SUPPLEMENT TO THE BASE PROSPECTUS FOR NON-EQUITY SECURITIES OF BANKIA REGISTERED IN THE OFFICIAL REGISTRIES OF THE CNMV ON 14 JULY 2015

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1 SUPPLEMENT TO THE BASE PROSPECTUS FOR NON-EQUITY SECURITIES OF BANKIA REGISTERED IN THE OFFICIAL REGISTRIES OF THE CNMV ON 14 JULY 2015 INTRODUCTION This supplement (the Supplement ) to the Base Prospectus for Bankia Non-Equity Securities registered in the official registries of the National Securities Market Commission (Comisión Nacional del Mercado de Valores, or CNMV ) on 14 July 2015, supplemented on 24 September 2015, is prepared to incorporate by reference the individual and consolidated annual financial information for the year ended 31 December 2015 of Bankia, S.A. and the subsidiaries that comprise the Bankia Group (hereinafter also Bankia ). PERSONS RESPONSIBLE Mr. Fernando Cuesta Blázquez, with current national identity document (Documento Nacional de Identidad or DNI ) number W, in use of the authority granted by resolution of Bankia s Board of Directors of 25 June 2015, resolves the incorporation by reference of Bankia s individual and consolidated annual financial information for the year ended 31 December 2015, and, in representation of Bankia, with registered office in Valencia at C/ Pintor Sorolla, 8, and tax identification number (Número de Identificación Fiscal or NIF ) A , assumes responsibility for this Supplement and declares, after using reasonable diligence to ensure that it is the case, that the information contained in this Supplement is, to his knowledge, consistent with the facts and contains no omission that could affect its content. AMENDMENTS TO THE BASE PROSPECTUS FOR NON-EQUITY SECURITIES This Supplement: - Incorporates by reference to the Base Prospectus for Non-Equity Securities, the individual and consolidated annual financial information for the year ended 31 December 2015 of Bankia, duly audited without qualifications, prepared by the Board of Directors of the Company on 10 February 2016, which may be viewed on the Company s website ( and the website of the CNMV ( The audit report for the individual and consolidated annual financial statements as at and for the year ended 31 December 2015 is attached to this Supplement. The Bankia annual financial information for 2015 incorporated into this Supplement by reference may be consulted at the following links:

2 This document is a supplement to the Base Prospectus for Bankia Non-Equity Securities in accordance with article 22 of Royal Decree 1310/2005 of 4 November 2005 and must be read together with that Base Prospectus for Non-Equity Securities and any other supplement to that Prospectus that Bankia may have published or may publish in the future. From the date of registration of the Base Prospectus for Non-Equity Securities dated 14 July 2015 to the date of registration of this Supplement, there have been no events that could materially affect the evaluation by investors that are not included in the supplement of 24 September 2015 incorporating by reference the Bankia consolidated financial information for the first half of 2015, in the financial information incorporated by reference by virtue of this Supplement and the information communicated as Material Disclosures to the CNMV, a list of which is set forth below and by reference also incorporated into the Base Prospectus: Identification of the Material Disclosure Date: 15/01/2016 Number: Description: Standard & Poor s Ratings Services affirms the rating of the Company's mortgage covered bonds Date: 22/01/2016 Number: Description: DBRS affirms the rating of the Company's mortgage covered bonds. Date: 17/02/2016 Number: Description: The company issues a press release on the opening of a process to repay the investment of retail investors who took part in the initial public offering in Date: 23/02/2016 Number: Description: Fitch Ratings upgrades the Company's long-term credit rating. Date: 26/02/2016 Number: Description: Fitch Ratings upgrades the Company's long-term credit rating. Date: 15/03/2016 Number: Description: The company announces the resolutions adopted at the Annual General Meeting of Shareholders Headings of the Base Prospectus for Non-Equity Securities affected by the Material Disclosure Additional information that complements the following sections: - Subsections B.17 and D.3 of Section I (Summary) - Section II (Risk factors relating to the securities) - Section 7 (Additional Information) Additional information that complements the following sections: - Subsections B.17 and D.3 of Section I (Summary) - Section II (Risk factors relating to the securities) - Section 7 (Additional Information) Subsection B.7 of Section I (Summary) - Subsections B.17 and D.3 of Section I (Summary) - Section II (Risk factors relating to the securities) - Section 7 (Additional Information) Additional information that complements the following sections: - Subsections B.17 and D.3 of Section I (Summary) - Section II (Risk factors relating to the securities) - Section 7 (Additional Information) The resolutions adopted at the Annual General Meeting of Shareholders affect the following sections: - Subsection B.6 of Section I (Summary): Appoint as director, in the category of independent director, Mr. Antonio Greño Hidalgo for the bylaws-mandated term of four years, replacing director Mr. Alfredo Lafita Pardo who tendered his resignation effective as from the conclusion of the General Meeting. - Subsections B.7 and B.10 of Section I (Summary) With the incorporation by reference of Bankia s individual and consolidated financial information for the year ended on 31 December 2015, and the other information referred to in this Supplement, the resulting text of the Summary of the Base Prospectus is as follows: 2

3 SUMMARY SECTION A INTRODUCTION AND WARNINGS A.1 WARNING This summary should be read as an introduction to the Prospectus. Any decision to invest in the securities should be based on the investor s consideration of the Prospectus as a whole. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor may, under the national legislation of the Member States, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability may be imposed on the persons filing the summary, including any translation thereof, only if the summary is misleading, inaccurate or inconsistent with other parts of the Prospectus, or when read together with other parts of the Prospectus does not provide information essential to assist investors when determining whether or not to invest in the aforesaid securities. A.2 Information on financial intermediaries Not applicable. The Company has not given its consent for any financial intermediary to use the Prospectus in subsequent sale or final placement of the securities. SECTION B ISSUER AND POSSIBLE GUARANTORS B.1 Legal and commercial name of the issuer B.2 Issuer s domicile, legal form, applicable law and country of establishment Bankia, S.A. (hereinafter Bankia, the Bank or the Issuer ), and in the commercial sphere Bankia. Bankia is a Spanish company, of a commercial nature, in the legal form of a public limited company, with the status of a bank. Its shares are admitted to trading in the Spanish stock exchanges through the stock exchange interconnection system (Sistema de Interconexión Bursátil). As a result, it is subject to the regulation established by the Corporate Enterprises Act, the Act on Structural Modifications of Commercial Companies and other related legislation, as well as the specific legislation for credit institutions and the supervision, control and rules of the Bank of Spain. Also, as a credit institution in the process of restructuring it is subject to Act 11/2015, of 18 June 2015, on the recovery and resolution of credit institutions and investment firms ( Act 11/2015 ), which partially repealed Act 9/2012 of 14 November 2012, on restructuring and resolution of credit institutions, and related legislation. Finally, as a listed company, it is subject to the Securities Market Act and its implementing regulations. Its registered office is in Spain, in Valencia at Calle Pintor Sorolla 8. Its tax identification number (Número de Identificación Fiscal or NIF ) is A B.3 Description of issuer The corporate purpose of Bankia includes all manner of activities, operations, acts, contracts and services related to the banking sector in general or directly or indirectly related thereto, that it is permitted to perform under current legislation, including the provision of investment services and ancillary services and performance of the activities of an insurance agency. The Bankia Group is the result of a process of integration that ended on 23 May 2011, involving Caja de Ahorros y Monte de Piedad de Madrid, Caja de Ahorros de Valencia, Castellón y Alicante, Bancaja, Caja Insular de Ahorros de Canarias, Caja de Ahorros y Monte de Piedad de Ávila, Caixa d Estalvis Laietana, Caja de Ahorros y Monte de Piedad de Segovia and Caja de Ahorros de La Rioja (collectively, the Cajas ). This process of integration was implemented in two phases: (i) in the first place, the Cajas that are a part of the integration spun off to Banco Financiero y de Ahorros, S.A. ( BFA ) all of their banking and quasi-banking assets and liabilities (the First Spinoff ), which, in turn, (ii) spun off to Bankia all of its banking business, the investments associated with the financial business and the other assets and liabilities it received from the Cajas by virtue of the First Spinoff or otherwise under the Integration Agreement, excluding certain assets and liabilities that continued to be owned by BFA. The Bankia Group s principal business segments are Personal Banking and Business Banking and the Corporate Centre. It also has ownership interests in other companies, although pursuant to the Restructuring Plan referred to in section B.4a of this summary, Bankia is currently divesting noncore assets. Personal Banking: it includes the retail bank activity under a universal banking model with individuals or legal persons (with a turnover of less than 6 million euros), the distribution of which is accomplished by way of a broad multi-channel network in Spain, with a business aimed at customer satisfaction and management profitability. Its goal is to build strong and lasting ties with 3

