Consolidated Financial Statements

twenty12

Auditor's Report4
Consolidated Balance Sheets5
Consolidated Income Statements 6
Consolidated StatementsofComprehensive Income 7
Comprehensive Statements of Changes in Consolidated Equity 8
Consolidated Statements of Cash Flows10

1	Nature, activities and composition of the Group 11
2	Accounting principles used 11
3	Distribution of earnings for the year 18
4	Deposit Guarantee Fund19
5	Accounting standards and valuation rules applied20
6	Cash and balances with central banks36
7	Trading portfolio of assets and liabilities and Other financial assets
	and liabilities at fair value with changes through profit and loss 37
8	Available-for-sale financial assets39
9	Held-to-maturity investments40
10	Loans and receivables 41
11	Asset and liability hedging derivatives 44
12	Non-current assets held for sale 47
13	Investments in associates48
14	Property, plant and equipment53
15	Intangible assets54
16	Reinsurance assets 54
17	Tax assets and liabilities 55
18	Other assets and liabilities 56
19	Financial liabilities at amortised cost 56
20	Liabilities under insurance contracts65
21	Provisions 67
22	Equity68
23	Valuation adjustments (equity) 73

24	Contingent risks and commitments74
	25 Transfers of financial assets74
	26 Other memorandum accounts - financial derivatives 77
27	Personnel expenses 77
28	Fee income and expense 83
29	Interest and similar charges/income84
	30 Gains/Losses on financial transactions 85
31	Exchange differences (net) 85
32	Other general administrative expenses86
33	Other operating income and expenses 86
	34 Gains and losses on derecognition of assets not classified as non-current
	assets held for sale and gains and losses on non-current assets held for sale
	not classified as discontinued operations 87
35	Transactions and balances with related parties 87
36	Remuneration and balances with members of the Board of Directors 87
37	Environmental information 93
38	Customer Support service94
39	Branches, centres and agents 96
40	Fiduciary business and investment services 96
41	Auditors' remuneration 97
42	Tax situation97
43	Assets and liabilities valued other than at fair value101
44	Risk policies and management 101
45	Information by segments 119
46	Equity holdings in credit institutions 119
	47 Information required under Act 2/1981, of 25 March, on Mortgage Market
	Regulation and under Royal Decree 719/2009, of 24 April, which implements
	certain aspects of said law 119
48	Exposure to the construction and property development sector129
	49 Additional information on risks: refinancing and restructuring
	transactions. Geographical and sector risk concentration132
50	Events after the reporting period 138
	Appendices
I	Transactions with related parties139
II	Information by segment143

III Financial Statements of Bankinter, S.A..................................................................147 IV Individualised information on certain issues, buybacks or reimbursements of debt securities......................................................................................................153
MANAGEMENT REPORT..............................................................................................159

Bankinter Group

Consolidated annual financial on the year ended ended 31 December 2012 and Consolidated Management Report and Audit Report

BANKINTER GROUP, CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2012 AND 2011 (€000s)

ASSETS	Note		31/12/2012 31/12/2011 (*) LIABILITIES AND EQUITY	Note		31/12/2012 31/12/2011 (*)
CASH AND BALANCES WITH CENTRAL BANKS	6	665,374	412,795 LIABILITIES
FINANCIAL ASSETS HELD FOR TRADING	7	2,109,264	2,415,506 FINANCIAL LIABILITIES HELD FOR TRADING	7	1,797,324	2,360,584
Debt instruments		1,391,681	1,768,879 Trading derivatives		434,592	857,273
Equity instruments		61,072	101,733 Short positions in securities		1,362,732	1,503,311
Trading derivatives		656,511	544,894
Memorandum items: Loaned or advanced as collateral		1,391,681	1,768,879 OTHER FINANCIAL LIABILITIES AT FAIR VALUE
OTHER FINANCIAL ASSETS AT FAIR			WITH CHANGES IN PROFIT AND LOSS	7	-	-
VALUE THROUGH PROFIT OR LOSS	7	39,860	31,377 Customer deposits		-	-
Equity instruments		39,860	31,377 FINANCIAL LIABILITIES AT AMORTISED
Memorandum items: Loaned or advanced as collateral		-	- COST	19	52,079,071	52,929,285
			Deposits from central banks		9,580,854	7,006,897
AVAILABLE-FOR-SALE FINANCIAL ASSETS	8	6,132,471	4,776,069 Deposits from credit institutions		4,008,226	3,260,647
Debt instruments		5,971,654	4,644,306 Customer deposits		24,631,869	25,505,317
Equity instruments		160,817	131,763 Marketable debt securities		12,499,194	15,540,242
Memorandum items: Loaned or advanced as collateral		1,719,346	3,074,142 Subordinated liabilities		767,852	958,170
			Other financial liabilities		591,076	658,012
LOANS AND RECEIVABLES	10	44,751,950	47,167,367
Deposits with credit institutions		1,093,728	1,779,395 MACRO-HEDGING ADJUSTMENTS TO		-	-
Loans and advances to customers		43,575,351	45,387,972 FINANCIALLIABILITIES
Debt instruments		82,871	-
Memorandum items: Loaned or advanced as collateral		414,953	950,667 HEDGING DERIVATIVES	11	43,100	68,677

HELD TO MATURITY INVESTMENTS	9	2,755,355	3,150,930 LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE		-	-
Memorandum items: Loaned or advanced as collateral		-	-
			LIABILITIES UNDER INSURANCE CONTRACTS	20	618,286	642,782

MACRO-HEDGING ADJUSTMENTS TO FINANCIAL ASSETS	11	3,018	11,463 PROVISIONS	21	48,200	64,122
			Pension funds and similar obligations		2,811	5,245
HEDGING DERIVATIVES	11	152,201	118,651 Provisions for contingent risks and commitments		5,139	20,626
			Other provisions		1,899	38,251
NON-CURRENT ASSETS HELD FOR SALE	12	381,141	308,514 Allowances for taxes and other legal contingencies		38,351	-

INVESTMENTS	13	40,600	28,341 TAX LIABILITIES	17	221,565	189,555
Associates		40,279	26,301 Current		73,636	70,572
Jointly controlled entities		321	2,040 Deferred		147,929	118,983

PENSION-LINKED INSURANCE AGREEMENTS	27	2,750	5,140 OTHER LIABILITIES	18	127,247	149,425

REINSURANCE ASSETS	16	3,966	3,928 TOTAL LIABILITIES		54,934,793	56,404,430
TANGIBLE ASSETS	14	442,288	466,901 EQUITY		3,231,097	3,086,996
Property, plant and equipment		433,336	466,901 EQUITY	22	3,228,045	3,118,641
For internal use		404,087	435,354 Capital		169,142	143,076
Assigned on lease		29,249	31,547 Registered		169,142	143,076
Real estate investments		8,952	- Issue premium		1,118,186	737,079
Memorandum item: acquired under finance lease		-	- Reserves		1,789,781	1,711,705
			Accumulated reserves (losses)		1,784,859	1,700,635
INTANGIBLE ASSETS Goodwill	15	317,538	338,040 Accumulated reserves (losses) of entities accounted for using the equity method		4,922	11,070
		161,836	161,836 Other equity instruments		72,633	404,812
Other intangible assets		155,702	176,204 Remaining equity instruments		72,633	404,812
TAX ASSETS	17	235,489	159,271 Less: treasury shares		(226)	(742)
Current		86,953	55,742 Profit (loss) attributable to owners of the parent company		124,654	181,227
Deferred		148,536	103,529 Less: dividends and remuneration		(46,125)	(58,516)

OTHER ASSETS	18	132,625	97,132 VALUATION ADJUSTMENTS	23	3,052	(31,645)
Other		132,625	97,132 Financial assets available for sale		3,145	(29,248)

			Exchange differences		209	206
			Other valuation adjustments		-	-
			Entities valued under the equity method		(302)	(2,603)
			MINORITY INTERESTS
TOTAL ASSETS		58,165,890	59,491,426 TOTAL LIABILITIES AND EQUITY		58,165,890	59,491,426
MEMORANDUM ITEMS:
CONTINGENT RISKS	24	2,482,865	2,439,670			5
CONTINGENT COMMITMENTS	24	11,239,659	9,208,807

(*) Shown solely for purposes of comparison

BANKINTER GROUP, CONSOLIDATED INCOMESTATEMENT FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

		(Debit) Credit
	Note	2012	2011 (*)
INTEREST AND SIMILAR INCOME	29	1,707,696	1,636,295
INTEREST EXPENSE AND SIMILAR CHARGES	29	(1,047,441)	(1,093,620)
NET INTEREST INCOME		660,255	542,675
INCOME FROM EQUITY INSTRUMENTS		11,791	16,491
SHARE OF RESULTS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD	22	17,677	14,675
FEES AND COMMISSIONS INCOME	28	274,455	265,641
FEES AND COMMISSIONS EXPENSE	28	(70,615)	(66,758)
GAINS / LOSSES ON FINANCIAL ASSETS AND LIABILITIES (net)	30	104,853	59,162
Held for trading		30,510	11,910
Other financial assets at fair value through profit and loss account		(1,952)	97
Financial instruments not measured at fair value through profit and loss account		76,902	45,987
Other		(607)	1,168
EXCHANGE DIFFERENCES (net)	31	40,277	38,678
OTHER OPERATING INCOME	33	698,173	716,231
Income from insurance and reinsurance policies issued		667,712	686,960
Other operating income		30,461	29,271
OTHER OPERATING EXPENSES	33	(482,825)	(482,315)
Expenses on insurance and reinsurance policies		(404,997)	(455,442)
Other operating expenses		(77,828)	(26,873)
GROSS INCOME		1,254,041	1,104,480
ADMINISTRATIVE COST		(599,004)	(580,822)
Personnel expenses	27	(342,498)	(329,965)
Other general administrative expenses	32	(256,506)	(250,857)
DEPRECIATION AND AMORTISATION	14/15	(65,865)	(64,097)
PROVISIONS (NET)	21	(21)	(28,175)
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET)		(419,028)	(158,229)
Loans and receivables	10	(410,356)	(156,196)
Other financial instruments not measured at fair value through profit and loss account	8	(8,672)	(2,033)
PROFIT FROM OPERATIONS		170,123	273,157
IMPAIRMENT LOSSES ON OTHER ASSETS (net)		(536)	(1,244)
Goodwill and other intangible assets
Other assets		(536)	(1,244)
GAINS / LOSSES ON DERECOGNITION OF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE	34	39,301	25,205
NEGATIVE GOODWILL ON BUSINESS COMBINATIONS		-	-
GAINS / LOSSES ON NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS	34	(54,709)	(56,970)
PROFIT BEFORE TAX		154,179	240,148
INCOME TAX	42	(29,525)	(58,921)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS		124,654	181,227
PROFIT (LOSS) FROM DISCONTINUED OPERATIONS (net)		-	-
CONSOLIDATED PROFIT FOR THE YEAR		124,654	181,227
Profit (loss) attributable to owners of the parent company		124,654	181,227
Profit (loss) attributable to non-controlling interests
EARNINGS PER SHARE
Basic earnings (euros)		0.24	0.38
Diluted earnings (euros)		0.23	0.35

(*) Shown solely for purposes of comparison

BANKINTER GROUP, COMPREHENSIVESTATEMENTS OF CONSOLIDATEDINCOME FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011(€000s)

	Financial year 2012	Financial year 2011 (*)
CONSOLIDATED PROFIT FOR THE YEAR	124,654	181,227

OTHER COMPREHENSIVE INCOME	34,697	(8,852)

Financial assets available for sale	46,275	(8,934)
Gains (losses) on valuation	72,655	(3,202)
Amounts transferred to profit and loss	(26,380)	(5,732)
Other reclassifications	-	-
Cash flow hedging	-	-
Gains (losses) on valuation	-	-
Amounts transferred to profit and loss	-	-
Amounts transferred to the initial value of hedged items	-	-
Other reclassifications	-	-
Hedging of net investments in foreign operations	-	-
Gains (losses) on valuation	-	-
Amounts transferred to profit and loss	-	-
Other reclassifications
Exchange differences	2	7
Gains (losses) on translation	2	71
Amounts transferred to profit and loss	-	(64)
Other reclassifications	-	-
Non-current assets for sale	-	-
Gains (losses) on valuation	-	-
Amounts transferred to profit and loss	-	-
Other reclassifications	-	-
Actuarial gains (losses) on pension plans	-	-
Entities accounted for using the equity method	2,302	(2,603)
Gains (losses) on valuation	2,302	(2,603)
Amounts transferred to profit and loss	-	-
Other reclassifications	-	-
Statement of comprehensive income	-	-
Income tax	(13,882)	2,678
TOTAL COMPREHENSIVE INCOME	159,351	172,375
Attributable to owners of the parent company	159,351	172,375
Attributable to non-controlling interests	-	-

(*) Shown solely for purposes of comparison

BANKINTER GROUP, COMPREHENSIVESTATEMENTS OF CHANGES IN CONSOLIDATED EQUITY FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

			EQUITY ATTRIBUTABLE TO OWNERSOFTHE PARENT COMPANY
			EQUITY
	Capital	Issue premium	Accumulated reserves (losses)	Other equity instruments	Less: Treasury Shares	End-of-year results attributed to the parent company	Less: Dividends and remunerations	Total Equity	Valuation adjustments	Total	Non controlling interests	Total net worth
Opening balance at 31/12/2011	143,076	737,079	1,711,705	404,812	(742)	181,227	(58,516)	3,118,641	(31,645)	3,086,996	-	3,086,996
Adjustments due to changes in accounting criteria	-	-	-		-	-	-	-	-	-	-	-
Adjustments due to errors	-	-	-		-	-	-	-	-	-	-	-
Adjusted opening balance	143,076	737,079	1,711,705	404,812	(742)	181,227	(58,516)	3,118,641	(31,645)	3,086,996	-	3,086,996
Total comprehensive income	-	-	-		-	124,654	-	124,654	34,697	159,351	-	159,351
Other changes in equity	26,066	381,107	78,076	(332,179)	516	(181,227)	12,391	(15,250)	-	(15,250)	-	(15,250)
Increases in capital/endowment fund	26,066	381,107	-	(332,179)	-	-	-	74,994	-	74,994	-	74,994
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 to financial liabilities	-	-	-		-	-	-	-	-	-	-	-
Distribution of dividends / Shareholder remuneration	-	-	-		-	-	(64,496)	(64,496)	-	(64,496)	-	(64,496)
Operations with shares / contributions to equity (net)	-	-	1,119		516	-	-	1,635	-	1,635	-	1,635
Transfer between net worth entries	-	-	104,340		-	(181,227)	76,887	-	-	-	-	-
Increases (reductions) in equity due to business combinations (net)	-	-	-		-	-	-		-		-
Discretionary contributions to social funds and projects (Savings banks)	-	-	-		-	-	-	-	-	-	-	-
Payments with equity instruments	-	-	(27,383)		-	-	-	(27,383)	-	(27,383)	-	(27,383)
Other increases (reductions) in equity	-	-			-	-	-	-	-	-	-	-
Closing balance as at 31/12/2012		169,142 1,118,186	1,789,781	72,633	(226)	124,654	(46,125)	3,228,045	3,052	3,231,096	-	3,231,096

BANKINTER GROUP, COMPREHENSIVESTATEMENTS OF CHANGES IN CONSOLIDATED EQUITY FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

		EQUITY ATTRIBUTABLE TO OWNERSOFTHE PARENT COMPANY
					EQUITY
	Capital	Issue premium	Accumulated reserves (losses)	Other equity instruments	Less: Treasury Shares	End-of-year results attributed to the parent company	Less: Dividends and remunerations	Total Equity	Valuation adjustments	Total	Non controlling interests	Total net worth
Opening balance 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
Adjustments due to changes in accounting criteria	-	-	-		-	-	-	-	-	-	-	-
Adjustments due to errors	-	-	-		-	-	-	-	-	-	-	-
Adjusted opening balance	142,034	737,079	1,648,910	-	(1,753)	150,730	(74,512)	2,602,488	(22,793)	2,579,695	-	2,579,695
Total comprehensive income	-	-	-		-	181,227	-	181,227	(8,852)	172,375	-	172,375
Other changes in equity	1,042		62,795	404,812	1,011	(150,730)	15,996	334,926	-	334,926	-	334,926
Increases in capital/endowment fund	1,042		(1,042)		-	-	-		-		-
Capital reductions	-	-	-		-	-	-	-	-	-	-	-
Conversion of financial liabilities into capital	-	-	-	175,000	-	-	-	175,000	-	175,000	-	175,000
Increases in other equity instruments	-	-	-	229,812	-	-	-	229,812	-	229,812	-	229,812
Reclassification of financial liabilities to other equity instruments	-	-	-		-	-	-	-	-	-	-	-
Reclassification of other equity instruments to financial liabilities	-	-	-		-	-	-	-	-	-	-	-
Distribution of dividends / Shareholder remuneration	-	-	-		-	-	(58,516)	(58,516)	-	(58,516)	-	(58,516)
Operations with shares / contributions to equity (net)	-	-	390		1,011	-	-	1,401	-	1,401	-	1,401
Transfer between net worth entries	-	-	76,218		-	(150,730)	74,512	-	-	-	-	-
Increases (reductions) in equity due to business combinations (net)	-	-	-		-	-	-		-		-
Discretionary contributions to social funds and projects (Savings banks)	-	-	-		-	-	-	-	-	-	-	-
Payments with equity instruments	-	-	(12,771)		-	-	-	(12,771)	-	(12,771)	-	(12,771)
Other increases (reductions) in equity	-	-			-	-	-	-	-	-	-	-
Closing balance as at 31/12/2011	143,076	737,079	1,711,705	404,812	(742)	181,227	(58,516)	3,118,641	(31,645)	3,086,996	-	3,086,996

(*) Shown solely for purposes of comparison

BANKINTER GROUP, CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

NET CASH FLOW FROM OPERATINGACTIVITIES (132,587) 186,683 Consolidated profit for the year 124,654 181,227 Adjustments to obtain cash flow from operating activities 514,387 303,560 Depreciation and Amortisation 65,865 64,097 Other adjustments 448,522 239,463 Net increase/decrease in operating assets 740,429 (5,257,528) Held for trading 306,242 (539,674) Other financial assets at fair value through profit or loss (8,483) 4,351 Financial assets available for sale (1,318,747) (1,684,541) Loans and receivables 1,880,506 (3,153,285) Other operating assets (119,089) 115,621 Net increase/decrease in operating liabilities (1,576,509) 4,925,031 Held for trading (563,260) 417,155 Other financial liabilities at fair value through profit or loss - (88,745) Financial liabilities at amortised cost (990,455) 4,528,111 Other operating liabilities (22,794) 68,510 Corporation tax collections/payments 64,452 34,393 NET CASH FLOW FROM INVESTING ACTIVITIES 515,325 88,879 Payments (24,776) (96,239) Tangible assets (15,969) (86,202) Intangible assets (8,807) (8,618) Investments - (1,419) Non-current assets held for sale and associated liabilities - -























Held to maturity investments - -
Collections 540,101 185,118
Tangible assets 1,602 37,487
Intangible assets - -
Investments 35,713 2,000
Non-current assets held for sale and associated liabilities 112,680 54,988
Held to maturity investments 390,106 90,643
NET CASH FLOW FROM FINANCING ACTIVITIES 4,864 160,754
Payments (147,228) (88,067)
Dividends (72,160) (58,352)
- - Subordinated liabilities
Acquisition of own equity instruments - -
Other payments linked to financing activities (75,068) (29,715)
Collections 152,092 248,821
Subordinated liabilities - -
Issue of own equity instruments - 211,568
Disposal of own equity instruments 77,099 31,380
Other inflows linked to financing activities 74,993 5,873
EFFECT OF EXCHANGE-RATE VARIATIONS - -
NET INCREASE/DECREASE IN CASH AND CASHEQUIVALENTS (A+B+C+D) 387,602 436,316
CASH AND CASHEQUIVALENTS AT START OF PERIOD 632,717 196,401
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,020,319 632,717
MEMORANDUM ITEMS:
BREAKDOWN OF CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,020,319 632,717
Cash 120,843 114,751
Balances equivalent to cash with central banks 544,531 298,044
Other financial assets 354,945 219,922
Total cash and cash equivalents at end of period 1,020,319 632,717

(*) Shown solely for purposes of comparison

Bankinter Group

Consolidated Report on the year ended 31 December 2012 31 December 2012

1. Nature of the Group and its activities and composition

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

The corporate object 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, in addition to its own individual financial statements, the Bank is obliged to draw up consolidated financial statements for the Group, which also include holdings in joint businesses and investments in associates.

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

The Group's consolidated financial statements have been drawn up in accordance with the accounting principles described in the section "Accounting principles and Valuation Rules Applied."

The balance sheets of Bankinter, S.A. as at 31 December 2012 and 2011 and the income statements for the years then ended are shown in Appendix III.

2. Accounting principles applied

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 securities are admitted to trading on a regulated market of any member state must present their consolidated financial statements for each financial year starting on or after 1 January 2005 in accordance with the International Financial Reporting Standards (IFRS) previously adopted by the European Union.

To adapt the accounting system of Spanish credit institutions to the new regulations, the Bank of Spain published Circular 4/2004 of 22 December on Rules for Public and Reserved Financial Information and Model Financial Statements.

The Group's consolidated financial statements for the year ended 31 December 2012 were approved by the Bank's Directors in a meeting of the Board of Directors held on 20 February 2013, in accordance with the regulatory framework applying to the Group as established in the Spanish Commercial Code and other commercial legislation and with the International Financial Reporting Standards adopted by the European Union and taking account of Bank of Spain Circular 4/2004 applying the principles of consolidation, accounting policies, and valuation criteria described in Note 5 to the consolidated financial statements so as to give a true and fair view of the Group's financial situation as at 31 December 2012 and of the results of its operations, its comprehensive income and cash flows for 2012. These financial statements for 2012 are pending approval by the General Meeting of Shareholders. However, the Bank's Board of Directors believes that these accounts will be approved without modifications.

The Group's consolidated financial statements for 2011 were approved by the General Meeting of Shareholders held on 15 March 2012.

In accordance with the options established in IAS 1.81, the Group has opted to present separate statements, one displaying components of consolidated results ("Consolidated income statement") and a second statement which, beginning with those consolidated results, displays components of other comprehensive income ("Statement of comprehensive income"). In Spanish it is referred to using the terminology of Bank of Spain Circular 4/2004.

All figures in this report referring to financial year 2011 are presented solely for purposes of comparison.

The accounting policies and methods used to prepare these financial statements are the same as those applied in drawing up the consolidated financial statements for 2011, taking account of the standards and interpretations that came into effect in 2012. In this respect we would highlight the following:

Standards and interpretations effective in the year under review

During 2012 the following standards and interpretations adopted by the European Union and the Group came into force, with none of them having a significant impact on the consolidated financial statements:

- Amendment to IFRS 7 Financial instruments: Breakdowns Transfers of financial assets. Tightens the disclosure requirements applying to transfers of assets, both in cases where the assets are not removed from the Balance Sheet and, more particularly, those where an asset is removed from the Balance Sheet but the entity has some kind of continued involvement.
- Amendment to IAS 12 Income taxes Deferred tax relating to investment property: The fundamental change is the introduction of an exception to the general principles of IAS 12 which affects deferred tax on investment property, which the Group values using the fair value model in IAS 40 Investment Property based on the assumption, for purposes of calculating deferred taxation, that the carrying amount of these assets will be recovered in full through their sale.

No significant effects on the Group's financial statements have arisen from application of the aforementioned accounting standards.

In addition, at the date of preparation of these financial statements the following standards and interpretations whose effective date is subsequent to 31 December 2012, had come into force:

- IFRS 10 Consolidated financial statements. (Mandatory for financial years starting 1 January 2014 or later, early application permitted) – This standard replaces the current IAS 27 and SIC 12, introducing a single consolidation model based on control, irrespective of the nature of the investee. It changes the current definition of control. The new definition of control consists of three conditions to be met: the investor's power over the investee; that the investor is exposed, or has rights, to variable returns from its investment; and that it has the ability to affect those returns by exercising that control.

- IFRS 11: Joint arrangements replaces IAS 31 as currently in force. The basic change from the current standard is that proportional consolidation may no longer be applied to joint ventures, which must now be accounted for using the equity method.
- IFRS 12: Disclosures of interests in other entities. IFRS 12 is a disclosure standard bringing together all the disclosure requirements, including new ones, relating to interests in other entities, be they subsidiaries, associates, joint arrangements or other interests.

The Group is presently analysing the possible effects of these standards (IFRS 10, 11 and 12). based on the analysis so far, the Group does not expect the application of these standards to have a significant effect on its consolidated financial statements.

- IFRS 13: Fair value measurement. This new standard sets out in a single IFRS a framework for measuring the fair value of assets and liabilities measured in this way as required by other standards. IFRS 13 changes the current definition of fair value, introduces new, more nuanced criteria and also adds to disclosure requirements.
- IAS 27: Separate financial statements and IAS 28: Investments in associates and joint ventures. The amendments to IAS 27 and IAS 28 are in parallel with the issue of the new IFRS (IFRS 10, IFRS 11 and IFRS 12) referred to above.
- Amendment to IAS 1 Presentation of Other Comprehensive Income: consisting in the obligation to present separate totals of components of "Other Comprehensive Income" according to whether or not they will subsequently be reclassified to profit or loss.
- Amendment to IAS 19 Employee benefits. The fundamental change in this amendment to IAS 19 will affect the accounting treatment of defined benefit plans, since it eliminates the corridor approach. At present it is possible to opt to defer a certain portion of actuarial gains and losses. Starting from when the

amendment comes into force all actuarial gains and losses will be recognised in OCI as they occur. It includes significant changes to the way cost components are presented, such that service costs (past-service, reductions and settlements) and net interest will be recognised in profit or loss, while the revaluation component (basically actuarial gains and losses) will be charged or credited to equity (valuation adjustments) and will not be reclassified to profit or loss. In accordance with IAS 8, this change in accounting standard involves a change in accounting policy, and as such must be applied retroactively from 1 January 2013, restating the starting balances of equity for the oldest preceding period so that it is presented as if the new accounting policy had always been applied. It will also involve changes in the grouping and presentation of cost components in the statement of comprehensive income.

- "Amendment to IAS 32: Offsetting of financial assets and liabilities and Amendment to IFRS 7 Disclosures: Offsetting of financial assets and liabilities." The amendment to IAS 32 introduces a series of additional clarifications in the application guidance on requirements for offsetting financial assets and liabilities on the Balance Sheet. IAS 32 already states that financial assets and liabilities can be offset only when the entity currently has a legally enforceable right to offset the recognised amounts. The amended application guidance indicates, among other considerations, that in order to meet this condition, the right to offset must not be dependent on future events and must be legally enforceable, both in the normal course of business and in case of default, insolvency or bankruptcy of the entity and all counterparties.
- The parallel amendment to IFRS 7 introduces a specific section of new disclosure requirements for financial assets and liabilities that are shown net in the Balance Sheet and also for other financial instruments that are subject to an enforceable offset agreement or similar, irrespective of whether or not they are shown net in accounting terms in accordance with IAS 32.

Lastly, as at the date on which these consolidated financial statements were approved, the following standards and interpretations which come into force after 31 December 2012 were pending adoption by the European Union:

- IFRS 9 Financial instruments: Classification and measurement - IFRS 9 will in future replace the parts of IAS 39 that relate to the classification and measurement of financial instruments. There are very significant changes from

the present standard. IFRS 9 requires financial assets to be classified into just two measurement categories: those measured at fair value and those measured at amortised cost. The current categories "Held-to-maturity investments" and "Available-for-sale financial assets" will no longer exist. Impairment will in effect apply only to assets recognised at amortised cost, and embedded derivatives will no longer be separately accounted for.

As regards financial liabilities, the classification categories proposed for IFRS 9 are similar to the current ones under IAS 39.

- Improvements to IFRS, 2009–2011 reporting cycle: Minor amendments to a number of standards
- Transitional rules for amendments to IFRS 10, 11 and 12: Clarification of the transitional rules for these standards.

The Group has yet to assess the impact of these standards.

All accounting policies and valuation criteria having a significant effect on the consolidated financial statements were applied in drawing up these statements.

Restructuring and recapitalisation of the Spanish banking sector

During the first half of 2012 the Spanish government pushed through a process of structural reform which included a number of measures aimed at cleaning up the balance sheets of Spanish credit institutions affected by the impairment undergone by their property-related assets. The main milestones were the approval, on 3 February and 18 May respectively, of Royal Decree-Laws 2/2012 and 18/2012 on the restructuring of the financial sector, which revised the minimum percentage provisions required to cover impairments relating to financing for the Spanish property sector as well as impairments to foreclosed or repossessed assets and those received in payment of debt arising from financing to the sector.

These requirements involve additional provisions to those resulting from the application of the minimum percentages previously established by the Bank of Spain for problem loans. During 2012 the Group evaluated the impairment suffered in the period, recognising the corresponding additions to provisions (see Notes 10 and 12) such that at year-end the legal requirements were fully covered.

Royal Decree-Law 24/2012 on the restructuring and resolution of credit institutions, approved on 31 August 2012, aims to regulate credit institutions' early intervention, restructuring and resolution processes, as well as establishing the legal regime of the FROB ("Fondo de Reestructuración Ordenada Bancaria" or Fund for the Orderly Restructuring of Banks) and its general framework of action, with a view to protecting the stability of the financial system while keeping the use of public funds to a minimum. It also changes the requirements and definition of core capital with which both consolidated groups of credit institutions and credit institutions not belonging to a consolidated group must comply, establishing a single requirement of 9% of risk-weighted exposure to be met from 1 January 2013.

Law 8/2012 of 30 October on the cleaning up and sale of property assets in the financial sector, approved on 31 October 2012, is intended to insulate and provide market access to assets whose inclusion in the institutions' balance sheets is hampering credit recovery. To this end it provides for the mandatory incorporation of companies known as SGAs ("sociedades de gestión de activos" or asset management companies) to which the credit institutions will have to transfer all properties foreclosed or received in payment of debts relating to land for real estate development or to property construction or developments. They will also have to transfer other repossessed assets and assets received in payment of debts after 31 December 2011. The deadline for complying with this legal obligation was 31 December 2012.

Lastly, the following standards were approved as part of the reform of the financial sector:

Law 9/2012 of 14 November on the restructuring and resolution of credit institutions, approved on 15 November 2012, aims to regulate credit institutions' early intervention, restructuring and resolution processes, as well as establishing the legal regime of the FROB ("Fondo de Reestructuración Ordenada Bancaria" or Fund for the Orderly Restructuring of Banks) and its general framework of action, with a view to protecting the stability of the financial system while keeping the use of public funds to a minimum.
Royal Decree 1559/2012 of 15 November, approved on 16 November 2012, establishes the legal regime for SGAs and develops the organisational and operational rules for them, as well as the legal framework applicable to the creation of the SAREB ("Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria"or Company for Managing Assets resulting from Bank Restructuring) and the assets transferred to it.

b) Accounting standards and valuation rules

In preparing the consolidated financial statements, the generally accepted accounting principles and valuation rules referred to in Note 5 as "Accounting principles and valuation rules applied" have been followed.

Unless otherwise indicated, these consolidated financial statements are presented in thousands of euros.

c) Opinions and estimates used

The information contained in these consolidated financial statements is the responsibility of the Bank's Directors. In valuing certain assets, liabilities, revenues, expenses and commitments, use has been made as necessary of estimates made by the Group's Senior Management and ratified by its Directors. These estimates relate mainly to:

impairment losses on certain assets (Note 10)
the useful life attributed to tangible and non-tangible assets (Notes 14 and 15)
the fair value of certain unlisted assets (Note 43)
the actuarial assumptions used to calculate liabilities and commitments for postemployment benefits (Note 27)
the calculation of provisions (Note 21)

Although these estimates have been made based on the best information available as at 31 December 2012 on the items concerned, it is possible that future events might require them to be revised in coming financial years. Any such revision would be carried out prospectively, in accordance with the provisions of IFRS 8, recognising the effects of the change in the corresponding profit and loss account in the financial years affected.

d) Consolidation principles

The Group has been defined in accordance with current applicable accounting regulations. Group Companies comprise Subsidiaries, Joint Arrangements and Associates.

Subsidiaries are entities forming a single decision-making unit with the parent company, in other words entities over which the parent company has the power to exert control directly or indirectly through other Group Companies. This power to exert control is generally, although not invariably, reflected in the parent company's holding, directly or indirectly through one or more other Group Companies, 50% or more of the voting rights in the Group Company. Control means the power to govern the financial and operating policies of a Group Company with a view to obtaining benefits from its activities, and may be exerted even if the abovementioned percentage of voting rights is not held.

Key information on investments in subsidiaries as at 31 December 2012 and 2011 is given in Note 13. In 2012 there was no company considered to be a subsidiary in which the Group's holding was less than 50%.

The overall integration procedure for the annual accounts of dependent entities has been applied to the consolidation process. Consequently, all significant inter-company balances and transactions have been eliminated in the consolidation process. Third party or minority interests in the Group's equity are presented under the heading Noncontrolling interests in the consolidated balance sheet and the portion of the year's profit attributable to them is shown under Profit (loss) attributable to non-controlling interests in the consolidated income statement.

Results generated by entities acquired by the Group during the financial year are consolidated only insofar as they relate to the period between the date of acquisition and year-end. Similarly, results generated by entities disposed of by the Group during the financial year are consolidated only insofar as they relate to the period between the beginning of the financial year and the date of the disposal.

Joint Arrangements are Group Companies which, while not being Subsidiaries, are jointly controlled by the Group and by one or more other entities not related to the Group (Joint Ventures), and Joint Operations. Joint Operations are 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 unanimous consent of all participants, without these transactions or assets being integrated in financial structures different from those of the two participants.

Joint Arrangements are accounted for using the equity method, applying the exceptions provided for in current applicable accounting regulations.

Relevant information on investments in Joint Arrangements as at 31 December 2012 and 2011 is presented in Note 13.

Associates are those over which the Group has a significant influence. Said significant influence is generally, although not invariably, reflected in the parent company's holding, directly or indirectly through one or more other Group Companies, 20% or more of the voting rights in the Group Company.

The equity method for associated entities has been applied to the consolidation process. Consequently, investments in Associates are valued at the proportion represented by the Group's holding in their capital, less dividends received and any other eliminations in equity. Transactions with Associates are eliminated in the proportion represented by the Group's holding. If an Associate's equity is negative as a result of losses incurred, it is shown as zero in the Group's consolidated balance sheet unless the Group is under an obligation to support it financially.

The relevant information on stockholdings in associates as at 31 December 2012 and 2011 is included in Note 13. In 2012 there was no investment in any company considered to be an Associate in which the Group's holding was less than 20%. During the year, Sociedad Canarias Excelencia en SIM, S.L. was wound up, having ceased trading, and is no longer included in the consolidation scope.

Note 13 includes information on the most significant acquisitions and disposals during the year of investments in Subsidiaries, Joint Arrangements and Associates.

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

Business combinations are operations whereby two or more entities or economic units combine to become a single entity or group of companies.

Thus at 31 December 2012 and 2011, Bankinter Vida, in which the Group has a 50%holding, was accounted for using the equity method.

e) Comparison of information

In accordance with business law, the Directors present the information contained in this report referring to 2011 exclusively for purposes of comparison with the 2012 figures, and therefore it does not constitute the Group's consolidated financial statements for 2011.

f) Equity

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

During 2012 the Group applied this Circular as updated by successive provisions. With Bank of Spain approval, the Group uses the internal ratings based (IRB) method to calculate capital requirements for the credit risk on certain credit exposures, and the standard method for all other exposures. In subsequent financial years, in accordance with the progressive implementation plan described in Rule 24 of Circular 3/2008 and subject to authorisation from the Bank of Spain, new portfolios will be incorporated into the IRB Approach.

The goal set by the Group's Management in relation to equity management consists in complying at all times with the applicable regulations, in accordance with the risks inherent in its activity and the context in which it operates, while at the same time seeking to make the process as efficient as possible. Capital consumption, together with other risk and return variables, is considered a fundamental variable in the analyses associated with the Group's investment decisions.

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 Equity Directorate, which is under the Capital Market Division, performs monitoring and control of solvency ratios, and has 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 capital requirements. Accordingly, there are contingency plans to ensure that the limits laid down in the applicable regulations are met.
The impact that decisions will have on the Group's equity and on the balance between capital consumption, risk and return, is taken into account as a key factor in planning, analysing and monitoring the Group's operations.

Thus, the Group considers equity and the capital requirements established by the abovementioned regulations to be a key factor in its management, affecting the entity's investment decisions, the analysis of the viability of any transaction, strategy for the distribution of results by subsidiaries and issues by the entity and the Group, etc.

Bank of Spain Circular 3/2008 of 22 May and complementary provisions (information available - in Spanish - on the Bank of Spain's website, at: http://www.bde.es/bde/es/ secciones/normativas/Regulacion_de_En/Estatal/Solvencia_y_recursos_propios.html) establishes which items are to be counted as capital for the purpose of complying with the minimum requirements established. For the purposes of the above rule, equity is classified as basic and second category equity and it differs from equity as calculated in accordance with EU-IFRS as it includes certain items that are not included under EU-IFRSand excludes others that are. In addition, the methods to be implemented for the consolidation and appraisal of holdings for the purposes of calculating the Group's minimum 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 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 equity to be as indicated in rule 8 of Bank of Spain Circular 3/2008.

The minimum equity requirements laid down in this 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, counterparties, guarantees, etc.), the counterparty, position and settlement risks on the trading portfolio, the exchange and gold position risk (depending on the net global position in foreign currency and the net gold position) and 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 interest-rate 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.

As at 31 December 2012 and 2011 and throughout the years then ended, the computable equity of the Group and of the Group entities subject to this obligation, considered on an individual basis, exceeded the requirements laid down under the rules referred to.

Consolidated equity as at 31 December 2012 and 2011 and the corresponding capital ratios are shown in the following table:

	€000s
	31/12/2012 (*)	31/12/2011 (*)
Capital and Reserves	2,991,426	2,554,154
Other equity instruments	72,633	404,812
Preference shares	60,844	168,165
Treasury shares	(226)	(742)
Intangible and other assets	(283,117)	(296,820)
Other deductions	(103,581)	(165,736)
Tier 1	2,737,979	2,663,833

Revaluation reserve	94,308	97,998
Subordinated financing	568,686	658,232
Generic insolvency funds	-	54,678
Other deductions	(96,551)	(154,243)
Tier 2	566,443	656,665
Total Equity	3,304,422	3,320,498
Risk-weighted assets	25,424,253	28,454,731
Tier 1 (%)	10.77	9.36
Tier 2 (%)	2.23	2.31
Capital ratio (%)	13.00	11.67

(*) Figures in accordance with Bank of Spain Circular 3/2008 on determining and controlling minimum equity. The lower limit of shareholders' equity requirements provided for 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-sized companies, Project Finance and Unsecured loans.

During 2012 there were some important changes in standards relating to financial institutions' solvency:

Royal Decree-Law 2/2012, of 3 February, on the restructuring of the financial sector, established among other things provisioning requirements for financing and assets foreclosed or received in payment of debt relating to the property sector, as well as increased core capital coverage requirements for real estate assets.

Royal Decree-Law 18/2012, of 11 May, on the write-down and sale of real estate assets in the financial sector, established additional coverage requirements to those established in Royal Decree-Law 2/2012, for impairment of financing linked to real estate activity classified as standard risk.

Royal Decree-Law 24/2012, of 31 August, on the restructuring and resolution of credit institutions, defines the regime for restructuring and resolution of entities and includes measures for improving protection of retail investors who subscribe to financial products not covered by the Deposit Guarantee Fund and modifies the requirements and definition of core capital that credit institutions will have to comply with starting in 2013. The definition is adjusted to bring it into line with the core tier 1 capita criteria of the European Banking Authority (EBA), and the minimum level of core capital is set at 9% with effect from 1 January 2013.

Bankinter complied throughout 2012 with these new regulatory requirements, and with the objective of meeting the new capital requirements it undertook a number of financial transactions aimed to strengthen its capital base, as described hereunder.

With regard to the 2011 issue of Mandatorily Convertible Subordinated Bonds, in March 2012 the General Meeting of Shareholders approved the establishment of an additional, voluntary conversion period and of special remuneration for those holders voluntarily converting their bonds during that period. The details of this conversion are contained in the 14 February 2012 announcement of the calling of the AGM. The voluntary conversion period ended on 10 May, and as a result the Bank's core capital increased by €332 million.

Apart from this, in July 2012 the Board of Directors, by virtue of the authorisation granted it by the General Meeting of Shareholders, made a public offer to holders of Bankinter preferred shares. The terms and conditions of this offer were summarised in the "Significant Event" report sent to the CNMV (Spain's securities regulator) on 18 July 2012. As a result of this transaction the Bank's core capita increased by €75 million.

Thanks to these transactions the Bank's capital ratios increased during the year. As at 31 December 2012 the core capital ratio in accordance with Royal Decree-Law 2/2011 as in force was 11.19% (9.47% at year-end 2011).

g) Minimum reserve ratio

MonetaryCircular1/1998of29September, effective1January1999,abolishedthe cashcoefficient which had been in place for ten years and replaced it with the minimum reserve ratio.

As at 31 December 2012 and 2011 and throughout the years then ended, the consolidated entities complied with the minimum amounts for this coefficient required by applicable Spanish regulations.

The amount of cash which the Group held immobilised on account with the Bank of Spain for this purpose stood at €544.43 million and €297.75 million as at 31 December 2012 and 2011 respectively, although the obligation of the various Group companies subject to this coefficient to maintain the balance required by applicable regulations in order to comply with the aforementioned minimum reserves coefficientis calculated on the average of closing balances for the day held by each of them in this account during the period for which it is maintained.

h) Information on deferrals in payments to suppliers. Third additional provision. "Duty of information" in Law 15/2010 of 5 July

The following information is provided in order to comply with the provisions of Law 15/2010 of 5 July amending Law 3/2004 of 29 December, establishing measures to combat payment delinquency in commercial transactions, as implemented by the Resolution of 29 December 2010 of the Spanish Accounting and Audit Institute on disclosures to be included in the notes to the financial statements with regard to delayed payments to suppliers in commercial transactions:

		Amounts paid and pending payment as at year end
		2012	2011
	Amount	%		%

Paid within the maximum legal timeframe	798,937	100%	718,537	100%
Other	-	-	-	-
Total payments for the year	798,937	100%	718,537	100%

Weighted average days past due	30		30

Deferrals which exceed the legal maximum term as at year-end	-	-	-	-

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. Appropriation of profit (loss)

The proposal to distribute the profits of Bankinter, S.A. for the year ending 31 December 2012, made by the bank's administrators and subject to the approval of the General Shareholders Meeting is as follows:

		€000s
	31/12/2012	31/12/2011

Appropriation:
Voluntary reserves	86,708	76,529
Interim dividend	61,500	76,887
Profit appropriated	148,208	153,416
Profit (loss) for the year	148,208	153,416

Details of interim dividends distributed and the corresponding liquidity statements are given in Note 22.

The proposed appropriation of profit for the year ended 31 December 2012 of the subsidiaries of Bankinter, S.A. drawn up by their respective Directors and pending approval by the respective General Shareholders Meetings is as follows:

€000s
	Earnings	Dividend	Reserves	Applications
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	596	-	596	-
Bankinter Seguros Generales, S.A (formerly Bankinter Servicios de Consultoría S.A)	-	-	-	-
Bankinter Gestión de Activos, S.A., S.G.I.I.C.	11,026	11,026	-	-
Hispamarket, S.A.	(4,929)	-	(4,929)	-
Intermobiliaria, S.A.	(79,428)	-	(79,428)	-
Bankinter Consumer Finance, E.F.C, S.A.	22,149	11,075	11,074	-
Bankinter Capital Riesgo, S.G.F.C.R, S.A.	196	-	196	-
Bankinter Sociedad de Financiación, S.A.	(8)	-	(8)	-
Bankinter Emisiones, S.A.	259	-	259	-
Bankinter Capital Riesgo I Fondo Capital	1,426	-	1,426	-
Línea Directa Aseguradora, S.A.	86,605	-	86,605	-
Arroyo Business Consulting Development, S.L.	-	-	-	-
Relanza Gestión, S.A.	35	-	35	-
Gneis Global Services S.A.	13,992	-	13,992	-

The appropriation of profits for the year ended 31 December 2011 of the subsidiaries of Bankinter, S.A., approved by their respective General Shareholders Meetings, was as follows:

€000s
	Earnings	Dividend	Reserves	Applications
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	(41)	-	(41)	-
Bankinter Seguros Generales, S.A (formerly Bankinter Servicios de Consultoría S.A)	3	-	3	-
Bankinter Gestión de Activos, S.A., S.G.I.I.C.	10,664	10,664	-	-
Hispamarket, S.A.	372	-	372	-
Intermobiliaria, S.A.	(68,719)	-	(68,719)	-
Bankinter Consumer Finance, E.F.C, S.A.	11,210	5,600	1,340	4,270
Bankinter Capital Riesgo, S.G.F.C.R, S.A.	155	-	155	-
Bankinter Sociedad de Financiación, S.A.	(842)	-	(842)	-
Bankinter Emisiones, S.A.	501	-	501	-
Bankinter Capital Riesgo I Fondo Capital	830	-	830	-
Línea Directa Aseguradora, S.A.	74,869	33,500	41,369	-
Arroyo Business Consulting Development, S.L.	-	-	-	-
Relanza Gestión, S.A.	13	-	13	-
Gneis Global Services S.A.	2,898	1,800	1,098	-

4. Deposit Guarantee Fund

Royal Decree–Law 16/2011, of 14 October, created the Credit Institution Deposit Guarantee Fund, following the merging of the three previously existing deposit guarantee funds into a single Credit Institution Deposit Guarantee Fund, which retains the functions and characteristic features of the three funds it replaced. This Royal Decree-Law increased the legal limit on banks' annual contributions from 0.2% to 0.3% to ensure that the fund has maximum operating capacity. Additionally, the Ministerial Orders establishing optional short-term reductions in contributions to 0.06%, 0.08% or 0.1% depending on the type of entity, were repealed. The result of these two changes is that there is now a limit of 0.3% on contributions for guaranteed deposits and a real contribution of 0.2% instead of the percentages referred to above.

Additionally, Bank of Spain Circular 3/2011 of 30 June laid down the rules for applying the changes introduced by Royal Decree 771/2011, of 3 June, amending Royal Decree– Law 216/2008, of 15 February on guaranteed deposits remunerated in excess of any of the following limits:

a. In the case of term deposits or similar instruments at terms of up to three months whose agreed annual interest is more than 150 basis points higher than average three-month EURIBOR; or more than 150 basis points higher than average sixmonth EURIBOR for terms of between three months and one year, or more than 100 basis points higher than average one-year EURIBORfor terms of one year or more.
b. In the case of sight deposits whose annual interest paid in the periodic settlement of the account is more than 100 basis points higher than average one-month EURIBOR.

The treatment of contributions to the Fund is changed, by applying a 500%weighting to the amounts of deposits whose agreed remuneration is in excess of the above limits. The difference between this (weighted) contribution and the contribution that would apply in the absence of these circumstances had to be paid in to the Fund every quarter.

With the publication during 2012 of Royal Decree–Law 24/2012, of 31 August, on the restructuring and resolution of credit institutions, this requirement was cancelled.

This past year saw the publication of Royal Decree–Law 2/2012, of 3 February, on restructuring of the financial sector, whereby, by virtue of the provisions of Royal Decree– Law 19/2011, of 2 December, amending Royal Decree–Law 16/2011, of 14 October, creating the Credit Institution Deposit Guarantee Fund, on the carrying out of the actions necessary to restore the Fund to sufficiency, on 30 July 2012 the Management Committee of the Credit Institution Deposit Guarantee Fund adopted a resolution to apply a surcharge to member entities, estimated based on the contributions made as of 31 December 2011 and payable in equal annual payments over the next ten years.

Royal Decree–Law 24/2012, of 31 August, on restructuring and resolution of credit institutions, establishes, subject to Bank of Spain, decisions that the Deposit Guarantee Fund shall reimburse the amounts of guaranteed deposits when a deposit that is due and payable is unpaid, always providing no proceedings have been initiated to resolve the entity. In this respect the Fund may adopt measures in support of the resolution of a credit institution such as granting guarantees or loans and acquiring assets or liabilities, either carrying out such actions itself or entrusting them to a third party. The Bank is a member of the Deposit Guarantee Fund.

The cost for 2012 and 2011 of the company's contributions to the Deposit Guarantee Fund was €68.78 million and €14.82 million respectively. These costs are included under the heading 'Other operating charges' in the Income Statement (Note 33).

5. Accounting principles and valuation rules applied

These consolidated financial statements have been prepared in accordance with the accounting principles and valuation rules currently in effect. A summary of the most important of these is given below:

a) Going-concern principle

In preparing the consolidated financial statements it was assumed that the management of the entities included in the Group will continue for the foreseeable future. Therefore, application of accounting standards is not aimed at determining the value of the consolidated equity with a view to their total or partial disposal or the amount that would result in the event of their liquidation.

b) Accrual principle

These consolidated financial statements, with the exception of the statements 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 credited to profit and loss at the time they are collected.

The accrual of interest on both lending and deposit transactions with settlement periods in excess of 12 months, are calculated using the financial method. For transactions with a lesser period, accrual is performed using either the financial method or the linear method.

Following general financial practice, transactions are recognised on the date they occur, which may differ from their corresponding value date on which financial revenue and expense calculations are based.

c) Transactions and balances in foreign currency

i. Functional Currency:

The Group's functional currency is the euro. Consequently all balances and transactions denominated in a currency other than the euro are considered to be denominated in "foreign currency".

ii. Criteria for conversion of foreign currency balances:

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 the average spot exchange rates in the currency market at year end.
Non-monetary items valued at historical cost have been converted into euros using the exchange rates of the date of acquisition.
Non-monetary entries valued at fair value have been converted into euros using the exchange rates of the date on which the fair value was determined.
Revenue and expenses have been converted into euros using exchange rates of the date of the transaction (using the average exchange rates for the year for all transactions performed in that year). Depreciation and amortisation have been converted into euros at the exchange rate applied to the corresponding asset.

Exchange rate differences have been recognised in consolidated profit and loss except for differences arising in non-monetary items at fair value, for which fair value adjustments are recognised directly in equity.

d) Consolidated statements of cash flow

The Group used the indirect method to prepare the cash flow statements, which use the following expressions and classification criteria:

- Cash flows:inflows and outflows of cash and cash equivalents; cash equivalents are understood as short-term investments with high liquidity and a low risk of alterations to their value. Cash and cash equivalents refer to the balances shown under the heading "Cash and deposits with central banks" as well as other accounts with highly liquid credit institutions in the enclosed balance sheets.
Operating activities: typical activities of credit institutions, and other activities that cannot be classified as investing or financing.
Investing activities: acquisition, disposal 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 consolidated statement of changes in equity shows the revenue and expenses generated by the Group as a consequence of its activity during the year. A distinction is made between items recognised in consolidated profit and loss for the year and other comprehensive income as provided by current regulations recognised directly in equity.

Therefore, this statement shows:

a. Consolidated income for the year.
b. The net amount of revenue and expenses temporarily recognised in consolidated equity as valuation adjustments.
c. The net amount of revenue and expenses definitively recognised in consolidated equity.
d. Corporation tax accrued on b) and c) above except for valuation adjustments on investments in associates or joint arrangements accounted for using the equity method, which are reported in net terms.
e. Total consolidated comprehensive income calculated as the sum of the above sections, showing separately the amount attributable to owners of the parent company and that attributable to non-controlling interests.

The amount of revenue and expenses corresponding to entities accounted for using the equity method recognised directly in equity is reported in this statement, regardless of its nature, under the heading "Entities accounted for using the equity method".

Changes in comprehensive income recognised in equity as valuation adjustments are broken down into:

- Gains (losses)on valuation: This shows the amount of income, net of expenses arising in the period, recognised directly in equity. The amounts recognised during the year under this heading are kept under this heading, even if in the same year they are transferred to consolidated profit and loss at the initial value of other assets or liabilities or reclassified under another heading.

- Amounts transferred to profit and loss: This covers the amount of gains or losses on valuation previously recognised in consolidated equity, even if in the same financial year, which are now recognised in the consolidated Income Statement.
- Amounts transferred to the initial carrying amount of the hedged items: This records the amount of valuation gains or losses previously recognised in consolidated equity, even if in the same financial year, which are now 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 items are reported by gross amount and, except as indicated above for items corresponding to valuation adjustments for the valuation of entities accounted for using the equity method, they show their corresponding tax effect under the heading "Corporate tax" of the statement.

f) Consolidated statement of changes in total equity.

