRS. AMALIA BLANCO LUCAS
MR. GONZALO ALCUBILLA
POVEDANO
MR. FERNANDO SOBRINI ABURTO
MR. MIGUEL CRESPO RODRÍGUEZ
MR. IÑAKI AZAOLA ONAINDIA
Post
DEPUTY GENERAL DIRECTOR OF
COMMUNICATION AND EXTERNAL
RELATIONS
DEPUTY GENERAL MANAGER OF
BUSINESS BANKING
DEPUTY GENERAL MANAGER
ATTACHED TO RETAIL BANKING
GENERAL SECRETARY
INTERNAL AUDIT CORPORATE
DIRECTOR
Total remuneration for senior executives (in
thousands of Euros)
19
2,768
C.1.17 Identify, if any, the members of the Board of Directors who are
likewise members of the Board of Directors of companies that hold
significant shares and/or group entities:
Personal or corporate
Corporate name of
name of Board member
MR.
JOSÉ
IGNACIO
GOIRIGOLZARRI
TELLAECHE
MR.
JOSÉ
SEVILLA
ÁLVAREZ
MR. ANTONIO ORTEGA
PARRA
significant shareholder
Post
BFA,
TENEDORA
ACCIONES, S.A.U.
DE
BFA,
TENEDORA
ACCIONES, S.A.U.
BFA,
TENEDORA
ACCIONES, S.A.U.
DE
DE
CHAIRMAN
DIRECTOR
DIRECTOR
Provide details of any relevant relations, as the case may be, other
than those contemplated in the previous section, between members
of the Board of Directors and significant shareholders and/or group
entities:
C.1.18 Indicate whether any of the rules and regulations of the Board were
amended during the financial year:
Yes X
No 
Description of amendments
The Board of Directors, based on favourable report of the Audit and Compliance
Committee, agreed on 23 February 2015 to amend the following articles of the Board of
Directors Regulations: article 4 (General supervisory function and other authority); article 8
(Kinds of directors); article 9 (The chairman of the Board); article 11 (The secretary of the
Board); article 13 (The executive committee); article 14 (The Audit and Compliance
Committee); article 15 (The appointments committee); article 15 bis (The Remuneration
Committee); article 16 (The risk advisory committee); article 16 bis (The Board risk
committee); article 17 (Meetings of the Board of directors); article 18 (Board meetings);
article 21 (Appointment, re-election and ratification of directors. Appointment of members
of Board committees. Appointment to positions on the Board and its committees); article 23
(Removal of directors); article 24 (Procedure for removal or replacement of members of the
Board or its committees and from positions on those Bodies); article 26 (Rights of
information and examination); article 27 (Remuneration of the directors); article 28
(Information on remuneration); article 29 (General obligations of a director); article 30
(General duty of diligence); article 31 (Duty of loyalty); article 32 (Duty to avoid situations
of conflict of interest); article 33 (Waiver scheme); article 34, (Director's duty of disclosure)
35 (Related-party transactions); article 36 (Relations with the markets); and renumbering of
article 38 to article 37 (Relations with shareholders); article 39 to article 38 (Relations with
institutional shareholders) and article 40 to article 39 (Relations with the statutory auditor),
all to adapt the Board of Directors Regulations to Act 10/2014 of 26 June 2014 on
governance, supervision and solvency of credit institutions and the amendments of the
Corporations Act introduced by Act 31/2014 of 3 December 2014 amending the
Corporations Act to improve corporate governance, and to introduce certain improvements
of a technical nature deriving from the aforesaid rules.
In addition, the Board of Directors, based on favourable report of the Audit and Compliance
Committee, agreed on 26 November 2015 to amend the following articles of the Board of
Directors Regulations: article 4 (General supervisory function and other authority), article 8
(Kinds of directors), the inclusion of article 8 bis (Director selection policy), article 9 (The
chairman of the Board), article 11 (The secretary of the Board), article 14 (The Audit and
20
Compliance Committee), article 15 (The appointments committee), article 15 bis (The
Remuneration Committee), the removal of article 15 ter (The appointments and
Remuneration Committee), article 16 (The risk advisory committee), article 17 (Meetings
of the Board of directors), the introduction of article 18 bis (Evaluation of the Board and
Board committees and evaluation of the performance of the chairman), article 21
(Appointment, re-election and ratification of directors. Appointment of members of Board
committees. Appointment to positions on the Board and its committees), article 23
(Removal of directors); article 24 (Procedure for removal or replacement of members of the
Board or its committees and from positions on those Bodies), article 27 (Remuneration of
the directors); article 28 (Information on remuneration), article 36 (Relations with the
markets), article 37 (Relations with shareholders), and the transitional provision. The
purpose of these amendments is to adapt the Board of Directors Regulations to the new
Good Governance Code of Listed Companies issued by the Spanish National Securities
Market Commission, Comisión Nacional de Mercado de Valores (CNMV), in February
2015, and amendments introduced by Act 22/2015 of 20 July 2015 of accounts auditing
amending the Corporations Act to introduce certain improvements of a technical nature
deriving from the aforesaid rules.
Similarly, at its meeting of 26 November 2015, the Board of Directors agreed to amend the
Board of Directors Regulations in order to adapt to the amendments to the Bylaws it intends
to submit for approval at the 2016 ordinary General Meeting of Shareholders. Accordingly,
the effectiveness of the resolution is contingent on the prior registration of the Bylaw
amendments. Amendments were made to: article 2 (Amendment), article 4 (General
supervisory function and other authority), article 9 (The chairman of the Board), article 12
(Committees of the Board of Directors), article 14 (Audit, compliance and responsible
management committee), article15 (The appointments committee), article 16 bis (Board
risk committee), article 23 (Removal of directors), article 33 (Waivers scheme), article 35
(Related party transactions), article 36 (Relations with the markets), article 37 (Relations
with shareholders), and article 39 (Relations with the statutory auditor).
The text of the Board of Directors Regulations is available for consultation on the entity's
website (www.bankia.com).
C.1.19 Indicate the procedures for, appointing, re-electing, evaluating and
removing Board members. Provide details of the competent bodies,
the processes and criteria used for each procedure.
Directors shall be appointed, re-elected and ratified by the General Meeting of Shareholders
or by the Board of Directors in conformity with the provisions set forth in prevailing
legislation and in article 40 of the Company's Bylaws and article 21 of the Board of
Directors Regulations.
In particular, the Board of Directors may appoint among the shareholders as directors by cooption to cover vacancies arising during the term of office of the directors. Directors
appointed by co-option shall provisionally hold the post until the date of the first General
Meeting of Shareholders after being appointed by co-option, inclusive, which may resolve
to ratify their appointment, whereby the appointment as director shall become permanent. In
any event, from the date of appointment, directors appointed by co-option shall have the
same rights and obligations as directors appointed directly by the General Meeting of
Shareholders.
Directors appointed by co-option shall immediately stand down if their appointment is not
ratified in the first General Meeting of Shareholders after they are appointed. Moreover,
should any vacancies arise once a general meeting is called but before it is held, the Board
of Directors may appoint a director to fill the vacancy until the new General Meeting of
Shareholders is held.
Any proposals for the appointment, re-election and ratification of directors which the Board
of Directors lays before the General Meeting of Shareholders and any appointment
decisions made by the Board itself under its powers of co-option are the responsibility of
the Appointments Committee, in the case of independent directors, or the Board itself, in
the case of all other directors, and must be preceded by a Board report assessing the
competence, experience and merits of the proposed candidate, which will be attached to the
general meeting or Board meeting minutes.
21
In selecting directors, care will be taken to select persons of recognised business and
professional good standing, competence, reputation and experience in the financial sector
who are equipped to exercise good governance of the Company, in accordance with
applicable laws and regulations in the matter.
The persons appointed as directors must satisfy the conditions imposed by law or the
Bylaws, at the time of taking office formally covenanting to fulfil the obligations and duties
contemplated therein and in the Board of Directors Regulations.
Any legal person who is appointed a director must appoint a single natural person
perform the director’s functions on a permanent basis. Any revocation of such
appointment by the legal person director will have no effect until a replacement
appointed. In addition, the appointment of a natural person to act as representative will
subject to a report by the Appointments Committee.
to
an
is
be
A natural person who is permanently appointed to perform the functions of a legal person
director must meet the same suitability requirements, is subject to the same rules of
incompatibility, has the same duties and is jointly and severally liable with the legal person
director.
There is no age limit for appointment to or serving in this position.
Regarding the evaluation of directors, article 18 bis was added to the Board of Directors
Regulations to expressly govern the evaluation of the performance of the Board and that of
its committees, as well as the performance of the Chairman. The performance of Board
members and their individual contribution are evaluated annually, with special attention
paid to the chairmen of the various committees.
The Chairman will organise and coordinate the periodic evaluation of the Board with the
chairmen of the Audit and Compliance Committee and the Appointments Committee.
Evaluations of Board committees shall be based on the reports presented by them to the
Board of Directors. In addition, based on the report prepared by the Appointments
Committee, the Board will evaluate the chairman’s performance on a yearly basis.
Evaluation of the chairman is overseen by the Lead Independent Director.
At least every three years, to aid in the evaluation process the Board of Directors should
engage an external facilitator, whose independence should be verified by the Appointments
Committee.
(Keep on section H)
C.1.20 Explain to what extent the annual evaluation of the Board has
prompted significant changes in its internal organisation and the
procedures applicable to its activities:
Description of amendments
Since the latest self-evaluation, a number of improvement initiatives have been undertaken,
such as:
- Treatment of strategic issues.
- Development and execution of a Director training plan.
- Expansion of the role of the Lead Independent Director, which has become a core element
of the Board's operation.
- Maintenance of an appropriate percentage of total time dedicated to addressing business
issues, with a good level of rotation and exposure of the bank's top level executives to the
Board.
- Treatment of talent management and improvement of top-tier and second-tier executives'
knowledge through regular presentations to the Board and training.
In 2015, the Appointments Committee began planning and debating issues regarding the
succession of the Bank's Board and top-tier executives.
22
C.1.20. bis Describe the evaluation process and the areas of the Board
evaluated by an external facilitator with respect to the diversity of
Board membership and competences, the performance and
membership of its committees, the performance of the chairman of the
Board of directors and the company's chief executive, and the
performance and contribution of individual directors.
The Board of Directors engaged an external advisor as facilitator and promoter in the self
evaluation of the overall performance of the Board of Directors in 2015. An interview script
was prepared for the Board's self-evaluation taking into account the situation of the Board and
international best corporate governance practices.
The external facilitator conducted individual interviews with each and every member of the
Board of Directors at which they analysed the structure, composition and performance of the
Board and its committees in 2015, including the evaluation of the Chairman, the Chief
Executive Officer, the Lead Independent Director and the Secretary of the Board of Directors.
An individual evaluation of directors was included for the first time.
The self-evaluation report contains the findings and was presented to the Appointments
Committee and the Board of Directors.
In particular, detailed analyses were carried out during the evaluation process on the following
areas:
-
-
-
Strengths of Bankia's corporate governance.
Improvement measures implemented since the previous self-evaluation.
Board composition.
Organisation and functioning.
Internal regime and culture.
Identification of content on which the Board should focus most.
General remarks on Board committees.
Detailed analysis of the evaluation of Bankia's various Board committees, which in 2015
were: the Audit and Compliance Committee, the Appointments Committee, the
Remuneration Committee, the Risk Advisory Committee and the Board Risk Committee.
Comparison with other Spanish banks.
Future issues and suggestions for 2016.
Also evaluated were:
-
Chairman.
Chief executive officer.
Lead Independent Director.
Directors: Individual evaluations of members of the Board of Directors were carried out for
the first time, analysing the following: attendance to Board meetings, the degree of
preparation of the documentation received before meetings, participation in debates, ability
to work together with other Directors and their commitment to Bankia.
C.1.20.ter Detail any business dealings that the facilitator or members of its
corporate group maintain with the company or members of its
corporate group.
At present, the external expert has only been engaged to evaluate the overall performance of the
Board of Directors.
C.1.21 Indicate the cases in which Board members must resign.
According to article 23 of the Board of Directors Regulations, directors will cease to serve as
such when the term for which they were appointed elapses, when so decided by the general
meeting or when they are to resign.
Directors who give up their place before their tenure expires, through resignation or otherwise,
shall state their reasons in a letter to be sent to all members of the Board of directors. The
motivating factors shall be explained in the annual corporate governance report.
23
Any proposal by the Board of Directors to dismiss an external director before the period of
appointment stipulated in the Bylaws has elapsed should be based on and supported by a
corresponding report from the appointments committee. The Board of directors should not
propose the removal of independent directors before the expiry of their tenure as mandated by
the Bylaws, except where they find just cause, based on a proposal from the appointments
committee. The removal of independent directors may also be proposed when a takeover bid,
merger or similar corporate transaction alters the company’s capital structure, provided the
changes in Board membership ensue from the proportionality criterion set out in good
corporate governance recommendations.
Without prejudice to the above, directors must place their offices at the Board of Directors’
disposal and, if the Board deems it appropriate, tender their resignation in the following cases:
a) When they are affected by any of the rules on incompatibility or prohibition or
unsuitability prescribed by law.
b) When they are tried for alleged criminal offenses or subject to disciplinary proceedings for
serious or very serious infractions brought by the supervisory authorities.
For these purposes, any director of the Company must advise the Board of Directors of the
existence of circumstances that could be detrimental to the credit and reputation of the
Company, in particular of criminal actions in which the director is an accused, as well as
subsequent procedural developments.
If a director is indicted or tried for any of the crimes specified in article 213 of the
Corporations Act, the Board will examine the matter as soon as possible and, in view of
the particular circumstances, decide whether or not it is appropriate for the director to
remain in the position.
c) When they are seriously admonished by the Audit and Compliance Committee for
violating their duties as directors.
d) When their remaining as directors could present a reputation risk to the interests of the
Company.
e) When they cease to hold the positions, offices or functions with which their appointment
as executive directors was associated.
f)
In the case of proprietary directors, when the shareholder at whose initiative they were
appointed disposes of its interest in the Company or reduces its interest to a level that
requires a reduction in the number of proprietary directors.
g) In the case of independent directors, when they no longer satisfy the conditions for being
considered independent directors.
If a natural person representing a legal person director is in any of the situations described in
the previous section, that person will be disqualified from acting as representative.
C.1.22
SECTION REMOVED
C.1.23 Are qualified majorities other than those prescribed by law required
for any type of decision?:
Yes 
No X
If applicable, describe the differences.
C.1.24 Explain whether there are specific requirements other than those
relating to Board members to be appointed Chairman.
Yes 
24
No X
C.1.25 Indicate whether the Chairman has the casting vote:
Yes X
No 
Matters in which there is a deciding vote
The final point of article 42.1 of the Bylaws states that in the event of a tie, the chairman
will have the casting vote.
C.1.26 Indicate whether the Bylaws or Board regulations set any age limit on
Board members:
Yes 
No X
C.1.27 Indicate whether the Bylaws or Board regulations set a limited term
of office for independent Board members, other than set in the law:
Yes 
No
X
C.1.28 Indicate whether the Bylaws or the Board of Directors regulations
stipulate specific regulations for delegating voting rights on the Board
of Directors, how it is done and, in particular, the maximum number
of delegations that may be conferred on a Board member, as well as
whether there is any limitation on the classes to which proxies can be
delegated in addition to any legal limitations. If so, provide brief
details of said regulations.
According to article 18.1 of the Board of Directors Regulations, the directors will do
everything possible to attend meetings of the Board. When they cannot do so in person, they
will arrange to grant voting proxies to another member of the Board. Proxies will be granted
on a special basis for the meeting of the Board of Directors in question, when possible with
instructions. Notice thereof may be given in any of the ways contemplated in the section 2 of
article 17 of the Board of Directors Regulations, although non-executive directors may only
grant proxies to another director in accordance with applicable legislation.
Similarly, article 30.4.b of the Board of Directors Regulations states that a director is required
to attend the meetings of the bodies of which he is a member and actively participate in the
deliberations so that his judgment effectively contributes to decision-making. If, for a justified
reason, a director is unable to attend meetings to which he has been called, he to the extent
possible must instruct the director who will represent him.
According to article 17.6 of the Board of Directors Regulations, the agendas of Board
meetings shall clearly indicate on which points directors must arrive at a decision, so they can
study the matter beforehand or gather together the material they need.
C.1.29 Indicate the number of Board meetings held during the financial year.
Likewise indicate, if any, the number of times the Board met without
the chairman in attendance. Proxies granted with specific instructions
for the meeting shall be counted as attendances.
Number of Board meetings
Number of Board meetings without the attendance of the
Chairman
25
18
0
If the chairman is also the company's chief executive, indicate the
number of meetings held without the attendance, in person or by
proxy, of any executive Board member chaired by the lead
independent director.
Number of meetings
0
Indicate the number of meetings held by the different Board
Committees during the financial year:
Number of Audit Committee meetings
16
Number of Appointments Committee meetings
10
Number of Remunerations Committee meetings
10
Number of Risk Advisory Committee meetings
36
Number of Board Risk Committee meetings
35
C.1.30 Indicate the number of Board meetings held during the year with the
attendance of all its members. Proxies granted with specific
instructions for the meeting shall be counted as attendances.
Number of Board meetings attended by all members
% of attendances of the total votes cast during the year
15
98.48%
C.1.31 Indicate whether the individual and consolidated financial statements
submitted for authorisation to the Board of Directors are certified
previously:
Yes X
No 
Identify, where applicable, the person or persons who certified the
company’s individual and consolidated financial statements, for their
authorisation by the Board:
Name
Post
CORPORATE FINANCIAL
CONTROLLER DIRECTOR
MR. SERGIO DURÁ MAÑAS
C.1.32 Explain the mechanisms, if any, put in place by the Board of
Directors to ensure that Board-prepared individual and consolidated
financial statements are not presented at shareholders’ general
meetings with qualified audit report.
Article 53.3 of the Bylaws of Bankia, S.A. states that the Board of directors will arrange for
definitive preparation of the accounts in a manner that will not result in qualifications by the
26
statutory auditor. Nevertheless, when the Board believes it must maintain its position, it will,
through the chairman of the Audit and Compliance Committee, publicly explain the
substance and scope of the difference and, also, will arrange for the statutory auditor also to
state its comments in this regard.
Through the Audit and Compliance Committee, the Board of Directors oversees the entire
process of preparing and issuing the financial statements of the Bank and its Group, and any
quarterly and half-yearly financial reports that are prepared. One of the aims of this control
and on-going contact with the auditor is to avoid qualifications in the Audit Report.
Bankia's Audit and Compliance Committee, all of whom will be non-executive directors and
a majority, independent, shall perform all the duties set forth in applicable legislation. In
particular but not exclusively, its basic responsibilities include the following:
-
Report to the General Meeting of Shareholders on questions that are posed regarding
matters within the competence of the committee and, in particular, on the audit findings,
explaining how the audit has contributed to the integrity of the financial information and
the Committee's role in this process.
-
Supervise the effectiveness of the internal control of the Company, the internal audit,
regulatory compliance, and risk management systems, and discuss with the statutory
auditor any material weaknesses of the internal control system that may have been
detected in the audit, without comprising its independence. To this end, where
appropriate the Committee may make recommendations or submit proposals to the
Board of Directors, along with the related follow-up period.
-
Supervise the preparation and filing of regulatory financial information and submit to the
Board of Directors recommendations or proposals designed to safeguard the integrity of
the financial information and, in particular:



report to the Board of directors, in advance, on the financial information that the
Company must publish periodically;
review the Company's accounts, to ensure compliance with legal requirements and
proper application of generally accepted accounting principles, and report on
changes to accounting principles and criteria proposed by management; and
review issue prospectuses and any periodic financial information the Board is
required to provide to the markets and market supervisory bodies.
-
Make recommendations to the Board of directors for the selection, appointment, reelection and removal of the statutory auditor, and oversee the selection process in
accordance with EU legislation and the terms and conditions of engagement.
-
Establish appropriate relations with the external auditors so as to receive information on
matters that could jeopardise the external auditor's independence, so that they may be
examined by the committee, and on any other matters arising from the auditing of the
Company's accounts and, as appropriate, authorise the services permitted under the terms
of EU legislation and regulations regarding independence, and make any other
disclosures required under applicable legislation and auditing standards. In particular:





act as a communications channel between the Board of directors and the auditors,
evaluating the results of each audit and the responses of the management team to its
recommendations and mediating in the event of disputes between the former and the
latter regarding the principles and criteria applicable to the preparation of the
financial statements;
receive regular information from the external auditor on the audit plan and the results
of the audit and ensure that senior management acts on the external auditor’s
recommendations;
ensure that the external auditor meets, at least once a year, with the Board in full to
inform it of the work undertaken and developments in the Company's risk and
accounting positions;
supervise compliance with the audit contract, seeking to ensure that the opinion on
the annual accounts and the principal content of the auditor’s report are drafted
clearly and accurately;
ensure the independence of the external auditor in the exercise of its functions, as set
out in section C.1.35 of this Report.
27
-
Issue a report each year, prior to the release of the auditors’ report, expressing an opinion
on whether the independence of the external auditor or audit firms has been
compromised. This report will contain a reasoned assessment of any additional non-audit
services provided considered individually and in the aggregate, other than that of the
legal audit and in relation to the auditors’ independence and compliance with auditing
standards.
C.1.33 Is the Board Secretary also a Board member?
Yes 
No X
Fill out the following table if the Board Secretary is not a Board
member.
Personal or corporate name of the
Board secretary
MR. MIGUEL CRESPO RODRÍGUEZ
Representative
-
C.1.34 SECTION REMOVED
C.1.35 Indicate, as the case may be, the mechanisms implemented by the
company to preserve the independence of the external auditors,
financial analysts, investment banks and rating agencies.
As stipulated in article 14 of the Board of Directors Regulations, the Audit and Compliance
Committee is responsible, inter alia, for ensuring the independence of the external auditor and
therefore:
-
-
-
-
Make recommendations to the Board of Directors for the selection, appointment, reelection and removal of the external auditor, oversee the selection process in accordance
with EU legislation and the terms and conditions of engagement, and receive regular
information from the external auditor on the audit plan and the results of the audit and
ensure that senior management acts on the external auditor's recommendations, and ensure
the independence of the external auditor in the exercise of its functions, seeking to ensure
that the opinion on the annual accounts and the principal content of the auditor's report are
drafted clearly and precisely.
Maintain relations with the statutory auditor in order to gather information on any
matters that may call the auditor’s independence into question, as well as any other
matters relating to the audit process, and engaging in such other communications with
the statutory auditor as are provided for in the audit legislation and technical standards
for audits;
Ensure that the Company and the auditor comply with current regulations on the
provision of non-audit services, the limits on the concentration of the auditor’s business
and, in general, other requirements designed to safeguard auditors’ independence; and
Ensure that the remuneration of the external auditor does not compromise its quality or
independence;
In the event of resignation of the external auditor, investigate the reasons for the
resignation; and
Ensure that the company notifies any change of external auditor as a material event,
accompanied by a statement of any disagreements arising with the outgoing auditor and
the reasons for the same.
In any event, the Audit and Compliance Committee will also receive an annual statement
from the external auditors certifying their independence in relation to the Company or entities
directly or indirectly related to it, as well as detailed and individualised information about any
28
additional services of any kind provided and the fees received from these entities by the
external auditor, or by individuals or entities related to it, in accordance with the laws on
auditing.
The Committee shall issue a report each year, prior to the release of the auditors’ report,
expressing an opinion on whether the independence of the external auditor or audit firms has
been compromised. This report will contain a reasoned assessment of any additional non-audit
services provided considered individually and in the aggregate, other than that of the legal
audit and in relation to the auditors’ independence and compliance with auditing standards.
Article 38 of the Board of Directors Regulations states that the Board of Directors will
establish mechanisms for the regular sharing of information with institutional investors who
are among the Company's shareholders, and that the relations between the Board of Directors
and institutional shareholders may not result in delivery to such shareholders of information
that could given them a privilege or advantage over other shareholders. The Board of
Directors shall draw up and implement a policy of communication with shareholders,
institutional investors and proxy advisors that complies in full with market abuse regulations
and accords equitable treatment to shareholders in the same position.
In this respect, the Policy of Information, Communication and Contacts with shareholders,
institutional investors and proxy advisors approved by the Board of Directors and which
forms part of the Company's corporate governance system, aims to engage and encourage
permanent dialogue with the Company's stakeholders, particularly its shareholders,
institutional investors and proxy advisors, in order to forge stable, strong and trusting relations
and promote transparency within the framework of corporate interest, acting in accordance
with the following principles: (i) transparent communication, (ii) information and ongoing
dialogue, (iii) equal treatment and non-discrimination, (iv) commitment and integrity in the
dissemination, communication and management of corporate information, (v) innovation,
sustainability and development in the use of new technologies, and (vi) compliance with the
law and the corporate governance system.
C.1.36 Indicate whether the company has changed its external auditor
during the financial year. If so, identify the incoming and outgoing
auditors:
Yes 
No X
Explain any disagreements with the outgoing auditor and the reasons
for the same:
C.1.37 Indicate whether the audit firm performs other non-audit work for the
company and/or its business group. If so, state the total fees paid for
such work and the percentage this represents of the fees billed to the
company and/or its business group:
No 
Yes X
Fees for non-audit work (in
Company
Group
Total
149
44
193
8.00%
15.48%
8.98%
thousands of Euros)
Fees for non-audit work/total
amount invoiced by the
audit firm (in %)
29
C.1.38 Indicate whether the audit report on the financial statement for the
previous financial year contains reservations or qualifications. If so,
detail the reasons given by the Chairman of the Audit Committee to
explain the content and scope of such reservations or qualifications.
Yes 
No X
C.1.39 Indicate the number of consecutive years during which the current
audit firm has been auditing the financial statement of the company
and/or its group. Likewise indicate the percentage of years the
current audit firm has been auditing the accounts over the total
number of years the financial statement have been audited:
Company
Group
3
3
15.00%
60.00%
Number of consecutive years
Number of years audited by the current
auditing company / number of
years the company has been audited (in %)
C.1.40 Indicate and give details of any procedures by which directors may
seek external consultancy:
Yes X
No 
Details of the procedure
Directors of Bankia, S.A. have a duty to demand, and a right to request, from the Company
all the information they need in order to perform their obligations and have the broadest
authority to seek information on any aspect of the Company, to examine its books, records,
documents and other evidence of the Company's transactions, and to inspect all its
facilities, according to article 26 of the Board of Directors Regulations.
The exercise of information rights will be channelled through the chairman or secretary of
the Board of Directors. They will respond to director inquiries by providing the information
directly, making the appropriate spokesmen within the organisation available as
appropriate, or arranging for appropriate on-site review and inspection.
The chairman or secretary may refuse information if they consider that: (i) the information
is not necessary for the proper performance of the director’s functions; (ii) the cost of the
information is unreasonable given the importance of the problem and the Company’s assets
and revenue; or (iii) the requested technical assistance may be adequately provided by
Company experts and technicians.
Moreover, according to article 9.3 of the Board of Directors Regulations, the chairman, as
the person responsible for the efficient functioning of the Board of Directors, will draw up
and submit to the Board, the estimated planning of ordinary and/or recurring issues to be
addressed, oversee management of the Board and its effective operation, ensure that
sufficient time is spent discussing strategic matters and agree and review refresher
programmes for each director when circumstances dictate, and ensure that the directors
receive sufficient information to be able to perform their function. Directors may request
any additional information or advice they may require for the performance of their
functions and may apply to the Board of Directors for assistance from independent experts
where the complexity or importance of the matters submitted for their consideration so
require.
30
To give new directors a knowledge of the Bank and its corporate governance rules, article
21.8 of the Board of Directors Regulations provides for an orientation and support
programme. When circumstances so advise, the Company may also establish continuing
professional development programmes for directors.
In addition, independent directors may channel through the Lead Independent Director all
the matters and concerns they raise. Its mission is, inter alia, to voice the concerns of
independent directors, organising any common positions of the independent directors and
acting as a channel of communication or spokesperson for any such common positions. The
lead independent director may request that a meeting of the Board of Directors be convened
and that items be included in the agenda.
Regarding Board committees, the Audit and Compliance Committee, the Appointments
Committee, the Remuneration Committee and the Risk Advisory Committee, for better
performance of their duties, may seek the advice of outside professionals on matters within
their remit (articles 14.9, 15.9, 15 bis.9, and 16.4, respectively, of the Board of Directors
Regulations).
C.1.41 Indicate whether there are procedures for directors to receive the
information they need in sufficient time to prepare for meetings of the
governing bodies:
Yes X
No 
The procedure for providing directors of Bankia, S.A. with the appropriate information to
prepare meetings of the governing bodies is regulated in article 17.2 of the Board of
Directors Regulations, which states that the Board of Directors will be called by individual
notice, stating the agenda for the meeting in sufficient detail. This notice will be sent by
fax, e-mail or letter to each of the directors, at least five (5) days in advance of the date
contemplated for the meeting, unless, in the judgment of the chairman, the urgency of the
matters to be considered requires an urgent call, which may be made by telephone, fax, email or any other remote means, sufficiently in advance to allow the directors to fulfil their
duty to attend.
In addition, in the case of an urgent call, the chairman wishes to submit for approval by the
Board resolutions that are not included in the agenda, prior and express consent of a
majority of directors in attendance is required, which must be duly noted in the minutes.
Directors may seek such additional information as they deem to be necessary regarding
matters within the competence of the Board.
Information requests must be made to the chairman or secretary of the Board.
For purposes of both call of the Board and any communication with directors, the e-mail
address the director provides to the Company of the time of accepting the position will
apply, the director being required to notify the Company of any change in this regard.
C.1.42 Indicate and, where appropriate, give details of whether the company
has established rules obliging directors to inform the Board of any
circumstances that might harm the organisation's name or reputation,
tendering their resignation as the case may be:
Yes X
31
No 
According to article 40 of the Bylaws, the members of the Board of Directors of Bankia,
S.A. must satisfy the requirements of banking regulation to be considered to be honourable
persons suitable for exercise of that function. In particular, they must be of high
commercial and professional integrity, have knowledge and experience appropriate to the
performance of their duties and be willing to exercise good governance of the Company.
Supervening failure to satisfy those requirements will be grounds for removal of the
director.
As per article 23 of the Board of Directors Regulations, directors must place their
directorships at the disposal of the Board of Directors and formally tender their
resignations, if the Board deems it to be desirable, in the following circumstances:
a) When they are affected by any of the rules on incompatibility or prohibition or
unsuitability prescribed by law.
b) When they are tried for alleged criminal offenses or subject to disciplinary proceedings
for serious or very serious infractions brought by the supervisory authorities.
For these purposes, any director of the Company must advise the Board of Directors of the
existence of circumstances that could be detrimental to the credit and reputation of the
Company, in particular of criminal actions in which the director is an accused, as well as
subsequent procedural developments.
If a director is indicted or tried for any of the crimes indicated in article 213 of the
Corporations Act, the Board will examine the matter as soon as possible and, in view of the
particular circumstances, decide whether or not it is appropriate for the director to remain in
the position.
c) When they are seriously admonished by the Audit and Compliance Committee for
violating their duties as directors.
d) When their remaining as directors could present a reputation risk to the interests of the
Company.
e) When they cease to hold the positions, offices or functions with which their appointment
as executive directors was associated.
f) In the case of proprietary directors, when the shareholder at whose initiative they were
appointed disposes of its interest in the Company or reduces its interest to a level that
requires a reduction in the number of proprietary directors.
g) In the case of independent directors, when they no longer satisfy the conditions for being
considered independent directors.
In addition, if a natural person representing a legal person director is in any of the situations
described in the previous sections, that person will be disqualified from acting as
representative.
C.1.43 Indicate whether any member of the Board of Directors has notified
the company that he/she was tried or formally accused of any of the
offences stipulated in Article 213 of the Corporations Act:
Yes 
No X
Indicate whether the Board of Directors has analysed the case. If the
answer is yes, explain the reasons for the decision taken on whether
or not the Board member should continue to hold its post or, as the
case may be, state the actions that the Board of Directors have taken
up to the date of this report or the report intended to be issued later.
Yes 
32
No X
C.1.44 List the still valid significant agreements signed by the company,
whether modified or terminated in the event of a change in the
company’s control through a hostile takeover bid, and its effects.
Not applicable.
C.1.45 Identify in aggregate form and provide detailed information on
agreements between the company and its officers, executives and
employees posts with compensations, guarantees or protection
clauses, in the event of resignation or unlawful dismissal or if
contractual relationship is abruptly halted because of a hostile
takeover bid or other kinds of transactions.
Number of beneficiaries
7
Type of beneficiary
EXECUTIVE DIRECTORS
MANAGEMENT COMMITEE
Agreement description
The contracts of the three executive
directors contain a termination benefit of
one year of fixed remuneration if the
Company decides to terminate their
employment unilaterally or in the event of a
change of control of the Company. The
contracts also contain a post-contractual
non-compete clause equal to one year of
fixed remuneration. Pursuant to prevailing
legislation, Bankia has amended these
contracts,
establishing
that
any
compensation and/or amounts received by
the executive directors shall comply with
Royal Decree-Law 2/2012, Law 3/2012, and
Law 10/2014.
The contracts of four senior executives
included clauses that set compensation for
all items if they are dismissed for legal
reasons, except for disciplinary reasons
considered legally valid, equivalent to two
years' fixed compensation. Pursuant to
prevailing legislation, Bankia has amended
these contracts, establishing that any
compensation and/or amounts received by
senior executives must comply with Royal
Decree-Law 2/2012, Law 3/2012, and Law
10/2014.
Indicate whether the governing bodies of the company or its group
must be informed of and/or must approve such contracts:
Board of Directors
Governing body
General Meeting
YES
NO
YES
Is the General Meeting informed about the
clauses?
33
X
NO
C.2 Committees of the Board of Directors
C.2.1 Give details of all Committees of the Board of Directors, their
members and the proportion of proprietary and independent Board
members on such Committees:
AUDIT AND COMPLIANCE COMMITTEE
Name
HIGUERUELA
% of proprietary Board members
% of independent Board members
% of other external
Post
Typology
CHAIRMAN
COMMITTEE
MEMBER
COMMITTEE
MEMBER
COMMITTEE
MEMBER
INDEPENDENT
INDEPENDENT
INDEPENDENT
INDEPENDENT
0.00%
100.00%
0.00%
Explain the duties attributed to this committee, describe and provide
a summary of its main actions carried out by the committee during
the year.
The Audit and Compliance Committee of Bankia has attributed to it all the duties required in
company law and banking regulations, as well as those set out in the Good Governance Code
of Listed Companies which, given their length, are presented in section H of this Report.
With respect to its rules of organisation and functioning, article 14 of the Board of Directors
Regulations states that the Audit and Compliance Committee will have no fewer than three
(3) and no more than five (5) members, all of whom will be non-executive directors and a
majority, independent. Where the members of the committee expressly so agree, its meetings
may also be attended by other directors, including executive directors, senior managers and
any other employee. The members of the Audit and Compliance Committee will be
appointed by the Board of Directors taking account of their knowledge, skills and experience
in accounting or auditing or both, and the overall technical expertise in relation to the
banking industry.
The committee will be chaired by a non-executive director that, in addition, has knowledge,
skills and experience in accounting, auditing or risk management. The chairman of the
committee must be replaced every four years, and may be re-elected after the term of one
year elapses since he left office. The chairman of the committee may, at any time, apply to
the senior manager responsible for the Company’s internal audit for information on internal
audit activities. Also, independently of organisational reporting lines, the head of internal
audit will maintain a functional relationship with the Audit and Compliance Committee and
its chairman. In any event, the Committee shall oversee the performance of the internal audit
unit.
The committee will have a secretary and, optionally, an assistant secretary, who need not be
directors and may be other than the secretary and assistant secretary of the Board of directors,
respectively.
The committee will meet as often as called by resolution of the committee itself or its
chairman, at least four times per year. Any member of the management team or employee of
the company that is required to do so must attend its meetings, to cooperate with it and
provide access to any information it may have. The committee also may require the
34
attendance of the statutory auditor. One of its meetings will be used to evaluate the efficiency
of and compliance with the Company’s governance rules and procedures, and prepare the
information the Board must approve and include in the annual public documentation.
Meetings of the Audit and Compliance Committee will be validly held when a majority of
the committee’s members are present in person or by proxy. Resolutions will be adopted by
absolute majority of the members present at the meeting in person or by proxy. In the event
of a tie, the chairman will have a casting vote. The members of the committee may extend
proxies to other members. The resolutions of the Audit and Compliance Committee will be
maintained in a minutes book, each entry in which will be signed by the chairman and the
secretary.
Regarding the main actions carried out in 2015, the Audit and Compliance Committee
focused its efforts primarily on monitoring six broad areas:

The Group’s financial information.

The activity of the external auditors.

The activity of internal audit.

The activity of regulatory compliance.

Related-party transactions.