4 B.4a Most significant recent trends affecting the Issuer and the sectors in which it operates customers by giving them better value in services and advice and better quality in the customer relationship. This is done by segmenting the customers based on the need for specialised attention and according to the needs of each type of customer. This segmentation, which classifies these customers into five broad categories (Private Banking, Personal Banking, High-Potential, SMEs and Micro-enterprises and Other retail segments) allows Bankia to assign specific customers to specialised managers, who take overall responsibility for their relationship with the bank, thereby obtaining higher levels of customer satisfaction and generating new sources of business. Personal Banking is a strategic business for Bankia, with a market share in Households of 10.44% (10.73% Dec/14) in loans and 9.16% (9.45% Dec/14) in deposits (Source: Research Office of Bankia and Bank of Spain, December 2015), along with a sizeable presence in investment funds, pension plans and private banking. Business Banking: it offers a specialised service aimed at legal persons with an annual turnover of more than 6 million euros. This segment groups all activities with companies and institutional customers of the bank, with a broad range of products and services. The Business Banking business model, offering a high degree of specialisation, is made up of various segments and distribution channels: Business Banking, Corporate Banking and Capital Markets. Bankia s business segment has over 20,000 active customers. In terms of turnover, at 31 December 2015 Bankia had awarded loans to businesses of billion euros ( billion euros at December 2014), and handled customer deposits of billion euros ( billion euros at December 2014). The Group s strategy is based on a customer-focused distribution model, with resources dedicated exclusively to companies. With regard to investees, Bankia has a portfolio of subsidiaries of 72 companies at 31 December 2015 (35 group companies, 3 jointly-controlled entities and 34 associates). These companies perform a range of activities including insurance, asset management, lending, services and realestate development and management. Moreover, at 31 December 2015, the balance of the portfolio of ownership interests in associates and jointly-controlled entities totalled 285 million euros, compared with 298 million euros at December Bankia primarily conducts its business in Spain, owning a total of 1,887 retail branches and 44 business banking centres at 31 December To strengthen its competitive positioning, based on the relationship with its customers, since 2013 Bankia has been promoting a new commercial model with a segmentation of the branch network in which there are universal branches, business branches, private banking centres and dynamic branches (oficinas ágiles). The latter are a new type of branch launched by Bankia on a pioneering basis in the Spanish financial system, allowing a quality and rapid response to those customers performing a high volume of transactions. The new dynamic branches are characterised by having extended hours and many cashiers and windows for rapid service. A 31 December 2015, Bankia had a total of 135 dynamic branches in Spain (20 opened in 2013, 100 in 2014 and 15 in 2015), thus covering the areas of greatest concentration of transactional customers. Macroeconomic and sectoral environment The global economic environment projected for 2016 is expansive, similarly to 2015, but the risks have become much more visible in recent months. The main concerns are financial turbulence in China, the sharp drop in equity markets, the destabilising effect of falling crude oil prices, especially for the energy sectors and petroleum producing countries, the possibility of the USA falling back into recession, the threat of the United Kingdom leaving the EU and the difficulties facing the European financial system in a context of negative interest rates. For now, these risks seem contained, but they have generated much uncertainty and pessimism in financial markets which, if they persist, could have very negative effects on the real economy. In so complex a scenario and with inflation exceptionally low, it is very likely that the ECB will step up its assetpurchasing programme and leave its benchmark rate at even lower negative rates and that the Fed will put off any rate hikes until after the summer. In 2015 the Spanish economy firmed up the recovery begun in mid-2013, with Gross Domestic Product (GDP) recording its strongest growth in eight years (+3.2% vs +1.4% the previous year). This stepped-up growth was driven by internal factors (lower personal income tax, improved competitiveness and borrowing terms, intense job creation) as well as external ones (the ECB's QE programme, cheaper oil, weaker euro, reactivation of European economies); nevertheless, the impact of some of these factors weakened as the year went on, with quarterly GDP growth rates declining. Domestic demand was the key driver of the economy, buoyed by vigorous growth in investment and, above all, in household spending; this proved compatible with an increase in financing capacity, thanks to the recovery in savings. This expansion will continue in 2016, albeit more moderately paced, thanks to cyclical momentum and the continuation of cheap oil; consequently, for the year as a whole we estimate GDP could 4

5 grow by around 2.8%. In any event, the downside risks in this scenario are growing, due both to the aforesaid external factors and to internal causes: political uncertainty, dropoff in household financial wealth, a possible halt to fiscal cleanup measures and the timetable of reforms and low potential growth rates. The growth in the domestic economy has been reflected in the banking business, which has made progress in boosting levels of new lending and asset quality. Nevertheless, the pressure on margins has intensified in an environment of very low interest rates and growing regulatory requirements. In this context, banks have continued to grow stronger, as borne out by the positive results obtained in the last transparency exercised carried out by the European Banking Authority in November 2015 and the ease with which the European supervisor's top-tier capital requirements that took effect on 1/1/16 (CET1 SREP) have been met. Restructuring Plan progress Pursuant to Act 9/2012, on 15 November 2012 the BFA-Bankia Group submitted to the Fund for Orderly Bank Restructuring (Fondo de Reestructuración Ordenada Bancaria or the FROB ) and the Bank of Spain its Restructuring Plan (the Restructuring Plan ), which was approved by the Bank of Spain and the European Commission on 27 and 28 November 2012, respectively. The BFA-Bankia Group must fulfil the commitments included in the Restructuring Plan (the information in this section refers to the BFA-Bankia Group since the Restructuring Plan was designed at consolidated level for the BFA-Bankia Group), which are summarised below: (i) (ii) (iii) Adjustment of the size of the Bank by transferring assets to Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria ( SAREB ), which was completed in Focus the business on commercial banking, i.e. Bankia will focus its business on offering customers deposits, loans, current accounts, other money transfer services, credit lines, lease arrangements, credit card transactions, bancassurance products, asset management, private banking and investment services, trade finance, currency exchange and online or telephone banking, among other services. The BFA-Bankia Group during the Restructuring Period will not engage in the following activities: - Granting real estate development loans. - Financing foreign companies outside Spain. - Banking activities with those companies that have access to the capital markets, excluding those of a short-term nature, such as financing working capital and short-term commercial and transactional banking services. In application of the two preceding points, during 2015 the BFA-Bankia Group carried through on practically all of the commitments set forth in the Restructuring Plan and Strategic Plan. In this regard, the most significant divestments completed 2015 were as follows: (iv) - Realia Business S.A.: in March 2015 Corporación Industrial Bankia (a solely-owned subsidiary of Bankia) signed a sale-purchase agreement with Inmobiliaria Carso, S.A. de C.V. to sell its entire stake in Realia Business, S.A. (24.953% of its share capital). The sales-purchase price was 0.58 euros per share, whereby the total price amounted to 44 million euros. This sale generated a net gain of 9.6 million euros. Globalvía Infraestructuras, S.A.: on 23 October 2015 the Group and Fomento de Construction y Contratas, S.A. (FCC) signed a sale-purchase agreement with the funds USS, OPTrust and PGGM for sale of 100% of the shares of Globalvia Infraestructuras, S.A., a company owned by the Bankia Group and FCC. The sale was executed as a result of exercise of right of first refusal of funds under the convertible bond of 750 million euros that they hold. The sale involved an initial payment of 166 million euros on formalising the transfer of shares, plus a deferred payment to be made in the first half of 2017, which could amount to a maximum of 254 million euros, depending on the value of the company when the bond is converted. City National Bank of Florida: on October 2015 there was signed the final sale of City National Bank of Florida, by way of transfer by the investee company Bankia Inversiones Financieras, S.A.U. of 100% of the shares of CM Florida Holdings Inc to the Chilean entity Banco de Crédito e Inversiones, after having been cleared by the Federal Reserve of the United State and payment of the agreed price. The sale generated a net capital of 117 million euros for the Bankia Group. According to the financial projections included in the Restructuring Plan, by 31 December 2015 the BFA-Bankia Group should have complied with the following economic figures and financial ratios: The net credit portfolio will not be greater than 116 billion euros. At 31 December 2015, 5