This part of the consolidated statement of changes in equity shows all changes in equity that have occurred during the year, including those arising from changes in accounting principles and the correction of errors. This statement therefore shows a reconciliation between the carrying amount at the start and end of the year of all components of consolidated equity, grouping together the movements based on their nature under the following headings:

- Adjustments arising from changes in accounting principles and the correction of errors: This includes changes to consolidated equity arising as a result of the retroactive restatement of balances in the financial statements due to changes in accounting standards or the correction of errors.
- Income and expenses recognised in the period:: This comprises, in aggregate form, the total of the items recognised in the statement of comprehensive income referred to above.

- Other changes in equity: This comprises all other items recognised in equity, such as increases or decreases in the endowment fund, appropriation of profits, transactions with own equity instruments, payments with equity instruments, transfers between equity headings and any other increases or decreases in consolidated equity.

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:

The column headed "Level 1" shows 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 headed "Level 2" shows the figures for financial instruments whose fair values are obtained from listed prices on active markets for similar instruments or using 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 the various positions is determined using models that are compared with 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 as derived from internal models takes account of 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 that therefore their data are representative. The valuation models do not incorporate subjectivities.

Additionally, 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.

As at 31 December 2012 the main techniques used by internal models to determine the fair value of financial instruments were the net present value model, which discounts future flows to the present using market interest rates, and the Black-Scholes model and its derivative, which, by means of a closed formula and using exclusively market inputs, enable interest rate options to be valued.

Credit derivatives are valued in the same way as other interest rate derivatives, except that the market inputs include the (market)differentials corresponding to the underlying of the issue.

We constantly compare and contrast the various valuations with counterparties to ensure the validity of the models and inputs used at all times.

€000s
		2012				2011
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial assets held for trading and other financial assets at fair value through profit or loss	999,650	1,149,474	-	2,149,124	1,161,939	1,284,944	-	2,446,883
Financial assets available for sale	4,154,154	1,978,317	-	6,132,471	2,899,186	1,876,878	5	4,776,069
Hedging derivatives (assets)	-	152,201	-	152,201	-	118,651	-	118,651
Financial liabilities held for trading and other financial liabilities at fair value with changes to the profit and loss account	918,975	878,349	-	1,797,324	1,141,282	1,219,302	-	2,360,584
Hedging derivatives (liabilities)	-	43,100	-	43,100	-	68,677	-	68,677

Financial liabilities

Financial liabilities are classified in the consolidated balance sheet according to the following criteria:

i. Trading portfolio which includes financial liabilities issued with a view to 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 on loan.
ii. Other financial instruments at fair value through profit or loss: This includes financial liabilities designated as "at fair value through profit or loss" with the purpose of obtaining more relevant information, as this significantly reduces accounting imbalances.
iii. Financial liabilities at amortised cost which cannot be included under any other heading in the balance sheet and which are part of the normal funding activities of financial institutions, regardless of the type of instrument used or their maturity dates.
iv Hedging derivatives including financial derivatives acquired or issued by the Bank which qualify to be considered accounting hedges.

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

i. Financial liabilities under the headings 'Trading portfolio' and "Other financial liabilities at fair value through profit or loss" are carried at fair value as defined for financial assets. Financial liabilities hedged in fair-value hedging operations are adjusted and any changes in their fair value relating to the risk hedged in the hedging transaction are recognised.
ii. Financial derivatives that have as their underlying equity instruments whose fair value cannot be determined in a sufficiently objective manner and which are settled on delivery, are valued at cost.

Changes in the carrying amount of financial liabilities are recognised, in general, with a balancing entry in profit and loss, with a distinction between those originating in the accrual of interest and similar items, which are recognised under the heading 'Interest and similar charges', and those due to other causes, which are recognised for their net amount in 'Results of financial transactions' in the income statement.

Regarding financial liabilities designated as hedged items and accounting hedges, differences in valuation are recognised on the basis of the criteria indicated for financial assets.

Financial assets

Financial assets bought and sold by means of contractual agreements, meaning 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 netting off, such as stock market and spot currency trades, are recognised upon acquisition as assets and are derecognised in the balance sheet upon sale, on the date from which the benefits, risks, rights and duties inherent in ownership pass to the acquiring party which, depending on the type of asset or market involved, may be the contracting date or the settlement or delivery date.

Financial debt instruments are recognised from the date on which the legal right to receive or duty to pay cash arises, and derivatives are recognised from the date on which they are contracted. As a general rule, the Group derecognises financial instruments in the balance sheet on the date from which the benefits, risks, rights and responsibilities inherent in them are or control of them is transferred to the acquiring party.

Financial assets are classified in the consolidated balance sheet in accordance with the following criteria:

i. Cash and balances with 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 financial assets acquired with a view to 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 recognised directly in profit or loss.
iii. Other financial assets at fair value through profit or loss, including (1) financial assets which, while 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 significantly to reduce overall exposure to interest-rate risk.
iv. Available-for-sale financial assets which are debt securities not classified as heldto-maturity investments, as other financial assets at fair value through profit or loss, as loan and receivables or as financial assets and liabilities held for trading, and the equity instruments of entities which are not subsidiaries, associates or joint ventures and which are not included in the categories of financial assets

and liabilities held for trading or other assets at fair value through profit or loss. Changes in the fair value of instruments in this portfolio are recognised directly in equity worth until the financial asset is derecognised from the balance sheet.

v. Loan and advances including financial assets not traded on an active market and not requiring to be carried at fair value but with cash flows of determined or determinable amounts whereby the Group's entire disbursement will be recovered, barring 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 a held-to-maturity investment 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 in relation to macro-hedges, being the balancing entry for the amounts credited to profit and loss arising from the valuation of the portfolio of financial instruments which are effectively hedged against interestrate risk by means of fair-value hedge derivatives.
viii.Hedging derivatives including the financial derivatives acquired or issued by the Bank which qualify to be considered as accounting hedges.
ix. Investments which include equity instruments in Joint Ventures or Associates.

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

i. Financial assets are carried at fair value, with the exception of loan and receivables, the portfolio of held-to-maturity investments, equity instruments whose fair value cannot be determined with sufficient objectiveness, investments in Subsidiaries, Joint Arrangements and Associates, 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 is organised, transparent and of sufficient depth.

Whenthere isnomarketprice foracertainfinancialasset,its fair valuemaybe estimated by valuation techniques which must comply with the following characteristics:

The techniques must be as consistent and appropriate as possible and will include observable market data such as recent transactions with other instruments that are substantially the same; discounted cash flows and market models to value options.
The techniques used must 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 method must be maintained over time as long as the factors that led to its being chosen have not altered. In any event, the valuation technique must be assessed periodically and its validity examined using observable prices for recent transactions and current market data.
In addition, consideration must also be given to factors such as the time value of money, credit risk, exchange rates, prices of equity instruments, volatility, liquidity, the risk of early cancellation and administrative costs.
iii. The fair value of financial derivatives with a quoted value on an active market is the daily trading price. If for any exceptional reason 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 to the valuation date using methods recognised by the financial markets.

iv. Loans and receivables and the portfolio of investments held to maturity are carried at amortised cost determined using the effective interest-rate method. Amortised cost means the acquisition cost of a financial asset corrected by the principal repayments and the portion of the difference between the initial cost and the repayment value at maturity that is charged to profit and loss, using the effective interest rate model, 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 fair-value hedging transactions, any variations arising in the fair value relating to the risk or risks hedged in said hedging transaction are recognised.

The effective interest rate is the rate which, when used to discount the estimated future cash flows over the life of the financial instrument, produces a present value exactly equal to the price of the financial instrument, based on the contractual conditions such as early repayment options, but without taking account of future losses due to credit risk. For fixed-interest financial instruments, the effective interest rate is the contractual interest rate established at the time of acquisition plus any applicable fees or commissions which, by 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 revision 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.

Changes in the carrying amount of financial assets are recognised, in general, with a balancing entry in profit and loss, with a distinction between those originating in the accrual of interest and similar items, which are recognised under the heading 'Interest and similar income', and those due to other causes, which are recognised for their net amount in 'Results of financial transactions' in the income statement.

However, variations in the carrying amount of the instruments included under the heading ' Available-for-sale financial assets' are temporarily recognised under the heading 'Equity valuation adjustments' except when they are due to exchangerate differences. The amounts included under the heading 'Valuation adjustments' continue to be part of equity until the assets to which they relate are removed from the balance sheet, at which time the entry is cancelled against profit and loss.

For financial assets designated as hedged items or accounting hedges of fair value, the valuation differences in both the hedging and the hedged items, as far as the type of risk hedged is concerned, are recognised directly in profit and loss.

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

h) Recognition of income and expenses

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

Fees paid or received for financial services, regardless of how they are described in contractual terms, are classified in the following categories, thereby determining their assignment in the income statement:

i. Financial fees which are an integral part of the return or effective cost of a financial transaction, and which are taken into profit and loss over the expected lifetime of the transaction as an adjustment to the cost or effective return. These include commitment fees and fees for the study of asset products, fees for excess credits, and overdraft fees on liability accounts.
ii Non-financial fees, which are those that derive from the provision 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 recognised in profit and loss, in accordance with the following criteria:

i. Those relating to financial liabilities at fair value through profit or loss are recognised when received.
ii. Those relating to transactions or services that are provided over a period of time are recognised during the period of such transactions or services.
iii. Those relating to a transaction or service executed in a single act are recognised when such act is performed.

Non-financial income and expenses are recognised 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 anticipated cash flows at market rates.

i) Impairment of financial assets

The carrying amount of financial assets is generally corrected as a charge against consolidated profit and loss 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, meaning 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 carrying amount will not be recovered.

As a general principle, the correction of the carrying amount of financial instruments owing to impairment is made against the income statement of the period in which the impairment is manifested; and the recovery of the losses owing to previously recognised losses from impairment, if any, is recognised in the income statement in the period in which the impairment is eliminated or reduced. If the possibility of recovering an amount owing to recognised impairment is considered remote, the impairment is eliminated from the consolidated balance sheet, although the Group may perform the actions necessary to attempt 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 carrying amount 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, that the Group estimates it will obtain during the lifetime of the instrument. This estimate takes account of all the relevant information available as at the date of preparation of the consolidated financial statements that provides 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.

In calculating the present value of estimated future cash flows the original effective interest rate of the instrument is used as the discount 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 is used if it is variable.

Portfolios of debt instruments, contingent risks, and contingent commitments, regardless of the customer, the instruments used or guarantees held, are analysed to determine the credit risk to which the Group is exposed and to estimate the requirements for covering any impairment in value. In drawing up 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 whether 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 geographical area of the activity, the type of guarantee, the aging of the due amounts and any other factor that may be relevant to an estimate of future cash flows.

ii. Future cash flows in each group of debt instruments are estimated for instruments with credit risk characteristics similar to those 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 carrying amount of all debt instruments and the present value of their estimated future cash flows.

Debt instruments not valued at fair value through profit or loss, contingent risks, and contingent commitments are classified according to the default risk attributable to the customer or to the transaction, into the following categories: normal risk, sub-standard risk, doubtful risk owing to customer delinquency, doubtful risk owing to reasons other than customer delinquency, and bad risk. For debt instruments not classified as normal risk, estimates are made of the specific coverage necessary for impairment on the basis of the aging of the unpaid amounts, the guarantees provided and the financial situation of the customer and, if applicable, of the guarantors. This estimate is generally made on the basis of arrears calendars.

In addition to the specific coverage for impairment indicated above, the Bank covers inherent losses incurred on debt instruments not valued at fair value through profit or loss and contingent risks classified as a normal risk through collective provisioning.

In this regard, the Bank of Spain determines the parameters, methods and amounts to be used to cover 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 Appendix IX to Bank of Spain Circular 4/2004 is divided into two stages.

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

The impaired amount is therefore the sum of the following:

The result of multiplying the value of the change in the balance of each risk type in the period by the relevant alpha regulatory parameter, plus
the sum of the results 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 net amount of additions to overall specific provisions made during the period.

The overall balance of generic provisions 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. During 2012 the Group released its entire generic provision,

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 income statement 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 'Available-for-sale financial assets' 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 income statement.

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 consolidated equity are recognised immediately in the consolidated income statement. 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 income statement for the period when recovered and, in the case of equity instruments, under the heading 'Valuation adjustments' in consolidated equity.

Impairment losses on equity instruments valued at their acquisition cost reflect the difference between their carrying amount and the present value of future expected cash flows, discounted at market rates of returns on other similar securities. These impairment losses are recognised in profit and loss in the period in which they occur, directly decreasing the cost of the financial asset, where the amount cannot be recovered except in case of sale.

In the case of equity instruments constituting holdings in joint ventures and associates, the Group estimates the amount of losses from impairment by comparing its recoverable amount with its carrying amount. 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 in addition to the above, checks are carried out to ensure that their market value is higher than the carrying amount recognised 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 of all or part of the credit and/or market risks associated with balances and transactions, using as underlying such things as interest rates, certain indices, the prices of certain securities, exchange rates between different currencies and other references of a similar kind. The Group uses financial derivatives traded on 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 hedging its positions, performing active management with other financial assets and liabilities or benefiting from the changes in their prices. Financial derivatives that can not be considered as hedging are considered to be trading derivatives.

Derivatives 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 that a participant in the market would consider, such as a) recent transactions with other instruments that are substantially the same; b) discounted cash flows and c) market models to value 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.

All financial derivatives are initially recognised at their fair value. For the case of financial swaps, said value is presumed to be zero, except when the entity shows otherwise by means of appropriate 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 these 'day one gains' during the lifetime of the financial swaps by which they are generated.

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

i. It may be considered a hedging instrument in its entirety, even if it is only a hedging instrument 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 time value or in forward contracts, which may be so considered 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-hedging or individual hedging (when there is a specific identification between instruments hedged and hedging instruments) hedges against exposure to changes in the fair value of the item hedged. The gain or loss arising from valuing the hedge instruments is recognised immediately in the income statement.
- Portfolio hedging (interest rate risk hedging in a portfolio of financial instruments) hedges exposure to changes in the fair value of the amount hedged in response to changes in the interest rate. The gain or loss arising from valuing the hedge instruments is recognised immediately in the income statement. In the case of the hedged amount, the gain or loss that arises when valuing it is directly recognised in the income statement, using as the balancing entry "Adjustments to financial assets by macro-hedging", or "Adjustments to financial liabilities by macrohedging", depending on whether the hedged amount corresponds to financial assets or financial liabilities.

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

Transfers of financial instruments are recognised 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 substantial retention of risks and profits associated with the financial instrumenttransferred, 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 income statement.
iii. If there is no transfer or substantial retention 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 derecognised 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 derecognised 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) Property, plant and equipment

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 or sum of the digits method, 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 Depreciation and Amortisation
Buildings	Straight-line over 50 years
Fixtures and fittings and others	Straight line from 6 to 12 years
Computer equipment	Sum of the digits

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

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 profit and loss at the time they occur.

At 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 carrying amount of the corresponding element to its recoverable amount and adjusts future depreciation charges in proportion to its adjusted carrying amount and for its remaining useful life, in the event that a re-estimate is necessary. In addition, when there are indications that the value of an asset has recovered, the group reverses the impairment loss recognised in prior periods and adjusts future depreciation charges. Reversal of the impairment loss on an asset may in no circumstances entail an increase in its carrying amount above what it would be if impairment losses had not been recognised in previous years.

The heading "Investment property" in the consolidated Balance Sheet comprises the net value of land, buildings and other constructions held either for renting out or with a view to obtaining a possible capital gain on their sale.

The criteria applied for recognition of the acquisition costs of investment properties, for depreciation, for estimating their respective useful lives and recognising any impairment losses are the same as those outlined above.

m) Intangible assets

Intangible assets are such identifiable, though invisible, non-monetary assets as arise as a consequence of a legal transaction or have been developed internally by the consolidated entities. Only those intangible assets whose cost can be estimated in a reasonably objective way and from which consolidated entities consider it likely that they will obtain future economic benefits are recognised in the 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 any impairment losses they may have suffered.

Goodwill

Differences between the cost of holdings in the capital of consolidated entities and entities accounted for using the equity method and other forms of business combinations and the corresponding net fair values of the assets and liabilities acquired, adjusted for the percentage holding acquired in these net assets and liabilities in the case of purchase of holdings, as at the date of their acquisition, are accounted for in the following way:

1. If the acquisition price exceeds the aforementioned fair value, as goodwill under "Intangible assets - goodwill" in the consolidated balance sheet. In the case of acquisition of holdings in associates or joint ventures accounted for using the equity method, any goodwill arising on acquisition is recognised as forming part of the value of the holding and not individually under the heading "Intangible assets - goodwill".
1. Negative differences between the acquisition cost and the fair value referred to are recognised once the valuation process has been reviewed, as income in the consolidated income statement under "Negative differences in business combinations".

Positive goodwill (excess of the acquisition price of a holding in a company or business over the net fair value of the assets, liabilities and contingent liabilities acquired) which are recognised in the consolidated balance sheet only when acquired for valuable consideration - therefore represent prepayments made by the acquiring entity for future economic benefits deriving from the assets of the entity or business acquired which are not individual and separately identifiable and recognisable.

Impairment losses recognised on goodwill shown under "Intangible assets - goodwill" are not subsequently reversed.

Other intangible assets

Intangible assets other than goodwill are recognised in the consolidated balance sheet at their acquisition or production cost, net of cumulative amortisation and any impairment they may have suffered.

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

Intangible assets with an indefinite useful life are not amortised, while for the close of each accounts period, consolidated entities review their remaining respective useful lives in order to ensure that these continue to be indefinite or if not, to take appropriate action.

Intangible assets with a definite life are amortised based on this life, applying criteria similar to those adopted for the depreciation of property, plant and equipment. The annual amortisation of intangible assets with a definite useful life is recognised in "Amortisation" in the consolidated income statement.

Both for intangible assets with indefinite useful lives and those with definite useful lives, the consolidated entities recognise any impairment losses, using as a balancing item "Impairment losses on other assets (net) - goodwill and other intangible assets" in the consolidated income statement. The criteria for recognising impairment losses on these assets and, if applicable, recoveries of impairment losses recognised in preceding years are similar to those applying to tangible assets for own use.

The balances recognised in the intangible asset items in the Balance Sheet, both under goodwill and under other intangible assets, essentially correspond to Línea Directa Aseguradora, S.A ("LDA").

n) Leases

o) Non-current assets for sale

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

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

When the Group acts as lessor, the total annual values of the amounts it will receive from the lessee plus a guaranteed residual value, which is usually the price of the purchase option held by the lessee upon termination of the contract, are recognised as financing granted to a third party, and as such included under the heading 'Loan and receivables' in the balance sheet, in accordance with the nature of the lessee.

On the other hand when the Group acts as lessee, the cost of the assets leased is recognised in the balance sheet according to nature of the asset that is the subject of the contract, and simultaneously as a liability for the same amount, which will be the lower of the fair value of the asset leased or the sum of the present values of the amounts to be paid to the lessor plus, where applicable, the price of the purchase option. These assets are depreciated using similar criteria to those applied to tangible assets for own use.

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

When the Group acts as lessor, it recognises the acquisition cost of the assets leased under the heading 'Tangible assets'. Such assets are depreciated in accordance with the policies in effect for similar tangible assets for own use and the income from lease agreements is recognised in profit and loss on a straight line basis.

On the other hand when the Group acts as lessee, leasing costs including any incentives granted by the lessor are recognised on a straight line basis in profit and loss.

Non-current assets for sale are those with a carrying amount 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 shown at the lower of fair value minus selling costs and their carrying amount, and they are not subject to depreciation or amortisation. In the case of repossessed 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 income statement. Recoveries of value are recognised in the consolidated income statement up to an amount equal to the losses from impairment recognised previously.

Buildings repossessed in payment of debt are recognised at the lower of fair value minus selling costs and carrying amount. Losses from impairment are recognised under the item 'Losses from impairment of non-current assets for sale' in the consolidated income statement, 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 settle them at their net value or to realise 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 their 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 present 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 present 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 guarantees are discounted to present value, with the differences being recognised in profit and loss as financial income.
b. The value of financial guarantee contracts which have not been classed as doubtful will be the amount initially recognised under liabilities less the part attributed to profit and loss on a linear basis over the expected lifetime of the guarantee or using another criterion, provided that this reflects more appropriately the receipt of the economic benefits and risks of the guarantee.

Financial guarantees are classified in accordance with the default risk attributable to the customer or to the transaction, and where appropriate, consideration is given to the need to establish provisions, applying criteria similar to those indicated in Note (g) for debt instruments valued at amortized cost.

In the event it should be necessary to establish a provision for financial guarantees, any fees pending accrual are reclassified to the corresponding provision.

s) Personnel expenses

Post-employment benefits

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

Commitments in respect of post-employment benefits made by the Bank to its personnel are deemed to be 'Defined contribution plans', where the Bank makes contributions of a pre-determined 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 'Defined benefit plans'.

Defined contribution plans

The contribution accrued during the financial year for this item is carried under the heading 'Personnel expenses' in the consolidated income statement.

If at 31 December of the financial year there is an outstanding amount pending contribution to the external plan through which the commitments are fulfilled, this is recognised at its present value under the heading 'Provisions - pension fund and similar obligations'. As at 31 December 2012 and 2011, there were no outstanding amounts pending contribution to external defined contribution plans.

Defined benefit plans

The Group records the present value of the post-employment fixed-provision benefits under the heading 'Provisions - Pension fund and similar obligations' in the liabilities of the consolidated balance sheet. As explained below, this value is recognised net of the fair value of the assets that meet the requirements in order to be considered as 'Plan assets'.

"Plan assets" are those linked to a particular defined benefit commitment with which these obligations will be settled directly, and which meet the following conditions: They are not owned by the Group, but by a legally separate third party that is not a related party; they are available only for paying or financing post-employment benefits; and they cannot return to the consolidated entities, except where the assets remaining in the 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 employee benefits already paid by the Group.

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

'Actuarial differences' are deemed to be those arising from the differences between previous actuarial hypotheses and reality and changes in the actuarial hypotheses used. The Group recognises net actuarial losses and gains in the period in which they arise, charging them to profit and loss.

Post-employment remunerations are recognised in the consolidated income statement as follows:

Current service cost - the increase in the current value of the obligations arising as a result of employees' service during the year - under the heading "Administration costs - 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 plan assets, the cost of the liabilities recognised in the consolidated income statement will be exclusively that corresponding to the obligations recognised in the liabilities.
The expected yield on any plan asset recognised in the assets of the consolidated Balance Sheet is shown under the heading "Interest and similar income" in the consolidated Income Statement.
The amortisation of the actuarial gains and losses, under the heading "Additions to Provisions (net)" in consolidated Income Statement.

Other long-term benefits

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, using the same criteria as explained above for defined benefit post-employment benefits, except that all costs for past services and actuarial gains (losses) are recognised as soon as they arise with a balancing entry in the consolidated income statement.

Death and invalidity of active personnel

The commitments made by the Group to cover the contingencies of death and invalidity of employees during the time that they are active and are covered by an insurance policy taken out by way of co-insurance with Axa and Caser are recognised in the consolidated income statement for an amount equal to the that of the premiums on these insurance policies accruing in each financial year.

t) Other allowances and contingencies

The Group records provisions 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 as regards 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 originating from third parties' valid expectation, created by the Group, 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.
Practically certain changes in the rules on certain issues, particularly regulatory measures which the Group will not be able to avoid.

Contingent liabilities are possible obligations of the Group that arise as a consequence of past events, the materialisation of which depends on whether future events outside the Group's control 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 a greater likelihood that they will materialise than that they will not, possible when there is less likelihood that they will materialise than that they will not, and remote when their occurrence is extremely rare.

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

Provisions are quantified on the basis ofthe bestinformation available on the consequences of the event that gives rise to them and they are estimated at the end of each accounting year, including the financial effect if it is significant. These are used to meet specific obligations for which they were recognised, and are reversed either totally or partially when said obligations no longer exist.

As at 31 December 2012 and 2011 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 on the consolidated financial statements, or as the case may be a significant additional impact to that already provided for.

u) Corporate tax

Corporate tax is considered an expense and is recognised under the heading 'Corporate Tax' in the income statement except when it is the result of a transaction recognised directly in equity, in which case it is recognised directly in equity, or of a business combination, where the deferred tax is recognised as an asset of the combination.

Expenses under the heading 'Corporate Tax' are determined by the tax calculated on the tax base for the year, taking account of changes during the year arising from temporary differences, tax credits for deductions and allowances and negative tax bases. The tax base for the year may differ from the net profit or loss for the year as presented in the income statement, since it excludes income and expense items that are taxable or deductible in other financial years as well as items for which this is never the case.

Deferred tax assets and liabilities correspond to taxes that are expected to be payable or recoverable on the differences between the carrying amounts of the assets and liabilities in the financial statements and the corresponding tax bases. They are recognised 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.

Deferred tax assets, such as tax paid in advance, credits for deductions and allowances, and credits for negative tax bases are recognised whenever it is probable that the Group will obtain sufficient taxable profits in the future against which to apply them. It is considered likely that the Group will obtain sufficient taxable profits 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 assets that arise upon recognition of investments in joint ventures or associates are recognised only when it is probable that they will be realised in the foreseeable future, and sufficient taxable profits are expected in the future against which to apply them. Deferred tax assets are also not recognised when an asset that is not a business combination is initially recognised, and where at the time of recognition they have not affected the accounting or tax result.

Deferred tax liabilities are always recognised, except when goodwill is recognised or if they arise upon recognition of investments in joint ventures or associates, if the Group is able to control the timing of the reversal of the temporary difference and it is also probable that the difference will not reverse in the foreseeable future. Deferred tax liabilities are also not recognised when an asset that is not a business combination is initially recognised, and where at the time of recognition they have 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 (contracts of insurance), and discretionary portfolio management contracts are not included in the Group Balance Sheet. Information on these resources as at 31 December 2012 can be 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 recognised under the heading 'Fees income' in the consolidated income statement. Note 40 provides information on third-party equity managed by the Group on 31 December 2012 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 for the various services rendered to these funds by the companies in the Group (wealth management services, portfolio custody, etc.) are recognised under the heading "Fees received" in the consolidated Income Statement.

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 income statement 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 income statement.

The most significant liabilities of these institutions as regards the direct insurance hired by same refer to the following: Provision for unearned premiums, for unexpired Risks, Provision for services, Mathematical provision, Life Insurance when the investment risk is undertaken by the policyholders and Participation in profits and for rebates. These

technical provisions for direct insurance are recognised in the consolidated balance sheets under 'Insurance liabilities' to cover claims arising from 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 recognised under the heading 'Insurance Activity' in the income statement.

6. Cash and balances with central banks

This heading comprises cash balances and balances held at the Bank of Spain and other central banks. The breakdown for the years ended 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Cash	120,843	114,751
Bank of Spain	544,429	297,754
Valuation adjustments	102	290
	665,374	412,795

In euros	664,160	411,767
In foreign currency	1,214	1,028
	665,374	412,795

Shown under valuation adjustments is an amount of €0.10 million representing accrued interest as at 31 December 2012 (€0.29 million as at 31 December 2011).

7. Trading portfolio of assets and liabilities and Other financial assets and liabilities at fair value with changes in profit and loss

As at 31 December 2012

The breakdown of these items of the consolidated balance sheets as at 31 December 2012
and 2011 is as follows:

€000s
	31/12/2012	31/12/2011
Asset:
Debt instruments	1,391,681	1,768,879
Other equity instruments	100,932	133,110
Trading derivatives	656,511	544,894
	2,149,124	2,446,883

In euros	2,144,547	2,442,841
In foreign currency	4,577	4,042
	2,149,124	2,446,883

"Other equity instruments" includes the securities forming part of the trading portfolio,
as well as other financial assets at fair value through profit or loss. The balance of these
other equity instruments as at 31 December 2012 stood at €39.86 million (€31.38 million
as at 31 December 2011).

The fair value of the loaned assets (assets assigned temporarily) in the trading portfolio on the asset side of the Balance Sheet as at 31 December 2012 was €1,391.68 million (€1,768.88 million as at 31 December 2011). Practically the whole of these assets have been ceded for terms of less than one year.

The breakdown of the financial assets and liabilities held for trading and other financial assets at fair value through profit or loss in the consolidated balance sheet as at 31 December 2012 and 2011, by instrument type and counterparty, is as follows:

					€000s
	Credit institutions	Non resident Public Admins.	Other Private Sector Resident	Other Private Sector Non resident	Total
Debt instruments	95,267	1,292,582	3,204	628	1,391,681
Other equity instruments	36,113	-	22,464	42,355	100,932
Trading derivatives	392,879	-	261,874	1,758	656,511
	524,259	1,292,582	287,542	44,741	2,149,124

As at 31 December 2011

					€000s
	Credit institutions	Non resident Public Admins.	Other Private Sector Resident	Other Private Sector Non resident	Total
Debt instruments	109,320	1,652,335	5,292	1,932	1,768,879
Other equity instruments	9,705	-	92,028	31,377	133,110
Trading derivatives	158,692	-	384,671	1,531	544,894
	277,717	1,652,335	481,991	34,840	2,446,883

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 trading portfolio is as follows:

		€000s
Liabilities	31/12/2012	31/12/2011
Trading derivatives	434,592	857,273
Short positions in securities	1,362,732	1,503,311
	1,797,324	2,360,584

In euros	1,794,615	2,357,875
In foreign currency	3,357	2,709
	1,797,324	2,360,584

The breakdown of the effect on the consolidated 2012 and 2011 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:

		€000s
	2012	2011
Trading portfolio (Note 30)	30,510	11,910
Organised market	37,440	(244)
Non-organised market	(6,930)	12,154
Other financial assets at fair value through profit or loss (Note 30)	(1,952)	97
	28,558	12,007

The net results by financial operation, broken down by the type of instrument in the trading portfolio and other financial assets at fair value through profit or loss recognised in financial years 2012 and 2011, are as follows:

		€000s
	2012	2011
Fixed income for trading (Note 30)	27,539	31,937
Other equity instruments (Note 30)	(14,934)	(41,738)
Held for trading	(12,982)	(41,835)
Other financial assets at fair value through profit or loss	(1,952)	97
Trading derivatives (Note 30)	15,953	21,808
	28,558	12,007

a) Debt instruments

The breakdown of this item in financial assets held for trading in the consolidated balance sheet as at 31 December 2012 and 2011 was as follows:

		€000s
	31/12/2012	31/12/2011
Public Administrations	1,292,582	1,652,335
Other private sectors	99,099	116,544
	1,391,681	1,768,879

The breakdown of this item in accordance with the nature of the securities that make it up as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Treasury Bills	494,319	742,699
Bonds	599,787	173,017
Debentures	107,563	573,320
Scrip	75,060	93,964
Other	114,952	185,879
	1,391,681	1,768,879

All of the amounts in this item are denominated in euros. The asset trading portfolio is composed of securities traded on organised markets as at 31 December 2012 and 2011.

b) Equity instruments

The breakdown and changes under this heading of the asset trading portfolio and of the other financial assets at fair value through profit or loss for financial years 2012 and 2011 is as follows:

				€000s
	From Credit Institutions	From other resident sectors	From other non-resident sectors	Total
Balance as at 31/12/2011	9,705	92,028	31,377	133,110
Balance as at 31/12/2012	36,113	22,464	42,355	100,932

The majority of the instruments under Other equity instruments on the Bankinter Group balance sheet are denominated in euros both in 2012 and in 2011.

c) Trading derivatives

The breakdown of this item in the financial assets and liabilities held for trading for assets in the consolidated balance sheet as at 31 December 2012 and 2011 is as follows:

	€000s
	Fair value
		31/12/2012		31/12/2011
	Assets	Liabilities	Assets	Liabilities
Purchase and sale of unmatured forward exchange contracts:	263,980	21,711	15,187	252,919
Currency purchases against euros	123,341	13,649	2,727	252,392
Currency purchases against other currencies	1,526	134	1,007	759
Currency sales against euros	139,113	7,928	11,310	(232)
Currency sales against other currencies	-	-	143	-
Securities and interest-rate futures:	-	-	966	-
Bought	-	-	966	-
Securities options:	36,562	48,874	58,925	53,812
Bought	36,562	11,210	58,925	4,852
Issued	-	37,664	-	48,960
Interest-rate options:	1,528	1,741	1,239	1,275
Bought	1,528	-	1,239	1,275
Issued	-	1,741	-	-
Currency options:	57	468	44	189
Bought	57	-	44	-
Issued	-	468	-	189
Other interest-rate operations:	354,384	361,798	468,350	548,633
Interest-rate swaps (IRSs)	354,384	361,798	468,350	548,633
Credit derivatives	-	-	183	445
Credit derivatives	-	-	183	445
	656,511	434,592	544,894	857,273

d) Short positions

This heading in the Balance Sheet consists of the financial liabilities originated by short selling to the value of €1,362.73 million as at 31 December 2012 (€1,503.31 million as at 31 December 2011). The balances are denominated in euros. These short positions are generated by the firm sale of financial assets acquired temporarily.

8. Financial assets available for sale

The breakdown of this heading in the consolidated balance sheet as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Debt instruments	5,971,654	4,644,306
Other equity instruments	160,817	131,763
	6,132,471	4,776,069
In euros	6,132,471	4,774,648
In foreign currency	-	1,421
	6,132,471	4,776,069

The breakdown of this item in accordance with the nature of the securities that make it up as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Fixed Income	5,971,654	4,644,306
Bills of exchange	1,846,234	727,225
Debt	2,788,762	1,890,349
Other Fixed Income	1,336,658	2,026,732
Equities	160,817	131,763

The fair value of the assets under this item of the consolidated Balance Sheet as at 31 December 2012 loaned or in guarantee was €1,719,35 million (€3,074,14 million as at 31 December 2011). Practically all these assets are assigned for terms of less than one year. The breakdown of these assets as at 31 December 2012 and 2011 is as follows (€000s):

			€000s
		31/12/2012
	Resident Public Administrations	Other Private Sectors	Total
Debt instruments	4,634,996	1,336,658	5,971,654
Other equity instruments	-	160,817	160,817
	4,634,996	1,497,475	6,132,471

			€000s
		31/12/2011
	Resident Public Administrations	Other Private Sectors

Debt instruments	2,617,574	2,026,732	4,644,306
Other equity instruments	-	131,763	131,763
	2,617,574	2,158,495	4,776,069

The effect on the item "Valuation adjustments" in consolidated equity was €3.15 million as at 31 December 2012 (-€29.25 million as at 31 December 2011).

The following is the breakdown of the movement:

		€000s
	2012	2011
Valuation adjustments as at 1 January	(29,248)	(22,994)
Valuation gains and losses	72,655	(3,202)
Income tax	(13,882)	2,680
Amounts transferred to results	(26,380)	(5,732)
Valuation adjustments as at 31 December	3,145	(29,248)
Debt securities	10,175	(22,282)
Equity instruments	(7,030)	(6,966)

Geographically, the portfolio of available-for-sale financial assets is concentrated practically entirely in Spain as at 31 December 2012 and 2011.

In 2012 the Group recognised an impairment loss of €8.67 million (2011: €2.03 million) under the headings "Impairment losses on available-for-sale financial assets" and "Other financial instruments at fair value through profit or loss" in the enclosed consolidated Income Statement.

The impairments for the year ended 31 December 2012 related mainly to the Group's holdings in the Eolia Group and Inmobiliaria Colonial, S.A.

Results recognised in the consolidated Income Statements for the years ended 31 December 2012 and 2011 from financial transactions (Note 30) by type of instrument in the portfolio of available-for-sale financial assets, were as follows:

		€000s
	31/12/2012	31/12/2011
Debt instruments	23,386	4,176
Other equity instruments	2,994	1,036
	26,380	5,212

9. Held to maturity investments

The breakdown of this item in the consolidated balance sheets as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Public administrations	2,486,154	2,217,558
Credit institutions	269,201	933,372
	2,755,355	3,150,930

The changes that occurred in the chapter "Held-to-maturity portfolio" in the financial years 2012 and 2011 are as follows:

	€000s
	2012	2011

Balance at start of period	3,150,930	3,241,573
Additions	-	25,294
Withdrawals	(395,575)	(115,937)
Other movements
Balance at close of period	2,755,355	3,150,930

As at 31 December 2012 the portfolio of held-to-maturity investments was more than 90%concentrated in Spanish Public Administration bodies guaranteed by the State.

The Market Risks division values these references on a monthly basis to confirm that they can be counted as liquid assets for calculating the Basel III Liquidity Coverage Ratio (LCR).

As at 31 December 2012 and 2011 the entire portfolio was denominated in euros.

10. Loans and receivables

The breakdown of this item in the consolidated balance sheets as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Deposits with credit institutions	1,085,765	1,772,506
Valuation adjustments	7,963	6,889
Total bank deposits	1,093,728	1,779,395
Loans and advances to customers	44,539,674	46,174,514
Valuation adjustments	(964,323)	(786,542)
Total customer lending	43,575,351	45,387,972
Total Debt instruments	82,871	-
	44,751,950	47,167,367

Euros	40,281,112	41,977,815
Foreign currency	4,470,838	5,189,552
	44,751,950	47,167,367

The valuation adjustments of the loan and receivables portfolio, as at 31 December 2012 and 2011 present the following figures:

		€000s
	31/12/2012	31/12/2011
Valuation corrections due to asset impairment	(953,385)	(765,454)
Accrued interest	98,881	86,753
Other	(101,856)	(100,952)
	(956,360)	(779,653)

The following are the details of the changes that occurred during 2012 and 2011 in the balance of financial assets classified as loans and receivables and considered to have been impaired due to their credit risk:

		€000s
	2012	2011
Balance at start of period	1,500,788	1,330,180
Net additions	670,514	449,943
Transferred to bad debts	(214,614)	(279,335)
Balance at close of period	1,956,688	1,500,788

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 in the consolidated Balance Sheet as at 31 December 2012 and 2011, by type of instrument and counterparty, irrespective of the fair value that may be attributed to any kind of guarantee to ensure performance, is as follows:

	€000s
		31/12/2012				31/12/2011
	Bank deposits	Loans and advances to customers	Debt instruments	Total Bank deposits		Loans and advances to customers

Banks	1,093,728	-	-	1,093,728	1,779,395	-	1,779,395
Resident Public Administrations	-	1,612,967	15,985	1,628,952	-	639,411	639,411
Other private sectors	-	41,962,384	66,886	42,029,270	-	44,748,561	44,748,561
	1,093,728	43,575,351	82,871	44,751,950	1,779,395	45,387,972	47,167,367

The following are the changes that occurred, during 2012 and 2011, 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.

		€000s
	31/12/2012	31/12/2011
Balance at start of period	765,454	861,210
Provisions charged to results for the year	360,935	137,925
Of which:
Calculated on an individual basis	948,842	352,233
Calculated on a collective basis	(97,479)	(35,453)
Recoveries credited to P&L	(490,428)	(178,855)
Used	(187,732)	(228,279)
Transfer of funds	17,290	-
Other movements	(2,562)	(5,402)
Balance at close of financial year	953,385	765,454

Of which:
Calculated on an individual basis	953,385	667,975
Calculated on a collective basis	-	97,479

During 2011 the Group sold a portfolio of bad debts for €122.83 million to OKO Investments 2, S.A.R.L., obtaining a gain of €7.25 million.

Assets in suspense recovered during 2012 and 2011 totalled €11.18 million and €10.66 million respectively. During financial years 2012 and 2011, the Group recognised impairment losses of €60.60 million and €36.18 million respectively on foreclosed assets (Note 12).

Considering these amounts and those recognised in the account "Provisions charged to results" in the previous table, impairment losses on "Loans and Receivables" amounted to €410.36 million and €156.20 million, recognised under the heading "Losses due to (net) impairment of financial assets" in the Income Statement.

Interest and return by type of instrument in the portfolio of loans and receivables recognised in the consolidated income statement as at 31 December 2012 and 2011 are as follows:

		€000s
	2012	2011
Deposits with credit institutions (Note 29)	28,128	48,040
Loans to customers (Note 29)	1,286,893	1,205,045
Debt instruments	5,413	-
	1,320,434	1,253,085

1. Deposits with credit institutions

The breakdown of this item in the loans and receivables portfolio for the assets in the consolidated balance sheet as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011

Term accounts	46,060	121,525
Assets held temporarily	503,337	737,114
Other accounts	536,368	912,061
Of which, managed as cash	354,945	219,922
Impaired assets	-	1,806
Valuation adjustments	7,963	6,889
Accrued interest	7,986	8,656
Other	(23)	(1,767)
	1,093,728	1,779,395

In euros	945,606	1,650,602
In foreign currency	148,122	128,793
	1,093,728	1,779,395

The breakdown of this item in the loans and receivables portfolio for the assets in the consolidated balance sheet as at 31 December 2012 and 2011 is as follows:

		€000s
Loans and advances to customers	31/12/2012	31/12/2011
Public Administrations	1,612,967	639,411
Loans to Public Administrations	1,607,289	634,207
Impaired assets	817	657
Valuation adjustments	4,862	4,547
Accrued interest	5,300	5,773
Other	(438)	(1,226)
Other private sectors	41,962,384	44,748,561
Commercial lending	2,177,584	2,029,780
Receivables secured by collateral	27,421,466	29,507,806
Assets held temporarily	1,515,467	2,781,837
Other non-current receivables	7,963,701	8,081,732
Finance leases	807,586	900,608
Sight debtors and miscellaneous	1,089,894	739,562
Impaired assets	1,955,871	1,498,325
Valuation adjustments	(969,185)	(791,089)
Valuation corrections due to asset impairment	(953,385)	(765,454)
Accrued interest	85,595	72,325
Other	(101,395)	(97,960)
	43,575,351	45,387,972

In euros	39,252,635	40,327,213
In foreign currency	4,322,716	5,060,759
	43,575,351	45,387,972

2. Loans and advances to customers

The breakdown of impaired assets by maturity as at 31 December 2012 and 2011 was as follows:

	€000s
	31/12/2012
Up to 6 months	516,951
More than 6 months but not more than 9	223,979
More than 9 months but not more than 12	220,246
More than 12 months	995,512
	1,956,688

The distribution of finance lease lending as at 31 December 2012 and 2011 is as follows:

	31/12/2012	31/12/2011
Tourism	18.05%	14.73%
Assorted machinery	57.97%	56.50%
Transport vehicles	22.89%	27.62%
Other	1.09%	1.15%
	100.00%	100.00%

3. Debt instruments

The breakdown of the heading Debt securities in the loans and receivables section of the consolidated Balance Sheet as at 31 December 2012 is as follows:

	€000s
	2012	2011
Resident Public Administrations	15,985	-
Instituto de Crédito Oficial (Official Spanish government credit agency)	5,145	-
Other resident sectors	40,500	-
Other non-resident sectors	21,241	-

	82,871	-

11. Asset/liability hedging derivatives

As at 31 December 2012, the Group held hedging derivatives in the amount of €152.20 million recognised on the assets side of the Balance Sheet and €43.10 million recognised on the liabilities side (€118.65 million and €68.68 million on the assets and liabilities sides respectively as at 31 December 2011). Net derivatives amounted to €109.10 million and €49.97 million as at 31 December 2012 and 2011 respectively.

	€000s
	31/12/2011
Up to 6 months	403,148
More than 6 months but not more than 9	167,777
More than 9 months but not more than 12	152,302
More than 12 months	777,561
	1,500,788

Assets matured and not impaired as at 31 December 2012 amounted to €171.87 million (€161.93 million as at 31 December 2011).

Finance lease agreements for financial years 2012 and 2011, have the following characteristics:

	2012	2011
Average life	4-8 years	4-6 years
Maximum differential	9.00%	9.00%

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

								€000s
Hedged Instrument	Type of Hedging	Hedging Instrument	Nominal Hedged	Nature of Hedged	Fair value of the Hedged Instrument attributed to the hedged risk		Fair Value of the Hedging Instrument (ex-coupon)
			(€ million)	Risk	31/12/2012	31/12/2012	31/12/2011	31/12/2011
Individual hedges or Micro-hedges:
Financial assets
Public Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	150	Interest Rate	29,611	(29,345)	25,499	(24,948)
Financial liabilities
Subordinated Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	290	Interest Rate	(59,848)	61,572	(58,257)	59,330
Senior Debt	Individual Hedges or Micro-hedges:	Interest-rate swaps	79	Interest Rate	(131)	64	(677)	656
Customer Deposits	Individual hedges or Micro-hedges:	Interest-rate swaps	5	Interest Rate	(1,871)	1,872	(1,978)	1,977
Backed issue	Individual hedges or Micro-hedges:	Interest-rate swaps	-	Interest Rate	-	-	(621)	597
FAAF bonds	Individual hedges or Micro-hedges:	Interest-rate swaps	-	Interest Rate	-	-	(299)	285
Mortgage Bond Issues	Individual hedges or Micro-hedges:	Interest-rate swaps	3,910	Interest Rate	(47,853)	48,124	(19,972)	19,842
Macro-hedging-
Mortgage Loans	Macro-hedging	Interest-rate swaps	1,875	Interest Rate	3,018	(2,990)	11,463	(11,336)
					(77,074)	79,297	(44,842)	46,403

The following is a comparison of cum-interest and ex-interest hedging instruments as at 31 December 2012 and 2011:

				€000s
	31/12/2012		31/12/2011
	With interest	Ex-interest		Ex-interest

Public Debt	(32,011)	(29,345)	(26,916)	(24,948)
Subordinated Debt	63,661	61,572	60,520	59,330
Customer Deposits	1,462	64	1,677	656
Senior debt	562	1,872	1,330	1,977
Backed issue	-	-	10,476	597
FAAF bonds	-	-	5,228	285
Mortgage Bond Issue	86,522	48,124	39,266	19,842
Macro-hedging - Mortgage loans	(11,095)	(2,990)	(41,607)	(11,336)
Other
	109,101	79,297	49,974	46,403

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 bank's hedges as at 31 December 2012.

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

In this type of hedging, the hedged elements are Spanish State Public Debt securities at 5.50% for a total nominal value at closure of €150 million recognised under the heading "Available-for-sale financial assets" in the assets included in Note 8. The risk hedged is the change in the fair value of these securities as a result of changes 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 bonds

In this case the items hedged are subordinated bonds issued by Bankinter at fixed interest rates of 6.00% and 6.375% for a total amount of €290 million, shown under the heading 'Financial liabilities at amortised cost' included in Note 19. The risk hedged is the change in the fair value of these securities as a result of changes 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 senior bond issue

In this case the items hedged are senior bonds issued by Bankinter for a 3% fixed interest rate for a total sum of 79 million euros carried under the heading 'Financial liabilities at depreciated cost' of the liabilities included under (Note 19). The risk hedged is the change in the fair value of these securities as a result of changes 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 customers in the amount of €5 million and shown under the heading "Financial liabilities at amortised cost" included in Note 19. The risk hedged is the change in the fair value of these deposits as a result of changes 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.

5.- Hedging of mortgage-backed bond issues

The instruments hedged are issues ES0413679079 (€899 million), ES0413679095 (€613 million), ES0413679079 (€400 million), ES0413679111 (€498 million), ES0413679178 (€1 billion) and ES0413679202 (€500 million) in mortgage-backed bonds for a nominal total of €3.91 billion.

The risk 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 changes in the risk-free interest rate, excluding changes due to possible credit risk premiums, market liquidity or any other than the aforementioned interest-rate risk.

6.- 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 changes in the risk-free interest rate.

In this hedge, the risk-free interest rate is understood as corresponding to the variable interest rate for interest rate swaps (IRS).

The instruments used to hedge the various mortgage loan amounts are IRS, contracted on a monthly basis depending on decisions taken with regard to managing interest-rate risk.

Effectiveness of the hedging:

The Micro-hedges and Portfolio Hedging described above are highly effective. The Group performs and records the pertinent tests to verify that at the beginning and throughout their lives it can be expected, prospectively, that the changes in the fair value of the item hedged attributable to the risk hedged will be almost fully set off by the changes in the fair value of the hedging instrument and that, retrospectively, the hedging results will have fluctuated within a range of eighty to one hundred and twenty-five per cent in respect of the results of the item hedged.

As regards portfolio hedges, as well as the foregoing, the Bank verifies compliance with the alternative, described in current applicable accounting regulations, of appraising their effectiveness 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 be ineffective only if upon review the amount of the net asset position were lower than the hedged amount.

12. Non-current assets held for sale

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

	€000s
Balance at 31.12.2010	271,537
Additions	190,724
Valuation adjustments	(69,319)
Cancellations	(84,428)
Balance at 31.12.2011	308,514
Additions	275,853
Valuation adjustments	(54,630)
Cancellations	(148,596)
Balance at 31.12.2012	381,141

The following is the classification of repossessed properties by category and average length of time in the portfolio of non-current assets for sale:

€000s
		Residential assets		Industrial assets		Other Assets	Totals
		31/12/2012 31/12/2011 31/12/2012 31/12/2011 31/12/2012 31/12/2011 31/12/2012 31/12/2011
Up to one month	14,615	6,699	6,162	5,644	2,402	120	23,179	12,463
Between one and three months	33,836	24,398	11,923	9,236	3,631	2,032	49,390	35,666
Between three and six months	34,520	5,890	10,504	4,795	3,010	155	48,034	10,840
Between six and twelve months	40,375	45,685	19,157	19,692	2,050	3,809	61,582	69,186
More than one year	96,233	90,876	53,240	57,010	49,483		32,473 198,956 180,359
		219,579 173,548 100,986		96,377	60,576		38,589 381,141 308,514

Movements in valuation adjustments to non-current assets for sale throughout the financial year 2012 were as follows:

	€000s
	2012	2011
Starting balance	175,894	106,575
Net provisions charged to results	100,729	83,827
Of which due to insolvency (Note 10)	60,597	36,175
Of which due to ageing effect (Note 34)	40,132	47,652
Application of funds	(46,099)	(19,301)
Other movements	-	4,793
End balance	230,524	175,894

Net losses recognised in 2012 (Note 34) on disposals of non-current assets held for sale amounted to €13.25 million (€9.32 million in 2011).

Repossessed assets that are not destined for proprietary use or property investments should be disposed of within a maximum timeframe of one year from the moment that they become available for immediate sale. This latter circumstance determines that the period for which a repossessed asset remains in the balance sheet may exceed one year. The distribution of repossessed assets by business segment is as follows, as at December 2012 and 2011:

Segments	31/12/2012	31/12/2011
Companies	44%	50%
Commercial Banking	56%	50%
Grand total	100%	100%

From 31 December 2012 to the date on which these financial statements were drafted, no significant amounts have been recognised under the item 'Non-current assets for sale' in the consolidated balance sheet.

Repossessed assets consist of assets repossessed in payment of debts, dations in payment of debts and acquisitions of assets with subrogation to companies in the Group. Initially, these assets are recognised at the net carrying amount of the debts from which they originated and the losses recognised on impairment are not released. Subsequently, these assets are valued at the lower of the net carrying amount of the relevant loan on the date of the acquisition or the fair value of the repossessed asset (estimated on the basis of its appraisal value), with a downward adjustment according to the time that the asset has remained in 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. All these assets were denominated in euros as at 31 December 2012 and 2011.

The Bankinter Group uses its subsidiary Intermobiliaria, S.A., as the management company for assets originating from problem lending (repossessions, properties accepted in payment of debts, etc.) This company was incorporated on 16 February 1976 and has its registered offices at Paseo de la Castellana 29, Madrid. The Group's general policy is that all assets originating from problem loans should be registered in the name of this subsidiary, although there may occasionally be circumstances that make it desirable for such registration to be carried out directly in the name of the parent company.

Since the current policy on repossessions was adopted and up until the date of these financial statements, the cumulative volume of assets originating from problem lending in this subsidiary is €875.72 million.

The acquisition of these assets is financed by the parent company on market terms. The resources made available to Intermobiliaria by the parent company as at 31 December 2012 and 2011 are summarised in the following table:

		€000s
	31/12/2012	31/12/2011
Capital contributions	7,391	6,701
Participating loans	300,000	200,000
Loan account	169,197	107,365
Collateralised loans	196,550	184,393
	673,138	498,459

In this past year the volume of assets transferred to Intermobiliaria was €255.38 million (€160.63 million in 2011), generating a loss of €57.04 million (€36.17 million in 2011). These acquisitions are financed entirely by the parent company.

13. Investments

The breakdown of this item in the consolidated balance sheets as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Associates	40,279	26,301
Jointly controlled entities	321	2,040

	40,600	28,341

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

	€000s
	2012	2011
Balance at start of period	28,341	29,593
Transfers from Group entities	14,970	-
Share of results of entities accounted for using the equity method	17,677	14,675
Dividends paid	(20,961)	(12,679)
Other movements	573	(3,248)
Balance at close of financial year	40,600	28,341

During the fourth quarter of 2012, the Bank sold 40.10% of the share capital of Bankinter Seguros Generales S.A. de Seguros y Reaseguros (formerly Bankinter Servicios de Consultoría, S.A.) for €12 million.

Following this sale, the Group retains a 49.9% interest in the company, but no longer has control. The company is now accordingly accounted for using the equity method. This change led to a €14.97 million increase in the portfolio of associates.

