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On Corporate Governance

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04

Annual Report On Corporate Governance 2013

of Bankinter, S.A. 3

Report by the Audit and

Statutory Compliance Committee 2013 62

index

3 BankinterAnnual Report On Corporate Governance 2013

A. OWNERSHIP STRUCTURE

A.1. Complete the following table on the Company’s share capital:

Date of last change Share capital (euros)

Number of shares Number of direct voting rights

4 December 2013 268,675,140 895,583,800 895,583,800

Indicate whether there are different classes of shares with different rights associated with them:

Yes No X

A.2. List the direct and indirect owners of significant shareholdings in your company at the end of the financial year, excluding directors:

Name or corporate name of the shareholder

Number ofdirect

voting rights

Indirect voting rights % of totalvotingrightsDirect owner of the

shareholding Number of

voting rights

MR. JAIME BOTÍN-SANZ DE SAUTUOLA Y GARCÍA DE LOS RÍOS

10,061 CARTIVAL, S.A. 204,681,888 22.94

Other shareholders of the company

775,838

Indicate the most significant changes in the shareholding structure during the year:


Date of transaction

Description of transaction

Credit Agricole, S.A. 04 September 2013

At 31 December 2012 Crédit Agricole held 15.10% of the Bankinter’s share capital; at 31 December 2013 it held 0.27%. Crédit Agricole published the following Significant Event Reports in regard to the reduction in its sha-reholding in Bankinter: 25 January 2013 under number 181,430 and 4 September 2013 under number 192,536.

ANNUAL REPORT ON CORPORATE GOVERNANCE

LISTED PUBLIC LIMITED COMPANIES

IDENTIFICATION DETAILS OF ISSUER

FINANCIAL YEAR END 31 December 2013

TAX IDENTIFICATION CODE (CIF) A-28157360

Company Name: BANKINTER, S.A.

Registered office: Paseo de la Castellana, 29 – 28046 Madrid

STANDARD FORM FOR ANNUAL REPORT ON CORPORATE GOVERNANCE FOR LISTED PUBLIC LIMITED COMPANIES


A.3. Complete the following tables on the members of the Board of Directors of the company who hold voting rights on shares in the company:

Name or corporate name of the director

Number ofdirect voting

rights

Indirect voting rights % of total votingrightsDirect

owner of the shareholding

Number ofvoting rights

MR. PEDRO GUERRERO GUERRERO

4,876,523 - 355,005 0.584

CARTIVAL, S.A. 204,681,888 - 0 22.855

MS. MARIA DOLORES DANCAUSA TREVIÑO

1,286,756 - 469 0.144

MR. FERNANDO MASAVEU HERRERO

771,683 Corporación Masaveu, S.A.

44,760,251 5.292

Other shareholders of the company

1,858,146

MR. MARCELINO BOTÍN-SANZ SAUTUOLA Y NAVEDA

248,400 - 0 0.028

MR. JOHN DE ZULUETA GREENEBAUM

250,003 - 0 0.028

MR. JAIME TERCEIRO LOMBA

46,837 - 0 0.005

MR. RAFAEL MATEU DE ROS CEREZO

1,449,762 - 0 0.162

MR. GONZALO DE LA HOZ LIZCANO

661,461 - 0 0.074

MR. PEDRO GONZÁLEZ GRAU

49,692 - 0 0.006

% total voting rights held by the Board of Directors 29.176

Complete the following tables on the members of the Board of Directors of the Company who hold voting rights over shares in the company:


No. ofdirectvoting rights

Indirect rights No. ofequivalent

shares

% oftotal

votingrights

Direct owner

No. of voting rights

A.4. Indicate the family, commercial, contractual or corporate relationships, if any, which exist between substantial shareholders, to the extent that they are known to the company, unless they are immaterial or derive from ordinary business dealings:

Name or corporate name of related parties

Type of relationship Brief Description

- - -

A.5. Indicate the commercial, contractual or corporate relationships, if any, which exist between substantial shareholders and the company and/or its group, unless they are immaterial or derive from ordinary business dealings:

Name or corporate name of related parties

Type of relationship Brief Description

- - -

A.6. Indicate whether the company has been notified of any shareholder pacts that affect it in accordance with the provisions of Articles 530 and 531 of the Capital Markets Act. If there are any, describe them briefly and list the shareholders bound by the pact:

Yes No X

Parties to concerted action % of share capital affected Brief description of the agreement:

Indicate whether the company is aware of any concerted actions among its shareholders. If so, describe them briefly:

Yes No X

Expressly indicate any amendments to or termination of such pacts or concerted actions during the year:


A.7. Indicate whether any individuals or bodies corporate currently exercise or could exercise control of the company in accordance with Article 4 of the Securities Market Act. If affirmative, identify this person:

Yes No X

Name or corporate name

Observations

A.8. Complete the following tables on the company’s treasury stock:

At the close of the financial year:

Number of direct shares Number of indirectly-owned shares (*)

% of total share capital

102,459 82 0.011

(*) Through:

Name or corporate name of the direct holder of the participation

Number of direct shares

HISPAMARKET, S.A. 82

Total: 82

Details of any significant changes carried out, in accordance with that which is provisioned in Royal Decree 1362/2007:

Notification Date Number of direct shares acquired

Number of indirect shares acquired

% of total share capital

01 February 2013 153,489 5,507,862 1.004

05 September 2013 70,661 5,996,520 0.692

05 September 2013 390,993 3,122,321 0.401

A.9. Describe the conditions and time limits applying to the General Meeting of Shareholders’ authorisation for the Board of Directors to carry out acquisitions or transfers of treasury shares.

The General Meeting of Shareholders held on 22 April 2010 resolved to authorise the Board of Directors to carry out, with express power to delegate to the Executive Committee, acquisitions of treasury shares through the Bank or any company controlled by the Bank, and subsequently to sell or amortise such shares. in accordance with the Corporate Enterprises Act.

The acquisitions may be made at any time and as often as deemed appropriate, by any means and any form of legal title, including charging them to profit for the year and/or freely available reserves. The maximum number of shares to be acquired at any one time may not exceed the face value of 10% of the Bank’s share capital or such higher figure as may be legally admissible, without prejudice to the cases provided in Article 144 of the Corporate Enterprises Act. The shares acquired by the Bank or its subsidiaries under this authority may be allocated in whole or in part to directors and employees of the company who have a recognised right thereto, either directly or as a result of exercising options that they hold, for the purposes provided in the last paragraph of Article 146, section 1 of the Corporate Enterprises Act. For trading transactions carried out in an official secondary market, the acquisition price shall be that of the stock market listing of the shares on the date on which the transaction is completed.

For purchases of treasury shares to comply with obligations established in option contracts or agreements, instalment purchases or sales or the like previously entered into by the Bank, including those involving shares and exchangeable or convertible bonds which are or are to be issued directly to directors or employees of the Company or are a consequence of the exercise of options which they own, to which transactions this authorisation also extends, the applicable price shall be as agreed in the pertinent agreement or contract.

The General Meeting of Shareholders on the same date and in the same resolution also authorised the Board of Directors to decide on a capital reduction in order to amortise own shares and to set the terms and conditions of the capital reduction, determine the fate of such shares, decide on their exclusion from listing and amend Article 5 of the Articles of Association, as well as to amend the nominal value of the shares without increasing or reducing the amount of the share capital. The authorisation was granted for five years from the date of the resolution and covers all treasury stock transactions carried out within its terms.


A.10. Indicate whether there are any restrictions on the transferability of securities and/or on voting rights. Indicate in particular the existence of any kind of restrictions that might impede the taking of control of the company by means of the acquisition of its shares in the market.

Yes No X

Description of the restrictions

A.11. Indicate whether the General Meeting of Shareholders has resolved to take neutralisation measures to prevent a takeover bid by virtue of the provisions of Act 6/2007.

Yes No X

If applicable, describe any measures that have been approved and the terms on which any restrictions will become ineffective.

A.12. Indicate whether the company has issued securities that are not traded on an EU regulated market:

There are no securities issued that are traded on a market other than the Spanish Stock Exchange.

If applicable, indicate the different share classes and the rights and obligations conferred by each.

B. GENERAL MEETING OF SHAREHOLDERS

B.1. Indicate whether there are any differences between the quorum provided for in the Corporate Enterprises Act and that required for the General Meeting of Shareholders. If so, give details.

% difference from the quorum established in

Article 193 of the Corporate Enterprises Act

% difference from the quorum established in

Article 194 of the Corporate Enterprises Act

Quorum required in first call - -

Quorum required in second call

- -

Description of the differences

B.2. Indicate whether there are any differences between the rules provided for in the Corporate Enterprises Act and those applying to corporate resolutions. If so, give details

Yes No X

Describe how they differ from the rules provided for in the Corporate Enterprises Act:

Reinforced majority different from that

established in Article 201.2 of the Corporate

Enterprises Act for cases referred to in Article 194.1

Other cases of reinforced majority

% established by the company for the adoption of resolutions

Describa las diferencias


B.3. Indicate the rules applicable to amendments to the company’s Articles of Association. In particular, indicate the majorities required to amend the Articles of Association and rules for protecting the rights of shareholders when amending the Articles of Association. .

In general Bankinter applies the rules contained in the Consolidated Text of the Corporate Enterprises Act.

Thus Article 20 of the Articles of Association of Bankinter states: “The quorums required for the valid constitution of the General Meeting of Shareholders, and the majorities required for the adoption of its resolutions shall be those generally established by Articles 193, 194 and 201.2 of the Corporate Enterprises Act. If the Agenda includes items requiring a reinforced quorum and such quorum is not met, but the quorum for validly dealing with the remaining items is met, then the General Meeting shall be deemed to be validly constituted to deal with the latter agenda items.”

Similarly, Article 14.1 of the Regulations of the General Meeting of Shareholders of Bankinter establishes that “14.1. The quorums required for the valid constitution of the General Meeting of Shareholders, and the majorities required for the adoption of its resolutions shall be those established in the Corporate Enterprises Act. If there is no quorum, the General Meeting of Shareholders shall be held in second call. If the Agenda includes items requiring a reinforced quorum and such quorum is not met, but the quorum for validly dealing with the remaining items is met, then the General Meeting shall be deemed to be validly constituted to deal with the latter agenda items.”

Also, according to Article 286 of the Consolidated Text of the Corporate Enterprises Act, when an amendment to the Articles of Association is proposed, the full text of the proposed amendment must be drawn up together with a written report justifying it, which must be made available to the shareholders when calling the general meeting of shareholders that will deliberate on the proposed amendment.

Since Bankinter is a credit institution, any amendment to the Articles of Association must conform to the provisions of Article 8.1 of Royal Decree 1245/1995 of 14 July, which establishes that amendments to the Articles of Association are subject to the procedure of authorisation and registration established in Article 1 of said Royal Decree. Without prejudice to the foregoing, and in accordance with the provisions of section 2 of said Article 8, amendments concerning the following matters are

not subject to the authorisation procedure, although they must be reported to Banco de España: change of registered office within Spain, capital increases, verbatim addition to the Articles of Association of legal or regulatory provisions of a mandatory or prohibitive nature, compliance with judicial or administrative rulings and those amendments for which the Directorate General of the Treasury and Financial Policy, in reply to a prior consultation on the subject, has stated that it considers authorisation unnecessary due to their limited importance.

Lastly, as indicated in the following Articles of the Regulations of the General Meeting of Shareholders of Bankinter:“8.1 The Company shall comply with its legally established obligations to inform the shareholders by means of the corporate website, without prejudice to being able to use any other means for the purpose and without prejudice to the rights of shareholders, in accordance with applicable legislation, to request information in printed form.”

“8.4.Up to seven days prior to the date set aside for the holding of the General Meeting, shareholders can apply to Bankinter for the information or clarifications that they consider necessary, or submit such questions as they consider relevant in writing.”

“8.5 In addition, within that same period shareholders can request information or clarification or submit questions in writing about the information available to the public that has been provided by the Company to the CNMV since the last General Meeting of Shareholders.”

“8.6 The Company shall be obliged to provide the information in writing before the day of the General Meeting of Shareholders.”

“8.7 During the General Meeting of Shareholders, shareholders may orally request the information or clarification that they consider advisable in regard to the matters included on the agenda and, in the event that it is not possible to satisfy the right of the shareholder at that moment, the Company shall be obliged to provide the information in writing within seven days of the end of the General Meeting.”

“8.8 The Company shall be obliged to provide the information requested except in cases where, in the Chairman’s opinion, its public disclosure would prejudice the company’s interests, or it does not relate to the items on the agenda, or the request is unnecessary or abusive.”


“8.9 Information may not be refused when the request is supported by shareholders representing at least one quarter of the share capital.”

“8.10 The Board of Directors is responsible for ensuring that all information to which shareholders are entitled is made available to them in accordance with the Law. The Board of Directors may empower any of its members, its Secretary or the managers and employees of the Bank whom it considers appropriate to respond to requests for information made by shareholders.

“8.11 Without prejudice to the provisions of Article 7 and the foregoing sections of this Article, shareholders can at any time make proposals, suggestions and consultations regarding the company’s business through the Company’s Shareholders’ Office.”

B.4. Indicate the attendance figures for the General Meetings of Shareholders held in the year to which this report refers and in the preceding year:

Attendance figures

Date of the General

Meeting of Shareholders

% attendance in person

% by proxy % remote voting Total

Electronic voting

Other

21 March 2013

0.70 65.77 0.81 0.00 67.28

15 March 2012

23.48 50.48 0.63 0.00 74.59

B.5. Indicate whether the Articles of Association impose any restriction in the form of a minimum number of shares needed to attend the General Meeting of Shareholders:

Yes X No

Number of shares necessary to attend the General Meeting of Shareholders

600

B.6. Indicate whether it has been agreed that certain decisions entailing a structural alteration to the company (“subsidiarisation”, acquisition or disposal of essential operating assets, transactions tantamount to liquidating the company, etc.) must be submitted for approval by the General Meeting of Shareholders, even when this is not explicitly required by Commercial Laws.

Yes No X

B.7. Indicate the address and means of access to the company’s website where the information on corporate governance and other information on general meetings of shareholders that must be made available to the shareholders can be found.

Bankinter’s corporate website address is www.bankinter.com/webcorporativa. In the Corporate Governance tab on this website, in the left-hand menu, there is a direct link to all Bankinter Corporate Governance contents (Articles of Association, Regulations of the General Meeting of Shareholders, Board Regulations, information on the latest General Meetings of Shareholders, Corporate Governance Reports, information on the Directors, information on significant shareholdings, treasury stock, etc.)


C. STRUCTURE OF CORPORATE GOVERNANCE

C.1. Board of Directors

C.1.1. State the maximum and minimum number of Directors established by the Articles of Association:

Maximum number of directors 15

Minimum number of directors 5

C.1.2. Complete the following table with the members of the Board:

Name or company name of the Director

Representative Office Date first appointed Date last appointed Elected by


- CHAIRMAN 13 April 2000 21 March 2013 VOTE AT THE SHAREHOLDERS GENERAL MEETING

CARTIVAL, S.A. ALFONSO BOTÍN-SANZ DE SAUTUOLA Y NAVEDA

VICE-CHAIRMAN 26 June 1997 22 April 2010 VOTE AT THE SHAREHOLDERS GENERAL MEETING


CHIEF EXECUTIVE OFFICER 21 October 2010 28 April 2011 VOTE AT THE SHAREHOLDERS GENERAL MEETING


- DIRECTOR 14 September 2005 21 March 2013 VOTE AT THE SHAREHOLDERS GENERAL MEETING

MR. MARCELINO BOTÍN-SANZ DE SAUTOLA Y NAVEDA

- DIRECTOR 21 April 2005 21 March 2013 VOTE AT THE SHAREHOLDERS GENERAL MEETING

MR. JOHN DE ZULUETA GREENEBAUM

- DIRECTOR 18 April 2001 28 April 2011 VOTE AT THE SHAREHOLDERS GENERAL MEETING

MR. JAIME TERCEIRO LOMBA

- DIRECTOR 13 February 2008 15 March 2012 VOTE AT THE SHAREHOLDERS GENERAL MEETING


- DIRECTOR 21 January 2009 21 March 2013 VOTE AT THE SHAREHOLDERS GENERAL MEETING


- DIRECTOR 13 February 2008 15 March 2012 VOTE AT THE SHAREHOLDERS GENERAL MEETING

MR. PEDRO GONZÁLEZ GRAU - DIRECTOR 21 March 2013 21 March 2013 VOTE AT THE SHAREHOLDERS GENERAL MEETING

Total number of directors 10


Indicate any resignations from the Board of Directors during the reporting period:


Office held by director on leaving office

Date left office

MR. JOSÉ ANTONIO GARAY IBARGARAY

External independent director

21 March 2013

C.1.3. Complete the following tables on the members of the Board of Directors and their different positions:

EXECUTIVE DIRECTORS


Committee that proposed his or her appointment

Position in the Company's organisational chart

CARTIVAL, S.A. APPOINTMENTS AND REMUNERATION COMMITTEE

VICE-CHAIRMAN


APPOINTMENTS AND REMUNERATION COMMITTEE

CEO

Total number of executive directors 2

% of total Board 20

EXTERNAL PROPRIETARY DIRECTORS


Committee that proposed appointment

Name or corporate name of substantial shareholder represented or which has proposed the appointment



CORPORACION MASAVEU, S.A.

MR. MARCELINO BOTÍN-SANZ DE SAUTUOLA Y NAVEDA


CARTIVAL, S.A.

Total number of proprietary directors 2

% of total Board 20

EXTERNAL INDEPENDENT DIRECTORS

Name or corporate name of the directorMR. JAIME TERCEIRO LOMBA

ProfileBorn 1946. Doctorate in aeronautical engineering from the Polytechnic University of Madrid, summa cum laude and degree in economics from the Autonomous University of Madrid, summa cum laude. Professor of Econometrics and Economic Analysis at the Universidad Complutense de Madrid since 1980. He has been first Vice-Rector of the Complutense University. He is a full member of the Royal Academy of Moral and Political Sciences. He worked for four years as a graduate engineer in the simulation and control department of Messerschmitt-Bölkow-Blohm (MBB) in Munich. He was General Manager of Banco Hipotecario de España. For nine years from 1988 he was Executive Chairman of Caja de Madrid and its Financial Corporation. He has been and currently remains an independent director of various listed and unlisted companies. He is the Chairman of the Council for Social Sciences of the Ramón Areces Foundation and a member of the board of trustees of several foundations.

Name or corporate name of the directorJOHN DE ZULUETA GREENEBAUM

ProfileBorn 1947. He has a Degree in Contemporary History from Stanford University, California (1968) and an MBA from Columbia University Business School, New York (1976). He began his professional career with The Boston Consulting Group. In 1978, he joined PepsiCo Inc, and was later appointed Chairman and General Director of Products of PepsiCo S.A. In 1985, he joined Cadbury Schweppes Plc, becoming the Chief Executive Officer of Schweppes, S.A. and subsequently Chairman of Cadbury Schweppes España, S.A. and Vice-Chairman for the South of Europe. In 1991 he was appointed Managing Director of Sanitas, S.A. de Seguros (BUPA Group) and in 2004 took over the Chairmanship until March 2009. He was Chairman of USP Hospitales, S.L. He is Sole Director of Point Lobos S.L. and represents it on the Board of Everis and on the Advisory Boards of Norman Broadbent España and the Universidad Europea de Madrid.


Name or corporate name of the directorRAFAEL MATEU DE ROS CEREZO

ProfileBorn 1953. Law degree. Summa cum laude PhD in Law from the Universidad Complutense de Madrid. Harvard PMD. State Attorney (not practising). He is currently a Director of Línea Directa Aseguradora, S.A. and a Trustee of the Bankinter Foundation for Innovation. He is also a partner at Ramón & Cajal Abogados SLP and a member of the Madrid Lawyers Association. He has also written numerous works on mercantile law, banking law, new technologies law and corporate governance.

Name or corporate name of the directorGONZALO DE LA HOZ LIZCANO

ProfileBorn 1943. He is an Industrial Engineer and has a degree in Computer Science from the UPM (Universidad Politécnica de Madrid) and a Master’s Degree in Electrical Engineering from the University of Texas. He was Managing Director of Línea Directa Aseguradora from May 1995 to February 2008. Previously he was General Manager of Operations (Resources) of Bankinter, where he worked from 1989 to 1995. He has held several positions of responsibility at IBM España, IBM USA and IBM Europe, where he managed the Development of European Products for Banking and Insurance from 1985 to 1987. He has been Chairman of Gneis Global Services, S.A. since December 2010 and a Director of Línea Directa Aseguradora since October 2009, both these companies belonging to the Bankinter Group.

Name or corporate name of the directorPEDRO GONZÁLEZ GRAU

ProfileBorn 1965. He holds a degree in Law from the Universidad Central de Barcelona. His experience is mainly in international private banking. He was a financial analyst with Salomon Brothers International until 1992, when he joined the private banking and investment management department of Goldman Sachs. He occupied various management positions at Goldman Sachs until 2008. Since 2010 he has been a founding partner of Alana Partners. He has also been a director of: GS Bank AG, Switzerland from 2000 to 2003, Tressis, Madrid from 2004 to 2006 and GS Monaco,

Monaco from 2006 to 2008. He is also a Trustee of the United World Colleges of Spain Foundation, Governor of the UWC Atlantic College, Wales and a Member of the Advisory Board of the Hazloposible Foundation.

Total number of external independent directors 5

% of total Board 50

Indicate whether any director classified as independent receives from the company, or from any entity in its group, any amount or benefit other than director’s remuneration, or maintains or has maintained during the past year a business relationship with the company or any company in its group, whether in his own name or as a significant shareholder, director or senior manager of an entity that maintains or has maintained such relations.

If so, enclose a statement by the Board giving the reasons why it considers that the director in question can perform his functions in the capacity of independent director.


Description of the relationship

Statement with reasons

OTHER EXTERNAL DIRECTORS

Name or corporate name of the director Committee that proposed the appointment

MR. PEDRO GUERRERO GUERRERO APPOINTMENTS AND REMUNERATION COMMITTEE

Total number of external directors 1

% of total Board 10

Details of the reasons why they cannot be considered as proprietary or independent and their connections, whether with the company or its management, or with its shareholders.



Reasons Company, manager, or shareholder with which/whom there is a relationship


According to the binding definition of inde-pendent director established by the Unified Code of Good Governance, one of the cir-cumstances barring a director from being considered independent is his having been employed or having been an executive director of the company or its Group, unless 3 or 5 years respectively have elapsed from the cessation of this relationship.Pedro Guerrero Guerrero was Executive Chairman of Bankinter until 31 December 2012, when he ceased to perform his exe-cutive functions. Therefore, since the period indicated in the Unified Code for being considered independent has not elapsed, Pedro Guerrero Guerrero is included in the category “Other external directors”.

Bankinter, S.A.

Indicate any changes that have taken place in the category of each director during the period.


Date of change Prior situation Current situation


01 January 2013 EXECUTIVE DIRECTOR

OTHER EXTERNAL DIRECTORS

C.1.4. Complete the following table with the information relating to the number of female directors during the past four financial years, as well as the status of such female directors:

Number of female directors as a % of the total number of directors of each type

Financial year 2013

Financial year 2012

Financial year 2011

Financial year 2010

Financial year 2013

Financial year 2012

Financial year 2011

Financial year 2010

Executive 1 1 1 1 50 33.33 33.33 33.33Proprietary 0 0 0 0 0 0 0 0Independent 0 0 0 0 0 0 0 0Other external 0 0 0 0 0 0 0 0Total 1 1 1 1 10 10 9 9

C.1.5. Explain any measures taken towards including such number of women on the Board of Directors as would lead to a balanced presence of men and women.

Explanation of measures

Bankinter is committed to equal opportunities for men and women and as such, every time it appoints members to its governing body it undertakes objective selection processes, without conditioners or bias that could represent a hindrance to the access of women to independent positions on the Board. In each case the independence of the candidate, his/her professional worth, ability and experience in the industry is duly assessed. The process for selecting candidates ensures that there are always women among the applicants studied.

