DEPOSIT GUARANTEE FUND FOR BANKING ESTABLISHMENTS

Transcription

1 DEPOSIT GUARANTEE FUND FOR BANKING ESTABLISHMENTS FONDO DE GARANTÍA DE DEPÓSITOS EN ESTABLECIMIENTOS BANCARIOS ANNUAL REPORT 2010 SPAIN Approved by the Management Committee on May 17, 2011

2 This document is a partial translation of the Spanish original and it has been prepared for the convenience of readers and in the event of ambiguity, the Spanish text will prevail. The Spanish version can be downloaded from the web site ( or can be requested to: Fondo de Garantía de Depósitos en Establecimientos Bancarios José Ortega y Gasset, Madrid España

3 TABLE OF CONTENTS Pages MANAGEMENT REPORT... 4 ANNUAL ACCOUNTS Balance Sheet Profit and loss account Statement of changes in equity Cash flows statement INDEPENDENT AUIDITORS REPORT... 16

4 DEPOSIT GUARANTEE FUND FOR BANKING ESTABLISHMENTS MANAGEMENT REPORT FOR THE YEAR 2010 Activity during the year 1. Management and administration of Deposit Guarantee Fund for Banking Establishments (hereinafter FGDEB) during the year 2010 have been carried out by the Fund s Management Company (Sociedad Gestora de los Fondos de Garantía de Depósitos en Entidades de Crédito, A.I.E.) in accordance with the terms of the contract signed with this latter on June 29, 2000, and have been in line with the guidelines issued by the FGDEB to the Management Company in previous years, as follows: Management of the equity capital not committed to any of the operations aimed to fulfill the purposes of the FGDEB through the investment in public debt. Total investments have amounted to 3,597,230 thousand and total of disinvestments to 3,331,593 thousand. The financial income shows a return of 51,980.6 thousand, representing an average yield of 2.2% on an average investment of 2,299,056.3 thousand. Financial management as a whole with other financial income and expenses shows a net return of thousand, thousand lower than the previous year, due to the lower return. Management of third party debts acquired in previous years from failed banking establishments. Other significant activities are those related to the preparation of Management Committee meetings and to the execution of the decisions taken, and the analysis of the coverage level on the basis of the institutions equity. 2. Article 2.4 of Royal Decree-law 9/2009, of June 26, on banking restructuring and credit institution equity reinforcement which, among other things, creates the Fund for Orderly Bank Restructuring, establishes the obligation for the three Deposit Guarantee Funds (for Banking Establishments, Savings Banks and Credit Cooperatives Banks) to endow the FROB with 2,250 million, which will be allocated among them according to the percentage that the deposits in their respective adhered entities amount over the total deposits in all credit institutions at the end of The percentage corresponding to the Deposit Guarantee Fund for Banking Establishments amounts to 35.40%, with a resulting disbursement of 796,602.4 thousand. During the 2010 period, ,5 M Euros have been added as impairment of the participation in FROB. This amount is derived from the net equity as at according to audited financial statements. 4

