CaixaBank, S.A. Zweigniederlassung Deutschland

Frankfurt am Main

Befreiender Jahresabschluss zum Geschäftsjahr vom 01.01.2022 bis zum 31.12.2022

CaixaBank Group Financial Statements 2022

This version of our report is a free translation of the original, which was prepared in Spanish. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

Independent auditor's report on the consolidated annual accounts

To the shareholders of CaixaBank, S.A.:

Report on the consolidated annual accounts

Opinion

We have audited the consolidated annual accounts of CaixaBank, S.A. (the Parent company) and its subsidiaries (the Group), which comprise the balance sheet as at 31 December 2022, and the profit or loss account, statement of changes in equity, cash flow statement and related notes, all consolidated, for the year then ended.

In our opinion, the accompanying consolidated annual accounts present fairly, in all material respects, the equity and financial position of the Group as at 31 December 2022, as well as its financial performance and cash flows, all consolidated, for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and other provisions of the financial reporting framework applicable in Spain.

Basis for opinion

We conducted our audit in accordance with legislation governing the audit practice in Spain. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the annual accounts section of our report.

We are independent of the Group in accordance with the ethical requirements, including those relating to independence, that are relevant to our audit of the consolidated annual accounts in Spain, in accordance with legislation governing the audit practice. In this regard, we have not rendered services other than those relating to the audit of the accounts, and situations or circumstances have not arisen that, in accordance with the provisions of the aforementioned legislation, have affected our necessary independence such that it has been compromised.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated annual accounts of the current period. These matters were addressed in the context of our audit of the consolidated annual accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters How our audit addressed the key audit matters

Estimating impairment due to credit risk on financial assets at amortised cost - "Customer loans and advances" and -Foreclosed property assets"

Estimating impairment due to credit risk on "Customer loans and advances" and "foreclosed property assets" is based on internal expected loss calculation models which entail significant complexity, specifically in adapting them to uncertain macro-economic scenarios. This estimate is one of the most significant and complex in preparing the accompanying consolidated financial statements and requires significant management judgement and so has been considered a key audit matter.

Management's main judgements and assumptions concern the following:

•	The criteria for identifying and staging impaired assets or assets with a significant increase in risk.
•	Construction of the parameters for the internal probability of default (PD) models and loss given default (LGD) models.
•	The use of assumptions with a significant effect on the established credit risk provisions, such as the macroeconomic scenarios considered, along with the probability of occurrence, specifically, the adjustment to the internal provision models made within the current context of uncertainty with respect to these macroeconomic variables, the expected lifetime of operations and the existence of prepayments, among others.
•	The main assumptions employed in determining the expected loss and the recoverable value in the risks assessed on an individual basis.
•	The realisable value of the real property guarantees associated with the lending transactions granted based on the information and / or valuation value provided by different valuation companies or through the use of statistical methodologies in cases of reduced exposure and risk.

Estimating impairment of real estate assets arising from lending activities and which through dation in payment, purchase or the courts are awarded to the Group is also based on internal calculation models and following the same criteria as those used for mortgage guarantees associated with lending transactions.

See Notes 2, 3.4.1, 14, 20, 21, 40.2 and 40.3 to the accompanying consolidated financial statements concerning credit risk and foreclosed property assets and Notes 36 and 39 to the accompanying consolidated financial statements concerning the profit or loss generated during the year.

How our audit addressed the key audit matter: Estimating impairment due to credit risk on financial assets at amortised cost - "Customer loans and advances" and -Foreclosed property assets"

We gained, with the collaboration of our internal credit risk experts, an understanding of management's process for estimating impairment of financial assets at amortised cost - "Customer loans and advances"- with respect to both provisions estimated collectively and provisions estimated individually. Additionally, as part of our audit procedures, we made enquiries of management in order to understand the scope of the impact of climate change on the credit risk.

With respect to the internal control system, we gained an understanding of the process for estimating impairment due to credit risk and performed tests on the appropriateness of controls in the different process phases and paid special attention to the determination and approval of the adjustments to the models in order to adapt them to the different macroeconomic scenarios.

The regular evaluation of credit risk monitoring alerts was also analysed, as well as the effective completion of the regular review of borrower files in order to monitor their classification and where warranted, recognise impairment.

In addition, we carried out the following tests of details:

•	Analysing the methodology and verifying the main internal models concerning: i) calculation and segmentation methods; ii) criteria for staging loans and discounts; iii) methodology for estimating expected loss parameters (probability of default and realisable value of guarantees); iv) data used and main estimates employed, particularly, those relating to macroeconomic scenarios and their assumptions; and v) internal model recalibration and backtesting.
•	Analysing the functioning of the "calculation engine" for the internal provision estimation models, re-performing the calculation of the estimates of impairment due to credit risk for certain loan portfolios and verifying the results with those obtained by Group management. Additionally, we verified the variation during the year in the collective provision which was initially established in 2020 due to the post-model adjustment resulting from the change in the macroeconomic scenario triggered by the Covid-19 crisis, as well as its reasonableness in the current environment shaped by macroeconomic uncertainties, at 31 December 2022.
•	Verifying the appropriate functioning of the "calculation engine" of internal models for estimating impairment of foreclosed property assets, re-performing the calculation of those provisions and verifying results with those obtained by Group management.
•	Obtaining a sample of individual case files in order to assess their appropriate classification, the application of the loss estimation methodology and the recognition, if appropriate, of the relevant impairment.
•	Analysing the methodology used to estimate costs to sell, sales periods and reductions in the guarantee value, in order to estimate impairment of foreclosed property assets.
•	Verifying a sample of valuations in order to assess whether they conform to prevailing legislation, their reasonableness and the degree to which they are up to date.

As a result of our tests, no differences were identified, in excess of a reasonable range, in the amounts recognised in the accompanying consolidated financial statements.

Key audit matters: Recoverability of deferred tax assets

The evaluation of the capacity to recover deferred tax assets is a complex exercise which requires a significant level of judgement and estimation and we therefore consider such estimation performed by Group management a key audit matter.

Group policy is to recognise DTAs, other than those qualifying for monetization, only when the Group considers it probable that sufficient tax gains will be obtained in the future to enable their recovery.

During this process, there are specific and complex considerations that management takes into account with respect to the tax consolidated group, in order to assess both the recognition and subsequent capacity to recover the deferred tax assets recognised, based on the Group's financial projections and business plans, and supported by defined assumptions which are projected over a timeline and considering tax legislation in effect at each point in time.

Additionally, Group management submits the deferred tax asset recoverability model to review by an independent tax expert, as well as regular back testing to assess predictability.

See Notes 2 and 25 to the accompanying consolidated financial statements.

How our audit addressed the key audit matters: Recoverability of deferred tax assets

With the collaboration of our tax experts, we obtained an understanding of the estimation process performed by management and the controls designed and implemented in preparing the Group's financial projections to estimate the recoverability of the deferred tax assets and the calculation of deductible temporary differences in accordance with applicable tax and accounting regulations.

Additionally, we carried out the following tests of details:

•	Evaluation of the accounting results taken into account in the financial projections and the reasonableness and accuracy of the calculations performed.
•	Analysis of the economic and financial assumptions assumed in the calculation of temporary differences, in order to assess whether they are complete, appropriate and usable by the established deadlines.
•	Analysis of the reasonableness of the amounts of deferred tax assets considered monetizable.

As a result of our tests, no differences were identified, in excess of a reasonable range, in the amounts recognised in the accompanying consolidated financial statements.

Key audit matters: Measurement of insurance contract liabilities

The Group carries out its life insurance business through its subsidiaries, VidaCaixa, S.A.0 is its most important. These contracts are marketed mainly through the Group's bank branches in Spain and Portugal.

The Group recognises insurance contract liabilities in accordance IFRS 4 "Insurance Contracts" which in certain cases requires the application of judgements and estimates by Group's management in order to properly measure insurance contract liabilities, meaning that this is a key audit matter.

For life-risks insurance, the estimated cost of claims not yet settled, paid and reported at the date of presentation of the financial statements at 31 December 2022 is included, inter alia. Additionally, the Group recognises a liability in respect of the necessary internal expenses to settle claims outstanding, as well as an unearned premium reserve and, if the premium is insufficient, an unexpired risk reserve.

For life -savings insurance, the Group calculates the mathematical reserve using actuarial techniques which comprise different calculation methodologies and are based on the use of numerous data and critical calculation assumptions such as the technical interest rate, expense assumptions or mortality tables in accordance with applicable legislation, including judgements and estimates in some cases.

How our audit addressed the key audit matters: Measurement of insurance contract liabilities

We gained an understanding of the process for estimating and recognising life insurance reserves which are the main item under insurance contract liabilities, and carried out an assessment of internal control, including information system controls connected with the measurement and recognition of these liabilities.

•	Our procedures focused on aspects such as:

Understanding the methodology used to calculate life insurance reserves in accordance with the nature of the products and the claims reserve, as well as its consistent application with respect to the previous year.

Verifying the appropriate recognition of insurance contract reserves, as well as variations during the period.

Carrying out tests of details on the consistency of the information concerning the reserves established at the end of the period and payments made during it.

With respect to the mathematical reserve specifically, we carried out additional complementary procedures with the participation of our actuarial specialists in relation to:

•	Verifying the completeness, accuracy and reconciliation of the technical-actuarial calculation databases with both the information systems and contractual information.
•	Re-performing the actuarial calculation of the mathematical reserve for a selection of policies in accordance with the staging procedures by homogeneous group, as well as verifying the technical terms and the application of biometric assumptions consistent with applicable legislation

Additionally, IFRS 17 on insurance contracts coming into force on 1 January 2023 supersedes IFRS 4. CaixaBank Group has disclosed the main impacts in the accompanying consolidated financial statements, stating the retrospective estimated effect at the transition date, January 1, 2022.

See Notes 2 and 17 to the accompanying consolidated financial statements.

•	Verifying the application of interest rate, expense and biometric assumptions consistent with applicable regulations and the Group's experience.
•	Verifying compliance with the specific regulations concerning the interest rates to be applied in calculating the mathematical provision, including an analysis of the liability cash flows matching considered in the portfolio immunization for a selected sample.
•	Verifying the sufficiency of the liability adequacy test, taking into account IFRS-EU requirements.

On the other hand, with respect to the claims reserve specifically, we carried out additional complementary procedures in relation to:

•	Verifying the calculation of the reserve for claims not reported and the reserve for internal claims settlement expenses in accordance with applicable legislation.
•	Verifying the sufficiency of the claims reserve established at the period end based on independent statistical projections.

With respect to life risks products specifically, we carried out the following audit procedures:

•	Verifying the calculation and appropriations over time to the unearned premiums reserve.
•	Verifying the need to establish the unexpired risk reserve in accordance with applicable legislation.

Regarding the disclosed information of the impacts derived from the coming into force of IFRS 17 on insurance contracts we have assessed the information contained in the Note 1.2 of the consolidated financial statements, and particularly, the impacts in equity and contractual service margin (CSM) as of the transition date of January 1, 2022.

As a result of our tests, no differences were identified, in excess of a reasonable range, in the amounts recognised in the accompanying consolidated financial statements

How our audit addressed the key audit matters: Risks associated with information technologies

The operation and continuity of the Group's business, due to its nature, and particularly, the process for preparing financial and accounting information, rely heavily on the information systems that make up its technological structure and ensure the correct processing of information. Therefore it is a key audit matter.

Besides, as systems become increasingly complex, the risks associated with information technologies, the organisation and therefore the information processed increase. The effectiveness of the general framework of internal control of information systems is a basic aspect supporting the Group's operation, as well as the accounting and closing process.

How our audit addressed the key audit matters: Risks associated with information technologies

With the collaboration of our information systems and process specialists, our work consisted of assessing and verifying the control environment connected with the information systems that support the Group's operation and particularly, the accounting close.

Within this context, procedures have been carried out on internal control along with substantive tests in order to assess aspects such as:

i.	the organisation and governance of the information systems area,
ii.	software change, development and maintenance management,
iii.	access control and physical and logical security of the software, operating systems and databases that underpin the Group's relevant financial information.

Specifically, with respect to the accounting and closing process, we performed the following additional procedures:

•	Understanding and analysing the process of generating accounting entries and financial information.
•	Extracting, verifying the completeness and filtering entries included in the accounting records, as well as analysing the reasonableness of certain entries.

The results of the above procedures did not bring to light any relevant observation with respect to this matter.

Other information: Consolidated management report

Other information comprises only the consolidated management report for the 2022 financial year, the formulation of which is the responsibility of the Parent company's directors and does not form an integral part of the consolidated annual accounts.

Our audit opinion on the consolidated annual accounts does not cover the consolidated management report. Our responsibility regarding the consolidated management report, in accordance with legislation governing the audit practice, is to:

a)

Verify only that the consolidated statement of non-financial information, certain information included in the Annual Corporate Governance Report and the Annual Report on Directors' Remuneration, as referred to in the Auditing Act, have been provided in the manner required by applicable legislation and, if not, we are obliged to disclose that fact.

b)

Evaluate and report on the consistency between the rest of the information included in the consolidated management report and the consolidated annual accounts as a result of our knowledge of the Group obtained during the audit of the aforementioned financial statements, as well as to evaluate and report on whether the content and presentation of this part of the consolidated management report is in accordance with applicable regulations. If, based on the work we have performed, we conclude that material misstatements exist, we are required to report that fact.

On the basis of the work performed, as described above, we have verified that the information mentioned in section a) above has been provided in the manner required by applicable legislation and that the rest of the information contained in the consolidated management report is consistent with that contained in the consolidated annual accounts for the 2022 financial year, and its content and presentation are in accordance with applicable regulations.

Responsibility of the directors and the Audit and Control Committee for the consolidated annual accounts

The Parent company's directors are responsible for the preparation of the accompanying consolidated annual accounts, such that they fairly present the consolidated equity, financial position and financial performance of the Group, in accordance with IFRS-EU and other provisions of the financial reporting framework applicable to the Group in Spain, and for such internal control as the aforementioned directors determine is necessary to enable the preparation of consolidated annual accounts that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated annual accounts, the Parent company's directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the aforementioned directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The Parent company's Audit and Control Committee is responsible for overseeing the process of preparation and presentation of the consolidated annual accounts.

Auditor's responsibilities for the audit of the consolidated annual accounts

Our objectives are to obtain reasonable assurance about whether the consolidated annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with legislation governing the audit practice in Spain will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated annual accounts.

As part of an audit in accordance with legislation governing the audit practice in Spain, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

•	Identify and assess the risks of material misstatement of the consolidated annual accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
•	Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Parent company's directors.
•	Conclude on the appropriateness of the Parent company's directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated annual accounts or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
•	Evaluate the overall presentation, structure and content of the consolidated annual accounts, including the disclosures, and whether the consolidated annual accounts represent the underlying transactions and events in a manner that achieves fair presentation.
•	Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated annual accounts. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Parent company's Audit and Control Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Parent company's Audit and Control Committee with a statement that we have complied with relevant ethical requirements, including those relating to independence, and we communicate with the aforementioned those matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Parent company's Audit and Control Committee, we determine those matters that were of most significance in the audit of the consolidated annual accounts of the current period and are therefore the key audit matters.

We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.

Report on other legal and regulatory requirements

European single electronic format

We have examined the digital files of the European single electronic format (ESEF) of CaixaBank, S.A. and its subsidiaries for the 2022 financial year that comprise an XHTML file which includes the consolidated annual accounts for the financial year and XBRL files with tagging performed by the entity, which will form part of the annual financial report.

The directors of CaixaBank, S.A. are responsible for presenting the annual financial report for 2022 financial year in accordance with the formatting and markup requirements established in the Delegated Regulation (EU) 2019/815 of 17 December 2018 of the European Commission (hereinafter the ESEF Regulation).

Our responsibility is to examine the digital files prepared by the Parent company's directors, in accordance with legislation governing the audit practice in Spain. This legislation requires that we plan and execute our audit procedures in order to verify whether the content of the consolidated annual accounts included in the aforementioned digital files completely agrees with that of the consolidated annual accounts that we have audited, and whether the format and markup of these accounts and of the aforementioned files has been affected, in all material respects, in accordance with the requirements established in the ESEF Regulation.

In our opinion, the digital files examined completely agree with the audited consolidated annual accounts, and these are presented and have been marked up, in all material respects, in accordance with the requirements established in the ESEF Regulation.

Report to the Audit and Control Committee of the Parent company

The opinion expressed in this report is consistent with the content of our additional report to the Audit and Control Committee of the Parent company dated 15 February 2023.

Appointment period

The General Ordinary Shareholders' Meeting held on 14 May 2021 appointed us as auditors of the Group for a period of one year, for the year ended 31 December 2022.

Previously, we were appointed by resolution of the General Ordinary Shareholders' Meeting for a period of three years and we have audited the accounts continuously since the year ended 31 December 2018.

Additionally, the General Ordinary Shareholders' Meeting held on 8 April 2022 appointed PricewaterhouseCoopers Auditores, S.L. as auditors of the Group for a period of one year, for the year ended December 31, 2023.

Services provided

Services provided to the Group for services other than the audit of the accounts are disclosed in note 35 to the consolidated annual accounts.

17 February 2023

PricewaterhouseCoopers Auditores, S.L. (S0242)

Original in Spanish signed by

Raúl Ara Navarro

CaixaBank Group Financial Statements at 31 December 2022

•

Consolidated balance sheet at 31 December 2022, 2021 and 2020, before appropriation of profit

•

Consolidated statement of profit or loss for the years ended 31 December 2022, 2021 and 2020

•

Consolidated statement of changes in equity for the years ended 31 December 2022, 2021 and 2020

•	Statement of other comprehensive income
•	Statement of total changes in equity

•

Consolidated statement of cash flows for the years ended 31 December 2022, 2021 and 2020

•

Notes to the consolidated financial statements for the year ended 31 December 2022

CONSOLIDATED BALANCE SHEET

ASSETS

(Millions of euros)

	NOTE	31-12-2022	31-12-2021 ( ^*)	31-12-2020 ( ^*)
Cash and cash balances at central banks and other demand deposits	10	20,522	104,216	51,611
Financial assets held for trading	11	7,382	10,925	6,357
Derivatives		6,963	10,319	5,301
Equity instruments		233	187	255
Debt securities		186	419	801
Financial assets not designated for trading compulsorily measured at fair value through profit or loss	12	183	237	317
Equity instruments		127	165	180
Debt securities		6	5	52
Loans and advances		50	67	85
Customers		50	67	85
Financial assets at fair value with changes in other comprehensive income	13	12,942	16,403	19,309
Equity instruments		1,351	1,646	1,414
Debt securities		11,591	14,757	17,895
Financial assets measured at amortised cost	14	442,754	420,599	267,509
Debt securities		77,733	68,206	24,670
Loans and advances		365,021	352,393	242,839
Central banks			63	4
Credit institutions		12,187	7,806	5,847
Customers		352,834	344,524	236,988
Derivatives - Hedge accounting	15	649	1,038	515
Fair value changes of the hedged items in portfolio hedge of interest rate risk	15	-753	951	1,286
Investments in joint ventures and associates	16	2,034	2,534	3,443
Joint ventures		44	44	42
Associates		1,99	2,49	3,401
Assets under the insurance business	17	68,534	83,464	77,241
Tangible assets	18	7,516	8,263	6,957
Property, plant and equipment		5,919	6,398	4,950
For own use		5,919	6,398	4,950
Investment property		1,597	1,865	2,007
Intangible assets	19	5,219	4,933	3,949
Goodwill		3,167	3,455	3,051
Other intangible assets		2,052	1,478	898
Tax assets		20,457	21,298	10,626
Current tax assets		2,16	1,805	832
Deferred tax assets	25	18,297	19,493	9,794
Other assets	20	2,369	2,137	1,202
Inventories		101	96	75
Remaining other assets		2,268	2,041	1,127
Non-current assets and disposal groups classified as held for sale	21	2,426	3,038	1,198
TOTAL ASSETS		592,234	680,036	451,520
Memorandum items
Off-balance-sheet exposures
Loan commitments given	26	112,8	101,919	78,499
Financial guarantees given	26	10,924	8,835	6,360
Other commitments given	26	38,441	33,663	20,207
Financial instruments loaned or delivered as collateral with the right of sale or pledge
Financial assets held for trading		20	45	15
Financial assets at fair value with changes in other comprehensive income		3,345	4,819	1,729
Financial assets measured at amortised cost		9,521	8,097	1,756
Tangible assets acquired under a lease	18	1,565	1,829	1,447
Investment property, leased out under operating leases		1,269	1,586	1,736

( ^*) Presented for comparison purposes only (see Note 1)

LIABILITIES

(Millions of euros)

	NOTE	31-12-2022	31-12-2021 ( ^*)	31-12-2020 ( ^*)
Financial liabilities held for trading	11	4,030	5,118	424
Derivatives		3,971	4,838	151
Short positions		59	280	273
Financial liabilities at amortised cost	22	482,501	547,025	342,403
Deposits		421,870	486,529	300,523
Central banks		16,036	80,447	50,090
Credit institutions		12,774	13,603	5,266
Customers		393,060	392,479	245,167
Debt securities issued		52,608	53,684	35,813
Other financial liabilities		8,023	6,812	6,067
Derivatives - Hedge accounting	15	1,371	960	237
Fair value changes of the hedged items in portfolio hedge of interest rate risk	15	-5,736	670	1,614
Liabilities under the insurance business	17	65,654	79,834	75,129
Provisions	23	5,263	6,535	3,195
Pensions and other post-employment defined benefit obligations		579	806	580
Other long-term employee benefits		2,614	3,452	1,398
Pending legal issues and tax litigation		971	1,167	556
Commitments and guarantees given		547	461	193
Other provisions		552	649	468
Tax liabilities		2,113	2,337	1,231
Current tax liabilities		457	189	222
Deferred tax liabilities	25	1,656	2,148	1,009
Other liabilities	20	2,760	2,115	1,995
Liabilities included in disposal groups classified as held for sale		16	17	14
TOTAL LIABILITIES		557,972	644,611	426,242
Memorandum items
Subordinated liabilities
Financial liabilities at amortised cost	22	9,280	10,255	6,222

^(*) Presented for comparison purposes only (see Note 1)

EQUITY

(Millions of euros)

	NOTE	31-12-2022	31-12-2021 ( ^*)	31-12-2020 ( ^*)
SHAREHOLDERS' EQUITY	24	36,639	37,013	27,118
Capital		7,502	8,061	5,981
Share premium		13,470	15,268	12,033
Other equity items		46	39	25
Retained earnings		13,653	9,781	8,719
Other reserves		-1,152	-1,343	-1,009
(-) Treasury shares		-25	-19	-12
Profit/(loss) attributable to owners of the Parent		3,145	5,226	1,381
ACCUMULATED OTHER COMPREHENSIVE INCOME	24	-2,409	-1,619	-1,865
Items that will not be reclassified to profit or loss		-1,379	-1,896	-2,383
Actuarial gains or (-) losses on defined benefit pension plans		-250	-473	-580
Share of other recognised income and expense of investments in joint ventures and associates			1	-70
Fair value changes of equity instruments measured at fair value with changes in other comprehensive income		-1,129	-1,424	-1,733
Failed fair value hedges of equity instruments measured at fair value with changes in other comprehensive income
Fair value changes of equity instruments measured at fair value with changes other comprehensive income [hedged instrument]		-38	-12
Fair value changes of equity instruments measured at fair value with changes in other comprehensive income [hedging instrument]		38	12
Items that may be reclassified to profit or loss		-1,030	277	518
Foreign currency exchange		12	5	-24
Hedging derivatives. Reserve of cash flow hedges [effective portion]		-499	-94	73
Fair value changes of debt securities measured at fair value with changes in other comprehensive income		-506	337	521
Share of other recognised income and expense of investments in joint ventures and associates		-37	29	-52
MINORITY INTERESTS (non-controlling interests)	24	32	31	25
Other items		32	31	25
TOTAL EQUITY		34,262	35,425	25,278
TOTAL LIABILITIES AND EQUITY		592,234	680,036	451,520

^(*) Presented for comparison purposes only (see Note 1)

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

(Millions of euros)

	NOTE	2022	2021 ( ^*)	2020 ( ^*)
Interest income	28	9,233	7,892	6,764
Financial assets at fair value with changes in other comprehensive income (1)		1,751	1,742	1,812
Financial assets measured at amortised cost (2)		7,443	5,500	4,700
Other interest income		39	650	252
Interest expense	29	-2,317	-1,917	-1,864
NET INTEREST INCOME		6,916	5,975	4,900
Dividend income	30	163	192	147
Share of profit/(loss) of entities accounted for using the equity method	16	264	425	307
Fee and commission income	31	4,406	4,129	2,911
Fee and commission expenses	31	-396	-424	-335
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	32	41	37	187
Financial assets measured at amortised cost		1	3	114
Other financial assets and liabilities		40	34	73
Gains/(losses) on financial assets and liabilities held for trading, net	32	476	97	127
Other gains or losses		476	97	127
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss, net	32	-9	-3	-24
Other gains or losses		-9	-3	-24
Gains/(losses) from hedge accounting, net	32	-18	51	-3
Exchange differences (gain/loss), net		-152	39	-49
Other operating income	33	604	551	649
Other operating expenses	33	-1,567	-1,445	-1,005
Income from assets under insurance and reinsurance contracts	33	1,329	1,128	1,107
Expenses from liabilities under insurance and reinsurance contracts	33	-463	-478	-509
GROSS INCOME		11,594	10,274	8,410
Administrative expenses		-5,263	-7,354	-4,039
Personnel expenses	34	-3,620	-5,588	-2,841
Other administrative expenses	35	-1,643	-1,766	-1,198
Depreciation and amortisation	18 and 19	-807	-695	-540
Provisions or reversal of provisions	23	-227	-418	-221
Impairment/(reversal) of impairment on financial assets not measured at fair value through profit or loss or net profit or loss due to a change	36	-882	-897	-1,943
Financial assets at fair value with changes in other comprehensive income		1		-1
Financial assets measured at amortised cost		-883	-897	-1,942
Impairment/(reversal) of impairment on investments in joint ventures and associates.	16	-18	-19	-316
Impairment/(reversal) of impairment on non-financial assets	37	-102	-158	-112
Tangible assets		-86	-62	-110
Intangible assets		-14	-58	-14
Other		-2	-38	12
Gains/(losses) on derecognition of non-financial assets, net	16 and 8	41	295	27
Negative goodwill recognised in profit or loss	7	0	4,300
Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations	39	-10	-13	334
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS		4,326	5,315	1,600
Tax expense or income related to profit or loss from continuing operations	25	-1,179	-88	-219
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS		3,147	5,227	1,381
Profit/(loss) after tax from discontinued operations		2	2
PROFIT/(LOSS) FOR THE PERIOD		3,149	5,229	1,381
Attributable to minority interests (non-controlling interests)		4	3
Attributable to owners of the parent		3,145	5,226	1,381

( ^*) Presented for comparison purposes only (see Note 1)

(1) Also includes the interest on availablefor-sale financial assets (IAS 39) linked to the insurance business

(2) Also includes interest on loans and receivables (IAS 39) of the insurance business

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PART A)

Consolidated statement of other comprehensive income

(Millions of euros)

	NOTE	2022	2021 ( ^*)	2020 ( ^*)
PROFIT/(LOSS) FOR THE PERIOD		3,149	5,229	1,381
OTHER COMPREHENSIVE INCOME		-790	246	-740
Items that will not be reclassified to profit or loss		518	486	-815
Actuarial gains or losses on defined benefit pension plans		340	106	-139
Share of other recognised income and expense of investments in joint ventures and associates		0	70	13
Fair value changes of equity instruments measured at fair value with changes in other comprehensive income	13	298	307	-719
Profit or loss from hedge accounting of equity instruments measured at fair value with changes in other comprehensive income		0	0	0
Fair value changes of equity instruments measured at fair value with changes in equity [hedged instrument]		-26	-12	58
Fair value changes of equity instruments measured at fair value with changes in equity [hedging instrument]		26	12	-58
Income tax relating to items that will not be reclassified		-120	3	30
Items that may be reclassified to profit or loss		-1,308	-240	75
Foreign currency exchange		7	29	-29
Translation gains/(losses) taken to equity		7	29	-29
Cash flow hedges (effective portion)		-596	-234	146
Valuation gains/(losses) taken to equity		-636	-222	130
Transferred to profit or loss		40	-12	16
Debt instruments classified as fair value financial assets with changes in other		-1,178	-241	65
prehensive income		-1,172	-200	101
Valuation gains/(losses) taken to equity
Transferred to profit or loss		-6	-41	-36
Share of other recognised income and expense of investments in joint ventures and associates		-65	80	-39
Income tax relating to items that may be reclassified to profit or loss		524	126	-68
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		2,359	5,475	641
Attributable to minority interests (non-controlling interests)		4	3	0
Attributable to owners of the parent		2,355	5,472	641

( ^*) Presented for comparison purposes only (see Note 1)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PART B)

Consolidated statement of total changes in equity (1)

(Millions of euros)

	Equity attributable to the parent
	Shareholders' equity
	NOTE	Capital	Share premium	Other equity	Retained earnings	Other reserves
BALANCE AT 31-12-2021		8,061	15,268	39	9,781	-1,343
OPENING BALANCE AT 01-01-2022		8,061	15,268	39	9,781	-1,343
TOTAL COMPR. INCOME FOR THE PERIOD
OTHER CHANGES IN EQUITY		-559	-1,798	7	3,872	191
Capital reduction	24	-559	-1,798
Dividends (or remuneration to shareholders)	6				-1,178
Purchase of treasury shares	24
Sale or cancellation of treasury shares	24
Transfers among components of equity					5,226
Other increase/(decrease) in equity				7	-176	191
CLOSING BALANCE AT 31-12-2022		7,502	13,470	46	13,653	-1,152

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PART B)

Consolidated statement of total changes in equity (2)

(Millions of euros)

	Equity attributable to the parent
	Shareholders' equity
	Less: treasury shares	Profit/(loss) attributable to nowners of the parent	Less: interim dividends
BALANCE AT 31-12-2021	-19	5,226	0
OPENING BALANCE AT 01-01-2022	-19	5,226	0
TOTAL COMPR. INCOME FOR THE PERIOD		3,145
OTHER CHANGES IN EQUITY	-6	-5,226	0
Capital reduction
Dividends (or remuneration to shareholders)
Purchase of treasury shares	-1,818
Sale or cancellation of treasury shares	1,812
Transfers among components of equity		-5,226
Other increase/(decrease) in equity
CLOSING BALANCE AT 31-12-2022	-25	3,145	0

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PART B)

Consolidated statement of total changes in equity (3)

(Millions of euros)

	Equity attributable to the parent	Minority interests
	Accumulated other comprehensive income	Accumulated other comprehensive income	Other items	Total
BALANCE AT 31-12-2021	-1,619	0	31	35,425
OPENING BALANCE AT 01-01-2022	-1,619	0	31	35,425
TOTAL COMPR. INCOME FOR THE PERIOD	-790		4	2,359
OTHER CHANGES IN EQUITY	0	0	-3	-3,522
Capital reduction				-2,357
Dividends (or remuneration to shareholders)			-0	-1,182
Purchase of treasury shares				-1,818
Sale or cancellation of treasury shares				1,812
Transfers among components of equity
Other increase/(decrease) in equity			1	23
CLOSING BALANCE AT 31-12-2022	-2,409	0	32	34,262

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PART B)

Consolidated statement of total changes in equity (1)

(Millions of euros)

	Equity attributable to the parent
	Shareholders' equity
	NOTE	Capital	Share premium	Other equity	Retained earnings	Other reserves
BALANCE AT 31-12-2019		5,981	12,033	24	7,795	-1,281
OPENING BALANCE AT 01-01-2020		5,981	12,033	24	7,795	-1,281
TOTAL COMP. INCOME FOR THE PERIOD
OTHER CHANGES IN EQUITY				1	924	272
Dividends (or remuneration to shareholders)					-418
Purchase of treasury shares
Sale or cancellation of treasury shares
Transfers among components of equity	24				1,705
Other increase/(decrease) in equity				1	-363	272
OPENING BALANCE AT 31-12-2020		5,981	12,033	25	8,719	-1,009
OPENING BALANCE AT 01-01-2021		5,981	12,033	25	8,719	-1,009
TOTAL COMP. INCOME FOR THE PERIOD
OTHER CHANGES IN EQUITY		2,080	3,235	14	1,062	-334
Issuance of ordinary shares		2,080	3,235
Dividends (or remuneration to shareholders)					-216
Purchase of treasury shares
Sale or cancellation of treasury shares
Reclassification of financial instruments from liability to equity				10
Transfers among components of equity	6				1,381
Other increase/(decrease) in equity				4	-103	-334
BALANCE AT 31-12-2021		8,061	15,268	39	9,781	-1,343

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PART B)

Consolidated statement of total changes in equity (2)

(Millions of euros)

	Equity attributable to the parent
	Shareholders' equity
	Less: treasury shares	Profit/(loss) attributable to nowners of the parent	Less: interim dividends
BALANCE AT 31-12-2019	-10	1,705
OPENING BALANCE AT 01-01-2020	-10	1,705
TOTAL COMP. INCOME FOR THE PERIOD		1,381
OTHER CHANGES IN EQUITY	-2	-1,705
Dividends (or remuneration to shareholders)
Purchase of treasury shares	-8
Sale or cancellation of treasury shares	6
Transfers among components of equity		-1,705
Other increase/(decrease) in equity
OPENING BALANCE AT 31-12-2020	-12	1,381
OPENING BALANCE AT 01-01-2021	-12	1,381
TOTAL COMP. INCOME FOR THE PERIOD		5,226
OTHER CHANGES IN EQUITY	-7	-1,381
Issuance of ordinary shares
Dividends (or remuneration to shareholders)
Purchase of treasury shares	-15
Sale or cancellation of treasury shares	8
Reclassification of financial instruments from liability to equity
Transfers among components of equity		-1,381
Other increase/(decrease) in equity
BALANCE AT 31-12-2021	-19	5,226

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (PART B)

Consolidated statement of total changes in equity (3)

(Millions of euros)

	Equity attributable to the parent	Minority interests
	Accumulated other comprehensive income	Accumulated other comprehensive income	Other items	Total
BALANCE AT 31-12-2019	-1,125		29	25,151
OPENING BALANCE AT 01-01-2020	-1,125		29	25,151
TOTAL COMP. INCOME FOR THE PERIOD	-740			641
OTHER CHANGES IN EQUITY			-4	-514
Dividends (or remuneration to shareholders)			-4	-422
Purchase of treasury shares				-8
Sale or cancellation of treasury shares				6
Transfers among components of equity
Other increase/(decrease) in equity				-90
OPENING BALANCE AT 31-12-2020	-1,865		25	25,278
OPENING BALANCE AT 01-01-2021	-1,865		25	25,278
TOTAL COMP. INCOME FOR THE PERIOD	246		3	5,475
OTHER CHANGES IN EQUITY			3	4,672
Issuance of ordinary shares				5,315
Dividends (or remuneration to shareholders)				-216
Purchase of treasury shares				-15
Sale or cancellation of treasury shares				8
Reclassification of financial instruments from liability to equity				10
Transfers among components of equity
Other increase/(decrease) in equity			3	-430
BALANCE AT 31-12-2021	-1,619		31	35,425

( ^*) Presented for comparison purposes only (see Note 1)

CONSOLIDATED STATEMENT OF CASH FLOWS (INDIRECT METHOD)

(Millions of euros)

	NOTE	2022	2021 ( ^*)	2020 ( ^*)
A) CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES		-79,875	38,628	37,562
Profit/(loss) for the period ^*		3,149	5,229	1,381
Adjustments to obtain cash flows from operating activities		819	-924	3,062
Depreciation and amortisation		807	695	540
Other adjustments		12	-1,619	2,522
Net increase/(decrease) in operating assets		-14,823	15,712	-24,832
Financial assets held for trading		3,543	1,401	1,013
Financial assets not designated for trading compulsorily measured at fair value through profit or loss		59	95	110
Financial assets at fair value with changes in other comprehensive income		2,446	12,795	-1,488
Financial assets measured at amortised cost		-24,385	4,67	-25,193
Other operating assets		3,514	-3,249	726
Net increase/(decrease) in operating liabilities		-68,625	19,462	58,101
Financial liabilities held for trading		-1,088	-912	-1,914
Financial liabilities at amortised cost		-63,400	18,934	59,369
Other operating liabilities		-4,137	1,440	646
Income tax (paid)/received		-395	-851	-150
B) CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES		164	13,888	484
Payments:		-1,304	-1,266	-776
Tangible assets		-440	-358	-403
Intangible assets		-476	-320	-287
Investments in joint ventures and associates			-49
Subsidiaries and other business units		-250
Non-current assets and liabilities classified as held for sale		-138	-539	-86
Proceeds:		1,468	15,154	1,260
Tangible assets		138	311	228
Intangible assets		1	1
Investments in joint ventures and associates		152	208	644
Subsidiaries and other business units			277
Non-current assets and liabilities classified as held for sale		1,177	2,266	388
Other proceeds related to investing activities	7		12,091
C) CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES		-3,984	88	-1,540
Payments:		-9,564	-4,438	-5,277
Dividends	6	-1,178	-216	-418
Subordinated liabilities		-1,76	-665
Purchase of own equity instruments		-1,818	-15	-8
Other payments related to financing activities		-4,808	-3,542	-4,851
Proceeds:		5,580	4,526	3,737
Subordinated liabilities	22	750	1,750	746
Disposal of own equity instruments		15	8	6
Other proceeds related to financing activities		4,815	2,768	2,985
D) EFFECT OF EXCHANGE RATE CHANGES		1	1	-5
E) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C+D)		-83,694	52,605	36,501
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		104,216	51,611	15,11
G) CASH AND CASH EQUIVALENTS AT END OF YEAR (E+F)		20,522	104,216	51,611
COMPONENTS OF CASH AND CASH EQUIVALENTS AT END OF PERIOD
Cash		2,560	3,044	2,339
Cash equivalents at central banks		16,384	99,574	48,535
Other financial assets		1,578	1,598	737
TOTAL CASH AND CASH EQUIVALENTS AT END OF YEAR		20,522	104,216	51,611
( ^*) Of which: Interest received		8,830	8,124	7,413
Of which: Interest paid		1,281	2,637	2,123
Of which: Dividends received		421	431	532

( ^*) Presented for comparison purposes only (see Note 1)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF CAIXABANK GROUP AT 31 DECEMBER 2022

As required by current legislation governing the content of consolidated financial statements, these notes to the consolidated financial statements complete, extend and discuss the balance sheet, statement of profit or loss, statement of changes in equity and the statement of cash flows, and form an integral part of them to give a true and fair view of the equity and financial position of CaixaBank group at 31 December 2022, and the results of its operations, the changes in equity and the cash flows during the year then ended.