C.1.6. Explain the measures, if any, agreed by the Appointments Committee to ensure that selection procedures do not suffer implicit biases that may hinder the selection of female directors, and that the company deliberately seeks and includes potential female candidates that meet the professional profile sought:

Explanation of measures

As a general rule, the Bankinter Appointments and Remuneration Committee uses outside advisers to carry out the selection of candidates who are likely to form part of the Board of Directors as independent directors. This Committee does not impose limitations or bias on those external advisers who carry out the tasks that might affect the choice of directors for the independent positions and verifies the inclusion of these in the list of candidates to be assessed.

When, despite any measures that might have been adopted, the number of female directors is low or zero, explain the reasons:

Explanation of reasons

Proof of the above is that in 2010 a woman was appointed a member of the Board of Directors, as executive director and CEO of the company. Bankinter will continue to value candidates’ professional capabilities and experience above all else, regardless of their sex.

C.1.7. Explain the form of representation on the board of shareholders with significant holdings.

Jaime Botín-Sanz de Sautuola, a significant shareholder in Bankinter, controls CARTIVAL, S.A., which is currently the Executive Vice-Chairman of Bankinter.


C.1.8. Explain, where applicable, the reasons why proprietary directors have been appointed at the behest of a shareholder whose holding is less than 5% of the capital:


Justification

- -

Indicate whether formal petitions have been ignored for presence on the board from shareholders whose holding is equal to or higher than others at whose behest proprietary directors were appointed. Where applicable, explain why these petitions have been ignored.

Yes No X


Explanation

C.1.9. Indicate whether any director has stood down before the end of his/her term in office, whether the director has explained his/her reasons to the board and through which channels, and in the event reasons were given in writing to the entire board, explain below, at least the reasons that were given:

Yes No X

Director's name Reasons for leaving

C.1.10. Indicate any powers delegated to the managing director(s):

Name or corporate name consejero Breve descripción

CARTIVAL, S.A. The Executive Vice-Chairman chairs the Risk Committee, the ALCO (Assets and Liabilities Committee) and, since January 2013, has chaired the Executive Committee.

Ms. María Dolores Dancausa Treviño The CEO is responsible for running the busi-ness and exercises the top management and executive duties of the Company.

C.1.11. Identify any members of the board holding positions as directors or managers in other companies that form part of the listed company’s group:


Corporate name of the group company

Position


LÍNEA DIRECTA ASEGURADORA S.A. COMPAÑÍA DE SEGUROS Y REASEGUROS

DIRECTOR



DIRECTOR



DIRECTOR



DIRECTOR


GNEIS GLOBAL SERVICES, S.A.

CHAIRMAN

C.1.12. Detail, where applicable, any company directors that sit on boards of other companies publicly traded on regulated securities markets outside the company’s own group, of which the company has been informed:


Corporate name of the listed company

Position

DON PEDRO GUERRERO GUERRERO

PROSEGUR, COMPAÑÍA DE SEGURIDAD, S.A.

DIRECTOR

DON FERNANDO MASAVEU HERRERO

HIDROELÉCTRICA DEL CANTÁBRICO, S.A.

DIRECTOR

C.1.13. Indicate and, where applicable, explain whether the company has established rules on the number of boards on which its directors may sit:

Yes X No


Description of the rules

As it is a financial institution, at Bankinter there is a restriction in force that limits the number of boards on which its directors may sit, in accordance with Act 31/1968, of 27 June, regarding incompatibility criteria to which Chairmen and directors and other executive offi-cers of private sector banks are subject. Bankinter added this limitation to its Regulations of the Board of Directors (Article 15.4 of the Bankinter Board Regulations).

C.1.14. Indicate the general corporate policies and strategies over which the board has exclusive approval rights:

Finance and investment policy YES

Definition of the structure of the corporate group YES

Corporate governance policy YES

Corporate social responsibility policy YES

Strategic or business plan, along with management targets and annual budgets YES

Remuneration policy and appraisal of performance of senior management YES

The risk control and management policy, and periodic monitoring of internal information and control systems

YES

The dividends policy, as well as that pertaining to the treasury shares portfolio, and in particular the limits placed thereon.

YES

C.1.15. Indicate the overall remuneration for the board of directors:

Remuneration of the Board of Directors (€000s) 3,473

Amount of overall remuneration corresponding to the rights accumulated by directors with respect to pensions (€000s)

600

Overall remuneration of the board of directors (€000s) 4,073

C.1.16. Identify members of the senior management that are not at the same time executive directors, and indicate the total remuneration accruing to them during the year:

Name or corporate name PositionMR. FERNANDO MORENO MARCOS MANAGER, COMMERCIAL BANKING AREAMR. EDUARDO OZAITA VEGA MANAGER, COMPANIES BANKING AREAMR. JACOBO DÍAZ GARCÍA MANAGER, INNOVATION, PRODUCTS AND

QUALITY AREAMS. GLORIA HERNÁNDEZ GARCÍA MANAGER, CAPITAL MARKETS AREAMS. GLORIA ORTIZ PORTERO MANAGER, FINANCE AND INVESTOR RELATIONS

AREAMS. MÓNICA LÓPEZ-MONÍS GALLEGO SECRETARY GENERAL AND SECRETARY TO THE

BOARD OF DIRECTORSMR. ÍÑIGO GUERRA AZCONA MANAGER, INVESTMENT BANKING AREAMR. MIGUEL ANGEL MATIACCI CALERO MANAGER, INTERNAL AUDIT

Total senior management remuneration (in €000s) 2,050

C.1.17. Indicate the identity of the board members, if any, that are in turn members of the board of directors of companies of significant shareholders and/or of entities of their group;


Corporate name of the substantial shareholder

Position

MR. MARCELINO BOTÍN-SANZ SAUTUOLA Y NAVEDA

CARTIVAL, S.A. Director

Detail the relevant relations other than those considered in the above paragraph that link board members to significant shareholders and/or companies in their group:

Name or corporate name of the connected director

Corporate name of the connected substantial shareholder

Description of relationship

CARTIVAL, S.A. MR. JAIME BOTÍN-SANZ DE SAUTUOLA Y GARCÍA DE LOS RÍOS

CONTROLLED COMPANY

MR. MARCELINO BOTÍN-SANZ DE SAUTUOLA Y NAVEDA

MR. JAIME BOTÍN-SANZ DE SAUTUOLA Y GARCÍA DE LOS RÍOS

SON


C.1.18. Indicate whether during the year there has been any change in the Board Regulations:

Yes X No

Description of changes

In its meetings of 23 January and 20 February 2013, the Board of Directors of Bankinter appro-ved certain amendments to the Regulations of the Board of Directors, of which the General Meeting of Shareholders held on 21 March 2013 was informed, in accordance with Article 528 of the Corporate Enterprises Act (point 11 of the Agenda of the AGM). Details of the amend-ments can be seen on the Bank’s corporate website (www.bankinter.com/webcorporativa).The amendments to the Regulations of the Board of Directors were made as a result of the change of status of the Chairman of the Board of Directors, who ceased to be an executive of the Company effective 1 January 2013.

C.1.19. Indicate the procedures for selection, appointment, re-election, assessment and removal of directors. List the competent bodies, the procedures to be followed and the criteria to be employed in each procedure.

Selection, appointment, assessment and removal procedure for directors.Directors affected by proposals for appointment, re-election or removal shall abstain from taking part in the relevant discussions and voting.

Term:The present term of office of a Director, without prejudice to indefinite re-election for terms of a similar maximum duration, is four years for all Directors.

Selection:A Director must be a person of acknowledged commercial and professional respectability, competence and solvency and, without prejudice to the provisions of Article 8 of the Regulations of the Board of Bankinter, must meet the requirements provided for in the legislation in force applicable to companies in general and credit institutions in particular, as well as any other that may be applicable.

Further, the members of the Board of Directors must have adequate knowledge and experience to be able to exercise their functions, in the terms laid down by law.

In the case of a legal entity, the private individual who represents the same in the exercise of the functions of such office, shall be subject to the same requirements and

he/she shall be personally bound to perform all duties of a director as provided for in the Board Regulations. For a legal entity to be appointed director of the Bank, it shall be necessary for the Board to accept the private individual who represents the director.

It shall not be necessary to be a shareholder or to hold a certain number of shares to be appointed director of the Bank or to hold office as Chairman, Vice-Chairman, Managing Director or to be a Chairman or Member of any Committee of the Board of Directors.

Any proposal to appoint, re-elect or remove a director that is submitted by the Board of Directors to the General Meeting, and any decision for a provisional appointment taken by the Board in accordance with the Act and the Articles of Association shall require a prior proposal from the Appointments and Remuneration Committee in accordance with a formal and open procedure. The Committee shall likewise propose the principles to be followed for the composition of the Board and the selection of candidates to be proposed as directors. In the event of the Board deciding to set aside the proposal of the Appointments and Remuneration Committee, it must give express reasons for the corresponding agreement.

Appointment:The Board of Directors consists of a minimum of five and a maximum of fifteen members, appointed by a General Meeting of Shareholders or, as applicable, by the Board of Directors, in accordance with the terms of the Corporate Enterprises Act, the Articles of Association or the Board Regulations.

Individuals or bodies corporate may be appointed, regardless whether or not they are shareholders of the Company.

Article 8 of the Board Regulations establishes that persons who are affected by any cause of prohibition or incompatibility, whether legal, regulatory or by virtue of the Articles of Association, cannot be appointed as directors, nor can limited companies, private individuals or legal entities from the financial industry or other sectors that are competitors of the Company or of another Bankinter Group Company be appointed as directors, nor can their directors or senior management or persons proposed by any of same in their capacity as shareholders be appointed. Persons who, either directly or through a connected person, are involved in a structural conflict of interest situation with the Company or with another Bankinter Group Company, or who are proposed by one or more shareholders who may be involved in said conflict of interest, may not be appointed as Directors.


In any of the aforementioned cases, the Board may not appoint by co-opting, nor may it present proposals to the General Meeting of Shareholders for the appointment, re-election or ratification of Directors when such persons are involved in any of the aforementioned situations, and it must oppose any other proposals or agreements that would be contrary to the provisions of this Article 8 of the Regulations.The Shareholders General Meeting will periodically be able to set the effective number of members of the Board of Directors within the stated minimum and maximum limits.

Removal:The Regulations of the Board of Directors, in accordance with the provisions of the Articles of Association, regulates the causes and procedures for cessation and resignation of Directors, incorporating the terms of Recommendation 30 of the Unified Code of Good Governance for Listed Companies (cessation of proprietary Directors).

Thus, the circumstances mentioned by the Regulations in which a Director must resign his position are the following: where the Director ceases to hold executive office in the Bank or to represent shareholders to which his/her/its appointment was linked, or, in the case of independent Directors, where they become involved in or are affected by circumstances that cause them to lose their independent status; when a Director is affected by any cause of prohibition or incompatibility, or legal cause for cessation or resignation, including conflict of competition or interest in the terms of Article 8 of the Board Regulations as previously referred to; or if a Director commits any act or omission contrary to the diligence and effectiveness with which he/she/it is obliged to exercise the office; or seriously breaches his/her/its duties as Director or in any way causes serious harm to or jeopardises the Company’s interests, its credit and reputation, or the functioning of the Board, or loses the confidence of the Board for good reason.

Similarly, they must resign if their remaining on the Board might place the interests of the Company at risk, either directly or through the Director’s connection with related persons.

In the stated circumstances, the Board of Directors may propose the cessation of the Director and, prior to this, require said director to resign from his/her/its position. A decision by the Board of Directors regarding any reasons to dismiss a Director in accordance with the provisions of the Regulations and any acceptance of a Director’s resignation, shall be taken at the proposal of the Appointments and Remuneration Committee, except in cases of urgency or need.

Re-election:As previously stated, the proposals for re-election of Directors submitted by the Board of Directors to the Shareholders General Meeting, will require the prior proposal of the Appointments and Remuneration Committee in accordance with a formal and transparent procedure. In the event of the Board deciding to set aside the proposal of the Appointments and Remuneration Committee, it must give express reasons for the corresponding agreement.

Assessment: Pursuant to the coming into force of Royal Decree 256/2013, of 12 April, incorporating the European Banking Authority’s guidelines of 22 November 2012 on the assessment of the suitability of members of the management body and key function holders into the rules for Spanish credit institutions, the Board of Directors, in its meeting of 17 June 2013, approved the “Protocol for complying with Bankinter’s suitability requirements”, which describes the requirements that have to be met by directors and senior managers and the respective assessment processes. In any case the Board of Directors had previously always taken account of all these variables when assessing the suitability of members of the Board of Directors.

Additionally, the Board of Directors of Bankinter assesses the suitability of its members, as indicated in the preceding paragraph, annually or on a more frequent ad hoc basic if necessary.

Also, according to Article 5 of the Regulations of the Board it is the competence of the Board of Directors annually to assess the its workings and those of its delegated Committees, starting out from the report submitted to it by the Corporate Governance Committee, as well as the performance of its Chairman and executive Directors.

C.1.20. Indicate whether the board of directors has assessed its activity during the year:

Yes X No

If so, explain to what degree the self-assessment has led to significant changes in its internal organisation and the procedures applicable to its activities:


Description of changes

Article 5 of the Regulations of the Board establishes that the Board shall assess the wor-kings of the Board and of its Committees, starting out from the report submitted to it by the Corporate Governance Committee. The Board of Directors has carried out the assessment for 2013.

C.1.21. Indicate the circumstances under which directors are obliged to resign.

As indicated in section C.1.19., in addition to the circumstances established in applicable legislation, Article 11 of the Regulations of the Board of Directors of Bankinter regulates the causes and procedures for cessation and resignation of Directors, establishing that a Director must place his position at the disposal of the Board of Directors and, if the Board sees fit, formally resign, where the Director ceases to hold executive office in the Bank or to represent shareholders to which his/her/its appointment was linked, or, in the case of independent Directors, where they become involved in or affected by circumstances that cause them to lose their independent status; when a Director is affected by any cause of prohibition or incompatibility, or legal cause for cessation or resignation, including conflict of competition or interest in the terms of Article 8 of the Board Regulations; or if a Director commits any act or omission contrary to the diligence and effectiveness with which he/she/it is obliged to exercise the office; or seriously breaches his/her/its duties as Director or in any way causes serious harm to or jeopardises the Company’s interests, its credit and reputation, or the functioning of the Board, or loses the confidence of the Board for good reason. They must also resign if their remaining on the Board might put the interests of the Company at risk, either directly or through the Director’s connection with related persons.

C.1.22. Indicate whether the role of chief executive officer in the company is performed by the chairman of the board. If so, indicate the measures taken to limit the risks of accumulating powers in a single person:

Yes No X

Measures to reduce risk

Indicate and, where applicable, explain whether rules have been established to empower one of the independent directors to request a board meeting be called or new business included on the agenda, to coordinate and give voice to the concerns of external directors and to direct the assessment by the board of directors.

Yes X No

Description of the rules

In accordance with that set out in Article 9 of the Board Regulations:‘4. The Independent Director who holds office as Chairman of the Corporate Governance Committee shall act as coordinator for the other independent Directors and non-executive Directors in general, with the powers provided for in these Regulations. The Coordinating Director will make the concerns of the other external directors known, and will also be in charge of directing the assessment of the Chairman by such means as may be established by the Board of Directors and the Corporate Governance Committee.’

Likewise, the Bankinter Board Regulations establish that Directors in general may include items on the Agenda. Thus, Article 29 states:“1. Prior to the start of each financial year, the Board of Directors shall approve the schedule of meetings for the coming year and the proposed Agenda for the same, Directors being entitled to propose additional items for inclusion on the Agenda.”“3. The Chairman will make the final decision on the Agenda for the meeting and any pos-sible changes to be introduced to same. Directors may ask the Chairman to include other matters on the Agenda.”This same Article 29, in section 4, provides that Board meetings may be called at the request of the Chairman of the Corporate Governance Committee, in accordance with the provisions contained in this Article.

C.1.23. Are reinforced majorities, different from legally established majorities, required for any type of resolution?

Yes No X

Where applicable, describe the differences.


C.1.24. Explain whether there are any specific requirements, different from those relating to directors, for being appointed chairman of the board

Yes No X



C.1.25. Indicate whether the chairman has a casting vote:

Yes X No

Issues on which there is a casting vote

Article 29 of the Articles of Association states that the Chairman of the Board shall have a casting vote in the event of a tie.

C.1.26. Indicate whether the Articles of Association or the Board regulations establish any age limit for directors:

Yes No X

Age limit for chairman Age limit for managing director

Age limit for directors

- - -

C.1.27. Indicate whether the Articles of Association or the Board regulations establish a limited term of office for independent directors, different from that established by law:

Yes No X

Maximum term of office in years -

C.1.28. Indicate whether the Articles of Association or the Board regulations establish specific rules for proxy voting on the Board of Directors, the way this is done and, in particular, the maximum number of proxies a director may have, and whether it is mandatory to grant proxy to a director of the same type. If so, briefly list these rules.

Article 30 of the Regulations of the Bankinter Board, following the recommendations of the Unified Code of Good Governance, states that directors may, for each meeting, issue a proxy by letter, fax, telegram, e-mail, or any other means deemed to be valid according to the said Regulations, together with voting instructions, to any other

director. The proxy vote must be sent to the Chairman or Secretary to the Board in advance of the time of the commencement of the meeting. One single director may hold more than one proxy.

In all cases, Directors may only fail to attend in exceptional circumstances.

The failure of the director to attend Board Meetings and Committees will deprive him/her of payment of all allowances, even though his/her proxy has been issued.

Furthermore, as has been indicated in other reports, in 2007, Bankinter created a Director’s website through which a director may, inter alia, issue a proxy if he/she is unable to attend a meeting. The said website contains all necessary information in order to be able to issue a proxy and voting instructions.

C.1.29. Indicate the number of meetings the Board of Directors has held during the year. Where applicable, indicate how many times the Board has met without the chairman in attendance. In calculating this number, proxies given with specific instructions will be counted as attendances.

Number of Board meetings 14Number of Board meetings without the Chairman in attendance 0

Indicate the number of meetings that have been held during the financial year by the different Board committees:

Number of Executive or delegated Committee meetings 11Number of Audit Committee meetings 11Number of Appointments & Remuneration Committee meetings 6Number of Appointments Committee meetings 0Number of Remuneration Committee meetings 0Number of Corporate Governance Committee meetings 4

C.1.30. Indicate the number of meetings held by the Board of Directors during the year attended by all its members. In calculating this number, proxies given with specific instructions will be counted as attendances.

Attendance of directors 11% of attendances to total votes during the year 100%


C.1.31. Indicate whether the individual and consolidated annual accounts presented for Board approval are certified beforehand:

Yes X No

Identify, if pertinent, the person or persons certifying the individual and consolidated annual accounts of the company for their formulation by the Board:

Name Position

MS. MARIA DOLORES DANCAUSA TREVIÑO CEO

MS. GLORIA ORTIZ PORTERO Manager, Finance and Investor Relations Area

C.1.32. Explain the mechanisms, if any, established by the Board of Directors to prevent the individual and consolidated financial statements it approves from being presented to the General Meeting of Shareholders with a qualified auditor’s report.

The Board of Directors controls all of the preparation and formulation process for the annual accounts of the Bank and its Group, likewise the financial information on a quarterly and half-yearly basis through its Audit and Regulation Compliance Committee.

The aim of this permanent contact and control, amongst others, is to avoid there being reservations on the audit report.

The Board of Directors of the company decided during 2011 to introduce certain changes in the functions of the Audit and Regulatory Compliance Committee as contained in the Regulations of the Board of Directors, among other things to bring them into line with the new requirements laid down in Act 12/2010, of 30 June, amending the eighth additional provision of Act 24/1988, of 28 July, on the Securities Market.

From among the powers contained in the Board Regulations, the Audit and Regulatory Compliance Committee therefore has the following:

7. To ensure independence for the external auditor and to receive this information from the auditors with regard to those matters that might place

his or her independence at risk and any others related to the performing of the auditing of the accounts, likewise the other notifications provisioned for in the legislation regarding the auditing of accounts and the technical rules of auditing. In any case, it must receive annual written confirmation from the auditors concerning their independence with regard to the Bank or entities related direct or indirectly to it, as well as information on the additional services of any kind provided to these entities by such auditors or firms, or by the persons or entities related to these, in accordance with legislation on the auditing of accounts.

7 bis. Issuing an annual report, prior to the issue of the auditor’s report on the accounts, expressing an opinion on the independence of the auditors or audit firms. This report must in any case include a mention of the provision of the additional services referred to in the preceding section.

8. Acting as a channel of communication between the Board of Directors and the external and internal auditors, evaluating the results of the audit reports and compliance with the observations and conclusions formulated, and discussing with the auditors any significant weaknesses they detected in the internal control system while performing the audit.

14. To ensure the reliability and transparency of the internal and external information on the Bank’s performance, activities and financial results and, in particular, to check the completeness and consistency of the quarterly and biannual financial statements of the Bank and the Group, as well as the annual accounts, the Annual Report and the Management Report, prior to their approval or proposal by the Board of Directors and their publication, and to supervise the Bank’s policies with regard to the issue of Prospectuses and other forms of public information.

The external auditor will attend meetings of the Audit and Compliance Committee provided always the Chairman thereof deems it pertinent and, in any case, provided said auditor’s report on the annual accounts and the Bank’s and the Group’s management report are to be examined, as well as meetings regarding the verification of quarterly results, prior to them being published.

To date, the individual and consolidated accounts have never been presented for approval to the General Meeting of Shareholders with any reservations or


qualifications in the Audit Report . In the event of this happening, the Audit and Regulatory Compliance Committee would meet with the auditors in order to find the best solution for the problem that has arisen.

Pursuant to the terms of the eighteenth additional provision, section 2.6) of the Securities Market Act, and in accordance with the provisions of the Regulations of the Board of Directors of Bankinter, the Audit and Regulatory Compliance Committee issues a report on the independence of the auditors, prior to the issue of the auditor’s report on the consolidated financial statements of the Bank and the Group.

C.1.33. Is the Secretary of the Board also a Director?

Yes No X

C.1.34. Explain the appointment and severance procedures for the Secretary of the Board, indicating whether his/her appointment and severance have been reported to the Appointments Committee and approved by the Board in a plenary meeting.

Appointment and removal procedure

According to Article 28 of the Board Regulations, the appointment and removal of the Secretary of the Board shall require a prior report from the Appointments and Remuneration Committee, and this must be approved by the Board of Directors in plenary session.

Does the Appointments Committee report on the appointment? YES

Does the Appointments Committee report on removal? YES

Does the Board in plenary session approve the appointment? YES

Does the Board in plenary session approve removal? YES

Has the Secretary of the Board been given the special task of ensuring compliance with corporate governance recommendations?

Yes X No

Observations

Article 28 of the Board of Directors Regulations: The Secretary to the Board must strive for the material and formal legality of the actions and the agreements of the Board and the Board Committees, and for the application of the recommendations of good governance in Spain that the company has accepted. He/she will exercise all of the powers attributed to him/her by commercial legislation and by the Articles of Association as regards the calling and constitution of the meetings, the adoption, formalising and execution of the resolutions of the Board of Directors, information, certification and other legal and statutory powers. In addition the Secretary to the Board will supply a legal advisory service to the Chairman, the Managing Director and to the Directors, and will be responsible for the external institutional information of the company that is of a legal nature.

C.1.35. Indicate what mechanisms the company has established, if any, to preserve the independence of the auditor, the financial analysts, the investment banks and the rating agencies.

Measures relating to the transparency of information are in line with restrictions laid down in the provisions concerning privileged and relevant information, confidentiality and banking secrecy laid down at law, in the Bankinter Board Regulations and Internal Code of Conduct relating to Securities Markets.

In addition the Internal Regulations of the Securities Market Conduct contain conduct rules to which both the directors of the entity and equally the personnel who perform activities related to the securities’ market are subject, in addition to rules applicable to separate areas (asset management, own portfolio management, management of other portfolios, analysis), as well as those operations concerning the company’s treasury shares and the applicable procedure with regard to operations and decisions with privileged or relevant information.

