Bankinter S.A. — Annual Report 2010

Dec 31, 2010

Legal Report for the Group2010

Bankinter Group

Consolidated Annual Financial Statements for the financial year ended on 31 December 2010 and Consolidated Management Report, together with the Audit Report

Bankinter Group Consolidated balance sheets as at 31 December 2010 and 2009 (notes 1 to 3) (thousands of euros)

ASSETS Cash and bala nces with central banks	NOTE 6	2010 196,401	2009 505,265	LIABILITIES AND EQUITY LIABILITIES		2010	2009
Financial assets held for trading	7	1,875,834	3,584,841	Financial liabilities held for trading	7	1,943,429	1,491,165
Debt instruments		1,275,490	2,852,908	Trading derivatives		854,126	611,866
Equity instruments		87,769	110,335	Short positions in securities		1,089,303	879,299
Trading derivatives		512,575	621,598
Memorandum items: Loaned or advanced as collateral		984,898	1,969,940	OTHE R FINANCIAL LIABILITIES AT FAIR VALUE
OTHE R FINANCIAL ASSETS AT FAIR VALUE				THROUGH PROFIT AND LOSS	7	88,745	278,727
With changes in profit and loss	7	35,727	16,361	Customer deposits		88,745	278,727
Other equity instruments		35,727	16,361	FINANCIAL LIABILITIES AT AMORTISED
Memorandum items: Loaned or advanced as collateral		-	-	COST	19	48,479,559	48,985,541
				Deposits from central banks		3,301,646	2,208,200
Financial assets ava ilabl e for sale	8	3,100,215	3,345,065	Deposits from credit institutions		2,462,457	5,374,913
Debt instruments		2,961,894	3,254,182	Customer deposits		24,176,201	21,782,602
Equity instruments		138,321	90,883	Marketable debt securities		16,895,422	17,971,994
Memorandum items: Loaned or advanced as collateral		1,227,514	1,483,368	Subordinated liabilities		1,118,631	1,117,817
				Other financial liabilities		525,202	530,015
Loan and receivabl es	10	44,126,944	43,669,718
Loans and advances to credit institutions		1,601,470	3,786,135	MACRO-HEDGING ADJUSTMENTS TO FINANCIAL LIABILITIES		-	-
Loans and advances to customers		42,525,474	39,883,583
Memorandum items: Loaned or advanced as collateral		693,928	626,720	HEDGING DERIVATIVES	11	40,441	65,010
Held to maturity investments	9	3,241,573	1,621,669	LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE		-	-
Memorandum items: Loaned or advanced as collateral		1,770,513	689,056
				Liabilities under insura nce contracts	20	654,923	625,620
MACRO-HEDGING ADJUSTMENTS TO FINANCIAL ASSETS	11	1,308	9,754	PROVISIONS	21	71,090	75,888
				Pension funds and similar obligations		7,836	129
HEDGING DERIVATIVES	11	171,917	189,987	Allowances for contingent risks and commitments		22,268	29,742
				Other provisions		40,986	46,017
NON-CURRENT ASSETS HELD FOR SALE	12	271,537	238,017
				TAX LIABILITIES	17	183,846	228,785
Investments	13	29,593	34,678	Current		41,789	65,075
Associates		29,067	33,304	Deferred		142,057	163,710
Jointly controlled entities		526	1,374
				OTHE R LIABILITIES	18	110,249	133,838
Pension-linked insura nce agr eements		7,690	-
				TOTAL LIABILITIES		51,572,282	51,884,574
RE-INSURANCE ASSETS	16	2,657	13,495
TANGIBLE ASSETS	14	456,569	475,636	EQUITY		2,579,695	2,582,890
Property, plant, and equipment-		456,569	452,645	SHAREHOLDERS' EQUITY	22	2,602,488	2,553,002
For internal use		444,396	440,137	Capital		142,034	142,034
Assigned on lease		12,173	12,508	Registered		142,034	142,034
Real-estate investments		-	22,991	Issue premium		737,079	737,079
Memorandum items: acquired under finance lease		-	-	Reserves		1,648,910	1,524,487
				Accumulated reserves (losses)		1,636,260	1,504,864
INTANGIBLE ASSETS	15	358,209	377,043	Accumulated reserves (losses) of enterprises carried by the ownership method		12,650	19,623
Goodwill		161,836	161,836	Less: treasury shares		(1,753)	(538)
Other intangible assets		196,373	215,207	End-of-year-results atributed to parent company		150,730	254,404
TAX ASSETS	17	164,375	246,055	Less: dividends and remunerations		(74,512)	(104,464)
Current		70,563	104,368
Deferred		93,812	141,687	VALUATION ADJUSTMENTS	23	(22,793)	29,888
				Financial assets available for sale		(22,994)	29,774
OTHE R ASSETS	18	111,428	139,880	Exchange differences		201	114
Other		111,428	139,880	Non controlling interests		-	-
TOTAL ASSETS		54,151,977	54,467,464	total liabilities and equity		54,151,977	54,467,464
CONTIN GENT RISKS	24	2,361,188	2,263,430
CONTIN GENT COMMITMENTS	24	9,258,379	9,209,725

(*) Shown solely for purposes of comparison Notes 1 to 50 described in the report and attached annexes I to IV form an integral part of the consolidated balance sheet as at 31 December 2010.

Bankinter Group consolidated income statement corresponding to financial years ended 31 December 2010 and 2009 (notes 1 to 3) (thousands of euros)

Note 2010 2009 (*) INTE REST AND SIMILAR INCOME 29 1,202,577 1,672,477 INTE REST EXPENSE AND SIMILAR CHARGES 29 (652,624) (879,898) NET INTEREST INCOME 549,953 792,579 Income from equity instrum ents 14,456 10,934 Share of results of entities acc ounted for using the equity method 22 10,958 16,234 FEES AND COMMISSIONS IN COME 28 261,479 270,726 FEES AND COMMISSIONS E XPENSE 28 (65,976) (68,493) Gains/Losses of financial assets and liabilities 30 71,152 63,513 Held for trading 16,794 68,020 Other financial assets at fair value through profit and loss account 10,835 958 Financial instruments not measured at fair value through profit and loss 46,572 (2,852) Other (3,049) (2,613) EXCHANGE DIFFERENCES (net) 31 49,319 25,275 OTHE R OPERATING INCOME 33 708,172 470,458 Income from insurance and reinsurance policies issued 681,080 445,334 Other operating income 27,092 25,124 OTHE R OPERATING EXPENSES 33 (497,190) (336,044) Expenses from insurance and reinsurance policies (473,901) (300,359) Other operating expenses (23,289) (35,685) GROSS INCOME 1,102,323 1,245,182 Administrative cost (593,514) (578,825) Personnel expenses 27 (332,934) (325,040) Other general administrative expenses 32 (260,580) (253,785) DEPRECIATION AND AMORTISATION 14/15 (62,183) (53,463) provisions 21 (815) (29,628) IMPAIRMENT LOSSES ON FINANCIALASSETS (NET) (216,666) (220,502) Loan and receivables 10 (216,281) (218,705) Other financial instruments not measured at fair value through profit and loss account 8 (385) (1,797) PROFIT FROM OPERATIONS 229,145 362,764 IMPAIRMENT LOSSES ON OTHE RASSETS (net) 15 (800) (10,562) Goodwill and other intangible assets (10,561) Other assets (800) (1) Gains/losses undiposal of assests nos cla ssified as non-curr ent assets held for sale 34 (895) (5,270) Negative goodwill on business combinations - - gains/losses undiposal on non-curr ent assets held for sale not cla ssified as discontinued operations 34 (22,236) (991) Profit before tax 205,214 345,941 INCOME TAX 42 (54,484) (91,537) Profit for the year fROM continuing operations 150,730 254,404 PROFIT (LOSS)FROM DISCONTIN UED OPERATIONS (net) - -			(Debit) Credit
	Consolidated icome for the year	150,730	254,404
Profit (loss) attributed to the parent company 150,730 254,404
Profit (loss) attributed to non controlling interests
EARNINGS PER SHARE
Basic earnings (euros) 0.32 0.57
Diluted earnings (euros) 0.32 0.57

(*) Submitted solely for the purposes of comparison. Notes 1 to 50 described in the report and attached annexes I to IV form an integral part of the consolidated profit and loss account at 31 December 2010.

Bankinter Group consolidated Statements of recognised income and expense corresponding to financial years ended 31 December 2010 and 2009 (notes 1 to 3) (thousands of euros)

	FINANCIAL YEAR 2010	FINANCIAL YEAR 2009 (*)
Consolidated PROFIT for the year	150,730	254,404
OTHE R RECOGNISED INCOME AND EXPENSES	(52,681)	28,256
Financial assets available for sale	(75,383)	40,360
Valuation gains (losses)	(42,800)	47,778
Amounts transferred to income statement	(32,583)	(7,418)
Other reclassifications	-	-
Cash flow hedging	-	-
Valuation gains (losses)	-	-
Amounts transferred to income statement	-	-
Amounts transferred to the initial book value of the hedged items	-	-
Other reclassifications	-	-
Hedging of net investments in foreign businesses	-	-
Valuation gains (losses)	-	-
Amounts transferred to income statement	-	-
Other reclassifications
Exchange differences	124	8
Valuation gains (losses)	124	15
Amounts transferred to income statement	-	(7)
Other reclassifications	-	-
Non-current assets for sale	-	-
Valuation gains (losses)	-	-
Amounts transferred to income statement	-	-
Other reclassifications	-	-
Actuarial gains (losses) in pension plans	-	-
Entities accounted for using the equity method	-	-
Valuation gains (losses)	-	-
Amounts transferred to income statement	-	-
Other reclassifications	-	-
Statement of comprehensive income	-	-
Corporate tax	22,578	(12,112)
TOTAL RECOGNISED INCOME AND EXPENSES	98,049	282,660
Attributable to the parent company	98,049	282,660
Attributable to non controlling interests	-	-

(*) Shown solely for the purposes of comparison. Notes 1 to 50 described in the report and attached annexes I to IV form an integral part of the consolidated statement of recognised income and expenses corresponding to the financial year ending at 31 December 2010.

Bankinter Group consolidated statements of changes in total equity corresponding to financial years ended at 31 December 2010 and 2009 (notes 1 to 3) (thousands of euros)

EQUITY attributable to the parent company									Non	Total
		EQUITY Valuation Total								controlling interests	Equity
	Capital	Issue pre mium	Accu mulated reserves (losses)	Less: Treasury shares	End-of year results atributed to parent company	Less: divi dends and remunera tions	Total sharehold ers' equity	adjust ments
Opening balance at 31/12/2009	142,034	737,079	1,524,487	(538)	254,404	(104,464)	2,553,002	29,888	2,582,890	-	2,582,890
Adjustments due to changes to accounting criteria	-	-	-	-	-	-	-	-	-	-	-
Adjustments due to errors	-	-	-	-	-	-	-	-	-	-	-
Adjusted opening balance	142,034	737,079	1,524,487	(538)	254,404	(104,464)	2,553,002	29,888	2,582,890	-	2,582,890
Total recognised income and expenses	-	-	-	-	150,730	-	150,730	(52,681)	98,049	-	98,049
Other changes in Equity	-	-	124,423	(1,215)	(254,404)	29,952	(101,244)	-	(101,244)	-	(101,244)
Increases in capital or provision fund	-	-	-	-	-	-	-	-	-	-	-
Capital reductions	-	-	-	-	-	-	-	-	-	-	-
Conversion of financial liabilities into capital	-	-	-	-	-	-	-	-	-	-	-
Increases in other equity instruments	-	-	-	-	-	-	-	-	-	-	-
Reclassification of financial liabilities into other equity instruments	-	-	-	-	-	-	-	-	-	-	-
Reclassification of other equity instruments into financial liabilities	-	-	-	-	-	-	-	-	-	-	-
Distribution of dividends/Remuneration of shareholders	-	-	-	-	-	(97,250)	(97,250)	-	(97,250)	-	(97,250)
Operations with shares/contributions to equity (net)	-	-	(244)	(1,215)	-	-	(1,459)	-	(1,459)	-	(1,459)
Transfer between net worth entries	-	-	127,202	-	(254,404)	127,202	-	-	-	-	-
Increases (reductions) due to business combinations (net)	-	-	-	-	-	-	-	-	-	-	-
Discretional contributions to social funds and projects (savings banks)	-	-	-	-	-	-	-	-	-	-	-
Payments with other equity instruments	-	-	-	-	-	-	-	-	-	-	-
Other increases (reductions)	-	-	(2,535)	-	-	-	(2,535)	-	(2,535)	-	(2,535)
Closing balance as at 31/12/2010	142,034	737,079	1,648,910	(1,753)	150,730	(74,512)	2,602,488	(22,793)	2,579,695	-	2,579,695

Notes 1 to 50 described in the attached report and annexes I to IV form an integral part of the statement of changes to consolidated net worth for financial year ending at 31 December 2010,

Bankinter Group consolidated statements of changes in total equity corresponding to financial years ended at 31 December 2010 and 2009 (notes 1 to 3) (thousands of euros)

		EQUITY ATTRIBUTABLE TO THE PARENT COMPANY								Non	Total net
				EQUITY				Valuation	Total	controlling interests	worth
	Capital	Issue pre mium	Accu mulated reserves (losses)	Less: Treasury shares	End-of year results atributed to parent company	Less: divi dends and remunera tions	Total sharehold ers' equity	adjust ments
Opening balance at 31/12/2008	121,768	395,932	1,326,197	(44,016)	252,289	(88,798)	1,963,372	1,632	1,965,004	-	1,965,004
Adjustments due to changes to accounting criteria	-	-	-	-	-	-	-	-	-	-	-
Adjustments due to errors	-	-	-	-	-	-	-	-	-	-	-
Adjusted opening balance	121,768	395,932	1,326,197	(44,016)	252,289	(88,798)	1,963,372	1,632	1,965,004	-	1,965,004
Total recognised income and expenses	-	-	-	-	254,404	-	254,404	28,256	282,660	-	282,660
Other changes in equity	20,266	341,147	198,290	43,478	(252,289)	(15,666)	335,226	-	335,226	-	335,226
Increases in capital or provision fund	20,266	341,147	(6,046)	-	-	-	355,367	-	355,367	-	355,367
Capital reductions	-	-	-	-	-	-	-	-	-	-	-
Conversion of financial liabilities into capital	-	-	-	-	-	-	-	-	-	-	-
Increases in other equity instruments	-	-	-	-	-	-	-	-	-	-	-
Reclassification of financial liabilities into other equity instruments	-	-	-	-	-	-	-	-	-	-	-
Reclassification of other equity instruments into financial liabilities	-	-	-	-	-	-	-	-	-	-	-
Distribution of dividends/Remuneration of shareholders	-	-	-	-	-	(135,954)	(135,954)	-	(135,954)	-	(135,954)
Operations with shares/contributions to equity (net)	-	-	(12,822)	43,478	-	-	30,656	-	30,656	-	30,656
Transfer between net worth entries	-	-	132,001	-	(252,289)	120,288	-	-	-	-	-
Increases (reductions) due to business combinations (net)	-	-	83,667	-	-	-	83,667	-	83,667	-	83,667
Discretional contributions to social funds and projects (savings banks)	-	-	-	-	-	-	-	-	-	-	-
Payments with other equity instruments	-	-	-	-	-	-	-	-	-	-	-
Other increases (reductions)	-	-	1,490	-	-	-	1,490	-	1,490	-	1,490
Closing balance as at 31/12/2009	142,034	737,079	1,524,487	(538)	254,404	(104,464)	2,553,002	29,888	2,582,890	-	2,582,890

(*) Shown solely for the purpose of comparison Notes 1 to 50 described in the attached report and annexes I to IV form an integral part of the statement of changes to consolidated net worth for financial year ending at 31 December 2010,

Bankinter Group consolidated statements of cash flow for financial years ending 31 December 2010 and 2009 (notes 1 to 3) (thousands of euros)

	2010	2009 (*)
NET CASH FLOWS FROM OPERATIONS	1,544,877	1,215,178
Consolidated earnings for the year	150,730	254,404
Adjustments to obtain the cash flow from operations	355,446	334,856
Depreciation	62,183	53,463
Other adjustments	293,263	281,393
Net increase/decrease in operating assets	1,385,732	582,993
Financial assets and liabilities held for trading	1,709,007	(1,356,711)
Other financial assets at fair value through the profit and loss account	(19,366)	(7,175)
Financial assets available for sale	169,082	1,995,893
Loan and receivables	(635,403)	51,844
Other operating assets	162,412	(100,858)
Net increase/decrease in operating liabilities	(389,472)	116,507
Financial assets and liabilities held for trading	452,264	684,799
Other financial liabilities at fair value through the profit and loss account	(189,982)	(326,326)
Financial liabilities at amortised cost	(591,222)	(872,953)
Other operating liabilities	(60,532)	630,987
Corporate tax collections/payments	42,438	(73,582)
NET CASH FLOWS FROM INVESTMENT ACTIVITIES	(1,731,950)	(1,580,380)
Payments	(1,977,565)	(1,615,959)
Tangible assets	(69,192)	(143,430)
Intangible assets	(7,436)	(273,102)
Stockholdings	-	(6,349)
Non-current assets held for sale and associated liabilities	(281,033)
Held to maturity investments	(1,619,904)	(1,193,078)
Collections	245,615	35,579
Tangible assets	50,665	26,122
Intangible assets	-	9,457
Stockholdings	5,604
Non-current assets held for sale and associated liabilities	189,346
Held to maturity investments	-
NET CASH FLOWS FROM FINANCING ACTIVITIES	(121,790)	488,333
Payments	(167,802)	(154,335)
Dividends	(110,408)	(130,442)
Subordinated liabilities	(50,000)	0
Acquisition of internal capital instruments	-	(5,597)
Other payments linked to financing activities	(7,394)	(18,296)
Collections	46,012	642,668
Subordinated liabilities	40,000	250,000
Issue of owncapital instruments	-	361,416
Disposal of own capital instruments	6,012,212	31,252
EFFECT OF EXCHANGE-RATE VARIATIONS	-	-
NET INCREASE/DECREASE OF CASH OR EQUIVALENT (A+B+C+D)	(308,864)	123,131
CASH AND EQUIVALENT AT START OF PERIOD	505,265	382,134
CASH AND EQUIVALENT AT END OF PERIOD	196,401	505,265
MEMORANDUMITEMS:
BREAKDOWNOFCASH AND EQUIVALENTS AT END OF PERIOD	196,401	505,265
Cash in hand	105,492	97,933
Balances equivalent to cash at central banks	90,659	406,938
Other financial assets	250	394
Total cash and equivalent at end of period	196,401	505,265

(*) Shown solely for the purpose of comparison

Notes 1 to 50 described in the report and attached annexes I to IV form an integral part of the consolidated cash flow statement for the financial year ending 31 December 2010,

Bankinter Group Consolidated Report for year ending 31 December 2010

1. Nature, activities and make-up of the Group

Bankinter, S.A. was founded by way of the public deed executed in Madrid on 4 June 1965 under the name of Banco Intercontinental Español, S.A. Its name was changed to the current one on 24 July 1990. It is filed with the Special Registry of Banks and Bankers. The Group's tax identification number is A-28157360 and it belongs to the Deposit Guarantee Fund under code number 0128. Its registered offices are located at Paseo de la Castellana 29, 28046 Madrid, Spain.

The corporate purpose of Bankinter, S.A. (hereinafter referred to as the Bank or the Entity) comprises banking activities subject to the rules and regulations governing banks operating in Spain.

In addition to its direct operations, the Bank is the parent company of a group of subsidiary companies dedicated to a variety of activities (mainly asset management, credit cards and the insurance business) which, together with the Bank, make up the Bankinter Group (hereinafter referred to as the 'Group' or the 'Bankinter Group'). Consequently and in addition to its own individual annual accounts, the Bank is obliged to draw up consolidated annual accounts for the group, which also include holdings in joint businesses and investments in associates.

The subsidiaries of the Bankinter Group are listed in Note 13 'Investments'.

The Group's consolidated annual accounts have been drawn up in accordance with the accounting principles reported in the section "Accounting principles and Valuation Rules Applied."

The Bankinter, S.A. balance sheets as at 31 December 2010 and 2009 and the Profit and Loss Accounts for the financial years ending on said dates are shown in Annex III.

2. Accounting principles used

a) Rules for the presentation of the annual accounts

In accordance with EC Regulation Nº 1606/2002 of the European Parliament and of the Council of 19 July 2002, all companies governed by the law of a member state of the European Union and whose stock is listed on a regulated market of one of said member states must present their consolidated financial statements for the financial years starting as from 1 January 2005 in accordance with the International Financial Reporting Standards (hereinafter IFRS) that have been previously adopted by the European Union.

To adapt the accounting system of Spanish credit institutions to the new regulations, the Banco de España (Spain's central bank) published Circular 4/2004 of 22 December on Rules for Public and Reserved Financial Information and Model Financial Statement.

The Group's consolidated Annual Accounts for the financial year 2010 were prepared by the Bank's Directors (at the meeting of the Board of Directors held on 23 March 2011), in accordance with the terms of the International Financial Reporting Standards adopted by the European Union and taking into consideration Bank of Spain Circular 4/2004, applying the principles of consolidation, accounting policies, and valuation criteria described in Note 5 to said consolidated financial statements so as to show a true and fair view of the Group's financial situation as at 31 December 2010 and the results of its operations, the changes in its consolidated comprehensive income and cash flows that took place in 2010. These Annual Accounts correspond to the 2010 financial year and are pending approval by the General Shareholders Meeting. However, the Bank's Board of Directors understands that these accounts will be approved without modifications.

The Group's consolidated financial statements for 2009 were approved by the General Shareholders Meeting held on 22 April 2010.

In compliance with that established in the International Accountancy Standard (IAS) 1.81, the Group has decided to present separate statements, one of which shall cover the consolidated results ("The Consolidated Profit and Loss Account") and a second statement which, based on those consolidated results, outlines the elements of the other overall results from the financial year that appears in these consolidated annual accounts as "Statement of recognised consolidated income and expenses", applying the provisions outlined in Circular 4/2004 of the Bank of Spain.

The total sums detailed in this report figure refer to the financial year 2009 are presented solely and exclusively for comparative purposes.

The accounting policies and methods used to preare these annual accounts are the same as those applied in the consolidated annual accounts from 2009, considering the rules and interpretation which came into effect in 2010. Accordingly, we highlight the following:

Effective rules and interpretations in the current period

In 2010 it has become obligatory to comply with International Financial Reporting Standards Interpretations. They have therefore been applied in the drawing up of the Group's consolidated annual accounts for 2010:

Denomination	Obligatory application data
Revision of IFRS 3 – Combination of businesses (Revised)	Annual periods which began subsequent to 1 July 2009
Modification of IAS 27 – Consolidated and Indi vidual Financial Statements	Annual periods which began subsequent to 1 July 2009
Modification of IAS 39 – Financial Instruments: Recognition and valuation – Aspects subject to being assigned as hedged entries	Annual periods which began subsequent to 1 July 2009
Modification of IFRS 2 - Group share-based pay ments	Annual periods which began subsequent to 1 January 2010
IFRS improvements (published in May 2008)	Modification of IFRS 5 (clarifies the application of IFRS 5 when control of a subsidiary company is lost) is applicable to annual periods which be gan subsequent to 1 July 2009
IFRS improvements (published in April 2009)	All changes are obligatory for the periods which commenced on 1 January 2010 within the EU (IASB original date: mainly obligatory for peri ods which commenced subsequent to 1 January 2010; some are obligatory for periods which be gan after 1 July 2009)
IFRIC 12 - Agreements concerning the provision of services	Annual periods which commenced subsequent to 1 April 2009 for EU companies (IASB original date: Annual periods which commenced subse quent to 1 de January de 2008)

Denomination	Obligatory application data
IFRIC 15 - Agreements for the construction of buildings	Annual periods which commenced subsequent to 1 de January de 2010 within the EU (IASB original date: Annual periods which commenced subsequent to 1 de January de 2009)
IFRIC 16 - Hedging of a net investment in a busi ness overseas	Annual periods which commenced subsequent to 1 July 2009 within the EU (IASB original date: Annual periods which commenced subse quent to 1 de October de 2008)
IFRIC 17 - Distribution of non-monetary assets to shareholders	Annual periods which commenced subsequent to 1 November 2009 within the EU (IASB origi nal date: Annual periods which commenced subsequent to 1 July 2009)
IFRIC 18 - Transfer of customer assets:	Annual periods which commenced subsequent to 1 November 2009 within the EU (IASB origi nal date: Transfers of assets from 1 July 2009)

The following is a summary of the main new elements introduced through these regulations:

Revision of IFRS 3 - Business Combinations

The revised IFRS 3 further strengthens the previous IFRS 3 model, as well as tackling the problems which had arisen in its application. The following is a summary of the key new elements introduced through this regulation:

• Calculation of goodwill: The revised IFRS 3 states that business combinations are to be entered into accounts using the acquisition method, calculating goodwill as the difference between: the transferred consideration, both retail interests (with a new option of valuing them at their fair value), plus the fair value of any earlier acquired holding and less the identifiable net assets of the acquiring party. This new methodology modifies the previous criteria, partly by allowing the valuation of retail interests at their fair value, as explained above, and partly due to the entering of any earlier acquired shareholding in results at a fair value.
• Transferred consideration: Acquisition costs, such as professional fees, no longer form a part of transferred consideration for the purposes of calculating goodwill; under the new regulation it will be entered into the profit and loss account.

The contingent consideration should be assessed at its fair value at the time of acquisition. The subsequent valuation of these assets is generally entered into the profit and loss account. Modifications to goodwill are only allowed in cases where more accurate information is provided concerning fair value at the time of acquisition and within a time limit of a year, as established as the period for provisional accounting. The requisite that contingent consideration should be assessed at a fair value at the time of acquisition means that an inclusive amount needs to be recognised although payment cannot be considered probable (probability is a factor to bear in mind in assessment).

• Acquisition by phases: IFRS 3 only requires the application of the acquisition method where control has been obtained. Goodwill is only assessed once, applying the method of calculation indicated earlier. For this reason any prior holding is once again assessed at fair value, recognising the corresponding profit or loss. Goodwill is not assessed again although the majority holding increases after the date of acquisition (for example, due to the purchase of non controlling interests). Instead, any transaction without control variation shall be entered into accounts as net equity, in compliance with IAS 27.
• Non controlling interests: Non controlling interests identified at the moment of acquisition and included in the calculation of goodwill can be valued in two ways: as the proportional part of identifiable net assets of the acquiring party or at fair value (in other words, considering their respective goodwill). The method us to evaluate non controlling interests can be determined individually for each operation.
• Re-acquired rights: As part of a business combinations, the acquiring party may reacquire a right (a prior contract between the parties concerned) that had previously been conferred to the acquiring party. Reacquired rights are entered into accounts as intangible assets, independently of goodwill. Capital gains and losses are recognised if the terms and conditions of the contract which establish the reacquired right differ from current market conditions for an identical or similar operation.

The business combination mentioned in Point 4.1 below has been entered into the Groups accounts by applying the these IFRS 3 modifications.

Modification to IAS 27 - Consolidated and individual financial statements

• •Acquisitions and disposals without control changes: The acquisitions and disposals that do not result in control changes are entered into accounts as net equity. Profit and loss are not recognised and are not assessed again with regard to goodwill if there is:
• •An acquisition that increases the parent company's shareholding in an existing subsidiary company; the difference between the consideration paid and the decrease in non controlling interests is recognised as net equity.
• Disposal where the result does not imply a loss of control; the difference between perceived profits and the increase in non controlling interests is recognised as net equity.
• •Loss of control: When control over a subsidiary company is relinquished, the assets, liabilities and non controlling interests of that subsidiary are to be cancelled. fair value of the received consideration should be recognised, as should any distribution of subsidiary company shares to shareholders and the fair value of any remaining investment. The difference between these sums is a capital gain or loss at the moment of sale. Unlike the previous version of this regulation, any remaining shareholding shall once again be assessed at fair value at the moment of disposal.

• Non controlling interests: The corresponding part of overall results is calculated as non controlling interests, even where this results in a debit balance (negative equity).

Given the date on which the Group was established, there have been no transactions of this type in the 2010 financial year which have resulted in the application of these modifications having a relevant impact on these consolidated annual accounts.

Modification of IAS 39 - Financial instruments: recognition and valuation – Aspects subject to being assigned as hedged entries

This modification was introduced in response to requests for clarification on how to determine the part that can be designated as a hedged entry in compliance with IAS 39 regarding account hedging related to inflation and options. Under the terms of this modification:

• If an option is purchased as a hedging instrument, only the intrinsic value and not its time value, reflecting unilateral risk. An option that has been designated as a hedging instrument in its entirety cannot be considered to be fully efficient. An entity may opt to exclude the time value from the designation as a hedging instrument in order to improve hedging efficiency (this part should be registered in results).
• Inflation in hedged entries can be only be covered if the changes to inflation constitute a contractually specified part of cash flow for a recognised financial instrument.

The introduction of this modification has had relevant impact on the Group's consolidated annual accounts in 2010.

Modification of IFRS 2 - Payments based on shares – Payments based on group shares

The modification covers the content of IFRIC and therefore replaces IFRIC 8 - Scope IFRS 2 and IFRIC 11 IFRS 2 – Group and treasury share transactions. The modification provides clarification regarding how a subsidiary company accounts for share-based payments, where, as a result, said company receives goods and services from employers and/or providers, but where another group entity (or a shareholder of another group entity) who is obliged to pay said employers and providers.

In this case, the entity receiving the goods or services in the operation should enter said goods and services into their accounts, regardless of the identity of the group entity (or shareholder) that liquidated the operation and that the operation was liquidated in shares or cash from another group entity.

The entity receiving the goods or services (the recipient) should recognise them as a share-based payment transaction liquidated through equity instruments or in cash, bearing in mind the nature of the concessions and their corresponding rights and obligations.

A share-based payment transaction liquidated through equity instruments shall be considered to exist where: the granted concessions consist of the entity's own equity instruments or the recipient has no obligation to liquidate the share-based payment operation.

In all other circumstances, the recipient shall value the goods and services as a sharebased payment transaction liquidated through cash (liability).

The entity liquidating the operation is to recognise it as a payment liquidated through equity instruments only in such cases where these are the entity's own equity instruments. In others cases, the operation shall be recognised as a cash liquidated payment (liability).

These provisions are applicable regardless of the existence or otherwise of intragroup repayment arrangements. The application of this regulation has had no impact on the 2010 consolidated annual accounts.

IFRIC 12 - Agreements concerning the provision of services

IFRIC 12 covers service concession agreements whereby a private operator (the operator) builds or acquires new or existing infrastructures for use in the provision of public services. More specifically, it is only applicable when a public or private body (the assignor) controls or regulates the services that the operator provides, including those who provides said services and at what price. The assignor also controls any significant residual stake in the corresponding infrastructure on the conclusion of the agreement period or when the useful life of said assets coincides with the concession / licence period.

IFRIC 12 identifies two types of service concession agreements: Those where the operator has a contractual right to receive cash or other financial assets from the assignor in relation to the building of the infrastructure and those where the operator has a right to charge users for accessing the services they provide.

In the case of the first type of agreement, where the operator does not assume demand risk, a financial asset may be recognised for the total amount to be received, to the extent that there is an unconditional contractual to receive cash or other financial assets during the concession period.

In the second type of agreement, where the operator assumes the demand risk, an intangible asset shall be recognised in relation to building services offered to date to the extent that a right to charge public service users is obtained.

The introduction of this interpretation has had no impact on the 2010 consolidated annual accounts.

IFRIC 15 - Agreements for the construction of buildings

IFRIC 15 establishes how real estate promoters should recognise income when they sell units, such as houses or apartments, before construction work has finished. Specifically, it provides guidance as to how IAS 18 - Income or IAS 11 - Building Contracts should be applied.

It concludes that IAS 11 is applicable if the purchaser is capable of specifying the main structural design elements of the property before building work commences, or can specify changes to the structure once construction work has begun. In all other cases, IAS 18 will be applicable.

When IAS 11 is applicable, income is to be recognised in terms o the extent of progress on the building of the property.

When IAS 18 is applicable, it shall be determined whether it is a provision of service or sale of product contract, with income entered into accounts accordingly. Income recognition therefore takes place either at a determined moment or else continuously, depending on the specific facts and circumstances.

The introduction of this interpretation has had no impact on the 2010 consolidated annual accounts.

IFRIC 16 - Hedging of a net investment in a business overseas

IFRIC 16 clarifies three key aspects relating to this hedging:

• Exchange rate risk – a parent company may only designate hedged risk as exchange rate differences derived from a foreign operation in which a different functional currency has been employed. The presentation currency does not expose the entity to any risk of being hedged.

• Hedging instrument – the hedging instrument in the hedging of an investment in a foreign business can be maintained by an entity or various entities within a group.

•Adjustments due to reclassification resulting from disposal of an investment – IFRIC 16 establishes that IAS 21 - The effects of changes in foreign exchange rates may be applied in order to determine the amount that has to be reclassified as profit and loss in relation to the hedged entry, and IAS 39 to determine the amount associated with the hedging instrument.

The introduction of this interpretation has had no impact on the 2010 consolidated annual accounts.

IFRIC 17 - Distribution of non-monetary assets to shareholders

IFRIC 17 covers dividends in kind and concludes: Dividends in kind should be assessed at fair value of the net assets to be distributed. If there is an alternative to cash payment, the entity should assess the probability of the proprietors choosing cash or non-monetary assets, evaluating the dividend based on the principle of fair value. The entity shall recognise the difference between the fair value of assets and book value of the assets distributed in the profit and loss account when undertaking distribution.

This interpretation is not applicable to the distribution of a non-monetary asset which ultimately is under the control of the same part(s) before and after distribution.

The introduction of this interpretation has had no impact on the 2010 consolidated annual accounts.

IFRS Improvement Project (published in May 2008)

If these annual improvements published in May 2008 were applicable to periods which began subsequent to 1 January 2009, there is a modification to IFRS 5, which is described in the following paragraph and which is applicable to the annual period which began on 1 January 2010 (periods which began subsequent to 1 July 2009).

This aforementioned clarification establishes that a subsidiary company's assets and liabilities should be classified as maintained for sale if the parent company has committed itself to carrying out a plan that represents the relinquishment of control over the subsidiary, regardless of whether or not the entity maintains a non controlling interests after the sale.

The application of this modification to IFRS 5 coincides with the criteria applied by the group, with their application not having had a relevant impact on these consolidated annual accounts.

IFRS Improvement Project (published in April 2009)

All the introduced improvements to this project have been obligatorily applicable from 1 January 2010 onwards.

The application of these modifications has had no relevant impact on the 2010 consolidated annual accounts. Specifically, all modifications which had a relevant impact on the estimation and accounting of business combination as mentioned in Point 4.1 below.

The following is a summary of the main modifications to the corresponding International Financial Reporting Standards:

• •Modification to IAS 18: an example has been added to the appendix to the regulation outlining how to determine if an entity acts as the primary or the agent in an operation. It states that there is no obligatory application date for this modification, as this affects a directive which in itself is not obligatory.
• •Modification of IFRS 2: modifies the scope of IFRS 2 in order to exclude the operations whereby an entity acquires goods as part of the net assets acquired in a business combination under joint control or through the addition of a business in order to constitute a joint venture.
• •Modifications to IAS 38: modifies the directives relating to the accounting of intangible assets acquired in a business combination. It states that intangible assets which can only be separated along with an associated identifiable contractual asset or liability should be recognised regardless of goodwill but jointly with the associated entry.

The regulation has also been modified to allow complementary intangible assets with similar service lives to be recognised as a single asset and in order to facilitate examples of assessment techniques used to evaluate fair value of intangible assets acquired in a business combination in order for there not to be an asset market.

• •Modification of IFRIC 9: The modification establishes that embedded derivatives acquired in business combinations under joint control or in the constitution of a joint venture are outside the scope of IFRIC 9 (revision of contracts with embedded derivatives).
• •Modification of IFRIC 16: The restriction preventing a hedging instrument related to net investment hedging held by a foreign transaction subject to hedging has been eliminated.
• •Modification of IFRS 5: The modification stipulates that IFRS 5 cover all breakdowns of discontinuedoperations and non-current assets held for sale or disposal groups classified as held for sale, in order that breakdowns carried out as a result of other regulations will only be applicable if another regulation requires specific breakdowns relating to operations or non-current assets held for sale or disposal groups classified as held for sale, and another regulation requires additional breakdowns of the valuation of entries included within disposal groups beyond the scope of IFRS assessment requirements.
• •Modification of IFRS 8: The modification clarifies that the information by segment relating to total assets is obligatory in the case of information normally communicated to the head of decision taking within an operative context.
• •Modification to IAS 1: It establishes that the conditions applicable to a liability which, at the discretion of the counterpart, may result in liquidation through the issue of equity instruments (convertible instruments), shall not affect its classification as current or non-current.
• •Modification to IAS 7: It also establishes that only expenses which result in the recognition of an asset may be classified as cash flow derived from investment activities.
• •Modification to IAS 17: The previous IAS 17 directive which establishes that the leasing of land for an indefinite period should be normally classified as operative leasing has been eliminated. This directive has been substituted by the requirement that both land and building leasing, whether they are operative or financial leases, are to be valued and classified based on that set out in the regulation, bearing in mind the fact that land normally has an indefinite service life.
• •Modification to IAS 36: The modification also establishes that the largest cash generating unit (or group of units) to which goodwill is to be applied is a segment operative for

the purposes of defining IFRS 8 before applying criteria regarding the application of said regulation.

•Modification to IAS 39: The following clarifications and modifications have been made to the regulation: exemptions to the scope of Paragraph 2 (g) have been clarified. These exemptions are only applicable to forward contracts between the buyer and seller of the shares in order to purchase or sell an acquisition resulting in a business combination at a future acquisition date. Furthermore, the execution period for the contract may not exceed the period normally required to finalise the operation.

The profit and loss of a hedging instrument used to hedge cash flow should be reclassified as net equity in the profit and loss account for the period in which the cash flow subject to hedging has an impact on said profit and loss account.

Additional orientation is provided in order to determine if early loan settlement penalties result in an embedded derivative which needs to be separated.

During 2010 a number of Bank of Spain Circulars have also come into force regarding aspects of accountancy. The following is a summary of the most relevant new aspects that have been introduced:

Bank of Spain Circular 3/2010 of 29 July

This Circular has modified certain aspects of Bank of Spain Circular 4/2004, taking advantage of the accumulated experience gained in the application of criteria used in the assessment of losses due to the impairment of financial assets within a context as complex as that which has been seen in recent years. The changes that have been introduced mean:

•A modification to the system used to estimate the reducing effect of losses due to the impairment of financial assets as a result of delinquency entered into accounts with mortgage guarantees, with it moving from being a system based on the estimation of percentages and differentiated provision calendars applied to this type of asset to becoming a system in which estimates are made by reducing the adjusted value of guarantees from the risk base, establishing specific conditions for these guarantees such as the condition that these be first charge.

The value of these guarantees is to be estimated by applying as series of cuts to the estimated amount bearing in mind the heterogeneity of the guarantees such as the various possibilities of their short-term mobilisation. These cuts range between 20% for finished buildings that are the normal place of residence of the borrower and 50% for plots of developable land.

• Secondly, the various provision calendars used for doubtful risk due to delinquency are to be combined as a single calendar, guaranteeing total credit risk cover (either based on the loan amount or bad credit, or based on the same system after deducting the adjusted value of the guarantees) after 12 months, in other words, the period of time to create a provision for loans has been substantially reduced.

• Thirdly, ex-ante principles of risk management are established which have an influence on aspects such as the correct assessment of the generation of the borrower's cash flow, the role that guarantees should play in the analysis of concessions and the management of credit operations, as well as the conditions that should be introduced in the event of financial restructuring.

These principles and criteria are aligned with credit risk management policies and procedures applied by the Group (see Point 33).

•Finally, certain principles have been established regarding provisions for assets acquired in the payment of debt, providing incentives in the search for management solutions regarding this type of asset, allowing the rapid freeing up of resources invested therein in benefit of the activities that are characteristic of credit institutions.

Bank of Spain Circular 8/2010 of 22 December

This Circular amends the Bank of Spain Circular 4/2004 of 22 December, in order to adapt it to the modifications introduced in the International Financial Reporting Standards through European Commission Directives EC 494/2009 and 495/2009 which, as has been outlined in Points (a) and (b) in the modification to IAS 27, concerning consolidated and separate financial statement, and IFRS 3, regarding business combinations.

Both these regulations taken together represent the conclusion of the second phase of the International Accounting Standards Board's review process that began in 2004 covering business combinations and consolidation that had constituted the basis for the previous Bank of Spain Circular 4/2004, cited above.

Regulations and interpretations which will be in force in coming financial years

The following sets out the details of the International Financial Reporting Standards and the interpretations of these regulations deemed to be applicable by the Group in the future, as approved by the European Union, the application of which will not be obligatory in the 2010 financial year, as well as those Regulations and Interpretations pending endorsement by the European Union and which have therefore not yet been applied by the Group with regard to the drawing up of the Group's consolidated annual accounts for 2010:

(application not obligatory in 2010)
Regulation	Content	Period of obligatory applica tion
Modification of IAS 32 – Finan cial Instruments: Presentation – Classification of share rights	Modifies the treatment of rights, options and warrants in a currency other than the func tional currency	Annual periods which com mence subsequent to 1 Febru ary 2010
Revision of IAS 24 - Informa tion to be given on related par ties	Modifies the definition of "re lated party" and reduces the information requirements on related entities if they are un der the control, joint control or under a significant influence of the government	Annual periods which com mence subsequent to 1 Janu ary 2011
Modification of IFRIC 14 - Early payment, where there is an obligation to maintain a mini mum level of financing	Early payment of contribu tions due to a requirement to maintain a minimum level of financing can be registered as an asset	Annual periods which com mence subsequent to 1 Janu ary 2011
IFRIC 19 - Cancellation of fi nancial liabilities with equity instruments	Treatment of the cancellation of financial liabilities through share issues	Annual periods which com mence subsequent to 1 July 2010
	Regulations not yet approved by the European Union for the purposes of application
IFRS 9 - Financial instruments: Classification and assessment (published in November 2009 and October 2010)	Replaces requirements con cerning the classification and assessment of IAS 39 financial assets and liabilities	Annual periods which com mence subsequent to 1 Janu ary 2013
IFRS improvements (published in May 2010)	Modifications to a series of regulations	Mainly obligatory for periods which commenced subsequent to 1 January 2011; some are obligatory for periods which began after 1 July 2010
Modifications to IAS 12 – Profit tax Recovery of profit tax	The modification establishes exceptions to the general prin ciple of treating deferred taxes in the case of deferred taxes originating from real estate in vestment	Applicable to annual periods which commence subsequent to 1 January 2012
Modification of IFRS 7 - Finan cial instruments: Breakdowns – transfers of financial assets (published in October 2010)	Extends and strengthens the breakdown of financial asset transfers	Annual periods which com mence subsequent to 1 July 2011

New regulations, modifications and interpretations approved for use in the European Union

The following is a summary of the main new elements introduced through these regulations and interpretations:

Modification of IAS 32 - Financial instruments: Presentation - Classification of share rights

The modification represents a change to the treatment of rights, options and warrants in a currency other than the functional currency. If the issue of rights, options or warrants represents a shareholder operation, where they act as proprietors, if these rights, options or warrants are offered to all existing shareholders who possess the same class of shares, in proportion to their respective holdings, and if the offer consists of a set number of the entity's equity instruments for a set financial amount, the issue is to be recognised as net equity, regardless of the currency of the exercise price.

Whilst this modification could have been applied voluntarily in 2010, as permitted by the regulation and approved for use in the European Union, it has not been applied in drawing up the Group's consolidated annual accounts for 2010. It was rather felt that in any event its application would have had no significant effect with regard to the drawing up of the Group's consolidated annual accounts.

Revision of IAS 24 - Information to be given on related parties

The revision of IAS 24 simplifies the definition of the related party, eliminating certain contradictions and reducing information requirements for Government-related bodies.

The revised definition is slightly broader than the earlier IAS 24; for example, it explicitly defines reciprocal related parties as including the following: two joint ventures that belong to a third party and a joint venture and a company associated with the same third party (but not two associated companies).

The definition of the degree of kinship has been reworded to clarify that it includes the wife or husband of the person or the partner of those in de facto couples, as well as the children (including adults) and persons dependent on said person, husband/wife or partner.

Government-related entities are defined as bodies under the control, joint control or under a significant influence of the Government (or its agencies or similar organisations). The previous version of the regulation makes no specific reference to Government-related bodies, and in practice, certain entities have difficulties in identifying all the parties related to the Government and the transactions with them. The revision of this regulation exempts the entity from general requirements to reveal information relating to operations with a Government that controls, co-controls or exercises a significant influence on the entity, or any other body under the control, joint control or under a significant influence of said government.

The current regulation includes an explicit reference to its application to dealings between an entity and its related parties, as well as any pending transactions and balances.

The revised regulation is of retroactive application and may therefore require the reformulation of information on comparative periods.

Whilst this modification could have been applied voluntarily in 2010, as permitted by the regulation and approved for use in the European Union, it has not been applied in drawing up the Group's consolidated annual accounts for 2010. It was felt that in any event its application would have had no significant impact on the revealing of information on related parties as outlined in Points 7 and 42 of the Group's consolidated annual report.

Modification of IFRIC 14 - Early payment, where there is an obligation to maintain a minimum level of financing

An unforeseen consequence of IFRIC 14 was that, in certain circumstances, entities may not recognise voluntary minimum early payments to pension plans as an asset. The modification of the interpretation covers this question and is only applicable in specific cases whereby an entity is subject to a minimum financing obligation and making an early payment in order to satisfy said obligation. In such cases, profits from early payment may be treated as an asset.

Whilst this modification could have been applied in 2010, as permitted by the regulation and approved for use in the European Union, it has not been applied in drawing up the Group's consolidated annual accounts for 2010. It was rather felt that in any event its application would have had no significant impact on the Group's consolidated annual accounts.

IFRIC 19 - Cancellation of financial liabilities with equity instruments

The main new characteristics introduced by the regulation are as follows:

IFRIC 19 offers orientation for those cases in which all or part of a liability is cancelled through the issue of equity instruments, an operation normally known as a debt for equity swap. The interpretation contains directives regarding the accountancy treatment to be applied to the issue of equity instruments (the debtor).

In this case, the issued equity instruments are assessed at fair value; if this fair value cannot be determined reliably, evaluation should reflect the fair value of the cancelled liability. Any difference between book value prior to the cancelled financial liability and the value of the equity instrument is recognised in profits and losses.

When the issue of an equity instrument only results in the cancellation of part of the financial liability, the debtor should assess if any consideration is related to the modification of the terms of the pending liability. If this is the case, the fair value of equity instruments should be distributed between the cancelled liability and the pending liability.

If the terms of the pending liability are substantially modified, it should be cancelled and recognised as a new liability as outlined in IAS 39.

Whilst this interpretation could have been applied voluntarily in 2010, as permitted by the regulation and approved for use in the European Union, Group managed decided against this option as it was felt that its application would have had no significant impact on the Group's consolidated annual accounts for 2010.

IFRS 9 - Financial instruments:

The publication of the first part of IFRC 9 concerning the classification and assessment of financial assets and liabilities is the first step in a three-phase process designed to replace IAS 39.

The current IFRS 9 replaces IAS 39 with regard to the classification and assessment of financial assets and liabilities (part of which was published in November 2009) and financial liabilities (published in October 2010). The regulation published in October 2010 also includes requirements concerning the recognition and cancellation of accounts which in essence are the same as in IAS 39. It is expected that throughout 2011 the remaining phases of IFRS 9 will be added (impairment and hedging) meaning that it can finally fully replace IAS 39.

Financial assets:

•Classification: The new regulation requires that financial assets are to be classified at the initial moment of registration as valued at amortized cost or fair value.

• The classification depends on the manner in which an entity manages its financial instruments (its business model) and the existence or otherwise of specifically defined contractual cash flow. If the aim of this business model is maintain a financial asset with a view to charging contractual cash flow, and according to the conditions of the contract or cash flow is received on specific dates that exclusively constitute payments of principal sum plus interest on the principal sum, the financial asset may be valued at amortized cost. All other financial assets are assessed at fair value.

•An entity may choose to assess a financial asset in its initial entry at fair value with alteration to the profit and loss account if that allows the elimination or reduction of an accounting mismatch.

Equity instruments:

•All equity instruments are assessed at fair value. To this end, the IFRS 9 differs from IAS 39 in that it allows cost criteria to be applied where fair value cannot be determined reliably.

• However, IFRS 9 establishes that in certain circumstances, the cost criteria may be an approximate estimate of fair value.

Subsequent valuation: The resulting profit and loss resulting from subsequent valuation of fair value is to be recognised profit and loss account. Nevertheless, an entity may choose to present profit and loss derived from investment as an equity instrument for consolidated comprehensive income (equity). This decision is irrevocable and is to be taken for each individual asset. It does not allow reclassification of the profit and loss account recognised as equity. This option is not applicable in the case of investments that are maintained for negotiating purposes.

Derivatives: Where there is a derivative that is implicit in a principal financial asset, the two elements of the hybrid instrument should not be separated, instead applying the classification regulations outlined above.

Reclassification: If the aim of an entity's business model suffers significant changes, reclassification will be obligatory. However it does stipulate that this circumstance only occurs very rarely.

Value depreciation

• IAS 39 requirements relating to value depreciation are still applicable at that moment.

• However, IAS 39 covers four categories of financial assets with differing requisites for value depreciation depending on the category. IFRS 9 only includes two categories, cost amortization and fair cost, and consequently the requirements regarding value depreciation have been simplified.

Financial liabilities

• The categories of the new IFRS 9 are basically the same as in IAS 39. In general financial liabilities are measured at amortized cost, except in the case of those financial liabilities that are maintained for negotiation purposes, such as derivatives for example, measured at fair value with changes in the profit and loss account.
• There is the option to initially and irrevocably designate a liability for assessment at fair value with changes in the profit and loss account if this would eliminate or reduce accounting mismatches, if they are a part of a portfolio whose performance is managed and evaluated on the basis of its fair value in accordance with a documented strategy or which contains an implicit derivative and is designated to be assessed in this way.

• One of the changes that have been made with respect to IAS 39 refers to liabilities assessed at fair value (only in the case of liabilities that are not derivatives or liabilities that are maintained for negotiation purposes). With liabilities of this kind, the entity should present any variation from fair value, excluding that derived from the entity's own credit risk, in the profit and loss account, presenting the portion of this variation due exclusively to the entity's own credit risk as "Other comprehensive profit or loss".

Account recognition and cancellation: Account cancellation criteria for both financial assets and liabilities are similar to those applied to date through IAS 39.

Transition

• The date set aside for obligatory application is 2013. Although the regulation caters for early application, at the moment this is not possible within the European Union as it has not been endorsed. In fact, the European Financial Reporting Advisory Group (EFRAG) has deferred the endorsement process until the new regulations have been published in full.

• IFRS 9 has therefore not been applied in drawing up the Group's consolidated annual accounts.

Group management is currently undertaking analysis and estimates relating to the impact that the application of this regulation might have on the Group's consolidated accounts, meaning that it is not possible to offer a fair estimate of their effect.

Modification of IFRS 7 - Financial instruments: Breakdowns - Financial asset transfers

The breakdown requirements applicable to asset transfers have been reinforced, both those where the assets cannot be cancelled from the balance sheet and those that are mainly classified as cancelled in the balance sheet. The entity still maintains some ongoing implication.

In the case of the latter, representing the majority of new breakdowns, by way of example, information should be provided outlining the maximum loss which may result from the ongoing implication, cash outflow for the reacquisition of assets with analysis of maturity, income and expenses resulting from this ongoing implication within the period and accumulated expenses, as well as more extensive qualitative information regarding the transaction which results in the cancellation of financial asset accounts (a description and the nature of the ongoing implication, risks that the entity is exposed to etc.). Whilst this regulation may be used prior to its obligatory application, it has not been applied in drawing up the Group's consolidated annual accounts for 2010 as it should be borne in mind that its application is still not possible as its use has not been approved in Europe. It is not felt that the application of this regulation would not have a relevant impact for the Group beyond an increase in certain breakdowns of financial asset transfers.

IFRS improvements (published in May 2010)

Whilst early application is permitted, these improvements are not obligatory until the periods which commenced subsequent to 1 January 2011 or for periods which commenced subsequent to1 July 2010. These modifications have not been applied by the Group for this financial year, as it was felt that its application would have had no significant impact on the Group's consolidated annual accounts for 2010.

The following is a summary of the key new elements introduced through these regulations and interpretations:

• •Modifications to IFRS 3: The following clarifications and modifications have been made to the regulation:
• The free election of the assessment method for non controlling interests is limited to existing holdings that give stakeholders the right to a proportional part of the entity's net assets in the event of liquidation (for example, ordinary shares). All other components of non controlling interests (for example, share options) are assessed at fair value on date of acquisition, unless other valuation criteria are required in compliance with IFRS.
• There is greater guidance regarding the treatment of transactions with payments based on the acquired parties shares, as well as the substitution of plans undertaken voluntarily by the acquiring party at the moment of acquisition.
• The temporary provisions stipulate the contingent considerations for acquisitions undertaken prior to the application of the revised IFRS 3 are to be entered into the accounts in compliance with the requirements of the previously regulation applicable prior to revision.
• •Modifications to IAS 27: It establishes the effective dates of parallel modifications IAS 21, IAS 28 and IAS 31 derived from modifications to IAS 27 instituted in 2008.
• •Modifications to IFRS 1: The following clarifications and amendments have been made to the standard:
• Describes the disclosures that are required when an entity alters its accounting policies or applies the exemptions in IFRS 1 in the period elapsing between the publication of its

first interim financial statement under the IFRS and its first financial statement under the IFRS; specifies that IAS 8 does not apply to these amendments.

• Tangible fixed assets and intangible assets used in regulated activities may be included in the amount calculated according to the previous GAAP (as an estimated cost) and be subjected to impairment tests on the date of transition to the IFRS.
• •Modification of IFRS 7: Recommends that the qualitative disclosures be reinforced and clarifies the level of disclosure required for credit risk and collaterals.
• •Modification to IAS 1: Clarifies the amounts that should be disclosed in the statement of changes in net equity. Indicates that an analysis should be presented for each component of OCI either in the Statement of Changes in Net Equity or in the report. The dividends distributed to shareholders and the dividend per share value should also be included in the report or in the Statement of Changes in Net Equity.
• •Modification to IAS 34: The amendment specifies the significant facts and operations that should be included in the interim financial information.
• •Modification of IFRIC 13: Clarifies how to measure the fair value of customer loyalty award credits ("points").

Amendments to IAS 12 (Income Tax): recovering underlying assets

This amendment explains the treatment that should be applied, as an exception to the general principle, for entering deferred taxes from investment properties being measured under the fair value model provided in IAS 40.

As this is not the criterion that is applied by the Group for recording its investment property, the entry into force of this amendment is not expected to have any impact on its financial statements.

b) Accounting standards and valuation rules

To prepare the consolidated annual accounts the generally accepted accounting rules and regulations reported in Note 5 called "Accounting principles and valuation rules applied" have been followed.

Unless indicated otherwise, these consoldiated annual accounts are reported in thousands of euros.

c) Opinions and estimates used

The information included in these consolidated annual accounts is the responsibility of the Bank's administrators, having used, as appropriate, estimates for the valuation of certain assets, liabilities, revenue, expenses and undertakings made by the Group's Senior Management and ratified by its administrators. These estimates refer mainly to:

• losses from the impairment of certain assets

• the service life applied to tangible and non-tangible assets

• the fair value of certain unlisted assets
• the actuarial hypothesis used to calculate liabilities and undertakings for post-employment remuneration

- the calculation of allowances.

Given that these estimates were made in accordance with the best information available at 31 December 2010 on entries affected, it is possible that events which could occur in the future require their modification in any context over the next few years. This modification will be made, as appropriate, prospectively and recognising the effects of the change in estimate in the corresponding P&L account.

d) Consolidation principles

The Group's definition has been made in accordance with that indicated by applicable accounting regulations. All Dependent, Multigroup, and Associated Entities are partiallyowned entities.

Dependent entities comprise a decision unit with the parent company which corresponds to those for which the parent company has, directly or indirectly by means of other partially-owned entities, the capacity to exert control. Said significant influence is generally, albeit not exclusively, manifested in the holding of a participation, either directly or indirectly through one or more partially-owned entities, of 50% or more of the voting rights in the partially-owned company. Control is understood as the power to lead financial and operational policies by means of a partially owned entity with the purpose of obtaining profits from their activities and may be exercised although the aforementioned participation percentage is not maintained.

Relevant information on holdings in Subsidiary Entities as at 31 December 2010 and 2009 is included in Note 13. In the financial year 2010 there was no company considered to be a subsidiary in which the Group's holding was lower than 50%.

The overall integration procedure for the annual accounts of dependent entities has been applied to the consolidation process. Consequently, all significant balances and transactions performed between the consolidated entities have been eliminated in the consolidation process. Furthermore, the participation of third parties in the Group's net worth is presented under the heading of non-controlling interests on the consolidated balance sheet and the part of the income for the year attributable to them is shown under the heading of earnings attributed to non-controlling interests on the consolidated profit and loss account.

Furthermore, the consolidation of the results generated by the companies acquired by the Group during the financial year is performed taking into account only those relative to the period between the date of acquisition and year end. Similarly, the consolidation of the results generated by the companies disposed of by the Group during the financial year is performed taking into account only those relative to the period between the beginning of the financial year and the date of the disposal.

Partially owned entities which, as they are not dependent entities, are jointly controlled by the group and by other entities not related to the group and joint businesses, are multigroup entites. Contractual agreements by virtue of which two or more entities or participants perform transactions or maintain assets in such a way that any financial or operational strategic decision which affects them requires the unaminous consent of all participants, without these transactions or assets being integrated in financial structures different from those of the two participants, are joint businesses.