6 (v) (vi) (vii) net credit portfolio amounted to 109 billion euros. During 2015 the BFA-Bankia Group sold non-performing loan books of billion euros gross, carried out in seven different transactions. - Risk weighted assets will not be greater than 93 billion euros as per EBA criteria. At 31 December 2015, risk-weighted assets as per the aforesaid EBA criteria amounted to 75 billion euros. - Total balance sheet assets will not be greater than 257 billion euros. At 31 December 2015, total balance sheet assets amounted to 214 billion euros. - The loans-to-deposits ratio will not be greater than 133%. At 31 December 2015, that ratio was 113%. At the same date, the ratio calculated as net credit divided by the sum of retail commercial paper, strict customer deposits, sponsored loans and non-negotiable notes amounted to 103%. - Retail branches will number around 1,950 in At 31 December 2015, the number of branches amounted to 1,931 (there were 1,887 retail branches). The majority of the closures have been in the regions considered not to be strategic for the Group, the weight of the network thus being concentrated in the regions of origin of the Cajas. - The number of employees will be streamlined to the new structure of the BFA-Bankia Group and the new branch network, with the objective of achieving a figure of around 14,500 employees in At 31 December 2015, the headcount stood at 13,571. Also, the BFA-Bankia Group has covenanted that the number of branches and employees will not increase after Regarding the branches subject to the reduction plan and that have been closed, or are currently being closed, described in the preceding point, the BFA-Bankia Group cannot extend new financing to existing customers unless: - It is necessary to preserve the value of the secured loan. - It is made to minimise capital losses or improve the expected recovery value of the loan. Mortgages arranged by branches that are being closed existing at the date of the Restructuring Plan will be managed in such a manner that their value is maximised. In particular, the BFA-Bankia Group may restructure the mortgages that have been granted on the following terms: a) changing the conditions of the loan; b) transferring the mortgages to new properties; and c) transferring the real estate asset. Corporate governance measures: - The BFA-Bankia Group will not acquire new ownership interests in or business lines of other companies while the Restructuring Plan is in effect. - The BFA-Bankia Group had dividend payments restricted until 31 December 2014, the date on which this restriction was lifted. At Bankia s General Meeting on 22 April 2015, shareholders approved the distribution of a gross dividend of euros per share charged against the Bank s earnings for 2014, which was paid to shareholders on 7 July In addition, in the year closed 31 December 2015 the Bankia Board of Directors proposed a gross dividend distribution of 302 million euros, which will be brought before the General Meeting of Shareholders of Bankia for approval. (viii) Measures to manage hybrid instruments were taken as specified in the resolution proposed by the governing board of the FROB, subject to the terms set forth in the Memorandum of Understanding on Financial-Sector Policy Conditionality of 20 July 2012 (the MOU ) as defined by the European authorities in the Spanish banking aid programme. The amount of capital generated through management of subordinated debt and hybrid capital instruments was billion euros at BFA Group level, of which billion was new capital in Bankia. (ix) As a result of BFA losing its licence to operate as a credit institution, the company (BFA) has substituted all its borrowings from the ECB for alternative sources of funding, including the repo arrangement with Bankia and other third parties. This financing arrangement between BFA and Bankia is at arms length, at a normal price for this type of repo transaction and discounted at the rates the market would apply for pledged collateral and the risk assumed by Bankia. BFA losing its licence to operate as a credit institution has no effect whatsoever on the solvency of Bankia, its legal nature, its business or its relationship with its customers. B.5 Group Bankia is the parent of the Bankia Group and forms part of the consolidated group of credit institutions, the controlling company of which is BFA (collectively the BFA-Bankia Group ). At 31 December 2015, the Bankia Group was a consolidated group composed of 72 companies (35 6

7 B.6 Major shareholders companies were group companies, 3 companies were jointly-controlled entities and 34 were associates). These companies perform a range of activities including insurance, asset management, lending, services and real-estate development and management. The group of companies classified as non-current assets held for sale at 31 December 2015 amounted to a total of 36 companies. During 2015 the Bankia Group continued with the process of divestiture of non-strategic assets, in fulfilment of the commitments agreed in the Restructuring Plan for the BFA-Bankia Group approved by the FROB and the European Commission. BFA, an entity wholly-owned by the FROB, is the majority shareholder of Bankia, holding 64.36% of its share capital at the date of preparation of this Document. At the date of this Document, the stakes held by members of the Board of Directors and senior management in the share capital of Bankia are as follows: Board members No. of shares Direct Indirect Total % of voting rights No. of shares % of voting rights No. of shares % of voting rights Mr. José Ignacio Goirigolzarri Tellaeche 1,036, % % 1,036, % Mr. Alfredo Lafita Pardo 217, % % 217, % Mr. Álvaro Rengifo Abbad 131, % % 131, % Ms. Eva Castillo Sanz 100, % % 10, % Mr. Fernando Fernández Méndez de 65, % % 65, % Andés Mr. Francisco Javier Campo García 201, % % 201, % Mr. Joaquín Ayuso García 220, % % 220, % Mr. Jorge Cosmen Menéndez-Castañedo % 121, % 121, % Mr. José Luis Feito Higueruela 197, % % 197, % Mr. José Sevilla Álvarez 220, % % 220, % Mr. Antonio Ortega Parra 300, % % 300, % Total 2,689, % 121, % 2,810, % Direct Indirect Total Directors No. of shares % of voting rights No. of shares % of voting rights No. of shares % of voting rights Mr. Miguel Crespo Rodríguez Ms. Amalia Blanco Lucas Mr. Fernando Sobrini Aburto Mr. Gonzalo Alcubilla Povedano 25, % % 25, % 63, % % 63, % % % % % % % Total 88, % % 88, % B.7 Selected historical financial information The most notable aspects of the financial evolution of the Bankia Group over the last three years are summarised below The attributable profit was billion euros, 39.2% higher than This is the result of the main factors that marked business performance during 2015: - The resilience of the Group's net interest income despite the extraordinarily low interest rates in the market. - Continuance of the cost-moderation policy after the completion of the Group's restructuring, which has contributed to stabilising earnings in a challenging environment for the banking industry. In this regard, at year-end 2015 the Bankia Group had an 7

8 efficiency ratio of 43.6%, one of the best of the Spain's biggest Spanish financial institutions. - The risk management focus, which has translated into a sizeable reduction in loan loss provisions and in provisions and write-downs of property assets. - Successful fulfilment of the Group's disinvestments plan, which culminated with the sale of City National Bank of Florida in October, buoying the generation of earnings in The capacity to generate profits, both organically and through disinvestments, boosted the ROE to 9% at the end of Furthermore, the 2015 set aside 424 million euros to strengthen its provisions for the future costs that could arise from the various lawsuits in relation to Bankia's initial public offering in Part of that provision (184 million euros) has been recognised in the consolidated income statement, and the rest (240 million euros) recorded against equity on the balance sheet. Stripping out the effect of this provision, the ROE would have reached 10.6%. On the business front, new lending by the Group to strategic segments such as businesses, SMEs and consumers continued growing. This rise in lending, together with a slowdown of deleveraging in the private sector in Spain, contributed to stabilising the volume of Group loans and receivables del Group, which in 2015 recorded a decline of 1.9%, much smaller than the decrease in In addition, a large part of this drop in lending has been concentrated in unproductive assets (doubtful loans), which has taken the NPL ratio down 2.3 percentage points from December of the previous year to 10.6%. The volume of customer funds under management continued trending upward, as regards both strict customer deposits and off-balance sheet funds, which recorded combined growth of billion euros, a rise of 3.3%, with respect to December This reflected a solid performance in capturing new deposits in the retail network and in the business banking network, as well as organic growth in assets managed, primarily in investment funds. In relation to disinvestments, the most important one was the sale of City National Bank of Florida, which reduced the Group's non-current assets held for sale by billion euros from. This sale generated an extraordinary profit of 201 million euros in The Bankia Group ended 2014 with an improvement over the results obtained in the prior year, with generalised increase of all margins and prudent management of the balance sheet, which translated into a decrease in non-performing loans (hereinafter NPLs ) (-1.8 percentage points, to 12.9%) and improvements in both solvency and liquidity. Attributed profits were 747 million euros, 340 million euros more than in the prior year. These results came from favourable evolution during the year of both sources of revenue from the basic banking business (net interest income and fees and commissions), and operating costs of the Group, reducing the dependence on revenue of a less recurring nature such as gains on financial assets and liabilities and gains on sale of shareholding interests, which had a greater weight in the profits obtained by the Bankia Group in Another relevant aspect was the reduction of provisions and impairment allowances as a result of a reduction in NPLs and the balance sheet clean-up during the prior two years. In the prevailing context of low interest rates, the persistence of more recurrent revenue, the favourable evolution of costs and the normalisation of the level of provisions were key factors allowing the Group to increase attributed profits significantly (+83.3% versus 2013). Regarding investment, in general terms the Group s activity continued to reflect the deleveraging process in the private sector (families and businesses), albeit at a slower pace than the previous year, and the bank s strategy regarding investment in segments strategic to the Group, decreasing NPLs and continuing strengthening of the solvency and liquidity levels. A positive factor was the deceleration of the decline in loans and advances to customers compared to prior years (-5.4% in 2014 as against -11.2% in 2013). This was a result of the incipient growth in demand for financing in Spain, the greater flow of new credit granted by Bankia (principally to small enterprises, consumers and independent contractors) and the reduction of NPLs, both by reason of fewer new delinquencies and stronger recovery activities and sale of portfolios. It is also worth noting the favourable behaviour of strict deposits, the growth of which (+5.4%) during the year was associated with the success in bringing in new customer funds and came off the back of the Group s effort to significantly cut the number of branches in Finally, it is also worth noting that in 2014, the Group s portfolio of financial assets available for sale reduced by billion euros (-14.6%) as a result of fixed income maturities occurring during the year, whereas non-current assets held for sale decreased by billion euros (-37.0%) due to the sale of shareholding interests and the removal from full consolidation of the assets of Aseval after the sale of 51% of the capital of the company to Mapfre in October

