Consolidated Financial Statements

Consolidated financial statements 2015 Bankinter Group Consolidated financial statements for the financial year ended 31 December 2015 and Consolidated management report, together with the Audit Report Index Audit Report 3 32 Foreign exchange differences (net) 102 Consolidated Balance Sheets 4 33 Other general administrative expenses 103 Consolidated Income Statements 5 34 Other operating income and expenses 103 Consolidated Statements of Comprehensive Income and Expenses 6 35 Gains and losses on derecognition of non classified assets como Consolidated Statements of Changesin Equity 7 no current for sale and Gains and losses of assets not corrientes Consolidated Cash Flow Statements 8 en non classified sale as discontinued operations 103 1 Nature, activities and composition of the Group 9 36 Related party transactions and balances 104 2 Accounting policies applied 9 37 Transactions and balances with members of the Board of Directors 104 3 Distribution of profits for the period 15 38 Environmental information 113 4 Deposit guarantee fund 17 39 Customer Service 115 5 Accounting policies and valuation principles applied 18 40 Branches, centres and agents 116 6 Cash and deposits with central banks 37 41 Fiduciary transactions and investment services 117 7 Held-for-trading assets and liabilities and other financial 42 Remuneration of account auditors 117 assets at fair value through profit and loss 38 43Tax situation 118 8 Available-for-sale financial assets 41 44 Fair value of assets and liabilities 122 9 Held-to-maturity investments 42 45 Risk policies and management 129 10 Credit investments 43 46 Information required by Law 2/1981 of 25 March on Mortgage Market 11 Asset and Liability hedging derivatives 47 Regulation and Royal Decree 716/2009 of 24 April implementing certain 12 Non-current assets held for sale 50 aspects of said law 150 13 Shares 52 47 Exposure to the construction and property development sector 165 14 Property, plant and equipment 64 48 Additional Information on risks: Refinancing and restructuring 15 Intangible assets 66 transactions. Sectoral and geographical concentration of risks 168 16 Reinsurance assets 68 49 Equity and Minimum reserves 182 17Deferred tax assets and liabilities 69 50 Information by segments 185 18 Rest of assets and rest of liabilities 70 51 Holdings in the capital of credit institutions 186 19 Financial liabilities at amortised cost 71 52 Information about average period of payment to suppliers 186 20 Liabilities under insurance contracts 77 53 Subsequent events 186 21 Provisions 80 54 Explanation added for translation to English 187 22 Equity 81 23 Valuation adjustments (shareholders' equity) 85 Appendices 24 Offsetting of financial assets and liabilities and collateral 86 I Related party transactions 188 25 Contingent risks and commitments 86 II Segmented Information 192 26Transfer of financial assets 87 III Financial Statements of Bankinter, S.A. 194 27 Financial derivatives 87 IV Individualised information on certain issues, 28 Staff costs 90 buy-backs or reimbursements of debt securities 199 29 Fee and commission income and expense 100 V Annual Banking Report 201 30 Interest and similar charges/income 101 MANAGEMENT REPORT 203 31Gains/loss from financial operations 102

Consolidated financial statements 2015 Bankinter 4

Bankinter Group. Consolidated Balance Sheets as at 31 December 2015 and 2014. (Thousands of Euros) ASSETS Note 31-12-2015 31-12-2014(*) LIABILITIES AND NET WORTH Note 31-12-2015 31-12-2014(*) CASH AND DEPOSITS WITH CENTRAL BANKS 6 925,361 357,327 LIABILITIES HELD-FOR-TRADING PORTFOLIO 7 4,473,638 5,353,482 Deposits with credit institutions 1,009,596 544,528 HELD-FOR-TRADING PORTFOLIO 7 3,769,080 2,441,491 Customer credit 808,476 1,967,180 Deposits by credit institutions 735,427 270,621 Debt securities 2,264,761 2,345,496 Customer deposits 995,019 451,559 Equity instruments 34,764 59,320 Trading derivatives 464,958 322,598 Trading derivatives 356,041 436,958 Short positions in securities 1,573,676 1,396,713 Memorandum items: Loaned or pledged 1,790,311 1,700,679 OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS - - OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 7 57,209 49,473 Equity instruments 57,209 49,473 FINANCIAL LIABILITIES AT AMORTISED Memorandum items: Loaned or pledged - - COST 19 49,836,994 49,990,680 Deposits by central banks 3,017,983 3,240,433 AVAILABLE-FOR-SALE FINANCIAL ASSETS 8 3,530,153 3,013,813 Deposits by credit institutions 1,792,316 5,249,425 Debt securities 3,377,008 2,845,308 Customer deposits 32,820,400 29,966,129 Equity instruments 153,145 168,505 Debt securities 10,484,882 9,311,034 Memorandum items: Loaned or pledged 460,940 746,292 Subordinated liabilities 594,563 608,198 Other financial liabilities 1,226,850 1,615,461 LOANS AND RECEIVABLES 10 45,479,314 44,006,521 Deposits with credit institutions 850,451 1,113,441 ADJUSTMENTS TO FINANCIAL LIABILITIES DUE TO Customer credit 44,182,633 42,446,723 MACRO HEDGES - - Debt securities 446,230 446,357 Memorandum items: Loaned or pledged 294,267 356,515 HEDGING DERIVATIVES 11 11,489 20,241

PORTFOLIO OF INVESTMENTS HELD TO MATURITY 9 2,404,757 2,819,482 LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE - - Memorandum items: Loaned or pledged - 2,805,745 LIABILITIES UNDER INSURANCE CONTRACTS 20 630,983 614,780 ADJUSTMENTS TO FINANCIAL LIABILITIES DUE TO MACRO-HEDGES - - PROVISIONS 21 95,868 88,236 Provisions for pensions and similar obligations 458 818 HEDGING DERIVATIVES 11 160,073 148,213 Provisions for risks and contingent commitments 8,312 7,499 Other provisions 3,938 7,141 NON-CURRENT ASSETS HELD FOR SALE 12 318,287 356,671 Provisions for taxes and other legal contingencies 83,160 72,778

INVESTMENTS 13 39,424 29,726 TAX LIABILITIES 17 314,940 312,416 Associates 38,681 28,857 Current 172,949 135,054 Joint ventures 743 869 Deferred 141,991 177,362

INSURANCE CONTRACTS LINKED TO PENSIONS 28 343 714 OTHER LIABILITIES 18 202,279 221,686

REINSURANCE ASSETS 16 2,889 3,006 TOTAL LIABILITIES 54,861,623 53,689,530 TANGIBLE ASSETS 14 493,114 467,362 NET WORTH 3,798,177 3,643,445 Property, plant and equipment - 417,280 412,838 SHAREHOLDERS' EQUITY 22 3,689,436 3,513,914 For own use 395,348 388,181 Share capital 269,660 269,660 Leased out under operating leases 21,932 24,657 Authorised 269,660 269,660 Investment property 75,834 54,524 Share premium account 1,184,268 1,184,268 Memorandum items: acquired under finance leases - - Reserves 1,996,421 1,853,783 Retained earnings (losses) 1,995,683 1,860,226 INTANGIBLE ASSETS 15 266,693 282,327 Retained earnings (losses) of companies accounted for by the equity method 738 (6,440) Goodwill 164,113 164,113 Other equity instruments 1,339 - Other intangible assets 102,580 118,214 Other equity instruments 1,339 - TAX ASSETS 17 348,238 298,172 Less: treasury shares (988) (771) Current 201,391 154,294 Profit (loss) for the year attributable to the parent company 375,920 275,887 Deferred 146,847 143,878 Less: dividends and similar payments (137,184) (68,913)

OTHER ASSETS 18 160,317 146,685 VALUATION ADJUSTMENTS 23 108,741 129,531 Other 160,317 146,685 Available-for-sale financial assets 107,084 123,727 Foreign exchange differences (3,337) 220 Other valuation adjustments 1,288 1,162 Entities accounted for by the equity method 3,706 4,422 NON-CONTROLLING INTERESTS - - TOTAL ASSETS 58,659,810 57,332,974 TOTAL LIABILITIES AND NET WORTH 58,659,810 57,332,974 MEMORANDUM ITEMS: CONTINGENT RISKS 25 3,229,661 2,736,529 CONTINGENT COMMITMENTS 25 10,989,833 13,527,713

(*) Presented for comparative purposes only.

The accompanying notes 1 to 54 and appendices I to V attached form an integral part of the consolidated balance sheet as at 31 December 2015. Consolidated financial statements 2015 Bankinter 5

Bankinter Group. Consolidated Income Statements. Corresponding to the Financial Years Ended 31 December 2015 and 2014. (Thousands of Euros)

(Debit)/ Credit Note 2015 2014 (*) INTEREST AND SIMILAR INCOME 30 1,283,765 1,404,321 INTEREST EXPENSE AND SIMILAR CHARGES 30 (414,311) (648,963) NET INTEREST INCOME/EXPENSE 869,454 755,358 RETURNS ON EQUITY INSTRUMENTS 6,681 8,004 SHARE OF PROFIT OR LOSS OF COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD 22 18,223 16,962 FEE AND COMMISSION INCOME 29 390,148 365,298 FEE AND COMMISSION EXPENSE 29 (80,275) (73,891) GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES (net) 31 66,151 90,084 Held for trading 12,360 14,982 Other financial instruments at fair value through profit or loss (3,183) 1,163 Financial liabilities not valued at fair value through profit or loss 57,707 74,058 Other (733) (119) FOREIGN EXCHANGE DIFFERENCES (net) 32 52,956 43,211 OTHER OPERATING INCOME 34 695,783 682,500 Income from insurance and reinsurance contracts written 669,031 651,549 Other operating income 26,752 30,951 OTHER OPERATING EXPENSES 34 (450,306) (438,703) Expenses from insurance and reinsurance contracts written (361,734) (362,487) Other operating expenses (88,572) (76,216) GROSS OPERATING INCOME 1,568,815 1,448,823 ADMINISTRATIVE EXPENSES (699,401) (655,473) Staff costs 28 (393,459) (368,738) Other general administrative expenses 33 (305,942) (286,735) DEPRECIATION AND AMORTISATION 14/15 (61,653) (63,773) PROVISIONING EXPENSE (NET) 21 (25,254) (41,536) IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET) (189,301) (237,390) Loans and receivables 10 (178,979) (233,874) Other financial instruments not valued at fair value through profit or loss 8 (10,322) (3,516) OPERATING PROFIT (LOSS) 593,206 450,651 IMPAIRMENT LOSSES ON OTHER ASSETS (net) (442) (118) Goodwill and another intangible assets - (168) Other assets (442) 50 GAINS (LOSSES) ON THE DISPOSAL OF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE 35 (2,001) (2,980) NEGATIVE GOODWILL ARISING IN BUSINESS COMBINATIONS - - GAINS (LOSSES) ON NON-CURRENT ASSETS HELD FOR SALE NO CLASSIFIED AS DISCONTINUED OPERATIONS 35 (70,433) (54,714) PROFIT BEFORE TAX 520,330 392,839 CORPORATION TAX 43 (144,410) (116,952) PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 375,920 275,887 PROFIT FROM DISCONTINUED OPERATIONS (net) - - CONSOLIDATED PROFIT FOR THE YEAR 375,920 275,887 Profit (loss) attributable to the parent company 375,920 275,887 Profit (loss) attributable to non-controlling interests EARNINGS PER SHARE Basic earnings (euros) 0.42 0.31 Diluted earnings (euros) 0.42 0.31

(*) Presented for comparative purposes only.

The accompanying notes 1 to 54 and appendices I to V attached form an integral part of the consolidated income statement as at 31 December 2015. Consolidated financial statements 2015 Bankinter 6

Bankinter Group. Consolidated Statement of Recognised Income and Expense Corresponding to the Financial Years Ended 31 December 2015 and 2014 (Thousands of Euros)

Financial year Financial year 2015 2014 (*)

CONSOLIDATED PROFIT FOR THE YEAR 375,920 275,887

OTHER RECOGNISED INCOME AND EXPENSE (20,790) 86,359 Items that will not be reclassified to income statement; 126 1,162 Actuarial gains and losses in defined benefit plans 180 1,659 Non-current assets held for sale - - Entities accounted for by the equity method - - Corporation tax related to items that will not be reclassified to income statement (54) (497) Items that may be reclassified to income statement; (20,916) 85,197 Available-for-sale financial assets - (30,149) 117,317 Revaluation gains (losses) 1,845 159,725 Amounts transferred to income statement (31,994) (42,408) Other reclassifications - - Cash flow hedges - - - Revaluation gains (losses) - - Amounts transferred to income statement - - Amounts transferred to initial carrying amount of hedged items - - Other reclassifications - - Hedges of net investments in foreign operations - - - Revaluation gains (losses) - - Amounts transferred to income statement - - Other reclassifications Foreign exchange differences - (5,081) 27 Conversion gains (losses) (4,321) 27 Amounts transferred to income statement (760) - Other reclassifications - - Non-current assets held for sale - - - Revaluation gains (losses) - - Amounts transferred to income statement - - Other reclassifications - - Actuarial gains (losses) in pension plans - - Companies accounted for by the equity method - (715) 3,056 Revaluation gains (losses) (715) 3,056 Amounts transferred to income statement - - Other reclassifications - - Other recognised income and expense - - Corporation Tax 15,029 (35,203) TOTAL RECOGNISED INCOME AND EXPENSE 355,130 362,246 Attributable to parent company 355,130 362,246 Attributable to non-controlling interests - -

(*) Presented for comparative purposes only.

The accompanying notes 1 to 54 and appendices I to V attached form an integral part of the consolidated statement of recognised income and expense corresponding to the financial year ended 31

December 2015. Consolidated financial statements 2015 Bankinter 7

Bankinter Group. Consolidated Statements of Changes in Equity Corresponding to the Financial Years Ended 31 December 2015 and 2014 (Thousands of Euros) NET WORTH ATTRIBUTABLE TO THE PARENT COMPANY SHAREHOLDERS' EQUITY

Profit (loss) Non- Retained Less: for the year Less: Dividends Total Total Net Share Share Valuation controlling Earnings Other equity Treasury attributable and Similar Shareholders' Total Worth capital premium Adjustments interests (Losses) instruments Shares to the parent Payments Equity company

Opening balance as at 31/12/2014 269,660 1,184,268 1,853,783 - (771) 275,887 (68,913) 3,513,914 129,531 3,643,445 - 3,643,445 Adjustments due to changes in accounting policy ------Adjustments to correct errors ------Adjusted opening balance 269,660 1,184,268 1,853,783 - (771) 275,887 (68,913) 3,513,914 129,531 3,643,445 - 3,643,445 Total recognised income and expense - - - - - 375,920 - 375,920 (20,790) 355,130 - 355,130 Other changes in net worth - - 142,638 1,339 (217) (275,887) (68,271) (200,398) - (200,398) - (200,398) Share capital increases ------Share capital reductions ------Conversion of financial liabilities to equity ------Increases in other equity instruments ------Reclassification of financial liabilities to other equity instruments ------Reclassification of other equity instruments to financial liabilities ------Distribution of dividends and similar payments to shareholder - - - - - (206,215) (206,215) - (206,215) - (206,215) Transactions with/contributions to treasury shares (net) - - 249 (217) - - 32 - 32 - 32 Transfers between net worth items - - 137,943 - (275,887) 137,944 - - - - - Increases (reductions) in net worth resulting from business combinations (net) ------Discretionary transfer to social projects and funds (Savings banks) ------Payments in equity instruments - - (12) 1,339 - - - 1,327 - 1,327 - 1,327 Other increases (reductions) in net worth - - 4,458 - - - 4,458 - 4,458 - 4,458 Closing balance as at 31/12/2015 269,660 1,184,268 1,996,421 1,339 (988) 375,920 (137,184) 3,689,436 108,741 3,798,177 - 3,798,177

NET WORTH ATTRIBUTABLE TO THE PARENT COMPANY SHAREHOLDERS' EQUITY

Opening balance as at 31/12/2013 268,675 1,172,645 1,744,134 12,609 (511) 215,424 (52,602) 3,360,373 43,172 3,403,545 - 3,403,545 Adjustments due to changes in accounting policy - - (25,824) - (25,524) - (51,348) - (51,348) - (51,348) Adjustments to correct errors ------Adjusted opening balance 268,675 1,172,645 1,718,310 12,609 (511) 189,900 (52,602) 3,309,025 43,172 3,352,197 - 3,352,197 Total recognised income and expense - - - - - 275,887 - 275,887 86,359 362,246 - 362,246 Other changes in net worth 985 11,623 135,473 (12,609) (260) (189,900) (16,311) (70,998) - (70,998) - (70,998) Share capital increases 985 11,623 - (12,609) ------Share capital reductions ------Conversion of financial liabilities to equity ------Increases in other equity instruments ------Reclassification of financial liabilities to other equity instruments ------Reclassification of other equity instruments to financial liabilities ------Distribution of dividends and similar payments to shareholder - - - - - (70,167) (70,167) - (70,167) - (70,167) Transactions with/contributions to treasury shares (net) - - 846 (260) - - 586 - 586 - 586 Transfers between net worth items - - 136,044 - (189,900) 53,856 - - - - - Increases (reductions) in net worth resulting from business combinations (net) ------Discretionary transfer to social projects and funds (Savings banks) ------Payments in equity instruments - - (205) - - - (205) - (205) - (205) Other increases (reductions) in net worth - - (1,212) - - - (1,212) - (1,212) - (1,212) Closing balance as at 31/12/2014 269,660 1,184,268 1,853,783 - (771) 275,887 (68,913) 3,513,914 129,531 3,643,445 - 3,643,445 (*) Presented for comparative purposes only

The accompanying notes 1 to 54 and appendices I to V attached form an integral part of the consolidated statement of changes in assets corresponding to the financial year ended 31 December 2015. Consolidated financial statements 2015 Bankinter Bankinter Group. Consolidated Cash Flow Statements Corresponding to the Financial Years Ended 31 December 2015 and 2014 8 (Thousands of Euros)

2015 2014 (*) NET CASH FLOWS FROM OPERATING ACTIVITIES 270,219 (805,031) Consolidated profit (loss) for the period 375,920 275,887 Adjustments to obtain cash flows from operating activities - 456,061 497,404 Depreciation and Amortisation 61,653 63,773 Other adjustments 394,408 433,631 Net increase/decrease in operating assets - 1,564,834 3,381,096 Held for trading (879,844) 1,006,909 Other financial assets at fair value through profit or loss 7,736 31,315 Available-for-sale financial assets 550,440 416,840 Loans and receivables 1,805,692 1,781,966 Other operating assets 80,810 144,066 Net increase/decrease in operating liabilities: 1,158,713 1,907,753 Held for trading 1,327,589 689,769 Other financial liabilities at fair value through profit or loss - - Financial liabilities at amortised cost (119,698) 1,081,241 Other operating liabilities (49,178) 136,743 Payments made / received in respect of corporation tax (155,641) (104,979) CASH FLOWS FROM INVESTING ACTIVITIES 519,234 517,966 Payments - (106,312) (110,341) Property, plant and equipment (83,021) (83,976) Intangible assets (23,291) (13,275) Investments - (13,090) Non-current assets and associated liabilities held for sale - - Held-to-maturity investments - - Payments received - 625,546 628,307 29,440 34,627 Property, plant and equipment Intangible assets 6,859 - Investments - - Non-current assets and associated liabilities held for sale 176,098 193,934 Held-to-maturity investments 413,149 399,746 CASH FLOWS FROM FINANCING ACTIVITIES (219,275) (175,643) Payments - (283,799) (225,995) Dividends (206,215) (90,097) Subordinated liabilities (13,300) (86,300) Acquisition of own equity instruments (64,284) (49,598) Other payments related to financing activities - - Payments received - 64,524 50,352 Subordinated liabilities - - Issue of own equity instruments - - Disposal of own equity instruments 64,524 50,352 Other payments received related to financing activities - - EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES - - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D) 570,178 (462,708) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 878,704 1,341,412 CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,448,882 878,704 MEMORANDUM ITEMS: COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,448,882 878,704 Cash 199,419 139,512 Cash equivalents at central banks 723,662 217,555 Other financial assets 525,801 521,637 Total cash and cash equivalents at end of period 1,448,882 878,704

(*) Presented for comparative purposes only

The accompanying notes 1 to 54 and appendices I to V attached form an integral part of the consolidated cash flow statement corresponding to the financial year ended 31 December 2015 Consolidated financial statements 2015 Bankinter 9

Bankinter Group The consolidated financial statements of the Group have been prepared in accordance with the accounting policies described in the section “Accounting Policies and Notes to the consolidated financial statements corresponding to the Valuation Principles Applied”. financial year ended 31 December 2015 The balance sheets of Bankinter, S.A. as at 31 December 2015 and 2014 and the 1. Nature, activities and composition of the Group income statements corresponding to the financial years ended on these dates are presented in Appendix III. Bankinter, S.A. was incorporated by notarial deed issued in Madrid on 4 June 1965, under the name Banco Intercontinental Español, S.A. On 24 July 1990 it acquired 2. Accounting policies applied its current name. It is registered in the Official Banks and Bankers Register. Its Tax Identification number is A-28157360 and it belongs to the Deposit Guarantee Basis of presentation of the financial statements Fund with code number 0128. The company address is Paseo de la Castellana 29, 28046 Madrid, Spain. The legal entity identification (LEI) code of Bankinter, S.A. is In accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of VWMYAEQSTOPNV0SUGU82. the Council of 19 July 2002, all companies that are governed by the Law of a member state of the European Union, and whose equity securities are listed on a regulated The corporate purpose of Bankinter, S.A. (the Bank or the Company) is the performance market of any of the States that constitute it, must prepare their consolidated financial of banking activity, and it is subject to the laws and regulations applicable to banking statements in accordance with the International Financial Reporting Standards entities operating in Spain. (hereinafter, IFRS) that have been previously adopted by the European Union.

In addition to the operations it carries out directly, the Bank is the parent company of In order to adopt the accounting regime of Spanish credit institutions to the new a group of dependent companies, which are dedicated to various activities (essentially regulations, the Banco de España published Circular 4/2004, of 22 December, on Public services related to investment, asset management, credit cards and the insurance and Confidential Financial Reporting Rules and Formats. business) and which constitute, together with the Bank, the Bankinter Group (hereinafter, the “Group” or the “Bankinter Group”). Consequently, the Bank is obliged The Group's consolidated financial statements have been prepared by the Directors of to elaborate, in addition to its own individual financial statements, consolidated the Bank (in the meeting of its Board of Directors on 16 February 2016) in accordance financial statements for the Group, which also include the shareholdings in joint with the regulatory framework application to the Group, which is that established ventures and investments in associate companies. in the Code of Commerce and other company law and in the International Financial Reporting Standards adopted by the European Union, and taking in consideration The subsidiary companies that make up the Bankinter Group are listed in Note 13 Circular 4/2004 of the Banco de España, applying the principles of consolidation, “Investments”. accounting policies and valuation criteria described assessment in Note 5 of the accompanying notes to the consolidated financial statements, in order to give a true and fair view of the consolidated assets and financial situation of the Group and of the consolidated profit or loss of its operations, recognised income and expense and cash flows. These consolidated financial statements corresponding to the 2015 financial year shall be presented for the approval of the General Shareholders' Meeting. Consolidated financial statements 2015 Bankinter 10

The notes to the consolidated financial statements contain information additional Standards and interpretations effective in the current financial year to that which is presented in the balance sheet, in the income statement, in the statement of changes in assets and in the cash flow statement. They contain narrative Changes implemented in the 2015 financial year descriptions or breakdowns of these statements in a clear, relevant, reliable and comparable manner. In the 2015 financial year, the following modifications of the IFRS and of their interpretations (hereinafter, “IFRIC”) came into force, which have not had a significant The Group's consolidated financial statements corresponding to the 2014 financial impact on the consolidated financial statements of the Bankinter Group. year were approved by the General Shareholders' Meeting held on 18 March 2015. ■■ IAS 19 modified - “Employee benefits. Employee contributions to defined benefit In accordance with the options established in IAS 1.81, the Group has chosen to plans” present separately, on the one hand, a statement that shows the components of the consolidated profit or loss (“Consolidated income statement”) and a second statement The new IAS 19 introduces modifications in accounting for contributions to defined that, starting from the consolidated profit or loss for the period, shows the components benefit plans in order to facilitate the possibility of deducting these contributions from of the other overall profit or loss for the period which, in these consolidated financial the service cost in the same period in which they are paid if certain requirements are statements, appears as the “Consolidated statement of recognised income and met, without the need to perform calculations to attribute the deduction to each year expense”, applying the name of Circular 4/2004 of the Banco de España. of service.

The accounting policies and methods used in preparing these financial statements are ■■ Annual improvements to IFRS 2010-2012 – Small modifications to IFRS 8, IFRS 13, the same as those applied in the consolidated financial statements of 2014, taking IAS 16, IAS 24 and IAS 38 in consideration the Standards and Interpretations that came into force during 2015. The annual improvements to IFRS 2010-2012 introduce small modifications and clarifications to IFRS 8 – Operating segments, IFRS 13 – Fair value Measurement, IAS 16 – Property, Plant and Equipment, IAS 24 – Related party disclosures and IAS 38 – Intangible assets.

■■ Annual improvements to IFRS 2011-2013

The annual improvements to IFRS 2011-2013 introduce small modifications and clarifications to IFRS 1 – First-time adoption of IFRS, IFRS 3 – Business combinations, IFRS 13 – Fair value measurement and IAS 40 – Investment property. Consolidated financial statements 2015 Bankinter 11

Standards and interpretations issued that have not come into force as at 31 December Finally, the impairment model proposed in IFRS9 is a model of expected loss, not of 2015. incurred loss as in the current IAS39. Also, the new impairment model of IFRS9 is a relative model that compares the existing credit risk at the time of the granting of In the 2015 financial year, the following standards, modifications or interpretations the operations with the current risk at the valuation date. If, as a consequence of this had been published by the IASB, but their application was not compulsory: comparison, a significant increase in the credit risk is highlighted, the operation would be classified in status “two” and a provision would be recognised for the estimated ■■ IFRS 9 - “Financial instruments” future expected loss up until the maturity of the operation. If, in addition, a loss incurred in these operations is identified, that is, objective evidence of impairment On 24 July 2014, the IASB issued IFRS 9 on financial instruments, which will substitute has been identified and it has been concluded that as at the reporting date the IAS 39 in the future. The standard includes three phases. operation is impaired, it will be classified in status “three” in which, in addition to recognising an impairment for the expected loss at maturity, interest would only be - Classification and measurement recognised for the principal of the operation net of provisions. In all other cases, the operations would be classified in status “one” where a provision is recognised for the - Hedge accounting expected loss of this category in the next 12 months.

- Impairment Expected loss over 12 months refers to the losses at maturity that the financial assets that will breach their contractual conditions in the next 12 months will suffer. There are significant differences to the current standard in relation to financial assets Expected loss at maturity refers to the losses at maturity that the financial assets including, among others, the approval of a new classification model based on the that breach their contractual conditions at any time in their life will suffer, hence it is business model of each portfolio and in the characteristics intrinsic to financial assets, logically a greater expected loss than that over 12 months. the disappearance of the current classification of “Investments held to maturity” and the non-splitting out of derivatives that are implicit in financial assets. The main impact in provisions of the application of this new impairment model will focus on statuses one and two, given that the provision of status three will be Financial liabilities continue to be recorded as at present with the exception that, as consistent with the current one for impaired financial assets. a general rule, changes in fair value due to credit risk of financial liabilities that are held for trading or designated at fair value through profit and loss will be recorded The Bankinter Group has set up an implementation committee for IFRS9 which is in shareholders' assets, as a valuation adjustment and will never go to the income analysing the main impacts and implementation strategies of this new standard. statement. The aforementioned committee will supervise the implementation of the standard during 2016 and part of 2017, as well as the parallel exercise that will be carried out Hedge accounting will also undergo changes as the approach of the standard is during 2017. The Group is waiting to present its first impact analysis in the Group's different to that of the current IAS 39, seeking to align the accounting with the consolidated financial statements for 2017. financial management of the risk. Consolidated financial statements 2015 Bankinter 12

The IASB has established 1 January 2018 as the compulsory application date, with the ■■ IFRS 15 – “Revenue from Contracts with customers” possibility for early application. IFRS 15 establishes the principles that a company should apply to account for the ■■ IFRS 7 modified – “Financial Instruments: Disclosures” revenue and cash flows from contracts for the sale of goods or services to its customers.

The IASB modified IFRS 7 in December 2011 to introduce new disclosures on financial According to this new standard, companies will recognise revenues from a contract instruments that companies should present in the period in which they apply IFRS 9 with customers when they have satisfied their obligations for the transfer of goods for the first time. or the rendering of services to their customers, in accordance with the contractual agreements, and it is considered that a good or service has been transferred when the ■■ Modification of IFRS 11 – “Joint arrangements” customer obtains control of it. With regard to the amount to be recognised, it shall be the amount reflected by the payment to which the right is expected for the goods or The modifications made to IFRS11 introduce an accounting guide for acquisitions of services transferred. shareholdings in joint operations whose activity constitutes a business, according to which they should be accounted for applying the principles of IFRS 3 – Business IFRS 15 replaces IAS 18 – Revenue from ordinary activities, IAS 11 – Construction combinations. contracts, IFRIC 13 – Customer loyalty programmes, IFRIC 15 – Agreements for the construction of real estate, IFRIC 18 – Transfers of assets from customers and to the These modifications shall apply to periods beginning from 1 January 2016, although SIC 31 – Revenue - Barter transactions involving advertising services. their early application is permitted. This standard shall apply to periods beginning from 1 January 2017, although its ■■ Modification of IAS 16 – “Property, Plant and Equipment” and IAS 38 modified – early application is permitted. “Intangible assets” ■■ Modification of IAS 27 – “Separate financial statements” The modifications made to IAS 16 and to IAS 38 exclude, as a general rule, asset depreciation and amortization methods that are based on income, due to the fact The modifications made to IAS 27 allow companies to use the equity method to that, except for in very exceptional cases, these methods do not reflect the pattern account for their investments in subsidiaries, joint ventures and associates, in their with which the company is expected to consume the economic benefits of the asset. separate financial statements.

These modifications shall apply to periods beginning from 1 January 2016, although These modifications shall apply to periods beginning from 1 January 2016, using the their early application is permitted. equity method. Consolidated financial statements 2015 Bankinter 13

■■ Modification of IFRS 10 – “Consolidated financial statements” and IAS 28 modified ■■ IFRS 16 – “Leases”

The modifications made to IFRS 10 and to IAS 28 establish that, when a company sells On 13 January 2016, the IASB issued IFRS 16, which will replace IAS 17. The new or transfers assets that constitute a business (including its consolidated subsidiaries) standard introduces a single accounting model for the lessee and requires it to to a company or joint venture of the company, it should recognise the gains or losses recognise the assets and liabilities of all lease contracts with a term of more than 12 from the transaction in their entirety. However, when the assets it sells or transfers months, unless the underlying assets is of low value. The lessee should recognise in do not constitute a business, it should recognise the gains or losses only to the extent the asset a right of use that represents its right to use the leased asset, and a lease of the shareholdings in the associate company or joint venture of other investors not liability that represents its obligation to make the lease payments. related to the company. With regard to the lessor's accounting, IFRS 16 substantially maintains the accounting These modifications shall apply to periods beginning from 1 January 2016, although requirements of IAS 17. As a result, the lessor will continue to classify its leases as their early application is permitted. operating leases or finance leases, and it shall account for each of those two types of lease contracts in a different way. ■■ Annual improvements of IFRS 2012-2014 This standard shall apply to periods beginning from 1 January 2019, although its The annual improvements to IFRS 2012-2014 introduce small modifications and early application is permitted if IFRS 15 is also applied. clarifications to IFRS 5 – Non-current assets held for sale and discontinued operations, IFRS 7 – Financial instruments: Disclosures, IAS 19 – Employee benefits and IAS 34 – During 2014, the Group carried out an early adoption of interpretation 21 of the Interim financial reporting. International Financial Reporting Interpretations Committee (IFRIC 21) on levies, which involved a change in the company's accounting policies in the 2014 financial These modifications shall apply to periods beginning from 1 January 2016, although year that was applied retrospectively. their early application is permitted. None of these regulatory modifications are expected to have a significant impact on These modifications shall apply to periods beginning from 1 January 2016, although the Group's consolidated financial statements. their early application is permitted in some cases. b) Accounting policies and valuation principles The modifications shall apply to periods beginning from 1 January 2017, although their early application is permitted in some cases. In preparing the consolidated financial statements, the generally accepted accounting policies and valuation principles described in Note 5, “Accounting Policies and Valuation Principles Applied”, have been followed.

Unless otherwise indicated, these consolidated financial statements are expressed in thousands of euros. Consolidated financial statements 2015 Bankinter 14

c) Judgements and estimates used d) Basis of consolidation

The information included in these consolidated financial statements is the The definition of the Group has been made in accordance with the accounting responsibility of the Directors of the Group, having used, where applicable, estimates regulations currently in force. All of the Dependent, Multi-group and Associate for the valuation of certain assets, liabilities, incomes, expenses and commitments Companies are considered Investee Companies. that have been made by the Senior Management of the Group and ratified by its Directors. These estimates correspond, essentially, to: Dependent Companies are those which constitute a decision unit with the Parent Company, which corresponds with those over which the Parent Company has ■■ the impairment losses of certain assets (Note 10) the capacity to exercise control, either directly or indirectly via another or other ■■ the useful life applied to the elements of the Property, plant and equipment and Investee Companies. This capacity to exercise control generally arises, although not to the Intangible assets (Notes 14 and 15) exclusively, from holding a share of 50% or more of the investee company's voting ■■ the fair value of certain unlisted assets (Note 44) rights, either directly or indirectly via another or other Investee Companies. Control is ■■ the actuarial hypotheses used in the calculation of the liabilities and commitments understood as the power to direct the financial and operational policies of an investee for post-employment benefits (Note 28) company, in order to obtain profits from its activities, and it can be exercised even ■■ the calculation of provisions (Note 21) if the aforementioned shareholding percentage is not held. There are no companies Despite the fact that these estimates have been made based on the best available considered dependent in which the Group holds less than 50%. information at the close of the financial year, it is possible that events which, where applicable, occur in the future compel them to be modified in subsequent periods, In the consolidation process, the full consolidation process has been applied for the which would be done prospectively in accordance with IFRS 8, recognising any effects financial statements of Dependent Companies. Consequently, all the significant of the change of estimate that, where applicable, may arise in the corresponding balances and transactions carried out between consolidated companies have been consolidated income statement of the periods affected. eliminated in the consolidation process.

The consolidation of the profits or losses generated by the companies acquired by the Group in the period is carried out taking into account only those which relate to the period between the date of acquisition and the end of the financial year. Also, the consolidation of the profits or losses generated by the companies disposed of by the Group in the period is carried out taking into account only those which relate to the period between the beginning of the financial year and the date of disposal.

Multi-group Companies are epinvestee companies which, not being Dependent Companies, are controlled jointly by the Group and by another or other companies that are unrelated to the Group and joint ventures. Joint ventures are contractual agreements in virtue of which two or more companies or shareholders carry out operations or hold assets such that any strategic decision of a financial or operational nature that affects them requires the unanimous consent of all the shareholders, Consolidated financial statements 2015 Bankinter 15

without these operations or assets being included in financial structures other than e) Comparison of information those of the shareholders. In the consolidation process, the equity method is applied for the financial statements of EMulti-group Companies. In accordance with company law, the Directors present the information contained in this report referring to 2014 only for the purposes of comparison with the information Associate Companies are those in which the Group has a significant influence. This related to the 2015 financial yearand, as a result, it does not constitute the Group's significant influence generally arises, although not exclusively, from holding a share consolidated financial statements for the 2014 financial year. of 20% or more of the Investee Company's voting rights, either directly or indirectly via another or other Investee Companies. 3. Distribution of profits for the period.

In the consolidation process, the equity method has been applied for Associate The proposed distribution of the profits of Bankinter, S.A. for the financial year Companies. Consequently, shareholdings in Associate Companies have been valued ended 31 December 2015, formulated by the directors of the Bank and which will be by the fraction that the Group's shareholding in its share capital represents, after submitted for approval by the General Shareholders' Meeting, is as follows: considering the dividends received from them and other equity eliminations. The profits or losses of transactions with an Associate Company are eliminated in Distribution: proportion to the Group's shareholding. If, as a result of the losses incurred by an Voluntary Reserves 171,499 Associate Company, its shareholders' assets were negative, it appears in the Group's Statutory Reserve - consolidated balance sheet with a zero value, unless an obligation exists for the Group Dividends 187,960 to support it financially. There are no investments in companies considered associates Profit distributed 359,459 Profit (loss) for period 359,459 in which the Group holds less than 20%.

The information related to shareholdings in Dependent, Multi-group and Associate The detail of the interim dividends distributed and the corresponding liquidity Companies is included in Note 13 of these financial statements. This note also statements are set out in Note 22. includes information on the most significant acquisitions and disposals that have taken place during the financial year.

Business combinations are considered to be operations through which the union of two or more companies or economic units in a single company or group of companies occurs. Consolidated financial statements 2015 Bankinter 16

The proposed distribution of the profits for the financial year ended 31 December The distribution of the profits for the financial year ended 31 December 2014 2015 of the subsidiaries of Bankinter, S.A., formulated by their own directors and of Bankinter, S.A. and of its subsidiaries, approved by the respective General pending approval by the respective General Shareholders' Meeting, is as follows: Shareholders' Meeting, is as follows:

Thousands of euros Thousands of euros Profit Profit Dividend Reserves Dividend Reserves (loss) (loss) Bankinter Consultoría, Asesoramiento y Atención Bankinter Consultoría, Asesoramiento y Atención 584 - 584 428 - 428 Telefónica, S.A. Telefónica, S.A. Bankinter Gestión de Activos, S.A., S.G.I.I.C. 32,475 32,475 - Bankinter Gestión de Activos, S.A., S.G.I.I.C. 26,281 26,281 - Hispamarket, S.A. 2,681 - 2,681 Hispamarket, S.A. 673 - 673 Intermobiliaria, S.A. (78,246) - (78,246) Intermobiliaria, S.A. -75,013 - -75,013 Bankinter Consumer Finance, E.F.C., S.A. 21,165 10,583 10,582 Bankinter Consumer Finance, E.F.C., S.A. 25,891 12,945 12,946 Bankinter Capital Riesgo, S.G.F.C.R., S.A. 251 - 251 Bankinter Capital Riesgo, S.G.F.C.R., S.A. 197 - 197 Bankinter Sociedad de Financiación, S.A. 12 - 12 Bankinter Sociedad de Financiación, S.A. 77 - 77 Bankinter Emisiones, S.A. 36 - 36 Bankinter Emisiones, S.A. 5 - 5 Bankinter Capital Riesgo I, Fondo Capital (1,291) - (1,291) Bankinter Capital Riesgo I, Fondo Capital 630 - 630 Línea Directa Aseguradora Group 99,415 92,517 6,898 Línea Directa Aseguradora Group 93,983 60,552 33,431 Arroyo Business Development, S.L. - - - Arroyo Business Development, S.L. -1 - -1 Relanza Gestión, S.A. 773 725 48 Relanza Gestión, S.A. 33 - 33 Bankinter Global Services, S.A. 11,774 5,887 5,887 Bankinter Global Services, S.A. 7,835 3,917 3,918 Bankinter Securities S.A. 4,736 2,368 2,368 Bankinter Securities S.A. 2,949 - 2,949 Bankinter Luxembourg, S.A. (1,644) - (1,644) Bankinter Luxembourg, S.A. -2,275 - -2,275 Naviera Goya. S.L. - - - Naviera Goya. S.L. 2 - 2 Naviera Sorolla, S.L. - - - Naviera Sorolla, S.L. 2 - 2 Consolidated financial statements 2015 Bankinter 17

4. Deposit guarantee fund 17 December 2014, that the payment of the remaining part of the aforementioned second tranche of the contribution would be made in two settlements, each for the Deposit Guarantee Fund (hereinafter, DGF). same amount, on 30 June 2015 and 30 June 2016.

During the 2015 financial year, Royal Decree 1012/2015, of 6 November, has modified National Resolution Fund (hereinafter, NRF). Royal Decree 2606/1996, of 20 December, regarding deposit guarantee funds in credit institutions. Among other standards, modifications were made to article 4 of Royal During the 2015 financial year, one of the basic pillars of the new resolution framework Decree 2606/1996, which determines the deposits, as well as the securities and other of credit institutions and investment service companies was set up: the National financial instruments, that are considered guaranteed by the DGF, and article 7.1 to Resolution Fund. Act 11/2015, of 18 June, together with the related regulations in extend the guarantee of deposits to the accrued interest. Royal Decree 1012/2015, of 6 November, deals with the transposition to the Spanish legal system of Directive 2014/59/EU, of 15 May. In this regulation, a new framework The DGF's management committee has determined the following annual contributions is established for the resolution of credit institutions and companies of investment of the affiliated companies for 2015: services, which in turn is one of the standards contributing to the constitution of the Single Resolution Mechanism, created through Regulations (EU) no. 806/2014, of 15 a) Contribution to the deposit guarantee compartment of the DGF equal to 1.6 July, and through which uniform standards and procedures are established for the per thousand of the guaranteed amount of the deposits existing on 31 December resolution of credit institutions and of certain investment service companies within 2015, as defined in Royal Decree 2606/1996. the framework of a Singe Resolution Mechanism and a Single Resolution Fund.

b) Contribution to the securities guarantee compartment of the DGF equal to One of the pillars of the new resolution framework is the creation of resolution funds, the 2 per thousand of the calculation base, as defined in Royal Decree 2606/1996, as financing instruments which the resolution authorities may use to effectively deal existing on 31 December 2015. with the various established resolution measures.

Furthermore, the fifth additional disposition of Royal decree-law 21/2012, of 13 At a national level, Act 11/2015 regulates the creation of the National Resolution Fund, July, introduced by article 2 of Royal decree-law 6/2013, of 22 March, established an whose financial resources should reach, before 31 December 2024, 1% of the amount of exceptional contribution of 3 per thousand on the deposits of companies affiliated the deposits guaranteed, through the contributions of credit institutions and investment on 31 December 2012. The first tranche of this contribution, being equivalent to service companies established in Spain. two fifths of it, would be made within the first twenty business days of 2014 after any deductions that may be agreed under this standard, while the second tranche, The calculation of each company's contribution is based on the proportion that each equivalent to the remaining three fifths, would be satisfied starting from 1 January of them represents on the total of the following figure: the company's total liabilities, 2014 in accordance with whatever payment calendar were fixed by the Management excluding equity and the guaranteed amount of deposits, which will subsequently Committee of the DGF within a maximum term of 7 years. Following the settlement of be adjusted to each company's risk profile. The details of the calculation method are the first tranche of the contribution by the affiliate companies on 22 January 2014, as regulated by Delegated Regulation (EU) 2015/63 of the Commission of 21 October well as a first payment of the second tranche equivalent to one seventh of this tranche 2014. on 30 September 2014, the DGF's Management Committee agreed, in its session of Consolidated financial statements 2015 Bankinter 18

After the calculations performed by the FROB on the basis of the information Interest accruals in both asset and liability operations with settlement terms in excess provided by the competent supervisory authority, and the company, the amount of of 12 months are calculated using the financial discounting method. In operations the contribution that Bankinter, S.A. has had to settle, as a company subject to the with shorter terms, they are accrued for indistinctly using the financial discounting payment, is 17,484 thousand euros during 2015. During 2014, this fund had not yet or the linear method. been set up and, therefore, no contribution was required. Following general financial practice, transactions are recorded on the date on which The expense recognised in the 2015 and 2014 financial years for the Company's they occur, which can differ from their corresponding effective date, on the basis of contributions to the Deposit Guarantee Fund and to the National Resolution Fund which the financial income and expenses are calculated. has amounted to 47,518 and 44,911 thousand euros, respectively; which is included within “Other operating expenses” in the income statement (Note 34). During 2015, c) Transactions and balances in foreign currency payments of the extraordinary contribution to the Deposit Guarantee Fund amount to 14,230 thousand euros (7,019 thousand euros in 2014). i. Functional Currency:

5. Accounting policies and valuation principles applied The functional currency of the Group is the euro. Consequently, all balances and transactions denominated in a currency other than the euro are considered to be These consolidated financial statements have been prepared following the accounting denominated in “foreign currency”. policies and the valuation principles established by the accounting regulations currently in force. A summary of the most significant ones is provided below: ii. Conversion criteria of balances in foreign currency: a) Going concern principle Balances and transactions in foreign currency have converted to euros using the following conversion rules: In preparing the consolidated financial statements, it has been considered that the management of the companies included in the Group will continue for the ■■ Assets and liabilities of a monetary nature have been converted to euros using the foreseeable future. Therefore, the application of the accounting standards is not average spot exchange rates of the currency market at the close of the financial aimed at determining the value of the consolidated net assets for the purposes of year. their complete or partial transfer nor the resulting amount in the event of their sale. ■■ Non-monetary items valued at historical cost have been converted to euros using b) Accruals principle the exchange rates of the date of acquisition.

These consolidated financial statements, except with regard to the cash flow statement, ■■ Non-monetary items measured at fair value have been converted to euros using have been prepared on the basis of the actual flow of goods and services, irrespective the exchange rates of the date on which the fair value was determined. of the date that payment was made or received for them, with the exception of the interest related to credit investments and other risks without investment with ■■ Income and expenses have been converted to euros using the exchange rates of borrowers considered to be impaired, which is recognised upon receipt. the date of the operation (using the average exchange rates for the period for all transactions carried out in it). Depreciation and amortization balances have been converted to euros at the exchange rate applied to the corresponding asset. Consolidated financial statements 2015 Bankinter 19

Foreign exchange differences have been registered in the consolidated income Therefore, this statement includes: statement, with the exception of differences arising in non-monetary items that are measured using their fair value, for which the adjustment to this fair value is recorded a. The consolidated profit or loss for the financial year. in shareholders' assets. b. The net amount of the income and expense recognised temporarily as valuation d) Consolidated cash flow statements reductions in the consolidated shareholders' assets.

The Group has used the indirect method to prepare the cash flow statements, which c. The net amount of the income and expense recognised definitively in the have the following expressions that incorporate the following classification criteria: consolidated shareholders' assets.

-Cash flows: Inflows and outflows of cash and cash equivalents; these equivalents d. The accrued corporation tax for the items indicated in letters b) and c) above, being understood as short-term investments with high liquidity and a low risk of except for valuation adjustments arising in shareholdings in associate or multi-group alterations in their value. Cash and equivalents are understood as being the balances companies accounted for by the equity method, which are presented in net terms. included in the line items “Cash and deposits with central banks”, as well as other accounts with high-liquidity credit institutions of the accompanying balance sheets. e. The total of the recognised consolidated income and expense, calculated as the sum of the above letters, showing separately the amount attributable to the parent ■■ Operating activities: typical activities of credit institutions, as well as other company and that corresponding to minority interests. activities that cannot be classified as investment or financing activities. The amount of the income and expense that correspond to companies accounted for ■■ Investment activities: those related to the acquisition, disposal or use by other by the assets method recorded directly against shareholders' equity are presented means of long-term assets and other investments not included in cash and cash in this statement, whatever their nature, in the line item “Companies valued by the equivalents. equity method”.

■■ Financing activities: activities that produce changes in the size and composition of The variations that have occurred in the income and expense recognised in the shareholders' assets and of the liabilities that do not form part of the operating shareholders' assets as valuation adjustments are broken down into: activities. e) Consolidated statement of recognised income and expense

In this part of the consolidated statement of changes in assets, the income and expenses generated by the Group as a result of its activity during the period are presented, distinguishing those recorded as results in the consolidated income statement for the period and the other income and expenses recorded, in accordance with current regulations, directly in consolidated shareholders' assets. Consolidated financial statements 2015 Bankinter 20

■■ Revaluation gains (losses): includes the amount of the income, net of the expenses ■■ Adjustments due to changes in accounting criteria and correction of errors: arising in the period, recognised directly in the consolidated shareholders' assets. which includes the changes in the consolidated shareholders' net worth that Amounts recognised in the period in this line item remain here, although in the arise as a result of the retrospective restatement of the balances of the financial same period they are transferred to the consolidated income statement, to the statements arising from changes in the accounting criteria or the correction of initial carrying amount of other assets or liabilities or are reclassified to another errors. line item. ■■ Income and expense recognised in the period: includes, in aggregate, the total of ■■ Amounts transferred to income statement: includes the amount of the valuation the items recorded in the statement of recognised income and expense indicated gains or losses recognised previously in the consolidated shareholders' assets, above. even if it is in the same period, that are recognised in the consolidated income statement. ■■ Other changes in net worth: includes the rest of the items recorded in shareholders' net worth, such as increases or decreases in the share capital contributions fund, ■■ Amount transferred to the initial carrying amount of hedges items: includes the the distribution of profits, operations with own equity instruments, payments with amount of the valuation gains or losses recognised previously in the consolidated equity instruments, transfers between items of shareholders' net worth and any shareholders' assets, even if it is in the same period, that are recognised in the other increase or decrease in the consolidated shareholders' net worth. initial carrying amount of assets or liabilities as a result of cash flow hedges. g) Recognition, measurement and classification of financial instruments ■■ Other reclassifications: includes the amount of the transfers made in the period between valuation adjustment items, in accordance with the criteria established Financial assets and liabilities are recognised when the Group becomes party to in the current regulations. contractual agreements according to the provisions of these agreements.

These items are presented at their gross amount, showing their corresponding tax Financial liabilities effect in the “Income tax” line of the statement, except for items corresponding to valuation adjustments of companies accounted for by the equity method as indicated Financial liabilities are classified in the consolidated balance sheet according to the previously. following criteria: f) Consolidated statement of changes in net worth i. Held for trading, which includes financial liabilities that have been issued in order to be settled in the short term. They are part of a portfolio of financial instruments In this part of the consolidated statement of changes in net worth, all the changes that identified and managed jointly for which recent actions have been carried out to have occurred in the shareholders' equity are shown, including those that arise from obtain short-term gains, they are derivative instruments not designated as accounting changes in the accounting criteria and corrections of errors. This statement shows, hedging instruments or they arise from the definitive sale of financial assets acquired therefore, a reconciliation of the carrying value at the beginning and at the end of under repurchase agreements or received on loan. the period of all of the items that make up the consolidated shareholders' net worth, grouping the movements that have occurred together according to their nature under the following headings: Consolidated financial statements 2015 Bankinter 21

ii. Other financial liabilities at fair value through profit and loss: includes financial With regard to financial liabilities designed as hedged items and accounting hedges, liabilities that have been designated as “at fair value through profit and loss” in valuation differences are recognised taking into account the criteria indicated for order to obtain more relevant information, since accounting asymmetries are Financial assets. significantly reduced with them. Financial assets iii. Financial liabilities at amortised cost, which corresponds to financial liabilities that do not fit into the other balance sheet headings and relate to the typical fund- Purchase and sale transactions of financial instruments carried out through conventional attracting activities of financial institutions, whatever their use and their maturity. contracts, understood as those in which the reciprocal obligations of the parties must be consummated within a time frame established by regulations or by market iv. Hedging derivatives, which includes financial derivatives acquired or issued by the conventions and which cannot be settled by differences, such as stock market contracts Company that qualify to be considered accounting hedges. and currency spot purchases and sales, shall be registered in additions as an asset, and shall be removed from the balance sheet in sales, on the date from which the Financial liabilities are recognised at their amortised cost, just as has been defined for profits, risks, rights and obligations inherent to any owners are acquired by the buying financial assets, except in the following cases: party. Depending on the type of asset or market, this may be the contract date or the settlement or delivery date. i. Financial liabilities included in the line item “Held for trading” and in “Other financial liabilities at fair value through profit and loss” are measured at fair value, Financial instruments of debt are recognised from the date on which the legal right just as defined for financial assets. Financial liabilities hedges in fair value hedging to receive or pay cash arises and derivatives are recognised from the date they are operations are adjusted, with the variations that occur in their fair value in relation contracted. In general, the Group removes financial instruments from the balance to the risk hedged in the hedging operation being recorded. sheet on the date from which the inherent profits, risks, rights and obligations or their control are transferred to the buying party. ii. Financial derivatives that have underlying equity instruments whose fair value cannot be determined in a sufficiently objective manner, and are settled by Financial assets are classified on the consolidated balance sheet according to the delivery of the same equity instruments, are measured by their cost. following criteria:

Variations in the book value of financial liabilities are recognised, in general, with the i. Cash and deposits with central banks, which correspond to cash balances and opposite entry in the income statement, differentiating between those that originate balances held with the Banco de España and in other central banks. from accrued interest and similar items, which are recorded within “Interest expense and similar charges”, and those that correspond to other causes, which are recorded ii. Held for trading, which includes financial assets acquired in order to be settled in at their net amount within “Gains or losses on financial assets and liabilities” in the the short term. They are part of a portfolio of financial instruments identified and income statement. managed jointly for which recent actions have been carried out in order to obtain short-term gains or they are derivative instruments not designated as accounting hedging instruments. Changes in fair value of the instruments of this portfolio are recorded directly in the income statement. Consolidated financial statements 2015 Bankinter 22

iii. Other financial assets at fair value through profit and loss, which includes: (1) vi. Held-to-maturity investments, which corresponds to securities representing debt financial assets which, not forming part of the held-for-trading portfolio, are with a fixed maturity and cash flows of a certain or determinable amount that considered hybrid financial assets and are measured in their entirety at their fair the company has, from the beginning and on any later date, both the positive value and (2) those that are managed together with liabilities due to insurance intention and the financial capacity to hold until their maturity. contracts measured at their fair value, or with financial derivatives, the purpose and effect of which is to significantly reduce their exposure to variations in their vii. Adjustments to financial assets due to macro-hedges, which corresponds to the fair value, or which are managed together with financial liabilities and derivatives opposite entry of the amounts recorded in the income statement originating from for the purpose of significantly reducing the overall exposure to interest rate risk. the valuation of the portfolios of financial instruments that are effectively hedged against interest rate risk, by means of fair value hedging derivatives. iv. Available-for-sale financial assets, which corresponds to securities representing debt not classified as an investment held-to-maturity, such as other financial assets vii. Hedging derivatives, which includes financial derivatives acquired or issued by the at fair value through profit and loss, such as credit investments or such as a held- Group that qualify to be considered accounting hedges. for-trading portfolio and equity instruments of companies that are not dependent, associate or multi-group companies and that have not been included in the ix. Shareholdings, which includes equity instruments in Multi-group or Associate categories of held-for-trading portfolio and other assets at fair value through profit companies. and loss. Changes in fair value of the instruments of this portfolio are recognised directly in the company's net worth until the financial asset is removed from the Financial assets are initially measured, in general, at their acquisition cost. Their balance sheet. subsequent valuation at each period end is performed according to the following criteria: v. Credit investments, which includes financial assets that, not being traded on an active market nor it being compulsory to measure them at their fair value, have i. Financial assets are measured at their fair value, except Credit investments, cash flows of a certain or determinable amount and in which all the disbursement the Held-to-maturity investments, equity instruments whose fair value cannot be made by the Group will be recovered, excluding reasons attributable to the solvency determined in a sufficiently objective manner, shares in Dependent, Multi-group and of the debtor. This includes both the investment from the typical credit activity, Associate companies and financial derivatives that have these equity instruments as such as the cash amounts used and pending repayment by customers as loans an underlying asset and are settled through their delivery. or deposits lent to other companies, whatever their legal form, and securities representing unlisted debt, as well as debts contracted by buyers of goods or users ii. The fair value of a financial asset on a given date is understood as the amount of services, which constitutes part of the business of the Group. for which it could be transferred between duly informed interested parties, in a transaction carried out in conditions of mutual independence. The best evidence of the fair value is the quotation price in an active market that corresponds to an organised, transparent and deep market.

When there is no market price for a particular financial asset, valuation techniques which should comply with the following characteristics are resorted to in order to estimate its fair value, : Consolidated financial statements 2015 Bankinter 23

■■ They shall be the most consistent and suitable techniques and they shall The fair value of OTC financial derivatives is the sum of the future cash flows incorporate observable market data, such as: recent transactions of other originating from the instrument and discounted to the valuation date, using instruments that are substantially the same; discounted cash flows and market methods recognised by the financial markets. models for valuing options. iv. Credit investments and Held-to-maturity investments are measured at their ■■ They shall be techniques that provide the most realistic estimate on the price of amortised cost, using the effective interest rate method to determine it. Amortised the instrument, and preferably, they shall be those which, usually, use participants cost is understood as the acquisition cost of a financial asset, corrected for the in the market when valuing the instrument. principal repayments and the part charged to the income statement, through the use of the effective interest rate method, of the difference between the historical ■■ They shall maximise the use of observable market data, limiting the use of cost and the corresponding reimbursement value at maturity, less any reduction non-observable data as much as possible. The valuation methodology shall be in value due to impairment recognised directly as a decrease in the asset's value respected over time, provided the that factors that led to its selection have not or through an account to correct its value. If they are hedged in fair value hedging been altered. In any case, the valuation technique should be periodically assessed operations, the variations that occur in their fair value related to the risk or the and its validity examined, using observable prices from recent transactions and risks hedged in these hedging operations are recorded. from current market data. The effective interest rate is the discount rate that exactly matches the value of ■■ In addition, other factors will be considered, such as the time value of money; a financial instrument with the estimated cash flows throughout the instrument's credit risk, the exchange rate, equity instrument prices, volatility, liquidity, the expected life, based on its contractual conditions, such as early repayment options, risk of early cancellation and administration costs. but without considering future losses due to credit risk. For financial instruments with a fixed interest rate, the effective interest rate matches the contractual Certain equity instruments are measured at cost because their fair value cannot be interest rate established at the time of its acquisition plus, where applicable, estimated reliably. The unreliability of a fair value estimate is due to the wide range any fees that are equivalent to an interest rate due to their nature. In financial of estimates and the impossibility of reasonably assessing the probabilities of each instruments with a variable interest rate, the effective interest rate matches the estimate within the range. rate of return in force for all concepts up until the first reference interest rate review is due to take place. iii. The fair value of financial derivatives with a quotation value in an active market is their daily quotation price and if, for exceptional reasons, its quotation price v. Shareholdings in the share capital of other companies whose fair value cannot be cannot be established on a given date, methods similar to those used to value determined in a sufficiently objective manner, and financial derivatives that have financial derivatives not contracted in organised markets are resorted to in order these instruments as an underlying asset and are settled through their delivery, are to value them. held at their acquisition cost adjusted, where applicable, for any impairment losses incurred. Consolidated financial statements 2015 Bankinter 24

Variations in the book value of financial liabilities are recognised, in general, with Debt instruments classified as non-performing for which specific value adjustments the opposite entry in the income statement, differentiating between those that have been made, whether estimated individually or collectively, will be reported as originate from accrued interest and similar items, which are recorded within “Interest “impaired assets”, while all other debt instruments will be reported as assets whose and similar income”, and those that correspond to other causes, which are recorded value has not been impaired, even if they form part of groups of assets for which at their net amount within “Gains or losses on financial assets and liabilities” in the collective value adjustments have been made due to losses incurred but not reported. income statement. h) Recognition of income and expenses However, variations in the book value of instruments included in the line “Available- for-sale financial assets” are recorded temporarily in the line “Valuation adjustments Income and expenses from interest and similar items are recorded, in general, of shareholders' equity”, unless they arise from foreign exchange differences. Amounts according to their accrual period and by applying the effective interest rate method. included in the line item “Valuation adjustments” remain within shareholders' equity Dividends received from other companies are recognised as income when the right to until the asset in which they originate is removed from the balance sheet, at which receive them arises. point they are cancelled against the income statement. Fees payable or receivable for financial services, regardless of the name they are In financial assets designated as hedged items and fair value accounting hedges, given in contracts, are classified in the following categories, which determine how valuation differences produced both in the hedging items and in the hedged items, they are recorded in the income statement: with regard to the type of risk hedged, are recognised directly in the income statement. i. Financial fees, which are those that form an integral part of the yield or effective In fair value hedges of the interest rate risk of a portfolio of financial instruments, the cost of a financial operation and are recorded in the income statement over the gains or losses that arise when measuring the hedging instruments are recognised expected life of the operation as an adjustment to its cost of effective performance. directly in the income statement, whereas the gains or losses due to variations in the They include opening fees and study fees of asset products, overdrawn credit fees fair value of the hedged amount, with regard to the hedged risk, are recognised in and liability account overdraft fees. the income statement with the opposite entry in “Adjustments to financial assets due to macro-hedges”. ii. Non-financial fees, which are those derived from the provision of services and can arise in services rendered over a period of time and in services rendered in a single Non-performing or impaired financial assets act.

“Non-performing” or “doubtful” balances are defined as all debt instruments, whatever their holder and guarantee, that have any overdue amount of principal, interest or contractually agreed expenses that is over 90 days old, unless they should be classified as failed; and contingent risks in which the guaranteed party has fallen into arrears. Also included in this category will be the amounts of all of a customer's operations when the balances classified as “non-performing” represent more than 20% of the outstanding amounts. Consolidated financial statements 2015 Bankinter 25

Income and expenses are recorded in the consolidated income statement, in general, As a general rule, adjustments to the book value of financial instruments due to according to the following criteria: impairment are made with a charge to the consolidated income statement in the period in which this impairment arises, and the recovery of previously recognised i. Those linked to financial assets and liabilities measured at fair value through profit impairment losses, where applicable, is recognised in the consolidated income and loss are recorded upon settlement. statement in the period in which the impairment is eliminated or reduced. If the recovery of any amount recorded due to impairment is considered remote, it is ii. Those which correspond to transactions or services performed over a period of time removed from the consolidated balance sheet, although the Group may carry out are recorded over the period of such transactions or services. the actions necessary to try to recover it until their rights have been definitively extinguished due to expiry, write-off or other causes. iii. Those which correspond to a transaction or service executed in a single act are recorded when the act that produced them occurs. In the case of debt instruments measured at their amortised cost, the amount of impairment losses incurred is equal to the negative difference between their book Non-financial income and expenses are recorded according to the accruals principle. value and the current value of their estimated future cash flows. In the case of quoted Receipts and payments that are deferred in the time, for periods greater than a year, debt instruments, their market value may be used as a substitute for the current value are recorded at the amount resulting from discounting the expected cash flows at of the future cash flows, provided that it is sufficiently reliable so as to consider it market rates. representative of the value that the Group could recover. i) Impairment of the value of financial assets The estimated future cash flows of a debt instrument are all of the amounts, principal and interest, that the Group estimates it will obtain over the life of the instrument. The book value of financial assets is adjusted, in general, with a charge to the In this estimate, all the relevant information available on the date the consolidated consolidated income statement when there is objective evidence that an impairment financial statements are prepared that provides information about the possibility of loss has occurred, which occurs: the future collection of contractual cash flows is considered. Also, in estimating the future cash flows of instruments that have collateral guarantees, the flows that would i. In the case of debt instruments, understood as loans and securities representing be obtained from realising them are taken into account, less the costs necessary to debt, when an event or the combined effect of several events occurs after their obtain and subsequently sell them, regardless of the probability of the guarantee initial recognition that represents a detrimental impact on their future cash flows. being executed. ii. In the case of equity instruments, when an event or the combined effect of several In calculating the current value of the estimated future cash flows, the discount rate events occurs after their initial recognition that means that their book value is no used is the original effective interest rate of the instrument, if its contractual rate is longer recoverabe. fixed. When it is variable, the discount rate used is the effective interest rate on the date to which the financial statements refer, determined according to the contract conditions. Consolidated financial statements 2015 Bankinter 26

The objective evidence of impairment will be determined individually for all the debt ii. The future cash flows of each group of debt instruments are estimated for instruments that are significant, and individually or collectively for groups of debt instruments with credit risk characteristics similar to those of the respective group, instruments that are not individually significant. When a specific instrument cannot after making the necessary adjustments to adapt the historical data to the current be included in any group of assets with similar risk characteristics, it will be analysed market conditions. exclusively individually to determine whether it is impaired and, where applicable, to estimate the impairment loss. Therefore, the impairment of value is broken down, iii. The impairment loss of each group is the difference between the book value of all according to the way in which it is calculated, into: the debt instruments in the group and the current value of their estimated future cash flows. 1) Specific value adjustments for financial assets, estimated individually: accumulated amount of hedges made for doubtful assets that have been Following on from this, the Banco de España determines parameters, methods and estimated individually. amounts to be used for hedging the inherent impairment losses incurred but not reported in debt instruments and contingent risks classified as having normal risk. 2) Specific value adjustments for financial assets, estimated collectively: accumulated amount of the collective impairment of the estimated value for debt Bankinter follows the criteria established in circular 4/2004 of the Banco de España instruments classified as doubtful with non-significant amounts whose value for the calculation of the impairment of its credit portfolio, and it therefore meets has been impaired individually and for which the company uses a statistical the criteria established in International Accounting Standard 39 (IAS39) for financial approach; specifically, it calculates the specific hedge applying collective hedge instruments, and in International Accounting Standard 37 (IAS37) for financial percentages according to the age of the non-payments. guarantees and irrevocable loan commitments. Bankinter has performed an analysis using internal data to ensure that these requirements are appropriate to the reality 3) Collective value adjustments for losses incurred but not reported: accumulated of the Group, confirming their suitability. amount of the collective impairment of the value of the debt instruments whose value has not been impaired individually The recognition in the consolidated income statement of accrued interest on the basis of the contractual terms is discontinued for all debt instruments individually The collective assessment of a group of financial assets to estimate its impairment classified as impaired and for those for which impairment losses have been calculated losses is carried out in the following manner: collectively due to having overdue amounts older than three months. i. The debt instruments are included in groups that have similar credit risk When there is objective evidence that the decrease in the fair value is due to characteristics, indicative of the debtors's capacity to pay all the amounts, principal impairment, the latent reductions in value recognised directly in the line “Valuation and interest, in accordance with the contractual conditions. The credit risk adjustments” within consolidated shareholders' net worth are recorded immediately characteristics that are considered for grouping the assets together are, among in the consolidated income statement. If all or part of the impairment losses others, the type of instrument, the debtor's business sector, the geographical area of are subsequently recovered, their amount is recognised, in the case of securities the activity, the type of guarantee, the age of the overdue amounts and any other representing debt, in the consolidated income statement in the period of recovery factor that is relevant for estimating the future cash flows. and, in the case of equity instruments, in the line “Valuation adjustments” within shareholders' net worth. Consolidated financial statements 2015 Bankinter 27

The amount of the impairment losses incurred in securities representing debt and j) Financial derivatives equity instruments included in the line “Available-for-sale financial assets” is equal to the positive difference between their acquisition cost, net of any principal repayment, The Group uses financial derivatives traded in organised markets or traded bilaterally and their fair value less any impairment loss previously recognised in the consolidated with the counterparty outside of organised markets (OTC), both in own operations and income statement. in operations with the wholesale or customer retail segment.

For the estimate of the impairment of equity instruments included in the portfolio of The Group takes positions in derivatives in order to formalise hedges, to actively available-for-sale financial assets, the company performs an individualised analysis manage other financial assets and liabilities or to profit from changes in their prices. of the impairment of each significant security. However, the group's accounting Financial derivatives that cannot be considered hedging derivatives are considered policies establish that, in any case, a prolonged or significant decrease in their fair trading derivatives. value, below their cost, constitutes objective evidence of an impairment of value and, therefore, an impairment should be recognised for the difference between the Derivatives for which there is an active market are measured according to the cost and the fair value of the affected instrument. Specifically, in the case of quoted quotation price of those markets. equity instruments, the accounting policy considers that a decrease is prolonged when the instrument's fair value has been below its cost for more than 18 months, and it Derivatives without a market or for which there is an inactive market are measured considers that the decrease is significant when it is greater than 40% of its cost. according to the most consistent and suitable economic methodologies, maximising the use of observable data and considering any factor that a participant in the Impairment losses of equity instruments valued at their acquisition cost correspond market would consider, such as: a) recent transactions of other instruments that to the difference between their book value and the current value of the expected are substantially the same, b) discounted cash flows, c) market models for valuing future cash flows, discounted at the market rate of return for other similar securities. options. The techniques applied are those preferably used by the market's participants These impairment losses are recorded in the consolidated income statement in the and have been proven to provide the most realistic estimate of the price of the period in which they occur, directly reducing the cost of the financial asset, without instrument. its amount being recoverable except in the event of the asset's sale. In their initial recognition, all financial derivatives are recorded at their fair value. In the case of equity instruments that constitute shareholdings in multi-group and At the time of the initial recognition, the best evidence of the fair value of a financial associate companies, the Group estimates the amount of the impairment losses by instrument is usually the transaction price. If it is determined that the fair value in the comparing their recoverable amount with their book value. These impairment losses initial examination differs from the transaction price, this instrument will be recorded are recorded in the consolidated income statement in the period in which they occur on that date as follows: and subsequent recoveries are recorded in the consolidated income statement in the period of recovery. a) If the fair value is supported by a price quoted on an active market for an identical asset or liability (that is, a level 1 variable) or it is based on a valuation technique that employs only observable market data, the company recognises the difference between the fair value in the initial recognition and the transaction price as a gain or loss. Consolidated financial statements 2015 Bankinter 28

b) In all other cases, the difference between the fair value in the initial The hedges carried out by the Group are fair value hedges: recognition and the transaction price is deferred, recognising it in the income statement only to the extent to which it results from a modification of a factor ■■ Micro-hedges or individual hedges (in which there is a specific identification (including time) that the participants in the market would take into account when between hedged items and hedging instruments) hedge the exposure to variations setting the price of the asset or liability. in the fair value of the hedged item. The gain or loss arising when measuring both the hedging instruments and the hedged items is recognised immediately in the Bankinter does perform significant operations with derivative instruments whose fair income statement. value in the initial recognition differs from the transaction price. ■■ Portfolio hedges (interest rate risk hedge of a portfolio of financial instruments) A derivative may be designated as a hedging instrument only if it meets the following hedge the exposure to variations in the fair value of the hedged amount caused by criteria: changes in the interest rate. The gain or loss arising when measuring the hedging instruments is recognised immediately in the income statement. In the case of the i. It can be entirely classified as a hedging instrument, even when it is only so for a hedged amount, the gain or loss arising when measuring it is recognised directly percentage of its total amount, unless it is options, in which case it the change in its in the income statement with the opposite entry in “Adjustments to financial intrinsic value may be designated as a hedging instrument excluding the change in assets due to macro-hedges”, or “Adjustments to financial liabilities due to macro- its temporary value or its value of forward contracts, which may be designated as hedges”, according to whether the hedged amount corresponds to financial assets such for the difference between the spot prices and future prices of the underlying or financial liabilities, respectively. asset. k) Transfers and removal from the balance sheet of financial instruments ii. It is designated as a hedge for the entirety of its remaining term. Transfers of financial instruments are accounted for taking into account the way in iii. In the case of a hedge of more than one risk, the different risks hedged can be which the transfer of the risks and rewards associated with the financial instruments clearly identified, and each part of the instrument can be designated as hedges transferred occurs, based on the following criteria: of specific hedged items and the effectiveness of the different hedges can be demonstrated. i. If the risks and rewards are substantially transferred to third parties, such as in the case of unconditional sales, sales with a buyback agreement at the fair value The hedge effectiveness of derivatives defined as hedges is duly documented through on the repurchase date, sales of financial assets with a call option acquired or a the effectiveness tests, which is the tool that tests that the differences arising due put option issued that is significantly out of the money, securitisations of assets in to market price variations between the hedged item and its hedge remain within which the grantor does not retain subordinated financings nor grants any kind of reasonable parameters throughout the life of the operations, thus fulfilling the credit improvement to the new holders, etc., the financial instrument transferred is predictions established at the time they were contracted. removed from the balance sheet, and any right or obligation retained or created as a result of the transfer is simultaneously recognised. If this is not the case at some point, the associated operations in the hedging group would become considered trading hedges and would be duly reclassified in the balance sheet. Consolidated financial statements 2015 Bankinter 29

ii. If the risks and rewards associated with the financial instrument transferred are Financial assets are therefore removed from the consolidated balance sheet only when substantially retained, such as in the case of sales of financial assets with a buyback the cash flows they generate have ended or when the risks and rewards implicit in agreement at a fixed price or at the sale price plus an interest charge, security them are substantially transferred to third parties. Similarmente, financial liabilities loan contracts in which the borrower has the obligation to return the securities or are only removed from the balance sheet when the obligations they generate have similar assets, etc., the financial instrument transferred is not removed from the been extinguished or when they are acquired with the intention of cancelling them balance sheet and it is continued to be measured with the same criteria used prior or repositioning again. to the transfer. However, the associated financial liabilities is recognised for an amount equal to that of the payment received, which is subsequently measured at When the transferred financial asset is completely removed from the balance sheet, an its amortised cost. The income from the financial asset transferred but not removed amount will be recognised in the income statement based on the difference between from the balance sheet and the expenses of the new financial liability will be its book value and the sum of: a) the payment received, including any new asset recognised directly in the income statement. obtained less any liability assumed, and b) any accumulated profit or loss recognised directly as “valuation adjustments” within shareholders' net worth attributable to the iii. If the risks and rewards associated with the transferred financial instrument transferred financial asset. are neither substantially transferred nor retained, such as in the case of sales of financial assets with a call option acquired or a put option issued that is neither l) Property, plant and equipment significantly in nor out of the money, securitisations in which the grantor assumes a subordinated financing or another type of credit improvement for a part of the Property, plant and equipment is presented at its acquisition cost, updated in transferred asset, etc., a distinction is made between: accordance with certain legal standards and revalued in accordance with what is allowed in the transition to the new accounting standards, less its corresponding ■■ If the Group does not retain control of the transferred financial instrument, in accumulated depreciation and, where applicable, less any impairment loss. which case it is removed from the balance sheet and any right or obligation retained or created as a result of the transfer is recognised. Depreciation is calculated systematically according to the straight line method, applying the years of estimated useful life of the different elements to the acquisition ■■ If the Group retains control of the transferred financial instrument, in which case it cost of the assets less their residual value. In the case of the land on which the continues to recognise it in the balance sheet for an amount equal to its exposure buildings and other constructions are located, they are understood as having an to changes of value it can experience and a financial liability associated with the indefinite life and, therefore, they are not subject to depreciation. The annual charges transferred financial asset is recognised. for depreciation of property, plant and equipment are recorded in the consolidated income statement and are calculated according to the estimated years of useful life, The net amount of the transferred asset and of the associated liability will be the which coincide with the legal minimums: amortised cost of the rights and obligations retained, if the transferred asset is Depreciation Method measured at its amortised cost, or the fair value of the rights and obligations retained, Real estate Straight line over 50 years if the transferred asset is measured at its fair value. Fixtures and fittings and other Straight line between 6 and 12 years IT equipment Straight line up to 4 years Consolidated financial statements 2015 Bankinter 30

The Group reviews, at least at the end of the financial year, the depreciation period Intangible assets are initially recognised at their acquisition or production cost and method of each of the tangible fixed assets. and, subsequently, are valued at their cost less, as applicable, their corresponding accumulated amortisation and any impairment losses that have been incurred. Conservation and maintenance costs of property, plant and equipment that do not improve its use or prolong the useful life of the respective assets are charged to the Goodwill income statement the moment are produced. Differences between the cost of the holdings in the share capital of the consolidated At each accounting period end, the Group analyses if there are indicators, both companies accounted for by the equity method and of other forms of business internal and external, that the net book value of the elements of its property, plant combination, compared with the corresponding net fair values of the assets and and equipment exceeds their corresponding recoverable amount. In this case, the liabilities acquired, on their acquisition date, adjusted for the percentage shareholding Group reduces the book value of the corresponding element to its recoverable amount acquired in these net assets and liabilities in the case of shareholding purchases, are and it adjusts the future depreciation charges in proportion to its adjusted net book accounted for as follows: value and to its new remaining useful life, if a reassessment is required. On the other hand, when indicators exist that the value of an element has been recovered, the 1. If there is an excess of the purchase price over the aforementioned fair Group registers the reversal of the impairment loss recorded in prior periods and value, as goodwill in the line item “Intangible assets – Goodwill” within the adjusts the future depreciation charges. The reversal of the impairment loss of an assets of the consolidated balance sheet. In the case of the acquisition of element cannot, under any circumstances, lead to the increase of its book value above shareholdings in associate or multi-group companies accounted for by the that which it would have if it had not recognised impairment losses in prior years. equity method, any goodwill that may arise in their acquisition is recorded as part of the value of the shareholding, not separately in the line item “Intangible The line item “Investment property” of the consolidated balance sheet includes the assets – Goodwill”. net book values of the land, buildings and other constructions that are held either to exploit them through rentals, or to obtain a possible capital gain from their sale. There 2. Negative differences between the acquisition cost less the aforementioned are no restrictions for realising the Property Investments in the market. fair value are recorded once the valuation process carried out has been reviewed, as an income in the consolidated income statement under the The criteria applied for recognising the acquisition cost of property investments, heading “Negative difference in business combinations”. their depreciation, for estimating their respective useful lives and for recording their possible impairment losses are the same as those described above. Positive goodwill balances (excess between the purchase price of an investee company or business and the net fair value of the assets, liabilities and contingent liabilities m) Intangible assets acquired of that company or business) - which are only recorded in the consolidated balance sheet when they have been acquired in exchange for consideration - therefore Intangible assets are considered to be non-monetary assets that are identifiable, represent advance payments made by the company that is acquiring the future albeit having no physical appearance, that arise as a result of a legal operation or economic benefits derived from the assets of the company or business acquired that have been developed internally by the consolidated companies. Only those intangible are not individually and separately identifiable and recognisable. assets whose cost can be estimated in a reasonably objective manner, and from which the consolidated companies consider it probable that future economic benefits will be obtained, are recognised. Consolidated financial statements 2015 Bankinter 31

Impairment losses recorded on goodwill balances recognised in the line item n) Leases “Intangible assets – Goodwill” cannot be subsequently reversed. Lease contracts are presented according to the economic substance of the operation, Other intangible assets regardless of its legal form, and are classified from the beginning as finance or operating leases. Intangible assets other than goodwill are recorded on the consolidated balance sheet at their acquisition or production cost, net of their accumulated amortisation and any i. A lease is considered a finance lease when substantially all the risks and rewards possible impairment losses they may have suffered. inherent to the ownership of the asset to which the lease contract relates are transferred to the lessee. Intangible assets can have an “indefinite useful life” - when, on the basis of the analyses performed of all the relevant factors, it is concluded that there is no When the Group acts as the lessor of an asset, the sum of the current values of the foreseeable limit to the period during which it is expected to generate net cash flows amounts that it will receive from the lessee plus the residual value guaranteed, in favour of the consolidated companies - or a “definite useful life”, in all other cases. usually the exercise price of the lessee's call option at the end of the contract, is recorded as financing granted to third parties, thus it is included in the line item Intangible assets with an indefinite useful life are not amortised, although, at each “Credit investments” on the balance sheet, in accordance with the nature of the lessee. accounting period end, the consolidated companies review their respective remaining useful lives in order to ensure that they are still indefinite or, otherwise, to proceed On the other hand, when the Group acts as lessee, the cost of the leased assets as required. are recorded on the balance sheet, according to the nature of the asset to which the contract relates and, simultaneously, a liability for the same amount is also Intangible assets with a definite useful life are amortised according to this useful recognised on the balance sheet. This liability will be the lower of the fair value of life, applying similar criteria to those adopted for the depreciation of property, plant leased asset and the sum of current values of the amounts to be paid to the lessor plus, and equipment. The annual amortisation of the elements of the intangible fixed where applicable, the exercise price of the call option. These assets are depreciated assets with a definite useful life is recorded under the heading “Amortisation” in the using criteria similar to those applied to all own-use property, plant and equipment. consolidated income statement. ii) Lease contracts that are not considered finance leases are classified as operating Both for intangible assets with an indefinite useful life and for those with a definite leases. useful life, the consolidated companies recognise in the accounting records any loss arising in the value recorded of these assets as a result of their impairment, with the When the Group acts as lessor, the acquisition cost of the leased assets is recorded in opposite entry being applied to “Impairment losses of other assets (net) – Goodwill the line item “Property, plant and equipment”. These assets are depreciated according and other intangible assets” in the consolidated income statement. The criteria for to the policies adopted for similar own-use tangible assets and the income from the the recognition of the impairment losses of these assets and, where applicable, of lease contracts is recognised in the income statement on a straight line basis. the recoveries of the impairment losses recorded in prior periods are similar to those applied for own-use property, plant and equipment. Consolidated financial statements 2015 Bankinter 32

On the other hand, when the Group acts as lessee, the expenses of the lease, including q) Securities loaned or pledged any incentives granted by the lessor, where applicable, are recorded in the income statement on a straight line basis. Loans of securities are transactions in which the borrower receives full ownership of some securities without making any payment other than the certain fees, with o) Non-current assets held for sale the commitment to return to the lender some securities of the same class as those received. Non-current assets held for sale are considered to be those whose book value is expected to be recovered, essentially, through their sale and which are available for Security loan contracts in which the borrower has the obligation to return the same their immediate sale and where their sale is considered highly probable. assets, other assets that are substantially the same and other similar assets that have the same fair value are considered to be operations in which the risks and rewards Non-current assets held for sale are accounted for at the lower of their fair value associated with the ownership of the asset are substantially retained by the lenders. less costs of sale and their book value and they are not depreciated. In the case of foreclosed assets, the acquisition cost corresponds to the net amount of the financial r) Financial guarantees assets delivered in exchange for its foreclosure. A financial guarantee contract is considered a contract that requires the issuer to Impairment losses are recognised within “Impairment losses of non-current assets make specific payments to reimburse the creditor for the loss it incurs when a specific held for sale” in the consolidated income statement. Recoveries of value are debtor breaches its payment obligation according to the conditions, whether original recognised in the consolidated income statement up to an amount equal to the or modified, of a debt instrument, regardless of its legal form. This guarantee can be, previously recognised impairment losses. among others, a deposit, financial guarantee, insurance contract or credit derivative.

Assets foreclosed as payment of debts are accounted for at the lower of their fair The Group recognises financial guarantee contracts within “other financial liabilities” value less costs of sale and their book value. Impairment losses are recognised within at their fair value plus the transaction costs that are directly attributable to their “Impairment losses of non-current assets held for sale” of the consolidated income issue. Initially, and unless there is evidence to the contrary, the fair value of financial statement, calculated individually for those that are held for a longer period than guarantee contracts issued in favour of an unrelated third party, within an isolated initially expected for their sale. transaction under conditions of mutual independence, will be the premium received plus, where applicable, the current value of the cash flows to be received, using an p) Offsetting of balances interest rate similar to that of financial assets issued by the company with a similar term and risk; simultaneously, a loan is recognised within assets for the current value Debit and credit balances originating from transactions which, contractually or as of the outstanding future cash flows using the aforementioned interest rate. required by law, permit offsetting, and where there is an intention to settle them for their net amount or to realise the asset and pay the liability simultaneously, are Following the initial recognition, contracts will be treated according to the following presented on the consolidated balance sheet at their net amount. criteria: Consolidated financial statements 2015 Bankinter 33

a. The value of the fees or premiums to be received for financial guarantees will be Defined contribution plans updated, registering the differences in the income statement as a finance income. The contribution accrued during the period for this concept is recorded within “Staff b. The value of financial guarantee contracts that have not been classified as doubtful costs” in the consolidated income statement. will be the amount initially recognised within liabilities, less the portion charged to the income statement on a straight line basis throughout the expected life of the If, on 31 December of the period, there were any outstanding amount to be paid guarantee, or with another criterion, provided that it reflects the perception of the into the external plan in which the commitments are materialised, it is recorded at economic risks and rewards of the guarantee more appropriately. its current value within “Provisions - pension fund and similar obligations”. As at 31 December 2015 and 2014, there was no outstanding amount to be paid into external Financial guarantees are classified according to the insolvency risk attributable to the defined contribution plans. customer or to the operation and, where applicable, the need to record provisions is estimated by applying criteria similar to those indicated in section (i) of this same Defined benefit plans Note for debt instruments valued at their amortised cost. The Group records in the line “Provisions – pension fund and similar obligations” If it is necessary to record a provision for financial guarantees, the fees yet to be within the liabilities of the consolidated balance sheet the current value of the post- accrued are reclassified to the corresponding provision. employment defined benefits, net, as explained below, of the fair value of the assets that meet the requirements to be considered “Assets attached to the plan”. s) Staff costs “Assets attached to the plan” are considered to be those which are linked to a certain Post-employment benefits defined benefit commitment with which these obligations will be directly settled, and which meet the following conditions: they are not owned by the Group, but rather by The Bank has acquired certain pension commitments with its employees derived from a third party that is legally separate and not a related party; they are only available the Collective Labour Agreement for Private Banking. for paying or financing post-employment benefits of the employees; and they cannot be returned to the consolidated companies, except for when the assets in the plan The post-employment commitments held by the Bank with its employees are are sufficient to fulfill all of the obligations of the plan or of the companies related to considered “Defined contribution plans”, when the Bank makes predetermined current or past employees' benefits to repay the employees' benefits that are already contributions to a separate company, without having any legal or effective obligation paid by the Group. to make additional contributions if the separate company were not able to pay the benefits to the employees related to services rendered in the current and previous financial years. Post-employment commitments that do not meet the above conditions will be considered “Defined benefit plans”. Consolidated financial statements 2015 Bankinter 34

If the Bank can demand payment of a part or all of the outlay required to cancel a ■■ The yield of the assets attached to the plan, excluding amounts included in the net defined benefit obligation from the insurance companies, and it is practically certain interest on the defined benefit liability (asset). that this insurer is going to reimburse some or all of the outlays demanded to cancel this obligation, but the insurance policy does not meet the conditions to be an asset ■■ Any change in the effects of the asset's limit, excluding amounts included in the of the plan, the Bank records its right to the reimbursement within the assets of the net interest on the defined benefit liability (asset). balance sheet in the line “Pension-related insurance contract” which, in all other aspects, is treated as an asset of the plan. Other long-term benefits

Post-employment benefits are recognised in the following manner: Early retirements

■■ The service cost is recognised in the income statement and includes the following The Group guarantees certain commitments acquired with staff who retire early - components: both with regard to salaries and other social costs - from the moment they take early retirement up until the effective retirement date. ■■ The service cost for the current period (understood as the increase in the current value of the obligations that arises a result of the services rendered Commitments for early retirements up until the effective retirement date are in the period by employees) is recognised within Staff costs. accounted for, in all regards, using the same criteria explained above for defined benefit post-employment benefits, with the exception that all of the past service cost ■■ The past service cost, which arises due to changes introduced in the pre- and the actuarial gains and/or losses are recorded immediately in the moment they existing post-employment benefits or due to the introduction of new benefits arise, with the opposite entry in the consolidated income statement. and includes the cost of reductions is recognised within Provisioning expense (net). Death and disability of staff in service

■■ Any gain or loss arising from a settlement of the plan is recorded within The commitments acquired by the Group to cover the contingencies of death and Provisioning expense (net). disability of the employees during the period in which they remain in active service, and which are covered through an insurance policy contracted under co-insurance ■■ The net interest on the defined benefit commitment net liability (asset) with Axa and Caser, are recorded in the consolidated income statement for an amount (understood as the change in the defined benefit net liability (asset) that arises equal to that of the premiums of these insurance policies accrued in each period. due to the passage of time), is recognised within Interest and similar charges (Interest and similar income, if it is an income) in the income statement. Remuneration with share-based payments

■■ The recalculation of the defined benefit net liability (asset) is recognised within The group remunerates certain groups of employees with shares, that is, providing Valuation adjustments and it includes: own equity instruments in exchange for services rendered. In accordance with accounting standards, services received under this compensation system are recorded ■■ The actuarial gains and losses generated in the period, which originate from the in the income statement, generating an equal and opposite increase in Shareholders' differences between the previous actuarial hypothesis and the reality and from Equity. changes in the actuarial hypotheses used. Consolidated financial statements 2015 Bankinter 35

t) Other provisions and contingencies The Group includes in the consolidated financial statements all significant provisions for which it is estimated to be more likely than not that the obligation will have to The Group accounts for provisions at the estimated amount required to meet current be settled. Contingent liabilities are not recognised in the consolidated financial obligations as a result of past events that are clearly specified in terms of their nature statements but are instead disclosed, unless the possibility of there being an outflow but are uncertain in terms of their amount or the time of their payment, and for the of resources embodying economic benefits is considered remote. payment of which it is probable that an outflow of resources embodying economic benefits will be required. These obligations can arise due to the following aspects: Provisions are quantified taking into consideration the best available information on the consequences of the event that give rise to them and they are estimated at every ■■ A legal or contractual provision. accounting period end, taking into account the discount effect if significant. They are used to cover the specific obligations for which they were recognised and are reversed, ■■ An implicit or implied obligation, which is born out of a valid expectation created either in full or partially, when these obligations cease to exist. by the Group with third parties with regard to the acceptance of certain types of responsibilities. Such expectations are created when the Group publicly accepts As at 31 December 2015 and 2014 various judicial proceedings and claims against the responsibilities, they are derived from past actions or from company policies that Group were in progress, arising from the ordinary performance of its activities. Both are publicly published. the Group's legal advisers and the Company's Directors understand that the conclusion of these proceedings and claims will not produce a significant impact, in addition to ■■ The virtually certain development of certain aspects of regulation, particularly the amount and included as a provision, where applicable, in the consolidated annual draft legislation which the Group will not be able to avoid. accounts.