The equity method for annual accounts of multigroup entities has been applied in the consolidation process, applying the exceptions considered in accounting regulations in force.

The relevant information on stockholding in multigroup companies at 31 December 2010 and 2009 is included in Note 13.

Associates are those over which the Group has a significant influence. Said significant influence is generally, albeit not exclusively, manifested in the holding of a participation, either directly or indirectly through one or more partially owned entities, of 20% or more of the voting rights in the partially owned company.

The equity method for associated entities has been applied to the consolidation process. Consequently, investments in associates have been valued by the fraction represented by the group's participation in its capital once the dividends received from these and other write-offs have been considered. The results of the transactions with an associated entity are eliminated as regards the proportion represented by the group's participation. If an Associated Enterprise's book balance is negative, it is stated as zero on the Group's consolidated balance sheet unless the Group is under an obligation to support it financially.

Relevant information on holdings in Associate Entities as at 31 December 2010 and 2009 is included in Note 13. In the financial year 2010 there was no investment in companies considered to be associates in which the Group's holding was lower than 20%.

Note 13 includes information on the most significant acquisitions and disposals, respectively, during the financial year in relation to stockholding in Dependent, Multigroup and Associates.

In the third quarter of 2010, Bankinter, S.A. set up the company Gneis Global Services, S.A., which has as its corporate purpose the provision of business advisory and consultancy services for the design and implementation of technological and operational systems. This company is globally integrated in the Bankinter Group financial statements.

Those transactions by means of which two or more entities or economic units in one single entity or group of companies merge together, are considered combinations of businesses.

As at 31 December 2010 and 2009, Bankinter Vida was consolidated by the equity accounting method; the percentage holding amounts to 50%.

e) Comparison of information

In accordance with business law, the Administrators submit the information contained in this report on the financial year 2009 exclusively for the purposes of comparison with the 2010 figures and therefore it does not constitute the Group's consolidated Annual Accounts for the 2009 financial year.

f) Shareholders' equity

Bank of Spain Circular 3/2008, of 22 May, to banks, on determining and controlling minimum shareholders' equity, regulates the minimum shareholders' equity to be maintained by Spanish credit institutions - both individually and as a consolidated group - and the way in which said shareholders' equity should be determined, as well as the various processes for capital self-assessment to be carried out by the institutions and the public information the aforementioned institutions should forward to the market.

During financial year 2010, the Group implemented the aforementioned Circular, using the internal ratings-based approach (IRB Approach), following the corresponding official validation, for calculating the equity requirements in terms of the credit risk of certain credit exposures, and the standard approach for the rest of the exposure. In subsequent financial years, in accordance with the progressive implementation plan described in Rule 24 of Circular 3/2008 and following authorisation from the Bank of Spain, new portfolios will be incorporated into the IRB Approach.

The goal set by the Group's Directors in relation to equity management consists of complying at all times with the applicable regulations, in accordance with the risks that are inherent to its activity and the context in which it operates, while simultaneously pursuing maximum efficiency in said process. Equity consumption, together with other return and risk variables, is considered to be a fundamental variable in the analyses associated to the Group's decision-taking on investment.

In order to meet this goal, the Group has a series of policies and processes for managing equity, the main guidelines in which are:

• The Directorate of Shareholder Equity, which falls under the Capital Market Division, performs monitoring and control of solvency ratios, and features warning systems that ensure that the applicable rules are being applied at all times and that the decisions made by the various departments and units in the entity are consistent with the targets set for compliance with minimum shareholders' equity. Accordingly, there are contingency plans to ensure that the limits laid down in the applicable regulations are met.

• Both in the planning and analysis and monitoring of the Group's transactions it is considered that the impact of any decision-making may be a key factor on the Group's shareholder equity and on the consumption-profitability-risk ratio.

Thus, the institution considers shareholders' equity and the requirements relating to shareholders' equity laid down under the aforementioned regulations as a fundamental item in its management that affects both the institution's investment decisions, the analysis of the viability of any transaction, strategy for the distribution of results by subsidiaries and issues by the institution and the Group, etc.

Bank of Spain Circular 3/2008, of 22 May, establishes which elements should be counted as shareholders' equity, for the purposes of complying with the minimum requirements laid down in said regulation. For the purposes of the above rule, shareholders' equity is classified as basic and second category shareholders' equity and it differs from the shareholders' equity that is calculated in accordance with the terms of the EU-IFIS as it considers certain items as such and incorporates the obligation to deduct others that are not contemplated in the aforementioned EU-IFIS. In addition, the methods to be implemented for the consolidation and appraisal of holdings for the purposes of calculating the Group's minimum shareholders' equity requirements differ, in accordance with standing regulations, from those implemented in drawing up these annual consolidated accounts, which also leads to the existence of differences for the purposes of calculating shareholders' equity under one regulation or the other.

As regards the conceptual definitions, the Group's management of its shareholders' equity is in compliance with the terms of Bank of Spain Circular 3/2008. Accordingly, the Group deems computable shareholders' equity to be as indicated in rule 8 of Bank of Spain Circular 3/2008.

The minimum shareholders' equity requirements laid down in the aforementioned Circular are calculated according to the Group's exposure to credit risk and dilution (depending on the assets, commitments and other memorandum accounts these risks present, in accordance with their amounts, characteristics, counterparts, guarantees, etc.), to counterpart and position and liquidation risk corresponding to the financial assets and liabilities held for trading, to the exchange and gold position risk (depending on the net global position in foreign currency and the net gold position) and to operational risk. In addition, the Group is also subject to compliance with the risk concentration limits laid down in the aforementioned Circular and the Group is subject to compliance with the internal Corporate Governance obligations, capital self-assessment and measurement of the interestrate risk and the public information obligations to be forwarded to the market, which are also laid down in the aforementioned Circular. With a view to guaranteeing compliance with the aforementioned targets, the Group performs integrated management of these risks, in accordance with the aforementioned policies.

At 31 December 2010 and 2009 and in these financial years, the computable shareholders' equity of the Group and of the Group's institutions subject to this obligation, considered on an individual basis, exceeded the requirements laid down under said rules.

The consolidated shareholders' equity as at 31 December 2010 and 2009 and the pertinent capital ratios, are shown in the following table:

Thousand euros	31-12-2010 (*)	31-12-2009(*)
Capital and Reserves	2,435,576	2,351,966
Preference shares	343,165	343,165
Treasury shares	(1,753)	(538)
Intangible and other assets	(339,044)	(308,715)
Other deductions	(174,658)	(100,724)
Tier 1	2,263,284	2,285,151
Revaluation reserve	98,698	111,161
Subordinated finance	706,354	713,566
Generic insolvency funds	76,852	149,307
Other deductions	(174,658)	(100,724)
Tier 2	707,245	873,309
Total Equity	2,970,529	3,158,461
Risk-weighted assets	30,963,938	30,403,572
Tier 1 (%)	7.31	7.52
Tier 2 (%)	2.28	2.87
Capital ratio (%)	9.59	10.39
Surplus resources	628,208	603,774

(*) In 2010 and 2009, actual ratios estimated on the basis of the Circular on Calculating and Controlling Minimum Shareholders' Equity published by Spain's Central Bank. The lower limit of the shareholders' equity requirements provided in Transitional Provision Eight of the aforementioned Circular is not applied. Internal models are applied to the following portfolios: Home mortgages for private individuals, Small companies, Medium size companies, Project Finance and Unsecured loans.

In January 2011, the Ministry of Finance and Revenue published its draft of the "Reinforcement Plan for the Financial Sector", which among other targets, contemplates bringing forward the solvency requirements laid down in Basel III and establishes certain minimum requirements for basic capital to be reached before the autumn of 2011.

On 18 February 2011, the Cabinet of Ministers passed a Royal Decree-Law designed with two priority aims in mind: to strongly reinforce the solvency of credit institutions and their ability to withstand even the most adverse and unlikely of scenarios, and to facilitate funding for them, thereby guaranteeing that credit will be channelled to the real economy and therefore, towards growth and employment.

This Royal Decree-Law complements measures taken in the last year in the financial sector, such as the reform of the governing bodies of the Savings' Banks or the stress tests performed last July, and it will provide a boost in the final stage of restructuring the Spanish financial sector, so that after the downturn is over, it may be ultimately strengthened in terms of solvency, transparency and ability to capitalise on the troughs in the economic cycle.

The Board of Management of Bankinter, SA, at its extraordinary meeting of 7 March 2011, agreed, on the basis of the permit granted by the General Meeting of 23 April 2009, to issue Subordinated Bonds Necessarily Convertible to new issue Bankinter, SA shares in two series, Series I and Series II, for a total combined value of 406,000,000€ and a threeyear period between the date of issue and the payout date-.

The total amount of the issue shall count for the purposes of the Bankinter Group's main capital ratio, allowing to reach 8.23% of main capital, in accordance with the requirements of Royal Decree-Law 2/2011, of 18 February, to reinforce the financial system, which imposes on Banks the need to have a main capital ratio of over 8%. The Bankinter Group's main capital ratio on 10 March 2011, calculated according to the rules contained in the Royal Decree-Law mentioned above, will be 6.92%.

g) Minimum reserve coefficient

In accordance with the monetary circular 1/1998 of 29 September, with effect 1 January 1999, the ten-year cash flow coefficient is repealed and replaced by the minimum reserve coefficient.

At 31 December 2010 and 2009, in addition to over years 2010 and 2008, the consolidated entities complied with the minimum amounts for this coefficient required by applicable Spanish regulations.

The amount of cash the group held immobilised in Spain's Central Bank account for these purposes stood at 90,659 and 406,824 thousands of euros at 31 December 2010 and 2009 respectively, while the obligation of various group companies bound by this coefficient to maintain the balance required by applicable regulations to comply with the aforementioned minimum reserves coefficient is calculated on the average of closing balances for the day held by each one in this account during the maintenance period.

h) Information on deferrals in payments to suppliers. Third additional provision. "Duty of information" in Act 15/2010 of 15 July

In compliance with the terms of Act 15/2010, of 5 July, amending Act 3/2004, of 29 December, defining measures to combat default in trade operations, which was implemented by the Resolution of 29 December 2010 by the Spanish Ministry of Finance and Revenue's Institute of Accounting and Auditing, on the information to be included in the report accompanying annual financial statements in relation to deferrals in payments to suppliers in trade operations, it should be noted that as at 31 December 2010, the Bank does not have any deferred payments to suppliers pending payment and deferred for longer than the legal timeframe for payment.

The legal timeframe has been defined in accordance with that which corresponds depending on the nature of the good or service received by the company under the terms of Act 3/2004, of 29 December, defining measures to combat default in trade operations.

3. Distribution of earnings for the year.

The proposal to distribute the profits of Bankinter, S.A. for the year ending 31 December 2010, made by the bank's administrators and subject to the approval of the General Shareholders Meeting is as follows:

Thousand euros	31-12-10	31-12-09
Distribution:
Voluntary reserves	2,619	133,087
Interim dividend	74,512	127,202
Earnings distributed	77,131	260,289
Profit/(loss) for the year	77,131	260,289

The breakdown of the interim dividends distributed and the corresponding liquidity statements are given in note 22.

The proposed distribution of earnings for the financial year ending 31 December 2010, for the subsidiaries of Bankinter, S.A. drawn up by their respective Directors and pending approval by the respective General Shareholders Meetings is as follows:

Thousand euros	Earnings	Dividend	Reserves	Applications
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	433	-	433
Bankinter Servicios de Consultoría, S.A.	(4)	-	(4)	-
Bankinter Gestión de Activos, S.A., S.G.I.I.C.	11,808	11,808	-	-
Hispamarket, S.A.	85	-	85	-
Intermobiliaria, S.A.	(43,022)	-	(43,022)	-
Bankinter Consumer Finance, S.A., E.F.C	(3,352)	-	(3,352)	-
Bankinter Capital Riesgo, S.G.E.C.R, S.A.	26	-	26	-
Bankinter Sociedad de Financiación, S.A.	180	-	180	-
Bankinter Emisiones, S.A.	84	-	84	-
Bankinter Capital Riesgo I Fondo Capital	112	-	112	-
Línea Directa Aseguradora, S.A.	66,260	-	66,260	-
Arroyo Business Consulting Development, S.L.	(1)	-	(1)	-
Canarias Excelencia en SIM, S.L.	-	-	-	-
Relanza Gestión, S.A.	56	-	56	-
Gneis Global Services S.A.	474		474

The distribution of earnings for the financial year ending 31 December 2009 for the subsidiaries of Bankinter, S.A., approved by their respective General Shareholders Meetings, was as follows:

Thousand euros	Earnings	Dividend	Reserves	Applications
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	156	-	156
Bankinter Servicios de Consultoría, S.A.	(4)	-	(4)	-
Bankinter Gestión de Activos, S.A., S.G.I.I.C.	11,304	11,304	-	-
Hispamarket, S.A.	(624)	-	(624)	-
Intermobiliaria, S.A.	(46,748)	-	(46,748)	-
Bankinter Consumer Finance, S.A., E.F.C	5,163	-	5,163	-
Bankinter Capital Riesgo, S.G.E.C.R, S.A.	5	-	5	-
Bankinter Sociedad de Financiación, S.A.	439	-	439	-
Bankinter Emisiones, S.A.	499	-	499	-
Bankinter Capital Riesgo I Fondo Capital	(540)	-	(540)	-
Línea Directa Aseguradora, S.A.	66,427	-	66,427	-
Arroyo Business Consulting Development, S.L.	(1)	-	(1)	-
Canarias Excelencia en SIM, S.L.	-	-	-	-
Relanza Gestión, S.A.	20	-	20	-

4. Deposit Guarantee Fund

Bankinter, S.A. is a member of the Deposit Guarantee Fund. The cost during financial years 2010 and 2009 of the company's contributions to the Deposit Guarantee Fund was 9,703 and 9,774 thousand euros, respectively. These costs are included under the heading of 'other operating charges' in the P&L account (Note 33).

5. Accounting standards and valuation rules used

These consolidated annual accounts have been drafted in accordance with the accounting standards and valuation rules currently in effect. A summary of the most significant is given below:

a) Going-concern principle

During the preparation of the consolidated annual accounts, it has been considered that the management of the entities included in the Group will continue in the foreseeable future. Therefore, application of accounting standards is not aimed at determining the consolidated net worth for the purposes of its overall or partial transmission or the amount resulting in case of its settlement.

b) Accrual principle

These consolidated Annual Accounts, with the exception of the Statement of cash flows, have been prepared based on the real flow of goods and services regardless of the payment or receipt dates, with the exception of the interest relating to loan and receivables and other non-investment risks with borrowers deemed to be impaired, which are carried in profit or loss at the time they are collected.

The accrual of interest in both active and passive transactions with settlement periods superior to 12 months, are calculated by the financial method. For transactions with a lower period, accrual is performed by the financial or linear method.

Following general financial practice, transactions are recorded on the date they occur, which may differ from their corresponding value date, based on which financial revenue and expenses are calculated.

c) Transactions and balances in foreign currency

Balances and transactions in foreign currency have been converted into euros using the following conversion rules:

• Monetary assets and liabilities have been converted into euros using average exchange rates for the foreign currency market at year end.
• Monetary entries valued at historical cost have been converted into euros using the exchange rates on the date of acquisition.

• Non-monetary entries valued at fair value have been converted into euros using the exchange rates on the date the fair value was determined.

• Revenue and expenses have been turned into euros using exchange rates for the date of the transaction (using the average exchange rates for the year for all transactions performed that year). Amortisations have been converted into euros at the exchange rate applied to the corresponding asset.

Exchange rate differences have been recorded in the consolidated P&L account except for the discrepancies that arose in non-monetary entries valued at their fair value whose adjustment to this fair value is computed in net worth.

d) Cash flow statements

The bank used the indirect method to prepare cash flow statements, which have the following expressions which incorporate the following classification criteria:

• Cash flows: inflow and outflow of cash and cash equivalents; these equivalents are deemed to be short-term investments with high liquidity and a low risk of alterations to their value. Cash and equivalents are deemed to be the balances shown under the headings 'Cash in hand and deposits at central banks' on the attached balance sheets.
• Operating activities: typical activities of credit institutions, and other activities that cannot be classified as investment or financing.
• Investment activities: acquisition, transfer or provision by other means of long-term assets and other investments not included in cash and cash equivalents.
• Financing activities: activities that produce changes in the size and composition of liabilities and equity and which do not form part of operating activities.

e) Consolidated other recognised income and expenses

This section of the statement of changes to consolidated net worth reports the income and expenses generated by the group as a consequence of its activity during the year. A differentiation is made between those recorded as results in the consolidated P&L account for the year and other income and expenses recorded, in accordance with that set out in current regulations, directly in consolidated net worth.

Therefore, this statement shows:

a. The consolidated income for the year.

b. The net value of the income and expenses definitively recognised in consolidated net worth.

c. The net amount of comprehensive income and expenses definitively in consolidated net worth.

d. The corporate tax accrued by the concepts indicated in letters b) and c) above except for valuation adjustments originating in participations in associated or multigroup companies valued by the equity accounting method, reported in net terms.

e. The total consolidated comprehensive income and expenses, calculated as the sum of the above sections, giving a separate account of the amount attributed to the parent entity and the one corresponding to non-controlling interests.

The amount of income and expenses corresponding to entities valued by the equity accounting method recorded directly against net worth are reported in this statement, regardless of its nature, under the heading "Entities valued by the equity accounting method".

Variations in comprehensive income and expenses in net worth as valuation adjustments are broken down into:

• Valuation gains (losses): this shows the value of the income, net of the expenses arising in the period, recognised directly in the consolidated net worth. The amounts recognised over the year for this entry are kept in this entry although in the same year they are transferred to the consolidated P&L account, at the initial value of other assets or liabilities or reclassified in another entry.

• Amounts transferred to the profit and loss account: this covers the amount of profit or loss by valuation recognised previously in consolidated net worth, although it is the same year, recognised in the consolidated P&L account.

• Amount transferred to the initial book value of the hedged entries: this records the value of the valuation gains or losses previously recognised in the consolidated net worth, even though they are recorded in the same year, as recognised in the initial value of the assets or liabilities as a result of cash flow hedges.

• Other reclassifications: this records the value of the transfers made in the period between entries for valuation adjustments in accordance with the criteria provided in current regulations.

The amounts of these entries are reported by gross amount and, except as indicated above for entries corresponding to valuation adjustments for the valuation of entities valued by the equity accounting method, they show their corresponding tax effect under the heading "Corporate tax" of the statement.

f) Consolidated statement of total changes to net worth.

This part of the statement of changes to consolidated net worth shows all the amounts carried in net worth, including those that arise from changes to accounting rules and the correction of errors. This statement therefore reveals a conciliation of the book value at the start and end of the year of all entries which comprise consolidated net worth, grouping together the movements based on their nature in the following entries:

• Adjustments for changes in accounting rules and correction of errors: which includes changes to consolidated net worth arising as a result of the retroactive restatement of the balances of the financial statements arising from changes to accounting rules or the correction of errors.

• Income and expenses recognised in the period: this includes, in aggregate form, the total of the entries recorded in the other recognised income and expenses referred to above.

• Other variations in net worth: this records all other entries carried under net worth, such as increases or decreases in the allowance fund, distribution of earnings, transactions with own equity instruments, payments with equity instruments, transfers between net worth entries, and any other increase or decrease in the consolidated net worth.

g) Recognition, valuation, and classification of financial instruments

Financial assets and liabilities are recognised when the group converts a portion of the contractual agreements in accordance with the provisions of these agreements.

The following is a breakdown of the financial instruments recorded at fair value in accordance with the procedure used to obtain the price:

Thousand euros		2010			2009
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Trading portfolio (assets) and other financial assets at fair value with changes to the profit and loss ac count	902,046	1,009,515	-	1,911,561	1,651,429	1,949,773	-	3,601,202
Financial assets available for sale	1,799,501	1,300,660	54	3,100,215	2,223,363	1,121,702	-	3,345,065
Hedge derivatives (assets)	-	171,917	-	171,917	-	189,987	-	189,987
Trading portfolio (liabilities) and other financial lia bilities at fair val ue with changes to the profit and loss account	1,124,395	907,779	-	2,032,174	890,137	879,755	-	1,769,892
Hedge derivatives (liabilities)	-	40,441	-	40,441	-	65,010	-	65,010

The column "Level 1" includes the figures for financial instruments whose fair values are obtained from listed prices on active markets for the same instrument, i.e. without modifying or reorganising differently. The column "Level 2" includes the figures for financial instruments whose fair values are obtained from listed prices on active markets for similar instruments or other valuation techniques in which all significant inputs are based on observable market data. The column "Level 3" includes figures for financial instruments whose fair values are obtained from valuation techniques in which a significant input is not based on observable market data.

Financial instruments at fair value and determined by listings published on active markets comprise the debt, private fixed income, variable income and organised market derivatives (corresponding to valuation level 1)

In cases where listings cannot be observed, the valuation of different positions is determined using models compared to the market. This section includes two different cases. In general, inputs used are observable market data (at Level 2), and, on certain occasions, when the data are not observable, estimates are used (Level 3).

The fair value of financial instruments which arises from internal models considers the terms of contracts and observable market data including interest rates, credit risk, exchange rates, listings of shares, volatilities, etc. We assume that markets in which we operate are efficient and therefore, their data are representative. The valuation models do not incorporate subjectivities.

In addition, in some cases and given the complexity of products valued the price used is that published by the counterparty in official media such as Reuters.

At 31 December 2010 the main techniques used by internal models to determine the fair value of financial instruments are the current value model (which discounts future movements at the current time using market interest rates) and the Black-Scholes model and its derivative (which enable, by means of a closed formula and using exclusively market inputs, valuation of interest rate options).

In case of valuation of credit derivatives, we proceed as for any other interest rate derivative but including the differentials in the market inputs (also market) corresponding to the underlying of the issue.

We maintain a permanent contrast with counterparties in the different valuations which ensure the validity of models and inputs used at all times.

Financial assets

Purchases and sales of financial assets carried out by means of conventional agreements, which are understood to be those in which the reciprocal obligations of the parties must be performed within a particular timeframe established by law or by market conventions and may not be settled by differences, such as stock-market agreements and purchases and sales of foreign currencies for cash, are carried under acquisitions as assets and are cancelled from sales on the balance sheet on the date when the profits, risks, rights or obligations inherent to all owners become those of the buyer which, depending on the type of asset or market involved, may be the contracting date or the settlement or delivery date.

Debt financial instruments are recognised from the date on which the legal right of receiving or paying cash arises and derivatives are recognised from the date on which they are contracted. As a general rule, the Group records the removal of financial instruments from the balance sheet on the date when the benefits, risks, rights and responsibilities inherent thereto arise or when their control is transferred to the buyer.

Financial assets are classified on the balance sheet according to the following guidelines:

i. Cash in hand and deposits at central banks corresponding to the cash balances and balances deposited with the Bank of Spain and other central banks.

ii. Financial assets and liabilities held for trading which includes the financial assets acquired with the intention of short-term realisation. They are part of a portfolio of financial instruments jointly identified and managed for which recent actions have been taken to obtain short-term gains, or they are derivative instruments not designated as hedging instruments. Changes in the fair value of the instruments in this portfolio are carried directly in profit or losses.

iii. Other financial assets carried for their fair value with changes to profit or loss, including (1) financial assets which, whilst not part of the financial assets and liabilities held for trading, are considered hybrid financial assets and are stated entirely at their fair value, and (2) those managed jointly with liabilities by insurance contracts carried at their fair value, or with financial derivatives that have the aim of significantly reducing their exposure to variations in their fair value, or which are managed jointly with financial liabilities and derivatives in order to significantly reduce global exposure to interest-rate risk value.

iv. Financial assets available for sale which refer to debt securities not classified as investments held to maturity, as other financial assets carried at their fair value with changes to the profit and loss account, as loan and receivables, or as financial assets and liabilities held for trading, and the equity instruments of entities which are not dependent, associated or multigroup entities and which are not included in the categories of financial assets and liabilities held for trading or other assets at their fair value with changes to the profit and loss account. The changes in the fair value of instruments in this portfolio are carried directly in the entity's net worth until they are removed from the financial-asset balance sheet.

v. Loan and receivables, including those financial assets which, whilst not traded on an active market and not required to be carried at their fair value, their cash flows are of a determined or determinable amount and for which the Group's entire disbursement will be recovered, excluding reasons attributable to the debtor's solvency. This includes both the investments from typical lending activity, such as the cash amounts drawn down and pending repayment by clients in the form of loans, and deposits lent to other entities, regardless of how they are legally implemented, and unlisted debt securities, as well as debt assumed by the buyers of goods or the users of services, all of which are part of the Group's business.

vi. Investment portfolio held to maturity which corresponds to fixed-term debt securities and cash flows of a determined or determinable amount for which the company has, as from the start and as at any subsequent date, both the positive intention and the financial capacity to hold them to maturity.

The Bank may not classify any financial asset as an investment held to maturity if during the financial year in progress or the two previous financial years it has sold or reclassified assets included in this portfolio for more than an insignificant amount in relation to the total amount of the assets included in this category.

vii. Adjustments to financial assets by macro-hedges that correspond to the balancing entry of the amounts posted to the profit and loss account originating in the valuation of the portfolio of financial instruments which are effectively hedged against interestrate risks by means of fair-value hedge derivatives.

viii. Hedge derivatives including the financial derivatives acquired or issued by the Bank which qualify to be considered book hedging.

ix. Investments which include equity instruments in multigroup or associated companies.

In general, financial assets are initially recorded at cost. Their subsequent valuation at the end of each period is assessed on the basis of the following criteria:

i. Financial assets are carried at their fair value, with the exception of loan and receivables, the portfolio of investments held to maturity, equity instruments whose fair value cannot be determined with sufficient objectiveness, investments held in dependent, multigroup and associated entities, and financial derivatives for which the underlying assets are said equity instruments and which are settled by delivery thereof.

ii. The fair value of a financial asset on any given date is deemed to be the amount for which it could be delivered between duly informed, willing parties in an arm's length transaction. The best evidence of fair value is the listed market price on an active market which corresponds to an organised, transparent, and profound market.

When there is no market price for a certain financial asset, its fair value may be estimated by valuation techniques which should comply with the following characteristics:

• The techniques will be as consistent and suitable as possible and will include observable market data such as: recent transactions with other instruments that are generally the same; discount from cash flows and market models to evaluate options.

• The techniques will be those which provide the most realistic estimate of the price of the instrument, and preferably they will be those which are normally used by market participants when valuing the instrument.

• The techniques will maximise the use of observable market data, with the use of non-observable data being restricted as far as possible. The valuation methodology will be respected over time in so far as the factors that led to its being chosen do not alter over time. In any event, the valuation technique should be assessed periodically and its validity should be examined using observable prices for recent transactions and current market data.

• In addition, consideration will also be given to factors such as the cost of borrowing, credit risk, exchange rates, the price of other equity instruments, volatility, liquidity, the risk of early cancellation, and administrative costs.

iii. The fair value of the financial derivatives with a quoted value on an active market is the daily trading price. If, under exceptional circumstances, there is no trading price for a particular date, then methods similar to those used to estimate the value of OTC financial derivates are used.

The fair value of OTC financial derivatives is the sum of future cash flows originating from the instrument and discounted as of the valuation date using methods recognised by the financial markets.

iv. Loan and receivables and the portfolio of investments held to maturity are carried at their amortised costs, using the effective interest-rate method for its determination. Amortized cost is deemed to be the acquisition cost of a financial asset corrected by the repayment of principal and the part charged to the profit and loss account, by way of using the effective interest rate model, the difference between the initial cost and the repayment value at maturity, and less any reduction in value due to impairment recognised directly as a decrease in the value of the asset or by means of an account to correct its value. If they are hedged by way of fair-value hedging transactions, any variations arising in the fair value relating to the risk or risks hedged in said hedging transaction are recorded.

The effective interest rate is the updating rate which is exactly equal to the value of the financial instrument with the estimated cash flows throughout the expected life of the instrument, based on the contractual conditions, such as early repayment options, but without considering losses due to future credit risks. For fixed-interest financial instruments, the effective interest rate is the contractual interest rate established at the time of acquisition plus any applicable commissions which, given their nature, are equivalent to an interest rate. For variable-interest financial instruments, the effective interest rate coincides with the yield rate in force for all items up to the first scheduled review of the reference interest rate.

v. Investments held in the capital of other entities for which the fair value cannot be determined in a sufficiently objective manner and financial derivatives for which these instruments are the underlying assets and which are settled by delivering the assets are carried at cost, corrected where applicable by the losses due to impairment which they have experienced.

Variations in the book value of financial liabilities are carried, in general, with a balancing entry in the profit and loss account, with a distinction between those originating in the accrual of interest and similar items, which are recorded under the heading 'Interest and similar charges', and those due to other causes, which are recorded at their net amount in the item 'Results of financial transactions' in the profit and loss account.

However, variations in the book value of the instruments included under the heading 'Financial assets available for sale' are temporarily recorded under the heading 'Valuation adjustments of net worth' except when they are due to exchange-rate differences. The amounts included under the heading 'Valuation adjustments' continue to be part of the net worth until the asset by which they appeared is removed from the balance sheet, at which time the entry is cancelled from the profit and loss account.

For financial assets designated as hedged items or hedging for fair value, the differences in the value of both the hedging elements and the hedged elements are recorded directly in the profit and loss account, with regard to the type of risk being hedged.

In hedging transactions for the fair value of the interest-rate risk on a portfolio of financial instruments, the gains or losses arising on the hedging instrument are carried directly on the profit and loss account, while the gains or losses due to variations in the fair value of the hedged amount, with regard to the hedged risk, are recorded in the profit and loss account with a balancing entry under the heading 'Adjustments to financial assets due to macro-hedges'.

Financial liabilities

Financial assets are classified on the balance sheet according to the following guidelines:

i. Financial assets and liabilities held for trading which includes the financial liabilities issued with the intention of short-term realisation. They are part of a portfolio of financial instruments jointly identified and managed for which recent actions have been taken to obtain short-term gains, or they are derivative instruments not designated as hedging instruments or they come from the firm sale of financial assets acquired temporarily or received as a loan.

ii. Other financial instruments at fair value with changes to the profit and loss account: this includes financial liabilities designated as "at fair value with changes in results" with the purpose of obtaining more relevant information as this significantly reduces assymetrical accounting.

iii. Financial liabilities at amortised costs that refer to financial liabilities not recordable under any other heading on the balance sheet and which are part of the usual funding activities of financial institutions, regardless of how they are implemented or their maturity dates.

iv. Hedge derivatives including the financial derivatives acquired or issued by the Bank which qualify to be considered book hedging.

Financial liabilities are recorded at their amortised cost, as defined for financial assets, except in the following cases:

i. Financial liabilities under the heading 'Financial assets and liabilities held for trading' and in "Other financial liabilities at fair value with changes in P&L" are valued at their fair value, as defined for financial assets. Financial liabilities hedged in fair-value hedging operations are adjusted, with any changes affecting their fair value with regard to the risk hedged in the hedging transaction being recorded.

ii. Financial derivatives that have underlying other equity instruments whose fair value cannot be determined in a sufficiently objective manner and which are liquidated upon delivery, are valued at cost.

Variations in the book value of financial liabilities are carried, in general, with a balancing entry in the profit and loss account, with a distinction between those originating in the accrual of interest and similar items, which are recorded under the heading 'Interest and similar charges', and those due to other causes, which are recorded at their net amount in the item 'Results of financial transactions' in the profit and loss account.

Regarding financial liabilities designated as hedged items and accounts hedging, the differences in valuation are recorded on the basis of the criteria indicated for financial assets.

h) Recognition of income and expenses

Income and expenses from interest and related items are recorded generally according to the period of accrual and by application of the effective interest-rate method. Dividends received from other entities are recorded as income at the moment the right to receive them arises.

Fees expense or collected for financial services, regardless of how they are described in contractual terms, are classified in the following categories, thereby determining their assignment in the profit and loss account:

i. Financial fees which are an integral part of the return or effective cost of a financial transaction, and which are assigned in the profit and loss account throughout the expected lifetime of the transaction as an adjustment to the cost or effective return. These include the commitment fee and fees for the study of asset products, fees for excess credits, and overdraft fees in liability accounts.

ii Non-financial fees, which are those that derive from the provisions of services and that might arise in the execution of a service provided during a period of time and in the provision of a service that is executed in a single act.

Income and expenses are generally carried in the profit and loss account, in accordance with the following criteria:

i. Those related to financial assets and liabilities valued at a fair value with changes to the profit and loss account are recorded at the moment of collection.

ii. Those related to transactions or services that are provided over a period of time are recorded during the period of said transactions or services.

iii. Those related to a transaction or service provided in a single act are recorded when said act is performed.

Non-financial income and expenses are carried in the accounts on an accrual basis. Deferred collections and payments, for a term in excess of one year, are recorded as the amount resulting from the financial updating of expected cash flows at market rates.

i) Impairment of financial assets

The book value of financial assets is generally corrected as a charge against the profit and loss account when there is objective evidence that a loss has occurred owing to impairment, which occurs in the following cases:

i. In cases of debt instruments, which are understood as loans and debt securities; when, after their initial recognition, there is an event or combined effect of several events that has a negative impact on future cash flows.

ii. In the case of equity instruments, when after recognition there is an event or combined effect of several events with the effect that its book value will not be recovered.

As a general principle, the correction of the book value of financial instruments owing to impairment is made against the profit and loss account of the period in which the impairment is manifested; and the recovery of the losses owing to previously recorded losses from impairment, if any, is recognised in the profit and loss account in the period in which the impairment is eliminated or reduced. If the recovery of an amount owing to recorded impairment is considered remote, the impairment is eliminated from the balance sheet, although the institution may perform the actions necessary to achieve collection until the final expiration of rights owing to prescription, cancellation or other causes.

In the case of debt instruments valued at their amortised cost, the amount of losses owing to impairment incurred is equal to the negative difference between its book value and the present value of estimated future cash flows. For listed debt instruments, use can be made, as a substitute for the present value of future cash flows, of their market value provided that it is sufficiently reliable to be considered representative of the value the Group may recover.

Estimated future cash flows of a debt instrument are all the sums, both principal and interest, the Group estimates it will obtain during the lifetime of the instrument. Said estimate considers all the relevant information available as of the date of preparation of the financial statements that provide data on the possible future collection of the contractual cash flows. Similarly, when estimating the future cash flows of instruments that have tangible securities, the flows that would be obtained from their realisation are taken into account, minus the costs necessary for their collection and subsequent sale, regardless of the probability of execution of the guarantee.

The calculation of the present value of estimated future cash flows uses the original effective interest rate of the instrument as the updating rate, if its contractual rate is fixed or the effective interest rate on the date referred to in the financial statements determined in accordance with the contractual conditions if it is variable.

Portfolios of debt instruments, contingent risks, and contingent commitments, regardless of the bearer, instrumentation, or guarantee thereof, are analysed to determine the credit risk to which the Group is exposed and to estimate the hedging needs for impairment of its value. In the drafting of the financial statements, the Group classifies its transactions according to the credit risk, with a separate analysis of the insolvency risk attributable to the client and the country-risk to which they are exposed, if any.

Objective evidence of impairment will be determined individually for all debt instruments that are significant, and individually and collectively for groups of debt instruments that are not individually significant. When a specific instrument cannot be included in any asset group with similar risk characteristics, it will be analysed in an exclusively individual manner to determine if it is impaired and, if necessary, to estimate the loss from impairment.

Collective evaluation of a group of financial assets in order to estimate the losses from impairment is carried out as follows:

i. Debt instruments are included in groups that have similar credit-risk characteristics that indicate the capacity of debtors to pay all sums, principal and interest, as per contractual conditions. The characteristics of credit risk used to group assets are, among others, the instrument type, the debtor's activity sector, the geographic area of the activity, the type of guarantee, the age of the due amounts and any other factor that may be relevant to estimate future cash flows.

ii. Future cash flows in each group of debt instruments are estimated for instruments with credit risk characteristics similar to that of the respective group, after making the adjustments necessary to adapt historical data to present market conditions.

iii. Loss due to impairment of each group is the difference between the book value of all debt instruments and the present value of their estimated future cash flow movements.

Debt instruments not measured at their fair value with changes in the profit and loss account, contingent risks, and contingent commitments are classified according to the default risk attributable to the client or transaction, into the following categories: normal risk, sub-prime risk, bad risk owing to client default, bad risk owing to reasons other than client default, and write-off. For debt instruments not classified as normal risk, estimates are made of the specific hedging necessary for impairment on the basis of the age of the unpaid amounts, the guaranties provided, and the economic situation of the client and, if relevant, of the guarantors. This estimate is generally made on the basis of arrears calendars.

In addition to the specific hedging for impairment indicated above, the Bank hedges inherent losses incurred in debt instruments not measured at their fair value with changes in the profit and loss account and contingent risks classified as a normal risk through collective hedging.

In this regard, the Bank of Spain determines the parameters, methods and amounts to be used in hedging losses from inherent impairment that occur in debt instruments and contingent risks that have been classified as normal risk.

The calculation method, as provided in Annex IX of Circular 4/2004 of the Bank of Spain, is divided into two stages.

In the first stage, balances are divided into six types of risk as per the regulation. These types are as follows: No significant risk, low risk, medium-low risk, medium risk, mediumhigh risk and high risk.

The impaired amount is therefore the sum of the following:

• the product of multiplying the value of the variation in the balance period of each one of the risk types by the relevant alpha regulatory parameter, plus

• the sum of the product of multiplying the total balance of transactions included in each of the risk types at the end of the period by the relevant beta regulatory parameter, minus

• the amount of the net reserve for specific global hedging made during the period.

The overall balance of generic hedging must not exceed 125% of the amount resulting from adding the product obtained by multiplying the amount of each type of risk by its relevant alpha regulatory parameter. In the Bank's case, the balance as at 31 December 2009 and 2008 corresponds to the maximum values.

The α and β regulatory parameters, for each class of risk, are as follows:

	α	β
No appreciable risk	0%	0 %
Low risk	0.6%	0.11%
Medium-low risk	1.5%	0.44%
Medium risk	1.8%	0.65%
Medium-high risk	2.0%	1.10%
High risk	2.5%	1.64%

Recognition in the profit and loss account of the accrual of interest on the basis of contractual terms is interrupted for all debt instruments individually classified as impaired, and for those for which losses from impairment have been collectively calculated because they have outstanding amounts more than three months old. The amount of financial assets which would be in an irregular situation if it were not because their conditions were renegotiated is not significant considering the group's financial statements as a whole.

The amount of losses from impairment incurred in debt securities and other equity instruments included under the item 'Financial assets available for sale' is equal to the positive difference between their acquisition cost, net of amortisation of the principal, and their fair value minus any loss from impairment previously recognised in the consolidated profit and loss account.

When there is objective evidence that the decrease in fair value is due to impairment, the latent losses expressly recognised under the item 'Valuation adjustments' in the consolidated net worth are recorded immediately in the consolidated profit and loss account. If some or all of the losses from impairment are subsequently recovered, the amount is recognised, in the case of debt securities, in the consolidated profit and loss account for the period when recovered and, in the case of equity instruments, under the heading 'Valuation adjustments' in the consolidated net worth.

Impairment losses of other equity instruments valued at their acquisition cost reflect the difference between their book value and the present value of future expected cash flows, updated to market rates of profitability for other similar securities. Said impairment losses are recorded in the profit and loss account of the period in which they occur, directly lowering the cost of the financial asset, where the amount cannot be recovered except in case of sale.

In the case of other equity instruments constituting investments in multigroup and associated entities, the Group estimates the amount of losses from impairment by comparing its recoverable amount with its book value. Said losses from impairment are recorded in the consolidated profit and loss account of the period in which they occur and subsequent recoveries are recorded in the profit and loss account of the recovery period.

In the case of listed equity instruments, and further to the above, it is verified that their market value is higher than the book value recorded for the instrument.

j) Financial derivatives

Financial derivatives are instruments that not only provide a profit or loss but also can allow, under certain conditions, offsetting all or part of the credit and/or market risks associated with balances and transactions, with the use of underlying factors such as interest rates, certain indices, the prices of certain shares, the crossed exchange rates of different currencies and other references of a similar kind. The Group uses financial derivatives traded in organised markets or bilaterally with over-the-counter trading (OTC) both in its own transactions and with retail or wholesale customers.

The Group takes positions in derivatives with the purpose of formalising hedging, performing active management with other financial assets and liabilities or benefiting from the changes in their prices. Financial derivatives that may not be considered as hedging are considered to be trading derivatives.

Derivates with an active market are valued according to the listed prices on said markets.

Derivatives without a market or for which the market has a low level of activity are valued on the basis of the most consistent and appropriate economic methodologies, maximising the use of observable data and including any factor a participant in the market would consider, such as: a) recent transactions with other instruments that are generally the same; b) discount from cash flows and c) market models to evaluate options. The techniques applied are those mainly used by market participants and have shown their capacity to provide the most realistic estimate of the price of the instrument.

In their initial recognition, all financial derivatives are recorded at their fair value. For the case of financial swaps, said value is presumed to be null, except when the entity shows otherwise through proper valuation techniques In this case, the initial recognition of fair value generates a profit or a loss that must be recorded in the profit and loss account when all the model variables come exclusively from observable market data, thereby generating so-called 'profits from day one'. On the basis of the principle of prudent supervision stipulated for the entity by the Bank of Spain, the Board of Directors decided to apply an alternative criterion of linear accrual of the above-mentioned 'profits from day one', during the lifetime of the financial swaps by which they are generated.

A derivative may be designated as a hedge instrument only if it meets the following criteria:

i. It may be considered a hedging instrument in its entirety, even if only for a percentage of its total amount, except in the case of options, in which case the change in its intrinsic value may be deemed to be a hedging instrument, excluding the change in its temporary value or in forward contracts, which may be so for the difference between the cash prices and the forward prices of the underlying asset.

ii. It is considered a hedge for the whole of its remaining term.

iii. Where more than one risk is hedged, the different risks hedged may be clearly identified, each part of the instrument may be designated as hedging specific hedged items, and the effectiveness of the different hedges may be demonstrated.

The effectiveness of derivatives hedging defined as hedging is duly documented by way of the effectiveness tests, which are tools that prove that the differences caused by variations in market prices between the hedged items and their hedging are within fair parameters throughout the lifetime of the transactions, thereby meeting the forecasts made at the time of procurement.

If this is not the case at some point, the transactions related to the hedging group would be deemed to be trade transactions and duly reclassified in the balance sheet.

The hedging performed by the Group belongs to the fair value hedging type:

• Micro-hedgings or individual hedgings (when there is a specific identification between instruments hedged and hedging instruments) cover exposure against movements in the fair value of the item hedged. The profit or loss arising from valuing the hedge instruments is recognised immediately in the profit and loss account.

• Portfolio hedgings (interest rate risk hedgings for a portfolio of financial instruments) cover exposure to any movement in fair value of the amount hedged in response to changes in the interest rate. The profit or loss arising from valuing the hedge instruments is recognised immediately in the profit and loss account. In the case of the hedged amount, the profit or loss that arises when valuing it is directly recognised in the profit and loss account, using as the offset "Adjustments to financial assets by macro-hedging", or "Adjustments to financial liabilities by macro-hedging", depending on whether the hedged amount corresponds to financial assets or financial liabilities, respectively.

k) Transfers and removal of financial instruments from the balance sheet

Transfers of financial instruments are recorded taking into account the manner in which the transfer of risks and profits related to the financial instruments transferred is performed, on the basis of the following criteria:

i. If risks and profits are substantially transferred to third parties, as in unconditional sales, sales with re-purchase agreements for fair value as at the re-purchase date, sales of financial assets with a call or put option issued out of the money, securities of assets in which the assignor does not withhold subordinated financing or give any type of credit enhancement to the new holders, etc. the financial instrument is removed from the balance sheet, with simultaneous recognition of any debt or obligation held or created as a consequence of the transfer.

ii. If there is a substantial withholding of risks and profits associated to the financial instrument transferred, as in the sales of financial assets with a re-purchase agreement, or for the sale price plus interest, securities loan agreements where the borrower is obliged to return the same or similar assets, etc., the financial instrument transferred is not removed from the balance sheet and it is still valued with the same criteria used prior to the transfer. However, the attendant financial liability is acknowledged in books at an amount equal to that of the consideration received, which is subsequently valued at its amortised cost. Income from financial assets transferred but not removed and the costs of the new financial liability are recognised directly in the profit and loss account.

iii. If there is no transfer or substantial withholding of the risks and profits attending the financial instrument transferred, as in the sales of financial assets with an acquired call option or an issued put option which are not in or out of the money, the securities in which the assignor assumes a subordinated financing or another type of credit enhancements for a part of the transferred asset, there is a distinction between:

• Where the group does not retain control of the financial instrument transferred, in which case it is removed from the balance sheet and any right or obligation retained or created as a result of the transfer is recognised.

• Where the group retains control of the financial instrument transferred, in which case it continues to recognise it in the balance sheet for an amount equal to its exposure to the changes in value it may undergo, and a financial liability linked to the financial asset transferred is recognised.

The net amount of the asset transferred and the associated liability will be the amortised cost of the rights and obligations retained, where the asset transferred is measured by its amortised cost, or for the fair value of the rights and obligations retained, where the asset is measured by its fair value.

Therefore, financial assets are removed from the balance sheet only when the cash flows they generate have ceased or when the risks and benefits they have implicit have substantially been transferred to third parties. Similarly, financial liabilities are removed from the balance sheet only when the obligations they generate have expired or when they are acquired with the intent of cancelling them or disposing of them again.

l) Tangible assets

Property, plant, and equipment is shown for its acquisition cost, updated in accordance with certain legal rules and appreciated as permitted under the transition to the new accounting standard, minus the relevant accumulated depreciation and any loss from impairment.

Depreciation is calculated systematically according to the linear method or digit numbers, applying estimated years of service life of the different elements to the acquisition cost of assets minus their residual value. In the case of land on which buildings and other constructions stand, it is deemed that these have an indefinite lifetime, and therefore they are not subject to depreciation. Annual allocations for the depreciation of tangible assets are charged to the profit and loss account and calculated according to the estimated years of service life, which coincide with the legal minimums.

	Depreciation method
Buildings	Linear over 50 years
Fixtures and fittings and others	Linear from 6 to 12 years
Computer equipment	Digits or shifts

The group reviews, at least at the end of the year, the period and method for depreciation of each of the tangible assets.

Maintenance expenses and maintenance of tangible assets which do not improve their use or lengthen the service life of the respective assets, are charged to the P&L account at the time they occur.

In each accounting closure, the group analyses whether there are internal and external indications that the net value of aspects of its tangible assets exceeds their corresponding recoverable amount. In this case, the group reduces the book value of the corresponding element up to its recoverable amount and adjusts future charges in the depreciation item in proportion to its adjusted book value and for its remaining service life, in case a reestimation is necessary. In addition, when there are indications that the value of an aspect has recovered, the group records the reinvestment of the loss from impairment in prior periods and adjusts future charges based on their depreciation. Reinvestment of the loss because of impairment of an aspect under no circumstances means the increase in its book value above what it would be if not for recognising losses because of impairment in previous years.

The heading 'Real-estate investments' on the consolidated balance sheet states the net values of the land, properties, and other constructions that are held either in order to let them, or to obtain a possible capital gain on their sale as a result of the future increases in their respective market values.

The criteria applied for recognition of the acquisition costs of property investments, for their amortisation, estimate of their respective service lives and recording of their possible losses because of impairment coincide with those reported above.

m) Intangible assets

Those identifiable, although with no physical appearance, non-monetary assets, which arise as a consequence of a legal business or developed internally by the consolidated entities, are considered intangible assets. Only those intangible assets whose cost may be estimated in a reasonably objective way and from which consolidated entities consider obtaining future profits probable are recognised in accounts.

Intangible assets are recognised initially at their acquisition or production cost and are subsequently valued at cost, less, as appropriate, their corresponding cumulative amortisation and losses because of impairment which they may have undergone.

Goodwill

Differences between the cost of participations in the capital of consoldiated entities and valued by the equity accounting method and other forms of business combinations made regarding corresponding net fair values of acquired assets and liabilities, adjusted for the percentage participation acquired of these net assets and liabilities in case of purchase of participations, on the date of their acquisition, are accounted for in the following way:

1. If there is an excess in the acquisition price on the aforementioned fair value, as goodwill in item "Intangible asset - goodwill" of the consolidated balance sheet asset. In case of purchase of shareholdings in associated or multigroup companies valued by the equity accounting method, the goodwill which may be highlighted in its acquisition is recorded as forming part of the value of the shareholding and not individually in the item "Tangible asset - goodwill".

2. Negative differences between the cost minus the fair value indicated are recorded once the valuation process realised is reviewed, as income in the consolidated P&L account in the item "Negative differences in business combinations".

Positive goodwill (excess between the cost of a holding company or business and the net fair value of assets, liabilities and contingent liabilities acquired from this entity or business) - which are only recorded in the consolidated balance sheet when acquired or valuable consideration. They therefore represent prepayments made by the acquiring entity for future financial profits arsing from assets of the entity or business acquired which are not individual and separately identifiable and recognisable.

Losses because of impairment recorded on goodwill recorded in the item "Tangible asset goodwill" are not subsequently reviewed.

Other intangible assets

Intangible assets, different to goodwill, are recorded in the consolidated balance sheet at their acquisition or production cost, less, as appropriate, their corresponding cumulative amortisation and losses because of impairment which they may have undergone.

Non-tangible assets may have an "indefinite service life" - when, based on the analyses performed of all relevant factors, it is concluded that there is no foreseeable limit of the period during which we expect net cash flows to be generated in favour of consolidated entities - or a "definite service life" in the remaining cases.

Non-tangible assets with an indefinite service life are not amortised, while for the close of each accounts period, consolidated entities review their remaining respective service lives with the purpose of ensuring that these continue indefinite or, on the contrary, proceeding as a result.

Non-tangible assets with a definite life are amortised based on this; we apply criteria similar to those adopted for the amortisation of tangible assets. The annual amortisation of aspects of non-tangible fixed assets with definite service life are recorded in the item "Amortisation" of the consolidated P&L account.

Both for non-tangible assets with indefinite service life and those with definite service life, the consolidated entities recognise for the purposes of accounts any loss that may have occurred in the recorded value of these assets originating from their impairment using as a counter-entry the item "Losses because of impairment of remaining assets (net) - goodwill and other non-tangible assets" from the consolidated P&L account. The criteria for recognition of losses from impairment of these assets and, when necessary, recovery of losses from impairment recorded in preceding years are similar to those of tangible assets.

The balances recorded in the items non-tangible asset from the balance sheet, both in goodwill and other non-tangible assets, essentially correspond to Línea Directa Aseguradora, S.A

n) Leases

Leases are presented in accordance with the economic basis of the transaction, independently of their legal form, and are classified from the start as financial or operating leases.

i. A lease is deemed to be a financial lease when essentially all risks and benefits inherent to ownership of the asset that is the subject of the contract are transferred to the lessee.

When the Group acts as the lessor of chattel, the total annual values of the amounts it will receive from the lessee plus a guarantied residual value, which is usually the strike price for the purchase right held by the lessee upon termination of the contract, are recorded as finance lent to a third party, and so is included under the heading 'Loan and receivables' on the balance sheet, in accordance with the nature of the lessee.

Moreover, when the Group acts as lessee, the cost of the assets leased is recorded in

the balance sheet according to nature of the asset that is the subject-matter of the contract, and simultaneously as a liability for the same amount, which will be the lower fair value of the chattel leased or the sum of the present values of the amounts to be paid to the lessor plus, when relevant, the strike price for the purchase right. These assets are amortized according to criteria that are similar to those applied to the whole of tangible assets for internal use.

ii. Lease agreements that are not considered financial leases are classified as operating leases.

When the Group acts as lessor, it records the purchase cost of the goods leased under the heading 'Tangible assets'. Said assets are amortized in accordance with the policies in effect for similar tangible assets for internal use and the income from lease agreements is recognised in the profit and loss account in a linear form.

In addition, when the Group acts as lessee, leasing costs such as incentives granted by the lessor are recorded in linear manner in the profit and loss account.

o) Non-current assets for sale

Non-current assets for sale are those with a book value that is to be recovered mainly through their sale, and which are available for immediate sale, and for which their sale is considered to be highly likely.

Non-current assets for sale are recorded at the lowest fair value minus the sale costs and their book value, and they are not subject to amortization. In the case of seized assets, the acquisition cost corresponds to the net value of the financial assets delivered in exchange for taking possession thereof.

Losses from impairment are recognised under the item 'Losses from impairment of noncurrent assets for sale' in the consolidated profit and loss account. Recoveries of value are recognised in the consolidated profit and loss account up to an amount equal to the losses from impairment recognised previously.

Buildings possessed in payment of debt are recorded at their lowest fair value minus

their sale costs and book value. Losses from impairment are recognised under the item 'Losses from impairment of non-current assets for sale' in the consolidated profit and loss account, calculated individually for those remaining for a period longer than that initially foreseen for their sale.

p) Set-off of balances

Balances due and receivable originating from transactions which include the possibility of set-off, either contractually or pursuant to a legal rule, and where the intention exists to liquidate them at their net value or to realize the asset and pay the liability simultaneously, are presented in the consolidated balance sheet at their net amount.

q) Security lending or guaranteed lending

Security lending is a transaction in which the borrower receives full ownership of the securities without paying out more than commissions, with the undertaking to return to the lender securities of the same type as those received.

Contracts for security lending in which the borrower bears the obligation to return the same assets, other assets that are substantially the same, and other similar assets with the same fair value are deemed to be transactions in which the risks and benefits attending ownership of the asset are substantially retained by the lender.

r) Financial guaranties

Financial guarantee contracts are considered as being contracts that require the issuer to make specific payments in order to refund the creditor for the loss incurred when a specific debtor defaults on its payment duties pursuant to the (original or amended) conditions of a debt instrument, irrespective of the legal form thereof, and which may be, amongst others, a surety, financial collateral, a contract of insurance, or a loan derivative.

The Bank recognises financial guarantee contracts under the heading 'Other financial liabilities' for their fair value plus the costs of the transaction that are directly attributable to its issue. At the start, and save where there is evidence to the contrary, the fair value of financial guarantee contracts issued in favour of an unrelated third party, as part of an isolated transaction at arm's length, will be the premium received plus, where appropriate, the current value of the cash flows receivable, using an interest rate similar to that of financial assets granted by the Bank with a similar term and risk; simultaneously, it recognises the current value of the future cash flows pending receipt as a credit in the assets using the aforementioned interest rate.

Subsequent to the initial recognition, the contracts are treated in accordance with the following criteria:

a. The value of the fees or premiums receivable for financial guaranties will be updated by carrying the differences in the profit and loss account as financial income.

b. The value of financial guarantee contracts which have not been classed as bad debts will be the sum initially recorded under liabilities less the part attributed to the profit and loss account on a linear basis throughout the expected lifetime of the guarantee or using another criterion, provided that this reflects more accurately the receipt of the economic benefits and risks of the guarantee.

Financial guaranties are classified in accordance with the default risk attributable to the client or to the transaction, and where appropriate, consideration is given to the need to set up allowances by way of the application of criteria similar to those indicated at Note (f) for debt instruments valued at their amortized cost.

In the event it should be necessary to set up an allowance for the financial guaranties, any fees pending accrual are reclassified to the corresponding allowance.

s) Personnel expenses

Post-employment remuneration

The Bank has made commitments with its personnel with regard to pensions arising under the Private Banking Collective Bargaining Agreement.

Commitments in respect of post-employment benefits made by the Bank to its personnel are deemed to be 'Fixed-contribution plans', where the Bank makes contributions of a predetermined nature to a separate entity, without any legal or effective duty to make additional contributions should the separate entity be unable to honour the payments due to personnel in relation to the services provided in the current period and previous periods. Post-employment commitments that do not meet the above conditions are deemed to be 'Fixed-provision plans'.

Allocations to defined contribution plans

The contribution accrued during the financial year for this item is carried under the heading 'Personnel expenses' of the consolidated profit and loss account.

At 31 December of the financial year should there be an outstanding amount pending being allocated to the external plan through which the commitments are materialised, this is recorded for its current value under the heading 'Allowances - pension fund and similar obligations'. As at 31 December 2010 and 2009, there is no outstanding amount pending being allocated to external fixed-contribution plans.

Fixed-contribution plans

The Group records the current value of the post-employment fixed-provision benefits under the item 'Allowances - Pension fund and similar obligations' of the liabilities of the consolidated balance sheet. As explained below, this value is recorded net of the fair value of the assets that meet the requirements in order to be considered as 'Assets associated with the plan'.

'Assets associated with the plan' are deemed to be those linked to a particular fixed-provision commitment with which these obligations will be settled directly, and which meet the following conditions: they are not owned by the Group, but rather a legally-separated third party that does not have the status of a related party; they are only available for the payment or financing of post-employment remunerations for personnel; and they cannot return to the consolidated entities, except where the assets remaining in the said plan are sufficient to meet all the obligations of the plan or the entities related to the benefits of the current or former personnel or to refund the remunerations of the personnel already paid by the Bank.

If the Bank can request that the insurance companies pay part or all of the payout required to cancel a defined benefit obligation, meaning it is practically certain that said insurer is going to reimburse some or all of the payouts required to cancel this obligation, but the insurance policy does not meet the conditions to be an asset in the plan, the Bank registers its right to reimbursement in the assets on the balance sheet under the heading "Insurance contract linked to pensions", which is otherwise treated as an asset in the plan.

'Actuarial gains (losses)' are deemed to be those arising from the differences between previous actuarial hypotheses and reality and changes in the actuarial hypotheses used. The Group records the net actuarial losses and gains in the period in which they arise chargeable to earnings.