Index of explanatory notes

	1. Corporate information, basis of presentation and other information
	2. Accounting policies and measurement bases
	3. Risk management
	4. Capital adequacy management
	5. Appropriation of profit
	6. Shareholder remuneration and earnings per share
	7. Business combinations, acquisition and disposal of ownership interests in subsidiaries
	8. Segment information
	9. Remuneration of key management personnel
	10. Cash and cash balances at central banks and other demand deposits
	11. Financial assets and liabilities held for trading
	12. Financial assets not designated for trading compulsorily measured at fair value through profit or loss
	13. Financial assets at fair value with changes in other comprehensive income
	14. Financial assets measured at amortised cost
	15. Derivatives - Hedge accounting (assets and liabilities
	16. Investments in joint ventures and associates
	17. Assets and liabilities under the insurance business
	18. Tangible assets
	19. Intangible assets
	20. Other assets and other liabilities
	21. Non-current assets and disposal groups classified as held for sale
	22. Financial liabilities
	23. Provisions
	24. Equity
	25. Tax position
	26. Guarantees and contingent commitments given
	27. Other significant disclosures
	28. Interest income
	29. Interest expense
	30. Dividend income
	31. Fee and commission income
	32. Gains/(losses) on financial assets and liabilities
	33. Other operating income and expenses and assets and liabilities under insurance or reinsurance contracts
	34. Personnel expenses
	35. Other administrative expenses
	36. Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss
	37. Impairment/(reversal) of impairment on non-financial assets
	38. Gains/(losses) on derecognition of non-financial assets
	39. Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations
	40. Information on the fair value
	41. Related-party transactions
	42. Other disclosure requirements
	43. Statements of cash flows
	Appendix 1 - CaixaBank investments in subsidiaries of CaixaBank Group
	Appendix 2 - CaixaBank stakes in agreements and joint ventures of CaixaBank Group
	Appendix 3 - Investments in associates of CaixaBank
	Appendix 4 - Disclosure on the acquisition and disposal of ownership interests in subsidiaries in 2021
	Appendix 5 - Annual banking report

1. CORPORATE INFORMATION, BASIS OF PRESENTATION AND OTHER INFORMATION

1.1. CORPORATE INFORMATION

CaixaBank, S.A. (hereinafter, CaixaBank -its trade name- or the Entity), is a Spanish public limited company registered in the Commercial Register of Valencia, Volume 10370, Folio 1, Sheet V-178351, and in the Special Administrative Register of the Bank of Spain, under number 2100. The Legal Entity Identifier (LEI) of CaixaBank is 7CUNS533WID6K7DGFI87, and its tax ID (NIF) is A08663619.

As of 1 July 2011, CaixaBank's shares are listed on the securities exchanges of Madrid, Barcelona, Valencia and Bilbao, in their continuous markets. The registered office and tax address of CaixaBank is Calle Pintor Sorolla, 2-4 in Valencia (Spain). The contact numbers for the shareholder service line are 902 11 05 82 / +34 935 82 98 03, and the one for institutional investors and analysts is +34 934 11 75 03.

The Entity's most relevant company milestones during its period of activity are:

The corporate purpose of CaixaBank, covered under Article 2 of its By-laws, mainly entails: i) all manner of activities, operations, acts, contracts and services related to the banking sector in general, including the provision of investment services and ancillary services and the performance of the activities of an insurance agency; ii) receiving public funds in the form of irregular deposits or in other similar formats, for the purposes of application on its own account to active credit and microcredit operations, and other investments, providing customers with services including dispatch, transfer, custody, mediation and others; and iii) the acquisition, holding, use and disposal of all kinds of securities and the formulation of public offerings for the acquisition and sale of securities, as well as all kinds of holdings in any company or enterprise.

CaixaBank, S.A. and its subsidiaries comprise CaixaBank Group (hereinafter "CaixaBank Group" or the "Group").

CaixaBank S.A. is the parent company of the financial conglomerate formed by the Group's entities that are considered to be regulated, recognising CaixaBank as a significant supervised entity, whereby CaixaBank comprises, together with the credit institutions of its Group, a significant supervised group of which CaixaBank is the entity at the highest level of prudential consolidation.

As a listed bank, it is subject to oversight by the European Central Bank and the Spanish national securities market regulator (the Comisión Nacional del Mercado de Valores, CNMV); however, the entities of the Group are subject to oversight by supplementary and industry-based bodies.

Since CaixaBank is a Spanish commercial enterprise structured as a public limited company, it is therefore subject to the amended text of the Spanish Corporate Enterprises Act, enacted by Royal Legislative Decree 1/2010 of 2 July and its implementing provisions. Furthermore, given that it is a listed company, it is also governed by the amended text of the Securities Markets Law, approved by Royal Legislative Decree 4/2015, of 23 October, and its implementing provisions.

CaixaBank's corporate website is www.caixabank.com.

1.2. BASIS OF PRESENTATION

The Group's consolidated financial statements have been prepared by the directors in accordance with the regulatory financial reporting framework applicable to the Group at 31 December 2022, which is set forth in the International Financial Reporting Standards adopted by the European Union (hereinafter, "IFRS-EU"). In preparing these statements, Bank of Spain Circular 4/2017 of 27 November has been taken into account, which constitutes the adaptation of the IFRS-EU to Spanish credit institutions, and subsequent amendments in force at the end of the financial year.

The financial statements, which were prepared from the accounting records of CaixaBank and the Group's companies, are presented in accordance with the regulatory financial reporting framework applicable to them and, in particular, with the accounting principles and rules contained therein and, accordingly, present fairly the Group's equity, financial position, results of operations and cash flows for the financial year. The accompanying financial statements include certain adjustments and reclassifications required to apply the policies and criteria used by the Group companies on a consistent basis with those of CaixaBank.

The figures are presented in millions of euros unless another monetary unit is stated. Certain financial information in these notes was rounded off and, consequently, the figures shown herein as totals may differ slightly from the arithmetic sum of the individual figures given before them. Similarly, in deciding what information to disclose in this report, its materiality was assessed in relation to the annual financial data.

Standards and interpretations issued by the IASB but not yet effective

Standards and interpretations	Title	Mandatory application for annual periods beginning on
IFRS 17	Insurance contracts	1 January 2023
Amendment to IFRS 17	First-time adoption of IFRS 17 and IFRS 9 - Comparative information	1 January 2023

At the date of authorisation for issue of these consolidated financial statements, following are the main standards and interpretations issued by the IASB but not yet effective, either because their effective date is subsequent to the date of the consolidated financial statements or because they had not yet been endorsed by the European Union:

◊ IFRS 17 "Insurance contracts"

The endorsement of IFRS 17 was published in the Official Journal of the European Union on 23 November 2021. This provides for an exception with regard to IFRS in respect of applying the requirement of annual cohorts for specific types of contracts, such as those managed through generations of various contracts that meet the conditions laid down in Article 77c of Directive 2009/138/EC on life insurance and the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), and they have been approved by the supervisory authorities for the purpose of applying the matching adjustment. The Group adopts this exception for the portfolios that fulfil the aforementioned requirements.

On 9 December 2021, the IASB issued an amendment to IFRS 17 on the comparative information in the initial application of IFRS 17 and IFRS 9 with the aim of helping companies to avoid temporary accounting imbalances between financial assets and liabilities from insurance contracts, and thus improve the comparative information for users of financial statements. This modification enables companies to submit comparative information on financial assets in the initial application of IFRS 17 and IFRS 9 based on the expected classification according to IFRS 9, as if the classification and measurement requirements of IFRS 9 had been applied to these financial assets. This presentation can only be applied in comparison periods that have been restated for IFRS 17. The Group will make use of this option.

As specified in Note 2.22, for insurance transactions, the Group's insurance companies have invoked the temporary exemption to the application of IFRS 9, meaning said rule is not yet applicable to the insurance business pursuant to the application of Regulation EU 2017/1988. This regulation has allowed for the deferral of IFRS 9 for insurance companies that form part of a financial conglomerate, as stated in article 2, section 14 of Directive 2002/87/EC. This option was adopted by the Group for the financial investments of the Group's insurance companies (VidaCaixa and BPI Vida e Pensões) from 1 January of 2018, as it fulfilled the conditions laid down by article 2 of the EU Regulation EU 2017/1988. As regards Bankia Vida and Sa Nostra Vida, the temporary exemption from IFRS 9 has also been applied from the date of the companies' takeover (see Note 7), up until the merger with VidaCaixa, in the case of Bankia Vida.

The Group will apply IFRS 17 and IFRS 9 (in the insurance business) for the first time on 1 January 2023. These standards will bring about significant changes in the accounting for insurance and reinsurance contracts and financial instruments, respectively.

Estimated impacts upon adoption of IFRS 17 and IFRS 9

The Group has estimated the impact of the application of IFRS 17 and IFRS 9 on its consolidated financial statements. On the basis of the best estimate available to the Group at that date, a negative impact in the CET1 ratio of 20 bps is estimated at 1 January 2023. If the decisions that affect the implementation of IFRS 9 and IFRS 17 are carried forward to 1 January 2022, and taking into consideration the interest rate changes in 2022, the same impact referring to 1 January 2022 would be a decrease in the CET1 ratio of 6 bps, equivalent to a decrease in equity at that date of EUR 218 million. The Group is currently finalising the estimate of the impact.

The previous impact results mainly from the fact that under the current IFRS 4, what is commonly called the "liability adequacy test" is conducted. This test is used to determine the overall adequacy of the provisions for the set of contract portfolios, and the compensation between them. With the entry into force of the new IFRS 17, this compensation will not be allowed, and as a result of the asymmetrical treatment of excesses and deficits at the portfolio level, the shortage in liabilities in some of them cannot be offset with the surpluses in others. This effect has to be charged to the first application reserves. Other elements that affect that capital impact are the cancellation of certain intangible assets and the impact on other cumulative income (OCI) resulting from the elimination of the shadow accounting figure, and the difference in OCI from the financial investments and the OCI of the liabilities (difference between the locked-in rate, used on the transition date, and the current rate on said date).

The impacts stated above all refer to the date of transition on a consolidated basis for VidaCaixa and SCA; no significant impacts are expected for the rest of the group's insurance companies. For such purposes, it should be noted that the Group took control of Bankia Vida in December 2021 and Sa Nostra Vida in November 2022 (see Note 7). The above impacts have already taken into consideration the elimination of intangible assets, other than intangible assets related to future renewals and goodwill, given that the former will be included in the IFRS 17 measurement.

At the date of authorisation for issue of these consolidated financial statements, these impacts are the best estimate of the effects that could be most significant for the subject scope, but are not a complete and exact listing of all impacts that could ultimately derive from application of this standard upon definitive application as of 1 January 2022. The impacts as at 1 January 2022 and 1 January 2023 of the adoption of both standards could vary by:

•	The Group continues to refine the new accounting processes and internal controls required by IFRS 17 and IFRS 9.
•	The new accounting policies, judgements and estimation techniques applied are subject to change until the Group has finalised its first financial statements under these new standards.The new accounting policies, judgements and estimation techniques applied are subject to change until the Group has finalised its first financial statements under these new standards.

◊ IFRS 17

A summary of the principles for the recognition, measurement, presentation and disclosure of the insurance contracts to be used by the Group is set out below:

Definition and classification

The Group has evaluated whether its contracts fulfil the definition of an insurance contract, i.e. whether it accepts a significant insurance risk from another party by agreeing to compensate the policyholder should an uncertain future event occur that adversely affects the policyholder. From this evaluation it has been concluded that all insurance contracts that were under the scope of IFRS 4 fulfil the definition of an insurance contract and therefore the introduction of IFRS 17 does not entail any reclassification, except for certain products of BPI Vida e Pensões, which do not transfer significant insurance risk and are therefore measured under IFRS 9.

Unit of account

The Group has analysed the criteria for grouping insurance contracts by taking into consideration whether they are contracts subject to similar risks and are managed jointly, onerousness and whether they are contracts that are not more than one year apart in terms of issue (annual cohorts). This analysis has concluded that the product groups currently used in Solvency II are adequate.

Since the Group has chosen the fair value transition approach, for contracts issued prior to the transition date (1 January 2022) it has not been necessary to aggregate the contracts by previous cohorts.

Contracts issued after the transition date have been grouped by year, except for insurance contracts managed under matching adjustment techniques and unit-linked contracts for which the Group has made use of the derogation in Article 2 of Commission Regulation (EU) 2021/2036 of 19 November 2021 whereby the annual cohort requirement may be waived for groups of insurance contracts managed through different generations of contracts that fulfil the conditions laid down in Article 77b of Directive 2009/138/EC and have been approved by the supervisory authorities to be eligible for the application of the matching adjustment and for groups of insurance contracts with direct participation features and groups of investment contracts with discretionary participation features as set out in that Regulation.

Recognition and derecognition of accounts

Groups of insurance contracts are initially recognised when the first of the following events occurs:

•	The beginning of the hedging period of the group of contracts
•	The date on which the first payment of a policyholder of a group policy falls due
•	For a group of contracts for pecuniary interest, the date on which the group becomes onerous

Insurance contracts acquired in a business combination within the scope of IFRS 3 will be accounted for as if they were concluded at the acquisition date.

In general, the Group uses the general model for recognising and measuring insurance contracts. However, the variable rate approach is used for unit-linked and similar contracts when they meet the definition of insurance contracts with direct participation features. Furthermore, for contracts with a hedging period of under one year, the Group uses the premium-allocation approach. This is also applied when the Group expects that the use of this simplified approach will yield a measurement that does not significantly differ from that which would be produced by applying the general method or FVA.

An insurance contract will be terminated when:

•	It has expired
•	The contract is amended and fulfils the requirements of the termination rule.

Measurement

• Initial recognition

For contract groups not measured under the premium-allocation approach, upon initial recognition the Group measures a group of insurance contracts for the total of:

+ Future cash flows, which include:

- Estimates of future cash flows. The Group estimates the present value of future cash outflows less the present value of future cash inflows which fall within the limits of the contract. These estimates are based upon the expected value of a full range of possible outcomes, grounded in the Group's perspective (but consistent with observable market prices for the inputs used) and reflect conditions existing at the measurement date.

- An adjustment to reflect the time value of money and the financial risks associated with future cash flows. In general, the Group has chosen a top-down approach for the discount rates, whereby the asset rate is taken as a reference and the credit risk is discounted. In the case of contracts priced under the floating rate model and risk products, the discount rate is established on the basis of a bottom-up approach.

- A risk adjustment for non-financial risk. This reflects the offsetting the Group requires for bearing the uncertainty about the amount and timing of cash flows arising from non-financial risk. The Group applies the Cost of Capital methodology, taking the Solvency II cost of capital (6%) and the regulatory capital requirement currently reported by the Company for underwriting risks (underwriting SCR).

+ The Contractual Service Margin (CSM). It represents the future profits of the insurance contracts issued. This amount is not recognised in the income statement at initial recognition, but is recognised when the services under the contract are rendered. When this margin is negative, the insurance contract is onerous and the loss must be immediately recognised in the income statement, without the contractual service margin being recognised in the balance sheet. The Group expects that the amount of CSM at the transition date will be in the range of EUR 2,600-2,900 million for contracts measured using the general model and the FVA model, and, therefore it does not include the expected profit that will accrue over time for life insurance contracts with a coverage period of less than one year where the Group uses the premium allocation approach and as such this profit is implicit in calculating the insurance liability, and is therefore not a separately accounted for component.

The Group has applied the premium-allocation approach for contracts which have a hedge period of one year or less, or where this approach is expected to result in a measurement of the remaining hedge liability that does not materially differ from that which would be produced by applying the general model.

At initial recognition the Group measures the remaining hedging liability as the premiums received plus/minus any amount resulting from derecognising assets/liabilities previously recognised for the cash flows related to the group of contracts.

For these contracts, the Group has chosen the policy option to recognise the cash flows from the purchase of the insurance as expenses when incurred.

• Subsequent recognition

The carrying amount of a group of insurance contracts at the close of each reporting period will be the sum of:

+ The remaining hedging liability, which comprises the cash flows derived from the performance of future services allocated to the group at that date and the group's contractual service margin at that date.

+ The liability for claims incurred, which comprises the cash flows arising from the performance of past services assigned to the group at that date.

Changes in cash flows related to present or past services are recorded in the income statement, whereas those related to future services adjust the CSM or loss component.

For contracts measured under the variable rate model the amounts related to future service that adjust the CSM include changes in the amount of the Company's interest in the fair value of the underlying items.

Changes in the measurement of cash flows at current rates are recorded under Other Comprehensive Income because the Group has chosen this accounting policy to minimise accounting asymmetries with the accounting recognition of financial assets. For contracts priced under the variable tariff model these amounts adjust the CSM.

The transfer of insurance contract services in the period is recognised as insurance income in profit or loss.

For insurance contracts in which the premium-allocation approach is applied, at the close of each period the carrying amount of a group of contracts is the sum of the liability for the remaining hedge and the liability for claims incurred. The remaining hedge liability is the result of the opening balance plus premiums received for the period less the amount recognised as insurance income for services provided in that period.

The Group does not adjust the remaining hedge liability for the time value of money because insurance premiums expire within the coverage period of the contracts, which is one year or less. The liability for claims incurred is measured in a similar way to the general model.

• Income and expenses from insurance contracts

Income and expenses from insurance contracts that are recognised using the following criteria:

Income and expenses from reinsurance contracts held are reported as a single amount and are presented separately from income and expenses from insurance contracts written under the headings "Net expenses from reinsurance contracts held" and "Finance income from reinsurance contracts held".

Income from the insurance service

Includes income from ordinary insurance activities that show the provision of services associated with the group of insurance contracts for an amount that reflects the compensation the bank expects to receive in exchange for said services.

Includes the expenses of the service , which include the claims paid (excluding investment components) and other expenses of the insurance service, the amortisation of acquisition cash flows, changes in the flows related with past services, and changes related with the current service.

Financial income and expenses from insurance

The insurance revenue or expenses include the group's book value of insurance contracts that result from the effect of the time value of money amd the changes in this value, and from the financial risk effect and changes to thie effect.

The group has adopted for the accounting policy of recognising the impact of changes in the discount rates and other financial variables in Other Comprehensive Income to minimise accounting asymetries with the accounting record of financial assets.

For contracts valued using the premium assignment approach, the discount rate will not be used since the cash flows are expected to be charged and paid in one year.

The group dissagreggates changes in the risk adjustment due to non-financial risk into income from the insurance service, and income or expenses from insurance financing.

Presentation and breakdown

IFRS 17 will have material changes to how insurance contracts will be presented and disclosed in the Group's financial statements.

For the balance sheet, portfolios of contracts will be classified as assets or liabilities on the basis of their net balance, and insurance and reinsurance contracts will be recorded separately.

For the Consolidated Statement of Profit or Loss, the amounts recognised will be separated into "Profit or loss on insurance services", which will include insurance service income and expenses, and "Financial income or expenses on insurance". As in the Balance Sheet, reinsurance contracts are presented separately. Based on the above, the main changes that are expected with respect to IFRS 4 are as follows:

•	The margin on savings products currently recorded under "Net interest income" will now be recorded under "Profit or loss on insurance services".
•	The margin for unit-linked products will be moved from "Fee and commission income" to "Profit or loss on insurance services".
•	"Operating expenses" will be reclassified as lower "Profit or loss on insurance services" when they are deemed to be directly attributable to insurance contracts.

In general, to present the changes in the discount rates of insurance liabilities, the Group has chosen the accounting policy option of recording them in "Other Comprehensive Income" to avoid asymmetries with the financial investments whose variations in value are generally recorded in "Other Comprehensive Income". For contracts priced under the variable tariff model these amounts adjust the CSM.

These changes will not have a material impact on either profitability or the ability to pay dividends.

Transition

For the purpose of transition requirements, the date of transition will be 1 January 2022, and given the impracticability of applying IFRS 17 retroactively, the Group has chosen to apply the fair value approach for all contracts in force on that date. For such purpose, the Group has determined the CSM or the loss component of the remaining hedging liability at the transition date as the difference between the fair value of a group of insurance contracts at that date and the cash flows derived from the performance measured at that date.

When implementing this approach, the Group has taken the following considerations into account:

•	Only future cash flows within the contract boundaries have been included in the fair value estimate, thereby excluding values of future renewals and new business.
•	The requirements of IFRS 13 have been taken into consideration.
•	Intangible assets related to future renewals that arose in business combinations have been recognised as insurance acquisition cash flow assets, given that these amounts are not included in the measurement of insurance contracts.

Furthermore, when applying this approach, the Group has opted to:

•	Include contracts issued more than one year apart in a group of contracts.
•	Determine discount rates at the initial recognition date, rather than at the transition date.
•	Given that the Group has chosen to split insurance finance income or expense between profit or loss and other comprehensive income, it has elected to determine the cumulative amount of such income or expense recognised in other comprehensive income at the date of transition retrospectively.

◊ IFRS 9

As previously stated, the Group's insurance companies have availed themselves of the temporary exemption from the application of IFRS 9 for insurance operations. As a consequence, the Group will apply IFRS 9 for these operations for the first time on 1 January 2023.

Note 2 provides details of the accounting principles and policies and measurement bases of IFRS 9, given that the Group has applied IFRS 9 for all other Group companies since 1 January 2018.

Below are the main differences that will arise from replacing IAS 39 with IFRS 9 in insurance operations:

•	Most financial assets are classified as availablefor-sale financial assets under IAS 39. Under IFRS 9 most portfolios will be classified as Financial assets at fair value through other comprehensive income. However, under certain circumstances, in order to avoid asymmetries between assets and liabilities, some portfolios will be classified as Financial assets at amortised cost.
•	As regards the unit-linked business, the financial assets related to these contracts are classified in Other financial assets at fair value through profit or loss under IAS 39. These portfolios are classified under IFRS 9 as financial assets designated at fair value through profit or loss.
•	Derivatives designated as hedged items in fair value micro-hedges are classified in IFRS 9 under the heading "Derivatives - hedge accounting"

Given that most financial assets are classified at fair value before and after the application of IFRS 9, no material impact on the Group's equity is expected. The only expected impact is for portfolios that have been reclassified to amortised cost.

Although the introduction of IFRS 9 entails a change from an incurred loss to an expected loss impairment model, because of the composition of the financial asset portfolio no material impact is expected.

1.3. RESPONSIBILITY FOR THE INFORMATION AND FOR THE ESTIMATES MADE

The Entity's consolidated financial statements for 2022 were authorised for issue by the Board of Directors at a meeting held on 16 February 2023. They have not yet been approved by the Annual General Meeting, while it is expected that they will be approved without any changes. The financial statements of 2021 were approved by the Ordinary Annual General Meeting on 8 April 2022.

These consolidated financial statements have been prepared according to a going concern based on the solvency (see Note 4) and liquidity (see Note 3.4.4) of the Group.

The preparation of the consolidated financial statements required the Board of Directors to make certain judgements, estimates and assumptions in order quantify certain assets, liabilities, revenues, expenses and obligations shown in them. These judgements and estimates mainly refer to:

•	The measurement of goodwill and intangible assets (Note 2.15 and 19).
•	The term of the lease agreements used in the assessment of the lease liabilities (Note 2.18).
•	The fair value of assets, liabilities and contingent liabilities in the context of the purchase price allocation in business combinations (Note 7).
•	Impairment losses on financial assets, and of the fair value of guarantees associated thereto, according to their classification in accounts, which entail the need to make judgments regarding: i) the consideration of "significant increase in credit risk" (SICR); ii) the definition of default; and iii) the incorporation of forward-looking information and the macro-economic uncertainties - Post Model Adjustment (Notes 2.7 and 3.4.1).
•	The measurement of investments in joint ventures and associates (Note 16).
•	Determination of the share of profit/(loss) of investments in associate companies (Note 16).
•	Actuarial assumptions used to measure liabilities arising from insurance contracts (Note 17).
•	The classification, useful life of and impairment losses on tangible assets and intangible assets (Notes 18 and 19).
•	Impairment losses on non-current assets and disposal groups classified as held for sale (Note 21).
•	Actuarial assumptions used to measure post-employment liabilities and commitments (Note 23).
•	The measurement of the provisions required to cover labour, legal and tax contingencies (Note 23).
•	The income tax expense based on the income tax rate expected for the full year and the capitalisation and recoverability of tax assets (Note 25).
•	The fair value of certain financial assets and liabilities (Note 40).

These estimates were made on the basis of the best information available at the date of authorisation for issue of the financial statements, considering the uncertainty at the time arising from the current economic environment. However, it is possible that events may occur that make it necessary for them to be changed in future periods. According to applicable legislation, the effects of these estimate changes would be recognised prospectively in the corresponding statement of profit or loss.

1.4. COMPARISON OF INFORMATION AND CHANGES IN THE SCOPE OF CONSOLIDATION

The 2021 and 2020 figures presented in the accompanying 2022 Financial Statements are given for comparison purposes only. In some cases, in order to facilitate comparability, the comparative information is presented in a summarised way, and the full information is available in the 2021 and 2020 financial statements.

The takeover of Bankia, S.A. took place on 23 March 2021. The financial statements at 31 December 2021 reflect the recognition of the business combination.

1.5. SEASONALITY OF OPERATIONS

The most significant operations carried out by the Group do not have a relevant cyclical or seasonal nature within a single financial year.

1.6. OWNERSHIP INTERESTS IN CREDIT INSTITUTIONS

At year-end, the Group held no direct ownership interest equal to or greater than 5% of the capital or voting rights in any credit institution other than the investments and subsidiaries and associates listed in Appendices 1 and 3.

1.7. RESERVE RATIO

In this year, the Entity complied with the minimum reserve ratio required by applicable regulations.

1.8. SIGNIFICANT OPERATIONS

Capital reduction

After receiving the appropriate regulatory approval, the Board of Directors on 16 May 2022 agreed to approve and commence a share buy-back programme for a maximum amount of EUR 1,800 million, in order to bring the CET1 ratio closer to the internal target. As a result, on 22 December 2022, following the completion of the share buy-back programme, CaixaBank's Board of Directors agreed to reduce the Company's share capital by redeeming all 558,515,414 treasury shares (6.93% of the share capital) acquired within the framework of the share buy-back programme for an amount of EUR 1,800 million, the resulting share capital amounting to EUR 7,502,131,619 represented by 7,502,131,619 shares at a nominal value of one euro each (see Note 24).

1.9. EVENTS AFTER THE REPORTING PERIOD

The operations -in addition to those stated in the rest of the notes- that have taken place between the close and the formulation thereof are set out below.

Debt securities issued

Issuance of senior non-preferred debt

On 18 January 2023, CaixaBank completed an issuance of senior non-preferred debt amounting to EUR 1,250 million, maturing in 6 years and paying a return of 6.208%.

Subordinated debt issue

On 25 January 2023, CaixaBank completed a subordinated debt issue amounting to GBP 500 million, maturing in 10 years and 9 months, and paying a return of 6.875%.

2. ACCOUNTING PRINCIPLES AND POLICIES, AND MEASUREMENT BASES

The principal accounting policies and measurement bases used in the preparation of the consolidated financial statements of the Group for 2022 were as follows:

2.1 BUSINESS COMBINATIONS AND BASIS OF CONSOLIDATION

In addition to data relating to the parent company, the consolidated financial statements contain information on subsidiaries, joint ventures and associates. The procedure for integrating the assets and liabilities of these companies depends on the type of control or influence exercised.

Subsidiaries

The Group considers as subsidiaries companies over which it has the power to exercise control. Control is evidenced when it has:

•	power to direct the relevant activities of the investee, i.e. the rights (legal or by-law provisions or through agreements) that confer the ability to direct the activities of the investee that significantly affect the investee's returns,
•	the present (practical) ability to exercise the rights to exert power over the investee to affect its returns, and,
•	exposure, or rights, to variable returns from its involvement with the investee.

In general, voting rights give the ability to direct the relevant activities of an investee. To calculate voting rights, all direct and indirect voting rights, as well as potential voting rights (e.g. call options on equity instruments of the investee) are considered. In some circumstances, a company may have power to direct the activities without holding a majority of the voting rights.

In these cases, the investor considers whether it has the practical ability to direct the relevant activities unilaterally (financial and operating decisions, or appointing and remunerating governing bodies, among others).

The subsidiaries are consolidated, without exception, on the grounds of their activity, using the full consolidation method, which consists of the aggregation of the assets, liabilities, equity, income and expenses of a similar nature included in their separate financial statements. The carrying amount of direct and indirect investments in the share capital of subsidiaries is eliminated in proportion to the percentage of ownership in the subsidiaries held by virtue of these investments. All other balances and transactions between the consolidated entities are eliminated on consolidation.

The share of third parties in the equity and profit or loss is shown under "Minority interests (non-controlling interests)" in the balance sheet and in "Profit/(loss) attributable to minority interests (non-controlling interests)" in the statement of profit or loss.

The results of subsidiaries acquired during the year are consolidated from the date of acquisition. Similarly, the results of subsidiaries that are no longer classified as subsidiaries in the year are consolidated at the amount generated from the beginning of the year up to the date on which control is lost.

Acquisitions and disposals of investments in subsidiaries without a change of control are accounted for as equity transactions, with no gain or loss recognised in the statement of profit or loss. The difference between the consideration paid or received and the decrease or increase in the amount of minority interests, respectively, is recognised in reserves.

According to IFRS 10, on loss of control of a subsidiary, the assets, liabilities, minority interests and other items recognised in valuation adjustments are derecognised, and the fair value of the consideration received and any remaining investment recognised. The difference is recognised in the statement of profit or loss.

Regarding non-monetary contributions to jointly controlled entities, the IASB recognised a conflict in standard between IAS 27, under which on the loss of control, any investment retained is measured at fair value and the full gain or loss on the transaction is recognised in the statement of profit or loss, and paragraph 48 of IAS 31 and the interpretation SIC 13, which, for transactions under their scope, restrict gains and losses to the extent of the interest attributable to the other equity holders of the jointly controlled entity. The Group has elected to apply, in a consistent manner, the provisions of IAS 27 to transactions under the scope of these standards.

Relevant information on these entities is disclosed in Appendix 1. The above information is based on the most recent actual or estimated data available at the time of preparation of these Notes.

Joint ventures

The Group considers as joint ventures those which are controlled jointly under a contractual arrangement, by virtue of which, decisions on relevant activities are made unanimously by the entities that share control with rights over the net assets.

Investments in joint ventures are accounted for using the "equity method", i.e. in the proportion to the Entity's share of the assets of the investee, after adjusting for dividends received and other equity eliminations.

Relevant information on these entities is disclosed in Appendix 2. The above information is based on the most recent actual or estimated data available at the time of preparation of these Notes.

Associates

Associates are companies over which the Group exercises significant direct or indirect influence, but which are not subsidiaries or joint ventures. In the majority of cases, significant influence is understood to exist when the company holds 20% or more of the voting rights of the investee. If it holds less than 20%, significant influence is evidenced by the circumstances indicated in IAS 28. These include representation on the board of directors, participation in policy-making processes, material transactions between the entity and its investee, interchange of managerial personnel or the provision of essential technical information.

Exceptionally, investees in which more than 20% of the voting rights is held, but it can clearly be demonstrated that significant influence does not exist, and therefore the Group effectively does not have the power to govern the Entity's financial and operating policies, are not considered associates. Based on these criteria, at the end of the year, the Group held certain equity investments for very insignificant amounts, ranging from 20% to 50% classified under "Financial assets at fair value with changes in other comprehensive income".

Investments in associates are accounted for using the equity method, i.e. in the proportion to the share of the assets of the investee, after adjusting for dividends received and other equity eliminations. The profits and losses arising from transactions with an associate are eliminated to the extent of the Group's interest in the share capital of the associate.

The amortisation of intangible assets with a finite useful life identified as a result of a Purchase Price Allocation (PPA) is recognised with a charge to "Share of profit/(loss) of entities accounted for using the equity method" in the statement of profit or loss.

The Group has not used the financial statements of companies accounted for using the equity method that refer to a different date than that of the Group's Parent.

Relevant information on these entities is disclosed in Appendix 3. The above information is based on the most recent actual or estimated data available at the time of preparation of these Notes.

Structured entities

A structured entity is that which has been designed so that voting or similar rights are not the dominant factor in deciding its control, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. In any case, the Group also uses the percentage of voting rights as an indicator for the purpose of measuring the existence of control in entities of this nature.

Where the Group creates or holds ownership interests in entities to provide customers access to investments or transfer certain risks to third parties, it analyses whether it has control over the investee and, therefore, whether it should or should not be consolidated.

Consolidatable structured entities:

To determine whether there is control over a structured entity and, therefore whether it should be consolidated, the Group analyses the contractual rights other than voting rights. For this, it considers the purpose and design of each entity and, inter alia, evidence of the ability to direct the relevant activities, potential indications of special relationships or the ability to affect the returns from its involvement.

With regard to securisation funds, the Group is highly exposed to variable returns and has decision-making power over the entity, directly or through an agent. Information on these funds, the financial support given to the vehicles and the reason are detailed in Note 27.8.

At year-end, there were no agreements to provide additional financial support to other types of consolidated structured entities than those described.

Non-consolidatable structured entities:

The Group creates vehicles to provide its customers access to certain investments or to transfer risks or for other purposes. These vehicles are not consolidated, as the Group does not have control and as the criteria for consolidation set out in IFRS 10 are not met.

At year-end, the Group did not have any significant interests in or provide financial support to unconsolidated structured entities.

Business combinations

Accounting standards define business combinations as the combination of two or more entities within a single entity or group of entities. "Acquirer" is defined as the entity which, at the date of acquisition, obtains control of another entity.

For business combinations in which the Group obtains control, the cost of the combination is calculated. Generally, it will be the fair value of the consideration transferred. This consideration includes the assets transferred by the acquirer, the liabilities assumed by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer.

In addition, the acquirer recognises, at the acquisition date, any difference between:

1.	the aggregate of the fair value of the consideration transferred, of the minority interests and the previously held equity interest in the company or business acquired, and
2.	the net amount of the identifiable assets acquired and liabilities assumed, measured at their fair value.

The positive difference between i) and ii) is recognised under "Intangible assets - Goodwill" in the balance sheet provided it is not attributable to specific assets or identifiable intangible assets of the company or business acquired. Any negative difference is recognised under "Negative goodwill recognised in profit or loss" in the statement of profit or loss.

2.2 FINANCIAL INSTRUMENTS

Classification of the financial assets

The criteria established by the regulatory framework for accounting for classifying financial instruments is set out below:

Contractual cash flows	Business model	Classification os financial assets (FA)
Payments, solely principal and interests on the amount of principal pending at specified dates (SPPI test)	In order to receive contractual cash flows	FA at amortised cost
	In order to receive contractual cash flows and sale	FA at fair value with changes in other comprehensive income
Others - No SPPI test	Derivative instruments designated as accounting hedging instruments	Derivatives - Hedge accounting
	They originate from or are acquired with the aim of realising them in the short-term	FA at fair value through profit or loss - FA held for trading
	They are part of a group of financial instruments identified and managed together, for which there is evidence of a recent pattern of short-term profit-taking
	Others	Others - FA not designated for trading compulsory measured at fair value through profit or loss

Investments in equity instruments are an exception to the aforementioned general assessment criteria. In general, the Group irrevocably exercises the option in the initial recognition by including -in the portfolio of financial assets at fair value with changes in other comprehensive income- investments in equity instruments that are not classified as held for trading and that, in the event of not exercising this option, would be classified as financial assets compulsorily measured at fair value through profit or loss.

With respect to the evaluation of the business model, this does not depend on the intentions for an individual instrument, but rather the determination is made for a set of instruments, taking into account the frequency, amount and calendar of sales in previous financial years, the reasons for said sales and expectations of future sales. The infrequent or insignificant sales, those near to the maturity of the asset and driven by increased credit risk of the financial assets or to manage the concentration risk, among others, can be compatible with the model of holding assets to receive contractual cash flows.

It is important to underline that the sale of financial assets held in the amortised cost portfolio as a result of the Group's change of view arising from the COVID-19 effects cannot be considered a change in the business model or does not involve an accounting reclassification of the securities held in this portfolio, as these were correctly reclassified when the business model was assessed without the global crisis caused by COVID-19 being a reasonably possible scenario. If the sales were completed during the crisis based on the exceptions foreseen in the regulatory framework, we consider that in any case these would also be consistent with a business model of maintaining financial assets to obtain contractual cash flows, as the existing conditions at the time and the reasons that gave rise to the need to sell classified assets in the amortised cost portfolio were obviously extraordinary and transitory in nature and could be framed within an identifiable time frame.

More specifically, the fact that the Group expects to make regular sales, focusing on loans (or similar financial assets) that have experienced a drop in credit risk levels, is not inconsistent with how those loans are classified under a business model that holds financial assets to receive contractual cash flows. These sales are not counted for the purpose of determining the frequency of sales and their materiality will, therefore, remain separate from the tracking ratios.

As regards the assessment in relation to whether the cash flows of an instrument solely represent payments of principal and interest, the Group carries out a series of judgements when assessing such compliance (SPPI test), the following being the most significant:

•

Modified time value of money: in order to assess whether the interest rate of a particular operation incorporates some consideration other than that linked to the passage of time, the Group considers factors such as the currency in which the financial asset is denominated and the term for which the interest rate is established. In particular, the Group performs a regular analysis for operations that present a difference between the holding period and the review frequency, whereby they are compared with another instrument that does not present such differences within a tolerance threshold.

•

Exposure to risks inconsistent with a basic lending arrangement: an assessment is conducted on whether the contractual features of financial assets introduce exposure to risks or volatility in the contractual cash flows unrelated to a basic lending arrangement, such as exposure to changes in equity or commodity prices, in which case they would not be considered to pass the SPPI test.

•

Clauses that amend the schedule or amounts of cash flows: the Group considers the existence of contractual conditions in virtue of which the timing or amount of the contractual flows of the financial asset can be modified. This applies to: i) assets whose contractual conditions allow for the total or partial early amortisation of the principal: ii) assets whose contracts allow for their duration to be extended, or iii) assets for which interest payments may vary according to a non-financial variable specified in the agreement. In these instances, the Entity evaluates whether the contractual cash flows that the instrument may generate over its life due to this contractual condition are solely payments of principal and interest on the principal amount outstanding and may include a reasonable additional compensation in the event of an early termination of the contract.

•

Leverage: financial assets with leverage, i.e. those in which the variability of the contractual flows increases such that they do not have the economic characteristics of interest, cannot be considered financial assets that pass the SPPI test (e.g. derivative instruments such as simple option contracts).

•

Subordination and loss of the right to receive payment: the Group evaluates any contractual clauses that may result in a loss of rights to receive payment of principal and interest on the principal amount outstanding.

•

Currency: in analysing whether the contractual cash flows are solely payments of principal and interest on the principal amount outstanding, the Group takes into consideration the currency in which the financial asset is denominated in order to assess the characteristics of the contractual flows, for instance by assessing the component corresponding to the time value of money based on the benchmark used for setting the financial asset's interest rate.

•

Contractually linked instruments: with respect to the positions in contractually linked instruments, it conducts a look-through analysis, which considers the cash flows resulting from this type of asset as consisting solely of payments of principal and interest on the principal amount outstanding if:

•	the contractual terms of the tranche being assessed for classification (without looking through the underlying pool of financial instruments) give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (e.g., the interest rate of the tranche not linked to a commodity index);
•	the underlying pool of financial instruments comprises one or more instruments with contractual cash flows that are solely payments of principal and interest on the principal amount outstanding; and
•	the exposure to the credit risk inherent in the tranche is equal to or lower than the exposure to the credit risk of the underlying pool of financial instruments (for example, the credit rating of the tranche being assessed for classification is equal to or higher than the credit rating that would apply to a single tranche comprising the underlying pool of financial instruments). Therefore, if the rating of the tranche is equal to or greater than that of the vehicle, this condition will be considered to have been met.