9 In 2013 the Bankia Group returned to profitability, after completion in 2012 of the process of cleaning up its balance sheet as provided in the Restructuring Plan, which required a strong provisioning and write-off effort. Despite the fact that the difficult economic environment affected the basic banking business (net interest income and fees and commissions), during 2013 the Group managed to reduce operating costs significantly. This allowed the efficiency ratio to be improved and net income before provisions maintained at a level near that of As a result of the improvements in these management parameters, in 2013 the Bankia Group had attributed profit of 408 million euros, as against the losses generated in 2012, beginning the process of generating value contemplated in the Restructuring Plan and in the Strategic Plan. As already mentioned, the evolution of the Group s business during 2013 occurred in a challenging environment for the banking business, with low volumes of activity, low demand for credit and a weak economic environment. In this scenario the Bankia Group focused its management on the roadmap set out in the Restructuring Plan, advancing with the process of deleveraging and strengthening its solvency and liquidity. Thus, as the most important milestone, in 2013 the process of capitalisation was completed with the two capital increases in May, which allowed the Bankia Group to close the year with positive equity of billion euros. In this context, at the end of December 2013 the Group had total assets of billion euros (a figure 10.9% less than in the prior year) and turnover (comprised of net loans and advances to customers, customer deposits, marketable debt securities, subordinated liabilities and assets managed off balance sheet, including investment funds, pension funds and savings insurance) of billion euros, 11.5% less than in December 2012 due to the reduction of credit, cancellation of subordinated liabilities of the Group after the capital increases in May, and maturity of wholesale debt. A part of the decline in the volume of assets for the year was also a result of the lower market valuation of trading derivatives as a result of the sensitivity of the portfolio to interest rates, as the long-term curves increased significantly in The favourable evolution of off-balance-sheet assets was notable. The growth for the year (6.239 billion euros excluding customer portfolios managed on a discretionary basis) offset the decrease in retail deposits as a result, mainly, of the acceleration of the process of closing branches as contemplated in the Restructuring Plan. Selected financial information from the consolidated income statement of the Bankia Group Income statement (figures in millions of euros) 31/12/ /12/ /12/2013 (1) Change (%) 2015 / 2014 Net interest income 2,740 2,927 2,425 (6.4%) Gross income 3,806 4,009 3,482 (5.1%) Net income before provisions 2,148 2,267 1,577 (5.2%) Net operating income/(expense) 1,413 1, % Profit/(loss) before tax 1, % Consolidated profit/(loss) for the year 1, % Profit/(loss) attributable to the parent 1, % (1) Presented solely for comparison purposes. Figures restated as per Note 1.5 to the 2014 consolidated annual accounts to retrospectively account for the effects of applying IFRIC 21 early. Selected financial information from the consolidated balance sheets of the Bankia Group Assets (figures in millions of euros) 31/12/ /12/ /12/2013 (1) Change (%) 2015 / 2014 Cash and balances with central banks 2,979 2,927 3, % Financial liabilities held for trading 12,202 18,606 22,244 (34.4%) Including: Loans and advances to customers Available-for-sale financial assets 31,089 34,772 40,704 (10.6%) Loans and receivables 117, , ,918 (6.0%) Including: Loans and advances to customers 110, , ,116 - (1.9%) Held-to-maturity investments 23,701 26,661 26,980 (11.1%) 9

10 Hedging derivatives 4,073 5,539 4,260 (26.5%) Non-current assets held for sale 2,962 7,563 12,000 (60.8%) Investments (4.3%) Tangible and intangible assets 2,261 2,058 2, % Other assets 9,642 9,997 9,858 (3.6%) TOTAL ASSETS 206, , ,569 (11.4%) Liabilities (figures in millions of euros) 31/12/ /12/ /12/2013 (1) Change (%) 2015/2014 Financial liabilities held for trading 12,408 18,124 20,218 (31.5%) Financial liabilities at amortised cost 176, , ,033 (8.7%) Including: Customer deposits 108, , , % Hedging derivatives 978 2,490 1,897 (60.7%) Liabilities under insurance contracts Provisions 2,898 1,706 1, % Other liabilities 1,714 5,714 8,117 (70.0%) TOTAL LIABILITIES 194, , ,209 (12.1%) Equity (figures in millions of euros) 31/12/ /12/ /12/2013 (1) Change (%) 2015 / 2014 Own funds 11,934 11,331 10, % Valuation adjustments 696 1, (42.8%) Non-controlling interests 66 (13) (40) - TOTAL EQUITY 12,696 12,533 11, % TOTAL LIABILITIES AND EQUITY 206, , ,569 (11.4%) (1) Presented solely for comparison purposes, at 31 December 2013, restated figures included in the 2014 consolidated annual accounts shown to retrospectively account for the effects of applying IFRIC 21 early. Business volume Business volume (figures in millions of euros) 31/12/ /12/ /12/2013 Change (%) 2015 / 2014 Net loans and advances to customers (1) 110, , ,119 (1.9%) Customer deposits 108, , , % Marketable debt securities 22,881 23,350 28,139 (2.0%) Subordinated liabilities 1,046 1, % Customer funds managed off the balance sheet (2) 22,773 21,042 20, % TOTAL BUSINESS VOLUME 265, , , % (1) Includes loans and advances to customers in loans and receivables and in the trading book. (2) Investment companies and funds, pension funds and savings insurance. Principal solvency indicators The following table shows the Bankia Group s main solvency ratios as per Basel III criteria for 2015, 2014 and, for comparison purposes, the proforma estimates for the 2013 close: Solvency (%) 31/12/ /12/ /12/2013 (2) Change (p.p.) 2015 / 2014 Basel III (CRR and 10

11 CRD IV) Common Equity Tier I ratio Basel III Phase In 13.9% 12.3% 10.4% 1.6 p.p. (scheduled) (1) Tier I Capital ratio Basel III Phase In 13.9% 12.3% 10.4% 1.6 p.p. (scheduled) (1) Total Capital ratio Basel III Phase In 15.1% 13.8% 10.8% 1.3 p.p. (scheduled) (1) (1) The ratios provided include in all years the net profit for the year allocated to reserves. (2) Proforma data under CRR and CRD IV, restated on early adoption of IFRIC 21. Minimum requirements applicable to the Bankia Group: - At 31 December 2015: Common Equity Tier I (CET-1): % (includes Pillar I, Pillar II and capital conservation buffer) - At 31 December 2014: Common Equity Tier 1 (CET-1): 4.5 % and Total Capital: 8% (includes Pillar I). - At 31 December 2013 there was no regulatory minimum requirement associated with BIS III as that standard came into effect on 1 January Risk management Risk management (figures in millions of euros and percent) 31/12/ /12/ /12/2013 Change (% & p.p.) 2015 / 2014 Total risks (1) 122, , ,660 (4.4%) Non-performing loans (2) 12,995 16,547 20,022 (21.5%) Loan loss provisions 7,794 9,527 11,312 (18.2%) NPL ratio (%) (2) 10.6% 12.9% 14.7% (2.3) p.p. Coverage ratio (%) (3) 60.0% 57.6% 56.5% 2.4 p.p. (1) Includes loans and advances to customers and contingent liabilities. (2) NPLs / Total assets (3) Provisions for bad debts / NPLs. Profitability and efficiency Profitability and efficiency (figures in millions of euros and percent) 31/12/ /12/ /12/2013 (1) Change (% & p.p.) 2015 / 2014 Average total assets (2) 222, , ,666 (10.6%) Average equity balance (3) 11,537 11,256 10, % Gross income 3,806 4,009 3,482 (5.1%) Administrative expenses 1,511 1,586 1,729 (4.7%) Depreciation and amortisation charge (5.8%) Consolidated profit/(loss) for the year 1, % Profit/(loss) attributable to the parent 1, % ROA (%) (4) 0.5% 0.3% 0.2% 0.2 p.p. ROE (%) (5) 9.0% 6.6% 3.8% 2.4 p.p. Efficiency ratio (%) (6) 43.6% 43.5% 54.7% 0.1 p.p. (1) Restated consolidated annual account figures used for (2) Average monthly closing balances of total assets. (3) Average monthly closing balances of total equity. (4) Consolidated result/average total assets. (5) Attributed profit/average equity. In 2013 equity at year end is used because it was negative until the capitalisation in May. (6) (Administrative expenses + Depreciation and amortisation)/gross income. 11

12 Share data Share data 31/12/ /12/ /12/2013 (1) Change 2015 / 2014 Number of shares (million) 11,517 11,517 11,517 - Share price at year end (euros) (13.2%) Market capitalisation (millions of euros) 12,370 14,258 14,212 (13.2%) Earnings per share (euros) (2) 28.6% (1) 2013 data are subsequent to the capitalisation in May (2) At December 2013, calculated by dividing the restated attributable profit by the weighted average number of shares taking into account the reverse split in May 2013 of shares in circulation at 1 January B.8 Selected pro forma financial information B.9 Profit forecasts or estimates B.10 Qualifications in audit reports Not applicable, as the Registration Document contains no pro forma financial information. Not applicable. The Company has chosen not to include forecasts or estimates of future profits in the Registration Document. Not applicable. The individual and consolidated financial statements for the years ended 2013, 2014 and 2015 have been audited by the external audit firm Ernst & Young, S.L., which issued an unqualified audit opinion. B.17 Credit ratings assigned to an issuer or its debt securities at the request or with the cooperation of the issuer in the rating process At the date of registering this Supplement, Bankia had been assigned the following ratings by Standard & Poor s and Fitch Ratings: Bankia Ratings agency Long term Outlook Short term Fitch Ratings España, S.A. BBB- Stable F3 Standard & Poor s Credit Market Services Europe Limited. BB Positive B The aforesaid rating agencies have been registered with the European Securities and Markets Authority in accordance with the provisions of Regulation (EC) 1060/2009 of the European Parliament and the Council, of 16 September 2009, on credit rating agencies. SECTION C SECURITIES C.1 Type and class of the securities offered - Class of Securities: [straight bonds / straight debentures / subordinated bonds / subordinated debentures / special subordinated debentures / mortgage covered notes / mortgage bonds / public sector covered notes / structured securities] (eliminate the issues that are not applicable pursuant to the Final Terms). - These are securities that: - represent a debt for their Issuer, bear interest and are redeemable in advance or at maturity. They do not have in rem security or third-party guarantees. Interest on the securities is backed by the whole of the net assets of the issuer. (keep only in the case of Straight Bonds and Straight Debentures) - represent a debt for their Issuer, bear interest and are redeemable in advance or at maturity. They do not have in rem security or third-party guarantees. Interest on the securities is backed by the whole of the net assets of the issuer. However, given their subordinated nature, for the purpose of priority of claims they rank behind all priority and ordinary creditors. (keep only in the case of Subordinated Bonds and Subordinated Debentures) - are backed by the portfolio of mortgage loans granted by the issuing company, in 12