The Group recognised a gain of €17.45 million on this transaction under the heading "Gains (losses) on derecognition of assets not classified as non-current assets held for sale''. See Note 34. The portion of this gain corresponding to the recognition of the fair value of the investment retained in the subsidiary amounts to €9.49 million.

The breakdown of fully consolidated Group companies as at 31 December 2012 is as follows:

			% Holding			Euros			€000s
	Registered office	Direct	Indirect	Total	Number of Shares	Nominal value	Capital	Reserves	Results	Theoretical carrying amount
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	Castellana, 29. Madrid	99.99	0.01	100	35,222	30	1,060	40,332	596	41,988
Bankinter Gestión de Activos, S.G.I.I.C.	Marqués de Riscal, 11 Madrid	99.99	0.01	100	144,599	30	4,345	17,170	11,026	32,541
Hispamarket, S.A.	Castellana, 29. Madrid	99.99	0.01	100	4,516,452	6	27,144	6,968	(4,929)	29,183
Intermobiliaria, S.A.	Castellana, 29. Madrid	99.99	0.01	100	243,546	30	7,319	(123,447)	(79,428)	(195,556)
Bankinter Consumer Finance, E.F.C, S.A.	Avda Bruselas 12 Arroyo de la Vega (Alcobendas) Madrid	99.99	0.01	100	1,299,999	30	39,065	22,793	22,149	84,007
Bankinter Capital Riesgo, SGECR, S.A.	Avda Bruselas 12 Arroyo de la Vega (Alcobendas) Madrid	99.99	0.01	100	3,000	100	310	356	196	862
Bankinter Sociedad de Financiación, S.A.	Castellana, 29. Madrid	99.99	0.01	100	602	100	60	1,647	(8)	1,699
Bankinter Emisiones, S.A.U.	Castellana, 29. Madrid	100	-	100	602	100	60	1,404	259	1,723
Bankinter Capital Riesgo I Fondo Capital	Castellana, 29. Madrid	99.99	0.01	100	29,661	1,000	30,000	1,872	1,426	33,298
Arroyo Business Consulting Development, S. L.	Avenida Bruselas, 12. Arroyo de la Vega (Alcobendas), Madrid	99.99	0.01	100	2,976	1	3	1	-	4
Gneis Global Services S.A.	Tres Cantos (Madrid)	99.99	0.01	100	30,000,000	1	30,000	1,572	13,992	45,564
Relanza Gestión, S.A.	Avda Bruselas 12 Arroyo de la Vega (Alcobendas) Madrid	-	100	100	1,000	60	60	89	35	184
Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros	Isaac Newton, 7	100	-	100	2,400,000	16	37,512	277,741	78,418	393,671
Línea Directa Asistencia, S.L.U.	Pozuelo de Alarcón (Madrid)	-	100	100	500	60	30	25,152	8,282	33,464
Línea Directa Activos, S.L.	Tres Cantos (Madrid)	-	100	100	3,003,000	1	3,003	5,132	189	8,324
Moto Club LDA, S.L.U.	Tres Cantos (Madrid)	-	100	100	30	100	3	84	190	277
Centro Avanzado de Reparaciones CAR, S.L.U.	Torrejón de Ardoz (Madrid)	-	100	100	10,000	60	600	(322)	263	541
Ambar Medline, S.L.	Tres Cantos (Madrid)	-	100	100	100,310	10	1,003	4	26	1,033

The breakdown of fully consolidated Group companies as at 31 December 2011 is as follows:

			% Holding			Euros	€000s
					Number of	Nominal				Theoretical carrying
	Registered office	Direct	Indirect	Total	Shares	value	Capital	Reserves	Results	amount
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	Castellana, 29. Madrid	99.99	0.01	100	35,222	30	1,060	40,373	(41)	41,392
Bankinter Seguros Generales, S.A. de Seguros y Reaseguros	Castellana, 29. Madrid	89.99	0.01	90	1,999	30	10,060	461	3	10,524
Bankinter Gestión de Activos, S.G.I.I.C.	Marqués de Riscal, 11 Madrid	99.99	0.01	100	144,599	30	4,345	17,170	10,664	32,179
Hispamarket, S.A.	Castellana, 29. Madrid	99.99	0.01	100	4,516,452	6	27,144	6,595	372	34,111
Intermobiliaria, S.A.	Castellana, 29. Madrid	99.99	0.01	100	222,999	30	6,701	(54,728)	(68,719)	(116,746)
Bankinter Consumer Finance, E.F.C, S.A.	Avenida Bruselas 12, Arroyo de la Vega (Alcobendas), Madrid	99.99	0.01	100	1,299,999	30	39,065	17,183	11,210	67,458
Bankinter Capital Riesgo, SGECR, S.A.	Avenida Bruselas 12, Arroyo de la 99.99 0.01 100 3,000 100 310 Vega (Alcobendas), Madrid		201	155	666
Bankinter Sociedad de Financiación, S.A.	Castellana, 29. Madrid	99.99	0.01	100	602	100	60	2,489	(842)	1,707
Bankinter Emisiones, S.A.U.	Castellana, 29. Madrid	100	-	100	602	100	60	903	501	1,464
Bankinter Capital Riesgo I Fondo Capital	Castellana, 29. Madrid	99.99	0.01	100	29,661	1,000	30,000	1,042	830	31,872
Arroyo Business Consulting Development, S. L.	Avenida Bruselas 12, Arroyo de la Vega (Alcobendas), Madrid	99.99	0.01	100	2,976	1	3	1	-	4
Gneis Global Services S.A.	Tres Cantos (Madrid)	99.99	0.01	100	30,000,000	1	30,000	474	2,898	33,372
Relanza Gestión, S.A.	Avenida Bruselas 12, Arroyo de la Vega (Alcobendas), Madrid	-	100	100	1,000	60	60	77	13	150
Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros	Isaac Newton, 7	100	-	100	2,400,000	16	37,512	228,226	74,869	340,607
Línea Directa Asistencia, S.L.U.	Pozuelo de Alarcón (Madrid)	-	100	100	500	60	30	17,131	8,022	25,182
Línea Directa Activos, S.L.	Tres Cantos (Madrid)	-	100	100	3,003,000	1	3,003	5,130	2	8,135

During 2012 Intermobiliaria, S.A. increased its share capital by €0.62 million. None of the companies in the portfolio of permanent equity holdings as at 31 December 2012 is listed. Details of Group companies accounted for using the equity method as at 31 December 2012 are as follows:

		% Holding			€000s
	Registered office	Direct	Indirect	Total	Capital	Reserves	Results	Theoretical carrying amount	Net carrying amount
Mercavalor, S.V., S.A.	Avenida Brasil 7, Madrid	25.01	-	25.01	2,576	6,424	(299)	8,701	2,274
Helena Activos Líquidos, S.L.	Serrano 41, Madrid	29.53	-	29.53	24	1,711	(30)	1,705	504
Eurobits Technologies, S.L.	Avenida Bruselas, 12. Arroyo de la Vega (Alcobendas), Madrid	32.01	-	32.01	9	1,171	(177)	1,003	321
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	Castellana, 29. Madrid	50.00	-	50.00	6,968	3,259	35,635	45,862	22,532
Bankinter Seguros Generales, S.A. de Seguros y Reaseguros	Castellana, 29. Madrid	49.90	-	49.90	10,060	464	0	10,524	14,970
									40,601

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

			% Holding		€000s
	Registered office	Direct	Indirect	Total	Capital	Reserves	Results	Theoretical carrying amount	Net carrying amount
Mercavalor, S.V., S.A.	Avenida Brasil 7, Madrid	20.01	-	20.01	3,220	7,103	140	10,463	2,191
Helena Activos Líquidos, S.L.	Serrano 41, Madrid	29.53	-	29.53	24	1,694	(331)	1,387	412
Moto Club LDA, S.L.U.	Tres Cantos (Madrid)	-	100	100	3	350	233	587	587
Centro Avanzado de Reparaciones CAR, S.L.U.	Torrejón de Ardoz (Madrid)	-	100	100	600	-	(322)	278	278
Ambar Medline, S.L.	Tres Cantos (Madrid)	-	100	100	1,003	14	18	1,034	1,007
Eurobits Technologies, S.L.	Avda Bruselas 12 Arroyo de la Vega (Alcobendas) Madrid	40.01	-	40.01	9	1,212	7	1,228	491
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	Castellana, 29. Madrid	50.00	-	50.00	6,968	31,557	29,625	68,150	23,375
									28,341

The financial statements of Eurobits Technologies, S.L, Mercavalor S.V., S.A and Helena Activos Líquidos, S.L. are as at 30 November 2012. The impact on the consolidated financial statements deriving from the use of financial statements as at dates prior to 31 December 2012 for these companies is not material.

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 and Bankinter Seguros Generales, S.A. de Seguros y Reaseguros are accounted for using the equity method as opposed to proportional consolidation, in accordance with the accounting regulations in force, since as there is no joint management with the 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 2012 and 2011:

As at 31 December 2012

	€000s
		Balance Sheet	Income Statement
	Assets	Liabilities	Expenses	Income
Eurobits Technologies, S.L.	1,798	1,975	1,210	1,033
Mercavalor, S.V., S.A.	15,995	16,294	2,236	1,937
Helena Activos Líquidos, S.L.	1,738	1,768	622	592
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	409,225	373,620	27,282	62,917
Bankinter Seguros Generales, S.A. de Seguros y Reaseguros	10,528	10,528	6	6

As at 31 December 2011

			€000s
	Balance Sheet			Income Statement
	Assets	Liabilities	Expenses	Income
Eurobits Technologies, S.L.	1,979	1,973	1,547	1,554
Mercavalor, S.V., S.A.	13,444	13,304	3,628	3,768
Moto Club LDA, S.L.U.	707	120	258	491
Centro Avanzado de Reparaciones CAR, S.L.U.	2,079	1,801	5,087	4,765
Ambar Medline, S.L.	1,257	250	2,947	2,968
Helena Activos Líquidos, S.L.	1,418	1,750	605	273
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	461,082	414,335	23,881	53,505

The following is a detailed breakdown of the activities of the group companies, joint ventures and associates:

	Activity
Group companies
Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A.	Telephone helpline
Bankinter Gestión de Activos, S.G.I.I.C.	Asset management
Hispamarket, S.A.	Holding and acquisition of securities
Intermobiliaria, S.A.	Property management
Bankinter Consumer Finance, E.F.C.,S.A.	Finance company
Bankinter Capital Riesgo, SGECR, S.A.	Fund management and private equity 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	Private equity fund
Arroyo Business Consulting Development, S. L.	Inactive
Gneis Global Services S.A.	Consultancy
Relanza Gestión, S.A.	Collection and recovery services
Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros	Insurance company
Línea Directa Asistencia, S.L.U.	Insurance assessments, 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
Ambar Medline, S.L.	Insurance mediation
Línea Directa Activos, S.L.	Property management

Joint arrangements and associates:
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
Bankinter Seguros Generales, S.A.de Seguros y Reaseguros	Insurance company

In December 2012 the entity reached agreement with Dutch bank Van Lanschot Bankiers N.V. on acquiring its Luxembourg subsidiary Van Lanschot Bankiers (Luxembourg) S.A. This transaction will provide the Bankinter group with the necessary infrastructure and banking licence to develop its private banking business model. The execution of the agreement, and therefore also the incorporation of this company into the Group, is pending finalisation of the regulatory and supervisory procedures inherent in this kind of transaction, and should be completed within the first quarter of 2013.

14. Property, plant and equipment

The breakdown of this heading in the balance sheet as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011

For internal use	410,839	435,354
Real estate investments	2,200	-
Other assets assigned under operating leases	29,249	31,547
	442,288	466,901

The following is a summary of the elements of the tangible assets and their movements during financial years 2012 and 2011:

						€000s
	31/12/2011			Additions Cancellations Transfers and others	Depreciation and Amortisation	31/12/2012
For internal use	435,354	15,966	4,024	(9,116)	34,093	404,087
Computer systems and equipment	11,116	500	1,068	-	2,588	7,960
Furniture, vehicles, and other installations	133,143	14,386	2,084	-	26,200	119,245
Buildings	289,233	886	-	(9,116)	4,928	276,075
Work in progress	1,847	194	871	-	377	793
Other	15	-	1	-	-	14
Real estate investments	-	-	-	9,116	164	8,952
Other assets assigned under operating leases	31,547	-	-	-	2,298	29,249
	466,901	15,966	4,024	-	36,555	442,288

						€000s
	31/12/2010	Additions	Cancellations	Transfers and others	Depreciation and Amortisation	31/12/2011
For internal use	444,396	66,128	40,566	-	34,604	435,354
Computer systems and equipment	15,459	10,216	8,519	-	6,040	11,116
Furniture, vehicles, and other installations	131,327	30,151	27,707	22,515	23,143	133,143
Buildings	285,761	13,232	4,339	-	5,421	289,233
Work in progress	11,833	12,529	-	(22,515)	-	1,847
Other	16	-	1	-	-	15
Other assets assigned under operating leases	12,173	20,079	-	-	705	31,547
	456,569	86,207	40,566	-	35,309	466,901

Fully depreciated property, plant and equipment held for the Bank's own use still in use as at 31 December 2012 amounted to €91.75 million (€84.88 million as at 31 December 2011).

The breakdown by asset type of the gains and losses recognised in 2012 and 2011 on sales of investment property and other items is as follows (Note 34):

	€000s
		2012	2011
	Gains	Losses	Gains	Losses
Other	253	2,675	2,152	5,226
	253	2,675	2,152	5,226

Note 43 '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 2012 and 2011, the Bank had no tangible assets for its own use or under construction that were subject to any ownership restrictions or had been given as collateral in cover 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 its own use.

The whole of the Bank's tangible assets for internal use as at 31 December 2012 and 2011 was denominated in euros.

The balance of assets leased out under operating leases and included under this heading in the balance sheer as at 31 December 2012 was €29.25 million (€31.55 million at 31 December 2011).

15. Intangible assets

The following is a breakdown of this item on the consolidated balance sheet and of its movements during financial years 2012 and 2011:

		€000s
	31/12/2010	Addi tions	Cancella tions	Amortisa tion	31/12/2011	Addi tions	Cancella tions	Amorti sation	31/12/2011
Goodwill	161,836	-	-	-	161,836	-	-	-	161,836
Other intangible assets	196,373	8,619	-	28,788	176,204	8,808	-	29,310	155,702
	358,209	8,619	-	28,788	338,040	8,808	-	29,310	317,538

The acquisition during financial year 2009 of 50% of the share capital of Línea Directa Aseguradora, S.A, Compañía de Seguros y Reaseguros ("LDA") led to the recognition of goodwill amounting to €161.84 million and Other Intangible Assets amounting to €221.93 million.

In accordance with the estimates made and the projections available to the Group's Directors, the expected earnings attributable to the goodwill of these companies or cashgenerating units to which they are linked, perfectly support the net value of the goodwill recognised.

In this regard, the entity subjects the goodwill recognised on the acquisition of 100% of LDA to the annual impairment analysis established in the accounting standards. This analysis is based on the impairment of the cash-generating unit to which this goodwill has been allocated; in this case LDA. This unit would be impaired if its carrying amount were more than the present value of its estimated future cash flows. 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, in accordance with best

practices. Specifically, projected cash flows are based on the assumption that forecasts for next year's profits will be achieved. For the remaining years the trend in cash flows has been estimated as the lower of the company's most recent forecasts and the objective inflation of the economic environment in which it conducts its business, namely 2%. Both past experience and forecasts are in excess of this 2%.

The discount rate applied to the projected cash flows is 10% (after tax), this being the internal cost of capital. This estimated cost of capital is in line with those applied by independent analysts in the sector. Also, 10% is the discount rate commonly used for this kind of analysis in the insurance sector in which LDA conducts its business.

The period used for this estimate is ten financial years, since this is the period used to value intangible assets recognised at the time of acquisition. The growth rate in perpetuity is equal to target inflation, 2%.

Other Intangible Assets generated by the acquisition of 50% of LDA essentially relate to the valuation of customer relationships at the time of the acquisition. Amortisation is linear over a period of 10 years from the date of acquisition, which is the estimated useful life of this asset. Amortisation of these assets during 2012 totalled €22.19 million, the same amount as in 2011. As at 31 December 2011 and 2012, this intangible asset did not show any sign of impairment.

As at 31 December 2012 and 2011 the Group reviewed the useful lives of its intangible assets, no changes resulting.

16. Reinsurance assets

As at 31 December 2012, the balance of the item "Insurance contract assets" contains the assets recognised by Línea Directa Aseguradora, S.A., Compañía de Seguros y Reaseguros in the course of its activity.

The changes occurring in the financial years 2012 and 2011 for each of the technical provisions included in the balance sheet attached hereto, are as follows:

	€000s
	Provision for Unearned Premium	Provision for Claims	Total
Balance as at 31-12-2011	568	3,360	3,928
Additions due to full consolidation of Línea Directa Aseguradora
Additions	547	3,604	4,151
Applications	(567)	(3,360)	(3,927)
Adjustments and settlements		(186)	(186)
Balances as at 31/12/2012	548	3,418	3,966

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 these kinds of losses which are random in both occurrence and amount.

During 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 Law (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 prudential requirements; they must also have excellent ratings proving their financial solvency. Foreign companies have to present a certificate of residence in Spain.

The criterion used to establish the reinsurance framework stipulates that reinsurers' rating must not be lower than A. However, a deposit clause will be included in the contracts of reinsurers with S&P ratings of AA- and below.

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 & Poor's, 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 in the consolidated balance sheet as at 31 December 2012 and 2011 is as follows:

		€000s
		Current	Deferred
	31/12/2012	31/12/2011	31/12/2012	31/12/2011
Retentions and payments on account	8,733	10,016
Income tax	71,813	36,886	148,536	103,529
VAT	6,407	8,840
Tax assets	86,953	55,742	148,536	103,529

Retentions and payments on account	7,576	6,685
Income tax	57,359	54,792	147,929	118,983
VAT	3,542	4,027
Other items	5,159	5,068
Tax liabilities	73,636	70,572	147,929	118,983

The movements in assets and liabilities due to deferred taxes during financial years 2012 and 2011, are as follows:

	€000s Deferred Taxes

	Assets	Liabilities
Balance as at 31/12/2010	93,812	142,057
Additions	80,943	5,195
Cancellations	71,226	28,269
Balance as at 31/12/2011	103,529	118,983
Additions	64,519	28,952
Cancellations	19,512	6
Balance as at 31/12/2012	148,536	147,929

The reconciliation of the movements in deferred taxes during 2012 is as follows:

				€000s
	31/12/2011	Charged/credited through profit or loss	Charged/credited in equity	31/12/2012
Deferred tax assets	103,529	55,926	(10,919)	148,536
Deferred tax liabilities	118,983	25,981	2,965	147,929

The reconciliation of the movements in deferred taxes during 2011 is as follows:

				€000s
	31/12/2010	Charged/ credited through profit or loss	Charged/credited in equity	31/12/2011
Deferred tax assets	93,812	7,039	2,678	103,529
Deferred tax liabilities	142,057	(23,074)	-	118,983

The details of deferred tax assets and liabilities are as follows:

		€000s
	31/12/2012	31/12/2011
Deferred Tax assets arising from:
Generic hedging	-	32,044
Contributions to pension funds	1,373	1,794
Impairment of property assets	55,202	41,303
Provisions for real estate promoter risk	46,407	-
Other provisions and accruals	39,826	801
Others:		694
Early retirement fund Software	-	514
Contract hire	52	191
Loan fees	2,204	2,596
Other	3,610	3,305
Available-for-Sale Portfolio	4,081	12,535
Consolidation adjustments	(4,219)	7,752
	148,536	103,529
Deferred tax liabilities arising from:
Revaluations of buildings	49,896	50,947
Others:
Available-for-Sale Portfolio	5,536	100
Intra-group sales	10,107	7,688

Other	20,767	-
Consolidation adjustments	61,623	60,248
Of which:
Revaluation of Assets of Línea Directa Aseguradora, S.A.	46,927	53,688
	147,929	118,983

The deferred tax assets recognised during the year basically concern the increase in deferred tax assets due to net additions to provisions of various kinds.

Derecognitions are due basically to the elimination of the deferred tax asset relating to the release of provisions that were not tax deductible at the time they were established.

18. Other assets and other liabilities

The breakdown of these items in the consolidated balance sheet as at 31 December 2012 and 2011 is as follows:

	€000s
	Assets		Liabilities
	31/12/2012	31/12/2011	31/12/2012	31/12/2011

Accrued expenses and deferred income	91,764	68,654	75,098	92,375
Operations in progress	11,760	1,082	16,953	16,825
Other items	29,101	27,396	35,196	40,225
	132,625	97,132	127,247	149,425

In euros	132,534	97,043	127,209	148,911
In foreign currency	91	89	38	514
	132,625	97,132	127,247	149,425

The heading "Other items" in liabilities includes sundry payables, provisions 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 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Deposits from central banks	9,580,854	7,006,897
Deposits from credit institutions	4,008,226	3,260,647
Customer deposits	24,631,869	25,505,317
Marketable debt securities	12,499,194	15,540,242
Subordinated liabilities	767,852	958,170
Other financial liabilities	591,076	658,012
	52,079,071	52,929,285

In euros	51,555,534	51,696,715
In foreign currency	523,537	1,232,570
	52,079,071	52,929,285

a) Deposits from central banks

The composition of "Financial liabilities at amortised cost" in the consolidated balance sheet was as follows as at 31 December 2012 and 2011:

		€000s
	31/12/2012	31/12/2011
Central Banks	9,500,000	7,000,000
Valuation adjustments	80,854	6,897
Accrued interest	80,854	6,897
	9,580,854	7,006,897

b) Bank deposits

The composition of "Financial liabilities at amortised cost" in the consolidated balance sheet was as follows as at 31 December 2012 and 2011:

		€000s
	31/12/2012	31/12/2011
Term accounts	1,354,023	951,703
Temporary assignment of assets	2,144,742	1,908,645
Other accounts	497,488	384,466
Valuation adjustments-	11,973	15,833
Accrued interest	11,973	15,833
	4,008,226	3,260,647

In euros	4,000,585	3,257,091
In foreign currency	7,641	3,556
	4,008,226	3,260,647

The breakdown of the 'Valuation adjustments' in the portfolio of financial liabilities at amortised cost as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Accrued interest-	408,456	295,776
Deposits with central banks	80,854	6,897
Deposits with credit institutions	11,973	15,833
Customer deposits	138,651	94,203
Marketable debt securities	170,359	171,789
Subordinated liabilities	6,619	7,054
Micro-hedging operations	146,791	116,044
Other	(64,166)	(67,183)
	491,081	344,637

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

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

c) Customer deposits

The composition of "Financial liabilities at amortised cost" in the consolidated balance sheet was as follows as at 31 December 2012 and 2011:

	€000s
	31/12/2012	31/12/2011

Public Administrations	430,863	1,483,544
Deposits received	429,581	1,482,111
Valuation adjustments	1,282	1,433
Accrued interest	1,282	1,433

Other private sectors	24,201,006	24,021,773
Sight deposits	9,269,136	9,045,156
Term deposits	10,592,220	9,378,212
Temporary assignment of assets	4,200,410	5,503,657
Valuation adjustments-	139,240	94,748
Accrued interest	137,369	92,770
Micro-hedging operations	1,871	1,978
	24,631,869	25,505,317

In euros	24,196,331	25,090,321
In foreign currency	435,538	414,996
	24,631,869	25,505,317

d) Marketable debt securities

The composition of "Financial liabilities at amortised cost" in the consolidated balance sheet was as follows as at 31 December 2012 and 2011:

	€000s
	31/12/2012	31/12/2011
Promissory notes and bills of exchange	2,390,395	2,683,334
Mortgage-backed securities	12,683,345	9,998,496
Other securities linked to transferred financial assets	2,867,439	3,281,506
Treasury stock	(7,999,014)	(6,087,167)
Hybrid securities	225,871	341,261
Other non-convertible securities	2,155,887	5,162,652
Valuation adjustments	175,271	160,160
Accrued interest	170,359	171,795
Micro-hedging operations	68,710	55,132
Other	(63,798)	(66,767)
	12,499,194	15,540,242

In euros	11,706,945	14,747,993
In foreign currency	792,249	792,249
	12,499,194	15,540,242

Own securities at 31 December 2012 comprised mortgage bonds for €6.47 billion and other non-convertible securities for €1.53 billion. Own securities at 31 December 2011 comprised mortgage bonds for €4.52 billion and other non-convertible securities for €1.57 billion.

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 and euro commercial paper) and long-term (bonds, debentures and notes and mortgage bonds) under all kinds of debt arrangements (guaranteed, senior, subordinated, etc.)

As at 31 December 2012, the outstanding balances of promissory notes and euro commercial paper issued were €2.52 billion and €7 million respectively (€2.78 billion and €22 million respectively as at 31 December 2011). The differences between the amounts recognised in the books and the nominal values 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 2012 and 2011, at their redemption value:

	€000s
	Outstanding balance at 31/12/2012	Outstanding balance at 31/12/2011
Date of registration with the CNMV (Spain's securities regulator)
09/11/2010	5,219	559,085
03/11/2011	1,788,265	2,216,837
08/11/2012	728,713	-

	2,522,197	2,775,922
Euro Commercial Paper	7,000	22,000

	2,529,197	2,797,922

These issues are denominated in euros.

Interest accruing on these issues of promissory notes during 2012 amounted to €109.58 million (Note 29) (€30.08 million in 2011).

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

Mortgage-backed securities, other non-convertible securities, and hybrid liabilities state, as at 31 December 2012 and 2011, 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 2012 and 2011 (nominal values, €000s):

31/12/2012
Issue	Nominal Value (€000s)	Type of Security	% Interest	Listed	Final maturity of the issue
Hybrid securities
Mar 05	75,000	Bonds	Eur3m flat (3% - 5%)	YES	Mar 2015
Jun 10	300	Structured bonds		YES	Jun 2013
Nov 10	16,850	Structured bonds		YES	Nov 2014
Jun 11	6,375	Structured bonds		YES	Jun 2014
Jun 11	1,285	Structured bonds		YES	Jun 2016
Jul 11	3,780	Structured bonds		YES	Jul 2014
Aug 11	6,775	Structured bonds		YES	Aug 2016
Aug 11	404(*)	Structured bonds		YES	Aug 2016
Aug 11	2,340	Structured bonds		YES	Aug 2016
Oct 11	5,980	Structured bonds		YES	Oct 2016
Oct 11	1,000	Structured bonds		YES	Oct 2015
Nov 11	1,895	Structured bonds		YES	Nov 2016
Nov 11	68(*)	Structured bonds		YES	Nov 2016
Dec. 11	370	Structured bonds		YES	Dec 2016
Dec. 11	4,400	Structured bonds		YES	Dec 2016
Jan 12	3,750	Structured bonds		YES	Jan 2015
Jan 12	9,050	Structured bonds		YES	Jan 2013
Feb 12	7,250	Structured bonds		YES	Feb 2017
Feb 12	3,850	Structured bonds		YES	Feb 2013
Mar 12	600	Structured bonds		YES	Mar 2017
Mar 12	2,650	Structured bonds		YES	Mar 2017
Mar 12	4,800	Structured bonds		YES	Apr 2017
Apr 12	1,000	Structured bonds		YES	Apr 2015
Apr 12	2,750	Structured bonds		YES	Apr 2017
Jun 12	2,450	Structured bonds		YES	Jun 2017
Jun 12	550	Structured bonds		YES	Jun 2015
Jun 12	1,300	Structured bonds		YES	Jun 2017
Aug 12	4,800	Structured bonds		YES	Aug 2017
Sep 12	4,200	Structured bonds		YES	Sep 2017
Oct 12	4,100	Structured bonds		YES	Oct 2013
Oct 12	600	Structured bonds		YES	Nov 2015

		31/12/2012
Issue	Nominal Value (€000s)	Type of Security	% Interest	Listed	Final maturity of the issue	Issue	Nominal Value (€000s)
					Oct 2013 (partial
Oct 2012	3,000	Structured bonds		YES	amortisation,
			90%) and	total in Oct
					2017
Nov 2012	1,450	Structured bonds		YES	Nov 2014
Nov 2012	8,500	Structured bonds		YES	Nov 2017
Nov 2012	10,600	Structured bonds		YES	Nov 2015
Nov 2012	1,000	Structured bonds		YES	Nov 2017
Nov 2012	1,000	Structured bonds		YES	Nov 2017
Dec 2012	1,200	Structured bonds		YES	Dec 2017
Dec 2012	5,900	Structured bonds		YES	Dec 2013
Dec 2012	11,600	Structured bonds		YES	Dec 2015
Dec 2012	1,099(*)	Structured bonds		YES	Dec 2017
	225,871

(*) Issued in USdollars

31/12/12
Issue	Nominal Value (€000s)	Type of Security	% Interest	Listed	Final maturity of the issue
Other non-convertible securities
Jun 06	150,000	Bonds	Eur3m + 0.17%	YES	Jun 2016
Jan. 10	498,050	Bonds	Eur3m + 0.95%	YES	Jan 2013
Jan. 10	78,800	Bonds	Fixed rate 3%	YES	Jan 2013
Oct 10	30,000	Bonds	Fixed rate 4.27%	YES	Jul 2016
Feb 12	800,000	Bonds	Eur3m + 2.80%	YES	May 2015
Jun 12	320,000	Bonds	Eur3m + 4.25%	YES	Jun 2016
Jun 12	280,000	Bonds	Eur3m + 4.25%	YES	Jun 2015
	2,156,850
Interest Discounted up front	(963)
	2,155,887

(*) Issued in USdollars

31/12/12
Issue	Nominal Value (€000s)	Type of Security	% Interest	Listed	Final maturity of the issue
Jun 05	68,213	Mortgage bond in foreign currency	3-mth LIBOR – 0.040%	NO	Jun 2013
Jul 07	100,000	Mortgage bond	Eur3m + 0.217%	NO	Jul 2015
Dec 07	100,000	Mortgage bond	Eur3m + 0.343%	NO	Dec 2015
Mar 08	50,000	Mortgage bond	Eur6m + 0.27%	YES	Mar 2013
Jun 08	200,000	Mortgage bond	Eur3m + 0.006%	NO	Jun 2016
Nov 09	1,000,000	Mortgage bond	Fixed rate 3.25%	YES	Nov 2014
Apr. 10	1,000,000	Mortgage bond	Fixed rate 2.625%	YES	Apr 2013
Jul 10	200,000	Mortgage bond	EURIBOR 3m + 0.37%	YES	Jul 2018
Jul 10	400,000	Mortgage bond	Fixed rate 2.625%	YES	Apr 2013
Sept 10	650,000	Mortgage bond	Fixed rate 3.75%	YES	Sep 2013
Jan 11	500,000	Mortgage bond	Fixed rate 4.875%	YES	Jan 2013
Jan 11	20,000	Mortgage bond	Fixed rate 3.90%	YES	Jan 2014
Mar 11	400,000	Mortgage bond	Fixed rate 3.25%	YES	Nov 2014
May 11	25,000	Mortgage bond	Fixed rate 4.875%	NO	Jan 2013
May 11	25,000	Mortgage bond	Fixed rate 4.875%	NO	Jan 2013
Sept 11	1,000,000	Mortgage bond	Fixed rate 4.25%	YES	Mar 2015
Oct 11	10,000	Mortgage bond	Fixed rate 4.25%	YES	Jan 2014
Dec. 11	1,000,000	Mortgage bond	Fixed rate 4.25%	YES	Mar 2015
Jan 12	1,200,000	Mortgage bond	Fixed rate 4.675%	YES	Jan 2016
Jan 12	200,000	Mortgage bond	Eur3m + 3.50%	YES	Jan 2020
Mar 12	1,000,000	Mortgage bond	Fixed rate 4.125%	YES	Mar 2017
Jun 12	500,000	Mortgage bond	Eur3m + 3.00%	YES	Jun 2014
Aug 12	100,000	Mortgage bond	Eur3m + 4.90%	YES	Aug 2022
Oct 12	500,000	Mortgage bond	Fixed rate 3.875%	YES	Oct 2015
Nov 12	1,250,000	Mortgage bond	Eur3m + 4.00%	YES	Nov 2019
Nov 12	600,000	Mortgage bond	Eur3m + 4.00%	YES	Nov 2017
Nov 12	700,000	Mortgage bond	Eur3m + 4.00%	YES	Nov 2018
	12,798,213
Interest Discounted up-front	(114,868)
	12,683,345

31/12/2011
Issue	Nominal Value (€000s)	Type of Security	% Interest	Listed	Final maturity of the issue
Hybrid securities
Mar 2005	75,000	Bonds	Eur3m flat (3% - 5%)	YES	Mar 2015
Jun 2010	300	Structured bonds		YES	Jun 2013
Nov 2010	16,850	Structured bonds		YES	Nov 2014
Dec 2010	1,000	Structured bonds		YES	Dec 2014
Mar 2011	700	Structured bonds		YES	Mar 2016
Jun 2011	21,250	Structured bonds		YES	Jun 2014
Jun 2011	12,850	Structured bonds		YES	Jun 2016
Jul 2011	12,600	Structured bonds		YES	Jul 2014
Aug 2011	67,750	Structured bonds		YES	Aug 2016
Aug 2011	3,694	Structured bonds		YES	Aug 2016
Aug 2011	23,400	Structured bonds		YES	Aug 2016
Oct 2011	59,800	Structured bonds		YES	Oct 2016
Oct 2011	1,000	Structured bonds		YES	Oct 2015
Oct 2011	1,000	Structured bonds		YES	Oct 2014
Nov 2011	18,950	Structured bonds		YES	Nov 2016
Nov 2011	652	Structured bonds		YES	Nov 2016
Nov 2011	15,450	Structured bonds		YES	Nov 2016
Dec 2011	1,450	Structured bonds		YES	Dec 2016
Dec 2011	3,700	Structured bonds		YES	Dec 2016
Dec 2011	4,400	Structured bonds		YES	Dec 2016
	341,796
Interest Discounted up front	(535)
	341,261

31/12/2011
Issue	Nominal Value (€000s)	Type of Security	% Interest	Listed	Final maturity of the issue
Other non-convertible securities
Jun 2006	150,000	Bonds	Eur3m + 0.17%	YES	Jun 2016
Jun 2007	900,000	Bonds	Eur3m + 0.14%	YES	Jun 2012
Feb 2009	889,800	Bonds	Fixed rate 3.00%	YES	Feb 12
Jun 2009	364,271	Bonds	Yen Libor 3m + 0.62%	YES	Jun 2012
Jun 2009	353,293	Bonds	Fixed rate 1.223%	YES	Jun 2012
Jan 2010	900,000	Bonds	Eur3m + 0.95%	YES	Jan 2013
Jan 2010	78,800	Bonds	Fixed rate 3%	YES	Jan 2013
Oct 2010	30,000	Bonds	Fixed rate 4.27%	YES	Jul 2016
Jul 2011	100,000	Bonds	Average Eur3m + 1.8%	YES	Jan 2014
Dec 2011	1,400,000	Bonds	Fixed rate 4.625%	YES	Dec 2014
	5,166,164
Interest Discounted up-front	(3,512)
	5,162,652

31/12/2011
Issue	Nominal Value (€000s)	Type of Security	% Interest	Listed	Final maturity of the issue

Jun 2005	69,557	Mortgage bond in foreign currency	Libor 3m – 0.040	NO	Jun 2013
Jul 2007	100,000	Mortgage bond	Eur3m + 0.217%	NO	Jul 2015
Dec 2007	100,000	Mortgage bond	Eur3m + 0.343%	NO	Dec 2015
Mar 2008	50,000	Mortgage bond	Eur6m + 0.27%	YES	Mar 2013
Jun 2008	200,000	Mortgage bond	Eur3m + 0.006%	NO	Jun 2016
Feb 2009	323,200	Mortgage bond	Fixed rate 3.5%	YES	Feb 12
Nov 2009	1,000,000	Mortgage bond	Fixed rate 3.25%	YES	Nov 2014
Apr 2010	1,000,000	Mortgage bond	Fixed rate 2.625%	YES	Apr 2013
Jun 2010	300,000	Mortgage bond	Fixed rate 2.25%	YES	Feb 2013
Jul 2010	200,000	Mortgage bond	EURIBOR 3m + 0.37%	YES	Jul 2018
Jul 2010	400,000	Mortgage bond	Fixed rate 2.625%	YES	Apr 2013
Sep 2010	750,000	Mortgage bond	Fixed rate 3.75%	YES	Sep 2013
Oct 2011	500,000	Mortgage bond	Fixed rate 4.875%	YES	Jan 2013
Jan 2011	20,000	Mortgage bond	Fixed rate 3.90%	YES	Jan 2014
Mar 2011	400,000	Mortgage bond	Fixed rate 3.25%	YES	Nov 2014
May 2011	600,000	Mortgage bond	Fixed rate 2.625%	NO	Apr 2013
May 2011	600,000	Mortgage bond	Fixed rate 4.875%	NO	Jan 2013
Sep 2011	1,000,000	Mortgage bond	Fixed rate 4.25%	YES	Mar 2015
Oct 2011	10,000	Mortgage bond	Fixed rate 4.25%	YES	Jan 2014
Dec 2011	1,500,000	Mortgage bond	Fixed rate 4.25%	YES	Feb 2014
Dec 2011	1,000,000	Mortgage bond	Fixed rate 4.25%	YES	Mar 2015
	10,122,757
Interest Discounted up-front	(124,261)
	9,998,496

All current issues are denominated in euros.

During 2012 mortgage-backed bonds were issued for €6.05 billion (€5.63 billion in 2011), senior bonds for €1.44 billion (€1.5 billion in 2011) and hybrid securities for €106.65 million (€248.65 million in 2011), with the characteristics indicated in the foregoing tables.

Interest accruing on issues of other non-convertible securities during 2012 amounted to €58.85 million (€119.95 million in 2011).

e) Subordinated liabilities

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

	€000s
	31/12/2012	31/12/2011
Marketable debt securities	624,547	721,964
Non-convertible	624,547	721,964
Preference shares	60,844	170,635
Valuation adjustments	82,461	65,571
Accrued interest	6,619	7,054
Micro-hedging operations	76,210	58,934
Other	(368)	(417)
	767,852	958,170

In euros	767,852	958,170
In foreign currency	-	-
	767,852	958,170

These liabilities meet the requirements of Rule 8 in Bank of Spain Circular 3/2008 of 22 May for inclusion as Tier 2 capital, and Bank of Spain approval has been obtained for them to be classified as such.

The following is the breakdown as at 31 December 2012 and 2011 of the subordinated debentures and preference shares (nominal value, €000s):

Balance as at 31 December 2012

		Thousands of Euros
		Nominal		Maturity
	Issue	value	% Interest	Issue
III SUBORDINATED BONDS 1998	14/05/1998	84,141	Fixed rate 6.00%	18/12/2028
I SUBORDINATED BONDS March 2006	21/03/2006	32,800	Eur3m + 0.50%	21/03/2016
II SUBORDINATED BONDS June 2006	23/06/2006	89,000	Eur3m + 0.80%	23/06/2016
III SUBORDINATED BONDS December
2006	18/12/2006	50,000	Eur3m + 0.84%	18/12/2016
I SUBORDINATED D. March 2007	16/03/2007	49,400	Eur3m + 0.82%	16/03/2017
I SUBORDINATED BONDSOctober 2008	10/10/2008	50,000	Eur3m + 3.00%	10/10/2018
I SUBORDINATED BONDS September			Fixed rate
2009	11/09/2009	250,000	6.375%	11/09/2019
I SUBORDINATED BONDS July 2010	07/07/2010	40,000	Fixed rate 6.75%	07/12/2020
			Fixed rate
I SUBORDINATED BONDS February 2011	10/02/2011	47,250	6.375%	11/09/2019
		692,591
Interest and other		(68,044)
		624,547

Balance as at 31 December 2011

		Thousands of Euros
	Issue	Nominal value	% Interest	Maturity Issue
II SUBORDINATED BONDS 1998	14/05/1998	36,061	Fixed rate 5.70%	18/12/2012
III SUBORDINATED BONDS 1998	14/05/1998	84,141	Fixed rate 6.00%	18/12/2028
I SUBORDINATED BONDS March 2006	21/03/2006	32,800	Eur3m + 0.50%	21/03/2016
II SUBORDINATED BONDS June 2006	23/06/2006	89,000	Eur3m + 0.80%	23/06/2016
III SUBORDINATED BONDS December 2006	18/12/2006	50,000	Eur3m + 0.84%	18/12/2016
I SUBORDINATED D. March 2007	16/03/2007	49,400	Eur3m + 0.32%	16/03/2017
I SUBORDINATED BONDS October 2008	10/10/2008	50,000	Eur3m + 3.00%	10/10/2018
I SUBORDINATED BONDSSeptember 2009	11/09/2009	250,000	Fixed rate 6.375%	11/09/2019
I SUBORDINATED BONDS July 2010	07/07/2010	40,000	Fixed rate 6.75%	07/12/2020
I SUBORDINATED BONDS February 2011	10/02/2011	47,250	Fixed rate 6.375%	11/09/2019
		728,652
Interest and other		(6,688)
		721,964

In July 2012 Bankinter S.A. made an offer to holders of preferred shares issued by Bankinter Emisiones, S.A.U. The offer consisted in exchanging 70%of the nominal value of the preferred shares for newly issued shares in Bankinter, S.A. and the remaining 30% for cash, payable two years after the date of the exchange, subject to the new shares still being held.

As a consequence of this exchange, by 31 December 2012 the Group had issued 27,270,552 new shares in Bankinter S.A, at a subscription price of €2.75 per share, leading to increases in the share capital and the share premium account of €8.18 million and €66.81 million respectively (See Note 22).

Additionally, the Group recognised an amount of €27.91 million under the heading "Financial liabilities at amortised cost - Other financial liabilities" to meet any cash payments deriving from the exchange. (See Note 19).

The profit obtained from this exchange transaction in the year ended 31 December 2012 was €4.24 million, recognised under the heading "Result of financial transactions" in the enclosed consolidated Income Statement (see Note 30).

The movement brought about by this transaction in 2012 was as follows:

	€000s
	31/12/2012	31/12/2011
Balance as at 31 December 2011	168,165	3,363,293
Redeemed by means of exchange (see Note 22)	(107,321)	(2,146,407)
Balance as at 31 December 2011	60,844	1,216,886

During 2011 the Group prepaid subordinated bonds via a swap transaction whereby newly issued subordinated bonds at a fixed interest rate of 6.375% maturing on 11 September 2019 were delivered. This exchange constitutes an exchange of liabilities with substantially different conditions, since the present value of the new liability's future cash flows, including net fees paid and received, differs by more than 10% from the present value of the remaining future cash flows of the original financial liability when both are discounted at the effective interest rate of the latter. On this transaction the Group recognised an amount of €7.97 million under the heading "Results of financial transactions (net)" in the enclosed consolidated Income Statement (see Note 30).

Interest accrued on these bond issues during 2012 amounted to €32.85 million (€33.90 million in 2011). Interest paid on subordinated deposits, which are recognised under the heading "Interest and similar charges" in the enclosed consolidated Income Statement (see Note 29), amounted to €6.53 million (€12.86 million in 2011).

The breakdown of issues in the Balance Sheet as at 31 December 2012 and 2011 is as follows:

31/12/2012
	Issue	Nominal value	% Interest	Issue maturity
BK Emisiones Series I	28/07/2004	60,844	Eur+3.75% min 4% - max 7%	PERPETUAL
Balance at 31 Dec. 2011		60,844

	31/12/2011
	Issue	Nominal value	% Interest	Issue maturity
BK Emisiones Series I	28/07/2004	168,165	Eur+3.75% min 4% - max 7%	PERPETUAL
Balance at 31 Dec. 2011		168,165

g) Other financial liabilities

The composition of "Financial liabilities at amortised cost" in the consolidated balance sheet was as follows as at 31 December 2012 and 2011:

	€000s
	31/12/2012	31/12/2011
Bonds payable-	128,218	102,747
Payables in respect of factoring	15,503	15,228
Others (*)	112,715	87,519
Security deposits received	79,587	51,060
Clearing houses	38,963	22
Tax-collection accounts	186,799	223,679
Special accounts-	67,225	214,906
Stock-Market transactions pending settlement	67,225	214,906
Other items	90,284	65,598
	591,076	658,012

In euros	580,480	636,174
In foreign currency	10,596	21,838
	591,076	658,012

(*) As at 31 December 2012 and 2011 it included drafts pending settlement to the value of €39.84 and €58.39 million respectively.

As at 31 December 2012 and 2011, the balance of "Liabilities under insurance contracts" contains the liabilities undertaken by Línea Directa Aseguradora, S.A. de Seguros y Reaseguros in the course of its activity. The changes occurring in the financial years 2012 and 2011 for each of the technical allowances included in the balance sheet attached hereto, are as follows:

	€000s
		31/12/2012		31/12/2011
	Provision for Unearned Premium	Provision for Claims	Total	Provision	Provision for Claims	Total
Balance at start of period	337,283	305,499	642,782	351,571	311,428	662,999
Additions due to change in scope
Additions	324,322	279,709	604,031	337,283	289,731	627,014
Applications	(337,283)	(305,499)	(642,782)	(351,571)	(311,428)	(662,999)
Adjustments and settlements	-	14,255	14,255	-	15,768	15,768
Balance at close of period	324,322	293,964	618,286	337,283	305,499	642,782

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 provision 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 establishes this provision for an amount that is sufficient to cover the cost of claims, meaning an amount that includes all 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, less the amounts already paid.

On 18 January 2008 the Company was authorised by the Directorate-General of Insurance and Pension Funds to apply statistical methodology in calculating the Technical Provision 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.

Procedures used to determine the main assumptions affecting assets, liabilities, income and expenses arising from insurance contracts and sensitivity analysis.

Income arising from insurance contracts consists mainly of insurance premiums paid in consideration of the risks assumed. Trends in premium income can be analysed using indicators such as average premium, product mix, percentage of cancellations, etc.

The main liability deriving from insurance contracts is that shown in the technical reserves, while the biggest expenses recognised in the Income Statement are the payment of claims and any additions considered necessary to provisions for payments pending at the end of the reporting period. To estimate these liabilities the Company analyses the changes over time in the frequency and average cost of events. Lastly, in estimating insurance liabilities the effect of reinsurance contracts is taken into account.

The net combined ratio measures the weight of the cost of claims and other expenses associated with the insurance business relative to the premiums accrued in the profit and loss account, net of the reinsurance effect. Changes in the conditions influencing the insurance risk are reflected in increases or decreases in the net combined ratio.

The following table shows the impact that a 1%change in net income recognised in equity would have in 2012 and 2011, together with the volatility index of this ratio calculated on the basis of its typical deviation over the past five years:

	(€000s)
	2012		2011	Volatility
	Profit	Equity	Profit	Equity	Index
1% change in combined ratio	5.36%	1.09%	6.34%	1.39%	1.38%
1% change in combined ratio	4,646		4,749

Objectives, policies and procedures for managing the risks arising from insurance contracts

The risks involved in the insurance business are centred on the subscription risk in nonlife insurance, which in turn consists of the premium sub-risk (the risk that premiums may not be sufficient)and the reserves sub-risk (the risk that the technical reserves may not be sufficient).

The Company makes use of reinsurance as the main means of mitigating the premium and reserves sub-risks. Reinsurance in turn forms part of counterparty risk, in view of the possibility of default by reinsurers on recoverable amounts.

Premium Sub-risk

The Technical Division of LDA is responsible for adjusting products and prices to the Company's general strategy. All such adjustments are supported by actuarial analyses duly documented in technical memoranda, and are approved by the Technical Committee, which is the body responsible for managing this sub-risk.

The Technical Committee takes operational decisions affecting prices and risk underwriting conditions of products offered by LDA, ensuring that they are consistent with the strategy and objectives laid down by the Board of Directors. In so doing it evaluates proposals presented by the Technical Division, also taking into account information on the business situation and future prospects provided by the business units.

Reserves Sub-risk

To estimate liabilities arising from insurance contracts, the Company uses statistical methods based on chain ladder methodology and stochastic methods based on bootstrap methodology. Finally it performs a validation using the average cost method.

The Claims and Reserves Committee is the body responsible for managing the Company's reserve risk and reinsurance credit risk. Its functions are to monitor the Company's reserves and provisions to ensure that claims are properly covered, and to approve changes to policies on opening and provisioning of claims under the various kinds of cover and guarantees, so as to ensure that reserves are adequate, in accordance with directives approved by the Company's Board of Directors.

It also approves the annual reinsurance programme and reports on it to the Management Committee.

Also, to ensure that the Company complies with the obligations deriving from Article 29 of the ROSSP ("Reglamento de Ordenación y Supervisión de los Seguros Privados", or Private Insurance Supervision Regulations) whereby the technical reserves must reflect in the Balance Sheet the obligations deriving from contracts written, the following controls are in place regarding additions to the technical reserves:

1. Analysis of future trends in cost deviations of events occurring before the end of each financial year. The analysis is carried out on the basis of events occurred and reported as at the end of the reporting period. The purpose of this is to check and correct any cost deviations arising on so-called long-tail claims caused by not having sufficient information to evaluate them at the end of the reporting period.
1. Producing monthly and quarterly projections of accident cost expense.
1. The company's reserves situation is also subjected to an analysis carried out by independent consultants at least once a year, which is presented to the Board of Directors.

Change during 2012 to the technical reserves (not counting cover for fines and travel assistance) corresponding only to claims pending as at 31 December 2011, broken down by branches, is as follows:

				(€000s)
	Reserves as at 31 December 2011	Net Payments	Reserves as at 31/12/2012	Surplus (Deficit)
Motor, Civil Liability	207,114,281	90,361,308	100,977,140	15,775,834
Motor, Other Coverage	69,491,938	39,014,274	21,740,840	8,736,823
Home	3,408,019	2,498,275	810,245	99,499
	280,014,238	131,873,857	123,528,225	24,612,156

The above table includes the home insurance branch, which at year-end 2011 had had four full years of operation since its launch. Losses incurred but not reported (IBNR) are included in the reserves at the end of 2010 not in the home insurance branch but in the motor branches, since the reserve for pending losses incurred, reported and not reported, were calculated together using statistical methods.

Changes during 2011 in the Company's technical reserves, not counting cover for fines and travel assistance, corresponding only to claims pending as at 31 December 2010, excluding losses incurred but not reported, broken down by branch, were as follows:

				(€000s)
	Reserves as at 31/12/2010	Net Payments	Reserves as at 31 December 2011	Surplus (Deficit)
Motor, Civil Liability	214,290,785	104,887,019	94,218,361	15,185,405
Motor, Other Coverage	59,322,071	43,630,258	22,253,168	(6,561,355)
Home	2,699,026	1,925,668	452,249	321,109
	276,311,881	150,442,945	116,923,778	8,945,159

Insurance risk concentrations

The Company's insurance business is located entirely in Spain, with no especially significant concentration in any particular geographical region.

The Company's business is centred on non-life branches, mainly motor, and is distributed as follows:

	€000s
	2012
	Total	Motor	Multi-risk Home
Premiums billed	650,585	613,768	36,816
Premiums ceded	3,313	2,820	493

	€000s
	2011
	Total	Motor	Multi-risk Home
Premiums billed	676,896	649,638	27,258
Premiums ceded	3,025	2,610	415

The Company is in the process of adapting to the Solvency II project, which will alter the focus of risk management for Europe's insurance companies.

21. Provisions

The breakdown of this item in the consolidated balance sheets as at 31 December 2012 and 2011 is as follows:

	€000s
	31/12/2012	31/12/2011

Pension funds and similar obligations	2,811	5,245
Provisions for contingent risks and commitments	5,139	20,626
Other provisions	1,899	38,251
Allowances for taxes and other legal contingencies	38,351	-
	48,200	64,122

The breakdown of the allocations made to allowances during the financial years 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011

Net allocations charged to income:
Pension funds and similar obligations	(5,645)	(8,509)
Provisions for contingent risks and commitments	1,787	(1,642)
Other provisions	(2,874)	38,326
Allowances for taxes and other legal contingencies	6,753	-
	21	28,175

The balance shown against "Provisions for taxes and other legal contingencies" in the "Provisions" section includes, among other items, those corresponding to provisions for tax and legal proceedings, which have been estimated using prudent calculation methods consistent with the uncertainties inherent in the obligations that they cover. In some cases, the time at which resources involving economic benefits for the Group will have to be released for the obligation in question has been determined as not having a fixed term, and in other cases it has been set in accordance with the status of the proceedings that are underway.

The heading "Provisions for contingent risks and commitments" comprises the generic and specific provisions for contingent risks as at 31 December 2012 and 2011. In 2012 there was a net addition of €1.79 million to these provisions, there having been a net release of €1.64 million in 2011.