5 3. With respect to the litigations instigated by Mr. Domingo López Alonso against Banco de Valladolid, S.A., (currently Barclays Bank, S.A.), and which are being handled by the Gestora s legal counsel, under the economic cover of FGDEB, it should be noted that in the annual report for 2009, it was reported, inter alia, that in the civil sphere, a ruling was outstanding on both appeals against the decisions of December 26, 2007 and October 1, 2008 filed with the Provincial Court, objecting to the fact that they were allowed in contradiction to the ruling of Similarly, a decision was pending on the appeal for reversal against the decision for dismissal with respect to the penal proceedings instigated against the Judge of the Court of First Instance 4 who issued the aforementioned decisions. Concerning these latter proceedings, the Second Court of the Supreme Court issued a judgement on July 14, 2010, rejecting the appeal for reversal filed against the Decision of the High Court of Madrid on October 29, 2009, confirming the free dismissal declared during the fast-track proceedings followed by that High Court. The representative of Barclays Bank, SA lodged an appeal for legal protection against that judgement with the Constitutional Court. Concerning the civil proceedings and in relation to the appeal for reversal lodged with Section 20 of the Provincial Court of Madrid against the decision issued by the Court of First Instance 4 on December 26, 2007, on October 7, 2010, the former issued a decision through which it revoked and declared void all enforcement proceedings connected with decisions relating to small amounts No. 2381/94, on the basis of the document submitted by Barclays Bank S.A. to the Court on January 4, 2007, and the Court should resume enforcement through non-cash channels, specifically, following the identification and determination of the securities to be delivered. Recently, the same Provincial Court issued a decision on January 27, 2011, rejecting the voiding of the proceedings instigated by Mr Lopez Alonso against the aforementioned decision of October 7. As a result, the resolution of another appeal is outstanding which should therefore end with the annulment of the Decision of October 1, 2008 that set the amount payable by Barclays Bank, SA to Mr Domingo Lopez Alonzo in respect of fair monetary compensation at 85 million. Subsequently all proceedings should be sent to the Court in order to restart the enforcement of the judgment and for the recovery of the 27 million inappropriate received by Mr Domingo López Alonso in The Resolution of the Ministry of Economy of August 1, 2002, issued in accordance with paragraph 3, article 74 of Law 24/2001, of December 27, on Tax, Administrative and Labour Matters, fixed the contributions payable by the Investment Guarantee Fund and the Deposit Guarantee Funds as a percentage of the total compensation to be paid by them due to the non-fulfillment by investment firms of their reimbursement and restitution obligations of the cash and securities deposited by investors, respectively, before the entry into force of the above mentioned Law 24/2001. By virtue of the above mentioned Resolution of the Ministry of the Economy, the percentage distribution of compensation payable to affected investors between the Investment Guarantee General Fund and the Deposit Guarantee Funds has been established as follows: Deposit Guarantee Fund for Banking Establishments % Deposit Guarantee Fund for Savings Banks % Deposit Guarantee Fund for Credit Cooperative Banks % Investment Guarantee General Fund % 5

6 The Management of the Investment Guarantee General Fund has estimated the total amount of compensation in 79.7 million. Approximately 43 million of this figure shall be payable by the FGDEB. This financial year 30.1 million have been paid, totalling 35.1 million from the beginning. Integrated entities and contributions 5. At the beginning of the year there were 72 Spanish and non-eu banks adhered to the FGDEB. A list of the adhered entities was published in the Spanish State Official Gazette (issue 81) on April 3, 2010, as required by Royal Decree 2606/1996. At the end of the year, the adhered entities include 72 Spanish and non-eu banks. During the period were occurred one increase and one decrease due to a transfer to the Deposit Guarantee Fund for Savings Banks. 6. The Order of the Ministry of Economy 318/2002, of February 14, published on February 20, 2002, established the contributions to be made to the FGDEB by the adhered entities. These contributions were fixed at 0.6 of the calculation basis established in articles 3 and 4 of Royal Decree 2606/1996, as amended by Royal Decree 948/2001, on investor compensation schemes. Banco de España, according to the legal framework in force, does not have to make contributions. The contributions of the entities were disbursed on February 26, 2010 and have amounted to 197,087.4 thousand, with an increase of 3% on the preceding year. Of the total amount paid in, 96.7% corresponds to guaranteed deposits and 3.3% to transferable securities and financial instruments. Guaranteed deposits and coverage ratio 7. Royal Decree 628/2010, of ay 14th, was published on June 2, 2010, modifying both Royal Decree 2606/1996, of December 20th, with respect to deposit guarantee funds in credit entities, and Royal Decree 948/2001, of August 3rd, regarding investor compensation systems, establishing a maximum guaranteed deposit amount of Euros 100,000 apart from any securities and other financial instruments that investors may have entrusted the credit entity, which will also be guaranteed up to a limit of Euros 100, The evolution of aggregate guaranteed deposits in the last years has been as follows, Euros in million: 6

