FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO

Transcription

1 FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO ANNUAL REPORT 2016

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3 FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO ANNUAL REPORT 2016

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8 Abbreviations, acronyms and signs EUR t: Thousand Euro. EUR M.: Million Euro. FGDEC: Fondo de Garantía de Depósitos de Entidades de Crédito. (Deposits Guarantee Fund of Credit Institutions) FGDEB: Fondo de Garantía de Depósitos en Establecimientos Bancarios. (Deposits Guarantee Fund of Banks Institutions) FGDCA: Fondo de Garantía de Depósitos en Cajas de Ahorro. (Deposits Guarantee Fund of Saving Banks) FGDCC: Fondo de Garantía de Depósitos en Cooperativas de Crédito. (Deposits Guarantee Fund of Credit Unions) FROB: Fondo de Reestructuración Ordenada Bancaria. (Fund for Orderly Bank Restructuring) Management: Management Company for the Deposits Guarantee Fund. : Amount equal to zero or non-existence of the considered concept. (): In an amount, indicates it is negative. Translation of the annual report originally issued in Spanish. In the event of a discrepancy, the Spanish language version prevails FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO José Ortega y Gasset, MADRID COMISIÓN GESTORA DEL FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO Depósito legal: M Unidad de Servicios Auxiliares, Banco de España

9 MANAGEMENT COMMITTEE OF THE FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO (At 31 December 2016) (Integrated under the Royal Decree Law 16/2011 of 14 October) President Mr. Fernando Restoy Lozano Deputy Governor of the Bank of Spain Vice president Ms. Emma Navarro Aguilera (since 11 November 2016) General Secretariat of the Treasury and Financial Policy Ms. Rosa María Sánchez-Yebra Alonso (until 11 November 2016) General Secretariat of the Treasury and Financial Policy Secretariat Mr. Francisco Javier Priego Pérez General Secretariat of the Bank of Spain Regular Members Mr. José Carlos Alcalde Hernández (until 25 November 2016) General Comptroller of the State Administration Mr. Julio Durán Hernández Director General of Financial Stability and Resolution of the Bank of Spain Mr. Isidro Fainé Casas President of the Confederación Española de Cajas de Ahorros Mr. Julio Gallastegui Zubizarreta Director General of Caja Laboral Popular, Cooperativa de Crédito Mr. Mariano Herrera García-Canturri Supervision Director General of the Bank of Spain Ms. M.ª Luisa Lamela Díaz (since 25 November 2016) State Management Financial Controller Mr. José María Méndez Álvarez-Cedrón Director General of the Confederación Española de Cajas de Ahorros Ms. Cristina de Parias Halcón Spain and Portugal Director of BBVA Mr. Matías Rodríguez Inciarte 2 nd Vice president of Banco Santander, SA

10 Substitute Members Mr. Javier Alonso Ruiz-Ojeda Director General of Operations, Markets and Payment Systems of the Bank of Spain Ms. Lucía Arranz Alonso (since 15 June 2016) Legal Department Director of the Bank of Spain Mr. Amado Franco Lahoz President of Ibercaja Banco, SA Mr. Francisco Gómez Martín (until 19 December 2016) CEO of Banco Popular, SA Mr. Jaime Guardiola Romojaro CEO of Banco Sabadell, SA Mr. Pedro Larena Landeta (since 19 December 2016) CEO of Banco Popular, SA Mr. Rafael López-Tarruella Martín Director General of Caja Rural del Sur Mr. Alberto Martín del Campo Sola Deputy General Director of Legislation and Financial Policy Ms. Rosario Martínez Manzanedo Director National Accounting Office, Ministry of Finance and Public Administration Mr. Braulio Medel Cámara President of Unicaja Foundation Mr. Roberto Ugena Torrejón (until 15 June 2016) Legal Department Director of the Bank of Spain General Director Mr. Luis Lorenzo Olmeda Since 31 December 2016, there have been changes to the FGDEC s Management Committee, becoming the President of the Board Mr. Javier Alonso Ruiz-Ojeda, Regular Member Mr. Jesús Saurina Salas, Substitute Members Mr. Juan Ayuso Huertas, Mr. José Luis Aguirre Loaso and Mr. Gregorio Villalabeitia Galarraga, leaving Mr. Fernando Restoy Lozano and Mr. Mariano Herrera García-Canturri as Regular Members, and Mr. Pedro Larena Landeta, Mr. Amado Franco Lahoz and Mr. Braulio Medel Cámara as Substitute Members.