13 accordance with the legislation applicable for the purpose (keep only in the case of Mortgage Covered Notes and Mortgage Bonds) - are issued with the backing of the portfolio of loans and credits granted by the issuing company to: (a) (b) Central, regional and local governments, regional agencies and any publicsector enterprises controlled by them, in accordance with the legislation applicable for the purpose. Central, regional and local governments, regional agencies and any publicsector enterprises controlled by them and any other entities of a similar nature in the European Economic Area that are not owned by the Spanish State, provided that such loans are not linked to contracts to finance for the export of goods and services or internationalisation of companies. (keep only in the case of Public Sector Covered Notes) - Represented a debt for their Issuer, bear interest, are redeemable in advance or upon maturity, with yield tied to the performance of an underlying or underlyings, on the basis of which the yield may be negative. (keep only in the case of Structured Securities) - The issued securities are not covered by the Deposit Guarantee Fund. - ISIN Code: [..] (] (complete based on the Final Terms) Representation of the Securities: Iberclear book entries C.2 Currency of the issue C.3 Number of shares issued and redeemed C.5 Restrictions on the free transferability of the securities C.7 Description of the dividend policy C.8 Description of rights attached to securities, ranking and limitations The issue is denominated in [..] (complete based on the Final Terms). Not applicable as the issue involves fixed-income securities. Under current legislation there are no specific or general restrictions on the free transferability of the securities expected to be issued, although restrictions may apply under the laws of the countries in which the securities are offered. Not applicable because the securities issued do not entitle holders to be paid dividends. According to the applicable legislation, the securities will not entitle investors who acquire them to any present and/or future voting rights in respect of the Issuer. The economic and financial rights for the investor that are associated with the acquisition and holding thereof will be those derived from the interest rates, yields and redemption prices with which they are issued, which are summarised in section C.9 of this Summary. [A syndicate of [debenture holders/bondholders/noteholders] has been constituted / A syndicate of [debenture holders/bondholders/noteholders] has not been constituted]. (eliminate as applicable based on Final Terms). Regarding rank, In the event of bankruptcy of the Issuer, investors rank behind such priority creditors as Bankia has to date, in accordance with the characterisation and ranking of credits established in the amendment to Bankruptcy Act 22/2003 of 9 July 2003 (the Bankruptcy Act ) introduced by Act 11/2015 and the other applicable rules (keep only in the case of Straight Bonds, Straight Debentures or Structured Securities). The investors rank behind all common creditors. This issue will have the following preference within the subordinated debt of Bankia: (1) the principal of the subordinated debt that is not additional Tier 1 or 2 capital; (2) the principal of the Tier 2 capital instruments; and (3) the principal of the additional Tier 1 capital instruments. It ranks ahead of any equivalent of capital, mandatorily convertible debentures, preferred shares, other preferred interests; all in accordance with the provisions of the Bankruptcy Act (keep only in the case of Subordinated Bonds or Subordinated Debentures). Principal and interest on the issues of mortgage covered notes will be specially guaranteed without need of registration, by a mortgage on all those that at any time are registered in favour of Bankia and not dedicated to the issue of mortgage bonds, without prejudice to the liability thereof based on all of its assets and, if there are any, by replacement assets 13

14 and cash flows generated by the derivative financial instruments tied to each issue, in accordance with the provisions of Mortgage Market Regulation Act 2/1981 of 25 March 1981, amended by Act 41/2007 of 7 December 2007 ( Act 2/198 ) and of Royal Decree 716/2009 of 24 April 2009, developing certain aspects of Act 2/1981 without prejudice to its liability based on all of its assets ( Royal Decree 716/2009 ). The holders of the mortgage covered notes will be creditors with a special priority (keep only in the case of Mortgage Covered Notes). Principal and interest on the public sector covered notes will be specially guaranteed, without need of registration, by the loans and credits extended by Bankia to: (a) (b) Central, regional and local governments, regional agencies and any publicsector enterprises controlled by them, in accordance with the legislation applicable for the purpose. Central, regional and local governments, regional agencies and any publicsector enterprises controlled by them and any other entities of a similar nature in the European Economic Area that are not owned by the Spanish State, provided that such loans are not linked to contracts to finance for the export of goods and services or internationalisation of companies. The holders of the public sector covered notes will have special priority (keep only in the case of Public Sector Covered Notes). The principal and interest on the issues of mortgage bonds will be specially guaranteed without need of registration, by a mortgage on the loans and credits specified in public deeds, without prejudice to the unlimited liability of the Issuer based on all of its assets and, if they exist, by the replacement assets suitable to serve as collateral and the cash flows generated by the derivative financial instruments tied to each issue, on the terms set by regulation, in accordance with the provisions of Act 2/1981 and Royal Decree 716/2009. The holders of the mortgage bonds will be creditors with a special priority (keep only in the case of Mortgage Bonds). C.9 Issue date of the securities, interest rate, redemption and representative of the holders of the securities issued C.10 Derivative instruments C.11 Admission to trading C.15 Description of how the value of the investment is Issue date: (include as determined in the Final Terms) Interest rate provisions: (include the elements of information contained in sections 7, 8, 9, 10 or 11 of the Final Terms, as applicable to the specific issue) Provisions related to automatic cancellation or early redemption: (include only if there are options for early redemption and/or early cancellation structures. If so, include the applicable elements contained in section 12 of the Final Terms) Final redemption provisions: (include the applicable elements contained in section 13 of the Final Terms) Relevant schedule for the payment of flows stipulated in the issue: Effective interest rate for subscriber: [.] (.] (include as determined in the Final Terms). Representation of the holders: The syndicate of debenture/bond/note holders. (Delete as applicable, based on the Final Terms) for this issue has been formed and [.] appointed as Commissioner thereof (complete as determined in the Final Terms).). A syndicate of the noteholders/bondholders of this issue has not been constituted. (eliminate if the Final Terms provide for the constitution of a Syndicate for the specific issue of Mortgage Covered Notes, Mortgage Bonds or Public Sector Covered Notes) Not applicable because the securities do not have any embedded derivatives affecting interest payments. (when the yield is not tied to underlyings) Given that the yield of the securities is tied to an underlying it cannot be determined in advance. For this reason the investors cannot know the yield on the investment in advance, instead it will depend on the performance of the underlying asset as set forth in section C.9 above (only applicable when the yield is tied to an underlying or underlyings and not dealing with Structured Securities). See more detail in section C.9 of this Summary. (only applicable when the yield is tied to an underlying or underlyings and not dealing with Structured Securities). See section C.15 of this Summary (only applicable when dealing with Structured Securities) Admission to trading of the securities on [AIAF / AIAF through its SEND platform] (eliminate what is not applicable) will be requested). Not applicable as this Summary does not refer to structured securities (when the Final Terms do not relate to Structured Securities). Not applicable because [the securities have a minimum unit value of 100,000 euros / the minimum 14

15 affected by the value of the underlying subscription is 100,000 euros] (when the securities have a minimum unit value of 100,000 euros or the minimum subscription is 100,000 euros.) The structured securities are securities of high risk, because they can include complex structures and depend on the evolution of the underlying over the life of the investment. This can result in total or partial loss of the face value of the security. Therefore, the investor cannot know the yield of the investment in advance. The possibility that the redemption price on the redemption date may be below the face value of the security will depend primarily on the type of underlying for the security, the performance of the underlying, [capital barriers (conditions for the recovery of the initial investment or the possibility of limiting losses of the initial value)] (eliminate when the structured security does not include capital barriers) [barriers of early cancellation] (eliminate when the structured security does not include early cancellation barriers) (and the maturity of the securities and final settlement. In addition, the amount of the coupons received by the investor also will depend primarily on the type of underlying and its evolution, [as well as the coupon barriers (conditions for the collection or non-collection of coupons)] (eliminate when the structured security does not include coupon barriers) (only applicable to Structured Securities). See more detail in section C.9 of this Summary. (only applicable to Structured Securities). C.16 Maturity or expiration date of the derivative securities C.17 A description of the settlement of the derivative securities. C.18 Description of payment on derivative securities C.19 Final reference price of the underlying C.20 Description of the type of underlying and the place where information on the underlying may be found Not applicable as this Summary does not refer to structured securities (when the Final Terms do not relate to Structured Securities) See section C.9 of this Summary (when the Final Terms relate to Structured Securities). Not applicable as this Summary does not refer to structured securities (when the Final Terms do not relate to Structured Securities) The settlement of the securities will be in cash. (when the Final Terms relate to Structured Securities) See section C.9 of this Summary (when the Final Terms relate to Structured Securities). Not applicable as this Summary does not refer to structured securities (when the Final Terms do not relate to Structured Securities) See section C.9 of this Summary (when the Final Terms relate to Structured Securities). Not applicable as this Summary does not refer to structured securities (when the Final Terms do not relate to Structured Securities) See section C.9 of this Summary (when the Final Terms relate to Structured Securities). Not applicable as this Summary does not refer to structured securities (when the Final Terms do not relate to Structured Securities) See section C.9 of this Summary (when the Final Terms relate to Structured Securities). SECTION D RISKS D.1 Key information regarding principal specific risks of the issuer or its business sector The updated description of risks to which the Issuer s activity is exposed is included in Bankia s Registration Document registered in the CNMV s official registers on 7 July 2015: A summary of said risks is provided hereon: Capital and capital requirements Regulatory capital requirements are increasingly stiff and possible new requirements could negatively affect the operations of the Bankia Group and its businesses. On 1 January 2014 Regulation No 575/2013 on prudential requirements for credit institutions and investment firms ( CRR ), and Directive 2013/36/EU ( CRD IV ) on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms came into force. This package of legislation constitutes the new prudential regulations on solvency known as Basel III ( BIS III ), transposed into Spanish law by way of Royal Decree-Law 14/2013 ( RDL 14/2013 ) and Act 10/2014 ( Act 10/2014 ) and its implementing regulation set forth in Royal Decree 84/2015, of 13 February All the current Bank of Spain rules regulating equity (Circular 3/2008 and Royal Decree-Law 2/2011 on principal capital) that are incompatible with the aforementioned rules were repealed when these rules came into force, which involved the 15