Through the Audit and Regulatory Compliance Committee, the Board of Directors supervises the objectivity of the relationship of the Company and the group with the external auditors, ensuring their complete independence. Specifically, the Board keeps a close watch on the rotation of the auditors, the prevention of conflicts of interest and the transparency of the information in the annual report in regard to the remuneration paid to the auditors in their capacity as such and in some cases under other headings. The report states and breaks down all of the remunerations received by the external auditor.

One of the Audit Committee’s functions is to keep a watching brief on the independence of the external auditor. It submits proposals to the Board for the


appointment, re-election or replacement of the external auditors, and the setting of the contracting terms, the scope of their professional mandate and the supervision of activities outside the Audit as such.

Pursuant to the terms of the eighteenth additional provision, section 2.6) of the Securities Market Act, the Audit and Regulatory Compliance Committee also issues a report on the independence of the auditors, prior to the issue of the auditor’s report on the consolidated financial statements of the Bank and the Group.

The Audit Committee and Regulatory Compliance Committee covers the following points in this report:

• Whether the appropriate relations and channels of communication have been established with the auditors for information to be received and examined by the Audit and Regulatory Compliance Committee concerning such matters as might jeopardise the auditors’ independence and any other matters relating to the account auditing process, as well as other communications provided by law and by technical auditing standards.

• It approves the annual budget for the fees for auditing the Bank and the Group, setting the maximum percentage of the total amount invoiced that may relate to services other than the auditing of the accounts and, in accordance with generally accepted practice, having defined a protocol of action so that the commissioning of such services is in all cases authorised in advance by the Committee.

• It supervises the rotation of the audit team, pursuant to the provisions of Article 8 (iv) of Act 12/2010, of 30 June, amending Act 19/1988, of 12 July, on the Auditing of Accounts, and ensures compliance with the legally required rotation at all times. Moreover, in order to ensure an annual study of the suitability and independence of the auditor, it is the policy of the Committee and of the Bank to decide on the re-appointment of the auditor every year, carrying out a process of reflection on the main aspects of the past year and the needs and circumstances pertaining in the coming one.

The Chairman of the Audit and Regulatory Compliance Committee will report to the Shareholders’ Ordinary General Meeting in regard to the conclusions of the annual report by said committee.

Following a report provided to the Audit and Compliance Committee, the external auditors submit an annual report to the Board of Directors on their conclusions

about the audit and a statement regarding risk control in the Bank and the Group. The Internal Audit Division reports functionally to the Chairman of the Board of Directors and hierarchically to the Audit and Regulatory Compliance Committee. The Committee appoints the person in charge of said division, approving its annual budget and the planning of its activities.

C.1.36. Indicate whether the company has changed its external auditor during the year. If so, identify the incoming and outgoing auditors:

Yes No X

Outgoing auditor Incoming auditor

If there have been any disagreements with the outgoing auditor, explain what they were about:

Yes No X

Explanation of disagreements

C.1.37. Indicate whether the audit firm does other work for the company and/or its group other than the audit. If so, declare the amount of fees received for such work and the percentage of such fees in the total fees charged to the company and/or its group:

Yes X No

Company Group Total

Amount of non-audit work (€000s) 92 85 177

Amount of non-audit work / total amount invoiced by the audit firm (%)

7.65% 7.12% 14.77%


C.1.38. Indicate whether the audit report on the annual financial statements for the previous year contained reservations or qualifications. If so, indicate the reasons given by the Chairman of the Audit Committee to explain the content and scope of such reservations or qualifications.

Yes No X

C.1.39. Indicate the number of consecutive years during which the current audit firm has been auditing the financial statements of the Company and/or its group. Also, indicate the number of years audited by the current audit firm as a percentage of the total number of years in which the annual financial statements have been audited:

Company Group

Number of consecutive years 8 8

Company Group

Number of years audited by current audit firm / number of years the company has been audited (%)

24.24 24.24

C.1.40. Indicate and, where applicable, give details on the existence of a procedure for directors to engage external advisory services:

Yes X No

Procedural details

Article 14.7 of the Board of Directors Regulations states that in matters which fall within the purview of the Audit and Compliance Committee, the Appointments and Remuneration Committee, and the Corporate Governance Committee, Directors who are members thereof may ask for auditors, consultants, advisers, or independent experts to be hired, as appro-priate, in order to assist the Committee concerned in such matters, with the corresponding decision being taken by the relevant Committee.

C.1.41. Indicate and, where applicable, give details on the existence of a procedure for directors to obtain the information they need to prepare the meetings of the governing bodies in sufficient time:

Yes X No

Detalle del procedimiento

The Regulations of the Board of Directors refer to this matter in Article 29 ‘Calling of mee-tings and setting of agendas’, establishing the following:

1. The Board of Directors shall approve the programme of meetings for the following year prior to the commencement of each financial year: The calendar can be altered with the agreement of the Board itself or by the decision of the Chairman, who will make the alteration known to the Directors sufficiently in advance. There shall be a minimum of ten meetings per year.

2. The calling of the ordinary meetings shall be done by letter, fax, telegram, e-mail or by any other valid means which can be placed on record and shall be authorised by the sig-nature of the Chairman, or such person as may be deputising for him, or by the Secretary by order of the Chairman. Sufficient notice must be given prior to the date of the mee-ting, except in cases of urgency or necessity. Notice must always include the meeting’s Agenda and be accompanied by the informative documentation previously set by the Board, or which the Chairman decides in each case. The directors will be able to apply to the Chairman or the Secretary to the Board to supply them with the information that is necessary to carry out an appropriate assessment of the corresponding operations or decisions, in such a way that they can reasonably prepare for the meetings and actively take part in the deliberations.

3. The Chairman will make the final decision for the Agenda for the meeting and any pos-sible changes to be introduced to same. The Directors may ask the Chairman for other business to be included on the Agenda.

The agenda, along with the rest of the documentation that is deemed necessary so as to be able to decide on the matters put forward on the agenda for the meetings, is accessible for the directors via telematic means over the Board website so as to make access to same even easier.

C.1.42. Indicate, with details if applicable, whether the company has established rules obliging directors to inform and, where applicable, resign under circumstances that may undermine the company’s credit and reputation:

Yes X No

Explain the rules

Article 11.2 of the Board Regulations stipulates that the Directors must place their position at the disposal of the Board and formally resign if the Board sees fit, in the following cases, among others:

4. When, for whatever reason, the Director causes serious harm or prejudice to the inter-ests of the company, the credit and reputation of same or the workings of the Board, or in general, loses the confidence of the Board for good reason.

5. Where there are any other circumstances for removal of the Director, in accordance with the recommendations in force in Spain for good corporate governance that have been accepted by the Company, and is so accepted by the Board of Directors.

6. Decisions of the Board of Directors regarding the assessment of the existence of reasons for the removal of a Director in accordance with the provisions of the preceding sections of the afore-mentioned Article, and the acceptance of a Director’s resignation, shall be taken at the propo-sal of the Appointments and Remuneration Committee except in cases of urgency or necessity.


C.1.43. Indicate whether any Board member has informed the company of any legal suit or court proceedings against him or her for any of the offences listed in Article 213 of the Corporate Enterprises Act:

Yes No X

Director's name Criminal Case Observations

Indicate whether the Board of Directors has considered the matter. If so, give a reasoned explanation of the grounds for the decision taken as to whether or not the director should retain his/her directorship or, where applicable, describe the actions taken or planned to be taken by the Board of Directors as at the date of this report.

Yes No X

Decision adopted / action taken Reasoned explanation

C.1.44. Detail any significant agreements reached by the Company that come into force, are amended or concluded in the event of a change in the control of the company stemming from a public takeover bid, and its effects.

C.1.45. Identify in aggregate form and indicate in detail any agreements between the company and its directors, managers or employees that have guarantees or ring-fencing severance clauses for when such persons resign or are wrongfully dismissed or if the contractual relationship comes to an end due to a public takeover bid or other kinds of transactions.

Number of beneficiaries 0

Type of beneficiary Description of the agreement

NO NO

Indicate whether these contracts have to be notified and/or approved by the company’s bodies or those of its group:

Board of Directors General Meeting of Shareholders

Body authorising the clauses - -

Yes No

Has the General Meeting of Shareholders been informed about these clauses?

C.2. Committees of the Board of Directors

C.2.1. Detail all the Board committees, their members and the proportion of proprietary and independent directors forming them:

EXECUTIVE OR DELEGATE COMMITTEE

Name Position Type

CARTIVAL, S.A. CHAIRMAN EXECUTIVE

MR. PEDRO GUERRERO GUERRERO MEMBER OTHER EXTERNAL DIRECTORS

MS. MARIA DOLORES DANCAUSA TREVIÑO MEMBER EXECUTIVE

MR. FERNANDO MASAVEU HERRERO MEMBER PROPRIETARY

MR. JAIME TERCEIRO LOMBA MEMBER INDEPENDENT

MR. RAFAEL MATEU DE ROS CEREZO MEMBER INDEPENDENT

MR. PEDRO GONZÁLEZ GRAU MEMBER INDEPENDENT

% of executive directors 28.58

% of proprietary directors 14.28

% of independent directors 42.86

% of other external directors 14.28


AUDIT AND COMPLIANCE COMMITTEE

Name Position Type

MR. GONZALO DE LA HOZ LIZCANO CHAIRMAN INDEPENDENT

MR. FERNANDO MASAVEU HERRERO MEMBER PROPRIETARY


MR. JOHN DE ZULUETA GREENEBAUM MEMBER INDEPENDENT


% of executive directors 0

% of proprietary directors 20

% of independent directors 80

% of other external directors 0


Name Position Type

MR. JOHN DE ZULUETA GREENEBAUM CHAIRMAN INDEPENDENT


MR. GONZALO DE LA HOZ LIZCANO MEMBER INDEPENDENT







Name Position Type

MR. RAFAEL MATEU DE ROS CEREZO CHAIRMAN INDEPENDENT

MR. MARCELINO BOTÍN-SANZ SAUTOLA Y NAVEDA

MEMBER PROPRIETARY

MR. JOHN DE ZULUETA GREENEBAUM MEMBER INDEPENDENT


MR. GONZALO DE LA HOZ LIZCANO MEMBER INDEPENDENT





C.2.2. Complete the following table with information on the number of female directors on Board committees over the last four years:

Number of female directors

Financial year 2013

Financial year 2012

Financial year 2011

Financial year 2010

Number % Number % Number % Number %

Executive Committee

1 14.29 1 14.29 1 14.29 1 14.29

Audit and Regulatory Compliance Committee

0 0.00 0 0.00 0 0.00 0 0.00

Appointments and Remuneration Committee

0 0.00 0 0.00 0 0.00 0 0.00

Corporate Governance Committee

0 0.00 0 0.00 0 0.00 0 0.00

C.2.3. Indicate whether the following functions correspond to the Audit Committee.

To supervise the preparation process and the integrity of the financial information relating to the Company and, if applicable, the group, ensuring compliance with regulatory requirements, the proper delimitation of the consolidation perimeter and the correct application of accounting principles.

YES

To review on a periodical basis the internal control and risk management systems so that the main risk areas are identified, managed, and are adequately communicated.

YES

To monitor the independence and efficiency of the internal audit function; to propose the selection, appointment, re-election, and cessation of the head of the internal audit department; to propose the budget for said department; to receive information periodically on its activities, and to verify that senior management consider the conclusions and recommendations contained in its reports.

YES

To establish and supervise a mechanism that will allow the employees to report confidentially and, where considered appropriate, anonymously, any irregularities with potentially serious implications, especially those of a financial or accounting nature, which they may detect within the company.

YES

To submit proposals to the Board for the selection, appointment, re-election or replacement of the external auditor, and the contracting terms and conditions.

YES

To receive from the external auditor on a regular basis information about the audit plan and its implementation results, and to verify that senior management considers its recommendations.

YES

To ensure the independence of the external auditor. YES


C.2.4. Give a description of the rules governing the organisation and running of each of the Board committees and the responsibilities attributed to each.


The General Meeting of Shareholders held on 28 April 2011 approved an amendment to Article 31 of the Articles of Association to bring the rules for the Audit Committee into line with the new requirements regarding its composition and functions as laid down in Act 12/2010 of 30 June, amending the eight additional provision of Act 24/1988, of 28 July, on the Securities Market. In any case the requirements regarding the composition and workings of Bankinter’s Audit and Regulatory Compliance Committee were already being complied with before the amendment to the Articles of Association was approved. The maximum number of members of the Audit Committee was also changed, from five to seven. (It currently has seven members.)

The Audit and Compliance Committee, in accordance with the current Articles of Association, shall consist of a minimum of three and a maximum of seven Directors appointed by the Board of Directors on the recommendation of the Appointments and Remuneration Committee, all of them being non-executive. The members of the Committee shall be appointed for an automatically renewable two-year term. In all cases, the Committee Chairman must be an independent director and must be replaced every four years at the most and may be re-elected one year after termination of his Chairmanship.

In compliance with Article 34 of the Board of Directors Regulations, the Chairman of the Committee will be an independent director with knowledge and experience in accounting, auditing, or risk management affairs, and all its members shall be non-executive directors with a majority of independent directors. The Secretary of the Board of Directors shall be the Secretary of the Committee. The Chairman of the committee will have the discretion to decide if the Chairman and Managing Director of the Bank can attend the meetings. Committee meetings may be attended by the Manager of the Audit Division and the Manager of the Regulatory Compliance Unit, as speakers but not as Members, with the frequency determined by the Committee. The Committee’s meetings can be attended, at the decision of the Committee, by other members of the Audit Division and any other manager or employee of the company even without the attendance of any executive.

The external auditors shall attend the Committee’s meetings whenever the Chairman considers it appropriate and, in any case, they shall attend the meetings in which the auditors’ report on the annual accounts and management report are reviewed, and those at which the quarterly and half yearly results are checked prior to publication.

The Audit and Regulatory Compliance Committee shall act by formulating recommendations on good practices addressed to the pertinent areas of the Bank, and may also pass resolutions on matters within its competence, without prejudice to those reserved to the Board of Directors, the Executive Committee or other corporate bodies by law and by the Articles of Association. The provisions in these Regulations dealing with the operation of the Board of Directors shall apply to the Audit and Compliance Committee on a supplementary basis. The application of these rules must in any event support the independent operation of the Committee.

As a general rule, the Committee shall meet with the same regularity as the Board of Directors. It shall also meet whenever it is convened by its Chairman, or a meeting is requested by two members. In the Chairman’s absence, meetings are chaired by the Independent Director appointed for the purpose by the Committee. The Secretary shall take the minutes of the meetings, which shall be signed by the Secretary and approved by the Chairman of the Committee, reported to the Board of Directors and distributed among all the Directors. The Secretary will convene the Committee and file the minutes and documents presented to it.

The Audit and Compliance Committee is the decision-making body that represents the Board of Directors in supervising and controlling the Company’s activities, the truthfulness, objectivity and transparency of the corporate accounts, the economic and financial information and compliance with the laws and regulations to which the Bank is subject. The Internal Audit Division reports functionally to the Chairman of the Board of Directors and hierarchically to the Audit and Regulatory Compliance Committee.

The functions of the Audit and Regulatory Compliance Committee are set out in Article 34 of the Regulations of the Board of Directors, which is available on Bankinter’s corporate website (www.bankinter.com/webcorporativa).


CORPORATE GOVERNANCE COMMITTEE

The Corporate Governance Committee shall comprise a minimum of three and a maximum of seven Directors appointed by the Board of Directors on recommendation from the Appointments and Remuneration Committee. The members of the Committee shall be appointed for an automatically renewable two-year term. The Chairman of the Committee shall be an independent director and all the members thereof shall be non-executive directors with a majority of independent directors. The Secretary of the Board of Directors shall be the Secretary of the Committee.

The other Directors of the Bank, including the executive directors or directors will be able to attend the meetings at the decision of the committee and by invitation of same.

The Corporate Governance Committee shall, as the case may be, regulate its own organisation and operation. In matters of competence, the decisions of the Committee will be considered as agreement proposals for the Board of Directors. The provisions in these Regulations on the operation of the Board of Directors shall apply on a supplementary basis to the operation of the Corporate Governance Committee. The application of these rules must in any event support the independent operation of the Committee.

The Corporate Governance Committee shall meet whenever convened by its Chairman, or requested by two members. In the Chairman’s absence, meetings are chaired by the independent Director appointed for the purpose by the Committee. The Secretary shall draw up the Minutes of the meetings, and they shall be signed by same with the countersignature of the Committee Chairman, who will notify the Board of Directors. The Secretary shall keep a file of the Minutes and documents presented to the Committee. Its functions are described in Article 36 of the Board Regulations.

The General Meeting of Shareholders held on 28 April 2011 approved an amendment to the Articles of Association concerning the attribution to the Chairman of the Corporate Governance Committee of the function of coordinator of the external Directors or “Lead Independent Director” and of the power to stand in for the Chairman of the Board in the event of vacancy, absence or illness of the Chairman and the Vice-Chairman. This amendment was prompted by Recommendations 16 and 17 of the Unified Code of Good Governance, to which Article 28 of the Articles of

Association already referred, and which are further developed in Articles 9.4, 29.4 and 36 of the Board Regulations.

Due to this, Article 27 of the Articles of Association was amended to attribute to the Chairman of the Corporate Governance Committee the power to stand in for the Chairman of the Board in the in the event of vacancy, absence or illness of the Chairman and the Vice-Chairman. In this way, the CEO will assume the function only in the absence of both the Vice-Chairman and the “Lead Independent Director”.

The functions of the Corporate Governance Committee are set out in Article 36 of the Regulations of the Board of Directors, which is available on Bankinter’s corporate website (www.bankinter.com/webcorporativa).


The Appointments and Remuneration Committee will comprise a minimum of three and a maximum of seven Directors appointed by the Board of Directors on a recommendation from the Appointments and Remuneration Committee. The members of the Committee shall be appointed for an automatically renewable two-year term.

The Chairman of the Committee shall be an independent director and all the members thereof shall be non-executive directors with a majority of independent directors. The Secretary to the Board will act as Secretary to the Committee and, when he/she has to be absent for reasons of conflict of interest, he/she will be substituted by the youngest Director in attendance. The Chairman and the Managing Director or other executive directors or directors of the Bank will be able to attend the meetings at the decision of the committee and by invitation of same. The Appointments and Remuneration Committee shall, as the case may be, regulate its own organisation and operation.

In matters of competence, the decisions of the Committee will be considered as agreement proposals for the Board of Directors. The provisions in these Regulations on the operation of the Board of Directors shall apply on a supplementary basis to the operation of the Appointments and Remunerations Committee.

The application of these rules must in any event support the independent operation of the Committee. The Appointments and Remunerations Committee shall meet


whenever convened by its Chairman, or requested by two members. In the Chairman’s absence, meetings are chaired by the independent Director appointed for the purpose by the Committee. The Secretary will draw up the Minutes of the meetings, and be signed by same with the counter signature of the Committee Chairman, who will notify the Board of Directors. The Secretary shall keep a file of the Minutes and documents presented to the Committee.

The functions of the Appointments and Remuneration Committee are set out in Article 35 of the Regulations of the Board of Directors, which is available on Bankinter’s corporate website (www.bankinter.com/webcorporativa).Act 2/2011 of 4 March on Sustainable Economy introduced, in its fifth final provision, a series of amendments to the Securities Market Act, in application of the principles of good corporate governance arising from the international resolutions and bodies, and in order to reinforce transparency in relation to the remuneration of its directors and senior management, as well as on its remuneration policies. Thus, a new Article 61 (iii) was introduced within the Securities Market Act, on the annual report on Directors’ remunerations of the directors, establishing, among other matters, that this report must be submitted to a consultative vote at the General Meeting of Shareholders. Subsequently, further developing this Act, Order ECC/461/2013, of 20 March, established the content and structure of the annual corporate governance report, the annual report on remuneration and other instruments of information of listed companies, inter alia. The provisions of Order ECC/461/2013, of 20 March, complete the regulation of the content and structure of the annual report on directors’ remuneration and empowers the CNMV to detail the content and structure of the reports on remuneration in accordance with the provisions of the Order, to which end CNMV Circular 4/2013 determines, among others, the model of the annual report on remuneration of directors of listed companies.As part of its policy of good governance, Bankinter decided to apply and comply with Recommendation 40 of the Spanish Unified Code of Good Governance from its entry into force in regard to the submitting of its report on the policy of directors’ remunerations to the Shareholders General Meetings as a separate point on the Agenda in a consultative capacity. Thus, since 2008 the Bank shareholders have had the opportunity to express their opinions specifically on this policy. In the 2013 AGM, 84.739% of the votes present and represented signalled their approval (2012: 99.025%).

EXECUTIVE OR DELEGATE COMMITTEE

The Chairman of the Executive Committee shall be chosen by the Board of Directors from among all its members, and the Secretary to the Board of Directors shall act as its Secretary. The Executive Committee will meet, when called by the Chairman, when he considers it advisable for reasons of urgency or need. It will also be convened when it is so requested by three Directors who make up same. The Secretary will draw up the Minutes of the meetings, they will be signed by him/her with the counter signature of the Committee Chairman, and they will be sent to all of the directors, without prejudice to the effectiveness of the agreements adopted by the Committee, which do not require subsequent ratification by the Board. The Committee’s Secretary convenes the Committee, and files the minutes and documentation presented to the commission. The provisions of the Board Regulations in regard to the workings of the Board of Directors shall also apply to the Executive Commission. The responsibilities attributed to this Committee are set out in Article 33 of the Regulations of the Board, which are available on Bankinter’s corporate website (www.bankinter.com/webcorporativa).

C.2.5. Indicate, where applicable, the existence of regulations for the Board committees, where they can be consulted and any amendments made to them during the year. Indicate whether an annual report on the activities of each committee has been drawn up voluntarily.

The regulation of the Committees is included in the Board of Directors Regulations that is available on the company’s corporate web site: www.bankinter.com/webcorporativa.

During 2013 the amendments to the Regulations of the Board indicated in point C.1.18 above were made.

An annual report is produced of the activities of the Audit and Regulatory Compliance Committee, a summary of which will be presented to the Chairman of the Committee at the Shareholders’ Ordinary General Meeting.

Additionally, since the General Meeting of Shareholders of 2010, the Chairman of the Appointments and Remuneration Committee has taken part in AGMs to report on the activity of the Committee during the past year. This report is presented by the Chairman of the Committee every year in the company’s AGMs, as indicated in the Regulations of the Board of Directors following the amendments made in 2011.


C.2.6. Indicate whether the composition of the executive or delegated committee reflects the distribution of different classes of directorship on the Board:

Yes X No

If not, explain the composition of its delegated or executive committee

D. RELATED PARTY TRANSACTIONS

D.1. Identify the competent body and explain the procedure, if any, for approving related party and intra-group transactions.

Competent body for approving related party transactions

Board of Directors

Procedure for approving related party transactions

Article 6 of the Regulations of the Board of Directors attributes, among others, the following function to the Board of Directors: “To approve the Company’s related party transactions with directors, significant shareholders or shareholders represented on the Board or persons linked to them, in the terms established in these Regulations and at the proposal of the Audit and Regulatory Compliance Committee.” The Director concerned, directly or indirectly, shall abstain from taking part in the delibera-tions and decisions relating to the specific transaction for which authorisation is requested.

Also, Article 19 of the Regulations of the Board regulates the authorisation of loans and other financial risks, as well as related party transactions:

1. The granting by the Bank of credits, loans or any other kind of financing or guarantee to Directors or to the related persons referred to by Article 23 of these Regulations shall conform to the rules and instructions of Banco de España and to the provisions of this Article, which shall also apply to any other transactions of Directors implying a financial risk of any kind for the Company.