Post-employment remunerations are recognised in the consolidated profit and loss account as follows:

• The cost of the services in the current period - deemed to be the increase in the current value of the obligations arising as a result of the services provided during the financial year by the personnel - under the item 'Administrative expenses - Personnel expenses'.

• Interest cost (defined as the increase during the year in the present value of the obligations as a result of the passage of time), under "Interest expense and similar charges". Where the obligations are shown in the liabilities net of the assets associated with the plan, the cost of the liabilities recognised in the consolidated profit and loss account will be exclusively that corresponding to the obligations recorded in the liabilities.

• The expected yield for any asset of the plan recognised in the assets of the consolidated balance sheet is shown under the 'Interest and similar income' chapter of the consolidated profit and loss account.

• The amortization of the actuarial gains and losses, under the 'Allocations to Allowances (net)' item of the consolidated profit and loss account.

Other long-term remuneration

Early retirement

The Group guarantees certain commitments made to personnel who have retired early both with regard to salaries and other social benefits - from the time of early retirement to the date of effective retirement.

Early retirement commitments up to the date of effective retirement are treated for accounting purposes, where applicable, with the same criteria as explained above for fixedprovision post-employment benefits, with the exception that all costs for past services and the actuarial gains (losses) are carried immediately at the time at which they arise with a balancing entry in the consolidated profit and loss account.

Death and invalidity of active personnel

The commitments made by the Group to cover the contingencies of the death and invalidity of employees during the time that they are active and that are covered by way of an policy of insurance taken out by way of co-insurance with Axa and Caser are recorded in the consolidated profit and loss account for a sum equal to the sum of the premiums of the said policies of insurance accrued in each financial year.

t) Other allowances and contingencies

The Group records allowances at the estimated value in order to meet current obligations resulting from past events that are clearly specified as regards their nature but which are indeterminate in terms of amounts or the date of cancellation, and where cancellation will require disposal of resources that contain economic benefits. Said obligations may arise from the following:

• A legal or contractual provision.

• An implicit or tacit obligation, which originates in a valid expectation created by the Group in third parties regarding the assumption of certain types of responsibilities. These expectations are created when the Group publicly accepts responsibilities, or they arise from past conduct or from business policies in the public domain.

• The practically certain evolution in the regulation of certain issues, particularly regulatory measures from which the Group cannot be exempt.

Contingent liabilities are possible obligations of the Group that arise as a consequence of past events, the existence of which is conditioned on whether future events independent of the will of the Group occur or not. Contingent liabilities include present obligations of the Group, the cancellation of which is improbable and which leads to a reduction of resources including economic benefits and the amount of which, in extremely rare cases, cannot be quantified with sufficient reliability.

Contingent obligations and liabilities are considered probable when there is greater likelihood that they will occur rather than not, possible when there is less likelihood that they will occur rather than not, and remote when their occurrence is extremely rare.

The Group includes in its consolidated annual accounts all significant allowance for which it is estimated that the probability that the obligation will have to be met is greater than not. Contingent liabilities are not recognised in the consolidated Annual Accounts but are instead reported on unless the possibility is considered remote that that there will be a loss of resources that includes economic benefits.

Allowances are quantified on the basis of the best information available on the event that originated them and they are estimated at the end of each accounting year, including the financial effect in case it is significant. These are used to meet specific obligations for which they were recognised, and are reverted either totally or partially when said obligations no longer exist.

As at 31 December 2010 and 2009 various legal proceedings and claims were being pursued against the Group in relation to the performance of its regular activities. Both the Group's legal advisors and the managers of the entity believe that the conclusion of these proceedings and claims will not have a significant impact, additional, as the case may be, included as an allowance, on the consolidated annual accounts.

u) Corporate tax

Corporate tax is considered an expense and is recorded under the heading 'Corporate Tax' in the profit and loss account except when it is the result of a transaction recorded directly in net worth, in which case it is recorded directly in net worth, or of a combination of businesses, where the deferred tax is recorded as one more asset of the same.

Expenses under the heading 'Corporate Tax' are determined by the tax calculated over the tax base of the year, following consideration of the variations in said year owing to temporary differences of credits from deductions and bonuses and negative tax bases. The tax base for the year may differ from the net result of the year presented in the profit and loss account since it excludes income and expense items that are taxable or deductible in other years as well as items for which this is never the case.

Assets and liabilities for deferred taxes correspond to these taxes that are expected to be payable or recoverable in the differences between the book amounts of the assets and liabilities in the financial statements and the corresponding tax bases. They are recorded using the liability method in the balance sheet and are quantified by applying the tax rate at which they are expected to be recovered or settled to the corresponding time difference or credit.

Assets from a deferred tax, such as tax paid early, credits for deductions and bonuses, and credits for negative tax bases are recognised whenever it is probable that the Group will obtain sufficient fiscal benefits in the future against which to apply them. It is considered likely that the Group will obtain sufficient fiscal benefits in the following cases, amongst others:

i) There are liabilities from deferred taxes that may be cancelled in the same year as the realization of the deferred tax asset or in a subsequent year in which it can offset the negative tax base in existence or generated by the amount paid early.

ii) The negative tax bases have been produced by identified causes that are unlikely to occur again.

Notwithstanding the foregoing, deferred tax asses that arise under the investments accounting entry in multigroup or associated entities are only recognised when it is probable that they will be realized in the foreseeable future, and sufficient fiscal benefits are expected in the future against which to bring them into effect. Furthermore, deferred tax liabilities are not recognised when an asset is initially recorded, which is not a business combination, and that at the time of recognition has not affected the accounting or tax result.

Deferred tax liabilities are always recorded, except when goodwill is recognised or if they arise within the accounting of investments in multigroup or associated entities, if the Group is capable of controlling the timing of the reversion of the temporary difference and it is also probable that the difference will not revert in the foreseeable future. Furthermore, deferred tax liabilities are not recognised when an asset is initially recorded, which is not a business combination, and that at the time of recognition has not affected the accounting or tax result.

At the end of each financial year the deferred taxes are revised, both assets and liabilities, in order to verify that they are still in effect and that the proper corrections are made.

v) Off-balance-sheet customer resources

Resources entrusted by third parties for investment in companies and mutual funds, pension funds (insurance contracts), and discretionary portfolio management contracts are not included in the Group balance sheet. Information on said resources as at 31 December 2010 is found in note 40.

Equity managed by consolidated companies owned by third parties is not included in the consolidated balance sheet. Fees generated by this activity are recorded under the item 'Fees income' in the consolidated profit and loss account. Note 40 provides information on third-party equity managed by the Group on 31 December 2010 and during the financial year ended on the aforementioned date.

Investment funds managed by consolidated companies are not recorded in the Group's consolidated balance sheet, as the equity in same is owned by third parties. Fees accrued in the financial year by the various services rendered to these funds by the companies in the Group (equity management services, portfolio registration, etc.) are recorded under the heading 'Fees income' in the consolidated profit and loss account.

w) Insurance contracts

In accordance with the accounting practices that are generally used in the insurance sector, insurance institutions record in the profits the amounts of the premiums that they issue and debit from their profit and loss account the cost of claims that they meet at the time of the final settlement thereof. These accounting practices oblige insurance institutions to accrue at the close of each financial year both the amounts paid for the premiums issued to their profit and loss accounts and not accrued at that date, and the foreseeable costs for claims that have occurred and which are pending debit to the profit and loss account.

The most significant liabilities of these institutions as regards the direct insurance hired by same refer to the following: Allowance for unearned premiums, for unexpired Risks, Allowance for services, Mathematical allowance, Life Insurance when the investment risk is undertaken by the policyholders and Participation in profits and for rebates. These technical allowances for direct insurance are recorded in the consolidated balance sheets in the chapter 'Liabilities under insurance contracts' to cover complaints originating in said insurance contracts.

The item 'Reinsurance assets' contains the amounts that the institutions are entitled to receive that originate from the reinsurance contracts they hold with third parties. These are calculated according to the reinsurance contracts that have been signed and applying the same criteria that are used for direct insurance.

The results of the group's insurance companies from its insurance activity are recorded under the heading 'Insurance Activity' in the profit and loss account.

6. Cash and balances with central banks

This heading includes cash balances and balances held at the Bank of Spain and other central banks. The breakdown as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Cash in hand	105,492	97,933
Bank of Spain	90,659	406,824
Other central banks	-	114
Valuation adjustments	250	394
	196,401	505,265
In euros	195,252	504,293
In foreign currency	1,149	972
	196,401	505,265

Shown under valuation adjustments is a sum of 250 thousand euros, representing accrued interest as at 31 December 2010 (394 thousand euros as at 31 December 2008).

7. Financial assets and liabilities held for trading and Other financial assets and liabilities at fair value with changes in profit and loss account

As at 31 December 2010

The breakdown of these items of the consolidated balance sheets as at 31 December 2010 and 2009 is as follows:

	Thousand euros
Assets	31-12-10	31-12-09
Debt instruments	1,275,490	2,852,908
Other equity instruments	123,496	126,696
Trading derivatives	512,575	621,598
	1,911,561	3,601,202
In euros	1,900,138	3,597,486
In foreign currency	11,423	3,716
	1,911,561	3,601,202

"Other equity instruments" includes the securities belonging to the negotiation portfolio,
as well as other financial assets at fair value with changes in profit and loss. The balance
for the latter, as at 31 December 2010, stood at 35,727 thousands of euros (16,361 thou
sands of euros as at 31 December 2009).

The fair value of the loaned assets (assets assigned temporarily) from the financial assets and liabilities held for trading of the assets on the balance sheet as at 31 December 2010 stands at 984,898 thousand euros (1,969,940 thousand euros as at 31 December 2009). Practically the whole of these assets are assigned for terms of less than one year.

The breakdown of the financial assets and liabilities held for trading of assets and other financial assets at fair value through profit and loss on the consolidated balance sheet as at 31 December 2010 and 2009, by instrument type and counterparty, is as follows:

Thousand euros	Credit in stitutions	Public Adminis trations Residents	Public Ad ministra tions Non residents	Other Private Sectors Resident	Other Private Sectors Non-resi dent	Total
Debt instru ments	288,841	984,898	1,475	274	2	1,275,490
Other eq uity instru ments	18,385	-	-	69,086	36,025	123,496
Trading de rivatives	292,195	-	-	219,228	1,152	512,575
	599,421	984,898	1,475	288,588	37,179	1,911,561

As at 31 December 2009

Thousand euros	Credit in stitutions	Public Adminis trations Residents	Public Ad ministra tions Non residents	Other Private Sectors Resident	Other Private Sectors Non-resi dent	Total
Debt instru ments	593,166	2,205,009	54,718		14	2,852,908
Other eq uity instru ments	31,332	-	-	77,870	17,494	126,696
Trading de rivatives	211,512	304	-	405,593	4,190	621,598
	836,010	2,205,313	54,718	483,463	21,698	3,601,202

The breakdown of debt securities by counterparty as at 31 December 2010 and 2009 is as follows (in thousands of euros):

Thousand euros	31-12-10				31-12-09
	Spanish Public Adminis trations	Other Private Sectors Resident	Other Private Sectors Non resi dent	Total	Spanish Public Adminis trations	Other Private Sectors Resident	Other Private Sectors Non resident	Total
Debt instru ments	984,898	288,841	1,751	1,275,490	2,205,009	593,166	54,733	2,852,908

The fair value of the guarantees received by the Group (financial and non-financial assets) that the Group is authorised to sell or pledge without the owner of the guarantee having defaulted on payment is lacking in relative importance considering the Group's financial statements as a whole.

The breakdown of the liabilities in the financial assets and liabilities held for trading and other financial liabilities at fair value through profit & loss is as follows:

	Thousand euros
Liabilities	31-12-10	31-12-09
Customer deposits	88,745	278,727
Short positions in securities	1,089,303	879,299
Trading derivatives	854,126	611,866
	2,032,174	1,769,892
In euros	2,030,740	1,768,929
In foreign currency	1,434	963
	2,032,174	1,769,892

The breakdown of the effect on the consolidated 2010 and 2009 profit and loss account of the changes in the fair value of the financial assets and liabilities held for trading of both assets and liabilities and the financial assets at fair value with changes to profits and losses is as follows:

	Thousand euros
	2010	2009
Financial assets and liabilities held for trading	16,794	68,020
Organised market	(27,256)	52,450
Non-organised market	44,046	15,570
Other financial assets at fair value with changes to the profit and loss account	10,835	958
	27,629	68,978

The net results by financial operation, broken down by the type of instrument in the financial assets and liabilities held for trading and other financial assets at fair value with changes to profits and losses recorded in financial years 2010 and 2009, are as follows:

	Thousand euros
	2010	2009
Fixed gains/Losses of financial assets and liabilities	24,737	45,140
Other equity instruments	(10,696)	69,498
Financial assets and liabilities held for trading	(21,531)	68,540
Other financial assets at fair value with changes to the profit and loss account	10,835	958
Trading derivatives	13,585	(45,660)
	27,629	68,978

a) Debt instruments

The breakdown of this item in the financial assets and liabilities held for trading of the assets on the consolidated balance sheet as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Public Administrations	984,898	2,259,727
Other private sectors	290,592	593,181
	1,275,490	2,582,908

The breakdown of this item in accordance with the nature of the securities that make it up as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Treasury Bills	499,198	1,333,065
Bonds	80,766	464,177
Debentures	330,090	395,725
Strips	40,825	12,042
Rest	324,611	647,899
	1,275,490	2,582,908

All of the amounts in this item are denominated in euros. The financial assets and liabilities held for trading for assets is composed of securities which are traded on organised markets as at 31 December 2010 and 2009.

b) Equity instruments

The breakdown and changes under this heading of the financial assets and liabilities held for trading and of the other financial assets at fair value through profit and loss account for financial years 2010 and 2009 is as follows:

Thousand euros	From banks	From other residen tial sectors	From other non residential sectors	Total
Balance as at 31-12-09	31,332	77,870	17,494	126,696
Balance at 31-12-10	18,385	69,086	36,025	123,496

The majority of the instruments under Other equity instruments on the Bankinter Group balance sheet are denominated in euros both in 2010 and in 2009.

c) Trading derivatives

The breakdown of this item in the financial assets and liabilities held for trading for assets on the consolidated balance sheet as at 31 December 2010 and 2009 is as follows:

Thousand euros	Fair value
	31-12-10			31-12-09
	Assets	Liabilities	Assets	Liabilities
Purchase and sale of unmatured forward exchange contracts:	15,294	132,531	46,280	35,561
Currency purchases for euros	9,967	126,414	21,754	31,819
Currency purchases for other currencies	-	3,308	11,355	1,560
Currency sales for euros	5,328	2,809	13,171	2,163
Currency sales for other currencies	-	-	-	19
Securities and interest-rate futures:	1,028	-	1,235	(12)
Bought	1,028	-	1,235	(12)
Securities options:	19,627	43,456	8,327	47,926
Bought	19,627		8,327
Issued	-	43,456	-	47,926
Interest-rate options:	2,195	1,576	13,994	1,811
Bought	2,195	-	13,994
Issued	-	1,576	-	1,811
Currency options:	-	481	90	364
Bought	-		90
Issued	-	481	-	364
Other interest-rate operations:	474,431	676,082	551,542	525,622
Interest-rate swaps (IRSs)	474,431	676,082	551,542	525,622
Loan derivatives	-	-	130	594
Loan derivatives	-	-	130	594
	512,575	854,126	621,598	611,866

d) Short positions

This heading in the balance sheet consists of the financial liabilities originated by overdrafts in disposals to the value of 1,089,303 thousand euros as at 31 December 2010 (879,299 thousand euros as at 31 December 2009). The balances are denominated in euros. These overdrafts in disposals are generated by the firm sale of temporary financial assets.

e) Customer deposits

The item "Other financial liabilities for fair value with changes to profit and loss" records liabilities with the resident public sector to the value of 88,745 thousand euros (278,727 as at 31 December 2009). Its composition is as follows:

Thousand euros	31-12-10	31-12-09
Deposits with Central Administration	88,639	268,574
Valuation adjustments	106	10,153
	88,745	278,727

These financial liabilities have been called "at fair value with changes in profit and loss" with a view to obtaining more relevant information, as this significantly reduces the accounting asymmetries that would occur if it were not done in this way.

No variation in the fair value of these financial liabilities that may be attributed to changes in the value of the instrument or institution has been recorded, because the aforementioned valuation adjustments correspond to deposits that materialised in temporary assignments of assets that are payable at the European Central Bank and therefore, given their legal formalisation and the maximum solvency of collateral, they do not incorporate proprietary credit risk. In fact, they are legally formalised in two contracts: one of which is a firm sale and the other a hire purchase. Therefore, the aforementioned valuation adjustments correspond exclusively to changes in interest rates.

8. Financial assets available for sale

The breakdown of this heading in the consolidated balance sheet as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Debt instruments	2,961,894	3,254,182
Equity instruments	138,321	90,883
	3,100,215	3,345,065
In euros	3,097,399	3,342,586
In foreign currency	2,816	2,479
	3,100,215	3,345,065

The fair value of the assets under this heading in the consolidated balance sheet as at 31 December 2010, loaned or under guarantee, is 1,227,514 thousand euros, respectively (1,483,368 thousand euros as at 31 December 2009). Practically all these assets are assigned for terms of less than one year.

The breakdown of these assets as at 31 December 2010 and 2009 is as follows (in thousands of euros):

Thousand euros	31-12-10
	Resident Public Other Private Sec Administrations tors		Total
Debt instruments	1,030,154	1,931,740	2,961,894
Other equity instruments	-	138,321	138,321
	1,030,154	2,070,061	3,100,215

Thousand euros	31-12-09
	Resident Public Other Private Sec Administrations tors		Total
Debt instruments	1,268,530	1,985,652	3,254,182
Other equity instruments	-	90,883	90,883
	1,268,530	2,076,535	3,345,065

The effect on the heading 'Valuation adjustments' in the consolidated net worth was (22,994) thousand euros as at 31 December 2010 (29,774 thousand euros as at 31 December 2009).

The following is the breakdown of the movement:

Thousand euros	31-12-10
Valuation adjustments as at 1 January	29,774
Valuation gains and losses	(42,763)
Income tax	22,578
Amounts transferred to results	32,583
Valuation adjustments as at 31 December	(22,994)
Debt securities	(24,083)
Other equity instruments	1,089

The portfolio of financial assets available for sale is concentrated according to geographical areas, practically all of which are in Spain as at 31 December 2010 and 2009.

As at 31 December 2010 and 2009, the Group has recorded an impairment of 385 and 1,797 thousand euros respectively.

The results for financial operations (Note 30) according to the type of instrument in the portfolio of financial assets available for sale recorded in the consolidated profit and loss account as of 31 December 2010 and 2009 are as follows:

Thousand euros	31-12-10	31-12-09
Debt instruments	29,003	(9,885)
Other equity instruments	3,580	670
	32,583	(9,215)

9. Held to maturity investments

The breakdown of this heading in the consolidated balance sheets as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Public administrations	2,181,880	689,056
Credit institutions	1,059,693	932,613
	3,241,573	1,621,669

The changes that occurred in the chapter "Held-to-maturity portfolio" in the financial years 2010 and 2008 are detailed as follows:

Thousand euros	2010	2009
Balance at start of period	1,621,669	-
Transfers	-	415,416
Additions	1,623,588	1,209,574
Withdrawals	-	-
Other movements	(3,684)	(3,321)
Balance at close of period	3,241,573	1,621,669

During the financial year 2009 fixed income securities were transferred from the portfolio of financial assets available for sale to the portfolio of investment held to maturity, to the value of 415,416 thousand euros as at the date of transfer.

10. Loan and receivables

The breakdown of this item in the consolidated balance sheets as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Loans and advances to credit institutions	1,610,194	3,798,183
Valuation adjustments	(8,724)	(12,048)
Total bank deposits	1,601,470	3,786,135
Loans and advances to customers	43,435,008	40,714,674
Valuation adjustments	(909,534)	(831,091)
Total Loans and advances to customers	42,525,474	39,883,583
	44,126,944	43,669,718
Euros	38,992,555	39,155,858
Foreign currency	5,134,389	4,513,860
	44,126,944	43,669,718

The following are the details of the changes that occurred during 2010 and 2009 in the balance of the financial assets classified as loans and receivables and considered to have been impaired due to their credit risk:

Thousand euros	31-12-10	31-12-09
Balance at start of period	1,094,137	605,129
Net entries	435,392	525,145
Transferred to bad debts	(199,349)	(36,137)
Balance at close of period	1,330,180	1,094,137

After the relevant provisions have been deducted, this amount is the Group's best estimate of the fair value of the impaired assets.

The breakdown of this item of the consolidated balance sheet as at 31 December 2010 and 2009, by instrument type and counterparty, irrespective of the fair value that may be attributed to any kind of guarantee to ensure performance, is as follows:

Thousand euros		31-12-10		31-12-09
	Bank de posits	Loans and advances to custom ers	Total	Bank de posits	Loans and advances to custom ers	Total
Banks	1,601,470	-	1,601,470	3,786,135	-	3,786,135
Resident Public Administrations	-	221,933	221,933	-	212,543	212,543
Other private sectors	-	42,303,541	42,303,541	-	39,671,040	39,671,040
	1,601,470	42,525,474	44,126,944	3,786,135	39,883,583	43,669,718

The valuation adjustments of the loan and receivables portfolio, as at 31 December 2010 and 2009 present the following figures:

Thousand euros	31-12-10	31-12-09
Valuation corrections due to asset impairment	(861,210)	(783,885)
Accrued interest	52,280	56,202
Rest	(109,328)	(115,456)
	(918,258)	(843,139)

The following are the changes that occurred, during 2010 and 2009, in the balance of the allowances that cover losses due to impairment of the assets that make up the balance of the "Loans and Receivables" headings.

Thousand euros	31-12-10	31-12-09
Balance at start of period	783,885	696,376
Allocations chargeable to results for the financial year	184,950	165,812
Of which:
Calculated on an individual basis	559,746	369,064
Calculated on a collective basis	34,859	(92,347)
Recoveries credited to P&L	(409,655)	(110,905)
Exercised	(99,329)	(53,891)
Other movements	(8,296)	(24,412)
Balance at close of financial year	861,210	783,885
Of which:
Calculated on an individual basis	723,802	415,195
Calculated on a collective basis	137,408	368,690

The suspended assets recovered during 2010 and 2009 total 4,602 and 3,431 thousand euros, respectively. During the financial years 2010 and 2009, the Group recorded losses of 35,933 and 56,324 thousand euros due to the impairment of foreclosed assets (Note 12). Considering these amounts and those recorded in the account "Allocations debited from results" in the previous table, the losses due to impairment of "Loans and Receivables" amounted to 216,281 and 218,705 thousand euros, recorded in the heading "Losses due to (net) impairment of financial assets" in the profit and loss account.

Interest and return according to instrument type in the portfolio of loans and receivables recorded in the consolidated profit and loss account as at 31 December 2010 and 2009 are as follows:

Thousand euros	2010	2009
Loans and advances to credit institutions	27,952	62,556
Loans and advances to customers	984,676	1,479,321
	1,012,628	1,541,877

1. Loans and advances to credit institutions

The breakdown of this item in the loans and receivables portfolio for the assets on the consolidated balance sheet as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Term accounts	189,638	97,394
Temporary asset acquisitions	829,174	3,190,648
Other accounts	578,123	496,882
Impaired assets	13,259	13,259
Valuation adjustments	(8,724)	(12,048)
Accrued interest	3,999	688
Rest	(12,723)	(12,736)
	1,601,470	3,786,135
In euros	1,513,799	3,725,421
In foreign currency	87,671	60,714
	1,601,470	3,786,135

2. Loans and advances to customers

The breakdown of this item in the loans and receivables portfolio for the assets on the consolidated balance sheet as at 31 December 2010 and 2009 is as follows:

Thousand euros
Loans and advances to customers	31-12-10	31-12-09
Public Administrations	221,933	212,543
Loans to Public Administrations	220,781	212,541
Valuation adjustments	1,152	2
Other private sectors	42,303,541	39,671,040
Commercial loans	1,930,582	1,176,764
Debtors with tangible guarantee	30,465,427	29,153,491
Temporary asset acquisitions	845,999	6,456
Hybrid financial assets	0	0
Other term debtors	6,874,515	6,348,192
Financial leases	1,021,974	1,163,958
Sight debtors and miscellaneous	757,657	1,572,394
Impaired assets	1,316,921	1,080,878
Valuation adjustments	(909,534)	(831,093)
Valuation corrections due to asset impairment	(861,210)	(783,885)
Accrued interest	48,281	55,503
Rest	(96,605)	(102,711)
	42,525,474	39,883,583
In euros	37,478,756	35,430,437
In foreign currency	5,046,718	4,453,146
	42,525,474	39,883,583

The breakdown of impaired assets according to maturity term as of 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10
Up to 6 months	369,246
More than 6 months but not more than 9	126,789
More than 9 months but not more than 12	124,399
More than 12 months	709,746
	1,330,180

Thousand euros	31-12-10
	31-12-09
Up to 6 months	242,765
More than 6 months but not more than 12	239,773
More than 12 months but not more than 18	218,323
More than 18 months but not more than 24	92,349
More than 24 months	33,996
Under 3 years	263,187
More than 3 years but not more than 4 years	3,056
More than 4 years but not more than 5 years	430
More than 5 years but not more than 6 years	127
More than 6 years	131
	1,094,137

Unimpaired mature assets as at 31 December 2010 total 129,538 thousand euros.

Finance lease agreements for financial years 2010 and 2009, have the following characteristics:

	2010	2009
Average lifespan	4.8 years	4.5 years
Maximum differential	9.00%	9.00%

The distribution of loans and receivables in financial leases as at 31 December 2010 and 2009 is as follows:

	31-12-2010	31-12-2009
Tourism	16.37%	36.55%
Assorted machinery	52.42%	28.02%
Transport vehicles	29.27%	29.33%
Other	1.94%	6.10%
	100.00%	100.00%

11. Hedging derivatives

As at 31 December 2010, the Group held hedge derivatives in the amount of 171,917 thousand euros recorded on the asset side of the balance sheet and 40,441 thousand euros recorded on the liability side (189,987 and 65,010 thousand euros on the asset and liability side as at 31 December 2009). The net of the derivatives climbed to 131,790 thousand euros and 124,977 thousand euros at 31 December 2010 and 2009, respectively.

The breakdown of the hedging derivatives and the corresponding hedged elements, differentiating according to the type of hedging, is as follows:

Thousand euros			Fair value of the Hedged Instrument attributed to the hedged risk		Fair value Hedging Instrument (ex interest)
Instrument Hedged	Type of Hedging	Hedging Instru ment	Hedged Par (mil lions of euros)	Nature of Risk Hedged	31-12-10	31-12-09	31-12-10	31-12-09
Individual hedges or Micro-hedges:
Financial assets
Public Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	430	Interest Rate	23,212	25,221	(22,476)	(24,043)
Financial liabilities
Subordinated Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	370	Interest Rate	(30,794)	(20,457)	31,436	20,422
Senior Debt	Individual Hedges or Micro-hedges:	Interest-rate swaps	79	Interest Rate	(1,007)	-	999	-
Customer Deposits	Individual hedges or Micro-hedges:	Interest-rate swaps	20	Interest Rate	(41,545)	(41,031)	41,627	40,682
Backed issue	Individual hedges or Mi cro-hedges:	Interest-rate swaps	1,500	Interest Rate	(16,715)	(11,491)	15,302	10,908
FAAF bonds	Individual hedges or Micro-hedges:	Interest-rate swaps	743	Interest Rate	(11,577)	(14,927)	11,631	15,041
Mortgage Bond Issues	Individual hedges or Micro-hedges:	Interest-rate swaps	2,500	Interest Rate	(26,229)	(20,349)	25,208	20,330
Macro-hedging-
Mortgage Loans	Macro-hedging	Interest-rate swaps	10100	Interest Rate	1,308	9,754	(1,210)	(9,259)
					(103,347)	(73,280)	102,517	74,081

The following is a comparison of the interest and ex-interest hedging instruments as at 31 December 2010 and 2009:

Thousand euros		31-12-10		31-12-09
	With inter est	Ex-interest	With inter est	Ex-interest
Public Debt	(27,124)	(22,476)	(35,708)	(24,043)
Subordinated Debt	33,094	31,436	22,056	20,422
Customer Deposits	41,666	41,627	40,682	40,682
Senior debt	2,268	999
Backed issue	38,385	15,302	34,174	10,908
FAAF bonds	17,345	11,631	20,801	15,041
Mortgage Bond Issue	38,231	25,208	72,098	20,330
Macro-hedging - Mortgage loans	(12,036)	(1,210)	(74,695)	(64,118)
Other
	131,790	102,517	124,977	74,081

The Group uses interest-rate swaps as hedging instruments. These swaps give rise to an economic interest rate exchange with no principal being exchanged.

The following is a description of the main characteristics of the hedging maintained by the institution as at 31 December 2010.

1.- Public Debt Hedging classified in the portfolio of assets available for sale

In this type of hedging, the hedged elements are Spanish State Public Debt securities at 5.40% and 5.50% for a total face value at closure of 430 million euros recorded under the heading "financial assets available for sale" in the assets included in (Note 19). The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. The accounting hedge is used to exchange exposure to fixed interest for exposure to variable interest. In each case, the amount hedged represents 100% of the issue.

2.- Hedging of issues of subordinated debentures

In this case the items hedged are subordinated debentures issued by Bankinter for 5.70%, 6.00% and 6,375% fixed interest rates for a total sum of 370 million euros carried under the heading 'Financial liabilities at depreciated cost' of the liabilities included under (Note 19). The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. In each case, the amount hedged represents 100% of the issue.

3.- Hedging of issues of senior bonds.

In this case the items hedged are senior bonds issued by Bankinter for a 3% fixed interest rate for a total sum of 78.8 million euros carried under the heading 'Financial liabilities at depreciated cost' of the liabilities included under (Note 19). The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount hedged is 100% of the issue.

4.- Hedging of Customer Deposits

The elements hedged are various fixed-rate deposits taken from clients in the amount of 19,554 thousand euros carried under the heading "financial liabilities at depreciated cost" of the liabilities included in (Note 19). The risk hedged is the variation in the fair value of said deposits as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount hedged is 101% for the CAS (CAS Cuadruplicón deposits) and 99% for PLUS (Deposits made to Seguros Plus Ultra).

5.- Hedging of backed issue

The instrument being hedged is issue ES0313679450, 1.500 billion euros. The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount that is hedged is 100%.

6.- Hedging of FAAF bonds

The instruments being hedged are bonds ES0413679046 and ES0413679053, for a face value of 743 million euros. The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount that is hedged is 100%.

7.- Hedging of mortgage-bond issues

The instruments being hedged are issues ES0413678061 (1 billion €), ES0413679079 (1 billion €) and ES0413679095 (500 million €) of mortgage bonds for a total face value of 2.500 billion euros.

The risk being hedged is the six-month interest rate risk at the start of each interest period to which the above fixed-income instrument is exposed as a consequence of the variations in the risk-free interest rate, excluding variations due to possible credit risk premiums, market liquidity or any other than the aforementioned interest-rate risk.

8.- Portfolio hedging

The element being hedged is the amount of the mortgage loans that it is decided to hedge on a monthly basis according to the time distribution of the maturity and variable interest-rate review dates to which they are linked.

The risk being hedged is the interest to which the aforementioned mortgage loan amounts are exposed for each of the rate-review terms that are to be hedged, as a consequence of variations in the risk-free interest rate.

In this hedge, the risk-free interest rate will be understood to correspond to the variable interest rates of the Call Money Swaps (CMS).

The instruments that are used as hedging elements for the various mortgage loan amounts are CMS hired on a monthly basis depending on the decisions that are adopted in managing interest-rate risk.

Hedging efficiency

The Micro-hedges and Portfolio Hedging described above are highly effective. The Bank performs and documents the necessary analyses to verify that at the start and during the lifetime of same, it is possible to expect, on a prospective basis, that the changes in the fair value of the hedged item that are attributable to the hedged risk will be almost fully compensated for by the changes in the fair value of the hedging instrument and, on a retrospective basis, that the results of the hedging will have fluctuated within a range of variation of between eighty and one hundred and twenty-five percent from the result of the hedged item.

As regards portfolio hedges, as well as the foregoing, the Bank verifies compliance with the alternative, described in the standing accounting regulations, of appraising their efficiency by comparing the amount of the net asset position in each of the time periods with the hedged amount designated for each one. According to this alternative, the hedge would only be inefficient if, after it were reviewed, the amount in the net asset position were lower than that of the hedged amount.

12. Non-current assets held for sale

The portfolio of non-current assets for sale consists of assets that have been awarded in the payment of debts. These are tangible assets denominated in euros in the amount of 271,537 thousand euros as at 31 December 2010 (238,017 thousand euros as at 31 December 2009).

The breakdown and changes in the non-current assets for sale are as follows:

	Thousand euros
Balance as at 31-12-08	50,468
Entries	286,343
Valuation adjustments	(65,799)
Cancellations	(32,995)
Balance as at 31-12-09	238,017
Entries	222,867
Valuation adjustments	(106,575)
Cancellations	(82,771)
Balance at 31.12.2010	271,537

During the financial year 2010 properties owned by the Group for which a sales plan had been prepared were reclassified in this chapter. As at 31 December 2009, these assets had been carried under the Tangible Assets heading of the consolidated balance sheet, to the value of 22,991 thousand euros.

The changes undergone by the valuation adjustments of non-current assets for sale throughout the financial year 2010 were as follows:

	Thousand euros
Balance as at 31-12-09	65,799
Net provisions charged to results	55,757
Application of funds	(11,200)
Other movements	(3,781)
Balance at 31-12-10	106,575

Net earnings recognised in financial year 2010 (Note 34) for disposal of non-current assets for sale totalled 1,489 thousand euros (-991 thousand euros in 2009). Moreover, during financial year 2010, allowances assigned to these assets to the value of 11,200 thousand euros were used or released.

The following is the classification in categories and according to the average length of permanence of the awarded properties in the portfolio of non-current assets for sale:

Thousand euros		Residential assets	Industrial assets		Other Assets		Totals
	31-12-10	31-12-09	31-12-10	31-12-09	31-12-10	31-12-09	31-12-10	31-12-09
Up to one month	6,547	7,739	1,348	2,821	3,546	10,815	11,441	21,375
Between one and three months	8,147	5,413	2,433	1,366	926	581	11,506	7,360
Between three and six months	14,527	29,317		10,813	5,179	15,174	19,706	55,304
Between six and twelve months	25,982	50,061	1,129	38,380	8,375	38,585	35,486	127,026
More than one year	102,943	10,314	10,008	10,349	80,448	6,289	193,399	26,952
	158,146	102,844	14,918	63,729	98,474	71,444	271,537	238,017

Awarded assets that are not destined for proprietary use or real estate investments should be disposed of in the maximum timeframe of one year from the moment that they become available for immediate sale. This latter circumstance determines that the period that an awarded asset remains in the balance sheet may exceed one year.

All awarded assets are valued by appraisal firms that are enrolled on the register of appraisal firms held at the Bank of Spain.

The distribution of the awarded assets according to business segments is as follows, as at December 2010 and 2009:

	13. Investments

Segments 31/12/2010 31/12/2009 Companies 47% 74% Retail Banking 53% 26% General total 100% 100%

From 31 December 2010 to the date on which these consolidated annual accounts were drafted, no significant amounts were recorded under the heading 'Non-current assets for sale' on the consolidated balance sheet.

Assets from awards consist of assets awarded as payment of debts, donations in payment of debts and acquisitions of assets with subrogation to companies in the Group. Initially, these assets are recorded for the net book value of the debts from which they originated and the losses from impairment entered in the accounts are not released. Subsequently, these assets are valued at the lower of the net book value of the relevant loan on the date of the acquisition or the fair value of the awarded asset (estimated on the basis of its appraisal value), with a downward adjustment according to the time that the asset has remained on the consolidated balance sheet. The appraisal value of non-current assets for sale has been estimated, basically, using appraisals performed by firms registered in the Register of Bodies Specialising in Appraisal held at the Bank of Spain.

The breakdown of this item in the consolidated balance sheets as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Associates	29,067	33,304
Jointly controlled entities	526	1,374
	29,593	34,678

The changes that occurred in the balance for this heading are shown below:

Thousand euros
Balance at start of period	34,678
Purchases and capital increases	-
Sales and capital reductions	(340)
Share of results of entities accounted for using the equity method	10,958
Dividends paid	(8,032)
Other movements	(7,671)
Balance at close of financial year	29,593

	The breakdown of the Group companies consolidated by global integration as at 31 December 2010 is as follows:

			% Stockholding			Euros			Thousand euros
	Registered office	Direct	Indirect	Total	No. Shares	Face value	Capital	Reserves	Results	Theoreti cal book value
Bankinter Consultoría, Asesoramiento, y Aten ción Telefónica, S.A.	Castellana, 29. Madrid	99.99	0.01	100	35,222	30	1,060	39,940	433	41,433
Bankinter Servicios de Consultoría, S.A.	Castellana, 29. Madrid	99.99	0.01	100	1,999	30	60	465	(4)	521
Bankinter Gestión de Activos, S.G.I.I.C.	Marqués de Riscal, 11. Madrid	99.99	0.01	100	144,599	30	4,345	5,363	11,808	21,516
Hispamarket, S.A.	Castellana, 29. Madrid	99.99	0.01	100	4,516,452	6	27,144	6,510	(85)	33,569
Intermobiliaria, S.A.	Castellana, 29. Madrid	99.99	0.01	100	222,999	30	6,701	(11,706)	(43,022)	(48,027)
Bankinter Consumer Finance, S.A., E.F.C	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	99.99	0.01	100	1,299,999	30	39,065	20,535	(3,352)	56,248
Bankinter Capital Riesgo, SGECR, S.A.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	99.99	0.01	100	3,000	100	310	175	26	511
Bankinter Sociedad de Financiación, S.A.	Castellana,29 Madrid	100	-	100	602	100	60	2,309	180	2,549
Bankinter Emisiones, S.A.	Castellana,29 Madrid	100	-	100	602	100	60	819	84	963
Bankinter Capital Riesgo I Fondo Capital	Castellana,29 Madrid	100	-	100	24,219	1,000	25,000	771	112	25,883
Arroyo Business Consulting Development, S. L.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	100	-	100	2,976	1	3	-	(1)	5
Canarias Excelencia en SIM	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	100	-	100	100,000	1	100	(2)	-	98
Gneis Global Services S.A.	Tres Cantos (Madrid)	100	-	100	30,000,000	1	30,000	-	474	30,474
Relanza Gestión, S.A.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	-	100	100	1,000	60	60	-	56	116
Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros	Isaac Newton, 7	100	-	100	2,400,000	15	37,512	195,466	66,260	299,238
Línea Directa Asistencia, S.L.U.	Pozuelo de Alarcón (Madrid)	-	100	100	500	60	30	9,742	7,389	17,161
Moto Club LDA, S.L.U.	Tres Cantos (Madrid)	-	100	100	30	100	3	142	208	353
Centro Avanzado de Reparaciones CAR, S.L.U.	Torrejón de Ardoz (Madrid)	-	100	100	10,000	100	1,000	(1,046)	143	97
Servicio Integral a Sociedades Tecnológicas, S.L.U.	Tres Cantos (Madrid)	-	100	100	3,006	1	3	-	-	3
Ambar Medline, S.L.	Tres Cantos (Madrid)	-	100	100	310	10	3	-	(14)	(11)

The breakdown of the Group companies consolidated by global integration as at 31 December 2009 is as follows:

			% Stockholding			Euros			Thousand euros
	Registered office	Direct	Indirect	Total	No. Shares	Face value	Capital	Reserves	Results	Theoreti cal book value
Bankinter Consultoría, Asesoramiento, y Aten ción Telefónica, S.A.	Castellana, 29. Madrid	99.99	0.01	100	35,222	1,060	1,060	39,784	156	41,000
Bankinter Servicios de Consultoría, S.A.	Castellana, 29. Madrid	99.99	0.01	100	1,999	60	60	469	(4)	525
Bankinter Gestión de Activos, S.G.I.I.C.	Marqués de Riscal, 11. Madrid	99.99	0.01	100	144,599	4,345	4,345	17,170	11,304	32,819
Hispamarket, S.A.	Castellana, 29. Madrid	99.99	0.01	100	4,516,452	27,144	27,144	8,392	(624)	34,911
Intermobiliaria, S.A.	Castellana, 29. Madrid	99.99	0.01	100	222,999	6,701	6,701	35,042	(46,748)	(5,004)
Bankinter Consumer Finance, S.A., E.F.C	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	99.99	0.01	100	1,299,999	39,066	39,065	15,369	5,163	59,597
Bankinter Capital Riesgo, SGECR, S.A.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	99.99	0.01	100	100	10	310	175	5	490
Bankinter Sociedad de Financiación, S.A.	Castellana,29 Madrid	100	-	100	602	60	60	1,870	439	2,369
Bankinter Emisiones, S.A.	Castellana,29 Madrid	100	-	100	602	60	60	320	499	879
Bankinter Capital Riesgo I Fondo Capital	Castellana,29 Madrid	100	-	100	18,830	18,830	20,000	1,171	(540)	20,631
Arroyo Business Consulting Development, S. L.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	100	-	100	2,976	3	3	-	(1)	5
Canarias Excelencia en SIM	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	100	-	100	100,000	100	100	-	-	100
Relanza Gestión, S.A.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	-	100	100	1,000	60	60	-	-	60
Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros	Isaac Newton, 7	100			2,400,000	72,120	37,512	129,038	66,427	232,977
Línea Directa Asistencia, S.L.U.	Pozuelo de Alarcón (Madrid)	-	100	100	500	60	30	4,216	5,526	9,772
Moto Club LDA, S.L.U.	Tres Cantos (Madrid)	-	100	100	30	100	3	79	63	145
Centro Avanzado de Reparaciones CAR, S.L.U.	Torrejón de Ardoz (Madrid)	-	100	100	10,000	100	1,000	(851)	(195)	(46)
Servicio Integral a Sociedades Tecnológicas, S.L.U.	Tres Cantos (Madrid)	-	100	100	3,006	1	3	-	-	3
Ambar Medline, S.L.	Tres Cantos (Madrid)	-	100	100	310	10	3	-	-	3

In the financial year 2010, Bankinter, S.A. set up the company Gneis Global Services, S.A., which has as its corporate purpose the provision of business advisory and consultancy services for the design and implementation of technological and operational systems. This company is globally integrated in the Bankinter Group financial statements.

None of the companies integrated in the portfolio of permanent investments as at 31 December 2010 is a listed company.

The breakdown of the companies in the Group that are consolidated by the equity method as at 31 December 2010 is as follows :

		% Stockholding			Thousand euros
	Registered office	Direct	Indirect	Total	Capital	Reserves	Results	Theoreti cal book value	Net Book Value
Mercavalor, S.V., S.A.	Avda. Brasil, 7 Madrid	20.01	-	20.01	3,219	6,465	435	10,119	2,164
Helena Activos Líquidos, S.L.	Serrano, 41 Madrid	29.53	-	29.53	7	500	(2)	505	960
Eurobits Technologies, S.L.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	40.01	-	40.01	9	1,139	(157)	991	396
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	Castellana,29 Madrid	50.00	-	50.00	6,968	19,389	21,526	47,883	26,073
									29,593

The company Professional Future Materials, S.L. was closed in the fourth quarter of 2010 due to the ceasing of its activities.

Also in the fourth quarter of 2010, the two companies Helena Activos Líquidos, S.L (absorbing company) and Helena Activos Líquidos Internacional, S.L. (absorbed company) were merged. The assets and liabilities of the absorbed company have been integrated in the absorbing company for all purposes since 30 September 2010.

Helena Activos Líquidos Internacional, S.L. was dissolved without liquidation and its property was universally transferred en masse to the company Helena Activos Líquidos, S.L, which subrogated all the rights and obligations of the absorbed company, with the absorbing company altering its share capital.

The company's share capital stands at 24 thousand euros, divided into 2,393,551 equal and indivisible equity interests with a face value of 0.01 euros each, fully taken up and paid.

The breakdown of the companies in the Group that are consolidated by the equity method as at 31 December 2009 is as follows :

			% Stockholding			Thousand euros
	Registered office	Direct	Indirect	Total	Capital	Reserves	Results	Theoreti cal book value	Net Book Value
Mercavalor, S.V., S.A.	Avda. Brasil, 7 Madrid	20.01	-	20.01	3,219	5,927	508	9,654	1,930
Helena Activos Líquidos, S.L.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	28.85	-	28.85	5	332	(7)	330	334
Helena Activos Líquidos Internacional, S.L.	Serrano 41. Madrid.	32.04	-	32.04	320	7	(123)	206	641
Eurobits Technologies, S.L.	Avda Bruselas 12 .Arroyo de la Vega (Alcobendas) Madrid	40.01	-	40.01	9	1246	(637)	618	162
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	Castellana,29 Madrid	50.00	-	50.00	6,968	18,327	17,125	42,420	31,232
Professional Future Materials, S.L.	Paseo Jose María Arizmendiarrieta, Mondragón. Guipúzcoa	19.73	-	19.73	1,950	(244)	(407)	1,299	379
									34,678

The financial statements for Eurobits Technologies, S.L, Mercavalor S.V., S.A and Helena Activos Líquidos, S.L, correspond to 30 November 2010. The impact on the consolidated annual accounts derived from the use of financial statements corresponding to dates prior to 31 December 2010 is not significant for these companies.

The companies Eurobits Technologies, S.A, Mercavalor, S.V., S.A., Helena Activos Líquidos, S.L. and Bankinter Seguros de Vida, S.A., de Seguros y Reaseguros are consolidated by the equity method and not by proportional integration, in accordance with the accounting regulations in force, given that as there is no joint management with other shareholders, this method allows the economic basis of the relationship between the companies to be more accurately reflected.

The following is a summary of the assets, liabilities, profits and losses of the companies consolidated by the equity method in financial years 2010 and 2009:

As at 31 December 2010

Thousand euros		Balance Sheet	Profit and Loss
	Assets	Liabilities	Expenses	Income
Eurobits Technologies, S.L.	1,879	2,036	1,704	1,547
Mercavalor, S.V., S.A.	15,983	15,548	6,243	6,678
Helena Activos Líquidos, S.L.	1,777	1,784	499	492

As at 31 December 2009

Thousand euros		Balance Sheet	Profit and Loss
	Assets	Liabilities	Expenses	Income
Eurobits Technologies, S.L.	1,370	2,007	1,622	985
Mercavalor, S.V., S.A.	12,808	12,299	6,307	6,816
Helena Activos Líquidos, S.L.	1,310	1,334	642	618
Helena Activos Líquidos Internacional, S.L.	1,152	1,535	418	35

The following is a detailed breakdown of the activity carried out by the group, multi-group and associated companies:

	Activity
Group companies
Bankinter Consultoría, Asesoramiento, y Aten ción Telefónica, S.A.	Telephone helpline
Bankinter Servicios de Consultoría, S.A. (for merly called Bankinter Gestión de Seguros S.A. de Correduría de Seguros)	Consultancy
Bankinter Gestión de Activos, S.G.I.I.C.	Asset management
Hispamarket, S.A.	Holding and acquisition of securities
Intermobiliaria, S.A.	Real-estate management
Bankinter Consumer Finance, E.F.C.,S.A.	Credit institution
Bankinter Capital Riesgo, SGECR, S.A.	Fund management and capital-risk companies
Bankinter Sociedad de Financiación, S.A.	Issue of debt securities
Bankinter Emisiones, S.A.	Issue of preferred shares
Bankinter Capital Riesgo I Fondo Capital	Capital Risk Fund
Arroyo Business Consulting Development, S. L.	Inactive
Canarias Excelencia en SIM	Telephony
Gneis Global Services S.A.	Consultancy
Relanza Gestión, S.A.	Provision of debt recovery services
Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros	Insurance company
Línea Directa Asistencia, S.L.U.	Insurance audits, vehicle inspections and travel assistance
Moto Club LDA, S.L.U.	Services to motorcycle users
Centro Avanzado de Reparaciones CAR, S.L.U.	Vehicle repair
Servicio Integral a Sociedades Tecnológicas, S.L.U.	Inactive
Ambar Medline, S.L.	Insurance mediation
Multigroup and associated companies:
Mercavalor, S.V., S.A.	Securities broker
Helena Activos Líquidos, S.L.	Other financial services
Eurobits Technologies, S.L.	Advanced digital services
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	Insurance company

14. Tangible assets

The breakdown of this heading in the balance sheet as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
For internal use	444,396	440,137
Real-estate investments	-	22,991
Other assets assigned under operating leases	12,173	12,508
	456,569	475,636

The following is a summary of the elements of the tangible assets and their movements during financial years 2010 and 2009:

Thousand euros	31-12-09	Entries	Cancella tions	Transfers and oth ers	Deprecia tion and amorti sation	31-12-10
For internal use	440,137	58,815	20,042	-	34,514	444,396
Computer systems and equipment	9,811	21,417	9,280	-	6,489	15,459
Furniture, vehicles, and other installa tions	118,955	12,104	10,744	34,071	23,061	131,327
Buildings	286,842	3,902	20	-	4,963	285,761
Works in progress	24,512	21,392	-	(34,071)	-	11,833
Other	17	-	-	-	1	16
Real-estate investments	22,991	12,104	-	(34,480)	615	-
Other assets as signed under operat ing leases	12,508	449	-	-	784	12,173
	475,636	69,192	20,042	34,480	35,913	456,569

Thousand euros	31-12-08	Entries	Entries due to Changes in the Con solidation Perimeter	Cancel lations	Trans fers and others	Depre ciation and amorti sation	31-12-09
For internal use	377,103	75,857	42,007	20,844	(2,817)	31,169	440,137
Computer systems and equipment	9,124	1,540	4,257	322	-	4,788
Furniture, vehicles, and other installa tions	112,293	26,991	4,990	20,522	15,483	20,280	118,955
Buildings	239,052	18,745	32,760	-	2,385	6,100	286,842
Works in progress	16,616	28,581	-	-	(20,685)	-	24,512
Other	18		-	-	-	1	17
Real-estate invest ments	3,499	22,446	-	2,330	-	624	22,991
Other assets as signed under oper ating leases	14,723	397	-	1,049	-	1,563	12,508
	395,325	98,700	42,007	24,223	(2,817)	33,356	475,636

The cost of the elements for internal use totally depreciated as at 31 December 2010 and which are in service amounts to 91,036 thousand euros (150,913 thousand euros as at 31 December 2009).

The breakdown by asset type for the profits and losses recorded in financial year 2010 and 2009 by way of sales of real-estate investments and other items is as follows (Note 34):

Thousand euros	2010		2009
	Profits	Losses	Profits	Losses
Building	-	-	-	-
Undeveloped land, plots, and build ing sites	-	-	15	-
Rest	3,117	4,012	57	5,202
	3,117	4,012	72	5,202

Note 40 'Assets and liabilities (financial and non-financial) valued at other than fair value' shows the fair value of the main elements of tangible assets and the calculation methodology used.

As at 31 December 2010 and 2009, the Bank has no tangible assets for internal use or under construction subject to any ownership restrictions or given as collateral for the repayment of debts. Neither are there any commitments to third parties on those dates for the acquisition of tangible assets. During said financial years, the Bank did not receive or expect to receive any amounts from third parties as compensation or indemnity for the impairment or loss of value of tangible assets for internal use.

The whole of the Bank's tangible assets for internal use as at 31 December 2010 and 2009 is denominated in euros.

The balance of the assets assigned by way of operating leases contained in the consolidated balance sheet as at 31 December 2010 under this heading is 12,173 thousand euros, and the balance as at 31 December 2009 was 12,508 thousand euros.

15. Intangible assets:

The following is a breakdown of this item on the consolidated balance sheet and of its movements during financial years 2010 and 2009:

Thousand euros	31-12- 08	Entries	Entries due to Changes in the Consolidation Perimeter	Can cella tions	Depre ciation and amorti sation	31-12- 09	En tries	Cancel lations	Depre ciation and amorti sation	31-12- 10
Goodwill			161,836	-		- 161,836	-	-		- 161,836
Other intangible assets	13,851	2,867	221,926	3,330	20,107	215,207	7,435	-		26,270 196,373
	13,851	2,867	383,762	3,330	20,107	377,043	7,435	-		26,270 358,209

The acquisition during financial year 2009 of 50% of the share capital of LDA, described in note 12, led to recognition of goodwill amounting to 161,836 thousand euros and Other Intangible Assets amounting to 221,926 thousand euros.

In accordance with the estimates made and the projections available to the Group's Administrators, the expected earnings attributable to the goodwill of these companies or the cash-generating units to which they are linked, perfectly support the net worth of the values recorded for goodwill.

In this regard and on an annual basis, the institution submits the goodwill recognised as a consequence of the acquisition of 100% of LDA to the impairment analysis described in the accounting regulations. This analysis is based on analysing the impairment of the cash-generating unit to which this goodwill has been allocated; in this case, LDA. This unit shall be considered to be impaired if its book value is higher than the current value of the estimated cash flows for it. This circumstance has not arisen in the last two financial years.

The estimated cash flows are taken from LDA's business plan in its most prudent scenario, with moderate growth rates and excluding the positive net flows that might be derived from structural changes in the business or in its efficiency, according to the best practices. The discount rate applied to these cash flows is that which is commonly used for this type of analysis in the insurance sector in which LDA's business is carried out.

The Other Intangible Assets generated by the purchase of 50% of LDA mostly correspond to the assessment of relations with clients at the time of purchase. Depreciation is linear over a period of 10 years from the date of acquisition, which is the estimated service life of this asset. In the financial year 2010, the depreciation of these elements totalled 22,193 thousand euros (14,795 thousand euros in 2009). As at 31 December 2009 and 2010, this intangible asset did not show any sign of impairment.

As of 31 December 2010 and 2009, the Group proceeded to review the service life of its intangible assets by adjusting their value according to the current perception of the economic profits that it expects to obtain from said elements. As a consequence of this review, in 2010 the Group did not record any amount under the heading "Losses due to impairment of other (net) assets".

16. Reinsurance assets

As at 31 December 2010, the balance of the item "Insurance contract assets" contains the assets recorded by the company Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros in the course of its activity.

The changes occurring in the financial years 2010 and 2009 for each of the technical allowances included in the balance sheet attached hereto, are as follows:

Thousand euros	Allowance for Un earned Premium	Allowance for Claims	Total
Balance as at 31-12-09	949	12,546	13,495
additions due to global integration of Línea Directa Aseguradora	-	-
Allocations	641	2,432	3,073
Applications	(949)	(12,546)	(13,595)
Adjustments and settlements		(455)	(316)
Balance as at 31-12-10	641	1,976	2,657

The reinsurance scheme followed by the Company is mostly based on an Excess Loss (XL) structure, with the aim of obtaining protection against serious or peak losses and events caused by natural events not covered by the Insurance Compensation Consortium, using reinsurance as a stabilising element for this kind of random losses, for both the occurrence and the amount of same.

During the financial year 2008, the coverage of the XL Motor reinsurance contract was altered to adapt it to the changes in the Revised Text of the Civil Liability Act (21/2007 of 11 July), one of the most important aspects of which is the increase in the limits for compulsory car insurance.

Reinsurers must be registered with the CNSF (National financial Services Commission) and comply with strict safety requirements; they must also have excellent ratings proving their financial solvency. Foreign companies have to present a certificate of residence in Spain.

The criterion that is followed to establish the reinsurance panel for 2009 is a minimum S&P rating of AA-. This criteria changed in 2010, when it was stipulated that the reinsurer rating should not be lower than A. However, a deposit clause will be included in the contracts of reinsurers with an S&P rating that is lower than AA-.

There is quarterly control over the ratings of the various companies that make up the reinsurance panel, with monitoring of the credit risk ratings published by Standard & Poors, Moody's and Fitch, meaning that changes in the probability of default on the commitments undertaken are subject to control.

17. Tax assets and liabilities

The breakdown of these items on the consolidated balance sheet as of 31 December 2010 and 2009 is as follows:

Thousand euros		Current		Deferred
	31-12-10	31-12-09	31-12-10	31-12-09
Withholdings	8,182	5,719	-	-
Income tax	55,955	86,570	93,812	141,687
VAT	6,427	12,079		-
Fiscal assets	70,563	104,368	93,812	141,687
Withholdings	4,419	4,774		-
Income tax	25,289	43,184	142,057	163,710
VAT	6,928	12,090		-
Other items	5,153	5,027		-
Tax liabilities	41,789	65,075	142,057	163,710

The movements in assets and liabilities due to deferred taxes during financial years 2010 and 2009, are as follows:

Thousand euros	Deferred Taxes
	Assets Liabilities
Balance as at 31-12-08	192,825	68,714
Entries	42,379	95,950
Cancellations	93,517	954
Balance as at 31-12-09	141,687	163,710
Entries	51,475	5,899
Cancellations	99,350	27,552
Balance at 31-12-10	93,812	142,057

The reconciliation of the changes in deferred taxes during the financial year 2010 is as follows:

Thousand euros	31-12-09	Debit/Cedit in Profit and Loss Ac count	Debit/Cedit in Net Worth	31-12-10
I. Deferred from Assets	141,687	(60,715)	12,840	93,812
I. Deferred from Liabilities	163,710	(11,878)	(9,775)	142,057

Thousand euros 31-12-10 31-12-09 Deferred Tax debits originating from: Generic Hedging 12,212 115,740 Pension fund allowances 1,522 1,360 Other provisions 57,432 13,245 Impairment in holdings - - Others: 1,509 2,525 Software early retirement fund 1,677 2,451 Contract hire 329 597 Loan fees 3,057 3,622 Other 6,355 2,687 Portfolio Available for Sale 9,719 (540) 93,812 141,687 Deferred Tax debits originating from Real estate revaluations 51,766 52,545 Others: Portfolio Available for Sale 97 12,301 Miscellaneous 90,194 98,864 Of which: Revaluation of Assets belonging to Línea Directa Aseguradora, S.A. 60,448 85,757 142,057 163,710

The details of deferred taxes in assets and liabilities are as follows:

18. Other assets and other liabilities

The breakdown of these items on the consolidated balance sheet as of 31 December 2010 and 2009 is as follows:

Thousand euros		Assets		Liabilities
	31-12-10	31-12-09	31-12-10	31-12-09
Accrued expenses and deferred in come	98,225	124,271	59,355	75,843
Operations in progress	2,737	6,683	17,898	34,344
Other items	10,466	8,926	32,996	23,651
	111,428	139,880	110,249	133,838
In euros	111,342	139,839	110,245	133,835
In foreign currency	86	41	4	3
	111,428	139,880	110,249	133,838

The heading "Other items" in liabilities includes miscellaneous accounts receivable, allowances for expenses and remuneration pending payment corresponding to the insurance business.