Contingent liabilities are the Group's possible obligations, arising as a result of past u) Income Tax events and the existence of which is conditional upon one or more future events occurring that are beyond the Group's control. Contingent liabilities include the Group's Corporation tax is considered an expense and is recorded in the “Income tax” line of current obligations, for the payment of which it is not probable that a reduction of the consolidated income statement, except when it is a result of a transaction recorded resources embodying economic benefits will be required or the amount of which, in directly in shareholders' equity, in which case it is recorded directly in shareholders' extremely rare cases, cannot be quantified with sufficient reliability. equity, and of a business combination, in which the deferred tax is recorded another element of it's equity. Contingent liabilities are classified as probable when there is a greater probability of them occurring than not, as possible when there is a lower probability of them The expense of the “Income tax” line is determined by the tax payable calculated occurring than not and as remote when their occurrence is extremely unlikely. with regard to the taxable income for the financial year, after considering variations during the year due to timing differences, credits for deductions and discounts and tax losses. The taxable income for the period may differ from the net profit or loss for the period presented in the consolidated income statement, since it excludes the items of income or expense that are taxable or deductible in other periods and the items that are never taxable or deductible. Consolidated financial statements 2015 Bankinter 36

Deferred tax assets and liabilities correspond to the taxes, which are expected to be At each accounting period end, the deferred taxes recorded, both assets and liabilities, payable or recoverable in the differences between the book values of the assets and are reviewed in order to check that they remain applicable and any necessary liabilities in the consolidated financial statements and the corresponding tax bases, corrections are made. are accounted for using the liability method in the consolidated balance sheet and are quantified applying the tax rate at which they are expected to be recovered or settled On the other hand, the Group only records deferred tax assets originating from to the corresponding timing difference or credit. deductible timing differences, credits for deductions or discounts or due to the existence of tax losses if the following conditions are met: A deferred tax asset, such as a tax advance, a credit for deductions and discounts and a credit for tax losses, is recognised provided that it is probable that the Group will ■■ those which can make them effective; or which are guaranteed in accordance obtain sufficient tax profits in the future against which to apply them. It is considered with Royal Decree Act 14/2013, of 20 November, regarding urgent measures for probable that the Group will obtain sufficient tax profits in the future when, among the adaptation of Spanish law to European Union regulations with regard to the others cases: supervision and solvency of financial institutions, and i) There deferred tax liabilities that are cancellable in the same period in which the ■■ in the case of deferred tax assets originating from tax losses, they have been deferred tax asset is realised or in other subsequent period in which it can offset the produced by identified causes that are unlikely to be repeated. tax loss that exists or is produced by the advance amount. At each end-of-year closure, the deferred taxes recognised are reviewed (both ii) Tax losses have been produced by identified causes that are unlikely to be repeated. assets and liabilities) with the purpose of ensuring that they remain valid, making any necessary corrections to them in accordance with the results of the analyses Notwithstanding the above, deferred tax assets that arise in accounting for performed. investments in multi-group or associate companies are only recognised when it is probable that it is going to be realised in the foreseeable future and sufficient tax v) Off-balance sheet customer funds profits against which to offset the asset are expected in the future. Neither are they recorded when they arise from the initial recognition an element of equity, other than Funds entrusted by third parties to be invested in investment companies or funds, a business combination, which did not affect the accounting profit or tax profit at the pension funds, (insurance contracts) and discretionary management contracts of time of recognition. portfolios are not included on the Group's balance sheet. Information on these funds as at 31 December 2015 and 2014 appears in Note 41. Deferred tax liabilities are always accounted for, except for when they arise from the recognition of goodwill or in accounting for investments in multi-group or associate companies, if the Group is able to control when the timing difference is reversed and, also, it is probable that this timing difference is not reversed in the foreseeable future. Neither are deferred tax liabilities recorded when they arise from the initial recognition of an element of equity, other than a business combination, which did not affect the accounting profit or tax profit at the time of recognition. Consolidated financial statements 2015 Bankinter 37

The assets managed by the consolidated companies that are the property of third In the line item ‘Reinsurance assets’, the amounts that companies have the right parties are not included on the consolidated balance sheet. Fees generated from this to receive originating from reinsurance contracts they hold with third parties are activity are included in the balance of the “Fees Receivable” line of the consolidated included. They are calculated according to the reinsurance contracts entered into and income statement. In Note 41, information is provided on the third-party assets by applying the same criteria as are used for direct insurance contracts. managed by the Group as at 31 December 2015 and 2014 and during financial year then ended. The profits of the group's insurance companies from their insurance activity are registered in the ‘Insurance activity’ line of the income statement. Investment funds managed by the consolidated companies are not recorded on the Group's consolidated balance sheet, as their assets are the property of third parties. 6. Cash and deposits with central banks Fees accrued in the period for the various services rendered to these funds by the companies of the Group (services of asset management, custody of portfolios, etc.) are This heading includes cash balances and balances held with the Banco de España and recorded in the line “Fees receivable” of the consolidated income statement. other central banks. The breakdown as at 31 December 2015 and 2014 is as follows: Thousands of euros w) Insurance contracts 31-12-15 31-12-14

In accordance with general accounting practices in the insurance sector, the insurance Cash 199,419 139,512 companies record in the income statement the amounts of the premiums that they Banco de España 723,649 217,544 issue and charge to their income statements the cost of the losses they cover when Other central banks 2,280 259 their final settlement occurs. These accounting practices compel insurance companies Valuation adjustments 13 12 to accrue, at each period end, both the incomes for premiums issued that have been 925,361 357,327 recorded in their income statements but not accrued on that date, and the expected In euros 924,154 356,061 costs of losses that have occurred and are yet to be charged to the income statement. In foreign currency 1,207 1,266 925,361 357,327 The most significant liabilities of these companies with regard to direct insurance policies contracted by them relate to: the provision for unearned premiums, the Valuation adjustments includes an amount of 13 thousand euros related to accrued provision for on-going risks, the provision for benefit payments, the mathematical interest as at 31 December 2015 (12 thousand euros as at 31 December 2014). reserve and the share in profits and for rebates. These direct insurance actuarial reserves are recorded on the accompanying consolidated balance sheets within the line item ‘Liabilities under insurance contracts’ to cover claims originating from these insurance contracts. Consolidated financial statements 2015 Bankinter 38

7. Held-for-trading assets and liabilities and Other financial assets The breakdown of the held-for-trading portfolio of assets and other financial assets at at fair value through profit and loss fair value through profit and loss of the consolidated balance sheet as at 31 December 2015 and 2014, by types of instruments and counterparties, is as follows: The breakdown of these headings in the balance sheet as at 31 December 2015 and 2014 is as follows: At 31 December 2015 Thousands of Euros Thousands of Euros 31-12-2015 31-12-2014 At 31 December 2015 Assets: Other Deposits with credit institutions 1,009,596 544,528 Public Other Non- Public admin. Domestic Domestic Customer credit 808,476 1,967,180 Total Credit admin. Non- Private Private Debt securities 2,264,761 2,345,496 institutions Domestic domestic Sectors Sectors Other equity instruments 91,973 108,793 Deposits with credit Trading derivatives 356,041 436,958 institutions 1,009,596 - - - - 1,009,596 4,530,847 5,402,955 Customer credit - - - 808,476 - 808,476

Debt securities 44,268 2,204,632 6,878 7,250 1,733 2,264,761 In euros 4,526,820 5,401,818 Other equity In foreign currency 4,027 1,137 instruments 10,431 - - 24,246 57,296 91,973 4,530,847 5,402,955 Trading derivatives 115,256 - - 240,383 402 356,041 1,179,551 2,204,632 6,878 1,080,355 59,431 4,530,847 The amount recorded in “Deposits with credit institutions” and in “Customer credit” as at 31 December 2015 and 2014 corresponds mostly to assets acquired under repurchase agreements.

The line item “Other equity instruments” includes securities that form part of the held- for-trading portfolio, as well as other financial assets at fair value through profit and loss. The balance of the latter, as at 31 December 2015 amounted to 57,209 thousand euros (49,473 thousand euros as at 31 December 2014).

The fair value of the loaned assets (assets granted under repurchase agreements) in the held-for-trading portfolio within the assets of the balance sheet as at 31 December 2015, is 1,790,311 thousand euros (1,700,679 thousand euros as at 31 December 2014). Almost all of these assets are granted for periods of less than a year. Consolidated financial statements 2015 Bankinter 39

At 31 December 2014 The amount recorded in “Customer deposits” as at 31 December 2015 corresponds Thousands of Euros mostly to assets granted under repurchase agreements. At 31 December 2014 Other The net gains and losses from financial operations (Note 31) generated by these Public Other Non- portfolios are set out below: Public admin. Domestic Domestic Total Credit admin. Non- Private Private Thousands of euros institutions Domestic domestic Sectors Sectors 2015 2014 Held for trading (Note 31) 12,360 14,982 Organised market 12,167 19,520 Deposits with credit Non-organised market 193 (4,538) institutions 544,528 - - - - 544,528 Other financial assets at fair value through profit and loss Customer credit - - - 1,967,180 - 1,967,180 (Note 31) (3,183) 1,163 Debt securities 63,907 2,092,940 174,521 7,587 6,541 2,345,496 9,177 16,145 Other equity instruments 40,821 - - 17,620 50,352 108,793 The net gains and losses from financial operations, broken down by type of Trading derivatives 257,174 - - 179,745 39 436,958 instrument, of the held-for-trading portfolio and of other financial assets at fair value 906,430 2,092,940 174,521 2,172,131 56,932 5,402,955 through profit and loss recorded in the 2015 and 2014 financial years are as follows: Thousands of euros 2015 2014 The breakdown of the held-for-trading portfolio's liabilities is as follows: Held for trading fixed-income (Note 31) 10,303 24,676 Other equity instruments (Note 31) (4,024) 3,805 Thousands of euros Held for trading (841) 2,642 Liabilities 31-12-15 31-12-14 Other financial assets at fair value through profit or loss (3,183) 1,163 Deposits by credit institutions 735,427 270,621 Trading derivatives (Note 31) 2,898 (12,336) Customer deposits 995,019 451,559 Trading derivatives 464,958 322,598 9,177 16,145 Short positions in securities 1,573,676 1,396,713 The held-for-trading portfolio of assets and liabilities is managed jointly. Note 45 Risk 3,769,080 2,441,491 Policies and Management sets out information on the policy and management of the held-for-trading portfolio.

In euros 3,764,607 2,440,351 In foreign currency 4,473 1,140 3,769,080 2,441,491 Consolidated financial statements 2015 Bankinter 40

a) Debt securities b) Other equity instruments

The composition of this heading of the held-for-trading portfolio within the assets of The breakdown of this heading of the held-for-trading portfolio of assets and of the the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: portfolio of other financial assets at fair value through profit and loss for the 2015 and Thousands of euros 2014 financial years is as follows: 31-12-15 31-12-14 Thousands of euros Public Administrations 2,211,510 2,092,840 Of Credit Of Other Domestic Of Other Non-Domestic Other private sectors 53,251 252,656 Institutions Sectors Sectors Total Balance at 31-12-14 40,821 17,620 50,352 108,793 2,264,761 2,345,496 Balance at 31-12-15 10,431 24,246 57,295 91,973 The breakdown of this heading according to the nature of the securities that make it By currency, practically all other equity instruments as at 31 December 2015 and 2014 up as at 31 December 2015 and 2014 is as follows: are denominated in euros

Thousands of euros c) Trading derivatives 31-12-15 31-12-14 Treasury bills 718,496 76,845 Bonds 695,394 1,392,633 The composition of this heading of the held-for-trading portfolio of assets and liabilities Debentures 614,935 511,649 of the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: Strips 175,331 111,814 Thousands of euros Other 60,605 252,555 Fair value 2,264,761 2,345,496 31-12-15 31-12-14 Assets Liabilities Assets Liabilities All amounts in this heading are denominated in euros. The held-for-trading portfolio Unexpired currency purchases and sales: 23,423 89,639 189,870 39,879 of assets is made up of securities that are listed in organised markets, as at 31 Purchases of currencies against euros 12,158 89,193 43,045 40,202 December 2015 and 2014. Purchases of currencies against currencies 12 2 18,807 77 Sales of currencies against euros 11,253 1,443 128,016 (406) Sales of currencies against currencies - - 2 6 Security options: 33,809 43,329 19,323 43,320 Purchased 33,809 12,474 19,323 5,886 Issued - 30,855 - 37,434 Interest rate options: 244 203 2,950 88,764 Purchased 244 203 2,950 88,764 Currency options: 4,625 4,391 - 10 Purchased 4,625 - - - Issued - 4,391 - 10 Other operations on interest rates: 293,941 325,044 224,815 150,625 Interest rate swaps (IRS´s) 293,941 325,044 224,815 150,625 356,041 464,958 436,958 322,598 Consolidated financial statements 2015 Bankinter 41

d) Short positions in securities The impact in the line item “Valuation adjustments” within the consolidated shareholders' net worth has been 107,083 thousand euros as at 31 December 2015 This heading of the balance sheet is made up of financial liabilities for overdrafts (123,727 thousand euros as at 31 December 2014). The breakdown of the movement in allocations with a value of 1,573,676 thousand euros as at 31 December 2015 is set out below: (1,396,713 thousand euros as at 31 December 2014). The balances are denominated Thousands of Euros in euros. These overdrafts in allocations are generated by the definitive sale of 2015 2014 financial assets acquired under repurchase agreements. Valuation adjustments at 1 January 123,727 41,605 Revaluation gains and losses 1,845 159,725 8. Available-for-sale financial assets Income tax 13,506 (35,195) Amounts transferred to income statement (31,994) (42,408) The breakdown of this heading of the consolidated balance sheet as at 31 December Valuation adjustments at 31 December 107,084 123,727 2015 and 2014 is as follows: Debt securities 99,548 118,199 Equity instruments 7,536 5,528 Thousands of euros 31-12-15 31-12-14 By geographical areas,the portfolio of available-for-sale financial assets is concentrated, Debt securities 3,377,008 2,845,308 mostly, in Spain as at 31 December 2015 and 2014. Other equity instruments 153,145 168,505 3,530,153 3,013,813 The breakdown of this heading according to the nature of the securities it is composed In euros 3,296,898 2,716,992 of as at 31 December 2015 and 2014 is as follows: In foreign currency 233,255 296,821 Thousands of euros 3,530,153 3,013,813 31-12-15 31-12-14 Fixed income 3,377,008 2,845,308 The fair value of the assets of this heading of the consolidated balance sheet as at Debt 1,939,919 676,249 31 December of 2014, loaned or pledged, is 460,940 thousand euros, respectively Other Fixed Income 1,437,089 2,169,059 (746,292 thousand euros as at 31 December 2014). Almost all of these assets are Equities 153,145 168,505 granted for periods of less than a year. The breakdown of this heading of the balance sheet as at 31 December 2015 and 2014, by type of instrument and counterparty, is as follows: Thousands of euros 31-12-15 Public Other Private Administrations Sectors Total Debt securities 1,939,919 1,437,089 3,377,008 Other equity instruments - 153,145 153,145 1,939,919 1,590,234 3,530,153 Consolidated financial statements 2015 Bankinter 42

Thousands of euros At the close of 2015 and 2014, the composition of the book value of the line item 31-12-14 “Valuation adjustments”, disclosing decreases and increases in value separately, is as Public Other Private follows: Administrations Sectors Total Debt securities 1,591,649 1,253,659 2,845,308 Thousands of euros Other equity instruments - 168,505 168,505 31-12-15 31-12-14 1,591,649 1,422,164 3,013,813 Debt Securities: Capital Gains 112,671 123,932 Debt Securities: Capital Losses (13,123) (5,733) The gains and losses from financial operations (Note 31), by type of instrument, of Total Fixed Income 99,548 118,199 the portfolio of available-for-sale financial assets recorded in the consolidated income Equity Instruments: Capital Gains 11,521 11,688 statement as at 31 December 2015 and 2014 are as follows: Equity Instruments: Capital Losses (3,986) (6,160) Thousands of euros Total Equities 7,535 5,528 31-12-15 31-12-14 Balance at the close of the period 107,083 123,727 Debt securities 19,713 35,886 Other equity instruments 12,281 6,522 9. Held-to-maturity investments 31,994 42,408 The breakdown of this heading of the consolidated balance sheets as at 31 December During the 2015 and 2014 financial years, for the Other Equity Instruments, the 2015 and 2014 is as follows: Group has recorded impairments amounting to 10,322 thousand euros and 3,516 Thousands of euros thousand euros, respectively, under the heading “Impairment losses of available-for- 31-12-15 31-12-14 sale financial assets” of the accompanying consolidated income statement. Public Administrations 2,391,162 2,805,744 Credit institutions 13,595 13,738 To estimate the impairment of equity instruments included in the portfolio of 2,404,757 2,819,482 available-for-sale financial assets, the company performs an individualised analysis of the impairment of each significant security. However, the group's accounting policies establish that, in any case, a prolonged or significant decrease in their fair value, below their cost, constitutes objective evidence of an impairment of value and, therefore, an impairment should be recognised for the difference between the cost and the fair value of the affected instrument. Specifically, in the case of listed equity instruments, the accounting policy considers that a decrease is prolonged when the instrument's fair value has been below its cost for more than 18 months, and it considers that the decrease is significant when it is greater than 40% of its cost.

During the 2015 financial year, no significant impairments of investments in equity instruments included in the portfolio of available-for-sale financial assets have been recorded due to prolonged or significant decreases. Consolidated financial statements 2015 Bankinter 43

The movement in the heading “Held-to-maturity investments” during the 2015 and The valuation adjustments of the portfolio of credit investments, as at 31 December 2014 financial years is set out below: 2015 and 2014, consist of the following amounts: Thousands of euros Thousands of euros 2015 2014 31-12-15 31-12-14 Balance at the start of the period 2,819,482 3,220,721 Impairment losses (847,990) (945,523) Additions - - Accrued interest 78,419 97,799 Repayments (414,725) (401,239) Micro-hedging operations 4,624 3,397 Balance at the close of the period 2,404,757 2,819,482 Other (90,689) (99,326) In the 2015 and 2014 financial years, no transfers from this to other accounting (855,637) (943,653) portfolios have occurred, nor vice versa. Below, a breakdown of the movement during 2015 and 2014 in the balance of As at 31 December 2015 and 2014, the portfolio of held-to-maturity investments financial assets classified as impaired due to their credit risk is shown: was concentrated, mostly, in Spanish Public Administrations. The Market Risks Area Thousands of euros values these references on a monthly basis, for the purposes of including them as 2015 2014 liquid assets in the Basel LCR ratio (Liquidity Coverage Ratio). As at 31 December Balance at the start of the period 2,194,568 2,234,982 2015 and 2014, the entire portfolio is denominated in euros. Net new non-performing loans 29,479 172,812 Transfers to write-offs (232,877) (213,226) 10. Loans and receivables Balance at the close of the period 1,991,170 2,194,568

The breakdown of this heading of the consolidated balance sheets as at 31 December The breakdown of this heading of the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: 2015 and 2014 by type of instruments and counterparty, regardless of the fair value Thousands of euros that any kind of guarantee to ensure their recovery may have, is as follows: 31-12-15 31-12-14 Thousands of euros Deposits with credit institutions 850,180 1,106,018 31-12-2015 31-12-2013 Valuation adjustments 271 7,423 Deposits Deposits Total Deposits with credit institutions 850,451 1,113,441 with Credit Customer Debt with Credit Customer Debt Institutions Credit securities Total Institutions Credit securities Total Customer credit 45,038,541 43,397,799 Credit institutions 850,451 - 30,234 880,685 1,113,441 - 1,113,441 Valuation adjustments (855,908) (951,076) Domestic public - - Total Customer credit 44,182,633 42,446,723 administrations 1,676,295 285,409 1,961,704 1,704,402 308,921 2,013,323 Total Debt securities 446,230 446,357 Other private sectors - 42,506,337 130,587 42,636,924 - 40,742,321 137,436 40,879,757 45,479,314 44,006,521 850,451 44,182,633 446,230 45,479,314 1,113,441 42,446,723 446,357 44,006,521 Euros 41,691,865 40,733,377 Foreign currency 3,787,449 3,273,144 45,479,314 44,006,521 Consolidated financial statements 2015 Bankinter 44

Below, the movement during 2015 and 2014 in the balance of the provisions that a) Deposits with credit institutions cover impairment losses in the assets that make up the “Credit Investments” balance is shown: The composition of this heading of the portfolio of credit investments within the assets Thousands of euros of the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: 31/12/2015 31/12/2014 Thousands of euros Balance at the start of the period 945,523 947,984 31-12-15 31-12-14 Net provisions charged to profit for the period 203,048 243,512 Term accounts 35,529 14,904 Provisions charged to profit for the period; 383,928 434,050 Repurchase agreements - 299,725 Reversal of provisions credited to profit (180,881) (190,538) Other accounts 814,652 791,389 Uses (296,185) (241,171) Of which managed as cash 523,521 521,377 Other movements/transfers (4,396) (4,801) Impaired assets - - Balance at the end of the period 847,990 945,523 Valuation adjustments 271 7,423 Accrued interest 291 7,419 Of which: Other (20) 4 Determined individually 820,356 917,172 850,451 1,113,441 Determined collectively 27,634 28,351 In euros 665,835 959,761 Doubtful loans recovered during 2015 and 2014 amount to 24,069 and 9,498 thousand In foreign currency 184,616 153,680 euros, respectively. During the 2015 and 2014 financial years, the Group has recorded 850,451 1,113,441 impairment losses for assets that have subsequently been transferred to foreclosed assets for an amount of 47,416 and 52,932 thousand euros (Note 12).

The interest and yields generated by Credit Investments and recorded in the consolidated income statement, as at 31 December 2015 and 2014, are as follows: Thousands of euros 2015 2014 Deposits with credit institutions (Note 30) 10,069 7,321 Customer credit (Note 30) 974,994 1,070,052 985,065 1,077,373 Consolidated financial statements 2015 Bankinter 45

b) Customer credit The breakdown of the impaired assets by maturity term as at 31 December 2015 and 2014 is as follows: The composition of this heading of the portfolio of credit investment within the assets Thousands of of the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: Euros 31-12-15 Thousands of euros Up to 6 months 397,492 Customer Credit 31-12-15 31-12-14 More than 6 months, up to 9 98,095 More than 9 months, up to 12 114,752 Public Administrations 1,676,296 1,704,402 More than 12 months 1,380,831 Credit to Public Administrations 1,671,214 1,696,895 1,991,170 Impaired assets 247 401 Valuation adjustments 4,835 7,106 Thousands of Accrued interest 5,056 7,510 Euros Other (221) (404) 31-12-14 Other private sectors 42,506,337 40,742,321 Up to 6 months 427,812 Commercial credit 1,793,057 2,016,997 More than 6 months, up to 9 146,960 Secured loans 25,915,053 25,353,414 More than 9 months, up to 12 140,055 Repurchase agreements - - More than 12 months 1,479,741 Other term receivables 11,540,110 9,899,189 2,194,568 Financial leases 985,139 968,590 Payable on demand and other accounts 1,142,758 1,268,146 Unimpaired overdue assets as at 31 December 2015 amount to 87,783 thousand euros Impaired assets 1,990,922 2,194,167 (206,904 thousand euros as at 31 December 2014). Valuation adjustments (860,743) (958,182) Impairment losses (847,990) (945,523) c) Information on leases. Accrued interest 73,071 82,870 Micro-hedging operations 4,624 3,397 c.1) Finance Leases Other (90,448) (98,926) 44,182,633 42,446,723 Finance lease contracts for the 2015 and 2014 financial years have the following In euros 41,348,374 39,327,259 characteristics: In foreign currency 2,834,259 3,119,464 2015 2014 Average life 6.3 years 4.8 years 44,182,633 42,446,723 Maximum differential 6.85% 7.00% Consolidated financial statements 2015 Bankinter 46

The distribution of credit investments in finance leases as at 31 December 2015 and c.2) Operating Leases. 2014 is as follows: The balance of the assets leased out under operating leases included on the balance 31-12-15 31-12-14 sheet as at 31 December 2015 is 21,932 thousand euros, with 24,657 thousand euros Passenger cars 8.84% 10.64% as at 31 December 2014. Various machinery 51.29% 47.65% Transport vehicles 37.85% 38.71% Other 2.02% 3.00% The amount of the minimum receipts in operating lease contracts in which the Bank 100.00% 100.00% acts as lessor, as at 31 December 2015 and 2014, is as follows: Thousands of Euros Impairment losses have been as follows: 2015 2014 31-12-15 31-12-14 Operating leases - Minimum payments: Provision for insolvencies 7,805 14,732 Less than a year 5,640 2,979 Between one and five years 13,361 12,433 Minimum future payments More than five years - 7,989 Thousands of Euros As at 31 December 2015 and 2014, there are no contingent payments in the operating 2015 2014 leases currently in force. Finance leases - Minimum payments: Between one and five years 198 179 d) Debt securities. More than five years 91 97

Non-guaranteed residual values in favour of the lessor The composition of the debt securities heading of credit investments within the asset

Thousands of Euros of the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: 2015 2014 Thousands of euros Residual values 2015 2014 Domestic public administrations 285,409 308,921 Between one and five years 66,482 57,746 Instituto de Crédito Oficial and Credit institutions 5,148 5,144 More than five years 51,085 52,802 Other domestic sectors 155,673 132,292

446,230 446,357

There are no impaired positions among the debt securities of this portfolio. Consolidated financial statements 2015 Bankinter 47

11. Hedging derivatives in assets and liabilities Below, a comparison of the hedging instruments with coupon and ex-coupon as at 31 December 2015 and 2014 is shown:

As at 31 December 2015, the Group has contracted hedging derivatives with a value Thousands of euros of 160,073 thousand euros recorded within the assets of the balance sheet and 11,489 31/12/2015 31/12/2014 thousand euros within the liabilities (148,213 and 20,241 thousand euros in the assets With coupon Ex-coupon With coupon Ex-coupon and liabilities as at 31 December 2014). The net of the derivatives has amounted to Spanish public debt Euros 9,623 10,275 -5,219 -10,541 148,584 thousand euros and 127,972 thousand euros as at 31 December 2015 and Italian public debt Euros 1,321 1,321 -2,390 -2,299 2014, respectively. Other fixed income Euros 1,342 1,405 -169 -162 Other fixed income USD -1,865 -1,407 -1,017 -866 The breakdown of the hedging derivatives and of the corresponding hedged items, Loan USD -5,039 -4,370 -4,040 -3,428 distinguishing by type of hedge, is as follows: Loan EUR -269 -269 0 0 Thousands of Euros Thousands of Euros Subordinated debt 68,822 64,421 76,121 71,723 Par value Fair Value of Fair Value of hedged Nature Fair Value of Fair Value of Senior debt 0 0 0 0 the Hedged the Hedged Hedging (Millions of the the Hedged the Hedged Hedged Instrument Type of hedging Instrument Instrument instrument of euros) Hedged Instrument Instrument Customer deposits -2,061 943 -1,257 1,233 Assigned Assigned Hedging Risk Assigned to Assigned to to the to the Mortgage bond issuance 76,973 52,002 65,943 46,696 instrument the Hedged the Hedged Hedged Risk Hedged Risk Risk Risk (Ex-coupon) (Ex-coupon) Macrohedges - Mortgages 83 83 Individual hedges or 31/12/2015 21/12/2014 31/12/2015 31/12/2014 Others 148,930 124,224 127,972 105,356 microhedges: Individual hedging or Interest rate Interest Financial assets- microhedging swaps rate The Group uses interest rate swaps as hedging instruments. These swaps give rise Spanish public debt Individual hedging or Interest rate Interest 687.00 -9,722 10,248 10,275 -10,541 Euros microhedging swaps rate to an economic exchange of interest rates, without carrying out any exchange of Italian public debt Individual hedging or Interest rate Interest 155.00 -1,194 2,280 1,321 -2,299 Euros microhedging swaps rate principal balances. Other fixed income Individual hedging or Interest rate Interest 70.80 -1,341 163 1,405 -162 Euros microhedging swaps rate Other fixed income Individual hedging or Interest rate Interest 68.89 1,405 861 -1,407 -866 USD microhedging swaps rate Below, the characteristics of the main hedges that the company holds as at 31 Individual hedging or Interest rate Interest Loan USD 141.91 4,355 3,397 -4,370 -3,428 December 2015 are described. microhedging swaps rate Individual hedging or Interest rate Interest Loan EUR 19.00 269 -269 microhedging swaps rate 1.- Hedge of Spanish Public Debt classified in the portfolio of available-for-sale assets Financial liabilities- Individual hedging or Interest rate Interest Subordinated debt 789.82 -63,190 -69,995 64,241 71,723 microhedging swaps rate Individual hedging or Interest rate Interest In these hedges, the hedged items are the following: Public Debt of the Spanish Senior debt 0.00 0 microhedging swaps rate Government with a par value of 28 million euros at 5.9%, a bond of the Community Individual hedging or Interest rate Interest Customer deposits 3.70 -932 -1,233 943 1,233 microhedging swaps rate of Madrid with a par value of 25 million euros at 1,826% and another of 25 million at Mortgage bond Individual hedging or Interest rate Interest 5,340,00 -52,203 -49,475 52,002 49,696 issuance microhedging swaps rate 1,189%, a Government bond with a par value of 50 million euros, a Government bond Macrohedges- with a par value of 42 million euros at 5.90%, a Government bond with a par value Interest rate Interest Mortgages Macrohedging 15.00 -88 83 swaps rate of 115 million euros at 1.95% and another of 377 million at 5.15% recorded in the 7,291 -122,640 -103,754 124,224 105,356 heading “Available-for-sale financial assets”. There is another hedge of a bond of the Basque Government with a par value of 25 million euros at 1.25%. Consolidated financial statements 2015 Bankinter 48

The hedged risk is the variation of the fair value of these securities as a result of 4.- Hedge of Other fixed income assets in dollars classified in the portfolio of available- fluctuations in the risk-free interest rate. Through the accountanting hedge, an for-sale assets. exposure at a fixed interest rate is swapped for an exposure at a variable interest rate. The hedged amount is 100% of the position in each case. The hedged items are the dollar bonds US92857WBC38 (5 million dollars), US05578DAG79 (15 million dollars), US655044AH83 (15 million dollars), 2.- Hedge of Italian Public Debt classified in the portfolio of available-for-sale assets US92343VBR42 (5 million dollars), US92343VCR33 (5 million dollars), US92553PAT93 (10 million dollars), US25152RXA66 (5 million dollars), US552081AK73 (15 million In these hedges, the hedged items are two Public Debt bonds of the Italian Government dollars). with a par value of 55 million euros at 3.75% and another of 100 million euros at 4.75%, recorded in the heading “Available-for-sale financial assets”. 5.- Hedge of the issue of subordinated debentures

The hedged risk is the variation of the fair value of these securities as a result of In these hedges, the hedged items are subordinated debentures issued by Bankinter fluctuations in the risk-free interest rate. Through the accountanting hedge, an at fixed interest rates of 6.00%, 6.375% and 1.75% for an overall amount of 790 exposure at a fixed interest rate is swapped for an exposure at a variable interest rate. million euros, recorded in the heading “Financial liabilities at amortised cost”. The hedged amount is 100% of the position in each case. The hedged risk is the variation of the fair value of these securities as a result of 3.- Hedge of Other fixed income assets in euros classified in the portfolio of available- fluctuations in the risk-free interest rate. Through this hedge, an exposure at a fixed for-sale assets interest rate is converted into an exposure at a variable interest rate. The hedged amount is 100% of the issue in each case. The hedged items are the following: a Telefónica asset swap bond at 2.932% with a par value of 2.8 million euros, a Carlsberg bond at 2.5% with a par value of 10 million, 6.- Hedge of customer deposits an Aurizon Network bond at 2% with a par value of 8 million, a Delphi Automotive bond at 1.5% with a par value of 10 million, a Metre AG bond at 1.5% with a par value The hedged items are various fixed-rate deposits taken out by customers with a value of 5 million, a Casino Guichard bond at 2.33% with a par value of 10 million and a of 4 million euros, recorded in the heading “Financial liabilities at amortised cost”. Portuguese Government bond at 2,875% with a par value of 25 millions, recorded in the heading “Available-for-sale financial assets”. The hedged risk is the variation of the fair value of these deposits as a result of fluctuations in the risk-free interest rate. Through this hedge, an exposure at a fixed The hedged risk is the variation of the fair value of these securities as a result of interest rate is converted into an exposure at a variable interest rate. The hedged fluctuations in the risk-free interest rate. Through the accountanting hedge, an amount is 100% for the INCREASE. exposure at a fixed interest rate is swapped for an exposure at a variable interest rate. The hedged amount is 100% of the position in each case. Consolidated financial statements 2015 Bankinter 49

7.- Hedge of mortgage bond issues The main currency is the Yen (1,600 million) and it is hedged at all times above 90%. Through Cross Currency Swaps, as at December 2015, 1,300 million was hedged. The The hedged items are the issues ES0413679178 (€1,000 mill. ), ES0413679327 (€1,000 list of these instruments is as follows: mill. ), ES0413679269 (€1,000 mill. ), ES0413679277 (€590 mill. ), ES0413679343 Product Type Par value Maturity (€1,000 mill. ), and ES0413679350 (€750 mill. ) , of mortgage bonds for a total par CCIRS EUR-JPY I 100,000,000 29/03/2016 value of 5,340 million euros. CCIRS EUR-JPY I 100,000,000 28/04/2016 CCIRS EUR-JPY I 100,000,000 12/05/2016 The hedged risk is the variation of the fair value of these securities as a result of CCIRS EUR-JPY I 100,000,000 06/06/2016 fluctuations in the risk-free interest rate. Through the accountanting hedge, an CCIRS EUR-JPY I 100,000,000 11/09/2017 exposure at a fixed interest rate is swapped for an exposure at a variable interest rate. CCIRS EUR-JPY I 100,000,000 13/01/2016 The hedged amount is 100% of the issue in each case. CCIRS EUR-JPY I 100,000,000 16/02/2016 CCIRS EUR-JPY I 100,000,000 29/07/2016 CCIRS EUR-JPY I 100,000,000 10/04/2017 8.- Hedge of loans CCIRS EUR-JPY I 100,000,000 28/04/2017 CCIRS EUR-JPY I 100,000,000 30/05/2017 The hedged items are two dollar loans with par values of 137 million dollars and 17.5 CCIRS EUR-JPY I 100,000,000 26/06/2017 million dollars. This latter loan has predetermined quarterly repayments. There is CCIRS EUR-JPY I 100,000,000 18/12/2017 another loan in euros of 19 million euros, repayable. Upon their maturity they are renewed, hence the Bank keeps the risk hedged at all The hedged risk is the variation of the fair value of this loan as a result of fluctuations times. in the risk-free interest rate. Through this hedge, an exposure at a fixed interest rate is converted into an exposure at a variable interest rate. The hedged amount is 100% Effectiveness of the hedges for the deposit. The Micro-hedged described above are highly effective. The Bank performs and 9.- Macro-hedges documents the corresponding analyses to verify that, at the beginning of and during their lives, the changes in the fair value of the hedged item that are attributable to the The Bank has a hedge of fixed-term mortgages that converts them to variable rates hedged risk can be expected, prospectively, to be almost entirely offset by the changes through a repayable IRS for 15 million euros. in the fair value of the hedging instrument, and that, retrospectively, the results of the hedge have fluctuated within a fluctuation range of eighty to one hundred and The Bank constantly maintains a hedge over the exchange rate risk of multi-currency twenty-five per cent with regard to the result of the hedged item. mortgages with a value of 2,200 million euros

The financial products used to cover this exchange rate are both cross currency swaps and FX forwards. Upon each instrument's maturity, they are renewed for others of the same operational characteristics, always on the basis of the mass of mortgages to which the hedge relates. Consolidated financial statements 2015 Bankinter 50

With regard to the portfolio hedges, in addition to the above, the Bank checks that The net profit or loss recognised in the 2015 financial year (Note 35) due to the it complies with the alternative included in the accounting regulations currently in disposal of non-current assets held for sale has been losses valued at 42,395 thousand force of assessing their effectiveness by comparing the amount of the net position euros (losses valued at 42,465 thousand euros in 2014). of assets in each of the time periods with the designated hedged amount for each of them. According to this alternative, there would only be inefficiency in the hedge The classification, by categories and by average period in the portfolio of non-current when, after its review, the amount of the net position of assets were lower than that assets held for sale of foreclosed properties is as follows: of the hedged amount. Thousands of euros Residential Industrial assets Other Assets Totals 12. Non-current assets held for sale Assets 31-12-15 31-12-14 31-12-15 31-12-14 31-12-15 31-12-14 31-12-15 31-12-14 The balances and movements of the non-current assets held for sale, during the 2015 Up to one 9,705 16,917 6,053 1,223 1,314 100 17,072 18,239 and 2014 financial periods, are as follows: month More than one Thousands of euros month and 13,184 21,194 8,485 9,492 40 8,840 21,709 39,526 Balance at 31.12.2013 369,210 up to three Additions 236,541 months Valuation adjustments 29,458 More than three and up to 14,214 15,392 4,660 12,383 690 1,480 19,564 29,256 Retirements and disposals (278,538) six months Balance at 31.12.2014 356,671 More than six Additions 208,146 months and up 34,289 32,889 23,715 17,477 7,243 5,564 65,247 55,930 Valuation adjustments 16,098 to one year Retirements and disposals (262,629) More than a 88,299 102,049 49,336 55,800 57,060 55,870 194,695 213,720 Balance at 31.12.2015 318,287 year Totals 159,691 188,441 92,249 96,375 66,347 71,855 318,287 356,671

The movement experienced by the valuation adjustments of the non-current assets held for sale over the course of the 2015 and 2014 financial years is as follows: In table 5 of note 47 of this report, greater detail is provided on foreclosed assets.

Thousands of euros 2015 2014 The foreclosed assets that are not allocated for own use or real estate investments Opening balance 229,159 258,616 must be disposed of within one year from when they become available for immediate Net provisions charged to profit 72,454 65,181 sale. This last circumstance determines that the period a foreclosed asset can remain Of which due to insolvencies (Note 10) 47,416 52,932 on the balance sheet for can be more than a year. Of which due to the passage of time (Note 35) 28,038 12,249 Use of funds (94,360) (99,746) Other Movements 2,808 5,108 Closing balance 213,061 229,159 Consolidated financial statements 2015 Bankinter 51

The distribution of the foreclosed assets by business sectors is as follows, as at The following table shows the valuation companies that have valued assets during the December 2015 and 2014: 2015 financial year, as well as the total amount valued for each class of asset.

Sectors 31-12-15 31-12-14 Thousands of euros Enteprise Banking 48% 44% Valuation Residential Assets Industrial assets Other Assets Totals Commercial Banking 52% 56% Companies Overall total 100% 100% 31-12-15 31-12-14 31-12-15 31-12-14 31-12-15 31-12-14 31-12-15 31-12-14 Gesvalt Sociedad 67,988 85,015 44,292 48,644 46,293 44,135 158,573 177,794 From 31 December 2015 up until the date these consolidated financial statements De Tasacion SA were formulated, no significant amounts have been classified in the heading “Non- Ibertasa SA 49,044 56,169 25,722 32,605 35,265 34,651 110,031 123,425 current assets held for sale” of the consolidated balance sheet. Tecnicos En Tasacion SA 47,375 55,399 35,064 37,687 25,897 21,285 108,336 114,371 Tecnitasa Assets from foreclosures correspond to assets foreclosed as payment for debts, Cia Hispania De to dations as payment for debts and to acquisitions of assets with subrogation to Tasaciones y 40,455 54,452 23,978 26,754 8,325 12,973 72,758 94,179 Valoraciones SA companies of the Group. Initially, these assets are recorded at the net book value Valoraciones 19,537 27,253 21,199 19,551 15,894 28,992 56,630 75,796 of the debts from which they originate, without releasing the impairment losses Mediterraneo SA accounted for. Subsequently, these assets are valued at the lower of the net book value Krata SA 6,373 0 4,802 0 978 0 12,153 0 of the corresponding loan on the acquisition date and the fair value of the foreclosed Tinsa Tasaciones 3,982 5,988 2,217 8,301 5,431 16,947 11,630 31,236 asset (estimated based on its appraisal value), adjusted downward according to the Inmobiliarias SA length of time the asset remains on the consolidated balance sheet. The appraisal Valtecnic SA 2,936 3,134 1,648 630 2,701 2,701 7,285 6,465 value of the non-current assets held for sale has been estimated, essentially, by Internacional De Transacciones y 0 0 0 0 6,041 8,523 6,041 8,523 means of valuations performed by companies registered in the Register of Valuation Servicios SA Specialists of the Banco de España. All of these assets are denominated in euros as at Tasa de 31 December 2015 and 2014. Consultores 0 0 0 0 1,778 1,778 1,778 1,778 Inmobiliarios Other 910 4,210 1,802 1,802 340 6,094 3,052 12,106

Totals 238,600 291,620 160,724 175,974 148,943 178,079 548,267 645,673 Consolidated financial statements 2015 Bankinter 52

The valuations performed by Tecnitasa, Cohispania, Ibertasa, Valmesa and Gesvalt for The live balances of the executed (foreclosed) guarantees owned by Bankinter and Bankinter in 2015 are in their vast majority valuations performed in accordance with Intermobiliaria as at December 2015 and 2014 are as follows; Ministerial Order ECO 805/2003. The technical valuation methods used are usually: 2015 2014 the cost method, the comparison method, the discounted income method and the Bankinter 35,728 33,633 residual method. Intermobiliaria 214,115 221,931 249,843 255,564 The Bankinter group uses its subsidiary, Intermobiliaria, S.A., as a management The live balances of the amounts granted as finance to buyers in the sales of assets company of the assets from problematic risks (foreclosures, dations in payment, included in this heading as at December 2015 and 2014 is as follows: etc…). This company was incorporated on 16 February 1976 and has its company 2015 2014 address at Paseo de la Castellana, 29, Madrid. The general policy of the group is Bankinter 4,903 7,603 that all assets from problematic risks are recorded in this subsidiary. Nevertheless, Intermobiliaria 53,703 62,920 occasionally there can be circumstances that make it advisable to record them directly 58,606 70,523 in the parent company. 13. Investments From the adoption of the current foreclosures policy up until the date of these financial statements, the accumulated volume of assets from problematic risks recorded in this The breakdown of this heading of the consolidated balance sheets as at 31 December subsidiary has been 1,501,778 thousand euros. 2015 and 2014 is as follows: Thousands of Euros The acquisition of these assets is financed by the parent company under market 31-12-15 31-12-14 conditions. The funds contributed by the parent company to Intermobiliaria as at 31 Associates 38,681 28,857 December 2015 and 2014 are summarised in the following table: Joint ventures 743 869 Thousands of euros 39,424 29,726 31-12-15 31-12-14 Capital Contributions 7,319 7,319 Shareholder loans 560,000 500,000 Credit account 328,000 278,600 Secured Loans - 71,421 895,319 857,340 Consolidated financial statements 2015 Bankinter 53

The movement in the balance of this heading is shown below: The company Intermobiliaria has an imbalance in its equity position. Being an instrumental company in the operation of all the Bankinter Group's property activity, Thousands of euros a commitment exists under which Bankinter, S.A. offsets the company's losses and 2015 2014 reinstates the equity balance within the legal deadlines, by granting a shareholder loan. This shareholder loan was granted by Bankinter, S.A. on 24 June 2010, for an Balance at the start of the period 29,726 36,362 amount of 100,000 euros. Subsequently, it was increased to 200,000 thousand euros Addition of companies from Group entities - 40 on 29 December 2011 and to 300,000 thousand euros on 27 December 2012. As at Disposal of companies from Group entities (48) - 31 December 2014, the aforementioned loan amounts to 500,000 thousand euros Other entities accounted for by the equity method (note 22) 18,223 16,962 Dividends received by the Bank (12,143) (26,539) and as at 31 December 2015 to 560,000 thousand euros. The shareholder loan is Other movements 3,666 2,901 recorded in the heading ‘‘Long-term debts with group companies and associates’’ Balance at the close of the period 39,424 29,726 within the liabilities of the subsidiary's balance sheet. This shareholder loan meets the requirements established by Royal Decree-Act 7/1996, of 7 June, regarding urgent During the 2015 financial year, the Group has decreased its share in the company fiscal measures and the promotion and liberalisation of economic activity, in order for Eurobits Technologies, S.L., reducing to 49.95%. During the fourth quarter of 2014, the it to be considered equity for the purposes of company law. Through this operation, Group, which had held a share in the company Eurobits Technologies, S.L. of 32.01%, the Company has re-established a balanced position in its equity. increased its share up to 71.98%. During the current year, the companies Gneis Global Services, S.A. and Mercavalor, Except for this operation, during the 2015 and 2014 financial years, no company S.A. have had their names changed to Bankinter Global Services, S.A. and Bankinter operations have been carried out that have modified the composition of the Securities, S.A. consolidated group. The list of the Group's companies as at 31 December 2015 that are consolidated by The financial statements of Eurobits Technologies, S.L., and Helena Activos Líquidos, complete consolidation, together with their most significant details, are shown below: S.L., correspond to the date 30 November 2015. The impact in the consolidated financial statements derived from the use of financial statements corresponding to dates prior to 31 December 2015 for these companies is not significant. Consolidated financial statements 2015 Bankinter 54

Financial year 2015

% share Summarised financial information

Par Tax ID % direct share of % indirect share dividends Share Profit (loss) Underlying Related Name Registered Address % total share Nº shares value Reserves Equity Cost Liabilities number Bankinter of Bankinter paid capital for period book value Assets (Euros)

Bankinter Consultoría, Asesoramiento, y Paseo de la Castellana 29. A78757143 99.99 0.01 100 - 35,222 30 1,060 29,474 584 31,118 31,118 28,060 54,136 23,018 Atención Telefónica, 28046 Madrid S.A. Bankinter Gestión de Calle Marqués de Riscal A78368909 99.99 0.01 100 22,781 144,599 30 4,345 17,170 32,475 53,991 54,010 4,527 69,751 15,741 Activos, S.G.I.I.C. 11. 28010 Madrid Paseo de la Castellana 29. Hispamarket, S.A. A28232056 99.99 0.01 100 - 4,516,452 6 27,144 549 2,681 30,374 30,374 26,962 116,647 86,273 28046 Madrid Paseo de la Castellana 29. Intermobiliaria, S.A. A28420784 99.99 0.01 100 - 243,546 30 7,319 (383,769) (78,246) (454,696) (454,696) 42,501 444,379 899,075 28046 Madrid Avda de Bruselas nº Bankinter Consumer A82650672 12-Alcobendas. 28108 99.99 0.01 100 8,160 1,299,999 30 39,065 58,666 21,165 118,896 118,896 60,002 662,065 543,169 Finance, E.F.C., S.A. Madrid Bankinter Capital A83058214 Paseo de la Castellana 29 96.77 3.23 100 - 3,100 100 310 936 251 1,493 1,497 249 1,619 123 Riesgo, SGECR, S.A. Bankinter Sociedad de Paseo de la Castellana 29. A84129378 100 - 100 - 602 100 60 2,431 12 2,503 2,503 60 1,201,870 1,199,367 Financiación, S.A.U. 28046 Madrid Bankinter Emisiones, Paseo de la Castellana 29. A84009083 100 - 100 - 602 100 60 1,669 36 1,765 1,765 60 58,620 56,855 S.A.U. 28046 Madrid Bankinter Capital Paseo de la Castellana 29. V84161538 100 - 100 - 30,000 1,000 30,000 5,241 (1,291) 33,950 36,640 30,000 37,231 591 Riesgo I Fondo Capital 28046 Madrid Arroyo Business Calle Marqués de Riscal Consulting B84428945 99.99 0.01 100 - 2,976 1 3 (1) - 2 2 6 2 - 13. 28010 Madrid Development, S. L. Consolidated financial statements 2015 Bankinter 55

% share Summarised financial information

% direct Tax ID % indirect share dividends Par value Share Profit (loss) Underlying Related Name Registered Address share of % total share Nº shares Reserves Equity Cost Liabilities number of Bankinter paid (Euros) capital for period book value Assets Bankinter

Bankinter Global Calle Pico de San Pedro 2, A85982411 99.99 0.01 100 3,917 30,000,000 1 30,000 25,763 11,774 67,538 67,929 30,392 81,368 13,439 Services, S.A. 28760 Madrid Avda de Bruselas nº Relanza Gestión, S.A. A85593770 12- Alcobendas. 28018 0.01 99.99 100 - 1,000 60 60 187 773 1,020 295 60 1,446 1,151 Madrid Línea Directa Aseguradora, S.A., Av Europa 7,28760 Tres A80871031 100 - 100 90,017 2,400,000 16 37,512 214,163 98,500 344,327 302,670 334,149 1,196,983 894,313 Compañía de Seguros y Cantos, Madrid Reaseguros CM CERRO DE LOS Línea Directa Asistencia, B80136922 GAMOS 1,28224 Pozuelo - 100 100 8,000 500 60 30 12,861 7,693 20,584 16,584 418 27,055 10,471 S.L.U. de Alarcón, Madrid

Rd Europa 7,28760 Tres LDACTIVOS, S.L.U. B86322880 - 100 100 - 3,006,000 1 3,006 1,085 1,633 5,724 59,352 8,133 79,751 20,399 Cantos, Madrid CL Isaac Newton 7, 28760 Moto Club LDA, S.L.U. B83868083 - 100 100 500 30 100 3 91 87 181 181 3 255 91 Tres Cantos, Madrid Centro Avanzado de Av Sol 5, 28850 Torrejón Reparaciones CAR, B84811553 - 100 100 - 10,000 60 600 646 121 1,367 1,367 2,103 2,561 1,194 de Ardoz, Madrid S.L.U. Av Europa 7,28760 Tres Ambar Medline, S.L. B85658573 - 100 100 - 100,310 10 1,003 44 3 1,048 1,048 1,003 1,826 777 Cantos, Madrid BANKINTER Marqués de Riscal A79203568 99.99 0.01 100 - 4,285 601 2,576 5,191 4,736 12,503 12,525 2,135 17,823 5,298 SECURITIES, S.A 11,28010 Madrid 37, avenue J. F Kennedy BANKINTER LU001623854 L - 1855 Luxembourg 99.99 0.01 100 - 30,750 870 26,753 6,214 -1,644 31,323 32,451 39,601 276,591 244,139 LUXEMBOURG, S.A Consolidated financial statements 2015 Bankinter 56

The companies of the Group consolidated using the equity method as at 31 December 2015 and 2014 are: Helena Activos Líquidos, S.L, Eurobits Technologies, S.L, Bankinter Seguros de Vida, S.A de Seguros y Reaseguros and Bankinter Seguros Generales, S.A de Seguros y Reaseguros. Their most significant details are shown below:

2015 financial year:

% share Summarised financial information

Tax ID % direct share % indirect share of Par value Share Profit (loss) Underlying Related Name Registered Address % total share dividends paid Nº shares Reserves Equity Cost Liabilities number of Bankinter Bankinter (Euros) capital for period book value Assets

Helena Activos Calle Serrano 41, B-84199173 29.53 - 29.53 0 706,932 0 24 1,726 60 1,810 1,810 325 1,562 85 Líquidos, S.L. 28001 Madrid

Avda de Bruselas nº Eurobits B-83852160 7- Alcobendas. 28108 49.95 - 49.95 0 2,835 1 11 1,278 197 1,486 1,487 154 1,953 673 Technologies, S.L. Madrid

Bankinter Seguros de Avda de Bruselas nº Vida, S.A. de Seguros A-78510138 12- Alcobendas. 28018 50 - 50 12,143 185,049 30 11,122 20,983 37,440 69,545 56,393 2,433 272,607 216,732 y Reaseguros Madrid

Bankinter Seguros Paseo de la Castellana Generales, S.A.de A-78510138 49.9 - 49.9 0 998 5,030 10,060 101 108 10,269 10,397 5,019 15,624 5,397 29. 28046 Madrid Seguros y Reaseguros Consolidated financial statements 2015 Bankinter 57

The list of the companies of the Group as at 31 December 2014 that are consolidated by full consolidation, together with their most significant details, is shown below:

% share Summarised financial information

% indirect Tax ID % direct share dividends Par value Share Profit (loss) Underlying Related Name Registered Address share of % total share Nº shares Reserves Equity Cost Liabilities number of Bankinter paid (Euros) capital for period book value Assets Bankinter

Bankinter Consultoría, Paseo de la Castellana Asesoramiento, y A78757143 99.99 0.01 100 35,222 30 1,060 29,045 428 30,534 30,534 28,060 31,550 1,016 29. 28046 Madrid Atención Telefónica, S.A. Calle Marqués de Bankinter Gestión de A78368909 Riscal 11. 28010 99.99 0.01 100 10,283 144,599 30 4,345 17,170 26,281 47,796 44,310 4,522 68,216 23,906 Activos, S.G.I.I.C. Madrid Paseo de la Castellana Hispamarket, S.A. A28232056 99.99 0.01 100 4,516,452 6 27,144 (125) 673 27,693 29,087 26,962 116,928 87,841 29. 28046 Madrid Paseo de la Castellana Intermobiliaria, S.A. A28420784 99.99 0.01 100 243,546 30 7,319 (308,755) (75,013) (376,450) (376,450) 42,497 486,005 862,455 29. 28046 Madrid Avda de Bruselas nº Bankinter Consumer A82650672 12-Alcobendas. 28108 99.99 0.01 100 6,138 1,299,999 30 39,065 45,720 25,891 110,676 105,891 60,002 377,938 272,047 Finance, E.F.C., S.A. Madrid Bankinter Capital Paseo de la Castellana A83058214 96.77 3.23 100 3,100 100 310 739 197 1,246 1,246 239 1,440 195 Riesgo, SGECR, S.A. 29 Bankinter Sociedad Paseo de la Castellana de Financiación, A84129378 100 - 100 602 100 60 2,354 77 2,492 2,492 60 3,696,331 3,693,840 29. 28046 Madrid S.A.U. Bankinter Emisiones, Paseo de la Castellana A84009083 100 - 100 602 100 60 1,663 5 1,729 1,729 60 60,595 58,867 S.A.U. 29. 28046 Madrid Bankinter Capital Paseo de la Castellana Riesgo I Fondo V84161538 100 - 100 30,000 1,000 30,000 4,610 630 35,241 33,666 30,000 34,213 547 29. 28046 Madrid Capital Arroyo Business Calle Marqués de Consulting B84428945 Riscal 13. 28010 99.99 0.01 100 2,976 1 3 (1) (1) 2 2 6 2 - Development, S. L. Madrid Consolidated financial statements 2015 Bankinter 58

% share Summarised financial information

% indirect Tax ID % direct share % total dividends Par value Share Profit (loss) Underlying Related Name Registered Address share of Nº shares Reserves Equity Cost Liabilities number of Bankinter share paid (Euros) capital for period book value Assets Bankinter

Bankinter Global Calle Pico de San Pedro A85982411 99.99 0.01 100 30,000,000 1 30,000 21,846 7,835 59,681 59,922 30,241 91,772 31,850 Services, S.A. 2, 28760 Madrid Avda de Bruselas nº Relanza Gestión, S.A. A85593770 12- Alcobendas. 28018 0.01 99.99 100 1,000 60 60 154 33 247 247 60 314 67 Madrid Línea Directa Aseguradora, S.A., Av Europa 7,28760 A80871031 100 - 100 290,122 2,400,000 16 37,512 174,127 98,493 243,835 243,835 334,149 1,252,658 953,127 Compañía de Seguros Tres Cantos, Madrid y Reaseguros CM CERRO DE LOS Línea Directa GAMOS 1,28224 B80136922 - 100 100 12,000 500 60 30 15,343 6,518 16,891 16,891 418 26,355 9,464 Asistencia, S.L.U. Pozuelo de Alarcón, Madrid Rd Europa 7,28760 LDACTIVOS, S.L.U. B86322880 - 100 100 3,006,000 1 35,633 244 841 36,718 36,718 35,633 56,750 20,032 Tres Cantos, Madrid CL Isaac Newton 7, Moto Club LDA, B83868083 28760 Tres Cantos, - 100 100 30 100 3 458 133 594 594 3 666 72 S.L.U. Madrid Centro Avanzado de Av Sol 5, 28850 Reparaciones CAR, B84811553 Torrejón de Ardoz, - 100 100 10,000 60 600 345 301 1,246 1,246 2,103 2,517 1,271 S.L.U. Madrid Av Europa 7,28760 Ambar Medline, S.L. B85658573 - 100 100 100,310 10 1,003 44 (1) 1,046 1,046 1,003 1,804 758 Tres Cantos, Madrid Bankinter Securities., Marqués de Riscal A-79203568 99.99 0.01 100 4,285 601 2,576 2,242 2,949 7,767 7,774 2,127 12,561 4,787 S.A. 11,28010 Madrid 37, avenue J. F BANKINTER LU001623854 Kennedy L - 1855 99.99 0.01 100 25,000 870 21,750 8,489 (2,275) 27,964 28,688 34,598 186,625 157,936 LUXEMBOURG, S.A Luxembourg Consolidated financial statements 2015 Bankinter 59

The companies of the Group consolidated using the equity method as at 31 December 2014, together with their most significant details, are as follows:

% share Summarised financial information

% indirect Tax ID % direct share of Par value Share Profit (loss) Underlying Related Name Registered Address share of % total share dividends paid Nº shares Reserves Equity Cost Liabilities number Bankinter (Euros) capital for period book value Assets Bankinter Helena Activos Calle Serrano 41, B-84199173 29.53 - 29.53 706,932 - 24 1,510 28 1,562 1,562 325 1,992 430 Líquidos, S.L. 28001 Madrid Avda de Bruselas nº Eurobits B-83852160 7- Alcobendas. 28108 71.98 - 71.98 4,606 1 9 1,121 77 1,207 1,207 202 1,894 687 Technologies, S.L. Madrid Bankinter Seguros de Avda de Bruselas nº Vida, S.A. de Seguros A-78510138 12- Alcobendas. 28018 50 - 50 26,539 185,049 30 6,969 14,282 34,793 56,044 35,605 2,433 313,269 277,664 y Reaseguros Madrid Bankinter Seguros Paseo de la Castellana Generales, S.A.de A-78510138 49.9 - 49.9 998 5,030 10,060 540 (461) 10,140 10,322 5,020 11,861 1,539 29. 28046 Madrid Seguros y Reaseguros Consolidated financial statements 2015 Bankinter 60

Below, a brief description is provided of the activity of the group, multi-group and associate companies: Activity Group companies: Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A. Help line Bankinter Gestión de Activos, S.G.I.I.C. Asset management Hispamarket, S.A. Holding and acquisition of securities Intermobiliaria, S.A. Property management Bankinter Consumer Finance, E.F.C.,S.A. Financial credit institution Bankinter Capital Riesgo, SGECR, S.A. Fund and venture capital management company Bankinter Sociedad de Financiación, S.A. Issuance of debt securities Bankinter Emisiones, S.A. Issuance of preference shares Bankinter Capital Riesgo I Fondo Capital Venture capital fund Arroyo Business Consulting Development, S. L. No activity Bankinter Global Services, S.A. Consultancy Relanza Gestión, S.A. Provision of recovery services Línea Directa Aseguradora, S.A. Compañía de Seguros y Reaseguros Insurance company Línea Directa Asistencia, S.L.U. Expert reports, vehicle inspections and roadside assistance Moto Club LDA, S.L.U Services for motorbike users Centro Avanzado de Reparaciones CAR, S.L.U Repair of vehicles Ambar Medline, S.L Insurance mediation Línea Directa Activos, S.L. Property management Naviera Soroya, S.L Special purpose vehicle Naviera Goya, S.L Special purpose vehicle Castellana Finance Limited Special purpose vehicle Bankinter Luxembourg Private Banking Bankinter Securities, S.A. Securities agency Multi-group and associate companies: Helena Activos Líquidos, S.L. Other financial services Eurobits Technologies, S.L. Advanced digital services Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros Insurance company Bankinter Seguros Generales, S.A. de Seguros y Reaseguros Insurance company Consolidated financial statements 2015 Bankinter 61

Furthermore, the group has structured the companies listed below, indicating whether During the 2015 financial year, as well as during 2014, there are no contractual they are consolidated or not. agreements in virtue of which the parent company or its subsidiary have provided or must provide financial nor sponsored support to these non-consolidated structured A) Non-consolidated structured companies companies.

2015 financial year: B) Consolidated structured companies

Total securitised Total 2015 financial year: Tax ID Registered Origination exposures securitised Name Activity number Address date at the exposures at Total origination 31-12-2015 securitised Total date Registered total % exposures securitised Name Tax ID number Activity Origination date Bankinter 3 Fondo Cl Lagasca Address control at the exposures at Financial de titulización V83123406 120, 28006 22-10-2001 1,322,500 137,724 origination 31-12-2015 services Hipotecaria Madrid date Bankinter 4 Fondo Cl Lagasca Bankinter 7 Fondo de Cl Lagasca 120, Financial Financial V-83905075 100 18-02-2004 490,000 107,746 de titulización V83419192 120, 28006 24-09-2002 1,025,000 156,047 titulización Hipotecaria 28006 Madrid services services Hipotecaria Madrid Bankinter 8 Fondo de Cl Lagasca 120, Financial V-83923425 100 03-03-2004 1,070,000 239,790 Bankinter5 Fondo Cl Lagasca titulización de activos 28006 Madrid services Financial de titulización V83501460 120, 28006 16-12-2002 710,000 113,688 services Hipotecaria Madrid Bankinter 9 Fondo de Cl Lagasca 120, Financial V-84246099 100 14-02-2005 1,035,000 312,958 Bankinter 6 Fondo Cl Lagasca titulización de activos 28006 Madrid services Financial de titulización V83756114 120, 28006 25-09-2003 1,350,000 293,090 services Hipotecaria Madrid Bankinter 10 Fondo de Cl Lagasca 120, Financial V-84388115 100 27-06-2005 1,740,000 554,547 titulización de activos 28006 Madrid services Financial year 2014: Bankinter11 Fondo de Cl Lagasca 120, Financial V-84520899 100 28-11-2005 900,000 334,012 Total titulización Hipotecaria 28006 Madrid services securitised Total Tax ID Registered Origination exposures securitised Name Activity Bankinter 2 Pyme Fondo de Cl Lagasca 120, Financial number Address date at the exposures at V84892272 100 26-06-2006 800,000 106,825 28006 Madrid services origination 31-12-2014 titulización de activos date Bankinter 2 Fondo Cl Lagasca Financial Bankinter 13 Fondo de Cl Lagasca 120, Financial de titulización V82463423 120, 28006 25-10-1999 320,000 22,883 V84752872 100 20-11-2006 1,570,000 701,141 services titulización de activos 28006 Madrid services Hipotecaria Madrid Bankinter 3 Fondo Cl Lagasca Financial de titulización V83123406 120, 28006 22-10-2001 1,322,500 164,308 Bankinter 3 FTPyme Fondo Cl Lagasca 120, Financial services V85264117 100 12-11-2007 617,400 141,114 Hipotecaria Madrid de titulización de activos 28006 Madrid services Bankinter 4 Fondo Cl Lagasca Financial de titulización V83419192 120, 28006 24-09-2002 1,025,000 181,917 services Hipotecaria Madrid Bankinter5 Fondo Cl Lagasca Financial de titulización V83501460 120, 28006 16-12-2002 710,000 131,505 services Hipotecaria Madrid Bankinter 6 Fondo Cl Lagasca Financial de titulización V83756114 120, 28006 25-09-2003 1,350,000 334,310 services Hipotecaria Madrid Consolidated financial statements 2015 Bankinter 62

Other structures. Summarised financial information

% direct Tax ID Par value Share Profit (loss) Underlying Related Name Registered Address share of Nº shares Reserves Equity Cost Liabilities number (Euros) capital for period book value Assets Bankinter

NAVIERA Paseo de la Castellana 29. B86728185 100 3,000 1 3 - - 3 3 3 68,665 68,662 SOROYA, S.L 28046 Madrid NAVIERA Paseo de la Castellana 29. B86728193 100 3,000 1 3 - - 3 3 3 288,236 288,233 GOYA, S.L 28046 Madrid CASTELLANA 25 Norta Wall Quay, 28001 909654647G 100 ------106,115 106,115 FINANCE Dublin

2014 financial year:

Total Total securitised Tax ID total % Origination securitised Name Registered Address Activity exposures at number control date exposures at the origination 31-12-2014 date Bankinter 7 Fondo de titulización Hipotecaria V-83905075 Cl Lagasca 120, 28006 Madrid Financial services 100 18-02-2004 490,000 123,302 Bankinter 8 Fondo de titulización de activos V-83923425 Cl Lagasca 120, 28006 Madrid Financial services 100 03-03-2004 1,070,000 271,875 Bankinter 9 Fondo de titulización de activos V-84246099 Cl Lagasca 120, 28006 Madrid Financial services 100 14-02-2005 1,035,000 351,420 Bankinter 10 Fondo de titulización de activos V-84388115 Cl Lagasca 120, 28006 Madrid Financial services 100 27-06-2005 1,740,000 615,708 Bankinter11 Fondo de titulización Hipotecaria V-84520899 Cl Lagasca 120, 28006 Madrid Financial services 100 28-11-2005 900,000 371,215 Bankinter 2 Pyme Fondo de titulización de activos V84892272 Cl Lagasca 120, 28006 Madrid Financial services 100 26-06-2006 800,000 133,530 Bankinter 13 Fondo de titulización de activos V84752872 Cl Lagasca 120, 28006 Madrid Financial services 100 20-11-2006 1,570,000 765,674 Bankinter 3 FTPyme Fondo de titulización de activos V85264117 Cl Lagasca 120, 28006 Madrid Financial services 100 12-11-2007 617,400 175,681 Bankinter 4 FTPyme Fondo de titulización de activos V85524791 Cl Lagasca 120, 28006 Madrid Financial services 100 15-09-2008 400,000 135,881

Other structures. Summarised financial information

% direct Profit Tax ID Par value Share Underlying Related Name Registered Address share of Nº shares Reserves (loss) for Equity Cost Liabilities number (Euros) capital book value Assets Bankinter period NAVIERA Paseo de la Castellana 29. B86728185 100 3,000 1 3 - 2 3 3 3 13 10 SOROYA, S.L 28046 Madrid NAVIERA Paseo de la Castellana 29. B86728193 100 3,000 1 3 - 2 3 3 3 179,713 179,710 GOYA, S.L 28046 Madrid CASTELLANA 25 Norta Wall Quay, 28001 909654647G 100 ------124,786 124,786 FINANCE Dublin Consolidated financial statements 2015 Bankinter 63

During the 2015 financial year, as well as during 2014, there are no contractual 2014 financial year: agreements in virtue of which the parent company or its subsidiary have provided or Total assets Total equity must provide financial nor sponsored support to these non-consolidated structured Pension funds 1,939,990 1,936,084 companies. Guaranteed fixed income 224,439 224,123 Guaranteed equities 685,771 684,511 C) Investment Funds, Sicavs and Pension Funds managed by the group. Global 219,410 218,625 Money Market 126,661 126,349 2015 financial year: Long-term fixed income 236,219 235,777 Euro equities 206,187 205,872 Total assets Total equity Euro mixed equities 241,303 240,830 Pension funds 2,092,469 2,085,600 Investment funds 7,259,337 7,233,279 Guaranteed fixed income 199,438 198,980 With partial guarantee 17,670 17,648 Guaranteed equities 617,145 615,704 Guaranteed fixed income 2,230,273 2,228,162 Global 226,596 225,881 Guaranteed equities 1,122,554 1,103,065 Money Market 171,681 171,249 Money Market 100,757 100,664 Long-term fixed income 255,370 254,239 Long-term fixed income 1,818,355 1,816,195 Euro equities 279,892 278,477 International mixed fixed income 60,857 60,775 Euro mixed equities 342,347 341,070 Euro equities 1,645,548 1,643,808 Investment Funds 7,441,284 7,417,440 Euro mixed equities 162,452 162,225 With partial guarantee 14,600 14,582 Absolute return 100,871 100,734 Guaranteed fixed income 2,254,797 2,252,665 SICAVs (open-ended investment companies) 2,459,761 2,398,565 Guaranteed equities 1,222,081 1,206,040 Global 2,459,761 2,398,565 Money Market 23,475 23,462 Overall total 11,659,088 11,567,925 Long-term fixed income 1,755,294 1,753,349 International mixed fixed income 100,789 100,678 Euro equities 1,709,381 1,707,211 Euro mixed equities 206,311 206,004 Absolute return 82,230 81,161 Profiled funds of funds 11,450 11445 Funds of funds 60,876 60843 SICAVs (open-ended investment 3,062,535 2,992,633 companies) Global 3,062,535 2,992,633 Overall total 12,596,288 12,495,673 Consolidated financial statements 2015 Bankinter 64

14. Property, plant and equipment Euros Disposals 2015 Opening Closing Additions and Balance Balance The breakdown of this heading of the balance sheet as at 31 December 2015 and 2014 other Cost: is as follows: For own use; 811,363 61,100 26,715 845,748 Land and Buildings 326,081 17,364 6,606 336,839 Thousands of euros Building work in progress 2,908 21,006 11,575 12,338 31-12-15 31-12-14 Facilities 277,836 14,390 4,089 288,137 For own use 395,348 388,181 Computer equipment 113,279 5,072 3,270 115,081 Furniture and fittings 73,993 3,268 1,175 76,086 Investment property 75,834 54,524 Elements of transport - - - - Other assets leased out under operating leases 21,932 24,657 Other property, plant and equipment 17,267 - - 17,267 493,114 467,362 Investment property 55,664 21,921 - 77,584 Other assets leased out under operating 26,954 - 2,725 24,229 A summary of the elements of property, plant and equipment and of their movement leases during the 2015 and 2014 financial years is shown below: Amortisation: For own use; 422,622 29,128 1,909 449,841 Land and Buildings 69,238 4,693 - 73,931 Building work in progress - - - - Facilities 193,267 17,504 1,191 209,581 Computer equipment 103,053 2,377 408 105,022 Furniture and fittings 54,996 4,211 311 58,896 Elements of transport - - - - Other property, plant and equipment 2,068 344 - 2,412 Investment property 709 696 236 1,169 Other assets leased out under operating leases 2,297 - - 2,297

Impairment: For own use; 558 - - 558 Land and Buildings 558 - - 558 Investment property 430 151 - 581 Other assets leased out under operating - - - - leases

Net book value: For own use; 388,183 31,973 24,806 395,349 Land and Buildings 256,285 12,672 6,606 262,350 Building work in progress 2,908 21,006 11,575 12,338 Facilities 84,569 -3,115 2,899 78,556 Computer equipment 10,225 2,696 2,862 10,059 Furniture and fittings 18,997 -942 864 17,190 Elements of transport - - - - Other property, plant and equipment 15,199 -344 - 14,855 Investment property 54,524 21,073 -236 75,834 Other assets leased out under operating 24,657 - 2,725 21,932 leases Total 467,364 53,046 27,295 493,115

Consolidated financial statements 2015 Bankinter 65

Euros Opening Disposals Closing The cost of the fully depreciated elements for own use as at 31 December 2015 that 2014 Additions Balance and other Balance are still in use amounts to 259,607 thousand euros (242,572 thousand euros as at 31 Cost: For own use; 804,564 41,695 34,824 811,435 December 2014). Land and Buildings 322,290 3,795 4 326,081 Building work in progress 7,541 11,189 15,822 2,908 Facilities 264,437 17,890 4,492 277,836 The breakdown by type of asset of the profits and losses recorded in the 2015 and Computer equipment 119,713 4,780 11,175 113,318 2014 financial years from the sale of investment properties and other items is as Furniture and fittings 73,274 4,041 3,289 74,025 Elements of transport 42 - 42 - follows (Note 35): Other property, plant and equipment 17,267 - - 17,267 Thousands of euros Investment property 13,797 41,867 - 55,664 Other assets leased out under operating leases 26,954 - - 26,954 2015 2014 Benefits Loss Benefits Loss Amortisation: Sale of investment properties and others 10 2,011 21 2,570 For own use; 409,073 29,663 16,032 422,704 Land and Buildings 65,008 4,602 385 69,226 10 2,011 21 2,570 Building work in progress - - - - Facilities 178,332 18,407 3,472 193,267 Computer equipment 111,829 2,200 10,937 103,093 Furniture and fittings 52,164 4,108 1,222 55,050 Elements of transport 14 2 17 - Other property, plant and equipment 1,724 344 - 2,068 Investment property 322 387 - 709 Other assets leased out under operating leases - 2,297 - 2,297

Impairment: For own use; 558 - - 558 Land and Buildings 558 - - 558 Investment property 430 - - 430 Other assets leased out under operating leases - - - -

Net book value: For own use; 394,933 12,032 18,792 388,173 Land and Buildings 256,723 -807 -381 256,297 Building work in progress 7,541 11,189 15,822 2,908 Facilities 86,105 -516 1,020 84,569 Computer equipment 7,884 2,580 238 10,225 Furniture and fittings 21,110 -68 2,068 18,975 Elements of transport 27 -2 25 - Other property, plant and equipment 15,542 -344 - 15,199 Investment property 13,044 41,480 - 54,524 Other assets leased out under operating leases 26,954 -2,297 - 24,657 Total 434,932 51,215 18,792 467,354

Consolidated financial statements 2015 Bankinter 66

In Note 44 “Fair value of assets and liabilities”, the fair value of the main elements 15. Intangible assets of property, plant and equipment is provided, as well as the methodology used to calculate it. The breakdown of this heading of the consolidated balance sheet and of its movement during the 2015 and 2014 financial years is as follows: As at 31 December 2015 and 2014, the Bank does not have any tangible assets, for 2015 Thousands of euros its own use or under construction, for which there are restrictions on their ownership Disposals Opening Closing Additions and or that have been pledged as collateral for the repayment of debts. Additionally, as Balance Balance at these dates there were no commitments with third parties for the acquisition of other (*) Cost: 470,751 23,291 6,859 487,183 tangible assets. In these periods, no amounts have been received or were expected to Goodwill 164,281 - - 164,281 be received from third parties as compensation or indemnity for the impairment or Intangible assets 300,393 11,468 - 311,861 loss of value of own-use tangible assets. Software in progress 6,077 11,823 6,859 11,041

All of the Bank's own-use tangible assets as at 31 December 2015 and 2014 is Amortisation: 188,256 32,066 - 220,322 denominated in euros. Goodwill - - - - Intangible assets 188,256 32,066 - 220,322 The balance of the assets leased out under operating leases included on the balance Software in progress - - sheet as at 31 December 2015 of this heading is 21,932 thousand euros, with 24,657 thousand euros as at 31 December 2014. Impairment: 168 - - 168 Goodwill 168 - - 168 Intangible assets - - - - Software in progress - - - -

Net book value: 282,327 (8,775) 6,859 266,693 Goodwill 164,113 164,113 Intangible assets 112,137 (20,598) - 91,539 Software in progress 6,077 11,823 6,859 11,041 Consolidated financial statements 2015 Bankinter 67

2014 Thousands of euros unit to which this goodwill has been assigned, in this case, Línea Directa Aseguradora, Disposals Opening Closing S.A, Compañía de Seguros y Reaseguros. This unit would be impaired if its book value Additions and other Balance Balance were greater than the current value of its estimated cash flows. This circumstance has (*) been occurred in the last two financial years. Cost: 461,278 13,275 3,802 470,751 Goodwill 164,281 - - 164,281 Intangible assets 293,970 10,225 3,802 300,393 The estimated cash flows come from the business plan of Línea Directa Aseguradora, Software in progress 3,027 3,050 - 6,077 S.A, Compañía de Seguros y Reaseguros, in its most prudent scenario, with moderate growth rates and excluding the net positive cash flows that could arise due to structural changes in the business or in its efficiency. Specifically, the forecast of Amortisation: 160,576 31,428 3,747 188,257 cash flows takes as a starting hypothesis the forecast profits or losses of the periods Goodwill - - - - for which a plan is prepared. For all other periods, the evolution of the cash flows Intangible assets 160,576 31,428 3,747 188,257 has been estimated similar to the objective inflation of the economic environment in Software in progress - - - - which the company performs its activity, that is, 2%. Past experience and forecasts are higher than this 2%. The estimation period is 5 years and the perpetual growth rate is equal to the objective inflation, 2%. Impairment: - 168 - 168 Goodwill - 168 - 168 Intangible assets - - - - The discount rate applied to the projected cash flows is 10% (after tax), as this is the Software in progress - - - - cost of capital considered internally. This estimated cost of capital is in line with those applied by independent analysts of the sector. Furthermore, the 10% discount rate is the rate commonly used for this type of analysis in the insurance sector in which the Net book value: 300,703 (18,321) 56 282,327 business of Línea Directa Aseguradora, S. A., Compañía de Seguros y Reaseguros is Goodwill 164,281 (168) - 164,113 performed. Intangible assets 133,394 (21,203) 56 112,204 Software in progress 3,027 3,050 - 6,077 A similar procedure is applied to the goodwill arising from the purchase of Bankinter Luxembourg, S.A. The acquisition during 2009 of 50% of the share capital of Línea Directa Aseguradora, S.A, Compañía de Seguros y Reaseguros, led to the recognition of Goodwill of 161,836 From the impairment analyses performed in the 2015 and 2014 financial years on thousand euros and Other Intangible Assets of 221,926 thousand euros. During the the goodwill balances recognised in the balance sheet, the only impairment detected 2013 financial year, the purchase of Bankinter Luxembourg, S.A. led to the recognition is one of 168 thousand euros in 2014 of the goodwill generated by the purchase of of goodwill of 2,445 thousand euros. Bankinter Luxembourg, S.A.

Following on from this, the company annual subjects the goodwill recognised as a The Other Intangible Assets generated by the purchase of 50% of Línea Directa result of the acquisition of 100% of Línea Directa Aseguradora, S.A, Compañía de Aseguradora, S.A, Compañía de Seguros y Reaseguros essentially correspond to the Seguros y Reaseguros to an impairment analysis, as established in the accounting valuation of the customer relationships at the time of the purchase. It is amortised standards. This analysis is based on the impairment analysis of the cash generating on a straight line basis over 10 years from the date of acquisition, based on this Consolidated financial statements 2015 Bankinter 68

asset's estimated useful life. During the 2015 financial year, the amortisation of these 16. Reinsurance assets elements has amounted to 22,193 thousand euros (22,193 thousand euros in 2014). As at 31 December 2014 and 2015, this intangible asset did not show any indicators As at 31 December 2015, the balance of the heading “Assets under insurance of impairment. contracts” includes the assets recorded by the company Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros in the performance of its activity. Capitalised software developments are another source for the generation of new intangible assets. During the 2014 financial year, the Group has capitalised 6,307 The movement produced during the 2015 and 2014 financial years in the Reinsurance thousand euros of the company Bankinter Global Services, S.A., (3,775 thousand assets is as follows: euros were capitalised during 2014). Thousands of euros Provision for Provision for As at 31 December 2015 and 2014, the Group has proceeded to review the useful lives Unearned Total Benefits of its intangible assets, without there being any changes as a result. Premiums Balance at 31-12-2014 425 2,581 3,006 Besides the impairment analysis of the goodwill balances recognised on the balance Allocations 422 2,456 2,878 sheet, the company performs a sensitivity analysis in order to determine if a Applications (425) (2,581) (3,006) reasonably possible change in a key hypothesis in the calculation of the recoverable Adjustments and settlements 10 10 amount of a cash generating unit (CGU) could lead to the net book value exceeding Balances at 31-12-2015 422 2,466 2,889 this recoverable amount. This sensitivity analysis has been performed for the 2015 and 2014 financial years, without it being concluded that a reasonably possible The reinsurance system followed by the Company is based mostly on an Excess of Loss change in a key hypothesis implies any significant variation in the conclusions on the (XL) structure, in order to achieve a protection against serious losses or catastrophic impairment of the goodwill balances recognised on the balance sheet. losses and events caused by natural phenomena not covered by the Insurance Compensation Consortium, using reinsurance to provide stability against this type of random natural catastrophes, both for their occurrence and for their amount.

Reinsurance companies must be registered with the CNSF (the National Financial Services Commission) and comply with strict security requirements, as well as possessing outstanding ratings that demonstrate their financial solvency. If it is a foreign company, it has to present a certificate of residence in Spain.