16 implementation of BIS III with a gradual transition schedule until fully implemented. By comparison with the regulation previously in the fact, BIS III strengthens the minimum capital requirements and establishes stricter criteria for inclusion and eligibility of elements of capital, especially at the level of common equity tier 1 (CET-1) or higher-quality capital. Furthermore, within the supervisory review process of the Competent Authority known as Pillar II, in November 2015, the European Central Bank notified the Bankia Group of the requirement to maintain a Common Equity Tier I ratio of (CET-1) 10.25%, which includes i) the ratio (CET-1) required for achieving Pillar I of the CRR (4.5%); ii) the ratio (CET-1) in excess of Pillar I, known as Pillar II; and iii) the capital conservation buffer (CBB) of 2.5 %. This supervisory review process will be conducted at least annually and the results will be used to set an individualised requirement level for the Bankia Group for each period, which generates uncertainty in relation to the future minimum capital adequacy requirements. Apart from the new Pillar II requirements, the Bankia Group has been identified by the Bank of Spain as an Other Institution of Systemic Importance, making it specifically subject to an additional capital buffer (greater requirements) of CET-1 items of 0.25 %. Taking into account the phased implementation timetable for those requirements, in 2016 the Bankia Group will only be required to have 25% of that buffer (0.0625%). The Bank of Spain has also announced that as from 1 January 2016 it will apply a countercyclical risk rate of 0 for credit risk exposures in Spain, although that requirement may be increased over the course of the year as that buffer is revisable. Breach of these minimum capital buffer requirements could mean that the Bankia Group may be subject to restrictions and therefore have limited discretion to set any discretional payouts, which therefore affects its dividends policy and payments on subordinated instruments. A regulatory change could imply additional capital requirements and changes in the methods of calculation resulting, in short, in the solvency ratios calculated and planned by the Bank not being correct. Solvency rules have undergone constant change in recent years, leading to new capital requirements and different calculation methodologies to those existing at the same time. The main risk factor to which the Bank Group is exposed regarding its equity is the continuity of a stable regulatory framework for solvency, which could affect its future earnings, business model, dividends policy and balance sheet structure. The following risk factors are of particular note: The manner in which the Bankia Group and other financial institutions affected by the rules interpret certain aspects of the CRR may not coincide with the instructions finally issued by regulators through technical standards. This could therefore mean that the planned solvency ratios calculated by the Bank may not be correct. In recent months a review of the BIS III regulatory framework is being concerned that could give rise to a new regulatory framework called Basel IV. In this respect, the Basel Committee on Banking Supervision (BCBS) is conducting an exhaustive analysis of Risk Weighted Assets (RWAs), the denominator used in solvency ratios, in order to lessen their calculation complexity (particularly in entities that use internal models), allow better comparability between financial institutions, limit the dependence on ratings in their determination and avoid regulatory arbitrage. The new global rules could be completed by late 2016 and it is expected they may come into effect in Consideration is also being given to a change in the beneficial treatment afforded to exposures to sovereign risk, which are currently assigned a 0 credit risk weight, and are also exempt from capital charges for concentration risk. In qualitative terms, the change in the prudential treatment of Risk Weighted Assets could eventually have significant impact in terms of greater capital requirements and reduction of the solvency ratios calculated and planned by the bank. That impact cannot be quantified at present. The structure of the Bankia Group s capital and balance sheet in the future may not fulfil the final definition and calibration of the leverage ratio expected to the determined in At present, European Union legislation does not require compliance with a specific leverage ratio; said ratio only needs to be calculated and reported to the Supervisor on a quarterly basis and, as from 1 January 2015, made public. Nevertheless, a minimum benchmark level has been set by the Basel Committee of 3%, which the Bankia Group exceeds as per the definition in the CRR and Commission Delegated Regulation (EU) 2015/62, of 10 October 2014 amending the CRR. The European rules on Resolution of Banks (Directive 2014/59/EU or BRRD ), transposed into Spanish law by Act 11/2015 of 18 June 2015 on the Resolution and Recovery of Credit Institutions of 18 June 2015, envisages a bail-in mechanism as a 16

17 cornerstone. In this regard a new requirement has been established called Minimum Required Eligible Liabilities (MREL) which is mandatory as from 1 January 2016 (with a 4-year phased progressive implementation period). The MREL level will be calculated specifically for each institution over the course of 2016 by the Resolution Authority. Solvency ratios will be of prime importance in setting MREL. Also, in October 2016 the European Commission reviewed its definition and implementation framework, probably to make it compatible with the equivalent Total Loss Absorbing Capacity (TLAC) standard established by the European Financial Stability Board (FSB) for Global Systemically Important Banks (G-SIBs). Although the FSB does not currently classify the Bankia Group as a Global Systemically Important Bank, so it is not expected that it will have any TLAC experience to draw on, there is uncertainty regarding the MREL level that will eventually apply to the Bankia Group in So there is a lack of definition of the potential negative impact of this requirement in terms of greater capital requirements to boost the total loss-absorbing capacity, the foreseeable negative effect on the income statement (due to the higher cost of liabilities) and of how the Bankia Groups capital and liabilities structure might be affected. Additional capital requirements would harm Bankia s returns on equity and other indicators. In relation to Act 11/2015, it is not envisaged that any securities deriving from fixedincome issues will be converted into shares or similar instruments when it takes effect. The BFA-Bankia Group is currently taking the necessary steps to strengthen its capital adequacy and minimise where possible the impacts of the aforementioned risk factors, so as to comply with national and international regulatory requirements over the next few years. Acquisition by the FROB of a stake in BFA and its restructuring plan - The interests of the FROB, as a government entity, may not be the same as those of Bankia and its minority shareholders, especially considering that the FROB controls other banking groups, currently undergoing restructuring, that are competitors of Bankia. On 27 June 2012, following the submission by the Board of Directors of BFA of a request to the FROB for conversion of the convertible preferred participating securities into shares of BFA, the authorisation of the conversion by the European Commission (27 June 2012) and the necessary valuation process, the said securities were converted into shares and the FROB became the sole shareholder of BFA. At the date of this Document, the FROB, through BFA, holds an indirect interest of 64.36% in Bankia s share capital. - Bankia is being restructured and if its Restructuring Plan is not fulfilled, the Bank of Spain could prompt the Company s resolution. Pursuant to the MOU, the BFA-Bankia Group is classified as a Group 1 entity. The Bank of Spain and the European Commission approved the Restructuring Plan on 27 and 28 November 2012, respectively. Without prejudice to the enactment of Act 11/2015, the restructuring of Bankia and its Restructuring Plan will continue to be governed by the content thereof and the provisions of Act 9/2012, in accordance with the first Transitional Provision of Act 11/2015. Among the commitments assumed by the BFA-Bankia Group in the Restructuring Plan is to reduce the real estate portfolio, focus the Group s activities on retail banking and companies, manage hybrids, divest the investment portfolio, reduce capacity, and other additional obligations that could affect the commercial strategy of the BFA-Bankia Group or implementation of corporate transactions. In the event of failure by Bankia to meet the deadlines or implement the measures laid down in the Restructuring Plan or other serious non-compliance, the Bank of Spain could, in the last instance, initiate the resolution of Bankia, which could eventually entail the sale of its business or the transfer of its assets and liabilities to another entity. Furthermore, implementation of the Restructuring Plan entails certain restrictions and commitments for Bankia. If Bankia is not capable of effectively handling those restrictions and commitments on a timely basis, the business, operating results and financial situation of the BFA-Bankia Group may suffer a material adverse effect, and could result in its resolution. In any event, at the date of this Registration Document, the Restructuring Plan is at a very advanced stage, significantly well ahead of schedule. - Possible changes to the valuation of assets transferred to the SAREB could negatively affect the Bankia Group. - An unfavourable ruling for Bankia regarding arbitration, judicial and administrative law claims deriving from the selling and management of hybrid instruments and the Restructuring Plan could have an adverse impact on the Bank s financial position. 17