19. Financial liabilities at amortised cost

The breakdown of these items of the consolidated balance sheets as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Deposits from central banks	3,301,646	2,208,200
Deposits from credit institutions	2,462,457	5,374,913
Customer deposits	24,176,201	21,782,602
Marketable debt securities	16,895,422	17,971,994
Subordinated liabilities	1,118,631	1,117,817
Other financial liabilities	525,202	530,015
	48,479,559	48,985,541
In euros	47,294,339	47,310,486
In foreign currency	1,185,220	1,675,055
	48,479,559	48,985,541

The breakdown of the 'Valuation adjustments' in the portfolio of financial liabilities at depreciated cost as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Accrued interest-	271,047	224,352
Central banks' deposits	1,646	8,200
Loans and advances to credit institutions	6,263	15,043
Customer deposits	129,267	73,742
Marketable debt securities	127,844	121,578
Subordinated liabilities	6,027	5,789
Micro-hedging operations	92,142	72,325
Rest	(31,813)	(34,459)
	331,376	262,218

Note 44 'Risk-management policies' includes the breakdowns of the maturity dates and interest-rate review terms for the items making up the financial liabilities at depreciated cost.

Note 43 '"Assets and liabilities valued at other than fair value" states the fair value by instrument type of the financial liabilities at depreciated cost and the methodology used for their calculation.

a) Deposits from central banks

The composition of this item of the 'financial liabilities at depreciated cost' in the liabilities on the consolidated balance sheet, is as follows as at 31 December 2010 and 2009:

Thousand euros	31-12-10	31-12-09
Central Banks	3,300,000	2,200,000
Valuation adjustments	1,646	8,200
Accrued interest	1,646	8,200
	3,301,646	2,208,200

b) Bank deposits

The composition of this item of the 'financial liabilities at depreciated cost' in the liabilities on the consolidated balance sheet, is as follows as at 31 December 2010 and 2009:

Thousand euros	31-12-10	31-12-09
Term accounts	623,139	1,467,792
Temporary assignment of assets	1,520,893	3,626,871
Other accounts	312,162	265,207
Valuation adjustments-	6,263	15,043
Accrued interest	6,263	15,043
	2,462,457	5,374,913
In euros	2,437,153	5,073,259
In foreign currency	25,304	301,654
	2,462,457	5,374,913

c) Customer deposits

The composition of this item of the 'financial liabilities at depreciated cost' in the liabilities on the consolidated balance sheet, is as follows as at 31 December 2010 and 2009:

Thousand euros	31-12-10	31-12-09
Public Administrations	300,649	228,966
Deposits received	298,291	216,147
Valuation adjustments	2,358	12,819
Accrued interest	2,252	2,666
Micro-hedging operations	-	-
Rest	106	10,153
Other private sectors	23,875,552	21,553,636
Sight deposits	9,016,549	9,961,198
Term deposits	9,764,660	6,330,708
Temporary assignment of assets	4,961,507	5,181,378
Valuation adjustments-	132,835	80,352
Accrued interest	127,015	71,076
Micro-hedging operations	5,820	9,276
	24,176,201	21,782,602
In euros	23,761,205	21,290,499
In foreign currency	414,996	492,103
	24,176,201	21,782,602

d) Marketable debt securities

The composition of this item of the 'financial liabilities at depreciated cost' in the liabilities on the consolidated balance sheet, is as follows as at 31 December 2010 and 2009:

Thousand euros	31-12-10	31-12-09
Promissory notes and bills of exchange	1,216,650	3,311,811
Mortgage-backed securities	6,117,081	4,925,244
Other securities linked to transferred financial assets	3,801,382	4,375,772
Treasury stock	(40,689)	(22,789)
Hybrid securities	93,150	75,000
Other non-convertible securities	5,557,045	5,187,402
Valuation adjustments	150,803	119,554
Accrued interest	127,844	121,578
Micro-hedging operations	54,521	42,588
Rest	(31,562)	(44,612)
	16,895,422	17,971,994
In euros	16,165,988	17,099,094
In foreign currency	729,434	872,900
	16,895,422	17,971,994

Promissory notes and bills of exchange

As a consequence of the planning required to manage the Bank's capital and liquidity, Bankinter, S.A. maintains diverse financing programmes and instruments on both the domestic market in Spain and international markets, to obtain financing or issue different kinds of securities, both short term (promissory notes, euro commercial paper) and long term (bonds, debentures and notes, mortgage bonds) under all kinds of debt arrangements (guaranteed, senior, subordinated…).

As at 31 December 2010, the outstanding balance of the promissory notes and the euro commercial paper issued was 731,741 thousand euros and 535,000 thousand euros, respectively (1,828,421 thousand euros and 1,525,796 thousand euros of promissory notes and euro commercial paper issues, respectively as at 31 December 2009). The difference between the amount recorded in the books and the face value of these issues are the financial expenses pending accrual.

The following is a breakdown of the issues of promissory notes in force as at 31 December 2010 and 2009, at their refund value:

Thousand euros	Outstanding balance as at 31-12-10	Outstanding balance as at 31-12-09
Date of registration CNMV
20-11-2007		633
18-11-2008		927,189
10-11-2009	412,848	900,599
9-11-2010	318,893	-
	731,741	1,828,421
Euro Commercial Paper	535,000	1,525,796
	1,266,741	3,354,217

These issues are denominated in euros.

The accrued interest on these issues of promissory notes during the course of financial year 2010 totalled 27,330 thousand euros (Note 27) (82,069 thousand euros in 2009).

Mortgage-backed securities, other non-convertible securities and hybrid securities

Mortgage-backed securities, other non-convertible securities, and hybrid liabilities states, as at 31 December 2010 and 2009, the outstanding volume for the issues of bonds, debentures, and mortgage bonds carried out by the Bank.

The following is a breakdown of the issues of bonds, debentures and mortgage bonds in circulation as at 31 December 2010 and 2009 (face value, in thousands of euros):

31-12-10
Issue	Face value	Type of Security	% Interest	Listing	Final maturity of the issue
Hybrid securities
16-03-2005	75,000	Bonds	Eur3m flat (3% - 5%)	YES	16-03-2015
June 2010	300	Structured bonds		YES	24/06/2013
November 2010	16,850	Structured bonds		YES	17/11/2014
December 2010	1,000	Structured bonds		YES	23/12/2014
	93,150
Other non-convertible securities
01-06-2006	1,000,000	Bonds	Eur3m + 0.125%	YES	01-06-2011
16-06-2006	150,000	Bonds	Eur3m + 0.17%	YES	16-06-2016
21-06-2007	1,000,000	Bonds	Eur3m + 0.14%	YES	21-06-2012
24-02-2009	1,500,000	Bonds	3.00% FIXED	YES	24-02-2012
15-06-2009	335,941	Bonds	Yen Libor 3m + 0.62%	YES	15-06-2012
15-06-2009	325,817	Bonds	1.22%	YES	15-06-2012
15-01-2010	900,000	Bonds	Euribor 3m+0.95%	YES	15-01-2013
21-01-2010	78,800	Bonds	FIXED RATE 3.00%	YES	21-01-2013
17-09-2010	120,000	Bonds	Euribor 3m+1.1%	YES	17-09-2012
17-09-2010	120,000	Bonds	Euribor 3m+1.1%	YES	17-09-2012
22-10-2010	30,000	Bonds	fixed rate 4.27%	YES	22-07-2016
	5,560,558
Mortgage-backed securities
14-03-2008	50,000	Mortgage bond	Eur6m + 0.27%	YES	04-03-2013
14-04-2008	25,000	Mortgage bond	Eur6m + 0.30%	YES	14-04-2011
29-12-2008	419,900	Mortgage bond	4.00% FIXED	YES	29-12-2011
17-02-2009	323,200	Mortgage bond	3.50% FIXED	YES	17-02-2012
13-11-2009	1,000,000	Mortgage bond	3.25% FIXED	YES	13-11-2014
15-06-2003	67,355	Mortgage bond	Libor 3m \$-4pb	NO	15-06-2013
05-07-2007	100,000	Mortgage bond	Euribor 3m-4.7pb	NO	05-07-2015
17-12-2007	100,000	Mortgage bond	Euribor 3m-5.5 pb	NO	17-12-2015
24-06-2008	200,000	Mortgage bond	Euribor 3m+0.006%	NO	24-06-2016
09-04-2010	1,000,000	Mortgage bond	FIXED RATE 2.625%	YES	09-04-2013
21-06-2010	1,500,000	Mortgage bond	FIXED RATE 2.25%	YES	01-02-2013
07-07-2010	200,000	Mortgage bond	Euribor 3m+1.90%	YES	07-07-2018
26-07-2010	400,000	Mortgage bond	FIXED RATE 2.625%	YES	09-04-2013
23-09-2010	750,000	Mortgage bond	FIXED RATE 3.75%	YES	23-09-2013
	6,135,455

		31-12-09
Issue	Face value	Type of Security	% Interest	Listing	Final maturity of the issue
Hybrid securities
16-03-2005	75,000	Bonds	Eur3m flat (3% - 5%)	YES	16-03-2015
	75,000
Other non-convertible securities
18-11-2005	1,000,000	Bonds	Eur3m + 0.11%	YES	18-11-2010
01-06-2006	1,000,000	Bonds	Eur3m + 0.125%	YES	01-06-2011
16-06-2006	150,000	Bonds	Eur3m + 0.17%	YES	16-06-2016
21-06-2007	1,000,000	Bonds	Eur3m + 0.14%	YES	21-06-2012
24-02-2009	1,497,450	Bonds	3.00% FIXED	YES	24-02-2012
15-06-2009	265,667	Bonds	Yen Libor 3m + 0.62%	YES	15-06-2012
15-06-2009	257,660	Bonds	1.22%	YES	15-06-2012
	5,170,777
Mortgage-backed securities
14-03-2008	50,000	Mortgage bond	Eur6m + 0.27%	YES	04-03-2013
27-03-2008	1,000,000	Mortgage bond	Eur1m +0.10%	YES	01-06-2010
14-04-2008	25,000	Mortgage bond	Eur6m + 0.30%	YES	14-04-2011
14-05-2008	1,500,000	Mortgage bond	5.00% FIXED	YES	14-05-2010
18-07-2008	150,000	Mortgage bond	5.00% FIXED	YES	14-05-2010
29-12-2008	419,900	Mortgage bond	4.00% FIXED	YES	29-12-2011
17-02-2009	323,200	Mortgage bond	3.50% FIXED	YES	17-02-2012
13-11-2009	1,000,000	Mortgage bond	3.25% FIXED	YES	13-11-2014
15-06-2003	61,224	Mortgage bond	Libor 3m \$-4pb (swap at Eur-4pb)	NO	15-06-2013
05-07-2007	100,000	Mortgage bond	Euribor 3m-4.7pb	NO	05-07-2015
17-12-2007	100,000	Mortgage bond	Euribor 3m-5.5 pb	NO	17-12-2015
24-06-2008	200,000	Mortgage bond	Euribor 3m+0.006%	NO	24-06-2016
	4,929,324

All current issues are denominated in euros.

The accrued interest on these issues of promissory notes during the course of the financial year 2010 totalled 125,179 thousand euros (116,944 thousand euros in 2009).

e) Subordinated liabilities

The composition of this heading in the portfolio of financial liabilities at depreciated cost is as follows:

Thousand euros	31-12-10	31-12-09
Marketable debt securities	732,815	743,067
Non-convertible	732,815	743,067
Preference shares	348,346	348,500
Valuation adjustments	37,471	26,250
Accrued interest	6,027	5,789
Micro-hedging operations	31,444	20,461
	1,118,631	1,117,817
In euros	1,118,631	1,117,817
In foreign currency	-	-
	1,118,631	1,117,817

As at 31 December 2010, the Bank has subordinated debentures in circulation with a value of 732,815 thousand euros (745,202 as at 31 December 2009) and subordinated deposits captured by subsidiary companies, originating from issues of preference shares, to the value of 343,165 thousand euros (343,165 thousand euros as at 31 December 2009). These liabilities have subordinated status, in accordance with the terms of article 7 of Act 13/1992 of 1 June on shareholders' equity and consolidated supervision of financial institutions, and with the eighth rule of Bank of Spain Circular 5/1993 of 26 March.

On 29 March 2010, it exercised the option of total early amortisation of the I issue of subordinated debentures worth 50 million euros.

These liabilities comply with the requirements described in the eighth rule of Bank of Spain Circular 5/1993 of 26 March, for compatibility as second-category equity and therefore the Bank of Spain approved that they be classified as liable for calculation as equity.

The following is the breakdown as at 31 December 2010 and 2009 of the subordinated debentures and preference shares (face value, in thousands of euros):

Thousand euros	Issue	Face value	% Interest	Issue matu rity
II SUBORDINATED D. 1998	14-05-1998	36,061	5.70	18-12-2012
II SUBORDINATED D. 1998	14-05-1998	84,141	6.00	18-12-2028
I SUBORDINATED D. March 2006	21-03-2006	75,000	Eur 3m + 0.26	21-03-2016
II SUBORDINATED D. June 2006	23-06-2006	100,000	Eur 3m + 0.30	23-06-2016
III SUBORDINATED D. Dec 2006	18-12-2006	50,000	Eur 3m + 0.50	18-12-2016
I SUBORDINATED D. March 2007	16-03-2007	50,000	Eur 3m + 0.32	16-03-2017
I SUBORDINATED D. Oct 2008	10-10-2008	50,000	Eur 3m + 3.00	10-10-2018
I SUBORDINATED D. Sept 2009	11-09-2009	250,000	6.375
I- SUBORDINATED D. July 2010	07-07-2010	40,000	6.75%	07-12-2020
		735,202
		31-12-10
	Issue	Face value	% Interest	Issue matu rity
BK Issues Series I	28-07-2004	253,165	Eur+3.75% min 4%- max 7%	PERPETUAL
BK Issues Series I	28-10-2004	90,000	Eur+3.75% min 4%- max 7%	PERPETUAL
Balance 31-12-09		343,165

In July 2010 it issued 40 million euros in Subordinated Debentures.

31-12-09
	Issue	Face value	% Interest	Issue matu rity
II SUBORDINATED D. 1998	14-05-1998	36,061	5.7	18-12-2012
II SUBORDINATED D. 1998	14-05-1998	84,141	6	18-12-2028
I SUBORDINATED D. 2004	29-09-2004	50,000	Eur 3m + 0.33	29-09-2014
I SUBORDINATED D. March 2006	21-03-2006	75,000	Eur 3m + 0.26	21-03-2016
II SUBORDINATED D. June 2006	23-06-2006	100,000	Eur 3m + 0.30	23-06-2016
III SUBORDINATED D. Dec 2006	18-12-2006	50,000	Eur 3m + 0.50	18-12-2016
I SUBORDINATED D. March 2007	16-03-2007	50,000	Eur 3m + 0.32	16-03-2017
I SUBORDINATED D. Oct 2008	10-10-2008	50,000	Eur 3m + 3.00	10-10-2018
I SUBORDINATED D. Sept 2009	11-09-2009	250,000	6.375	11-09-2019
Balance 31-12-09		745,202

31-12-09
	Face Issue % Interest value
BK Issues Series I	28-07-2004	253,165	Eur+3.75% min 4%- max 7%	PERPETUAL
BK Issues Series I	28-10-2004	90,000	Eur+3.75% min 4%- max 7%	PERPETUAL
Balance 31-12-09		343,165

The accrued interest on these issues of promissory notes during the course of financial year 2010 totalled 28,199 thousand euros (19,565 thousand euros in 2009). The interest paid by the subordinated deposits amounts to 16,435 thousand euros (17,614 thousand euros in 2009).

In view of the identical financial and economic characteristics of the Preference Shares in both series, the economic rights of investors in Series II Preference Shares will not be affected by the integration of Series II Preference Shares in Series I.

g) Other financial liabilities

The composition of this item of the 'financial liabilities at depreciated cost' in the liabilities on the consolidated balance sheet, is as follows as at 31 December 2010 and 2009:

Thousand euros	31-12-10	31-12-09
Debentures payable-	109,025	84,586
Factoring accounts receivable	9,377	4,076
Others (*)	99,648	80,510
Security deposits received	58,383	54,824
Clearing houses	0	3
Tax-collection accounts	153,218	173,601
Special accounts-	145,798	145,925
Stock-Market transactions pending settlement	145,798	145,925
Other items	58,778	71,076
	525,202	530,015
In euros	509,716	521,618
In foreign currency	15,486	8,397
	525,202	530,015

(*) As at 31 December 2010 and 2009, it included drafts pending settlement to the value of 32,775 and 29,558 thousand euros, respectively.

20. Liabilities under insurance contracts

As at 31 December 2010 and 2009, the balance of the chapter "Liabilities under insurance contracts" contains the liabilities undertaken by the company Línea Directa Aseguradora, S.A., de Seguros y Reaseguros in the course of its activity. The changes occurring in the financial years 2010 and 2009 for each of the technical allowances included in the balance sheet attached hereto, are as follows:

Thousand euros		31-12-10 31-12-09
	Allowance for Un earned Premium	Allowance For Benefits	Total	Allowance for Un earned Premium	Allowance for Benefits	Total
Balance at start of period	335,421	290,199	625,620	-	-	-
Additions due to change in perim eter				329,587	266,873	596,460
Allocations	343,496	292,053	635,549	335,421	270,062	605,483
Applications	(335,421)	(290,199)	(625,620)	(329,587)	(266,873)	(596,460)
Adjustments and settlements	-	19,375	19,374	-	20,137	20,137
Balance at close of period	343,495	311,428	654,923	335,421	290,199	625,620

The allowance for unearned premiums represents the fraction of the premiums accrued in the financial year that is attributed to the period between the closing date and the end of the policy coverage period, using the policy-by-policy procedure and taking as the basis for calculation the fee premiums accrued in the financial year, with the security surcharge being deducted.

The allowance for claims represents the total amount of the insurer's pending obligations derived from claims occurring prior to the date on which the financial year is closed. The Company constitutes this allowance for an amount that is sufficient to cover the cost of claims, which is understand to mean an amount that includes all of the expenses, both external and internal, in managing and handling the files, regardless of their origin, incurred or to be incurred until the claims are fully settled and paid, whereas this cost is reduced by the amounts already paid.

On 18 January 2009, the Company was authorised by the Directorate-General of Insurance and Pension Funds to apply statistical methodology in calculating the Technical Allowance for Claims in accordance with article 43 of the Regulation on the Organisation and Supervision of Private Insurance following the amendment introduced by Royal Decree 239/2007 of 16 February.

21. Provisions

The breakdown of this heading in the consolidated balance sheets as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Pension funds and similar obligations	7,836	129
Allowances for contingent risks and commitments	22,268	29,742
Other provisions	40,986	46,017
	71,090	75,888

The breakdown of the allocations made to allowances during the financial years 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Net allocations charged to income:
Pension funds and similar obligations	(2,774)	-
Allowances for contingent risks and commitments	(8,086)	(4,299)
Other provisions	11,675	33,927
	815	29,628

The provisions referred to under the heading "Other Provisions" are basically of a legal and fiscal nature. The fiscal provisions are allocations derived from lawsuits in progress in different forums (economic-administrative and judicial channels) for fiscal contingencies derived from state taxes revealed in inspections, and regional and local tax settlements. They are recorded at their current value, which is calculated using market interest rates and according to the expected calendar for outgoing flows, to which the probability of occurrence has been applied.

The heading "Allowances for contingent risks and commitments" states the general and specific hedging for contingent risks as at 31 December 2010 and 2009. The net amount allocated to results for this item in the financial years 2010 and 2009 stood at 8,086 thousand euros and 4,299 thousand euros, respectively.

The movement in the heading "Other Allowances' during the financial years ended on 31 December 2010 and 2009 is as follows:

	Thousand euros
Balance as at 31-12-08	101,467
Allocations to allowances:
Allocations chargeable to results	37,265
Recovery of sums allocated in previous financial years	(3,338)
Application of funds	(92,029)
Other movements	2,652
Balance as at 31-12-09	46,017
Allocations to allowances:
Allocations chargeable to results	12,106
Recovery of sums allocated in previous financial years	(431)
Application of funds	(16,706)
Other movements	0
Balance at 31-12-10	40,986

The heading "Other Allowances" includes an allowance for fiscal assessments for the Corporate Tax corresponding to financial years 2001 and 2003.

The uses of funds in financial year 2009 correspond to the settlement of assessments issued to the Group and corresponding to Corporate Tax (financial years 1997 - 2000) (see Note 42).

The rest of the amount included in this heading corresponds to risks for which the Bank.

22. Shareholders' equity

The breakdown of the composition and movements in the Group's shareholders' equity in financial years 2010 and 2009 is included in the Overall Statement of Changes in Consolidated Public Net Worth.

a) Capital

As at 31 December 2010, the share capital of Bankinter, S.A. is represented by 473,447,732 registered shares with a face value of 0.3 euros each, fully subscribed and paid up. These shares all have equal voting and economic rights.

All the shares are represented by book entries, officially listed on the Madrid and Barcelona stock exchanges and traded by the Spanish computer-assisted trading system.

The following changes were recorded in the shares in circulation in financial years 2010 and 2009:

	Number of shares	Face value (Thousands of euros)
Balance as at 31-12-08	405,893,880	121,768
Entries	67,553,852	20,266
Cancellations	-
Balance as at 31-12-09	473,447,732	142,034
Entries	-	-
Cancellations	-	-
Balance at 31-12-10	473,447,732	142,034

The breakdown of shareholders with a percentage holding equal to or greater than 10% of share capital as at 31 December 2010 and 2009, is as follows:

	No. Direct Shares		No. Indirect Shares		Percentage of share capital
Shareholder	31-12-10	31-12-09	31-12-10	31-12-09	31-12-10	31-12-09
Cartival, S.A.	105,279,273	68,109,311	7,282,994	7,282,994	23.77	15.92
Crédit Agricole, S.A	116,927,050	110,871,555	7,005	7,005	24.70	23.42

b) Issue premium

During the financial year 2019 there was no variation in the issue premium.

c) Reserves

The breakdown of this item on the consolidated balance sheet is as follows:

Thousand euros	31-12-10	31-12-09
Statutory reserve	50,990	50,974
Freely-available reserve	1,292,944	1,147,309
Revaluation reserve	168,521	178,951
Treasury shares reserve-	95,442	99,267
By acquisition	1,753	538
By guarantee	93,689	98,729
Canary Islands investment reserve	28,363	28,363
Reserves (losses) of enterprises carried by the ownership method-	12,650	19,623
Associates	12,530	19,038
Jointly controlled entities	120	585
	1,648,910	1,524,487

Statutory reserve

Companies are obliged to allocate 10% of their profits in each financial year to forming a reserve fund, until the latter reaches at least 20% of share capital. This reserve is not distributable to shareholders and may only be used to cover the debit balance in the profit and loss account if there are no other reserves available. Under certain circumstances, it may also be used to increase the share capital in the part of this reserve that exceeds 10% of the increased capital figure.

Revaluation reserve

This item in the consolidated balance sheet is the consequence of the operations to update the value of tangible fixed assets carried out in accordance with Royal Decree-Law 7/1996 and the revaluation of real estate practised on 1 January 2004, which are allowed under standing accounting rules.

Voluntary reserves

Voluntary reserves are freely available for use.

Reserves (losses) of enterprises carried by the ownership method

The breakdown of the reserves and losses in companies consolidated by the equity method is as follows:

Thousand euros	31-12-10		31-12-09
	Reserves Losses		Reserves	Losses
Professional Future Materials, S.L.	-	(176)	-	(161)
Mercavalor, S.V., S.A.	1,284	-	1,176	-
Bankinter Seguros de Vida, S.A.	10,745	-	17,936	-
Helena Activos Líquidos, S.L.	500	-	332	-
Eurobits Technologies, S.L.	297	-	340	-
	12,826	(176)	19,784	(161)

e) Treasury shares

As at 31 December 2010, the Group held 407,921 treasury shares (72,599 shares as at 31 December 2009).

During the financial year 2010, stock market transactions were carried out for the purchase of 1,209,166 shares (296,170 in 2009), and for the sale of 1,281,765 shares (3,518,658 in 2009). The results obtained are stated in the "Reserves" item on the balance sheet.

The breakdown of treasury stock as at 31 December 2010 and 2009 is as follows:

e) Results attributed to the Group

The breakdown of the individual results for each of the companies belonging to the Group during the financial years 2010 and 2009 is as follows:

Thousand euros	2010	2009
Bankinter, S.A.	91,917	308,415
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	618	219
Bankinter Servicios de Consultoría, S.A.	(6)	(6)
Bankinter Gestión de Activos, S. A. , SGIIC	16,869	16,238
Hispamarket, S. A.	87	(967)
Intergestora, Sociedad de Capital Riesgo, S.A., S.C.R.	0	0
Intermobiliaria, S. A.	(61,460)	(66,942)
Bankinter Consumer Finance, S.A., E.F.C	(4,762)	6,849
Bankinter Capital Riesgo, SGECR, S. A.	37	8
Bankinter Sociedad de Financiación, S. A.	257	600
Bankinter Emisiones, S. A.	119	713
Bankinter Capital Riesgo I Fondo Capital	114	(764)
Línea Directa Aseguradora, S.A.	94,352	94,027
Gneis Global Services S.A.	677	-

	Number of shares		Thousand euros		Euros		Thousand euros
			Face value			Average Purchase Price		Acquisition cost		Shareholders' Equity Reserve		Percentage of capital
	31-12-10	31-12-09	31-12-10	31-12-09	31-12-10	31-12-09	31-12-10	31-12-09	31-12-10	31-12-09	31-12-10	31-12-09
Bankinter, S.A.	-	72,599	-	22	-	7.39	-	538	-	538	-	0.02
Hispamarket, S.A.	407,921	-	122	-	4.30	-	1,753	-	1,753	-	0.09	-
Total	407,921	72,599	122	22	4.30	7.39	1,753	538	1,753	538	0.09	0.02

The results for companies consolidated by the equity method for years 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Línea Directa Aseguradora, S.A.	-	8,829
Mercavalor, S.V., S.A.	87	102
Techrules Escuela de Finanzas, S.A	-	73
Eurobits Technologies, S.L.	(66)	(255)
Helena Activos Líquidos, S.L.	(2)	(130)
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	10,763	7,728
Professional Future Materials, S.L.	176	(113)
	10,958	16,234

2010 2009 Diluted profit for the year (thousands of euros) 150,730 254,404 Average number of diluted shares (thousands of shares) 473,352 449,731 Diluted earnings per share (euros) 0.32 0.57

The calculation of the diluted profit per share for the Group is as follows:

g) Dividends and remunerations

The Bank runs a system of quarterly dividend payments in January, April, July and October of each year.

The breakdown of the dividends distributed chargeable to results in 2010 and 2009 is as follows, not including treasury shares in the possession of the bank:

		Date	Dividend per share (Euros)	Number of shares	Amount (thousands of euros)	Date ap proved by Board	Results for the financial year
		Jul 09	0.07135	473,161,967	33,760	Jun 09	2009
		Oct. 09	0.07353	473,381,839	34,808	Sep 09	2009
2010	2009	Jan. 2010	0.07583	473,375,133	35,896	Dec. 09	2009
		Apr. 2010	0.04803	473,378,360	22,738	Mar-10	2009
			0.26874		127,202
		July 2010	0.05708	473,447,732	27,020	June 2010	2010
		Oct. 2010	0.052003	473,447,732	24,618	Sept. 2010	2010

The provisional accounting statements drawn up by the Bank in accordance with legal requirements, which prove the existence of sufficient resources for the distribution of interim dividends, were as follows:

Jan. 2010 0.048313 473,447,732 22,874 Dec. 10 2010

0.15739 74,512

f) Profit per share

Profit per share is calculated by dividing the result that is attributable to the Group by the weighted average number of ordinary shares in circulation during the financial year, excluding treasury stock acquired by the Group, as appropriate. In financial years 2010 and 2009, earnings per share are as follows:

	2010	2009
Profit for the year (thousands of euros)	150,730	254,404
Average number of shares (thousands of shares)	473,352	449,731
Profit per share (euros)	0.32	0.57

In order to calculate the diluted profit per share, the weighted average number of ordinary shares in circulation is adjusted to reflect the conversion of all of the potentially dilutable ordinary shares. The potentially dilutable ordinary shares that the Group holds are debentures that are convertible into shares. It is assumed that convertible debentures are converted into common shares.

80 Bankinter Group 2010 Consolidated Annual Accounts

	16 June 2010	23 Septem ber 2010	22 Decem ber 2010
	First	Second	Third
Profit after tax (thousands of euros)	76,077	90,854	77,131
Dividends paid (thousands of euros)	-	(27,020)	(51,638)
	76,077	63,834	25,493
Interim dividends (thousands of euros)	27,020	24,618	22,874
Accumulated interim dividends (thousands of euros)	27,020	51,638	74,512
Gross dividend per share (euros)	0.05708	0.052003	0.048313
Payment date	July 2010	Oct. 2010	Jan. 2010

23. Valuation adjustments (net worth)

The breakdown of this item is as follows:

Thousand euros	31-12-10	31-12-09
Financial assets available for sale	(22,994)	29,774
Exchange differences	201	114
	(22,793)	29,888

Thousand euros	31-12-10	31-12-09
Contingent risks:
Financial guarantees-	113,951	1,008,726
Collateral	113,951	1,008,726
Loan derivatives sold	-	-
Other financial guarantees	-	-
Assets associated to third-party debentures	-	-
Irrevocable documentary loans	119,086	109,612
Other collateral and security given	2,034,019	1,085,035
Other contingent risks	94,132	60,057
	2,361,188	2,263,430
Contingent commitments:
Available to third parties	7,368,511	8,008,173
Commitments to purchase financial assets on credit	18,085	17,409
Conventional agreements for the acquisition of financial assets	1,800,636	1,109,114
Subscribed securities pending disbursement	2,076	2,076
Other contingent commitments	69,071	72,953
	9,258,379	9,209,725

The item "Contingent commitments available to third parties" contains all of the credit commitments with immediate availability.

24. Contingent risks and commitments

The composition of this item is as follows:

25. Transfers of financial assets

The breakdown of the financial asset transfers carried out by the Group at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Removed from the balance sheet prior to 01-01-04	1,485,403	1,718,555
Kept on the balance sheet in full	14,577,701	14,263,595
	16,063,104	15,982,150

The removed assets refer to the loans securitized prior to 1 January 2004, as described below:

• In the financial year 2003, mortgage lending valued at 1,350,000 thousand euros was transferred to 'Bankinter 6, Asset Securitization Fund', and lending to SMEs valued at 250,000 thousand euros was transferred to 'Bankinter I FTPYME, Asset Securitization Fund'.
• In the financial year 2002 mortgage lending valued at 1,025,000 thousand euros was transferred to 'Bankinter 4, Mortgage Securitization Fund', and mortgage lending valued at 710,000 thousand euros was transferred to 'Bankinter 5, Mortgage Securitization Fund'.
• In the financial year 2001, mortgage lending valued at 1,332,500 thousand euros was transferred to 'Bankinter 3, Mortgage Securitization Fund'.
• In the financial year 1999, mortgage lending valued at 600,000 thousand euros was transferred to 'Bankinter 1, Mortgage Securitization Fund', and mortgage lending valued at 320,000 thousand euros was transferred to 'Bankinter 2, Mortgage Securitization Fund'.

The assets maintained in their entirety on the Bank's balance sheet, according to criteria referred to in Note 5 section (i), refer to the loans securitized after 1 January 2004 as described below.

During the financial year 2010 a financial asset transfer transaction worth 1,650,000 thousand euros was performed to "Bankinter 20, Asset Securitization Fund", which is financed by the issue of a single A series of bonds.

The main characteristics of the securitizations carried out subsequent to 1 January 2004 are as follows (amounts in thousands of euros):

The second one entailed the transfer of mortgage lending to the value of 1,000,000 thousand to 'Bankinter 17, Mortgage Securitization Fund', which is financed by way of the issue of bonds, all of which are placed on the institutional market, of which 34,000 thousand euros correspond to B-series subordinated bonds, 13,500 thousand euros correspond to C-series subordinated bonds.

The third of these entailed the transfer of lending to the value of 400,000 thousand euros to 'Bankinter Leasing I, Mortgage Securitization Fund', which is financed by way of the issue of bonds, all of which are placed on the institutional market and of which 21,400 thousand euros correspond to the issue of B-series subordinated bonds and 12,000 thousand euros correspond to C-series subordinated bonds.

The fourth of these entailed the transfer of lending to the value of 400,000 thousand euros to 'Bankinter 4 Ftpymes, Mortgage Securitization Fund', which is financed by way of the issue of bonds, of which 30,000 thousand euros correspond to the issue of B-series subordinated bonds and 16,000 thousand euros correspond to C-series subordinated bonds.

The fifth of these entailed the transfer of lending to the value of 1,500,000 thousand euros to 'Bankinter 18, Mortgage Securitization Fund', which is financed by way of the issue of bonds, of which 65,300 thousand euros correspond to the issue of B-series subordinated bonds and 30,000 thousand euros correspond to C-series subordinated bonds.

The main characteristics of the securitizations carried out subsequent to 1 January 2004 are as follows (amounts in thousands of euros):

Fund	Series	Rating
			Amount	Interest	Maturity	Fund	Series	Rating	Amount	Interest	Maturity
BK 7 FTH	A-Series	Aaa/AAA:	471,800	Eur 3 m. + 0.21%	16-09-2040
	B-Series	A2/A:	13,000	Eur 3 m. + 0.55%		BK 11 FTH	A1 Series	Aaa/AAA:	30,000	Eur 3 m. + 0.05%	21-08-2048
	C-Series	Baa3/BBB:	5,200	Eur 3 m. + 1.20%			A2 Series	Aaa/AAA:	816,800	Eur 3 m. + 0.14%
Total			490,000				B-Series	Aa3/A:	15,600	Eur 3 m. + 0.30%
							C-Series	Baa1/ BBB-:	15,300	Eur 3 m. + 0.55%
BK 8 FTA	A-Series	Aaa/AAA:	1,029,300	Eur 3 m. + 0.17%	15-12-2040		D Series	Ba3/BB-:	9,800	Eur 3 m. + 2.25%
	B-Series	A2/A:	21,400	Eur 3 m. + 0.48%			E Series	Ca	12,500	Eur 3 m. + 3.90%
	C-Series	Baa3/BBB:	19,300	Eur 3 m. + 1.00%		Total			900,000
Total			1,070,000
BK 9 FTA	A1 (P) Series	Aaa/AAA:	66,600	Eur 3 m. + 0.07%	16-07-2042	BK 12 FTH	A1 Series	Aaa/AAA:	50,000	Eur 3 m. + 0.04%	15-12-2043
	A2 (P) Series	Aaa/AAA:	656,000	Eur 3 m. + 0.11%			A2 Series	Aaa/AAA:	1,102,400	Eur 3 m. + 0.12%
	B (P) Series	A2/A+:	15,300	Eur 3 m. + 0.50%			B-Series	Aa3/A+:	13,100	Eur 3 m. + 0.25%
	C (P) Series	Baa3/BBB:	7,100	Eur 3 m. + 0.95%			C-Series	A3/A-	11,900	Eur 3 m. + 0.35%
		Total (1)	745,000				D Series	Ba1/BBB-	11,300	Eur 3 m. + 2.25%
	A1 (T) Series	Aaa/AAA:	21,600	Eur 3 m. + 0.07%	16-07-2042		E Series	Ca/CCC	11,300	Eur 3 m. + 3.90%
	A2 (T) Series	Aaa/AAA:	244,200	Eur 3 m. + 0.11%		Total			1,200,000
	B (T) Series	A1/A:	17,200	Eur 3 m. + 0.50%
	C (T) Series	Baa1/	7,000	Eur 3 m. + 0.95%		BK 2 Pyme FTA	A1 Series	Aaa/AAA:	49,000	Eur 3 m. + 0.06%	16-05-2043
		BBB-:					A2 Series	Aaa/AAA:	682,000	Eur 3 m. + 0.12%
		Total (2)	290,000				B-Series	Aa3/A+:	16,200	Eur 3 m. + 0.22%
Total			1,035,000				C-Series	Baa2/BBB	27,500	Eur 3 m. + 0.52%
							D Series	Ba3/BB	10,700	Eur 3 m. + 2.10%
BK 10 FTA	A1 Series	Aaa/AAA:	80,000	Eur 3 m. + 0.08%	21-06-2043		E Series	C/CCC-	14,600	Eur 3 m. + 3.90%
	A2 Series	Aaa/AAA:	1,575,400	Eur 3 m. + 0.16%		Total			800,000
	B-Series	A1/A:	20,700	Eur 3 m. + 0.29%
	C-Series	Baa1/ BBB-:	22,400	Eur 3 m. + 0.70%
	D Series	Ba3/BB-:	19,100	Eur 3 m. + 2.00%
	E Series	Caa3/CCC-	22,400	Eur 3 m. + 3.90%
Total			1,740,000

Fund	Series	Rating	Amount	Interest	Maturity	Fund	Series	Rating	Amount	Interest	Maturity
BK 13 FTA	A1 Series	Aaa/AAA:	85,000	Eur 3 m. + 0.06%	17-07-2049	BK 3 FTPyme
	A2 Series	Aaa/AAA:	1,397,400	Eur 3 m. + 0.15%		FTA	A1 Series	Aaa/AAA:	180,000	Eur 3 m. + 0.09%	18-02-2046
	B-Series	Aa3/A:	22,400	Eur 3 m. + 0.27%			A2 Series	Aaa/AAA:	288,900	Eur 3 m. + 0.20%
	C-Series	A3/BBB	24,100	Eur 3 m. + 0.48%			A3 Series (guarantied)	Aaa/AAA:	91,200	Eur 3 m. + 0.02%
	D Series	Ba1/BB-	20,500	Eur 3 m. + 2.25%			B-Series	Aa3/AA:	23,100	Eur 3 m. + 0.35%
	E Series	Ca/CCC-	20,600	Eur 3 m. + 3.90%			C-Series	Baa2/BBB	6,000	Eur 3 m. + 0.90%
Total			1,570,000				D Series	Ba3/BB	10,800	Eur 3 m. + 1.80%
							E Series	C/CCC-	17,400	Eur 3 m. + 3.90%
BK 14 FTH	A1 Series	Aaa/AAA:	172,700	Eur 3 m. + 0.07%	17-12-2049	Total			617,400
	A2 Series	Aaa/AAA:	566,600	Eur 3 m. + 0.15%
	A3 Series	Aaa/AAA:	172,700	Eur 3 m. + 0.23%		BK 16 FTA	A-Series	Aaa/AAA:	1,882,000	Eur 3 m. + 0.30%	16-09-2050
	B-Series	Aa2/AA:	14,100	Eur 3 m. + 0.30%			B-Series	Aa2/AA:	46,000	Eur 3 m. + 0.40%
	C-Series	A3/A-	14,200	Eur 3 m. + 0.40%
	D Series	Ba2/BB-	9,500	Eur 3 m. + 2.50%			C-Series	A3/BBB	38,000	Eur 3 m. + 0.50%
	E Series	C/CCC-	14,200	Eur 3 m. + 3.90%			D Series	Ba2/BB	34,000	Eur 3 m. + 2.50%
Total			964,000				E Series	C/CCC-	43,000	Eur 3 m. + 3.90%
						Total			2,043,000
CASTELLANA	A-Series	AAA	83,700	Eur 3 m. + 0.30%	08-01-2050
FINANCE	B1 Series	AA	26,000	Eur 3 m. + 0.70%		BK 17 FTA	A-Series	AAA	952,500	Eur 3 m. + 0.30%	18-04-2051
	B2 Series	AA	10,000	Eur 3 m. + 0.85%			B-Series	A	34,000	Eur 3 m. + 0.50%
	C1 Series	A+	38,700	Eur 3 m. + 1.20%			C-Series	BBB	13,500	Eur 3 m. + 0.70%
	C2 Series	A	23,900	Eur 3 m. + 1.50%		Total			1,000,000
	D Series		2,850	Eur 3 m. + 7.00%
Total			185,150			BK Leasing 1 FTA	A-Series	Aaa	366,600	Eur 3 m. + 0.30%	15-04-2031
							B-Series	A3	21,400	Eur 3 m. + 0.50%
BK 15 FTH	A1 Series	Aaa/AAA:	255,000	Eur 3 m. + 0.09%	16-07-2050		C-Series	Baa3	12,000	Eur 3 m. + 0.80%
	A2 Series	Aaa/AAA:	853,400	Eur 3 m. + 0.18%		Total			400,000
	A3 Series	Aaa/AAA:	345,000	Eur 3 m. + 0.27%
	B-Series	Aa3/AA:	15,800	Eur 3 m. + 0.35%
	C-Series	A3/A-	15,800	Eur 3 m. + 0.45%
	D Series	Ba2/BB-	15,000	Eur 3 m. + 2.65%
	E Series	C/CCC-	25,500	Eur 3 m. + 3.90%
Total			1,525,500

Fund	Series	Rating	Amount	Interest	Maturity
BK 4 FTPyme FTA	A1 Series	AAA	160,000	Eur 3 m. + 0.32%	18-10-2051
	A2 Series	AAA	174,400	Eur 3 m. + 0.30%
	A3 Series (guarantied)	AAA	19,600	Eur 3 m. + 0.34%
	B-Series	A	30,000	Eur 3 m. + 0.50%
	C-Series	BBB	16,000	Eur 3 m. + 0.70%
Total			400,000
BK 18 FTA	A1 Series	Aaa/AAA:	1,404,700	Eur 3 m. + 0.30%	23-01-2052
	B-Series	Aa3/A:	65,300	Eur 3 m. + 0.50%
	C-Series	A2/BBB	30,000	Eur 3 m. + 0.70%
Total			1,500,000
BK 1 Companies FTA	A-Series	Aaa	608,400,000	Eur 3 m. + 0.30%	14-03-2047
	B-Series	A3	30,600,000	Eur 3 m. + 0.50%
	C-Series	Baa3	71,000,000	Eur 3 m. + 0.70%
Total			710,000,000
BK 19 FTA	A-Series	Aaa	1,597,900,000	Eur 3 m. + 0.30%	18-06-2052
	B-Series	A1	20,700,000	Eur 3 m. + 0.50%
	C-Series	Baa3	31,400,000	Eur 3 m. + 0.70%
Total			1,650,000.00
BK 20 FTA	A-Series	Aaa/AAA	1,650,000	Eur 3m+0.30%	17-12-2053
Total			1,650,000.00

The outstanding balance for securitizations as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Bankinter 1 Mortgage Securitization Fund	53,609	69,855
Bankinter 2 Mortgage Securitization Fund	50,316	60,294
Bankinter 3 Mortgage Securitization Fund	315,184	370,492
Bankinter 4 Mortgage Securitization Fund	317,077	365,903
Bankinter 5 Mortgage Securitization Fund	216,492	247,634
Bankinter 6 Mortgage Securitization Fund	532,727	604,377
Bankinter 1 FTPYME	-	-
	1,485,403	1,718,555
Kept on the balance sheet in full:
Bankinter 7 Mortgage Securitization Fund	189,475	211,606
Bankinter 8 Asset Securitization Fund	423,502	476,475
Bankinter 9 Asset Securitization Fund	520,437	577,958
Bankinter 10 Asset Securitization Fund	895,756	990,902
Bankinter 11 Mortgage Securitization Fund	527,542	580,140
Bankinter 12 Mortgage Securitization Fund	718,622	780,404
Bankinter 2 SME Asset Securitization Fund	308,477	361,636
Bankinter 13 Asset Securitization Fund	1,049,105	1,128,430
Bankinter 14 Mortgage Securitization Fund	706,364	760,896
Bankinter 3 SME Asset Securitization Fund	355,853	407,622
Bankinter 15 Mortgage Securitization Fund	1,155,314	1,232,052
Bankinter 16, Asset Securitization Fund	1,623,772	1,730,881
Bankinter 17, Asset Securitization Fund	816,118	871,508
Bankinter Leasing I, Asset Securitization Fund	178,898	276,219
Bankinter 4 FTpymes, Asset Securitization Fund	273,740	317,622
Bankinter 18 Asset Securitization Fund	1,319,450	1,399,467
Bankinter 1 Asset Securitization Fund	501,680	603,503
Bankinter 19, Asset Securitization Fund	1,427,569	1,556,274
Bankinter 20 Asset Securitization Fund	1,586,027	-
	14,577,701	14,263,595

The sum of the associated financial liabilities as at 31 December 2010 stands at 2,768,863 thousand euros (3,464,625 thousand euros as at 31 December 2009).

26. Other memorandum accounts - financial derivatives

The breakdown of Other memorandum accounts as at 31 December 2010 and 2009 is as follows:

Thousand euros	31-12-10	31-12-09
Financial derivatives (Notes 7 and 10):
Exchange-rate risk	6,150,266	4,878,686
Interest-rate risk	35,775,440	52,588,681
Shares risk	2,564,977	2,335,761
Credit risk	-	58,825
Other risks	-	-
	44,490,683	59,861,953

The notional amount of the contracts formalised does not mean the actual risk undertaken by the Group in relation to such instruments.

27. Personnel expenses

The composition of the amounts included under this item in the consolidated profit and loss account for financial years 2010 and 2009 is as follows:

Thousand euros	2010	2009
Salaries and bonuses paid to active staff	240,529	242,368
Social Security contributions	61,248	55,671
Allocations to defined benefit plans
Contributions to defined plans	1,160	1,086
Severance packages	3,907	3,388
Remuneration based on other equity instruments	-	-
Other personnel expenses	26,090	22,527
	332,934	325,040

The breakdown of the Group's personnel as at 31 December 2010 and 2009, in accordance with pension commitments, is as follows:

	31-12-10	31-12-09
Active employees with seniority acknowledged as being previous to 8 March 1980	459	478
Personnel that are pension beneficiaries	57	61
Early retirees	59	69
Other active employees	4,165	4,086

Post-employment remuneration

As regards the pension commitments, under the terms of the Collective Bargaining Agreement in force, for personnel hired prior to 8 March 1980 and for certain members of personnel according to individually established agreements, the Bank has undertaken the commitment to complement the Social Security payments in the event of retirement ( according to a defined benefit regime), and in other particular cases, the Bank has undertaken to disburse an amount (according to a defined contribution regime), the exchange value of which on the date of retirement will be the employee's remuneration at that time.

To cover the aforementioned pension commitments, the Bank has taken out an insurance contract with the company Winterthur Seguros y Reaseguros, S.A. (now AXA Seguros y Reaseguros S.A. following the subsequent merger with this institution), with the unconditional backing of the parent Winterthur A. G., which guarantees future coverage for all payments to complement pensions for passive personnel until financial year 2003. In addition, for passive personnel after financial year 2003 and to cover active personnel, the aforementioned payments are guaranteed by a co-insurance policy in which Winterthur Seguros y Reaseguros (now AXA Seguros y Reaseguros S.A.) has a 40% holding as the party opening the co-insurance, with Caser Ahorrovida S. A de Seguros y Reaseguros and Allianz, Compañía de Seguros y Reaseguros S.A each having a 30% holding.

The financial year 2010 saw net periodical recovery premiums amounting to 155 thousand euros for retirement cover (384 thousand euros in 2009)

Other long-term remuneration

Moreover, under the Collective Bargaining Agreement in force, the Bank has undertaken the commitment to complement Social Security payments to total, if necessary, certain payments for permanent invalidity, widowhood or orphanhood.

The premium paid for death and incapacity cover in the financial year 2010 amounted to 216 thousand euros (229 thousand euros in 2009).

The Bank maintains commitments with early retired employees to whom the payment of salaries and social contributions from the time of their early retirement until the date of their effective retirement is guaranteed. To cover these commitments, the Bank has taken out policies with Nationale Nederlanden.

Active personnel

The basic hypotheses used for the calculations in the actuarial study, as at 31 December 2010 and 2009, for commitments with active personnel, are as shown in the table attached hereto:

	31-12-10	31-12-09
Mortality	Probabilities set in the GKM/- 95 tables, at 80%.	Probabilities set in the GKM/- 95 tables, at 80%.
Survival
Men	Probability associated with table PERM-2000 P.	Probability associated with table PERM-2000 P.
Female	Probability associated with PERF- 2000 P table.	Probability associated with PERF- 2000 P table.
Invalidity	Probabilities set in the OM 24/01/1977 on Bank insurance net of costs.	Probabilities set in the OM 24/01/1977 on Bank insurance net of costs.
Type of updating	Euribor zero-coupon curve as at 23.11.2010	Euribor zero-coupon curve as at 16.11.09
Rise in CPI	2%	2%
Rise in salaries	3.50% for remuneration items linked to the collective bar gaining agreement	3.50% for remuneration items linked to the collective bar gaining agreement
Social Security evolution
Rise in Maximum
Bases	2%	2%
Maximum pension:	2%	2%

The most significant aspects of the actuarial study carried out as at 31 December 2010 and 2009 are as follows:

Thousand euros	31-12-10	31-12-09
Debenture value	46,014	37,619
Fair value of the associated assets:
Allianz	14,268	11,709
Caser	14,268	11,709
AXA	19,024	15,612

As a significant aspect of the difference between the actuarial valuations as at 31 December 2009 and 2010, we should point out the fact that the allocations corresponding to the retirement commitments were increased, as a result of financial market trends during the financial year 2010. As at 16 November 2009, the 25-year return - the average financial duration of the commitments undertaken - stood at 4.17%, and as at 23 November 2010, the 24-year return had reached 3.29%; consequently, the amounts corresponding to the pension commitment coverage were increased by 7,292 thousand euros.

Personnel that are pension beneficiaries

The most significant aspects of the actuarial study carried out as at 31 December 2010 and 2009 are as follows:

	31-12-10	31-12-09
Debenture value	8,957	8,798
Fair value of the assets in the plan	8,913	8,764
Actuarial hypotheses
Tables used
Pensions deriving from the ini tial premium	PERMF/2000 P	PERMF/2000 P
Pensions deriving from subse quent contributions	PERMF/2000 P	PERMF/2000 P
Technical interest rate	Euribor zero-coupon curve as at 23.11.2010	Euribor zero-coupon curve as at 16.11.09
Rise in salaries	Not applicable	Not applicable
Pension appreciation rate	2% for appreciable claims	2% for appreciable claims

We should highlight as a significant aspect of the difference between the actuarial valuations as at 31 December 2009 and 2010 the fact that the allocations corresponding to retirement commitments were increased as a result of financial market trends in the financial year 2010. As at 16 November 2009, the 13-year return - the average financial duration of the commitments undertaken - stood at 3.94%, and as at 23 de November de 2010, that return had reached 3.21%. Therefore, the amounts corresponding to cover for pension commitments increased by 593 thousand euros.

Early retirees. Post-employment remuneration and other long-term benefits

In financial years 2002 and 2003, the Bank organised two early retirement schemes for employees. The commitments undertaken with them until the date of returement were insured with the insurance company Nationale-Nederlanden Vida. The commitments undertaken with early retiree personnel from the date of retirement are covered in the same policy, according to a co-insurance regime, entered into with Winterthur (now AXA) (40%), Allianz (30%) and Caser (30%) for covering active personnel and those that are beneficiaries of a pension after financial year 2003.

The basic hypotheses used for the calculations in the actuarial study, as at 31 December 2010 and 2009, for commitments with active personnel, are as shown in the table attached hereto:

	31-12-10	31-12-09
Survival:
Men	Probability associated with table PERM-2000 P.	Probability associated with table PERM-2000 P.
Female	Probability associated with PERF- -2000 P table.	Probability associated with PERF- -2000 P table.
Type of updating	Euribor zero-coupon curve as at 23.11.2010	Euribor zero-coupon curve as at 16.11.09
Rise in CPI:
Early retirement stage	2% for appreciable benefits.	2% for appreciable benefits.
Retirement stage	2%	2%
Rise in salaries	-	-
Retirement stage	-	-
Social Security evolution	-	-
Retirement stage	-	-
Rise in Maximum Bases	2%	2%
Maximum pension:	2%	2%

For the retirement stage of early retiree personnel and for the part accrued and not accrued at 31 December 2010 and 2009, the same profitabilities as mentioned previously for commitments undertaken with active personnel were considered.

Explanation of the variation in pension commitments under the fixed-provision system as at 31 December 2010 (as compared to 31 December 2009) and the coverage thereof:

The most significant aspects of the actuarial study carried out as at 31 December 2010 and 2009 are as follows:

	31-12-10			31-12-09
	Early retirement stage	Retirement stage	Early retirement stage	Retirement stage
Other long-term benefits:
Early retirees 2002	1,090		2,113
Early retirees 2003	6,702		9,220
Post-employment remuneration:
Early retirees 2002		1,096		1,566
Early retirees 2003		9,296		8,207
Contracts of insurance linked to pensions:
Nationale Nederlanden Vida	7,690	-	11,239	-
Allianz, Compañía de Seguros y Reaseguros , S.A.	-	3,229	-	2,913
Caser, S.A., de Seguros y Reaseg uros sobre la Vida	-	3,229	-	2,913
Winthertur Vida, S.A., de Seguros y Reaseguros sobre la Vida	-	4,305	-	3,884

We may highlight as a significant aspect of the difference between the actuarial valuations as at 31 December 2009 and 2010 the fact the allocations corresponding to the retirement commitments were increased as a result of the evolution in the financial markets during financial year 2010. As at 16 November 2008, the 14-year return - the average financial duration of the commitments undertaken - stood at 4.00%, and as at 23 November 2009, that return had reached 3.29%. Therefore, the amounts corresponding to cover for pension commitments dropped by 931 thousand euros

	Thousand euros
Valuation of commitments as at 31-12-2009:	67,525
Active Personnel	37,619
Early retiree personnel (early retirement stage)	11,334
Early retiree personnel (retirement stage)	9,773
Personnel that are pension beneficiaries	8,798
Changes in obligations during financial year 2010:
Accruals for the year 2010:	1,061
Pension fund interest:	2,549
Reductions for payments of benefits or cancellation of commitments:	(4,747)
Actuarial profits and losses (deviation and amendment of hypotheses)	6,765
Valuation of commitments as at 31-12-2010:	73,154
Active Personnel	46,014
Early retiree personnel (early retirement stage)	7,792
Early retiree personnel (retirement stage)	10,392
Personnel that are pension beneficiaries	8,957
Coverage of obligations as at 31-12-2009:	67,396
Plan assets:	56,157
Pension-linked insurance agreements	11,239
Other funds	0
Return expected from plan assets/insurance contracts:	2,582
Actuarial profits/(losses)	9,497
Contributions	919
Recoveries	(764)
Benefits paid	(4,705)
Coverage of obligations as at 31-12-2010:	74,925
Plan assets:	67,235
Pension-linked insurance agreements	7,690
Other funds	0

Table for reconciling the value of the obligations and the fair value of the assets assigned to cover them:

Reconciliation of the components of pension expenditure

	Thousand euros
Period ending on 31 December 2010	Current value of com mitted remuneration	Value of the associ ated funds
Value as at 1 January 2010	67,525	67,396
Normal Cost (Annual accrual)	1,061	-
Cost from Interest (financial expenses)	2,549	-
Return expected from associated assets	-	2,582
Company contributions	-	919
Company recoveries	-	(764)
Benefits paid	(4,709)	(4,705)
Early retiree risk premiums earned	(38)	-
Actuarial losses/(profits)	6,765	-
(Losses)/profits on the value of the fund	-	9,497
Value as at 31 December 2010	73,154	74,925

Pension expenditure incurred in financial year 2009:

The total cost recognised in the profit and loss account in the 2010 annuity for coverage of pension commitments amounts to (1,704) thousand euros, in accordance with the following breakdown:

Thousand euros
Cost of the services in the current period:	1,061
Interest cost	2,549
Return expected from plan assets:	(2,582)
Actuarial losses and profits	(2,732)

The Bank's estimate with regard to pensions costs for financial year 2011 amounts to 1,486 thousand euros.

The following is a breakdown of the insurance policies taken out with the various insurance institutions (according to fair value):

	Percentage
Axa - Winterthur:	40
Allianz	25
Caser	24
Nationale Nederlanden:	10

The expected return at the start of the financial year for the assets in the plan was estimated at 2,582 thousand euros, whilst the actual return obtained was 10,408 thousand euros, with the variation being due almost in its entirety to the increase in value as a result of the reduction in the market rates arising since the close of the previous financial year at the close of the financial year 2010.

The Bank's estimate of forecast contributions to the plan during financial year 2011 amounts to 1,091 thousand euros.

The forecast return from plan assets for 2011 and estimated at the start of the said year amounts to 2,322 thousand euros.