The criteria followed for establishing the reinsurance network establishes that the rating of reinsurance companies cannot be lower than “A”. However, a depository clause will be included in the contracts of those reinsurance companies that have a lower rating issued by S&P of “AA-”. Lastly, any exception is approved by the Board of Directors. Consolidated financial statements 2015 Bankinter 69

A quarterly review is performed of the rating of the various companies that are The reconciliation of the movement of deferred taxes during the 2015 financial year included in the reinsurance network, and the credit risk ratings published by Standard is as follows: & Poor's, Moody’s and Fitch are monitored, checking for any modification in the Thousands of euros probability of non-payment of the established commitments. Charge/Credit to Income Charge/Credit to 17. Tax Assets and Liabilities 31-12-14 Statement Equity 31-12-15 Deferred Tax Assets 143,878 2,644 325 146,847 Deferred Tax Liabilities 177,362 (18,673) (16,698) 141,991 The breakdown of these headings of the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: Charges/credits for deferred taxes recognised in the income statement (21,318 Thousands of euros thousand euros) include the deferred tax expense corresponding to 30% of the timing Current Deferred differences for 2015 (20,225 thousand euros). The remaining amount relate to the 31-12-15 31-12-14 31-12-15 31-12-14 charges/credits that are recognised in the income statement for 2015 as a result of Withholdings and payments on account 4,223 6,743 accounting for the definitive Corporation tax of the prior year, as well as other charges/ Income tax 182,804 137,484 146,847 143,878 credits to deferred tax expense that do not necessarily relate to timing differences. VAT 10,976 6,775 Other items 3,388 3,292 Charges/credits for deferred taxes recognised in net worh (17,023 million euros) Tax Assets 201,391 154,294 146,847 143,878 reconcile to the amount reflected in the Income Tax line of the consolidated statement of Recognised Income and Expense corresponding to the 2015 financial year. Withholdings and payments on account 4,487 5,245 Income tax 151,141 116,378 141,991 177,362 The reconciliation of the movement of deferred taxes during the 2014 financial year VAT 11,738 8,076 is as follows: Other items 5,583 5,355 Tax Liabilities 172,949 135,054 141,991 177,362 Thousands of euros Charge/Credit The movement of the deferred tax assets and liabilities during the 2015 and 2014 to Income Charge/Credit to financial years is as follows: 31-12-13 Statement Equity 31-12-14 Deferred Tax Assets 132,300 13,160 (1,582) 143,878 Thousands of euros Deferred Tax Liabilities 149,647 (5,906) 33,621 177,362 Deferred Taxes Related Assets Liabilities Balance at 31-12-13 132,300 149,647 Additions 47,340 31,196 Retirements and disposals 35,762 3,481 Balance at 31-12-14 143,878 177,362 Additions 40,686 199 Retirements and disposals 37,717 35,570 Balance at 31-12-15 146,847 141,991 Consolidated financial statements 2015 Bankinter 70

The breakdown of the deferred tax assets and liabilities is as follows: The Group has performed an analysis on the recoverability of the deferred tax assets

Thousands of euros recorded as at 31 December 2015, which supports their recoverability before their 31/12/2015 31/12/2014 legal expiry. Deferred Tax Assets (Note 17) 146,847 143,878 Reversal within 10 years: 18. Other assets and other liabilities Provisions for pension funds 227 - Impairment of property assets 51,343 56,535 The breakdown of these headings of the consolidated balance sheet as at 31 December Other provisions and accruals 77,163 72,593 2015 and 2014 is as follows: Impairment of shareholdings 10,518 6,023 Thousands of euros Software 13 46 Assets Liabilities Loan fees 1,292 1,562 31-12-15 31-12-14 31-12-15 31-12-14 Other 5,902 7,502 Prepayments/Accruals 135,341 126,034 106,957 113,430 Available for Sale Portfolio 497 180 Transactions in progress 1,723 760 45,003 68,923 Consolidation Adjustments -108 -563 Other items 23,253 19,891 50,319 39,333 Deferred Tax Liabilities (Note 17) 141,991 177,362 160,317 146,685 202,279 221,686 Reversal within 10 years Available for Sale Portfolio 38,992 53,703 Intercompany sales 0 10,107 In euros 160,317 145,102 202,278 221,682 Pension funds 51 - In foreign currency - 1,583 1 4 Other 21,146 23,615 160,317 146,685 202,279 221,686 Consolidation Adjustments 34,347 41,668 Of which: The line “Other concepts” within liabilities includes sundry creditors and provisions Revaluation of Assets of Línea Directa Aseguradora, S.A. 26,646 33,406 for expenses. Reversal after 10 years: Property revaluations 47,455 48,269

Royal Decree-Law 14/2013, dated 29 November, on urgent measures to adapt Spanish law to European Union regulations on the subject of the supervision and solvency of financial entities, adds the twenty-second additional clause to the Consolidated Corporation Tax Act, establishing the conversion of certain deferred tax assets into callable loans with the Tax administration. The Group estimates that approximately 89,756 thousand euros of deferred tax assets will be able to be monetised (86,418 thousand euros in 2014). Section 2 of the thirty-third transitional provision related to the provision of assets in the conversion of deferred tax assets into callable loans with the Tax Administration, to which the Thirteenth Additional Condition of Act 27/2014 on Corporation Tax refers, does not apply in the case of the Bankinter group. Consolidated financial statements 2015 Bankinter 71

19. Financial liabilities at amortised cost In Note 45 “Risk policies and management”, details are provided on the maturities and interest rate review periods of the items that make up the financial liabilities at The breakdown of these headings of the consolidated balance sheets as at 31 amortised cost. December 2015 and 2014 is as follows: Thousands of euros In Note 44 “Fair value of assets and liabilities”, the fair value by type of instrument of the 31-12-15 31-12-14 financial liabilities at amortised cost and the methodology used to calculate it is provided. Deposits by central banks 3,017,983 3,240,433 Deposits by credit institutions 1,792,316 5,249,425 a) Deposits by central banks Customer deposits 32,820,400 29,966,129 Debt securities 10,484,882 9,311,034 The composition of this heading of “Financial liabilities at amortised cost” within the Subordinated liabilities 594,563 608,198 liabilities of the consolidated balance sheet is as follows as at 31 December 2015 and Other financial liabilities 1,126,850 1,615,461 2014: 49,836,994 49,990,680 Thousands of euros In euros 48,900,290 49,053,976 31-12-15 31-12-14 In foreign currency 936,704 936,704 Central Banks 3,015,600 3,215,600 49,836,994 49,990,680 Valuation adjustments 2,383 24,833 Accrued interest 2,383 24,833 The breakdown of the “Valuation adjustments” of the portfolio of financial liabilities at 3,017,983 3,240,433 amortised cost as at 31 December 2015 and 2014 is as follows: Thousands of euros b) Deposits by credit institutions 31-12-15 31-12-14 Accrued interest - 153,787 167,830 The composition of this heading of “Financial liabilities at amortised cost” within the Deposits with central banks 2,383 24,833 liabilities of the consolidated balance sheet is as follows as at 31 December 2015 and 2014: Deposits with credit institutions 4,624 9,730 Thousands of euros Customer deposits 44,218 82,000 31-12-15 31-12-14 Debt securities 92,148 41,476 Term accounts 1,068,430 1,463,863 Subordinated liabilities 10,475 9,791 Repurchase agreements 521,069 3,636,851 Micro-hedging operations 119,046 127,506 Other accounts 198,202 138,999 Other (8,599) (5,051) Valuation adjustments- 4,624 9,712 264,300 290,285 Accrued interest 4,615 9,712 Other (9) 1,792,316 5,249,425

In euros 1,751,241 5,179,369 In foreign currency 41,075 70,056 1,792,316 5,249,425 Consolidated financial statements 2015 Bankinter 72

c) Customer deposits d) Debt securities

The composition of this heading of “Financial liabilities at amortised cost” within the The composition of this heading of “Financial liabilities at amortised cost” within the liabilities of the consolidated balance sheet as at 31 December 2015 and 2014 is as liabilities of the consolidated balance sheet as at 31 December 2015 and 2014 is as follows: follows Thousands of euros Thousands of euros 31-12-15 31-12-14 31-12-15 31-12-14 Public Administrations 536,940 478,576 Promissory notes and effects 945,117 915,813 Deposits received 536,724 476,702 Mortgage securities 10,545,080 9,336,530 Valuation adjustments 216 1,874 Other securities associated with transfered financial assets 1,357,762 2,151,855 Accrued interest 216 1,874 Treasury shares (4,346,464) (5,021,143) Hybrid securities 1,158,437 1,154,566 Other private sectors 32,283,460 29,487,553 Other non-convertible securities 677,780 677,780 Demand deposits 22,293,479 15,084,805 Valuation adjustments 147,170 95,633 Term deposits 9,727,181 10,294,690 Accrued interest 92,148 41,476 Repurchase agreements 217,873 4,026,699 Micro-hedging operations 63,375 58,950 Valuation adjustments- 44,928 81,359 Other (8,353) (4,793) Accrued interest 44,002 80,126 10,484,882 9,311,034 Micro-hedging operations 932 1,233 Other (6) - In euros 10,478,199 9,302,980 32,820,400 29,966,129 In foreign currency 6,683 8,054 10,484,882 9,311,034 In euros 31,611,835 29,002,678 Within the heading “Own shares” as at 31 December 2015, the amount related to In foreign currency 1,208,565 841,451 mortgage bonds is 4,340,019 thousand euros (5,011,054 thousand euros as at 31 32,820,400 29,966,129 December 2014). Consolidated financial statements 2015 Bankinter 73

Promissory notes and effects List of bonds in circulation as at 31 December 2015 and 2014 (par values in thousand euros):

As a result of the planning that requires the management of the Bank's liquidity and 31-12-15 capital, Bankinter, S.A. maintains various financing programmes and instruments, Par value Final Maturity of both in the domestic Spanish market and in the international markets, in order to Issue (Thousands Type of Security % Interest Listed the Issue obtain financing or to issue securities of all type, both short-term (Promissory notes, of euros) Euro Commercial Paper) and long-term (bonds, debentures and notes, mortgage Jun-08 200,000 Mortgage bond EUR 3m + 0.006% NO Jun-16 bonds), in any form of debt (guaranteed, senior, subordinated…). EURIBOR 3m + Jul-10 200,000 Mortgage bond YES Jul-18 1.90% A list of the promissory note issues in force as at 31 December 2015 and 2014 is shown Fixed rate Jan-12 300,000 Mortgage bond YES Jan-16 below, indicating their reimbursement value: 4.675% Fixed rate Thousands of Euros Mar-12 996,000 Mortgage bond YES Mar-17 4.125% Outstanding balance at Outstanding balance at Nov-12 1,250,000 Mortgage bond EUR 3m + 4.00% YES Nov-19 31-12-15 31-12-14 Nov-12 600,000 Mortgage bond EUR 3m + 4.00% YES Nov-17 CNMV entry date Nov-12 700,000 Mortgage bond EUR 3m + 4.00% YES Nov-18 08/11/2012 - 40,428 Jan-13 200,000 Mortgage bond Zero coupon YES Jan-16 08/11/2013 2,600 597,524 Jan-13 500,000 Mortgage bond Fixed rate 2.75% YES Jul-16 08/11/2014 259,255 294,729 Fixed rate Feb-13 495,000 Mortgage bond YES Feb-18 08/11/2015 695,574 3.125% Promissory notes 957,429 932,681 Fixed rate Apr-13 90,000 Mortgage bond YES Feb-18 Interest not yet due (12,312) (16,868) 3.125% Total 945,117 915,813 May-13 1,300,000 Mortgage bond EUR 3m + 2.50% YES May-23 May-13 497,000 Mortgage bond Fixed rate 2.75% YES Jul-16 These issues are denominated in euros. May-14 200,000 Mortgage bond EUR 3m + 0.85% YES May-22 Jan-15 50,000 Mortgage bond EUR 3m + 0.45% YES Jan-23 The interest accrued by these promissory note issues during the course of 2015 has Feb-15 1,000,000 Mortgage bond Fixed rate 1.00% YES Feb-25 totalled 19,418 thousand euros (see Note 30) (20,367 thousand euros in 2014). Jun-15 250,000 Mortgage bond EUR 3m + 0.18% YES Jun-23 Fixed rate 1,000,000 Mortgage bond YES Aug-22 Aug-15 0.857% Mortgage Securities, Other non-convertible securities and hybrid securities Fixed rate 750,000 Mortgage bond YES Oct-20 Oct-15 0.625% Mortgage securities, Other non-convertible securities and hybrid liabilities as at 31 10,578,000 December 2015 and 2014 include the outstanding balance of the issues of bonds, Interest (32,920) debentures and mortgage bonds carried out by the Bank. Discount Total 10,545,080 Consolidated financial statements 2015 Bankinter 74

31-12-14 Below is a list of the issues of hybrid liabilities (structured bonds) in circulation as at Par value Final 31 December 2015 and 2014, by original term. Issue (Thousands of Type of Security % Interest Listed Maturity of euros) the Issue TERM BALANCE Jul-07 100,000 Mortgage bond EUR 3m + 0.217% NO Jul-15 Dec-15 Dec-14 Dec-07 100,000 Mortgage bond EUR 3m + 0.343% NO Dec-15 up to 1 year 500 0.00 Jun-08 200,000 Mortgage bond EUR 3m + 0.006% NO Jun-16 more than 1 year - 2 years 16,449 22,660.00 EURIBOR 3m + more than 2 years - 3 years 29,019 27,378.00 Jul-10 200,000 Mortgage bond YES Jul-18 1.90% more than 3 years - 4 years 36,719 32,224.00 Sep-11 750,000 Mortgage bond Fixed rate 4.25% YES Mar-15 more than 4 years - 5 years 41,730 42,585.00 Fixed rate Jan-12 300,000 Mortgage bond YES Jan-16 more than 5 years 1,034,020 1,029,720.00 4.675% Fixed rate Mar-12 1,000,000 Mortgage bond YES Mar-17 Total 1,158,437.00 1,154,567.00 4.125% Fixed Rate Oct-12 500,000 Mortgage bond YES Oct-15 Below is a list of the non-convertible bonds in circulation as at 31 December 2015 and 3.875% 2014 (par values in thousands of euros): Nov-12 1,250,000 Mortgage bond EUR 3m + 4.00% YES Nov-19 Nov-12 600,000 Mortgage bond EUR 3m + 4.00% YES Nov-17 31-12-15 Par value Final Nov-12 700,000 Mortgage bond EUR 3m + 4.00% YES Nov-18 Type of Issue (thousands of % Interest Listed Maturity of Jan-13 200,000 Mortgage bond Zero coupon YES Jan-16 Security euros) the Issue Jan-13 500,000 Mortgage bond Fixed rate 2.75% YES Jul-16 Other non- EURIBOR 3m Feb-13 200,000 Mortgage bond YES Feb-21 convertible +3.25% securities Fixed rate Feb-13 500,000 Mortgage bond YES Feb-18 3.125% Jun-06 150,000 Bonds EUR 3m + 0.17% YES Jun-16 Fixed rate Apr-13 90,000 Mortgage bond YES Feb-18 Oct-10 30,000 Bonds Fixed rate 4.27% YES Jul-16 3.125% Jun-14 500,000 Bonds Fixed rate 1.75% YES Jun-19 May-13 1,300,000 Mortgage bond EUR 3m + 2.50% YES May-23 680,000 May-13 500,000 Mortgage bond Fixed rate 2.75% YES Jul-16 Interest Jan-14 200,000 Mortgage bond EUR 3m + 1.25% YES Jan-22 (2,220) Discount May-14 200,000 Mortgage bond EUR 3m + 0.85% YES May-22 677,780 9,390,000 Interest (53,470) Discount

Total 9,336,530 Consolidated financial statements 2015 Bankinter 75

31-12-14 The interest accrued by these issues of debentures during the course of the 2015 Par value Final Type of financial year have totalled 27,826 thousand euros (28,154 thousand euros in 2014). Issue (thousands of % Interest Listed Maturity of Security The interest paid by the preference shares that are recorded in the line “Interest euros) the Issue expense and similar charges” of the accompanying consolidated income statement Other non- convertible (see Note 30), amount to 2,367 thousand euros (2,454 thousand euros in 2014) securities Subordinated bonds Jun-06 150,000 Bonds EUR 3m + 0.17% YES Jun-16 Oct-10 30,000 Bonds Fixed rate 4.27% YES Jul-16 The list as at 31 December 2015 and 2014 of the subordinated debentures is as follows Jun-14 500,000 Bonds Fixed rate 1.75% YES Jun-19 (par values in thousands of euros): 680,000 Interest (2,220) Discount Balance at 31 December 2015 677,780 Thousands of Euros All of the issues in force are denominated in euros. Par value Issue Issue amount % Interest Maturity III SUBORDINATED D. 1998 14/05/98 81,893 Fixed rate 6.00% 18/12/28 The interest accrued by the issues of other non-convertible securities during the I SUBORDINATED D. March 2006 21/03/06 17,300 EUR 3m + 0.50% 21/03/16 course of the 2015 financial year have totalled 10,962 thousand euros (11,679 II SUBORDINATED D. June 2006 23/06/06 30,500 EUR 3m + 0.80% 23/06/16 thousand euros in 2014). III SUBORDINATED D. December 2006 18/12/06 10,000 EUR 3m + 0.84% 18/12/16 e) Subordinated liabilities I SUBORDINATED D. March 2007 16/03/07 4,700 EUR 3m + 0.82% 16/03/17 I SUBORDINATED D. September 2009 11/09/09 250,000 Fixed rate 6.375% 11/09/19 The composition of this heading of the portfolio of financial liabilities at amortised I SUBORDINATED D. July 2010 07/07/10 40,000 Fixed rate 6.75% 07/12/20 cost of the balance sheet is as follows: I SUBORDINATED D. February 2011 10/02/11 47,250 Fixed rate 6.375% 11/09/19 481,643 Thousands of euros Interest and other concepts (8,396) 31-12-15 31-12-14 473,247 Debt securities 473,247 473,020 Non-convertible (Subordinated debentures) 473,247 473,020 Preferred shares 56,324 58,336 Valuation adjustments 64,992 76,842 Accrued interest 10,475 9,791 Micro-hedging operations 54,740 67,323 Other (223) (272) 594,563 608,198 In euros 594,563 608,198 594,563 608,198 Consolidated financial statements 2015 Bankinter 76

Balance at 31 December 2014 During 2014, there were partial repayments in the preference shares for an amount Thousands of 2,508 thousand euros. As at 31 December 2014, their par value amounted to 58,336 of Euros thousand euros and the number of shares to 1,166,715. Par value Issue Issue amount % Interest Maturity The list of the preference share issues that remained on the balance sheet as at 31 Fixed rate III SUBORDINATED D. 1998 14/05/98 81,893 6.00% 18/12/28 December 2015 and 2014 is as follows: EUR 3m + 31-12-15 I SUBORDINATED D. March 2006 21/03/06 17,300 0.50% 21/03/16 Par value EUR 3m + Issue amount % Interest Issue Maturity II SUBORDINATED D. June 2006 23/06/06 31,900 0.80% 23/06/16 BK Series I III SUBORDINATED D. December EUR 3m + Issues 28-07-2004 56,324 EUR+3.75% min 4% - max 7% PERPETUAL 2006 18/12/06 21,900 0.84% 18/12/16 Balance 31-12-15 56,324 EUR 3m + I SUBORDINATED D. March 2007 16/03/07 4,700 0.82% 16/03/17 31-12-14 Fixed rate Par value I SUBORDINATED D. September 2009 11/09/09 250,000 6.375% 11/09/19 Issue amount % Interest Issue Maturity Fixed rate BK Series I I SUBORDINATED D. July 2010 07/07/10 40,000 6.75% 07/12/20 Issues 28-07-2004 58,336 EUR+3.75% min 4% - max 7% PERPETUAL Fixed rate Balance 31-12-14 58,336 I SUBORDINATED D. February 2011 10/02/11 47,250 6.375% 11/09/19 494,943 g) Other financial liabilities Interest and other concepts (21,923) The composition of this heading of “Financial liabilities at amortised cost” within the liabilities 473,020 of the consolidated balance sheet as at 31 December of 2015 and 2014 is as follows: On 21 January 2014, the Bank partially repaid four subordinated debenture issues in Thousands of euros advance for a par value of 86,300 thousand euros. 31-12-15 31-12-14 Payment obligations 466,484 506,935 On 9 January 2015, the Bank partially repaid two subordinated debenture issues in Factoring creditors 16,760 17,221 advance for a par value of 13,300 thousand euros. Other 449,711 489,714 Deposits received 106,774 411,042 Preference shares Clearing houses 189,725 235,769 Collection accounts 193,078 200,081 During 2015, there have been partial repayments in the preference shares for an Special accounts 27,295 66,696 amount of 2,012 thousand euros. As at 31 December 2015, their par value amounted Stock exchange transactions pending settlement 26,136 65,981 to 56,324 thousand euros and the number of shares to 1,126,487. Other items 143,494 194,938 1,126,850 1,615,461 In euros 1,115,409 1,602,343 In foreign currency 11,441 13,118 1,126,850 1,615,461 Consolidated financial statements 2015 Bankinter 77

The amount included in “Deposits Received” relates mostly to deposits received for The Company recognises this provision for an amount that enables it to cover the securities operations with Credit institutions. cost of the losses, understood as the amount that includes all expenses, both external and internal, for the management and processing of the cases, whatever their origin, 20. Liabilities under insurance contracts produced and to be produced up until the full settlement and payment of the losses, reducing this cost by the amounts already paid. As at 31 December 2015 and 2014, the balance of the heading “Liabilities under insurance contracts” includes the liabilities contracted by the company Línea Directa The provision for benefits is, in turn, made up of the two provisions set out below: Aseguradora, S.A., de Seguros y Reaseguros in the performance of its activity. the provision for benefits pending settlement or payment and for losses yet to be The movement during the 2015 and 2014 financial years of each of the actuarial declared, and the provision for internal expenses for the settlement of losses. provisions that appear on the balance sheet is as follows: Thousands of euros On 18 January 2009, the Company was authorised by the Directorate-General for 31-12-15 31-12-14 Insurance and Pension Funds to apply the statistical methodology in calculating the Provision for Provision for Total Provision Provision for Total actuarial provision of benefits, in accordance with article 43 of the ROSSP after the Unearned Benefits Benefits modification introduced by Royal Decree 239/2007, of 16 February. Premiums Balance at the start of the 326,576 277,003 614,780 321,202 275,821 607,794 period With regard to the provision for internal expenses for the settlement of losses, it is Additions due to change recognised for the amount that is sufficient to cover the expenses necessary for the in scope ------full completion of the losses pending at the end of the period. Allocations 343,369 273,390 613,962 326,576 277,003 600,053 Applications (326,576) (277,003) (614,780) (321,202) (275,821) (607,794) Procedures used for determining hypotheses that have a major effect on assets, Adjustments and - 17,022 17,021 - 14,727 14,727 liabilities, income and expenses arising from insurance contracts and sensitivity settlements Balance at the close of 343,369 287,615 630,983 326,576 288,204 614,780 analysis the period The main income that results from insurance contracts is the insurance premiums as The provision for unearned premiums represents the fraction of the premiums payment for the assumed risk. The evolution of the income from premiums can be accrued in the period that relates to the period between the period end date and the analysed using indicators such as the average premium, the product mix, percentage end of the policy's coverage period, through the policy to policy procedure, and taking of cancellations, etc. the price premiums accrued in the period as the basis for the calculation, deducting the security surcharge. The main liability derived from insurance contracts is the actuarial provisions for benefits, such that the most significant expense recognised in the income statement The provision for benefits represents the total amount of the insurance company's refers to the amount paid for losses that have occurred, as well as the variation of outstanding obligations derived from the losses that occurred prior to the period end the estimate of provisions for outstanding payments on the date of the financial date. statements. To estimate these liabilities, the Company analyses the evolution over time of the frequency and average costs of the losses. Finally, to estimate the insurance liabilities, the incidence of the reinsurance contracts is taken into account. Consolidated financial statements 2015 Bankinter 78

The net combined ratio measures the weight of the costs of losses and expenses supported by actuarial analyses documented in its corresponding technical notes and associated with the insurance activity over the premiums accrued in the income are approved by the Technical Committee, which is the body responsible for managing statement net of the impact of reinsurance. Fluctuations in the conditions that this sub-risk. influence the insurance risk are reflected as an increase or decrease of the net combined net ratio. The Technical Committee takes the operational decisions that affect the prices and the risk subscription conditions of the products offered by Línea Directa Aseguradora, The following table shows the impact that a fluctuation of 1% of the combined ratio ensuring that they are coherent with the strategy and objectives established by the would have on the net profit recognised in the 2015 and 2014 financial years and Board of Directors. To do so, it considers the proposals presented by the Technical on shareholders' equity, together with the volatility index of this ratio calculated Area, also taking into account data on the position of the business and the outlook according to its standard deviation in the last five years: provided by the business areas.

In thousands of euros Reserves Sub-risk 2015 2014 Volatility Index Profit Equity Profit Equity To estimate the liabilities from insurance contracts, the Company uses statistical Fluctuation of 1% on the methods based on “chain ladder” methodology, and stochastic methods based on combined ratio (in %) 4.64% 1.64% 4.78% 1.71% 4.78% “bootstrapping” methodology. Finally, it performs a comparison with the “average Fluctuation of 1% on the cost” method to ensure reasonableness. combined ratio (in thousands of €) 4,611 4,488 4,488 The Claims and Reserves Committee is the body responsible for managing the Objectives, policies and procedures for managing risks that arise from insurance Company's reserve risk as well as the reinsurance credit risk. It functions are to contracts monitor the Company's reserves and provisions to ensure coverage of the claims, and to approve changes in the policies for the opening and provisioning of loss The risk of the insurance activity is focused in the risk of non-life insurance contracts, claims in the different coverages and guarantees, which guarantee the adequacy of which in turn consists of the premium sub-risk (risk of sufficiency of the premium) the reserves, in accordance with the guidelines approved by the Company Board of and the reserve sub-risk (risk of sufficiency of the actuarial provisions). Directors.

The Company manages the reinsurance arrangements as a primary tool for mitigating It also annually approves the reinsurance programme and reports it to the the premium and reserve sub-risks. Reinsurance, in turn, forms part of counterparty Management Board. risk due to the possibility of default of the amounts recoverable from the reinsurance companies. Furthermore, in order to ensure that the Company complies with the obligations of article 29 of the ROSSP - that the actuarial provisions reflect in the balance sheet Premium Sub-risk the obligations arising from the contracts taken out - the controls listed below are established over the recognition of the provision for benefits: The Technical Area of Línea Directa Aseguradora sees to modifying the products and prices according to the general strategy of the Company. All these modifications are Consolidated financial statements 2015 Bankinter 79

1. Analysis of the evolution in subsequent periods of the cost deviations The evolution during the 2014 financial year of the Company's provision for benefits of the losses that occurred before the end of each period. The analysis is without fines guarantee and roadside assistance, corresponding only to the claims performed on the base of the losses occurred and declared at the period end pending on 31 December 2013, excluding losses occurred but not yet declared, date. Its purpose is to check and to correct the possible cost deviations that specified by category, is as follows: occur in losses of those referred to as “long tail” that are caused as a result of In thousands of euros not having sufficient information at the period end to properly assess them. Provision at Provision at Surplus Net Payments 31-12-13 31-12-14 (Deficit) 2. Performance of monthly and quarterly forecasts of claim costs Car, Civil Liability 193,907 76,475 76,822 40,610 Car, Other Guarantees 60,429 29,018 21,779 9,632 3. The company's position of reserves is also subjected to an analysis carried Home 6,250 3,231 1,409 1,610 260,586 108,724 100,010 51,852 out by independent consultants at least once a year, which is submitted to the Board of Directors Concentrations of insurance risk

The evolution during the 2015 financial period of the provision for benefits The Company's insurance business is entirely located in Spain, and there is not any (without the fines guarantee and roadside assistance), corresponding only to particularly significant concentration in any geographical area. the claims pending on 31 December 2014, specified by category, is as follows: On the other hand, the Company focuses its business in non-life insurance categories In thousands of euros (mostly car risks), which, by insurance premiums, is distributed as follows: Provision at Provision at Surplus Thousands of euros Net Payments 31-12-14 31-12-15 (Deficit) 2015 Car, Civil Liability 190,190 80,623 68,630 40,936 Comprehensive Total Car Risks Car, Other Guarantees 59,509 25,643 22,695 11,170 Household Home 9,773 4,787 1,752 3,233 Premiums issued 679,791 610,093 64,696 259,472 111,053 93,077 55,339 Premiums transferred (4,340) (2,780) (1,560)

Thousands of euros 2014 Comprehensive Total Car Risks Household Premiums issued 650,619 593,245 57,374 Premiums transferred (3,977) (3,123) (854) Consolidated financial statements 2015 Bankinter 80

The Company is in the process of adapting to the Solvency II project, which will The balance included in the line “Provisions for taxes and other legal contingencies change the risk management approach of European insurance companies. - Other movements” includes, for 2015, provisions recorded in the line “Income tax” of the accompanying income statement. During the 2014 financial year, it reflects 21. Provisions movements related to balance reclassifications.

Below is a table with the balances and movements of the provisions during the 2015 During 2015, the impact of the passage of time has been 8 thousand euros, and there and 2014 financial years: is no impact related to changes in the discount rate (261 thousand and 156 thousand Provisions Privisions Provisions euros, respectively, during 2014). for pensions for Risks and Other for Taxes and Total (thousands of and similar Contingent Provisions other legal In note 43 “Tax situation” of the notes to the consolidated financial statements, the euros) obligations commitments contingencies Group's main contingencies are described. Balance at 53,753 1,456 8,642 4,697 38,958 31-12-13 Net provisions At the close of 2015 and 2014,, the directors of the Group consider that the recorded in contingencies are adequately provisioned. the period 44,626 3,090 (1,166) 4,631 38,071 Transfer of funds - - - - - In the provisions for taxes, the Group has adequately assessed the probability of Use of funds (17,033) (2,628) - (2,368) (12,037) prevailing against the tax administration in the claims mentioned above, as well Other as the time that will foreseeably pass until they are concluded through a definitive movements 6,890 (1,100) 23 181 7,786 administrative resolution or court decision, in determining the amount of the Balance at 88,236 818 7,499 7,141 72,778 corresponding provision. 31-12-14 Net provisions recorded in In the legal provisions, the Group takes into account the probabilities of obtaining a the period 26,168 914 - 810 2,622 21,822 favourable resolution in the various proceedings that are open, as well as the time Use of funds (17,056) - - (5,825) (11,231) that will foreseeably pass until a definitive court decision is obtained. Other movements (1,480) (1,274) 3 - (209) Lastly, in relation to the court proceedings derived from contracting financial swaps, Balance at 95,868 458 8,312 3,938 83,160 31-12-15 the provisions for these products are recorded in the accounts when the outflow of resources from the Group is considered probable, in accordance with the applicable Of the net provisions recorded in the period set out in the table above, 25,254 thousand accounting standards. euros are recorded in the line “Provisioning expense (Net)” in the accompanying income statement during 2015 (41,536 thousand euros in 2014). With respect to the calendar of the outflow of resources, the weighted average maturity of the tax contingencies is 5.8 years and 2.8 years for the contingencies of a legal nature during 2015 (6.3 years, and 5.9 during 2014). Consolidated financial statements 2015 Bankinter 81

The Group considers that there will not be any future reimbursements that require There have not been any significant movements in the share capital during the 2015 the recognition of assets. financial year. The movement of the shares in the 2015 and 2014 financial years is as follows: In Note 28 “Staff costs”, further detail is given on the provisions for Pension Funds and Thousands similar obligations. Furthermore, in note 45 “risk policies and management”, further of Euros detail is provided about the Provisions for risks and contingent commitments. Number of Nominal Shares Value 22. Equity Balance at 31-12-13 895,583,800 268,675 Additions 3,282,354 985 Conversion due to maturity of the issue of necessarily convertible 3,282,354 985 The breakdown of the composition and movements of the equity of the Group in the subordinated bonds into shares of Series I and Series II 2015 and 2014 financial years is included in the Consolidated Statement of Changes Balance at 31-12-14 898,866,154 269,660 in Equity. Additions - - Balance at 31-12-15 898,866,154 269,660 a) Share capital The list of shareholders with a stake of at least 10% in the share capital as at 31 As at 31 December 2015 and 2014, the share capital of Bankinter, S.A. is represented December 2015 and 2014 is as follows: by 898,866,154 registered shares with a par value of 0.3 euros each, fully subscribed No. of Direct Shares No. of Indirect Shares % of the Share Capital and paid-up. These shares enjoy equal voting and economic rights. As at 31 December Shareholder 31-12-15 31-12-14 31-12-15 31-12-14 31-12-15 31-12-14 2014, the share capital of Bankinter, S.A. was represented by 898,866,154 registered Cartival, S.A. 205,505,462 204,706,145 - - 22.86 22.77 shares with a par value of 0.3 euros each.

All shares are represented in book entries, officially listed on the Madrid and Barcelona Stock Exchanges, and subscribed on the continuous market. Consolidated financial statements 2015 Bankinter 82

b) Share premium Statutory reserve: Companies are obliged to allocate 10% of the profits of each period to establishing a reserve fund until it reaches at least 20% of the share capital. This During 2015, the share premium has not been increased. During 2014, the share reserve is not distributable to the shareholders and may only be used to cover, in premium was increased, due to the conversion at maturity of the issue of subordinated the event of there being no other available reserves, the debit balance of the income bonds, for the amount of the difference between the par value of the new shares and statement. Also, under certain circumstances, it may be used to increase the share their subscription price. The movement of the share premium in the 2015 and 2014 capital in the portion of this reserve that exceeds 10% of the share capital amount after is as follows: the increase. As at 31 December 2015, the statutory reserves were fully established. Thousands of Euros Revaluation reserves: This heading includes the revaluation reserves generated by Share premium business combinations.

Bookings (losses) of companies considered by the method of the share:The breakdown Balance at 31-12-13 1,172,645 of the reserves and losses in companies consolidated by the equity method is as Additions 11,623 Of which due to conversion of subordinated bonds 11,623 follows: Conversion due to May maturity 11,623 Thousands of euros Balance at 31-12-14 1,184,268 31-12-15 31-12-14 Additions - Reserves Reserves Balance at 31-12-15 1,184,268 Bankinter Seguros Generales, S.A. (1,310) (410) Bankinter Seguros de Vida, S.A. 1,333 (6,357) c) Reserves Helena Activos Líquidos, S.L. 192 128 Eurobits Technologies, S.L. 523 199 The breakdown of this heading of the consolidated balance sheet is as follows: 738 (6,440) Thousands of euros Capitalisation reserve: Thisreserve is established to comply with section 1.b) of article 31-12-15 31-12-14 25 of Act 27/2014on Corporation Tax, as a result of the Bankinter Group’s application Statutory reserve 57,467 57,467 in 2015 ofthe tax profit of the capitalisation reserve regulated by this article. Unrestricted reserves 1,791,100 1,663,476 Revaluation reserve 31,087 38,974 Treasury share reserve - 61,077 71,943 Due to acquisition 988 771 Due to guarantee 60,089 71,172 Reserve for investments in the Canary Islands 28,363 28,363 Reserves (losses) of companies accounted for by the equity method - 738 (6,440) Associates 215 (6,639) Joint ventures 523 199 Capitalisation reserve 26,589 - 1,996,421 1,853,783 Consolidated financial statements 2015 Bankinter 83

d)Other Equity Instruments Thousands of Euros Balance at 31-12-13 12,608 On 11 May 2011, the Group made an issue of bonds necessarily convertible into shares Retirements due to conversion of subordinated bonds 12,608 for a 404,812 thousand euros, in two series: Series I for a par value of 175,000 thousand Conversion due to May maturity 12,608 euros and Series II for a par value of 229,812 thousand euros, with a maturity date Balance at 31-12-14 - Movements during 2015 0 of 11 May 2014 and a remuneration of 7% per annum. The terms of the issue met Balance at 31-12-15 - the definition of asset instrument, due to i) there being no obligation to deliver cash orother financial assets as the conversion is compulsory, and due to theremuneration During the 2015 and 2014 financial years there were no transaction costs that have being subject, among other conditions, to the discretion of theBoard of Directors of been recorded as deductions to net worth due to the issue or acquisition of treasury the bank, and, ii) the conversion ratebeing fixed, for all cases of conversion, as the shares. coefficient between the parvalue of the bonds and the established conversion price (6.28 and 5.03 euros pershare for Series I and Series 11, respectively), with fixed e) Treasury shares amounts of bonds being converted for a fixed number of sharesin all cases. Therefore the issue was recorded within shareholders’ net worth in "Equity – Other equity As at 31 December 2015, the Group possessed 150,080 treasury shares (114,117 instruments". treasury shares as at 31 December 2014).

On 11 May 2014, as a result of thematurity of the issue of both series, the bonds During 2015, purchases have been made on the stock market of 9,625,250 shares outstanding on that date (12.60par value of 12,609 thousand euros) were converted (8,409,960 in 2014) and sales of 9,587,287 shares (8,398,384 in 2014), through which into3,282,354 new Bankinter shares. That conversion produced an increase in the a profit of 249 thousand euros has been obtained, which is recorded in the “Reserves” share capital of 985 thousand euros and in the share premium of 11,623 thousand line of the Balance Sheet (846 thousand euros of profit in 2014). euros. The exchange operations described did not imply the recognition of any amount in the consolidated income statement as at December 2014.

During the 2015 financial year, there has been no remuneration for this concept as these bonds were not maintained as convertibles. The remuneration accrued during the 2014 financial year for this product amounted to 291 thousand euros, this being the amount net of corporation tax of 205 thousand euros that is recorded as a direct reduction to the bank’s reserves. Consolidated financial statements 2015 Bankinter 84

The breakdown of the treasury stock as at 31 December 2015 and 2014 is as follows: The profit (loss) of the companies consolidated by the equity method for 2015 and 2014 is as follows: f) Earnings attributable to the Group Thousands of euros 31-12-15 31-12-14 The breakdown of the pre-tax profits (losses) of each of the companies that have made Eurobits Technologies, S.L. 111 468 up the Group during 2015 and 2014 is as follows: Helena Activos Líquidos, S.L. 18 8 Bankinter Seguros Generales, S.A. (626) (910) Thousands of euros Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros 18,720 17,396 2015 2014 18,223 16,962 Bankinter, S.A. 450,692 453,557 g) Earnings per share Bankinter Consultoría, Asesoramiento y Atención Telefónica, S.A. 811 612 Bankinter Gestión de Activos, S. A., SGIIC 45,137 37,546 The earnings per share are calculated by dividing the earnings attributable to the Hispamarket, S. A. 3,915 959 Intermobiliaria, S.A. (111,779) (107,158) Group by the weighted average number of ordinary shares in circulation during the Bankinter Consumer Finance, E.F.C., S.A. 29,923 36,987 period, excluding, where applicable, the treasury shares acquired by the Group. In the Bankinter Capital Riesgo, SGECR, S.A. 348 281 2015 and 2014 financial years, the earnings per share was as follows: Bankinter Sociedad de Financiación, S.A. 17 111 2015 2014 Bankinter Emisiones, S.A. 50 8 Profit for the period (thousands of euros) 375,920 275,887 Bankinter Capital Riesgo I, Fondo Capital (1,291) 799 Average number of shares (thousands of shares) 898,866 897,291 Línea Directa Aseguradora Group 139,006 133,930 Arroyo Business Consulting Development, S.A. - (1) Earnings per share (euros) 0.42 0.31 Relanza Gestión, S.A. 1,073 47 Bankinter Global Services, S.A. 14,847 10,137 Bankinter Securities, S.A. 6,730 4,158 Bankinter Luxembourg, S.A. (1,644) (2,275) To calculate the diluted earnings per share, the weighted average number of ordinary Naviera Goya, S.L. and Naviera Sorolla, S.L. - 4 shares in circulation is adjusted to reflect the conversion of all the dilutive potential Castellana Finance Limited - - ordinary shares. The dilutive potential ordinary shares issued by the Group are the debentures that are convertible for shares. It is assumed that the convertible debentures will be converted into ordinary shares. As at 31 December 2015 and 2014, the group does not have any dilutive potential ordinary shares issued. Consolidated financial statements 2015 Bankinter 85

The calculation of the diluted earnings per share of the Group is as follows: The provisional financial statements formulated by Bankinter, S.A. in accordance with the legal requirements, highlighting the existence of sufficient resources for the 2015 2014 distribution of the interim dividends, were as follows: Diluted earnings for the period (thousands of euros) 375,920 275,887 Average number of diluted shares (thousands of shares) 898,866 897,291 May September November 2015 2015 2015 First Second Third Diluted earnings per share (euros) 0.42 0.31 Profit after tax (thousands of euros) 169,953 268,691 360,119 h) Dividends and similar payments Dividends paid (thousands of euros) - 43,606 90,395

The breakdown of the dividends distributed and charged to profit in 2015 and 2014 is Interim dividend (thousands of euros) 43,606 46,789 46,789 as follows not including actions treasury shares held by the bank: Accumulated interim dividends (thousands of euros) 43,606 90,395 137,184 Cost Date Results Gross dividend per share (euros) 0.0485229 0.0520743 0.0520735 Dividend per Number of (Thousands of Approval of the Payment date Jun - 15 Oct - 15 Dec-15 Date Share (Euros) Shares Euros) Board Financial Year May - 14 0.02211170 895,583,800 19,801 Apr - 14 2014 23. Valuation adjustments (net worth) Aug - 14 0.02732690 898,866,154 24,556 Jul - 14 2014 Nov - 14 0.02732540 898,866,154 24,556 Oct - 14 2014 The breakdown of this heading is as follows: Mar - 15 0.07681390 898,866,154 69,031 Feb - 15 2014 Thousands of euros 137,944 31-12-15 31-12-14 Jun - 15 0.04852290 898,866,154 43,606 May - 15 2015 Available-for-sale financial assets 107,084 123,727 Oct - 15 0.05207430 898,866,154 46,789 Sept - 15 2015 Foreign exchange differences (3,337) 220 Dec - 15 0.05207350 898,866,154 46,789 Dec - 15 2015 Entities accounted for by the equity method 3,706 4,422 Mar - 16 0.05649030 898,866,154 50,776 Feb - 16 2015 Other valuation adjustments 1,288 1,162 187,960 108,741 129,531 Consolidated financial statements 2015 Bankinter 86

24. Offsetting of financial assets and liabilities and collateral It should be taken into account that the differences as at 31 December 2015 between the valuation and the collateral guarantees are corrected through contributions The company does not carry out any activities that involve the offset recognition of of collateral between the counterparties on the next working day, if the transfer assets and liabilities. On the other hand, it does carry out activities that require the minimums are reached. deposit of mutual collateral with counterparties, calculated on the basis of net risks. With regard to the operations for the acquisition and allocation of assets, the situation The products affected by collateralisations are, mostly, the derivatives under of collaterals is as follows, shown according to whether they represent a positive or CSA (Credit Support Annex) signed and the asset repurchase agreements under negative valuation for the Company: GMRA (Global Master Repurchase Agreement). Below, the main characteristics and Counterparty Exposure Collateral counterparties of these derivative products are disclosed: BANCO POPULAR -671 60 Derivatives: BANKIA -71 0 BBVA -22 0 Collateral Collateral CECABANK 2 0 Counterparty Assets Liabilities Net received contributed GOLDMAN -138 0 Banco Sabadell 283 0 283 290 0 BANCO SANTANDER 31,333 46,699 -15,366 0 15,370 Furthermore, Bankinter has special deposits due to its securitisation operations, Bank of America 0 5 5 0 0 which out set out below (thousands of euros): BANKIA 38 1,162 -1,125 0 1,180 Barclays 15,566 4,498 11,067 11,190 0 Counterparty Special deposit BBVA 35,839 98,020 -62,180 0 62,180 BNP PARIBAS 7,151 18,405 -11,254 0 11,260 BBVA 3,370.00 CAIXABANK 352 0 352 350 0 EUROPEA DE TITULIZACIÓN 2,820.00 CECABANK 0 0 0 0 0 CITIBANK 9,454 9,217 237 0 0 EUROPEA DE TITULIZACIÓN 10,200.00 CITIGROUP CGML 0 5,258 -5,258 0 5,258 COMMERZBANK 8,095 37,104 -29,008 0 30,170 EUROPEA DE TITULIZACIÓN 2,540.00 Credit Agricole (Calyon) 22,193 14,520 7,673 7,680 0 EUROPEA DE TITULIZACIÓN 3,940.00 CREDIT SUISSE INT 27,884 6,320 21,565 21,600 0 DANSKE BANK 0 0 0 0 0 DEUTSCHE BANK 6,188 16,185 -9,997 0 10,060 GOLDMAN 7,827 9,627 -1,800 0 1,810 HSBC PLC 1,887 9,476 -7,589 0 7,430 JP MORGAN 10,578 9,216 1,362 1,550 0 JP MORGAN PLC 6,829 8,488 -1,660 0 1,550 LANDESBANK 0 0 0 0 0 MERRIL LYNCH 1,581 110 1,471 1,480 0 MORGAN STANLEY 1,372 2,949 -1,577 0 1,620 NATIXIS 12,080 18,748 -6,668 0 6,670 NOMURA 11,255 12,750 -1,495 0 1,620 NORDEA 0 3,749 -3,749 0 3,820 ROYAL BANK OF SCOTLAND 13,844 9,783 4,061 4,110 0 SOCIETE 2,506 15,445 -12,939 0 12,940 UBS AG 296 966 -670 0 700 UBS LTD 259 286 -28 0 0 Consolidated financial statements 2015 Bankinter 87

25. Contingent risks and commitments 26. Transfer of financial assets

The composition of this heading is as follows: The breakdown of the transfers of financial assets made by the Group as at 31 Thousands of euros December 2015 and 2014 is as follows: 31-12-15 31-12-14 Thousands of Euros 31-12-15 31-12-14 Contingent risks: Removed from the balance sheet 700,548 834,922 Financial guarantees - 880,741 763,223 Fully retained on the balance sheet 2,498,133 2,944,285 Financial guarantees 880,741 763,223 3,198,681 3,779,207 Irrevocable letters of credit 425,632 197,439 During the 2015 financial year, the early repayment of the securitisation fund Other guarantees and sureties granted 1,923,288 1,735,235 Bankinter 2 FTH and of Bankinter 4 Ftpymes FTA took place. Other contingent risks - 40,632

3,229,661 2,736,529 During 2014, there has not been any early repayment of securitisation funds.

Contingent commitments: The assets retired correspond to the securitisations of loans made prior to 1 January Available to third parties 9,384,388 8,228,081 2004, as indicated below: Financial asset forward purchase commitments 10,253 9,575 Conventional financial asset purchase contracts 1,578,709 5,276,596 ■■ During 2003, mortgages with a value of 1,350,000 thousand euros were transferred Securities subscribed pending disbursement 120 120 to “Bankinter 6, Fondo de Titulización de Activos” and loan granted to SMEs with Other contingent commitments 16,363 13,342 10,989,833 13,527,713 a value of 250,000 thousand euros to “Bankinter I FTPYME, Fondo de Titulización de Activos”. The heading “Contingent commitments available to third parties” is entirely made up of immediately available loan commitments. ■■ During 2002, mortgages with a value of 1,025,000 thousand euros were transferred to “Bankinter 4, Fondo de Titulización Hipotecaria”, and mortgages with a value of 710,000 thousand euros to “Bankinter 5, Fondo de Titulización Hipotecaria”.

■■ During 2001, mortgages with a value of 1,332,500 thousand euros were transferred to “Bankinter 3, Fondo de Titulización Hipotecaria”.

During 1999, mortgages with a value of 600,000 thousand euros were transferred to “Bankinter 1, Fondo de Titulización Hipotecaria” and mortgages with a value of 320,000 thousand to “Bankinter 2, Fondo de Titulización Hipotecaria”. Consolidated financial statements 2015 Bankinter 88

The assets fully retained on the balance sheet of the Bank correspond to the securitisations of loans made after 1 January 2004. The main characteristics of these Fund Series Rating Nominal amount Coupon Maturity securitisations are as follows (amounts in thousands of euros): Series A1 Aaa/AAA: 49,000 EUR 3 m. + 0.06% 16-05-2043 Nominal Series A2 Aaa/AAA: 682,000 EUR 3 m. + 0.12% Fund Series Rating Coupon Maturity Series B Aa3/A+: 16,200 EUR 3 m. + 0.22% amount BK 2 Pyme FTA Series A Aaa/AAA: 471,800 EUR 3 m. + 0.21% 26-09-2040 Series C Baa2/BBB 27,500 EUR 3 m. + 0.52% BK 7 FTH Series B A2/A: 13,000 EUR 3 m. + 0.55% Series D Ba3/BB 10,700 EUR 3 m. + 2.10% Series C Baa3/BBB: 5,200 EUR 3 m. + 1.20% Series E C/CCC- 14,600 EUR 3 m. + 3.90% Total 490,000 Total 800,000

Series A Aaa/AAA: 1,029,300 EUR 3 m. + 0.17% 15-12-2040 Series A1 Aaa/AAA: 85,000 EUR 3 m. + 0.06% 17-07-2049 BK 8 FTA Series B A2/A: 21,400 EUR 3 m. + 0.48% Series A2 Aaa/AAA: 1,397,400 EUR 3 m. + 0.15% Series B Aa3/A: 22,400 EUR 3 m. + 0.27% Series C Baa3/BBB: 19,300 EUR 3 m. + 1.00% BK 13 FTA Total 1,070,000 Series C A3/BBB 24,100 EUR 3 m. + 0.48% Series D Ba1/BB- 20,500 EUR 3 m. + 2.25% Series E Ca/CCC- 20,600 EUR 3 m. + 3.90% Series A1 (P) Aaa/AAA: 66,600 EUR 3 m. + 0.07% 16-07-2042 Total 1,570,000 Series A2 (P) Aaa/AAA: 656,000 EUR 3 m. + 0.11% Series B (P) A2/A+: 15,300 EUR 3 m. + 0.50% Series C (P) Baa3/BBB: 7,100 EUR 3 m. + 0.95% Series A AAA 83,700 EUR 3 m. + 0.30% 08-01-2050 BK 9 FTA Total (1) 745,000 Series B1 AA 26,000 EUR 3 m. + 0.70% Series A1 (T) Aaa/AAA: 21,600 EUR 3 m. + 0.07% 16-07-2042 CASTELLANA Series B2 AA 10,000 EUR 3 m. + 0.85% Series A2 (T) Aaa/AAA: 244,200 EUR 3 m. + 0.11% FINANCE Series C1 A+ 38,700 EUR 3 m. + 1.20% Series B (T) A1/A: 17,200 EUR 3 m. + 0.50% Series C2 A 23,900 EUR 3 m. + 1.50% Series C (T) Baa1/BBB-: 7,000 EUR 3 m. + 0.95% Series D 2,850 EUR 3 m. + 7.00% Total (2) 290,000 Total 185,150 Total 1,035,000

Series A1 Aaa/AAA: 180,000 EUR 3 m. + 0.09% 18-02-2046 Series A1 Aaa/AAA: 80,000 EUR 3 m. + 0.08% 21-06-2043 Series A2 Aaa/AAA: 288,900 EUR 3 m. + 0.20% Series A3 Series A2 Aaa/AAA: 1,575,400 EUR 3 m. + 0.16% Aaa/AAA: 91,200 EUR 3 m. + 0.02% Series B A1/A: 20,700 EUR 3 m. + 0.29% BK 3 FTPyme (endorsed) BK 10 FTA Series B A1/A- 23,100 EUR 3 m. + 0.35% Series C Baa1/BBB-: 22,400 EUR 3 m. + 0.70% FTA Series C Baa3/BBB 6,000 EUR 3 m. + 0.90% Series D Ba3/BB-: 19,100 EUR 3 m. + 2.00% Series D Ba3/BB 10,800 EUR 3 m. + 1.80% Series E Caa3/CCC- 22,400 EUR 3 m. + 3.90% Series E C/CCC- 17,400 EUR 3 m. + 3.90% Total 1,740,000 Total 617,400

Series A1 Aaa/AAA: 30,000 EUR 3 m. + 0.05% 21-08-2048 Series A1 AAA 160,000 EUR 3 m. + 0.32% 18-10-2051 Series A2 Aaa/AAA: 816,800 EUR 3 m. + 0.14% Series A2 Series B Aa3/A: 15,600 EUR 3 m. + 0.30% AAA 174,400 EUR 3 m. + 0.30% BK 11 FTH BK 4 FTPyme (endorsed) Series C Baa1/BBB-: 15,300 EUR 3 m. + 0.55% FTA Series A3 AAA 19,600 EUR 3 m. + 0.34% Series D Ba3/BB-: 9,800 EUR 3 m. + 2.25% Series B A 30,000 EUR 3 m. + 0.50% Series E Ca 12,500 EUR 3 m. + 3.90% Series C BBB 16,000 EUR 3 m. + 0.70% Total 900,000 Total 400,000 Consolidated financial statements 2015 Bankinter 89

As at 31 December 2015, there remain on the balance sheet securitisation bonds With regard to the securitisations fully retained on the balance sheet, the following issued by securitisation funds included in the Bank with a value of 1,255,074 thousand information is provided: euros (909,433 thousand euros as at 31 December 2014). These secuities are recorded Thousands of Euros within the liabilities of the balance sheet, reducing the amount of the corresponding Book Original Fair Outstanding value of Fair value issues, in the line “Customer deposits”. value of value of Net balance at associated of assets assets associated Position 31/12/2015 liabilities transferred transferred liabilities There are no agreements through which the company must recognise a financial Bonds (bonds) liability on the balance sheet as a result of undertaking to provide financial support to securitised assets. Bankinter 7 Fondo 107,746 de Titulización 89,243 490,000 94,484 91,233 3,250 The outstanding balance of the securitisations removed from the balance sheet prior Hipotecaria to 1 January 2004, as at 31 December 2015 and 2014, is as follows: Bankinter 8 Fondo 239,790 de Titulización 153,468 1,070,000 160,462 155,275 5,186 Thousands of Euros Hipotecaria 31-12-15 31-12-14 Bankinter 9 Fondo 312,958 Removed from the balance sheet before 01-01-04: de Titulización 197,400 1,035,000 208,014 199,382 8,632 Bankinter 2 Fondo de Titulización Hipotecaria - 22,883 Hipotecaria Bankinter 3 Fondo de Titulización Hipotecaria 137,724 164,308 Bankinter 10 Fondo 554,547 de Titulización 272,243 1,740,000 284,652 274,109 10,544 Bankinter 4 Fondo de Titulización Hipotecaria 156,047 181,916 Hipotecaria Bankinter 5 Fondo de Titulización Hipotecaria 113,688 131,505 Bankinter 11 Fondo 334,012 Bankinter 6 Fondo de Titulización Hipotecaria 293,090 334,310 de Titulización 226,146 900,000 236,133 228,108 8,025 700,548 834,922 Hipotecaria Bankinter 2 Pyme 106,825 Fondo de Titulización 54,018 800,000 56,404 54,457 1,947 de Activos Bankinter 13 Fondo 701,141 de Titulización de 331,182 1,570,000 347,503 336,148 11,355 Activos Bankinter 3 Pyme Fondo de Titulización 141,114 - 617,400 - - - de Activos Bankinter 4 Ftpymes, Fondo - - 400,000 - - - de Titulización de Activos 2,498,133 1,323,700 8,622,400 1,387,652 1,338,712 48,939 Consolidated financial statements 2015 Bankinter 90

Thousands of Euros 27. Derivatives Financial derivatives Book Original Fair Outstanding value of Fair value value of value of Net The breakdown of the notional values of the financial derivatives held by the Group balance at associated of assets assets associated Position 31/12/2014 liabilities transferred as at 31 December 2015 and 2014 is as follows: transferred liabilities Bonds (bonds) Thousands of euros

31-12-15 31-12-14

Financial derivatives (Notes 7 and 11): Bankinter 7 Fondo de Titulización 123,302 111,024 490,000 120,373 116,397 3,976 Foreign exchange risk 6,342,501 5,576,035 Hipotecaria Interest rate risk 14,936,058 11,683,621 Bankinter 8 Fondo Equity risk 4,330,077 4,306,187 de Titulización 271,875 253,482 1,070,000 263,837 254,594 9,243 Merchandise risk 6,250 4,000 Hipotecaria Credit risk - - Bankinter 9 Fondo 25,614,886 21,569,843 de Titulización 351,420 305,834 1,035,000 301,216 291,069 10,147 Hipotecaria Bankinter 10 Fondo The breakdown above shows the notional value of the formalised contracts, which de Titulización 615,708 519,450 1,740,000 543,207 524,427 18,780 Hipotecaria does not represent the actual risk assumed by the Bank, since the net position in these Bankinter 11 Fondo financial instruments results from their offsetting and/or combination. de Titulización 371,215 268,364 900,000 308,139 298,117 10,022 Hipotecaria 28. Staff costs Bankinter 2 Pyme Fondo de Titulización 133,530 113,501 800,000 106,772 103,127 3,645 de Activos The composition of the amounts that appear in the consolidated income statement for Bankinter 13 Fondo the 2015 and 2014 financial years for this concept is as follows: de Titulización de 765,675 474,957 1,570,000 496,679 481,654 15,025 Activos Thousands of euros Bankinter 3 Pyme 2015 2014 Fondo de Titulización 175,681 35,803 617,400 37,441 35,830 1,611 Salaries and bonuses of current employees 264,276 de Activos 282,710 Bankinter 4 Social security contributions 66,905 63,639 Ftpymes, Fondo 135,881 36,441 400,000 - - - Contributions to defined benefit plans 1,299 898 de Titulización de Activos Contributions to defined contribution plans 1,687 1,440 2,944,285 2,118,855 8,622,400 2,177,663 2,105,214 72,450 Severance payments 8,048 10,504 Other staff-related costs 32,810 27,981 393,459 368,738 Consolidated financial statements 2015 Bankinter 91

The group remunerates certain groups of employees with shares, that is, providing Other long-term benefits shares in exchange for services rendered. In accordance with accounting standards, services received are recorded in the income statement, generating an equal and Additionally, there is a group of staff who have taken early retirement, in December opposite increase in Shareholders' Equity. The amount recorded in Shareholders' 2003. As a result, the Bank has undertaken to pay a financial benefit in fourteen non- Equity as at 31 December 2015 amounts to 1,339 thousand euros. adjustable monthly payments up until the date they turn 65 years of age, the amount of which is established individually with each individual taking early retirement. The The breakdown of the staff of the Group as at 31 December 2015 and 2014 according Bank has also undertaken to pay a financial benefit in twelve monthly payments up to the pension commitments is as follows: until the date they turn 65 years of age, for the purposes of subscribing to the Special 31-12-15 31-12-14 Agreement of the Social Security Institute, under the terms established with each individual taking early retirement. This latter amount is adjustable in accordance Employees with recognised service prior to 8 March 1980 200 232 with the growth of the Minimum Tax Bases of Self-Employed Workers / Maximum Tax Staff beneficiaries of a pension being drawn down 71 69 Staff in early retirement 4 10 Bases for Social Security Contributions. Other employees in active service 4,205 3,953 Similarly, in accordance with the Collective Labour Agreement in force, the Bank has Post-employment benefits assumed the commitment to complement the Social Security payments until certain payments for permanent disability, widowhood or orphanhood are met, if necessary. In relation to commitments for pensions, in accordance with the Collective Labour Agreement in force, for the staff hired prior to 8 March 1980, as well as for certain In order to cover the aforementioned commitments for pensions, the Bank has an staff in accordance with individually established agreements, the Bank has assumed insurance contract with the company Winterthur Seguros y Reaseguros S.A. (now AXA the commitment to top up the Social Security payments in the event of retirement Seguros y Reaseguros S.A. as a result of the subsequent fusion with this company), (under a defined benefit system). This social security plan is managed and guaranteed with the unconditional guarantee of its parent company, Winterthur A.G., that it externally from the Bank through various insurance policies that enable all their guarantees to cover all future pension top-up payments made to non-active staff economic risks (yield and interest rates fluctuation) and demographic risks (survival) caused prior to 2003. Additionally, for non-active staff starting from 2003 and to to be covered, thereby obtaining, firstly, a high level of immunity from the above cover staff in active service, the aforementioned benefits are guaranteed through risks and their diversification across different insurance companies; and, secondly, a co-insurance policy, in which Winterthur Seguros y Reaseguros S.A. (now AXA the guarantee of the plan being managed externally from the risks of the Bank itself. Seguros y Reaseguros S.A.) participates at the rate of 40% acting as the company leading the co-insurance, and Caser Ahorrovida S.A. de Seguros y Reaseguros and Lastly, for Top Executives appointed from 2012 onwards, a one-off contribution of Allianz, Compaía de Seguros y Reaseguros S.A. at the rate of 30% each. 656,560 euros will be made to a Unit Link contract taken out with AXA Seguros y Reaseguros S.A., such that in the event of retirement, death or disability, the During 2015, net recurring premiums from recoveries have been recorded for an beneficiary receives the funds accumulated in the Unit Link contract at the time of amount of 1,022 thousand euros for retirement cover (7 thousand euros in 2014) the loss event. Consolidated financial statements 2015 Bankinter 92

The premium paid for the death and disability coverages amounted to 113 thousand The most significant aspects of the actuarial study performed as at 31 December 2015 euros in the 2015 financial year (58 thousand euros in 2014). and 2014 are as follows: Thousands of Euros Post-employment benefits 31-12-15 31-12-14 Value of the obligations 32,412 38,345 The basic hypotheses used for the group of employees in active service for the Fair value of the plan assets: calculations of the actuarial study of the defined benefit liabilities, as at 31 December Allianz 11,227 11,504 2015 and 2014, for commitments with the active staff are those indicated in the table Caser 11,345 11,504 below: AXA 14,970 15,337 31-12-15 31-12-14 With regard to the difference between the actuarial valuations at 31 December 2014 Mortality: Probabilities set in the tables Probabilities set in the tables and 2015, a significant aspect is that the provisions corresponding to retirement GKM/-95, at 80%. GKM/-95, at 80%. commitments have been reduced as a result of staff that have left in 2015 with a loss Survival of the commitment, and the retirement of more than 10% of the staff with a right to Men: Probability associated with the Probability associated with the this type of benefit in 2015 and who have mostly collected their benefit in the form table PERM-2000 P. table PERM-2000 P. of capital. Women: Probability associated with the Probability associated with the table PERF- 2000 P. table PERF- 2000 P. Discount rate: iBoxx Corporate AA rate + 10 iBoxx Corporate AA rate + 10 The financial duration of the payment obligations assumed or accrued at the period years of 3.12.2015 2.00% years of 3.12.2014 end for the staff in active service (retirement obligations for staff in early retirement Total expected rate of have also been included) is 20.24 years (20.86 years in 2014), and it is distributed as return iBoxx Corporate AA rate + 10 iBoxx Corporate AA rate + 10 of the assets: years of 3.12.2015 2.00% years of 3.12.2014 follows: CPI Growth: 2% 2% up to 5 years 4% Salary growth: 3.50% for remuneration items 3.50% for remuneration items between 5 and 10 years 14% linked to the Collective linked to the Collective between 10 and 15 years 18% Labour Agreement Labour Agreement between 15 and 20 years 17% Evolution of Social Security More than 20 years 47% Growth of Base figures Maximum: 2% 2% Maximum pension: 2% 2% Consolidated financial statements 2015 Bankinter 93

The most significant aspects for the group of beneficiaries of the actuarial study Post-employment benefits and other long-term benefits for the group of staff in performed as at 31 December 2015 and 2014 are as follows: early retirement

31-12-15 31-12-14 During 2002 and 2003, the Bank undertook two employee early-retirement processes. Value of the obligations 10,806 11,202 The commitments acquired with them up until the retirement date have been insured Fair value of the plan assets 10,760 11,163 Actuarial hypotheses with the insurance company Nationale-Nederlanden Vida. The commitments acquired Tables used with the staff in early retirement starting from their retirement date are covered in Pensions derived from the the same policy, under co-insurance, subscribed with Winterthur (now AXA) (40%), PERMF/2000 P PERMF/2000 P initial premium Allianz (30%) and Caser (30%) for the coverage of the staff in active service who are Pensions derived from PERMF/2000 P PERMF/2000 P beneficiaries of a pension arising from 2003 onward. subsequent contributions iBoxx Corporate AA rate + 10 iBoxx Corporate AA rate + 10 Actuarial interest rate years of 3.12.2015 2% years of 3.12.2014 The basic hypotheses used for the calculations of the actuarial study, as at 31 Total expected rate of return iBoxx Corporate AA rate + 10 iBoxx Corporate AA rate + 10 December 2015 and 2014, for the commitments with the staff in early retirement are of the assets: years of 3.12.2015 2% years of 3.12.2014 those indicated in the table below: Salary growth Not applicable Not applicable 31-12-15 31-12-14 Pension revaluation rate Not applicable Not applicable Survival: With regard to the difference between the actuarial valuations at 31 December 2014 Probability associated with the Probability associated with the Men and 2015, a significant aspect is that the provisions corresponding to retirement table PERM-2000 P. table PERM-2000 P. Probability associated with the Probability associated with the commitments have been reduced, mainly, as a result of the payment of benefits to Women table PERF-2000 P. table PERF-2000 P. the group of pensioners in 2015. Discount rate: iBoxx Corporate AA rate 1-3 iBoxx Corporate AA rate 1-3 The financial duration of the payment obligations assumed or accrued at the period Pre-retirement years of 3.12.2015 0.25% years of 3.12.2014 end for the non-active staff is 11.83 years, and it is distributed as follows: phase iBoxx Corporate AA rate + 10 iBoxx Corporate AA rate + 10 Retirement phase years of 3.12.2015 2.00% years of 3.12.2014 up to 5 years 27% Total expected rate of return iBoxx Corporate AA rate + 10 iBoxx Corporate AA rate + 10 between 5 and 10 years 23% of the assets: years of 3.12.2015 2.00% years of 3.12.2014 between 10 and 15 years 18% CPI Growth: between 15 and 20 years 13% Pre-retirement phase 2% for adjustable benefits. 2% for adjustable benefits. More than 20 years 19% Retirement phase 2% 2% Salary growth: 3.50% for remuneration items 3.50% for remuneration items Retirement phase linked to the Collective linked to the Collective Labour Agreement Labour Agreement Evolution of Social Security Growth of Maximum bases 2% 2% Maximum pension: 2% 2% Consolidated financial statements 2015 Bankinter 94

For the retirement phase of the staff in early retirement, and for accrued and non- Below, the explanation of the variation of defined benefit pension commitments as at accrued part as at 31 December 2015 and 2014, the same returns as those mentioned 31-12-2015 (compared with 31-12-2014) and their coverage is shown: previously for commitments contracted with the active staff have been considered. Thousands of euros The most significant aspects of the actuarial study performed as at 31 December 2015 Valuation of commitments at 31-12-2014: 55,356 and 2014 are as follows: Staff in active service 38,345 Staff in early retirement (pre-retirement phase) 717 Thousands of Euros Staff in early retirement (retirement phase) 5,092 31-12-15 31-12-14 Staff beneficiaries of a pension being drawn down 11,202 Pre- Retirement Pre- Retirement retirement Phase retirement Phase Phase Phase Movements of obligations during 2015: (8,482) Other long-term benefits: 350 717 Accruals for 2015: 1,079 Post-employment benefits: 3,306 5,092 Interest of pension funds: 924 Insurance contracts linked to Reduction due to payment of benefits or cancellation of commitments (7,139) pensions: Actuarial gains and losses (deviation and modification of hypotheses) (3,346) Nationale Nederlanden Vida 343 - 714 - Breakdown: due to demographic hypotheses – 1,590 thousand euros. Plan Assets: due to financial hypotheses – (4,934) thousand euros. Allianz, Compañía de Seguros y Valuation of commitments at 31-12-2015: 46,874 Reaseguros, S.A. - 1,033 - 1,528 Staff in active service 32,412 Caser, S.A., de Seguros y Staff in early retirement (pre-retirement phase) 350 Reaseguros sobre la Vida - 1,033 - 1,528 Staff in early retirement (retirement phase) 3,306 AXA, S.A., Seguros y Reaseguros - 1,378 - 2,037 Staff beneficiaries of a pension being drawn down 10,806

With regard to the pre-retirement commitments and the difference between the Coverage of the obligations at 31-12-2014: 58,221 actuarial valuations at 31 December 2014 and 2015, a significant aspect is that Plan assets 57,507 the provisions corresponding to retirement commitments have been considerably Insurance contracts linked to pensions 714 reduced, as a result of a large part of the group reaching retirement. Other funds 0

With regard to the post-employment commitments and the difference between the Expected return of the plan assets / insurance contracts: 1,060 actuarial valuations at 31 December 2014 and 2015, a significant aspect is that the Actuarial gains / (losses) (3,207) provisions corresponding to the retirement commitments have been substantially Contributions 3,741 reduced as a result of the benefits initially foreseen as income being taken out in the Collections (2,720) Benefits paid (5,005) form of capital.

Coverage of the obligations at 31-12-2015: 52,090 Plan assets 51,747 Insurance contracts linked to pensions 343 Consolidated financial statements 2015 Bankinter 95

Table of reconciliation of the value of the obligations and the fair value of the assets 2014: assigned to cover them: ■■ Provision for Christmas hamper (awarded to retired staff): 39 thousand euros. Reconciliation of the components of the cost for pensions ■■ Provision for payment commitment to staff in early retirement (incomes agreed Thousands of Euros before retiring): 717 thousand euros. Current Value of the Benefit Value of the Period ended 31 December 2015 Commitments Related Funds ■■ Provision for pension commitments of Bankinter Luxembourg: 62 thousand euros. Value at 1 January 2015 55,356 58,221 Standard cost (annual accrual) 1,079 TOTAL: 818 thousand euros. Interest cost (finance expenses) 924 Expected return of the plan assets 1,060 Note 1: the Christmas hamper is a commitment that is paid in kind. It is provided for but it is not externalised as it is not a monetary commitment. Company Contributions 3,741

Company Recoveries (2,720) Note 2: the incomes agreed in early retirement agreements that refer to payment Benefits paid (5,009) (5,005) dates prior to the date of retirement are not an off-balance sheet externalised Risk premiums of early retirements consumed (2) commitment to the extent that they are not for concepts related to retirement, death Reduction of commitments (2,128) or disability (hence why the incomes agreed after retirement are externalised). Actuarial losses / (gains) (3,346) (Losses) / gains in the value of the fund (3,207) Note 3: the pension commitments in Luxembourg (related to the agreement Valor at 31 December 2015 46,874 52,090 commitments of the staff employed there) are materialised in that country.

The balances that appear on the balance sheet as provisions for pensions at the close of 2015 and 2014 amount to 458 thousand euros and 818 thousand euros, respectively. These balances break down into the following concepts: Consolidated financial statements 2015 Bankinter 96

2015: 2014:

■■ Provision for Christmas hamper (awarded to retired staff): 46 thousand euros. ■■ Balance sheet: provision for Christmas hamper: 39 thousand euros.

■■ Provision for payment commitment to staff in early retirement (incomes agreed ■■ Balance sheet: provision for (pre-retirement) incomes of staff in early retirement: before retiring): 350 thousand euros. 717 thousand euros.

■■ Provision for pension commitments of Bankinter Luxembourg: 62 thousand euros. ■■ Externalised and off-balance sheet: Amount corresponding to retirement commitments with staff in active service: 38,345 thousand euros. TOTAL: 458 thousand euros. ■■ Externalised and off-balance sheet: Amount corresponding to retirement The rest of the commitments that make up the figure of 55,356 thousand euros (2014) commitments (incomes agreed after the retirement date) for the staff in early and 46,874 thousand euros (2015) are specified below and are not on the balance retirement: 5,092 thousand euros. sheet due to being externalised (as they are post-retirement, death or disability incomes): ■■ Externalised and off-balance sheet: Amount corresponding to commitments for retirement, death (widowhood/orphanhood) and disability for non-active staff (incomes being drawn down on): 11,163 thousand euros.

TOTAL: 55,356 thousand euros.

Consolidated financial statements 2015 Bankinter 97

2015: 2. Staff in early retirement (balance sheet):

■■ Balance sheet: provision for Christmas hamper: 46 thousand euros. Close of 2014: 717 thousand euros.

■■ Balance sheet: provision for (pre-retirement) incomes of staff in early retirement: ■■ interest cost for 2015: +2 thousand euros. 350 thousand euros. ■■ benefit payments: - 384 thousand euros. ■■ Externalised and off-balance sheet: Amount corresponding to retirement commitments with staff in active service: 32,412 thousand euros. ■■ risk premiums: - 2 thousand euros.

■■ Externalised and off-balance sheet: Amount corresponding to retirement ■■ Actuarial gains and losses: 17 thousand euros. commitments (incomes agreed after the retirement date) for the staff in early retirement: 3,306 thousand euros. Close of 2015: 350 thousand euros.

■■ Externalised and off-balance sheet: Amount corresponding to commitments for 3. Other externalised commitments (off-balance sheet): retirement, death (widowhood/orphanhood) and disability for non-active staff (incomes being drawn down on): 10,760 thousand euros. Close of 2014: 54,600 thousand euros. This is broken down into 38,345 (staff in active service) + 5,092 (post-retirement incomes for staff in early retirement) + 11,163 (non- TOTAL: 46,874 thousand euros. active staff) thousand euros, indicated above.

The reconciliation for 2015 of the above amounts would be as follows: ■■ accrual for active staff 2014: +1,079 thousand euros.

1. Christmas hamper (balance sheet): ■■ interest cost for 2014: +922 thousand euros.

Close of 2014: 38.5 thousand euros. ■■ benefit payments: - 4,621 thousand euros.

■■ interest cost for 2015: +0.5 thousand euros. ■■ plan reductions: - 2,128 thousand euros.

■■ benefit payments (2015 hampers): - 3 thousand euros. ■■ Actuarial gains and losses: -3,374 thousand euros.

■■ Actuarial gains and losses: 10 thousand euros. Close of 2015: 46,478 thousand euros. This is broken down into 32,412 (staff in active service) + 3,306 (post-retirement incomes for staff in early retirement) + 10,760 (non- Close of 2015: 46 thousand euros. active staff) thousand euros, indicated above.

Consolidated financial statements 2015 Bankinter 98

Finally, and with regard to the PLAN ASSETS, with a value of 57,507 thousand euros Post-employment Benefits for 2014 and 51,747 thousand euros for 2015, their reconciliation is as follows: Active, non-active and pre-retired staff Close of 2014: 57,507 thousand euros. Current value of the benefit commitments 46,478

■■ expected return of the assets for 2015 +1,058 thousand euros. Valor of the related funds 51,747 Pensions asset 5,269 ■■ contributions made/premiums paid in 2015: +3,716 thousand euros. Other liabilities ■■ recoveries/withdrawals made in 2015: - 2,720 thousand euros. Current value of the benefit commitments 46 ■■ benefits paid in 2015: - 4,621 thousand euros. Valor of the related funds 0 Pensions liability 46 ■■ Actuarial gains and losses: -3,193 thousand euros. Other long-term benefits Close of 2015: 51,747 thousand euros. Staff in early retirement Sensitivity to the variation of the main valuation hypotheses: Current value of the benefit commitments 350 To the salary Survival To the interest rate increase sensitivity Valor of the related funds 0 Close of - 0.5% - 0.5% + 0.5% tables PERM/F + 0.5% 2.5% Pensions liability 350 the year 1.5% 3% 4% - 1 year Current value of the benefit 46,874 50,844 43,337 45,896 47,881 48,159 Insurance contracts linked to pensions 343 commitments Value of the 52,090 56,453 48,208 52,014 52,148 53,508 Related Funds

Below, the reconciliation of the current value of the obligation for defined benefits and the fair value of the plan assets with the assets and liabilities recognised on the balance sheet as at 31 December 2015 is shown: Consolidated financial statements 2015 Bankinter 99

Pensions expense incurred in the 2015 financial year for defined benefit The expected return of the plan assets for 2015 and estimated at the start of the commitments aforementioned period amounts to 1,046 thousand euros.

The total expense recognised in the income statement in 2015 due to coverages for Breakdown of the evolution of the current value of the defined benefit pension defined benefit pension commitments amounts to (1,153) thousand euros, according obligations, and of the assets related to their coverage, at the close of each year to the following breakdown: Thousands of Euros Thousands of Euros Defined Benefit Related Assets Other Net actuarial Current period service cost 1,079 Year Obligations Related Funds Deficit/Surplus gain and loss Finance cost (136) 2009 67,525 67,396 129 - 1,022 Reduction of pension commitments (2,128) 2010 73,154 74,925 44 1,814 1,090 Actuarial gains and losses (staff in early retirement) 32 2011 64,869 70,835 39 6,005 8,503 2012 48,368 51,773 35 3,440 6,535 The company's estimate for the pensions expense for 2016 amounts to 767 thousand 2013 48,855 49,429 31 605 1,210 euros. 2014 55,356 58,221 39 2,904 455 2015 46,874 52,090 46 5,262 138

Breakdown of the plan assets associated with the coverage of defined benefit Pensions expense incurred in the 2015 financial year for defined contribution pension commitments commitments

Below, the breakdown of the insurance policies taken out with the different insurance The total expense recognised in the income statement in 2015 due to coverages for companies is shown (according to fair value): defined contribution pension commitments amounts to 1.427 thousand euros. Percentage This cost is practically entirely due to the Company Pension Plan implemented Axa – Wintethur 45% in the 2014 financial year and managed by Mutuactivos Pensiones, fulfilling the Allianz 27% Caser 27% requirements of the 22nd Collective Labour Agreement for Banking, which establishes Nationale Nederlanden 1% the requirement for the creation of a defined contribution Complementary Employee Pension Plan system for employees hired from 8 March 1980 onward that have The expected return at the start of the period of the plan assets was estimated at accumulated at least two years of service in the Company and with a minimum annual 1,060 thousand euros, while the actual return obtained was (2,148) thousand euros. contribution of 300 euros. The variance is almost entirely due to the reduction in value as a result of the slight increase (+30 bp) of market rates produced since the close of the prior financial year to the cose of the 2015 financial year, which has caused the value of the assets to reduce.

The company's estimate of the expected contributions to the plan (net of recoveries) during 2016 amounts to 0 thousand euros. Consolidated financial statements 2015 Bankinter 100

The average number of employees by category and sex during the 2015 and 2014 29. Fee and commission income and expense financial years is as follows:

2015 2014 The breakdown of this heading of the consolidated income statement as at 31 Male Female Male Female December 2015 and 2014 is as follows: Managers 422 179 404 176 Thousands of euros Executives 1,110 1,034 1057 905 2015 2014 Operational staff 590 962 587 1021 Fee expense: 2,122 2,175 2,048 2,102 Fees transferred to other companies and correspondents 17,234 23,984 Fees transferred to agents, online banking 43,958 33,530 The breakdown by sex and category of the employees as at 31 December 2015 and Other fees 19,083 16,377 2014 is as follows: Total fee expense 80,275 73,891 2015 2014 Male Female Male Female Fee income: Managers 437 185 410 179 For financial guarantees and letters of credit 30,702 29,522 Executives 1,136 1,083 1080 948 For exchange of foreign currencies and foreign banknotes 8,894 8,619 Operational staff 600 964 578 990 For contingent commitments 14,590 16,542 2,173 2,232 2,068 2,117 For charges and payments: 64,380 69,798 Bills of exchange 6,269 6,093 Current accounts 14,319 14,859 Credit and debit cards 29,050 33,990 Cheques 450 835 Payment orders 14,292 14,021 For securities services: 85,587 70,747 Underwriting and placement of securities 2,971 2,654 Purchase and sale of securities (see Note 41) 36,583 31,476 Administration and custody of securities 27,466 25,008 Asset management (see Note 41) 18,567 11,609 For marketing of non-banking financial products: 153,775 127,810 Investment funds 94,390 73,440 SICAVS 13,085 9,807 Pension funds 17,821 15,642 Insurance 27,162 28,408 Others (advisory services) 1,317 513 Other fees 32,220 42,260 Total fee income 390,148 365,298 Consolidated financial statements 2015 Bankinter 101

30. Interest and similar charges/income The average annual interest rate by category during the 2015 and 2014 financial years is as follows: The breakdown of these headings of the consolidated income statement, according to 31-12-15 31-12-14 the nature of the operations that produced the charges or income, for the financial Average Average years ended 31 December 2015 and 2014 is as follows: Interest Interest Similar income: Thousands of euros Deposits with central banks 0.02% 0.10% Interest and similar income 2015 2014 Deposits with credit institutions 0.09% 0.18% Deposits with the Banco de España (see Note 6) 107 443 Customer credit (a) 2.35% 2.67% Deposits with credit institutions (see Note 10) 10,069 7,321 Debt securities 3.26% 3.52% Money market transactions through counterparties 3 2,363 Equities 2.07% 2.36% Customer loans (see Note 10) 974,994 1,070,052 Similar costs: Debt securities 271,289 287,349 Deposits by central banks 0.12% 0.17% Impaired assets 20,132 19,599 Deposits by credit institutions 1.43% 1.82% Adjustments to income as a result of hedging transactions 4,965 13,882 Customer funds (c) 0.68% 1.23% Income from insurance contracts linked to pensions and similar 1,058 1,465 Customer deposits 0.48% 1.02% obligations Debt securities 1.29% 1.84% Other interest 1,147 1,847 Subordinated liabilities 4.95% 4.93% 1,283,765 1,404,321 Below, we separately indicate the amount of the interest income and expense accrued The line “customer loans” (see Note 10) includes, in the 2015 financial year, 383,778 in the 2015 and 2014 financial years by financial assets and liabilities that are not thousand euros corresponding to transactions with collateral guarantees (417,673 measured at fair value through proit and loss: thousand euros in 2014). Thousands of euros Thousands of euros 2015 2014 Interest expense and similar charges 2015 2014 Interest and similar income: 1,283,765 1,404,321 From deposits with the Banco de España 2,603 4,973 From deposits with credit institutions 87,314 124,621 of which; From money market transactions through counterparties 1,119 830 (a) Are not measured at fair value through profit and losss 1,216,607 1,331,610 From customer loans 147,726 292,504 (b) Are measured at fair value through profit and losss 67,158 72,711 From debt securities (see Note 19) 165,182 211,826 From subordinated liabilities 30,122 30,560 Interest expense and similar charges: (414,311) (648,963) Adjustments to income as a result of hedging transactions (36,778) (27,128) of which; Interest cost for pension funds 923 1,462 (a) Are not measured at fair value through profit and losss (336,427) (572,560) Other interest 16,100 9,315 (b) Are measured at fair value through profit and losss (77,884) (76,403) 414,311 648,963 Consolidated financial statements 2015 Bankinter 102

31. Gains or losses on financial assets and liabilities 32. Foreign exchange differences (net)

The breakdown of these headings of the consolidated income statement, for the The amount of the net foreign exchange differences recorded in the consolidated financial years ended 31 December 2015 and 2014, is as follows: income statement for the financial year ended 31 December 2015 is 52,956 thousand Thousands of euros euros (43,211 thousand euros in the financial year ended 31 December 2014). 2015 2014 From the held-for-trading portfolio (Note 7) 12,360 14,982 The breakdown by currency of the Group's assets and liabilities of the balance sheet From debt securities 10,303 24,676 denominated in foreign currency as at 31 December 2015 and 2014 is as follows: Other equity instruments (841) 2,642 Thousands of euros Trading derivatives 2,898 (12,336) From other financial instruments at fair value through profit 2015 2014 (3,183) 1,163 and loss (Note 7) Related Liabilities Related Assets Liabilities Other equity instruments (3,183) 1,163 Assets From available-for-sale financial assets (Note 8) 31,994 42,408 US dollar 1,462,566 1,182,103 958,519 868,611 From debt securities 19,713 35,886 Pound sterling 86,667 53,100 77,363 46,821 Other equity instruments 12,281 6,522 Japanese yen 1,787,831 5,882 1,880,534 9,798 From financial liabilities at amortised cost 25,339 31,582 Swiss franc 641,335 18,761 629,004 5,719 Debt securities 25,127 6,895 Norwegian krone 954 3,444 974 2,123 Subordinated liabilities - 1,322 Swedish krona 645 1,176 1,653 787 Other subordinated liabilities 212 23,365 Danish kroner 1,771 205 1,174 273 Other gains and losses (358) (51) Other 44,226 14,636 24,800 9,168 66,151 90,084 4,025,995 1,279,308 3,574,021 943,000

The breakdown of the assets and liabilities denominated in foreign currency as at 31 December 2015 and 2014 is as follows: Thousands of euros 2015 2014 Related Related Liabilities Liabilities Assets Assets Cash and deposits with central banks 1,207 - 1,266 - Held for trading 4,027 4,473 1,137 1,140 Loans and receivables 3,787,449 - 3,273,144 - Available-for-sale financial assets 233,255 - 296,821 - Prepayments/Accruals - - 1,583 - Financial liabilities at amortised cost - 1,267,801 - 936,704 Other 57 7,034 70 5,156 4,025,995 1,279,308 3,574,021 943,300 Consolidated financial statements 2015 Bankinter 103

33. Other general administrative expenses The line “Financial fees to compensate direct costs” includes the part of the fees and compensate direct costs related to credit instruments. The composition of the amounts that appear in the consolidated income statement for the 2015 and 2014 financial years for this concept is as follows: The amounts reflected in the line Income and expenses from insurance and Thousands of Euros reinsurance contracts written relate to the operating activity of the company Línea 2015 2014 Directa Aseguradora.

Tax contributions 6,442 6,756 35. Gains and losses in the disposal of assets not classified as non- Properties and supplies 29,762 32,355 current assets held for sale and Gains and losses of non-current Entertainment and travel expenses 6,024 5,779 assets held for sale not classified as discontinued operations Equipment and sundry expenses 15,287 13,218 External services 79,345 77,735 The breakdown of these headings of the consolidated income statement, for the IT and communication 65,800 55,127 Advertising 75,575 68,639 financial years ended 31 December 2015 and 2014, is as follows: Other expenses 27,707 27,126 Thousands of euros 305,942 286,735 2015 2014 Gains (losses) in the disposal of assets not classified as non- current assets held for sale 34. Other products and operating expenses Gains on disposal of property, plant and equipment (Note 14) 10 21 Losses on disposal of property, plant and equipment (Note 14) (2,011) (2,570) Gains on the disposal of shareholdings - - The breakdown of this heading of the consolidated income statement for the financial Gains on the disposal of other equity instruments - - years ended 31 December 2015 and 2014 is as follows: Other items - (431) Thousands of euros (2,001) (2,980) 2015 2014 Gains (losses) of non-current assets held for sale not classified Income Expenses Income Expenses as discontinued operations: Income from the operation of property - - Losses for impairment of assets (see Note 12) (28,038) (12,249) investments and other operating leases 9,398 6,866 Gains on disposal 96,454 102,105 Financial fees to compensate direct - - Losses on disposal (138,849) (144,570) costs 8,520 9,706 Contribution to the Deposit Guarantee Fund - 47,518 - 44,911 and Resolution Fund (Note 4) Income and expense from insurance 361,734 362,487 and reinsurance contracts written 669,031 651,549 Other 8,834 41,055 14,379 31,305 695,783 450,306 682,500 438,703 Consolidated financial statements 2015 Bankinter 104

36. Related party transactions and balances ■■ Fixed annual allocation

The breakdown of the transactions and balances with Group companies and other ■■ Allowances for attending the meetings of the Board of Directors and of the Board related entities and individuals, as at 31 December 2015 and 2014, is set out in of Directors' Committees to which they belong, Appendix I and in Note 37 below. ■■ Delivery of shares, option rights on shares or remuneration indexed to the value 37. Remuneration of and balances with members of the Board of of the shares, following the corresponding agreement of the General Shareholders' Directors Meeting with regard to the number, price and other concepts established by the law. Remuneration of the Board of Directors The General Shareholders' Meeting of 18 March 2015 approved, in accordance On 18 March 2015, Bankinter presented in its General Shareholders' Meeting the report with articles 217 and 529 of the Companies Act, to set the maximum amount of on directors' remunerations, for consultative vote, with the structure established the directors' annual remuneration in their capacity as directors at the amount of in Circular 4/2013, of 12 June, of the Comisión Nacional del Mercado de Valores. 1,600,000 euros, an amount that will remain in force provided no modification is The report included information on its general policy in this matter, its approved by the general shareholders' meeting. application to the 2014 financial year and the remuneration system applicable to 2015. Although this practice is mandatory only since 2014, Bankinter has been The Board of Directors, at the suggestion of the Remuneration Committee, determined presenting this report to its General Shareholders' Meeting since 2008, following the specific amount that has corresponded to each of the directors, conforming to the the recommendations of the Code of Good Governance for listed companies. agreement of the General Shareholders' Meeting when legally required.

The report on directors' remunerations was approved by 77.40% (96.51% in the For the 2015 financial year, the total remuneration received individually has been General Shareholders' Meeting of 2014) of the total share capital present and satisfied by means of: i) fixed annual allocation for belonging to the Board of Directors represented in this General Shareholders' Meeting for 2015, and it contained, among and for the performance of their duties as chairmen of their committees and ii) other information, the directors' remunerations for the 2015 financial year that are allowances for attending the meetings of the Board and of its committees. Therefore, detailed and disclosed in this note. during this year there was no delivery of Bankinter shares as remuneration. i) Remuneration of the directors for the performance of their duties in their The non-executive directors' remuneration does not include any variable components, capacity as directors: in so much as its receipt is not subject to objectives being achieved, thus complying with the recommendations with regard to corporate governance. According to Bankinter's Articles of association, the directors may be remunerated by means of the following concepts for the performance of their duties as mere directors: At the close of 2015, the number of directors of Bankinter, S.A. remains at 10, just as at the close of the last two years. Consolidated financial statements 2015 Bankinter 105

With regard to the remuneration of the members of the Board of Directors of Below, the overall amounts indicated in the previous table that correspond to each Bankinter, the individualised breakdown of the total remuneration received in their adviser in their capacity as such are dislosed individually and by concepts, as fixed capacity as mere directors (supervision and joint decision-making functions) during remuneration and allowances for attending the meetings of the Board of Directors the 2015 and 2014 financial years is as follows: and of the Board of Directors' Committees during the 2015 and 2014 financial years:

In Euros In Euros Directors 2015 2014 2015 2014 Pedro Guerrero Guerrero 204,000 206,800 Directors Fixed Attendance Fixed Attendance María Dolores Dancausa Treviño 177,500 165,880 remuneration Allowances remuneration Allowances Cartival, S.A. 199,500 182,820 Pedro Guerrero Guerrero 170,000 34,000 72,160 90,640 Marcelino Botín-Sanz de Sautuola y Naveda 105,000 84,275 María Dolores Dancausa Treviño 150,000 27,500 54,120 78,760 Fernando Masaveu Herrero 117,000 121,141 Cartival, S.A. 165,000 34,500 54,120 95,700 (1) Rosa María García García 91,500 - Marcelino Botín-Sanz de Gonzalo de la Hoz Lizcano 151,500 130,134 Sautuola y Naveda 85,000 20,000 36,080 26,195 Jaime Terceiro Lomba 159,000 155,883 Fernando Masaveu Herrero 85,000 32,000 36,080 63,061 María Teresa Pulido Mendoza (2) 103,000 39,685 Rosa María García García (1) 75,000 16,500 - - Rafael Mateu de Ros Cerezo 159,500 158,101 Gonzalo de la Hoz Lizcano 100,000 51,500 36,080 72,054 Former directors (3) 40,000 176,009 Jaime Terceiro Lomba 100,000 59,000 36,080 97,803 1,507,500 1,420,728 María Teresa Pulido Mendoza (2) 85,000 18,000 16,400 13,600

(1) Rosa María García García was appointed independent non-executive director of Bankinter by the General Rafael Mateu de Ros Cerezo 100,000 59,500 36,080 100,021 Shareholders' Meeting held on 18 March 2015. Former directors (3) 25,000 15,000 49,200 92,298 (2) María Teresa Pulido Mendoza was appointed director of Bankinter by co-option on 23 July 2014, with this appointment being subsequently ratified by the General Shareholders' Meeting held on 18 March 2015. Subtotals 1,140,000 367,500 426,400 730,132 (3) Within the category of former directors, the amount of the table included in the 2015 and 2014 financial years correspond to the amount received by Pedro González Grau, who ceased being a director of Bankinter on Total 1,507,500 1,156,532 25 April 2014, and John de Zulueta Greenebaum, who ceased being a director of Bankinter on 18 March 2015. (1) Rosa María García García was appointed independent non-executive director of Bankinter by the General Shareholders' Meeting held on 18 March 2015. (2) María Teresa Pulido Mendoza was appointed director of Bankinter by co-option on 23 July 2014, with this appointment being subsequently ratified by the General Shareholders' Meeting held on 18 March 2015. (3) Within the category of former directors, the amount of the table included in the 2015 and 2014 financial years correspond to the amount received by Pedro González Grau, who ceased being a director of Bankinter on 25 April 2014, and John de Zulueta Greenebaum, who ceased being a director of Bankinter on 18 March 2015. Consolidated financial statements 2015 Bankinter 106

As previously indicated, since 1 January 2015 no deliveries of shares have been Since January 2013, the Chairman of the Board of Directors receives fixed remuneration made to directors as remuneration in their capacity as such, hence the individualised for the performance of non-executive institutional functions (detailed in section A.3 of breakdown of deliveries of shares to directors in their capacity as such for the 2015 the report on directors' remunerations), in addition to the functions he performs in his and 2014 financial years is as follows: capacity as Chairman of the body which are remunerated as outlined in the previous 2015 2014 point. The amount of this remuneration during 2015 has been 630,000 euros (during Amounts No. of Shares Amounts No. of Shares 2014 the amount of this remuneration was 600,000 euros). Directors Invested Delivered Invested Delivered The Chairman of the Board of Directors does not receive any variable remuneration, Pedro Guerrero Guerrero 0 0 44,000 7,199 due to the same criteria indicated in the previous point towards for non-executive María Dolores Dancausa Treviño 0 0 33,000 5,399 directors. Cartival, S.A. 0 0 33,000 5,399 Marcelino Botín-Sanz de ii) Remuneration of executive directors for their executive functions. Sautuola y Naveda 0 0 22,000 3,598 Fernando Masaveu Herrero 0 0 22,000 3,598 The executive directors accrued the following amounts during 2015 as remuneration Rosa María García García (1) 0 0 - - for their activity, which were approved by the Board of Directors, at the suggestion Gonzalo de la Hoz Lizcano 0 0 22,000 3,598 Jaime Terceiro Lomba 0 0 22,000 3,598 of the then Appointments and Remuneration Committee (currently Remuneration María Teresa Pulido Mendoza Committee): (2) 0 0 9,685 1,499 Fixed Remuneration: Rafael Mateu de Ros Cerezo 0 0 22,000 3,598 Former directors (3) 0 0 34,511 4,883 0 0 264,196 42,369 ■■ CARTIVAL, S.A., Executive vice-president of Bankinter, received a total of 521 (1) Rosa María García García was appointed independent non-executive director of Bankinter by the General thousand euros as fixed remuneration. Shareholders' Meeting held on 18 March 2015. (2) María Teresa Pulido Mendoza was appointed Bankinter's director on 23 July 2014 by co-option; this ■■ María Dolores Dancausa Treviño, CEO of Bankinter, received a total of 701 appointment was subsequently ratified by the General Shareholders' Meeting celebrated on 18 March 2015. (3) Within the category of former directors, the amount of the table included in the 2015 and 2014 financial thousand euros as fixed remuneration. years correspond to the amount received by Pedro González Grau, who ceased being a director of Bankinter on 25 April 2014, and John de Zulueta Greenebaum, who ceased being a director of Bankinter on 18 March 2015. Variable Remuneration:

The Executive directors' system of annual variable remuneration is the same as is applied to the rest of the staff of the Bankinter Group that receives this type of remuneration. Consolidated financial statements 2015 Bankinter 107

As was already indicated in the report on directors' remunerations approved by The annual variable remuneration accrued in 2015 will be paid 50% in cash and 50% the General Shareholders' Meeting last year, this annual variable remuneration is in shares, partly in 2016 and partly deferred in three years, as follows: linked to the profit target of the Group's banking business being achieved, in terms of profit before tax, as approved by the Board of Directors at the suggestion of the ■■ 60% of the annual variable remuneration will be paid in 2016, in halves and after Remuneration Committee. Each of the Executive directors are assigned an amount in taxes, in cash and in shares. the event of 100% of the planned target being met. However, this variable incentive is accrued from the target being 80% achieved and up to a maximum of 120% of it ■■ The remaining 40% will be deferred in thirds and will be paid, where applicable, in and, according to these percentage achievements, between 70% and 120% of the the subsequent periods (up until 2019). In each year, the corresponding amount will variable amount assigned to each of the beneficiaries can be received. The percentage be paid, after taxes, half in cash and half in shares. achievement in 2015 has been 102.43% (120% in 2014). In any case, the deliveries of shares in the case of the Executives directors are on The annual variable remuneration accrued in 2015 was also directly indexed to other condition of their approval by the General Shareholders' Meeting of Bankinter, which objectives: i) the overall external quality indicator received by customers (NPS,Net will be held in 2016 (the year following the year of accrual), as required by article 219 Promoter Score, is used), which measures customers' willingness to recommend a of the Companies Act. company, classifying them on a scale of 0 to 10 as Promoters, Neutral and Detractors; and it is calculated by deducting from the percentage of Promoter customers Below, the amounts accrued during 2015 by the company's Executive directors are (assessments of 9 and 10) the % of Detractor customers (assessments between 0 set out: and 6), hence the resulting amount can vary between - 100% and 100%), and ii) the company's solvency ratio (CET1). Each of these indicators determined the receipt of At the close of the 2015 financial year, the percentage achievement was 102.43%, 10 percent of the variable remuneration, independently, varying between zero and which has determined the accrual of a variable incentive of 161,289 euros for the one hundred within that variable remuneration percentage subject to these objectives Executive vice-chairman and of 228,038 euros for the CEO, which will be paid in the being achieved. The percentage achievement in 2015 for both indicators has been form and terms indicated below: 100%, hence the amount of the variable remuneration to be received for the PBT objective is not reduced, with the final % achievement finally being the 102.43% ■■ In cash (the gross amounts accrued are indicated below, and these amounts will mentioned above. be paid after taxes):

- 50% of the non-deferred variable remuneration accrued by the variable incentive for 2015: 48,387 euros correspond to the Executive vice-chairman of the Board and 68,411 euros to the CEO. Consolidated financial statements 2015 Bankinter 108

- 50% of the deferred variable remuneration accrued by the variable incentive - 50% of the deferred variable remuneration accrued by the variable incentive for 2015 will be paid in shares: for 2015 will be paid in shares, bearing in mind that the reference share price for obtaining the amount of shares to be delivered is the same as that § 1/3 of 50% of the deferred variable remuneration accrued by the indicated above (6.1680769 euros/share). The amounts to bereceived over the variable incentive for 2015 will be paid in January 2017: 10,753 next few years are disclosed below: euros correspond to the Executive vice-chairman of the Board and 15,202 euros to the CEO. § Executive vice-chairman:

§ 1/3 of 50% of the deferred variable remuneration accrued by the - 1,743 shares will be delivered throughout January 2017, which corresponds variable incentive for 2015 will be paid in January 2018: 10,753 to 1/3 of 50% of the deferred variable remuneration accrued by the variable euros correspond to the Executive vice-chairman of the Board and incentive for 2015. 15,202 euros to the CEO. - 1,743 shares will be delivered throughout January 2018, which corresponds § 1/3 of 50% of the deferred variable remuneration accrued by the to 1/3 of 50% of the deferred variable remuneration accrued by the variable variable incentive for 2015 will be paid in January 2019: 10,753 incentive for 2015. euros correspond to the Executive vice-chairman of the Board and 15,202 euros to the CEO. - 1,743 shares will be delivered throughout January 2019, which corresponds to 1/3 of 50% of the deferred variable remuneration accrued by the variable ■■ In shares (on the condition of the approval of the General Shareholders' Meeting, incentive for 2015. as previously indicated), with the maximum number of shares that can be delivered being that indicated below, calculated on the gross amounts accrued: § CEO:

- 50% of the non-deferred variable remuneration accrued by the incentive - 2,464 shares will be delivered throughout January 2017, which corresponds variable for 2015: 7,844 shares to the Executive vice-chairman and 11,091 to 1/3 of 50% of the deferred variable remuneration accrued by the variable shares to the CEO, at a price of 6.1680769 euros/share, this being the average incentive for 2015. price of Bankinter shares at the close of the market of the trading days between 4 January and 20 January 2016, inclusive. If the aforementioned - 2,464 shares will be delivered throughout January 2018, which corresponds delivery of shares is approved by the General Shareholders' Meeting held in to 1/3 of 50% of the deferred variable remuneration accrued by the variable 2016, the shares will be delivered within the next 5 market business days incentive for 2015. following its approval. - 2,464 shares will be delivered throughout January 2019, which corresponds to 1/3 of 50% of the deferred variable remuneration accrued by the variable incentive for 2015. Consolidated financial statements 2015 Bankinter 109

All in all, the sum of the amounts accrued by the executive directors in 2015 (for their With regard to the record of the variable remuneration payable in stock kept on the executive functions) totalled 1,611 thousand euros. In 2014 it was 1,597 thousand Remunerations of the Board of Directors, the impact of these delivery of shares on the euros. income statements of financial years 2014 and 2015 has been as follows (amounts in euros): During 2015, the corresponding shares for the deferral of the variable 2015 2014 remuneration accrued in the years 2011, 2012 and 2013, as well as the shares Directors (*) 49,500 194,346 corresponding to the immediate payment of the remuneration accrued in 2014, Executive Directors 221,431 216,149 have been delivered to the Executive directors in accordance with the detail Total 270,931 410,495 of the agreements approved in the General Shareholders' Meeting held in the (*) accrued in 2014 but delivered at the beginning of 2015. years 2012, 2013, 2014 and 2015, respectively. In the section on directors' remuneration of the individual legal report of Bankinter and of the Consolidated The impact of these deliveries of shares on net worth at 31 December 2015 is of group for the 2015 financial year, a list of the deliveries made during 2015 is included: €190,045 euros.