18 (iii) - Risk of losses from legal and regulatory proceedings. There is a risk that the Bank may suffer losses from legal and regulatory proceedings arising from its relationships with customers, competitors, shareholders, employees, institutions or other agents. Credit, real estate, liquidity, market and interest rate risk - Credit risk: Credit risk is defined as the risk of loss assumed by the BFA-Bankia Group as a result of the ordinary pursuit of its banking activity in the event of default by customers or counterparties on their contractual payment obligations. - Impact of reclassifying refinancing and restructuring transactions. Risk deriving from floor clauses. Exposure to construction and real estate development risk in Spain means that the Bankia Group is exposed to changes in property prices on the Spanish market. Liquidity risk: Liquidity risk is defined as the probability of incurring losses by reason of not having sufficient liquid funds to meet committed payment obligations, both expected and unexpected, over a given period of time, assuming that the Group can liquidate its assets under acceptable terms of cost and time. Market risk: This risk arises from the possibility of incurring losses of value of the positions maintained in financial assets, due to changes in market risk factors (interest rates, equity prices, exchange rates or credit spreads). This risk arises from the Cash and Capital Markets positions and can be managed by way of contracting other financial instruments. Bankia s business is sensitive to interest rate fluctuations. Structural interest rate risk relates to potential losses in the event of adverse trends in market interest rates. Ratings: Any downgrading of the credit rating of Bankia or BFA could drive up finance costs, restrict access to capital markets, negatively affect the sale or marketing of products, affect participation in the Bankia Group s commercial transactions, and reduce its ability to retain customers. Any of these factors could affect the Group s liquidity and may be detrimental to its businesses, financial position and results. Risk factors associated with the macroeconomic environment in which Bankia operates - Sovereign risk within the European Union. Bankia s commercial activity is primarily carried on in Spain and, therefore, the Spanish economic scenario is key to its business performance. Nevertheless, the evolution of the situation in the European Union is also very important, given its impact on liquidity and funding conditions. - Bankia operates in Spain and therefore any loss of confidence in the Spanish economy and its financial system could impact the businesses and its results. The concentration of business in Spain increases the Bank s exposure to: (i) the evolution of the Spanish economy and any potential deterioration therein; and (ii) changes in the Spanish regulatory framework, which could negatively affect the Bank s business, its financial situation and its results. Other risks - Risk of increased cost of, and dependence on, retail customer funds: Bankia cannot guarantee that greater competition in the markets in which it competes for retail customer funds will not drive the cost of these funds higher, which could have an adverse effect on Bankia s business, earnings and financial position. - Risk of an increase in the cost of, and a lack of access to, wholesale funding. Given current uncertainties, the Bank can make no assurances that it will continue to have access to wholesale funding sources, that its wholesale funding costs will not rise and that it will not have to liquidate certain assets. This could have an adverse effect on Bankia s business, financial position and operating results. - Operational risk: Inadequate management of Bankia s operational risk, including the risks arising from Bankia s integration and from the Restructuring Plan, could have an adverse effect on the Bank s business, operating results and financial position. - Risk of lower fee and commission income. 18

19 - Investment risk: The Bank is subject to general and specific risks arising from the nature and characteristics of its investments. Bankia is indirectly subject to the risks associated with the sectors of the economy in which its investee companies do business. - If the Bank does not have the right people to sustain its activity, or if it loses any of its key executives and is unable to replace them as and when required, its business, financial position and operating results could be adversely affected by, amongst other things, a weakening of internal controls and an increase in operational risk. - Risk associated with labour disputes: Changes in staffing levels over the next few years will be determined by the rationalisation plan presented to and accepted by the employee representatives and unions, and the Restructuring Plan, the terms and conditions of which could give rise to an increase in labour disputes. - Risks not identified or provided for in the risk management and control policy. - Changes in regulatory framework and regulatory risk. Regulatory developments or changes in government policies in relation to any of these matters, those deriving from banking union or of any other type could have a material adverse effect on the Group's business. - Exposures to the risks of insolvency of other financial institutions: The bankruptcy of an important counterparty or liquidity problems in the financial system could have a material adverse effect on the Bank s businesses, financial position and operating results. D.3 Key information on principal specific risks of the securities Market risk Market risk refers to the risk generated by variations in general market conditions vis-à-vis investment conditions. The issues of straight bonds and debentures, subordinated bonds and debentures, mortgage covered and public sector covered notes and structured securities are subject to possible price fluctuations on the market, mainly depending on interest rate behaviour and investment duration (an increase in interest rates entails a decrease in market prices). They may be at levels less than their face values or acquisition or subscription prices. Risk of changes in the credit quality of Issuer and securities Credit quality is measured by the capacity of a company to meet its financial obligations. It may worsen as a result of increased indebtedness or deterioration of financial ratios, resulting in the Issuer s inability to meet its contractual obligations. Credit ratings are a way of measuring risk and the greater the risk, the higher the return required by investors in the market. In particular, investors should assess the likelihood of a downgrade of the credit rating of an Issuer or the securities (if they have a rating), which could result in a loss of liquidity in the market and a loss of value. At the date of registering this Document, Bankia had been assigned the following ratings by Standard & Poor s and Fitch Ratings: Bankia Ratings agency Long term Outlook Short term Fitch Ratings España, S.A. BBB- Stable F3 Standard & Poor s Credit Market Services Europe Limited. BB Positive B The abovementioned rating agencies have been registered with the European Securities and Markets Authority as required under Regulation (EC) no. 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies. However, there can be no assurance that the above ratings assigned by the credit risk rating agencies will be maintained throughout the period of validity of the Base Prospectus. The risk of changes in the Issuer s credit rating is due to the possibility that the credit rating may revised upward or downward, suspended or even withdrawn by the rating agency at any time. A downgrade, suspension or withdrawal of a credit rating by a rating agency could make it difficult for Bankia to access the international debt markets and so could affect its wholesale funding capacity. In addition, a decrease in the credit rating of the bank may result in the appearance of new contractual obligations tied to the rating of Bankia. 19

20 Risk of liquidity or representativeness of the securities in the market Liquidity risk is the risk that investors do not find a counterparty for the securities. The securities issued under this Base Prospectus will be newly issued and so may not be very widely distributed, with the result that there may not yet be an active trading market for them. The securities issued under this Base Prospectus are expected to be listed and traded on the AIAF Fixed-income Market and possibly on other official regulated markets, although no assurance can be given that they will be actively traded in the market. Nor can any assurance be given as to the development or liquidity of the trading markets for each issue in particular. Risks of subordination and ranking of investors in insolvency situations Pursuant to the amendment to the Bankruptcy Act set forth in Act 11/2015, the securities will rank behind privileged creditors, pari passu with all other ordinary creditors, and ahead of subordinated creditors. The holders of bonds and debentures, whatever the issue date of the securities, will have no preference over other senior debt, in whatever form and on whatever date this debt is issued (applicable only in the case of Straight Bonds, Straight Debentures and Structured Securities). The securities are ranked behind the claims of all privileged and ordinary creditors, and ahead of any class of funds considered equivalent to capital, mandatorily convertible debentures, and preferred shares and preference interests. This subordinated debt issue will have preference over: (1) the principal of the subordinated debt that is not additional Tier 1 or 2 capital; (2) the principal of the Tier 2 capital instruments; and (3) the principal of the additional Tier 1 capital instruments. (keep only in the case of Subordinated Bonds and Subordinated Debentures). The holders of mortgage bonds will have the status of special preferred creditors. Principal and interest on the issues of mortgage covered notes will be specially guaranteed without need of registration, by a mortgage on all those that at any time are registered in favour of Bankia and not dedicated to the issue of mortgage bonds, without prejudice to the liability thereof based on all of its assets and, if there are any, by replacement assets and cash flows generated by the derivative financial instruments tied to each issue, in accordance with the provisions of Mortgage Market Regulation Act 2/1981 of 25 March 1981, amended by Act 41/2007 of 7 December 2007 ( Act 2/1981 ) and of Royal Decree 716/2009 of 24 April 2009, developing certain aspects of Act 2/1981 without prejudice to its liability based on all of its assets ( Royal Decree 716/2009 ). All holders of covered notes, whatever the issue date of the notes, will have the same priority of claim in respect of the loans and credits in the cover pool, any substitute assets and any cash flows generated by the financial derivatives linked to the issues. (applicable only in the case of Mortgage Covered Notes) The public sector covered notes will be specially secured in accordance with the provisions of Act 44/2002, of 22 November 2002, on financial system reform measures. Principal and interest on the public sector covered notes will be specially guaranteed, without need of registration and without prejudice to the unlimited liability of the Issuer, by the loans and credits extended by Bankia to: (a) (b) Central, regional and local governments, regional agencies and any publicsector enterprises controlled by them, in accordance with the legislation applicable for the purpose. Central, regional and local governments, regional agencies and any publicsector enterprises controlled by them and any other entities of a similar nature in the European Economic Area that are not owned by the Spanish State, provided that such loans are not linked to contracts to finance for the export of goods and services or internationalisation of companies. The holders of mortgage bonds will have the status of special preferred creditors. The principal and interest on the issues of mortgage bonds will be specially guaranteed without need of registration, by a mortgage on the loans and credits specified in public deeds, without prejudice to the unlimited liability of the Issuer based on all of its assets and, if they exist, by the replacement assets suitable to serve as collateral and the cash flows generated by the derivative financial instruments tied to each issue, on the terms set by regulation, in accordance with the provisions of Act 2/1981 and Royal Decree 716/2009. The holders of the bonds included in an issue will be senior to the holders of the public sector covered notes when their claims in respect of a loan or credit backing said issue coincide (applicable only in the case of Mortgage Bonds). [The setting of a floating interest rate / Possibility of subsequent revisions to fixed interest 20