11 INDEX MANAGEMENT REPORT ANNUAL ACCOUNTS 2016 Balance sheet Income statements Income and expenses statement Statements of cash flows DIRECTOR S REPORT 2016 Notes to the annual accounts Notes to the balance sheet Notes to the income statements Other notes to the annual accounts ANNEXES Annex 1 Allocation of the annual accounts for 2016 to deposits guarantee and securities guarantee compartments Annex 2 List of shareholdings Annex 3 Historical series of contributions, assets, and investments Annex 4 Credit institutions members at 31 December Annex 5 Rehabilitation or restructuring operations of credit institutions Annex 6 Legislative index Pages 11

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13 Article 2 nd - Four b) of Royal Decree 2606/1996, of 20 December, on deposits guarantee funds of credit institutions states that it is a function of the Management Committee the approval of the accounts that the Fondos de Garantía de Depósitos (now the Fondo de Garantía de Depósitos de Entidades de Crédito) must report annually to its members and the Bank of Spain. In compliance with this legal mandate, on 8 May 2017 the financial statements for 2016, comprising the balance sheet, income statement, statement of changes in equity, the cash flow statement and the report, are issued providing information on the activities carried out in 2016, showing a fair equity presentation and financial situation of the Fondo de Garantía de Depósitos de Entidades de Crédito at year-end as well as management results and resources obtained and applied in that period, information that is extended with data concerning the year 2015 and the financial statements resulting from the differential allocation of resources to the deposits guarantee compartment or to the securities guarantee compartment, as set out in the tenth final provision of Law 11/2015, of 18 June, on recovery and resolution of credit institutions and investment services companies. 13

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15 FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO MANAGEMENT REPORT 2016 Establishment 1. On 15 October 2011 came into force Royal Decree Law 16/2011 of 14 October, and the Fondo de Garantía de Depósitos de Entidades de Crédito (FGDEC) is created, dissolving the three existing deposits guarantee funds (the Fondo de Garantía de Depósitos en Cajas de Ahorro, the Fondo de Garantía de Depósitos en Establecimientos Bancarios, and the Fondo de Garantía de Depósitos en Cooperativas de Crédito), their assets were integrated into the FGDEC, and all rights and obligations of those were subrogated. The references that appear in this report to FGDCA, FGDEB and FGDCC correspond to the three guarantee funds deposits dissolved. Operation 2. The FGDEC has legal personality, with full capacity for the development of its purposes under private law and not subject to the rules governing public agencies and state corporations. FGDEC function is the guarantee of deposits in credit institutions as provided in Royal Decree-Law 16/2011 and its implementing regulations. To fulfil its functions, the FGDEC thrives on: a) the annual contributions by member institutions provided in the rules governing their operation; b) extraordinary contributions made to such entities, distributed according to the basis of calculation of contributions and limits established by regulation, having to register such apportionments as equity once they are agreed; and c) the funds raised in the securities markets, loans or any other debt operations. Additionally, the deposits guarantee compartment may be finance by payment commitments of its member institutions provided that such commitments are: a) fully backed by guarantees of low-risk assets, free of charge and freely available for FGDEC, and b) do not exceed 30% of the compartment s total available resources. 15

16 Constitution of separate compartments 3. The tenth final disposal of Law 11/2015, of 18 June, on recovery and resolution of credit institutions and investment services companies amended the Royal Decree-Law 16/2011, determining that, from the date of entry into force of the mentioned law, the resources of the FGDEC will be allocated to deposits guarantee compartment or securities guarantee compartment, which will be separated accounts, and each compartment should be liable of its own, costs, expenses and obligations. The same rule states that rights and obligations acquired by the FGDEC prior to its entry into force shall be allocated to the deposits guarantee compartment. Activity report 4. The management and administration of the FGDEC in 2016 have focused on acting and following the guidelines of recent years, in terms of: Management of the liquid assets of the FGDEC investing them in government debt. Revenues from financial investments in Spanish government debt amounted to EUR 13,801.5 t (EUR 4,839.8 t in 2015), which, on an average investment in the exercise of EUR 4,671.5 M (EUR 3,874.3 M in 2015) have provided a return of 0.30% per annum (0.12% per year in 2015). However, financial income, which includes income from financial investments, the cost of received financing, the result of the sale of public debt and the impact of the financial updating of expected payments because of the assets protection schemes (EPA) granted, as well as other payments and expected incomes, has resulted in a net loss of EUR 184,729.2 t (EUR 176,294.9 t in 2015). Operations related to the management and the divestment of assets acquired in 2010 from the Caja de Ahorros de Castilla-La Mancha (CCM), in accordance with the provisions of the action plan of the entity. Operations related to the management and development of assets portfolios related to the EPA granted in 2010, 2011 and 2012 to Banco de Castilla-La Mancha, SA (BdCLM), Banco CAM, SA, and Unnim Banc, SA, respectively, in each case in accordance with the corresponding plan of action or restructuring plan approved for the purpose. Actions related to the deferred collections and payments arising from the sales of shareholdings in NCG Banco, SA, and Catalunya Banc, SA, carried out in 2014 and 2015, respectively. Both shares were acquired by the FGDEC through voluntary purchase offers announced by the FGDEC on 10 June Management of credits against investees and other assets acquired in credit institutions as a consequence of the intervention of the FGDEC. 16