2. Said transactions must be authorised or ratified by the Board of Directors or, in case of urgency, by the Executive Committee, the Audit and Regulatory Compliance Committee, or other Board Committee or person or persons to which or to whom the Board or the competent Committee has delegated said power, without prejudice to the defini-tive approval of the Board when appropriate. The decision shall be taken without the Director concerned taking part.

3. An exception is made for transitional transactions such as overdrafts or debit balances on credit cards, providing the amount drawn is within the usual limits, renewals, exten-sions or modifications to transactions previously authorised when they do not involve an increase in the amount or limit granted, and, in the case of executive Directors, tran-sactions covered by collective labour agreements or similar agreements or regulations and those that are exempted by the rules and instructions referred to in section 1 of this Article.

4. All other related party transactions between the Company and its Directors, significant shareholders, shareholders represented on the Board or persons connected to them must be approved by the Board of Directors in the terms of section 2 of this Article, on the basis of a report by the Audit and Regulatory Compliance Committee, with the exception of transactions carried out under standardised contracts for customers at generally established prices or rates and the amount of which does not exceed 1% of the Company’s annual revenues.


State whether the approval of related party transactions has been delegated, indicating the body or parties to which said approval has been delegated, if any.

D.2. List any transactions significant in their amount or by virtue of their nature between the company or its group companies, and significant shareholders of the company:

Name or corporate name of the significant shareholder

Name or corporate name of the company or the company in its group

Nature of therelationship

Type of transaction

Amount (€000s)

- - - - -

D.3. List any transactions significant in their amount or by virtue of their nature between the company or its group companies, and directors or managers of the company:

Name or corporate name of the directors or managers

Name or corporate name of the related party

Relation Nature of the transaction

Amount (€000s)


BANKINTER, S.A.

Member of the Board of Directors

Financing 5,621


BANKINTER, S.A.


Financing 3,481

CARTIVAL, S.A. BANKINTER, S.A.


Financing 10,000


BANKINTER, S.A.


Financing 4,000


BANKINTER, S.A.


Financing 4,634

D.4. List any significant transactions carried out by the company with other companies belonging to the same group, other than those eliminated in drawing up the consolidated financial statements and those forming part of the company’s ordinary business as regards their purpose and terms.

In any case, provide information on any intra-group transaction with companies established in countries or territories considered as tax havens:

Corporate name of the group company

Brief description of the transaction

Amount (€000s)

- - -

D.5. Indicate the amount of the transactions carried out with other related parties.

D.6. Detail the mechanisms established to detect, determine and resolve possible conflicts of interest between the company and/or its group, and its directors, managers and/or significant shareholders.

Article 18 of the Board Regulations provides as follows:

1. 1. The Directors shall inform the Board of Directors or the Audit and Compliance Committee of any conflicts of interest they may have with the Company, and specifically of any remunerated activities they undertake for other companies or entities - including the office of Director and Administrator - or that they undertake as self-employed persons, and in general, any other professional duties or situation that may be relevant or might affect the fulfilment of their duties as Directors of the Company as soon as they become aware of their existence or of the possibility of any conflict or situation. Information will be given on the corporate website in regard to the other Boards of Directors of which the Director is a member, regardless of whether the companies concerned are listed or unlisted.

2. In the event of a conflict, the affected Director will abstain from taking part in any deliberations, decisions and transactions to which the conflict refers to.

3. The Directors must notify the Audit and Regulatory Compliance Committee in regard to any participations in the capital of any companies, when they are majority holdings or when they confer control of the companies in question with the meaning as expressed in this Regulation, likewise any modification that occurs to the referred to participations.


4. Transactions between the Directors and the Company shall be entered into at market value and be fully open, and subject furthermore to the application of the rules of conduct in the securities market which are contained in these Regulations, and to all other restrictions which are legally applicable.

5. With the exception of normal bank transactions, Directors shall inform the Audit and Compliance Committee of professional, commercial or economic transactions with the Company, whether direct or indirect, especially those not linked to the Company’s ordinary business and those which, exceptionally, are not carried out on normal market conditions, to which the rules provided in Article 19 of these Regulations shall apply.

6. When requested by the Audit and Compliance Committee, the Executive Directors shall also inform it of their investments and financial and economic transactions in general.

7. Directors shall not use the company name or their status as Directors when carrying out transactions on their own behalf or, on behalf of related persons. Nor must they make use of the information or the assets of the Company or make use of their position in it to obtain a financial advantage, except when it is in return for appropriate consideration on market conditions or the information in question has been made known publicly.

8. Directors must not either for their own benefit or for that of related persons undertake any transaction related to the company about which they had prior knowledge due to their position as Director, when the investment or transaction would have been offered to the company, or in which it would have had an interest. The exception is where the Company has, without influence of the Director in question, discarded such investment or transaction. Business opportunity of the Director is understood as any possibility of making a financial, industrial, commercial or real estate investment or transaction, that had arisen in connection with the exercising of the office held by the Director or by means of the use of Company information or equally under circumstances in which it could reasonably be thought that the third party offer was being directed to the Company.

9. Directors shall give notice to the Audit and Compliance Committee of their business and circumstances in any case that might have an adverse effect on the Company’s image and reputation, as well as any criminal procedure in which they may be involved as a suspect.

10. The situations and transactions referred to in this Article shall be made public as may be legally required.

11. Persons connected to the Director, qualified as proprietary, or who should be considered as such are, for the purposes of Articles 8, 11, 17 and 18 of

the present Regulations considered as a shareholder or shareholders who have appointed or proposed the appointment, ratification or renewal of the Director and the persons related to them, or those which the Director represents for any reason; likewise those who act in an agreed manner with any of them in accordance with the legislation in force.

12. In any of the aforementioned events, the Audit and Compliance Committee may request a Report from the Appointments and Remuneration Committee or the Corporate Governance Committee, if appropriate. If the Audit and Compliance Committee or any of the aforementioned Committees find there is any serious cause for prohibition, incompatibility or conflict of interest, notice thereof shall be given to the Director and the Board of Directors.

13. The structural conflict of interest will be cause for incompatibility for the appointment or the exercising of the office of Director in accordance with Articles 8 and 11 of the present Regulation.

A conflict of interest exists in those situations in which there is a risk of the Company’s interests or those of the Companies in the Bankinter Group being directly or indirectly opposed to the personal interests of the Director, the shareholder that proposed his appointment or persons connected with either of them.

A conflict of interest is considered as structural whenever it affects or can affect in a total or partial manner the current or future corporate interests or the strategy of the company in any way and therefore implies the risk of a breach of duty by the Director in his/her loyalty to the corporate interests. A personal conflict of interest will exist when the matter that affects him/her or a person connected to him/her or, in the case of a proprietary director, the shareholder or shareholders that proposed or made his/her appointment or persons directly or indirectly related to same. In order to determine if there is a structural conflict of interest, the same factors as stated in this article will be taken into account. 17.6 of the Regulations.

D.7. Is more than one company in the Group listed in Spain?

Yes No X


Identify the subsidiaries listed in Spain:

Listed subsidiaries

Indicate whether the respective areas of activity and any business relations between them, and any business relations between the listed subsidiary and other group companies, have been publicly and precisely defined;

Yes No

Describe any business relations between the parent company and the listed subsidiary, and between the listed subsidiary and other group companies.

Identify the mechanisms established to resolve any potential conflicts of interest between the listed subsidiary and the other companies of the group:

Mechanisms for resolving possible conflicts of interest

E. RISK CONTROL AND MANAGEMENT SYSTEMS

E.1. Explain the scope of the company’s Risk Management System.

Bankinter sees the Risks function as one of the central elements of its competitive strategy, and this is reflected in its risk management, which sets it apart from the rest of the financial sector.

The basic principles governing risk management are:

• Contributing towards maximising capital, safeguarding the Bank’s solvency.• Independence of the function.• Alignment with the strategic objectives.• New products: risk determination, approval and monitoring.• Comprehensive risk management.• Mass use of automated approval.• Diversification of risk• Relevance of the quality of service factor in the risks function.• Policy of Sustainable Investment.

Bankinter’s Risk Management System works in an integrated and continuous manner, consolidating management by business unit (customer segments), subsidiaries and geographical areas (regional divisions) in accordance with the needs of the business.The following is a brief summary of the main methods, procedures and systems used in Group risk management. Further information can be found in the section headed “Risk processes, methods, measurement systems and information” in the Report on Matters of Prudential Importance and in the section headed “Risk Policies and Management” of the Bank’s Statutory Annual Report. Both documents are available on Bankinter’s corporate website https://webcorporativa.bankinter.com , under “Financial info. and CNMV”.

Management of credit risk is supported by the Bank’s experience and culture and the risk quantification methods (IRB internal rating models). The models, which are based on statistical methods, allow risk to be quantified and the most appropriate decisions to be taken in terms of the approval of transactions (both automatically and manually), the internal allocation of capital and price setting.


For approving transactions, Bankinter relies on advanced electronic file processing systems allowing automatic approval of risk transactions that meet certain requirements, and sending them to be processed by established manual means of analysis and approval if they do not. The structure of powers (authority to approve transactions) is highly integrated into the systems, which facilitates control of limits and rapid adaptation of risk policies to changing circumstances. For control and monitoring, Bankinter has a series of systems and applications which help managers to detect symptoms of deterioration in the quality of customer risk, in order to be able to anticipate any possible non-performing loan problems:

As far as recoveries and the management of NPLs are concerned, a robust process is in place to manage incidents, centralised for the largest positions and decentralised for the rest, with the support of collection agencies and automated follow-up systems and a daily incident position information service. In order to properly manage non-performing loans, the Bank has an NPL and forecasts application which managers use to report the actions carried out, thereby allowing the state of the negotiations, the commitments made by clients, the time period, and the estimated recovery percentage to be closely monitored. The Credit Risk information systems outlined above feature information in real time and on a periodic basis, depending on their respective functions. Additionally, the Bank has an exhaustive IT system in which all the necessary management information is integrated, with different levels of aggregation for each business segment and for all of them together: Branch Office, Regional Organisation and Division.

As regards structural and market risks, the Bank has systems and controls in proportion to the scope and complexity of its activities, consolidating its activity in line with the different divisions, operating units and types of risk.

Bankinter has a specific system for structural risk, controlling the interest rate risk and liquidity risk deriving from the balance sheet and permanently ensuring that the risk taken on does not exceed the limits approved by the Board. For market risks arising from the trading activity, the Bank has another system for controlling the risk of positions taken by operators, trading desks and the Capital Markets Division. Various methods are applied depending on the particular case, such as Gaps or

interest rate and liquidity maps, measurements of interest rate sensitivity (in terms of both financial margin and economic value), Value at risk (VaR) and stress testing.

For Operational Risk the Bank has adopted the standard approach approved by Banco de España, and manages it in accordance with best industry practices (self-assessments, registers of operational losses, specific organisation dedicated to managing operational risk, etc.) Measures and information on operational risk are based on risk maps, key operational risk indicator, contingency scenarios and loss databases.

The support areas are also included in the risk management systems. The Bank periodically draws up a risk map which includes these areas, evaluates compliance with best practices of risk management and identifies and prioritises specific actions for improvement where necessary.

E.2. Identify the corporate bodies responsible for drawing up and executing the Risk Management System.

The Board of Directors, through the Executive Committee and the Audit and Compliance Committee, takes care of and supervises the policies, systems and internal control procedures relating to all the Bank’s risks, as well as the prevention of money laundering in accordance with applicable current legislation.

The Framework Agreement on Risk Policy established by the Board of Directors sets out the Bank’s risk strategy and profile for each year.

The organisational structure of the entire risks function reports hierarchically to the CEO, thus establishing independence between the risks and business functions.

The identification, measurement, monitoring, control and management of all the risks inherent in banking operations constitute a fundamental aim within the framework of overall management of all risks.

The principles for managing risk in each business segment are determined in the Framework Agreement. There is a specific section relating to the Responsible Lending Policy, pursuant to the provisions of the Transparency Act, which contains the principles that the Bank has always applied in this field.


Organisation and management in respect of the main risks is as follows:

Credit Risk

The Board of Directors establishes the Risks Policy and delegates its implementation to the Risks Committee, which is chaired by the Executive Vice-Chairman. Its delegated powers include approving operations and defining the powers of the committees at the next levels below.

The Risks, Incidents & Arrears Control and repossessed assets divisions each report directly and separately to the CEO, thus ensuring maximum attention to all the processes relating to risk management.

The Risks Division, which covers the main risks (credit risk, market risk, structural interest rate and exchange risks and operational risks) is responsible for drawing up and publishing policies for the approval, control and management of risks. Its targets include the development of automated authorisation systems and all risk approval processes, while always seeking maximum efficiency and quality.

The Credit Risk division performs its functions through the following organisational units:

• Risk approval and policies are carried out by: - The Private Individual Risks Unit, - the Corporate and Developer Risks Unit - the Corporate Risks Unit.

• The Risk Processes Unit is in charge of defining and enhancing the various risk processes and IT systems.

• The construction and maintenance of risk models and their components is carried out by the Global Risk Management Unit.

In addition to their own functions the various Units take part in the process of defining new products and determining the risk parameters and the approval process.

In accordance with the Bank’s strategy and policies, the hierarchy and structure of the powers delegated to each of the risk Committees are established, and the approval systems automatically check that they are complied with.

The risk approval process is supported by an electronic proposal that enables integration and unification of all of the Bank’s networks and channels. The use of statistical models enables retail risk approval to be automated and assists decision-making on risks requiring non-automated approval.

The Incident Control department is responsible for managing and handling the processes for the control, monitoring and collection of early arrears, developing automated systems to make the processes more efficient and establishing controls on data quality and transaction formalities.

The Arrears and Repossessed Assets department is responsible for managing and handling processes for the control, monitoring and non-amicable recovery of loans, establishing processes and systems to make this activity more efficient and improve recovery rates on non-performing loans.

It is also responsible for all matters relating to the policy on, and the study, approval and monitoring of refinancing transactions. Refinancing or restructuring transactions are carried out only when they can be shown to be viable, and incorporating additional guarantees whenever possible.

Apart from this, it is also responsible for setting prices for repossessed assets, establishing sales policies and taking care of the assets until they are sold, with a view to maximising the value for the Bank, taking account of market conditions at any given time.

Forming part of the Arrears and Repossessed Assets Division is the Internal Validation Unit, which is responsible for validating the advanced risk models and their results, independently of its risk modelling functions.

Every year the Risks Division produces a Risk Map, to identify, quantify and uniformly summarise the various risks to which the Bank is exposed, as well as the situation of the management systems used to control them, with the aim of reducing potential losses as far as possible by means of mitigation measures.

Risk diversification is a fundamental management principle that has demonstrated its effectiveness in this crisis. The Bank periodically monitors risk diversification by sector, geographical location, product, security held, customers and counterparties, and has maximum permitted risk concentration policies.


Structural and market risks

The Board of Directors delegates the continuous monitoring of decisions regarding structural balance sheet risks (interest rate risk and liquidity risk), stock market risk and exchange rate risk of the Bank’s corporate positions, as well as the establishment of financing policies, to the Assets and Liabilities Committee (ALCO). On an annual basis it reviews, approves and delegates to the ALCO the limits applicable for managing the aforementioned risks. The Treasury and Capital Markets Area implements the decisions taken by the ALCO with regard to the Bank’s corporate positions.

The Board of Directors also sets the operating limits applicable to the Treasury and Capital Markets division for dealing on the Bank’s own account in the financial markets on an annual basis, in order to take advantage of any business opportunities that may arise.

The Balance Sheet Management Area, which is part of the Capital Markets Directorate, has the function of measuring and managing the institution’s structural risks.

The Market Risk Unit, which is part of the Risk Directorate, has the independent function of monitoring and controlling the Institution’s structural and market risks.

Operational risk

For managing operational risk, Bankinter applies a decentralised model in which final responsibility for managing operational risk rests with the business and support units.

For governance purposes, the following control bodies and general lines of responsibility have been established:

The Board of Directors approves the policies and the management framework; establishes the level of risk that Bankinter is willing to undertake.

The Operational, Reputational and New Products Risk Committee is the executive governing body on which the Senior Management is represented and which undertakes the following main roles in managing operational risk:

• Promoting the implementation of active risk management policies.• Tracking significant operational risks and the development of plans to

mitigate them.• Ensuring that the protocol for evaluating risks associated with new product

launches is applied.

The Operational Risk Unit, reporting to the Risks Division, is responsible for the following main functions:

• Promoting management of operational risks in the various divisions, encouraging risk identification, allocation of responsibility, keeping of written records of controls, generation of indicators, drawing up of mitigation plans, regular review and action to be taken in the event of new significant losses or risks.

• Equipping divisions and units with the methodologies, tools and procedures necessary for managing their operational risks.

• Promoting the drawing up of contingency and business continuity plans that are appropriate and in proportion to the size and activity of the institution in the units that so require.

• Ensuring that operational losses occurring in the institution are recorded correctly and in full.

• Providing the organisation with a uniform view of its exposure to operational risk, in which the existing operational risks are identified, integrated and evaluated.

• Providing information on operational risk to be forwarded to regulators, supervisors and external bodies.

The Business Units have the following functions:

• Management of operational risk in the unit and specifically, identification, evaluation, control, monitoring, analysis and mitigation of the operational risk on which they have the ability to act.

• Recording and communication of operational losses produced in the course of their activity.

• Studying, defining, prioritising and funding the operational risk mitigation plans which they are responsible for running.

• Maintaining and testing the business continuity plans supported by the unit.


Reputational Risk

Reputational Risk is the risk of interactions with customers leading to negative publicity regarding business practices and relations, which may cause a loss of trust in the institution’s moral integrity.

The Operational, Reputational and New Products Risk Committee meets on a regular basis, with the following functions as regards reputational risks:

• To promote the implementation of reputational risk policies.• To monitor actions taken to mitigate the most significant risks. • To decide on the proposals put to the Committee on possible reputational risk

events.• Validating compliance with procedures and protocols for identifying and

assessing reputational risks. This function is particularly relevant where launches of new products or business lines are concerned.

E.3. Indicate the main risks that could prevent business targets from being met.

Bankinter does practically all its lending in Spain. As such it is subject to the usual risks inherent in the banking and finance business, such as: credit risk, market risk, structural risk, exchange risk, interest rate risk, liquidity risk, operational risk, business risk and reputational risk.Bankinter has always had a prudent risk policy, which has allowed it to outperform the sector throughout the long economic and financial crisis that started in 2007. As regards credit risk, the Group centres on lending to middle – high income private individuals and has a sound mortgage lending portfolio. For businesses, the focus is on medium-sized and large companies, which have performed relatively well in the crisis.Exposure to market risk is very limited, and as for structural risks, the Bank pursues a policy of neutralising the interest rate and exchange risks deriving from the Group’s business.The risks that might affect attainment of business objectives are those characteristic of the banking activity in Spain, accentuated by the lasting financial crisis. Thus, although over the course of 2013 we saw the rate of new NPLs slow, the risk remains of its being maintained or accelerating once more. The flatness of domestic demand and the deleveraging process that the Spanish economy is going through point to weak growth, with doubtful debts continuing to be a significant risk Bankinter ended 2013 with an NPL ratio of 4.98%, which is 38% of the sector

average (13.08% to November 2013). Its privileged position and long-standing policy of prudent lending allows it to face the future development and management of credit risk with confidence.Market risk, interest rate risk, exchange risk and liquidity risk could all arise from new systemic episodes such as those seen in 2012. Bankinter actively manages these risks and pays permanent attention to them.Another significant risk in the current context of low growth is the business risk, which Bankinter is successfully confronting by shifting away from its mortgage lending business, which is highly safe and low-margin, towards other segments with limited risk and bigger margins, such as private banking, corporates and insurance. The Bank’s solid balance sheet is also allowing it to focus its attention on growth, and operating results before provisions grew by 18% in 2013.

E.4. State whether the entity has a risk tolerance level.

The Framework Agreement on Risk Policies, which the Board reviews annually establishes in detail the risk policies and the systems of limits and powers for all significant risks and ensures that they are executed within the established margins of tolerance.

The Framework Agreement and the provisions developing it internally, establish metrics and precise limits for each type of risk and organisational unit, which in summary form are as follows:

As regards credit risk, the Framework Agreement as further developed in the System of Delegated Powers assigns quantitative limits, in amounts, for the approval of risks depending on the level in the organisation and the nature and term of the transaction.

As regards structural and market risks, for each of the different risks there are specific metrics (level of exposure, value at risk (VaR), maturity mismatches, liquidity gaps) and limits are established at the various management levels. For operational risk, the Framework Agreement establishes the risk control environments appropriate to their magnitude (the bigger the risk, the better the control environment required). For prioritising risks an estimate of potential losses is made in the Risk Map and losses due to operational risk events are monitored in detail.


Given the wide diversity of types of risk, applying the principle of proportionality and considering the breadth and level of detail of the Framework Policy on Risks, we have not so far considered it necessary to establish an overall figure for acceptable risk at corporate level.

E.5. Indicate the risks that materialised during the year.

The adverse effects of the economic and financial crisis that started in 2007 continued to be felt through 2013, although over the course of the second half signs of economic stabilisation and indications of a timid recovery appeared.

On the credit supply side, the crisis that continues to impact banks’ earnings, the restructuring, the ‘clean-up’ and new capital requirements have inevitably reduced banks’ lending capacity.

On the demand side, businesses and families have continued their efforts to deleverage so as to adapt to the new economic situation; furthermore, the years of crisis we have come through are leading to a reduction in solvency on the part of would-be borrowers, while demand from solvent borrowers has remained very low, with so many investment projects suspended in the light of economic uncertainty.

All these factors combined to reduce the supply of and solvent demand for credit. Bankinter, while maintaining its high standards of credit quality, is committed to the recovery of credit for families and businesses. In this context, the solvency and quality of its balance sheet have allowed it to continue to perform much better than the sector as a whole. It is remarkable that Bankinter’s lending to companies increased by 4.6% in a context in which lending to manufacturers by the sector as a whole fell by 19.5% (information for Q3).

Non-performing loans and problem assets continued to deteriorate in 2013 as a result of the prolonged crisis. Additionally, the recognition and clean-up of refinanced loans was tackled in accordance with criteria laid down by the regulator. In spite of the deterioration, in 2013 the difference in credit quality between Bankinter’s portfolio and that of the sector as a whole increased once again, as shown by the data relating to the level and quality of the lending portfolio.

Bankinter ended 2013 with a level of computable credit risk (comprising both lending and contingent liabilities) of €45.65 billion (1.51% down on the previous year), doubtful debt of €2.27 billion (up by 14.68% on the previous year) and an NPL ratio of 4.98% (up by 16.36%). The level of provisions for credit risk stood at €957 million (down 0.20%) and coverage of NPLs was 42.04% (down by 12.98% on the year before).

The NPL ratio of 4.98% is just 38% of the figure for the sector as a whole, which was 13.08% at the end of November 2013 according to data from Banco de España.

Repossessed assets at year-end 2013 stood at €628 million (up by 2.64% on 2012), with provisions of €259 million ((up by 12.19%) and coverage of 41.19% (up by 9.29%).

The portfolio of credit risk refinancing and restructuring transactions at the end of 2013 stood at €1.73 million, with any amendment to credit risk conditions being considered as refinancing. The majority of refinancing operations have additional guarantees. During 2013 the strict classification criteria established by Banco de España were applied to refinancing transactions.

The volume of problematic and repossessed assets continues to be well below those of the Group’s main competitors in comparative terms.

Further information about the impact of these risks on the Bank’s accounts can be found in the sections “Risk policies and management”, “Exposure to the construction and property development sector” and “Additional information on risks: refinancing and restructuring transactions”. The Statutory Report is available on Bankinter’s corporate website https://webcorporativa.bankinter.com, under “Financial info. and CNMV” – Statutory Report.

The conservative credit approval policy maintained over the past few years, and the proportion of risk secured by mortgages (60% at year-end), have allowed us to keep losses on the lending portfolio down throughout the crisis. The LTV (loan to value) ratio, which measures the ratio of the amount of the loan to the value of the house, has always been moderate (59% at year-end) and continues to provide an important safety margin in case of falling real estate prices. Also notable is the fact that 82% of the mortgage lending portfolio is secured by mortgages on residential


properties, and this has been a great source of strength for the portfolio during the long recession.

