Documento Registro Bankia 2011 INGLES · As provided in Royal Decree 1310/2005 of 4 November 2005, and Ministerial Order EHA 3537/2005 of 10 November 2010, the Registration Document

REGISTRATION DOCUMENT

This prospectus has been registered in the Official Registers of the Spanish Securities Market Commission (“Comisión Nacional del Mercado de Valores” or CNMV) on 29 June 2011.

As provided in Royal Decree 1310/2005 of 4 November 2005, and Ministerial Order EHA 3537/2005 of 10 November 2010, the Registration Document and the Share Securities Note of this Prospectus have been drawn up in accordance with the forms set out in Annexes I, II and III to Commission Regulation (EC) number 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements.

- ii-

CONTENTS

I. SUMMARY ..................................................................................................................... 1

II. RISK FACTORS............................................................................................................. 1

1. RISK FACTORS SPECIFIC TO THE ISSUER OR TO ITS BUSINESS SECTOR .......................................................................................................................... 1

1.1. Risk factors specific to Bankia ................................................................................ 3

1.2. Risk factors associated with the sector in which Bankia operates .......................... 9

1.3. Risk factors associated with the macroeconomic environment in which Bankia operates ..................................................................................................... 17

2. RISK FACTORS RELATING TO THE SECURITIES OFFERED (N/A) ............ 19

III. INFORMATION ABOUT THE ISSUER (ANNEX I OF COMMISSION REGULATION (EC) NO 809/2004 OF 29 April 2004) ............................................. 19

1. PERSONS RESPONSIBLE ......................................................................................... 19

1.1. Identification of the persons responsible for the registration document ............... 19

1.2. Declaration by the persons responsible for the shares registration document ...... 19

2. STATUTORY AUDITORS ......................................................................................... 19

2.1. Names and addresses of the issuer’s auditors for the period covered by the historical financial information (together with their membership in a professional body) ................................................................................................. 19

2.2. If auditors have resigned, been removed or not been re-appointed during the period covered by the historical financial information, indicate details if material. ................................................................................................................. 20

3. SELECTED FINANCIAL INFORMATION ............................................................. 21

3.1. Selected historical financial information ............................................................... 21

3.2. Interim financial information ................................................................................ 23

4. RISK FACTORS........................................................................................................... 26

5. INFORMATION ABOUT THE ISSUER................................................................... 26

5.1. History and Development of the Issuer ................................................................. 26

5.2. Investments ............................................................................................................ 39

6. BUSINESS OVERVIEW ............................................................................................. 41

6.1. Principal activities ................................................................................................. 41

iii

6.2. Principal Markets .................................................................................................. 83

6.3. Where the information given pursuant to items 6.1. and 6.2. has been influenced by exceptional factors, mention that fact ............................................. 85

6.4. If material to the issuer's business or profitability, a summary information regarding the extent to which the issuer is dependent, on patents or licences, industrial, commercial or financial contracts or new manufacturing processes ................................................................................................................ 85

6.5. The basis for any statements made by the issuer regarding its competitive position .................................................................................................................. 85

7. ORGANISATIONAL STRUCTURE ......................................................................... 85

7.1. If the issuer is part of a group, a brief description of the group and the issuer's position within the group .......................................................................... 85

7.2. A list of the issuer's significant subsidiaries, including name, country of incorporation or residence, proportion of ownership interest and, if different, proportion of voting power held ............................................................................ 87

8. PROPERTY, PLANTS AND EQUIPMENT ........................................................... 102

8.1. Information regarding any existing or planned material tangible fixed assets, including leased properties, and any major encumbrances thereon .................... 102

9. OPERATING AND FINANCIAL REVIEW ........................................................... 110

9.1. Financial condition .............................................................................................. 110

9.2. Operating results .................................................................................................. 110

10. CAPITAL RESOURCES ........................................................................................... 114

10.1. Information concerning the issuer’s capital resources (both short and long term) .................................................................................................................... 114

10.2. An explanation of the sources and amounts of and a narrative description of the issuer’s cash flows ......................................................................................... 124

10.3. Information on the borrowing requirements and funding structure of the issuer .................................................................................................................... 127

11. RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES ................... 127

11.1. Research and development .................................................................................. 127

11.2. Rights over intangible property ........................................................................... 130

12. TREND INFORMATION .......................................................................................... 131

12.1. Include a statement that there has been no material adverse change in the prospects of the issuer since the date of its last published audited financial statements. In the event that the issuer is unable to make such a statement, provide details of this material adverse change ................................................... 131

iv

12.2. Information on any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the issuer’s prospects for at least the current financial year ................................................... 131

13. PROFIT FORECASTS OR ESTIMATES ............................................................... 138

13.1. A statement setting out the principal assumptions upon which the issuer has based its forecast, or estimate .............................................................................. 139

13.2. A report prepared by independent accountants or auditors stating that in the opinion of the independent accountants or auditors the forecast or estimate has been properly compiled on the basis stated and that the basis of accounting used for the profit forecast or estimate is consistent with the accounting policies of the issuer ......................................................................... 139

13.3. The profit forecast or estimate must be prepared on a basis comparable with the historical financial information ..................................................................... 139

13.4. If a profit forecast in a prospectus has been published which is still outstanding, then provide a statement setting out whether or not that forecast is still correct as at the time of the registration document, and an explanation of why such forecast is no longer valid if that is the case ................................... 139

14. ADMINISTRATIVE, MANAGEMENT, AND SUPERVISORY BODIES AND SENIOR MANAGEMENT .............................................................................. 139

14.1. Names, business addresses and functions in the issuer of the following persons, and an indication of the principal activities performed by them outside the issuer where these are significant with respect to that issuer: .......... 139

14.2. Administrative, management and supervisory bodies and senior management conflicts of interest ......................................................................... 162

15. REMUNERATION AND BENEFITS ...................................................................... 163

15.1. The amount of remuneration paid (including any contingent or deferred compensation), and benefits in kind granted to such persons by the issuer and its subsidiaries for services in all capacities to the issuer and its subsidiaries by any person ................................................................................... 163

15.2. The total amounts set aside or accrued by the issuer or its subsidiaries to provide pension, retirement or similar benefits ................................................... 167

16. BOARD PRACTICES ................................................................................................ 167

16.1. Date of expiration of the current term of office, if applicable, and the period during which the person has served in that office ............................................... 167

16.2. Information about members of the administrative, management or supervisory bodies' service contracts with the issuer or any of its subsidiaries providing for benefits upon termination of employment, or an appropriate negative statement ............................................................................ 168

v

16.3. Information about the issuer's audit committee and remuneration committee, including the names of committee members and a summary of the terms of reference under which the committee operates ................................................... 169

16.4. Statement as to whether or not the issuer complies with its country’s of incorporation corporate governance regime(s). In the event that the issuer does not comply with such a regime, a statement to that effect must be included together with an explanation regarding why the issuer does not comply with such regime. ................................................................................... 181

17. EMPLOYEES ............................................................................................................. 189

17.1. Either the number of employees at the end of the period or the average for each financial year for the period covered by the historical financial information up to the date of the registration document (and changes in such numbers, if material) and, if possible and material, a breakdown of persons employed by main category of activity and geographic location. If the issuer employs a significant number of temporary employees, include disclosure of the number of temporary employees on average during the most recent financial year. ...................................................................................................... 189

17.2. Shareholdings and Stock Options ........................................................................ 193

17.3. Description of any arrangements for involving the employees in the capital of the issuer ......................................................................................................... 193

18. MAJOR SHAREHOLDERS ..................................................................................... 193

18.1. In so far as is known to the issuer, the name of any person other than a member of the administrative, management or supervisory bodies who, directly or indirectly, has an interest in the issuer’s capital or voting rights which is notifiable under the issuer's national law, together with the amount of each such person’s interest or, if there are no such persons, an appropriate negative statement ............................................................................................... 193

18.2. Whether the issuer's major shareholders have different voting rights, or an appropriate negative statement ............................................................................ 194

18.3. To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled and by whom and describe the nature of such control and describe the measures in place to ensure that such control is not abused .................................................................................................................. 194

18.4. A description of any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer ........ 196

19. RELATED PARTY TRANSACTIONS.................................................................... 196

19.1. Transactions with significant shareholders of the Bank ...................................... 197

19.2. Other dealings with related parties ...................................................................... 199

19.3. Transactions with directors and officers of the Bank .......................................... 201

vi

20. FINANCIAL INFORMATION CONCERNING THE ISSUER’S ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES ....................................................................................................................... 205

20.1. Historical financial information .......................................................................... 206

20.2. Pro forma financial information of Bankia ......................................................... 207

20.3. Financial statements ............................................................................................ 224

20.4. Auditing of historical annual financial information ............................................ 224

20.5. Age of latest financial information ...................................................................... 225

20.6. Interim and other financial information .............................................................. 225

20.7. Dividend policy ................................................................................................... 246

20.8. Legal and arbitration proceedings ....................................................................... 246

20.9. Significant change in the issuer’s financial or trading position .......................... 249

21. ADDITIONAL INFORMATION .............................................................................. 249

21.1. Share capital ........................................................................................................ 249

21.2. Memorandum and Articles of Association .......................................................... 252

22. MATERIAL CONTRACTS ...................................................................................... 259

22.1. Integration Agreement ......................................................................................... 260

22.2. Addenda to the Integration Agreement ............................................................... 263

22.3. Novation Agreement in respect of the Integration Agreement, adapting it to Royal Decree Law 2/2011 of 18 February for strengthening financial system ... 263

22.4. Framework agreement and service agreement between Bankia and Banco Financiero y de Ahorros ...................................................................................... 268

22.5. Home Territory Management Services Agreements ........................................... 272

22.6. Agreement for the transfer of loans and reciprocal provision of management services relating to the Monte de Piedad pawnshop business ............................. 274

23. THIRD PARTY INFORMATION, STATEMENT BY EXPERTS AND DECLARATIONS OF ANY INTEREST ................................................................. 275

23.1. Where a statement or report attributed to a person as an expert is included in the Registration Document, provide such person’s name, business address, qualifications and material interest if any in the issuer. If the report has been produced at the issuer’s request a statement to the effect that such statement or report is included, in the form and context in which it is included, with the consent of the person who has authorised the contents of that part of the Registration Document. ....................................................................................... 275

23.2. Where information has been sourced from a third party, provide a confirmation that this information has been accurately reproduced and that as far as the issuer is aware and is able to ascertain from information

vii

published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. In addition, identify the source(s) of the information. ............................................................ 275

24. DOCUMENTS ON DISPLAY ................................................................................... 276

25. INFORMATION ABOUT INVESTEES .................................................................. 276

PRO FORMA FINANCIAL INFORMATION BUILDING BLOCK ................................ 1

IV. INFORMATION CONCERNING THE SECURITIES (ANNEX III OF COMMISSION REGULATION (EC) 809/2004 OF 29 April 2004) (N/A) ............... 1

1. PERSONS RESPONSIBLE ............................................. ¡Error! Marcador no definido.

1.1. Persons responsible for the Share Securities Note ¡Error! Marcador no definido.

1.2. Declaration by the persons responsible for the Share Securities Note¡Error! Marcador no defini

1.3. Declarations by the Global Coordinators and Lead Managers¡Error! Marcador no definido.

2. RISK FACTORS............................................................... ¡Error! Marcador no definido.

3. KEY INFORMATION ..................................................... ¡Error! Marcador no definido.

3.1. Working capital statement ..................................... ¡Error! Marcador no definido.

3.2. Capitalisation and indebtedness ............................ ¡Error! Marcador no definido.

3.3. Interest of natural and legal persons involved in the issue/offer¡Error! Marcador no definido.

3.4. Reasons for the offer and use of proceeds ............. ¡Error! Marcador no definido.

4. INFORMATION CONCERNING THE SECURITIES TO BE OFFERED/ADMITTED TO TRADING...................................................................... 1

4.1. A description of the type and the class of the securities being offered and/or admitted to trading, including the ISIN (International Security Identification Number) or other such security identification code¡Error! Marcador no definido.

4.2. Legislation under which the securities have been created¡Error! Marcador no definido.

4.3. Indication of whether the securities are in registered or bearer form and whether the securities are in certificated or book-entry form In the latter case, name and address of the entity in charge of keeping the records.¡Error! Marcador no defin

4.4. Currency of the securities issue ............................. ¡Error! Marcador no definido.

4.5. A description of the rights attached to the securities, including any limitations of those rights, and procedure for the exercise of those rights¡Error! Marcador no de

4.6. In the case of new issues, a statement of the resolutions, authorisations and approvals by virtue of which the securities have been or will be created and/or issued .......................................................... ¡Error! Marcador no definido.

4.7. In the case of new issues, the expected issue date of the securities¡Error! Marcador no definido

4.8. Description of any restrictions on the free transferability of the securities¡Error! Marcador no d

viii

4.9. An indication of the existence of any mandatory takeover bids and/or squeeze-out and sellout rules in relation to the securities¡Error! Marcador no definido.

4.10. An indication of public takeover bids by third parties in respect of the issuer’s equity, which have occurred during the last financial year and the current financial year ............................................. ¡Error! Marcador no definido.

4.11. In respect of the country of registered office of the issuer and the country(ies) where the offer is being made or admission to trading is being sought: ................................................................... ¡Error! Marcador no definido.

5. TERMS AND CONDITIONS OF THE OFFER ......................................................... 1

5.1. Conditions, offer statistics, expected timetable and action required to apply for the offer ............................................................ ¡Error! Marcador no definido.

5.2. Plan of distribution and allotment ......................... ¡Error! Marcador no definido.

5.3. Pricing ................................................................... ¡Error! Marcador no definido.

5.4. Placing and underwriting ....................................... ¡Error! Marcador no definido.

6. ADMISSION TO TRADING AND DEALING ARRANGEMENTS ........................ 1

6.1. An indication as to whether the securities offered are or will be the object of an application for admission to trading, with a view to their distribution in a regulated market or other equivalent markets with indication of the markets in question. This circumstance must be mentioned, without creating the impression that the admission to trading will necessarily be approved. If known, the earliest dates on which the securities will be admitted to trading¡Error! Marcador no

6.2. All the regulated markets or equivalent markets on which, to the knowledge of the issuer, securities of the same class of the securities to be offered or admitted to trading are already admitted to trading¡Error! Marcador no definido.

6.3. If simultaneously or almost simultaneously with the creation of the securities for which admission to a regulated market is being sought securities of the same class are subscribed for or placed privately or if securities of other classes are created for public or private placing, give details of the nature of such operations and of the number and characteristics of the securities to which they relate¡Error! Marcador no definido.

6.4. Details of the entities which have a firm commitment to act as intermediaries in secondary trading, providing liquidity through bid and offer rates and description of the main terms of their commitment¡Error! Marcador no definido

6.5. Stabilisation: where an issuer or a selling shareholder has granted an over-allotment option or it is expected that price stabilising activities may be entered into in connection with an offer ................ ¡Error! Marcador no definido.

7. SELLING SECURITIES HOLDERS ........................................................................... 1

7.1. Name and business address of the person or entity offering to sell the securities, the nature of any position office or other material relationship

ix

that the selling persons has had within the past three years with the issuer or any of its predecessors or affiliates ....................... ¡Error! Marcador no definido.

7.2. The number and class of securities being offered by each of the selling security holder ....................................................... ¡Error! Marcador no definido.

7.3. Lock-up agreements .............................................. ¡Error! Marcador no definido.

8. EXPENSE OF THE ISSUE/OFFER ............................................................................. 1

8.1. The total net proceeds and an estimate of the total expenses of the issue/offer .............................................................. ¡Error! Marcador no definido.

9. DILUTION ...................................................................................................................... 1

9.1. The amount and percentage of immediate dilution resulting from the offer¡Error! Marcador no d

9.2. In the case of a subscription offer to existing equity holders, the amount and percentage of immediate dilution if they do not subscribe to the new offer¡Error! Marcador no d

10. ADDITIONAL INFORMATION .................................................................................. 1

10.1. If advisors connected with an issue are mentioned in the securities note, a statement of the capacity in which the advisors have acted¡Error! Marcador no definido.

10.2. An indication of other information in the securities note which has been audited or reviewed by statutory auditors and where auditors have produced a report. Reproduction of the report or, with permission of the competent authority, a summary of the report ........................ ¡Error! Marcador no definido.

10.3. Where a statement or report attributed to a person as an expert is included in the securities note, provide such persons' name, business address, qualifications and material interest if any in the issuer. If the report has been produced at the issuer’s request, a statement to the effect that such statement or report is included, in the form and context in which it is included, with the consent of the person who has authorised the contents of that part of the securities note ........................................................ ¡Error! Marcador no definido.

10.4. Where information has been sourced from a third party, provide a confirmation that this information has been accurately reproduced and that as far as the issuer is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. In addition, identify the source(s) of the information ............... ¡Error! Marcador no definido.

Summary -1-

I. SUMMARY

This summary (hereinafter, the “Summary”) describes the principal characteristics and essential risks associated with the issuer and the securities covered by the registration document (the “Registration Document”) and the share securities note (the “Securities Note”) which, amongst other documents, must be considered for an adequate understanding of the offer mentioned here. The Securities Note describes the offer for subscription (the “Offer” or the “Subscription Offer”) of Bankia shares with an aggregate nominal value (without including the shares associated with the green shoe option) of 1,649,144,506 euros, divided into 824,572,253 new ordinary shares, each with a par value of two (2) euros, and the admission to trading of the shares of Bankia, S.A. (hereinafter, “Bankia”, the “Company”, the “Bank” or the “Issuer”).

Nevertheless, it is expressly placed on record that:

(i) This Summary should be read as an introduction to the Securities Note and to the Registration Document of the Company (both documents together, the “Prospectus”). The Prospectus was registered in the Official Register of the CNMV on 29 June 2011 and may be consulted on the website of the Comisión Nacional del Mercado de Valores (“CNMV”) (www.cnmv.es) or on the Company's website (www.bankia.com) and is available to the public through the Placement Agents.

(ii) Any decision to invest in the securities should be based on the investor’s consideration of the Prospectus as a whole.

(iii) No civil liability can be claimed of any person solely on the basis of this Summary, unless the Summary is misleading, inaccurate or inconsistent in relation to the other parts of the Prospectus.

(iv) Where a claim relating to the information contained in the Prospectus is brought before a court, the claimant investor may, under the national legislation of a Member State, have to bear the costs of translating the Prospectus before the legal proceedings are initiated.

1. RISK FACTORS

1.1. Risk factors specific to the issuer or to its business sector

Risks derived from the integration of entities

The Issuer, Bankia, arose from the integration of seven savings banks (cajas de ahorros) —Caja de Ahorros y Monte de Piedad de Madrid (“Caja Madrid”), Caja de Ahorros de Valencia, Castellón y Alicante, Bancaja (“Bancaja”), Caja Insular de Ahorros de Canarias (“Caja Insular de Canarias”), Caja de Ahorros y Monte de Piedad de Ávila (“Caja de Ávila”), Caixa d’Estalvis Laietana (“Caixa Laietana”), Caja de Ahorros y Monte de Piedad de Segovia (“Caja Segovia”) and Caja de Ahorros de La Rioja (“Caja Rioja”) (the “Cajas”). The integration into Bankia of the banking and banking-related business of these seven Cajas

Summary -2-

is a complex operation, and it is possible that the benefits and synergies generated by the integration many not fulfil the initial expectations or that said integration might not be carried out in the agreed time frame or efficiently, and that the integration process may entail significant costs. Furthermore, given that the homogenisation of the relevant data is complex, the analytical and management information included in this Prospectus might prove insufficient.

Risks deriving from Bankia's lack of operating and financial history as an integrated Group

The recent nature of the Cajas' integration into Bankia and consequent lack of financial and operating history for Bankia as an integrated Group has conditioned the available information on Bankia at the time of the issue. The historical financial information of the Cajas and of Banco Financiero y de Ahorros, S.A. (“Banco Financiero y de Ahorros” or the “Central Company”) incorporated into this Prospectus by reference may not be representative or comparable with the operating results, financial position and cash flows of the Bankia Group. The financial information might not represent the real situation of what Bankia might have been had the financial, banking and banking-related businesses of Banco Financiero y de Ahorros been integrated before 1 January 2010. Similarly, the results might have been different if other criteria had been applied in preparing the pro forma financial information.

1.1.1. Risk factors specific to Bankia

Risk deriving from the presence of the FROB as creditor of the Company's largest shareholder

On 3 December 2010, the Fondo de Reestructuración Ordenada Bancaria (“Bank Restructuring Fund — FROB”) subscribed for preference shares convertible (PPCs) into shares issued by Banco Financiero y de Ahorros (parent company of Bankia) for 4,465 million euros. Those PPCs have not been transferred to Bankia. In the event there arise any of the situations that authorise the FROB to go forward with the conversion, the FROB may become a significant or even a majority shareholder of Banco Financiero y de Ahorros and, indirectly, of the Bank, with capacity to exercise significant influence in the Bank's management and governance. Similarly, as principal shareholder of Bankia, Banco Financiero y de Ahorros could find itself to obliged to sell part or all of its holding in Bankia at the request of the FROB.

Risk of controlling shareholder

Banco Financiero y de Ahorros, controlled by the seven Cajas, is the sole shareholder of Bankia prior to the Offer and, after the Offer, will continue to be the majority shareholder in Bankia and have decisive influence in all issues that require decision by a majority of shareholders, including dividend distributions, appointments of directors (with the proportional representation right limitations established by Spanish law), capital increases or reductions and amendment of the bylaws, amongst other matters. The interests of Banco Financiero y de Ahorros, as controlling shareholder, may not be the same as the interests of the rest of the shareholders or as those of the Bank itself. Once the Offer has been completed, Banco Financiero y de Ahorros will own 52.41% of the shares and voting rights of Bankia

Summary -3-

(50.03%, if the “green shoe” option over additional shares is exercised in full), assuming that the number of shares issued in the Offer is 824,572,253.

In line with corporate governance recommendations, Bankia and Banco Financiero y de Ahorros have signed a framework agreement which, amongst other questions, regulates the scope of the activity of both companies and establishes mechanisms for avoiding conflicts of interest. Banco Financiero y de Ahorros y Bankia and their respective subsidiaries maintain diverse commercial and financial relations. Such operations will be carried out on an arm's length basis, following the guidelines established in the framework agreement, the content of which is summarised in section 22.4 of the Registration Document of the Prospectus. The contracting, modification or renewal of operations between Banco Financiero y de Ahorros and Bankia or any operations which are considered significant and, due to the parties involved, qualify as related party transactions, will requires the approval of the Bankia Board of Directors, upon a prior favourable report from the Audit and Compliance Committee, which must make an express pronouncement on the essential terms and conditions proposed (term, subject matter, price, etc.).

Related party transactions

Given that Banco Financiero y de Ahorros is controlling shareholder of Bankia, the operations carried out between them qualify as dealings with related parties. In this regard, the framework agreement between Bankia and Banco Financiero y de Ahorros establishes a general framework of transparency and diligence in order to confront the risks posed by such transactions.

Exposure to the Spanish real estate market

Mortgage loans represent one of the Bank's principal assets. The Bank has extended credit to property developers. The current trends seen in non-performing loan rates, high interest rates and jobless rates, together with the continuous decline in real estate asset prices, could have a material effect on the Bank's non-performing mortgage loan rates, and have a negative impact on the Bank's business, financial position and earnings.

Risk of holdings

The Bank is subject to general and specific risks that arise from the nature and characteristics of its investments. Bankia is indirectly subject to risks associated with the sectors in which its corporate holdings operate. In addition, the Issuer holds minority interests in listed and unlisted companies and may make investments of this type in the future. These investments or acquisitions may be significant and entail greater risks derived from the Bank's smaller influence in the investee company.

Risk of restructuring of the bancassurance agreements

As a result of the integration of the seven Cajas, the Group currently has agreements with various insurers to distribute insurance products through its branch network. Without prejudice to the Bank's intention to comply with those agreements, there is a risk that they may need to be restructured and that Bankia will be obliged to face penalties, with the consequent impact on Bankia's business, operations and earnings.

Summary -4-

Risk of possible rise in labour conflicts arising from the integration process

The process of integrating the Cajas into Banco Financiero y de Ahorros and into Bankia includes integrating the workforces of the seven Cajas and harmonising the work conditions that apply to the employees at each. It appears prudent to believe that there should not exist any potential sources of conflict as a result of these questions, beyond the customary sources of conflict that may arise over the course of the negotiations until the final agreement is reached.

The Bank's success rests on certain officers and qualified personnel

If the Bank does not have the right personnel to sustain its activity or loses any of its key officers and is unable to replace them in due time and form, its business, financial position and earnings could be affected negatively with, inter alia, a weakening of controls and an increase in operational risk. Furthermore, if the Bank does not manage to attract, train, motivate and retain qualified professionals, its businesses could suffer.

Risks not identified or foreseen in the risk management and control policy

The Bank's risk management techniques and strategies, now in the process of being harmonised, might not be fully effective for mitigating the risk exposure in all market economic environments or with respect to all types of risks, including those the Bank may not be capable of identifying or foreseeing. The Bank's losses, therefore, could prove significantly higher than those indicated in the historical measurements. Moreover, not all risks are taken into account in the quantitative models used by the Bank. Furthermore, if in the opinion of current or prospective customers, the risk management conducted by the Bank is not adequate, those customers could take their business to another entity, thereby harming the Bank's reputation, as well as its revenue and profits.

Risk relating to the remuneration policy

As disclosed in section 15 below of the Registration Document, the final remuneration policy in Bankia remains to be determined, given the recentness of the integration. That final policy must be adapted to the provisions of Royal Decree 771/2011 of 3 June 2011.

Risk of losses from legal and regulatory proceedings

There is the risk of the Bank suffering losses as a result of legal and regulatory proceedings that arise from its relations with customers, competitors, shareholders, employees, institutions or any other agent.

1.1.2 Risk factors associated with the sector in which Bankia operates

Credit risk

Credit risk is defined as the risk of loss arising from a partial or total default by a borrower on its obligations; it represents the Bank's most significant risk. Deterioration in the quality of this risk existing at the current date may lead to an increase in doubtful balances and, therefore, require additional provisions under the applicable laws and regulations, which take into account the coverage percentages to be applied according to the term and type of

Summary -5-

guarantee, applying discounts to those guarantees depending on their nature. Similarly, inadequate management of credit risk by Bankia could have an adverse effect on its business, its earnings and its financial position.

Bankia is subject to Bank of Spain concentration limits, and must not exceed 25% of total eligible capital for outside economic groups or borrowers and 20% for unconsolidated entities.

Market risk

Market risk is the potential loss caused by adverse movements in the prices of the financial instruments in which the Bank trades in financial and securities markets. The risks associated with market risk include: foreign exchange risk, due to changes in exchange rates; interest rate risk, due to changes in market interest rates; other fixed-income and equity security price risks attributable to the issuer or to the market as a whole; liquidity risk; model risk and counterparty risk. Inadequate management of market risk by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

Interest rate risk

Structural interest rate risk on the balance sheet is defined as the probability of losses arising from adverse movements in market interest rates. Inadequate management of interest rate risk by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

Liquidity risk

Structural liquidity risk reflects the uncertainty, in adverse conditions, as to the availability of funds at reasonable prices to allow the Bank to make timely payment on the commitments it has acquired and to finance the growth of its investing activity. Inadequate management of this risk by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

Risk of increased costs of and dependence on retail bank funds

The main source of funds of the Cajas that have integrated their businesses in the Bank comes from customer deposits (sight, term and with prior notice). The Bank can give no assurances that greater competition in the markets in which it operates to raise funds from retail customers will not drive the costs of these funds higher, which could have an adverse effect on Bankia's business, earnings and financial position.

Risk of increased costs and of access to wholesale funding

An increase in the ratio of wholesale financing of the Bank could affect its capacity to meet its commitments on asset operations, with the consequent possible adverse effect on Bankia's business, earnings and financial position. Also, although market conditions have improved in recent months, the Bank can give no assurances of continued access to wholesale funds, that the cost of its wholesale funds will not rise or that certain assets will not have to be liquidated.

Summary -6-

Operational risk

According to the New Basel Capital Accord, operational risk is the risk of loss due to inadequate or failed internal processes, people and systems or from external events, including legal risks but excluding strategic and reputational risks. Inadequate management of operational risk, including those risks arising from the Bankia integration, by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

Risk of decreasing fee income

The Bank may generate less fee income as a result of unfavourable market conditions. Even in the absence of unfavourable changes in market conditions, if the return generated by the investment funds managed by the Bank is less than the market level, this could give rise to greater outflows of funds and smaller inflows, and reduce the income received by the Bank on its asset management business.

Risk of worsening situation in financial markets after the results of the financial stress tests

The European Banking Authority (EBA) is conducting a new round of stress tests. If the test results indicate that Bankia may be affected negatively by an adverse scenario, or more affected than expected by the market, Bankia could suffer a possible increase in its funding costs and difficulties in raising funds, with the consequent potential impact on the Bank's interest spreads and, in general, a negative impact on its businesses, operating results and financial position. This could lead to a decline in the Bankia share price. In addition, Bankia could be affected by the results of the stress tests applied to other Spanish or European bank if those results lead to uncertainty in Spanish or EU financial markets, with effects on the availability of financing and on its cost and the consequent negative impact on the Bank.

Changes in regulatory frameworks

Bankia operates in a regulated environment and is subject to strict and extensive rules that include, amongst others, standards on solvency and capital adequacy. Changes in regulations, which are beyond the Bank's control, could have a substantial influence on its activities and operations. In turn, given that some bank laws and regulations have been adopted only recently, the way in which they will be applied to the operations of financial institutions is still in the process of being worked out. Furthermore, it cannot be assured that the adoption, entry into force or interpretation of the laws and regulations will be done in a manner that does not have a negative influence on the Bank's activity.

Greater capital requirements

Between January 2013 and January 2019 new capital parameters for financial institutions will be gradually introduced as stipulated in Basel III. It is not yet known how they will be implemented in Spain in general and, in particular, with respect to banks the size of Bankia. Also, greater capital requirements on the part of Spanish regulators (in line with what is established in Royal Decree Law 2/2011 of 18 February 2011 to strengthen the financial system) may translate into additional capital needs and thus affect Bankia's activity. It cannot be guaranteed that implementation of those parameters or of any other new rules will not have an adverse effect on Bankia's capacity to pay dividends or that it will not oblige the entity to

Summary -7-

issue securities that qualify as regulatory capital or sell assets at a loss or reduce its activity, which could have an adverse effect on Bankia's business, financial position and operating results.

Exposure to the risks of insolvency of other financial institutions.

The Bank routinely engages in transactions with other financial institutions, including securities brokers, dealers, commercial and investment banks, fund managers or other institutional clients. The bankruptcy of an important counterparty or liquidity problems in the financial system could have a material adverse effect on the Bank's businesses, financial position and earnings.

Risks relating to competition by other entities

Bankia could be exposed to risks associated with heightened competition by other entities in the context of a market undergoing an aggressive process of consolidation. Bankia could see its business, financial position and operating results affected if these risks materialise.

1.1.3 Risk factors associated with the macroeconomic environment in which Bankia operates

Sovereign risk within the European Union

Bankia carries on significant commercial activity in Spain. Like other banks that operate in Spain and Europe, Bankia's results and liquidity can be affected be affected by the economic situation prevailing in Spain and in other European Union Member States. Also, some European countries, including Spain, have a relatively large volume of sovereign debt or fiscal deficit or both. This has led to a series of reforms and macroeconomic measures by States to remedy the situation that may have a negative impact on their economic growth during the coming years. In turn, the economic situation in Spain and the European Union remains uncertain and may deteriorate in the future, which could negatively impact the cost and availability of funds for Spanish and European banks, including Bankia, or otherwise adversely affect Bankia's business, financial position and results.

Loss of confidence in the Spanish economy and in the financial system

The Spanish economy is currently going through a time of economic difficulties that lends greater importance to fulfilment of the macro-assumptions on economic recovery.

The concentration of its activity in Spain increases the Bank's exposure to (i) the adverse economic scenario of the Spanish economy and to any potential worsening in that scenario; and (ii) changes in the Spanish regulatory framework, which could have a negative effect on the Bank's business, its financial position and its earnings.

In the medium term the Spanish economy may prove unable to follow the same pace of recovery from the crisis as the major European Union economies, which could have an adverse effect on Bankia's business, financial position and operating results.

Summary -8-

Risk of force majeure events

Bankia's financial and operating results could be affected by force majeure events.

1.2 Risk factors relating to the securities offered

NOT RELEVANT FOR BANKIA´S REGISTRATION DOCUMENT

2. INFORMATION ON THE ISSUER

Bankia is a Spanish commercial company organised in the form of a public limited company (sociedad anónima) and qualifies as a bank. Its registered office is in Valencia, at Calle Pintor Sorolla 8, and it holds Spanish taxpayer identification number (NIF) A-14,010,342.

The Bankia Group originated in the creation of an Institutional Protection Scheme (SIP from the Spanish Sistema Institucional de Protección) under article 4 of Royal Decree Law 11/2010 of 9 July 2010 on governing bodies and other aspects of the legal regime of savings banks, which amended article 8.3 of Spanish Act 13/1985 of 25 May 1985 on investment ratios, equity and reporting obligations of financial intermediaries, by the Cajas pursuant to an integration agreement for the formation of a contractual Group set up as an Institutional Protection Scheme (“SIP”) that was signed on 30 July 2010.

Once the conditions precedent established in the integration agreement were fulfilled, on 3 December the Central Company of the SIP was formed under the name Banco Financiero y de Ahorros, S.A. in which Caja Madrid held a 52.1% equity interest, Bancaja 37.7%, Caja Insular de Canarias 2.5%, Caja de Ávila 2.3%, Caixa Laietana 2.1%, Caja Segovia 2.0% and Caja Rioja 1.3%.

On that same date, the Board of Directors of the Central Company approved its accession to the integration agreement as from 3 December 2010.

Afterwards, as explained in detail in section 5.1.5 of the Registration Document, the Cajas and Banco Financiero y de Ahorros approved a spinoff of the financial, banking and banking-related assets and liabilities of the Cajas for their integration into Banco Financiero y de Ahorros which, likewise, resolved to spin off to Bankia ownership of its banking, banking-related and financial business to Bankia, with the exceptions noted in section 5.1.5 of the Registration Document.

The scope of consolidation of the Bankia Group includes subsidiary companies, associates and jointly-controlled entities that pursue diverse activities, which include, amongst others, insurance, asset management, lending, services, development and management of real estate assets. The main activities carried on by Bankia and its investees fall into the following business areas: retail banking, business banking, private banking, asset management and bancassurance, capital markets and corporate holdings.

Bankia is the biggest financial institution in terms of total assets in Spain, with pro forma consolidated total assets at 31 December 2010 of 292,188 million euros (source: data from the company and the Bank of Spain at 31 December 2010. The analysis includes La Caixa,

Summary -9-

Santander, BBVA, Banco Popular, Banesto and Sabadell. Santander calculated as Spain network. BBVA includes Spain and Portugal).

The Company has established a corporate governance structure in accordance with the prevailing laws in Spain and in line with the recommendations on corporate governance (applicable to the Company) of the Unified Code of Good Governance approved by the CNMV on 22 May 2006 (the “Unified Code”). That corporate governance structure will apply on the date the Company shares are admitted to trading.

The number of members of the Board of Directors of Bankia has been set at 19, although at the date this Prospectus is registered 15 members have been appointed (leaving four vacancies on the Board), of whom four are executive directors, five are proprietary directors (non-executive directors who represent significant shareholders), three are independent and three are other categories of outside (non-executive) directors.

3. SELECT FINANCIAL INFORMATION

Due to the recent integration, through Banco Financiero y de Ahorros, of the financial, banking and banking-related business of the Cajas into Bankia, the only consolidated financial information consists of the audited consolidated abridged interim financial statements of the Bankia Group for the quarter closed on 31 March 2011. The Issuer has also drawn up the consolidated balance sheet at 1 January 2011 for purposes of comparison only.

In addition, pro forma consolidated financial information on the Bankia Group has been prepared for illustrative purposes, based on certain scenarios and assumptions and making certain significant adjustments. Therefore, the pro forma financial data refer to a hypothetical situation and might not be sufficiently representative of the real financial position or results of the Bankia Group.

Historical annual financial information BANKIA GROUP BFA GROUP Balance Sheet (millions of euros)

Consolidated 1-Jan-11

Pro forma Dec-10

Consolidated Dec-10

Aggregated Dec-09

Cash and deposits with central banks 6,505 6,521 6,636 5,296Held for trading 16,502 17,591 16,596 12,970Other financial assets at fair value through profit or loss 95 95 95 103Available-for-sale financial assets 14,002 13,860 23,414 35,667Loans and receivables 215,269 222,970 233,458 246,512Of which: Customer loans 193,756 196,283 214,520 223,690Held-to-maturity investments 9,087 9,087 16,082 13,592Hedging derivatives 3,618 3,618 3,950 3,727Noncurrent assets held for sale 1,809 1,851 5,450 4,364Investments 4,119 2,581 6,492 3,781Insurance contracts linked to pensions 231 231 247 167Reinsurance assets 1 1 1 6Property, plant and equipment 4,334 4,397 5,952 6,401Intangible assets 237 271 273 853Tax assets 4,517 4,815 6,239 2,660Other assets 2,826 4,299 3,390 1,826

Summary -10-

TOTAL ASSETS 283,153 292,188 328,277 337,924Held for trading 13,904 15,084 14,063 11,671Financial liabilities at amortised cost 250,315 258,397 297,200 302,174Of which: Customer deposits 144,037 144,715 165,448 166,950Hedging derivatives 651 651 1,003 1,140Liabilities associated with non-current assets held for sale -- -- 24 21Liabilities under insurance contracts 358 358 358 1,847Provisions 2,307 2,310 2,345 837Tax liabilities 970 981 1,239 1,071Other liabilities 942 994 1,372 1,516TOTAL LIABILITIES 269,448 278,775 317,604 320,277EQUITY 12,976 13,260 8,480 16,045VALUATION ADJUSTMENTS 0 0 0 (303)MINORITY INTERESTS 728 153 2,193 1,905TOTAL EQUITY 13,704 13,413 10,673 17,647TOTAL LIABILITIES AND EQUITY 283,153 292,188 328,277 337,924

Income Statement Pro forma Pro forma (*)Aggregated

(*)(millions of euros) Dec-10 Dec-10 Dec-09Net Interest Income 3,217 3,135 4,473Gross Income 5,541 6,049 7,013Net Income 2,625 2,963 3,903Profit from Operations 559 810 1,290Profit Before Tax 359 501 836Consolidated Net Profit 356 529 732Profit Attributed to the Group 357 440 612

(*) Based on the operating results, the headings of the pro forma 2010 income statement of the Banco Financiero y de Ahorros Group are not representative for analysing the evolution of the BFA Group's businesses, given that they include the effect of extraordinary provisions associated with the Group's restructuring after the integration of the seven Cajas.

Note: The Consolidated Balance Sheet and Income Statement of the Banco Financiero y de Ahorros Group for 2010 and for the first quarter of 2011, as well as the aggregate financial information of the Cajas for 2009 and the first quarter of 2010, are included merely for informational purposes, but they are not comparable to the Balance Sheet and Income Statement of the Bankia Group because they refer to different scopes of business.

Interim financial information

Balance Sheet (millions of euros) BANKIA GROUP BFA GROUP

Pro forma

Mar-11Consolidated

Mar-11Consolidated

Mar-11Consolidated

Dec-10Cash and deposits with central banks 3,525 3,880 6Held for trading 12,724 12,791 16,Other financial assets at fair value through profit or loss 104 104 104 95Available for sale financial assets 18,595 24,505 23,Loans and receivables 2 207,755 230,942 233,4Of which: Customer loans 1 190,083 209,808 214,5Held-to-maturity investments 10,538 16,212 16,Hedging derivatives 2,515 2,717 3Non-current assets held for sale 1,984 6,049 5Investments 4,166 6,686 6Insurance contracts linked to pensions 219 219 235 247Reinsurance assets 1 1 1 1Property, plant and equipment 4,329 5,960 5Intangible assets 255 222 267 273

Summary -11-

Tax assets 4,551 6,338 6Other assets 3,165 3,679 3TOTAL ASSETS 2 274,393 320,367 328,2Held for trading 10,856 10,986 14,Financial liabilities at amortised cost 2 245,262 292,675 297,2Of which: Customer deposits 1 152,962 173,941 165,4Hedging derivatives 497 497 801 1Liabilities associated with non-current assets held for sale -- -- 24 24Liabilities under insurance contracts 354 354 354 358Provisions 1,888 1,926 2Tax liabilities 1,052 1,465 1Other liabilities 706 609 1,065 1TOTAL LIABILITIES 2 260,518 309,297 317,6EQUITY 12,992 8,554 8VALUATION ADJUSTMENTS 79 75 224 0MINORITY INTERESTS 227 807 2,292 2TOTAL EQUITY 13,875 11,070 10,TOTAL LIABILITIES AND EQUITY 2 274,393 320,367 328,2Income Statement Pro forma Consolidated Consolidated Aggregated(millions of euros) Mar-11 Mar-11 Mar-11 Mar-10Net Interest Income 635 530 577 902Gross Income 974 1,112 1Net Income 537 474 550 843Profit from Operations 41 (24) 165 297Profit Before Tax 125 72 247 242Consolidated Net Profit 88 64 205 199Profit Attributed to the Group 91 35 195 169

(*) Based on the operating results, the headings of the pro forma 2010 income statement of the Banco Financiero y de Ahorros Group are not representative for analysing the evolution of the BFA Group's businesses, given that they include the effect of extraordinary provisions associated with the Group's restructuring after the integration of the seven Cajas.

Note: The Consolidated Balance Sheet and Income Statement of the Banco Financiero y de Ahorros Group for 2010 and for the first quarter of 2011, as well as the aggregate financial information of the Cajas for 2009 and the first quarter of 2010, are included merely for informational purposes, but they are not comparable to the Balance Sheet and Income Statement of the Bankia Group because they refer to different scopes of business.

4. CHARACTERISTICS OF THE OFFER


Summary -12-

5. DOCUMENTS ON DISPLAY

If necessary, the following documents (or copies) may be inspected at the CNMV during the period in which the Registration Document is validly in effect: deed of incorporation of the Bank, current bylaws, regulation of the board of directors, regulation of the general shareholders meeting, internal code of conduct in securities markets, audited consolidated financial statements of Bankia at 31 March 2011, unaudited pro forma consolidated balance sheets and income statements of Bankia at 31 December 2010, unaudited pro forma consolidated balance sheet and income statements of Bankia at 31 March 2011, deed of spinoffs of the Cajas to Banco Financiero y de Ahorros and spinoff of Banco Financiero y de Ahorros to Bankia and the framework agreement between Banco Financiero y de Ahorros and Bankia.

These documents will be available to interest parties at the CNMV and at the registered office of Bankia, as well as on its website (www.bankia.com), except for the deed of incorporation and the spinoff deeds, which may be consulted at the registered office.

Registration Document - 1 -

II. RISK FACTORS

Before adopting the decision to invest in shares of Bankia, S.A. (hereinafter, “Bankia”, the “Bank” or the “Issuer”) referred to by the offer for subscription and admission to trading (the “Offer”) of this Prospectus, there must be taken into account the risks set out below that are associated with the Bank's activity and with the sector in which it does business, and the risks relating to the shares offered, which could have an adverse negative effect on the results or financial position or net assets of the Issuer or on the trading price of its shares.

These are not the only risks which may be faced by the Issuer in the future. It is possible that future risks, currently unknown or not regarded as material, may affect the business, results or financial position or net assets of the Issuer or the trading price of its shares. It should likewise be taken into account that those risks may have an adverse effect on the price of the Issuer's shares that could lead to loss of part or all of the investment made due to diverse factors, including the risks to which the Bank is exposed that are described in this section and in others of the Registration Document.

For the purposes of the risk factors described below, all references made to Bankia, the Bank or the Issuer should be understood as also referring to all companies that form part of the corporate Group headed by Bankia as parent company (hereinafter, the “Bankia Group” or the “Group”).

1. RISK FACTORS SPECIFIC TO THE ISSUER OR TO ITS BUSINESS SECTOR

Of the risk factors that apply to Bankia, the two described below bear emphasis and, given the idiosyncrasy and origins of the Bank, must be taken into account when assessing the rest of the risk factors:

Risks derived from the integration of entities

The Issuer, Bankia, is formed from the integration of seven savings banks (caja de ahorros): Caja de Ahorros y Monte de Piedad de Madrid (“Caja Madrid”), Caja de Ahorros de Valencia, Castellón y Alicante, Bancaja (“Bancaja”), Caja Insular de Ahorros de Canarias (“Caja Insular de Canarias”), Caja de Ahorros y Monte de Piedad de Ávila (“Caja Ávila”), Caixa d’Estalvis Laietana (“Caixa Laietana”), Caja de Ahorros y Monte de Piedad de Segovia (“Caja Segovia”) and Caja de Ahorros de La Rioja (“Caja Rioja”) (the “Cajas”). The integration has been carried out in two phases: (i) first, the Cajas spun off to Banco Financiero y de Ahorros, S.A. (“Banco Financiero y de Ahorros” or “BFA”) all of their banking and banking-related assets and liabilities (the “First Spinoff”), and BFA, in turn, (ii) spun off to Bankia all of its banking business, the holdings associated with the financial business and the rest of the assets and liabilities that it received from the Cajas in the First Spinoff or via other arrangements by virtue of the integration agreement, excluding certain assets and liabilities that continued to be owned by Banco Financiero y de Ahorros after the First Spinoff and certain later operations, most notably including (i) on the asset side, land awarded in foreclosures, land financing in a doubtful or substandard situation, certain non-financial interests such as Mapfre, S.A., Mapfre América, Hipotecaria Su Casita, Indra, CISA, BISA (owner of the holdings in Iberdrola, NH Hoteles and Banco de Valencia), the cash needed to meet its payment obligations, portfolio of fixed-income securities and the shareholding it will maintain in Bankia; and (ii) on the liability side, the preference shares


(participaciones preferentes) subscribed for by the FROB bank restructuring fund and certain issues of long-term financial instruments, including issues of preference shares, of subordinated debt, guaranteed debt securities and repos. Also, certain operations after the spinoffs gave rise to the current perimeter of Bankia's business.

Integrating the banking and banking-related business of the seven Cajas into Bankia is a complex operation that involves, amongst other things, integrating the technological systems existing in each of the seven Cajas, their control systems, the different business areas and products, personnel, their risk management, human resources and other policies, the closing of offices, the establishment of a new brand for the Cajas, etc.

The benefits and synergies attained with that integration may not live up to the initial expectations or the integration may not be completed within the agreed time frame or in an efficient manner. It is also possible that the integration process may entail significant costs.

Given that the technology platforms have not yet been integrated, until the integration is completed the Bankia management information is prepared based on the data obtained from the seven Cajas. Furthermore, it should be borne in mind that the criteria and assumptions used in preparing the analytical information of each of the Cajas are not necessarily homogeneous and said information is therefore not fully comparable. As a consequence of the above, and given that homogenising the data is complex, the analytical and management information contained in this Prospectus may prove insufficient.

In addition, the need for the Bankia management team to currently focus a large part of its attention on the questions arising from the execution of these restructuring and integration operations could have an adverse effect on Bankia's business.

Risks deriving from Bankia's lack of operating and financial history as an integrated Group

The recent nature of the Cajas' integration into Bankia and consequent lack of financial and operating history for Bankia as an integrated Group has conditioned the available information on Bankia at the time of the issue.

In this regard, this Prospectus includes financial information taken from the audited consolidated abridged interim financial statements of the Bankia Group at 31 March 2011 and pro forma financial information of the Bankia Group (i) at 31 March 2011, which presents the pro forma balance sheet and income statement of the Bankia Group as if the restructuring and integration operations that generate the pro forma adjustments had been carried out at 31 March 2011, for purposes of the balance sheet, and at 1 January 2010 for purposes of the income statement; and (ii) at 31 December 2010, which presents the pro forma consolidated balance sheet and income statement of the Bankia Group at 31 December 2010 as if the restructuring and integration operations that generate the pro forma adjustments had been carried out at 31 December 2010, for purposes of the balance sheet, and at 1 January 2010, for purposes of the income statement.

Given the still short existence of Bankia as an integrated group, for purposes of comparability and historical evolution, this Prospectus includes unaudited aggregate financial information from the seven Cajas at 31 December 2009 and the audited consolidated annual accounts of


the Banco Financiero y de Ahorros group at 31 December 2010 (which includes the income statement prepared on an aggregate basis by summation of the financial statements of the Cajas), as well as the unaudited abridged income statement of the Banco Financiero y de Ahorros group at 31 March 2010 (aggregate) and the income statement of the Banco Financiero y de Ahorros group at 31 March 2011 (consolidated).

Notwithstanding the foregoing, the comprehension and comparability of Bankia's financial and operating information may be limited, given that, as a result of the restructuring and spinoff operations, the historical financial information of the Cajas and of Banco Financiero y de Ahorros incorporated by reference or cited in this Prospectus might not be representative of or comparable with the operating results, financial position and cash flows of the Bankia Group.

It is important to note that said financial information may not be representative of the reality of what Bankia would have been if the financial, banking and banking-related businesses of Banco Financiero y de Ahorros had been integrated prior to 1 January 2010. Furthermore, if other criteria had been adopted in preparing the pro forma financial information, the results might have been different and, therefore, the information provided may not be comparable with data obtained using different assumptions and hypotheses. In this sense, the pro forma financial information should not be taken as indicative of the future results of the Group's operations.

1.1. Risk factors specific to Bankia

Risk deriving from the presence of the FROB as creditor of the Company's largest shareholder

On 3 December 2010, the FROB bank restructuring fund subscribed for preference shares convertible (PPCs) into shares issued by Banco Financiero y de Ahorros (parent company of Bankia) in the amount of 4,465 million euros. Those PPCs have not been transferred to Bankia.

The issue deed of the PPCs provides for events in which the FROB may request to have the PPCs converted into ordinary shares of Banco Financiero y de Ahorros, namely: (i) on the fifth anniversary of the Closing Date (or on the seventh if the Buyback Extension has been granted); for these purposes, the FROB must request conversion of the PPCs no later than six months after the end of the fifth year (or, if applicable, of its extension); or (ii) at any time before the fifth anniversary of the Closing Date if the Bank of Spain, pursuant to the applicable laws and regulations, considers it unlikely, in view of the situation of Banco Financiero y de Ahorros or of its Group, that the repurchase of the PPCs will be carried out.

In the event there arise any of the situations which authorise the FROB to carry out the conversion, considering that the future conversion rate will be determined by an independent expert, as provided in the issue deed, the FROB could become a significant or even majority shareholder of Banco Financiero y de Ahorros and, indirectly, of the Bank, with the possibility of exercising significant influence in the Bank's management and governance.


Bankia, Banco Financiero y de Ahorros, as principal shareholder of Bankia, could find itself obliged to sell all or part of its 50.03% shareholding in Bankia (after the exercise of the subscription option and assuming the number of shares issued in the Offer is 907,029,479) at the request of the FROB. Nevertheless, Banco Financiero y de Ahorros has maintained, after the Spinoffs, a sufficient funding structure that renders borrowing unnecessary for Bankia. In any event, any operation between Bankia and Banco Financiero y de Ahorros will be subject to the procedure and safeguards provided for in the framework agreement referred to by the following section and in section 22.4 of the Registration Document.

Risk of controlling shareholder

Banco Financiero y de Ahorros, an entity controlled by the seven Cajas, is the sole shareholder of Bankia prior to the Offer and, after the Offer, it will continue to be the majority shareholder of Bankia. The interests of Banco Financiero y de Ahorros, as controlling shareholder, may not be the same as the interests of the rest of the shareholders or as those of the Bank itself.

Once the Offer has been completed, Banco Financiero y de Ahorros will own 52.41% of the shares and voting rights of Bankia (50.03%, if the “green shoe” option over additional shares is exercised in full), assuming that the number of shares issued in the Offer is 824,572,253.

In view of the above, consummation of the Offer including the “green shoe” will leave Banco Financiero y de Ahorros with an interest of more than 50%, which will not imply a change of control under the contracts and issues assumed by the Bank as a result of the spinoff of the businesses of each of the Cajas. Nevertheless, an unexpected change in Banco Financiero y de Ahorros' holding in the Bank could trigger application of certain events of acceleration tied to the shareholding. In any event, such events are not frequent and could affect a very small number of contracts. For these purposes, the Bank will monitor these situations closely and procure, in such events, that the agreements that are affected can be adapted and renegotiated. If such event arises and the affected contracts cannot be renegotiated, the Bank could opt between taking on the possible accelerations or making refinancing arrangements.

Banco Financiero y de Ahorros is the entity formed by the seven Cajas as central company of the institutional protection scheme. Shown in the following table is the distribution of the Banco Financiero y de Ahorros shareholder base:


Shareholder Interest

Caja Madrid 52.06%

Bancaja 37.70%

Caja Insular de Canarias 2.45%

Caja de Ávila 2.33%

Caixa Laietana 2.11%

Caja Segovia 2.01%

Caja Rioja 1.34%

Total 100%

The relations of the Cajas as shareholders of Banco Financiero y de Ahorros, S.A. are regulated in the Integration Agreement (as defined in section 5.1.5 of the Registration Document of this Prospectus). Section 22.1.1 of the Registration Document of this Prospectus contains a detailed explanation of the content of the Integration Agreement in its current version.

As already stated, Banco Financiero y de Ahorros and, indirectly, the Cajas, will continue to be the majority shareholder of the Bank after the Offer and wield decisive influence on all questions that require decision by a majority of shareholders, including dividend distributions, appointments of directors (with the proportional representation right limitations established by Spanish law), capital increases or reductions and amendment of the bylaws, amongst other matters.

After the Company shares are admitted to trading, Banco Financiero y de Ahorros will maintain a majority position that will allow it to decide on the matters that require approval by the shareholders in general meeting. In line with corporate governance recommendations, Bankia and Banco Financiero y de Ahorros have signed a framework agreement which, amongst other questions, regulates the scope of the activity of both companies and establishes mechanisms for avoiding conflicts of interest. Banco Financiero y de Ahorros y Bankia and their respective subsidiaries maintain diverse commercial and financial relations. Such operations will be carried out on an arm's length basis, following the guidelines established in the framework agreement, the content of which is summarised in section 22.4 of the Registration Document of this Prospectus. The contracting, modification or renewal of operations between Banco Financiero y de Ahorros and Bankia or any operations which are considered significant and, due to the parties involved, qualify as related party transactions, will requires the approval of the Bankia Board of Directors, upon a prior favourable report from the Audit and Compliance Committee, which must make an express pronouncement on the essential terms and conditions proposed (term, subject matter, price, etc.).


Related party transactions

Given that Banco Financiero y de Ahorros is the controlling shareholder of Bankia, the operations conducted between them will be considered dealings between related parties.

In this regard, the framework agreement between Bankia and Banco Financiero y de Ahorros establishes a general framework of transparency and diligence in order to confront the risks posed by such transactions (section 22.4 of the Registration Document of this Prospectus contains a brief description of the content of the framework agreement).

Exposure to the Spanish real estate market

Mortgage loans represent one of the Bank's principal assets. At March 2011 they accounted for 45% of the pro forma gross loans and advances of the Bank and expose Bankia to the evolution of the Spanish real estate market.

The average non-performing loan rate of the Cajas integrated in the Bank rose from 5.38% at year-end 2009 to 6.34% at 31 December 2010 (consolidated rate for Banco Financiero y de Ahorros), with coverage of non-performing loans going from 47% to 63% in that period. At 31 March 2011 the pro forma non-performing loans rate for the Bank stood at 5.68%, compared with 5.50% at 31 December 2010. The pro forma coverage of non-performing loans remained stable at 63% on both dates.

The Bank is also exposed to real estate development in Spain. At 31 March 2011, the pro forma gross lending to property developers amounted to 32,950 million euros, or 16.6% of the total pro forma gross credit risk to which Bankia was exposed at 31 March 2011. This pro forma portfolio of loans to property developers recorded a non-performing loan rate of 16.5%, with coverage of 49.8%.

The Bank's housing mortgage loan book in Spain in March 2011 recorded a non-performing loan rate of 3.5%.

The current trends seen in high interest rates and jobless rates, together with the continuous decline in real estate asset prices, could have a material effect on the Bank's non-performing mortgage loan rates, and have a negative impact on the Bank's business, financial position and earnings.

Furthermore, there is the risk that the carrying values of these assets on the balance sheet do not correspond to their realisable value if they had to be sold today, given the difficulties of making such valuations in a market as acutely illiquid as the Spanish property market at present.

Risk of holdings

The Bank is subject to general and specific risks that arise from the nature and characteristics of its investments. Bankia is indirectly subject to risks associated with the sectors in which its corporate holdings operate. The degree of exposure will depend on the relative weight these investments have in the Issuer. These risks include risks derived from the Company's holdings in business that operate in highly regulated sectors such as energy, telecommunications,


finance or insurance, as well as the operational risks faced by its corporate holdings in sectors such as infrastructure, real estate, health, services and leisure.

Significant changes in the sectors in which the corporate holdings do business may affect their market value, and have a negative impact on the business, financial position and operating results of the Bank.

In addition, the Issuer holds minority interests in listed and unlisted companies and may make investments of this type in the future. These investments or acquisitions may be significant and entail greater risks derived from the Bank's smaller influence in the investee company. In addition, the management investment regarding those investments may be of inferior quality, and thus limit the Bank's capacity to influence their business decisions.

The Group has also acquired interests in several financial institutions in recent years. The Group can give no assurances that its acquisitions will perform according to its expectations. When assessing possible acquisitions, the Group must necessarily base itself on limited and potentially erroneous information, and on working hypotheses regarding operations, returns and other aspects that may be inaccurate or incomplete. The Group cannot guarantee that its expectations for integration and synergies will materialise.

At 31 March 2011, the total amount of holdings in jointly controlled (multi-group) and associate entities of the Bank was 4,166 million euros. According to the pro forma data, this figure would be 2,715 million euros after the adjustments explained in point 20.6.2 further below.

Risk of restructuring of the bancassurance agreements

As a result of the integration of the seven Cajas, the Group currently has agreements with various insurers to distribute insurance products through its branch network. Without prejudice to the Bank's intention to comply with those agreements, there is a risk that they may need to be restructured and that Bankia will be obliged to face penalties, with the consequent impact on Bankia's business, operations and earnings. Section 20.8 of this Registration Document makes reference to the claims on these matters.

Risk of possible rise in labour conflicts arising from the integration process

The process of integrating the Cajas into Banco Financiero y de Ahorros and into Bankia includes integrating the workforces of the seven Cajas and harmonising the work conditions that apply to the employees at each.

The Agreement signed on 14 December 2010 with employee representatives established that the Central Company (Banco Financiero y de Ahorros) would be subject to the Sector Collective Bargaining Agreement for Cajas, in relation to this aspect of labour relations, and it also established the fundamental aspects of the framework employment conditions that will apply in Banco Financiero y de Ahorros. The further development of that framework is to be taken up in the collective bargaining carried on in 2011.


Therefore, it appears prudent to believe that there should not exist any potential sources of conflict as a result of these questions, beyond the customary sources of conflict that may arise over the course of the negotiations until the final agreement is reached.

As regards integration of the workforce, during the coming years the evolution of the workforce will be associated with the Staff Rationalisation Plan already presented to and agreed with the employee representatives and unions. Its impact on the overall staffing levels (net effect, that is, departures less additions), will be to reduce the workforce by around 3,756 persons. The downsizing plan is being implemented as projected, and through 31 March 2011 has affected 3,476 persons (3,082 taking the early retirement plan, 58 suspensions of contract, 52 compensated departures and 284 departures for other reasons), some 1,766 of which had already been executed at that date.

The Bank's success rests on certain officers and qualified personnel

The continued success of the Bank depends in part on the work of certain key persons in the organisation. The capacity to attract, train, motivate and retain qualified professionals is a key factor in the Bank's strategy. Successful implementation of the Bank's growth strategy depends on the availability of qualified executives, both at the central offices and in each of the business units. If the Bank does not have the right personnel to sustain its activity or loses any of its key officers and is unable to replace them in due time and form, its business, financial position and earnings could be affected negatively with, inter alia, a weakening of controls and an increase in operational risk. Furthermore, if the Bank does not manage to attract, train, motivate and retain qualified professionals, its businesses could suffer.

Risks not identified or foreseen in the risk management and control policy

The Bank's risk management techniques and strategies, now in the process of being harmonised, might not be fully effective for mitigating the risk exposure in all market economic environments or with respect to all types of risks, including those the Bank may not be capable of identifying or foreseeing. Some of the qualitative tools and metrics the Bank plans to use for its risk management are based on the historical behaviour of the market, applying statistical and other types of tools to those observations as a means of quantifying its risk exposures. Those qualitative tools and metrics might prove incapable of predicting future risk exposures (for example, those arising from the factors the Bank has not foreseen or has not accurately gauged in its statistical models) and thereby limit the Bank's risk management capacity. The Bank's losses, therefore, could prove significantly higher than those indicated in the historical measurements. Moreover, not all risks are taken into account in the quantitative models used by the Bank. The Bank's strategy for managing those risks may turn out to be insufficient and expose it to unforeseen material losses. If in the opinion of current or prospective customers, the risk management conducted by the Bank is not adequate, those customers could take their business to another entity, thereby harming the Bank's reputation, as well as its revenue and profits.

Risk relating to the remuneration policy

As disclosed in section 15 below of the Registration Document, the final remuneration policy in Bankia remains to be determined, given the recentness of the integration. That final policy must be adapted to the provisions of Royal Decree 771/2011 of 3 June 2011, which amended


Royal Decree 216/2008 of 15 February 2008 on capital and reserves of financial institutions and Royal Decree 2606/1996 of 20 December 1996 on deposit guarantee funds of credit institutions.

Risk of losses from legal and regulatory proceedings

There is a risk that the Bank may suffer losses from legal and regulatory proceedings that arise from its relations with its customers, competitors, shareholders, employees, institutions or other agents.

At present, Bankia is not subject to legal and regulatory proceedings that are expected to produce significant losses beyond those disclosed in section 20.8 of the Registration Document of this Prospectus.

1.2. Risk factors associated with the sector in which Bankia operates

Credit risk

Credit risk is defined as the risk of loss arising from a partial or total default by a borrower on its obligations; it represents the Bank's most significant risk. Managing credit risk is a comprehensive process that goes from the time the loan or credit is extended until the risk is extinguished, either at maturity or through recovery with sale of assets in the case of award of collateral in defaulted operations. Credit risk management involves identification, analysis, measurement, monitoring, integration and valuation of the different operations that involve credit risk, on a differentiated basis for different segments of the Bank's customers.

The variables used in measuring credit risk by the Bank are based on internal models: the probability of default, the exposure at default and the loss given default (severity). These variables allow ex ante analysis of the portfolio's risk profile through the calculation of the expected loss and of the economic capital required.

At 1 January 2011 the non-performing loan (NPL) ratio was 5.45% (5.50% according to pro forma data at 31 December 2010). The ratio rose moderately during the first quarter of the year and reached 5.76% (5.68% pro forma) at the end of March. It should nonetheless be noted that the NPL coverage ratio (the provisions set aside by the Bank to cover losses from impairment of its assets divided by the total assets classed as non-performing) stayed at a similar levels on both dates, specifically 65% (63% pro forma) at 31 March and 66% (63% pro forma) at 1 January 2011, thanks to the policy of maximum prudence adopted by the Group in allocating non-recurring revenues obtained during the first quarter of the year to strengthening the overall level of provisions.

Deterioration in the quality of this risk existing at the current date may lead to an increase in doubtful balances and, therefore, require additional provisions under the applicable laws and regulations, which take into account the coverage percentages to be applied according to the term and type of guarantee, applying discounts to those guarantees depending on their nature. Similarly, inadequate management of credit risk by Bankia could have an adverse effect on its business, its earnings and its financial position.


Bankia is subject to Bank of Spain concentration limits, and must not exceed 25% of total eligible capital for outside economic groups or borrowers and 20% for unconsolidated entities. At the date hereof there are no exposures that exceed those limits, with Bankia's maximum exposure estimated at approximately 16.5% of its own funds.

The quantitative impact of the Bankia Group's credit risk in the 3-month period from 1 January to 31 March is presented in detail in Note 3.1 to the consolidated interim financial statements.

Market risk

Market risk is the potential loss caused by adverse movements in the prices of the financial instruments in which the Bank trades in financial and securities markets. The risks associated with market risk include: foreign exchange risk, due to changes in exchange rates; interest rate risk, due to changes in market interest rates; other fixed-income and equity security price risks attributable to the issuer or to the market as a whole; liquidity risk; model risk and counterparty risk.

Market risk is controlled through a system of limits, which are set based on the maximum exposure approved each year by the Board Risk Committee of the Bank and are then shared out among the different business areas and centres. Limits are set by reference to a four metrics: value at risk (VaR), measured by the historical simulation method; sensitivity; stop-loss limit; and size of position. At 31 March 2011, the daily average VaR was 26.8 million euros, with a high of 39.8 million euros and low of 15.0 million euros. The market risk limits system is complemented by a market liquidity limits system that is aimed at avoiding overconcentration in a given asset of the Bank's balance sheet such as could negatively affect the price of the asset in the event of sale.

Monitoring price impairment of specific assets is complex and may translated into unexpected losses for Bankia. Prolonged deterioration of markets can reduce their liquidity, hindering the sale of assets and generating material losses. Downtrends in financial markets may produce changes in the value of Bankia's portfolios of investment and operations.

These develops may lead to material losses if Bankia does not liquidate its loss positions at the right time. Inadequate management of market risk by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

Interest rate risk

Structural interest rate risk on the balance sheet is defined as the probability of losses arising from adverse movements in market interest rates. In accordance with the applicable laws and regulations, the Bank manages this risk having regard to the impact variations in interest rates would have on the evolution of its net interest income.

The measures used to control and monitor interest rate risk are: (i) monitoring of interest rate gaps to identify concentrations of risk in certain periods; (ii) analysis of the interest rate sensitivity of net interest income and assets and liabilities; and (iii) analysis of different scenarios.


The market interest rate scenarios during 2010 was marked by the European Central Bank's decision to keep the 1-year interest rates at 1% to help the financial system return to normal and support economic recovery. Nevertheless, these interest rates were raised to 1.25% in April 2011 and the 1-year Euribor rose from 1.25% at 31 December 2009 to 1.51%, 26 basis points higher, at 31 December 2010. At 31 March 2011 the Euribor stood at 1.99%, 48 basis points above the level recorded at the end of 2010.

Responsibility for controlling and managing the overall interest rate risk of the institution is formally assigned to the Board Risk Committee, a top-level executive body in the Bank, in accordance with the rules and guidelines approved by the Board of Directors.

Sensitivity gap analysis uses a matrix of maturities or repricings, grouping the carrying amount of assets and liabilities by market rate on the basis of the repricing or maturity dates, whichever falls earliest. The qualitative impact of the sensitivity gap at 31 March 2011 and 1 January 2011 of the Bankia Group is presented in detail in section 20 of the Registration Document.

Inadequate management of interest rate risk by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

Liquidity risk

Structural liquidity risk reflects the uncertainty, in adverse conditions, as to the availability of funds at reasonable prices to allow the Bank to make timely payment on the commitments it has acquired and to finance the growth of its investing activity. Inadequate management of this risk by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

The Assets and Liabilities Committee (ALCO) is responsible for controlling and managing liquidity risk, following rules and guidelines approved by the Board of Directors and taking into account the characteristics of the markets and their expected evolution. The ALCO approves the rules for raising funds by instrument and maturity so as to ensure that reasonably priced funds are available at all times to meet obligations finance the growth of investment activity.

This function is performed by systematic monitoring of different liquidity measures, the main one being the liquidity gap, which involves classifying the outstanding principal amount of financial assets and liabilities by maturity, taking as reference the time from the measurement date to the contractual maturity dates without considering possible renewals.


At 31 March 2011, the liquidity gap was as shown below:

(millions of euros)

ACCOUNTS

On

demand

Up to 1

month1 to 3 months

3 months to 1

year 1 to 5 years

More than 5

years Total

Assets

Cash and deposits with central banks 2 1,064 - - - 106 3,525

Deposits in credit institutions 274 5,714 3,284 1,076 627 12,037

Loans and advances to customers 229 6,972 20,729 52,892 97,815 190,119

Held for trading and other financial assets at

fair value through profit or loss - 305 5 51 138 86 585

Held-to-maturity investments - 5,169 129 317 2,229 2,694 10,538

Other portfolios — Debt instruments 74 7,422 623 1,507 8,452 4,182 22,260

Total 2 26,647 25,889 64,787 105,511 239,064

Liabilities

Deposits from central banks and credit

institutions 279 15,190 959 6,910 2,591 32,298

Customer deposits, marketable debt

securities and subordinated liabilities 46, 26,783 46,682 47,910 28,393 211,517

Total 46, 41,973 47,640 54,820 30,984 243,814

TOTAL GAP (43,66 (15,327) ( (21,752) 9,967 74,527 (4,750)

CUMULATIVE GAP (*) (58,996) (67 (89,244) (79,277) (4,750)

(*) The "Cumulative GAP" includes, separately, the "sight" balances of the rest of the maturities, for purposes of the liquidity analysis, given that the balances of customer deposits, although legally available on demand, have historically been stable over time. The calculation of the liquidity gap has considered government debt securities traded on a market with depth and immediate liquidity, with a maturity of one month, a term equivalent to the maturity of the underlying repos.

At 1 January 2011, the liquidity gap was as shown below: (millions of euros)

ACCOUNTS On demand

Up to 1

month

1 to 3

months

3 months to

1 year 1 to 5 years

More than 5

years Total

Assets

Cash and deposits with central banks 3,798 - - - 187 6,505

Deposits in credit institutions 142 5,503 868 1,556 987 12,436

Loans and advances to customers 97 8,181 23 54,842 98,287 193,791

Held for trading and other financial assets at

fair value through profit or loss - 548 12 25 166 16 767

Held-to-maturity investments 3 6,130 309 263 1,377 1,004 9,087

Other portfolios — Debt instruments 50 3,190 8,326 6,084 20,817

Total 27,350 1 28 66,267 106,565 243,403

Liabilities

Deposits from central banks and credit 481 23,235 6,834 3,431 42,329


institutions

Customer deposits, marketable debt

securities and subordinated liabilities 4 19,641 1 42 52,191 29,856 206,442

Total 4 42,876 2 44 59,025 33,287 248,771

TOTAL GAP (46 (15,526) (8 (15,5 7,242 73,278 (5,368)

CUMULATIVE GAP (*) (61,716) (70, (85,8 (78,646) (5,368)

(*) The "Cumulative GAP" includes, separately, the "sight" balances of the rest of the maturities, for purposes of the liquidity analysis, given that the balances of customer deposits, although legally available on demand, have historically been stable over time. The calculation of the liquidity gap has considered government debt securities traded on a market with depth and immediate liquidity, with a maturity of one month, a term equivalent to the maturity of the underlying repos.

This gap is the result of grouping the financial assets and liabilities by contractual maturity, at 31 March 2011 and at 1 January 2011, without taking into account possible renewals. This is therefore an extremely prudent analysis of liquidity risk, given the historical levels of the Group’s financial liabilities, especially as regards customer deposits (retail liabilities).

The Bankia Group's active management of liquidity risk is based on three main lines of action: attracting traditional customer deposits; expanding the liquidity reserve at the European Central Bank for use as a contingent source of funding in the event of a freeze in the capital and interbank markets; and, depending on market conditions, raising funds in the wholesale markets through public and private placements. In this regard, despite the difficulties that continue to exist for issuing new debt in wholesale institutional markets during the first quarter of the year the Bankia Group carried out an issue of 750 million euros of mortgage covered bonds (cédulas hipotecarias) with a redemption period of three years. This issued earned the strongest rating from Standard & Poor’s (AAA) and international subscriptions accounted for more than 69%.