Delivery of shares Delivery of shares Bankinter has no pension-related obligations with its External or Non-executive Delivery of shares Delivery of shares corresponding to the corresponding to the corresponding to the corresponding to the variable remuneration variable remuneration Directors, and it neither has any new nor different commitments to its Executive variable remuneration variable remuneration accrued in 2013 accrued in 2014 accrued in 2011 (13.33%) accrued in 2012 (13.33%) Directors other than those already mentioned in the Remunerations Report for Executive Director (13.33%) (10.00%) Unit price Unit price Unit price Unit price previous years. Bankinter has no new or different pension-related obligations with assigned to In shares assigned to In shares assigned to In shares assigned to In shares each share1 each share2 each share3 each share4 its Executive Directors or members of Senior Management other than those already CARTIVAL 3.1059855 8,628 2.605153847 7,179 5.46476923 3,663 6.56261538 2,840 mentioned in the Executives Remunerations Reports for previous years. María Dolores 3.1059855 8,628 2.605153847 9,572 5.46476923 4,884 6.56261538 3,876 Dancausa Treviño

Bankinter has not agreed any golden parachute clauses with any of its Executive 1Average listed price of Bankinter stock at market close of each of the trading sessions held between 2 January Directors in its administration contracts or in the service agreement entered with the and 20 January 2012, (the initial price was €4.831533, but following the adjustment due to the capital increase Chairman that link the accrual of financial rights to situations of change of control of with share bonus issued in April 2013, the new value is €3.1059855). the Bank, which are common clauses in these types of contracts in large companies, 2 Average listed price of Bankinter stock at market close of each of the trading sessions held between 2 January as specified on the Executive Remunerations Reports that will be voted at the General and 20 January 2013, (the initial price was €4.0524615, but following the adjustment due to the capital increase with share bonus issued in April 2013, the new value is €2.605153847). Shareholders' Meeting held in 2016, as last year. 3 Average listed price of Bankinter stock at market close of each of the trading sessions held between 2 January and 20 January 2014. Bankinter has not agreed any golden parachute clauses with any of the members of 4 Average listed price of Bankinter stock at market close of each of the trading sessions held between 2 January its Senior Management in its management contracts that link the accrual of financial and 20 January 2015. rights to situations of change of control of the Bank, which are common clauses in these management contracts and which are set forth in Royal Decree 1382/1985 on the special labour relations of senior management. Consolidated financial statements 2015 Bankinter 110

Summary of Director's remunerations, loans and other benefits Remunerations by type of Director including all items Thousands of euros Remunerations by type 2015 2014 Thousands of euros Type of Director By Company1 By Group (**) By Company1 By Group (**) 2015 (*) 2014 (*) Executives (*) 1,988 - 1,945 - Fixed remuneration (1) 1,852 1,766 External Proprietary 222 - 205 - Variable remuneration (2) 389 434 Directors Allowances (3) 368 730 External Independent 705 41 660 27 By-law allowances(4) 1,140 690 Directors Options on shares and/or other financial instruments - - Other External Directors 834 - 810 - Other - - (***) 3,749 3,620 3,749 41 3,620 27 1 not including remuneration in kind received by the Chairman and the Managing Director (8 thousand euros) (*) not including remuneration in kind received by the Chairman and the Managing Director (8 thousand (*) The following are executive directors: CARTIVAL, S.A., executive Vice-chairman, and María Dolores euros) Dancausa Treviño, Managing Director. (1) Fixed remuneration accrued in 2015 corresponding exclusively to Executive Directors in their capacity as (**) Mr. Gonzalo de la Hoz Lizcano and Mr. Rafael Mateu de Ros, in their capacity as Non-executive Directors, executives and to the Chairman of the Board for their non-executive institutional functions. received €25,500 and €15,000 respectively during 2015 by way of attendance fees for meetings of the Board of (2) Variable remuneration corresponding exclusively to Executive Directors in their capacity as executives, Directors of Línea Directa Aseguradora, S.A. The amount received by Mr. Gonzalo de la Hoz Lizcano includes as annual variable remuneration accrued in 2015. Each Executive Director was assigned an amount that he attendance fees for both as a member of the Board of Directors and as a member of the Control Committee of would receive if the goal was achieved, as explained in the heading “Remuneration of Executive Directors for Línea Directa Aseguradora. In addition, Mr. Gonzalo de la Hoz Lizcano is the Chairman of Bankinter Global their executive functions”. For merely information purposes, the Chairman of the Board does not receive a Services, S.A., the Group’s technology and operating services company, and he received €7,200 during 2015 variable remuneration. by way of fees for attending meetings of the Board of Directors. (3) Attendance fees for Board and Committee meetings (Directors) (***) The Chairman, Mr. Pedro Guerrero Guerrero, is classified as "Other External Directors". (4) Comprises the Directors' fixed remuneration plus free allocation of shares (for their functions purely as Directors)

Other benefits Thousands of euros Advances - Loans granted - Pension Plans and Funds: Contributions - Pension Plans and Funds: Obligations undertaken 600 Life insurance premiums 1.6 Guarantees set up by the company in favour of Directors - Consolidated financial statements 2015 Bankinter 111

Transactions with members of the Board of Directors The average effective rate of the credits granted to "Other Related Parties" is of 1.568% (2.527% in 2014). Out of the total amount of those credits, 78% have Regarding transactions that involve a transfer of resources or obligations in a personal guarantee and the remaining 22% have collateral, (79% and 21%, significant amounts between the Company and Group entities and the Directors of respectively, in 2014). Bankinter,S.A., its significant shareholders, directors and related parties, outside the scope of Bankinter S.A.’s ordinary operations or not carried out in normal market At 2015 and 2014 year-end there have been no value adjustments for doubtful debts conditions, refer to section D (related party transactions) in the Annual Corporate related to the amounts included in the outstanding balances. Governance Report for 2015. At 2015 and 2014 year-end there have been no expenses related to bad debts or The global characteristics and details of credits and guarantees granted to Directors doubtful debts of related parties. are as follows: Conflicts of interest of the members of the Board of Directors. At 31 December 2015, the credits granted to the Directors amounted to 21,153 thousand euros (22,294 thousand euros at 31 December 2014). At 31 December Article 229 of the Capital Companies Act establishes that directors must inform the 2015 the Institution did not provide any guarantees in favour of its Directors (390 Board of Directors of any situation of conflict, direct or indirect, that they or persons thousands euros at 31 December 2014). related to them may have with the interests of the company. None of the members of the Board of Directors has reported a situation of conflict of interest as defined in The average term of the loans and credits granted to Directors of the Institution in Article 229 of the Capital Companies Act, which is hereby expressly stated pursuant 2015 is of approximately 14 years (12 years in 2014). In 2015 the interest rates were to section three of the aforementioned Article. between 0.31% and 3.04% (0.70% and 4.57% in 2014).

Further information about the transactions with related parties that appear in Appendix I of this report is detailed below:

The average term of the financing agreements that appear in the aforementioned Annex of the annual report is of 14 years and 11 months (12 years and 9 months in 2014).

The average effective rate of the credits granted to Directors and Executives is of 1.347% (1.691% in 2014). Out of the total amount of those credits, 37% have a personal guarantee and the remaining 63% have collateral, (39% and 61%, respectively, in 2014). Consolidated financial statements 2015 Bankinter 112

Directors' shareholdings

In compliance with Law 26/2003 of 17 July amending Law 24/1988 of 28 July on the Securities Market and the Capital Companies Act, the Institution must provide information on the shareholdings owned by the Directors of Bankinter, S.A.

The breakdown of the shares held by the members of the Board of Directors at 31 December 2014 and 2013 were as follows:

31-12-15 31-12-14 (4) (4) Percentage of Percentage of Total Shares Direct Indirect Total Shares Direct Indirect Participation Participation Pedro Guerrero Guerrero 3,360,822 0.374 3,085,817 275,005 3,359,133 0.374 3,084,128 275,005 María Dolores Dancausa Treviño 1,012,655 0.113 1,012,186 - 1,137,190 0.127 1,136,922 268 Cartival, S.A. 205,505,462 22.863 205,505,462 - 204,706,145 22.774 204,706,145 - Marcelino Botín-Sanz de Sautuola y Naveda 253,045 0.028 253,045 - 252,201 0.028 252,201 - Fernando Masaveu Herrero 47,568,636 5.311 776,330 46,792,306 47,551,881 5.290 775,484 46,776,397 Rosa María García García (1) 1,000 0.000 1,000 - Gonzalo de la Hoz Lizcano 666,105 0.074 666,106 - 453,762 0.050 453,762 - Jaime Terceiro Lomba 51,482 0.006 51,482 - 50,638 0.006 50,638 - María Teresa Pulido Mendoza (2) 1,509 0.000 1,509 - 665 0.000 665 - Rafael Mateu de Ros Cerezo 1,014,721 0.113 1,014,721 - 1,095,877 0.122 1,095,877 - Former director (3) - - - - 228,804 0,023 228,804 - Totals 259,435,437 28.882 212,367,658 47,067,311 258,836,296 28.794 211,759,626 47,051,670 (1) The General Shareholders' Meeting, which took place on 18 March 2015, approved Rosa María García's appointment as an independent external advisor to the bank. (2) María Teresa Pulido Mendoza was appointed Bankinter's director on 23 July 2014 by co-option; this appointment was subsequently ratified by the General Shareholders' Meeting celebrated on 18 March 2015. (3) In the category of former directors, the amounts in the table for financial year 2014 correspond to John de Zulueta Greenbaum, who ceased to be a director of Bankinter on 18 March 2015. (4) The share capital of Bankinter at 31 December 2015 and 31 December 2014 is represented by a total of 898,866,154 shares. Consolidated financial statements 2015 Bankinter 113

Remuneration of the senior management

At 31 December 2015, the number of senior managers in the institution was seven, not including the Chairman or the executive directors. The remuneration of senior management1 in 2015 was 2,503 thousand euros, of which 1,914 thousand euros was fixed remuneration and 589 thousand euros was variable remuneration. In 2014 this remuneration amounted to 2,725 thousand euros (7 people).

38. Environmental information

As part of the Bankinter Group’s firm commitment to carrying on its activity and business in compliance with the strictest Sustainability criteria, in 2012 it published the principles of its Policy, which serves as a framework for action aimed at integrating environmental, social and ethical criteria into its management model.

1 Senior management shall be understood as those managers that directly report to the Board or to the Executive directors of the institution. Consolidated financial statements 2015 Bankinter 114

The Sustainability Committee, led by the Chairman of the institution, is the body ■■ An economic point of view, embodying strategies that focus on promoting and responsible for overseeing compliance with the principles set forth in the Sustainability supporting innovative entrepreneurship and gathered in the Entrepreneurship Policy. It is also responsible for defining the strategy and developing the objectives Project; and the development of Socially Responsible Investment, which contained in the multi-year management programme. incorporates ESG (Environmental, Social and Governance) principles into the institution's investment and financing policies. In 2015 the Bank continued to develop the strategic lines defined in the Tic Tac Toe Plan, the objective of which is to integrate the Institution’s economic, social and ■■ A social perspective, through the "A bank for all" project, which includes environmental dimensions transversally into its business model. the institution's inclusive strategy, making it also as fully accessible as possible to people with disabilities in the physical, digital and cognitive environments. The Plan was drawn up on the basis of detecting the aspects of the banking activity that have an impact on the economic, social and environmental milieu, with the ■■ An environmental point of view, with the implementation of measures aimed purpose of minimising the negative and maximising the positive ones. at reducing the carbon footprint as a consequence of the direct and indirect environmental impact of its activity. This commitment involves its stakeholder Prior to its preparation an analysis was conducted on the changes that had been groups such as employees, customers, suppliers, shareholders, investors and occurring in the institution's most immediate economic, social and environmental society in general. milieu. This Bankinter Sustainability Plan relies on four basic pillars for its implementation: The Plan's design was inspired by recognised standards such as the ISO 26000 Guidance on Social Responsibility or Forética's SGE21 Standard, and it follows recommendations ■■ Quality, the commitment of its human resources to excellence in the provision of of international specifiers, such as the sustainability rating agencies and corporate services and attention to customers' financial needs. responsibility observatories. ■■ The management systems, with tools for continuously improving economic, social All the actions defined and implemented in the Plan are considered from three and environmental performance, which moreover have been externally audited perspectives: and certified in accordance with internationally recognised standards.

■■ The involvement of its strategic stakeholder groups, especially its employees, through training and awareness programmes and their participation in volunteer actions.

■■ The use of the best technology available and the most innovative solutions as the bank's hallmarks.

The Sustainability department reports to the Chairman's Office and the People Management and Corporate Communications area, which in turn reports to the bank's Managing Director. Consolidated financial statements 2015 Bankinter 115

Bankinter is also a member of the United Nations Global Compact Network Spain and, The Activities Report for 2015 drawn up by the Customer Support Service, which shall as such, assumes the commitment to incorporate its ten conduct and action principles be presented at the meeting of the Board of Directors on 16 February 2016, specifies into its activity on human rights, labour, environment and combating corruption. that during 2015 the number of complaints/claims fell yet again, to 1.52 per million Bankinter is also a member of Forética, which is an association of Spanish companies transactions (2.19 the year before). whose mission is to promote a culture of ethical business management. The number of complaints and claims handled by the Customer Service department In addition, Bankinter is a collaborating company in Fundación Lealtad, a non-profit in 2015 dropped by 13.67% with respect to 2014, reaching 4,400. Claims of a financial institution whose mission is to promote Spanish society’s trust in NGOs with the aim nature amounted to 3,433, 44.9% of which resulted in a favourable resolution for the of obtaining further donations, as well as any type of collaboration with the voluntary customer. sector. CLAIMS AND COMPLAINTS 2015 2014 Total No. of Complaints 967 962 The Bank's sustainable management was recognised in 2015 by socially responsible Total No. of Claims 3,433 4,121 investment indices, such as FTSE4Good and MSCI, and in environmental management Total Claims and Complaints 4,400 5,083 rankings, such as the Carbon Disclosure Project, together with major world companies FINANCIAL CLAIMS by capitalisation In the Customer's favour 1,540 2,176 44.9% 52.8% In the Bank's favour 1,893 1,945 During the financial year, it was not considered necessary to recognise any allocation 55.1% 47.2% for environmental risks and liabilities as there were no contingencies linked to Total Financial Claims 3,433 4,121 environmental protection and improvement and no penalties or fines were imposed in relation to the environmental management carried out by the Bankinter Group. The As regards the timeframe for dealing with these complaints, in 2015, 47.9% of Directors of the Group consider that the environmental risks inherent to its activities incidents were answered in less than 48 hours (similar to the previous year, 47.6%). are minimal and adequately covered, and they do not believe it is exposed to any additional liabilities in relation to such risks. Neither has the Group incurred in any Resolution times, comparative previous year. expenses or received any subsidies linked to these risks. Year / Term 2015 2014 0 days 1,306 29.7 1,443 28.4 39. Customer service 1 and 2 days 802 18.2 976 19.2 3 to 6 days 702 16.0 916 18.0 Article 17 of Order 734/2004 of 11 March of the Ministry of Economy on customer 7 to 10 days 405 9.2 438 8.6 service departments and services and the ombudsman of financial institutions > 10 days 1,185 26.9 1,310 25.8 establishes, inter alia, the need to prepare a report on the activities performed by 4,400 100.0 5,083 100.0 these services in the preceding financial year and, also, to include a summary of this report in their financial statements. Consolidated financial statements 2015 Bankinter 116

The External Ombudsman dealt with 397 incidents in 2015; 481 were processed, 40. Branches, centres and agents 17.5% more than in 2014. Of these, 242 were resolved in the customer's favour.

External Ombudsman: 2015 2014 Variation The list of Bankinter, S.A. branch offices, centres and agents at 31 December 2015 Processed 481 397 17.5 and 2014 is as follows: Resolved in the Customer’s 31-12-15 31-12-14 favour 242 217 10.3 Branches 361 360 Resolved in the Bank’s favour 234 150 35.9 Commercial management centres - Excluded 5 30 Corporate 22 49 During 2015, 135 incidents were handled through Banco de España, a 38.1% drop SMEs 78 78 with respect to 2014. Private Banking and Personal Finances 48 39 Virtual Offices 431 398 The number of incidents resolved by Banco de España in the aforementioned period Number of agents 505 467 was 67, of which 15 were in the Bank's favour. Telephone and Internet branches 3 3 Banco de España 2015 2014 Variation Claims 135 218 -38.1% In the Customer's favour 49 23 113.0% At 31 December 2015, Bankinter, S.A. had a network of 505 agents (469 in 2014), Uncontested 3 28 89.3% composed of individuals or legal entities who have been granted powers to deal In the Bank's favour 15 15 _ with the Bank's customers on its behalf in negotiating and completing transactions Pending resolution 53 144 -63.2% typical of a Credit Institution. At 31 December 2015, this network handled customer Outside the BE competence 1 _ _ deposits for 1,572 thousand euros (1,191 thousand euros at 31 December 2014) Filed 13 8 62.5% with an average investment of 1,574 thousand euros (1,609 thousand euros at 31 Rescission 1 _ _ December 2014). The list of agents is registered with the Financial Institutions Office During the financial year of 2015, 30 incidents were processed through the Comisión of Banco de España. EAFIs (Financial Advisory Companies), of which there were 43 Nacional del Mercado de Valores, that is, a 28.57% drop when compared with the 42 at 31 December 2014, are governed by the Securities Exchange Act, by Royal Decree processed in 2014. 217/2008 of 15 February on the legal regime of investment service companies and, in particular, Circular 10/2008 of 30 December of the Comisión Nacional del Mercado de No recommendations were issued in the Activities Report for 2015, which was drawn Valores on EAFIs. up by the Customer Support Service. Consolidated financial statements 2015 Bankinter 117

41. Fiduciary transactions and investment services 42. Remuneration of account auditors

The following table details the fees recorded in financial years 2015 and 2014 for the Below are the fees for the professional services provided by the auditors of the investment services and complementary activities provided by the Group: Financial Statements and for other services provided by the auditor of the Bank and Thousands of euros the Group, Deloitte, S.L., or by a company linked to the auditor, in a manner of control, 2015 2014 common ownership or management, during financial years 2015 and 2014: For securities services- 85,587 70,747 Fees for services charged by the account Underwriting and placement of securities 2,971 2,654 auditor and linked companies Sale and purchase of securities 36,583 31,476 Description Thousands of euros Administration and custody of securities 27,466 25,008 Bankinter, S.A. Bankinter Group 2015 2014 2015 2014 Asset management 18,567 11,609 Auditing Services 669 414 1,042 829 For marketing of non-banking financial products- 153,775 127,810 Other Verification services 137 365 235 365 Investment funds 94,390 73,440 Total Auditing services and Related services 806 779 1,277 1,194 SICAVS 13,085 9,807 Tax Advisory Services - - - - Pension funds 17,821 15,642 Other Services 322 143 331 143 Insurance 27,162 28,408 Total Professional Services 1,128 922 1,608 1,337 Others (advisory services) 1,317 513 Total fee income 239,362 198,557

Below are the balances of assets of the investment funds, pension funds, customer portfolios and SICAVs managed by the Group together with the external investment funds sold: Thousands of euros 31-12-15 31-12-14

Own investment funds 7,417,440 7,233,279 External investment funds sold 6,187,744 3,812,032 Pension funds 2,085,600 1,936,084 Asset management and SICAVs 5,312,272 3,862,604

21,003,055 16,843,999 Consolidated financial statements 2015 Bankinter 118

43. Tax situation Law 27/2014 of 27 November 2014 (hereinafter, LIS) which replaces the previous revised text of the Spanish Corporation Tax Law approved by Royal Legislative Decree On 27 December 2000, the Bank notified the National Revenue Agency of its decision 4/2004 of 5 March, and which changes the tax rates by lowering the standard rate to apply the tax consolidation system from financial year 2001 onwards. The Tax from 30% to 25% (28% in 2015) has been effective as from 1 January 2015. However, Group number allocated by the National Revenue Agency was 13/2001. the tax rate for credit institutions remains at 30%.

The list of Bankinter subsidiary companies comprising the tax group at 31 December As a result of this modification and the developments in the tax consolidation system 2014 was as follows: arising thereof, the Bank has modified the composition of the tax group in such a way that, from 1 January 2015, the tax group 13/01 is composed of Bankinter S.A., ■■ Bankinter Consultoría, Asesoramiento y Atención Telefónica, S.A. Bankinter Consumer Finance E.F.C., S.A. and Intermobiliaria S.A. ■■ Bankinter Gestión de Activos, S.A., S.G.I.I.C. ■■ Hispamarket, S.A. The rest of companies composing the tax group 13/01 in 2014 are removed from ■■ Intermobiliaria, S.A. it and are taxed individually in the financial year 2015, except for Línea Directa ■■ Bankinter Consumer Finance E.F.C., S.A Aseguradora, S.A., Línea Directa Asistencia, S.L.U., Motoclub LDA. S.L.U., Centro ■■ Bankinter Capital Riesgo, S.G.E.C.R, S.A. Avanzado de Reparaciones CAR, S.L.U., Ambar Medline, S.L.U., and LDActivos, S.L., ■■ Bankinter Emisiones, S.A. which have composed their own consolidated tax group as from 1 January 2015. ■■ Bankinter Sociedad de Financiación, S.A. ■■ Arroyo Business Consulting Development, S.L. Below is included a reconciliation of the consolidated accounting profit (loss) and the ■■ Relanza Gestión, S.A. taxable profit (loss) for years 2015 and 2014: ■■ Gneis Global Services, S.A.. Thousands of euros ■■ Línea Directa Aseguradora, S.A. 31-12-15 31-12-14 ■■ Línea Directa Asistencia, S.L.U.

■■ Motoclub LDA. S.L.U. Profit or loss before tax for the financial year 520,330 392,839 ■■ Centro Avanzado de Reparaciones CAR, S.L.U. Permanent differences- ■■ Ambar Medline, S.L.U. Application of prior years’ tax losses - (864) ■■ LDActivos, S.L. Share of profit or loss of equity-accounted institutions (18,223) (16,962) ■■ Naviera Goya S.L.U. Other (32,068) 6,369 ■■ Naviera Sorolla, S.L.U. Accounting tax base 470,039 381,382 ■■ Mercavalor. S.A Temporary differences 67,417 66,943 Tax Base 537,456 448,325 Consolidated financial statements 2015 Bankinter 119

The positive temporary differences in financial year 2015 are essentially due to Below is the reconciliation of the profit before tax with the tax expense for the adjustments for non tax-deductible provisions. The negative temporary differences financial year: essentially consist of differences due to reversals of adjustments for provisions and Thousands of euros other non-tax deductible items in previous financial years. 2015 2014 The expense in financial years 2015 and 2014 for Corporation Tax is as follows: Pre-tax accounting profit: 520,330 392,839 Thousands of euros Tax at 30% 156,099 117,852 2015 2014 Breakdown of items to reconcile tax expense at the tax rate Expense corresponding to the current financial year 141,012 114,415 and Corporation Tax expense for the year: Deductions and allowances (2,361) (10,514) Non-deductible expenses 1,130 2,384 Other items 6,202 12,865 Non-qualifying income (16,217) (5,562) Tax adjustments from previous financial years (443) 185 Total deductions applied in the financial year (2,361) (10,514) 144,410 116,951 Negative tax bases - (259) Other: The item "Tax adjustments from previous financial years" in 2015 states Corporation Tax adjustment from the previous financial year (443) 185 the expense for Corporation Tax from tax adjustments carried out in the settlement of Other 6,202 12,865 the Group’s Corporation Tax corresponding to financial year 2014 and not envisaged Corporation Tax expense for the financial year 144,410 116,951 at 31 December 2014. Effective tax rate for the year 27.75% 29.77%

The current tax expense for the financial year and the amount of deferred tax expense The tax on profit for the year is calculated by adding the current tax resulting from (income) for 2015 and 2014 are as follows: applying the tax rate to the tax base for the financial year, after applying admissible deductions, plus the change in tax assets and liabilities due to taxes paid in advance Thousands of euros and deferred and tax credits, both due to negative tax bases and deductions. 31-12-15 31-12-14 Current expense 164,635 137,034 The deferred tax assets and liabilities include the temporary differences that are Deferred tax expense (20,225) (20,083) identified as the amounts that are expected to be payable or recoverable due to the Total Tax Expense 114,410 116,951 differences between the carrying amounts of assets and liabilities and their tax value, as well as the negative tax bases pending offset and credits for tax deductions not yet applied. These amounts are recognised by applying to the temporary difference or credit in question the tax rate at which they are expected to be recovered or paid. Consolidated financial statements 2015 Bankinter 120

The deferred tax liabilities are recognised for all of the taxable temporary differences, Similarly, on 25 September 2014 a partial inspection was initiated for the same reason except, in general, if the temporary difference derives from the initial recognition of and financial years in the group company Bankinter Global Services, S.A., receiving goodwill. The deferred tax assets identified with temporary differences are recognised on 23 July 2015 the corresponding settlement agreement confirming the adjusted only if it is considered likely that the consolidated institutions will in the future have amounts in the notice of disagreement. This agreement has been object of appeal sufficient taxable profits against which to realise them. The remaining deferred tax before the TEAC on 30 July 2015. assets (negative tax bases and deductions pending offset) are recognised only if it is considered likely that the consolidated institutions will in future have sufficient As regards the remaining procedures deriving from tax inspections in previous years, taxable profits against which to realise them. and, specifically, those corresponding to the general inspection of 2001 to 2003, a favourable ruling was received from the Spanish National High Court on 17 September At each end-of-year closure, the deferred taxes recognised are reviewed (both 2015 regarding the appeal lodged by Bankinter against the settlement agreement assets and liabilities) with the purpose of ensuring that they remain valid, making and the decision adopted in the penalty proceedings corresponding to the Corporation any necessary corrections to them in accordance with the results of the analyses Tax of financial years 2001 to 2003. This judgment is currently under appeal in the performed. Spanish Supreme Court.

In this sense, due to the coming into force as from 1 January 2015 of Law 27/2014 Similarly, on 12 November and 16 November 2015 partial favourable rulings of 27 November 2014, which changes the tax rates (except for credit institutions) were received for the period between January 2002 and February 2005 by lowering the standard rate from 30% to 25% (28% in 2015), the deferred taxes regarding the appeals lodged by Bankinter against the settlement agreements recognised at 31 December 2015 have been updated in the non-credit institutions and the decisions adopted in the penalty proceedings corresponding to the belonging to the Bankinter Group with a total net impact on Expense for Corporation withholdings of movable capital earnings from euroipfs during the financial Tax of 1,114 thousands of euros. years 2002 to 2005. With regard to the unfavourable part, an appeal for cassation has been lodged on 23 December 2015 before the Spanish Supreme Court. On 9 April 2014 Bankinter was informed by the tax authorities of a partial inspection, limited to IRPF (PAYE, income tax retentions on salary payments) for compensations paid in 2010 to 2012, as a result of which was signed a notice of disagreement on With respect to the remaining procedures, those corresponding to the general 13 November 2014. On 9 March 2015, the corresponding settlement agreement is inspection covering financial years 2004 to 2006 are currently under appeal before received for an amount of 11,578 thousand euros, which has been appealed before the Spanish High Court, while those corresponding to the general inspection covering the TEAC (Central Economic Administrative Court) on 27 March 2015. The decision of the years 2007 to 2009 are currently under appeal before the TEAC. Rulings were the penalty proceedings was received on 16 November 2015 for an amount of 7,350 received from the TEAC on October 22 for the latter, one unfavourable ruling for the thousand euros, which has also been object of appeal before the TEAC. settlement agreement of VAT of financial years 2007-2008, which is currently object of appeal before the Spanish High Court, and one favourable ruling, in its entirety, for the penalty proceeding of VAT of financial year 2009 in Bankinter. Consolidated financial statements 2015 Bankinter 121

In any case, the tax liabilities that might derive from the appeals lodged against the During the financial year 2005, the bank opted to apply the tax system applicable to disputed assessments were adequately provided for at the end of 2015 and preceding institutions holding foreign securities as regulated in chapter XIV of Title VII of Royal financial years. Legislative Decree 4/2002 of 5 March, which approves the revised text of the Spanish Corporation Tax Law. The bank notified this decision to the competent body of the Tax liabilities of a contingent nature could arise as a result of different possible State Tax Administration Agency on 21 April 2005. interpretations of the tax rules applicable to certain types of transaction within the banking industry. However, the possibility of such liabilities arising is remote, and if In accordance with the provisions of Article 118.3 of this revised text, we report that they did arise, the resulting tax charge would not be such as to have any significant during the financial year of 2015 the Bank obtained capital gains of 4,732 thousand impact on the consolidated annual financial statements. euros (1,505 thousand euros in 2014) and received dividends amounting to 1,834 thousand euros (1,029 thousand euros in 2014). The foreign taxes on said dividends The various tax benefits applied in the calculation of the Corporation Tax payable amounted to 275 thousand euros (164 thousand euros in 2014). for the Group in financial years 2014 and 2015 are shown in the following table:

Thousands of euros 31-12-15 31-12-14

Applied to the tax base: Capital reserve (26,589) - Exemption DDID (38) Exemption from ETVE system (entities holding foreign (2,739) (333) securities) Allocation of negative tax bases from economic interest (1,014) 1,379 groupings (30,380) 1,046 Applied to the tax payable: Deductions for double taxation 371 8,747 Deduction for R&D and Technological Innovation 1,354 1,165 Deduction for donations to institutions 621 602 Deduction for non-deductible depreciation 15 - 2,361 10,514 Consolidated financial statements 2015 Bankinter 122

44. Fair value of assets and liabilities a) Fair value of financial instruments

Below is the breakdown ofthe fair value of financial instruments and the procedure used to obtain the price: Book Fair value Fair Value Hierarchy Fair value Valuation techniques Main Inputs value 1. Cash and deposits with Present value Expected discounted cash flows following the market curve central banks 925,361 925,361 Level 2 925,361 Held for trading 2.1. Deposits with credit Calculation of prices from market inputs 1,009,596 1,009,596 Level 2 1,009,596 institutions and explicit formulas Interest rate curves and fixing of interest rate Calculation of prices from market inputs 2.2. Customer credit 808,476 808,476 Level 2 808,476 and explicit formulas Interest rate curves and fixing of interest rate Directly captured from prices listed in 2.3. Debt securities 2,264,761 2,264,761 Level 1 2,264,761 markets Observable market data Directly captured from prices listed in 2.4. Equity instruments 34,764 34,764 Level 1 34,764 markets Observable market data

356,041 356,041 Level 1 4,631 Directly captured from prices listed in markets Equity fixing, volatility Directly captured from prices listed in Level 1 0 markets Interest rate curves and Euribor fixing Calculation of prices from market inputs 2.5. Trading derivatives Level 2 17,888 and explicit formulas Interest rate curves and Euribor fixing Calculation of prices from market inputs Level 2 172,641 and explicit formulas Interest rate curves and Euribor fixing Calculation of prices from market inputs Level 2 5,348 and explicit formulas Interest rate curves and Euribor fixing Calculation of prices from market inputs Level 2 23,243 and explicit formulas Interest rate curves and Euribor fixing Calculation of prices from market inputs Level 2 132,290 and explicit formulas Interest rate curves and Euribor fixing Consolidated financial statements 2015 Bankinter 123

Other financial assets at fair value through profit or loss 3.4. Equity instruments 57,209 57,209 Level 1 57,209 Directly captured from prices listed in markets Observable market data Available-for-sale financial assets Level 1 3,214,442 Directly captured from prices listed in markets Observable market data 4.1. Debt securities 3,377,008 3,377,008 Calculation of prices from market inputs and Interest rate curves and Euribor Level 2 162,566 explicit formulas fixing 4.2. Equity instruments 113,660 113,660 Level 1 84,163 Directly captured from prices listed in markets Observable market data Calculation of prices from market inputs and Expected discounted cash flows Level 2 29,497 explicit formulas following the market curve 4.3. Equity instruments valued at cost 39,485 Loans and receivables Expected discounted cash flows 5.1. Deposits with credit institutions Present value 850,451 850,538 Level 2 850,538 following the market curve Expected discounted cash flows 5.2. Customer credit 44,182,634 45,125,760 Level 2 45,125,760 Present value following the market curve Expected discounted cash flows 5.3. Debt securities 446,230 536,179 Level 2 536,179 Present value following the market curve Held-to-maturity investments 6. Held-to-maturity investments 2,404,757 2,814,097 Level 1 2,814,097 Directly captured from prices listed in markets Observable market data Hedging derivatives Calculation of prices from market inputs and Interest rate curves and Euribor 7. Hedging derivatives 160,073 160,073 Level 2 160,073 explicit formulas fixing Consolidated financial statements 2015 Bankinter 124

LIABILITIES Book value Fair value Hierarchy Fair value Valuation techniques Main Inputs Held for trading Calculation of prices from market inputs and Interest rate curves and fixing of 1.3. Deposits by credit institutions 735,427 735,427 Level 2 735,427 explicit formulas interest rate Calculation of prices from market inputs and Interest rate curves and Euribor 1.3. Customer deposits 995,019 995,019 Level 2 995,019 explicit formulas fixing 464,958 464,958 Level 1 14,983 Directly captured from prices listed in markets Equity fixing, volatility Interest rate curves and Euribor Level 1 3,914 Directly captured from prices listed in markets fixing Calculation of prices from market inputs and 21,264 Equity fixing, volatility explicit formulas Calculation of prices from market inputs and Equity fixing, volatility interest rate 172,193 1.5. Trading derivatives explicit formulas curves and Euribor fixing Calculation of prices from market inputs and Level 2 4,222 Currency fixing, interest rate curves explicit formulas Calculation of prices from market inputs and 90,548 Currency fixing, interest rate curves explicit formulas Calculation of prices from market inputs and Interest rate curves and Euribor 157,834 explicit formulas fixing 1.6. Short positions in securities 1,573,676 1,573,676 Level 1 1,573,676 Directly captured from prices listed in markets Observable market data Financial liabilities at amortised cost Expected discounted cash flows 3.1. Deposits by central banks 3,017,983 3,024,175 Level 2 3,024,175 Present value following the market curve Expected discounted cash flows 3.2. Deposits by credit institutions 1,792,316 1,792,404 Level 2 1,792,404 Present value following the market curve Expected discounted cash flows 3.3. Customer deposits 32,820,399 32,894,745 Level 2 32,894,745 Present value following the market curve Expected discounted cash flows 3.4. Debt securities 10,484,882 11,027,104 Level 2 11,027,104 Present value following the market curve Expected discounted cash flows 3.5. Subordinated liabilities 594,563 823,263 Level 2 823,263 Present value following the market curve Expected discounted cash flows 3.6. Other financial liabilities 1,126,850 1,126,850 Level 2 1,126,850 Present value following the market curve Hedging derivatives Calculation of prices from market inputs and Interest rate curves and Euribor 4. Hedging derivatives 11,489 11,489 Level 2 11,489 explicit formulas fixing Consolidated financial statements 2015 Bankinter 125

Financial year 2014: Book Fair value Fair Value Hierarchy Fair value Valuation techniques Main Inputs value 1. Cash and deposits with 357,327 357,327 Level 2 357,327 Present value Expected discounted cash flows following the market curve central banks Held for trading 2.1. Deposits with credit Calculation of prices from market inputs 544,528 544,528 Level 2 544,528 Interest rate curves and fixing of interest rate institutions and explicit formulas Calculation of prices from market inputs 2.2. Customer credit 1,967,180 1,967,180 Level 2 1,967,180 Interest rate curves and fixing of interest rate and explicit formulas Directly captured from prices listed in 2.3. Debt securities 2,345,496 2,345,496 Level 1 2,345,496 Observable market data markets Directly captured from prices listed in Level 1 59,320 Observable market data markets Directly captured from prices listed in 2.4. Equity instruments 59,320 59,320 Level 1 5,295 Observable market data markets Calculation of prices from market inputs - Equity fixing, volatility, Level 2 2,423 and explicit formulas - Interest rate curves and Euribor fixing Calculation of prices from market inputs Level 2 10,404 Equity fixing and volatility and explicit formulas Calculation of prices from market inputs Level 2 54,644 Currency fixing, interest rate curves and explicit formulas Calculation of prices from market inputs 2.5. Trading derivatives 436,958 436,958 Level 2 512 Interest rate curves and Euribor fixing and explicit formulas Calculation of prices from market inputs Level 2 192,333 Equity fixing, volatility, interest rate curves and fixing and explicit formulas Calculation of prices from market inputs Level 2 171,347 Currency fixing, interest rate curves and explicit formulas Consolidated financial statements 2015 Bankinter 126

Other financial assets at fair value through profit or loss 3.4. Equity instruments 49,473 49,473 Level 1 49,473 Directly captured from prices listed in markets Observable market data Available-for-sale financial assets Level 1 1,837,738 Directly captured from prices listed in markets Observable market data 4.1. Debt securities 2,845,308 2,845,308 Calculation of prices from market inputs and Level 2 1,007,570 Interest rate curves and Euribor fixing explicit formulas 4.2. Equity instruments 126,295 126,295 Level 1 87,645 Directly captured from prices listed in markets Observable market data Calculation of prices from market inputs and Expected discounted cash flows following Level 2 38,650 explicit formulas the market curve 4.3. Equity instruments valued at cost 42,210 Loans and receivables Expected discounted cash flows following 5.1. Deposits with credit institutions 1,113,441 1,113,597 Level 2 1,113,597 Present value the market curve Expected discounted cash flows following 5.2. Customer credit 42,446,723 43,047,345 Level 2 43,047,345 Present value the market curve Expected discounted cash flows following 5.3. Debt securities 446,357 523,800 Level 2 523,800 Present value the market curve Held-to-maturity investments 6. Held-to-maturity investments 2,819,482 3,290,053 Level 1 3,290,053 Directly captured from prices listed in markets Observable market data Hedging derivatives Calculation of prices from market inputs and 7. Hedging derivatives 148,213 148,213 Level 2 148,213 Interest rate curves and Euribor fixing explicit formulas Consolidated financial statements 2015 Bankinter 127

LIABILITIES Book value Fair value Hierarchy Fair value Valuation techniques Main Inputs Held for trading Calculation of prices from market inputs and 1.3. Deposits by credit institutions 270,621 270,621 Level 2 270,621 Interest rate curves and Euribor fixing explicit formulas Calculation of prices from market inputs and 1.3. Customer deposits 451,559 451,559 Level 2 451,559 Interest rate curves and Euribor fixing explicit formulas 322,598 322,598 Level 1 11,569 Directly captured from prices listed in markets Observable market data Level 1 6,171 Directly captured from prices listed in markets Observable market data Calculation of prices from market inputs and 15,644 Equity fixing, volatility explicit formulas Calculation of prices from market inputs and 52,090 Currency fixing 1.5. Trading derivatives explicit formulas Calculation of prices from market inputs and Level 2 552 Interest rate curves and Euribor fixing explicit formulas Calculation of prices from market inputs and 41,330 Interest rate curves and currency fixing explicit formulas Calculation of prices from market inputs and 195,242 Interest rate curves and equity fixing explicit formulas 1.6. Short positions in securities 1,396,713 1,396,713 Level 1 1,396,713 Directly captured from prices listed in markets Observable market data Financial liabilities at amortised cost Expected discounted cash flows 3.1. Deposits by central banks 3,240,433 3,233,433 Level 2 3,233,433 Present value following the market curve Expected discounted cash flows 3.2. Deposits by credit institutions 5,249,425 5,365,896 Level 2 5,365,896 Present value following the market curve Expected discounted cash flows 3.3. Customer deposits 29,966,129 30,089,543 Level 2 30,089,543 Present value following the market curve Expected discounted cash flows 3.4. Debt securities 9,311,034 9,788,981 Level 2 9,788,981 Present value following the market curve Expected discounted cash flows 3.5. Subordinated liabilities 608,198 771,154 Level 2 771,154 Present value following the market curve Expected discounted cash flows 3.6. Other financial liabilities 1,615,461 1,615,461 Level 2 1,615,461 Present value following the market curve Hedging derivatives Calculation of prices from market inputs and 4. Hedging derivatives 20,241 20,241 Level 2 20,241 Interest rate curves and Euribor fixing explicit formulas Consolidated financial statements 2015 Bankinter 128

“Level 1” hierarchy includes figures of financial instruments, the fair values of which When calculating the fair value of liability derivatives, the institution distinguishes are obtained from prices listed on active markets for the same instrument, that is, between collateralised positions, for which the impact of own credit risk is estimated without modifying or reorganising differently. “Level 2” hierarchy includes figures as zero, and uncollateralised positions, for which the valuation adjustment for own of financial instruments, the fair values of which are obtained from prices listed on credit risk is estimated objectively on the basis of the probability of default by the active markets for similar instruments or from using other valuation techniques in institution observed in data published by the major financial information agencies in which all significant inputs are based on observable market data. “Level 3” hierarchy the market. includes figures of financial instruments, the fair values of which are obtained from valuation techniques in which a significant input is not based on observable market When calculating the fair value of asset derivatives, the institution distinguishes data. between collateralised positions, for which the impact of counterparty credit risk is estimated as zero, and uncollateralised positions, for which the valuation adjustment Certain equity instruments are measured at cost because their fair value cannot be for counterparty credit risk is estimated in accordance with internal probability of estimated reliably. The unreliability of a fair value estimate is due to the wide range default models constructed on the basis of historical information from the bank's of estimates and the impossibility of reasonably assessing the probabilities of each databases. estimate within the range. When calculating the fair value of shareholdings in subsidiaries, multi-group The fair value of the financial instruments that is derived from internal models takes companies or associates, the institution's accounting policy is to consider the whole into account the terms and conditions of contracts and the observable market data, investment as the unit of account. including interest rates, credit risk, exchange rates, stock prices, volatilities, etc. We assume that the markets in which we operate are efficient and, therefore, that b) Fair value of non-financial assets and liabilities their data are representative. The valuation models do not incorporate subjective approaches. Below is a breakdown of the fair value of non-financial assets and liabilities at 31 December 2015 and 2014: In addition, in some cases and given the complexity of the products valued, the price Thousands of euros Thousands of euros used is that published by the counterparty in official media such as Reuters. 31-12-15 31-12-14

At 31 December 2015 the main techniques used by internal models to calculate the Recognised Recognised fair value of the financial instruments were the present value model, which discounts value Fair value value Fair value the future cash flows back to the present time using market interest rates, and the Assets: Black-Scholes model and its variation, which, by means of a closed formula and using Property, plant and equipment 493,114 488,183 467,363 462,689 exclusively market inputs, enable interest rate options to be valued. Credit derivatives Foreclosed assets 318,287 318,287 356,671 356,671 are valued in the same way as other interest rate derivatives, except that the market inputs include the market differentials corresponding to the underlying of the issue. We constantly contrast the various valuations with counterparties to ensure the validity of the models and inputs used at all times. Consolidated financial statements 2015 Bankinter 129

The fair values of property were calculated based on observable market prices. This The Risk Appetite Framework thus provides an instrument to ensure that the risk calculation was reached using the appraisal values certified by Appraisal Companies levels assumed are coherent with the Group's business strategy and plans, without and modified by the price variation index if the appraisals had been made more than prejudice to the limits established for the different risks that are regularly monitored three years ago. through the corresponding Committees and organisational structures. Below is the Risk Appetite Statement made by Bankinter and the general principles that govern it. 45. Risk policies and management Risk appetite statement: Bankinter wishes to maintain a measured and prudent Risk appetite risk that enables it to achieve a balanced and healthy balance sheet and a recurring and income statement over time, while maximising the long-term value for its Bankinter understands Risk as one of the main aspects of its competitive strategy, and shareholders. it permeates through the way it manages the risks, thus distinguishing the Institution from others in the financial system. The risk appetite and tolerance that the Group assumes during the carrying out of its business are adapted to these principles: It is a priority of the Board of Directors that the relevant risks of all Group businesses are properly identified, measured, managed and controlled. To this end, it establishes ■■ Management strategies, policies, organisation and systems that are prudent and the basic principles and mechanisms for their appropriate management, with the suitable to the size, scope and complexity of the Institution's lines of business, purpose of achieving the Group's strategic objectives, protecting the Group's reputation based on quality banking practices. and results, defending the interests of shareholders, customers, other stakeholders and society in general, and guaranteeing business stability and financial soundness ■■ Respect and adaptation of the Institution's activity to the regulatory established over time. demands, limits and restrictions, ensuring compliance with the prevailing legislation at all times. The Board of Directors approved the Risk Appetite Framework in 2015, which defines the level of appetite and tolerance that the Institution is willing to assume during the ■■ Maintenance of a low or moderate exposure to credit risk, with a non-performing carrying out of its business. The Framework includes a set of key metrics related to the loan ratio in the lowest range of the Spanish financial system. levels of the different risks, quality and repetition of results, liquidity and solvency. For each one of these metrics, we have defined a series of levels of risk tolerance that ■■ Suitable coverage of problematic assets. the Group is prepared to assume. ■■ Appropriate remuneration of invested capital to ensure minimum returns on the These metrics are monitored quarterly, and if a negative trend is observed in any risk-free rate throughout the cycle. of them, action plans are implemented and monitored until they return to the appropriate levels. Consolidated financial statements 2015 Bankinter 130

■■ Maintenance of a low level of market risk, in such a way that, in stress scenarios, ■■ Reinforced control of the institutions's reputational position (Good Corporate the generated losses have a reduced impact on the Institution's profit and loss Governance, systemic risks, etc.). account. ■■ Willingness to complete the service level that Bankinter provides its Private ■■ Intense growth in strategic priority sectors of large and medium-sized companies. Banking and Corporate & SME Banking customers, offering Investment Banking services with a limited risk. ■■ Balance of credit investment portfolio of individuals and businesses. ■■ Optimisation of the Cost/income ratio. ■■ Balanced growth of retail financing resources. ■■ Maximisation of shareholders' value generation throughout cycles via dividends ■■ Diversification of wholesale financing sources, both from the point of view of and stock revaluation, over a strong capital and liquidity base. instruments and markets and maintenance of a balanced maturities profile. ■■ Maintenance of a Common Equity Tier 1 (CET1) within the fluctuation band that ■■ Cost optimisation of retail financing, maintaining a balanced relationship with the the Institution has established, higher than the regulatory minimum. credit yield and the rate situation in the market. Corporate governance of the risk function ■■ Establishment of a risk diversification principle to avoid excessive concentration levels that could translate into difficulties for the Institution. The Bankinter Group has a corporate governance system in line with the best practices of the sector and adapted to the regulatory requirements. The Board of Directors, in ■■ Limitation of business in sensitive sectors that could entail a risk for the accordance with that established in the Board's Regulations, is the body responsible Institution's sustainability, such as those related to real-estate development and for the approval of the risk control and management policy, as well as for periodically construction, or have a negative impact on the bank's reputation and/or integrity. monitoring the Risk control and information systems.

■■ Moderate interest rate risk appetite. Among the administration and monitoring functions that the Company's Board of Directors possesses, there are two clearly separate functions regarding risks which are ■■ Maintenance of an extremely low structural currency position (excluding trading, allocated to it as its ultimate responsibility. which is measured and limited by other means). ■■ Management and monitoring function

■■ Control function Consolidated financial statements 2015 Bankinter 131

The Board of Directors oversees these functions, sometimes delegating their fulfilment ■■ Executive Risk Committee. It is responsible for establishing the limits for delegating and follow-up through other delegated bodies, as indicated below: powers to lower internal bodies, such as the internal Credit Risk Committee, the Incident and Non-performing Asset Committee, the Foreclosure Committee and Management and monitoring function the different risk committees at different regional organisations, within the limits established by the Board of Directors. It is responsible for the approval of individual Authorisation, formalisation, assessment, sanctioning or ratification of risk or group risks, in accordance with the established delegation structure, and it operations: monitors the credit quality of the Bank's different businesses, the concentrations of risk and the evolution of the most sensitive sectors at any given time. The Board of Directors of Bankinter has this power delegated, depending on the nature or amount, to the following delegated or internal bodies: ■■ Management Committee. Its functions include making suggestions to the Board and updating the annual Business Plan, defining strategies to comply with ■■ Executive Committee, which is of an executive nature and takes decisions on objectives, monitoring them and making decisions on any deviations to them. matters covered by the powers delegated to it by the Board. Presided over by the Bankinter Executive Vice-president, and made up of Bank Board members. ■■ Asset and Liability Committee (hereinafter 'ALCO'). It is the body directly It approves operations within the limits established by the Board of Directors responsible for managing overall interest rate and liquidity risks, as well as being and that are set out in the limits section of this document. On matters related to responsible for stock market and institutional change risks and the Institution's risks, the Executive committee takes decisions on operations that are above the financing policies. This is without prejudice to Capital Markets being able to take powers delegated to bodies below it. It also periodically monitors the liquidity risk actions, within its powers or following the guidelines of the Chairman, of the and credit, market and operational risks via the evolution of the APRs and the Managing Director or the Director General of Capital Markets, aimed at protecting institution's level of solvency. the Bank from its risks or to take advantage of any trading opportunities that may arise. The Asset and Liability Committee is also responsible for the regular The Executive Committee adopts decisions for managing and monitoring all types of supervision and monitoring of issues related to capital management. risk, delegating to these committees:

o Credit risk, to the Executive Risk Committee

o Business Risk, to the Management Committee

o Structural (liquidity, interest rate, currency) and Market Risks, to the Asset and Liability Committee (ALCO). Consolidated financial statements 2015 Bankinter 132

Control function Organisation of the Risks function

Approval of the risk control and management policy and supervision of the control Bankinter follows a risk management and control model based on three lines of systems and the information they contain: defence:

The Board of Directors, for the exercise of this function, has the support of the Risk The first line consists of the business units and support areas, which is where the Committee in an advisory capacity, which comprises members of Bankinter's Board risk exposure originates. These units are responsible for managing, monitoring and of Directors, who are mostly independent, with one of them taking on the role of reporting on the generated risk, which must adhere to the risk appetite and the chairman. It meets at least quarterly and is the body responsible, among other things, authorised risk limits. for monitoring capital planning and advising on the risk appetite. The second line consists of risk control and monitoring teams, including the regulatory Internal Audit: compliance function. This second line is responsible for effective control of risks and ensures that they are managed in accordance with the defined risk appetite level. The Audit and Regulatory Compliance Committee directs the activity of Internal Audit through the approval of the Annual Plan of Audit Activities. In this Plan, the main The third line consists of Internal Auditing, which periodically ensures that the policies, tasks to be performed by Internal Audit, as well as the guidelines to be followed methods and procedures are appropriate and checks their actual implementation. in the different aspects of the audit function, are approved. The Audit Committee periodically monitors all the activity of Internal Audit. The Chief Risks Officer (hereinafter “CRO”) , is the person ultimately responsible for risk management. He/she reports functionally to the Risk Committee and hierarchically Internal Audit, falling under the Audit and Regulatory Compliance Committee from a to the CEO, the Company's highest-ranking executive. They are a member of the functional point of view, evaluates the compliance with the policies approved by the Executive Risk Committee, to ensure that the admission, measurement, analysis, Board, the procedures, the risk management systems and the internal control function. control and reporting of risks that are studied in the aforementioned Committee are Similarly, it is responsible for reviewing and evaluating the effective implementation in line with the general risk policy established, ultimately, by the Board of Directors. and efficiency of the risk control and mitigation procedures, maintaining mandatory independence from their management. Its review activity and evaluation of the The Institution's organisational structure is based on the principle of independence processes related to risks is added to its audit plans and regular procedures. and segregation of duties between the business units and the monitoring and risk control units.

From both a hierarchical and a functional point of view, the CRO oversees the different Risk management Directorships or Units, as well as those related to the Control and internal validation of risks, duly separated from one another. Consolidated financial statements 2015 Bankinter 133

The Group has a Responsible Lending Policy, in accordance with the provisions of The approval and risk policies are carried out through the following units: the Transparency Act, which sets forth the principles that the Institution has always applied in this field. ■■ Risks of Individuals.

The identification, measurement, monitoring, control and management of all the risks ■■ Risks of Businesses and Developers:. inherent in banking operations constitute a fundamental aim within the framework of overall management of all risks. ■■ Corporate Risks.

Bankinter has received the approval from the Banco de España for its internal The different risk processes and IT systems are defined and improved by the Risks rating based models (IRB models) and the corresponding methodologies, systems Processes Unit. and policies for measuring credit risk, applying them to the calculation of equity as established by the solvency regulations. The risk models and their components are constructed and maintained by the Global Risk Management Unit. Credit risk In addition to their own functions, the different Units take part in the process of Organisation, policies and management defining new products, determining the risk parameters and the approval process.

The Credit Risk Directorate is responsible for the development and dissemination of The hierarchy and structure of the powers delegated to each of the Risk Committees the policies of approval, monitoring and management of risks. Its objectives include are established in accordance with the Institution’s strategy and policies, and their the development of automated approval systems and all risk approval processes, compliance is verified by the approval systems automatically. while always seeking maximum efficiency and quality. The risk approval process is supported by an electronic proposal that enables While maintaining the Institution's traditionally rigorous approach in evaluating risks integration and unification of all of the approval networks and channels. The use and the principles of transparency with customers, the credit operations approval of statistical models to manage this process enables the retail risk approval to be policy seeks to increase credit in strategic business segments, and its main pillars are automated and provides support for decisions on risks requiring a manual approval. the customers' proven solvency and ability to pay; the strictly complementary nature of guarantees and their rigorous assessment; a pricing policy adjusted to customers' The Non-Performing Loans and Incidents Management is responsible for running risk profiles and transactions; and maintaining an appropriate diversification of risk and managing processes to control, monitor and collect non-performing loans at their by customers and sectors. very early stages, establishing processes and systems that make management more efficient and improve the collection of defaulting transactions. It is also responsible The control and monitoring policies, as well as the management of problematic for all matters related to the policy, analysis, authorisation and monitoring of transactions, rely heavily on technology to achieve uniformity and efficiency of refinancing operations. processes, the ability to anticipate events and high levels of recovery.

Consolidated financial statements 2015 Bankinter 134

The Real Estate Assets Management is responsible for pricing foreclosed assets, Evolution during the financial year establishing commercial policies, preparing the assets up until their sale in order to maximise the value for the Group, taking into account the market conditions at any In 2015, despite the fact that the volume of new credit transactions of the system has given time. continued to grow, the total credit volume has dropped: According to Banco de España data, in November 2015 home loans and non-financial business loans were 2.2% and The Control Management, with its Risk Control and Internal Validation functions, 1.4% lower, respectively, than in the same month of the previous year. In this context, has responsibilities of a global scope and corporate nature and of supporting the the quality of Bankinter's assets led to it presenting a behaviour above the sector governing bodies of the Group. Its responsibilities are performed by: average, with a growth of 4.4% in computable credit risk (including investment and off-balance sheet exposure). ■■ Risk Control Unit:its mission is to supervise the quality of the Group's risk management and, in particular, to guarantee that the management and control In terms of non-performing loans, the financial year closed with an index of 4.13%, systems for the different risks comply with the most demanding criteria and the 59 basis points less than the previous year, which represents a 12.50% drop. The best practices observed in the sector and/or required by the regulators, verifying non-performing loan ratio at year-end is 40% of the sector's average index (10.35% that the effective risk profile taken on is in line with what has been established by according to Banco de España data from November 2015). The volume of problematic the senior management; and foreclosed assets continues to be much lower than those of the Group's main competitors. At the close of December 2015 the foreclosed assets portfolio was 531 ■■ Internal Validation Unit:is responsible for validating the credit risk, market risk million euros, 1.1% of total credit risk, with a 9.3% reduction during the year. and economic capital risk models in order to assess their suitability both for ASSET QUALITY 31/12/2015 31/12/2014 Variation % var. management and for regulatory purposes. Computable risk (includes 49,415,783 47,321,948 2,093,836 4.42 contingent risk) At-risk exposure (includes Every year the Control Management produces a Risk Map, to identify, quantify and 2,039,239 2,232,732 -193,493 -8.67 uniformly summarise the different risks to which the Institution is exposed, as well contingent risk) Provisions for credit risk 856,302 953,022 -96,720 -10.15 as the situation of the management systems used to control them, with the aim of Index of non-performing loans 4.13 4.72 -0.59 -12.50 reducing potential losses as far as possible by means of mitigation measures. (%) Coverage rate (%) 41.99 42.68 -0.69 -1.62 Risk diversification is a fundamental management principle that has demonstrated Foreclosed assets 531,348 585,830 -54,482 -9.30 its effectiveness in the successive financial crises. The Institution regularly monitors Provision for foreclosures 213,061 229,159 -16,098 -7.02 risk diversification by sectors, geographic location, products, guarantees, customers Foreclosure coverage (%) 40.10 39.12 0.98 2.51 and offsets. Consolidated financial statements 2015 Bankinter 135

Individuals Evolution of non-performing loans rate (%)

In 2015 a slight reactivation of credit demands from individuals was registered, supported by the improvement of the economic situation. This fact, accompanied by the stabilisation of the real estate market in the regions in which Bankinter has the 10.35 strongest presence, made it possible to increase financing to individuals. The Bank has maintained the mortgage campaigns it initiated at the end of 2013 with the same risk policy that characterises the institution and that allows it to continue improving its credit quality. 4.13 The residential mortgage portfolio of individuals shows an LTV of 58% at year-end 2015 and 90% have as collateral the holders' primary residence. The non-performing loan ratio in this portfolio (2.7% at year-end) continues to be the best in the entire

86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 15 Spanish financial system, which in September 2015 (the latest information published by the Spanish Mortgage Association) had a non-performing loan ratio of 5.0% for this type of lending. l Sector Source: Banco de España. November 2015 for the data of the sector. l Bankinter The policy for approving new residential mortgage loans, which is the product with The company regularly monitors risk diversification by sectors, geographic location, the greatest exposure, has always been very conservative. Since 2003, the maximum products, guarantees, customers and offsets, and it has established policies on the LTV has been set at 80%, in anticipation of a change of cycle, which is decisive in the maximum permitted risk concentration. The geographic distribution of credit by differential quality of this portfolio compared with the sector as a whole. regional offices is depicted in the graph below. The average effort (measured as the proportion of income that the customer allocates to paying mortgage loan instalments) in the mortgage portfolio remained at a very low level (22% at year-end).

The non-performing loan ratio in this portfolio (2.7% at year-end) continues to be the best in the entire Spanish financial system, which in September 2014 (the latest information published by the Spanish Mortgage Association) had a non-performing loan ratio of 5.0% for this type of lending. Consolidated financial statements 2015 Bankinter 136

Small and Medium-sized Enterprises Evolution of non-performing loan ratio of housing loans The largest growth in risk in the financial year was recorded in the small and medium- sized enterprises segment, located at 10,243 million euros when the year closed, with a positive year-on-year variation of 26.4% and a non-performing loan ratio of 5.00 8.15%. The institution applies automated decision-making models for managing this segment, along with a team of risk analysts with extensive experience.

Maximum exposure to credit risk 2.73

The following table shows the maximum level of exposure to Credit Risk assumed by the Group at 31 December 2015 and 2014 for each type of financial instrument, without deducting the collateral or other credit enhancements received to ensure borrowers’ compliance. 08 09 10 11 12 13 14 15

l System System September 2015 vs Bankinter December 2015. System Information provided by the Spanish Mortgage Association. l Bankinter

The total private individuals portfolio maintained its high credit quality, reaching 24,849 million euros at year end (1.6% higher than the previous year) with a non- performing loan ratio of 2.97%.

Corporate & SME Banking

Bankinter has extensive experience in this sector, and its business is more internationalised and therefore less exposed to Spain's economic cycle, which is why its non-performing loan ratio is lower. Lending in this segment in 2015 reduced slightly, ending the year at 13,353 million euros, which is 3.9% lower than the previous year. The non-performing loan ratio at year-end was 1.97%. Consolidated financial statements 2015 Bankinter 137

At 31 December 2015

Thousands of Euros Asset balances

Financial assets at fair value Types of instruments Available-for- Held-to- Memorandum through profit or loss Loans and Hedging Total sale financial maturity accounts receivables derivatives Held for assets investments Other assets trading Debt instruments- Deposits with credit institutions 1,009,596 - - 850,451 - - - 1,860,047 Negotiable securities 2,299,525 57,209 3,530,153 446,230 2,404,757 - - 8,737,874 Customer credit 808,476 - - 44,182,634 - - - 44,991,109 Total debt instruments 4,117,597 57,209 3,530,153 45,479,314 2,404,757 55,589,030 Contingent risks - Financial guarantees ------880,741 880,741 Other contingent risks ------2,348,920 2,348,920 Total contingent risks 3,229,661 3,229,661 Other exposure - Derivatives 356,041 - - - - 160,073 - 516,114 Contingent commitments ------10,989,833 10,989,833 Other exposure ------Total other exposure 356,041 160,073 10,989,833 11,505,947 MAXIMUM LEVEL OF EXPOSURE TO THE CREDIT RISK 4,473,638 57,209 3,530,153 45,479,314 2,404,757 160,073 14,219,495 70,324,639 Consolidated financial statements 2015 Bankinter 138

At 31 December 2014

Thousands of Euros Asset balances

Types of instruments Financial assets at fair value Available-for- Held-to- Memorandum through profit or loss Loans and Hedging Total sale financial maturity accounts receivables derivatives Held for assets investments Other assets trading Debt instruments- Deposits with credit institutions 544,528 - - 1,113,441 - - - 1,657,969 Negotiable securities 2,404,816 49,473 3,013,813 446,357 2,819,482 - - 8,733,941 Customer credit 1,967,180 - - 42,446,723 - - - 44,413,903 Total debt instruments 4,916,524 49,473 3,013,813 44,006,521 2,819,482 54,805,813 Contingent risks - Financial guarantees ------763,223 763,223 Other contingent risks ------1,973,306 1,973,306 Total contingent risks 2,736,529 2,736,529 Other exposure - Derivatives 436,958 - - - - 148,213 - 585,171 Contingent commitments ------13,527,713 13,527,713 Other exposure ------Total other exposure 436,958 148,213 13,527,713 14,112,884

MAXIMUM LEVEL OF EXPOSURE TO THE CREDIT RISK 5,353,482 49,473 3,013,813 44,006,521 2,819,482 148,213 16,264,242 71,655,226 Consolidated financial statements 2015 Bankinter 139

Below is the exposure to the credit risk by type of guarantee held by the company at The following information shows the credit quality of financial assets that are not year-end 2015 and 2014: overdue and the value of which is not impaired for December 2015 and 2014:

2015 Thousands of euros 2015 2014 Other No appreciable risk 7,005,967 7,228,730 Total balance Secured by Personal secured sheet 2015 property Guarantee Low risk 20,411,499 20,505,880 Thousands of euros loans Medium-low risk 6,618,869 6,119,002 Deposits with credit institutions 1,860,047 190,800 1,669,248 Medium risk 13,305,014 11,713,212 Negotiable securities 8,737,874 202,392 8,535,481 Medium-high risk 334,512 247,227 Customer credit 44,991,109 27,207,004 1,725,575 16,058,530 High risk 726,336 697,288 Financial guarantees 880,741 2,929 82,772 795,041 TOTAL 48,402,197 46,511,338 Other contingent risks 2,348,919 5,287 134,980 2,208,652 Derivatives 516,114 47,835 468,279 Contingent commitments 10,989,833 830,167 172,996 9,986,670 Other exposure - - Maximum level of exposure to the The following analysis shows the ageing of past due and unpaid amounts of financial credit risk 70,324,638 28,045,387 2,557,350 39,721,901 assets, the value of which is not impaired at 31 December 2015 and 2014:

2014 DECEMBER 2015 MORTGAGE COLLATERAL OTHERS Other Total balance Secured by Personal 0 - 30 DAYS OVERDUE 4,454 4,837 47,745 secured sheet 2014 property Guarantee Thousands of euros loans 30 - 60 DAYS OVERDUE 2,590 521 16,390 Deposits with credit institutions 1,657,969 544,528 1,113,441 60 - 90 DAYS OVERDUE 3,716 91 5,695 Negotiable securities 8,733,941 202,392 8,531,549 Customer credit 44,413,903 26,731,882 2,781,347 14,900,674 Total 10,760 5,449 69,830 Financial guarantees 763,223 5,448 78,692 679,083 DECEMBER 2014 MORTGAGE COLLATERAL OTHERS Other contingent risks 1,973,306 7,941 115,356 1,850,009 0 - 30 DAYS OVERDUE 4,708 4,367 48,058 Derivatives 585,170 428,985 166,186 Contingent commitments 13,527,713 540,194 173,344 12,814,175 30 - 60 DAYS OVERDUE 12,526 862 10,728 Other exposure - - 60 - 90 DAYS OVERDUE 8,856 74 7,804 Maximum level of exposure to the Total 26,090 5,303 66,590 credit risk 71,655,226 27,285,465 4,324,644 40,045,117 Consolidated financial statements 2015 Bankinter 140

The following analysis shows the debt instruments for which impairment has (e) Significant reductions in the customer's capitalisation, which may cast doubt on been determined individually. There are no other financial instruments for which repayment of the financial burden. impairment has been determined individually (thousands of euros):

Debt instruments (f) Changes in debt. Risks Subject Excess over (g) Evolution and sustainability of cost structure. Total guarantee value (h) Verification and analysis of any credit event of the customer that might affect the Financial assets for which ability to pay the debt. impairment has been determined individually 993,574 59,776 Transactions originated as “no appreciable risk” 1,069 (i) Changes in the value of the guarantees. General treatment 454,445 Up to 6 months 154,870 Between 6 and 9 months 7,918 (j) Changes in the percentage of the Bank's debt with respect to the total debt. Between 9 and 12 months 16,356 More than 12 months 275,302 Non-performing loans and foreclosed assets Transactions secured with movable assets 538,060 59,776 Up to 6 months 94,408 13,455 The year 2015 was characterised by a progressive reduction of non-performing loan Between 6 and 9 months 11,492 1,516 balances. The monthly average of the recovery index (new/cancelled) for the financial Between 9 and 12 months 28,310 3,200 year has been higher than 94%, and it has shown a growing trend in the second half More than 12 months 403,850 41,605 of the year. The at-risk exposure at year-end stands at 2,039 million euros, 8.7% lower than at the close of the previous year.

An individual analysis of each credit asset is carried out on a yearly basis. The main This reduction in doubtful debts, together with the increase in lending, enabled the factors taken into account when calculating the impairment of each asset are as bank to reduce the non-performing loan ratio by 12.5% in the year, to 4.13% at the follows: end of December. Yet another year, Bankinter has continued to improve its recovery processes. (a) Verification and analysis of external ratings published on our customers. The portfolio of credit risk refinancing and restructuring at the end of 2015 reached (b) Analysis of financial statements. 1,325 million euros, considering as refinancing any modification to the credit risk conditions. The majority of refinancing has additional guarantees. (c) Evolution and analysis of their income statement, as well as the customer's ability to pay.

(d) Analysis and projection of cash flows. Consolidated financial statements 2015 Bankinter 141

Evolution of the monthly new and cancelled non-performing loans Evolution of doubtful balance and non-performing loan rate

4,000 4.98% 4.72% 4.28% 3,000 4.13%

3.24% 2,000 2.87% 2.46%

1,000 1.34% 0.36% 0 157 607 1,093 1,330 1,516 1,984 2,275 2,233 2,039 2007 2008 2009 2010 2011 2012 2013 2014 2015

l l % recovery Doubtful debts (Mill. €) l l Entries non-performing loans ratio l Recovery

Consolidated financial statements 2015 Bankinter 142

The portfolio of credit risk refinancing and restructuring at the end of 2014 reached Refinancing and restructuring policy 1,325 million euros, considering as refinancing any modification to the credit risk conditions. The majority of refinancing has additional guarantees. The Refinancing Policy follows the best practices covered in Circular 6/2012 of 28 September of Banco de España and letters of Banco de España of 30 April 2013, and The flow of non-performing loan balances has been as follows: in this respect the main goal is the recovery of all full amounts due, which involves the need to immediately recognise the amounts that are considered unrecoverable. Movement of at-risk exposure (includes contingent risk) 31/12/2015 31/12/2014 Var. % var. The refinancing of operations must take into account: Balance at the start of the period 2,232,732 2,275,370 -42,638 -1.87

Net new non-performing loans 39,384 145,601 -106,217 -72.95 ■■ An up-to-date and individualised analysis of the economic and financial situation of the borrowers and guarantors, as well as their capacity to make repayments. Write-offs 232,877 188,239 44,638 23.71 ■■ The situation and effectiveness of the guarantees provided. Balance at the close of the period 2,039,239 2,232,732 -193,493 -8.67 ■■ Experience with the borrower: sufficiently extensive history of compliance or, otherwise, of an equivalent amount of repayment of the principal. The gross balance of the portfolio of real estate assets at year-end stood at 531,348 ■■ Half-yearly review of the rating. million euros, with a reduction in the year of 54,482 million euros. ■■ Interruption of late-payment status. The refinancing or restructuring of operations that are not keeping up with payments does not interrupt the period of their The real estate assets are highly diversified in geographical terms and as property late-payment status, nor will it result in them being reclassified, unless there type, which makes them easier to sell. The volume of sales amounted to 260,585 is a reasonable certainty that the customer can keep up with their payments or thousand euros. new effective guarantees are provided and, in both cases, at least the ordinary outstanding interest charges are received. It is worth noting that the real estate portfolio does not include any properties ■■ The refinancing of operations, as well as the resulting impairment, will be currently in the development stage and that the proportion of rural land is very small; associated with its rating under one of the following categories: in the current situation, the market for both these products is far more limited. ■■ Normal refinancing: Those for which there is objective evidence rendering the Foreclosed assets 31-12-15 31-12-14 Variation % var. recovery of all full amounts due highly probable. Following on from this, the Balance at the start of the period 585,830 627,826 (41,996) (6.69) following factors will be taken into consideration: Net new non-performing loans (54,482) (41,996) (12,486) 29.73 Closing balance 531,348 585,830 (54,482) (9.30) o Maximum grace period of 12 months. Provision (213,061) (229,159) 16,098 (7.02) o Existence of a suitable repayment plan. In the case of operations with individuals structured via monthly payment instalments, a burden not Net balance of foreclosed assets 318,287 356,671 (38,384) (10.76) exceeding 50 per cent will be taken into account. Consolidated financial statements 2015 Bankinter 143

o Incorporation of guarantors of doubtless solvency, or of new effective ■■ The capacity to pay the debt of all operations. guarantees. The value of the tangible security will be the minimum amount between the deed value and the appraisal value, to which the following ■■ Payment of instalments from the refinancing: reduction will apply: o Property mortgage with monthly instalments: minimum of 6 months. § Main home of the holder: 20% o Rest: minimum of 12 months. § Rural properties for their polyvalent operations, branches, warehouses o Payment of 10% of the refinanced amount. and premises: 30% § Other completed housing (second property, developer property etc.): ■■ Property mortgage: 40% § Developable pieces of land and plots (property development): 50% o Burden (lower than 50%). o Grace period (under 30 months). ■■ Doubtful refinancing: Operations where there is evidence of the vulnerabilities o Refinancing number. in the capacity of the borrower to pay will be qualified thus. Following on from o Financing of instalments. this, the following factors will be taken into consideration: o Positive experience subsequent to the refinancing.

o The failure to provide new effective guarantees or to perceive all outstanding ■■ Companies: interests. o The assignment of grace periods for capital repayment above 30 months. o Grace period (under 30 months) o The origin of previous refinancing or restructuring. o Incorporation of sufficient effective guarantees. o Interest payment. All of this applies unless there is evidence of sufficient ability of the borrower to o Refinancing number. address their commitments in the time and manner contractually agreed. o Financing of instalments. o Positive experience subsequent to the refinancing. ■■ Substandard refinancing: They will be all the cases not mentioned in the two previous classifications. According to the mentioned Circular, regarding the reporting that must be carried out, it is possible to differentiate between: Policy on accounting reclassification ■■ Refinancing operation The reclassification between refinancing categories to qualify as a standard ■■ Refinanced operation refinancing (and therefore without provision) requires an exhaustive review of the ■■ Restructured operation equity and financial situation that reaches the conclusion that the holder is not likely ■■ Renewal operation to have financial difficulties. In this respect it is essential to consider: ■■ Renegotiated operation Consolidated financial statements 2015 Bankinter 144

■■ Refinancing transaction: transaction which, irrespective of the borrower or ■■ Renewal transaction: transaction entered into to replace another previously security held, is granted or used for economic or legal reasons relating to financial granted by the Bank, without the borrower having or being seen as likely to difficulties -current or foreseeable- of the borrower(s) in order to cancel one or have financial difficulties in the future; i.e. when the conditions are amended for more transactions granted by the Bank or by other group institutions to the reasons other than refinancing borrower(s) or to one or more other companies of the borrower’s economic group, or whereby such transactions are brought totally or partially up to date with ■■ Renegotiated transaction: transaction where the financial conditions are amended payments, in order to help the borrower(s) under the cancelled or refinanced without the borrower having or being seen as likely to have financial difficulties transactions to pay their debts (principal and interest) because they cannot, or it is in the future; i.e. when the conditions are amended for reasons other than thought that they will not be able to comply in time and form with its conditions. restructuring.

■■ Refinanced transaction: a transaction that is brought totally or partially up to date The Group currently has live refinanced loans amounting to 1,325 million euros. This with payments as a consequence of a refinancing transaction carried out by the figure includes both regular status loans and substandard and delinquent balances. Bank or another institution in its economic group. This figure represents 2.68% of the Credit Risk. Out of the refinanced amount, 207 million euros correspond to developer risk. In individuals, the Group has refinanced ■■ Restructured transaction: a transaction in which, for economic or legal reasons a total of 377 million euros. relating to current or foreseeable financial difficulties of the borrower(s), the financial conditions are amended in order to help the borrower(s) under the Below is the reconciliation of the opening and closing balance sheets of refinanced cancelled or refinanced transactions to pay their debts (principal and interest) and restructured assets and the balance of associated impairment provisions, showing because they cannot, or it is thought that they will not be able to comply in time separately for both items the movements for the risk categories normal, substandard and form with its conditions, even if such amendment is envisaged in the contract. and doubtful: In any case, the following transactions shall be considered to be restructured: transactions involving a ‘haircut’ or debt forgiveness or where assets are accepted in part-payment of the debt, or where the conditions are amended to extend the maturity, change the repayment schedule to reduce the amount of the instalments in the short term or reduce their frequency, or establish or extend a grace period for principal, interest or both, except when it can be shown that the conditions are amended for reasons other than the borrower’s financial difficulties and are analogous to those applied in the market at the date of the amendment to transactions granted to customers with a similar risk profile. Consolidated financial statements 2015 Bankinter 145

TOTAL NORMAL TOTAL SUBSTANDARD TOTAL DOUBTFUL TOTAL DECEMBER 2014 REFINANCED PORTFOLIO 31 Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage DECEMBER 2015 (thousand of €) Public Administrations 8,820 0 0 0 0 8,820 0 Corporate entities and 465,221 169,709 12,913 555,432 270,010 1,190,362 282,923 enterpreneurs Individuals 213,953 108,336 2,696 122,297 17,245 444,586 19,941 TOTAL 687,994 0 278,045 15,609 677,729 287,255 1,643,768 302,864

ADDITIONS TO NORMAL ADDITIONS TO SUBSTANDARD ADDITIONS TO DOUBTFUL TOTAL ADDITIONS

ADDITIONS (thousands of €) Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage

Public Administrations 0 0 0 0 0 0 0 Corporate entities and 144,565 81,956 9,307 95,188 47,401 321,709 56,708 enterpreneurs Individuals 68,497 14,623 387 40,048 10,229 123,168 10,615 TOTAL 213,062 0 96,579 9,693 135,236 57,630 444,877 67,323

REMOVALS FROM NORMAL REMOVALS FROM SUBSTANDARD REMOVALS FROM DOUBTFUL TOTAL REMOVALS

REMOVALS (thousands of €) Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage

Public Administrations 8,820 0 0 0 0 8,820 0 Corporate entities and 344,600 90,013 7,466 129,673 62,819 564,285 70,285 enterpreneurs Individuals 137,279 25,385 645 27,981 3,532 190,645 4,178 TOTAL 490,699 0 115,398 8,111 157,654 66,351 763,750 74,463

TOTAL NORMAL TOTAL SUBSTANDARD TOTAL DOUBTFUL TOTAL DECEMBER 2015 REFINANCED PORTFOLIO 31 Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage Gross amount Specific coverage DECEMBER 2014 (thousand of €) Public Administrations 0 0 0 0 0 0 0 Corporate entities and 265,186 161,652 14,753 520,948 254,592 947,786 269,345 enterpreneurs Individuals 145,170 97,574 2,438 134,364 23,942 377,108 26,380 TOTAL 410,356 0 259,226 17,191 655,312 278,534 1,324,894 295,725 Consolidated financial statements 2015 Bankinter 146

Structural and market risks The Balance Sheet Management Unit, which reports to the General Capital Markets Division, has the function of measuring and managing the Institution’s structural The Board of Directors decides the strategy and policy of the Institution regarding risks. “Structural Risks” and “Market Risk”, and it delegates their management, monitoring and control to various Bodies in the Institution. It also sets the profile of risks to be The Market Risk Directorate, which reports to the Chief Risks Officer, has the accepted by the Institution, establishing maximum limits that it delegates to these independent function of controlling them. bodies and that are reviewed annually. Structural liquidity risk The general policy of the Group regarding the management and control of “Structural Risks” (interest and liquidity risk) and “Market Risk” is intended to neutralise the Structural liquidity risk is associated with the Institution's capacity to handle impact of fluctuations in interest rates, in the main variables of the market and in the the payment obligations it takes on and to finance its investment business. The very structure of the Institution's Balance sheet in the Income Statement, adopting the Institution actively monitors its liquidity situation and its projection, as well as the most suitable investment and hedging strategies. actions to execute both in normal market situations and in exceptional circumstances due to internal causes or market behaviours. For this purpose, it develops the most suitable systems for measuring structural and market risks with the aim of providing information on the exposure that the The management of this risk is the ALCO's responsibility by delegation of the Board Institution has to these risks, as well as regarding any possible deviations that may of Directors. occur with respect to the established limits and procedures. The principles, strategies and practices for liquidity management are set out in the Thanks to the policies pursued, the Institution presents no significant exchange rate Liquidity Planning Framework and they ensure that the Institution has sufficient risk. liquidity to be able to meet its daily liquidity obligations and face a period of liquidity tensions. The strategic principles on which the liquidity management is based are as The Board of Directors delegates to the Asset and Liability Committee (ALCO) the follows: constant monitoring of the decisions made on the structural risks of the balance sheet (interest and liquidity risk), the market risk and the exchange rate of the institutional ■■ Reducing dependence on wholesale markets for funding the business, by seeking positions of the Bank, as well as the establishment of the financing policies. In balance growth in retail funds addition, and on an annual basis, it reviews, approves and delegates to the ALCO the applicable limits for the management of the aforementioned risks. The Treasury and ■■ Diversification of wholesale financing sources, both from the point of view of Capital Market execute the decisions taken by ALCO in relation to the institutional instruments and markets, and maintenance of a balanced maturities profile roles of the Bank.

To exercise these functions, the most appropriate financial instruments at any given time are used, which include interest-rate, exchange-rate and equity derivatives. The financial instruments with which trading is undertaken must, in general, be sufficiently liquid and be associated with hedging instruments. Consolidated financial statements 2015 Bankinter 147

With the objective of complying with the foregoing principles, the following strategic To respond to the demand for short term titles, the Bank used programmes of liquidity management lines have been defined: short term securities, primarily on the domestic market, with its promissory note programme. The balance of promissory notes placed on the wholesale market was ■■ Continue to reduce the commercial gap 547 million on 31 December.

■■ Be present in wholesale markets, issuing on a regular basis in accordance with the The Bank has several tools for analysing and monitoring the short and long-term needs and market opportunities liquidity situation. These are static and dynamic tools. In addition, Back-testing is also conducted on the projections made. The Risk Appetite Framework also reflects the ■■ Offer maximum transparency to investors, regularly providing information about importance of the liquidity and the monitoring of the main ratios. the Institution The Bank has several tools for analysing and monitoring the short and long-term ■■ Ensure an appropriate wholesale maturity profile, avoiding concentrations liquidity situation. These are static and dynamic tools. In addition, Back-testing is also conducted on the projections made. ■■ Maintain a sufficiently large buffer of liquid assets to cover a possible shutdown of wholesale markets One of the analyses conducted to control and monitor liquidity is the liquidity gap, which shows information about the distribution of the balances and cash flows of During 2015, the commercial gap (difference between investment and customers' the asset and liability positions of the balance sheet between different time frames resources) was reduced by 2,430 million. As a result, the percentage of credit depending on the expected date of completion or liquidation and in accordance with investment that is financed by customer resources rose from 78.3% to 83.5%. On a series of assumptions based on the historical performance of these products. These international markets, 2,750 million euros were placed in mortgage bonds at 5, 7 and assumptions are reviewed on a regular basis and, when necessary, supported by 10 year terms under the fixed income programme registered with the CNMV, which models based on historical series. also diversifies the Bankinter debt maturities and gives it a solid liquidity position. The following table shows the liquidity gap at year-end 2015. The information provided by the liquidity plan is static, and it does not reflect the foreseeable financing needs, as it does not include behavioural models of the asset items, that is, the prepayment of mortgage loans and the renewal of lines of credit or of liability items such as the renewal of fixed-term deposits, among others. Consolidated financial statements 2015 Bankinter 148

Figures December 2015 in millions of euros At sight 1D TO 1M 1M TO 3M 3M TO 12M 12M TO 5Y > 5Y TOTAL ASSETS Credit investment 1,947 3,178 7,457 13,187 27,005 52,774 Deposits in credit institutions 0 0 0 1,536 1,536 Credit to customers 1,947 3,178 7,457 13,153 25,057 50,792 Others 0 0 0 34 412 446 Fixed Income Portfolio 213 69 1,451 3,641 3,675 9,049 Held-for-trading Portfolio 65 4 843 1,024 502 2,438 Available-for-sale Portfolio 42 63 213 1,501 1,486 3,305 Portfolio of investments held to Maturity 107 1 394 1,116 1,687 3,305 Other Assets 816 0 0 0 3,880 4,696 Total Assets 2,977 3,246 8,908 16,828 34,560 66,519

LIABILITIES Liabilities Fixed Income Portfolio 58 0 345 990 512 1,905 Held-for-trading Portfolio 58 0 345 990 512 1,905

Financial Liabilities at Amortised Cost 22,864 4,016 1,351 8,098 7,374 9,588 53,292 Deposits in credit institutions 0 2,336 120 373 3,592 67 6,488 Customer deposits 22,864 1,299 1,202 6,743 980 0 33,089 Debt securities 0 382 29 981 2,802 8,396 12,590 Others 0 0 0 0 0 1,125 1,125

Other Liabilities 465 0 0 0 2,336 2,801

Own Funds 0 0 0 0 3,658 3,658

Total Liabilities and Own Funds 22,864 4,539 1,351 8,443 8,364 16,094 61,656

TOTAL LIQUIDITY GAP -22,864 -1,562 1,895 465 8,464 18,466 4,863 Consolidated financial statements 2015 Bankinter 149

With regard to the contingent liabilities, which is reflected in the following table, the ■■ Wholesale financing concentration ratios: With the aim of not subjecting fact that 9,955 million euros are shown as being at sight does not mean that they will Bankinter to stress as a result of a possible sudden shutdown of the wholesale be demanded in the immediate future. Credit accounts, the main component of the markets, limits are established on the short-term wholesale funding, as well as on amount, are made available to customers depending on their financing needs over the concentration of issue maturities. time.

■■ Figures at In structural, in addition to the Loan to Deposits ratio, the regulatory definition of December 2015 Demand 3M a 12M a NSFR is actively followed. in million euros deposits 1D a 1M 1M a 3M 12M 5Y > 5Y TOTAL Contingent In addition to the limits established by the Board, monitoring is carried out on Liabilities the evolution of the gap and liquidity, as well as obtaining information on and Financial guarantees and analysing the specific situation of balances resulting from sales transactions, letters of credit 571 135 144 254 182 22 1,308 wholesale maturities, interbank assets and liabilities and other financing sources. Commitments These analyses are performed both under normal market conditions and simulating available by third parties 9,384 9,384 different scenarios of liquidity needs that could stem from different business conditions or market variations. To control the liquidity risk, in addition to the foregoing, the Market Risks Directorate verifies the compliance with the limits set by the Board and delegated to the persons Bankinter has implemented a liquidity contingency plan that specifies the persons responsible for their management and the ALCO. The calculation of limits is carried responsible and the lines of action to take in the event of adverse conditions in the out by the Market Risks Directorate based on the information prepared for the financial markets in order to obtain liquidity. This plan identifies three levels of alert: different regulators. minor problems, serious problems and severe liquidity crisis. Besides including the procedure for identification, it sets forth the way that each of the affected persons There are three broad types of limit: should act in each of the scenarios. The activation of the contingency is decided by ALCO. The alerts included in the contingency plan are followed by both the Balance ■■ Determination of the Liquidity Buffer: For this purpose, the Bank uses both the Sheet Management Unit and the Market Risks Directorate, which notify the members definition of regulatory LCR and a similar ratio extended to ninety days and with of ALCO in the event of deterioration of the objective conditions identified. a definition of liquid assets in accordance with those accepted by the European Central Bank as collateral for liquidity. Another reference for calculating the Structural interest rate risk liquidity buffer is the schedule of upcoming maturities of wholesale issues over the following months. The structural interest rate risk is the exposure of the Institution to variations in the market interest rates, deriving from the different timing structure of maturities and repricing of the various items of the Overall Balance Sheet.