The underlying group of instruments referred to in the previous section could also include instruments that reduce the variability of the flows of that group of instruments such that, when they are combined with these instruments, they generate flows that are solely payments of principal and interest on the principal amount outstanding (e.g. an interest rate ceiling or floor option or a contract that reduces the credit risk associated with the instruments). It could also include instruments that allow the flows from the tranches to be aligned with the flows from the group of underlying instruments in order to settle exclusively the differences in the interest rate, the currency in which the flows are denominated (including inflation) and the timing of cash flows.

•

Assets without personal liability (non-recourse): the fact that a particular financial asset does not have any personal liability associated with it does not necessarily mean it must be considered a Non-SPPI financial asset. In these situations, the Group assesses the underlying assets or cash flows to determine whether they consist solely of payments of principal and interest on the principal amount outstanding, regardless of the nature of the underlying assets in question.

In particular, in the case of financing operations for projects that are repaid exclusively with the incomes from the projects being financed, the Group analyses whether the cash flows that are contractually determined to be principal and interest payments do indeed represent the payment of principal and interest on the principal amount outstanding.

•

Negative compensation (symmetrical clauses): certain instruments incorporate a contractual clause whereby, if the principal amount outstanding is either fully or partially repaid early, the party that chooses to end the contract early -whether it is the debtor or the creditor- is able to receive fair additional compensation despite being the party choosing to end the contract early. This is the case, for instance, of so-called symmetrical clauses found in certain fixed-rate financing instruments. These clauses stipulate that when the creditor executes the option to make a repayment in advance, there must be compensation for the early termination of the contract, and this compensation will be in either the debtor's or the creditor's favour depending on how interest rates have fluctuated between the initial grant date and the date on which the contract is terminated early.

The fact that a financial instrument incorporates this contract term, known as negative compensation, does not necessarily mean that the instrument in question must be considered Non-SPPI. A financial instrument that would otherwise have met the conditions to be considered SPPI-compliant, had it not been for the incorporation of fair additional compensation for the early termination of the contract (to be either received or paid by the party that decides to terminate the contract early), will be eligible to be measured at amortised cost or at fair value with changes in other comprehensive income, as determined by the business model.

In cases where a characteristic of a financial asset is not congruous with a basic loan agreement, i.e. the asset has characteristics that give rise to contractual flows other than payments of principal and interest on the principal amount outstanding, the Group will assess the materiality and probability of occurrence in order to determine whether this characteristic or element should be taken into consideration when evaluating the SPPI test.

With respect to the materiality of a characteristic of a financial asset, the assessment performed by the Group involves estimating the impact it could have on the contractual flows. The impact of such an element is considered not material when it entails a change of less than 5% in the expected cash flows. This tolerance threshold is determined on the basis of the expected contractual flows, without any discounting.

If the characteristic of an instrument could have a significant impact on the contractual flows but that characteristic affects the contractual flows of the instrument solely if an event occurs that is considered to be extremely exceptional, highly anomalous and highly unlikely, the Group will not take that characteristic or element into consideration when assessing whether the contractual cash flows from the instrument are solely payments of principal and interest on the principal amount outstanding.

Classification of the financial liabilities

Financial liabilities are classified under: "Financial liabilities held for trading", "Financial liabilities designated at fair value through profit or loss" and "Financial liabilities measured at amortised cost", unless they must be presented under "Liabilities included in disposal groups classified as held for sale" or relate to "Fair value changes of the hedged items in portfolio hedge of interest rate risk" or "Derivatives - Hedge accounting", which are presented separately.

Particularly, the portfolio "Financial liabilities at amortised cost": includes financial liabilities not classified as financial liabilities held for trading or as other financial liabilities at fair value through profit or loss. The balances recognised in this category, irrespective of the substances of the contractual arrangement and maturity of such liabilities, arise from the ordinary capture activities of credit institutions.

Initial recognition and measurement

Upon initial recognition, all financial instruments are recognised at fair value. For the financial instruments that are not registered at fair value through profit or loss, the fair value amount is adjusted, adding or deducting transaction costs directly attributable to the acquisition or issuance thereof. In the case of financial instruments at fair value through profit or loss, the directly attributable transaction costs are immediately recognised in the statement of profit or loss.

The transaction costs are defined as expenses directly attributable to the acquisition or drawdown of a financial asset, or to the issuance or assumption of a financial liability, which would not have been incurred if the Group had not made the transaction. These include fees paid to intermediaries (such as prescribers); mortgage arrangement expenses borne by the Group and part of the personnel expenses in the Risk Acceptance Centres. Under no circumstances are the internal administrative costs or those deriving from prior research and analysis considered transaction costs.

The Group uses analytical accounting tools to identify direct and incremental transaction costs of asset operations. These costs are included in determining the effective interest rate, which is reduced for financial assets, thus, the costs are accrued throughout the duration of the transaction.

Subsequent measurement of the financial assets

After its initial recognition, the Group measures the financial asset at amortised cost, at fair value with changes recognised in other comprehensive income, or at fair value with changes recognised in profit or loss.

The receivables for trading operations that do not have a significant financing component and the commercial loans and short-term debt instruments that are initially measured by the price of the transaction or its principal, respectively, continue to be measured by said amount less the correction of value due to estimated allowances for impairment as described in Note 2.7.

With regard to the conventional purchases and sales of fixed income and equity instruments, these are generally recorded at the settlement date.

Income and expenses of the financial assets and liabilities

The income and expenses of financial instruments are recognised according to the following criteria:

Portfolio		Recognition of income and expenses
Financial assets	At amortised cost	Accrued interest: recorded in the statement of profit or loss using the effective interest rate of the transaction on the gross carying amount of the transaction (except in the case of non-performing assets, where it is applied to the net carrying amount)
		Other changes value: income or expenses when the financial instrument is derecognised from the balance sheet, reclassified or when losses occur due to impairement or gains are produced by its subsequent recovery
	Measured at fair value through profit or loss	Changes in fair value: fair value changes are recorded directly in the statement of profit or loss, and a differentiation is made - for non-derivative instruments - between the part attributable to the returns earned by the instrument, which will be recorded as interest or as dividends according to its nature, and the rest, which will be recorded as profit/(loss) of financial operations in the corresponding balance item.
		Accrued interest: on these debt instruments, calculated using the effective interest method.
	At fair value with changes in other comprehensive income ( ^*)	Interests or dividends accrued, in the statement of profit or loss. For interest, the same assets at amortised cost.
		The differences in a change in the statement of profit or loss in the case of monetary financial assets, and in other comprehensive income, in the case of non-monetary financial assets.
		For the case of debt instruments, impairment looses or gains due to their subsequent recovery in the statement of profit or loss.
		The remaining changes in value are recognised in other comprehensive income.
Financial liabilities	At amortised cost	Accrued interest: recorded in the statement of profit or loss using the effective interest rate of the operation on the gross carrying amount of the operation, except in the case of Tier 1 isuances, in which the discrectionary coupons are recognised in reserves.
		Other changes in value: income or expense when the financial instrument is derecognised from the balamce sheet or reclassified.
	Measured at fair value through profit or loss	Changes in fair value: changes in the fair value of a financial liability designated at fair value through profit or loss, in the case of applying in the following manner:
		a) the amount of the change in the fair value of the financial liability attributable to changes in the credit risk of said liability is recognised in other comprehensive income, which would be directly transferred to a reserve item if the aforementioned financial liability is derecognised, and
		b) the remaining amount of the change in the fair value of the liability is recognised in the profit or loss for the year.
		Accrued interest: on these debt instruments, calculated using the effective interest method.

( ^*) Thus, when a debt instrument is measured at fair value with changes in other comprehensive income, the amounts that would be recognised in the profit or loss for the year will be the same as those that would be recognised if it were ñeasured at amortised cost.

When a debt instrument at fair value with changes in other comprehensive income is derecognised from the balance sheet the profit or loss accumulated in equity is reclassified and recorded in the statement of profit or loss for the period. In turn, when an equity instrument at fair value with changes in other comprehensive income is derecognised from the balance sheet, the amount of the loss or gain recorded in other accumulated comprehensive income is not reclassified to the statement of profit or loss, but instead to a reserve balance item.

For each of the aforementioned portfolios, the recognition would change if said instruments form part of a hedging relationship (see section 2.3).

The effective interest rate is the rate that discounts future cash payments or charges estimated during the expected life of the financial asset or liability with respect to the gross carrying amount of a financial asset or the amortised cost of a financial liability. To calculate the effective interest rate, the Group estimates the expected cash flows, taking into account all the contractual terms of the financial instrument, but without considering expected credit loss. The calculation includes all fee and commission income and interest basis points, paid or received by the parties of the agreement, which make up the effective interest rate, transaction costs and any other premium or discount. In cases where the cash flows or remaining life of a financial instrument cannot be estimated reliably (e.g. advance payments), the Group uses the contractual cash flows throughout the full contractual period of the financial instrument.

In the case of financial instruments with variable remuneration and contingent upon the fulfilment of certain future events, other than loans originated and deposits and issues made, the accounting criteria applied by the Group if there is a subsequent change in the estimate of the remuneration arising from a change in the expectation as to the fulfilment of the future contingency is based on a recalculation of the amortised cost of the operation and recording the effect of such restatement in the income statement.

In the particular case of the third series of targeted longer-term refinancing operations (known as 'TLTRO III' - see Note 3.4.4), the Group considers that each of the operations falls under the scope of the IFRS 9 Financial Instruments, given that they are operations whose interest rate is not significantly below the market rate. Here, in its initial recognition, the Group considers whether the terms of each operation, in relation to market prices for other loans with similar guarantees available to the Group, and the rates of bonds and other relevant instruments of the money market, are close to market terms or whether they are significantly off market.

For TLTRO III, up to November 2022, the effective interest rate was calculated for each operation of this series, reflecting the Group's estimation in the initial recognition with respect to the amount of final interest to charge upon its specific maturity, and taking into account specific assumptions of fulfilment of eligible volumes. On this basis, the Group accrued the interest rate of each of the TLTRO III operations in tranches. In November, the change in the way these operations are remunerated (ECB decision in October this year) took effect, and the interest rate accrued is now directly linked to the reference rate that determines the interest of each of these series. In accordance with the Group's accounting criteria, this decision has meant that each of the series has changed to a variable interest rate, a fact that has been considered both as a qualitative change resulting in the derecognition of the operations that had been recognised and the recognition of new operations with different characteristics. The accounting effect of recording this derecognition and new recognitions has not been material. Each future change in the ECB's benchmark interest rate will result in a new remuneration to accrue for each of the operations until maturity or early repayment.

Reclassifications between financial instrument portfolios

According to the provisions set out in IFRS 9, only in the event the Group decides to change its financial asset management business model, would all the affected financial assets be reclassified. This reclassification would be carried out prospectively from the date of the reclassification. In accordance with the IFRS 9 approach, in general, changes in the business model occur very infrequently. Financial liabilities cannot be reclassified between portfolios.

2.3 ACCOUNTING HEDGES

The Group uses financial derivatives as a financial risk management tool, mainly interest rate risk in the banking book (see Note 3.4.3). When these transactions meet certain requirements, they qualify for hedge accounting.

When a transaction is designated as a hedge, this is done at inception of the transaction or of the instruments included in the hedge and a technical note of the transaction is documented in accordance with the regulations in force. The hedge accounting documentation duly identifies the hedging instrument or instruments, and the hedged item or forecast transaction, the nature of the risk to be hedged and the way in which the Group assesses whether the hedging relationship meets the requirements of hedging effectiveness (together with the analysis of the causes of failed protection and the way in which the coverage ratio is determined).

For the purpose of verifying the effectiveness requirement:

A)	there must be an economic relationship between the hedged item and the hedging instrument;
B)	the credit risk of the hedged item's counterparty or of the hedging instrument should not have a dominant effect on changes in value resulting from said economic relationship; and
C)	it is essential to comply with the coverage ratio of the hedging accounting relationship, which is defined as the relationship between the quantity of the hedged item and the quantity of the hedging instrument, and it must be the same as the coverage ratio used for management purposes.

Fair value hedges

Fair value hedges hedge the exposure to changes in fair value of financial assets and liabilities or unrecognised firm commitments, or an identified portion of such assets, liabilities or firm commitments, that is attributable to a particular risk and could affect the statement of profit or loss.

In fair value hedges, the gains or losses on the hedging instrument or on the hedged item for the portion attributable to the hedged risk are recognised in an asymmetrical way according to whether the hedged element is a debt instrument or an equity instrument:

•

Debt instruments: In fair value hedges, the gains or losses on the hedging instrument or on the hedged item for the portion attributable to the hedged risk are recognised in the statement of profit or loss, in the "Gains/(losses) from hedge accounting, net" section. Particularly, in fair value macro-hedges, gains or losses arising on the hedged items are balanced in "Assets - Fair value changes of the hedged items in portfolio hedge of interest rate risk" or "Liabilities - Fair value changes of the hedged items in portfolio hedge of interest rate risk" depending on the substance of the hedged item, rather than in the items under which the hedged items are recognised.

•

Equity instruments: the gains or losses on the hedging instrument or on the hedged item for the portion attributable to the hedged risk are recognised in the section "Accumulated other comprehensive income - Items that will not be reclassified to profit or loss - Failed fair value hedges of equity instruments measured at fair value with changes in other comprehensive income" of the balance sheet.

When hedging derivatives no longer meet the requirements for hedging accounting, they are reclassified as trading derivatives. The amount of the previously registered adjustments to the hedged item is attributed as follows:

•	Debt instruments: they are recognised in the heading "Gains/(losses) from hedge accounting, net" of the statement of profit or loss using the effective interest rate method at the date hedge accounting is discontinued.
•	Equity instruments: are reclassified to reserves under the heading "Accumulated other comprehensive income - Elements that will not be reclassified to profit or loss - Failed fair value hedges of equity instruments measured at fair value with changes in other comprehensive income" of the balance sheet.

Cash flow hedges

Cash flow hedges hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognised financial asset or liability or with a highly probable forecast transaction and could affect the statement of profit or loss.

The amount adjusted on the hedging item is recognised in "Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Hedging derivatives. Reserve of cash flow hedges [effective portion]" where they will remain until the forecast transaction occurs, at which point it will be recognised in "Gains/(losses) from hedge accounting, net" of the income statement, in symmetry with the forecast cash flow. However, if it is expected that the transaction will not be carried out, in, it will be recognised immediately in the statement of profit or loss. The hedged items are recognised using the methods described in Note 2.3, without any changes for their consideration as hedged instruments.

2.4 OFFSETTING FINANCIAL ASSETS AND LIABILITIES

A financial asset and a financial liability are offset and the net amount presented in the balance statement only when the Entity has a legally enforceable right to off set the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously, taking the following into consideration:

•	The legally enforceable right to off set the recognised amounts should not be contingent on a future event and must be legally enforceable in all circumstances, including cases of default or insolvency of any or all of the counterparties.
•	Settlements that meet the following requirements are considered equivalent to 'net settlement': they totally eliminate or result in insignificant credit and liquidity risk; and settlement of the asset and liability is made in a single settlement process.

A breakdown of the offset transactions is presented below:

Offsetting of assets and liabilities (1)

(Millions of euros)

	31-12-2022
	Gross amount recorded (A)	Offset amount(B)	Net amount in bal. sheet(C=A B)
ASSETS
FA held for trading - Derivatives	26,876	19,914	6,963
FA at amortised cost - Loans and advances	380,057	15,036	365,021
Of which: Collateral	6,070	6,070
Of which: Reverse repurchase	8,940	8,940
Of which: Tax lease transaction	26	26
Derivatives - Hedge accounting	2,964	2,315	649
LIABILITIES
FL held for trading	26,641	22,671	3,971
FL at amortised cost	491,949	9,448	482,501
Of which: Other financial liabilities	482	482
Of which: Repurchase agreement	8,940	8,940
Of which: Tax lease transaction	26	26
Derivatives - Hedge accounting	6,589	5,218	1,371

Offsetting of assets and liabilities (2)

(Millions of euros)

	31-12-2021			31-12-2020
	Gross amount recorded (A)	Offset amount(B)	Net amount in bal. sheet(C=A B)	Gross amount recorded (A)	Offset amount(B)	Net amount in bal. sheet(C=A B)
ASSETS
FA held for trading - Derivatives	18,877	8,558	10,319	10,323	5,022	5,301
FA at amortised cost - Loans and advances	368,419	16,026	352,393	248,137	5,298	242,839
Of which: Collateral	1,592	1,592		2,779	2,779
Of which: Reverse repurchase	14,434	14,434		2,045	2,045
Of which: Tax lease transaction				474	474
Derivatives - Hedge accounting	3,656	2,618	1,038	2,382	1,867	515
LIABILITIES
FL held for trading	17,419	12,581	4,838	9,374	9,223	151
FL at amortised cost	561,290	14,265	547,025	345,074	2,671	342,403
Of which: Other financial liabilities	-169	-169		152	152
Of which: Repurchase agreement	14,434	14,434		2,045	2,045
Of which: Tax lease transaction				474	474
Derivatives - Hedge accounting	2,104	1,144	960	574	337	237

FA: Financial assets; FL: Financial liabilities

( ^*) Collateral exchange operations implemented through repos, whereby separate cancellation is not permitted. They are generally carried out at 12 months.

2.5 DERECOGNITION OF FINANCIAL INSTRUMENTS

All or part of a financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire or when the entity transfers the asset to an unrelated third party.

The accounting treatment of transfers of financial assets depends on the extent to which the risks and rewards associated with ownership of the transferred assets are transferred to third parties:

•

If all the risks and rewards of ownership of the transferred asset are substantially transferred (such as in the case of, among others: unconditional sales, a sale with an option to repurchase the financial asset at its fair value at the time of repurchase, a sale of a financial asset together with a put or call option that is deep out of the money, or asset securitisations in which the transferor does not retain any subordinated loans and does not provide any type of credit enhancement to the new owners), it is derecognised, and any rights or obligations retained or arising as a result of the transfer are simultaneously recognised.

•

If the risks and rewards of ownership of the transferred financial asset are substantially retained (such as in the case of, among others: sale and repurchase transactions where the repurchase price is a fixed price or the sale price plus a lender's return, a securities lending agreement under which the borrower has the obligation to return the securities or similar), it is not derecognised and continues to be measured by the same criteria used before the transfer and the following are recognised:

―	A financial liability equal to the consideration received, which is subsequently measured at amortised cost, unless it meets the requirements to be classified under other liabilities at fair value through profit or loss; and
―	The income generated on the transferred (but not derecognised) financial asset and the expenses of the new financial liability, without offsetting.

•

If substantially all the risks and rewards of ownership of the transferred financial asset are neither transferred nor retained (such as in the case of, among others, a sale of a financial asset together with a put or call option that is neither deep-in-the-money nor deep-out-of-the-money, securitisations in which the transferor assumes a subordinated loan or other type of credit enhancement for part of the transferred asset), the following distinction is made:

―

If the transferor does not retain control over the financial asset transferred, it is derecognised and any right or obligation retained or arising from the transfer is recognised; or

―

If the transferor retains control over the financial asset transferred, it continues to recognise the asset for an amount equal to its exposure to changes in value of the asset, recognising a liability associated with the financial asset transferred. The net amount of the transferred asset and the associated liability shall be the amortised cost of the rights and obligations retained, if the asset is measured at amortised cost, or at fair value of the rights and obligations retained, if the transferred asset is measured at fair value.

According to the terms of the transfer agreements in place, virtually the entire portfolio of loans and receivables securitised by the Group does not need to be written off the balance sheet.

Financial liabilities shall equally be derecognised when the obligation specified in the contract is discharged or cancelled or expires.

2.6 FINANCIAL GUARANTEES

Financial guarantees given

Financial guarantees are defined as contracts whereby the issuer thereof undertakes to make specific payments to reimburse the creditor for the loss incurred when a specific debtor fails to meet its payment obligations, irrespective of the legal form of the obligation, such as deposits (including those to participate in auctions and tenders), financial and technical guarantees, irrevocable documentary credits, insurance contracts or credit derivatives.

Financial deposits comprise all manner of deposits that directly or indirectly guarantee debt securities such as loans, credit facilities, finance leases and deferred payment arrangements for all types of debt.

All these operations are recognised under the memorandum item "Guarantees given" in the balance sheet.

At the time of their initial recording, the Group accounts for financial guarantees provided in the liabilities of its balance sheet at fair value, which generally equates to the current value of fee and commission income and income to collect for said agreements throughout their duration, whereby the counterpart is the amount of fee and commission income and similar income charged at the start of the operations, and a credit in the assets of the balance sheet for the current value of commissions and yields not yet charged.

Financial guarantee and guarantee contract portfolios, regardless of the guarantor, instrumentation or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, estimate any provision required. The credit risk is determined by applying criteria similar to those established for quantifying impairment losses on debt securities measured at amortised cost as set out in Note 2.7 below, except in the case of technical guarantees, where the criteria set out in Note 2.20 are applied.

Provisions set aside for this type of arrangement are recognised under "Provisions - Commitments and guarantees given" on the liability side of the balance sheet, and under "Provisions - Other provisions"; as regards the latter, if the financial guarantees given are classified as written-off operations pending execution by third parties. Additions to and reversals of provisions are recognised in "Provisions or reversal of provisions" in the statement of profit or loss.

Should it become necessary to establish provisions for these financial guarantees, any fees that may accrue on these transactions in future which would be recognised in "Financial liabilities at amortised cost - Other financial liabilities" are reclassified to "Provisions - Commitments and guarantees given".

Financial guarantees received

No significant guarantees or collateral were received with regard to which there is authorisation to sell or repledge without default by the owner of the guarantee or collateral, except for the collateral inherent to the Group's treasury activity (see Note 3.4.4).

2.7 IMPAIRMENT OF FINANCIAL ASSETS

The Group applies the requirements on impairment of debt instruments that are measured at amortised cost and at fair value with changes in other comprehensive income, as well as other exposures that involve credit risk, such as loan commitments given, financial guarantees given and other commitments given.

The aim of the regulatory accounting framework requirements as regards impairment is to ensure recognition of the credit losses of operations, assessed collectively or individually, considering all the reasonable and substantiated information available, including information of a prospective nature. In certain circumstances, when the available macroeconomic updates have not been included in the last recalibration of the credit risk models or when these are very uncertain or volatile, the estimate of their impact is recognized as a Post Model Adjustment (PMA) in the provision funds, which will be reviewed in the future based on the new information available and its incorporation into the credit risk models, avoiding in any case a duplicity in the quantification of these impacts.

Impairment losses on debt instruments in the period are recognised as an expense under the heading "Impairment or reversal of impairment losses on financial assets not measured at fair value through profit or loss or net profit or loss due to a change" in the statement of profit or loss. The impairment losses of debt instruments at amortised cost are recognised against a corrective account of provisions that reduces the carrying amount of the asset, whereas those of instruments at fair value with changes in other comprehensive income are recognised against accumulated other comprehensive income.

The hedges to cover impairment losses in exposures involving credit risk other than debt instruments are recorded as a provision under the heading "Provisions - Commitments and guarantees given" on the liabilities side of the balance sheet. Additions to and reversals of these hedges are recognised charged under the heading "Provisions or reversal of provisions" in the statement of profit or loss. For the purpose of recording the hedging for impairment losses of debt instruments, the following definitions must be taken into account in advance:

•

Credit losses: these correspond to the difference between all the contractual cash flows owed to the Group in accordance with the financial asset's contract and all the cash flows that it is due to receive (i.e. all the insufficiency of cash flows), discounted at the original effective interest rate or, for financial assets that were purchased with or that originated with credit impairment, discounted at the effective interest rate adjusted to reflect credit quality, or the interest rate on the date referred to in the financial statements in the case of a variable rate.

In the case of the loan commitments given, the contractual cash flows that would be owed to the Group in the event the loan commitment were drawn down are compared to the cash flows that it would expect to receive if the commitment were drawn down. In the case of financial guarantees given, the payments that the Group expects to receive are taken into account, less the cash flows that are expected to be received from the guaranteed holder.

The Group estimates the cash flows of the operation during its expected life taking into account all the contractual terms and conditions of the operation (such as early repayment, extension, redemption and other similar options). In extreme cases when it is not possible to reliably estimate the expected life of the operation, the Group uses the remaining contractual term of the operation, including extension options.

The cash flows taken into account include those deriving from the sale of collateral, taking into account the cash flows that would be obtained from the sale thereof, less the amount of the costs required to obtain them, maintenance and their subsequent sale, or other credit improvements that form an integral part of the contractual conditions, such as financial guarantees received. In addition, the Entity also takes into account any eventual income from the sale of financial instruments when measuring the expected loss.

If the Group's current non-performing asset reduction strategy expects loan sales and other accounts receivable whose credit risk has increased (exposure classified at Stage 3), then the Group will retain any asset affected by this strategy under the model for retaining assets to receive their contractual cash flows, thus they are measured and classified in the portfolio of "Financial assets at amortised cost", provided that their flows only include payments of principal and interest. Similarly, until they no longer intend to make sales, the corresponding credit risk provision takes into account the price to be received from a third party.

•

Expected credit losses: these are the weighted average of the credit losses, using as weighting the respective risks of default events. The following distinction will be taken into account:

•	Expected credit losses during the life of the operation: these are expected credit losses resulting from all the possible default events during the expected life of the operation.
•	Expected credit losses at twelve months: these are the part of the credit losses expected during the life of the operation corresponding to the expected credit losses resulting from any default events during the twelve months following the reference date.

The amount of the hedges to cover impairment loss is calculated according to whether there has been a significant increase in credit risk since the operation's initial recognition, and whether a default event has occurred:

	Observed impairment of credit risk since its initial recognition
Credit risk cathegory	Normal risk	Normal risk in special surveillance	Non-performing risk	Write-off risk
	Stage 1	Stage 2	Stage 3
Classification and transfer criteria	Operations whose credit risk has not significantly increased since their initial recognition.	Operations whose credit risk has sifnificantly increased (SICR), but they do not have any default events	Operations with credit impairment. Default event: with amounts past due of over 90 days.	Operations without reasonable expectations of recovery.
Calculation of the impairment hedge	Expected credit loses at twelve months	Expected credit loses during the life of the operation.	Expected credit loses during the life of the operation.	The recognition in results of looses for the carying amount of the operation and the total derecognition of the asset.
Interest calculation and recognition	It is calculated by applying the effective interest rate to the gross carrying amount of the operation.	It is calculated by applying the effective interest rate to the gross carrying amount of the operation.	It is calculated by applying the effective interest rate at amortised cost (adjusted to reflect any impairment value correction)	They are not recognised in the income statement.
Included operations	Initial recognition of the financial instruments	Operations included in sustainability agreements that have not completed the trial period.	Non performing due to borrower arrears: operations with amounts past due of over 90 days. Operations where all holders are classified as non-performing (personal risk criteria)	Operations with remote recovery possibility
		Operaions carried out by insolvent borrowers that should not be classified as non-permorming or write-off.	Non-performing for reason other than borrower arrears: operations that pose reasonable doubts regarding full repayment, operations with legally demanded balances, operations in which the collateral execution process has been initiated, operations and guarantees of the holders in insolvency proceedings with no liquidation petition and refinanced operations reclassifiable as non-performing.	Partial write-offs without the extintion of the rights (partial write-off).
		Refinanced or restructured operations that should not be classified as non-performing and are still in a trial period (unless there is refutable proof to classify them in STAGE 1)		Non-performing operations due to arrears of more than 4 years, when the amount not hedged by effective guarantees has been mantained with 100% credit risk hedge for more than 2 years (unless they have effective collateral to hedge at least 10% of the gross amount).
		Operations with past due of over 30 days.		Operations with all the holders in insolvency proceedings in the liquidation phase (unless hey have effective collaterals that cover at least 10% of the gross amount).
		Operations which can be identified as having registred a significant increase in credit risk on the basis of market indicators/triggers

The Group classifies as "write-offs" the debt instruments, whether due or not, for which after analysing them individually, it considers the possibility of recovery to be remote and proceeds to derecognise them, without prejudice to any actions that may be initiated to seek collection until their contractual rights are extinguished definitively by expiry of the statute-of-limitations period, forgiveness or any other cause.

This category of write-offs includes, at least, i) non-performing operations due to customer arrears older than four years, or, before the end of the four-year period when the amount not secured by effective guarantees is fully covered for more than two years, and ii) operations made by borrowers declared to be insolvent which have entered or will enter the liquidation phase. In both cases, the operations are not considered to be write-offs if they have effective collateral that covers at least 10% of its gross carrying amount.

However, in order to reclassify transactions to this category before these terms expire, the Group must demonstrate the remote likelihood of recovering the corresponding balances.

Based on the Group's experience of recoveries, it deems the recovery of the remaining balance of mortgage operations remote when there is no additional collateral once the good has been recovered, and therefore, the aforementioned remainder is classified as a write-off.

Furthermore, the Group considers assets acquired with a significant discount reflecting credit losses incurred at the time of the transaction to be POCIs (Purchased or Originated Credit Impaired). Given that the discount reflects the losses incurred, no separate provision for credit risk is recorded in the initial recognition of the POCIs. Subsequently, changes in the expected losses in the life of the operation are recognised from their initial recording as a credit risk provision of the POCIs. The interest income of these assets is be calculated by applying the effective interest rate adjusted to reflect credit quality at the amortised cost of the financial asset, although this effect is not significant at the initial recognition date.

When the contractual cash flows of a financial asset are modified or the financial asset is replaced with another, and the modification or exchange does not cause it to be derecognised from the balance sheet, the Group recalculates the gross carrying amount of the financial asset, taking into account the modified flows and the effective interest rate applicable before the modification, and recognises any difference that emerges as a loss or gain due to a change in the profit or loss of the period. The amount of the directly attributable transaction costs raises the carrying amount of the modified financial asset and it will be amortised during the remainder of its life, which will require the company to recalculate the effective interest rate.

2.8 REFINANCING OR RESTRUCTURING OPERATIONS

According to the provisions of the regulation, these relate to operations in which the customer has, or will foreseeably have, financial difficulty in meeting its payment obligations under the contractually agreed terms and, therefore, has amended the agreement, cancelled the agreement and/or arranged a new operation.

These operations may derive from:

•	A new transaction (refinancing operation) granted that fully or partially cancels other transactions (refinanced operations) previously granted by any Group company to the same borrower or other companies forming part of its economic group that become up-to-date on its payments for previously past-due loans.
•	The amendment of the contractual terms of an existing operation (restructured operations) that changes its repayment schedule (grace periods, extension of loan maturities, reduction in interest rates, changes in the repayment schedule, extension of all or part of the capital on maturity, etc.).
•	The activation of contract clauses agreed at source that extend the debt repayment terms (flexible grace period).
•	The partial cancellation of the debt without the contribution of funds by the customer (foreclosure, purchase or received in lieu of payment of the collateral, or forgiveness of capital, interest, fees and commissions or any other cost relating to the loan extended to the borrower).

The existence of previous defaults is an indication of financial difficulty. Unless otherwise demonstrated, a restructuring or refinancing operation is assumed to exist when the amendment to contractual terms affects operations that have been past due for more than 30 days at least once in the three months prior to the amendment. However, previous defaults are not a requirement for an operation to be classified as refinanced or restructured.

The cancellation of an operation, changes in the contractual terms or the activation of clauses that delay payments when the customer is unable to meet future repayment obligations can also be classified as refinancing/restructuring.

In contrast, debt renewals and renegotiations may be granted when the borrower does not have, or is not expected to have, financial difficulties; i.e. for business reasons, not to facilitate repayments.

For an operation to be classified as such, the borrower must have the capacity to obtain credit from the market, at the date in question, for a similar amount and on similar terms to those offered by the Entity. In turn, these terms must be adjusted to reflect the terms offered to borrowers with a similar risk profile.

In general, refinanced or restructured operations and new operations carried out for refinancing are classified in the watch-list performing category. However, according to the particular characteristics of the operation, they are classified as non-performing when they meet the general criteria for classifying debt securities as such, and specifically i) operations backed by an unsuitable business plan; ii) operations that include contractual clauses that delay repayments in the form of interest-only periods longer than 24 months; iii) operations that include amounts that have been removed from the balance sheet having been classified as unrecoverable that exceed the hedging applicable according to the percentages established for operations in the watch-list performing category; and iv) when pertinent restructuring or refinancing measures may result in a reduction of the financial obligation higher than 1% of the net present value of the expected cash flows. Additionally, adjustments have been made to the criteria for exit from default, thus, refinanced operations cannot be migrated to stage 2 until their repayment has been ongoing for 12 months.

Refinanced or restructured operations and new operations carried out for refinancing are classified as watch-list performing for a trial period until all the following requirements are met:

•	After reviewing the borrower's asset and financial position, it is concluded that they are unlikely to have financial difficulties and therefore it is highly probable that they will meet their obligations vis-a-vis the entity in both time and form.
•	A minimum period of two years has elapsed from the date of authorisation of the restructuring or refinancing operation, or, if later, from the date of its reclassification from the non-performing category.
•	The borrower has covered all the principal and interest payments from the date of authorisation of the restructuring or refinancing transaction, or, if later, from the date of its reclassification from the non-performing category. Additionally: i) the borrower has made regular payments of an amount equivalent to the whole amount (principal and interest) falling due at the date of the restructuring or refinancing operation, or that were derecognised as a result of it; or ii) when it is deemed more appropriate given the nature of the operations, the borrower complies with other objective criteria that demonstrate their payment capacity. If there are contractual clauses that may delay repayments, such as grace periods for the principal, the operation will remain classified as watch-list performing until all criteria are met.
•	The borrower must have no other operations with past due amounts for more than 30 days at the end of the period.

When all the above requirements are met, the operations are no longer classified as refinancing, refinanced or restructured operations in the financial statements.

During the previous trial period, further refinancing or restructuring of the refinancing, refinanced or restructured operations, or the existence of amounts that are more than 30 days overdue in these operations, will mean that the operations are reclassified as non-performing for reasons other than arrears, provided that they were classified in the non-performing category before the start of the trial period.

Refinanced and restructured operations and new operations carried out for refinancing remain classified as non-performing until they meet the general criteria for debt instruments; specifically the following requirements:

•	A period of one year has elapsed from the refinancing or restructuring date.
•	The borrower has covered all the principal and interest payments (i.e. they are up to date on payments) thereby reducing the renegotiated principal, from the date of authorisation of the restructuring or refinancing operation, or, if later, from the date of its reclassification to the non-performing category.
•	The borrower has made regular payments of an amount equivalent to the whole amount (principal and interest) falling due at the date of the restructuring or refinancing operation, or that were derecognised as a result of it, or, when it is deemed more appropriate given the nature of the operations, the borrower complies with other objective criteria that demonstrate their payment capacity.
•	The borrower has no other operations with past due amounts for more than 90 days at the date the refinancing or restructured operation is reclassified to the watch-list performing category.

Furthermore, in relation to the accounting treatment of the moratoria, both legislative and sectoral, established in support of COVID-19, the entity considers them a relevant qualitative change that gives rise to a contractual modification, but not a recognition of the affected financial instrument (see Note 3.4.1. Credit risk).

2.9 FOREIGN CURRENCY TRANSACTIONS

The Group's functional and presentation currency is the euro. Consequently, all non-euro balances and transactions are foreign currency balances and transactions.

All foreign currency transactions are recorded, on initial recognition, by applying the spot exchange rate between the functional currency and the foreign currency.

At the end of each reporting period, foreign currency monetary items are translated to euros using the average exchange rate prevailing on the spot currency market at the end of each period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated to euros using the exchange rate at the date of acquisition. Non-monetary items measured at fair value in a foreign currency are translated to euros using the exchange rates at the date when the fair value is determined.

Unmatured forward foreign exchange purchase and sale transactions not considered as hedges are translated to euros at the year-end exchange rates on the forward currency market.

The exchange rates used in translating the foreign currency balances to euros are those published by the European Central Bank (ECB) at 31 December of each year.

The exchange differences arising on the translation of foreign currency balances and transactions to the reporting currency of the Group are generally recognised under "Exchange differences (net)" in the statement of profit or loss. However, exchange differences arising on changes in the value of non-monetary items are recognised under "Equity - Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Exchange differences" in the balance sheet, and exchange differences arising on financial instruments classified as at fair value through profit or loss are recognised in the statement of profit or loss with no distinction made from other changes in fair value.

Income and expenses are translated at the closing exchange rate of each month.

2.10. RECOGNITION OF INCOME AND EXPENSE

The main policies applied to recognise income and expenses are as follows:

	Characteristics	Recognition
Interest income, interest expense, dividends and similar items	Interests income, interest expese and similar items	Recognised on an accrual basis, using the effective interest method, regardless of when the resulting monetary or financial flow arises, as previously described
	Dividends received	Recognised as income when the right to receive payment is established. This is when the dividend is officially declared by the company's relevant body
Credit fees. There are an intergral part of the yield or effective cost of a financing operation. They are received in advance.	Fees received by creating or acquiring financial operations that are not measured at fair value through profit or loss (i.e. remuneration from activities such as the assessment of the financial situation of the financial situation of the borrower, assessing and recording various guarantees, negotiating the terms amd conditions of operations, preparing and processing documentation and closing the transaction)	They are declared and are recognised over the life of the transaction as an adjustment to the return or effective cost of the operation.
	Fees negotiated as compensation for the commitment of granting financing, when this commitment is not measured at fair value through profit or loss and it is likely that the group enters into a specific loan agreement.	They are deferred, deposited over the life of the transaction as an adjustment to the return or effective cost of the operation. If the commitment expires and the company has not made the loan, the feeis recognised as income at the time of expiry.
	Fees paid when issuing financial liabilities at amortised cost.	They are included together with any related direct cost in the carrying amount of the financial liability, and are deposited as an adjustment to the effective cost of the operation.
Non credit fees. This includes those deriving from different provisions for the various financial services of the financing operations.	Those related to the execution of a service provided over time (i.e. the fees for the administration of accounts and those received in advance for the issuance or renewal of credit cards).	They will be registered over time, measuring the progress towards full compliance with the execution obligation.
	Those related to the provision of a service that is executed at a specific time (i.e. subscription of securities, currency exchange, consultancy or syndication of loans).	They are registered in the income statement upon collection.
Other non-financial income and expenses	Other income from ordinary activities	As a general criterion, they are recognised inasmuch as the assets and services contractually agreed with the customers are provided. The amount of the payment to which the Group expects to have right in exchange for these goods or sevices, is recognised as income, during the life of the contract.
		If it receives or has a right to receive a payment and the goods or service have not been transferred, the Group recognises a liability, which remains on the balance sheet until it is allocated to the statement of profit or loss.
		The Group can transfer the control over time or at a specific time (see the phases in the following chart)

In particular, the Group adheres to the following stages:

Stage 1	Identifying the contract (or contracts) with the customer and of the obligation or obligations arising out of the execution of the contract.	The Group assesses the committedgoods or services and identifies-as an execution obligation- each commitment to transfer the customer:
		a good, a service or a differentiatedgroup of goods or services or
		a series of differentiated goods or services that are practically identical and comply with the same customer transfer pattern.
Stage 2	Determining the price of the transaction.	It is defined as the amount of the payment to which the Group expects to have the right in exchange for delivering the goods or providing the services, excluding amounts charged on behalf of third parties, suh as indirect taxes, and not taking into consideration any cancellations, renewals or modifications to the contract.
		The price of the transaction can consist of fixed or variable amounts, or both, and may vary due to discounts, subsidies, reductions or other similar events. Similarly, the price will be variable when the right to charge for the transaction depends on whether a future event will occur. To reach the transaction price it will be necessary to deduct discounts, subsidies or commercial reductions.
		In the event the price includes a variable payment, the Group initialy estimates the amount of the payment to which it will have the right, either as an expected value, or as the amount in the most probable scenario.
		This amount is included, in whole or in part, in the transaction price only inasmuch as it is highly probable that ther will be no significant reversal in the amount of the accumulated income recognised by the contract.
		At the end of each period, the Group updates the estimate of the transaction price, to accurately represent the existing circumstances at the time. To determine the price of the transaction, the Group adjusts the amount of the payment to take into account the time value of the money when the agreed payment schedule provides the customer of the company with a significant financing profit. The discount rate used is that which would be used in an independent financing transaction between the company and its customer at the start of the contract. This discount rate is not subject to subsequent updates. Notwithstanding the above, the Group does not update the amount of the payment if, at the start of the contract, the maturity is likely to be equal to or less than a year.
Phase 3	Allocating the price of the transaction between the execution obligations.	The Group distributes the price of the transaction in such a way that each execution obligation identified in the contract is assigned an amount that represents the payment that it will obtain in exchange for transferring to the customer the good or service commited in this execution obligation. This amount is allocated based on the corresponding independent selling prices of the goods and services subject to each execution obligation. The best evidence of an independent selling price is its observable price, if these goods or services are sold separatelly in similar circumstances.
		The Group allocates to the different execution obligations of the contract any subsequent change in the estimate of the transaction price on the same basis as at the start of the contract.
Phase 4	Recognising the income inasmuch as the company complies with its obligations	The Group recognises as income the amount of the transaction price allocated to an execution obligation, inasmuch as it meets this obligation by transferring the committed good or service to the customer.