Movement in "Other provisions" during the years ended 31 December 2012 and 2011 was as follows:

	€000s


Balance as at 31/12/2010	71,090
Net additions to reserves for the year charged to profit and loss	28,175
Application of funds	(42,532)
Other movements	7,389
Balance as at 31/12/2011	64,122

Net additions to reserves for the year charged to profit and loss	21
Application of funds	(1,881)
Transfer of funds	(17,290)
Other movements	3,228
Balance as at 31/12/2012	48,200

"Other movements" reflects the reclassification of balances under the heading "Provisions for taxes and other legal contingencies".

The remaining amount under this heading refers to risks for which the Institution has estimated there is a probability that disbursements may be required in the future for past events.

22. Shareholders' equity

The breakdown of the composition and movements in the Group's shareholders' equity in financial years 2012 and 2011 is included in the Overall Statement of Changes in Consolidated Public Net Worth.

a) Capital

As at 31 December 2012, the share capital of Bankinter, S.A. was represented by 563,806,141 registered shares with a nominal value of €0.30 each, fully subscribed and paid up. These shares all have equal voting and economic rights. As at 31 December 2011, the share capital of Bankinter, S.A. was represented by 476.919.014 registered shares with a nominal value of €0.30 each.

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 2012 and 2011:

		€000s
	Number of shares	Nominal value
Balance as at 31/12/2010	473,447,732	142,034
Additions	3,471,282	1,042
Of which alternative dividend	3,471,282	1,042
Balance as at 31/12/2011	476,919,014	143,076
Additions	86,887,127	26,066
Of which on conversion of subordinated bonds	59,616,575	17,885
Of which on exchange of preferred shares (Note 19)	27,270,552	8,181
Balance as at 31/12/2012	563,806,141	169,142

The increase in capital is the result of the conversion of mandatorily convertible subordinated bonds into shares (see section d) as well as of the purchase of preferred shares issued by Bankinter Emisiones S.A.U. (see Note 19).

Under the Bankinter Alternative Dividend Flexible Shareholder Remuneration Programme approved by the Ordinary General Meeting of Shareholders of 28 April 2011, shareholders holding 263,906,373 warrants opted during 2011 to receive free new shares. As a result of the above, on 30 September 2011 the Board of Directors set the number of ordinary shares to be issued in the capital increase against freely available reserves at 3,471,282 for a capital increase of €1.04 million.

The breakdown of shareholders with a percentage holding equal to or greater than 10% of share capital as at 31 December 2012 and 2011 is as follows:

	Directly	Number of Shares held	Number of Shares held Indirectly			Percentage of Share Capital
Shareholder	31/12/2012	31/12/2011	31/12/2012	31/12/2011	31/12/2012	31/12/2011
Cartival, S.A.	131,565,493	106,671,902	-	7,378,822	23,34	23,91
Crédit Agricole, S.A	85,146,775	116,927,050	18,505	47,723	15,102	24,53

b) Issue premium

During 2012 the share premium account increased by the difference between the nominal value of the new shares and their subscription price. During 2011 there were no changes in this Balance Sheet heading. Movements in the share premium account in 2012 and 2011 were as follows:

	€000s
	Nominal value
Balance as at 31/12/2010	737,079
Additions	-
Balance as at 31/12/2011	737,079
Additions	381,107
Of which on conversion of subordinated bonds	314,294
March conversion	313,990
May conversion	146
November conversion	158
Of which on exchange of preferred shares (Note 19)	66,813
Balance as at 31/12/2012	1,118,186

c) Reserves

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

		€000s
	31/12/2012	31/12/2011
Statutory reserve	51,680	51,091
Freely-available reserve	1,448,986	1,349,513
Revaluation reserve	149,057	160,634
Treasury shares reserve-	106,773	111,034
By acquisition	225	742
By guarantee	106,548	110,292
Canary Islands investment reserve	28,363	28,363
Reserves (losses) of entities accounted for using the equity method-	4,922	11,070
Associates	4,707	10,743
Jointly controlled entities	215	327
	1,789,781	1,711,705

Statutory reserve

Companies are obliged to allocate 10% of their profits in each financial year to a reserve fund, until this reaches at least 20% of share capital. This reserve may not be distributed to shareholders and may be used only to cover losses if there are no other reserves available. In 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 reserves

This heading in the consolidated Balance Sheet shows the effect on the reserves of the revaluation of properties carried out on 1 January 2004, as allowed in the transition to the IFRS. This heading also includes the revaluation reserves generated by business combination transactions.

Voluntary reserves

Voluntary reserves are freely available for use.

Reserves (losses) of entities accounted for using the equity method-

The breakdown of the reserves and losses in companies accounted for using the equity method is as follows:

		€000s
	31/12/2012	31/12/2011
	Reserves	Reserves
Bankinter Seguros Generales, S.A	232	-
Professional Future Materials, S.L.	-	(176)
Mercavalor, S.V., S.A.	1,607	1,414
Bankinter Seguros de Vida, S.A.	2,681	8,830
Helena Activos Líquidos, S.L.	187	499
Eurobits Technologies, S.L.	215	327
	4,922	10,894

d) Other Equity Instruments

On 11 May 2011 the Bank issued mandatorily convertible bonds for €404.81 million, in two series: Series I for a nominal amount of €175.00 million and Series II for a nominal amount of €229.81 million maturing 11 May 2014 with an annual remuneration of 7%. The terms of the issue conform to the definition of equity instrument since i) there is no obligation to deliver cash or other financial assets since conversion is mandatory, and since the remuneration is subject, inter alia, to the discretion of the Bank's Board of Directors, and ii) the conversion rate is fixed for all conversions as the result of dividing the nominal value of the bonds by the established conversion price (€6.28 and €5.03 per share for Series I and Series II respectively), subject in any case to fixed numbers of bonds being exchanged for fixed numbers of shares. The issue is therefore recognised in equity as "Equity - Other equity instruments". Remuneration accruing during 2011 on this product amounted to €18.24 million. This amount net of corporation tax (€12.77 million) is recognised directly in equity as a deduction from reserves.

During the first half of 2012 the following mandatorily convertible subordinated bonds were voluntarily converted into new Series Iand II Bankinter shares:

The Company's AGM, held on 15 March 2012, in its eighth resolution, approved the setting of 29 March 2012 as an extraordinary date for voluntary conversion. Consequently on that date requests were made for the conversion of 3,240,012 Series I bonds, with a nominal value of €162 million (93% of Series I) and 3,397,138 Series II bonds, with a nominal value of €169.86 million (74% of Series II). To meet these conversion requests a total of 59,559,333 new shares were issued.

On the ordinary voluntary conversion date, 11 May 2012, requests were made for the conversion of 1,186 Series I bonds with a nominal value of €59,000 and 1,901 Series II bonds with a nominal value of €95,000. To meet these conversion requests a total of 28,279 new shares were issued.

On the ordinary voluntary conversion date, 12 November 2012, requests were made for the conversion of 2,170 Series I bonds with a nominal value of €108,000 euros and 1,182 Series II bonds with a nominal value of €59.000. To meet these conversion requests a total of 28,963 new shares were issued.

Remuneration accruing during 2012 on this product amounted to €57,362. This amount, net of corporation tax (€40.15 million), is recognised directly in equity as a deduction from reserves.

	€000s
Balance as at 31/12/2010	-
Additions	404,812
Balance as at 31/12/2011	404,812
Additions	-
Subordinated bonds cancelled upon conversion	332,179
March conversion	331,857
May conversion	154
November conversion	168
Balance as at 31/12/2012	72,633

None of the exchange transactions described involved the recognition of any amount in the enclosed consolidated Income Statements for the years ended 31 December 2012 or 2011.

e) Own securities

As at 31 December de 2012, the Group owned 76,316 of its own shares (162,620 shares as at 31 December de 2011).

During 2012, stock market transactions were carried out for the purchase of 22,014,342 shares (7,011,172 in 2011) and the sale of 22,100,646 shares (7,256,473 in 2011) on which gains of €0.19 thousands were obtained, recognised directly in equity under "Reserves" in the Balance Sheet.

The breakdown of treasury stock as at 31 December 2012 and 2011 is as follows:

			€000s			Euros			€000s
	Number of shares		Nominal value			Average acquisition price		Acquisition cost		Treasury-stock reserve		Percentage of capital
	31/12/ 2012	31/12/ 2011	31/12/ 2012	31/12/ 2011	31/12/ 2012	31/12/ 2011	31/12/ 2012	31/12/ 2011	31/12/ 2012	31/12/ 2011	31/12/ 2012	31/12/ 2011
Bankinter, S.A.	76,316	71,203	23	21	2.95	4.33	226	308	226	308	0.01	0.01
Hispamarket, S.A.	-	91,417	-	28	3.19	4.75	-	434	-	434	0.00	0.02
Total		76,316 162,620	23	49	6.14	9.08	226	742	226	742	0.01	0.03

f) Results attributed to the Group

The breakdown of the individual pre-tax results for each of the companies belonging to the Group during the financial years 2012 and 2011 is as follows:

		€000s
	2012	2011
Bankinter, S.A.	187,958	187,267
Bankinter Consultoría, Asesoramiento y Atención Telefónica, S.A.	853	(59)
Bankinter Seguros Generales, S.A	-	5
Bankinter Gestión de Activos, S. A., SGIIC	15,806	15,235
Hispamarket, S. A.	(7,085)	514
Intermobiliaria, S. A.	(113,463)	(98,169)
Bankinter Consumer Finance, E.F.C, S.A.	31,636	16,033
Bankinter Capital Riesgo, SGECR, S. A.	280	222
Bankinter Sociedad de Financiación, S. A.	(12)	(1,203)
Bankinter Emisiones, S. A.	370	716
Bankinter Capital Riesgo I, Fondo Capital	1,426	830
Línea Directa Aseguradora, S.A.	121,497	107,213
Arroyo Business Consulting Development S.A	-	(1)
Relanza Gestión S.A	50	18
Gneis Global Services S.A.	18,223	2,937

The result of the companies consolidated by the equity method for years 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Mercavalor, S.V., S.A.	(75)	28
Eurobits Technologies, S.L.	(57)	3
Helena Activos Líquidos, S.L.	(9)	(98)
Moto Club LDA, S.L.U.	-	233
Centro Avanzado de Reparaciones CAR, S.L.U.	-	(322)
Ambar Medline, S.L.	-	19
Bankinter Seguros de Vida, S.A. de Seguros y Reaseguros	17,818	14,812
	17,677	14,675

g) Earnings per share

Earnings per share are calculated by dividing profit attributable to the Group by the weighted average number of ordinary shares in circulation during the financial year, excluding any treasury stock acquired by the Group. In financial years 2012 and 2011, earnings per share are as follows:

	2012	2011
Profit for the year (€000s)	124,654	181,227
Average number of shares (000s)	521,177	474,183

Earnings per share (euros)	0.24	0.38

To calculate diluted earnings per share, the weighted average number of ordinary shares in circulation is adjusted to reflect the conversion of all the potentially dilutive ordinary shares. The potentially dilutive ordinary shares that the Group holds are bonds convertible into shares. It is assumed that convertible bonds are converted into common shares.

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

	2012	2011
Diluted profit for the year (€000s)	124,654	181,227
Average number of diluted shares (000s)	527,659	520,243

Diluted earnings per share (euros)	0.23	0.35

h) Dividends and remuneration

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

The breakdown of the dividends distributed from profits in 2012 and 2011 is as follows, not including treasury shares in the possession of the bank:

Date	Dividend per Share (Euros)	Number of shares	Amount (€000s)	Date approved by Board	Results for the year
Jul 11	0.05193	473,447,732	24,582	Jun 11	2011
Oct 11	0.052	473,447,732	10,896	Sept 11	2011
Jan 12	0.048313	476,919,014	23,038	Dec. 11	2011
Apr 12	0.038527	476,919,014	18,371	Feb 12	2011
Total	0.19077		76,887

July 12	0.028661	536,506,626	15,375	Jun 12	2012
Oct 12	0.027276	563,777,178	15,375	Oct 12	2012
Jan 13	0.027275	563,806,141	15,375	Dec 12	2012
Apr 13	0.027272	563,806,141	15,375	Feb 13	2012
Total	0.110484		61,500

During 2011, as well as the €76.89 million in dividends referred to, a further €13.72 million in shares was made available to shareholders as part of the Bankinter Alternative Dividend Flexible Shareholder Remuneration Programme approved by the Ordinary General Meeting of Shareholders of 28 April 2011. Shareholders holding 263,906,373 free warrants opted to receive new shares. In consequence on 30 September 2011 the Board of Directors set the number of ordinary shares to be issued in the capital increase against freely available reserves at 3,471,282 for a capital increase of €1.04 million.

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:

	June 2012	September 2012	December 2012
	First	Second	Third
Profit after tax (€000s)	99,212	121,848	148,208
Dividends paid (€000s)	-	15,375	30,750

Interim dividend (€000s)	15,375	15,375	15,375
Accumulated interim dividends (€000s)	15,375	30,750	46,125
Gross dividend per share (euros)	0.0286614	0.027276	0.027275
Payment date	July 2012	Oct 2012	Jan 2013

23. Valuation adjustments (equity)

The breakdown of this item is as follows:

		€000s
	31/12/2012	31/12/2011
Financial assets available for sale	3,145	(29,248)
Exchange differences	208	206
Entities valued under the equity method	(301)	(2.603)
	3,052	(31,645)

24. Contingent risks and commitments

The composition of this item is as follows:

	€000s
	31/12/2012	31/12/2011
Contingent risks:
Financial guarantees-	631,925	590,143
Financial guarantees	631,925	590,143
Loan derivatives sold	-	-
Other financial guarantees	-	-
Assets associated with third-party obligations	-	-
Irrevocable documentary credits	123,893	149,454
Other guarantees and sureties given	1,676,110	1,590,114
Other contingent risks	50,937	109,959
	2,482,865	2,439,670

Contingent commitments:
Available to third parties	6,684,740	6,895,998
Commitments to purchase financial assets in instalments	13,209	12,609
Contractual agreements to acquire financial assets	4,524,597	2,221,798
Subscribed securities pending disbursement	120	14,284
Other contingent commitments	16,993	64,118
	11,239,659	9,208,807

The item "Contingent commitments available by third parties" consists entirely of commitments on immediately available credit.

25. Transfers of financial assets

The breakdown of transfers of financial assets carried out by the Group at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Removed from the balance sheet prior to 1 Jan. 2004	1,099,471	1,256,311
Retained in the balance sheet in full	4,276,316	8,996,843
	5,375,787	10,253,154

During 2012 the following securitisation funds were prepaid: Bankinter 14 FTH, Bankinter 15 FTH , Bankinter 17 FTA, Bankinter 18 FTA, BK Empresas 1 FTA and BK Leasing I.

The derecognised assets refer to the loans securitised prior to 1 January 2004, as described below:

In 2003, mortgage loans valued at €1.35 billion were transferred to "Bankinter 6, Asset Securitisation Fund", and loans to SMEs valued at €250 million were transferred to "Bankinter I FTPYME, Asset Securitisation Fund".
In 2002 mortgage loans valued at €1.03 billion were transferred to "Bankinter 4, Mortgage Securitisation Fund", and mortgage loans valued at €710 million were transferred to "Bankinter 5, Mortgage Securitisation Fund".
In 2001 mortgage loans valued at €1.33 billion were transferred to "Bankinter 3, Mortgage Securitisation Fund".
In 1999, mortgage loans valued at €600 million were transferred to "Bankinter 1, Mortgage Securitisation Fund", and mortgage loans valued at €320 million were transferred to "Bankinter 2, Mortgage Securitisation Fund".

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

As at 31 December 2012 the Balance Sheet included securitisation bonds issued by securitisation funds forming part of the consolidated Group for an amount of €1,536.28 million (€5,928.18 million as at 31 December 2011). These securities are recognised as liabilities in the Balance Sheet, as deductions from the amount of the corresponding issues under the heading "Customer deposits".

The main characteristics of the securitisations carried out subsequent to 1 January 2004 are as follows (amounts in €000s):

Fund	Series	Rating	Amount	Interest	Maturity
BK 7 FTH	A-Series	Aaa/AAA:	471,800	Eur 3 m. + 0.21%	26/09/2040
	B-Series	A2/A:	13,000	Eur 3 m. + 0.55%
	C-Series	Baa3/BBB:	5,200	Eur 3 m. + 1.20%
Total			490,000

BK 8 FTA	A-Series	Aaa/AAA:	1,029,300	Eur 3 m. + 0.17%	15/12/2040
	B-Series	A2/A:	21,400	Eur 3 m. + 0.48%
	C-Series	Baa3/BBB:	19,300	Eur 3 m. + 1.00%
Total			1,070,000

BK 9 FTA	A1 (P) Series	Aaa/AAA:	66,600	Eur 3 m. + 0.07%	16/07/2042
	A2 (P) Series	Aaa/AAA:	656,000	Eur 3 m. + 0.11%
	B (P) Series	A2/A+:	15,300	Eur 3 m. + 0.50%
	C (P) Series	Baa3/BBB:	7,100	Eur 3 m. + 0.95%
		Total (1)	745,000
	A1 (T) Series	Aaa/AAA:	21,600	Eur 3 m. + 0.07%	16/07/2042
	A2 (T) Series	Aaa/AAA:	244,200	Eur 3 m. + 0.11%
	B (T) Series	A1/A:	17,200	Eur 3 m. + 0.50%
	C (T) Series	Baa1/BBB-:	7,000	Eur 3 m. + 0.95%
		Total (2)	290,000
Total			1,035,000

BK 10 FTA	A1 Series	Aaa/AAA:	80,000	Eur 3 m. + 0.08%	21/06/2043
	A2 Series	Aaa/AAA:	1,575,400	Eur 3 m. + 0.16%
	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

BK 11 FTH	A1 Series	Aaa/AAA:	30,000	Eur 3 m. + 0.05%	21/08/2048
	A2 Series	Aaa/AAA:	816,800	Eur 3 m. + 0.14%
	B-Series	Aa3/A:	15,600	Eur 3 m. + 0.30%
	C-Series	Baa1/BBB-:	15,300	Eur 3 m. + 0.55%
	D Series	Ba3/BB-:	9,800	Eur 3 m. + 2.25%
	E Series	Ca	12,500	Eur 3 m. + 3.90%
Total			900,000

BK 12 FTH	A1 Series	Aaa/AAA:	50,000	Eur 3 m. + 0.04%	15/12/2043
	A2 Series	Aaa/AAA:	1,102,400	Eur 3 m. + 0.12%
	B-Series	Aa3/A+:	13,100	Eur 3 m. + 0.25%
	C-Series	A3/A-	11,900	Eur 3 m. + 0.35%
	D Series	Ba1/BBB-	11,300	Eur 3 m. + 2.25%
	E Series	Ca/CCC	11,300	Eur 3 m. + 3.90%
Total			1,200,000

Fund	Series	Rating	Amount	Interest	Maturity
BK 2 Pyme
FTA	A1 Series	Aaa/AAA:	49,000	Eur 3 m. + 0.06%	16/05/2043
	A2 Series	Aaa/AAA:	682,000	Eur 3 m. + 0.12%
	B-Series	Aa3/A+:	16,200	Eur 3 m. + 0.22%
	C-Series	Baa2/BBB	27,500	Eur 3 m. + 0.52%
	D Series	Ba3/BB	10,700	Eur 3 m. + 2.10%
	E Series	C/CCC-	14,600	Eur 3 m. + 3.90%
Total			800,000

BK 13 FTA	A1 Series	Aaa/AAA:	85,000	Eur 3 m. + 0.06%	17/07/2049
	A2 Series	Aaa/AAA:	1,397,400	Eur 3 m. + 0.15%
	B-Series	Aa3/A:	22,400	Eur 3 m. + 0.27%
	C-Series	A3/BBB	24,100	Eur 3 m. + 0.48%
	D Series	Ba1/BB-	20,500	Eur 3 m. + 2.25%
	E Series	Ca/CCC-	20,600	Eur 3 m. + 3.90%
Total			1,570,000

Fund	Series	Rating	Amount	Interest	Maturity

CASTELLANA FINANCE	A-Series	AAA	83,700	Eur 3 m. + 0.30%	08/01/2050
	B1 Series	AA	26,000	Eur 3 m. + 0.70%
	B2 Series	AA	10,000	Eur 3 m. + 0.85%
	C1 Series	A+	38,700	Eur 3 m. + 1.20%
	C2 Series	A	23,900	Eur 3 m. + 1.50%
	D Series		2,850	Eur 3 m. + 7.00%
Total			185,150

BK 3 FTPyme FTA	A1 Series	Aaa/AAA:	180,000	Eur 3 m. + 0.09%	18/02/2046
	A2 Series	Aaa/AAA:	288,900	Eur 3 m. + 0.20%
	A3 Series (guaranteed)	Aaa/AAA:	91,200	Eur 3 m. + 0.02%
	B-Series	Aa3/AA:	23,100	Eur 3 m. + 0.35%
	C-Series	Baa2/BBB	6,000	Eur 3 m. + 0.90%
	D Series	Ba3/BB	10,800	Eur 3 m. + 1.80%
	E Series	C/CCC-	17,400	Eur 3 m. + 3.90%
Total			617,400

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 (guaranteed)	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

Outstanding balances of securitisations as at 31 December 2012 and 2011 were as follows:

		€000s
	31/12/2012	31/12/2011

Removed from the balance sheet prior to 01-01-04:

Bankinter 1 Mortgage Securitisation Fund	-	-
Bankinter 2 Mortgage Securitisation Fund	33,910	41,808
Bankinter 3 Mortgage Securitisation Fund	229,548	269,552
Bankinter 4 Mortgage Securitisation Fund	241,386	277,309
Bankinter 5 Mortgage Securitisation Fund	169,934	192,048
Bankinter 6 Mortgage Securitisation Fund	424,693	475,594
Bankinter 1 FTPYME	-	-
	1,099,471	1,256,311
Retained on the balance sheet in full:
Bankinter 7 Mortgage Securitisation Fund	153,184	170,776
Bankinter 8 Asset Securitisation Fund	340,346	379,634
Bankinter 9 Asset Securitisation Fund	429,232	471,765
Bankinter 10 Asset Securitisation Fund	743,651	816,687
Bankinter 11 Mortgage Securitisation Fund	446,216	486,009
Bankinter 12 Mortgage Securitisation Fund	606,926	662,145
Bankinter 2 Asset Securitisation Fund	207,993	253,601
Bankinter 13 Asset Securitisation Fund	898,701	972,638
Bankinter 14 Mortgage Securitisation Fund	-	660,164
Bankinter 3 Asset Securitisation Fund	254,599	299,953
Bankinter 15 Mortgage Securitisation Fund	-	1,069,044
Bankinter 16 Asset Securitisation Fund	-	-
Bankinter 17 Asset Securitisation Fund	-	758,649
Bankinter Leasing I, Asset Securitisation Fund	-	112,104
Bankinter 4 Ftpymes, Asset Securitisation Fund	195,468	236,159
Bankinter 18 Asset Securitisation Fund	-	1,239,175
Bankinter 1 Asset Securitization Fund	-	408,340
Bankinter 19 Asset Securitisation Fund	-	-
Bankinter 20 Asset Securitisation Fund	-	-
	4,276,316	8,996,843

The sum of the associated financial liabilities as at 31 December 2012 stands at €2.631 billion (€2.595 billion as at 31 December 2011).

26. Other memorandum accounts - financial derivatives

The breakdown of financial derivatives in other memorandum accounts as at 31 December 2012 and 2011 is as follows:

		€000s
	31/12/2012	31/12/2011
Financial derivatives (Notes 7 and 10):
Exchange-rate risk	6,701,672	6,621,875
Interest-rate risk	17,996,801	26,921,783
Equity risk	3,159,866	3,156,955
Credit risk	-	5,000
	27,858,339	36,705,613

The notional amount of the contracts does not reflect the actual risk assumed by the Group in relation to such instruments.

27. Personnel expenses

The composition of the amounts included under this item in the consolidated income statement for financial years 2012 and 2011 is as follows:

		€000s
	2012	2011

Salaries and bonuses paid to active staff	244,105	245,985
Social Security contributions	57,387	60,985
Contributions to defined benefit plans	1,905	1,300
Contributions to defined plans	117	-
Severance packages	20,534	1,550
Other personnel expenses	18,450	20,145
	342,498	329,965

The breakdown of the Group's personnel as at 31 December 2012 and 2011, in accordance with pension commitments, was as follows:

	31/12/2012	31/12/2011
Active employees in service since before 8 March 1980	302	372
Personnel who are pension beneficiaries	59	62
Early retirees	38	48
Other active employees	3,853	3,904

Post-employment benefits

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

Additionally, there is a group of early retirees who retired early in December 2002 and December 2003, to whom the Bank has committed to pay a financial benefit in fourteen monthly amounts not subject to revaluation until the date on which they attain 65 years of age, this amount being established individually with each early retiree, and a financial benefit in twelve monthly instalments until the date on which they attain 65 years of age for the contributions to the Special Social Security Agreement, on the terms established with each early retiree, which are subject to revaluation in accordance with increases in the Minimum Bases for Self-Employed Workers / Maximum Contribution Bases.

Lastly, for members of Senior Management appointed in or after 2012, a single contribution of €656,560 will be made to a Unit-Linked contract with AXA Seguros y Reaseguros S.A., such that in the event of retirement, death or incapacity, the beneficiary will receive the funds accumulated in the Unit-Linked contract at the time of the loss.

Other long-term benefits

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.

In order to cover the aforementioned pension commitments, the Bank has an insurance policy with Winterthur Seguros y Reaseguros S.A. (now AXA Seguros y Reaseguros S.A. as a result of the subsequent merger of the two companies) backed by the unconditional guarantee of the parent company, Winterthur A.G., which guarantees the future coverage of all pension supplements payable to non-active staff arising prior to financial year 2003. In addition, for non-active staff as from 2003 and for the cover of active staff, the aforementioned benefits are guaranteed under a co-insurance policy in which Winterthur Seguros y Reaseguros (now AXA Seguros y Reaseguros S.A.) has a 40% participation, acting as lead co-insurer, while Caser Ahorrovida S.A. de Seguros y Reaseguros and Allianz, Compañía de Seguros y Reaseguros S. A. each have a 30% participation.

In 2012 regular premiums paid for retirement cover, net of recoveries, totalled -€6.86 million (-€3.07 million in 2011).

Premiums paid for death and incapacity cover in 2012 amounted to €0.11 million (€0.12 million in 2011).

Active personnel

The basic assumptions used for the calculations in the actuarial study as at 31 December 2012 and 2011 for commitments to active personnel, are as shown in the following table:

	31/12/2012	31/12/2011
Mortality:	Probabilities set in the GKM/-95 tables, at 80%.	Probabilities set in the GKM/- 95 tables, at 80%.
Survival
Men:	Probability associated with PERM 2000 P table.	Probability associated with PERM-2000 P table.
Women:	Probability associated with PERF 2000 P table.	Probability associated with PERF-2000 P table.
IInvalidity:	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:	3.60%*	Euribor zero-coupon curve as at 03 Nov 2011
Expected total return on assets:	3.60%*	Euribor zero-coupon curve as at 03 Nov 2011
Rise in CPI:	2%	2%
Salary inflation:	3.50% for remuneration items linked to the collective bargaining agreement	3.50% for remuneration items linked to the collective bargaining agreement
Social Security evolution	-	-
Rise in Maximum	-	-
Maximums:	2%	2%
Maximum pension:	2%	2%

*Returns corresponding to those indicated in the iBoxx Corporate AA curve of 31 October 2012, depending on the duration of each payment commitment.

The most significant aspects of the actuarial study carried out as at 31 December 2012 and 2011 are as follows:

	€000s
	31/12/2012	31/12/2011
Value of the obligations	29,359	40,943
Fair value of plan assets:
Allianz	9,769	13,888
Caser	9,769	13,888
AXA	13,025	18,518

One significant aspect of the difference between the actuarial values as at 31 December 2011 and 2012 is that the additions to provisions for retirement commitments were reduced as a consequence of the evolution of the financial markets during 2012. As at 3 November 2011 the 24-year return - this being the average financial duration of the commitments undertaken - based on the EuroSwap curve was 2.94%, and as at 30 October 2012, the 23-year return, based on the iBoxx Corporate AA10+ rate, stood at 3.60%, as a result of which coverage of pension commitments was reduced by €4.71 million.

Personnel that are pension beneficiaries

The most significant aspects of the actuarial study carried out as at 31 December 2012 and 2011 are as follows:

	31/12/2012	31/12/2011
Value of the obligations	9,012	9,463
Fair value of the plan assets	8,977	9,424
Actuarial assumptions
Tables used
Pensions deriving from the initial premium	PERMF/2000 P	PERMF/2000 P
Pensions deriving from subsequent contributions	PERMF/2000 P	PERMF/2000 P
Technical interest rate	3.60%*	Euribor zero-coupon curve as at 03 Nov 2011
Forecast total yield from the assets:	3.60%*	Euribor zero-coupon curve as at 03 Nov 2011
Rise in salaries	Not applicable	Not applicable
Pension revaluation rate	Not applicable	Not applicable

*Returns corresponding to those indicated in the iBoxx Corporate AA curve of 31 October 2012, depending on the duration of each payment commitment.

One significant aspect of the difference between the actuarial values as at 31 December 2011 and 2012 is that the additions to provisions for retirement commitments were reduced as a consequence of the evolution of the financial markets during 2012. As at 3 November 2011 the 13-year return - this being the average financial duration of the commitments undertaken - based on the EuroSwap curve was 2.81%, and as at 30 October 2012 the return was 3.60%, based on iBoxx Corporate AA 10+ rates. As a result, the amount of cover for pension commitments fell by €0.74 million.

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

In 2002 and 2003 the Bank organised two early retirement schemes for employees. The commitments undertaken towards them up until the date of retirement were insured with Nationale-Nederlanden Vida. The commitments undertaken towards early retirees from the date of retirement are covered in the same policy, under a co-insurance between Winterthur (now AXA) (40%), Allianz (30%) and Caser (30%) covering active personnel who are beneficiaries of a pension after financial year 2003.

The basic assumptions used for the calculations in the actuarial study, as at 31 December 2012 and 2011, for commitments to active personnel, are as shown in the following table:

	31/12/2012	31/12/2011
Survival:
Men	Probability associated with PERM-2000 P table.	Probability associated with PERM 2000 P table.
Women	Probability associated with PERF-2000 P table.	Probability associated with PERF 2000 P table.
Type of updating:	Pre-retirement phase: 1.00% Post-retirement phase: 3.60%	Euribor zero-coupon curve as at 03 Nov 2011
Forecast total yield from the assets:	Pre-retirement phase: 1.00% Post-retirement phase: 3.60%	Euribor zero-coupon curve as at 03 Nov 2011
Rise in CPI:
Early retirement stage	2% for re-valuable benefits	2% for re-valuable benefits
Retirement stage	2%	2%
Salary inflation:
Retirement stage	Not applicable	Not applicable
Social Security evolution
Rise in Maximum Bases	2%	2%
Maximum pension:	2%	2%

*Returns corresponding to those indicated in the iBoxx Corporate AA curve of 31 October 2012, depending on the duration of each payment commitment.

For the retirement stage of early retirees and for the part accrued and not accrued at 31 December 2012 and 2011, the same profitability as mentioned previously for commitments undertaken with active personnel were used.

The most significant aspects of the actuarial study carried out as at 31 December 2012 and 2011 are as follows:

	31/12/2012 Early retirement stage	Retirement stage	31/12/2011 Early retirement stage	Retirement stage
Other long-term benefits:
Early retirees 2002	205		205
Early retirees 2003	2,571		2,571
Post-employment benefits
Early retirees 2002		239		239
Early retirees 2003		6,981		6,981
Pension-linked insurance agreements
Nationale Nederlanden Vida	2,750	-	2,750	-
Allianz, Compañía de Seguros y Reaseguros, S.A.	-	2,245	-	2,245
Caser, S.A. de Seguros y Reaseguros sobre la Vida	-	2,245	-	2,245
Winterthur Vida, S.A. de Seguros y Reaseguros sobre la Vida	-	2,994	-	2,994

As regards pre-retirement commitments, one significant aspect of the difference between the actuarial valuations as at 31 December 2011 and 2012 is that the additions to provisions for retirement commitments were increased as a consequence of the evolution of the financial markets during 2012. As at 3 November 2011 the two-year return - this being the average financial duration of the commitments undertaken - based on the EuroSwap curve was 1.70%, and at 30 October 2012 the two-year return, based on iBoxx Corporate AA 10+ rates, was 1.00%. As a result of this, the amounts corresponding to cover for pension commitments have increased by €25,000.

As regards post-employment commitments, one significant aspect of the difference between the actuarial valuations as at 31 December 2011 and 2012 is that the additions to provisions for retirement commitments were reduced as a consequence of the evolution of the financial markets during 2012. As at 3 November 2011 the 24-year return - this being the average financial duration of the commitments undertaken - based on the EuroSwap curve was 2.94%, and as at 30 October 2012, the 23-year return, based on the iBoxx Corporate AA10+ rate, stood at 3.60%, as a result of which coverage of pension commitments was reduced by 930 thousand euros.

Explanation of the change in defined benefit pension commitments as at 31 December 2012 compared with 31 December 2011 and coverage thereof:

	€000s
Valuation of commitments as at 31-12-2011:	64,869
Active Personnel	40,943
Early retirees (early retirement stage)	5,206
Early retirees (retirement stage)	9,257
Personnel who are pension beneficiaries	9,463
Changes in obligations during financial year 2012:	(16,501)
Accruals for the year 2012:	1,756
Pension fund interest:	1,855
Reductions for payments of benefits or cancellation of commitments:	(3,844)
Actuarial profits and losses (deviation and changes to assumptions)	(16,268)
Valuation of commitments as at 31-12-2012:	48,368
Active Personnel	29,359
Early retirees (early retirement stage)	2,776
Early retirees (retirement stage)	7,221
Personnel who are pension beneficiaries	9,012
Coverage of obligations as at 31-12-2010:	70,835
Plan assets	65,695
Pension-linked insurance agreements	5,140
Other funds	0
Return anticipated from plan assets/insurance contracts:	1,923
Actuarial gains / (losses)	(10,624)
Contributions	1,672
Recoveries	(8,201)
Benefits paid	(3,831)
Coverage of obligations as at 31-12-2011:	51,773
Plan assets	49,023
Pension-linked insurance agreements	2,750

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 expenses

	€000s
Period ended December 2012	Present value of committed benefits	Value of the associated funds
Value as at 01 January 2012	64,869	70,835
Normal Cost (Annual accrual)	1,756
Interest Cost (financial expenses)	1,855
Expected return on plan assets		1,923
Company contributions		1,672
Company recoveries		(8,201)
Benefits paid	(3,834)	(3,831)
Early retiree risk premiums earned	(10)
Actuarial losses / (gains)	(16,268)
(Losses) / gains on the value of the fund		(10,625)
Value as at 31 December 2012	48,368	51,773

The following is a reconciliation between the present value of defined benefit obligations and the fair value of the plan assets with the assets and liabilities recognised in the Balance Sheet as at 31 December 2012:

Post-employment benefits

Active, passive and early-retired personnel

Present value of committed benefits	45,557
Value of the associated funds	49,023
Unrecognised net actuarial losses and gains	0
Cost of past service not recognised	0
Pension assets	3,466

Other liabilities

Present value of committed benefits	35
Value of the associated funds	0
Unrecognised net actuarial losses and gains	0
Cost of past service not recognised	0
Pension liabilities	35

Other long-term benefits

Early retirees

Present value of committed benefits	2,776
Value of the associated funds	0
Pension liabilities	2,776

Insurance agreements linked to pensions	2,750

Pension costs incurred in 2012 for defined benefit commitments

The total cost recognised in the Income Statement for 2012 for coverage of pension commitments amounts to (€3.96 million), as per the following breakdown:

	€000s

Cost of services in the current period	1,756
Interest cost	1,855
Expected return on plan assets	(1,923)
Actuarial gains and losses	(5,644)

The Bank's estimate with regard to pensions costs for 2013 amounts to €0.88 million.

Breakdown of plan assets associated with cover of defined benefit commitments

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

	Percentage
Axa - Winterthur	44%
Allianz	26%
Caser	25%
Nationale Nederlanden	5%

The expected return at the start of the financial year for the plan assets was estimated at €1.92 million, while the actual return obtained was (€8.70 million), the difference being due almost entirely to the increase in value as a result of the increase in market rates between the end of 2011 and the end of 2012.

The Bank's estimate of forecast contributions to the plan during financial year 2013 amounts to (€1.92 million). The forecast return from plan assets for 2013 and estimated at the start of said year amounts to 1.736 million euros.

Details of changes in the present value of defined benefit pension commitments and the assets assigned to cover them as at each year-end.

€000s
Year	Defined Benefit Obligations	Assets Assigned	Other Funds	Deficit/Surplus
2.004	129,814	130,514	-	701
2.005	166,512	168,600	-	2,088
2.006	132,232	130,852	1,380	-
2.007	103,462	102,353	1,137	-
2.008	76,839	77,979	33	1,173
2.009	67,525	67,396	129	-
2.010	73,154	74,925	44	1,814
2011	64,869	70,835	39	6,005
2012	48,368	51,773	35	3,440

Pension costs incurred in 2012 for defined contribution commitments

The total cost recognised in profit and loss in 2012 for coverage of defined contribution pension commitments amounts to €45,000.

The average number of employees by category and sex during financial years 2012 and 2011 was as follows:

	2012		2011
	Men	Women	Men	Women
Managers	393	170	415	179
Executives	957	780	968	781
Operatives	677	1,157	769	1,251
	2,027	2,107	2,152	2,211

The breakdown of personnel by sex and category as at 31 December 2012 and 2011 was as follows:

	2012		2011
	Men	Women Men		Women
Managers	399	172	399	170
Executives	943	790	974	780
Operatives	643	1.121	703	1.184
	1,985	2,083	2,076	2,134

28. Fees received and paid

Details of this heading in the consolidated income statement for the years ended 31 December 2012 and 2011 are as follows:

	€000s
	2012	2011

Fees expense:
Fees paid to other institutions and correspondents	29,010	24,805
Fees paid to brokers, virtual banking	19,596	24,914
Other fees	22,009	17,039
Total fees expense	70,615	66,758
Fee income:
For guarantees and documentary credits	27,853	23,842
For exchange of foreign currencies and foreign banknotes	7,499	7,247
For contingent commitments	14,139	11,619
For collections and payments-	58,573	54,955
Trade bills	5,468	5,786
Sight accounts	11,833	9,972
Credit and debit cards	32,867	31,053
Cheques	1,443	1,466
Payment orders	6,962	6,678
For securities services-	40,753	41,142
Underwriting and placement of securities	2,761	632
Securities trading (Note 40)	18,844	20,863
Administration and custody of securities	18,125	17,468
Wealth management	1,023	2,179
For the marketing of non-banking financial products-	87,546	87,537
Investment funds	36,928	36,869
SICAVs	6,130	6,032
Pension funds	3,912	3,706
Insurance	40,287	40,562
Other (advisory services)	289	368
Other fees	38,092	39,299
Total fee income	274,455	265,641

29. Interest and similar charges/income

The breakdown of these items in the consolidated income statement, in accordance with the nature of the operations that give rise to the results, for the financial years ended 31 December 2012 and 2011 is as follows:

	€000s
Interest and similar income	2012	2011

Deposits with Bank of Spain (Note 6)	2,240	6,006
Deposits with credit institutions (Note 10)	28,128	48,040
Money market transactions through counterparties	5,429	30,866
Customer loans (Note 10)	1,286,893	1,205,045
Debt instruments	371,980	314,734
Impaired assets	18,936	13,916
Income corrections from hedging operations	(9,908)	11,192
Income from insurance contracts linked to pensions and similar obligations	1,856	2,223
Other interest	2,142	4,273
	1,707,696	1,636,295

In 2012, the heading "Customer loans" includes €686 million corresponding to operations with tangible security (€679.54 million in 2011). The item "debt securities" includes, in 2012, €257.19 million corresponding to State Debt (€188.72 million in 2011).

	€000s
Interest expense and similar charges	2012	2011

On deposits with the Bank of Spain	81,629	37,584
On deposits with credit institutions	139,655	153,702
On money-market transactions through counterparties	7,921	20,991
On customer loans	423,922	474,608
On debt represented by negotiable securities (Note 19)	400,285	414,290
Subordinated liabilities (Note 19)	39,005	45,956
Expense corrections from hedging transactions	(48,543)	(59,295)
Pension fund interest costs	1,787	2,200
Other interest	1,780	3,584
	1,047,441	1,093,620

The item "Debits represented by negotiable securities" (Note 19) includes in 2012 interest and charges for transactions with promissory notes and commercial paper to the value of €107.45 million (€30.08 million in 2011).

The average annual interest per item during financial years 2012 and 2011 was as follows:

	31/12/2012	31/12/2011
	Average interest	Average interest
Similar income:
Deposits with central banks	0.46%	0.97%
Deposits with credit institutions	1.02%	1.69%
Loans and advances to customers (a)	3.06%	2.96%
Debt instruments	3.73%	3.59%
Equities	4.16%	4.31%
Similar costs:

Deposits from central banks	0.89%	1.28%
Deposits from credit institutions	1.91%	2.30%
Customer resources (c)	2.07%	2.21%
Customer deposits	1.94%	1.97%
Marketable debt securities	2.27%	2.58%
Subordinated liabilities	3.93%	4.77%

30. Trading income

The breakdown of these items in the consolidated income statement for the years ended 31 December 2012 and 2011 is as follows:

	€000s
	2012	2011
From financial assets and liabilities held for trading (Note 7)	30,510	11,910
From debt securities	27,539	31,937
Other equity instruments	(12,982)	(41,835)
Trading derivatives	15,953	21,808
Other financial instruments at fair value through profit and loss account (Note 7)	(1,952)	97
Other equity instruments	(1,952)	97
From financial assets available for sale (Note 8)	26,380	5,212
From debt securities	23,386	4,176
Other equity instruments	2,994	1,036
Financial liabilities at amortised cost	47,322	40,774
Debt instruments	43,085	40,774
Subordinated liabilities	4,237
Other income and expense	2,593	1,169
	104,853	59,162

31. Exchange differences (net)

The amount of the net exchange differences recognised in the consolidated Income Statement for the year ended 31 December 2012 was €40.28 million (€38.68 million in the year ended 31 December 2011).

The breakdown by currency of the assets and liabilities in the Group's balance sheet denominated in foreign currencies as at 31 December 2012 and 2011 is as follows:

	€000s
	2012		2011
	Assets	Liabilities	Assets	Liabilities
US dollar	334,129	460,900	265,162	438,710
Sterling	88,543	37,386	22,783	38,035
Japanese yen	3,290,617	5,871	4,089,271	722,425
Swiss franc	731,185	12,982	788,918	10,612
Norwegian krone	2,505	1,122	604	1,130
Swedish krona	1,421	649	1,008	856
Danish krone	13,813	135	1,896	19
Others	14,507	7,887	33,969	24,006
	4,476,720	526,932	5,203,611	1,235,793

The breakdown of assets and liabilities denominated in foreign currencies as at 31 December 2012 and 2011 is as follows:

	€000s
	2012		2011
	Assets	Liabilities	Assets	Liabilities
Cash and balances with central banks	1,214	-	1,028	-
Financial assets and liabilities held for trading	3,372	3,357	2,621	2,709
Loans and receivables	4,470,838	-	5,189,552	-
Financial assets available for sale	1,205	-	10,321	-
Accrued expenses and deferred income	45	-	42	-
Financial liabilities at amortised cost	-	523,537	-	1,232,570
Other	46	38	47	514
	4,476,720	526,932	5,203,611	1,235,793

32. Other general administrative expenses

The composition of the amounts included under this item in the consolidated income statement for financial years 2012 and 2011 is as follows:

	€000s
	2012	2011
Taxes	6,923	5,133
Buildings and supplies	31,187	32,653
Entertaining and travel expenses	4,139	4,552
Material and sundry expenses	12,320	33,848
External services	71,829	59,681
Software and communications	49,003	42,624
Advertising	57,888	49,940
Other expenses	23,217	22,426
	256,506	250,857

33. Other operating income and expense

The breakdown of this item in the consolidated income statement for the years ended 31 December 2012 and 2011 is as follows:

	€000s
	2012		2011
	Income	Expenses	Income	Expenses
Income from the operation of investment property and other operating leases	7,305	-	3,796	-
Financial fees setting off direct costs	12,146	-	11,807	-
Contribution to the Deposit Guarantee Fund (Note 4)	-	68,775	-	14,817
Income and expense from/on insurance and reinsurance policies issued	667,712	404,997	686,960	455,442
Other	11,010	9,053	13,668	12,056
	698,173	482,825	716,231	482,315

The amount recognised under the heading "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 of credit institutions.

Spain's deposit guarantee system was substantially reformed during 2011: The three existing deposit guarantee funds (banks, savings banks and credit cooperatives) have been merged into a single Credit Institution Deposit Guarantee Fund and its functions updated and strengthened with a view to ensuring its flexible operation in reinforcing the solvency and functioning of the institutions. The legal limit on annual contributions to the fund was increased from 0.2%to 0.3%, which in practice means increasing the annual contribution from 0.06% to 0.2% of deposits guaranteed as at each reference date. Also, an additional quarterly contribution was introduced, with a 500%weighting applied to deposits on which agreed remuneration exceeds certain rates of interest which are reviewed on a quarterly basis.

Royal Decree-Law of 31 August 2012 on the restructuring and resolution of credit institutions also repealed with immediate effect sections 2b and 2c of Article 3 of Royal Decree 2606/1996 of 20 December on credit institution deposit guarantee funds, which laid down the additional quarterly contributions to be made by the entities.

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

The amounts shown under the heading Income and Expense on insurance and re-insurance contracts issued correspond to the operating activity of Línea Directa Aseguradora.

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 in the consolidated income statement for the years ended 31 December 2012 and 2011 is as follows:

		€000s
	2012	2011
Differences in the derecognition of assets not classified as non current assets held for sale:
Gains on disposal of property, plant and equipment (Note 14)	253	2,152
Losses on disposal of property, plant and equipment (Note 14)	(2,675)	(5,226)
Gains on disposal of shares	41,673	26,000
Gains on disposal of other equity instruments	50	2,279
	39,301	25,205

Gains / (Losses) on non-current assets held for sale not classified as discontinued operations:
Impairment losses on assets (Note 12)	(40,132)	(47,652)
Gains on disposals	55,870	22,875
Losses on disposals	(70,447)	(32,193)
	(54,709)	(56,970)

During 2012 the Group recognised €24.23 million under the heading "Gains on disposal of equity holdings" deriving from the first variable payment associated with the sale, in 2007, of 50% of the share capital of Bankinter Seguros de Vida, S.A de Seguros y Reaseguros to Mapfre Vida, S.A. This variable payment is linked to the attainment of the business plan established for the Company.

Additionally, the Group recognised €17.45 million under this same heading for the sale in December 2012 of 40.1% of the share capital of Bankinter Seguros Generales, S.A de Seguros y Reaseguros to the Mapfre Group (Note 13).

During 2011 the Group recognised €24 million under the heading "Gains on disposal; of equity holdings" in respect of the release of blocked gains on the 30 June 2007 sale of 50% of Bankinter Seguros de Vida, Sociedad de Seguros y Reaseguros S. A. to Mapfre Vida Sociedad de Seguros y Reaseguros S. A.. This gain remained blocked by the shareholders' agreement providing for a purchase option in favour of the buyer in the event that, at year-end 2011, Bankinter Seguros de Vida, Sociedad de Seguros y Reaseguros S. A. had not attained 50% of its business plan. During 2011 this option was cancelled, since the business plan objectives had been met.

35. Transactions and balances with related parties

The breakdown of transactions and balances with Group entities and other related entities and private individuals as at 31 December 2012 and 2011 is provided in Appendix I and the following Note 36.

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

Directors' remuneration

As it has demonstrated year after year, Bankinter pursues a remuneration policy in line with the criteria and recommendations of good corporate governance and currently applicable laws and regulations. On 15 March 2012 Bankinter presented a remuneration policy report to its AGM for a consultative vote. The report included information on the Bank's general policy in this area, its application to financial year 2011 and the remuneration system applying to financial year 20121. This is a good corporate governance practice that Bankinter has carried out every year since the AGMheld in 2008. The remuneration policy report was approved by 99.607% (2011: 99.045%) of the total capital in attendance and represented at the aforementioned 2012 General Meeting of Shareholders. Among other information, it contained the remuneration for the Board and top management for the financial year 2012, which is detailed and broken down in this note.

This report also included the conclusions of the analysis of the degree to which Bankinter's remuneration policy as applied to Directors, Senior Management and other persons included in the Group's "risk takers" conformed to the rules set out in Royal Decree 771/2011. Since 2009, Bankinter has carried out an exhaustive analysis of the extent to which all remuneration systems and items in all the management, business, support and control areas, including Senior Management and the Board of Directors, comply with the

^1. Law 2/2011 on Sustainable Economy amended the existing legal framework, introducing new disclosure requirements for listed companies. It established the obligation to provide a report on directors' remuneration which must be distributed and submitted to a consultative vote as a separate agenda item in the AGM, thus making the recommendation of the Unified Code of Good Corporate Governance mandatory.

principles contained in all the EUand Spanish standards and recommendations issued during this period2. In general terms, as can be seen from the remuneration reports submitted to our AGM in for the last two years, the conclusion has always been that the Bank's systems, principles and policies for remuneration were in line with the fundamental principles contained in the recommendations of the FSB (Financial Stability Board)and in the relevant EUDirectives, and with the recommendations of the CUBG (Unified Code of Good Governance for listed companies)and currently applicable Spanish law.

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 2012 and 2011 is as follows:

		In euros
Directors	2012	2011
Pedro Guerrero Guerrero	223,020	238,353
María Dolores Dancausa Treviño	163,800	175,354
Cartival, S.A.	163,800	175,354
Marcelino Botín-Sanz de Sautuola y Naveda	93,677	103,710
Fernando Masaveu Herrero	127,064	130,006
John de Zulueta Greenebaum:	132,362	160,646
Gonzalo de la Hoz Lizcano	115,853	127,531
Jaime Terceiro Lomba	151,458	137,342
José Antonio Garay Ibargaray	136,057	151,036
Rafael Mateu de Ros Cerezo	176,702	188,582
Former directors (1)	-	44,610
	1,483,793	1,632,524

(1) In the category of former directors, the amounts in the table for 2011 refer to those received by José Ramón Arce Gómez, who resigned in April 2011.

At year-end 2012 the number of Directors of Bankinter S.A. stood at ten, unchanged from year-end 2011.

Pursuant to Article 32 of the Articles of Association, the following items are included in the amounts shown in the above table:

- a fixed amount for the role of director,
an amount that is accrued for attendance at meetings of the Board and its Committees (attendance fees).
And allocation of shares.

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 fees for attending the meetings of the Board of Directors and the Board Committees in financial years 2012 and 2011:

^2. In December 2010, Directive 2010/76 of the European Parliament and Council, of 24 November 2010, was published, concerning 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. Also in December 2010, the Committee of European Banking Supervisors (CEBS) published a guide to interpreting the contents of the aforementioned Directive (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.

Also, 5 June 2011 saw the coming into force of Royal Decree 771/2011, of 3 June, amending Royal Decree 216/2008, of 15 February, on financial institutions' equity and Royal Decree 2606/1996, of 20 December, on guarantee funds for deposits of credit institutions and incorporating a new Chapter XII on remuneration policy of credit institutions in Royal Decree 216/2008 on financial institutions' equity, thus completing the transposition of Directive 2010/76/EUinto Spanish law. This Royal Decree introduces a mandatory framework for remuneration policies of credit institutions, which is applicable to remuneration accruing in 2011 and to that granted in 2010 but not yet paid.

Finally, Bank of Spain Circular 4/2011, of 30 November, amending Circular 3/2008, of 22 May, on the determination and control of minimum capital requirements, develops aspects relating to the transparency of the remuneration policy and aggregate quantitative data on remuneration (to be included in the Information of Prudential Relevance report published in 2012 and relating to remunerations in 2011). This Circular deals particularly with remuneration of managers and employees whose decisions may affect the institution's risk profile.

				In euros
	2012		2011
	Fixed	Attendance	Fixed	Attendance
Directors	remuneration	Fees	remuneration	Fees
Pedro Guerrero Guerrero	72,160	106,860	73,949	120,404
María Dolores Dancausa Treviño	54,120	76,680	55,461	86,893
Cartival, S.A.	54,120	76,680	55,461	86,893
Marcelino Botín-Sanz de Sautuola y Naveda	36,080	35,597	36,975	44,735
Fernando Masaveu Herrero	36,080	68,984	36,975	71,031
John de Zulueta Greenebaum:	36,080	74,282	36,975	101,671
Gonzalo de la Hoz Lizcano	36,080	57,773	36,975	68,556
Jaime Terceiro Lomba	36,080	93,377	36,975	78,367
José Antonio Garay Ibargaray	36,080	77,977	36,975	92,061
Rafael Mateu de Ros Cerezo	46,904	101,198	48,066	111,916
Former directors (1)	-	-	7,454	31,656
Subtotals	443,784	769,408	462,241	894,183
Total		1,213,192		1,356,424

(1) In the category of former directors, the amounts in the table for 2011 refer to those received by José Ramón Arce Gómez, who resigned in April 2011.