17 Preparation of management committees and implementation of the adopted decisions. Additionally, in 2016 has been continued the management, initiated in 2015, of the payments of guaranteed deposits up to a limit of EUR 100,000 to depositors of Banco de Madrid, SAU, having determined the Bank of Spain, on 18 March 2015 that given its financial situation this entity was unable to restore their cash deposits in the immediate future. Likewise, in 2016 and in exercise of the right of first refusal provided in the EPA granted to Banco CAM on the assets covered by this scheme, the FGDEC has acquired real estate and financial assets subsequently placed on sale in accordance with the action already taken in respect of assets with the same origin acquired in 2015, in order to minimize losses in the mentioned EPA. Action Plan of Caja de Ahorros de Castilla-La Mancha 5. Management and divestment of assets from actions in CCM have been continued, assets that in 2012 were transferred to Inversiones Corporativas, SA (IC), also from CCM and since 2010 a subsidiary of the FGDEC in 100% through a nonmonetary contribution of such assets by an expansion of its share capital. After all these assets were put together in IC, during 2013, 2014, 2015 and 2016 funds resulting from divestments have been applied to IC expenses or from its subsidiaries, as well as to reducing their debt, as a consequence the FGDEC has not received any cash from such divestitures. As of 31 December 2015, as a consequence of the deterioration of its financial investments, the balance of IC had negative net equity, as a result of which FGDEC s participation in the company was fully deteriorated. Subsequently, on 27 December 2016, the company formalized with its principal creditor BdCLM a repayment of part of its debt as well as the transformation of another part of its debt into a participatory loan, which has allowed it to continue its operations focused on the realization of its assets, notwithstanding of which it is considered very reduced the possibility that the FGDEC can obtain a return, that is why its participation in the society stays fully deteriorated. In addition, as part of the action plan of CCM, the FGDEC (then the FGDCA) granted an EPA to BdCLM over certain assets portfolio, assuming the FGDEC the possible losses for a period of five years as from 31 December 2009, this deadline was subject to an extension up to seven more years under certain circumstances, above the provisions that the portfolio had and up to a given maximum, establishing for it in BdCLM a security deposit for an amount equal to that maximum. On 2 December 2014, the BdCLM and the FGDEC signed an addendum to the regulations governing the EPA extending its maturity until 31 December At the end of the year 2016, BdCLM has reported its estimation of the losses in the portfolio subject to the EPA at maturity in excess of the maximum limit covered by the FGDEC, as a result of 17

18 which it has provisionally recorded a provision for the same amount up to the aforementioned maximum. At the date of preparation of these accounts, the process of calculating the final loss and liquidation of the EPA as set forth in the regulation and addendum is open, a process that includes valuation of the remaining covered portfolio by independent valuation experts, submission by BdCLM of its liquidation proposal, the conformity or modification of said liquidation by the FGDEC and, where appropriate, the actions to resolve possible differences as established in the aforementioned contractual documents. Restructuring of Banco CAM, SA 6. The commitments arising from the restructuring of Banco CAM, SA, during the year 2016 obey to the EPA granted on certain assets portfolio, assuming the FGDEC the 80% of the losses that might occur in it for a period of ten years from 31 July 2011 above the existing provisions on the said portfolio. At the end of 2016, the FGDEC has accounted, at its current value, the amount of the payments to be made to meet all the losses expected until the end of the EPA according to the latest available estimate. Restructuring of Unnim Banc, SA 7. The commitments arising from the restructuring of Unnim Banc, SA, during the year 2016 obey to the EPA granted on certain portfolio, assuming the FGDEC the 80% of the losses that might occur in it for a period of ten years from 31 October 2011, above the existing provisions on the said portfolio. At the end of 2016, the FGDEC has accounted, for its current value, the amount of payments to be made to meet all the losses expected until the end of the EPA according to the latest available estimate. European financial assistance 8. On 16 July 2012, and in order to facilitate the operation of European financial assistance for the recapitalization of Spanish banks under the terms established in the fifth additional provision of Royal Decree-Law 21/2012, of 13 July, on liquidity measures of the Public Administrations and the financial sector, and under paragraph 4 of that provision, the FGDEC signed a guarantee in favour of the Republic of Finland, committing itself to create pledges for an amount equivalent to 40% of the risk assumed by the said State in disbursements to be made by the European Financial Stability Facility to the Kingdom of Spain, contract subsequently adapted to the final establishment of the European Stability Mechanism by the corresponding addendum of 28 November The participation of the Republic of Finland in the European Stability Mechanism at 28 November 2012 was of %, and disbursements made to the Kingdom of Spain were EUR 39,468 M in November 2012 and EUR 1,865 M in January 2013, because of which the FGDEC constituted two separate cash deposits as guarantee, the first on 28 Novem- 18