Also, to meet the future maturities of its financing, the Group also holds certain liquid assets that cover the commitments acquired in financing its investment activity, thereby minimising the structure liquidity risk typical of the banking business. These include the securities in the European Central Bank credit facility (Eurosystem), which at 31 March 2011 would allow immediate access to liquidity totalling 10,107 million euros.

At 31 March 2011, Bankia had total liquid assets of 17,170 million euros and debt issuance capacity of 10,821 million euros, mainly in the form of mortgage covered bonds (cédulas hipotecarias) and public covered bonds (cédulas territoriales). These amounts cover the refinancing risk associated with the maturities of the Group's wholesale issues until the end of 2012.

At 31 March 2011 the net position with credit institutions showed a debt position of 10,555 million euros (9,615 million euros at start of year). It should be noted that for both periods this heading includes a term deposit provided by Banco Financiero y de Ahorros of 4,465 million euros associated with the disbursement made by the FROB in connection with the subscription of the issue of convertible preference shares carried out by Banco Financiero y de Ahorros in December. That deposit, the financial terms of which replicated that of the preference shares issued by Banco Financiero y de Ahorros was cancelled on 1 April, with the


establishment of a demand deposit with Banco Financiero y de Ahorros for the same amount and earning market interest rates in accordance with the new nature of the deposit.

As for the position with central banks, at 31 March 2011 the Bank had a net debt position of 6,948 million euros, compared to 14,702 million euros at the start of the year.

The foregoing notwithstanding, it cannot be ruled out that in a scenario of liquidity tensions or crises in the markets, Bankia may not be able to draw on and dispose of those liquid assets to meet contingent liquidity risks.

Also, changes in financial markets may generate changes in the value of the Bankia investment portfolios and operations. Some of Bankia's assets do not have markets with sufficient liquidity. Assets not traded on stock exchanges or on other secondary markets may be measured by Bankia using commonly accepted methods. Monitoring asset price impairment can be complex and translated into losses not anticipated by Bankia.

Risk of increased costs of and dependence on retail bank funds

The main source of funds of the Cajas that have integrated their businesses in the Bank comes from customer deposits (sight, term and with prior notice). According to the pro forma data at 31 March 2011, 43% of these customer deposits are term deposits (excluding repos and one-off covered bonds) amounting to 66,500 million euros. Including repos and one-off covered bonds, customer term deposits totalled 85,070 million euros, representing 55% of customer funds. At 31 March 2011 deposits accounted for 72% of the Bank's funding sources.

The Bank can give no assurances that greater competition in the markets in which it operates to raise funds from retail customers will not drive the costs of these funds higher, which could have an adverse effect on Bankia's business, earnings and financial position.

Risk of increased costs and of access to wholesale funding

In relation to funding risks at 31 March 2011, the Bank's outside funding is mainly sourced from customer deposits, which account for 72% of the total on-balance sheet funding; the remaining 28% consists of wholesale funding, with the attendant dependence of the Bank of wholesale funding with which to carry out its asset operations.

An increase in the ratio of wholesale financing of the Bank could affect its capacity to meet its commitments on asset operations, with the consequent possible adverse effect on Bankia's business, earnings and financial position.

The drying up of liquidity in the markets caused by the deterioration of the subprime market in the United States affected the availability and cost of funds and liquidity. This market deterioration spread to the world economy and in particular, to institutional market issuers (primarily asset backed securities), as well as the availability of liquidity in interbank markets. Although market conditions have improved in recent months, the Bank cannot guarantee its access to wholesale funding sources, that the cost of such funding will not rise or that certain assets will not need to be liquidated.


Operational risk

According to the New Basel Capital Accord, operational risk is the risk of loss due to inadequate or failed internal processes, people and systems or from external events, including legal risks but excluding strategic and reputational risks.

Inadequate management of operational risk, including those risks arising from the Bankia integration, by the Bank could have an adverse effect on Bankia's business, earnings and financial position.

Risk of decreasing fee income

The Bank's fee and commission income may decline. The currently unfavourable market conditions are likely to reduce the volume of transactions the Bank executes for its customers and, hence, diminish its non-interest revenues. Furthermore, given that the fees charged by the Bank for providing services (asset management, payment systems, etc.) are in many cases based on the value or profitability of the customer portfolios and on consumer spending levels, an adverse change in the market that reduces the value of those portfolios, decreases consumer spending or increases the withdrawal of funds would reduce the Bank's fee and commission income and, consequently, the revenues made on its portfolio management, private banking and custodial businesses.

Even in the absence of unfavourable changes in market conditions, if the return generated by the investment funds managed by the Bank is less than the market level, this could give rise to greater outflows of funds and smaller inflows, and reduce the income received by the Bank on its asset management business.

At 31 March 2011 revenues from net fees and commissions amounted to 288 million euros (289 million euros pro forma).

Risk of worsening situation in financial markets after the results of the financial stress tests

The European Banking Authority (EBA) is conducting a new round of stress tests on European banks, based on the results of the tests carried out last year and on record in the registers of the European Systemic Risk Board (ESRB) and of the European Central Bank (ECB). This new round of stress testing includes a more rigorous definition of what is considered Core Capital (Tier I) and poses a more adverse scenario than the projections on which last year's testing was based. In addition, at the registration date of this Prospectus the EBA has not yet fully defined the treatment and calculation criteria that will be applied, amongst other magnitudes, to the general provisions and provisions for substandard loans of financial institutions. Depending on the treatment and criteria finally adopted, the results of the stress tests for Bankia could vary significantly. The new stress tests may be publicly released during the public offer period or close to its completion date. If the test results indicate that Bankia could be negatively affected by an adverse scenario, or affected more than expected by the market, Bankia may indeed find itself negatively impacted by a possible rise in its funding costs and by difficulties in raising funds. This situation could also lead to an across-the-board increase in the cost of financing, narrowing he Bank's interest margins and, in general, generating a negative impact on its businesses, operating results and financial position. This could lead to a decline in the Bankia share price.


In addition, Bankia could be affected by the results of the stress tests applied to other Spanish or European bank if those results lead to uncertainty in Spanish or EU financial markets, with effects on the availability of financing and on its cost, and the consequent negative impact on the Bank.

Changes in regulatory frameworks

Bankia operates in a regulated environment and is subject to strict and extensive rules that include, amongst others, standards on solvency and capital adequacy.

As a result of the current financial crisis and ensuing intervention by diverse governments, the regulation of the financial industry is expected to increase considerably, with more demanding capital requirements, greater transparency and the imposition of restrictions on executing certain structured operations. Many of the initiatives that are expected are novelties. If they materialise, the Bank could be required to inject more capital into its current businesses or into those it may acquire in the future, to restrict the type or volume of the businesses it carries on or to establish limits or modify the fees and charges for its products. All this could reduce the return on its investments, on its assets and on its equity. The Bank is exposed to greater compliance costs and to the establishment of limits on its businesses. Changes in regulations, which are beyond the Bank's control, could have a substantial influence on its activities and operations. Given that some bank laws and regulations have been adopted only recently, the way in which they will be applied to the operations of financial institutions is still in the process of being worked out. Furthermore, it cannot be assured that the adoption, entry into force or interpretation of the laws and regulations will be done in a manner that does not have a negative influence on the Bank's activity.

Greater capital requirements

Between January 2013 and January 2019 new capital parameters for financial institutions will be gradually introduced as stipulated in Basel III. It is not yet known how they will be implemented in Spain in general and, in particular, with respect to banks the size of Bankia. Also, greater capital requirements on the part of Spanish regulators (in line with what is established in Royal Decree Law 2/2011 of 18 February 2011 to strengthen the financial system) may translate into additional capital needs and thus affect Bankia's activity.

In relation to core capital requirements, it should be noted that Royal Decree 2/2011 requires consolidated groups of credit institutions to have a ratio of core capital throughout 2011 of 8% of its risk-weighted exposures, unless its wholesale funding index is greater than 20% and it does not have 20% or more of its capital and voting rights placed with third parties, in which case the above requirement will be 10% of their risk-weighted exposures. For the Banco Financiero y de Ahorros Group, of which Bankia is a member, at 31 December 2010, the required 8% and 10% of risk-weighted exposures exceeded the core capital by 1,795 and 5,775 million euros, respectively.

It cannot be guaranteed that implementation of those parameters or of any other new rules will not have an adverse effect on Bankia's capacity to pay dividends or that it will not oblige the entity to issue securities that qualify as regulatory capital or sell assets at a loss or reduce its activity, which could have an adverse effect on Bankia's business, financial position and operating results.


Exposure to the risks of insolvency of other financial institutions.

The Bank routinely engages in transactions with other financial institutions, including securities brokers, dealers, commercial and investment banks, fund managers or other institutional clients. The collapse or even rumours of insolvency of certain financial institutions have caused the sector to suffer liquidity problems which could lead to losses or to the bankruptcy of other entities. These liquidity problems have generated and may continue generating a sharp reduction in interbank transactions. Many of the transactions in which the Bank routinely takes part expose it to considerable counterparty risk, which could materialise if a significant counterparty were to go bankrupt. The bankruptcy of an important counterparty or liquidity problems in the financial system could have a material adverse effect on the Bank's businesses, financial position and earnings.

Risks relating to competition by other entities

Bankia could be exposed to risks associated with heightened competition by other entities in the context of a market undergoing an aggressive process of consolidation. Bankia could see its business, financial position and operating results affected if these risks materialise.

1.3. Risk factors associated with the macroeconomic environment in which Bankia operates

Sovereign risk within the European Union

Bankia carries on significant commercial activity in Spain. Like other banks that operate in Spain and Europe, Bankia's results and liquidity can be affected be affected by the economic situation prevailing in Spain and in other European Union Member States. In this regard, it bears emphasis that the European Union's rescue of Portugal and the difficulties faced by Greece in meeting the commitments associated with its debt level have even called into question the stability of the European Monetary Union. Also, some European countries, including Spain, have a relatively large volume of sovereign debt or fiscal deficit or both. This has led to a series of reforms and macroeconomic measures by States to remedy the situation that may have a negative impact on their economic growth during the coming years. This situation has produced tensions in international capital, debt and interbank lending markets, and volatility in euro exchange rates recently.

At 31 March 2011 the Group's exposure to sovereign debt stood at 12,929 million euros, according to pro forma information. Of that total, 81% is Spanish sovereign debt.

The economic situation in Spain and the European Union remains uncertain and may deteriorate in the future, which could negatively impact the cost and availability of funds for Spanish and European banks, including Bankia, or otherwise adversely affect Bankia's business, financial position and results.

Loss of confidence in the Spanish economy and in the financial system

The Spanish economy is currently going through a time of economic difficulties that lends greater importance to fulfilment of the macro-assumptions on economic recovery.


The concentration of its activity in Spain increases the Bank's exposure to (i) the adverse economic scenario of the Spanish economy and to any potential worsening in that scenario; and (ii) changes in the Spanish regulatory framework, which could have a negative effect on the Bank's business, its financial position and its earnings.

Against this backdrop, the Government of Spain, in collaboration with the various economic agents, has approved and implemented a series of structural reforms to spur recovery of the Spanish economy, notably including adoption of budget austerity with the aim of bringing down the fiscal deficit, reform of employment laws, measures reforming the financial system and the announcement of the privatisation of public companies.

Failure to meet the objectives of those measures and the expectations communicated to the market by the Government of Spain and other institutions in the coming years could lead to a loss of confidence in the Spanish economy by international financial operators with the consequent impact on companies that do an important part of their business in Spain and on Bankia's business, financial position and operating results.

A possible failure to fulfil the current hypotheses of economic recovery could intensify the pressure on Spain with the consequent increase in borrowing costs.

Such a rise in the cost of raising funds on capital markets or from deposits could have a negative effect on the Bank's net interest income. Similarly, a slowdown in the pace of economic activity could reduce the Bank's business and revenues.

Together with this near-term risk faced by the Spanish economy, in the medium term the Spanish economy may prove unable to follow the same pace of recovery from the crisis as the major European Union economies, which could have an adverse effect on Bankia's business, financial position and operating results.

Risk of force majeure events

Bankia's financial and operating results could be affected by force majeure events, given that a significant part of its loan book consists of mortgage loans.

Natural disasters such as earthquakes and floods can cause major damage and harm the credit quality of the Bank's loan book or have a negative impact on the economy of the affected zone.

Acts of terrorism, rioting, sudden changes in governments or other events of a geopolitical nature could have a negative effect on the Spanish economy and on the economy of other countries where Bankia does business, on the financial conditions of those economies and on Bankia's business, financial position and operating results.


2. RISK FACTORS RELATING TO THE SECURITIES OFFERED


III. INFORMATION ABOUT THE ISSUER (ANNEX I OF COMMISSION REGULATION (EC) NO 809/2004 OF 29 APRIL 2004)

1. PERSONS RESPONSIBLE

1.1. Identification of the persons responsible for the registration document

Mr. Francisco Verdú Pons, in his capacity of Chief Executive Officer, for and on behalf of Bankia, S.A. (hereinafter, “Bankia”, the “Bank” or the “Issuer”), entity with registered office at Valencia, C.P. 46002, Calle Pintor Sorolla, 8, assumes responsibility for the content of this Registration Document (hereinafter, the “Registration Document”), with express authorisation for these purposes by virtue of the resolution approved by the Bank's Board of Directors on 28 June 2011.

1.2. Declaration by the persons responsible for the shares registration document

Mr. Francisco Verdú Pons assumes responsibility for the content of the Registration Document and for its veracity and represents, having taken all reasonable care to ensure that such is the case, that the information contained in the registration document is, to the best of his knowledge, in accordance with the facts and contains no omission likely to affect its import.

2. STATUTORY AUDITORS

2.1. Names and addresses of the issuer’s auditors for the period covered by the historical financial information (together with their membership in a professional body)

Due to the recent creation of the Bankia Group as currently defined, there is no historical consolidated financial information on the Group and, therefore, the Issuer's auditors have not been able to audit its consolidated financial statements for the period that would be covered by such consolidated historical financial information.

Nevertheless, the auditors appointed to audit the Company's annual financial statements in the current year are Deloitte, S.L. (“Deloitte”) with registered office in Madrid, Plaza Pablo Ruiz Picasso 1, Torre Picasso, holder of Spanish corporate taxpayer identification number (CIF) B-79,104,469 and registered in the ROAC register of auditors under number S0692 and in the Companies Registry of Madrid in volume 13,650, folio 188, section 8, page M-54,414.


2.2. If auditors have resigned, been removed or not been re-appointed during the period covered by the historical financial information, indicate details if material.

As indicated in the preceding section, due to the recent creation of the Bankia Group as currently defined, the Bank's auditors have not resigned, been removed or not been re-appointed, having been named at the General Meeting of shareholders of the Bank on 6 April 2011 for fiscal 2011.


3. SELECTED FINANCIAL INFORMATION

All financial information contained in this report, except where specifically indicated otherwise, has been prepared in accordance with Bank of Spain Circular 4/2004 and with the International Financial Reporting Standards (IFRS) adopted by the European Union.

3.1. Selected historical financial information

After the recent integration in Bankia of the financial, banking and banking-related businesses that had been received by Banco Financiero y de Ahorros from the Cajas, the scope of the Issuer's business was modified substantially, subsequent to the registration on 23 May 2011 of the two spinoffs in the Companies Registry, with effective date retroactive to 1 January 2011.

Due to the recent formation of Bankia as currently defined, the only audited consolidated financial information are the audited consolidated abridged interim financial statements of the Bankia Group for the quarter closed on 31 March 2011. The Company has also prepared a consolidated balance sheet at 1 January 2011 as initial balance sheet after the spinoff and integration of the Cajas.

As a result of the above and of the lack of historical information on Bankia, the Bank has prepared pro forma consolidated financial statements at 31 December 2010. Nevertheless, it is important to note that said financial information may not be representative of the reality of what Bankia would have been if the financial, banking and banking-related businesses of Banco Financiero y de Ahorros had been integrated prior to 1 January 2010. Section 20.2 of this Prospectus sets out the basis for preparing said pro forma consolidated financial statements and the reasons why they many not be sufficiently representative.

Given the absence of historical consolidated financial information, the Bank has prepared unaudited aggregate financial information of the seven Cajas integrated in Banco Financiero y de Ahorros Group for the year ended 31 December 2009, which, together with the audited consolidated information (for the balance sheet) and pro forma consolidated information (for the income statement) of the Banco Financiero y de Ahorros Group for 2010, provide a reference of what the Bankia Group's evolution would have been. Nevertheless, the aggregated financial statements of the seven Cajas for 2009 and the 2010 consolidated financial information of Banco Financiero y de Ahorros Group should not be compared with the Bankia Group, as they refer to different scopes of business in which there would have to be taken into account the assets that continue to be owned by Banco Financiero y de Ahorros after the First Spinoff (which are detailed in section 5.1.5 (G) below) and those that have been kept by the Cajas. Also, the annual financial statements of the Cajas for 2008, 2009 and 2010 are available at the CNMV and the consolidated annual accounts of the Banco Financiero y de Ahorros Group for the year ended 31 December 2010 may be obtained at Banco Financiero y de Ahorros.


The following table summarises the selected historical annual information that is included in this Registration Document:

31/12/2009 31/12/2010 01/01/2011

Income Statement Aggregated Cajas BFA Group

Pro forma **

Bankia Pro

forma -

Balance Sheet Aggregated Cajas

BFA Group

Consolidated

Audited

Bankia Pro

forma

Consolidated

Bankia Group

** This pro forma income statement information and the respective explanations are included in Note 2.1 “Business combination and consolidation” of the consolidated annual accounts of Banco Financiero y de Ahorros for the year ended 31 December 2010.

The following table gives selected annual financial information obtained from the consolidated and pro forma financial statements of the Bankia Group, as well as the main financial ratios for the Issuer prepared according to Bank of Spain Circular 4/2004 and to the International Financial Reporting Standards adopted by the European Union. In order to show how the main headings of the Bankia 2010 income statement might have evolved, and given that there is no historical financial information of the Issuer that allows that evolution to be analysed due to its recent creation, the table also includes the pro forma income statement of the Banco Financiero y de Ahorros Group for 2010 and the aggregate statement for the Cajas for 2009. However, when analysing a possible trend in the evolution of Bankia's businesses, there should only be taken into account the Net Interest Income, Gross Income and Net Income of both income statements, as they are the only headings that could show a similar trend in Bankia. The lines below the Net Income are not representative for analysing the evolution of Bankia's businesses in 2010, because in the 2010 pro forma income statement of the Banco Financiero y de Ahorros Group de 2010, those lines mainly include the effect of extraordinary provisions associated with the process of restructuring the Banco Financiero y de Ahorros Group after the integration of the seven Cajas, and these are neither recurring nor applicable to Bankia.


BANKIA GROUP BANCO FINANCIERO Y DE AHORROS GROUP (BFA) Balance Sheet Consolidated Aggregated Var. 10-09 % 10/09 (millions of euros) Dec-10 Dec-09 Total assets 283,153 292,188 328 33 (9,64 (2.9%) Loans and advances to customers(1)

193,790 196,317 214 22 (9,17 (4.1%)

Capital and Reserves 12,976 13,260 (7,5 (47.1%) Equity 13,704 13,413 1 (6,97 (39.5%) Customer funds (on balance sheet) 206,442 207,120 252 26 (9,50 (3.6%) Income Statement Pro forma (2) Aggregated (2) Var. 10-09 % 10/09 (millions of euros) Dec-10 Dec-09 Net interest income 3,217 (1,33 (29.9%) Gross Income 5,541 (964) (13.7%) Net Income 2,625 (939) (24.1%) Profit from Operations 559 810 (480) (37.2%) Profit Before Tax 359 501 836 (335) (40.1%) Consolidated Net Profit 356 529 732 (203) (27.8%) Profit Attributed to the Group 357 440 612 (172) (28.0%) Ratios (3) Consolidated

Dec-10 Aggregated

Dec-09

ROE - 2.7% 2.9% 3.7% ROA - 0.1% 0.2% 0.2% Solvency Ratio 7.6% 7.7% 11.9% 11.3% Principal Capital Ratio 7.7% 7.5% 7.1% -- Efficiency - 46.5% 45.3% 39.5% Non-performing loans 5.45% 5.52% 6.34% 5.38% Coverage 66% 63% 61% 47%

(1) Bankia Group includes loans and advances to customers in the held‐for‐trading portfolio amounting to 34 million euros at 1 January 2011 (Consolidated) and at 31 December 2010 (Pro forma). The Banco Financiero y de Ahorros Group includes loans and advances in the held‐for‐trading portfolio amounting to 34 million euros at 31 December 2010 (Consolidated) and 39 million euros at 31 December 2009 (Aggregated).

(2) The lines below Net Income of the pro forma income statement 2010 of the Banco Financiero y de Ahorros Group are not representative for purposes of

analysing the evolution of the BFA Group's businesses, as they include the effect of extraordinary provisions made in connection with the Group's restructuring subsequent to the integration of the seven Cajas.

(3) ROE: Profit Attributed to the Group / Average Capital and Reserves

ROA: Consolidated Net Profit / Average Total Assets

Solvency Ratio: calculated according to the Bank of Spain standards

Principal Capital Ratio: calculated according to the Bank of Spain standards

Efficiency: (Staff Costs + General Expenses) / Gross Margin

Non-performing loans: Total Doubtful Assets (including Loans and Contingent Liabilities ) / Loans and Contingent Liabilities

Coverage: Total Loan Loss Provisions / Total Doubtful Assets (including Loans and Contingent Liabilities)

3.2. Interim financial information

As mentioned in the preceding section, due to the recent formation of Bankia as currently structured, the only audited consolidated financial information are the abridged interim consolidated financial statements of the Bankia Group for the quarter closed on 31 March 2011. Bankia also presents, to satisfy the requirement for comparative information in the balance sheet, the consolidated balance sheet at 1 January 2011.


Due to the above and of the lack of financial information with the current scope of the Issuer's business, pro forma consolidated financial statements at 31 March 2011 have been prepared. But, as mentioned in section 3.1, it should be noted that those pro forma consolidated financial statements might not be representative of the reality of what Bankia would have been had the financial, banking and banking-related businesses of Banco Financiero y de Ahorros been integrated prior to 1 January 2010 or if the asset sale-purchases had been carried out before 1 January 2011, respectively. Nevertheless, at 31 March 2011 there were pending formal execution certain asset sale-purchases that modify the scope of the Bankia Group (detailed in section 5.1.5 (G) below). Most of those operations have been executed at the registration date of this Prospectus. Section 20.6.2 of this Prospectus describes the basis for preparing those pro forma consolidated financial statements.

Section 20.6 of the Registration Document of this Prospectus gives the consolidated interim financial information of Bankia for the period ended 31 March 2011 and discusses the main variations recorded, as well as the pro forma financial information referenced to the scope of the Bankia Group as definitively defined and structured. Also, in order to show what the trend might have been in the evolution of the Bankia income statement, and given that there is no comparable year-on-year information, also included are the variations in the March 2011 income statement of the Banco Financiero y de Ahorros Group with respect to the aggregate income statement of the Cajas in March 2010, as that trend might be similar for Bankia. However, as mentioned in 3.1 above, both income statements are included merely for informational purposes as they refer to businesses and structures that are not the same as those of the Bankia Group and hence not comparable.

The accompanying table summarises the selected interim financial information that is included in this Registration Document:

31/03/2010 31/12/2010 01/01/2011

Income Statement Aggregated Cajas

BFA Group

Consolidated

Bankia Group

Consolidated

Audited

Bankia Group

Pro forma

Balance Sheet

Bankia Group

Consolidated

Audited

Bankia Group

Pro forma


Presented below is the consolidated and pro forma interim financial information of Bankia at 31 March 2011, prepared according to Bank of Spain Circular 4/2004 and to the International Financial Reporting Standards adopted by the European Union.

BANKIA GROUP BANCO FINANCIERO Y DE AHORROS GROUP

(BFA)

Balance Sheet Pro forma

Consolidate

d

Consolidate

d

Pro

forma Pro forma

%

Var.

Consolidate

d

Consolidate

d

Var. 11-

10

% 11/10

(millions of euros) Mar-11 Mar-11 1-Jan-11 Dec-10 Variation Mar-11 Dec-10

Total assets 282,439 274,393 283,15 292,188 (9,74 (3.3%) 320.367 328.277 (7.910) (2.4%)

Loans and advances to

customers(1)

191,384 190,119 193,79 196,317 (4,93 (2.5%) 209.844 214.554 (4.710) (2.2%)

Capital and Reserves 13,27 12,992 12,9 13,260 16 0.1% 8.55 8.48 74 0.9%

Equity 13,58 13,875 13,7 13,413 169 1.3% 11,0 10, 397 3.7%

Customer funds (on balance

sheet)

212,034 211,517 206,44 207,120 4, 2.4% 257,00 252,5 4,450 1.8%

Income Statement Pro forma Consolidate

d

Consolidate

d Aggregated

Var. 11-

10 % 11/10

(millions of euros) Mar-11 Mar-11 Mar-11 Mar-10

Net interest income 635 530 577 902 (325) (36.0%)

Gross Income 1,0 974 1 1 (482) (30.2%)

Net Income 537 474 550 843 (293) (34.7%)

Profit from Operations 41 (24) 165 297 (132) (44.3%)

Profit Before Tax 125 72 247 242 5 2.0%

Consolidated Net Profit 88 64 205 199 6 3.2%

Profit Attributed to the

Group

91 35 195 169 26 15.6%

Ratios (4)

Pro forma

Mar-11

Consolidate

d

Mar-11

Consolidate

d

Mar-11

Consolidate

d

Dec-10

ROE 2.8% -(2) 9.4% 2.9% (3)

ROA 0.1% -(2) 0.3% 0.2%

Solvency Ratio 8.0% 8.0% 12.4% 11.9%

Principal Capital Ratio 7.8% 7.99% 7.5% 7.1%

Efficiency 41.2% 43.3% 43.0% 45.3%

Non-performing loans 5.68% 5.76% 6.68% 6.34%

Coverage 63% 65% 60% 61%

(1) Bankia Group includes loans and advances to customers in the held-for-trading portfolio amounting to 36 million euros at 31 March 2011 Pro forma and in the Consolidated and 34 million euros at 1 January 2011. Banco Financiero y de Ahorros Group includes loans and advances to customers in the held-for-trading portfolio amounting to 36 million euros in the March 2011 Consolidated and 34 million euros in the December 2010 Consolidated.

(2) The consolidated ROA and ROE are not included for the Bankia Group at March 2011 because the Bankia income statement only covers three months of activity and the pro forma data give a more accurate estimate of the Bankia ROE and ROA in its current configuration at 31 March 2011.

(3) The Banco Financiero y de Ahorros Group ROE for March 2011 is higher than for December 2010 because the average capital and reserves at March 2011 do not record the full effect of the writedown to fair value, with a

charge to reserves, of certain assets and liabilities received by Banco Financiero y de Ahorros from the Cajas in the spinoffs. (4) ROE: Profit Attributed to the Group / Average Capital and Reserves

ROA: Consolidated Net Profit / Average Total Assets

Solvency Ratio: calculated according to the Bank of Spain standards

Principal Capital Ratio: calculated according to the Bank of Spain standards

Efficiency: (Staff Costs + General Expenses) / Gross Margin

Non-performing loans: Total Doubtful Assets (including Loans and Contingent Liabilities ) / Loans and Contingent Liabilities

Coverage: Total Loan Loss Provisions / Total Doubtful Assets (including Contingent Assets and Liabilities)


4. RISK FACTORS

See section 1 of chapter II (“Risk Factors”) above .

5. INFORMATION ABOUT THE ISSUER

5.1. History and Development of the Issuer

5.1.1. Legal and commercial name of the issuer

The full legal name of the Issuer is Bankia, S.A. Its commercial name is Bankia.

5.1.2. Place of registration of the issuer and its registration number

The Bank is registered in the Valencia Companies Registry Volume 9,341, Book 6,623, folio 104, page V-17274, Entry 183.

The Bank is also registered in the Bank of Spain’s Special Register of Banks and Bankers under number 2038.

5.1.3. Date of incorporation and the length of life of the issuer, except where indefinite

The Bank was incorporated for an indefinite period as "Bank of Córdoba, S.A." by public deed on 5 December 1963 before the Granada notary, Mr Antonio Tejero Romero, amended by subsequent deeds (changing its name and amending its Articles of Association) and it changed its name to Altae Banco, S.A. by deed recorded by the Valencia notary, Mr Eduardo Llagaría Vidal on 10 July 1995 under number 2,473 in his record book.

On 29 April and 16 June 2011, the sole shareholder decided to change the name of the bank to the current Bankia, S.A..

Section 5.1.5 below includes a detailed account of the Bank's recent history.

5.1.4. Domicile and legal form of the issuer

Bankia’s corporate domicile is Calle Pintor Sorolla, 8, Valencia. Its Spanish Taxpayer Identity Number is A-14.010.342.

The Bank is a Spanish, commercial, organised as a public limited company (sociedad anónima) and is registered as a bank. It is therefore subject to the regulations laid down by the Capital Companies Act (Ley de Socieades de Capital), the Structural Changes to Commercial Companies Law and other associated legislation as well as the specific legislation relating to credit institutions and the oversight, control and regulations of the Bank of Spain.


Bankia Group was originally formed through an institutional protection scheme (Sistema Institucional de Protección — SIP) under Article 4 of Royal Decree Law 11/2010 of 9 July, on governing bodies and other aspects of the legal regime of savings banks, which amended Article 8.3 of Law 13/1985 of 25 May, on investment ratios, own funds and reporting obligations of financial intermediaries, by Caja de Ahorros y Monte de Piedad de Madrid (“Caja Madrid”), Caja de Ahorros de Valencia, Castellón y Alicante, Bancaja (“Bancaja”), Caja Insular de Ahorros de Canarias (“Caja Insular de Canarias”), Caja de Ahorros y Monte de Piedad de Ávila (“Caja de Ávila”), Caixa d’Estalvis Laietana (“Caixa Laietana”), Caja de Ahorros y Monte de Piedad de Segovia (“Caja Segovia”) and Caja de Ahorros de La Rioja (“Caja Rioja”) (the “Cajas”) based on an agreement to merge by creating a contractual Group structured as an SIP signed on 30 July 2010.

Once the conditions precedent in the Integration Agreement were met, on 3 December the Central Company of the SIP was incorporated under the name Banco Financiero y de Ahorros, S.A. (“Banco Financiero y de Ahorros” or the “Central Company”) in which Caja Madrid held a 52.1% interest, Bancaja 37.7%, Caja Insular de Canarias 2.5%, Caja de Ávila 2.3%, Caixa Laietana 2.1%, Caja Segovia 2.0% and Caja Rioja 1.3%. The Central Company was incorporated by public deed before Valencia Notary, Mr Manuel Ángel Rueda Pérez, entered under number 1,504 in his record book and registered in the Valencia Companies Registry on 7 December 2010 and in the Bank of Spain's Register of Banks and Bankers on 13 December 2010.

At the same date, the Board of Directors of the Central Company agreed to sign up to the Integration Agreement as of 3 December 2010, and the agreement was then registered as a public deed before the Valencia Notary Manuel Ángel Rueda Pérez on the same date under number 1,514 of his record book.

Subsequently, as set out in greater detail in section 5.1.5, the Cajas and Banco Financiero y de Ahorros approved the spinoff of the financial, banking and banking-related assets and liabilities held by the Cajas for incorporation into Banco Financiero y de Ahorros. Banco Financiero y de Ahorros then agreed to transfer to Bankia ownership of all its banking, banking-related and financial businesses except for those parts indicated in section 5.1.5 of this Registration Document.

Contact details for shareholders wishing to contact the issuer are:

Contact phone number for shareholders and investors: 902 10 75 75

From outside Spain: +34 91 791 16 49

Email: [email protected]

Website: www.bankia.com

5.1.4.1. Legislation under which the issuer operates

Bankia is organised as a sociedad anónima (public limited company). Its operations are subject to special legislation applying to credit institutions and, in particular, to Bank of Spain


oversight, control and regulations. Bankia is the parent company of the Bankia Group and its sole shareholder is Banco Financiero y de Ahorros.

Banco Financiero y de Ahorros is the Central Company of the SIP institutional protection scheme including the savings banks Caja Madrid, Bancaja, Caja Insular de Canarias, Caja de Ávila, Caixa Laietana, Caja Segovia and Caja Rioja.

SIPs were instituted by Royal Decree 216/2008 of 15 February on the capital of financial institutions (“Royal Decree 216/2008”), as amended by Royal Decree 771/2011, of 3 June, which amended both Royal Decree 216/2008 and Royal Decree 2606/1996, of 20 December, on the credit guarantee funds of credit institutions (“Royal Decree 771/2011”) as well as by Bank of Spain Circular 3/2008, of 22 May, for Credit Institutions, on the calculation and monitoring of minimum capital (“Circular 3/2008”) as a way of enabling, based on a mutual support agreement, certain special arrangements for risk management and capital consumption.

Law 13/1985, of 25 May, on investment ratios, own funds and reporting obligations of financial intermediaries, as drafted by Royal Decree 6/2010, of 9 April, on measures to strengthen the economic recovery and employment, and subsequently by Royal Decree Law 11/2010, of 9 July, on the governing bodies and other aspects of the legal regime of savings banks (“Law 13/1985”), permits, in the same way, the creation of a consolidated group of credit institutions with no need for a legal merger. There are also the provisions of Royal Decree Law 9/2009, of 26 June, on bank restructuring and the strengthening of the capital of credit institutions, regarding merger processes between credit institutions intended to improve their efficiency (“Royal Decree Law 9/2009”).

Also, Bankia is subject to Royal Decree Law 2/2011 of 18 February, on the strengthening of the financial system (“Royal Decree Law 2/2011”), especially its provisions for strengthening the solvency of credit institutions and minimum requirements for core capital.

5.1.5. Important recent events in the development of the issuer's business

Bankia is the institution created by the merger of the seven Cajas, as a result of the SIP based on the Integration Agreement signed by the Cajas on 30 July 2010. The major milestones in the integration process that began with the formation of the SIP were as follows:

• Signature of Integration Protocol (June 2010)

• Signature of Integration Agreement (June 2010)

• Incorporation of Banco Financiero y de Ahorros, the SIP’s Central Company (December 2010)

• Subscription by the FROB for Banco Financiero y de Ahorros convertible preference shares (December 2010).

• Signature of the first Addendum to the Integration Agreement by which the Cajas undertook to cede the voting rights of their controlled subsidiaries to Banco Financiero y de Ahorros (December 2010).


• Signature of the Second Addendum to the Integration Agreement, which transferred all assets and liabilities from the Cajas’ retail banking business to Banco Financiero y de Ahorros but left the Cajas to manage retail banking in their home territories under powers delegated by Banco Financiero y de Ahorros (January 2011).

• Signature of the Third Addendum to the Integration Agreement, allowing Banco Financiero y de Ahorros to adopt whatever structure it saw fit to float its business on the stock market (February 2011).

• Signature of the novation of the Integration Agreement bringing it into line with Royal Decree Law 2/2011 (April 2011) under which the Cajas and Banco Financiero y de Ahorros accepted, among other matters, the system for mutualisation of profit and full guarantee of solvency and liquidity set out in the Integration Agreement.

• Signature of Agreements to provide Management Services in their home territories by each of the Cajas with Banco Financiero y de Ahorros (April 2011). Under these agreements each Caja provides monitoring and cooperation services to manage the retail banking business in its home territory and the use of its brand.

• Spinoff of the Cajas’ businesses to Banco Financiero y de Ahorros (May 2011).

• Spinoff of Banco Financiero y de Ahorros’ businesses to Bankia (May 2011).

• Transactions subsequent to the Second Spinoff (June 2011)

• Agreements delegating management of the pawn shop businesses to the Cajas, which will also take on the costs.

(A) Events leading to the creation of the SIP: Integration Protocol and Integration Agreement.

On 14 June 2010, following approval by their boards of directors, the Cajas signed a integration protocol setting out the terms for the formation of a contractual group between the Cajas (the “Integration Protocol”).

Subsequently, on 30 July 2010, the Cajas signed an Integration Agreement that contractually created a consolidated group of credit institutions under a SIP (the “Integration Agreement”), developed from the bases laid down by the Integration Protocol and approved by the Boards of Directors and General Assemblies of the Cajas on 29 July 2010 and 14 September 2010, respectively.

The merger of the Cajas involves a measure of internal restructuring with a consequent streamlining of staff. Changes will be made in accordance with the terms set out in the integration labour agreement, signed on 14 December 2010 by staff representatives and the institutions, guaranteeing consensus and security for the whole process (the “integration labour agreement”). Section 17 of the Registration Document in this Prospectus contains a brief summary of the integration labour agreement.


(B) Incorporation of Banco Financiero y de Ahorros, the SIP’s central company

Once the conditions precedent in the Integration Agreement were met, on 3 December 2010 the Central Company of the SIP was incorporated under the name Banco Financiero y de Ahorros, S.A., which the same day signed up to the Integration Agreement, registered in the Bank of Spain’s Bank of Spain's Register of Banks and Bankers under number 0488 on 13 December 2010.

As stated in the Integration Agreement, on 3 December 2010, the Cajas granted the Central Company the right to receive 100% of the income from all businesses carried on by the Cajas in all areas as from 1 January 2011 (the “Mutualisation Right”) via a capital increase against a contribution-in-kind, which was subsequently agreed in April by the novation of the Integration Agreement.

(C) Subscription for convertible preference shares by the FROB

In July 2010, the Bank of Spain and the Committee of European Banking Supervisors (CEBS) working with the European Central Bank (ECB) and European Commission, submitted 27 Spanish financial institutions (8 listed banks and 19 savings banks) — along with another 64 European banks — to stress tests, simulating a sharp fall in GDP, increase in unemployment and non-performing assets, as well as a fall in the price of public debt. The aim was to gauge their capacity to survive a widespread deterioration of the economy.

These stress tests revealed the capital requirements of some institutions whose Tier I capital (i.e. the capital, reserves and preference shares that an institution can call on to meet the risks it takes on) fell short of the required 6% of assets in certain scenarios.

As the Cajas reported through significant event filings on 23 July 2010, the SIP formed by the Cajas passed the stress tests.

Based on the stress tests, in December 2011 the SIP would have a Tier I ratio of 8.8% in the benchmark scenario, falling to 6.8% in the adverse scenario and 6.3% in the adverse scenario with additional sovereign debt shock.

Surplus capital would be 5,991 million euros in the benchmark scenario, 1,714 million euros in the adverse scenario and 639 million euros in the sovereign debt-shock scenario.

The 4,465 million euros requested from the FROB was included in the analysis of all the scenarios where the Banco Financiero y de Ahorros Group passed the stress tests, although this aid was only actually needed in situations of maximum stress. The FROB’s Governing Committee agreed on 29 June 2010 to provide financial support for the Cajas’ merger via an undertaking to subscribe for 4,465 million euros of convertible preference shares (participaciones preferentes convertibles — “PPCs”). On 3 December 2010, the Combined General Meeting of the Central Company approved the issue of the PPCs, which were subscribed and paid for exclusively by the FROB.

The key terms of the PPC issue were based on the Resolution of the FROB’s Governing Committee, of 27 July 2010, setting out the criteria and conditions which would determine the actions of the FROB in merger or recapitalisation processes undertaking credit institutions in


line with Articles 9 and 10 of Royal Decree Law 9/2009, of 26 June, on banking restructuring and the strengthening of the capital of credit institutions. These are as follows:

- PPCs are issued at par, i.e. 100% of their nominal value. The nominal value of each PPC is 100,000 euros, higher than the nominal value of Banco Financiero y de Ahorros’ shares (i.e. one (1) euro per share).

- Banco Financiero y de Ahorros shall, directly or indirectly, buy back on one or more occasions the PPCs as soon as possible and within 5 years, extensible to 7 years, from the date of payment.

- Under the FROB Governing Committee resolution, interest applied to the nominal value of the PPCs until the time of repayment, conversion or repurchase, is calculated by the FROB on the subscription date as the lower of:

(i) 7.7% per annum, or,

(ii) the annual yield on 5-year bonds issued by the Kingdom of Spain plus a 500 basis point spread. The benchmark used for this calculation is the average rate at the last issue of fixed-rate 5-year sovereign debt held by the Kingdom of Spain before the payment date.

In the end, the Issue Resolution set the annual interest rate on PPCs at 7.75%, this being less than the average rate at the last issue of Spanish 5-year debt (3.576%) plus a 500 basis point spread.

The remuneration rate will rise by 15 basis points (0.15%) on each anniversary of the payment date (up to the fifth anniversary exclusive).

If the FROB agrees to extend repurchase of the loan, the remuneration rate will rise by 100 basis points (1%) for each year’s extension up to a maximum of two years.

- The FROB’s subscription of PPCs is accompanied by a number of operational restrictions on Banco Financiero y de Ahorros, including limits on its commercial policies, expansion plans involving the acquisition of other institutions, executive pay and dividends. Under the terms of the PPC issue deed, any serious breach of any of these commitments by Banco Financiero y de Ahorros shall result in a 200 basis point (2%) increase in the interest rate on the PPCs.

- The PPCs shall be convertible into Banco Financiero y de Ahorros shares, on the sole instigation of the FROB, in the circumstances set out in the resolution of Banco Financiero y de Ahorros General Meeting of 3 December 2010: (i) on the fifth anniversary of the payment date (or the seventh if the FROB has granted a extension). In this case, the FROB must request the conversion of the PPCs within six months counted from the end of the fifth year (or, if applicable, the extended term). And (ii) at any time before the fifth anniversary of the payment date if the Bank of Spain, acting in accordance with regulations in force, should deem it unlikely that the PPCs could be repurchased given the situation of Banco Financiero y de Ahorros or its group.


In the event of conversion, the FROB shall be awarded a number of Banco Financiero y de Ahorros shares (the “Shares to be Issued”) that confer a specific percentage of the voting rights at Banco Financiero y de Ahorros’ General Shareholders’ Meeting. This is defined as the percentage equivalent to the nominal value of the PPCs to be converted at that date plus accrued unpaid interest (the “Cash Amount”) as a proportion of Banco Financiero y de Ahorros’ total capital on the date the FROB announces its intention to convert (the “Economic Value of Banco Financiero y de Ahorros”) plus the Cash Amount.

The “Conversion Ratio” shall be the number of shares to be issued divided by the number of PPCs to be converted into Banco Financiero y de Ahorros shares at that date. The FROB will therefore receive a number of Banco Financiero y de Ahorros shares from the conversion equal to the number of PPCs it holds and wishes to convert multiplied by the Conversion Ratio.

The Economic Value of Banco Financiero y de Ahorros shall be calculated based on a valuation carried out by independent appraisers appointed jointly by Banco Financiero y de Ahorros and the FROB.

The deadline for completing conversion of the PPCs into Banco Financiero y de Ahorros shares is six months after the end of the fifth year (or seventh year if extended).

The deed for the PPC issue was executed on 16 December 2010 and registered in the Valencia Companies Registry on 22 December 2010. Payment by the FROB was made on 28 December 2010.

(D) Amendments to the Integration Agreement: Addenda and Novation of the Integration Agreement

The Integration Agreement has been amended several times since it was first agreed. Specifically, it was amended by the following agreements:

(i) First Addendum to the Integration Agreement, signed on 30 December 2010, transferring the voting rights of institutions controlled by the Cajas’ to Banco Financiero y de Ahorros to decide and develop policy for these institutions.

(ii) Second Addendum to the Integration Agreement, signed on 28 January 2011, ceding all assets and liabilities forming part of the Cajas’ retail banking business to Banco Financiero y de Ahorros, but allowing the Cajas to continue managing the retail banking business in their home territories,

(iii) Third Addendum to the Integration Agreement, signed on 17 February 2011, allowing Banco Financiero y de Ahorros to adopt whatever structure it sees fit to float its business on the stock market,

(iv) Novation of the Integration Agreement amending it to comply with Royal Decree Law 2/2011, agreed on 29 April 2011.

Section 22 of the Registration Document of this Prospectus includes a summary of these amendments to the Integration Agreement.


(E) Management services agreements

Under the terms of the agreements to provide management services in their respective home territories each Caja will provide monitoring and cooperative services for their retail banking business in their home territory and brand management services.

The Cajas must provide these services exclusively to the Bank. The Bank cannot assume management responsibility in the home territory of any other institution.

These contracts stipulate that agreements delegating management of the pawn shop business shall be signed under which the Bank will be absolved of any costs of the delegation.

(F) Restructuring: First and Second Spinoffs

Between 14 and 17 February 2011, the boards of directors of the Cajas and Banco Financiero y de Ahorros approved projects to spin off the Cajas’ banking and banking-related businesses for integration into Banco Financiero y de Ahorros (the “First Spinoff”) which were duly recorded in the corresponding Companies Registries (the “Spinoff Projects”) and subsequently approved by the General Assemblies of the Cajas between 8 and 14 March 2011 and by the Bank’s General Shareholders’ Meeting on 24 March 2011.

After the Spinoffs filed on 23 May 2011, some balance sheet items, basically those related to the Obra Social, the pawn shop business, associated cash, and some individual assets, were excluded from the First Spinoff and therefore remain on the balance sheets of the respective Cajas. Eligible assets and liabilities owned by each Caja consist of: (i) the brand; (ii) assets and liabilities relating to the Obra Social; (iii) the pawn shop businesses (in the case of Caja de Canarias, Caja Madrid and Bancaja); (iv) assets and liabilities that cannot be spun off for legal reasons, and (v) real estate and furnishings of artistic, historical, archaeological, documentary, bibliographical, scientific, ethnographic or paleontological interest which were inventoried as such or have been declared of cultural significance.

Subsequently, under the Third Addendum, the boards of directors of Banco Financiero y de Ahorros and Altae Banco, S.A. (“Altae”) resolved to transfer to Altae the ownership of some assets and liabilities belonging to Banco Financiero y de Ahorros (the “Second Spinoff”) as initial steps leading to the listing of Altae (now renamed Bankia). The Second Spinoff was approved at the general shareholders’ meetings of Banco Financiero y de Ahorros and Altae on 5 and 6 April 2011, respectively. On 29 April 2011, Altae’s sole shareholder resolved to change Altae’s name to Bankia. The name change was officially registered by public deed on 16 May 2011 and recorded in the Companies Registry on 17 May 2011.


The Second Spinoff covers part of the corporate assets and liabilities that Banco Financiero y de Ahorros received from the Cajas under the First Spinoff: all the banking business, shareholdings associated with the financial business and the other assets and liabilities that Banco Financiero y de Ahorros received from the Cajas under the First Spinoff or under the Integration Agreement. Exempted are certain assets and liabilities that remained with Banco Financiero y de Ahorros after the First Spinoff (the “Residual Assets and Liabilities in Banco Financiero y de Ahorros”) and a number of subsequent transactions, including:

(a) assets: foreclosed land, impaired or substandard loans on land, shareholdings in Mapfre, S.A., Mapfre América, Hipotecaria Su Casita, Indra, CISA, BISA (holding company for investments in Iberdrola, NH Hoteles and Banco de Valencia), the cash needed to meet their payment obligations, fixed-income portfolio and its shareholding in Bankia, and

(b) liabilities: preference shares subscribed for by the FROB and some issues of long-term financial instruments, including preference participating units, subordinated debt, state-backed bonds and repos.

So, the second Spinoff left a number of items on Banco Financiero y de Ahorros’ balance sheet, including loans on impaired or substandard land, foreclosed land, certain shareholdings, cash and securities trading portfolio, preference participating units subscribed for by the FROB and certain issues of financial instruments.


Highlights of Banco Financiero y de Ahorros’ individual balance sheet following the Second Spinoff were as follows:

Banco Financiero y de Ahorros balance sheet (Spinoff deed)

Millions of euros Dec-10 Dec-10

Loans and advances to credit institutions 5,378 State-backed finance 7,278

Available-for-sale financial assets 10,307 Subordinated finance 5,430

Loans and advances to customer (real estate loans to third parties, impaired, substandard and to subsidiaries)

6,425 Participating preference units

4,140

Hedging derivatives 415 Repurchase agreements 9,649

Non-current assets held for sale and investment properties (foreclosed and purchased land)

1,006 Customer deposits (mainly subsidiaries)

1,578

Investments 15,470 Hedging derivatives 152

of which — Bankia 12,000 Tax and other liabilities 423

of which — Other 3,470 FROB 1 4,465

Tax assets 1,207 Equity 7,093

Total assets 40,208 Total liabilities 40,208

Notes: - Available-for-sale financial assets basically consist of Spanish sovereign debt. - Repo sales have Bankia as counterparty. - Values have been rounded.

As a result of the Second Spinoff, Bankia increased its capital by 12,000 million euros, issuing 900,000,000 shares with a nominal value of two (2) euros per share and of the same class and series as shares already issued, numbered 8,000,001 to 908,000,000 inclusive and with a total share premium of 10,200 million euros, equivalent to a per share premium of approximately eleven euros thirty-three cents (11.33 euros), corresponding to all the shares in the Banco Financiero y de Ahorros capital increase.

Once the deadline for objections by creditors to the First and Second Spinoff expired on 16 May 2011, the corresponding deeds for both Spinoffs were officially recorded and registered in the Companies Registry on 23 May 2011.


The chart below illustrates the effects of the First and Second Spinoffs:

BANKIA

It should be noted that following the first Spinoff, Bankia's controlling shareholder, Banco Financiero y de Ahorros also has a 27.33% stake, via BISA’s 39.054% shareholding, in Banco de Valencia, whose shares are listed on the Spanish stock exchanges (Continuous Market). Banco Financiero y de Ahorros has exercised its rights as shareholder and director of Banco de Valencia in strict accordance with the rules on Good Governance and the Banco de Valencia’s internal Rules and with respect for the rights of other shareholders in the bank.

Also, Deutsche Bank AG, Sucursal en España (“DB”) and Caja de Ahorros de Valencia Castellón y Alicante “Bancaja” (“Bancaja”) agreed a swap (the "Swap Contract”) on a shareholding owned by Picton S.a.r.l. in Bancaja Inversiones S.A. (“BISA”). The BISA investment and Swap Contract were transferred by universal succession to Banco Financiero y de Ahorros as part of the Spinoff of businesses from Bancaja to Banco Financiero y de Ahorros. As a result, Banco Financiero y de Ahorros has a dividend swap on its books carried at zero value and an option of the BISA equity investment, the counterparty for both derivatives being shareholders in BISA.

(G) Transactions subsequent to the Second Spinoff

Following the First and Second Spinoffs various transactions were carried out to complete the restructuring of the Group in readiness for the current Offer. Under some of these transactions, Bankia sold certain financial assets classed as impaired and substandard in order

37.7% 2.5% 2.3% 2.1% 2.0% 1.3% 52.1%

• Consolidated assets and liabilities

Banco Financiero y de Ahorros (BFA)

Caja Madrid Bancaja Caja Canarias Caja de Ávila Caixa Laietana Caja Segovia Caja Rioja

Banking and banking-related business Other non-financial investments

100% (Pre-spinoff)


to finance the land holdings. Other deals could only go ahead once the Spinoffs had been completed.

The impact of these transactions on Bankia’s financial statements is summarised in section 20.6 below.

(G.1) Sales and purchases subsequent to the Second Spinoff

As part of the restructuring preparatory to listing the Group's business, on 1 June 2011, certain internal sales between different BFA Group companies took place, most notably:

− The sale by Banco Financiero y de Ahorros to Bankia of 48.64% of Corporación Financiera Caja de Madrid, S.A., 64.73% of Arrendadora Aeronáutica, A.I.E., 99.99% of Mediación y Diagnósticos, S.A. and 32.93% of Avalmadrid, S.G.R. as well as a number of other minor sales from the "Available-for-sale financial assets" portfolio, for a total consideration of 366 million euros.

− The sale by Caja Madrid Cibeles, S.A., a Bankia Group subsidiary, to Banco Financiero y de Ahorros of 14.96% of Mapfre, S.A., 10.36% of Mapfre América S.A. and 100% of CM Invest 1702 Corporación Internacional E.T.V.E., S.L., for a total consideration of 1,380 million euros.

− The sale by Corporación Financiera Caja de Madrid, S.A. to Bankia of 19.99% of Indra Sistemas, S.A. for 541 million euros. Bankia then transferred the investment on the same day to BFA for 394 million euros.

The transaction was completed on 1 June 2011. The previous sale had been done and recognised at consolidated book value, being an intra-Group transaction, and therefore had no income or first-time consolidation impact on Bankia Group's consolidated income statement.

The transaction was carried out in two phases: (i) Corporación Financiera Caja Madrid’s sale to Bankia at the value of the shareholding recorded in the Corporación Financiera individual financial statements of 541 million euros, and (ii) on the same date, sale of the same shareholding by Bankia to Banco Financiero y de Ahorros at its value in Bankia’s consolidated financial statements of 394 million euros.

The difference between the two figures corresponds to goodwill retained on Bankia’s consolidated balance sheet and which originated on Caja Madrid's consolidated financial statements when the shareholding was transferred to Corporación Financiera.

These transactions were done and recognised at consolidated book value, being an intra-Group transaction, and therefore had no income or first-time consolidation impact on Bankia's consolidated income statement.

(G.2) Total demerger of CISA, Cartera de Inmuebles, S.L.

On 8 June 2011, the deed recording the complete demerger of CISA, Cartera de Inmuebles, S.L. ("CISA") was officially registered.

Under this transaction (i) CISA’s business managing certain assets, mainly foreclosed land, and liabilities was transferred to a newco wholly owned by Banco Financiero y de Ahorros,


and (ii) CISA’s business managing other assets, mainly built land, and liabilities was transferred to Bancaja Habitat, S.L., a company wholly owned by Bankia.

(G.3) Capital reduction by Banco de Servicios Financieros Caja Madrid-Mapfre, S.A.

On 28 March 2011, Caja Madrid Cibeles, S.A. (“Caja Madrid Cibeles”) signed a protocol with Mapfre, S.A. undertaking to buy all Mapfre’s shares in Banco de Servicios Financieros Caja Madrid-Mapfre, S.A. (“BSF”). The deal would leave Caja Madrid holding more than 99.98% of BSF.

Given this high percentage owned by Caja Madrid and the low number of shares still held by third parties, Caja Madrid Cibeles proposed a restructuring of BSF that would lead to its full integration within the Bankia group.

This restructuring was achieved by a reduction in BSF’s share capital charged against free reserves, via the cancellation of all shares not held by Caja Madrid Cibeles and Mapfre, S.A., and the return of contributions in kind which was approved by the enhanced majority required by the Capital Companies Act: a vote in favour by the majority of the shares represented in person or by proxy at the General Shareholders' Meeting and a vote in favour by the shareholders affected attending the meeting.

In compliance with the Corporations Law, BSF provisioned a reserve, charged against free reserves, for the nominal amount of the cancelled shares which would be available only on the same terms as required for the capital reduction.

The deed for the BSF capital reduction was recorded on 2 June 2011 and registered in the Valencia Companies Registry on 10 June 2011. As a result of this capital reduction, the Bank held 100% of the shares in BSF indirectly through Caja Madrid Cibeles.

(G.4) Sale of certain assets between Banco Financiero y de Ahorros and Bankia

As part of the restructuring in preparation for flotation of the Bankia Group, in June a number of steps were taken to exchange certain financial and real estate assets between BFA and Bankia, most notably, (i) Bankia's purchase from BFA of certain financial assets (loans), classified as impaired or substandard to finance land holdings, and (ii) Banco Financiero y de Ahorros’ purchase from Bankia of some additional land holdings that at the publication date of this prospectus were in the process of being transferred. The Company estimates that these sales will be completed before the settlement date of the Offer.

(G.5) Adjustment of deposits linked to convertible preference shares.

Banco Financiero y de Ahorros placed deposits with Bankia in the same amount as the convertible preference shares (PPCs) subscribed for by the FROB (4,465 million euros). These deposits were remunerated at the same interest rate as the PPCs, i.e. 7.75% per annum. Bankia’s directors adjusted the remuneration of these deposits to the market interest rate paid on interbank deposits and Bankia's finance costs were adjusted accordingly on the consolidated income statement for the period between 1 January and 31 March 2011, to reflect the difference between the actual interest rate on these deposits and the market rate.


(G.6) Spinoff of Bankia Banca Privada

The board of directors and sole shareholder of Bankia and the board of directors and sole shareholder of Banco de Servicios Financieros Caja Madrid-Mapfre, S.A.U., a wholly owned subsidiary of Bankia via Caja Madrid Cibeles, S.A.U. agreed a "Spinoff Project" under which Bankia would transfer its private banking business to Bankia Banca Privada. The Spinoff Project was filed with the Madrid Companies Registry and the transaction is still pending final authorisation and completion at the date of this Prospectus, which we expect to happen in the next few weeks.

5.2. Investments

5.2.1. Description, (including the amount) of the issuer's principal investments for each financial year for the period covered by the historical financial information up to the date of the registration document

As indicated above, because Bankia was only recently formed with its current business scope, there is no consolidated historical financial information for the Company, other than the historical financial statements (for 2008, 2009 and 2010) of each Caja and the 2010 financial statements of Banco Financiero y de Ahorros which are included in this Prospectus by reference.

This section summarises the investments (without depreciation, amortization or provisions) in 2010 and 2009, in accordance with Circular 4/2004, of 22 December, based on aggregated financial information from the individual Cajas.

Property, plant and equipment

In 2010 and 2009, net investments in property, plant and equipment for own use and other assets held under operating leases by the Cajas whose banking and banking-related businesses were integrated to the Group, totalled 135 million euros and 178 million euros, respectively. In 2010, 262 buildings belonging to the Spanish retail banking network were sold, along with a single building, resulting in net divestments of 108 million euros and 61 million euros respectively. These were subsequently leased back under operating leases. Also, in the first half of 2011 eight buildings from the Spanish retail banking network were sold, at a net disinvestment of 3 million euros. These too were then leased back under operating leases.

Intangible assets

Net investment in intangible assets in 2010 and 2009 by the Cajas, whose banking and banking-related businesses were incorporated into the Group, totalled 54 million euros and 72 million euros, respectively.


Shareholdings

Based on aggregated information from the Cajas, investments made by the Cajas and transferred to the Bank as a result of the integration of associates, joint ventures and subsidiaries totalled 756 million euros in 2010 and 858 million euros in 2009. The principal investments were as follows:

• Nuevas Actividades Urbanas, 65 million euro capital increase in 2009.

• City National Bancshares INC. (entity absorbed in 2011 by CM Florida Holdings): the investment made in 2010 consisted of a cash contribution of 100 million dollars in March and the acquisition in May of the outstanding 17% of the company still held by the minority shareholder, giving the Group a 100% stake. The total value in euros of these two payments was 228 million euros.

• SOS Corporación Alimentaria, S.A. (SOS) in the first half of 2009 Caja Madrid Group acquired 10.5% of the company for 149 million euros. In 2010, it invested a further 75 million euros raising its holding to 18.4%.

• Bancaja Habitat, 150 million euro capital increase in 2010.

• Costa Bellver, 65 million euro stake acquired in 2009.

• Banco de Servicios Financieros Caja Madrid-Mapfre, S.A. In 2009, 57 million euro subscription at a capital increase to keep the percentage holding unchanged at 51%.

As stated in section (G.3) above, Caja Madrid Cibeles acquired all the Banco de Servicios Financieros Caja Madrid-Mapfre, S.A. (“BSF”) shares owned by Mapfre, S.A., giving Bankia an indirect 99.98% stake in BSF. Following the capital reduction described in the same section, Bankia now owns 100% of BSF.

• Bancaja Participaciones, 50 million euro capital increase in 2010.

• Urbapinar, S.L. 61 million euro capital increase in 2010.

Regarding divestments, in 2009 and 2010, Cajas disposed of the following significant available-for-sale assets:

• Bankinter. Between June and October 2009 the whole 4.68% investment in Bankinter was gradually sold for 142 million euros.

• Attijariwafa Bank. In the third quarter 2010, the whole 3.42% stake in Attijariwafa Bank was sold for 23 million euros.

In the first half of 2011 the whole 20% investment in Generaciones Especiales I, S.L. was sold for 131 million euros and 12.5% of Mapfre Internacional, S.A. for 295 million euros.


5.2.2. Description of the issuer’s principal investments that are in progress, including the geographic distribution of these investments (home and abroad) and the method of financing (internal or external)

There are no investments in progress at the moment.

5.2.3. Information concerning the issuer's principal future investments on which its management bodies have already made firm commitments

There are no firm commitments to other investments. Bankia’s strategy foresees no material acquisitions or investments in the medium term.

6. BUSINESS OVERVIEW

6.1. Principal activities

6.1.1. Description of, and key factors relating to, the nature of the issuer's operations and its principal activities, stating the main categories of products sold and/or services performed for each financial year for the period covered by the historical financial information

6.1.1.1. General description of the Group and key factors relating to the business

Bankia is the biggest financial institution by assets in Spain, with total pro forma consolidated assets at 31 December 2010 of 292,188 millions of euros (source: data from comparable companies and Bank of Spain at 31 December 2010. Comparables used were La Caixa, Santander, BBVA, Banco Popular, Banesto and Sabadell. The figure for Santander was calculated for the Spanish network. BBVA includes Spain and Portugal).

The Bank is one of the largest entities by domestic business volume (defined as total loans and deposits for resident private sector customers), which was greater than 300,000 million euros at 31 March 2011, according to pro forma. Bankia is the second-largest lender to private sector customers with a pro forma loan book of 190,000 million euros at 31 December 2010 giving it a 10.9% market share (sources: reserved consolidated balance sheet from the Bank of Spain. Other private sector loans. Spanish business – savings banks – and Bank of Spain – market. Data at December 2010. The figure for Santander was calculated as Santander private sector loans less Banesto’s market share). It is also the second-largest taker of private sector customer deposits, with a total of 139 billion euros at 31 December 2010 (pro forma) giving Bankia a market share of 10.2%. (source: reserved consolidated balance sheet from the Bank of Spain. Other private sector deposits. Spanish business – savings banks – and Bank of Spain – market. Data at December 2010. The figure for Santander was calculated as Santander private sector deposits less Banesto’s market share).

Because Bankia was only recently formed with its current business scope, there is no consolidated historical financial information for the Company, other than the historical financial statements (for 2009 and 2010) of each Caja and the 2010 financial statements of Banco Financiero y de Ahorros, which are included in this Prospectus by reference. Therefore, the following section details the key figures for the Bank's business at 31 December 2010 and at 31 March 2011 based on pro forma data (in millions of euros).


Financial highlights

(pro forma)

December 2010

March 2011

Net interest income 3,217 635

Gross income 5,541 1,048

Net income (Before provisions) 2,625 537

Provisions (1) -2,336 -521

PBT 359 125

Profit attributable to the parent 357 91

(1) Including impairment of financial and other assets

At 31 March 2011 the Bankia Group had 402 companies in its scope of consolidation, including subsidiaries, associates and jointly controlled entities, engaged in diverse activities, including insurance, asset management, financing, services and development and management of real estate assets.

As for key business factors Bankia operates to a universal banking business model based on a multi-brand multi-channel approach. This model relies on a close, personalised relationship with customers, product innovation and high quality service which is focussed on satisfying the financial needs of 11.2 million customers in all sectors: a) retail, SMEs, large corporate and public and private institutions.

The results of this strategy are reflected in the high level of customer loyalty to the bank in the Spanish market. Business is concentrated in Spain through a network of 4,070 branches at 31 December 2010 covering the whole country in line with a business model that prioritises geographical diversification. There are also 31 branches located outside Spain. The bank has a market share of over 20% in eight Spanish provinces and over 5% in another 24 provinces (source: Bank of Spain). Bankia had a 3,864 branches offering retail services at 31 December 2010. Most of these are in Madrid, with 1,200 branches at the end of 2010 (21.6% market share) or in the Valencian Community, 752 branches (19.5% market share). Bankia is concentrated in the most dynamic regions of Spain with the greatest levels of commercial and financial activity. These regions are able to add value to the business as together they generate 56% of Spanish GDP (source: Bank of Spain (Banks and Savings Banks) at December 2010. Based on 3,864 retail branches). Bankia currently has 3,786 branches (at 31 March 2011), less than in December 2010, following a number of branch closures as the businesses of the different saving banks were integrated into the Bankia group.

The close relationships and loyalty between Bankia and its customer base and the improved perception of the different brands in the Bankia Group will be reinforced by the recognition and branding of the seven component Cajas in their home territories and home markets. These banks are already well known given their historical presence in their respective regions and


the visibility of the community projects that they continue to develop as part of their Obra Social.

The integration of the operations and activities of Bankia’s seven constituent Cajas will make possible improvements in the Group's productivity and significant cost-saving synergies. This is already occurring, mainly through a rationalization of the branch networks, a reduction in staff numbers, the integration of technology and the unification and rationalization of supply chain services and management processes. Taken together, these steps will help the Group cut costs and ultimately create greater value.

Finally, the other key elements in Bankia's business and strategy are risk management and control and the definition of its risk profile, its organizational structure and the corporate governance that will support the management of the company as a whole.

6.1.1.2. Business areas

The main activities of Bankia and its component banks can be grouped into the following business areas: retail banking, business banking, private banking, asset management and bancassurance, capital markets and investee companies.

Given the recent creation of the Bankia Group under its current scope of business and given that the integration of the businesses of the seven saving banks is still a work in progress, it is impossible to provide financial figures for each business area as data from different Cajas may not be comparable. Therefore, sector data will be presented as the sum of the individual items at each Caja. These figures have been extracted and are shown below:

Business areas

Retail

banking Business

banking Private

banking Capital

markets Corporate

holdings

Asset

management and

bancassurance

Sales and Marketing support


At 31 March 2011 Retail Banking Business Banking Corporate Centre(*)

Customer loans 69% 28% 4%

Customer deposits 74% 10% 16%

(*) The Corporate Centre mainly comprises the direct holdings of the institution as well as the activities of support units such as the Assets and Liabilities Committee and Treasury.

Asset management and bancassurance involve off-balance sheet resources and are not included in these figures. The same applies to private banking which basically consists of the management of customer's funds and therefore mainly concerns off-balance sheet resources. The contribution of activities undertaken by Capital Markets and its contribution to customer loans and deposits is insignificant.

(A) Retail banking:

The retail banking business includes retail banking for individuals and legal entities (with an annual turnover of less than 6 million euros) through an extensive multi-channel network of branches located throughout Spain. Its business model is customer-oriented and profit-driven.

Retail banking is a strategic business for Bankia, as one of the leading financial institutions in this area with a market share of 12.2% of accounts in Spain (source: FRS-Inmark 2010), 13.9% of debit cards (source: FRS-Inmark 2010), 13.8% of mortgages (source: Bank of Spain, December 2010) and 11.8% of customers' fixed term deposits (source: Bank of Spain, December 2010).

(A.1) Main business indicators and positioning:

(millions of euros) 2010 1Q 2011

Customer financing 131,389 129,254

Customer deposits 96,982 98,237

Off-balance sheet customer funds 23,765 23,574

Trade gap (34,407) (31,017)


New Business Margins(1)(basis points)

(Millions of euros)

4Q 2010 1Q 2011

Mortgages 100 131

SMEs(2) 222 337

Long term deposits 286 300 (1) Figure calculated from the quarterly margins for Caja Madrid and Bancaja only. (2) Excluding discounts on trade bills.

Default ratio (%) 2010 1Q 2011

Mortgages n.a. 3.5

Consumer finance n.a. 3.9

SMEs n.a. 5.4 n.a.: not available

(A.2) Customers

At the end of 2010 retail banking had a customer base of 11.2 million, of which 10.6 million were individuals. This represents a customer penetration of 16.3% (customers that agree to work with the entity; source: FRS/Inmark 2010) and 0.6 million small and medium-sized enterprises (SMEs) which represents penetration of 14.3% (source: FRS/Inmark 2010).

Bankia's Retail Banking has a customer penetration of 50.9% in the Madrid Community region (source: FRS/Inmark 2010) and in the Valencian Community it has a customer penetration of 33.9% (source: FRS/Inmark 2010). In Catalonia the customer penetration is 6.0% (source: FRS/Inmark 2010).

The process of integrating the seven Cajas has resulted, at the publication date of this prospectus, in limited overlap of customers (between 2% and 4% depending on the region), with 56.2% of Retail Banking customers being exclusive to Bankia (source: FRS/Inmark 2010).

(A.3) Distribution network

The distribution network comprises a network of branches with broad and dense coverage of the country, a complimentary network of agencies (the most important being Mapfre’s), which provides an additional competitive advantage and lastly, a low-cost multi-channel distribution network (offering facilities such as self-service terminals, internet, mobile and telephone banking).

Retail banking is organised into eight commercial units: Central, East, Catalonia, North 1, North 2, West, Andalusia and the Canary Islands. There is also the agents network business


unit, which manages the network of sales agents. The commercial units for the Central, Eastern and Catalonia regions are sub-divided into territorial business units. These commercial and business units control a total of 114 area units, each of which will have an average of 28 branches once the proposed reorganisation is complete.

Branches

At 31 December 2010 the retail banking network comprised 3,864 branches, with a market share of 10.2% (source: Bank of Spain, December 2010), in addition there are eight mobile branches that provide services at events and in locations without banking facilities. The branches are distributed throughout Spain and employ 16,401 Bankia Group employees.

The map below shows the distribution of the branch network, with the number of branches in each province at 31 December 2010. The map also shows the home territories of each of the seven Cajas and the areas served in common.

The market share of branches in the home territories of the Cajas is up to 16.3% (source: Bank of Spain December 2010) and in the common areas it is 4.1% (source: Bank of Spain December 2010). The coverage of towns with more than 50,000 inhabitants is 99.3% (i.e. nearly total).

Agents network

The strategic alliance between Caja Madrid and Mapfre has meant that, to date, Mapfre has been exclusively distributing Bankia's specialised financial products.

Territory Total Branches

Home

Common


This agents network forms part of the business referrals channel and concentrates on attracting new customers, both individuals and businesses, and on selling banking products and services.

At 31 December 2010 Mapfre had more than 3,000 branches, more than 12,000 agents and more than 7 million customers. It has a structured sales network and experience in bancassurance.

Within this network Bankia had, at 31 December 2010, more than 6,700 active business referral agents at 650 points of sale selected by Bankia from the Mapfre network, equipped to contract and supply services directly to customers and distribute various banking products, but not to deal in cash.

Of the 650 branches with the capacity to distribute banking services, 321 are in the home territory of the Cajas, boosting by 10% the number of Bankia branches in those areas, and 329 are in the common area, adding 43% to Bankia’s branch coverage in these regions. The number of active customers using this distribution channel at 31 December 2010 was approximately 292,000, with a business volume of more than 10,000 millions of euros.

The map below shows Bankia points of sale in Mapfre branches and their distribution across Spain.

Note: The colours show the eight commercial units into which Bankia is organised

Other complementary channels

Bankia also has other complementary channels within its distribution network.


The network of self-service terminals consists of more than 7,700 ATM machines, a market share of 12.9% (source: Bank of Spain 2010) compatible with 8.6 million cards in circulation.

Despite the odd mix of ATM machines used by the seven Cajas, a process of unification and standardisation has been started to ensure that they all use the same system (that of Caja Madrid, on efficiency grounds as it has the most machines). Where this is not technically feasible the ATMs are being replaced (using machines from branches scheduled to close under the Integration Plan) in order to guarantee a standardised operation system, applications and functionality and the same connection to Bankia's IT systems. Since last January it has been possible to use the cards from all the Cajas interchangeably, without charge, for cash withdrawals and for account and transaction enquiries. All of the Cajas will be integrated according to a schedule provided in the Integration Plan, with the last cash-points forecast for integration by 2013.

In addition, Bankia has a full range of technological channels (Internet Branch, Mobile Branch and Telephone Branch), where customers can carry out transactions, purchase and manage products and use the Online Broker. At 31 December 2010 more than 2.2 million customers regularly accessed Bankia's banking services through these channels.

Bankia's market share through its Internet Branch is 8.1% (source: Nielsen 2010) with 1.9 million regular users and nearly 1,300 million transactions in 2010.

Over 25 million transactions were carried out using the Telephone Branch in 2010 and it has more than 188,000 regular users.