Breakdown of the performance in the current value of pension commitments undertaken under the fixed-benefit system, and of the assets associated with covering them, as at the close of each annuity

Thousand euros
Year	Defined Benefit Obligations	Associated as sets	Other funds	Deficit/Surplus
2004	129,814	130,514	-	701
2005	166,512	168,600	-	2,088
2006	132,232	130,852	1,380	-
2007	103,462	102,353	1,137	-
2008	76,839	77,979	33	1,173
2009	67,525	67,396	129	-
2010	73,154	74,925	44	1,814

The average number of employees according to category and gender during the financial year 2010 is as follows:

	2010	2009
Directors	440	187
Executives	976	798
Clerks	855	1,311
	2,270	2,295

The breakdown of employees according to gender and category as at 31 December 2010 is as follows:

	31-12-10
	Men	Women
Directors	433	188
Executives	986	807
Clerks	831	1,298
	2,250	2,293

28. Fees income and expense

The breakdown of this item in the consolidated profit and loss account is as follows:

Thousand euros	2010	2009
Fees expense:
Fees paid to other institutions and correspondents	23,934	27,289
Fees assigned to brokers, virtual banking	42,042	41,204
Total Fees expense	65,976	68,493
Fees income:
For documented guarantees and loans	24,202	20,857
For exchange of foreign currencies and notes issued by foreign banks	7,022	6,772
For contingent commitments	8,317	5,897
For collections and payments-	57,041	59,731
Commercial papers	6,151	6,182
Sight accounts	10,016	10,370
Credit and debit cards	31,909	33,416
Cheques	1,520	2,239
Payment orders	7,445	7,524
For services involving securities-	40,623	47,208
Insurance and placement of securities	1,003	1,313
Sale and purchase of securities	21,610	26,532
Administration and custody of securities	18,010	19,363
For the marketing of non-banking financial products-	87,621	84,155
Investment funds	45,738	43,516
Pension funds	3,632	3,302
Insurance	38,251	37,337
Other fees	36,653	46,106
Total fees income	261,479	270,726

29. Interest and similar charges/income

The breakdown of these items in the consolidated profit and loss account, in accordance with the nature of the operations that give rise to the results, for the annual financial years ended on 31 December 2010 and 2009 is as follows:

Thousand euros	2010	2009
Deposits at the Bank of Spain	4,309	6,115
Loans and advances to credit institutions	27,952	62,556
Money market transactions through counterparties	2,858	-
Client loans	984,676	1,479,321
Debt instruments	201,227	232,458
Impaired assets	15,588	9,684
Income corrections from hedging operations	(40,031)	(125,305)
Income from insurance contracts linked to pensions and similar obligations	2,406	-
Other interest	3,592	7,648
	1,202,577	1,672,477

In the financial year 2010, the heading "Customer loans" includes 585,453 thousand euros corresponding to operations with a tangible security (1,047,076 thousand euros in 2009). The item "debt securities" includes, in the financial year 2010, 103,520 thousand euros corresponding to Noted State Debt (163,359 thousand euros in 2009).

Thousand euros	2010	2009
From Deposits at the Bank of Spain	36,122	66,745
From bank deposits	52,126	89,873
From money-market transactions through counterpart entities	3,735	1,061
From Client loans	264,204	327,080
From debits represented by negotiable securities	344,450	418,907
From Subordinated liabilities	44,344	30,322
Income corrections from hedging operations	(97,407)	(59,001)
Costs from pension fund interest	2,371	-
Remuneration of financial-liability capital	-	-
Other interest	2,680	4,911
	652,624	879,898

The item "Debits represented by negotiable securities" (note 19) includes in financial year 2010 interest and charges for transactions with promissory notes and commercial paper to the value of 27,330 thousand euros (82,069 thousand euros in 2009).

The average annual interest per item during financial years 2010 and 2009 is as follows:

	31-12-10	31-12-09
	Average inter est	Average inter est
Similar income:
Central banks' deposits	0.77%	1.05%
Loans and advances to credit institutions	0.63%	0.90%
Money market transactions through counterparties	0.74%	-
Loans and advances to customers	2.47%	3.81%
Debt instruments	2.84%	2.91%
Similar costs:
Deposits from central banks	0.99%	2.16%
Deposits from credit institutions	1.11%	1.49%

	31-12-10	31-12-09
	Average inter est	Average inter est
Customer funds	1.53%	1.89%
Customer deposits	1.26%	1.47%
Marketable debt securities	1.86%	2.44%
Subordinated liabilities	3.94%	3.24%

30. Gains/Losses of financial assets and liabilities

The breakdown of these items on the consolidated profit and loss account for the annual financial years ended on 31 December 2010 and 2009 is as follows:

Thousand euros	2010	2009
From the financial assets and liabilities held for trading (Note 7)	16,791	68,020
From debt securities	24,737	45,142
Other equity instruments	(20,008)	66,868
Trading derivatives	12,062	(43,990)
Other financial instruments at fair value through profit and loss ac count (Note 7)	10,835	958
Other equity instruments	10,835	958
From financial assets available for sale (Note 8)	32,545	(9,215)
From debt securities	29,003	(9,885)
Other equity instruments	3,542	670
Other earnings	10,981	3,750
	71,152	63,513

31. Exchange differences

The amount of the net exchange differences recorded in the consolidated profit and loss account for the financial year ended on 31 December 2010 is 49,319 thousand euros (25,275 thousand euros in the financial year ended on 31 December 2009).

The breakdown by currency of the assets and liabilities on the Groups balance sheet denominated in foreign currencies as at 31 December 2010 and 2009 is as follows:

Thousand euros	2010		2009
	Assets	Liabilities	Assets	Liabilities
US dollar	198,547	457,649	175,632	628,361
UK sterling	46,822	42,192	57,408	45,452
Japanese yen	4,014,753	670,309	3,420,442	956,256
Swiss franc	884,692	7,783	863,405	39,611
Norwegian krone	707	1,440	1,164	789
Swedish krona	1,639	396	1,127	245
Danish krone	995	713	799	14
Others	8,798	6,174	8,179	5,293
	5,156,953	1,186,656	4,528,156	1,676,021

The breakdown of the assets and liabilities denominated in foreign currencies as at 31 December 2010 and 2009 is as follows:

Thousand euros	2010			2009
	Assets	Liabilities	Assets	Liabilities
Cash in hand and Central banks' deposits	1,149	-	972	-
Financial assets and liabilities held for trading	1,825	1,434	1,237	963
Loan and receivables	5,134,390	-	4,513,860	-
Financial assets available for sale	19,504	-	12,013	-
Accrued expenses and deferred income	41	-	33	-
Financial liabilities at amortised cost	-	1,185,220	-	1,675,055
Other	45	2	41	3
	5,156,953	1,186,656	4,528,156	1,676,021

32. Other general administrative expenses

The composition of the amounts included under this item in the consolidated profit and loss account for financial years 2010 and 2009 is as follows:

Thousand euros	2010	2009
Taxes	4,382	4,273
Buildings and supplies	36,924	36,927
Representation and travel expenses	6,446	6,772
Material and miscellaneous outgoings	38,386	31,722
External services	64,517	61,001
Software and communications	63,045	66,334
Advertising	38,872	32,398
Other expenses	8,008	14,358
	260,580	253,785

33. Other operating income and expenses

The breakdown of this item on the consolidated profit and loss account for the annual financial years closed on 31 December 2010 and 2009 is as follows:

Thousand euros	2010		2009
	Income	Expenses	Income	Expenses
Income from the operation of real-estate invest ments and other operating leases	4,080	-	3,883	-
Financial fees setting off direct costs	13,028	-	13,548	-
Contribution to the Deposit Guarantee Fund	-	9,703	-	9,774
Income from insurance and reinsurance policies issued	681,080	473,901	445,334	300,358
Other	9,984	13,586	7,693	25,912
	708,172	497,190	470,458	336,044

The amount recorded under the item "Contribution to the Deposit Guarantee Fund" is the result of the calculation made according to the rules established in Royal Decree 2606/1996, of 20 December, on guarantee funds for deposits in credit institutions. Royal Decree 948/2001, the purpose of which is to implement article 77 of the Stock Market Act on Deposit Guarantee Funds (Note 4) was enacted on 3 August 2001.

The item "financial fees setting off direct costs" contains the part of the fees that offset direct costs linked to investment products.

The amounts reflected in the item "Income and expenditure from insurance and reinsurance contracts issued" corresponds to the operating activity of the company Líea Directa Aseguradora, which after acquiring an additional 50% of its share capital in April of the year 2009, was globally integrated in the Bankinter Group.

34. Gains and losses in the derecognition of assets not classified as non-current assets held for sale and Profits and losses from non-current assets held for sale not classified as discontinued operations.

The breakdown of these items on the consolidated profit and loss account for the annual financial years ended on 31 December 2010 and 2009 is as follows:

Thousand euros	2010	2009
Gains (losses) in the derecognition of assets not classified as non current assets held for sale:
Profits from sale of tangible assets	3,117	72
Losses from sale of tangible assets	(4,012)	(5,202)
Losses from sale of shares	-	(140)
	(895)	(5,270)
Gains (losses) in non-currentassetsheldfor sale not classified as discontinuedoperations:
Losses from asset impairment	(19,825)	(2,609)
Gains from sale	16,493	1,618
Losses from sale	(18,904)	-
	(22,236)	(991)

35. Transactions and balances with related parties

The breakdown of the operations and balances with Group institutions and other associated institutions and private individuals as at 31 December 2010 and 2009 is provided in Annex I.

36. Remuneration and balances with members of the Board of Directors

Remuneration for Directors

Following Recommendation 40 from the Spanish Unified Good Governance Code, Bankinter submitted a report at its General Meeting of 22 April 2010 for advisory votation, on its remuneration policy, including information on its general policy in this regard, its application to the financial year 2009 and the remuneration scheme that applied to the financial year 2010. The remuneration policy report was approved by 99,025% of the total capital present and represented at the aforementioned General Meeting in 2010 and contained, among other information, the remuneration paid to the Board and the senior management for the financial year 2010, of which the details and breakdown are provided in this note. This report included the conclusions of the analysis as to the degree to which the institution's remuneration schemes were adapted to the applicable FSB standards from September 2009 (on the principles approved by the Financial Stability Forum in September 2009), which concluded that in general the study carried out on the bank's remuneration schemes, items and policies were adapted to the fundamental principles contained in the FSB document1

As regards the remuneration for the members of Bankinter's Board of Directors, the individual breakdown of the total remuneration received in their status as directors during financial years 2010 and 2009 is as follows:

In euros
Directors	2010	2009
Pedro Guerrero Guerrero	259,173	259,614
Maria Dolores Dancausa Treviño (1)	29,481	-
Cartival, S.A.	208,012	219,333
Marcelino Botín-Sanz de Sautuola y Naveda	97,178	103,360
Fernando Masaveu Herrero	123,991	100,000
José Ramón Arce Gomez	180,853	182,202
John de Zulueta Greenebaum:	178,013	181,362
Gonzalo de la Hoz Lizcano	110,080	109,542
Jaime Terceiro Lomba	134,440	132,222
José Antonio Garay Ibargaray (2)	163,053	64,224
Rafael Mateu de Ros Cerezo (3)	204,123	188,609
Former directors (4)	146,418	190,773
	1,834,815	1,731,241

(1) Appointed CEO of Bankinter (by co-option) on 21 October 2010

(2) Appointed Board Member of Bankinter by the Ordinary General Meeting held on 23 April 2009.

(3) Appointed Board Member of Bankinter at the Board meeting held on 21 January 2009, subsequently ratified by the Annual General Meeting held on 23 April 2009.

(4) In the category on former Directors, the amounts in the table included in the financial years 2009 and 2010 correspond to what was received by Jaime Echegoyen Enríquez de la Orden who left the post of CEO of Bankinter in October 2010.

At the close of 2010, the number of Directors of Bankinter S.A. remained unchanged in comparison to the close of 2009, although it should be pointed out that in the month of October 2010 a woman was appointed as CEO of Bankinter.

Pursuant to article 32 of the Articles of Association, the following items are included in the amounts depicted in the above table:

• a set amount for the role of director,

• an amount that is accrued for attendance at meetings of the Board and its Committees (attendance allowances).

• Shares are also provided.

^1. Subsequently, in December 2010, Directive 2010/76 of the European Parliament and Council, of 24 November 2010, was published, as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies, establishing provisions for the policies and practices of credit institutions in the area of remuneration, in particular, regarding categories of staff that have a significant impact on the institution's risk profile or are engaged in control functions.

Moreover and also in the month of December 2010, the European Banking Authority (EBA) published an guide to interpreting the contents of the aforementioned Directive regarding remuneration policies and practices (Guidelines on Remuneration Policies and Practices) with the aim of clarifying and detailing the criteria to be applied in interpreting the provisions of the aforementioned Directive.

Article 32 of the Articles of Association also allow Directors to be remunerated with option schemes or other instruments linked to Bankinter shares. However, in line with current good corporate governance recommendations, since 2007 Bankinter has not granted its Directors any remuneration consisting of stock options on shares in return for their board member status.

The following is an individualised and itemised breakdown of the overall amounts indicated in the above table to which each director is entitled as remuneration. Fixed remuneration and allowances for attending the meetings of the Board of Directors and the Board Committees in financial years 2010 and 2009:

In euros
Directors		2010		2009
	Set remu neration	Attendance Allowances	Set remu neration	Attendance Allowances
Pedro Guerrero Guerrero	97,173	112,000	82,000	127,614
Maria Dolores Dancauso Treviño (1)	11,871	10,272	-	-
Cartival, S.A.	75,983	94,529	61,500	120,333
Marcelino Botín-Sanz de Sautuola y Naveda	41,000	31,178	41,000	37,360
Fernando Masaveu Herrero	56,172	42,818	41,000	34,000
José Ramón Arce Gómez	56,172	99,680	41,000	116,202
John de Zulueta Greenebaum:	56,172	96,840	41,000	115,362
Gonzalo de la Hoz Lizcano	41,000	44,080	41,000	43,542
Jaime Terceiro Lomba	41,000	68,440	41,000	66,222
José Antonio Garay Ibargaray (2)	56,172	81,880	18,085	28,900
Rafael Mateu de Ros Cerezo (3)	68,472	103,150	48,773	110,135
Former directors (4)	64,801	75,210	61,500	91,773
Subtotals	665,988	860,077	517,858	891,443
Total		1,526,065		1,409,301

(*) The fixed remuneration corresponds to what is received for the meetings of the Board and the Executive Committee

(1) Appointed CEO of Bankinter (by co-option) on 21 October 2010.

(2) Appointed Board Member of Bankinter by the Ordinary General Meeting held on 23 April 2009.

(3) Appointed Board Member of Bankinter at the Board meeting held on 21 January 2009, subsequently ratified by the Annual General Meeting held on 23 April 2009.

(4) The category on former Directors includes the amounts received in the financial years 2009 and 2010 by the CEO, Jaime Echegoyen, until he left the post of CEO of Bankinter in October 2010.

The individual breakdown of the allocations of shares to Directors carried out under the item of remuneration in financial years 2010 and 2009 is as follows:

Directors	2010		2009
	Amounts in vested	No. shares al located	Amounts in vested	No. shares al located
Pedro Guerrero Guerrero	50,000	9,526	50,000	6,322
Maria Dolores Dancausa Treviño (1)	7,337	1,518	-	-
Cartival, S.A.	37,500	7,145	37,500	4,741
Marcelino Botín-Sanz de Sautuola y Naveda	25,000	4,762	25,000	3,160
Fernando Masaveu Herrero	25,000	4,762	25,000	3,160
José Ramón Arce Gomez	25,000	4,762	25,000	3,160
John de Zulueta Greenebaum:	25,000	4,762	25,000	3,160
Gonzalo de la Hoz Lizcano	25,000	4,762	25,000	3,160
Jaime Terceiro Lomba	25,000	4,762	25,000	3,160
José Antonio Garay Ibargaray (2)	25,000	4,762	17,239	2,278
Rafael Mateu de Ros Cerezo (3)	32,500	6,191	29,701	3,796
Former Directors (4)	20,890	5,626	37,500	4,741
	323,227	63,340	321,940	40,838

(1) Appointed CEO of Bankinter (by co-option) on 21 October 2010.

(2) Appointed Board Member of Bankinter by the Ordinary General Meeting held on 23 April 2009.

(3) Appointed Board Member of Bankinter at the Board meeting held on 21 January 2009, subsequently ratified by the Annual General Meeting held on 23 April 2009.

(4) The category on former Directors includes the amounts received in the financial years 2009 and 2010 by the CEO, Jaime Echegoyen, until he left the post of CEO of Bankinter in October 2010.

As indicated previously, since 1 January 2007 the form of remuneration consisting of granting options linked to Bankinter, S.A. shares is no longer used as a system for remunerating directors for fulfilling their duties.

There are currently no option plans in place granted to Directors (of the kind granted prior to the financial year 2007).

As at 30 December 2010, the 2006 options plan for Directors expired. This plan was liquidated due to differences in accordance with the terms and conditions laid down at the time, but because the liquidation price of the plan was lower than that of the financial year at the time of expiry, the options were cancelled without the Directors receiving any.

Finally, it should be pointed out that the Board agreed to maintain the stock options in place for Mr. Jaime Echegoyen at the time of resignation and which were granted to him in the financial years 2005 and 2006, which may be exercised according to the terms and conditions contained in the relevant authorisation agreements. At the close of 2010, and after the 2007 split and the capital increase in 2009, there are a total of 54.062 stock options for the former CEO. Moreover, as a consequence of his resignation, the Board of Management of Bankinter, at its meeting of 21 October 2010, agreed to pay him compensation, by applying the terms of the commercial administration contract signed by the CEO and Bankinter and as compensation for the end of this commercial relationship and his employment with the bank since he first joined it. In both cases, the rules and bases for calculation applied were those that are provided in the employment regulations. This compensation amounted to 4,701 thousand euros.

Loans and guarantees

The value of loans granted to Directors as at 31 December 2010 stood at 24,995 thousand euros (29,448 thousand euros as at 31 December 2009). As at 31 December 2010, the Bank has guarantees on behalf of its Directors amounting to 390 thousand euros (as at 31 December 2009 there were no guarantees on behalf of its Directors).

The average term of the loans and lines of credit granted to Directors of the Bank is approximately 9 years in 2010 (the same as in 2009). The interest rates stand at between 0.84% and 3.76% in 2010 (1.07% and 4.57% in 2009).

Remuneration of Executive Directors and Senior Management

During 2010, there were 5 senior managers in the institution, not counting the Chairperson, the Vice-Chairperson or the Chief Executive Officer. Taking this into account, the remuneration of the Senior Management, excluding executive directors, received during

2010 stood at 1,453 thousand euros, of which 1,009 thousand euros correspond to fixed remuneration, and 444 thousand euros to variable remuneration. In 2009, this amount stood at 1,885 thousand euros (5 persons).

In turn, the executive directors received the following amounts in 2010 as remuneration for their activity:

• Pedro Guerrero, received a total of 1,046 thousand euros entirely under the fixed remuneration heading.
• CARTIVAL, S.A., which on 21 October 2010 undertook an executive role, received a total of 77 thousand euros entirely under the fixed remuneration heading.
• Maria Dolores Dancausa, who was appointed Chief Executive Officer on 21 October 2010, received a total of 112 thousand euros entirely under the fixed remuneration heading.
• Jaime Echegoyen Enríquez de la Orden, who was CEO at the Bank until 21 October, received 1,056 thousand euros, broken down as follows: 675 thousand euros as fixed remuneration and 381 thousand euros as variable remuneration.

The sum of the amounts received by the executive directors in 2010 under the heading of salaried remuneration stood at 2,291 thousand euros. In 2009, the total received by executive directors stood at 2,176 thousand euros.

Bankinter does not have pension commitments for its senior management or executive directors. In the case of the current Chief Executive Officer, it should be pointed out that as the CEO of Bankinter's subsidiary, Línea Directa Aseguradora S.A., she was awarded a defined contribution pension plan in the year 2005, which the Board of Directors of Bankinter, following a proposal from its Appointments and Remuneration Committee, decided to maintain when she joined the bank. The amount contributed to the aforementioned plan totalled 600 thousand euros and it covers the usual contingencies of retirement, death and invalidity. Because it is a defined benefit plan, there is no commitment by Línea Directa or by Bankinter to make new contributions. This means that no contributions were made for this item during 2010 or 2009, as indicated in the legal report for this financial year.

In addition, it should be noted that Bankinter has not agreed on golden parachute clauses for any of its executive directors or senior management. Should their employment with the bank come to an end, members of these groups are only entitled to receive an amount of compensation that is lower than that to which any other employee is entitled under the Workers' Statute and in the same circumstances described in the aforementioned legal provision. In the case of executive directors, this compensation is supported by the Articles of Association, and in both this case and that of the senior management, by an Agreement adopted by the Board of Directors following a proposal from the Appointments and Remuneration Committee and by the commercial administration and employment contracts entered into by the Company with said members of the senior management.

As indicated in the report for the previous financial year, the General Meeting of the Board of Directors of Bankinter held in April 2009 approved as part of the remuneration policy report, to set up a new Pluriannual Incentives Plan (2009-2010), of which the beneficiaries are the Chairperson, the Chief Executive Officer and the members of the Senior Management, as well as the rest of the bank's management team. The liquidation will be performed in the month of May 2011 on the specific date that is decided by the Board of Directors.

Summary of remuneration, loans, and other benefits for Directors

Remuneration under remuneratory items

Thousand euros	2009
Fixed remuneration (1)	1,910
Variable remuneration (2)	381
Allowances (3)	845
Directors' Fees (4)	989
Options on shares and/or other financial instruments	-
Other	-
	4,125

(1) Fixed remuneration exclusively for Executive Directors in their capacity as executives, including that which was received by Jaime Echegoyen Enríquez de la Orden until the time he left the post.

(2) Variable remuneration corresponding to Executive Directors in their capacity as executives, including that which was received by Jaime Echegoyen Enríquez de la Orden until the time he left the post.

(3) Attendance allowance for Board and Committee meetings (Directors).

(4) Includes fixed remuneration (Board and Executive Committee) plus the gratuitous allocation of shares (Directors)

Remuneration according to the type of director including all items

Thousand euros
Type of Director	By Company	Per Group(**)
Executives(*)	2,934	-
External Proprietary Directors	221	-
External Independent Directors	766	6
Other External Directors	204	6
	4,125	12

(*) The following have the status of Executive Directors: Pedro Guerrero Guerrero, Chairperson; CARTIVAL,S.A., Vice-Chairperson (became an Executive Director on 21 October 2010); María Dolores Dancausa Treviño, Chief Executive Officer (appointed by co-optation on 21 October 2010) and what was received by Jaime Echegoyen Enríquez de la Orden in his status as an executive in Bankinter until his resignation (not including compensation, which is entered separately).

(**) Directors Mr- Gonzalo de la Hoz Lizcano and Mr. Rafael Mateu de Ros, as Non-Executive Directors, received the amount of 6.000 euros each during the year 2010 as an allowance for attending the meetings of the Board of Directors of Línea Directa Aseguradora, S.A., a 100% subsidiary of Bankinter. Mr. Gonzalo de la Hoz Lizcano also received an allowance for his role as member of the Control Committee of Línea Directa Aseguradora, to the value of 600 euros.

Other benefits

	Thousand euros
Advances	-
Loans granted	24,995
Pension Funds and Plans: Contributions	-
Pension Funds and Plans: Contractual obligations assumed	600
Life insurance premiums	0.294
Guarantees set up by the company in favour of directors	-

Transactions with Members of the Board of Directors

In relation to operations involving a transfer of resources or obligations between the Company and entities belonging to the Group and the Directors of Bankinter, S.A., its significant shareholders, directors and associated parties, beyond the scope of Bankinter, S.A.'s ordinary operations or that have not been carried out under normal market conditions, see section C (operations with associated parties) in the Annual Corporate Governance Report for 2010.

In compliance with Act 26/2003 of 17 July, which amends Act 24/1988, of 28 July, on the Securities Market, and the revised text of the Public Limited Companies Act, approved by Royal Legislative Decree 1/2010, of 2 July, the Institution is obliged to inform on the holdings of the Administrators of Bankinter, S.A. in the institution's share capital.

In turn, article 229.2 of the revised text of the Public Limited Companies Act provides that administrators should notify as to any holding they may have in a company with the same, analogous or complementary type of activity to that which is carried out by the Institution, as well as any posts, duties and activities carried out and/or held in same.

As at 31 December 2010, the stock holdings declared by the directors of Bankinter in companies pursuant to article 229.2 are as follows:

Director	Institution	% Capital (1)	Post or duties
	Banco Santander	0.000085%
María Dolores Dancausa Treviño	Banco Bilbao Vizcaya Argentaria	0.00004%	None
	Royal Bank of Scotland	0.00002%
Cartival, S.A	Banco Santander	0.0816% (2)	None
	Banco Santander	0.002%
Fernando Masaveu Herrero	UBS	0.001%	None
Rafael Mateu de Ros Cerezo	Banco Santander	0.00001%	None

(1) Direct and/or indirect holding.

(2) Cartival has a life interest (usufruct) of 0.033% of the share capital of Banco Santander, S.A. as at 31 December 2010.

It should also be pointed out that persons linked to the members of the Board of Directors held the following number of shares as at 31 December 2010: 23.688 Banesto, 1,009,742 Banco Popular, 13,390,906 Banco Santander and 372.640 Espiritu Santo Financial Group.

Directors' holdings in share capital

The breakdown of the interests held by the members of the Board of Directors as at 31 December 2010 and 2009 is as follows:

			31-12-10				31-12-09
	Total Shares	% hold ing	Direct	Indirect	Total Shares	% Share holding (*)	Direct	Indirect
Pedro Guerrero Guerrero	3,080,868	0.651	2,946,697	134,171.	3,072,053	0.649	2,937,882	134,171
María Dolores Dancausa Treviño (1)	692,812	0.146	692,588	224	-	-	-	-
Cartival, S.A.	112,562,267		23.775 105,279,273	7,282,994	75,392,305		15.924 68,109,311 7,282,994
Marcelino Botín-Sanz de Sautuola y Naveda	129,010	0.027	129,010	-	124,603	0.026	124,603	-
Fernando Ma saveu Herrero	462,718	0.098	450,718	12,000	446,311	0.094	446,311	-
José Ramón Arce Gómez	1,946,536	0.411	1,887,376	59,160	1,917,129	0.405	1,882,969	34,160
John de Zulue ta Greenebaum:	131,305	0.028	131,549	-	117,142	0.025	117,142	-
Gonzalo de la Hoz Lizcano	368,193	0.078	368,193	-	363,786	0.077	363,786	-
Jaime Terceiro Lomba	12,432	0.003	12,432	-	8,025	0.002	8,025	-
José Antonio Garay Ibarga ray (2)	973,627	0.205	167,627	806,000	150,690	0.032	150,690	-
Rafael Mateu de Ros Cerezo (3)	908,908	0.192	908,908	-	903,179	0.191	903,179	-
	121,268,676		25.614 112,974,371	8,160,378	82,495,223		17.637 75,043,898 7,451,325

(1) Appointed CEO of Bankinter (by co-optation) on 21 October 2010

(2) Appointed Director of Bankinter by the Ordinary General Meeting held on 23 April 2009.

(3) Appointed Director of Bankinter at the Board meeting held on 21 January 2009, subsequently ratified by the Annual General Meeting held on 23 April 2009.

37. Environmental information

As a financial institution, Bankinter is firmly committed to conserving the environment and seeking to develop a business model that is environmentally, economically and socially sustainable.

This commitment is stated in the principles of action in the Environmental Policy that the Bank publicised in 2004. It was revised and updated in 2007 to describe the resources and procedures for activities in need of improvement as regards environmental performance.

1.- Comply with legal environmental requirements and other requirements endorsed by the Bank that are applicable to its environmental matters.

2.- Implement the necessary processes to achieve ongoing improvement of the Environmental Management System, thereby improving the Bank's environmental behaviour.

3.- Promote responsible behaviour towards the environment by stakeholders and make them aware, through the annual report and our websites, of the trends and results of our Environmental Policy.

4.- Train and raise awareness among our employees by implementing best environmental practices, with the aim of promoting a rational and efficient use of natural resources.

5.- Support the development of conservation and environmental improvement projects.

6.- Market financial products and services related to environmental industries.

As part of its climate change strategy, the Bank has defined an Environmental Management Programme, which contains the aims and goals to be reached, and details the action to be taken, in order to achieve ongoing improvement in its environmental performance as regards aspects for which there is as yet no legislation, over and above strict compliance with the legal requirements. To this end, it has identified, measured and controlled both the direct impacts derived from the banking operations themselves, and the indirect impacts generated in finance operations, asset management and responsible management of the supplier and subcontractor chain.

The main environmental measures taken by Bankinter during the year 2010 include:

• Calculating the institution's carbon footprint, i.e. the total quantity of emissions of CO2 and other greenhouse gases generated directly or locally by its activity.

• Implementing environmentally efficient measures and adopting best environmental practices that enable to improve the bank's environmental performance, recorded in the main environmental indicators: consumption of electricity, materials, waste management, etc,

• Bringing down the company's overall emissions. Compensating for direct emissions.

• Lending its support to various environmental initiatives and implementing the public commitment undertaken by joining the following:

• the United Nations Global Compact, which includes three environmental principles.

• the Carbon Disclosure Project, which promotes and facilitates dialogue between institutional investors, purchasing organisations and senior managers, in response to the involvement of companies as agents that are jointly responsible for climate change.

• The Earth Hour campaign run by the WWF, by turning off the lights in all of its buildings during the campaign and inviting its employees and customers to join the initiative.

• In 2010, the Bank renewed the certification for its environmental management system under the EN-ISO 14,001 Standard, which is in place at two of the Bank's main centres in Madrid.

• Promoting environmental training, communication and awareness campaigns aimed at employees, and holding corporate volunteering initiatives linked to the environment.

• Launching campaigns intended for customers, to promote the use of web correspondence service and avoid the use of paper via the postal service.

• Making progress in implementing the environmental rating tool for credit operations.

• Funding projects with a positive environmental impact.

During the financial year, it was not considered necessary to record any allocation for environmental risks and liabilities as there were no contingencies linked to environmental protection and enhancement and no sanction or fine was received in relation to the environmental management carried out by the Bankinter Group. The Administrators of the Bank consider that the environmental risks inherent to its activities are minimal and adequately covered, and do not believe it is exposed to any additional liabilities in relation to such risks. Neither has the Bank incurred any expenses or received any subsidies linked to these risks.

38. Customer Support service

Article 17 of Order 734/2004 of 11 March issued by the Ministry of Finance on client support departments and services and consumer ombudsmen at financial institutions stipulates, inter alia, that financial institutions are required to prepare a report on the activities performed by these services in the preceding financial year and, also, to include a summary of this in the annual Report on their financial statements

The Activities Report corresponding to financial year 2010 drawn up by the Customer Support Service, which will be presented at the meeting of the Board of Directors on 23 March 2011, indicates that during the year 2010, the number of complaints/claims stood at 8.38 per million transactions (compared to 11.43 in the previous year).

The total number of complaints and claims in 2010 was 14,522, of which economic claims represented 10,535. Of these, 60.34% were resolved in favour of the client.

	2010	2009
Total number of Complaints and Claims:
Total no. of complaints (non-financial)	3,987	4,609
Total no. of claims (financial)	10,535	14,947
Total financial Complaints and Claims	14,522	19,556
Financial claims:
No. of claims in client's favour	6,357	8,757
In the customer's favour (%).	60.34%	58.59%
No. of claims in the Bank's favour	4,178	6,190
% in the Bank's favour	39.66%	41.41%
Total financial claims	10,535	14,947

As regards the timeframe for dealing with said complaints, 57.33% of exceptions were answered in less than 48 hours, which represents a 4.8% improvement on the previous year.

Timeframes for dealing with financial incidents

Timeframes	Total Shrinkage 2010	Percentage	Total Shrinkage 2009	Percentage
0 days	5,738	39.51%	7,001	35.80%
1 to 2 days	2,588	17.82%	3,271	16.73%
3 to 6 days	2,194	15.11%	2,492	12.74%
7 to 10 days	888	6.12%	1,437	7.35%
> 10 days	3,114	21.44%	5,355	27.38%
	14,522	100.00%	19,556	100.00%

The External Customers Ombudsman processed 824 exceptions, 21.6% fewer than in 2009; of these, 486 were settled in the Bank's favour (58.98%) and 271 in that of the customer (32.89%).

	2010	2009	Variation
External Ombudsman:
Incidents processed	824	1,051	-21.60%
Settled in the customer's favour	271	261	3.83%
Settled in the Bank's favour	486	571	-14.89%
Excluded	67	219	-69.41%

Similarly, in the year 2010 539 exceptions were reported to Spain's Central Bank (515 in 2009), of which 423 were settled (likewise 154 in 2009), 164 of which in the Bank's favour (58 in 2009) and 193 in that of the customer.

	2010	2009	Variation
Bank of Spain:
Claims settled	539	515	4.66%
In the customer's favour	154	55	180.00%
Uncontested	39	39	0.00%
In the Bank's favour	164	58	182.76%
Pending settlement	116	361	-67.87%
Outside Bank of Spain jurisdiction	66	2	3,200.00%

No recommendations were issued in the Activities Report for financial year 2010 drawn up by the Customer Support Service.

39. Branches, centres and agents

The breakdown of the Bankinter, S.A. branch offices, centres and agents as at 31 December 2010 and 2009 is as follows:

	31-12-10	31-12-09
Branch Offices	367	369
Commercial management centres-
Corporate Banking	47	47
SMEs	89	102
Private Banking and Personal Finance	61	62
Virtual Offices	377	399
Number of Agents	543	683
Telephone and Internet branches	3	3
Insurance centres	3	3

As at 31 December 2010, Bankinter, S.A. had a network of 543 agents (683 agents in 20089), composed of individuals and legal entities who have been granted powers to deal with the Bank's clients on its behalf in the negotiation and formalization of the typical operations of a lending institution. This network handles resources valued at 1,738 thousand euros as at 31 December 2010 (1,892 thousand euros as at 31 December 2009), with an average investment of 1,960 thousand euros (1,977 thousand euros as at 31 December 2009). The list of the latter is registered in the Financial Institutions Office at the Bank of Spain.

The insurance centres section includes the call centre and telephone hotline offices of the company Línea Directa Aseguradora.

40. Trust and investment services

The following table states the fees recorded in financial years 2010 and 2009 for the activities of investment services and complementary activities provided by the Group:

Thousand euros	2010	2009
Estate management	1,342	669
Management agreements	328	865
Safe deposit boxes	603	623
Purchase and sale of securities	21,610	18,718
	23,883	20,875

Thousand euros	Bankinter, S.A.			Bankinter Group
	2010	2009	2010	2009
Auditing services	337	337	533	495
Audit-linked services	398	397	407	412
Fiscal services	22	-	22	-
Other services	139	121	139	166
	896	855	1,101	1,073

The amount stated in the above table for auditing services includes all fees relating to auditing for the financial years 2010 and 2009, irrespective of when they were invoiced.

The following table states, in summary, the value of the investment funds, pension funds, and customer portfolios managed by the group:

Thousand euros	31-12-2010	31-12-2009
Investment funds	3,958,823	5,216,266
Pension funds	1,246,968	1,213,089
Customer portfolios managed	1,429,710	1,401,168
	6,635,501	7,830,523

41. Auditors' remuneration

Set forth below are the fees for professional services incurred by the auditors of the individual and consolidated Annual Accounts of the Bank and the Group during financial years 2010 and 2009:

42. Tax situation

Profit, which is calculated in accordance with tax legislation, is subject to a 30% levy on the taxable base. Certain deductions can be made to the resulting amount.

The Bankinter Group pays tax under the fiscal consolidation regime. The fact of a consolidated return being submitted for Corporate Tax does not mean that the Corporate Tax accrued by each Institution is substantially different from that which would occur in the case of individual taxation. On 27 December 2000, the Bank notified the National Inspection Office at the Spanish Inland Revenue Authorities of its decision to apply the fiscal consolidation regime from financial year 2001 onwards. The Fiscal Group number allocated by the National Inspection Office at the Spanish Inland Revenue Authorities was 13/2001.

The list of subsidiary companies in the Bankinter tax group as at 31 December 2010 is as follows:

• Bankinter Consultoría, Asesoramiento y Atención Telefónica, S.A.
• Bankinter Gestión de Activos, S.A., S.G.I.I.C.
• Hispamarket, S.A.
• Intermobiliaria, S.A.
• Bankinter Servicios de Consultoría, S.A.
• Bankinter Consumer Finance, S.A., E.F.C

• Bankinter Capital Riesgo, S.G.E.C.R, S.A.

• Bankinter Emisiones, S.A.

• Bankinter Sociedad de Financiación, S.A.

• Arroyo Business Consulting Development, S.L.
• Relanza Gestión, S.A.
• Gneis Global Services S.A.
• Línea Directa Aseguradora, S.A.
• Línea Directa Asistencia, S.L.U.
• Motoclub LDA. S.L.U.
• Centro Avanzado de Reparaciones CAR, S.L.U.
• Ambar Medline, S.L.
• Servicio Integral a Sociedades Tecnológicas, S.L.U.

There follows below a reconciliation of the consolidated accounting profit and tax profit for years 2010 and 2009:

Thousand euros	31-12-10	31-12-09
Pre-tax accounting profit for the financial year	205,214	345,941
Permanent differences-	(12,377)	(27,984)
Gains (losses) from institutions appraised by the equity
method	(10,958)	(16,234)
Others	(1,419)	(11,750)
Accounting Base for Tax	192,837	317,957
Temporary differences	(165,161)	(40,297)
Tax Base	27,676	277,660

The positive temporary differences in financial year 2010 mostly include differences due to adjustments for non-tax-deductible allowances. The negative temporary differences mostly include differences due to reversals of adjustments for allowances and other nontax-deductible items in previous financial years.

The expenditure in the year for Corporation Tax for financial years 2010 and 2009 is calculated as follows:

Thousand euros	2010	2009
Expenses corresponding to current financial year	57,851	95,387
Deductions and discounts	(3,028)	(23,362)
Other items (*)	45	20,720
Tax adjustments from previous financial years	(384)	(1,208)
	54,484	91,537

(*) As at 31 December 2009, deductions applied and entered in the accounts in

previous financial years to the amount of 20.713 were included.

The item 'Tax adjustments from previous years' in 2010 states expenditure for Corporation Tax caused by tax adjustments carried out in the settlement of the Group's Corporation Tax corresponding to financial year 2009 not envisaged as at 31 December 2009.

The following is the reconciliation of the profit before tax with the expenditure for the financial year:

Thousand euros	2010	2009
Pre-tax book profit	205,214	345,941
Tax at 30%	61,564	103,782
Breakdown of balancing entries between the expenditure at tax rate and the Corporate Tax expenditure for the year:
Non-deductible expenses	1,451	2,345
Non-computable income	(5,164)	(10,740)
Total deductions applied in the financial year	(3,028)	(23,362)
Others:
Corporate Tax adjustment from the previous financial year	(384)	(1,208)
Corporate Tax Dublin branch		7
Deferred tax adjustment	-	-
Amount of deductions applied and entered in the accounts in previ ous financial years	-	20,713
Other	45	-
Corporate Tax expenditure for the financial year	54,484	91,537
Effective tax rate for the year	26.55%	26.46%

The expenditure incurred in corporate tax for the financial year is calculated by adding the current tax resulting from applying the tax rate to the tax base for the financial year, after applying the deductions that are fiscally allowed, plus the variation in the assets and liabilities due to taxes paid in advance and deferred and tax credits, both due to negative tax bases and deductions.

Assets and liabilities due to deferred taxes include the temporary differences that are identified as the amounts that are expected to be payable or retrievable due to the differences between the book value of assets and liabilities and their tax value, as well as the negative tax bases pending offset and the credits for fiscal deductions that are not fiscally applied. These amounts are recorded applying to the temporary difference or credit in question the rate at which they are expected to be retrieved or settled.

Liabilities are recognised due to deferred taxes for all of the taxable temporary differences, except in general if the temporary difference is derived from the initial recognition of goodwill. In turn, assets due to deferred taxes, identified with temporary differences are only recognised if it is considered to be probable that the consolidated institutions will in future have sufficient fiscal gains against which to make them effective. The rest of the assets due to deferred taxes (negative tax bases and deductions pending offset) are only recognised if it is considered to be probable that the consolidated institutions will in future have sufficient fiscal gains against which to make them effective.

On the occasion of each accounting closure, the deferred taxes that are recorded are reviewed (both assets and liabilities) with a view to ensuring that they remain valid, with any necessary corrections to same being made in accordance with the results of the tests performed.

As a consequence of the last general audit performed on the Bank for the financial years 2001 to 2003 for the following taxes:

	Financial Years
Corporate Tax	2001 to 2003
Value-Added Tax	09/2002 to 12/2003
Withholdings/Payment on account of Work/Professional earnings	09/2002 to 12/2003
Withholding/Payment on account Return on Investments	09/2002 to 12/2003
Withholding/Payment on account Real-estate leases	09/2002 to 12/2003
Withholding on account Non-residents' income tax	09/2002 to 12/2003
Annual return on operations	2002 to 2003
Abridged declaration of intra-community supply and acquisition of goods	2002 to 2003

During financial year 2008, agreed tax returns were signed and paid corresponding to financial years 2002 and 2003 with regard to withholdings and payments on account for work performed by personnel and professionals, and withholdings on account for nonresidents in an outstanding amount of 236 thousand euros. Similarly, agreed tax returns were signed for Value Added Tax in financial years 2002 and 2003 in an outstanding amount of 1,383 thousand euros.

On 14 March 2008, the Bank received notification of communication of the extension of partial verification and investigation initiatives for the following items and periods, with the partial initiative being limited to verification of the "euroipf" fixed term deposits marketed by the Bank's Dublin branch.

	Financial Years
Withholding/Payment on account Return on Investments	02/2004 to 12/2005

In addition, on 6 June 2008, the Bank received notification of communication of the extension of partial verification and investigation proceedings for the following items and periods, with the partial proceeding being limited in VAT to the inclusion in the monthly settlement periods of the results of the adjustment proposal resulting from the verification proceedings underway and those that result from checking the final pro-rata percentage calculation as at 31 December 2004 and 2005.

	Financial Years
Value-Added Tax	05/2004 to 12/2005

In any case, the tax liabilities that may be derived as a result of the claims filed against the items that have been disputed are adequately covered by allowances as at the date of closure of 2010 and preceding financial years.

On 4 February 2009, disconformity certificates were signed for Corporate Tax, financial years 2001 to 2003, to the value of 9,191 thousand euros payment and 1,784 thousand euros in interest on arrears, as well as Withholdings and payments on account for movable capital, financial years 2002 and 2003, as well as 2004 and 2005, to the value of 107 thousand euros and 49 thousand euros in payment and 273 thousand euros and 274 thousand euros in interest on arrears, respectively. These payments are currently being appealed before the Central Administrative Economic Tribunal (TEAC).

On 27 March 2009, Bankinter was notified of sanction-imposing agreements related to withholdings and payments on account for personnel and professional work earnings, withholdings on behalf of non-residents and Value-Added Tax, financial years 2002 and 2003, to the amount of 30 thousand euros, 39 thousand euros and 3 thousand euros respectively, which are currently being appealed before the Central Administrative Economic Tribunal (TEAC) and the Regional Administrative Economic Tribunal (TEAR).

Finally, on 9 October 2009, Bankinter received notification of sanction-imposing agreements for Corporation Tax, financial years 2001 to 2003, to the value of 9,244 thousand euros and Withholdings and payments on account for movable capital, financial years 2002 and 2003, as well as 2004 and 2005, to the value of 3,684 thousand euros and 4,043 thousand euros respectively, which are currently being appealed by Bankinter before the Central Economic Administrative Court (TEAC).

In addition and in relation to the sanction-imposing agreement for payments on account for movable capital, financial years 2002, 2003, 2004 and 2005 corresponding to "EU-ROIPF" fixed term impositions marketed by the Bank's branch in Dublin, on 9 February 2010 and under the terms of Royal Decree 1676/2009 of 13 November, regulating the Taxpayer Protection Council, Bankinter submitted a complaint to this body for the blatant violation of the principles of unique non-derogability of the Regulations, of legality, regulatory hierarchy and proportionality, which in its opinion was committed in this approval proceeding by the Revenue Administration. On 13 July 2010 an entirely favourable reply to all aspects of the complaint submitted was received from the Council.

On 13 July 2009, the Group was notified of the commencement of general-purpose verification and investigation proceedings by the Tax Inspectorate, which continued during the financial year 2010 in connection with the following taxes and financial years:

	Financial Years
Corporate Tax	2004 to 2006
Value-Added Tax	06/2005 to 12/2006
Withholdings/Payment on account of Work/Professional earnings	06/2005 to 12/2006
Withholding/Payment on account Return on Investments	06/2005 to 12/2006
Withholding/Payment on account Real-estate leases	06/2005 to 12/2006
Withholding on account Non-residents' income tax	06/2005 to 12/2006
Annual return on operations	2005 to 2006
Abridged declaration of intra-community supply and acquisition of goods	04/2005 to 12/2006

Due to the possible interpretations of the fiscal regulations that apply to certain operations performed in the banking sector, there may be certain tax liabilities of a contingent nature. The Group Administrators consider that the possibility of these contingent liabilities becoming actual liabilities is remote and that, in any case, the tax charge which would arise would not materially affect the Consolidated Annual Accounts.

The various tax credits applied in the calculation of the Corporation Tax payable for the Group in financial years 2010 and 2009 are shown in the following table:

Thousand euros	31-12-10	31-12-09
Applied to the tax base:
Monetary depreciation	-	9
Exemption for international double taxation-	-	-
Exemption for domestic double taxation	-	-
Allocation of NTBs from EIGs	1,934	12,086
	1,934	12,095
Applied to the tax due:
Deductions for double taxation	1,470	1,449
Deduction for training costs	3	32
Deduction for ID/IT	803	428
Deduction for re-investment of extraordinary profits	2	20,772
Deduction for donations to institutions	750	681
	3,028	23,362

The amount of the earnings covered by the deduction for re-investment of extraordinary profits in the financial year 2010 totalled 2 thousand euros (143,346 thousand euros in 2009), with the Bank having made in said financial year sufficient fixed asset purchases to comply with the re-investment requirements laid down in article 42 of Legislative Royal Decree 4/2002 of 5 March, which passed the revised text of the Corporation Tax Act. The majority of the earnings covered in financial year 2009 by the deduction for re-investment corresponds to the amount obtained in the sale of 50 percent of the institution Bankinter Seguros de Vida. S.A., in financial year 2007, the re-investment of which was sufficiently materialised in financial year 2009 by the purchase by Bankinter of 50 percent of the institution Línea Directa Aseguradora, S.A. for the amount of 426 million euros.

During financial year 2005, the decision was to implement the tax regime applicable to institutions that held foreign securities as regulated in chapter XIV of Royal Legislative Decree 4/2002, of 5 March, which passed the revised text of the Corporate Tax Act, with said decision having been informed to the competent body in the Spanish Inland Revenue Authorities, on 21 April 2005.

Pursuant to the provisions of article 118.3 of this revised text, it is hereby reported that during this financial year 2010, the Bank obtained surpluses in the sum of 2,005 thousand euros (0 thousand euros in 2009) and dividends in the sum of 967 thousand euros (348 thousand euros in 2009), and that 210 thousand euros (79 thousand euros in 2009) were paid in foreign tax on said dividends.

43. Assets and liabilities valued at other than fair value.

With regard to the most significant items of assets and liabilities, the table below shows a comparison between the value for which those assets of the Bank valued other than at fair value are recorded, and their corresponding fair value, estimated at the close of each financial year:

Thousand euros	31-12-10
	Recorded value	Fair value
Asset:
Loans and advances to customers	42,490,050	42,741,663
Held to maturity investments	3,241,573	3,147,178
Tangible assets	456,569	470,266
Liabilities:
Deposits from central banks	3,301,646	3,305,134
Deposits from credit institutions	2,462,457	2,464,003
Customer deposits	24,279,494	24,136,325
Marketable debt securities	16,938,661	17,604,489

The fair values provided in this Note were calculated by updating the estimated capital flows and corresponding interest, except in the cases of the held-to-maturity investment portfolio and real estate, for which the market prices are available.

To calculate the fair value of real estate properties, the appraisal values certified by Appraisal Companies were taken as the basis and altered by the price variation index if said reports had been drawn up more than three years previously.

44. Risk policies and management.

Risk management

Risk management is a fundamental principle that prevails throughout the Bank's divisions. The Board of Directors holds the highest responsibility and establishes the Bank's own risk profile, risk policy and internal control systems. The Framework Agreement on Risks sets the strategy in the area of risks on an annual basis.

The Board of Directors, through the Executive Committee, the Audit and Regulatory Compliance Committee (to which both Audit and Risks report on a regular basis), oversees and supervises accounting policies and systems and internal monitoring procedures, in regard to all risks inherent to the Bank's activities, and the prevention of capital laundering in accordance with standing legislation.

The entire Risks structure (Credit, Control and Recoveries and Global management) as well as Market, Operational and Reputational Risk, is directly seconded to the Executive Vice-Chairperson, according to the principle of independence and segregation of duties.

The identification, measurement, management, control and monitoring of the risks inherent to banking operations constitute a fundamental aim, always in a context of optimising the global management of all risks.

We are one of the few nationwide banks that have achieved approval from Spain's Central Bank for the majority of our internal rating models. Moreover, all of the methodologies, systems and policies provided in the Basel II capital framework for managing and measuring risk and equity are in place at Bankinter. Supported by these models, risk-adjusted return is the management tool that enables to perfectly combine the Institution's solvency binomial with sustainable value creation over time.

The main principles that govern Risk Management are as follows:

• Function independence.
• Alignment with strategic objectives.
• Integrated risk management.
• Management based on the risk-return binomial
• Mass use of automatic authorisation.

• Risk diversification by clients, sectors, counterparts and markets.

• Identification, assessment and control of product risk, particularly when new products are launched.

• Relevance of the quality of service factor in the risks function.

Management policies for Structural Risks and Market Risks

Bankinter is guided by principles that constitute the basis of the general risk policy. These basic principles are of a permanent nature; they have been in application in recent years and continue to apply. In general, these policies are as follows:

1.- The purpose of Bankinter's policy on the management and control of "Structural Risks" and "Market Risk" is to neutralise the impact of variations in interest rates, in the main market variables and in the balance sheet structure itself, on the Bank's profit and loss account, by adopting the most appropriate investment or hedging strategies.

2.- To develop the most adequate systems for the measurement of structural and market risks to provide information relating to the Institution's exposure to these risks, and to any possible deviations that might arise regarding established limits and procedures.

The Board of Directors decides the strategy and policy for the Bankinter Group's policy as regards "Structural Risks" and "Market Risk" and delegates management, monitoring and control to various Bodies in the Institution. It also decides on the risk profile that the Institution is willing to undertake, establishing the maximum limits that it delegates to said bodies and which are reviewed on an annual basis.

It should be noted that the exchange rate risk is not significant at the Bank.

Structural risks

The Sovereign Debt crisis that started in early 2010 had a marked influence on trends in the financial markets during this financial year. This, the risk premium in peripheral countries increased, activity decreased in the wholesale markets and the Institutions have had to use other alternative means of funding. The exchange markets were also highly volatile. All of these facts reveal the importance of managing interest and liquidity risks in Financial Institutions. Bankinter has continued with its prudent policy in managing and controlling these risks, so as to minimise their impact.

The Board of Directors delegates the ongoing monitoring of decisions regarding structural balance sheet risks (interest rate risk and liquidity risk), stock market risk and exchange rate risk of the Bank's corporate positions, as well as the establishment of the financing policies, to the Assets and Liabilities Committee (ALCO). Moreover, each year it reviews, approves and delegates to the ALCO the limits applicable for managing the aforementioned risks. The Treasury and Capital Markets area implements the decisions taken by the ALCO with regard to the Bank's corporate positions.

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

Market Risk, which is seconded to the Risks Department, has the independent function of measuring, tracking and controlling the Institution's structural risks.

Interest rate structural risk

The structural interest rate risk is the Institution's exposure to fluctuations in the market's interest rates, derived from the different temporary maturity and revaluation structure of the items on the Global Balance Sheet.

Bankinter performs active management of this risk in order to protect the interest margin and to preserve the economic value of the Bank against interest rate fluctuations.

In order to control exposure to the interest rate structural risk, the Bank has established a structure of limits that is reviewed and approved on an annual basis by the Board of Management, in accordance with Bankinter's strategies and policies in this regard.

In addition, Market Risk performs sensitivity analyses on financial margin and economic value, for both the Bank and the Subsidiaries that are associated to these risks and the impact that they have on the Consolidated Group.

Bankinter has tools to monitor and control the structural interest rate risk. We will now go on to specify the main measurements used by the Bank that enable to manage and control the interest rate risk profile approved by the Board of Directors:

a) Interest Rate Gap or Plan:

Shows the exposure to the interest rate risk on the basis of the structure of maturities and/or repricing of the Institution's on- and off-balance sheet items. This measurement is obtained automatically, at least on a weekly basis, and it constitutes the basic tool that provides static information on interest rate concentrations in the various terms and which also serves as the basis for analysing the possible impacts that the variations in the interest rates may have on the Institution's Financial Margin and Net Asset Value.

The interest rate plan is obtained by distributing the positions and balances of the on- and off-balance sheet items according to time terms depending on their nature. Therefore, items that are sensitive to interest rates for which the interest rate maturity or review date is known are classified in the plan according to these criteria, depending on whether they are linked to a fixed or variable rate, respectively. Items that are sensitive or insensitive to interest rates, with no fixed maturity rate, are distributed according to particular historical behaviour hypotheses that are reviewed on a regular basis by Market Risk, with a view to adjusting the measurement model to their historical performance.

The operational limits that are applicable to this measurement are defined as the maximum opening figures or the difference between the total amount of the active and passive positions (gap) that may be maintained in each time bracket in the interest rate risk plan.

The interest rate risk plans for the Bankinter Group at the close of 2010 and 2009 are attached below:

INTEREST GAP Dec10 (GROUP)

Figures as at 31/12/10 in millions of euros	Up to 1 month	1 to 3 months	3 to 12 months	1 to 2 years	2 to 3 years	3 to 4 years	4 to 5 years	more than 5 years	total
ASSETS
Loan and receivables	16,189	6,011	18,428	543	192	152	85	1,756	43,356
Loans and advances to credit institutions	958	297	181	45	0	0	0	1,481
Loans and advances to customers	15,231	5,714	18,247	498	192	152	85	1,738	41,857
Other	0	0	0	0	0	0	0	18	18
Fixed Income Portfolio	1,023	154	665	2,601	3,220	715	221	1,076	9,675
Financial assets and liabilities held for trading	11	140	195	447	99	47	32	304	1,275
Portfolio Available for Sale	1,013	13	364	796	2,463	263	39	205	5,158
Held to maturity investments	0	0	106	1,358	657	404	150	567	3,242
Other Assets	722	0	65	0	0	0	0	3,187	3,974
Total Assets	17,935	6,165	19,158	3,144	3,412	867	307	6,019	57,005
LIABILITIES
Creditor fixed income portfolio	0	0	15	301	303	172	45	253	1,088
Financial assets and liabilities held for trading	0	0	15	301	303	172	45	253	1,088
Financial liabilities at Amortised Cost	13,867	13,282	10,295	3,167	5,652	1,824	2	3,384	51,472
Deposits from credit institutions	3,593	1,995	195	1	0	0	0	247	6,031
Customer deposits	7,291	6,907	9,755	535	1,900	817	2	2,202	29,409
Marketable debt securities	2,188	4,069	205	2,631	3,752	1,006	0	407	14,248
Other	795	321	140	0	0	0	0	529	1,785
Other liabilities	419	59	134	85	0	0	0	1,195	1,892
Shareholders' Equity	10	17	91	122	0	0	0	2,312	2,552
Total Liabilities and Shareholders' Equity	14,297	13,358	10,536	3,675	5,955	1,995	46	7,144	57,005
Off balance sheet operations	9,026	-4,719	-8,115	1,467	1,079	1,230	-38	69	0
TOTAL INTEREST GAP	12,664	-11,912	506	936	-1,463	102	222	-1,056	0
Figures as at 31/12/09 in millions of euros	Up to 1 month	1 to 3 months	3 to 12 months	1 to 2 years	2 to 3 years	3 to 4 years	4 to 5 years	more than 5 years	total
Total Assets	19,225	5,843	21,083	2,151	2,098	645	1,392	4,663	57,101
Total Liabilities and Shareholders' Equity	15,174	14,678	11,775	1,777	3,770	885	1,049	7,994	57,101
Off balance sheet operations	11,277	-1,963	-11,705	-197	1,601	-225	1,108	104	0
TOTAL INTEREST GAP	15,328	-10,798	-2,397	177	-71	-464	1,452	-3,227	0
DIFFERENCES	Up to 1 month	1 to 3 months	3 to 12 months	1 to 2 years	2 to 3 years	3 to 4 years	4 to 5 years	more than 5 years	total
Total Assets	-1,291	322	-1,925	992	1,314	222	-1,086	1,356	-96
Total Liabilities and Shareholders' Equity	-877	-1,320	-1,239	1,898	2,185	1,111	-1,003	-851	-96
Off balance sheet operations	-2,250	-2,756	3,590	1,664	-521	1,455	-1,147	-35	0
TOTAL INTEREST GAP	-2,664	-1,114	2,903	759	-1,392	566	-1,230	2,172	0

(*) Foreign-currency positions are not relevant and so have not been included in the breakdowns of the attached Gaps.

The items included in the Interest Rate Plan may be classified as follows, depending on their exposure to the interest rate risk.

Exposure to interest rate risk: they constitute the majority of the Bankinter Group's Balance Sheet and are items comprising financial instruments that are sensitive to variations in interest rates. These may also be:

Items subject to fair value risk: they are those financial instruments at a fixed rate of interest. The assets include practically the entire fixed income portfolio, operations involving deposits in credit institutions and a low-relevance part of the loans to clients. As regards the liabilities, the highlights are the majority of the client and credit institution deposits, and the credit fixed income portfolio. Also included is the fixed income securities portfolio held by Línea Directa Aseguradora S.A.