Bankinter actively manages this risk with the aim of protecting its financial margin and preserving its financial value when faced with interest rate variations. Consolidated financial statements 2015 Bankinter 150

To control the exposure to the structural interest rate risk, the Bank has established a b. Sensitivity of the Economic Value: structure of limits that is reviewed and approved on an annual basis by the Board of Directors, in accordance with Bankinter’s strategies and policies in this regard. It is a measure that is supplementary to the previous two and it is calculated monthly. It enables the exposure of the Bank's economic value to interest rate risk to be Bankinter has tools to control and monitor the structural interest rate risk. Below quantified, and it is obtained as the difference between the net present value of the are specified the main measurements used by the Bank that allow managing and items that are sensitive to interest rate curves in different scenarios and the curve controlling the interest-rate risk profile approved by the Board of Directors: listed in the market at each analysis date. a. Sensitivity of the Financial Margin: The Board of Directors establishes on a yearly basis a reference in terms of sensitivity to the Economic Value for variations of 200 parallel basis points in the market interest The exposure of the financial margin in the event of different scenarios of interest rate rates. The sensitivity in this scenario is measured, controlled and submitted to the variation and for a time frame of 12 months are measured monthly, using dynamic ALCO. measures. The sensitivity of the financial margin is obtained as the difference between the financial margin projected with the market curves at each analysis date The sensitivity of the Economic Value under parallel movements of 200 basis points, and the financial margin projected with the interest rate curves altered in different calculated following regulatory principles, at the close of 2014 was placed at +1.3%. scenarios, both of parallel movements of rates and changes in the slope of the curve. The estimated sensitivity at the close of 2015 is of +6.8%

The Board of Directors establishes on a yearly basis a reference in terms of sensitivity Market risk to the financial margin for variations of 100 parallel basis points in the interest rate curves up to the term of 12 months. The sensitivity in this scenario is followed by the The Board of Directors delegates proprietary trading in the financial markets to the ALCO. General Directorate of Treasury and Capital Markets, which acts through its Trading Area with the purpose of making the most of the trading opportunities that arise, The exposure to interest rate risk of Bankinter's interest margin in the face of using the most appropriate financial instruments at any given time, including interest variations of 100 parallel basis points in the market interest rates is approximately and exchange rate derivatives and equity derivatives. The financial instruments with +7.4% for rises and -0.4% for reductions, both for a 12-month horizon, on the Bank's which trading is undertaken must, in general, be sufficiently liquid and be associated management assumptions. Given the current level of rates and taking into account with hedging instruments. The risk that may arise from managing the institution’s that a floor is applied at 0%, as recommended by the supervisory authorities, the own accounts is associated with variations in interest rates, stock market prices, sensitivity in the face of the rise and reduction of rates is significantly different. exchange rates, volatility and credit spreads. The reduction scenario is similar to the one of a drop of the curve, as the short-term interest rates remain at 0% and it is only the 12-month Euribor curve that experiences The Board of Directors delegates to the ALCO the continuous monitoring of the a drop. proprietary trading activities carried out by the Treasury's Trading Area and it establishes maximum limits for the authorisation of the possible excesses that may occur in this activity. Consolidated financial statements 2015 Bankinter 151

The Market Risks Directorate, which reports to the CRO, independently measures, Total VaR 2015 Total VaR 2014 monitors and controls the Institution's market risks and the limits delegated by the Millions of Euros Last Millions of Euros Last Boards. VaR Interest Rate 14.75 VaR Interest Rate 3.44

The market risk is mainly measured using the “Value at Risk ” method (VaR), VaR Equity 0.53 VaR Equity 0.36 considered both globally and segregated for each significant risk factor. The limits in VaR Exchange Rate 0.06 VaR Exchange Rate 0.02 VaR terms are supplemented by other measures, such as Stress Testing, sensitivities, VaR Volatility Rate 0.03 VaR Volatility Rate 0.03 stop loss and concentration. Credit VaR 0.00 Credit VaR 0.00 14.84 3.49 A description of the method used for measuring the main market risk indicators follows. Trading VaR 2015 Trading VaR 2014 Millions of Euros Last Millions of Euros Last Value at Risk (VaR) VaR Interest Rate 0.37 VaR Interest Rate 0.54 VaR Equity 0.24 VaR Equity 0.10 “ Value at Risk ” (VaR) is defined as the maximum expected loss in a given portfolio of VaR Exchange Rate 0.06 VaR Exchange Rate 0.02 financial instruments, in normal market conditions, for a specific confidence level and VaR Volatility Rate 0.03 VaR Volatility Rate 0.03 time horizon as a result of variations in market prices and variables. Credit VaR 0.00 Credit VaR 0.00

The VaR is the principal indicator used on a daily basis by Bankinter to comprehensively 0.48 0.58 and globally measure and control the exposure to the market risk per the interest rates, equity, exchange rates, volatility and credit. Sales available VaR 2015 Sales available VaR 2014 Millions of Euros Last Millions of Euros Last The method used to measure the VaR is "Historical Simulation", which is VaR Interest Rate 14.56 VaR Interest Rate 3.28 based on the analysis of potential changes in the value of the position using, for this VaR Equity 0.32 VaR Equity 0.25 purpose, historical movements in the individual assets forming it. The calculation of VaR Exchange Rate 0.00 VaR Exchange Rate 0.00 VaR is made with a 95% confidence level and a time horizon of one day, although additional monitoring is carried out with other confidence levels. Credit VaR 0.00 Credit VaR 0.00 14.63 3.27 Below are provided comparative VaR data by risk for the Bank's positions in 2015 and 2014, both in total values and differentiated by portfolio:, Confidence level 95%, time horizon 1 day Consolidated financial statements 2015 Bankinter 152

The year 2015 was characterised by strong variations in the interest rate curves Below follows information on the results of one of the most extreme stress scenarios that caused a greater number of extreme scenarios. This, together with the higher for financial years 2015 and 2014: position, has resulted in an increase of VaR by applying a more aggressive scenario than in 2014. Stress Testing 2015 Stress Testing 2014 Stress Interest Rate 42.10 Stress Interest Rate 33.09 Given the instability of recent years, Bankinter maintained the limits from the previous year in VaR terms. Stress Equity 7.01 Stress Equity 5.07 Stress Exchange Rate 0.40 Stress Exchange Rate 1.23 Moreover, a monthly monitoring of the VaR is carried out of the portfolio positions of Stress Volatility 1.16 Stress Volatility 0.20 the subsidiary Línea Directa Aseguradora using the historical simulation methodology. Stress Credit 0.00 Stress Credit 0.00 The VaR of the Línea Directa Aseguradora portfolio was, under the same hypotheses, Stress Credit-Relative 5.52 Stress Credit-Relative 8.19 2.39 million euros at the close of December 2015. The possible risk that may be Total Stress 56.19 Total Stress 47.78 incurred by the subsidiary Bankinter Luxembourg is also monitored, applying the same method as that applied to the parent, that is, VaR by historical simulation. In 2015, the VaR has been estimated at 0.10 million euros. *The information on Stress Testing corresponds to the “Held-for-trading portfolio” and Stress testing “Available-for-sale portfolio”

The Stress testing or analysis of adverse scenarios, is a complimentary test to the VaR. At year-end 2015 the total level of interest rate Stress Testing had increased with Estimates from Stress testing quantify the potential loss that extreme movements in respect to 2014, as a consequence of an increase in the Available-for-Sale portfolio in risk factors to which a portfolio is exposed could cause to the portfolio value. public debt, in spite of a lower duration portfolio where a stress scenario with a rise in rates and a drop of slope is penalised further. Every year, the Board of Directors approves an extreme scenario based on significant movements in interest rates, stock market prices, exchange rates and volatility, as Applying the same scenarios to the positions of the Línea Directa Aseguradora well as a series of maximum references regarding these variations for each type of portfolio at the close of 2015, stress totalled 33.48 million euros. Applying the same risk. In addition, estimates are made using other scenarios that replicate different scenarios to the positions of the Bankinter Luxemburgo portfolio at the close of 2015, historical crisis situations and other relevant current market situations. stress totalled 0.79 million euros.

■■ In 2015, the stress scenarios for volatility were updated, toughening them, to adapt them to the events observed in the market for this type of risk factors. Consolidated financial statements 2015 Bankinter 153

Operational risk ■■ In order to explore all the institution's activities to inventory operational risks, the business units are established as the analysis unit such that, after analysing the Operational risk is defined as the possibility of suffering losses due to failures risks of the units, the institution's total risks are arrived at by aggregation and of processes, people or internal systems, or due to external events. Within this consolidation. definition, legal risks are included, and strategic and reputational risks are excluded. In general terms, it concerns risks which are encountered in processes and generated Bankinter's Management Framework for Operational Risk is based on the following internally by persons and systems, or which are a consequence of external agents main elements: such as natural disasters. ■■ Identification and evaluation of risks by developing risk maps estimating the The model to manage operational risk that Bankinter follows is known as the 'standard severity level of the risk, evaluating the appropriateness of its control mechanisms method' according to solvency regulations in force. This method requires the existence and reflecting action plans for mitigating these risks. of certain systems of identification, measurement, and management of operational risks. Its use also requires prior authorisation by Banco de España and being subject ■■ Recording of loss events with the associated management information, sorted and to its annual audit. Moreover, Bankinter ensures access to best sector management classified in accordance with Basel recommendations. practices by participating in the Consorcio Español de Riesgo de Operacional (Spanish Operational Risk Consortium), a private forum of financial institutions to exchange ■■ Drawing up of Continuity and Contingency Plans stipulating the alternative experiences in this field. procedures to normal operations aimed at restoring critical services in the event of unforeseen interruptions. Principle of action and Management Framework ■■ Generation and dissemination of management information suited to the needs of With a view to achieving an adequate system for managing Operational Risk, each governing body that has responsibilities in managing operational risk. Bankinter has set forth the following basic principles of action:

■■ The main goal is to identify and preventively mitigate the major operational risks, seeking to minimise any possible associated losses.

■■ Systematic procedures are defined for assessing, analysing, measuring and reporting risks and generating appropriate action plans to control them. Consolidated financial statements 2015 Bankinter 154

Governance structure - Monitoring projects for mitigating significant operational risks associated with launching and selling products and services. Bankinter follows a decentralised model in which the final responsibility for managing Operational Risk falls on the respective business and support units. ■■ Operational Risk: Reporting to the Risks Directorate, the Operational Risk unit undertakes the following main functions: For governance purposes, the following control bodies and general lines of responsibility have been established: - Promoting the management of operational risks in the various areas and units, encouraging risk identification, allocation of responsibility, establishment ■■ Board of Directors: It approves the policies and the management framework, of controls, generation of indicators, drawing up mitigation plans, regular establishing the level of risk that Bankinter is willing to undertake. review and the action to be taken in the event of new significant losses or risks. ■■ Risk Committee: A governing body in which Senior Management is represented and which undertakes the following functions in managing operational risk: - Equipping areas and units with the methodologies, tools and procedures necessary for managing their operational risks. - Promoting the implementation of active management policies for Operational Risk. - Promoting the drawing up of contingency and business continuity plans that are appropriate and in proportion to the size and activity of the Institution in - Monitoring the significant operational risks and the evolution of its the units that so require. mitigation plans. - Ensuring that operational losses occurring in the Institution are recorded - Resolving conflicts of responsibility and deciding on the proposals made by correctly and in full. Operational Risk. - Providing the organisation with a uniform vision of its exposure to operational ■■ New Products Committee: A governing body in which Senior Management risk, identifying, integrating and assessing the operational risks in existence. is represented and which undertakes the following functions in managing operational risk: - Providing information on operational risk to be forwarded to regulators, supervisors and external institutions. - Overseeing compliance with procedures for identifying and evaluating operational risks associated with the launch of new products and new lines ■■ Business Units: With the following functions: of business. Authorising or declining, if the case, the sale of products with relevant operational risks. - The management of the unit's operational risks and specifically, the identification, assessment, control, monitoring, analysis and mitigation of - Reviewing operational risks associated with the sale of existing products, the operational risks on which it has the capacity to act. their sales policies and the materialisation of these risks in relations with customers, partners and suppliers. Consolidated financial statements 2015 Bankinter 155

- The recording of incidents and communication of the operational losses Percentage breakdown by line of business produced in the course of its activity. 80 71% - The study, definition, prioritisation and financing of mitigation plans of the 70 operational risks under its management. 60 50 44% - The maintenance and testing of the business continuity plans for which the 40 unit is responsible. 27% 30 23% 20 With regard to loss events databases, Bankinter's operational risk profile is 13% 11% 10 4% 4% summarised in the charts below: 1% 3% 0

Percentage breakdown by amount intervals Comm. B. Brokerage Retail B. Asset manage- Trade & sales ment 80 69% l Events 70 l Cost 60 50 38% 40 36% 30 21% 20 14% 11% 10 5% 2% 3% 1% 0

<1000 1,000-3,000 3,000-25,000 25,000-100,000 >100,000 l Events l Cost Consolidated financial statements 2015 Bankinter 156

Insurance in managing operational risk The compliance function reports to the Board on a permanent basis and does so mostly through the Audit and Compliance Committee. Bankinter uses insurance as a key element to manage certain operational risks, thus complementing the mitigation of risks where their nature makes this advisable. The last tier of governance consists of the internal corporate committees, among them the Products Committee, responsible for the analysis of the Bankinter Group's To this end, the Insurance Area, together with the different areas in Bankinter marketing of products and services. and taking into account the operational risk assessments and the historical losses, assesses the advisability of altering the coverage perimeter of the insurance policies The organisational model is articulated around the Compliance Area, included in the for the different operational risks. Institution's General Secretariat.

Examples are the insurance taken out with various companies of recognised solvency Reputational risk management, referring to the perception that the different for contingencies affecting the Bank’s property (earthquake, fire, etc.), internal or stakeholders with which the Company relates have of it, is performed more directly external fraud (robbery, embezzlement, etc.), employees’ civil liability, etc. from within the Company Reputation area, which is included within the External communication department. The primary responsibility for the management of Reputational and compliance risk reputational risks is shared between the compliance area, the external communication area and the different business and support units that carry out the activities that give In the field of reputational risks and compliance risks, the Board is the body rise to the risk. responsible for ensuring compliance with the Group's general code of conduct, the overall policy for the prevention of money laundering and the financing of terrorism The responsibility for developing policies and for applying the corresponding controls and the product and service marketing policy. falls upon the Compliance area, in the case of compliance risk, this area also being responsible for advising the senior management on this matter and for promoting The risk committee assesses reputational risk within the scope of its activities and a culture of compliance. This is all within the framework of an annual programme decisions. The Audit and Compliance Committee has entrusted, among others, the whose effectiveness is assessed periodically. functions of checking compliance with legal requirements, supervising the effectiveness of the internal control and risk management systems, monitoring compliance with the This area directly manages the basic components of these risks (money laundering, Group's code of conduct in the share markets, of the money laundering prevention codes of conduct, marketing of products, etc.) and ensures that the rest is duly manuals and procedures and, in general, of the Bank's governance and compliance addressed by the corresponding unit of the Group, and has the appropriate control rules and making the proposals necessary for their improvement. It is also entrusted and verification systems established for this purpose. with the function of reviewing the compliance of whatever actions and measures arise as a consequence of the monitoring and control administrative authorities' reports or The proper execution of the risk management model is supervised by the area of activities. overall risk control and internal validation. Furthermore, as part of its functions, internal audit performs the necessary tests and reviews to check that the standards and procedures established in the Group are complied with. Consolidated financial statements 2015 Bankinter 157

46. Information required by Law 2/1981 of 25 March on dMortgage The key elements of the risk policies for this product are: Market Regulation and Royal Decree 716/2009 of 24 April implementing certain aspects of said law- Automatic authorisation and discrimination by rating.

The Board of Directors of Bankinter declares that the bank has policies and procedures ■■ In home mortgage loan operations the maximum authorisation is sought via in place to carry out its business in the mortgage market. The Board of Directors is automatic systems. responsible for compliance with all mortgage market regulations and as such has approved these policies and procedures. ■■ Bankinter has an internal rating model, developed and improved over the course of the last few years, based on statistical systems in accordance with solvency The Control and Risk Management Framework is the document in which on a yearly rules. The acquisition of a rating for each of the operations involves a specific non- basis the Board of Directors sets out the basic principles in terms of Risk Policy for payment probability, which is estimated in accordance with historical behaviour each of the business sectors. The Board also approves a Responsible Lending Policy, and projections of future scenarios. The acquisition of a rating for each of the in accordance with the provisions of the Transparency Act, which sets forth the operations is associated with a specific non-payment probability in accordance principles that the Institution has always applied in this field. with historical data and is the main indicator of the quality of an operation. The rating is the fundamental variable in the automatic authorisation and a relevant The Policies regarding the granting of mortgage loans include, among others, the element in the manual decision making of authorised operations. following criteria: Customer classification and payment capacity ■■ The ratio between the amount of the loan and the appraisal value of the property being mortgaged, as well as the existence of other complementary guarantees. ■■ Operations are accepted based on the personalised study of customers, the rating, economic capacity and customised prices according to the customer's social ■■ Selecting the valuation institutions. economic profile.

■■ The ratio between the debt and the borrower’s income, and verification of the ■■ The maximum burden that the customer may take on must always be taken information provided by the borrower and its solvency. into account. The following information must be available in order to make this calculation: Servicing of all debts and their recurring income (extraordinary income should not be taken into account). Thus a check is carried out to ascertain whether the final disposable income is enough to meet our financing and the usual expenses. The documentation upon which the calculation of the burden of the operation is based is fiscal, and must be as up-to-date as possible. Consolidated financial statements 2015 Bankinter 158

Expected return. Type of asset

■■ The expected return from the customer requesting a mortgage operation is one ■■ The property subject to financing must be located at consolidated areas, urban of the variables taken into account in the automatic authorisation. Starting from locations, where there must be a property market with extensive supply and a sufficient quality of risk, calculated in terms of rating, operations are accepted demand. taking into account the return deriving from both the mortgage and from the linked products. Standardisation of the mortgage process

Financing the main home and second home. ■■ Standardisation is of vital importance in order to achieve a process where efficiency is its core element, most notably in retail banking. ■■ The Bankinter mortgage loan policy is intended for financing main homes and second homes, not investment financings. ■■ The total management of the process, as well as the coordination with all acting parties (mostly agencies and appraisal companies) is entrusted to a specialised LTV (Loan to Value, relationship between the amount of the loan and the property). department, which is in charge of establishing the procedures, applications, organisation and control of the process. Thus, the process is guaranteed to be ■■ The general policy of the bank is the financing of property up to 80% LTV. In undertaken correctly, with an optimum level of customer service and an excellent operations corresponding to customers with a high social economic profile, with credit quality of mortgage operations. a high capacity for repayment and solvency, a higher LTV will be exceptionally permitted. The guarantee must be correctly valued, both when the operation is Independent appraisal process accepted and throughout its life. ■■ The appraisal process is completely independent of the Commercial network. It is ■■ In the acceptance, the value of the guarantee will be determined by an assessed carried out in a centralised way and the appraisal company designated for each appraisal or the purchase value executed by deed, the lesser of the two, whereby appraisal is selected at random. This way there is a guarantee that the transactions there may not be a considerable difference between them. carried out by a branch have been assessed by different appraisal companies.

Non-residents Monitoring of the property market

■■ In these operations the required burden ratio is more demanding. In addition, ■■ Official reports to monitor the value on the property market are periodically financing must be lower (therefore, requiring greater coverage), whereby the obtained. The value of the mortgage guarantees is updated when the appraisals actual contribution of resources carried out by the customer must be verified. reach a certain age in accordance with the current regulation.

Consolidated financial statements 2015 Bankinter 159

Multicurrency By way of sales support the Bank relies on:

■■ Given the volatility of the portfolio linked to the currency, there is a need for ■■ The branch network, which has a financial incentive to refer possible interested specific monitoring and control. A contingency plan will be determined which buyers. takes into account the decisions to be made in the event of a strengthening of the currency, which may result in a decrease of mortgage guarantees. ■■ Its own property portal on the Bank's website: https://www.bankinter.com/www/ es-es/cgi/ebk+inm+home Policy in sale of foreclosed assets ■■ The assets are published on the main national portals. Prior to foreclosure, the team of specialised professionals forming the Real Estate Assets Unit has as its initial task the in-situ inspection of the property in order to ■■ Its own property magazines, by type of property and geographical location. perform a technical analysis which covers: characteristics, type, description and condition of the property, as well as a study of the market and of prices in the area. ■■ Sales service call centre.

The selling prices are set centrally based on objective criteria and they are reviewed There is an active policy aimed at studying the possibilities of disposing of the periodically to ensure that they are in line with the market, following an active policy portfolio as a whole or in batches of foreclosed assets. of managing property as quickly and efficiently as possible. Land and works in progress For the sale of real estate assets, the Bank has a network of external collaborators specialising in the property market. These collaborating specialists are selected Due to the highly restrictive risk policy on financing for property developers, the individually based on criteria of proximity, local knowledge and product suitability. amount for foreclosed land is very low in relation to the size of the Bank and The effectiveness of this network is very closely monitored, with daily contact and particularly in comparison with the banking sector as a whole. Most of the foreclosed evaluation of the level of sales and commitments. land is urban and, therefore, does not require urban management.

Knowing the property developers, the size of the developments and the risk policy followed have enabled us to support developers to, at least, ensure that the financed projects are completed. Therefore, there are practically no developments in progress among the foreclosed assets. In any case, the policy pursued in managing land is aimed at establishing controls to prevent impairment of the value of the asset and improving its condition to ensure a quick sale. Consolidated financial statements 2015 Bankinter 160

Specific examples of these procedures include: 31 December 2015:

■■ The selection and control of specialist providers for resolving planning issues Updated Nominal value with land and unfinished developments, accepting budgets and monitoring their value execution 1 Total loans 27,265,556 2 Mortgage participations issued 1,368,196

■■ Supervision and monitoring of the procedures for obtaining the necessary sale Of which: Loans retained on the statement of financial 762,128 permits from official bodies or municipalities position 3 Mortgage transfer certificates issued 1,828,728 ■■ Proposing the analysis of development viability studies to investors and property Of which: Loans retained on the statement of financial 1,734,248 promoters position 4 Mortgage loans pledged as security for funds received Policy on financing granted to problematic property developers 5 Loans covering issues of mortgage bonds and covered bonds 24,068,632 5.1 Non-eligible loans 4,108,983 5.1.1 Loans satisfying eligibility requirements except Due to the low level of exposure to credit risk on property developers (less than 2% for limit stated in Royal Decree 716/2009, art. 5.1 of total customer risk), there is no need to design broad recovery policies to deal with 5.1.2 Other 4,108,983 problematic property development projects. The policy is aimed at financing specific, 5.2 Eligible loans 19,959,649 small-scale projects in good locations with well-established property developers, and 5.2.1 Non-qualifying portions this has enabled most of the risk in this sector to focus on completed developments 5.2.2 Qualifying portions 19,959,649 ready for sale. Projects and selling prices are closely monitored with a view to 5.2.2.1 Loans used to back issues of mortgage reducing the risk. bonds 5.2.2.2 Loans eligible to back issues of covered 19,959,649 bonds a) Lending

The following presents, at 31 December 2015, the nominal value of the totality of mortgage credits and loans outstanding at said date in the aforementioned Group institutions, the nominal value of these eligible loans and credits, the mortgage credits and loans covering the issue of mortgage bonds, those that have been issued as mortgage participations or mortgage transfer certificates and non-committed transactions: Consolidated financial statements 2015 Bankinter 161

31 December 2014; 31 December 2015; Nominal Updated Loans covering issues of mortgage bonds and Of which: Eligible loans value value covered bonds 1 Total loans 27,051,510 TOTAL 24,068,632 19,959,649 1 ORIGIN OF THE TRANSACTIONS 24,068,632 19,959,649 2 Mortgage bonds issued 1,589,561 1.1 Originated by the Institution 22,290,557 18,426,696 Of which: Loans retained on the statement of financial position 860,479 1.2 Transferred from other institutions 1,778,075 1,532,953 3 Mortgage transfer certificates issued 2,185,370 1.3 Other - - 2 CURRENCY 24,068,632 19,959,649 Of which: Loans retained on the statement of financial position 2,079,529 2.1 Euro 21,528,965 17,802,392 4 Mortgage loans pledged as security for funds received 2.2 Other currencies 2,539,667 2,157,257 5 Loans covering issues of mortgage bonds and covered bonds 23,276,579 3 PAYMENT SITUATION 24,068,632 19,959,649 3.1 Normal repayment 23,223,318 19,760,857 5.1 Non-eligible loans 4,148,122 3.2 Other situations 845,314 198,792 5.1.1 Loans satisfying eligibility requirements except 4 AVERAGE RESIDUAL MATURITY 24,068,632 19,959,649 for limit stated in Royal Decree 716/2009, art. 5.1 4.1 Up to ten years 4,019,251 3,202,134 4.2 More than ten years and up to twenty 8,928,864 7,336,381 5.1.2 Other 4,148,122 years 4.3 More than twenty years and up to 9,191,107 7,855,813 5.2 Eligible loans 19,128,457 thirty years 5.2.1 Non-qualifying portions 4.4 More than thirty years 1,929,410 1,565,321 5.2.2 Qualifying portions 19,128,457 5 INTEREST RATES 24,068,632 19,959,649 5.1 Fixed 374,092 232,748 5.2.2.1 Loans used to back issues of mortgage 5.2 Variable 23,694,540 19,726,901 bonds 5.3 Mixed - - 5.2.2.2 Loans eligible to back issues of covered 6 BORROWERS 24,068,632 19,959,649 19,128,457 bonds 6.1 Corporate entities and enterpreneurs 5,854,027 3,948,432 Of which: Real estate developers 403,049 289,676 6.2 Other individuals and NPISHs 18,214,606 16,011,217 7 TYPE OF GUARANTEE 24,068,632 19,959,649 7.1 Assets/completed buildings 22,821,709 19,176,939 7.1.1 Residential 19,444,305 16,844,912 Of which: Subsidised housing - - 7.1.2 Commercial 3,377,404 2,332,027 7.1.3 Other - - 7.2 Assets/buildings under construction 928,443 624,929 7.2.1 Residential 24,533 17,749 Of which: Subsidised housing - - 7.2.2 Commercial 903,910 607,180 7.2.3 Other - - 7.3 Land 318,480 157,781 7.3.1 Prepared for development 219,450 157,781 7.3.2 Other 99,030 - Consolidated financial statements 2015 Bankinter 162

31 December 2014; The following presents a breakdown of the loans and mortgage credits elegible and Loans covering issues outstanding at 31 December 2015 and 31 December 2014 attending to the percentage of mortgage bonds and Of which: Eligible loans reached by the amount of the transactions with the corresponding value of the covered bonds TOTAL 23,276,579 19,128,457 guarantee obtained from the latest available appraisal of the mortgaged property 1 ORIGIN OF THE TRANSACTIONS 23,276,579 19,128,457 1.1 Originated by the Institution 21,507,805 17,966,966 (loan to value): 1.2 Transferred from other institutions 1,768,774 1,161,491 1.3 Other - - 31 December 2015; 2 CURRENCY 19,128,457 23,276,579 2.1 Euro 20,685,311 16,860,520 RISK ON AMOUNT OF LATEST AVAILABLE APPRAISAL FOR MORTGAGE MARKET 2.2 Other currencies 2,591,268 2,267,937 (loan to value) Higher Higher 3 PAYMENT SITUATION 19,128,457 23,276,579 Equal or than 40% than 60% TYPE OF Higher Higher 3.1 Normal repayment 22,312,130 18,894,490 lower than and equal and equal TOTAL GUARANTEE than 60% than 80% 3.2 Other situations 964,449 233,967 40% or lower or lower

4 AVERAGE RESIDUAL MATURITY 19,128,457 than 60% than 80% 23,276,579 4.1 Up to ten years 3,796,264 2,844,133 Loans eligible to 4.2 More than ten years and up to 8,211,220 6,674,832 cover issues of twenty years 6,910,821 8,284,770 - 4,764,058 - 19,959,649 4.3 More than twenty years and up to mortgage bonds 8,927,631 7,714,589 thirty years and covered bonds 4.4 More than thirty years 2,341,464 1,894,902 - On residential 5 INTEREST RATES 19,128,457 23,276,579 property 5,202,394 6,749,477 4,764,058 - 16,715,929 5.1 Fixed 319,757 138,855 5.2 Variable 22,956,822 18,989,602 5.3 Mixed - - - On other property 1,708,427 1,535,293 - 3,243,720 6 BORROWERS 23,276,579 19,128,457 6.1 Corporate entities and enterpreneurs 5,386,098 3,305,877 Of which: Real estate 319,757 189,130 developers 31 December 2014; 6.2 Other individuals and NPISHs 17,890,481 15,822,580 RISK ON AMOUNT OF LATEST AVAILABLE APPRAISAL FOR MORTGAGE MARKET 7 TYPE OF GUARANTEE 19,128,457 23,276,579 (loan to value) 7.1 Assets/completed buildings 22,298,076 18,591,856 Higher Higher 7.1.1 Residential 19,058,855 16,507,924 Equal or than 40% than 60% TYPE OF Higher Higher Of which: Subsidised housing lower than and equal and equal TOTAL GUARANTEE than 60% than 80% 7.1.2 Commercial 3,239,221 2,083,931 40% or lower or lower 7.1.3 Other than 60% than 80% 7.2 Assets/buildings under construction 620,401 378,335 Loans eligible to 7.2.1 Residential 29,019 17,913 cover issues of - - Of which: Subsidised housing mortgage bonds and 6,512,988 7,960,103 4,655,366 19,128,457 7.2.2 Commercial 591,382 360,422 covered bonds 7.2.3 Other - On residential 7.3 Land 358,102 158,266 property - 7.3.1 Prepared for development 243,077 158,266 5,089,230 6,698,894 4,655,366 16,443,490 7.3.2 Other 115,025 -

- On other property - 1,423,758 1,261,209 2,684,967 Consolidated financial statements 2015 Bankinter 163

Financial year 2015 31 December 2014; MOVEMENTS Eligible loans Non-eligible loans Loans and mortgage credits Available balances. Nominal values 1 Opening balance 31/12/2014 19,128,457 4,148,122 Total 552,400 2 Cancellations at due date 2,558,586 1,574,379 – Potentially eligible 343,398 2.1 Cancellations at maturity 1,097,008 276,633 – Non-eligible 209,002 2.2 Repaid before maturity 1,461,578 1,297,746 2.3 Transferred to other entities - - At 31 December 2015 and 2014 there were no replacement assets relating to the issue 2.4 Other - - of covered bonds and mortgage bonds. 3 Additions in the period 3,389,779 1,535,239 3.1 Originated by the institution 3,236,679 1,475,788 b) Liability operations 3.2 Transferred from other entities 54,159 18,565 3.3 Other 98,940 40,886 The following table presents the aggregate nominal value of the covered bonds 4 Closing balance 31/12/2015 19,959,649 4,108,983 outstanding at 31 December 2015 and 2014 issued by the Bank on the basis of the Fiscal year 2014 residual maturity, as well as the mortgage bonds and mortgage transfer certificates MOVEMENTS Eligible loans Non-eligible loans outstanding at 31 December 2015 and 2014 issued by the Bank based on the 1 Opening balance 31/12/2013 18,102,214 4,512,146 remaining maturity: 2 Cancellations at due date 1,761,002 833,187 2.1 Cancellations at maturity 1,189,547 305,396 2.2 Repaid before maturity 571,455 527,791 2.3 Transferred to other entities - - 2.4 Other - - 3 Additions in the period 2,787,245 469,163 3.1 Originated by the institution 2,615,530 442,629 3.2 Transferred from other entities 71,334 9,629 3.3 Other 100,381 16,905 4 Closing balance 31/12/2014 19,128,457 4,148,122

31 December 2015; Loans and mortgage credits Available balances. Nominal values Total 840,040 – Potentially eligible 622,677 – Non-eligible 217,363 Consolidated financial statements 2015 Bankinter 164

31 December 2015; 31 December 2014; Average residual Average residual MORTGAGE SECURITIES Nominal value Updated value maturity MORTGAGE SECURITIES Nominal value Updated value maturity 1 Mortgage debentures issued and 1 Mortgage debentures issued and outstanding - outstanding - 2 Covered bonds issued 10,590,000 2 Covered bonds issued 9,390,000 Of which: Not carried as liabilities on Of which: Not carried as liabilities on statement of financial position 4,350,000 statement of financial position 5,100,000 2.1 Debt securities Issued via public 2.1 Debt securities Issued via public offering 10,590,000 offering 9,390,000 2.1.1 Residual maturity up to a year 1,700,000 2.1.1 Residual maturity up to a year 750,000 2.1.2 Residual maturity higher than 2.1.2 Residual maturity higher a year and up to two years 1,600,000 than a year and up to two years 1,400,000 2.1.3 Residual maturity higher than 2.1.3 Residual maturity higher than two years and up to three years 1,490,000 two years and up to three years 2,000,000 2.1.4 Residual maturity higher than 2.1.4 Residual maturity higher than three years and up to five years 2,000,000 three years and up to five years 2,090,000 2.1.5 Residual maturity higher than 2.1.5 Residual maturity higher five years and up to ten years 3,800,000 than five years and up to ten years 3,150,000 2.1.6 Residual maturity higher than 2.1.6 Residual maturity higher than ten years ten years 2.2 Debt securities Other issues 2.2 Debt securities Other issues 2.2.1 Residual maturity up to a year 2.2.1 Residual maturity up to a 2.2.2 Residual maturity higher than year a year and up to two years 2.2.2 Residual maturity higher 2.2.3 Residual maturity higher than than a year and up to two years two years and up to three years 2.2.3 Residual maturity higher 2.2.4 Residual maturity higher than than two years and up to three three years and up to five years years 2.2.5 Residual maturity higher than 2.2.4 Residual maturity higher five years and up to ten years than three years and up to five 2.2.6 Residual maturity higher than years ten years 2.2.5 Residual maturity higher 2.3 Deposits than five years and up to ten years 2.3.1 Residual maturity up to a year 2.2.6 Residual maturity higher than ten years 2.3.2 Residual maturity higher than a year and up to two years 2.3 Deposits ears and up to three years 2.3.1 Residual maturity up to a year 2.3.4 Residual maturity higher than three years and up to five years 2.3.2 Residual maturity higher than a year and up to two years 2.3.5 Residual maturity higher than five years and up to ten years 2.3.3 Residual maturity higher than two years and up to three 2.3.6 Residual maturity higher than years ten years 2.3.4 Residual maturity higher 3 Mortgage bonds issued 762,128 117 than three years and up to five 3.1 Issued via public offering 762,128 117 years 3.2 Other issues 2.3.5 Residual maturity higher 4 Mortgage transfer certificates issued 1,734,248 163 than five years and up to ten years 4.1 Issued via public offering 1,734,248 163 2.3.6 Residual maturity higher 4.2 Other issues than ten years 3 Mortgage bonds issued 860,222 125 3.1 Issued via public offering 860,222 125 3.2 Other issues 4 Mortgage transfer certificates issued 2,078,908 171 4.1 Issued via public offering 2,078,908 171 4.2 Other issues - Consolidated financial statements 2015 Bankinter 165

The comparative information of year 2014 can present differences with that published Chart 2: Breakdown of financing for construction and property development previously due to reviews and adjustments in the Databases. Figures at 31/12/2015 Financing for construction and property development Gross amount In compliance with the request made by Banco de España for credit institutions Unsecured by mortgage 165,911 to publish their exposure to the construction and property development sector, Secured by mortgage 805,030 Bankinter, S.A. publishes the following information at 31 December 2015 and 31 Completed buildings 489,113 December 2014, which goes beyond the level of detail and transparency requested: Housing 322,991 Other 166,122 47. Exposure to the construction and property development sector Buildings under construction 176,593 Table 1: Financing for property development and its coverage Housing 176,593 Other Figures at 31/12/2015 Land 139,324 Plots prepared for development 131,019 Excess over Other land 8,305 Gross amount guarantee value (1) Specific coverage TOTAL 970,941 1. Credit recorded by Group credit institutions (businesses Figures in thousands of euros in Spain) 970,941 69,229 93,685 1.1. Of which: Doubtful 202,945 26,660 88,664 Financing for construction and property 1.2. Of which: Substandard 56,372 3,585 5,022 development Gross amount Figures in thousands of euros Figures at 31/12/2014 Figures at 31/12/2014 Unsecured by mortgage 137,764 Excess over Secured by mortgage 737,125 Gross amount guarantee value (1) Specific coverage Completed buildings 508,877 1. Credit recorded by Group Housing 336,443 credit institutions (businesses 874,889 75,670 114,181 Other 172,434 in Spain) Buildings under construction 85,084 1.1. Of which: Doubtful 240,376 31,247 107,147 Housing 85,084 1.2. Of which: Substandard 66,925 7,268 7,034 Other - *Figures in thousands of euros Land 143,164 (1) Amount of the excess of the gross value of each transaction over the value of any in rem rights received in Plots prepared for development 131,093 guarantee, calculated in accordance with the provisions of Appendix IX of Circular 4/2004 (completed habitual Other land 12,071 residence at 80%; offices, business premises and multipurpose industrial buildings at 70%; Rest of completed TOTAL 874,889 housing at 60%; Rest of assets at 50%) Figures in thousands of euros Consolidated financial statements 2015 Bankinter 166

Figures at 31/12/2015 Table 4: Breakdown of home loans secured by mortgages for the purchase of housing, in accordance with the percentage of the total risk over the latest Memorandum items: - available appraisal (LTV). - Total general coverage (total business) - Asset write-offs 37,682 Figures at 31/12/2015

Memorandum items: Figures for the consolidated group LTV ranges (10) Carrying amount LTV≤40% 40% Total 1. Total credit to customers excluding Public Administrations ≤60% ≤80% ≤100% 100% 43,314,814 (businesses in Spain) 2. Total consolidated assets (total business) 58,659,810 Gross amount 4,537,698 6,673,332 5,271,370 689,048 155,681 17,327,129 Figures at 31/12/2014 Of which: 43,965 131,130 171,035 37,317 19,255 402,702 doubtful Memorandum items: - Total general coverage (total business) - Figures in thousands of euros - Asset write-offs 56,390 Memorandum items: Figures for the consolidated group Figures at 31/12/2014 Carrying amount LTV ranges (10) 40% 1. Total credit to customers excluding Public Administrations 40,742,322 LTV≤40% Total (businesses in Spain) ≤60% ≤80% ≤100% 100% Gross amount 4,408,771 6,591,991 5,607,616 596,920 161,246 17,366,544 2. Total consolidated assets (total business) 57,332,974 Of which: 45,880 123,752 201,636 34,127 16,306 421,701 Table 3: Home loans for purchase of residential property doubtful

Figures at 31/12/2015 Figures in thousands of euros

Gross amount Of which: Doubtful The financial year 2014 has been reconstructed on the basis of the new criteria Loans for purchase of residential property 17,403,587 406,330 employed in our Databases in 2015 with the purpose of providing unified and Unsecured by mortgage 76,458 3,628 comparable data. Secured by mortgage 17,327,129 402,702

Figures in thousands of euros

Figures at 31/12/2014

Loans for purchase of residential property 17,444,468 427,543 Unsecured by mortgage 77,924 5,842 Secured by mortgage 17,366,544 421,701

Figures in thousands of euros Consolidated financial statements 2015 Bankinter 167

Table 5: Assets foreclosed by consolidated group institutions (businesses in Figures at 31/12/2014 Spain) Carrying Of which: Figures at 31/12/2015 amount Coverage Initial cost Gross debt 1. Real estate assets from financing transactions for Carrying Of which: property construction and amount Coverage Initial cost Gross debt development companies 123,768 50,229 173,997 249,639 1. Real estate assets from financing transactions for property 1.1. Completed buildings 68,176 20,369 88,545 115,731 construction and development 1.1.1. Housing 34,134 8,568 42,702 57,604 companies 93,828 45,216 139,045 200,287 1.1.2. Other 34,042 11,801 45,843 58,127 1.1. Completed buildings 45,134 14,761 59,895 76,385 1.2. Buildings under construction 6,103 147 6,250 10,072 1.1.1. Housing 22,758 4,966 27,724 36,116 1.2.1. Housing 6,103 147 6,250 10,072 1.1.2. Other 22,376 9,796 32,171 40,269 1.2.2. Other - - - - 1.2. Buildings under construction 5,497 489 5,987 9,353 1.3. Land 49,488 29,713 79,201 123,836 1.2.1. Housing 5,497 489 5,987 9,353 1.3.1. Plots prepared for development 49,488 29,713 79,201 123,836 1.2.2. Other - - - - 1.3. Land 43,197 29,966 73,163 114,549 1.3.2. Other land - - - - 2. Real estate assets from 1.3.1. Plots prepared for development 43,197 29,966 73,163 114,549 mortgage financing operations 1.3.2. Other land - - - - to households for the purchase of housing 109,228 12,751 121,979 152,142 2. Real estate assets from mortgage financing operations to households 3. Other foreclosed assets 122,598 14,052 136,650 182,424 for the purchase of housing 100,257 12,726 112,983 141,898 4. Equity instruments, securities 3. Other foreclosed assets 124,166 17,414 141,580 189,029 and financing to non-consolidated companies holding said assets 45 2,595 2,640 8,925 4. Equity instruments, securities and financing to non-consolidated companies holding said assets 3,321 2,274 5,595 6,217 Figures in thousands of euros Consolidated financial statements 2015 Bankinter 168

48. Additional Information on risks: Refinancing and restructuring transactions. Sectoral and geographical concentration of risks.

In compliance with Banco de España’s request established in Circular 6/2012 for credit institutions to publish information on refinancing and restructuring transactions, as well as on the sectoral and geographical concentration of risks.

The policy on Refinancing and Restructuring established by the Bank is described in Note 45.

Bellow follows a breakdown by counterparty, type of insolvency and type of guarantee, and the current balances at 31 December 2015 and 2014 of the restructuring and refinancing transactions carried out by the Bank. Consolidated financial statements 2015 Bankinter 169

Refinancing and restructuring transactions

Current balances for refinancing and restructuring at 31 December 2015: NORMAL (b) SUBSTANDARD Fully secured by real estate Fully secured by real estate Other secured loans (c) Current unsecured loans Other tangible security (c) Current unsecured loans mortgage mortgage Specific Number of Gross Number of Gross Number of Gross Number of Gross Number of Gross Number of Gross coverage transactions amount transactions amount transactions amount transactions amount transactions amount transactions amount

1. Public Administrations ------2. Other businesses and 588 172,577 38 7,739 512 84,870 236 113,415 13 7,425 58 40,812 14,753 entrepreneurs Of which: Financing for construction and property 56 32,773 2 137 10 7,170 26 27,787 2 1,245 0 0 2,108 development 3. Other individuals 767 136,051 32 4,684 222 4,435 429 93,724 14 3,292 49 558 2,438 4. Total 1,355 308,628 70 12,423 734 89,305 665 207,139 27 10,717 107 41,370 17,191

Current balances for refinancing and restructuring at 31 December 2015: DOUBTFUL Fully secured by real TOTAL Other tangible security (c) Current unsecured loans estate mortgage Specific Number of Gross Number of Gross Number of Gross coverage Number of Gross Specific transactions amount transactions amount transactions amount transactions amount coverage

1. Public Administrations ------2. Other businesses and entrepreneurs 714 320,177 81 31,906 936 168,865 254,592 3,176 947,786 269,345 Of which: Financing for construction and property development 146 121,106 18 11,038 37 5,595 62,733 297 206,851 64,841 3. Other individuals 568 117,541 32 9,729 260 7,094 23,942 2,373 377,108 26,380 4. Total 1,282 437,718 113 41,635 1,196 175,959 278,534 5,549 1,324,894 295,725 Consolidated financial statements 2015 Bankinter 170

Current balances for refinancing and restructuring at 31 December 2014: NORMAL (b) SUBSTANDARD Fully secured by real estate Fully secured by real estate Other secured loans (c) Current unsecured loans Other tangible security (c) Current unsecured loans mortgage mortgage Specific Number of Gross Number of Gross Number of Gross Number of Gross Number of Gross Number of Gross coverage transactions amount transactions amount transactions amount transactions amount transactions amount transactions amount

1. Public Administrations - - - - 1 8,820 ------2. Other businesses and entrepreneurs 834 352,699 74 19,670 613 92,852 293 121,142 18 8,160 77 40,407 12,913 Of which: Financing for construction and property 93 54,782 8 6,764 10 12,186 30 36,897 2 1,273 1 672 2,744 development 3. Other individuals 1,107 197,376 48 11,322 312 5,255 482 105,296 9 2,204 71 836 2,696 4. Total 1,941 550,075 122 30,992 926 106,927 775 226,438 27 10,364 148 41,243 15,609 Current balances for refinancing and restructuring at 31 December 2014: DOUBTFUL Fully secured by property TOTAL Other tangible security (c) Current unsecured loans mortgage Specific Number of Gross Number of Gross Number of Gross coverage Number of Gross Specific transactions amount transactions amount transactions amount transactions amount coverage

1. Public Administrations ------1 8,820 - 2. Other businesses and entrepreneurs 725 343,209 80 36,207 1,050 176,016 270,010 3,764 1,190,362 282,923 Of which: Financing for construction and property development 157 137,571 21 11,001 34 4,786 69,490 356 265,932 72,234 3. Other individuals 502 108,121 26 7,671 259 6,505 17,245 2,816 444,586 19,941 4. Total 1,227 451,330 106 43,878 1,309 182,521 287,255 6,581 1,643,768 302,864 Consolidated financial statements 2015 Bankinter 171

Breakdown of amount of transactions classed as doubtful after refinancing or restructuring during the year.

Fully secured by real estate mortgage Other secured loans (c) Current unsecured loans

Number of Number of Number of Gross amount Gross amount Gross amount transactions transactions transactions

Corporate entities and entrepreneurs 127 39,133 13 4,731 193 41,529 Of which: Financing for construction and property development 17 8,024 4 2,777 Individuals 181 30,854 7 1,284 63 1,459 Total 308 69,987 20 6,015 256 42,987

Breakdown of amount of transactions classed as doubtful after refinancing or restructuring in the previous year.

Fully secured by real estate mortgage Other secured loans (c) Current unsecured loans

Number of Number of Number of Gross amount Gross amount Gross amount transactions transactions transactions

Corporate entities and entrepreneurs 161 58,710 13 2,944 238 43,881 Of which: Financing for construction and property development 25 15,255 3 1,159 2 286 Individuals 154 27,901 6 1,169 66 1,110 Total 315 86,611 19 4,113 304 44,991 Consolidated financial statements 2015 Bankinter 172

Breakdown of the average probability of default of refinanced and restructured transactions

Year 2015; NORMAL SUBSTANDARD Fully secured by real Fully secured by real Other tangible security Current unsecured loans Other tangible securities Current unsecured loans estate mortgage estate mortgage Number of Number of Number of Number of Number of Number of PD PD PD PD PD PD transactions transactions transactions transactions transactions transactions 1. Public Administrations ------2. Other businesses and entrepreneurs 588 0.38 38 0.78 512 0.71 236 0.33 13 0.09 58 0.65 Of which: Financing for construction and 56 0.08 2 0.05 10 0.96 26 0.03 2 0.04 - - property development 3. Other individuals 767 0.33 32 0.35 222 0.14 429 0.28 14 0.34 49 0.26 4. Total 1,355 0.36 70 0.61 734 0.62 665 0.30 27 0.23 107 0.51

Year 2015; DOUBTFUL Fully secured by property mortgages Other secured loans TOTAL Current unsecured loans

Number of Number of Number of Number of PD PD PD PD transactions transactions transactions transactions 1. Public Administrations ------2. Other businesses and entrepreneurs 714 0.75 81 0.86 936 0.97 3,176 0.62 Of which: Financing for construction and 146 0.28 18 0.56 37 1.00 property development 297 0.25 3. Other individuals 568 0.98 32 1.00 260 1.00 2,373 0.54 4. Total 1,282 0.84 113 0.93 1,196 0.98 5,549 0.58 Consolidated financial statements 2015 Bankinter 173

2014 NORMAL SUBSTANDARD Fully secured by real Fully secured by real Other tangible security Current unsecured loans Other tangible securities Current unsecured loans estate mortgage estate mortgage Number of Number of Number of Number of Number of Number of PD PD PD PD PD PD transactions transactions transactions transactions transactions transactions 1. Public Administrations ------

2. Other businesses and entrepreneurs 834 0.31 74 0.27 613 0.32 293 0.34 18 0.18 77 0.24

Of which: Financing for construction and 93 0.05 8 0.00 10 0.17 30 0.07 2 0.19 1 0.13 property development

3. Other individuals 1,107 0.24 48 0.22 312 0.30 482 0.24 9 0.51 71 0.52

4. Total 1,941 0.27 122 0.26 925 0.31 775 0.28 27 0.31 148 0.32

2014

DOUBTFUL TOTAL Fully secured by property mortgages Other secured loans Current unsecured loans

Number of Number of Number of Number of PD PD PD PD transactions transactions transactions transactions

1. Public Administrations

2. Other businesses and entrepreneurs 725 0.73 80 0.84 1,050 1.00 3,764 0.54 Of which: Financing for construction and 157 0.28 21 0.48 34 1.00 property development 356 0.17 3. Other individuals 502 0.98 26 0.85 259 0.98 2,816 0.43 4. Total 1,227 0.82 106 0.84 1,309 1.00 6,580 0.49 Consolidated financial statements 2015 Bankinter 174

Sectoral and geographical concentration of risks.

Below is a breakdown of the book value of the Group’s most significant financial assets at 31 December 2015 and 2014 by geographical area of activity, business segment, counterparty and purpose for which the financing was granted. These figures include the trading portfolio's asset positions. However, the liability positions that offset them and are required to measure the net risk of each sector or geographical area are not included. Further information is provided on the composition of the trading portfolio in note 7 of this report.

Distribution of the credit to customers by activity (book value).

Financial year 2015

Collateralised credit. Loan to value (f) Of which: Of which: other TOTAL Secured by tangible security Equal or Higher than 40% and Higher than 60% Higher than 80% Higher than property (e) (e) lower than equal or lower than and equal or lower and equal or lower 100% 40% 60% than 80% than 100% 1 Public Administrations. 1,676,296 6,419 - 5,282 - 1,137 - - 2 Other financial institutions 1,324,455 59,979 817,071 1,118 57,246 744 817,025 917 3 Non-financial companies and entrepreneurs 21,022,327 7,849,251 711,670 2,839,481 2,860,031 1,831,844 490,227 539,338 3.1 Construction and property development 881,446 729,296 27,963 163,958 257,151 265,934 42,071 28,145 3.2 Construction of civil works 338,496 9,129 3,382 5,217 1,681 1,941 515 3,157 3.3 Other purposes 19,802,385 7,110,826 680,325 2,670,306 2,601,199 1,563,969 447,641 508,036 3.3.1 Large enterprises 6,876,573 765,745 54,252 234,488 263,041 180,407 62,769 79,292 3.3.2 SMEs and entrepreneurs 12,925,812 6,345,081 626,073 2,435,818 2,338,158 1,383,562 384,872 428,744 6.2 Other households and NPISHs 20,968,031 19,291,355 196,834 5,526,498 7,426,234 5,563,392 723,646 248,419 4.1 Housing 17,760,762 17,630,192 35,359 4,782,020 6,824,634 5,247,007 651,754 160,136 4.2 Consumer 844,377 16,211 1,808 7,815 7,046 2,321 462 375 4.3 Other purposes 2,362,892 1,644,952 159,667 736,663 594,554 314,064 71,430 87,908 SUBTOTAL 44,991,109 27,207,004 1,725,575 8,372,379 10,343,511 7,397,117 2,030,898 788,674 5 Less: Value corrections due to asset impairment not attributable to specific - transactions 6 TOTAL. 44,991,109 MEMORANDUM ITEMS: Refinanced, restructured and refinancing transactions 1,032,259 866,223 9,825 237,329 253,019 258,392 86,044 41,264 Consolidated financial statements 2015 Bankinter 175

Financial Year 2014

Collateralised credit. Loan to value Of which: Of which: Higher than Higher than Higher than TOTAL Secured by Other secured Equal or lower 40% and equal 60% and equal 80% and equal Higher than property loans than 40% or lower than or lower than or lower than 100% Figures in thousands of euros. 60% 80% 100% 1 Public Administrations 1,704,401 5,419 - 5,419 - - - - 2 Other financial institutions 2,488,865 7,967 1,973,151 3,768 8,525 - 1,968,129 696 3 Non-financial companies and entrepreneurs 19,525,475 7,544,944 650,308 2,706,208 2,868,153 1,750,264 396,612 474,015 3.1 Construction and property development 775,941 656,114 17,271 139,562 219,769 231,792 36,301 45,961 3.2 Construction of civil works 280,557 12,838 385 5,302 5,378 1,761 408 374 3.3 Other purposes 18,468,977 6,875,992 632,652 2,561,344 2,643,006 1,516,711 359,903 427,680 3.3.1 Large enterprises 6,121,714 701,031 62,037 183,275 228,337 200,131 68,095 83,230 3.3.2 SMEs and entrepreneurs 12,347,263 6,174,961 570,615 2,378,069 2,414,669 1,316,580 291,808 344,450 6.2 Other households and NPISHs 20,695,162 19,173,552 157,888 5,426,895 7,475,950 5,573,202 631,651 223,742 4.1 Housing 17,612,128 17,452,820 33,794 4,682,318 6,827,163 5,240,258 573,531 163,344 4.2 Consumer 626,325 17,456 1,611 7,961 7,277 3,014 300 515 4.3 Other purposes 2,456,709 1,703,276 122,483 736,616 641,510 329,930 57,820 59,883 SUBTOTAL 44,413,903 26,731,882 2,781,347 8,142,290 10,352,628 7,323,466 2,996,392 698,453 5 Less: Value corrections due to asset impairment not attributable to specific - transactions 6 TOTAL 44,413,903 MEMORANDUM ITEMS: Refinanced, restructured and refinancing transactions 1,345,786 1,148,410 19,673 304,862 355,625 349,225 107,646 50,725 Consolidated financial statements 2015 Bankinter 176

Concentration of risks by Activity and Geographical Area (Book value). Total activity. Financial year 2015 Rest of the TOTAL Spain America Rest of the world Figures in thousands of euros. European Union 1. Credit institutions 2,800,147 2,016,923 436,492 171,432 175,301 2 Public Administrations 8,511,343 8,137,668 373,463 212 - Central Government 7,412,044 7,038,475 373,463 106 - 2.2 Other 1,099,299 1,099,193 - 106 - 3 Other financial institutions 3,115,331 2,690,156 341,209 50,543 33,422 4 Non-financial companies and entrepreneurs 23,892,056 22,919,839 738,285 184,142 49,790 4.1 Construction and property development (b) 991,262 987,505 - 3,757 - 4.2 Construction of civil works 850,016 802,125 10,193 33,576 4,122 4.3 Other purposes 22,050,777 21,130,209 728,092 146,809 45,668 4.3.1 Large enterprises (c) 8,236,811 7,411,824 670,487 119,578 34,923 4.3.2 SMEs and entrepreneurs (c) 13,813,966 13,718,385 57,605 27,231 10,745 5 Other households and NPISHs 21,055,351 20,388,618 472,479 61,051 133,203 5.1 Housing (d) 17,765,038 17,152,935 426,021 57,470 128,612 5.2 Consumer (d) 844,383 842,984 670 357 372 5.3 Other purposes (d) 2,445,930 2,392,699 45,788 3,224 4,219 SUBTOTAL 59,374,229 56,153,205 2,361,928 467,380 391,716 6 Less: Value corrections due to asset impairment not attributable to specific - transactions 7 TOTAL 59,374,229 Consolidated financial statements 2015 Bankinter 177

Concentration of risks by Activity and Geographical Area (Book value). Activity in Spain. 2015 Balearic Canary Castile-La Castilla- Figures in thousands of euros. TOTAL Andalucía Aragon Asturias Cantabria Catalonia Islands Islands Mancha León 1 Credit institutions 2,016,923 1 4,934 - 12,554 1 122,246 1 - 524,400 2 Public Administrations 8,137,668 83,603 39,681 29,788 - 23,087 3,785 29,597 140,128 15,701 Central Government 7,038,475 2.2 Other 1,099,193 83,603 39,681 29,788 - 23,087 3,785 29,597 140,128 15,701 3 Other financial institutions 2,690,156 1,124 500 3,237 358 48 33 43 8,777 24,443 4 Non-financial companies and entrepreneurs 22,919,839 2,539,882 905,441 456,884 673,415 1,107,237 289,039 540,094 577,661 2,784,246 4.1 Construction and property development 987,505 128,102 52,121 7,928 24,560 13,165 25,827 4,471 23,674 77,448 4.2 Construction of civil works 802,125 102,484 12,213 4,079 13,700 47,467 15,630 12,011 9,151 78,438 4.3 Other purposes 21,130,209 2,309,296 841,107 444,877 635,155 1,046,605 247,582 523,612 544,836 2,628,360 4.3.1 Large enterprises 7,411,824 428,877 185,003 64,626 271,715 312,799 51,018 47,207 150,920 984,545 4.3.2 SMEs and entrepreneurs 13,718,385 1,880,419 656,104 380,251 363,440 733,806 196,564 476,405 393,916 1,643,815 5 Other households and NPISHs 20,388,618 2,364,518 454,874 296,091 527,560 735,352 279,979 668,159 852,547 2,997,898 5.1 Housing 17,152,935 1,978,311 370,275 237,288 467,322 629,526 236,471 569,016 753,211 2,530,499 5.2 Consumer 842,984 101,036 15,271 15,341 16,823 42,745 11,613 27,672 36,780 100,994 5.3 Other purposes 2,392,699 285,171 69,328 43,462 43,415 63,081 31,895 71,471 62,556 366,405 SUBTOTAL 56,153,205 4,989,128 1,405,430 785,999 1,213,887 1,865,724 695,083 1,237,894 1,579,114 6,346,687 6 Less: Value corrections due to asset impairment not - attributable to specific transactions 7 TOTAL 56,153,205 Consolidated financial statements 2015 Bankinter 178

Basque Ceuta and Figures in thousands of euros. TOTAL Extremadura Galicia Madrid Murcia Navarre Valencia La Rioja Country Melilla 1 Credit institutions 2,016,923 - 408 886,442 1 66 251,012 214,854 3 - 2 Public Administrations 8,137,668 55,470 35,356 402,963 8,283 56,852 3,907 130,580 36,336 4,076 Central Government 7,038,475 2.2 Other 1,099,193 55,470 35,356 402,963 8,283 56,852 3,907 130,580 36,336 4,076 3 Other financial institutions 2,690,156 29 75 2,636,641 255 20 2,432 12,019 122 0 4 Non-financial companies and entrepreneurs 22,919,839 210,844 459,820 7,211,348 660,740 376,579 2,056,288 1,870,072 189,834 10,414 4.1 Construction and property development 987,505 4,681 7,753 366,881 37,350 9,848 125,808 56,671 18,369 2,848 4.2 Construction of civil works 802,125 28,855 27,570 282,657 7,918 7,251 43,541 105,441 3,719 - 4.3 Other purposes 21,130,209 177,308 424,497 6,561,810 615,472 359,480 1,886,939 1,707,960 167,746 7,566 4.3.1 Large enterprises 7,411,824 76,483 139,877 3,035,399 192,400 153,630 455,002 846,793 15,529 - 4.3.2 SMEs and entrepreneurs 13,718,385 100,825 284,620 3,526,411 423,072 205,850 1,431,937 861,167 152,217 7,566 5 Other households and NPISHs 20,388,618 152,936 407,017 7,374,418 359,807 146,175 1,660,450 1,007,856 95,337 7,643 5.1 Housing 17,152,935 124,001 328,378 6,179,350 301,116 121,327 1,403,647 836,671 80,857 5,669 5.2 Consumer 842,984 9,075 28,639 313,000 16,211 5,073 74,011 23,814 3,196 1,689 5.3 Other purposes 2,392,699 19,860 50,000 882,068 42,480 19,775 182,792 147,371 11,284 285 SUBTOTAL 56,153,205 419,279 902,676 18,511,812 1,029,086 579,692 3,974,090 3,235,383 321,632 22,133 6 Less: Value corrections due to asset impairment not - attributable to specific transactions 7 TOTAL 56,153,205 Consolidated financial statements 2015 Bankinter 179

Concentration of risks by Activity and Geographical Area (Book value). Total activity.

Fiscal year 2014 Rest of TOTAL Spain America Rest of the world Figures in thousands of euros. European Union

1 Credit institutions 2,775,402 1,797,072 714,716 24,457 239,157 2 Public Administrations 8,421,059 8,079,990 341,059 10 - Central Government 7,374,674 7,033,609 341,059 5 - 2.2 Other 1,046,385 1,046,380 - 5 - 3 Other financial institutions 3,580,246 3,155,484 316,611 105,199 2,952 4 Non-financial companies and entrepreneurs 22,278,321 21,551,357 501,642 180,283 45,039 4.1 Construction and property development 780,449 775,923 - 4,526 - 4.2 Construction of civil works 559,183 515,155 16,292 27,686 50 4.3 Other purposes 20,938,688 20,260,279 485,350 148,071 44,989 4.3.1 Large enterprises 8,244,450 7,647,351 441,548 118,723 36,829 4.3.2 SMEs and entrepreneurs 12,694,238 12,612,928 43,802 29,348 8,160 5 Other households and NPISHs 21,102,211 20,498,049 438,477 47,389 118,296 5.1 Housing 17,637,130 17,077,067 401,191 44,160 114,712 5.2 Consumer 626,325 624,536 777 493 519 5.3 Other purposes 2,838,756 2,796,446 36,509 2,736 3,065 SUBTOTAL 58,157,239 55,081,952 2,312,505 357,338 405,444 6. Less: value corrections due to asset impairment not - attributable to specific transactions 7 TOTAL 58,157,239 Consolidated financial statements 2015 Bankinter 180

Concentration of risks by Activity and Geographical Area (Book value). Activity in Spain. 2014 Balearic Canary Castile-La Castilla- Figures in thousands of euros. TOTAL Andalucía Aragon Asturias Cantabria Catalonia Islands Islands Mancha León 1 Credit institutions 1,797,072 1,014 109,638 1 22,353 7 86,692 3 5 355,644 2 Public Administrations 8,079,990 123,050 19,186 40,569 5,005 26,880 5,520 37,230 135,020 64,597 Central Government 7,033,609 2.2 Other 1,046,380 123,050 19,186 40,569 5,005 26,880 5,520 37,230 135,020 64,597 3 Other financial institutions 3,155,484 596 658 1,342 78 24 26 19 8,254 34,239 4 Non-financial companies and entrepreneurs 21,551,357 2,585,306 806,947 483,687 562,226 788,188 257,993 542,423 581,297 2,720,516 4.1 Construction and property development 775,923 127,646 53,871 12,761 31,987 15,087 20,914 5,158 32,263 53,505 4.2 Construction of civil works 515,155 57,341 13,247 2,455 12,151 30,341 16,280 9,202 9,786 54,507 4.3 Other purposes 20,260,279 2,400,319 739,829 468,471 518,088 742,760 220,799 528,063 539,248 2,612,504 4.3.1 Large enterprises 7,647,351 541,509 190,896 86,596 241,615 238,624 47,637 62,816 167,478 1,105,514 4.3.2 SMEs and entrepreneurs 12,612,928 1,858,810 548,933 381,875 276,473 504,136 173,162 465,247 371,770 1,506,990 5 Other households and NPISHs 20,498,049 2,412,164 456,407 290,077 526,974 751,083 276,964 676,193 850,775 3,037,811 5.1 Housing 17,077,067 1,993,233 373,945 234,972 474,119 646,305 235,105 580,240 754,711 2,587,873 5.2 Consumer 624,536 87,953 11,961 12,419 12,932 33,737 8,490 20,529 30,051 85,177 5.3 Other purposes 2,796,446 330,978 70,501 42,686 39,923 71,041 33,369 75,424 66,013 364,761 SUBTOTAL 55,081,952 5,122,130 1,392,836 815,675 1,116,636 1,566,182 627,195 1,255,868 1,575,350 6,212,807 6 Less: Value corrections due to asset impairment not - attributable to specific transactions 7 TOTAL 55,081,952 Consolidated financial statements 2015 Bankinter 181

Concentration of risks by Activity and Geographical Area (Book value). Activity in Spain. Basque Ceuta and Figures in thousands of euros. TOTAL Extremadura Galicia Madrid Murcia Navarre Valencia La Rioja Country Melilla 1 Credit institutions 1,797,072 0 379 876,048 1 11,005 237,266 97,014 2 0 2 Public Administrations 8,079,990 59,978 64,339 231,456 8,920 57,266 14,199 110,304 38,005 4,857 Central Government 7,033,609 2.2 Other 1,046,380 59,978 64,339 231,456 8,920 57,266 14,199 110,304 38,005 4,857 3 Other financial institutions 3,155,484 0 195 3,093,091 291 7 3,216 13,422 26 0 4 Non-financial companies and entrepreneurs 21,551,357 191,458 498,424 6,863,334 644,599 355,959 1,926,889 1,519,938 214,989 7,185 4.1 Construction and property development 775,923 4,704 9,691 191,688 43,660 11,575 108,286 25,043 28,084 0 4.2 Construction of civil works 515,155 24,468 18,642 151,383 9,935 11,469 39,463 52,184 2,301 0 4.3 Other purposes 20,260,279 162,286 470,091 6,520,263 591,004 332,915 1,779,140 1,442,711 184,604 7,185 4.3.1 Large enterprises 7,647,351 59,939 165,642 3,344,353 171,583 101,078 417,531 676,936 27,605 0 4.3.2 SMEs and entrepreneurs 12,612,928 102,347 304,449 3,175,910 419,421 231,837 1,361,609 765,775 156,999 7,185 5 Other households and NPISHs 20,498,049 149,094 411,527 7,365,954 364,814 139,137 1,680,646 1,004,513 97,497 6,422 5.1 Housing 17,077,067 123,834 332,156 5,948,486 313,478 115,938 1,433,632 841,632 82,962 4,446 5.2 Consumer 624,536 8,185 23,918 191,074 13,202 3,907 60,819 16,270 2,236 1,679 5.3 Other purposes 2,796,446 17,075 55,453 1,226,394 38,134 19,292 186,195 146,611 12,299 297 SUBTOTAL 55,081,952 400,530 974,864 18,429,883 1,018,625 563,373 3,862,216 2,745,191 350,519 18,464 6 Less: Value corrections due to asset impairment not - attributable to specific transactions 7 TOTAL 55,081,952 Consolidated financial statements 2015 Bankinter 182

49. Equity and Minimum reserves. Management of equity a) Equity and The principle laid down by Bankinter's Board of Directors in relation to the management of its equity consists in operating with a level of solvency in excess of Applicable regulations that established by applicable laws and regulations, appropriate to the risks inherent in its business and in the environment in which it operates. The objective is the On 1 January 2014 the Regulation (EU) 575/2013 of the European Parliament and continuous strengthening of solvency as a basis for sustained growth and long-term the Council of 26 June 2013, concerning the prudential requirements of credit value creation for shareholders. institutions and investment companies, came into force together with Directive 2013/36 of the Parliament and the Council dated 26 June 2013, concerning access to In order to meet this objective, the Group has a series of policies and processes for the activity of credit institutions and the prudential supervision. Both texts constitute managing equity, the main guidelines of which are: the transposition into European law of the new solvency rules known as BIS III, and they regulate the levels of solvency and composition of the computable resources with ■■ The Board of Directors and Senior Management are actively involved in the which credit institutions must operate. strategies and policies concerning the management of the Group's capital. The objective is to maintain robust solvency ratios of appropriate quality that are These new rules require much more demanding capital requirements on institutions, consistent with the Bank's risk profile and its business model. and to avoid this strengthening of solvency excessively affecting the real economy, certain aspects of it will be phased-in gradually between now and 2019. This ■■ The Equity and Basel Directorate, which reports to the Capital Market area, transitional implementation phase mainly affects the definition of equity computable monitors and controls the solvency ratios using warning systems that ensure that as capital and the establishment of capital buffers higher then the regulatory the applicable rules are applied at all times and that the decisions made by the minimums. different areas and units of the Institution are consistent with the targets set for compliance of minimum equity requirements. In this sense, there are contingency Banco de España Circulars 2/2014 of 31 January and 3/2014 of 30 July establish plans to ensure the compliance of the limits set forth in the applicable regulations. the calendar for applying the different aspects of the regulations in Spain. In There are independent units entrusted with the validation, control and auditing addition, certain aspects of the regulations are subject to further development by the of these processes. European Banking Authority, whose main purpose is to establish uniform principles of implementation throughout the European Union. Over the course of 2014 and ■■ Internal ratings based (IRB) methods are used to calculate the equity requirements 2015, the EBA published a large number of technical standards, guidelines and for certain credit portfolios, which have been validated and approved by the recommendations developing numerous aspects, but many still remain in process of Supervisor. For the remainder of portfolios, the standard methods established consultation or study, and they will be addressed, approved and published during the in the regulations are applied, and a progressive implementation plan has been next few years. agreed with the Supervisor to incorporate new portfolios into the IRB approach in upcoming years. Consolidated financial statements 2015 Bankinter 183

■■ The impact that decisions will have on the Group’s equity and the risk-return ratio, Further details of the characteristics of these instruments with regard to their capacity is taken into account as a key factor in planning, analysing and monitoring the to absorb losses, availability, permanence and ranking of claims in the event of Group’s transactions. liquidation can be found in the Information of Prudential Relevance document, which is published on the Bank's corporate website. This report also details the reconciliation ■■ Capital planning is carried out annually, and it is periodically monitored by the of accounting equity with computable capital. Management Bodies with the purpose of detecting any deviations and taking the appropriate corrective measures. Within this planning process, stress tests are The risk-weighted assets are determined on the basis of the institution's exposure to carried out that allow monitoring the Bank's resistance in particularly adverse credit and counterparty risk, the trading portfolio risk and operational risk. economic scenarios. In addition, the Regulation establishes certain limits on risk concentration and The Bank considers its computable equity and the capital requirements established by specific mandatory aspects with regard to the institution's corporate governance. It regulations to be key factors in its management, affecting investment decisions, the also includes two new ratios related to the institution's liquidity and a leverage ratio. analysis of the viability of transactions, the strategy for distributing profits and issues The Liquidity Coverage Ratio (LCR) aims to measure the institution's short-term by the parent company, the subsidiaries and the Group, etc. liquidity, and the Net Stable Funding Ratio (NSFR) measures the entity's level of stable funding in the medium term; the latter is still being calibrated. The leverage Evolution of equity during the year ratio seeks to limit excessive gearing and to ensure that institutions maintain assets in proportion to their level of capital, so as to try to avoid traumatic deleveraging in The minimum level of solvency required by Regulation (EU) 575/2013 is calculated by times of recession. This ratio is also in the process of being calibrated, although the dividing the institution's computable equity by its risk-weighted assets. institutions are obliged to publish it starting in 2015.

The highest quality equity is called CET1 (Common Equity Tier 1), and it basically comprises capital and reserves, minus a number of items such as treasury stock, intangible assets and certain significant investments.

After CET1 comes AT1 (Additional Tier 1), which basically consists of certain instruments with a high loss absorption component, as they would only outrank shareholders in the event of liquidation.

Last comes T2 (Tier 2), which basically consists of instruments that absorb losses only after shareholders and AT1 instruments, being subordinated to common creditors. Consolidated financial statements 2015 Bankinter 184

The consolidated equity at 31 December 2015 and 2014 and corresponding capital In December 2015 the highest quality equity (CET1) ratio was 11.77%, well in excess ratios are shown in the following table: of the regulatory minimum required by the regulations in force. The overall solvency level was 12.73%. Next, we will explain in further detail the main changes in each of Thousand the levels of capital. 31/12/2015 31/12/2014 euros Reserves 3,353,210 3,137,032 216,178 The changes in the year 2015 in Common Equity Tier 1 (CET1) are basically due to CET1 Deductions -207,149 -120,214 -86,935 retaining part of the earnings for the year and the evolution of the deductions. Preferred shares 0 46,669 -46,669 Changes in Additional Tier 1 (AT1) during the year resulted from the issue of AT1 Deductions -209,001 -282,947 73,946 preferred shares for 56,324 thousand euros no longer being eligible as Additional Tier 1 (AT1) under the new regulations. The deductions that should have been carried out to Additional Tier 1 were deducted from Common Equity Tier 1 (CET1). CET 1 3,206,720 3,050,199 156,521 CET 1 (%) 11.77% 11.87% -0.09% Tier 2 capital (T2) reduced as a result of certain subordinated debt issues were no longer considered as capital, either because they were nearing their maturity or TIER 1 3,206,720 3,050,199 156,521 because they did not meet the stricter eligibility criteria contained in the current TIER 1 (%) 11.77% 11.87% -0.09% regulations.

As regards to the risk-weighted assets, there was an increase resulting from the TIER 2 Instruments 340,412 421,747 -81,334 Institution's increase of business that affected the credit risk, market risk and TIER 2 Deductions -79,800 -112,427 32,627 operational risk.

TIER 2 260,613 309,320 -48,708 Supervisory review and evaluation process (SREP) TIER 2 (%) 0.96% 1.20% -0.25% In November 2015, the European Central Bank notified institutions the conclusions regarding the supervisory review and evaluation process it carried out during the Total Computable Equity 3,467,333 3,359,519 107,813 year, as well as its decision on the requirements of minimum capital to maintain said institutions. The minimum capital ratio CET1 demanded from Bankinter is 8.75%, the Solvency level 12.73% 13.07% 0.34% lowest in the Spanish banking sector.

Total risk-weighted assets 27,238,576 25,703,876 1,534,700 credit risk 23,693,867 22,156,903 1,536,964 market risk 257,969 381,580 -123,610 operational risk 1,929,060 1,773,375 155,685 Consolidated financial statements 2015 Bankinter 185

The supervisor established the ratio by assessing the institution's risk profile and Private Banking: a line of business specialised in advisory for and comprehensive by analysing the existing strategies, policies, technological systems and processes management of estates and investors. It is made up of customers with a financial net aimed at covering the risks of its banking activity and the existence of an effective worth, in and out of Bankinter, above €1,000,000. management of the capital. Personal Banking: Customers not included in Private Banking and who have: The capital ratio CET1 at the close of 2015 was 11.77%, and it comfortably complies with the requirements set forth following the supervisory process, exceeding it by 302 ■■ Family unit income above €70,000 basis points. ■■ Funds + Securities + Brokerage between €75,000 and €1,000,000 b) Minimum Reserve Ratio ■■ Financial Net Worth in or out of Bankinter between €75,000 and €1,000,000. Monetary Circular 1/1998 of 29 September, effective 1 January 1999, abolished the cash coefficient which had been in place for ten years and replaced it with the Personal Banking: includes the products and services offered to domestic economies. minimum reserve ratio. Other Individuals

At 31 December 2015 and 2014 and throughout these financial years, the consolidated Foreigners: Non-Spanish European customers of any of the following Organisations: entities complied with the minimums for this ratio required by applicable Spanish Catalonia, Eastern Spain, Balearic Islands, Andalusia or Canary Islands. regulations. Corporate & SME Banking offers a specialised service aimed at large enterprises, as The amount of cash that the Group held on account at Banco de España for this well as the public sector and SMEs. This sector encompasses all activity with entities purpose stood at 723,649 and 217,544 thousand euros at 31 December 2015 and of the bank, due to the similarity of the nature of products and services offered, the 2014, respectively, although the obligation of the various Group companies subject to type of recipient customers and the distribution methods. this coefficient to maintain the balance required by applicable regulations in order to comply with the aforementioned minimum reserves coefficient is calculated on the Consumer finance, concentrates the consumer finance business managed mainly average of closing balances for the day held by each of them in this account during by Bankinter Consumer Finance, E.F.C., via credit cards and consumer loans. The the period for which it is maintained. customers of this segment can be either exclusive or shared with the Commercial Banking segment. 50. Information by segments

The Bank's business is split into Commercial Banking and Corporate & SME Banking. The highest authority in operational decision-making is the Management Committee of Bankinter, S.A.

Commercial banking encompasses the following, due to the similarity of the nature of products and services offered, the type of recipient customers and the distribution methods: Consolidated financial statements 2015 Bankinter 186

In Other Businesses we can break it down in 5 groups: 52. Information about average period of payment to suppliers

■■ Coinc, the online savings platform created by Bankinter. In accordance with Resolution of 29 January 2016 of the Instituto de Contabilidad y Auditoría de Cuentas (Spanish Accounting and Audit Institute) on the information to ■■ The net interest income/expense and the profit/loss from financial operations be added to the notes of the financial statements with regard to the average period generated by the Institutional Portfolio. of payment to suppliers in commercial transactions, the following informations is provided: ■■ The differences between the Analytical Accounting records and the General 2015 Accounting records. Days Average period of payment to suppliers 29.97 Appendix II shows further information on segments. Ratio of paid transactions 30.09 Ratio of transactions pending payment 15.05 51. Holdings in the capital of credit institutions Thousands of euros Total payments made 412,682 Total pending payments 3,381 Below follows the list of holdings in the capital of credit institutions or financial credit establishments, both national and foreign, held by the Bank that exceed 5% of the capital or voting rights: Percentage of 53. Subsequent events Participation Bankinter Consumer Finance, E.F.C., S.A. 100% No events having a significant effect on these consolidated financial statements have Bankinter Luxembourg, S.A. 100% occurred between the end of financial year 2015 and the date on which they were prepared, except for those presented below.

In accordance with the provisions of Article 20 of Royal Decree 1245/1995 of 14 July on On 2 September 2015 Bankinter, S.A. reached an agreement with Barclays PLC holdings in the capital of financial institutions that exceed 5% of the capital or voting through which Bankinter, S.A. acquired the retail network of Barclays in Portugal; and rights and which are held by national or foreign credit institutions or by Banks, as Bankinter Seguros de Vida, a joint company of Mapfre and Bankinter, acquired the defined by Article 4 of the Securities Market Act, to which a national or foreign credit insurance business of Barclays in Portugal. The transaction consists in the acquisition institution belongs, at 31 December 2015 no such Institution or Bank exceeded this of a Barclays PLC customer portfolio together with the material and human resources percentage. that provide the service to these customers and maintain the relationship with them. It constitutes the incorporation into Bankinter, once the agreement takes effect, of 185,000 new customers, 84 new branches, and nearly one thousand employees, in addition to a 4,881 million euros credit investment, regular accounts of 2,500 million euros, and 2,936 million euros in assets managed off the balance sheet. Consolidated financial statements 2015 Bankinter 187

Bankinter obtained in the first week of January the necessary authorisations from The date in which it shall be first applied will be set when the amendment of Circular the European Central Bank (ECB) and the Bank of Portugal (BdP) to establish its 4/2004 is published. branch in Portugal. At the same time, the Portuguese Insurance and Pension Funds Supervisory Authority (ASF) has authorised Bankinter Seguros de Vida, a company The Group has internal contrast models to verify whether the level of provisioning is controlled at 50% by Bankinter and Mapfre, to constitute a Portuguese branch and to adjusted to the applicable financial reporting framework. Within the context of this complete the purchase of the life insurance and pensions business with which Barclays amendment of Circular 4/2004, we understand that the Group will be able to apply operates in the Portuguese market. It is expected that the agreement will take force these internal provisioning models, and, thus, it does not expect a significant impact and that the purchase will be completed in the first half of 2016. From that moment, as a consequence of applying this new provisioning policy. a merging process will begin, which will last approximately twelve months, in order to integrate the staff, installations, operating systems, technological platforms, policies 54. Explanation added for translation to English and business models of both banks. These consolidated financial statements are presented on the basis of the regulatory At the date in which the financial statements of 2015 were drafted, the aforementioned financial reporting framework applicable to the Group in Spain (see Note 2). purchase and sale operation had not been materialised. Certain accounting practices applied by the Group that conform with that regulatory framework may not conform with other generally accepted accounting principles and On 22 January 2016, the Banco de España published a consultation draft to amend rules. current Appendix IX of Circular 4/2004 of 22 December on public and confidential financial reporting rules and formats of financial statements.

The draft amends the policy established by the Banco de España for estimating the provisions of the credit investment portfolio, off-balance exposures and foreclosed assets. This amendment sets forth the guidelines that institutions should follow to estimate their provisions for insolvency using internal models based on past experience and adjusted to current market conditions. In absence of these internal models or insofar as they are developed by the institutions, the Banco de España establishes a series of practical solutions based on its knowledge of the sector. These practical solutions are based on coverage percentages for the healthy portfolio, based on the average experience of the sector, and the impaired portfolio considering a schedule of up to 21 months. Consolidated financial statements 2015 Bankinter 188

APPENDIX I Related party transactions

Thousands of Euros

Expenditure and Revenue of Related Parties 2015 Individuals, Companies or Significant Shareholders Directors and Executives Other Related Parties Total Group Institutions

Expenditures: Financial expenses - 55 - 405 460 Management or collaboration contracts - - - - - R&D transfers and licensing agreement - - - - - Leases - - - - - Receipt of services - - - - - Purchase of goods (finished or unfinished) - - - - -

Value corrections for bad or doubtful debts - - - - - Dividends paid - - - - - Other expenses ------55 - 405 460 Revenues: Financial revenues - - - - - Management or collaboration contracts - - - - - R&D transfers and licensing agreement - - - - - Dividends received - - - - - Leases - - - - - Provision of services - - - - - Sale of goods (finished or unfinished) - - - - - Gains on cancellation or disposal of assets - - - - - Other income ------Consolidated financial statements 2015 Bankinter 189

ANNEX I (Continuation)

Thousands of Euros

Other Transactions 31-12-15 Individuals, Companies or Significant Shareholders Directors and Executives Other Related Parties Total Group Institutions Purchase of tangible, intangible or other - - - - - assets Financing agreements: capital contributions - 24,122 - 23,741 47,863 and credits (lender) Financial leases (lessor) - - - - - Amortisation or cancellation of credits and - - - - - financial leases (lessor) Sale of tangible, intangible or other assets - - - - - Financing agreements: capital contributions - - - 25,752 25,752 and loans (borrower) Financial leases (lessee) - - - - - Amortisation or cancellation of loans and - - - - - financial leases (lessee) Guarantees issued 19,370 - - 51 19,421 Guarantees received - - - - - Commitments acquired - - - - - Commitments/guarantees cancelled - - - - - Dividends and other distributed profits 12,067 49,487 - - 61,554 Other transactions - 3,374 - - 3,374 Consolidated financial statements 2015 Bankinter 190

ANNEX I (Continuation)

Thousands of Euros

Expenditure and Revenue of Related Parties 2014 Individuals, Companies or Significant Shareholders Directors and Executives Other Related Parties Total Group Institutions Expenditures: Financial expenses 1 226 - 553 780 Management or collaboration contracts - - - - - R&D transfers and licensing agreement - - - - - Leases - - - - - Receipt of services - - - - - Purchase of goods (finished or unfinished) - - - - -

Value corrections for bad or doubtful debts - - - - - Dividends paid - - - - - Other expenses - - - - - 1 226 - 553 780 Revenues: Financial revenues - - - - - Management or collaboration contracts - - - - - R&D transfers and licensing agreement - - - - - Dividends received - - - 26,539 26,539 Leases - - - - - Provision of services - - - - - Sale of goods (finished or unfinished) - - - - - Gains on cancellation or disposal of assets - - - - - Other income ------26,539 26,539 Consolidated financial statements 2015 Bankinter 191

ANNEX I (Continuation) Thousands of Euros 31-12-14 Other Transactions Individuals, Companies or Significant Shareholders Directors and Executives Other Related Parties Total Group Institutions Purchase of tangible, intangible or other - - - - - assets Financing agreements: capital contributions - 22,294 - 23,864 46,158 and credits (lender) Financial leases (lessor) - - - - - Amortisation or cancellation of credits and - - - - - financial leases (lessor) Sale of tangible, intangible or other assets - - - - - Financing agreements: capital contributions - - - 67,718 67,718 and loans (borrower) Financial leases (lessee) - - - - - Amortisation or cancellation of loans and - - - - - financial leases (lessee) Guarantees issued 19,370 390 - - 19,760 Guarantees received - - - - - Commitments acquired - - - - - Commitments/guarantees cancelled - - - - - Dividends and other distributed profits 4,754 22,684 - - 27,438 Other transactions - - - - - Consolidated financial statements 2015 Bankinter 192

APPENDIX II - Segmented Information Commercial Financial year 2015 Enteprise Banking BKCF LDA Other Businesses Total Banking NET INTEREST INCOME/EXPENSE 208,744 377,502 82,025 30,736 170,447 869,454 0 Capital instrument yields 2,023 4,658 6,681 Profits/losses of entities accounted for using the equity method 0 18,223 18,223 Fees 173,748 133,445 8,127 552 -5,999 309,873 Profits/losses from financial operations and forex differences 28,290 21,117 3,533 66,168 119,108 Other products / operating expenses -10,815 -4,452 -4,018 314,464 -49,702 245,477

GROSS OPERATING INCOME 399,966 527,612 86,135 351,308 203,794 1,568,815

Transformation costs 163,143 111,386 39,577 210,925 236,023 761,054 Losses due to impairment of assets 59,538 87,106 16,635 26,312 189,592 Allocations 423,098 618,207 75,152 229,567 1,346,025 Collections -363,559 -531,102 -58,517 -203,255 -1,156,434 Provisions recorded 25,254 25,254

OPERATING PROFIT/LOSS 177,285 329,120 29,923 140,383 -83,505 593,306

Other earnings (net) 28,750 43,279 1,377 -821 72,585

GROSS PROFIT/LOSS 148,535 285,841 29,923 139,006 -82,975 520,330

Average assets of the segment 24,820,774 19,896,130 482,568 1,272,492 46,471,963 Average liabilities of the segment 19,659,635 12,834,072 0 939,308 33,433,015 Average off-balance sheet resources 15,251,177 907,403 0 16,158,580

Costs incurred in the acquisition of assets 4,891 2,573 7,464

Net billings between segments: -125,963 -56,334 182,298 0 Services rendered 20,217 11,234 -31,450 0 Services received -146,180 -67,568 213,748 0 Consolidated financial statements 2015 Bankinter 193

APPENDIX II (Continuation) Commercial Fiscal year 2014 Enteprise Banking BKCF LDA Other Businesses Total Banking NET INTEREST INCOME/EXPENSE 106,978 371,023 65,723 40,363 171,270 755,358

Capital instrument yields 2,008 5,995 8,004 Profits/losses of entities accounted for using the equity method 0 16,962 16,962 Fees 163,326 136,520 7,581 1,062 -17,083 291,407 Profits/losses from financial operations and forex differences 10,090 17,385 2,139 103,681 133,296 Other products / operating expenses -9,147 -898 58 293,379 -39,595 243,797

GROSS OPERATING INCOME 271,248 524,030 73,362 338,953 241,230 1,448,823

Transformation costs 153,325 106,981 25,423 204,983 228,535 719,247 Losses due to impairment of assets 72,797 135,530 10,953 0 18,229 237,508 Allocations 517,315 961,884 49,480 157,531 1,686,211 Collections -444,518 -826,354 -38,528 -139,303 -1,448,703 Provisions recorded 41,536 41,536

OPERATING PROFIT/LOSS 45,127 281,519 36,987 133,970 -46,952 450.

Other earnings (net) 20,144 37,536 40 0 57,694

GROSS PROFIT/LOSS 24,983 243,983 36,987 133,930 -47,044 392,839

Average assets of the segment 24,375,473 18,890,837 395,786 1,321,259 44,983,355 Average liabilities of the segment 17,681,102 11,156,041 972,295 29,809,438 Average off-balance sheet resources 12,402,075 961,614 13,363,689

Costs incurred in the acquisition of assets 4,608 2,756 7,363

Net billings between segments: -110,559 -55,107 165,667 0 Services rendered 16,139 9,963 -26,102 0 Services received -126,698 -65,070 191,769 0 Consolidated financial ANNEXE III statements 2015 Bankinter Financial Statements of Bankinter, S.A. at 31 December 2015 and 2014 194

BALANCE SHEETS AT 31 DECEMBER 2015 And 2014 (Thousands of Euros)

ASSETS 31-12-15 31-12-14 (*) LIABILITIES AND NET WORTH 31-12-15 31-12-14 (*) CASH AND DEPOSITS WITH CENTRAL BANKS 923,074 357,063 LIABILITIES:

TRADING PORTFOLIO: 4,473,638 5,353,482 TRADING PORTFOLIO: 3,766,728 2,438,260 Deposits with credit institutions 1,009,596 544,529 Deposits by credit institutions 735,427 270,620 Customer credit 808,476 1,967,180 Customer deposits 995,019 451,559 Debt securities 2,264,761 2,345,496 Trading derivatives 462,606 319,368 Equity instruments 34,764 59,320 Short positions in securities 1,573,676 1,396,713 Trading derivatives 356,041 436,957 Other financial liabilities - - Memorandum items: Loaned or pledged 1,790,311 1,700,679 OTHER FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS: - -

OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 57,209 49,473 Customer deposits - - Equity instruments 57,209 49,473 Memorandum items: Loaned or pledged - - FINANCIAL LIABILITIES AT AMORTISED COST: 51,205,826 53,737,120 - - Deposits by central banks 3,017,983 3,240,433 Deposits by credit institutions 1,913,003 5,237,576 AVAILABLE-FOR-SALE FINANCIAL ASSETS: 3,819,898 5,693,680 Customer deposits 34,413,799 33,364,263 Debt securities 3,759,594 5,628,836 Debt securities 10,432,073 9,877,631 Equity instruments 60,304 64,844 Subordinated liabilities 594,616 607,794 Memorandum items: Loaned or pledged 638,849 2,936,586 Other financial liabilities 834,352 1,409,423

CREDIT INVESTMENTS: 45,713,446 44,249,937 ADJUSTMENTS TO FINANCIAL LIABILITIES DUE TO MACRO HEDGES - - Deposits with credit institutions 575,150 806,596 Customer credit 44,646,678 42,951,791 HEDGING DERIVATIVES 11,489 20,240 Debt securities 491,618 491,550 Memorandum items: Loaned or pledged 294,267 356,515 LIABILITIES LINKED TO NON-CURRENT ASSETS HELD FOR SALE - -

PORTFOLIO OF INVESTMENTS HELD TO MATURITY 2,404,757 2,819,482 LIABILITIES UNDER INSURANCE CONTRACTS - - Memorandum items: Loaned or pledged - 2,805,745 PROVISIONS: 92,173 84,796 Provisions for pensions and similar obligations 396 756 ADJUSTMENTS TO FINANCIAL ASSETS DUE TO MACRO HEDGES - - Provisions for taxes and other legal contingencies 79,864 69,738 Provisions for risks and contingent commitments 8,312 7,498 HEDGING DERIVATIVES 160,073 148,213 Other provisions 3,601 6,804

NON-CURRENT ASSETS HELD FOR SALE 37,106 33,610 TAX LIABILITIES: 241,242 225,964 Current 171,341 136,935 SHARES: 561,322 555,370 Deferred 69,901 89,029 Associates 9,846 7,777 Joint ventures 154 202 OTHER LIABILITIES 141,886 170,295 Group Institutions 551,322 547,391 TOTAL LIABILITIES 55,459,344 56,676,675 INSURANCE CONTRACTS LINKED TO PENSIONS 343 714 EQUITY: 3,469,495 3,335,175 REINSURANCE ASSETS - - NET WORTH: 3,415,679 3,262,022 PROPERTY, PLANT AND EQUIPMENT: 327,082 342,300 Capital - 269,660 269,660 Property, plant and equipment - 327,082 342,300 Authorised 269,660 269,660 For own use 305,150 317,643 Less - Uncalled capital - - Leased out under operating leases 21,932 24,657 Share premium account 1,184,268 1,184,268 Investment property - - Reserves 1,739,237 1,483,948 Memorandum items: acquired under finance leases - - Other equity instruments 1,227 - Hybrid financial instruments INTANGIBLE ASSETS: - - Other equity instruments 1,227 - Goodwill - - Less - Treasury shares (988) (771) Other intangible assets - - Profit (loss) for period 359,459 393,830 Less - Dividends and remunerations (137,184) (68,913) TAX ASSETS: 422,310 384,982 Current 197,328 195,463 VALUATION ADJUSTMENTS: 53,816 73,153 Deferred 224,982 189,519 Available-for-sale financial assets 55,873 71,771 Foreign exchange differences (3,337) 220 OTHER ASSETS 28,581 23,544 Other valuation adjustments 1,280 1,162

TOTAL ASSETS 58,928,839 60,011,850 TOTAL LIABILITIES AND NET WORTH 58,928,839 60,011,850 MEMORANDUM ITEMS CONTINGENT RISKS 3,341,095 3,833,523 CONTINGENT COMMITMENTS 9,306,462 12,066,675 Consolidated financial statements 2015 Bankinter APPENDIX III (Continuation) 195

INCOME STATEMENT OF BANKINTER, S.A. CORRESPONDING TO THE FINANCIAL YEARS ENDED 31 DECEMBER 2015 AND 2014(Thousands of Euros)

(Debit)/Credit 2015 2014 (*) INTEREST AND SIMILAR INCOME 1,175,879 1,314,511 INTEREST EXPENSE AND SIMILAR CHARGES (437,744) (681,762) NET INTEREST INCOME 738,135 632,749 RETURNS ON EQUITY INSTRUMENTS 141,637 301,166 FEE AND COMMISSION INCOME 336,648 319,158 FEE AND COMMISSION EXPENSE (95,432) (84,231) GAINS OR LOSSES ON FINANCIAL ASSETS AND LIABILITIES (net): 67,695 70,767 Held for trading 21,697 22,963 Other financial instruments at fair value through profit or loss (3,183) 1,163 Financial liabilities not valued at fair value through profit or loss 49,932 46,798 Other (751) (157) FOREIGN EXCHANGE DIFFERENCES (net) 51,791 43,274 OTHER OPERATING INCOME: 20,857 28,299 Other operating income 20,857 28,299 OTHER OPERATING EXPENSES: (82,165) (74,310) Other operating expenses (82,165) (74,310) GROSS OPERATING INCOME 1,179,166 1,236,872

ADMINISTRATIVE EXPENSES: (478,540) (445,647) Staff costs (247,315) (232,709) Other general administrative expenses (231,225) (212,938) DEPRECIATION AND AMORTISATION (23,943) (27,196) PROVISIONING EXPENSE (NET) (23,869) (42,813) IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET): (202,637) (265,675) Loans and receivables (195,993) (262,077) Other financial instruments not valued at fair value through profit or loss (6,644) (3,598) OPERATING PROFIT (LOSS) 450,177 455,541

IMPAIRMENT LOSSES ON OTHER ASSETS (net): (1,236) (2,336) Goodwill and another intangible assets - - Other assets (1,236) (2,336) GAINS (LOSSES) ON THE DISPOSAL OF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE 7,227 5,127 GAINS (LOSSES) ON NON-CURRENT ASSETS HELD FOR SALE NO CLASSIFIED AS DISCONTINUED OPERATIONS (5,476) (4,775) PROFIT BEFORE TAX 450,692 453,557 CORPORATION TAX (91,233) (59,727) PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 359,459 393,830 PROFIT FROM DISCONTINUED OPERATIONS (net) - - PROFIT (LOSS) FOR THE PERIOD 359,459 393,830 EARNINGS PER SHARE:

Basic earnings (euros) 0.40 0.44

Diluted earnings (euros) 0.40 0.44

(*) Presented for comparative purposes only Consolidated financial statements 2015 Bankinter APPENDIX III (Continuation) 196

STATEMENTS OF RECOGNISED INCOME AND EXPENSE OF BANKINTER, S.A. CORRESPONDING TO THE FINANCIAL YEARS ENDED 31 DECEMBER 2015 AND 2014(Thousands of Euros)

Financial year Financial year 2015 2014 (*)

PROFIT (LOSS) FOR THE PERIOD 359,459 393,830

OTHER RECOGNISED INCOME AND EXPENSE: (19,337) 46,120 Items that will not be reclassified to income statement; 118 1,162 Actuarial gains and losses in defined benefit plans 169 1,659 Non-current assets held for sale - - Entities accounted for by the equity method - - Corporation tax related to items that will not be reclassified to income statement (51) (498) Items that may be reclassified to income statement; (19,455) 44,958 Available-for-sale financial assets - (22,711) 64,199 Revaluation gains (losses) 841 105,654 Amounts transferred to income statement (23,552) (41,455) Other reclassifications - - Cash flow hedges - - - Revaluation gains (losses) - - Amounts transferred to income statement - - Amounts transferred to initial carrying amount of hedged items - - Other reclassifications - - Hedges of net investments in foreign operations - - - Revaluation gains (losses) - - Amounts transferred to income statement - - Other reclassifications - - Foreign exchange differences - (5,081) 27 Revaluation gains (losses) (5,081) 27 Amounts transferred to income statement - - Other reclassifications - - Non-current assets held for sale - - - Revaluation gains (losses) - - Amounts transferred to income statement - - Other reclassifications - - Actuarial gains (losses) in pension plans - - Other recognised income and expense - - Corporation Tax 8,337 (19,268) TOTAL RECOGNISED INCOME AND EXPENSE 340,122 439,950 Consolidated financial statements 2015 Bankinter APPENDIX III (Continuation) 197

BANKINTER, S.A.