The Mobile Bank comprises two mobile branches, one for individuals and the other for businesses. There are more than 100,000 regular users of this service.

(A.4) Business model:

The Retail Banking business is customer oriented. Its aim is to increase customer loyalty and retention, delivering higher value services and advice to its customers and better service. To do this, it makes use of customer segmentation, portfolio organisation and enhancing loyalty among customers through its extensive retail network.

(i) Segmentation

Retail Banking segments its customers based on the need for specialised service according to the needs of each customer type (Personal Banking, SMEs and other Retail customer groups).

Personal Banking: service aimed at high net worth or high income customers or those likely to be so in the future. Specialist financial advice is provided through the entire network of Retail Banking branches. These customers make up approximately 10% of Retail Banking customers. Personalised attention is available at all the universal banking branches thanks to 1,616 highly qualified specialist


managers (personal managers), who exclusively serve and advise customers from this segment with regard to their different customer profiles. In branches without a personal advisor the branch manager looks after these customers.

Preferential Management: service aimed at intermediate net worth or income customers whose assets or income may rise to the level of Personal Banking customers. They are divided into different portfolios and receive specialist financial advice. These customers make up approximately 5% of Retail Banking customers.

SMEs and Independent Contractors: small and medium-sized enterprises are served through the Retail Banking network (SMEs are legal persons billing less than 6 million euros annually), as are independent contractors (people in business on their own account) and the business dealings of liberal professionals. Branches with the highest numbers of such customers have specialist marketing staff who offer advice and products specific to these groups. The main products for companies are support for cash management, corporate insurance and the ICO lines. Altogether, these customers make up approximately 10% of Retail Banking customers.

Other Retail Banking Customers: Retail Banking offers a full range of products and services which includes, among other things, sight and term savings deposits, mortgages, consumer credit, short- and long-term finance, guarantees and debit and credit cards. These other segments make up approximately 75% of Retail Banking customers. The division also distributes other banking products and services, with a focus on those that foster an ongoing relationship with customers, such as automatic salary and bill payments, third-party products such as investment and pension funds and casualty and life insurance.

(ii) Customer loyalty

This segmentation of divisions allows Bankia to allocate specific customers to specialist managers, who take overall responsibility for their relationship with the Bank. Under this structure, both customers that need specialist treatment or advice and higher value customers that require personal attention are allocated specialist managers, either one of the 1,616 personal banking managers or one of the 589 SME and independent contractor managers, a policy that increases customer satisfaction and opens up new sources of business.

Non-portfolio customers: to boost profitability, retention and loyalty among these customers, the Bank has developed a business model based on enhancing loyalty, which focuses on increasing penetration of priority products. According to this system, customers are broken down into three distinct groups corresponding to high, medium or low loyalty scores. Looking at 80% of Bankia customers, 13% score high, 53% medium and 34% low on loyalty. Analysis shows that profitability among high loyalty customers is triple that of the low loyalty cohort and the rates of customer loss or lapse is thirteen times lower.

(A.5) Key factors and future strategies

The Retail Banking business faces the challenge of integrating the seven Cajas. Key priorities for the plan are to improve the efficiency of the branch network by weeding out less profitable


and overlapping branches, managing the resulting staff movements and unifying the different business cultures.

Geographical reorganisation of the network seeks to thin out overlaps by closing the least profitable branches with the lowest business volumes, while still protecting and retaining customers and business as far as possible.

In 2011, it is planned to close 617 branches (16% of the retail branch network at 31 December 2010, in addition to a few branches that were already closed in December 2010 as part of the restructuring), seeking to minimise the impact on customers. It is planned to close 477 branches in the Cajas’ natural territories or home markets and another 140 in common territory. At the end of 2011, Retail Banking will have a network of 3,247 branches.

A common protocol has been drawn up for branch closures with individual plans for each branch and actions to take for all high-value customers. This streamlining of the network will help enhance efficiency with the minimum loss of business.

Restructuring will result in the loss of more than 1,900 employees from the commercial network out of a total headcount of 16,401 in December 2010. At the same time, Bankia has unified management of the participating Cajas, which will boost efficiency by pooling business and improving joint positioning in markets.

By 31 May 64% of the branch closures planned for 2011 had been completed and 85% of the planned staff cuts for the year.

Integrated management of the Retail Banking business is promoting the spread of best practice and supporting each Caja’s positioning in its original markets and home territories where its local brands have high recognition. Management agreements between Bankia and each Caja preserve their regional and brand identities and regulate powers to manage the territorial retail banking business. This endows the group with broad geographical coverage based on local proximity while offering improved products and more efficient services thanks to central management of the business.

To confront the current environment of low growth, high unemployment, weak demand for credit and expectations of a rise in interest rates, Retail Banking has devised the following strategy: improve liquidity, prioritise attracting deposits, boost margins and profitability, improve cross-selling, offer protection to customers, especially high-value customers, and manage non-performing assets.

The drive to boost profitability in the current environment is focused on three fronts:

• Improving margins: loans charge higher spreads depending on the market and in term deposits margins have improved, thanks in large part to the rise in benchmark rates (Euribor).

• Increasing fee income: one of the initiatives under the integration process is to standardise Bankia’s fees and charges and harmonise policies on discounting by segment, so extending best practise throughout the Bank’s networks and raising fee income.


• Improving cross selling: despite the segmentation of Retail Banking customers, efforts are underway to increase the potential sale of new products, also using the best internal practice for cross selling.

(B) Business Banking:

Business Banking is targeted at legal persons with annual billings of at least 6 million euros. Other customers, either legal persons or contractors billing less than 6 million euros annually are dealt with by Bankia’s Retail Banking network as described in section A above.

(B.1) Financial highlights:

On 31 March 2011, Bankia had outstanding corporate loans of 55,846 and corporate deposits of 13,631 million.

Pro forma balance sheet highlights on 31 December 2010 and 31 March 2011 were as follows:

(millions of euros and percent) 2010 1Q 2011 %(1)

Loans and advances 57,359 55,846 30%

Companies 39,129 37,809

Developers 14,601 14,111

Public sector 3,629 3,973

Deposits 12,776 13,631 12% (2) (1) Percentage of Bankia’s consolidated balance sheet (2) Percentage of total customer deposits

Source: Bankia. Data were calculated taking account of the Spinoffs, but not subsequent transactions.


The table below shows the spreads over Euribor of new lending during the four quarters up to the first quarter 2011:

Spreads on new Business Banking loans1

2.29% 2.07%

3.38%

1.65%1.98%

0.0%

1.0%

2.0%

3.0%

4.0%

1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011

1 Due to the risk that data may not be comparable, only Caja Madrid and Bancaja figures are shown here. Spreads on new lending in the quarters shown. Excluding discounts on trade bills.

Source: Bankia.

(B.2) Customers:

Bankia is a leading player in Business Banking with a customer base of approximately 28,000 and a market share of 7.7%, measured as the number of principal relationships (source: SABI and FRS-Inmark 2011).

The Bank is number one by number of medium- and large-corporate customers in two of the four biggest business markets, Madrid and the Valencian Community, where their market share is 14.8% and 14.1%, respectively (source: SABI). It also has customer penetration rate of over 60% in both markets (source: SABI), and is among the top four in the two other major corporate markets (Catalonia and Andalusia). The graphics below show Bankia’s penetration in Spanish Business Banking by region:


81%

69%

67%

62%

49%

48%

48%

40%

40%

36%35%

35%

34%

34%

32%

27%

24%

La Rioja

Castil la La Mancha

C. Valenciana

C. Madrid

Baleares

Canarias

Murcia

Cast illa León

Andalusia

Cantabria

Catalon ia

Extrem adura

Gal ic ia

Asturi as

Aragón

Basque country

Navarre

Bankia penetration rates % of total relationships with target customers

Percentageof 2010 GDP

0.7%

3.4%

9.6%

17.9%

2.5%

3.9%

2.6%

5.4%

13.5%

1.3%

18.6%

1.7%

5.2%

3.1%

1.8%

6.3%

2.2%

Note: Excludes loans to property developers and central and regional governments Source: INE, SABI and Bankia.

Bankia’s Business Banking addresses a customer base diversified between different economic sectors, with the service sector being the largest, followed by construction, trade and industry.

The table below shows the breakdown of Business Banking loan books by sector, excluding loans to developers and government, which on 31 March 2011 represents 14,111 and 3,973 million euros, respectively.

Corporate loans by sector(1Q 2011)

Construction, In fr astructure and

Urban services16.1%

Services15.6%

Industry11.7%

Com mer cia l andRepairs11.6%

Util ities11.1%

Trans por t and m otorways

7.1%

Leisure6.5%

IT and Telecom s

5.0%

Others15.2%

Note: Excludes loans to property developers and central and regional governments (source: Bankia)

Section 6.1.1.5 below details exposure to risks of property assets and central and regional governments, among others.


The chart below shows a breakdown of the loan book and customer numbers on 31 March 2011, by companies with small, medium and large annual turnover. Former Caja Madrid, Bancaja and Caja Insular de Canarias customers held around 98% of Business Banking loans on 31 March 2011.

23,062 1,983 544# Customers

12,012

6,457

17,720

<50m n 50 – 300mn >300m n

Total exposure (€ mn)

Note: Due to the risk that data may not be comparable, the chart only includes data from Caja Madrid, Bancaja and Caja Insular de Canarias on 31 March 2011, excluding property and government exposure. Bancaja data assume figures are distributed in the same proportions as Caja Madrid.

Source: Bankia. Millions of euros.

(B.3) Structure and business model:

The business model of the Business Banking division is a proven customer-oriented distribution model whose resources are exclusively dedicated to serving companies. Its main features are as follows:

(i) Specialist service

The distribution model is designed to meet the specific needs of each segment and promote in-depth knowledge of the customer. To do this, Bankia deploys specialist resources which are exclusively devoted to business banking. The team operates a portfolio-based approach under a single brand, Bankia.

Bankia’s business model distinguishes between the following segments and distribution channels:

a) Business centres:

The business centre network seeks to develop the banking business among customers with annual turnover of more than six million euros (excluding the corporate segment). Centres are opened in areas with a critical mass of customers and have specialist managers embedded in


retail branches to serve markets that lack critical mass, overseen by the nearest business branch.

To develop sales and new business in this area, the Business Centre Network has been configured to strict criteria of specialisation: managers specialised in dealing with companies (applying a portfolio-based approach, i.e. assigning a set of customers to each manager), with specific management tools and support teams exclusively dedicated to legal, tax, risk management, marketing and specialist products, among other areas.

The Bank currently has 101 business centres spread throughout Spain with a presence in most provinces and a concentration in the areas of greatest activity, coordinated via five territorial offices. This network is currently being resized, to eliminate overlap between the networks of Bankia’s constituent institutions, which should be completed in 2011, leaving the group with 78 business branches.

b) Corporate Banking Centres:

• Spanish Corporate Banking Centres:

The corporate customer segment is made up of the Bank’s large corporate accounts. The common denominators among these large corporates are their size, the international dimension to their business and their demand for complex and sophisticated financial services.

Sales to these groups are run out of three centres in Madrid, Barcelona and Valencia where teams of account managers, specialised by business sector, work in coordination with the Capital Markets product teams and a team specialising in administrative support for transactions.

• International Corporate Banking Centres:

Corporate customers in the international sphere are served by three Corporate Banking Centres outside Spain, in Miami, Vienna and Lisbon. These three offices focus on providing financial support and assistance for Spanish customers in their international transactions and for local customers’ transactions in the top customer segments, with a particular emphasis on the energy, infrastructure development and telecommunications sectors.

The Bank’s international infrastructure for support to companies also includes a network of representative offices in London, Paris, Munich, Dublin, Milan, Warsaw, Cancun and Shanghai, offering banking services to Spanish companies engaged in international expansion and foreign companies with interests in Spain.


Planned network of Business Centres by province at yearend-2011 after restructuring

Tamaño mercado

Alto

Medio

21

1 1

1 11

1

1

1

11

1

1 17

1

34

9

4

1

11

1

18

1

1

2

1

1 1

311

Red Banca Empresas

Centros Banca de Empresas

78

3

N

c) Internet:

Finally, the model of specialist customer service is combined with a powerful internet banking facility through which customers can directly carry out more than 400 different transactions, particularly business transactions and operational activities, and companies can directly contract deposit and investment products. In 2010, 89.9% of customers made use of this service, a 6.9 percentage point rise on the previous year.

(ii) Focus on risk adjusted return.

Business banking is marked by a results-driven culture based on performance-related pay, much of which is indexed to the profit-contribution made by each manager and sales team and the non-performing loan (NPL) ratio achieved. A significant portion of the variable remuneration to managers depends on their success in anticipating and managing NPLs.

There is also strict discipline on pricing, with minimum prices being set based on the risk posed by the customer (measured using internal models approved by the Bank of Spain) and the cost of funds. Any transaction offered on special terms must be referred up the management hierarchy for approval. Sales policy is based around the active management of total customer returns.

(iii) Risk management

Risk management is an essential feature of Business Banking’s risk management. Business Banking controls and manages risk through two distinct teams, both reporting to the Risk Management department, which analyse, authorise and monitor risks.

Market size

Large Medium Corportate Banking Network 78

Business Banking Centres 3


There are specialist business risk management and authorisation teams. Some of their functions are centralised, such as support for large corporate and institutional transactions and financial structuring, while others are delegated to the Regional Units.

The percentage of non-performing assets in Business Banking has remained well below the market average (see chart):

0.77%

2.51%

4.40%5.37%

0.68%1.98%

3.54%

4.37%

0.47%1.13%

2.00%

2.50%

2007 2008 2009 2010

Spanish banking systemMedium-sized companies

Business Banking total

Note: Caja Madrid and Bancaja data at 1Q 2011, excluding property and public sector exposure. Source: authors for Bankia data and Bank of Spain for market data

(B.4) Key factors and future strategies

In the current market situation, the strategic priorities for Bankia’s Business Banking division are:

To complete the integration, emphasising best practice within the Group for each area and extracting synergies.

To maintain the core focus on the income statement, improving profitability by repricing margins on the loan book, harmonising fees and realising the potential for cross selling.

To seize opportunities arising as the bank restructure progresses, with potential impacts in specific markets.

To capitalise on the scope for increasing customer penetration outside Madrid and the Valencian Community and improve positioning in the banking pool as first-choice benchmark supplier for existing customers.

Medium term, to build up the corporate network by moving into new markets and increase penetration in geographies where Bankia is currently relatively weak (such as Catalonia and the Basque Country).

All of this, while maintaining strict control and management of risk, through specialist teams and the structuring of performance incentives for managers.


(C) Private Banking:

Bankia’s Private Banking division seeks to supply the type of specialist service offered by boutique private banking providers through the Bank’s banking and sales network.

(C.1) Financial highlights and positioning

Based on figures taken from DBK’s report “Competitors 2010”, Bankia’s Private Banking division was among the top 10 Private Banking managers in Spain by assets under management at yearend-2010, ranking eighth by individual institution and sixth by group. The division had 8,455 million euros under management in December 2010 (8,710 million euros at 31 January 2011 and 9,340 million euros at the end of the first quarter 2011).

The Bank’s Private Banking arm is also one of the leading managers of open-end investment companies (SICAVs), ranking number four in Spain by business under management and number of SICAVs, which equates to a 5.0% market share of total business volumes at the end of March 2011 according to the Association of Collective Investment Institutions (Inverco). The Bank managed assets totalling 1,308 million euros in 189 SICAVs at 31 March 2011.

The table below shows the recent development of assets under management and customer numbers and the distribution of volumes under management by type of contract and asset and the end of the first quarter 2011.

December 2010 March 2011

Business volume (millions of euros) 8,455 9,340

Customer numbers 5,388 5,481

Business volume by type of contract at 31 March 2011 (%)

74%

14%

8% 1% 3%

Advisory

SICAV

DiscretionarymanagementFundmanagement

Non-advisoryproducts

Business volume by type of asset at 31 March 2011 (%)

33%

23%

30%

8%2% 4%

Funds EquitiesFixed income CashAsset transactions Other


(C.2) Customers:

Bankia’s Private Banking division targets a customer segment of individuals, wealth management companies and foundations with wealth of more than 600,000 euros. It offers a full range of products and services with a highly personalised approach, providing solutions adapted to the financial and tax needs of customers through flexible high quality management. The main business lines are:

Wealth management and advisory for private banking customers, through individualised customer portfolios or SICAVs.

Marketing of third-party financial products: investment funds (both international managers and the Group’s own asset management company, based on a fully open architecture approach), public offerings and structured products, among others.

Securities dealing brokerage services.

Advisory services to companies on the securities markets.

(C.3) Business model

Bankia Private Banking is based mainly on the combination of Altae and Arcalia, the private banking arms of Caja Madrid and Bancaja, respectively. While Altae’s business model has traditionally revolved around high volumes with a concentration on merely marketing products and services, Arcalia has been an active manager and dealer in its business and achieved higher profitability.

Within this organisational structure, Private Banking’s business model is based around the following three elements:

1) Independence from both the Retail and Business Banking divisions, while still cooperating closely with both, as all three divisions come under the General Business Department.

2) Structured through an existing credit institution with its own banking business (specifically, the Banco de Servicios Financieros which has since changed its name to Bankia Banca Privada, as shown in section 5.1.5 (G) above, and which forms part of Bankia Group),

3) A division with its own fund management unit, responsible for managing wealth via SICAVs and discretionary portfolio management agreements.

The aim is, through these three elements, to provide the best possible service to a network that can identify, attract and retain customers who fit the Private Banking profile, both in Retail and Business Banking. The division has 172 employees including 95 private bankers.

Also, the customer’s relationship and loyalty with the Bank is enhanced by a triple link involving contact with their private bankers (sales), portfolio managers (fund management unit) and their usual relationship managers in the Bankia branches.


(C.4) Future strategy:

The strategic priorities for the short term are to complete the integration of the Private Banking companies into two companies (a bank and a fund manager), and to start the process of migrating or transferring customers from the private banking segment who are currently served by Retail Banking branches.

In the medium term, the strategy is focused on developing the portfolio management business, both through discretionary management agreements and SICAVs, deepening the independent and open-architecture approach as a way to maximise the value offered to the customer and improving the efficiency of the networks through the retention of higher value-added activities (management and brokerage) and cost reduction and control.

(D) Asset management and bancassurance:

Bankia’s asset management and bancassurance business covers the investment fund businesses, and pension and life insurance funds and plans. At 31 December 2010, these areas generated revenue of 302.7 million euros.

(Data at 31 December 2010, millions of euros)

Investment funds

Pension funds Bancassurance1 Total

Assets under management 7,523 6,620 6,687 20,840

Revenue from management and joint ventures

11.9 15.5 87.4 114.8

Distribution fees 51.7 26.3 109.9 187.9

Total revenue 63.6 41.8 197.3 302.7 1 Note: assets under management refer to life insurance savings.The information in the table on assets under management may vary in some respects depending on accounting classifications. Source: Bankia.

Investment funds

Bankia is restructuring (and merging) the different asset managers that make up the asset management businesses of its constituent Cajas into Bankia Fondos SGIIC, which sells, designs, manages and administers securities and property investment funds, offering products in all Inverco categories. Bankia owns 100% of Bankia Fondos SGIIC. Bankia also sells funds managed by Ahorro Corporación while maintaining marketing agreements with international asset managers for niche products.

At 31 March 2011, securities and property investment funds wholly managed by Bankia were valued at 7,505 million euros (compared to 7,523 million euros at the end of 2010). This equates to 5.1% of the Spanish market according to Inverco, making Bankia Spain’s fourth-largest investment fund manager by assets under management. Also, funds sold by Bankia but managed by Ahorro Corporación (those distributed by Caja Insular de Canarias, Caixa Laietana, Caja de Ávila, Caja de Segovia and Caja Rioja) were valued at a total 547 million euros at 31 March 2011 (compared to 574 million euros at the end of 2010).


At the end of the first quarter 2011, the division’s contribution to group income was 14.3 million euros, including 2.6 million euros in profit from the investment management companies and 11.7 million euros in fees for distributing investment funds paid to Bankia Group.

The table shows shares of the securities and real-estate investment fund markets for each of Bankia’s constituent institutions (excluding funds sold on behalf of international investment managers).

Investment funds – market share

Market share

2010 1Q 2011 Caja Madrid1 4.31% 4.26%

Bancaja3 0.82% 0.81%

Caja Insular de Canarias2,3 0.06% 0.07%

Caixa Laietana3 0.09% 0.09%

Caja de Ávila2, 3 0.05% 0.05%

Caja Segovia2, 3 0.12% 0.12%

Caja Rioja2, 3 0.17% 0.14%

Bankia 5.61% 5.53% Source: Inverco and Company Notes: 1. Includes data for securities and real-estate funds. 2. Funds managed by Ahorro Corporación. 3. Securities funds only.

Pension funds

Bankia’s investment management unit manages the various types of pension funds defined by Spanish legislation: individual plans, employment plans and associated plans. The aim is to meet the needs of plan members and provide products to suit each member’s investor profile and timescale for retirement.

Bankia wholly owns the asset management companies and also has distribution agreements with Aviva and Caser.

At the end of March 2011, the total value of pension funds at Bankia was 6,790 million euros (against 6,620 million euros at yearend-2010), of which 70% was in individual plans and the remaining 30% in employment and associated plans (72% individual and 28% employment and associated plans at 31 December 2010). This equates to a total market share of 7.99% (against 7.81% in December 2010) making Bankia Spain’s fourth biggest pension fund provider, according to Inverco data.

At the end of the first quarter of 2011, the division reported earnings of 8.5 million euros, of which 3.1 million was profit from the investment management companies and 5.4 million euros came from gross distribution fees.


The tables below show the change in value of the pension funds and their breakdown by type as well as the trend in share of the pension fund market for each of Bankia’s constituent Cajas.

Total 2010 1Q 2011 Assets - total value of pension funds (millions of euros)

6,620 6,790

Individual plans (%) 71.6 69.7

Employment and associated plans (%) 28.4 30.3

Market share (%) 7.81 7.99

Source: Inverco, Company

Pension funds – market share

Market share 2010 1Q 2011

Caja Madrid 4.81% 4.84%

Bancaja1 2.26% 2.41%

Caja Insular de Canarias2 0.24% 0.24%

Caixa Laietana 0.19% 0.19%

Caja de Ávila2 0.13% 0.13%

Caja Segovia2 0.11% 0.11%

Caja Rioja2 0.07% 0.07%

Bankia 7.81% 7.99%

Source: Inverco Notes: 1. Funds via Aseval, S.A. 2. Funds via Caser, S.A.

Bancassurance

Bankia’s Bancassurance division is responsible for distributing life and general insurance through all the Group’s companies. The division groups together insurance specialists, such as insurance companies, insurance brokers and a number of joint ventures and strategic alliances in life insurance, such as Aviva, Mapfre and Caser, and in general insurance: Mapfre, Caser, Groupama, Helvetia and others. The most important alliances are with:

Mapfre Caja Madrid Vida, S.A. Life and property/casualty insurer, the result of an exclusive distribution agreement between Caja Madrid and Mapfre, run through this joint venture in which Caja Madrid has a 49% stake.

Aseguradora Valencia, S.A. (Aseval). Insurance company, 50% owned by Bancaja and 50% by UK multinational Aviva.

The Bancassurance division is configured as provider of a full range of insurance products in their different forms for the Group.


Business lines run by the division are as follows:

Individual insurance. Covers all insurance products designed to cover casualties, whether personal and family (death, health, savings and retirement planning) or property (home, vehicles, etc.).

Company and professional insurance. A wide range of products to cover personal casualties to staff and safeguard the assets of the company or professional business (civil liability, transport insurance, loans, guarantees and contingencies).

At 31 December 2010, net premiums written totalled 2,085 million euros (of which 1,682 million euros was for life insurance and 403 million euros for general insurance). This equates to a 9.3% share of net premiums written in the Spanish Bancassurance channel according to data published by ICEA (2010 figures are estimated based on figures published in the last ICEA report for 2009 as real data are not collected until the middle of the year).

The table below shows the distribution of premiums written by type of insurance, market share, life insurance provisions and income in 2010:

Premiums by type of insurance

2010

(millions of euros) Net premiums written Share of bancassurance market

Life (savings) 1,439.5 8.9% Life (risk) 242.3 8.9% Total life insurance 1,681.8 8.6% Home insurance 174.4 13.1% Vehicles 87.9 14.4% Health 38.7 14.9% Other 102.4 9.8% Total general insurance 403.5 13.42% TOTAL INSURANCE 2,085 9.3%

Source: ICEA


Mathematical reserves for 2010 (life insurance)

2010 (millions of euros) Mathematical reserves Share of bancassurance

market

Life insurance 7,600.64 8.90%

Source: ICEA Income

(millions of euros) 2010 Gross distribution fees 109.9

Contribution of profits from strategic alliances 87.4

Total 197.3 Source: ICEA

Looking to the future, the growth potential in this business area centres on the scope for increasing customer numbers and the number of policies taken out by each customer. Note that at 31 December 2010, the number of policies in the insurance book was 3,809,000 (of which 2,496,000 were life insurance and 1,312,000 general insurance). Currently, penetration is 21.3% (number of Bankia customers with a policy taken out through the group), with an average of 1.2 policies per customer. This leaves room for improvement, taking advantage of opportunities for cross-selling the product range offered by the Group.

Also, compared with Bankia’s position in the Spanish financial sphere, where it has a 13.8% market share in mortgages and 11.8% in long-term deposits, the bancassurance division’s relatively meagre 9.3% market share in life and general insurance (latest ICEA data) suggests a clear growth opportunity in this area.

(E) Capital markets:

Bankia Capital Markets brings together the Bank’s capacity for origination, design and structuring of financial products and direct sales of such products through the customer networks.

The Capital Markets division trades on behalf of customers, mainly companies but also some private individuals, and does not engage in proprietary trading.

(E.1) Structure and business model

The division comprises six business areas. Three of these are responsible for product design and origination: financial advisory, corporate finance and derivatives structuring. Products are then sold through the Business and Retail Banking divisions. Capital Markets covers securities trading on behalf of customers, which is run through Bankia’s brokerage firm Bankia Bolsa.


Capital Markets Division

CorporateFinance

Derivatives and Fixed Income structuring

BankiaBolsa

Wholesale Distr ibution

FinancialAdvisory

Planning and monitoring

RetailDistr ibution

Structure of the Capital Markets Division

Capital Markets products are sold to institutions, corporates, SMEs and retail customers through the Wholesale and Retail Distribution business areas. Bankia Bolsa has its own distribution channels.

The main business lines in Capital Markets are:

Financial Advisory: this is sub-divided in turn into (i) Mergers and Acquisitions, advising companies on takeovers, sales, mergers, etc., and (ii) Equity Capital Markets, providing a full range of advice on processes for flotation, capital increases, block sales and other capital raising transactions.

Stock market: Bankia’s brokerage arm offers equity products and services to investors and issuers through traditional and internet channels. Services offered to investors include: primary market brokerage, brokerage via electronic trading platforms for equities, fixed income and derivatives products on Spanish and international markets, futures and options trading, financial analysis, depositary and custody services. Services offered to issuers are: treasury share services, share registry management, financial analysis, share placements, agent bank services for share placements and fixed-income issues on primary markets and placement of share blocks on secondary markets and share offerings, as well as liquidity provision on Spain’s alternative stock market (Mercado Alternativo Bursátil, MAB).

Corporate Finance: origination, structuring, management and execution of non-traditional financing transactions. The area sub-divides into the following: (i) syndicated finance (syndicated finance deals with recourse to the balance sheet of Bankia’s customers), (ii) project finance (transactions structured around the capacity of a project to repay with limited recourse to the developer), (iii) takeover finance (with or without recourse, finance through vehicles, share offerings, acquisitions of share blocks and analysis and finance of expansion plans), and (iv) asset finance (operating and finance leases, tax lease, sale and lease back transactions, financing of future rights, etc.).

Derivatives structuring and fixed income: this area subdivides into (i) derivatives and structured products: design of investment structures, financing and hedging


arrangements, with all types of underlyings involving derivatives (stock option plans, convertible bond issues, margin loans, deals in investees with derivative structures, etc.) and (ii) fixed income: origination, structuring, management and execution in the market of public and private fixed-income issues, monitoring and management of the secondary market in issues run by Bankia and in major Spanish and international benchmarks.

Wholesale and retail distribution: Capital Markets distributes its products through its Wholesale and Retail Distribution arms, which coordinate with the customer areas.

(E.2) Future strategy

Bankia’s main strategic priorities in Capital Markets are:

To seize opportunities arising from integration of Bankia’s constituent entities and, specifically, to add to the customer base and distribution capacity while cutting costs.

To increase capacity for distribution to institutional customers.

To continue internationalisation, further diversifying risks and sources of revenue.

To generate a recurring flow of business with the aim of offering the best possible value to the customer.

6.1.1.3. Corporate holdings

Corporate holdings include includes the investments held to diversify Bankia’s sources of income by sector (corporate and real-estate investments, in listed and unlisted Spanish companies) or by geography (investments in financial institutions and insurance companies in non-domestic markets, mainly the US and Central America).

Bankia takes an integrated approach to managing the portfolio of subsidiaries, associates and jointly-controlled entities within Bankia Group and the major stable equity investments held as available-for-sale financial assets.

The key strategic aim in managing Bankia Group investees is to maximise their economic value to the Group.

Bankia subsidiaries

Bankia has 188 subsidiaries, made up of various types of investee companies: financial or banking-related firms (asset management, bancassurance or specialist financial services) as well as real-estate, industrial and service companies.


The investments in these companies are held either directly in Bankia’s portfolio, or indirectly, via various holding companies. The most important are:

Note: pro forma incorporating the adjustments described in section 20.6 below.

Bankia’s strategy is based on exercising significant influence on the companies in which it invests, via a presence on their governing bodies and cooperation in developing strategies and projects.

Bankia’s subsidiary holdings belonging to unlisted property companies are concentrated in two holding companies:

- Bancaja Hábitat, S.L., which operates both directly and through its 78 subsidiaries. Its two main business lines are: sale and management of property assets, either directly owned or via related companies and property development, mainly of homes for primary or secondary residential use, but with some diversification into non-residential development projects (offices, hotels, logistics facilities, old people’s homes, etc.) and some international diversification (Mexico, Miami in the US, Eastern Europe and Singapore in Asia). Property sales has been the core business of Bancaja Hábitat since it was founded. Properties are sold through multiple channels and internal and external networks, including the financial network, which oversees the efficiency and control of the process. The development of marketing systems and channels has allowed the company to significantly increase its sales volume in recent years, delivering more than 3,600 homes in 2010.

- Intermediación y Patrimonios, S.L., which develops residential properties for rent with an option to buy under the Young Person’s Housing Plan (Plan de Vivienda Joven) through 27 investee companies with developer partners. Under this scheme, rents are capped for seven years in the Madrid Community and ten years elsewhere in Spain. After this period, the young beneficiaries have the option to buy their homes at discounted prices. At the end of 2010, the companies in which Intermediación y Patrimonios was invested had a portfolio of 2,392 homes in operation, of which 91% were in the Community of Madrid and the rest in the Community of Valencia and Castilla and León. They also have 2,824 homes at an advanced stage of construction. Of these 84% are in the Madrid area followed by the Community of Valencia, Andalusia and Castilla and León.

BANKIA

CAJA MADRID CIBELES

BANCAJA PARTICIPACIONES

CORPORACION FRA. CAJA MADRID

BANCAJA HABITAT

Holding company for banking-related -- and financial subsidiaries

Holding company for Holding companies for Industrial investments SOC. PROMOCIÓN Y

PART. EMPRESARIALINTERMEDIACIÓN Y PATRIMONIOS

Real estate investments

100 %100 % 100 %

100 % 100 %

100 %

Managed by the General Business

Department


A number of these subsidiaries are currently legally obliged to wind themselves up as their assets are inadequate to their capital. To avoid this, Finanmadrid, S.A., EFC resolved on 28 June 2011 to reduce its capital subject to authorisation under the Order of the Ministry of the Economy and Finance dated 20 June 2011.

Bankia jointly-controlled entities and associates

At 31 March 2011, Bankia’s investments in jointly-controlled (multigroup) entities and associates totalled 4,166 million euros, which, on pro forma figures, equates to 2,715 million euros after the adjustments explained in section 20.6.2 below.

The consolidated carrying amount of 4,166 million euros breaks down as: (i) Investments in listed companies: 2,562 million euros, (ii) Investments in unlisted industrial, financial and other companies: 1,173 million euros and (iii) Investments in unlisted real-estate companies: 431 million euros.

Investments in listed companies

Bankia has investments in listed companies active in the industrial, infrastructure, services and property sectors. At 31 March 2011, these investments in listed companies were carried on the consolidated balance sheet at 2,562 million euros, or 1,061 million euros pro forma after the adjustments explained in section 20.6.2 below. Investments in listed real-estate companies made up 7% of jointly-controlled entities and listed associates at 31 March 2011.

Bankia’s main investments in listed companies are:

Investments in unlisted companies – Industrial, financial and other sectors

The consolidated carrying amount of Bankia Group’s investments in unlisted companies is 1,173 million euros, approximately 28% of the total for jointly-controlled entities and associates at 31 March 2011.

Bankia Group has holdings in around 70 unlisted industrial, financial and other companies mainly in the sectors that have proved most dynamic in recent years and offer the best prospects for growth: infrastructure, insurance, renewable energies, leisure and tourism, health, venture capital, etc..

PRINCIPAL JOINT VENTURES AND LISTED ASSOCIATES

%Direct

%Indirect

%Total

Realia Business, S.A. Jointly-contr. - 27.7 27.7 170 135 Corp. Financiera Caja Madrid Mapfre , S.A. (1) Associate - 15.0 15.0 1,110 1,198 Caja Madrid Cibeles Indra Sistemas , S.A. (1)

(*)Associate - 20.0 20.0 391 465 Corp. Financiera Caja Madrid

International Consolidated Airlines Group (*) Associate 12.1 - 12.1 622 581 Bankia SOS Corporación Alimentaria , S.A.

(*)Associate - 18.4 18.4 153 127 Soc. Promoción y Part. Empresarial

NH Hoteles , S.A. (2) (*) Associate - 10.0 10.0 116 119 Corp. Financiera Caja Madrid

(1) On 01.06.11 the sale to BFA of the entire stake in Mapfre , S.A. and19.99% of Indra was completed.

(2) Excludes holding in NH Hoteles via Bancaja Inversiones S.A. (*) The % interest does not include available -for -sale positions .

Investee Company

Accounting

classification Main holding company% interest Market

value31.03.11

Carryingamount(€m)


The table below shows Bankia’s largest investments in unlisted industrial, financial and other companies.

These six principal investments make up nearly 63% of Bankia’s holdings in unlisted industrial, financial and other companies, and nearly 18% of the total portfolio for all jointly-controlled entities and associates.

Investments in unlisted real-estate companies

The consolidated carrying amount of investments in unlisted property companies transferred to Bankia is 431 million euros, approximately 10% of the total for jointly-controlled entities and associates at 31 March 2011.

Bankia has holdings in 130 unlisted property companies.

The table below shows the largest investments.

PRINCIPAL INVESTMENTS IN UNLISTED REAL ESTATE COMPANIES

%Direct

%Indir ect

%Total

Deproinmed S.L. Associate - 32.9 32.9 107 Bancaja Habitat Nuevas Actividades Urba nas, S.L. Associate - 12.9 12.9 54 Bancaja Habitat Grupo Inmobiliario Ferrocarril, S.A. Associate 19.4 - 19.4 25 Bankia Urbanizadora Marina Cope S.L. Associate - 20.0 20.0 19 Bancaja Habitat Vehículo de Tenencia y Gestión 9, S.L. Associate 22.9 19.8 42.7 9 Bankia

Carryingamount(€m)

Investee C ompany

Acc ounting classif ication

% interest Main holding company

The companies listed above represent around 50% of the Group’s investment in unlisted property companies by value and 5% of all Bankia’s jointly-controlled entities and associates.

The principal companies are:

- Deproinmed (32.9%): its core business line is the land development in Alicante province, including the biggest land bank for social housing in the city of Alicante.

PRINCIPAL UNLISTEDINVESTMENTS

%Direct

%Indirect

%Total

Globalvía Infraestructuras, S.A. Jointly-contr. - 50.0 50.0 469 Corp. Financiera Caja Madrid InfrastructureBanco Inversis Net, S.A. Associate - 38.5 38.5 55 Caja Madrid Cibeles Banking Soc. Inv y Part Comsa Emte, S.L. Associate - 20.0 20.0 50 Soc. Promoción y Part. Empresarial Infrastruc . & Eng.Ribera Salud, S.A. Associate - 50.0 50.0 24 Bancaja Participaciones HealthRenovables Samca , S.A. Associate - 33.3 33.3 77 Soc. Promoción y Part. Empresarial Energy Mecalux, S.A. Associate - 20.0 20.0 66 Soc. Promoción y Part. Empresarial Warehousesystems

SectorMain holding company Investee Company

Accountingclassification % interest Carrying

amount(€m)


- Nuevas Actividades Urbanas (12.9%): its core business is the development of property projects for the tertiary sector (shopping centres, hotels, offices, hospitals). It has stakes in various property development companies involved in land management and residential building, both private homes and social housing.

Bankia equity investments held as Available-for-sale Financial Assets

At 31 March 2011, the market value of Bankia’s equity investments classified as Available-for-sale Financial Assets was 1,970 million euros, or 1,828 million euros pro forma after the adjustments detailed in section 20.6.2 below.

The market value at 31 March 2011 of listed companies classified as Available-for-sale Financial Assets was 470 million euros, of which 246 million euros related to the property business, representing 12% of all available-for-sale financial assets.

The table below shows Bankia’s principal investments in equity instruments classed as available for sale:

PRINCIPAL AVAILABL E-FOR-SALE INVESTMENTS

%Direct

%Indirect

%Total

Metrovacesa, S.A. (1) AFS 9.1 - 9.1 Bankia Real estateCartera Gonvarri, S .L. AFS - 9.6 9.6 Soc. Promoción y Part. Empresarial SteelPlaya Hotels & Resorts, S.L. AFS - 7.2 7.2 Bancaja Particip aciones Hotels Bolsa y mercados españoles, SHMSF, S.A. AFS 0.1 4.0 4.1 Corp. F inanciera Caja Madrid Other services

(1) This % c ould ri se to 19%, as a re sult of capi tali sation of 273 mi llion e ur os in loans under the ongoing capital incre ase proc ess

InvesteeCompany

Accouting

classification

% interest Main holding company Sect or

The companies above make up 17% of the market value of all available-for-sale financial assets.

6.1.1.4. Bankia’s risk management and control policy and risk profile

The risk management and control policy is of strategic importance in Bankia Group’s business.

General principles

The risk management and control policy is based on the following general principles:

• Ensuring the bank remains financially sound and solvent.

• Optimising the risk/return ratio.

• Ensuring risk management remains independent of commercial activities: hierarchical structure differentiated from the business areas.

• Involving Bankia’s senior management in risk management through the various committees and other bodies.

• Global vision of risk.


• Early intervention to manage non-performing assets

• Analysis of credit, market and operational risks.

• Co-existence of centralised bodies, which have an integrated structure and system to manage Bankia’s risks, with specialist teams focusing on particular risk areas.

• Risk management using an IRB (internal modelling) approach for credit and market risk and standardised approach for operational risk.

Organisation of risk management The Risk Committee of the Board of Directors is the body responsible for global risk management, including assessment of any reputational risk arising from the Board’s actions and decisions. The Committee’s membership and functions are explained in section 16.3.2.

Risk is managed through various specific committees, with the Finance and Risk Department responsible for control. The Committee (see 16.3.2 for details) has executive powers and is responsible for establishing and overseeing compliance with the institution’s risk control systems, approving major transactions and setting global limits for bodies lower down the decision hierarchy to approve all other transactions. It is composed of three Directors and its key functions include:

(i) Presenting risk policies to the Board of Directors,

(ii) Proposing risk management and control policy for the Bank and Group to the Board of Directors,

(iii) In light of the risk policies approved by the Board of Directors, setting the level of risk that the Bank considers acceptable at each moment and overseeing the credit quality of the risk portfolio. This, without stifling the responsiveness and flexibility that the competitive market demands.

(iv) Carrying out regular credit reviews of the Bank’s and Group’s loan books, to make sure that the risks taken on are appropriate to the determined risk profile, with particular attention to principal customers of the Bank and Group and the distribution of risk across business sectors, geographical areas and risk types,

(v) Regularly verifying the systems, processes, valuation methodologies and criteria used to approve transactions,

(vi) Reporting to the Board of Directors and Executive Committee on transactions that might pose risks to the Bank’s solvency, sustainability of its results, operations or reputation.

Bankia’s risk is managed by a number of specific committees reporting to the Finance and Risk Department, and is structured around three core areas: (i) approval of risks, (ii) definition of risk policies and models and (iii) quantification and control of market risk. The Property Asset Recovery and Management Department is responsible for monitoring and anticipating any weakening of the loan books, maximising recovery and managing foreclosed assets.


Risk policies

Bankia has implemented a set of controls over the risk portfolio that monitor key risk indicators (e.g. for sectors or geographical areas) and compliance with regulations on matters such as concentration of risk.

Credit risk, defined as the risk of loss to the Group in the normal course of its banking activities if its customers or counterparties should fail to meet their payment obligations, is managed using IRB models, which, at the time of writing, have been authorised for the portfolios of Caja Madrid with an application to authorise their use to Bankia’s other exposures pending. This approach allows the Bank to manage risk through authorisation, monitoring, recovery and quantification of expected loss under different scenarios. An application has been filed to extend the IRB models to other standardised exposures and segments. Meanwhile, without waiting for the result of this application, since December 2010 the Bank has rated all legal persons using the current IRB models, allowing it to factor into its processes and risk quantification procedures their different profiles for probability of default, loss given default and exposure at default. Based on this work, in December 2010 the Capital Self-Assessment Report was drawn up covering all significant portfolios (legal persons and Bancaja’s mortgage book) using the models referred to above.

In this way, any transaction involving a legal person must be accompanied by a rating using the current models (this chiefly means large corporates and developers, companies and developers, local authorities and financial institutions). In the case of companies and developers, the current models can produce monthly scores for alerts and behaviours, both financial and overall. The Bank has also developed and distributed software that can estimate the risk-weighted return on transactions allowing generalised implementation of the risk-weighted pricing policy, a key part of Bankia’s management strategy. This is why processes were put under way at an early stage to roll out IRB metrics to all Bankia’s significant portfolios and once the Regulator grants specific authorisation to estimate solvency using IRB models, it will be able to cover approximately 91% of the risks with internal models.

The items modelled, i.e., probability of default, loss given default (LGD) and exposure at default (EAD), allow risk measurement and ex-ante risk monitoring of the portfolio through the calculation of expected loss and economic capital.

A key point is the credit risk policies, methods and procedures, approved on 24 March 2011 by the Bankia Board of Directors as part of compliance with Annex IX of Bank of Spain Circular 4/2004 incorporating the latest updates issued by the Bank of Spain. Its principles are:

Stability of general lending criteria.

Adapting the securities or limits to which the policies are applied, while keeping stable the specific criteria for each segment.

Appropriate risk pricing.

Data quality that guarantees the consistency and integrity of the scoring models.


Alignment with capital requirements contained in the Capital Self-Assessment Report.

Establishment of an appropriate procedure for subsidiaries.

Specific policies are laid down for managing credit risk in the different customer segments and a procedure for regular risk control by the Company’s governing bodies.

Bankia’s risk exposure

By business sector, the distribution of the total risk portfolio is as follows:

Regarding risk concentration, none of the major risk groups breaches the regulatory ceilings of 25% of capital, or 20% for non-consolidated entities in the same economic group.

Estimates of expected loss are based on internal rating and scoring models and IRB parameters (probability of default, loss given default and exposure at default) which at the date of publication of this Prospectus have been approved by the Bank of Spain for Caja Madrid’s exposures. This estimate was reached by rating all counterparties using existing rating models, which have been used in Bankia’s risk management process since January, and other regulatory requirements such as the Capital Self-Assessment Report (Banco Financiero y de Ahorros scope) or different stress test scenarios required by other regulators (e.g. the EBA). Once these models have been authorised by the Regulator, the Bank will progressively migrate from the standardised methods of measuring solvency to the IRB approach. Circular 3/2008 requires institutions using the IRB approach to compare levels of provisions against the expected loss forecast by the regulator-approved models. Any shortfall must be deducted from capital. In December, when the expected loss was estimated, Bankia had provisions, not including provisions against foreclosed assets, of 7,446 million euros. Comparing this to the

13%

17%

Companies19%

Real estate developers

12%

Specialist Finance 3%

Retail

38%

Central, regional and local government

Banks and other financials

Risk portfolio by sector


estimated expected loss on the above parameters gave a surplus of 984 million euros. No deduction from capital was therefore necessary.

Segment Expected loss (millions of euros)

Government 16 Banks and financial intermediaries 45 Companies 1,559 Developers 2,857 Mortgages 1,282 Other retail 442 Equities 262 TOTAL 6,462

The following internal models are in use at Caja Madrid and pending Bank of Spain approval for roll-out to the other institutions’ portfolios:

• Legal persons: large corporate and developer models (more than 150 million euros in annual billings), company and developer model (between 1 million euros and 150 million euros of annual billings), bank model, Local Authority model.

• Individuals: mortgage, consumer credit, card, micro-enterprise and contractor models.

All these models come with estimated probabilities of default based on the point in the economic cycle using a methodology approved and authorised by the Bank of Spain since June 2008. The parameters estimated specifically meet all the requirements in Circular 3/2008 and any subsequent recommendations made by the Regulator, Internal Audit or Internal Validation department. The data series available for the calculation run from 1996 to the present for Retail and Business Banking, and have been adjusted to cover a full economic cycle (cyclical adjustment) back to March 1991. For Large Corporates and Banks the data series run from 1981 to the present and are external data (Moody’s).

Loss given default is estimated by discounting cash flows from all internal recovery processes based on data used and originated by Caja Madrid from June 1999 to the present. The information available on each recovery process allows the Bank to factor in the discounted value of all cash flows, positive and negative, involved in the process, such as recovered or written-down debt, proceeds from the sale of loans, late interest, management costs, unrecovered legal costs, billings of external companies and cash flows from the foreclosure of assets such as capitalisable expenses, management changes and gains or losses on sale as well as fees paid to third parties. Overall, this gives estimates of LGD for each segment, product, type of collateral, time in default, and in the case of mortgage loans, LGD for each loan-to-value (LTV) tranche, vintage and purpose of the loan. It also includes special processes for analysing recurring defaults, survival, adjustments to the full cycle, risk premiums and for modelling the process of realising foreclosed assets. These processes can take account of all cash flows from assets that are foreclosed or given in payment up to the final sale of the asset, (sale price, finance costs, general costs, capitalisable costs, third-party fees) and can estimate,


for unsold assets, how long they will remain on the books based on the type of asset, selling price based on appraisal value, carrying amount and time in the portfolio.

Credit risk

At 31 March 2011, Bankia’s gross loan book to the resident sector (pro forma) was 198,601 million euros. Of this, 102,164 million euros, approximately 51.4%, consisted of loans to companies and the public sector while the remaining 96,417 million (48.6%) were retail loans, mainly mortgages. This diversification between the retail and wholesale sectors allows the Bank to balance both its medium-term maturities and the inherent nature of credit risk.

The loan book is also diversified by segment. The largest segment, mortgage finance to retail customers, in 91% of cases for first homes, represents 45.2% of total lending with a pro forma total of 89,843 million euros. The next largest segments in descending order are business loans excluding construction and developers (58,951 million euros, 29.7% of the resident loan book) and loans to the construction and developer sector (32,950 million euros, 16.6%).

It should be emphasised that, adding together business and retail loans, Bankia’s total exposure to the property sector makes up 61.8% of the loan book.

Regarding credit quality, out of 32,950 million euros in loans to property developers, 5,437 million euros were classed as doubtful assets and 4,871 million euros as substandard. This represents a NPL ratio of 16.5%. The coverage ratio of provisions for doubtful assets, including specific, generic and unassigned provisions, is 49.8%.

As for mortgage loans to retail customers (89,843 million euros), doubtful assets total 3,185 million euros and substandard assets 2,379 million euros, a NPL ratio of 3.5%. The coverage ratio of provisions for doubtful assets, including specific, generic and unassigned provisions, is 35.7%.

Bankia’s total doubtful assets are, on pro forma figures, 11,542 million, and assets classed as substandard total 10,633 million euros, out of a total gross loan book by value of 198,601 million euros. This gives a NPL ratio of 5.8%. The coverage ratio of provisions for doubtful assets, including specific, generic and unassigned provisions, is 49.8%, which includes the entire generic provision for the developer sector.

The table below shows the main credit risk items:


Millions of euros Credit risk Total coverage*

Total % total Normal Substandard Doubtful%

Doubtful Substandard Doubtful

% coverage of doubtful

loans BUSINESS

Property development and/or construction 32,950 16.6% 22,514 4,983 5,452 16.5% 642 2,708 50% Construction unrelated to property development 3,784 1.9% 3,245 212 327 8.6% 42 178 54% Large corporates 28,621 14.4% 26,274 1,761 586 2.0% 253 423 72% SMEs and contractors 30,330 15.3% 27,491 1,187 1,653 5.4% 186 1,037 63%

RETAIL 0 0

Mortgages 89,843 45.2% 84,278 2,379 3,185 3.5% 67 1,107 35% Other collateral and other types of loan 6,595 3.3% 6,146 111 337 5.1% 13 257 76%

Total private sector risk 192,122 96.7% 168,948 10,633 11,541 6.0% 1,203 5,710 50% 0 0 Public sector 6,479 3.3% 6,477 0 2 0.0% 0 0 0% 0 Total gross credit (pro forma at 31.03.11) 198,601 100.0% 176,426 10,633 11,542 5.8% 1,203 5,710 50%

Note: Coverage here includes specific, generic and unassigned specific provisions.


Collateral coverage of credit risk is split nearly 50/50 between real and personal collateral, with real collateral making up a large proportion of the retail loan book. Property is recognised as collateral, provided it is on-demand, at the lower of the notarised or recorded cost of the asset or its appraisal value. For foreclosed assets or assets received in payment of debts, appraisals must be within the required timescale (minimum independent appraisal every three years, with the same exceptions as above). In these cases, appraisals must be done by different firms at each successive update.

The chart shows the breakdown of the pro forma gross loan book at 31 March 2011:

Exposure to property assets

Out of Bankia’s total loan book related to property development or construction 79.3% is guaranteed by real first-mortgage collateral. The other 20.7% mainly consists of funding to developers unrelated to any specific development (mainly syndicated loans). Approximately 31% of these loans are backed by pledges and the remaining 69% by personal guarantees or second mortgages.

Developer

17%

Private sectorresidential

45%Public sectorresidential

3%

Other residential finance

3%

Other, business SMEs etc.

32%


The chart below breaks down by type of collateral the property development and construction loans backed by real first mortgages:

As the chart shows, 76.7% of collateral consists of completed buildings or buildings under construction.

The land finance portfolio, which contained no significant doubtful or substandard positions at 31 March 2011, totalled 6,087 million euros, on pro forma data at the same date. Of this, 99% is either urban or eligible for urban development, according to a Company survey of transactions worth 3 million euros or more, which make up 66% of the portfolio’s financing.

Exposure to the five largest borrowers based on their property exposure was 2,506 million euros, 1.26% of all gross pro forma lending, with total coverage of 27%. Of these five, three are classed as doubtful and have totalled combined loans of 1,638 million euros, with specific provisioning of 37%. A fourth, with a 407 million euro position, is classed as substandard and has been allocated a specific provision of 15%.

Of the finance backed by buildings under construction, 94% of loans over 5 million euros are for residential purposes and the biggest 20 exposures make up 20% of the portfolio.

Where lending is backed by completed buildings, 81% of loans over 5 million euros are for residential purposes and the biggest 20 exposures make up 22% of the portfolio.

Also, 91% of residential mortgages are on first homes. Average LTV (nominal value of mortgage over the appraisal value of the home at the time the loan is granted) in the Spanish banking sector is 62% (source: Bank of Spain: Financial Stability Report, May 2011). Bankia has an average LTV of 63%.

Foreclosed assets (see section 8.1.4 below) represented 1.6% of the pro forma balance sheet total at 31 March 2011. Most were concentrated in three regions of Spain (Madrid, Valencia

Land 23.3%

Completed buildings 57.2%

Buildings under construction 19.6%

Total: 26,152 million euros


and Catalonia) and largely consisted of first homes. The coverage ratio for these foreclosed assets is 25%.

Bankia’s constituent institutions calculate fair values and impairment due to credit risk in compliance with the regulations for credit impairment coverage set out in Annex IX of Bank of Spain Circular 4/2004. Coverage is recorded against credit impairment losses on any contingent risks and debt instruments not measured at fair value, with changes in value recognised in the income statement. The different types of coverage are set out in Circular 4/2004 as amended, along with the haircuts applying to transactions backed by real collateral. In these cases impairment is estimated based on the value of real rights received as collateral according to the criteria and percentages set out in Circular 3/2010.

The different types of coverage applied are:

• Specific coverage is taken against transactions classed as doubtful or substandard.

• Generic coverage is taken against inherent losses or losses that have not been assigned to individual assets, based on risks classified as normal.

• Country risk coverage is taken on transactions classed as incurring country risk in groups of countries rated 3 to 6.

• Coverage for impairment of foreclosed assets.

The percentages used to estimate these coverage requirements against assets classed as doubtful due to customer default are as follows:

Time since acquisition % impairment Up to 6 months

6 - 9 months 25% 50%

9 - 12 months 75% More than 12 months 100%

Recognition of minimum impairment of foreclosed assets

Time since acquisition % impairment At acquisition 10%

More than 12 months 20% More than 24 months 30%

The Bank also ran a sensitivity analysis, using the Credit Risk Distribution structure (CRD) to estimate the expected loss on portfolios of developer loans (32,950 million euros) and mortgages (89,117 million euros, excluding, in the case of mortgages, securitisations with substantial transfer of risk). This sensitivity exercise stress-tested the expected loss in scenarios of adverse GDP growth (0.2% in 2011), employment (social security subscribers falling by 1.4% in 2011) and rising interest rates (3.4% at yearend-2011), estimating the likelihood of default observed in this situation as well as stressed levels of LGD in scenarios of adverse movements in housing and land prices. The analysis reveals a sensitivity to expected loss of 5,304 million euros against total provisions of 4,528 million euros,


identifying a 776 million euro deficit in coverage of these portfolios under such adverse scenarios.

Credit refinancing policy

Debt restructuring and refinancing processes are meant to restore enough financial stability for the borrower and its group remain in business and continue to trade. This is achieved through measures that address the core of the problem, either systemic (impacting all segments and borrowers equally, such as interest rate increases) or specific (requiring individual structural measures on a case by case basis).

Borrowers are deemed eligible for debt restructuring measures if they have shown demonstrable willingness to pay and/or have been up-to-date in their transactions over the previous twelve months, except for exceptional circumstances which must be approved by high-level Committees.

For individuals, one restructuring only is permitted. Failure to comply with its terms triggers foreclosure of the collateral. For legal persons the policy is the same but, based on the type, nature and volume of the business the number can exceptionally be increased subject to approval by high-level Committees.

Exposure to sovereign debt

The Group’s total exposure to sovereign debt at 31 March 2011 was 12,929 million euros, consisting entirely of debt issued by EU member states rated A or higher: Spain (AA), France (AAA), Italy (A+), Belgium (AA+) and Germany (AAA).

Of the Group’s sovereign debt portfolio, 41% is available for sale and 59% is designated as held to maturity. Further, 51% of the available-for-sale debt is hedged by interest rate swaps.

SOVEREIGN DEBT EXPOSURE AT 31 MARCH 2011

Millions of euros Total % Total Available-for-sale (1)

Held to maturity

Spain 10,468 81% 5,213 5,255

France 1,050 8% 0 1,050

Italy 1,000 8% 0 1,000

Belgium 300 2% 0 300

Germany 100 1% 100 0

Other 11 -- 5 6

Total 12,929 5,318 7,611

(1) Available-for-sale assets hedged with interest rate swaps (IRS): 2,705 million euros in Spain and 100 million euros in Germany.


Its holdings of Kingdom of Spain debt are 10,468 million euros, 81% of the Group’s sovereign debt exposure. Of this, 50% is available for sale and 50% held to maturity. And, of the 5,313 million euros of Spanish sovereign debt available for sale, 52% (2,705 million euros), is hedged by IRS.

The remaining 19% of sovereign debt exposure is distributed as shown in the table among the following EU member states: France (8%), Italy (8%), Belgium (2%) and Germany (1%). Except for German debt which is available for sale and fully hedged by IRS, other sovereign debt must be held to maturity.

The maturity schedule for the Group’s sovereign debt holdings is shown below:

As the chart shows, 78% of the sovereign debt exposure matures in more than three years, 22% in less.

The distribution of the 3-year plus debt is as follows: 40% in 3-5 years, 33% in 5-10 years and 5% in more than 10 years.

Sovereign debt portfolio by maturity

31 March 2011

10-30 yrs

5% 0-3 yrs

22%

3-5 yrs

40%

5-10 yrs

33%


Exposure to regional and local public sector bodies

The Group’s exposure to regional and local government, counting all lending with exposures to other products (including off-balance sheet items such as guarantees and all credit lines drawn or undrawn) is 8,625 million euros, of which 4,899 million euros, or 57%, is to regional governments and the remaining 3,726 million euros to city and other local authorities.

The exposure to regional and local governments of Madrid, Valencia and Catalonia makes up 71% of the Group’s total exposure to these tiers of the public sector. Exposure to the Autonomous Communities of Madrid, Valencia and Catalonia is 3,560 million euros, 73% of the Group’s exposure to Spain’s regional public sector and 41% of the local sector, totalling 2,582 million euros.

Looking just at local authorities, where total exposure is 3,726 million euros, the Ayuntamiento de Madrid (Madrid municipal government) stands out with 1,645 million euros, 44% of all Group exposure to this segment.

Taken together, the Group’s exposure to regional and local government constitutes 7.5% of the entire Spanish financial system’s exposure to the sector.

The largest single element in the Bank’s 4,899 million euros exposure to the regional public sector is loans, which make up 45.1% of total exposure. The second-biggest product for funding the regional public sector is fixed-income securities and commercial paper issued by regional governments. Together these two formats make up 31.6% of exposure. Credit lines are just 10.6% of regional public sector funding.

For local authorities, most funding is in the form of loans (80%) due to tighter legal restrictions on these authorities’ ability to issue debt. Credit lines are another common way of financing local government.

New initiatives to strengthen the risk management function

Bankia is continually implementing new initiatives that seek to strengthen risk management and control, particularly in the current environment of economic crisis. Recent noteworthy measures adopted or in the process of introduction include:

The implementation of mandatory global policies restricting credit to certain sectors, customer profiles or levels of indebtedness,

The development of tools to control compliance with risk policies,

The launch of a plan for early intervention to manage NPLs and detect and manage doubtful loans,

Strengthening of asset valuation tools and data quality,

Changes to the organisational structure of the risk team.


6.1.1.5. Bankia corporate strategy

Bankia’s corporate strategy is based on developing both geographically and by business line to meet a series of strategic targets:

(i) strengthening its position and presence in the domestic Spanish market,

(ii) increasing market share in areas of banking and territories where the Bank currently has little presence,

(iii) integrating the businesses of the different Cajas and extracting the resulting operational synergies,

(iv) improving recurring margins and profitability (by increased cross-selling among other methods) and diversifying businesses and sources of revenue,

(v) strengthening solvency and capital to comply with the new Basel III requirements: (a) increasing the size and quality of the capital base by floating Bankia on the stock market, (b) deleveraging the balance sheet which should reduce capital requirements, opening up the potential for total or part divestment of the investee companies, (c) improving risk management and corporate governance by optimising internal models and policies for credit acceptance and selection and (d) gradually replacing subordinated or hybrid instruments that will become ineligible for capital requirements by others that are perpetual and have no incentive for early redemption.

(vi) improving the risk profile by strengthening risk management policy,

(vii) optimising the financial structure, improving access to different sources of funding,

(viii) improving operational efficiency and sales productivity,

(ix) building up the Bank’s institutional reputation and brand positioning.

6.1.2. An indication of any significant new products and/or services that have been introduced and, to the extent the development of new products or services has been publicly disclosed, give the status of development

The Bank offers the products and services indicated in section 6.1.1 of Chapter II of this Prospectus. Besides these, the Bank has no plans to launch any new product or service.

6.2. Principal Markets

The Bank’s business is largely concentrated in Spain, where it is the leading financial institution by total assets with 292,188 million euros in assets at 31 December 2010 (source: comparable company data and Bank of Spain at 31 December 2010). Comparables used in the analysis included La Caixa, Santander, BBVA, Banco Popular, Banesto and Sabadell. Santander figures were based on its Spanish network only. BBVA includes Spain and Portugal.


The Bank is also one of the Spanish market leaders by domestic business volumes (understood as the sum of loans and deposits by resident private sector customers) which exceeded 300,000 million euros at 31 March 2011. Bankia is the second-largest institution by lending to private sector customers, with a total loan book of 190,000 million at 31 December 2010 and a market share of 10.9% as well as the second-largest taker of private sector customer deposits, with 139,000 million euros in deposits at 31 December 2010, a 10.2% market share.

In International Corporate Banking, Bankia manages its presence in its principal markets directly through Operational Branches. These branches had authorised around 5,000 million euros in risk exposures at 31 December 2010.

• Miami (Florida USA) serves all Bankia’s customers in the Americas. By country investments are distributed as follows: US (41%), Mexico (25%), Canada (10%), Chile (9%), Brazil (7%), Costa Rica (3%) and Others (5%).

• Vienna serves customers in Central and Eastern Europe. By country investments are mainly distributed as follows: Austria (22%), Germany (18%), Poland (18%), Russia (13%), Hungary (10%), Slovenia (10%) and Others (9%).

• Lisbon and Oporto exclusively serve the Portuguese market.

The business model developed by the Group focuses on medium-sized corporate customers with good risk quality, active in the principal business sectors (energy, infrastructure, telecommunications etc.), along with the public sector. Customers are always in countries with at least investment grade credit ratings or subject to additional guarantees underwriting the transaction. Bankia offers the classic banking products on the market to meet the investment and working capital needs of its customers, such as bilateral loans, syndicated loans, credit lines, project finance, guarantees, etc..

Bankia also has a network of seven representative offices in London, Paris, Munich, Milan, Warsaw, Cancun and Shanghai, providing banking coverage for Spanish companies expanding abroad in these countries and companies based in these countries with interests in Spain. These offices support Bankia’s customers seeking to break into these markets and puts them in touch with potential commercial or financial customers. They also identify local transactions involving Spain, which can then be channelled toward Bankia’s home-based business or corporate centres to handle the foreign trade or investment aspects. This international presence via representative offices gives Bankia a way of evaluating future needs for international Operational Branches, which are constantly being expanded and diversified.

Bankia’s Capital Markets business is among the top 10 in the market for:

Project Finance: in 2010 the Group ranked sixth in the Europe Project Finance MLA (mandated lead arrangers) market with a share of 3.6% after closing 36 deals with a total volume of 2,526 million dollars (source: Dealogic).

Syndicated finance: in 2010 Bankia was Spanish number three with a 7.1% market share. (source: Dealogic).


Equities: in 2010 Caja Madrid Bolsa was rated Spain’s number one research house by financial consultancy Starmine. Ninth in Spain by equity market trading volumes.

Fixed-income origination: in 2010 Bankia was number two, placing 7,899 million euros in 38 issues (source: Bloomberg).

Derivatives: in 2010, Bankia was ranked third in FRAs, fourth in IRSs and fifth in interest rate options, risk management advisory and derivatives transactions (Source: Risk España).

6.3. Where the information given pursuant to items 6.1. and 6.2. has been influenced by exceptional factors, mention that fact

Aside from the process of integrating the Cajas described in detail in section 5 above, the Bank knows of no exceptional factors that have influenced its principal markets and businesses. Section II of this Registration Document (Risk Factors) sets out the factors that affect or potentially affect the bank’s activities in the principal markets where it operates.

6.4. If material to the issuer's business or profitability, a summary information regarding the extent to which the issuer is dependent, on patents or licences, industrial, commercial or financial contracts or new manufacturing processes

By their nature, the activities of the Bank do not depend on patents or licences or on industrial, commercial or financial contracts, or on new manufacturing processes that are material to its business or profitability. For further information on research and development, patents and licences, see Chapter 11 of this Registration Document.

6.5. The basis for any statements made by the issuer regarding its competitive position

Statements on Bankia’s competitive position contained in section 6 are drawn from the data bases and published reports of the companies, organisations and associations cited as sources.

7. ORGANISATIONAL STRUCTURE

7.1. If the issuer is part of a group, a brief description of the group and the issuer's position within the group

Bankia S.A. is the dominant company in the Group. At 31 March 2011, the Group comprised 178 fully consolidated companies. Another 226 companies are associates, jointly-controlled entities or listed on the stock market and available for sale, of which the Group owns more than 3%.

After the transactions that followed the Spinoffs detailed in section 5.1.5 (g) above, at the date of this Prospectus, the Group comprised 188 fully consolidated companies, as indicated in section 7.2. There were another 218 companies which are associates, jointly-controlled


entities or listed on the stock market and available for sale, of which the Group owns more than 3%, at the date of this Prospectus.

As part of the integration process Bankia Group is restructuring its organisation and, particularly, restructuring companies formerly belonging to the seven Cajas whose businesses have since been integrated within the Group and which carry on similar activities.

The organisational chart below shows Bankia and its group, including Banco Financiero y de Ahorros and its group and the Cajas.

***gráfico: Nuevos Inversores New Investors (OPS)***

Scope of Bankia Group

(only principal companies are shown)***


7.2. A list of the issuer's significant subsidiaries, including name, country of incorporation or residence, proportion of ownership interest and, if different, proportion of voting power held

The table below lists the principal consolidated subsidiaries that make up the Bankia Group, their name, place of registration, business and percentage of voting rights (direct and indirect) at the date of this Prospectus.

Further, Annexes I, II and III containing the consolidated interim financials statements of Bankia at 31 March 2011, present details of the institutions within Bankia Group’s scope of consolidation at the same date: subsidiaries controlled by the Bank, jointly-controlled entities and associates over which the bank exercises significant direct or indirect influence. Bankia’s percentage share of the voting rights is shown in each case.


Institution Business Place of registration

% Capital owned by the Group % present interest

Direct Indirect Total interest

890 Harbor Drive, LLC Rental property Florida - USA 100.00 - 100.00

Abitaria Consultoría y Gestión, S.A. Technical inspection of buildings Madrid - Spain - 100.00 100.00

Accionariado y Gestión, S.L. Other independent services Madrid - Spain 100.00 - 100.00

Activos 26001, S.L.U. Rental property Logroño (La Rioja) - Spain - 100.00 100.00

Adamar Sectors, S.L. Property development Mataró (Barcelona) - Spain - 82.00 82.00

Adquirent Immobles, S.L. Property development Mataró (Barcelona) - Spain 100.00 - 100.00

Aliancia Inversión en Inmuebles Dos, S.L. Asset management Las Rozas (Madrid) - Spain 48.32 25.92 74.24

Aliancia Zero, S.L. Property Las Rozas (Madrid) - Spain 28.69 31.04 59.73

Alquiler para Jóvenes Viviendas Colmenar Viejo S.L. Property Madrid - Spain - 78.27 78.27

Análisis y Verificación, Control Técnico de Edificación, S.L. Residential property rental Mataró (Barcelona) - Spain 100.00 - 100.00

Arcalia Inversiones S.G.I.I.C., S.A. Investment fund manager and other Madrid - Spain - 77.79 77.79

Arcalia Patrimonios, Sociedad de Valores S.A. Investment fund manager and other Madrid - Spain - 77.79 77.79

Arcalia Servicios, S.A. Other business Madrid - Spain - 77.79 77.79





Arrendadora Aeronáutica, A.I. E. Aircraft purchase and leasing Madrid - Spain 68.17 - 68.17

Arrendadora de Equipamientos Ferroviarios, S.A. Rail purchase and leasing Barcelona - Spain 85.00 - 85.00

Arrendamientos 26001, S.L.U. Rental property Logroño (La Rioja) - Spain 100.00 - 100.00

Auto Renting Rioja, S.A.U. (*) Note: currently under legal obligation to wind itself up and engaged in an “accordion transaction” (i.e. capital reduction against losses followed by capital increase).

Vehicle leasing Logroño (La Rioja) - Spain - 100.00 100.00

Avanza Inversiones Empresariales, Sgecr, S.A. Venture capital fund manager Madrid - Spain - 100.00 100.00

Baja California Investments, B.V. Property Gravenhage - Netherlands - 40.00 40.00

Bancaja Consultora de Riesgos, S.L. Insurance company/Broker Valencia - Spain 99.00 1.00 100.00

Bancaja Emisiones, S.A. Unipersonal SPV Castellón de la Plana - Spain 100.00 - 100.00

Bancaja Fondos S.G.I.I.C, S.A. Investment fund manager and other Valencia - Spain - 100.00 100.00

Bancaja Gestión Activos, S.L. Investment fund manager and other Valencia - Spain 99.91 0.09 100.00

Bancaja Habitat, S.L. Property Valencia - Spain 100.00 - 100.00

Bancaja Participaciones, S.L. Holding company Castellón de la Plana - Spain 99.99 0.01 100.00

Bancaja Us Debt SPV Castellón de la Plana - Spain 100.00 - 100.00




Direct Indirect Total interest Banco de Servicios Financieros Caja Madrid- Mapfre, S.A (to be renamed Bankia Banca Privada, S.A.).

Bank Madrid - Spain - 100.00 100.00

Bancofar, S.A. Bank Madrid - Spain - 70.21 70.21

Beimad Investment Services Co., Ltd. Management consultancy Beijing - People’s Republic of China 100.00 - 100.00

Benidorm Complejo Vida & Golf Unipersonal S.L. Unipersonal Property Valencia - Spain - 100.00 100.00

Caja de Madrid Pensiones, S.A. E.G.F.P. Pension fund manager Madrid - Spain - 100.00 100.00

Bankia Bolsa, S.V., S.A. Brokerage Madrid - Spain - 100.00 100.00

Caja Madrid Cibeles, S.A. Management company Madrid - Spain 100.00 - 100.00

Caja Madrid, S.D. Finance BV Financial intermediation Amsterdam - Netherlands 100.00 - 100.00

Caja Rioja Mediación de Seguros Operador de Banca Seguros, S.A.U. Private insurance agent Logroño (La Rioja) - Spain 100.00 - 100.00

Caja Segovia Operador de Banca Seguros, S.A. Insurance agent Segovia - Spain 100.00 - 100.00

Camí la Mar de Sagunto, S.A. Property Valencia - -Spain 96.66 - 96.66

Cavaltour, Agencia de Viajes, S.A. Travel agency Valencia - Spain 50.00 - 50.00

Caymadrid Internacional, Ltd. Financial intermediation Gran Caiman - Caiman Islands 100.00 - 100.00





Centro Médico Maestranza, S.A. Outpatient healthcare services Madrid - Spain - 86.06 86.06

City National Bank Of Florida Bank Florida - USA - 100.00 100.00

City National Title Insurance Agency, INC. Other independent services Florida - USA - 100.00 100.00

Civitas Inmuebles, S.L. Property Xátiva (Valencia) - Spain - 80.00 80.00

CM Florida Holdings, INC. Management company Florida - USA - 100.00 100.00

Cobimansa Promociones Inmobiliarias, S.L. Property development Madrid - Spain - 83.30 83.30

Colmenar Desarrollos Residenciales, S.L. Property Madrid - Spain - 100.00 100.00

Complejo Capri Gava Mar, S.A. Hotel operator Mataró (Barcelona) - Spain 97.62 - 97.62

Corporación Empresarial Caja Rioja, S.A.U. Finance Logroño (La Rioja) - Spain 100.00 - 100.00

Corporación Finance Caja de Madrid, S.A. Management company Madrid - Spain 100.00 - 100.00

Corporación Finance Habana, S.A. Industrial, commercial and service sector finance La Habana - Cuba 60.00 - 60.00

Costa Eboris S.L. Property Valencia - Spain - 100.00 100.00

Costa Verde Habitat, S.L. Property Valencia - Spain - 50.00 50.00

Desarrollos Urbanísticos de Segovia S.A. Property rentals Segovia - Spain 100.00 - 100.00





Dicumar Balear, S.L. Property Valencia - Spain - 100.00 100.00

Edicta Servicios S.A. Property appraisal, services, agency and sale Segovia - Spain - 100.00 100.00

Edificios Singularesde Canarias, S.A.U. Property Las Palmas de Gran Canarias - Spain 100.00 - 100.00

EE Spain Limited Property London - UK - 100.00 100.00

Encina Los Monteros S.L. Property Valencia - Spain - 100.00 100.00

Estrategia Inversiones Empresariales, SCR, S.A. Venture capital Madrid - Spain - 100.00 100.00

Finanmadrid, S.A., E.F.C. (*) Note: the company is currently in the process of reducing its share capital having obtained authorisation from the Directorate General for Treasury and Finance Policy (by order of the Economy and Finance Ministry on 20 June 2011) and approval at the General Shareholders’ Meeting of 28 June 2011, to avoid the legal obligation to wind itself up due to an inadequate assets/equity ratio.