The individual breakdown of the allocations of shares to Directors by way of remuneration in 2012 and 2011 is as follows:

	2012		2011
Directors	Amounts invested	Number of shares Allocated	Amounts invested	Number of shares Allocated
Pedro Guerrero Guerrero	44,000	14,632	44,000	9,268
María Dolores Dancausa Treviño	33,000	10,973	33,000	6,950
Cartival, S.A.	33,000	10,973	33,000	6,950
Marcelino Botín-Sanz de Sautuola y Naveda	22,000	7,315	22,000	4,633
Fernando Masaveu Herrero	22,000	7,315	22,000	4,633
John de Zulueta Greenebaum:	22,000	7,315	22,000	4,633
Gonzalo de la Hoz Lizcano	22,000	7,315	22,000	4,633
Jaime Terceiro Lomba	22,000	7,315	22,000	4,633
José Antonio Garay Ibargaray	22,000	7,315	22,000	4,633
Rafael Mateu de Ros Cerezo	28,600	9,509	28,600	6,024
Former directors (1)	-	-	5,500	1,077
	270,600	89,977	276,100	58,067

(1) In the category of former directors, the amounts in the table for 2011 refer to those received by José Ramón Arce Gómez, who resigned in April 2011.

Loans and guarantees

Total loans granted to Directors as at 31 December 2012 amounted to €26.33 million (€23.83 million as at 31 December 2011). As at 31 December 2012 the Entity had outstanding guarantees in favour of its Directors for a total of €0.39 million (the same amount as at 31 December 2011).

The average term of the loans and lines of credit granted to the Bank's Directors was approximately 11 years in 2012 (10 years in 2011). The interest rates stand at between 1.05% and 5.55% in 2012 (1.93% and 5.98% in 2011).

Remuneration of Executive Directors and Senior Management

As at 31 December 2012 the number of senior managers in the entity was five, not including the Chairman, Vice-chairman and CEO. Taking this into account, remuneration of Senior Management in 2012, excluding executive directors, was €1.68 million, of which €1.34 million was fixed remuneration and €0.34 million variable remuneration. In 2011, this amount stood at €1.51 million (5 persons).

In 2012, the Executive Directors received the following amounts, approved by the Board of Directors on the proposal of the Nomination and Remuneration Committee, as remuneration for their activity:

Fixed remuneration:

Pedro Guerrero, Chairman of Bankinter, received a total of €0.92 million, all by way of fixed remuneration.
Cartival, S.A., Vice-chairman of Bankinter, received a total of €0.36 million, all by way of fixed remuneration.
María Dolores Dancausa, CEO of Bankinter, received a total of €0.61 million, all by way of fixed remuneration.

Variable remuneration

Since the Bankinter AGM held in 2011, each year, as part of the remuneration policy report, an annual variable remuneration has been approved in favour of all Bankinter Group employees including Executive Directors, except for the Chairman, and members of Senior Management. This annual variable remuneration is linked to the attainment of the pre-tax profit objective for the Group's banking activity, as approved by the Board of Directors on the proposal of the Appointments and Remuneration Committee. Each Director has been assigned an amount that will be received if the objective is fully achieved. However, this variable incentive starts to accrue from an 80% achievement of the objective and up to a maximum of 130%, such that directors may receive between 70% and 145% of the variable amount assigned to each, depending on the degree of achievement. The attainment rates for 2011 and 2012 were 100.52% and 93.52% respectively.

In the case of the Executive Directors, the Board of Directors approved, on the proposal of the Appointments and Remuneration Committee, the application of certain measures on remuneration received by way of the annual variable remuneration for 2011, as introduced by Royal Decree 771/2011 of 3 June, and more specifically the deferral of 40% of the accrued incentive over three years by the linear method as well as the payment of 50% of the total incentive in the form of shares in the Bank. The latter measure was conditional, in the case of the Executive Directors, upon approval by the 2012 General Meeting of Shareholders of Bankinter, as required by Article 219 of the Corporate Enterprises Act. The 2012 AGM approved the remuneration of the Executive Directors consisting in the allocation of shares as part of their variable remuneration for 2011, with 99.771% of votes in favour.

The following are the amounts received during 2012 by the Executive Directors of the Company, with the exception of the Chairman, who does not receive any variable remuneration for his activity.

As indicated above, at year-end 2011 the attainment rate was 100.52%, which led to the accrual of a variable incentive of €201,030.93 for each of the two Executive Directors (Vice-Chairman and CEO), which will be paid as follows:

In 2012 the Vice-Chairman and the CEO each received the following amounts relating to this annual variable remuneration:

In cash, 50% of the variable remuneration accrued in respect of variable incentive 2011: €100,430.90
In shares, 10% of the variable remuneration accrued in respect of variable incentive 2011: 4,180 shares, at a price of €4.83153 per share, this being the average closing price of Bankinter shares between 2 January and 20 January 2012 inclusive.

The remaining 40%of the annual variable remuneration for 2011 will also be paid in shares, as approved by the AGM held on 15 March 2012 (item 14.2). Since the reference share price used to obtain the number of shares to be allocated is the same as that previously indicated (€4.83153 per share), the numbers of shares to be received in the coming years are as follows:

5,547 shares will be delivered within the first fifteen days of January 2013.
5,547 shares will be delivered within the first fifteen days of January 2014.
5,547 shares will be delivered within the first fifteen days of January 2015.

The sum of the amounts received by the Executive Directors in 2012 under the heading of salaried remuneration was €2.13 million. In 2011, the total received by Executive Directors was €1.95 million.

Bankinter has decided to apply the abovementioned principle of deferred payment and payment in shares to annual variable remuneration from 2012 onwards, not only for Executive Directors but also for members of Senior Management as referred to in this report, among others. The details of the amounts of annual variable remuneration for 2012 accrued by the Vice-Chairman, CEO and Senior Management (as a group) and which will be paid during 2013 and successive years, are shown in letter G of the Corporate Governance Report that forms part of the Management Report of this AnnualReport, as well as in the report on remuneration policy which will be submitted to a consultative vote at the forthcoming AGM.

Bankinter has no pension commitments to its non-executive Directors, nor does it have commitments to its Executive Directors that are either new or different from those already mentioned in the Remuneration Report for 2011. Bankinter has no commitments to members of Senior Management that are either new or different from those already mentioned in the Remuneration Report for 2011.

Bankinter has not agreed "golden parachute" clauses in its contracts with any of its Executive Directors linking the accrual of financial rights to situations of change of control of the Bank (which is a common clause in these types of contracts). The indemnifications provided for in these contracts apply only in analogous cases to those established for ordinary labour relations in the Workers' Statute and are subject to a limit which, depending on the particular case, is equal to or lower than that established in the regulations for ordinary labour relations.

Bankinter has not agreed "golden parachute" clauses in its contracts with any of the members of its senior management linking the accrual of financial rights to situations of change of control of the Bank (which is a common clause in these types of contracts and provided for in the Royal Decree). 1382/1985 regulating special labour relations with senior management). The indemnifications provided for in these contracts apply only to the cases envisaged for ordinary labour relations in the Workers' Statute, and are subject to a limit which is appreciably lower than that established in the Statute for ordinary labour relations.

Summary of Directors' remuneration, loans, and other benefits for Directors

Remuneration by type

	€000s
	2012
Fixed remuneration (1)	1,886
Variable remuneration (2)	241
Attendance fees (3)	769
Directors' Fees (4)	714
Options on shares and/or other financial instruments	-
Other	-
	3,610

(1) Fixed remuneration corresponding to Executive Directors exclusively in their capacity as executives. (2)Variable remuneration corresponding to Executive Directors in their capacity as executives, in respect of 2011 annual variable remuneration linked to the achievement of a specific pre-tax profit objective for the Group's banking activity in 2011. Each executive Director, except for the Chairman, was assigned an amount that he or she would receive if the objective was fully achieved, as explained in the heading "Remuneration of Executive Directors and Senior Management".

(3) Attendance fees for Board and Committee meetings (Directors).

(4) Includes fixed remuneration plus the free allocation of shares (Directors)

Remuneration by type of director including all items

		€000s
		2012
Type of Director	By Company	By Group (**)

Executives (*)	2,677	-
External Proprietary Directors	221	-
External Independent Directors	712	27
Other External Directors	-	-
	3,610	27

(*) The following are Executive Directors: Pedro Guerrero Guerrero, Chairman; CARTIVAL, S.A., Vice-chairman; María Dolores Dancausa Treviño, CEO.

(**) During 2012 Mr. Gonzalo de la Hoz Lizcano and Mr. Rafael Mateu de Ros, in their capacity as non-executive directors, received €9,000 and €6,000 respectively by way of attendance fees for meetings of the Board of Directors of LDA. The amount received by Mr. Gonzalo de la Hoz Lizcano includes fees both as a member of the Board of Directors and as a member of the Control Committee of LDA. Additionally, Mr. Gonzalo de la Hoz Lizcano is the Chairman of Gneis Global Services, S.A., the Group's technology and operating services company, and during 2012 he received €12,000 by way of fees for attending meetings of the Board of Directors.

Other benefits

	€000s
Advances	-
Loans granted	26,332
Pension Funds and Plans: Contributions	-
Pension Funds and Plans: Contractual obligations assumed	600
Life insurance premiums	0.587
Guarantees set up by the company in favour of directors	-

Transactions with Members of the Board of Directors

In relation to transactions 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 related parties, outside the scope of Bankinter S.A.'s ordinary operations or not been carried out on normal market terms, please refer to section C (transactions with related parties) in the Annual Corporate Governance Report for 2011.

In compliance with Law 26/2003 of 17 July amending Law 24/1988 of 28 July on the Securities Market and the revised text of the Corporate Enterprises Act approved by Royal Legislative Decree 1/2010 of 2 July, the Entity is obliged to provide information on the holdings of the Directors of Bankinter, S.A. in the entity's share capital.

Article 229.2 of the revised text of the Corporate Enterprises Act provides that directors must declare 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 Entity, as well as any posts, duties and activities carried out and/or held in such companies.

As at 31 December 2012, the holdings declared by the directors of Bankinter in companies pursuant to Article 229.2 were as follows:

Director	Entity	% Capital (1)	Office or functions
María Dolores Dancausa Treviño	Banco Santander	0.00008%	None
	Banco Bilbao Vizcaya Argentaria	0.00003%	None
	Royal Bank of Scotland	0.00002%	None
Cartival, S.A.	Banco Santander	0.09143%	None
Fernando Masaveu Herrero	Banco Santander	0.1736%	None
	Banco Espírito Santo	0.0255%	None
	Banco Popular	0.0732%	None
	Banco Español de Crédito	0.0034%	None
	Lloyds Banking Group	0.002%	None
	UBS	0.001%	None
Rafael Mateu de Ros Cerezo	Banco Santander	0.00001%	None
José Antonio Garay Ibargaray	Banco Bilbao Vizcaya Argentaria	0.0042%	None
	Bankia	0.0147%	None

(1) Direct and/or indirect holding.

Directors' holdings in share capital

The breakdown of the interests held by the members of the Board of Directors as at 31 December 2012 and 2011 is as follows:

			31/12/2012 (1)		31/12/2012 (2)
	Total Shares	Percent age Holding	Direct	Indirect	Total Shares	Percent age Holding	Direct	Indirect
Pedro Guerrero Guerrero	3,442,841	0.611	3,125,961	316,880	3,131,240	0.657	2,995,304	135,936
María Dolores Dancausa Treviño	810,631	0.144	810,327	304	708,875	0.149	708,649	226
Cartival, S.A.	131,565,493		23.335 131,565,493		- 114,050,724		23.914 106,671,902	7,378,822
Marcelino Botín-Sanz de Sautuola y Naveda	155,211	0.028	155,211	-	135,624	0.028	135,624	-
Fernando Masaveu Herrero	29,928,472	5.308		491,606 29,436,866	26,493,612	5.555	484,593	26,009,019
John de Zulueta Greenebaum:	156,244	0.028	156,244	-	136,418	0.029	136,418	-
Gonzalo de la Hoz Lizcano	420,752	0.075	420,752	-	377,954	0.079	377,954	-
Jaime Terceiro Lomba	25,638	0.005	25,638	-	17,512	0.004	17,512	-
José Antonio Garay Ibargaray	1,218,116	0.216	214,264	1,003,852	1,117,018	0.234	190,949	926,069
Rafael Mateu de Ros Cerezo	926,176	0.164	926,176	-	829,187	0.174	829,187	-
	168,649,574		29,913 137,891,672 30,757,902 146,998,164				30,823 112,548,092	34,450,072

(1) The capital of Bankinter as at 31 December 2012 is represented by a total of 563,806,141 shares. (2) The capital of Bankinter as at 31 December 2011 was represented by a total of 476,919,014 shares.

37. Environmental information

The Bankinter Group undertakes before its stakeholder groups – customers, shareholders, employees and society in general – to operate in the most sustainable way, to minimise its negative effects on the environment and maximise the positive ones. To this end, the Bank has an active policy of protecting the environment and combating climate change, and to this end it has identified, measured and controlled both the direct effects of its activity and the indirect ones generated in financing transactions, asset management and responsible management of the supply chain, including subcontractors.

The action principles of its environmental policy, which go beyond strict compliance with legal requirements, adopting behavioural guidelines on unlegislated aspects, are:

1.- Comply with legal environmental requirements and other requirements endorsed by the Bank that are applicable to its environmental affairs.

2.- Implement the necessary processes to achieve ongoing improvement of the Environmental Management System, thereby improving the Group's environmental behaviour.

3.- Promote responsible environmental behaviour among stakeholder groups (employees, customers, potential customers, suppliers, subcontractors, institutions, shareholders and investors, analysts and society in general), and inform then through the annual reports and the Bank's website of the development and results of our environmental performance. 4.- Train and raise awareness among 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.

7.- Seek ways to mitigate and adapt to climate change.

Corporate Responsibility is the area responsible for monitoring compliance with this Policy and for driving and coordinating activities aimed at improving environmental performance, handling in-house and external suggestions for improvement and monitoring the management indicators.

Every year it draws up a comprehensive environmental management programme incorporating the objectives for improvement and also detailing the goals, actions and resources involved and persons responsible for carrying it out.

The Sustainability Committee was set up in 2009. It is headed by the Chairman and coordinated by the Sustainability division. This Committee is responsible for guiding the Group's sustainability policy and programmes and driving the necessary environmental responsibility initiatives to incorporate the Bank's economic, environmental and social dimensions in a sustainable development model.

To ensure compliance with the principles contained in its environmental policy, and as a tool for ensuring the continuous improvement of its environmental behaviour, Bankinter has implemented an environmental management system for the major Madrid centres which has been certified by the company SGS in accordance with the UNE-EN ISO 14001 standard.

The main environmental measures taken by the Bankinter Group during 2012 included:

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. Offsetting direct emissions and those deriving from its annual employees meeting in Madrid.

Implementing environmentally efficient measures and adopting environmental best practices that enable the Bank to improve its environmental performance as recorded in its main environmental indicators: consumption of electricity, materials, waste management, etc.

Lending its support to various environmental initiatives and implementing the public commitment undertaken by joining the following:

United Nations Global Compact, an initiative which the Bank joined as a member in 2011.

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. Promoting environmental training, communication and awareness campaigns aimed at employees, and holding corporate volunteering initiatives linked to the environment.

Launching campaigns aimed at customers to promote the use of the web-based correspondence service and avoid the use of paper via the postal service.

Making progress in implementing the environmental rating tool for credit operations.

Financing projects with a positive environmental impact.

During the financial year, it was not considered necessary to recognise any allocation for environmental risks and liabilities as there were no contingencies linked to environmental protection and enhancement and no sanction or fine was imposed in relation to the environmental management carried out by the Bankinter Group.

The Directors of the Group 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 Group incurred any expenses or received any subsidies linked to these risks.

38. Customer service

Article 17 of Order 734/2004 of 11 March of the Ministry of Economy on customer service departments and services and 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 report in the notes to their financial statements

The Activities Report for 2012 drawn up by the Customer Support Service, which will be presented at the meeting of the Board of Directors on 20 February 2013, indicates that during 2012 the number of complaints/claims again fell, to 3.4 per million transactions (compared to 4.13 in 2011).

There were a total of 6,027 complaints and claims in 2012, of which financial claims accounted for 5,205. Of these, 42.80% were resolved in the customer's favour.

	2012	2011
Total number of Complaints and Claims:
Total no. of complaints (non-financial)	822	1,403
Total no. of claims (financial)	5,205	5,904
Total financial Complaints and Claims	6,027	7,307

Financial claims:
No. of claims in client's favour	2,228	3,155
In customer's favour (%).	42.80%	53.44%
No. of claims in the Bank's favour	2,977	2,749
% in the Bank's favour	57.20%	46.56%
Total financial claims	5,205	5,904

As regards the timeframe for dealing with these complaints, in 2012 51.63% of incidents were answered in less than 48 hours, which represents an improvement of nearly three percentage points on the previous year (48.73%).

Time taken to resolve dossiers

	Total		Total
Timeframes	2012	Percentage	2011	Percentage
0 days	1,951	32.37%	2,321	31.76%
1 to 2 days	1,161	19.26%	1,240	16.97%
3 to 6 days	964	15.99%	1,178	16.12%
7 to 10 days	402	6.67%	991	13.56%
> 10 days	1,549	25.71%	1,577	21.59%
	6,027	100.00%	7,307	100.00%

The External Customers Ombudsman dealt with 539 incidents in 2012, 10.68% more than in 2011; of these, 254 were settled in the Bank's favour (47.12%of the total) and 261 in favour of the customer (48.42%).

	2012	2011	Change
External Ombudsman:
Incidents processed	539	487	10.68%
Settled in the customer's favour	261	208	25.48%
Settled in the Bank's favour	254	249	2.01%
Excluded	24	30	(20%)

Also, in 2012 198 incidents were reported to the Bank of Spain (2011:194), 91 of them being resolved, with 33 of them in the Bank's favour.

	2012	2011	Change

Bank of Spain:
Claims processed	198	194	2.06%
In the customer's favour	29	30	(3.33%)
Uncontested	23	12	91.67%
In the Bank's favour	33	40	(17.50%)
Pending settlement	107	101	5.94%
Outside Bank of Spain jurisdiction	6	9	(33.33%)
Filed	0	2	(100.00%)

No recommendations were issued in the Activities Report for 2012 drawn up by the Customer Support Service.

Finally, as regards the legal proceedings arising from the contracting of financial swaps, their amount is set at indeterminate by the plaintiffs, since exact quantification of the contingency involved in these proceedings is not possible until a firm ruling is given and, if applicable, executed. In view of the uncertainty regarding the result of these legal proceedings, no provision has been recognised in respect of these proceedings for merely having been instigated. Any provisions for and impairment of receivables recognised in relation to financial swaps are established in accordance with applicable standards, and in the Bank's judgement they are sufficient to cover both insolvency and any losses that

might be generated by the legal proceedings instigated with respect to the validity of these products, taking account of the proportion of favourable rulings at various stages of the proceedings and the most recent case law in this area.

39. Branches, centres and agents

The breakdown of the Bankinter, S.A. branch offices, centres and agents as at 31 December 2012 and 2011 is as follows:

	31/12/2012	31/12/2011
Branch Offices	367	366
Commercial management centres-
Corporate	45	47
SMEs	76	81
Private Banking and Personal Finance	38	59
Virtual Offices	353	360
Number of Agents	505	511
Telephone and Internet branches	3	3

As at 31 December 2012 Bankinter S.A. had a network of 505 agents (478 agents plus 27 EAFIs ("Empresas de Asesoramiento Financiero" or Financial Advisory Companies), compared with 511 agents in 2011, composed of individuals or legal entities who have been granted powers to deal in the name and on behalf of Bankinter S.A. with the Bank's customers in negotiating and completing operations typical of a credit institution. This network handled average resources of €1.87 million as at 31 December 2012 (€1.79 million as at 31 December 2011), with an average investment of €1.87 million (€1.92 million as at 31 December 2011). The list of agents is registered with the Financial Institutions Office of the Bank of Spain. EAFIs ("Empresas de Asesoramiento Financiero" or Financial Advisory Companies) are governed by the Stock Exchange Act, by Royal Decree 217/2008, of 15 February, on the legal regime of investment service companies and, in particular, Circular 10/2008, of 30 December, of the CNMV, the Spanish securities regulator, on EAFIs.

The insurance centres section includes the call centre and telephone hotline offices of Línea Directa Aseguradora.

40. Trust and investment services

The following table details the fees recorded in financial years 2012 and 2011 for the activities of investment services and complementary activities provided by the Group:

		€000s
	2012	2011

Wealth management	1,023	2,179
Management agreements	361	349
Safe deposit boxes	596	600
Securities trading (Note 28)	18,844	20,863
	20,824	23,991

The following table states, in summary, the value of the mutual funds, pension funds, and client portfolios managed by the Group:

		€000s
	31/12/2012	31/12/2011
Own investment funds	3,585,303	3,664,236
External investment funds sold	1,444,421	1,078,672
Pension funds	1,392,575	1,253,312
Management of SICAVs (open-ended collective investment companies)	1,433,502	1,336,320
	7,855,801	7,332,540

41. Auditors' remuneration

Set forth below are the fees for professional services incurred by the auditors of the individual and consolidated Annual Accounts for the Bank and the Group during financial years 2012 and 2011:

				€000s
		Bankinter, S.A.	Bankinter Group
	2012	2011	2012	2011
Auditing services	384	361	740	798
Audit-linked services	105	439	105	439
Tax services	-	4	-	4
Other services	80	164	80	164
	569	968	925	1,405

The amount stated in the above table for auditing services includes all fees relating to auditing for the financial years 2012 and 2011, irrespective of when they were invoiced.

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 from the resulting amount.

The fact that a consolidated return is filed for Corporation Tax does not mean that the Corporation Tax payable by each Entity is substantially different from what it would be if assessed on an individual basis.

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 2012 is as follows:

Bankinter Consultoría, Asesoramiento, y Atención Telefónica, S.A. Bankinter Gestión de Activos, S.A., S.G.I.I.C. (formerly Gesbankinter, S.A.) Hispaarket, S.A. Intermobiliaria, S.A. Bankinter Emisiones, S.A. Bankinter Consumer Finance, E.F.C, S.A. Bankinter Capital Riesgo, S.G.E.C.R, S.A. Bankinter Sociedad de Financiación, S.A. Arroyo Business Consulting Development, S.L. Gneis Global Services S.A. Relanza Gestión, 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. LDActivos, S.L.U.

There follows below a reconciliation of the consolidated accounting profit and tax profit for years 2012 and 2011:

	€000s
	31/12/2012	31/12/2011
Accounting profit before tax for the financial year	154,179	240,148
Permanent differences-	(21,607)	(12,157)
Application of prior years' tax losses	(263)	-

Share in results of entities accounted for using the equity method	(17,677)	(14,675)
Others	(3,667)	2,518
Accounting Base for Tax	132,572	227,992
Temporary differences	138,174	21,175
Tax Base	270,746	249,167

The positive temporary differences in 2012 are essentially due to adjustments for non taxdeductible provisions. The negative temporary differences mostly consist of differences due to reversals of adjustments for provisions and other non-tax-deductible items in previous financial years. During 2012 the Group recognised deferred tax assets in an amount of €14.87 million, corresponding mainly to changes in timing differences on provisions relative to those calculated at year-end 2011.

The tax expense for Corporation Tax for financial years 2012 and 2011 is calculated as follows:

	€000s
	2012	2011
Expenses corresponding to current financial year	39,772	68,398
Deductions and allowances	(6,258)	(7,764)
Other items (*)	(2,540)	(2,266)
Tax adjustments from previous financial years	(1,449)	553
	29,525	58,921

(*) As at 31 December 2012 there were deductions pending application amounting to €2.48 million.

The item 'Tax adjustments from previous years' in 2012 states expenditure for Corporation Tax caused by tax adjustments carried out in the settlement of the Group's Corporation Tax corresponding to financial year 2011 not envisaged as at 31 December 2011.

The following is the reconciliation of the profit before tax with the tax expense for the financial year:

		€000s
	2012	2011
Pre-tax accounting profit	154,179	214,148
Tax at 30%	46,254	72,045
Breakdown of items to reconcile tax expense
at the tax rate and Corporation Tax expense for the year:
Non-deductible expenses	756	1,331
Non-computable income	(9,952)	(8,917)
Total deductions applied in the financial year	(6,258)	(7,764)
Others:
Corporate Tax adjustment from the previous financial year	(1,449)	553


Amount of deductions pending application	(2,479)	(240)
Other	2,653	1,913
Corporate Tax expenditure for the financial year	29,525	58,921
Effective tax rate for the year	19.15%	24.53%

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 recognised by 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. Deferred tax assets identified with temporary differences are recognised only if it is considered probable that the consolidated entities will in future have sufficient taxable profits against which to realise them. The remaining deferred tax assets (negative tax bases and deductions pending offset) are recognised only if it is considered probable that the consolidated entities will in future have sufficient taxable profits against which to realise them.

On the occasion of each accounting closure, the deferred taxes recognised 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 2004 to 2006 for the following taxes:

	Financial Years
Corporate Tax	2004 to 2006
Value Added Tax	06/2005 to 12/2006
Withholdings/Payroll tax/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 declaration of transactions	2005 to 2006
Summary declaration of intra-community supply and acquisition of
goods	04/2005 to 12/2006

During 2011, the Bank accepted, signed and paid assessments for 2005 and 2006 concerning retentions and payments on account of payroll tax and tax on non-residents for total amounts of €62,508.36 and €117,812.91 respectively. It also signed acceptance of assessments for €544,261.73 relating to Corporation Tax for 2006.

On 25 May 2011 the Bank signed deeds disputing the assessment for Corporation Tax for the years 2004 to 2006 in an amount of €14.24 million in tax plus €3.86 million in delay interest, as well as Retentions and payments on account of tax on movable assets for the years 2005 and 2006 in an amount of €1.09 million in tax plus €0.55 million in delay interest, and VATwith an assessment of zero.

Similarly, in February 2012 sanctions were imposed in respect of Corporation Tax for the years 2004 to 2006 in an amount of €3.57 million, retentions and payments on account of tax on investment income for 2005 and 2006 in an amount of €2.98 million and VAT for 2005 and 2006 in an amount of €0.33 million.

These assessments and sanctions have been appealed before the Central Administrative Economic Tribunal (TEAC).

Regarding the inspection of the years 2001 to 2003, the TEAC issued a ruling on 25 October 2012 revoking the deed of non-acceptance for Corporation Tax for the years 2001 to 2003 and the imposition of sanctions, specifically in respect of the regularisation of the Sogecable transaction, determining a reduction in the amount regularised in terms of tax, delay interest and sanction of approximately €14.49 million.

The remaining items regularised for Corporation Tax 2001 to 2003 in an amount of approximately €5.19 million in tax and delay interest plus a fine of €0.25 million, have been appealed before the Spanish National Court.

Additionally, in relation to the fines imposed in respect of retentions corresponding to deposits of our Dublin Branch's customers, on 9 February 2010 Bankinter filed a complaint with the Council for the Defence of the Taxpayer, and received a favourable response on 13 July 2010. However, on 18 December 2012 the TEAC issued a ruling dismissing the complaints in respect of the years 2002 to 2005. An appeal will be lodged with the Spanish National Court.

In any case, the tax liabilities that may derive from the appeals lodged against the disputed assessments were adequately provided for as at the end of 2012 and preceding financial years.

Due to the possible interpretations of the tax regulations that apply to certain transactions carried out in the banking sector, there may be certain tax liabilities of a contingent nature. The Bank considers 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 financial statements.

The details of the deferred tax assets and liabilities that Bankinter's Administrators expect to be reversed in future financial years are as follows:

		€000s
	31/12/2012	31/12/2011
Deferred tax assets (Note 17)	148,536	103,529
Less than 10 years:
Provisions	143,524	72,086
Impairment of holdings	69,311	47,587
Early retirement Fund	-	694
Pensions Fund	1,373	1,794
DVP portfolio	4,081	9,775
Other	5,907	9,366
Consolidation adjustments	(75,659)	(78,817)
More than 10 years:
Generic Cover:	-	30,044
Deferred tax liabilities (Note 17)-	147,929	118,983
Less than 10 years	98,032	68,036
More than 10 years:
Revaluation of buildings	49,896	50,947

The various tax credits applied in the calculation of the Corporate Tax payable for the Group in financial years 2012 and 2011 are shown in the following table:

		€000s
	31/12/2012	31/12/2011
Applied to the tax base:
Allocation of NTBs from EIGs	5,905	7,389
	5,933	7,391

Applied to the tax due:
Deductions for double taxation	1,765	1,738
Deduction for ID/IT	599	223
Deduction for reinvestment of extraordinary profits	1,476	2,880

Deduction for donations to institutions	512	423
Deduction for film productions	1,906	2,500
	6,258	7,764

Income covered by the deduction for re-investment of extraordinary income in 2012 amounted to €12.30 million (€24 million in 2011 and €2,000 in 2010), the Bank having met the reinvestment requirements established in Article 42 of Legislative Royal Decree 4/2002, of 5 March, approving the consolidated text of the Corporation Tax Act.

The majority of the income covered in financial year 2009 by the deduction for reinvestment corresponds to the amount obtained from the sale of 50 percent of Bankinter Seguros de Vida. S.A. in 2007, the reinvestment of which was sufficiently materialised in financial year 2009 by Bankinter's purchase of 50 percent of Línea Directa Aseguradora, S.A. for an amount of €426 million. The majority of the income covered in 2012 by the deduction for reinvestment corresponds to the amount obtained from the sale of 50.1% of Bankinter Seguros Generales S.A. in 2012, reinvestment of which was fully realised in 2012 by Bankinter's purchase of 100% of Van Lanschot Bankiers Luxembourg S.A. for €17.8 million.

During 2005 the Bank opted to apply the tax regime applicable to institutions holding foreign securities as regulated in chapter XIV of Title VII of Royal Legislative Decree 4/2002 of 5 March approving the revised text of the Corporation Tax Act, the competent body of the Spanish Inland Revenue being notified of this decision on 21 April 2005.

Pursuant to the provisions of Article 118.3 of this consolidated text, during 2012 the Bank obtained capital gains in the amount of €3.11 million (€2.31 million in 2011) and received dividends in the amount of €1.38 million (€1.69 million in 2011), and that €0.21 million (€0.18 million in 2011) was paid in foreign tax on these dividends.

Lastly, in accordance with the provisions of Article 93 of this consolidated text, and in relation to the transaction whereby Bankinter S.A. contributed repossessed real estate assets to Intermobiliaria S.A. on 24 December 2012 pursuant to the provisions of Law 8/2012, of 30 October, on the write-down and sale of real estate assets of the financial sector, since the tax-neutral regime was applied, pursuant to Chapter VIII of Title VIII of the Consolidated Text of the Corporation Tax Act as approved by Royal Decree-Law 4/2004, of 5 March, the following information is provided:

Financial years in which the transferring entity acquired the depreciable assets transferred
List of assets acquired recognised in the accounts. These assets have been recognised in Intermobiliaria, S.A. for the carrying amount at which they were shown in the Bankinter S.A. head office.

Assets	Carrying amount	Accounting Provision	Date of Acquisition
0581 Patrim Colonia San Pedro	134	62	30/05/2011
0581 Patrim Colonia San Pedro	141	65	30/05/2011
0581 Patrim Colonia San Pedro	140	65	30/05/2011
0581 Patrim Colonia San Pedro	132	61	30/05/2011
0581 Patrim Colonia San Pedro	137	64	30/05/2011
0581 Patrim Colonia San Pedro	137	64	30/05/2011
0581 Patrim Colonia San Pedro	154	72	30/05/2011
0860 Construcciones Franchini	-	-	17/02/1996
0860 Construcciones Franchini	-	-	17/02/1996
0637 Promociones Casegar	609	513	11/10/2012

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:

	€000s
	31/12/2012
	Recognised value	Fair value
Asset:
Loans and advances to customers	43,575,351	43,833,390
Held to maturity investments	2,755,355	2,735,665
Property, plant and equipment	442,288	455,115

Liabilities:
Deposits from central banks	9,580,854	9,721,707
Deposits from credit institutions	4,008,226	4,103,613
Customer deposits	24,631,869	25,009,016
Marketable debt securities	12,499,194	13,084,868

	€000s
	31/12/2011
	Recognised value	Fair value
Asset:
Loans and advances to customers	45,387,972	45,570,065
Held to maturity investments	3,150,930	3,117,960
Property, plant and equipment	466,901	480,908
Liabilities:
Deposits from central banks	7,006,897	7,010,515
Deposits from credit institutions	3,260,647	3,323,062
Customer deposits	25,505,317	25,550,517
Marketable debt securities	15,540,242	16,148,924

The fair values presented in this Note were calculated by discounting the estimated flows of principal and corresponding interest to their present value, except in the case of the held-to-maturity investment portfolio and investment property, for which market prices are available.

To calculate the fair value of investment property, the appraisal values certified by Appraisal Companies were taken as the basis and altered by the price variation index if the appraisals had been made more than three years previously.

44. Risk policies and management

Risk management

The Framework Agreement on Risk Policy, issued by the Board of Directors, establishes the Bank's risk strategy and profile for each year.

The Board of Directors, through the Executive Committee and the Audit and Compliance Committee, takes care of and supervises the policies, systems and internal control procedures relating to all the Bank's risks, as well as the prevention of money laundering in accordance with applicable current legislation.

The organisational structure of the entire risks function reports hierarchically to the Executive Vice-Chairman, reflecting the independence that is inherent to the function.

The identification, measurement, management, control and monitoring of the risks inherent in banking operations constitute a fundamental aim, always within a context of optimising the overall management of all risks.

Bankinter has received Bank of Spain approval for its internal rating models, methodologies, systems and policies for measuring most of its risks, applying them to the calculation of capital requirements as established by the Basel II Capital Framework.

The basic principles that continue to govern risk management are:

Contribute towards maximising capital, safeguarding the Bank's solvency.
Independence of the function.
Alignment with strategic objectives.
New products: risk determination, approval ad monitoring.
Integrated risk management.
Mass use of automated approval.
Diversification of risk.
Relevance of the quality of service factor in the risks function.
Policy of Sustainable Investment .

The basic risk principles are determined in the Framework Agreement for each segment. In this regard we would highlight the fact that, pursuant to the provisions of the Transparency Act, we have brought together the various aspects of the Responsible Lending Policy in a single document, in the interests of greater clarity, even though all the principles had been incorporated over the past few years in the Framework Agreement, which is reviewed and updated every year.

Policies for managing 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 applied 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 appropriate systems for measuring structural and market risks so as to provide information on the Entity'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 exchange rate risk is not significant in the Banking Group.

Structural risks

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 with hedging instruments.

The Balance Sheet Management unit, which is part of the Capital Markets Directorate, has the function of measuring and managing the institution's structural risks. Market Risk, reporting to the Risks Directorate has the independent function of controlling them:

Interest rate structural risk

Structural interest rate risk is the Entity's exposure to changes in market interest rates arising from timing differences between maturities and repricings of the various items in the overall 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.

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 the management and control of the interest rate risk profile approved by the Board of Directors:

a) 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.

Every year, the Board of Directors sets a reference for the financial margin in terms of sensitivity 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.

The exposure of Bankinter's financial margin to interest rate risk in the event of +/- 100 bp parallel movements in market interest rates is approximately 2.2% for a 12-month horizon.

The sensitivity of the Bank's financial margin to changes in the slope of the curve for a 12-month horizon is 4.5%. This scenario is built by holding the 6-month rate constant and changing the short-term (up to 3 months) and 12-month rates by the same amounts but in opposite directions so as to alter the slope of the curve by 25 basis points in the period under consideration.

Financial Margin Sensitivity	2012
100 bp parallel movements	2.2%
25 bp slope variations	4.5%

b) Economic Value Sensitivity

This is a measurement that complements the previous two and which is calculated on a monthly basis. It allows the exposure of the Bank's economic value to interest-rate risk to be quantified, and is obtained as the difference between the net present 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 market interest rates. Sensitivity to this scenario is measured, controlled and submitted to the ALCO.

The sensitivity of the Bank's Economic Value to 200 bp parallel movements, obtained by means of the criterion described above, was, at year-end 2012 and 2011, 7.5%and 3.4% of the Bank's equity, respectively.

Economic Value Sensitivity
	2011	2012
NPV Sensitivity	3.4%	7.5%

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 its projection as well as actions to be taken both in normal market conditions and in exceptional situations arising from internal causes or market trends.

Management of this risk is the responsibility of the ALCO committee, delegated by the Board of Directors.

Liquidity requirements were covered by turning to the international medium- and longterm debt markets. The Bank issued €6.05 billion of mortgage-backed bonds and €1.44 billion of senior debt, of which €1.40 billion is guaranteed by the Kingdom of Spain. In both cases a portion is retained in the Balance Sheet.

To meet its requirements, the Group used short-term issue programmes, mainly in the domestic market with its commercial paper programme. The balance of promissory notes placed in the wholesale market was €897 million as at 31 December.

The Group has various tools for analysing and monitoring the short- and long-term liquidity situation. These tools are static and dynamic. Back-testing is also carried out on projections made.

One of the analyses used for controlling and monitoring liquidity is the liquidity plan or gap.

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 assumptions based on the historical performance of these products. These assumptions are reviewed on a regular basis and, in such cases as where they are necessary, supported by models based on historical series.

Liquidity plans or gaps at year-end 2012 and 2011 were as follows. The information provided by the liquidity plan is static, and does not show the expected financing needs as it does not include behavioural models of the asset items, that is, the prepayment of mortgage loans and the renewal of lines of credit or of liability items such as the renewal of fixed term deposits, among others.

Figures as at December 2012 in € millions	Sight	1 day to 1 month	1 to 3 months	3 to 12 months	12 months to 5 years	more than 5 years	TOTAL
ASSETS
Loans and receivables		2,165	2,871	6,172	12,121	27,557	50,887
Deposits with credit institutions		0	0		0	1,120	1,120
Loans and advances to customers		2,165	2,871	6,131	12,098	26,413	49,679
Other		0	0	41	23	24	88
Fixed Income Portfolio		195	634	2,444	9,877	1,793	14,942
Trading portfolio		16	0	445	580	463	1,504
Available-for-Sale Portfolio		85	633	1,320	7,851	94	9,983
Held-to-Maturity Portfolio		95	1	679	1,445	1,236	3,455
Other Assets		666	0	0	0	2,167	2,833

Total Assets		3,026	3,505	8,616	21,998	31,517	68,662
LIABILITIES
Fixed income portfolio		365	236	98	522	452	1,673
Trading portfolio		365	236	98	522	452	1,673

Financial liabilities at Amortised Cost	11,043	3,896	4,963	8,534	9,933	20,062	58,430
Deposits from credit institutions		430	239	288	881	12,114	13,951
Customer deposits	11,043	1,546	3,924	5,206	4,585	6,330	32,633
Marketable debt securities		1,920	800	3,040	4,468	1,054	11,282
Other		0	0	0	0	563	563
Other liabilities		0	0	0	0	748	748

Equity		0	0	0	0	2,862	2,862
Total Liabilities and Equity	11,043	4,260	5,199	8,632	10,455	24,123	63,713
TOTAL LIQUIDITY GAP	-11,043	-1,234	-1,695	-16	11,543	7,394	4,949
Figures as at December 2011 in € million
Total Assets		3,510	2,589	10,493	16,140	33,244	65,976
Total Liabilities and Equity	9,667	3,258	3,136	9,771	14,293	22,687	62,812
TOTAL LIQUIDITY GAP	-9,667	252	-547	722	1,847	10,557	3,164

Note 1: Foreign-currency positions are not material and so have not been included in the breakdowns of the

attached Gaps.

Note 2: The Entity has no positions in unlisted securities

In addition to those previously mentioned, the means used by Market Risks to control the liquidity risk include checking to ensure compliance with the limits established by the Board and delegated to the department heads and the ALCO (Assets and Liabilities Committee). The calculation of limits is carried out by Market Risks based on the information prepared for the various regulators.

There are three broad types of limit:

1) Determining the liquidity buffer

The Bank uses both the definition of regulatory LCR (liquidity coverage ratio) and a similar ratio extended to ninety days and with a definition of liquid assets in accordance with those accepted by the European Central Bank as collateral for liquidity. Another reference for calculating the liquidity buffer is the schedule of upcoming maturities of wholesale issues over the next few months.

2) Wholesale financing concentration ratios

With the aim of avoiding Bankinter's being subjected to stress as a result of a possible sudden shutdown of wholesale markets, limits are established on the amount of shortterm wholesale financing that can be taken, as well as on the concentration of issue maturities.

3) Ratio of stable deposits to total lending.

With a view to limiting reliance on wholesale financing, a minimum ratio of stable deposits to loans is established. In establishing the stability of deposits, use is made both of the regulatory definition of the NSFR (Net Stable Funding Ratio)and of experience of the Spanish finance sector.

As well as the limits established by the Board, monitoring also covers the evolution in the gap or 'liquidity plan' and information and analysis on the specific situation of the balances resulting from trade operations, wholesale maturities, interbank assets and liabilities and other sources of funding. These analyses are carried out both under normal market conditions and simulating different liquidity scenarios that could come about as a result of different trading conditions or changes in market conditions.

Market Risk

The Board of Directors delegates proprietary trading in the financial markets to Treasury and Capital Markets, which acts through its Trading Area with a view to taking advantage of trading opportunities that arise, using the most appropriate financial instruments at any given time, including interest and exchange rate derivatives and equity derivatives. The financial instruments with which trading is undertaken must, in general, be sufficiently liquid and be associated with hedging instruments. The risk that may derive from the management of the institution's own accounts is associated with movements in interest rates, stock market prices, exchange rates, volatility and credit spreads.

The Board of Directors delegates to the ALCO the continuous monitoring of the Treasury Trading area's proprietary trading activities and establishes maximum limits for the authorisation of the possible excesses that may arise in this activity.

Market Risk, which reports to the Risks Directorate, 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 significant 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 indicators.

Value-at-Risk (VaR)

"Value-at-Risk" (VaR) is defined as the maximum loss that is anticipated 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 the Group to measure and control on an integrated and global basis exposure to market risks arising from interest rates, equities, exchange rates, volatility and credit.

The method used to measure VaR is "Historical Simulation" based on the analysis of possible changes in the value of the position, using historical movements in the individual assets forming it. VaR is calculated with a level of confidence of 95% and a time horizon of one day, although additional monitoring is carried out with other levels of confidence.

There is also a monthly monitoring of the VaR of its subsidiary Línea Directa Aseguradora S.A. using the "Historical Simulation" method.

The following are the comparative VaR data by risk factor for the Bank's positions in 2012 and 2011, both for the total and differentiated by portfolio:

Total VaR 2012		Total VaR 2011
million euros	Final	million euros	Final
Interest Rate VaR	18.71	Interest Rate VaR	10.71
Equities VaR	0.32	Equities VaR	0.76
Exchange Rate VaR	0.07	Exchange Rate VaR	0.03
Volatility Rate VaR	0.05	Volatility Rate VaR	0.02
Credit VaR	0.00	Credit VaR	0.02
	18.80		11.96

Trading VaR 2012		Trading VaR 2011
million euros	Final	million euros	Final
Interest Rate VaR	0.86	Interest Rate VaR	0.59
Equities VaR	0.15	Equities VaR	0.47
Exchange Rate VaR	0.07	Exchange Rate VaR	0.03
Volatility Rate VaR	0.05	Volatility Rate VaR	0.02
Credit VaR	0.00	Credit VaR	0.02
	0.91		0.91

Available-for-sale VaR 2012		Available-for-sale VaR 2011
million euros	Final	million euros	Final
Interest Rate VaR	18.35	Interest Rate VaR	10.56
Equities VaR	0.23	Equities VaR	0.34
Exchange Rate VaR	0.00	Exchange Rate VaR	0.00
Credit VaR	0.00	Credit VaR	0.00
	18.33		11.04

2012 was characterised by severe turbulence in the public debt markets of the euro zone. On top of the interest rate risk came significant credit risk and the risk of redenomination of various countries' public debt. As these risks built up, so liquidity in certain financial markets diminished.

In view of this situation in the financial markets, over the course of the year Bankinter established a series of sub-limits in accordance with market circumstances. Apart from this, the VaR calculation was reinforced by extending the stress testing analysis, as dealt with in the following section, by adding specific assumptions based on expectations of their occurring in the financial markets, as well as endeavouring to simulate the most adverse circumstances for the positions taken in trading operations.

The market risk (VaR) for the Línea Directa Aseguradora portfolio at the close of the financial years 2012 and 2011, was €0.77 million and €0.88 million respectively, calculated using the "Historical Simulation" method, with a level of confidence of 95% and a time horizon of one day. Market risk is slightly less from one year to the next due to the reduced duration of the portfolio and a change in the distribution by type of risk, which increases the correlation between positions at risk.

Stress Testing

Stress testing, or the analysis of extreme scenarios, is a supplementary test to VaR. The estimates from the stress tests quantify the 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. Additionally, estimates are made using other scenarios which replicate different historical crisis situations and other relevant current market situations.

In 2012, the stress scenarios for Interest Rate and Volatility were updated to adapt them to each product type and to the evolution of events observed in the market for this type of risk factors.

The following is information on the results of one of the most extreme stress scenarios for the Bank in financial years 2012 and 2011:

Confidence level 95%, time horizon of 1 day

Stress Testing 2012		Stress Testing 2011
million euros	Final	million euros	Final
Interest Rate Stress	74.85	Interest Rate Stress	49.56
Equities Stress	5.14	Equities Stress	7.30
Exchange Rate Stress	0.43	Exchange Rate Stress	0.39
Volatility Stress	3.33	Volatility Stress	0.48
Credit Stress	0.00	Credit Stress	0.09
Total Stress	83.75	Total Stress	57.82

At year-end 2012 the total level of interest rate stress testing had increased relative to 2011, as a consequence of an increase in the Available-for-Sale portfolio in public debt. However, as can be seen in the foregoing table, equities stress testing at year-end 2012 reduced due to a decline in the stock market position.

The result of the calculation of the stress scenarios for the portfolio positions of Línea Directa Aseguradora at the end of 2012 amounted to €23.52 million compared with €23.48 million in 2011. Stress testing was maintained at similar levels to the previous year, since the reduced position in equities was offset by an increase in the fixed income position.

Operational risk

Operational risk is defined as: "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 disasters.

Our operational risk management model is based on the guidelines of the Basel II Capital Framework, complies with Bank of Spain Circular 3/2008 on the determination and control of Equity and incorporates the best practices in the sector, which 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, Bankinter has laid down the following basic governing principles:

The basic aim is to identify and preventively mitigate the major operational risks, seeking to minimise any possible associated losses.
Systematic procedures are established for assessing, analysing, measuring and reporting risks and generating appropriate action plans to control them.
With a view to exploring the Bank's activities to draw up an inventory of the operational risks, the unit selected for analysis is the business unit. By analysing the business units' risks and aggregating and consolidating them, the Bank's total risks are obtained.
Of the possible Capital calculation systems associated with Operational Risk in the framework of the Basel Accord, Bankinter has adopted the Standard Method. This method is reserved to institutions with efficient and systematic operational risk management

Operational Risk Management Framework

The Bankinter Management Framework for Operational Risk is based on the following main elements:

-Identification and evaluation of risks by developing risk maps showing the severity level of the risk, evaluating the appropriateness of existing control mechanisms and showing action plans for mitigating these risks.
Recording of loss events arising, with the associated management information, sorted and classified in accordance with 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 interruption 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.

Structure of Governance

Bankinter applies a decentralised model in which final responsibility for managing operational risk rests with the business and support units.

For governance purposes, the following control bodies and general lines of responsibility 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:

Promote the implementation of active risk management policies.

To track significant operational risks and trends in mitigation plans.

Ensure that the protocol for evaluating risks associated with new product launches is applied.

Operational Risk: Reporting to the Risks Directorate, the Operational Risk unit has the following main functions:

Promoting management of operational risks in the various areas, encouraging identification thereof, 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 creation of contingency and business continuity plans that are appropriate 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 functions:

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, prioritising and financing the operational risk mitigation plans which it is responsible for running.
Maintaining and testing the business continuity plans supported by the unit.

As regards databases of loss events, the Bankinter operational risk profile is represented in the following graphs:

% amount Events

Insurance in managing operational risk

Bankinter uses insurance as a key element in managing certain operational risks, thus complementing the mitigation of risks where their nature makes this advisable.

To this end, the Insurance Area, together with the various areas in Bankinter and taking into account both the operational risk assessments and historical losses, assesses the advisability of altering the coverage perimeter of the insurance policies for the Bank's various operational risks.

Examples are insurance policies taken out with various companies of recognised solvency for contingencies affecting the Bank's premises (earthquake, fire, etc.), internal or external fraud (robbery, embezzlement, etc.), employees' civil liability, etc.

Credit risk

The Board of Directors establishes the Risks Policy, delegating its implementation to the Risks Committee, which is chaired by the Executive Vice-Chairman. Its delegated powers include approving operations and defining the powers of the committees at the next levels below.

The Risks Directorate, reporting directly to the Vice-Chairman, is responsible for drawing up and publishing risk policies. 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 responsibility of:
o the Private Individual Risks Unit,
o the Company and Developer Risks Unit
o 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.

In addition to their own functions the various units take part in the process of defining new products and determining the risk parameters and the approval process.

The risk function's principle of alignment with strategy combines a hierarchical approach with the delegation of powers to each of the Risk Committees.

The risk approval 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 retail risk approval to be automated and provides support for decisions on risks requiring non-automated approval.

The Risk Map, which is produced annually, is an exercise in detection, analysis and assessment of the potential impact (severity) of the risks inherent in the activity, as well as processes for monitoring and controlling them and measures for mitigating or if possible eliminating any remaining risk.

The current financial crisis and the requirements of the Basel Accords have demonstrated the need for increased monitoring of the policy on risk concentration. In this regard, monitoring is carried out of diversification by sector, geographical location, products and guarantees, as well as by customer concentration, and a policy of permitted maximums is in place.

Refinancing or restructuring transactions are carried out only when they can be shown to be viable, and incorporating additional guarantees whenever possible. The system of delegated powers does not allow these kinds of transactions to be approved by Branches, and furthermore they are limited to 50% of the discretionary limits held by the Regional Organisations.

Policy on refinancing and restructuring:

The policy on refinancing in its various categories starts out from the basic principle that any such refinancing must involve a clear improvement in the outlook for repayment by strengthening security. The categories are:

- Refinancing / refinanced transactions: when a new transaction is carried out in order to cancel, totally or in part, a transaction with a customer on whom or which we wish to eliminate our risk and we establish the means of doing so.
- Restructuring: when we alter the financial conditions of transactions in force with a customer on whom or which we wish to eliminate our risk and establish the means of doing so.
- Assurance: when the customer is not in either of the above categories but there is a change to the original conditions of the transaction.

In both cases we are dealing with a customer or group on whom/which we wish to eliminate our risk and we establish the means of doing so,

A further condition is the impossibility of either cancelling or maintaining the current conditions in light of the analysis carried out by the corresponding Risks Committee.

In particular, and by way of example:

the carrying out of a new transaction in order to cancel, totally or partly, an existing transaction or classification (not including ordinary renewals)
the granting of additional grace or interest-only periods relative to those originally authorised
the financing of instalments (nominal and/or interest),
the incorporation of guarantees in working capital transactions (ratings, financial risk, issuer risk and commercial risk),
the establishment of a calendar of repayments to cancel the risk
Any other cases involving approval of transactions that are not in accordance with the

Bank's risks policy.

Such transactions must not involve additional financing for the customer, and must maintain the existing guarantees. Ordinary interest due must be collected, and furthermore the restructuring must meet the following conditions:

The situation of delinquency will be considered to be at an end providing the guarantees for the transaction are strengthened by incorporating effective tangible collateral or the capacity to repay is strengthened.

In order for a debt refinancing to bring an end to the situation of delinquency, it is important for guarantees of payment to exist, either in the form of effective security being provided (pledges, mortgages or personal guarantees) or by means of verification of the customer's ability to pay, as indicated in Appendix IX to Bank of Spain Circular No. 4/2004 as recently amended in 2010. Such transactions must not involve additional financing for the customer, and must maintain the existing guarantees. Ordinary interest due must be collected, and furthermore.

Refinanced transactions will generally be classified as subjectively doubtful and restructured ones as substandard transactions if no effective guarantees are taken or if there are reasonable doubts as to the customer's ability to repay.