19 ber 2012 amounting to EUR 283,759.1 t and the second on 22 January 2013 amounting to EUR 13,408.6 t. Subsequently, and in accordance with the terms of the guarantee agreement, these amounts have been invested in securities issued by Member States of the euro area with the highest credit rating. It is estimated that the granting of the said guarantee shall not entail any losses for the FGDEC. During 2016, EUR 6,564.4 t of the coupons and securities acquired (EUR 9,053 t in 2015) and EUR 191,303 t par at maturity of the investments (EUR 183,441 t in 2015) have been received; funds, that under the terms of the signed contract, may be used in the acquisition of securities issued by Member States of the euro area with the highest credit rating, which remain in guarantee of the operation, having been applied to this end most of these funds with the remainder in cash account held in the custodian bank, also in guarantee the operation. The change in the total value of the collateral is due to changes in the market value of the securities. Subscription of shares of NCG Banco, SA, and Catalunya Banc, SA 9. Under the fifth additional provision of Royal Decree-Law 21/2012, of 13 July, as amended by Article 2 of Royal Decree Law 6/2013, of 22 March, on protection to holders of certain saving and investment products and other financial measures, on 10 June 2013 the FGDEC announced the offer of voluntary purchase offer for common shares of NCG Banco, SA, and Catalunya Banc, SA, with certain considerations and conditions. As a result of these, the FGDEC acquired 640,964,146 shares of Catalunya Banc, SA (Representing 32.4% of its capital), for a total cost of EUR 1,000,939.9 t; and 603,671,160 shares of NCG Banco, SA (Representing 25.6% of its capital), for a total cost of EUR 802,364.1 t, signing at the same time with the controlling shareholder, the Fund for Orderly Bank Restructuring (FROB), certain agreements of partial coverage of the evolution of the value and the result of the sale of such shares. On 18 December 2013, the FROB announced the award, after the study of the binding offers received in the corresponding sales process, of a shareholding of 88.3% of NCG Banco, SA, to Banco Etcheverría, SA (Banesco Group). As provided in Articles 26.2 and 64.1.c of Law 9/2012, of 14 November, on restructuring and resolution of credit institutions, the referral sale process included the shares owned by the FGDEC. Subsequently, on 25 June 2014 the FROB announced the consummation of the transaction after obtaining all the necessary authorizations. At 31 December 2016, payments received by the FGDEC in this operation amounted to EUR 198,612.4 t (EUR 139,630.2 t in 2015), being estimated at EUR 43,278.9 t the present value of the expected net payments thereof (EUR 80,533.7 t in 2015). The decrease in the current value of the expected net collections is due to the combined effects of: (i) ) a new modification of the amount of the guarantees granted to the buyer plus an advance on the dates scheduled for payment; (ii) an increase in the amount to be paid by the FROB to the FGDEC due to partial coverage agreements on the evolution of the value 19

20 and the result of the sale of the holding; and (iii) an advance in the collection of part of the deferred amount of the sale price with respect to the expected date. On 21 July 2014, the FROB announced, after the study of the binding offers received in the corresponding sales process, a stake of 98.4%, or 100% under certain circumstances, of Catalunya Banc, SA, to Banco Bilbao Vizcaya Argentaria, SA (BBVA). As provided in the aforementioned items 26.2 and 64.1.c of Law 9/2012, the referenced sales process included the shares owned by the FGDEC. The transaction was subject to compliance with the legally established requirements and to the corresponding approval by the relevant national and international authorities. Subsequently, on 24 April 2015 the FROB announced the completion of the operation for the 98.4%, after obtaining all the necessary authorizations. In view of the conditions of this transaction and payments estimated to be received by the FGDEC at the end of 2014, the FGDEC s stake in Catalunya Banc, SA, was updated to adjust the its book value of the to their value. On 4 September 2015, the FGDEC received from the FROB EUR 142,461.2 t for the settlement at fair value of the sale of the aforementioned participation, retaining the FROB an amount equal to the share to be assumed by the FGDEC of the estimated financial guarantees given to the buyer, value which can change in the future based on the actual cost that eventually could reach those financial supports granted in the operation. In 2016 the FROB has paid FGDEC EUR 1,031.4 t as a result of the lower estimated cost of the guarantees granted to the buyer. Depositors coverage of Banco de Madrid, SAU 10. From the information received from the Bankruptcy Administration of the entity, the FGDEC proceeded during 2015 to inform depositors of Banco de Madrid, SAU, the status of their deposits and the guaranteed amounts, requesting their conformity to proceed with the payment of those amounts. At 31 December 2016 the guaranteed amounts reported to depositors amounted EUR 125,734.6 t, (amount lower than the EUR 125,737.5 t reported on 31 December 2015, following the resolution of several incidents which in some cases resulted in a greater or lesser guaranteed amount) pending to inform depositors of guaranteed deposits for a total of EUR t due to the existence of different issues (EUR 18.0 t at 31 December 2015). At the same date of 31 December 2016, once received in each case the conformity of the depositor, the FGDEC had paid guaranteed amounts for a total of EUR 122,695.2 t, (EUR 118,974.3 t in 2015) thus outstanding payments amount to EUR 3,246.6 t (EUR 6,781.2 t) which could not been made because the depositors were untraceable, or in disagreement to the data or other incidents managed by the Bankruptcy Administration. On 29 July 2016, Banco de Madrid, SAU, paid the FGDEC an amount of EUR 59,958.6 t, thus reducing its obligation to pay for the guaranteed deposits paid by the FGDEC to depositors of that entity, which have the ordinary credit rating in the creditors tender. 20