Items subject to cash flow risks: they are those financial instruments referenced to floating interest rates. The assets basically include the majority of the client loans and the liabilities, the majority of the debits represented by negotiable securities or own shares.

No exposure to interest rate risk: they represent a part that is of little importance in the Bankinter Group's Balance Sheet and are the balances included in items of other assets and other liabilities.

b) Sensitivity of the Financial Margin:

Dynamic simulation measures are used to measure on a monthly basis financial margin exposure in different scenarios of variation in interest rates and for a 12-month time horizon. Financial margin sensitivity is obtained as the difference between the financial margin projected with the market curves at each analysis date and the one that is projected with the interest-rate curves altered in different scenarios, both of parallel movement of rates and changes in the slope of the curve.

For a calculation of the dynamic projections of the margin, use is made of the "Interest rate plan" that is obtained from the average monthly balances of those items sensitive to interest rates and by assuming certain renewal or maturity hypotheses. In repricing items that mature or are reviewed, the forward interest rate curves listed on the market and the commercial differentials estimated for each one of them are taken into account. These projections are made considering that the balances remain constant during the time horizon in the simulation or applying the growth expected by the Institution for the period to the various items.

Every year, the Board of Directors sets a reference in terms of sensitivity for the financial margin for -100 basis point parallel movements in the interest rate curves for a term of up to 12 months. The sensitivity in this scenario is followed by the ALCO.

Moreover, the sensitivity to the same interest-rate scenarios for the Subsidiaries subject to this risk and the impact that it has on the Consolidated Group's financial margin are analysed.

The exposure of the Bankinter Group's financial margin to interest rate to +/- 100 bp parallel movements in market interest rates is approximately +/- 0.6% for a 12-month horizon.

The sensitivity of the Group's financial margin to changes in the slope of the curve for a 12-month horizon is +/- 2%. This scenario is built by maintaining the 6-month rate constant and varying the short (up to 3 months) rates and the 12-month rate in the same amount and in the opposite direction, to vary the slope of the curve by +/- 25 basis points in the period under consideration.

Financial Margin Sensitivity	2010
100 bp parallel movements	0.5%
25 bp slope variations	3%

c. Economic Value Sensitivity:

This is a measurement that complements the previous two and which is calculated on a monthly basis. It allows to quantify the exposure of the Bank's economic value to the interest-rate risk and is obtained as the difference between the net current value of the items that are sensitive to interest rates calculated using the curves for rates in different scenarios and the rates curve listed in the market at each analysis date.

Every year, the Board of Directors sets a reference in terms of the economic value sensitivity for 200 bp parallel movements in the market interest rates for 12% of Shareholders' Equity. Sensitivity to this scenario is measured, controlled and submitted on a monthly basis at each ALCO meeting.

The exposure of the consolidated Group's economic value is also quantified following the same criterion as described above.

The sensitivity of the consolidated Group's Economic Value to 200 bp parallel movements, obtained by means of the criterion described above, was, at the close of financial years 2010 and 2009, +/- 1.1% (*) and +/-1% of the Bankinter Group's Shareholder Equity, respectively.

Economic Value Sensitivity	2009	2010
NPV Sensitivity	2,9%	0,2%

(*) of shareholders' equity

Structural liquidity risk

The structural liquidity Risk is related to the Institution's capacity to fulfil its payment obligations and finance its investments. The Bank actively monitors the liquidity situation and measures to be taken both under normal market conditions and in exceptional situations arising due to internal causes or market trends.

Management of this risk is the responsibility of the ALCO committee, delegated by the Board of Directors.

To obtain liquidity, the Bank used short-term issue programmes both on the domestic market and on the international market, with the Euro-Commercial Paper programme. The average balances during the year were 1.395 and 1.347 billion Euros respectively. To complete capital and liquidity requirements, 2.350 billion euros of listed mortgagebacked bonds and 1.267 billion euros of senior debt and 40 million of subordinated debt were issued.

The analyses and measurements used to control and monitor liquidity are:

a. Liquidity plan or gap:

This shows information on the distribution of the balances and cash flows of the asset and liability positions of the balance sheet between various timeframes depending on the expected date of completion or liquidation and in accordance with a series of hypotheses based on the historical performance of these products. These hypotheses are reviewed on a regular basis and, in such cases as where they are necessary, supported by models based on historical series.

Included below are the liquidity plans or gap at the closing dates of financial years 2010 and 2009. The information provided by the liquidity plan is static and does not show the expected finance needs as it does not include behavioural models of the asset items, that is, the prepayment of mortgage loans and the renovation of lines of credit or of liability items such as the renewal of IFPs, amongst others.

LIQUIDITY GAP 2010 (Group)

Figures as of December 2010 in millions of euros	Sight	1 day to 1 month	1 to 3 months	3 to 12 months	12 months to 5 years	>5	TOTAL
ASSETS
Loan and receivables		2,376	2,141	7,620	10,694	24,618	47,450
Deposits from credit institutions		95	48	111	45	1158	1,456
Loans and advances to customers		2,281	2,094	7,510	10,649	23,442	45,976
Other		0	0	0	0	18	18
Fixed Income Portfolio		1,076	161	699	7,089	1,131	10,155
Financial assets and liabilities held for trading		11	148	205	658	319	1,342
Portfolio Available for Sale		1,065	13	382	3,728	215	5,403
Held to maturity investments		0	0	111	2,703	596	3,411
Other Assets		1,169	0	328	0	1,504	3,002
Total Assets		4,622	2,303	8,647	17,783	27,253	60,608
LIABILITIES
Creditor fixed income portfolio		11	0	16	863	267	1,157
Financial assets and liabilities held for trading		11	0	16	863	267	1,157
Financial liabilities at Amortised Cost	10,407	3,414	2,471	8,496	13,124	14,141	52,054
Deposits from credit institutions		179	50	1	0	5,811	6,041
Customer deposits	10,407	2,596	1,775	7,130	1,909	5,092	28,908
Marketable debt securities		640	646	1,365	11,216	1,449	15,317
Other		0	0	0	0	1,788	1,788
Other liabilities		0	0	0	0	1,495	1,892
Shareholders' Equity		0	0	0	0	2,552	2,552
Total Liabilities and Shareholders' Equity	10,407	3,755	2,471	8,580	13,987	18,455	57,655
TOTAL LIQUIDITY GAP	-10,407	867	-169	67	3,797	8,798	2,953
Figures as of December 2009 in millions of euros	Sight	1 day to 1 month	1 to 3 months	3 to 12 months	12 months to 5 years	>5	TOTAL
Total Assets		4,450	2,679	11,483	15,768	28,297	62,676
Total Liabilities and Shareholders' Equity	10,897	4,550	4,189	8,330	10,270	18,147	56,383
TOTAL LIQUIDITY GAP	-10,897	-100	1,511	3,154	5,498	10,149	6,293

(*) Foreign-currency positions are not relevant and so have not been included in the breakdowns of the attached Gaps.

(*) The Institution does not have any non-listed positions

b. Analysis of finance needs, maturities and scenarios

The business gap is analysed to predict the liquidity needs or excesses arising from the difference between investment and customer resources and these are compared with the sources of funding that are expected and the assets that are available. Other stress scenarios that may affect these variables are also analysed.

c. Monitoring of the specific situation relating to assets, concentration in issue maturities. Accordingly, the Board of Directors lays down a number of maximum exposure ceilings.

d. Contingency Plan

The Institution has a Contingency Plan which identifies the general actions to be taken in different crisis scenarios, the internal and external communication channels and the bodies in charge of monitoring these situations.

Market Risk

The Board of Directors delegates to the Treasury and Capital Markets Area operation on its own behalf in the financial markets, with a view to leveraging the business opportunities that arise, using the financial instruments that are most appropriate at any given time, including interest-rate, exchange-rate and variable-income derivatives. The financial instruments with which trading is undertaken must, in general, be sufficiently liquid and be associated to hedging instruments. The risk that may be derived from the management of the institution's own accounts is associated to the movement of interest rates, stock market, exchange, volatility and credit spread.

The Board of Directors delegates to the ALCO committee ongoing monitoring of the management carried out by the Treasury and Capitals Market area on its own behalf and establishes some maximum limits for authorising possible excesses that may occur due to the activity carried out by the Treasury and Capitals Market area.

Market Risk, which is seconded to the Risks Department, has the independent function of measuring, tracking and controlling the Bank's market risk and the delegated limits.

Market risk is measured mostly using the "Value at Risk" (VaR) methodology, considered both globally and segregated for each relevant risk factor. The limits in VaR terms are supplemented by other measures such as stress testing, sensitivities, stop loss and concentration.

Value-at-Risk (VaR)

"Value-at-Risk" (VaR) is defined as the maximum loss that is expected from a particular portfolio of financial instruments, under normal market conditions, for a certain confidence level and time horizon, as a consequence of movements in prices and market variables.

The VaR is the main indicator used daily by Bankinter to measure and control on an integrated and global basis exposure to market risks owing from interest rates, variable income, exchange rates, volatility and lending.

The measuring methodology used is the 'Historical Simulation' based on the analysis of possible changes in the value of the position used. Historical movements in the individual assets that make it up are used. VaR is calculated with a confidence level of 95% and a time horizon of one day. During this financial year, the VaR model was adjusted to obtain a market risk measurement more in line with the market trends.

On the other hand, there is monthly monitoring of the VaR at its subsidiary, Línea Directa Aseguradora S.A. using the "historical simulation" methodology.

The following are the VaR comparative risk factor data for the Bank's positions in financial years 2010 and 2009, both for the total and differentiated according to portfolio:

Total VaR 2010
Million Euros	Final
Interest Rate VaR	3.83
Variable Income VaR	0.67
Exchange Rate VaR	0.01
VaR Volatility Rate	0.03
Credit VaR	0.00
	3.92

Total VaR 2009
Million Euros	Final
Interest Rate VaR	3.63
Variable Income VaR	0.68
Exchange Rate VaR	0.02
Credit VaR	0.04
	3.71

Trading VaR 2010
Million Euros	Final
Interest Rate VaR	0.87
Variable Income VaR	0.18
Exchange Rate VaR	0.01
VaR Volatility Rate	0.03
Credit VaR	0.00
	0.95

Trading VaR 2009
Million Euros	Final
Interest Rate VaR	0.32
Variable Income VaR	0.16
Exchange Rate VaR	0.02
Credit VaR	0.04
	0.35

Available sale VaR 2010
Million Euros	Final
Interest Rate VaR	3.10
Variable Income VaR	0.49
Exchange Rate VaR	0.00
Credit VaR	0.00
	3.27

Available sale VaR 2009
Million Euros	Final
Interest Rate VaR	3.72
Variable Income VaR	0.52
Exchange Rate VaR	0.00
Credit VaR	0.00
	3.84

Confidence level 95%, time horizon of 1 day

(*) The VaR figure at the close of 2009 in the previous table was altered in relation to the figure submitted in the 2009 Annual Report. This variation is due to the fact that in the financial year 2010 there was a change in the positions taken into account in the "fixed income available for sale portfolio". The impact is not significant on the VaR figure for the Interest Rate presented in the Annual Report for 2009.

In the year 2010 an increase was recorded in the volatility of the various risk factors and in particular, the Spanish Treasury interest rates, which had an influence on the market risk of the held portfolio. The Bank has kept low risk levels, in general, as may be seen in the previous tables, both as regards the "negotiation portfolio" and the "available for sale portfolio".

The market risk (VaR) for the Línea Directa Aseguradora portfolio at the close of the financial years 2010 and 2009, was 0.90 million euros and 0.76 million euros respectively, calculated according to the "Historical Simulation" methodology, with a confidence level of 95% for a 1 day horizon. This increase is due to the increase in the position of the variable income compared to the previous financial year, and to the change in scenario applied. However, despite the increase in the volatility of interest rates during the financial year, the interest rate VaR for Línea Directa Aseguradora was reduced by the drop in the fixed income portfolio.

Stress Testing

Stress testing, or the analysis of extreme scenarios, is a supplementary test to VaR. The estimates from the stress tests quantify the maximum potential loss in portfolio value under extreme scenarios of change in the risk factors to which the portfolio is exposed.

Each year, the Board of Directors adopts an extreme scenario based on significant movements in interest rates, stock markets, exchange rates and volatility, together with certain maximum references regarding said variations for each type of risk. In addition, estimates are made with other scenarios that replicate different past crisis situations and other current relevant market situations not included in the scenarios that were applied.

In 2010, the stress scenarios for Stock Market and Volatility were updated and adapted to each product type and to the evolution of past events on the market for this type of risk factor.

The following information shows the results of one of the most extreme stress scenarios for the Bank in financial years 2010 and 2009:

Stress Testing 2010
Million Euros	Final
Interest Rate Stress	10.83
Variable Income Stress	10.45
Exchange rate Stress	0.15
Volatility Stress	0.42
Credit Stress	0.00
Total Stress	21.84

Stress Testing 2009
Million Euros	Final
Interest Rate Stress	25.02
Variable Income Stress	7.00
Exchange rate Stress	0.32
Volatility Stress	1.18
Credit Stress	0.12
Total Stress	33.64

(*) The Stress Testing figure at the close of 2009 in the previous table was altered in relation to the figure submitted in the 2009 Annual Report. This variation is due to the fact that in the financial year 2010 there was a change in the positions taken into account in the "fixed income available for sale portfolio". This impact brought about a drop of approximately 15 million euros from the Interest Rate Stress testing Figure that was presented in the 2009 Annual Report.

The total stress testing level at the close of the financial year 2010 dropped in comparison to 2009. The drop in the interest rate stress testing level is notable because of the lower position in fixed income. On the other hand, the variable income stress testing level at the close of the financial year 2010 was higher than that of the previous year, basically as a result of the change made in the stress scenario applied in 2010.

The result of calculating the stress scenarios for the Línea Directa Aseguradora portfolio positions at the close of the financial year 2010 totals 22.75 million euros compared to 11.15 million euros in 2009. The increase is due to the variable income stress testing due to the increase in position and the change in the scenario applied to this risk factor.

Operational risk

The basic aim is to identify and preventively mitigate the greatest operational risks, seeking to minimise the possible losses associated to same.

The definition of 'operational risk' used by Bankinter is that which is provided in the Basel Capital Accord (BIS II): "the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputational risk". In general, risks that are to be found in the processes and that are generated internally by persons and systems, or as a consequence of external agents, such as natural catastrophes.

Our operational risk management model is inspired by the guidelines defined in the "Basel II" Capital framework agreement and complies with Spain's Central Bank Circular 3/2008 on calculating and controlling Shareholders' Equity. It also incorporates the best practices from the sector that are shared in the CERO (Spanish Operational Risk Consortium) and CECON (Spanish Business Continuity Consortium) groups, of which Bankinter is an active member.

Basic governing principles.

With a view to achieving an adequate system for managing Operational Risk and in line with the best practices on the market, Bankinter has laid down the following basic governing principles:

• The basic aim is to identify and preventively mitigate the greatest operational risks, seeking to minimise the possible losses associated to same.

• Systematic procedures are defined for assessing, analysing, measuring and reporting risks and generating plans of action that are adequate in controlling them.

• With a view to exploring the bank's activities to draw up an inventory of the operational risks, the unit for analysis are the business units. By analysing their risks, the bank's total risks are obtained by aggregating and consolidating the former.

• Of the possible Capital calculation systems associated to Operational Risk in the framework of the Basel Accord, Bankinter has adopted the Standard Method. This method is reserved in Solvency Circular 2/2008 for institutions that carry out efficient, systematic management of operational risks.

Operational Risk Management Framework.

In Bankinter, the Management Framework for Operational Risks revolves around the following main elements:

• Identifying and assessing risks by developing a risks map for the institution, showing the frequency and severity levels of such risks, the control mechanisms in place and the plans of action for mitigation.

• Keeping a record of the operational risk events that have occurred, with the management information associated to same being ordered and classified in accordance with the Basel recommendations.

• Monitoring risk by establishing a panel of indicators to provide information on the evolution of existing operational risk levels and alerts on the appearance of undesired trends.

• Drawing up Continuity and Contingency Plans describing the set of procedures that are alternative to normal operations and which are aimed at restoring activity in the event of an unforeseen interruptions to critical services.

• Generating and disseminating management information that is suited to the needs of each governing body that has responsibilities in managing operational risk.

Government Structure

Bankinter has chosen to follow a decentralised model in which responsibility for Operational Risk management is distributed among the respective business and/or support units.

For governance purposes, the following control bodies and general responsibility guidelines have been established:

Board of Directors: Approves the policies and the management framework; establishes the level of risk that Bankinter is willing to undertake.

Operational, Reputational and New Product Risk Committee: An executive governing body on which the Senior Management is represented and which undertakes the following main roles in managing operational risk:

• To promote the implementation of active Operational Risk management policies.

• To track significant operational risks and trends in mitigation plans.

• To ensure that the assessment protocol for risks associated to the launch of new products is followed, and authorise that it be marketed, as applicable.

Operational Risk:Seconded to the Risks Directorate, Operational Risk is responsible for the following functions:

• Promoting management of operational risks in the various areas, encouraging identification of same, allocation of responsibility for them, the formalisation of controls, the generation of indicators, the creation of mitigation plans, regular review and steps to be taken in the event of substantial losses or risks.

• Equipping areas and units with the methodologies, tools and procedures that are necessary for managing their operational risks.

• Promoting the construction of contingency and business continuiyu plans that are adequate and in proportion to the size and activity of the institution in the units that so require.

• Ensuring that operational losses occurring in the institution are recorded correctly and in full.

• Providing the organisation with a uniform view of its exposure to operational risk, in which the existing operational risks are identified, integrated and evaluated.

• Providing information on operational risk to be forwarded to regulators, supervisors and external bodies.

Business Units: With the following main responsibilities:

resented in the following graphs:

• Management of operational risks in the unit and specifically, identification, evaluation, control, monitoring, analysis and mitigation of the operational risks on which it has the ability to act.

• Recording and communication of operational losses produced in the course of their activity.

• Studying, defining, priorising and funding the operational risk mitigation plans for which it is responsible for running.

• Maintaining and testing the business continuity plans supported by the unit.

As regards databases on loss events, the Bankinter operational risk profile would be rep-

80 60 40 20 0

Commercial Bank Customer Bank Asset management Customer interest Business and sales

Insurance in managing operational risk

Bankinter uses insurance as a key element in managing some operational risks, thus complementing the mitigation of those risks for which this is recommended due to their nature.

To this end, the Insurance Area and the various areas in Bankinter, taking into account both the operational risk assessments and the record of losses, assess the convenience of altering the coverage perimeter of the insurance policies for the bank's various operational risks.

Some examples are as follows: Insurance taken out with various companies of recognised solvency for contingencies affecting the bank's premises (earthquakes, fires...), internal or external fraud (robbery, disloyalty, etc.), civil liability for employees, etc.

Credit risk

Organisation and functions

The Board of Directors establishes the strategy to be followed in respect of each individual risk in the Risk Framework Agreement, which is drawn up on an annual basis. It decides on the basic guidelines behind the Institution's risk appetite, setting the course as regards the granting of risks. It establishes the next level of powers and decides on how they should be delegated. As well as its executive and authorisation function in the area of risks, it is informed on a monthly basis as to the evolution of the main risk indicators.

The Risk Committee, which is chaired by the Chief Executive Officer, is the body to which the Board of Directors delegates implementation of the risk policy. The attributions that have been delegated to this Committee include the authorisation of operations and deciding on the level of powers to be assigned to the Committees in subsequent levels. The evolution recorded in clients, sectors and main matters affecting credit quality is reported.

The next level of competence lies with the Credit Risk Committee, the Management of which is directly seconded to the Executive Vice-Chairperson. The Risks Directorate is responsible for drawing up the various risks policies and informing on how they are implemented. Its targets include the development of automatic authorisation systems and all risk processes, while always seeking maximum efficiency and quality.

The Credit Risk Department performs its functions through the units that form its structure:

• Risk approval and policies are the work area of:
• the Private Individual Risks Unit,
• the Company and Developer Risks Unit,
• the Corporate Risks Unit.

• The Risk Processes Unit is in charge of defining and improving the various risk processes, including the IT systems for risks.

As well as their own functions, the various Units actively intervene in the process of defining new products, deciding on the risk parameters and collaborating on the strategy for defining the client profile, as part of the marketing process, with the most efficient authorisation process always being set.

The Validation Unit has the function of validating the advanced risk models and their results, which is an indispensable requirement in calculating equity needs on the basis of internal estimates. This is an independent Unit within the Risks Department; it also performs a critical examination of the parameters used in building the models and tests their use in management.

Structure and procedures

The organisational structure of the risk function at the institution combines a hierarchical structure with the delegation of powers. This combination is perfectly delimited by a series of rules that establish competencies, specify functions and create spheres of responsibility, thus enabling the same strategic line to be maintained. Decision-taking on the Risks Committees is on a collegiate basis, representing the various areas involved.

The risk admission process is supported by an electronic proposal that enables integration and unification of all of the bank's networks and channels. The use of statistical models enables automatic authorisation of retail risks, in compliance with the objective of efficiency and the use of technology in authorisation. The information from the systems is contrasted to ensure its accuracy. Assessing a customer's risk premium and Return is an important part of the acceptance process.

Risks Map

The Bank of Spain's new regulations on capital management and the solvency of credit institutions imposes the need to establish specific procedures for controlling and managing risk-inducing factors that can result in the materialisation of economic losses.

A methodology has been developed to allow for the detection, analysis and assessment of the potential impact (severity) of all of those practices and factors that are inherent to the activity being carried out, and which can be instigators of risk, as well as processes for tracking and controlling these mitigation practices and measures or where appropriate, if possible, eliminating the residual risk affecting these practices.

Concentration

The recent financial crisis and the requirements in the New Basle II Accord have let to closer monitoring of the Institution's concentration policy. The aspects that are taken into account are diversification according to sectors, geographical location, products and guarantees, as well as concentration in clients. Diversification in terms of the different categories of statistic models, within legal entities, shows correct distribution: Less than 5% are Very Small Companies and in the rest, Very Large Companies stands out with a percentage in excess of 40%. Comparison of exposure according to sectors with the total banking system and more specifically with the exposure of Banks only (according to the data published on the Bank of Spain website) reveals that the distribution is very similar, with higher exposure in very atomised sectors such as those of Business and Repairs and lower exposure in high-risk sectors, such as developers. From the geographical viewpoint, the highlight is the greater presence in Madrid, which is characteristic of the broad-ranging network developed in this Community. There is concentration (in turn highly diversified) in mortgage guarantee products, which represent around 70% of total risk. In accordance with the criterion established by Spain's Central Bank for classifying Major Risks (in excess of 10% of Shareholders' Equity), there are only two groups with exceptional credit quality.

Maximum exposure to credit risk

The following table depicts the maximum level of exposure to credit risk undertaken by the Group as at 31 December 2010 and 2009 for each class of financial instruments, without deducting from same tangible securities or other credit enhancements received to vouch for debtor compliance:

As of 31 December 2010

thousands of euros	Asset balances
	Financial assets for fair value with changes to the profit and loss account			Investments
Instrument types	Financial assets and liabilities held for trading	Other assets	Financial assets available for sale	Credit accounts	Held to maturity investments	Hedge derivatives	Order ac counts	Total
Debt instruments
Loans and advances to credit institu tions	-	-	-	1,601,470	-	-	-	1,601,470
Negotiable securities	1,363,259	35,727	3,100,215	-	3,241,573	-	-	7,740,774
Loans and advances to customers	-	-	-	42,525,474	-	-		42,525,474
Total debt instrument	1,363,259	35,727	3,100,215	44,126,944	3,241,573	-	-	51,867,718
Contingent risks -
Collateral	-	-	-	-	-	-	113,951	113,951
Other contingent risks	-	-	-	-	-	-	2,247,237	2,247,237
Total contingent risks	-	-	-	-	-	-	2,361,188	2,361,188
Other exposure -
Derivatives	512,575	-	-	-	-	171,917	-	684,492
Contingent commitments	-	-	-	-	-	-	9,258,379	9,258,379
Total other exposure	512,575	-	-	-	-	171,917	9,258,379	9,942,871
MAXIMUM LEVEL OF EXPOSURE TO CREDIT RISK	1,875,834	35,727	3,100,215	44,126,944	3,241,573	171,917	11,619,567	64,171,777

As of 31 December 2009

thousands of euros	Asset balances
	Financial assets for fair value with changes to the profit and loss account			Investments
Instrument types	Financial assets and liabilities held for trading	Other assets	Financial assets available for sale	Credit accounts	Held to maturity investments	Hedge derivatives	Order ac counts	Total
Debt instruments
Loans and advances to credit institu tions	-	-	-	3,786,135	-	-	-	3,786,135
Negotiable securities	2,963,246	16,361	3,345,065	-	1,621,669	-	-	6,324,669
Loans and advances to customers	-	-	-	39,883,583	-	-	-	39,883,583
Total debt instrument	2,963,246	16,361	3,345,065	43,669,718	1,621,669	-	-	49,994,387
Contingent risks -
Collateral	-	-	-	-	-	-	1,008,726	1,008,726
Other contingent risks	-	-	-	-	-	-	1,254,704	1,254,704
Total contingent risks	-	-	-	-	-	-	2,263,430	2,263,430
Other exposure -
Derivatives	621,598	-	-	-	-	189,987	-	621,598
Contingent commitments	-	-	-	-	-	-	9,209,725	9,209,725
Total other exposure	621,598	-	-	-	-	189,987	9,209,725	10,021,310
MAXIMUM LEVEL OF EXPOSURE TO CREDIT RISK	3,584,841	16,361	3,345,065	43,669,718	1,621,669	189,987	11,473,155	62,279,127

Evolution of client risk

The worsening of the economic downturn was the main characteristic of 2010 for all financial institutions. In accordance with expectations, default continued to increase, although at lower levels than in the year 2009. If the existing default level is added to the assets foreclosed by the Financial Sector and assets classified as problematic or substandard by the sector to which they belong or the limited expectations for repayment, the conclusion is that there has been significant impairment in the quality of credit risk throughout this year. Just like in previous years, in this area the differences in the quality of the portfolios were even more pronounced. The hedging that Financial Institutions have had to face increased considerably as a consequence of the volume of default and foreclosures and of the alteration in the Circular from Spain's Central Bank regarding allowances, which calls for greater coverage of default positions in a shorter period of time.

Bankinter once again stood out thanks to its strong credit portfolio. The risk culture that is integrated at all levels of the organisational structure is the pillar on which the balance sheet has been built and the reason for the excellent risk ratios.

Exposure to credit risk with customers totalled 46.291 billion euros as at 31 December 2010, with a 4% increase, which compares very positively with the evolution in the system (according to a publication from Spain's Central Park with data from Nov. 10 it has remained stable). The quality of the assets (default ratio in Dec 2010 2.87%) and conscientious risk management have allowed to look for opportunities for growth in more valuable sectors and customers.

The Bank's credit risk includes a high percentage of mortgage guarantees, which reflects the conservative policy implemented in recent years. 70% of the credit portfolio includes a mortgage guarantee, with an LTV (loan to value, measures the proportion between the value of the house and the loan) ratio of 57%.

83% of the portfolio with mortgage guarantees corresponds to residential mortgages on houses. Exposure to other lower quality assets is residual, as may be seen in the graph.

Guarantee risk (%)

The high percentage of mortgage guarantees for Companies and Small Companies, 57%, in December 2010, has proven to be an efficient risk policy in these times of downturn.

Another feature that is characteristic of the portfolio is the high level of risk diversification, reaching 71% with operations worth less than 600,000 euros.

Relative	≤ 150	150 - 600	600 - 3000	3000 - 6000	> 6000	Total
	2%	2%	2%	1%	3%	9%
≤ 3 MONTHS	2%	2%	2%	1%	2%	9%
	3%	3%	3%	1%	3%	12%
3 - 12 MONTHS	3%	3%	3%	1%	3%	13%
	2%	1%	1%	0%	1%	5%
12 - 36 MONTHS	3%	1%	1%	0%	1%	5%
	26%	34%	9%	2%	4%	73%
> 36 MONTHS	27%	33%	8%	2%	3%	73%
	33%	38%	14%	4%	11%	100%
TOTAL	36%	38%	14%	4%	9%	100%

Figures in ORANGE are from December 2010, in WHITE from December 2009

The reduced exposure to housing developments (lower than 3%) and the non-existence of finance for plots, has once again allowed us to stand out clearly from the rest of the market. In the Spanish Financial System, default and foreclosures in this sector have had a severe effect on the Profit and Loss account due to the high exposure.

	CREDIT RISK
Consolidated figures	Monetary value at risk	Guarantees	Available
I) COMPANIES (1)	16,141	1,993
1. Purpose real estate development and/or construction	1,082	41	373
2. Purpose construction unrelated to real estate devel opment	1,370	424
3. Other purposes	13,689	1,528
A. Large companies	7,527	1,262
B. SMEs and self-employed workers	6,162	267
II) PRIVATE INDI VIDUALS	27,986	162
1. Assets with 1st mortgage guarantee (	25,713	0
a) 1st home	22,938	0
b) 2nd home	2,036	0
c) Others (garages, storage compartments, etc.)	739	0
2. Assets with other tangible security	424	0
3. Other formalisations	1,849	162
TOTAL RISK	44,127	2,155

The personnel team, which is highly qualified and has a deeply rooted risk culture, supported by advanced information systems, is the main reason for the clear competitive advantage held by the Institution in the area of risks.

Analysis of credit risk
Million €	31/12/2010	31/12/2009	Amount	%
"Computable risk" (total lending)excluding securitisation	46,291	44,401	1,890	4.26
Doubtful debts	1,330	1,093	237	21.67
Total provisions	883	814	70	8.59
Required provisions	883	814	70	8.59
General	157	398	-241	-60.54
Specific	727	416	311	74.71
Non-performing loans ratio excluding securitisation (%)	2.87	2.46	0.41	16.70
NPL ratio (%)	2.97	2.56	0.41	16.02
NPL ratio of the ex-securitised mortgage portfolio (%)	2.37	1.95	0.42	21.27
Non-performing loans coverage ratio (%)	66.43	74.43	-8.00	-10.75
Non-performing loans hedge ratio
with no tangible security (%)	93.72	78.94	14.78	18.72

Private individuals

The excellent credit quality of the bank's natural persons portfolio remains unaltered, with a default ratio of 1.9%.

The most relevant product in the Private Individuals segment is the mortgage loan. The weight of our residential mortgage portfolio in the Bank's total investment has remained very high, up to 54%.

The figures for new mortgage operations have increased compared to the same period in 2009, which was a year with a low mortgage output as a consequence of the downturn. The new output profile is as follows:

	2008	2009	2010
LTV	59%	63%	64%
Term	323	324	347
Rating	5.39	5.52	5.9
Effort	39%	28 %	28%
Average Amount	179,000	159,000	179,000
No. Operations	17,041	9,689	13,706
Limits (MM)	3,048	1,540	2,458

Since the year 2003 and anticipating the change in cycle, the admission policy for this product was adapted, selecting clients with the highest income and setting a maximum LTV ratio of 80%, which once again sets us apart from the sector.

90% of mortgages are processed by expert approval systems and 39% of the output in 2010 was automatically approved.

The RAROC (Risk-Adjusted Return on Capital) is a decisive variable in authorising operations, with the price therefore being matched to the risk that is inherent to the operation.

The average effort (measured as the percentage of income that the customer allocates to paying their mortgage loan instalments) in the mortgage loans signed in 2010 remained very low (26% in the case of 2010), mostly due to the interest rates that are relatively low.

The LTV ratio for the average mortgage portfolio is 59%, with less than 5% being over 80%.

TOTAL BANK	% OPERATIONS
LTV 00 - 10%	15.3
LTV 10 - 20%	10.78
LTV 20 - 30%	11.16
LTV 30 - 40%	12.2
LTV 40 - 50%	12.93
LTV 50 - 60%	13.03
LTV 60 - 70%	11.88
LTV 70 - 80%	8.1
LTV 80 - 90%	2.29
LTV 90 - 100%	2.32
TOTAL LTV BRACKETS	100

The NPL Ratio (1.23% in December 2010) is the best in the entire financial system, for which the ratio in June 2010 for this type of investment stood at 2.56%. (Data provided by the Spanish Mortgage Association)

	2008	2009	2010
LTV	59%	57%	59%
First home	90%	91%	92%
Term	225	219	217
Rating	5.64	5.54	5.6
Effort	35%	29%	28%
Average Amount	112,000€	111,000€	115,000€
Non-performing loans ratio	0.61%	1.12%	1.23%

Corporate Banking

The total risk in Corporate Banking climbed to 10.005 billion, a 16% rise on 2009. Despite the increase in the credit risk, the default balance remains contained, as the financial year closed with an NPL ratio of 2.3%, the same as the previous year.

The principles in Corporate Banking remain unaltered, with the highlights being:

• Monitoring of current risks.

• Systematic use of rating models based on statistical rating and subjective assessment by the Risks Committee

• Conservative customer portfolio management.

• Optimisation of the risk-return binomial.

• Long-term investment, with the aim of a long-term relationship with the customer.

CREDIT RISK TEMPLATE CREDIT RISK EXPRESSED IN THOUSANDS OF EUROS

Absolute	≤ 150	150 - 600	600 - 3000	3000 - 6000	> 6000	Total
≤ 3 MONTHS	1%	3%	5%	2%	25%	37%
3 - 12 MONTHS	2%	4%	7%	3%	11%	28%
12 - 36 MONTHS	1%	1%	1%	1%	3%	7%
> 36 MONTHS	1%	2%	6%	3%	16%	28%
TOTAL	5%	11%	20%	9%	56%	100%

Small and medium-sized enterprises

The credit risk totalled 7.298 billion, representing a 3% drop due to the halting economy.

The institution has automatic decision models for risk management and teams of highly experienced risk analysts.

Diversification by sectors, which allows management by portfolios and greater dilution of the risk amongst them all.

The economic situation has called for stricter risk policy as regards mortgage guarantees and partner involvement. Moreover, during the year a new centralised approval process was implemented for Small Companies, with a view to streamlining risk acceptance criteria and enhancing the efficiency of the process.

SME default increased in the year 2010, reaching a 7.7% ratio compared to the 5.8% in the previous financial year.

The level of recoveries over additions in the Small and Medium Enterprise segment has remained good.

It should be highlighted that 48% of the outstanding balance for SMEs has mortgage guarantees with an LTV ratio of 42%.

Sector distribution for Small and Medium Sized Companies (%)

Control, Monitoring, and Recoveries

The Control, Tracking and Recoveries Department is directly seconded to the Executive Vice-President, which guarantees that it functions on an independent basis. Its basic function is to direct and manage the processes for following up on and controlling credit investment with a view to anticipating possible decline in customer risk quality. It also defines and establishes the processes for recovering non-compliant positions.

Bankinter has had automatic systems in place for years for controlling and monitoring credit risk on a permanent basis. There are also processes for controlling the quality of data entered in the automatic authorisation systems and controlling the formalisation of credit operations.

The year 2010 was characterised by an increase in default that was lower than that of the previous year as a consequence of the higher recoveries and similar volume of additions in line with the economic cycle. The anticipation and management of default has special relevance in these times and because of this we have dedicated some of our best resources to this activity.

The Control and Recoveries Process means:

1. The introduction of Risk CRM (Customer Relationship Management) as regards Centres and Organisation, prioritising the warnings by means of the use of the risk agenda.

2. Computerising the Recovery System with variables that allow recovery actions to be carried out according to sectors, customer ratings and severity.

3. Streamlined pre-litigious process, from notification to closure and notice to debtors.

4. ntegration of the information from all recovery agents, internal and external, enabling daily monitoring of the entire process.

5. Development of behaviour models in accordance with the terms of Basel II and integration thereof in the customer statistical alert system.

In addition to the function of the control and monitoring carried out by the Control Unit, it also develops, evaluates and carries out the monitoring of the Control tools and applications used by the Network.

The Bank has a variety of applications that allow us to monitor credit investments in a predictive, reliable and high-quality manner for each client and Centre/Office. These tools allow us to establish special supervision of certain clients in difficulties, with the aim of reducing or cancelling the credit risk in a short period of time:

• Statistical client alert

The Statistical Customer Alert System detects, on the basis of statistical analysis of the most predictive variables, customers with a higher probability of default.

• Risk Quality

Subjective classification by managers enabled us to segment clients: those that require special surveillance and those that are classified as a risk to be eliminated.

The subjective qualification linked to the objective qualification systems in line with certain variables (risk, risk evolution, problems, etc.) has enabled us to anticipate breach situations.

• Branch-Office Alerts

The increase in personnel in the years of the economic bonanza requires monitoring at office level. We have a statistical tool to do this, which complements the Risk Audits.

• Anticipation of Risk

This is a measurement tool that enables us to know for sure if risks are being anticipated correctly. It measures the efficiency of the two systems described above (Statistical Customer Alert and Risk Quality).

Default Recovery and Management

The Recoveries Unit monitors operations that register exceptions and are responsible for recovering the positions of the most important customers from the moment the problem is detected through to regularisation.

Fast decision-making is still a decisive and distinctive factor in the Bank. Looking for specific solutions has in many cases allowed the customer to continue, with no impairment for the bank.

Collaboration with external recovery agencies for less important positions was of special relevance, enabling the freeing-up of resources in the Commercial Network and in the Organisations, for tasks with a higher added value.

The level of recoveries over additions increased substantially and is now a benchmark in the sector.

The Bank's strategy in recent years - focused on a unique business model, with a strong culture of credit risk management at all levels, combined with highly qualified personnel - is clearly reflected in the current non-performing loans ratio. The Bank's default ratio

Entries / recovery / % recovery

increased during the financial year 2010, rising to 2.87%, compared to 2.46% in the previous financial year.

This increase in default was most severely felt in the Small and Medium Enterprise segment.

The default flows in this financial years were as follows: the default figure reached a balance of 1.330 billion compared to the figure of 1.093 billion in the financial year 2009, with an increase of 237 million in default (including 78 million in doubtful balances for reasons other than default and certain customers having been classified as doubtful that while they have not defaulted, show unequivocal signs of doubtfulness in the short/ medium term).

Non-performing loan flows (%)

127 Bankinter Group 2010 Consolidated Annual Accounts

Refinancing of customers with risk in excess of 500,000 € in the financial year 2010 accounts for 0.63% of credit risk, with refinancing being considered to mean any change in credit risk conditions. The majority of refinancing operations have additional guarantees.

Purchase of real estate assets

The purchase of real estate assets occasionally allows for more efficient recovery. It means that the assets are immediately available, with lower costs and terms that judicialisation of positions and it contributes towards improving the client's situation insofar as leveraging is reduced.

Purchases of shares in the bank rose to 50 million, with the current portfolio being 378 million in real estate assets.

Real estate assets are highly diversified in geographical terms and as regards property type, which makes them easier to sell. Turnover exceeded 84 million € in the financial year.

Hedging for foreclosed assets stood at 28% in December 2010

Due to the scarce presence of Bankinter in the development sector, real estate asset purchases are clearly lower than the average for the sector. In the real estate asset portfolio, we should highlight the absence of developments in progress and the low importance of non-urban plots, both of which are products with a much more limited market in the current situation.

Provisions

Solvency levels and asset coverage allow us to face the current situation in optimum conditions.

At the close of the financial year, the doubtful credit portfolio with personal guarantees includes significant allocations as a consequence of the Circular from Spain's Central Bank that significantly accelerated specific allocations.

The doubtful mortgage portfolio with mortgage guarantees presents an LTV ratio of 49.6% and given the excellent default ratio with mortgage guarantees and the high LTV, the losses in the mortgage portfolio are insignificant.

Variation in non-performing loans. M+D and non-performing loans ratio

Reputational risk

Reputational Risk is the risk that is inherent to taking steps with clients that may lead to negative publicity regarding practices and business relations, which may cause a loss of trust in the institution's moral integrity.

The responsibility is to detect, analyse and evaluate the potential impact (severity) of all of the practices and factors that are inherent to the activity being carried out and which may induce reputational risk, as well as the task of establishing processes for monitoring and controlling these mitigation practices and measures or as applicable, if possible, eliminating the risk that is inherent to same.

The Operational and Reputational Risks and New Products Committee meets on a regular basis, with the following functions as regards reputational risks:

• To promote the implementation of reputational risk policies.
• To monitor mitigation projects for substantial risks.
• To decide on the proposals put to the Committee as possible reputational risk events.

• Validating compliance with procedures and protocols for identifying and assessing reputational risks. This function is particularly relevant where launches of new products or business lines are concerned.

45. Information by segments

The Group is divided into Retail Banking, Corporate Banking and Línea Directa Aseguradora (LDA):

• Retail Banking consists of the following:

Private Individual Banking includes products and services offered to domestic economies

Personal Banking

Private Banking: - the line of business that specialises in consultancy and integral asset and investment management services.

Personal Finance: the Bank's business division aimed at the segment of customers with equity in excess of 1,800 thousand euros.

• Corporate Banking offers a specialised service demanded by big companies, the public sector and SMEs.

• Línea Directa Aseguradora, S.A. includes the LDA subgroup business.

The structure of this information (Appendix II) is divided into Retail Banking, Corporate Banking and Línea Directa Aseguradora as if they were separate businesses with independent shareholders' equity. Net earnings from interest and ordinary income in the segments are calculated by applying to the relevant assets and liabilities transfer prices that are in line with the market rates in force. The return on the variable-income portfolio is distributed among the lines of business depending on their participation.

Administrative expenses include both direct and indirect costs and are distributed among the segments depending on the internal use that is made of said services. The average assets distributed among the various business Organisations (retail and corporate banking) include the financial assets and liabilities held for trading, the securities portfolio and the loans with financial institutions and customers.

The average liabilities and shareholders' equity distributed among the various business Organisations include negotiable security debits, debits to financial institutions and to customers. The Gross Margin states the earnings from interest, fees charged for the various services and products offered and the earnings generated by financial operations.

In contrast, financial costs include the interest and fees expense, losses from financial operations, and general administration costs. Costs incurred in acquiring assets states the total cost incurred in the financial year to acquire assets in the segment whose expected duration is longer than one financial year.

Information according to business Organisations is detailed in Annex II attached hereto, which is an integral part of this note in the report.

46. Investments in the capital of credit institutions

In accordance with the terms of article 20 in Royal Decree 1245/1995, of 14 July, we will now go on to list the Group's investments in the capital of national and foreign credit institutions that exceed 5% of capital or voting rights in same:

% holding Bankinter Consumer Finance, S.A., E.F.C 100%

In accordance with the terms of article 20 in Royal Decree 1245/1995, of 14 July, we will now go on to provide the list of the Group's investments in the capital of financial institutions that exceed 5% of capital or voting rights in same and which are held by national or foreign credit institutions of groups, according to the meaning provided in article 4 of the Stock Market Act, among which a national or foreign credit institution is included.

	% holding	Company or group owning the stockholding
Crédit Agricole, S.A	24.698%	Crédit Agricole

47. Information required under Act 2/1981, of 25 March, on Mortgage Market Regulation and under Royal Decree 716/2009, of 24 April, which implements certain aspects of said law-

The Board of Directors of Bankinter hereby declares that the bank has express policies and procedures in place for all of the activities carried out in the scope of mortgage market security issues that guarantee compliance with the applicable regulations, for the purposes of the terms of Royal Decree 716/2009, of 24 April, which implements certain aspects of Act 2/1981, of 25 March, on mortgage market regulation and other regulations that apply to the mortgage and financial system.

The Policies regarding the granting of mortgage loans include, among others, the following criteria:

• The ratio between the amount of the loan and the valuation value of the property being mortgaged, and the existence of other supplementary guarantees.

• Selecting the valuation institutions.

• The ratio between the debt and the borrower's income, and verification of the information provided by the borrower and the latter's solvency.

• Avoiding imbalances between the flows from the hedging portfolio and those that are derived from attending to payments due for securities issued.

As the issuer of mortgage bonds, we will now go on to provide certain relevant information that is required in the annual accounts under the regulations that govern the mortgage market.

1. Information on hedging and privileges assigned to the holders of mortgage bonds issued by the Bank. It is the only institution in the Group to issue mortgage bonds and holdings.

These mortgage bonds are securities whose capital and interest are subject to special guarantees, without the need for enrolment in the register, by a mortgage over all of those that are enrolled in the Bank's favour and which are not associated to the issue of mortgage bonds, without detriment to the Bank's universal asset liability.

Mortgage bonds incorporate the holder's credit entitlement to the Bank, guaranteed as described in the previous paragraphs. They include enforcement to claim payment from the issuer after maturity. The holders of such securities have the status of special preference creditors as indicated in item 3 of article 1.923 of the Civil Code over any other creditors, in relation to the totality of the loans and mortgage loans enrolled in the issuer's favour. All holders of bonds, regardless of their issue date, have the same preference over the loans and credits that guarantee them and (if they exist) over the replacement assets and economic flows generated by the derivative financial instruments linked to the issues.

In the event of insolvency, the holders of mortgage bonds would enjoy the special privilege described in number 1, item 1 in article 90 of the Insolvency Act 22/2003, of 9 July.

Without detriment to the foregoing, in accordance with number 7 of item 2 in article 84 of the Insolvency Act 22/2003, of 9 July, the payments that apply for amortisation of capital and interest on the mortgage bonds issued and pending amortisation on the date of filing for insolvency would be admitted during the insolvency proceeding as credits against the estate, up to the amount of the earnings received by the insolvent party from the mortgage loans and credits and, if any, from the replacement assets that back the mortgage loans and the economic flows generated by the financial instruments linked to the issues.

If due to a time gap, the earnings received by the insolvent party were insufficient to cover the payments mentioned in the previous paragraph, the insolvency administrators would have to meet them by liquidating the replacement assets associated to the issue and, if the latter should prove to be insufficient, financing operations should be set up to ensure the mandate of payment to the bond holders, with the financer subrogating their position.

If it were necessary to proceed according to the terms of number 3 in article 155 of the Insolvency Act 22/2003, of 9 June, payment to all of the holders of bonds issued by the issuer would be made on a pro-rata basis, regardless of the dates on which their securities were issued. If the same loan is associated to the payment of bonds and to a bond issue would first be paid to the holders of the bonds.

In turn, the holders of mortgage securities issued by the Bank can take enforceable action against the Bank, as long as the failure to comply with the obligations is not the consequence of the debtor in whose loan the holder participates failing to pay. In this case, the holder of the participation will take part, with the same rights as the mortgage creditor, in the enforcement against the aforementioned debtor, receiving on a pro-rata basis from their respective participation in the operation and without detriment to the issuing Bank receiving the possible difference between the interest agreed upon in the loan and that which was granted in the participation, when the latter is lower.

The holder of the participation will be entitled to compel the Bank to initiate enforcement. If the Bank fails to initiative judicial enforcement within sixty days of their being compelled to do so, the holder of the participatoon may subrogate said enforcement, for the amount of their respective participation.

Any necessary notifications will be made by reliable means.

In the event of the Bank being declared insolvent, the act of issuance of such bond will only be challengeable in the terms of article 10 of Act 2/1981, of 25 March, and consequently, the holder of such a bond will have the benefit of an absolute right of separation.

They will be entitled to the same right of separation in the event of the Bank suspending payments or in similar situations.

Sections "a" and "b" below present consolidated information for the institutions in the Group that issue mortgage bonds and securities, to which mention was made previously, as at 31 December 2010, and which are included in the Special Accounting Register referred to in article 21 of Royal Decree 716/2009, of 24 April, for these institutions:

a) Active operations

We shall now go on to present, as at 31 December 2010, the face value of the totality of mortgage credits and loans pending on said date in the institutions in the Group indicated above, the face value of these eligible loans and credits, the mortgage credits and loans that hedge the issue of mortgage bonds, those that have been mobilised in mortgage securities or mortgage transfer certificates and operations that are not committed:

		Thousand euros
	Nominal pending amortization for chosen credit and loans			Credit and loans covering the issue of mortgage bonds (1)		Nominal value of mortgage credit	Nominal value of available mortgage credit and loans (unavailable committed amounts)
	Nominal pending amortization	Nominal value with out applying the limits established in Article 12 of Royal Decree 716/2009	Nominal value ap plying the limits es tablished in Article 12 of Royal Decree 716/2009	Par value	Updated value	and loans mobilised through mortgage participations or mortgage transmis sion certificates	Potentially eligible operations	Non-eligible opera tions
Mortgage credit and loans	32,063,767	9,006,984		-	-	15,726,021	-	-

(1) Amounts calculated based on that established in Article 23 of Royal Decree of the 24th of April.

The face value of loans and credits pending and not eligible as at 31 December 2010 totals 32,063,767.38 thousand euros, of which 7,330,761 thousand euros correspond to credits and loans that are not eligible as they do not exclusively comply with the limits provided in article 5.1 of Royal Decree 716/2009, of 24 April (guaranteed loans or credits that exceed 60% of the valuation value of the asset being mortgaged, or 80% of said value in the case of financing the construction, refurbishment or purchase of a home, without detriment to the exceptions provided in said regulation.

We shall now go on to present the face value of the mortgage credits and loans pending and the face value of the loans and credits that are eligible, without considering the limitations on calculation provided in article 12 of Royal Decree 716/2009, of 24 April, 31 December 2010, which should be broken down according to the currency in which they are denominated, the payment situation, depending on the average residual maturity timeframe, the purpose of the operations, interest rate and type of guarantee:

Thousand euros	Nominal value of mortgage credit and loans pending de amortization	Nominal value of eligible mortgage credit and loans (without considering the limits set out in in Article 12 of Royal Decree 716/2009)
a) By currency
In euros	27,211,989	6,593,680
In other non-euro currencies	4,851,778	2,413,304
b) By payment situation
Up-to-date in payment as of 31 December 2010	31,535,039	9,006,143
Other operations	528,728	841
c) Average residual maturity period
Under 10 years	4,096,745	1,364,027
From 10 to 20 years	10,227,050	3,030,495
From 20 to 30 years	13,626,675	3,528,927
More than 30 years	4,113,297	1,083,535
d) By type of interest
Fixed-interest operations	62,836	57,607
Variable-interest operations	32,000,931	8,949,377
Mixed-interest operations	-	-
e) By the purpose of the operation
Aimed at individuals and entities (business activities)	11,184,128	3,142,752
Of which: with connections to real estate development	832,558	-
Home financing	20,879,539	5,864,232
f) By type of guarantee
Operations with asset / finished building guarantees:
Residential property	22,209,615	8,883,486
Commercial property	8,999,994	-
Other assets	-	-
Operations with assets / unfinished building guarantees:
Residential property	-	-
Commercial property	-	-
Other assets	-	-
Residential property	632,427	121,097
Commercial property	221,731	2,401
Other assets	-	-
Promemoria: Operations with subsidised housing guarantees (finished or at the project stage)

We shall now go on to present the breakdown of the face value of eligible mortgage loans and credits pending as at 31 December 2010 according to the percentage reached by the amount of the operations with the corresponding value of the guarantee obtained on the basis of the most recent valuation available for the mortgaged assets ("loan to value"):

Type of guarantee	Thousand euros
	Loan to value ratio of the operations
	Up to 40%	Between 40% and 60%	Between 60% and 80%	Over 80%
Mortgages on houses	2,392,772	3,473,326	3,140,886	-
Other guarantees	-	-	-

b) Liability operations

We shall now go on to present the aggregate face value of outstanding mortgage bonds as at 31 December 2010 issued by the Group according to their residual maturity term:

	Thousand euros
	Residual maturity term as at 31 December 2010
	Less than 3 years	3 - 5 years	5 - 10 years	More than 10 years
Issued in a public offering	2,968,100	1,000,000	200,000	200,000
Not issued in a public offering	1,567,655.18	200,000	0	0
Total	4,535,755.18	1,200,000	200,000	200,000

We shall also present the aggregate face value of mortgage securities and mortgage transfer certificates outstanding as at 31 December 2010 and issued by the Group according to their residual maturity term:

	Thousand euros
	Residual maturity term as at 31 December 2010
	Less than 3 years	3 - 5 years	5 - 10 years	More than 10 years
Mortgage securities
Issued in a public offering	52,739.62	79,282.53	376,971.06	2,120,024.54
Not issued in a public offering	7,490.93	25,101.67	190,636.86	3,775,661.49
Total	60,230.55	104,384.21	567,607.92	5,895,686.03
Mortgage transfer certificates
Issued in a public offering	17,685.07	55,850.81	314,119.18	2,373,664.58
Not issued in a public offering	22,561.12	66,855.54	475,046.42	5,825,044.81
Total	40,246.19	122,706.35	789,165.60	8,198,709.38

48. Exposure to the construction and development sector

In compliance with the request made by Spain's Central Bank for credit institutions to publish their exposure to the construction and development sector, Bankinter, S.A. published the following information as at 31 December 2010, increasing the level of detail and transparency requested:

Table 1: Finance allocated to real estate construction and development and hedging (thousands of euros)
	Excess over Gross amount Specific hedging guarantee value
Credit recorded by the group's credit institutions (business in Spain)	2,451,811	99,408	174,400
Of which: Doubtful	291,275	11,749	158,400
Of which: Substandard	99,000	3,997	16,000

Memorandum items: - Total general hedging (total business)	156,971
- Failed assets	6,460

Memorandum items: Figures for the consolidated group

	Book value
Total lending to customers excluding Public Administrations (business in Spain).	42,410,502
Total consolidated assets (total business)	54,151,977

Table 2: Breakdown of financing allocated to real estate construction and development (thousands of euros)
	DEVELOPER	CONSTRUCTION	CONSTRUCTION ASSISTANT	TOTAL Credit: Gross amount
Without a mortgage guarantee	113,586	625,915	343,050	1,082,551
With a mortgage guarantee	968,308	272,597	128,355	1,369,260
Finished buildings	700,000	272,597	128,355	1,100,952
Housing	630,000	27,260	-	657,260
Rest	70,000	245,337	128,355	443,692
Buildings under construction	78,000	-	-	78,000
Housing	70,200	-	-	70,200
Rest	7,800	-	-	7,800
Land	190,308	-	-	190,308
Urban plots	171,308	-	-	171,308
Other land	19,000	-	-	19,000
TOTAL	1,081,894	898,512	471,405	2,451,811

Table 3: Lending to households for the purchase of housing (thousands of euros)
Gross amount Of which: Doubtful
Lending for the purchase of housing	25,712,752	302,278
Without a mortgage guarantee	-	-
With a mortgage guarantee	25,712,752	302,278

Table 4: Breakdown of lending with a mortgage guarantee to homes for the purchase of housing according to the percentage that the total risk represents of the amount of the most recent available valuation (LTV) (thousands of euros)

</ltv≤100%<></ltv≤80%<></ltv≤100%<>

	LTV brackets (10)
	LTV≤50%	50% <ltv≤80%< th="">	80%<ltv≤100%< th="">	LTV> 0%	80% <ltv≤100%< th="">	LTV> 0%	LTV> 0%
Gross amount	10,542,228	12,856,376	1,799,893	514,255
Of which: doubtful	76.91	17,503	47,498	5,186

Table 5: Assets foreclosed to institutions belonging to the consolidated group (thousands of euros)
	Book value	Of which: Coverage
Real estate assets from financing operations allocated to real estate construction and development companies	287,914	84,352
Finished buildings	168,257	39,963
Housing	145,682	34,511
Rest	22,575	5,452
Buildings under construction	1,327	725
Housing	1,327	725
Rest	-	-
Land	118,330	43,664
Urban plots	99,501	35,930
Other land	18,829	7,734
Real estate assets from mortgage financing operations to households for the purchase of housing	21,768	5,156
Rest of real estate assets foreclosed	68,587	16,642
Other equity instruments, securities and financing to non-consolidated companies holding said assets

49. Subsequent events

On 18 February 2011, the Spanish Cabinet of Ministers passed Royal Decree-Law 2/2011 that implements the "Financial Sector Reinforcement Plan". Note 2 provides details of the plan of action to be carried out by the Group in order to comply with the requirements laid down by said Royal Decree.

On 24 January 2011, the Bank announced a swap offer for existing subordinated debentures, as follows:

ISIN	Maturity	Currency	Face Value (MM)	Swap Price	Face value subject to swap offer	Listing
ES0213679139	March 2016	EUR	75	85%	Total face value	AIAF second ary fixed-in come market
ES0213679147	June 2016	EUR	100	85%	Total face value	AIAF second ary fixed-in come market
ES0213679162	December 2016	EUR	50	85%	Total face value	AIAF second ary fixed-in come market
ES0213679170	March 2017	EUR	50	85%	Total face value	AIAF second ary fixed-in come market

On 10 February 2011 the swap was carried out, with newly-issued subordinated debentures being handed out, with a fixed interest rate of 6,375% and a maturity date of 11 September 2019, for which a request for acceptance on the AIAF Fixed Income Market will be submitted. The Newly-Issued Subordinated Debentures shall be perishable with the subordinated debentures that make up the issue called "Bankinter, S.A. Subordinated Debentures Issue, September 2009" issued on 11 September 2009 and they shall have the same terms and conditions that applied to the latter.

The face value of the swapped debentures totals 53,800 thousand euros. In addition, one of the issues was extended by 47,250 thousand euros. Existing Subordinated Debentures acquired by Bankinter in the Swap Offer shall be cancelled by the Issuer and not reissued or resold.

50. Explanation added for translation to English

These consolidated financial statements are presented on the basis of accounting principles generally accepted in Spain. Certain accounting practices applied by the Bank that conform with generally accepted accounting principles in Spain may not conform with generally accepted accounting principles in other countries.