7 Year Deposits and securities insured Calculation bases of contributions Deposits and securities covered % coverage , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , From December 31, 2001, the financial cover of the FGDEB includes also the transferable securities and financial instruments. The calculation base includes the total amount of cash deposits and the 5% of the value of transferable securities and financial instruments. On December 31, 2010, guaranteed cash and securities deposits increased on the previous year 4.4%. FGDEB s equity capital in 2010 has amounted to 0.64% of the calculation base for contributions in 2010 (2009: 0.66%). In compliance with article 3.4 of Royal Decree 2606/1996, the contributions will cease when FGDEB s equity capital reaches 1% of the calculation base for contributions. Actions in banks 9. At year-end, the guaranteed deposits by FGDEB derived from the crises of other banks, which have not been claimed by their holders, amount a total of 1,718.5 thousand, and are related with Bank of Credit and Commerce, SAE, Banco Credipás, SA, Banco de Navarra, SA, Banco de los Pirineos, SA, and Eurobank del Mediterráneo, SA. 7

8 Assets derived from financial restructuring 10. Debtors: The assets derived from financial restructurings can be considered as residual and of difficult collection, and their realization will take place hardly. In 2010, thousand ( thousand in 2009) have been recovered from the sale of assets and other mortgage loans. FGDEB has allocated to fully cover unsecured third party debts and has allocated to cover up to 42% (41.9 in 2009) in the case of losses of value arising from shareholdings on the basis of estimated settlement values. 11. Shareholdings: Final liquidation of six entities which remain under the control of the FGDEB is being delayed on account of legal procedures and expropriations. Financial position 12. Available financial resources have been increased in 206,557.6 thousand (decreased in 483,086.7 thousand at 2009) as a result of the integrated entities contributions, amounting to 197,087.4 thousand. The mentioned financial resources were invested in public debt, in accordance to article 3.7 of Royal Decree 2606/1996 that obliges to invest the not comprise equity in public debt or other related assets of low risk and high liquidity. At year-end, the distribution of financial investments is 56.1% for Treasury bills and 43.9% for government bonds. The weighted average maturity is 0.7 years. 13. Financial resources at year end were 2,372,417.2 thousand ( 2,164,316.8 thousand in 2009) and represented 75.2% of total assets and 75.5% of capital equity. Surplus for the year and equity 14. The surplus of the year shows the next figures, Euros in thousands: Items Operating Investing Exceptional Total Income , , ,634.2 Expenses... (1,274.3) (1,274.3) Impairment in FROB investment (26,886.6) (26,886.6) TOTAL , ,132.3 (26,886.6) 223,473.3 The 2010 surplus stood at 223,473.3 thousand, ( ,2 thousand at a decrease of 54,385.9 thousand (19.6%) from the previous year. The surplus includes 197,087.4 thousand from integrated entities contributions which represents 84.4% of the surplus of the year and the expenditure 26,886.6 thousand of impairment provision of participation in the FROB. 15. Considering the amount of the surplus for the year 2010, the FGDEB s capital equity amounts to 3,144,074.2 thousand at December 31, 2010, ( 2,962,395.3 thousand in 2009) up 6.1 % over the opening balance. 8

9 16. On April 26, 2011, the existence of a favourable judicial verdict was communicated by the managing company of the "Fondo General de Garantía de Inversiones, S.A.". This verdict instructs the administrators of "AVA, Asesores de Valores, AV, SA" to proceed payment to the affected parties, 6.486,7 thousands of which correspond to FGDEB and were deposited at the aforementioned date. There is no knowledge of any other subsequent event as at December 31, 2010 nor before the date of this report, that could have a repercussion to the financial statements. Economic/financial control Court of Auditors 17. The results of auditing the accounts and contracts in 2009 which have been submitted to the Spanish Court of Auditors (Tribunal de Cuentas) will be made public in the annual report for that year. External audit 18. The 2010 audit report prepared by PricewaterhouseCoopers Auditores, SL, is attached. Management Committee 19. During 2010, there have not been any variations in the composition of the members of the Managing Comission. 9