21 Acquisition of real estate in exercise of the right of first refusal 11. On 17 November 2015, in exercise of the right of first refusal provided for in the EPA Protocol granted to Banco CAM, SA, FGDEC acquired certain real state properties at a cost of EUR 30,034.5 t. During 2016 and in exercise of the same right of first refusal, the FGDEC has acquired other real estate and financial assets at a cost of EUR t and EUR t, respectively. In 2016 the FGDEC has started to commercializate these mentioned assets. Disputes with heirs of Mr. Domingo López Alonso 12. With regard to judicial proceedings initially maintained with the former president of Banco de Valladolid, SA (Subsequently Barclays Bank, SAU, then absorbed by Caixabank, SA), Mr. Domingo López Alonso, and today with his heirs, under the legal direction and economic coverage of the FGDEC, Barclays Bank, SAU, has complied with the sentence of 6 October 1998 making available to the heirs of Mr. Domingo López Alonso the debt securities stated in the sentence. After an appeal by the heirs of Mr. Domingo López Alonso that has been dismissed, the proceeding is closed by Decree of 25 November Regarding actions to recover the amounts (EUR 27.4 M) delivered by the FGDEC to Mr. Domingo López Alonso in late 2003 in the provisional enforcement of the mentioned sentence, they are limited by the lack of sufficient information regarding the destination of the money, preventing its recovery. It should be noted that the heirs of Mr. Domingo López Alonso have accepted the inheritance with benefit of inventory and recorded as only asset of the inheritance the credit rights of the case arising from the mentioned legal proceedings and, given its final result, determines the absence of any asset in the inheritance. Finally, we should mention the continuation of the procedure that claims amounts to the heirs of Mr. Domingo López Alonso (arising from an executive proceeding of 1981) which set at EUR 1.6 M the outstanding amounts to the FGDEC. Investment coverage function 13. By resolution of the Secretary of the State Economy (Secretario de Estado de Economía) of 1 August 2002, issued pursuant to the provisions of paragraph 3 of Article 74 of Law 24/2001 of 27 December on fiscal and administrative measures and on social order, were set the percentages that would satisfy each of the three deposits guarantee funds then existing and the Fondo General de Garantía de Inversiones on the total compensation for the obligations incurred by such Fondo as a consequence of the failures of investment companies prior to the entry into force of the Law 24/

22 Under that resolution, the percentage distribution of the total amount of compensation to be paid to the harmed investors between the dissolved deposits funds and the Fondo General de Garantía de Inversiones was established as follows: % Fondo de Garantía de Depósitos de Entidades de Crédito Fondo de Garantía de Depósitos en Establecimientos Bancarios Fondo de Garantía de Depósitos en Cajas de Ahorro Fondo de Garantía de Depósitos en Cooperativas de Crédito Fondo General de Garantía de Inversiones The total amount of compensations estimated by the Gestora del Fondo General de Garantía de Inversiones SA, amounted to EUR 79.7 M, corresponding to the deposits guarantee funds an amount of EUR 79.5 M. In 2016 there were disbursed EUR 1,6 t for this item (EUR 15.8 t in 2015). At year end of 2016 and 2015 the amount of outstanding claims assumed by the FGDEC amounts to EUR 5.6 M. Integrated entities and their contributions 14. At 1 January 2016, 140 entities were adhered. During 2016 no entities were registered, having been deregistered ten, so at year end there were 130 adhered entities. The list of the member institutions at 31 December 2016 is in Annex 4 of these annual accounts. Pursuant to article 6 of Royal Decree-Law 16/2011, of 14 October, modified according to the final tenth provision of Law 11/2015, dated 18 June, and by article 3 of Royal Decree 2606/1996, of 20 December, modified by the first final provision of Royal Decree 1012/2015, of 6 November, which developed Law 11/2015, the annual contributions of the member entities, both to the deposits guarantee compartment and to the securities guarantee compartment shall be determined by the Management Committee of the FGDEC, in accordance with the respective calculation bases established in paragraphs a) and b) of section 2 of said article 3 of Royal Decree 2606/1996, and in the case of the deposits guarantee fund, from 2016 at the latest, to the risk profile of each entity. In addition, article 6 of Royal Decree-Law 16/2011, supplemented by its second additional provision incorporated under the tenth final provision of Law 11/2015, states that: The financial resources available of the deposits guarantee compartment must attain at least, and no later than 3 July 2024, the 0.8% of the amount of the guaranteed deposits. However, the FGDEC may ask the European Commission to reduce this level to 0.5% taking into account certain factors. Annual contributions to the securities guarantee compartment may not exceed 0.3% of the amount of the guaranteed values. 22