The limited exposure to housing developments (less than 2%) and the non-existence of finance for land, has allowed Bankinter to continue to stand out clearly from the rest of the market. In the Spanish Financial System, the default and foreclosures affecting this sector had a significantly negative effect on the income statement due to the high level of exposure.

Bankinter considers that its control and monitoring systems have worked effectively throughout the crisis, as indicated by its having maintained one of the lowest NPL ratios in the sector. In 2013 we strengthened the control systems by creating a unit to act directly on early arrears, the Incident Control area, which is described in section E.2.

E.6. Explain the plans for overseeing and responding to the main risks to which the entity is exposed.

Bankinter actively manages risks, supported by various pillars as described in the foregoing sections and summarised hereunder:

• A clear organisational structure, independent of the business function, which originates from the Board of Directors and establishes a structure and the functions for identifying, measuring, controlling and managing the various different risks.

• Risk policies clearly established by the Board and developed through specific structures for limits and powers and internal information and decision making processes.

• Specific control systems and procedures strongly supported by computerised information, control and management systems.

• A solid risk culture established over the years.

The Bank’s capacity for response when faced with the main risks, as shown throughout the crisis and as foreseeable in the immediate future, can be summarised as follows:

• The risk approval policy is conservative, and business plans are geared primarily to low- or moderate-risk customer segments in both the private individuals and companies sectors. The control, monitoring and recovery systems for credit risk have been strengthened over the course of the crisis, and supported by heavy investment in information systems. All of which translates into an NPL ratio of 4.98% at year-end 2013, less than 40% of the sector average.

• The structural interest rate risk is actively managed in order to protect the financial margin and the economic value of the Bank against interest rate fluctuations.

• Liquidity risk is actively managed and monitored, mainly by means of buffers of liquid assets, concentration of wholesale financing, diversification of sources of funding and appropriate handling of balances resulting from commercial transactions. The ratio of deposits to loans has gone from 56.6% at the end of 2010 to 76.5% at the end of 2013.

• Operational risk is actively managed by means of self-assessments, risk maps, specific improvement plans, key indicators of operational risk and contingency plans for the most significant risks.

• The Bank has strengthened its solvency by means of various financial measures (capital increases, issues of convertible bonds, provisioning and the generation and retention of profits), and its Core Tier 1 EBA solvency ratio has increased from 6.8% at the end of 2010 to 12.6% at the end of 2013.

We should also mention that, as an additional level of risk supervision, the Audit and Regulatory Compliance Committee’s functions include the following:

• Promoting and periodically reviewing the functioning of adequate internal control systems that ensure the proper management of the Company’s risks.

• To direct the internal auditing activities of the Bank and of the Group, and therefore, to approve its annual work plan, the annual activities report, and


to ensure that the main risk areas and the internal control systems and procedures are revised.’

• To check the general risk map for the Bank and the Group and to present the corresponding proposals to the Board.

• Being informed of any significant irregularities, breaches or risks detected in the course of the Compliance Area’s control work.

F. INTERNAL CONTROL OVER FINANCIAL REPORTING (ICFR)

F.1. The entity’s control environment

F.1.1. Which bodies and/or functions are responsible for: (i) the existence and maintenance of an appropriate and effective ICFR; (ii) its implementation; and (iii) its supervision?

The Board of Directors of Bankinter is the body responsible for financial information and for the existence of a proper system of internal control thereon. Additionally, Article 34.11 of Board of Directors’ Regulations states that the Board of Directors of Bankinter has delegated the aforementioned function to the Audit and Regulatory Compliance Committee: “To ensure the reliability and transparency of the internal and external information on the Bank’s performance, activities and financial results and, in particular, to check the completeness and consistency of the quarterly and biannual financial statements of the Bank and the Group, as well as the annual accounts, the Annual Report and the Management Report, prior to their approval or proposal by the Board of Directors and their publication, and to supervise the Bank’s policies with regard to the issue of Prospectuses and other forms of public information.”

The ICFR Manual is approved by the Board of Directors on a proposal from the Audit Committee.

The Board of Directors’ Regulations establish in Article 6 that one of the functions of the Board of Directors is “to approve the policy for the control and management of risks, and the periodic monitoring of the internal information and control systems.” Also, Article 34 section 11.4 of the Board of Directors’ Regulations indicates that the Audit and Regulatory Compliance Committee has the function of “supervising the effectiveness of the internal control, the Company’s Internal Audit services and the risk control systems, and ensuring the independence and effectiveness of the aforementioned function.”

However, the design of the systems for controlling financial information in the Bankinter Group falls under the supervision of the Bank’s CEO. Moreover, the effective implementation of the control systems for financial reporting is the responsibility of the Bank’s Finance Division and of each of the Group’s subsidiaries, as well as of the General Management of the areas involved in or having an impact


on the quality and reliability of financial information that serves as the basis for drawing up the Group’s Financial Statements.

The Audit and Regulatory Compliance Committee deals, among other things, with any weaknesses in the control system, as well as the reliability and accuracy of the financial statements, in order to evaluate possible corrections, after obtaining the information and necessary explanations from the responsible or involved areas. For detecting these weaknesses, the Committee is supported by both the Group’s Auditor and the Internal Audit department, who verify the efficiency of the scheme for controlling the quality of the financial information so as to detect any possible deviations that might ultimately transpire to be material errors in said information.

F.1.2. Whether the following elements exist, especially as regards the process of drawing up the financial information:

Departments and/or mechanisms responsible for: (i) the design and review of the organisational structure; (ii) clearly defining lines of responsibility and authority, with an appropriate distribution of tasks and functions; and (iii) ensuring that sufficient procedures exist for their appropriate dissemination within the entity.

The Board of Directors of Bankinter is responsible for approving and reviewing the organisational structure of the Bank, on a proposal from the Appointments and Remuneration Committee.

The Bankinter Group Manual of Accounting Policies and Financial Reporting Procedures, approved by the Board of Directors on a proposal from the Audit and Regulatory Compliance Committee, establishes the lines of responsibility and authority in relation to the drawing up of the finantial information processes.

Bankinter’s current organisational structure aims to ensure a solid model of internal control on financial reporting.

Code of conduct, approval body, degree of dissemination and instruction, principles and values included (indicating whether specific mention is made of the recording of transactions and drawing up of financial information), body in charge of analysing non-compliance and proposing corrective measures and sanctions.

Bankinter Group has a Code of Professional Ethics which contains all the basic principles of action and practices of professional conduct expected to all employees and persons working for the Group.

The Bankinter Group’s Code of Professional Ethics is approved by the Board of Directors, on a proposal from the Audit and Regulatory Compliance Committee.

The code is updated to bring it into line with such circumstances as so require. The last update has been approved by the Board of Directors on 24 April 2013.

All employees of the Group, and all persons subject to the Code of Ethics, receive it upon first being hired, as well as having it at their permanent disposal both in the internal regulations and on the corporate website. They also have a mailbox for any queries or doubts they might have about the Code.

Additionally, the Group’s Manual of Accounting Policies and Procedures for Financial Reporting introduces a complement to the Code of Ethics, establishing a number of ethical principles applying to all persons with accounting and financial reporting responsibilities and functions. This manual deals in detail with the ethical principles and the procedures that must be followed in recording transactions and drawing up and communicating financial information.

In summary form, the ethical principles which apply are independence, integrity, responsibility, professionalism, dedication and confidentiality.

Furthermore, the general conduct guidelines establish that all transactions must be recorded in the accounts in accordance with generally accepted accounting principles, and specifically in accordance with the applicable rules set out in the Manual of Accounting Policies.

Other direct responsibilities of employees regarding accounting and financial functions are as follows:

• Keeping up to date in their knowledge of accounting regulations and Group policies and procedures, and performing their functions in accordance with them. They are obliged to seek professional advice in-house whenever they consider it necessary.


• Being alert to any possible cases of non-compliance with the Bank’s financial and accounting policies that may be detected in analysing the accounting information, and reporting them immediately.

• Communicating and reporting financial information with total transparency.

• Keeping the supporting documents for the accounting records in accordance with Group policy.

• Immediately reporting any pressure applied by management to manipulate estimates and/or accounting valuations with a view to altering the financial results.

• Senior management with responsibility for financial reporting must additionally:

- Ensure that all personnel with accounting functions have sufficient professional experience and have sufficient resources to perform the function appropriately.

- Prevent and detect any pressure to alter valuations or accounting estimates with a view to influencing or inappropriately altering the financial results.

- Take the necessary measures to provide reasonable assurance that the financial statements and the communications relating to financial matters issued by the Bank are correct and complete. Specifically, measures must be established to issue alerts on:i. Accounting records that do not adequately reflect the nature of the

transaction.ii. Pressure to produce incorrect accounting results.

iii. Resistance on the part of persons involved in or responsible for processes with financial and accounting functions to prevent them from being reviewed or audited.

iv. Existence of funds that have not been reported, or of assets or liabilities that have not been recorded.

v. Estimates of valuations, provisions, reserves, etc. that are not supported by facts or appropriate documentation.

The Group has procedures in place for monitoring that the principles of integrity and professional ethics are complied with, as well as measure for identifying and correcting deviations. Control of compliance with the Code of Ethics is the competence

of the Regulatory Compliance Unit, without prejudice to the functions attributed to other areas of the Bank. The Regulatory Compliance Unit periodically informs the Audit and Regulatory Compliance Committee on the status of compliance with the ethical principles established.

Additionally, there is a Code of Professional Ethics Monitoring Committee, which is empowered to examine and sanction infractions of the Group’s various codes of professional conduct.

Whistle-blowing channel, to allow financial and accounting irregularities to be reported to the audit committee, as well as any non-compliance with the code of conduct and irregular activities in the organisation, reporting where applicable whether this is confidential.

The Group has a confidential whistle-blowing channel providing direct access to the Audit and Regulatory Compliance Committee.The existence of this channel, and the way to access it, are disseminated among all members of the organisation with a view to its serving as a channel through which to report irregularities of any kind, including those of a financial or accounting nature.

This channel is used by Bankinter to receive complaints or confidential reports relating to inappropriate practices in financial and accounting matters with possibly serious implications for the company, and the identity of the whistle-blower is protected. It was also created in order to preserve the corporate values of the Bankinter Group, as well as purely personal responsibility for individual actions, requiring employees to undertake to report any situations they consider ethically questionable in accordance with the contents of the Code of Professional Ethics, even if such situations are not related to their actions or sphere of responsibility.

The reports shall be sent to an e-mail address provided for the purpose, and will be received exclusively by the Chairman of the Audit and Regulatory Compliance Committee, or the Chairman of the Corporate Governance Committee, thus guaranteeing absolute confidentiality, both in the process of reporting and of any subsequent process of investigation. Whistle-blowing reports are all studied in the order they are received, providing they meet the requirements set out in the rules governing the procedure.


Periodic training and refresher courses for employees involved in preparing and reviewing financial information, and in ICFR assessment, covering at least accounting standards, auditing, internal control and risk management.

Bankinter Group personnel involved in the various processes of preparation of financial information take part periodically in training and refresher programmes to ensure that they can perform their functions effectively.

The training plans for financial and accounting personnel are designed and approved by senior financial management at the Bank and its subsidiaries, as well as by the various General Management units involved in preparing financial information. These training plans are implemented and looked after by the People Management Division.

In the field of the Group’s banking activity, five courses relating to Financial Information were delivered in 2013, with a total of 414 hours of training. The main areas receiving this training were:

• Accounting and Control• Financial Information• Risks• Transactions• IT• Regulatory Capital & Basel• Treasury• Regional Sales Organisations• Internal Audit

As for Línea Directa Aseguradora, in 2013 a total of 213.5 hours of training were given on financial and accounting subjects, in which a total of 125 persons took part.

F.2. Evaluation of risks associated with financial information

F.2.1. What are the main characteristics of the process of identifying risks, including those of error or fraud, as regards:

Whether the process exists and is documented.

The process of identifying risks to financial information is described and formalised in the Group’s Manual of Accounting Policies.

The ICRF system must maintain a balance between the level of control and the associated cost. In this respect the Group’s Manual of Accounting Policies establishes a procedure for identifying risks in financial information which is designed on the basis of the relative significance and taking account of all the financial information reported and published.

The system for identifying risks to financial reporting in the Bankinter Group follows a “top-down” process within the framework principles of relative significance approved by the Board of Directors and which leads ultimately to a risk map of the financial information which includes: Group companies, processes and significant sub-processes.

The Finance and Investor Relations Division is responsible for checking at least once a year that there have been no significant changes in the risk map of financial information, updating it if necessary and reporting on it to Internal Audit.

All business processes identified as important are assigned to a responsible area which is in charge of documenting the process, identifying the risks inherent in it and evaluating the controls in place for it and defining and implementing new controls if considered necessary.

Whether the process covers all the objectives of financial information (existence and occurrence; completeness; valuation; presentation, breakdown and comparability; and rights and obligations), and whether the process is updated and if so how often.

Both the procedures for identifying risks to financial information and the controls designed to cover important processes and activities take account of all the objectives of the financial information, in accordance with qualitative materiality criteria, centring on the areas and processes with the greatest risk of fraud or error in estimates and taking account of the principles of occurrence, completeness, breakdown and comparability. Specifically, the Manual of Accounting Policies establishes the following objectives:


• Existence: All assets (rights) and liabilities (obligations) recorded in the Bank’s balance sheet exist, and the transactions recorded took place in the period of reference.

• Completeness: Not only do they exist, but all assets and liabilities have been recognised as at the date of the balance sheet as well as the transactions that have taken place in the period then ended.

• Valuation: The amounts for which assets, liabilities, revenue and expenditure have been recognised have been determined in accordance with generally accepted principles.

• Presentation: The information is sufficient, appropriate and correctly described and classified.

The existence of a process for identifying the consolidation perimeter, taking into account, inter alia, the possible existence of complex corporate structures or instrumental or special purpose vehicles.

Within the Finance and Investor Relations Division is the function of Group Financial Information, which is in charge of determining the consolidation perimeter of the Group.

The Group’s Manual of Accounting Policies establishes the principles to be followed in assessing significant influence and/or the concept of control, which are fundamental for deciding on the inclusion and method of inclusion of the various associates and subsidiaries, as well as special purpose vehicles.

The main accounting policies, including those relating to the identification of the perimeter of the Group, are descried in detail in the Annual Report.

Whether the process takes into account the effects of other types of risks (operational, technological, financial, legal, reputational, environmental, etc.) insofar as they affect the financial statements.

The Bank maintains a global risk map in which the risks regarding financial information are contained, and which identifies and evaluates the various risks to which the Bank is exposed.

In preparing the risk map for financial information and evaluating each process and its controls, the existence of risk valuation or the inclusion of managers’ estimates in their calculation is taken into account as a fundamental factor.

Which of the entity’s governing bodies supervises the process

In the final instance, it is the Board of Directors, through the Audit and Regulatory Compliance Committee, which has the function of supervising the process, supported by the Internal Audit Unit.

F.3. Control activities

F.3.1. Procedures for review and authorisation of the financial information and the description of the ICFR, to be published on the securities markets, indicating who is responsible for them, and the documentation describing the activity and controls flows (including those relating to the risk of fraud) for the various types of transactions that may materially affect the financial statements, including the procedure for closing the accounts and the specific review of significant judgements, estimates, valuations and forecasts.

As mentioned previously in this document, it is the Board of Directors that delegates to the Audit and Regulatory Compliance Committee “To ensure the reliability and transparency of the internal and external information on the Bank’s performance, activities and financial results and, in particular, to check the completeness and consistency of the quarterly and biannual financial statements of the Bank and the Group, as well as the annual accounts, the Annual Report and the Management Report, prior to their approval or proposal by the Board of Directors and their publication, and to supervise the Bank’s policies with regard to the issue of Prospectuses and other forms of public information.”

The ICFR system in Bankinter centres on ensuring the proper recording, valuation, presentation and breakdown of such transactions as are relatively significant and as such may affect the financial information. The Manual of Accounting Policies and Procedures for Financial Reporting details the types of transactions covered, establishing the necessary procedures for keeping them updated over time.

The Group has documented all the critical processes and activities that in view of their importance might affect financial reporting, in the Manual of Accounting Policies and Procedures for Financial Reporting. The documentation establishes the procedures and controls to be followed at any given time by personnel with responsibility for them.


The accounting of the Bank and its subsidiaries is almost completely mechanised, being automatically set in train as soon as a transaction is posted. For this reason the ICFR system pays special attention to the manual accounting processes and to the process for launching new products, new ways of operating or special transactions.

As regards manual accounting, it is important to stress that this is restricted to users specialising in the area of accounting transactions. Items posted are perfectly traceable since they are registered with the user who posted them and a description.

The appearance and launch in the market of new products and services or the start of a new activity, special transactions or any other event with an impact on the financial statements is evaluated from an accounting point of view to ensure that the financial information generated is reliable and that it complies with applicable accounting rules. In this regard, the Finance and Investor Relations Division is informed by the areas driving the various initiatives, so that it can analyse and determine the accounting policies to apply, produce the accounting definition, inventories, required regulatory information and any other aspect with an impact on the financial statements.

Bankinter has an Operational, Reputational and New Products Risk Committee, in order to provide the Bank with a mechanism for supervising and controlling Operational and Reputational Risks that may arise in the Bank’s normal operation in general, and for approving the launch of new products or new sales practices, the establishment of sales policies, business agreements with other entities or possible partners, etc. so as to ensure that all Bankinter’s quality standards are met and all the legal, operational and reputational requirements laid down by the Bank are complied with.

The Operational, Reputational and New Products Risk Committee meets on a regular basis, and whenever any particular circumstance or event warrants it, and has the following functions as regards reputational risks:

• To promote the implementation of reputational risk policies throughout the Bankinter Group.

• To monitor actions taken to mitigate the most significant risks.• To resolve conflicts of responsibility arising in the everyday reputational risk

management context.• To debate and decide on the proposals put to the Committee on possible

reputational risk events.

• To validate compliance with procedures and protocols for identifying and evaluating reputational risks, with particular emphasis on the launch of new products, new business lines, new practices or new regulations, the revision of existing products or of sales policies relating to them or the materialisation of relations with new customers, agents, virtual branches, cooperation agreements or pacts with other companies and entities, involving the different Areas with responsibility for the aspects analysed and leaving evidence of the analysis and the decisions adopted.

• Entrusting to the corresponding business and support areas the tasks of identifying, analysing and evaluating the reputational risks decided on so that the conclusions and proposals can be submitted to the Committee.

As well as the controls at the level of process and activity, second-level controls are also performed with a view to detecting any material errors that might affect the financial information. These controls include notably the balancing of inventories against accounting databases, controls of input, output and miscellaneous accounts, control of items in suspense accounts, reconciliation of current accounts, reasonableness of movement in balances, cost and returns in relation to movements in interest rates and activity, deviations from budget, control of entries posted for large amounts, etc.As for the process of closing the books and reviewing significant judgements, estimates, valuations and projections, updates made in this regard fall under the provisions of the Group’s Manual of Accounting Policies which are described in detail in the Group’s Statutory Report, and are carried out by the expert areas in each field and examined by the Finance Division of the Bank or of the subsidiary concerned.Additionally, on every quarterly closing of the books, the results are analysed by the Audit and Regulatory Compliance Committee before being finally approved by the Board of Directors. In performing these functions they are supported by the analysis and considerations of the Internal Audit Unit and the external Auditor.

The main characteristics of this process are:

Performance of the analytical procedures for evaluating such aspects of the Income Statement as:

• Consistency of financial data with the development of the Group’s and the sector’s business.

• Analytical procedures designed to identify unusual dealings and accounting entries, including:


- Comparison with the Income Statement of prior periods. - Comparison of actual with budgeted results in cases where they have been

defined. - Comparison of the entries in the Income Statement with those expected

in accordance with the experience of the Bankinter Group and its sector. - Effect on the Income Statement of resolutions adopted by the General

Meeting of Shareholders, Board of Directors, etc.

• Interviews with managers with responsibility for financial and accounting matters, with a view to evaluating, based on the information obtained from the aforementioned analytical procedures, questions such as:

- Whether the Income Statement has been drawn up in accordance with applicable accounting principles.

- Changes that may have occurred in the activity of the Bankinter Group or in the application of the accounting principles.

- Significant aspects affecting the Income Statement relating to changes in the activity, new products or new business lines.

- Explanations on trends in the Income Statement and on changes observed in the respective headings, particularly any that may be unexpected or unusual.

- Obtaining information, documentation and/or data so as to be able to evaluate the reasonableness of the explanations given.

Review, calculation and contrasts of similar nature.The foregoing procedures are applied taking account of the principle of relative significance, and accordingly do not include items which, in view of their small amounts in relation to the Income Statement of the Group, were not considered significant enough to be considered by the Audit and Regulatory Compliance Committee, or items where the changes reflect those in the respective variables giving rise to them.

Complementing all the foregoing, a system based on the key processes and controls identified is implemented to ensure the accuracy and reliability of the financial information generated every month.

The control system has been designed in line with principles of materiality, centring on the areas and processes at most risk (fraud, estimates, valuations, errors, etc.) All business processes identified as important are assigned to a responsible area which is in charge of documenting the process, identifying the risks inherent in it and

evaluating the controls in place for it and defining and implementing new controls if considered necessary. On the controls established by the heads of department themselves, the Financial Control department has designed a system that is agile, dynamic and efficient.

The frequency of reporting in the process is:

• Monthly

- A report is sent to each of the areas and/or heads, showing the controls that must be reviewed before the accounts are closed.

- This report must be returned by the person responsible for the controls, indicating the situation within four business days from the end of the previous month or before the definitive closing of the entity’s results. There are a number of controls with different timeframes from those mentioned previously, due to the nature of the control itself, given that they would not have an impact on the entity’s results.

- All this information is grouped together and sent to the financial heads for them to take note of and check the situation before the results for the current month are finalised, allowing them to take action to resolve any incidents and/or circumstances that might have arisen and so avoid inaccuracies in the results.

In 2013 a total of 377 control reports were sent, the situation reported by those responsible for them being favourable in all cases, since all of them were reviewed and classified as “OK”, with only one exception which was marked “Not OK” due to a small, non-material difference.

• Annual

- A report is sent to each of the areas and/or heads, showing the processes and controls established by them, for their review.

- This report must be returned by the person responsible for these processes/controls, validating, modifying and/or increasing all such processes and/or controls as have been modified and/or altered in a way that changes both the structure of the process and the control carried out. Achieving a dynamic control system.


F.3.2. Internal control procedures and policies for information systems (among others, access security, change control, their operation, operational continuity and segregation of functions) that support the major processes in the entity as regards the drawing up and publication of financial information.

Bankinter’s information systems relating to the processes for preparing financial information, either directly or indirectly, at all times ensure the correct preparation and publication of financial information by means of a specific internal control structure.

The Bank has specific internal procedures covering the access management to the applications and systems in accordance with a system of profiles suited to the functions performed in each position.

The access management to the IT applications and systems is clearly established and standardised, being performed by the Technical Administration Management department.

For its data processing centre, the Bank has controls on physical security covering both access and possible accidents. The effectiveness of these mechanisms is tested periodically, at least once a year.

The Operational Risk Unit has developed a Business Continuity Plan (BCP) for the Company.

This BCP is divided into business processes, each of which has a specific plan. Notable among these is the Technological Continuity and Disaster Recovery Plan, which is the responsibility of the Security Unit, within the Technological Risks Organisation.

The main measures of the Technological Continuity Plan are based on the availability of data processing centres at sufficiently remote geographical locations with synchronised data replication. In the event of a contingency, this allows the data and IT systems to be recovered almost instantaneously, without appreciable loss of information. At least once a year partial tests are conducted on the plan to verify its correct functioning.