As for the accounting of the costs related to the contracts, the costs of obtaining a contract are those which the Group incurs to obtain a contract with a customer and which it would not have incurred if the Group had not entered into said contract.

In accordance with the accounting framework applicable to the Group, all incremental costs of obtaining and/or fulfilling a contract are capitalised provided that the costs are directly related to a contract or to an expected contract that the entity can specifically identify (e.g., costs related to services that will be provided as a result of the renewal of an existing contract or design costs of an asset that will be transferred under a specific contract that has not yet been approved);

•	the costs generate or improve the company's funds that will be used to pay (or to continue paying) for future execution obligations; and
•	the costs are expected to be recovered.

The Group attributes these capitalised costs to the statement of profit or loss based on the term of the framework agreement or the operations that give rise to the costs and additionally, at least on a half-yearly basis, conducts an impairment test to assess to what degree the future profits generated by these contracts bear the capitalised costs. In the event that the costs exceeded the current value of the future profits, these assets would be impaired by the appropriate proportion.

2.11 ASSETS UNDER MANAGEMENT

Collective investment institutions and pension funds managed by Group companies are not presented on the face of the Group's balance sheet since the related assets are owned by third parties. The fees and commissions earned in the period from this activity are included under "Fee and commission income" in the statement of profit or loss, based on the service provided by the Group.

2.12 EMPLOYEE BENEFITS

Employee benefits include all forms of consideration given in exchange for services rendered to the Group by employees or for benefits payable after completion of employment. They can be classified into the following categories:

Short-term employee benefits

These are employee benefits (other than termination benefits) which fall due wholly within 12 months after the end of the period in which the employees render the related service. It includes wages, salaries and social security contributions; paid annual leave and paid sick leave; profit-sharing and bonuses; and non-monetary benefits payable to employees such as medical care, housing, cars and free or subsidised goods or services.

The cost of services rendered is recognised under "Administrative expenses - Personnel expenses" of the statement of profit or loss, except for part of the personnel costs of the Risk Acceptance Centres which are presented as a smaller financial margin of the operations to which they are associated and certain incentives for the personnel of the branch network for the marketing of products, including insurance policies, which are also presented with a reduced financial margin or under the heading of expenses from liabilities under insurance or reinsurance contracts.

Credit facilities made available to employees at below market rates are considered to be non-monetary benefits and are calculated as the difference between market rates and the rates agreed with employees. The difference is recognised under "Administrative expenses - Personnel expenses" with a balancing entry under "Interest income" in the statement of profit or loss.

Remuneration to employees based on equity instruments

The delivery of shareholder equity instruments to employees as payment for their services -when such a delivery is made upon completion of a specific period of services- is recognised as a services expense, insomuch as it is provided by employees, with a balancing entry under the heading "Shareholders' Equity - Other equity items" elements.

On the date the equity instruments are granted, these services -as well as the corresponding equity increase- will be measured at the fair value of the services received, unless it cannot be reliably estimated, in which case they will be measured indirectly with reference to the fair value of the granted equity instruments. The fair value of these equity instruments will be determined on the date they are granted.

When external market conditions are established -among the requirements laid down in the remuneration agreement-, their performance will be taken into account when estimating the fair value of the granted equity instruments. In turn, variables that are not considered market variables are not taken into account when calculating the fair value of granted equity instruments, but they are considered when determining the number of instruments to be delivered. Both effects will be recognised in the statement of profit or loss and in the corresponding increase in equity.

In the case of share-based payment transactions that are cash-settled, an expense with a balancing entry will be recorded on the liabilities side of the balance sheet. Up to the date on which the liability is settled, this liability will be measured at its fair value, recognising value changes in the profit/(loss) for the period.

As an exception to the provision of the previous paragraph, share-based payment transactions that have a net-settlement feature to satisfy tax withholding obligations will be classified in their entirety as share-based payment transactions settled through equity instruments if, in the absence of the net-settlement feature, they have been classified as such.

Post-employment benefits

Post-employment benefits are all those undertaken with employees, to be paid after completion of their employment with the Group. They include: retirement benefits, such as pensions and one-off retirement payments; and other post-employment benefits, such as post-employment life insurance and post-employment medical care, at the end of the employment relationship.

Defined contribution plans

The post-employment obligations with employees are deemed to be defined contribution obligations when the Group makes pre-determined contributions to a separate entity or pension fund and has no legal or constructive obligation to make further contributions if the separate entity or fund cannot pay the employee benefits relating to the service rendered in the current and prior periods. Defined contribution plans each year are recognised under "Administrative expenses - Personnel expenses" in the statement of profit or loss. Post-employment obligations that do not meet the aforementioned conditions are considered defined benefit obligations.

Defined benefit plans

The present value of defined benefit post-employment obligations, net of the value of plan assets, is recorded under "Provisions - Pensions and other post-employment defined benefit obligations" in the balance sheet.

Plan assets are defined as follows:

•	The assets held by a long-term employee benefit fund, and
•	Qualifying insurance policies; those issued by an insurer that it is not a related part of the Group. In the case of the assets held by a benefit fund, they must be assets:
•	Held by a fund that is legally separate from the Group and exists solely to pay or finance employee benefits, or
•	They are solely available to pay or finance post-employment remuneration, they are not available to cover the debts of Group creditors (not even in the event of bankruptcy), and they cannot be returned to the Group unless i) the remaining assets of the plan are sufficient to meet all the related employee benefit obligations of the plan or CaixaBank, or ii) are used to reimburse it for post-employment benefits the Group has already paid to employees.

In the case of insurance policies, the defined benefit commitments assured through policies taken out with the entities that are not considered related parties also meet the requirements to be considered plan assets.

The value both of the assets held by a pension fund, as well as qualifying insurance policies is recognised as a decrease in the value of the liabilities under "Provisions - Pensions and other post-employment defined benefit obligations". When the value of plan assets is greater than the value of the obligations, the net positive difference is recognised under "Other assets".

The assets and liabilities of subsidiaries that include the mathematical provisions of the policies taken out directly by CaixaBank are included on consolidation. Therefore, in this process the amount under "Liabilities under insurance contracts" is deducted and the investments in financial instruments under policies are registered.

Post-employment benefits are recognised as follows:

•

Service cost is recognised in the statement of profit or loss and includes the following:

•	Current service cost, understood as the increase in the present value of obligations arising from employee service in the current period, recognised under "Administrative expenses - Personnel expenses".
•	Past service cost, resulting from amendments to existing post-employment benefits or the introduction of new benefits, and the cost of curtailments, recognised under "Provisions or reversal of provisions".
•	Any gain or loss arising on settlement of a plan is recognised in "Provisions or reversal of provisions".

•

The net interest on the net defined benefit post-employment benefit liability/(asset), understood to be the change during the period in the net defined benefit liability/(asset) that arises from the passage of time, is recognised in "Interest expense", or "Interest income" if it results in income, in the statement of profit or loss.

•

Remeasurements of the net liability/(asset) for defined benefit post-employment benefits are recognised in "Accumulated other comprehensive income" in the balance sheet. It includes:

•

•	Actuarial gains and losses arising in the period from differences between the previous actuarial assumptions and what has actually occurred and from changes in the actuarial assumptions used.
•	The return on plan assets, excluding the amounts included in the net interest on the liability/(asset) for defined benefit post-employment benefits.
•	Any change in the impact of the asset ceiling, excluding the amounts included in the net interest on the liability/(asset) for defined benefit post-employment benefits.

Other long-term employee benefits

Other long term employee benefits, understood as obligations with pre-retired employees (those who have ceased rendering services but who, without being legally retired, continue to enjoy economic rights vis-à-vis the Entity until they acquire the status of legally retired), long-service bonuses and similar items, are treated for accounting purposes, where applicable, as established for defined benefit post-employment plans, except that the actuarial gains and losses are recognised in "Provisions or reversal of provisions" in the statement of profit or loss.

Termination benefits

These benefits are payable as a result of the Group's decision to terminate an employee's employment before the normal retirement date, a valid expectation raised in the employee or an employee's decision to accept voluntary redundancy in exchange for those benefits.

A liability and an expense for termination benefits are recognised when there is no realistic possibility of withdrawing the offer to pay the termination benefits or when the costs for restructuring, which involves the payment of termination benefits, are recognised. These amounts are recognised as a provision under "Provisions - Other long¬term employee benefits" in the balance sheet until they are settled.

In the case of payments of over 12 months, the same treatment is applied as for the other long-term employee benefits.

2.13 INCOME TAX

The expense for Spanish income tax is considered to be a current expense and is recognised in the statement of profit or loss, except when it results from a transaction recognised directly in equity, in which case the corresponding tax effect is recognised in equity.

Income tax expense is calculated as the sum of the current tax for the year resulting from applying the tax rate to the taxable profit for the year and any changes in deferred tax assets and liabilities recognised in the year in the statement of profit or loss, less any allowable tax deductions.

Temporary differences, tax loss carryforwards pending offset and unused tax deductions are recognised as deferred tax assets and/or deferred tax liabilities. The amounts are recognised at the tax rates that are expected to apply when the asset is realised or the liability is settled.

Tax assets are recognised under "Tax assets" in the balance sheet as current, for amounts to be recovered in the next 12 months, or deferred, for amounts to be recovered in future reporting periods.

Similarly, tax liabilities are recognised in "Tax liabilities" in the balance sheet, also by current and deferred. Current tax liabilities include the amount of tax payable within the next 12 months and deferred tax liabilities as the amount expected to be paid in future periods.

Deferred tax liabilities arising from temporary differences related to investments in subsidiaries, associates or joint ventures are not recognised when the Group is able to control the timing of the reversal of the temporary difference and, in addition, it is probable that the temporary difference will not reverse.

Deferred tax assets are only recognised when it is probable that they will be reversed in the foreseeable future and it is estimated that there is sufficient taxable profit against which they can be used.

2.14 TANGIBLE ASSETS

Property, plant and equipment for own use

They include the amount of property, land, furniture, vehicles, IT equipment and other facilities owned or acquired under a lease, as well as assets leased out under an operating lease.

Property, plant and equipment for own use includes assets held by the Group for present or future administrative uses or for the production or supply of goods and services that are expected to be used over more than one financial period.

Investment property

It reflects the carrying amounts of land, buildings and other constructions -including those received by the Bank for the total or partial settlement of financial assets that represent collection rights vis-à-vis third parties- owned to obtain rental income or gains through sale.

Tangible assets are generally stated at acquisition cost less accumulated depreciation and any impairment losses determined by comparing the carrying amount of each item to its recoverable amount.

Depreciation is calculated using the straight-line method on the basis of the acquisition cost of the assets less their net carrying value. Land is not depreciated since it is considered to have an indefinite life.

The depreciation charge is recognised with a balancing entry under "Depreciation and amortisation" in the statement of profit or loss and is calculated basically using the depreciation rates set out in the table below, which are based on the years of estimated useful life of the various assets.

Useful life of tangible assets

(Years)

	Estimated useful life
Constructions
Buildings	16 - 50
Installations	8 - 25
Furniture and fixtures	4 - 50
Electronic equipment	3 - 8
Other	7 - 14

At the end of each reporting period, the Group assesses tangible assets for any indications that their net carrying amount exceeds their recoverable amount, understood as fair value less costs to sell and value in use.

Any impairment loss determined is recognised with a charge to "Impairment/(reversal) of impairment on non-financial assets - Tangible assets" in the statement of profit or loss and a reduction to the carrying amount of the asset to its recoverable amount. After the recognition of an impairment loss, the depreciation charges for the asset in future periods are adjusted in proportion to its revised carrying amount and remaining useful life.

Similarly, when there are indications of a recovery in the value of the assets, a reversal of the impairment loss recorded in prior periods is recognised and the depreciation charge for the asset in future periods is adjusted. In no circumstances may the reversal of an impairment loss on an asset raise its carrying amount above that which it would have if no impairment losses had been recognised in prior years.

Likewise, the estimated useful lives of tangible assets are reviewed each year or whenever indications are noted which make it advisable to do so and, where appropriate, the depreciation charges are adjusted in the statement of profit or loss of future years.

Upkeep and maintenance expenses are recognised under "Administrative expenses - Other administrative expenses" in the statement of profit or loss, when they are incurred. Similarly, operating income from investment properties is recognised under "Other operating income" in the statement of profit or loss and the related operating expenses under "Other operating expenses".

2.15 INTANGIBLE ASSETS

Intangible assets are identifiable non-monetary assets without physical substance acquired from third parties or developed internally.

Goodwill

Goodwill represents the payment made by the acquirer in anticipation of future economic benefits from assets that are not capable of being individually identified and separately recognised. Goodwill is only recognised in the acquisition of a business combination for valuable consideration.

In business combinations, goodwill arises as the positive difference between:

•	the consideration transferred plus, as appropriate, the fair value of any previously-held equity interest in the acquiree and the amount of minority interests; and
•	the net fair value of the identifiable assets acquired less the liabilities assumed.

Goodwill is recognised in "Intangible assets - Goodwill" and is not amortised.

At the end of each reporting period or whenever there are indications of impairment, an estimate is made of any impairment that reduces the recoverable amount to below its recorded net cost and, where there is impairment, the goodwill is written down with a balancing entry in "Impairment/(reversal) of impairment on non-financial assets - Intangible assets" in the statement of profit or loss. Impairment losses recognised for goodwill are not reversed in a subsequent period.

Other intangible assets

This includes the amount of other identifiable intangible assets, such as assets arising in business combinations and computer software.

Other intangible assets have an indefinite useful life when, based on an analysis of all the relevant factors, it is concluded that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group, and a finite useful life in all other cases.

Intangible assets with an indefinite life are not amortised. However, at the end of each reporting period, or whenever there is any indication of impairment, the remaining useful lives of the assets are reviewed in order to determine whether they continue to be indefinite and, if this is not the case, to take the appropriate steps.

Intangible assets with a finite useful life are amortised over the useful life, applying policies similar to those followed for the depreciation of tangible assets.

Any impairment losses on assets with either indefinite or finite useful lives are recognised with a balancing entry in "Impairment/(reversal) of impairment on non-financial assets - Intangible assets" in the statement of profit or loss. The policies for recognising impairment losses on these assets and for reversing impairment losses recognised in prior years are similar to those for tangible assets. Any impairment losses on assets with either indefinite or finite useful lives are recognised with a balancing entry in "Impairment/(reversal) of impairment on non-financial assets - Intangible assets" in the statement of profit or loss. The policies for recognising impairment losses on these assets and for reversing impairment losses recognised in prior years are similar to those for tangible assets.

Software

Software is recognised as an intangible asset when, among other requirements, it is capable of being used or sold, and it is identifiable and its ability to generate future economic benefits can be demonstrated.

Expenses incurred during the research phase are recognised directly in the statement of profit or loss for the period in which they are incurred, and cannot subsequently be capitalised.

Practically all software recognised under this chapter of the balance sheet has been developed by third parties and is amortised with a useful life of between 4 and 15 years.

2.16. OTHER ASSETS AND LIABILITIES

•

Other assets: Includes the amount of the not recorded in other items, broken down as follows:

•

Insurance contracts linked to pensions: includes the fair value of insurance policies to cover pension commitments that must be recorded as a separate asset because they do not meet the requirements to be considered assets related to defined benefit post-employment plans.

•

Inventories: This item in the balance sheet includes non-financial assets held for sale in the ordinary course of business, that are in the process of production, construction or development for such sale, or that are to be consumed in the production process or in the rendering of services.

Inventories are measured at the lower of cost, including borrowing costs, and net realisable value. Net realisable value is defined as the estimated selling price less the estimated costs of production and the estimated costs necessary to make the sale.

Any write-downs to inventories or subsequent reversals of write-downs are recognised under "Impairment/(reversal) of impairment on non-financial assets - Other" in the statement of profit or loss for the year in which the write-down or reversal occurs.

When inventories are sold, the carrying amount of those inventories is derecognised and an expense recognised in the statement of profit or loss for the period in which the related revenue is recognised.

•

Remaining other assets: includes the amount of all asset accrual accounts, except those corresponding to interest, the net assets in pension plans corresponding to the difference between the value of the plan assets and the defined benefit pension plan obligations with a favourable balance for the entity, the transactions in transit between different units of the entity when it is not possible to allocate them and the amount of the remaining assets not included in other categories.

•

Other liabilities: Includes the amount of all the liability accrual accounts, except those corresponding to interest, and the amount of the remaining liabilities not included in other categories.

2.17 ASSETS AND LIABILITIES HELD FOR SALE

Assets recognised under this heading in the balance sheet reflect the carrying amount of individual assets or disposal groups, or assets that form part of a line of business that will be disposed of (discontinued operation) whose sale is highly probable in their present condition within one year from the reporting date. Assets that will be disposed of within a year but where disposal is delayed by events and circumstances beyond the Group's control may also classified as held for sale, when there is sufficient evidence that the Entity is still committed to selling them. The carrying amount of these assets will be recovered principally through a sale transaction.

Specifically, real estate or other non-current assets received as total or partial settlement of debtors' payment obligations in credit operations are recognised under "Non-current assets and disposal groups classified as held for sale" unless it has been decided to make continuing use of the assets.

The Group has centralised the ownership of virtually all the real estate assets acquired or foreclosed in payment of debts in its subsidiary BuildingCenter, SAU, in a bid to optimise management.

Non-current assets classified as held for sale are generally measured initially at the lower of the carrying amount of the financial assets and their fair value less costs to sell the asset to be foreclosed:

•

To estimate provisions for the financial assets, the estimated fair value less the costs to sell the asset to be foreclosed are taken as the recoverable value of the guarantee when the Company's sales experience attests to its ability to realise this asset at fair value. This recalculated carrying amount is compared with the previous carrying amount and the difference is recognised as an increase or a release of provisions as appropriate.

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To determine the fair value less the costs to sell the asset to be foreclosed, the Entity uses the market value extended in the full individual ECO appraisal at the time of foreclosure or reception. Internal valuation models are used to calculate the adjustment to be applied to this market value in order to estimate the discount on the reference price and the costs to sell. These in-house models factor in prior sales experience for similar assets in terms of price and volume.

When the fair value less costs to sell exceeds the carrying amount, the Group recognises the difference in the statement of profit or loss, as an impairment reversal, up to the limit of the impairment accumulated as from the initial recognition of the foreclosed asset.

After the initial recognition, the Group compares the carrying amount with the fair value less costs to sell, recognising any possible additional impairment in the statement of profit or loss. For this purpose, the main valuation used to estimate fair value is updated by the Group. In line with the procedure followed in the initial recognition process, the Group also applies an adjustment, based on the internal models, to the main valuation.

Impairment losses on an asset or disposal group are recognised under "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations, net" in the statement of profit or loss. Gains on a non-current asset held for sale resulting from subsequent increases in fair value (less costs to sell) increase its carrying amount and are recognised also in the statement of profit or loss item up to an amount equal to the previously recognised impairment losses.

Non-current assets held for sale are not depreciated while they are classified as held for sale.

2.18. LEASES

The means of identifying and accounting for leasing operations in which the Group acts as lessor or lessee, are set out below:

2.19 CONTINGENT ASSETS

Contingent assets arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits. Contingent assets are not recognised in financial statements, except where an inflow of economic benefits is practically certain. If there is a probable inflow of economic benefits, the group discloses the contingent asset.

Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements.

2.20 PROVISIONS AND CONTINGENT LIABILITIES

Provisions cover present obligations at the date of preparation of the financial statements arising from past events which could give rise to a loss considered likely to occur. They are certain as to its nature but uncertain as to its amount and/or timing.

The financial statements include all the material provisions with respect to which it is considered more likely than not that the obligation will have to be settled. Provisions are recognised on the liability side of the balance sheet in accordance with the obligations covered.

Provisions, which are quantified based on the best information available on the consequences of the event giving rise to them and are re-estimated at the end of each reporting period, are used for specific expenditures for which the provision was originally recognised. Provisions are fully or partially reversed when the obligations cease to exist or are reduced.

The tax contingency policy is to set aside provisions for the possible tax expense and late-payment interest arising from the income tax assessments initiated by the tax authorities for the main applicable taxes, irrespective of whether an appeal has been lodged. Meanwhile, provisions are made for legal suits, in those instances where there is over a 50% probability of losing the case.

When there are present obligations but they are not likely to give rise to an outflow of resources, they are recorded as contingent liabilities. Contingent liabilities may develop in a way not initially expected. Therefore, they are assessed continually to determine whether an outflow of resources embodying economic benefits has become probable. If it becomes more probable than not that an outflow of future economic benefits will be required, a provision is recognised in the balance sheet.

Provisions are recognised under "Provisions" on the liability side of the balance sheet in accordance with the obligations covered. Contingent liabilities are recognised under memorandum items in the balance sheet.

2.21. TREASURY SHARES

Own equity instruments are recorded at acquisition cost as a reduction of equity under "Shareholders' equity - Treasury shares" in the balance sheet. Gains or losses that may arise as a result of subsequent disposal or redemption are recognised directly in equity, without any gain or loss being recognised.

2.22. INSURANCE TRANSACTIONS

Financial instruments

The Group's insurance companies (VidaCaixa, BPI Vida e Pensões and Se Nostra Vida) have made use of the temporary exemption from IFRS 9, which is why its financial instruments are presented in accordance with IAS 39 in the heading "Assets under the insurance business" of the accompanying balance sheet (see Notes 1 and 17).

Financial assets are presented in the balance sheet, grouped in the section "Assets under the insurance business" in different categories in which they are classified for management and assessment purposes, and which are described below:

•	"Financial assets and liabilities held for trading": This item mainly comprises financial assets or liabilities acquired or issued for the purpose of selling in the short term or which are part of a portfolio of identified financial instruments managed together and for which there is evidence of a recent pattern of short-term profit-taking. Financial liabilities held for trading also comprise short positions arising from sales of assets acquired temporarily under a non-optional reverse repurchase agreement or borrowed securities. Also included as financial assets or liabilities held for trading are derivative assets and liabilities that do not meet the definition of a financial guarantee contract and have not been designated as hedging instruments.
•	"Financial assets and liabilities designated at fair value through profit and loss": includes, where applicable, financial instruments designated upon initial recognition, e.g. hybrid financial assets or liabilities mandatorily measured in full at fair value, or with financial derivatives, the purpose of which is to mitigate the exposure to changes in fair value, or managed as a group with financial liabilities and derivatives to mitigate the overall exposure to interest rate risk. In general, the category includes all financial assets and liabilities when such designation eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatches) that would otherwise arise. Financial instruments in this category must be subject at all times to an integrated and consistent measurement system, management and control of risks and returns permitting verification that risk has effectively been mitigated. Financial assets and liabilities may only be included in this category on the date they are acquired or originated.
•	"Available-for-sale financial assets": includes debt securities and equity instruments not classified under any of the preceding categories.
•	"Loans and receivables": includes financing granted to third parties through ordinary lending and credit activities carried out by said subsidiaries, their receivables from policyholders and for debt securities not quoted in an active market.

Measurements of financial assets and liabilities

All financial instruments are initially recognised at their fair value, which, unless there is evidence to the contrary, is the transaction price.

Subsequently, at a specified date, the fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. The most objective reference for the fair value of a financial instrument is the price that would be paid for it on an active, transparent and deep market. Accordingly, the quoted or market price is used.

If there is no market price, fair value is estimated on the basis of the price established in recent transactions involving similar instruments and, in the absence thereof, of valuation techniques commonly used by the international financial community, always taking into account the specific features of the instrument to be measured and, in particular, the various types of risk associated with it.

Any changes in fair value of financial instruments, except for trading derivatives, due to the accrual of interest and similar items, are recognised in the statement of profit or loss of the year of the accrual. Dividends received from other companies are recognised in the statement of profit or loss of the year in which the right to receive the dividend is established.

Changes in fair value after initial recognition for reasons other than those indicated in the preceding paragraph are treated as described below based on the category of financial asset or financial liability:

•	Financial instruments classified as "Financial assets held for trading", "Financial assets designated at fair value through profit or loss", "Financial liabilities held for trading" and "Financial liabilities designated at fair value through profit or loss" are measured initially at fair value, with any changes in fair value recognised with a balancing entry in the statement of profit or loss.
•	In turn, financial instruments classified as "Available-for-sale financial assets" are initially measured at fair value, with subsequent changes, net of the related tax effect, recognised with a balancing entry in "Equity - Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Available-for-sale financial assets" and "Equity - Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Foreign currency exchange" in the balance sheet.
•	Derivatives are recognised in the balance sheet at fair value. When derivatives are entered into, in the absence of evidence to the contrary, fair value is the transaction price. The derivative is recognised as an asset if the fair value is positive and a liability if it is negative. For derivatives classified in Levels 1 and 2 of the fair value hierarchy (see section on "Fair value of financial instruments" of this Note), if the price differs from the fair value when the derivative is entered into, the difference is recognised immediately in the statement of profit or loss. Subsequent changes in fair value of derivatives are recognised in the statement of profit or loss, except with cash flow hedges, in which case they are recognised under "Equity - Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Hedging derivatives. Cash flow hedges. Derivatives embedded in other financial instruments or in other contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the instrument or host contract, provided a reliable fair value can be attributed to the embedded derivative taken separately.
•	Financial instruments classified as "Loans and receivables" and "Financial liabilities at amortised cost" are measured at amortised cost. Amortised cost is acquisition cost, minus principal repayments and plus or minus the cumulative amortisation (as reflected in the statement of profit or loss by the effective interest rate method) of any difference between the initial amount and the maturity amount. And, in the case of assets, minus any allowances for impairment.

The effective interest rate is the discount rate that exactly equates the initial value of a financial instrument to the estimated cash flows for all items until the instrument matures or is cancelled. For fixed-rate financial instruments, the effective interest rate coincides with the contractual interest rate plus any commission or transaction costs included in its yield. Where the fixed rate of interest is contingent, the Group includes it in the estimate of the effective interest rate only if it is highly probable that the triggering event will be reached. For floating-rate financial instruments, the effective interest rate is calculated as a fixed rate until the next reference rate reset.

Reclassifications between financial instrument portfolios

At the close of the financial year, the amounts of financial assets under IAS 39 processing reclassified in previous financial years were not significant.

Impairment of financial assets (IAS 39)

A financial asset is considered to be impaired when there is objective evidence of an adverse impact on the future cash flows that were estimated at the transaction date, where the borrower is unable or will be unable to meet its obligations in time or form, or when the asset's carrying amount may not be fully recovered. However, a decline in fair value to below the cost of acquisition is not in itself evidence of impairment.

As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to "Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss and net profit or loss due to a change" in the statement of profit or loss for the period in which the impairment becomes evident. The reversal, if any, of previously recognised impairment losses is recognised in the same item in the statement of profit or loss for the period in which the impairment no longer exists or has decreased.

For the case of debt instruments at amortised cost, the categories specified in Note 2.7 remain, although the calculation of the hedges is based on the provisions of IAS 39. The calculated hedging or provision is defined as the difference between the gross carrying amount of the transaction and the estimated value of future expected cash flows, discounted at the original effective interest rate of the transaction. Effective guarantees received are taken into consideration. For the purposes of estimating hedging, the amount of the risk for debt instruments is the gross carrying amount, and for off-balance exposures, the estimated value of the disbursements.

Both transactions classified as not bearing appreciable risk and those that, due to their type of collateral, are classified as not bearing appreciable risk, could have 0% hedging. This percentage will only be applied to the hedged risk.

The accounting policy referring to the recognition of losses due to impairment of the categories of availablefor-sale instruments is described below:

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Debt securities classified as available for sale: the market value of quoted debt securities is deemed to be a reliable estimate of the present value of their future cash flows.

•

When there is objective evidence that the negative differences arising on measurement of these assets are due to impairment, they are removed from "Equity - Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Available-for-sale financial assets" and the cumulative amount considered impaired at that date is recognised in the statement of profit or loss. If all or part of the impairment loss is subsequently reversed, the reversed amount is recognised in the statement of profit or loss for the period in which the reversal occurs.

Assets under insurance and reinsurance contracts

Furthermore, the chapter "Assets under the insurance business - under insurance and reinsurance contracts" of the balance sheet also covers the amounts that the consolidated companies have the right to receive that originate from reinsurance contracts that they hold with third parties, and more specifically, the share of the reinsurance in the technical provisions constituted by the consolidated insurance companies.

Liabilities under insurance contracts

The chapter "Liabilities under the insurance business - Liabilities under insurance contracts" of the balance sheet covers the technical provisions of the direct insurance and of the accepted reinsurance recorded by the consolidated companies to cover the obligations originating from insurance contracts that they hold that are in force at the close of the period. The main components of technical provisions are as follows:

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Unconsumed premiums and risk in progress:

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The provision for unearned premiums includes the proportion of premiums written in the year that must be allocated to the period between the close of the reporting period and the expiry of the policy period.

The provision for unexpired risks is designed to complement the provision for unearned premiums by the amount which is not sufficient to cover the measurement of all the risks and expenses corresponding to the coverage period not elapsed at the end of the period.

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Life insurance provision: consists mainly of the mathematical provisions of the insurance contracts and the provision for unearned premiums of insurance contracts with a period of coverage equal to or less than one year. Mathematical provisions represent the excess of the current actuarial value of the future obligations of subsidiary insurance companies over that of the premiums which the policyholder must satisfy.

•

Relating to life insurance when the policyholder assumes the investment risk: they correspond to the technical provisions of insurance contracts where the investment risk is born by the policyholder.

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Claims: this represents the total amount of outstanding liabilities on claims occurring before the end of the reporting period. The Group calculates this provision as the difference between the total estimated or exact cost of the claims that have occurred and are pending declaration, settlement or payment, including external and internal expenses for handling and processing the files, and the combined amount of the amounts already paid as a result of the claims.

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Provisions for bonuses and rebates: these include the benefits accrued to the policyholders or beneficiaries and not yet assigned at the end of the reporting period. Not included is the effect of allocating part of the unrealised gains on the investment portfolio to policyholders.

Technical provisions linked to risks assigned to reinsurers are calculated on the basis of the reinsurance contracts entered into and by applying criteria similar to those used for direct insurance.

Additionally, the Group has applied the accounting option provided for in IFRS 4 named "shadow accounting", whereby the insurer is permitted to change its accounting policies so that a recognised but unrealised gain or loss on an asset related to insurance contracts affects those measurements of liabilities under insurance contracts in the same way as a realised gain or loss does. The related adjustment to the insurance liability (or deferred acquisition costs or intangible assets) shall be recognised in the statement of profit or loss in other comprehensive income if, and only if, the unrealised gains or losses are recorded in other recognised income and expense.

The Group carries out an annual liability adequacy test in order to identify any provision shortfall and to make the related provision. Otherwise, if the result of the liability adequacy test shows that the provisions recognised were adequate or that excess provisions were recognised, the Group adopts the principle of prudence as established in IFRS 4. The liability adequacy test consists of assessing liabilities under insurance contracts based on the most up-to-date estimates of future cash flows from their contracts in relation to the assets covered. In this respect, it determines:

•	The difference between the carrying amount of the insurance contracts less any related deferred acquisition costs and any related intangible assets, and the present value of contractual cash flows from the insurance contracts and any related cash flows, such as claims handling costs, as well as cash flows resulting from embedded options and guarantees.
•	The difference between the carrying amount and the present value of projected cash flows from the financial assets related to the insurance contracts.

The future estimated cash flows arising from insurance contracts and affected financial assets are discounted subject to a yield curve of assets with high credit quality (Spanish sovereign debt). In order to estimate future cash flows arising from insurance contracts, the surrender rates observed in the portfolio in accordance with the average over the last five years are taken into consideration. In addition, sensitivity exercises are carried out with regard to the discount curve used. This sensitivity analysis consists of entering a drop in the interest rate of 100, 150 and 200 basis points of the discount curve used, and an increase of 80, 100 and 200 basis points.

The Group does not unbundle any deposit component of insurance contracts. This unbundling is voluntary. In addition, the fair value of the policyholders' option to surrender insurance contracts is estimated to be zero, otherwise it is measured as part of the value of the insurance contract liabilities.

2.23. STATEMENTS OF CASH FLOWS

The following terms are used in the presentation of the statement of cash flows:

•	Cash and equivalents: cash balances at central banks and other demand deposits: This includes coins and notes held by the Entity and balances receivable on demand deposited with central banks and credit institutions.
•	Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value.
•	Operating activities: the indirect method is used to present cash flows from operating activities, which are the principal revenue-producing activities of credit institutions and other activities that are not investing or financing activities.
•	Investing activities: the acquisition, sale or other disposal of long-term assets, such as equity investments and strategic investments, and other investments not included in cash and cash equivalents.
•	Financing activities: activities that result in changes in the size and composition of equity and liabilities that do not form part of operating activities, such as subordinated financial liabilities. The issues placed on the institutional market are classified as financing activities, whereas the issues placed on the retail market among our customers are classified as operating activities.

2.24. STATEMENT OF CHANGES IN EQUITY. PART A) STATEMENT OF RECOGNISED INCOME AND EXPENSE

This statement presents the income and expense recognised as a result of the Group's activity in the period, with a distinction between those taken to profit or loss in the statement of profit or loss and other comprehensive income directly in equity.

2.25. STATEMENT OF CHANGES IN EQUITY. PART B) STATEMENT OF TOTAL CHANGES IN EQUITY

This statement presents all changes in the Group's consolidated equity, including those due to accounting policy changes and error corrections. This statement presents a reconciliation between the carrying amount of each component of equity at the beginning and the end of the period, grouping movements by nature under the following headings:

•	Adjustments due to accounting policy changes and error corrections: includes changes in equity as a result of the retrospective restatement of financial statement balances on account of changes in accounting policies or for correction of errors.
•	Total comprehensive income: represents the aggregate of all items recognised in the statement of changes in equity part A) Comprehensive income, outlined above.
•	Other changes in equity: includes the remaining items recognised in equity, such as capital increases or decreases, distribution of dividends, treasury share transactions, equity-based payments, transfers between equity items, and any other increase or decrease in equity. Particularly, the headings 'Accumulated gains' and 'Other reserves' contain:
•	The shareholder equity heading, 'Retained earnings', includes, at year-end, undistributed gains from the appropriation of the profit/loss of the companies of the consolidated group, and income coming from the sale of investments classified in 'Financial assets at fair value with changes in other comprehensive income - Equity instruments', among others.
•	The shareholder equity heading, 'Other reserves', includes, at year-end, the implications of the 1st application of accounting regulations, the application of the profit/(loss) of companies consolidated using the equity accounting method, net of the dividends distributed to companies of the consolidated group, the remuneration of issuances with certain characteristics, and gains/losses deriving from operations with own shares, among others.

3. RISK MANAGEMENT

3.1 ENVIRONMENT AND RISK FACTORS

The following risk factors had a significant influence on the Group's management in 2022, due to their impact during the year and their long-term implications for the Group:

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Macroeconomic environment

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Global economy

Following the extraordinary shock of the pandemic in 2020 and the strong upturn in 2021, 2022 was expected to serve as a stepping stone for the global economy to get back on track. However, the outbreak of war in Ukraine came as another extraordinary shock when several major economies were still operating below pre-COVID levels and inflationary pressures were already emerging from the aftermath of the pandemic (supply disruptions, demand readjustments, fiscal stimuli, etc.). Consequently, the global economic context in 2022 was marked by the war in Ukraine, with an impact on energy that exacerbated the intensity and persistence of inflationary pressures, thereby resulting in a tightening of monetary policy from the main central banks.

For the year as a whole, this all led to declines in international markets, particularly in technology, and sharp increases in debt rates. On the other hand, global economic activity showed some resilience thanks to the recovery of the services sector, the strength in the labour market and the excess savings accumulated over the previous two years. In particular, it is estimated that the world's economy grew 3% in 2022, with some fluctuation throughout the year and with some variation among different countries. The US showed very moderate GDP growth (2.1%), even suffering slight contractions in some quarters, while eurozone GDP grew around 3%, albeit with marked disparity between countries. China's GDP grew above 3%, although this figure was much lower than expected, hampered by the zero-COVID policy and the string of lockdowns, in addition to the decline in the real estate sector, both of which look likely to continue in 2023.

Looking to the quarters to come, a further slowdown in global activity is expected, held back by increased uncertainty, the erosion of purchasing power due to rising inflation, diminishing confidence and the tightening of monetary policy. Nonetheless, the cooldown in global demand, alongside improvements in the bottlenecks, should help bring inflation down and, therefore, facilitate the end to monetary tightening, although rates will remain high. After a difficult winter, the global economy should pick up in 2023. Even so, the environment is very uncertain and there are significant risks of further weakness in activity, more persistent inflation and greater monetary tightening. In this context, the following will be key: i) the persistence of the energy price shock; ii) second-round effects on inflation; iii) the anchoring of inflation expectations; iv) the alignment of tax policy with the monetary aim of cooling demand; and v) the effectiveness of the monetary tightening carried out.