ANNEX I

Transactions with related parties

Thousand euros
		31-12-10
Revenue and Expenses	Significant Shareholders	Directors and Manag ers	Persons, companies or entities in the Group	Other Related Parties	Total
Expenses:
Financial expenses	-	254	-	185	439
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Leases	-	-	-	-	-
Receipt of services	-	-	-	-	-
Purchase of assets (finished or in progress)	-	-	-	-	-
Value corrections due to bad
or doubtful debts	-	-	-	-	-
	-	254	-	185	439
Revenues:
Financial revenues	-	-	2,145	-	2,145
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Dividends received	32,696	22,873	-	-	55,569
Leases	-	-	-	-	-
Provision of services	-	-	-	-	-
Sale of assets (finished or in progress)	-	-	-	-	-
Gains on cancellation or disposal of assets	-	-	-	-	-
Other income	-	-	-	-	-
	32,696	22,873	2,145	-	57,714

Thousand euros
	31-12-10
Other Transactions	Significant Shareholders	Directors and Man agers	Persons, compa nies or entities in the Group	Other Related Parties	Total
Purchases of tangible, intangible or other
assets	-	-	-	-	-
Financing agreements: loans and capital
increases (lender)	-	27,238	-	31,997	59,235
Financial lease contracts (lessor)	-	-	-	-	-
Amortisation or cancellation of loans and financial
lease contracts (lessor)	-	-	-	-	-
Sales of tangible, intangible or other
assets	-	-	-	-	-
Financing agreements: loans and capital
increases (borrower)	-	-	109,382	-	-
Financial lease contracts (lessee)	-	-	-	-	-
Amortisation or cancellation of loans and
financial lease contracts (lessee)	-	-	-	-	-
Guarantees issued	4,535	390	71	772	5,768
Guarantees received	-	-	-	-	-
Commitments acquired	-	-	-	-	-
Commitments/guarantees cancelled	-	-	-	-	-
Dividends and other distributed profits	-	-	8,032	-	8,032
Other transactions	-	8,002	-	83	8,085

Thousand euros
		31-12-09
Revenue and Expenses	Significant Shareholders	Directors and Manag ers	Persons, companies or entities in the Group	Other Related Parties	Total
Expenses:
Financial expenses	-	269	-	199	468
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Leases	-	-	-	-	-
Receipt of services	-	-	-	-	-
Purchase of assets (finished or in progress)	-	-	-	-	-
Value corrections due to bad
or doubtful debts	-	-	-	-	-
	-	269	-	199	468
Revenues:
Financial revenues	-	-	5,953	-	5,953
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Dividends received	37,290	27,550	-	-	64,840
Leases	-	-	-	-	-
Provision of services	-	-	-	-	-
Sale of assets (finished or in progress)	-	-	-	-	-
Gains on cancellation or disposal of assets	-	-	-	-	-
Other income	-	-	-	-	-
	37,290	27,550	5,953	-	70,793

Thousand euros
	31-12-09
Other Transactions	Significant Shareholders	Directors and Manag ers	Persons, companies or entities in the Group	Other Related Parties	Total
Purchases of tangible, intangible or other
assets	-	-	-	-	-
Financing agreements: loans and capital
increases (lender)	-	29,448	-	32,560	62,008
Financial lease contracts (lessor)	-	-	-	-	-
Amortisation or cancellation of loans and financial
lease contracts (lessor)	-	-	-	-	-
Sales of tangible, intangible or other
assets	-	-	-	-	-
Financing agreements: loans and capital
increases (borrower)	-	-	-	152,356	152,356
Financial lease contracts (lessee)	-	-	-	-	-
Amortisation or cancellation of loans and
financial lease contracts (lessee)	-	-	-	-	-
Guarantees issued	14,550		-	388	14,938
Guarantees received	-	-	-	-	-
Commitments acquired	-	-	-	-	-
Commitments/guarantees cancelled	-	-	-	-	-
Dividends and other distributed profits	-	-	7,036	-	7,036
Other transactions	-	8,002	-	83	8,085

ANEX II

Information by Segments

Thousand euros
2010
			Primary Segment: Lines of Business
	Retail Banking	Corporate Banking	Línea Directa	Other Business	Total
NET INTE REST INCOME	310,144	264,644	36,191	(61,025)	549,953
Return on other equity instruments	-	-	-	14,456	14,456
Results for institutions valued according to the equity method	-	-	337	10,621	10,958
Fees and Commissions	176,661	121,125	319	(102,602)	195,503
Results from financial operations and exchange differences	10,493	10,493	2,730	96,755	120,471
Other operating products/expenses	-	-	207,179	3,802	210,982
GROSS INCOME	497,298	396,262	246,756	(37,992)	1,102,323
Transformation costs	170,408	103,254	176,557	205,478	655,697
Losses from asset impairment	117,987	315,743	-	(219,253)	214,477
Allocations to allowances	-	-	-	11,004	11,004
Profit from operations	208,903	(22,735)	70,199	(35,222)	221,145
Other (net) income	12,097	3,833	-	-	15,930
GROSS RESULT	196,805	(26,568)	70,199	(35,222)	205,214
Average assets for the segment	30,462,334	13,840,988	-	-	44,303,322
Average liabilities for the segment	10,803,426	7,095,199	-	-	17,898,625
Average off-balance sheet resources	6,874,233	890,787	-	-	7,765,020
Costs incurred in acquiring assets	5,060	2,952	-	-	8,012
Segment-to-segment net turnover	(132,553)	(46,212)	-	178,765	-
Services provided	19,235	19,235	-	(38,469)	-
Services received	151,787	65,447	-	(217,234)	-

Thousand euros

Banking for Private Individuals	SMEs	Private Banking	Corporate Banking	Personal Finance	Foreign Clients	Línea Directa Aseguradora	Other Business	Total
306,966	149,485	37,776	114,768	26,553	12,777	24,704	119,549	792,579
						8,829	7,405	16,234
71,959	51,748	42,211	32,090	18,486	5,783	194	-20,239	202,233
20,349	9,914	3,643	12,172	3,628	1,011	1,840	36,232	88,788
						141,847	-7,434	134,414
399,273	211,147	83,631	159,030	48,667	19,571	177,415	146,448	1,245,182
198,691	113,427	47,719	39,054	12,909	9,610	116,271	94,607	632,288
82,450	128,835	4,509	53,454	-5,069	1,428	0	-34,543	231,064
						0	29,628	29,628
118,132	-31,115	31,403	66,523	40,827	8,532	61,144	56,756	352,202
561	273	100	336	100	28	-1,665	-5,994	-6,261
118,693	-30,841	31,503	66,858	40,927	8,560	59,479	50,761	345,941
23,625,286	7,418,214	4,065,355	6,257,354	3,109,081	870,196	-	-	45,345,486
4,777,806	3,044,931	3,891,484	4,205,161	3,212,169	227,589	-	-	19,359,140
1,696,536	246,066	2,797,149	132,096	1,759,398	25,716	-	-	6,656,961
3,556	2,063	1,060	639	284	203		-	7,805
-74,531	-28,885	-16,865	-12,185	-5,269	-3,223		140,958	-
38,306	15,017	5,092	7,950	1,026	2,194		-69,585	-
112,837	43,902	21,957	20,136	6,294	5,417		-210,543	-
						Primary Segment: Lines of Business

Thousand euros
Financial year 2010	Ordinary income	Results before taxes	Average total assets
Andalusia	60,757	(152)	5,162,041
Balearic Islands	11,303	1,550	1,086,718
Castilla La Mancha-Extremadura	15,960	(1,520)	1,382,232
Catalonia	63,181	(18,194)	5,483,894
Las Palmas	13,219	(862)	1,113,060
Levante (Eastern Spain)	71,084	(33,667)	5,361,489
Madrid Corporate Banking	42,268	28,684	2,761,210
Madrid - East	41,932	(3,296)	4,220,305
Madrid - West	66,916	14,553	6,402,758
Navarre - Aragon - Rioja	31,776	(586)	2,294,363
North-Western Spain	41,740	(8,823)	3,367,664
Northern Spain	42,654	17,978	3,403,909
Tenerife	11,052	2,818	790,009
Off-site networks	7,270	6,889	1,094,708
Consumer financing	53,673	(2,295)	378,963
Other business	(24,833)	202,136
	549,953	205,214	44,303,322

Thousand euros
Financial year 2009	Ordinary income	Results before taxes	Average total assets
Andalusia	68,132	23,620	5,295,799
Balearic Islands	12,800	5,140	1,121,849
Castilla La Mancha-Extremadura	17,997	6,975	1,401,440
Catalonia	74,922	12,908	5,732,781
Las Palmas	15,742	7,452	1,170,849
Levante (Eastern Spain)	84,782	(15,747)	5,813,389
Madrid Corporate Banking	27,478	26,032	1,604,999
Madrid - East	62,415	22,891	5,344,152
Madrid - West	79,766	47,833	6,934,334
Navarre - Aragon - Rioja	36,749	23,807	2,427,233
North-Western Spain	29,848	12,932	2,082,670
Northern Spain	53,632	37,976	3,910,423
Tenerife	13,010	7,545	842,488
Off-site networks	11,995	11,544	1,213,268
Consumer financing	59,055	4,794	449,813
Other business	144,254	110,240
	792,579	345,940	45,345,486

ANNEX III

BANKINTER, S.A.-BALANCE SHEETS AS AT 31 DECEMBER 2010 AND 2009 (thousands of euros)

ASSETS	31-12-10	31-12-09	LIABILITIES AND EQUITY	31-12-10	31-12-09
CASH AND BALANCES WITH CENTRAL BANKS	196,395		505,260 LIABILITIES :
			Financial liabilities held for trading:	1,935,685	1,461,788
Financial assets held for trading:	1,875,834		3,584,841 Deposits from central banks	-	-
Loans and advances to credit institutions	-		- Deposits from credit institutions	-	-
Loans and advances to customers	-		- Customer deposits	-	-
Debt instruments	1,275,490		2,852,908 Marketable debt securities	-	-
Equity instruments	87,769		110,335 Trading derivatives	846,382	582,489
Trading derivatives	512,575		621,598 Short position	1,089,303	879,299
Memorandum items: Loaned or advanced as collateral	984,898		1,969,926 Other financial liabilities	-	-
OTHE R FINANCIAL ASSETS AT FAIR VALUE WITH CHANGES IN PROFIT OR LOSS	35,727	16,361 OTHE	R FINANCIAL LIABILITIES CARRIED AT FAIR VALUE THROUGH PROFIT &LOSS	88,745	278,727
Equity instruments	35,727		16,361 Deposits from central banks	-	-
Memorandum items: Loaned or advanced as collateral	-		- Deposits from credit institutions	-	-
			Customer deposits	88,745	278,727
FINANCIAL ASSETS AVAILABLE FOR SALE:	4,747,738		Marketable debt securities 4,666,410 Subordinated liabilities	- -	- -
Debt instruments	4,695,042		4,624,157 Other financial liabilities	-	-
Equity instruments	52,696	42,253
Memorandum items: Loaned or advanced as collateral	3,325,553		3,872,052 FINANCIAL LIABILITIES AT AMORTISED COST	51,138,284	50,911,899
			Deposits from central banks	3,301,646	2,208,200
LOANS AND RECEIVABLES:	44,222,413		43,489,243 Deposits from credit institutions	2,482,758	5,367,568
Loans and advances to credit institutions	1,238,464		3,624,537 Customer deposits	30,577,410	28,062,306
Loans and advances to customers	42,983,949		39,864,706 Marketable debt securities	13,134,165	13,631,196
Debt instruments	-		- Subordinated liabilities	1,113,451	1,112,482
Memorandum items: Loaned or advanced as collateral	-		- Other financial liabilities	528,854	530,147
Held to maturity investments	3,241,573		1,621,669 MACRO-HEDGING ADJUSTMENTS TO FINANCIAL
Memorandum items: Loaned or advanced as collateral	1,770,513		689,056 LIABILITIES	-	-
ADJUSTMENTS TO FINANCIAL ASSETS BY MACRO-HEDGING	1,308		9,754 HEDGING DERIVATIVES	40,441	65,010
HEDGING DERIVATIVES	171,917		189,987 LIABILITIES LINKED TO NON-CURRENT ASSETS HELD FOR SALE	-	-
NON-CURRENT ASSETS HELD FOR SALE	22,489		14,325 Liabilities under insura nce contracts	-	-
INVESTMENTS	541,968		507,853 PROVISIONS :	70,798	76,208
Associates	3,412		3,087 Pension funds and similar obligations	7,836	129
Jointly controlled entities	162		696 Allowances for taxes and other legal contingencies	-	-
Group Companies	538,394		504,070 Allowances for contingent risks and commitments	22,268	30,354
			Other provisions	40,694	45,725
Pension-linked insura nce agr eements	7,690	-
			TAX LIABILITIES :	65,499	110,744
RE-INSURANCE ASSETS	-		- Current	8,971	45,902
			Deferred	56,528	64,842
TANGIBLE ASSETS :	376,924	383,676
Property, plant, and equipment- For internal use	376,924 364,751	383,676 OTHE	R LIABILITIES 371,168 TOTAL LIABILITIES	125,351 53,464,805	103,359 53,007,735
Assigned on lease	12,173	12,508
Real-estate investments	-		- NET WORTH:
Memorandum items: acquired under finance lease	-		- SHAREHOLDERS' EQUITY:	2,223,559	2,243,381
			Capital-	142,034	142,034
INTANGIBLE ASSETS :	-		- Registered	142,034	142,034
Goodwill	-		- Less- uncalled capital	-	-
Other intangible assets	-		- Issue premium	737,079	737,079
			Reserves	1,341,827	1,208,980
TAX ASSETS :	202,955		258,829 Less - Treasury shares	-	(537)
Current	52,395		89,880 Profit/(loss) for the year	77,131	260,289
Deferred	150,560		168,949 Less - Dividends and remunerations	(74,512)	(104,464)
OTHE R ASSETS	20,051		27,206 VALUATION ADJUSTMENTS :	(23,382)	24,298
			Financial assets available for sale	(23,583)	24,184
			Exchange differences	201	114
TOTAL ASSETS	55,664,982	55,275,414 total	liabilities and equity	55,664,982	55,275,414
MEMORANDUM ITEMS:
CONTIN GENT RISKS	4,242,772	5,171,757
CONTIN GENT COMMITMENTS	8,350,162	8,300,267

BANKINTER, S.A. Income statement corresponding to financial years ending 31 DECEMBER 2010 AND 2009

(Thousands of Euros)

2010 2009 INTEREST AND SIMILAR INCOME 1,163,595 1,657,272 INTEREST EXPENSE AND SIMILAR CHARGES (794,967) (1,227,880) INTEREST MARGIN 368,628 429,392 Income from equity instruments 45,526 135,790 FEES AND COMMISSIONS IN COME 234,622 237,869 FEES AND COMMISSIONS E XPENSE (70,153) (69,480)
Gains/Losses of financial assets and liabilities: 154,417 366,192
Financial assets and liabilities held for trading 102,669 371,125
Other financial assets at fair value through the profit and loss account 10,835 958
Financial instruments not measured at fair value through the profit and loss 43,962 (3,278)
Other (3,049) (2,613)
EXCHANGE DIFFERENCES (net) 49,319 25,275
OTHE R OPERATING INCOME: 30,747 33,227
Other operating income 30,747 33,227
OTHE R OPERATING EXPENSES : (22,491) (29,360)
Other operating expenses (22,491) (29,360)
GROSS INCOME 790,615 1,128,905
Administrative cost: (432,119) (457,747)
Personnel expenses (236,650) (261,218)
Other general administrative expenses (195,469) (196,529)
DEPRECIATION AND AMORTISATION (28,507) (32,065)
provisions (1,170) (30,313)
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET): (250,295) (228,703)
Loan and receivables (250,295) (228,703)
Other financial instruments not measured at fair value through profit and loss account - -
PROFIT FROM OPERATIONS 78,524 380,077
IMPAIRMENT LOSSES ON OTHE R ASSETS (NET): (501) (64,691)
Goodwill and other intangible assets - (9,673)
Other assets (501) (55,018)
GAINS/LOSSES UNDISPOSAL OF ASSETS NOT CLASSIFIED AS
NON-CURRENT ASSETS HELD FOR SALE 13,630 (5,082)
gains/losses undiposal on non-curr ent assets held for sale not classified as discontinued operations 264 (1,889)
Profit before tax 91,917 308,415
INCOME TAX (14,786) (48,126)
Profit for the year fROM continuing operations 77,131 260,289
PROFIT (LOSS)FROM DISCONTIN UED OPERATIONS (net) - -
RESULT FOR THE FINANCIAL YEAR 77,131 260,289
EARNINGS PER SHARE: 0.32 0.58
Basic earnings (euros) 0.32 0.58
Diluted earnings (euros) 0.32 0.58

Bankinter S.A. Statements of recognised income and expenses corresponding TO FINANCIAL YEARS ENDED 31 DECEMBER 2010 AND 2009 (Thousands of euros)

	2010	2009
RESULT FOR THE FINANCIAL YEAR	77,131	260,289
OTHE R COMPREHENSI VE INCOME	(47,680)	8,843
Financial assets available for sale	(68,239)	12,624
Valuation gains (losses)	(38,266)	2,983
Amounts transferred to the profit and loss account	(29,973)	9,641
Other reclassifications	-	-
Cash flow hedging	-	-
Valuation gains (losses)	-	-
Amounts transferred to the profit and loss account	-	-
Amounts transferred to the initial book value of the hedged items	-	-
Other reclassifications	-	-
Hedging of net investments in foreign businesses	-	-
Valuation gains (losses)	-	-
Amounts transferred to the profit and loss account	-	-
Other reclassifications	-	-
Exchange differences	124	8
Valuation gains (losses)	124	15
Amounts transferred to the profit and loss account	-	(7)
Other reclassifications	-	-
Non-current assets for sale	-	-
Valuation gains (losses)	-	-
Amounts transferred to the profit and loss account	-	-
Other reclassifications	-	-
Actuarial gains (losses) in pension plans	-	-
Statement of comprehensive income	-	-
Corporate tax	20,435	(3,789)
TOTAL RECOGNISED INCOME AND EXPENSES	29,451	269,132

					Shareholders' Equity
	Capital	Issue pre mium	Reserves	Other equity instruments	Less - Own Securities	Result for the year	Less - Dividends and remu nerations	Total share holders' equity	Valuation adjustments	Total
CLOSIN GBALANCE AT 31 DECEMBER 2009	142,034	737,079	1,208,980	-	(537)	260,289	(104,464)	2,243,381	24,298	2,267,679
Adjustments due to changes to accounting criteria
Adjustments due to errors
ADJUSTED O PENIN GBALANCE	142,034	737,079	1,208,980	-	(537)	260,289	(104,464)	2,243,381	24,298	2,267,679
Total recognised income and expenses	-	-	-	-	-	77,131	-	77,131	(47,680)	29,451
Other changes in Equity			132,847	-	537	(260,289)	29,952	(96,953)	-	(96,953)
Capital increases				-	-	-	-		-
Capital reductions	-	-	-	-	-	-	-	-	-	-
Conversion of financial liabilities into capital	-	-	-	-	-	-	-	-	-	-
Increases in other equity instruments	-	-	-	-	-	-	-	-	-	-
Reclassification of financial liabilities to other equity instruments	-	-	-	-	-	-	-	-	-	-
Reclassification of other equity instruments into financial liabilities	-	-	-	-	-	-	-	-	-	-
Distribution of dividends/Remuneration of shareholders	-	-	-	-	-	-	(97,250)	(97,250)	-	(97,250)
Transactions with other equity instruments (net)	-	-	(240)	-	537	-	-	297	-	297
Transfer between net worth entries	-	-	133,087	-	-	(260,289)	127,202	-	-	-
Increases (reductions) from business combinations	-	-	-	-	-	-	-	-	-	-
Payments with other equity instruments	-	-	-	-	-	-	-	-	-	-
Other increases (reductions)	-	-	-	-	-	-	-	-	-	-
CLOSIN GBALANCE AT 31 DECEMBER 2010	142,034	737,079	1,341,827	-	-	77,131	(74,512)	2,223,559	(23,382)	2,200,177

Bankinter, S.A. statements of changes in total equity corresponding to financial years ENDED 31 DECEMBER 2010 AND 2009.

Bankinter, S.A. statements of changes in total equity corresponding to financial years ENDED 31 DECEMBER 2009 AND 2008.

					Shareholders' Equity
	Capital	Issue pre mium	Reserves	Other equity instruments	Less - Own Securities	Result for the year	Less - Dividends and remu nerations	Total share holders' equity	Valuation adjustments	Total
CLOSIN GBALANCE AT 31 DECEMBER 2008	121,768	395,932	1,146,700	-	(40,743)	201,448	(88,798)	1,736,307	15,455	1,751,762
Adjustments due to changes to accounting criteria
Adjustments due to errors
ADJUSTED O PENIN GBALANCE	121,768	395,932	1,146,700	-	(40,743)	201,448	(88,798)	1,736,307	15,455	1,751,762
Total recognised income and expenses	-	-	-	-	-	260,289	-	260,289	8,843	269,132
Other changes in net worth	20,266	341,147	62,280	-	40,206	(201,448)	(15,666)	246,785	-	246,785
Capital increases	20,266	341,147	(6,046)	-	-	-	-	355,367	-	355,367
Capital reductions	-	-	-	-	-	-	-	-	-	-
Conversion of financial liabilities into capital	-	-	-	-	-	-	-	-	-	-
Increases in other equity instruments	-	-	-	-	-	-	-	-	-	-
Reclassification of financial liabilities to other equity instruments	-	-	-	-	-	-	-	-	-	-
Reclassification of other equity instruments into financial liabilities	-	-	-	-	-	-	-	-	-	-
Distribution of dividends/Remuneration of shareholders	-	-	-	-	-	-	(135,964)	(135,964)	-	(135,964)
Transactions with other equity instruments (net)	-	-	(12,824)	-	40,206	-	-	27,382	-	27,382
Transfer between net worth entries	-	-	81,150	-	-	(201,448)	120,298	-	-	-
Increases (reductions) from business mergers	-	-	-	-	-	-	-	-	-	-
Payments with other equity instruments	-	-	-	-	-	-	-	-	-	-
Other increases (reductions) in net worth	-	-	-	-	-	-	-	-	-	-
CLOSIN GBALANCE AT 31 DECEMBER 2009	142,034	737,079	1,208,980	-	(537)	260,289	(104,464)	2,243,381	24,298	2,267,679

Bankinter, S.A. STATEMENTS OFCASH FLOW FOR FINANCIAL YEARS ENDED 31 DECEMBER 2010 AND 2009 (Thousands of euros)

	2010	2009
NET CASH FLOWS FROM OPERATIONS	1,529,913	1,231,375
Profit/(loss) for the year	77,131	260,289
Adjustments to obtain the cash flow from operations	327,009	359,400
Other adjustments	298,500	327,335
Depreciation	28,507	32,065
Net increase/decrease in operating assets	(664,018)	(2,530,895)
Financial assets and liabilities held for trading	(1,709,007)	1,356,697
Other financial assets at fair value through the profit and loss account	19,366	7,175
Financial assets available for sale	149,567	(3,325,972)
Loan and receivables	978,383	(627,449)
Other operating assets	(102,327)	58,654
Net increase/decrease in operating liabilities	419,317	(1,844,594)
Financial assets and liabilities held for trading	473,897	660,014
Other financial liabilities at fair value through the profit and loss account	(189,982)	(326,326)
Financial liabilities at amortised cost	180,842	(2,229,143)
Other operating liabilities	(45,441)	50,861
Corporate tax collections/payments	42,439	(74,615)
NETCASH FLOWS FROM INVESTMENT ACTIVITIES:	(1,718,802)	(1,514,459)
Payments	(1,812,331)	(1,752,988)
Tangible assets	(107,029)	(55,283)
Intangible assets	(17,589)	(470)
Stockholdings	(42,988)	(497,494)
Non-current assets held for sale and associated liabilities	(24,822)	(6,663)
Held to maturity investments	(1,619,904)	(1,193,078)
Collections	93,529	238,529
Tangible assets	81,716	17,639
Intangible assets	24	9,457
Stockholdings	-	211,433
Dependent entities and other business units
Held to maturity investments
Non-current assets held for sale	11,789	-
NET CASH FLOWS FROM FINANCING ACTIVITIES	(119,975)	406,210
Payments	(165,915)	(222,639)
Dividends	(110,273)	(130,598)
Subordinated liabilities	(50,000)	-
Amortisation of internal capital instruments	-	-
Acquisition of own shares (capital contributions) (other than savings banks)	(5,641)	(2,144)
Other payments linked to financing activities	-	(89,897)
Collections	45,939	628,849
Subordinated liabilities	40,000	250,000
Issuance of equity instruments	-	355,367
Disposal of own shares/capital contributions (other than savings banks)	5,939	23,482
Other inflows linked to financing activities	-	-
EFFECT OF EXCHANGE-RATE VARIATIONS	-	-
EFFECT OF CHANGESIN CASH ANDCASH EQUIVALENTS	(308,865)	123,126
CASH AND EQUIVALENT AT START OF PERIOD	505,260	382,134
CASH AND EQUIVALENT AT END OF PERIOD	196,395	505,260
MEMORANDUMITEMS:
BREAKDOWN OF CASH AND EQUIVALENTS
Cash in hand	105,486	97,928
Balances equivalent to cash at central banks	90,909	407,332
Total cash and equivalent at end of period	196,395	505,260

Details of the Issuing Institution				Details of Issues made in 2010 (a)
Name	Relation to the Bank	Country	Credit rating for Issuer or Issue	ISIN code	Type of Security	Rate Operation	Date of trans action	Amount of the Issue, Buyback or Reimburse ment (thousands of euros)	Outstanding balance as at 31-06-08 (thousands of euros)	Interest Rate	Market where it is listed	Type of Guar antee Granted	Risks in addition to the guarantee the Group would undertake
Bankinter TDA 19	Subsidiary	SPAIN	Aaa/AAA	ES0315945008	Mortgage portfolio	Issue	18/06/2010	1,500,000	1,500,000	2.25%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter 20 FTA	Subsidiary	SPAIN	Aaa/AAA	ES0313438006	Mortgage portfolio	Issue	14/07/2010	1,650,000	1,650,000	Eur 3m+0.30%	AIAF secondary fixed-income market	Mortgage portfolio	Credit improvement
Bankinter S,A	Parent company	SPAIN	Aaa/AAA	ES0413679079	Mortgage bond	Issue	09/04/2010	1,000,000	1,000,000	2.625%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter S,A	Parent company	SPAIN	Aaa/AAA	Nominative	Mortgage bond	Issue	21/06/2010	1,500,000	1,500,000	2.25%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter S,A	Parent company	SPAIN	Aaa/AAA	ES0413679087	Mortgage bond	Issue	07/07/2010	200,000	200,000	Eur3m+1.90%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter S,A	Parent company	SPAIN	Aaa/AAA	ES0413679079	Mortgage bond	Issue	26/07/2010	400,000	400,000	2.625%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter S,A	Parent company	SPAIN	Aaa/AAA	ES0413679095	Mortgage bond	Issue	23/09/2010	750,000	750,000	3.75%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter S,A	Parent company	SPAIN	A1/A-	ES0313679484	Senior Debt	Issue	15/01/2010	900,000	900,000	Eur3m+0.95%	AIAF secondary fixed-income market		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0313679492	Senior Debt	Issue	21/01/2010	78,800	78,800	3%	AIAF secondary fixed-income market		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0313679518	Senior Debt	Issue	17/09/2010	120,000	120,000	Average euri bor3m+1.1%	AIAF secondary fixed-income market		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0313679526	Senior Debt	Issue	17/09/2010	120,000	120,000	Average euri bor3m+1.1%	AIAF secondary fixed-income market		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0213679212	Senior Debt	Issue	22/10/2010	30,000	30,000	4.27%	AIAF secondary fixed-income market		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0213679113	Subordinated Debt	Depreciation and amortisation	29/03/2010	50,000	-	Euribor 3m+0.33%	AIAF secondary fixed-income market
Bankinter S.A.	Parent company	SPAIN	Aaa/AAA	ES0413679020	Mortgage bond	Depreciation and amortisation	14/05/2010	1,500,000	-	5%	AIAF secondary fixed-income market	Mortgage portfolio
Bankinter S.A.	Parent company	SPAIN	Aaa/AAA	ES0413679020	Mortgage bond	Depreciation and amortisation	14/05/2010	150,000	-	5%	AIAF secondary fixed-income market	Mortgage portfolio
Bankinter S.A.	Parent company	SPAIN	Aaa/AAA	Nominative	Mortgage bond	Depreciation and amortisation	01/06/2010	1,000,000	-	Euribor 1m+0.10%	AIAF secondary fixed-income market	Mortgage portfolio
Bankinter S.A.	Parent company	SPAIN	Aa3/A	ES0313679427	Senior Debt	Depreciation and amortisation	18/11/2010	1,000,000	-	Euribor 3m+0.11%	AIAF secondary fixed-income market
						(a) If it corresponds to securities in foreign currency, the relevant amounts have been converted into euros at the exchange rate that existed at the close of the financial year,

ANNEX IV Individualised information on certain issues, buybacks or reimbursements of debt securities

	Details of the Issuing Institution			Details of Issues made in 2009 (a)
Name	Relation to the Bank	Country	Credit rating for Issuer or Issue	ISIN code	Type of Se curity	Type of Operation	Date of transaction	Amount of the Issue, Buyback or Reimburse ment (thousands of euros)	Outstanding balance as at 31-12-10 (€000s)	Interest Rate	Market where it is listed	Type of Guarantee Granted	Risks in addition to the guarantee the Group would undertake
Bankinter S.A.	Parent com pany	SPAIN	Aaa/AAA	ES0413679053	Mortgage bond in Eur	Issue	17/02/2009	323,200	323,200	3.5	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter S.A.	Parent com pany	SPAIN	Aaa/AAA	ES0313679450	Backed senior	Issue	24/02/2009	1,497,450	1,497,450	3	AIAF secondary fixed income market	-	Credit Enhancement (0%)
Bankinter 1 Companies	Subsidiary	SPAIN	Aaa	ES0313402002	Asset securiti sation bonds	Issue	16/03/2009	608,400	577,980	1.552	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (31.96%)
Bankinter 1 Companies	Subsidiary	SPAIN	A3	ES0313402010	Asset securiti sation bonds	Issue	16/03/2009	30,600	30,600	1.752	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (31.96%)
Bankinter 1 Companies	Subsidiary	SPAIN	Baa3	ES0313402028	Asset securiti sation bonds	Issue	16/03/2009	71,000	71,000	1.952	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (31.96%)
Bankinter 19 FTA	Subsidiary	SPAIN	Aaa	ES0313533004	Asset securiti sation bonds	Issue	27/04/2009	1,597,900	1,597,900	1.794	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (6.36%)
Bankinter 19 FTA	Subsidiary	SPAIN	A1	ES0313533012	Asset securiti sation bonds	Issue	27/04/2009	20,700	20,700	1.994	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (6.36%)
Bankinter 19 FTA	Subsidiary	SPAIN	Baa3	ES0313533020	Asset securiti sation bonds	Issue	27/04/2009	31,400	31,400	2.194	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (6.36%)
Bankinter S.A.	Parent com pany	SPAIN	Aaa/AAA	ES0313679476	Backed senior in Yen	Issue	15/06/2009	265,667	269,352	1.111	AIAF secondary fixed income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent com pany	SPAIN	Aaa/AAA	ES0313679468	Backed senior in Yen	Issue	15/06/2009	257,660	261,235	1.223	AIAF secondary fixed income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent com pany	SPAIN	Aaa/AAA	ES0413679061	Mortgage bond in Eur	Issue	13/11/2009	1,000,000	1,000,000	3.25	AIAF secondary fixed income market	Mortgage portfolio	Credit Enhancement (0%)
Bankinter S.A.	Parent com pany	SPAIN	A2/A-	ES0213679196	Subordinated Debt	Issue	11/09/2009	250,000	250,000	6.375	AIAF secondary fixed income market	-	Credit Enhancement (0%)
Bankinter 1 FTPYME FTA	Subsidiary	SPAIN	Aaa	ES0313922009	Asset securiti sation bonds	Depreciation and amortisation	15/12/2009	148,600	-	1.744	AIAF secondary fixed income market	-	-
Bankinter 1 FTPYME FTA	Subsidiary	SPAIN	Aaa	ES0313922009	Asset securiti sation bonds	Depreciation and amortisation	15/12/2009	73,400	-	1.514	AIAF secondary fixed income market	-	-
Bankinter 1 FTPYME FTA	Subsidiary	SPAIN	Aa2	ES0313922009	Asset securiti sation bonds	Depreciation and amortisation	15/12/2009	19,000	-	1.844	AIAF secondary fixed income market	-	-
Bankinter 1 FTPYME FTA	Subsidiary	SPAIN	Baa3	ES0313922009	Asset securiti sation bonds	Depreciation and amortisation	15/12/2009	9,000	-	3.194	AIAF secondary fixed income market	-	-
						(a) If it corresponds to securities in foreign currency, the relevant amounts have been converted into euros at the exchange rate that existed at the close of the financial year,

Bankinter Group

Consolidated Management Report for financial year ended on 31 December 2010

1. Group's Performance in the financial year

Company Activity

In June 2010, Bankinter, S.A. set up the company Gneis Global Services, S.A., which has as its corporate purpose the provision of business advisory and consultancy services for the design and implementation of technological and operational systems. This company is globally integrated in the Bankinter Group financial statements.

Results

In the financial year 2010 the Bankinter Group's earnings structure continued to be based on the generation of recurring profits which, unlike other institutions, do not include any extraordinary items.

As regards the various margins in the income statement, the interest margin was affected by the interest rate situation, and more specifically by the positive effect of the repricing of mortgage loans included in the margin for 2009. At the end of 2010 this margin reached 549.95 million euros (30.61% less than in 2009), although if this repricing effect were not taken into account, the fall in the interest margin for the period would have been only 15.4%, as a result of significant improvement in the financing structure over the course of the year.

It should be pointed out that the reduction in the interest margin will ease in 2011. Indeed a change of trend under this heading has already been anticipated for the coming financial year based on a number of different factors: A possible rise in interest rates, limited growth of problematic assets, easing of the deposits war in the sector, a low level of wholesale financing maturities in 2011 and more active management of differentials. All these factors imply the prospect of improved interest margins for the coming year.

As regards the gross margin 1.10232 billion euros), whilst this represents a decline of 11.47% compared to the end of 2009, some 35% of this comes from strategic products that are not dependent on lending and which have growth potential, such as insurance, securities services, asset management, etc. In December 2009 this percentage stood at 25%.

As such it is a good indication of the success of the bank's income diversification strategy.

As a result of all these factors, Bankinter ended 2010 with pre-tax profits of 205.21 million euros (down 40.68%), and net profit for the year of 150.73 million euros(40.75% less than in 2009).

As regards the Bankinter Group's balance sheet, total assets stand at 54.152 billion euros (0.57% down on year-end 2009); loans and advances to customers stood at 44.127 billion euros, up by 1.04% on 2009. These figures bear witness to the fact that Bankinter has maintained a good level of activity in customer lending, which is a matter of vital importance in an economy in crisis. As regards customer deposits, at year-end they stood at 24.265 billion euros, representing a 9.99% increase on the December 2009 figure. Bankinter's solvency and non-performing loan figures show evidence of extraordinary solidity, which is particularly noteworthy when compared with other financial institutions, especially bearing in mind the prevailing climate of crisis. Thus doubtful debts stand at 1.33 billion euros, equivalent to 2.87% of the Bank's computable risk, which is half the sector average. Bearing in mind also that net additions to non-performing loans slowed over the course of the year compared with 2009, we may expect improved prospects for 2011.

At the same time, the ratio of hedging for non-performing loans stands at 66.43%, one of the highest in the banking sector, compared with 51% for other comparable banks. Provisions for bad debts increased by 8.59% relative to December 2009, to reach 883.48 million euros. These provisions amount to 990 million euros (13% more than in December 2009) if one includes the 106 million euros of provisioning for repossessed properties, which are covered to the extent of 28% of their carrying amount, as against 18% for other comparable banks. We should once again emphasise that Bankinter's repossessed assets, the gross amount of which stands at 378 million euros, represent barely 0.6% of the market share.

As regards shareholder's equity under the Basel II Framework rules, the solvency ratios estimated in accordance with the Circular from Spain's Central Bank on calculating and controlling minimum shareholders' equity ended 2010 at a level appropriate to Bankinter's risk profile, with surplus capital of 493.14 million euros.

Small and Medium Enterprise Segment

In 2010 Bankinter continued to show its commitment to the SME segment, which is still relevant for generating income in the Group. In this financial year, our network of offices managed to attract 8.968 new customers to the bank, generating earnings that were slightly (3.5%) lower than the figures for 2009, but with a cash flow that was 2.3% higher.

The growth in typical resources in December 2010 stood at 2.4%, compared to the same date in 2009, while average investment contracted by 2.0%. The balance sheet for the SME business is still built on the basis of a very solid credit risk assessment, with quality diversified investments. A high percentage of the finance granted is still with a mortgage guarantee, and the strategy of maintaining a low concentration in the sectors that are most severely affected by the economic downturn is being continued.

In 2010, Bankinter's value proposal for this customer segment, which is unique and highly competitive, continued to focus on global client management, service quality and multichanneling.

As in previous financial years, the increase in client activity was managed through the most efficient channels. In this regard, it should be highlighted that 80% of transactions completed in 2010 were performed through remote channels.

Corporate Banking Segment

The general slump in economic activity recorded in 2009 continued in the financial year 2010, translating in practice into lower turnovers in companies and progressive worsening of income statement figures, which has led to an increase in the non-performing loan ratios and bankruptcy scenarios on the market. Despite these negative circumstances, Bankinter's Corporate Banking segment managed to end the year with a growth rate of 17.3% in the gross margin, thanks on the one hand, to the increase in the financial margin, derived from adequate management of the interest differentials, in which an increase of 19% was achieved, and to the ongoing improvement in fees, with a 14% increase compared to 2009. The final figure for profit before tax at year-end stood at 50.10 million euros, with non-performing loan ratios remaining at 2.25% of total investments.

As regards the items on the balance sheet and despite the recession mentioned previously, the average credit investment increased by 12.85%, reaching 6.757 billion euros in December and exceeding 10.005 billion euros including signing risks. These figures were compensated with a 12.34% growth rate on the other side of the balance sheet, with the average resources figure reaching 4.191 billion euros.

The value proposal for clients continues to be based on differentiation through constant enhancement in service quality, with satisfaction rates that are much higher than those of our competitors. The accumulated satisfaction index in December reached 78.87 points, with a 1.86 point improvement in December 2009.

Bankinter continues to maintain its commitment in the Corporate Banking segment to a multi-channel management model, offering products and services that are in line with the activities pursued by this type of customers, and a permanent concern for innovation, especially via the corporate website. This website, which is among the most highly reputed in the entire financial sector, currently channels 79.24% of the total customer transactions, guaranteeing fast, efficient solutions in their daily operations.

In short, it may be said that in the year 2010, Corporate Banking remained true to its principles of quality and innovation and was able to end a complicated year on a brilliant note, keeping the main management ratios for its business very high, with a gross return on assets or ROA of 2.65%; with excellent operational efficiency - ratio of total costs to operational earnings - of 23.41%; and most importantly of all, with the solidity and quality of its credit portfolio, all of which are variables that characterise business at Bankinter.

Private Individuals Segment:

As mentioned in the Report on the year 2009, during this year, Bankinter created a new line of business called Personal Banking. Therefore, in the early months of the year, some of the customers with the highest earnings and equity were transferred from Private Individuals to the new Personal Banking segment. This fact explains the variations between the data presented this year and those that were presented in the report from the previous year.

Bearing this in mind, the Private Individual Banking segment reached a total of 447.096 active customers in 2010.

Total average assets at the end of 2010 total 16.291 billion euros. In balance sheet terms, the year ended with average controlled resources amounting to 2.474 billion euros; 79% of which are typical resources and the remaining 21%, brokerage. The increase in typical resources amounted to 27 million euros in the year. Lending stood at 16.236 billion euros at year end.

Mortgage lending was the best performing product this year, with a total of 7.080 mortgage transactions completed, amounting to a total of 1.023 billion euros.

The Bank's mortgage portfolio maintained its excellent risk quality, with a delinquency ratio of 1.07%, a figure that remains one of the lowest in the sector. This is particularly worthy of mention in a year that saw a substantial increase in non-performance in the financial sector.

There was intense sales activity in this segment in 2009. Mention should be made of the boost that was given in strategic areas to certain variable income products and to life assurance.

In variable income, at year-end the figure for the deposit portfolio was 481 million euros. Operations performed by customers totalled 242,516.

In life assurance, a total of 25.958 policies were sold to customers in this segment, for an insured capital of 1.481 billion.

Lastly, in terms of quality, this customer segment closed the year with an accumulated NSI of 73.73.

Foreign Clients Segment

In 2010 the Foreigners segment reached the figure of 25,607 active customers and was maintained as a sub-segment of Private Individuals focusing on citizens from other countries that buy a second home on the Spanish coast, for which they apply for finance and specialised services.

Average total assets climbed at year-end to 801 million euros, compared to 850 million euros in 2009, which represents a 5.8% drop.

En terms of the balance sheet, the year ended with average controlled resources to the value of 223.1 million euros. 89.8% are typical resources and the remaining 10.2%, brokerage.

Private Banking Sector

Private Banking ended the year 2010 with 54.202 active customers, which represents 3.810 customers more than at the start of the year.

By year-end, 6.437 billion euros were being managed, of which 56% correspond to typical equity and the remaining 44% to intermediation.

In turn, the average investment figures increased by 13.43% compared to 2009, reaching 3.164 billion euros.

As regards earnings, there was a 7.9% drop as a consequence of the economic situation and the continued uncertainties and tensions on the financial markets, meaning that customer investments mostly took refuge in deposits, in many cases, "ex pats".

As for the retail activity, the success recorded by some product types such as risk life assurance should be noted, of which a total of 4.560 policies to the value of 603 million in insured capital were taken out.

As regards the installed capacity, the bank has 47 Private Banking Centres in operation, spread throughout Spain and staffed by personnel with experience in dealing with this customer profile. In order to ensure that the skills of these employees remain high, the specific training programmes have been revamped and reinforced, to adapt them to the requirements of the new MIFID regulations. In this regard, numerous internal courses have been provided for the whole workforce.

As well as these centres specialising in customer support and advisory services, the Private Banking segment continues to be supported by multiple channels as the formula for relating to customers via the channel that best suits their preferences.

With a view to maintaining direct relations with customers and prospects in the segment and giving them advice on the situation of the stock markets and markets, 26 meetings were held during the year in various cities in Spain. These participative events provided attendants with first-hand knowledge of the opinion of the bank's expert analysts, its consultancy department and other international consultants, regarding the financial situation of the markets and the most interesting investment opportunities.

On a lighter note and in the spirit of solidarity, the bank organised 7 charity concerts to raise funds for Cáritas, attended by customers from this segment as guests. This successful series of concerts included the participation of the Czech National Symphony Orchestra conducted by Inma Shara, one of the most brilliant representatives of the new generation of conductors in Spain.

The CRM (Customer Relationship Management) Department is still, ever increasingly, a key component in offering a customised high quality service and one of the reasons for the good impression that customers have of the service received from the bank. The Net Satisfaction Rate for the segment stood at 76.60.

Personal Finance Segment

2010 was a year marked by an adverse macroeconomic situation and markets that caused customers to display a certain aversion to risk.

In this context, Bankinter made a serious effort to increase both its direct relations with Personal Finance customers and the activity to attract new prospects.

In this regard, the work of the teams devoted to advisory services took on a special relevance. This was acknowledged by the customers themselves, who improved their opinion of the service they receive in our regular customer satisfaction surveys.

This meant that the main business variables have continued to improve considerably, both as regards customer resources and in investment. Moreover, earnings from Personal Finance, measured according to the gross margin, rose by 7% in interannual terms.

Service quality, a fundamental factor on which our Personal Finance activity is based, was in 2008 perceived by customers to be worthy of a very high score, with a satisfaction index of almost 80, which clearly places us above the average for the sector.

The value proposal from Personal Finance, which focuses on comprehensive advisory services and management of customer equity, has continued to improve, with customised solutions and relevant contributions from the Equity Services and Legal and Fiscal Advisory departments, in a bid to meet the complex needs of customers with higher equities.

The increase in the number of SICAVs managed by Bankinter Gestión de Activos amounted to 10 new companies created during the year. Once again, it was the institution that recorded the highest growth in the Spanish financial sector and consolidated its position, with 250 SICAVs, as the third bank in terms of the number of collective investment societies managed, according to the Inverco ranking.

Personal Banking Segment

If 2009 was the year in which Bankinter started to offer differentiated management to certain customers that due to their income and equity levels, required differentiated support within the Private Banking sector, the year 2010 marked the official launch of this segment, which was given the name "Personal Banking".

The most relevant facts in the creation of this segment were:

• Notification to customers to inform them that they belonged to this new segment, by means of a specific marketing initiative.

• Creation of a specialised sales network to deal with this group of customers.

• Internal accounting independence, with a separate income statement and balance sheet, and individualised monitoring of retail activity indicators, quality, efficiency, etc.

The financial year 2010 opened with 96.771 customers from among those with the highest income and equity in the Private Individuals segment, which is the reason why they were selected to join the new Personal Banking segment.

At the end of December, the number of active customers stood at 104.986, which represents an 8.5% increase during the course of the year. Throughout 2010, a total of 13.166 customers were captured, with the mortgage being the most important engine in this process, especially in the middle of the year. The financial year ended with 3.523 mortgages granted to new customers.

The specialised sales network created to deal specifically with this customer group consists of 308 managers based throughout the network of officers, and 12 remote managers.

These people have been given specific training, based on advice on products of priority importance for this type of customers (investment funds, variable income, insurance, etc.) and on tools designed for this group, such as Financial Planning. This planning and advisory service is to help the customer to maintain a certain economic situation during their retirement or to attain a financial goal in the middle or long term. This tool was used to make 9.135 planning proposals to customers during the year.

The retail activity in the segment is organised via the CRM, which enables the bank to maintain the desired frequency of contact with each customer and to adapt the offering of services and products to each customer's needs, preferences and risk profile.

As regards the opinion expressed by the customers regarding the quality of service received, the accumulated satisfaction index for the year stood at 74.52, an indicator that has been rising throughout 2010.

As regards the balance sheet, Personal Banking ended the year with total average customer resources under control amounting to 3.877 billion euros and an average investment totalling 7.024 billion euros, which represents a 3.33% increase on the month of December 2009.

In order to correctly interpret the results provided below, it is important to highlight that some of the data are in blank because there is no information from the year 2009, as the segment was created in January 2010.

Obsidiana

Bankinter Consumer Finance continues to consolidate its position in the consumer finance market. On the one hand, by distributing revolving credit cards and loans under its main brand, Obsidiana. On the other, by strengthening its current alliances and looking for new opportunities.

The risk control initiatives carried out last year had the consequence of good default results, with a clearly downward trend. In this regard, the achievements of the recoveries unit should also be highlighted, in its second year of existence. Its work has served to manage defaults in the friendly and judicial stages internally, with better results and costs.

However, the financial year 2010 was not as positive as might have been expected. Average investments in customers this year stood at 379 million euros, which represents a 10% drop on the previous year. The drop in consumption in the current economic climate and the adjustment of allowances, according to the new regulations issued by Spain's Central Bank, contributed to diluting the bank's earnings this year.

The investment policy continues to focus on the risk-return binomial, with the price of each offer being adjusted to the customer profile so as to guarantee the return. Moreover, in line with the macroeconomic situation, costs and marketing investments have continued to be the object of control.

Growth lines continue to focus on the segments with deserving risk and return profiles. This is why, during this financial year, Bankinter Consumer Finance has limited its growth, reaching, at the close of the year, 414.146 cards issued, representing a slight decline of 7% compared to the same figures in 2009.

The satisfaction of these more than 400.000 customers was also a key factor in the profitability of the business in the financial year 2010. The mission of Bankinter Consumer Finance is to meet the financing needs of customers, providing them with the most suitable financial products and services at any given time, but above all providing them with flexible payment for managing their everyday financial needs.

LDA

Despite the crisis circumstances that reign in every sector of the Spanish economy, in the financial year 2010, the LDA group attained premiums accrued in the year of 685 million euros, a 3.5% increase on the previous financial year.

The number of policies increased by 5.5% compared to 2009, reaching a total of 1,797,554 policies in the portfolio.

The result of the technical statement of non-life insurance in the consolidated profit and loss account presents a profit of 94.2 million euros, which represents a 0.8% reduction compared to the consolidated benefit obtained in 2009, mostly due to the increase in the claims rate. In the financial year 2010, the net reinsurance claims rate was 78.34%. This figure amounted to 76.33% in the financial year 2009.

The household sector in the financial year 2010, the third year of activity, attained a turnover of 18,538,901.74 euros, representing a 75% increase on the previous year.

The average rate of return for the fixed income securities and deposits in credit institutions during the financial year was 4.08% and 2.97% respectively, compared to 3.78% and 1.19% obtained in the financial year 2009.

The LDA group continued with its investment policy with a view to guaranteeing their safety, liquidity and profitability, while applying the principles of dispersion, diversification and adaptation of terms to the technical liabilities to be covered, in order to compensate for market, credit, liquidity and cash flow risks.

Solvency

Bank of Spain Circular 3/2008, of 22 May, to banks, on determining and controlling minimum shareholders' equity, regulates the minimum shareholders' equity to be maintained by Spanish credit institutions - both individually and as a consolidated group - and the way in which said shareholders' equity should be determined, as well as the various processes for capital self-assessment to be carried out by the institutions and the public information the aforementioned institutions should forward to the market.

During financial year 2010, the Group implemented the aforementioned Circular, using the internal ratings-based approach (IRB Approach), following the corresponding official validation, for calculating the equity requirements in terms of the credit risk of certain credit exposures, and the standard approach for the rest of the exposure. In subsequent financial years, in accordance with the progressive implementation plan described in Rule 24 of Circular 3/2008 and following authorisation from the Bank of Spain, new portfolios will be incorporated into the IRB Approach.

The goal set by the Group's Directors in relation to equity management consists of complying at all times with the applicable regulations, in accordance with the risks that are inherent to its activity and the context in which it operates, while simultaneously pursuing maximum efficiency in said process. Equity consumption, together with other return and risk variables, is considered to be a fundamental variable in the analyses associated to the Group's decision-taking on investment.

In order to meet this goal, the Group has a series of policies and processes for managing equity, the main guidelines in which are:

• The Directorate of Shareholder Equity, which falls under the Capital Market Division, performs monitoring and control of solvency ratios, and features warning systems that ensure that the applicable rules are being applied at all times and that the decisions made by the various departments and units in the entity are consistent with the targets set for compliance with minimum shareholders' equity. Accordingly, there are contingency plans to ensure that the limits laid down in the applicable regulations are met.

• Both in the planning and analysis and monitoring of the Group's transactions it is considered that the impact of any decision-making may be a key factor on the Group's shareholder equity and on the consumption-profitability-risk ratio.

Thus, the institution considers shareholders' equity and the requirements relating to shareholders' equity laid down under the aforementioned regulations as a fundamental item in its management that affects both the institution's investment decisions, the analysis of the viability of any transaction, strategy for the distribution of results by subsidiaries and issues by the institution and the Group, etc.

Bank of Spain Circular 3/2008, of 22 May, establishes which elements should be counted as shareholders' equity, for the purposes of complying with the minimum requirements laid down in said regulation. For the purposes of the above rule, shareholders' equity is classified as basic and second category shareholders' equity and it differs from the shareholders' equity that is calculated in accordance with the terms of the EU-IFIS as it considers certain items as such and incorporates the obligation to deduct others that are not contemplated in the aforementioned EU-IFIS. In addition, the methods to be implemented for the consolidation and appraisal of holdings for the purposes of calculating the Group's minimum shareholders' equity requirements differ, in accordance with standing regulations, from those implemented in drawing up these annual consolidated accounts, which also leads to the existence of differences for the purposes of calculating shareholders' equity under one regulation or the other.

As regards the conceptual definitions, the Group's management of its shareholders' equity is in compliance with the terms of Bank of Spain Circular 3/2008. Accordingly, the Group deems computable shareholders' equity to be as indicated in rule 8 of Bank of Spain Circular 3/2008.

The minimum shareholders' equity requirements laid down in the aforementioned Circular are calculated according to the Group's exposure to credit risk and dilution (depending on the assets, commitments and other memorandum accounts these risks present, in accordance with their amounts, characteristics, counterparts, guarantees, etc.), to counterpart and position and liquidation risk corresponding to the financial assets and liabilities held for trading, to the exchange and gold position risk (depending on the net global position in foreign currency and the net gold position) and to operational risk. In addition, the Group is also subject to compliance with the risk concentration limits laid down in the aforementioned Circular and the Group is subject to compliance with the internal Corporate Governance obligations, capital self-assessment and measurement of the interestrate risk and the public information obligations to be forwarded to the market, which are also laid down in the aforementioned Circular. With a view to guaranteeing compliance with the aforementioned targets, the Group performs integrated management of these risks, in accordance with the aforementioned policies.

At 31 de December 2010 and 2009 and in these financial years, the computable shareholders' equity of the Group and of the Group's institutions subject to this obligation, considered on an individual basis, exceeded the requirements laid down under said rules.

The consolidated shareholders' equity as at 31 de December 2010 and 2009 and the pertinent capital ratios, are shown in the following table:

Thousand euros	31-12-2010 (*)	31-12-2009(*)
Capital and Reserves	2,435,576	2,351,966
Preference shares	343,165	343,165
Treasury shares	(1,753)	(538)
Intangible and other assets	(339,044)	(308,715)
Other deductions	(174,658)	(100,724)
Tier 1	2,263,284	2,285,151
Revaluation reserve	98,698	111,161
Subordinated finance	706,354	713,566
Generic insolvency funds	76,852	149,307
Other deductions	(174,658)	(100,724)
Tier 2	707,245	873,309
Total Equity	2,970,529	3,158,461
Risk-weighted assets	30,963,938	30,403,572
Tier 1 (%)	7.31	7.52
Tier 2 (%)	2.28	2.87
Capital ratio (%)	9.59	10.39
Surplus resources	493,415	726,175

(*) In 2010 and 2009, actual ratios estimated on the basis of the Circular on Calculating and Controlling Minimum Shareholders' Equity published by Spain's Central Bank. The lower limit of the shareholders' equity requirements provided in Transitional Provision Eight of the aforementioned Circular is not applied. Internal models are applied to the following portfolios: Home mortgages for private individuals, Small companies, Medium size companies, Project Finance and Unsecured loans.

2. Main Business Risks

Economic Environment and International Markets

In 2010 the world economy presented signs of recovery, although the speed varied depending on the geographical areas. Emerging economies, such as China and India, now play an essential role in global expansion, with double-digit growth figures and very strong domestic demand. On the other hand, the developed nations are experiencing more moderate rates of recovery, with high unemployment rates and real estate markets that have not yet managed to reverse the downward trend.

During the course of the year 2010 the nature of the downturn moved from the private sector to the states, in some cases jeopardising solvency. Concern for the sustainability of public finances has been particularly strong in the Eurozone, where governments have been forced to implement austere expenditure reduction programmes. Central banks have been forced to prioritise controlling inflation rather than job creation or growth.

Europe has borne the brunt of the solvency crisis. The finance difficulties encountered by Greece (May) and Ireland (November) gave these countries no choice but to accept financial assistance programmes. The risk of these difficulties spreading to other European states is a risk that is still on the table, and extending the differentials of the bonds issued by the most vulnerable states has been a serious obstacle hindering European economic recovery. However, after the ECB started to play a more active role in this issue, the situation may have stabilised, although the balance is still a delicate one.

The year 2010 was the most intense of the crisis for Spain, whose economy is a prime example of the asymmetries in the recovery process. However, during the year GDP changed signs, from negative to a modest positive (third quarter), although unemployment levels remain intolerably high and represent the main challenge for the upcoming quarters. Rising taxes and the increase in energy prices have been major obstacles to the recovery of private consumption and business investment.

Interest and currency rates

The absence of inflationary tensions in the developed economies, combined with incipient or non-existent economic growth, meant that any increase in interest rates by the central banks was not necessary throughout 2010. Key lending rate levels remain at historical lows so as not to hinder recovery, and no change in this attitude is expected in the short term. Even in the United Kingdom, where inflation amply exceeded the central bank target, key lending rates have remained unaltered so as not to hinder the incipient economic growth.

In the emerging economies, where growth rates have recovered more quickly, some pricing tensions have surfaced, with the immediate response of moderate increases in intervention rates. This was the case of China, although the phenomenon is not exclusively restricted to this country.

The following table shows the changes in the key lending rates made by the main central banks since 2007, the year in which the crisis officially began and after which the interest rates in the various countries started to fall.

Official Interest rates (%)

	31/12/2007	31/12/2008	31/12/2009	31/12/2010
Euro Zone	4	2.5	1.00	1.00
US	4.25	0.25	0.0/0.25	0.0/0.25
United Kingdom	5.5	2	0.5	0.5
Japan	0.5	0.1	0.1	0.0/0.1

The asymmetries in economic recovery depending on geographical areas has given rise to an abnormally high inconsistency in currencies throughout 2010. The two most significant trends were, on the one hand, the appreciation of the currencies in the emerging economies, particularly in Asia/ Pacific, and on the other hand, the weakening of the euro compared to the U.S. dollar. The first of these trends may be explained by the faster rate of recovery offered by the emerging economies, while the depreciation of the euro reflects the doubts posed regarding the solvency of some of the economies that make up the Eurozone. The attitude of the European Union in the tensest stages, more reactive than proactive, and the resistance of the ECB to adopting a leadership role in dealing with the crisis, have not helped the euro at all.

One debate that will remain on the table is the pressure exerted by the United States to revalue the yuan, although the increase in interest rates in the Asian giant could lead to advances in this regard. The yen and the Swiss franc have played the role of 'shelter currencies', as both currencies rose significantly compared to the euro and the dollar in 2010.