ESTADOS TOTALES DE CAMBIOS EN EL PATRIMONIO NETO DE LOS EJERCICIOS ANUALES FINALIZADOS EL 31 DE DICIEMBRE DE 2015 Y 2014 (Thousands of Euros) Own funds Less - Total Other equity Less - Treasury Profit (loss) for Dividends and Shareholders' Valuation Share capital Share premium Reserves instruments shares the period Remunerations Equity Adjustments Total

CLOSING BALANCE AT 31 DECEMBER 2014 269,660 1,184,268 1,483,948 - (771) 393,830 (68,913) 3,262,022 73,153 3,335,175 Adjustments due to changes in accounting policy - - - Adjustments to correct errors ADJUSTED OPENING BALANCE 269,660 1,184,268 1,483,948 - (771) 393,830 (68,913) 3,262,022 73,153 3,335,175 Total recognised income and expense - - - - - 359,459 - 359,459 (19,337) 340,122 Other changes in net worth: - - 255,289 1,227 (217) (393,830) (68,271) (205,802) - (205,802) Capital increases ------Share capital reductions ------Conversion of financial liabilities to equity ------Increases in other equity instruments ------Reclassification of financial liabilities to other equity instruments ------Reclassification of other equity instruments to financial liabilities ------Distribution of dividends and similar payments to shareholder ------(206,215) (206,215) - (206,215) Trading in own equity instruments (net) - - (585) - (217) - - (802) - (802) Transfers between net worth items - - 255,886 - - (393,830) 137,944 - - - Increases (reductions) due to business combinations ------Payments in equity instruments - - (12) 1,227 - - - 1,215 - 1,215 Other increases (reductions) in net worth ------CLOSING BALANCE AT 31 DECEMBER 2015 269,660 1,184,268 1,739,237 1,227 (988) 359,459 (137,184) 3,415,679 53,816 3,469,495

Own funds

Less - Profit (loss) Less - Share Share Other equity Treasury for the Dividends and Total Shareholders' capital premium Reserves instruments shares period Remunerations Equity Valuation Adjustments Total CLOSING BALANCE AT 31 DECEMBER 2013 268,675 1,172,645 1,356,638 12,608 (432) 233,907 (52,602) 2,991,439 27,033 3,018,472 Adjustments due to changes in accounting policy (25,824) (25,524) (51,348) (51,348) Adjustments to correct errors ADJUSTED OPENING BALANCE 268,675 1,172,645 1,330,814 12,608 (432) 208,383 (52,602) 2,940,091 27,033 2,967,124 Total recognised income and expense - - - - - 393,830 - 393,830 46,120 439,950 Other changes in net worth: 985 11,623 153,134 (12,608) (339) (208,383) (16,311) (71,899) - (71,899) Capital increases 985 11,623 - (12,608) ------Share capital reductions ------Conversion of financial liabilities to equity ------Increases in other equity instruments ------Reclassification of financial liabilities to other equity instruments ------Reclassification of other equity instruments to financial liabilities ------Distribution of dividends and similar payments to shareholder ------(70,167) (70,167) - (70,167) Trading in own equity instruments (net) - - 24 - (339) - - (315) - (315) Transfers between net worth items - - 154,527 - - (208,383) 53,856 - - - Increases (reductions) due to business combinations ------Payments in equity instruments - - (205) - - - - (205) - (205) Other increases (reductions) in net worth - - (1,212) - - - - (1,212) - (1,212) CLOSING BALANCE AT 31 DECEMBER 2014 269,660 1,184,268 1,483,948 - (771) 393,830 (68,913) 3,262,022 73,153 3,335,175 Consolidated financial statements 2015 Bankinter APPENDIX III (Continuation) 198

CASH FLOW STATEMENTS OF BANKINTER, S.A. CORRESPONDING TO FINANCIAL YEARS ENDED 31 DECEMBER 2015 AND 2014 (Thousands of Euros)

Financial year 2015 Financial year 2014 (*) NET CASH FLOWS FROM OPERATING ACTIVITIES: 420,952 (768,090) Profit (loss) for period 359,459 393,830 Adjustments to obtain cash flows from operating activities - 320,949 405,653 Other adjustments 297,006 378,457 Depreciation and Amortisation 23,943 27,196 Net increase/(decrease) in operating assets - (1,021,324) 1,813,226 Held for trading (879,844) 1,006,909 Other financial assets at fair value through profit or loss 7,736 31,315 Available-for-sale financial assets (1,844,428) (1,035,638) Loans and receivables 1,635,587 1,652,362 Other operating assets 59,625 158,278 Net increase/(decrease) in operating liabilities- (1,420,674) 140,673 Held for trading 1,328,467 690,779 Other financial assets at fair value through profit or loss - - Financial liabilities at amortised cost (2,736,558) (669,313) Other operating liabilities (12,583) 119,207 Payments made / received in respect of corporation tax 139,894 104,979

NET CASH FLOWS FROM INVESTING ACTIVITIES: 407,868 397,229 Payments - (49,197) (82,269) Property, plant and equipment (33,901) (34,442) Intangible assets (8,062) (8,062) Investments (7,234) (39,765) Non-current assets and associated liabilities held for sale - - Held-to-maturity investments - - Payments received - 457,065 479,498 Property, plant and equipment 25,176 18,731 Intangible assets - - Investments 48 37,912 Subsidiaries and other business units Non-current assets held for sale 18,691 23,109 Held-to-maturity investments 413,150 399,746 NET CASH FLOWS FROM FINANCING ACTIVITIES: (220,121) (90,375) Payments - (232,723) (97,928) Dividends (206,215) (90,077) Subordinated liabilities (13,300) - Amortisation of equity instruments - - Acquisition of own shares (contributions to capital) (except Savings banks) (13,208) (7,851) Other payments related to financing activities - - Payments received - 12,602 7,553 Subordinated liabilities - - Issuing of equity instruments - - Disposal of own shares/contributions to capital (except Savings banks) 12,602 7,553 Other payments received related to financing activities - -

EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES - - EFFECT OF CHANGES IN CASH AND CASH EQUIVALENTS 608,699 (461,236) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 579,785 1,041,021 CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,188,484 579,785

MEMORANDUM ITEMS: COMPONENTS AND CASH AND CASH EQUIVALENTS- Cash 199,413 139,508 Cash equivalents at central banks 723,661 217,555 Other financial assets 265,410 222,722 Total cash and cash equivalents at the end of the period 1,188,484 579,785 Consolidated financial statements 2015 Bankinter 199

APPENDIX IV Individualised information on certain issues, buy- backs or reimbursements of debt securities

Details of the Issuing Institution Details of Issues carried out in 2015 (a) Outstanding Risks that the Amount of the balance at Market on Type of Group would Relation to the Credit rating of Type of Date of Issue, Buy-back or Name Country ISIN code Type of Security 31-12-2015 Interest rate which it is Guaranteed Assume In Group Issuer or Issue Transaction Transaction Reimbursement (Thousands of quoted Granted Addition to the (Thousands) Euros) Guarantee Credit Parent Mortgage Bankinter S.A. SPAIN A1/A ES0413679319 Mortgage bond Issue 30/01/2015 50,000 50,000 EUR 3m + 0.45% AIAF enhancement Company portfolio (0%) Credit Parent Mortgage Bankinter S.A. SPAIN A1/A ES0413679327 Mortgage bond Issue 05/02/2015 1,000,000 1,000,000 1.10% AIAF enhancement Company portfolio (0%) Credit Parent Mortgage Bankinter S.A. SPAIN A1/A ES0413679103 Mortgage bond Issue 02/06/2015 250,000 250,000 EUR 3m + 0.18% AIAF enhancement Company portfolio (0%) Credit Parent Mortgage Bankinter S.A. SPAIN Aa2/A ES0413679343 Mortgage bond Issue 03/08/2015 1,000,000 1,000,000 0.875% AIAF enhancement Company portfolio (0%) Credit Parent Mortgage Bankinter S.A. SPAIN Aa2/A ES0413679350 Mortgage bond Issue 09/10/2015 750,000 750,000 0.625% AIAF enhancement Company portfolio (0%) Credit Parent Subordinated Partial Bankinter S.A. SPAIN Ba2/BB- ES0213679162 09/01/2015 11,900 10,000 EURIBOR 3m+0.84% AIAF - Enhancement Company Debt amortisation (0%) Bankinter Credit Partial Eur 3M +3.75% min Emisiones S.A. Subsidiary SPAIN B2/B ES0113549002 09/01/2015 60 56,324 AIAF - Enhancement Preferred Shares amortisation 4%- max 7% Unipersonal (0%) Series I Bankinter Credit Partial Eur 3M +3.75% min Emisiones S.A. Subsidiary SPAIN B2/B ES0113549002 15/07/2015 1,951 56,324 AIAF - Enhancement Preferred Shares amortisation 4%- max 7% Unipersonal Series I (0%) Depreciation Credit Bankinter 2 Asset-backed Mortgage Subsidiary SPAIN A2 ES0313800031 and 22/01/2015 21,956 - Euribor 6m + 0.25% AIAF enhancement FTH securities portfolio Amortisation (7.50%) Depreciation Credit Bankinter 2 Asset-backed Mortgage Subsidiary SPAIN B1 ES0313800049 and 22/01/2015 3,200 - Euribor 6m + 0.50% AIAF Enhancement FTH securities Portfolio Amortisation (3.50%) Depreciation Credit Bankinter 4 Asset-backed Mortgage Subsidiary SPAIN A1/AA - ES0313800031 and 19/01/2015 11,357 - Euribor 3m + 0.32% AIAF enhancement FTPYME securities portfolio Amortisation (54.93%) Depreciation Credit Bankinter 4 Asset-backed Mortgage Subsidiary SPAIN A1/A+ ES0313800049 and 19/01/2015 63,572 - Euribor 3m + 0.30% AIAF enhancement FTPYME securities Portfolio Amortisation (54.93%) Depreciation Credit Bankinter 4 Asset-backed Mortgage Subsidiary SPAIN A1/A+ ES0313800031 and 19/01/2015 7,144 - Euribor 3m + 0.34% AIAF enhancement FTPYME securities portfolio Amortisation (54.93%) Depreciation Credit Bankinter 4 Asset-backed Mortgage Subsidiary SPAIN A1/A ES0313800049 and 19/01/2015 30,000 - Euribor 3m + 0.50% AIAF enhancement FTPYME securities Portfolio Amortisation (31.51%) Depreciation Credit Bankinter 4 Asset-backed Mortgage Subsidiary SPAIN Ba1/BBB ES0313800031 and 19/01/2015 16,000 - Euribor 3m + 0.70% AIAF enhancement FTPYME securities portfolio Amortisation (19.02%) Depreciation Credit Parent Mortgage Bankinter S,A SPAIN A3/A- ES0413679251 Mortgage bond and 06/02/2015 200,000 - EUR 3m + 3.25% AIAF enhancement Company portfolio Amortisation (0%) Depreciation Credit Parent Mortgage Bankinter S,A SPAIN A3/A- ES0413679293 Mortgage bond and 27/07/2015 200,000 - EUR 3m + 0.217% AIAF enhancement Company portfolio Amortisation (0%) Consolidated financial statements 2015 Bankinter 200

ANNEXE IV Individualised information on certain issues, buy-backs or reimbursements of debt securities

Details of the Issuing Institution Details of Issues carried out in 2014 (a) Amount of Outstanding Risks that the the Issue, balance at Group would Credit rating Buy-back or 31-12-2014 Market on Type of Assume In of Issuer or Type of Date of Reimbursement (Thousands which it is Guaranteed Addition to Name Relation to the Group Country Issue ISIN code Type of Security Transaction Transaction (Thousands) of Euros) Interest rate quoted Granted the Guarantee Credit Mortgage Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679293 Coverage Issue 27/01/2014 200,000 200,000 EUR 3m + 1.25% AIAF Portfolio (0%) Credit Mortgage Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679301 Coverage Issue 19/05/2014 200,000 200,000 EUR 3m + 0.85% AIAF Portfolio (0%) Credit Enhancement Bankinter S.A. Parent Company SPAIN BBB-/Baa3 ES03136793B0 Senior products Issue 10/06/2014 500,000 500,000 1.75% AIAF - (0%) Depreciation Credit Mortgage and Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679103 Coverage Amortisation 14/01/2014 20,000 0 3.90% AIAF Portfolio (0%) Depreciation Credit Mortgage and Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679137 Coverage Amortisation 15/01/2014 10,000 0 4.25% AIAF Portfolio (0%) - Credit Partial Enhancement Bankinter S.A. Parent Company SPAIN BB ES0213679139 Subordinate amortisation 21/01/2014 1,500 17,300 EUR 3m + 0.76% AIAF (0%) - Credit Partial Enhancement Bankinter S.A. Parent Company SPAIN BB ES0213679147 Subordinate amortisation 21/01/2014 27,100 31,900 EUR 3m + 0.80% AIAF (0%) - Credit Partial Enhancement Bankinter S.A. Parent Company SPAIN BB ES0213679162 Subordinate amortisation 21/01/2014 17,700 21,900 EUR 3m + 0.84% AIAF (0%) - Credit Partial Enhancement Bankinter S.A. Parent Company SPAIN BB ES0213679170 Subordinate amortisation 21/01/2014 40,000 4,700 EUR 3m + 0.82% AIAF (0%) Credit Mortgage Partial Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679129 Coverage amortisation 18/03/2014 150,000 750,000 4.25% AIAF Portfolio (0%) Credit Mortgage Partial Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679160 Coverage amortisation 18/03/2014 400,000 300,000 4.675% AIAF Portfolio (0%) Depreciation Credit Mortgage and Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679152 Coverage Amortisation 25/04/2014 200,000 0 EUR 3m + 3.50% AIAF Portfolio (0%) Depreciation Credit Mortgage and Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679194 Coverage Amortisation 07/05/2014 100,000 0 EUR 3m + 4.90% AIAF Portfolio (0%) Depreciation Credit Mortgage and Mortgage Enhancement Bankinter S.A. Parent Company SPAIN A1/A ES0413679061 Coverage Amortisation 13/11/2014 1,175,000 0 3.25% AIAF Portfolio (0%) Consolidated financial statements 2015 Bankinter 201

APPENDIX V Annual Banking Report consolidated financial statements for the Group, which also include the shareholdings in joint ventures and investments in associate companies. Information on the Group Bankinter The consolidated group conducts its business in Spain, except in the case of its pursuant to Article 87 of Law 10/2014 of 26 June subsidiary Bankinter Luxembourg S.A., which conducts its business in another European Union Member State: Luxembourg. (“Annual Banking Report”): b) Turnover This information has been prepared in compliance with the provisions of Article 87 and the twelfth transitional provision of Law 10/2014 of 26 June on the organisation, This heading shows information corresponding to the turnover by country on a supervision and solvency of credit institutions, published in the Boletín Oficial del consolidated basis. We have considered as turnover the gross operating income, as Estado (Spanish Official State Gazette) of 27 June 2014, transposing Article 89 of shown in the Group's consolidated income statement, at year-end 2015: Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 Figures at 31 December 2015 concerning access to the activity of credit institutions and the prudential supervision Turnover of credit institutions and investment firms, amending Directive 2002/87/EC (CRD IV) (in thousands of euros) and repealing Directives 2006/48/EC and 2006/49/EC. Spain 1,564,198 Luxembourg 4,617 a) Name, nature and geographical location of the activity Total 1,568,815 c) Number of full-time employees. Bankinter, S.A. was incorporated by notarial deed issued in Madrid on 4 June 1965, under the name Banco Intercontinental Español, S.A. On 24 July 1990 it acquired Below follows information on the full-time employees by country at the close of 2015; its current name. It is registered in the Official Banks and Bankers Register. Its Tax Figures at 31 December 2015 Identification number is A-28157360 and it belongs to the Deposit Guarantee Fund No. of employees with code number 0128. The company address is Paseo de la Castellana 29, 28046 Spain 4,386 Madrid, Spain. Luxembourg 19 Total 4,405 The corporate purpose of Bankinter, S.A. is the performance of banking activity, and it is subject to the laws and regulations applicable to banking institutions operating in Spain.

In addition to the operations it carries out directly, the Bank is the parent company of a group of dependent institutions, which are dedicated to various activities (essentially services related to asset management, credit cards and the insurance business) and which constitute, together with the Bank, the Bankinter Group. Consequently, the Bank is obliged to elaborate, in addition to its own individual financial statements, Consolidated financial statements 2015 Bankinter 202

d) Gross profit before tax

This heading shows the gross profit before tax, on a consolidated basis. Figures at 31 December 2015 Gross profit (in thousands of euros) Spain 521,975 Luxembourg -1,644 Total 520,330

e) Taxes on profit

This heading shows the tax on profit, on a consolidated basis. Figures at 31 December 2015 Taxes on profit (in thousands of euros) Spain 144,410 Luxembourg - Total 144,410

f) Grants, subsidies or public assistance received

Neither Bankinter S.A. nor any institution in its Group has received any grants, subsidies or public assistance. g) Return on assets.

The Group's return on assets during the year, calculated by dividing the net profit by the average balance sheet total (equal to the sum of balance sheet totals at last two year-ends divided by two) is 0.65%. Consolidated financial statements 2015 Bankinter 203

Bankinter Group Bankinter obtained in the first week of January the necessary authorisations Management Report corresponding to the financial year from the European Central Bank (ECB) and the Bank of Portugal (BdP) to establish ended 31 December 2015 its branch in Portugal. At the same time, the Portuguese Insurance and Pension Funds Supervisory Authority (ASF) has authorised Bankinter Seguros de Vida, a 1. Evolution of the Group during the financial year company controlled at 50% by Bankinter and Mapfre, to constitute a Portuguese branch and to complete the purchase of the life insurance and pensions business 1.1 Corporate Activity with which Barclays operates in the Portuguese market. It is expected that the agreement will take force and that the purchase will be completed in the first Bankinter, S.A. is the parent company of a group with subsidiary and affiliated half of 2016. From that moment, a merging process will begin, which will last companies that mainly operate in the banking, securities and insurance sector. It approximately twelve months, in order to integrate the staff, installations, follows a group management model and, therefore, we will go on to incorporate operating systems, technological platforms, policies and business models of both the group's consolidated management report, of which Bankinter, S.A. is the banks. parent company. At the date in which the financial statements of 2015 were drafted, the On 2 September 2015 Bankinter, S.A. reached an agreement with Barclays PLC aforementioned purchase and sale operation had not been materialised. through which Bankinter, S.A. acquired the retail network of Barclays in Portugal; and Bankinter Seguros de Vida, a joint company of Mapfre and Bankinter, acquired Note 13, Shareholdings, of the consolidated financial statements describes the the insurance business of Barclays in Portugal. The transaction consists in the structure of the group: the main subsidiaries and associates, percentages of direct acquisition of a Barclays PLC customer portfolio together with the material and and indirect holdings, activity, key figures and other information of interest. human resources that provide the service to these customers and maintain the It also provides information on institutions structured by the group, whether relationship with them. It constitutes the incorporation into Bankinter, once the consolidated or not, and investment funds, pension funds and SICAVs managed agreement takes effect, of 185,000 new customers, 84 new branches, and nearly by the group. one thousand employees, in addition to a 4,881 million euros credit investment, regular accounts of 2,500 million euros, and 2,936 million euros in assets During the 2015 financial year, the Group has reduced its share in the company managed off the balance sheet. Eurobits Technologies, S.L. to 49.95%. During the fourth quarter of 2014, the Group, which had held a share in the company Eurobits Technologies, S.L. of 32.01%, increased its share up to 71.98%. Consolidated financial statements 2015 Bankinter 204

1.2. Results These results are based on sustained growth in the consolidated strategic business lines of Private Banking and Corporate & SME Banking, the recently The Group Bankinter obtained a net profit at year-end 2015 of 375.9 million euros, nurtured Personal Banking and Consumer Finance business lines, and the 36.26% higher than in 2014, which translates into a profit increase of 100 million. solidity and profitability of the insurance business. This rise in revenue is a direct It is the best net profit that the bank has recorded in its 50 years of history. In 2015 result of typical customer business, where the net interest income and fees and the profit before tax reached 520.3 million, 32.45% higher than in 2014. Similarly, commissions have increased. They are recurring income and the generation of return on invested capital reached sector highs, with an ROE of 10.9%. results from the Bank's institutional portfolios have been largely abandoned. With respect to costs, there is a 6.7% increase of staff costs due to adding 220 staff to the 31/12/2015 31/12/2014 Difference Banking Group. The general expenses, including depreciation and amortisation, INCOME STATEMENT Cost Cost Cost % have increased by 4.9%, due to costs related to increasing staff and higher Interest and similar income 1,283,765 1,404,321 -120,556 -8.58 investments in the Corporate & SME Banking and Consumer Finance business Interest expense and similar charges -414,311 -648,963 234,653 -36.16 lines. Despite these higher costs in 2015, the efficiency of the banking business Net interest income 869,454 755,358 114,096 15.10 has helped it drop from 44.5% at the close of 2014 to 43.7% in 2015. In short, the Returns on equity instruments 6,681 8,004 -1,323 -16.53 higher costs have been amply absorbed by the greater revenue generated. Share of profit or loss of equity- accounted instituions 18,223 16,962 1,261 7.43 Net fees 309,873 291,407 18,465 6.34 Profits/losses from financial operations and foreign exchange differences 119,108 133,296 -14,188 -10.64 Other products / operating expenses 245,477 243,797 1,680 0.69 Gross Profit Margin 1,568,815 1,448,823 119,992 8.28 Staff Costs -393,459 -368,739 -24,721 6.70 Administrative expenses / Depreciation and amortisation -367,594 -350,508 -17,086 4.87 Profit (loss) before impairment losses 807,761 729,576 78,185 10.72 Provisions recorded -25,254 -41,536 16,281 -39.20 Losses due to impairment of assets -189,592 -237,508 47,916 -20.17 Profit (loss) after impairment losses 592,915 450,533 142,383 31.60 Gains (losses) on derecognition of assets -72,585 -57,694 -14,891 25.81 Profit before tax 520,330 392,839 127,491 32.45 Income tax -144,410 -116,951 -27,459 23.48 Consolidated result 375,920 275,887 100,033 36.26 Consolidated financial statements 2015 Bankinter 205

The following table shows the evolution of the income statement by quarter: As regards the various margins in the income statement, the Group’s net interest income reached 869.5 million euros, representing an increase of 15.10% relative INCOME STATEMENT 4Q15 3Q15 2Q15 1Q15 4Q14 to 2014. The fall of the yield on loans (-8.6%) has been offset by the sharp drop of Interest and similar the cost of customer funds (-36.2%). As a result, the overall customer margin has income 311,664 315,397 323,090 333,613 354,235 improved. Similarly, the cost of wholesale financing was considerably reduced. Interest expense and similar charges -90,325 -99,455 -102,661 -121,869 -143,693 The contribution of the institutional portfolio to the net interest income in 2015 Net Interest Income 221,339 215,942 220,429 211,744 210,544 has been of 165.2 million euros (159.9 million in 2014). The net interest income Returns on equity for the fourth quarter of 2015 was 221.4 million, 5% higher than in the fourth instruments 969 958 1,777 2,977 1,397 quarter of 2014. The drop in income (-12%) was much less than the drop in funding Share of profit or loss of costs (-37.1%), making it the best quarter for Bankinter in terms of net interest companies accounted for by the equity method 4,526 4,883 4,678 4,136 4,600 income. Net fee and commission income 76,976 79,765 77,784 75,348 74,842 The following table shows an analysis of the effects of changes in average Gains or losses on volumes and prices on the pure banking business, i.e. excluding the contribution financial assets and liabilities and foreign of LDA to the net interest income. It is worth noting the increase in average loan exchange differences 34,444 21,794 26,593 36,277 22,684 outstandings, providing a higher income of 68.6 million euros, and the decrease of Other products and interest rates in customer funds, involving a lower cost of 34.2 million euros. The operating income 30,852 69,575 72,252 72,799 27,989 total effect is a higher income of 122.9 million euros. Gross Operating Income 369,106 392,916 403,513 403,280 342,055 Accumulated Net Interest Staff costs -98,471 -99,260 -97,797 -97,932 -90,281 Difference Effect Income (Banking Group) Administrative/ Type-Balance Effect Amortisation expenses -90,172 -92,649 -90,630 -94,143 -88,425 Balances Margin Balances Types Total December 15/14 Operating Profit (Loss) Before Impairment 180,462 201,008 215,086 211,205 163,349 Credit Investment Customers 1,248,306 -94,504 63,808 -158,312 -94,504 Provisioning Expense -5,237 -6,184 -5,621 -8,213 -13,390 Debt Securities 315,133 -8,698 4,593 -13,291 -8,698 Impairment losses on assets -57,127 -35,351 -44,102 -53,012 -63,694 Other Assets -376,312 -4,162 220 -4,381 -4,162 Operating Profit (Loss) Coverage -5,103 -5,103 -5,103 After Impairment 118,098 159,473 165,363 149,981 86,265 Total Assets (a) 1,187,127 -112,466 68,621 -181,088 -112,466 Gains/losses on the Customer funds 2,750,178 -145,593 -7,194 -138,399 -145,593 disposal of assets -16,850 -18,447 -23,214 -14,075 -20,460 Negotiable Securities -198,982 -56,332 9,087 -65,420 -56,332 Profit before tax 101,249 141,027 142,149 135,906 65,805 Other Liabilities -1,780,425 -33,477 -22,010 -11,460 -33,470 Corporation Tax -24,854 -38,796 -39,989 -40,772 -18,841 Total Liabilities (b) 770,771 -235,402 -20,117 -215,278 -235,395 Consolidated Profit 76,395 102,231 102,161 95,134 46,963 Financial Margin (a) - (b) 416,356 122,935 88,738 34,191 122,928 Consolidated financial statements 2015 Bankinter 206

The customer margin has shown a positive trend in recent years, with a value 2.2 With respect to fees and commissions, the growth of the net fees and commissions times higher in 2015 when compared with 2011. This increase is mainly based is of 6.34%, which translates into a higher income of 18.5 million. Particularly on the drop of costs of customer funds and the moderation in the reduction of the notable within this growth is the asset management business, a strategic priority yields of funds, in an environment with historical lows in terms of interest rates.. of the Group, through its Private Banking and Personal Banking operations. Paid The following table shows the evolution by quarter: fees increased by 8.6% as a consequence of the higher fees paid to our virtual partners and brokers, which results from the higher revenue achieved via these data in % 4Q15 3Q15 2Q15 1Q15 4Q14 distribution channels. Weight Rate Weight Rate Weight Rate Weight Rate Weight Rate TOTAL FEES AND 31/12/2015 31/12/2014 Difference % Deposits in central banks 0.98% 0.01% 0.85% 0.02% 0.77% 0.02% 0.75% 0.03% 0.72% 0.03% COMMISSIONS Deposits in credit institutions 5.01% 0.12% 4.67% 0.15% 4.90% 0.03% 4.94% 0.08% 6.09% 0.09% FEE AND COMMISSION Credit to customers (a) 74.55% 2.19% 74.84% 2.25% 74.12% 2.41% 74.40% 2.55% 72.77% 2.65% EXPENSE 80,275 73,891 6,385 8.64 Debt securities 14.43% 3.22% 14.82% 3.26% 15.02% 3.16% 14.17% 3.40% 15.06% 3.34% Equity 0.53% 1.25% 0.53% 1.25% 0.61% 2.06% 0.60% 3.62% 0.59% 1.65% FEE AND COMMISSION INCOME Other non-weighted yield 0.13% 0.11% 0.14% 0.16% 0.15% Average interest-bearing assets (b) 95.50% 2.24% 95.72% 2.29% 95.43% 2.41% 94.85% 2.57% 95.24% 2.60% For financial guarantees and letters of credit 30,702 29,522 1,180 4.00 Other assets 4.50% 4.28% 4.57% 5.15% 4.76% TOTAL AVERAGE ASSETS 100.00% 2.14% 100.00% 2.20% 100.00% 2.30% 100.00% 2.44% 100.00% 2.48% For exchange of foreign Deposits in central banks 3.17% 0.14% 2.68% 0.15% 3.89% 0.12% 5.26% 0.10% 5.36% 0.06% currencies and foreign banknotes 8,894 8,619 274 3.18 Deposits in credit institutions 7.86% 2.00% 10.38% 1.52% 12.78% 1.19% 12.43% 1.23% 12.58% 1.56% Customer funds (c) 75.66% 0.50% 73.85% 0.60% 70.15% 0.70% 68.78% 0.94% 69.02% 1.05% For contingent commitments 14,590 16,542 -1,952 -11.80 Customer deposits 57.53% 0.33% 56.08% 0.40% 53.13% 0.51% 51.92% 0.72% 51.73% 0.84% For collections and payments 64,380 69,798 -5,417 -7.76 Debt securities 18.13% 1.01% 17.77% 1.26% 17.01% 1.30% 16.86% 1.63% 17.29% 1.68% For securities services 85,587 70,747 14,840 20.98 Subordinated liabilities 1.03% 5.03% 1.06% 4.95% 1.09% 4.90% 1.09% 4.94% 1.08% 5.00% Underwriting and placement Other non-weighted expenses 0.12% 0.12% 0.12% 0.15% 0.16% of securities 2,971 2,654 317 11.95 Average funds with expenses (d) 87.71% 0.70% 87.97% 0.78% 87.90% 0.83% 87.56% 1.01% 88.05% 1.14% Sale and purchase of Other liabilities 12.29% 12.03% 12.10% 12.44% 11.95% securities 36,583 31,476 5,107 16.23 AVERAGE TOTAL FUNDS 100.00% 0.62% 100.00% 0.69% 100.00% 0.73% 100.00% 0.88% 100.00% 1.00% Administration and custody of securities 27,466 25,008 2,458 9.83 Customer margin (a-c) 1.70% 1.65% 1.71% 1.61% 1.60% Brokerage margin (b-d) 1.53% 1.51% 1.58% 1.56% 1.46% Asset management 18,567 11,609 6,958 59.94 For marketing of non- Quarter ATM (thousands of €) 58,000,873 57,154,487 56,628,053 56,040,432 56,987,518 banking financial products 153,775 127,810 25,965 20.32 Asset management 108,792 83,760 25,033 29.89 Insurances and pension funds 44,983 44,049 933 2.12 Other fees 32,220 42,260 -10,040 -23.76 Total fee income 390,148 365,298 24,850 6.80 TOTAL NET FEES 309,873 291,407 18,465 6.34 Consolidated financial statements 2015 Bankinter 207

The Gross Operating Income of 2015 amounts to 1,568.8 million euros, which is Efficiency ratio with amortization of bank activity (%) 120 million euros more than in the same period of the previous year, and a growth of 8.3%. This increase is owed to the improvement of the net interest income (15.1%), the higher fees (6.3%) and the improvement of the LDA's technical results (7.2%). With regard to the financial transactions, their results dropped by 26.6% with respect to year-end 2014.

Accumulated Gross Operating Income (millions of €)

Lastly, in 2015, the group improved the coverage of its legal and tax contingencies, and reduced impairment losses on financial assets. All the above has led to a 32.45% improvement in pre-tax profit, closing the year with 520.3 million euros.

This financial year 2015 has highlighted the solidity and good progress of the Bank's customer business, which continues to pursue a strategy focused primarily on Corporate & SME Banking, Private Banking, Personal Banking and Consumer Ex RoF Gross Operating Income Ex RoF customer business Finance, the recurring business with customers still being the major contributor to income: 87%.

The increase in staff costs is related to the investments which the group is carrying out in the organic growth of the business: new recruitments, investments in marketing, and other related investments: However, this increase in costs is fully absorbed by the rise in income, improving the efficiency of the banking business from 44.5% in 2014 to 43.7% in 2015 and increasing the productivity per employee. Consolidated financial statements 2015 Bankinter 208

CUSTOMER FUNDS 31/12/2015 31/12/2014 Thousands of € % Breakdown of Gross Operating Income by Business (millions of €) Thousands of € Retail funds 34,603,553 30,310,757 4,292,795 14.16 2015 2014 Dif. % Public Administration Corporate Banking 527.6 522.3 1.0% Deposits 536,940 478,564 58,375 12.20 Commercial banking 400.0 273.0 46.5% Private Sector Deposits 32,065,587 25,460,855 6,604,732 25.94 LDA 351.3 339.0 3.6% Current Accounts 22,293,479 15,084,805 7,208,673 47.79 Consumer Finance 86.1 73.4 17.4% Term deposits 9,727,181 10,294,690 -567,510 -5.51 Not Customers 203.8 241.1 -15.5% Valuation adjustments 44,928 81,359 -36,431 -44.78 Gross Operating Income 1,568.8 1,448.8 8.3% Other demand liabilities 219,214 266,062 -46,848 -17.61 Online negotiable securities 1,781,812 4,105,276 -2,323,464 56.60

Repurchase agreements 789,927 684,660 105,267 15.38

Wholesale negotiable securities 8,920,997 7,609,976 1,311,021 17.23

Promissory notes and 1.3. Evolution in Deposits and Lending effects 536,304 363,796 172,508 47.42 Securitised bonds 1,357,762 2,151,855 -794,092 -36.90 Customer retail lending grew by 4,292 million euros or 14.16% in the year. The Mortgage bonds 6,194,371 4,316,985 1,877,386 43.49 strong increase in current accounts of 47.8% stands out. Senior bonds 677,037 676,914 123 0.02 Valuation adjustments 155,523 100,426 55,097 54.86 Off-balance sheet resources also showed a strong growth of 24.7%, with particularly notable increases in investment funds, asset management and SICAVs. Total Funds on balance sheet 44,314,476 38,605,393 5,709,084 14.79

Funds off balance sheet 21,003,055 16,843,999 4,159,056 24.69 Own investment funds 7,417,439 7,233,279 184,160 2.55 External investment funds 6,187,744 3,812,032 2,375,712 62.32 Pension funds 2,085,600 1,936,084 149,516 7.72 Asset management and SICAVs 5,312,272 3,862,604 1,449,667 37.53

Customer lending grew by 4.3%, with particularly notable growth as has been indicated previously in lending to businesses (+5.6%). There was a sharp increase in new residential mortgage lending, a 19.8% rise with respect to 2014, which translates into 1,857 million euros. Off-balance sheet risks grew by 14.9%. Consolidated financial statements 2015 Bankinter 209

Liquidity gap (thousands of million €) Loan to Deposit Ratio (in %) CREDIT INVESTMENT 31/12/2015 31/12/2014 Thousands of € % Thousands of € Credit to Public Administration 1,676,296 1,704,402 -28,106 -1.65 Other sectors 42,506,338 40,742,322 1,764,016 4.33 Commercial credit 1,793,057 2,016,997 -223,939 -11.10 Secured loans 25,915,053 25,353,414 561,639 2.22 Other term receivables 11,540,110 9,899,189 1,640,921 16.58 Personal loans 6,319,321 5,791,740 527,582 9.11 Liquidity gap Credit accounts 5,220,789 4,107,449 1,113,339 27.11 Financial leases 985,139 968,590 16,548 1.71 Doubtful assets 1,990,922 2,194,167 -203,245 -9.26 Valuation adjustments -860,702 -958,193 97,491 -10.17 Other credits 1,142,758 1,268,158 -125,399 -9.89

Total Credits to customers 44,182,634 42,446,723 1,735,910 4.09

Risks off balance sheet 12,601,692 10,964,609 1,637,083 14.93 Contingent risks 3,229,661 2,736,529 493,132 18.02 Available to third parties 9,384,389 8,228,081 1,156,308 14.05

Similarly, Bankinter has improved its financing structure, increasing yet another year the loan to deposits ratio up to 83.5% compared to 78.3% a year ago. The loan to deposit (LTD) ratio is calculated as the ratio between credit investment minus the securitised portion sold in the markets, as the numerator, and the customer lending (retail and institutional) plus ICO financing, as the denominator. With respect to the liquidity gap, it has been reduced by 2,000 million with respect to 2014. Consolidated financial statements 2015 Bankinter 210

Bankinter maintains its traditional competitive edge in terms of asset quality and Risk Cost solvency levels. Thus, Bankinter has reduced its non-performing loans ratio down Yearly Risk Cost* (millions of € and % over Total risk) to 4.1% vs the 4.7% of last year, constituting less than half of the sector average. Non-performing investments amount to 2,039 million euros, which is 8.7% lower than in 2014. The gross value of the foreclosed property asset portfolio was, on 31 December 2015, 531.3 million euros, 9.3% less than a year ago, and its coverage was 40.1%.

Credit Risk Problematic Assets €531.3M Amount Allocated Evolution of non-performing loans -€54.5M with respect to 2014 -9.3% (thousands of million €)

Non-performing loan ratio (in %)

With regards to solvency, Bankinter maintains a solid CET1 fully loaded capital ratio of 11.77%, among the highest in the sector and well above regulatory demands.

In the same way, maturities of wholesale issuances pending until 2019 total 4 billion euros, for which the bank has liquid assets valued at 9.1 billion euros in order to face and a capacity to issue mortgage debentures of 5.1 billion. The risk cost maintains its downward trend, reaching 0.52% at year-end, an 11.2% drop with respect to 2014 Consolidated financial statements 2015 Bankinter 211

1.4. Evolution in the business segments ■■ 361 SME Centres inside general branches to provide 62,868 active customers with services. Corporate & SME Banking ■■ 78 business centres, for 19,476 customers. During 2015, Corporate & SME Banking had to become familiar with an environment characterised by the narrowing of margins, as a result of the fall in interest rates. ■■ 22 corporate centres, for 5,578 customers.

In order to grow, rationalise resources and improve its relationship with customrers, Between the 22 corporate centres there are three dedicated exclusively to large the bank completed a profound transformation in the area, the latter segmented the corporations (customers invoicing more than one thousand million): two in Madrid attention directed at companies into three levels, depending on their annual sales and one in Barcelona. volume: SMEs (up to five million), businesses (from five to 50 million) and corporate (starting from 50 million). Area Results

A new structure was created with the aim of growing and generating more income; of While proceeding with the restructuring, Corporate & SME Banking continued in 2015 better managing customers by offering specific products, services and advice matched with its ordinary activities, which resulted in a rise in investment to nearly 19,900 to the companies' needs according to their size; improving service quality; creating million euros, 1,100 million more or 5.6% higher than at the end of the previous year. specialised centres for each segment; assigning specialised professionals in every Really significant was the growth in the volume of Signature Risk (documentary segment and adapting Basel and European Central Bank criteria, which are going to guarantees and business), which reached more than 2,900 million euros, after be used to supervise the main Spanish and European financial institutions. increasing by 21%. The market share of new business climbed to 5.4%, almost double that four years earlier. The transformation of the Business area required the relocation of most of the customers, which today are allocated to new centres and mentors with a greater Objectives degree of specialisation. Each of the three major segments of Enteprise Banking for 2016 is assigned specific The restructuring took place in phases. First, a pilot programme was completed in the objectives, always within the context of service improvement and results: Northern Area. Using the experience gained during the first half of 2015, the plan was extended to Madrid, Andalusia, the Balearic Islands and Levante. During the other half of the year it was the turn of the rest of the territorial network, which in Spain, at 31 December had: Consolidated financial statements 2015 Bankinter 212

■■ SMEs: increase in related business (payments and collections), seeking synergies COMMERCIAL BANKING between Private Banking and Personal Banking and adequacy in the price of financing risk. Retail Banking and Foreigners

■■ Companies: significant increase in the customer base, supporting international In 2015, the market for private customers was characteristically highly competitive. expansion, investment banking services and also the adequacy of the price of risk. Competition for the capture of customers was especially intense in two business areas:

■■ Corporate: defend the current margins, gain market share in overseas business, ■■ From the point of view of assets, the competitive pressure on mortgage lending expand the presence of Baning Partnet (offices in large companies) and increased. The result was a very significant decrease in the interest rate strengthen the expertise of professionals who are dedicated to large corporations. differentials offered and greater product diversification. Bankinter responded to the challenge of the market with innovative proposals, both fixed and variable mortgages. With a pioneering spirit, the bank also launched a mixed mortgage, 2015 2014 % Dif. which, for time intervals allows you to chose if the loan has a fixed or variable Acquisition (No. customers) 16,194 18,186 -11.0 interest rate. This strategy in the Retail Banking segment resulted in an increase Total Resources (in mill €) 13,743 12,048 14.1 in the contracting of new mortgages by 21%, which has meant the registration of Typical Resources (in mill €) 12,836 11,108 15.6 658.1 million euros worth of mortgages throughout the year. Investment 19,896 18,836 5.6 ■■ The high level of activity during 2015 in the registration of personal loans in the Retail Banking should be emphasised. During 2015, 134.7 million euros worth in registrations were taken, 46% more than in the previous year.

■■ From a point of view of liability, competition intensified especially in the salary- account segment. Given the reduction in interest rates and the narrowing of margins, banks strengthened their proposals regarding acquisition related products. Bankinter was one of the first banks to offer very competitive returns on its Salary Account, where in certain conditions the client would obtain a high return on the money deposited. In 2015, the balance of the Salary Accounts portfolio increased by 22%. Consolidated financial statements 2015 Bankinter 213

In addition to these strategic lines of action, the company also developed other Retail Banking 2015 2014 % Dif. products to meet the needs of all customer profiles. This applies, for example, to the Acquisition (No. customers) 32,047 32,259 -0.7% 'You and I' account aimed at couples who combine separate and common accounts, Total Resources (in mill €) 3,915 3,407 14.9% or to the Non-Salary Account in which the institution proposes several advantages Typical Resources (in mill €) 3,110 2,724 14.2% in return for linking receipts and spending per card. The offer of pre-authorised Investment 14,060 14,338 -1.9% consumer loans, which are granted to selected customers who meet certain pre- conditions has also been strengthened.

Foreigners 2015 2014 % Dif. Looking to the financial year 2016 no significant changes are expected in the personal Acquisition (No. customers) 2,863 2,796 2.4% market, so Bankinter will look into its strategies for customer acquisition, mortgages Total Resources (in mill €) 243 207 17.4% and salary accounts. Typical Resources (in mill €) 219 185 18.2% The market of individual foreign customers, centred most notably around mortgage Investment 653 669 -2.4% financing, was consolidated in 2015. The number of new customers went up to 2,863, with an increase of 7% in active customers. Total resources also evolved in a similar way, with a rise of 17.4%. The amount from the contracting of new Mortgages rose Private Banking Segment 66.5 million euros, which meant an increase of 39% on the previous year. Private Banking had an excellent 2015. The first half of the year was very positive, The Foreigners segment is concentrated in coastal areas, most notably in the and subsequently slowed down due to customers' reservations as a result of the Mediterranean and in the Canary Islands, where they usually acquire a residence. For Chinese crisis, as well as other issues that shook the market. From October, however, this, they need appropriate financing and they also demand high quality specialised things went back to normal thanks to the Stock Market's recuperation, whose cycles services. largely depend on Bankinter's strategic activities.

In order to provide this group of customers with the appropriate attention, Bankinter The objective of Private Banking it is to increase its customrt base, in particular has highly trained staff with language skills and knowledge of their specific needs. customers who are searching for a trustworthy portfolio manager in order to best optimise the profitability of their money, with reasonable security margins. Responding to these needs requires highly qualified staff who go through a process of continual training.

This trainings consists of staying up to date with knowledge, weekly meetings with Bankinter Asset Management leaders and a daily update on market developments. Thanks to this and to their independent judgment, bankers offer the best advice on investment and taxes, the two matters that concern customers the most. Consolidated financial statements 2015 Bankinter 214

Reinforcements and improvements to the Private Banking service, as well as the The switch in context coincided with the process of strengthening Personal Banking, constant renovation to its product portfolio, led to a new increase in net worth under the area of the organisation dedicated to the segment of customers with assets of management. The year ended with 28 thousand million euros, 21% more than in between € 75,000 and one million euros. This customer group, requires custom-made 2014. In 2015, Bankinter also ranked second in a ranking for Open-ended Investment management, specialised attention, a high level of service and a product offering Companies (SICAVs), with 461 and an annual rise of 20%. We estimate that one out which is adapted to the needs of each customer. of every 3 SICAVs set up during the financial year belonged to the Bank. To reinforce this service, in 2014, Bankinter started a process to transform Personal The reasons behind this success can be found in the rigorous selection process, good Banking, as it had done previously with Private Banking (one of the hallmarks of preparation and staff's sense of responsibility, which explains the increased quality Bankinter). To that end, the institution embarked on a major effort to develop new perceived by customers. In fact, the Private Banking team is considered to be one products, improve customer service and the training of specialised managers to of the best in the country. These achievements include the image of solvency and protect customers in this segment. security that the brand transmits and the implication of Senior Management in achieving the objectives set out. The activity of Personal Banking revolves around the manager, as we want to provide our customers the best possible service, and, therefore, the manager needs more and After three years of growth, the Private Banking division of Bankinter aspires to more sophisticated tools to properly perform their work. This way, the manager will keep acquiring new customers in 2016, but also to earn their loyalty and to achieve be able to choose the financial products that best suit the customer's risk profile and a greater volume of delegated assets, either directly or via funds, maintaining the needs, helping customers with a savings plan for their retirement, and providing profitability achieved thus far. solutions to their financing needs, mortgages, lines of credit, personal loans, etc. 2015 2014 % Dif. Acquisition (No. customers) 6,094 5,239 16.3 The improvement and transformation effort paid off in 2015, with an increase of 6.4% Total Resources (in mill €) 16,311 13,348 22.2 in the number of active customers. The development of the ‘Non-Salary Account’, Typical Resources (in mill €) 7,285 6,265 16.3 especially for the self-employed and entrepreneurs, and the ‘You and I’ Account, for Investment 2,624 2,368 10.8 couples with separate economies, contributed to the increase.

Personal Banking Segment The great challenge for Personal Banking is to consolidate changes that were put in motion throughout 2015. The improvement in economic expectations, together with low interest rates, meant 2015 2014 % Dif. that in 2015 customers demanded new investment proposals. This provided business Acquisition (No. customers) 27,025 26,781 0.9 opportunities that had disappeared during the hardest years of the crisis and which Total Resources (in mill €) 14,441 13,192 9.5 reappeared during the recovery. Typical Resources (in mill €) 9,045 8,554 5.7 Investment 7,484 7,055 6.1 Consolidated financial statements 2015 Bankinter 215

BANKINTER CONSUMER FINANCE In addition, Bankinter Consumer Finance, with a young and highly qualified team continued to develop in 2015 the two traditional pillars of its business: With the improvement in the economy, consumer credit recovered in Spain during 2015, although still rather timidly. Similarly, the non-performing loan ratios ■■ The already mentioned Obsidiana card not only provides credit facilities, but decreased, the growth of which had been spectacular at the start of the crisis. also offers the customer other advantages, such as specific discounts on certain products and services. Including, during 2015, the management of the Única Card In this context, last year Bankinter Consumer Finance – the Group's business for Bankinter's customers. specialised in credit cards and consumer loans – decided to implement an area for New Businesses, with the aim of attending to, in the best possible way, it's customers' ■■ The classical consumer credits are already automatic via card or with demand for financing. preauthorisation. To assess the latter, it has a refined data analysis system, which calibrates the risk-profitability of each operation and sets a specific price This newly created area is, amongst other things, meant to offer crossed loans to depending on the applicant profile. Obsidiana credit card holders, who already enjoy the most flexible conditions in the market, they can adjust the loan payments they have made to their income stream by Thanks to all of this, in 2015, Bankinter Consumer Finance managed to increase using plastic, without needing to accumulate them at the end of the month. its client base by 51%. The number of customers reached 728 thousand, as against 484 thousand in 2014. The average investment per customer was 987 euros, which Within new businesses, Bankinter Consumer Finance also designed a loans format represented an increase of 14% compared to the previous year. with a prescriptor, in order to finance purchases in certain establishments with which the bank maintains corresponding agreements. These loans will be launched on the For 2016, the company's intention is to continue making good use of the opportunities market throughout 2016. that the economy's recovery has generated and, specifically:

■■ Seek new strategic partnerships with large companies that are willing to use the finance products of Bankinter Consumer Finance as tools of customer loyalty.

■■ To develop advanced instruments so that customers can access their loans with all guarantees, with maximum comfort and in the briefest space of time possible. Consolidated financial statements 2015 Bankinter 216

LDA These results have been possible thanks to a strategy based on quality, flexibility and specialisation, in which, during recent years, various business proposals have been Direct Line Insurance, wholly-owned by Bankinter, is the leading company in terms of developed and adapted to each customer. Following on from this, Penélope Seguros, direct insurance sales in Spain, with a market share of almost 60% among companies a product designed for women, and Nuez, a brand that is revolutionising the sale of that operate over the telephone and online. Besides maintaining one of the highest insurance through the Internet and social networks, have consolidated their positions growth rates in the sector, it also boasts one of the best Customer Satisfaction Ratings as two of themost innovative brands in the industry. (CSAT 80.25), consolidating its position as a benchmark for quality, profitability and job creation, with a workforce of nearly 2,000 professionals and a portfolio of more The best Combined Ratio in the sector. Another of Línea Directa's great results of 2015 than 2.2 million policies at the end of 2014. has been its Combined Ratio, which ahs decreased to 86.7%, one of the lowest in the insurance sector. This indicator, which is key for any insurance company, measures Línea Directa operates in the Motor and Home branches, and is special in that its the profitability of insurance activity by relating the claims cost and the running cost products are only distributed over the phone or over the Internet, enabling it to offer with the volume of premiums issued. its customers high-end services at very competitive prices. In this respect, its business model, direct and without intermediaries, is based on direct contact with customers, The result in 2015 has been possible thanks to great operational efficiency and prudence in selecting risks and sales strength, making it very flexible from an excellent risk selection, which drastically reduced the loss ratio to 67.7%, an all-time operational standpoint in what is a very complex economic setting. low for Línea Directa.

Excellent results. During 2015, the company recorded a net increase of about 144,000 The value of reputation After having been included in MERCO Business and MERCO policies, representing a growth of 6.4% with respect to the previous year. In this People rankings for several years, in 2015, Línea Directa was entered in MERCO CSR regard, the total volume of the portfolio has exceeded 2.3 million customers, which is (Corporate Social Responsibility) rankings for the first time, consolidating it not only a particularly impressive figure when considering that the number of insured vehicles as one of the most responsible companies in the country, but also as having some in Spain only rose 1.1% last year. of the best Corporate Governance standards. The report, which takes the opinions of managers, CSR experts, NGOs, consumer associations, journalists and financial With respect to the volume of premium issued, Línea Directa reached 679.7 million analysts into account, ranks Línea Directa at number 4 in terms of its reputation in euros, 4.5% more than in 2014. This is thanks to the recovery of the Motor branch the sector and 85 in the whole country. (+2.8%), and to the strong growth experienced by the Home branch (+20.5%), much higher than the overall increase in the sector, which only equated to 1.7% for vehicles Road Safety. Here and Now. and 2.1% for home insurance. The Línea Directa Foundation was created in 2014 with the aim of fighting against Furthermore, Earnings before Taxes (EBT) was 139 million euros, corresponding to traffic accidents, promoting values such as safe driving and responsible behaviour +4%, which, in turn, has increased Net Profit by 6%, reaching 99.4 million euros, behind the wheel. That is why, using the slogan ‘Road Safety. Here and Now’, the the best in the company's history. In addition, Direct Line obtained in 2015 a ROE of Foundation centres its activity around four areas: Dissemination, Research, Training 29.8%, a coverage of actuarial reserves of 148% and a ratio of Solvency of 204%, which and Social Action, always with the common denominator of fighting in favour of the consolidates it as one of the more profitable and solid insurers of the sector. Road Safety. Consolidated financial statements 2015 Bankinter 217

Three powerful reports were written in 2015 and were widely discussed in the media, These new rules require much more demanding capital requirements on institutions, thus making drivers aware of the need to maintain safe driving standards. This year and to avoid this strengthening of solvency excessively affecting the real economy, the Línea Directa Foundation presented three studies: ‘Traffic fines, penalties or certain aspects of it will be phased-in gradually between now and 2019. This lessons?’, ‘The Influence that having older cars on the road has on traffic accidents transitional implementation phase mainly affects the definition of equity computable (2008-2013)’ and ‘Passengers and their influence in preventing traffic accidents. A as capital and the establishment of capital buffers higher then the regulatory gender perspective’. minimums.

Furthermore, the Foundation held the Journalistic Prize of Road Safety once again, Banco de España Circulars 2/2014 of 31 January and 3/2014 of 30 July establish which has been recognising the importance of the media's work in the prevention the calendar for applying the different aspects of the regulations in Spain. In of traffic accidents for over a decade, stimulating the publication of reports and the addition, certain aspects of the regulations are subject to further development by the promotion of road safety. European Banking Authority, whose main purpose is to establish uniform principles of implementation throughout the European Union. Over the course of 2014 and Another action that had a large impact was the 'Not a drop of alcohol behind the wheel 2015, the EBA published a large number of technical standards, guidelines and this Christmas' campaign, in which the Línea Directa foundation, in collaboration with recommendations developing numerous aspects, but many still remain in process of CEPSA and the Association for the Study of Spinal Injuries (AESLEME), distributed consultation or study, and they will be addressed, approved and published during the 5,000 breathalysers across various petrol stations in Madrid, Barcelona, Valencia and next few years. Seville. Management of equity 2015 also saw the first edition of the Entrepreneurs and Road Safety Prize, a unique competition in Spain, with a 20,000 euro prize as an investment, including training, The principle laid down by Bankinter's Board of Directors in relation to the mentoring and access to rounds of financing. The first edition received more than 60 management of its equity consists in operating with a level of solvency in excess of candidates focused on preventing traffic accidents. that established by applicable laws and regulations, appropriate to the risks inherent in its business and in the environment in which it operates. The objective is the 2. SOLVENCY and Management of Equity continuous strengthening of solvency as a basis for sustained growth and long-term value creation for shareholders. On 1 January 2014 the Regulation (EU) 575/2013 of the European Parliament and the Council of 26 June 2013, concerning the prudential requirements of credit In order to meet this objective, the Group has a series of policies and processes for institutions and investment companies, came into force together with Directive managing equity, the main guidelines of which are: 2013/36 of the Parliament and the Council dated 26 June 2013, concerning access to the activity of credit institutions and the prudential supervision. Both texts constitute the transposition into European law of the new solvency rules known as BIS III, and they regulate the levels of solvency and composition of the computable resources with which credit institutions must operate. Consolidated financial statements 2015 Bankinter 218

■■ The Board of Directors and Senior Management are actively involved in the The Bank considers its computable equity and the capital requirements established by strategies and policies concerning the management of the Group's capital. The regulations to be key factors in its management, affecting investment decisions, the objective is to maintain robust solvency ratios of appropriate quality that are analysis of the viability of transactions, the strategy for distributing profits and issues consistent with the Bank's risk profile and its business model. by the parent company, the subsidiaries and the Group, etc.

■■ The Equity and Basel Directorate, which reports to the Capital Market area, Evolution of equity during the year monitors and controls the solvency ratios using warning systems that ensure that the applicable rules are applied at all times and that the decisions made by the The minimum level of solvency required by Regulation (EU) 575/2013 is calculated by different areas and units of the Institution are consistent with the targets set for dividing the institution's computable equity by its risk-weighted assets. compliance of minimum equity requirements. In this sense, there are contingency plans to ensure the compliance of the limits set forth in the applicable regulations. The highest quality equity is called CET1 (Common Equity Tier 1), and it basically There are independent units entrusted with the validation, control and auditing comprises capital and reserves, minus a number of items such as treasury stock, of these processes. intangible assets and certain significant investments.

■■ Internal ratings based (IRB) methods are used to calculate the equity requirements After CET1 comes AT1 (Additional Tier 1), which basically consists of certain for certain credit portfolios, which have been validated and approved by the instruments with a high loss absorption component, as they would only outrank Supervisor. For the remainder of portfolios, the standard methods established shareholders in the event of liquidation. in the regulations are applied, and a progressive implementation plan has been agreed with the Supervisor to incorporate new portfolios into the IRB approach in Last comes T2 (Tier 2), which basically consists of instruments that absorb losses only upcoming years. after shareholders and AT1 instruments, being subordinated to common creditors.

In addition, the Regulation establishes certain limits on risk concentration and Thousands of € specific mandatory aspects with regard to the institution's corporate governance. It 31/12/2015 31/12/2014 Thousands of € also includes two new ratios related to the institution's liquidity and a leverage ratio. Capital 269,660 269,660 0 The Liquidity Coverage Ratio (LCR) aims to measure the institution's short-term Reserves 3,353,210 3,137,032 216,178 liquidity, and the Net Stable Funding Ratio (NSFR) measures the entity's level of stable funding in the medium term; the latter is still being calibrated. The leverage CET1 deductions -207,149 -120,214 -86,935 ratio seeks to limit excessive gearing and to ensure that institutions maintain assets Preferred shares 0 46,669 -46,669 in proportion to their level of capital, so as to try to avoid traumatic deleveraging in AT1 deductions -209,001 -282,947 73,946 times of recession. This ratio is also in the process of being calibrated, although the institutions are obliged to publish it starting in 2015. CET 1 3,206,720 3,050,199 156,521 CET 1 (%) 11.77% 11.87% -0.09% The consolidated equity at 31 December 2015 and 2014 and corresponding capital ratios are shown in the following table: TIER 1 3,206,720 3,050,199 156,521 TIER 1 (%) 11.77% 11.87% -0.09%

TIER 2 instruments 340,412 421,747 -81,334 TIER 2 deductions -79,800 -112,427 32,627

TIER 2 260,613 309,320 -48,708 TIER 2 (%) 0.96% 1.20% -0.25%

Total Computable Equity 3,467,333 3,359,519 107,813

Solvency level 12.73% 13.07% -0,34% Consolidated financial statements 2015 Bankinter 220

In December 2015 the highest quality equity (CET1) ratio was 11.77%, well in excess The supervisor established the ratio by assessing the institution's risk profile and of the regulatory minimum required by the regulations in force. The overall solvency by analysing the existing strategies, policies, technological systems and processes level was 12.73%. Next, we will explain in further detail the main changes in each of aimed at covering the risks of its banking activity and the existence of an effective the levels of capital. management of the capital.

The changes in the year 2015 in Common Equity Tier 1 (CET1) are basically due to The capital ratio CET1 at the close of 2015 was 11.77%, and it comfortably complies retaining part of the earnings for the year and the evolution of the deductions. with the requirements set forth following the supervisory process, exceeding it by 302 basis points. Changes in Additional Tier 1 (AT1) during the year resulted from the issue of preferred shares for 56,324 thousand euros no longer being eligible as Additional Tier 3. Main Business Risks 1 (AT1) under the new regulations. The deductions that should have been carried out to Additional Tier 1 were deducted from Common Equity Tier 1 (CET1). Economic Environment and International Markets

Tier 2 capital (T2) reduced as a result of certain subordinated debt issues were no E2015 was known for being a year of striking divergence in the pace of growth of the longer considered as capital, either because they were nearing their maturity or different economies from a geographical perspective. Whereas the United States and because they did not meet the stricter eligibility criteria contained in the current Europe continue to fortify their respective paths to recovery, emerging economies face regulations. serious imbalances. Joined to the sluggish growth rates recorded by several of these and considerable deficits in their current accounts or their failure to make structural As regards to the risk-weighted assets, there was an increase resulting from the reforms, are external factors such as the fall in price of raw materials, especially oil, Institution's increase of business that affected the credit risk, market risk and the consequences that the monetary normalisation initiated by the American Federal operational risk. Reserve has on their foreign debt, which especially affects those who have higher percentages of their debt in dollars, or the loss of momentum in China. Supervisory review and evaluation process (SREP) In 2015 the European path to recovery was still unremarakble. The newly found In November 2015, the European Central Bank notified institutions the conclusions European economic recovery was backed by the European Central Bank, whose regarding the supervisory review and evaluation process it carried out during the monetary policy was highly expansive. In its last meeting last year - December - it year, as well as its decision on the requirements of minimum capital to maintain said relaxed its monetary policy even more by cutting its deposit interest rate ( a further institutions. The minimum capital ratio CET1 demanded from Bankinter is 8.75%, the - 10 bp up to - 0.30%) and extended the period for its assets purchase programme, lowest in the Spanish banking sector. amongst other measures. Partly as a result of these activities, credit given in the Eurozone grew by +1.2% until November 2015, which strengthened the process of economic recovery. Consolidated financial statements 2015 Bankinter 221

In the domestic arena, Spain, together with Ireland, continued to lead economic 4. Risk management. growth in the Eurozone as its GDP grew by +3.4% in the third quarter of 2015. The improvement in the Spanish economy is supported by the recovery of domestic Note 45 of the financial statements contains a description of the Group's risk policies demand, driven in turn by household consumption and by the increase in business and risk management during 2015. Following the recommendations of the “Guide to investment. There are already clear signs of an upturn in employment : In 2015 the preparation of the management report for listed institutions” published by the CNMV unemployment figure fell by 354,200 and the number of people registered for Social in 2013, we refer to this Note, which deals specifically with: Security rose by 533,186. ■■ Framework Agreement on Risk Policy issued by the Board of Directors Amongst developed economies, the United States remained as the global leader, one year more, with year-on-year growth that was over 2% and showed a high amount ■■ Credit Risk: Organisation, policies and management, Evolution during the year, of employment creation. The promising direction the American economy was taking Maximum exposure to credit risk, Policy on refinancing and restructuring, allowed the Federal Reserve to begin the process of standardisation of its monetary Evolution of customer risk, Control, monitoring and recoveries, Non-performing policy at its meeting in December 2015, when it raised its reference interest rate by loans and Foreclosed Assets, Provisions. 25 bp, up to the 0.25%/0.50%.range. ■■ Policies for managing structural risks: structural interest rate, liquidity and market Emerging economies continued to be the weakest link in the chain of global economic risk. recovery. Two economies stand out for their poor performance: Brazil and China. Brazil, apart from experiencing a downturn in its economy in 2015 (-4.5% in the 3Q ■■ Policies for managing market risk. of 2015) and a slowdown in the main economic sectors, faced high inflation (+10.7% in December 2015) and a strong depreciation of its currency. High prices compelled ■■ Operational Risk. its central bank to keep raising its reference interest rate throughout 2015, up to low two-digit rates. The slowdown in the Chinese economy meant the global economy was ■■ Reputational and Compliance Risk subjected to considerable imbalance, not just due to the loss of momentum there, but because of the consequences this had on other economies. Also, Note 11 of the financial statements details the main asset and liability accounting hedge transactions undertaken by the institution. All in all, the the global business cycle kept changing positively throughout 2015 at a slight, but expansive pace despite all the difficulties and vulnerabilities there were. In a sense, there was a comeback in the global economy last year, when the phase turned from downturn to growth. Consolidated financial statements 2015 Bankinter 222

5. Other Relevant Information The most significant data on Bankinter stock in 2015 are summarised in this chart:

Generation of value for shareholders 5.1. Stock market information Data per share for the period, as at 31/12/2015 (euros) At 31 December 2015, the Bankinter share capital was represented by 898,866,154 Earnings per share 0.42 shares with a par value of 0.30 euros each, fully subscribed and paid-out. All shares Dividend per share 0.23 are represented in book entries, officially listed on the Madrid and Barcelona Stock Theoretical account value per share 4.23 Exchanges, and subscribed on the continuous market. Share price at the start of the year 6.70 At the close of the financial year, Bankinter´s share capital structure was made up Minimum share price 5.88 of 61,386 shareholders. Residents held 55.80% of share capital and the other 44.20% Maximum share price 7.40 was in the hands of non-residents. Registered shareholders with over 5% of share Last share price 6.54 capital are detailed in the attached chart. Bought-back shares were 150,080. Revaluation over last 12 months (%) -2.34 Shareholders with significant holdings 31/12/2015 Name Total Shares % Cartival, S.A. 205,505,462 22.86 Market ratios as at 31/12/2015 Corporación Masaveu, S.A. 44,959,730 5.00 Price/Theoretical accounting value (times) 1.55

PER (price/earnings, times) 15.64 Share ownership structure by 31/12/2015 number of shares Dividend yield (%) 3.51 Number of shareholders 61,386 Tranches No. of shareholders % No. of Shares % From 1 to 100 shares 19,855 32.35 263,937 0.03 Number of shares 898,866,154 From 101 to 1,000 shares 18,031 29.37 8,873,528 0.99 Number of shares of non-residents 397,261,143 From 1,001 to 10,000 shares 19,436 31.66 65,285,838 7.26 Average daily trading (number of shares) 4,780,231 From 10,001 to 100,000 shares 3,769 6.14 89,839,446 9.99 More than 100,000 shares 295 0.48 734,603,405 81.73 Average daily trading (thousands of €) 32,198 Total 61,386 898,866,154

Stock market capitalisation (thousands of €) 5,882,180 No. of Summary by type of shareholder Shareholders % No. of Shares % Residents 60,574 98.68 501,605,011 55.80 Non-residents 812 1.32 397,261,143 44.20 Total 61,386 898,866,154 Consolidated financial statements 2015 Bankinter 223

Evolution of stock. In 2015 the Spanish Stock Exchange suffered from the economic Cost Date Results uncertainties and geopolitical tensions that shook several regions of the world, Dividend per Number of (Thousands of Approval of the Date Share (Euros) Shares Euros) Board Financial Year aggravated in Spain by territorial tensions and the general elections with doubtful outcomes. In this setting, Bankinter stock was not exempt from the general recession, Jun - 15 0.04852290 898,866,154 43,606 May - 15 2015 although it lost only 2.34% of its value, versus the drop of 7.15% the Spanish market Oct - 15 0.05207430 898,866,154 46,789 Sept - 15 2015 recorded on the IBEX 35 and the 3.25% decrease of STOXX Europe 600 Banks. It Dec - 15 0.05207350 898,866,154 46,789 Dec - 15 2015 thus compares highly favourably against both domestic and European financial Mar - 16 0.05649030 898,866,154 50,776 Feb - 16 2015 institutions. 187,960

The stock exchange scorecard from recent years has been very positive for the Bank, American Depositary Receipts (ADR) is a product which allows residents of the which closed 2015 with a capitalisation of 5,882 million euros, three and a half times United States to invest in foreign companies in their own currency and with dividend that registered at the close of 2012 (1,770 million). That positive performance, which payments also made in dollars. The Bankinter programme is Level 2 managed by even led to a maximum stock market price in the financial year of 7.09 euros per the Bank of New York-Mellon and at the close of 2015 there were 144,912 ADRs in share which was close to an all-time high, together with the 3.5% dividend yield, circulation. meant shareholders gained +1.1% for the period. Thus for another year, it was the listed bank stock with the best yields in Spain for shareholders. 5.3. Ratings

5.2. Dividends policy Bankinter kept all its ratings at "investment grade’ throughout 2015, improving its rating and outlook as regards some of its agencies. Bankinter continued to pay its dividends in cash each quarter, thanks to the business's solid growth and good situation in terms of solvency, letting it avoid the steep During 2015, Standard & Poor’s maintained last year's rating raise up to BBB- with a restrictions established by supervisors in recent years to preserve capital. stable outlook. Moody’s improved the institution's rating to Baa2 in the long term and P-2 in the short term in June, and it also raised the outlook to stable. Moreover, DBRS, Bankinter, therefore, distributed four cash dividends among its shareholders, one in its September sectorial review, and in exclusive reference to "systemic" supplementary to the financial year 2014 and three for 2015, which represented support to the bank under the new European resolution regulation, just as to most approximately 50% of the ordinary profit obtained in the first three quarters. The institutions in the sector, reduced the long-term rating from A (low) to BBB (high) fourth remains outstanding and supplementary and will be paid against the profits maintaining the short term outlook as R-1 (low) and raising the outlook from negative for the complete year, which will be passed at the 2016 General Shareholders' Meeting. to stable. The distribution of dividends for the financial year 2015 submitted for approval by the General Shareholders' Meeting, is as follows: Additionally all ratings were confirmed as investment grade in September, after announcing the purchase of Barclays retail business in Portugal. According to Standard & Poor’s, it is a manageable "operation", which will open up business opportunities for the institution in the middle and long term. Consolidated financial statements 2015 Bankinter 224

Bankinter has at least one meeting a year, which lasts an entire day, for its annual We continue to be the benchmark institution in the quest for solvency for savings, review with each of the credit rating agencies. At these meetings, the situation of and in this regard we should highlight the good reception given to the issue of 17 the Bank is fully reviewed, such as its business strategy, financing, investment grade, Structured Deposits with 100% guaranteed principal and subscriptions of more than capital and liquidity, etc., and senior management attend. 265 million euros. For the more sophisticated customers, we should point to the wide range of issues of Structured Notes, 235 to be precise, with a total volume of 931 million euros. Agency Date Long-term Short-term Perspective

Standard & Poor’s 27/11/2014 BBB - A3 Stable Improvements have been made to the advisory service for customers through the Moody's 17/06/2015 Baa2 P-2 Stable Tailored Investment product. This is an advisory service which includes the creation DBRS 29/09/2015 BBB (high) R-1 (low) Stable of a personalised multi-asset investment proposal recommended by our Analysis and Advisory team, with an ongoing monitoring of investments, in which the customer 6. New products is informed of what changes to make and when to make them. The final decision as to whether or not to accept these recommendations always rests with the customer. 2015 has been a year in which we have made the most of the improvements in all business lines; the brand's solidity has certainly helped this process, achieving As regards Investment Funds, in 2015, Bankinter incorporated 950 new funds, extraordinary results in the different advances. including their different types. The Bank's commercial offer at this point has surpassed 3,000 funds. In addition, we have incorporated another 15 international In current accounts for individuals we have added the 'Salary Account' at 5%, the asset managers, increasing the number of trading managers to 90. With respect to 'Non-Salary Accountant', which caters customers with irregular income, and the 'You funds managed by Bankinter, we continued launching guaranteed funds, mostly and I Account', which is a free account for common expenses that completes the equities. In terms of Delegated Management, the range of managed vehicles has been management needs of a household. This year we have continued to search for simple broadened, launching new discretionary-managed funds, mainly aimed at customers solutions to the financial management problems of individuals and their environment. of Private Banking, and Delegated Portfolios.

During 2015, the Bank has provided a more versatile offer in mortgages, helping During this financial year, we have renewed our investment tools for operating customers take advantage of the value being generated in the markets thanks to the in the stock markets; our first step has been taken towards updating Broker Plus, especially low interest rates. In mortgages with a fixed interest rate the financing our investment tool that services our most experienced customers. This update period has been extended to 20 years; mixed rate mortgages (with a first period at a has involved: a change in appearance that improves the investor's experience, an fixed interest rate and a second with a variable interest rate) also saw the fixed rate improvement in response times, a substantial increase of technical analysis indicators period extended to a maximum of 20 years. and further ease of use, and more operational agility.

In 2016 Bankinter continued its collaboration with important European public and private institutions in financing Businesses, where the agreements with the European Investment Fund (EIF), the European Investment Bank (EIB) and the Official Credit Institute (OCI) stand out. Together with the European Investment Fund (EIF) we have continued implementing the financing agreement for Innovative companies Consolidated financial statements 2015 Bankinter 225

(Innonvfin SME) and signed a new agreement for the financing of SMEs (SME 9. Research and development activities Initiative). With the European Investment Bank, in addition to giving continuity to agreements similar to those entered in previous years aimed at financing SMEs, this At the close of financial year 2015, the bank was not engaged in any significant year we have signed two new agreements that have enabled us to specifically finance research and development activities. companies in the agri-food sector and the purchase of vehicles for the transport of goods or passengers. 10. Dependence on patents and licences

The growing internationalisation of Spanish companies has led us to improve and At the close of financial year 2015, the Bankinter Group is not affected by any develop the products designed for financing exports, mainly factoring and cash relevant degree of dependency as regards the issuers of patents, licences, industrial, management instruments. Bankinter has also bolstered its activity in the granting commercial or financial contracts or new manufacturing processes. of international guarantees, which are a key element for the increasingly growing number of Spanish companies that are carrying out projects in foreign countries. 11. Transactions with treasury shares

This year has seen the launch of the Cuenta Relación, which is a current account These transactions are described in Note 22 of the Consolidated Financial Statements. aimed at SMEs and which, as a reward, offers preferential conditions to companies that link with each other in their transactional activity. 12. Report on Corporate Governance

7. Foreseeable evolution Is attached as a separate document.

Looking towards the future, the Group will continue to develop its business model based on creating value through differentiation, focusing on service quality and supported by multi-channelling and ongoing innovation, as well as strict monitoring of asset quality and solvency. With this model, it expects to maintain the positive trend in results and value creation.

8. Subsequent events

No events having a significant effect on these consolidated financial statements have occurred between the end of financial year 2015 and the date on which these statements were prepared. annual report on corporate governance 2015 Contents

Annual Report On Corporate Governance 2015 of Bankinter, S.A.

Report by the Audit and Compliance Committee 2015 ACGR 2015 Bankinter 3

ANNUAL CORPORATE GOVERNANCE REPORT A. OWNERSHIP STRUCTURE OF PUBLICLY TRADED COMPANIES

A.1. Fill in the following table on the company’s share capital: ISSUER INDENTIFICATION: Date of last change Share capital (EUR) Number of shares Number of voting REFERENCE YEAR END DATE: 31/12/2015 rights 30/05/2014 269,659,846.20 898,866,154 898,866,154 TAX ID. No: A-28157360 Indicate if there are different classes of shares with different rights associated with them: REGISTERED NAMED: BANKINTER, S.A. Yes No X REGISTERED ADDREES: Paseo de la Castellana, 29 – 28046 MADRID A.2. Detail the direct and indirect owners of significant holdings in your company at year-end, excluding directors: 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. Name of shareholder Number of Number of % of total (person or company) direct indirect voting voting rights voting rights rights MR JAIME BOTÍN-SANZ DE 10,061 205,505,462 22.86% SAUTUOLA Y GARCÍA DE LOS RÍOS STANDARD LIFE INVESTMENT 15,114,188 32,336,917 5.28% (HOLDINGS) LIMITED CORPORACIÓN MASAVEU, S.A. 44,959,730 0 5.00% BLACKROCK INC. 0 31,717,118 3.53

Name of shareholder Direct owner of stake Number of (person or company) voting rights MR JAIME BOTÍN-SANZ DE CARTIVAL, S.A. 205,505,462 SAUTUOLA Y GARCÍA DE LOS RÍOS STANDARD LIFE INVESTMENT OTHER SHAREHOLDERS 32,336,917 (HOLDINGS) LIMITED IN THE COMPANY BLACKROCK INC. OTHER SHAREHOLDERS 31,717,118 IN THE COMPANY

Indicate the most significant movements in the shareholding structure during the year: ACGR 2015 Bankinter 4

Name of shareholder Date of the Description of the transaction A.4. Where applicable, indicate any family, commercial, contractual or corporate (person or company) transaction relationships between holders of significant shareholdings, insofar as the company BLACKROCK INC. 21/01/2015 Fell below 3% is aware of them, unless they are of little relevance or due to ordinary trading or exchange activities: BLACKROCK INC. 27/03/2015 Exceeded 3% BLACKROCK INC. 25/09/2015 Fell below 3% A.5. Where applicable, indicate any commercial, contractual or corporate relationships BLACKROCK INC. 08/10/2015 Exceeded 3% between holders of significant shareholdings, and the company and/or its group, unless they are of little relevance or due to ordinary trading or exchange activities: A.3. Fill in the following tables with the members of the company’s Board of Directors with voting rights on company shares: A.6. Indicate whether the company has been informed of any shareholder agreements Name of director Number of Number of % of total that may affect it as set out under articles 530 and 531 of the Corporate Enterprises (person or company) direct indirect voting Act. Where applicable, briefly describe them and list the shareholders bound by such voting rights voting rights rights agreement: MR GONZALO DE LA HOZ LIZCANO 666,106 0 0.07% MR RAFAEL MATEU DE ROS CEREZO 1,014,721 0 0.11% Yes No X MR FERNANDO MASAVEU HERRERO 776,330 46,792,306 5.29% MS MARIA DOLORES DANCAUSA TREVIÑO 1,012,186 469 0.11% Indicate whether the company is aware of the existence of concerted actions amongst MR MARCELINO BOTIN‑SANZ SAUTUOLA Y 253,045 0 0.03% its shareholders. If so, describe them briefly: NAVEDA

MR JAIME TERCEIRO LOMBA 51,482 0 0.01% Yes No X MR PEDRO GUERRERO GUERRERO 3,085,817 275,005 0.37% CARTIVAL, S.A. 205,505,462 0 22.86% If there has been any amendment or breaking-off of said pacts or agreements or MS MARIA TERESA PULIDO MENDOZA 1,509 0 0.00% concerted actions, indicate this expressly: MS ROSA MARÍA GARCÍA GARCÍA 1,000 0 0.00%

Name of shareholder Direct owner of stake Number of (person or company) voting rights MR FERNANDO MASAVEU HERRERO Corporacion Masaveu, S.A. 44,959,730 MR FERNANDO MASAVEU HERRERO Other shareholders in the Company 1,832,576 MR PEDRO GUERRERO GUERRERO Other shareholders in the Company 275,005

% total voting rights held by the Board of Directors 28.85%

Fill in the following tables with the members of the company’s Board of Directors with voting rights on company shares: ACGR 2015 Bankinter 5

A.7. Indicate whether any person or organisation exercises or may exercise control over A.9. Describe the conditions and term of the prevailing mandate from the general the company pursuant to article 5 of the Securities Exchange Act. If so, identify names: meeting to the Board of Directors to issue, buy back and transfer treasury stock.

Yes No X At the General Shareholders’ Meeting held on 18 March 2015, the shareholders approved the authorisation to the Board of Directors, with express authority to delegate such power to the Executive Committee, for the derivative acquisition of its own shares by the Company Comments and/or by its subsidiaries, on the terms and conditions established in applicable legislation, with express power to dispose of or cancel such shares, reducing the amount of share capital and depriving of effect the power delegated by the shareholders at General Shareholders A.8. Fill in the following tables regarding the company’s treasury stock: Meetings approved in prior financial years to the extent of the unused amount.

At year- end: Such acquisitions may be made at any time, and as many times as is deemed appropriate, in any form or manner, including with a charge to the profits of the financial year and/or Number of direct shares Number of indirect shares (*) Total % of share capital to unrestricted reserves. The maximum number of shares to be acquired at any time may 150,080 0 0.01 not exceed 10% of the nominal value of the Bank’s share capital, or such higher amount as may be permitted by law, without prejudice to the instances described in section 144 of the (*) Through: Spanish Companies Act (Ley de Sociedades de Capital). The shares acquired by the Bank or its subsidiaries in reliance on this authorisation may be allocated, in whole or in part, to delivery to the directors and employees of the company when there is recognised right, be Name of direct owner of shareholding Number of direct shares (person or company) it directly or as a result of the exercise of options held by them, for the purposes described - - in the last paragraph of section 146, subsection 1, of the Companies Act. For purchase and sales on official secondary markets, the acquisition price shall be equal to the listing price Give details of any significant changes during the year, pursuant to Royal Decree of the shares on the day the transaction is formalised. 1362/2007: In the case of acquisition of its own shares as a result of compliance with obligations established in option agreements, purchase and instalment purchase agreements or similar agreements previously formalised by the Bank, including those covering convertible or exchangeable shares and debentures that are or must be delivered directly to directors or employees of the Company, or that result from the exercise of option rights held by them, which transactions are likewise covered by this authorisation, the applicable price shall be the one agreed to in the respective contract or agreement.

On the same date and by the same resolution, the shareholders at the General Shareholders’ Meeting approved the authorisation to the Board of Directors both to approve a reduction in share capital in order to repurchase and cancel its own shares and to set the terms and conditions of the reduction in share capital, determine the use to be made thereof, resolve to de-list the shares and amend article 5 of the By-Laws, and to modify the par value of the shares without increasing or reducing the amount of share capital. The authorisation ACGR 2015 Bankinter 6

granted shall be valid for five years from the date of adoption of the resolution, covers all B. GENERAL MEETING treasury stock transactions made in accordance with its terms, and is in full force and effect as from the date of this report. B.1. Indicate, and where applicable give details, whether there are any differences from the minimum standards established under the Corporate Enterprises Act (CEA) with A.9 bis. Estimated floating capital: respect to the quorum and constitution of the General Meeting.

Estimated floating capital 62.31% Yes No X

A.10. Indicate whether there is any restriction on the transferability of securities and/ or any restriction on voting rights. In particular, report the existence of any restrictions B.2. Indicate, and where applicable give details, whether there are any differences from that might hinder the take-over of control of the company by purchasing its shares on the minimum standards established under the Corporate Enterprises Act (CEA) for the the market. adoption of corporate resolutions:

Yes No X Yes No X

A.11. Indicate whether the General Meeting has agreed to adopt measures to neutralise Describe any differences from the minimum standards established under the CEA. a public takeover bid, pursuant to Act 6/2007. B.3. Indicate the rules applicable to amendments to the company bylaws. In particular, Yes No X report the majorities established to amend the bylaws, and the rules, if any, to safeguard shareholders’ rights when amending the bylaws. If so, explain the measures approved and the terms and conditions under which the restrictions would become inefficient: Bankinter generally applies the provisions of the Consolidated Text of the Companies Act. Thus, article 20 of the By-Laws of Bankinter provides that: “The quorums and majorities required to validly constitute and pass resolutions at General Meetings shall A.12. Indicate whether the company has issued securities that are not traded on a be as generally provided by Articles 193, 194, and 201 of the Spanish Companies Act. regulated market in the EU: If the Meeting Agenda refers to items that require a quorum with a reinforced majority and this is not reached but, on the contrary, there is a sufficient quorum to validly deal with the remaining items on the Agenda, it shall be deemed that the Meeting is validly Yes No X constituted to deal with these items.”

Where applicable, indicate the different classes of shares, and what rights and Similarly, article 14.1 of the Regulations for the General Shareholders’ Meeting obligations each share class confers. of Bankinter provides that “14.1. The quorums and majorities required for valid constitution and the passage of resolutions by the General Meeting are those established in the Capital Companies Act. In the absence of a sufficient quorum, a General Meeting is held on second notice. Should the Agenda for the General Meeting include matters demanding a reinforced constituent quorum and such quorum is not reached but there is a quorum to deal validly with the remaining items on the Agenda, ACGR 2015 Bankinter 7

the General Meeting is deemed to be validly constituted to deal with such remaining B.5. Indicate the number of shares, if any, that are required to be able to attend the items”. General Meeting and whether there are any restrictions on such attendance in the bylaws: Furthermore, according to section 286 of the Consolidated Text of the Companies Act, whenever an amendment of the by-laws is proposed, the full text of the proposed Yes X No amendment must be drafted, along with a written report describing the rationale for the amendment, which shall be made available to the shareholders at the time of the Number of shares necessary to attend the General Meetings 600 call to General Meeting to deliberate on such amendment. B.6. Section repealed. Given that Bankinter is a financial institution, any amendment of the by-laws must conform to the provisions of section 10 of Royal Decree 84/2015 of 13 February B.7. Indicate the address and means of access through the company website to the implementing Law 10/2014 of 26 June on the Organisation, Supervision and Solvency information on corporate governance and other information on the general meetings of Financial Institutions. These legal provisions provide that by-law amendments are that must be made available to shareholders on the company’s website. subject to the authorisation and registration procedure. The address of Bankinter’s corporate website is www.bankinter.com/webcorporativa. In Without prejudice to the foregoing, the following amendments shall not be subject the left-hand menu of the Corporate Governance tab of this website there is a direct to the authorisation procedure, although notice thereof must be given to Banco de link to all of Bankinter’s Corporate Governance contents (By-Laws, Regulations for the España (Bank of Spain): amendments made to change the address of the registered General Shareholders’ Meeting, Regulations of the Board of Directors, information on office within Spain, an increase in share capital, the verbatim inclusion in the by-laws recent General Meetings, corporate governance reports, director remuneration reports, of mandatory or prohibitory statutory or regulatory provisions, or to comply with court information on the Directors, information on significant interests, treasury stock, etc. or governmental orders , and those other amendments for which Banco de España, in reply to a prior question in that regard, has deemed it unnecessary because they are not significant.