Corporate governance
The Audit and Compliance Committee prepares an annual report of its actions carried out in
the year.
Identify the member of the Audit Committee who was appointed
based on their knowledge and experience in accounting or auditing
or both, and report the number of years during which the Chairman of
this committee has held the post.
Name of director with
ALFREDO LAFITA PARDO
experience
Number of years the Chairman
3
has held his/her post:
APPOINTMENTS COMMITTEE
Post
Typology
Name
CHAIRMAN
INDEPENDENT
MR. FRANCISCO JAVIER CAMPO
COMMITTEE
INDEPENDENT
GARCÍA
MEMBER
COMMITTEE
INDEPENDENT
MEMBER
MR. ÁLVARO RENGIFO ABBAD
COMMITTEE
INDEPENDENT
MEMBER
% of other external
0.00%
100.00%
0.00%
35
Explain the responsibilities attributed to this committee, describe and
provide a summary of its main highlights during the year.
The Appointments Committee of Bankia has attributed to it all the duties required in
company law and banking regulations, as well as those set out in the Good Governance
Code of Listed Companies which, given their length, are presented in section H of this
Report.
With respect to its rules of organisation and functioning, article 15 of the Board of
Directors Regulations states that the Appointments Committee will have no fewer than
three (3) and no more than five (5) members, all of whom will be non-executive directors
and a majority, independent. Where the members of the committee expressly so agree, its
meetings may also be attended by other directors, including executive directors, senior
managers and any employee.
The members of the Appointments Committee will be appointed by the Board of directors
taking account of their knowledge, skills and experience and the committee’s tasks. The
committee will be chaired by a non-executive director appointed by the Board of directors.
The chairman of the committee must be replaced every four years, and may be re-elected
one or more times for terms of the same length.
The committee will have a secretary and, optionally, an assistant secretary, who need not
be directors and may be other than the secretary and assistant secretary of the Board of
directors, respectively.
chairman, at least four times per year. Further, it also will meet whenever the Board of
directors or its chairman requests the issue of a report or adoption of proposals.
A majority of the members of the committee, present in person or by proxy, constitute a
quorum.
The committee will adopt resolutions by absolute majority of the members present at the
meeting in person or by proxy. In the event of a tie, the chairman will have a casting vote.
Regarding the main actions carried out in 2015, the Appointments Committee focused its
efforts primarily on six areas:

The evaluation of the Board and its committees, the performance of the Chairman and
the performance of individual directors.

Annual verification of the nature of directors.

Preparation of reports on appointments of directors and the management team.

The director and senior executive training plan.

The coordination succession plans for the chairman, the chief executive officer and
senior executives of the Company.

The Annual Corporate Governance Report in the area of its remit.
The Appointments Committee prepares an annual report of its actions carried out in the
year.
REMUNERATION COMMITTEE
Name
Post
Typology
CHAIRMAN
INDEPENDENT
COMMITTEE
MEMBER
COMMITTEE
MEMBER
COMMITTEE
MEMBER
36
INDEPENDENT
INDEPENDENT
INDEPENDENT
0.00%
100.00%
% of other external
0.00%
The Remuneration Committee of Bankia has attributed to it all the duties required in
company law and banking regulations, as well as those set out in the Good Governance
Code of Listed Companies which, given their length, are presented in section H of this
Report.
With respect to its rules of organisation and functioning, article 15 bis of the Board of
Directors Regulations states that the Remuneration Committee will have no fewer than
three (3) and no more than five (5) members, all of whom will be non-executive directors
and a majority, independent. Where the members of the committee expressly so agree, its
meetings may also be attended by other directors, including executive directors, senior
managers and any employee.
The members of the Remuneration Committee will be appointed by the Board of directors,
taking account of their knowledge, skills and experience and the committee’s tasks. The
committee will be chaired by a non-executive director appointed by the Board of directors.
The chairman of the committee must be replaced every four years, and may be re-elected
one or more times for terms of the same length.
The committee will have a secretary and, optionally, an assistant secretary, who need not
be directors and may be other than the secretary and assistant secretary of the Board of
directors, respectively.
chairman, at least four times per year. Further, it also will meet whenever the Board of
directors or its chairman requests the issue of a report or adoption of proposals.
A majority of the members of the committee, present in person or by proxy, constitute a
quorum.
The committee will adopt resolutions by absolute majority of the members present at the
meeting in person or by proxy. In the event of a tie, the chairman will have a casting vote.
Regarding the main actions carried out in 2015, the Remuneration Committee focused its
efforts primarily on the following areas:

The remuneration policy for directors and senior managers.

The Annual Report on Director Remuneration.