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Eurozone

The eurozone has been was of the regions worst affected by the war in Ukraine due to its high dependency on Russian gas imports. Russia's decision to gradually reduce the flow of gas into Europe throughout 2022 (to virtually zero since September), catapulted gas prices, which in August set record highs and forced the European Commission to adopt a battery of measures to confront this energy crisis. In order to weather the winter months and avoid energy rationing, the EC recommended energy saving measures, while pushing gas reserves to 90% of their total storage capacity by November. This challenge was met comfortably, allowing us to get through winter with more peace of mind. In addition, the eurozone economy performed better than expected up to the third quarter thanks to the boost provided by the lifting of COVID restrictions. The deterioration in leading indicators of industry and business and household confidence point to moderate declines in activity towards the end of 2022 and early 2023. This is more pronounced in Germany and Italy, two of the large economies most exposed to Russian gas. Despite the slowdown at the end of the year, the eurozone's GDP grew 3.5% in 2022. More caution is needed for 2023, when the eurozone is expected to grow barely 0.5%.

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Spain and Portugal

The performance of the Spanish economy throughout 2022 was conditioned, on the one hand, by the lifting of pandemic control restrictions, which encouraged the reactivation of international tourism, and on the other, by the outbreak of the war in Ukraine, the accentuation of inflationary pressures and the rise in interest rates. In a macroeconomic context marked by great uncertainty, economic activity slowed throughout the year, particularly affected by declining household spending due to the impact of the upturn in inflation and interest rates on their purchasing power, with the 12-month Euribor closing December with a monthly average of 3%.

Nonetheless, the Spanish economy overcame a turbulent year with relative success, and thanks to the country's low dependence on Russian gas and the high regasification capacity of liquefied natural gas, the impact of the crisis in Spain was lower than in other major European economies. Furthermore, the excess household savings accumulated during the pandemic and the fiscal and regulatory measure implemented partially cushioned the impact of higher energy prices. For the year as a whole, GDP has grown 5.5%, although at year-end the recovery was not yet complete and GDP was 0.9% below pre-pandemic levels (Q4 2019). In positive terms, the good performance of the labour market stands out during the year, with an increase of 471,360 workers registered with the Social Security system up to the end of the year.

For 2023, in a context of weakness in the major eurozone economies, activity is expected to cool significantly and GDP growth is expected to moderate to an annual average of 1.3% as the impact of rising inflation and interest rates will peak. However, activity is expected to pick up from the spring onwards as the deployment of Next Generation EU funds (NGEU) increases and the energy market tensions begin to ease and inflation begins to moderate, which will benefit the recovery of agents' real incomes and an improvement in confidence. In any case, the Spanish economy is better positioned than other large European economies to cope with the energy crisis, thanks to its low dependence on Russian gas, the high regasification capacity of liquefied natural gas and greater flexibility to diversify the gas supplies.

Moreover, inflation decelerated following the peak reached in July (10.8%) and closed the year at 5.7%, registering an annual average of 8.4%. In 2023, inflation is expected to continue decelerating and reach an annual average of 4.2%, due to the inflation correction in energy and food and the completion of the pass-through of the increase in energy costs to the final selling prices in a context of moderate second-round effects.

The Portuguese economy posted remarkable growth in 2022, despite the substantial challenges it faced: High energy costs, rising inflation and tightening of monetary policy. GDP growth was around 6.7%, thus, exceeding pre-pandemic levels. In any case, the economy's trajectory throughout the year was markedly downwards, with GDP increasing 12% year-on-year in the first quarter, in contrast to the expansion of just 3.1% year-on-year in the third quarter. The main drivers of growth were domestic demand components, particularly private consumption, which benefited from a dynamic labour market and from savings accumulated during the lockdown periods. Investment also performed positively, although less than expected, due to the persistence of bottlenecks in global supply chains and the environment of increased uncertainty resulting from the war in Ukraine. The year was also marked by the rise in inflation, which in October exceeded 10%, the highest level since 1992; in average annual terms, inflation in 2022 stood at 7.8%.

In 2023, we will see a marked slowdown in GDP growth, expected to come in up to 1.0% for the year, while inflation will ease to 5.5%. Despite the containment of inflation expected through the year and the gradual stabilisation of interest rates in the eurozone, the cumulative effect of the rising prices of goods and services, alongside the notable increase in financing costs, will foreseeably cause a sharp slowdown in private consumption and investment.

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Regulatory environment

The regulatory outline on which the Group's business model lies is crucial to its development, whether in terms of methodological or management processes. Thus, regulatory analysis represents a key point in the Group's agenda.

Proposals for legislative and regulatory changes, as well as new legislation and regulation passed in 2022, include:

Geopolitical and macroeconomic events:

As a result of the conflict between Ukraine and Russia and rising inflation, a series of regulatory measures were established, including:

―	Royal Decree Law (RDL) 6/2022 and the modification of the Code of Good Practice provided in RDL 5/2021, establishing a package of urgent measures to address the economic and social consequences of the war in Ukraine.
―	Five legislative packages of sanctions against Russia for its armed conflict against Ukraine including, inter alia, restrictions on the provision of credit rating services to any Russian person or entity; constraints to new investments in the Russian energy sector; freezing of assets and the prohibition to make funds or other economic resources available to the sanctioned persons and entities; and restriction on the provision of specialised financial messaging services (SWIFT) to certain Russian and Belarusian banks.
―	European Commission's consultation on the process for implementing the sanctions imposed on Russia and Belarus.
―	Royal Decree Law 19/2022, establishing a Code of Good Practice to alleviate the rise in interest rates on mortgage loans for primary residences.

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Sustainable financing and environmental, social and governance (ESG) factors:

―	Reports from authorities subject to public consultation: i) the EBA's discussion paper on the role of ESG risks within the prudential framework; ii) the ITS (Implementing Technical Standards) for ESG risk disclosures under Pillar 3 of the EBA; iii) consultation of the Sustainable Finance Platform on the draft report on minimum guarantees; iv) European Financial Reporting Advisory Group's (EFRAG) public consultation on sustainability disclosure standards.
―	Legislative and regulatory proposals in discussion: i) the proposal for a Regulation on a European Green Bond Standard; ii) the proposed Corporate Sustainability Reporting Directive (CSRD) from the European Commission.
―	Legislative and regulatory texts that entered into force/application: Sustainable Finance Disclosure Regulations ("SFDR"). As well as public consultation to update the ESMA Guidelines on certain aspects of MiFID suitability requirements with the aim of setting common provisions for entities to consider customers' sustainability preferences when assessing suitability.
―	Other important texts and milestones: i) ISSB consultation on the proposal to create a global basis for sustainability disclosure.

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Pillar 3 regulation:

―	European Commission public consultation on the review of the banking package (Capital Requirements Regulation - CRR III - and Capital Requirements Directive - CRD IV) implementing the final reforms of the Basel III agreements in Europe.
―	Bank of Spain Circular 3/2022, of 30 March, establishing the criteria for exercising various regulatory options contemplated by the capital requirements regulation (Regulation (EU) no. 575/2013).
―	Bank of Spain Public Consultation on the role of environmental risks within the Pillar 1 prudential framework.
―	Bank of Spain Public Consultation on the development of new macro-prudential tools introduced by RD-L 22/2018.
―	EBA Public Consultation on draft ITS on NPL templates.
―	EBA Guidelines on improving resolvability for financial institutions.
―	European Commission Public Consultation on improvement of macroprudential framework.
―	EBA Public Consultation relating to the introduction of changes to interest rate risk (IRRBB) and credit spread risk (CSRBB) frameworks.
―	Second Public Consultation of the Basel Committee on the prudential processing of crypto-assets.
―	EBA Public Consultation on draft Guidelines for institutions and resolution authorities on the transferability of parts of or a whole bank in the context of resolution.

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Digital regulation and payments:

―	European consultation on key design characteristics of a digital euro, covering a wide range of issues, including consumer needs and expectations, retail payments, the provision of a digital euro, the impact on the financial sector and financial stability, the prevention of money laundering and terrorist financing, privacy and international payments.
―	A European Commission proposed Regulation on harmonised standards related to the access and the fair use of data (Data Law), with the aim of making it easier for users to access the data resulting from the use of connected products and services, their portability and other rights.
―	European Commission consultation on the review of the Payment Services Directive (PSD2), with a view to helping the regulator assess the need to update this legislation.
―	Open Finance Framework consultation, which aims to provide third-party providers with access to the data of financial institutions' customers, both corporate and consumer, with the agreement of the latter.
―	European Commission proposed Regulation on Cyber Resilience, with the aim of guaranteeing that digital products are more secure for consumers throughout the EU.
―	Draft Law on Securities Markets and Investment Services, introducing amendments to existing Spanish legislation to adapt it to the implementation of the Regulation on markets in crypto-assets (MiCA) and the Regulation on a pilot regime for market infrastructures based on Distributed Ledger Technology (DLT).
―	European Commission proposed Regulation on instant transfers in euros, with the aim of guaranteeing that instant payments in euros are affordable, secure and processed without hindrance across the EU.
―	Circular 1/2022 of 10 January of the National Securities Market Commission (CNMV), on the advertising of crypto-assets presented as an investment product.
―	EBA Guidelines on the limited network exclusion under PSD2.
―	Bank of Spain Circular 2/2022 of 15 March on rules for the submission to the Bank of Spain of payment statistics by payment service providers and payment system operators.
―	Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act).
―	Regulation 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market for Digital Services and amending Directive 2000/31/EC (Digital Services Act).

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Retail and markets:

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Proposal to reform the Consumer Credit Directive.

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Draft law on Customer Services.

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Draft law protecting whistleblowers and anti-corruption, with the aim of transposing Directive 2019/1937.

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Draft law on the Securities Market and Investment Services which, among other aspects, transposes the quick fix of MiFID II.

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Draft law for the promotion of the start-up ecosystem.

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Draft law transposing European Union Directives on accessibility of certain products and services.

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Draft law creating the Independent Administrative Authority for the Defence of Financial Customers, which will centralise the current complaints services of the Bank of Spain, National Securities Market Commission (CNMV) and the Directorate General of Insurance and Pension Funds

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Follow-up to the initiatives of the Commission on CNMV's Retail Investor Strategy public consultation on the Code of Good Practice for institutional investors, asset managers and proxy advisers.

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EBA public consultation on the draft implementing technical standards (ITS) specifying the templates to be used by credit institutions for reporting as referred to in Directive (EU) 2021/2167 of 24 November 2021.

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Bank of Spain public consultation on Covered Bonds.

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ESMA consultation on MiFID II product governance guidelines.

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Publication of the EIOPA warning regarding matters related to remuneration and conflicts of interest from the sale of credit protection insurance.

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Publication of Act 4/2022, of 25 February, on the protection of consumers and users in situations of social and economic vulnerability.

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Publication of Bank of Spain Circular 3/2022, of 30 March, amending Circular 2/2016, of 2 February, to credit institutions on supervision and capital adequacy, completing the adaptation of the Spanish legal system to Directive 2013/36/EU and Regulation (EU) 575/2013; Circular 2/2014, of 31 January, to credit institutions on exercising different regulatory options contained in Regulation (EU) 575/2013 of the European Parliament and of the Council, of 26 June 2013, on prudential requirements for credit institutions and investment firms and amending Regulation (EU) 648/2012; and Circular 5/2012, of 27 Junes, to credit institutions and payment service providers on transparency of banking services and responsibility in the granting of loans.

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Publication of ESMA Guidelines on certain aspects of the MiFID II appropriateness and execution-only requirements.

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Publication of ESMA Guidelines on certain aspects of the MiFID II remuneration requirements. Entry into force: From 6 months after the date of publication on the ESMA website in all official EU languages.

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Publication of National Securities Market Commission (CNMV) Circular 3/2022, of 21 July, on the collective investment schemes prospectus and registration of the key investor information document.

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Publication of Act 18/2022, of 28 September, on the creation and growth of companies.

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Publication of:

―	Implementing Regulation (EU) 2022/1859 amending the implementing technical standards laid down in Implementing Regulation (EU) 1248/2012 as regards the format for applications for registration as trade repositories and for applications for extension of registration as trade repositories.
―	Commission Delegated Regulation (EU) 2022/1857 amending the regulatory technical standards laid down in Delegated Regulation 150/2013 as regards the details of applications for registration as a trade repository and for applications for extensions of registration as a trade repository.
―	Commission Delegated Regulation (EU) 2022/1856 amending the regulatory technical standards laid down in Delegated Regulation 151/2013 by further specifying the procedure for accessing details of derivatives as well as the technical and operational arrangements for their access.
―	Commission Delegated Regulation (EU) 2022/1855 supplementing Regulation 648/2012 (EMIR REFIT) with regard to regulatory technical standards specifying the minimum details of the data to be reported to trade repositories and the type of reports to be used.
―	Commission Implementing Regulation (EU) 2022/1860 laying down implementing technical standards for the application of Regulation 648/2012 (EMIR REFIT) with regard to the standards, formats, frequency and methods and arrangements for reporting.
―	Commission Delegated Regulation (EU) 2022/1858 supplementing Regulation 648/2012 (EMIR REFIT) with regard to regulatory technical standards specifying the procedures for reconciliation of data between trade repositories and the procedures to be applied by the trade repository to verify the compliance by the reporting counterparty or submitting entity with the reporting requirements and to verify the completeness and correctness of the data reported.

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Publication of Royal Decree Law 19/2022 of 22 November, establishing a Code of Good Practice to alleviate the rise in interest rates on mortgage loans for primary residences, amending Royal Decree Law 6/2012 of 9 March, on urgent measures to protect mortgage debtors without resources, and adopting other structural measures to improve the mortgage loan market.

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Anti-money laundering and countering the financing of terrorism (AML/CFT):

―	Follow-up work was done on various legislative initiatives, most notably the 4 legislative proposals of the EU in the area of anti-money laundering and countering the financing of terrorism (AML/CFT), which is currently under development: i) Regulation creating a new European supervisory authority with regard to AML/CFT (AMLA); ii) the Regulation on obligations involving AML/CFT; iii) the 6th AML/CFT Directive (amends the 5th by repealing the 4th); and iv) the Regulation on the information that must accompany the transfer of funds and certain crypto-assets
―	Publication, on 14 June, of the European Banking Authority (EBA) Guidelines on the role of AML/CFT compliance officers and the management body of credit or financial institutions.
―	Public hearing in March on the Royal Decree creating the Register of Real Estate Ownership, and the prior public consultation, on 13 April, on the draft Royal Decree amending the Royal Decree implementing Act 10/2010, of 28 April, on AML/CFT.

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Strategic events

The so-called "strategic events" are the most relevant occurrences that may result in a medium-term material impact on the Group. Only events that are not yet materialised and do not form part of the Catalogue, but which the organisation's strategy is exposed to are considered, even if the severity of their impact can be mitigated through management. If a strategic event occurs, the impact may be on one or more of the risks of the Catalogue simultaneously.

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Shocks stemming from the geopolitical and macroeconomic environment

Significant and persistent impairment of macroeconomic perspectives, and increase of risk aversion in financial markets. For example, this could be the result of: intensification of the war in Ukraine, the prolongation and intensification of inflationary tensions, fast and persistent increases in interest rates, other geopolitical shocks of a global scope, domestic political factors (such as territorial tensions, populist governments and social protests), an intense resurgence of the pandemic, or the reappearance of tensions in the eurozone that rekindle the risks of fragmentation. Possible consequences: rise of the country risk premium (cost of financing), pressure on costs (due to inflation), reduction of business volume, a worsening of credit quality, deposit withdrawals, material damages to offices or impeded access to corporate centres (due to protests or sabotage due to social unrest).

Mitigating factors: the Group understands that such risks are sufficiently managed by its levels of provisions, solvency and liquidity, validated by compliance with both external and internal stress exercises, and reported in the annual internal capital and liquidity adequacy assessment processes (ICAAP and ILAAP, respectively).

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New competitors and application of new technologies

There is an expectation that the competition of newcomers will moderately increase, such as fintech companies (e. g. digital banks), as well as big tech companies and other players with disruptive proposals or technologies due to reduced investment and difficulties in accessing capital. This could lead to intense disaggregation and the disintermediation of part of the value chain, which in turn could lead to an impact on margins and cross-selling, given that we would be competing with more agile, flexible companies with generally low-cost proposals for the consumer. All of this could be exacerbated if the regulatory requirements applicable to these new competitors and services were not the same as those in place at present for credit institutions.

However, the main newcomers-including digital banks and big BNPL (buy now pay later) players-continue to perform negatively despite the growth in customer numbers, and in the current market context there have been significant changes to their valuations and even forced staff layoffs, casting doubt over their sustainability.

In parallel to the evolutions of new market entrants, the development of technology is also driving initiatives fostered by the regulator, such as the Central Bank Digital Currencies (CBDC) or the Digital Identity initiative. In that regard, the launch of a Digital euro could facilitate the entry into the financial business of actors other than banks (e.g. payment institutions and digital money institutions), should intermediation be authorised in the management of digital euro wallets (e-wallets).

Mitigating factors: the Group considers new entrants a low risk as they are a potential threat, and at the same time an opportunity for collaboration, learning and stimulus to meet the objectives of digitalisation and business transformation established in the Strategic Plan. For this reason, the Group periodically monitors the evolution of the main newcomers and the big tech movements within the industry. Furthermore, an internal sandbox space has been in place since 2020 to technically analyse -in a streamlined and secure way- the solutions of certain fintech companies with which there are partnership opportunities.

The Group also has Imagin as a first-rate value proposal that it will continue to leverage. With respect to the Group's competition from big tech companies, it is committed to improving the customer experience with the added value represented by the Group's social sensitivity (bits and trust), in addition to proposing possible collaboration approaches (open banking) and having agreements in some cases (e.g. Apple, PayPal).

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Cybercrime and data protection

Cybercrime evolves criminal schemes to try to profit from different types of attacks. In this regard, the dissemination of new technologies and services that the Group makes available to customers entails easier access to cybercrime, and thus makes their criminal operations more sophisticated. This constant evolution of criminal vectors and techniques puts pressure on the Group to constantly reassess the model for preventing, managing and responding to cyberattacks and fraud in order to be able to respond effectively to emerging risks.

The constant campaigns to impersonate different companies and official bodies have made it possible for cybercriminals to materialise certain cybersecurity events in many organisations. In parallel, regulators and supervisors in the financial field have escalated the priority of this field. Taking into account the global context, existing threats regarding cybersecurity and recent attacks received by other organisations, these events on the Group's digital environment could pose serious impacts of a different kind, notably including mass data corruption, the unavailability of critical services (e. g. ransomware), attacks on the supply chain, the leaking of confidential information or fraud on digital service channels. Should these impacts directly related to banking operations occur, they could entail significant sanctions by the competent organisations and potential reputational damage for the Group.

Mitigating factors: the Group is also well aware of the importance and extent of the existing threat at this time, and thus it constantly reviews the technological environment and applications relating to the integrity and confidentiality of information, in addition to systems availability and business continuity, through planned reviews and ongoing auditing by monitoring the risk indicators defined. Additionally, the Group keeps security protocols and mechanisms up to date in order to adapt them to the threats of the current context, continually monitoring emerging risks. The evolution of security protocols and measures are included in the strategic information security plan, in line with the Group's strategic targets to remain at the forefront of information protection and in accordance with the best market standards.

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Changes to the legal, regulatory or supervisory framework

The risk of increased pressure from the legal, regulatory or supervisory environment is one of the risks identified in the risk self-assessment that could entail a higher impact in the short-medium term. Specifically, we have observed a need to continue to uphold constant monitoring of new regulatory proposals and their implementation, given the high activity of legislators and regulators in the financial sector. Currently of particular note, among others, are the increasing expectations regarding ESG aspects from different stakeholders (supervisory bodies, regulators, governing bodies, etc.).

Mitigating factors: The regulations that affect the Group are controlled and monitored, with the support of an external provider to carry out a double control of said regulations. The Regulatory Implementation Management team carries out the centralised control of effective regulatory implementation in the Group's companies. Regulatory implementation processes are submitted to each of the relevant internal committees (e.g. to the Transparency Committee for the adaptation of the new regulation on contracts, rules, policies and internal procedures). The status and evolution of the implementation is reported to the Risk Committee on a six-monthly basis. Furthermore, given the increase in legislative activity, relations with the authorities has been intensified in order to anticipate possible new legislative initiatives and, in turn, to be able to represent and convey CaixaBank's interests to the authorities in an efficient manner.

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Pandemics and other extreme events

It is not known what the exact impact of extreme events will be, such as future pandemics or environmental events, for each of the risks of the Catalogue, which will depend on uncertain future events and developments, including actions to contain or treat the event and curb its impact on the economies of affected countries. Taking COVID-19 as a reference, there may be high volatility in the financial markets, with significant crashes. Furthermore, macroeconomic perspectives may get significantly worse and with notable volatility in the prospective scenarios.

Mitigating factors: capacity for effective implementation of management initiatives to mitigate the effect on the risk profile caused by the deterioration of the economic environment in case of an extreme operational event, as is the specific case of COVID-19.

3.2 RISK GOVERNANCE, MANAGEMENT AND CONTROL

CaixaBank aims to maintain a medium-low risk profile, a comfortable level of capital, and ample liquidity measures in line with its business model and the risk appetite established by the Board of Directors.

As part of the internal control framework and in accordance with the Corporate Global Risk Management Policy, CaixaBank Group has a risk management framework that enables it to make informed risk-taking decisions, consistent to the objective risk profile and the level of appetite approved by the Board of Directors. This framework comprises the elements described below:

3.2.1. Internal control framework

The internal control framework is the set of strategies, policies, systems and procedures that exist across CaixaBank Group to ensure prudent business management and effective and efficient operations. It is implemented through:

•	the suitable identification, measurement and mitigation of risks that the Group is or could be exposed to,
•	the existence of comprehensive, pertinent, reliable and relevant financial and non-financial information,
•	the adoption of solid administrative and accounting procedures, and
•	compliance with regulations and requirements in terms of supervision, codes of ethics and internal policies, processes and standards.

This is integrated into the Group's internal governance system, is aligned with the business model and is in line with: i) the regulations applicable to financial institutions; ii) the EBA Guidelines on Internal Governance, of 21 July 2021, which develops the internal governance requirements established in Directive 2013/36/EU of the European Parliament; iii) the recommendations of the CNMV in this respect and iv) other guidelines on control functions applicable to financial institutions.

The guidelines for the Group's Internal Control Framework are set out in the Internal Corporate Control Policy and are structured around the "three lines of defence" model.

First line of defence

Comprises the business lines and units, together with the areas providing support, that give rise to the exposure to risks in the performance of the Group's operations. They take on risks taking into account the Group's risk appetite, the authorised risk limits and policies and procedures in force, and is responsible for managing these risks. They are therefore responsible for developing and maintaining effective controls over their businesses, and for identifying, managing, measuring, controlling, mitigating and reporting the main risks that arise throughout their activity.

The business lines and support departments integrate control in their daily activities as a basic element that reflects the Group's risk culture.

These functions may be embedded in the business units and support areas. However, when the level of complexity or intensity require it, specific control units with greater specialism are set up to ensure that the risks are properly controlled.

Second line of defence

It comprises the risk management and compliance functions. They in charge, inter alia, of:

•	Preparing risk management and control policies aligned with the Risk Appetite Framework (RAF) in coordination with the first line of defence, assessing their subsequent fulfilment.
•	Identifying, measuring and monitoring risks (including emerging risks), contributing to the definition and implementation of risk, process risk and control indicators.
•	Regular monitoring of the effectiveness of first line of defence indicators and controls, as well as second line of defence indicators and controls.
•	Following up control weaknesses that are identified, as well as establishing and implementing Action Plans.
•	Issuing an opinion on the suitability of the risk control environment.

The activities of the second line of defence, in the same way as i) the identified weaknesses, ii) the monitoring of action plans and iii) the opinion on the adequacy of the control environment in the Group, are regularly reported to the bodies responsible for the control environment, following the established hierarchy, as well as to supervisory bodies.

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Risk management function

In addition to identifying, defining assumption limits, measuring, monitoring, managing and reporting on the risks within its scope of responsibility, i) it ensures that all risks to which the Group is, or may be, exposed are identified, assessed, monitored and controlled adequately; ii) it provides the Governing Bodies with an aggregated vision of all the risks to which the Group is, or may be, exposed, including an aggregated view of the operational control environment of the risk processes; iii) it monitors the risk generating activities, assessing their alignment with the approved risk tolerance and ensuring the prospective planning of the corresponding capital and liquidity needs in normal and adverse circumstances; iv) it monitors compliance with the risk appetite limits approved by the Board of Directors, and v) validates and controls the appropriate functionality and governance of the risk models, verifying their suitability in accordance with the regulatory uses.

At CaixaBank, the risk management function is carried out by the Corporate Risk Management Function and Planning and Compliance and Control divisions.

The responsibilities of the Corporate Risk Management Function and Planning directorate include the corporate coordination of the risk management function in CaixaBank Group; the direct exercise of the functions of second line of defence for risks of a financial nature, as well as being responsible for determining the general risk management framework and other common aspects for financial and non-financial risks, and the cross-cutting coordination of the risk management of the various Group companies. The Corporate Risk Management Function and Planning Director will be responsible for CaixaBank Group's risk management function and, therefore, will attest to the compliance of the supervisor's requirements in this matter and perform the functions allocated to this position by the applicable regulations.

Furthermore, the Directorate of Compliance and Control directly exercises the second line of defence functions for non-financial risks; the cross-cutting function of promotion, coordination and governance of the operational internal control activity in all the Company's risks, the reliability of information and model validation.

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Compliance function

The mission of the compliance function is to identify, evaluate, supervise and report on the risks of sanctions or financial losses to which the Bank is exposed, as a result of the breach of or defective compliance with laws, regulations, legal or administrative requirements, codes of conduct, ethical standards or good practices, relating to the scope of action and in reference to the legal and regulatory risk and conduct and compliance risk (together "Compliance Risk"); as well as advise, inform and assist the senior management and the governance bodies in relation to regulatory compliance, promoting a culture of compliance throughout the organisation by way of training actions, information and raising awareness.

To this end, the mission of Regulatory Compliance is expressed through the following objectives:

•	Supervising compliance risk in connection with the processes and activities carried out by the Bank.
•	Fostering, championing and promoting the corporate values and principles enshrined in the Code of Ethics that guide the Bank's actions.
•	Promoting a culture of control and compliance with the law and with all rules and regulations in force (both external and internal) so as to help ensure that they are known and respected across the entire organisation.

The compliance function is conducted from the Office of Compliance, dependent upon the Directorate of Compliance and Control, and reports on a regular basis, through the Global Risk Committee, to the Governing Bodies and, furthermore, to supervisory bodies (Bank of Spain, ECB, Executive Service of the Commission for the Prevention of Money Laundering and Monetary Offences SEPBLAC, Treasury, CNMV and other bodies).

The management model of the compliance function has two main pillars: the compliance risk taxonomy and the three lines of defence model. The function is served by the following key elements to ensure an adequate coverage of Compliance Risk: compliance programme, annual compliance plan and monitoring of gaps (control deficiencies or breaches of regulations) identified and of the action plans to mitigate them. Furthermore, the function carries out advisory activities on the matters that fall under its responsibility, and carries out actions to foster the culture throughout the organisation (training, awareness-raising and corporate challenges).

To help ensure compliance with the Code of Ethics in general and internal regulations in particular, CaixaBank has set up a Whistleblowing Channel, available to all directors, employees, temporary staff, agents and suppliers; this channel is essential in preventing and remedying regulatory breaches. Requests for clarification of concrete queries arising from the application or interpretation of the abovementioned texts can be submitted through the Queries Channel, and confidential and swift communication of irregularities that may involve infringements can be made through the Whistleblowing Channel.

Lastly, after CaixaBank obtained, in July 2021, the ISO 37301 certification on the Compliance Management System, which involved a comprehensive review of the elements comprising the function, seeking to confirm alignment with regulatory best practices, between June and July 2022, the annual monitoring audit was carried out by AENOR, confirming that CaixaBank's Compliance Management System meets the requirements of the Standard and the rest of the audit criteria.

Third line of defence

Internal Audit acts as the third line of defence, independently supervising the activities of the first and second lines to provide Senior Management and Governing Bodies with a reasonable degree of security.

In order to establish and preserve the function's independence, Internal Audit Management functionally reports to the Chair of the Audit and Control Committee, without prejudice to the fact that it must report to the Chairman of the Board of Directors for the due compliance of duties.

Internal Audit has a rule book governing how it operates, which has been approved by the Board of Directors. It establishes that it is an independent and objective assurance and consultation function, established to add value and improve operations. Its objective is to provide reasonable assurance to Senior Management and the Governing Bodies with regard to:

•	The effectiveness and efficiency of internal control systems in offsetting the risks associated with the Group's activities.
•	Compliance with the legislation in force, with special attention to the requirements of supervisors and the suitable application of the defined global management and risk appetite frameworks.
•	Compliance with internal policies and regulations, and alignment with best practices and uses in the sector, for adequate internal governance of the Group.
•	The reliability and integrity of information, including the effectiveness of the Internal Control System over financial and non-financial reporting (ICFR and ICNFR). Its main supervisory functions include:
•	The adequacy, effectiveness and implementation of policies, regulations and procedures.
•	The effectiveness of controls.
•	Adequate measurement and monitoring of first line of defence and second line of defence indicators.
•	The existence and correct implementation of action plans to remedy shortcomings in controls.
•	The validation, monitoring and assessment of the control environment by the second line of defence. Its duties also include:
•	Preparing the multi-year Annual Audit Plan based on risk assessments, which includes regulatory requirements and tasks and projects requested by Senior Management and the Audit and Control Committee. In that regard, the 2022 Annual Audit Plan has focused on six particularly relevant fields: the post-merger with Bankia, the governance of the Entity, the evolution of the lending portfolio in the macroeconomic context (portfolio quality post-COVID and Ukraine-Russia conflict), cybersecurity, profitability and sustainability.
•	The periodical report on the conclusions of works carried out and weaknesses detected, passed on to Governing Bodies, senior management, external auditors, supervisors and all other relevant control and management environments.
•	Adding value by proposing recommendations to address weaknesses detected in reviews and monitoring their implementation by the appropriate centres.

3.2.2 Governance and organisation

Below is the organisational diagram in relation to the governance of risk management:

3.2.3 Strategic risk management system

The goal of strategic risk management processes is to identify, measure, monitor, control and report on risks. To this end, the processes include three key elements, which are developed below: risk assessment (identification and evaluation), the risk catalogue (taxonomy and definition) and the risk appetite framework (monitoring).

The result of strategic processes is reported at least annually, first to the Global Risk Committee and then to the Risk Committee, before finally being submitted to the Board of Directors for approval.

Identification and risk assessment

The Group conducts a risk profile self-assessment process every six months, seeking to:

•	Identify and assess inherent risks assumed by the Group in its environment and business model.
•	Make a self-assessment of its risk management and control capacities, as a tool to help detect best practices and weaknesses in relation to risks. This process makes it possible to determine the status of each of the material risks identified in the Corporate Risk Catalogue and, also taking into account the internal governance assessment, to determine the Group's risk profile. The Risk Assessment is one of the main sources for identifying the following:
•	Emerging risks:a risk whose materiality or importance for the institution is increasing to the extent that it could be included directly in the Corporate Risk Catalogue.
•	Strategic events: the most relevant occurrences that may result in a medium-term material impact on the Group. Only events that are not yet materialised and do not form part of the Catalogue, but which the organisation's strategy is exposed to are considered, even if the severity of their impact can be mitigated through management. If a strategic event occurs, the impact may be on one or more of the risks of the Catalogue simultaneously.

Corporate Risk Catalogue

The Corporate Risk Catalogue is the Group's risk taxonomy. It promotes internal and external monitoring and reporting of risks and consistency across the Group, and is subject to regular review at least on an annual basis. This update process also evaluates the materiality of the emerging risks previously identified in the Risk Assessment process and covers the definition of strategic events.

The definition of each risk is set out below:

Risks		Description
Transversal risks	Business profitability	Results achieved that are below market expectations or the Group's targets and that ultimately impede the Group from reaching a sustainable level of profitability that exceeds the cost of capital
Transversal risks	Own resources and solvency	Restriction of the CaixaBank Group's ability to adapt its volume of own resources to the regulatory demands or to modify its riks profile.
Transversal risks	Reputational	Potential financial losses or reduced income for the Group, as a result of events that negatively affect the perception that stakeholders have of the CaixaBank Grout.
Financial risk	Loans and advances	Loss of value of the assets of the Caixabank Group due to a customer's impaired ability to make good on its commitments to the Group. It includes the risk generated by financial market operations (counterparty risk).
Financial risk	Actuarial	The risk of loss or adverse change in the value of the liability undertaken through insurance or pension cntracts with customers or employees resulting from a divergence between actuarial variables used for pricing and reserves, and their real performance.
Financial risk	Structural risk	Negative impact on the economic value of the balance sheet's items or on the financial margin due to changes in the temporary structure of interest rates and its impact on asset and liability instruments and those outside of the Group's balance sheet not recorded in financial assets held for trading.
Financial risk	Funding and liquidity	Risk of insufficient liquid assets or limited access to market financing to meet contractual maturities of liabilities, regulatory requirements, or the investment needs of the Group.
Financial risk	Market	Loss of value, impacting on performance or solvency, of a portfolio (set of assets and liabilities), due to unfavourable movements in prices or market rates.
Operational risk	Conduct and compliance	The application of conduct criteria that run contrary to the interests of customers and stakeholders, or acts or ommissions that are not compliant with the legal or regulatory framework, or with internal codes and rules, or with codes of conduct and ethical and good practice standards
Operational risk	Legal and regulatory	The potential loss or decrease in the profitability of the CaixaBank Group as a result of changes in the legislation, of the incorrect implementation of this legislation in the CaixaBank Group's processes, of the inappropiate interpretation of the same in various operations, of the incorrect management of court or administrative injunctions, or of the claims or complaints received.
Operational risk	Technological	Losses due to inadequacies or faults in the hardware or software of the technology infrastructure, due o cyberattacks or other circumstances, that could compromise the availability, integrity, accessibility or security of the infrastructure and the data.
Operational risk	Model	Potential adverse consequences for the Group that could arise as a result of decissions based primarily on the outcome of internal models that are incorrectly built, applied or used.
Operational risk	Other operational risk	Losses or damages caused by errors or faults in processes, due to external events, or actions or third parties outside the Group, whether accidentally or intentionally. It includes, among others, risk factors related to outsourcing, operational continuity or external fraud.

The most relevant amendments of this year's review are:

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The risk of reliability is derecognised as it is not considered so much a risk as a set of processes that are absolutely critical and necessary to ensure the existence of a robust control environment that minimises the possibility of errors in the generation of information for the monitoring and management of risks.

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With respect to sustainability risk (ESG), it considers a cross factor with an impact on several risks in the Catalogue (credit, reputational and other operational risks), also adding mentions of climate change and other environmental risks in the definitions of legal and regulatory risk. Liquidity and market risks are not specifically mentioned given the low level of materiality applicable to them. However, in any case it has been assessed that the stress tests conducted are of sufficient magnitude to include impacts in these areas of climatic origin.

ESG risk factors

The consideration of sustainability risks (ESG) as a cross-cutting factor is also the approach adopted by the majority of financial institutions and regulators/supervisory bodies.

Within the ESG risk factors, climate risks in particular are highly complex to measure. The climate risk assessment is based on climate change scenarios and takes into account various time horizons. In line with supervisory expectations, CaixaBank has taken into account in its materiality assessment the following climate scenarios laid down by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS): i) orderly transition; ii) disorderly transition and iii) hot house world. Out of the three scenarios identified, the orderly transition scenario has been selected as the base scenario for the materiality assessment, given that it is consistent with the commitments assumed by CaixaBank and is currently still the most likely scenario in the European Union framework.

In a scenario of an orderly transition, the main impacts of climate risk relate to the long term in legal persons' credit portfolios, whereas the impact on the rest of financial risks is lower or circumstantial (see section "Sustainability risk management" in the Consolidated Management Report).

Risk Appetite Framework

The Risk Appetite Framework (RAF) is a comprehensive and forward-looking tool used by the Board of Directors to determine the types and thresholds of risk (risk appetite) it is willing to assume in achieving the Group's strategic objectives.1. These objectives are formalised through qualitative statements in relation to the risk appetite, expressed by the Board of Directors, and the metrics and thresholds that allow for the development of the activity to be monitored for the different risks of the Corporate Catalogue.

To determine the thresholds, as applicable, the references taken into account are current applicable regulatory requirements, historical developments and standardised and structural approaches, and strategic objectives with a sufficient additional margin to allow for early management to prevent non-compliance. ¹

3.2.4. Risk culture

The risk culture at the Group will encompass the conduct and attitudes towards risk and the management thereof of employees, reflecting the values, objectives and practices shared by the entire Group, and it is integrated into management through its policies, communication and staff training.

This culture influences employees' management decisions in their day-to-day work to prevent any behaviour that could unintentionally increase risks or lead to unacceptable risks. It is based on a high level of risk awareness and risk management, a robust governance structure, open and critical dialogue across the organisation, and the absence of incentives for unwarranted risk-taking.

This, actions and decisions involving an assumption of risk are:

•	Aligned with the Group's corporate values and basic principles of action.
•	Aligned with the Group's risk appetite and risk strategy.
•	Based on exhaustive knowledge of the risks involved and how to manage them, including environmental, social and governance factors.

The risk culture includes, but is not limited to, the following elements:

Responsibility

CaixaBank's Board of Directors is responsible for establishing and supervising the implementation of a solid and diligent risk culture in the organisation, which promotes conduct in line with risk identification and mitigation. Furthermore, they shall examine the impact of such a culture on the financial stability, risk profile and appropriate governance of the institution and make changes where necessary.

All employees must be fully aware of their responsibility towards risk management; management that does not only correspond to risk experts or internal control functions, given that the business units are primarily responsible for the day-to-day management of risks.

Communication

CaixaBank's management assists the governing bodies in establishing and communicating the risk culture to the rest of the organisation, ensuring that all members of the organisation are aware of the fundamental values and associated expectations in risk management, an essential element for maintaining a robust and coherent framework aligned with the Group's risk profile.

In this regard, the Risk Culture project, which aims to raise awareness of the importance of all employees in risk management (credit, environmental, etc.) in order to be a solid and sustainable bank, has marked a turning point in the dissemination of the risk culture throughout the Entity. Various actions intended to raise awareness of the risk culture among all CaixaBank employees within the framework of this project, by publication on the intranet, as well as other places, of news related to risk projects.

Throughout 2022, the risk news channel on the intranet has published items explaining the most important projects and providing generic information on risk management concepts. Among these initiatives, of particular note is the communication of the Code of Good Practice for risk management of the ICO COVID facility, the development and deployment of the risk exposure limit tool for large exposures (LEX) and the implementation of the first phase of the Environmental Risk Reports (IRMA) for eligible customers under the new Corporate Sustainability Policy.

Furthermore, the corporate risk intranets (business and retail) comprise a dynamic environment for directly communicating key updates in the risk environment. They are notable for their content on news, institutional information, sector information, training and FAQs.