10 ANNUAL ACCOUNTS MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying annual accounts of the Deposit Guarantee Fund for Banking Establishments and the information related thereto in this Annual Report are the responsibility of its Management Committee. The annual accounts have been prepared by the Fund s Management Company (Sociedad Gestora de los Fondos de Garantía de Depósitos en Entidades de Crédito, AIE), in accordance with generally accepted accounting standards applied in Spain. The financial information presented elsewhere is consistent with that contained in the annual accounts. Under the article 2.º - 4 b) of Royal Decree 2606/1996, of December 20, the Management Committee is competent to approve the accounts that the Deposit Guarantee Fund for Banking Establishments must submit each year to their members and to Banco de España. In fulfilment of those rules, the submitted Annual Report together with the annual accounts, offer information about the activities performed in 2010, the equity and the financial situation of the Deposit Guarantee Fund for Banking Establishments, the results of its management and the source and allocation of funds for the year 2010, information that is enlarged with data regarding previous exercises. These annual accounts have been audited by PricewaterhouseCoopers Auditores, S.L., and the report is included herein. 10

11 DEPOSIT GUARANTEE FUND FOR CREDIT COOPERATIVE BANKS BALANCE SHEET (Thousands of euros) ASSETS NON CURRENT ASSETS Long term investments , ,989,1 Financial investments (related companies) , ,602.4 Long term financial investments , ,007.7 Government bonds , ,944.5 Long term deposits Impairments... (425.6) (425.6) Total non current assets... 1,467, ,581,996.8 CURRENT ASSETS Real State Accounts receivable... 3, ,680.8 Loans to related companies... 9, ,364.3 Short term financial investments... 1,670, ,377, Treasury bills... 1,327, , Government bonds , , Interest receivable on financial investments... 32, , Deposits Cash and others liquid assets... 5, ,211.3 Total current assets... 1,688, ,394,842.6 TOTAL ASSETS... 3,156, ,976,839.4 FUND BALANCE AND LIABILITIES FUND BALANCE Retained earnings... 2,918, ,641,126.0 Surplus of the year , ,859.2 Unrealized gains on available-for-sale investment... 1, ,410.1 Total fund balance... 3,144, ,962,395.3 NON CURRENT LIABILITIES Long term provisions 9, ,138.8 Indemnities for legal prescription... 7, ,948.5 Provision for liabilities and charges... 1, ,190.3 Long term creditors 1, ,644.1 Other liabilities... 1, ,644.1 Total non current liabilities... 11, ,782.9 CURRENT LIABILITIES Liabilities with related companies Other debts Total current liabilities TOTAL LIABILITIES... 11, ,444.1 TOTAL FUND BALANCE AND LIABILITIES... 3,156, ,976,

12 DEPOSIT GUARANTEE FUND FOR BANKING ESTABLISHMENTS PROFIT AND LOSS ACCOUNT (Thousands of euros) OPERATING ACTIVITIES Contributions , ,396.8 Annual contributions , ,396.8 Operating income... 1, Operating expenses... (1,274.3) (1,719.5) Freed up provisions Operating results , ,733.7 INVESTING ACTIVITIES Financial income... 52, ,283.8 Interest on Treasury bills... 14, ,901.7 Interest on government bonds... 37, ,323.7 Other financial income Change of value financial instruments Foreign currency translation Gains on sales of financial investments ,600.3 Treasury bills ,693.6 Government bonds ,906.7 Investing results... 52, ,125.5 Surplus from activities , ,859.2 Impairment FROB investment... (26,886.5) -- SURPLUS OF THE YEAR , ,

13 DEPOSIT GUARANTEE FUND FOR BANKING ESTABLISHMENTS STATEMENT OF RECOGNISED INCOMES AND EXPENSES On the year ended 2010 and 2009, there were no income or expense entries that have been recognized directly on net equity, other than those on the Income Statement and the unrealized gains on available for sale investment. STATEMENT OF CHANGES IN EQUITY (Thousands of euros) Items Fund balance - Beginning... 2,962, ,641,126.0 Annual contributions , ,396.8 Financial results... 52, ,125.5 Operating expenses... (1,274.3) (1,719.5) Impairment FROB Investment... (26,886.5) -- Other ítems... 2, Surplus of the year , ,859.2 Unrealized gains on available-for-sale investment... (41,794.5) 43,410.1 Increase (Decrease) in equity , ,269.3 Fund balance - Ending.... 3,144, ,962,