Changes to existing applications or the installation of new applications must be carried out in accordance with established internal procedures. Development must be carried out in different environments to production, and technical and functional tests of user names must be carried out in a pre-production environment so as not to affect the

Bank’s real operations. The pre-production environment is a test environment where all the development phases for new applications or programs are carried out such that both the technical tests and the test installations in the financial systems are carried out with affecting the real environment, to which they will be transferred once they have been tested by all the areas involved.

F.3.3. Internal control policies and procedures designed to supervise the management of activities subcontracted to third parties, and such aspects of assessment, calculation or valuation entrusted to independent experts as may materially affect the financial statements.

It is a general principle of the Bank’s policy not to outsource any activity that is considered significant in view of its impact on financial information. In no case are the processes of valuation, judgements or calculations for the preparation and publication of the financial statements outsourced.

The outsourcing of activities is always supported by a service provision agreement clearly determining the services provided and the required levels of service quality.

Processes and procedures subcontracted to third parties are subject to periodic audits by the Internal Audit area, which verifies the suitability of the services and the controls in place.

F.4. Information and communication

F.4.1. A specific function in charge of defining and maintaining up to date the accounting policies (accounting policy area or department) and resolving doubts or conflicts deriving from their interpretation, maintaining fluid communication with those in charge of operations in the organisation, and an up-to-date manual of accounting policies, communicated to the units through which the entity operates.

The Finance and Investor Relations Division, reporting direct to the CEO, assumes among its responsibilities that of defining and resolving doubts deriving from the interpretation of the Group’s accounting policies.

The Finance and Investor Relations Division is also responsible for keeping the Group’s accounting policies up to date and ensuring that they are communicated to the various subsidiaries and General Managements involved in the preparation


of financial information, submitting any significant changes to principles to the Audit and Regulatory Compliance Committee for approval. Last updated Manual of Accounting Policies took place in December 2013, being biannual the update frecuency of the aforementioned Manual, except in the case of substantive amendments to applicable legislation, in which case it must be updated in line with these.

F.4.2. Mechanisms for capturing and preparing financial information in standardised formats, for application and use by all units of the entity or the group, that support the main financial statements and the notes, as well as the information given on the ICFR.

The Bankinter Group’s systems are totally integrated and the posting of a transaction automatically sets in train the accounting and the updating of the inventories.

The automatic accounting is parametrised and defined after analysis and comparison by the Accounting Standards Unit of the Finance and Investor Relations Division so as to ensure compliance with applicable rules in force at any given time and with the Group’s accounting policies.

The consolidation of the Group’s financial statements is a totally mechanised process supported by the use of a standard tool totally integrated with the internal systems.

All subsidiaries within the Group’s perimeter report submit their financial statements monthly to the Finance Division of the parent company in accordance with a Group charter of accounts.

F.5. Monitoring Operation System

F.5.1. The ICFR supervision activities carried out by the audit committee, and whether the entity has an internal audit function whose powers include support to the committee in its task of supervising the internal control system, including the ICFR. Also, provide information on the scope of the ICFR assessment carried out during the year and of the procedure whereby the person in charge of performing the assessment communicates its results, whether the entity has an action plan listing the possible corrective measures, and whether its impact on financial information has been considered.

In accordance with the provisions of the Bank’s Articles of Association and the Regulations of the Board of Directors of the Bankinter Group, the Audit and Regulatory Compliance Committee, as a delegated committee of the Board of Directors, has among its functions and competences the supervision and control of the Company’s activity, the truthfulness, objectivity and transparency of the company accounts, supervising the process of preparation and presentation of regulated financial information and compliance with the legal and regulatory provisions to which the Bank is subject.

Also, promote and periodically review the functioning of the internal control systems ensuring proper management of the company’s risks, verify the completeness and consistency of the Bank’s and the Group’s quarterly ad half-yearly financial statements, and the annual accounts, annual report and management report, prior to their approval or proposal by the Board of Directors and to their publication.

According to Article 34 of the Regulations of the Board of Directors, the Bankinter Group’s Internal Audit Division reports hierarchically to the Audit and Regulatory Compliance Committee and functionally to the Chairman of the Board of Directors, ensuring the independence, autonomy and universality of the Internal Audit function.

As provided in the Internal Audit Statute approved by the Board of Directors on a proposal from the Audit and Regulatory Compliance Committee, the objectives and functions of Internal Audit include assisting the Audit Committee to fulfil the purpose of its responsibilities; verifying that risks are appropriately managed by evenly and efficiently applying the policies and procedures forming the internal control system, and overseeing the integrity, completeness and accuracy of the financial, accounting and management information issued.

It oversees the process of preparation and the completeness of the company’s and the group’s financial information, reviewing the application of accounting principles, the perimeter of consolidation and compliance with regulatory requirements, once the accounting department has prepared the financial statements under the supervision of Internal Audit and with the mandatory involvement of the external auditor, who inform the Audit Committee of their opinion as to whether the financial statements give a true and fair view of the company’s assets and financial situation and whether they have any reservations or positions contrary to those of


management with regard to substantive matters that might affect the true and fair view, informing the Board of Directors accordingly.

On a quarterly basis, Internal Audit presents the Audit Committee with a verification report on the Bankinter Group’s consolidated profit and loss account, with the involvement of the external Auditor. The same regime applies to the half-yearly report on results.

Every six months, Internal Audit presents a report to the Audit Committee on the monitoring and situation of recommendations issued and correctives measures proposed as a result of audit reports, both external and internal.

F.5.2. Whether there is a discussion procedure whereby the auditor (in accordance with auditing standards), the internal audit function and other experts can inform senior management and the audit committee or the directors of the entity of significant weaknesses in the internal control detected during the processes for reviewing the annual accounts or such other tasks as may have been entrusted to them. Also, state whether there is an action that seeks to correct or mitigate the weaknesses observed.

Article 34 of the Regulations of the Board of Directors provide that the external auditors must attend the meetings of the Audit Committees whenever its Chairman considers it appropriate, and in any case when their report on the annual accounts and management report of the Bank and the Group are examined, and those at which results are checked prior to publication.

Likewise, in accordance with the law and the Articles of Association, the Audit Committee shall serve as a channel of communication between the Board of Directors and the external and internal auditors, evaluating the results of the audit reports and compliance with the observations and conclusions formulated, and discussing with the auditors any significant weaknesses they detect in the internal control system while performing the audit.

The Audit and Regulatory Compliance Committee approved a general framework for the process of managing and following up on binding recommendations made by Internal Audit, defining a plan for fulfilment, in time and form, by the persons responsible for putting them into effect, and a periodic situation report which is submitted to both the Audit Committee and the Management Committee of the Bank.

F.6. Other important information

F.7. External auditor’s report

F.7.1. Whether the ICFR information sent to the markets has been submitted to review by the external auditor, in which case the entity should attach the corresponding report as an appendix. If not, explain why.

Pursuant to the recommendation contained in the Action Guide on the auditor’s report on information relating to the ICFR systems of listed companies, published by the CNMV on its website, Bankinter has submitted the contents of the information relating to the ICFR system for review by the external auditor. The resulting report when issued will be included as an Appendix to this Annual Corporate Governance Report.


G. DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDA-TIONS

Indicate the extent to which the company follows the recommendations of the Unified Code of Corporate Governance.

If any recommendation is not followed, or only partially followed, a detailed explanation must be given of the reasons, so that shareholders, investors and the market in general have sufficient information to assess the company’s actions. Explanations of a general nature are not acceptable.

1. The Articles of Association of listed companies should not place an upper limit on the number of votes that can be cast by a single shareholder, or impose other restrictions that impede the takeover of the company by means of the acquisition of its shares on the market.

See sections: A.10, B.1, B.2, C.1.23 and C.l.24

Complies

2. When both the parent company and a subsidiary are listed, both should provide precise disclosure on:

a) The respective areas of activity and possible business relations between them, as well as those of the listed subsidiary company with the rest of the group companies.

b) The mechanisms in place for the resolving of possible conflicts of interest that may arise.

See sections: D.4 and D.7

Not applicable

3. Even when not expressly required under commercial law, any transactions involving a structural corporate change should be submitted to the General Meeting of Shareholders for approval, and in particular:

a) The transformation of listed companies into holding companies, by way of ‘subsidiarisation’ or the transfer of essential activities carried out up until

that time by the company itself on behalf of subsidiary companies, even where the latter maintains absolute ownership of the former.

b) The acquisition or disposal of essential operational assets, where this entails the effective modification of the corporate objects.

c) Transactions with an effect that is tantamount to the liquidation of the company.

See sections: B.6

Complies

4. The detailed proposals for the resolutions to be approved at the General Meeting of Shareholders, including the information referred to in recommendation 28, should be made public at the time the announcement of the Meeting is published.

Complies

5. Those matters which are substantially independent are voted on separately at the General Meeting of Shareholders, so that shareholders can exercise their voting preferences separately. To ensure that this rule is applied:

a) To the appointment or ratification of directors, to be voted on individually.b) That in the event of amendments to the Articles of Association, each

Article or group of Articles is substantially independent.

Complies

6. That companies allow votes to be split so that financial intermediaries who appear on behalf of shareholders, but who act for different clients, can cast their votes in accordance with the instructions given by said clients.

Complies

7. That the Board performs its functions with a unity of purpose and independence of will, treating all shareholders alike, and guided by the interest of the company, which means to maximise, on a sustained basis, the economic value of the company.

In its relationships with interest groups (stakeholders) the company should respect all applicable laws and regulations, complying in good faith with its obligations and


contracts and respecting the uses and good practices of the sectors and territories where it exercises its activity, as well as observing the additional principles of social responsibility that it had voluntarily accepted.

Complies

8. That the Board accepts, as the core of its mission, the approval of its strategy and the organisation necessary in order to put it into practice, as well as to ensure the supervision and monitoring of compliance with the objectives laid down and respect for the corporate interests of the company. To that purpose, the Board in plenary session reserves the competence to approve:

a) The general policies and strategies of the company, and in particular:

i. The strategic or business Plan, as well as the annual management and budget objectives

ii. The financing and investment policyiii. Definition of the structure of the group of companies iv. Corporate governance policy v. Corporate social responsibility policy

vi. The policy on remuneration and evaluation of senior manager performance.vii. The control and management of risk policy, as well as the periodical monitoring

of internal information and control systems.viii. The policy on dividends, as well as that pertaining to the treasury shares

portfolio, and in particular the limits placed thereon.

See sections: C.1.14, C.1.16 and E.2

b) The following decisions:

i. Following a proposal by the Company’s chief executive, the appointment and possible removal of senior managers, and their indemnity clauses.

ii. Directors’ remuneration, and in the case of executives, any additional remuneration for executive functions and other terms to be contained in their contracts..

iii. Any financial information which the company, given its listed status, has to make public on a regular basis.

iv. The investments or transactions of all types, which as a result of their high amount or special nature, have a strategic nature, unless the approval corresponds to the General Meeting of Shareholders;

v. The creation or acquisition of equity holdings in special purpose vehicles or entities domiciled in countries or territories considered as tax havens, as well as any other transactions or operations of a similar nature which, given their complexity, may diminish the transparency of the group.

c) Any transactions performed by the company with directors, with significant shareholders or shareholders who are represented on the Board, or with persons linked thereto (‘related party transactions’).

That authorisation from the Board shall not, however, be understood as essential in those connected transactions that simultaneously comply with the following three conditions:

1. Those carried out by virtue of contracts where the conditions are standardised and are applied en masse to a number of clients.

2. Those carried out at prices or rates established in a general manner by the person who acts as supplier of the goods or service being dealt with.

3. Where the amount does not exceed 1% of the company’s annual income. It is recommended that the Board should approve connected transactions following the favourable report of the Audit Committee or of any other committee to which this function has been transferred, as the case may be; and that the directors affected thereby should, in addition to not exercising or delegating their right to vote, leave the boardroom whilst the Board is deliberating and voting upon it.

It is recommended that the powers hereby conferred on the Board should be non-delegable, except for those referred to in Points (b) and (c), which may be adopted for reasons of urgency by the Delegated Committee, and subsequently ratified by the Board in plenary session.

See sections: D.1 and D.6

Complies


9. The Board should be of the right size in order to operate effectively and with full participation, making it advisable for its size to be no less than five and no more than fifteen members.

See section: C.1.2

Complies

10. External proprietary and independent directors should constitute an ample majority on the Board and that the number of executive directors should be the minimum necessary, taking into account the complexity of the company group and the percentage holding of the executive directors in the share capital of the company.

See sections: A.3 and C.1.3

Complies

11. That among the external directors, the ratio between the number of proprietary directors and independent directors should reflect the proportion between the company’s share capital represented by proprietary directors and the rest of the share capital.

This principle of strict proportionality can be reduced, in such a way that the weight of the proprietary directors is greater than that which would correspond to the total percentage of capital that they represent:

1. In companies with a high level of capitalisation where there are no or hardly any shareholdings that might be legally deemed to be significant, but there are shareholders who hold share portfolios which have a high absolute value.

2. In the case of companies where there is a plurality of shareholders represented on the Board, and they have no links among themselves.

See sections: A.2, A.3 and C.1.3

Complies

12. The number of independent directors should represent at least one third of the total number of directors.

See section: C.1.3

Complies

13. The nature of each director should be explained by the Board at the General Meeting of Shareholders which is to make or ratify the appointment, and that this should be confirmed or, as the case may be, reviewed annually in the Annual Corporate Governance Report, following verification by the Appointments Committee. The aforementioned Report should also explain the reasons for the appointment of external proprietary directors at the request of shareholders whose shareholding participation is less than 5% of the share capital; and the reasons for not having acceded to formal requests for presence on the Board made by shareholders whose shareholding is equal to or in excess of that of others who have successfully requested the appointment of external proprietary directors should be explained, where appropriate.

See sections: C.1.3 and C.1.8

Complies

14. Where there are no or hardly any female directors, the Board should explain the reasons for this and the initiatives that have been adopted in order to correct this situation; and that, in particular, the Appointments Committee should promote the following actions whenever any vacancies occur:

a) Selection procedures should not contain an implicit bias that obstructs the appointment of female directors;

b) The company should make a deliberate search, and include women who meet the professional profile required among the potential candidates.

See sections: C.l.2, C.1.4, C.1.5, C.1.6, C.2.2 and C.2.4

Complies

15. The Chairman, as the person with responsibility for the effective workings of the Board, ensures that the directors receive sufficient prior information;


stimulates the debate and active participation of the directors during Board meetings, safeguarding their freedom to take a stance and express their opinions; and organising and coordinating with the relevant committee chairmen for the periodic evaluations of the director, likewise, and where appropriate, that of the Managing Director or Chief Executive Officer.

See section: C.1.19. and C.1.41

Complies

16. When the Chairman of the Board is also the Chief Executive Officer of the company, one of the independent directors of the company is empowered to request the convening of the Board or the inclusion of new points on the agenda and to coordinate and concern himself with the concerns of the external directors, as well as to direct assessment of the Chairman by the Board.

See section: C.1.22

Not applicable

17. The Secretary of the Board should place special emphasis on ensuring that the activities of the Board:

a) Are in accordance with the letter and the spirit of the Law and the regulations, including those approved by regulatory bodies.

b) Are in accordance with the company’s Articles of Association and with the Regulations of the AGM, the Board, and any others in force at the company.

c) Take into account the recommendations in respect of good governance contained in this Unified Code that the company has accepted.

In order to safeguard the independence, impartiality and professionalism of the Secretary, his/her appointment and removal are announced by the Appointments Committee and approved before the Board in plenary session, with this appointment and removal procedure featuring in the Board Regulations

See section: C.1.34

Complies

18. The Board should meet with the necessary frequency in order to be able to carry out its functions effectively, following the schedule of dates and matters as laid down at the start of the financial year, with every Director having the right to propose other points on the agenda which were not initially envisaged.

See section: C.1.29

Complies

19. That absences by directors should be reduced to the absolutely unavoidable and that these should be quantified in the Annual Corporate Governance Report. If representation is essential, instructions are duly conferred.

See sections: C.1.28, C.1.29 and C.1.30.

Complies

20. Where the directors or the Secretary voice concerns with regard to any proposal or, in the case of directors, the company’s performance, and these concerns are unable to be resolved by the Board, this should be recorded in the minutes at the request of the person voicing said concerns.

Complies

21. The Board in plenary session should evaluate, once a year, the following:

a) The quality and effectiveness of the functioning of the Board;b) The performance of the Chairman of the Board and the company’s chief

executive, on the basis of the report drawn up by the Appointments Committee.c) The functioning of the Committees, on the basis of the reports drawn up

and submitted to the Board.

See section: C.1.19 and C.1.20

Complies

22. All directors may exercise the right to receive any additional information that they might consider necessary on matters within the competence of the Board.


Unless the Articles of Association or the Board Regulations state otherwise, direct the demand to the Chairman or the Secretary to the Board.

See section: C.1.41

Complies

23. That all directors should have the right to obtain the advice they require from the company in order to perform their functions. The company judges the appropriate routes for the exercising of this right, which in special circumstances could include external consultancy charged to the company.

See section: C.1.40

Complies

24. Companies should establish a guidance programme providing new directors with speedy and sufficient knowledge of the company, as well as of its rules on corporate governance. Directors should also be offered programmes for the updating of their knowledge where circumstances so advise.

Complies

25. Companies should require that directors dedicate the necessary time and effort to their duties in order to perform them effectively, and consequently:

a) The directors inform the Appointments Committee of their other professional commitments, in case they might interfere with the dedication required;

b) b) The companies establish rules on the number of Boards on which directors can sit.

See sections: C.1.12, C.1.13 and C.1.17

Complies

26. The proposal for the appointment or re-election of directors submitted by the Board to the General Meeting of Shareholders, as well as their provisional appointment by co-option, should be approved by the Board:

a) At the proposal of the Appointments Committee, in the case of independent directors.

b) Following a report by the Appointments Committee, in the case of all other directors.

See section: C.1.3

Complies

27. Companies should publish on their website, and keep up to date, the following information with regard to their directors:

a) Professional and biographical profile.b) Other Boards of Directors of which they are members, whether or not these

are at listed companies.c) Indication of the category of directors into which they fall, with an

indication, in the case of external proprietary directors, of the shareholder they represent or with whom/which they are linked.

d) The date of their first appointment as director at the company, as well as of all subsequent reappointments, and;

e) What shares in the company or share options they may hold.

Complies

28. External proprietary directors should tender their resignation if the shareholder they represent sells its entire shareholding. And that they should also do so, in the corresponding number, if said shareholder reduces its shareholding to a level that requires a reduction in the number of its external proprietary directors.

See sections: A.2, A.3 and C.1.2

Complies

29. The Board of Directors should not propose the removal of any independent director prior to the expiry of the period laid down in the Articles of Association for which he/she was appointed, except for just cause, acknowledged by the Board following a report by the Appointments Committee. In particular, just cause shall be deemed to exist if the director has breached the duties inherent in his/her position or been


affected by any of the circumstances leading to the loss of his or her independent status in accordance with the provisions of Order ECC/461/2013.

The removal of independent directors may also be proposed as a result of Public Takeover Bids, mergers, or any other similar corporate transactions that amount to a change in the company’s share capital structure, where these changes in the structure of the Board are propitiated by the proportionality criterion set forth at Recommendation 11.

See sections: C.1.2, C.1.9, C.1.19 and C.1.27

Complies

30. Companies should establish rules obliging directors to report on, and as the case may be, resign in those cases that may affect the credit and reputation of the company, and in particular, oblige them to inform the Board of any criminal proceedings where they appear as suspects, as well as of subsequent procedural developments.

Should a director be charged with, or served with a writ for the commencement of oral proceedings for, any of the criminal offences set forth in Article 213 of the Corporate Enterprises Act, the Board should examine the case as soon as possible, and in light of the specific circumstances, decide whether or not it is appropriate for the director to continue in his/her position. The Board takes all of this into account in a justified manner in the Corporate Governance Annual Report.


Complies

31. That all directors should clearly express their opposition if they consider that a proposed decision submitted to the Board may be contrary to the interests of the company. Independent directors and others who are not affected by the potential conflict of interest should do likewise in the case of decisions which may prejudice those shareholders who are not represented on the Board.

Where the Board adopts significant or reiterated decisions about which the director had made serious reservations, he/she will draw the conclusions deemed appropriate and, if he/she decides to resign, explain the reasons in the letter which the following recommendation refers to.

This recommendation also covers the Secretary of the Board, even when he/she does not have the status of director.

Complies

32. Where a director is obliged to step down from his/her position prior to the expiry of his/her term of office, whether due to resignation or any other reason, he/she should explain the reasons in a letter to be sent to all members of the Board. Without prejudice to this being reported as a significant event, the reason for the resignation should be stated in the Annual Corporate Governance Report.

See section: C.1.9

Complies

33. Remuneration by way of allocation of shares in the company or in group companies, share options, instruments linked to the value of shares, variable remuneration linked to the performance of the company, or welfare provision systems should be limited to executive directors.

This recommendation will not cover the delivery of shares, where this is conditional on the directors holding onto the shares until their cessation as directors.

Complies

34. The remuneration of the external directors should be sufficient to reward the dedication, qualifications and responsibilities as required by the position; but not so high as to compromise their independence.

Complies

35. Remuneration linked to the company’s performance should take into account any possible reservations set forth in the external Auditor’s report which might impair said results.

Complies


36. In the case of variable remuneration, payment policy should include the technical precautions required in order to ensure that such remuneration maintains its relationship with the professional performance of the beneficiaries and should not simply derive from the general performance of the markets or of the company’s sector of activity or other similar circumstances.

Complies

37. Where there is a Delegated or Executive Committee (hereinafter, ‘Delegated Committee’), the participation structure for the different categories of directors should be similar to that on the Board itself, and its secretary should be the same as that of the Board.

Ver epígrafes; C.2.1 and C.2.6

Complies

38. The Board should always be informed of the matters dealt with and the decisions taken by the Delegated Committee, and all members of the Board should receive a copy of the minutes of the sessions of the Delegated Committee.

Complies

39. The Board of Directors should set up, in addition to the Audit Committee required by the Securities Market Act, a Committee, or two separate Committees, for Appointments and Remuneration.

The rules on the make-up and workings of the Audit Committee and the Appointments and Remunerations Committee or Committees are shown in the Board Regulations, and include the following:

a) The Board should appoint the members of these Committees, taking into consideration the know-how, aptitudes, and experience of the directors and the scope of each Committee; it should deliberate on its proposals and reports; and they should report to it on their activity, at the first plenary session of the Board subsequent to their meetings, and answer for the work performed.

b) These Committees should be composed exclusively of external directors, with a minimum of three. The above is understood without prejudice to the

attendance of executive directors or senior management, when expressly agreed to by the members of the Committee.

c) The Chairmen should be independent directors.d) They may seek outside advice, where they consider this necessary for the

performance of their functions.e) Minutes should be kept of meetings, with a copy sent to all members of

the Board


Complies

40. Supervision of compliance with the internal codes of conduct and the rules on corporate governance should be attributed to the Audit Committee, to the Appointments Committee or, if they exist in separate form, to the Compliance or Corporate Governance Committees.

Complies

41. Members of the Audit Committee, and in particular the Chairman, should be appointed taking into account their know-how and experience in accounting, auditing, or risk management matters.

Complies

42. Listed companies should have an Internal Auditing function which, under the supervision of the Audit Committee, should promote the proper functioning of the information and internal control systems.

Complies

43. The person responsible for the Internal Auditing function should submit his/her annual work plan to the Audit Committee, report directly on any incidents arising in the performance thereof, and submit an activities report at the end of each financial year.

Complies


44. The control and management of risk policy should identify at least the following:

a) The different types of risk (operational, technological, financial, legal, reputation, etc.) that the company faces, including among the financial or economic risk any contingent liabilities and other off-balance sheet risk.

b) The setting of the level of risk that the company considers acceptable.c) The measures envisaged in order to mitigate the impact of the risk that

have been identified, in the event that these should occur.d) The information and internal control systems that are to be used in order

to control and manage risk, including any contingent liabilities and other risk off the balance sheet.