The figures for the Group's main training initiatives in the field of promoting risk culture are as follows:

Risk training and culture

Course	Title	Group trained	Number of people
Banking risk basic course (latest edition)	Basic level university qualification	Generalist managers and staff from the business network of branches and other stakeholders who may need a basic knowledge of the organisation's risk management criteria to carry out their work	2,259 (accumulated)
Postgraduate Diploma in Banking Risk Analysis (8th retail edition and 4rd business edition)	University diploma	Business network branch deputy managers and managers and other stakeholders who, given their role, may be involved in approving loans or may require in-depth knowledge of risk	300 on-going for retail and 700 for business (Employees certified: 1,937 accumulated in retail and 423 business)
Specialist training in risks for AgroBank branches	Speciality	Employees that make up the AgroBank branch network	2,105 (accumulated)
Specialist training in risks for BusinessBank branches	Speciality	Employees that make up the BusinessBank branch network	631 (accumulated)
Specialist training in risks for Private Banking branches	Speciality	Employees that make up the Private Banking network	595 (accumulated)
Training in Property Credit Contract Act 5/2019 (6th and 7th editions)	Certificate of specialisation from Pompeu Fabra University - BSM	A refresher course on the new act 5/2019 intended for employees that comprise the Retail, Business and Risk network	28,278 (accumulated)
Training in document compliance and data quality	Internal training	Aimed at all employees to improve awareness of risk aspects such as document integrity and the quality of data entered into the systems	20,293
Basic Course on Economic - Financial Analysis	Internal training	Intended for the Retail and Company Centre network collective, including Welcome - Company Banking, Welcome - Business Bank	474
Risk Management and Company Banking Circuits training	Internal training	A specific training course on risk policies and circuits has been developed for the group of professionals in the Risk department arising from the merger with Bankia	610

Performance assessment and remuneration

The Group seeks to keep the motivation of its employees in line with the risk culture, and with compliance of the risk levels that the Board is prepared to take on. Thus, responsibility for risk management will be embedded, as appropriate, in the duties performed by employees, including their personal goals, performance appraisal and remuneration structures.

Along these lines, there are compensation schemes in remuneration policies that establish adjustments to the remuneration of senior executives and other groups whose activities have a significant impact on the risk profile directly linked to the annual progress of the RAF metrics and which are specified in the Annual Remunerations Report.

3.3 CROSS RISKS

3.3.1 Business profitability risk

Business profitability risk refers to obtaining results below market expectations or Group targets that, ultimately, prevent the company from reaching a level of sustainable returns that exceeds the cost of capital.

The profitability targets, based on a financial planning and monitoring process, are defined in the Group's Strategic Plan, for a three-year term, and are specified annually in the Group's budget and in the challenges for the commercial network.

The Group has a corporate Policy for Business Profitability risk management. Management of this risk is founded on four visions of management:

•

Group vision: the overall aggregated return at the level of CaixaBank Group.

•

Business/Region vision: the return from businesses/territories.

•	Financial-Accounting vision: the return from different corporate businesses.
•	Commercial-Management vision: the return from the management of the CaixaBank commercial network.

•

Pricing vision: the return from setting prices for CaixaBank products and services.

•

Project vision: the return from relevant Group projects.

The risk management strategy for business profitability is closely integrated with the capital adequacy and liquidity management strategy of the Group, and is supported by the strategic risk processes (Corporate Risk Catalogue, risk assessment and RAF).

3.3.2 Risk of own funds and capital adequacy

The risk of own funds and capital adequacy responds to the potential restriction of the Group to adapt its volume of own funds to regulatory requirements or a change to its risk profile.

The Group has set an objective of maintaining a medium-low risk profile and a comfortable level of capital to strengthen its position. Capital adequacy to cover eventual unexpected losses is measured from two different perspectives and using different methodologies: regulatory capital and economic capital.

Regulatory capital is the metric required by regulators and used by analysts and investors to compare financial institutions. It is governed by Regulation 575/2013 (CRR) and Directive 2013/36/EU of the European Parliament and of the Council (CRD 4) which incorporated the Basel III regulatory framework (BIS III) into the European Union. Whereas the CRR was directly applied in Spain, CRD 4 was transposed to Spanish law through Act 10/2014 on the arrangement, monitoring and solvency of credit institutions and its subsequent regulatory development through Royal Decree 84/2015 and Bank of Spain Circular 2/2016.

On 27 June 2019, a comprehensive package of reforms to amend the CRR and CRD 4 came into force. i) Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 (CRR2 ii) Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019 (CRD 5). CRD5 partially incorporated Spanish legislation through Royal Decree Law 7/2021 (amending, inter alia, Act 10/2014). Similarly, Royal Decree 970/2021 amended, among others, RD 84/2015. Lastly, with the approval of Bank of Spain Circular 3/2022, amending Circular 2/2016, CRD5 is fully transposed into Spanish law. Similarly, following the transposition to European legislation in 2013, the Basel Committee and other relevant bodies published a series of additional rules and documents containing new specifications for the calculation of capital.

This means that procedures are constantly being updated, and therefore the Group continuously adapts its processes and systems to ensure the calculation of capital consumption and deductions from own funds are fully aligned with the new established requirements.

Meanwhile, the economic capital measures the internal criteria for own funds and capital requirements for all risks derived from its activity. This measure complements the regulatory vision of capital adequacy, allows for it to better offset the risk assumed by the Entity and includes risks that have not been factored in at all or only partially by the regulatory measures. In that regard, in addition to the risks referred to in Pillar I (credit, market and operational risk), it includes others also included in the Corporate Risk Catalogue, (e.g. interest rate risk in the banking book, and liquidity, business profitability and actuarial risk, etc.). This vision is used for i) the self-assessment of capital, subject to presentation and periodical review in the Group's corresponding bodies; ii) as a control and monitoring tool; iii) risk planning and iv) calculating Risk-Adjusted Return (RAR) and Pricing. In contrast with regulatory capital, economic capital is an internal estimate which is adjusted according to the level of tolerance to risk, volume, and type of business activity.In addition to the risks referred to in Pillar I (credit, market and operational risk), it includes others also included in the Corporate Risk Catalogue , (e.g. interest rate risk in the banking book, and liquidity, business and actuarial risk, etc.).

In addition, the regime under Directive 2014/59/EU (BRRD) and Regulation 806/2014/EU (SRM) of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms, implemented in Spain through Act 11/2015 and Royal Decree 1012/2015, requires that banks must have minimum qualifying own funds and liabilities (MREL). The abovementioned comprehensive reform package also amended the BRRD and SRM Regulation, giving rise to BRRD 2 and SRM 2. BRRD 2 has been incorporated into Spanish legislation through Royal Decree-Law 7/2021 (which has amended, among others, Act 11/2015 and Royal Decree 1041/2021 which has amended Royal Decree 1012/2015).

The Group has a Corporate Policy for Own Funds and Capital Adequacy Risk that covers a broad concept of own funds, including both eligible own funds under prudential regulations and eligible instruments for hedging MREL minimum requirements, the purpose of which is to lay down the principles on which capital objectives are determined in CaixaBank Group, as well as to lay down a common set of guidelines in relation to the monitoring, control and management of own funds that allow this risk to be mitigated, among other aspects. Similarly, the main processes comprising the management and control of capital adequacy and own funds risk are as follows: i) ongoing measurement and internal and external reporting on regulatory capital and economic capital through relevant metrics; ii) capital planning in different scenarios (standardised and stress scenarios, including ICAAP, EBA Stress Test and Recovery Plan), integrated in the corporate financial planning process, which includes the projection of the Group's balance sheet, income statement, capital requirements and own funds and capital adequacy. All of this is accompanied by monitoring of the capital regulations applicable at present and over the coming years.

For further information on the risk management of own funds and capital adequacy, see Note 4 - Capital Adequacy Management.

3.3.3 Reputational risk

Reputational risk is defined as any potential economic loss or lower revenue for the Group as a result of events that negatively affect the perception that stakeholders have of CaixaBank Group.

The Entity manages this risk to maintain sufficient liquidity levels so that it can comfortably meet all its payment obligations and to prevent its investment activities from being affected by a lack of lendable funds, at all times within the risk appetite framework (RAF). The strategic principles to achieve the liquidity management objectives are as follows:

Some areas of risk identified by the Group in which such perceptions could be impaired are, among others, the inadequate design and marketing of products, inefficient information security systems, and the need to promote ESG aspects (Environmental, Social and Corporate Governance) in the business, including climate change, talent development, work-life balance, diversity and occupational health.

The risk is monitored using internal and external selected reputational indicators from various sources of stakeholder expectations and perception analysis. The measurement indicators are weighted according to their strategic importance and are grouped in a balanced reputation scorecard that enables a Global Reputation Index (GRI) to be obtained. This metric allows for the positioning to be temporarily monitored on a quarterly basis, by sector, and for the tolerated ranges and metrics to be established in the Risk Appetite Framework.

The Group has a specific policy for reputational risk management based on the Company's three lines of defence model, which outlines and extends on the principles governing the management and control of this risk in the Group. It covers the regulatory framework, general principles and strategy governing reputational risk management, governance framework, control framework and functions, as well as the reporting framework for this risk. Its scope covers all Group companies.

Specifically, the Group's reputational risk management and control strategy includes:

•	The regular identification and assessment of reputational risks, for which there is a specific taxonomy (risk catalogue) and regular assessment and analysis processes (half-yearly risk assessment, regular analysis of perceptions, identification of crisis milestones, studies and market benchmarks).
•	Management and prevention policies and procedures including, besides the creation of the abovementioned policy, the development of the reputational risk culture in all Group companies and internal procedures for reputational crisis management with detection protocols, severity scales, and actions to curtail or eliminate potential negative effects.
•	Risk prevention and fostering of reputation by managing communication channels and dialogue with stakeholders, analysing business operations from this perspective, and developing communication initiatives that strengthen the visibility and recognition of corporate values among stakeholders.
•	Risk monitoring and control through both internal and external indicators, such as RAF reputation metrics, control framework review, regulatory compliance, and the development of regular reputation control and measurement systems.
•	Lastly, regular reporting to the governing bodies, to the Entity's senior management, as well as to the supervisors, for informed decision-making in this area.

In addition, in 2022, the Board of Directors approved the biennial update of the Corporate Communication Policy. This policy includes reference to the Corporate Reputational Risk Management Policy, which was approved after the Corporate Communication Policy. In this regard, it is indicated that both policies are aligned.

3.4 Financial Risks

3.4.1 Credit risk

Overview

Credit risk corresponds to a decrease in value of the Group's assets due to uncertainty about a customer's ability to meet its obligations to the Group. It includes the risk generated by financial market operations (counterparty risk). It is the Group's most significant risk financial activity, based on banking and insurance marketing, treasury operations and long-term equity instruments (shareholder portfolio).

The maximum credit risk exposure of the financial instruments included under the financial instruments headings on the asset side of the balance sheet, including counterparty risk, are set out below:

Maximum exposure to credit risk

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Maximum exposure to credit risk	Hedge	Maximum exposure to credit risk	Hedge	Maximum exposure to credit risk	Hedge
Financial assets held for trading (Note 11)	419		606		1,056
Equity instruments	233		187		255
Debt securities	186		419		801
Financial assets not designated for trading compulsorily measured at fair value through profit or loss (Note 12)	183		237		317
Equity instruments	127		165		180
Debt securities	6		5		52
Loans and advances	50		67		85
Financial assets at fair value with changes in other comprehensive income (Note 13)	12,942		12,942		19,309
Equity instruments	1,351		1,646		1,414
Debt securities	11,591		14,757		17,895
Financial assets at amortised cost (Note 14)	450,171	-7,417	428,873	-8,274	273,129	-5,620
Debt securities	77,749	-16	68,220	-14	24,681	-11
Loans and advances	372,422	-7,401	360,653	-8,260	248,448	-5,609
Central banks			63		4
Credit institution	12,195	-8	7,814	-8	5,847
Customers	360,227	-7,393	352,776	-8,252	242,597	-5,609
Trading derivatives and hedge accounting	2,922		4,466		4,120
Assets under the insurance business (Note 17)	68,534		83,464		77,241
TOTAL ACTIVE EXPOSURE	535,171	-7,417	534,049	-8,274	375,172	-5,620
TOTAL GUARANTEES GIVEN AND CONTINGENT COMMITMENTS ( ^*)	162,165	-547	144,417	-461	105,066	-193
TOTAL	697,336	-7,964	678,466	-8,735	480,238	-5,813

( ^*) CCF (Credit Conversion Factors) for guarantees given and credit commitments amount to EUR 110,335, 96,458 and 75,560 million at 31 December 2022, 2021 and 2020, respectively

The maximum exposure to credit risk is the gross carrying amount, except in the case of derivatives, which is the exposure value according to the mark-to-market method, which is calculated as the sum of:

•	Current exposure: the highest value between zero and the market value of an operation or of a portfolio of operations in a set of operations that can be offset with a counterparty that would be lost in the event of non¬payment of the counterparty, assuming that none of the value of the operations will be recovered in the event of insolvency or settlement beyond the collateral received.
•	Potential risk: variation of the credit exposure as a consequence of the future changes of the valuations of operations that can be offset with a counterparty during the residual term until maturity.

The Group gears its lending activity towards meeting the finance needs of households and businesses and providing value-added services, within the medium-low risk profile set as a target in the RAF.

The corporate credit risk management policy, approved by the Board of Directors, lays down the general framework and basic principles that serve as a benchmark and minimum standard for the identification, assessment, approval, monitoring and mitigation of credit risk, as well as the criteria for quantifying the hedging of expected losses from this risk, for both accounting and capital adequacy purposes.

The core principles and policies that underpin credit risk management in the Group are as follows:

•	The credit risk management policy and strategy, as well as the frameworks and limits for controlling and mitigating this risk, are integrated and consistent with the overall risk strategy and appetite.
•	Clear definition and allocation of responsibilities to the different areas participating in the cycle of granting, managing, monitoring and controlling credit risk, in order to guarantee effective management of this risk.
•	The business lines and units that generate credit risk are primarily responsible for managing the credit risk generated by their activities throughout the credit life cycle. Such business lines and units have adequate internal controls to ensure compliance with internal policies and applicable external requirements. The risk management function will be responsible for assessing the adequacy of these controls.
•	The granting is based on the borrower's repayment capability, with an adequate relationship between the income and expenses they assume. In general, guarantees, whether personal or collateral, do not replace a lack of repayment capacity or an uncertain purpose of the transaction.
•	An adequate assessment is conducted both on guarantees and assets that are foreclosed or received in payment of debt.
•	The pricing system is adjusted to the risk assumed in the transactions, in such a way as to ensure the appropriate relationship of the risk/profitability duality and in which the guarantees act as a mitigation element, especially in long-term transactions.
•	The development of internal models for rating exposures and borrowers, as well as to measure risk parameters for the purposes of consumption of regulatory capital or provisions, ensures the establishment and standardisation of key aspects of these models according to a methodology adapted to suit the characteristics of each portfolio.
•	There is an independent system of internal validation and regular review of credit risk models used for both management and regulatory purposes, for which materiality criteria is applied.
•	There is a monitoring framework that ensures that information on credit risk exposures, borrowers and collateral are relevant and kept up-to-date throughout the life cycle of credit exposures, and external reports are reliable, complete, up-to-date, and drawn up within the time limits.
•	Criteria has been established for the accounting classification of transactions and for quantification of expected losses and capital requirements for credit risk that faithfully reflect the credit quality of assets.
•	The recovery process is governed by the principles of anticipation, objectivity, effectiveness, and customer orientation. The recovery circuit has been designed in such a way as to be articulated based on early detection of the possibility of default and appropriate measures have been provided for effectively claiming debts.

Credit risk cycle

The full credit risk management cycle covers the entire life of the transaction, from feasibility studies and the approval of risks as per established criteria, to monitoring solvency and returns and, ultimately, to processing and recovering non-performing assets. The Corporate Credit Risk Policy lays down the general framework and core principles that primarily pursue consistency with the Group's overall risk appetite and strategy and effective risk management at each stage of the cycle.

Approval and granting

The approval function is the primary step in the credit risk management process, and the application of strict methodologies in the application, analysis and approval processes will largely contribute to the successful repayment of transactions. The process for admitting and granting new loans is based on the analysis of the solvency of the parties involved and characteristics of the transaction.

The power system assigns an approval level to certain employees holding a position of responsibility established as standard associated with their position. It is based on the study of four key parameters:

•

Amount: financial amount applied for plus any risk already granted; this is the first key element and it involves calculating the accumulated risk for each of the title holders of the application and, where applicable, their economic group. The amount of the operation is defined through two alternative methods according to the sector to which the operations belong:

•	Product-weighted loss: based on the expected-loss calculation formula, it takes into account the risk appetite according to the nature of each product. This system is used for applications where the principal borrower is a legal person.
•	Nominal: it factors in the nominal amount and guarantees of risk operations. It applies to individuals.

•

Guarantee: the group of assets and/or funds pledged to secure fulfilment of a repayment obligation. However, the risk decision is generally based on the debtor's repayment capacity, not on their guarantees.

•

Term: this refers to the duration of the operations requested, which must be coherent with the purpose. There are specific policies according to the type of operation and its term, which require a higher level of authority for their approval.

•

Policies that amend the approval level: raft of criteria identifying and assessing the relevant variables of each type of transaction, and which involve specific processing. It takes into account aspects such as default alerts in external or internal databases, the scoring/rating diagnosis, the debt ratio, the ratings as a result of the monitoring activity or the fact that the transaction is of a small amount.

Except those that can be approved at branch level or by the Business Area Manager, the approval of the risk of any transaction.

Transactions beyond the powers of the commercial network will be transferred to the appropriate Risk Acceptance Centre according to the type of holder. Risk Acceptance Centres will have certain levels of risk approval, in such a way that if the level of risk requested to approve a transaction is not beyond its authority, it may be approved within its remit. Otherwise the request will be forwarded to the required top-level centre.

In order to facilitate agility in granting, there are Risk Acceptance Centres according to the type of holder:

•	individuals and self-employed workers in a centralised Individuals Approval Centre in Corporate Services, and
•	legal entities in Approval Centres distributed throughout the country, which manage the applications within their power levels, and transfer them to specialised Corporate Service centres in the event the application exceeds their powers.

Credit pre-granting is also conducted for legal entities and individuals in the micro-enterprise and small enterprise segments for certain products and in accordance with defined risk limits and criteria.

In particular, the internal organisation of Business Risk Approvals at Central Services is based on the following specialised structure, according to the type of risk and customer segment:

•	Corporate Risks: centralises business groups with an annual turnover above EUR 200 million in the Corporate centre and in the International Branches.
•	Business Risk: legal entities or business groups with turnover up to EUR 200 million and those with turnover over EUR 200 million not managed by Corporate centres or the International Branches nor those that belong to specialised sectors (Property, Agro-food, Tourism or Project Finance).
•	Real Estate Risk: covers developers in any segment, regardless of turnover, and real estate investment companies, including real estate project finance.
•	Food and Agriculture and Tourism Risk: covers all companies and business groups that operate in the tourism and food and agriculture sectors. It also includes self-employed professionals in the farming sector.
•	Project Finance: includes all operations presented through the project finance scheme, object finance, and asset finance operations.
•	Institutional Banking: comprises public autonomous or central government institutions, town councils and local institutions, and members of economic groups or management groups whose representative/parent meets the aforementioned criteria. It also includes private institutions (foundations, universities, NGOs, religious orders, etc.) managed by the Institutions' Centres.
•	Financial Institutions and Country and Sovereign Risk: responsible for granting and managing country risk and financial institution risk inherent in funding transactions for the various segments.

Lastly, the Standing Credit Committee holds the power to approve transactions on the basis of specific limits both in terms of individual transactions and in terms of cumulative risk with the client or its group and, in general, it holds the power to approve transactions that involve exceptions in their characteristics to those that can be approved in branches and in Risk Acceptance Centres. In the event of exceeding the aforementioned powers, the power of approval corresponds to the Executive Committee.

In order to ensure an adequate level of protection of the banking service customer, there are policies, methods and procedures for studying and granting loans, or responsible lending, as required in Act 2/2011 on Sustainable Economy and Order EHA/2899/2011 on transparency and protection of customers of banking services, or the more recent Property Credit Contract Regulatory Act 5/2019, of 15 March.

For pricing purposes, all the factors associated with the transaction are taken into account, which are essentially the costs of structure, financing and the cost of risk. Furthermore, operations must provide a minimum contribution to capital requirements, which will be calculated net of tax.

Tools related to pricing and RAR (Risk-Adjusted Return) allow the highest standards to be reached in controlling the balance between risk and return, making it possible to identify the factors determining the returns of each customer more easily and, thus, to analyse customers and portfolios in accordance with their adjusted returns.

The business divisions are responsible for approving the prices of the operations. Following on from this, the determination of the prices is subject to a power system focused on obtaining minimum compensation and on establishing margins according to different businesses.

Mitigation of the risk

The Group's credit risk management profile is characterised by a prudent granting policy, at a price in keeping with the conditions of the borrower and suitable hedges/guarantees. In any case, long-term operations must have more robust guarantees due to the uncertainty deriving from the passing of time. These guarantees should never be used to substitute a lack of repayment capacity or an uncertain outcome for the operation.

For accounting purposes, effective guarantees or collateral are collateral and personal guarantees that can be demonstrated as valid as risk mitigators, according to: i) the amount of time required for their enforcement; ii) the ability to realise the guarantees; and iii) the experience in realising the same. The different types of guarantees and collateral are as follows:

•

Personal guarantees or those constituted due to the solvency of holders and guarantors: most of these relate to risk operations with companies in which the collateral provided by the shareholders, irrespective of whether they are individuals or legal entities, is considered relevant. For individuals, collateral is estimated on the basis of asset declarations. Where the backer is a legal entity, it is analysed as the borrower for the purposes of the approval process.

•

Collateral, main types:

•

Pledged collateral: they notably include the pledge of operations of liabilities or the intermediated balances. To be admitted as collateral, financial instruments must, among other requirements: i) be free of liens and charges; ii) their contractual definition must not restrict their pledge; and iii) their credit quality or change in value must not be related to the borrower. The pledge remains in place until the loan matures, it is repaid early, or it is derecognised.

•

Mortgage guarantees on properties. A real right on immovable property given as security for an obligation, on which, according to internal policy, the following is established:

―	The procedure for approval of guarantees and the requirements for drawing up operations, e.g., the documentation that must be supplied by the holders and the mandatory legal certainty of this documentation.
―	The review processes for the appraisals registered, in order to ensure proper monitoring and control of the guarantees. Regular processes are also carried out to check and confirm the appraisal values, in order to detect any anomalies in the procedures used by the valuation companies supplying the Group.
―	The outlay policy, mainly concerning property development and self-development operations.
―	The loan-to-value (LTV) of the operation. The capital to be granted in mortgage operations is limited to percentages of the value of the guarantee, which is defined as the lowest of the appraisal value and the value shown on the official deed or the accredited value of the property. IT systems calculate the level of approval required for each type of operation.

•

Credit derivatives: guarantors and counterparty. The Group occasionally uses credit derivatives, contracted with entities with a high credit level and protected by collateral contracts, to hedge against credit risk.

A breakdown of the guarantees received in the approval of the Group's lending transactions is provided below, specifying the maximum amount of the collateral that can be considered for the purposes of calculating impairment: the estimated fair value of property according to the latest appraisal available or an update on the basis of the provisions of applicable regulations in force. In addition, the remaining collateral is included as the current value of the collateral that has been pledged to date, not including personal guarantees:

Categorisation by stage of the credit investment and affected guarantees ^* (1)

(Millions of euros)

	31-12-2022
	GROSS AMOUNT	Allowances for impairment	Value of the collateral ^**
Stage 1:	319,367	-1,342	418,522
Unsecured loans	159,000	-747
Real estate collateral	156,037	-589	412,780
Other collateral	4,330	-6	5,742
Stage 2 + POCI without impairment:	28,565	-1,368	37,484
Unsecured loans	12,929	-679
Real estate collateral	15,245	-675	36,995
Other collateral	391	-14	489
Stage 3 + POCI with impairment:	10,086	-4,681	12,108
Unsecured loans	3,860	-2,301
Real estate collateral	6,106	-2,300	12,063
Other collateral	120	-80	45
TOTAL	358,018	-7,391	468,114

Categorisation by stage of the credit investment and affected guarantees ^* (2)

(Millions of euros)

	31-12-2021			31-12-2020
	GROSS AMOUNT	Allowances for impairment	Value of the collateral ^**	GROSS AMOUNT	Allowances for impairment	Value of the collateral ^**
Stage 1:	306,212	-966	426,791	212,834	-920	276,360
Unsecured loans	139,850	-638		102,733	-606
Real estate collateral	157,084	-298	418,866	103,520	-280	269,795
Other collateral	9,278	-30	7,925	6,581	-34	6,565
Stage 2 + POCI without impairment:	31,440	-1,632	37,094	20,066	-1,064	25,846
Unsecured loans	14,372	-716		8,299	-606
Real estate collateral	16,323	-884	36,399	11,183	-411	25,004
Other collateral	745	-32	695	584	-47	842
Stage 3 + POCI with impairment:	12,967	-5,653	15,291	8,256	-3,625	9,761
Unsecured loans	4,158	-2,731		2,334	-1,869
Real estate collateral	8,658	-2,839	15,256	5,787	-1,698	9,572
Other collateral	151	-83	35	135	-58	189
TOTAL	350,619	-8,251	479,176	241,156	-5,609	311,967

^(*) Includes loans and advances to customers under the headings "Financial assets measured at amortised cost" (Note 14) and "Financial assets not designated for trading compulsorily measured at fair value through profit or loss" (Note 12).

^(**) Reflects the maximum amount of the effective collateral that can be considered for the purposes of the impairment calculation, i.e. the estimated fair value of real estate properties based on their latest available valuation or an update of that valuation based on the applicable standard in force. In addition, the remaining collaterals are included as the current value of the collateral that has been pledged to date, not including personal guarantees.

On the other hand, counterparty risk mitigation measures are specified at the end of this section.

Monitoring and measurement of credit risk

The Group has a monitoring and measurement system that guarantees the coverage of any borrower or operation through methodological procedures adapted to the nature of each holder and risk:

1.

Borrower monitoring processes

The aim is to determine the quality of the risk assumed with the borrower ("Monitoring Rating") and actions that need to be taken according to the result, including the estimation of impairment. The targets of risk monitoring are the borrowers that hold the debt instruments and off-balance sheet exposures that bear credit risk, and the profit or loss is a reference for the future granting policy.

The Credit Risk Monitoring Policy is prepared based on the type and specific nature of the exposure, segregated into differentiated areas, in accordance with the various credit risk measurement methods.

The Monitoring Rating is an assessment of each customer's situation and risks. All borrowers have a monitoring rating which classifies them into one of five categories2 which are, from best to worse: insignificant risk, low risk, moderate risk, high risk or doubtful; and they can be generated manually (in the case of the scope of borrowers under individualised monitoring) or automatically (for the rest).

According to the scope of monitoring and rating relating to the borrowers, monitoring can be: ²

•

Individualised: applied to exposures of a significant amount or that have specific characteristics. The monitoring of major risks leads to the issuance of group monitoring reports, concluding in a monitoring rating for the borrowers in the group.

The Group defines individually significant borrowers (Single Names) as those that meet the following thresholds or characteristics:

•	Exposure of greater than EUR 30 million for two consecutive months or greater than EUR 36 million for one month.
•	Exposure of greater than EUR 10 million for two consecutive months or greater than EUR 12 million for one month, which meet at least one of the following criteria: expected loss of greater than EUR 200 thousand, with refinanced operations, with early non-performing loans (>45 days) or those that form part of the Entity's consolidated group through the equity consolidation method.
•	Exposure of more than EUR 5 million with non-performing operations (objective or subjective) representing more than 5% of the total risk of the borrower.
•	Borrowers that form part of the Group (due to global integration), with the exception of BPI.

•

Collective: The ratings are obtained by combining a statistical model, referred to as the Early Alert Model (EAM), the Probability of Default (PD) calibrated with a forward-looking view (consistent with the PD used to calculate the credit risk hedges) and other relevant alerts. Both the EAM and the PD are obtained at least on a monthly basis, and daily in the case of the alerts.

Similarly, the EAM and PD models are subject to the credit risk model management policy.

2.

Quantifying and assessing credit risk

Credit risk quantifies losses that might derive from failure by borrowers to comply with their financial obligations, based on two concepts: expected loss and unexpected loss.

•

Expected Loss (EL): This is the average or mathematical expectation of potential anticipated losses calculated by multiplying the three following factors: probability of default (PD), exposure at default (EAD) and loss given default (LGD).

•

Unexpected loss: potential unforeseen loss caused by variability in losses with respect to the estimated expected loss. It can occur due to sudden changes in cycles or alterations in risk factors, and the dependence between the credit risk for the various debtors. Unexpected losses have a low probability and large amount, and should be absorbed by the Group's own funds. The calculation of unexpected loss is also mainly based on the operation's PD, EAD and LGD.

Credit risk parameters are estimated based on the historical default experience. To do so, the Bank has a set of tools and techniques for the specific needs of each type of risk, described below according to how they affect the three factors for calculating the expected loss:

•

EAD: an estimate of the outstanding debt in the event of default by the customer. This measurement is significant for financial instruments with a repayment structure that varies according to customer drawdowns (in general, any revolving credit product).

The estimate is based on observing internal default experience, relating the drawdown levels upon default to drawdown levels over the 12 preceding months. To build the model, several variables are considered, such as product type, term to maturity and customer characteristics.

•

PD: the Group uses management tools covering virtually all of its lending business to help predict the probability of default associated with each borrower. ³

These tools, implemented in the branch network and the risk monitoring and granting channels, were developed on the basis of NPL experience and include the measurements required to fine-tune the results both to the business cycle, with a view to securing relatively stable measures in the long term and to recent experience and future projections. The models can be classified according to their orientation toward the product or customer:

•	Product-oriented tools are used mainly within the scope of authorisation of new retail banking operations (approval scorings) and take account of the debtor's characteristics, information deriving from the customer relationship, internal and external alerts, as well as the specific characteristics of the operation to determine the probability of default.
•	Customer-oriented tools assess the debtor's probability of default. They comprise behavioural 'scoring' models for monitoring the risk of individuals and ratings or companies.

A Rating tools for companies are specific according to the segment to which they belong. The rating process for micro-enterprises and SMEs, in particular, is based on a modular algorithm, which rates three different sets of data: the financial statements, the information drawn from dealings with customers, internal and external alerts and certain qualitative factors.
As regards large corporates, the Group has models that require the expert judgement of analysts and seek to replicate and be coherent with the ratings of rating agencies. In view of the lack of sufficient frequency of internal default rates for drawing up purely statistical models, the models in this segment were built in line with the Standard and Poor's methodology, enabling the public global default rates to be used, making the methodology much more reliable.
The customers are scored and rated on a monthly basis in order to keep the credit rating up-to-date, except for the rating of large corporations, which is updated at least annually or if significant events arise that can alter credit quality. For legal persons, the financial statements and qualitative information is updated periodically to achieve the maximum level of coverage of the internal rating.

•

LGD: quantifies the unrecoverable debt in the event of customer default.

The historic loss given default is calculated using internal information, taking into account the cash flows associated with contracts from the moment of default. The models allow different LGDs to be obtained based on the guarantee, the LTV ratio, the product type, the borrower's credit rating and, for uses required by regulation, the recessionary conditions of the economic cycle. An estimate is also made of the indirect expenses (office staff, infrastructure costs and similar) associated with the recovery process. In the case of large corporates, loss given default also includes elements of expert judgement, coherent with the rating model.

It is worth noting that the Group considers, through severity, the income generated in the sale of defaulted contracts as one of the possible future flows generated to measure the expected impairment losses of the value of loans and advances. This income is calculated on the basis of the internal information of the sales carried out in the Group4. The sale of these assets is considered to be reasonably predictable as a method of recovery, thus, as part of its strategy for reducing doubtful balances, the Group considers portfolio sales as one of the recurring tools. In this regard, an active market for impaired debt exists, which ensures with a high probability the possibility to make future sales of debt.

In addition to regulatory use to determine the Group's minimum capital requirements and the calculation of hedges, the credit risk parameters (PD, LGD and EAD) are used in a number of management tools, such as in the risk-adjusted return calculation tool, the pricing tool, the customer pre-qualification tool, monitoring tools and alert systems.

3.

© Defining the accounting classification

The accounting classification among the different stages of IFRS 96 among the different Stages of IFRS 9 is defined in the event of a default and/or significant increase in credit risk (SICR) since the operation's initial recognition.

It will be considered that there has been an SICR from the first recognition, whereby these operations are classified as Stage 2, when there are weaknesses that may involve assuming significantly higher losses than expected at the time the loan is granted. To identify it, the Group has the monitoring and rating processes described in (2). Specifically, when the operations meet any of the following qualitative or quantitative criteria, unless they must be classified as Stage 3: ⁴ ⁵ ⁶

1.

Operations with amounts that are more than 30 days overdue (but less than 90, in which case they would be classified as Stage 3).

2.

Operations involving borrowers that are in administration classified as Stage 2. Risks of borrowers declared bankrupt without a liquidation request will be reclassified as Stage 2 when they have fulfilled one of the following conditions:

1.	The borrower has paid at least 25% of the entity's loans affected by the administration situation, after deducting the agreed write-off, where applicable.
2.	Two years have passed since the deed of approval of the creditors' agreement was registered in the Companies Register, provided that this agreement is being faithfully complied with and the company's equity and financial situation eliminates any doubts over the amounts owed being fully reimbursed, unless interest charges that are clearly below market rates have been agreed.

3.

Operations which can be identified as having registered a SICR on the basis of market indicators/triggers.

4.

Operations for which there has been an SICR since the date of initial recognition on the basis of any of the following two criteria7: a deterioration in its monitoring rating or a relative increase in PD.

Operations that no longer meet the conditions to qualify for Stage 2 will be classified as Stage 1.
However, the specific structure of certain operations may mean that under individual analysis it may be determined that there is no significant increase in risk despite the resulting downgrading of the rating of their holders and that, as a result, their rating does not correspond to Stage 2.
Conversely, operations of individually significant borrowers will be classified as Stage 2 if it is determined after an individual analysis that a SICR has occurred.
The refinancing or restructuring of an operation will be deemed to be a rebuttable presumption of the existence of a SICR. Consequently, unless otherwise determined, refinancing, refinanced or restructured operations in the probationary period for which classification as Stage 3 is not applicable will be classified as Stage 2.
Refinancing, refinanced or restructured operations that classify as Stage 2 due to failing to proceed to classify them as Stage 3 on the date of refinancing or restructuring or due to having been reclassified from the Stage 3 category, will remain identified as refinancing, refinanced or restructured operations for a probationary period until they meet all the following requirements with a general nature:

•	After an exhaustive review of the borrower's asset and financial position it is concluded that they are unlikely to have financial difficulties and therefore it is highly probable that they will meet their obligations vis-a-vis the entity in both time and form. This analysis of the time and manner of risk recoverability needs to be supported by objective evidence, such as the existence of a payment schedule aligned with the holder's recurrent cash flow or the addition of new guarantors or new effective collateral;
•	A minimum period of two years has elapsed from the date of authorisation of the restructuring or refinancing operation, or, if later, from the date of its reclassification from the non-performing category;
•	The borrower has covered all the principal and interest payments from the date of authorisation of the restructuring or refinancing transaction, or, if later, from the date of its reclassification from the non-performing category. Furthermore, the borrower must have made regular payments of an amount equivalent to the whole amount (principal and interest) falling due at the date of the restructuring or refinancing transaction, or that were derecognised as a result of it;
•	There are no contractual clauses that may delay repayments, such as grace periods for the principal;
•	The borrowers must have no other transactions with amounts that are more than 30 days overdue at the end of the trial period.

It will be considered that there has been a default and, therefore, an operation will be classified at Stage 3 when - regardless of the borrower and the guarantee- there is an amount overdue (capital, interests or contractually agreed costs) by more than 90 days, as well as the operations of all other holders when operations with past due amounts of over 90 days account for more than 20% of the amounts pending collection. ⁷
Operations classified as Stage 3 due to the customer being non-performing will be reclassified to Stage 1 or Stage 2 when, as a result of charging part of the overdue amounts, the reasons that caused their classification as Stage 3 disappear and there remain no reasonable doubts regarding their full repayment by the holder for other reasons.
In addition, the following operations will be classified as Stage 3:

1.

Operations with legally demanded balances.

2.

Operations in which the collateral execution process has been initiated.

3.

Operations of borrowers who have declared insolvency proceedings or are expected to declare insolvency proceedings where no liquidation petition has been made.

4.

Guarantees extended to borrowers that are undergoing insolvency proceedings where the liquidation phase has or will be declared, or that have undergone a significant and irrecoverable loss of solvency, even though the beneficiary of the guarantee has not demanded payment.

5.

Refinancing, refinanced or restructured operations will be classified as Stage 3 on the refinancing date when the general criteria determining this classification are met or when, in the absence of evidence to the contrary, the following specific criteria exist:

6.

•	An inadequate payment plan.
•	Contractual clauses that delay the repayment of the transaction through regular payments (grace periods longer than two years).
•	Amounts derecognised from the balance sheet as unrecoverable exceeding the hedges resulting from applying the percentages established in the alternative solutions of Annex IX(III) of Circular 4/2017 to Stage 2 transactions.
•	A modification of its conditions that implies changes in the structure of the transaction that result in a reduction of the current value of future flows greater than 1%.
•	Operations that were previously classified as Stage 3.
•	Refinancing, refinanced or restructured operations that having been classified as Stage 3 before the trial period, are refinanced or restructured or that have amounts that are more than 30 days past-due.

7.

Operations that have a second-call mortgage guarantee or later when the first-call guarantee operation is classified as Stage 3.

8.

Operations in which all of the holders have operations refinanced under a Code of Good Practice.

9.

Operations with borrowers who, after an individualised review, pose reasonable doubts regarding full repayment (principal and interest) in the contractually agreed terms.

Unless they are identified as refinancing, refinanced or restructured operations, those classified as Stage 3 for reasons other than the customer being non-performing can be reclassified to Stage 1 or Stage 2 if, as a result of an individualised study, the reasonable doubts regarding their full repayment by the holder on the contractually agreed terms disappear and there are no amounts overdue by more than ninety days on the date of reclassification to Stage 1 or Stage 2.
In the case of refinanced, restructured or refinancing operations, in order to consider the credit quality of the operation to have improved and, therefore, to proceed to reclassify it to Stage 2, all the following criteria must be verified in general:

1.	After reviewing the borrower's asset and financial position it is concluded that they are unlikely to have financial difficulties.
2.	One year has elapsed since the forbearance date or, if later, since the date of the reclassification of the forbearance to the non-performing category.
3.	One year has elapsed since the contractual clauses delaying repayment -such as grace periods for the principal if the transaction included them- ceased to apply.
4.	The borrower has covered all the principal and interest payments (i.e. the operation has no overdue amounts) thereby reducing the renegotiated principal, from the date of authorisation of the restructuring or refinancing operation, or, if later, from the date of its reclassification to the Stage 3 category;
5.	An amount equivalent to all amounts, principal and interest, which were due at the date of the forbearance operation, or which were written off as a result of it, has been paid through regular payments.
6.	One of the borrowers must have no other operations with past due amounts for more than 90 days The process for determining the borrower's accounting classification is specified below:

•

Single Name: these borrowers are constantly assessed as regards the existence of evidence or indications of impairment, as well as a potential significant increase in credit risk (SICR) from the initial recognition, and losses associated with the assets of this portfolio are assessed.