21 rate] (eliminate as applicable) could affect the securities market value Changes in the interest rate [fixed rate that can be revised / floating rate] (eliminate as applicable) could result in a lower interest rate than the initial rate, which could affect the securities market value. (Eliminate when the issue does not entail a fixed interest rate that can be revised or a floating interest rate) Risk of [early redemption/ automatic cancellation] (delete as applicable) of the securities [The issuer may redeem the securities early / The securities may be cancelled automatically (see summary of grounds for automatic cancellation in section C.9 of this Summary)]. In this case, the investor may not be able to reinvest the early [redemption / cancellation] proceeds in similar securities at the same interest rate (delete as applicable). Delete if the issue includes no early redemption or automatic cancellation option). The subordinated bonds and debentures could be used to absorb losses at the point of nonviability Following the agreements reached in the Memorandum of Understanding and pursuant to Royal Decree-Law 24/2012, of 31 August 2012, subsequently replaced by Act 9/2012, a number of specific loss absorption measures have been introduced that could be applied by the Issuer, the Bank of Spain or the FROB. Moreover, on 15 April 2014 the European Parliament adopted a legislative resolution on the proposals for a directive establishing a framework for the recovery and resolution of credit institutions and investment firms, known as the Recovery and Resolution Directive ( RRD ), amending the legal regime governing loss absorption in Spain currently set forth in Act 9/2012. The RRD was approved by the Council and published in the Official Journal of the European Union on 12 June Although Member States have been applying the RRD since 1 January 2015, the loss absorption (bail-in) mechanism does not come into effect until 1 January The RRD has been partially implemented in Spain by way of Act 11/2015 which, notwithstanding the provisions of the corresponding transitional regime, abolishes Act 9/2012. Without prejudice to the enactment of Act 11/2015, the restructuring of Bankia and its Restructuring Plan will continue to be governed by the content thereof and the provisions of Act 9/2012, in accordance with the first Transitional Provision of Act 11/2015, which states that: Restructuring and resolution procedures initiated before the entry into force of the Act and any accompanying associated measures, including financial aid instruments and the management of hybrid instruments, will continue to be regulated until completion by the legislation in force prior to this Act taking effect Nevertheless, in the future Bankia could be subject to a new resolution plan that would be approved in accordance with the new framework established under Act 11/2015. The Issuer could request that these loss absorption measures be applied or the Bank of Spain could impose them as the Spanish preventive resolution authority, pursuant to Act 11/2015, or the FROB as the executive resolution authority, pursuant to Act 11/2015, if: (i) the Issuer or its group breached (or there was sufficient objective grounds to reasonably consider that it could be in breach of) the statutory requirements concerning solvency, liquidity, internal structure and internal controls; (ii) if the Issuer required public financial aid to ensure its viability; or (iii) if the Issuer was not viable). In any of these circumstances, the Issuer could be subject to an early intervention, preventive resolution or resolution procedure, respectively (as per the definitions established in Act 11/2015). The restructuring and resolution procedures could result in loss absorption measures being adopted, including: (i) the deferment, suspension, elimination or amendment of certain rights, obligations, terms and conditions of any subordinated or unsubordinated debentures (except covered bonds or debentures, such as internationalisation, public sector and mortgage covered bonds and notes ); (ii) the repurchase of any subordinated or unsubordinated debentures (except covered bonds or debentures, such as internationalisation, public sector and mortgage covered bonds and notes) at a price set by the Bank of Spain or the FROB; (iii) the exchange of any subordinated or unsubordinated debentures (except covered bonds or debentures, such as internationalisation, public sector and mortgage covered bonds and notes) for capital instruments of the Issuer; (iv) haircut of interest and/or principal of any subordinated or unsubordinated bonds (except covered bonds or debentures, such as internationalisation, public sector and mortgage covered bonds and notes ); and (v) call of any subordinated or unsubordinated debentures (except covered bonds or debentures, such as internationalisation, public sector and mortgage covered bonds and notes). Subordinated or unsubordinated debentures (except covered bonds or debentures, such as internationalisation, public sector and mortgage covered bonds and notes) may therefore be subject to haircut or absorption of losses at the point of non-viability or in other cases for recapitalisation or in accordance with the loss absorption measures as per Act 11/2015, which could lead the holders of 21

22 these bonds and debentures to loss all or part of their investment. The exercising of this power or even the suggestion that it may be applied could therefore significantly prejudice the bonds and debentures (except covered bonds or debentures, such as internationalisation, public sector and mortgage covered bonds and notes). That said, the process of determining whether or not an entity is viable could depend on a series of factors beyond its control. The aforesaid loss absorption (bail-in) mechanism does not come into effect until 1 January Notwithstanding the enactment of Act 11/2015, the loss absorption and capital requirements laid down in the RRD have still not been applied in Spain and have yet to be interpreted by the Bank of Spain. (Eliminate when Subordinated Securities are not involved) The credits of the holders of straight bonds and obligations and structured securities are lower ranked that those of certain creditors and since 1 January 2016, are eligible for use as a bail-in instrument). [Straight bonds / straight debentures / structured securities] (eliminate the issues that are not applicable) are uncovered and unsubordinated debentures of the Issuer. Pursuant to the ranking established by law, [the straight bonds / straight debentures / structured securities] (eliminate as applicable) have the same rank as the other uncovered and unsubordinated debt of the Issuer. However, [the straight bonds / straight debentures / structured securities] (eliminate as applicable) will be effectively subordinate to the Issuer s uncovered debt vis-à-vis the value of the assets securing said debt, and other preferred debentures, as per Spanish legislation. The RRD also determines that resolution authorities will be able to haircut the debts of nonguaranteed creditors of an entity in serious difficulty and convert the non-guaranteed debt into capital (including [the straight bonds / straight debentures / structured securities] (eliminate as applicable) if certain parameters are met whereby liabilities could be deemed eligible when using the bail-in instrument). Although Member States have been applying the RRD since 1 January 2015, the loss absorption (bail-in) mechanism does not come into effect until 1 January It is still not possible to determine the full impact of transposing the RRD into Spanish law, including the scope of eligibility for bail-in of instruments such as [the straight bonds / straight debentures / structured securities] (eliminate as applicable). Nevertheless, the value of these instruments may be significantly prejudiced if any of the aforesaid powers are exercised or even if there is a suggestion they may be applied. D.6 Key information on principal specific risks of the securities E.2.b Reasons for the offer and use of proceeds Risk of loss of principal for structured securities Not applicable as the securities are not structured (Eliminate where the securities are structured). Investors are warned that they may lose up to [X]% of their investment. (complete according to the chosen structure, as described in the Final Terms) (applicable only when the securities are structured) Structured securities are high-risk securities (they have complex structures, which in many cases involve trading in derivatives) which can generate positive returns but also losses of principal. If at the redemption date the settlement price is below face value and/or the cash paid by investors, they may lose part of the principal amount they invested. If the settlement price is zero, 100% of the principal may be lost. (applicable only when the securities are structured). SECTION E OFFER Reasons for the issue and use of the proceeds [..] (Complete based on the Final Terms) E.3 Terms of the offer Amount of the Offer Total face amount: Total cash amount: Unit face value: Number of securities: Issue price: Subscription: - Potential subscribers to whom the Issue is addressed: [..] (Complete based on the Final Terms) - Minimum/Maximum subscription amount: (Complete based on the Final Terms) 22

23 Distribution and Placement: - Processing of subscriptions: [..] (Complete based on the Final Terms) - Procedure for allotment and placement of the securities: [..] (Complete based on the Final Terms) - Closing Date: [..] (Complete based on the Final Terms) - Lead Managers: [..] (Complete based on the Final Terms) - Underwriters: [..] (Complete based on the Final Terms) Placement Entities: [..] (Complete based on the Final Terms) E.4 Significant interests in the offer, including conflicts E.7 Expenses for the investor (Complete based on the Final Terms) The securities will be subscribed free of fees and expenses for subscribers on the part of the Issuer. Nor will Bankia, as the issuer, charge any expenses for redemption of the securities. All other fees will be in accordance with the Tariff Schedule (available at The securities will be represented by book entries and all expenses derived from registration at the Iberclear central registry will be for the account of the Issuer or, where applicable, the entity responsible for keeping the accounting records for the issue. Furthermore, the entities participating in Iberclear may establish, pursuant to applicable law, the fees and expenses to be charged for management of the securities, to be freely determined, as long as they are notified to the Bank of Spain and/or the CNMV and are paid by the security holders. All chargeable expenses and fees may be consulted by any investor in the corresponding tariff schedules of recoverable expenses and fees, which all entities supervised by the Bank of Spain and the CNMV are required to publish by law. Copies of these tariff schedules may be consulted at the abovementioned supervisory bodies. In Madrid, 16 March 2016 Mr. Fernando Cuesta Blázquez 23

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