See sections: E

Complies

45. The following are to be the responsibility of the Audit Committee:

1. With regard to information and internal control systems:

a) To ensure that the main risks identified as a consequence of the supervision of the efficiency of the internal control of the company and its internal audit if applicable are properly managed and reported.

b) To monitor the independence and efficiency of the internal audit function; to propose the selection, appointment, re-election, and cessation of the head of the internal audit department; to propose the budget for said department; to receive information periodically on its activities, and to verify that senior management consider the conclusions and recommendations contained in its reports.

c) To establish and supervise a mechanism that will allow the employees to communicate, in a confidential and, where appropriate in an anonymous way, any potentially significant irregularities, especially of a financial and accounting nature, which they may detect within the company.

2. With regard to the external auditor:

a) To receive from the external auditor on a regular basis information about the audit plan and its implementation results, and to verify that senior management considers its recommendations.

b) To ensure the independence of the external auditor, and to this end:

i. The company should notify the CNMV, in the form of a significant event report, of any change of auditor, and this should be accompanied by a declaration with regard to the possible existence of disagreements with the outgoing auditor, and where applicable, the nature thereof.

ii. ii) In the event the external auditor resigns, the circumstances that have led to this.

See sections: C.1.36, C.2.3, C.2.4 and E.2

Complies

46. The Audit Committee may summon any employee or manager of the company, and even order their attendance without the presence of any other manager.

Complies

47. The Audit Committee should report to the Board, prior to the approval by the latter of the corresponding resolutions, with regard to the following matters set out in Recommendation 8:

a) Any financial information which, given its status as a listed company, the company is required to make public on a regular basis. The committee should ensure that the interim accounts are prepared with the same accounting criteria as the annual accounts and, for that purpose, consider the appropriateness of a limited review by the external auditor.

b) The creation or acquisition of equity holdings in special purpose vehicles or entities domiciled in countries or territories considered to be tax havens, as well as any other transactions or operations of a similar nature which, given their complexity, may diminish the transparency of the group.

c) Any related party transactions, except where this function of prior reporting has been attributed to a Committee other than a supervision and control Committee.


Complies


48. The Board of Directors should seek to present the accounts to the General Meeting of Shareholders without reservations or qualifications in the audit report. In those exceptional circumstances where they do exist, both the Chairman of the Audit Committee and the auditors should clearly explain to the shareholders the content and scope of these reservations or qualifications.

See section: C.1.38

Complies

49. The majority of the members of the Appointments Committee - or of the Appointments and Remuneration Committee, should they be one and the same - should be independent directors.

See section: C.2.1

Complies

50. The Appointments Committee should have the following functions, in addition to those set forth in the above Recommendations:

a) To assess the powers, know-how, and experience necessary on the Board, to define, as a result, the functions and aptitudes necessary in the candidates who are to fill each vacancy, and to assess the time and dedication required for them to properly perform their function.

b) To examine or organise, in the manner deemed appropriate, the succession of the Chairman and of the Chief Executive, and as the case may be, make proposals to the Board so that this succession may take place in an orderly and well-planned manner.

c) To report on the appointment and removal of senior managers proposed by the chief executive to the Board.

d) To report to the Board on matters of gender diversity set out in Recommendation 14 of this Code.

See section: C.2.4

Complies

51. The Appointments Committee should consult the Chairman and the chief executive of the company, especially in those matters concerning the executive directors.

And any director may request the Appointments Committee to take potential candidates into consideration to cover vacancies on the Board if they consider them to be suitable.

Complies

52. The Remunerations Committee should have the following functions, in addition to those set forth in the above Recommendations:

a) To propose to the Board of Directors:

i. The remuneration policy of the directors and the senior management.ii. ii) The individual remuneration of executive directors and any other

contractual conditions.iii. iii) The basic conditions of senior management contracts

d) To monitor the observance of the remunerative policy laid down by the company.

See sections: C.2.4 Complies

53. The Remuneration Committee should consult the Chairman and the chief executive of the company, especially in those matters relating to the executive directors and senior managers.

Complies


H. OTHER INFORMATION OF INTEREST

1. If there is any other significant aspect in the field of corporate governance in the company or in the group entities that has not been included in the other sections of this report but is necessary to include to provide more comprehen-sive and well-grounded information on the corporate governance structure and practices in the entity or its group, detail them briefly.

2. Any other information, clarification or nuance relating to the foregoing sec-tions of the report may also be included in this Section, providing it is relevant and not reiterative.

Specifically, it will state whether the company is subject to any legislation other than Spanish legislation in the matter of corporate governance and, where appropriate, it will include such information as it is obliged to provide and as is different from that required in the present report.

3. The company may also indicate whether it has voluntarily subscribed to any international, industry-wide or other codes of ethical principles or best prac-tices. If so, identify the code in question and the date of subscription.

Section A.1.

The date indicated under the heading ‘last change in share capital’ is the date of filing with the Trade & Companies Registry of the deed of capital increase approved by the Board of Directors on 21 November 2013, to cater to the conversion of mandatorily convertible subordinated bonds series I and II into newly issued ordinary shares, as per the company’s Significant Event Reports published on the CNMV’s website on 25 October and13 December 2013 under numbers 194,452 and196,921 respectively.

Section A.2.

In accordance with the provisions of CNMV Circular 5/2013 approving the model for the annual report on corporate governance of listed companies, and as far as the indirect equity holdings broken down in section A.2 are concerned, the direct holder of the shares with voting rights is identified only when the percentage represents 3% of the total voting rights of the issuer, or 1% if he/she is a resident of a tax haven.

On 25 January 2013, Crédit Agricole reduced its shareholding in Bankinter by means of an accelerated book building process, according to a Significant Event Report published on that date under registry number: 181,430. Crédit Agricole’s shareholding in Bankinter thus went from 15.10% at the end of 2012 to 9.906%. Subsequently, on 4 September, Crédit Agricole reported a further reduction in its shareholding in Bankinter, by means of Significant Event Report number 192,536. At the end of 2013 its shareholding was 0.27%.

Lastly, on 4 March 2011, as has been indicated in previous reports, proprietary Director of Bankinter Fernando Masaveu Herrero, informed the Company that he controlled the voting rights of shares in Bankinter held by the various companies of the Masaveu group that until then had been regarded as voting rights controlled directly or indirectly by significant shareholder S.A. Tudela Veguín. This fact was reported by the Director solely for purposes of good governance and to comply with the rules in force on transparency and disclosure in listed companies, and does not involve any change in ownership or assignment of owners’ rights. In view of the matter commented on in section A.2 on significant movements in the shareholding structure, we report the increase to above 5% in the shareholding of the Director, due to his having assumed control over the voting rights held by Corporación Masaveu, S.A. (formerly S.A. Tudela Veguín).

Section A.3.

This section includes Directors’ shareholdings in Bankinter at year-end 2013. We list hereunder the number of shares involved in the fourth quarterly allocation in respect of the 2013 remuneration system to members of the Board of Directors for remuneration accrued in 2013, as well as the allocations of deferred shares to executive Directors in respect of variable remuneration accrued in 2011 and 2012. All these share allocations took place on 28 January 2014:

• Mr. Pedro Guerrero Guerrero: 2,095 shares in Bankinter. • Ms. María Dolores Dancausa Treviño: 19,771 shares in Bankinter.• CARTIVAL, S.A.: 17,378 shares in Bankinter.• Mr. Fernando Masaveu Herrero: 1,047 shares in Bankinter.• Mr. Marcelino Botín-Sanz de Sautuola y Naveda: 1,047 shares in Bankinter.• Mr. John de Zulueta Greenebaum: 1,047 shares in Bankinter.• Mr. Jaime Terceiro Lomba: 1,047 shares in Bankinter.• Mr. Rafael Mateu de Ros Cerezo: 1,361 shares in Bankinter.


• Mr. Gonzalo de la Hoz Lizcano: 1,047 shares in Bankinter.• Mr. Pedro González Grau: 1,047 shares in Bankinter.

The Board of Directors present at the AGM delegated its vote to the Chairman of the Board of Directors.

Section B.5.

Although the Articles of Association still give the minimum number of shares to be able to attend the Bank’s General Meetings of Shareholders as 600, following the stock split carried out by Board resolution in June 2007, whereby each shareholder received five new shares for every old share, and the capital increase of 26 April 2013 by way of a bonus issue of five new shares for every nine old ones, the amount of investment necessary to be able to attend AGMs has reduced considerably.

Section B.7.

For the General Meeting of Shareholders of 21 March 2013, Bankinter published the announcement of the call both in the Official Gazette of the Trade & Companies Registry and on the company’s website (www.bankinter.com/webcorporativa) as permitted by the Corporate Enterprises Act.

Section C.1.2.

José Antonio Garay Ibargaray was a Director of Bankinter for the term of his office, but at his own request was not proposed for re-election, having indicated at the time of his appointment his express wish to serve only the four years for which he was appointed.

Section C.1.3.

As per Significant Event Report no. 180659 of 31 December 2012, the Board of Directors of Bankinter resolved that the Chairman of the Board of Directors of Bankinter, Pedro Guerrero Guerrero, should cease to have executive status with effect from 1 January 2013, becoming a non-executive external Director. Also, since 1 January 2013, the Executive Committee of Bankinter, which until then had been chaired by Pedro Guerrero Guerrero, has been chaired by the executive Vice-Chairman, Cartival, S.A., represented by Alfonso Botín-Sanz de Sautuola y Naveda, the Chairman of the Board continuing to be a member of the Committee.

As stated in previous years’ reports, in relation to the classification of director Fernando Masaveu Herrero, who was appointed a director in his personal capacity, on a proposal from the Appointments and Remunerations Committee, the company considers that, while it is legally necessary to classify him as a proprietary director, since he controls a significant shareholding in the Bank, this being expressly required by the Unified Code of Good Governance, nevertheless he should be counted as an independent director for the purposes of determining the percentage of independent directors on the Board, since there is another significant reference shareholder in the company, Cartival S.A. with a much larger shareholding and with two representatives on the Board, so that his minority status among significant shareholders makes it possible to attribute to him a very similar role on the Board to that of the independent directors, constituting a guarantee of control over their influence and over the role of the executive directors and in favour of the minority shareholders of the company, moreover having no relations with them or with the company that might influence or interfere with the exercise of that control.

At present 50% of the Board of Bankinter is made up of independent directors, and 60% if we include Fernando Masaveu within the category of independent director. Bankinter complies not only with the 33% required by the Unified Code of Good Governance, but also the 50% recommended in some international standards and by some voting recommendation agencies.

Section C.1.11.

Alfonso Botín-Sanz de Sautuola y Naveda, who represents a corporate Director on the Board of Directors is in his personal capacity the executive Chairman of the Board of Directors of Línea Directa Aseguradora, S.A. Compañía de Seguros y Reaseguros, which is currently a wholly-owned subsidiary of the Bank.


Section C.1.16

The Board of Directors of Bankinter resolved in its meeting of 18 December 2013, on a proposal from the Appointments and Remuneration Committee, to appoint Mónica López-Monís Gallego as Secretary General and Secretary to the Board of Directors, as well as Secretary to al the Board Committees, with effect from 1 January 2014, replacing Rafael Mateu de Ros Cerezo as Secretary to the Board of Directors and Iñigo Guerra Azcona as Secretary General from that date on. In the same meeting the Board of Directors also resolved to appoint Gloria Ortiz Portero as a senior manager of the Bank with effect from 1 January 2014, forming part of senior management as defined in the Unified Code of Good Governance.

Total remuneration accruing during 2013 is that of the members of senior management who are indicated in the table in section C.1.16 from the time they became members of senior management (also excluding executive directors).

The only accumulated pension rights accorded to a single member of senior management are those approved by the Board of Directors on a proposal from the Appointments and Remuneration Committee in 2011 in order to bring them into line with mechanisms used in the past with Senior Management. The amount contributed to this plan was €656,565. This pension plan covers the usual contingencies of retirement, death and invalidity. Since it is a defined contribution plan, there is no commitment on the part of Bankinter to make new contributions. This fact was reported in the report on remuneration policy published in 2012.

Section C.1.17

The individual representing the Director CARTIVAL S.A., Alfonso Botín-Sanz de Sautuola y Naveda, is the brother of Marcelino Botín-Sanz de Sautuola y Naveda, who is also a Director of CARTIVAL S. A., and the son of Jaime Botín-Sanz de Sautuola y García de los Ríos.

Section C.1.22.

At Bankinter there are several counter-balance mechanisms in place to prevent the risk of power accumulation in a single executive director.

Until the end of 2012 the Chairman was an executive director, and his functions were precisely delimited in Article 25 of the Board Regulations.

There is also a Vice-Chairman who, as stated in last year’s Report, acquired executive status (the change being approved by a meeting of the Board of Directors held on 21 October 2010), undertaking certain duties relating to the fields of Strategy and Risk (as detailed in the Significant Fact Report published by the company on 21 October 2010 under number: 131,830).

For her part the CEO acts as the chief executive of the company and has ultimate responsibility for the conduct of the business, assuming the top management and executive functions of the Company under the supervision and control of the Board.

Lastly, the presence of only three executive Directors on the Board during 2012 and two since 1 January 2013, as has already been explained, as well as the large majority of external Directors on the Board and its Committees ensures the existence of effective means of control within the governing body itself.

There is also an independent Director who is the Chairman of the Bank’s Corporate Governance Committee, who has the functions assigned him by Board Regulations in his capacity as ‘Coordinating Director´. Exceptionally, at the behest of the ‘Coordinating Director’, an extraordinary session of the Board will be held, provided that it has the agreement of the Corporate Governance Committee. The meeting shall be called by the Chairman of the Board at the behest of the Coordinating Director or, exceptionally, by the latter.


Section C.1.45

Bankinter has not agreed on golden parachute clauses for any of its executive directors or senior management. Should their employment with the bank come to an end, members of these groups are only entitled to receive an amount of compensation that is lower than that to which any other employee is entitled under the Workers’ Statute and in the same circumstances described in the aforementioned legal provision. In the case of executive directors, this compensation is supported by the Articles of Association, and in both this case and that of the senior management, by an Agreement adopted by the Board of Directors following a proposal from the Appointments and Remuneration Committee and by the commercial administration and employment contracts entered into by the Company with said members of the senior management.The computer model does not allow the bodies authorising these clauses to be left blank when there are none, so in the model of the report, the reference to whether these clauses have been completed is marked “NO”.

Section D.2

There are no transactions significant in their amount or otherwise significant between the company or its group and significant shareholders. However, for the sake of transparency we indicate hereunder the amounts of guarantees issued (as part of the Company’s ordinary business, and on market conditions) for companies linked to the Masaveu Group, whose equity holding in Bankinter is declared as an indirect position of Director Fernando Masaveu Herrero, as indicated in section A.2. of point G: Corporación Masaveu S.A. €19,014,000 and Estacionamientos de Iruña S.A. €150,000.

Section D.3.

The transactions with director and senior management included in this section correspond to significant transactions or transactions of large amounts, and in all cases form part of the Company’s ordinary business and are on market conditions.

Members of senior management also have loans which were granted by the company for the acquisition of convertible bonds and of shares from the capital increase that Bankinter resolved in May 2009. They also have outstandings under financing agreed on the applicable conditions in the framework of the Collective Labour Agreement and corporate agreements with the Bank’s employees. The

total amount of transactions with members of senior management with the characteristics referred to above is: €2,882,000

This Annual Corporate Governance Report was approved by the Board of Directors of the Company in a meeting held on 19 February 2014.

Indicate whether any of the Directors had voted against or had abstained in regard to the approving of this report.

Yes No X

Name or corporate name of any director not voting in favour of the approval of this report

Reasons (opposed, abstained, absent)

Explain the reasons


Report of the Audit and Regulatory Compliance Committee 2013rmativo08This Report was approved by the Board of Directors of Bankinter at its meeting of 19 February 2014, at the proposal of the Audit and Regulatory Compliance Committee of Bankinter, S.A. pursuant to its meeting of 17 February 2014, and is available on Bankinter’s corporate website (www.bankinter.com/webcorporativa) together with the rest of the documentation that the company has placed at shareholders’ disposal for the Ordinary General Meeting of Shareholders called for 20 March at first calling. For comprehensive information on Corporate Governance at Bankinter S. A., please see Bankinter’s Annual Corporate Governance Report for 2013.

Contents

1. Organisation of the Audit and Regulatory Compliance Committee1.1. Composition1.2. Origin and development1.3. Characteristics1.4. Regulations1.5. Operation1.6. Competences

2. 2. Structure of Internal Audit

3. 3. Committee meetings held during 2013

4. 4. Activities carried out by the Committee during 2013

4.1. Internal Control4.2. Regulatory compliance4.3. Financial information4.4. External Auditors’ Annual Report (accounts)

5. 5. Audit of accounts for 2013

6. 6. Outlook for 2014

7. 7. Report on the independence of the auditor

1. Organisation of the Audit and Regulatory Compliance Committee

1.1. Composition

The following Directors form the Committee:

Chairman:Gonzalo de la Hoz Lizcano (independent external Director)

Members:Fernando Masaveu Herrero (external proprietary Director)John de Zulueta Greenebaum (independent external Director)Jaime Terceiro Lomba (independent external Director)Rafael Mateu de Ros Cerezo (independent external director)

Secretary:Mónica López-Monis Gallego (non-director Secretary to the Board of Directors)

The professional profiles of the members of this Committee, and of the other Directors of the company, as well as their membership of the other Board Committees, are shown on the Bank’s corporate website www.bankinter.com/webcorporativa.

1.2. Origin and development

The Board of Directors of Bankinter, meeting on 11 October 1995, structured the organisation and expanded the functions of the Audit and Regulatory Compliance Committee, set up in 1993 as a delegated body of the Board of Directors.

The various Codes of Good Corporate Governance published nationally and internationally, and especially the Unified Code of Good Governance approved by the CNMV (Comisión Nacional del Mercado de Valores, Spain’s securities and exchange commission) in 2006, highlight the key role that must be played by certain specialised Committees of the Board of Directors, and in particular by the Audit and Control or Audit and Compliance Committee.


The functions of the Audit Committee have also been adapted to the provisions of Act 12/2010 of 30 June, in order to strengthen its independence and its supervisory tasks in the areas of its competence. The most recent changes to the functions of the Audit and Regulatory Compliance Committee, which are contained in the Regulations of the Board of Directors, were basically made in order to bring them into line with the amendments made to the Articles of Association pursuant to the changes introduced in the Consolidated Text of the Corporate Enterprises Act, approved by Royal Legislative Decree 1/2010 of 2 July.

Following those recommendations, over the past few years the Board of Directors of Bankinter has made various changes to the structure and workings of the Audit Committee.

Since 1999, the Bankinter Group Annual Report has included a section dedicated to Corporate Governance and, starting with the 2002 Annual Report, a specific Corporate Governance Report has also been approved. This report was adapted in 2004 to conform to the provisions of Act 26/2003 of 17 July, the Ministerial Order of 26 December 2003 and CNMV Circular 1/2004, and again in 2007 to conform to CNMV Circular 4/2007 of 27 December. The present structure of the Corporate Governance Report conforms to the model approved by CNMV Circular 5/2013 for reports with information for 2013 onward.

The Annual Corporate Governance Report is also published on the corporate website www.bankinter.com/webcorporativa which additionally contains an archive of the reports published since 2009.

1.3. Características

The Audit and Regulatory Compliance Committee is the body delegated by the Board of Directors to exercise the Board’s powers in respect of the supervision and control of the Company’s business, the truthfulness, objectivity and transparency of the corporate accounts and economic and financial information, and to ensure compliance with the laws and regulations to which the Company is subject.

The following functions, among others, are within the competence of the Audit and Regulatory Compliance Committee:

• The Committee must ensure the reliability and transparency of the internal and external information on results and activities of the Bank and, in particular, periodically verify the integrity and consistency of the financial statements of the Bank and the Group, as well as the annual accounts, the annual report and the management report, prior to their approval or proposal by the Board of Directors and to their publication.

• The Committee drives and periodically supervises the internal control systems and procedures in relation to the risks associated with the Bank›s business, as well as reviewing the general risk map of the Bank and the Group.

• The Committee is the corporate body to which the Internal Audit function reports hierarchically. The Committee carries out an annual assessment of the performance of the head of Internal Audit, participates in the process of determining his remuneration and the resources of the Audit staff and approves the budget for same, including IT development.

• The Committee is directly in charge of ensuring the independent operation of the confidential whistle-blowing procedure for employees as introduced in the reform from the Regulations of the Board of 17 January 2007.

• The Regulations of the Board of Directors expressly attribute to the Committee those functions directly related to Directors› duties of fidelity and loyalty and thus to the Bank›s Regulatory Compliance. Hence, the Directors have to notify the Committee of any situations of direct or indirect conflict of interest as established for the purpose in the Corporate Enterprises Act, the Securities Market Act and the Company›s internal rules. The Committee is the competent body for resolving questions raised in this area and agreeing any dispensations or exemptions from Directors› fiduciary duties and the rules of conduct in the securities market.

• The Committee approves an Annual Report, which is made available to all shareholders when the Ordinary General Meeting of Shareholders is called, and which is available on Bankinter S.A.›s corporate website.

1.4. Regulations

The internal regulations of the Audit and Regulatory Compliance Committee are contained in Article 31 of the Articles of Association and in Article 34 of the Regulations of the Board of Directors, plus references to the Committee in other internal Company rules.

Bankinter has not considered it necessary for the Committee to have specific regulations for its organisation and workings, since the aforementioned rules, in


particular those contained in the Board Regulations, regulate all the characteristics of the Committee in sufficient detail.

The Chairman of the Audit and Regulatory Compliance Committee takes part in the Shareholders’ Ordinary General Meeting to inform shareholders of the Committee’s activities during the year for which the financial statements are submitted for the AGM’s approval in compliance with Article 16 of the Regulations of the General Meeting of Shareholders.

1.5. Operation

All the members of the Committee must be non-executive Directors, with a majority of independent Directors. Members of the Committee are appointed for a two-year term, automatically renewable. In any case, the Chairman of the Committee must be replaced at least every four years, although he/she may be re-elected after one year has elapsed from the end of his previous term of office.

At present, the Committee comprises five Directors, all of whom are external or non-executive and four of whom are independent.

The Chairman of the Committee is an independent Director, and the Secretary to the Board of Directors acts as Secretary to the Committee.

At the discretion of the Chairman of the Committee and on his/her invitation, its meetings may be attended by the Bank’s Chairman, CEO or other executive Directors or managers. Meetings of the Committee may be attended by executive Directors of the Company only on an exceptional and ad hoc basis, at the prior invitation of the Chairman of the Committee and for reasons connected with the nature of the point or matter to be considered.

The Committee’s meetings may be attended, as speakers but not as Members, by the Manager of Internal Audit and, among others, the head of the Regulatory Compliance Unit and the Financial Director of the Company, with such frequency as may be determined by the Committee. The Chairman of the Committee may also allow other members of Internal Audit and the heads of the various areas of the Bank and the Group or any other executive or employee of the Company to attend meetings, even without the presence of any other manager.

The external auditors must attend the Committee’s meetings whenever the Chairman considers it appropriate, and in any case they must attend those in which

their report on the annual accounts and management report of the Bank and the Group are examined, and those at which results are checked prior to publication.

As a general rule, the Audit and Regulatory Compliance Committee acts by formulating recommendations on good practices addressed to the pertinent areas of the Bank, and may pass resolutions on matters within its competence, without prejudice to those reserved to the Board of Directors, the Executive Committee or other corporate bodies by law and by the Articles of Association.

The provisions of the Regulations of the Board relating to the workings of the Board of Directorsalso apply to the Audit and Regulatory Compliance Committee. The application of these rules must in any event support the independent operation of the Committee.

As a general rule the Committee meets with the same frequency as the Board of Directors. It also meets whenever it is convened by its Chairman or the Chairman of the Board of Directors or a meeting is requested by two of its members. In the Chairman’s absence, meetings are chaired by the independent Director designated for the purpose by the Committee.