Collateral will be valued at the lesser of value per deed of conveyance or appraised value, minus the following:

Customer's habitual residence: 20%
Farmland, offices, warehouses and multi-purpose premises: 30%
Other completed residential properties (second home, property developer's home, etc.): 40%
Plots with building permission (real estate development): 50%

Refinancing and restructuring transactions must incorporate:

Tangible guarantees for transactions with personal guarantees, or additional tangible guarantees for transactions that already have tangible guarantees, or
- Sufficient guarantees such that the net assets of the guarantors less their direct and indirect risks exceed the amount of the transaction.

The proposal must be processed through the credit approval systems established by the Bank.

In all cases business and financial information must be updated, as must information on borrowings, business plan and viability justifying the refinancing.

The Group currently has 4,794 live refinanced transactions totalling €1.37 billion. This figure includes both regular status loans and substandard and delinquent balances. This figure represents 2.96% of total Credit Risk.

The figure for risk on property developers is €333 million. At present 33.6% of the Group's real estate development portfolio (€983 million) is in arrears, with a coverage of 31%.

In the private individuals segment, the Group refinanced 1,487 loans for a total of €216 million, with a delinquency rate of 13%.

Restructuring of the Finance Sector

February 2012 saw the publication of Royal Decree-Law 2/2012 on restructuring of the finance sector, which laid down additional requirements for provisions and capital in respect of assets associated with real estate business. Bankinter made all the provisions required by this Royal Decree-Law during the first quarter of 2012. Also, its own funds amply cover the top capital requirements established by this law.

Subsequently, in May 2012, Royal Decree-Law 18/2012 on the write-down and sale of the finance sector's real estate assets established additional coverage requirements for impairment of lending linked to real estate business classed as performing. Bankinter made all the provisions required by this Royal Decree-Law during the second quarter of 2012.

Apart from this, the Council of Ministers in its Resolution of 11 May instructed the Ministry of Economy and Competitiveness to commission an external study to assess the ability of the Spanish banking sector as a whole to withstand a further severe deterioration in the economic situation. The Bank of Spain, in coordination with the Ministry of Economy and Competitiveness, decided to commission Roland Berger and Oliver Wyman as independent consultants to carry out this strict evaluation of the Spanish banking sector.

The results of this study, published on 21 June 2012 by the two consultancies, conclude that for a base macroeconomic scenario and a core Tier 1 ratio of 9%, capital requirements for the entire sector studied would be between €16 billion and €26 billion. In the adverse macroeconomic scenario, with a core tier 1 ratio of 6%, the Spanish banking sector's additional capital requirements would be within a range of €51 billion to €62 billion.

Following this overall assessment, individual bottom-up assessments were carried out of each entity, including a comprehensive analysis of due diligence and individual analyses of banks' portfolios in order to determine additional capital requirements, based on their risk profiles.

Following analysis of the published information, in view of the Bank's delinquency ratios, which were the lowest in the sector, and its almost residual exposure to real estate, Bankinter showed a capital surplus of €399 thousands.

Maximum exposure to credit risk

The following table shows the maximum level of exposure to credit risk undertaken by the Group as at 31 December 2012 and 2011 for each class of financial instrument, without deducting from same tangible securities or other credit enhancements received to ensure borrowers' compliance:

As at 31 December 2012

	€000s
			Asset balances
	Financial assets at fair value through profit or loss
Types of instrument	Held for trading	Other assets	Financial assets available for sale	Loans and receivables	Held to maturity investments	Hedging derivatives	Memorandum accounts	Total
Debt instruments
Deposits with credit institutions	-	-	-	1,093,728	-	-	-	1,093,728
Negotiable securities	1,452,753	39,860	6,132,471	82,871	2,755,355	-	-	10,463,310
Loans and advances to customers	-	-	-	43,575,351	-	-	-	43,575,351
Total debt instruments	1,452,753	39,860	6,132,471	44,751,950	2,755,355			55,132,389
Contingent risks -
Financial guarantees	-	-	-	-	-	-	631,925	631,925
Other contingent risks	-	-	-	-	-	-	1,850,940	1,850,940
Total contingent risks							2,482,865	2,482,865
Other exposure -
Derivatives	656,511	-	-	-	-	-	-	656,511
Contingent commitments	-	-	-	-	-	-	11,239,659	11,239,659
Other exposure	-	-	-	-	-	152,201	-	152,201
Total other exposure	656,511					152,201	11,239,659	12,048,371
MAXIMUM LEVEL OF EXPOSURE TO CREDIT RISK	2,109,264	39,860	6,132,471	44,751,950	2,755,355	152,201	13,722,524	69,663,625

As at 31 December 2011

	€000s
			Asset balances
		Financial assets at fair value through profit or loss
Types of instrument	Held for trading	Other assets	Financial assets available for sale	Loans and receivables	Held to maturity investments	Hedging derivatives	Memorandum accounts	Total
Debt instruments
Deposits with credit institutions	-	-	-	1,779,395	-	-	-	1,779,395
Negotiable securities	1,870,612	31,377	4,776,069	-	3,150,930	-	-	9,828,988
Loans and advances to customers	-	-	-	45,387,972	-	-	-	45,387,972
Total debt instruments	1,870,612	31,377	4,776,069	47,167,367	3,150,930	-	-	56,996,355
Contingent risks -
Financial guarantees	-	-	-	-	-	-	590,143	590,143
Other contingent risks	-	-	-	-	-	-	1,849,527	1,849,527
Total contingent risks	-	-	-	-	-	-	2,439,670	2,439,670
Other exposure -
Derivatives	544,894	-	-	-	-	-	-	544,894
Contingent commitments	-	-	-	-	-	-	9,208,807	9,208,807
Other exposure	-	-	-	-	-	118,651	-	118,651
Total other exposure	544,894	-	-	-	-	118,651	9,208,807	9,872,352
MAXIMUM LEVEL OF EXPOSURE TO CREDIT RISK	2,415,506	31,377	4,776,069	47,167,367	3,150,930	118,651	11,648,477	69,308,377

Trends in customer risk

The economic and financial crisis that started five years ago continued to make itself felt throughout the year under review. In terms of new instances of arrears, the peak of late 2008 marked a trend that bottomed out at the beginning of 2011 but then started to deteriorate again, with the peak being repeated in the first half of 2012.

In this past year there were clear signs of fatigue on the part of business and household economies alike in the face of this deep and prolonged crisis, which means it is affecting all levels of solvency. Our customers' situation was helped by the Bank's sound refinancing policy, which adheres to the Bank's basic and unchanging principles.

In this environment, the total risk of the financial system declined by 5% (latest figures available from the Bank of Spain website, as at October 2012). The reasons for this situation are deleveraging by households and businesses, combined with a contraction of the markets, which led to a substantial reduction in liquidity in the system.

NPLs, a reflection of credit quality, continued to increase, by much more than in 2011, contributing to greater control and restriction of credit risk. In general terms both households and businesses have needed to refinance their debt.

The volume of distressed assets linked to the real estate sector is the main problem of the economy. It has involved an increase in the volume of assets repossessed by the institutions, which looks set to continue to grow considerably over the next few years.

If to these existing NPLs we add repossessed assets and assets classified as substandard because of the sector they belong to or the unlikelihood of repayment capacity, the deterioration in the quality of credit risk has been very significant.

Analysis of credit risk

Quality of assets				€000s
"Computable risk" (total lending) excluding securitisation	46,355,295	46,802,151	-446,856	-0.95
Doubtful debts	1,984,028	1,515,766	468,262	30.89
Provisions for credit risk	958,523	786,080	172,443	21.94
NPL ratio (%)	4.28	3.24	1.04	32.10
Non-performing loans coverage ratio (%)	48.31	51.86	-3.55	-6.85
Repossessed assets	611,665	484,408	127,257	26.27
Provision for impairment of repossessed assets	230,524	175,894	54,630	31.06
Coverage of repossessed assets (%)	37.69	36.31	1.38	3.80

Computable credit risk fell by just 0.95%, which compares favourably with the deleveraging being carried out throughout the banking industry. Once again our Bank stands out because of the solidity of its credit portfolio, which enables it to outperform its peers. Good risk selection in this period will help the Bank to emerge from the crisis with a clear competitive advantage over its rivals.

The Bank has a very solid risk culture at all levels, with a team of highly qualified people who, with the support of advanced information systems, constitute one of its basic pillars. In terms of arrears, we ended the year with a ratio of 4.28% compared with 3.24% the year before. This compares very favourably with the system (Bank of Spain: 7.90% in December 2011 and latest figure from October 2012 of 11.23%) as we are at less than half the average for the sector. As in 2011, companies were the worst affected, although it should be pointed out that in 2012 the private individuals business suffered the consequences of the persistent crisis.

The volume of problematic and repossessed assets continues to be well below those of the Group's main competitors in comparative terms.

Thanks to the prudent credit approval policy applied in both the growth phase of the economy and the present contracting one, the volume of risk secured by mortgages (64%) ensures better results in the current crisis. It should be borne in mind that LTV or loan to value ratios applied have been in accordance with prudent criteria, the current ratio being 54%, to guard against possible falls in prices as indeed have come about and are likely to continue. Lastly, we would highlight the fact that 83% of the mortgage portfolio is secured by residential properties, and this has proven to be the greatest strong point in confronting the current recession.

Another example of the judicious risk policy was the decision to keep exposure to risk on property developers to a minimum (approximately 2%). This being one of the serious problems giving rise to the present crisis in all financial institutions, Bankinter's highly restrictive policy in approving risk on property developers, with almost no financing of land purchases, now represent a clear competitive advantage.

Although NPLs continued to increase in the SMEsegment, the monitoring policy aimed at greater reinforcement of collateral (53%) meant that the volume of specific provisioning required was actually lower.

Private individuals

The excellent credit quality of the Bank's private individuals portfolio remains unaltered, with a non-performing loans ratio of 2.5%.

The approval policy for residential mortgage loans, the product with the biggest exposure in the portfolio, has followed very conservative criteria, with the maximum LTVhaving been established at 80%since 2003 in anticipation of the downturn, which again sets us apart from the sector as a whole.

The average effort (measured as the proportion of income that the customer allocates to paying mortgage loan instalments) in the mortgage portfolio remained at a very low level (23%).

The breakdown of the portfolio by LTV is as follows:

MORTGAGE PORTFOLIO BY TRANCHES % LTV PRIVATE INDIVIDUALS
LTV 00 - 10%	16.84
LTV 10 - 20 %	11.74
LTV 20 - 30 %	12.19
LTV 30 - 40 %	12.79
LTV 40 - 50 %	13.53
LTV 50 - 60 %	13.02
LTV 60 - 70 %	10.84
LTV 70 - 80 %	6.00
LTV 80 - 90 %	1.96
LTV 90 - 100 %	1.11
TOTAL LTV BRACKETS	100

The NPLratio (2.16% in December 2012) continues to be the best in the entire financial system, which in September 2012 (the latest information published by the Mortgage Association of Spain) had a ratio of 3.49% for this type of lending.

(Data provided by the Spanish Mortgage Association)

Corporate Banking

Since the onset of the crisis, and in line with the strategy laid down by the Board for taking advantage of our competitive advantage, this has once again been the segment with the most growth (16%). By focusing on the major corporates, with which it has many years of experience, the Bank has been able to attract new customers and increase credit exposure with a low incidence of NPLs. Total risk in Corporate Banking amounted to €13.12 billion, while NPLs, at €339 million, were still well contained, ending the year with an NPL ratio of 2.6%.

This growth continued on the basis of principles which remain fixed, notably:

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 trade-off.
Long-term investment, with the aim of a long-term relationship with the customer.
Diversification of sectors and terms.

Small and medium-sized enterprises

Credit risk totalled €6,506 million, representing a 4% drop due to the economic slowdown. The non-performing loan ratio was 10.5%.

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.

It should be highlighted that 64% of the outstanding arrears balance for SMEs has mortgage guarantees with an LTV ratio of 39%.

Control, Monitoring and Recoveries

The Control, Recoveries and Real Estate Assets Department reports directly to the Executive Vice-Chairman, thus ensuring its independence. Its basic function is to direct and manage the monitoring and control procedures for loans and receivables. It also defines and establishes the processes for recovering non-compliant positions. During this past year the Real Estate Assets Unit was incorporated under this Directorate in order to achieve greater integration of this part of the recovery process.

In 2012 the team's wide experience and the excellent functioning of the processes and tools enabled us to optimise the level of recoveries.

Bankinter has had automatic systems in place for years for controlling and monitoring credit risk on a permanent basis.

In 2012 we saw a bigger increase in non-performing loans than in the previous year. The volume of new NPLs increased due to the deepening crisis in the second half of the year, although the ratio of recoveries to new cases was maintained above 80%.

Our limited exposure to property developers, which have been most penalised by the crisis, has enabled us to widen our lead over the sector as a whole and over our closest rivals in terms of the arrears ratio.

The Control and Recoveries Process involves:

1. Support from technology (CRM).
1. Traceability.
1. Integration of all information from all parties involved, external and internal.
1. Behavioural models (Basel II).

The Bank has various applications for monitoring loans and advances.

Statistical customer alert.
Risk Rating "special watch" and "risk to be eliminated".
Office-branch alerts
Back-testing

The portfolio of credit risk refinancing and restructuring transactions at the end of 2012 stood at €1.38 billion, with any amendment to credit risk conditions being considered as refinancing. The majority of refinancing operations have additional guarantees (See Note 49).

The flow of non-performing loan balances was as follows:

Impaired assets	31/12/2012	31/12/2011
Balance at start of period	1,515,767	1,329,980
Net additions	936,826	611,927
Transferred to Repossessed	275,853	190,724
Transferred to Bad Debts	192,712	235,417
Balance at close of period	1,984,028	1,515,766
Provision for impairment	958,523	786,080

Repossessed assets	31/12/2012	31/12/2011
Balance at start of period	484,408	378,112
Net additions	127,257	106,296
Balance at close of period	611,665	484,408
Provision for impairment of repossessed assets	-230,524	-175,894
Net balance of repossessed assets	381,141	308,514

Real estate assets

The balance of the current portfolio of real estate assets stood at €611.67 million, representing an increase of €127.26 million on the previous year.

Real estate assets are highly diversified in geographical terms and as regards property type, which makes them easier to sell. The volume of sales amounted to €148.60 million, representing an increase of 76% compared with the previous year.

The coverage of repossessed assets stood at 37.7% in December 2012.

In the real estate asset portfolio, we would highlight the virtual absence of property developments in progress and the limited number 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.

The doubtful mortgage portfolio with mortgage guarantees presents an LTV ratio of 47% and given this fact, plus the excellent default ratio with mortgage guarantees, losses on the mortgage portfolio are insignificant.

Reputational Risk

Reputational Risk is the risk of interactions with customers leading to negative publicity regarding business practices and 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 practices and factors inherent in the activity carried out and which may induce reputational risk, as well as the task of establishing processes for monitoring and controlling such mitigating practices and measures or, if applicable and possible, eliminating the risk inherent in them.

The Operational, Reputational and New Products Risk Committee meets on a regular basis, with the following functions as regards reputational risks:

To promote the implementation of reputational risk policies.
- Following up the actions taken to mitigate the most significant risks.
To decide on which proposals should be submitted to the Committee regarding 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): The ultimate authorities for taking operational decisions are the Management Committee of Bankinter, S.A. for the Commercial banking and Business Banking segments, and the Management Committee of LDA for Línea Directa Aseguradora.

Based on similarities in the nature of products and services offered, the type of target customer and distribution methods, Commercial Banking comprises:
Private Banking, a business line that specialises in comprehensive advisory and management services for high net worth investors. It caters to customers with financial assets of over €1 million with Bankinter and elsewhere.
- Personal Banking: Customers not included in Private Banking and having:
o Annual household income of more than €70,000
o or Deposits + Securities + Intermediation of between €75,000 and €1,000,000
o or Financial assets with Bankinter and elsewhere of between €75,000 and €1,000,000
- Private Individual Banking comprises the products and services offered to households. Other Private Individuals
- Foreigners: Non-Spanish Europeans customers of any of the following. Regional Headquarters Catalonia, Levante, Balearic Islands, Andalusia and Canary Islands.
- Obsidiana: Consumer financing
Corporate Banking offers a specialised service demanded by big companies, the public sector and SMEs. Based on similarities in the nature of products and services offered, the type of target customer and distribution methods, this segment covers all the Bank's activity with businesses.
Línea Directa Aseguradora (LDA): includes the insurance business of the LDA sub-group.

46. Holdings in the capital of credit institutions

In accordance with the provisions of Article 20 of Royal Decree 1245/1995 of 14 July, we present hereunder a list of 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, E.F.C, S.A.	100%

In accordance with the provisions of Article 20 of Royal Decree 1245/1995 of 14 July, we provide hereunder the list of holdings in the capital of Group financial institutions which exceed 5% of capital or voting rights and which are held by national or foreign credit institutions or by groups as defined by Article 4 of the Stock Market Act to which a national or foreign credit institution belongs.

	% holding	Company or group owning the investment
Crédit Agricole, S.A	15.102%	Crédit Agricole

47. Information required by Law 2/1981 of 25 March on Mortgage Market Regulation and Royal Decree 716/2009 of 24 April implementing certain aspects of said law-

The Framework Agreement is the document in which every year the Board of Directors establishes the basic principles of Risks Policy for each business segment. In this regard we would highlight the fact that, pursuant to the provisions of the Transparency Act, we have brought together the various aspects of the Responsible Lending Policy in a single document, in the interests of greater clarity, even though all the principles had been incorporated over the past few years in the Framework Agreement, which is reviewed and updated every year.

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.

The bases of the risks policy for this product are:

Automated approval with discrimination by rating. In the case of residential mortgage loans we seek to maximise the extent to which transactions can be approved using automated systems.

The Bank has an internal rating model, developed and improved over the course of the last few years, based on statistical systems in accordance with Basel II rules. For each transaction, obtaining a rating is associated with a given probability of default based on historical data, and is the main indicator of the quality of a transaction. The rating is the fundamental variable in automated approval and an important factor in taking decisions on transactions for which approval is not automated.

Types of customers and ability to repay.

The approval of customer transactions is based on individualised studies of the customer, the rating, financial capacity and personalised prices depending on the customer's social and financial profile.

The maximum effort that a customer can make must always be taken into account. To calculate it, the following information is required: servicing of all debts and recurring income (exceptional income must not be taken into account). In this way we check whether final disposable income is enough to service our financing and the usual expenses. The documentation used as the basis for assessing repayment capacity for the transaction is tax-based, and must be as up to date as possible: the last three months' payslips for employees, and in the case of self-employed persons the latest available income tax declaration.

Expected profitability.

The expected profitability of the mortgage applicant is one of the variables taken into account in the automated approval process. By means of an internal statistical model, the Bank calculates the expected profitability of all the products and services that the customer may use, depending on his/ her income and asset profile, excluding profitability obtained directly from the mortgage transaction.

Providing the risk quality is good enough, measured in terms of rating, then the approval decision takes into account the profitability both of the mortgage loan itself and of any associated products.

Financing habitual dwelling and secondary residence.

The mortgage lending policy at Bankinter is geared to the financing of habitual place of residence and secondary residence for private individuals, not to investor-type financing.

LTV.

The Bank's general policy is to finance homes up to 80% LTV. Exceptionally, in the case of transactions for HNWcustomers with proven capacity to repay, a higher LTV may be allowed. The security needs to be valued correctly, both on approval and during the life of the loan.

In the approval process, the value of the security is determined by an official appraisal or by the purchase price as registered in the deed of conveyance, whichever is lower, subject to there not being a large difference between the two.

Non-residents.

More stringent requirements as regards the ratio of effort required. Additionally, LTDhas to be lower and checks must be made on the real equity contribution made by the customer.

Type of asset.

The residential property to be financed must be located in an established urban zone and there must be a property market with ample supply and demand.

Standardisation of the mortgage process.

Standardisation is of prime importance in achieving a process in which efficiency is paramount, particularly in Retail Banking.

The integrated handling of this process, and co-ordination with all the parties involved (mainly agencies and appraisal firms) is entrusted to a specialised department which takes charge of establishing the procedures, applications, organisation and control of the process. This ensures that the process is carried out smoothly with first-class customer service and excellent quality of mortgage lending.

Independent appraisal process.

The appraisal process is absolutely independent of the Sales network. It is carried out on a centralised basis, and the appraiser assigned to each valuation is selected at random, thus ensuring that transactions from any given branch have been valued by different appraisal companies.

Monitoring of the mortgage market.

Official reports are regularly obtained in order to monitor property market prices. In the event of any substantial change in the value of a property the value must be adjusted in the Bank's books.

Interest-rate hedges.

The risks policy for approving this type of transaction is restricted to customers with a mortgage loan from the Bank, and we never cover more than 75% of the balance of the transaction, nor do we ever go beyond an eight-year term.

Policy on sale of repossessed assets

Prior to repossession, the team of specialised professionals forming the Real Estate Assets Unit has as it initial task the in-situ inspection of the property in order to perform a Technical Analysis which covers: characteristics, type, description and condition of the property, as well as a study of the market and of prices in the area Selling prices are established centrally based on objective criteria and reviewed periodically to ensure that they are in line with the market, following the active policy of managing property as quickly and efficiently as possible.

For the sale of real estate assets the Bank has a network of external collaborating property market specialists. These collaborating specialists are selected individually based on considerations of proximity, local knowledge and product suitability. The effectiveness of this network is very closely monitored, with daily contact and evaluation of the level of sales and commitments.

By way of sales support the Bank relies on:

- The branch network, which has a financial incentive to refer possible interested buyers.
Dedicated property portal on the bank's website:https://www. bankinter.com/www/es-es/cgi/ebk+inm+home
The assets are published on the main national portals.
Our own property magazines, by type of property.
Sales service call centre.

There is an active policy of studying possibilities for disposing of the portfolio as a whole or in batches of repossessed assets.

Land and construction work in progress

As a consequence of the highly restrictive risk policy on financing for property developers, the amount relating to repossessed land is insignificant relative to the size of the Bank and particularly in comparison with the banking sector as a whole. Most of the repossessed land is urban and therefore does not require town planning and management.

Our knowledge of property developers, the size of the developments and the risk policy pursued have allowed us to support developers at least enough to ensure that financed projects are completed, which explains why there are no developments in progress among the repossessed assets. In any case the policy for managing land focuses on establishing controls to prevent physical deterioration of the asset and carrying out the necessary technical procedures to ensure a quick sale.

Specific examples of these procedures include:

The selection and control of specialist providers for resolving planning issues with land and unfinished developments, accepting budgets and monitoring their execution
Supervision and monitoring of the procedures for obtaining the necessary sale permits from official bodies or town halls.

Other proposals such as barter and other alternative solutions have been studied but to date have not been used.

Policy on financing granted to problematic property developers

Due to the low level of exposure to credit risk on property developers (about 2% of total customer risk), there is no need to design recovery policies for problematic property development projects. Policy has focused on financing specific, small-scale projects in good locations and with well-established property developers. As a result most of the risk in this sector is on completed developments ready for sale. The Bank's real estate website has a sales section which we can use for selling projects of property developers financed by the Bank. Projects and selling prices are closely monitored with a view to reducing the risk.

a) Asset transactions

We now go on to present, as at 31 December 2012, the nominal value of the totality of mortgage credits and loans outstanding at that date in the Group entities indicated above, the nominal value of these eligible loans and credits, the mortgage credits and loans covering the issue of mortgage bonds, those that have been issued in the form of mortgage participations or mortgage transfer certificates and non-committed transactions:

	Nominal value	NPV
1 Total loans	29,033,037
2 Mortgage participations issued	2,640,009
Of which: Loans retained on the balance sheet	1,670,494
3 Mortgage transmission certificates issued	2,721,511
Of which: Loans retained on the balance sheet	2,591,555
4 Mortgage loans assigned in guarantee of financing received	-
5 Loans backing the issue of mortgage debentures and bonds	23,671,517
5.1 Non-eligible loans	5,784,014
5.1.1 They meet the eligibility requirements except for the limit of Article 5.1 of Royal Decree 716/2009	-
5.1.2 Other	5,784,014
5.2 Eligible loans	17,887,503
5.2.1 Non-computable amounts	-
5.2.2 Computable amounts	17,887,503
5.2.2.1 Loans covering issues of mortgage debentures	-
5.2.2.2 Loans eligible for covering issues of mortgage bonds	17,887,503

31 December 2011;

	Nominal value	NPV
1 Total loans	31,260,157
2 Mortgage participations issued	4,679,764
Of which: Loans retained on the balance sheet	3,566,032
3 Mortgage transmission certificates issued	5,397,235
Of which: Loans retained on the balance sheet	5,254,655
4 Mortgage loans assigned in guarantee of financing received	-
5 Loans backing the issue of mortgage debentures and bonds	21,183,158
5.1 Non-eligible loans	7,933,053
5.1.1 They meet the eligibility requirements except for the limit of Article 5.1 of Royal Decree 716/2009	-
5.1.2 Other	7,933,053
5.2 Eligible loans	13,250,105
5.2.1 Non-computable amounts	-
5.2.2 Computable amounts	13,250,105
5.2.2.1 Loans covering issues of mortgage debentures	-
5.2.2.2 Loans eligible for covering issues of mortgage bonds	13,250,105

31 December 2012;

	Loans backing the issue of mortgage debentures and bonds	Of which: Eligible loans
TOTAL	23,671,517	17,887,503
1 ORIGIN OF TRANSACTIONS	23,671,517	17,887,503
1.1 Originated by the entity	21,763,604	16,270,011
1.2 Subrogated from other entities	1,907,913	1,617,492
1.3. Other	-	-
2 CURRENCY	23,671,517	17,887,503
2.1 Euros	19,205,354	15,203,899
2.2. Other currencies	4,466,163	2,683,604
3 PAYMENTSITUATION	23,671,517	17,887,503
3.1 Normal	22,773,725	17,644,941
3.2 Other than normal	897,792	242,562
4 AVERAGEREMAININGMATURITY	23,671,517	17,887,503
4.1 Up to ten years	3,115,479	2,373,295
4.2 From ten to twenty years	7,788,683	5,844,019
4.3 From twenty to thirty years	9,736,943	7,305,873
4.4 More than thirty years	3,030,412	2,364,316
5 INTERESTRATES	23,671,517	17,887,503
5.1 Fixed	53,202	23,657
5.2 Variable	23,618,315	17,863,846
5.3 Mixed	-	-
6 BORROWERS	23,671,517	17,887,503
6.1 Companies and entrepreneurs	4,958,368	2,841,880
Of which: Property developers	623,346	372,682
6.2 Other companies and ISFLSH (Private non-profit making institutions serving households)	18,713,149	15,045,623
7 TYPE OF GUARANTEE	23,671,517	17,887,503
7.1 Finished assets/buildings	19,529,498	15,471,770
7.1.1 Residential	15,789,110	13,776,856
Of which: State-subsidised housing	-
7.1.2 Commercial	3,740,388	1,694,914
7.1.3 Other	-	-
7.2 Assets/buildings under construction	3,670,025	2,195,702
7.2.1 Residential	3,303,023	1,976,132
Of which: State-subsidised housing	-	-
7.2.2 Commercial	367,003	219,570
7.2.3 Other	-	-
7.3 Plots of land	471,993	220,030
7.3.1 Developed	322,497	220,030
7.3.2 Other	149,946	-

31 December 2011;

	Loans backing the issue of mortgage	Of which: Eligible
	debentures and bonds	loans
TOTAL	21,183,158	13,250,105
1 ORIGIN OF TRANSACTIONS	21,183,158	13,250,105
1.1 Originated by the entity	19,350,546	11,890,375
1.2 Subrogated from other entities	1,832,612	1,359,730
1.3. Other	-	-
2 CURRENCY	21,183,158	13,250,105
2.1 Euros	15,946,125	10,858,546
2.2. Other currencies	5,237,033	2,391,559
3 PAYMENTSITUATION	21,183,158	13,250,105
3.1 Normal	20,554,037	13,215,264
3.2 Other than normal 4 AVERAGEREMAININGMATURITY	629,121 21,183,158	34,841 13,250,105
4.1 Up to ten years	2,843,959	1,765,082
4.2 From ten to twenty years	6,770,413	4,288,065
4.3 From twenty to thirty years	8,885,808	5,190,076
4.4 More than thirty years	2,682,978	2,006,882
5 INTERESTRATES	21,183,158	13,250,105
5.1 Fixed	48,604	30,994
5.2 Variable	21,134,554	13,219,111
5.3 Mixed	-	-
6 BORROWERS	21,183,158	13,250,105
6.1 Companies and entrepreneurs	4,911,585	2,217,704
Of which: Property developers	736,066	439,003
6.2 Other companies and ISFLSH (Private non-profit making institutions serving households)	16,271,573	11,032,401
7 TYPE OF GUARANTEE	21,183,158	13,250,105
7.1 Finished assets/buildings	20,248,297	12,638,023
7.1.1 Residential	13,278,202	10,176,211
Of which: State-subsidised housing	-	-
7.1.2 Commercial	6,970,095	2,461,812
7.1.3 Other	-	-
7.2 Assets/buildings under construction	736,066	439,003
7.2.1 Residential	662,459	395,103
Of which: State-subsidised housing	-	-
7.2.2 Commercial	73,607	43,900
7.2.3 Other	-	-
7.3 Plots of land	198,795	173,079
7.3.1 Developed	177,821	169,503
7.3.2 Other	20,974	3,576

The following is a breakdown of the nominal value of eligible mortgage loans and credits outstanding as at 31 December 2012 and 31 December 2011 by loan to value (LTV) based on the latest available appraisal of the mortgaged property:

31 December 2012;

	RISK AS%OF AMOUNT OFLATEST AVAILABLEAPPRAISAL FORMORTGAGEMARKET (loan to value)
TYPE OF GUARANTEE	Equal to or less than 40%	From 40% to 60% incl.	More than 60%	From 60 % to 80 % incl.	More than 80 %	TOTAL
5 Loans eligible for the issue of mortgage debentures and bonds	5,383,854	7,236,882	-	5,266,766	-	17,887,503
- On residential property	3,515,361	5,025,339		5,266,766	-	13,807,467
- On other assets	1,868,493	2,211,543	-			4,080,036

31 December 2011;

	RISK AS%OF AMOUNT OFLATEST AVAILABLEAPPRAISAL FORMORTGAGEMARKET (loan to value)
TYPE OF GUARANTEE	Equal to or less than 40%	From 40% to 60% incl.	More than 60%	From 60 % to 80 % incl.	More than 80 %	TOTAL
5 Loans eligible for the issue of mortgage debentures and bonds	3,807,526	5,023,337	-	4,419,242	-	13,250,105
- On residential property	2,370,861	3,386,108		4,419,242	-	10,176,211
- On other assets	1,436,665	1,637,229	-			3,073,894

2012

MOVEMENTS	Eligible loans	Non-eligible loans
1 Opening balance at 31/12/2011	13,250,105	7,933,053
2 Deductions in the period	1,605,994	2,853,079
2.1 Cancelled at due date	1,204,591	533,974
2.2 Pre-paid	401,403	392,815
2.3 Subrogated by other entities	-	-
2.4 Other	-	1,926,290
3 Additions in the period	6,243,392	704,040
3.1 Originated by the entity	794,327	441,344
3.2 Subrogated from other entities	13,522	2,574
3.3 Other	5,435,543	260,122
4 Closing balance as at 31/12/2012	17,887,503	5,784,014

2011

MOVEMENTS	Eligible loans	Non-eligible loans
1 Opening balance at 31/12/2010	9,006,984	7,330,457
2 Deductions in the period	815,436	709,048
2.1 Cancelled at due date	525,564	369,212
2.2 Pre-paid	289,872	339,836
2.3 Subrogated by other entities	-	-
2.4 Other	-	-
3 Additions in the period	5,058,557	1,311,644
3.1 Originated by the entity	4,472,155	1,162,405
3.2 Subrogated from other entities	206,155	26,465
3.3 Other	380,247	122,775
4 Closing balance as at 31/12/2011	13,250,105	7,933,053

b) Liability operations

We present hereunder the aggregate nominal value of the mortgage bonds outstanding as at 31 December 2012 and 2011 issued by the Group, listed by remaining maturity, as well as mortgage participations and mortgage transfer certificates outstanding as at 31 December 2012 and 2011 issued by the Group listed by remaining maturity:

31 December 2012;

Mortgage credit and loans	Available balances. Nominal value
Total	1,071,707
– Potentially eligible	152,997
– Non-eligible	918,710

31 December 2011;

Mortgage credit and loans	Available balances. Nominal value
Total	378,961
– Potentially eligible	377,079
– Non-eligible	1,882

As at 31 December 2012 and 2011 there were no replacement assets in cover of issues of mortgage bonds or debentures in Bankinter.

31 December 2012;

MORTGAGE-BACKED SECURITIES	Nominal value	Average remaining maturity
1 Mortgage debentures issued and outstanding	-
2 Mortgage bonds issued	12,798,213
Of which: Not recognised as liabilities in the balance sheet	6,541,150
2.1 Debt securities. Issued in a public offering	12,798,213
2.1.1 Remaining maturity up to one year	2,718,213
2.1.2 Remaining maturity from one to two years	1,930,000
2.1.3 Remaining maturity from two to three years	2,700,000
2.1.4 Remaining maturity from three to five years	3,000,000
2.1.5 Remaining maturity from five to ten years	2,450,000
2.1.6 Remaining maturity over ten years
2.2 Debt securities. Other issues
2.2.1 Remaining maturity up to one year
2.2.2 Remaining maturity from one to two years
2.2.3 Remaining maturity from two to three years
2.2.4 Remaining maturity from three to five years
2.2.5 Remaining maturity from five to ten years
2.2.6 Remaining maturity over ten years
2.3 Deposits
2.3.1 Remaining maturity up to one year
2.3.2 Remaining maturity from one to two years
2.3.3 Remaining maturity from two to three years
2.3.4 Remaining maturity from three to five years
2.3.5 Remaining maturity from five to ten years
2.3.6 Remaining maturity over ten years
3 Mortgage participations issued	1,670,494	237
3.1 Issued by means of public offering	1,670,494	237
3.2 Other issues	-	-
4 Mortgage transmission certificates issued	2,591,555	237
4.1 Issued by means of public offering	2,591,555	237
4.2 Other issues	-	-

MORTGAGE-BACKED SECURITIES	Nominal value	Average remaining maturity
1 Mortgage debentures issued and outstanding	-
2 Mortgage bonds issued	10,122,757
Of which: Not recognised as liabilities in the balance sheet	4,596,000
2.1 Debt securities. Issued in a public offering	10,122,757
2.1.1 Remaining maturity up to one year	323,200
2.1.2 Remaining maturity from one to two years	4,269,557
2.1.3 Remaining maturity from two to three years	2,930,000
2.1.4 Remaining maturity from three to five years	2,400,000
2.1.5 Remaining maturity from five to ten years	200,000
2.1.6 Remaining maturity over ten years
2.2 Debt securities. Other issues
2.2.1 Remaining maturity up to one year
2.2.2 Remaining maturity from one to two years
2.2.3 Remaining maturity from two to three years
2.2.4 Remaining maturity from three to five years
2.2.5 Remaining maturity from five to ten years
2.2.6 Remaining maturity over ten years
2.3 Deposits
2.3.1 Remaining maturity up to one year
2.3.2 Remaining maturity from one to two years
2.3.3 Remaining maturity from two to three years
2.3.4 Remaining maturity from three to five years
2.3.5 Remaining maturity from five to ten years
2.3.6 Remaining maturity over ten years
3 Mortgage participations issued	3,566,032	281
3.1 Issued by means of public offering	3,566,032	281
3.2 Other issues	-	-
4 Mortgage transmission certificates issued	5,254,655	281
4.1 Issued by means of public offering	5,254,655	281
4.2 Other issues		-

48. Exposure to the construction and property development sector

In compliance with the request made by the Bank of Spain for credit institutions to publish their exposure to the construction and property development sector, Bankinter, S.A. publishes the following information as at 31 December 2012, which goes beyond the level of detail and transparency requested:

Table 1: Financing for property development and its coverage

Figures as at 31/12/2012

	Gross amount	Excess over guarantee value (1)	Specific coverage
1. Lending recorded by the group's credit institutions
(businesses in Spain)	983,522	95,636	302,700
1.1. Of which: Doubtful	330,758	49,828	135,555
1.2. Of which: Substandard	38,929	5,037	12,455

Information in €000s

Figures as at 31 December 2011

		Gross amount	Excess over guarantee value (1)	Specific coverage
	1. Lending recorded by the group's credit institutions
(businesses in Spain)		1,075,156	43,006	68,226
1.1.	Of which: Doubtful	206,668	8,267	59,449
1.2.	Of which: Substandard	60,253	2,410	8,777

Information in €000s

(1) This is the amount of the excess of the gross value of each transaction over the value of any rights in rem received in guarantee, calculated in accordance with the provisions of Appendix IX to Circular 4/2004 (finished habitual residence 80%; offices, shops and multipurpose industrial buildings 70%; other finished housing 60%; other assets 50%)

Table 2: Breakdown of financing for property construction and development

Figures as at 31/12/2012	Financing of property construction and development. Gross amount
Without a mortgage guarantee	134,171
With a mortgage guarantee	849,351
Finished buildings	579,391
Housing	398,307
Other	181,084
Buildings under construction	57,151
Housing	57,151
Other	-
Land	212,809
Urban plots	197,309
Other land	15,500
TOTAL	983,522

Information in €000s

	Financing of property construction and development.
Figures as at 31 December 2011	Gross amount
Without a mortgage guarantee	113,951
With a mortgage guarantee	961,205
Finished buildings	654,079
Housing	588,671
Other	65,408
Buildings under construction	108,331
Housing	97,498
Other	10,833
Land	198,795
Urban plots	177,821
Other land	20,974
TOTAL	1,075,156

Information in €000s

Figures as at 31/12/2012

Memorandum items:
- Total generic coverage (all businesses)	-
- Bad debts	44,063

Memorandum items: Figures for the consolidated group

	Carrying amount
1. Total lending to customers excluding Public Administrations
(businesses in Spain).	41,962,384
2. Total consolidated assets (all businesses)	58,165,890

Figures as at 31 December 2011

	Gross amount	Of which: Doubtful
Lending for the purchase of housing	24,328,310	399,127
Without a mortgage guarantee	-	-
With a mortgage guarantee	24,328,310	399,127

Information in €000s

Table 4: Breakdown of mortgage lending to households for the purchase of housing by loan to value (LTV) based on the latest available appraisal.

Figures as at 31/12/2012

</ltv≤100%<></ltv≤80%<></ltv≤60%<></ltv≤100%<></ltv≤80%<></ltv≤100%<>

	LTV brackets (10)
	LTV≤40%	40% <ltv≤60%< td="">	60% <ltv≤80%< td="">	80% <ltv≤100%< td="">	LTV > 100%	Total	60% <ltv≤80%< td="">	80% <ltv≤100%< td="">	LTV > 100%	Total	80% <ltv≤100%< td="">	LTV > 100%	Total	LTV > 100%	Total
Gross amount	7,036,857	7,424,121	6,562,849	1,605,509	111,846	22,741,182
Of which doubtful	94,613	145,570	188,608	55,780	6,687	491,258

Information in €000s

</ltv≤100%<></ltv≤80%<></ltv≤60%<></ltv≤100%<></ltv≤80%<></ltv≤100%<>

Figures as at 31 December 2011
		LTV brackets (10)
	LTV≤40%	40% <ltv≤60%< td="">	60% <ltv≤80%< td="">	80% <ltv≤100%< td="">	LTV > 100%	Total	60% <ltv≤80%< td="">	80% <ltv≤100%< td="">	LTV > 100%	Total	80% <ltv≤100%< td="">	LTV > 100%	Total	LTV > 100%	Total
Gross amount	6,943,192	7,367,970	7,200,806	2,045,077	771,265	24,328,310
Of which doubtful	63,519	103,827	159,135	46,353	26,293	399,127

Information in €000s

Figures as at 31 December 2011

Memorandum items:
- Total generic coverage (all businesses)	114,769
- Bad debts	13,360

Memorandum items: Figures for the consolidated group

	Carrying amount
1. Total lending to customers excluding Public Administrations
(businesses in Spain).	42,731,343
2. Total consolidated assets (all businesses)	59,491,426

Table 3: Lending to households for purchase of residential property

Figures as at 31/12/2012

	Gross amount	Of which: Doubtful
Lending for the purchase of housing	22,741,182	491,258
Without a mortgage guarantee	-	-
With a mortgage guarantee	22,741,182	491,258

Information in €000s

Table 5: Assets repossessed by consolidated group entities (businesses in Spain))

Figures as at 31/12/2012

	Carrying amount	Of which: Coverage	Initial cost	Gross Debt
1. Real estate assets from financing transactions for property construction and development companies	191,204	73,651	264,855	351,875
1.1. Finished buildings	143,679	36,911	180,590	227,687
1.1.1. Housing	92,614	19,497	112,111	143,745
1.1.2. Other	51,065	17,414	68,479	83,942
1.2. Buildings under construction	4,289	700	4,989	8,559
1.2.1. Housing	4,289	700	4,989	8,559
1.2.2. Other	-	-	-	-
1.3. Land	43,236	36,040	79,276	115,629
1.3.1. Urban plots	43,236	36,040	79,276	115,629
1.3.2. Other land	-	-	-	-
2. Real estate assets from mortgage financing operations to households for the purchase of housing	91,080	7,647	98,727	119,159
3. Other real estate assets foreclosed	98,760	8,677	107,437	140,375
4. Other equity instruments, securities and financing to non-consolidated companies holding said assets	204	2,436	2,640	8,925

Information in €000s

Figures as at 31 December 2011

	Carrying amount	Of which: Coverage	Initial cost	Gross Debt
1. Real estate assets from financing transactions for property construction and development companies	194,868	76,836	271,704	337,878
1.1. Finished buildings	150,324	32,536	182,860	216,038
1.1.1. Housing	88,910	22,056	110,966	133,447
1.1.2. Other	61,414	10,480	71,894	82,591
1.2. Buildings under construction	2,194	175,759	2,370	4,325
1.2.1. Housing	2,194	175,759	2,370	4,325
1.2.2. Other	-		-	-
1.3. Land	42,350	44,125	86,474	117,515
1.3.1. Urban plots	34,818	39,964	74,782	98,686
1.3.2. Other land	7,532	4,161	11,692	18,829
2. Real estate assets from mortgage financing operations to households for the purchase of housing	61,401	3,264	64,665	79,086
3. Other real estate assets foreclosed	52,245	4,138	56,383	67,443
4. Other equity instruments, securities and financing to non-consolidated companies holding said assets	-		-	-

49. Additional Information on risks: Refinancing and restructuring transactions: Geographical and sector risk concentration

In compliance with the Bank of Spain's request per Circular 6/2012 for credit institutions to publish information on refinancing and restructuring transactions, as well as on sector and geographical risk concentration.

The policy on refinancing and restructuring established by the Bank is described in Note 42.

The following is a breakdown by counterparty, type of insolvency and type of security held, of balances of restructuring and refinancing transactions carried out by the Bank and outstanding as at 31 December 2012.

Refinancing and restructuring transactions:

Outstanding balances of refinancing and restructuring transactions as at 31 December 2012:

		NORMAL (b)						SUBSTANDARD
	Fully secured by property mortgage		Other tangible security (c)		Without tangible security		Fully secured by property mortgage		Other tangible security (c)		Without tangible security
	No. of transactions	Gross amount	No. of transactions	Gross amount	No. of transactions	Gross amount	No. of transactions	Gross amount	No. of transactions	Gross amount	No. of transactions	Gross amount	Specific coverage
1. Public Administrations	-	-	-	-	3	606	-	-	-	-	-	-	-
2. Remaining companies and sole proprietors	901	344,715	113	43,346	1,214	229,867	63	62,420	7	4,107	43	34,523	22,357
Of which: Financing of property construction and development	115	81,239	10	7,699	19	15,349	26	35,962	-	-	-	-	11,671
3. Other Private Individuals	791	160,042	61	17,829	419	7,019	5	2,400	4	1,139	11	209	623
4. Total	1,692	504,757	174	61,175	1,636	237,492	68	64,820	11	5,246	54	34,732	22,980

Outstanding balances of refinancing and restructuring transactions as at 31 December 2012:

				DOUBTFUL
	Fully secured by property mortgage		Other tangible security (c)		Without tangible security			TOTAL
	No. of transactions	Gross amount	No. of transactions	Gross amount	No. of transactions	Gross amount	Specific coverage	No. of transactions	Gross amount	Specific coverage
1. Public Administrations	-	-	-	-	-	-	-	3	606	-
2. Remaining companies and sole proprietors	383	289,357	51	28,065	532	115,621	169,916	3,307	1,152,021	192,273
Of which: Financing of property construction and development	164	174,408	20	13,423	34	4,615	76,426	388	332,695	88,097
3. Other Private Individuals	62	21,740	12	2,920	119	3,376	3,754	1,484	216,674	4,377
4. Total	445	311,097	63	30,985	651	118,997	173,670	4,794	1,369,301	196,650

Breakdown of amount of transactions classed as doubtful subsequent to refinancing or

restructuring during the year.

		Fully secured by property mortgage		Other tangible security (c)	Without tangible security
	No. of transactions	Gross amount	No. of transactions	Gross amount	No. of transactions	Gross amount
Companies and sole proprietors	170	76,768	20	9,078	415	79,621
Of which: Financing of property construction and development	116	122,307	9	5,445	26	3,575
Private individuals	59	21,079	11	2,876	120	3,029
Total	229	97,847	31	11,954	535	82,650

Breakdown of the average probability of default (PD) of refinanced and restructured transactions by segment

		NORMAL							SUBSTANDARD
	Fully secured by property mortgage		Other tangible security		Without tangible security		Fully secured by property mortgage		Other tangible security		Without tangible security
	No. of transactions	PD	No. of transactions	PD	No. of transactions	PD	No. of transactions	PD	No. of transactions	PD	No. of transactions	PD
1. Public Administrations	-	-	-	-	-	-	-	-	-	-	-	-
2. Remaining companies and sole proprietors	580	0.36	59	0.27	763	0.26	25	0.10	1	0.18	6	0.16
Of which: Financing of property construction and development	69	0.23	2	0.01	6	0.15	5	0.00	0	0.00	0	0.00
3. Other Private Individuals	671	0.46	34	0.24	408	0.16	3	0.30	2	1.00	10	0.17
4. Total	1.251	0.41	93	0.26	1.171	0.25	28	0.11	3	0.93	16	0.15

Breakdown of the average probability of default (PD) of refinanced and restructured transactions by segment

	Fully secured by property mortgage		Other tangible security		Without tangible security		TOTAL
	No. of transactions	PD	No. of transactions	PD	No. of transactions	PD	No. of transactions	PD
1. Public Administrations
2. Remaining companies and sole proprietors	174	0.87	15	0.97	256	0.62	1,879	0.51
Of which: Financing of property construction and development	58	0.96	4	0.96	9	0.84	153	0.56
3. Other Private Individuals	54	0.81	3	1.00	115	0.81	1,300	0.48
4. Total	228	0.86	18	0.97	371	0.65	3,179	0.50

Geographical and sector risk concentration

The following is a breakdown of the carrying amount of the Group's most significant financial assets as at 31 December 2012 by geographical area of activity, business segment, counterparty and purpose for which the financing was granted.

Breakdown of customer lending by activity (carrying amount).

							Collateralised loans. Loan to value
Information in 000s euros	TOTAL	Of which: Secured by property	Of which: Other tangible security	Equal to or less than 40%	From 40% to 60% incl.	From 60 % to 80% incl.	From 80% to 100% incl.	More than 100%
1 Government Bodies	1,612,967	6,946	21,489	354	6,592	-	-	21,489
2 Other financial institutions	1,642,862	-	-	-	-	-	-	-
3 Non-financial companies and sole proprietors	18,746,150	8,083,957	459,710	2,477,752	3,021,540	1,979,215	572,550	492,610
3.1 Property construction and development	901,840	786,010	15,793	165,258	263,718	249,839	50,021	72,967
3.2 Civil engineering construction	326,356	36,695	2,048	10,649	10,411	11,827	4,304	1,552
3.3 Other purposes	17,517,954	7,261,252	441,869	2,301,845	2,747,411	1,717,549	518,225	418,091
3.3.1 Major corporates	11,544,337	3,124,806	237,125	900,776	1,165,802	804,001	273,162	218,190
3.3.2 SMEs and sole proprietors	5,973,617	4,136,446	204,744	1,401,069	1,581,609	913,548	245,063	199,901
4 Other home and ISFLSH (Private non-profit institutions serving households)	21,925,410	20,965,648	134,518	4,867,217	7,187,279	7,028,057	1,652,265	365,348
4.1 Residential properties	16,089,721	15,959,170	9,236	3,335,290	5,426,073	5,724,486	1,252,494	230,063
4.2. Consumer	235,890	20,830	1,097	7,670	7,895	5,412	778	172
4.3 Other purposes	5,599,799	4,985,648	124,185	1,524,257	1,753,311	1,298,159	398,993	135,113
SUBTOTAL	43,927,389	29,056,551	615,717	7,345,323	10,215,411	9,007,272	2,224,815	879,447
5 Less: Value corrections due to asset impairment not attributable to specific transactions	154,690
6 TOTAL	43,772,699
MEMORANDUMACCOUNTS
Refinancing, refinanced and restructured transactions:	1,177,807	828,251	33,716	192,375	216,961	257,976	124,182	70,472

Concentration of risks by Activity and Geographical Area (Carrying amounts). Total activity.

Information in 000s euros	TOTAL	Spain	Rest of the European Union	The Americas	Rest of the world
1 Credit institutions	3,057,483	2,426,885	626,121	3,261	1,216
2 Government Bodies	9,508,499	9,427,554	80,945	-	-
2.1 Central Administration	8,803,046	8,722,101	80,945	-	-
2.2. Other	705,453	705,453	-	-	-
3 Other financial institutions	10,731,996	10,697,829	31,200	391	2,576
4 Non-financial companies and sole proprietors	21,551,061	20,975,587	422,650	131,891	20,933
4.1 Property construction and development	943,515	943,515	-	-	-
4.2 Civil engineering construction	855,220	814,511	11,878	28,831	-
4.3 Other purposes	19,752,326	19,217,561	410,772	103,060	20,933
4.3.1 Major corporates	13,754,039	13,220,866	410,692	102,048	20,433
4.3.2 SMEs and sole proprietors	5,998,287	5,996,695	80	1,012	500
5 Other home and ISFLSH (Private non-profit institutions serving households)	21,968,459	21,372,962	479,081	29,966	86,450
5.1 Residential properties	16,089,721	15,596,706	392,857	22,913	77,245
5.2. Consumer	235,894	234,587	597	243	467
5.3 Other purposes	5,642,844	5,541,669	85,627	6,810	8,738
SUBTOTAL	66,817,498	64,900,817	1,639,997	165,509	111,175
6. Less: value corrections due to asset impairment not attributable to specific transactions	154,690
7 TOTAL	66,662,808

Concentration of risks by Activity and Geographical Area (Carrying amounts). Activity in Spain.

Information in 000s euros	TOTAL	Andalusia	Aragón	Asturias	Balearic Islands	Canary Islands	Cantabria	Castile - La Mancha	Castilla y León	Catalonia
1 Credit institutions	2,426,885	-	-	1,026	81	-	119,504	-	-	157,580
2 Government Bodies	9,427,554	99,314	16,603	25,702	12,139	47,880	6,524	40,465	68,073	62,068
2.1 Central Administration	8,722,101
2.2. Other	705,453	99,314	16,603	25,702	12,139	47,880	6,524	40,465	68,073	62,068
3 Other financial institutions	10,697,829	617,492	17,965	16,541	28	35	53	5,707	296	107,542
4 Non-financial companies and sole proprietors	20,975,587	2,474,839	808,109	199,174	376,439	856,012	275,416	487,297	512,334	2,497,317
4.1 Property construction and development	943,515	172,939	57,117	11,128	21,453	18,933	28,800	10,004	37,431	55,214
4.2 Civil engineering construction	814,511	73,242	13,152	2,718	10,333	39,343	31,346	7,357	17,051	141,888
4.3 Other purposes	19,217,561	2,228,658	737,840	185,328	344,653	797,736	215,270	469,936	457,852	2,300,215
4.3.1 Major corporates	13,220,866	1,206,992	445,091	74,967	197,447	515,212	116,543	257,734	216,479	1,665,229
4.3.2 SMEs and sole proprietors	5,996,695	1,021,666	292,749	110,361	147,206	282,524	98,727	212,202	241,373	634,986
5 Other home and ISFLSH (Private non-profit institutions serving households)	21,372,962	2,494,970	496,170	322,062	564,075	854,514	299,329	736,114	944,805	3,217,793
5.1 Residential properties	15,596,706	1,807,378	342,369	224,808	426,277	644,943	235,564	534,937	790,816	2,374,911
5.2. Consumer	234,587	29,840	5,474	4,304	4,282	12,164	4,222	7,954	9,797	30,042
5.3 Other purposes	5,541,669	657,752	148,327	92,950	133,516	197,407	59,543	193,223	144,192	812,840
SUBTOTAL	64,900,817	5,686,615	1,338,847	564,505	952,762	1,758,441	700,826	1,269,583	1,525,508	6,042,300
6 Less: Value corrections due to asset impairment not attributable to specific transactions	154,690
7 TOTAL	64,746,127

Concentration of risks by Activity and Geographical Area (Carrying amounts). Activity in Spain.