In order help with the proactive management of evidence and indications of impairment and a SICR, the Group has developed triggers, which are an indication of impairment of the asset affecting the customer or the operations, and are assessed by the analyst to determine classification to Stage 2 or Stage 3 of the customer's operations. They are based on internal and external available information, per borrower and per operation, grouped according to the sector, which conditions the type of information required to analyse the credit risk and the sensitivity to the changes of variables indicative of the impairment. We have:

•

Global triggers:

―

Financial difficulties of the issuer or debtor: subjective doubtful triggers (i.e. unfavourable financial information on the debtor, measured via various ratios on their financial statements) and triggers of a minimum of Stage 2 (due to deterioration of the monitoring rating).

―

A breach of contract, such as a default or delinquency in interest or principal payments: Stage 3 triggers (i. e. non-payments exceeding 90 days) and triggers of a minimum of Stage 2 (non-payments exceeding 30 days).

―

In the event of financial difficulties, the borrowers are given concessions or advantages that would otherwise not be considered. Trigger of a minimum of Stage 2 (refinancing).

―

Probability of the borrower declaring bankruptcy or restructuring. Stage 3 trigger (declaration of insolvency).

―

Triggers referring to identifying financial difficulties of the debtor or issuer, either due to breaches of contractual clauses or to the disappearance of an active market for the financial security:

―	External or internal rating that indicates either default or near to default (Level 6 rating as defined in the CRR).
―	Significant downgrading of the borrower's credit rating by the Group.
―	Automatic rating downgrading
―	External Rating below CCC+
―	Relative change in the CDS compared to a reference index (iTraxx)
―	Significant downgrading in the external rating of the issuer with respect to when the operation was initially granted
―	Non-payment event other than those mentioned in the ISDA definition of default
―	Decrease in the price of the borrower's bond issues of > 30% or quoted price below 70%
―	Suspension of the listing of the borrower's shares.

•

Specific triggers: For sectors such as property developers, project finance and public administrations.

In cases in which, in the opinion of the analyst, contracts are classified as Stage 2 or Stage 3, the expert calculation of the specific provision is used.

•

Other contracts (not Single Name): as previously stated, when the borrower's monitoring rating has significantly deteriorated or when there is a relative increase of relevant PD with respect to the start of the operation, the Entity proceeds to classify the contract at accounting Stage 2. For these purposes, the classification is revised monthly, taking into account that the fulfilment of any of the two conditions below will determine that a SICR exists:

•

Deterioration in the monitoring rating: it will be considered that there has been an SICR if, on the date of classification for accounting purposes (each month-end close), the borrower has exacerbated their monitoring rating, to a moderate risk or worse, since the operation's initial recognition.

•

Relative increase in PD: It will be considered that there has been an SICR if the regulatory PD8 of the operation on the accounting classification date exceeds a certain absolute threshold and there has been a relative increase in the regulatory PD (exceeding a certain threshold) of the operation in question since its initial recognition (in the case of exposures with individuals, a comparison is made with the first and oldest live risk PD of the operation). It must therefore be classified as Stage 2, if the following conditions are met:

―	Master Scale is greater than or equal to 4, i.e., PD greater than 0.4205%.
―	The contract's current PD is more than 3 times its original PD.

The monitoring rating and PD classification are the most recent. Both are updated at least monthly in the same way as the other criteria for classification to Stage 2 or Stage 3.
In the context of COVID-19, there were no changes in the criteria for determining the SICR. Notwithstanding the foregoing, the Group applied prudent adjustments in the form of a transitional overlay on the SICR criteria. This adjustment has been eliminated in 2022 because the reasons behind it, such as general moratoria, no longer apply.

4.

® Defining the accounting hedge

The aim of the IFRS 9 requirements as regards impairment is to ensure recognition of the expected credit losses of operations, assessed collectively or individually, considering all the reasonable and substantiated information available, including forward-looking information.

Principles for measuring expected credit losses for the purpose of defining the credit risk loss hedges

The calculated accounting hedging or provision is defined as the difference between the gross carrying amount of the operation and the estimated value of future expected cash flows, discounted at the original effective interest rate of the operation, considering the effective guarantees received.

The Group estimates the expected credit losses of an operation so that these losses reflect:

•

a weighted and non-biased amount, determined through the assessment of a series of possible results;

•

the time value of the money; and

•

the reasonable and substantial information that is available at the reference date, at no disproportionate cost or effort, on past events, current conditions and forecasts of future economic conditions.

In line with applicable rules, the hedging calculation method is set according to whether the borrower is individually significant and its accounting category.

•

If, in addition to being individually significant, the customer has operations that are non-performing (whether for reasons of delinquency or for other reasons) or in Stage 211, the allowances for the non-performing operations will be estimated through a detailed analysis of the status the borrower and their capacity to generate future flows. ⁸ ⁹ ¹⁰ ¹¹

•

In all other cases, hedging is estimated collectively using internal methodologies, subject to the credit risk model management policy in force, based on past experience of portfolio defaults and recoveries, and factoring in the updated and adjusted value of the effective guarantees. Additionally, future economic condition predictions will be considered under various scenarios.

To determine hedging for credit losses of portfolios under collective analysis, models are used to estimate the PD; probability of correcting defaulting cycles (specifically its complementary measurement, PNC); loss given loss (LGL) in the event of no correction; recoverable value models for mortgage guarantees (haircuts); as well as adjustments to include lifetime or forward-looking effects, according to the agreement's accounting classification. We must emphasise that the set of models of haircuts, LGL and PNC are models of LGD or severity.

The models used are re-estimated or re-trained every six months, and they are executed monthly in order to properly reflect the current economic environment at any given time. This makes it possible to reduce the differences between estimated loss and recent observations. The models include an unbiased forward-looking view to determine the expected loss, taking into account the most relevant macroeconomic factors: i) GDP growth, ii) unemployment rate, iii) 12-month Euribor, and iv) growth in housing prices. Following on from this, the Group generates a baseline scenario, as well as a range of potential scenarios that make it possible to perform a weighted adjustment of the estimated expected loss, based on its probability.

The calculation process is structured in two steps:

•

Determining the basis for the calculation of allowances, is carried out in two steps:

•	Calculation of the exposure amount, which is the sum of the gross carrying amount at the time of calculation and off-balance sheet amounts (available or exposure) expected to be disbursed when the borrower fulfils the conditions to be considered non-performing.
•	Calculation of the recoverable value of the effective guarantees linked to the exposure. In order to establish the recoverable value of these guarantees, for real estate collateral the models estimate the amount of the future sale of the collateral, which is discounted from the total expenses incurred until the moment of the sale.

•

Determining the hedging to be applied on the basis for the calculation of allowances:

This calculation factors in the probability of the borrower defaulting on the operation obligations, the probability of the situation being remedied or resolved and the losses that would occur if this did not happen.

For insignificant portfolios where it is considered that the internal model approach is not suitable due to the processes involved or a lack of past experience, the Group may use the default coverage rates established in the current national regulations.

Operations classified as not bearing appreciable risk and those that due to the type of guarantor are classified as not bearing appreciable risk, could have 0% accounting hedge. In the case of the latter, this percentage will only be applied to the guaranteed part of the risk.

The hedges estimated individually or collectively must be consistent with the way in which the categories into which the operations can be classified are processed. In other words, the hedging level for an operation must be higher than the hedging level that would correspond to it, if it were classified in another category of a lower credit risk.

The necessary improvements detected in the backtesting and benchmarking exercises are also incorporated in the review cycles. Similarly, the models developed are documented so they can be replicated by a third party. The documentation contains key definitions, information regarding the process of acquiring samples and data processing, methodological principles and results obtained, as well as the comparison of said results with those of previous years.

CaixaBank has a total of 68 models, in order to obtain the parameters necessary to calculate the hedges using a collective analysis. For each of the risk parameters, different models can be used to adapt to each type of exposure. Specifically, the models include those indicated below:

•	18 Scoring and Rating parameter models
•	19 PD parameter models
•	7 EAD parameter models
•	13 PNC parameter models
•	3 Haircut parameter models
•	1 LT/FL (Life-time/Forward-looking) transformation parameter model

Other subsidiaries such as BPI and CaixaBank Payments and Consumer also have additional internal models.
The amount of the operations of holders that have not been classified as Stage 3 despite there being amounts more than 90 days overdue with the same debtor
Operations by holders that have not been classified as Stage 3 despite there being amounts overdue by more than 90 days with the same debtor are not of a significant amount.
Inclusion of forward-looking information into the expected loss models
As shown in the following section, the Group has taken into account different levels of severity of macroeconomic scenarios, consistent with internal management and monitoring processes. These stages have been contrasted and they are aligned with those issued by public bodies, following the recommendation of the European Central Bank in its letter of 1 April 2020.
The projected variables considered are as follows:

Forward-looking macroeconomic indicators (1)
(% Percentages)

	31-12-2022
	Spain			Portugal
	2023	2024	2025	2023	2024	2025
GDP growth
Baseline scenario	2.4	2.6	2.1	2.0	2.3	2.1
Upside scenario	5.1	4.1	2.0	3.2	4.6	2.6
Downside scenario	-1.6	1.8	2.9	-1.2	1.4	1.7
Unemployment rate
Baseline scenario	12.6	12.5	11.8	5.7	5.6	5.6
Upside scenario	11.4	11.0	10.0	5.4	5.2	5.2
Downside scenario	15.8	16.3	14.9	8.5	8.9	8.4
Interest rates
Baseline scenario	1.70	1.78	1.78	1.70	1.78	1.78
Upside scenario	2.32	2.54	2.54	2.32	2.54	2.54
Downside scenario	0.84	0.99	1.46	0.84	0,99	1.46
Evolution of property prices
Baseline scenario	2.2	2.5	2.8	1.5	2.8	2.8
Upside scenario	3.8	4.9	3.9	5.0	4.6	2.9
Downside scenario	-0.5	-2.4	1.5	-3.1	-2.1	1.9

Forward-looking macroeconomic indicators (2) (% Percentages)

	31-12-2021
	Spain			Portugal
	2022	2023	2024	2022	2023	2024
GDP growth
Baseline scenario	6.2	2.9	1.6	3.1	1.8	1.6
Upside scenario	7.8	4.3	1.9	3.5	1.9	2.2
Downside scenario	3.7	2.1	1.6	3.9	3.4	1.7
Unemployment rate
Baseline scenario	14.5	13.2	12.5	7.7	6.9	6.5
Upside scenario	14.2	12.2	11.2	7.6	6.3	6.0
Downside scenario	15.7	15.8	15.1	8.2	7.1	6.6
Interest rates
Baseline scenario	-0.40	-0.23	0.15	-0.40	-0.23	0.15
Upside scenario	-0.33	-0.07	0.54	-0.33	-0.07	0.54
Downside scenario	-0.58	-0.47	-0.28	-0.58	-0.47	-0.28
Evolution of property prices
Baseline scenario	1.6	2.5	2.8	0.6	2.0	2.3
Upside scenario	2.7	5.4	4.5	2.7	4.1	3.0
Downside scenario	-0.8	-0.5	1.5	-2.7	1.7	2.3

Forward-looking macroeconomic indicators (3) (% Percentages)

	31-12-2020
	Spain			Portugal
	2021	2022	2023	2021	2022	2023
GDP growth
Baseline scenario	6.0	4.4	2.0	4.9	3.1	1.8
Upside scenario	7.7	5.0	1.9	6.9	3.5	2.0
Downside scenario	1.7	5.5	2.8	-0.3	4.2	3.3
Unemployment rate
Baseline scenario	17.9	16.5	15.4	9.1	7.7	6.9
Upside scenario	16.9	14.9	14.1	8.3	7.0	6.3
Downside scenario	20.8	18.4	16.7	10.1	8.3	7.3
Interest rates
Baseline scenario	-0.47	-0.40	-0.21	-0.47	-0.40	-0.21
Upside scenario	-0.44	-0.32	-0.08	-0.44	-0.32	-0.08
Downside scenario	-0.55	-0.50	-0.42	-0.55	-0.50	-0.42
Evolution of property prices
Baseline scenario	-2.0	0.8	1.8	-6.1	-1.0	1.6
Upside scenario		2.6	2.2	-3.3	0.8	2.1
Downside scenario	-5.2	-1.3	1.3	-9.0	-3.2	1.5

(*) Source: CaixaBank Research. At the date preparation of these annual accounts, there are updates to the macro data for employees in the calculation of the provisions after the year-end (as presented in section 3.1) that have no material impact on the provisions constituted by the Group, see Sensitivity Analysis.
(**) For models for default frequency projection in Spain, the unemployment rates shown in this table have increased, including 10% of the workers included in Temporary Redundancy Plans.
The downside range of variables used to calculate provisions includes deficiencies in structural reforms leading - together with other macroeconomic dynamics- to drops in productivity and thus in GDP. Thus, the estimated drop reflects the potential impact of an exacerbated climate risk which, through various mechanisms (e. g. increased production costs, increased commodity prices, etc.), would eventually affect long-term economic growth.
The weighting of the scenarios considered in each of the financial years for each sector is as follows:

Weighting of occurrence of the considered scenarios (1) (% Percentages)

	31-12-2022
	BASELINE SCENARIO	UPSIDE SCENARIO	DOWNSIDE SCENARIO
Spain	60	20	20
Portugal	60	20	20

Weighting of occurrence of the considered scenarios (2)
(% Percentages)

	31-12-2021			31-12-2020
	BASELINE SCENARIO	UPSIDE SCENARIO	DOWNSIDE SCENARIO	BASELINE SCENARIO	UPSIDE SCENARIO	DOWNSIDE SCENARIO
Spain	60	20	20	60	20	20
Portugal	60	20	20	60	20	20

Assumptions and adjustments to models
The above macroeconomic table and scenario weighting are used in the latest November 2022 half-yearly model recalibration. However, in view of subsequent macroeconomic developments (see section 3.1 "Environment and risk factors"), as well as uncertainties in estimating these scenarios, the Group maintains a Post Model Adjustment (PMA) in the provision funds, with the result that it has a collective provision fund amounting to EUR 1,137 million at 31 December 2022. This collective WFP fund includes the update to the baseline macroeconomic scenario; the foreseeable effects of inflation and interest rates on the portfolio's credit quality, given that the movements in these macroeconomic figures have not manifested themselves in the form of increases in non-performing loans in recent years; and they enable uncertainties in the estimation of these future macroeconomic prospects to be absorbed. This collective fund has been estimated by conducting top-down and bottom-up analyses on the lending portfolio, is of a temporary nature, is based on the directives issued by the supervisors and regulators, and is backed by duly documented processes and subject to strict oversight. Furthermore, it will be reviewed in the future as new information becomes available and the macroeconomic uncertainties are reduced.
In accordance with the principles of the applicable accounting standard, the hedging level factors in a forward-looking (12-month) or life-time vision, according to the accounting classification of the exposure (12 months for Stage 1 and life-time for Stages 2 and 3).
Sensitivity analysis
The relationship between the various variables that measure or quantify the economic situation, such as gross domestic product growth and the unemployment rate, is well known. These interrelationships make it difficult to establish clear causality relationships between a specific variable and an effect (e.g. expected credit losses), as well as making it difficult to interpret the sensitivities to calculations performed using expected credit loss models when these sensitivities are applied to various variables simultaneously.
Interest rates, which also form part of the group of forward-looking indicators, have only a minor impact on the calculation of expected credit losses and apply only to the portfolio of consumer loans, among the significant portfolios.
The table below shows the estimated sensitivity to a loss of 1% of gross domestic product, as well as a 10% drop in real estate prices in the expected losses due to credit risk at 2022 year-end, broken down by portfolio type for business in Spain:
Sensitivity analysis - Spain
(Millions of euros)

	Increase in the expected loss
	1% drop in GDP	10% drop in real estate prices
Other financial institutions	2	1
Non-financial corporations and individual entrepreneurs	50	63
Project finance	8	12
For financing real estate construction and development, including land	3	9
For financing civil engineering work	3	3
Other project finance	2
Purposes other than project finance	42	50
Large corporates	13	8
SMEs	26	36
Individual entrepreneurs	3	6
Households (excluding individual entrepreneurs)	62	195
Home purchases	44	164
For the purchase of a main residence	39	151
For the purchase of a secondary residence	5	13
Consumer credit	11	6
Consumer credit	9	6
Credit card debt	2
Other purposes	7	25
TOTAL	114	259

The table below shows the estimated sensitivity to a loss or gain of 1% of gross domestic product for business in Portugal:
Sensitivity analysis - Portugal
(Millions of euros)

	Increase in expected loss *
	1% GDP growth	1% drop in GDP
TOTAL	-16.9	16.9

(*) Calculation of sensitivity focused on GDP that, due to its nature, allows for the effect of the other aggregated macroeconomic indicators to be collected, as a result of their high level of interdependence. (*) Calculation of sensitivity focused on GDP that, due to its nature, allows for the effect of the other aggregated macroeconomic indicators to be collected, as a result of their high level of interdependence.
The models and the estimates on macroeconomic variations are periodically reviewed to detect possible impairment in the quality of the measurements. This continual risk assessment provides information on the distribution of risk exposure in the various portfolios with respect to creditworthiness, expressed as a probability of default.
NPL management
The recovery and NPL management function is aligned with the Group's risk management guidelines. The default monitoring and recovery activity is especially relevant in the current economic context of uncertainty, with the main objective to maximise the recovery of the financing operations granted, always respecting the situation of each customer and minimising the impact on the volume of non-performing positions and provisions.
The underlying principles of NPL management are not only geared towards the management of non-payment, but also preventive and anticipatory actions on the basis of various impairment indicators available to the bank, preventing triggers that would result in default itself and possible positions being classified to Stage 2 and their consequent impact on the income statement.
Furthermore, proactive monitoring is conducted on the portfolio classified as Stage 3 for reasons other than default in order to reorganise it, designing specific management plans geared towards the reasons that caused its switch to that accounting classification
On one hand, the governance model and the operational framework of problematic asset management maintains the comprehensive approach to the overall life cycle and specialised management according to the moment of non¬payment of the debt. Responsibility for the management is broken down into two different fields:

•

Flow management: comprises preventive and anticipatory management and early non-payment and default management of customers with payments past due between 1 and 90 days. From the business field, the Solutions and Collections area centrally coordinates the branch network and recovery agencies in managing the recovery prior to entering accounting arrears. In the current economic outlook, the capillarity of the branch network and its proximity to customers continues to be key to identifying the situation and needs of customers, especially situations of social vulnerability.

•

Stock management: concentrates the management of customers who are in accounting arrears, with non-payments in excess of 90 days. This is the responsibility of the Risk Area, with management differentiated into the individual customer and business customer segments. The team of specialists is geared towards seeking final solutions in more advanced situations of non-payment.

On the other hand, the overall management of recovery and NPLs has been adapted to the measures adopted by CaixaBank since 2020 to support the economy in order to combat the consequences of the pandemic, as well as the current energy and geopolitical crisis arising from the war in Ukraine. In terms of non-performing assets, it has collaborated and continues to work on identifying and providing support with sustainable solutions for customers whose debt is still structurally viable, ensuring that the financing needs of customers arising from a temporary reduction of their income are covered. Similarly, it is worth mentioning the Company's commitment to the original contracts of the ICO COVID facilities relating to the Code of Good Practice and extensions of the terms of said financing, as well as to the current ICO Ukraine facility, in order to continue supporting the business fabric.
All this management has been subject to the application of the policies and procedures in force which, in accordance with accounting and regulatory standards, lay down the guidelines for the suitable classification of borrowings and estimation of hedges.
A noteworthy key line of work is the accompaniment throughout the management cycle of the moratoria, the code of best practice and ICO-backed loans granted, especially through active monitoring of the maturity of the measures granted.
In the macroeconomic context of rising interest rates in response to inflationary pressures, the approval of Royal Decree-Law 19/2022 is noteworthy:

•

It lays down a new Code of Good Practices, of a temporary and transitory nature, lasting twenty-four months, for the adoption of urgent measures for mortgage debtors at risk of vulnerability.

•

It amends Royal Decree-Law (RDL) 6/2012, of 9 March, on urgent measures for the protection of mortgage debtors without resources, expanding it so that it can cover those vulnerable debtors affected by interest rate rises that reach levels of mortgage burden considered excessive, in the event of any increase in mortgage burden. The treatment of these situations is graded, with a five-year grace period on the principal and a reduction in the applicable interest rate to Euribor minus 0.10% from the previous Euribor plus 0.25%, when the increase in the mortgage burden is greater than 50%; and with a 2-year grace period and an extended term of up to seven years when the increase in mortgage burden is less than 50%.

In November the Board of Directors approved its adhesion to the new support measures for mortgage borrowers in difficulty. Thus, the institution has adhered to both the extension of the Code of Good Practices laid down in RDL 6/2012 and also to the new, transitional one.
Foreclosed assets
BuildingCenter is the Group's company responsible for the management of property assets in Spain, which basically originate from streamlining of the Group's credit activity through any of the following ways: i) acquisition at auctions held after assets have been foreclosed, mainly in relation to mortgage loans; ii) Acquisition of mortgaged real estate assets of individuals, with the subsequent subrogation and cancellation of the debts; iii) Acquisition of real estate assets of companies, mainly property developers, to cancel their debts; and iv) foreclosure through insolvency proceedings.
The acquisition process includes conducting full legal and technical reviews of the properties using the committees appointed for such purpose. In all cases, purchase prices are based on appraisals performed by appraisal firms approved by the Bank of Spain and in accordance with the parameters set forth in the approved internal rules.
The strategies undertaken for the sale of these assets are as follows:

•	Individual sale: through a servicing contract with Servihabitat Servicios Inmobiliarios, S.A. and Haya Real Estate, S.A., which performs multi-channel marketing activities via its own branches, the external collaboration of the network of real-estate agents and has an active presence on the Internet. This marketing activity comes in addition to a key factor: support in prescribing properties generated by the branch network.
•	Institutional sales: the Group takes into account institutional operations of sales of asset portfolios to other specialised companies.
•	Completion of housing developments: a number of minor measures to improve some of these developments are made to ensure they can be sold. These measures are performed using the synergies of the Group.
•	Rental: it is a means of benefiting from rising demand and generating recurring income, as well as creating added value on the property in the event of its future sale.

The table below shows foreclosed assets by source and type of property:
Foreclosed real estate assets - 31-12-2022 *
*(Millions of euros)

	Gross carrying amount	Allowances for impairment **	Of which from foreclosure	Net carrying amount
Real estate acquired from loans to real estate constructors and developers	1,041	-406	-273	635
Buildings and other completed constructions	815	-279	-169	536
Homes	684	-222	-129	462
Other	131	-57	-40	74
Buildings and other constructions under construction	46	-25	-17	21
Homes	30	-16	-11	14
Other	16	-9	-6	7
Land	180	-102	-87	78
Consolidated urban land	86	-52	-45	34
Other land	94	-50	-42	44
Real estate acquired from mortgage loans to homebuyers	2,857	-786	-536	2,071
Other real estate assets or received in lieu of payment of debt	939	-326	-265	613
TOTAL	4,837	-1,518	-1,074	3,319

(*) Includes foreclosed assets classified as "Tangible assets - Investment property" amounting to EUR 1,285 million, net, and includes foreclosure rights deriving from auctions in the amount of EUR 142 million, net. Does not include the foreclosed properties of Banco BPI, which have a total net book value of EUR 3 million, as this business is not in Spain.
(**) Cancelled debt associated with the foreclosed assets totalled EUR 6,662 million and total write-downs of this portfolio amounted to EUR 3,342 million, EUR 1,518 million of which are impairment losses recognised in the balance sheet.
Foreclosed real estate assets - 31-12-2021 *
*(Millions of euros)

	Gross carrying amount	Allowances for impairment **	Of which from foreclosure	Net carrying amount
Real estate acquired from loans to real estate constructors and developers	1,306	-455	-287	851
Buildings and other completed constructions	1,054	-338	-192	716
Buildings and other constructions under construction	53	-24	-19	29
Land	199	-93	-76	106
Real estate acquired from mortgage loans to homebuyers	3,340	-886	-603	2,454
Other real estate assets or received in lieu of payment of debt	1,095	329	-255	766
TOTAL	5,741	-1,670	-1,145	4,071

(*) Includes foreclosed assets classified as "Tangible assets - Investment property" amounting to EUR 1,616 million, net, and includes foreclosure rights deriving from auctions in the amount of EUR 176 million, net. Excludes foreclosed assets of Banco BPI, with a gross carrying amount of EUR 5 million, as this is not included in business in Spain.
(**) Cancelled debt associated with the foreclosed assets totalled EUR 7,946 million and total write-downs of this portfolio amounted to EUR 3,875 million, EUR 1,670 million of which are allowances for impairment recognised in the balance sheet.
Foreclosed real estate assets - 31-12-2020 * *(Millions of euros)

	Gross carrying amount	Allowances for impairment **	Of which from foreclosure	Net carrying amount
Real estate acquired from loans to real estate constructors and developers	1,324	-431	-218	893
Buildings and other completed constructions	1,188	-371	-189	817
Buildings and other constructions under construction	29	-16	-9	13
Land	107	-44	-20	63
Real estate acquired from mortgage loans to homebuyers	2,218	-611	-314	1,607
Other real estate assets or received in lieu of payment of debt	417	-141	-53	276
TOTAL	3,959	-1,183	-585	2,776

(*) Includes foreclosed assets classified as "Tangible assets - Investment property" amounting to EUR 1,748 million, net, and includes foreclosure rights deriving from auctions in the amount of EUR 98 million, net. Excludes foreclosed assets of Banco BPI, with a gross carrying amount of EUR 8million, as this is not included in business in Spain.
(**) Cancelled debt associated with the foreclosed assets totalled EUR 4,792 million and total write-downs of this portfolio amounted to EUR 2,114 million, EUR 1,183 million of which are impairment losses recognised in the balance sheet.
Refinancing policies
The general principles published by the EBA for this type of transaction in the Guidelines on managing non-performing and restructured or refinanced exposures and the definitions laid down in Annex IX of Bank of Spain Circular 4/2017 and its subsequent amendments are included in the Corporate Credit Risk Management Policy, and in the Refinancing and Recovery Policy.
According to the provisions of the previous paragraph and the rest of the regulatory framework, these relate to operations in which the customer has, or will foreseeably have, financial difficulty in meeting its payment obligations under the contractually agreed terms and, therefore, has amended the agreement and/or arranged a new operation.
These operations may derive from:

•	A new operation (refinancing operation) granted that fully or partially cancels other operations (refinanced operations) previously extended by any Group company to the same borrower or other companies forming part of its economic group that become up-to-date on its payments for previously past-due loans.
•	The amendment of the contract terms of an existing transaction (restructured operations) that changes its repayment schedule, reducing the payment amounts (grace periods, extension of loan maturities, reduction in interest rates, change in the repayment schedule, extension of all or part of the capital on maturity, etc.).
•	The activation of contract clauses agreed at source that extend the debt repayment terms.
•	The partial cancellation of the debt without any contribution of customer funds, primarily through the forgiveness of principal or ordinary interest (on the credit granted to the customer). The existence of previous defaults is an indication of financial difficulty. Unless otherwise demonstrated, a restructuring or refinancing operation is assumed to exist when the amendment to contractual term affects operations that have been past-due for more than 30 days at least once in the three months prior to the amendment. Restructuring or refinancing shall also be presumed to exist in the following circumstances, unless there is evidence to the contrary:
•	At the same time as additional financing is granted by the Entity, or at a time close to such granting, the borrower has made payments of principal or interest on another operation with the Entity that is not classified as non¬performing, the payments of which have been past due, in whole or in part, for more than 30 days at least once in the three months prior to the refinancing.
•	The Entity approves the use of implicit amendment clauses in relation to operations that are not classified as non-performing with pending amounts past due for 30 days, of that would be past due for 30 days if such clauses were not exercised.

However, previous defaults are not a requirement for an operation to be classified as refinanced or restructured.
In contrast, debt renewals and renegotiations may be granted when the borrower does not have, or is not expected to have, financial difficulties; i.e. for business reasons, not to facilitate repayments.
For an operation to be classified as such, the borrowers must have the capacity to obtain credit from the market, at the date in question, for a similar amount and on similar terms to those offered by the Entity. In turn, these terms must be adjusted to reflect the terms offered to borrowers with a similar risk profile.
The risk management procedures and policies applied allow for detailed monitoring of credit transactions. In this regard, any transaction uncovered whose terms may need to be changed due to evidence of impairment of the borrower's solvency is marked appropriately so the associated accounting classification and provision for impairment is made. Therefore, as these transactions are correctly classified and valued according to the Group's best judgement, no additional provisions emerge in relation to the impairment of refinanced loans.
The breakdown of refinancing by economic sector is as follows:
Refinancing - 31-12-2022 *(1)
(Millions of euros)

	Unsecured loans
	No. of operations	Gross carrying amount
Public administrations	155	142
Other financial corporations and individual entrepreneurs (financial business)	44	38
Non-financial corporations and individual entrepreneurs (non-financial business)	25,913	4,029
Of which: Financing for real estate construction and development (including land)	209	14
Other households	56,432	363
TOTAL	82,544	4,573
Of which: in Stage 3
Public administrations	117	2
Other financial corporations and individual entrepreneurs (financial business)	19	21
Non-financial corporations and individual entrepreneurs (non-financial business)	12,853	1,523
Of which: Financing for real estate construction and development (including land)	152	13
Other households	28,433	212
TOTAL STAGE 3	41,422	1,758

Refinancing - 31-12-2022 *(2)
(Millions of euros)

	Secured loans
			Maximum amount of the collateral
	No. of operations	Gross carrying amount	Real estate mortgage secured	Other collateral	Impairment due to credit risk *
Public administrations	783	18	16		-2
Other financial corporations and individual entrepreneurs (financial business)	28	90	89		-12
Non-financial corporations and individual entrepreneurs (non-financial business)	10,669	2,196	1,530	26	-1,392
Of which: Financing for real estate construction and development (including land)	1,347	335	209		-124
Other households	101,391	3,971	2,962	7	-1,160
TOTAL	112,871	6,275	4,597	33	-2,566
Of which: in Stage 3
Public administrations	688	7	6		-1
Other financial corporations and individual entrepreneurs (financial business)	15	1	1		-11
Non-financial corporations and individual entrepreneurs (non-financial business)	7,100	1,208	710	11	-1,235
Of which: Financing for real estate construction and development (including land)	940	160	80		-89
Other households	61,864	2,435	1,630	4	-993
TOTAL STAGE 3	69,667	3,651	2,346	16	-2,240

Memorandum items: Financing classified as non-current assets held for sale (*)
(*) Corresponds to "Non-current assets and disposal groups classified as held for sale".
Refinancing operations - 31-12-2021 *(1)
(Millions of euros)

	Unsecured loans
	No. of operations	Gross carrying amount
Public administrations	53	150
Other financial corporations and individual entrepreneurs (financial business)	39	30
Non-financial corporations and individual entrepreneurs (non-financial business)	25,528	3,665
Of which: Financing for real estate construction and development (including land)	219	15
Other households	69,452	533
TOTAL	95,072	4,378
Of which: in Stage 3	51,164	1,812

(*) Corresponds to "Non-current assets and disposal groups classified as held for sale".
Refinancing operations - 31-12-2021 *(2)
(Millions of euros)

	Secured loans
			Maximum amount of the collateral
	No. of operations	Gross carrying amount	Real estate mortgage secured	Other collateral	Impairment due to credit risk *
Public administrations	2,148	36	30		-6
Other financial corporations and individual entrepreneurs (financial business)	29	90	89		-24
Non-financial corporations and individual entrepreneurs (non-financial business)	15,047	2,543	1,875	25	-1,410
Of which: Financing for real estate construction and development (including land)	2,036	419	308		-101
Other households	133,045	5,614	4,586	6	-1,262
TOTAL	150,269	8,283	6,580	31	-2,702
Of which: in Stage 3	113,359	5,404	4,219	15	-2,441

Memorandum items: Financing classified as non-current assets held for sale (*)
Refinancing operations - 31-12-2020 *(1)
(Millions of euros)

	Unsecured loans
	No. of operations	Gross carrying amount
Public administrations	43	161
Other financial corporations and individual entrepreneurs (financial business)	39	3
Non-financial corporations and individual entrepreneurs (non-financial business)	9,914	1,418
Of which: Financing for real estate construction and development (including land)	158	30
Other households	54,074	325
TOTAL	64,070	1,907
Of which: in Stage 3	41,237	1,020

Refinancing operations - 31-12-2020 *(2)
(Millions of euros)

	Secured loans
			Maximum amount of the collateral
	No. of operations	Gross carrying amount	Real estate mortgage secured	Other collateral	Impairment due to credit risk *
Public administrations	192	47	43
Other financial corporations and individual entrepreneurs (financial business)	22	1	1		-1
Non-financial corporations and individual entrepreneurs (non-financial business)	12,787	1,302	962	19	-816
Of which: Financing for real estate construction and development (including land)	2,040	454	355		-99
Other households	124,579	3,617	2,947	6	-831
TOTAL	137,580	4,967	3,953	25	-1,648
Of which: in Stage 3	110,251	3,776	2,919	17	-1,564

Memorandum items: Financing classified as non-current assets held for sale (*)
(*) Corresponds to "Non-current assets and disposal groups classified as held for sale"
Concentration risk
In the Corporate Risk Catalogue, concentration risk is included within credit risk, since it is the main risk source, although it covers all types of assets, as recommended by sector supervisors.
The Group has developed policies that lay down guidelines for concentration risk or frameworks that develop calculation methodologies and set specific limits within management. Additionally, mechanisms have been developed to systematically identify the aggregated exposure and, wherever it is considered necessary, limits on relative exposures have been defined, under the RAF.
Concentration in customers or in "major risks"
The Group monitors compliance with the regulatory limits (25% of Tier 1 capital) and the risk appetite thresholds. At year-end, no breach of the defined thresholds had been observed.
Geographical and counterparty concentration
The Group monitors a full perspective of accounting positions, segregated by product and issuer/counterparty, classified under loans and advances, debt securities, equity instruments, derivatives and guarantees given, that complement the other positions of the Group and of the secured investment and pension funds.
Risk by geographic area is as follows:
Concentration by geographic location
(Millions of euros)

	Total	Spain	Portugal	Rest of the European Union	America	Rest of the world
Central banks and credit institutions	47,197	19,959	3,294	12,701	3,139	8,104
Public administrations	148,771	119,067	4,552	19,681	3,269	2,202
Central government	123,841	98,389	699	19,618	2,941	2,194
Other public administrations	24,930	20,678	3,853	63	328	8
Other financial corporations and individual entrepreneurs (financial business)	24,651	9,206	550	11,586	1,529	1,780
Non-financial corporations and individual entrepreneurs (non-financial business)	186,127	135,589	13,589	19,705	8,604	8,640
Real estate construction and development (including land)	4,818	4,744	64	2	7	1
Civil engineering	7,757	5,865	949	95	848
Other	173,552	124,980	12,576	19,608	7,749	8,639
Large corporates	114,441	75,654	6,036	18,285	7,037	7,429
SMEs and individual entrepreneurs	59,111	49,326	6,540	1,323	712	1,210
Other households	175,389	157,543	15,670	691	242	1,243
Homes	144,393	128,279	14,073	644	223	1,174
Consumer lending	20,086	18,416	1,583	38	10	39
Other purposes	10,910	10,848	14	9	9	30
TOTAL 31-12-2022	582,135	441,364	37,655	64,364	16,783	21,969
TOTAL 31-12-2021	663,411	539,965	40,383	49,575	13,334	20,154
TOTAL 31-12-2020	430,193	336,825	36,307	34,994	10,277	11,790

The breakdown of risk in Spain by Autonomous Community is as follows:
Concentration by Autonomous Community (1)
(Millions of euros)

	Total	Andalusia	Balearic Islands	Canary Islands	Castile-La Mancha	Castilla-León
Central banks and credit institutions	19,959	28			1
Public administrations	119,067	1,926	957	1,542	619	1,678
Central government	98,389
Other public administrations	20,678	1,926	957	1,542	619	1,678
Other financial corporations and individual entrepreneurs (financial business)	9,206	163	4	11	2	40
Non-financial corporations and individual entrepreneurs (non-financial business)	135,589	9,350	5,037	3,539	2,119	2,414
Real estate construction and development (including land)	4,744	452	206	186	77	107
Civil engineering	5,865	472	179	155	104	124
Other	124,980	8,426	4,652	3,198	1,938	2,183
Large corporates	75,654	1,986	2,816	1,377	357	462
SMEs and individual entrepreneurs	49,326	6,440	1,836	1,821	1,581	1,721
Other households	157,543	23,583	7,132	7,808	4,342	4,746
Homes	128,279	18,589	6,042	6,283	3,605	3,868
Consumer lending	18,416	3,039	725	1,126	496	534
Other purposes	10,848	1,955	365	399	241	344
TOTAL 31-12-2022	441,364	35,307	13,130	12,900	7,083	8,878
TOTAL 31-12-2021	539,965	35,465	13,774	13,596	7,555	8,913
TOTAL 31-12-2020	336,825	25,583	8,050	9,696	4,771	5,679

Concentration by Autonomous Community (2)
(Millions of euros)

	Catalonia	Madrid	Navarre	Valencia	Basque Country	Other(*)
Central banks and credit institutions	410	17,409		491	783	580
Public administrations	2,036	5,842	191	2,598	632	2,657
Central government
Other public administrations	2,036	5,842	191	2,598	632	2,657
Other financial corporations and individual entrepreneurs (financial business)	427	7,257	114	201	854	133
Non-financial corporations and individual entrepreneurs (non-financial business)	21,417	64,899	1,812	9,677	3,843	11,482
Real estate construction and development (including land)	1,354	1,666	82	212	246	156
Civil engineering	682	2,772	109	367	211	690
Other	19,381	60,461	1,621	9,098	3,386	10,636
Large corporates	6,768	51,333	678	3,681	1,645	4,551
SMEs and individual entrepreneurs	12,613	9,128	943	5,417	1,741	6,085
Other households	36,505	33,312	2,994	17,210	4,113	15,798
Homes	28,539	28,393	2,451	14,061	3,488	12,960
Consumer lending	4,875	2,956	332	2,012	413	1,908
Other purposes	3,091	1,963	211	1,137	212	930
TOTAL 31-12-2022	60,795	128,719	5,111	30,177	10,225	30,650
TOTAL 31-12-2021	57,862	210,395	5,043	31,235	10,511	31,615
TOTAL 31-12-2020	52,481	105,013	5,029	15,851	9,304	19,859