The Annual Corporate Governance Report in the area of its remit.
The Remuneration Committee prepares an annual report of its actions carried out in the
year.
RISK ADVISORY COMMITTEE
Name
MR.
FRANCISCO
CAMPO GARCÍA
JAVIER
MÉNDEZ DE ANDÉS
% of other external
Post
Typology
CHAIRMAN
INDEPENDENT
COMMITTEE
MEMBER
COMMITTEE
MEMBER
INDEPENDENT
INDEPENDENT
0.00%
100.00%
0.00%
37
The Risk Advisory Committee of Bankia has attributed to it all the duties required in by
law, especially banking regulations. Given their length, they are presented in section H of
this Report.
With respect to its rules of organisation and functioning, article 47 quater of the Bylaws
and article 16 of Board of Directors Regulations states that the Risk Advisory Committee
will be comprised of a minimum of (3) and maximum of (5) directors, who may not be
executive directors, without prejudice to attendance, when so expressly resolved by the
members of the Committee, of other directors, including executive directors, senior
managers and any employee. In any event the number of members of the Risk Advisory
Committee will be determined directly by way of establishment of that number by express
resolution, or indirectly by way of filling vacancies or appointment of new members
within the established maximum.
The members of the Risk Advisory Committee must have the appropriate knowledge,
ability and experience to fully understand and control the risk strategy and risk tolerance of
the Company. At least one third of its members must be independent directors. In any
event, the chairman of the committee will be an independent director. The chairman of the
committee must be replaced every four years, and may be re-elected one or more times for
terms of the same length.
The members of the Risk Advisory Committee will be appointed by the Board of directors,
taking into account the directors’ knowledge, skills and experience and the committee’s
duties.
There will be a quorum for the committee when the majority of the directors that are a part
thereof are in attendance, in person or by proxy. It will adopt its resolutions by absolute
majority of the members of the committee, present at the meeting in person or by proxy. In
the event of a tie, the chairman will have a casting vote.
Regarding the main actions carried out in 2015, the Risk Advisory Committee advised the
Board of Directors on the following key matters:
 Advice on the definition of the Company's and Group's overall risk tolerance, set out in
the Framework of Risk Appetite and Tolerance.
 Advice on the approval of the Company's and the Group's risk control and management
policy, identifying the various types of risk assumed by the Company and the Group,
the levels of risk they are willing to take and the necessary corrective measures to limit
their impact.
 Advice on the approval of risk manuals and policies.
 Regular monitoring of the loan portfolio and the risks assumed by the Company and the
Group, in the broadest sense, proposing to the Board the necessary corrective measures
to adapt the risk assumed to the approved risk profile.
BOARD RISK COMMITTEE
Name
Post
Typology
MR.
FRANCISCO
JAVIER
CAMPO GARCÍA
CHAIRMAN
COMMITTEE
MEMBER
COMMITTEE
MEMBER
COMMITTEE
MEMBER
EXECUTIVE
MÉNDEZ DE ANDÉS
INDEPENDENT
INDEPENDENT
INDEPENDENT
% of executive Board members
25.00%
0.00%
38
75.00%
% of other external
0.00%
The Board Risk Committee is governed by article 16 bis of the Board of Directors
Regulations. The Board risk committee is the body responsible for approving risks within
the authority delegated to it and for overseeing and administering the exercise of the
authority delegated to lower-ranking bodies, all this without prejudice to the oversight
authority vested by law in the Audit and Compliance Committee. A list of this committee's
functions is provided in section H of this Report.
As regards the rules of organisation and functioning, article 16 bis of the Board of
Directors Regulations states that the Board Risk Committee will be made up of no fewer
than three (3) and no more than seven (7) directors. The chairman of the committee will be
a director appointed by the Company’s Board of directors.
Resolutions of the Board Risk Committee will be adopted by absolute majority of the
members present at the meeting in person or by proxy.
In the event of a tie, the chairman will have a casting vote.
The Board Risk Committee will have operational authority and, therefore, may adopt the
corresponding decisions within the scope of authority delegated by the Board.
The Board Risk Committee will have the specific delegated authority contemplated in the
delegation resolution.
Also, copies of the minutes of meetings of this committee will be made available to all
directors.
Regarding the main actions carried out in 2015, the Board Risk Committee's principle
activity is the approval of risks within the authority delegated to it and overseeing and
administering the exercise of the authority delegated to lower-ranking bodies.
Given the executive nature of the Board Risk Committee, at its meeting the committee
analyses and, where appropriate, approves all specific risk transactions, finance
programmes and the overall limits of prequalifications attributed to it within the scope of
authority delegated by the Board of Directors.
C.2.2 Complete the following table using the information relating to the
number of female Board members who have served on the Board of
Directors Committees over the past four financial years:
Number of female Board members
Year 2015
Number
%
Audit
and
Compliance
Committee
Appointments
Committee
Remuneration
Committee
Risk Advisory
Committee
Board
Risk
Committee
Year 2014
Number
%
Year 2013
Number
%
Year 2012
Number
%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
0
0.00%
--
--
--
--
1
25.00%
1
25.00%
--
--
--
--
1
33.33%
1
33.33%
--
--
--
--
1
25.00%
1
25.00%
0
0.00%
0
0.00%
39
C.2.3
SECTION REMOVED
C.2.4
SECTION REMOVED
C.2.5 Indicate, as appropriate, whether there are any regulations governing
the Board committees. If so, indicate where they can be consulted,
and whether any amendments have been made during the year.
Also, indicate whether an annual report on the activities of each
committee has been prepared voluntarily.
AUDIT AND COMPLIANCE COMMITTEE
The regulation of the Audit and Compliance Committee is set forth in the Bylaws (articles 44
and 46) and the Board of Directors Regulations (articles 12 and 14). Both documents, as well
as the composition of the committee, are permanently available for consultation on the Bankia
website: www.bankia.com.
In 2015, amendments were made to articles 44 and 46 of the Bylaws pursuant to a resolution
adopted at the General Meeting of Shareholders held on 22 April 2015, and to article 14 of the
Board of Directors Regulations pursuant to a resolution adopted by the Board on 23 February
2015, regarding the responsibilities of the committee, as indicated in section C.1.18 of this
Report. In addition, article 14 of the Board of Directors Regulations was amended pursuant to
the Board resolution of 26 November 2015 to adapt to the recommendations of the Good
Governance Code of Listed Companies and to and amendments introduced by Act 22/2015 of
20 July 2015 of accounts auditing amending the Corporations Act.
(Keep on section H)
APPOINTMENTS COMMITTEE
The regulation of the Appointments Committee is included in the Bylaws (articles 44 and 47)
and the Board of Directors Regulations (articles 12 and 15). Both documents, as well as the
composition of the Committee, are permanently available for consultation on the Bankia
In 2015, amendments were made to articles 44 and 47 of the Bylaws pursuant to a resolution
adopted at the General Meeting of Shareholders held on 22 April 2015, and to article 15 of the
Board of Directors Regulations regarding the responsibilities of the Committee, as indicated
in section C.1.18 of this Report. In addition, article 15 of the Board of Directors Regulations
was amended pursuant to the Board resolution of 26 November 2015 to adapt to the
recommendations of the Good Governance Code of Listed Companies and to and
amendments introduced by Act 22/2015 of 20 July 2015 of accounts auditing amending the
Corporations Act.
(Keep on section H)
REMUNERATION COMMITTEE
The regulation of the Remuneration Committee is included in the Bylaws (articles 44 and 47)
and the Board of Directors Regulations (articles 12 and 15 bis). Both documents, as well as
the composition of the Committee, are permanently available for consultation on the Bankia
In 2015, amendments were made to articles 44 and 47 bis of the Bylaws pursuant to a
resolution adopted at the General Meeting of Shareholders held on 22 April 2015, and to
article 16 of the Board of Directors Regulations regarding the responsibilities of the
Committee, as indicated in section C.1.18 of this Report. In addition, article 16 of the Board
of Directors Regulations was amended pursuant to the Board resolution of 26 November 2015
to adapt to the recommendations of the Good Governance Code of Listed Companies and to
and amendments introduced by Act 22/2015 of 20 July 2015 of accounts auditing amending
the Corporations Act.
(Keep on section H)
40
RISK ADVISORY COMMITTEE
The regulation of the Risk Advisory Committee is included in the Bylaws (articles 44 and 47
quater) and the Regulations of the Board of directors (articles 12 and 16). Both documents, as
well as the composition of the Committee, are permanently available for consultation on the
Bankia website: www.bankia.com.
In 2015, amendments were made to the Bylaws pursuant to a resolution adopted at the
General Meeting of Shareholders held on 22 April 2015, to add article 47 quarter governing
the composition and functioning of the Board Risk Committee. In addition, article 16 of the
Board of Directors Regulations was amended pursuant to the Board resolution of 26
November 2015 to reinforce the competences of the Committee with regard to supervising the
Company's risk control and management and overseeing the internal control and risk
management function, as indicated in section C.1.18.
(Keep on section H)
BOARD RISK COMMITTEE
The regulation of the Board Risk Committee is set forth in the Bylaws (articles 44 and 48) and
the Board of Directors Regulations (articles 12 and 16 bis). Both documents, as well as the
composition of the Committee, are permanently available for consultation on the Bankia
In 2015, amendments were made to Bylaws pursuant to a resolution adopted at the General
Meeting of Shareholders held on 22 April 2015, and to article 16 bis of the Board of Directors
Regulations, as indicated in section C.1.18, to reinforce the competences of the Committee in
matters within its remit.
C.2.6
D
SECTION REMOVED
RELATED-PARTY AND INTRAGROUP TRANSACTIONS
D.1 Explain the procedure, if any, for approving related-party and intragroup
transactions.
Procedure for reporting the approval of related-party transactions
According to article 35 of the Board of Directors Regulations of Bankia, S.A., the Board of
Directors shall review the transactions the Company engages in, directly or indirectly, with
directors, shareholders or persons related to them.
Engaging in such transactions will require authorisation of the Board, after a favourable report
from the Audit and Compliance Committee. The aforesaid transactions will be evaluated from the
point of view of equal treatment and market terms, and will be included in the periodic public
reporting on the terms contemplated in applicable regulations.
There will be no obligation to advise the Board, or seek the authorisation contemplated in the
preceding section, in the case of transactions with shareholders that simultaneously satisfy the
following three conditions:
a) they are pursuant to contracts the terms of which are basically standardised and customarily
are applied to customers contracting for the type of product or service in question;
b) they are at prices or tariffs established on a general basis by the one acting as the supplier of
the goods or services in question or, when the transactions relate to goods or services for
which there are no established tariffs, they are on customary market terms, comparable to
those applied in commercial relationships maintained with customers having similar
characteristics; and
41
c) the amount is no more than 1% of the Company’s annual revenue.
Transactions with directors in any event will be subject to the authorisation referred to in this
article, except in the case of credit, loan or guarantee transactions the amount of which is not more
than the amount determined by the Board of directors, simultaneously satisfying conditions (a) and
(b) as set forth in section above.
A director violates his duty of loyalty to the Company if, with prior knowledge, he allows or does
not disclose the existence of transactions related thereto, undertaken by the persons indicated in
Article 35 of the Board of Directors Regulations.
D.2 Give details of transactions deemed significant due to the amount or relevant
due to the aspect between the company and companies of its group, and the
significant shareholders in the company:
Personal or
Name or
corporate
company or
name of
entity in the
Nature of
Type of
significant
group
relationship
transaction
BANKIA, S.A.
Contractual
Financing
arrangements:
Others
1,244,590
BANKIA, S.A.
Contractual
Financing
arrangements:
Others
1,104,000
Contractual
Other instruments
may imply a
transfer of
resources or
obligations
between the
Company and the
related party
871,679
Amount
(in thousands
of Euros)
shareholder
BFA,
TENEDORA DE
ACCIONES,
S.A.U.
BFA,
TENEDORA DE
ACCIONES,
S.A.U.
BFA,
TENEDORA DE
ACCIONES,
S.A.U.
BANKIA, S.A.
D.3 Give details of transactions that are significant due to amount or that are
relevant due to the nature between the company and companies of its
group, and the managers and directors of the company:
D.4 Report on the significant transactions between the company and other
entities in the same group provided they are not eliminated in the process of
preparing the consolidated financial statements, and are not part of the
normal company transactions with regards to purpose and conditions.
At any rate, report shall be issued on any intra-group transaction with
entities in countries or territories classified as tax havens:
42
D.5 Indicate the amount of the transactions with other related parties.
D.6 Provide details of any mechanisms in place to detect, determine and resolve
possible conflicts of interest between the company and/or its group and its
Board members, executives or significant shareholders.
Article 32 of the Board of Directors Regulations regulates the situation of conflicts of interest. This
article place the obligation for directors to notify the Board of directors conflict of interest they may
have the interests of the Bank. In addition, article 31 of the Board of Directors Regulations, directors
have to refrain from deliberating or voting on resolutions or decisions in which they, or persons related
to them, have a direct or indirect conflict of interest.
In addition, under the scope of the Internal Rules of Conduct for Securities Markets activities (RIC),
article 32 establishes the duties of covered persons and article 33 the general rules for resolving
conflicts. The mechanisms for detecting conflicts of interest are based fundamentally on the obligation
to disclose to Regulatory Compliance Department any situation of conflict of covered persons.
On the other hand, the Bankia Group has a Code of Ethics and Conduct which must be complied with