Financing vehicle - Consumer credit Madrid - Spain - 100.00 100.00

Finanmadrid México, S.A.de C.V. Financing vehicle - Consumer credit México- Mexico - 100.00 100.00

Fincas y Gestión Inmobiliaria 26001, S.L.U. Property Logroño (La Rioja) - Spain 100.00 - 100.00

Garanair, S.L. Other independent services Madrid - Spain 87.00 - 87.00

Gecesa, Gestión Centros Culturales, S.A. Management of cultural activities and libraries Madrid - Spain - 100.00 100.00





Geoportugal - Imobiliaria, Lda. Property development Povoa du Varzim - Portugal 57.79 21.02 78.81

Ges Layetana de Pensiones S.A., Entidad Gestora de Fondos de Pensiones Pension fund manager Mataró (Barcelona) - Spain 100.00 - 100.00

Ges Layetana S.A., Sociedad Gestora de Instituciones de Inversión Colectiva Fund manager Mataró (Barcelona) - Spain 100.00 - 100.00

Gesmadrid, S.G.I.I.C., S.A. Fund manager Madrid - Spain - 100.00 100.00

Gestión de Iniciativas Riojanas, S.A.U. Services Logroño (La Rioja) - Spain 100.00 - 100.00

Gestora Castellana del Suelo S.A. Property Madrid - Spain - 100.00 100.00

Gestora del Suelo de Levante, S.L. Property Madrid - Spain - 60.05 60.05

Grand Coral Property & Facility Managment S.A de C.V. Property Cancun - México - 40.00 40.00

Grupo Bancaja Centro de Estudios S.A. Holding company Valencia - Spain 99.83 0.17 100.00

Habitat Resorts S.L Unipersonal Property Valencia - Spain - 100.00 100.00

Habitat Usa Corporation Note: under legal obligation to wind itself up Property Florida - USA - 100.00 100.00

Habitat Vida & Resorts S.L. Unipersonal Property Valencia - Spain - 100.00 100.00

Hotel Alameda Valencia, S.L. Property Valencia - Spain - 100.00 100.00

Icono Mediterráneo S.L. Unipersonal Property Valencia - Spain - 100.00 100.00





Iniciativas Gestiomat, S.L. Property development Mataró (Barcelona) - Spain - 57.15 57.15

Inmacor Desarrollo S.A. de C.V. Property Cancun - México - 40.00 40.00

Inmobiliaria Piedra Bolas, S.A. de C.V. Property Cancun - México - 40.00 40.00

Inmogestión y Patrimonios, S.A. Manager of companies Madrid - Spain 0.10 99.90 100.00

Inmovemu, S.L. Property development Madrid - Spain - 95.22 95.22

Intermediación y Patrimonios, S.L. Property development Madrid - Spain - 100.00 100.00

Inverávila, S.A. Proprietary property trading Ávila - Spain 100.00 - 100.00

Invercalia Gestión Privada, S.A. Holding company Valencia - Spain - 100.00 100.00

Inversión en Alquiler Viviendas, S.L. Holding company Segovia - Spain 100.00 - 100.00

Inversiones Turísticas de Ávila, S.A. Proprietary property trading Ávila - Spain 100.00 - 100.00

Inversiones y Desarrollos 2069 Madrid, S.L. Property Segovia - Spain 100.00 - 100.00

Inversiones y Desarrollos 2069 Valladolid, S.L. Property Segovia - Spain 100.00 - 100.00

Inversora Burriac, S.L.U. Holding company for shares and equity investments Mataró (Barcelona) - Spain 100.00 - 100.00

Jardi Residencial La Garriga, S.L. Property development Mataró (Barcelona) - Spain - 51.00 51.00




Direct Indirect Total interest La Caja de Canarias Mediación Operador de Banca Seguros Vinculado, S.A.U. Insurance agent Las Palmas de Gran Canarias -

Spain 100.00 - 100.00

La Caja Tours, S.A. Travel agency Las Palmas de Gran Canarias - Spain 70.21 - 70.21

Laietana Generales, Cía. Seguros de La Caja de Ahorros Laietana, S.A.U. General insurance Mataró (Barcelona) - Spain 100.00 - 100.00

Laietana Mediación Operador de Banca-Seguros Vinculado, S.A. Insurance broker Mataró (Barcelona) - Spain 100.00 - 100.00

Laietana Vida, Cia. Seguros de La Caja de Ahorros Laietana, S.A.U. Life and complementary insurance Mataró (Barcelona) - Spain 100.00 - 100.00

Macla 2005, S.L. Property development Mataró (Barcelona) - Spain - 52.73 52.73

Madrid Leasing Corporación, S.A., E.F.C. Finance leasing Madrid - Spain - 100.00 100.00

Mas de Peiron, S.L. Unipersonal Property Valencia - Spain - 100.00 100.00

Mediación y Diagnósticos, S.A. Management company Madrid - Spain 100.00 -- 100.00

Mondrasol 1, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00



















Montis Locare, S.L. Property Zaragoza - Spain - 52.27 52.27

Moviola Asociados 21, S.L. Property development Mataró (Barcelona) - Spain 100.00 - 100.00

Naviera Cata, S.A. Purchase, leasing and operation of ships

Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Ocio Los Monteros S.L. Unipersonal Property Valencia - Spain - 100.00 100.00




Direct Indirect Total interest Operador De Banca Seguros Vinculado A Grupo Bancaja, S.A. Insurance company/Broker Valencia - Spain 99.92 0.08 100.00

Pagumar, A.I.E. Purchase, leasing and operation of ships

Las Palmas de Gran Canarias - Spain 85.45 - 85.45

Parkia Canarias, S.L.Unipersonal Parking Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Parque Biológico de Madrid, S.A. Theme park concession-holder and operator Madrid - Spain - 92.50 92.50

Participaciones y Cartera de Inversión, S.L. Management company Madrid - Spain 0.01 99.99 100.00

Pinar Hábitat S.L. Property Madrid - Spain - 60.00 60.00

Pinarges, S.L. Property Madrid - Spain - 60.00 60.00

Playa Paraíso Maya S.A de C.V. Property Municipio de Benito Juárez - Mexico - 40.00 40.00

Plurimed, S.A. Health centre operator Madrid - Spain - 92.48 92.48

Pluritel Comunicaciones, S.A. Telephone banking Madrid - Spain 99.98 0.02 100.00

Portuna Investment BV Property The Hague - Netherlands - 40.00 40.00

Promociones de Obras 26001, S.L.U. Rental property Logroño (La Rioja) - Spain - 100.00 100.00

Promociones El Pedrazo, S.A.U. Property development Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Promociones Llanos Maspalomas, S.A.U. Property development Las Palmas de Gran Canarias - Spain 100.00 - 100.00





Proyecto Inmobiliario Valiant, S.L. Property development Barcelona - Spain - 51.00 51.00

Proyectos y Desarrollos Hispanomexicanos S.A. de C.V. Property Cancun - Mexico - 40.00 40.00

Reales Atarazanas, S.L. Property Valencia - Spain - 70.00 70.00

Renlovi, S.L. Property development Mataró (Barcelona) - Spain 51.00 - 51.00

Reser, Subastas y Servicios Inmobiliarios, S.A. Property auctions Madrid - Spain 55.00 - 55.00

Restaura Berlín, GmbH Property development Berlin - Germany - 94.50 94.50

Restaura Maraton Gardens SP.Z.O.O. Property development Warsaw - Poland - 71.83 71.83

Restaura Nowogrozka, SP. Z.O.O. Property refurbishment, purchase and sale Warsaw - Poland - 51.00 51.00

Riviera Maya Investment, BV Property Gl Wassenaar - Netherlands - 40.00 40.00

Sala Retiro, S.A. Auction house Madrid - Spain 0.01 99.99 100.00

Santa Pola Life Resorts, S.L.Unipersonal Property Valencia - Spain - 100.00 100.00

Sector de Participaciones Integrales, S.L. Management company Madrid - Spain 100.00 - 100.00

Segoviana de Gestión 2007, S.A. Property services Segovia - Spain - 100.00 100.00

Segurávila, Operador de Banca Seguros Vinculado de Caja de Ahorros de Ávila, S.L.

Auxiliary services for insurance and pension funds Ávila - Spain 100.00 - 100.00




Direct Indirect Total interest Segurcaja, S.A., Correduría de Seguros Vinculada Al Grupo Caja Madrid Insurance broker Madrid - Spain 0.02 99.98 100.00

Sociedad de Promoción y Participación Empresarial Caja Madrid, S.A. Management company Madrid - Spain - 100.00 100.00

Suelos 26001, S.L.U. Rental property Logroño (La Rioja) - Spain - 100.00 100.00

Suelos 26002, S.L.U. Property Logroño (La Rioja) - Spain 100.00 - 100.00

Tasaciones Madrid, S.A. Appraiser Madrid - Spain 0.10 99.90 100.00

Torre Caja Madrid, S.A. Property Madrid - Spain 100.00 - 100.00

Tramitación y Servicios, S.A. Services Mataró, Barcelona - Spain 100.00 - 100.00

Trebol Hábitat, S.L. Property Valencia - Spain - 100.00 100.00

Urbapinar, S.L. Property Madrid - Spain 90.07 - 90.07

Urbiland Inversora, S.L. Property development Mataró (Barcelona) - Spain - 100.00 100.00

Valenciana de Inversiones Mobiliarias, S.L. Holding company Valencia - Spain 100.00 - 100.00

Valoración y Control, S.L. Management company Madrid - Spain 0.01 99.99 100.00

Vallenava Inversiones, S.L. Property Segovia - Spain 100.00 - 100.00

Varamitra Propertys B.V. Property Gl Wassenaar - Netherlands - 40.00 40.00





Vehículo de Tenencia y Gestión Nº 4, S.L. Property development Madrid - Spain 100.00 - 100.00

Viajes Caja de Ávila, S.A. Travel agency and tourist operator Ávila - Spain 70.00 - 70.00

Viajes Hidalgo, S.A. Travel agency and tourist operator Ávila - Spain - 52.49 52.49

Viviendas en Alquiler en Móstoles S.L. Property Madrid - Spain - 100.00 100.00

Voltpro I, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro II, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro III, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro IV, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro IX, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro V, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro VI, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro VII, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro VIII, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro X, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00





Voltpro XI, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XII, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XIII, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XIV, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XIX, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XV, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XVI, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XVII, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XVIII, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Voltpro XX, S.L. PV energy Las Palmas de Gran Canarias - Spain 100.00 - 100.00

Xaday Proyectos y Aplicaciones, S.L. Old people’s homes Mataró (Barcelona) - Spain - 94.86 94.86

Zilex Catalunya, S.L. Property development Arenys de Mar (Barcelona) - Spain - 51.00 51.00


8. PROPERTY, PLANTS AND EQUIPMENT

8.1. Information regarding any existing or planned material tangible fixed assets, including leased properties, and any major encumbrances thereon

8.1.1. Main buildings owned by the Bank

The table below shows details of major property assets held on Bankia Group’s consolidated balance sheet at 1 January 2011 and 31 March 2011:

Thousands of euros

ITEM For own use

Other assets leased out

under operating

leasesInvestment

property TotalCost

Balance 01.01.2011 5,905,208 293,607 1,410,828 7,609,643 Balance 31.03.2011 5,893,805 294,712 1,471,728 7,660,245

Cumulative depreciation Balance 01.01.2011 (2,751,730) (212,489) (48,477) (3,012,696) Balance 31.03.2011 (2,788,586) (220,447) (51,263) (3,060,296)

Impairment losses Balance 01.01.2011 (22,315) (1,361) (239,215) (262,891) Balance 31.03.2011 (19,854) (1,155) (249,760) (270,769)

Total at 1 January 2011 3,131,163 79,757 1,123,136 4,334,056 Total at 31 March 2011 3,085,365 73,110 1,170,705 4,329,180

The breakdown by nature of property, plant and equipment for own use at 31 March 2011 is as follows:

Thousands of euros

ITEM CostCumulative depreciation Impairment Net balance

Buildings and other constructions 2,866,556 (412,166) (1,280) 2,453,110 Furniture and vehicles 293,442 (217,813) - 75,629 Plant 1,585,932 (1,178,680) - 407,252 Office fittings and mechanisation 1,077,014 (978,830) - 98,184 Other property, plant and equipment 159 (27) - 132 Investment properties under construction 70,702 (1,070) (18,574) 51,058 Balance at 31 March 2011 5,893,805 (2,788,586) (19,854) 3,085,365

Investment properties include all land, buildings and other constructions held either for leasing out for rent or for future gains on disposal. These include properties acquired by the Group from defaulting credit customers in full or in part payment of their debt.

Also, on 31 March 2011, the Group had no significant contractual obligations in relation to the future development of investment properties on the consolidated balance sheet at that date, nor were there significant restrictions on their sale, other than the current state of the property market.


Note that the details given above take no account of the pro forma adjustments relating to the spin-off of CISA, Cartera de Inmuebles, S.L. Unipersonal and acquisition of a 49% stake in Banco de Servicios Financieros Caja Madrid Mapfre.

Aside from the above, at the preparation date of this Prospectus, Bankia is looking into opportunities to sell the tower block at Paseo de la Castellana, 189, in Madrid. No decision has yet been taken in this regard.

The table below shows the main buildings owned directly or indirectly by Bankia, S.A. at the date of preparation of this Prospectus.


LOCATION OF BUILDING SURFACE AREA

ADDRESS TOWN OR CITY PROVINCE TYPE Built area

Pza. Santa Teresa, 10 - Registered office Ávila Ávila Building 7,377.89

C/ Hornos Caleros, 26. - Administrative office Ávila Ávila Building 10,388.00

Polig. Las Hervencias. C/ Río Esla, 51-B. Logistics centre

Ávila Ávila Industrial premises 2,200.00

C/ Triana, 20 Las Palmas G.C. Las Palmas Building 10,090.00

C/ Sucre, 11 - Sao Paulo Las Palmas G.C. Las Palmas Building 13,223.00

C/ Valentín Sanz, 25 Santa Cruz de Tenerife Santa Cruz de Tenerife Building 1,768.80

C/ Miguel Villanueva, 8 y 9 Logroño La Rioja Building 4,884.00

C/ Valdegastea, 2 Logroño La Rioja Building 9,921.57

Paseo de la Castellana, 189 Madrid Madrid Building 53,199.79

C/ Monte Esquinza, 48 Madrid Madrid Building 1,658.52

C/ Emilio Muñoz, 31 Madrid Madrid Building 8,510.00

C/ Pintor Sorolla, 21 Valencia Valencia Building 4,312.00

Paseo de la Castellana, 259 A Madrid Madrid Building 105,121.25

C/ Fernández Ladreda, 8 (*) Segovia Segovia Building 9,708.56



ADDRESS TOWN OR CITY PROVINCE TYPE Built area

Avda. Lluis Companys, 44-60 Mataró Barcelona Building 31,644.00

C/ Cardenal Benlloch, 67 Valencia Valencia Building 13,433.51

C/ Pintor Sorolla, 8 Valencia Valencia Building 16,168.01

C/ Caballeros, 2 Castellón Valencia Building 8,136.29

C/ San Fernando, 35 Alicante Alicante Building 2,150.44

C/ María de Molina, 39 Madrid Madrid Building 1,084.00

C/ María de Molina, 40 Madrid Madrid Building 1,100.00

(*) Complex of four units or buildings


8.1.2. Branch network

At 31 December 2010 Bankia Group had a network of 4,101 branches. This includes Retail and Business Banking branches belonging to Bankia’s subsidiaries, the Private Banking network, consumer and lease finance capacity provided by Group companies, the network of foreign branches owned by Bankia subsidiaries and that of the wholly owned City National Bank of Florida. Of all the branches in the Bankia Network at 31 December, 54% were owned by the Bank, 37% rented and the remaining 9% held under other arrangements, either leased back, mixed ownership or transferred.

The Retail Banking networks of Bankia’s constituent Cajas had 3,864 branches at year-end, and the Business Banking network had 118. This network is currently being streamlined to eliminate overlaps between the Cajas’ networks. In 2011, 657 branches are expected to close. Retail Banking plans to shut down 617 of its branches in 2011, of which 40% are owned by Bankia, and Business Banking plans to close 40 (51% owned by Bankia). The Bank is on schedule with its branch closures, having completed 53% of planned Retail closures by 30 April and 43% of Business Banking closures.

In the first quarter 2011, eight buildings were sold. These were all in Spain and formed part of the commercial network. They were sold to investors unconnected to the Group. The sales generated 21,888,000 euros including capital gains of 18,718,000 euros. After this disposal, which was done without providing finance to the buyers, a minimum 25-year operating lease was signed with the investors, extensible for another four 5-year periods up to 45 years. A general agreement was also reached to update rents annually based on the consumer prices index.

Similarly in 2010, another 262 buildings had been sold, all in Spain and forming part of the commercial network, to investors unconnected to the Group. The sales generated 274,430,000 euros including capital gains of 166,816,000 euros. As part of these sales, which also required no finance for the buyers, operating leases were signed with the investors on the same terms as described in the previous paragraph.

Also in 2010, the sale was completed of a unique building in Madrid to a non-Group investor, for 108 million euros generating gains of 46,755,000 euros. Under this sale, also involving no financing of the buyer, a subsequent leaseback agreement was arranged for 30 years, extensible by two further 10-year periods. Likewise, rents under the operating lease are reviewed annually.


8.1.3. Central services buildings (housing the Group’s central, administrative and management services)

Besides the unique buildings owned by the Bank listed in section 8.1.1 above, the central administration and management operations of the bank are located in the following buildings:


ADDRESS TOWN OR CITY PROVINCE TYPE Built area Usable area

Plaza Celenque, 2 (*) Madrid Madrid Building 28,126.59 -- c/ Gabriel García

Márquez, 1 Las Rozas Madrid Building 58,208.23 50,862.30

Avda. del Puerto, 31 Valencia Valencia Building 715.31 -- c/ María de Molina, 41 Madrid Madrid Building 380.87 --

(*) Owned by Caja Madrid but housing Bankia’s administrative and management services.


8.1.4. Foreclosed assets

At 31 March 2011, Bankia had foreclosed property assets totalling 3,124 million euros in real terms.

Including adjustments for the CISA spin-off and Bankia’s sales of land assets to BFA described in 20.6.2.3 below (Adjustment 4) pro forma foreclosed property assets held by the Group had a net carrying amount of 4,586 million euros. This entails a 1,004 million euro provision. Incorporating equity instruments, shareholdings and funding of non-consolidated holding companies for the assets, in line with data in the Bank of Spain transparency on property exposure report (included in Bankia Group’s interim financial statements at 31 March 2011) adds a further 1,380 million euros and another 547 million euros in provisions.

The 4,586 million euro balance net of provisions breaks down as follows:

- 1,977 million euros for assets arising from loans and finance to construction companies and property developers, with coverage of 26.2%, after write-downs of the original loans at the time of the foreclosure/acquisition. Of this total, 1,766 million euros relates to completed buildings and 211 million euros to buildings under construction.

- 2,441 million euros in assets from individual residential loans, with coverage of 21.8% of the original loan value (i.e. considering current provisions against the buildings and those taken to cover the original loans and applied at the time of foreclosure),

- 168 million euros for other foreclosed property assets (mainly garages and store rooms recorded separately in the property register from the residential space on individuals’ properties, industrial plants, etc.) with coverage of 19.8% of the original loans.

This 4,586 million euros in foreclosed assets made up 1.6% of the Bankia’s pro forma balance sheet at 31 March 2011, with coverage of 23.7% including the insolvency funds applied to the original loans at the time of the foreclosure or acquisition.

The breakdown above shows that 91.7% of the foreclosed buildings are complete and the other 8.3% still under construction.

By geography, 24.9% of foreclosed assets are in the Valencia Autonomous Community, 22.6% in Madrid (all these derive from first-home mortgage loans), 14.4% in Catalonia and 38.1% in other regions. Most of the portfolio of foreclosed assets (61.9%) is thus concentrated in three regions of Spain and principally relates to finance to people buying first homes.

Bankia’s property assets are managed by the Property Assets Business Area, which is charged with managing, administering and selling the Group’s foreclosed assets. The process begins when the asset comes onto the institution’s balance sheet after foreclosure, transfer in lieu of payment or acquisition. Once the Bank has taken ownership of the asset, an external appraiser is appointed to value it and the asset is pre-assigned to a property sales broker for the locality. The broker prepares a report on the


asset including its environment, distribution, qualities and photographs so that it can be posted on the property website. Before this happens, the appropriate committee sets a price based on the Bank’s policies, taking account of market data, the appraisal price and the broker’s guide price.

Once the asset is posted on the website it is offered for sale through the different channels. The sale process concludes when an offer presented by a customer is approved by the appropriate committee. This process includes the activities ancillary to the sale: dealing with the customer, reviewing the assets posted, managing the sales channels, managing proposals for sale/rental and managing the auctions.

All appraisal values on foreclosed assets are established by external appraisers.

Fair values and credit risk impairment are calculated in accordance with the standards in force. Transactions are reviewed on a case by case basis and, where there is reasonable doubt about payment, provisions are taken. Once on the balance sheet, foreclosed properties are re-measured every three years, if they stay there that long. Transactions that imply subjective impairment must be presented to the risk department. Provisioning for subjective impairment is overseen by the Delegated Risk Committee.

Risk policies are covered by a number of rules designed to comply with Bank of Spain Circular 4/2004 Annex IX: risk analysis and provisioning, as amended by Circular 3/2010, of 29 June. In this respect, for the purpose of provisioning credit risk, property is recognised as collateral provided it is on-demand, at the lower of the notarised or recorded cost of the asset or its appraisal value. The valuation of these assets must meet the following requirements:

• The application of maximum prudence when using appraisal values and indeed any other work done by external professionals in credit transactions involving real property as additional collateral to the personal guarantee of the borrower.

• In approving such transactions, all appraisals must be by Bank of Spain approved companies, which are regulated by Royal Decree 775/1997, thereby ensuring the quality and transparency of their work.

• Appraisal values must be calculated in accordance with Order ECO805/2003 without reservations.

Real property posted as collateral for loans must be reviewed regularly and the appraisal value updated to take account of changes in the market for the asset posted or acquired in payment of debt. The following rules must therefore be applied:

• In ‘normal’ transactions involving residential property collateral the value of the mortgaged asset is updated annually using statistical techniques. In all cases, for loans of 3 million euros or 5% of the institution's equity, the mortgaged asset must be re-measured at least every three years by an independent appraiser. In these cases, there is no need to visually inspect the property once the loan has been paid down to less than 50% of the value of the collateral in residential properties or 40% in commercial properties.


• For loans classed as doubtful or doubtful assets, appraisals must be carried out by independent companies and cannot be more than three years old, unless significant falls in market prices make it advisable to reappraise more frequently. As an exception to this rule, in transactions of less than 500,000 euros where completed buildings are posted as on-demand collateral, it is acceptable to take as a best estimate of current value the lower of 80% of the last available appraisal value and the value derived from using statistical methods to update this appraisal to less than one year old. This must be done by an independent appraisal company authorised by the Bank of Spain.

• For foreclosed assets or assets received in payment of debts, appraisals must be within the timescale required above (minimum independent appraisal every three years, with the same exceptions ). In these cases, appraisals must be done by different firms at each successive update.

In practice, at Bankia, as soon as the court grants authorisation to go to auction a valuation is requested from an external appraiser. The request is made by the Recovery Department using the recovery and foreclosed asset software, and including the necessary registry documentation (simple notice or certification) and other necessary reference data to carry out the appraisal (number of the asset, address, land registry).

The appraiser completes the appraisal within 10 days and submits to the Recovery Department the appraisal and corresponding certificate, which it endorses.

The results of the appraisal are input to the Recovery, Foreclosed Assets and Accounting software so that Recovery can propose putting the asset up for auction and the building’s foreclosure can be recorded in the accounts once the results of the auction are known.

8.1.5. A description of any environmental issues that may affect the issuer’s utilisation of the tangible fixed assets.

There are no environmental issues that might affect the Bank’s use of its property, plant and equipment.

9. OPERATING AND FINANCIAL REVIEW

9.1. Financial condition

See sections 20.1 et seq. of this Registration Document.

9.2. Operating results

9.2.1. Information regarding significant factors, including unusual or infrequent events or new developments, materially affecting the issuer’s income from operations, indicating the extent to which income was so affected



9.2.2. Where the financial statements disclose material changes in net sales or revenues, provide a narrative discussion of the reasons for such changes


9.2.3. Information regarding any governmental, economic, fiscal, monetary or political policies or factors that have materially affected, or could materially affect, directly or indirectly, the issuer’s operations

In order to strengthen the regulation, supervision and management of risks in the banking sector, the Basel Committee has developed a set of reforms known as Basel III, which form part of a wider reform process and arose as a result of the action plan that the G 20 approved at the Washington summit in November 2008 (aimed at providing global solutions to the crisis and enhancing international cooperation) and of the subsequent agreements of the London, Pittsburgh and Toronto summits.

The Basel III reform consists of the following elements:

(i) Increased capital quality to ensure greater capacity for absorbing losses.

(ii) Improved risk capture. Modifications are made to the calculation of risks for certain exposures that, as the crisis has demonstrated, had been captured inadequately. In particular, for activities relating to the trading portfolio, securitisation, exposure to off-balance-sheet vehicles and counterparty risk arising from exposures in derivatives.

(iii) The build-up of capital buffers at positive moments in the cycle that may be used in periods of stress. The aim is to contribute to a more stable banking system, which helps to mitigate, rather than exacerbate, economic and financial crises.

(iv) The introduction of a leverage ratio as a supplementary measure to the risk-based capital ratio, with the aim of reducing the overleveraging of the banking system.

(v) An increase in the level of capital requirements, in order to enhance the entities’ solvency and to contribute to greater financial stability. The level of capital adequacy had not been amended in Basel II.

(vi) An improvement in the standards of the Pillar 2 supervisory review process and the Pillar 3 market disclosures, and the establishment of additional guidelines in areas such as liquidity risk management, best practices for the measurement of financial instruments, stress tests, corporate governance and remuneration.

(vii) The introduction of a liquidity standard that includes a short-term liquidity coverage ratio and a long-term structural liquidity ratio. The objective is to ensure that the entities have sufficient liquidity buffers to cope with possible market stress situations and a balance sheet structure that does not rely excessively on short-term funding.


With regard to the new capital requirements and capital buffers, the calibration established in Basel III is as follows:

The entity must cover with Common Equity (highest quality capital) at least 4.5% of its risk-weighted assets; with Tier 1 (consisting of Common Equity and Additional Tier 1) at least 6% of risk-weighted assets; and with regulatory capital (Tier 1 plus Tier 2) at least 8% of risk-weighted assets.

As well as these minimum requirements, there is a requirement to constitute a capital conservation buffer, whereby the entities’ Common Equity must be 2.5% or more of the value of their risk-weighted assets. This buffer is in addition to the minimum Common Equity requirement. Any entities not meeting the capital conservation buffer requirement will be subject to restrictions on the distribution of earnings.

The calibration of the countercyclical buffer, which only applies at times of excessive credit expansion, sets its minimum at zero and maximum at 2.5%.

This new calibration represents a significant increase in the entities’ capital adequacy in relation to the current requirements. Although Basel II only sets a regulatory capital requirement of 8%, since it includes a set of rules setting the proportion that must exist between the various components of regulatory capital, this means in practice that Tier 1 is set at, at least, 4% and Common Equity (before adjustments) at 2%.

Therefore, under the new regulations, the minimum Common Equity requirement (before adjustments) will rise from 2% to a minimum Common Equity requirement (after adjustments) of 4.5%. After adding the capital buffer to be built up by entities, Common Equity will be at least 7% of risk-weighted assets.

As explained above, the new regulatory requirements represent a significant tightening of capital regulations and a considerable effort on the entities’ part, which, taken together, will necessitate a high level of additional capital to meet the new requirements. In this regard, the estimated impact of the new capital adequacy requirements established by Basel III at Bankia Group, calculated on the basis of the latest available data (March 2011, prior to the flotation), sets the Basel III Common Equity ratio above the 7% minimum requirement, i.e. a reduction of less than 100 basis points with respect to the current core capital ratio.

Basel III also introduces new liquidity requirements that will also have a significant effect on the entities. Therefore, at their September 2010 meeting, the Group of Governors and Heads of Supervision resolved to establish a sufficiently long transitional period in which the measures will be implemented gradually. The aim is to ensure that the entities increase their capital gradually while continuing to perform their functions in relation to financial intermediation and the provision of credit to the economy.

As a result, although the new package of capital and liquidity measures will take effect on 1 January 2013, a timetable has been set to enable their gradual implementation. The rules relating to the minimum requirements for capital and the conservation buffer will be implemented gradually up until 1 January 2019. Therefore, the leverage ratio will be


implemented in 2018 following a trial period and the review of their design and calibration.

The short-term liquidity ratio will be implemented in 2015 and the structural liquidity ratio in 2018, following their respective observation periods and the review of their designs. On the basis of timetable agreed by the governors and heads of supervision, Basel III will be implemented in full on 1 January 2019.

In February 2011, the Spanish Council of Ministers approved Royal Decree Law 2/2011 of 18 February 2011 to strengthen the financial system (“RDL 2/2011”), with the twin objective of, firstly, enhancing the solvency of all credit institutions through the establishment of stringent requirements relating to highest quality capital, in order to dispel any doubts about their solvency and, secondly, accelerating the final stage of the entities’ restructuring processes within the necessary framework created by Royal Decree Law 11/2010.

With regard to the strengthening of capital adequacy, the legislation provides for the early and rigorous application of the new international capital standards of Basel III. Accordingly, it establishes with immediate effect a minimum principal capital requirement in respect of risk-weighted assets, based essentially on the definition of the requirement to be met in 2013 under Basel III. In particular, Royal Decree Law 2/2011 establishes that (i) credit institutions must have a principal capital ratio of at least 8% of their total risk-weighted exposures, calculated in accordance with Law 13/1985 of 25 May, on the investment ratios, own funds and reporting obligations of financial intermediaries and the related implementing regulations (“Law 13/1985”); and that (ii) those credit institutions that have secured over 20% of funding from the wholesale market and that have placed less than 20% of capital or voting rights with third parties must have a principal capital ratio of 10%.

In principle, the entities must meet their respective applicable principal capital ratios before 10 March 2011, on the basis of the risk-weighted assets at 31 December 2010. However, any entity not meeting this deadline will have an additional adaptation period ending 30 September 2011, whereby it will have to submit a plan for compliance with its strategy and timetable to the Bank of Spain. In exceptional cases, the Bank of Spain may extend the compliance period until 31 December and, in the case of entities involved in flotation processes, until the first quarter of 2012.

By virtue of Royal Decree Law 2/2011 the banking sector restructuring fund FROB (Fondo de Reestructuración Ordenada Bancaria) is authorised to acquire ordinary shares from or make capital contributions to (in the case of credit cooperatives) entities that so request. The subscription of these securities will give rise to the immediate inclusion of the FROB in the entity’s governing body and will be conditional on the entity’s assumption of the following commitments: (i) at the FROB’s request, the reduction of overhead costs; (ii) the organisation of its corporate governance in line with the standards applicable to listed companies, and (iii) increased financing to SMEs.

Other than what is disclosed in section 20 of this Registration Document, in the period of historical financial information and until the date of this Registration Document, there have been no governmental, economic, fiscal, monetary or political policies or


factors that have materially affected, or could materially affect, directly or indirectly, the Bank’s operations.

10. CAPITAL RESOURCES

10.1. Information concerning the issuer’s capital resources (both short and long term)

The Group’s equity

Bank of Spain Circular 3/2008, on the calculation and control of minimum capital requirements, which was approved in 2008, represents the final implementation of the legislation on capital and consolidated supervision of financial institutions, which was contained in Law 36/2007 of 16 November, in turn amending Law 13/1985 of 25 May, on investment ratios, own funds and reporting obligations of financial intermediaries. Bank of Spain Circular 3/2008 adapts Spanish legislation to the Community Directives that stem, in turn, from the Basel Capital Accord (Basel II). The new approach is based on three core pillars that support the aforementioned Circular: minimum capital requirements (Pillar 1), the internal capital adequacy assessment process (Pillar 2) and market disclosures (Pillar 3).

On 30 December 2010, the Bank of Spain issued Circular 9/2010 of 22 December, amending Circular 3/2008, with the aim of implementing European Commission Directives 2009/27/EC and 2009/83/EC. An array of unconnected changes have been made to the way certain capital components are computed, the calculation of capital requirements in respect of credit risk (for both the standardised approach and the internal ratings-based approach), credit risk reduction techniques, securitisation, the treatment of counterparty risk and assets and liabilities held for trading, and market reporting requirements. The new Circular includes a non-binding Guide that encourages the introduction by the Group of robust governance procedures with regard to liquidity risk and the monitoring of securitisation-related risks.

In addition, Royal Decree 771/2011 of 3 June amends Royal Decree 216/2008 of 15 February on the capital of financial institutions. The purpose of this law is to improve (i) the quality of credit institutions’ eligible capital; (ii) the capital requirements for trading book exposures to equate their treatment to that of banking book exposures; (iii) the provisions of the standards relating to the prudential regime for securitisations introduced in Law 6/2011 of 11 April; (iv) the improvements introduced to the rules on limits on large exposures; the rules on the new prudential requirements for liquidity risk; (v) various matters relating to the Bank of Spain’s supervisory activity and its cooperation with the financial supervisory authorities of other EU Member States and (vii) the requirements with regard to the credit institutions’ remuneration policies.

With respect to minimum capital requirements (Pillar I), after obtaining explicit authorisation from the Bank of Spain, the Group applied advanced IRB approaches to assess its credit risk for certain risk exposures — Institutional, Corporate and Retail (including micro-companies, mortgages, cards and other retail transactions) — in the Caja Madrid portfolios, and the standardised approach for such exposures at the


remaining Group entities. The Group uses the standardised approach to measure other exposures in order to calculate the capital requirements for credit risk.

The minimum capital requirements for risks related to the trading book (currency risk and market risk) and for certain risk exposures of quoted available-for-sale equity securities have been calculated by applying internal approaches, with the standardised approach being used to some extent.

Additionally, as regards the calculation of capital requirements for operational risk, the Group uses the basic indicator approach and, to some extent, the standardised approach.

Tier 1 capital includes, essentially, share capital, share premium, reserves, net profit for the year to be appropriated to reserves after deducting dividends, non-controlling interests and preference shares, net, among other items, of goodwill, the balance of intangible assets and the unrealised losses (net of their related tax effect) of the available-for-sale fixed-income and equities portfolios. Tier 2 capital includes, mainly, revaluation reserves, subordinated debt, the excess of provisions for impairment on assets recognised in relation to the expected losses and a percentage (between 35% and 45%) of the gross unrealised gains on the available-for-sale fixed-income and equities portfolios. It is important to note that, as indicated above, the net losses recognised as valuation adjustments of available-for-sale financial assets are deducted directly from eligible Tier 1 capital, thereby reflecting the effect of the effective realisation of said unrealised losses.

The Bankia Group’s management of its capital, as regards conceptual definitions, is in keeping with Bank of Spain Circular 3/2008, amended subsequently by Circular 9/2010.

Since Bankia was incorporated recently and in the absence of historical data, the table below only reflects the trend in capital ratios in the three-month period from 1 January to 31 March 2011.


Data in millions of euros and percentages

Bankia capital adequacy 31/03/11 01/01/11 Eligible capital: 13,221 12,875 Tier 1 capital, of which 12,563 12,465

Core capital 13.048 12.946 Tier 2 capital 658 410

Risk-weighted assets 164,731 168,914 BIS II ratio (%) 8.03% 7.62% Core capital (%) 7.92% 7.66% Tier 1 (%) 7.63% 7.38% Tier 2 (%) 0.40% 0.24% Principal capital ratio 7.99% 7.66% Total minimum capital requirements 13,178 13,513 Excess capital 43 -638

At 31 March 2011, the Bankia Group’s eligible capital, according to the criteria defined in the Basel II capital accord, amounted to 13,221 million euros, substantially all of which was Tier 1 capital and, specifically, core capital. The risk-weighted assets at the end of the three-month period totalled 164,731 million euros and, accordingly, at that date the total capital ratio (BIS II ratio) was 8.03% and the core capital ratio was 7.92%. Taking into consideration the data at 1 January 2011, the date for accounting purposes of the Bankia economic group, the total capital ratio stood at 7.62%. The improvement in this ratio in the first quarter of 2011 was due both to the higher balance of eligible capital as a result of, inter alia, a higher excess of impairment provisions in relation to expected loss, the increase in gains on the available-for-sale portfolio, the improvement in results of the non-controlling interests and the recognition of the first quarter results, and to the lower balance of risk-weighted assets, connected mainly to the balance sheet deleveraging.

Royal Decree 2/2011 to strengthen the financial system introduces the concept of “principal capital”, defined as the sum of, inter alia, the following capital components: the share capital of public limited companies, share premiums paid, actual and express reserves, eligible profits for the year, positive valuation adjustments arising from available-for-sale financial assets within equity, net of tax effects, the holdings of non-controlling interests in terms of ordinary shares of consolidated Group companies, and eligible instruments subscribed by the FROB. This sum must be net of any losses carried forward and losses in the current year, negative valuation adjustments arising from available-for-sale financial assets, net of tax effects, and intangible assets, including goodwill from business combinations, consolidation or use of the equity method. At March 2011, the Bankia Group’s principal capital amounted to 13,165 million euros, and the principal capital ratio was 7.99%.


In relation to principal capital requirements, it is important to note that Royal Decree Law 2/2011 stipulates that in the course of 2011, consolidated groups of credit institutions must reach a principal capital ratio of 8% of their risk-weighted exposure, unless their wholesale financing ratio exceeds 20% and at least 20% of their capital or voting rights are not placed with third parties, in which case the aforementioned requirement is 10% of their risk-weighted exposure. Pursuant to the provisions of Royal Decree Law 2/2011, on 10 March 2011, the Bank of Spain published the capital requirements of credit institutions, which included Banco Financiero y de Ahorros, S.A.

Since the percentage of wholesale financing of the Banco Financiero y de Ahorros Group, the consolidated group to which Bankia belongs, was above 20% and it had not placed with third parties equity securities or voting rights of, at least, 20% or more, the Group’s principal capital ratio, pursuant to Royal Decree Law 2/2011, should be 10%, for which it would need to raise 5,775 million euros.

However, if the Bank were successful in placing 20% or more of its share capital with third parties, the Group’s additional capital requirements would decrease to 1,795 million euros, which would be sufficient to attain the required principal capital ratio of 8%.

At 31 March 2011, Bankia’s principal capital ratio prior to the share offering, pursuant to the provisions of Royal Decree Law 2/2011, stood at 7.99%.

Therefore, according to the Bank’s internal calculations and, in accordance with the provisions of Royal Decree Law 2/2011, Bankia would need to raise 4,967 million euros in order to attain a principal capital ratio of 10%. This amount would decrease to 1,045 million euros, i.e. an amount enabling it to attain a principal capital ratio of 8%, if, as a result of this share offering, the Bank was successful in placing with third parties 20% or more of its share capital.

In this regard, the Bankia IPO would enable it to reach the principal capital levels required under Royal Decree Law 2/2011, since, once said flotation was completed, the requirement of 8% of risk-weighted exposures would be applicable.

At the end of the first quarter of 2011, the Bankia Group’s total equity amounted to 13,875 million euros, i.e. 171 million euros more than at 1 January 2011, or 1.25% in relative terms. At 31 March 2011, the Bankia Group’s shareholders’ equity by line item (share capital, share premium, reserves and profit for the period) amounted to 12,992 million euros, up 16 million euros in the quarter. Valuation adjustments increased by 75 million euros, primarily as a result of the valuation adjustments of the available-for-sale financial assets, which increased by 117 million euros due to the impact of the positive market performance in the quarter. Lastly, the non-controlling interests amounted to 807 million euros, up 79 million euros on 1 January 2011. It is important to note that, in pro forma terms, the non-controlling interests decreased by 580 million euros primarily due to the effect of the acquisition, after 31 March 2011, of a 49% holding in Corporación Financiera Caja de Madrid, S.A. whereby Bankia’s ownership interest in this company rose to 100%. In pro forma equity terms, this decrease in minority interests was partially offset by an increase in reserves of 285 million euros.


Following is the Bankia Group’s consolidated statement of changes in equity for the period from 1 January to 31 March 2011.


EQUITY

VALUATION ADJUSTMENTS TOTAL

NON-CONTROLLING

INTERESTS TOTAL EQUITY

Share capital

Share premium

Reserves

Other equity instruments

Less: treasury shares

Profit/Loss for the year

attributable to the Parent

Less: dividends and remuneration

Total Equity

Accumulated reserves

Reserves (losses) of

entities accounted for

using the equity method

1. Balance at 01/01/11 1,818 10,200 992 (34) 12,976 12,976 728 13,704 1.1 Adjustments due to changes in accounting principles - - - - - - - - - - - - - 1.2 Adjustments to correct errors - - - - - - - - - - - - - 2. Adjusted opening balance 1,818 10,200 992 - - (34) - - 12,976 - 12,976 728 13,704 3. Total recognised income and expense - - - - - - 35 - 35 75 110 32 143 4. Other changes in equity 67 (86) (19) (19) 47 28 4.1 Increases in endowment fund - - - - - - - - - - - 4.2 Capital reductions - - - - - - - - - - - 4.3 Conversion of financial liabilities into equity - - - - - - - - - - - - - 4.4 Increase in other equity instruments - - - - - - - - - - - - - 4.5 Reclassification of financial liabilities to other equity instruments - - - - - - - - - - - 4.6 Reclassification of other equity instruments to financial liabilities - - - - - - - - - - - 4.7 Remuneration of shareholders - - - - - - - - - - - 4.8 Own equity instrument transactions (net) - - - - - - - - - - - - - 4.9 Transfers between equity accounts - - - - - - - - - - - - - 4.10 Increases (Decreases) due to business combinations - - - - - - - - - 4.11 Discretionary transfer to welfare funds - - - - - - - - - - - 4.12 Equity-instrument-based payments - - - - - - - - - - - - - 4.13 Other increases (decreases) in equity - - 67 (86) - - - - (19) - (19) 47 28 5. Balance at 31/03/11 1,818 10,200 1,059 (86) (34) 35 12,992 75 13,068 807 13,875


The Group’s external financing

The Bank’s external financing consists of on-balance-sheet customer funds and the deposits of credit institutions including the European Central Bank.

At 31 March 2011, total on-balance-sheet customer funds (consisting of customer deposits, marketable debt securities and subordinated liabilities) amounted to 211,517 million euros, 2.5% higher than at 1 January 2011.

(Millions of euros) 31/03/11 01/01/11 Change %

Customer deposits 152,962 144,037 6.2%

Marketable debt securities 58,239 62,104 (6.2%)

Subordinated liabilities 316 301 4.9%

On-balance-sheet customer funds 211,517 206,442 2.5%

Some 72% of on-balance-sheet customer funds are customer deposits (70% at the beginning of the year), thereby reducing the recourse to wholesale financing. ****

At 31 March 2011, “Customer Deposits” in the consolidated balance sheet includes the balance relating to non-marketable one-off mortgage covered bonds (cédulas hipotecarias) issued by the Group for 16,785 million euros.

Customer deposits

The on-balance-sheet customer deposits increased by 6.2% in the first quarter of 2011. There was noteworthy growth in retail customer time deposits (excluding repos and one-off covered bonds) of 3,182 million euros. This positive trend partially offset the decline in one-off covered bonds amounting to 3,420 million euros. As a result, there was a net drop in time deposits of 235 million euros.

In the quarter, the deposits from the Spanish public sector rose by 5,550 million, mainly as a result of the higher balance of repurchase agreements with the Treasury. (Millions of euros) 31/03/11 01/01/11 Change %

Public sector 10,206 4,656 119.2%

Other resident sectors 126,290 127,294 (0.8%)

Current accounts 17,748 18,367 (3.4%)

Savings accounts 27,981 28,449 (1.6%)

Fixed-term deposits 78,538 78,773 (0.3%)

of which one-off covered bonds 16,785 20,205 (16.9%)

Repos and other accounts 2,022 1,705 18.6%


Non-residents 15,543 10,915 42.4%

Repos 11,488 6,852 67.7%

Other accounts 4,055 4,063 (0.2%)

Total 152,039 142,865 6.4%

Valuation adjustments 923 1,173 (21.3%)

Total customer deposits 152,962 144,037 6.2%

In pro forma terms, total customer deposits amounted to 153,479 million euros at the end of the first quarter of 2011, 6.1% more than at the beginning of the year.

Marketable debt securities and subordinated liabilities

At 31 March 2011, the sum of marketable debt securities and subordinated liabilities amounted to 58,555 million euros, down 4.9% on 1 January 2011. The detail, by type of issue of this debt, at the end of the first quarter of 2011, is as follows:

(Millions of euros) 31/03/11 Senior debt 13,328 Bonds and mortgage covered bonds 25,305 State-guaranteed issues 8,652 Subordinated debt 296 Senior retail debt 450 Public covered bonds 1,525 Securitisations sold to third parties 8,816 Commercial paper 1,442 Valuation adjustments (1,259) Total marketable debt securities and subordinated liabilities (*) 58,555 (*) Net amount of treasury shares totals 12,076 million euros

At 31 March 2011, 45% of the balances in marketable debt securities and subordinated liabilities related to mortgage covered bonds (cédulas hipotecarias) and public covered bonds (cédulas territoriales), 23% related to senior debt (including retail senior debt), 14% to state-guaranteed issues, 15% to securitisations sold to third parties and the remaining 3% to other issues (mainly commercial paper).


The maturity schedule of these long-term issues (excluding commercial paper) at 31 March 2011 is as follows:

(Millions of euros)

Maturities

<3 months 3-6 months 6-12 months >12 months

Senior debt 1,264 2,936 2,729 6,399

Bonds and mortgage covered bonds 25 200 3,859 21,221

State guaranteed issues 220 3,072 5,360

Subordinated debt 296

Retail senior debt 120 120 210

Public covered bonds 20 1,505

Securitisations sold to third parties 8,816

Valuation adjustments (1,259)

TOTAL 1,409 3,476 9,680 42,548

In pro forma terms, the balances in the Bankia Group’s marketable debt securities and subordinated liabilities are the same.

The marketable securities set to mature from March 2011 until December 2011 amount to 7,970 million euros. In 2012 the maturities of this type of financing total 15,356 million euros. Taking into consideration also the multiseller bonds issued, net of those retained, which amount to approximately 10,500 million euros, these maturities in 2011 and 2012 would increase by approximately 1,200 million euros.

However, the refinancing of these amounts would not have to be made on the total amount, since a portion of these maturities will not need to be renegotiated due to the reduction in the commercial gap in the balance sheet deleveraging process and the liquidity received in the flotation process. Furthermore, these maturities of marketable securities include 4,084 million euros of mortgage covered bonds securities that may be issued and either placed on the market or used for discount at the European Central Bank. Taking into consideration also the multiseller bonds, the total amount of the bonds that could be issued or placed on the market would total approximately 5,300 million euros.

Deposits from credit institutions and central banks

At 31 March 2011, the Group had a net borrower position of 10,555 million euros with credit institutions (9,615 million euros at the beginning of the year). It is important to note that in both periods this line item includes a time deposit granted by Banco Financiero y de Ahorros of 4,465 million euros associated with the payment made by the FROB in subscribing the issue of convertible preference shares launched by Banco de Financiero y de Ahorros in December. This deposit, whose financial conditions mirrored those of the preference shares issued by Banco Financiero y de Ahorros, was cancelled on 1 April and, subsequently, a demand deposit was constituted at Banco


Financiero y de Ahorros for the same amount and accruing interest at market rates for this type of deposit.

In pro forma terms, the net borrower position at 31 March 2011 amounted to 11,727 million euros, practically the same balance as at 1 January 2011.

The Group held a net borrower position at central banks amounting to 6,948 million euros at 31 March 2011, compared with 14,702 million at the beginning of the year. In pro forma terms, the differences between these balances are not significant.

Issue capacity

At 1 January and 31 March 2011, the Group had issued marketable and non-marketable mortgage covered bonds for a nominal amount of 50,579 million euros.

Non-marketable mortgage covered bonds amounted to 17,232 million euros at 31 March 2011 (of which, 16,785 million were included in customer deposits and 447 million euros in deposits from credit institutions).

The aggregate nominal value, by residual maturity and stating whether issued in a public offering, of the outstanding marketable and non-marketable mortgage covered bonds issued by the group at 1 January and 31 March 2011 is as follows:

(Millions of euros) MORTGAGE COVERED BONDS (NOMINAL VALUE) 31/03/11 01/01/11 Issued through a public offering 24,889 24,139 Maturity > 3 years 4,545 4,545 Maturity 3 to 5 years 5,850 5,100 Maturity 5 to 10 years 8,994 8,994 Maturity > 10 years 5,500 5,500 Not issued through a public offering 25,690 27,109 Maturity > 3 years 12,633 12,702 Maturity 3 to 5 years 5,359 5,082 Maturity 5 to 10 years 4,630 6,008 Maturity > 10 years 3,068 3,317 Total nominal value of mortgage covered bonds 50,579 51,248


With regard to asset-based transactions, the following table itemises the Group’s issue capacity at 31 March 2011:

(Millions of euros)

NOMINAL VALUE 31/03/11 Total mortgage loans and credits 136,430 Of which: Eligible loans and credits in accordance with the requirements of article 12 of RD 716/2009 for the coverage of security issuance 75,948 Of which:

Loans and credits operated through transfer certificates 23,586 Mortgage covered bonds issue capacity (margin) 10,180 Public covered bonds issue capacity (margin) 641 Total issue capacity 10,821

It is also important to note that the Group has certain liquid assets available to guarantee the commitments acquired in its lending activities. Most noteworthy among these assets are the securities included in the European Central Bank (Eurosystem) facility, which will provide immediate liquidity. The total undrawn balance of these securities at 31 March 2011 was 10,107 million euros.

10.2. An explanation of the sources and amounts of and a narrative description of the issuer’s cash flows

(A) Asset and liability liquidity and management

Bankia’s Finance Department manages the structural portfolios owned by the entity, primarily invested in government debt and corporate fixed income, and it intermediates with the markets all manner of risks arising from both products that the Capital Markets unit distributes among customers and the risks relating to the management of the entity’s balance sheet.

It also manages the Group’s short-term liquidity and acts as market maker for government debt and fixed income securities. The most noteworthy activities of Finance Department are as follows:

(i) Government debt and own fixed income securities

The management of government debt and corporate fixed income securities aims to generate net interest income within the framework of the policies and strategies set by the entity’s Risk Committee and Asset-Liability Committee (ALCO), and to take advantage of investment opportunities based on a medium and short term interest rate and credit perspective, in order to obtain both net interest income and gains from price fluctuations.


At 31 December 2010, the total nominal balance of Bankia’s portfolio was 23,136 million euros, of which 60% related to government securities and 40% to private fixed income securities.

Meanwhile, the activity relating to credit default swaps enables the entity to partially hedge the credit risk from fixed income securities in periods of volatility.

(ii) Liquidity management and portfolio financing

- Own issues. Financing structure

The management of own issues aims to analyse the instruments for obtaining funds that are available in the capital markets, to propose the decision to be taken with regard to the financing structure (senior bonds, subordinated debt, mortgage covered bonds, preference shares, loans, EMTN, etc.) distributed both to retail investors through the branch network and to institutional investors in the international capital markets. In order to carry out these tasks, it maintains regular contact with the various origination and syndication teams at international financial institutions and takes ultimate charge of the negotiations and the definitive contractual terms and conditions of the issues based on market conditions. The terms, currencies, rates and hedges relating to medium and long-term financing are decided in accordance with the general guidelines stipulated by the ALCO.

As additional tasks, in conjunction with the fixed income investor relations area, it performs regular roadshows, takes part as a panellist at various conferences and roundtables in order to raise awareness of the Issuer, opens new credit facilities and updates current institutional investors on the credit profile.

It proposes the establishment of the various issue programmes to be used by the Bank, both domestically and abroad, with the aim of widening its access to other markets, currencies and types of investor. This area will ultimately be responsible for creating and managing the Bank’s benchmark issues and credit risk curve.

- Cash and short-term liquidity management

The Finance Department manages short-term liquidity, focussing on trading on the money markets in both euros and other currencies. The most noteworthy activities are:

- Management of the reserve ratio (cash ratio), availing itself of the power to appeal to the European Central Bank in its open market transactions.

- Maintenance of liquidity in all other currencies, managing the balances of correspondents in foreign currency and all interest rate hedges required for balance sheet management in euros or other currencies. The provision of liquidity to branches outside Spain (Miami, Lisbon, Vienna, etc.) and to other Group companies (Bancofar and Inversis) for their balance sheet transactions.

- Short-term issue programmes. The promissory note issue programme (registered with the Spanish National Securities Market Commission, the CNMV) and commercial paper and certificates of deposit (registered at the London Stock


Exchange) have been the two cornerstones for attracting funding.

- Portfolio financing

The activities relating to the financing of the public and private fixed income investment portfolios are carried out by the Treasury department. These activities were highly affected by the market crisis in general and the sovereign debt crisis in particular, and most of the impact was felt by the operations performed in relation to this type of asset in Spain. 2010 was marked by the following:

- Bilateral operating agreements were abandoned in favour of clearing houses. Although MeffClear already existed in the Spanish market, risk aversion prompted entities to re-direct their repo activity through the EurexRepo and LCH.Clearnet clearing houses.

- Caja Madrid was the first Spanish entity to join EurexRepo (June 2010) which, together with LCH.Clearnet (since October 2010) have helped to obtain a very considerable increase in the potential for asset financing.

Furthermore, Bankia is currently a member of the MMCG (Money Market Contact Group), which is led by the European Central Bank and comprises 20 members from European financial institutions, and of the European Repo Council Committee since 2004. This committee, which is made up of 19 members at European level, acting under the umbrella of the ICMA (International Capital Markets Association), plays a central role in the repo activity on an international level.

(B) Trading activity and derivative and cash book management

The trading desks perform short-term trading activities relating to interest rates, equities, credit and exchange rates, with a focus on generating gains on financial assets and liabilities. This trading activity is performed within the strict market risk limits and position control, overseen by an independent market risk unit.

Bankia has books for derivatives relating to interest rates, inflation, equities and exchange rates in order to manage the risk arising from derivatives entered into by its customers (corporate, institutional and from the branch network) and of the entity’s risks (issues, portfolios, balance sheet management, etc.).

Bankia is also a market maker for State bills and bonds. It has an active presence in the market, trading over 125,000 million euros p.a. and distributing to the major institutional customers in the Spanish market. It is a member of the MTS Spain and SENAF trading platform (the largest in traded volume terms). Bankia ranks sixth among market makers, a ranking that includes the 22 most important entities from Spain and abroad.

Section 20.1 of this Registration Document includes the Bank’s consolidated statements of cash flows for the three-month period ended 31 March 2011 prepared under IFRS and presented in thousands of euros, together with the explanations relating to the changes in said consolidated statements of cash flows.


10.3. Information on the borrowing requirements and funding structure of the issuer

The issuer’s financing structure and the nature of its sources of financing are described in section 10.1 of this Registration Document. There are no special conditions other than the features of the various sources of financing described above.

11. RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES

11.1. Research and development

Research and development projects:

Bankia is developing a series of research, development and systems projects in order to improve its commercial, business and risk management activities, which are described briefly below:

New commercial model

This is a process engineering project designed to transform the traditional financial terminal into a single branch desktop to standardise all the branch processes (commercial, operational, internal management, etc.) by integrating all the tools made available to the commercial staff. It aims to structure the sales process, encourage the feedback of information to the marketing department and foster the identification of the customer as the primary activity in any process, while at the same time providing for the inclusion of commercial proposals and suggestions even when purely operational processes are being executed.

It also makes the commercial activity easier for users by incorporating an intuitive interface, highlighting at all times the key content that supports the particular process being executed and by specifying and prioritising the pending tasks for each member of the sales staff.

The cost of the project in 2010 amounted to 1,200 thousand euros, which represents approximately 20% of the project’s total estimated cost.

Foreclosed asset management

This area consists of the design and development of a system enabling the management, administration, marketing and sale of the entity’s portfolio of assets foreclosed through a legal process to execute unpaid debt or dation in payment. This management system introduces functionalities such as integration with accounting tools, the automation of the presentation of sale offer proposals to committees, electronic signature and the digitalisation of files. In addition, a management system and a website have been developed for performing queries and the prescription of properties for both sale and rental.



Analysis and Monitoring of Basel II (ASR)

This involves the research applied to the development of the software required for analysing and monitoring risk under the Basel II advanced approach (internal calculations of: probability of default, exposure, expected loss, risk-adjusted return, loss given default, credit ratings, scorings, etc.), which enables the entity to respond to the information and management requirements of the internal approaches.

The cost of the project in 2010 amounted to 300 thousand euros, which represents approximately 8% of the project’s total estimated cost.

Contactless card

This project involves including contactless payments in financial cards, in addition to traditional EMV payments, thereby enabling customers to make purchases in a fast, simple and secure manner.


Digital signature

This project aims to enhance efficiency at the branch network by replacing the handwritten signature on paper (in print documents) by the signature on a digitalised tablet in all customer transactions with the Entity.


Travel insurance

The pioneering Viaje Seguro project in Spain enables the sale of travel insurance in real time using special self-service touch screen kiosks. The operational application that was developed has been implemented across Caja Madrid’s ATM network.


Signage model

This project consists of the installation, on the outside of branches, of the largest illuminated signs in banking based on low-consumption LED technology and, on the inside, a sequence of dynamic slides on LCD screens and using projectors for projecting centrally-distributed commercial content (using a specific software for personalising messages and content according to the time of day and the location of the branch).

In 2010 no amounts were allocated to this signage project. However, the cost of the project in 2009 amounted to 2,334 thousand euros, which represents approximately 74% of the project’s total estimated cost.


External valuation model

This involves the research applied to the development of valuation models (price and risk), of exotic products (for which there is no analytical solution) through the calculation of the interest rate curve. The products to be valued may be fixed income, equities or hybrids. This project aims to obtain new models enabling Bankia to measure prices and risks in the financial environment. The project is expected to facilitate the incorporation of models, the uniformity of the system and the implementation of security requirements. This is an example of technological progress for the entity, as it provides it with software for measuring complex transactions for which there is no precedent in the market.


Technological innovation projects

Securitisations system

The design and development of a system to enable the securitisation process to be performed quickly, providing new functional and reporting capabilities required for each of the parties involved in the process. Another objective of this process is the development of the common accounting plan for all the securitisations in order to speed up and facilitate the work involved. Through the development of the new system, Bankia will have a general, multi-product software to support any type of securitisation (loans, cards, fixed income, credit accounts, etc.), which users can parameterise according to their preferences. This is expected to save time and effort in the development of each software program. This system is a significant technological breakthrough as it provides mechanisms so that users will receive alerts when set ranges are surpassed and enables them to perform transactions with the files without outside help. It will also include a window for settling swaps that will enable reconciliation mechanisms to be established for the settlements in which various levels of priority will be established according to the requirements set by the users.


Derivative accounting and measurement

The design and development of a system for the accounting treatment and monitoring of derivative products, which enables the valuation of advanced exotic products and the calculation of the maximum risk exposure. The development of the new system will enable Bankia to adapt its software for monitoring risk and position for Business Banking, in order to extend the use of advanced approaches and internal rating methods and for updating software packages so that Bankia can further develop its Business Banking risk management systems. The new system is expected to represent a significant technological improvement for Bankia as it will be used to enhance its risk management systems while minimising operational risks. It will also enable Bankia to develop its OTC manual accounting processes and new functionalities in OTC derivatives that are already automated.



Financial guarantees

The design and development of a new Corporate Guarantee system to provide support for the capture, administration, monitoring and measurement of guarantees, applicable to any product to which a guarantee might be associated and to any entity or person.

This system will enable Bankia to perform a closer control of the guarantees provided by customers. As a result, a more precise calculation of the risk associated with each credit transaction may be made. This innovative system is expected to represent a significant technological advancement with regard to the pre-existing systems since no unified automatic system exists that is able to manage the complete life cycle of guarantees provided by the entity’s customers.


11.2. Rights over intangible property

The Bankia Group’s main brands are Bankia, Caja Madrid, Bancaja, La Caja de Canarias, Caja de Ávila, Caixa Laietana, Caja Segovia and Caja Rioja. The savings banks own their brands and their use is granted to Bankia by virtue of the Home Territories Management Services Agreements described in section 22.5 below.

Without prejudice to the comments made below with regard to the “Bankia” brand, all the Issuer’s brands have been duly registered at the Spanish Patents and Trademarks Office and at the intellectual and industrial property registries of the other countries where it operates.

Situation of the Bankia brand

The Bankia Group uses the “Bankia” logo to distinguish its products and services in the market and has presented an application to register a national brand in Spain (M 2964282), published on 16 February 2011, the subject of which is the “Bankia” logo represented below:

On 4 March 2011, Soluciones Interactivas, S.L. (“Soluciones Interactivas”) contested the application to register the “Bankia” brand on the basis of its priority brand M 2523823, the subject of which is the “Rankia” brand.

The Issuer, in accordance with the advice received from its brand agents, considers that the existence of “Rankia” should not constitute an obstacle to the registration and use of


the “Bankia” brand and, accordingly, it decided to continue to use the “Bankia” brand to distinguish its products and services. The Issuer has also been advised that the “Bankia” and “Rankia” brands are different and, as a result, there are no grounds for Rankia’s opposition.

Furthermore, on 17 March 2011, Bankoa, S.A. (“Bankoa”) sent a letter of formal notice to Banco Financiero y de Ahorros by virtue of which (i) it indicated that the “Bankia” and “Bankoa” brands were incompatible, and (ii) as a consequence, it urged Banco Financiero y de Ahorros to revoke its application to register the “Bankia” brand, to cease using this brand to identify its products or services and to negotiate an agreement to define the use of the brand. If such an agreement were not reached, Bankoa would file an appeal contesting the approval of the application to register the “Bankia” brand. Bankoa’s formal notice was based on various brands, in particular the priority brand for the name “Bankoa” M 0769464. Bankoa forms part of the Crédit Agricole banking group and identifies its offices with a sign that includes the phrase “Bankoa Crédit Agricole” and not “Bankoa” on its own. However, the “Bankoa” brand is used independently in internet. At the date of presentation of this Registration Document, an agreement was entered into with the Crédit Agricole banking group (of which Bankoa forms part) for peaceful coexistence of the two brands and, as a result, Bankoa revoked its claim.

12. TREND INFORMATION

12.1. Include a statement that there has been no material adverse change in the prospects of the issuer since the date of its last published audited financial statements. In the event that the issuer is unable to make such a statement, provide details of this material adverse change

Except for that which is described below in section 12.2, there is no evidence of any change in the Issuer’s prospects since the date of the latest published audited financial statements.

12.2. Information on any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on the issuer’s prospects for at least the current financial year

a) Integration process

The integration of the operations and processes of the seven savings banks (Cajas) that make up Bankia will enable the Group to improve its productivity and obtain significant cost synergies that will be achieved primarily through the following plans and specific aspects:

(i) Branch network rationalisation plan;

(ii) Staff rationalisation plan;

(iii) Technological integration plan;


(iv) Unification and rationalisation of procurement and supplier management services and processes; and

(v) Tax benefits arising from the integration process.

The costs of the Integration Plan were recognised at 31 December 2010 at 1,422 million euros and it is estimated that these costs will be incurred in 2011, 2012 and 2013 for approximately 150 million euros, 95 million euros and 40 million euros, respectively.

(i) Branch network rationalisation plan

The branch network rationalisation plan aims to preserve the main differentiating features of the positioning of the Bankia network, which are:

a) A positioning in the natural markets of origin of the seven Cajas, which coincide with the domestic markets with most potential: Madrid Autonomous Community, Valencia Autonomous Community, Catalonia and the Mediterranean area, Castilla y Leon, La Rioja and the Canary Islands.

b) A very considerable presence in all domestic markets, with a wide-reaching network and leadership potential nationwide.

c) The highly complementary nature of the various savings banks’ networks.

The plan envisages the closure of 657 branches (16% of the total original 4,101 branches in the seven networks), which will be carried out in 2011. As a result, the Group’s network will comprise around 3,442 branches, with the objective of ensuring the maintenance of the commercial potential and strategic differentiation of the Group’s network.

The criteria for selecting the branches to be optimised have taken into consideration the Group’s vocation for efficiency in the home markets of the seven constituent Cajas in order to enhance efficiency without affecting competitive capability. This objective is coupled with an expansion strategy in other (non-home) markets, focussed on growth in the most attractive markets, while assuming the objective of maintaining a significant presence with a focus on achieving maximum efficiency, optimising the distribution model and maintaining market strength. The selection of the branches to be closed has taken into account profitability by branch and the capacity for absorbing the business by the remaining local network. The highly complementary geographical nature of the integrated networks enables Bankia to carry out the process to absorb business and customers with minimum disruption for the latter. In this regard, the business of branches to be rationalised will be transferred to the other branches in the network that enable Bankia to best protect the value of its business in each territory.

The ultimate aim is for a network with a higher business volume and rate of return by branch, and with an optimum size in order to maintain or achieve leadership in each market.

Accordingly, at 31 May 2011, the number of branches effectively closed amounted to 410, 393 of which were for individual customers and 17 for business banking, which


represents 62% of the total planned closures, in strict compliance with the timetable established in the integration plan.

(ii) Staff rationalisation plan

The staff rationalisation targets reducing the workforce by 3,756 positions, approximately 15% of the total workforce of the Bankia Group prior to the integration. The main approach for managing the excess workforce will be through early retirement although other options are also considered, such as voluntary redundancy.

The main criteria used for preparing the re-sizing of the Group’s workforce are determined by the size of the branches, whereby the number of staff in the commercial network can be rationalised, taking into consideration the total number of branches to be closed and the average number of employees per average target branch. Furthermore, because of the integration of all the operations of the seven Cajas into a single entity, the Group can carry out a significant re-sizing and optimisation of the pre-existing workforce in the various central services.

At 31 May 2011, of the 3,102 employees qualifying for early retirement (i.e. those who, at 31 December 2010, had reached 54 years of age), 3,082 (99.3%) had availed themselves of the plan, of whom 2,255 had effectively formalised their early retirement. Also, 270 employees had taken voluntary redundancy or had opted for another type of termination at that date. Therefore, to date, 2,525 employees, representing 67.2% of the total target, had effectively terminated their employment contracts, which is a substantially early achievement of the target compared with the original plan.

As with the branch network rationalisation plan, all the employees’ contract terminations are forecast to be carried out before 31 December 2011 and, accordingly, substantially all the savings from staff costs and general expenses arising from these plans will be achieved in 2012.

(iii) Technological integration plan

The technological integration plan is highly complex since, as it involves seven entities with no initial connection, it is necessary to integrate the technological platforms of six entities into the selected destination platform, i.e. Caja Madrid’s original platform.

To this end, a pressing timetable for the technological integration has been designed, which is set to conclude in the first quarter of 2012. However, it is important to note that at the end of 2012, over 90% of Bankia’s operations will already be under the single technological platform and that the primary aim of the technological integration is to ensure the operability of customer transactions, the interconnection between the platforms not yet integrated and enhanced productivity.

The technological plan is expected to deliver significant savings following the technological integration through the unification of the technological investment plans and related developments. The scalability of the common technological platform and future developments will lead to less investment in technology than the sum of the current and future plans of the seven Cajas operating independently.


Therefore, the technological integration plan envisages the development and adaptation of the recipient platform and the effective migration of the systems of the other six Cajas, whose platforms will cease to be operative. Of these, the most complex integration relates to the Bancaja platform, whose migration has been prioritised for the first half of 2012. The main milestones of the technological integration are as follows:

a) Technological integration of the operations relating to Treasury and Markets, which will be completed in the first quarter of 2011.

b) Migration and integration in the recipient platform of all the operations relating to Caja de Ávila before December 2011.

c) Complete integration in the recipient platform of all the operations relating to Bancaja forecast for before the end of the first half year of 2012.

d) Complete migration to the recipient platform of all the operations relating to Caja Rioja and Caja Insular de Canarias in the fourth quarter of 2012.

e) Lastly, migration of the platforms of Caja Segovia and Caixa Laietana, and completion of the technological integration plan in the first quarter of 2013.

(iv) Unification and rationalisation of procurement and supplier management services and processes

The centralisation and unification of the central services will enable the renegotiation of contracts, economies of scale of certain services and recurring expenses that will foreseeably lead to savings in various items of general expenses such as rentals, the provision of outside services and communications.

The global integration plan, the costs of which were recognised in provisions in the 2010 income statement and which envisages four main plans indicated above and others with less specific weight, will be completed in the first half of 2013. It is expected to lead to, as indicated above, the rationalisation of the networks, workforce and technology that will give rise to synergies estimated at over 500 million euros per year from 2012 onwards, thereby enabling Bankia to improve its operational efficiency to levels in line with industry best practices.

In addition, the unification of the businesses and commercial policies of the seven Cajas, together with the wider reach of the commercial network, will foreseeably increase the generation of revenue synergies due to the increase in the number and volume of banking and banking-related products and services offered to customers, as well as the rationalisation of prices, tariffs and bonuses. As a result of the combination of the customer care and quality and close customer ties of the seven Cajas, together with a top quality range of products and services on offer, it is foreseeable that the customer base will increase its use of the range of banking and financial services, thereby generating more fees, commissions and non-financial revenue. To this end, specific commercial plans have been launched to unlock this potential revenue between 2011 and 2013.


(v) Tax benefits arising from the integration process

Bankia’s financial statements at 31 March 2011 include tax assets and liabilities amounting to 4,200 million euros and 630 million euros, respectively. In turn, the tax assets include current and non-current deferred tax assets amounting to 3,800 million euros, and tax loss and tax credit carryforwards amounting to 400 million euros.

The tax assets relating to pre-paid taxes were generated mainly by the temporary differences arising from the exceptional write-downs recognised in 2010 and, accordingly, they represent an early recognition of impairment. It can therefore be concluded that their full recovery is reasonable as it depends entirely on the inevitable event in which the expense or income that gave rise to them is recognised or reversed. These tax assets include 900 million euros that, in order to be recovered, do not require Bankia to obtain taxable profits, because they are either current tax assets (withholdings and interim payments pending refund) or adjustments to the fixed income and equities portfolio whose reversal only depends on the recognition of the related income.

To sum up, the essential characteristic of all these assets, which has been specifically verified with the tax authorities, is their total availability for the calculation of Bankia’s income tax charge which, coupled with the long term (up to fifteen years) that the Corporation Tax Law provides for recovering tax losses, make it reasonable to consider as irrelevant any negative impact on Bankia’s capital arising from eventual impairment on these assets.

b) Technological systems

Bankia arose on the integration of seven Cajas into a single financial institution which has a single, consistent offering to its customers and is aligned with the support of the pre-existing local brands.