23 Contributions to a compartment is suspended when the available financial means not engaged in operations object of the mentioned compartment equals or exceeds 1% of the total amounts guaranteed by the compartment. Addressing to it, the Management Committee of the FGDEC, at its meeting held on 15 July 2016, has determined the annual contributions for 2016 to the deposits guarantee compartment equal to 1.6/1000 of the guaranteed monetary deposits existing as at 30 June 2016, which would be calculated for each entity based on its guaranteed deposits and risk profile, and the annual contribution to the securities guarantee compartment equal to 2/1000 of 5/100 of its valuation to the last working day of 2016 of the Securities deposited as of 31 December 2016, also determining that the disbursement of both contributions be made on the last working day of February Additionally, on 23 March 2013 was published the Royal Decree Law 6/2013, amending the fifth additional provision of Royal Decree-Law 21/2012, stating that the annual contribution under Article 3 of Royal Decree 2606/1996, which would have to make the member institutions on deposits at 31 December 2012 would increase exceptionally, and only once, by an extra 3/1000 being this increase paid in two tranches: a first tranche, equivalent to two fifths of the total increase, would be fulfilled within 20 working days from 31 December 2013; and a second tranche, equivalent to the remaining three fifths would be met as from 1 January 2014, according to the payment schedule set by the Management Committee within a maximum period of seven years, and the corresponding amounts of the second tranche will be recognised as assets of the FGDEC on the date on which the first tranche is satisfied. The rule also provided that, in relation to the first tranche, the Management Committee of the FGDEC may establish, by resolution adopted by a majority of two thirds of its members: i) a shift to the second tranche of the corresponding contribution to this initial tranche up to 50%; ii) non-application of this tranche to the entities to which the ninth additional provision of Law 9/2012 refers to; iii) a deduction of up to 50% on contributions from member institutions whose calculation basis does not exceed EUR 5,000 M, and iv) a deduction of up to 30% of the amounts invested by institutions, before 31 December 2013, in the subscription or acquisition of shares or subordinated debt instruments issued by the Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria (Sareb). All this so that the sum of the deductions provided for in paragraphs iii) and iv) above does not exceed, in any case, 90% of the amount that, in dependence of the balance of deposits held at 31 December 2012, would correspond to meet to each entity. In order to implement the payment of the first instalment of the additional contribution, on 22 November 2013 the Management Committee decided to adopt, within the framework of the authorization conferred by the referenced rule, the deductions provided for by the rule, thus materializing the amount of the first tranche by each member entity, for a total of EUR 233,790.8 t, recorded as greater equity of the FGDEC in 2013 and paid by member institutions on 22 January As provided in the above regulation, the updated value of the second tranche of the extraordinary contribution was recorded as greater equity of the FGDEC on 22 January Also under the same regulation, on 10 June 2014 the Management Committee decided to disburse a first instalment of the said second tranche equivalent to one-seventh 23

24 of that tranche on 30 September 2014, performing at that date the said disbursement totalling EUR 232,699.3 t. Also at its meeting of 17 December 2014 the Management Committee decided that the disbursement of the remainder of the second tranche of the contribution will be done by two instalments of the same amount each, one on 30 June 2015 and the other on 30 June On June 30, 2015, the first of these payments was settled by EUR 697,619.6 t; an additional amount corresponding to the first payment was then settled by EUR t, initially not settled to a split-off entity pending the determination of its imputation to the affected entities in view of the split-off process. On 30 June 2016, the last outstanding payment was settled, amounting to EUR 697,852.6 t. Regardless of the aforementioned payments, the entities affiliated to the FGDEC as of the date of publication of Royal Decree-Law 6/2013 that have been terminated before the publication of the said RD-L have paid the present value of the amounts that corresponded to them. The Bank of Spain, according to the current legal framework does not have to make any contribution. Guaranteed deposits and asset coverage 15. On 3 June 2010 was published the Royal Decree 628/2010 of 14 May, amending Royal Decree 2606/1996, of 20 December, and Royal Decree 948/2001, of 3 August, on compensation schemes of investors, stating that the guaranteed amount of deposits will be limited to the amount of EUR 100,000 per account holder and the secured amount guaranteed to the investors that have entrusted securities and financial instruments to the credit institution shall be independent and will reach a maximum of EUR 100,000 per account holder. Subsequently, the tenth final disposition of the Law 11/2015 of 18 June, amending Royal Decree-Law 16/2011, has expanded the amount of guaranteed deposits, by providing that, in addition to the amount above mentioned, will be guaranteed, regardless of the amount and for three months from the time the amount has been credited or from the moment when such deposits have become legally transferable: i) the amounts from transactions with residential real estate and sole owner; ii) those arising from payments one-off basis received by the depositor relating to marriage, divorce, retirement, dismissal, disability or death; and iii) which are based on the payment of insurance benefits or compensation for damages resulting from a crime or a miscarriage of justice. In turn, the regulatory changes mentioned have assumed that, since 2015, has come to define as eligible deposits those defined in previous legislation as guaranteed deposits ; now defined as guaranteed deposits those previously denominated covered deposits. This change has not affected the securities deposits that still retain their previous terminology, i.e. the guaranteed securities (equivalent to eligible in the deposits compartment) and covered (equivalent to those guaranteed in the deposits compartment).in addition, from 2015 the calculation basis of the contributions that entities must make on cash deposits becomes composed by the guaranteed deposits (before it was by the eligible). The column headings (a) and (c) of the following table, expressed in million euros, are adjusted to the terminology used by the current legislation, being the basis for calculating 24