by all persons who have any type of professional relation with the group. The purpose of the Code of
Ethics is to establish ethical principles and general rules that shall shape the Group's activities and the
individuals subject to the Code, both within the Group and in relations with clients, partners, suppliers
and any individuals and public and private companies with which the Group has direct or indirect
relations.
The Group has a Confidential Whistleblowing Channel, where the staff can report any irregularities
they detect in the compliance with the Code of Ethics and Conduct, involving directors, employers or
suppliers. The Ethics and Conduct Committee are ultimately responsible for resolving conflicts of
interest and its decisions are binding.
To resolve possible conflicts of interest between BFA and other group companies, efforts have been
made to promote best practices in good governance in respect of relations between BFA and Bankia,
including the signing of a Framework Agreement in 2011, which was updated on 28 February 2014.
The objectives of this agreement are (i) to establish relations between both entities and between their
respective group companies and ensure an adequate level of coordination, thereby minimizing and
regulating each company's areas of activity - at arm's length - and potential conflicts of interest that
could arise in the future. (ii) The Framework Agreement entered into by BFA and Bankia also
regulates the procedure to be followed should the members of Bankia's Board of Directors find
themselves in a situation that conflicts directly or indirectly with the interests of BFA, establishing the
obligation to declare this situation of conflict and refrain from taking part in the deliberation and
discussion of issues at the heart of the conflict. (iii) The Framework Agreement also regulates
information flows between Bankia and BFA to ensure both parties comply with their statutory
accounting, tax and reporting obligations. In the event that a director is a member of the Boards of
both BFA and Bankia, they shall refrain from being involved in the matters set forth in the Framework
Agreement.
The Framework Agreement establishes that related party transactions will be governed by the
principles of transparency and the undertaking or render thereof on reasonable and equitable market
terms, preferred treatment, and following diligence and confidentiality criteria. Bankia's Audit and
Compliance Committee shall formally issue its opinion, by means of a report to the Company's Board
of directors, on whether the related-party transactions are at arm's length. Following a favourable
report from the Audit and Compliance Committee, the Board of directors shall ratify all related-party
transactions. Section 6.6 of the aforementioned Framework Agreement establishes the requirements to
be met in the event of an extension of financing by Bankia to BFA.
In addition, on 17 December 2015, the Board of Directors approved the Conflict of Interests Policy of
Bankia, S.A., which sets forth the procedures for preventing conflicts of interests between
shareholders and members of the Board of Directors of the Company, mainly, as well as personnel of
Bankia Group companies, and the Company, its parent, other Group companies and customers
pursuant, in particular, to the corporate rules and regulations, and the Company's corporate governance
system.
43
D.7 Is more than one group company listed in Spain?
Yes 
No X
Identify the subsidiaries listed in Spain:
Indicate whether they have provided detailed disclosure on the type of
activity they engage in, and any business dealings between them, as well as
between the subsidiary and other group companies:
Indicate the mechanisms in place to resolve possible conflicts of interest
between the listed subsidiary and other group companies.
E
RISK CONTROL AND MANAGEMENT SYSTEMS
E.1 Explain the scope of the company’s Risks Management System, including
tax risks.
Risk management is a strategic pillar in the organisation. The primary objective of risk management is to
safeguard the Group’s financial stability and asset base, while creating value and developing the business in
accordance with the risk appetite and risk tolerance levels set by the governing bodies. It involves the use of tools
for measuring, controlling and monitoring the requested and authorised levels of risk, late payment management
and recovering unpaid risks.
Further progress was made in 2015 on the process to improve risk management and control under the scope of the
Risk Function Transformation Plan designed in 2013. New initiatives identified in Bankia's continuous
improvement process have been added to this plan.
There are three main cornerstones to this process:
I.- General principles governing the risk function.
II.- An organisational model based on a comprehensive view of risk through its life cycle, dividing risk
management up between two Risk units (Wholesale and Retail), with each overseeing all the functions of
authorisation, monitoring and recoveries within their domain.
III. A transformation plan: the change in the risk management model culminated with the definition and design of
a set of initiatives to improve performance within the general principles.
Basic principles guiding risk management:
1. Independent and global risk function, which assures there is adequate information for decision-making at all
levels.
2. Objectivity in decision-making, taking account of all relevant (quantitative and qualitative) risk factors.
3. Active management throughout the life of the risk, from preliminary analysis until the risk is extinguished.
4. Clear processes and procedures, reviewed regularly as needs arise, with clearly defined levels of responsibility.
5. Comprehensive management of all risks through identification, measurement and consistent management based
on a common measure (economic capital).
6. Individual treatment of risks, channels and procedures based on the specific characteristics of the risk.
7. Generation, implementation and promotion of advanced tools to support decision-making which, with efficient
use of new technologies, aids risk management.
44
8. Decentralisation of decision-making based on the approaches and tools available.
9. Inclusion of risk in business decisions at all levels (strategic, tactical and operational).
10. Alignment of overall and individual risk targets in the entity to maximise value creation.
The main achievements of the aforementioned transformation plan are as follows:
• Creation of a Risk Advisory Committee.
This measure implied an improvement in corporate governance and complies with Law 10/2014, of 26 June, on
the regulation, supervision and solvency of credit institutions. See section E.2 for further information.
• Implementation of a Risk Appetite Framework:
The Risk Appetite Framework was approved by the Boards of Directors of Bankia and BFA on 23 and 24
September 2014, respectively, and resulted in major changes in the Entity's risk management and control. See
section E.4 for further information.
• Review of the Entity's recovery management:
In 2015, further strides were made in rolling out the 'Recovery' IT tool, which will combine effective and efficient
recovery with the reduction in human resources in both central services and the Regional and Business
Departments applied in the Entity.
• Modification of the Entity's Scheme of Credit Risk Authorisation Powers:
At its meeting of 23 September 2014, the Board of Directors approved a new scheme of Credit Risk Authorisation
Powers which improves management by simplifying the calculation method used, making it easier and quicker to
authorise transactions and introducing new levels of authority, which will result in greater control and
discrimination in accordance with the use of authority demonstrated.
• Documentation and formalisation of processes:
The Entity's main business processes have been formalised so that they can be duly documented for consultation
by internal or external auditing (e.g. by the single European supervisor).
• Internal control:
The first annual review of the internal control policies approved in 2014 was carried out and approved at the Board
of Directors meeting held on 28 October 2015. In addition, during the course of the year progress was made on
establishing the function, documenting procedures, setting up new controls and raising awareness at all levels of
the importance of having an appropriate risk control framework.
(Keep on section H).
E.2 Identify the bodies responsible for preparing and implementing the risk
management system, including tax risks.
On 26 June 2013, the European Council approved a regulation which, from 1 January 2014, made application of
the capital agreements known as BASEL III effective for the entire European Union. This regulation is articulated
in a capital requirements directive and a capital requirements regulation, known as CRD IV and CRR,
respectively.
One of the main features of this regulation compared to previous regulations is the introduction of corporate
governance as a core element of risk management. In this regard, Bankia answers fully to the spirit of the new
regulation, with its governing bodies assuming responsibility for the oversight and control of risks:
- The Board of Directors is the highest governing body. It determines and approves the general internal control
strategies and procedures, as well as the policies for the assumption, management, control and reduction of risks to
which the group is exposed. It has several internal Committees, attributed different risk control and monitoring
responsibilities.
- The Audit and Compliance Committee's basic duties include verifying that the internal control model, internal
audit and risk management systems are effective. In particular, it is responsible for regularly reviewing internal
control and risk management systems to ensure the main risks are correctly identified, managed and declared.
- Risk Advisory Committee. Article 38 of the Law on the Regulation, Supervision and Solvency of Credit
Institutions (LOSSEC) establishes the need to create a Risk Committee whose members do not have executive
duties. Therefore, in 2014, the Board Risk Committee was relieved of functions not related to authorisation of
transactions (non-executive). These have been transferred to the new Risk Advisory Committee, whose functions
45
included those from the Board Risk Committee and those in the draft Royal Decree implementing the LOSSEC.
The Risk Advisory Committee is currently the body responsible for overall risk management, taking the related
decisions in accordance with the authorities delegated to it and being responsible for establishing and supervising
compliance with the control mechanisms for the various types of risk, without prejudice to the supervisory
authority legally corresponding to the Audit and Compliance Committee.
- The Board Risk Committee, with executive power and authority to approve the most significant transactions,
may establish, as authorised by the Board of Directors, the overall limits in order for lower-ranking bodies to
approve the others. With respect to credit risk, the risk approval structure and the risks, which due to their amount,
are reserved for the Board Risk Committee are determined by the existing risk segments at any given time and the
levels catalogued in accordance with their credit rating (“rating” or “scoring”) based on models endorsed by the
supervisor.
Lastly, Bankia has a risk department that operates independently. In addition to managing risks, it is required to
issue timely reports to the governing bodies. The risk department, which reports directly to the Chief Executive
Officer, shares responsibilities with the following six departments:
1. Global Risk Management:
- Construction and management of credit risk measurement and control tools: authorisation and behaviour,
economic capital, rating, scoring, RAR models.
- Monitoring of regulatory capital and solvency requirements.
- Comprehensive generation of data on the Bank’s internal and external risks.
- Monitoring of the global risk profile.
2. Retail Risks:
- Management of the complete Retail Banking risk life cycle: authorisation, monitoring and recovery.
3. Wholesale Risks:
- Management of the complete Business Banking, Corporate Banking and Real Estate Developer risk life cycle:
authorisation, monitoring and recovery.
4. Market, structural and other risks:
- Measurement and control of market and counterparty risk.
- Management and control of structural interest rate and liquidity risk.
- Identification, assessment, monitoring, control and mitigation of operational risk.
- Measurement and control of other risks (insurance, fiduciary and pension risk).
5. Technical Secretariat for Risks:
Its main duties include:
- Obtaining reasonable assurance about the process in the area of Risks to ensure appropriate risk management and
the effectiveness of controls, complying at all times with prevailing legislation.
- Verifying the correct functioning of internal controls developed by the Entity, participating in their approval and
definition and issuing its own opinion on the approaches, documentation and information used.
- Managing the Committees, the Authorisation Systems and the projects that transcend the Risk function.
6. Risk Process Management:
- Managing special transaction projects and monitoring the achievement of projects.
- Ensuring compliance with outsourcing agreements in the area of risks.
E.3 Indicate the main risks, including tax risks, which may prevent the company
from achieving its targets.
Macroeconomic risks: lower economic growth than expected would, in general, have an adverse impact on the
business performance, provisions and margins.
Political risks: political uncertainty (governance issues, regional issues, fragmentation of parliament) could have a
significant impact on the risk premium and hinder further upgrades to the sovereign rating, which would have an
impact on growth and cause funding costs for Spanish entities in general to increase.
Regulatory risks: as a response by authorities to the mistakes that led to the international financial crisis, the
46
financial sector has been subject to myriad regulatory reforms, which have considerably changed the way banks do
business. In this respect, the Group continues to reinforce its corporate governance structure, as well as its capital
and liquidity position, so that it can adapt successfully to the new banking business model in an increasingly
competitive environment.
Using the conventional classification of risks generally used in the financial sector, Bankia analyses, measures and
manages the following risks:
Credit risk
Understood as the risk of loss arising from the failure of a counterparty to meet its contractual obligations. This is
the entity’s main risk.
The breakdown of loans and advances to customers is 31%-69% wholesale segment including the public sector and
retail. The real estate development portfolio as a percentage of the total has decreased gradually, now representing
just 1%, and it is highly provisioned. Personal mortgages account for 61% of gross lending.
As a result of the public assistance received at the end of 2012 and the transfer of assets to the SAREB, the entity
has a large portfolio of fixed-income instruments which, in addition, provide it with a strong liquidity position.
Counterparty risk
Counterparty risk is the risk of loss for the Bank in its dealings in financial markets from the probability of a default