14 DEPOSIT GUARANTEE FUND FOR BANKING ESTABLISHMENTS CASH FLOW STATEMENT (Thousands of euros) Indirect Method Profit or loss for the year (+/-) , ,859.2 Adjustment to achieve cash flow from operating activities(+/-) 39, ,191.2 Losses (net) by assets impairment (+/-)... 26, Provisioning risk expense (net)(+/-)... (650.8) (230.3) Profit / Losses by sales of non-financial assets (+/-)... 13, ,421.5 Net increase (decrease) on operating activities (+/-)... 5,965.8 (7,801.8) Other receivables 5,761.5 (7,549.7) Other operating liabilities (+/-) (252.1) Others cash income ,0 Cash provided by operating activities , ,310.6 INVESTING ACTIVITIES Financial investments variation , ,561.1 Contribution made to the FROB (796,602.4) Cash used by investing activities ,277.0 (301,041.3) Net increase (decrease) in cash or equivalents... 3, ,269.3 Cash or cash equivalents at the beginning of the year (+/-) 2, Cash or cash equivalents at the end of the year (+/-)... 5, ,

15 DEPOSIT GUARANTEE FUND FOR CREDIT COOPERATIVE BANKS CASH FLOW STATEMENT (Thousands of euros) Direct Method OPERATING ACTIVITIES Annual contributions , ,396.8 Financial income... 72, ,247.5 Deposits for expropriations (8,067.8) Operating expenses... (1,220.4) (1,719.6) Other items (net) Cash provided by operating activities , ,310.5 INVESTING ACTIVITIES Financial disinvestments... 3,597, ,907,506.1 Financial investments... (3,331,953.0) (2,411,945.0) Contribution to the FROB (796,602.3) Cash used by investing activities... (265,277.0) (301,041.2) Net increase (decrease) in cash or equivalents... 3, ,

16 INDEPENDENT AUDITORS REPORT 16

17 Independent auditors Report (Translation from the original in Spanish) To Deposit Guarantee Fund for Banking Establishments Management Commitee (Comisión Gestora del Fondo de Garantía de Depósitos en Establecimientos Bancarios), for command of Fund s Management Company (Dirección de la Sociedad Gestora de los Fondos de Garantía de Depósitos en Entidades de Crédito, A.I.E.). We have audited the annual accounts of Deposit Guarantee Fund for Banking Establishments, consisting of the balance sheet at 31 December 2010, the income statement, the statement of changes in equity, the cash flow statement and related notes for the year then ended. The managing directors of the Fund s Management Company are responsible for the preparation of these annual accounts in accordance with the financial reporting framework applicable to the entity (as identified in Note 2 to the accompanying annual accounts), and in particular, with the accounting principles and criteria included therein. Our responsibility is to express an opinion on the annual accounts taken as a whole, based on the work performed in accordance with legislation governing the audit practice in Spain, which requires the examination, on a test basis, of evidence supporting the annual accounts and an evaluation of whether their overall presentation, the accounting principles and criteria applied and the estimates made are in accordance with the applicable financial reporting framework. In our opinion, the accompanying annual accounts for 2010 present fairly, in all material respects, the financial position of Deposit Guarantee Fund for Banking Establishments at 31 December 2010 and the results of its operations and cash flows for the year then ended in accordance with the applicable financial reporting framework, and in particular, with the accounting principles and criteria included therein. The accompanying directors Report for 2010 contains the explanations which the directors consider appropriate regarding the company s situation, the development of its business and other matters and does not form an integral part of the annual accounts. We have verified that the accounting information contained in the directors Report is in agreement with that of the annual accounts for Our work as auditors is limited to checking the directors Report in accordance with the scope mentioned in this paragraph and does not include a review of information other than that obtained from the company s accounting records. PricewaterhouseCoopers Auditores, S.L. (Signed by) José Ángel Díez Ruiz de Azúa May 16,