Against this backdrop, the Group has decided to integrate the various IT systems and operations into a single centre on the basis of the technology of the largest entity, i.e. Caja Madrid, which has the widest functionality available (over 2 million function points).

Integration plan

Caja Madrid’s IT and operating systems are being completed with the inclusion of functional and structural adjustments required to integrate the transactions and customers of the other entities, and with the addition of the best practices identified within the group to the destination platform. The Integration Plan for the computer and operating systems will be implemented in the terms described in section 6.1.1.6 (iii) above. At the date of the incorporation of Bankia, all the major decisions on the structure of the destination technological platform had been taken and, immediately after its incorporation, the Systems Department was already implementing these decisions. It is expected that in the first week of July 2011, the Caja Madrid system will become the Bankia system, since it is the same system.


Additional lines of action

In addition to the content of this master plan, the Integration Plan envisages a chosen set of priorities that continue to be implemented with a similar level of management and investment effort as that of the priority Operational Integration Plan. Specifically:

- the care and maintenance of the high level of service that the pre-existing platforms provided to its customers;

- the development of tactical sales management projects focussed on defending the Group’s market position (in both market share and margin terms), and the availability of tools designed to attract customers that could be open to new proposals in the context of the sector restructuring;

- the construction of the instruments required to immediately integrate risk management at Group level and create a consistent commercial plan prior to the global operational integration;

- the operational and technological support of initiatives that, although not affecting the critical integration path, could enable the generation of synergies and savings prior to the global operational integration;

- attention to markets that, due to their growth rate, require special attention or specific investments and in which delayed intervention could lead to imbalances or mismatches in the Group’s business position that it would find very difficult or very costly to resolve subsequently, e.g., commercial management, payment methods and mobile banking; and

- all actions that, while not affecting the critical path of the Integration Plan, could generate specific savings or unlock cost synergies.

c) Macroeconomic situation in Spain

The Spanish economic climate in 2011 is still marked by insufficient growth to create employment and the need to make further reforms. The correction needed for the imbalances that built up in the economic growth phase continues to weigh down growth. In view of the complicated digestion of the excesses that built up in the growth phase, the contractive fiscal policy and financial restrictions, economic growth in Spain in 2011 will be quite weak and insufficient to generate employment intensely. As a result, the forecasts of the International Monetary Fund, the Bank of Spain and FUNCAS point to slight full-year GDP growth of 0.8%.

The pattern of economic growth is forecast to be very similar to that of last year, with very weak domestic demand and a significant positive contribution from external demand, which will continue to help reduce financing needs from abroad.

Domestic demand is forecast to make another negative contribution to GDP growth (around -0.6pp), albeit below the 2010 figure (-1.2pp), as a result of the measures required to put the financial situation (both public and private) back on a sound footing and of tighter financial conditions.


In the case of household consumption, scant growth (+0.5%) is forecast, given the high level of indebtedness and contracting income, arising mainly from the adverse performance of the labour market, higher financial charges due to rising interest rates and the effects of inflationary pressure.

As for investment, adjustments are forecast to centre on construction (-6.7%), where the correction will be more intense in the other construction segment (civil engineering and non-residential building), which will fall by 6.8% (-6.4% in home construction), as it feels the impact of the public investment cutbacks in infrastructure. In the case of investment in capital goods, the recovery will be more modest (+1.6%), as it will be held back by deteriorating expectations, low capacity utilisation rates and financial restrictions, although the recovery in earnings could be a growth catalyst.

External demand is forecast to provide a similar positive contribution to 2010 (1.3 percentage points vs. 1.1 percentage points), on the back of export growth (+8%), driven by the recovery of trading partners, efforts to contain prices and costs and diversified external markets. Furthermore, tourism could benefit from the complicated geo-political situation and be a significant driver for the rest of the economy. Imports will perform worse (+3%), in line with stagnant domestic demand.

Quarterly GDP growth figures are not expected to be more vigorous until 2012. However, a very slow recovery is forecast, in which year-on-year GDP growth will not exceed 2% until 2013 (Source: Bankia’s Research Area). Vigorous growth sustained over the medium term requires a more competitive production capability and a reallocation of production factors to sectors in which the Spanish economy enjoys more competitive advantages. As a result, it is essential to intensify and accelerate the reforms in order to speed up the process of renewing supply and creating more favourable conditions for economic growth.

d) Consolidation of the sector

Bankia was incorporated within the framework of the restructuring process of the Spanish banking system, which mainly affects the savings bank sector. The on-going restructuring aims to adjust the size of the banking system and strengthen the entities in order to withstand the current cyclical situation and to prepare for a more severe regulatory and competitive context in the years to come.

Integration processes have become the main mechanism for approaching the restructuring. In 2010, 12 integration processes affecting 95% of the savings bank sector were defined. As a result, the number of institutions fell from 45 to 17. The concentration of the entities led to an increase in the average size of the institutions, from 29,000 million euros in assets to 76,000 million euros, together with commitments to adjust capacity by around 10%-25% at branches and to adjust the workforce by 12%-18%.

The process was supported by new regulatory instruments designed to provide help in the integration processes and in solving the crisis. The FROB bank restructuring fund, created in June 2009, aims to facilitate the integration of viable institutions and resolve those of entities experiencing most difficulties. At 2010 year-end, the FROB had granted aid amounting to 11,600 million euros, i.e. 1% of GDP. Similarly, the new savings bank law, set out in Royal Decree Law 11/2010, has made profound changes to


the savings banks’ legal regime in areas such as governance and the capacity to raise top quality capital in the capital markets.

Also worthy of note is Royal Decree Law 2/2011, which raised the capital requirements of entities in order to improve their access to financing and to reinforce confidence in the strength of the system. This regulation establishes that (i) credit institutions must have principal capital of at least 8% of their total risk-weighted assets, calculated in accordance with the provisions of Law 13/1985 of 25 May, on investment ratios, own funds and reporting obligations of financial intermediaries and of its implementing regulation (“Law 13/1985”); and (ii) credit institutions exceeding 20% wholesale financing that have not placed with third parties equity securities or voting rights of, at least, 20% or more, must have a principal capital ratio of at least 10%. Therefore, groups of entities that have contributed their business to a company whose shares are admitted to trading on the stock exchange must have a principal capital ratio of 8%. Pursuant to the above, the Bank of Spain published the needs for additional capital in order to reach the levels required by the new regulation, which amounted to around 16,000 million euros. This amount could be halved if the flotation processes are completed successfully and the private investors that were announced are actually included. In any event, the FROB is committed to subscribing the amounts of capital required at those entities that so request, either as a first or second option, in order to supplement or substitute recourse to private capital.

As the integration processes become operational and produce their benefits of scale and solvency, it is expected that the Spanish banking sector and the entities comprising it will improve their position in an environment that will be more rigorous with regard to growth and regulation in coming years.

In April 2011 (latest published data) the trend in non-performing loans in the Spanish financial services sector had risen. The savings banks’ NPL ratio rose from 6.24% in March to 6.53% in April (up 29 basis points in only one month) vs. an increase of 36 basis points in the first quarter of 2011 (from 5.88% in December 2010 to 6.24% in March). The banks experienced a similar trend in default, up from 5.45% in March to 5.56% in April (up 11 basis points), vs. a rise of only 17 basis points in the first quarter of 2011 (rising from 5.28% in December to 5.45% in March). The Issuer considers that the upward trend in non-performing loans in the Spanish financial services sector in the first month of the second quarter will continue and reach highs in the second half of the year.

In addition, the adverse trend in non-performing loans, coupled with rising market interest rates, which spreads faster to the cost of wholesale financial liabilities than to the return on the loan assets of credit institutions, will lead to a downturn in the contribution of net interest income to the Spanish financial services sector income statement in the short term.

Apart from the above, there are no known trends, uncertainties, demands, commitments, events or any circumstances other than those described in this Registration Document that are reasonably likely to have a material effect on the Bank’s prospects for the current financial year.

13. PROFIT FORECASTS OR ESTIMATES


The Bank has opted to not include any profit forecasts or estimates.

13.1. A statement setting out the principal assumptions upon which the issuer has based its forecast, or estimate

This section is not applicable.

13.2. A report prepared by independent accountants or auditors stating that in the opinion of the independent accountants or auditors the forecast or estimate has been properly compiled on the basis stated and that the basis of accounting used for the profit forecast or estimate is consistent with the accounting policies of the issuer


13.3. The profit forecast or estimate must be prepared on a basis comparable with the historical financial information


13.4. If a profit forecast in a prospectus has been published which is still outstanding, then provide a statement setting out whether or not that forecast is still correct as at the time of the registration document, and an explanation of why such forecast is no longer valid if that is the case


14. ADMINISTRATIVE, MANAGEMENT, AND SUPERVISORY BODIES AND SENIOR MANAGEMENT

14.1. Names, business addresses and functions in the issuer of the following persons, and an indication of the principal activities performed by them outside the issuer where these are significant with respect to that issuer:

a) Members of the administrative, management or supervisory bodies:

Board of Directors

The composition of the Bank's Board of Directors is shown below:


Board of directors

Name Office Type of

directorship

Mr. Rodrigo de Rato Figaredo Chairman Executive

Mr. José Luis Olivas Martínez Sole Deputy Chairman for

Holdings

Executive

Mr. Francisco Verdú Pons Chief Executive Officer Executive

Mr. José Manuel Fernández

Norniella

Board member Executive

Ms. Carmen Cavero Mestre Board member Independent

Mr. Arturo Fernández Álvarez Board member Proprietary

Mr. Alberto Ibáñez González Board member Independent

Mr. Javier López Madrid Board member Proprietary

Mr. Juan Llopart Pérez Board member Other

Ms. Araceli Mora Enguídanos Board member Independent

Mr. Jose Antonio Moral Santín Board member Proprietary

Mr. Francisco Juan Ros García Board member Other

Mr. José Manuel Serra Peris Board member Other

Mr. Atilano Soto Rábanos Board member Proprietary

Mr. Antonio Tirado Jiménez Board member Proprietary

Non-director secretary: Mr. Miguel Crespo Rodríguez

Notes: Director Mr. Francisco Juan Ros is classified as “Other outside directors” given his relationship with the Company, as explained in section 19.3 below. Proprietary Directors are non-executive Directors who have been proposed by Banco Financiero y de Ahorros, the sole shareholder of the Company. Messrs Llopart and Serra have resigned their offices as independent Directors of Banco Financiero y de Ahorros, although they have in the past held positions in subsidiary companies of Caja Madrid, and are therefore classified as Other outside directors.

The number of members of the Board of Directors of Bankia has been set at 19, although at the date this Prospectus is registered 15 members have been appointed (leaving four vacancies on the Board), of whom four are executive directors, five are proprietary directors, three are independent and three are other categories of outside directors.

The non-director secretary of the Board of Directors is Mr. Miguel Crespo Rodríguez.


There follows a brief summary of the professional careers of the members of the Board of Directors.

Mr. Rodrigo de Rato Figaredo

Chairman

Mr. Rodrigo de Rato y Figaredo. Law Degree from the Universidad Complutense de Madrid, MBA from University of California and Doctorate in Economics from the Universidad Complutense de Madrid. He has served as a Member of the Spanish Parliament and been a member of the leadership of the Partido Popular (PP) for 25 years. From 1985 to 2004 he was responsible for designing the PP's economic alternative. From 1989 to 1996 he was speaker for the PP parliamentary group. From 1996 to 2004, Rodrigo de Rato y Figaredo was Minister of the Economy and Vice President of the Government of Spain. During this stage he exercised functions of Governor for Spain on the Boards of Governors of the IMF, World Bank, Inter-American Development Bank, European Investment Bank, European Bank for Reconstruction and Development and Representative of Spain in the meeting of Finance Ministers of the Group of Seven held in connection with the Spanish Presidency of the European Union en 2002. He has also served as chairman of the European Council of Economy Ministers in the changeover to the (2002) and Managing Director of the International Monetary Fund (2004). At present he is Chairman of the Board of Directors of Banco Financiero y de Ahorros, S.A., Bankia, S.A., Caja de Ahorros y Monte de Piedad de Madrid and of Corporación Financiera Caja de Madrid, S.A., Caja Madrid Cibeles, S.A. and Garanair S.L. He is also Vice Chairman of the Board of Directors of the Spanish Confederation of Savings Banks (Confederación Española de Cajas de Ahorro), member of the Board of MAPFRE and member of the Board of Trustees of the Teatro Real de Madrid. He is a proprietary Director and Deputy Chairman of Iberia and proprietary director in International Consolidated Airlines Group (IAG) (since 2010).

Mr. José Luis Olivas Martínez

Sole Deputy Chairman for Holdings

Mr. José Luís Olivas Martínez. Law Degree from the Universidad Complutense de Madrid and Diploma in Public International Law. He has pursued his professional career as lawyer member of the Valencia and Madrid Bar Associations. He has lengthy career experience in managing the economy and public finances, having served from 1991 to 1995, as Deputy Mayor and Delegate for Finance of the Valencia municipal government. In 1995, and also in 1999, he was elected member of the Valencian regional parliament and named to head the Department of Economy and Finance for the Valencian regional government. During his term directing that department, he also presided over the Valencian Institute of Finance, the banking supervisor and regulator for the region, and was president of the Valencian Economic Research Institute and the Valencian Institute of Statistics. In 1999 he took office as First Vice President of the Generalitat Valenciana (regional government) and, in 2002, was named President of the Generalitat. During his years in public office he has been a member of the Committee of the Regions of the European Union in the areas dedicated to employment, economic policy, single market, industry and small and medium enterprises. His public and business career have been recognised by various national and international organisations


and institutions. He was honoured by the Hispanic Society of America in New York for his contribution to the development and conservation of Spanish culture and art. He also received a distinction from the Spanish Senate on the 25th Anniversary of the Spanish Constitution of 1978 and received the High Distinction of the Generalitat Valenciana for his public service. In the business world, Mr. Olivas Martínez has been a Director in Abertis Infraestructuras y Servicios, S.A., Director in Metrovacesa S.A., Board member in Encovagás, S.A. (the corporate developer of the regasification plant and combined cycle power plant in Sagunto), Deputy Chairman of Enagas S.A. At present he is a member of the Board of Trustees of the Valencia international trade fair known as Feria Muestrario Internacional de Valencia, member of the Social Council of the Universitat de València, Board member of Iberdrola S.A. and Chairman of its Consulting Board in the Valencian Community, Member of the Board of the Confederación Española de Cajas de Ahorro, President of the Federación Valenciana de Cajas de Ahorros (Valencian Federation of Savings Banks), Chairman of Bancaja, Chairman of Banco de Valencia S.A., Deputy Chairman of Banco Financiero y de Ahorros, S.A., and Executive Deputy Chairman of Bankia, S.A.

Mr. Francisco Verdú Pons

Chief Executive Officer

Mr. Francisco Verdú Pons. Degree in Economics from the Universidad de Alicante and MBA from the University of Chicago. Mr. Verdú Pons began his career in the Banco de Vizcaya-BBV Group. He participated in the integration of the entities that formed the Argentaria Group (Caja Postal, Banco Exterior, Banco de Crédito Local) and has held diverse positions in that group in Argentaria, Banco Vizcaya and Caja Postal. In 1996 he was named chief executive officer of Banca March where he also served as Vice Chairman of the Board and as Chairman of the Board's executive committee before joining the Bankia Group as CEO. He has held seats on the boards of various companies, including Banco Crédito Agrícola, Media Planning, ACS and Corporación Financiera Alba, amongst others.

Ms. Carmen Cavero Mestre

Board member

Ms. Carmen Cavero Mestre. Degree in Economics and Business Studies from the Universidad Complutense of Madrid. Member of Board of Caja Madrid Cibeles, Member of the Board of Directors and founding partner of Subastas Segre, Director in Bankia, S.A. She has served as member of the Executive Board and the Standing Committee of the Association of Collective Investment Institutions (Inverco). She has also pursued her career in the Banco Exterior de España and in the Santander Group.

Mr. Arturo Fernández Álvarez

Board member

Mr. Arturo Fernández Álvarez is member of the Boards of Directors of Bankia, S.A., Caja Madrid, Corporación Financiera Caja de Madrid, S.A., Mapfre RE Cía. de Seguros y Reaseguros (as individual representative for the directorship held by Mediación y Diagnósticos, S.A.) and Sociedad Pública Turismo Madrid, S.A.; Sole Director of


Restaurantes Hoteles Cantoblanco, S.A., Monte de Cantoblanco, S.A., Tres Cantos Instalaciones Deportivas, S.A., Arturo Cantoblanco, S.A., Broko, S.A. and Cadena Hotelera H-21, S.A. He has been a Director in Banco Financiero y de Ahorros, S.A.

Mr. José Manuel Fernández Norniella

Board member

Mr. José Manuel Fernández Norniella. Energy Techniques Engineering Degree from the Universidad Politécnica de Madrid, diploma in Foreign Trade, in Logistics and Supplies, and Project Management. Mr. José Manuel Fernández Norniella has held various management positions in the business world: from 1970 to 1979 in Electromecanique, Alfa-Laval and Blackstone; between 1979 and 1993 he holds diverse executive positions in the Brown Boveri Group (BBC) as Manager of Logistics and Supplies and, later on, in Asea Brown Boveri (ABB) as Director of General Affairs, Director of Turbochargers and General Manager of Administration. He served as Executive Vice Chairman of Aldeasa from 1998 to 2000 and Executive Chairman of Ebro Puleva from 2000 to 2005. Directorships in: RTVE, Argentaria, Endesa, Chilectra (Chile), Iansa (Chile), Campos Chilenos (Chile), Endesa Internacional and Enagás, member of the advisory Boards of Accenture and Abengoa. He was elected to a Member of the Spanish Parliament for Madrid in the 4th and 5th Legislatures, State Secretary for Trade, Tourism and SMEs, substitute representative for Spain in the World Bank, International Development Bank and European Development Bank (EBRD). Mr. Fernández Norniella has served as Chairman of the Higher Council of Chambers of Commerce of Spain (1996 - 2005) and as member of the International Chamber of Commerce. At present, he is Vice Chairman of the Board of Directors of Caja de Ahorros y Monte de Piedad de Madrid as representative of depositors, Director in Iberia since 2003 (as an other outside director), Director in Corporación Financiera Caja de Madrid, S.A., in Banco Financiero y de Ahorros S.A., in Bankia S.A., in Mapfre América, S.A. (as individual representative for the directorship held by Corporación Financiera Caja de Madrid, S.A.), in Garanair S.L., in International Consolidated Airlines Group (IAG), in Telvent, in Telesp and Honorary President of the Ebro Group. José Manuel Fernández Norniella has been distinguished with the Gran Cruz de Isabel la Católica (Spain), the Orden Bernardo O'Giggins (Republic of Chile), the Verdienstkreuz mit Stern (Federal Republic of Germany) and Order of Merit (Polish Republic).

Mr. Alberto Ibáñez González

Board member

Mr. Alberto Ibáñez González holds a Law Degree from the Universidad Complutense de Madrid and an MBA. Outside advisor of KPMG and RBS in Rangiroa Inversiones, S.L. Director in Bankia, S.A. He has been the Chairman of Citigroup for Spain and Portugal. He has also pursued his career in Salomon Brothers, Philip Brothers, Ybarrola, S.A. and Banco Ibérico. Member of the Board of Colonial.


Mr. Javier López Madrid

Board member

Mr. Javier López Madrid holds a Degree in Economics and Business Studies. He is Member of the Boards of Directors of Bankia, S.A., Caja Madrid and Corporación Financiera Caja de Madrid, S.A.; Sala Retiro, S.A. (as individual representative for the directorship held by Valoración y Control, S.A., S.A.); Chief Executive Officer of Grupo Villar Mir, S.L., Director in Obrascon Huarte Lain, S.A., Fertiberia, S.A., OHL Concesiones, S.L. and Espacio Activos Financieros (as individual representative for the directorship held by Grupo Villar Mir, S.L.); Vice Chairman of Grupo Ferroatlántica, S.L.; and Chairman of Tressis, S.V., S.A., STH Capital, S.C.R., S.A. and Financiera Siacapital, S.L., Joint Administrator of Kenmara Inversora Internacional, S.L. He has been a Director in Banco Financiero y de Ahorros, S.A.

Mr. Juan Llopart Pérez

Board member

Mr. Juan Llopart Pérez holds a Degree in Law and Economics. MBA Wharton (Philadelphia). He is a Director in Bankia, S.A. NH Hoteles, S.A., Deoleo, S.A., Grupo Zeta and Chairman of its Executive Committee. Director in Seeliger y Conde Internacional, S.L. Director in Cuarzo Producciones, S.L. Director in INDUKERN, S.A. Advisory Director in CIRSA Business Corporation, S.A. Chairman of Llopart Euroconsejo, S.L. He has held directorships and other offices in various financial institutions including Banca Jover, Banco Santander, Caixabank, Banco de Europa, Banco Herrero, Banco Mapfre, Corporación Hipotecaria Central and Banco Financiero y de Ahorros.

Ms. Araceli Mora Enguídanos

Board member

Ms. Araceli Mora Enguídanos. Full Professor at the Universidad de Valencia. Financial Economics and Accounting. Member of the Technical Committee of the European Financial Reporting Advisory Group Technical Expert Group; Board member of the European Accounting Association, President of the Advisory Committee of the Spanish National Commission for Evaluation of Research Activity, and member of the advisory board on accounting matters in the General Council of Economists of Spain. Director in Bankia, S.A. Member of the Committee on Accounting Principles and member of the Research Committee of the Spanish Association of Business Administration and Accounting.

Mr. José Antonio Moral Santín

Board member

Mr. José Antonio Moral Santín holds a Degree in Political Science and Economics from the Universidad Complutense of Madrid (UCM) and Doctorate in Political Science and Economics. Full Professor of Applied Economics at the UCM. Vice Chairman of the Board of Directors of Caja Madrid; Member of the Boards of Directors of Bankia, S.A.,


Corporación Financiera Caja de Madrid, S.A., S.A., Caja Madrid Cibeles, S.A., Mapfre, S.A., Mapfre América, S.A. (as individual representative for the directorship held by Mediación y Diagnósticos, S.A.), Ente Público Radiotelevisión Madrid and Chairman de Gestora del Centro Internacional de Estudios Económicos y Sociales, S.L. He has been a Director in Banco Financiero y de Ahorros, S.A.

Mr. Francisco Juan Ros García

Board member

Mr. Francisco Juan Ros García holds an Economics Degree from Escuela Superior de Ciencias Empresariales of Alicante, is Chief Executive Officer of Corporación Ros Casares, S.L., Chief Executive Officer of Grupo Ros Casares, S.L., Director in Thyssen Ros Casares, S.A., in Bankia, S.A., National Vice Chairman of the Asociación para el Progreso de la Dirección (APD), Levant Chairman of the APD, member of the Consultative Board for Levant in Iberdrola, member of the Valencian Business Association, member of the Chamber of Commerce, Navigation and Industry of Valencia, member of the Board of Trustees of the Endowed Chair of Business Culture at the Universidad de Valencia and member of the Prospective Committee for the Agencia Valenciana d’Avalació i Prospectiva.

Mr. José Manuel Serra Peris

Board member

Mr. José Manuel Serra Peris. State Attorney. Member of the Board of Directors of Bankia, S.A., Grupo Empresarial Ence, S.A., Iberia, L.A.E. S.A. Operadora, IB Opco Holding, S.A. (the last two as representative of Valoración y Control, S.L.). He has previously been on the Boards of Directors of Banco Financiero y de Ahorros, S.A., of Sociedad Estatal de Participaciones Industriales (State Industrial Holdings Company) — SEPI), and of de la Sociedad Estatal de Participaciones Patrimoniales (State Holdings Company — SEPPA), of Corporación Financiera Alba, S.A. and Natraceutical. He has also held seats on the Boards of Directors and on the Executive Committee of Endesa, as well as of Red Eléctrica de España, S.A. and Uralita, S.A. He has also held a Board seat and later served as Chairman of Cable y Televisión de Cataluña, S.A. (MENTA) of the Auna Group.

Mr. Atilano Soto Rábanos

Board member

Mr. Atilano Soto Rábanos. Doctorate in Philosophy from the Universidad Complutense of Madrid. Chairman of Caja de Ahorros y Monte de Piedad de Segovia, Chairman of the Fundación del Patrimonio Histórico de Castilla y León, Chief Executive Officer of Sociedad Empresarial, Cultural y Deportiva “Segovia 21, S.A.”, Director in Bankia, S.A. Full Professor of Sociology at the Universidad de Valladolid in Segovia, Honorary President of the Regional Federation of Municipalities and Provinces, Honorary President of the “Esteban Vicente” Museum of Contemporary Art and member of its Board of Trustees.


Mr. Antonio Tirado Jiménez

Board member

Mr. Antonio Tirado Jiménez. Law Degree. Member of the Board of Directors of Banco Financiero y de Ahorros, S.A., of Bankia, S.A., Vice Chairman of Bancaja, Vice Chairman of Banco de Valencia, S.A., Member of the Board of Proyecto Cultural de Castellón, S.A., Chairman of Fundación Caja Castellón. He has also served as Chairman of Bancaja and Banco de Valencia, S.A.

The business address of the board members is Paseo de la Castellana 189, Torre Bankia, 28046, Madrid.

Board Committees

In accordance with the Board Regulations, the Bank's board of directors has established the following committees with decision making capacity: an Executive Committee, to which general decision making powers have been delegated; a Board Risk Committee, to which the board delegates powers specifically relating to risks, with decision making capacity in that area, as detailed in section 16 further below.

It has also established an Audit and Compliance Committee and a Nominations and Remuneration Committee with the powers and functions also described in section 16.

As at the date of this Registration Document, the Executive Committee is composed of the following members:

Executive Committee

Name Office Type of directorship

MR. Rodrigo de Rato Figaredo Chairman Executive

Mr. José Luis Olivas Martínez Board member Executive

Mr. Francisco Verdú Pons Board member Executive

Mr. José Manuel Fernández Norniella Board member Executive

Mr. José Antonio Moral Santín Board member Proprietary



Secretary: Mr. Miguel Crespo Rodríguez


As at the date of this Registration Document, the Board's Risk Committee is composed of the following members:

Board Risk Committee


Mr. José Manuel Fernández Norniella Chairman Executive

Mr. Juan Llopart Pérez Board member Independent



As at the date of this Registration Document, the Audit and Compliance Committee is composed of the following members:

Audit and Compliance Committee


Mr. Alberto Ibáñez González Chairman Independent




As at the date this Registration Document is registered, the Nominations and Remuneration Committee is composed of:

Nominations and Remuneration Committee


Mr. José Manuel Serra Peris Chairman Other




b) Partners with unlimited liability, in the case of a limited partnership with a share capital

Not applicable, as the Company is organised as a sociedad anónima (public limited company).


c) Founders, if the issuer has been established for fewer than five years

Although the Bank was formed in 1964, the scope of Bankia's business as currently configured is the result of certain operations carried out pursuant to the Institutional Protection System whose central company is Banco Financiero y de Ahorros and into which the Cajas have been integrated as part of the preparation of this Offer. Section 5.1.5 includes a detailed description of the recent history of Bankia.

d) Any senior manager who is relevant to establishing that the issuer has the appropriate expertise and experience for the management of the issuer's business

Bankia has a Management Committee composed of the heads of the different business areas indicated below.

Therefore, the executive directors and the members of the Management Committee listed below make up the Bank's senior management, without prejudice to the positions they occupy, in some cases, on the board of directors.

Management Committee

Name Office

Mr. Miguel Crespo Rodríguez General Secretary

Mr. Ildefonso José Sánchez Barcoj General Manager of Finance and Risks

Mr. Pedro Vázquez Fernández General Manager of Resources

Mr. Aurelio Izquierdo Gómez General Business Manager

Ms. María del Pilar Trucios Caballero Deputy General Manager of Communications and Brand

Mr. Luis Maldonado García-Pertierra Manager of the Office of the Chairman, Strategy and Corporate Development

Mr. Miguel Crespo Rodríguez

General Secretary

State Attorney (on leave). Law Degree from the Universidad Complutense de Madrid . He currently holds the following positions: General Secretary and Secretary to the Board of Directors of Caja Madrid and of Banco Financiero y de Ahorros, Secretary of the Board of Directors of Corporación Financiera de Caja Madrid, S.A. and Secretary of the Board of Trustees of Fundación Caja Madrid.

Before joining the Group, he served as General Secretary and Secretary to the Board of ING Direct España. He has held directorships in companies such as Crédito y Caución S.A. and the Sociedad Estatal de Participaciones Industriales (State Industrial Holdings


Company — SEPI).

Mr. Ildefonso Sánchez Barcoj

General Manager of Finance and Risks

Degree in Economics from the Universidad Complutense de Madrid. Master in Business Administration (MBA) from the University of Houston (Texas). He currently serves as head of finance and risks for Banco Financiero y de Ahorros.

Previously, he worked in Caja Madrid in the positions of director of the Resources Unit, head of Auditing, head of Commercial Banking, and general manager of Altae Banco (Caja Madrid Group). He sits on the boards of directors of various companies as representative of the Caja Madrid Group.

Mr. Pedro Vázquez Fernández

General Manager of Resources

Degree in Economics and Business Studies from the Universidad Autóoma de Madrid. Chartered Accountant. He currently holds the office of general manager of resources in Banco Financiero y de Ahorros.

He previously worked in Bancaja as Director of Marketing and Director of Technical Resources. Before that he pursued his career in Arthur Andersen y Cía. and later on in Avidesa/Luis Suñer, S.A. as Chief Financial Officer.

Mr. Aurelio Izquierdo Gómez

General Business Manager

Degree in Economics and Business Studies, chartered accountant and member of the Register of Economists and Auditors. He currently serves as General Business Manager of Banco Financiero y de Ahorros, S.A.

Previously he worked in Bancaja in the Finance Area, with responsibility in the areas of treasury and capital markets, international banking, corporate banking, investments and corporate holdings, management control and auditing. Before joining Bancaja he worked in Banco Bilbao Vizcaya and in Arthur Andersen.

Ms. María del Pilar Trucios Caballero

Deputy General Manager of Communications and Brand

Degree in Information Sciences from the Universidad Complutense de Madrid and Executive MBA from IESE. She serves as Deputy General Manager of Communications and Brand.

She has also served as assistant editor of the daily financial newspaper Expansión and head of Expansión & Empleo and Expansionyempleo.com. She has worked as communications advisor to Infoempleo, Vaughan, Banco Lazard, M&B Capital Advisers and Vega Sicilia and collaborated with the consultancy PeopleMatters on


human resources and internal communications projects.

Mr. Luis Maldonado García-Pertierra

Manager of the Office of the Chairman, Strategy and Corporate Development

Degree in Law and in Economics and Business Studies from the Universidad Pontificia de Comillas (ICADE), State Trade Expert and Economist, and MBA from Georgetown University in Washington, DC. At present, he also serves as head of the Office of the Chairman of Banco Financiero y de Ahorros.

Before joining the Group he was director of Strategic Consulting on the Financial Sector in PricewaterhouseCoopers. He has also worked at the International Monetary Fund.

In addition to the senior managers on the Management Committee, included below for informational purposes, even though they do not fall within the definition of senior managers, are the persons who make up the second tier of managers in Bankia:

Second Tier Managers

Name Office

Mr. Jorge Dajani González Director of Investor Relations

Mr. Julio Esparza Rico Director of Services

Mr. Vicente Tos Viala Director of Systems

Mr. Fernando Sobrini Aburto Director of Retail Banking

Mr. Sebastián Ruiz Gallardo Director of Marketing

Ms. Maria Jesús de Jaen Beltrán Director of Risks

Mr. José Vicente Giner Ponce Audit Director for the Commercial Network

Mr. Gustavo Adolfo Rivero Gómez Director of Private Banking

Mr. Juan Antonio Arribas Caballero Director of Purchasing

Mr. Rafael Garcés Beramendi Director of Capital Markets

Mr. Adolfo Porcar Rodilla Director of the Legal Office

Mr. Carlos Torres García Director of Organisation and Innovation

Mr. Manuel Cobo Barroso Director of Operations and Processes

Mr. Carlos Stilianopoulos Ridruejo Financial Director


Second Tier Managers

Name Office

Mr. Juan Martín Bartolomé Pasaro Director of Recoveries and Management of Property Assets

Mr. Luis Enrique Gabarda Durán Director of Asset Management and Bancassurance

Mr. Gonzalo Alcubilla Povedano Director of Business Banking

Mr. Alfonso González-Espejo García Director of Legal Compliance

Mr. Javier María Tello Bellosillo Director of Tax Advising

In addition to the above managers, there remain to be appointed the head of the General Controller's Office, Human Resources and General Vice Secretariat, executive positions which have been taken into account in relation to the data on aggregate salary expenses in section 16 below.

Shown below are brief professional profiles of the members of that second-tier management team:

Mr. Jorge Dajani González:

Degree in Economics and Business Studies. Member of the Higher Corps of State Trade Experts and Economists and Master in Public Management Leadership from the IESE. He has served as Executive Director of Strategy and Development of the State Corporation for attraction of investments, Invest in Spain, and head of analysis and strategy in the Directorate General of the Treasury. He has been Chief Consul of the Spanish Trade Commission in Shanghai and previously worked as advisor on international affairs in the Ministry of Economy and Finance. He is now Director of Investor Relations for Bankia.

Mr. Julio Esparza Rico:

Degree in Industrial Engineering. Professor of Thermotech Engineering. Consultant in Arthur Andersen. Project Manager in Bancaja. Assistant General Manager Aseval. Chief IT Officer for Aviva Bancassurance. Adjunct in infrastructure management office of Bancaja. Courses in Chicago (Arthur Andersen), Wharton (Philadelphia), London Business School and Ceped (Fontainebleau). He is now Director of Services for Bankia.

Mr. Vicente Tos Viala:

He joined Bancaja in 1975 where he worked for three years in the commercial network. In 1978 he moved to the IT Department and held several positions there prior to being named to head that department in January 1988. Since then he has participated in various merger projects. From 1998 to 2000 he headed the project to upgrade the technology of all of Bancaja's banking platforms, implementing a new project


management model that remains in use today. On 31 December 2010 he joined Bankia as Director of Systems.

Mr. Fernando Sobrini Aburto:

Degree in Law and in Economics and Business Studies. He has performed functions of Business Manager for South Madrid, Corporate Business Manager and, previously, he was responsible for risks and large corporations in Bankinter. He is now Director of Retail Banking in Bankia, after having held that same position in Caja Madrid.

Mr. Sebastián Ruiz Gallardo:

Economist. His entire professional career has been pursued in Bancaja and, as from February 2011, in Bankia. He has experience performing diverse executive functions (Office Manager, Zone Manager, Products Manager and Marketing Manager) in Bancaja and as member of its Executive Management Committee during the last 11 years. Director in various companies (Aseval, Servired, Chairman of Cavaltour), and is now Director of Marketing in Bankia.

Ms. María Jesús de Jaén Beltrán:

Degree in Economics and Business Studies and Master in Business Administration. She began her professional career with Banco Santander, where she held different positions in the Corporate Risks management department and worked on implementing the Wholesale Global Banking model in Latin America. She later joined Caja Madrid where she performed different functions in the Business Banking Risks and Risk Acceptance area. Since February 2011 she has served as Director of Risks in Bankia.

Mr. José Vicente Giner Ponce:

His professional career began in Bancaja in 1973, in the branch network, where he remained until 1989 when named to head the Internal Control Department and then to lead the Business Area, with planning and management functions. In March 1994 he was appointed Audit Director for Bancaja and in September 2008 Director of Risks. Since Mayo 2011 he has performed, on an interim basis, functions of the office of Audit Director of the Bankia Commercial Network.

Mr. Gustavo Adolfo Rivero Gómez:

Degree in Economics, EFPA Financial Advising, and Master in Private Banking from Garrigues. He has served as General Manager of Caja Madrid Bolsa and Director of Private Banking in Banesto during 10 years. His teaching experience includes work as professor at the Garrigues Study Centre in courses for the Master's programme in Banking and Taxes. He is now Director of Private Banking in Bankia.

Mr. Juan Antonio Arribas Caballero:

With training in business administration, his career in Caja Madrid began in 1980, where he held various positions in the Commercial Network, Internal Audit and as Director of the Cash Management Department during the changeover to the single European currency. Since May 2004 he has performed the functions of Director of


Purchasing in Caja Madrid and now holds that same position in Bankia.

Mr. Rafael Garcés Beramendi:

Degree in Economics and Expert in Valuation of Companies from the I.E.A.F. He has worked in Caja Madrid as Director of Specialised Corporate Finance, in Banesto as Director of Capital Markets and, previously, in Continental Illinois as Senior Vice President, and in Banco de Vizcaya. He is now Director of Treasury and Capital Markets in Bankia.

Mr. Adolfo Porcar Rodilla:

Law Degree from the Universidad de Valencia. He was head of the KPMG office in the Valencian Community before joining the Bancaja Group, where he was head of Legal Services, as well as Director and legal advisor to various companies in the Group. Member of the Legal Committee of the Spanish Confederation of Savings Banks (CECA) and Director in several Group companies. He is now Director of Legal Services in Bankia.

Mr. Carlos Torres García:

Degree in Economics and Business Studies. Chartered Accountant and member of the Register of Economists and Auditors of Spain. He holds a Master's in Financial Management from the IE Business School. He has performed functions of Zone Director in Retail Banking and in Business Banking and headed up the Human Resources Management and Organisation Departments in Caja Madrid. He is now Director of Organisation and Innovation in Bankia.

Mr. Manuel Cobo Barroso:

Degree in Economics and Business Studies. Senior Executive Programme at IESE. Chairman of the Board of Directors of IBERPAY (Spanish payment services company); Vice Chairman of Centro de Cooperación Interbancaria; member of COAS-CECA. With Caja Madrid since 1972, he has performed functions of Business-Zone Director, Director of Management Control and General Manager. Adjunct Manager of Audit and Internal Control, Director of Services and, until 2010, Director of Operations. He is now Director of Operations and Processes in Bankia.

Mr. Carlos Stilianopoulos Ridruejo:

Degree in Economics from the University of Richmond. He has worked in Banesto, Banco Santander de Negocios, Banco Santander and Caja Madrid, always in the Treasury and Capital Markets areas. Since January 2011 he has been Financial Director in Bankia.

Mr. Juan Martín Bartolomé Pasaro:

He has held diverse positions in Caja Madrid, including Director of Risks, Director of Developers, Adjunct Director of Commercial Banking, Commercial Director in Financing Area and Madrid Business Director. He is Chairman of the Board of RESER Subastas and holds directorships in Tasamadrid, in Banco SF Caja Madrid-Mapfre and


in Capital Riesgo Madrid. He is now Director of Recoveries and Management of Property Assets in Bankia.

Mr. Luis Enrique Gabarda Durán:

Degree in Law and Business Administration from ICADE, with professional experience in Banco de Progreso, ABN, Bestinver and Banco Urquijo, having held executive positions in management of funds, stock market brokerage, treasury and capital markets. In 1998 he joined Caja Madrid as Director of Balance Sheet Management, Director of the Office of the Chairman (2001) and Director of the Property Asset Management Business (2007) and Financial Director of Cibeles (2008). He is now Director of Asset Management and Bancassurance in Bankia.

Mr. Gonzalo Alcubilla Povedano:

Degree in Economics, specialised in Quantitative Economics. His entire professional career has been spent in Caja Madrid Group, as Director of the Investment Portfolio, Director of Corporate Banking, Director of Corporate Finance, Assistant General Manager and Director of Business Banking. He is now Director of Business Banking in Bankia.

Mr. Alfonso González-Espejo García:

Law Degree. Member of the Corps of State Attorneys; Head of the State Legal Services Office in León; Manager in the Ministry of Public Administrations; General Secretary and Board Secretary of the Spanish Energy Commission (CNE); Secretary of the Board of Neo-Sky S.A.; General Secretary and Board Secretary of Group Lar SA. He is now Director of Legal Compliance in Bankia.

Mr. Javier Mª Tello Bellosillo:

He has led the Tax Advising Office of Caja Madrid since 1999, served as Assistant General Manager of Special Proceedings in the national government's Tax Agency, and is on a voluntary personal leave from the Corps of State Finance Inspectors and from the Corps of State Controllers and Auditors. He is now Director of Tax Advising in Bankia.

The business address of the above senior managers is Paseo de la Castellana, 189, Torre Bankia, 28046, Madrid.

The nature of any family relationship between any of those persons

It is hereby place on record that there is no family relationship between any of the persons referred to above.


In the case of each member of the administrative, management or supervisory bodies of the issuer and of each person mentioned in points (b) and (d) of the first subparagraph, details of that person’s relevant management expertise and experience and the following information:

a) the names of all companies and partnerships of which such person has been a member of the administrative, management or supervisory bodies or partner at any time in the previous five years, indicating whether or not the individual is still a member of the administrative, management or supervisory bodies or partner. It is not necessary to list all the subsidiaries of an issuer of which the person is also a member of the administrative, management or supervisory bodies

Listed below are the companies, other than the Bank, in which the persons mentioned in points a) and d) of this section 14.1 have been members of the administrative, management or supervisory bodies, or direct partners, at any time in the last five years, except for (i) companies that are merely family businesses or family-held holding companies; (ii) shareholdings in publicly traded companies where those holdings do not qualify as significant holdings; (iii) companies integrated in the Bank or any others that are of no significance for purposes of the Bank's activity.

Name of the director Name of the company Office or functions

Mr. Rodrigo de Rato Figaredo Banco Financiero y de Ahorros, S.A. Chairman of the Board

Caja de Ahorros y Monte de Piedad de Madrid Chairman of the Board

Corporación Financiera Caja de Madrid, S.A. Chairman of the Board

Caja Madrid Cibeles, S.A. Chairman of the Board

Garanair, S.L. Chairman of the Board

Mapfre, S.A. Director

International Consolidated Airlines Group, S.A. (IAG) Director

Confederación Española de Cajas de Ahorro (Spanish Confederation of Savings Banks)

Vice Chairman

Mr. José Luis Olivas Martínez Banco Financiero y de Ahorros, S.A. Deputy Chairman of the Board

Bancaja Chairman of the Board

Banco de Valencia, S.A. Chairman of the Board

Iberdrola, S.A. Director

Federación Valenciana de Cajas de Ahorros (Valencian Federation of Savings Banks)

Chairman

Confederación Española de Cajas de Ahorro (Spanish Board member



Confederation of Savings Banks)

ABERTIS Infraestructuras y Servicios, S.A. Director

Mr. Francisco Verdú Pons Banca March Deputy Chairman and Chairman of the Executive Committee

Banco de Crédito Agrícola Director

Media Planning Director

Actividades de Construction y Servicios, S.A. Director

Corporación Financiera Alba Director

Ms. Carmen Cavero Mestre Caja Madrid Cibeles, S.A. Director

Subastas Segre Director and founding partner

Asociación de Instituciones de Inversión Colectiva (Association of Collective Investment Schemes)

Member of the Executive Board and of the Standing Committee

Mr. Arturo Fernández Álvarez Banco Financiero y de Ahorros, S.A. Director

Caja de Ahorros y Monte de Piedad de Madrid Director

Corporación Financiera Caja de Madrid, S.A. Director

Mapfre RE Cía. de Seguros y Reaseguros Director

Sociedad Pública Turismo Madrid, S.A. Director

Restaurantes Hoteles Cantoblanco, S.A. Sole Administrator

Monte de Cantoblanco, S.A. Sole Administrator

Tres Cantos Instalaciones Deportivas, S.A. Sole Administrator

Arturo Cantoblanco, S.A. Sole Administrator

Broko, S.A. Sole Administrator

Cadena Hotelera H-21, S.A. Sole Administrator

Mr. José Manuel Fernández Norniella

Caja de Ahorros y Monte de Piedad de Madrid Vice Chairman of the Board of Directors


Banco Financiero y de Ahorros, S.A. Director



Mapfre América, S.A. Individual representative for the directorship held by Corporación Financiera Caja de Madrid, S.A.

International Consolidated Airlines Group, S.A. Director

Garanair, S.L. Director

Telvent Git, S.A. Director

Telecomunicaçoes de Sao Paulo S.A.-TELESP Director

Endesa Director

Endesa Internacional Director

Chilectra Director

IANSA Director

Enagás Director

Consejo Superior de Cámaras de Comercio de España (Higher Council of Chambers of Commerce of Spain)

Chairman

Ebro Puleva Honorary President

Mr. Alberto Ibáñez González Rangiroa Inversiones, S.L. Outside advisor to RBS and KPMG

Inmobiliaria Colonial S.A. Director

Citigroup Inc. President for Spain and Portugal

Mr. Javier López Madrid Banco Financiero y de Ahorros, S.A. Director

Caja de Ahorros y Monte de Piedad de Madrid Director


Sala Retiro, S.A. Individual representative

for the directorship held by Valoración y Control, S.A.

Grupo Villar Mir, S.L. Chief Executive Officer

Obrascon Huarte Lain, S.A. Director

Fertiberia, S.A. Director

OHL Concesiones, S.L. Director



Espacio Activos Financieros Individual representative

for the directorship held by Grupo Villar Mir, S.L.

Grupo Ferroatlántica, S.L. Deputy Chairman

Tressis, S.V., S.A. Chairman

STH Capital, S.C.R., S.A. Chairman

Financiera Siacapital, S.L. Chairman

Kenmara Inversora Internacional, S.L. Joint Administrator

Mr. Juan Llopart Pérez Banco Financiero y de Ahorros, S.A. Director

NH Hoteles, S.A. Director

Deoleo, S.A. Director

Grupo Zeta Director and Chairman of the Executive Committee

Seeliger y Conde Internacional, S.L. Director

Cuarzo Producciones, S.L. Director

INDUKERN, S.A. Director

CIRSA Business Corporation, S.A. Director

Llopart Euroconsejo, S.L. Chairman

Ms. Araceli Mora Enguídanos European Financial Reporting Advisory Group Technical Expert Group (EFRAG-TEG)

Member of the Technical Committee

European Accounting Association Director

Comisión Nacional de Evaluación de la Actividad Investigadora (National Research Activity Assessment Commission)

Chair of the Advisory Committee

Consejo General de Economistas de España (General Council of Economists of Spain)

Member of the Advisory Board

Asociación Española de Contabilidad y Administración de Empresas (Spanish Association of Business Accounting and Administration)

Member of the Research Committee

Mr. José Antonio Moral Santín

Banco Financiero y de Ahorros, S.A. Director

Caja de Ahorros y Monte de Piedad de Madrid Vice Chairman of the Board of Directors




Caja Madrid Cibeles, S.A. Director

Mapfre, S.A. Director

Mapfre América, S.A. Individual representative for the directorship held by Mediación y Diagnósticos, S.A.

Ente Público Radiotelevisión Madrid Director

Gestora del Centro Internacional de Estudios Económicos y Sociales, S.L.

Chairman

Mr. Francisco Juan Ros García

Corporación Ros Casares, S.L. Chief Executive Officer

Grupo Ros Casares, S.L. Chief Executive Officer

Thyssen Ros Casares, S.A. Director

Asociación por el Progreso de la Dirección Nacional (National Association for the Advancement of Management — APD)

Deputy Chairman

Iberdrola S.A. Member of the Consultative Committee of Levant

Valencia Chamber of Commerce, Navigation and Industry (Cámara de Comercio, Navegación e Industria)

Board member

Mr. José Manuel Serra Peris Banco Financiero y de Ahorros, S.A. Director

Grupo Empresarial Ence, S.A. Director

Iberia, L.A.E. S.A. Operadora Individual representative for the directorship held by Valoración y Control, S.L.

IB Opco Holding, S.A. Individual representative for the directorship held by Valoración y Control, S.L.

Sociedad Estatal de Participaciones Industriales (State Industrial Holdings Company)

Director

Sociedad Estatal de Participaciones Patrimoniales (State Holdings Company)

Director

Corporación Financiera Alba, S.A. Director



Natraceutical Director

Endesa Director and Chairman of the Executive Committee

Red Eléctrica de España Director

Uralita, S.A. Director

Cable y Televisión de Cataluña, S.A. Director and Chairman

Mr. Atilano Soto Rábanos Caja de Ahorros y Monte de Piedad de Segovia Chairman

Sociedad Empresarial, Cultural y Deportiva “Segovia 21, S.A.”

Chief Executive Officer

Mr. Antonio Tirado Jiménez Banco Financiero y de Ahorros, S.A. Director

Bancaja Deputy Chairman

Banco de Valencia, S.A. Deputy Chairman

Proyecto Cultural de Castellón, S.A. Director

Name of the senior manager Name of the company Office or functions

Mr. Miguel Crespo Rodríguez Crédito y Caución S.A. Director

Caja Madrid General Secretary

Banco Financiero y de Ahorros, S.A. General Secretary

Mr. Ildefonso Sánchez Barcoj Banco Financiero y de Ahorros, S.A. Chief Financial Officer

Caja de Ahorros y Monte de Piedad de Madrid Head of the Resources Unit, head of Audit and head of Commercial Banking

Altae Banco, S.A. General Manager

Mr. Pedro Vázquez Fernández Banco Financiero y de Ahorros, S.A. General Manager of Resources

Bancaja Director of Marketing and

Director of Technical Resources

Avidesa/Luis Suñer, S.A. Chief Financial Officer



Arthur Andersen LLP

Mr. Aurelio Izquierdo Gómez Banco Financiero y de Ahorros, S.A. General business manager

Bancaja Director of Finance

Banco Bilbao Vizcaya, S.A.

Arthur Andersen LLP

Ms. María del Pilar Trucios Caballero

Diario Expansión Deputy director

Infoempleo Communications advisor

Vaughan Communications advisor

Banco Lazard Communications advisor

Vega Sicilia Communications advisor

M&B Capital Advisers Communications advisor

PeopleMatters Collaborator for human resources and internal communications projects

Mr. Luis Maldonado García-Pertierra

Banco Financiero y de Ahorros S.A. Manager of the Office of the Chairman

PricewaterhouseCoopers Director of Strategic Consulting on the Financial Sector

International Monetary Fund

No senior manager of the Bank has been a member of the administrative, management or supervisory bodies, or member or partner of any company or association at any time during the preceding five years other than (i) companies that are merely family businesses or family-held holding companies; (ii) shareholdings in publicly traded companies where those holdings do not qualify as significant holdings; (iii) companies integrated in the Bank or any others that are of no significance for purposes of the Bank's activity.

b) any convictions in relation to fraudulent offences for at least the previous five years

c) details of any bankruptcies, receiverships or liquidations with which a person described in (a) and (d) of the first subparagraph who was acting in the


capacity of any of the positions set out in (a) and (d) of the first subparagraph was associated for at least the previous five years

d) details of any official public incrimination and/or sanctions of such person by statutory or regulatory authorities (including designated professional bodies) and whether such person has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer for at least the previous five years

If there is no such information to be disclosed, a statement to that effect is to be made.

In accordance with the information provided to the Bank by each director and senior manager, no director or senior manager of the Bank: (i) has had any convictions in relation to fraudulent offences for at least the last five years; (ii) is involved in bankruptcies, receiverships or liquidations of any commercial company in which he or she has acted as member of the Board of Directors or as senior manager for at least the last five years; nor (iii) has been the subject of any official public incrimination and/or sanctions by statutory or regulatory authorities or disqualified by any court for his or her actions a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or for his or her conduct of the affairs of any issuer for at least the previous five years.

14.2. Administrative, management and supervisory bodies and senior management conflicts of interest

According to the information available to the Bank, other than as disclosed in this Prospectus, no member of the Board of Directors or senior management mentioned in section 14.1 above has any conflict of interest between their duties with the Bank and their private interests of any kind.

Article 30 of the Board of Directors Regulations provides that Directors with work with loyalty to the company's interests and diligently meet their responsibilities.

In turn, article 33 of the Board Regulations governs conflicts of interest and lays down the obligation of Board members (i) to report to the board of directors any situation of conflict they may have with the Company's interests and to give immediate notice of any change in the circumstances already disclosed or the disappearance or emergence of new ones; and (ii) to abstain from attending and participating in deliberations involving matters in which the director, or a person related to the director, have a personal interest. The article defines related persons of directors in accordance with article 231 of the Spanish Capital Companies Act (Ley de Sociedades de Capital) and requires that directors disclose the direct or indirect holding which they or the persons referred to in preceding section own in the capital of any company with the same, analogous or complementary type of activity as the Company's registered corporate objects, and to likewise disclose the offices and functions they discharge in such companies.

Directors are also prohibited from carrying out professional or commercial operations with the Company unless they previously report the conflict of interest, and the board,


upon prior report from the nominations and remuneration committee, approves the operation.

In addition, the framework agreement signed between Banco Financiero y de Ahorros and Bankia, and described in section 22 below, regulates the procedure to be followed if any member of the Board of Directors of Bankia is involved in any direct or indirect conflict of interest with Banco Financiero y de Ahorros, and establishes the obligation to disclose such situation and to abstain from participating in the deliberations and decisions on the matter. The framework agreement provides that for so long as it is in force, the members of the Board of Directors of Bankia must avoid any and all direct or indirect conflict of interest with Banco Financiero y de Ahorros, and in all events disclose the existence of any such conflicts, if they prove inevitable, to the Board of Directors for the latter to decide on the matter. In the event of conflict, the Director involved must leave the meeting room and abstain from participating in the Board's deliberations and decision on the question affected by the conflict. In any event, the proprietary directors representing Banco Financiero y de Ahorros will abstain from participating in the Bankia Board of Directors deliberations and decision on matters of related party transactions and conflicts of interest, in accordance with the provisions of the agreement. In the event the same Director sits on both the Banco Financiero y de Ahorros and the Bankia boards, that Director will have the duty to abstain from all matters covered by the framework agreement.

15. REMUNERATION AND BENEFITS

15.1. The amount of remuneration paid (including any contingent or deferred compensation), and benefits in kind granted to such persons by the issuer and its subsidiaries for services in all capacities to the issuer and its subsidiaries by any person

(a) Remuneration

On 28 June 2011, the sole shareholder of Bankia approved the general parameters of the director compensation policy. Those guidelines will be developed and implemented by the Board, along with the levels of remuneration paid to the Directors and senior managers indicated below.

The amount set for 2011 is 80,000 euros per director, along with 3,000 euros as per diems payable to the members of the Board of Directors for each Board meeting.

Pursuant to the above, taking into account the annual remuneration fixed for 2011, and assuming the Board of Directors will meet an average of once per month, the estimated yearly distribution of remuneration by individual Board member in respect of their directorship will be as indicated in the accompanying table:


In euros

ESTIMATED YEARLY REMUNERATION OF DIRECTORS

Name Type of directorship Board of Dir. (*)

Mr. Rodrigo Rato y Figaredo Executive 196,000

Mr. José Luis Olivas Martínez Executive 156,000

Mr. Francisco Verdú Pons Executive 36,000

Mr. José Manuel Fernández Norniella Executive 116,000

Ms. Carmen Cavero Mestre Independent 116,000

Mr. Arturo Fernández Álvarez Proprietary 116,000

Mr. Alberto Ibáñez González Independent 116,000

Mr. Javier López Madrid Proprietary 116,000

Mr. Juan Llopart Pérez Other 116,000

Ms. Araceli Mora Enguídanos Independent 116,000

Mr. Jose Antonio Moral Santín Proprietary 116,000

MR. Francisco Juan Ros García Other 116,000

Mr. José Manuel Serra Peris Other 116,000

Mr. Atilano Soto Rábanos Proprietary 116,000

Mr. Antonio Tirado Jiménez Proprietary 116,000

TOTAL 1,780,000

(*) The remuneration indicated above may be increased by the compensation payable to each director for membership on other committees, work groups and internal bodies of the Company, as explained further below.

It has not been taken into account that some directors have not held their directorship during all of 2011; the remuneration shown is the overall annual amount for the Board of Directors.

As for the different Board committees, for 2011 the annual remunerations are as shown below:

- Members of the Executive Committee and of the Board Risk Committee will receive fixed pay of 35,000 euros;

- Members of the Audit and Compliance Committee will receive fixed pay of 30,000 euros; and

- Members of the Nominations and Remuneration Committee will receive fixed pay of 25,000 euros.


The remuneration to be received by the Chairman of the Board of Directors and the Chairs of each of the Committees will be twice the amount payable to members of the Board or of the Committee in question. Similarly, the remuneration of the Deputy Chairman of the Board of Directors will be 50% higher than the remuneration paid to members of the Board or of the Committee in question, if applicable.

Furthermore, each Director will be entitled to a complementary remuneration in an amount equivalent to 20% of the overall total to which he or she is entitled in shares of Bankia. The Nominations and Remuneration Committee will bring before the Board of Directors the relevant proposal for developing and implementing this complementary share-based compensation. In any event, the shares received from the Bank may only be disposed of three years after they are awarded; said disposability will not be conditional on continued holding of the directorship.

In addition, each Director will be entitled to receive variable pay in an amount equal to 20% of the overall total he or she receives provided the Director meets the target milestones set in relation to the integration process. The Nominations and Remuneration Committee will bring before the Board of Directors the relevant proposal for developing and implementing this variable pay and the target milestones to which it is linked.

Directors who belong to a committee or internal body of the Company will each be entitled to receive an additional 70,000 euros per year for each body to which they belong.

It is estimated that the 32 executives of the Company, including the Executive Directors and the rest of the senior managers and executives mentioned in section 14 above will receive a maximum aggregate annual remuneration of 24,191,717 euros, composed of a fixed portion of 13,497,923 euros and an aggregate variable part of a maximum of 10,693,794 euros.

Of the above amounts, the Chairman, Deputy Chairman and Chief Executive Officer will receive a maximum aggregate annual remuneration of 10,156,000 euros, composed of a fixed portion of up to 4,080,000 euros and a total variable part of a maximum of 6,076,000 euros.

(b) Provisions on internal regulations and good practices of the Company

The non-executive directors of the Company that receive any remuneration for belonging to a governing body of the financial institution which is the majority shareholder of Bankia or of the credit institutions that are shareholders of said majority shareholder, or which have an employment or senior management contract with those institutions, will not be entitled to receive any compensation for their directorship in the Company, other than reimbursement of expenses incurred.

In addition, the executive directors of the Company who receive remuneration for performing executive functions in the financial institution which is the majority shareholder of Bankia, or in the credit institutions that are shareholders of said majority shareholder, will not be entitled to receive any compensation for their executive functions in the Company, other than reimbursement of expenses incurred.


If applicable, the executive directors of the Company will not be entitled to receive simultaneous compensation in respect of per diems or periodic sums for belonging to a governing body of the financial institution which is the majority shareholder of Bankia, or of the credit institutions that are shareholders of said majority shareholder, without prejudice to what is indicated below.

The Chairman, Deputy Chairman and Chief Executive Officer will receive no compensation for belonging to Boards of Directors of the corporate holdings to which they belong for the account and in representation of the Group.

Furthermore, directors who perform executive or advisory functions other than the supervisory and collegiate decision making functions that are part of their directorship, regardless of the nature of their relationship with Bankia, will be entitled to receive the employment or professional, fixed or variable, cash or in kind remunerations which the Bankia board of directors decides are in order for discharging those functions, including participation in such incentives systems as may be generally set up for members of the Company's senior management.

The rules governing executives and directors of the Cajas will be as provided in the basic laws of Spain and of the relevant region.

Without prejudice to what is provided in the Bylaws and to what is indicated above, it is noted that Directors who are directors in both Banco Financiero y de Ahorros and in Bankia will only receive compensation for their directorship from Bankia.

(c) Compliance with laws and recommendations

As provided in the applicable legislation and in the Bylaws, the yearly report on director compensation and the annual report will disclose the individual remuneration received by each director, specifying the sums paid in respect of each compensation category. The annual report will also give individualised information, broken down by compensation category, of the remuneration in respect of the executive functions entrusted to the Company's executive directors.

As for the proposed adaption of the Unified Code for listed companies to the European Commission Recommendation 3177/2009/EC of 30 April 2009 regarding remuneration of directors of listed companies, the Company plans to adapt as needed its remuneration arrangements to that Recommendation as it is applied in Spain.

In particular, there will be strict compliance with the provisions of Royal Decree 771/2011 of 3 June 2011, which amended Royal Decree 216/2008 of 15 February 2008 on capital of financial institutions and Royal Decree 2606/1996 of 20 December 1996 on deposit guarantee funds of credit institutions, and Bankia will notify its remuneration policy to the Bank of Spain as provided by the aforesaid Royal Decree 771/2011.

As already stated, the remuneration policy of Bankia and, in particular, certain parameters of that policy, are pending specification and must comply with the terms of Royal Decree 771/2011 and, if applicable, be open to review by the Bank of Spain, so it may be subject to adjustments. In this regard, the Nominations and Remuneration Committee will adapt the proposals it brings before the Bankia Board of Directors to the applicable legislation.


15.2. The total amounts set aside or accrued by the issuer or its subsidiaries to provide pension, retirement or similar benefits

The Directors are covered by three types of insurance policies: civil liability insurance, medical insurance and complex risk insurance that combines savings and benefits in the events of death, total disability, severe or major dependence and retirement. In this regard, it was decided that the following criteria were to be taken into account:

- The upper limit of contributions per Director will be 600,000 euros.

- The term for making the savings contribution is set at 6 years at a rate of 6,000 euros per month, allowing, in relation to contributions, the extension of term of office, though the maximum aggregate contributions receivable must not exceed the limit indicated in the preceding paragraph.

- Once the maximum possible savings contribution is reached, the Bank will continue paying, so long as the Director's term of office has not ended, only the risk portion of the premium.

In addition, the Executive Directors and rest of the senior managers and managers will have a contractual right to receive benefits (essentially pension plans or savings instruments linked to retirement and similar benefits) for a total aggregate amount of 2,906,489 euros, of which 1,265,000 euros are for the Chairman, the Deputy Chairman and the Chief Executive Officer. Similarly, General Managers and similar officers will be entitled to a complex risk insurance that includes savings elements, with a contribution of 6,000 euros per month per senior manager, up to an overall maximum of 600,000 euros in contributions.

As regards the rest of the management personnel, the complex insurance may apply to them, subject to the upper limits on the monthly amount and on the total previous contributions.

16. BOARD PRACTICES

16.1. Date of expiration of the current term of office, if applicable, and the period during which the person has served in that office

Shown below are the dates of original appointment and expiration of the term of office of the members of the Board of Directors:

Name Office Date appointed Expiration

date term of office

Mr. Rodrigo de Rato Figaredo Chairman 16-06-2011 16-06-2017

Mr. José Luis Olivas Martínez Sole Deputy Chairman for

Holdings

16-06-2011 16-06-2017


Name Office Date appointed Expiration

date term of office

Mr. Francisco Verdú Pons Chief

Executive Officer

16-06-2011 16-06-2017

Ms. Carmen Cavero Mestre Board member 16-06-2011 16-06-2017

Mr. Arturo Fernández Álvarez Board member 16-06-2011 16-06-2017

MR. José Manuel Fernández Norniella Board member 16-06-2011 16-06-2017

Mr. Alberto Ibáñez González Board member 16-06-2011 16-06-2017

Mr. Javier López Madrid Board member 16-06-2011 16-06-2017

Mr. Juan Llopart Pérez Board member 16-06-2011 16-06-2017

Ms. Araceli Mora Enguídanos Board member 16-06-2011 16-06-2017

Mr. Jose Antonio Moral Santín Board member 16-06-2011 16-06-2017

Mr. Francisco Juan Ros García Board member 16-06-2011 16-06-2017

Mr. José Manuel Serra Peris Board member 16-06-2011 16-06-2017

Mr. Atilano Soto Rábanos Board member 16-06-2011 16-06-2017

Mr. Antonio Tirado Jiménez Board member 16-06-2011 16-06-2017

Mr. Miguel Crespo Rodríguez Non-director secretary

Pursuant to article 39 of the Bank's Bylaws, Board members will hold their directorships for six (6) years, and at the end of that term of office may be re-elected one or more times for the same term of office.

16.2. Information about members of the administrative, management or supervisory bodies' service contracts with the issuer or any of its subsidiaries providing for benefits upon termination of employment, or an appropriate negative statement

The members of the Management Committee mentioned in section 14 above have contracts that provide for amounts equal to two years' salary at the termination of their functions.

Irrespective of the foregoing and of what is indicated in section 15 above, there are no contracts with members of the administrative, management or supervisory bodies of the


Bank or of any of its subsidiaries providing for benefits for the said persons as a consequence of termination of their offices or functions.

16.3. Information about the issuer's audit committee and remuneration committee, including the names of committee members and a summary of the terms of reference under which the committee operates

The Bylaws and the Board of Directors Regulations of the Bank provide that the Board of Directors will set up an Executive Committee, a Risk Committee on the Board, an Audit and Compliance Committee and a Nominations and Remuneration Committee, with authority to create other committees of a purely internal nature with the powers determined by the Board of Directors itself.

There follows a description of the structure and functions assigned to each of these committees, in accordance with the provisions of the Bylaws and the Board of Directors Regulations.

16.3.1. Executive Committee

The Bylaws and the Board of Directors Regulations stipulate that an Executive Committee will be set up with a minimum of 7 and a maximum of 11 directors. At present, it is composed of seven (7) directors. The Committee will be chaired by the Chairman of the Board of Directors. The Secretary of the Board of Directors or, in default thereof, the Deputy Secretary, will act as Secretary of the Committee. The Board of Directors of the Bank, at its meeting of 16 June 2011, resolved to set up the Executive Committee.

As at the date of this Registration Document, the Executive Committee is composed of the following members:

Executive Committee


Mr. Rodrigo de Rato Figaredo Chairman Executive

Mr. José Luis Olivas Martínez Board member Executive

Mr. Francisco Verdú Pons Board member Executive

Mr. José Manuel Fernández Norniella Board member Executive




Secretary Mr. Miguel Crespo Rodríguez


The Executive Committee will deal with all matters within the powers of the Board which, in the opinion of the Committee itself, need to be resolved without delay, with the sole exception of those matters that the law, the Bylaws or the Board of Directors Regulations stipulate cannot be delegated.

The basic functions of the Executive Committee are indicated below:

a) General management and executive functions:

(i) Bring before the Board of Directors the short and long-term policies, objectives and programmes of the Bank and of the Group.

(ii) Submit to the Board of Directors proposed actions relating to security and image, resolving on the actions entrusted to it on these matters.

(iii) Insofar as legally admissible, adopt resolutions that would normally fall to the Board of Directors where needed due to reasons of urgency. Without prejudice to their validity, those resolutions must be reported to the Board of Directors at its next closest meeting, as applicable and as soon as possible, without prejudice to the decisions subsequently adopted by the Board.

(iv) Resolve to rectify, complement or correct all types of resolutions regarding ordinary operating matters, including those adopted by the Board of Directors, provided that this is necessary for carrying out the operation in question and does not involve a substantial variation to what was agreed by the Board and that the Board of Directors is given a full accounting thereof.

(v) Authorise the making of all types of legally admissible contracts that are necessary and convenient for the operation, development and defence of the interests of the Banco and of the Group; reach settlements; and commit to arbitration at law or in equity, resolving to agree to all such covenants and conditions as it deems fit, and the exercise of the relevant procedural actions.

(vi) Extend authorisation for executing the resolutions to the Chairman, to any director, to the general managers, to the General Secretary and to any other employee of the Bank or unrelated persons, on a joint or individual basis, by simple certification of its resolutions or by granting notarised powers of attorney.

(vii) Whenever it deems appropriate, decide at its discretion not to resolve on a matter or operation, even if within its competence, resolving to call an extraordinary urgent meeting of the Board of Directors to submit proposals and reports to it without any limitation.

(viii) The incorporation of any new subsidiary, regardless of the legal form it adopts, the acquisition of shares in listed or unlisted companies, disinvestments in such companies, and acquisitions and disposals of businesses, provided in all events that less than 3% of the Group's eligible capital is involved.


(ix) The creation of special purpose entities and companies domiciled in countries or territories considered tax havens, as well as the acquisition of interests that imply individual or joint control.

(x) Submission to the Board of Directors of the corporate governance and corporate social responsibility policies.

(xi) Submission to the Board of Directors of the policy for management of own shares held as treasury stock.

(xii) Submission to the Board of Directors of the proposed policy for disclosure to and communication with shareholders.

(xiii) Submission to the Board of Directors of the proposal for approval of the annual corporate governance report.

(xiv) Submission to the Board of Directors of the proposal for approval of the periodic financial information that the Bank must make public.

(xv) Disclosure to the markets of significant information, especially in relation to the ownership structure, amendments to the rules of governance, to related party transactions of particular importance or to treasury stock.

(xvi) Submission to the Board of Directors of the proposal to amend the internal rules and regulations governing the functioning of the Board of Directors, upon prior report from the Audit and Compliance Committee.

(xvii) Submission to the Board of Directors of any other proposal for approval of reports and development of functions not contemplated in the foregoing subparagraphs and which the applicable regulations stipulate are required of the Board.

(xviii) Determination of the content of the Bank's website.

(xix) Assessment of the performance of the board committees.

b) General functions of organisation and control:

(i) Submit to the Board of Directors proposals on the principles that are to inform the Bank and Group's structure and the measures for implementing common policies.

(ii) Comply with and enforce the provisions of the Bylaws, Regulations and resolutions of the Board of Directors, as well as the provisions of the Integration Agreement.

(iii) Arrange, without prejudice to exercise by other company bodies of powers delegated for such purpose, for inspections of all services of the Bank and of the Group and require that any deficiencies detected are remedied.

(iv) Monitoring of the performance and development of the Integration Agreement.


c) Powers on risk matters:

(i) The Executive Committee may adopt the relevant decisions within the scope of the powers delegated by the Board of Directors on risk matters specifically provided for in the Board of Directors delegation resolution in force from time to time.

(ii) In relation to credit risk, the structure for approving risks, and the risks which by reason of their amount are reserved for the Executive Committee itself, will be determined by the risk segments in effect from time to time as well as by the risk levels classified according to their credit rating or scoring based on the models certified by the supervisory authority.

(iii) The Executive Committee may approve, pursuant to the powers delegated by the Board of Directors, operations where the cumulative risks of the borrower or, as applicable, of the borrower's group, is greater than 100 million euros for the worst rating level, and up to 250 million euros, above which the decision will rest with the Board of Directors. Irrespective of the above limit, the Executive Committee will not study operations in amounts of 10 million euros or less. The amounts of cumulative risk and amount per operation apply to all segments including exclusive segments. Nor will the Executive Committee be responsible for those singular groups which the Board of Directors determines must be resolved on by the Board itself.

The determination of risks by amounts will be estimated by aggregating the risks of the applicant and, if applicable, of the applicant's group of undertakings, according to the criteria established in the risk management powers approved by the Board of Directors. Those powers will incorporate criteria of segmentation, risk level, and the models that are approved as the IT platforms are adapted, with those platforms being adapted in the transitional period to easy-to-implement rules.

The Executive Committee will report to the Board of Directors, at its first meeting following the Committee meetings, on the matters dealt with and the decisions adopted by the Committee.

The Executive Committee will meet whenever called by its Chairman, at his own initiative or at that the request of any four (4) of its members. The resolutions of the Executive Committee will be approved by a majority of the Board members on the Committee who are present or represented at the meeting. In the event of deadlock, the Chairman will have the casting vote.

16.3.2. Board Risk Committee

On 16 June 2011, pursuant to article 48 of the Bylaws and article 17 of the Board of Directors Regulations of the Bank, a Risk Committee was set up within the Board.

The Board Risk Committee, which is an executive committee and, therefore, has powers to adopt decisions within the scope of the powers delegated to it, is responsible for establishing and overseeing compliance with the Bank's risk control mechanisms. Consequently, it will be the body charged with approving the most significant


operations and approving the overall limits for lower-ranking bodies to approve the other operations, all subject to the supervisory powers that legally rest with the audit and compliance committee.

The Board Risk Committee will be composed of a minimum of three and a maximum of seven directors. It will be chaired by a Director appointed by the Bank's Board of Directors.