Information in 000s euros	TOTAL	Extremadura	Galicia	Madrid	Murcia	Navarra	Valencia Autonomous Region	Basque Country	La Rioja	Ceuta and Melilla
1 Credit institutions	2,426,885	2,218	31,079	2,010,862	912	-	30,881	72,742	-	-
2 Government Bodies	9,427,554	24,886	43,026	125,016	3,002	28,609	6,312	72,175	23,659	-
2.1 Central Administration	8,722,101
2.2. Other	705,453	24,886	43,026	125,016	3,002	28,609	6,312	72,175	23,659	-
3 Other financial institutions	10,697,829	2	202,588	9,195,426	464	100	72,169	461,410	12	-
4 Non-financial companies and sole proprietors	20,975,587	250,545	544,931	7,556,434	577,110	376,116	1,713,207	1,267,889	196,590	5,828
4.1 Property construction and development	943,515	5,730	10,750	246,872	70,903	8,694	130,111	27,980	29,456	-
4.2 Civil engineering construction	814,511	31,172	25,958	273,828	15,948	21,686	56,547	50,283	2,659	-
4.3 Other purposes	19,217,561	213,643	508,223	7,035,734	490,259	345,736	1,526,549	1,189,626	164,475	5,828
4.3.1 Major corporates	13,220,866	159,428	390,550	5,542,799	348,858	278,579	852,065	840,267	109,891	2,735
4.3.2 SMEs and sole proprietors	5,996,695	54,215	117,673	1,492,935	141,401	67,157	674,484	349,359	54,584	3,093
5 Other home and ISFLSH (Private non-profit institutions serving households)	21,372,962	156,326	438,839	7,339,974	383,308	138,283	1,796,603	1,087,630	95,290	6,877
5.1 Residential properties	15,596,706	116,738	305,721	5,178,762	290,786	100,247	1,287,788	851,492	76,948	6,221
5.2. Consumer	234,587	2,350	6,600	76,857	4,173	1,590	19,609	14,321	929	79
5.3 Other purposes	5,541,669	37,238	126,518	2,084,355	88,349	36,446	489,206	221,817	17,413	577
SUBTOTAL	64,900,817	433,977	1,260,463	26,227,712	964,796	543,108	3,619,172	2,961,846	315,551	12,705
6 Less: Value corrections due to asset impairment not attributable to specific transactions	154,690
7 TOTAL	64,746,127

50. Subsequent events

No events having a significant effect on these consolidated financial statements have occurred between the end of the reporting period and the date on which these statements were approved.

APPENDIX I - Related Party Transactions

	€000s
Related party income and expense			2012
	Significant Shareholders	Directors and Managers	Persons, companies or entities in the Group	Other related parties	Total

Expenses:
Financial expenses	-	372	-	653	1,025
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Leases	-	-	-	-	-
Receipt of services	-	-	-	-	-
Purchase of assets (finished or in progress)	-	-	-	-	-
Value corrections for bad and doubtful debts	-	-	-	-	-
Dividends paid	19,968	21,577	-	-	41,545
Other expenses	-	-	-	-	-
	19,968	21,949	-	653	42,570
Revenues:
Financial revenues	-	-	-	-	-
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Dividends received	-	-	-	20,961	20,961
Leases	-	-	-	-	-
Provision of services	-	-	-	-	-
Sale of assets (finished or in progress)	-	-	-	-	-
Gains on cancellation or disposal of assets	-	-	-	-	-
Other income	-	-	-	-	-
	-	-	-	20,961	20,961

APPENDIX I (cont.)
--------------------	--

	€000s
			31/12/2012
Other Transactions	Significant Shareholders	Directors and Managers	Persons, companies or entities in the Group	Other related parties	Total
Purchases of property, plant and equipment and intangible and other assets	-	-	-	-	-
Financing, loan and capital contribution agreements (lender)	-	26,332	-	-	26,332
Finance leases	-	-	-	-	-
Amortisation or cancellation of loans and lease contracts (lessor)	-	-	-	-	-
Sales of tangible, intangible or other assets	-	-	-	-	-
Financing, loan and capital contribution agreements (borrower)	-	-	-	8,607	8,607
Finance leases (lessee)	-	-	-	-	-
Amortisation or cancellation of loans and financial lease contracts (lessee)	-	-	-	-	-
Guarantees issued	19,270	390	-	390	20,050
Guarantees received	-	-	-	-	-
Commitments acquired	-	-	-	-	-
Commitments/guarantees cancelled	-	-	-	-	-
Dividends and other distributed profits	-	-	-	-	-
Other transactions	-	6,734	-	-	6,734

	€000s
Related party income and expense			2011
	Significant Shareholders	Directors and Managers	Persons, companies or entities in the Group	Other related parties	Total

Expenses:
Financial expenses	-	388	-	663	1,051
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Leases	-	-	-	-	-
Receipt of services	-	-	-	-	-
Purchase of assets (finished or in progress)	-	-	-	-	-
Value corrections for bad and doubtful debts	-	-	-	-	-
Dividends paid	20,482	16,472	-	-	36,954
Other expenses	-	-	-	-	-
	20,482	16,860	-	663	38,005
Revenues:			-
Financial revenues	-	-	-	-	-
Management or collaboration contracts	-	-	-	-	-
R&D transfers and licensing agreements	-	-	-	-	-
Dividends received	-	-	-	12,678	12,678
Leases	-	-	-	-	-
Provision of services	-	-	-	-	-
Sale of assets (finished or in progress)	-	-	-	-	-
Gains on cancellation or disposal of assets	-	-	-	-	-
Other income	-	-	-	-	-
	-	-	-	12,678	12,678

	€000s
Other Transactions			31/12/2011
	Significant Shareholders	Directors and Managers	Persons, companies or entities in the Group	Other related parties	Total

Purchases of property, plant and equipment and intangible and other assets	-	-	-	-	-
Financing, loan and capital contribution agreements (lender)	-	26,023	-	-	26,023
Financial lease contracts (lessor)	-	-	-	-	-
Amortisation or cancellation of loans and lease contracts (lessor)	-	-	-	-	-
Sales of tangible, intangible or other assets	-	-	-	-	-
Financing, loan and capital contribution agreements (borrower)	-	-	-	23,002	23,002
Finance leases (lessee)	-	-	-	-	-
Amortisation or cancellation of loans and lease contracts (lessee)	-	-	-	-	-
Guarantees issued	19,734	390	-	390	20,514
Guarantees received	-	-	-	-	-
Commitments acquired	-	-	-	-	-
Commitments/guarantees cancelled	-	-	-	-	-
Dividends and other distributed profits	-	-	-	-	-
Other transactions	-	8,002	-	83	8,085

APPENDIX II - SegmentedInformation

2012	Commercial Banking	Corporate Banking	LDA	Other Businesses	Total
NET INTEREST INCOME	271,403	400,914	40,825	(52,887)	660,255
Return on other equity instruments	-	-	2,190	9,601	11,791
Results of entities accounted for using the equity method	-	-	-	17,677	17,677
Fees and Commissions	128,472	108,877	(144)	(33,365)	203,840
Results from financial transactions and exchange differences	20,948	17,347	727	106,108	145,130
Other operating products/expenses	(33,865)	(2,405)	266,043	(14,425)	215,348

GROSS INCOME	386,958	524,733	309,641	32,709	1,254,041
Transformation costs	171,629	103,056	187,296	202,888	664,869
Losses from asset impairment	98,547	217,376	-	103,105	419,028
Provisions	-	-	-	(21)	(21)

OPERATINGPROFIT/(LOSS)	116,782	204,301	122,345	(273,305)	170,123
Other gains (net)	28,164	28,932	848	(42,000)	15,944

GROSS RESULT	88,618	175,369	121,497	(231,305)	154,179

Average assets for the segment	27,614,931	17,064,133	1,118,097	-	45,797,161
Average liabilities for the segment	15,788,701	8,740,387	732,626	-	25,261,714
Average off-balance sheet resources	6,444,609	638,942	-	-	7,083,551
			-	-
Costs incurred in acquiring assets	4,986	3,009	-	-	7,995
			-	-
Segment-to-segment net turnover	(94,749)	(47,099)	-	141,848	-
Services provided	21,024	10,339	-	(31,363)	-
Services received	115,772	57,439	-	(173,211)	-

2011	Commercial Banking	Corporate Banking	LDA	Other Businesses	Total
NET INTEREST INCOME	259,794	309,499	39,597	(66,215)	542,675
Return on other equity instruments	-	-	-	16,491	16,491
Results for institutions valued according to the equity method	-	-	(71)	14,746	14,675
Fees and Commissions	130,680	98,366	318	(30,481)	198,883
Results from financial operations and exchange differences	19,710	16,787	730	60,613	97,840
Other operating products/expenses	13,378	10,243	232,242	(21,947)	233,916

GROSS INCOME	423,562	434,895	272,816	(26,793)	1,104,480
Transformation costs	187,564	108,866	191,338	157,151	644,919
Losses from asset impairment	35,645	104,341	-	18,243	158,229
Provisions	-	-	-	28,175	28,175

OPERATINGPROFIT/(LOSS)	200,353	221,688	81,478	(230,362)	273,157
Other gains (net)	37,437	19,145	426	(23,999)	33,009

GROSS RESULT	162,916	202,543	81,052	(206,363)	240,148

Average assets for the segment	29,304,315	15,482,770	1,078,736	-	45,865,821
Average liabilities for the segment	13,645,268	7,849,164	738,556	-	22,232,988
Average off-balance sheet resources	6,069,759	724,787	-	-	6,794,546

Costs incurred in acquiring assets	5,063	3,088	-	-	8,151

Segment-to-segment net turnover	(97,623)	(48,469)	-	146,092	-
Services provided	25,557	11,998	-	(37,555)	-
Services received	123,180	60,467	-	(183,647)	-

€000s
2012	Ordinary income	Profit (loss)before tax	Average total assets
Andalusia	63,070	(13,913)	5,349,851
Balearic Islands	13,036	660	1,108,369
Castilla La Mancha-Extremadura	18,026	3,593	1,406,792
Catalonia	58,065	(3,048)	5,527,076
Canary Islands	23,299	(5,730)	1,775,695
Levante (Eastern Spain)	61,433	(95,395)	5,132,689
Madrid Corporate Banking	96,965	101,333	3,938,827
Madrid - East	33,944	(288)	4,048,957
Madrid - West	61,297	9,407	6,485,860
Navarre - Aragon - Rioja	39,546	(4,126)	2,383,660
North-Western Spain	45,907	(11,247)	3,328,657
Northern Spain	47,215	18,818	3,230,225
Remote networks	3,632	2,369	956,599
Consumer financing	49,211	28,135	323,272
Other business	45,609	123,611
Total	660,255	154,179	44,996,529

2011	Ordinary income	Profit (loss)before tax	Average total assets
Andalusia	54,921	14,275	5,359,827
Balearic Islands	9,527	3,169	1,113,628
Castilla La Mancha-Extremadura	14,671	4,749	1,409,877
Catalonia	49,462	13,393	5,467,321
Las Palmas	11,631	2,717	1,086,053
Levante (Eastern Spain)	57,205	7,363	5,184,876
Madrid Corporate Banking	56,318	62,565	3,024,134
Madrid - East	32,839	13,254	4,146,732
Madrid - West	57,797	37,546	6,501,870
Navarre - Aragon - Rioja	32,114	14,138	2,331,222
North-Western Spain	39,876	14,041	3,381,548
Northern Spain	41,086	27,701	3,278,547
Tenerife	9,869	4,506	767,691
Remote networks	4,758	5,123	1,032,746
Consumer financing	45,034	13,585	325,737
Other business	25,567	2,023
Total	542,675	240,148	44,411,809

ANNEX III

Financial Statements of Bankinter, S.A. as at 31 December 2012 and 2011

BALANCE SHEETSASAT 31 DECEMBER 2012 AND 2011

(€000s)

ASSETS	31/12/2012	31/12/2011 (*)	LIABILITIES AND EQUITY	31/12/2012	31/12/2011 (*)
CASH AND BALANCES WITH CENTRAL BANKS	665,364		412,791 LIABILITIES:
			FINANCIALASSETSHELDFORTRADING:	1,791,953	2,353,904
FINANCIALASSETSHELDFORTRADING:	2,109,264		2,415,506 Trading derivatives	429,221	850,593
Debt instruments	1,391,681		1,768,879 Short positions in securities	1,362,732	1,503,311
Equity instruments	61,072		101,733 Other financial liabilities	-	-
Trading derivatives	656,511	544,894
Memorandum items: Loaned or advanced as collateral	1,391,681		1,768,879 OTHER FINANCIAL LIABILITIES AT FAIR VALUE
			WITH CHANGES IN PROFIT AND LOSS:	-	-
OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS	39,860		31,377 Customer deposits	-	-
Equity instruments	39,860	31,377
Memorandum items: Loaned or advanced as collateral	-	-	FINANCIAL LIABILITIES AT AMORTISED COST	56,458,746	54,892,745
	-	-	Deposits from central banks	9,580,854	7,006,897
			Deposits from credit institutions	4,012,079	3,278,006
FINANCIAL ASSETS AVAILABLE FOR SALE:	9,477,068		5,608,126 Customer deposits	31,819,731	30,644,630
Debt instruments	9,390,319		5,552,595 Marketable debt securities	9,714,894	12,341,848
Equity instruments	86,749		55,531 Subordinated liabilities	767,851	955,701

Memorandum items: Loaned or advanced as collateral	4,321,260		4,686,364 Other financial liabilities	563,337	665,663

LOANS AND RECEIVABLES:	44,975,315		47,312,980 MACRO-HEDGING ADJUSTMENTS TO FINANCIAL LIABILITIES	-	-
Deposits with credit institutions	1,119,745	1,167,570
Loans and advances to customers	43,772,699		46,145,410 HEDGING DERIVATIVES	43,100	68,677
Debt instruments	82,871	-
Memorandum items: Loaned or advanced as collateral	-	-	LIABILITIES LINKED TO NON-CURRENT ASSETS HELD FOR SALE	-	-

HELD TO MATURITY INVESTMENTS	2,755,355		3,150,931 LIABILITIES UNDER INSURANCE CONTRACTS	-	-
Memorandum items: Loaned or advanced as collateral	-		122,730 PROVISIONS:	47,587	61,336
			Pension funds and similar obligations	2,811	5,245
ADJUSTMENTS TO FINANCIAL ASSETS BY MACRO-HEDGING	3,018		11,463 Allowances for taxes and other legal contingencies	38,024	-
			Provisions for contingent risks and commitments	5,139	20,626
HEDGING DERIVATIVES	152,201		118,651 Other provisions	1,613	35,465

NON-CURRENT ASSETS HELD FOR SALE	33,216		36,214 TAX LIABILITIES	129,070	113,350
			Current	60,319	54,615
INVESTMENTS	573,159		559,271 Deferred	68,751	58,735
Associates	8,422	3,412
Jointly controlled entities	162		162 OTHER LIABILITIES	107,555	121,567
Group Companies	564,575	555,697
			TOTAL LIABILITIES	58,578,011	57,611,579
PENSION-LINKED INSURANCE AGREEMENTS	2,750	5,140
			EQUITY:
REINSURANCE ASSETS	-	-
			EQUITY:	2,841,229	2,710,008
TANGIBLE ASSETS:	366,400		385,722 Capital-	169,142	143,076
Property, plant and equipment	366,400		385,722 Registered	169,142	143,076
For internal use	337,151		354,175 Less- uncalled capital	-	-
Assigned on lease	29,249		31,547 Issue premium	1,118,186	737,079
Real estate investments	-	-	Reserves	1,379,410	1,330,449
Memorandum item: acquired under finance lease	-	-	Other equity instruments	72,633	404,812
			Of compound financial instruments		-
INTANGIBLE ASSETS:	-	-	Other equity instruments	72,633	404,812
Goodwill	-	-	Less - Treasury shares	(225)	-308
Other intangible assets	-	-	Profit (loss) for the year	148,208	153,416
			Less - Dividends and remunerations	(46,125)	-58,516
TAX ASSETS:	260,047	236,711
Current	108,845		71,000 VALUATION ADJUSTMENTS:	20,586	-16,650
Deferred	151,202		165,711 Financial assets available for sale	20,377	-16,856
			Exchange differences	209	206
OTHER ASSETS	26,809	20,054

TOTAL ASSETS	61,439,826	60,304,937	TOTAL LIABILITIES AND EQUITY	61,439,826	60,304,937
MEMORANDUMITEMS
CONTINGENT RISKS	6,580,585	4,163,136
CONTINGENT COMMITMENTS	10,188,675	8,220,466

APPENDIX III (Continued). INCOMESTATEMENT FORTHE YEARS ENDED 31 December 2012 AND 2011 (€000s)

		(Debit) Credit
	2012	2011 (*)
INTEREST AND SIMILAR INCOME	1,667,728	1,578,754
INTEREST EXPENSE AND SIMILAR CHARGES		(1,179,590) (1,165,778)
NET INTEREST INCOME	488,138	412,976
INCOME FROM EQUITY INSTRUMENTS	38,485	72,445
FEES AND COMMISSIONS INCOME	246,994	238,991
FEES AND COMMISSIONS EXPENSE	(71,709)	(70,763)
GAINS / LOSSES ON FINANCIAL ASSETS AND LIABILITIES:	155,457	86,188
Held for trading	86,567	42,319
Other financial assets at fair value through profit and loss account	(1,952)	97
Financial instruments not measured at fair value through profit and loss account	71,449	42,604
Other	(607)	1,168
EXCHANGE DIFFERENCES (net)	40,312	38,678
OTHER OPERATING INCOME:	30,862	31,580
Other operating income	30,862	31,580
OTHER OPERATING EXPENSES:	(77,228)	(26,050)
Other operating expenses	(77,228)	(26,050)
GROSS INCOME	851,311	784,045

ADMINISTRATIVE COSTS:	(428,610)	(413,896)
Personnel expenses	(219,140)	(193,581)
Other general administrative expenses	(209,470)	(220,315)
DEPRECIATION AND AMORTISATION	(28,004)	(26,064)
PROVISIONS (NET)	15,078	(28,380)
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET):	(253,714)	(162,679)
Loans and receivables	(251,646)	(161,623)
Other financial instruments not measured at fair value through profit and loss account	(2,068)	(1,056)
PROFIT FROM OPERATIONS	156,061	153,026

IMPAIRMENT LOSSES ON OTHER ASSETS (net):	-	3,406
Goodwill and other intangible assets	-	-
Other assets	-	3,406
GAINS / (LOSSES) ON DERECOGNITION OF ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE	38,130	30,647
GAINS / LOSSES ON NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS	(6,233)	188
PROFIT BEFORE TAX	187,958	187,267
INCOME TAX	(39,750)	(33,851)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS	148,208	153,416
PROFIT (LOSS) FROM DISCONTINUED OPERATIONS (net)	-	-
RESULT FOR THE FINANCIAL YEAR	148,208	153,416
EARNINGS PER SHARE:
Basic earnings (euros)	0.28	0.32
Diluted earnings (euros)	0.27	0.29

APPENDIX III (Continued) COMPREHENSIVESTATEMENTS OF INCOME FORTHE YEARS ENDED 31 December 2012 AND 2011 (€000s)

	2012	Financial year 2011 (*)
RESULT FOR THE FINANCIAL YEAR	148,208	153,416
OTHER COMPREHENSIVE INCOME	37,236	6,732
Financial assets available for sale	53,190	9,610
Gains (losses) on valuation	78,655	15,112
Amounts transferred to profit and loss	(25,465)	(5,502)
Other reclassifications	-	-
Cash flow hedging	-	-
Gains (losses) on valuation	-	-
Amounts transferred to profit and loss	-	-
Amounts transferred to the initial value of hedged items	-	-
Other reclassifications	-	-
Hedging of net investments in foreign operations	-	-
Gains (losses) on valuation	-	-
Amounts transferred to profit and loss	-	-
Other reclassifications	-	-
Exchange differences	4	7
Gains (losses) on valuation	4	71
Amounts transferred to profit and loss	-	(64)
Other reclassifications	-	-
Non-current assets for sale	-	-
Gains (losses) on valuation	-	-
Amounts transferred to profit and loss	-	-
Other reclassifications	-	-
Actuarial gains (losses) on pension plans	-	-
Statement of comprehensive income	-	-
Income tax	(15,958)	(2,885)
TOTAL COMPREHENSIVE INCOME	185,444	160,148

APPENDIX III (Continued) COMPREHENSIVESTATEMENTS OF CHANGES IN CONSOLIDATED EQUITY FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

	Capital	Issue premium	Reserves	Other equity instruments	Equity Less - Treasury shares	Profit (loss) for the year	Less - Divi dends and remunerations	Total Equity	Valuation ad justments	Total

CLOSING BALANCE AT 31 December 2011	143,076	737,079	1,330,449	404,812	(308)	153,416	(58,516)	2,710,008	(16,650)	2,693,358
Adjustments due to changes in accounting criteria
Adjustments due to errors
ADJUSTED OPENING BALANCE	143,076	737,079	1,330,449	404,812	(308)	153,416	(58,516)	2,710,008	(16,650)	2,693,358
Total comprehensive income	-	-	-	-	-	148,208	-	148,208	37,236	185,444
Other changes in equity:	26,066	381,107	48,961	(332,179)	83	(153,416)	12,391	(16,987)	-	(16,987)
Capital increases	26,066	381,107	-	(332,179)	-	-	-	74,994	-	74,994
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 to financial liabilities	-	-	-	-	-	-	-	-	-	-
Distribution of dividends / Shareholder remuneration	-	-	-	-	-	-	(64,496)	(64,496)	-	(64,496)
Transactions with own equity instruments (net)	-	-	(185)	-	83	-	-	(102)	-	(102)
Transfer between net worth entries	-	-	76,529	-	-	(153,416)	76,887	-	-	-
Increases (reductions) due to business combinations	-	-	-	-	-	-	-	-	-	-
Payments with equity instruments	-	-	(27,383)	-	-	-	-	(27,383)	-	(27,383)
Other increases (reductions) in equity	-	-	-	-	-	-	-	-	-	-
CLOSING BALANCE AT 31 December 2012	169,142	1,118,186	1,379,410	72,633	(225)	148,208	(46,125)	2,841,229	20,586	2,861,815

APPENDIX III (Continued).

					Equity
	Capital	Issue premium	Reserves	Other equity instruments	Less - Treasury shares	Profit (loss) for the year	Less - Dividends and remunerations	Total Equity	Valuation adjustments	Total

CLOSING BALANCE AT 31 DECEMBER 2010	142,034	737,079	1,341,827	-	-	77,131	(74,512)	2,223,559	(23,382)	2,200,177
Adjustments due to changes in accounting criteria
Adjustments due to errors
ADJUSTED OPENING BALANCE	142,034	737,079	1,341,827	-	-	77,131	(74,512)	2,223,559	(23,382)	2,200,177
Total comprehensive income	-	-	-	-	-	153,416	-	153,416	6,732	160,148
Other changes in equity:	1,042		(11,378)	404,812	(308)	(77,131)	15,996	333,033	-	333,033
Capital increases	1,042		(1,042)	-	-	-	-		-
Capital reductions	-	-	-	-	-	-	-	-	-	-
Conversion of financial liabilities into capital	-	-	-	175,000	-	-	-	175,000	-	175,000
Increases in other equity instruments	-	-	-	229,812	-	-	-	229,812	-	229,812
Reclassification of financial liabilities to other equity instruments	-	-	-	-	-	-	-	-	-	-
Reclassification of other equity instruments to financial liabilities	-	-	-	-	-	-	-	-	-	-
Distribution of dividends / Shareholder remuneration	-	-	-	-	-	-	(58,516)	(58,516)	-	(58,516)
Transactions with own equity instruments (net)	-	-	(184)	-	(308)	-	-	(492)	-	(492)
Transfer between net worth entries	-	-	2,619	-	-	(77,131)	74,512	-	-	-
Increases (reductions) due to business combinations	-	-	-	-	-	-	-	-	-	-
Payments with equity instruments	-	-	(12,771)	-	-	-	-	(12,771)	-	(12,771)
Other increases (reductions) in equity	-	-	-	-	-	-	-	-	-	-
CLOSING BALANCE AT 31 December 2011	143,076	737,079	1,330,449	404,812	(308)	153,416	(58,516)	2,710,008	(16,650)	2,693,358

APPENDIX III (Continued).

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011

(€000s)

	2012	Financial year 2011 (*)
NET CASH FLOWS FROM OPERATIONS	(144,197)	234,285
Profit (loss) for the year	148,208	153,416
Adjustments to obtain cash flow from operating activities	283,909	256,861
Other adjustments	255,905	230,797
Depreciation and Amortisation	28,004	26,064
Net increase/decrease in operating assets	(1,480,458)	(4,448,235)
Held for trading	306,242	(539,672)
Other financial assets at fair value through profit or loss	(8,483)	4,350
Financial assets available for sale	(3,817,819)	(851,834)
Loans and receivables	2,078,572	(3,070,098)
Other operating assets	(38,970)	9,019
Net increase/decrease in operating liabilities	839,602	4,237,850
Held for trading	(561,951)	418,219
Other financial assets at fair value through profit or loss	-	(88,745)
Financial liabilities at amortised cost	1,412,980	3,857,920
Other operating liabilities	(11,427)	50,456
Corporation tax collections/payments	64,542	34,393

NET CASH FLOWS FROM INVESTING ACTIVITIES:	405,926	23,259
Payments	(41,433)	(99,200)
Tangible assets	(11,794)	(64,462)
Intangible assets	(8,062)	(8,062)
Investments	(21,577)	(26,676)
Non-current assets held for sale and associated liabilities	-	-
Held to maturity investments	-	-
Collections	447,359	122,459
Tangible assets	1,531	26,689
Intangible assets	-	-
Investments	36,232	2,100
Subsidiaries and other business units		5,028
Non-current assets held for sale	19,488
Held to maturity investments	390,108	88,642
NET CASH FLOWS FROM FINANCING ACTIVITIES	2,794	170,968
Payments	(73,921)	(63,669)
Dividends	(72,160)	(58,352)
Subordinated liabilities	-	-
Amortisation of equity instruments	-	-
Acquisition of own shares (capital contributions) (other than savings banks)	(1,761)	(5,317)
Other payments linked to financing activities	-	-
Collections	76,715	234,637
Subordinated liabilities	-	-
Issuance of equity instruments	74,993	229,812
Disposal of own shares/capital contributions (other than savings banks)	1,722	4,825
Other inflows linked to financing activities		-
EFFECT OF EXCHANGE-RATE VARIATIONS	-	-
EFFECT OF CHANGES INCASH ANDCASH EQUIVALENTS	264,523	428,512
CASH AND CASHEQUIVALENTS AT START OF PERIOD	624,907	196,395
CASH AND CASH EQUIVALENTS AT END OF PERIOD	889,430	624,907

MEMORANDUM ITEMS:
BREAKDOWN OF CASH AND CASHEQUIVALENTS
Cash	120,833	114,747
Balances equivalent to cash at central banks	544,531	298,044
Other financial assets	224,066	212,116
Total cash and cash equivalents at end of period	889,430	624,907

ANNEX IV Individualised information on certain issues, buybacks or reimbursements of debt securities

	Details of the Issuing Institution			Details of Issues carried out in 2012 (a)
Name	Relationship with the Group	Country	Credit rating of Issuer or Issue	ISIN code	Type of Security	Type of Transaction	Date of transaction	Amount of the Issue, Buy-back or Reim- bursement (€000s)	Outstanding balance as at 31- 12-2012 (thousands of euros)	Interest Rate	Market on which traded	Type of Guarantee Granted	Risks that the Group would assume in addition to the guarantee
Bankinter Empresas 1 FTA	Subsidiary	SPAIN	A3	ES0313402010	Securitisation bonds	Depreciation and Amortisation	18/06/2012	30,600	-	EURIBOR 3m + 0.50%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (57.52%)
Bankinter Empresas 1 FTA	Subsidiary	SPAIN	Baa3	ES0313402028	Securitisation bonds	Depreciation and Amortisation	18/06/2012	71,000	-	EURIBOR 3m + 0.70%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhancement (39.43%)
Bankinter S.A.	Parent company	SPAIN	Aaa/AA+	ES0313679450	Backed senior	Depreciation and Amortisation	24/02/2012	744,700	-	3.00%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A	ES0313679484	Senior debt	Partial amortisation	29/03/2012	138,000	762,000	EURIBOR 3m + 0.95%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A	ES0313679484	Senior debt	Partial amortisation	26/06/2012	263,950	498,500	EURIBOR 3m + 0.95%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	Aa3/A	ES0313679443	Senior debt	Depreciation and Amortisation	21/06/2012	856,000	-	EURIBOR 3m + 0.14%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	NA	ES0313679575	Convertible Subordinated Bonds	Issue	29/03/2012	162,000	12,831	7.00%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	NA	ES0313679575	Convertible Subordinated Bonds	Issue	29/03/2012	169,856	59,800	7.00%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter Emisiones, S.A., a single shareholder company Subsidiary		SPAIN	B2/CCC+	ES0113549002	Series 1 Preferred Shares Issue		30/08/2012	168,164	60,844	3-mth EURIBOR +3.75%, min. 4% - max 7%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter, S.A.	Parent company	SPAIN	Ba1/BB-	ES0313679625	Senior Debt	Depreciation and Amortisation	13/07/2012	100,000	100,000	EURIBOR 3m+1.80%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter, S.A.	Parent company	SPAIN	Ba2/	ES0213679022	Subordinated Debt	Depreciation and Amortisation	18/12/2012	20,370	-	5.70%	AIA	-	Credit Enhancement (0%)
Bankinter, S.A.	Parent company	SPAIN	A3/A	ES0313679079	Mortgage bond	Depreciation and Amortisation Parcial	06/11/2012	600,000	1,400,000	2.625%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0313679111	Mortgage bond	Depreciation and Amortisation Parcial	06/11/2012	550,000	550,000	4.875%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0413679095	Mortgage bond	Depreciation and Amortisation Parcial	06/11/2012	100,000	650,000	3.75%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0413679145	Mortgage bond	Depreciation and Amortisation	06/11/2012	1,500,000	-	4.25%	AIAF secondary fixed-income market	-	Credit Enhancement (0%)

Details of the Issuing Institution Details of Issues carried out in 2012 (a)
Name	Relationship with the Group	Country	Credit rating of Issuer or Issue	ISIN code	Type of Security	Type of Transac tion	Date of trans action	Amount of the Issue, Buy-back or Reim bursement (€000s)	Outstand ing balance as at 31- 12-2012 (thousands of euros)	Interest Rate	Market on which traded	Type of Guar antee Granted	Risks that the Group would assume in addition to the guar antee
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0413679194	Mortgage bond Issue		08/08/2012	100,000	100,000	EURIBOR 3m+4.90%	AIAF second ary fixed-in come market -		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0413679202	Mortgage bond Issue		30/10/2012	500,000	500,000	3.875%	AIAF second ary fixed-in come market -		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0413679210	Mortgage bond Issue		06/11/2012	1,250,000	1,250,000	EURIBOR 3m+4.00%	AIAF second ary fixed-in come market -		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0413679228	Mortgage bond Issue		16/11/2012	600,000	600,000	EURIBOR 3m+4.00%	AIAF second ary fixed-in come market -		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A3/A	ES0413679236	Mortgage bond Issue		16/11/2012	700,000	700,000	EURIBOR 3m+4.00%	AIAF second ary fixed-in come market -		Credit Enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	A2/BBB+	ES0313679807	Senior Debt	Depreciation and Amortisation	10/11/2012	40,000	-	Average 3 mth EURIBOR + 1.8%	AIAF second ary fixed-in come market -		Credit enhancement (0%)
Bankinter 14FTA	Subsidiary	SPAIN	Aaa/AAA	ES0313271001	Asset securiti sation bonds	Depreciation and Amortisation	17/09/2012	-	-	3 mth EURIBOR + 0.070%	AIAF second ary fixed-in come market	Mortgage portfolio	Credit enhancement (10.10%)
Bankinter 14FTA	Subsidiary	SPAIN	A3/A+	ES0313271019	Asset securiti sation bonds	Depreciation and Amortisation	17/09/2012	430,783	-	3 mth EURIBOR + 0.150%	AIAF second ary fixed-in come market	Mortgage portfolio	Credit enhancement (10.10%)
Bankinter 14FTA	Subsidiary	SPAIN	A3/A+	ES0313271027	Asset securiti sation bonds	Depreciation and Amortisation	17/09/2012	172,700	-	3 mth EURIBOR + +0.230%	AIAF second ary fixed-in come market	Mortgage portfolio	Credit enhancement (10.10%)
Bankinter 14FTA	Subsidiary	SPAIN	A3/A+	ES0313271035	Asset securiti sation bonds	Depreciation and Amortisation	17/09/2012	14,100	-	3 mth EURIBOR + +0.300%	AIAF second ary fixed-in come market	Mortgage portfolio	Credit enhancement (7.95%)
Bankinter 14FTA	Subsidiary	SPAIN	A3/A-	ES0313271043	Asset securiti sation bonds	Depreciation and Amortisation	17/09/2012	14,200	-	3 mth EURIBOR + +0.400%	AIAF second ary fixed-in come market	Mortgage portfolio	Credit enhancement (5.78%)
Bankinter 14FTA	Subsidiary	SPAIN	Ba2/BB-	ES0313271050	Asset securiti sation bonds	Depreciation and Amortisation	17/09/2012	9,500	-	3 mth EURIBOR + +2.500%	AIAF second ary fixed-in come market	Mortgage portfolio	Credit enhancement (4.33%)
Bankinter 14FTA	Subsidiary	SPAIN	C/D	ES0313271068	Asset securiti sation bonds	Depreciation and Amortisation	17/09/2012	14,200	-	3 mth EURIBOR + +3.900%	AIAF second ary fixed-in come market	Mortgage portfolio	Credit enhancement (2.17%)
Bankinter S.A.	Parent company	SPAIN	Ba1/BB	ES0313679765	Senior Debt	Depreciation and Amortisation	26/10/2012	900,000	-	4.625%	AIAF second ary fixed-in come market -		Credit enhancement (0%)
Bankinter S.A.	Parent company	SPAIN	Ba1/BB	ES0313679765	Senior Debt	Depreciation and Amortisation	27/12/2012	500,000	-	4.625%	AIAF second ary fixed-in come market -		Credit enhancement (0%)

	Details of the Issuing Institution			Details of Issues carried out in 2012 (a)
Name	Relationship with the Group	Country	Credit rating of Issuer or Issue	ISIN code	Type of Security	Type of Transac tion	Date of transac tion	Amount of the Issue, Buy-back or Reim bursement (€000s)	Outstand ing bal ance as at 31-12-2012 (thousands of euros)	Interest Rate	Market on which traded	Type of Guarantee Granted	Risks that the Group would as sume in addition to the guarantee
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679160	Mortgage bond Issue		24/01/2012	1,200,000	1,200,000	4.675%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679152	Mortgage bond Issue		26/01/2012	200,000	200,000	EURIBOR 3m + 3.50%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (0%)
Bankinter S.A.	Controlling Company (*)	SPAIN	Aa2	ES0413679178	Mortgage bond Issue		22/03/2012	1,000,000	1,000,000	4.125%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (0%)
Bankinter S.A.	Controlling Company (*)	SPAIN	A1	ES0413679186	Mortgage bond Issue		11/06/2012	500,000	500,000	EURIBOR 3m + 3.00%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	A3/BBB+	ES0213679139	Backed senior	Issue	14/06/2012	280,000	280,000	EURIBOR 3m + 4.25%	AIAF second ary fixed income market -		Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	A3/BBB+	ES0313679948	Backed senior	Issue	14/06/2012	320,000	320,000	EURIBOR 3m + 4.25%	AIAF second ary fixed income market -		Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	A2/A:	ES0313679815	Backed senior	Issue	24/02/2012	800,000	800,000	EURIBOR 3m + 2.80%	AIAF second ary fixed income market -		Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	A2/BBB+	ES0313679807	Senior Debt	Issue	10/02/2012	40,000	40,000	Average 3 mth EURIBOR + 1.8%	AIAF second ary fixed income market -		Credit enhance ment (0%)
TDA 19	Parent company	SPAIN	Aaa/AAA	Nominative	Mortgage bond	Depreciation and Amortisation	05/03/2012	300,000	-	2.25%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/AA+	ES0313679476	Backed senior	Depreciation and Amortisation	15/06/2012	36,500,000	-	3 mth yen LI BOR + 0.62%	AIAF second ary fixed income market -		Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/AA+	ES0313679468	Backed senior	Depreciation and Amortisation	15/06/2012	35,400,000	-	1.22%	AIAF second ary fixed income market -		Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/AA+	ES0313679450	Backed senior	Depreciation and Amortisation	15/06/2012	744,700	-	3.00%	AIAF second ary fixed income market -		Credit Enhance ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/AAA	ES0413679053	Mortgage bond	Depreciation and Amortisation	15/06/2012	323,200	-	3.50%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (0%)
Bankinter 17FTA	Subsidiary	SPAIN	A+/Aa1	ES0313582001	Asset securitisa tion bonds	Depreciation and Amortisation	18/01/2012	720,497	-	EURIBOR 3m + 0.30%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (8.68%)
Bankinter 17FTA	Subsidiary	SPAIN	A/Ba1	ES0313582019	Asset securitisa tion bonds	Depreciation and Amortisation	18/01/2012	34,000	-	EURIBOR 3m + 0.50%	AIAF second ary fixed income market	Mortgage portfolio	Credit Enhance ment (4.43%)

	Details of the Issuing Institution		Details of Issues carried out in 2012 (a)
Name	Relationship with the Group	Country	Credit rating of Issuer or Issue	ISIN code	Type of Security	Type of ransaction	Date of transaction	Amount of the Issue, Buy-back or Reimburse ment (€000s)	Outstanding balance as at 31-12-2012 (thousands of euros)	Interest Rate	Market on which traded	Type of Guarantee Granted	Risks that the Group would as sume in addition to the guarantee
Bankinter 17FTA	Subsidiary	SPAIN	BBB/Caa2	ES0313582027	Asset securiti sation bonds	Depreciation and Amortisa tion	18/01/2012	13,500	-	EURIBOR 3m + 0.70%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (2.49%)
Bankinter 15FTH	Subsidiary	SPAIN	Aaa/A+	ES0313272017	Asset securiti sation bonds	Depreciation and Amortisa tion	21/01/2012	691,626	-	EURIBOR 3m + 0.18%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (6.16%)
Bankinter 15FTH	Subsidiary	SPAIN	AAA/A+	ES0313272025	Asset securiti sation bonds	Depreciation and Amortisa tion	21/01/2012	345,000	-	EURIBOR 3m + 0.27%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (6.16%)
Bankinter 15FTH	Subsidiary	SPAIN	Aa3/A+	ES0313272033	Asset securiti sation bonds	Depreciation and Amortisa tion	21/01/2012	15,800	-	EURIBOR 3m + 0.35%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (4.70%)
Bankinter 15FTH	Subsidiary	SPAIN	Baa2/A-	ES0313272041	Asset securiti sation bonds	Depreciation and Amortisa tion	21/01/2012	15,800	-	EURIBOR 3m + 0.45%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (3.24%)
Bankinter 15FTH	Subsidiary	SPAIN	Ba3/BB	ES0313272058	Asset securiti sation bonds	Depreciation and Amortisa tion	21/01/2012	15,000	-	EURIBOR 3m + 2.65%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (1.86%)
Bankinter 15FTH	Subsidiary	SPAIN	C/D	ES0313272066	Asset securiti sation bonds	Depreciation and Amortisa tion	21/01/2012	25,500	-	EURIBOR 3m + 3.90%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (0%)
Bankinter 18FTA	Subsidiary	SPAIN	Aaa/AAA	ES0313401004	Asset securiti sation bonds	Depreciation and Amortisa tion	23/01/2012	1,159,675	-	EURIBOR 3m + 0.30%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (11.03%)
Bankinter 18FTA	Subsidiary	SPAIN	Aa3/A	ES0313401012	Asset securiti sation bonds	Depreciation and Amortisa tion	23/01/2012	65,300	-	EURIBOR 3m + 0.50%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (5.83%)
Bankinter 18FTA	Subsidiary	SPAIN	A2/BBB	ES0313401020	Asset securiti sation bonds	Depreciation and Amortisa tion	23/01/2012	30,000	-	EURIBOR 3m + 0.70%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (3.44%)
Bankinter Leasing	Subsidiary	SPAIN	A1	ES0314787005	Asset securiti sation bonds	Depreciation and Amortisa tion	16/04/2012	70,914	-	EURIBOR 3m + 0.30%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (38.74%)
Bankinter Leasing	Subsidiary	SPAIN	Ba1	ES0314787013	Asset securiti sation bonds	Depreciation and Amortisa tion	16/04/2012	21,400	-	EURIBOR 3m + 0.50%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (18.23%)
Bankinter Leasing	Subsidiary	SPAIN	Caa1	ES0314787021	Asset securitisa tion bonds	Depreciation and Amortisation	16/04/2012	12,000	-	EURIBOR 3m + 0.80%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (6.73%)
Bankinter Empresas 1 FTA	Subsidiary	SPAIN	Aa/AAA	ES0313402002	Securitisation bonds	Depreciation and Amortisation	18/06/2012	290,949	-	EURIBOR 3m + 0.30%	AIAF secondary fixed-income market	Mortgage portfolio	Credit Enhance ment (65.32%)

(a) In the case of securities in foreign currency, the relevant amounts have been converted into euros at the

closing exchange rate for the year.

	Details of the Issuing Institution Details of Issues carried out in 2011 (a)
Name	Relation to the Bank	Country	Credit rating of Issuer or Issue	ISIN code	Type of Security	Rate Transaction	Date of Transaction	Amount of the Issue, Buy-back or Redemption (€000s)	Outstanding balance as at 31/12/2011 (€000s)	Type of Rate	Market on which traded	Type of Guar- antee Granted	Risks that the Group would as- sume in addition to the guarantee
Bankinter TDA 19	Subsidiary	SPAIN	Aaa/AAA	ES0315945008	Mortgage portfolio	Depreciation and Amortisa- tion	04/05/2011	1,200,000	-	2.25%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter 20 FTA	Subsidiary	SPAIN	Aaa/AA-	ES0313438006	Mortgage portfolio	Depreciation and Amortisa- tion	09/08/2011	1,531,954	-	Eur 3m+0.30%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit enhance- ment
Bankinter 19 FTA	Subsidiary	SPAIN	Aaa/AA-	ES0313533004	Mortgage portfolio	Depreciation and Amortisa- tion	20/06/2011	1,354,799	-	Eur 3m+0.30%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter 19 FTA	Subsidiary	SPAIN	A1	ES0313533012	Mortgage portfolio	Depreciation and Amortisa- tion	20/06/2011	20,700	-	Eur 3m+0.50%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter 19 FTA	Subsidiary	SPAIN	Baa3	ES0313533020	Mortgage portfolio	Depreciation and Amortisa- tion	20/06/2011	31,400	-	Eur 3m+0.70%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter 16 FTA	Subsidiary	SPAIN	Aaa/A+	ES0313480008	Mortgage portfolio	Depreciation and Amortisa- tion	16/12/2011	1,431,066	-	Eur 3m+0.30%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter 16 FTA	Subsidiary	SPAIN	Aa2/A+	ES0313480016	Mortgage portfolio	Depreciation and Amortisa- tion	16/12/2011	46,000	-	Eur 3m+0.40%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter 16 FTA	Subsidiary	SPAIN	A3/BBB	ES0313480024	Mortgage portfolio	Depreciation and Amortisa- tion	16/12/2011	38,000	-	Eur 3m+0.50%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter 16 FTA	Subsidiary	SPAIN	Ba2/BB	ES0313480032	Mortgage portfolio	Depreciation and Amortisa- tion	16/12/2011	34,000	-	Eur 3m+2.50%	AIAF second- ary fixed-in- come market	Mortgage portfolio	Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	A2/A:	ES0313679625	Senior Debt	Issue	13/07/2011	100,000	100,000	EURIBOR 3m+0.50%	AIAF second- ary fixed-in- come market		Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	A1/AA-	ES0313679765	Senior Debt	Issue	29/12/2011	1,400,000	1,400,000	4.625%	AIAF second- ary fixed-in- come market		Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	A2/A-	ES0213679196	Subordinated Debt Issue		10/02/2011	47,250	47,250	6.375%	AIAF second- ary fixed-in- come market
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679111	Mortgage bond	Issue	20/01/2011	500,000	500,000	4.875%	AIAF second- ary fixed-in- come market	Mortgage portfolio
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679103	Mortgage bond	Issue	14/01/2011	20,000	20,000	3.90%	AIAF second- ary fixed-in- come market	Mortgage portfolio
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679061	Mortgage bond	Issue	17/03/2011	400,000	400,000	3.25%	AIAF second- ary fixed-in- come market	Mortgage portfolio
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679079	Mortgage bond	Issue	13/05/2011	600,000	600,000	2.625%	AIAF second- ary fixed-in- come market	Mortgage portfolio

(b) In the case of securities in foreign currency, the relevant amounts have been converted into euros at the closing exchange rate for the year.

(a) In the case of securities in foreign currency, the relevant amounts have been converted into euros at the

closing exchange rate for the year.

	Details of the Issuing Institution Details of Issues carried out in 2011 (a)
								Amount of the	Outstanding				Risks that the
Name	Relation to the Bank	Country	Credit rating of Issuer or Issue	ISIN code	Type of Security	Rate Transaction	Date of Transaction	Issue, Buy-back or Redemption (€000s)	balance as at 31/12/2011 (€000s)	Type of Rate	Market on which traded	Type of Guaran- tee Granted	Group would as- sume in addition to the guarantee
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679111	Mortgage bond	Issue	13/05/2011	600,000	600,000	4.875%	AIAF secondary fixed-income market	Mortgage port- folio
											AIAF secondary fixed-income	Mortgage port-
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679129	Mortgage bond	Issue	28/09/2011	1,000,000	1,000,000	4.25%	market AIAF secondary fixed-income	folio Mortgage port-
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679137	Mortgage bond	Issue	28/09/2011	10,000	10,000	4.25%	market AIAF secondary	folio
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679145	Mortgage bond	Issue	01/12/2011	1,500,000	1,500,000	4.25%	fixed-income market	Mortgage port- folio
Bankinter S.A.	Parent company	SPAIN	Aaa	ES0413679129	Mortgage bond	Issue	19/12/2011	1,000,000	1,000,000	4.25%	AIAF secondary fixed-income market	Mortgage port- folio
						Depreciation and Amortisa-					AIAF secondary fixed-income
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0213679139	Subordinated Debt	tion Depreciation and Amortisa-	10/02/2011	42,200	-	Eur3m + 0.50%	market AIAF secondary fixed-income
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0213679147	Subordinated Debt	tion Depreciation	10/02/2011	11,000	-	Eur3m + 0.80%	market AIAF secondary
Bankinter S.A.	Parent company	SPAIN	A1/A-	ES0213679170	Subordinated Debt	and Amortisa- tion	10/02/2011	600	-	Eur3m + 0.32%	fixed-income market
Bankinter S.A.	Parent company	SPAIN	Aaa/A+	ES0313679450	Senior Debt	Depreciation and Amortisa- tion	08/06/2011	300,000	-	3.00%	AIAF secondary fixed-income market		Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/A+	ES0313679450	Senior Debt	Depreciation and Amortisa- tion	27/10/2011	130,500	-	3.00%	AIAF secondary fixed-income market		Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/A+	ES0313679450	Senior Debt	Depreciation and Amortisa- tion	15/11/2011	51,900	-	3.00%	AIAF secondary fixed-income market		Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/A+	ES0313679450	Senior Debt	Depreciation and Amortisa- tion	01/12/2011	127,800	-	3.00%	AIAF secondary fixed-income market		Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A	ES0313679518	Senior Debt	Depreciation and Amortisa- tion	17/06/2011	100	-	Average EURIBOR 3m + 1.1%	AIAF secondary fixed-income market		Credit Enhance- ment (0%)
Bankinter S.A.	Parent company	SPAIN	A1/A	ES0313679450	Senior Debt	Depreciation and Amortisa- tion	19/09/2011	120,000	-	Average EURIBOR 3m + 1.1%	AIAF secondary fixed-income market		Credit Enhance- ment (0%)
						Depreciation and Amortisa-				Average EURIBOR	AIAF secondary fixed-income		Credit Enhance-
Bankinter S.A.	Parent company	SPAIN	A1/A	ES0313679526	Senior Debt	tion	19/09/2011	119,900	-	3m + 1.1%	market AIAF secondary fixed-income	Mortgage port-	ment (0%)
Bankinter S.A.	Parent company	SPAIN	Aaa/AAA	ES0413679012	Mortgage bond	Redemption	14/04/2011	25,000	-	Eur 6m + 0.30%	market AIAF secondary	folio
Bankinter S.A.	Parent company	SPAIN	Aa3/A	ES0313679435	Senior Debt	Redemption	01/06/2011	1,000,000	-	Eur3m + 0.125%	fixed-income market AIAF secondary
Bankinter S.A.	Parent company	SPAIN	Aaa/AAA	ES0413679046	Mortgage bond	Redemption	28/09/2011	419,900	-	4.00%	fixed-income market	Mortgage port- folio
Bankinter S.A.	Parent company	SPAIN	Aa3/A	ES0313679443	Senior Debt	Depreciation and Amortisa- tion	28/12/2011	100,000	-	Eur3m + 0.14%	AIAF secondary fixed-income market
Bankinter 1 FTH Subsidiary		SPAIN	Aaa	ES0313799001	Mortgage portfolio	Depreciation and Amortisa- tion	26/04/2011	51,766,430,94	-	EURIBOR 6m + 0.25%	AIAF secondary fixed-income market	Mortgage port- folio	Credit Enhance- ment (0%)
Bankinter 1 FTH Subsidiary		SPAIN	A2	ES0313799019	Mortgage portfolio	Depreciation and Amortisa- tion	26/04/2011	6,000,000,66	-	EURIBOR 6m + 0.50%	AIAF secondary fixed-income market	Mortgage port- folio	Credit Enhance- ment (0%)
													158

Bankinter Group

Consolidated Management Report for the Statements for the financial year 31 December 2012

1. Group's Performance for the year

Company Activity

During the fourth quarter of 2012 the Group sold 40.10% of the share capital of Bankinter Seguros Generales (BKSG) S.A. de Seguros y Reaseguros for €17.5 million.

During 2011 this company changed its name to the current one (from Bankinter Servicios de Consultoría, S.A) and increased its share capital by €10 million. The Group subsequently sold 10% of its share capital.

During 2012 Bankinter Seguros Generales S.A. de Seguros y Reaseguros obtained approval from the Directorate General for Insurance to operate as an insurance company.

Additionally, in December 2012 Bankinter, S. A. reached an agreement with Dutch bank Van Lanschot Bankiers N.V. on acquiring its Luxembourg subsidiary Van Lanschot Bankiers (Luxembourg) S.A. This transaction will provide the Bankinter group with the necessary infrastructure and banking licence to develop its private banking business model. The execution of the agreement and therefore also the incorporation of this company into the Group, is pending finalisation of the regulatory and supervisory procedures inherent in this kind of transaction, and should be completed within the first quarter of 2013.

During 2012 Intermobiliaria, S.A. increased its share capital by €0.62 million.

The Bank's equity holding in Mercavalor S.V., which is accounted for using the equity method, increased by 5% in 2012.

During 2011 Canarias Excelencia en SIM, S.L., which had ceased trading, was wound up.

During 2011 Bankinter Capital Riesgo I Fondo de Capital increased its capital by €5 million.

Results

Bankinter's net profit for the year ended 31 December 2012 was €124.65 million, on pretax profit of €154.18 million. These profit figures are respectively 31.22% and 35.80% down on those posted for 2011. However, it should be borne in mind that this past year the Bank made the significant additions to provisions required by Royal Decree Laws 2/2012 and 18/2012, making the additions in full in the quarters in which the Laws were proclaimed, which had an impact on net profit of €124.3 million. Without this impact, the Bank's net profit for the year would have been €249 million.

The Group also continues to show extraordinary quality in terms of its assets, its NPL figures and its solvency, as was demonstrated by the stress tests to which the sector was subjected in September and which gave Bankinter a capital surplus of €399 million in the most adverse scenario envisaged.

The quality of the Group's assets continues to be much better than that of its peers, with an NPL ratio of 4.28%, as against the 11.38% shown by the sector as a whole in November and with coverage of 48.31%. In this respect the Bank's ratio of troubled assets (at-risk exposure + substandard risk + foreclosed assets as a percentage of total computable risk) is much lower than those of other banks, with a total of €2.74 billion, giving a ratio of 5.9% as opposed to 15.9% at comparable banks.