25 each year (b) those determined by the current regulation at all times, which justifies the relevant variation of the amount since Years Eligible deposits and guaranteed values Basis for calculating contributions Guaranteed deposits and covered securities % Coverage (a) (b) (c) (c / a) , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,127, , , ,209, , , ,171, , , ,221, , , ,216, , , ,213, , , ,154, , , ,197, , , ,193, , , ,305, , , ,343, , , Since 31 December 2001 to 31 December 2014, eligible deposits (before guaranteed) and guaranteed securities include the amount of the securities and guaranteed financial instruments, and the basis of calculation of contributions includes eligible cash deposits and 5% of the securities and financial instruments, referring the data from previous years only to cash deposits; finally from 31 December 2015 the calculation basis of contributions includes the guaranteed cash deposits and the 5% of the deposited securities and financial instruments. The eligible and guaranteed cash deposits as of 30 June 2016, which, as indicated in the previous section, were those considered for the calculation of the contributions for 25

26 2016 to the deposits guarantee compartment, amounted to EUR 967,704.8 M and EUR 700,820.6 M, respectively. At 31 December 2016, eligible and guaranteed cash deposits amounted respectively to EUR 979,637.7 M and EUR 698,969.5 M (EUR 947,279.1 M and EUR 684,901.7 M at 31 December 2015). At the same date guaranteed and covered securities amounted respectively to EUR 363,531.9 M and EUR 91,094.1 M (EUR 358,023.4 M and EUR 91,397.0 M at 31 December 2015). Financial situation 16. The financial resources (consisting of contributions and extraordinary contributions from member institutions accounted in for short-term, public investments in short- and longterm government debt, and cash) amounted to EUR 6,821,231.8 t at 31 December 2016 (EUR 6,274,678.8 t at 31 December 2015), having increased in the year by EUR 546,553.0 t (EUR 1,838,938.7 t in 2015), mainly due to the contributions and the mentioned apportionments. The financial resources have been invested in public debt of the State. At year-end, financial investments in short and long term Spanish State debt amounted to EUR 5,597,441.6 t (EUR 4,370,998.8 t in 2015), and are invested in Treasury bills, bonds and debentures. The weighted average maturity is 940 days (120 days in 2015). Extraordinary expenditures approved 17. The Management Committee of the FGDEC in session on 30 July 2012, and in order to restore capital adequacy of the FGDEC according to the provisions of the Article 6.2 of Royal Decree-Law 16/2011, of 14 October, agreed a extraordinary contribution by member institutions for a nominal amount of EUR 2,346,000 t, distributed according to the basis of contributions at 31 December 2011, which will be payable by each entity in ten equal annual instalments, with total annual payments of EUR 234,600 t, to be paid on the same day as the ordinary annual contributions are met, and that each adhered entity may deduct such payment from the regular annual contribution met on the same date and up to the amount of the ordinary contribution. At 31 December 2016 the annual payments to be made by the member institutions have fallen slightly to EUR 234,370.7 t (EUR 234,525.5 t in 2015), because several entities have paid their contributions in advance for being no longer affiliated entities to the FGDEC. In 2016 the fourth annual fee has been collected. Profit and equity 18. The year closed with a surplus of EUR 468,723.0 t, (deficit of EUR 419,873.4 t in 2015) as detailed below, in thousands of euros: 26

27 Concepts Management Financial Total Management Financial Total Revenue , , , , , ,773.9 Management and financial expenses. (11,876.5) (207,746.9) (219,623.4) (8,689.7) (186,934.3) (195,624.0) Gains on sale of assets Exceptional items (253,695.6) (253,695.6) (1,134,024.6) (1,134,024.6) Total ,452.2 (184,729.2) (468,723.0) (243,578.5) (176,294.9) (419,873.4) Memorandum: Deposits guarantee compartment ,289.7 (185,048.5) (432,241.2) (278,922.5) (176,294.9) (455,217.4) Guaranteed securities compartment.. 36, , , ,344.0 The management revenues include EUR 918,962.4 t of the current value of the corresponding ordinary contributions in 2016 (EUR 893,064.4 t in 2015), paid by the member institutions to the FGDEC on 28 February 2017; of that amount EUR 882,942.9 t (EUR 857,661.5 t in 2015) correspond to deposits guarantee compartment and EUR 36,019.5 t (EUR 35,402.9 t in 2015) to the securities guarantee compartment. The exceptional items correspond to the higher costs of the actions or restructuring processes of credit institutions with respect to those calculated in previous years, all of which relate to the deposits compartment. Management costs assigned to the deposits and securities guarantee compartments during 2016 have amounted EUR 11,727.7 t and EUR t, respectively (EUR 8,630.8 t and EUR 58.9 in 2015). Regarding net financial income and expenses, net expenses of EUR 185,048.5 t correspond to the deposits compartment, and revenues of EUR t to the securities compartment (in 2015 all corresponded to the deposits compartment). The accumulated assets at 31 December 2016, including the surplus for the year is positive with EUR 1,597,832.3 t (EUR 1,022,323.7 t in 2015). In addition, on 28 February 2017 the FGDEC has received from member institutions the fifth annual payment corresponding to the extraordinary contributions mentioned in paragraph 17 above, amounting to EUR 234,370.7 t (EUR 234,525.5 t in 2016) although the collection of this amount, even when it concerns the financial situation of the FGDEC, does not affect its assets situation, as it was already recorded as an asset and as equity in its balance sheet. Economic and financial control Audit Court 19. At the date of preparation of this report the contracts formalised in 2016 have already been forwarded to the Court of Auditors. On 22 December 2016 the Court of Auditors issued its Report on the supervision of the bank restructuring process, 2009 to 2015, 27