B.4. Indicate the data on attendance at general meetings held during the year to which this report refers and the previous year:

Attendance figures General % % attending by % voting remotely Total Meeting shareholders proxy date present Electronic Other vote 20/03/2014 0.74% 67.13% 0.61% 0.00% 68.48% 18/03/2015 5.55% 67.07% 0.54% 0.00% 73.16% ACGR 2015 Bankinter 8

C. CORPORATE GOVERNANCE STRUCTURE

C.1. Board of Directors

C.1.1. Maximum and minimum number of directors established in the bylaws:

Maximum number of Directors 15 Minimum number of Directors 5

C.1.2. Fill in the following table on the Board members:

Name of director (person Representative Type of directorship Position on the Board Date first appointed Date last Election procedure or company) appointed MR GONZALO DE LA HOZ - Independiente DIRECTOR 13/02/2008 15/03/2012 GENERAL MEETING RESOLUTION LIZCANO MR FERNANDO - INDEPENDENT DIRECTOR 14/09/2005 21/03/2013 GENERAL MEETING RESOLUTION MASAVEU HERRERO MR RAFAEL MATEU DE - Independiente DIRECTOR 21/01/2009 21/03/2013 GENERAL MEETING RESOLUTION ROS CEREZO MS MARIA DOLORES EXECUTIVE CEO 21/10/2010 18/03/2015 GENERAL MEETING RESOLUTION DANCAUSA TREVIÑO MR MARCELINO - PROPRIETARY DIRECTOR 21/04/2005 21/03/2013 GENERAL MEETING RESOLUTION BOTÍN‑SANZ SAUTOLA NAVEDA MR JAIME TERCEIRO - INDEPENDENT DIRECTOR 13/02/2008 15/03/2012 GENERAL MEETING RESOLUTION LOMBA MR PEDRO GUERRERO - OTHER EXTERNAL CHAIRMAN 13/04/2000 21/03/2013 GENERAL MEETING RESOLUTION GUERRERO CARTIVAL, S.A. ALFONSO BOTÍN-SANZ EXECUTIVE VICE CHAIRMAN 26/06/1997 20/03/2014 GENERAL MEETING RESOLUTION DE SAUTUOLA Y NAVEDA MS MARIA TERESA - INDEPENDENT DIRECTOR 23/07/2014 18/03/2015 GENERAL MEETING RESOLUTION PULIDO MENDOZA MS ROSA MARIA GARCIA - INDEPENDENT DIRECTOR 18/03/2015 18/03/2015 GENERAL MEETING RESOLUTION GARCIA

Total number of Directors 10 ACGR 2015 Bankinter 9

Indicate the severances that have occurred on the Board of Directors during the EXTERNAL INDEPENDENT DIRECTORS reporting period: Name of director (person or company) Name of director (person or Condition of director at time Date of leaving MR GONZALO DE LA HOZ LIZCANO company) of severance MR JOHN DE ZULUETA INDEPENDIENT 18/03/2015 Profile GREENEBAUM He has a degree in Industrial and Information Engineering from the Universidad Politécnica de Madrid and a Master’s in Electrical Engineering from the University of C.1.3. Fill in the following tables on the Board members and their different kinds of Texas. He also has academic certificates from the Systems Research Institute in Geneva, directorship: Switzerland (various mathematical and IT disciplines), as well as in Management and Business Administration from joint programmes of the RBS and Harvard University. EXECUTIVE DIRECTORS He was the Chief Executive Officer of Línea Directa Aseguradora from May 1995 to Nombre o denominación del consejero Cargo en el organigrama de la sociedad February 2008, a period of intense activity with British and Spanish regulators because MS MARIA DOLORES DANCAUSA TREVIÑO CEO of the alliance existing at the time with the Royal Bank of Scotland. During this period at LDA, the various internal control mechanisms of the company were developed that CARTIVAL, S.A. VICE CHAIRMAN are still in place today, and the various lines of control in the company’s organisation chart were defined. He was previously General Director of Operations (Media) of Total number of executive Directors 2 Bankinter, where he worked in a professional capacity from 1989 until 1995, and % of total directors 20% introduced significant improvements in the control environment of the operational area of Bankinter during that period. EXTERNAL PROPRIETARY DIRECTORS Prior to his activities in the banking and insurance industries, he held several positions Name of director (person or company) Name or corporate name of significant of responsibility at IBM España, at IBM in White Plains (NY) (1979-1981), and at IBM shareholder represented or proposing the Europe (Paris 1984-1987). In Paris, he headed the European Product Development appointment activities for the Banking and Insurance areas. MR FERNANDO MASAVEU HERRERO CORPORACION MASAVEU, S.A. He is currently the Chairman of Bankinter’s Audit and Regulatory Compliance MR MARCELINO BOTIN-SANZ DE SAUTUOLA CARTIVAL, S.A. Committee since 2014. He is a Director of Línea Directa Aseguradora, a company of the Y NAVEDA Bankinter Group, and Chairman of the Audit and Internal Control Committee of such Insurance Company since 2013. Significant initiatives were launched during that period Total number of proprietary Directors 2 that have made it possible not only to implement control mechanisms at the group, but % of total directors 20% also to establish a control culture that has permeated the entire institution.

Name of director (person or company) MR RAFAEL MATEU DE ROS CEREZO

Profile Law Degree with a special distinction. Doctor of Law from the Universidad Complutense of Madrid and graduate of the Harvard PMD programme. Government lawyer (on extended leave of absence). He is currently a Director of Línea Directa Aseguradora, ACGR 2015 Bankinter 10

S.A. and a trustee of Bankinter’s Fundación para la Innovación. He is also a partner of Name of director (person or company) the Ramón & Cajal Abogados SLP law firm and a member of the Madrid Bar Association. MS ROSA MARIA GARCÍA GARCÍA He is the author of many works on Company Law, Banking Law, New Technology Law and Corporate Governance. Profile Degree in Mathematics from the Autonomous University of Madrid. She has held Name of director (person or company) several senior positions throughout her professional career. In particular, Ms Rosa María MR JAIME TERCEIRO LOMBA García García has over 25 years of international experience in the fields of information technology, industry and energy, among others. She is currently the Chairwoman and CEO of Siemens, S.A., with responsibility for Siemens’ business in Spain, and she is an Profile Independent Director of Acerinox, a position she has held since November 2013. She Engineer and Doctorate in Aeronautical Engineering from the Polytechnic University has managed the business in Spain of large multinational corporations such as Siemens of Madrid, Summa Cum Laude, and degree in Economics from the Autonomous and Microsoft. She was an Independent Director and Member of the Appointments and University of Madrid, Summa Cum Laude. Lecturer in Economic Analysis at the Madrid Remuneration Committee of BME until January 2015. Before joining Siemens, she was Complutense University (1980), of which he was vice-chancellor and director of the Vice-president of Consumer and Online Business for Western Europe. Formerly, she quantitative economics department. Full member of the Royal Academy of Moral and held a number of positions in the same sector, as Chairwoman and CEO of Microsoft Political Sciences (1996). King Juan Carlos Economics Prize (2012). Chairman of the Spain. For four years, Ms. Rosa María García García was an Independent Director and Social Sciences Board of the Ramón Areces Foundation and member of the board of Member of the Appointments and Remuneration Committee of Banesto. trustees of various foundations. Worked as a graduate engineer at the simulation and control department of Messerschmitt-Bölkow-Blohm (MBB) in Munich (1970-1974). Was General Manager of Expansion and General Manager of Planning and Investment Total number of independent Directors 5 at Banco Hipotecario de España (1981-1983). For nine years (1988-1966) was Executive % of total directors 50% Chairman of Caja de Madrid. Was and is an independent director at various listed and unlisted companies. Indicate whether any director considered an independent director is receiving from the company or from its group any amount or benefit under any item that is not the Name of director (person or company) remuneration for his/her directorship, or maintains or has maintained over the last MS MARÍA TERESA PULIDO MENDOZA year a business relationship with the company or any company in its group, whether in his/her own name or as a significant shareholder, director or senior manager of Profile an entity that maintains or has maintained such a relationship. A graduate in Economics from Columbia University, and with an MBA from the Sloan School of Management at MIT, María Teresa Pulido Mendoza has over twenty years of Where applicable, include a reasoned statement from the Board with the reasons why professional experience in strategic consulting (McKinsey & Co.) as well as in private it deems that this director can perform his/her duties as an independent director. and corporate banking (Citi and Deutsche Bank). At these companies, she has worked mainly on business development, strategy, organisation and change management projects. Since 2011, she has been the Manager of Corporate Strategy for Ferrovial and a member of the Management Committee. ACGR 2015 Bankinter 11

OTHER EXTERNAL DIRECTORS C.1.4. Fill in the following table with information regarding the number of female directors over the last 4 years, and the category of their directorships: Identify all other external Directors and explain why these cannot be considered proprietary or independent Directors and detail their relationships with the Number of female directors % of total female directors of each company, its executives or its shareholders: category Year Year Year Year Year Year Year Year 2015 2014 2013 2012 2015 2014 2013 2012 Name of director Reasons Company, executive or (person or company) shareholder to which Executive 1 1 1 1 50% 50% 50% 33.33% related Proprietary 0 0 0 0 0% 0% 0% 0% MR PEDRO GUERRERO The binding definition of independent Bankinter, S.A. GUERRERO director established by the Companies Act Independent 2 1 0 0 40% 20% 0% 0% mentions as one of the circumstances that Other external 0 0 0 0 0% 0% 0% 0% prevent a director from being classified as an independent director the fact of having Total 3 2 1 1 30% 20% 10% 10% been an employee or executive director of the company or of its Group, unless 3 or 5 C.1.5. Explain the measures, if any, that have been adopted to try to include a number of years, respectively, have passed since the end of such relationship. female directors on the Board that would mean a balanced presence of men and women. Pedro Guerrero Guerrero was Executive Chairman of Bankinter until 31 December 2012, at which time he stopped performing Explanation of measures executive duties. Accordingly, given that Bankinter is committed to equal opportunities for men and women and in this regard, every the period established in the Code of Good time it appoints members of its board of directors, it engages in objective selection processes Governance of Listed Companies of 2015 that are free from any determining conditions or biases that might entail a limitation on the has not elapsed, Pedro Guerrero Guerrero is access of women to positions as independent directors on the Board, evaluating in each case classified within “Other external directors”. the independence of the candidate and the candidate’s professional qualifications, capacity and experience in the industry. The candidate selection process seeks to ensure that the candidates reviewed always include women. Total number of other external Directors 1 As provided in section 529 quindecies of the Companies Act, the Appointments Committee % of total directors 10% must set a representation target for the gender less represented on the Board of Directors and prepare guidelines on how to achieve such target. At is meeting of 20 October 2014, Bankinter’s Appointments and Remuneration Committee established such target (30%), as Indicate any changes that may have occurred during the period in the type of well as an action protocol to achieve it, the basic elements of which are described in the directorship of each director: following section. As a result, and following the latest appointments of directors approved by the shareholders at the General Meeting held in 2015, the established target was achieved, and a proportion of 30% of women on the Board of Directors was established. ACGR 2015 Bankinter 12

C.1.6. Explain the measures, if any, agreed by the Appointments Committee to ensure C.1.6 bis. Explain the conclusions of the Appointments Committee regarding verification that selection procedures do not suffer from implicit biases that may hinder the selection of compliance with the board member selection policy. And, in particular, explain how of female directors, and that the company deliberately seeks and includes potential this policy is fostering the goal for 2020 to have the number of female board members female candidates that meet the professional profile sought: represent at least 30% of the total number of members of the board of directors.

Explanation of measures Explanation of conclusions In October 2014, the Appointments and Corporate Governance Committee of the institution set a The Appointments and Corporate Governance Committee has verified that the process followed representation target for the less represented gender on the Board of Directors (30%) and pre- by external advisers in the selection of new directors in 2015 satisfactorily complied with the pared a document with the guidelines on how such target should be achieved. After describing selection policy, thus ensuring the necessary diversity of profiles required for the best possible the prior study conducted on changes in the gender less represented on the Board of Directors composition of the Board of Directors and that, as regards the proportion of women directors, in recent years, such protocol sets the representation target to be achieved, the committee’s gui- ended in 2015 with the appointment of two new women directors. Accordingly, as of the date delines to achieve such target, a breakdown of the composition of the committees of the Board, hereof, such target has already been achieved and Bankinter has thus complied with the recom- and application to the other companies of the Bankinter Group, among other things. Bankinter’s mended target for 2020 ahead of time. Appointments and Corporate Governance Committee generally uses external advisers to select candidates for membership on the Board of Directors as independent directors. The Committee does not impose any limitations or biases on the external advisors retained that might affect C.1.7. Explain the form of representation on the Board of shareholders with significant the selection of women directors as independent directors and verifies that women are included holdings. in the list of candidates to be evaluated, and even encourages the inclusion of women in the group of candidates to be evaluated. As a result of the foregoing, a woman became a member of the Board of Directors as executive Mr Jaime Botín-Sanz de Sautuola, a major shareholder of Bankinter, controls director and chief executive of the company in 2010. In the last two years, at the proposal of the CARTIVAL, S.A., currently the Executive Vice-chairman of Bankinter. In addition, Mr Appointments Committee, the Board of Directors appointed two women as independent direc- Marcelino Botín-Sanz de Sautuola is a proprietary director of the company, appointed tors, thus reaching a proportion of 30% of women on the Board as of the end of this financial year. at the behest of the major shareholder Mr Jaime Botín-Sanz de Sautuola. Bankinter continues in its commitment to give priority to the professional qualifications and experience of candidates, without any conditions relating to the gender of the candidate. Mr Fernando Masaveu Herrero was appointed at the behest of the major shareholder Corporación Masaveu, S.A. When, despite any measures that might have been adopted, the number of female directors is low or zero, explain the reasons: C.1.8. Explain, where applicable, the reasons why proprietary directors have been appointed at the behest of a shareholder whose holding is less than 3% of the capital: Explanation of reasons - Indicate whether formal petitions have been ignored for presence on the Board from shareholders whose holding is equal to or higher than that of others at whose behest proprietary directors were appointed. Where applicable, explain why these petitions have been ignored:

Yes No X ACGR 2015 Bankinter 13

C.1.9. Indicate if any director has stood down before the end of his/her term of office, if C.1.11. Identify any members of the Board holding positions as directors or managers in the director has explained his/her reasons to the Board and through which channels, and other companies belonging to the listed company’s group: if reasons were given in writing to the entire Board, explain below, at least the reasons that were given: Name of director (person or Name of the Group Position Does the company) Company director hold executive Name of director Reason for leaving functions? MR JOHN DE ZULUETA GREENEBAUM On 18 March 2015, Mr De Zulueta Greenebaum MR GONZALO DE LA HOZ LINEA DIRECTA DIRECTOR No notified the Board of Directors of Bankinter in LIZCANO ASEGURADORA S.A. writing of his resignation. Mr De Zulueta who, COMPAÑÍA DE SEGUROS Y had he continued in his position, would have REASEGUROS had to stand for re-election at the General Meeting held last year, decided not to continue MR GONZALO DE LA HOZ BANKINTER GLOBAL CHAIRMAN No to serve as Director of Bankinter and to focus LIZCANO SERVICES, S.A. on other professional goals. In addition, Mr MR RAFAEL MATEU DE LINEA DIRECTA DIRECTOR No De Zulueta had been an external independent ROS CEREZO ASEGURADORA S.A. director for 12 years and therefore, had he COMPAÑÍA DE SEGUROS Y been re-elected, he could no longer have REASEGUROS been classified in that category of directors. However, Mr De Zulueta is currently a director MS MARIA DOLORES LINEA DIRECTA DIRECTOR No of the Bankinter subsidiary Línea Directa DANCAUSA TREVIÑO ASEGURADORA S.A. Aseguradora and thus continues to contribute COMPAÑÍA DE SEGUROS Y his vast knowledge and experience to the REASEGUROS Group. MR PEDRO GUERRERO LINEA DIRECTA DIRECTOR No GUERRERO ASEGURADORA S.A. C.1.10. Indicate any powers delegated to the managing directors(s): COMPAÑÍA DE SEGUROS Y REASEGUROS

Name of director (person or company) Brief description C.1.12. Detail, where applicable, any company directors that sit on Boards of other MS MARÍA DOLORES DANCAUSA TREVIÑO The Chief Executive Officer (Consejera companies publicly traded on regulated securities markets outside the company’s own Delegada) is responsible for the day-to-day management of the business and has the hig- group, of which the company has been informed: hest management and executive duties at the Company. Name of director Name of the listed company Position CARTIVAL, S.A. The Executive Vice-Chairman chairs the (person or company) Executive Committee, the Executive Risk Committee and the ALCO (Assets and MR PEDRO GUERRERO PROSEGUR, COMPAÑÍA DE DIRECTOR Liabilities) Committee, with duties related GUERRERO SEGURIDAD, S.A. directly to the risk management of the institution. The Institution’s Investment Banking ROSA MARÍA GARCÍA SIEMENS, S.A. CHAIRMAN area also reports thereto. GARCÍA

ROSA MARÍA GARCÍA ACERINOX, S.A. DIRECTOR GARCÍA ACGR 2015 Bankinter 14

C.1.13. Indicate and, where applicable, if board regulations have established rules on the C.1.16. Identify members of senior management that are not in turn executive directors, maximum number of company boards on which its directors may sit: and indicate the total remuneration accruing to them during the year:

Yes X No Name (person or company) Position MS GLORIA HERNÁNDEZ GARCÍA GENERAL MANAGER, CAPITAL MARKETS AREA Explanation of rules MR JACOBO DÍAZ GARCÍA MANAGER, INNOVATION, PRODUCTS AND QUALITY AREA Since it is a financial institution, Bankinter is subject to the restrictions established by Law 10/014 of 26 June on the Organisation, Supervision and Solvency of Financial Institutions con- MR JAIME ÍÑIGO GUERRA AZCONA GENERAL MANAGER, INVESTMENT BANKINGAREA cerning the number of boards on which its Directors may serve. Bankinter has included this restriction in its Regulations of the Board of Directors. In addition, the Bankinter Board of Directors, MR FERNANDO MORENO MARCOS GENERAL MANAGER, COMMERCIAL BANKING AREA at the proposal of the Appointments and Corporate Governance Committee, approved a Policy on MR EDUARDO OZAITA VEGA GENERAL MANAGER, BUSINESS BANKING AREA the Disqualifications and Limitations of Senior Officers and other Officers of Bankinter, which sets forth the aforementioned limitations applicable to the members of the Board of Directors. MS GLORIA ORTIZ PORTERO FINANCE MANAGER MS GLORIA CALVO DÍAZ GENERAL SECRETARY C.1.14. Section repealed MR CARLOS RODRIGUEZ UGARTE INTERNAL AUDIT

C.1.15. Indicate the overall remuneration for the Board of Directors: Total senior management remuneration (€k) 2,701

Remuneration of the Board of Directors (thousands of euros) 3,806 C.1.17. Indicate the identity of the Board members, if any, who are in turn members of Cumulative amount of rights of current Directors in pension scheme (thousands of 600 the Board of Directors in companies of significant shareholders and/or in entities of their euros) group: Cumulative amount of rights of former Directors in pension scheme (thousands of 0 euros) Name (person or company) Corporate name of the Position substantial shareholder MR MARCELINO BOTIN-SANZ CARTIVAL, S.A. DIRECTOR SAUTUOLA Y NAVEDA MR FERNANDO MASAVEU CORPORACIÓN MASAVEU, CHAIRMAN HERRERO S.A.

Detail the relevant affiliations, other than those considered in the above paragraph, that link Board members to significant shareholders and/or companies in their group: ACGR 2015 Bankinter 15

Name (person or company) Corporate name of the Description of relationship C.1.19. Indicate procedures for selection, appointment, re-election, assessment and significant shareholder removal of directors. List the competent bodies, the procedures to be followed and the CARTIVAL, S.A. MR JAIME BOTIN-SANZ DE CONTROLLED COMPANY criteria to be employed in each procedure. SAUTUOLA Y GARCÍA DE LOS RÍOS On 18 November 2015 the Board of Directors of Bankinter approved a Policy on MR MARCELINO BOTÍN-SANZ MR JAIME BOTIN-SANZ DE SON Selection and Succession members of the Board that includes, the following basic DE SAUTUOLA Y NAVEDA SAUTUOLA Y GARCÍA DE LOS RÍOS features, among others:

C.1.18. Indicate whether there has been any change in the Board regulations during the I. Selection: year: 1. Criteria: A Director must be a person of renowned commercial and professional probity, Yes No X competence and solvency and must meet, without prejudice to article 8 of the Regulations of the Board of Bankinter, the prerequisites established in the regulations Description of changes in force regarding companies in general and financial institutions in particular, as well The Board of Directors of Bankinter, at meetings held on 21 January, 22 July and 16 December as any other that shall be deemed to be applicable. 2015, approved certain amendments to its Regulations; the amendments of 21 January 2015 In addition, the members of the Board of Directors must have suitable knowledge and were disclosed at the General Shareholders’ Meeting held on 18 March 2015 (item 12 on the agenda for that General Shareholders’ Meeting), and those approved on the other two experience for the performance of their duties within the terms established by law. dates indicated above will be disclosed the next General Shareholders’ Meeting to be held in Where a legal entity holds the office of Director, the individual representing it in March 2016 in accordance with section 528 of the Companies Act (item 10 on the agenda for pursuit of the functions inherent to the post shall be subject to the same requirements the General Shareholders’ Meeting). A description of these amendments can be seen on the institution’s website (www.bankinter.com/webcorporativa). and shall be required personally to comply with the Director’s duties in terms of the The amendments to the Regulations of the Board of Directors were due to the separation of the Regulations of the Board. For a legal entity to be appointed a Director of the Bank, the Appointments and Remuneration Committee into two committees, the change in name of the Board must accept the individual representing such Director. Risk Committee, a more detailed listing of the duties assigned to the Executive Committee, and the conformance of the Regulations of the Board of Directors to certain recommendations of the Being a shareholder or the holder of a specific number of shares is not a requirement Good Governance Code of Listed Companies, among other reasons. for becoming a Director of the Bank nor for the positions of Chairman, Vice-Chairman or CEO of the Bank or for the positions of chairman or member of Committees of the Board of Directors.

2. Competent body: The Board of Directors is responsible for the process of selecting directors in accordance with the procedure described in the following section.

3. Procedures: Decisions by the Board of Directors regarding selection as well interim pursuant to law and the By-Laws shall require a prior proposal from the Appointments and Corporate Governance Committee in a formal and transparent procedure. The Committee shall also propose the criteria to be followed for the composition of the Board and for selecting the persons to be proposed for the position of director. Should the Board ACGR 2015 Bankinter 16

decide not to follow the proposal or report by the Appointments and Remunerations 2. Competent body: Committee, it must give the specific reasons in its resolution. The General Shareholders’ Meeting or, if applicable, the Board of Directors, pursuant In the process of selecting directors, there shall first be an analysis of the needs of to the provisions of the Companies Act, the By-Laws and the Regulations of the the company and of the entities making up the Group. Proposals for the appointment Board. and re-election of independent directors is the responsibility of the Appointments and Corporate Governance Committee, and those of proprietary and executive directors is 3. Procedures: the responsibility of the Board of Directors itself. Within this framework, the Company Because this is a financial institution, the appointment of new members of the may use the services of outside advisors to identify and evaluate candidates. Board of Directors involves, among other things,, compliance with the procedures In all cases, the procedure for selecting candidates shall avoid any sort of implied bias and requirements set forth in Law 10/2014 of 26 June on the Organisation, that could compromise the diversity of required profiles, experiences and knowledge. Oversight and Solvency of Credit Institutions and in Royal Decree 84/2015 of 13 Directors affected by proposals for appointment, re-election or dismissal must refrain February, which implements this law. from intervening in the related debate and votes. III. Removal: II. Appointment: 1. Criteria: 1. Criteria: Pursuant to the By-Laws, the Regulations of the Board of Directors govern the Both private individuals and legal entities may be appointed Directors, whether or not causes and procedures for removal and dismissal of Directors, and incorporate the shareholders in the Company. provisions of Recommendation 30 of the Uniform Good Governance Code of Listed Article 8 of the Regulations of the Board provides that those persons meeting any cause Companies (removal of proprietary directors). of prohibition or legal, regulatory or by-laws incompatibility, may not be appointed Thus, the cases indicated by the Regulations in which directors must tender their Director. The companies or individuals or legal entities, national or foreign, in the resignation are as follows: if they step down from their executive post at the Bank financial sector or in others, competitor of the Company or of other company of the or as the representative of the group of shareholders to which their appointment as Bankinter Group, as well as their administrators or senior officers and the persons that, Director is tied or, for independent directors, if they fall in any situation that causes as the case may be, were to be proposed by any of them as shareholders, may not be them to lose their independence; if they incur in any situation of incompatibility, appointed Director. Those persons that, directly or through a linked person, are in the prohibition or where required by law to step down or resign, including conflict of situation of structural conflict of interests with the Company or any other company competition or interest as provided in article 8 of the Regulation of the Board of of the Bankinter Group or those proposed by one or several shareholders having said Directors referred to above or if a Director should commit acts or omissions contrary conflict of interests, may not be appointed Director. to the diligence and efficacy with which he/she ought to perform the office, or In any of the cases indicated, the Board may not appoint on an interim basis nor submit seriously infringe his/her duties as a Director, where the Directors should for any to the General Shareholders’ Meeting proposals to appoint, re-elect or ratify Directors other reason cause serious damage or loss to the Company’s interests, its credit in case of persons where any of the circumstances described are met and must oppose and reputation, or the functioning of the Board, or where a Director should lose the other proposals or resolutions that are contrary to the provisions of article 8 of these confidence of the Board for a justifiable reason. Regulations. They must also step down where their continuance on the Board may, directly or The General Shareholders’ Meeting may periodically set the actual number of members through the Director’s links with persons, put at risk the Company’s interest. of the Board of Directors within the maximum and minimum indicated. 2. Competent body and procedures: In any of the cases described, the Board of Directors may propose the resignation of the Director and, previously, to require the same to tender his/her resignation. ACGR 2015 Bankinter 17

Resolutions of the Board of Directors relating to the acknowledgement that the reasons C.1.20. Explain to what degree the self- assessment has led to significant changes in its for the resignation of the Director have arisen as provided for in the Regulations and internal organization and the procedures applicable to its activities: the acceptance of the resignation of the Director shall be approved following a proposal by the Appointments and Corporate Governance Committee, except in the event of Description of changes urgency and need. The Regulations of the Board establish that the Board will evaluate the functioning of the Board and its committees. The Board of Directors has performed the evaluation for financial year 2015, IV. Re-election: with no obvious significant deficiencies found that would cause major changes in internal organisation or procedures applicable to its activities. 1. Criteria: The same ones described for selection and appointment of members of the Board. C.1.20. bis. Describe the assessment process and the assessed areas conducted by the board of directors assisted, as the case may be, by an external consultant, regarding the 2. Competent body and procedures: diversity in its composition and capacities, duties and composition of its committees, the As indicated above, proposals submitted by the Board of Directors to the General performance of the chair of the board of directors and the first executive of the company, Shareholders’ Meeting to re-elect directors shall require a proposal from the and the performance and contribution of each board member: Appointments and Corporate Governance Committee in a formal and transparent procedure. Should the Board decide not to follow the proposal of the Appointments and The Board of Directors evaluates its own functioning and that of its committees on an annual basis, on the basis of the report submitted by the Appointments and Corporate Governance Corporate Governance Committee, it must give the specific reasons in its resolution. Committee. The Board’s evaluation covers the functioning of the Board and its committees and the perfor- V. Evaluation: mance of its Chairman, executive directors and the chairmen of the committees, which, given the size of the Board, entails an individualised assessment of almost all of its members. The process covers the following phases: preparation of surveys; completion of the surveys by the Upon the entry into force of Royal Decree 256/2013 of 12 April, which incorporated the directors; analysis and conclusions which, if necessary, include action plans to be adopted to 22 November 2012 guidelines of the European Banking Authority the assessment of remedy any deficiencies found. The degree of compliance with the targets established the previous year by the Board for the the suitability of the members of the management body and key function holders of for Chairman of the Board and the executive directors, one of whom is the Chief Executive Officer, credit institutions, the Board of Directors, at its meeting of 19 June 2013, approved the is also assessed, along with the performance, and new targets are established for the next year. “Bankinter Protocol on Compliance with the Suitability Requirement”, which describes the On 21 October 2015, the Board of Directors decided that this evaluation would be carried out by an independent external expert at least every three years, and will be performed in financial requirements to be met by directors and senior officers, as well as the respective evaluation year 2016. processes to implement these standards. The Board of Directors had all these variables in At the proposal of the Appointments and Corporate Governance Committee, the Board of mind, however, in evaluating the suitability the members of the Board of Directors. Directors did not deem it necessary for the evaluation in 2015 to be carried out by an external consultant due to the following reasons, among others: i) the new members of the Board of In addition, the Board of Directors of Bankinter annually, or more frequently if needed, Directors and of the committees, ii) the changes in corporate governance by the institution pur- performs an evaluation of the suitability of its members as indicated in the preceding suant to the entry into force of the new Good Governance Code of listed companies, and iii) the paragraph. decision of the SREP (Supervisory Review and Evaluation Process), which implementation can only be properly assessed after the passage of at least one full financial year. In addition, under article 5 of the Regulations of the Board, the Board of Directors performs an annual evaluation at least once a year of the functioning of the Board and of its delegated committees, on the basis of the report that the Appointments and Corporate Governance Committee submits to the Board and likewise the likewise of its Chairman and executive board members and of the Board Committees. On 21 October 2015, the Board of Directors decided that this evaluation would be carried out by an independent external expert at least every three years. ACGR 2015 Bankinter 18

C.1.20. ter. Break down, where pertinent, the business relationship that the consultant C.1.25. Indicate whether the Chairman has a casting vote: or any company of its group maintains with the company or any company of its group: Yes X No In 2015, the evaluation of the function and activity of the Board was not performed by an external consultant. Issues on which there is a casting vote C.1.21. Indicate the circumstances under which directors are obliged to resign. Article 29 of the By-Laws provides that the Chairman of the Board of Directors shall have a casting vote in the event of a tie. The non-executive chairman of Bankinter has not used this casting vote to date.

As indicated in section c.1.19., in addition to the cases provided by applicable law, the C.1.26. Indicate whether the bylaws or the Board Regulations establish an age limit for Regulations of the Board of Bankinter govern the grounds and the procedure for removal and resignation of Directors, providing that Directors must tender their resignation to the Board of directors: Directors and, where the Board should consider appropriate, step down from the executive post at the Bank or as representative of the group of shareholders to which their appointment as Director is tied or, for independent directors, if they fall in any situation that causes them to lose Yes No X their independence; if they incur in any of the situations of incompatibility, prohibition or where required by law to step down or resign, including conflict of competition or interest as provided in the Regulations of the Board of Directors referred to above or if a Director should commit C.1.27. Indicate whether the bylaws or the Board Regulations establish a limited term of acts or omissions contrary to the diligence and efficacy with which he/she ought to perform the office for independent directors, other than that established by law: office, or seriously infringe his/her duties as Director, where the Directors should for any other reason cause serious damage or loss to the Company’s interests, its credit and reputation, or the functioning of the Board, or where a Director should lose the confidence of the Board for a Yes No X justifiable reason. They must also step down where their continuance on the Board may, directly or through the Director’s links with persons, put at risk the Company’s. C.1.28. Indicate whether the bylaws or the Board Regulations establish specific rules for proxy voting in the Board of Directors, the way this is done and, in particular, the C.1.22. Section repealed. maximum number of proxies a director may have, and whether it has established any limit regarding the categories that may be delegated beyond the limits stipulated by C.1.23. Are reinforced qualified majorities required, other than the legal majorities, for legislation. If so, briefly give details on such standards. some type of resolution?

The Regulations of the Board of Bankinter provide that for each meeting, the Directors Yes No X may grant their right to vote, and issue instructions with regard to how that right to vote is to be exercised, to any other Director by letter, fax, telegram, e-mail, or any Where applicable, describe the differences. other means considered to be valid by the Regulations. Proxies must be addressed to the Chairman or Secretary of the Board before the commencement of the meeting. One C.1.24. Explain whether there are specific requirements, other than those regarding Director may hold a number of proxies. directors, to be appointed Chairman of the Board of Directors. Since the amendments to the Companies Act became effective, non-executive directors at listed companies may not give their proxy to an executive director; they may only Yes No X give the proxy to another non-executive director. Under all circumstances, failure to attend by Directors should be reduced to unavoidable cases. A Director’s failure to attend Board or committee meetings will deprive him from collecting the attendance fees even if he has granted a proxy. ACGR 2015 Bankinter 19

In addition, as already indicated in other reports, Bankinter has had a Director Website C.1.31. Indicate whether the individual and consolidated financial statements presented since 2007, which they can use to, among other things, grant proxies if they do not for Board approval are certified beforehand: attend, with all the information needed to grant a proxy being available beforehand on the same website in order give instructions about the desired direction of the vote. Yes X No

C.1.29. Indicate the number of meetings the Board of Directors has held during the year. Where applicable, identify the person(s) who has(/have) certified the Company’s Where applicable, indicate how many times the Board has met without the Chairman in individual and consolidated financial statements to be filed by the Board: attendance. In calculating this number, proxies given with specific instructions will be counted as attendances. Name Position MS MARIA DOLORES DANCAUSA TREVIÑO CEO Number of Board meetings 14 MS GLORIA ORTIZ PORTERO FINANCE MANAGER Number of Board meetings not attended by the Chairman 0

C.1.32. Explain the mechanisms, if any, established by the Board of Directors to prevent If the Chairman is an executive Director, indicate the number of meetings held without the individual and consolidated financial statements that it files from being presented to an executive director present or represented and chaired by the Lead Director the General Meeting with a qualified auditors report.

Number of meetings 0 The Board of Directors, through its Audit and Compliance Committee, controls the entire process of preparing and formulating the annual accounts of the Bank and its Indicate the number of meetings of the Board’s different committees have held during Group along with quarterly and half-yearly financial information. the year: This control of and permanent contact with the auditor are intended to, among other things, avoid qualifications in the auditors’ report. Audit and Compliance Committee 11 At 31 December 2015, the powers of the Audit and Compliance Committee as set out in Risks Committee 4 the Board Regulations include the following: Executive Committee 11 Remuneration Committee 7 - To safeguard the independence of the external auditor and receive from him information from the same on those matters that may jeapordize their independence, Appointments and Corporate Governance Committee 6 for review by the Committee, and any others connected to the process of carrying out the auditing of accounts, as well as all other communications envisaged in the C.1.30. Indicate the number of meetings held by the Board of Directors during the year legislation on accounts auditing and in the technical auditing rules. In any case, attended by all its members. In calculating this number, proxies given with specific they annually shall receive from the account auditors the written confirmation of instructions will be counted as attendances: their independence from the entity or entities linked directly or indirectly to it, as well as the information of the additional services of any kind provided to those Number of meetings attended by all directors 14 entities by such auditors or companies, or by the persons or entities linked to them % of attendances to total votes during the year 100% in accordance with the provisions of the legislation on accounts auditing.

- To issue annually, prior to the issuance of the accounts audit report, a report in which an opinion on the independence of the accounts auditors or audit firms shall ACGR 2015 Bankinter 20

be stated. In any case, this report shall take a position on the provision of additional C.1.35. Indicate what mechanisms the company has established, if any, to preserve the services referred to in the previous sub-section. independence of the external auditors, the financial analysts, the investment banks and the rating agencies. - To provide a channel of communication between the Board of Directors and the external and internal auditors, and to evaluate the results of the audit reports and The Board of Directors, through its Audit and Compliance Committee, oversees the compliance with the observations and conclusions drawn, as well as to discuss with objectivity of relationships of the Company and the Group with the external auditors, the accounts auditors the significant weaknesses of the internal control system ensuring their complete independence. Specifically, the Board ensures that auditors are observed during the auditing. rotated, that conflicts of interest are prevented and that the information in the annual report on remuneration to auditors as such and for other reasons if any is transparent. - To safeguard the reliability and transparency of the internal and external The report indicates and breaks down all the remuneration received by the external information on the Bank’s results and activities and, in particular, to verify the auditor. Bank and the Group’s quarterly and half-yearly financial statements, and the annual accounts, annual report, and management report prior to their approval by The Audit Committee has among its functions that of safeguarding the independence or submission to the Board of Directors and their publication, and to supervise the of the external auditor; it is up to this committee to propose appointment, re-election or Bank’s policy in relation to prospectuses and other forms of public information. replacement of external accounts auditors to the Board and to determine the conditions for contracting the auditors, the scope of their professional term of office and oversight The external auditor attends the meetings of the Audit and Compliance Committee of activities that are not actually auditing accounts. if the Chairman of this committee considers it to be in the committee’s interests and whenever there is an examination of the report of said auditors on the annual accounts In addition, the Audit and Compliance Committee, in compliance with section 2.6 of and management report of the Bank and of the Group, as well as meetings to verify the eighteenth additional provision of the Securities Market Act, issues a report on the quarterly results prior to publication thereof. independence of the auditors of accounts prior to issuance by the auditor of the audit report on the consolidated accounts of the Bank and the Group. To date, the individual and consolidated accounts have never been submitted for approval at the General Shareholders Meeting with qualifications in the Auditors’ The Audit and Compliance Committee includes the following items in this report: Report. • Whether the proper relationships and communications channels have been C.1.33. Is the company Secretary a director? established with the auditors to receive information on those issues that may put their independence at risk so that they may be examined by the Audit and Yes No X Compliance Committee and anything else associated with the process of auditing the accounts, as well as those other communications provided for by law and the Complete if the Secretary is not also a Director: technical rules on auditing. • It approves the annual budget for fees to be paid for the services of auditing the accounts of the Bank and the Group, setting the maximum percentage of the Name or company title of the Secretary Representative total invoice that may be represented by billing for services other than auditing MS GLORIA CALVO DÍAZ in accordance with generally accepted customs, with a protocol being defined to ensure that the engagement of these services is previously authorized by the C.1.34. Section repealed. committee and overseen at all times by the internal audit of the Group. • It oversees the rotation of the auditing team in compliance with the provisions of section 8 quater of Law 12/2010 of 30 June amending Law 19/1988 of 12 June ACGR 2015 Bankinter 21

on the Auditing of Accounts and ensures that there is compliance at all times If there were disagreements with the outgoing auditor, explain their grounds. with the rotation required by law. In addition, to ensure that there is an annual analysis of the suitability and independence of the auditor, it is a policy of the Board and of the bank that a decision be made each year about renewing the C.1.37. Indicate whether the audit firm does other work for the company and/or its group auditor’s appointment and that there be a process of reflection regarding the other than the audit. If so, declare the amount of fees received for such work and the main aspects of the previous financial year and the needs and circumstances percentage of such fees on the total fees charged to the company and/or its group: that apply to the next financial year. Yes X No The Chairman of the Audit and Compliance Committee informs the Annual General Meeting about the conclusions of the Annual Report of this Committee. Company Group Total The external auditors provide the Board of Directors with an annual report on the conclusions of the audit and on the status of risk management at the Bank and the Amount of non-audit work (thousands euros) 331 - 331 Group, after a report of the Audit and Compliance Committee. The Internal Audit Division is functionally subordinate to the Chairman of the Board of Directors and is Amount of non-audit work / total amount billed by the 25.92% - 25.92% hierarchically subordinate to the Audit and Compliance Committee. The committee audit firm (%) appoints the head of the division and approves the annual budget and the planning for the division’s activities. C.1.38. Indicate whether the audit report on the annual financial statements for the previous year contained reservations or qualifications. If so, indicate the reasons given As concerns the independence of agencies, analysts and investment banks, the Bank by the chair of the audit committee to explain the content and scope of such reservations has information transparency measures that conform to the restrictions set out in the or qualifications. rules on privileged and material information, confidentiality and bank secrecy, that are contained in the law, the Regulations of the Board, and Bankinter’s Internal Rules on Yes No X Conduct in the Securities Market. C.1.39. Indicate the number of consecutive years during which the current audit firm has The Internal Rules on Conduct in the Securities Market include, in addition to the rules been auditing the financial statements for the company and/or its group. Indicate the of conduct to which the directors of the institution as well as its officers and personnel percentage of the number of years audited by the current audit firm to the total number engaged in activities associated with the securities market are subject, the rules that of years in which the annual financial statements have been audited: apply to the separated areas (asset management, own portfolio management, outside portfolio management, and analysis), as well as those associated with treasury share Company Group transactions and the procedure applicable to transactions and decisions based on privileged or material information. Number of consecutive years 10 10 Company Group C.1.36. Indicate whether the company has changed its external auditor during the year. Number of years audited by current audit firm / number of years 28.57% 28.57% If so, identify the incoming and outgoing auditors: the company has been audited (%)

Yes No X ACGR 2015 Bankinter 22

C.1.40. Indicate and, where applicable, give details on the existence of a procedure Details of the procedure for directors to engage external advisory services: The Regulations of the Board of Directors refer to this issue in Article 30, “Notice and Agenda of the meetings”, providing as follows: Yes X No 1. Before the beginning of each financial year, the Board of Directors shall approve the programme of meetings for the following year. The calendar may be amended by a resolution of the Board itself or by a decision of the Chairman, who shall make the amendment known to the Directors sufficiently in advance. There shall be a minimum of ten meetings per year. Details of the procedure 2. Notice of ordinary meetings shall be given by letter, fax, telegram, e-mail or by any other valid Article 13.8 of the Regulations of the Board provides that in those matters that fall within the means providing proof of sending, and shall be authorised by the signature of the Chairman or power of the Board and the Board’s committees, Directors may ask for auditors, consultants, such person as may replace him/her, or by the Secretary acting on the Chairman’s orders. Notice advisors or independent experts to be hired, as the case may be, in order to assist the Board must be given, except in cases of urgency or necessity, sufficiently in advance of the date of or the Committee concerned in such matters. the meeting. Notice must always include the meeting’s Agenda and shall be accompanied by the informative documentation previously defined by the Board or which the Chairman decides in each case. The Directors may ask the Chairman or the Secretary of the Board of Directors to C.1.41. Indicate and, where applicable, give details on the existence of a procedure for supply them with the information necessary so that they may adequately assess the correspon- directors to obtain the information they need to prepare the meetings of the governing ding transactions or decisions, in order that they may reasonably prepare for the meetings and bodies with sufficient time: participate actively in the deliberations. 3. The Chairman shall decide on the final Agenda for the meeting and possible changes to be made to it. The Directors may ask the Chairman for other business to be included on the Agenda. Yes X No On 16 December 2015, the Board of Directors of Bankinter approved a procedure to prepare meetings for the Board and its committees intended to ensure that the preparation of the meetings of the Board of Directors of Bankinter, S.A. and its committees complies with the rules set forth above and contained in the Regulations of the Board, such that the deliberations of the Board and the adoption of resolutions is carried out with the full knowledge of its members and with adequate time for them to analyse them. As a result, the following are governed by this procedure: • The programme for meetings of the Board and its committees. • The method and site for holding meetings. • The notice and agenda for each meeting. • The time and media for making the documentation available that will be the subject of analysis and debate for each meeting. • Media for communicating with the directors responsible for compliance with this procedure. The agenda, along with the other documentation considered necessary to decide on the issues on the agenda for meetings, can be accessed by the directors online using the Director Website to make access thereto even easier. Furthermore, the procedure for preparing Board meetings approved on 16 December 2015, provides that “Directors may ask the Chairman through the Office of the Secretary for any documentation or information they may need for proper preparation for meetings, having full access to the records, reports and presentations for the meetings held.”

ACGR 2015 Bankinter 23

C.1.42. Indicate and, where applicable give details, whether the company has established C.1.45. Identify in aggregate terms and indicate in detail any agreements between the rules requiring directors to inform and, where applicable, resign under circumstances company and its directors, managers or employees that have guarantee or ring-fencing that may undermine the company’s credit and reputation: severance clauses for when such persons resign or are wrongfully dismissed or if the contractual relationship comes to an end due to a public takeover bid or other kinds of Yes X No transactions.

Number of beneficiaries 0 Explanation of the rules Type of beneficiary Article 10.2 of the Regulations of the Board provides that directors shall tender their resignation to the Board and, where the Board should consider it appropriate, step down, in the following Description of the agreement cases, without limitation: 5. Where the Director should for any other reason cause serious damage or loss to the Company’s interests, its credit and reputation, or the functioning of the Board, or in general, Indicate whether these contracts must be disclosed to and/or approved by the company where a Director should lose the confidence of the Board for a justifiable reason. or group governance bodies: 6. Where any other circumstances for the resignation of a Director should arise in accordance with the recommendations on good corporate governance in force in Spain and accepted by the Company, and this should be deemed to exist by the Board of Directors. Board of Directors General information Resolutions of the Board of Directors relating to the acknowledgment that the reasons for the resignation of the Director have arisen as provided for in the foregoing sections of the article Body authorising the clauses No No cited and to the acceptance of the resignation of the Director shall be approved following a proposal by the Appointments and Corporate Governance Committee, except in the event of Yes No urgency or need. Is the General Meeting informed of the clauses? X On 22 April 2015, the Board of Directors of Bankinter approved a Policy on the Prevention of Conflicts of Interest of Senior Officers, which, among other things, defines the general principles of conduct to prevent conflicts of interest among the Senior Officers. C.2. Board of Directors Committees C.1.43. Indicate whether any member of the Board of Directors has informed the company of any legal suit or court proceedings against him or her for any of the C.2.1. Detail all the Board Committees, their members and the proportion of executive, offences listed in article 213 of the Corporate Enterprises Act: proprietary, independent and other external directors sitting on them:

AUDIT AND COMPLIANCE COMMITTEE Yes No X Name Position Category Indicate whether the Board of Directors has analysed the case. If so, explain the MR GONZALO DE LA HOZ LIZCANO CHAIRMAN INDEPENDENT grounds for the decision taken as to whether or not the director should retain his/her MR FERNANDO MASAVEU HERRERO MEMBER PROPRIETARY directorship or, where applicable, describe the actions taken or planned to be taken by MR JAIME TERCEIRO LOMBA MEMBER INDEPENDENT the Board of Directors on the date of this report. MR RAFAEL MATEU DE ROS CEREZO MEMBER INDEPENDENT

C.1.44. Detail significant agreements reached by the Company that come into force, are % of proprietary Directors 25% amended or concluded in the event of a change in the control of the company stemming % of independent Directors 75% from a public takeover bid, and its effects. % of other external Directors 0% ACGR 2015 Bankinter 24

Explain the committee’s duties, describe the procedure and organisational and operational In general terms, the Committee shall meet with the same frequency as the Board of Directors. rules and summarize the main actions taken during the year. Among other activities, the Audit and Compliance Committee i) has approved all the activities to be performed by Internal Audit during the year, ii) has monitored in detail compliance with the 2008 Internal circular on tracking and monitoring Internal Audit recommendations, iii) has Article 35 of the Regulations of the Board of Directors of Bankinter, which is available on the engaged in various tasks to verify the most relevant management information, the informa- corporate website, describes the functions and rules organisation and operation of the Audit tion contained in the quarterly triptych distributed to shareholders, investors and the market, and Compliance Committee. the sales report and the corporate governance report, iv) has been informed about the various The Audit and Compliance Committee has the following functions, without limitation: Internal Audit reports regarding the principal subsidiaries of the Bank. All of the activities of • The Committee must safeguard the reliability and transparency of the internal and external the Committee are included in the annual activity report for financial year 2015, which the information on the Bank’s results and activities and, in particular, verify the integrity and con- Committee approved in February 2016 and which is published on the Institution’s corporate sistency of the Bank’s and the Group’s quarterly and half-yearly financial statements, and the website. annual accounts, annual report, and management report prior to their approval by or submission to the Board of Directors and their publication. • The Committee must promote and review on a periodical basis the functioning of adequate inter- Identify the Director who has been appointed Chairman on the basis of knowledge nal control systems and procedures in regard to the Bank’s activities, in addition to reviewing the and experience of accounting or auditing, or both and state the number of years they general risks map for the Bank and the Group. have been Chairman. • The Committee is the corporate body to which the Internal Audit function is hierarchically subordinate. The Committee annually evaluates the performance of the head of Internal Audit and participates in the process of determining his remuneration, the allocation of the Audit staff, and Name of Director MR GONZALO DE LA HOZ LIZCANO approval of the budget thereof, including IT development. • The Committee is directly responsible for supervising the confidential reporting by employees Number of years as Chairman 0 of complaints as included in the 17 January 2007 amendments of the Regulations of the Board. • The Regulations of the Board of Directors expressly assign to the Committee functions directly related to the duties of fidelity and loyalty of directors and hence with the Institution’s regulatory RISK COMMITTEE compliance. Thus, directors must inform the Committee about the situations where there is a Name Position Category direct or indirect conflict of interest as provided for in the Companies Act, the Securities Market Act or the internal rules of the Company. The Committee is also the body competent to decide MR FERNANDO MASAVEU HERRERO MEMBER PROPRIETARY issues on this subject and to agree to waiver or exemption from fiduciary duties for directors or MR JAIME TERCEIRO LOMBA CHAIRMAN INDEPENDENT from the rules of conduct in the securities market. • The Committee approves an Annual Report that is made available to all shareholders upon the MR GONZALO DE LA HOZ LIZCANO MEMBER INDEPENDENT call to the Annual General Meeting, and which is included on the corporate website of Bankinter MR RAFAEL MATEU DE ROS CEREZO MEMBER INDEPENDENT S.A. The Audit and Compliance Committee is comprised of a minimum of three and a maximum of % of proprietary Directors 25% seven Directors, all of them non-executive, appointed by the Board of Directors on the recommendation of the Appointments and Corporate Governance Committee. Committee members are % of independent Directors 75% appointed for a two year term which may be extended automatically. In all cases, the Chairman % of other external Directors 0% of the Committee shall be an independent director and must be replaced after a maximum of four years, and may be re-elected after one year has elapsed since stepping down. Under the Regulations of the Board, the Chairman of the Committee, like the rest of its members, shall be Explain the committee’s duties, describe the procedure and organisational and an independent Director with knowledge and experience in matters of accounting, auditing, or risks management; all members of the Committee are non-executive directors independent direc- operational rules and summarize the main actions taken during the year. tors being in the majority. The Secretary of the Committee shall be the Secretary of the Board of Directors. The Committee’s meetings may be attended, as speakers but not as Members, by the Head of the Audit Division as well as the Head of the Compliance Unit, who shall do so with such frequency as the Committee may decide. The external auditors shall attend the Committee meetings whenever its Chairman considers it appropriate, and in any event they shall attend all meetings examining the report by the said auditors on the Bank’s and the Group’s accounts and the annual report on the control of the Bank, as well as any other meetings on verification on half-yearly and quarterly results prior to their publication. ACGR 2015 Bankinter 25

Article 36 of the Regulations of the Board of Directors of Bankinter, which is available on the corpora- EXECUTIVE COMMITTEE te website, describes the functions and the rules of organisation and operation of the Risk Committee. Name Position Category The functions of the Risk Committee are: • Advising the Board of Directors on the institution’s overall current and future risk propensity and CARTIVAL, S.A. CHAIRMAN EXECUTIVE on its strategy in this regard, and assisting the Board of Directors in the effective implementa- MR PEDRO GUERRERO GUERRERO MEMBER OTHER EXTERNAL tion of that strategy. Notwithstanding the foregoing, the Board of Directors shall retain overall responsibility with respect to risk. MS MARIA DOLORES DANCAUSA TREVIÑO MEMBER EXECUTIVE • Assessing whether the prices for the assets and liabilities offered to customers fully take into MR FERNANDO MASAVEU HERRERO MEMBER PROPRIETARY account the institution’s business model and risk strategy. To the extent this is not the case, the Risk Committee shall submit a corrective plan to the Board of Directors. MR JAIME TERCEIRO LOMBA MEMBER INDEPENDENT • Determining, together with the Board of Directors, the nature, quantity, format and frequency of MR RAFAEL MATEU DE ROS CEREZO MEMBER INDEPENDENT the information on risk to be received by the Committee itself and the Board of Directors. • Assisting with the establishment of rational remuneration policies and practices. To this end, and without prejudice to the duties of the Remuneration Committee, the Risk Committee shall % of executive Directors 33.3% examine whether the incentives established in the remuneration system take into consideration risk, capital, liquidity, and probability and opportunity of benefits. % of proprietary Directors 16.7% • Approving, at the proposal of the Chairman of the Board, the Vice-Chairman, if the latter is an % of independent Directors 33.3% executive, or the Chief Executive Officer, the appointment or the replacement of the Risk Director. For the proper performance of its duties, the Risk Committee shall meet as many times as it is con- % of other external Directors 16.7% vened under agreement by the Committee itself or by its Chairman, any person belonging to the Company may attend if deemed fit by the Committee itself. The Risk Committee may freely access information on the institution’s risk situation and, if necessary, Explain the committee’s duties, describe the procedure and organisational and operational the risk management unit and specialist external advice, in order to properly perform its duties. rules and summarize the main actions taken during the year. The Risk Committee, via its Chairman, shall report its activity and the work it has carried out to the Board in the meetings planned to this effect or in the meeting immediately after, as considered appropriate by the Chairman. Under article 34 of the Regulations of the Board of Directors, the permanent delegation of the All of the activities of the Committee are included in the annual activity report for financial year powers of the Board of Directors to the Executive Committee shall include all of the Board’s 2015, which the Committee approved in February 2016 and which is published on the institution’s powers, except for those that may not be delegated pursuant to the provisions of law, these corporate website. Among the activities described in this report are participation in the preparation of By-Laws or the Regulations of the Board. the risk management and control framework and of the risk appetite framework as well as tracking Without prejudice to the aforementioned delegation, the following powers are expressly and the metrics detailed in this framework. permanently delegated to the Executive Committee: 1. Generally, to authorize credit transactions, up to the limit set by the Board of Directors. Transactions involving the Directors, senior officers, and other related transactions are excluded from this delegation, and must necessarily be approved by the Board of Directors. 2. To authorise new business and individual transactions, provided they are non-strategic and do not imply a particular tax risk for the Institution or its Group. 3. To monitor the different businesses, types of customers and their segmentation across the institution, the institution’s sales networks and organisations, as well as the products and services offered, all in line with the strategic or business plan approved by the Board of Directors for such purpose. 4. To monitor any significant variations in the shareholder base. ACGR 2015 Bankinter 26

The Executive Committee shall consist of no fewer than three and no more than seven directors. Article 37 of the Regulations of the Board of Directors of Bankinter, which is available on the The structure of participation of the several categories of directors shall be similar to that of corporate website, describes the functions and the rules of organisation and operation of the the Board of Directors. Committee members shall be appointed for such term as the Board of Remuneration Committee. Directors may determine. The Chairman of the Committee shall be the person designated as The functions of the Remuneration Committee include those listed below: such by the Board of Directors from among all of its members, and the Secretary shall be the Entre las funciones de la Comisión de Retribuciones están las que se relacionan a continuación: Secretary of the Board of Directors. The Executive Committee shall meet such number of times 1. Proposing to the Board the remuneration policy for the directors and their individual remu- as it is called by its Chairman. The Executive Committee may also be at the request of three neration, along with the corresponding annual director remuneration report, which the of the directors that are members thereof. The Executive Committee shall report to the Board Board shall submit for consultative voting at the General Meeting. of Directors on the matters discussed and the decisions taken in its meetings, and shall make 2. Proposing to the Board the individual remuneration of the executive Directors and, if appli- copies of the minutes of such meetings available to the Board members. cable, the external Directors, for the performance of duties other than those of a director and The Executive Committee met 11 times in 2015, where it studied and authorised credit tran- other terms and conditions of their contracts. sactions that were later presented to the Board of Directors for approval, and monitored the 3. Proposing the remuneration policy for senior management, including general managers institution’s businesses and the matters included in the delegation of its functions. or those performing senior management duties under the direct oversight of the board, of executive committees or of chief executive officers, as well as the individual remuneration and other basic terms and conditions of their contracts. Indicate whether the composition of the Executive Committee reflects the distribution of 4. Even if they are not part of senior management, the remuneration of members receiving different classes of directorship on the Board: significant remuneration, especially variable remuneration, and whose activities may have a significant impact on the Group’s assumption of risk. 5. Overseeing the extent to which the remuneration policy has generally been applied during Yes X No the financial year and ensure compliance therewith. 6. Periodically reviewing the remuneration programmes, assessing the implementation and performance thereof and ensure that director remuneration conforms to standards of mode- REMUNERATION COMMITTEE ration and suitability in respect of the Company’s results. Name Position Category 7. Ensuring the transparency of remuneration and the inclusion thereof in the annual report and in any annual reports containing information about the remuneration of directors and, MS ROSA MARÍA GARCÍA GARCÍA CHAIRMAN INDEPENDENT for this purpose, provide the Board with as much information as appropriate. 8. Reporting on incentive plans for officers or employees that are tied to changes in the listing MR JAIME TERCEIRO LOMBA MEMBER INDEPENDENT price of the Bank’s shares or other variable indices, as well as on remuneration schemes for MR GONZALO DE LA HOZ LIZCANO MEMBER INDEPENDENT the Institution’s management team based on group insurance systems or deferred remuneration schemes, if any. MR RAFAEL MATEU DE ROS CEREZO MEMBER INDEPENDENT 9. Other functions assigned thereto by these Regulations or by the Board of Directors. The Remuneration Committee shall meet as many times as it is called by agreement of the % of proprietary Directors 0% Committee itself or by its Chairman in order to properly perform its duties. % of independent Directors 100% Following a decision by the Committee and at the invitation of its Chairman, the Chairman, the Vice-Chairman, if an executive, and the Chief Executive Officer of the Bank or other executive % of other external Directors 0% directors or senior officers may attend meetings dealing with matters concerning executive directors or senior officers other than the attendees or relating to the remuneration of the senior Explain the committee’s duties, describe the procedure and organisational and operational officers. In all cases, the Committee must consult the Chairman, the Vice-Chairman, if the Vice- Chairman is an executive, and the Chief Executive Officer, with regard to the aforementioned rules and summarize the main actions taken during the year. matters prior to making any proposal or report. The Remuneration Committee shall have access to all the information and documentation necessary in order to exercise in its functions, and it may request the assistance of advisers, consultants, experts and other independent professionals. ACGR 2015 Bankinter 27

The Remuneration Committee, via its Chairman, shall report to the Board of Directors on its • To assess the necessary balance of powers, expertise, diversity and experience within the Board activities and work carried out at the meetings called for this purpose or at the immediately of Directors. To this end, the Committee will define the necessary duties and skills of the candi- subsequent meeting where the Chairman deems it appropriate, and shall make copies of the dates that must cover each vacancy, and determine the time and dedication required so as to minutes of such meetings available to the Directors. permit the efficient discharge of their duties. All of the activities of the Committee are included in the annual report on activities during • To periodically assess, at least once a year, the suitability of the various members of the Board of financial year 2015, which the Committee approved in February 2016, and which is publis- Directors and of the Board as a whole, and to make a consequent report to the Board of Directors. hed on the Institution’s corporate website. The activities described in this report include the • To set a representation target for the less represented gender in the Board of Directors, and to proposal to the Board of the Director Remuneration Policy, the determination and proposal to prepare guidelines on how to achieve such target. the Board of individual remuneration and other contractual conditions for executive directors • To analyse the existence and currency of succession plans for the Chairman, the Vice-Chairman and the non-executive chairman, the proposal for the annual director remuneration report, the (where appropriate), the Chief Executive Officer and the company’s senior officers and, if applica- proposal for the General Remuneration Policy of the Bank, verification of the information on ble, to submit proposals to the Board of Directors to ensure an organised and planned succession. remuneration of directors and senior officers contained in corporate documents, and tracking • To report on proposals for the appointment, discharge and removal of the Company’s senior compliance with the remuneration policy established by the Company and periodically revised, officers. among other issues. • To periodically review the Board of Directors’ policy on the selection and appointment of the members of senior management and to submit recommendations. • To report on appointments and removals of directors or senior officers of subsidiaries or of affi- APPOINTMENTS AND CORPORATE GOVERNANCE COMMITTEE liates who act on behalf of or are proposed by the Bank. Name Position Category • And other functions detailed in article 38 of the Regulations of the Board of Directors. To properly perform its duties, the Appointments and Corporate Governance Committee shall MR RAFAEL MATEU DE ROS CEREZO CHAIRMAN INDEPENDENT meet whenever convened by resolution of the Committee itself or by its Chairman. MR MARCELINO BOTIN-SANZ SAUTOLA MEMBER PROPRIETARY Following a decision by the Committee and at the invitation of its Chairman, the Chairman, the YNAVEDA Vice-Chairman, if an executive, and the Chief Executive Officer of the Bank and other executive directors or senior officers, if applicable, may attend the meetings. In general terms, the MR GONZALO DE LA HOZ LIZCANO MEMBER INDEPENDENT Chairman, Vice-Chairman, if an executive, and/or the Chief Executive Officer shall be called to the Committee’s meetings addressing matters relating to executive directors or senior officers MR JAIME TERCEIRO LOMBA MEMBER INDEPENDENT other than the attendees or relating to the appointment and remuneration of the senior officers. In all cases, the Committee must the Chairman, the Vice-Chairman, if the Vice-Chairman is an % of proprietary Directors 25% executive, and the Chief Executive Officer with regard to the aforementioned matters prior to % of independent Directors 75% making any proposal or report. The Appointments and Corporate Governance Committee shall have access to all the informa- % of other external Directors 0% tion and documentation necessary in order to exercise its functions, and it may request the assistance of advisers, consultants, experts and other independent professionals. Explain the committee’s duties, describe the procedure and organisational and The Appointments and Corporate Governance Committee, via its Chairman, shall report to the Board of Directors on its activities and work carried out at the meetings called for this purpose operational rules and summarize the main actions taken during the year. or at the immediately subsequent meeting where the Chairman deems it appropriate, and shall Article 38 of the Regulations of the Board of Directors of Bankinter, which is available on make copies of the minutes of such meetings available to the Directors. the corporate website, describes the functions and rules of organisation and operation of the All of the activities of the Committee are included in the annual report on activities during Appointments and Corporate Governance Committee. financial year 2015, which the Committee approved in February 2016 and which is published These include: on the Institution’s corporate website. The activities described in said report include the propo- • To propose the appointment, ratification, re-election and removal of the Independent Directors sed appointment, re-election and ratification of Board members, the assessment of the Board and of the Board’s Advisers indicating, for the former, the capacity in which they are appointed. of Directors and the Committees and Chairman thereof, as well as of the Chairman and the With regard to the appointment of Directors, the Committee shall ensure that when vacancies Executive Directors; it proposed to the Board that it approve certain policies, such as the director arise, the selection procedures do not contain any implicit bias against the appointment of female selection and succession policy, the director conflict of interest policy, and the corporate social Directors, and should seek to include women who meet the desired professional profile amongst responsibility policy, among others. the possible candidates where the number of female Directors is low or zero. • To propose the appointment, re-election and removal of the Chairman and Members of the Committees of the Board of Directors. ACGR 2015 Bankinter 28

C.2.2. Fill in the following table with information on the number of female directors were intended to update its duties as provided in the Companies Act, including more sitting on Board Committees over the last four years: details about their powers in the Regulations, in line with what is included for the other Committees. In this regard, the Executive Committee is given all the powers of the Board Number of female directors that can be delegated under the law and the By-Laws, except for those that are expressly reserved for the Board. Year 2015 Year 2014 Year 2013 Year 2012

Number % Number % Number % Number % In addition, the powers listed below are expressly and permanently delegated:

Audit and 0 0.00% 0 0.00% 0 0.00% 0 0.00% Compliance 1. Generally to authorise credit transactions, up to the limit set by the Board Committee of Directors. Transactions involving the Directors, senior officers and other Risk Committee 0 0.00% 0 0.00% 0 0.00% 0 0.00% related transactions are excluded from this delegation, and must necessarily be approved by the full Board of Directors. Executive 1 16.66% 1 16.66% 1 14.29% 1 14.29% Committee 2. To authorise new businesses and individual transactions, provided they are non- Remuneration 1 25.00% 0 0.00% 0 0.00% 0 0.00% strategic nature and do not imply a particular fiscal risk for the Institution or its Committee Group. Appointments 0 0.00% 0 0.00% 0 0.00% 0 0.00% 3. To monitor the different businesses, types of customers and their segmentation and Corporate across the institution, the institution’s sales networks and organisations, as well Governance as the products and services offered, all in line with the strategic business plan Committee approved by the Board of Directors for such purpose. 4. To monitor any significant variations in the shareholder base. C.2.3. Section repealed An annual report of the activities of the Audit and Compliance Committee is prepared, C.2.4. Section repealed and a summary of this report is presented by the Chairman of the committee at the Annual General Shareholders’ Meeting. C.2.5. Indicate, where applicable, the existence of regulations for the Board Committees, where they can be consulted and any amendments made to them during the year. The Remuneration Committee also prepares an annual report, which is presented by the Indicate whether an annual report on the activities of each committee has been drawn Chairman of this Committee at the General Shareholders’ Meeting as provided in the up voluntarily. Regulations of the Board of Directors after the amendments introduced in 2011.

The rules governing the committees are included in the Regulations of the Board C.2.6. Section repealed. of Directors, which are available on the company’s website: www.bankinter.com/ webcorporativa.

The amendments to the Regulations of the Board indicated in item C.1.18. above were made in 2015. As concerns the powers of the committees of the Board, the amendments concerning the Remuneration Committee and the Appointment and Corporate Governance Committee were intended to conform the division of powers to the segregation of duties between the committees. In the case of the Executive Committee, the amendments ACGR 2015 Bankinter 29

D. RELATED-PARTY TRANSACTIONS AND INTRA-GROUP TRANSACTIONS Likewise, on 22 April 2015 the Board of Directors of Bankinter approved: • The Bankinter Senior Management Conflict of Interest Prevention Policy: as an essential D.1. Explain the procedure, if any, for approving related-party and intra-group part of its supervisory function, the Board is responsible for addressing any matters likely to give rise to conflicts of interest, and specifically monitors Bankinter engaging in any transactions. related transactions between Bankinter and the Senior Management requiring approval in accordance with law or the internal regulations of Bankinter. • The Procedure for the approval of loans/bonds and guarantees of Senior Officers of Procedures for approving related party transactions Bankinter, which describes the internal procedures for the approval of lines of loans/bonds The Regulations of the Board of Directors allocate, inter alia, the following functions to the and guarantees for the Senior Management of Bankinter, whether or not in advance of Board of Directors: “To approve the Company’s linked transactions with Directors, significant a request for authorisation to Banco de España under Law 10/2014 of 26 June on the shareholders, or shareholders represented on the Board, or with persons linked to them, within Organisation, Supervision and Solvency of Credit Institutions, as further implemented by the terms laid down in these Regulations, and following a proposal by the Audit and Compliance Royal Decree 84/2015, of 13 February, specifically article 35 “Restrictions on the provision of Committee.”. loans, bonds and guarantees for the institution’s senior management”. The Director affected, either directly or indirectly, must refrain from intervening in the debates This is consistent with and follows the principles and criteria laid down by the Senior and decisions related to the transaction in respect of which a request for authorisation is being Management Conflict of Interest Prevention Policy approved by the Board of Directors. made. Likewise, the Regulations of the Board provide rules on the approval of lines of credit and other financial risks, including related transactions which, in the version introduced as at 31 D.2. Detail any significant transactions, entailing a transfer of a significant amount or December 2014, provide as follows: obligations between the company or its group companies, and the company’s significant shareholders: 1. The concession by the Bank of lines of credit, loans, and other forms of financing and gua- ranty to the Directors or persons linked to them in accordance with the terms of Article 23 of these Regulations must comply with the rules and instructions of the Bank of Spain and with the provisions of this article which shall be likewise applicable to any transactions by Directors which entail a financial risk of any sort or kind for the Company. 2. The said transactions must be authorized or ratified by the Board of Directors, or in cases of urgency, by the Executive Committee, Audit and Compliance Committee, the Board Committee to which the said power has been delegated, or the person or persons to whom the Board or the relevant Committee has delegated the said power, without prejudice to final approval by the Board where appropriate. The interested Director shall abstain in the approval of the resolution. 3. Temporary transactions such as account overdrafts or credit-card debt balances are excep- ted, provided that the amount overdrawn is within the usual limits, the renewal, extension, or modification of previously-authorized transactions that do not involve an increase in the amount or limit allowed, as well as, in the case of executive Directors, transactions covered by collective bargaining arrangements, accords, or like regulations, and those exempted in the rules and instructions referred to at section 1 of this Article. 4. With regard to all other linked transactions between the Company and the Directors, or the significant shareholders, or those represented on the Board, or persons linked to them, these should be approved by the Board of Directors in accordance with the terms of section 2 of this article, following a report by the Audit and Compliance Committee, with the exception of those transactions that are carried out pursuant to standard-form contracts for clients, at the established prices or tariffs, in general terms, and for which the amount does not exceed 1% of the annual revenues of the Company. ACGR 2015 Bankinter 30

D.3. Detail any significant transactions entailing a transfer of a significant amount D.6. Detail the mechanisms established to detect, determine and resolve possible or obligations between the company or its group companies, and the directors and/ conflicts of interest between the company and/or its group, and its directors, managers or senior managers: and/or significant shareholders.

Name of the Name of the Nature of Nature of Amount (€k) As at 31 December 2015, the Regulations of the Board of Directors provide as follows: directors and/or related party relationship transaction senior managers (person or 1. Directors must notify the Board of Directors or the Audit and Compliance Committee (person or company) company) of situations of conflicts of interest they may have with the Company and, MR PEDRO BANKINTER, Member of Board Financing 3,500 specifically, any remunerated activities they perform at other companies or entities GUERRERO S.A. of Directors – including the positions of Director or Administrator – or which they perform on GUERRERO a self-employed basis, and in general, any other professional duties or situations MS MARIA BANKINTER, Member of Board Financing 1,716 which may interfere with the dedication to be expected from the position of Director DOLORES S.A. of Directors and the performance of their duties as Administrators of the Company, as soon as DANCAUSA they become aware of their existence or of the possibility of a conflict or situation. CARTIVAL, S.A. BANKINTER, Member of Board Financing 10,000 The corporate website shall contain information on the other Boards of Directors on S.A. of Directors which the Directors sit, whether or not the companies are listed companies. MR FERNANDO BANKINTER, Member of Board Financing 4,000 MASAVEU S.A. of Directors 2. In the event of a conflict, the Director concerned must refrain from intervening in HERRERO the debates, decisions, and transactions to which such conflict refers. MR RAFAEL BANKINTER, Member of Board Financing 1,877 3. Directors must inform the Audit and Compliance Committee of any holdings in MATEU DE ROS S.A. of Directors the capital of any companies where these are majority holdings or where they CEREZO confer control of those companies to the Directors in the sense indicated in these MR MARCELINO BANKINTER, Member of Board Financing 60 Regulations, and of any modification to such holdings. BOTÍN-SANZ DE S.A. of Directors 4. Transactions between the Directors and the Company must take place at market SAUTUOLA Y NAVEDA prices and in conditions of complete transparency, and with the application of the securities market code of conduct in these Regulations, and any other legally- D.4. Detail the significant transactions in which the company has engaged with other applicable restrictions. companies belonging to the same group, except those that are eliminated in the process 5. With the exception of standard banking transactions, the Directors must notify the of drawing up the consolidated financial statements and that do not form part of the Audit and Compliance Committee of direct or indirect professional, commercial, or company’s usual trade with respect to its object and conditions. financial transactions with the Company, particularly those outside the Company’s ordinary business and not carried on under normal market conditions, to which the In any event, provide information on any intragroup transaction with companies provisions laid down at Article 19 of these Regulations shall be applicable. established in countries or territories considered tax havens. 6. In addition, executive Directors must, where appropriate, advise the Audit and Compliance Committee, at the request of the said Committee, of their investments D.5. State the amount of the transactions carried out with other related parties. and financial and economic transactions in general. 7. Directors may not use the Company’s name or rely on their position as Directors thereof in order to perform transactions on their own account or for persons linked to them. Nor may they use the Bank’s information or assets or avail themselves of their position within the Bank to secure a proprietary benefit, except in exchange ACGR 2015 Bankinter 31

for an adequate consideration under market conditions or where the information shareholder that appointed or proposed to appoint him/her or linked persons to concerned has been disclosed publicly. any of them. 8. Directors must not, whether for their own benefit or for that of persons linked to them, make investments or carry out any transactions connected with the Company Politics and procedures described in section D.1 above. made known to them during their term of office as Director, where such investment or transaction was offered to the Company or it had an interest in it. An exception is made where the Company rejects the investment or transaction, without the D.7. Are more than one of the Group’s companies listed in Spain as publicly traded Director’s influence. A business opening for the Director is understood as any companies? possibility for an investment or transaction of a financial, industrial, commercial, or real-property nature arising in connection with the exercise of the office by Yes No X the Director or using the Bank’s information, or in circumstances in which it is reasonable to think that the third party’s offer was addressed to the Bank. Identify the subsidiaries listed in Spain: 9. Directors must inform the Audit and Compliance Committee in those cases where their activity or circumstances may prejudice the credit or reputation of the Indicate whether the respective areas of business and any potential relations between Company, as well as of any criminal proceedings in which they appear as suspects. them and any potential business relations between the holding company and the 10. The situations and transactions to which this article refers should be the subject of listed subsidiary and other group companies have been publicly defined: public information in those cases and in the manner laid down by law. 11. Linked persons to the Director classified as nominee or who must be considered Yes No as such are deemed to be, for the purposes of Articles 8, 11, 17 and 18 of these Regulations, the shareholder(s) having appointed or proposed to appoint, ratify or re-elect the Director and the persons linked to them or those represented by the Define any potential business relations between the holding company and the listed Director at the Board for any cause, as well as those acting in concerted form with subsidiary company and between the listed subsidiaries and other group companies any of them according to the legislation in force. 12. In any of the cases described in the above sub-sections, the Audit and Compliance Committee may seek a report from the Appointments and Remuneration Committee Identify the mechanisms established to resolve any potential conflicts of interest or from the Corporate Governance Committee, where it should deem this advisable. between the listed subsidiary and other companies of the group In the event that the Audit and Compliance Committee or any of the said Committees should detect the existence of a possible case of prohibition, incompatibility, or Mechanisms to resolve possible conflicts of interest conflict of interest, it should inform the Director of this and report to the Board of Directors. 13. The structural conflict of competition shall be cause of incompatibility for the appointment or the exercise of the position of Director in accordance with the Regulations.

There is a conflict of interest in those situations where, in a direct or indirect way, there is a risk of opposition between the Company or Bankinter Group Companies’ interest, and the Director’s personal interest or that of the ACGR 2015 Bankinter 32

E. RISK CONTROL AND MANAGEMENT SYSTEMS and otherwise submit the transactions to established manual analysis and permission procedures. The structure of powers is highly integrated into the systems, which makes E.1. Explain the scope of the company’s Risk Management System, including risks of a it easier to control limits and rapidly adjust risk policies to changing circumstances. tax-related nature. For control and tracking, Bankinter has a series of systems and applications that help Bankinter understands the risk function to be one of the central elements in its the various managers detect symptoms of reduction in the risk quality of its customers competitive strategy, which is translated into its risk management and differentiates with the goal of anticipating possible delinquency problems. the Institution in the financial system. For collections and delinquency management, there is a robust management process It is a priority of the Board of Directors for the relevant risks of businesses of the Group for the transactions concerned, centralised for the best positions and decentralised for to be properly identified, measured, managed and controlled. To do that, it establishes the rest, supported by collection agencies and automated systems for complaints and the basic mechanisms and principles for proper management, such that it can reach the providing daily information on affected positions. To properly manage delinquency, Group’s strategic goals, protect the Group’s results and reputation, defend the interests the Bank uses a delinquency software application and forecasts in which the managers of shareholders, customers, other stakeholders and society in general, and ensure report the actions taken, which allows tracking of the status of negotiations, customer business stability and financial strength on a sustained basis over time. commitments and the estimated percentage of recovery.

Bankinter’s Risk Management System works continuously in an integrated fashion, The Credit Risk software systems indicated above provide real-time or periodic consolidating management by business units (customer segments), branches and information available according to their respective functionalities. geographic areas (regional divisions) in accordance with the needs of the activity. Set forth below is a brief description of the principal methods, procedures and systems used The institution also has an exhaustive computer software system that includes all to manage risk within the Group. the necessary management information with differing levels of aggregation for each business segment and for all of them together: Office, Regional Organisation and More information can be found in the sections on “General risk management principles” Division. and “Processes, methods, and systems to measure and provide information about risks” in the Prudential Relevance Report and in the section on “Risk policies and For structural and market risk, the institution has systems and controls proportionate management” in the Institution’s Legal Report. Both documents are available on to the scope and complexity of its activities, consolidating its activities based on the Bankinter’s corporate website (www.bankinter.com/webcorporativa) in the “Financial various divisions, operating units and risk types. Information” and “CNMV” sections. Bankinter has a specific structural risk system that monitors interest rate and liquidity Credit risk management is based on the institution’s experience and culture and on risk risks deriving from the balance sheet and allows constant monitoring of whether the quantification methodologies (IRB internal rating models). risk assumed is above the limits approved by the Board. For market risks incurred by negotiation activities, there is another system that allows risk monitoring of the The models, based on statistical methodologies, make it possible to quantify risks positions assumed by operators, negotiating desks, and the Capital Market Division. and make better decisions as concerns accepting transactions (either automatically or Depending on the case, methodologies such as interest rate and liquidity gaps or manually), internal allocation of capital, and pricing. charts, interest rate sensitivity measures (both in terms of financial margin and in economic value), amount at risk and analysis of extreme scenarios (stress testing) are In accepting transactions, Bankinter uses advanced electronic file processing systems applied. that automatically approve those risk transactions meeting specified requirements ACGR 2015 Bankinter 33

For operating risk, the Institution follows the standard method approved by Banco The Board of Directors pays attention to these functions, delegating compliance and de España and manages this risk in accordance with industry best practices (self- tracking sometimes, through other bodies as shown below: assessments, recording of operating losses, and a specific organisation dedicated to managing operational risk). The measures and information on operational risk are Management and tracking function based on risk maps, key indicators of operating risks, contingency plans and loss data bases. Authorisation, formalisation, appraisal, permission or ratification of risk operations:

In this regard, in compliance with section 529 ter 1b) of Royal Legislative Decree This power of the Board of Directors is delegated, depending on the nature or amount, 1/2010 of 2 July, which approves the restated text of the Companies Act, the Board to the following delegated or internal bodies: of Bankinter, S.A. was informed on 20 May 2015 that KPMG Abogados, S.L. had been hired to prepare a report to perform diagnostics on the tax-related risk control policies • Executive Committee, which is of an executive nature and makes decisions at the Bankinter Group and, if appropriate, to define possible areas for improvement within the scope of powers delegated thereto by the Board. It is chaired by the concerning (i) the organisation that would be most suited to control the fiscal area and Executive Vice-Chairman of Bankinter and made up of directors of the Bank. (ii) the procedures in place to manage and control the fiscal area, keeping in mind the It generally meets monthly and approves transactions within the limits set mandatory obligation for final determination and supervision of this risk control and by the Board of Directors described in the section on limits in this document. management policy that the Companies Act establishes. For risks, the Executive Committee decides on transactions above the powers delegated to lower bodies. periodicity also periodically tracks liquidity risk, As a result of this analysis, a Report on recommendations dated 23 October 2015 and credit risk, market risk and operating risk through changes in APRs and the the Executive Summary of the Report on recommendations dated 16 November 2015 solvency level of the institution. were issued along with a report on “Diagnostics on existing internal control processes and systems within the Bankinter Group” dated 4 February 2016 were issued. They The Executive Committee makes decisions to manage and track all types of were accompanied by a letter with basic conclusions, stating that as a result of the risk, delegating to the following Committees: analysis, KPMG believes that “no significant issues have been found that might imply the existence of material defects in the area of the tax function”, the recommendations -- Credit Risk, to the Executive Risk Committee being limited to improvements in the operational function of the Group’s tax-related -- Business Risk, to the Management Committee activity as no material risks had been detected in the area of the tax-related function -- Structural Risks (liquidity, interest rate, currency) and Market Risk: to the of the institution. Assets and Liability Committee (ALCO).

E.2. Identify the corporate bodies responsible for drawing up and enforcing the Risk Control function Management System, including tax-related risks. Approval of the policy for controlling and managing risks and supervising the Within the administration and supervision functions held by the Board of Directors of systems for the control and reporting thereof: the Company, there are two clearly separated functions as concerns risk for which the Board is ultimately responsible: In performing this function, the Board of Directors is supported by the Risk Committee, on a consultative basis. This committee is made up of members of the • The management and monitoring function. Board of Directors of Bankinter, most of whom are independent, and the chairman of • The control function. which is independent. It meets at least quarterly and is tasked with tracking capital planning and advising on the risk appetite, among other duties. ACGR 2015 Bankinter 34

Internal Audit: The risks that might affect achievement of business goals are those that inherent to banking activities in Spain. At year-end 2015, after the extensive restructuring of the The Audit and Compliance Committee directs internal auditing by approving the financial system, the prospects for Spanish banks are positive for the next few years, Annual Audit Activity Plan. This plan approves the primary work to be done by Internal with the evolution of the European economy and the political uncertainty in Spain Audit as well as the guidelines to be followed on the various aspects of the audit being the primary unknowns in business with legal entities and employment recovery function. The Audit Committee periodically monitors the activities of Internal Audit. being the variable with most influence on business with individuals. There is strong pressure on margins from strong competition and the quantitative easing policies of Internal Audit, which is functionally subordinate to the Audit and Compliance the European Central Bank. Committee, evaluates compliance with the policies approved by the Board, procedures, risk management systems and the internal control function. It is also responsible for There was a decrease in delinquencies and strengthening of the Spanish economy in reviewing and evaluating the effective implementation and effectiveness of risk control 2015. The high level of indebtedness of the Spanish economy and the European outlook and mitigation procedures while maintaining the mandatory independence of its point to weak mid-term growth in which delinquencies will continue to be a material management. Its review activities and evaluation of risk-related processes is included risk. Bankinter ended financial year 2015 with a delinquency rate of 4.13%, 59 basis within its audit plans and customary procedures. points less than the previous year, which is a 12.50% decrease and represents 40% of the median for the industry (10.35% in November 2015). The quality of Bankinter’s As concerns tax-related risks, see the description in the preceding section. assets and its traditional policy of prudence allow it to face the developments and future management of credit risk with confidence. E.3. Indicate the principal risks, including tax-related risks that could prevent business targets from being met. Market risk, interest rate risk, exchange rate risk and liquidity risk might result from new systemic episodes such as those experienced in 2012 during the Euro zone Bankinter does practically all its lending activity in Spain. In this regard, it is subject financial crisis, which appear remote as of the date of preparation of this report. to the usual risks for banking and financial activity, such as credit risk, market risk, Bankinter actively manages these risks and pays continual attention to them. structural exchange rate and interest rate risks, liquidity risk, operating risk, business risk, reputational risk and compliance risk. For tax-related risks, based on the analysis by KPMG, S.L. described in section E.1 above, it is not believed that the tax-related risks detected will affect business objectives. Bankinter has traditionally maintained a prudent risk policy, which has allowed it to maintain differentiated performance in the industry over the years. E.4. Identify whether the entity has a risk tolerance level, including tax-related risks.

For credit risk, the Group concentrates on lending to individuals with moderately-high As declared in the Risk Appetite Framework of the institution, Bankinter wishes to and high income with a solid residential mortgage portfolio and significant advisory maintain a moderate and prudent risk profile, which will allow it to obtain a balanced and asset management activities. As concerns businesses, the focus is on medium-sized and cleaned-up balance sheet and income that is recurring and sustainable over time, and large businesses that have performed relatively better in crises and have higher maximising long-term value for its shareholders. international growth potential. The risk appetite and tolerance that the Group assumes in performing its activity are For market risk, the exposure is very limited and as far as structural risks are subject to the following principles: concerned, the institution follows a policy of neutralising interest rate and exchange rate risks deriving from the Group’s businesses. • Strategies, policies, organisation and management systems are prudent and adjusted to the size, environment and complexity of the Institution’s activities, based on high-quality banking practices. ACGR 2015 Bankinter 35

• The Institution’s respect for and conformance to established requirements, limits The Risk Appetite Framework thus is a governance tool to ensure that the risk levels and regulatory restrictions, ensuring proper compliance with current regulatory assumed are consistent with the Group’s strategy and business plans, without prejudice documents at all times. to the limits established on the various risks and monitored regularly though the • Maintenance of a low or moderate exposure to risk, with a delinquency rate in relevant committees and organizational units. the lowest range of the Spanish financial system. • Appropriate hedging of problem assets. In addition, the Risk Control and Management Framework established by the Board • The return on capital investment is proper, with profitability over the risk-free (hereinafter the Framework) establishes in detail the risk policies; the systems of rate being kept to a minimum over the cycle. limits and powers for all material risks ensure that the policies are implemented within • Maintenance of a low level of market risk, so that in stress scenarios the losses the established tolerance margins. This Framework and the provisions developed generated have a reduced impact on the Institution’s income statement. internally establish precise metrics and limits for each type of risk and organisational • Intense growth in the priority medium-sized and large business strategic unit, which are summarised below: segments. • Balance of the loan portfolio between individuals and legal entities. • For credit risk, quantitative limits are assigned in the Framework and developed • Balanced growth in retail financing resources. in the delegated powers system to the amount of risk approved based on • Sources of wholesale financing are diversified, from the viewpoint of both organisational level and the nature and duration of the transaction. instruments and markets, and maintenance of a balanced maturity profile. • For structural and market risks, there are specific metrics (exposure level. • Optimisation of the cost of retail financing, maintaining a balance between the amount at risk (VaR), maturity mismatches, liquidity mismatches) and limits return on the loan and the rate situation in the market. are established for the various management levels. • Use of a risk diversification policy to avoid excessive concentration levels that • For operating risk, the Framework establishes the risk control environments, might translate into difficulties for the Institution. adjusting them to the amount of risk (higher inherent risk requires a better • Limitation on activities in sensitive industries that might pose a risk to the control environment). An estimate of potential risks is made in the risk map to Institution’s sustainability, such as industries associated with development prioritise risk management and losses from operating risks events are tracked or construction, or might have a negative impact on its reputation and/or in detail. respectability. • Moderate appetite for interest rate risk. For tax-related risks, it should be noted that by means of a resolution dated 20 May • Maintenance of a much reduced structural foreign currency position (excluding 2015, the Board of Directors of the Institution approved the definition of the fiscal trading activity, which is measured and limited by other means). strategy of the Bankinter Group, providing that it was essentially aimed at ensuring • Strengthened control of the reputational positioning of the Institution (Good responsible compliance with tax rules, paying attention to society’s interest and Corporate Governance and systemic risks, etc.). supporting the Group’s business strategies. For these purposes, within the framework • Desire to round out the level of services level that Bankinter offers its customers, of its social and corporate responsibility, BANKINTER recognizes the function of the tax both in private banking and merchant banking, offering limited-risk Investment system in society and thus intends that handling the tax function in the Group also pay Banking services. attention to the interests of society and its stakeholders as well as the value given to • Optimisation of the Efficiency Ratio. the confidence of the community in which it operates. • Maximisation of the generation of value for shareholders throughout cycles through both dividends and increase in share price, all on a strong base of Furthermore, at a meeting held on 22 April 2014, the Board of Directors of Bankinter, capital and liquidity. S.A. approved, among other things, an Agreement of the Institution to Adhere to the • Common Equity Tier 1 (CET1) is maintained within the fluctuation band set by entire Good Tax Practice Code sponsored by the State Tax Administration Agency the Institution, above the regulatory minimums. (Agencia Estatal de la Administración Tributaria), both in Bankinter’s own name and ACGR 2015 Bankinter 36

in its role as the controlling entity of Tax Group 13/01 for purposes of taxation in the from financial difficulties being considered refinancing. The strict classification criteria fiscal consolidation mode under the Corporate Income Tax and 128/09 for purposes of for refinancing specified in regulation were applied to compute refinancing. the tax mode for the group of institutions for Value Added Tax. The volume of problem assets and foreclosed assets continues to be much less in E.5. State what risks, including tax-related risks, have occurred during the year. comparative terms than that for the Group’s primary competitors.

The economic recovery that in mid-2013 in Spain strengthened during 2015. The For more information about the impact of these risks on the Institution’s accounts, predictions of Banco de España in December 2015 for the end of the financial year please consult the sections on “Risk policies and management”, “Exposure to the pointed to an increase of more than 3% in GDP. construction and development industry”, and “Additional information on risks: refinancing and restructuring transactions” in the Legal Report, which is available on According to information from Banco de España, new lending transactions in the Bankinter’s company web site, section labelled “Shareholders and Investors” – Financial Spanish financial system will continue to grow in 2015, though in terms of stock, credit Information, Report”. decreased for an additional year: at the end of November 2015, total financing to non- financial companies was still 1.4% below the previous year, and was down 2.2% for Bankinter believes that the control and tracking systems are functioning properly, as home financing. indicated by the fact that a delinquency rate among the lowest in the system is being maintained. In this context, the quality of Bankinter’s assets has allowed us to demonstrate performance higher than that of the industry for another year, with computable credit No tax-related risk materialised during the financial year that might have affected the risk (which includes investment and company risk) growing by 4.4%. business targets.

Bankinter has been balancing the distribution of its credit portfolio between individuals As concerns tax proceedings for the Bankinter Group, which are pending because the and legal entities for years. In 2015, the credit risk for individuals grew by 2.3% and profit and loss statements were challenged at the Economic Administrative Courts and that for legal entities by 6.8%. At the end of the financial year, the computable risk for at bodies having jurisdiction, we refer to the Group Report and indicate that, in any individuals was 51.4% of the total, and that for legal entities was 48.6%. event, there are adequate provisions for any tax-related liabilities that might derive from these proceedings as at the end date of financial year 2015 and previous financial In terms of delinquency, the financial year closed at 4.13%, which is a reduction of 59 years. basis points from the previous year, a reduction of 12.50%. The delinquency rate at the end of the financial year is 40% of the median for the industry (10.35% according to E.6. Explain the response and supervision plans for the principal risks faced by the Banco de España data from November 2015). company, including tax-related risks.

The volume of problem assets and foreclosed assets continues to be much less than that Bankinter actively manages these risks using various pillars as described in previous for the Group’s primary competitors. At the end of December 2015, the foreclosed asset sections and summarised below: portfolio was 531 million euros, which was 1.1% of the total credit risk, a reduction of 9.3% in the financial year. • A clear organisational structure that is independent of the business function, which starts from the Board of Directors and establishes a structure and functions The portfolio of loans refinanced and restructured due to credit risk at the end of 2015 for identifying, measuring, controlling and managing the various risks. was 1.325 billion euros, with any modifications in the credit risk conditions resulting ACGR 2015 Bankinter 37

• Risk policies clearly established by the Board that have been developed in • To be informed of relevant irregularities, breaches or risks observed during the specific structures for limits, powers and internal information and decision control actions carried out by the Compliance Area. making processes. • Specific control systems and procedures, strongly supported by IT information, As concerns the improvements in operating function shown in the documentation control and management systems. prepared by KPMG, S.L., an action plan will be prepared by the Fiscal Advisory Area of • A solid risk culture established over years the Institution to be implemented during financial year 2016, with KPMG, S.L. and the Institution’s Audit Department being charged with verifying compliance with the plan. The Institution’s capacity to respond to the primary risks demonstrated during the crisis and that can be foreseen in the immediate future can be summarised as follows: The Board of Directors of the Institution will be informed of the results of compliance with this action plan. • The risk acceptance policy is prudent and business plans are primarily aimed at low- and moderate-risk customer segments, both for individuals and legal entities. The credit risk control, tracking and recovery systems are continually strengthened and supported by investments in IT systems. This rendered a delinquency rate of 4.13% at the end of the financial year, which is 40% of the median for the industry. • There is active management of structural interest rate risk aimed at protecting the financial margin and the Bank’s economic value vis-à-vis changed in interest rates. • Liquidity risk is monitored and actively managed, working primarily on liquid asset cushions, concentration on wholesale financing, diversification of funding sources and improvement of the resulting balances on commercial transactions. The deposit to loan ratio was 83.5% at year-end 2015. • Operating risk is actively managed using self-evaluations, risk maps, specific improvement plans, key operating risk indicators and contingency plans for the most relevant risks. • The Institution maintains certain solvency levels above the regulatory minimums. At year-end 2015, the CET1 (Common Equity Tier I) ratio was 11.77%.