The Bankinter Group has a very small and well diversified portfolio of repossessed assets, very little of it represented by land, with a gross amount valued at €611.66 million and coverage of 37.69% of the book value. We would also point out that the Bank maintains a good rate of turnover, with sales of these assets representing 53.1% of the gross amount of all newly repossessed assets during the year.

As regards solvency, the Group has significantly strengthened its capital ratios, thanks in part to the new share issues carried out in support of the early conversion of subordinated notes and preferred shares. As a result, the Bank's EBA capital ratio at the end of 2012 stood at 10.22%, compared with 7.28% at the end of 2011.

We would also point out that 2012 maturities totalling €2.5 billion were met with ease, thanks to new medium- and long-term issues carried out during the year for a total of €1.8 billion, and to a €3.2 billion reduction in the liquidity gap. As regards wholesale financing maturities for the next three years, these are totally covered by the bank's €7.9 billion of liquid assets.

In parallel, the bank continues to strengthen its retail financing, as can be seen from the trend in the ratio of deposits to lending, which at the end of 2012 stood at 66.9% as against 58.4% at the end of 2011.

The Bankinter Group's interest margin for the year amounted to €660.25 million, which was 21.67% up on 2011, this being one of the main drivers of the result. This was in spite of tighter margins brought about by the interest rate environment in the fourth quarter, the effect of which will be gradually offset in 2013 thanks to the new restrictions on remuneration of deposits. Gross margin for the year was €1,254.04 million, up by 13.54%. The margin before provisions, at €608.59 million, was up by 32.43% on 2011.

As regards the Group's Balance Sheet, total assets ended the year at €5817 billion (2.23% less than at the end of December 2011). Total customer resources controlled by the Bank stood at €44,328.14 million at year-end, 3.05% less than one year before, although retail resources (sight accounts, deposits and promissory notes) grew by 10.57% and resources managed off-balance sheet (investment funds, pensions and discretionary asset management) were up by 7.14%.

Lending to customers reached €42,059.72 million, 1.28% less than at year-end 2011. However, if we turn the spotlight onto lending to businesses, and more specifically the Corporate Banking segment, lending increased by 20.3%, reaching €10.2 billion, as a result of the changing mix in the Bank's lending portfolio towards greater weighting of non-mortgage lending and consequently towards improved margins.

With regard to customer business, the steady pace at which new customers are won was maintained throughout the year, with a total of 130,600 new customers being acquired, 15% more than in the previous year. Of these, more than 34,000 belong to high income segments, a particularly important group in the Bank's strategy.

In this segment, Bankinter has set in train a major shift in its business model, towards a format geared more to asset management and specialist advisory services to customers, with more sophisticated products and services, larger and more highly trained teams of account executives and a new segmentation into just two divisions:private banking and personal banking. The acquisition of the Luxembourg subsidiary of the Dutch bank Van Lanschot complements this new strategy by enhancing the value proposition from a more global perspective.

A similar growth trend is also shown by the insurance business, to which Bankinter pays particular strategic attention and which continues to make a notable contribution to Group results.

Thus, the result achieved by Bankinter Seguros de Vida (Life Insurance) in 2012 stands at €17.8 million, up 20.3% on 2011.

Línea Directa for its part showed sustained growth in a difficult environment, reaching 1.74 million motor policies at the end of the year, an increase of 2.1%. In relative terms, the increase in the number of home insurance policies was much greater: 31.5%, reaching a total of 219,000 policies at the end of 2012.

Bankinter maintains service quality as the fundamental basis of its customer business. According to the results of studies carried out by an independent firm based on the opinions of the customers themselves, Bankinter extended the lead that it has traditionally maintained over the rest of the sector in terms of service quality. Thus the Group's Net Satisfaction Index (NSI) for private individuals as at 31 December 2012 stood at 75.1, which is 8.4 points ahead of the market average, compared with a 4.4 point lead at the end of 2011.

CORPORATE BANKING

Small and Medium Enterprise Segment

During 2012 the Group continued to pursue its policy of growth in the Small and Medium Enterprises (SMEs) segment, not only by financing projects but also increasing the degree of relations with these kinds of customers in their day-to-day operations, with the aim of offering a comprehensive service providing these customers with access to the technological advantages and efficient applications offered by the Bank in their payment and collection processes.

This strategy was reflected in the profit and loss account in the form of a 3.6%increase in gross revenues in the SME segment relative to 2011. All these developments are also the consequence of increased attraction of regular customer resources (15% more than in 2011), and appropriate investment management, although volumes for the latter were slightly down on the previous year as a result of reduced investor activity in these segments.

The balance sheet for the SME business is still based on very solid credit risk assessment, with high-quality and diversified investments. This balance sheet has a high percentage of financing granted against tangible security. At the same time the Bank's strategy of

maintaining a low concentration in the sectors most affected by the economic downturn continues.

In 2012, the Group's value proposition for this customer segment, which is differentiated and highly competitive, continued to focus on global customer management, service quality and multi-channelling.

Millions	2011	2012	% Diff.
Average resources	3,137.36	3,606.81	14.93%
Average loans and receivables	6,824.97	6,754.32	- 1.04%
Ordinary income	204.79	212.08	3.56%
NSI (points)	71.9	74.37	3.31%

Corporate Banking Segment

The economic situation deteriorated further during 2012, with international investors continuing to lose confidence, leading to a tense situation in the markets, with the consequent effects on liquidity and constantly rising risk premiums for the countries involved.

In Spain's case and as regards the Spanish business sector, economic activity continued to decline, while the unemployment rate rose. Companies saw business volumes fall across the board and rates of arrears and insolvencies in the market increased to unprecedented levels.

Despite this adverse climate, the Corporate Banking segment continued to pursue its strategy of supporting financing to its corporate customers, leading to a 22.7%increase in lending to these companies, which reached €9.43 billion at year-end. All this was achieved while still maintaining the long-standing principle of solid credit that has enabled Bankinter to position itself as the bank with the lowest percentage of NPLs in the sector, this ratio for the Corporate segment standing at 2.6% of total lending. This growth in lending went hand in hand with increase attraction of customer deposits, which grew by 2.2%in the segment, to €4.8 billion.

This growth strategy is clearly reflected in the income statement, with a 41.7%increase in EBITDAthanks not only to this growth in lending but also to appropriate management of interest differentials and constant improvement in fee income, which grew by 17.2%. As a result of all the foregoing factors, Bankinter posted EBITDAof €326.39 million for the year.

The value proposition to customers in this segment continues to be based on constant improvements in the quality of service, with overall satisfaction indices well in excess of those of our competitors, the cumulative NSI ending December at 80.85 points, 0.86 points higher than in December 2011.

In its Corporate Banking segment, Bankinter continues to push its multi-channel business model, offering products and services in accordance with the activity of these types of customers, and with a constant focus on innovation, especially via the companies' website, one of the most highly regarded in the whole financial sector and through which 78% of all transactions are channelled, ensuring that customers receive solutions that are quick and efficient in their day-to-day operations.

In this difficult environment we succeeded in maintaining the main business management ratios in Corporate Banking at very high levels, with a gross ROA of 3.4% and an excellent cost/income ratio of 15.5%. To summarise, Corporate Banking continued to focus on quality and innovation, supporting companies and improving the main business management ratios.

Millions	2011	2012	% Diff.
Average resources	4,698.54	4,800.79	2.18%
Average loans and receivables	7,685.63	9,426.20	22.65%
Gross Margin	230.42	326.39	41.65%
NSI (points)	79.99	80.85	1.08%

COMMERCIAL BANKING

Private Individuals Segment:

The private individuals banking segment reached a total of 333,316 active customers in 2012. In terms of the Balance Sheet, the year ended with average resources of €2.71 billion. We should also point out that regular customer deposits grew by 8.57%in the year. Loans and advances stood at €16.8 billion at year end, representing a reduction of 3.86% relative to 2011. At the end of 2012 the mortgage portfolio stood at €15.42 billion with the risk quality continuing to be excellent.

During 2012 substantial sales activities continued, focused on strengthening existing ties with customers by offering them products such as payroll accounts, more than 30,000 of which were opened.

Also notable were the efforts made in attracting customers, with an increase of 15% compared with 2011, in addition to which these customers are more closely tied to the Bank than in the past, given that one in every three new customers start their relations with the Bank by way of the payroll account product. Another product with similar tie-in effects is pure life insurance, more than 9,000 policies having been sold to customers in this segment, for €630 million of capital sums insured.

Lastly, in terms of quality, this customer segment closed the year with a cumulative NSI of 71.9.

€ millions	2011	2012	Diff. %
Average resources	2,492.94	2,706.68	8.57%
Average loans and receivables	17,474.58	16,799.99	-3.86%
Ordinary income	141.97	140.78	-0.83%
NSI	71.55	71.9	4.89%

Foreign Customers Segment

The Foreign Customers segment covers non-Spanish customers acquiring secondary residences in coastal areas of Spain and requiring specialised financing and services.

This business at the end of 2012 reached a figure of 24,000 active clients. Average total assets in 2012 were €715 million, representing a decrease of 7.10%.

In Balance Sheet terms, the year ended with average customer resources of €205 million, of which 91% were conventional accounts and deposits and 9% intermediation.

Loans and advances at the end of 2012 stood at €715 million, with a total of 168 mortgage loans having been signed during the year for a total volume of €17 million.

The quality of service to customers continues to be one of the strategic pillars of the area, resulting its obtaining a cumulative NSI score of 81.63 at year-end.

€ millions	2011	2012	Diff. %
Average resources	205.06	187.26	-8.68%
Average loans and receivables	769.45	714.78	-7.10%
Ordinary income	13.25	11.96	-9.57%
NSI	80.48	81.63	1.43%

Private Banking Sector

2012 was another challenging year for Private Banking. On top of the economic recession, which has been underway for some time, came the euro crisis, investor concerns about Spain's financial situation and the possibility of its having to seek a bailout from the European Union.

In this environment, Bankinter continued to make full use of the strength deriving from its balance sheet and its business model, as well as of its commitment to service and proximity in giving advice to customers, which lead to the Net Overall Customer Satisfaction indices in the segment being maintained at near-excellent levels.

For Private Banking 2012 was another year of growth in revenue (12.31% up on 2011) and an excellent one in terms of attracting new clients: a total of 1,692 new clients were welcomed to this segment during the year.

Private Banking's value proposition is based on comprehensive advisory and management services for customers' assets. Consequently, the Specialised Services and Legal and Tax Advice departments, as well as the Wealth Management unit, seek to attend to the complex needs of Bankinter's HNW customers. Their involvement was very significant both for the business results and, especially , for customer satisfaction with the service received.

Bankinter Asset Management once again increased its market share in SICAVs (openended collective investment companies) with the number of SICAVs managed rising to 252, representing 8.47% of SICAVs managed by the Spanish financial sector. In this way the Bank consolidated its position as the number three bank in terms of the number of companies and volume of assets under management, according to the Inverco ranking.

Highlights of the Private Banking business

	31/12/2011	31/12/2012	% difference
Average funds	4,795.75	4,951.37	3.25%
Total normal customer resources (1+2)
Average loans and receivables	2,294.88	2,337.25	1.85%
Total loans and receivables ( 1+2)
Gross Margin
Ordinary income	88.6	99.5	12.31%
Management report for balances
NSI	79.45	79.8	0.44%

Churn rate	4.84%	6.12%	26.45%
Churn rate by segment/network

All this activity was carried out through our established distribution networks: Branches, Agents, Remote networks, Banca Partnet, and the team of account executives specialising in providing service to this type of customer. We have 337 account executives spread around our traditional branch network and in our remote customer service centre.

The main tool used in running the sales activity continues to be our CRM, which enables frequency of customer contact to be maintained as well as facilitating the adaptation of the range of products and services to customers' needs, preferences and risk profiles.

We continue to be firmly committed to quality of service in this customer segment. We ended 2012 with an improvement to our customers' overall satisfaction level, showing an NSI of 75.09 points while satisfaction with the services provided by personal account executives reached an NSI of 81.01 points.

€ millions	31/12/2011	31/12/2012	% difference
Average funds	5,544.85	6,715.61	21.11%
Average loans and receivables	8,116.69	7,949.08	-2.07%
Ordinary income	123.15	122.89	-0.21%
Efficiency	80.18	94.57	17.95%
NSI	74.93	75.09	0.21%

Personal Banking Segment

For Personal Banking, 2012 was a year of changes deriving from the transformation of the Private Banking segment. As a result of these changes, we have raised the profile of the clients to whom our segment is directed, focusing on the customer group which, because of the level of income or assets, has greater financial requirements, and accordingly we make available personal account managers with specialist knowledge and specific tools to manage their assets, such as a Personal Financial Planning Adviser or an Investment Adviser. We ended 2012 with 158,128 active customers.

Sales activity for the year was centred on two main areas: attracting new customers and boosting the deposit base. In terms of new customers, the year was a very positive one, with 19,030 new clients captured during the year, representing a sharp increase compared with 2011. As for boosting the deposit base, the figure at year-end came to a monthly average of €7.38 billion, representing an increase of 20.82% year-on-year.

As well as the capture of deposits, we should also point out the figures achieved in investment and pension funds. We ended 2012 with €2.42 billion of assets in funds, 12.80% more than in 2011. This past year credit also continued to flow in our segment, improving the figures for personal loans granted in our customer segment very significantly, with 37% more transactions completed than in 2011.

Obsidiana

Bankinter Consumer Finance continues to consolidate its position in the consumer finance sector, strengthening its distribution of revolving cards through its strategic alliances. Its main mission is to meet customers' financing requirements by providing them with flexible means of payment for managing their day-to-day finances.

In line with previous years, the Bank made significant investments in marketing in order to promote the growth of the business. The Company pursued a risk management policy focused on the risk-return trade-off, adjusting the price of each offer in line with the customer profile so as to ensure profitability.

As a result Bankinter Consumer Finance saw its customer base grow by 7% compared with 2011, reaching a total of 451,914 cards issued at year-end.

The quality of the portfolio increased substantially, with the fall in average customer lending being cut back from 14%in 2011 to just 1% in 2012, ending at €323.27 million. Gross operating profit grew by 3% during the year, to €58.84 million; and the cost of NPLs continued its downward trend, thanks mainly to the in-house Recoveries unit.

In short, 2012 was very positive for Bankinter Consumer Finance, which contributed solid profits to the Group's results.

LDA

Despite the climate of crisis prevailing in all sectors of the Spanish economy during 2012, the Company attained earned premiums of €661 million for the year, net of reinsurance, representing a 2.8% decrease compared with the previous year.

The number of policies increased by 5.6% compared with 2011, reaching a total of 1,975,336 policies in the portfolio.

The non-life technical account showed a profit of €105.9 million, representing an increase of 14,3% compared with that of 2011, due essentially to the good performance of the claims rate and the policy of containing expenses implemented by the Company. In the financial year 2012, the net reinsurance claims rate was 71.72%. This figure amounted to 76.63% in the financial year 2011.

In 2012, the fifth year of activity, the home insurance branch wrote premiums totalling €36.8 million, representing a 35% increase on the previous year.

Solvency

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 Equity Directorate, which is under the Capital Market Division, performs monitoring and control of solvency ratios, and has 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 capital requirements. Accordingly, there are contingency plans to ensure that the limits laid down in the applicable regulations are met.
The impact that decisions will have on the Group's equity and on the balance between capital consumption, risk and return, is taken into account as a key factor in planning, analysing and monitoring the Group's operations.

Bank of Spain Circular 3/2008 of 22 May and the provisions complementing it (information available - in Spanish - on the Bank of Spain's website at: http://www.bde.es/bde/es/ secciones/normativas/Regulacion_de_En/Estatal/Solvencia_y_recursos_propios.html) establishes which items are to be counted as capital for purposes of complying with the minimum requirements laid down by the standard. For the purposes of the above rule, equity is classified as basic and second category equity and it differs from equity as calculated in accordance with EU-IFRS as it includes certain items that are not included under EU-IFRSand excludes others that are. In addition, the methods to be implemented for the consolidation and appraisal of holdings for the purposes of calculating the Group's minimum 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 equity under one regulation or the other.

Consolidated equity as at 31 December 2012 and 2011 and the corresponding capital ratios are shown in the following table:

	€000s
	31/12/2012 (*)	31/12/2011 (*)
Capital and Reserves	2,991,426	2,554,154
Other equity instruments	72,633	404,812
Preference shares	60,844	168,165
Treasury shares	(226)	(742)
Intangible and other assets	(283,117)	(296,820)
Other deductions	(103,581)	(165,736)
Tier 1	2,737,979	2,663,833

Revaluation reserve	94,308	97,998
Subordinated financing	568,686	658,232
Generic insolvency funds	-	54,678
Other deductions	(96,551)	(154,243)
Tier 2	566,443	656,665
Total Equity	3,304,422	3,320,498
Risk-weighted assets	25,424,253	28,454,731
Tier 1 (%)	10.77	9.36
Tier 2 (%)	2.23	2.31
Capital ratio (%)	13.00	11.67

During 2012 there were some important changes in standards relating to financial institutions' solvency:

Royal Decree-Law 18/2012, of 11 May, on the write-down and sale of real estate assets in the financial sector, established additional coverage requirements to those established in Royal Decree-Law 2/2012 for impairment of financing linked to real estate activity classified as standard risk.

As a result of these measures, capital ratios increased in the year and at 31 December 2012 the core capital ratio in accordance with Royal Decree-Law 2/2011 was 11.19% (9.47% at year-end 2011).

2. Principal business risks

Economic Environment and International Markets

We leave behind us a difficult year, which involved an intense process of adjustment in which austerity and growth were in serious conflict with one another. This past year 2012, and more particularly the last quarter, constituted an important inflection point in this crisis.

The agreements reached at the European summit of 28 and 29 June have provided the roadmap for resolving the serious problems of the euro zone. Following an extremely tough period in July, in which euroscepticism gained more ground than ever, advances in financial and fiscal union started to materialise. From September onwards we have seen a gradual improvement in the climate thanks to factors such as the approval of the ESM (European Stability Mechanism) by Germany's Constitutional Tribunal, unconditional support from central banks and the individual efforts of the various national economies to comply with their deficit reduction objectives.

As regards the central banks, whose actions took on a more central role during the year, we would highlight the following matters:

The launch of the ECB's new Outright Monetary Transactions (OMT) debt purchasing programme, and the more flexible definition of assets accepted for discount (September). This programme constituted a valid safety net, dispelling fears about the demise of the euro and relieving debt tensions in peripheral economies. And so the year ended with a considerable and apparently consistent reduction in risk premiums.
The Federal Reserve maintained an extremely loose monetary policy, with minimal interest rates, a decision that favoured the USreal estate market which is now definitely on the road to recovery. Concerns about the jobs market became the main reason for launching QE31 in September and extending it to December, in order to replace Operation Twist2, which had come to an end, and to continue providing stimulus to the economy.
The Japanese economy was held back by the strength of the yen in its capacity as a safe haven currency. The new Abe administration that came to power at the end of 2012, and the pressure it exerted on the BoJ after less than a month in office, led to much faster than expected depreciation of the yen.

The last three months of the year saw a combination of events that brought about a clear change in the environment. Funds have started to flow into risk assets and out of safe haven assets. The macroeconomic variables ceased to present a persistently negative picture, even beyond the US, where the "fiscal cliff" has apparently been avoided for the time being. The crisis in Europe has started to ease thanks to progress on agreements and ECB support. Lastly, economies such as that of China, which were threatening a hard landing, have once again shown signs of revival.

In sum, although 2012 was just as difficult as 2011, if not more so, events unfolding in the last part of the year have turned out to be rather constructive. This development has been more readily observable in the United States; and certain signs pointing in the same direction can be seen in other economies - not, however including those of Europe at the time of writing.

Interest and currency rates

During 2012 the environment was clearly one of low key interest rates on the part of the major central banks, while safe haven currencies suffered significant stresses, except in the last two months of the year.

Inflationary risks continued to take a back seatto the need to push for growth in a depressed global economy. We even saw further cuts in key interest rates in emerging markets such as Brazil and China, where the cycle appeared to run out of steam to a worrying extent at certain times. However, the improvement in the economic environment and a more favourable financial climate have reduced the likelihood of further cuts in key lending rates.

During the first half of the year, uncertainty surrounding the future of the euro led to downward pressure on the common currency relative to other major currencies. However, starting in the third quarter, the euro strengthened thanks to the support of the ECB and a decrease in risk aversion. Without doubt the explicit and unconditional support for the euro on the part of the governor of the ECB, who said he was prepared to "do whatever is necessary to save the euro" played a decisive part in the single currency's regaining part of its attraction.

In this regard, the Swiss franc, capped by the SNB3 at 1.20, came under less pressure, weakening thanks to investors shifting their savings into other assets. Something similar happened with the yen, although the depreciation posted at the end of the year was much more abrupt. The yen weakened much faster than expected as a result of BoJ intervention by means of consecutive purchases of bonds through various linked quantitative easing programmes and as a result of the more aggressive expectations brought about by the change of government.

Policy rates	2007	2008	2009	2010	2011	2012
Euro zone	4.00	2.50	1.00	1.00	1.00	0.75
United States	4.25	0.25	0.00/0.25	0.00/0.25	0.00/0.25	0.00/0.25
UK	5.50	2.00	0.50	0.50	0.50	0.50
Japan	0.50	0.10	0.10	0.0/0.1	0.0/0.1	0.0/0.1

Note: At the end of each financial year

International stock markets

The downward impetus of the stock markets, carried through from 2011, gradually lost momentum over the course of 2012. The USstock markets were the first to regain investors' confidence, followed by those of Europe in the second half of the year, and the year eventually closed with gains on both sides of the Atlantic.

2012 did not turn out to be particularly adverse for stock markets, contrary to what one might intuitively expect. With the exception of the Ibex, which despite the year-end rally did not manage to offset the cumulative losses, the major indices closed with gains, from the most developed economies to emerging ones like India, Brazil, Mexico, etc. This is clearly shown in the following table.

Risk appetite gradually returned to the market over the course of the year. Central banks' support in stimulating economies played a crucial role, especially the ECB's defence of the euro. In general terms, the expectations that arose of an improved economic and financial climate in the US and Europe were an important catalyst for the recovery in equities over the course of 2012.

^1. QE3, the third round of quantitative easing since the onset of the crisis in 2007.

^{2. &}quot;Operation Twist", an operation undertaken in September 2011 consisting in shifting part of the Federal Reserve's Balance Sheet assets from short-to-medium (maximum duration three years) into medium-to-long term (from six to thirty years).

The following table shows the changes in the major stock markets in 2012 and 2011, all in local currency:

Major currencies	2007	2008	2009	2010	2011	2012
Euro	1.32	1.40	1.43	1.34	1.30	1.32
Sterling	0.67	0.95	0.89	0.86	0.83	0.81
Swiss franc	1.61	1.49	1.48	1.25	1.22	1.21
Yen	157.1	126.7	133.2	108.5	99.7	114.5

Note: Year-end exchange rate of each currency against the euro, except in the case of the euro, where the exchange rate is against the US dollar

Source: Invertia

Geographical area	Contents	Change % 2011	Change % 2012
Spain	Ibex35	-13.1	-4.7
United States	S&P 500	-0.0	13.4
United States	NASDAQ 100	2.7	16.8
Euro zone	EuroStoxx 50	-17.1	13.8
UK	FTSE 100	-5.6	5.8
Germany	DAX	-14.7	29.1
France	CAC	-17.0	15.2
Japan	Nikkei	-17.3	22.9
China	Shanghai (B)	-29.3	13.8
Brazil	Bovespa	-18.1	7.4
India	Sensex	-24.6	25.7

3. Risk policies and management

The Framework Agreement on Risk Policy, issued by the Board of Directors, establishes the Bank's risk strategy and profile for each year.

The organisational structure of the entire risks function reports hierarchically to the Executive Vice-Chairman, reflecting the independence that is inherent to the function.

The basic principles that continue to govern risk management are:

• Contribute towards maximising capital, safeguarding the Bank's solvency.
• Independence of the function.
• Alignment with strategic objectives.
• New products: risk determination, approval and monitoring.
• Integrated risk management.
• Mass use of automated approval.
• Risk diversification.
• Relevance of the quality of service factor in the risks function.
• Policy of Sustainable Investment.

Structural and market risk management policies

It should be noted that exchange rate risk is not significant in the Banking Group.

STRUCTURAL RISKS

The Balance Sheet Management unit, which is part of the Capital Markets Directorate, has the function of measuring and managing the institution's structural risks.

Market Risk, reporting to the Risks Directorate has the independent function of controlling them:

Interest rate structural risk

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.

a) Sensitivity of the Financial Margin:

Every year, the Board of Directors sets a reference for the financial margin in terms of sensitivity 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.

The exposure of Bankinter's financial margin to interest rate risk in the event of +/- 100 bp parallel movements in market interest rates is approximately 2.2% for a 12-month horizon.

Financial Margin Sensitivity	2012
100 bp parallel movements	2.2%
25 bp slope variations	4.5%

b) Economic Value Sensitivity

Economic Value Sensitivity
2011 2012
NPV Sensitivity	3.4%	7.5%

Structural liquidity risk

Management of this risk is the responsibility of the ALCO committee, delegated by the Board of Directors.

The Bank has various tools for analysing and monitoring the short- and long-term liquidity situation. These tools are static and dynamic. Back-testing is also carried out on projections made.

One of the analyses used for controlling and monitoring liquidity is the liquidity plan or gap.

a) Liquidity plan or gap

Figures as at December 2012 in € millions	Sight	1 day to 1 month	1 to 3 months	3 to 12 months	12 months to 5 years	more than 5 years	TOTAL
ASSETS
Loans and receivables		2,165	2,871	6,172	12,121	27,557	50,887
Deposits with credit institutions		0	0		0	1,120	1,120
Loans and advances to customers		2,165	2,871	6,131	12,098	26,413	49,679
Other		0	0	41	23	24	88
Fixed Income Portfolio		195	634	2,444	9,877	1,793	14,942
Trading portfolio		16	0	445	580	463	1,504
Available-for-Sale Portfolio		85	633	1,320	7,851	94	9,983
Held-to-Maturity Portfolio		95	1	679	1,445	1,236	3,455
Other Assets		666	0	0	0	2,167	2,833
Total Assets		3,026	3,505	8,616	21,998	31,517	68,662
LIABILITIES
Fixed income portfolio		365	236	98	522	452	1,673
Trading portfolio		365	236	98	522	452	1,673

Financial liabilities at Amortised Cost	11,043	3,896	4,963	8,534	9,933	20,062	58,430
Deposits from credit institutions		430	239	288	881	12,114	13,951
Customer deposits	11,043	1,546	3,924	5,206	4,585	6,330	32,633
Marketable debt securities		1,920	800	3,040	4,468	1,054	11,282
Other		0	0	0	0	563	563
Other liabilities		0	0	0	0	748	748
Equity		0	0	0	0	2,862	2,862
Total Liabilities and Equity	11,043	4,260	5,199	8,632	10,455	24,123	63,713
TOTAL LIQUIDITY GAP	-11,043	-1,234	-1,695	-16	11,543	7,394	4,949

Figures as at December 2011 in € million
Total Assets		3,510	2,589	10,493	16,140	33,244	65,976
Total Liabilities and Equity	9,667	3,258	3,136	9,771	14,293	22,687	62,812
TOTAL LIQUIDITY GAP	-9,667	252	-547	722	1,847	10,557	3,164

Note 1: Foreign-currency positions are not material and so have not been included in the

breakdowns of the attached Gaps.

Note 2: The Entity has no positions in unlisted securities

There are three broad types of limit:

1) Determining the liquidity buffer

2) Wholesale financing concentration ratios

With the aim of avoiding Bankinter being subjected to stress as a result of a possible sudden shutdown of wholesale markets, limits are established on the amount of shortterm wholesale financing that can be taken, as well as on the concentration of issue maturities.

3) Ratio of stable deposits to total lending.

MARKET RISK

Market Risk, which reports to the Risks Directorate, has the independent function of measuring, tracking and controlling the Bank's market risk and the delegated limits.

We will now go on to describe the methodology for measuring the main market risk indicators.

Value-at-Risk (VaR)

The VaR is the main indicator used daily by the Group to measure and control on an integrated and global basis exposure to market risks arising from interest rates, equities, exchange rates, volatility and credit.

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 level of confidence of 95% and a

time horizon of one day, although additional monitoring is carried out with other levels of confidence.

There is also a monthly monitoring of the VaR of its subsidiary Línea Directa Aseguradora S.A. using the "historical simulation" method.

The following are the comparative VaR data by risk factor for the Bank's positions in 2012 and 2011, both for the total and differentiated by portfolio:

Total VaR 2012		Total VaR 2011
million euros	Final	million euros	Final
Interest Rate VaR	18.71	Interest Rate VaR	10.71
Equities VaR	0.32	Equities VaR	0.76
Exchange Rate VaR	0.07	Exchange Rate VaR	0.03
Volatility Rate VaR	0.05	Volatility Rate VaR	0.02
Credit VaR	0.00	Credit VaR	0.02
	18.80		11.96

Trading VaR 2012		Trading VaR 2011
million euros	Final	million euros	Final
Interest Rate VaR	0.86	Interest Rate VaR	0.59
Equities VaR	0.15	Equities VaR	0.47
Exchange Rate VaR	0.07	Exchange Rate VaR	0.03
Volatility Rate VaR	0.05	Volatility Rate VaR	0.02
Credit VaR	0.00	Credit VaR	0.02
	0.91		0.91

Available-for-sale VaR 2012		Available-for-sale VaR 2011
million euros	Final	million euros	Final
Interest Rate VaR	18.35	Interest Rate VaR	10.56
Equities VaR	0.23	Equities VaR	0.34
Exchange Rate VaR	0.00	Exchange Rate VaR	0.00
Credit VaR	0.00	Credit VaR	0.00
	18.33		11.04

Confidence level 95%, time horizon of 1 day

The market risk (VaR) for the LDA portfolio at year-end 2012 and 2011 was €0.77 million and €0.88 million respectively, calculated using the "Historical Simulation" method, with a level of confidence of 95% and a time horizon of one day. Market risk is slightly less from one year to the next due to the reduced duration of the portfolio and a change in the distribution by type of risk, which increases the correlation between positions at risk.

Stress Testing

In 2012, the stress scenarios for Interest Rate and Volatility were updated to adapt them to each product type and to the evolution of events observed in the market for this type of risk factors.

The following is information on the results of one of the most extreme stress scenarios for the Bank in financial years 2012 and 2011:

Stress Testing 2012		Stress Testing 2011
million euros	Final	Final million euros
Interest Rate Stress	74.85	Interest Rate Stress	49.56
Equities Stress	5.14	Equities Stress	7.30
Exchange Rate Stress	0.43	Exchange Rate Stress	0.39
Volatility Stress	3.33	Volatility Stress	0.48
Credit Stress	0.00	Credit Stress	0.09
Total Stress	83.75	Total Stress	57.82

Credit Risk

Organisation and functions

The Credit Risk Department performs its functions through the units that form its structure:

• Risk approval and policies are the work area of:

o the Private Individual Risks Unit.
o the Business and Property Developer Risks Unit.
o 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.

In addition to their own functions the various units take part in the process of defining new products and determining the risk parameters and the approval process.

The risk function's principle of alignment with strategy combines a hierarchical approach with the delegation of powers to each of the Risk Committees.

Policy on refinancing and restructuring:

-Refinancing / refinanced transactions: when a new transaction is carried out in order to cancel, totally or in part, a transaction with a customer on whom or which we wish to eliminate our risk and we establish the means of doing so.

-Restructuring: when we alter the financial conditions of transactions in force with a customer on whom or which we wish to eliminate our risk and establish the means of doing so.

-Assurance: when the customer is not in either of the above categories but there is a change to the original conditions of the transaction.

In both cases we are dealing with a customer or group on whom/which we wish to eliminate our risk and we establish the means of doing so.

A further condition is the impossibility of either cancelling or maintaining the current conditions in light of the analysis carried out by the corresponding Risks Committee.

In particular, and by way of example:

the carrying out of a new transaction in order to cancel, totally or partly, an existing transaction or classification (not ordinary renewals)
the granting of additional grace or interest-only periods relative to those originally authorised
the financing of instalments (nominal and/or interest),
the incorporation of guarantees in working capital transactions (ratings, financial risk, issuer risk and commercial risk),
the establishment of calendar of repayments to cancel risk
Any other cases involving approval of transactions that are not in accordance with the Bank's risks policy.

Collateral will be valued at the lesser of value per deed of conveyance or appraised value, minus the following:

Customer's habitual residence: 20%
Farmland, offices, warehouses and multi-purpose premises: 30%

• Other completed residential properties (second home, property developer's home, etc.): 40%

• Plots with building permission (real estate development): 50%

Tangible guarantees for transactions with personal guarantees, or additional tangible guarantees for transactions that already have tangible guarantees, or
Sufficient guarantees such that the net assets of the guarantors less their direct and indirect risks exceed the amount of the transaction.

The proposal must be processed through the credit approval systems established by the Bank.

In all cases business and financial information must be updated, as must information on borrowings, business plan and viability justifying the refinancing.

The Group currently has 5,062 live refinanced loans totalling €1.37 billion. This figure includes both regular status loans and substandard and delinquent balances. This figure represents 2.96% of total Credit Risk.

The figure for risk on property developers is €333 million. At present 33.6% of the Group's real estate development portfolio (€983 million) is in arrears, with a coverage of 31%.

In the private individuals segment, the Group refinanced 1,487 loans for a total of €216 million, with a delinquency rate of 13%.

Restructuring of the Finance Sector

Maximum exposure to credit risk

As at 31 December 2012

	€000s
			Asset balances
	Financial assets at fair value through profit or loss
	Held for		Financial assets	Loans and	Held to maturity	Hedging	Memorandum
Types of instrument	trading	Other assets	available for sale	receivables	investments	derivatives	accounts	Total
Debt instruments
Deposits with credit institutions	-	-	-	1,093,728	-	-	-	1,093,728
Negotiable securities	1,452,753	39,860	6,132,471	82,871	2,755,355	-	-	10,463,310
Loans and advances to customers	-	-	-	43,575,351	-	-	-	43,575,351
Total debt instruments	1,452,753	39,860	6,132,471	44,751,950	2,755,355			55,132,389
Contingent risks -
Financial guarantees	-	-	-	-	-	-	631,925	631,925
Other contingent risks	-	-	-	-	-	-	1,850,940	1,850,940
Total contingent risks							2,482,865	2,482,865
Other exposure -
Derivatives	656,511	-	-	-	-	-	-	656,511
Contingent commitments	-	-	-	-	-	-	11,239,659	11,239,659
Other exposure	-	-	-	-	-	152,201	-	152,201
Total other exposure	656,511					152,201	11,239,659	12,048,371
MAXIMUM LEVEL OF EXPOSURE TO CREDIT RISK	2,109,264	39,860	6,132,471	44,751,950	2,755,355	152,201	13,722,524	69,663,625

As at 31 December 2011

		€000s
			Asset balances
		Financial assets at fair value through profit or loss
Types of instrument	Held for trading	Other assets	Financial assets available for sale	Loans and receivables	Held to maturity investments	Hedging derivatives	Memorandum accounts	Total
Debt instruments
Deposits with credit institutions	-	-	-	1,779,395	-	-	-	1,779,395
Negotiable securities	1,870,612	31,377	4,776,069	-	3,150,930	-	-	9,828,988
Loans and advances to customers	-	-	-	45,387,972	-	-	-	45,387,972
Total debt instruments	1,870,612	31,377	4,776,069	47,167,367	3,150,930	-	-	56,996,355
Contingent risks -
Financial guarantees	-	-	-	-	-	-	590,143	590,143
Other contingent risks	-	-	-	-	-	-	1,849,527	1,849,527
Total contingent risks	-	-	-	-	-	-	2,439,670	2,439,670
Other exposure -
Derivatives	544,894	-	-	-	-	-	-	544,894
Contingent commitments	-	-	-	-	-	-	9,208,807	9,208,807
Other exposure	-	-	-	-	-	118,651	-	118,651
Total other exposure	544,894	-	-	-	-	118,651	9,208,807	9,872,352
MAXIMUM LEVEL OF EXPOSURE TO CREDIT RISK	2,415,506	31,377	4,776,069	47,167,367	3,150,930	118,651	11,648,477	69,308,377

Trends in customer risk

If to these existing NPLs we add repossessed assets and assets classified as substandard because of the sector they belong to or the unlikelihood of ability to repay, the deterioration in the quality of credit risk has been very significant.

Over the course of 2012 further progress was made with the process of recapitalising and restructuring of the Spanish financial sector that had started in 2009 and the purpose of which is to ease tensions in the financial markets deriving from the sovereign debt crisis and doubts about the Spanish financial sector.

The measures taken in 2012 to strengthen and restructure financial institutions were:

a) New requirements for additional provisions for exposure to credit risk on real estate construction and development, applying to problem loans, repossessed assets and also regular status lending (Royal Decree-Laws 02/2012 and 18/2012).

Bankinter was among the first banks to meet these requirements, provisioning all required additional amounts in the first half of the year. The total amount concerned was €275.2 million. These provisions will enable the Bank to cover any losses deriving from its small real estate risk in the coming years.

b) Independent in-depth valuation of balance sheets in the financial sector. This exercise was conducted with the 14 biggest banks, which represent 90% of the financial sector. The exercise was carried out between May and September 2012

-Phase 1: Top-down analysis carried out by Oliver Wyman and Roland Berger to evaluate the financial system's ability to withstand a highly adverse base scenario. The study showed that the system as a whole needed between €51 billion and €62 billion in additional capital in the adverse scenario.

-Phase 2: Bottom-up analysis. A detailed individual analysis was carried out of each bank's credit portfolios, to assess the appropriateness of their systems for classifying, provisioning and measuring their risks, as well as the procedures established for dealing with unpaids.

Based on this analysis a more comprehensive exercise was developed, applying a stress test to calculate individual additional requirements in the two scenarios, base and adverse. The exercise was carried out by consultants Oliver Wyman together with the leading audit firms in Spain and under the supervision of the Boston Consulting Group.

The adverse scenario used was very tough, the toughest of any applied to stress tests carried out in Europe to date. The probabilities of default used were multiplied by three for businesses and property developers, and by five for residential mortgage lending while for repossessed assets a loss of 64%was assumed. As for the absorption capacity, the exercise was highly restrictive in terms of net results from financial transactions and future trading income.

In Bankinter, it involved the rigorous analysis of 9% of the credit risk portfolio and more than half of the Bank's risk on property developers.

In the adverse scenario core tier one capital (CT1) required is 6%, while in the base case it is 9%.

The results were that at overall sector level, additional capital requirements amounted to €57 billion before tax.

For Bankinter the results were highly satisfactory, the Bank being one of seven institutions, representing 62% of the risk portfolio analysed, that does not need additional capital in the adverse scenario. Bankinter is one of the banks in "group zero", with no capital shortfall.

The main conclusions of the exercise in Bankinter are:

Capital ratio of 7.4%in the adverse scenario, well in excess of minimum requirements, with a capital surplus of €399 million.
Level of expected losses of 7.2% of total assets in the adverse scenario, the lowest in the financial sector
Expected loss of 6.5%on the loan portfolio in the adverse scenario, by far the lowest in its peer group and with the lowest ratios in both the private individuals and the residential mortgage loan portfolios (4.1%and 2.1%respectively) as well as in lending to businesses (16%).
The portfolio mix is ideal in terms of credit risk, due to the minimal exposure to real estate risk.

Analysis of credit risk

QUALITY OF ASSETS	€000s
"Computable risk" (total lending) excluding securitisation	46,355,295	46,802,151	-446,856	-0.95
Doubtful debts	1,984,028	1,515,766	468,262	30.89
Provisions for credit risk	958,523	786,080	172,443	21.94
NPL ratio (%)	4.28	3.24	1.04	32.10
Non-performing loans coverage ratio (%)	48.31	51.86	-3.55	-6.85
Repossessed assets	611,665	484,408	127,257	26.27
Provision for impairment of repossessed assets	230,524	175,894	54,630	31.06
Coverage of repossessed assets (%)	37.69	36.31	1.38	3.80

The Bank has a very solid risk culture at all levels, with a team of highly qualified people who, together with the support of advanced information systems, constitute one of its basic pillars.

In terms of arrears, we ended the year with a ratio of 4.28% compared with 3.24% the year before. This compares very favourably with the system (Bank of Spain: 7.90% in December 2011 and latest figure, in October 2012, of 11.23%) as we have less than half the sector's average delinquency rate. As in 2011, companies were the worst affected, although it should be pointed out that in 2012 the private individuals business suffered the consequences of the persistent crisis.

The volume of problematic and repossessed assets continues to be well below those of the Bank's main competitors in comparative terms.

Private individuals

The excellent credit quality of the Bank's private individuals portfolio remains unaltered, with a non-performing loans ratio of 2.5%.

The average effort (measured as the proportion of income that the customer allocates to paying mortgage loan instalments) in the mortgage portfolio remained at a very low level (23%).

The breakdown of the portfolio by LTV is as follows:

MORTGAGE PORTFOLIO BY TRANCHES % LTV PRIVATE INDIVIDUALS
LTV 00 - 10%	16.84
LTV 10 - 20 %	11.74
LTV 20 - 30 %	12.19
LTV 30 - 40 %	12.79
LTV 40 - 50 %	13.53
LTV 50 - 60 %	13.02
LTV 60 - 70 %	10.84
LTV 70 - 80 %	6.00
LTV 80 - 90 %	1.96
LTV 90 - 100 %	1.11
TOTAL LTV BRACKETS	100

*Sector data for September 2012 vs. Bankinter for December 2012

⁽Data provided by the Spanish Mortgage Association)

Corporate Banking

This growth continued on the basis of principles which remain fixed, notably:

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 trade-off.
Long-term investment, with the aim of a long-term relationship with the customer.
Diversification of sectors and terms

Small and medium-sized enterprises

Credit risk totalled €6,506 million, representing a 4% drop due to the economic slowdown. The non-performing loan ratio was 10.5%.

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.

It should be highlighted that 64% of the outstanding arrears balance for SMEs has mortgage guarantees with an LTV ratio of 39%.

Control, Monitoring, and Recoveries

In 2012 the team's wide experience and the excellent functioning of the processes and tools enabled us to optimise the level of recoveries.

Bankinter has had automatic systems in place for years for controlling and monitoring credit risk on a permanent basis.

The Control and Recoveries Process involves:

1. Support from technology (CRM).
1. Traceability.
1. Integration of all information from all parties involved, external and internal.
1. Behavioural models (Basel II).

The Bank has various applications for monitoring loans and advances.

• Statistical customer alert.

• Branch-Office Alerts
• Back-testing

The flow of non-performing loan balances was as follows:

Impaired assets	31/12/2012	31/12/2011
Balance at start of period	1,515,767	1,329,980
Net additions	660,973	421,203
Written off	192,712	235,417
Balance at close of period	1,984,028	1,515,766
Provision for impairment	958,523	786,080

Real estate assets

The balance of the current real estate portfolio amounts to €610.9 million, representing an increase of €128 million on the previous year.

Real estate assets are highly diversified in geographical terms and as regards property type, which makes them easier to sell. The volume of sales amounted to €146 million, representing an increase of 74% compared with the previous year.

The coverage of repossessed assets stood at 37.7% in December 2012.

Provisions

Solvency levels and asset coverage allow us to face the current situation in optimum conditions.

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 Operational, Reputational and New Products Risk 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.

As at 31 December 2012, the Group held hedging derivatives in the amount of €152.20 million recognised on the assets side of the balance sheet and €43.10 million recognised on the liabilities side (€118.65 million and €68.68 million on the assets and liabilities sides respectively as at 31 December 2011). Net derivatives amounted to €109.10 million and €49.97 million as at 31 December 2012 and 2011 respectively.

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

								€000s
	Fair value of the Hedged Instrument attributed to the hedged risk		Fair Value of the Hedging Instrument (ex-coupon)
Hedged Instrument	Type of Hedging	Hedging Instrument	Nominal Hedged (€ million)	Nature of Hedged Risk	31/12/2012	31/12/2012	31/12/2011	31/12/2011
	Individual hedges or Micro-hedges:
Financial assets
Public Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	150	Interest Rate	29,611	(29,345)	25,499	(24,948)
Financial liabilities
Subordinated Debt	Individual hedges or Micro-hedges:	Interest-rate swaps	290	Interest Rate	(59,848)	61,572	(58,257)	59,330
Senior Debt	Individual Hedges or Micro-hedges:	Interest-rate swaps	79	Interest Rate	(131)	64	(677)	656
Customer Deposits	Individual hedges or Micro-hedges:	Interest-rate swaps	5	Interest Rate	(1,871)	1,872	(1,978)	1,977
Backed issue	Individual hedges or Micro-hedges:	Interest-rate swaps	-	Interest Rate	-	-	(621)	597
FAAF bonds	Individual hedges or Micro-hedges:	Interest-rate swaps	-	Interest Rate	-	-	(299)	285
Mortgage Bond Issues	Individual hedges or Micro-hedges:	Interest-rate swaps	3.910	Interest Rate	(47,853)	48,124	(19,972)	19,842
Macro-hedging-
Mortgage Loans	Macro-hedging	Interest-rate swaps	1.875	Interest Rate	3,018	(2,990)	11,463	(11,336)
					(77,074)	79,297	(44,842)	46,403

The following is a comparison of cum-interest and ex-interest hedging instruments as at 31 December 2012 and 2011:

€000s
	31/12/2012		31/12/2011
	With interest Ex-interest		With interest	Ex-interest

Public Debt	(32,011)	(29,345)	(26,916)	(24,948)
Subordinated Debt	63,661	61,572	60,520	59,330
Customer Deposits	1,462	64	1,677	656
Senior debt	562	1,872	1,330	1,977
Backed issue	-	-	10,476	597
FAAF bonds	-	-	5,228	285
Mortgage Bond Issue	86,522	48,124	39,266	19,842
Macro-hedging - Mortgage loans	(11,095)	(2,990)	(41,607)	(11,336)
Other
	109,101	79,297	49,974	46,403

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 bank's hedges as at 31 December 2012.

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

2.- Hedging of issues of subordinated bonds

3.- Hedging of issues of senior bonds

4.- Hedging of Customer Deposits

5.- Hedging of mortgage-backed bond issues

The instruments hedged are issues ES0413679079 (€899 million), ES0413679095 (€613 million), ES0413679079 (€400 million), ES0413679111 (€498 million), ES0413679178 (€1 billion) and ES0413679202 (€500 million) of mortgage bonds for a total nominal value of €3.91 billion.

6.- Portfolio hedging

In this hedge, the risk-free interest rate is understood as corresponding to the variable interest rate for interest rate swaps (IRS).

The instruments used to hedge the various mortgage loan amounts are IRS, contracted on a monthly basis depending on decisions taken with regard to managing interest-rate risk.

Effectiveness of the hedging:

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.

5. New products

This past year saw fierce competition for remunerated deposits in the financial sector. Over the course of the year we adapted our offering and made it more flexible in order to respond to customer needs and preferences at any given time, as well as offering competitive rates. As a result of this effort to adapt, and also of the excellent image that the Bank's rigorous approach projects in the markets, plus its inclusion in the so-called "zero group" for additional capital requirements, the net increase in remunerated deposits was 14.1%.

As regards current accounts, we continued with the Payroll Account campaign started in 2011. There was a sharp increase in the number of new accounts opened, reflecting the fact that its terms are possibly the best in the market.

In 2012 the markets were characterised by uncertainty and volatility, making it difficult for customers to make decisions. The Bank has made all its analytical power available to customers, with new product lines allowing customers to delegate part of the management of their assets to Bankinter. In 2012 the Bank launched a new product called "Delegated Wealth Management" which meets this need and which has been extremely well received by customers.

As regards lending, Bankinter increased financing to customers following its habitual rigorous and diversifying approach.

The decline in the mortgage lending market was offset by the increase in business financing in all its various forms. Bankinter's role in the ICO mediation lines, in which we have raised our share from last year to 4.9% of the total financing provided by the banking sector under the ICO-funded scheme.

In 2012 we saw companies looking to exports as a way out of the ups and downs of domestic business. Bankinter is committed to providing further support for this initiative, and to this end we will continue with the project that we launched in 2011, further developing its two main thrusts:

Creating a range of new foreign trade services for our customers, not limited to banking but extending to the essence of their international activity or expansion - search for assistance, grants, international tender opportunities, consortia, etc.
And developing our own banking products and services, adapting them to suit actual current needs, and with a clear view focused on the customer's day-to-day operations. Increasing available self-service operability through remote channels so as to bring customers closer to their handling of international business with Bankinter.

During 2011, Bankinter continued to offer its HNWcustomers alternative investments with which to diversify their assets. The assets most in demand were 'buy to let', particularly commercial buildings and shops, preferably located in privileged commercial zones, occupied by first rate tenants and with solid leases.

Bankinter offers a wide range of products and services for stock market investors, including spot trading on the national market and the main international markets, as well as transactions involving derivatives, warrants and futures. Also worthy of note is the possibility of operating on credit, making the most of opportunities in both bull and bear markets, or the hiring of a broad range of ETFs, listed funds that allow investors to combine the agility of a stock market investment with the possibility of diversification offered by investment funds. Lastly, customers have access to various tools to help them manage risk. For example they can select the type of order to be sent to the stock market: stop, dynamic, referenced and linked orders, with conditions and restrictions, etc.

At the close of 2012, one in every five customers had at least one securities account with Bankinter.

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 multi-channelling and ongoing innovation, as well as strict monitoring of asset quality and solvency. With this model, it expects to maintain the positive trend in results and value creation.

7. Subsequent events

No events having a significant effect on these consolidated financial statements have occurred between the end of the reporting period and the date on which these statements were approved.

8. Research and development activities

At the close of financial year 2012, the bank was not engaged in any significant research and development activities.

9. Dependence on patents and licences

At the close of financial year 2012, 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.

AI assistant

Bankinter S.A. — Audit Report / Information 2012

1799_10-k_2012-12-31_d208a792-fb77-4060-b2c4-42e1b046f198.pdf

Consolidated Financial Statements

twenty12

Contents

Bankinter Group

BANKINTER GROUP, CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2012 AND 2011 (€000s)

BANKINTER GROUP, CONSOLIDATED INCOMESTATEMENT FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

BANKINTER GROUP, COMPREHENSIVESTATEMENTS OF CONSOLIDATEDINCOME FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011(€000s)

BANKINTER GROUP, COMPREHENSIVESTATEMENTS OF CHANGES IN CONSOLIDATED EQUITY FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

BANKINTER GROUP, COMPREHENSIVESTATEMENTS OF CHANGES IN CONSOLIDATED EQUITY FORTHE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

BANKINTER GROUP, CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2012 AND 2011 (€000s)

Bankinter Group

1. Nature of the Group and its activities and composition

2. Accounting principles applied

a) Rules for the presentation of the annual accounts

Standards and interpretations effective in the year under review

Restructuring and recapitalisation of the Spanish banking sector

b) Accounting standards and valuation rules

c) Opinions and estimates used

d) Consolidation principles

e) Comparison of information

f) Equity

g) Minimum reserve ratio

h) Information on deferrals in payments to suppliers. Third additional provision. "Duty of information" in Law 15/2010 of 5 July

3. Appropriation of profit (loss)

4. Deposit Guarantee Fund

5. Accounting principles and valuation rules applied

a) Going-concern principle

b) Accrual principle

c) Transactions and balances in foreign currency

d) Consolidated statements of cash flow

e) Consolidated other recognised income and expenses

f) Consolidated statement of changes in total equity.

g) Recognition, valuation, and classification of financial instruments

Financial liabilities

Financial assets

h) Recognition of income and expenses

i) Impairment of financial assets

j) Financial derivatives

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

l) Property, plant and equipment

m) Intangible assets

Goodwill

Other intangible assets

n) Leases

o) Non-current assets for sale

p) Set-off of balances

q) Security lending or guaranteed lending

r) Financial guaranties

s) Personnel expenses

Post-employment benefits

Defined contribution plans

Defined benefit plans

Other long-term benefits

Early retirement

Death and invalidity of active personnel

t) Other allowances and contingencies

u) Corporate tax

v) Off-balance-sheet customer resources

w) Insurance contracts

6. Cash and balances with central banks

7. Trading portfolio of assets and liabilities and Other financial assets and liabilities at fair value with changes in profit and loss

As at 31 December 2012

a) Debt instruments

b) Equity instruments

c) Trading derivatives

d) Short positions

8. Financial assets available for sale

9. Held to maturity investments

10. Loans and receivables

1. Deposits with credit institutions

2. Loans and advances to customers

3. Debt instruments

11. Asset/liability hedging derivatives

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

2.- Hedging of issues of subordinated bonds

3.- Hedging of senior bond issue

4.- Hedging of Customer Deposits

Bankinter S.A. Audit Report / Information 2012