The Secretary draws up minutes of the meetings, signed by the Secretary and approved by the Chairman of the Committee and reported to the Board of Directors and distributed among all the Directors. The Secretary convenes the Committee and files the minutes and documents presented to it.

In 2013 the Committee met eleven times in ordinary session. As a general rule the frequency of the meetings is monthly, and meetings usually last approximately two hours.

1.6. Competences

The Audit and Regulatory Compliance Committee has, among others, the competences assigned to it in accordance with the law, the Articles of Association and the Regulations of the Board of Directors. These competences are set out in Appendix 1 to this report.

It is also important to point out that the Audit and Regulatory Compliance Committee is responsible for supervising the confidential whistle-blowing procedure for employees to report any irregularities they observe within the company that


could have serious implications, especially those of a financial or accounting nature, and in any case for ensuring the effectiveness of the procedure.

The Audit and Regulatory Compliance Committee has access to all the documentation and information necessary for the performance of its functions, and may call on auditors, advisers, consultants, experts and other independent professionals for assistance. With the Committee’s prior authorisation, its Chairman may contract, directly or through Internal Audit, the services of such professionals, whose work will be carried out directly and exclusively for the Committee.

In the event of any qualifications or reservations in the Auditor’s Report, the Chairman of the Committee will inform the General Meeting of Shareholders of them.

2. Structure of Internal Audit

Bankinter’s Internal Audit is the operating instrument that serves as a support to the Committee and a means of executing its directives. The Audit function in Bankinter is configured as an independent and objective activity designed to add value and improve the processes of the organisation.

For this purpose, and without prejudice to its independence and neutrality, the Internal Audit has the immediate purpose of helping the Committee to fulfil its objectives, contributing a systematic and disciplined focus that enables the effectiveness of the risk management, control, business and management processes to be evaluated and improved. Its ultimate purpose is to ensure that those processes are regular, in line with the Bank’s risk policies, carried out in complete compliance with the regulatory framework in force, and duly known and evaluated by the Directors via the Audit Committee.

The Internal Audit is organised in four specialised areas:- Global Risk Management Audit Area- Central Services, Subsidiaries and Technology Audit Area- Distribution Networks Audit Area- Corporate Governance and Regulatory Compliance Audit Area

The Internal Audit Division comprises 29 auditors, with an average age of 41.2 years and an average experience of 10.2 years in Internal Auditing and 15.6 years at Bankinter. Most of the Audit staff are university graduates.

During 2013, Internal Audit issued a total of 472 reports, of which: 309 were Distribution Network Audits; 64 Central Services, Subsidiaries and IT Audits; 7 Corporate Governance area Audits; 35 Basel Audits; 12 Remote Audits and 45 for other collaborations and projects. It also issued 975 reports obtained automatically and reporting on the assessment and evolution of certain indicators selected in order to increase the effectiveness of internal control.

In the Internal Audit budget, which is supervised by the Audit Committee,there is a specific section for the in-house development of IT applications proposed by Internal Audit.

3. Committee meetings held during 2013

The dates of the meetings and the main subjects discussed in the meetings held by the Committee during 2013 are provided below:

22 January 2013Verification report on the financial statements for 2012.Report on Internal Audit activity for 2012.Planning of the Regulatory Compliance Unit’s activities for 2013.

19 February 2013External auditor’s report on Internal Control.Verification report of the Annual Report of the Bankinter Group and the Corporate Governance Report. Audit reports on the Central Services, Subsidiaries and Technology area.Report on the activity of the Operational, Reputational and New Products Risk Committee for 2012.

19 March 2013Verification report on the Capital Self-Assessment Report and the Prudential Relevance Report.Monitoring report on Basel Audit activity for 2012.In-house talk on structure and management of internal control on Remote Networks.

22 April 2013Verification Report on the profit and loss account for the first quarter of 2013.Verification Report on procedures for the General Meeting of Shareholders.


Audit reports on the Central Services, Subsidiaries and Technology area.Report on the activity of the AML area

22 May 2013Outside talk by KPMG on regulatory initiatives and action frameworks for viability plans that are complementary to the capital plan and the liquidity contingency plan. Periodic report on monitoring and situation of recommendations issued by Internal Auditing. Audit reports on the Central Services, Subsidiaries and Technology area.

17 June 2013In-house talk on structure and management of internal control on Agent Network.Evaluation report on the level of Customer Asset Protection (IPAC). Half-yearly activity report of the Network Audit area.

22 July 2013Report on profit and loss account for the first half of 2013.Report on the Internal Audit Division’s activities in the first half of 2013.Report on the review of the Internal Audit function by the Institute of Internal Auditors and obtainment of Quality Assurance certificate.

17 September 2013Outside talk by PwC on the new regulatory and supervisory demands – Single Supervisory Mechanism (SSM).External auditor’s report on Internal Control.Audit reports on the Central Services, Subsidiaries and Technology area.Report on results of the self-assessment exercise of the systems of the AML unit.

21 October 2013Audit Verification Report on the profit and loss account for the third quarter of 2013.Audit reports on the Central Services, Subsidiaries and Technology area. Proposal to amend the Internal Audit Statute to bring it into line with EU legislative provisions.

20 November 2013In-house talk. Proposal of Bankinter treasury stock policy to conform to the new principles and recommendations of the CNMV.Report on the internal control map of the subsidiary group Bankinter Consumer Finance.

Follow-up report on the review and update of the Corporate Risks Map.Audit reports on the Central Services, Subsidiaries and Technology area. Summary of review of compliance with resolutions of the Board of Directors and Boards of the companies in the Bankinter Group.

16 December 2013Internal Audit activities plan for 2014.Report on the activity of the Network Audit Area for 2013.Proposed approval of amendments to the Manual of Accounting Policies and Financial Information Procedures to conform to new rules.Independence of the external auditor. Monitoring of invoicing for services other than auditing of the Group accounts.

At every meeting other points in the Sundry Matters section are also discussed, including the authorisation of financing and other transactions of Directors and Executives who are subject to such authorisation, the reappointment of the external auditor, the main new laws and regulations affecting the company, the most significant incidents associated with any of the risks managed by the Bank, and the monitoring of inspections and supervision actions carried out by any supervisory body with regard to the Bank.

4. Activities carried out by the Committee during 2013

4.1. Internal Control

Internal Audit reports hierarchically to the Audit and Regulatory Compliance Committee, while functionally it is assigned to the Chairman of the Board of Directors, with co-ordination by the Secretary General and the Board of Directors of Bankinter with regard to the competences of the Board and the Committee.

Internal Audit Plan. Half-yearly approval and follow-upOn an annual basis the Audit Committee approves all the activities that Internal Audit plans to carry out in the coming year.

Internal Audit planning deals in detail with the reports and main tasks to be performed during the year in accordance with the corporate risk map and the risk map defined by Internal Audit, which serves as the method for fulfilling the Bank’s control objectives. Every six months the Committee carries out a follow-up of the


planning, in which the situation as regards attainment of objectives is presented and explained. Also, the requests made by the organisation to Internal Audit and which are included in the annual planning are presented to the Committee.

The Committee is notified in advance and adopts, where appropriate, the decisions that it considers advisable on:

• The global annual budget for Internal Audit.• The IT and consultancy projects that Internal Auditing intends to undertake.• The contracting of certain projects or services, especially in cases where

Auditing of accounts is subcontracted.• The annual training plan for the team of Internal Auditors.

External evaluation and review of the quality of the Internal Audit function The Audit Committee approved the carrying out of a review by an independent external body of the quality of the Group’s Internal Audit function. This review was carried out by the Spanish Institute of Internal Auditors, which gave it the highest score on its evaluation scale in respect of compliance with the International Standards for the Professional Practice of Internal Auditing, further concluding that the function is effective and performs its mission in conformity with its Statute and the expectations expressed by its Organisation.

Information on incidentsThe main incidents that may arise in the Bank with regard to weaknesses in systems, errors with far-reaching implications or alleged irregularities on the part of employees, are presented to the Audit Committee, which supervises the measures adopted by the competent bodies of the Bank in this respect.

Circular on follow-up of binding audit recommendationsIn 2013, the Audit Committee carried out a detailed follow-up of compliance with the Circular of 2008 on following up and controlling the recommendations made by Internal Audit.

In 2013, 519 recommendations were issued. As at 31 December, 82% of the recommendations issued during the year had already been implemented.

The experience of the past few years has shown that within twelve months approximately 80% to 90% of the recommendations issued are finalised, demonstrating the value of Internal Audit to the organisation.

Follow-up on Operational Risk PlanSince 2004, at the request of the Audit Committee, Internal Audit has developed a specific annual plan of action for the purpose of evaluating and preventing the Bank’s operational risk in its various forms.

Information Verification AuditsVarious projects on data verification were undertaken during 2013. On the one hand, the verification of the most important management information –including the sources and original databases– used in the Bank’s presentations; and on the other hand, verification of various presentations made to the Board of Directors, including those made by the CEO, with positive results.

Another recurring task of Internal Audit is the verification of the information contained in the quarterly leaflet that is sent out to shareholders, investors and the market, as well as the Annual Report and the Annual Report on Corporate Governance, with favourable results.

Confidential whistle-blowing procedureThe Chairman of the Audit Committee receives the notifications submitted through the internal whistle-blowing channel implemented in the Bank in 2007, concerning any irregularities observed that might have serious implications, particularly those of financial or accounting nature, and evaluates and processes the statements submitted to him for clarification, ensuring their confidentiality. The Chairman periodically reports to the Audit Committee on activity through this channel.

Corporate Governance AuditsIn 2013 an external audit was carried out on preparation, delegation of votes, remote voting and scrutiny of the votes at the General Meeting of Shareholders, as commented upon below.

Review of audits of subsidiaries and associatesDuring 2013 the Audit Committee was informed of the various Internal Audit reports on the Bank’s main subsidiaries and associates.

Follow up on the verification of Credit Risk Models BaselDuring 2013 the Audit Committee oversaw the follow-up, in different sessions, of the verifying work that Internal Audit is carrying out on the process of implementing the Credit Risk Models under Basel II.


The Master Plan for the implementation of the models and their verification by Internal Audit and the external auditors is periodically reported on to the Audit Committee.

Monitoring of inspectionsThe Audit Committee is similarly informed of inspections of the Bank or Group companies by the supervisory bodies, as well as tax inspections, when they take place.

Prevention of Money LaunderingThe Committee is periodically informed about the control of the anti-money laundering (AML) activity, which comes under the Secretary General, including the Bank’s relations with the Executive Service of the Committee for the Prevention of Money Laundering and the coordination of the workings of the Bankinter internal control body.

4.2. Regulatory Compliance

The Regulatory Compliance Unit (RCU) –coming under the Secretary General– periodically reports to the Audit and Regulatory Compliance Committee informing it about the planning of the legal obligations for communications to the Company and to the regulatory bodies that affect the Directors of Bankinter, the date, the format and the minimum content of the notifications that must be sent.

The aforementioned Unit also informs the Committee about its other activities,such as following up on the implementation of the Markets in Financial Instruments Directive (MiFID), control of the securities operations of persons subject to the Internal Code of Conduct for the Securities Market, segregated areas, control of privileged and reserved information, limited or closed periods for dealing in Bank’s shares, and other matters relating to Director’s obligations, the rules of conduct, the application of the above-mentioned Internal Code of Conduct for the Securities Market of Bankinter and the periodic updating of the list of Executives subject to it.

In accordance with the Statute of Regulatory Compliance, the Regulatory Compliance Unit has to perform the following functions:¡

1. Control of codes of conduct (internal and those of the Securities Market)2. Internal control and management of compliance risk and regulatory risk in

general.

3. Ensuring compliance with formal obligations towards the regulatory and supervisory bodies, relations with regulators and authorities, support for departments and guidance on matters of regulatory compliance.

4. Corporate Governance duties, which are carried out under the supervision of the Secretariat of the Board of Directors: - Supporting the Secretary to the Board of Directors and the Committees,

particularly the Corporate Governance Committee, in developing the Company’s internal regulations and good governance policies.

- Participation in the periodic updating of corporate governance rules. - Follow-up on recommendations on good governance. - Management of the Directors’ website.

Under this heading we must also point out the 2013 audit on Preparation, calling and scrutiny of the General Meeting of Shareholders, carried out by KPMG, with a favourable result, the practice of which will be repeated at the 2014 Ordinary General Meeting of Shareholders. The purpose of the work was to check whether in the calling and preparation of the General Meeting of Shareholders held on 21 March 2013, the Bank had applied the procedures for action in the terms described in the Manual of Procedures for the General Meeting of Shareholders, available to all shareholders on the website at the time the meeting is called, as well as to verify, after the meeting, the availability of information and the integrity of the files.

4.3. Financial information

On a quarterly basis, Internal Audit presents the Audit Committee with a verification report on the Bankinter Group’s consolidated profit and loss account, with the involvement of the external Auditor. The same system is applied to the half-yearly report on results as referred to in Royal Decree 1362/2007 of 19 October.

The presentation of this independent report and the Committee’s approval of its conclusions constitute a mandatory procedure without which the Board of Directors cannot approve or publish the quarterly, six-monthly or annual results.

Said presentation consists of a Committee Report on the preparation process for the results and the checking of same. The method is based on the review of the differing Sections of the consolidated accounts, verifying that the data expressed in them are correct and coherent, analysing the reasonableness of the criteria applied and the most significant figures.


In all cases, it was concluded that the information contained in the Bankinter Group Accounts adequately reflected the accounting situation of the Bankinter Group.

4.4. External Auditors’ Annual Report (accounts)

The auditors make their main recommendations and state their conclusions on the annual external audit work in an annual Auditor’s Report that is presented to the Committee and subsequently to the plenary meeting of the Board of Directors.

The Audit Committee studies and makes proposals to the Board of Directors –which in turn passes these on to the General Meeting of Shareholders– for the reappointment or, where appropriate, the replacement and new appointment of the auditors of the accounts of the Bank and the Group. The Committee also determines the term of office and the general principles applicable to the negotiation and contents of the conditions of the audit contract, in accordance with the regulations in force.

It should be pointed out that, in order to ensure an annual analysis of the suitability and independence of the auditor, it is the policy of the Committee and of the Bank to go through a process of reflection every year to decide on reappointment or replacement of the auditor according to the needs or circumstances pertaining.

On the recommendations of the Board of Directors and the Audit and Regulatory Compliance Committee, the General Meeting of Shareholders held on 21 March 2013 re-elected Deloitte S.L. as the Auditor. The agreement of the General Meeting establishes:

“To re-elect Deloitte S.L. as auditors of the accounts of Bankinter S.A. and its Consolidated Financial Group for 2013, in accordance with the proposal made by the Audit and Regulatory Compliance Committee to the Board of Directors and approved by the latter.”

5. 2013 Audit

The annual control report presented by the external auditors to the Audit and Regulatory Compliance Committee on 17 February 2014 and to the Board of Directors on 19 February 2014 refers to the Auditor’s unqualified opinion, concluding that the individual and consolidated financial statements present a faithful reflection of the Bank and the Group respectively, in accordance with the IFRS and Banco de España Circular 4/2004.

6. Outlook for 2014

The Audit Committee intends to meet at least 11 times during 2014, applying once again a scheme of cooperation with the external firms, who will be invited to report on different topical matters in the regulatory and risk management fields, in accordance with the schedule of meetings and the agenda of contents approved by the Committee.

In the planning of the audit work for 2014 the main focus is onaudits relating to Market Risk, Credit Risk, Technological Risk, Regulatory Risk, Reputational Risk and Operational Risk; the second-level internal control function in the Bank; continued special attention to Credit Risk audits in the Companies segment, and continuity in on-site audits in the Branch Network.

The Global Risk Management Audit area will continue to implement indicators to monitor different risks as well as automatic auditing and self-audits for the different centres and their subsequent evaluation and monitoring.

Priority will continue to be given to the verification of the statistical Credit Risk models resulting from the coming into force of the Basel II Accord, which is in progress in accordance with Banco de España directives. The Audit Committee has decided to carry out once again, in 2014, an audit to verify compliance of the process, security, integrity and consistency of the data and processes associated with the Ordinary General Meeting of Shareholders, as well as an independent count of the votes cast by shareholders, among other reports related to Corporate Governance and Regulatory Compliance.

7. 7. Report on the independence of the auditor

Pursuant to the terms of the eighteenth additional provision, section 2.6) of Act 24/1988 of 28 July on the Securities Market, and in accordance with the provisions of the Regulations of the Board of Directors of Bankinter, the Audit and Regulatory Compliance Committee issues the required report on the independence of the auditors, prior to the issue of the audit report on the consolidated financial statements of the Bank and the Group by the auditor for 2013.

The Audit and Regulatory Compliance Committee confirms that:


the appropriate relations and channels of communication have been established with the auditors for information to be received and examined by the Audit and Regulatory Compliance Committee concerning such matters as might jeopardise the auditors’ independence and any other matters relating to the account auditing process, as well as other communications provided by law and by technical auditing standards.

Apart from this, the Audit and Regulatory Compliance Committee approves the annual budget for the fees for auditing the Bank and the Group, setting the maximum percentage of the total amount invoiced that may relate to services other than the auditing of the accounts and, in accordance with generally accepted practice, having defined a protocol of action so that the commissioning of such services is in all cases authorised in advance by the Committee.

The Audit and Regulatory Compliance Committee supervises the rotation of the audit team, pursuant to the provisions of Article 8 (iv) of Act 12/2010 of 30 June amending Act 19/1988 of 12 July on the Auditing of Accounts, and ensures compliance with the legally required rotation at all times. Moreover, in order to ensure an annual study of the suitability and independence of the auditor, it is the policy of the Committee and of the Bank to decide on the reappointment of the auditor every year, carrying out a process of reflection on the main aspects of the past year and the needs and circumstances pertaining in the coming one.

The present firm of auditors has been performing the audit for eight years without interruption, which represents 24.2% of the total number of years in which the annual accounts of the Company and the Group have been audited.

The Audit and Regulatory Compliance Committee has received written confirmation from the auditors regarding the following matters:

• that during the execution of their assignment they have not been affected by any legal cause of incompatibility with regard to the Bankinter Group or its directors and/or executives, nor has any situation arisen that, in the opinion of the auditor, might have jeopardised their independence.

• that the amount invoiced to Bankinter in 2013 for all items is not material in relation to the total amount invoiced to all its clients.

• that the amount invoiced to the Bank for work other than the auditing of accounts represented 14.77% of the total invoiced for the year.

• that all the foregoing data allow it to confirm that no elements exist that might jeopardise the independence of the auditor in the execution of its accounts auditing work.

Bankinter’s Internal Auditors have checked the veracity and accuracy of the above statements.

In conclusion, from the information obtained through the aforementioned communication channels and procedures, the Committee considers that no aspects have been identified that call into question the independence of the auditor in performing its task of auditing the annual accounts.


Appendix I. Competences of the Audit and Regulatory Compliance Committee (Article 34.11. of the Regulations of the Board of Directors of Bankinter)

The Audit and Regulatory Compliance Committee has the following specific competences in accordance with the law and the Articles of Association:

1. Informing the General Meeting of Shareholders, through its Chairman, of the state of control of the Company and the activities of the Committee during the year and on such matters raised by shareholders at said meeting as are within the competence of the Committee.

2. Proposing to the Board of Directors, for submission to the General Meeting of Shareholders, the appointment, re-election or replacement of the external auditors, as well as their contractual terms, the scope of their professional mandate, the supervision of their activities apart from the actual auditing of accounts and the assurance of the independence of the external Auditors.

3. Submitting the Annual Report of the Audit and Regulatory Compliance Committee to the Board of Directors for its approval.

4. Overseeing the effectiveness of the internal control, the internal audit services and the risk control systems of the Company, and ensuring the independence and effectiveness of that function.

5. Knowing about and overseeing the process of preparation and the integrity of the financial information and the internal control systems of the Company.

6. Promoting and periodically reviewing the functioning of adequate internal control systems that ensure the proper management of the Company›s risk.

7. Ensuring the independence of the external auditors and receiving information from the auditors on such matters as might jeopardise their independence and any other matters relating to the performance of the auditing of the accounts, as well as the other communications provided for in the legislation on the auditing of accounts and the technical rules of auditing. In any case, it must receive annual written confirmation from the auditors concerning their independence with regard to the Bank or entities related direct or indirectly to it, as well as information on the additional services of any kind provided to

these entities by such auditors or firms, or by the persons or entities related to these, in accordance with legislation on the auditing of accounts.

7 bis. Issuing an annual report, prior to the issue of the auditor’s report on the accounts, expressing an opinion on the independence of the auditors or audit firms. This report must in any case include mention of the provision of the additional services referred to in the preceding section.

8. Acting as a channel of communication between the Board of Directors and the external and internal auditors, evaluating the results of the audit reports and compliance with the observations and conclusions formulated, and discussing with the auditors any significant weaknesses they detected in the internal control system while performing the audit.

9. Supervising the fulfilment of the audit contract, ensuring that the opinion on the annual accounts and the main contents of the Audit Report are drawn up precisely and transparently.

10. 1In the event the external Auditor should resign, examining the circumstances that have led to this situation.

11. 1Encouraging the Group auditor to accept responsibility for the audits of the companies forming the Group.

12. 1Informing the Board, before it takes the relevant decisions, on the incorporation of companies, businesses, associations, foundations or any other kind of legal entities (including special purpose vehicles), as well as any other transactions or operations of an analogous nature that, in view of their complexity, might diminish the transparency of the Group.

13. 1Keeping informed of the reports on the Bank issued by supervisory bodies, especially Banco de España and the CNMV, as a result of inspections, and supervising compliance of the actions and measures deriving from the inspection reports.

14. 1Ensuring the reliability and transparency of the internal and external information on the Bank’s performance and activities and, in particular, checking the integrity and consistency of the quarterly and half-yearly


financial statements of the Bank and the Group, as well as the annual accounts, the Annual Report and the Management Report, prior to their approval or proposal by the Board of Directors and their publication, and supervising the Bank’s policies with regard to prospectuses and other forms of public information.

15. 1Controlling compliance with the Bankinter Group’s Code of Professional Ethics, the Internal Code of Conduct for the Securities Market and all other internal rules on the securities market and privileged and important information approved by the Board of Directors.

16. 1Receiving information on disciplinary measures that may affect the Bank’s Managers as a result of breaches of the employment regulations or the internal rules of conduct and, in cases considered particularly important by the Committee, to taking the final decision regarding these matters.

17. 1Ensuring the independence, autonomy and universality of the Internal Audit function.

18. 1Overseeing the internal auditing activities of the Bank and the Group, and therefore approving the annual work plan and the annual activities report and ensuring that the main risk areas and the internal control systems and procedures are reviewed.

19. 1Approving or amending the Statute of the Internal Audit Function, which will contain its functions and competences.

20. 2Reviewing the Bank’s and the Group’s general risk map and presenting the corresponding proposals to the Board.

21. 2Approving the appointment or replacement of the Manager of Internal Audit, at the proposal of the Chairman of the Board or the CEO.

22. 2Ensuring that sufficient means and resources are assigned to Internal Audit.

23. 2Overseeing compliance with the Bankinter Group’s Internal Code of Conduct for the Securities Market and Code of Professional Ethics and the performance of the functions assigned to the Bank’s Regulatory Compliance Unit and to the

areas responsible for the protection of personal data and the Prevention of Money Laundering, and taking due note of such reports and proposals as may be presented to it by said units and areas.

24. 2Approving or amending the Statute of the Regulatory Compliance Function, which will contain its functions and competences.

25. 2Being informed by the Chairman of the Board or the CEO of the appointment or replacement of the Manager of the Regulatory Compliance Unit.

26. 2Reporting on related party transactions of Directors and significant shareholders, with the power to authorise them in the terms established in the Board Regulations.

27. 2Being informed of any significant irregularities, breaches or risks detected in the course of the Compliance Area’s control work.

28. 2To review any other matter that is submitted to it by the Board, the Chairman, the Executive Committee or the CEO.

29. 2To perform such other duties as may be assigned by the Regulations of the Board or by the Board of Directors.

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