by a counterparty in its contractual obligations.
Market risk
Market risk is the risk of loss caused by adverse fluctuations in prices of the financial instruments in which Bankia
operates. Another risk related to market risk is liquidity risk.
As a result of the obligations assumed under the Recapitalisation Plan, the Entity ceased its proprietary trading
activity, thereby decreasing market risk in terms of VaR and the capital charge to cover this risk.
The Restructuring Plan gears the Entity's activity in financial markets towards achieving two main goals: to provide
services to customers (Franchise Banking) and to manage its own structural risks.
Activity in financial markets also exposes the entity to market liquidity risk, which arises from difficulties closing
or covering positions due to an absence of counterparties in the market which can cause the price to be negatively
affected in the case of sale.
Structural balance sheet interest rate risk
Structural balance sheet interest rate risk relates to potential losses in the event of adverse trends in market interest
rates. Interest rate fluctuations affect both net interest income and equity. The intensity of the impact depends to a
large extent on the different schedule of maturities and repricing of assets, liabilities and off-balance sheet
transactions.
Structural liquidity risk
Structural liquidity risk consists of the uncertainty, in adverse conditions, of the availability of funds at reasonable
prices, to enable an entity to meet the obligations undertaken and finance the growth of its investment business.
As a supplement to the various metrics, the entity has a well defined Contingency Plan, which identifies alert
mechanisms and sets out the procedures to follow if the plan needs to be activated.
Operational risk
Operational risk is the risk of loss due to inadequate or failed internal processes, people and systems or from
external events. This definition includes legal risk, but not reputation risk. Reputational or brand risk is taken into
account by qualitatively evaluating the impact on end customers of any identified operational risks.
Reputational risk
The Entity's approach includes mechanisms to assess, measure and manage new risks, enabling the Entity to
respond quickly and efficiently to adverse situations that could pose reputational risk and result in financial losses.
In this respect, the new corporate risk culture has led to a more demanding and rigorous risk management model
embedded in the Entity's strategy and organisation that ensures comprehensive treatment of risks under the slogan
“We are all risks”.
Tax risk
In view of the possibility of sustaining a higher-than-expected tax effect on transactions, the reform to the
Corporations Act included a series of measures designed to improve corporate governance, such as Tax Risk
Management (TRM). Listed companies are obliged to manage tax risk appropriately and the Board of Directors of
these companies is ultimately responsible in this respect.
47
E.4 Identify if the company has a risk tolerance level, including tax risks.
In line with recommendations issued by the main international regulatory bodies indicating that banks should
implement systems to define and monitor their level of risk appetite, at its meeting of 23 September 2014, the
Board of Directors approved the BFA-Bankia Group's Risk Appetite Framework (RAF). Amendments were
approved subsequently at the Board of Directors meetings held on 23 July and 17 December 2015.
Risk appetite is understood as the amount and type of risk the Entity is willing to take in its activity in order to meet
its objectives, complying with regulatory restrictions and the commitments undertaken. The RAF includes a set of
elements to provide a comprehensive view of risk appetite, tolerance and capacity, and compare these with the risk
profile.
The formalisation of the RAF, as well as the monitoring of risk appetite and tolerance, are clear improvements to
the Entity's risk management compared to before. This formalisation mainly affords the following advantages as it:
1. Complies with the requirements and recommendations of good governance in the risk function of most
regulators, including the new single European regulator.
2. Improves the perception of risk at all levels of the Entity, thereby strengthening the corporate risk culture.
3. Implies an exercise of transparency vis-à-vis external agents, shareholders, regulators, rating agencies, analysts
and investors.
4. Lends consistency in budget preparation and planning processes with risk targets; i.e. among the various targets
affecting capital, balance sheet and income statement indicators.
The BFA-Bankia Group's RAF comprises the following three elements:
1. Risk appetite and tolerance statement, setting out the desired and maximum levels for the Entity of the following
risks:
• Global risk.
• Credit risk.
• Concentration risk.
• Market risk.
• Operational risk.
• Structural interest rate risk.
• Liquidity and financing risk.
• Business risk.
The addition of new risks in the upcoming review of the RAF is being evaluated. This review will tentatively be
presented to the Board of Directors sometime during the first quarter of 2016.
2. Monitoring and control mechanisms, which define procedures to ensure the risk profile does not diverge from
desired levels and does not exceed the limits established in the risk appetite and tolerance statement.
3. Roles and responsibilities, which specify the responsibilities of the various bodies, committees and units
involved in establishing and monitoring the Entity's risk appetite.
E.5 Identify the risks, including tax risks, that materialised during the financial
year.
Credit Risk
The Bankia Group reduced doubtful exposures in 2015 by EUR 3,552 million. A key contributor to this improvement was
the selection and sale of doubtful portfolios, a process that began in 2013 and culminated with six transactions involving a
doubtful exposure of EUR 1,907 million. Stripping out this amount from the total reduction in doubtful risk, the decrease
in the year was EUR 1,645 million, attributable to the monitoring and management of recoveries.
The decrease in the doubtful portfolio led to a reduction in the NPL ratio for loans and receivables to 10.6% in 2015 from
48
12.9% in 2014.
Also worth noting is the breakdown of doubtful assets. At 31 December 2015, 45% of assets were classified in the
doubtful category for subjective criteria or are in the "curing" period. Accordingly, no loans in this portfolio are past-due
that imply subjective arrears, or refinancing agreements have been reached with the customers and, therefore, there is an
apparent willingness to pay. This must be verified over a period of at least six months, but can be extended to the entire
grace period where applicable.
Counterparty risk
To mitigate the risk of trading in derivatives with financial and non-financial institution counterparties, Bankia has entered
into CMOF or ISDA framework contracts, which enable it to net negative and positive positions of the same counterparty.
At 31 December 2015, there were 887 netting agreements. Bankia also has collateral agreements (Appendix III of CMOF
and CSA) to mitigate exposure of collateralisation to the market value of positions with the contribution of cash or bonds.
There are currently 212 collateral agreements signed (129 derivatives, 74 repos and 9 securities loans). These agreements
reduced the credit risk of the derivatives activity by 93.49%.
Market risk
Bankia’s average VaR in 2015 was EUR 1.84 million, with a maximum of EUR 3.87 million and a minimum of EUR 1.11
million.
Interest rate VaR (EUR 0.99 million) accounted for the largest share of average VaR, followed by volatility VaR (EUR
0.66 million).
Structural balance sheet interest rate risk
An adverse movement in the yield curve could have a negative effect on the value of the Entity's assets and liabilities and
its net interest margin. The other sensitivity measures calculated during the year were within the regulatory limits, which
establish risk levels consistent with prudent management.
Structural liquidity and financing risk
The high level of available liquid assets, coupled with the decline in the commercial gap (loans minus customer deposits),
is enabling the entity to cover its liquidity requirement without having to tap the wholesale market. In addition, the entity
has appropriate liquidity contingency plans in place it may use in the hypothetical event of a liquidity crisis.
Operational risk
Operational risks in 2015 amounted to EUR 54.99 million. The main ones related to “process execution, delivery and
management) (EUR 28.28 million) and “client practices” (EUR 17.4 million). These figures do not include the
extraordinary costs related to ongoing and exceptional arbitration processes and legal rulings on preference shares or the
related costs incurred by the Entity for legal defence.
E.6 Explain the response and monitoring plans for the most threatening risks,
including tax risks, of the entity.
Credit Risk. Credit risk management is backed by a set of tools that can be classified according to their use in:
Risk classification: Rating and scoring tools used to classify borrowers and/or transactions by risk level. The Entity also
has a system for monitoring levels designed for pro-active management of risks through their classification into four
categories: Levels I, II and III of monitoring, and other exposures considered standard.
Risk quantification: carried out based on expected loss (provisioned) and unexpected loss on portfolios, which is the
possibility of higher losses over a period of time than expected, affecting the level of capital considered necessary to meet
objectives; i.e. economic capital.
Risk projection: stress models are another key element of credit risk management, allowing for the risk profiles of
portfolios and the sufficiency of capital under stressed scenarios to be evaluated.
Recovery management: Bankia applies early warning models in lending to retail customers. They are designed to identify
potential problems and offer solutions, such as adapting the conditions of the loan.
Counterparty risk. The following overall limits are established to control Counterparty Risk:
Overall Risk Limit (risk ceiling from all of Bankia's operations with financial institutions), Fixed-income Underwriting
Framework (covers underwriting for different issuers assuming final assumption of zero), Limit on Trading in
Government Debt (ceiling on all Bankia's trading with an issuer that is a state-owned entity), Alco Portfolio Limit
49
(structural portfolio allowing for fixed-income investment), and Derivatives Lines for Non-Financial Institutions
(individual limits per counterparty).
To mitigate counterparty risk, the Entity performs daily analysis of exposures to counterparties in order to assess
cumulative risk and control potential excesses, reconciles the derivative portfolios of each counterparty regularly and
calculates daily the margins to be exchanged with counterparties that have a collateral agreement signed.
Market risk. Market risk is controlled through the establishment of limits based on VaR, calculated using the historical
simulation method, sensitivity, maximum loss and size of the position. These limits are established according to maximum
exposure approved annually by Senior Management and distributed among the different areas and business centres.
The main tools used to measure and control market risk are VaR with a 1-day time horizon and a 99% confidence level
and sensitivity. The main movements in market factors used in sensitivity analysis are interest rates, equity prices,
exchange rates, volatility and credit spreads.
Structural balance sheet interest rate risk. The Entity has a structural risk management policies and procedures
framework under which it monitors regulatory and other, stricter internal limits. Based on this, it controls and monitors the
sensitivity of the interest margin and the value of its assets and liabilities by simulating different interest-rate scenarios to
complement regulatory scenarios. The new measurement scheme will cover on one hand the balance sheet and on the
other hand the portfolio of financial assets held to maturity.
Liquidity and financing risk. To monitor this risk, the Entity has management policies and procedures in place that
enable it to identify, measure, monitor and control the risks inherent in the management of liquidity and financing. The
analysis including the current/non-current ratio; and calculation of various liquidity ratios, underpinned by the regulatory
liquidity ratio, based on different assumptions.
In addition, the Entity has appropriate liquidity contingency plans in place it may use in the hypothetical event of a
liquidity crisis.
Operational risk. In 2013, the Entity chose the standardised approach for calculating its capital requirements,
subsequently making improvements in operational risk management on several fronts, including the real loss database and
the extension of the self-assessment to all Group companies.
Bankia's operational risk management objectives are to foster a culture of operational risk management, especially with
regard to risk awareness, assume responsibility and commitments, and service quality, ensure operational risks are
identified and measured in order to prevent possible damages that could affect results.
(Keep on section H)
F
INTERNAL RISKS MONITORING AND MANAGEMENT SYSTEMS IN
RELATION TO THE FINANCIAL REPORTING (ICFR) PROCESS
Describe the mechanisms entailed in the risks monitoring and management
system in relation to the company’s financial reporting (System of Internal Control
over Financial Reporting) process.
F.1
The entity’s control environment
Report, pointing out the main characteristics of at least:
F.1.1. The bodies and/or functions in charge of: (i) the existence and
maintenance of an appropriate and effective System of Internal
Control over Financial Reporting (ICFR); (ii) its implementation;
and (iii) its monitoring.
Article 4 of the Board of Directors Regulations expressly states the Board of Directors
shall provide the markets with prompt, accurate and reliable information (“particularly on
ownership structure, substantial amendments to governance rules, trading in treasury
shares and particularly significant related-party transactions”), and approve financial
reporting the Company must regularly publish.
In addition, article 36.2 of the Board of Directors Regulations stipulates that “The Board
50
will adopt the measures necessary to guarantee that quarterly, semi-annual and any other
financial information that is disclosed to the markets is prepared in accordance with the
same professional practices, principles and policies as the annual financial statements and
is equally reliable”.
Meanwhile, the Audit and Compliance Committee's responsibility include, inter alia,
supervising the preparation and filing of regulatory financial information and, in particular,
reviewing the Company's accounts.
The Board of Directors has delegated in the Audit and Compliance Committee
responsibility for overseeing that ICFR operates correctly.
Lastly, Senior Management is responsible for designing and implementing the ICFR
through the Corporate Financial Controller’s Department, which shall perform any
activities required to ensure the ICFR operates correctly.
F.1.2. The following elements, if existing, especially in relation to the
process of elaborating the financial report:

Departments and/or mechanisms in charge of: (i) designing
and revising the organisational structure; (ii) clearly defining
the lines of responsibility and authority, with an appropriate
distribution of duties and tasks; and (iii) ensuring the
existence of sufficient procedures for its correct
announcement throughout the entity.
The Transformation and Organisation Department is responsible for the design e
implementation the organisational structure, size and functions of the Bank's different
organisational groupings, as well as the operational procedures that regulate the
performance of these functions in order to achieve the most efficient distribution of
functions and resources possible.
It is also responsible for defining and making any changes to the functions attributed to the
Bank's groupings, upholding the principles of segregation of duties and organisational
efficiency, as well as preparing and keeping up to date the Bank's Operations Manual and
publishing the organisational chart on the website.
Such updates should be duly approved by the pertinent authorised party in accordance with
the prevailing system of authorities and delegated responsibilities in place for Human
Resources and Organisational matters.

Code of conduct, body of approval, degree of publication and
instruction, principles and values including (indicating
whether there is specific mention of the recording of
transactions and the elaboration of the financial report), body
in charge of analysing breaches and of proposing the correct
actions and sanctions.
The Bankia Group has a Code of Ethics and Conduct, approved by the Board of
Directors, which plays a crucial role in establishing a corporate culture and way of
doing things based on our corporate values: integrity, professionalism, closeness,
commitment and achievement orientation.
The Code of Ethics and Conduct is mandatory for all Bankia professionals and governs
their relationships both within the Company and with customers, suppliers,
shareholders and others that have dealings with Bankia. It sets the standards that must
their behaviour in their daily work and in their decision making. It sets forth the rules
and guidelines of professional conduct applicable to all employees and directors of the
51
Entity and all the Bankia Group’s businesses and activities.
The objective of the Code of Ethics and Conduct is to regular permitted and prohibited
conduct and set out the ethical principles and general rules that must guide the actions
of the Group and the people within the scope of application.
Bankia's Board of Directors and governing bodies are responsible for ensuring all
activities focus on this goal, dealing with potential breaches and, if needed, taking
corrective measures as and when required.
All people to whom the Code of Ethics and Conduct applies have received a copy. It
has also been published on the corporate intranet and on the Company's website. In
addition, a specific training programme has been set up for all professionals of the
Entity. The objectives of this programme include teaching these professionals how to
apply Code of Ethics and Conduct correctly and report any behaviour that breaches the
Code by using the Confidential Whistleblowing Channel.
Bankia has an Ethics and Conduct Committee, whose functions are decided by the
Board of Directors. These include operating the measures necessary to handle ethically
questionable conduct; overseeing compliance with the Code of Ethics and Conduct and
ensuring its proper functioning; and performing annual assessments of the degree of
compliance with the Code and drafting reports for senior management.

Whistle-blowing channel, which enables reporting of
irregularities of financial and accounting nature to the Audit
and Compliance Committee, in addition to possible breaches
of the code of conduct and irregular activities in the
organisation. The reports may be filed in secrecy or
anonymity.
The Bankia Group has a Confidential Whistleblowing Channel, as provided for in the
Code of Ethics and Conduct. This channel provides a communication tool to all
employees and suppliers (certified and potential) though which they can report
potential breaches of the Code of Ethics and Conduct, ask questions and, as
appropriate, make suggestions.
The Confidential Whistleblowing Channel has a set of regulations approved by the
Audit and Compliance Committee setting out the mechanisms for receiving, filtering,
classifying and handling reports submitted, all in accordance with the criteria issued by
the Spanish data protection agency in this respect, and guaranteeing confidentiality as
it is managed by an external firm with wide experience in the field which refers
complaints, queries or suggestions to the Ethics and Conduct Committee.
Both the Code of Ethics and Conduct and the confidential whistleblowing channel are
core elements of the crime prevention and detection model.
The Ethics and Conduct Committee reports directly to the Audit and Compliance
Committee.

Training programs and regular updates for the personnel
involved in the preparation and revision of the financial report,
as well as in the evaluation of the System of Internal Control
over Financial Reporting, which should at least cover
accounting regulations, auditing, internal risks monitoring and
management.
Bankia has established mechanisms to ensure individuals involved directly in
collating financial information and preparing and reviewing financial reporting have
the professional skills and competence to perform such duties. In this respect, these
individuals are continuously updated on prevailing legal requirements and are
sufficiently able to efficiently perform their tasks and duties.
52
The Personnel Strategy and Policy Division of Bankia's oversees the Group's training
activities and programmes, and keeps an up-to-date record of all training courses
provided and the content thereof. Specifically, regular training and refresher courses
are provided to personnel involved in the ICFR and its oversight that cover at least
accounting standards, auditing, internal control and risk management.
As well as induction training, during the year further training may be provided to
attend to specific training needs not envisaged at the offset, such as training in
response to regulatory changes or in response to specific requests from departments
for certain courses.
F.2
Financial Reporting Risks Assessment
At least reporting the following:
F.2.1. What are the main characteristics of the process of identifying
risks, including those of error or fraud, with regards to:

Whether the process does exist and is documented.
Bankia has developed a procedure for identifying material areas and relevant
processes, which takes into account the risk of errors and fraud that could
significantly affect the Group's financial reporting.

Whether the process covers the entire objectives of the
financial reporting, (existence and occurrence; integrity;
evaluation; presentation, breakdown and comparability; and
rights and obligations), if updated and at what frequency.
This procedure has been designed taking into account all financial reporting objectives
(existence, integrity, valuation, presentation and disclosures, and rights and
obligations). The procedure is documented, establishing the frequency, methodology,
types of risks as well as other guidelines, and the Corporate Financial Controller's
Department is responsible for implementing and updating this procedure.
The procedure to identify relevant processes and areas is performed once a year using
the latest financial information. However, this assessment will also be carried out
whenever circumstances not previously identified arise that result in possible errors in
the financial information or when substantial changes in transactions could lead to new
risks.

The existence of a process for identifying the consolidation
perimeter, considering, among other things, the possible
existence of complex corporate structures, instrumental or
special purpose entities.
The Company therefore avails of a monthly procedure for updating and verifying the
scope of consolidation performed by the - Corporate Financial Controller's
Department. This procedure is based on the Group's consolidation tool and enables
Bankia to ensure any variations in the scope of consolidation in the different reporting
periods are correctly included in the Group's consolidated financial statements.
The Regulations of the Board of Directors also authorise the Board to approve
53
resolutions concerning the creation or acquisition of shares in special purpose vehicles
or entities resident in countries or territories considered tax havens, and any other
transactions or operations of a comparable nature whose complexity might impair the
transparency of the Company and the Group.

Whether the process takes into account the effects of other
types of risks (operational, technological, financial, legal,
reputation, environmental, etc.) in the manner in which they
affect the financial statements.
The risk identification process takes into account of the impact of other types of risks
(e.g. operational, technological, financial, legal, tax, reputational, and environmental)
to the extent that these could affect the Bank’s financial reporting.