As an additional risk supervision level. the Audit and Compliance Committee has following powers, among others:

• To promote and review on a periodical basis the functioning of adequate internal control systems that ensure that the Company’s risks are adequately managed. • To supervise the Bank’s and the Group’s internal auditing activities, and therefore to approve its annual work plan, the annual report on activities, and to ensure that the main risk areas and the internal control systems and procedures are reviewed. ACGR 2015 Bankinter 38

F. SYSTEMS OF INTERNAL RISK MANAGEMENT AND INTERNAL CONTROL OVER the risk control systems, and to safeguard the independence and effectiveness of the said FINANCIAL REPORTING (ICFR) function.”

Describe the mechanisms comprising the risk management and control systems for Nevertheless, the design of the control system for financial information at the Bankinter financial reporting (ICFR) in the entity. Group is under the supervision of the chief executive officer of the Bank. Actual implementation of the control systems for financial information is the responsibility of F.1. The institution’s control environment. the Financial Division of the Bank and of each of the subsidiaries of the Group, as well as of the Divisions of the areas that participate in, or have an impact on the quality Give information, describing the key features of at least: and reliability of the financial information on the basis of which the Group’s Financial Statements are prepared. F.1.1. Which bodies and/or functions are responsible for: (i) the existence and maintenance of an adequate and effective ICFR; (ii) its implementation; and (iii) its supervision. The Audit and Regulatory Compliance Committee considers, among other matters, the possible weaknesses of the control system, as well as the reliability and accuracy of Bankinter’s Board of Directors is the body responsible for financial information and for the financial statements, in order to evaluate possible corrections, after receiving the the existence of an adequate internal control system for such information. In addition, necessary information and clarifications from the areas responsible for such statements article 35 of the Regulations of the Board of Directors has delegated to the Audit and or involved therein. To detect such weaknesses, the Audit and Regulatory Compliance Regulatory Compliance Committee the duty to: Committee draws on support from both the Auditor of the Group and the Internal Audit Division, who verify the effectiveness of the system to control the quality of financial “Safeguard the reliability and transparency of the internal and external information to detect possible deviations that might ultimately lead to material errors in information on the Bank’s results and activities and, in particular, to verify the such information. integrity and consistency of the Bank and the Group’s quarterly and half-yearly financial statements, and the annual accounts, annual report and management F.1.2. Whether, especially in the process of drawing up the financial information, the report prior to their approval by, or submission to the Board of Directors and following elements exist: their publication, and to supervise the Bank’s policy in relation to prospectuses and other forms of public information”. Departments and/or mechanisms responsible for: (i) the design and review of the organisational structure; (ii) the clear definition of lines of responsibility and The institution has a Manual of Accounting Policies and Financial Information Procedures authority, with an adequate distribution of tasks and functions; and (iii) ensuring (hereinafter, the “Accounting Policies Manual”), approval of which is within the purview that sufficient procedures exist for their correct dissemination within the entity. of the Board of Directors, at the proposal of the Audit and Regulatory Compliance Committee. Bankinter’s Board of Directors is responsible for approving and reviewing the institution’s organisational structure, at the proposal of the Appointments and Article 5 of the Regulations of the Board of Directors provides that, among other Corporate Governance Committee. responsibilities, the Board of Directors is responsible for “approving the risk control and management policy, as well as regularly monitoring the internal information and control The Bankinter Group’s Manual of Accounting Policies and Financial Information systems….” Section 11.6 of Article 35 of the Regulations of the Board of Directors further Procedures, approved by the Board of Directors, at the proposal of the Audit and provides that the Audit and Regulatory Compliance Committee has the duty to “supervise Regulatory Compliance Committee, lays down the lines of responsibility and the effectiveness of internal control, the internal auditing services at the Company and authority in connection with the preparation of financial information. ACGR 2015 Bankinter 39

The existing organisational structure of Bankinter seeks to ensure a sound internal General guidelines for conduct also provide that all transactions must be recorded control model for financial information. in accordance with generally accepted accounting principles, specifically, in accordance with the applicable rules set forth in the Accounting Policies Manual. Code of conduct, approval body, degree of dissemination and instruction, Other direct responsibilities of employees with financial and accounting duties are principles and values included (indicating whether specific mention is made of the following: recording the transactions and drawing up of the financial information), body in charge of analysing non-compliance and proposing corrective measures and • Stay up to date in the knowledge of accounting regulations and the policies sanctions. and procedures of the Group, and perform their duties in accordance therewith. Employees have the duty to request professional advice internally if they deem The Bankinter Group has a Code of Professional Ethics that comprises the basic it necessary. principles of conduct and practices of professional conduct required of all employees • Be on the alert for possible violations of the institution’s financial and accounting and persons working for Bankinter SA and its subsidiaries (except for Línea Directa policies that may be detected in the review of financial information and report Aseguradora). The Bankinter Group’s Code of Professional Ethics is approved by them immediately. the Board of Directors, at the proposal of the Audit and Regulatory Compliance • Communicate and report financial information in a fully transparent manner. Committee. • Keep the documents supporting accounting records under custody, in accordance with the Group’s policy. The aforementioned Code of Ethics is updated to bring it into line with the • Immediately report any pressure from management to manipulate estimates circumstances that so require; with most recent amendment being approved at and/or accounting valuations in order to alter financial results. the Board of Directors meeting held on 20 October 2015, at which the Exhibit thereto was deleted, to be replaced by the Regulations of the Crime Prevention and In addition, senior management with responsibility for financial information must: Professional Ethics Committee. • Ensure that all employees with accounting duties have adequate professional All employees of the group, as well as all persons subject to the Code of Ethics, experience and resources to perform their duties properly. receive the Code upon hiring. This Code is also permanently available both in • Prevent and detect pressure to alter accounting valuations or estimates in order internal regulations and on the corporate website. There is also a mailbox available to improperly influence or alter financial results. to employees for questions or concerns regarding the Code. • Take the necessary measures to reasonably ensure that the financial statements and communications concerning financial matters made by the institution are In addition, the Group’s Manual of Accounting Policies and Financial Information complete and correct. Procedures introduces a supplement to the Code of Ethics that establishes a number • Specifically, measures shall be taken to warn of: of ethical principles applicable to all persons having accounting and financial i. Accounting records that improperly reflect the nature of the transaction. information responsibilities and duties. This manual provides a detailed description ii. Pressure to produce incorrect book earnings/losses. of the ethical principles and the procedures to be observed when recording iii. Resistance from persons or heads of processes with financial and accounting transactions and in the preparation and communication of financial information. duties to avoid such processes being reviewed or audited iv. Existence of unreported funds or unrecorded assets or liabilities. In summary, applicable ethical principles are independence, integrity, responsibility, v. Estimates of valuations, allowances, reserves, etc. not supported by facts and professionalism, dedication and confidentiality. by proper documentation. ACGR 2015 Bankinter 40

The Group has procedures in place to ensure that the principles of integrity and in the order in which they are received, provided they meet the requirements professional ethics are observed, as well as measures to identify and correct deviations. established in the procedures governing them. Control of compliance with the Code of Professional Ethics and disciplinary power for irregular conduct in violation of the various codes of conduct of the Bankinter Group Periodic training and refresher courses for employees involved in preparing and are the responsibility of the Crime Prevention and Professional Ethics Committee, revising the financial information, and in ICFR assessment, covering at least a body established by Resolution of the Board of Directors of BANKINTER, S.A. of accounting standards, audit, internal control and risk management. 20 October 2015, which replaces the former Monitoring Committee of the Code of Professional Ethics, and which is now also given autonomous powers of initiative Bankinter Group employees involved in the various processes for the preparation of and control to supervise the operation of, and compliance with the criminal risk financial information regularly participate in training and update programmes so prevention model. The aforementioned Committee reports directly to the Board of as to allow them to perform their duties effectively. Directors through the Audit and Regulatory Compliance Committee. Training plans for financial and accounting personnel are designed and approved Whistle-blowing channel, to allow financial and accounting irregularities to be by the financial divisions of the Bank and subsidiaries, as well as the various communicated to the Audit Committee, as well as possible non-compliance with General Divisions that participate in the preparation of financial information. Such the code of conduct and irregular activities in the organization, reporting where training plans are supervised and managed by the People Management Division. applicable if this is confidential in nature. Seven Financial Information courses were given in 2015 in the banking activities The Group has a confidential whistle-blowing channel, which is a direct channel of area of the Group. A total of 257 training hours were given. The main areas access to the Audit and Regulatory Compliance Committee. receiving this training were:

The existence of and access to this channel is disseminated among all members of • Accounting and Control the organisation in order for it to serve as a channel to warn of irregularities of any • Financial Information. kind, including those of a financial and accounting nature.. • Risks. • Operations. This channel is a channel of communication at Bankinter to receive complaints or • IT. reports on a confidential basis in connection with bad practices in financial and • Public Relations and Basle. accounting matters that may be potentially significant for the company, protecting • Treasury. the identity of the whistleblower. It was also created to preserve the Bankinter • Internal Audit. Group’s corporate values, in addition to the mere personal liability for individual actions, and requires the commitment of employees to report those situations As for Línea Directa Aseguradora, 10 courses were given in 2015, with 819 hours which, while not related to their actions or area of responsibility, they consider to be of training on financial and accounting matters, in which a total of 123 persons ethically questionable in accordance with the contents of the Code of Ethics. participated.

Such reports shall be sent to an e-mail address provided for such purpose, and the F.2. Financial reporting risk assessment. recipient of such report shall only be the Chairman of the Audit and Regulatory Compliance Committee, or the Chairman of the Appointments and Corporate Give information on at least: Governance Committee, thus guaranteeing absolute and strict confidentiality both in the reporting process and in any investigation process. Reports are reviewed ACGR 2015 Bankinter 41

F.2.1. The key features of the risk identification process, including error and fraud and error in estimates, and taking into account the principles of occurrence, risks, with respect to: integrity, breakdown and comparability. Specifically, the Accounting Policies Manual establishes the following objectives: Whether the process exists and is documented. • Existence: All assets (rights) and liabilities (obligations) recorded in the The risk identification process in connection with financial information is bank’s balance sheet exist, and the transactions posted have been made in the described and formalised in the Group’s Accounting Policies Manual. respective period. • Entirety: Not only do they exist, but all assets and liabilities as of the end of The control system for financial information must establish a balance between the period covered by the balance sheet and the transactions made during the the level of control and the related cost. In line therewith, the Group’s Accounting period are recorded. Policies Manual establishes a process for the identification of risks in financial • Valuation: The carrying amount of the assets and liabilities, as well as revenues information designed following a standard of relative importance and taking and expenses, have been determined in accordance with generally accepted into account all the reported and published financial information. principles. • Presentation: The information is sufficient, adequate, and is correctly described The Bankinter Group’s risk identification system for financial information follows and classified. a top-down process within the framework of the relative importance standards approved by the Board of Directors, which concludes with the identification The existence of a process for identifying the consolidation perimeter, taking into of a financial information risk map that includes Companies of the Group and account aspects including the possible existence of complex corporate structures, significant processes and subprocesses. instrumental or special purpose vehicles.

The Finance and Investor Relations Division is responsible for checking that Within the Finance and Investor Relations Division is the Group’s Financial there have been no significant alterations in the financial information risk map Information Function, charged with determining the scope of consolidation of the at least once a year and reporting thereon to Internal Audit. Group.

All business processes identified as significant have been assigned a responsible The full consolidation procedure will be applied for the annual accounts of area, which is charged with documenting the process, identifying the risks Subsidiaries (Entitades Dependientes). Accordingly, all significant balances and thereof and evaluating existing controls, as well as with establishing and transactions made between consolidated institutions shall be eliminated in the implementing new controls if deemed necessary. consolidation process.

Whether the process covers all the objectives of financial reporting (existence The consolidation of the profits/losses generated by the institutions that the Group and occurrence; completeness; valuation; presentation, breakdown and may acquire during a reporting period will be made taking into account solely those comparability; and rights and obligations), whether the information is relating to the period between the beginning of the period covered by the financial updated and with what frequency. statements and the date of disposal.

Both the procedures to identify financial information risks and the controls The equity method will be applied in such process for the accounts of Jointly designed to control significant processes and activity take into account all Controlled Entities (Entitades Multigrupo), with the exceptions provided in the objectives of financial information, following materiality and qualitative applicable accounting laws and regulations. The equity method will be applied for standards, focusing on the areas and processes with the greatest risk of fraud Associates (Entidades Asociadas). ACGR 2015 Bankinter 42

If the Financial Division is informed of the acquisition of an institution in which the The Board of Directors, through the Audit and Regulatory Compliance Committee, is Group has an interest, inclusion thereof in the scope of consolidation is reviewed ultimately responsible for supervising the process, with the support of the Internal and determined in accordance with the procedures described above. Audit Unit.

There were no changes in the Bankinter Group’s scope of consolidation in 2015. F.3. Control activities. For consolidation of the scope, the Institution takes into account the following types of operational, technological, financial, strategic, market and legal risks, among Give information on the main features, if at least the following exist: others. F.3.1. Procedures for review and authorisation of the financial information and the The Finance and Investor Relations Division shall be responsible for reviewing, description of the ICFR, to be published on the securities markets, indicating who is at least on an annual basis, whether there have been any changes in the risks responsible for it, and the documentation describing the activity flows and controls identified in the preparation of the consolidated accounts and shall report any (including those concerning risk of fraud) for the different types of transactions that changes therein to the Audit Division. may materially impact the financial statements, including the procedure for closing the accounts and the specific review of the relevant judgments, estimates, valuations and The Group’s Accounting Policies Manual establishes the standards to be taken into projections. account to assess the significant influence and/or the concept of control which are essential to decide on consolidation and the consolidation method for the various As already mentioned, the Board of Directors delegates to the Audit and Regulatory associated institutions and subsidiaries, as well as special purpose vehicles. Compliance Committee the duty to “Safeguard the reliability and transparency of the internal and external information on the Bank’s results and activities and, in particular, A detailed description of the main accounting policies, including those relating to to verify the integrity and consistency of the Bank’s and the Group’s quarterly and the identification of the Group’s scope, is provided in the annual report. half-yearly financial statements, and the annual accounts, the annual report and the management report prior to their approval by, or submission to the Board of Directors Whether the process takes into account the effects of other types of risks and their publication, and to supervise the Bank’s policy in relation to prospectuses and (operational, technological, financial, legal, tax-related, reputational, other forms of public information”. environmental, etc.) insofar as they impact the financial statements. The Audit Committee, through the external auditor and the internal audit function, The Bank has an overall risk map, of which the financial information risk map reviews the quarterly and half-yearly financial statements of the bank and the group, as is part, which identifies and assesses the various risks to which the institution is well as the annual accounts, the annual report and the management report, prior to the exposed. approval thereof.

The financial information risk map is prepared taking into account, as a basic The Internal Control System for Financial Information at Bankinter focuses on ensuring element to evaluate each process and the controls thereof, the existence of a the proper recording, valuation, presentation and breakdown of transactions of relative valuation risk or the fact that management estimates are included in its calculation. importance and that may therefore affect financial information. The Accounting Policies Manual provides a detailed description of the types of transactions covered and • Which of the entity’s governance bodies supervises the process establishes the necessary procedures for the updating thereof.

All the Group’s critical processes and activities that, because of their significance, could have an impact on financial information are documented in the Accounting Policies ACGR 2015 Bankinter 43

Manual. Such documentation establishes the procedures and controls that must be As regards the process for the closing of accounts and the review of litigation and observed at all times by employees responsible for them. significant estimates, valuations and projections, updates on this matter are made in accordance with the provisions of the Group’s Accounting Policies Manual, which are The accounting of the Bank and its subsidiaries is automated practically in its entirety described in detail in the Group’s legal report, and they are made by the areas specialising and is triggered automatically by the recording of the transaction. For that reason, the in each of the issues and checked by the Financial Division of the Bank or of each ICSFI pays particular attention to manual accounting processes and to the launching of subsidiary, as the case may be. new products, operations or special operations. In addition, in all quarterly closings, the results are reviewed by the Audit and Regulatory As regards manual accounting operations, it should be noted that accounting through Compliance Committee, for ultimate approval by the Board of Directors. To perform these manual entries is limited to users specialising in the operations and accounting area. The duties it draws on the reviews and considerations in that regard of the Internal Audit Unit entries made are perfectly traceable, as they are recorded together with the user who and the external auditor. made them and the description thereof. The following are the main features of this process: The appearance and launching of new products and services on the market or the beginning of a new activity, special operations or any other event that has an impact Performance of analytical procedures that make it possible to assess aspects of the on the financial statements is evaluated from an accounting standpoint to ensure that Income Statement, such as: the financial information generated is reliable and complies with applicable accounting • Consistency of the financial information with the performance of the business of laws and regulations. The Finance and Investor Relations Division is advised by the the Group and of the industry. implementing areas of the various initiatives, as are the operational areas, in order • Analytical procedures designed to identify unusual operations and items, for them to review and determine the applicable accounting policies, to determine the including: required accounting, inventory, and regulatory information and any other aspect having -- Comparison with the Income Statement for prior periods. an impact on the financial statements. -- Comparison of actual results with budgeted results where these have been defined. Bankinter has a New Product Launching Committee in order to put in place a strict -- Comparison of Income Statement items with those estimated in accordance mechanism of supervision and control of Operational and Reputational Risks that might with the experience of the Bankinter Group and of its industry. arise in the ordinary course of banking activities with customers and, in particular, with -- Effect on the Income Statement of the resolutions adopted by the shareholders the approval of the launching of new products and services, adjustment of business at the General Shareholders’ Meeting, by the Board of Directors, etc. practices, establishment of marketing policies and control of business agreements with • Meetings with members of Management with responsibility for financial and other entities or possible partners, ensuring that the statutory requirements laid down in accounting matters in order to, on the basis of the information obtained from the regulations and the operational and reputational standards established by the Bank are aforementioned analytical procedures, evaluate matters such as: complied with. -- Whether the Income Statement has been prepared in accordance with applicable accounting standards. In addition to controls at the process and activity levels, second-level controls are -- Changes that may have occurred in the activities of the Bankinter Group or in performed in order to detect material errors that could affect financial information. the application of accounting standards. Worth noting among such controls are the reconciliation of inventories and accounting -- Significant aspects affecting the Income Statements relating to changes in databases, controls of input-output and other accounts, control of items pending activities, new products or new lines of business. allocation, reconciliation of checking accounts, fairness of changes in balances, yields and -- Statements concerning changes in the Income Statements and concerning costs in relation to changes in interest rates and activities, budgetary deviations, control changes in the respective line items, particularly unexpected or unusual of allocations of sizeable amounts, etc. changes. ACGR 2015 Bankinter 44

-- Obtaining information, documentation and/or data that make it possible to current month, which will allow them to act to resolve possible incidents and/or assess the fairness of the statements made. circumstances, if any, that may have occurred, preventing an incorrect impact on results. Review and performance of calculations and comparisons of a similar nature. A total of 309 controls have been sent to date (December 2015), the status of which, as The aforementioned procedures are applied bearing in mind a principle of relative reported by those responsible for them, has been favourable, given that they have all importance such that those items that, because of their small amount compared with been reviewed and classified as without noteworthy qualifications. the Group’s Income Statement, are not significant for consideration by the Audit and Regulatory Compliance Committee, or those items showing changes that are On an Annual basis: commensurate with the corresponding variables that cause them, are not reviewed. • Send to each of the areas and/or heads a report with the processes established by them for review. Supplementing all of the foregoing, a system is implemented that is based on the key • Such report must be returned by the person responsible for such processes/ processes and controls identified to ensure the accuracy and reliability of the financial controls validating, modifying and/or increasing all processes and/or controls information generated on a monthly basis. that have been modified and/or altered which modify both the structure of the process and the control performed, achieving a dynamic control system. The control system has been designed following materiality standards, focusing on the areas and processes with the greatest risk (fraud, estimates, valuations, errors, F.3.2. Internal control procedures and policies for information systems (among others, etc.). All business processes identified as significant have been assigned a responsible access security, change control, their operation, operational continuity and segregation area, which is in charge of documenting the process, identifying the risks thereof and of functions) that support the relevant processes in the entity with respect to the drawing evaluating existing controls, as well as of establishing and implementing new controls up and publication of the financial information. if deemed necessary. Bankinter’s information systems relating to the processes for the preparation of financial The Financial Control department designs an agile, dynamic and efficient system on information, be it directly or indirectly, ensure at all times the correct preparation and the controls established by the heads themselves. publication of financial information by means of a specific internal control system.

The characteristics of the process are the following: The Institution has specific internal procedures governing the management of access to applications and systems in accordance with a profile system tailored to the duties of each On a Monthly basis: position. • Send to each of the areas and/or heads a report with the controls that must be checked prior to the closing of results. Management of access to applications and information systems is clearly established and • Such report must be returned by the person responsible for such control, standardised, and is the responsibility of the Technical Management department. describing the status thereof, within 4 business days of the end of the previous month, or prior to the final closing of the results of the institution. There are The Institution has specific controls for data processing centres to ensure security. The a number of controls that are performed at intervals different from those configuration of access control is tested periodically, at least once a year. mentioned above because of the very nature of the control, as they would not have an impact on the results of the Institution. The Technological Risks area has developed a Business Continuity Plan (BCP) for the • All this information is grouped and sent to the heads of the financial area for Company. information and control of the situation prior to the closing of results of the ACGR 2015 Bankinter 45

Such BCP is divided by business processes, each of which has its specific plan. Worth noting On 16 December 2015, Bankinter’s Board of Directors approved an Outsourcing Policy that is the Technological Continuity and Recovery in the Event of Disaster Plan, which is the establishes, among other things, the principles, the services that may be outsourced, the responsibility of the Technological Risks area within the Information Security department. persons responsible for outsourcing, limitations and the outsourcing procedure. The main measure of the Technological Continuity Plan is based on the availability of two data processing centres at geographical locations that are sufficiently distant from one another, and the data of which are replicated synchronously. F.4. Information and communication

This makes it possible to recover data and information systems in the event of contingency Give information on the main features, if at least the following exist: without a significant loss of information. Partial tests of the plan are carried out at least once a year to check that it operates properly. F.4.1. A specific function in charge of defining and keeping the accounting policies updated (accounting policy department or area) and dealing with queries or conflicts Changes in existing applications or implementation of new applications are made in stemming from their interpretation, ensuring fluent communication with those in accordance with established internal procedures and the development method of the charge of operations in the organization, and an up-to-date manual of accounting Institution. Developments are made on environments other than production environments, policies, communicated to the units through which the entity operates. and technical and functional user tests are performed in a pre-production environment, such that they do not affect the actual operations of the Institution. New applications, The Finance and Investor Relations Division is responsible for ensuring the quality, changes or software are moved to the real environment once they have been tested by all transparency and timeliness of the individual financial information of Bankinter S.A. areas involved. and the consolidated financial information of the Bankinter Group, including that such quality, transparency and timeliness are based on appropriate accounting methods. F.3.3. Internal control procedures and policies designed to supervise the management of In order to achieve these basic objectives of financial information, it is deemed activities subcontracted to third parties, and those aspects of the evaluation, calculation necessary to formally create and include in this manual the specific function in and assessment outsourced to independent experts, which may materially impact the charge of developing and updating the institution’s accounting policies, as well as of financial statements. resolving all doubts or conflicts arising out of the interpretation of accounting laws and regulations. As a general rule, it is the policy of the Institution not to subcontract any activity that is considered significant because of its impact on financial information outside of the This function is assumed by the Financial Information and Planning Division, which Group. No valuation processes, lawsuits or calculations to be made for the preparation and will be responsible for resolving any conflict of interest that may arise among the publication of the financial statements have been outsourced. various areas and divisions of the bank, and for deciding how to set forth or interpret financial information in the various reports prepared in accordance with the guidelines Outsourcing of activities is always supported by a services agreement clearly determining established by applicable laws and the accounting principles and policies established the services provided and the required service quality levels. in the Accounting Policy Manual. It will submit significant changes in standards, if any, to the Audit and Regulatory Compliance Committee. The last update of the Processes and procedures subcontracted to third parties are part of the auditable universe Accounting Policies Manual was issued in December 2015. Such Manual is to be and are subject to periodic audits by the Internal Audit area, which verifies the suitability updated on an annual basis, unless there are substantial amendments to applicable of the services and the controls established. laws and regulations, in which case it will be updated when such laws and regulations are amended. ACGR 2015 Bankinter 46

F.4.2. Mechanisms to capture and prepare the financial reporting in standardised The audit plan of the Bankinter Group’s Audit function includes the performance of an formats, for application and use by all the units of the entity or the group, that support ICSFI review of the Group. The Audit Plan 2014 was approved by the Audit and Regulatory the main financial statements and the notes, and the information detailed on ICFR. Compliance Committee. The recommendations arising from the ICSFI audit report follow a stringent monitoring process in accordance with internal regulations. As of the date The systems of the Bankinter Group are fully integrated and the recording of hereof, all recommendations have been satisfactorily implemented. In accordance with the transactions automatically triggers the recording thereof in the accounting records, as provisions of the By-Laws of the Institution and of the Regulations of the Board of Directors well as the update of inventories. of the Bankinter Group, the Audit and Regulatory Compliance Committee, as a committee of the Board of Directors with delegated powers, has among its duties and powers, the The automated accounting is parameterised and is defined following review and supervision and control of the activities of the Company, of the truthfulness, objectivity verification, by the Accounting Definition Department under the Financial and Investor and transparency of the corporate accounting records and the oversight of the process of Relations Division, so as to ensure compliance with laws and regulations applicable at preparation and presentation of regulated financial information and of compliance with any time and with the Group’s accounting policies. statutory and regulatory provisions to which the bank is subject.

The consolidation of the Group’s financial statements is a fully automated process that It also has the duty to promote and periodically review the proper operation of internal is based on the use of a standard tool that is fully integrated in internal systems. control systems to ensure the proper management of the risks of the company, to verify the integrity and consistency of the quarterly and half-yearly financial statements of the Bank All the subsidiaries included within the perimeter of the Group report their financial and the Group, and the annual accounts, the annual report and the management report statements to the Financial Division of the parent company on a monthly basis in prior to their approval by, or submission to the Board of Directors and their publication. accordance with the Group’s charts of account. Pursuant to the Regulations of the Board of Directors, the Internal Audit Division of the The Hyperion tool, which standardises and harmonises accounting information and Bankinter Group is under the control of the Audit and Regulatory Compliance Committee consolidation of the Perimeter of the Consolidated Group, is used for accounting and is functionally attached to the Office of the Chairman of the Board, ensuring the consolidation purposes. independence, autonomy and universality of the Internal Audit function. As provided in the Internal Audit Charter approved by the Board of Directors at the proposal of the Audit and Regulatory Compliance Committee, the objectives and duties of Internal Audit include F.5. Supervision of the system’s operation. assisting the Audit and Regulatory Compliance Committee in the objective performance of its duties, verifying that risks are properly managed through the consistent and efficient Give information, describing the key features of at least: application of the policies and procedures making up the internal control system, and safeguarding the integrity, completeness and accuracy of the financial, accounting and F.5.1. The ICFR supervision activities carried out by the Audit Committee and whether management information issued. the entity has an internal audit function whose powers include providing support to the Audit Committee in its task of supervising the internal control system, including The process of preparation and the integrity of the financial information of the Institution the ICFR. Likewise, give information on the scope of the ICFR assessment carried out and the Group have been supervised, and the application of accounting standards, the during the year and of the procedure by which the person in charge of performing the consolidation perimeter and compliance with regulatory requirements have been verified, assessment communicates its results, whether the entity has an action plan listing the once accounting services prepared the financial statements under the supervision of the possible corrective measures, and whether its impact on the financial reporting has been Internal Audit service, and with the mandatory participation of the external auditor. They considered. then report to the Audit and Regulatory Compliance Committee, expressing their opinion as to whether such financial statements provide a true and fair view of the assets and ACGR 2015 Bankinter 47

liabilities and of the financial position of the company and, if applicable, whether they Article 35 of the Regulations of the Board of Directors provides that the external auditors have reservations or positions contrary to those of the management team on substantive shall attend the meetings of the Audit and Regulatory Compliance Committee, provided the matters that could affect such fair view, reporting thereon to the Board of Directors. Chairman thereof deems it appropriate and, in any event, when the report of such auditors on the annual and half-yearly accounts and on the annual report on control of the Bank Internal Audit submits to the Audit and Regulatory Compliance Committee, on a quarterly and of the Group is examined, as well as other meetings on the verification of results prior basis, the report on the verification of the consolidated income statement of the Bankinter to the publication thereof. Group, also with the participation of the Auditor. The same applies to the half-yearly report on the income statement. In addition, and pursuant to the provisions of law and the By-Laws, the Audit and Regulatory Compliance Committee shall serve as the channel for communication between Internal Audit reports to the Audit and Regulatory Compliance Committee on a half-yearly the Board of Directors and the external and internal auditors, shall evaluate the results of basis on the monitoring and status of the recommendations issued and the corrective the auditors’ reports and compliance with the qualifications and conclusions stated, and measures proposed as a result of both the external auditor’s and the internal auditor’s shall discuss with the auditors the possible significant weaknesses in the internal control reports. system detected during the conduct of the audit.

As of 31 December, the annual Internal Audit review of the internal control system for The Audit and Regulatory Compliance Committee approved a general framework for the financial information had been completed. The field work was carried out in November and management and monitoring of the binding recommendations made by Internal Audit December 2015, with the following scope: and established a plan for compliance, as and when required, by those responsible for • Process of identification of companies of the group that are significant for implementing them, as well as a periodic report on the status thereof to be submitted financial information purposes. to both the Audit and Regulatory Compliance Committee and the Bank’s Management • Process of identification and determination of significant financial information Committee. and of the business processes that have an impact thereon. • Documentation of business processes, identification of associated risks and controls that mitigate such risks. F.6. Other relevant information. • Controls performed by the areas and existence of second control level monitoring mechanisms. The audit firm Deloitte, S.L. as the auditor of the annual accounts of the Bank and of the Bankinter Group, reviews the established control model for the financial information The conclusion of such review is correct, with some slight deficiencies. 6 recommendations system described above on an annual basis. were issued and 66% of recommendations were completed prior to issuing the Report on 21 January 2016. The report describes the action plans in respect of each recommendation. F.7. External auditor report. The outcome of the review is reported to the Management of the Bankinter Group and submitted to the Group’s Audit Committee. Report on:

F.5.2. Whether there is a discussion procedure by which the auditor (in line with the F.7.1. Whether the ICFR information disclosed to the markets has been submitted by the technical auditing notes), the internal audit function and other experts can inform external auditor, in which case the entity must attach the corresponding report as an senior management and the audit committee or the directors of the entity of significant annexe. Otherwise, explain the reasons why it was not. weaknesses in the internal control encountered during the review processes for the annual accounts or any others within their remit. Likewise, give information on whether Applying the recommendation included in the Guide for Action on the Auditor’s report there is an action plan to try to correct or mitigate the weaknesses observed. on the Information concerning the Internal Control System for Financial Information ACGR 2015 Bankinter 48

of listed entities, published by the National Securities Market Commission (Comisión G. DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS Nacional del Mercado de Valores) on its website, Bankinter has submitted to the auditor for review the content of the information regarding the Internal Financial Control Indicate the extent to which the company follows the recommendations of the Good Information System. The resulting report, once issued, will be included as an Exhibit to Governance Code of listed companies. this Annual Corporate Governance Report. Should any recommendation not be followed or be only partially followed, a detailed explanation should be given of the reasons so that the shareholders, investors and the market in general have sufficient information to assess the way the company works. General explanations will not be acceptable.

1. The bylaws of listed companies should not place an upper limit on the votes that can be cast by a single shareholder, or impose other obstacles to the takeover of the company by means of share purchases on the market.

Compliant

2. When a dominant and a subsidiary company are both listed, they should provide detailed disclosure on:

a) The activity they engage in and any business dealings between them, as well as between the listed subsidiary and other group companies. b) The mechanisms in place to resolve possible conflicts of interest.

Not Applicable

3. During the annual general meeting the chairman of the board should verbally inform shareholders in sufficient detail of the most relevant aspects of the company’s corporate governance, supplementing the written information circulated in the annual corporate governance report. In particular:

a) Changes taking place since the previous annual general meeting. b) The specific reasons for the company not following a given Good Governance Code recommendation and any alternative procedures followed in its stead.

Compliant

4. The company should draw up and implement a policy of communication and contacts with shareholders, institutional investors and proxy advisors that complies in full with ACGR 2015 Bankinter 49

market abuse regulations and accords equitable treatment to shareholders in the same of the audit committee and the auditors should give a clear account to shareholders of position. This policy should be disclosed on the company’s website, complete with details their scope and content of how it has been put into practice and the identities of the relevant interlocutors or those charged with its implementation. Compliant

Compliant 9. The company should disclose its conditions and procedures for admitting share ownership, the right to attend general meetings and the exercise or delegation of voting 5. The board of directors should not make a proposal to the general meeting for the rights, and display them permanently on its website. Such conditions and procedures delegation of powers to issue shares or convertible securities without pre-emptive should encourage shareholders to attend and exercise their rights and be applied in a non- subscription rights for an amount exceeding 20% of capital at the time of such delegation. discriminatory manner. When a board approves the issuance of shares or convertible securities without pre-emptive subscription rights, the company should immediately post a report on its website explaining Compliant the exclusion as envisaged in company legislation. 10. When an accredited shareholder exercises the right to supplement the agenda or submit Compliant new proposals prior to the general meeting, the company should: a) Immediately circulate the supplementary items and new proposals. 6. Listed companies drawing up the following reports on a voluntary or compulsory basis b) Disclose the model of attendance card or proxy appointment or remote voting should publish them on their website well in advance of the annual general meeting, even form duly modified so that new agenda items and alternative proposals can be if their distribution is not obligatory: voted on in the same terms as those submitted by the board of directors. a) Report on auditor independence. c) Put all these items or alternative proposals to the vote applying the same voting b) Reviews of the operation of the audit committee and the nomination and rules as for those submitted by the board of directors, with particular regard to remuneration committee. presumptions or deductions about the direction of votes. c) Audit committee report on third-party transactions. d) After the general meeting, disclose the breakdown of votes on such supplementary d) Report on corporate social responsibility policy. items or alternative proposals.

Compliant Compliant

7. The company should broadcast its general meetings live on the corporate website. 11. In the event that a company plans to pay for attendance at the general meeting, it should first establish a general, long-term policy in this respect. Explain Not Applicable The General Shareholders’ Meeting of Bankinter is broadcast live on its corporate website until the beginning of the shareholder presentation period. 12. The board of Directors should perform its duties with unity of purpose and independent judgement, according the same treatment to all shareholders in the same position. It 8. The audit committee should strive to ensure that the board of directors can present should be guided at all times by the company’s best interest, understood as the creation of the company’s accounts to the general meeting without limitations or qualifications in a profitable business that promotes its sustainable success over time, while maximising its the auditor’s report. In the exceptional case that qualifications exist, both the chairman economic value. In pursuing the corporate interest, it should not only abide by laws and regulations and conduct itself according to principles of good faith, ethics and respect for ACGR 2015 Bankinter 50

commonly accepted customs and good practices, but also strive to reconcile its own interests 16. The percentage of proprietary directors out of all non-executive directors should be no with the legitimate interests of its employees, suppliers, clients and other stakeholders, greater than the proportion between the ownership stake of the shareholders they represent as well as with the impact of its activities on the broader community and the natural and the remainder of the company’s capital. This criterion can be relaxed: environment.. a) In large cap companies where few or no equity stakes attain the legal threshold Compliant for significant shareholdings. b) In companies with a plurality of shareholders represented on the board but not 13. The Board of Directors should have an optimal size to promote its efficient functioning otherwise related. and maximize participation. The recommended range is accordingly between five and fifteen members. Compliant

Compliant 17. Independent directors should be at least half of all board members. However, when the company does not have a large market capitalisation, or when a large cap company 14. The board of directors should approve a director selection policy that: has shareholders individually or concertedly controlling over 30 per cent of capital, independent directors should occupy, at least, a third of board places. a) Is concrete and verifiable. b) Ensures that the appointment or reelection proposals are based on a prior Compliant analysis of the board’s needs. c) Favours a diversity of knowledge, experience and gender. 18. Companies should disclose the following director particulars on their websites and keep them regularly updated: The results of the prior analysis of board needs should be written up in the nomination a) Background and professional experience. committee’s explanatory report, to be published when the general meeting is b) Directorships held in other companies, listed or otherwise, and other paid convened that will ratify the appointment and re-election of each director. activities they engage in, of whatever nature. The director selection policy should pursue the goal of having at least 30% of total c) Statement of the director class to which they belong, in the case of proprietary board places occupied by women directors before the year 2020. directors indicating the shareholder they represent or have links with. The nomination committee should run an annual check on compliance with the d) Dates of their first appointment as a board member and subsequent re-elections. director selection policy and set out its findings in the annual corporate governance e) Shares held in the company, and any options on the same. report. Compliant

Compliant 19. Following verification by the nomination committee, the annual corporate governance report should disclose the reasons for the appointment of proprietary directors at the urging 15. Proprietary and independent directors should constitute an ample majority on the of shareholders controlling less than 3 per cent of capital; and explain any rejection of a board of directors, while the number of executive directors should be the minimum practical formal request for a board place from shareholders whose equity stake is equal to or greater bearing in mind the complexity of the corporate group and the ownership interests they than that of others applying successfully for a proprietary directorship. control. Compliant Compliant ACGR 2015 Bankinter 51

20. Proprietary directors should resign when the shareholders they represent dispose of The terms of this recommendation also apply to the secretary of the board, even if he or their ownership interest in its entirety. If such shareholders reduce their stakes, thereby she is not a director. losing some of their entitlement to proprietary directors, the latters’ number should be reduced accordingly. Compliant

Compliant 24. Directors who give up their place before their tenure expires, through resignation or otherwise, should state their reasons in a letter to be sent to all members of the board. 21. The Board of Directors should not propose the removal of independent directors before Whether or not such resignation is disclosed as a material event, the motivating factors the expiry of their tenure as mandated by the Bylaws, except where they find just cause, should be explained in the annual corporate governance report. based on a proposal from the Nomination Committee. In particular, just cause will be presumed when directors take up new posts or responsibilities that prevent them allocating Compliant sufficient time to the work of a board member, or are in breach of their fiduciary duties or come under one of the disqualifying grounds for classification as independent enumerated 25. The nomination committee should ensure that non-executive directors have sufficient in the applicable legislation. The removal of independent directors may also be proposed time available to discharge their responsibilities effectively. The board of directors when a takeover bid, merger or similar corporate transaction alters the company’s capital regulations should lay down the maximum number of company boards on which directors structure, provided the changes in board membership ensue from the proportionality can serve. criterion set out in recommendation 16. Compliant Compliant 26. The board should meet with the necessary frequency to properly perform its functions, 22. Companies should establish rules obliging directors to disclose any circumstance that eight times a year at least, in accordance with a calendar and agendas set at the start of might harm the organisation’s name or reputation, tendering their resignation as the case the year, to which each director may propose the addition of initially unscheduled items. may be, and, in particular, to inform the board of any criminal charges brought against them and the progress of any subsequent trial. The moment a director is indicted or tried Compliant for any of the offences stated in company legislation, the board of directors should open an investigation and, in light of the particular circumstances, decides whether or not he 27. Director absences should be kept to a strict minimum and quantified in the Annual or she should be called on to resign. The board should give a reasoned account of all such Corporate Governance Report. In the event of absence, directors should delegate their determinations in the annual corporate governance report. powers of representation with the appropriate instructions.

Compliant Compliant

23. Directors should express their clear opposition when they feel a proposal submitted for 28. When directors or the secretary express concerns about some proposal or, in the case the board’s approval might damage the corporate interest. In particular, independents and of directors, about the company’s performance, and such concerns are not resolved at the other directors not subject to potential conflicts of interest should strenuously challenge any meeting, they should be recorded in the minute book if the person expressing them so decision that could harm the interests of shareholders lacking board representation. requests. When the board makes material or reiterated decisions about which a director has expressed serious reservations then he or she must draw the pertinent conclusions. Compliant Directors resigning for such causes should set out their reasons in the letter referred to in the next recommendation. ACGR 2015 Bankinter 52

29. The company should provide suitable channels for directors to obtain the advice they give voice to the concerns of non-executive directors; maintain contacts with investors and need to carry out their duties, extending if necessary to external assistance at the company’s shareholders to hear their views and develop a balanced understanding of their concerns, expense. especially those to do with the company’s corporate governance; and coordinate the chairman’s succession plan. Compliant Compliant 30. Regardless of the knowledge directors must possess to carry out their duties, they should also be offered refresher programmes when circumstances so advise. 35. The board secretary should strive to ensure that the board’s actions and decisions are informed by the governance recommendations of the Good Governance Code of relevance Compliant to the company.

31. The agendas of board meetings should clearly indicate on which points directors must Compliant arrive at a decision, so they can study the matter beforehand or gather together the material they need. For reasons of urgency, the chairman may wish to present decisions or 36. The board in full should conduct an annual evaluation, adopting, where necessary, an resolutions for board approval that were not on the meeting agenda. In such exceptional action plan to correct weakness detected in: circumstances, their inclusion will require the express prior consent, duly minuted, of the majority of directors present. a) The quality and efficiency of the board’s operation. b) The performance and membership of its committees. Compliant c) The diversity of board membership and competences. d) The performance of the chairman of the board of directors and the company’s 32. Directors should be regularly informed of movements in share ownership and of the chief executive. views of major shareholders, investors and rating agencies on the company and its group. e) The performance and contribution of individual directors, with particular attention to the chairmen of board committees. Compliant The evaluation of board committees should start from the reports they send the 33. The chairman, as the person charged with the efficient functioning of the board of board of directors, while that of the board itself should start from the report of the directors, in addition to the functions assigned by law and the company’s bylaws, should nomination committee. prepare and submit to the board a schedule of meeting dates and agendas; organise and coordinate regular evaluations of the board and, where appropriate, the company’s Every three years, the board of directors should engage an external facilitator to aid chief executive officer; exercise leadership of the board and be accountable for its proper in the evaluation process. This facilitator’s independence should be verified by the functioning; ensure that sufficient time is given to the discussion of strategic issues, and nomination committee. approve and review refresher courses for each director, when circumstances so advise. Any business dealings that the facilitator or members of its corporate group Compliant maintain with the company or members of its corporate group should be detailed in the annual corporate governance report. 34. When a lead independent director has been appointed, the Bylaws or Board of Directors regulations should grant him or her the following powers over and above those conferred by law: chair the board of directors in the absence of the chairman and vice chairmen ACGR 2015 Bankinter 53

The process followed and areas evaluated should be detailed in the annual corporate 1. With respect to internal control and reporting systems: governance report. a) Monitor the preparation and the integrity of the financial information prepared Compliant on the company and, where appropriate, the group, checking for compliance with legal provisions, the accurate demarcation of the consolidation perimeter, 37. When an executive committee exists, its membership mix by director class should and the correct application of accounting principles. resemble that of the board. The secretary of the board should also act as secretary to the b) Monitor the independence of the unit handling the internal audit function; executive committee. propose the selection, appointment, reelection and removal of the head of the internal audit service; propose the service’s budget; approve its priorities and Compliant work programmes, ensuring that it focuses primarily on the main risks the company is exposed to; receive regular report-backs on its activities; and verify 38. The board of directors should be kept fully informed of the business transacted and that senior management are acting on the findings and recommendations of its decisions made by the executive committee. To this end, all board members should receive reports. a copy of the committee’s minutes. c) Establish and supervise a mechanism whereby staff can report, confidentially and, if appropriate and feasible, anonymously, any significant irregularities that Compliant they detect in the course of their duties, in particular financial or accounting irregularities. 39. All members of the audit committee, particularly its chairman, should be appointed with regard to their knowledge and experience in accounting, auditing and risk management 2. With regard to the external auditor: matters. A majority of committee places should be held by independent directors. a) Investigate the issues giving rise to the resignation of the external auditor, Compliant should this come about. b) Ensure that the remuneration of the external auditor does not compromise its 40. Listed companies should have a unit in charge of the internal audit function, under the quality or independence. supervision of the audit committee, to monitor the effectiveness of reporting and control c) Ensure that the company notifies any change of external auditor to the CNMV systems. This unit should report functionally to the board’s non-executive chairman or the as a material event, accompanied by a statement of any disagreements arising chairman of the audit committee. with the outgoing auditor and the reasons for the same. d) Ensure that the external auditor has a yearly meeting with the board in full to Compliant inform it of the work undertaken and developments in the company’s risk and accounting positions. 41. The head of the unit handling internal audit function should present an annual work e) Ensure that the company and the external auditor adhere to current regulations programme to the audit committee, inform it directly of any incidents arising during its on the provision of non-audit services, limits on the concentration of the auditor’s implementation and submit an activities report at the end of each year. business and other requirements concerning auditor independence.

Compliant Compliant

42. The audit committee should have the following functions over and above those legally assigned: ACGR 2015 Bankinter 54

43. The audit committee should be empowered to meet with any company employee or c) Ensure that risk control and management systems are mitigating risks effectively manager, even ordering their appearance without the presence of another senior officer. in the frame of the policy drawn up by the board of directors.

Compliant Compliant

44. The Audit Committee should be informed of any fundamental changes or corporate 47. Appointees to the nomination and remuneration committee – or of the nomination transactions the company is planning, so the committee can analyse the operation and committee and remuneration committee, if separately constituted – should have the right report to the board beforehand on its economic conditions and accounting impact and, when balance of knowledge, skills and experience for the functions they are called on to discharge. applicable, the exchange ratio proposed. The majority of their members should be independent directors.

Compliant Compliant

45. Risk control and management policy should identify at least: 48. Large cap companies should operate separately constituted nomination and remuneration committees. a) The different types of financial and non-financial risk the company is exposed to (including operational, technological, financial, legal, social, environmental, Compliant political and reputational risks), with the inclusion under financial or economic risks of contingent liabilities and other offbalance-sheet risks. 49. The Nomination Committee should consult with the company’s Chairman and chief b) The determination of the risk level the company sees as acceptable. executive, especially on matters relating to executive Directors. c) The measures in place to mitigate the impact of identified risk events should they occur. When there are vacancies on the board, any Director may approach the Nomination d) The internal control and reporting systems to be used to control and manage the Committee to propose candidates that it might consider suitable. above risks, including contingent liabilities and off-balance sheet risks. Compliant Compliant 50. The remuneration committee should operate independently and have the following 46. Companies should establish a risk control and management function in the charge of functions in addition to those assigned by law: one of the company’s internal department or units and under the direct supervision of the audit committee or some other dedicated board committee. This function should be a) Propose to the board the standard conditions for senior officer contracts. expressly charged with the following responsibilities: b) Monitor compliance with the remuneration policy set by the company. c) Periodically review the remuneration policy for directors and senior officers, a) Ensure that risk control and management systems are functioning correctly and, including share-based remuneration systems and their application, and ensure specifically, that major risks the company is exposed to are correctly identified, that their individual compensation is proportionate to the amounts paid to other managed and quantified. directors and senior officers in the company. b) Participate actively in the preparation of risk strategies and in key decisions d) Ensure that conflicts of interest do not undermine the independence of any about their management. external advice the committee engages. ACGR 2015 Bankinter 55

e) Verify the information on director and senior officers’ pay contained in corporate b) Oversee the communication and relations strategy with shareholders and documents, including the annual directors’ remuneration statement. investors, including small- and medium-sized shareholders. c) Periodically evaluate the effectiveness of the company’s corporate governance Compliant system, to confirm that it is fulfilling its mission to promote the corporate interest and catering, as appropriate, to the legitimate interests of remaining stakeholders. 51. The remuneration committee should consult with the company’s chairman and chief d) Review the company’s corporate social responsibility policy, ensuring that it is executive, especially on matters relating to executive directors and senior officers. geared to value creation. e) Monitor corporate social responsibility strategy and practices and assess Compliant compliance in their respect. f) Monitor and evaluate the company’s interaction with its stakeholder groups. 52. The terms of reference of supervision and control committees should be set out in the g) Evaluate all aspects of the non-financial risks the company is exposed to, including board of directors regulations and aligned with those governing legally mandatory board operational, technological, legal, social, environmental, political and reputational committees as specified in the preceding sets of recommendations. They should include at risks. least the following terms: h) Coordinate non-financial and diversity reporting processes in accordance with applicable legislation and international benchmarks. f) Committees should be formed exclusively by non-executive directors, with a majority of independents. Compliant g) b) They should be chaired by independent directors. h) c) The board should appoint the members of such committees with regard to the 54. The corporate social responsibility policy should state the principles or commitments knowledge, skills and experience of its directors and each committee’s terms of the company will voluntarily adhere to in its dealings with stakeholder groups, specifying reference; discuss their proposals and reports; and provide report-backs on their at least: activities and work at the first board plenary following each committee meeting. i) d) They may engage external advice, when they feel it necessary for the a) The goals of its corporate social responsibility policy and the support instruments discharge of their functions. to be deployed. j) e) Meeting proceedings should be minuted and a copy made available to all b) The corporate strategy with regard to sustainability, the environment and social board members. issues. c) Concrete practices in matters relative to: shareholders, employees, clients, Compliant suppliers, social welfare issues, the environment, diversity, fiscal responsibility, respect for human rights and the prevention of illegal conducts. 53. The task of supervising compliance with corporate governance rules, internal codes d) The methods or systems for monitoring the results of the practices referred to of conduct and corporate social responsibility policy should be assigned to one board above, and identifying and managing related risks. committee or split between several, which could be the audit committee, the nomination e) The mechanisms for supervising non-financial risk, ethics and business conduct. committee, the corporate social responsibility committee, where one exists, or a dedicated f) Channels for stakeholder communication, participation and dialogue. committee established ad hoc by the board under its powers of self-organisation, with at the g) Responsible communication practices that prevent the manipulation of least the following functions: information and protect the company’s honour and integrity.

a) Monitor compliance with the company’s internal codes of conduct and corporate Compliant governance rules. ACGR 2015 Bankinter 56

55. The company should report on corporate social responsibility developments in its Compliant directors’ report or in a separate document, using an internationally accepted methodology. 59. A major part of variable remuneration components should be deferred for a long enough Compliant period to ensure that predetermined performance criteria have effectively been met.

56. Director remuneration should be sufficient to attract individuals with the desired profile Compliant and compensate the commitment, abilities and responsibility that the post demands, but not so high as to compromise the independent judgement of non-executive directors. 60. Remuneration linked to company earnings should bear in mind any qualifications stated in the external auditor’s report that reduce their amount. Compliant Compliant 57. Variable remuneration linked to the company and the director’s performance, the award of shares, options or any other right to acquire shares or to be remunerated on the basis 61. A major part of executive directors’ variable remuneration should be linked to the award of share price movements, and membership of long-term savings schemes such as pension of shares or financial instruments whose value is linked to the share price. plans should be confined to executive directors. The company may consider the share-based remuneration of non-executive directors provided they retain such shares until the end Compliant of their mandate. This condition, however, will not apply to shares that the director must dispose of to defray costs related to their acquisition. 62. Following the award of shares, share options or other rights on shares derived from the remuneration system, directors should not be allowed to transfer a number of shares Compliant equivalent to twice their annual fixed remuneration, or to exercise the share options or other rights on shares for at least three years after their award. The above condition will 58. In the case of variable awards, remuneration policies should include limits and technical not apply to any shares that the director must dispose of to defray costs related to their safeguards to ensure they reflect the professional performance of the beneficiaries and not acquisition. simply the general progress of the markets or the company’s sector, or circumstances of that kind. In particular, variable remuneration items should meet the following conditions: Compliant

a) Be subject to predetermined and measurable performance criteria that factor the 63. Contractual arrangements should include provisions that permit the company to reclaim risk assumed to obtain a given outcome. variable components of remuneration when payment was out of step with the Director’s b) Promote the long-term sustainability of the company and include non-financial actual performance or based on data subsequently found to be misstated. criteria that are relevant for the company’s long-term value, such as compliance with its internal rules and procedures and its risk control and management Compliant policies. c) Be focused on achieving a balance between the delivery of short, medium 64. Termination payments should not exceed a fixed amount equivalent to two years of the and long-term objectives, such that performance-related pay rewards ongoing director’s total annual remuneration and should not be paid until the company confirms achievement, maintained over sufficient time to appreciate its contribution to that he or she has met the predetermined performance criteria. long-term value creation. This will ensure that performance measurement is not based solely on one-off, occasional or extraordinary events. Compliant ACGR 2015 Bankinter 57

H. OTHER INFORMATION OF INTEREST governance and in order to comply with applicable regulations concerning transparency of information at listed companies, and does not entail a change of ownership or a financial 1. If there is any other aspect relevant to the corporate government in the company benefit derived from the rights of the holders thereof. or in the group entities that has not been reflected in the rest of the sections of this report, but is necessary to include to provide more comprehensive and well grounded information on the corporate governance structure and practices in your entity or its Section B.2 group, detail them briefly. Pursuant to the Organisation, Supervision and Solvency of Financial Institutions Act, 2. This section may also include any other relevant information, clarification or approval of a variable remuneration level in excess of 100% of the fixed component detail related to previous sections of the report insofar as they are relevant and requires that the decision be adopted by a two thirds majority, provided at least 50% not reiterative. Specifically indicate whether the company is subject to corporate of the shares or equivalent voting rights are present and vote, in person or by proxy. governance legislation from a country other than Spain and, if so, include the If such quorum is not present, a majority of at least three fourths of the voting capital mandatory information to be provided when different from that required by this in attendance in person or by proxy will be required. report. Section B.4 3. The company may also indicate if it has voluntarily signed up to other international, industry-wide or any other codes of ethical principles or best practices. Where Practically all the members of the Board of Directors attending the General applicable, the code in question will be identified along with the date of signing. In Shareholders’ Meeting appointed the Chairman of the Board of Directors as their proxy. particular, mention will be made as to whether it has adhered to the Code of Best Tax Practices (Código de Buenas Prácticas Tributarias) of 20 July 2010. Section B.5

At its meeting of 22 April 2014, the Board of Directors resolved that Bankinter and Although the minimum number of 600 shares is maintained at present in the By-Laws its Group will adhere to the entire Code of Best Tax Practices, approved at the Large as the number entitling shareholders to attend General Shareholders’ Meetings of the Businesses Forum (Foro de Grandes Empresas) on 20 July 2010. Bank, it should be noted that following the split in the par value of the shares carried out by resolution of the Board in June 2007 (with such split, each shareholder received Section A.2 a total of 5 new shares for each old share) and subsequent increases in share capital by the company, including the increase in share capital effected on 26 April 2013 by Pursuant to the provisions of National Securities Market Circular 5/2013 approving the means of the issuance of bonus shares (in a proportion of 5 new shares for every 9 form of annual corporate governance report for listed companies, and as regards indirect old shares), the amount of the investment required to attend General Shareholders’ interests, the breakdown of which is provided in section A.2, the direct holder of the voting Meetings was significantly reduced. shares is only identified when the percentage thereof represents 3% of the total voting rights of the issuer, or 1% if it is a resident of a tax haven. Section B.7 Finally, as stated in previous reports, on 4 March 2011, the Proprietary Director of Bankinter, Mr Fernando Masaveu Herrero, notified the company that he controlled the For the General Shareholders’ Meeting held on 18 March 2015, Bankinter published its voting rights of the Bankinter shares held by the various companies of the Masaveu group, call to General Shareholders’ Meeting both in the Official Bulletin of the Commercial and which were previously attributed as voting rights controlled directly or indirectly Registry and on the company’s website (www.bankinter.com/webcorporativa), as by the major shareholder, doing business at the time as S.A. Tudela Veguin (currently permitted by the Companies Act. Corporación Masaveu). Such fact was stated by the Director solely for purposes of good ACGR 2015 Bankinter 58

Section C.1.11 Section C.1.45

Alfonso Botín-Sanz de Sautuola y Naveda, representative on the Board of Directors is, The software form does not allow the bodies authorising such clauses to be left blank in a personal capacity, Executive Chairman of the Board of Directors of Línea Directa when there are none; accordingly, in the report form, the “NO” option is checked when Aseguradora, S.A. Compañía de Seguros y Reaseguros, currently a wholly-owned referring to whether the clauses are reported. In the case of Bankinter, no information subsidiary of the bank. on these agreements is provided because they do not exist. On 14 January 2015, John de Zulueta Greenebaum, was appointed a member of the Board of Directors of the company of the Bankinter Group company Línea Directa Section C.2.1 Aseguradora, S.A. John de Zulueta resigned from his position as director of Bankinter on 18 March 2015. The number of years the President in the Audit Committee is 3 years (By outside society technical reasons, this information is not properly incorporated in that apart). Section C.1.14 Section D.3 “Remuneration of the Board of Directors” includes the remuneration received by the directors both at Bankinter and at companies of the Bankinter group. The breakdown of The transactions with directors included in this section are significant transactions such remuneration may be found both in the Director remuneration report and under or transactions of sizeable amounts, which are in all cases made within the ordinary the heading relating to the remuneration of directors of the Legal Report, which the course of business of the Company and on an arm’s length basis. company publishes at the time of the call to General Shareholders’ Meeting. In addition, the company has provided loans to the members of senior management Section C.1.17 for the acquisition, at the time, of convertible debentures as well as of shares resulting from the increase in share capital that Bankinter approved in May 2009. They also have The individual representing the Director CARTIVAL S. A., Alfonso Botín-Sanz de open financing positions formalised under applicable terms and conditions, within Sautuola y Naveda is the brother of Marcelino Botín-Sanz de Sautuola y Naveda, who the framework of the Collective Bargaining Agreement and company agreements, for is also a Director of CARTIVAL S. A. and the son of Jaime Botín-Sanz de Sautuola y employees of the Bank. The aggregate amount of the transactions with members of García de los Ríos. senior management with the aforementioned characteristics is 1,302,000 euros.

Section C.1.36 This annual report on corporate governance has been approved by the Company’s Board of Directors on 16 February 2016. At its meeting held on 18 November 2015, the Board of Directors selected PricewaterhouseCoopers Auditores, S.L. (“Pwc”) as the external auditor of Bankinter, List whether any Directors voted against or abstained from voting on the approval of S.A. and of its consolidated Group to verify the annual accounts for financial years this Report. 2016, 2017 and 2018. The decision was adopted following the corporate governance recommendations concerning rotation of the external auditor, at the proposal of Yes No X the Audit and Regulatory Compliance Committee, as a result of a fully transparent selection process (such decision was announced to the market through Significant Event number 231158 on 19 November 2015). The Board of Directors of Bankinter, S.A. has proposed such appointment to the Annual General Shareholders’ Meeting to be held in March 2016.

ACGR 2015 Bankinter 60

2015 Report of the Audit and Compliance Committee 1. Organization of the Audit and Compliance Committee rmativo08 This Report was approved by Bankinter’s Board of Directors at its meeting of 16 1.1. Composition February 2016 at the proposal of Bankinter S.A.’s Audit and Compliance Committee made on 15 February 2016, and is available on Bankinter’s corporate website The Committee is made up of the following Directors: (www.bankinter.com/webcorporativa) together with the other documentation the company makes available to the shareholders for the Annual General Meeting, called Chairman: for 17 March at first call. For complete information on Bankinter S.A.’s Corporate Gonzalo de la Hoz Lizcano (External Independent Director) Governance, see the 2015 Bankinter Annual Corporate Governance Report. Members: Fernando Masaveu Herrero (External Proprietary Director) Contents Jaime Terceiro Lomba (External Independent Director) Rafael Mateu de Ros Cerezo (External Independent Director) 1. Organization of the Audit and Compliance Committee 1.1. Composition 1.2. Origen and evolution Secretary: 1.3. Characteristics Gloria Calvo Díaz (Non-Director Secretary of the Board of Directors) 1.4. Regulation 1.5. Operation The professional profile of the members of this Committee, as with the rest of 1.6. Powers the company’s directors, as well as their membership of the other Committees of the Board of Directors, may be consulted at the institution’s corporate website: 2. Internal Audit Structure www.bankinter.com/webcorporativa.

3. Committee activities during 2015 1.2. Origin and evolution 3.1. Internal control 3.2. Regulatory compliance At its meeting of 11 October 1995, Bankinter’s Board of Directors structured the 3.3. Economic-financial information organisation and expanded the duties of the Audit and Compliance Committee, 3.4. Annual Control Report of the External Accounts Auditors established in 1993 as the executive body of the Board of Directors.

4. Audit of accounts for financial year 2015 The domestic and international publication of various Corporate Good Governance Codes, and in particular the publication of the Unified Good Governance Code approved 5. Projections for financial year 2016 by the CNMV in 2006, highlights the key role to be played by certain specialised Committees of the Board of Directors, and particularly the so-called Audit and Control 6. Report on the independence of the accounts auditor or Audit and Compliance Committee.

The duties of Bankinter’s Audit and Compliance Committee have also been adapted to the provisions of Law 12/2010 of 30 June, for purposes of strengthening its independence and its supervisory work in the areas for which it is responsible. The ACGR 2015 Bankinter 61

latest changes to its duties, contained in the Regulations of the Board of Directors, were • The Committee periodically promotes and supervises internal control systems essentially implemented as a consequence of its adjustment to changes in the By-Laws and procedures relating to the risks of the Bank’s activity, in addition to to adapt them to the amendments introduced to the Restated Text of the Companies Act reviewing the overall risk map of the Bank and of the Group. [Ley de Sociedades de Capital], approved by Royal Legislative Decree 1/2010 of 2 July. • The Committee is the corporate body to which the Internal Audit function hierarchically reports. The Committee annually assesses the performance of the Following such recommendations, in recent years Bankinter’s Board of Directors head of Internal Audit and participates in the process of establishing his or her has made various changes to the structure and operation of Bankinter’s Audit and remuneration, the Audit workforce and the approval of its budget, including IT Compliance Committee. development. • The Committee is directly responsible for the independent operation of the Since 1999, the Bankinter Group’s Annual Report has included a section dedicated to confidential employee whistleblowing process, introduced in the reform of the Corporate Governance and, as from the Annual Report for financial year 2002, a specific Regulations of the Board of 17 January 2007. Corporate Governance Report has been approved each year, which was adapted in 2004 • The Regulations of the Board of Directors expressly delegate to the Committee to the provisions of Law 26/2003 of 17 July, Ministerial Order of 26 December 2003 and duties directly related to the Directors’ duties of good faith and loyalty, and CNMV Circular 1/2004, as well as CNMV Circular 4/2007 of 27 December. Currently, the consequently to the Institution’s Regulatory Compliance. Directors must inform structure of the Corporate Governance Report follows the model approved by CNMV the Committee of situations of direct or indirect conflict of interest as established Circular 7/2015 of 22 December, for reports containing data from 2015 onwards. under the Companies Act, the Securities Market Act (Ley del Mercado de Valores) and the Company’s internal regulations. The Committee is also the competent The Annual Corporate Governance Report is also published on the corporate website body for resolving disputes in these matters, and for approving dispensations or at www.bankinter.com/webcorporativa, which maintains a history of reports published exemptions from Directors’ fiduciary duties and rules of conduct in the securities since 2009. market. • The Committee approves an Annual Report or Note (which for 2015 is contained 1.3. Characteristics in this document), which is made available to all shareholders upon the call to the Annual General Meeting and which is included on Bankinter S.A.’s corporate The Audit and Compliance Committee is the executive body of the Board of Directors website. for performing the Board’s duties relating to supervision and control of the Company’s activities, the accuracy, objectivity and transparency of corporate accounting, economic 1.4. Regulation and financial information, and ensuring compliance with the legal and regulatory provisions to which the Company is subject. The Audit and Compliance Committee’s internal regulation is contained in article 33 of the By-Laws and in article 35 of the Regulations of the Board of Directors, as well as The Audit and Compliance Committee’s powers include the following, among others: in references to the Committee that exist in other internal regulations of the Company.

• The Committee must seek reliability and transparency in internal and external Bankinter has not deemed it necessary for the Committee to have specific organization information on the Bank’s results and activities, and specifically, must periodically and operating regulations, as it deems that the aforementioned regulations, particularly verify the integrity and consistency of the financial statements of the Bank and those included in the Regulations of the Board, regulate all characteristics of the of the Group, as well as the annual accounts, annual report and management Committee in sufficient detail. report, prior to their approval or proposal by the Board of Directors and to their publication. The Chairman of the Audit and Compliance Committee participates in the Annual General Meeting to report to shareholders on the Committee’s activity during the ACGR 2015 Bankinter 62

financial year, the accounts of which are subject to approval pursuant to article 16 of As a general rule, the Audit and Compliance Committee shall act through the the Regulations of the General Shareholders’ Meeting. preparation of good practice recommendations directed to the corresponding Bank areas and may adopt resolutions, in matters within its competence, notwithstanding 1.5. Operation those reserved for the Board of Directors, the Executive Committee, or other Company entities, according to the law and the bylaws. All Members of the Committee shall be non-executive directors with a majority of Independent Directors. Committee Members shall be appointed for the term of office In general, the Committee shall meet with the same frequency as the Board of Directors. set by the Board of Directors. In any event, the Chairman of the Committee must be It shall also meet whenever called by its Chairman, by the Chairman of the Board of replaced at least every four years, and may be re-elected after the lapse of one year Directors, or when requested by two of its members. In the absence of its Chairman, from his or her removal. the meeting shall be chaired by the Independent Director appointed for that purpose by the Committee. The Committee is currently made up of four directors, all of them external or non- executive, three of whom are independent. The Secretary shall prepare minutes of the meetings, signed thereby with the approval of the Chairman of the Committee, which shall be reported to the Board of Directors The Chairman of the Committee is an Independent Director and the Secretary of the and distributed to all the Directors. The Secretary shall assume responsibility for calling Board of Directors acts as Secretary of the Committee. Committee meetings and filing the minutes and documentation presented thereat.

At the discretion and invitation of the Chairman of the Committee, the Chairman, the In 2015, the Committee met in session on 11 occasions. It does so systematically at least Bank’s Chief Executive Officer or other executive directors or managers, as applicable, once each month—except in August. Meetings tend to take approximately two hours. may attend the Committee’s meetings. The presence of the Company’s executive directors at Committee meetings is exceptional and one-off in nature, and may only 1.6. Powers occur upon the invitation of the Chairman of the Committee due to the nature of the item or issue to be discussed. The Audit and Compliance Committee’s powers include those assigned thereto in accordance with law, the By-Laws and the Regulations of the Board of Directors. Such The Internal Audit Director may attend Committee meetings as a contributor but powers are described in Exhibit 1 of this report. without the status of a Member thereof, as may, among others, the head of the Regulatory Compliance Unit and the Company’s Chief Financial Officer, who shall It is also important to note that the Audit and Compliance Committee will supervise attend at the frequency established by the Committee. At the decision of the Chairman the procedure for the confidential reporting of potentially significant irregularities, of the Committee, other members of Internal Audit and those responsible for the particularly relating to finance and accounting, which are noted within the company various areas of the Bank and of the Group, and any Company officer or employee, even and reported by employees, in all cases guaranteeing the effectiveness of the without the presence of any other officer, may also attend the meetings. aforementioned procedure.

External auditors shall attend Committee meetings provided that the Chairman thereof The Audit and Compliance Committee has access to all necessary information and deems it appropriate, and they shall do so, in any case, at meetings that examine the documentation for the performance of its duties and may obtain the assistance of reports of such auditors on the Bank’s and Group’s annual accounts and management auditors, advisors, consultants, experts and other independent professionals. Subject report, as well as at meetings to verify results prior to their publication. to Committee authorization, its Chairman may undertake, directly or through Internal Audit, to engage the services of such professionals, whose work shall be provided directly and exclusively to the Committee. ACGR 2015 Bankinter 63

In the event of the existence of reservations or exceptions in the Report of the Accounts The Internal Audit budget, which is overseen by the Audit Committee, contains a Auditor, the Chairman of the Committee shall report them to the Annual General specific item for the internal development of IT applications that are proposed by Meeting. Internal Audit.

2. Internal Audit Structure 3. Committee activities during 2015

Bankinter’s Internal Audit is the operating instrument that serves as support for the In 2015, the Audit Committee met on 11 occasions, at which it addressed matters Committee and a means of implementing the guidelines thereof. The Audit function at related to the scope of its duties and powers, a description of which is set forth in the Bankinter is structured as an independent and objective activity organised to add value sections provided below. and improve the organisation’s operations. Each meeting also addressed other topics, including the authorisation of financing To this end, and notwithstanding its autonomy and neutrality, the immediate purpose transactions and other transactions of Directors and Management subject thereto, of Internal Audit is to help the Committee fulfil its objectives, contributing a systematic renewal of the external auditor, as well as the main regulatory changes affecting the and disciplined approach that allows the effectiveness of the processes of management institution, the most significant impacts related to any of the bank’s risks, monitoring of risk, control, business and management to be assessed and improved. Its ultimate of inspections and supervisory measures carried out by any supervisory body with purpose is to ensure that these processes are regular, are adapted to the Institution’s respect to the institution. risk policies, are carried out in full compliance with the current regulatory framework and are duly known and assessed by the directors through the Audit Committee. 3.1. Internal control

Internal Audit is organised into four specialised areas: Internal Audit reports hierarchically to the Audit and Compliance Committee and functionally to the Chairman of the Board of Directors. • IRB Models and Remote Audit Area • Processes, Subsidiaries and Technology Audit Area Internal Audit Planning. Approval and semi-annual monitoring • Retail Networks Audit Area The Audit Committee annually approves all the activities that Internal Audit will carry • Corporate Governance Audit Area out during the financial year.

The Internal Audit workforce is made up of 32 professionals, with an average age of Internal Audit planning covers in detail the reports and principal work to be carried 41 years and average Internal Audit experience of 10.1 years, with an average of 14.8 out during the year according to the corporate risk map and the risk map defined by years at Bankinter. Practically all of the Audit workforce has graduate training. Audit, which serves as methodology for satisfying the Institution’s control targets. The Committee monitors the planning semi-annually, presenting and explaining In 2015, Internal Audit issued a total of 550 reports, of which: 365 correspond to the compliance status of the identified targets. It also presents to the Committee the the Audit of Retail Networks; 85 fall under the Audit of Processes, Subsidiaries and requests that the organisation make of Internal Audit, which are included within the Technology; 9 correspond to the Corporate Governance Audit Area; 30 correspond to annual plan. Audit of IRB Models; 11 correspond to Remote Audit; and 51 to other activities and projects. Further, 1,880 automatically generated reports have been issued reporting on the assessment and evolution of specific indicators selected for purposes of increasing the effectiveness of internal control. ACGR 2015 Bankinter 64

The Committee is informed in advance and, if applicable, adopts any decisions it Information verification audits considers appropriate regarding: Various data verification tasks were carried out in 2015, including, on the one hand, verification of the most relevant management information—including original sources • Internal Audit’s annual overall budget. and data bases—used in the Institution’s presentations; and, on the other hand, various • IT and consulting projects in which Internal Audit is involved. tasks verifying presentations made to the Board of Directors, including those performed • The subcontracting of various projects or services, especially in cases of by the Chief Executive Officer, with positive results. subcontracting of the Accounts Auditor. • The annual training plan for the Internal Audit team. Another recurring Internal Audit task is verification of the information contained in the quarterly brochure distributed to shareholders, investors and the market, as well Information on incidents as the integrated report (Sales Note and Annual Corporate Governance Report), with The main incidents that may occur at the Institution concerning system weaknesses, favourable results. major errors or alleged employee irregularities, are submitted to the Audit Committee, which supervises the measures adopted for such purpose by the competent bodies of Whistleblowing procedure the Bank. The Chairman of the Audit Committee is the recipient of communications passed through the channel for whistleblowing, established at the Institution in 2007, Circular on the monitoring of binding audit recommendations regarding potentially significant irregularities, especially financial and accounting, In 2015, the Audit Committee undertook detailed monitoring of changes in the that have been noted, assessing and processing the statements made thereto for fulfilment of the Internal Circular of 2008 on the monitoring and control of Internal clarification and guaranteeing confidentiality. The Chairman reports periodically to the Audit recommendations. Audit Committee on activity carried out through this channel.

Five hundred and ninety-seven recommendations were issued during the financial Corporate Governance Audits year and 442 remained in progress as at 31 December, thus showing Internal Audit’s In 2015, external audits were carried out concerning preparation, vote allocation, contribution of value to the organisation. distance voting and ballot-counting of the General Shareholders’ Meeting, as discussed below.

Review of audits of subsidiary companies During financial year 2015, the Audit Committee was informed of the various Internal Audit reports made regarding the Bank’s principal subsidiary companies.

Monitoring of IRB Credit Risk Model Audits In 2015, at various meetings, the Audit Committee supervised the monitoring of the actions taken by Internal Audit in the process of implementing Credit Risk Models under Basel II.

Monitoring of inspections The Audit Committee was also informed regarding inspections by the supervisory bodies of the Bank or Group companies, as well as tax inspections, when held. ACGR 2015 Bankinter 65

3.2. Regulatory Compliance In accordance with the Regulations of Bankinter’s Board of Directors, the Audit and Regulatory Compliance Committee is responsible for approving the appointment and In the control framework required for all credit institutions, the duty of regulatory removal of the head of the Regulatory Compliance Unit. compliance has been established in accordance with best international practices and recommendations as a second line of defence, on the basis of responsibility in the Bankinter’s regulatory compliance function is based on the following fundamental regulatory compliance of all business units, as a first line, with such compliance duty pillars: also subject to verification by internal audit, as a third line of defence. • Advising of senior management, employees and the Group’s business and During 2015, the internal institutional framework relating to the compliance duty was operating areas. strengthened with the creation of the Regulatory Compliance Committee, as a Senior • Supervision and monitoring of compliance with rules of conduct in providing Management body responsible for monitoring the compliance policy in the Bank’s the Group’s investment and banking services, market abuse and prevention of activities. The Regulatory Compliance Committee was thus designed as a control money laundering and the financing of terrorism. entity forming part of the first line of defence, responsible for executing the policies • Detection and management of risk of non-compliance in the provision of concerning regulatory and regulatory compliance matters established at any time by investment services, market abuse and prevention of money laundering and the Board of Directors’ Audit and Compliance Committee. financing of terrorism. • Relations with regulatory and oversight authorities and bodies in matters that The Group’s organic framework of regulatory compliance is also supplemented by other fall under its powers in accordance with these By-Laws. Committees: The Regulatory Compliance Unit prepares and submits to the Audit and Compliance • The Crime Prevention and Professional Ethics Committee, which is responsible Committee an Annual Regulatory Compliance Plan establishing the range of activities for supervision of the operation of and compliance with the criminal risk necessary to implement and review the specific policies and procedures and to assess prevention model implemented by the Bankinter Group, as well as the exercise the risk of non-compliance, both general and in relation to specific activities. of disciplinary authority with respect to violations of the Professional Ethics Code and other internal regulations applicable to the various activities of the Group’s Such Plan includes periodic reviews of established procedures, and its purpose is to entities. prevent, detect, correct and minimise any risk of violation of the obligations imposed by • The Products Committee, the task of which is to approve the launch, modification applicable standards in the provision of investment and banking services, prevention of or cancellation of products and services offered to retail customers. money laundering and market abuse and, in particular, the risk of incurring penalties, • The Internal Control Body, the principal task of which is to establish and approve material financial losses or reputational damage as a result of violating the laws, policies relating to the prevention of money laundering and the financing of regulations, rules, standards of self-regulation and codes of conduct applicable to its terrorism pursuant to Law 10/2010 and its implementing regulations, which activities. policies constitute the Bankinter Group’s prevention framework, as well as to ensure compliance therewith. The Regulatory Compliance Unit prepares quarterly and annual written reports on the results of tasks completed, highlighting violations and associated risks. It also The Regulatory Compliance Unit hierarchically reports to the Audit and Compliance periodically reports to the Committee on money laundering prevention activities, Committee of Bankinter’s Board of Directors and functionally reports to the Office of including the Bank’s relations with the Committee’s Executive Area for the Prevention the General Secretary of the Bank. of Money Laundering, and coordination of the operation of the Internal Control Body established for that purpose within Bankinter. ACGR 2015 Bankinter 66

3.3. Economic-financial information At the proposal of the Audit and Compliance Committee, the Board of Directors submitted to the General Shareholders’ Meeting held 18 March 2015 the re-election of Each quarter, with the additional participation of the Accounts Auditor, Internal Audit Deloitte S.L. as accounts auditor for financial year 2015. The resolution of the General submits the verification report on the Bankinter Group’s consolidated income statement Shareholders’ Meeting stated: to the Audit Committee. The same system applies to the semi-annual report on results to which RD 1362/2007 of 19 October refers. “Re-election of the firm Deloitte S.L. as accounts auditor of Bankinter S.A. and of its Consolidated Financial Group for financial year 2015, in accordance with the proposal The submission of this independent report and the Committee’s approval of its by the Audit and Compliance Committee to the Board of Directors and as approved by conclusions constitute a mandatory process without which the Board of Directors will the latter.” not approve or publish the aforementioned quarterly, semi-annual and annual results. At its meeting held on 18 November 2015, the Board of Directors selected Such presentation consists of a report to the Committee on the process of preparing the PricewaterhouseCoopers Auditores S.L. (“Pwc”) as the external auditor of Bankinter, results and their verification. The method is based on a review of the various sections S.A. and its Consolidated Group, to verify the annual accounts for financial years of the consolidated income statement, verifying that the data expressed therein are 2016, 2017 and 2018. The decision was adopted following Corporate Governance correct and consistent, analysing the reasonableness of the criteria applied and of the recommendations concerning the rotation of external auditors, at the proposal of the most significant figures. Audit and Compliance Committee as a result of a fully transparent tender process (such decision was reported to the market as Significant Event No. 231158 dated 19 In all cases, it has been concluded that the information contained in the Bankinter November 2015). Bankinter, S.A.’s Board of Directors has proposed such appointment Group’s Income Statement adequately reflects the Bankinter Group’s accounting to the Annual General Meeting to be held in March 2016. situation. 3.5. Audit of the General Shareholders’ Meeting 3.4. Annual Control Report of the External Accounts Auditors In 2015, the audit of the ‘Preparation, call and ballot-counting of the General The accounts auditors state their main recommendations and conclusions on the Shareholders’ Meeting’ was again carried out by the audit firm KPMG, with favourable annual External Audit in an Annual Control Report submitted to the Committee and results. Such practice will be repeated at the 2016 Annual General Meeting. The subsequently to the full Board of Directors. purpose of the task was to confirm whether, upon the call and preparation of the General Shareholders’ Meeting, which was held on 18 March 2015, the Bank had The Audit Committee studies and proposes to the Board of Directors—for it to, in applied the actions procedures in the terms described in the Procedural Guide to the turn, present it to the General Shareholders’ Meeting—the renewal or, if applicable, Annual General Meeting, available to all shareholders on the corporate website from replacement and new appointment of the Accounts Auditor for the Bank and the the time of calling the General Meeting, as well as subsequently to verify the holding Group. The Committee also sets the term of office and general criteria applicable to the of the General Meeting, the availability of the information and the integrity of the files. negotiation and content of the conditions of the audit agreement, in accordance with applicable regulation. 4. Audit of accounts for financial year 2015 We note that, to guarantee an annual analysis of the suitability and independence of the accounts auditor, it is the policy of the Committee and the Bank that a reflection The annual control report submitted by the external auditors to the Audit and process be carried out every year to decide on renewing or replacing the auditor, Compliance Committee on 16 February 2015, and subsequently to the Board of Directors depending on concurrent needs or circumstances. on 17 February 2015, contains the opinion of the accounts auditor without reservations, ACGR 2015 Bankinter 67

and concludes that the individual and consolidated annual accounts are an accurate 6. Informe sobre la independencia del auditor de cuentas reflection of the Bank and of the Group (respectively), according to IFRS [International Financial Reporting Standards] and Banco de España Circular 4/2004. Such report is In compliance with the provisions of the 18th additional provision, section 2.6) of included in the Legal Note for financial year 2015, available on the corporate website. Securities Market Law 24/1988 of 28 July, and in accordance with the provisions of the Regulations of Bankinter’s Board of Directors, the Audit and Compliance Committee issues the mandatory report on the independence of the accounts auditors, prior to 5. Projections for financial year 2016 issuing the audit report on the Bank’s and the Group’s consolidated accounts by the aforementioned auditor for financial year 2016. The Audit Committee is scheduled to meet at least 11 times in 2016, again applying a structure of collaboration with external firms in which they will be invited to report on The Audit and Compliance Committee states that: various current regulatory and risk control issues, in accordance with the schedule of meetings approved by the Audit Committee and ratified by the Board of Directors at its Appropriate relations and communication channels have been established with the meeting of 16 December 2015. accounts auditors to receive information on issues that might endanger the latter’s independence, for its examination by the Audit and Compliance Committee, and The planning of the 2016 audit work highlights the focus on audits relating to Market any others related to the process of completing the audit of accounts, as well as Risk and Credit, Technological, Regulatory, Reputational and Operational Risk; the other communications established by law and by technical audit regulations. second-level function of the institution’s internal control; and continued particular attention to Credit Risk Audits, as well as continued in-house audit activity in the Office The Audit and Compliance Committee also approves the annual budget for fees to Network. be received for the services of auditing the Bank’s and Group’s accounts, setting the maximum percentage of the total fees that may derive from fees for services other The Remote Audit Area will continue to implement indicators to monitor various risks, than the accounts audit, and in accordance with generally accepted practices, having as well as automatic audits and self-audits for the various centres and their subsequent defined an action protocol so that the engagement of these services shall in all cases assessment and monitoring. be previously authorised by the Committee and supervised at all times by the Group’s internal audit. During the financial year, the audit functions of IRB Credit Risk statistical models resulting from the entry into force of the Basel II agreements as a consequence of the The Audit and Compliance Committee supervises the rotation of the accounts audit on-going verification process in accordance with Banco de España guidelines, as well team in compliance with the provisions of section 8 quáter of Law 12/2010 of 30 June, as the audits of the Credit and Financial Risk processes, will continue to take priority. amending Law 19/1988 of 12 July on the Audit of Accounts, and ensures compliance For 2016, the Audit and Compliance Committee has decided to repeat an audit to at all times with the legally required rotation. Moreover, for purposes of ensuring an verify fulfilment of the process, the security, integrity and consistency of the data annual analysis of the suitability and independence of the accounts auditor, it is the and processes associated with the Annual General Shareholders’ Meeting, as well as policy of the Committee and the bank that each year a decision be made on renewing independent monitoring of votes cast by shareholders, among other reports related to the auditor and that a reflection process be carried out concerning the main issues matters of Corporate Governance and Regulatory Compliance. of the previous financial year and the concurrent needs and circumstances in the following year.

The current audit firm has spent ten consecutive years performing the accounts audit, representing some 28% of the number of years audited by such audit firm out of the ACGR 2015 Bankinter 68

total number of years in which the annual accounts have been audited in the Company and Group.

The Audit and Compliance Committee has received written confirmation from the accounts auditor concerning the following matters:

• that during the performance of its office, it has not incurred any legal cause of conflict with the Bankinter Group or its directors and/or officers, nor has any situation occurred that, in the auditor’s opinion, may have endangered its independence. • that the amount billed to Bankinter during financial year 2015 for all items is not significant in comparison with the total amount billed to all its customers. • that the amount billed to the bank for tasks other than accounts audit totalled 25.92% of the total annual billing. • that all the above data confirm that there are no elements that might endanger the auditor’s independence in performing its accounts audit tasks.

Bankinter’s Internal Audit has confirmed the truthfulness and accuracy of the above statements.

As a conclusion from the information obtained through the aforementioned communication channels and procedures, the Committee considers that no aspects have been identified that call into question the independence of the auditor in executing its task of auditing the annual accounts.

ACGR 2015 Bankinter 69

Exhibit I. Powers of the Audit and Regulatory Compliance Committee (art. 35.11 of it, as well as the information of the additional services of any kind provided to the Regulations of Bankinter’s Board of Directors). those entities by such auditors or companies, or by the persons or entities linked to them in accordance with the provisions of the legislation on accounts auditing.

8. To issue annually, prior to the issuance of the accounts audit report, a report in 1. To report to the General Meeting, through its Chairman, on the situation which an opinion on the independence of the accounts auditors or audit firms regarding the control of the Company and the Committee’s activities in the shall be stated. In any case, this report shall take a position on the provision of financial year and on questions raised at the meeting by the shareholders in additional services referred to in the previous sub-section, taken individually matters within the Committee’s jurisdiction. and as a whole, other than legal audit and with relation to the independence regime or auditing regulations. 2. To propose to the Board of Directors, for submission to the General Meeting, the selection, appointment, re-election, or replacement of the external accounts 9. To make a prior report to the Board of Directors on all the matters established by auditors, as well as their contractual conditions, the scope of their professional law, the By-Laws and these regulations, and specifically on: mandate, and supervision of those activities distinct from the auditing of accounts itself and to ensure the independence of the external auditor . a) The financial information to be periodically published by the company, b) The issuance or purchase of shares in special purpose vehicles or entities 3. To propose to the Board of Directors the approval of the Audit and Compliance domiciled in jurisdictions or territories classified as tax havens. Committee Annual Report. c) Related-party transactions.

4. To supervise the effectiveness of the internal control, the internal auditing 10. To provide a channel of communication between the Board of Directors and the services at the Company and the risk control systems, including tax risks, to external and internal auditors, and to evaluate the results of the audit reports safeguard the independence and effectiveness of the said function, as well as and compliance with the observations and conclusions drawn, as well as to to discuss with the account auditors any significant weaknesses in the internal discuss with the accounts auditors the significant weaknesses of the internal control systems identified in the course of the audit. control system observed during the auditing.

5. To be aware of and to supervise the process for the drafting of the financial 11. To supervise the performance of the auditing agreement, ensuring that the information and its integrity and the Company’s internal control systems. opinion on the annual accounts and the main contents of the audit report are accurate and transparent. 6. To promote and review on a periodical basis the functioning of adequate internal control systems that ensure that the Company’s risks are adequately managed. 12. To examine, in the event the external auditor should resign, the circumstances that have led to this. 7. To safeguard the independence of the external auditor and receive information from the same on matters that may jeopardize their independence, for review 13. To ensure that the Group’s auditor should take responsibility for auditing the by the Committee, and any others connected to the process of carrying out the companies that make up the said Group. auditing of the accounts, as well as all other communications envisaged in the legislation on accounts auditing and in the technical auditing rules. In any case, 14. To inform the Board prior to the Board taking the corresponding decisions of the they annually shall receive from the account auditors the written confirmation incorporation of companies, businesses, associations, foundations, and any other of their independence from the entity or entities linked directly or indirectly to kinds of legal entities (including special purpose vehicles), as well as any other ACGR 2015 Bankinter 70

transactions or operations of a similar nature which, given their complexity, may 22. To review the general risks map for the Bank and the Group, and to submit to reduce the transparency of the Group. the Board the corresponding proposals.

15. To be aware of the reports on the Bank issued by supervisory bodies and to 23. To approve, following a proposal by the Chairman of the Board or the Managing supervise the compliance with those actions and measures which arise as a Director, the appointment or replacement of the Director of the Auditing Division. result of the inspection reports issued by the supervision and control authorities. 24. To ensure that the means and resources earmarked for the Auditing Division and 16. To safeguard the reliability and transparency of the internal and external for the Compliance Unit are sufficient. information on the Bank’s results and activities and, in particular, to verify the integrity and consistency of the Bank’s and the Group’s quarterly and half-yearly 25. To supervise compliance with the Internal Securities-Market Code of Conduct financial statements, and the annual accounts, annual report, and management Regulations, the Bankinter Group Code of Professional Ethics, and the report prior to their approval by or submission to the Board of Directors and their implementation of the functions attributed to the Bank’s Compliance Unit and publication, and to supervise the Bank’s policy in relation to prospectuses and with the departments responsible for the Protection of personal data and the other forms of public information. Prevention of Money Laundering, and to be aware of the reports and proposals that are submitted to it by the said units and departments. 17. To control compliance with the Bankinter Group Code of Professional Ethics, the Internal Securities-Market Code of Conduct Regulations, and the other internal 26. To approve or modify the Compliance Function By-laws, which shall contain its rules on the securities market and privileged and relevant information, approved functions and powers. by the Board of Directors. 27. To be informed, by the Chairman of the Board, the Deputy Chairman, if the 18. To receive information on disciplinary measures which may affect the managers Deputy Chairman is an executive, the Managing Director, or the General of the Bank, as a result of breaches of the employment provisions or the Secretary, of the appointment or replacement of the Director of the Compliance internal rules of conduct, to transfer the pertinent policies and instructions Unit. to the relevant Company bodies, and where the Committee should consider it particularly important, to adopt the final decision in relation thereto. 28. To report on any linked transactions by Directors and significant shareholders, with powers, as the case may be, to authorize them within the terms laid down 19. To safeguard the independence, autonomy, and universality of the internal in these Regulations. auditing function. 29. To be informed of the relevant irregularities, breaches or risks observed during 20. To supervise the Bank’s and the Group’s internal auditing activities, and the control actions carried out by the Bank’s authorised departments. therefore to approve its annual work plan, the annual report or the annual report on activities, and to ensure that the main risk areas and the internal control 30. To review any other matter that falls within its powers and that may be referred systems and procedures are reviewed. to it by the Board of Directors, the Chairman, the Deputy Chairman, if the Deputy Chairman is an executive, or the Managing Director. 21. To approve or modify the Internal Auditing Function By-laws, which shall contain its functions and powers. 31. Any other functions that may be attributed to it by these Regulations or by the Board of Directors.