As at the date of this Registration Document, the Board's Risk Committee is composed of the following members:

Board Risk Committee


Mr. José Manuel Fernández Norniella Chairman Executive




The Board Risk Committee, as body responsible for overall management of risks, will assess the reputational risk within the scope of its actions and decisions.

The basic functions of the Board Risk Committee are to:

(i) Present the risk policies to the Board of Directors.

(ii) Propose the Bank and Group's risk control and management policies to the Board of Directors through the Internal Capital Assessment Report (IAC), which will specifically identify:

(a) The different types of risk faced by the Bank and the Group.

(b) The internal control and information systems for risk control and management in the Bank and Group.

(c) The levels of risk that can be taken on by the Bank.

(d) The corrective measures to limit the impact of the risks that have been identified if they should materialise.

(iii) Submit to the Board of Directors proposals for:

- Approval of the policies on acceptance, management, control and mitigation of the risks to which the Bank is or may be exposed, including those stemming from the macroeconomic environment in relation to the state of the economic cycle.


- Approval of general internal control strategies and procedures, on which it will receive periodic reports.

- Periodic reports on the results of the examination and control functions carried out by the Bank's units.

(iv) Within the framework of the risk policies approved by the Board of Directors, set the level of risk which the Bank regards as acceptable from time to time and safeguard the credit quality of the risk portfolio, in a manner compatible with the agility and flexibility required in a competitive market.

(v) Carry on periodic monitoring of the loan portfolio of the Bank and Group, with the aim of ensuring that the risk assumed is consistent with the stipulated risk profile, paying particular attention to the Bank and Group's main customers and to the distribution of risks by economic sector, geographical area and type of risk.

(vi) Run periodic checks of the systems, processes, valuation methodologies and criteria for approving operations.

(vii) Evaluate, follow and implement the instructions and recommendations of supervisory entities in the exercise of its functions and, if applicable, submit to the Board of Directors the actions to be carried out, without prejudice to following the instructions received.

(viii) Determine the Bank's risk reporting processes.

(ix) Inform the Board of Directors and the Executive Committee on those operations which may entail risks for the capital adequacy, recurrence of results, operations or reputation of the Bank.

(x) Delegate powers for assuming risks to other lower-ranking or executive bodies of the Bank.

(xi) In relation to credit risk, the structure for approving risks, and the risks which by reason of their amount are reserved for the Board Risk Committee itself, will be determined by the risk segments in effect from time to time as well as by the risk levels classified according to their credit rating or scoring based on the models certified by the supervisory authority.

(xii) Define, within the scope of its powers, the overall pre-classification limits for customers or groups of customers in relation to exposures by risk category.

(xiii) Know and, if appropriate, authorise the operations delegated to it from time to time in relation to the issuance of financial instruments.

(xiv) The Board Risk Committee may approve, in accordance with the powers delegated by the Board of Directors, operations where the cumulative risk of the borrower or, if applicable, of the borrower's group, is over 50 million euros for the worst credit rating up to the amount delegated to the Executive Committee. Irrespective of this limit, the Board Risk Committee will not consider operations


involving 6 million euros or less. The amounts of cumulative risk and amount per operation apply to all segments including exclusive segments.

The determination of risks by amounts will be estimated by aggregating the risks of the applicant and, if applicable, of the applicant's group of undertakings, according to the criteria established in the risk management powers approved by Board of Directors. Those powers will incorporate criteria of segmentation, risk level, and the models that are approved as the IT platforms are adapted, with those platforms being adapted in the transitional period to easy-to-implement rules.

(xxi) In relation to the approval of risks not classified as credit risk, the powers of the Board Risk Committee will be those delegated by the Board of Directors from time to time.

16.3.3. Audit and Compliance Committee

On 16 June 2011, pursuant to article 46 of the Bylaws and article 15 of the Board of Directors Regulations of the Bank, an Audit and Compliance Committee was set up within the Board, governed by the following rules:

i) The Audit and Compliance Committee will be composed of a minimum of three (3) and maximum of seven (7) directors, a majority of whom must be outside or non-executive directors. The Committee members will be named by the Board of Directors taking into account their expertise, skills and experience in accounting, auditing and risk management.

ii) The Chairman of the Audit and Compliance Committee will be an independent director, and must be replaced every four years, with the possibility of being re-elected once a year has passed after the expiry of his or her term.

iii) The Committee Secretary will be appointed from amongst its members.

iv) The members of the Audit and Compliance Committee and, most especially, the Chairman, will be appointed taking into account their expertise and experience in accounting, auditing or risk management.

As at the date of this Registration Document, the Audit and Compliance Committee is composed of the following members:

Audit and Compliance Committee


Mr. Alberto Ibáñez González Chairman Independent





Without prejudice to any other tasks that may be assigned from time to time by the Board of Directors, the Audit and Compliance Committee will exercise the following basic functions:

(i) Reporting, through its Chairman and/or Secretary, to the General Shareholders' Meeting on the questions raised there by the shareholders on matters within the Committee's competence.

(ii) Supervising the effectiveness of the Bank's internal control, the internal audit, if applicable, and the risk management systems, as well as discussing with the statutory auditors or audit firms the significant weaknesses detected in the internal control system during the audit. In particular, in relation to the internal control and reporting systems:

• check the adequacy and integrity of the internal control systems and review the appointment and replacement of the persons in charge of those systems;

• know and supervise the process of preparing and the completeness of the financial information on the Bank and, where applicable, on the Group, reviewing compliance with regulatory requirements and proper application of accounting criteria;

• periodically review the risk management and internal control systems, so that the main risks are identified, managed and adequately known;

• safeguard the independence and effectiveness of the internal audit and legal compliance functions; selection, appointment and removal of the head of internal audit functions; review the annual work plan; propose the budget for these services; receive periodic financial information on these activities; and verify that the conclusions and recommendations of its reports are taken into account by the top management In particular, the internal audit services will comply with the reporting requests received from the audit and compliance committee in the exercise of its functions; and

• establish and supervise a mechanism that allows employees to confidentially report the irregularities of potential importance, especially financial and accounting ones, that they detect inside the Bank.

(iii) Supervising the process of preparing and presenting the regulated financial information, and in particular:

• review the Bank's accounts, oversee compliance with legal requirements and proper application of generally accepted accounting principles, as well as reporting on the proposals suggested by the management for modification of accounting principles and policies; and

• review the issue prospectus and periodic financial information which must be provided by the board to the markets and the market supervisors.


(iv) Proposing to the Board of Directors for submission to the shareholders in General Meeting, the appointment of the statutory auditors. The Committee shall bring proposals for selection, appointment, re-election and replacement of the said auditors, and the terms of their contract, before the Board.

(v) Making the appropriate arrangements with the statutory auditors to receive information on issues that may jeopardise their independence for examination by the committee, and any other questions relating to the carrying on of the audit, as well as other communications provided for in the laws governing auditors and audit standards. In particular, to:

• channel communications between the Board of Directors and the auditors, assessing the results of each audit and the responses of the management team to the auditors' recommendations and mediating in any disagreements which may arise between the managers and auditors in relation to the principles and criteria to be applied in preparing the financial statements;

• receive information on a regular basis from the external auditor on the audit plan and results of its execution, and check that the senior management takes their auditor's recommendations into account;

• supervise compliance with the audit contract, procuring that the opinion on the annual financial statements and main contents of the audit report are drafted clearly and precisely;

• ensure the outside auditor's independence and to that end:

maintain relations with the statutory auditor to receive information on issues that may jeopardise his independence, and any other questions relating to the carrying on of the audit, as well as maintaining with the statutory auditor those other communications provided for in the laws governing auditors and audit standards;

ensure that the Bank and the auditor respect the prevailing rules on the provision of non-audit services, the limits on concentration of the auditor's business and, in general, the rest of the rules for guarantee the independence of auditors; and

examine the circumstances that motivated the auditor's resignation, where such is the case.

In any event, written confirmation must be received every year from the statutory auditors of their independence from the entity and from any directly or indirectly related entities, as well as information on the additional services of any type provided to those entities by the said auditors, or by persons or entities related to the auditors according to the provisions of the Spanish Account Audit Law 19/1988 of 12 July 1988.

(vi) Before the audit report is issued, producing a yearly report giving an opinion on the independence of the statutory auditors or audit firms. This report must in all


events make a pronouncement on the provision of the additional services referred to in the preceding paragraph.

(vii) Examining the compliance with the Board of Directors Regulations, with the anti-money laundering manuals and procedures and, in general, with the governance and compliance rules of the Bank, and making the necessary proposals for improvement. In particular, the Audit and Compliance Committee is responsible for receiving information and, if applicable, issuing a report on disciplinary measures for members of the Board of Directors or senior management of the Bank.

(viii) Supervising compliance with the Bank's Rules of Conduct for Securities Market Activities, with the anti-money laundering manuals and procedures and, in general, with the governance and compliance rules of the Bank, and making the necessary proposals for improvement. In particular, the Committee is responsible for receiving information and, if applicable, issuing a report on disciplinary measures for members of senior management.

In addition, the Audit and Compliance Committee will report to the Board of Directors, before the Board adopts the pertinent decisions, on related party transactions, unless this prior reporting function has been attributed to other supervisory and control committees.

The Audit and Compliance Committee will be quorate when half or more of its members are present or represented. Its resolutions will be adopted by a majority of the members present or represented at the meeting, and, in the event of a deadlocked vote, the Chairman will have the casting vote.

The Audit and Compliance Committee will meet whenever called by decision of the committee itself or of its Chairman and, at least, four times per year. Any member of the management team or employee of the Bank asked to attend the meeting will be obliged to do so and provide their cooperation and access to the information at their disposal. The statutory auditor may also be required to attend. One of these meetings must necessarily be dedicated to assessing the effectiveness of and compliance with the Bank's governance rules and procedures and to preparing the information which the board must approve and include in the annual public documents.

In order to best perform its functions, the Audit and Compliance Committee may request the advice of outside professionals on matters that fall within the Committee competence.

16.3.4. Nominations and Remuneration Committee

On 16 June 2011, pursuant to article 47 of the Bylaws and article 16 of the Board of Directors Regulations, a Nominations and Remuneration Committee was set up within the Board, governed by the following rules:

(i) The Nominations and Remuneration Committee will be composed of a minimum of three (3) and maximum of seven (7) outside or non-executive directors named by the Board of Directors. The members of the Nominations and Remuneration Committee will be appointed taking into account their


expertise, skills and experience, as well as the functions charged to the Committee.

(ii) The Nominations and Remuneration Committee will be chaired by an outside Director named by the Board of Directors. The Committee Chairman will be replaced every four years, and may be re-elected one or more times for terms of the same duration.

(iii) The Nominations and Remuneration Committee will have a Secretary and, optionally, a Deputy Secretary, who need not hold directorships and need not be the same persons as the Secretary and Deputy Secretary of the Board of Directors, respectively.

In relation to the composition of the Remuneration Committee, Bankia has adapted its Bylaws to comply with the provisions of Royal Decree 771/2011 of 3 June 2011, which amended Royal Decree 216/2008 of 15 February 2008 on capital and reserves of financial institutions and Royal Decree 2606/1996 of 20 December 1996 on deposit guarantee funds of credit institutions, by providing that the Nominations and Remuneration Committee will be composed solely of outside or non-executive directors.

As at the date this Registration Document is registered, the Nominations and Remuneration Committee is composed of:

Nominations and Remuneration Committee


Mr. José Manuel Serra Peris Chairman Other




Without prejudice to other functions that may be assigned to it by the Board of Directors, the Nominations and Remuneration Committee has the following basic responsibilities:

(i) bring before the Board of Directors nominations of independent directors for their appointment by cooption or, if applicable, for submission to the decision of the shareholders in General Meeting, as well as proposals for their re-election or removal by the General Meeting;

(ii) issue a non-binding report on the Board of Directors' nominations of the rest of the directors for their appointment by cooption or, if applicable, for submission to the decision of the shareholders in General Meeting, as well as proposals for their re-election or removal by the General Meeting;


(iii) issue a non-binding report on resolutions proposed to the Board by the Chairman regarding the appointment or removal of the Bank's senior managers;

(iv) propose to the Board of Directors:

(a) the compensation policy for directors and senior managers;

(b) the individual compensation of executive directors and the other terms and conditions of their contracts; and

(c) the basic terms and conditions of the contracts of senior managers.

(v) periodically review the remuneration programmes, weighing their adequacy and performance;

(vi) ensure the transparency of the remuneration system and that the annual report on director remuneration and the annual corporate governance report contain information on director compensation and, toward this end, submit all relevant information to the board in this respect;

(vii) oversee compliance with the remuneration policy established by the Bank; and

(viii) safeguard the independence, impartiality and professionalism of the Secretary and Deputy Secretary of the Board of Directors, report on their nomination and removal for approval by the board in plenum.

The Nominations and Remuneration Committee will be quorate when half plus one or more of its members are present or represented. Its resolutions will be adopted by a majority of the members present or represented at the meeting, and, in the event of a deadlocked vote, the Chairman will have the casting vote.

The Nominations and Remuneration Committee will normally meet on a quarterly basis. It will also meet when called by the Board or its Chairman, who will be obliged to call the meeting whenever the Board or its Chairman request that a report be issued or that proposals be adopted.

For the best performance of its functions, the Nominations and Remuneration Committee may engage outside experts for advice when it deems necessary for discharging its functions.


16.4. Statement as to whether or not the issuer complies with its country’s of incorporation corporate governance regime(s). In the event that the issuer does not comply with such a regime, a statement to that effect must be included together with an explanation regarding why the issuer does not comply with such regime.

Bankia believes it is largely compliant with the Unified Code of Good Governance of Publicly Traded Companies approved on 19 May 2006 by the Special Working Group appointed by the government to advise the CNMV on harmonising and updating the recommendations for good governance of listed companies (hereinafter, the “Unified Code of Good Governance”), with the following particularities:

• In relation to Recommendation 8, the Bank's internal rules do not expressly include the list of competences set out in that Recommendation that can only be approved by the Board of Directors in full. Nevertheless, according to the Bank's internal rules the Board of Directors is the highest decision making body in the Company (without prejudice to the powers of the shareholders in General Meeting) and has the general supervisory function. It deals with all matters of importance for the Company, including most of the competences set out in Recommendation 8.

• With respect to Recommendation 13, the Bank's internal rules do not expressly provide that one third of the Board of Directors must be independent Directors, although they do set this as an objective. Though the independent Directors do not reach the one-third recommended by the Unified Code of Good Governance, they do represent 20% of the total Board (3 independents out of a total of 15 directors).

• With respect to Recommendation 17, the Bank's internal rules do not expressly contemplate the possibility that an independent director can request the calling of a Board of Directors meeting (which may nevertheless be called at the request of four directors) or the inclusion of new points on the meeting agenda, or that an independent director may coordinate and give voice to the concerns of outside directors and lead the board’s evaluation of the Chairman.

• In relation to Recommendation 36, Bankia does not limit remuneration via delivery of shares to its executive directors, although inasmuch as this type of compensation has not yet been implemented the possibility exists of making delivery of shares conditional on the shares being held until the Director leaves the directorship, in which case this Recommendation would not be applicable.

• In relation to Recommendation 42, and taking into account the practices and management conducted by the Bank, it has been considered appropriate not to initially include independent directors on the Executive Committee. Nevertheless, it bears emphasis that the Board of Directors will be informed in full detail of all actions carried out by the Executive Committee. The Company will review this situation in the future and, based on the experience with this arrangement and of other companies in the sector, it will study the advisability of increasing the number of independents on both the Board and the Executive Committee.


• In relation to Recommendation 44, the Bank's internal rules do not expressly provide that the Audit and Compliance Committee will be composed solely of outside directors, although it does stipulate that a majority of the Committee will be outside directors. In any event, in practice the Company complies with the recommendation. Uniquely, as initially configured, all members of the Audit and Compliance Committee are not only outside directors, but independent outside directors as well. Furthermore, with regard to Recommendation 44.c), the Bank's internal rules do not expressly provide that the Chairman of the Nominations and Remuneration Committee be an independent director.

According to article 51 of the Bylaws, the Board of Directors will draw up an Annual Corporate Governance Report which will be subject to deliberation and approval simultaneous to the annual financial statements for each year, with the content and structure established by the laws in force from time to time.

Also, article 52 of the Bylaws provides that the Bank will have a website (www.bankia.com) through which there will be disclosed to shareholders, investors and the market in general all significant or material developments in relation to the Bank. The content and structure of the Bank's website will conform to the legal provisions and other rules on these matters in effect from time to time.

In June 2010 the CNMV released the Guide with Recommendations on matters of internal control of financial information to be published by listed companies, including a set of recommendations and good practices and identifying the reference indicators to be used by publicly traded companies for reporting on their financial reporting internal control system (SCIIF, from the Spanish "Sistema de Control Interno sobre Información Financiera").

Even though the obligation to disclose the characteristics of the internal risk management and control systems does not apply until the publication in 2012 of the Annual Corporate Governance Report for 2011, there follows a brief description of the Company's SCIIF in accordance with section III of the Guide with Recommendations on matters of internal control of financial reporting. It should be noted that because the Guide is recent, many of the procedures set out there are currently being developed and implemented in the Bankia Group:

1) What bodies are responsible for the existence and maintenance of an adequate and effective SCIIF, its implementation and supervision.

Ultimate responsibility for the existence and maintenance of an adequate and effective SCIIF rests with the Board of Directors, and supervision of the SCIIF is delegated to the Audit and compliance Committee. The senior management, through the Department of Finance and Risk, is charged with its design and implementation, and the Audit Department with supervising the effectiveness of the relevant controls.


2) What departments are responsible for designing and reviewing the organisational structure; (ii) for defining the lines of responsibility and authority; and (iii) for the procedures for their proper dissemination throughout the entity, especially as regards the process of preparing the financial information.

Within the scope of the SCIIF, the Department of Finance and Risks defines the lines of responsibility and authority, the procedures for preparing the financial information, and the organisational structure that supports it.

3) Elements of the process of preparing financial information (i) Code of conduct, bodies charged with approval and with analysing non-compliances and proposing penalties; (ii) Channel for reporting financial and accounting irregularities; and (iii) Programme for basic and periodic continuing training of personnel involved in preparing the reviewing financial information.

Article 14 of the Board Regulations, in relation to the internal control and reporting systems, attributes to the Audit and Compliance Committee the responsibility for establishing and supervising a mechanism that allows employees to confidentially report any potentially significant irregularities, especially of a financial and accounting nature, that they detect inside the Company.

In this regard, a Reporting Channel has been set up in which the Legal Compliance and Audit Departments assume specific functions in the establishment of a procedure for using the channel to process and manage such reports and in the analysis and resolution of the irregularities, respectively.

The establishment of this communication mechanism (Reporting Channel) implies the implementation, inter alia, of the Code of Ethics or Conduct and of the Regulation on the Channel for Reporting Irregularities.

At present, the establishment of the Channel has been approved and is pending implementation. Its principal characteristics are:

- It is a confidential channel intended for employees and directors of the Entity and managed by the Legal Compliance Committee, which delegates certain functions regarding these matters to the Legal Compliance Department and to the Internal Audit Department.

- It includes a procedure for using the Channel and a process for managing the reports.

- The Channel's existence and the procedure for using it will be communicated to all employees, and periodic reports will be prepared on its functioning.


There are basic training and continued training programmes for personnel involved in the SCIIF and its supervision, covering aspects such as accounting standards, auditing, internal control, risk management, etc. By way of example, for staff involved in the SCIIF and its supervision, the following training programmes or initiatives may be mentioned:

- On accounting and audit matters: New accounting standards, Bank of Spain Circular 4/2004, New standards for formulating accounts, etc.

- On internal control matters: internal control, commercial programming and control, good corporate governance, etc.

- On risk management matters: Methodology for measuring and controlling operational, credit and market risks; Basel II, managing liquidity risk, etc.

4) Principal characteristics of the process of identifying risks and the governance body that supervises the process, including the risk of error or fraud.

The Board Risk Committee will be responsible for establishing and overseeing compliance with the entity's risk control mechanism and will, naturally, be the body charged with approving the most significant operations and setting the overall limits subject to which the lower-ranking bodies can approve the rest.

This Committee is already functioning and meets at least every fortnight, and may meet more often if the business so requires.

The Audit and Compliance Committee is responsible, amongst other functions, for supervising the effectiveness of the Bank's internal control, the internal audit and the risk management systems, as well as discussing with the statutory auditors or audit firms the significant weaknesses detected in the internal control system during the audit.

In particular, in relation to the internal control and reporting systems:

- check the adequacy and integrity of the internal control systems and review the appointment and replacement of the persons in charge of those systems;

- know and supervise the process of preparing and the completeness of the financial information, reviewing compliance with regulatory requirements and proper application of accounting criteria;

- periodically review the risk management and internal control systems, so that the main risks are identified, managed and adequately known;

- safeguard the independence and effectiveness of the internal audit and legal compliance functions; selection, appointment and removal of the head of internal audit functions; review the annual work plan, proposing the budget for these services; receive periodic financial information on these activities; and verify that the conclusions and recommendations of its reports are taken into account by the top management.


- establish and supervise a mechanism that allows employees to confidentially report potentially significant irregularities, especially financial and accounting ones.

There is a process for identifying risks that takes into account, inter alia, the technological, financial, legal and operational risks, the latter being the ones with which errors are associated.

The primary controls implemented by the managing units are aimed, amongst other purposes, at detecting possible errors.

The internal control system is subject to periodic review by the Audit unit, which will make the weaknesses detected known so they can be remedied.

In relation to fraud, there are a series of remote audit controls and alerts that act on the applications supporting the entity's operations. In addition, in connection with the entry into force of the Reform of the Criminal Code, work is under way on a Criminal Risk Prevention Model for Bankia in which those said controls and alerts are also identified.

5) Documentation and controls of transactions that may have a material effect on the financial statements, including the accounting closing procedure and specific review of the significant judgments, estimates, valuations and projections.

Within the framework of the specific control activities whose implementation is stipulated with the objective of mitigating the risks arising from possible errors, inaccuracies or irregularities in the financial information, Bankia has a Manual of Accounting Policies and a Manual of Accounting Procedures, which are continually being developed and updated, together with the review processes established by the Department of Finance and Risks. The manual duly identifies the following:

First, the critical areas directly or indirectly involved in the process of preparing Bankia's financial information; these include the procedures for checking and confirming the estimates made that can have a significant impact on the financial information, as well as the critical procedures relating to the accounting closing before that information is obtained (all subject to the materiality thresholds defined for the key financial fundamentals of the Group's financial statements, having regard to both quantitative and qualitative aspects).

Second, the control activities established for mitigating risks associated with the aforementioned critical areas and which involve, inter alia, the establishment of:

o Internal control policies designed for the existing information systems existing, which cover aspects such as system security, separation of functions, integrity and updating of the information, resolution of conflicts of interest, specific training, etc.

o Persons with specific responsibility for certain processes identified as essential and for carrying on the stipulated relevant monitoring.


o Reviews of the financial information performed, ultimately, by a different department than the ones that normally participate in generating and preparing the financial information in question, within the Department of Finance and Risks.

In addition, the Group has the review carried out by the outside auditor and by Internal Audit.

6) Internal control policies and procedures for the information systems that support the preparation and publication of the financial information.

The Department of Finance and Risks draws up the specifications of the policies and procedures for the information systems that support the preparation and publication of the financial information.

Those systems are submitted to the IT security standards in place for the organisation's information systems.

Bankia's Directorate General of Resources is responsible for the Bank's information and telecommunications systems. Its functions including defining and monitoring the security policies and standards for applications and infrastructure, including the internal control model in the IT area.

The key tasks assigned to that Directorate General in relation to information systems are:

- Access to hardware security systems and data.

- Access to software security systems and data.

- Management of backup copies.

- Management of scheduled tasks.

- Management of incidents.

7) Policies and procedures for internal control of the management of outsourced activities, as well as of the evaluation, calculation or valuation tasks commissioned to independent experts and which may have a material effect on the financial statements.

When Bankia uses the services of an independent expert it obtains assurances of the technical and legal competence and capacity of the professional. Bankia has internal control procedures in place to check the reasonableness of the conclusions reached in the reports such experts issue.

There is an internal procurement procedure for purchases and suppliers (including outside advisors), along with a system of authorities and delegations which requires certain levels of approval depending on the type of service and amounts involved, with the Board of Directors as the highest level.


At present, no essential functions are outsourced; although there are certain projects or tasks which are subcontracted, their oversight and supervision remain inside the organisation.

8) Procedure for review and authorisation of the financial information and description of the SCIIF to be published.

Bankia will release financial information to the market with the frequency determined by the applicable rules. That financial information is prepared by the Department of Finance and Risks and is then reviewed or audited by the statutory auditors, who report to the Audit and Compliance Committee on the significant evidence found during their review or audit.

The Audit and Compliance Committee informs the Board of Directors of its conclusions on the financial information presented.

The Board of Directors approves the financial information which the company must disclose periodically.

9) Department responsible for defining the accounting policies and keeping them up to date, as well as resolving doubts or conflicts regarding their interpretation.

The Department of Finance and Risks defines and updates the accounting principles. When some doubt arises as to the accounting treatment of a specific operation, whether in the course of the accounting audit or during the pursuit of the business activities, the Department of Finance and Risks must be informed.

The General Manager of Finance and Risks forms part of the Bank's top tier of executives.

10) Manual of accounting policies.

Bankia's accounting policies are developed on the basis of the International Financial Reporting Standards adopted by the European Union and are set out in the Bankia Manual of Accounting Policies. That document is periodically updated.

11) Mechanisms for capturing and preparing the financial information with homogeneous formats that support the statements, the notes and the information on the SCIIF.

The Bankia Group has IT tools in place to cover the reporting requirements for individual and consolidated accounts and facilitating consolidation and subsequent analysis.

Those tools contain all of the accounting information for the individual financial statements of the subsidiary companies that make up the Group.


12) Internal audit area.

The Bankia Audit Department's functions include providing support to the Audit and Compliance Committee in supervising the proper functioning of the internal control system, and, toward this end, conducting periodic reviews of reporting procedures.

The Audit Deputy General Manager is part of the top tier of executives and acts, in the performance of his functions, with hierarchical and functional independence from the other Departments, and his functions are supervised by the Audit and Compliance Committee.

13) Discussion procedure by which the statutory auditors, the internal audit area and other experts inform the top management and the Audit Committee on significant internal control weaknesses.

The Bankia Audit Department continuously reports to the top management and to the Audit and Compliance Committee on any significant internal control weaknesses identified in the audits and reviews conducted during the year of Bankia's financial information, as well as on the state of implementation of the action plans put in place to mitigate those weaknesses.

The auditor of Bankia's accounts has direct access to Bankia's senior management and holds periodic meetings, both to obtain the information needed for carrying out the audit work and for communicating the control weakness turned up in the audit.

In addition, the statutory auditor periodically reports to the Audit and Compliance Committee on the conclusions of the audit or review of Bankia's financial information, including any aspects he considers significant.

14) Description of the scope of the SCIIF evaluation carried out during the year.

The interim accounts as at 31 March 2011 are being prepared. The outside auditor will report the control weaknesses detected during the audit review.

Also, Internal Audit will strive to ensure the outside auditor's independence and will inform the top management and the competent body for these purposes on all significant information detected in the audit reports, including shortcomings in the processes and any instance of fraud that are identified.

Furthermore, once the shares have been admitted to trading, Bankia will establish the necessary internal procedures for conducting an assessment of the SCIIF in accordance with the pertinent requirements in this regard.

15) Description of the SCIIF supervision activities carried on by the Audit Committee

The Audit and Compliance Committee analyses the information received via the different channels (mainly through the Department of Finance and Risks, Audit Department and the outside auditor), and requests, when necessary, the presence,


collaboration and access to the information in the possession of any member of the management team or personnel.

For those questions which must be dealt with the senior executives, time limits are set for their resolution and the resolution's implementation is monitored.

16) Review by the outside auditor of the SCIIF information released to the markets.

Bankia will make a future decision as to whether or not it will have the SCIIF information it releases to the markets reviewed by an outside auditor.

17. EMPLOYEES

17.1. Either the number of employees at the end of the period or the average for each financial year for the period covered by the historical financial information up to the date of the registration document (and changes in such numbers, if material) and, if possible and material, a breakdown of persons employed by main category of activity and geographic location. If the issuer employs a significant number of temporary employees, include disclosure of the number of temporary employees on average during the most recent financial year.

Section 12 gives a brief summary of the Staff Rationalisation Plan approved by the Group in the context of the integration of the seven Cajas.

Pursuant to that Plan, on 14 December 2010 the corporate representatives of the Cajas signed, together with the trade union representatives from CC.OO., UGT, ACCAM/ACPCA, CIC, CSICA, CGT, CSIF, accounting for 98% of overall representation in all of the Cajas, a Labour Integration Agreement (the “Labour Integration Agreement”). The Labour Integration Agreement regulates the staff restructuring process that is needed to achieve rationalisation of the services after the signing of the Integration Agreement by the Cajas, and systematises the framework of working conditions for employees from any of the seven Cajas integrated in the SIP institutional protection scheme.

The Labour Integration Agreement includes a programme to restructure the workforces of the various Cajas that involves early retirements, resignations with incentives, temporary suspensions of contracts with compensation and reduction of work hours. The Agreement also regulates geographical mobility and the closing of offices that may arise from the restructuring and integration of the Cajas.

In addition, the Labour Integration Agreement establishes the framework of working conditions for employees that provide their services in the Cajas and who, after the culmination of the integration process, will joint the central company (Banco Financiero y de Ahorros). The issues regulated include professional promotion and classification, the pay structure, pension plans, working hours and company benefits for those employees.

The Labour Integration Agreement also provides for the creation of a Monitoring Committee with employees and Company represented in equal proportions and charged


with overseeing the interpretation and application of the Agreement, and with resolving any exceptional situations which may arise in implementing the new conditions established by the Agreement.

Shown below are the total number of persons employed by category and by geographical location in the Bankia Group at the end of the quarter ended on 31 March 2011 and at 1 January 2011:

Category 31/03/2011 01/01/2011

Level I 314 329

Level II 1,171 1,306

Level III 1,680 1,769

Level IV 2,257 2,366

Level V 2,475 2,597

Level VI 4,089 4,470

Level VII 1,119 1,322

Level VIII 1,151 1,121

Level IX 1,098 1,300

Level X 1,074 1,043

Level XI 2,437 2,192

Level XII 2,297 2,880

Level XIII 103 111

Group 2 and others 118 130

Subtotal without corporate holdings

21,383 22,936

Other companies(1) 1,300 1,312

Total 22,683 24,248

(1) “Other companies” includes: Gesmadrid, Arcalia Inversiones, Caja Madrid Pensiones, Altae Banco, Arcalia Patrimonios, BSF, Bancaja Fondos, Segurcaja, Bancaja Gestión Activos, Invercalia Gestión Privada, Caja Madrid Bolsa, Operador Bancaja Seguros, Caja Madrid Cibeles, S.A., Bancaja Consult. Riesgos, Corporación Financiera, Bancaja Participaciones SL, Tasamadrid, Bancaja Inversiones S.A., Pluritel, Bancaja Habitat y CISA, Arrendadora Aeronáutica, Cavaltour, Abitaria Consultoría, Ges Layetana, SGIIC, Avanza, Ges Layetana Pensiones, La C.Canarias Mediación, Laietana Vida, La Caja Tours, S.A., Laietana Generales, Edif. Singulares de Canarias, Laietana Mediación, Oper. De Banca


Seguros, Inversoa Burriac, SLU, Edicta, CR Mediación de Seguros, Desarrollos Urbanísticos Segovia, Auto Renting Rioja and Segoviana de Gestión.

The above table is based on the occupational classification of the Collective Bargaining Agreement for Savings Banks. The compensation levels are classified into two professional groups with homogeneous functions: Group 1 includes those directly tied to the specific savings bank activity and Group 2 brings together the rest of the occupations or specialties. The highest remuneration is for Level 1 of Group 1.

Following the same criteria as used to compute the workforce for purposes of the Staff Rationalisation Plan referred to in section 12 above, the table does not include Group employees who have taken partial retirement (and who may therefore be regarded as part-time employees), who amounted to 767 at 31 March 2011 and 781 at 1 January 2011.

At 31 March 2011 there were 561 employees working under a fixed-term contract, or 2.5% of the total workforce, whereas this figure at 1 January 2011 was 542 persons or 2.2% of the total.

Country 31/03/2011 01/01/2011

Spain 22,590 24,158

• Andalusia 1,072 1,099

• Aragón 162 164

• Asturias 121 118

• Balearic Isles 292 302

• Canary islands 1,241 1,324

• Cantabria 130 131

• Castilla y León 1,222 1,331

• Castilla La Mancha 728 777

• Catalonia 2,339 2,556

• Ceuta 36 43

• Extremadura 110 112

• Galicia 262 268

• La Rioja 448 484


Country 31/03/2011 01/01/2011

• Madrid 8,635 9,181

• Murcia 168 177

• Navarre 41 44

• Basque Country 207 224

• Valencia 4,076 4,511

• Other companies (1) 1,300 1,312

Portugal 21 21

Italy 3 3

France 1 1

Austria 12 10

Germany 2 1

Poland 2 2

Great Britain 2 2

USA 40 40

Mexico 2 2

Cuba 3 3

Dublin 1 1

China 4 4

Total 22,683 24,248 (1) “Other companies” includes: Gesmadrid, Arcalia Inversiones, Caja Madrid Pensiones, Altae Banco, Arcalia Patrimonios, BSF, Bancaja Fondos, Segurcaja, Bancaja Gestión Activos, Invercalia Gestión Privada, Caja Madrid Bolsa, Operador Bancaja Seguros, Caja Madrid Cibeles, S.A., Bancaja Consult. Riesgos, Corporación Financiera, Bancaja Participaciones SL, Tasamadrid, Bancaja Inversiones S.A., Pluritel, Bancaja Habitat y CISA, Arrendadora Aeronáutica, Cavaltour, Abitaria Consultoría, Ges Layetana, SGIIC, Avanza, Ges Layetana Pensiones, La C.Canarias Mediación, Laietana Vida, La Caja Tours, S.A., Laietana Generales, Edif. Singulares de Canarias, Laietana Mediación, Oper. De Banca Seguros, Inversoa Burriac, SLU, Edicta, CR Mediación de Seguros, Desarrollos Urbanísticos Segovia, Auto Renting Rioja and Segoviana de Gestión.


17.2. Shareholdings and Stock Options

No director nor senior manager of the Bank owns shares in the Bankia at the date of this Registration Document.

Similarly, as at the date of this Registration Document, the directors and senior managers of the Bank do not hold options or other rights to acquire or receive Bankia shares.

17.3. Description of any arrangements for involving the employees in the capital of the issuer

At the date of this Registration Document there are no arrangements for involving the Bank's employees in Bankia's share capital, without prejudice to what is provided with respect to the Employees Subtranche in Securities Note of this Prospectus.

18. MAJOR SHAREHOLDERS

18.1. In so far as is known to the issuer, the name of any person other than a member of the administrative, management or supervisory bodies who, directly or indirectly, has an interest in the issuer’s capital or voting rights which is notifiable under the issuer's national law, together with the amount of each such person’s interest or, if there are no such persons, an appropriate negative statement

At the date of this Prospectus the sole shareholder of the Bank is Banco Financiero y de Ahorros. Given that Banco Financiero y de Ahorros is the sole shareholder of Bankia, it is possible that the two entities may engage in operations with each other which would be considered dealings with related parties. In this regard, both companies have entered into a framework agreement that establishes a general context of transparency and diligence to deal with the risks that arise from such transactions. Section 22 of this Registration Document includes a description of the content of that agreement.

Assuming the Offer referred to by this Prospectus is fully subscribed, the percentage interest in Bankia's capital held by Banco Financiero y de Ahorros after the Offer, with and without exercise of the “green shoe” option, would be as shown below:

Shareholder Pre-Offer holding Post-Offer holding Holding after Offer (including the

green shoe)

Shares (%) Shares (%) Shares (%)

Banco Financiero y de Ahorros, S.A. 908,000,000 100 908,000,000 52.41 908,000,000 50.03

Free-float 0 0 824,572,253 47.59 907,029,479 49.97

Total 908,000,000 100 1,732,572,253 100 1,815,029,479 100


18.2. Whether the issuer's major shareholders have different voting rights, or an appropriate negative statement

All shares representing the capital of the Bank will enjoy the same voting rights. Each share entitles one vote, and there are no privileged shares.

Therefore, all shareholders of Bankia have the same voting rights.

18.3. To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled and by whom and describe the nature of such control and describe the measures in place to ensure that such control is not abused

Banco Financiero y de Ahorros, S.A. owns 1,816,000,000 shares of Bankia, that is, its entire share capital prior to the Offer.

Banco Financiero y de Ahorros, S.A. is owned by the Cajas de Ahorros in the SIP, with the following distribution:

Shareholder Shares Interest

Caja Madrid 14,077,024 52.06%

Bancaja 10,194,080 37.70%

Caja Insular de Canarias 662,480 2.45%

Caja de Ávila 630,032 2.33%

Caixa Laietana 570,544 2.11%

Caja Segovia 543,504 2.01%

Caja Rioja 362,336 1.34%

Total 100% 100%

The relations between the Cajas as shareholders of Banco Financiero y de Ahorros, S.A. are regulated in the Integration Agreement, as amended by the Addenda and by the Novation. Section 22 of this Registration Document includes a detailed explanation of the content of the Integration Agreement in its current terms.

In particular, with respect to shareholders' agreements, the provisions of the Integration Agreement include a covenant regulating the adoption of resolutions at general Meetings of Banco Financiero y de Ahorros.

Under that covenant, the following matters regarding Banco Financiero y de Ahorros (“Matters Reserved for the General Meeting”) will require the favourable vote of


shareholders representing at least 75% of the total voting rights in Banco Financiero y de Ahorros:

(i) Merger, split-up, alteration of corporate form and en bloc assignment of assets and liabilities.

(ii) Amendment of the Bylaws, except for the changes that must be made in connection with an initial public offering of Banco Financiero y de Ahorros and for those arising from increases or reductions of the share capital.

(iii) Disapplicaton of preferential subscription rights in capital increases.

(iv) The entry of new members in the Group.

(v) Initial public offering and issuance of public sale or subscription offers if (a) these take place during the period 2010-2014, or (b) imply loss by Caja Madrid and Bancaja of a majority shareholding in Banco Financiero y de Ahorros.

(vi) Setting the number of directors within the range envisaged in the Bylaws of Banco Financiero y de Ahorros.

As a result of the majority rule established above, the approval of resolutions that affect Matters Reserved for the General Meeting will in all events require the favourable vote of Caja Madrid (52.06% of the voting rights) and Bancaja (37.70%).

Also, the following matters regarding Banco Financiero y de Ahorros (“Matters Specially Reserved for the General Meeting”) will require the favourable vote of shareholders representing at least 93% of the total voting rights in Banco Financiero y de Ahorros:

(i) Winding up and liquidation, unless done by legal obligation.

(ii) The entry of new credit institution shareholders via a capital increase that entails loss of the majority shareholding controlled by the Cajas.

(iii) Initial public offering and issuance of public sell offers (OPV) or public subscription offers (OPS) if they entail loss by the Cajas of their majority interest in the share capital de Banco Financiero y de Ahorros.

If a resolution may be considered to fall within both the Matters Reserved for the General Meeting and to the Matters Specially Reserved for the General Meeting, the majority rule provided for the latter will prevail.

Resolutions that qualify neither as a Matter Reserved for the General Meeting nor a Matter Specially Reserved for the General Meeting will be adopted by the majorities provided in the applicable laws.


Furthermore, on 29 April 2011, Banco Financiero y de Ahorros and the Cajas signed an agreement novating the Integration Agreement (the “Novation”). The Novation includes a covenant in the form of a clause regulating the content of the vote by the representative of Banco Financiero y de Ahorros in Bankia General Meetings, in its capacity as majority shareholder of Bankia, on the following terms:

• The content of the vote by the Banco Financiero y de Ahorros representative in General Meetings of Bankia in relation to the decisions the said Bankia General Meeting must make on any matters which under the Integration Agreement classify as Matters Reserved for the General Meeting of Banco Financiero y de Ahorros, will constitute a Matter Reserved for the General Meeting of Banco Financiero y de Ahorros.

• The content of the vote by the Banco Financiero y de Ahorros representative in General Meetings of Bankia in relation to the decisions the said Bankia General Meeting must make on any matters which under the Integration Agreement classify as Matters Specially Reserved for the General Meeting, will constitute a Matter Specially Reserved for the General Meeting of Banco Financiero y de Ahorros.

Consequently, the Banco Financiero y de Ahorros representative in the General Meeting of Bankia will vote as previously resolved at the General Meeting of Banco Financiero y de Ahorros with such special majorities as may apply for reserved matters or specially reserved matters, within the meaning of the Integration Agreement and of the bylaws of Banco Financiero y de Ahorros (as indicated above in this section).

The aforesaid shareholders' agreements have been duly deposited in the Companies Registry.

18.4. A description of any arrangements, known to the issuer, the operation of which may at a subsequent date result in a change in control of the issuer

Without prejudice to what is described in section 18.1 above and in chapter II of this Prospectus on risk factors, the Bank does not know of any arrangement the operation of which may at a subsequent date result in a change of control of Bankia.

19. RELATED PARTY TRANSACTIONS

Due to the recent formation of the Bankia Group as now configured, no details can be given of related party transactions entered into during the period covered by the historical financial information, given that such historical financial information does not exist. Nevertheless, the financial statements of the Cajas disclose the transactions entered into with each of their related parties.

Without prejudice to the above, there follows a description of related party transactions entered into during 2011, in accordance with the terms of Ministerial Order EHA/3050/2004 of 15 December 2004 on the disclosure of related party transactions by issuers of securities admitted to trading on official secondary markets.


19.1. Transactions with significant shareholders of the Bank

Banco Financiero y de Ahorros is the sole shareholder of Bankia configuration, consequently, operations between the two are considered related party transactions. In this regard, both companies have entered into a framework agreement (“Framework Agreement”) that establishes a general context of transparency and diligence to deal with the risks that arise from such transactions. The content of the Framework Agreement is described in section 22.4 of this Registration Document.

In addition, in the development of that Framework Agreement, Banco Financiero y de Ahorros and Bankia regarded it as necessary to enter into a service agreement to allow Banco Financiero y de Ahorros to manage its activity adequately, drawing on Bankia's material and human resources, avoiding duplication of costs within the consolidated Group it controls and optimising the resources of the Group controlled by Banco Financiero y de Ahorros, while at the same time complying with the obligations imposed by article 16 of the Spanish Corporate Income Tax Act (the “Service Agreement”). The content of the Service Agreement is likewise described in section 22.4 of this Registration Document.

Irrespective of the above, the transactions entered into by the Bank with its sole significant shareholder (owner of 100% of the share capital at the date of this Prospectus) are reflected in the Bank's consolidated financial information of the Bank at 31 March 2011. Those transactions include the long-term deposit of 4,465,345 thousand euros provided by Banco Financiero y de Ahorros, sole shareholder of Bankia, in connection with the disbursement made by the FROB as part of the subscription of the issue of convertible preference shares carried out by Financiero y de Ahorros in December 2010. The information on transactions with related parties at 31 March 2011 also includes 85,915 thousand euros in finance expense generated by Bankia maintaining that deposit accruing interest for the Banco Financiero y de Ahorros during the first quarter of 2011. The long-term deposit provided by Banco Financiero y de Ahorros was cancelled on 1 April. At 31 March 2011, this item was included under "Financial liabilities at amortised cost — Due to banks" on the liabilities side of the consolidated balance sheet. A demand deposit was then set up with the aforementioned entity for the same amount and accruing interest at market rates for this type of deposit.

In addition, the transactions at 31 March 2011 between Bankia and its sole shareholder include 48,500 thousand euros in the net fee and commission income for Bankia paid by Banco Financiero y de Ahorros for managing recovery of assets in default.


There follow the balances recorded on the consolidated balance sheet at 31 March 2011 originating in transactions with significant shareholders (the thousands of euros):

ACCOUNT SIGNIFICANT SHAREHOLDERS

ASSETS

Credit institutions -

Loans and advances to customers -

Credit risk -

Other assets -

Total -

LIABILITIES

Credit institutions 4,476,345

Customer deposits -

Debt securities -

Subordinated liabilities -

Other liabilities -

Total 4,476,345

OTHER

Contingent liabilities -

Commitments -

Total -

PROFIT OR LOSS

Finance income(*) -

(Finance expense)(*) (85,915)

Income from equity securities -

Net fee and commission income 48,500

Other gains -

(Provisions to Allowances) -

(*) Interest income and expense are presented gross

Master agreements for financial transactions and repos between Bankia and Banco Financiero y de Ahorros

In connection with the second spinoff, under Spanish jurisdiction, Banco Financiero y de Ahorros (or “BFA”) maintained legal title to certain hedging derivatives worth 968 million euros at 31 March 2011, as well as of asset repos of 9,696 million euros at that date. The hedged assets and liabilities and underlying debt, respectively, were likewise maintained on the BFA balance sheet. Nevertheless, for operational reasons and international jurisdiction considerations, Bankia continued to be the counterparty vis-à-vis third parties in those derivatives and repo transactions. In this connection, to give


contractual support to these arrangements, BFA and Bankia signed on 25 May 2011 a Master Agreement for Financial Transactions (“CMOF”) to hedge the derivatives transactions between the two entities. The purpose of the CMOF agreement is for BFA to contract, via Bankia, derivatives to hedge the interest rate risk of the assets and liabilities carried by BFA on its balance sheet. In operational terms, therefore, Bankia has been subrogated to the position of the Cajas with those third parties and, in turn, has signed with BFA “mirror” derivatives of those positions that are supported in the CMOF.

Also, on 25 May 2011 BFA and Bankia signed a global repurchase agreement (“Global Master Repurchase Agreement” or “GMRA”) and an agreement for collateral transactions. The GMRA serves to hedge BFA's contracting, through Bankia, of asset repos with underlying assets of 10,000 million euros in fixed-income securities that BFA keeps on its balance sheet.

Under the “CMOF” and “GMRA” agreements signed between Bankia and BFA, the pro forma consolidated balance sheet of the Bankia Group at 31 March 2011 considers the effect of Bankia's subrogation in the hedges associated with BFA assets and liabilities, mainly fixed income issues, as well as its substitution as counterparty in the repos maintained by BFA at 31 March 2011 of 9,696 million euros. In this regard, the effects of these transactions on the pro forma income statement of the Bankia Group have not been considered significant, given that the arm's length prices charged by Bankia to BFA for these transactions have not been adjusted from the time the contracts were signed, and the annual income on which for Bankia is estimated to be some 5 million euros (1.25 million euros per quarter).

It should be noted that the said hedging derivatives over assets and liabilities of BFA are also economic hedging derivatives for Bankia, because each derivative bought (or sold) is fully covered economically by its symmetrical or “mirror” derivative, so they do not generate any effect in the Bankia income statement (their value is set off by the symmetric valuation of their “mirror” derivative). On the Bankia balance sheet those derivatives are recorded under “Held for trading – Derivatives held for trading”, on both the assets and liabilities sides.

The signing of such agreements is a customary practice between financial institutions and, as indicated above, they have been signed on arm's length conditions.

19.2. Other dealings with related parties

Detailed below are transactions with related parties other than sole shareholder included in the Bankia financial information at 31 March 2011, on the terms of Finance Ministry Order EHA/3050/2004 of 15 December 2004 on the disclosure of related party transactions by issuers of securities admitted to trading on official secondary markets.

In particular, the list includes transactions with associated enterprises and jointly controlled (multi-group) companies.


• Associated enterprises

The section on associates discloses transactions entered into by the Bank and companies in which Bankia has the capacity to exert significant influence, although not control or joint control (such capacity normally takes the form of direct or indirect control of 20% or more of the voting rights of the investee company). Prominent amongst the related party transactions recorded in the financial information at 31 March 2011 are the 2,131,063 thousand euros credit extended by the Bank, on an arm's length basis, to associated enterprises. There is no significant concentration of debtors due to that balance, and the associated doubtful debt risk is negligible. In accordance with banking regulations, Bankia has 18,602 thousand euros set aside to cover the credit risk associated with the aforesaid loans, as recorded in the consolidated financial statements at 31 March 2011. With respect to the Bank's liabilities, the balance sheet carries 230,122 thousand euros in customer deposits in respect of associates.

The income statement, includes the gross finance income (27,647 thousand euros), gross finance expense (5,501 thousand euros), net fee and commission income (1,184 thousand euros) and provisioning to allowances (4,171 thousand euros) generated by the preceding banking activity with associated enterprises. “Income from equity securities” reflects dividends paid to Bankia by associates and amounts to 289 thousand euros.

In its off-balance sheet memorandum accounts, the Bank has recorded contingent liabilities (mainly guarantees) in respect of associates of 261,138 thousand euros and undrawn balances on credit facilities granted to those associated enterprises of 269,023 thousand euros.

All of these transactions are arm's length.

• Jointly controlled companies

The section on jointly controlled companies discloses the related party transactions made by the Bank and companies in which Bankia has contractual arrangements with another shareholder or with other shareholders (unitholders) whereunder any strategic financial or operating decision requires the unanimous consent of all parties. Notable among the operations conducted by the Bank with jointly controlled companies are the assets carried on Bankia's balance sheet in respect of credit extended to credit institutions which are, in turn, multigroup companies (mainly to the Banco de Servicios Financieros Caja Madrid- Mapfre, S.A. group, as part of treasury operations), which stood at 4,252,467 thousand euros at 31 March 2011. The balance sheet also reflects 799,790 thousand euros in financing granted to other jointly controlled companies (not credit institutions), with an immaterial amount past due, and 34,774 thousand euros in provisions to cover the credit risk associated with that financing as required by banking regulations. The Bank's liabilities include 53,875 thousand euros in deposits made by jointly controlled credit institutions and 614,381 thousand euros in customer deposits by other jointly controlled companies.

The income statement records the gross finance income (20,985 thousand euros), gross finance expense (7,195 thousand euros), net fee and commission income (8,841 thousand euros) and the provisioning to allowances (8,562 thousand euros) generated by the preceding banking activity with jointly controlled companies.


In its off-balance sheet memorandum accounts, the Bank has recorded contingent liabilities (mainly guarantees) in respect of jointly controlled companies in the amount of 604,798 thousand euros and undrawn balances on the credit facilities extended to those jointly controlled companies of 194,914 thousand euros.


Shown in the following table are the balances recorded on the consolidated balance sheet at 31 March 2011 (in thousands of euros) that originated in transactions with related parties (jointly controlled companies and associates):

ACCOUNT ASSOCIATES JOINTLY CONTROLLED COMPANIES

ASSETS Credit institutions - 4,252,467 Loans and advances to customers 2,131,063 799,790 Credit risk (18,602) (34,774) Other assets - 1 Total 2,112,461 5,017,484 LIABILITIES Credit institutions 16,556 53,875 Customer deposits 230,122 614,381 Debt securities - - Subordinated liabilities - - Other liabilities 3,353 939 Total 250,031 669,195 OTHER Contingent liabilities 261,138 604,798 Commitments 269,023 194,914 Total 530,161 799,712 PROFIT OR LOSS Finance income(*) 27,647 20,985 (Finance expense)(*) (5,501) (7,195) Income from equity securities 289 - Net fee and commission income 1,184 8,841 Other gains (814) (36) (Provisions to Allowances) 4,171 8,562

19.3. Transactions with directors and officers of the Bank

The Bank's consolidated financial statements at 31 March 2011 included transactions carried out between the Bank and persons who were members of the Board of Directors at that date.

The related party transactions with the Bankia directors were conducted on an arm's length basis.


Particular note should be taken of the following balances associated with the most significant transactions, not including non-material or ordinary banking transactions in amounts that are not significant:

• Total balance of 3,864 thousand euros in favour of a Director recorded under Bankia customer deposits, some 173 thousand euros of which were term deposits and 3,670 thousand euros were repos involving fixed-income financial assets.

• Total balance of 2,077 thousand euros in favour of a Director recorded under Bankia customer deposits.

There are also undrawn balances available on credit cards for the benefit of directors of 27 thousand euros and financial costs, in respect of interest on deposits held by directors, of 29 thousand euros.

Shown below are the balances recorded on the consolidated balance sheet at 31 March 2011 that originated from transactions with members of the Board of Directors (in thousands of euros) at 31 March 2011:

ACCOUNT Board of Directors ASSETS Credit institutions - Loans and advances to customers - Credit risk - Other assets - Total - LIABILITIES Credit institutions - Customer deposits 5,959 Debt securities - Subordinated liabilities - Other liabilities - Total 5,959 OTHER Contingent liabilities - Commitments 27 Total 27 PROFIT OR LOSS Finance income(*) - (Finance expense)(*) (29) Income from equity securities - Net fee and commission income - Other gains - (Provisions to Allowances) -

• Other related parties “Other related parties” includes the balances held by family relations of the members of the Bank's Board of Directors (such relations being understood to include, amongst others, the spouses of directors, and the parents and grandparents, descendents and siblings of directors or of director’s spouses), as well as other entities related to those individuals, insofar as known to the Bank.


In relation to transactions between the Bank and these “Other related parties,” the total customer deposits stood at 9,653 thousand euros, including repos involving fixed-income financial assets (3,670 thousand euros) associated with one Director, term deposits (2,965 thousand euros) with parties related to another Director and other customer deposits (2,873 thousand euros) in relation to another Director.

There were also subordinated liabilities of 120 thousand euros in relation to one Director.

On the assets side, loans and advances to customers included 191 thousand euros in respect of financing to persons related to one Director.

Shown below are the balances recorded on the consolidated balance sheet at 31 March 2011 that originated in transactions with these related parties:

(in thousands of euros) At 31/03/2011

ACCOUNT OTHER RELATED PARTIES

ASSETS Credit institutions - Loans and advances to customers 191 Credit risk - Other assets 2 Total 193 LIABILITIES Credit institutions - Customer deposits 9,653 Debt securities - Subordinated liabilities 120 Other liabilities - Total 9,773 OTHER Contingent liabilities - Commitments 28 Total 28 PROFIT OR LOSS Finance income(*) 1 (Finance expense)(*) (55) Income from equity securities - Net fee and commission income 1 Other gains - (Provisions to Allowances) -

(*) Finance income and expense are shown gross.



There follows a description of the significant related party transactions at the date of this Prospectus between Bankia and the current directors and offices of Bankia referred to in section 14 above and who were named on 16 June 2011, except for those non-material or ordinary banking activities in insignificant amounts.

• The group of undertakings held or controlled by Director Arturo Fernández has been granted credit or loans on which an aggregate of 2,824,724 euros have been borrowed and are outstanding.

• The group of undertakings held or controlled by Director Francisco Ros García has been granted credit or loans on which a total of 54,907,609 euros have been borrowed and are outstanding.

All of the credit or loans indicated above were granted before the appointment of said persons as directors of Bankia and were concluded arm's length. No provisions have been set aside for the above credit/loans, as these transactions are not considered past due, doubtful or substandard.

No other personal loans or credit have been extended to any other Director.

It is noted that the Bankia Group has extended credit or loans to companies in which its directors also hold seats on the Board of Directors. These are companies, many of them publicly traded, in which the Bankia directors do not hold controlling interests, and loans or credit extended before the said persons were named directors of Bankia and were concluded arm's length.

In relation to the related party transactions with the senior managers of the Company mentioned in section 14, the accompanying table gives the balances recorded at 31 March 2011 which originated in operations with senior managers or with related parties thereof (in thousands of euros):

(in thousands of euros) At 31/03/2011

ACCOUNT SENIOR MANAGEMENT

OTHER RELATED PARTIES OF MEMBERS OF THE SENIOR

MANAGEMENT ASSETS Credit institutions Loans and advances to customers 165 660 Credit risk Other assets Total 165 660 LIABILITIES Credit institutions Customer deposits 7,054 2,683 Debt securities 20 Subordinated liabilities Other liabilities Total 7,054 2,703

ACCOUNT SENIOR MANAGEMENT

OTHER RELATED PARTIES OF MEMBERS OF THE SENIOR

MANAGEMENT OTHER Contingent liabilities


Commitments 69 32 Total 69 32 PROFIT OR LOSS Finance income 1 4 Finance expense -56 -27 Income from equity securities Net fee and commission income 1 Other gains Provisions to Allowances

All transactions carried out with senior managers or persons related to senior managers qualify as ordinary and routine banking operations of the Group and were conducted on normal market conditions.

20. FINANCIAL INFORMATION CONCERNING THE ISSUER’S ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES

As a result of the recent integration, through Banco Financiero y de Ahorros, of the financial, banking and bank-related business of the Bankia Cajas (savings banks), the only consolidated financial information available are the Bankia Group’s audited consolidated condensed interim financial statements for the quarter ended 31 March 2011. The Issuer also prepared a consolidated balance sheet at 1 January 2011 for comparison purposes only.

Due to the absence of historical consolidated financial information, unaudited aggregate financial information was prepared for the seven Cajas comprising the Banco Financiero y de Ahorros Group for 2009 which, together with the audited consolidated information (for the balance sheet) and pro forma consolidated information (for the income statement) of the Banco Financiero y de Ahorros Group for 2010, offer an indication of how the Bankia Group’s business would have performed last year. However, the aggregate financial statements of the seven Cajas for 2009 and the Banco Financiero y de Ahorros Group’s consolidated financial information for 2010 should not be compared with the Bankia Group, as they relate to different scopes of consolidation and would have had to consider the assets that have remained under the ownership of Banco Financiero y de Ahorros following the spinoff process (detailed in section 5.1.5 (G) of this prospectus) and those that are still held by the Cajas. Furthermore, the Cajas’ audited financial statements for 2008, 2009 and 2010 are available at their respective registered offices and at the CNMV, and the consolidated financial statements of the Banco Financiero y de Ahorros Group for the year ended 31 December 2010 are available at Banco Financiero y de Ahorros, and are included in this prospectus for reference purposes.

The information used as a starting point for presenting the Issuer’s financial position and the performance of its businesses, was as follows:

• Audited consolidated condensed interim financial statements of Bankia for the period from 1 January 2011 to 31 March 2011.


• Pro forma consolidated financial information of Bankia for the period from 1 January 2011 to 31 March 2011.

• Consolidated income statement of the Banco Financiero y de Ahorros Group for the period from 1 January 2011 to 31 March 2011.

• Pro forma consolidated financial information of Bankia for the year ended 31 December 2010.

• Audited consolidated financial statements of the Banco Financiero y de Ahorros Group for the period from 3 December 2010 to 31 December 2010.

• Aggregate income statement of the Cajas for the period from 1 January 2010 to 31 March 2010.

• Aggregate consolidated balance sheet of the Cajas at 31 December 2009 and aggregated consolidated income statement of the Cajas for the year then ended.

20.1. Historical financial information

The lack of operational and financial history at Bankia as an integrated group in its current scope of consolidation has determined the information available on Bankia at the date of the issue.

As mentioned in section 3.1 of the registration document, the spinoff of the financial, banking and bank-related businesses of Banco Financiero y de Ahorros to Bankia was registered at the Companies Registry on 23 May 2011 and took effect on 1 January 2011. Therefore, the issuer’s first consolidated financial information consists of the audited financial statements of the Bankia Group for the three-month period ended 31 March 2011 and the unaudited consolidated balance sheet at 1 January 2011, which is presented for comparison purposes.

Bankia’s audited information at 31 March 2011, since it is interim information, was included in section 20.6 below.

For comparison purposes, section 20.2.4 presents the consolidated balance sheets and income statements of the Banco Financiero y de Ahorros Group at 31 December 2010, and the Cajas’ aggregate consolidated balance sheet at 31 December 2009, together with their aggregate consolidated income statement for the year then ended.


Bankia’s consolidated balance sheet at 1 January 2011 is as follows:

BALANCE SHEET (Millions of euros)

Consolidated 01/01/11

Cash and balances with central banks 6,505 Financial assets held for trading 16,502 Other financial assets at fair value through profit or loss 95 Available-for-sale financial assets 14,002 - Debt instruments 11,741 - Equity instruments 2,261 Loans and receivables 215,269 - Loans and advances to credit institutions 12,436 - Loans and advances to customers 193,756 - Debt instruments 9,076 Held-to-maturity investments 9,087 Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- Hedging derivatives 3,618 Non-current assets held for sale 1,809 Investments 4,119 Insurance contracts linked to pensions 231 Reinsurance assets 1 Tangible assets 4,334 Intangible assets 237 Tax assets 4,517 Other assets 2,826 TOTAL ASSETS 283,153 Financial liabilities held for trading 13,904 Other financial liabilities at fair value through profit or loss -- Financial liabilities at amortised cost 250,315 - Deposits from central banks 20,277 - Deposits from credit institutions 22,052 - Customer deposits 144,037 - Marketable debt securities 62,104 - Subordinated liabilities 301 - Other financial liabilities 1,544 Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- Hedging derivatives 651 Liabilities associated with non-current assets held for sale -- Liabilities under insurance contracts 358 Provisions 2,307 Tax liabilities 970 Other liabilities 942 TOTAL LIABILITIES 269,448 SHAREHOLDERS’ EQUITY 12,976 Share capital, share premium and other reserves 13,010 Other equity instruments -- Less: treasury shares (34) Profit/loss for the year attributable to the Parent -- Less: dividends and remuneration -- VALUATION ADJUSTMENTS 0 NON-CONTROLLING INTERESTS 728 TOTAL EQUITY 13,704 TOTAL LIABILITIES AND EQUITY 283,153

20.2. Pro forma financial information of Bankia

Owing to the lack of historical financial information of the Issuer, pro forma financial statements at 31 December 2010 were prepared.

The pro forma consolidated financial information was prepared solely for illustrative purposes and, therefore, the pro forma financial data relate to a hypothetical situation


and do not represent the Bankia’s Group’s financial position, actual results, the results of its operations or the financial and equity position at a potential date or for a period in the future.

Following is the detail of the bases of preparation of the accompanying pro forma financial information defined by the directors of Bankia, S.A. including the information sources and assumptions used. This includes a detailed description of the significant adjustments made by the directors of Bankia, S.A. in order to prepare the accompanying pro forma financial information.

20.2.1. Bases of preparation of the pro forma consolidated financial information for 2010

The financial information used as the starting point and basis for compiling the pro forma consolidated financial information is as follows:

1. The consolidated balance sheet of the Bankia Group at 1 January 2011 (included for comparison purposes in the interim financial statements for the period from 1 January 2011 to 31 March 2011), prepared by the directors of Bankia on the basis of the audited consolidated balance sheet of Banco Financiero y de Ahorros, S.A. and subsidiaries (“the BFA Group”) at 31 December 2010 (prepared by the directors of BFA in accordance with the International Financial Reporting Standards adopted by the European Union (EU-IFRS) and taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments) to which the effects of the spinoff, detailed in the “spinoff” column of Bankia Group’s pro forma balance sheet, were added.

2. Pro forma consolidated income statement of the BFA Group for 2010 prepared by the directors of BFA in accordance with the EU-IFRS and taking into account Bank of Spain Circular 4/2004 of 22 December, and related amendments, included in Note 2.1 to the consolidated financial statements of the BFA Group for the year ended 31 December 2010.

3. Other unaudited information provided by each of the Cajas for determining the adjustments detailed further below.

Since the accounting policies and measurement bases used in preparing the Bankia Group’s pro forma consolidated financial information at 31 December 2010 under EU-IFRS, while taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments, do not differ significantly from those used in the preparation of the aforementioned financial and accounting information, no adjustments or reclassifications were made to unify the policies and bases with those used by Bankia.

Furthermore, it is important to note that said pro forma financial information was prepared in accordance with the requirements of European Commission Regulation (EC) No 809/2004 and with the content of the CESR Recommendation for the consistent implementation of said regulation (CESR/05-054b).

For a correct interpretation of the pro forma consolidated income statement, the pro forma consolidated balance sheet and the accompanying explanatory notes thereto, they


should be read in conjunction with the consolidated financial statements of the BFA Group at 31 December 2010, with the Cajas’ financial statements at 31 December 2010 included in the pro forma financial statements and with the condensed consolidated interim financial statements of the Bankia Group for the period from 1 January 2011 to 31 March 2011.

In preparing the pro forma consolidated financial information of the Bankia Group, the following was taken into consideration:

a) The Bankia Group’s pro forma consolidated balance sheet at 31 December 2010 was prepared as if the transactions giving rise to the pro forma adjustments had taken place on 31 December 2010.

b) The Bankia Group’s pro forma consolidated income statement for the year ended 31 December 2010 was prepared as if the transactions giving rise to the pro forma adjustments had taken place on 1 January 2010.


20.2.2. Pro forma balance sheet and income statement of the Bankia Group for 2010 ADJUSTMENT MADE 2 7 11 12 13


BFA GROUP

Consolidated31/12/10 Spin-off

BANKIA GROUP


Decons. CISA

Sale of companies

to BFA

Purchase of companies from BFA

Purchase of49% share of

BSF

CMOF and GMRA

agreements

BANKIA GROUP

Pro forma 31/12/10

Cash and balances with central banks 6,636 (131) 6,505 16 6,521Financial assets held for trading 16,596 (94) 16,502 1,089 17,591Other financial assets at fair value through profit or loss 95 -- 95 95Available-for-sale financial assets 23,414 (9,412) 14,002 (142) 13,860- Debt instruments 20,905 (9,164) 11,741 11,741- Equity instruments 2,509 (248) 2,261 (142) 2,119Loans and receivables 233,458 (18,189) 215,269 (3,154) 313 846 9,696 222,970- Loans and advances to credit institutions 13,151 (715) 12,436 142 (4,835) 9,696 17,439- Loans and advances to customers 214,520 (20,763) 193,756 (3,296) 313 5,509 196,283- Debt instruments 5,787 3,289 9,076 172 9,248Held-to-maturity investments 16,082 (6,995) 9,087 9,087Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- -- -- --Hedging derivatives 3,950 (332) 3,618 3,618Non-current assets held for sale 5,450 (3,641) 1,809 42 1,851Investments 6,492 (2,373) 4,119 186 (1,557) (167) 2,581Insurance contracts linked to pensions 247 (16) 231 231Reinsurance assets 1 -- 1 1Tangible assets 5,952 (1,618) 4,334 58 5 4,397Intangible assets 273 (36) 237 1 33 271Tax assets 6,239 (1,722) 4,517 129 169 4,815Other assets 3,390 (566) 2,826 1,466 6 1 4,299TOTAL ASSETS 328,277 (45,125) 283,153 (1,314) (1,699) 319 945 10,785 292,188Financial liabilities held for trading 14,063 (159) 13,904 91 1,089 15,084Other financial liabilities at fair value through profit or loss -- -- -- --Financial liabilities at amortised cost 297,200 (46,886) 250,315 (1,355) (1,699) 607 833 9,696 258,397- Deposits from central banks 21,728 (1,451) 20,277 20,277- Deposits from credit institutions 20,730 1,322 22,052 (1,355) (1,699) 422 103 9,696 29,219- Customer deposits 165,448 (21,411) 144,037 678 144,715- Marketable debt securities 72,010 (9,906) 62,104 62,104- Subordinated liabilities 15,095 (14,794) 301 301- Other financial liabilities 2,190 (646) 1,544 185 52 1,781Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- -- -- --Hedging derivatives 1,003 (352) 651 651Liabilities associated with non-current assets held for sale 24 (24) -- --Liabilities under insurance contracts 358 -- 358 358Provisions 2,345 (38) 2,307 3 2,310Tax liabilities 1,239 (269) 970 3 8 981Other liabilities 1,372 (428) 942 38 3 10 994Equity refundable on demand -- -- -- --TOTAL LIABILITIES 317,604 (48,156) 269,448 (1,314) (1,699) 610 945 10,785 278,775SHAREHOLDERS’ EQUITY 8,480 4,496 12,976 -- -- 284 -- 13,260Share capital, share premium and other reserves 8,480 4,530 13,010 284 13,294- Share capital 1,818 1,818 1,818- Share premium 10,200 10,200 10,200- Reserves plus profit/loss attributable to the Parent 8,480 (7,488) 992 284 1,276Other equity instruments -- -- -- --Less: treasury shares -- (34) (34) (34)Less: dividends and remuneration -- -- -- --VALUATION ADJUSTMENTS -- -- -- --NON-CONTROLLING INTERESTS 2,193 (1,465) 728 (575) 153TOTAL EQUITY 10,673 3,031 13,704 -- -- (291) -- 13,413TOTAL LIABILITIES AND EQUITY 328,277 (45,125) 283,153 (1,314) (1,699) 319 945 10,785 292,188


ADJUSTMENT MADE 1 2 3 4 5 6 7 8 9 10 11 12

INCOME STATEMENT (Millions of euros)

BFA GROUP

Pro forma2010

Decons.BISA

Decons.CISA

Gains/Losses on BFA Financial

Assets

Elimination BFA Assets / Liabilities Financial Margin

Recognition Provisions BFA Assets

Restruct. Expenses

Sale of companies to

BFA

Gains/ Losses on

BFA Financial Liabilities

Bankia Assets –

Provisions and Write-

downs

BFA Overhead

Costs

Purchase of

companies from BFA

Purchase of 49% share of

BSF

BANKIA GROUP

Pro forma 2010

Interest and similar income 7,871 (689) (1) (361) 3 186 7,009Interest expense and similar charges (4,736) 346 2 669 (3) (70) (3,792)NET INTEREST INCOME 3,135 (343) 1 308 116 3,217Income from equity instruments 121 (14) (35) 72Share of results of entities accounted for using the equity method 124 (143) 11 (42) 56 6Net fee and commission income 1,158 (75) (371) (148) 132 1 1,216Gains (losses) on financial assets and liabilities and exchange differences (net) 1,428 (53) 24 880Other operating income (net) 84 24 42 0 150GROSS INCOME 6,049 (604) 54 (371) 308 (77) (148) 132 197 5,541Administrative expenses (2,739) 165 36 15 (54) (2,577)a) Staff costs (1,893) 114 1 15 (29) (1,792)b) Other general administrative expenses (846) 51 35 (25) (785)Depreciation and amortisation charge (347) 13 1 (5) (338)NET INCOME 2,963 (426) 91 (371) 308 (77) (148) 132 15 138 2,625Provisions (net) (1,406) (27) 1,400 (1,304) (190) (33)Impairment losses on financial assets (net) (748) 211 (3) (2,034)PROFIT (LOSS) FROM OPERATIONS 810 (242) 88 (371) 308 1,400 (77) (148) (1,172) 15 (52) 559Impairment losses on other assets (net) (429) 91 6 234 (194) (10) (302)Gains (losses) on disposal of assets not classified as non-current assets held for sale (12) (6) (18)Negative goodwill on business combinations 0 0 0Gains (losses) on non-current assets held for sale not classified as discontinued operations 132 (61) 67 (18) 120PROFIT (LOSS) BEFORE TAX 501 (218) 161 (371) 308 234 1,400 (77) (148) (1,366) 15 (80) 359Income tax 29 (26) (32) 111 (93) (70) (420) 44 410 (5) 48 (3)Profit (loss) from discontinued operations (net) (1) 1 (0)PROFIT (LOSS) FOR THE YEAR 529 (244) 130 (260) 215 164 980 (77) (104) (956) 11 (32) 356

PROFIT (LOSS) ATTRIBUTABLE TO THE PARENT 440 (140) 120 (260) 215 164 980 (77) (104) (956) 11 -- (36) 357PROFIT (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 88 (104) 10 4 (1)


20.2.3. Explanation of the adjustments made in the pro forma financial information at 31 December 2010

Assumptions used

The following assumptions were used in the preparation of the consolidated pro forma financial information:

• For the purposes of preparing the pro forma consolidated income statement for 2010, Bankia was considered to have been incorporated and operating since 1 January 2010 and that it has prepared consolidated financial statements in accordance with the International Financial Reporting Standards adopted by the European Union (EU-IFRS), taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments since that date.

• In this regard and solely for the purposes of calculating the effects on the pro forma consolidated income statement, all the spun-off assets were considered to have been owned by Bankia since 1 January 2010.