International stock markets

Contrary to what might be deducted at first glance, 2010 was a good year for the markets, except in Europe and Japan. The progress in the U.S. and in the emerging countries was significant, double digits in many cases (see the following table), although the perspective from the Eurozone was somewhat disappointing. This statement is particularly valid in the case of the Spanish stock market, which dropped -17.4%, one of the worst records at international level. Even Japan, despite presenting a slightly negative net annual balance after years of high instability, managed to improve as the year progressed.

The European decoupling was due to the profound solvency crisis affecting the Old Continent. However, its impact on the rest of the indexes was very limited and therefore global recovery continues its course.

The volatility of the stock markets, both American and European, has been falling since the end of the first quarter to levels that are close to their historical average, which indicates a hypothetically consolidatable trend during 2011.

The following table shows the changes in the main stock markets in 2010 and 2009, always in local currency:

	References	2009 (%)	2010 (%)
Spain	Ibex35	29.8	-17.4
USA	S&P 500	23.5	12.8
USA	Nasdaq	53.5	19.2
Europe	EuroStoxx 50	21.0	-5.8
United Kingdom	FTSE 100	22.1	9.0
Germany	DAX	23.8	16.1
France	CAC	22.3	-3.3
Japan	Nikkei	19.0	-3.0
China	Shanghai (B)	127.6	20.6
Brazil	Bovespa	82.7	1.0
India	Sensex	81.0	17.4

3. Risk policies and management

Risk management is a fundamental principle that prevails throughout the Bank's divisions. The Board of Directors holds the highest responsibility and establishes the Bank's own risk profile, risk policy and internal control systems. The Framework Agreement on Risks sets the strategy in the area of risks on an annual basis.

The Board of Directors, through the Executive Committee, the Audit and Regulatory Compliance Committee (to which both Audit and Risks report on a regular basis), oversees and supervises accounting policies and systems and internal monitoring procedures, in regard to all risks inherent to the Bank's activities, and the prevention of capital laundering in accordance with standing legislation.

The entire Risks structure (Credit, Control and Recoveries and Global management) as well as Market, Operational and Reputational Risk, is directly seconded to the Executive Vice-Chairperson, according to the principle of independence and segregation of duties.

The identification, measurement, management, control and monitoring of the risks inherent to banking operations constitute a fundamental aim, always in a context of optimising the global management of all risks.

We are one of the few nationwide banks that have achieved approval from Spain's Central

Bank for the majority of our internal rating models. Moreover, all of the methodologies, systems and policies provided in the Basel II capital framework for managing and measuring risk and equity are in place at Bankinter. Supported by these models, risk-adjusted return is the management tool that enables to perfectly combine the Institution's solvency binomial with sustainable value creation over time.

The main principles that govern Risk Management are as follows:

• Function independence.
• Alignment with strategic objectives.
• Integrated risk management.
• Management based on the risk-return binomial
• Mass use of automatic authorisation.
• Risk diversification by clients, sectors, counterparts and markets.
• Identification, assessment and control of product risk, particularly when new products are launched.
• Relevance of the quality of service factor in the risks function.

Management policies for Structural Risks and Market Risks

Bankinter is guided by principles that constitute the basis of the general risk policy. These basic principles are of a permanent nature; they have been in application in recent years and continue to apply. In general, these policies are as follows:

• The purpose of Bankinter's policy on the management and control of "Structural Risks" and "Market Risk" is to neutralise the impact of variations in interest rates, in the main market variables and in the balance sheet structure itself, on the Bank's profit and loss account, by adopting the most appropriate investment or hedging strategies.
• To develop the most adequate systems for the measurement of structural and market risks to provide information relating to the Institution's exposure to these risks, and to any possible deviations that might arise regarding established limits and procedures.

The Board of Directors decides the strategy and policy for the Bankinter Group's policy as regards "Structural Risks" and "Market Risk" and delegates management, monitoring and control to various Bodies in the Institution. It also decides on the risk profile that the Institution is willing to undertake, establishing the maximum limits that it delegates to said bodies and which are reviewed on an annual basis.

It should be noted that the exchange rate risk is not significant at the Institution.

STRUCTURAL RISKS

The Sovereign Debt crisis that started in early 2010 had a marked influence on trends in the financial markets during this financial year. This, the risk premium in peripheral countries increased, activity decreased in the wholesale markets and the Institutions have had to use other alternative means of funding. The exchange markets were also highly volatile. All of these facts reveal the importance of managing interest and liquidity risks in Financial Institutions. Bankinter has continued with its prudent policy in managing and controlling these risks, so as to minimise their impact.

The Board of Directors delegates the ongoing monitoring of decisions regarding structural balance sheet risks (interest rate risk and liquidity risk), stock market risk and exchange rate risk of the Bank's corporate positions, as well as the establishment of the financing policies, to the Assets and Liabilities Committee (ALCO). Moreover, each year it reviews, approves and delegates to the ALCO the limits applicable for managing the aforementioned risks. The Treasury and Capital Markets area implements the decisions taken by the ALCO with regard to the Bank's corporate positions.

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

Market Risks, which reports to Risk Management, and which is in turn part of the Risks and Finance Department, is entrusted with the independent function of measuring, monitoring and controlling the Entity's structural risks.

Interest rate structural risk

The structural interest rate risk is the Institution's exposure to fluctuations in the market's interest rates, derived from the different temporary maturity and revaluation structure of the items on the Global Balance Sheet.

Bankinter performs active management of this risk in order to protect the interest margin and to preserve the economic value of the Bank against interest rate fluctuations.

In order to control exposure to the interest rate structural risk, the Bank has established a structure of limits that is reviewed and approved on an annual basis by the Board of Management, in accordance with Bankinter's strategies and policies in this regard.

In addition, Market Risk performs sensitivity analyses on financial margin and economic value, for both the Bank and the Subsidiaries that are associated to these risks and the impact that they have on the Consolidated Group.

Bankinter has tools to monitor and control the structural interest rate risk. We will now go on to specify the main measurements used by the Bank that enable to manage and control the interest rate risk profile approved by the Board of Directors:

a) Interest Rate Gap or Plan

Shows the exposure to the interest rate risk on the basis of the structure of maturities and/or repricing of the Institution's on- and off-balance sheet items. This measurement is obtained automatically, at least on a weekly basis, and it constitutes the basic tool that provides static information on interest rate concentrations in the various terms and which also serves as the basis for analysing the possible impacts that the variations in the interest rates may have on the Institution's Financial Margin and Net Asset Value.

The interest rate plan is obtained by distributing the positions and balances of the on- and off-balance sheet items according to time terms depending on their nature. Therefore, items that are sensitive to interest rates for which the interest rate maturity or review date is known are classified in the plan according to these criteria, depending on whether they are linked to a fixed or variable rate, respectively. Items that are sensitive or insensitive to interest rates, with no fixed maturity rate, are distributed according to particular historical behaviour hypotheses that are reviewed on a regular basis by Market Risk, with a view to adjusting the measurement model to their historical performance.

The operational limits that are applicable to this measurement are defined as the maximum opening figures or the difference between the total amount of the active and passive positions (gap) that may be maintained in each time bracket in the interest rate risk plan. The interest rate risk plans for the Bankinter Group at the close of 2010 and 2009 are attached below:

It is an approval tree with a regression, which determines the likelihood of default in operations. In 2008, the RAROC (Risk-adjusted Profitability) was incorporated into the template as a decisive variable in granting operations.

INTEREST GAP Dec10 (GROUP)

Figures as at 31/12/10 in millions of euros	Up to 1 month	1 to 3 months	3 to 12 months	1 to 2 years	2 to 3 years	3 to 4 years	4 to 5 years	more than 5 years	total
ASSETS
Loan and receivables	16,189	6,011	18,428	543	192	152	85	1,756	43,356
Loans and advances to credit institutions	958	297	181	45	0	0	0	1,481
Loans and advances to customers	15,231	5,714	18,247	498	192	152	85	1,738	41,857
Other	0	0	0	0	0	0	0	18	18
Fixed Income Portfolio	1,023	154	665	2,601	3,220	715	221	1,076	9,675
Financial assets and liabilities held for trading	11	140	195	447	99	47	32	304	1,275
Portfolio Available for Sale	1,013	13	364	796	2,463	263	39	205	5,158
Held to maturity investments	0	0	106	1,358	657	404	150	567	3,242
Other Assets	722	0	65	0	0	0	0	3,187	3,974
Total Assets	17,935	6,165	19,158	3,144	3,412	867	307	6,019	57,005
LIABILITIES
Creditor fixed income portfolio	0	0	15	301	303	172	45	253	1,088
Financial assets and liabilities held for trading	0	0	15	301	303	172	45	253	1,088
Financial liabilities at Amortised Cost	13,867	13,282	10,295	3,167	5,652	1,824	2	3,384	51,472
Deposits from credit institutions	3,593	1,995	195	1	0	0	0	247	6,031
Customer deposits	7,291	6,907	9,755	535	1,900	817	2	2,202	29,409
Marketable debt securities	2,188	4,069	205	2,631	3,752	1,006	0	407	14,248
Other	795	321	140	0	0	0	0	529	1,785
Other liabilities	419	59	134	85	0	0	0	1,195	1,892
Shareholders' Equity	10	17	91	122	0	0	0	2,312	2,552
Total Liabilities and Shareholders' Equity	14,297	13,358	10,536	3,675	5,955	1,995	46	7,144	57,005
Off balance sheet operations	9,026	-4,719	-8,115	1,467	1,079	1,230	-38	69	0
TOTAL INTEREST GAP	12,664	-11,912	506	936	-1,463	102	222	-1,056	0
Figures as at 31/12/09 in millions of euros	Up to 1 month	1 to 3 months	3 to 12 months	1 to 2 years	2 to 3 years	3 to 4 years	4 to 5 years	more than 5 years	total
Total Assets	19,225	5,843	21,083	2,151	2,098	645	1,392	4,663	57,101
Total Liabilities and Shareholders' Equity	15,174	14,678	11,775	1,777	3,770	885	1,049	7,994	57,101
Off balance sheet operations	11,277	-1,963	-11,705	-197	1,601	-225	1,108	104	0
TOTAL INTEREST GAP	15,328	-10,798	-2,397	177	-71	-464	1,452	-3,227	0
DIFFERENCES	Up to 1 month	1 to 3 months	3 to 12 months	1 to 2 years	2 to 3 years	3 to 4 years	4 to 5 years	more than 5 years	total
Total Assets	-1,291	322	-1,925	992	1,314	222	-1,086	1,356	-96
Total Liabilities and Shareholders' Equity	-877	-1,320	-1,239	1,898	2,185	1,111	-1,003	-851	-96
Off balance sheet operations	-2,250	-2,756	3,590	1,664	-521	1,455	-1,147	-35	0
TOTAL INTEREST GAP	-2,664	-1,114	2,903	759	-1,392	566	-1,230	2,172	0

(*) Foreign-currency positions are not relevant and so have not been included in the breakdowns of the attached Gaps.

The items included in the Interest Rate Plan may be classified as follows, depending on their exposure to the interest rate risk.

• Exposure to interest rate risk: they constitute the majority of the Bankinter Group's Balance Sheet and are items comprising financial instruments that are sensitive to variations in interest rates. These may also be:

Items subject to fair value risk: they are those financial instruments at a fixed rate of interest. The assets include practically the entire fixed income portfolio, operations involving deposits in credit institutions and a low-relevance part of the loans to clients. As regards the liabilities, the highlights are the majority of the client and credit institution deposits, and the credit fixed income portfolio. Also included is the fixed income securities portfolio held by Línea Directa Aseguradora S.A.

Items subject to cash flow risks: they are those financial instruments referenced to floating interest rates. The assets basically include the majority of the client loans and the liabilities, the majority of the debits represented by negotiable securities or own shares.

• No exposure to interest rate risk: they represent a part that is of little importance in the Bankinter Group's Balance Sheet and are the balances included in items of other assets and other liabilities.

b) Sensitivity of the Financial Margin:

Dynamic simulation measures are used to measure on a monthly basis financial margin exposure in different scenarios of variation in interest rates and for a 12-month time horizon. Financial margin sensitivity is obtained as the difference between the financial margin projected with the market curves at each analysis date and the one that is projected with the interest-rate curves altered in different scenarios, both of parallel movement of rates and changes in the slope of the curve.

For a calculation of the dynamic projections of the margin, use is made of the "Interest rate plan" that is obtained from the average monthly balances of those items sensitive to interest rates and by assuming certain renewal or maturity hypotheses. In repricing items that mature or are reviewed, the forward interest rate curves listed on the market and the commercial differentials estimated for each one of them are taken into account. These projections are made considering that the balances remain constant during the time horizon in the simulation or applying the growth expected by the Institution for the period to the various items.

Every year, the Board of Directors sets a reference in terms of sensitivity for the financial margin for -100 basis point parallel movements in the interest rate curves for a term of up to 12 months. The sensitivity in this scenario is followed by the ALCO.

Moreover, the sensitivity to the same interest-rate scenarios for the Subsidiaries subject to this risk and the impact that it has on the Consolidated Group's financial margin are analysed.

The exposure of the Bankinter Group's financial margin to interest rate to +/- 100 bp parallel movements in market interest rates is approximately +/- 0.6% for a 12-month horizon.

The sensitivity of the Group's financial margin to changes in the slope of the curve for a 12-month horizon is +/- 2%. This scenario is built by maintaining the 6-month rate constant and varying the short (up to 3 months) rates and the 12-month rate in the same amount and in the opposite direction, to vary the slope of the curve by +/- 25 basis points in the period under consideration.

Financial Margin Sensitivity
100 bp parallel movements	0.5%
25 bp slope variations	3%

c) Economic Value Sensitivity:

This is a measurement that complements the previous two and which is calculated on a monthly basis. It allows to quantify the exposure of the Bank's economic value to the interest-rate risk and is obtained as the difference between the net current value of the items that are sensitive to interest rates calculated using the curves for rates in different scenarios and the rates curve listed in the market at each analysis date.

Every year, the Board of Directors sets a reference in terms of the economic value sensitivity for 200 bp parallel movements in the market interest rates for 12% of Shareholders' Equity. Sensitivity to this scenario is measured, controlled and submitted on a monthly basis at each ALCO meeting.

The exposure of the consolidated Group's economic value is also quantified following the same criterion as described above.

The sensitivity of the consolidated Group's Economic Value to 200 bp parallel movements, obtained by means of the criterion described above, was, at the close of financial years 2010 and 2009, +/- 1.1% (*) and +/-1% of the Bankinter Group's Shareholder Equity, respectively.

Economic Value Sensitivity	2009	2010
NPV Sensitivity	2,9%	0,2%

(*) of shareholders' equity

Structural liquidity risk

The structural liquidity Risk is related to the Institution's capacity to fulfil its payment obligations and finance its investments. The Bank actively monitors the liquidity situation and measures to be taken both under normal market conditions and in exceptional situations arising due to internal causes or market trends.

Management of this risk is the responsibility of the ALCO committee, delegated by the Board of Directors.

To obtain liquidity, the Bank used short-term issue programmes both on the domestic market and on the international market, with the Euro-Commercial Paper programme. The average balances during the year were 1,395 and 1.347 billion euros respectively. To complete capital and liquidity requirements, 2.350 billion euros of listed mortgagebacked bonds and 1.267 billion euros of senior debt and 40 million of subordinated debt were issued.

The analyses and measurements used to control and monitor liquidity are:

a) Liquidity plan or gap:

This shows information on the distribution of the balances and cash flows of the asset and liability positions of the balance sheet between various timeframes depending on the expected date of completion or liquidation and in accordance with a series of hypotheses based on the historical performance of these products. These hypotheses are reviewed on a regular basis and, in such cases as where they are necessary, supported by models based on historical series.

Included below are the liquidity plans or gap at the closing dates of financial years 2010 and 2009. The information provided by the liquidity plan is static and does not show the expected finance needs as it does not include behavioural models of the asset items, that is, the prepayment of mortgage loans and the renovation of lines of credit or of liability items such as the renewal of IFPs, amongst others.

LIQUIDITY GAP 2010 (Group)

Figures as of December 2010 in millions of euros	Sight	1 day to 1 month	1 to 3 months	3 to 12 months	12 months to 5 years	>5	TOTAL
ASSETS
Loan and receivables		2,376	2,141	7,620	10,694	24,618	47,450
Deposits from credit institutions		95	48	111	45	1158	1,456
Loans and advances to customers		2,281	2,094	7,510	10,649	23,442	45,976
Other		0	0	0	0	18	18
Fixed Income Portfolio		1,076	161	699	7,089	1,131	10,155
Financial assets and liabilities held for trading		11	148	205	658	319	1,342
Portfolio Available for Sale		1,065	13	382	3,728	215	5,403
Held to maturity investments		0	0	111	2,703	596	3,411
Other Assets		1,169	0	328	0	1,504	3,002
Total Assets		4,622	2,303	8,647	17,783	27,253	60,608
LIABILITIES
Creditor fixed income portfolio		11	0	16	863	267	1,157
Financial assets and liabilities held for trading		11	0	16	863	267	1,157
Financial liabilities at Amortised Cost	10,407	3,414	2,471	8,496	13,124	14,141	52,054
Deposits from credit institutions		179	50	1	0	5,811	6,041
Customer deposits	10,407	2,596	1,775	7,130	1,909	5,092	28,908
Marketable debt securities		640	646	1,365	11,216	1,449	15,317
Other		0	0	0	0	1,788	1,788
Other liabilities		0	0	0	0	1,495	1,892
Shareholders' Equity		0	0	0	0	2,552	2,552
Total Liabilities and Shareholders' Equity	10,407	3,755	2,471	8,580	13,987	18,455	57,655
TOTAL LIQUIDITY GAP	-10,407	867	-169	67	3,797	8,798	2,953
Figures as of December 2009 in millions of euros	Sight	1 day to 1 month	1 to 3 months	3 to 12 months	12 months to 5 years	>5	TOTAL
Total Assets		4,450	2,679	11,483	15,768	28,297	62,676
Total Liabilities and Shareholders' Equity	10,897	4,550	4,189	8,330	10,270	18,147	56,383
TOTAL LIQUIDITY GAP	-10,897	-100	1,511	3,154	5,498	10,149	6,293

(*) Foreign-currency positions are not relevant and so have not been included in the breakdowns of the attached Gaps.

(*) The Institution does not have any non-listed positions

b) Analysis of finance needs, maturities and scenarios

The business gap is analysed to predict the liquidity needs or excesses arising from the difference between investment and customer resources and these are compared with the sources of funding that are expected and the assets that are available. Other stress scenarios that may affect these variables are also analysed.

c) Monitoring of the specific situation relating to assets, concentration in issue maturities. In this regard, the Board of Directors lays down a number of maximum exposure ceilings.

d) Contingency Plan

The Institution has a Contingency Plan which identifies the general actions to be taken in different crisis scenarios, the internal and external communication channels and the bodies in charge of monitoring these situations.

MARKET RISK

The Board of Directors delegates to the Treasury and Capital Markets Area operation on its own behalf in the financial markets, with a view to leveraging the business opportunities that arise, using the financial instruments that are most appropriate at any given time, including interest-rate, exchange-rate and variable-income derivatives. The financial instruments with which trading is undertaken must, in general, be sufficiently liquid and be associated to hedging instruments. The risk that may be derived from the management of the institution's own accounts is associated to the movement of interest rates, stock market, exchange, volatility and credit spread.

The Board of Directors delegates to the ALCO committee ongoing monitoring of the management carried out by the Treasury and Capitals Market area on its own behalf and establishes some maximum limits for authorising possible excesses that may occur due to the activity carried out by the Treasury and Capitals Market area.

Market Risk, which is seconded to the Risks Department, has the independent function of measuring, tracking and controlling the Bank's market risk and the delegated limits.

Market risk is measured mostly using the "Value at Risk" (VaR) methodology, considered both globally and segregated for each relevant risk factor. The limits in VaR terms are supplemented by other measures such as stress testing, sensitivities, stop loss and concentration.

We will now go on to describe the methodology for measuring the main market risk measurements.

Value-at-Risk (VaR)

"Value-at-Risk" (VaR) is defined as the maximum loss that is expected from a particular portfolio of financial instruments, under normal market conditions, for a certain confidence level and time horizon, as a consequence of movements in prices and market variables.

The VaR is the main indicator used daily by Bankinter to measure and control on an integrated and global basis exposure to market risks owing from interest rates, variable income, exchange rates, volatility and lending.

The measuring methodology used is the 'Historical Simulation' based on the analysis of possible changes in the value of the position used. Historical movements in the individual assets that make it up are used. VaR is calculated with a confidence level of 95% and a time horizon of one day. During this financial year, the VaR model was adjusted to obtain a market risk measurement more in line with the market trends.

On the other hand, there is monthly monitoring of the VaR at its subsidiary, Línea Directa Aseguradora S.A. using the "historical simulation" methodology.

The following are the VaR comparative risk factor data for the Bank's positions in financial years 2010 and 2009, both for the total and differentiated according to portfolio:

Total VaR 2010
Million Euros	Final
Interest Rate VaR	3.83
Variable Income VaR	0.67
Exchange Rate VaR	0.01
VaR Volatility Rate	0.03
Credit VaR	0.00
	3.92

Total VaR 2009
Million Euros	Final
Interest Rate VaR	3.63
Variable Income VaR	0.68
Exchange Rate VaR	0.02
Credit VaR	0.04
	3.71

Trading VaR 2010
Million Euros	Final
Interest Rate VaR	0.87
Variable Income VaR	0.18
Exchange Rate VaR	0.01
VaR Volatility Rate	0.03
Credit VaR	0.00
	0.95

Trading VaR 2009
Million Euros	Final
Interest Rate VaR	0.32
Variable Income VaR	0.16
Exchange Rate VaR	0.02
Credit VaR	0.04
	0.35

Available sale VaR 2010
Million Euros	Final
Interest Rate VaR	3.10
Variable Income VaR	0.49
Exchange Rate VaR	0.00
Credit VaR	0.00
	3.27
Available sale VaR 2009
Million Euros	Final
Interest Rate VaR	3.72
Variable Income VaR	0.52
Exchange Rate VaR	0.00
Credit VaR	0.00
	3.84

Confidence level 95%, time horizon of 1 day

(*) The VaR figure at the close of 2009 in the previous table was altered in relation to the figure submitted in the 2009 Annual Report. This variation is due to the fact that in the financial year 2010 there was a change in the positions taken into account in the "fixed income available for sale portfolio". The impact is not significant on the VaR figure for the Interest Rate presented in the Annual Report for 2009.

In the year 2010 an increase was recorded in the volatility of the various risk factors and in particular, the Spanish Treasury interest rates, which had an influence on the market risk of the held portfolio. The Bank has maintained low risk levels, in general, as may be seen in the previous tables, in both the "negotiation portfolio" and in the variable income risk and change in "portfolio available for sale". However, the increase in the VaR recorded at year-end for the interest rate "portfolio available for sale", arising from the reclassification to same of the entire "investment held to maturity portfolio" position.

The market risk (VaR) for the Línea Directa Aseguradora portfolio at the close of the financial years 2010 and 2009, was 0.90 million euros and 0.76 million euros respectively, calculated according to the "Historical Simulation" methodology, with a confidence level of 95% for a 1 day horizon. This increase is due to the increase in the position of the variable income compared to the previous financial year, and to the change in scenario applied. However, despite the increase in the volatility of interest rates during the financial year, the interest rate VaR for Línea Directa Aseguradora was reduced by the drop in the fixed income portfolio.

Stress Testing

Stress testing, or the analysis of extreme scenarios, is a supplementary test to VaR. The estimates from the stress tests quantify the maximum potential loss in portfolio value under extreme scenarios of change in the risk factors to which the portfolio is exposed.

Every year, the Board of Directors approves an extreme scenario based on significant movements in interest rates, securities exchanges, exchange rates and volatility, and certain upper references regarding these variations for each type of risk. In addition, estimates are made with other scenarios that replicate different historical crisis situations and other relevant current market situations that were not included in the scenarios applied.

In the year 2010, the stress scenarios for Stock Market and Volatility were updated to adapt them to each product type and to the evolution of historical events observed in the market for this type of risk factors.

Set out below is information on the results of one of the most extreme stress scenarios for the Bank in financial years 2010 and 2009:

Stress Testing 2010
Million Euros	Final
Interest Rate Stress	10.83
Variable Income Stress	10.45
Exchange rate Stress	0.15
Volatility Stress	0.42
Credit Stress	0.00
Total Stress	21.84

Stress Testing 2009
Million Euros	Final
Interest Rate Stress	25.02
Variable Income Stress	7.00
Exchange rate Stress	0.32
Volatility Stress	1.18
Credit Stress	0.12
Total Stress	33.64

*The Stress Testing figures at the end of 2009 shown in the previous table were altered in relation to the figure presented in the Annual Report for 2009. This variation is because in the current financial year 2010 there was a change in the positions taken into consideration in the "fixed income portfolio available for sale". This impact brought about a drop of approximately 15 million euros from the Interest Rate Stress testing Figure that was presented in the 2009 Annual Report.

The total stress testing level at the close of the financial year 2010 dropped in comparison to 2009. The drop in the interest rate stress testing level is notable because of the lower position in fixed income. On the other hand, the variable income stress testing level at the close of the financial year 2010 was higher than that of the previous year, basically as a result of the change made in the stress scenario applied in 2010.

The result of calculating the stress scenarios for the Línea Directa Aseguradora portfolio positions at the close of the financial year 2010 totals 22.75 million euros compared to 11.15 euros in 2009. The increase is due to the variable income stress testing due to the increase in position and the change in the scenario applied to this risk factor.

Credit risk

Organisation and functions

The Board of Directors establishes the strategy to be followed in respect of each individual risk in the Risk Framework Agreement, which is drawn up on an annual basis. It decides on the basic guidelines behind the Institution's risk appetite, setting the course as regards the granting of risks. It establishes the next level of powers and decides on how they should be delegated. As well as its executive and authorisation function in the area of risks, it is informed on a monthly basis as to the evolution of the main risk indicators.

The Risk Committee, which is chaired by the Chief Executive Officer, is the body to which the Board of Directors delegates implementation of the risk policy. The attributions that have been delegated to this Committee include the authorisation of operations and deciding on the level of powers to be assigned to the Committees in subsequent levels. The evolution recorded in clients, sectors and main matters affecting credit quality is reported.

The next level of competence lies with the Credit Risk Committee, the Management of which is directly seconded to the Executive Vice-Chairperson. The Risks Directorate is responsible for drawing up the various risks policies and informing on how they are implemented. Its targets include the development of automatic authorisation systems and all risk processes, while always seeking maximum efficiency and quality.

The Credit Risk Department performs its functions through the units that form its structure:

o Risk approval and policies are the responsibility of:

o The Private Individual Risks Unit,

o the Corporate and Developer Risks Unit

o the Corporate Risks Unit.

o The Risk Processes Unit is in charge of defining and improving the various risk processes, including the IT systems for risks.

As well as their own functions, the various Units actively intervene in the process of defining new products, deciding on the risk parameters and collaborating on the strategy for defining the client profile, as part of the marketing process, with the most efficient authorisation process always being set.

The Validation Unit has the function of validating the advanced risk models and their results, which is an indispensable requirement in calculating equity needs on the basis of internal estimates. This is an independent Unit within the Risks Department; it also performs a critical examination of the parameters used in building the models and tests their use in management.

Structure and procedures

The organisational structure of the risk function at the institution combines a hierarchical structure with the delegation of powers. This combination is perfectly delimited by a series of rules that establish competencies, specify functions and create spheres of responsibility, thus enabling the same strategic line to be maintained. Decision-taking on the Risks Committees is on a collegiate basis, representing the various areas involved.

The risk admission process is supported by an electronic proposal that enables integration and unification of all of the bank's networks and channels. The use of statistical models enables automatic authorisation of retail risks, in compliance with the objective of efficiency and the use of technology in authorisation. The information from the systems is contrasted to ensure its accuracy.. Assessing a customer's risk premium and Return is an important part of the acceptance process.

Risks Map

The Bank of Spain's new regulations on capital management and the solvency of credit institutions imposes the need to establish specific procedures for controlling and managing risk-inducing factors that can result in the materialisation of economic losses.

A methodology has been developed to allow for the detection, analysis and assessment of the potential impact (severity) of all of those practices and factors that are inherent to the activity being carried out, and which can be instigators of risk, as well as processes for tracking and controlling these mitigation practices and measures or where appropriate, if possible, eliminating the residual risk affecting these practices.

Concentration

The recent financial crisis and the requirements in the New Basle II Accord have let to closer monitoring of the Institution's concentration policy. The aspects that are taken into account are diversification according to sectors, geographical location, products and guarantees, as well as concentration in clients. Diversification in terms of the different categories of statistic models, within legal entities, shows correct distribution: Less than 5% are Very Small Companies and in the rest, Very Large Companies stands out with a percentage in excess of 40%. Comparison of exposure according to sectors with the total banking system and more specifically with the exposure of Banks only (according to the data published on the Bank of Spain website) reveals that the distribution is very similar, with higher exposure in very atomised sectors such as those of Business and Repairs and lower exposure in high-risk sectors, such as developers. From the geographical viewpoint, the highlight is the greater presence in Madrid, which is characteristic of the broad-ranging network developed in this Community. There is concentration (in turn highly diversified) in mortgage guarantee products, which represent around 70% of total risk. In accordance with the criterion established by Spain's Central Bank for classifying Major Risks (in excess of 10% of Shareholders' Equity), there are only two groups with exceptional credit quality.

Maximum exposure to credit risk

Maximum exposure to credit risk coincides with that which is reflected on the balance sheet and the notes of the explanatory report, for each category of financial instrument, with no tangible securities or other credit enhancements received to ensure debtor compliance being deducted from same.

Evolution of client risk

The worsening of the economic downturn was the main characteristic of 2010 for all financial institutions. In accordance with expectations, default continued to increase, although at lower levels than in the year 2009. If the existing default level is added to the assets foreclosed by the Financial Sector and assets classified as problematic or substandard by the sector to which they belong or the limited expectations for repayment, the conclusion is that there has been significant impairment in the quality of credit risk throughout this year. Just like in previous years, in this area the differences in the qual- Mortgage, 70%

ity of the portfolios were even more pronounced. The hedging that Financial Institutions have had to face increased considerably as a consequence of the volume of default and foreclosures and of the alteration in the Circular from Spain's Central Bank regarding allowances, which calls for greater coverage of default positions in a shorter period of time.

Bankinter once again stood out thanks to its strong credit portfolio. The risk culture that is integrated at all levels of the organisational structure is the pillar on which the balance sheet has been built and the reason for the excellent risk ratios.

Exposure to credit risk with customers totalled 46.291 billion euros as at 31 December 2010, with a 4% increase, which compares very positively with the evolution in the system (according to a publication from Spain's Central Park with data from Nov. 10 it has remained stable). The quality of the assets (default ratio in Dec 2010 2.87%) and conscientious risk management have allowed to look for opportunities for growth in more valuable sectors and customers.

The Bank's credit risk includes a high percentage of mortgage guarantees, which reflects the conservative policy implemented in recent years.

70% of the credit portfolio includes a mortgage guarantee, with an LTV (loan to value, measures the proportion between the value of the house and the loan) ratio of 57%.

83% of the portfolio with mortgage guarantees corresponds to residential mortgages on houses. Exposure to other lower quality assets is residual, as may be seen in the graph.

Guarantee risk (%)

The high percentage of mortgage guarantees for Companies and Small Companies, 57%, in December 2010, has proven to be an efficient risk policy in these times of downturn.

Another feature that is characteristic of the portfolio is the high level of risk diversification, reaching 71% with transactions worth less than 600.000 euros.

Relative	≤ 150	150 - 600	600 - 3000	3000 - 6000	> 6000	Total
	2%	2%	2%	1%	3%	9%
≤ 3 MONTHS	2%	2%	2%	1%	2%	9%
	3%	3%	3%	1%	3%	12%
3 - 12 MONTHS	3%	3%	3%	1%	3%	13%
	2%	1%	1%	0%	1%	5%
12 - 36 MONTHS	3%	1%	1%	0%	1%	5%
	26%	34%	9%	2%	4%	73%
> 36 MONTHS	27%	33%	8%	2%	3%	73%
	33%	38%	14%	4%	11%	100%
TOTAL	36%	38%	14%	4%	9%	100%

Figures in ORANGE are from December 2010, in WHITE from December 2009

The reduced exposure to housing developments (lower than 3%) and the non-existence of finance for plots, has once again allowed us to stand out clearly from the rest of the market. In the Spanish Financial System, the default and foreclosures affecting this sector had a significantly negative effect on the Income Statement due to the high level of exposure.

	CREDIT RISK
Consolidated figures	Monetary value at risk	Guarantees	Available
I) COMPANIES (1)	16,141	1,993
1. Purpose real estate development and/or construction	1,082	41	373
2. Purpose construction unrelated to real estate devel opment	1,370	424
3. Other purposes	13,689	1,528
A. Large companies	7,527	1,262
B. SMEs and self-employed workers	6,162	267
II) PRIVATE INDI VIDUALS	27,986	162
1. Assets with 1st mortgage guarantee (	25,713	0
a) 1st home	22,938	0
b) 2nd home	2,036	0
c) Others (garages, storage compartments, etc.)	739	0
2. Assets with other tangible security	424	0
3. Other formalisations	1,849	162
TOTAL RISK	44,127	2,155

The personnel team, which is highly qualified and has a deeply rooted risk culture, supported by advanced information systems, is the main reason for the clear competitive advantage held by the Institution in the area of risks.

Analysis of credit risk
Million €	31/12/2010	31/12/2009	Amount	%
"Computable risk" (total lending)excluding securitisation	46,291	44,401	1,890	4.26
Doubtful debts	1,330	1,093	237	21.67
Total provisions	883	814	70	8.59
Required provisions	883	814	70	8.59
General	157	398	-241	-60.54
Specific	727	416	311	74.71
Non-performing loans ratio excluding securitisation (%)	2.87	2.46	0.41	16.70
NPL ratio (%)	2.97	2.56	0.41	16.02
NPL ratio of the ex-securitised mortgage portfolio (%)	2.37	1.95	0.42	21.27
Non-performing loans coverage ratio (%)	66.43	74.43	-8.00	-10.75
Non-performing loans hedge ratio
with no tangible security (%)	93.72	78.94	14.78	18.72

Private individuals

The excellent credit quality of the bank's natural persons portfolio remains unaltered, with a default ratio of 1.9%.

The most relevant product in the Private Individuals segment is the mortgage loan. The weight of our residential mortgage portfolio in the Bank's total investment has remained very high, up to 54%.

The figures for new mortgage operations have increased compared to the same period in 2009, which was a year with a low mortgage output as a consequence of the downturn. The new output profile is as follows:

	2008	2009	2010
LTV	59 %	63%	64 %
Term	323	324	347
Rating	5.39	5.52	5.9
Effort	39 %	28 %	28 %
Average Amount	179,000	159,000	179,000
No. Operations	17,041	9,689	13,706
Limits (MM)	3,048	1,540	2,458

Since the year 2003 and anticipating the change in cycle, the admission policy for this product was adapted, selecting clients with the highest income and setting a maximum LTV ratio of 80%, which once again sets us apart from the sector.

90% of mortgages are processed by expert approval systems and 39% of the output in 2010 was automatically approved.

The RAROC (Risk-Adjusted Return on Capital) is a decisive variable in authorising operations, with the price therefore being matched to the risk that is inherent to the operation.

The average effort (measured as the percentage of income that the customer allocates to paying their mortgage loan instalments) in the mortgage loans signed in 2010 remained very low (26% in the case of 2010), mostly due to the interest rates that are relatively low.

The LTV ratio for the average mortgage portfolio is 59%, with less than 5% being over 80%.

TOTAL BANK	% OPERATIONS
LTV 00 - 10 %	15.3
LTV 10 - 20 %	10.78
LTV 20 - 30 %	11.16
LTV 30 - 40 %	12.2
LTV 40 - 50 %	12.93
LTV 50 - 60 %	13.03
LTV 60 - 70 %	11.88
LTV 70 - 80 %	8.1
LTV 80 - 90 %	2.29
LTV 90 - 100 %	2.32
TOTAL LTV BRACKETS	100

The NPL Ratio (1.23% in December 2010) is the best in the entire financial system, for which the ratio in June 2010 for this type of investment stood at 2.56%. (Data provided by the Spanish Mortgage Association)

	2008	2009	2010
LTV	59%	57%	59%
First home	90%	91%	92%
Term	225	219	217
Rating	5.64	5.54	5.6
Effort	35%	29%	28%
Average Amount	112,000€	111,000€	115,000€
Non-performing loans ratio	0.61%	1.12%	1.23%

Corporate Banking

The total risk in Corporate Banking climbed to 10.005 billion, a 16% rise on 2009. Despite the increase in the credit risk, the default balance remains contained, as the financial year closed with an NPL ratio of 2.3%, the same as the previous year.

The principles in Corporate Banking remain unaltered, with the highlights being:

• Monitoring of current risks.
• Systematic use of rating models based on statistical rating and subjective assessment by the Risks Committee
• Conservative customer portfolio management.
• Optimisation of the risk-return binomial.
• Long-term investment, with the aim of a long-term relationship with the customer.

CREDIT RISK TEMPLATE CREDIT RISK EXPRESSED IN THOUSANDS OF EUROS

Absolute	≤ 150	150 - 600	600 - 3000	3000 - 6000	> 6000	Total
≤ 3 MONTHS	1%	3%	5%	2%	25%	37%
3 - 12 MONTHS	2%	4%	7%	3%	11%	28%
12 - 36 MONTHS	1%	1%	1%	1%	3%	7%
> 36 MONTHS	1%	2%	6%	3%	16%	28%
TOTAL	5%	11%	20%	9%	56%	100%

Small and medium-sized enterprises

The credit risk totalled 7.298 billion, representing a 3% drop due to the halting economy.

The institution has automatic decision models for risk management and teams of highly experienced risk analysts.

Diversification by sectors, which allows management by portfolios and greater dilution of the risk amongst them all.

Sector distribution for Small and Medium Sized Companies (%)

The economic situation has called for stricter risk policy as regards mortgage guarantees and partner involvement. Moreover, during the year a new centralised approval process was implemented for Small Companies, with a view to streamlining risk acceptance criteria and enhancing the efficiency of the process.

SME default increased in the year 2010, reaching a 7.7% ratio compared to the 5.8% in the previous financial year.

The level of recoveries over additions in the Small and Medium Enterprise segment has remained good.

It should be highlighted that 48% of the outstanding balance for SMEs has mortgage guarantees with an LTV ratio of 42%.

Control, Monitoring, and Recoveries

The Control, Tracking and Recoveries Department is directly seconded to the Executive Vice-President, which guarantees that it functions on an independent basis. Its basic function is to direct and manage the processes for following up on and controlling credit investment with a view to anticipating possible decline in customer risk quality. It also defines and establishes the processes for recovering non-compliant positions.

Bankinter has had automatic systems in place for years for controlling and monitoring credit risk on a permanent basis. There are also processes for controlling the quality of data entered in the automatic authorisation systems and controlling the formalisation of credit operations.

The year 2010 was characterised by an increase in default that was lower than that of the previous year as a consequence of the higher recoveries and similar volume of additions in line with the economic cycle. The anticipation and management of default has special relevance in these times and because of this we have dedicated some of our best resources to this activity.

The Control and Recoveries Process means:

1. The introduction of Risk CRM (Customer Relationship Management) as regards Centres and Organisation, prioritising the warnings by means of the use of the risk agenda.

2. Computerising the Recovery System with variables that allow recovery actions to be carried out according to sectors, customer ratings and severity.

3. Streamlined pre-litigious process, from notification to closure and notice to debtors.

4. Integration of the information from all recovery agents, internal and external, enabling daily monitoring of the entire process.

5. Development of behaviour models in accordance with the terms of Basel II and integration thereof in the customer statistical alert system.

In addition to the function of the control and monitoring carried out by the Control Unit, it also develops, evaluates and carries out the monitoring of the Control tools and applications used by the Network.

The Bank has a variety of applications that allow us to monitor credit investments in a predictive, reliable and high-quality manner for each client and Centre/Office. These tools allow us to establish special supervision of certain clients in difficulties, with the aim of reducing or cancelling the credit risk in a short period of time:

• Statistical client alert

The Statistical Customer Alert System detects, on the basis of statistical analysis of the most predictive variables, customers with a higher probability of default.

• Risk Quality

Subjective classification by managers enabled us to segment clients: those that require special surveillance and those that are classified as a risk to be eliminated.

The subjective qualification linked to the objective qualification systems in line with certain variables (risk, risk evolution, problems, etc.) has enabled us to anticipate breach situations.

• Branch-Office Alerts

The increase in personnel in the years of the economic bonanza requires monitoring at office level. We have a statistical tool to do this, which complements the Risk Audits.

• Anticipation of Risk

This is a measurement tool that enables us to know for sure if risks are being anticipated correctly. It measures the efficiency of the two systems described above (Statistical Customer Alert and Risk Quality).

Default Recovery and Management

The Recoveries Unit monitors operations that register exceptions and are responsible for recovering the positions of the most important customers from the moment the problem is detected through to regularisation.

Fast decision-making is still a decisive and distinctive factor in the Bank. Looking for specific solutions has in many cases allowed the customer to continue, with no impairment for the bank.

Collaboration with external recovery agencies for less important positions was of special relevance, enabling the freeing-up of resources in the Commercial Network and in the Organisations, for tasks with a higher added value.

The level of recoveries over additions increased substantially and is now a benchmark in the sector.

Entries / recovery / % recovery

The Bank's strategy in recent years - focused on a unique business model, with a strong culture of credit risk management at all levels, combined with highly qualified personnel - is clearly reflected in the current non-performing loans ratio. The Bank's default ratio increased during the financial year 2010, rising to 2.87%, compared to 2.46% in the previous financial year.

This increase in default was most severely felt in the Small and Medium Enterprise segment.

The default flows in this financial years were as follows: the default figure reached a balance of 1.330 billion compared to the figure of 1.093 billion in the financial year 2009, with an increase of 237 million in default (including 78 million in doubtful balances for reasons other than default and certain customers having been classified as doubtful that while they have not defaulted, show unequivocal signs of doubtfulness in the short/ medium term).

Variation in non-performing loans. M+D and non-performing loans ratio (balance in million of euros)

Refinancing of customers with risk in excess of 500,000 € in the financial year 2010 ac- the losses in the mortgage portfolio are insignificant. counts for 0.63% of credit risk, with refinancing being considered to mean any change in credit risk conditions. The majority of refinancing operations have additional guarantees.

Purchase of real estate assets

The purchase of real estate assets occasionally allows for more efficient recovery. It means that the assets are immediately available, with lower costs and terms that judicialisation of positions and it contributes towards improving the client's situation insofar as leveraging is reduced.

Purchases of shares in the bank rose to 33.5 million, with the current gross portfolio being 378 million in real estate assets.

Real estate assets are highly diversified in geographical terms and as regards property type, which makes them easier to sell. Turnover exceeded 82.7 million € in the financial year.

Hedging of foreclosed assets stood at 28% in December 2010.

Due to the scarce presence of Bankinter in the development sector, real estate asset purchases are clearly lower than the average for the sector. In the real estate asset portfolio, we should highlight the absence of developments in progress and the low importance of non-urban plots, both of which are products with a much more limited market in the current situation.

Provisions

Solvency levels and asset coverage allow us to face the current situation in optimum conditions.

At the close of the financial year, the doubtful credit portfolio with personal guarantees includes significant allocations as a consequence of the Circular from Spain's Central Bank that significantly accelerated specific allocations.

The doubtful mortgage portfolio with mortgage guarantees presents an LTV ratio of 49.6% and given the excellent default ratio with mortgage guarantees and the high LTV,

Reputational Risk

Reputational Risk is the risk that is inherent to taking steps with clients that may lead to negative publicity regarding practices and business relations, which may cause a loss of trust in the institution's moral integrity.

The responsibility is to detect, analyse and evaluate the potential impact (severity) of all of the practices and factors that are inherent to the activity being carried out and which may induce reputational risk, as well as the task of establishing processes for monitoring and controlling these mitigation practices and measures or as applicable, if possible, eliminating the risk that is inherent to same.

The Operational and Reputational Risks and New Products Committee meets on a regular basis, with the following functions as regards reputational risks:

• To promote the implementation of reputational risk policies.
• To monitor mitigation projects for substantial risks.
• To decide on the proposals put to the Committee as possible reputational risk events.

• Validating compliance with procedures and protocols for identifying and assessing reputational risks. This function is particularly relevant where launches of new products or business lines are concerned.

4. Use of financial instruments to hedge risks.

The Group takes positions in derivatives with the purpose of formalising hedging, performing active management with other financial assets and liabilities or benefiting from the changes in their prices. Financial derivatives that may not be considered as hedging are considered to be trading derivatives.

The hedging performed by the Group belongs to the fair value hedging type:

Micro-hedging or individual hedging (where there is a specific identification between the instruments hedged and the hedge instruments) hedges exposure to changes in the fair value of the item hedged. The profit or loss arising from valuing the hedge instruments is recognised immediately in the profit and loss account.

Portfolio hedging (interest-rate risk hedging in a portfolio of financial instruments) hedges exposure to variations in the fair value of the amount hedged in response to modifications in the interest rate. The profit or loss arising from valuing the hedge instruments is recognised immediately in the profit and loss account. In the case of the hedged amount, the profit or loss that arises when valuing it is directly recognised in the profit and loss account, using as the offset "Adjustments to financial assets by macro-hedging", or "Adjustments to financial liabilities by macro-hedging", depending on whether the hedged amount corresponds to financial assets or financial liabilities, respectively.

As at 31 December 2010, the Group held hedge derivatives in the amount of 171,917 thousand euros recorded on the asset side of the balance sheet and 40,441 thousand euros recorded on the liability side (189,987 and 65,010 thousand euros on the asset and liability side as at 31 December 2009). The net of the derivatives climbed to 131,476 thousand euros and 124,977 thousand euros at 31 December 2010 and 2009, respectively.

The breakdown of the hedging derivatives and the corresponding hedged elements, differentiating according to the type of hedging, is as follows:

Thousand euros					Fair value of the Hedged Instrument attributed to the hedged risk	Fair value Hedging Instrument (ex	interest)
Instrument Hedged	Type of Hedging	Hedging Instru ment	Hedged Par (mil lions of euros)	Nature of Risk Hedged	31-12-10	31-12-09	31-12-10	31-12-09
Individual hedges or Micro-hedges:
Financial assets
Public Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	430	Interest Rate	23,212	25,221	(22,476)	(24,043)
Financial liabilities
Subordinated Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	370	Interest Rate	(30,794)	(20,457)	31,436	20,422
Senior Debt	Individual Hedges or Micro-hedges:	Interest-rate swaps	79	Interest Rate	(1,007)	-	999	-
Customer Deposits	Individual hedges or Micro-hedges:	Interest-rate swaps	20	Interest Rate	(41,545)	(41,031)	41,627	40,682
Backed issue	Individual hedges or Mi cro-hedges:	Interest-rate swaps	1,500	Interest Rate	(16,715)	(11,491)	15,302	10,908
FAAF bonds	Individual hedges or Micro-hedges:	Interest-rate swaps	743	Interest Rate	(11,577)	(14,927)	11,631	15,041
Mortgage Bond Issues	Individual hedges or Micro-hedges:	Interest-rate swaps	2,500	Interest Rate	(26,229)	(20,349)	25,208	20,330
Macro-hedging-
Mortgage Loans	Macro-hedging	Interest-rate swaps	10,100	Interest Rate	1,308	9,754	(1,210)	(9,259)
					(103,347)	(73,280)	102,517	74,081

The following is a comparison of the interest and ex-interest hedging instruments as at 31 de December 2010 and 2009:

Thousand euros		31-12-10	31-12-09
	With inter est	Ex-interest	With inter est	Ex-interest
Public Debt	(27,124)	(22,476)	(35,708)	(24,043)
Subordinated Debt	33,094	31,436	22,056	20,422
Customer Deposits	41,666	41,627	40,682	40,682
Senior debt	2,268	999
Backed issue	38,385	15,302	34,174	10,908
FAAF bonds	17,345	11,631	20,801	15,041
Mortgage Bond Issue	38,231	25,208	72,098	20,330
Macro-hedging - Mortgage loans	(12,036)	(1,210)	(74,695)	(64,118)
Other
	131,790	102,517	124,977	74,081

The Group uses interest-rate swaps as hedging instruments. These swaps give rise to an economic interest rate exchange with no principal being exchanged.

The following is a description of the main characteristics of the hedging maintained by the institution as at 31 de December 2010.

1.- Public Debt Hedging classified in the portfolio of assets available for sale

In this type of hedging, the hedged elements are Spanish State Public Debt securities at 5.40% and 5.50% for a total face value at closure of 430 million euros recorded under the heading "financial assets available for sale" in the assets included in (Note 19). The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. The accounting hedge is used to exchange exposure to fixed interest for exposure to variable interest. In each case, the amount hedged represents 100% of the issue.

2.- Hedging of issues of subordinated debentures

In this case the items hedged are subordinated debentures issued by Bankinter for 5.70%, 6.00% and 6,375% fixed interest rates for a total sum of 370 million euros carried under the heading 'Financial liabilities at depreciated cost' of the liabilities included under (Note 19). The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. In each case, the amount hedged represents 100% of the issue.

3.- Hedging of issues of senior bonds.

In this case the items hedged are senior bonds issued by Bankinter for a 3% fixed interest rate for a total sum of 78.8 million euros carried under the heading 'Financial liabilities at depreciated cost' of the liabilities included under (Note 19). The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount hedged is 100% of the issue.

4.- Hedging of Customer Deposits

The elements hedged are various fixed-rate deposits taken from clients in the amount of 19,554 thousand euros carried under the heading "financial liabilities at depreciated cost" of the liabilities included in (Note 19). The risk hedged is the variation in the fair value of said deposits as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount hedged is 101% for the CAS and 99% for the PLUS.

5.- Hedging of backed issue

The instrument being hedged is issue ES0313679450, 1.5 billion euros. The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount that is hedged is 100%.

6.- Hedging of FAAF bonds

The instruments being hedged are bonds ES0413679046 and ES0413679053, for a face value of 743 million euros. The risk hedged is the variation in the fair value of said securities as a result of variations in the risk-free interest rate. This accounting hedge is used to transform exposure to a fixed interest rate into exposure to a variable interest rate. The amount that is hedged is 100%.

7.- Hedging of mortgage-bond issues

The instruments being hedged are issues ES0413678061 (1 billion €), ES0413679079 (1 billion €) and ES0413679095 (500 million €) of mortgage bonds for a total face value of 2.5 billion euros.

The risk being hedged is the six-month interest rate risk at the start of each interest period to which the above fixed-income instrument is exposed as a consequence of the variations in the risk-free interest rate, excluding variations due to possible credit risk premiums, market liquidity or any other than the aforementioned interest-rate risk.

8.- Portfolio hedging

The element being hedged is the amount of the mortgage loans that it is decided to hedge on a monthly basis according to the time distribution of the maturity and variable interest-rate review dates to which they are linked.

The risk being hedged is the interest to which the aforementioned mortgage loan amounts are exposed for each of the rate-review terms that are to be hedged, as a consequence of variations in the risk-free interest rate.

In this hedge, the risk-free interest rate will be understood to correspond to the variable interest rates of the Call Money Swaps (CMS).

The instruments that are used as hedging elements for the various mortgage loan amounts are CMS hired on a monthly basis depending on the decisions that are adopted in managing interest-rate risk.

Hedging efficiency

The Micro-hedges and Portfolio Hedging described above are highly effective. The Bank performs and documents the necessary analyses to verify that at the start and during the lifetime of same, it is possible to expect, on a prospective basis, that the changes in the fair value of the hedged item that are attributable to the hedged risk will be almost fully compensated for by the changes in the fair value of the hedging instrument and, on a retrospective basis, that the results of the hedging will have fluctuated within a range of variation of between eighty and one hundred and twenty-five percent from the result of the hedged item.

As regards portfolio hedges, as well as the foregoing, the Bank verifies compliance with the alternative, described in the standing accounting regulations, of appraising their efficiency by comparing the amount of the net asset position in each of the time periods with the hedged amount designated for each one. According to this alternative, the hedge would only be inefficient if, after it were reviewed, the amount in the net asset position were lower than that of the hedged amount.

5. New products

Continuing with the same retail policy implemented in the previous year, in 2010 Bankinter maintained its proposal of a customised deposit offering at attractive interest rates that may be adapted to all customers, with the double aim of attracting new customers and balances and of retaining the balances already held by the bank.

On the other hand, it also promoted a deposit offering in which the return is linked to hiring and maintaining other associated products. Therefore, more committed customers have the possibility of obtaining a better return on their balances.

Another stable product proposal that has been consolidated are the Structured Deposits. Moreover, at the end of the year the bank started to sell its own Structured Bonds.

As regards current accounts, the highlight is the launch of the Cuenta Nómina Plus (Payroll Plus Account) aimed at the bank's best customers, which adds to the advantages of the Cuenta Nómina (Payroll Account) a remote IT support and data recovery service provided by the company Lázarus, and a free bill protection insurance policy provided by Groupama.

During the year 2010, Bankinter decided to relaunch its portfolio management service for Investment Funds, Pension Plans/ EPSVs and Securities, as an interesting alternative for customers seeking to delegate the management of part of their equity to Bankinter, under the new name "Inversión Delegada" (Delegated Investment).

As regards the credit investment, and despite the current economic climate in general and credit-associated in particular, Bankinter has continued to maintain its commitment to a growth that is profitable - among families and companies alike - diversified and healthy in terms of asset quality. These factors, together with appropriate policies for risk approval and control, enable Bankinter to post one of the lowest non-performing loan ratios on the market.

Mortgage lending continues to be one of the pillars of our lending, despite the adjustment caused by the stagnation of the property market, although we would also point to the growing importance of financing associated with corporate business, which is becoming a key segment for developing the Bank's financing activities. This is why, once again, in 2010 Bankinter joined as a collaborating institution in the various ICO lines of credit.

2010 was also a year of growth and consolidation in the 3 basic pillars in the International Business area, which are clear protagonists in our customers' everyday business:

• International Business Experts: our call-centre specialising in advisory services and monitoring international operations, which recorded a total of 21.000 calls from customers.

• Online Currency Broker: responsible for over 50% of currency operations are performed, in the cash and forward markets.

• International Operations Centre: which this year once again recorded an improvement in the quality satisfaction index perceived by the customers that it supports.

In the year 2010, Bankinter continued to strengthen its Equity Services offering for High Income customers.

Within this area, the products most sought after by our customers were investment properties, particularly retail premises and offices located in the business districts of cities, with strong lease contracts.

There was also demand for assets with businesses requiring low management, predictable positive flows from the outset, such as rotating car parks or service stations.

In the first semester of the year there was a demand for renewable energy generation assets, especially photovoltaic solar power plants, operating under Royal Decree 661/2007 and new ones commissioned under the terms of Royal Decree 1578/2008.

On the other hand, there has been ongoing demand for investing or disinvesting in unquoted companies and we also collaborated in obtaining investors to increase the capital of a company before it was listed on the MAB (Alternative Stock Market).

Finally, our customers' needs for family protocol services were met, in this case with the collaboration of reputed collaborators.

6. Foreseeable evolution

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

7. Subsequent events

On 18 February 2011, the Spanish Cabinet of Ministers passed Royal Decree-Law 2/2011 that implements the "Financial Sector Reinforcement Plan". Note 2 provides details of the plan of action that the Bank is going to implement to comply with the requirements stated in the aforementioned Royal Decree.

On 24 January 2011, the Bank announced a swap offer for existing subordinated debentures, as follows:

ISIN	Maturity	Cur rency	Face Value (MM)	Swap Price	Face value subject to swap offer	Listing
ES0213679139	March 2016	EUR	75	85%	Total face value	AIAF second ary fixed-in come market
ES0213679147	June 2016	EUR	100	85%	Total face value	AIAF second ary fixed-in come market
ES0213679162	December 2016	EUR	50	85%	Total face value	AIAF second ary fixed-in come market
ES0213679170	March 2017	EUR	50	85%	Total face value	AIAF second ary fixed-in come market

On 10 February 2011 the swap was carried out, with newly-issued subordinated debentures being handed out, with a fixed interest rate of 6,375% and a maturity date of 11 September 2019, for which a request for acceptance on the AIAF Fixed Income Market will be submitted. The Newly-Issued Subordinated Debentures shall be perishable with the subordinated debentures that make up the issue called "Bankinter, S.A. Subordinated Debentures Issue, September 2009" issued on 11 September 2009 and they shall have the same terms and conditions that applied to the latter.

The face value of the swapped debentures totals 53,800 thousand euros. Issue ES0213679139 worth 42,200 thousand €, Issue ES0213679147 in the sum of 11,000 thousand € and Issue ES0213679170, for 600 thousand €. One of the Issues ES0213679196 was also extended by 47,250 thousand euros. Existing Subordinated Debentures acquired by Bankinter in the Swap Offer shall be cancelled by the Issuer and not reissued or resold.

8. Research and development activities.

At the close of financial year 2010, the bank was not engaged in any relevant research and development activities.

9. Dependence on patents and licences.

At the close of financial year 2010, the Bankinter Group is not affected by any relevant degree of dependency as regards the issuers of patents, licences, industrial, commercial or financial contracts or new manufacturing processes.

10. Transactions with treasury shares

These transactions are described in Note 22 of the Consolidated Report and in Note 21 of the Individual Report.

11. Corporate Governance Report

This is attached as a separate document.

The 2010 Bankinter Report is available on CD-Rom. Copies can be obtained from the Bankinter External Communication Department or by sending an e-mail to: comunicacion@bankinter.es The list of Bankinter Branches and Agents is published as an offprint of this Report.

Published by Bankinter Department of External Communication

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