28 available on the website of that institution, and in its recommendations section contains paragraph (9.2) on the FGDEC. External audit 20. The audit report for the year, conducted by Grant Thornton S.L.P. is incorporated. Subsequent events 21. Note 7 to the financial statements, included in the annual accounts, details the significant events occurred after 31 December 2016 and until the date of preparation of the financial statements. 28

29 ANNUAL ACCOUNTS FINANCIAL YEAR

30 FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO BALANCE SHEET Thousand of Euros Asset Notes NON CURRENT ASSET Intangible assets Property, plant and equipment Real estate investments , ,695.3 Non-current investments in Group companies and associates Company shares , ,015.3 Impairment shareholdings (673,015.3) (673,015.3) Non-current financial assets ,346, ,597,073.1 Credit entities. Extraordinary expenditure ,068, ,264,413.7 Reimbursement rights EPA ,475, ,475,000.0 Impairment reimbursement rights EPA (2,475,000.0) (2,041,922.0) Receivables for provided guarantees EPA , ,638.7 Long term loans , ,781.3 Participatory rights , ,484.0 Expenditures collection rights and contributions Banco Madrid Payment receivables depositors Banco Madrid , ,755.5 National debt euro area , ,673.4 Guarantee deposit made , ,849.5 National debt ,802, ,233.2 Subordinate debentures (net) , ,091.3 Credit entities investments Other financial assets Staff loans Total non-current assets ,348, ,599,066.0 CURRENT ASSETS Non-current assets for sale , ,481.3 Debtors and other account receivables , ,396.2 Current investments in Group companies and associates , ,201.3 Current financial assets ,058, ,018,171.5 Credit entities. Extraordinary expenditure y , ,407.7 Credit entities. Extraordinary contributions ,642.5 Ordinary contributions , ,064.4 Short term loans FROB-NCG Banco, SA , ,540.5 National debt , ,115,765.6 National debt accrued interest , ,296.7 Deposits receivables Depositors collection rights Banco Madrid Staff loans Other short term loans Current prepayments and accrued income Cash and cash equivalents , ,268.7 Total current assets ,124, ,124,571.7 TOTAL ASSETS ,473, ,723,

31 FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO BALANCE SHEET Thousand of Euros Equity and liabilities Notes EQUITY Own funds ,539, ,021,598.4 Equity fund ,021, ,366,324.1 Extraordinary expenditure , ,952.5 Extraordinary contribution , ,195.2 Surplus (Deficit) financial year ,723.0 (419,873.4) Adjustments for changes in value financial investments , Total equity ,597, ,022,323.7 NON-CURRENT LIABILITIES Long term provisions ,594, ,749,728.5 Disbursement provision EPA Banco CAM ,041, ,030,709.1 Disbursement provision EPA Unnim Banc, ,484, ,576,993.1 Success fee provision EPA BdCLM ,069.6 Provision for asset management commission , ,350.3 Compensations (Art. 74, Law 24/2001) , ,632.6 Commitments with staff , ,505.7 Other provisions Long term debts , ,497.7 Debt FROB-NCG Banco, S.A , ,788.1 Other creditors , ,709.6 Total non-current liabilities ,651, ,861,226.2 CURRENT LIABILITIES Short term debts ,223, ,065.3 Creditors and other payables , ,136.1 Public administrations payables Creditors payables EPA Banco CAM ,181, ,816.6 Commitments to depositors of Banco de Madrid , ,781.2 FROB-NCG Banco SA debt ,517.4 Creditors for outstanding disbursements Commercial creditors and other payables Current prepayments and accrued income ,016.5 Total current liabilities ,223, ,087.8 Total liabilities ,875, ,701,314.0 TOTAL EQUITY AND LIABILITIES ,473, ,723,

32 FONDO DE GARANTÍA DE DEPÓSITOS DE ENTIDADES DE CRÉDITO INCOME STATEMENTS Thousand of Euros Continuing operations Notes Income , ,134.5 Contributions from member institutions , ,263.4 Providing services Operating expenses (11,876.5) (8,689.7) Outcome disposal of assets and other income Extraordinary items (253,695.6) (1,134,024.6) Operating surplus/loss ,452.2 (243,578.5) Financial income , ,639.4 Financial costs (207,746.9) (186,934.3) Financial loss/surplus (184,729.2) (176,294.9) CONTINUING OPERATIONS SURPLUS/LOSS ,723.0 (419,873.4) SURPLUS (DEFICIT) FINANCIAL YEAR ,723.0 (419,873.4) 32