• All BFA’s overhead costs in 2010 were considered to have been included in Bankia’s pro forma consolidated income statement, except for the estimated overhead costs required for managing BFA’s operations (see Adjustment 10).

• Income from the recovery of written-off assets relating to BFA Group’s entire lending portfolio was assigned to BFA and, accordingly, for the purposes of BFA’s 2010 pro forma consolidated income statement, it was considered to be BFA’s recoveries. Also, a success fee for recovering written-off assets was established, of 50% for Bankia (see Adjustment 9).

• Within the second spinoff, under Spanish law, BFA retained the legal ownership of certain hedging derivatives amounting to 1,089 million euros and of repurchase agreements amounting to 9,696 million euros, whose hedged assets and liabilities and underlying debt, respectively, were also retained on BFA’s balance sheet. However, for operational reasons and for the purposes of international law, Bankia continued to be the counterparty with regard to the third parties for these derivatives and repurchase agreements.

In this regard, to provide contractual support to the arrangement described above, on 25 May 2011 BFA and Bankia entered into a financial transaction framework agreement (“CMOF”) in order to hedge the derivative transaction between the two entities. The object of the framework agreement is for BFA to enter into, through Bankia, the interest rate risk hedging derivatives of the assets and liabilities that BFA has on its balance sheet. Therefore, in operational terms, Bankia has subrogated the Cajas’ position with said third parties and, in turn, has entered into derivatives with BFA that “mirror” these positions, which are provided for in the CMOF agreement (see Adjustment 13).


Similarly, on 25 May 2011, BFA and Bankia entered into a global master repurchase agreement (“GMRA”) and an agreement covering transfers as collateral. The object of the GMRA is to hedge BFA’s operations whereby it enters into, through Bankia, repurchase agreements whose underlying assets are fixed income securities amounting to 10,000 million euros that BFA retains on its balance sheet.

By virtue of the aforementioned CMOF and GMRA agreements entered into by Bankia and BFA, consideration was made of the effects on the Bankia Group’s pro forma consolidated balance sheet at 31 December 2010 of Bankia’s subrogation in the derivative contracts associated with BFA’s assets and liabilities, mainly fixed income securities and debt issues, and its replacement as the counterparty of the repurchase agreements that BFA held at that date (see Adjustment 13).

• In order to make future comparisons with Bankia’s 2010 pro forma consolidated income statement easier, adjustments were made reflecting the impact on said income statement assuming that the corporate transaction, in which Banco Financiero y de Ahorros, S.A. was incorporated, through the contribution of the assets and liabilities of the seven Cajas comprising the “Institutional Protection Scheme” (Sistema Institucional de Protección— SIP), had not occurred (see Adjustments 6 and 9). It is important to note that, with regard to restructuring expenses, the adjustment refers exclusively to the amounts accrued at 31 December 2010 in the consolidated financial statements of the BFA Group at that date and does not include, therefore, possible expenses not accrued at that date.

• Furthermore, in preparing the pro forma financial statements, consideration was made of the impact of certain events already performed or in progress at the date of this report, subsequent to the second spinoff, namely: the sale of certain investments of Bankia to BFA (see Adjustment 7), the spinoff of Cartera de Inmuebles, S.A. “CISA” (see Adjustment 2), the acquisition from BFA of certain investments (see Adjustment 11) and the full consolidation of the BSF Group following the acquisition of an additional 49% share (see Adjustment 12).

• The related tax effect of the pro forma adjustments was calculated, where necessary, using a 30% tax rate, except in certain exceptional cases in which a reversal of the tax adjustment was made for the exact amount included in the item.

Description of the spinoff adjustment and pro forma adjustments

BFA Group spinoff

On 5 April 2011, the Board of Directors and the shareholders at the General Meeting of Banco Financiero y de Ahorros, S.A. resolved to approve, with effect for accounting purposes on 1 January 2011, a “Spinoff Project” consisting of the transfer en bloc from BFA to Bankia, S.A. of the entire banking business, investments associated with the financial business and the other assets and liabilities that BFA had received from the Cajas, except for certain assets and liabilities that BFA will continue to own including, most notably, the following:


a) On the asset side: • Fixed income securities of various portfolios are retained by BFA amounting to 10,000

million euros approximately.

• BFA retained approximately 4,400 million euros of doubtful and substandard loans secured by land in loans and advances to customers, and spun off loans secured by land classified as “normal” risk to Bankia.

• With regard to foreclosed assets, BFA retained foreclosed land assets directly owned by the Cajas amounting to approximately 1,100 million euros.

• BFA retained certain investments on its balance sheet including: a 69.98% holding in Bancaja Inversiones “BISA”, a 100% holding in Sociedad Cartera de Inmuebles, S.L. (“CISA”), a 49% holding in Corporación Financiera Caja Madrid and its 64.73% share in Arrendadora Aeronáutica, A.I.E.

• BFA retained a dividend swap on its books which is recognised for a zero amount and was entered into following the cancellation of the derivative mentioned in Adjustment 3, and a call option written on the ownership interest in BISA. The BISA shareholders are the counterparty of both derivatives (see Adjustment 3).

• BFA retained on its balance sheet derivatives associated with public debt and issuances which are recognised at 1,089 million euros, as mentioned in “Assumptions Used” and in Adjustment 13.

b) On the liability side, BFA retained on its balance sheet all the preference shares (including those subscribed by the FROB), government-backed debt and subordinated debt for approximately 22,000 million euros, as well as deposits of subsidiaries retained at BFA. In addition, BFA’s liabilities at amortised cost contain close to 10,000 million euros in repurchase agreements.

It is also important to note that the investments held at BFA have, inter alia, the following impact on the Bankia Group’s consolidated balance sheet, which was included in the “Spinoff” column of the accompanying pro forma balance sheet:

• Full deconsolidation of Cartera de Inmuebles, S.L. (“CISA”), a vehicle for holding and managing foreclosed property assets, both land and building space, which implies, among other assets, a reduction of around 3,600 million euros in this class of assets that are mainly classified under non-current assets held for sale.

• In turn, Bancaja Inversiones (“BISA”) holds a 39% share in Banco de Valencia de S.A. The full deconsolidation of BISA at the Bankia Group implies, in turn, the deconsolidation of Banco de Valencia, with significant effects, mainly:


o A reduction in the balance of loans and advances to customers of approximately 18,400 million euros.

o A reduction in the balance of fixed income securities in the various portfolios of approximately 3,300 million euros.

o A reduction in the balance of customer deposits of approximately 13,200 million euros and in other financial liabilities at amortised cost (primarily deposits from central banks and credit institutions and marketable debt securities) of approximately 9,000 million euros.

o A reduction in the balance of non-controlling interests of approximately 2,000 million euros.

• Lastly, since BFA retains a 49% share in Corporación Financiera Caja Madrid, S.A., while the remaining 51% is included in the Bankia Group’s scope of consolidation, an increase in non-controlling interests occurs at the latter for around 600 million euros.

Adjustment 1 – Deconsolidation of the BISA sub-group

The Bancaja de Inversiones, S.A. (“BISA”) sub-group mainly consists of BFA’s fully consolidated investments in Banco de Valencia, S.A., other significant investments in associates (Iberdrola, S.A. and NH Hoteles, S.A.) and certain financial investments (Enagas, S.A., FCC, S.A. and Abertis, S.A.). This sub-group does not form part of the Bankia Group and, as a result, its contributions to consolidated profit or loss were eliminated.

Adjustment 2 – Deconsolidation of the CISA sub-group

At 1 January 2011, Cartera de Inmuebles, S.L. Unipersonal (“CISA”) held total assets of slightly over 5,000 million euros, mainly foreclosed and acquired assets (approximately 3,600 million euros). On the liability side, CISA had bank borrowings amounting to almost 5,000 million euros. By virtue of the aforementioned spinoff, 1,500 million euros of these loans were granted by BFA and the remainder, i.e. approximately 3,500 million euros, were granted primarily by Bankia.

On 7 June 2011, a public deed was executed for the total spinoff of CISA, Cartera de Inmuebles, S.L. Unipersonal and its integration in CISA 2011, S.L. (a newly formed subsidiary owned directly by BFA whose main assets will be land assets) and in Bancaja Hábitat S.L. Unipersonal (a Bankia group subsidiary). By virtue of this public deed, Bancaja Hábitat, S.L.U., a Bankia Group subsidiary, receives assets and liabilities associated with completed properties, properties under construction and administrative concessions. The assets spun off to Bancaja Hábitat amounted to 2,000 million euros and consisted of property, plant and equipment, inventories, investments in companies and tax assets (the main source of which were the temporary differences relating to the measurement of property, plant and equipment of approximately 81 million euros). On the liability side, debts payable to Bankia were spun off to Bancaja Hábitat amounting to approximately 2,000 million euros, which were eliminated in the pro forma balance sheet against loans granted by Bankia for an identical amount.


Bankia’s pro forma consolidated balance sheet at 31 December 2010 takes into account the effect of integrating the assets and liabilities of the spun-off company, Bancaja Hábitat, S.L.U. and the estimated income and expense generated by the assets and liabilities of this company were recognised in the pro forma consolidated income statement.

An adjustment was also made in relation to Bankia’s replacement by BFA as creditor of CISA 2011 in various loans secured by land amounting to approximately 1,500 million euros and the balance of the interbank account between BFA and Bankia was reduced by the same amount. At the date of this report, this transaction is still being processed.

Adjustment 3 – Elimination of the impact of derivative transactions on results

In 2010 net gains on financial transactions from the settlement of derivatives were generated at the BFA Group. These gains arose mainly from a long-term transaction in which the BFA Group and another BISA shareholder exchanged the dividends relating to the companies in which the aforementioned company held investments and which are held at BFA at a floating rate. In February 2010, this transaction was cancelled early through a private agreement between the two parties, which did not give rise to any cost for either. The parties were also exempt from any obligation that might exist between them and the BFA Group recognised the income relating to the collected premium unearned at the date for this option.

Therefore, in preparing the pro forma consolidated income statement, these gains were eliminated since they related to gains arising from investments held by BISA in BFA. The effect on the Bankia Group’s pro forma consolidated balance sheet at 31 December 2010 was not significant.

Adjustment 4 – Elimination of the financial margin of financial instruments not assigned to Bankia

The BFA Group recognised in its 2010 consolidated income statement income from public debt that it holds for performing carry trades (financed by repurchase agreements) and from its “substandard” loans granted for “land” purposes. Also, its consolidated income statement includes a financial expense net of hedges from preference shares, subordinated debt and government-backed debt.

The financial income and expenses do not relate to Bankia since they arise from assets and liabilities held at BFA. Therefore, a pro forma adjustment was recognised to eliminate this income and these expenses for 360 million euros (of which 270 million euros relate to carry trades) and 669 million euros before tax, respectively.

Adjustment 5 – Allocation of provisions to BFA property assets

BFA’s consolidated balance sheet at 31 December 2010 contains certain property assets, mainly land, classified as “Non-Current Assets Held for Sale” and “Investment Property” (in addition to those contributed by the CISA sub-group – see Adjustment 2 above). Since these


assets were not transferred to Bankia, the impairment losses recognised in the BFA Group’s consolidated income statement are eliminated, for the purposes of the presentation of the pro forma consolidated income statement, in the amount of 234 million euros before tax.

Adjustment 6 – Restructuring costs

As a result of the corporate transaction to incorporate the SIP, certain provisions were recognised for restructuring costs amounting to 1,400 million euros.

Therefore, considering that this pro forma income statement was prepared without contemplating the existence of this corporate transaction (see Note 4) and since this expense will not recur in future years, this amount was not taken into account in Bankia’s pro forma consolidated income statement.

Adjustment 7 – Sale of Mapfre, Mapfre América, Indra and Grupo Su Casita, S.A., S.C.V. to BFA

The directors of Bankia arranged the sale of its investments in Mapfre, S.A., Mapfre América, S.A., Indra, S.A. and Grupo Su Casita, S.A., S.C.V., through the instrumentality company CM Invest 1702 Corporación Internacional E.T.V.E., S.L., to BFA in June 2011, and, accordingly, these sales were considered to have been performed on 1 January 2010 for the purposes of eliminating the gains contributed by these investments from Bankia’s 2010 pro forma consolidated income statement. Therefore, the gains generated by these investments are not considered a part of Bankia’s pro forma consolidated income statement. Therefore, a pro forma adjustment amounting to 77 million euros was recognised to eliminate this income.

For the purposes of the presentation of Bankia’s pro forma consolidated balance sheet, these sales were considered to have been performed at 31 December 2010.

Considering that the carrying amount of these investments recognised on Bankia’s books at 1 January 2011 was 1,180 million, 142 million, 377 million and 0 million euros, respectively, adjustments were made to Bankia’s pro forma consolidated balance sheet for these amounts, recognising income in the interbank account between Bankia and BFA, with a balancing entry under “Investments in Associates” for Mapfre, S.A., Indra, S.A. and Grupo Su Casita, S.A., S.C.V. and under “Available-for-Sale Financial Assets” in the case of Mapfre América, S.A.

Adjustment 8 – Gains from the repurchase of financial liabilities at amortised cost from BFA

In 2010 the BFA Group obtained gains from the repurchase of issues. These gains were recognised under “Gains/Losses on Financial Assets and Liabilities (Net)” in BFA’s consolidated income statement and were eliminated for the preparation of the 2010 pro forma consolidated income statement, since they did not relate to liabilities in Bankia’s pro forma consolidated balance sheet.


Adjustment 9 – Loans and receivables and other financial assets

Assuming the non-existence of the corporate transaction to incorporate the SIP and as a result of the assets transferred to Bankia, an estimate was made pursuant to current legislation of the credit loss allowance and the write-down of other assets for the balances of these assets contributed to Bankia. In addition, the amounts obtained, which amounted to 264 million euros in 2010, in the recovery of written-off assets assigned to BFA, and a success fee of 50% in the management of these recoveries to Bankia for managing the recovery process.

Adjustment 10 – BFA overhead costs

Bankia’s directors have estimated at 15 million euros the amount before tax of the operating costs relating to the management of the assets/liabilities that BFA will retain after the Second Spinoff. Therefore, for the preparation of Bankia’s 2010 pro forma consolidated income statement, this amount was deducted from the balance of “Administrative Expenses”.

Adjustment 11 – Corporación Financiera Caja Madrid, S.A. – Arrendadora Aeronáutica, A.I.E.

In June 2011, the directors of Bankia formalised the acquisition from BFA of certain companies, the largest being the 48.64% investment it holds in Corporación Financiera Caja Madrid, S.A. and the 64.73% investment it holds in Arrendadora Aeronáutica, A.I.E. and, accordingly, in the preparation of the pro forma consolidated financial statements this acquisition was considered to have been performed on 1 January 2010.

As a result, Arrendadora Aeronáutica A.I.E., which was not previously included Bankia’s scope of consolidation, was fully consolidated by the Bankia Group.

Furthermore, as the ownership interest in Corporación Financiera Caja Madrid, S.A. was 51% prior to this acquisition of the remaining 48.63%, this investment was already fully consolidated. Therefore, the only adjustment made on the balance sheet was the elimination of the non-controlling interests relating to this investment.

Adjustment 12 – Acquisition of 49% of Banco de Servicios Financieros Caja Madrid – Mapfre, S.A. (“BSF”)

The directors of Bankia completed the acquisition from Mapfre, S.A. of 49% of the share capital of Banco de Servicios Financieros Caja Madrid - Mapfre, S.A. on 13 May 2011. For the purposes of preparing these pro forma financial statements, the transaction price was considered to be the carrying amount of the remaining investment in Banco de Servicios Financieros Caja Madrid - Mapfre, S.A., which Bankia had recognised on the balance sheet at 31 December 2010 and the acquisition did not give rise to any gain or loss in the income statement.


Subsequent to this acquisition, Bankia will hold 100% of the share capital of Banco de Servicios Financieros Caja Madrid – Mapfre, S.A. and, accordingly, the necessary adjustments were made to the pro forma consolidated balance sheet at 31 December 2010 and the pro forma income statement for the year then ended in order to fully consolidate this investment at Bankia since, when it held 51% of the share capital of Servicios Financieros Caja Madrid – Mapfre, S.A., it classified this investment as a jointly controlled entity and accounted for it using the equity method in accordance with the prior agreements with Mapfre, S.A.

The assets and liabilities disclosed in the consolidation process of this investment include deferred tax assets amounting to 157 million euros, of which 116 million euros arose from tax assets at BSF subsidiaries and 41 million euros relate to temporary differences with regard to the measurement of financial instruments and other provisions.

Adjustment 13 – “CMOF” and “GMRA” agreements

By virtue of the “CMOF” and “GMRA” agreements entered into by Bankia and BFA on 25 May 2011, mentioned in “Assumptions Used”, consideration was made of the effects on the Bankia Group’s pro forma consolidated balance sheet at 31 December 2010 of Bankia’s subrogation in the derivative contracts associated with BFA’s assets and liabilities, mainly fixed income securities and debt issues, and its replacement as the counterparty of the repurchase agreements that BFA held at 31 December 2010 in the amount of 9,696 million euros. In this regard, the effects of these transactions on the Bankia Group’s pro forma income statement were not considered significant.

It is important to note that the aforementioned hedging derivatives on BFA’s assets and liabilities are, at the same time, economic hedges for Bankia, as each derivative purchased or sold is economically and fully hedged by a symmetrical “mirror” derivative and, accordingly, no effect is generated on Bankia’s income statement (their value is offset by the symmetrical value of the “mirror” derivative). On Bankia’s balance sheet, these derivatives are recognised under “Financial Assets Held for Trading - Trading Derivatives” and “Financial Liabilities Held for Trading”.


20.2.4. Comments on Bankia’s pro forma consolidated financial statements for 2010

a) Balance sheet


BFA GROUP Consolidated

12/10

CAJAS Aggregate

12/09

BFA/CAJAS % Chg. 10/09

BANKIA Pro forma (*)

12/10 Cash and balances with central banks 6,636 5,296 25.3% 6,521 Financial assets held for trading 16,596 12,970 28.0% 17,591 Other financial assets at fair value through profit or loss 95 103 (8.4%) 95 Available-for-sale financial assets 23,414 35,667 (34.4%) 13,860 - Debt instruments 20,905 29,124 (28.2%) 11,741 - Equity instruments 2,509 6,543 (61.6%) 2,119 Loans and receivables 233,458 246,512 (5.3%) 222,970 - Loans and advances to credit institutions 13,151 16,771 (21.6%) 17,439 - Loans and advances to customers 214,520 223,690 (4.1%) 196,283 - Debt instruments 5,787 6,051 (4.4%) 9,248 Held-to-maturity investments 16,082 13,592 18.3% 9,087 Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- -- -- -- Hedging derivatives 3,950 3,727 6.0% 3,618 Non-current assets held for sale 5,450 4,364 24.9% 1,851 Investments 6,492 3,781 71.7% 2,581 Insurance contracts linked to pensions 247 167 47.6% 231 Reinsurance assets 1 6 (80.3%) 1 Tangible assets 5,952 6,401 (7.0%) 4,397 Intangible assets 273 853 (68.0%) 271 Tax assets 6,239 2,660 134.6% 4,815 Other assets 3,390 1,826 85.7% 4,299 TOTAL ASSETS 328,277 337,924 (2.9%) 292,188 Financial liabilities held for trading 14,063 11,671 20.5% 15,084 Other financial liabilities at fair value through profit or loss -- -- -- -- Financial liabilities at amortised cost 297,200 302,174 (1.6%) 258,397 - Deposits from central banks 21,728 10,593 105.1% 20,277 - Deposits from credit institutions 20,730 27,314 (24.1%) 29,219 - Customer deposits 165,448 166,950 (0.9%) 144,715 - Marketable debt securities 72,010 84,105 (14.4%) 62,104 - Subordinated liabilities 15,095 11,001 37.2% 301 - Other financial liabilities 2,190 2,211 (1.0%) 1,781 Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- -- -- -- Hedging derivatives 1,003 1,140 (12.0%) 651 Liabilities associated with non-current assets held for sale 24 21 -- -- Liabilities under insurance contracts 358 1,847 (80.6%) 358 Provisions 2,345 837 180.1% 2,310 Tax liabilities 1,239 1,071 15.6% 981 Other liabilities 1,372 1,516 (9.5%) 994 TOTAL LIABILITIES 317,604 320,277 (0.8%) 278,775 SHAREHOLDERS’ EQUITY 8,480 16,045 (47.1%) 13,260 Share capital, share premium and other reserves 8,480 16,045 (47.1%) 13,294 - Share capital -- -- -- 1,818 - Share premium -- -- -- 10,200 - Reserves plus profit attributable to the Parent -- 16,045 100.0% 1,276 Other equity instruments -- -- -- -- Less: treasury shares -- -- -- (34) Less: dividends and remuneration -- -- -- -- VALUATION ADJUSTMENTS 0 (303) (100.0%) 0 NON-CONTROLLING INTERESTS 2,193 1,905 15.1% 153 TOTAL EQUITY 10,673 17,647 (39.5%) 13,413 TOTAL LIABILITIES AND EQUITY 328,277 337,924 (2.9%) 292,188

(*) Bankia’s balance sheet is included solely for information purposes as it is not comparable with that of the consolidated Banco Financiero y de Ahorros Group or the Cajas’ aggregate balance sheet.

The Bankia Group was incorporated for accounting purposes on 1 January 2011 and, accordingly, the only consolidated information available for 2010 are the pro forma consolidated financial statements at 31 December 2010.


Following is a series of comments on Bankia’s main pro forma balance sheet headings at 31 December 2010.

• Loans and advances to customers: this is the main asset component and amounts to 196,317 million euros on Bankia’s 2010 pro forma balance sheet (net loans and advances to customers includes loans and advances to customers in the held-for-trading portfolio amounting to 34 million euros) and 203,465 million euros in gross terms (before impairment losses), of which 63% relates to secured loans, mainly loans to the resident private sector secured by mortgages for home purchase (44% of total gross loans and advances to customers). Doubtful loans amount to 11,402 million euros in total, of which the non-performing loan ratio is 5.5% and the loan loss allowance amounts to 7,149 million euros.

• Customer deposits: this heading amounted to 144,715 million euros in 2010. The deposits from the resident private sector totalled 110,591 million euros (excluding repurchase agreements and one-off securities), relating mainly to term deposits and savings accounts. The deposits from the public sector amounted to 4,676 million euros.

With the sole purpose of showing the trend in certain variables that are most representative of the Issuer’s banking business, in the absence of comparative information for Bankia, following are a series of comments on the changes in the Banco Financiero y de Ahorros Group’s 2010 consolidated balance sheet headings and in the Cajas’ 2009 aggregate balance sheet, since the trend at Bankia is similar.

• Loans and advances to customers: in 2010 this heading exceeded 214,554 million euros at the Banco Financiero y de Ahorros Group in net terms (net loans and advances to customers includes loans and advances to customers in the held-for-trading portfolio amounting to 34 million euros), and 223,422 million euros in gross terms, of which 63% relates to secured loans, mainly loans to the resident private sector secured by mortgages for home purchase (41% of total loans and advances to customers).

Last year this heading fell by 9,175 million euros (-4.1%) with respect to the aggregate amount for the Cajas in 2009. This contraction is associated with the Group’s balance sheet deleveraging strategy and arose primarily from loans to the resident private sector in Spain.

The adverse economic situation of recent years is reflected in the trend in doubtful loans, the balance of which increased by 12.2% in 2010 on the aggregate figure for 2009 to 14,561 million euros, up 1,585 million euros on the figure at 2009 year-end. At the end of 2010, the Banco Financiero y de Ahorros Group’s total non-performing loan ratio was 6.34%, compared with 5.38% (aggregate) the previous year, and its coverage ratio was 61%.

• Customer deposits: in 2010, this heading on the Banco Financiero y de Ahorros Group

balance sheet amounted to 165,448 million euros, practically unchanged with respect to 2009. The deposits from the non-resident private sector increased by 14,223 million euros due mainly to the increase in repurchase agreements with the Treasury. This is a result of the operational change in the repo activity that took place in 2010 due to the


increase in activity through the trading and counterparty clearing houses, Eurex Repo and London Clearing House, which was offset by a decrease in balances from the public sector, which registered a larger year-on-year decline. Meanwhile, deposits from the resident private sector fell slightly in 2010, primarily term deposits, partly reflecting the fierce competition in this type of product in the Spanish financial services sector last year.

b) Income statement

INCOME STATEMENT (Millions of euros) BFA GROUP

12/10 (*)

CAJAS Aggregate

12/09

BFA/CAJAS % Chg. 10/09

BANKIA GROUP

Pro forma 12/10 (**)

Interest and similar income 7,871 11,041 (28.7%) 7,009 Interest expense and similar charges (4,736) (6,569) (27.9%) (3,792) NET INTEREST INCOME 3,135 4,473 (29.9%) 3,217 Income from equity instruments 121 261 (53.5%) 72 Share of results of entities accounted for using the equity method 124 (220) (156.4%) 6 Net fee and commission income 1,158 1,196 (3.2%) 1,216 Gains (losses) on financial assets and liabilities and exchange differences (net) 1,428 1,167 22.3% 880 Other operating income (net) 84 137 (38.4%) 150 GROSS INCOME 6,049 7,013 (13.7%) 5,541 Administrative expenses (2,739) (2,770) (1.1%) (2,577) a) Staff costs (1,893) (1,947) (2.8%) (1,792) b) Other general administrative expenses (846) (822) 2.9% (785) Depreciation and amortisation charge (347) (341) 1.7% (338) NET INCOME 2,963 3,903 (24.1%) 2,625 Provisions (net) (1,406) 73 (100.0%) (33) Impairment losses on financial assets (net) (748) (2,686) (72.2%) (2,034) PROFIT FROM OPERATIONS 810 1,290 (37.2%) 559 Impairment losses on other assets (429) (569) (24.6%) (302) Gains (losses) on disposal of assets not classified as non-current assets held for sale (12) 118 (109.9%) (18) Negative goodwill on business combinations 0 0 0 Gains (losses) on non-current assets held for sale not classified as discontinued operations 132 (3) 100.0% 120 PROFIT BEFORE TAX 501 836 (40.1%) 359 Income tax 29 (104) (128.1%) (3) Profit (loss) from discontinued operations (net) (1) (1) 0.0% (0) PROFIT FOR THE YEAR 529 732 (27.8%) 356 PROFIT ATTRIBUTABLE TO THE PARENT 440 612 (28.0%) 357 PROFIT ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 88 120 (26.4%) (1)

(*) This information on the pro forma income statement and related explanations are included in Note 2.1 “Business combinations and consolidation” to the consolidated financial statements of Banco Financiero y de Ahorros for the year ended 31 December 2010.

(**) Bankia’s pro forma income statement is included solely for information purposes but it is not comparable with the Banco Financiero y de Ahorros Group’s consolidated pro forma income statement for 2010 or the Cajas’ 2009 aggregate income statement.

As with the balance sheet, in the absence of comparative information for the Bankia Group, following are a series of comments on the situation with regard to the most representative items in the Bankia Group’s pro forma income statement at year-end:

• Net interest income and Net fee and commission income: in 2010 the Bankia Group’s pro forma net interest income amounted to 3,217 million euros. The balance of net fee and commission income was 1,216 million euros. In this regard, it is important to note that, in general terms, 2010 was marked by lower business volumes than in previous years, against a backdrop of economic recession.

• Gains and losses on financial assets and liabilities and Exchange differences: this item includes essentially the gains and losses on the repurchase of own issues, the sale of fixed-income securities and equities in the available-for-sale portfolio and the sale of


hedging derivatives to Bankia customers. It should be noted that the balance recorded in 2010, 880 million euros, is well above the level that could be considered as recurring for Bankia, which is 300 million to 400 million euros, since the 880 million euros of gains on financial assets and liabilities include 500 million euros generated by the repurchase of own issues.

• Other operating income: the net balance of this item was 150 million euros in 2010, which was particularly high due to the non-recurring income relating to the insurance marketing activity, which is not forecast to occur again in 2011, and the sale of properties of certain Group property management companies.

• Provisions, Impairment losses on financial assets and Impairment losses on other assets: taken together, these items would have amounted to 2,369 million euros in 2010 according to the Bankia Group pro forma income statement. It is important to note that this level of provisions relates to the cost of risk in one of the worst years in the economic cycle and, therefore, it is at the high end of the range of provisions of an adverse year in economic terms.

• Gains on non-current assets held for sale not classified as discontinued operations: this item includes the gains relating to the sale and lease back transactions on certain properties and the gains on the sale of investees (Attijariwaffa Bank and Abertis).

For the purposes of describing the trend that might have occurred in the main items of Bankia’s 2010 income statement, owing to the lack of historical financial information on the part of the Issuer, due to its recent incorporation, which would enable an analysis of this trend, following is a series of comments on the main changes between the 2010 pro forma income statement of Banco Financiero y de Ahorros and the Cajas’ aggregate 2009 income statement, since the trend could be similar to that of Bankia.

• Net interest income: in 2010 the Banco Financiero y de Ahorros Group’s net interest income fell by approximately 30% to 3,135 million euros from 4,473 million euros in aggregate terms in 2009. An analysis of the change from one year to the next should take into account that the net interest income obtained in 2009 was boosted by the sharp fall in market interest rates at the beginning of the year, which had a much faster effect on costs than on financial revenue. As a result, a high level of net interest income was obtained in the first half or 2009, which declined in the second half of the year and which, in any event, distorts the comparison with 2010, which was marked by a stable trend in low market interest rates.

• Net fee and commission income: the Banco Financiero y de Ahorros Group’s net fee and commission income remained practically stable, registering a slight year-on-year decline of 38 million euros to 1,158 million euros. This decrease arose mainly from the fees and commissions received from companies for bill discounting facilities and fees and commissions from investment funds. However, it should be noted that fees and commissions from insurance intermediation performed well, registering a 16% increase.


• Administrative expenses: in 2010, these expenses, which include staff costs and general expenses, decreased at the Banco Financiero y de Ahorros Group by 1.1% to 2,739 million euros, primarily as a result of lower staff costs (-2,8%), taking the efficiency ratio to 45.3%. Meanwhile, general administrative expenses were up slightly, mainly as a consequence of the costs arising from the preparation of technical reports required for restructuring the Group and from the VAT increase in June 2010.

20.2.5. Special auditor’s report

On 17 June 2011, the Bankia Group’s auditor, Deloitte, S.L., issued a special report on the Bankia Group’s pro forma financial information at 31 December 2010.

This special report contained the following declarations:

• That the accompanying pro forma financial information was compiled adequately on the basis of the assumptions defined by the directors of Bankia, S.A.U.; and

• That the accounting basis used by the directors of Bankia, S.A.U. in the preparation of the accompanying pro forma financial information is consistent with the accounting policies used by the directors of Bankia, S.A.U. in the preparation of the “Consolidated interim financial statements and explanatory notes for the period from 1 January to 31 March 2011”.

20.3. Financial statements

The only consolidated financial information relating to Bankia’s current business are the audited consolidated condensed interim financial statements of the Bankia Group for the quarter ended 31 March 2011. The Issuer also prepared a consolidated balance sheet at 1 January 2011 for comparison purposes only.

The consolidated financial statements of Bankia for the period ended 31 March 2011 are included in section 20.6.

20.4. Auditing of historical annual financial information

20.4.1. A statement that the historical financial information has been audited

Due to the recent incorporation of Bankia, there is no historical financial information for the current sphere of economic activity.


20.4.2. Indication of other information in the registration document which has been audited by the auditors

The consolidated condensed interim financial statements of the Bankia Group for the quarter ended 31 March 2011 which have been included in this prospectus were audited.

20.4.3. Unaudited data

Deloitte, S.L. issued a special report on the Bankia Group’s pro forma financial information at 31 December 2010 and 31 March 2011 pursuant to the provisions of Annex II to Commission Regulation (EC) No 809/2004 of 29 April 2004.

Except for the data extracted from the condensed interim financial statements that were the subject of the auditors’ report cited in section 20.4.2 above, and other data for which the source is expressly cited, all other data and information on the Bank contained in this registration document were extracted from the Bank’s internal accounting records and information system and were not audited.

20.5. Age of latest financial information

The latest audited financial information included in this prospectus relates to the Bankia Group’s consolidated audited financial statements for the quarter ended 31 March 2011.

Therefore, the latest financial information is not older than 15 months at the date of this registration document.

20.6. Interim and other financial information

20.6.1. If the issuer has published quarterly or half yearly financial information since the date of its last audited financial statements, these must be included in the registration document. If the quarterly or half yearly financial information has been reviewed or audited, the audit or review report must also be included. If the quarterly or half yearly financial information is unaudited or has not been reviewed state that fact.

20.6.1.1. Accounting principles

The Bankia Group prepared its consolidated condensed interim financial statements for the period from 1 January 2011 to 31 March 2011 in accordance with the accounting principles and standards established in International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the European Union, for the preparation of condensed financial statements, and taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments, which implement and adapt EU-IFRS for Spanish credit institutions.

The quarterly financial statements were prepared adequately taking into account all the aforementioned mandatory accounting principles and rules. These accounting principles and standards may be consulted in the Bankia Group’s consolidated condensed intermediate financial statements for the period from 1 January 2011 to 31 March 2011, and in the consolidated financial statements of Grupo Banco Financiero y de Ahorros, S.A. for the


period from 3 December 2010 to 31 December 2010, which are available on the Banco Financiero y de Ahorros website.

20.6.1.2. Interim financial information of the Bankia Group

a) Consolidated balance sheet at 31 March 2011 and 1 January 2011 BALANCE SHEET (Millions of euros)

Consolidated

March 2011

Consolidated

01/03/11

% Chg.

March/Jan 2011

Cash and balances with central banks 3,525 6,505 (45.8%) Financial assets held for trading 12,724 16,502 (22.9%) Other financial assets at fair value through profit or loss 104 95 9.5% Available-for-sale financial assets 18,595 14,002 32.8% - Debt instruments 16,625 11,741 41.6% - Equity instruments 1,970 2,261 (12.9%) Loans and receivables 207,755 215,269 (3.5%) - Loans and advances to credit institutions 12,037 12,436 (3.2%) - Loans and advances to customers 190,083 193,756 (1.9%) - Debt instruments 5,636 9,076 (37.9%) Held-to-maturity investments 10,538 9,087 16.0% Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- -- -- Hedging derivatives 2,515 3,618 (30.5%) Non-current assets held for sale 1,984 1,809 9.7% Investments 4,166 4,119 1.1% Insurance contracts linked to pensions 219 231 (5.1%) Reinsurance assets 1 1 (0.9%) Tangible assets 4,329 4,334 (0.1%) Intangible assets 222 237 (6.6%) Tax assets 4,551 4,517 0.7% Other assets 3,165 2,826 12.0% TOTAL ASSETS 274,393 283,153 (3.1%) Financial assets held for trading 10,856 13,904 (21.9%) Other financial liabilities at fair value through profit or loss -- -- -- Financial liabilities at amortised cost 245,262 250,315 (2.0%) - Deposits from central banks 9,706 20,277 (52.1%) - Deposits from credit institutions 22,592 22,052 2.4% - Customer deposits 152,962 144,037 6.2% - Marketable debt securities 58,239 62,104 (6.2%) - Subordinated liabilities 316 301 4.9% - Other financial liabilities 1,447 1,544 (6.2%) Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- -- -- Hedging derivatives 497 651 (23.7%) Liabilities associated with non-current assets held for sale -- -- -- Liabilities under insurance contracts 354 358 (1.1%) Provisions 1,888 2,307 (18.2%) Tax liabilities 1,052 970 8.4% Other liabilities 609 942 (35.4%) TOTAL LIABILITIES 260,518 269,448 (3.3%) SHAREHOLDERS’ EQUITY 12,992 12,976 0.1% Share capital, share premium and other reserves 12,991 13,010 (0.1%) Other equity instruments -- -- -- Less: treasury shares (34) (34) -- Profit for the year attributable to the Parent 35 -- 100.0% Less: dividends and remuneration -- -- -- VALUATION ADJUSTMENTS 75 0 100.0% NON-CONTROLLING INTERESTS 807 728 10.9% TOTAL EQUITY 13,875 13,704 1.2% TOTAL LIABILITIES AND EQUITY 274,393 283,153 (3.1%)

As indicated above, the Bankia Group was incorporated for tax purposes on 1 January 2011 and, accordingly, the consolidated interim balance sheet at 31 March 2011 includes the Bankia Group’s consolidated balance sheet at 1 January 2011 for comparison purposes.

At the end of the first quarter of 2011 the Bankia Group had total assets of 274,393 million euros and a volume of banking business (consisting of loans and advances to customers,


customer funds under management and off-balance-sheet managed funds, i.e. investment funds, pension funds and insurance) of nearly 424,200 million euros.

It is important to note that in the first quarter of 2011 the Bankia Group’s financing profile improved thanks to both the reduction in the balance of loans and receivables and the increase in the attraction of new deposits. As a result, at 31 March 2011, 80% of loans and advances to customers was financed by customer deposits, which represents a six percentage point increase on the figure in its initial balance sheet at 1 January 2011. Customer deposits accounted for 72% of the financing structure, compared with 70% at 1 January.

Following is a detail of the trend in the Bankia Group’s most significant balance sheet headings at 31 March 2011.

• Loans and advances to customers: in gross terms (before valuation adjustments) loans and advances to customers amounted to 197,404 million euros, which represents a 1.75% decrease on the figure in the initial balance sheet at 1 January 2011, in line with the current deleveraging policy adopted by the Group, and is concentrated mainly in credit to the resident private sector in Spain which, both at 31 March and 1 January, represented 92% of total gross credit.

The balance of doubtful loans at the end of the first quarter of 2011 increased by 4.26% to 11,604 million euros, up 474 million euros on 1 January 2011. The Bankia Group’s non-performing loan ratio was 5.76% at the end of the first quarter of 2011, slightly up on the figure at 1 January 2011 (5.45%), and its coverage ratio remained at 65% thanks to the policy of utmost prudence implemented by the entity in the recognition of provisions.

• Customer deposits: at the end of the first quarter of 2011, customer deposits amounted to 152,962 million euros, up 6.25% in the quarter, i.e. 8,925 million euros more than the balance recognised at 1 January 2011. Retail customer term deposits (excluding one-off bonds) increased by 3,185 million euros. This growth partly offset the change in one-off bonds amounting to 3,420 million euros. As a result, the net reduction in term deposits was 235 million euros. Meanwhile, deposits from the Spanish public sector rose by 5,550 million euros in the quarter.


b) Consolidated income statement at 31 March 2011

INCOME STATEMENT

(Millions of euros)

Consolidated

March 2011

Interest and similar income 1,726 Interest expense and similar charges (1,196) NET INTEREST INCOME 530 Income from equity instruments 4 Share of results of entities accounted for using the equity method 46 Net fee and commission income 288 Gains (losses) on financial assets and liabilities and exchange differences (net) 88 Other operating income (net) 18 GROSS INCOME 974 Administrative expenses (422) a) Staff costs (255) b) Other general administrative expenses (167) Depreciation and amortisation charge (79) NET INCOME 474 Provisions 28 Impairment losses on financial assets (net) (526) LOSS FROM OPERATIONS (24) Impairment losses on other assets 3 Gains (losses) on disposal of assets not classified as non-current assets held for sale (3) Negative goodwill on business combinations -- Gains (losses) on non-current assets held for sale not classified as discontinued operations 95 PROFIT BEFORE TAX 72 Income tax (7) Profit (loss) from discontinued operations (net) 0 PROFIT FOR THE YEAR 64 PROFIT ATTRIBUTABLE TO THE PARENT 35 PROFIT ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 29

With regard to the income statement, in view of the fact that Bankia has existed as an economic group since 1 January 2011, comments may only be made on the situation at 31 March 2011 and not on the trend in results in the first quarter of this year in comparison with the same period in 2010.

Following is a series of comments on the most significant items in the Bankia Group’s income statement at 31 March 2011.

• Net interest income and Net fee and commission income: at the end of the first quarter of 2011 the Bankia Group’s net interest income amounted to 530 million euros, generated primarily by lending to the resident private sector. Taking into account the current economic situation and the lower business volumes, total net fee and commission income contributed 288 million euros, most noteworthy of which was that generated by collection and payment services and by the sale of non-banking financial products.


• Gains and losses on financial assets and liabilities and Exchange differences: the balance of this item in the income statement for the first quarter of 2011 was 88 million euros, which includes essentially the gains obtained from transactions involving the customer portfolio (primarily the sale of interest rate risk hedge derivative products) and the sale of available-for-sale financial assets, both fixed income securities and equities, which is a level that could be regarded as representative of the ordinary level of results in a given quarter.

• Administrative expenses: in the first quarter of 2011, these expenses, which include staff costs and general expenses, amounted to 422 million euros. This item includes the release of provisions amounting to 153 million euros relating to extraordinary staff costs associated with a multi-year incentive target that was not met. The efficiency ratio stood at 43.3% at 31 March 2011.

In this regard, it is important to note that the early retirement plan arising from the labour agreement entered into by the Cajas to implement the restructuring of the workforce of the entities integrated in Bankia has progressed rapidly. As a result, in March 2011, 47% of the plan target had already been met. However, given that the early retirements began to take effect at the end of February 2011, the synergies arising from the plan will start to have an effect on the Group’s results from the second half of the year onwards. Also, the impact of the synergies arising from the Group restructuring plan as a result of the reorganisation of the branch network will start to be reflected mid-year.

• Impairment losses on financial assets: the figure of 526 million euros recognised in this item includes general provisions for loans amounting to 130 million euros, which highlights the fact that, in the current economic environment, in which the recovery is slow, Bankia is maintaining its policy of utmost prudence by allocating its non-recurring income obtained in the first quarter of the year to strengthen the overall level of provisions.

At 31 March 2011, Bankia’s non-performing loan ratio stood at 5.76% and its coverage ratio was 65%. It is expected that the NPL ratio will rise somewhat over the first quarters of the year and that this growth will slow down subsequently.

• Loss from operations: the loss of 24 million euros in the first quarter arose as a result of the Bankia Group’s policy of utmost prudence with regard to provisions, since, as mentioned in the previous point, the non-recurring income obtained in the first quarter of the year was allocated to strengthening the level of general provisions.

• Gains on non-current assets held for sale not classified as discontinued operations: in the first quarter of 2011 this item represented a gain of 95 million euros, which related mainly to extraordinary income from the disposal of investees.

For the purposes of describing the trend that might have occurred in the main items of Bankia’s income statement for the first quarter of 2011, owing to the lack of financial information at the end of the first quarter of 2010, following is a series of comments on the main changes between the income statement for the first quarter of 2011 of the Banco


Financiero y de Ahorros Group and the Cajas’ aggregate income statement for the first quarter of 2010, since the trend could be similar to that of Bankia.

INCOME STATEMENT

(Millions of euros)

BFA GROUP

Consolidated

March 2011

Aggregate

Cajas

March

2010

% Chg.

BFA/

Cajas

2011/2010

GRUPO

BANKIA

Consolidated

(**)

March 2011

BANKIA

GROUP

Pro forma

(**)

March 2011

Interest and similar income 2,039 1,983 2.8% 1,726 1,767 Interest expense and similar charges (1,376) (1,081) 27.3% (1,196) (1,132) NET INTEREST INCOME PRE-FROB (*) 663 902 (26.5%) NET INTEREST INCOME 577 902 (36.0%) 530 635 Income from equity instruments 4 69 (93.9%) 4 4 Share of results of entities accounted for using the equity method 83 (23) (456.7%) 46 0 Net fee and commission income 257 272 (5.4%) 288 289 Gains (losses) on financial assets and liabilities and exchangedifferences (net) 197 284 (30.6%) 88 103 Other operating income (net) (6) 90 (107.0%) 18 17 NET INCOME 1,112 1,594 (30.2%) 974 1,048 Administrative expenses (478) (666) (28.2%) (422) (432) a) Staff costs (289) (484) (40.3%) (255) (259) b)Other general administrative expenses (189) (182) 4.0% (167) (173) Depreciation and amortisation charge (83) (85) (1.9%) (79) (80) NET INCOME 550 843 (34.7%) 474 537 Provisions 28 (22) (227.7%) 28 29 Impairment losses on financial assets (net) (413) (524) (21.1%) (526) (524) PROFIT (LOSS) FROM OPERATIONS 165 297 (44.3%) (24) 41 Impairment losses on other assets 3 (52) (105.2%) 3 3 Gains (losses) on disposal of assets not classified as non-current assets held for sale (2) (1) 68.1% (3) (3) Negative goodwill on business combinations -- -- -- -- -- Gains (losses) on non-current assets held for sale not classified as discontinued operations 81 (2) 100.0% 95 84 PROFIT FOR THE YEAR 247 242 2.0% 72 125 Income tax (41) (42) (1.1%) (7) (37) Profit (loss) from discontinued operations (net) (0) (1) 100.0% 0 0 PROFIT FOR THE YEAR 205 199 3.2% 64 88 PROFIT ATTRIBUTABLE TO THE PARENT 195 169 15.6% 35 91 PROFIT ATTRIBUTABLE TO NON-CONTROLLINGINTERESTS 10 30 (66.2%) 29 (3)

(*) Net interest income PRE-FROB was calculated before the financial charge associated with the preference shares acquired by the

FROB.

(**) Bankia’s pro forma consolidated income statement is included solely for comparison purposes since it is not comparable with the consolidated income statement of the Banco Financiero y de Ahorros Group or with the Cajas’ aggregate income statement. The details on the preparation of, and the adjustments included in, the pro forma income statement are included in section 20.6.2.

• Net interest income: at the end of the first quarter of 2011, the total amount of this item for the Banco Financiero y de Ahorros Group was 663 million euros, before taking into account the interest on the preference shares acquired by the FROB, the effect of which is not applicable to Bankia as they will remain on the separate balance sheet of Banco Financiero y de Ahorros, which represents a 26.5% reduction on the first quarter of 2010.

• Net fee and commission income: the Banco Financiero y de Ahorros Group’s net fee and commission income contributed 257 million euros, which represents a 5.4% decline on


the first quarter of 2010, noteworthy of which was the income relating to disintermediation, which rose by 2.7% in relation to the aggregate amount for the Cajas in the same period of the previous year.

• Administrative expenses: in the first quarter of 2011, the Banco Financiero y de Ahorros Group recognised 478 million euros in operating expenses, which was lower than the balance for the first quarter of 2010 as a result of the release of provisions amounting to 153 million euros mentioned above. Excluding this extraordinary effect, staff costs decreased by 8.7% on the first quarter of 2010. Other general expenses increased moderately by 4%, primarily as a result of the increase in advertising expenditure relating to the campaign to launch the new brand and to the technical reports on the corporate restructuring and the spinoff projects.

At 31 March 2011, the efficiency ratio stood at 43%, which represents a 2.3 percentage point improvement on the ratio at December 2010.


c) Consolidated statement of cash flows at 31 March 2011

STATEMENT OF CASH FLOWS

(Millions of euros)

Consolidated

March 2011

A) CASH FLOWS FROM OPERATING ACTIVITIES (1,625) Consolidated profit/loss for the period 64 Adjustments made to obtain the cash flows from operating activities 378 - Depreciation and amortisation charge 79 - Other 299 Net increase/decrease in operating assets (6,842) - Held for trading (3,778) - Other financial assets at fair value through profit or loss -- - Available-for-sale financial assets 4,539 - Loans and receivables (6,646) - Other operating assets (957) Net increase/decrease in operating liabilities (8,909) - Held for trading (3,048) - Other financial liabilities at fair value through profit or loss -- - Financial liabilities at amortised cost (5,060) - Other operating liabilities (801) Income tax receipts (payments) -- B) CASH FLOWS FROM INVESTING ACTIVITIES (1,477) Payments 1,583 - Tangible assets 118 - Intangible assets 6 - Investments -- - Subsidiaries and other business units -- - Non-current assets held for sale and associated liabilities 8 - Held-to-maturity investments 1,451 - Other payments related to investing activities -- Receipts 106 - Tangible assets 59 - Intangible assets -- - Investments 15 - Subsidiaries and other business units -- - Non-current assets held for sale and associated liabilities 33 - Held-to-maturity investments -- - Other proceeds related to investing activities -- C) CASH FLOWS FROM FINANCING ACTIVITIES 121 Payments -- - Dividends -- - Subordinated liabilities -- - Redemption of own equity instruments -- - Acquisition of own equity instruments -- - Other payments related to financing activities -- Receipts 121 - Subordinated liabilities 15 - Issuance of own equity instruments -- - Disposal of treasury shares -- - Other collections related to financing activities 106 D) EFFECT OF FOREIGN EXCHANGE RATE CHANGES -- E) INCREASE/(DECREASE) NET OF CASH AND CASH EQUIVALENTS (A+B+C+D) (2,980) F) CASH AND CASH EQUIVALENTS AT START OF YEAR 6,505 G) CASH AND CASH EQUIVALENTS AT END OF YEAR 3,525

The source (financing) and application (investment) of cash flows generated by the Bankia Group are mainly connected with the entity’s own, ordinary financial activity.


20.6.2. In the first quarter of 2011, there was a net reduction in the balance of the Group’s cash and cash equivalents of 2,980 million euros. The main changes that gave rise to this reduction were as follows:

• The cash flows arising from the consolidated profit of the first quarter, adjusted for the expenses and income that did not result in cash flows (essentially depreciation and amortisation charges, impairment losses, period provisions, exchange differences and unrealised revaluation gains or losses), represented an inflow of cash and cash equivalents of 442 million euros.

• The decrease in the Group’s operating assets represented a net increase in cash and cash equivalents of 6,842 million euros, of which 3,778 million euros related to the lower volume of the Group’s held-for-trading portfolio, 6,646 million euros related to the net reduction in the lending activity in line with the Group’s deleveraging policy and 957 million euros related to the reduction in other operating assets. The decline in these items, net of the cash outflow due to the increase in investment in financial assets classified as available-for-sale (mainly debt instruments) amounting to 4,539 million euros, gave rise to the net increase in cash and cash equivalents of 6,842 million euros mentioned above.

• The decline in the Group’s operating liabilities represented a net reduction in cash and cash equivalents of 8,909 million euros, relating mainly to deposits from central banks, which decreased by 9,571 million euros mainly because the Group drew down a smaller amount from the European Central Bank credit facility, and as a result of lower issues of marketable securities, which fell by 3,865 million euros in the quarter. However, this reduction in cash flows from cash and cash equivalents was partly offset by the increase in flows from customer deposits, which increased by 8,924 million euros due to the increase in new retail customer term deposits and in the repo activity in the first quarter of 2011.

As for its investing activities, the Group increased the assets in its held-to-investment portfolio, which led to a cash outflow of 1,477 million euros. The Group obtained cash flows of 121 million euros through its financing activities.


d) Sensitivity of the liquidity gap at 31 March 2011

The table below shows the Group’s liquidity gap according to the classification, by maturity, of the outstanding principal amounts of the financial assets and liabilities, taking as a reference the period remaining from the reporting date to the contractual maturity date. The liquidity gap at 31 March 2011 is as follows:

(Millions of euros)

On

demandLess than 1

month1 to 3 months3 months to 1 year 1 to 5 years

More than 5 years Total

Assets Cash and balances with central banks 2,355 1,064 - - - 106 3,525Loans and advances to credit institutions 274 5,714 1,061 3,284 1,076 627 12,037Loans and advances to customers 229 6,972 11,481 20,729 52,892 97,815 190,119Financial assets held for trading and other financial assets at fair value through profit or loss - 305 5 51 138 86 585Held-to-maturity investments - 5,169 129 317 2,229 2,694 10,538Other assets- Debt instruments 74 7,422 623 1,507 8,452 4,182 22,260Subtotal 2,931 26,647 13,300 25,889 64,787 105,511 239,064Liabilities Deposits from central banks and credit institutions 279 15,190 6,369 959 6,910 2,591 32,298Customer deposits, marketable debt securities and subordinated liabilities 46,321 26,783 15,427 46,682 47,910 28,393 211,517Subtotal 46,600 41,973 21,796 47,640 54,820 30,984 243,814TOTAL GAP (43,669) (15,327) (8,496) (21,752) 9,967 74,527 (4,750)CUMULATIVE GAP (*) (58,996) (67,492) (89,244) (79,277) (4,750)

(*) In the “cumulative gap”, the “on demand” balances were considered separately from the other maturities for liquidity analysis purposes, since the balances relating to customer deposits, although legally claimable on demand, have remained historically stable over time. For the calculation of the liquidity gaps, the government debt securities listed on deep, highly liquid markets were considered to mature at terms of one month, equal to the maturities of most of the repurchase agreements that have them as their underlying.


At 1 January 2011, the liquidity gap was as follows: (Millions of euros)

On demandLess than 1

month 1 to 3 months3 months to 1 year 1 to 5 years

More than 5 years Total

Assets Cash and balances with central banks 2,520 3,798 - - - 187 6,505Loans and advances to credit institutions 142 5,503 868 3,380 1,556 987 12,436Loans and advances to customers 97 8,181 9,144 23,240 54,842 98,287 193,791Financial assets held for trading and otherfinancial assets at fair value through profit orloss - 548 12 25 166 16 767Held-to-maturity investments 3 6,130 309 263 1,377 1,004 9,087Other assets- Debt instruments 50 3,190 1,076 2,091 8,326 6,084 20,817Subtotal 2,812 27,350 11,409 28,999 66,267 106,565 243,403Liabilities Deposits from central banks and creditinstitutions 481 23,235 6,343 2,006 6,834 3,431 42,329Customer deposits, marketable debtsecurities and subordinated liabilities 48,522 19,641 13,686 42,546 52,191 29,856 206,442Subtotal 49,002 42,876 20,029 44,552 59,025 33,287 248,771TOTAL GAP (46,190) (15,526) (8,619) (15,553) 7,242 73,278 (5,368)CUMULATIVE GAP (*) (61,716) (70,336) (85,889) (78,646) (5,368)

(*) In the “cumulative gap”, the “on demand” balances were considered separately from the other maturities for liquidity analysis purposes, since the balances relating to customer deposits, although legally claimable on demand, have remained historically stable over time. For the calculation of the liquidity gaps, the government debt securities listed on deep, highly liquid markets were considered to mature at terms of one month, equal to the maturities of most of the repurchase agreements that have them as their underlying.

This gap is the result of grouping financial assets and liabilities together by contractual maturity dates at 31 March 2011 and 1 January 2011, disregarding possible renewals. It is, therefore, an extremely prudent analysis of liquidity risk, given the historical performance of the Group’s financial liabilities, especially customer deposits (retail liabilities).

In managing its liquidity gap, and in order to cater for future funding maturities, the Group has certain liquid assets available to guarantee the commitments acquired in its lending activities. Most noteworthy among these assets are the securities included in the European Central Bank (Eurosystem) facility, which would provide immediate liquidity. The total undrawn balance of these securities at 31 March 2011 was 10,106,954 thousand euros.

20.6.3. Bankia’s pro forma financial information at 31 March 2011

On 31 March 2011, the Bankia Group presented financial information relating to its balance sheet and income statement for the first time, which is included in section 20.6.1.2. However, at that date, certain asset purchase and sale transactions, which are mentioned in section 5.1.5 (G), had not yet been formalised and will alter the Bankia Group’s scope. If these transactions had taken place in the first quarter of 2011, they would have modified the financial information presented by Bankia in March 2011.

The pro forma consolidated financial information was prepared with the sole purpose of providing information on Bankia, S.A. and the subsidiaries forming part of the Bankia Group, including the effects of the transactions mentioned above.


The pro forma consolidated financial information was prepared solely for illustrative purposes and, therefore, the pro forma financial data relate to a hypothetical situation and do not represent the Bankia’s Group’s financial position, actual results, the results of its operations or the financial and equity position at a potential date or for a period in the future.

Following is the detail of the bases of preparation of the accompanying pro forma financial information defined by the directors of Bankia, S.A. including the information sources and assumptions used. This section also includes a detailed description of the significant adjustments made by the directors of Bankia, S.A. in order to prepare the accompanying pro forma financial information.

20.6.3.1. Bases of preparation of the pro forma financial information at 31 March 2011

The financial information used as the starting point and basis for compiling the pro forma consolidated financial information is as follows:

a) The consolidated balance sheet of the Bankia Group at 31 March 2011, prepared by the directors of Bankia in accordance with the International Financial Reporting Standards adopted by the European Union (EU-IFRS) and taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments.

b) The consolidated income statement of the Bankia Group for the period from 1 January 2011 to 31 March 2011 prepared by the directors of Banco Financiero y de Ahorros, S.A. in accordance with the EU-IFRS and taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments.

c) Other unaudited information provided by each of the Cajas forming part of the Bankia Group for determining the adjustments detailed further below.

Since the accounting policies and measurement bases used in preparing the Bankia Group’s pro forma consolidated financial information for the period from 1 January 2011 to 31 March 2011 under EU-IFRS, while taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments, do not differ significantly from those used in the preparation of the aforementioned financial and accounting information, no adjustments or reclassifications were made to unify the policies and bases with those used by Bankia.

Furthermore, it is important to note that said pro forma financial information was prepared in accordance with the requirements of European Commission Regulation (EC) No 809/2004 and with the content of the CESR Recommendation for the consistent implementation of said regulation (CESR/05-054b).

For a correct interpretation of the pro forma income statement, the pro forma consolidated balance sheet and the explanatory notes thereto, these should be read in conjunction with the Bankia Group’s consolidated interim financial statements and explanatory notes thereto for


the period from 1 January 2011 to 31 March 2011, and the Bankia Group’s pro forma consolidated financial information for the year ended 31 December 2010.

In preparing the pro forma consolidated financial information of the Bankia Group, the following was taken into consideration:

a) The Bankia Group’s pro forma consolidated balance sheet at 31 March 2011 was prepared as if the transactions giving rise to the adjustments had taken place on 31 March 2011.

b) The Bankia Group’s pro forma consolidated income statement for the period from 1 January 2011 to 31 March 2011 was prepared as if the transactions giving rise to the pro forma adjustments had taken place on 1 January 2010.


20.6.3.2. The Bankia Group’s pro forma balance sheet and income statement at 31 March 2011

AJUSTE 1 2 3 4 5 6


BANKIA GROUP

Consolidated31/03/11

Sale of companies

to BFA

Acquisition of companies

from BFA

Acquisition of 49% of

BSF Decons. CISA Other

CMOF and GMRA

contracts

BANKIA GROUP

Pro forma31/03/11

Cash and balances with central banks 3,525 11 3,537Financial assets held for trading 12,724 968 13,692Other financial assets at fair value through profit or loss 104 104Available-for-sale financial assets 18,595 (142) 18,452- Debt instruments 16,625 16,624- Equity instruments 1,970 (142) 1,828Loans and receivables 207,755 0 308 697 (4,138) 9,696 214,316- Loans and advances to credit institutions 12,037 (4,482) 82 9,696 17,332- Loans and advances to customers 190,083 308 5,179 (4,220) 191,348- Debt instruments 5,636 5,636Held-to-maturity investments 10,538 10,538Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- --Hedging derivatives 2,515 2,515Non-current assets held for sale 1,984 41 2,025Investments 4,166 (1,501) (141) 191 2,715Insurance contracts linked to pensions 219 219Reinsurance assets 1 1Tangible assets 4,329 5 65 4,399Intangible assets 222 32 1 255Tax assets 4,551 157 94 4,802Other assets 3,165 1 1,714 (11) 4,869TOTAL ASSETS 274,393 (1,643) 308 803 (2,073) (11) 10,664 282,439Financial liabilities held for trading 10,856 66 968 11,890Other financial liabilities at fair value through profit orloss -- --Financial liabilities at amortised cost 245,262 (1,643) 596 720 (2,165) (11) 9,696 252,455- Deposits from central banks 9,706 9,706- Deposits from credit institutions 22,592 (1,643) 419 171 (2,165) (11) 9,696 29,059- Customer deposits 152,962 517 153,479- Marketable debt securities 58,239 58,239- Subordinated liabilities 316 316- Other financial liabilities 1,447 177 32 1,656Changes in the fair value of hedged items in portfolio hedges of interest rate risk -- --Hedging derivatives 497 497Liabilities associated with non-current assets held for sale -- --Liabilities under insurance contracts 354 354Provisions 1,888 3 1,891Tax liabilities 1,052 9 3 1,064Other liabilities 609 3 5 89 706Equity refundable on demand -- --TOTAL LIABILITIES 260,518 (1,643) 599 803 (2,073) (11) 10,664 268,857SHAREHOLDERS’ EQUITY 12,992 0 285 0 0 0 0 13,276Share capital, share premium and other reserves 13,026 285 13,310- Share capital 1,818 1,818- Share premium 10,200 10,200- Reserves plus profit attributable to the Parent 1,008 285 1,292Other equity instruments -- --Less: treasury shares (34) (34)Less: dividends and remuneration -- --VALUATION ADJUSTMENTS 75 4 79NON-CONTROLLING INTERESTS 807 (580) 227TOTAL EQUITY 13,875 0 (291) 0 0 0 13,582TOTAL LIABILITIES AND EQUITY 274,393 (1,643) 308 803 (2,073) (11) 10,664 282,439


AJUSTE 1 2 3 4 5

INCOME STATEMENT (Millions of euros)

BANKIA GROUP


Sale of companies to

BFA

Acquisition of companies from

BFA

Acquisition of 49% of

BSF

DeconsolidationCISA and assets

sold to BFA Other

BANKIA GROUP Pro

forma 31/03/11

Interest and similar income 1,726 1 42 (2) 1,767Interest expense and similar charges (1,196) (1) (15) 5 75 (1,132)NET INTEREST INCOME 530 27 3 75 635Income from equity instruments 4 4Share of results of entities accounted for using the equity method 46 (47) 1 0Net fee and commission income 288 1 289Gains (losses) on financial assets and liabilities and exchange differences (net) 88 14 103Other operating income (net) 18 17GROSS INCOME 974 (47) 43 3 75 1,048Administrative expenses (422) (10) (432)Staff costs (255) (4) (259)Other general administrative expenses (167) (6) (173)Depreciation and amortisation charge (79) (1) (80)NET INCOME 474 (47) 32 3 75 537Provisions (net) 28 29Impairment losses on financial assets (net) (526) (15) 17 (524)PROFIT (LOSS) FROM OPERATIONS (24) (47) 17 20 75 41Impairment losses on other assets (net) 3 3Gains (losses) on disposal of assets not classified as non-current assets held for sale (3) (3)Negative goodwill on business combinations -- --Gains (losses) on non-current assets held for sale not classified as discontinued operations 95 (4) (7) 84PROFIT (LOSS) BEFORE TAX 72 (47) 0 13 13 75 125Income tax (7) (3) (4) (23) (37)Profit (loss) from discontinued operations (net) 0 0PROFIT (LOSS) FOR THE YEAR 64 (47) 0 10 9 52 88PROFIT (LOSS) ATTRIBUTABLE TO THE PARENT 35 (47) 33 9 9 52 91PROFIT (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 29 0 (33) 1 0 0 (3)


20.6.3.3. Explanation of the adjustments made in the pro forma financial information at 31 March 2011

Assumptions used

The following assumptions were used in the preparation of the consolidated pro forma financial information:

• For the purposes of preparing the pro forma consolidated income statement for the period from 1 January 2011 to 31 March 2011, Bankia was considered to have been incorporated and operating since 1 January 2010 and that it has prepared consolidated financial statements in accordance with the International Financial Reporting Standards adopted by the European Union (EU-IFRS), taking into account Bank of Spain Circular 4/2004 of 22 December and related amendments since that date.

• In this regard and solely for the purposes of calculating the effects on the pro forma consolidated income statement, all the spun-off assets were considered to have been owned by Bankia since 1 January 2010.

• In preparing these pro forma financial statements, consideration was made of the impact of certain events already performed or in progress at the date of this report, subsequent to 31 March 2011, namely: the sale of certain investments of Bankia to BFA (see Adjustment 1), the spinoff of Cartera de Inmuebles, S.A. “CISA” and the purchase and sale between Bankia and BFA of certain financial and property assets (see Adjustment 4), the acquisition from BFA of certain investments (see Adjustment 2) and the full consolidation of the BSF Group following the acquisition of an additional 49% share (see Adjustment 3).

• Within the second spinoff, under Spanish law, BFA retained the legal ownership of certain hedging derivatives amounting to 968 million euros at 31 March 2011 and of repurchase agreements amounting to 9,696 million euros at said date, whose hedged assets and liabilities and underlying debt, respectively, were also retained on BFA’s balance sheet. However, for operational reasons and for the purposes of international law, Bankia continued to be the counterparty with regard to the third parties for these derivatives and repurchase agreements.

In this regard, to provide contractual support to the arrangement described above, on 25 May 2011 BFA and Bankia entered into a financial transaction framework agreement (“CMOF”) in order to hedge the derivative transaction between the two entities. The object of the framework agreement is for BFA to enter into, through Bankia, the interest rate risk hedging derivatives of the assets and liabilities that BFA has on its balance sheet. Therefore, in operational terms, Bankia has subrogated the Cajas’ position with said third parties and, in turn, has entered into derivatives with BFA that “mirror” these positions, which are provided for in the CMOF (see Adjustment 6).


Similarly, on 25 May 2011, BFA and Bankia entered into a global master repurchase agreement (“GMRA”) and an agreement covering transfers as collateral. The object of the GMRA is to hedge BFA’s operations whereby it enters into, through Bankia, repurchase agreements whose underlying assets are fixed-income securities amounting to 10,000 million euros that BFA retains on its balance sheet. By virtue of the aforementioned CMOF and GMRA agreements entered into by Bankia and BFA, consideration was made of the effects on the Bankia Group’s pro forma consolidated balance sheet at 31 March 2011 of Bankia’s subrogation in the derivative contracts associated with BFA’s assets and liabilities, mainly fixed income securities and debt issues, and its replacement as the counterparty of the repurchase agreements that BFA held at that date (see Adjustment 6).

• On 1 April 2011, the term deposit granted by BFA to Bankia for 4,465 million euros was cancelled. This was associated with the payment made by the FROB in the subscription of the issue of convertible preference shares launched by BFA in December. Subsequently, a demand deposit was constituted at BFA for the same amount and accruing interest at market rates for this type of deposit. In preparing the pro forma income statement, the impact of this cancellation and the constitution of the new demand deposit were taken into account as if they had been performed on 1 January 2011 (see Adjustment 5).

• The related tax effect of the pro forma adjustments was calculated, where necessary, using a 30% tax rate, except in certain exceptional cases in which a reversal of the tax adjustment was made for the exact amount included in the item.

Description of the pro forma adjustments

Adjustment 1 – Sale of Mapfre, Mapfre América, Indra and Grupo Su Casita, S.A., S.C.V. to BFA

The directors of Bankia arranged the sale of its investments in Mapfre, S.A., Mapfre América, S.A., Indra, S.A. and Grupo Su Casita, S.A., S.C.V., through the instrumentality company CM Invest 1702 Corporación Internacional E.T.V.E., S.L., to BFA in June 2011, and, accordingly, these sales were considered to have been performed on 1 January 2010 for the purposes of eliminating the gains contributed by these investments from Bankia’s pro forma consolidated income statement for the period from 1 January 2011 to 31 March 2011. Therefore, the gains generated by these investments are not considered as part of Bankia’s pro forma consolidated income statement. Therefore, a pro forma adjustment amounting to 47 million euros was recognised to eliminate this income.

For the purposes of the presentation of Bankia’s pro forma consolidated balance sheet, these sales were considered to have been performed at 31 March 2011.

Considering that the carrying amount of these investments recognised on Bankia’s books at 31 March 2011 was 1,110 million, 142 million, 391 million and 0 million euros, respectively, adjustments were made to Bankia’s pro forma consolidated balance sheet for these amounts, recognising income in the interbank account between Bankia and BFA, with a balancing entry


under “Investments in Associates” for Mapfre, S.A., Indra, S.A. and Grupo Su Casita, S.A., S.C.V. and under “Available-for-Sale Financial Assets” in the case of Mapfre América, S.A.

Adjustment 2 – Corporación Financiera Caja Madrid, S.A. – Arrendadora Aeronáutica, A.I.E.

In June 2011, the directors of Bankia completed the acquisition from BFA of certain companies, the largest being the 48.64% investment it holds in Corporación Financiera Caja Madrid, S.A. and the 64.73% investment it holds in Arrendadora Aeronáutica, A.I.E. and, accordingly, in the preparation of the pro forma consolidated financial statements this acquisition was considered to have been performed on 1 January 2010. Subsequently, Arrendadora Aeronáutica, A.I.E. was fully consolidated by Bankia.

As a result, Arrendadora Aeronáutica A.I.E., which was not previously included in Bankia’s scope of consolidation, was fully consolidated by the Bankia Group. Furthermore, as the ownership interest in Corporación Financiera Caja Madrid, S.A. was 51% prior to this acquisition of the remaining 48.63%, this investment was already fully consolidated. Therefore, the only adjustment made on the balance sheet and income statement was the elimination of the non-controlling interests and the profit attributable to non-controlling interests, respectively, relating to this investment.

Adjustment 3 – Acquisition of 49% of Banco de Servicios Financieros Caja Madrid - Mapfre, S.A. (“BSF”)

The directors of Bankia formalised the acquisition from Mapfre, S.A., of 49% of the share capital of Banco de Servicios Financieros Caja Madrid - Mapfre, S.A. on 13 May 2011. For the purposes of preparing these pro forma financial statements, the transaction price was considered to be the carrying amount of the remaining investment in Banco de Servicios Financieros Caja Madrid - Mapfre, S.A., which Bankia had recognised on the balance sheet at 1 January 2010 and the acquisition did not give rise to any gain or loss in the income statement.

Subsequent to this acquisition, Bankia will hold 100% of the share capital of Banco de Servicios Financieros Caja Madrid – Mapfre, S.A. and, accordingly, the necessary adjustments were made to the pro forma consolidated balance sheet at 31 March 2011 and the pro forma income statement for the period from 1 January 2011 to 31 March 2011 in order to fully consolidate this investment at Bankia since, when it held 51% of the share capital of Servicios Financieros Caja Madrid – Mapfre, S.A., it classified this investment as a jointly controlled entity and accounted for it using the equity method in accordance with the prior agreements with Mapfre, S.A.

The assets and liabilities disclosed in the consolidation process of this investment include deferred tax assets amounting to 151 million euros, of which 116 million euros arose from tax assets at BSF subsidiaries and 35 million euros relate to temporary differences with regard to the measurement of financial instruments and other provisions.


Adjustment 4 – Spinoff of CISA and sale of other land-related assets

At 1 January 2011, Cartera de Inmuebles, S.L. Unipersonal (“CISA”) held total assets of slightly over 5,000 million euros, mainly foreclosed and acquired assets (approximately 3,600 million euros). On the liability side, CISA had bank borrowings amounting to almost 5,000 million euros. By virtue of the aforementioned spinoff, 1,500 million euros of these loans were granted by BFA and the remainder, i.e. approximately 3,500 million euros, were granted primarily by Bankia.

On 7 June 2011, a public deed was executed for the total spinoff of CISA, Cartera de Inmuebles, S.L. Unipersonal and its integration in CISA 2011, S.L. (a newly formed subsidiary owned directly by BFA whose main assets will be land assets) and in Bancaja Hábitat S.L. Unipersonal (a Bankia group subsidiary). By virtue of this public deed, Bancaja Hábitat, S.L.U., a Bankia Group subsidiary, receives assets and liabilities associated with completed properties, properties under construction and administrative concessions. The assets spun off to Bancaja Hábitat amounted to 2,000 million euros and consisted of property, plant and equipment, inventories, investments in companies and tax assets (the main source of which were the temporary differences relating to the measurement of property, plant and equipment of approximately 78 million euros). On the liability side, debts payable to Bankia were spun off to Bancaja Hábitat amounting to approximately 2,000 million euros, which were eliminated in the pro forma balance sheet against loans granted by Bankia for an identical amount.

An adjustment was also made in relation to Bankia’s replacement by BFA as creditor of CISA 2011 in various loans secured by land amounting to approximately 1,309 million euros and the balance of the interbank account between BFA and Bankia was reduced by the same amount. At the date of this report, this transaction is still being processed.

