BBVA in 2012

• On July 20, the Government requested external financial assistance in order to recapitalize theSpanish banking sector. This financial aid, set out in a Memorandum of Understanding (MoU),was established at up to €100,000m.– First, the MoU covered the requirement of determining each bank’s capitalrequirements through an analysis of the asset quality on its balance sheet, andalso carrying out stress tests in the event of a hypothetical extremely adversemacroeconomic environment. In September, the bottom-up exercise was carried outby Oliver Wyman. The study again showed the disparity within the Spanish financialsystem, with a core of strong banks while vulnerability is limited to a specific part of theindustry.– Second, it included the form of recapitalizing, restructuring or, as the case may be,winding up weak banks in an orderly way, on the basis of the plans established toaddress the capital deficits detected in previous tests. Last November, the EuropeanCommission approved the restructuring plans of the four Spanish banks takeninto administration. According to the Commission, all four will need an injection of€37,000m in public funds. The bank taking most of the public aid is Bankia, whichrequires 49% of the total. In exchange, the Commission has required on a 60%reduction of their existing assets as of December 2010, to be carried out by 2017.The banks included initially in Group 3 have managed to meet their capital needsindependently. December 20 saw the approval of the recapitalization plans of the banksincluded in Group 2. The capital they will receive as a whole is estimated at €1,865m. Asin the case of the banks taken into administration, they will have to reduce the assetson their balance sheets as of December 31, 2010 by between 25% and 40% (dependingon the bank) by 2017.– Third, the creation of the Asset Management Company (SAREB), which would take over theState aided banks’ impaired assets. SAREB was set up on November 28, and the transfer oftoxic assets by the nationalized banks was completed on December 31. Specifically, it hasreceived €36,695m from BFA Bankia, Catalunya Banc, NCG Banco and Banco de Valencia,which in exchange have received senior debt issued by SAREB and guaranteed by thegovernment. The transfer of assets for Group 2 took place on February 28 and requireda new capital increase and the issue of subordinated debt, subscribed by the currentshareholders and by new ones who joined.In short, the restructuring process will enable a reduction of the installed capacity in theindustry and lead to a financial system with fewer but solvent, healthy and more efficientbanks.Lastly, with regard to BBVA, it is worth noting:• The top-down analysis carried out in June revealed that BBVA is one of the few Spanish banksthat does not need additional capital under any stress scenario.• The bottom-up stress test carried out by Oliver Wyman confirmed that BBVA will not need anyadditional capital, even in the most adverse macroeconomic scenario, thanks to the recurrenceand soundness of its business model. It clearly shows the strength of the Group’s model insituations of extreme difficulty.• On July 27, BBVA completed the acquisition of 100% of the capital stock of Unnim Banc, S.A. Itcontributes a loan book of €18 billion, 25% of which is regulated by an asset protection scheme(EPA), and includes customer funds of around €11 billion. This operation has great strategicmeaning for the Bank, because it completes the franchise in Catalonia, where the market shareis lower than the natural share in Spain. It will also add value once the BBVA business model isimplemented. Lastly, it is a transaction with limited risks, given that 80% of the losses derivedfrom exposure to the developer sector and to real-estate assets are covered through an assetprotection scheme. The consolidation of Unnim continued in the fourth quarter of 2012 withsignificant progress being made:Spain137