Which corporate governance body supervises the process?
The Audit and Compliance Committee's duties include supervising the effectiveness of
internal control and, specifically, periodically reviewing the internal control and risk
management systems, so that the principal risks are identified, managed and
appropriately disclosed.
F.3
Control activities
Indicate, specifying their main characteristics, the existence of at least the
following:
F.3.1. Procedures for reviewing and authorizing the financial reporting
and the description of the ICFR, to be published at the stock
market, indicating responsibilities, as well as the descriptive
documents of cash flows and monitoring (even in connection with
fraud risks) of the various types of transactions that could
materially affect the financial statements, including the accounting
closure proceedings and the specific revision of the judgements,
estimates, evaluations and relevant projections.
As stated in section F.1.1, the Board of Directors has delegated the authority to oversee the
correct functioning of the ICFR to the Audit and Compliance Committee.
The main duties of this Committee are:
1.- Supervise the effectiveness of the Company’s internal controls, internal audit, regulatory
compliance and risk management systems and discuss with the statutory auditor any
material weaknesses of the internal control system that may have been detected in the
audit, all while safeguarding independence. To this end, where appropriate the
Committee may make recommendations or submit proposals to the Board of Directors,
along with the related follow-up period. In particular, regarding internal reporting and
control systems:
-
verify the appropriateness and integrity of internal control systems and review the
appointment and replacement of those responsible for them;
-
review and supervise the preparation and integrity of the financial information
regarding the Company and, where appropriate, the Group, reviewing compliance
54
with regulatory requirements and the proper delimitation of the scope of
consolidations and the proper application of accounting principles;
-
periodically review the internal control and risk management systems, so that the
principal risks are identified, managed and appropriately disclosed;
-
establish and supervise a mechanism whereby staff can confidentially report any
irregularities with potentially serious implications they detect within the Company,
in particular financial or accounting irregularities; and
-
establish and supervise a system for preventing and detecting crimes that may result
in criminal liability for the Company.
2.- Supervise the preparation and filing of regulatory financial information and make
recommendations or submit proposals to the Board of Directors to safeguard the
integrity of the financial information, and in particular:
-
report to the Board of directors, in advance, on the financial information that the
Company must publish periodically;
-
review the Company’s accounts, to ensure compliance with legal requirements and
proper application of generally accepted accounting principles, and report on
changes to accounting principles and criteria proposed by management; and
-
review issue prospectuses and any periodic financial information the Board is
required to provide to the markets and market supervisory bodies.
The responsibilities of the Corporate Financial Controller's Department include, inter alia,
overseeing accounting management and the preparation of the Group's periodic financial
statements, as well as the financial information disclosed to the markets and regulatory
bodies.
This Department is also in charge of designing, implementing and regularly updating the
System of Internal Control Over Financial Reporting (ICFR).
Depending on the nature and frequency of the financial reporting, different levels of
responsibility have been assigned to different departments in the organisation:
-
the preparation of regulatory half-yearly and annual financial information is the
responsibility of the Corporate Financial Controller's Department, which reports to the
Chief Executive Officer.
-
the preparation of quarterly financial information for analysts and investors is the
responsibility of the Corporate Finance Department, which reports to the Chief
Executive Officer.
When preparing this information, the Corporate Financial Controller's Department and the
Corporate Finance Department call on the support of the departments and/or units
responsible for collecting certain supporting information that has to be disclosed in the
periodic financial reports. In addition, once the information has been prepared, and before it
is published, these departments and units are also required to review and give final approval
of the information under their responsibility.
Within the process of preparing half-yearly and year-end financial information, the
Corporate Financial Controller's Department is responsible for the accounting records arising
from the various transactions that took place in the Bank and the main control activities
identified in the accounting close process based on the materiality thresholds defined. In this
preparation, control procedures have been defined and implemented that guarantee the
quality of information and its reasonableness ahead of its presentation to management.
In this respect, the Corporate Internal Audit Department is in charge of the proper
functioning of the internal control and risk management system, as well as compliance with
regulations and procedures, issuing any recommendations for improvement it deems
appropriate.
The Audit and Compliance Committee is also involved in this review, notifying the Board of
Directors of its conclusions on the financial information that the Company must publish
periodically before it is disclosed.
Ultimately, the Board of Directors approves the financial information that the Company
must periodically disclose. These duties are set forth in the Board of Directors Regulations,
as described in point F.1.1 above. This review is documented in the minutes of the meetings
of the Board and its Committees.
The description of the ICFR is examined by the Corporate Financial Controller's Department
55
and the Corporate Internal Audit Department.
Within the framework of the specific controls and activities regarding transactions that may
significantly affect the financial statements, the Bankia Group has identified material areas
and specific risks, as well as significant processes in these areas, differentiating between
business processes and transversal processes, and has documented in detail each of the
processes, flows of activities, existing risks, controls performed, the frequency thereof, and
those responsible for carrying out these activities.
In order to identify the critical areas and significant processes, the Group has used the
materiality thresholds defined for the main financial figures in its financial statements, and
has taken into account both qualitative and quantitative matters.
The business processes identified affect the following critical areas:
-
Loans and receivables.
-
Financial liabilities at amortised cost.
-
Debt securities.
-
Derivatives.
-
Non-current assets held for sale.
-
Investments.
-
Tax assets and liabilities.
-
Provisions.
-
Fees and commissions for service transactions.
The transversal processes identified are as follows:
-
Accounting close.
-
Consolidation.
-
Judgements and estimates.
-
General IT controls.
Accordingly, the accounting close process includes the following phases:
-
Accounting close process, including revision, analysis and control tasks to ensure that
the monthly financial information offers a true and fair view of the Entity.
-
Preparation of financial statements.
-
Preparation of confidential financial statements for supervisory bodies.
-
Preparation of public information.
In addition, the accounting judgements and estimates process, backed by a specific policy
approved by the Management Committee, is designed to validate and confirm estimates that
could have a material impact on the financial information. These mainly refer to:
-
The fair value of certain financial and non-financial assets and liabilities.
-
Impairment losses on certain financial assets, considering the value of the guarantees or
collateral received and non-financial assets (mainly real estate).
-
The assumptions used in the actuarial calculation of post-employment benefit liabilities
and obligations and another long term obligations.
-
The estimate of costs to sell and the recoverable amount of non-current assets held for
sale, investment properties and inventories acquired by the Group in payment of debt, by
nature, condition and purpose.
-
The useful life, fair value and recoverable amount of tangible and intangible assets.
-
The recoverability of recognised tax assets.
-
The estimate, at each date, of the potential impacts of legal proceedings and claims
lodged against the Group in the course of its business.
-
The estimate, at each date, of the potential impacts of the existence of tax assessments
appealed and the results of tax inspections for the years open for review.
The head of each area affected is in charge of making estimates. In addition, the Corporate
56
Financial Controller's Department, during the preparation of financial reports, analyses these
estimates to assess their consistency and reasonableness, and presents them to the Bank's
Management Committee for approval before they are ultimately approved by the Board of
Directors.
As part of the Entity's ICFR assessment process, in 2014 an internal certification process was
designed and implemented to ensure the reliability of the half-yearly/annual financial
information for its disclosure to the market. In this process, each person in charge of the key
controls identified certifies, for the given period, the effective execution of the controls.
The Entity carried out two certification processes in 2015 for the preparation of the halfyearly and annual financial statements. No significant incidents were uncovered that could
have a material effect on the reliability of the financial information.
For the preparation of financial statements, the Corporate Financial Controller presents the
results of the certification process to the Board of Directors and the Audit and Compliance
Committee.
Moreover, the Corporate Internal Audit Department carries out supervisory functions, as
described in sections F.5.1 and F.5.2.
F.3.2. Policies and procedures of internal control of information systems
(especially on safety and security of access, monitoring of
changes, operating them, operational continuity and separation of
functions) that back the entity’s relevant processes with regards to
the elaboration and publication of the financial report.
The Corporate Financial Controller's Department prepares specifications for the policies and
procedures concerning IT systems that are used to prepare and publish financial information.
The Information Security General Policy and Regulations rolled out across the Entity's IT
systems are applied to the systems on which financial reporting is based and those used for its
preparation and control.
The Personnel, Resources and Technology Department is responsible for the Bank's IT and
telecommunication systems. Its duties include defining and monitoring the security policies
and standards for applications and infrastructures, including the IT internal control model.
The key tasks assumed by this department in relation to IT systems are as follows:
-
Data access and physical security systems.
-
Data access and logical security systems.
-
Back-up management.
-
Management of scheduled tasks.
-
Incident management.
-
Systems incident management.
The Bankia Group has set of rules regulations, including the Information Security General
Policy and Regulations, which are mandatory for anyone who processes information. These
documents are available to all employees on the Corporate intranet.
The Information Security General Policy constitutes the general regulatory framework, setting
for the responsibilities with respect to data protection and covering the general philosophy, the
goals, the principles and the acceptable ways of proceeding with respect to information
security, and constituting the first level of this set of rules and regulations. The objective is to
adequately protect the information of the Bankia Group.
The General Security Regulations detail the actions and controls applied to protect the Bankia
Group's information. Its aim is to support and facilitate the Policy. In this respect, it sets out
governance of information security, defining the access-protection measures and controls, and
implementation of the documented operational procedures and guidelines, which are reviewed
periodically in order to manage security in applications. It defines the principles of segregation
of duties, the management of back-up copies, the definition of responsibilities and functions
57
regarding security, training and raising awareness among those who process data, as well as
issues regarding confidentiality, integrity and availability of information and assets.
The Company's development process, which broadly encompasses the development of new
applications or modification of existing applications and appropriate management of these
projects, is based on maturity models that guarantee software quality and, especially, the
appropriate processing of transactions and the reliability of information.
The Entity has a Business Continuity Policy, which sets for the purposes and targets of its
business continuity programme, understood as an ongoing management and governance
process backed by senior management and endowed with the appropriate resources to
implement and maintain a business continuity management system. The main objective of this
system is to prevent or minimise potential losses for the organisation caused by a disruption,
ensure that the organisation can give a planned response to any incident, especially those that
could threaten its survival. Therefore, strategies are laid out for each critical activity to enable
their recovery. A testing and trial schedule is drawn up at the beginning of each year to ensure
that all the continuity preparations are executed with the determined frequency.
Bankia's business continuity system is BSI certified in accordance with the ISO 22301:2012
standard.
The Company has back-up architecture in its main processing centres. Back-up policies and
procedures also ensure information is available and can be recovered in the event of a loss.
Back-up procedures and recovery plans are evaluated by independent units to ensure they are
effective and that transactions involving financial information are appropriately processed and
registered.
F.3.3. Policies and procedures of internal control aimed at supervising the
management of activities sourced out to third parties, including the
aspects of valuation, calculation or assessment entrusted to
independent experts, which could materially affect the financial
statements.
The Bankia Group has a policy for outsourcing services and functions approved by the
Board of Directors, along with a governance model for outsourcing management.
The policy for outsourcing, understood as delegating to a third party the provision of
services and/or exercise of functions inherent in the normal or typical provision of banking
or investment services, outlines the criteria and guidelines necessary to address specific
aspects of outsourcing to: comply with applicable legislation; identify, measure, control and
management the inherent outsourcing risks; and adopt appropriate measures to prevent or
mitigate exposure to potential risks (operational, reputational and concentration), in
particularly when essential services or functions are outsourced.
The Bankia Group's outsourcing policy is supplemented with information and monitoring
procedures, which are applied until the outsourcing arrangement is concluded (including the
preparation on reasons underlying the outsourcing, the arrangement of the outsourcing
agreement, completion of the agreement until its conclusion, contingency plans, exit
strategy). In this respect, it is supplemented with the supplements the Governance Model for
Outsourcing Management. Among other things, implementation of model unifies the risk
management procedures associated with the outsourcing, prevents functional overlaps and
ensures regulatory compliance.
Before outsourcing essential functions and services, the Entity conducts a feasibility study of
the service or function, and selects and evaluates providers.
The feasibility study of the service or functions to be outsourced takes into consideration,
inter alia, the following factors: regulatory issues that affect the outsourcing; the impact of
the outsourcing on the entity’s business and the operational, reputational and concentration
risks it could entail; the entity’s ability to supervise the outsourced functions effectively and
manage the risks associated with the outsourcing adequately and its experience in doing so;
and preparation, application and maintenance of an emergency data recovery plan in the
event of catastrophes and regular verification of IT security mechanisms as necessary in light
of the outsourced function or service.
58
Providers are selected and evaluated in accordance with a number of factors to ensure: that
they have the competence, ability and necessary authorisations and permits to provide the
outsourced essential service or function reliably and professionally; that they effectively
provide the outsourced service or function, supervision the correction provision and that they
have personnel with appropriate training and experience; and that the provider manages the
outsourcing risk adequately (e.g. it has measures to safeguard confidential information,
performs regular data back-ups and security checks, and has, applies and keeps up to date an
emergency and contingency plan to enable it to continue its activity and limit losses in the
event of serious incidents in the business).
The organisational unit that outsources each essential service or function is responsible for
permanent control and monitoring of the services or functions performed by the provider. At
least every six months, it must prepare a report on the monitoring and control of the provider
and furnish this to the organisational groups that are assigned the internal control function of
the Group.
In any event,

(consolidated) Open

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