Bankia’s pro forma consolidated balance sheet at 31 March 2011 takes into account the effect of integrating the assets and liabilities of the spun-off company, Bancaja Hábitat, S.L.U. and the estimated income and expense generated by the assets and liabilities of this company in the period from 1 January 2011 to 31 March 2011 were recognised in the pro forma consolidated income statement.

Bankia also intends to sell to BFA land-secured loans and additional land for 671 million euros and 318 million euros respectively recognised under “Loans and Receivables” and “Other Assets” in the pro forma consolidated balance sheet at 31 March 2011, thereby reducing the balance of the interbank account between BFA and Bankia. At the registration date of this document, the land sale had not yet been formalised.

Adjustment 5 – Adjustment of the interest rate applied to the “FROB” mirror deposit to market rates

The preference shares issued by BFA for 4,465 million euros which were subscribed by the FROB and accrue interest at 7.75% p.a. are held at BFA, which has constituted deposits at Bankia for the same amount that accrue the same rate of interest. The directors of Bankia


adjusted the interest accrued on these deposits to the market interest rate for interbank deposits. As a result, Bankia’s finance expenses were adjusted in its consolidated income statement for the period from 1 January 2011 to 31 March 2011 for the difference between the current interest rate of these deposits and the market rate.

Adjustment 6 – “CMOF” and “GMRA” agreements

By virtue of the “CMOF” and “GMRA” agreements entered into by Bankia and BFA on 25 May 2011, mentioned in “Assumptions Used”, consideration was made of the effects on the Bankia Group’s pro forma consolidated balance sheet at 31 March 2011 of Bankia’s subrogation in the derivative contracts associated with BFA’s assets and liabilities, mainly fixed income securities and debt issues, and its replacement as the counterparty of the repurchase agreements that BFA held at 31 March 2011 in the amount of 9,696 million euros. In this regard, the effects of these transactions on the Bankia Group’s pro forma income statement were not considered significant, since the prices applied to BFA for this operation were not adjusted to market conditions after the agreements were entered into, the annual return on which is estimated at approximately 5 million euros (1.25 million euros per quarter) for Bankia.

It is important to note that the aforementioned hedging derivatives on BFA’s assets and liabilities are, at the same time, economic hedges for Bankia, as each derivative purchased or sold is economically and fully hedged by a symmetrical “mirror” derivative and, accordingly, no effect is generated on Bankia’s income statement (their value is offset by the symmetrical value of the “mirror” derivative). On Bankia’s balance sheet, these derivatives are recognised under “Financial Assets Held for Trading - Trading Derivatives” and “Financial Liabilities Held for Trading - Trading Derivatives”.

The main differences arising between the Bankia Group’s consolidated interim balance sheet and income statement at 31 March 2011 and the Bankia Group’s pro forma balance sheet and income statement at the same date after applying the adjustments described above are as follows:

• Loans and advances to customers: this increases by 1,267 million euros as a result of the full consolidation of Banco de Servicios Financieros Caja Madrid-Mapfre S.A.

• Investments: the amount in this heading falls by 1,451 million euros as a result of the disposal of investments in Mapfre, Mapfre América, Indra and CM Invest 1702 Corporación Internacional ETVE, S.L.

• Other assets: this heading increases by 1,704 million euros because the contribution of assets, mainly building space, from the CISA spinoff is considered to have been completed.

• Financial liabilities at amortised cost: this increases by 7,193 million euros primarily as a consequence of the combined effect of (i) an increase of 9,696 million euros in deposits from credit institutions as a result of Adjustment 6 described above, (ii) an increase of approximately 1,305 million euros due to the full consolidation of Banco de Servicios Financieros Caja Madrid-Mapfre, S.A. and Arrendadora Aeronáutica, A.I.E.


and (iii) a reduction of 3,808 million euros as a result of the formalisation of the sales by Bankia of Mapfre, Mapfre América, Indra and CM Invest 1702 Corporación Internacional ETVE, S.L., and the sale of land-related financing to Banco Financiero y de Ahorros, thereby decreasing the balance of the interbank account between Banco Financiero y de Ahorros and Bankia.

• Net interest income: this item increases by 105 million euros in respect of the amount recognised in the audited consolidated income statement at 31 March 2011 as a result of the full consolidation of Banco de Servicios Financieros Caja Madrid-Mapfre, S.A. and the lower finance expenses connected with the adjustment to the higher interest rate cost of the deposits described in Adjustment 5 above.

• Gross income: this income statement item increases by 74 million euros due to the full consolidation of Banco de Servicios Financieros Caja Madrid-Mapfre, S.A. and the improvement in the net interest income described in the previous point, after eliminating the results of Mapfre, Mapfre América, Indra and CM Invest 1702 Corporación Internacional ETVE, S.L., which were sold to Banco Financiero y de Ahorros.

20.6.3.4. Special auditor’s report

On 17 June 2011, the Bankia Group’s auditor, Deloitte, S.L., issued a special report on the Bankia Group’s pro forma financial information at 31 March 2011.

This special report contained the following declarations:

• That the accompanying pro forma financial information was compiled adequately on the basis of the assumptions defined by the directors of Bankia, S.A.U.; and

• That the accounting basis used by the directors of Bankia, S.A.U. in the preparation of the accompanying pro forma financial information is consistent with the accounting policies used by the directors of Bankia, S.A.U. in the preparation of the “Consolidated interim financial statements and explanatory notes for the period from 1 January to 31 March 2011”.

20.6.4. If the registration document is dated more than nine months after the end of the last audited financial year, it must contain interim financial information, which may be unaudited (in which case that fact must be stated) covering at least the first six months of the financial year)

Not applicable


20.7. Dividend policy

20.7.1. The amount of the dividend per share for each financial year for the period covered by the historical financial information, adjusted, where the number of shares in the issuer has changed, to make it comparable

The Group’s dividend policy and the amount of dividends, if any, distributed in the future will depend on a series of factors that include profit, the financial position, cash requirements (including investment requirements), the amounts allocated to the legal reserve, future expectations for the business and other factors that are deemed appropriate at any given time.

In any event, the dividend policy will be that approved by the shareholders at the General Meeting, in accordance with the proposed distribution of profit of each financial year submitted to their approval by the Bank’s Board of Directors.

The Company plans to set its dividend policy on the basis of the Group’s results, financial structure, and the maintenance of prudent capital ratios and for it to be in line with other market practices and with industry peers. In this regard, the current level of dividends distributed is around 50% of the Group’s net attributable Group profit.

20.8. Legal and arbitration proceedings

Bankia is not subject currently, nor has it been in the last twelve months, to legal or arbitration proceedings other than those identified below that might have, or have had, significant effects on the Bank or on its financial position or return.

The Issuer considers that the legal contingencies, if any, that might arise from all the procedures described below will not have an adverse material impact on the Bankia Group’s financial position.

The main litigation and claims in progress against the Cajas and their subsidiaries that, at the date of this prospectus and arising from their integration in Bankia, form part of Bankia are as follows:

1. Aviva. Bancaja and Aviva entered into a bancassurance alliance through various agreements signed in May 2000. The essential purpose of these agreements was to establish an exclusive alliance for the development, marketing and banking distribution of personal insurance and pension plans through the Bancaja network, under the terms and conditions regulated in detail in the agreements. The alliance was implemented through the acquisition by Aviva of 50% of the share capital of Aseval. Aviva maintains that the spinoff of the banking and bank-related business of Bancaja to Banco Financiero y de Ahorros constitutes a breach of these agreements and that, pursuant to the provisions thereof, Bancaja is obliged to acquire from Aviva its ownership interest in Aseval, in accordance with the terms of said agreements. Bankia denies the existence of this breach and has declared to Aviva on numerous occasions its intention to comply with the agreements. Aviva applied for an injunction with regard to Bancaja’s non-recognition of Aviva’s right of objection to the spinoff of assets to Banco Financiero de Ahorros. Madrid Commercial Court number 12 issued an order on 12 May 2011 dismissing the measures requested by Aviva and ordering the latter to pay costs. As a


result, an interlocutory order was issued on 27 May 2011 confirming the preparation of the appeal filed by Aviva and ordering the latter to file the appeal within 20 days. On 13 June 2011, notice was given of the request for arbitration filed by Aviva Europe, SE before the Court of Arbitration of the Madrid Chamber of Commerce in relation to the possible breach of the contracts or shareholder agreements entered into in May 2000 (“the Shareholders Agreement”). The request calls for (i) the declaration of a breach of the Aseval Shareholders Agreement of 18 May 2000 and (ii) the recognition of the legitimacy of the right to a sale option on its shares in Aseval. Within the legally established period of 15 days, Bankia responded to the request for arbitration by reiterating, inter alia, that, in its opinion, no breach of the Shareholders Agreement had occurred as a result of the transfer of Aseval and that the new situation does not prevent the commitments established with Aviva Europe, S.A. from being fulfilled.

2. Rankia: section 11.2 of this prospectus includes a brief description of the objection made by the entity that owns the Rankia brand.

3. Claim filed against Caja Madrid by Agrosevibeja S.L., for 8.5 million euros in which it requests : 1) an action to declare null and void the dation in payment agreement of 1 June 1995; 2) if the aforementioned claim is not upheld, an action to declare null and void the entries regarding registered property 7806 that are on record at Madrid Property Registry 16; and 3) a declaration of unjust enrichment amounting to 8,432,700 euros. In January 2008 a favourable ruling was handed down at first instance, which dismissed the claim with an order to pay costs. In February 2010 a favourable ruling was handed down at second instance. The claimant has filed an appeal against the ruling, which is in progress.

4. The Gescartera case: on 13 October 2009, Spain’s Supreme Court handed down Ruling no. 986/2009 relating to the cassation appeal filed by Caja Madrid Bolsa, which partially set aside Ruling no. 18/08 of 25 March 2008, handed down by Panel Four of Criminal Chamber 10 of the National Appellate Court. With regard to Caja Madrid Bolsa, the aforementioned Supreme Court Ruling partially upheld the cassation appeal that had been filed, restricting its secondary third-party liability exclusively to the amounts misappropriated by the persons responsible at Gescartera of (i) the funds managed by Caja Madrid Bolsa and (ii) subject to the duration of the sub-custodian agreement entered into with Gescartera but not to the total amount of the investments not recovered by Gescartera’s customers. The National Appellate Court will be responsible for determining the amount of the liability in the course of the proceedings, with any expert assistance that may be required, under the adversarial system and hearing the parties.

5. Claim filed by Ribertierra, S.L. against Caja Madrid and Altae Banco S.A. for 25.2 million euros due to deficient advice on bank financing secured by Landsbanki bonds. The hearing set for 20 June 2011 has been adjourned. The new date for the hearing has not yet been notified.

6. Collective claim against Caja Madrid and other international entities filed by the parties adversely affected by the declaration of insolvency of Lehman Brothers, in progress in the US courts. A system of collective defence has been arranged. The claim against the insurance companies relates to inaccurate information from the issuer, in particular


reference to the 2006 financial statements and the quarterly reports submitted subsequently. The only defence allowed for the insurers of the issues in these cases is that they carried out a due diligence process that reasonably concluded that the information was accurate, since the insurers, merely because they are insurers, would be responsible for the accuracy of the issuer’s statements. This is in progress.

7. Rounding clause. On 10 October 2002, the Madrid Provincial Appellate Court handed down a ruling upholding in its entirety the ruling handed down by Court no. 50. Caja Madrid filed a cassation appeal against this ruling and, during the related proceedings, the Supreme Court resolved to apply to the European Court of Justice in Luxembourg for a preliminary ruling with regard to the transposition of Council Directive 93/13/EEC on consumer contracts to domestic legislation. At this stage of the proceedings, a ruling was handed down on 3 June 2010 recognising the domestic legislator’s right to extend the control of unfair terms to basic elements of contracts. As a result and in view of this ruling, on 23 June 2010 Caja Madrid submitted a written request to withdraw the cassation appeal. The Court ruled in favour of this withdrawal and declared the proceedings closed.

Similarly, on 15 May 2007, the Court of First Instance no. 36 of Barcelona handed down a ruling declaring null and void the rounding-up clause used by Caixa d’ Estalvis Laietana and ordered amounts to be repaid; on 22 September 2008, Panel 15 of the Barcelona Provincial Appellate Court handed down a ruling partially upholding the appeal filed by the entity, confirming the two judgements mentioned above. The cassation appeal filed by Caixa Laietana was dismissed on formal grounds and, accordingly, the Provincial Appellate Court ruling is final. Occasional claims from customers are handled on a case-by-case basis, bearing in mind that in 2002 the rounding-up clause was removed from new transactions.

8. Inmobiliaria García Lacunza S.L. versus Bancaja. This company requests Bancaja to approve a loan to the property developer or, alternatively, to provide compensation for damage and losses caused by not granting a loan to the property developer when the subrogation to a mortgage loan for the financing of land had been accepted. Preliminary hearing set for December 2011.

9. Derivatives and hedges: at the date of this prospectus, there are 154 proceedings in progress relating to claims on the marketing of derivatives and hedges, in respect of which 16 rulings have been handed down in favour of Bankia and 18 against, and 5 final judgments at first instance in favour of Bankia and 1 final judgment against. These claims amount to approximately 8.6 million euros in total, to which the total cancellation costs of the derivatives on the market, amounting to 6.1 million euros, would have to be added.

Recently a request for preliminary measures filed by the Adicae association was received, in order to provide the details of the individuals who are the owners of the derivative products (which mainly affects the portfolio of customers from Caja Madrid). An objection was made to this request and the Court ruled that the preliminary measure should not be carried out. It set 30 June 2011 as the date for the mandatory hearing for ruling on the objection made.


10. Land clauses: Bankia has become aware of the news of a collective claim filed by Adicae (the Spanish Association of Users of Banks, Savings Banks and Insurance), with the support of four hundred signatures of aggrieved parties, against the so-called “land clauses”, which set a minimum interest rate that must be paid on mortgage loans, thereby preventing borrowers from benefiting from possible reductions in the Euribor interest rate. The defendant parties are, in turn, all the entities that use this type of clause in their contracts, namely, banks and savings banks that have granted mortgage loans under these conditions. However, at the date of this prospectus, Bankia has not received any notification with regard to this claim. Furthermore, neither Caja Madrid nor Bancaja (from which Bankia received most of its customer base) use this type of clause in their mortgage loans.

20.9. Significant change in the issuer’s financial or trading position

As explained in detail in section 5.1.5 of chapter III of this prospectus, on 23 May 2011, after registering the First Spinoff on the same date, the spinoff to Bankia was registered at the Companies Registry of part of the business assets of Banco Financiero de Ahorros received from the Cajas by virtue of the First Spinoff, consisting of its entire financial and banking business, the investments associated with the financial business and the other assets and liabilities that it received from the Cajas by virtue of the First Spinoff and through other securities by virtue of the Integration Agreement, excluding certain assets and liabilities.

Since 31 March 2011, no significant change has occurred in Bankia’s financial or trading position and no other important events have occurred in the Bank’s activity except those described above or mentioned in this registration document.

21. ADDITIONAL INFORMATION

21.1. Share capital

21.1.1. The amount of issued capital, and for each class of share capital:

At the date of registration of this registration document, the nominal value of the share capital issued by Bankia amounts to one thousand eight hundred and sixteen thousand (1,816,000,000) euros represented by nine hundred and eight million (908,000,000) registered shares, fully subscribed and paid, with a par value of two euros (2 euros) each, belonging to a single class and series. All the Bank’s shares are traded by the book entry system.

a) the number of shares authorised;

At the date of this registration document, the Bank’s shareholders at the General Meeting have not authorised the issue of any shares other than those already issued, except for those that are the subject of this Offering.

b) the number of shares issued and fully paid and issued but not fully paid;

All the issued shares are fully paid.


c) the par value per share, or that the shares have no par value;

All the shares representing the Bank’s share capital have a par value of 2 euros each.

d) a reconciliation of the number of shares outstanding at the beginning and end of the year. If more than 10% of capital has been paid for with assets other than cash within the period covered by the historical financial information, state the fact.

At the date of this registration document, the number of shares outstanding was 908,000,000.

21.1.2. If there are shares not representing capital, state the number and the main characteristics of such shares

There are no shares not representing the Bank’s capital.

21.1.3. The number, book value and face value of shares in the issuer held by or on behalf of the issuer itself or by subsidiaries of the issuer

At the date of this registration document, the Bank does not hold any treasury shares either directly or through subsidiaries.

On 16 June 2011, the Sole Shareholder of Bankia gave authorisation to the Board of Directors for the derivative acquisition of treasury shares according to the limits requirements established in law. Accordingly, Bankia may make a derivative acquisition of treasury shares over a period of five years. The price or equivalent value will range from a minimum equal to par value to a maximum equal to the closing market price of the shares on the Spanish Stock Market Interconnection System on the acquisition date. Any shares acquired as a result of this authorisation may be either disposed of or redeemed, or allocated to employee remuneration schemes, as set forth in Article 146.1 ter. 1 of the Spanish Limited Liability Companies Law.

21.1.4. The amount of any convertible securities, exchangeable securities or securities with warrants, with an indication of the conditions governing and the procedures for conversion, exchange or subscription

At the registration date of this registration document, there are no exchangeable securities or securities convertible into shares or warrants issued by the Bank or in existence.

However, on 16 June 2011, the Sole Shareholder of Bankia resolved to delegate to the Board of Directors the power to issue, over a five-year period from the adoption of the resolution, debentures and any other similar securities convertible into shares newly issued by the Company and/or exchangeable into outstanding shares of the Bank, and warrants or other similar securities carrying the right to subscribe or acquire Bank shares, either newly-issued or outstanding.

Securities which the Board of Directors is empowered to issue by virtue of this resolution may be issued once or several times, at any time within the maximum five-year period as from the date of adoption of the resolution.


The total maximum amount of the securities issuance or issuances covered by the authorisation is four thousand million euros (4,000,000,000 euros) or its equivalent in another currency.

In the case of warrants, the calculation of the aforementioned limit must take into account the aggregate premiums and the exercise price of the warrants of each issuance that may be approved in accordance with this authorisation.

21.1.5. Information about and terms of any acquisition rights and or obligations over authorised but unissued capital or an undertaking to increase the capital

At the date of this registration document, there are no acquisition rights or obligations over authorised but unissued capital or an undertaking to increase capital.

21.1.6. Information about any capital of any member of the group which is under option or agreed conditionally or unconditionally to be put under option and details of such options including those persons to whom such options relate

At the date of this registration document, no member of the Bank has capital which is under option or agreed conditionally or unconditionally to be put under option.

21.1.7. A history of share capital, highlighting information about any changes, for the period covered by the historical financial information

The Bank was incorporated on 1 January 1964. At 1 January 2011, the share capital of Bankia (then called Altae Banco, S.A.) amounted to 18,040,000 euros, represented by four million registered shares, with a par value of four euros and fifty-one cents (4.51 euros) each. The following table details the changes occurring in the share capital since 1 January 2011:

Nominal amount (euros)

Issued shares Resulting number of shares

Resulting face value (euros)

Capital increase (23/05/11) 1,800 million 900 million 908 million 2

Share split (31/05/11) -- 1,816 million 1,816 million 1

Share reverse split (24/06/11) 1.816 million 908 million 2

The share capital at the date of this registration document amounts to one thousand eight hundred and sixteen thousand (1,816,000,000) euros represented by nine hundred and eight million (908,000,000) registered shares, fully subscribed and paid, with a par value of two euros (2 euros) each, belonging to a single class and series.


21.2. Memorandum and Articles of Association

21.2.1. A description of the issuer’s objects and purposes and where they can be found in the memorandum and articles of association

Pursuant to Article 2 of the Bylaws (articles of association):

“1. The Company’s object consists of:

a) the performance of all kinds of activities, transactions, acts, agreements and services specific to the banking business in general or related to it directly or indirectly and that it is permitted to perform under prevailing legislation, including the provision of investment and ancillary services and the performance of insurance agency activities, on an exclusive or tied basis, but not including the simultaneous performance of both; and

b) the acquisition, use and disposal of all kinds of marketable securities, including, but not limited to, investments in other credit institutions, investment services companies, insurance companies or insurance intermediaries, as permitted by prevailing legislation.

2. The activities included in the company object may be carried on by it, in full or in part, indirectly by any lawful means and, in particular, through the holding of shares and equity interests in companies whose object is identical, similar, ancillary or supplementary to such activities.”

21.2.2. A summary of any provisions of the issuer’s articles of association, statutes, charter or bylaws with respect to the members of the administrative, management and supervisory bodies

Bylaws

The Bylaws establish the following points of most significance with regard to the members of the Bank’s governing, management and supervisory bodies:

– The Board of Directors will comprise a number of members no fewer than 5 and no more than 19, which will be determined by the shareholders at the General Meeting.

– At the General Meeting, the shareholders will attempt to ensure that, as far as possible, in the composition of the Board of Directors the non-executive directors represent a broad majority with respect to the executive directors and include a reasonable number of independent directors. At the General Meeting, the shareholders will attempt to ensure that the number of independent directors is close to the number set forth in the good corporate governance recommendations.

– The definition of the non-executive, proprietary, independent and executive directors is that established by legislation, the Bylaws or as specified in the Board Regulations.

– The Board of Directors will appoint the Chairman and Sole Executive Deputy Chairman from among its members and may designate a Chief Executive Officer. It will also


appoint a Secretary. The persons appointed Chairman or Deputy Chairman must be members of the Board of Directors but this is not necessary for the person appointed Secretary, who will have the right to speak but not to vote. The Board of Directors also has the power to appoint a Deputy Secretary who is not obliged to be a Board member.

– The Board of Directors will generally meet once a month and whenever called by the Chairman, acting on his own initiative or at the request of four directors. In the latter case, the Chairman will call the extraordinary meeting in a maximum period of three working days from receipt of the request, to be held in the following three working days, and will include in the agenda the items forming part of the meeting.

– The Board meetings will be called by individual notification sent by fax, e-mail or standard mail and will be authorised at least five (5) days in advance, unless the urgent nature of the items to be discussed, in the Chairman’s opinion, requires an urgent call notice, which will be made by telephone, fax, e-mail or any other electronic means with sufficient prior notice to enable the directors to fulfil their duty to attend.

– The meetings of the Board of Directors may be also be held by videoconference, conference call or any other similar method that might exist in the future, unless four directors express their objection to the use of these means.

– The Board of Directors may also adopt resolutions in writing (including fax or e-mail beforehand and the subsequent delivery of the original document by standard mail) with no need to hold a meeting, if none of the directors opposes this procedure.

– Without prejudice to the foregoing, the meeting of the Board of Directors will be deemed validly convened without the need for a call notice if all its members, in person or by proxy, unanimously agree to hold the meeting and to the items on the agenda.

– The Board meetings will be quorate when attended, in person or by proxy, by one half plus one of the members.

– The resolutions will be adopted by an absolute majority of the attendees at the meeting, except in cases in which the law provides for qualified majorities. The Chairman will have the casting vote in the event of a tie.

– The directors’ remuneration will comprise a fixed regular amount and fees for attending the meetings of the Board of Directors and its committees, without prejudice to the repayment of related expenses, and the possibility of receiving part of the remuneration in shares of the Company. The Board of Directors is responsible for setting this amount, its distribution among the various directors and the frequency of payment.

– The executive directors will also be entitled to receive remuneration consisting of (a) a fixed amount, commensurate with the services provided and the responsibilities undertaken; (b) a variable amount, related to an indicator of the performance of the director or the company; (c) welfare benefits, including the relevant pensions and insurance schemes; and (d) compensation in the event of separation or any other form of cancellation of the legal relationship with the Bank not caused by non-fulfilment attributable to the director.


– The Board of Directors is also responsible for determining the amount of the remuneration items comprising the fixed amount, the types of configuration of the indicators used to calculate the variable amount, the welfare plans and the amounts of compensation or the criteria used to calculate them. In any event, the remuneration of the members of the Bank’s governing bodies will be adjusted to the provisions thereon contained in corporate and banking regulations.

– The Board of Directors may create and maintain among its members an Executive Committee, and must create an Audit and Compliance Committee, a Nominations and Remuneration Committee, and a Board Risk Committee, whose structure, functions and rules on procedures will be regulated, where not provided for in the Bylaws, by the Board Regulations.

– Furthermore, the Board of Directors may also create committees or commissions with powers as determined by the Board of Directors itself.

At its meeting held on 16 June 2011, in anticipation of the admission to trading of the Bank’s shares on the stock exchanges, the Board of Directors approved the Board Regulations, of which the Sole Shareholder was informed on 16 June 2011 (“the Board Regulations”).

The purpose of the Board Regulations is to determine the business principles of Bankia’s Board of Directors, the basic rules on its procedures and the rules of conduct of its members, the most important aspects being as follows:

– Except with respect to matters for which the General Meeting has sole responsibility, the Board of Directors is the Bank’s senior decision-making body. This is without prejudice to the powers and authorisations granted to the Chairman of the Board of Directors in accordance with the Bylaws.

– The Board’s policy is to delegate the conduct of the Bank’s ordinary operations to the management team and to focus on the general supervisory function and on the consideration of matters that are of particular importance to the Bank.

– The Board of Directors, in exercising its powers of proposal to the shareholders at the General Meeting and of co-option to fill vacancies, shall ensure that (a) the non-executive directors are in broad majority with respect to the executive directors and include a reasonable number of independent directors; and (b) there is an on-going professionalisation of the Board of Directors, taking into consideration where possible the recommendations of good corporate governance. In order to qualify the nature of the directors as executive, proprietary or independent, the recommendations of the Ministry of Economy and Finance will be taken into account or, instead, those of the Spanish National Securities Market Commission (CNMV), together with the recommendations of the Unified Code of Good Governance of Listed Companies.

– The Board must explain the nature of each director to the shareholders at the General Meeting, who must make or ratify the appointment. Furthermore, each year, following verification by the Nominations and Remuneration Committee, this nature will be reviewed by the Board of Directors, which will be reported in the annual corporate governance report.


– The position of director is remunerated.

– The directors’ remuneration will comprise a fixed regular amount and fees for attending the meetings of the Board of Directors and its committees, without prejudice to the repayment of related expenses. The Board of Directors is responsible for setting this amount, its distribution among the various directors and the frequency of payment.

– The executive directors will also be entitled to receive remuneration consisting of (a) a fixed amount, commensurate with the services provided and the responsibilities undertaken; (b) a variable amount, related to an indicator of the performance of the director or the company; (c) welfare benefits, including the relevant pensions and insurance schemes; and (d) compensation in the event of separation or any other form of cancellation of the legal relationship with the Bank not caused by non-fulfilment attributable to the director.

– The Board of Directors is also responsible for determining the amount of the remuneration items comprising the fixed amount, the types of configuration of the indicators used to calculate the variable amount, the welfare plans and the amounts of compensation or the criteria used to calculate them. In any event, the remuneration of the members of the Bank’s governing bodies will be adjusted to the provisions thereon contained in corporate and banking regulations.

– Each year, the Board of Directors will approve a report on the remuneration policy in which it will set out the criteria and bases for determining directors’ remuneration in the previous and current year. It will make this report available to the shareholders when the call notice is issued for the Ordinary General Meeting. The report will include, at least, complete, clear and comprehensible information of the Company’s directors’ remuneration policy approved by the Board for the current year and, where appropriate, for future years. It will also include an overall summary of how the remuneration policy was applied in the year and a detail of the remuneration accrued by each of the directors. Individual information on the remuneration received by each director will be disclosed in the annual report, together with the amounts relating to each remuneration item. The remuneration relating to the executive functions assigned to the Company’s executive directors will also be disclosed in the annual report by individual director and by item.

– The Board will ensure that the directors’ remuneration meets the criteria for moderation and for being commensurate with the Bank’s results. In particular, it will ensure that the remuneration of non-executive directors is sufficient to compensate the dedication, qualification and responsibility required for discharging the duties of the position.

– In the performance of their functions, the directors will act with the standard of care of orderly business people and loyal representatives.

– The Board will encourage the informed involvement of the shareholders at General Meetings and will take all appropriate measures to enable shareholders at General Meetings to exercise their functions effectively, pursuant to the Law and the Bylaws.


– The Board of Directors will also establish adequate mechanisms for exchanging regular information with institutional investors forming part of the Bank’s shareholder structure.

Also, at the aforementioned meeting of 16 June 2011, in anticipation of the admission to trading of the Bank’s shares on the stock exchanges, the Board of Directors approved the Internal Code of Market Conduct (“the Internal Code of Conduct”).

The purpose of the Bankia’s Internal Code of Conduct is to ensure compliance with the provisions contained in Securities Market 24/1988 of 28 July and in Royal Decree 1333/2005 of 11 November on market abuse.

The Internal Code of Conduct defines the rules for conduct and actions that must be followed in relation to the transactions described therein and the treatment, use and dissemination of privileged, reserved and relevant information, in order to promote transparency in the performance of the business activities of the Bank’s companies and the provision of adequate information and protection for investors.

The most significant aspects of the Internal Code of Conduct include the following:

– The Bankia Group companies that are involved in the securities markets and the following persons are subject to the Internal Code of Conduct: (a) the members of the Boards of Directors, oversight and control committees and other Board committees of the Bank companies subject to the code; (b) the members of the Management Committees of the Bank’s subject entities; (c) other executives, employees, attorneys and agents of the Bank’s subject entities whose work is directly related to securities market transactions and activities; (d) other individuals who belong or provide services to the Bank and who, although their function is not directly related to securities markets, for Regulatory Compliance purposes, should be subject to the Internal Code of Conduct on a permanent or temporary basis due to their participation in or knowledge of transactions relating to these markets.

– Restrictions and conditions for buying and selling the Bank’s securities or financial instruments by the individuals subject to the Internal Code of Conduct and by individuals who have privileged information from the Bank. Rules of conduct are also established in relation to reserved information and the obligation to safeguard privileged information.

– The individuals who are subject to the Internal Code of Conduct must refrain from preparing or performing practices that distort the free formation of prices of Bankia’s securities or financial instruments.

– Treasury share transactions may not, under any circumstances, affect or intervene in the free formation of prices. Actions in this connection must be neutral. Dominant market positions must never be held that might prevent the correct formation of prices.

– The individuals who are subject to the Internal Code of Conduct and are personally affected by a conflict of interest must refrain from intervening in preparatory work and from deciding or, where appropriate, issuing their vote, in situations in which this


conflict of interest arises, and will notify this fact to whoever is to take the related decision.

21.2.3. A description of the rights, preferences and restrictions attaching to each class of the existing shares

All the shares of Bankia currently outstanding, as they are all ordinary shares belonging to a single class and series, confer on their holders the same voting and dividend rights, which are the full voting and dividend rights inherent thereto, as provided for in the Spanish Limited Liability Companies Law and in the Bank’s Bylaws.

21.2.4. A description of what action is necessary to change the rights of holders of the shares, indicating where the conditions are more significant than is required by law

The changes to the rights of holders of the shares comprising Bankia’s share capital will require the appropriate change to the Bylaws which, if it affects only one part of the shares and represents discriminatory treatment between them, must be approved by the majority of the affected shares as required by Article 293 of the Spanish Limited Liability Companies Law.

21.2.5. A description of the conditions governing the manner in which annual general meetings and extraordinary general meetings of shareholders are called including the conditions of admission

The conditions governing the manner in which annual general meetings and extraordinary general meetings of shareholders are called including the conditions of admission are defined in Bankia’s Bylaws and the General Meeting Regulations approved by the Bank’s Sole Shareholder on 16 June 2011, in anticipation of the admission to trading of the Bank’s shares on the stock exchanges and in order to adapt the Bank’s Bylaws to legal requirements and good corporate governance practices of listed companies (“the General Meeting Regulations”).

Ordinary General Meetings will be held within the first six months of each year in order to approve the management of the company and, where appropriate, the financial statements for the previous year and to resolve on the distribution of profit or allocation of loss, without prejudice to its authority to address and decide on any item on the agenda. All general meetings other than those provided for above will be deemed to be extraordinary general meetings.

Pursuant to Articles 173 and 176 of the Spanish Limited Liability Companies Law, general meetings of public limited liability companies shall be called by a notice published at least one month before it is scheduled to be held in the Official Gazette of the Companies Register and on the Bank’s website. The call notice will state whether the meeting is ordinary or extraordinary, the date and place it will be held and all the items on the agenda. It may also include, if applicable, the date for holding the general meeting on second call. A period of at least twenty-four hours must elapse between the first and second call. If a duly called general meeting is not held on first call, and the call notice does not stipulate a date for the meeting on second call, notice of the meeting on second call shall be given, subject to the same disclosure requirements as those for the meeting on first call, within fifteen days of the date originally set


for the meeting and eight days prior to the date of the new meeting. The provisions of the Spanish Limited Liability Companies Law are also applicable with regard to court orders to call general meetings. The Board of Directors must also call a General Meeting when requested to do so by at least five per cent of the share capital or when a tender offer is made for shares issued by the Bank.

Furthermore, the General Meeting may be held in a universal capacity, which will be deemed to have been called and validly convened, without requiring a prior call, provided that all the share capital present and the attendees agree unanimously to hold the Meeting, in accordance with Article 178 of the Spanish Limited Liability Companies Law. Universal General Meetings may be held anywhere in domestic or foreign territory.

The shareholders may attend the General Meeting regardless of the number of shares they hold provided that evidence of title to shares has been provided at least five (5) days before the date of the General Meeting. Their identity must be evidenced by the relevant attendance card issued by the Secretary of the Bank which, in accordance with the law, identifies them as shareholders, and indicates the number, class and series of shares that they own, and the number of votes they can cast. Shareholders must have registered the ownership of their shares in the corresponding book-entry register at least five days before the date on which the General Meeting is to be held and must obtain the relevant attendance card that, in accordance with the law, identifies then as shareholders. Although the members of the Board of Directors are obliged to attend the general meetings, any absence on their part will not, under any circumstances, prevent the General Meeting from being validly convened. The chairman of the General Meeting may authorise any person he deems appropriate to attend. However, the shareholders at the General Meeting may revoke this authorisation.

Without prejudice to the attendance of shareholder legal entities through whoever they have granted their proxy, all shareholders eligible to attend the General Meeting may grant a proxy to another person, who need not be a shareholder.

Proxies must be conferred in writing or remotely using the means of communication that the Board of Directors chooses and that duly guarantee the identity of the shareholder and the representative, for each particular General Meeting, in the terms and within the scope established in the Spanish Limited Liability Companies Law and the General Meeting Regulations.

Remote voting will be valid provided that the vote has been received by the Bank at its head office or, where appropriate, the address stated in the call notice of the General Meeting, before midnight of the third day before the General Meeting is to be held at first call. The Board of Directors will be responsible for carrying out the preparations, establishing the instructions, rules, media and procedures required for the level of technology in order to enable voting and granting of proxies by electronic means. Furthermore, to prevent possible duplication, the Board of Directors may adopt all measures that are required to ensure that whoever has voted or granted a proxy remotely is duly entitled to do so in accordance with the Bylaws and the General Meeting Regulations. Any implementing regulations adopted by the Board of Directors pursuant to this section will be published on the Bank’s website (www.bankia.com).


21.2.6. A brief description of any provision of the issuer’s articles of association, statutes, charter or bylaws that would have an effect of delaying, deferring or preventing a change in control of the issuer

There are no provisions in the Bylaws or internal regulations that would have an effect of delaying, deferring or preventing a change in the control of the Bank.

21.2.7. An indication of the articles of association, statutes, charter of bylaw provisions, if any, governing the ownership threshold above which shareholder ownership must be disclosed

There are no provision in the Bylaws obliging the shareholders with a significant shareholding to reveal this circumstance, without prejudice to the requirements established in current legislation and, in particular, in Royal Decree 1362/2007 of 19 October with regard to the transparency requirements relating to information on issuers whose securities have been admitted to trading on an official secondary securities market or other regulated market in the European Union, in Royal Decree 1333/2005 of 11 November, on market abuse and in the legislation applicable to credit institutions.

21.2.8. A description of the conditions imposed by the memorandum and articles of association statutes, charter or bylaw governing changes in the capital, where such conditions are more stringent than is required by law

The conditions governing changes in the capital are those set forth in the Spanish Limited Liability Companies Law. The Bank’s Bylaws do not establish any special conditions in this connection.

22. MATERIAL CONTRACTS

The following are the most significant contracts entered into by the Bank and its sole shareholder:

(i) Integration Agreement, signed by the Cajas on 30 July 2010 and by Banco Financiero y de Ahorros, once it was created, on 3 December;

(ii) First Addendum to the Integration Agreement, signed on 30 December 2010;

(iii) Second Addendum to the Integration Agreement, signed on 28 January 2011;

(iv) Third Addendum to the Integration Agreement, signed on 17 February 2011;

(v) Novation Agreement in respect of the Integration Agreement, adapting it to Royal Decree Law 2/2011, signed on 29 April 2011;

(vi) Home Territory Management Services Agreements, signed by each of the Cajas and by Banco Financiero y de Ahorros on 29 April 2011;

(vii) Framework Agreement between Bankia and Banco Financiero y de Ahorros, aimed at establishing a general context of transparency and diligence in the management of the


risks arising from any transactions that might take place between them, signed on 22 June 2011;

(viii) Service Agreement between Bankia and Banco Financiero y de Ahorros relating to the provision of services by Bankia in the areas of General Secretariat, Department of Resources (which includes the Human Resources, Services, Purchasing and Systems departments), Department of Finance and Risks, Department of Capital Markets, and Audit, signed on 27 June 2011;

(ix) Management Delegation Agreement relating to the Monte de Piedad pawnshop business.

22.1. Integration Agreement

(A) Object

As pointed out in section 5.1.5 of this Registration Document, on 30 July 2010 the Cajas signed an Integration Agreement for the creation of a consolidable Group of credit institutions, formed on a contractual basis around an Institutional Protection Scheme.

The object of the original Integration Agreement, subsequently amended by the First, Second and Third Addenda and the Novation Agreement, was to establish the Group as an integrated entity that is recognised, from the accounting and regulatory point of view, as a Group that is to be consolidated and, from the point of view of competition law, as an instrument of concentration. The building blocks of the Group, in accordance with the Integration Agreement as amended, are as follows:

(i) Establishment of a central governing body, the Central Company; and

(ii) Implementation of an advanced functional integration programme, structured around (i) centralisation of strategies and policies (in relation to finance, risks, commercial activities, marketing and communication, brand, industrial investments, etc.); (ii) operational and technological integration (common corporate services, technology platform, vehicles to access capital markets, etc.); and (iii) integrated or joint development of businesses (wholesale banking, private banking, business and corporate banking, investments in companies, etc.); all this while preserving the legal personality and regional identity of the Cajas, each of which will retain management authority over the retail banking business in its home territory, within the overall framework of the policies laid down by the Bank, and over the Obra Social welfare and cultural projects.

It should be pointed out, in this regard, that the Second Addendum expressly acknowledges that it is intended that the Cajas should have management authority over the retail banking business in their home territories on a permanent basis, on the terms and conditions approved by the Central Company. The object of the home territory management services agreement entered into between each Caja and Banco Financiero y de Ahorros is to establish the terms and conditions on which each Caja shall provide services of supervision and cooperation to Banco Financiero y de Ahorros in relation to the management of the retail business in the Caja’s home territory, all this within the framework of the policies laid down by Banco Financiero y de Ahorros as central company of the Group and in accordance with the


functions stipulated in the Agreement, and to regulate the management of the use of the Caja’s brand.

(B) Main characteristics

The Integration Agreement specifies, among other things, the following legal and economic matters regarding the structure of the Group’s integration:

(C) Governance structure of the Bank: new administrative structure

(i) Creation of the Central Company. The Cajas created the Central Company, which was established as the parent, delegating to it the necessary powers to manage the Bank as a unit on the terms and in the decision areas assigned to it in the Integration Agreement, including:

- Overall management of the Group: definition of Group strategies and policies; oversight and monitoring of the Group; external relations; and Group representation.

- Functional integration: overall management of financial, risk, accounting and financial reporting policies; technical and technological support; administration of joint businesses; and internal control.

(ii) Ancillary obligations. As ancillary commitments linked to their participation in Banco Financiero y de Ahorros, the Cajas have assumed the following obligations:

- To provide the Central Company with all the information it needs in order to be able to perform its functions within the Group and meet its regulatory, prudential and oversight obligations.

- To comply with the guidelines and instructions issued by the Central Company within its area of authority.

- To safeguard, by the means established at any given time by the Central Company as manager of the SIP institutional protection scheme, the solvency and liquidity of the Group and its members.

- Not to carry out any transactions that might alter the composition of the Group, as established in the Integration Agreement.

(iii) General Meeting. The Cajas have voting rights in the General Meeting of Banco Financiero y de Ahorros in proportion to their share of the capital. Certain resolutions of particular importance may only be adopted by supermajority (75% or 93% of the total voting rights).

In the Novation Agreement, the Cajas and the Central Company agreed that where the General Meeting of the Bank must vote on a matter for which a supermajority is required, the representative of the Central Company in the General Meeting of the Bank shall vote in the manner that shall be decided by the General Meeting of the Central Company with the same supermajority.


(iv) Board of Directors. The Board of Directors of Banco Financiero y de Ahorros is made up of 21 members, as follows:

- 11 members appointed at the proposal of Caja Madrid.

- 6 members appointed at the proposal of Bancaja.

- 2 members appointed at the proposal of the remaining Cajas, rotating every two years.

- 2 members are independents.

Each director has one vote. Resolutions will be adopted by absolute majority of the directors present in person or by proxy, except in the case of especially important matters, which will require the vote in favour of at least 16 directors.

As established in the Novation agreement, the vote of the proprietary directors appointed to the Board of Directors of the Bank by the Central Company will be decided by the directors themselves in the best interests of the company, as provided by company law. Nevertheless, to the extent that the calling of meetings of the Board of Directors of the Bank allows and within the framework of the principle of good faith established in the Integration Agreement, the Board of Directors of the Central Company may issue recommendations or reports on matters on which said board must decide, which will be sent to said directors as proprietary directors. Such reports or recommendations must be approved with the supermajority required for matters reserved for the Board.

(v) Headquarters. The registered office of the Central Company and the business address of the Group’s investees are in Valencia. The operating headquarters of the Central Company are in Madrid.

(D) - Functional integration

There are three dimensions to the functional integration of the Cajas:

(i) Centralisation of policies. In the conduct of their business, the Cajas are subject to such strategies and policies as the Central Company may establish for the Group within the scope of its powers.

(ii) Operational and technological integration.

(iii) Pooling and joint development of businesses.

See section 5.1.5 of this Registration Document for a more detailed explanation of the First Spinoff and the Second Spinoff.

(E) Mechanisms to ensure the stability of the Bank

The Integration Agreement establishes a minimum duration of 15 years for the Bank, after which the Integration Agreement would automatically become an open-ended agreement, except for any Cajas that had given at least 24 months’ notice of their wish to terminate it.


22.2. Addenda to the Integration Agreement

22.2.1. First Addendum

On 30 December 2010, for regulatory reasons and with a view to reinforcing the integration, the Cajas and Banco Financiero y de Ahorros signed an addendum under which the Cajas undertook to transfer the voting rights of the entities controlled by them, with the aim of specifying and elaborating the policies for the control of these entities by Banco Financiero y de Ahorros provided for in the Integration Agreement (the “First Addendum”).

22.2.2. Second Addendum

On 28 January 2011, the Cajas and Banco Financiero y de Ahorros signed another addendum to the Integration Agreement, whereby the Cajas assigned all the assets and liabilities of their retail banking business to Banco Financiero y de Ahorros, while retaining management control of the retail banking business in their home territories under powers delegated to them by Banco Financiero y de Ahorros (the “Second Addendum”).

On 29 April 2011, each Caja entered into an agreement with Banco Financiero y de Ahorros aimed at regulating the collaboration of the Cajas in promoting the retail banking business in their home territories and the management and use of the brand of each Caja, as established in the Second Addendum (the “Home Territory Management Services Agreements”). A brief summary of its content is included in section 22.1.5 of Chapter III of this Prospectus.

22.2.3. Third Addendum

On 17 February 2011, the Cajas and Banco Financiero y de Ahorros signed a third addendum to the Integration Agreement to allow Banco Financiero y de Ahorros to adopt the structure that was most appropriate for the public offering of its business (the “Third Addendum”).

As indicated in the recitals of the Third Addendum, in order to be successful the IPO of Banco Financiero y de Ahorros required that investors be offered the opportunity to become shareholders of a company that was free from any commitment to share results with the Cajas and to which the Cajas had assigned all their financial businesses. It was also necessary that the new investors be able to invest in a company that was free from any cross-guarantees between the Cajas and Banco Financiero y de Ahorros vis-à-vis third parties, as the liabilities of the banking business had been assigned to Banco Financiero y de Ahorros.

22.3. Novation Agreement in respect of the Integration Agreement, adapting it to Royal Decree Law 2/2011 of 18 February for strengthening financial system

(A) Background

On 24 January 2011, the government of Spain announced the Government Plan to Reinforce the Financial Sector (the “Government Plan”), which in order to improve the capital strength of financial institutions provided for an increase in minimum core capital requirements for credit institutions.

On 18 February 2011, the Spanish cabinet approved Royal Decree Law 2/2011 of 18 February for strengthening the financial system (“RDL 2/2011”), which fleshed out the measures


announced in the Government Plan and established, among other things, that (i) credit institutions must have core capital of at least 8% of their total risk-weighted exposures, calculated in accordance with Law 13/1985 of 25 May on investment ratios, own funds and reporting obligations of financial intermediaries and its implementing legislation (“Law 13/1985”); and that (ii) credit institutions which depend on wholesale finance markets to fund more than 20% of their assets and which have not placed securities representing at least 20% of their capital or voting rights with third parties must have core capital of at least 10%.

In its Third Additional Provision, RDL 2/2011 further establishes that in the institutional protection schemes provided for in article 8.3.(d) of Law 13/1985 in which ownership of all the assets and liabilities used in the banking businesses of the member savings banks has been assigned to the central company, or in which various savings banks in concert, through the central company, exercise exclusively their object as credit institutions, as provided in article 5.4 of Royal Decree Law 11/2010 of 9 July on governing bodies and other aspects of the legal regime of savings banks, the provisions of points (iii) and (iv) of article 8.3.(d) of Law 13/1985 will be deemed to have been met.

Points (iii) and (iv) of article 8.3.(d) of Law 13/1985 state two of the requirements that a Group of entities belonging to an institutional protection scheme must meet in order to be recognised as a Group of credit institutions that is to be consolidated: (i) that the contractual agreement that constitutes the institutional protection scheme contain a mutual commitment to preserve solvency and liquidity among scheme members that reaches at least 40% of each member’s regulatory own funds, as regards solvency support; and (ii) that the members of the institutional protection scheme share a significant portion of their results, equal to at least 40%, which must be distributed in proportion to each member’s participation in the scheme.

The Integration Agreement established a Mutual Support System between the Cajas and Banco Financiero y de Ahorros and, for that purpose, an obligation of reciprocal financial assistance in the form of a guarantee of solvency and liquidity among the members of the Group. The same reciprocal guarantee commitment on which the Mutual Support System established in the Integration Agreement was based was also assumed by the Cajas in relation to third-party creditors. Through this commitment, from the moment it was formed the Group jointly and severally guaranteed the obligations of each Caja in relation to third-party creditors. At the same time, each Caja jointly and severally guaranteed the obligations of the rest of the Cajas from the moment the Integration Agreement came into force, and those of Banco Financiero y de Ahorros from the moment it was incorporated.

Furthermore, the Integration Agreement provided for a Mutual Profit-Sharing System whereby the Cajas assigned 100% of the results of their businesses to Banco Financiero y de Ahorros.

(b) Content of the Novation Agreement

For all the above reasons, on 29 April 2011 the Cajas and Banco Financiero y de Ahorros entered into a novation agreement for the purpose of adapting the Integration Agreement to RDL 2/2011 (the “Novation Agreement”).


Under the Novation Agreement the parties agreed, among other things, to:

(i) terminate the Mutual Support System provided for in the Integration Agreement;

(ii) terminate the Mutual Profit-Sharing System provided for in the Integration Agreement;

(iii) change the rules on Cajas’ leaving the SIP or ceasing to be shareholders of the Central Company;

(iv) approve new rules for the partial cancellation of the Agreement and terminate the division procedure provided for in the Integration Agreement;

(v) adapt the rules for full cancellation;

(vi) regulate the voting of the representative of the Central Company in the governing bodies of Bankia;

(vii) regulate under which brand or brands the Group will operate in the municipality of Barcelona and the person who will be entrusted with the task of management.

(B.i) Termination of the Mutual Support System

The Cajas and Banco Financiero y de Ahorros declared the Mutual Support System provided for in the Integration Agreement to be terminated with effect from the date on which the spinoffs of all the banking and non-banking assets and liabilities of the Cajas into Banco Financiero y de Ahorros were registered with the Companies Registry (Registro Mercantil) and became fully effective.

The following were thus terminated:

- the obligation of reciprocal financial assistance in the form of a guarantee of solvency and liquidity; and

- the guarantee commitment in relation to third-party creditors.

The termination of the Mutual Support System was announced to the market on 29 April 2011 through the appropriate relevant information notice, as provided in the Novation Agreement.

The Cash Pooling System provided for in the original Integration Agreement was also declared to be terminated.

(B.ii) Termination of the Mutual Profit-Sharing System

Under the Novation Agreement the parties likewise agreed to declare the Mutual Profit-Sharing System provided for in the Integration Agreement to be terminated on the date on which the spinoffs of all the banking and non-banking assets and liabilities of the Cajas into Banco Financiero y de Ahorros were registered with the Companies Registry (Registro Mercantil) and became fully effective.


As consideration for the total cancellation of the Mutuality Right and within the framework of the spinoffs from the Cajas and integration into the Central Company, the Cajas assigned to Banco Financiero y de Ahorros certain equity interests that had been excluded from the spinoff plans.

Furthermore, the provisions of the original Integration Agreement regarding dividend policy, which established the obligation to pay a minimum dividend to the Cajas, were annulled.

(B.iii) Rules on leaving the SIP or ceasing to be a shareholder of Banco Financiero y de Ahorros

As agreed in the Novation Agreement, any Caja that has obtained the necessary authorisations from Banco Financiero y de Ahorros and, where applicable, from the Autonomous Communities and other competent bodies may choose to forgo its authorisation to operate as a credit institution and become a special foundation under article 6 of RDL 11/2010.

Any such Caja would be subject to its obligations as a shareholder but would no longer be bound by the provisions of the Integration Agreement in respect of the SIP and so would not be subject to any penalty.

The rules on majorities for the adoption of resolutions and the rules on transmission of shares would remain in force.

The conversion of a Caja into a special foundation would entail the termination of the Home Territory Management Services Agreement entered into by the Caja, without prejudice to the continuity of the right of Banco Financiero y de Ahorros to use the brand on the terms set forth in said management agreement.

Following the approval of the Novation Agreement, any Caja may opt to transfer its shares in the Central Company in accordance with the rules established in the bylaws and any side agreements, maintaining its nature as a credit institution and without being subject to any penalty. Nevertheless, the Caja would have to continue to abide by the binding policies issued by Banco Financiero y de Ahorros as central company. In that case, the Home Territory Management Services Agreement would remain in effect.

Section 22.5 of this Registration Document explains the content of the Home Territory Management Services Agreement entered into by each Caja with the Bank.

The entry of new shareholders on the terms set forth in the Integration Agreement is subject to the requirement that the new shareholders be either credit institutions or financial entities or institutions. In any case, the parties undertook to review the terms for the transfer of shares of the Central Company to third parties once the preferred participating securities subscribed by the FROB had been amortised, and also to establish a liquidity mechanism for the transfer of said shares.

(B.iv) New rules on partial cancellation

The Integration Agreement may be partially cancelled in respect of a Caja only where there is good reason in the event of very serious non-compliance.


(B.v) Termination of the division procedure

The parties also agreed to declare the division procedure provided for in the Integration Agreement to be terminated.

(B.vi) Adaptation of the rules on full cancellation

The rules on full cancellation will continue to apply only:

- in the event of non-compliance with obligations under the Integration Agreement;

- on ordinary notice of termination, once the minimum period of 15 years has elapsed, if at the time of the notice the Bank is made up of only two Cajas.

In both cases the Purchase Option procedure provided for in the Integration Agreement remains in force.

(B.vii) Voting by the representative of the Central Company (Banco Financiero y de Ahorros) in the governing bodies of Bankia

- The vote cast by the representative of the Central Company in the General Meeting of Bankia on resolutions that the General Meeting of Bankia must adopt in relation to any of the matters identified in the Integration Agreement as Matters Reserved for the General Meeting of the Central Company will be a matter reserved for the General Meeting of the Central Company.

- The vote cast by the representative of the Central Company in the General Meeting of Bankia on resolutions that the General Meeting of Bankia must adopt in relation to any of the matters identified in the Integration Agreement as Matters Specially Reserved for the General Meeting will be a matter specially reserved for the General Meeting of the Central Company.

- The vote of the proprietary directors appointed to the Board of Directors of Bankia by the Central Company will be decided by the directors themselves in the best interests of the company, as provided by company law.

(B.viii) Retail banking business in the municipality of Barcelona

Under the Novation Agreement the parties agreed that Banco Financiero y de Ahorros should decide (i) under what brand or brands the Group will operate in the municipality of Barcelona (between Bankia, Bancaja, Caixa Laietana and Caja Madrid), and (ii) the persons who will manage the Barcelona operations.


22.4. Framework agreement and service agreement between Bankia and Banco Financiero y de Ahorros

Framework Agreement

On 22 June 2011, Banco Financiero y de Ahorros and Bankia signed a framework agreement (the “Framework Agreement”) to regulate relations between the two and between the companies in their groups (as defined in the Framework Agreement). The main objectives of the Framework Agreement are: to define the necessary mechanisms to ensure a proper level of coordination between Bankia and Banco Financiero y de Ahorros and the companies in its group; to manage and minimise potential conflicts of interest between the two organisations; and to ensure due respect for and protection of the interests of the shareholders of Banco Financiero y de Ahorros and Bankia within a framework of transparency in relations between the two organisations.

For the purposes of the agreement, the Banco Financiero y de Ahorros Group will consist of Banco Financiero y de Ahorros and the companies controlled by it within the meaning of article 4 of the Securities Market Law, except for Bankia and the companies controlled by Bankia.

The entry into force of the Framework Agreement is conditional upon the effective admission to trading of the shares of Bankia and so will take full effect from the first day of trading of the shares of Bankia on the four Spanish stock exchanges and on the continuous market. The Framework Agreement provides for a transitional period of six months to adapt any agreements between companies in the Banco Financiero y de Ahorros Group and Bankia that are already in force at the effective date of the Framework Agreement.

The following are some of the aspects regulated in the Framework Agreement:

With regard to the composition of the Board of Directors of Bankia, the Agreement establishes that Banco Financiero y de Ahorros, as majority shareholder of Bankia, will be represented on the Board of Directors of Bankia, within the majority group of outside (non-executive), independent and other outside directors, in a proportion that is in line with good governance recommendations and the Bylaws of Bankia.

The Framework Agreement outlines the main areas of activity of Bankia. Starting from the business perimeter established in the Second Spinoff, the scope of activity of Bankia from the effective date of this Agreement will be centred on:

a) Carrying on its activity in the financial sector (including consumer lending; insurance; finance and operating leases; fund, pension and asset management; stock brokerage; and investment advice and wealth management).

b) Carrying on the retail banking activity.

c) Carrying on its activity in business banking or wholesale banking and finance in general.

Bankia will thus be the vehicle through which, as provided in the Framework Agreement, the Banco Financiero y de Ahorros Group will exclusively provide and manage the


abovementioned universal banking services and any investments in companies that carry on mainly the abovementioned activities. In relation to these activities, the Cajas and Banco Financiero y de Ahorros will deliver support to Bankia, providing it with the necessary know-how to optimise the businesses in which it invests.

The above is deemed to be without prejudice to any other financial activities carried out by Bankia through investees included in the financial perimeter of the Group, or that were carried out by Banco Financiero y de Ahorros through investees before the date of the Agreement, except for any transactions of Banco Financiero y de Ahorros that are necessary for the management and disposal of the businesses it has retained after the Spinoffs.

As a consequence of the above, Banco Financiero y de Ahorros and the companies in its Group undertake not to compete with Bankia in creating, or acquiring interests in, entities that carry on the activities mentioned previously, except in certain specific circumstances.

With respect to related party transactions, that is, any relations between Bankia and Banco Financiero y de Ahorros that currently exist and any relations, services or transactions that may be arranged in the future, the Framework Agreement establishes that such relations shall be governed by the principles of transparency, provision of services on reasonable and equitable market terms, preferential treatment, due care and confidentiality.

To comply with the provisions regarding related party transactions, Banco Financiero y de Ahorros and Bankia have entered into an agreement for services relating to the areas of General Secretariat, Department of Resources (which includes the Human Resources, Services, Purchasing and Systems departments), Department of Finance and Risks, Department of Capital Markets, and Audit, the content of which is summarised in this section.

All related party transactions will require the approval of the Board of Directors of Bankia, subject to a favourable report by the Audit and Compliance Committee. This committee will be responsible for overseeing the monitoring of and compliance with the Framework Agreement and for monitoring related party transactions, with the option of delegating to a subcommittee. Once the currently existing relations between the Parties and their groups and any changes in these relations as a result of the signing of the Framework Agreement have been identified, the Audit and Compliance Committee of Bankia will issue a formal assessment, through a report to the Board of Directors of the Company, as to whether the existing relations among the Parties are conducted at arm’s length. Subject to a favourable report by the Audit and Compliance Committee, the Board of Directors of Bankia will ratify all related party transactions identified in accordance with this paragraph.

In particular, although there is at present no financing between Banco Financiero y de Ahorros and Bankia, were Bankia to consider offering finance to Banco Financiero y de Ahorros, such finance would have to comply not only with the principles and rules for related party transactions provided in the Framework Agreement but also with the following additional principles and requirements:

a) the finance must be extraordinary and temporary. For these purposes, Banco Financiero y de Ahorros shall submit to Bankia a report in support its request for finance, containing detailed information about any alternative financing options that have been discarded and the reasons why they have been discarded; and


b) the interest received by Bankia for the finance granted to Banco Financiero y de Ahorros may not be less than the average of the interest quoted by at least three respected, top-ranking financial institutions for borrowers with a credit rating similar to that of Banco Financiero y de Ahorros.

The Framework Agreement also regulates the information flows between Bankia and Banco Financiero y de Ahorros so as to ensure that both parties meet their legal, accounting, tax and disclosure obligations.

With regard to conflicts of interest, the Framework Agreement establishes that the Directors of Bankia will avoid any direct or indirect conflict with the interests of Banco Financiero y de Ahorros and will disclose any conflict that cannot be avoided to the Board of Directors, which will rule on the matter. Where a conflict exists, the Director concerned (in particular, the Director representing Banco Financiero y de Ahorros on the Board of Bankia) shall leave the meeting room and abstain from taking part in the Board’s deliberations and decision making on the matter to which the conflict relates.

Similarly, Banco Financiero y de Ahorros and Bankia each undertake not to have interests in or maintain direct or indirect ties with any company or business that competes directly or indirectly with any of the activities carried out by the other without the other’s prior written consent, which shall be granted by its Board of Directors if a majority of the Directors votes in favour. Any possible investment or business opportunity directly related to the activities carried out by either of the parties to the Framework Agreement that may be identified by Bankia or a company in its Group shall first be offered to the other party.

Lastly, the Framework Agreement assumes that Bankia will maintain the dividend policy set forth in this Registration Document, unless the Parties agree otherwise after having adopted the necessary corporate agreements.

Service Agreement

Respecting the principles stated in the Framework Agreement, on 27 June 2011 Banco Financiero y de Ahorros and Bankia entered into a Service Agreement that will allow Banco Financiero y de Ahorros to manage its activity using, where necessary, the material and human resources at the disposal of Bankia, avoiding duplication of costs within the consolidated group of which it is the parent and optimising the resources of the group controlled by Banco Financiero y de Ahorros, while at the same time complying with the obligations imposed by article 16 of the Spanish Corporate Income Tax Act (the “Service Agreement”).

Banco Financiero y de Ahorros and Bankia consider that any service or intragroup transaction must always be on a contractual basis and that, without prejudice to the provisions of each individual agreement, all related party transactions should be governed by the following general principles:

a) transparency and arm’s length relationships;


b) preferential treatment, in accordance with the commitment of the Parties to offer one another the most favourable terms they are offering at any given time to third parties in the market for each transaction or service;

c) the commitment of the Parties to provide services with the greatest possible diligence and with all the means at their disposal;

d) the commitment of the Parties to maintain confidentiality and not to disseminate the information to which they have access as a result of related party transactions;

e) the protection of the corporate interest, giving priority, other conditions being equal, to the interests of the other party over those of third parties; and

f) the right to cease to provide the corresponding services upon reasonable notice and subject to the determination of good faith and payment by the Parties of any termination costs that early termination might cause in the event of a change of control.

The purpose of the Service Agreement is to: (a) identify and regulate the services and actions that Bankia will provide and materially execute for Banco Financiero y de Ahorros, relating to the activities and services specific to the Areas of General Secretariat, Resources (which includes the Human Resources, Services, Purchasing and Systems departments), Finance and Risks, Treasury and Capital Markets, and Audit, as well as any other service or action that may be agreed in the future; (b) establish the general rules for the provision of services between related parties on reasonable and equitable market terms; and (c) determine mechanisms to ensure a proper flow of information among the Parties, so that their management requirements and their obligations to regulators are met. In particular, the signing of the Service Agreement and the provision and execution of the services and actions that are its object do not relieve Banco Financiero y de Ahorros of its responsibility towards third parties (including supervisory or regulatory bodies) in the conduct of its activities, nor does it entail any alteration or change in those responsibilities.

Under the Service Agreement, Bankia will provide services and materially execute actions in favour of the companies that are part of the Banco Financiero y de Ahorros Group on the same terms and conditions as it does in favour of Banco Financiero y de Ahorros itself. To this end, it is anticipated that Bankia will enter into an agreement, on terms similar to those of this Agreement, with each subsidiary of Banco Financiero y de Ahorros that is to be a beneficiary of its services. Moreover, if as a result of the provision of services under the abovementioned agreement a conflict of interest arises or is detected between Bankia and Banco Financiero y de Ahorros, the appropriate Separated Area will be established in accordance with the internal rules of Bankia to ensure that the decision is taken with full respect for the interests of each party and, where applicable, in accordance with market criteria. Where in the reasonable judgement of either party the measures to remedy possible conflicts of interest set forth in the previous paragraph do not guarantee that the objectives described above will be achieved, either Party may demand that the service in question be provided by a third party.

The Service Agreement regulates the manner in which the services are provided and the actions executed, and the object of the services and actions. The services to be provided consist essentially of those included within the powers of the General Secretariat (including


Customer Service, Regulatory Compliance, implementation of company policy, and legal and tax advisory), Resources (including human resources, management and maintenance, administration – invoicing, charges, expenses – purchasing and IT services, and communications), Finance and Risks, Treasury and Capital Markets, and Internal Audit.

The services and actions that Bankia provides or executes for Banco Financiero y de Ahorros under the Service Agreement will be remunerated at reasonable market prices. The Service Agreement regulates the time and manner of payment of said remuneration.

It also provides that Banco Financiero y de Ahorros will entrust the provision of the services regulated in the Service Agreement to Bankia on an exclusive basis. Nevertheless, either party may outsource the exercise of the functions where this is justified on grounds of efficiency and economic rationality.

In addition, the Service Agreement regulates the flow of information between Bankia and Banco Financiero y de Ahorros, so that both may comply with their legal, accounting, fiscal and capital obligations and for any other purposes that are to the benefit and in the interest of both parties. Such information is reserved.

The Service Agreement provides for a transitional period of six months to adapt any agreements between companies in the Banco Financiero y de Ahorros Group and Bankia that are already in force at the effective date of the Service Agreement.

22.5. Home Territory Management Services Agreements

On 29 April 2011, each of the Cajas entered into a Home Territory Management Services Agreement with Banco Financiero y de Ahorros aimed at regulating the collaboration of the Cajas in the promotion of the retail banking business in their home territories and the management and use of their brands, as established in the Second Addendum, in which it was agreed that each Caja, once the retail banking business in its home territory had been spun off and integrated into the Bank, would exercise management authority over said business within the framework of Group policies.

On the occasion of the Second Spinoff, Banco Financiero y de Ahorros assigned its contractual position under the Home Territory Management Services Agreements to Bankia, which therefore assumed all of the former’s rights and obligations under said agreements.

(A) Object

The Home Territory Management Services Agreements establish the terms and conditions on which the Cajas shall provide to the Bank services of supervision and cooperation in relation to the management of the retail banking business in their home territories and in relation to the management of the use of the brand of each Caja.


(B) Services

As provided in the Home Territory Management Services Agreements, the Cajas shall provide such services as are necessary or appropriate in order to achieve the object of the agreements, including, without limitation, the following (the “Services”):

(i) Supervise, within their home territories, the execution of the retail banking policies established by the Bank;

(ii) Manage any assets or liabilities which for legal, contractual, operational or business reasons cannot be assigned under the spinoff plan, in accordance with the policies of the Group;

(iii) Collaborate actively in controlling the policies for communication with retail customers in their home territory;

(iv) Manage the use of the brand in the marketing of products in their home territory, assigning use of the brand to the Bank for these purposes;

(v) Promote an effective transition of the branch network in their home territory to the Bank;

(vi) Collaborate in conducting the Group’s institutional relations in their home territory;

(vii) Cooperate with the Bank and strengthen relations with the regional governments in their home territory;

(viii) Submit proposals for the opening or closure of branches in their home territory;

(ix) Monitor the progress of the retail business in their home territory, in coordination with the business of the Group.

(C) Exclusivity

The Cajas shall not provide the Services to any other entity. The Bank shall not entrust management in the Home Territory to any other entity.

(D) Resources

The Bank undertakes to make available to the Cajas such material and human resources as may be required from time to time.

(E) Monte de Piedad pawnshop business

Cajas that have a Monte de Piedad pawnshop business will (i) maintain ownership of this business in accordance with the Integration Agreement; (ii) assign management of the pawn loan book to the Bank, while retaining ownership of the loans vis-à-vis customers as well as overall management of the pawnshop business; and (iii) delegate to the Bank the necessary authority to carry on this management activity. The terms on which this management is to be conducted are set forth in section 22.6 below.


(F) Remuneration

No remuneration will be paid, given that the tasks assumed by the Cajas are understood to derive directly from the Integration Agreement and are already remunerated under that agreement.

(E) Staff

The Cajas will retain their administrative and governing bodies and other legally established bodies. They will also have an auxiliary management body with the agreed minimum staff required to provide the Services.

(F) Responsibility

The Cajas provide the Services at their responsibility, which will be excluded, however, in the event of damage resulting from an event of force majeure.

(G) Duration

The Home Territory Management Services Agreements will remain in force for the duration of the Integration Agreement and for so long as the Cajas retain their status as credit institutions.

(H) Termination

The Home Territory Management Services Agreements will be deemed to be terminated in the event of full cancellation (or partial cancellation in respect of the contracting Caja) of the Integration Agreement.

They may be terminated in the event of non-compliance with the contractual obligations if a remedy is possible but the defaulting party fails to remedy the non-compliance or to supply the means to do so within 30 days.

(I) Reports

The Cajas shall deliver such documents or monitoring reports as may be required or as may be demanded of them by the Bank.

(J) Personally identifiable information

Any files of the Bank that are processed by the Cajas will continue to be the property of the Bank.

22.6. Agreement for the transfer of loans and reciprocal provision of management services relating to the Monte de Piedad pawnshop business

The Home Territory Management Services Agreements entered into by each of the Cajas and Banco Financiero y de Ahorros (in which Bankia is subrogated to the contractual position of Banco Financiero y de Ahorros and so to all the latter’s rights and obligations) regulate,


among other things, the management of the Monte de Piedad pawnshop business in the Cajas that have one.

In particular, said Home Territory Management Services Agreements establish that: (i) the Caja will retain ownership of the pawnshop business in accordance with the Spinoff Plan and the Integration Agreement; (ii) the Caja will transfer management of the pawn loan book to the Bank by any means that is valid in law, while continuing to hold the loans vis-à-vis customers and to manage the pawnshop business as a whole, including authority to enforce the pledges securing the debts in accordance with the standard procedures in pawnshop businesses in the event of non-payment; and (iii) pursuant to the above, the Caja will delegate to the Bank the necessary authority to perform this management task.

To implement the Home Territory Management Services Agreements, a Pawnshop Business Management Delegation Agreement will be entered into with each Caja, under which the Bank will be held harmless from any costs it may have incurred in the exercise of the delegation. Once settled, such costs will be discounted from the annual return obtained by the Caja from the management of the pawnshop business within the two (2) months following the end of each year. To ensure proper provision of the services, the Pawnshop Business Management Delegation Agreement provides that the Bank shall allocate such resources and provide such technical or technological support as may be required at any given time.

23. THIRD PARTY INFORMATION, STATEMENT BY EXPERTS AND DECLARATIONS OF ANY INTEREST

23.1. Where a statement or report attributed to a person as an expert is included in the Registration Document, provide such person’s name, business address, qualifications and material interest if any in the issuer. If the report has been produced at the issuer’s request a statement to the effect that such statement or report is included, in the form and context in which it is included, with the consent of the person who has authorised the contents of that part of the Registration Document.

This Registration Document does not include any statement or report attributed to a person as an expert.

23.2. Where information has been sourced from a third party, provide a confirmation that this information has been accurately reproduced and that as far as the issuer is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. In addition, identify the source(s) of the information.

There is no information from third parties.


24. DOCUMENTS ON DISPLAY

A statement that for the life of the registration document the following documents (or copies thereof), where applicable, may be inspected:

Documents

Deed of incorporation of the Bank

Current bylaws

Regulations of the Board of Directors

Regulations of the General Meeting of Shareholders

Rules of Conduct for Securities Market Activities

Audited consolidated financial statements of Bankia as at 31 March 2011

Unaudited pro forma consolidated balance sheets and income statements of Bankia as at 31 December 2010

Unaudited pro forma consolidated balance sheets and income statements of Bankia as at 31 December 2011

Deeds of the First and Second Spinoffs

Framework Agreement between Banco Financiero y de Ahorros and Bankia

In addition, these documents will be available to interested parties at the registered office of Bankia and on its web site www.bankia.com, except for the deed of incorporation and the deeds of the First and Second Spinoffs, which may be consulted at its registered office.

25. INFORMATION ABOUT INVESTEES

A list of significant subsidiaries of the Bank, showing the name, the country of incorporation, the percent ownership and the share of voting rights is given in section 7.2.

Details of the entities included within the scope of consolidation of the Bankia Group at 31 March 2011 (subsidiaries controlled by the Bank, jointly controlled entities and associates over which Bankia directly or indirectly has significant influence) are given in Annexes I, II and III of the consolidated interim financial statements of Bankia, indicating the percentage share of voting rights held by Bankia in each one.

Share Securities Note - 1 -

PRO FORMA FINANCIAL INFORMATION BUILDING BLOCK

Pro forma financial information on the Bankia Group has been prepared and is included in sections 20.2 and 20.6 of the Registration Document in this Prospectus.

IV. INFORMATION CONCERNING THE SECURITIES (ANNEX III OF COMMISSION REGULATION (EC) 809/2004 OF 29 APRIL 2004)


4. INFORMATION CONCERNING THE SECURITIES TO BE OFFERED/ADMITTED TO TRADING


5. TERMS AND CONDITIONS OF THE OFFER


6. ADMISSION TO TRADING AND DEALING ARRANGEMENTS


7. SELLING SECURITIES HOLDERS


8. EXPENSE OF THE ISSUE/OFFER


9. DILUTION


10. ADDITIONAL INFORMATION


Share Securities Note - 2 -

In Madrid, on 29 June 2011.

____________________________________ Mr. Francisco Verdú Pons Chief Executive Office For and on behalf of Bankia, S.A.