(*) Includes autonomous communities that combined represent no more than 10% of the total
Concentration by economic sector
Risk concentration by economic sector is subject to RAF limits, differentiating between private business economic activities and public sector financing, and the channels of the internal report. Particularly, for the private business sector, a maximum concentration limit in any economic sector is established by aggregating the accounting positions recognised, excluding treasury repo/depo operations and those of the trading portfolio.
Total gross loans to customers by activity were as follows (excluding advances):
Concentration by activity of loans to customers - 31-12-2022 (1)
(Millions of euros)

	Total	Of which real estate collateral	Of which other collateral
Public administrations	20,212	412	210
Other financial corporations and individual entrepreneurs (financial business)	7,757	643	594
Non-financial corporations and individual entrepreneurs (non-financial business)	147,835	24,370	3,031
Real estate construction and development (including land)	4,497	3,910	22
Civil engineering	6,750	572	201
Other	136,588	19,888	2,808
Large corporations	82,933	6,088	1,788
SMEs and individual entrepreneurs	53,655	13,800	1,020
Other households	174,823	148,400	906
Homes	144,391	141,329	283
Consumer lending	20,069	2,341	386
Other purposes	10,363	4,730	237
TOTAL	350,627	173,825	4,741
Memorandum items: Refinancing, refinanced and restructured operations	8,282	4,749	89

Concentration by activity of loans to customers - 31-12-2022 (2)
(Millions of euros)

	Secured loans. Carrying amount based on latest available appraisal (loan to value)
	≤ 40%	> 40% and ≤ 60%	> 60% and ≤ 80%	> 80% and ≤ 100%	> 100%
Public administrations	147	266	83	65	61
Other financial corporations and individual entrepreneurs (financial business)	295	210	168	497	67
Non-financial corporations and individual entrepreneurs (non-financial business)	10,734	8,287	3,991	1,619	2,770
Real estate construction and development (including land)	1,287	1,442	724	216	263
Civil engineering	265	214	66	47	181
Other	9,182	6,631	3,201	1,356	2,326
Large corporates	3,005	1,926	1,183	601	1,161
SMEs and individual entrepreneurs	6,177	4,705	2,018	755	1,165
Other households	48,900	48,581	36,965	8,519	6,341
Homes	45,075	46,504	36,028	8,050	5,955
Consumer lending	1,462	696	313	151	105
Other purposes	2,363	1,381	624	318	281
TOTAL	60,076	57,344	41,207	10,700	9,239
Memorandum items: Refinancing, refinanced and restructured operations	1,314	1,362	959	579	624

Concentration by activity of loans customers - 31-12-2021 (1)
(Millions of euros)

	Total	Of which real estate collateral	Of which other collateral
Public administrations	20,043	463	227
Other financial corporations and individual entrepreneurs (financial business)	3,992	560	970
Non-financial corporations and individual entrepreneurs (non-financial business)	143,088	26,823	4,058
Other households	175,245	150,197	927
TOTAL	342,368	178,043	6,182
Memorandum items: Refinancing, refinanced and restructured operations	9,959	6,845	257

Concentration by activity of loans customers - 31-12-2021 (2)
(Millions of euros)

	Collateralised loans carrying amount based on latest available appraisal (loan to value)
	≤ 40%	> 40% and ≤ 60%	> 60% and ≤ 80%	> 80% and ≤ 100%	> 100%
Public administrations	156	291	114	57	72
Other financial corporations and individual entrepreneurs (financial business)	1,255	117	41	51	66
Non-financial corporations and individual entrepreneurs (non-financial business)	13,087	8,640	4,787	1,703	2,664
Other households	47,649	51,313	36,550	8,468	7,144
TOTAL	62,147	60,361	41,492	10,279	9,946
Memorandum items: Refinancing, refinanced and restructured operations	1,479	1,687	1,849	991	1,096

Concentration by activity of loans customers - 31-12-2020 (1)
(Millions of euros)

	Total	Of which real estate collateral	Of which other collateral
Public administrations	16,169	401	332
Other financial corporations and individual entrepreneurs (financial business)	2,392	479	227
Non-financial corporations and individual entrepreneurs (non-financial business)	103,534	21,622	4,241
Other households	113,452	95,600	872
TOTAL	235,547	118,102	5,672
Memorandum items: Refinancing, refinanced and restructured operations	5,226	4,065	79

Concentration by activity of loans customers - 31-12-2020 (2)
(Millions of euros)

	Collateralised loans carrying amount based on latest available appraisal (loan to value)
	≤ 40%	> 40% and ≤ 60%	> 60% and ≤ 80%	> 80% and ≤ 100%	> 100%
Public administrations	198	200	158	97	80
Other financial corporations and individual entrepreneurs (financial business)	486	169	49	1	1
Non-financial corporations and individual entrepreneurs (non-financial business)	10,631	7,750	3,830	1,457	2,195
Other households	31,478	34,769	23,095	4,580	2,550
TOTAL	42,793	42,888	27,132	6,135	4,826
Memorandum items: Refinancing, refinanced and restructured operations	694	1,084	1,654	396	316

Breakdown of loans and advances to customers by type (1)
(Millions of euros)

	31-12-2022
	Stage 1	Stage 2 + POCI w/oimpairment	Stage 3 + POCI with impairment
Loan type and status
Public administrations	19,871	318	29
Other financial corporations	7,591	172	24
Loans and advances to companies and individual entrepreneurs	132,662	14,098	4,821
Real estate construction and development (including land)	9,498	1,613	656
Other companies and individual entrepreneurs	123,164	12,485	4,165
Other households	159,243	13,977	5,212
Homes	132,184	10,647	3,634
Other	27,059	3,330	1,578
TOTAL	319,367	28,565	10,086

Breakdown of loans and advances to customers by type (2)
(Millions of euros)

	31-12-2021			31-12-2020
	Stage 1	Stage 2 + POCI w/o impairment	Stage 3 + POCI with impairment	Stage 1	Stage 2	Stage 3
Loan type and status
Public administrations	19,612	392	59	15,784	371	22
Other financial corporations	3,852	172	28	2,279	120	3
Loans and advances to companies and individual entrepreneurs	124,335	17,172	5,387	93,160	9,943	3,035
Real estate construction and development (including land)	10,348	1,935	738	8,878	1,472	565
Other companies and individual entrepreneurs	113,987	15,237	4,649	84,282	8,471	2,470
Other households	158,413	13,704	7,493	101,611	9,632	5,196
Homes	131,553	10,349	5,437	80,177	6,743	3,347
Other	26,860	3,355	2,056	21,434	2,889	1,849
TOTAL	306,212	31,440	12,967	212,834	20,066	8,256

Breakdown of hedges of loans and advances to customers by type (1)
(Millions of euros)

	31-12-2022
	Stage 1	Stage 2 + POCI w/o impairment	Stage 3 + POCI with impairment.
Public administrations	-1		-5
Other financial corporations	-7	-3	-20
Loans and advances to companies and individual entrepreneurs	-718	-586	-2,442
Real estate construction and development (including land)	-61	-114	-345
Other companies and individual entrepreneurs	-657	-472	-2,097
Other households	-616	-779	-2,214
Homes	-272	-433	-1,369
Other	-344	-346	-845
TOTAL	-1,342	-1,368	-4,681
Of which: identified individually		-210	-1,214
Of which: identified collectively	-1,342	-1,158	-3,467

Breakdown of hedges of loans and advances to customers by type (2)
(Millions of euros)

	31-12-2021			31-12-2020
	Stage 1	Stage 2 + POCI w/o impairment	Stage 3 + POCI with impairment.	Stage 1	Stage 2	Stage 3
Public administrations	-1	-3	-16	-2		-6
Other financial corporations	-10	-7	-43	-4	-4	-2
Loans and advances to companies and individual entrepreneurs	-438	-710	-2,658	-566	-495	-1,543
Real estate construction and development (including land)	-57	-143	-376	-47	-91	-253
Other companies and individual entrepreneurs	-381	-567	-2,282	-519	-404	-1,290
Other households	-517	-912	-2,936	-348	-565	-2,074
Homes	-132	-491	-1,751	-67	-250	-1,221
Other	-385	-421	-1,185	-281	-315	-853
TOTAL	-966	-1,632	-5,653	-920	-1,064	-3,625
Of which: identified individually		-170	-1,196		-109	-913
Of which: identified collectively	-966	-1,462	-4,457	-920	-955	-2,712

Breakdown of loans and advances to customers according to arrears status and rates
(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
By arrears status
Of which: default on payment of less than 30 days or up to date on payments	350,847	342,302	235,855
Of which: default on payment between 30 and 60 days	1,034	953	470
Of which: default on payment between 60 and 90 days	734	641	383
Of which: default on payment between 90 days and 6 months	886	983	468
Of which: default on payment between 6 months and 1 year	1,331	1,308	786
Of which: default on payment of more than 1 year	3,186	4,432	3,194
By interest rate type
Fixed	126,896	123,051	83,039
Floating	231,122	227,568	158,117

Concentration by economic activity
The breakdown of loans and advances to non-financial companies by economic activity is set out below, based on the NACE code of the counterparty:
Concentration by economic activity of non-financial companies - 31-12-2022
(Millions of euros)

	Gross carrying amount	Of which: Stage 3	Hedge
Agriculture, livestock, forestry and fishing	3,079	168	-129
Mining and quarrying	556	16	-12
Manufacturing industry	24,676	630	-525
Electricity, gas, steam and air conditioning supply	10,476	123	-115
Water supply	1,765	9	-16
Buildings	11,314	501	-471
Wholesale and retail trade	20,006	704	-540
Transport and storage	12,650	284	-330
Accommodation and food service activities	8,891	518	-244
Information and communication	4,724	109	-87
Financial and insurance activities	13,506	59	-98
Real estate	14,027	286	-257
Professional, scientific and technical activities	7,210	403	-284
Administrative and support service activities	4,472	103	-81
Public administration and defence; compulsory social security	1,563		-13
Education	659	31	-26
Human health services and social work activities	1,767	28	-36
Arts, entertainment and recreation	1,194	184	-82
Other services	4,033	157	-219
TOTAL	146,568	4,313	-3,565

Concentration by credit quality
The methodology applied to assign credit ratings to fixed income issuances is based on:

•	Fixed-income instruments: the regulatory banking criteria defined in the CRD IV regulation and the CRR on capital requirements, and therefore, the second best rating of all those available is used, if more than two ratings are available. In this context, for example, on 31 December 2022 and 2021, the rating of Spanish sovereign debt is A-. In 2020 it was A.
•	Loan portfolio: certification of the internal classifications to Standard and Poor's methodology.

The risk concentration according to credit quality of credit risk exposures associated with debt instruments for the Group, at the end of the financial year, is stated as follows:
Concentration according to credit quality - 31-12-2022 (1) (Millions of euros)

	Group (exc. insurance group)
	FA at amortised cost
	Loans and advances to customers
	Stage 1	Stage 2	Stage 3	POCI	Debt sec.
AAA/AA+/AA/AA-	17,060	9			9,575
A+/A/A-	43,744	96			38,146
BBB+/BBB/BBB-	79,277	747			6,827
INVESTMENT GRADE	140,081	852			54,548
Allowances for impairment	-545	-13
BB+/BB/BB-	68,996	6,692	1		488
B+/B/B-	17,700	10,980	28
CCC+/CCC/CCC-	842	4,319	106		18
No rating	93,957	5,719	9,486	468	22,694
NON- INVESTMENT GRADE	181,495	27,710	9,621	468	23,200
Allowances for impairment	-799	-1,355	-4,459	-222	-15
TOTAL	320,232	27,194	5,162	246	77,733

Concentration according to credit quality - 31-12-2022 (2)
(Millions of euros)

	Group (exc. insurance group)
				Financial guarantees, loan commitments and other commitments given
	FA held for training - Debt sec.	FA not designated for trading * - Debt sec.	FA at fair view w/changes in other comprehensive income	Stage 1	Stage 2	Stage 3
AAA/AA+/AA/AA-			2,689	13,297	9
A+/A/A-	24		6,656	11,899	19
BBB+/BBB/BBB-	43		2,162	41,934	218	1
INVESTMENT GRADE	67		11,507	67,130	246	1
Allowances for impairment				-12
BB+/BB/BB-			74	33,018	2,627	16
B+/B/B-				6,497	2,091	4
CCC+/CCC/CCC-			1	309	474	4
No rating	119	6	9	48,345	483	920
NON-INVESTMENT GRADE	119	6	84	88,169	5,675	944
Allowances for impairment				-83	-70	-382
TOTAL	186	6	11,591	155,299	5,921	945

Concentration according to credit quality - 31-12-2022 (3)
(Millions of euros)

	Insurance group **
	FA held for training - Debt sec.	Available for-sale FA	Loans and receivables - Debt sec.
AAA/AA+/AA/AA-		1,807
A+/A/A-	25	35,835	145
BBB+/BBB/BBB-	1	10,896	119
INVESTMENT GRADE	26	48,538	264
Allowances for impairment
BB+/BB/BB-		142
B+/B/B-
CCC+/CCC/CCC-
No rating		30
NON- INVESTMENT GRADE		172
Allowances for impairment
TOTAL	26	48,710	264

Concentration according to credit quality - 31-12-2021 (1)
(Millions of euros)

	Group (exc. insurance group)
	FA at amortised cost
	Loans and advances to customers
	Stage 1	Stage 2	Stage 3	POCI	Debt sec.
AAA/AA+/AA/AA-	16,982	37			3,286
A+/A/A-	42,943	630			53,528
BBB+/BBB/BBB-	72,642	1,766			6,600
INVESTMENT GRADE	132,567	2,433			63,414
Allowances for impairment	-299	-77			1
BB+/BB/BB-	64,773	8,193	2		517
B+/B/B-	19,821	11,082	34
CCC+/CCC/CCC-	1,354	3,742	181		114
No rating	89,854	5,989	12,062	689	4,176
NON- INVESTMENT GRADE	175,802	29,006	12,279	689	4,807
Allowances for impairment	-668	-1,555	-5,571	-82	-14
TOTAL	307,402	29,807	6,708	607	68,206

Concentration according to credit quality - 31-12-2021 (2)
(Millions of euros)

	Group (exc. insurance group)
				Financial guarantees, loan commitments and other commitments given
	FA held for training - Debt sec.	FA not designated for trading * - Debt sec.	FA at fair view w/changes in other comprehensive income	Stage 1	Stage 2	Stage 3
AAA/AA+/AA/AA-			60	11,105	25
A+/A/A-	147		11,751	10,497	77
BBB+/BBB/BBB-	174		2,848	33,698	318
INVESTMENT GRADE	321		14,659	55,300	420
Allowances for impairment			-1	-16	-2
BB+/BB/BB-			79	31,555	1,711
B+/B/B-				7,158	2,136	3
CCC+/CCC/CCC-				317	515	6
No rating	98	5	20	43,535	764	997
NON-INVESTMENT GRADE	98	5	99	82,565	5,126	1,006
Allowances for impairment				-79	-53	-311
TOTAL	419	5	14,757	137,865	5,546	1,006

Concentration according to credit quality - 31-12-2021 (3)
(Millions of euros)

	Insurance group **
	FA held for training - Debt sec.	Available for-sale FA	Loans and receivables - Debt sec.
AAA/AA+/AA/AA-		1,710
A+/A/A-	109	52,681
BBB+/BBB/BBB-	2	7,882	61
INVESTMENT GRADE	111	62,273	61
Allowances for impairment
BB+/BB/BB-		142
B+/B/B-		166
CCC+/CCC/CCC-
No rating		41	72
NON- INVESTMENT GRADE		207	72
Allowances for impairment
TOTAL	111	62,480	133

Debt sec.: Debt securities; FA: Financial assets
(*) Compulsorily measured at fair value through profit or loss
(**) Financial assets allocated at fair value through profit or loss are not included, as they primarily cover investments related to life insurance product operations, when the investment risk is taken on by the holder (Unit-links)
Concentration according to credit quality - 31-12-2020 (1)
(Millions of euros)

	Group (exc. insurance group)
	FA at amortised cost
	Loans and advances to customers
	Stage 1	Stage 2	Stage 3	POCI	Debt sec.
AAA/AA+/AA/AA-	29,541	86			394
A+/A/A-	26,560	757			16,272
BBB+/BBB/BBB-	29,818	1,125			5,641
INVESTMENT GRADE	85,919	1,968			22,307
Allowances for impairment	-292	-73
BB+/BB/BB-	40,931	5,047	1
B+/B/B-	11,935	6,235	19
CCC+/CCC/CCC-	505	2,070	58		47
No rating	74,985	4,746	8,178		2,327
NON- INVESTMENT GRADE	128,356	18,098	8,256		2,374
Allowances for impairment	-628	-991	-3,625		-11
TOTAL	213,355	19,002	4,631		24,670

Concentration according to credit quality - 31-12-2020 (2)
(Millions of euros)

	Group (exc. insurance group)
				Financial guarantees, loan commitments and other commitments given
	FA held for training - Debt sec.	FA not designated for trading * - Debt sec.	FA at fair view w/changes in other comprehensive income	Stage 1	Stage 2	Stage 3
AAA/AA+/AA/AA-	10		61	14,684	24
A+/A/A-	458		13,788	9,629	116
BBB+/BBB/BBB-	256	1	3,876	22,818	251
INVESTMENT GRADE	724	1	17,725	47,131	391
Allowances for impairment				-1	-7	-3
BB+/BB/BB-		46	124	18,975	1,407
B+/B/B-				4,708	1,186	5
CCC+/CCC/CCC-				240	310	64
No rating	77	5	47	29,734	325	590
NON-INVESTMENT GRADE	77	51	171	53,657	3,228	659
Allowances for impairment				-50	-27	-106
TOTAL	801	52	17,895	100,788	3,619	659

Concentration according to credit quality - 31-12-2020 (3)
(Millions of euros)

	Insurance group **
	FA held for training - Debt sec.	Available for-sale FA	Loans and receivables - Debt sec.
AAA/AA+/AA/AA-		1,083
A+/A/A-	463	53,921	15
BBB+/BBB/BBB-	82	6,393	61
INVESTMENT GRADE	545	61,397	76
Allowances for impairment
BB+/BB/BB-		211
B+/B/B-
CCC+/CCC/CCC-
No rating		35	113
NON- INVESTMENT GRADE		246	113
Allowances for impairment
TOTAL	545	61,643	189

Debt sec.: Debt securities; FA: Financial assets
(*) Compulsorily measured at fair value through profit or loss
(**) Financial assets allocated at fair value through profit or loss are not included, as they primarily cover investments related to life insurance product operations, when the investment risk is taken on by the holder (Unit-links).
Concentration according to sovereign risk
The Group's position in sovereign debt is subject to the general risk-taking policy, which ensures that all positions taken are aligned with the target risk profile:

•	The position in public, regional and local debt is subject to the general concentration and country risk limits established. Regular control procedures are in place for preventing new positions in countries in which there is a high risk concentration, unless express approval is given by the pertinent authority.
•	For fixed-income securities, a framework is in place regulating the solvency, liquidity and geographic location of all of the fixed-income issues and any similar transaction implying payment in cash for the buyer and the assumption of the issuer's credit risk or related collateral. This control is exercised during the risk acceptance phase and throughout the life of the position in the portfolio.
•	Public debt positions held on the Treasury Desk are subject to the framework for market risk control and limits.

The risk associated with exposures to sovereign risk, whether direct exposure or assets with sovereign backing, is continuously monitored in view of publicly available information, which includes the ratings of public agencies. At year-end 2022, all exposures are backed by sovereigns whose credit rating is BBB or better, and no hedging is deemed to be required for these exposures.
Furthermore, as specified in the table "Maximum exposure to credit risk" in Note 3.4.1, there are no material impairments of debt securities.
The carrying amounts of the main items related to sovereign risk exposure for the Group are set out below:
Sovereign risk exposure - 31-12-2022 (1)
(Millions of euros)

	Group (exc. insurance group)
Country / Supranational body	Residual maturity	FA at amortised cost	FA held for trading	FA at FV w/changes in other comprehend-sive income	FA not designated for trading *	FL held for trading - Short positions
Spain	Less than 3 months	6,802	1
	Between 3 months and 1 year	5,256	15	3,396	50	-13
	Between 1 and 2 years	10,689	1	2,040
	Between 2 and 3 years	14,651		182
	Between 3 and 5 years	10,544	1	944
	Between 5 and 10 years	20,710	5	82
	Over 10 years	8,778
Spain	TOTAL	77,430	23	6,644	50	-28
Italy	Less than 3 months
	Between 3 months and 1 year
	Between 1 and 2 years			283
	Between 2 and 3 years	423
	Between 3 and 5 years	252
	Between 5 and 10 years	3,179	4	527
	Over 10 years
Italy	TOTAL	3,854	4	810
Portugal	Less than 3 months	9
	Between 3 months and 1 year	566
	Between 1 and 2 years	15
	Between 2 and 3 years	370		276
	Between 3 and 5 years	398
	Between 5 and 10 years	1,270
	Over 10 years	733
Portugal	TOTAL	3,361		276
US	Less than 3 months
	Between 1 and 2 years	140
	Between 2 and 3 years	139
	Between 3 and 5 years	187
	Between 5 and 10 years		2,242
US	TOTAL	466	2,242
France	Less than 3 months
	Between 3 months and 1 year	97
	Between 2 and 3 years	52
	Between 5 and 10 years	1,924
France	TOTAL	2,073
Japan	Less than 3 months
	Between 3 months and 1 year	121
	Between 3 and 5 years	358
	Between 5 and 10 years	251
Japan	TOTAL	730

Sovereign risk exposure - 31-12-2022 (2)
(Millions of euros)

		Insurance group *
Country / Supranational body	Residual maturity	Available for-sale FA	FA held for training
Spain	Less than 3 months	576
	Between 3 months and 1 year	974	25
	Between 1 and 2 years	3,341
	Between 2 and 3 years	1,912
	Between 3 and 5 years	4,938
	Between 5 and 10 years	11,701
	Over 10 years	16,400
Spain	TOTAL	39,842	25
Italy	Less than 3 months
	Between 3 months and 1 year	609
	Between 1 and 2 years	272
	Between 2 and 3 years	56
	Between 3 and 5 years	398
	Between 5 and 10 years	1,090
	Over 10 years	2,953
Italy	TOTAL	5,378
Portugal	Less than 3 months
	Between 3 months and 1 year	51
	Between 1 and 2 years	7
	Between 2 and 3 years	45	1
	Between 3 and 5 years	71
	Between 5 and 10 years	141
	Over 10 years
Portugal	TOTAL	315	1
US	Less than 3 months
	Between 1 and 2 years	212
	Between 2 and 3 years
	Between 3 and 5 years
	Between 5 and 10 years
US	TOTAL	212
France	Less than 3 months
	Between 3 months and 1 year
	Between 2 and 3 years
	Between 5 and 10 years
France	TOTAL
Japan	Less than 3 months
	Between 3 months and 1 year
	Between 3 and 5 years
	Between 5 and 10 years
Japan	TOTAL

Sovereign risk exposure - 31-12-2022 (1)
(Millions of euros)

	Group (exc. insurance group)
Country / Supranational body	Residual maturity	FA at amortised cost	FA held for trading	FA at FV w/changes in other comprehend-sive income	FA not designated for trading *	FL held for trading - Short positions
European Union	Less than 3 months
	Between 1 and 2 years	16
	Between 3 and 5 years	1,017		263
	Between 5 and 10 years	1,867
	Over 10 years		128
European Union	TOTAL	2,900		391
Other	Less than 3 months	2
	Between 3 months and 1 year	2		2		-10
	Between 1 and 2 years
	Between 2 and 3 years	39
	Between 3 and 5 years
	Between 5 and 10 years	286
	Over 10 years	74
Other	TOTAL	403		2		-10
TOTAL		91,217	27	10,365	50	-38
Of which: Debt securities		70,922	27	10,365	50

Sovereign risk exposure - 31-12-2022 (2)
(Millions of euros)

		Insurance group *
Country / Supranational body	Residual maturity	Available for-sale FA	FA held for training
European Union	Less than 3 months
	Between 1 and 2 years
	Between 3 and 5 years
	Between 5 and 10 years
	Over 10 years
European Union	TOTAL
Other	Less than 3 months	2
	Between 3 months and 1 year	1
	Between 1 and 2 years
	Between 2 and 3 years	2
	Between 3 and 5 years	26
	Between 5 and 10 years	37
	Over 10 years	14
Other	TOTAL	82
TOTAL		45,827	26
Of which: Debt securities		45,827	26

FA: Financial assets; FL: Financial liabilities; FV: Fair value
(*) Compulsorily measured at fair value through profit or loss
(**) Financial assets allocated at fair value through profit or loss are not included, as they primarily cover investments related to life insurance product operations, when the investment risk is taken on by the holder (Unit-links).
Sovereign risk exposure - 31-12-2021 (1)
(Millions of euros)

	Group (exc. insurance group)
Country /Supranational body	Fa at amortised cost	Fa held for training	FA at FV w/changes in other comprehensive income	FFA not designated for trading *	FL held for trading -Short positions
Spain	74,973	128	11,817	65	-120
Italy	3,183	118	939		-119
Portugal	3,550		438
Other	1,216
TOTAL	82,922	246	13,194	65	-239
Of which: Debt securities	63,106	246	13,194	65

Sovereign risk exposure - 31-12-2021 (2)
(Millions of euros)

	Insurance group **
Country /Supranational body	Available-for sale FA	FA held for training
Spain	52,943	110
Italy	6,618
Portugal	377	1
Other	54
TOTAL	59,992	111
Of which: Debt securities	59,992	111

FA: Financial assets; FL: Financial liabilities; FV: Fair value
(*) Compulsorily measured at fair value through profit or loss.
(**) Financial assets allocated at fair value through profit or loss are not included, as they primarily cover investments related to life insurance product operations, when the investment risk is taken on by the holder (Unit-links).
Sovereign risk exposure - 31-12-2020 (1)
(Millions of euros)

	Group (exc. insurance group)
Country /Supranational body	Fa at amortised cost	Fa held for training	FA at FV w/changes in other comprehensive income	FFA not designated for trading *	FL held for trading -Short positions
Spain	32,183	442	13,966	84	-224
Italy	1,088	22	1,552		-20
Portugal	3,311	152	654		-5
Other	583
TOTAL	37,165	616	16,172	84	-249
Of which: Debt securities	21,165	616	16,172	84

Sovereign risk exposure - 31-12-2020 (2)
(Millions of euros)

	Insurance group **
Country /Supranational body	Available-for sale FA	FA held for training
Spain	51,613	345
Italy	6,273
Portugal	374	179
Other	61
TOTAL	58,321	524
Of which: Debt securities	58,321	524

FA: Financial assets; FL: Financial liabilities; FV: Fair value
(*) Compulsorily measured at fair value through profit or loss
(**) Financial assets allocated at fair value through profit or loss are not included, as they primarily cover investments related to life insurance product operations, when the investment risk is taken on by the holder (Unit-links).
Information regarding financing for real estate construction and development, home purchasing, and foreclosed assets
The main data regarding financing for real estate development, home purchasing and foreclosed assets are discussed below.
Financing for real estate construction and development
The tables below show financing for real estate construction and development, including developments carried out by non-developers (business in Spain):
Financing for real estate construction and development
(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Total amount	Of which: NP	Total amount	Of which: NP	Total amount	Of which: NP
Gross amount	4,824	274	5,708	364	5,467	380
Allowances for impairment	-244	-152	-280	-162	-234	-142
CARRYING AMOUNT	4,580	122	5,428	202	5,233	238
Excess gross exposure over the maximum recoverable value of effective collateral	943	147	922	123	858	125
Memorandum items: Asset write-offs	1,885		1,999		1,969
Memorandum items: Loans to customers excluding public administrations (business in Spain) (carrying amount)	293,745		293,289		193,667

The tables below show the breakdown of financing for real estate developers and developments, including developments carried out by non-developers (business in Spain), by collateral:
Financing for real estate developers and developments by collateral (Millions of euros)

	Gross amount
	31-12-2022	31-12-2021	31-12-2020
Without mortgage collateral	620	621	548
With mortgage collateral	4,204	5,087	4,919
Buildings and other completed constructions	2,911	3,429	3,294
Homes	1,958	2,313	2,250
Other	953	1,116	1,044
Buildings and other constructions under construction	952	1,240	1,251
Homes	811	1,101	1,158
Other	141	139	93
Land	341	418	374
Consolidated urban land	156	156	193
Other Land	185	262	181
TOTAL	4,824	5,708	5,467

The following table presents financial guarantees given for real estate construction and development, including the maximum level of exposure to credit risk (i.e. the amount the Group could have to pay if the guarantee is called on).
Financial guarantees
(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Financial guarantees given related to real estate construction and development	210	446	105
Amount recognised under liabilities

The table below provides information on guarantees received for real estate development loans by classification of customer insolvency risk:
Guarantees received for real estate development transactions *
(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Value of collateral *	11,921	13,574	12,454
Of which: guarantees non-performing risk	622	758	738

(*) The maximum amount of the effective collateral that can be considered for the purposes of the impairment calculation, i.e., the estimated fair value of real estate properties based on their latest available appraisal or an update of that appraisal based on the applicable regulations in force. In addition, the remaining collaterals are included as the current value of the collateral that has been pledged to date, not including personal guarantees.
Financing for home purchases
The breakdown of home-purchase loans (business in Spain), as well as the annual financing granted to purchase homes from credit streamlining at the end of these financial years, is as follows:
Loans granted for financing buyers of foreclosed homes
(Millions of euros)

	2022	2021	2020
Financing granted in the year	330	210	166
Average percentage financed	93%	92%	94%

Home purchase loans with mortgage at these dates by the loan-to-value (LTV) ratio, based on the latest available appraisal, are as follows:
Home purchase loans by LTV * (Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Gross amount	Of which: NP	Gross amount	Of which: NP	Gross amount	Of which: NP
Not real estate mortgage secured	1,077	10	1,125	12	639	8
Real estate mortgage secured, by LTV ranges **	124,018	3,176	125,824	4,777	73,220	2,775
LTV ≤ 40%	37,543	373	36,757	405	21,989	221
LTV between 40% and 60%	40,068	560	42,911	653	26,826	386
LTV between 60% and 80%	31,475	630	30,582	863	17,441	560
LTV between 80% and 100%	7,238	514	6,964	833	3,747	520
LTV > 100%	7,694	1,099	8,610	2,023	3,217	1,088
TOTAL	125,095	3,186	126,949	4,789	73,859	2,783

(*) Includes financing for home purchases granted by subsidies Unión de Créditos para la Financiación Inmobiliaria, EFC, SAU (Credifimo) and Corporación Hipotecaria Mutual.
(**) LTV calculated according to the latest available appraisals. The ranges for non-performing transactions are updated in accordance with prevailing regulations.
Counterparty risk generated by transactions with derivatives, repos, securities lending and deferred settlement transactions
Monitoring and measurement of counterparty risk
Counterparty risk is credit risk generated by derivatives and security financing transactions. It quantifies the losses derived from the counterparty's potential default before the cash flows are definitively settled.
The approval of new transactions involving assuming counterparty risk in the Group is subject to an internal framework that has been approved by the Global Risk Committee and that enables rapid decision making, for both financial and other counterparties.
In the case of operations with financial institutions, the Group has a specific internal framework that reflects the methodology used for the granting of facilities. The maximum authorised credit risk exposure with an entity is primarily determined on the basis of the entities' ratings and the analysis of their financial statements. This framework also includes the model for determining limits and calculating consumer risk for Central Counterparties (CCPs).
In transactions with other counterparties, including retail customers, derivative transactions relating to asset applications (loan interest rate risk hedging) are approved jointly with the asset transaction. All other transactions subject to counterparty risk do not require explicit approval, provided that the consumption does not exceed the allocated risk limit of said counterparty. Otherwise, an individual study will be requested. Approval of transactions corresponds to the risk areas responsible for credit risk analysis and approval.
The definition of limits for counterparty risk is complemented by internal concentration limits, mainly for country and large exposure risks.
Counterparty risk relating to derivative transactions is quantitatively associated with the related market risk. The amount owed by the counterparty must be calculated by reference to the market value of the contracts and their related potential value (possible changes in their value under extreme market price conditions, based on the historical pattern). The equivalent credit exposure for derivatives is understood as the maximum potential loss over the life of an operation that the bank might incur should the counterparty default at any time in the future. This is calculated using Monte Carlo simulation with portfolio effect and offsetting of positions, as applicable, at a 95% confidence interval, based on stochastic models incorporating the volatility of the underlying asset and all of the characteristics of the operations.
Counterparty risk exposure for repos and securities lending is calculated in the Group as the difference between the market value of the securities/cash granted to the counterparty and the market value of the securities/cash received from the counterparty as collateral, considering the applicable volatility adjustments in each case.
When calculating the exposure of derivatives, repos and securities lending, the mitigating effect of collateral received under Framework Collateral Agreements is also considered.
In general, the methodology for calculating counterparty risk exposure described above is applied during the acceptance of new operations and in recurrent calculations on subsequent days.
Counterparty risk in the Group for financial counterparties is controlled through an integrated system that provides real-time data on the available exposure limit for any counterparty, product and maturity. For the remaining counterparties, counterparty risk is controlled through corporate applications, which contain both the limits of the lines of derivatives risk (if any) and credit exposure of derivatives and repos.
Hedging policies and mitigation techniques for counterparty risks
The main risk mitigation policies and techniques employed for counterparty risk with financial institutions involve:

•	ISDA/CMOF contracts. Standardised contracts for global derivative operations with a counterparty. These explicitly provide for the possibility of offsetting the flows of outstanding collections and payments between the parties for all derivatives trading hedged by the contracts.
•	CSA Appendix (ISDA) / Appendix III (CMOF). Agreements whereby each of the parties undertake to provide collateral (usually a cash deposit) as security for the net counterparty risk position arising from the derivatives traded between them. The calculation of the collateral to be exchanged takes into account the compensation clauses included in the ISDA or CMOF contracts.
•	GMRA/ CME/ GMSLA contracts. Agreements whereby the parties undertake to deliver collateral for the net counterparty risk position arising from repo or securities lending transactions, calculated as the deviation that may occur between the value of the amount accrued for the simultaneous purchase and sale of securities and the current market value of these securities.
•	Break-up clauses. Provisions in derivative contracts that enable, at a certain point in the contract, the early termination by free decision of one of the parties. This mitigates counterparty risk by reducing the effective duration of the operations subject to the clause.
•	Delivery-versus-payment in securities settlement systems. Systems that eliminate settlement risk with a counterparty, since clearing and settlement occur simultaneously and in an inseparable fashion. One major system is the Continuous Linked Settlement (CLS) system that allows the Group to ensure delivery against payment in the case of simultaneous collection and payment flows in different currencies.
•	Central Counterparties (CCP). The use of CCPs in derivatives and securities lending transactions can mitigate the associated counterparty risk, as these entities act as intermediaries on their own behalf between the two parties to the transaction, thus absorbing the counterparty risk.

The EMIR Regulation and its amendment, EMIR-Refit, establish a series of obligations for all investors trading derivatives contracts. Of particular note is the mandatory use of an authorised Central Counterparty when trading in certain derivatives contracts or the reporting to trade repositories authorised or recognised by ESMA of all derivative contracts traded.
For non-financial counterparties, the mitigation techniques for counterparty risk involve: ISDA/CMOF contracts, CSA contract/CMOF Appendix III and break-up clauses, as well as pledges of financial guarantees and the use of guarantees issued by counterparties with higher credit quality than the original counterparty in the transaction.
The Group has signed collateral agreements, mainly with financial institutions. Risk is quantified daily, in most cases, by marking to market all outstanding transactions, subject to the collateral framework agreement, and comparing this amount to the current guarantee received/delivered. This entails modification, where applicable, of the collateral delivered by the debtor. In a hypothetical downgrade to the Group's rating, the impact on collateral would not be significant as most of the collateral agreements do not include franchises related to its external credit rating.
Risk associated with the investee portfolio
The risk associated with equity investments (or "investees") is included under credit risk for investments that are not classified in the held-for-trading portfolio. More specifically, the Corporate Risk Catalogue contemplates it as a specific credit risk item that reflects the potential loss, over a medium and long-term time horizon, generated by unfavourable movements in market prices, impairment of value, concentration, country of issue, or illiquidity of the positions that make up the portfolio of the CaixaBank Group companies' equity investments.
The way in which each share is methodologically processed for capital consumption will depend on: i) the accounting classification of the share, for investments classified in the portfolio at fair value with changes in other comprehensive income, the calculation is carried out using the internal VaR model; and ii) the longevity strategy, for investments intended to be held on a long-term basis or there is a long-term link in their management, the most significant risk is credit risk, and, therefore, the PD/LGD approached is used whenever possible.
If the requirements for applying the aforementioned methods are not met or there is not sufficient information, the simple risk-weight approach is applied in accordance with current regulations. Without prejudice to the foregoing, for certain cases laid down in the regulation corresponding to significant financial holdings, the capital consumption will be subjected to deductions from own funds or a fixed weighting of 250%.
As regards management, a financial analysis and control is conducted on the main investees by specialists exclusively responsible for monitoring changes in economic and financial data and for understanding and issuing alerts in the event of changes in regulations and fluctuations in competition in the countries and sectors in which the investees operate. These analysts also interact with the Investor Relations departments of the listed investees and compile the information needed, including third-party reports (e.g. investment banks, rating agencies) needed for an overview of possible risks to the value of the shareholdings.
In general, with the most significant shareholdings, both the estimates of and actual data on investees' contributions to income and equity (where applicable) are updated regularly by these analysts. In these processes, the outlook for securities markets and analysts' views (e.g. recommendations, target prices, ratings, etc.) are shared with Senior Management for regular comparison with the market.
COVID-19 support measures
On the specific matter of COVID-19, CaixaBank has added to the legislative moratoria through other chiefly sector-based agreements. These moratoriums expired entirely in 2022.
Efforts were also made to ensure the deployment of new ICO (Spanish Official Credit Institute) guarantee facilities, which CaixaBank also extends using working capital facilities and special funding facilities, among others.
In the case of Portugal, BPI has also applied its own extraordinary measures to handle the impact of COVID-19, approved under the scope of Decree-Law 10-J/2020, issued by the Portuguese government. These measures cover actions of a similar nature to the foregoing in the Spanish context.
Guarantees granted by ICO fulfil the definition of financial guarantee contracts. As a result, the Company's criteria for recording financial guarantees received have not been altered, and they are only taken into account for the purpose of calculating the expected loss on the transaction. However, the particular characteristics of these guarantees have been taken into consideration in order to determine when, pursuant to IFRS 9, the substantial transfer of risks and rewards to the ICO takes place, which enables the percentage of the guaranteed principal of doubtful transactions to be removed from the balance sheet on the grounds of being non-performing loans.
The financial guarantee has been considered an incremental cost directly attributable to the operations, which involves the accrual of a lower effective interest rate in the operation. No grant or public aid or any tax effects have been recognised under IAS 12.
The following is a breakdown of the public guarantee financing operations (carrying amount):

Breakdown of government guaranteed loans (1)

(Millions of euros)

	31-12-2022			31-12-2021
	Spain (ICO)	Portugal	Total	Spain (ICO)	Portugal	Total
Public administrations	7		7	9		9
Non-financial corporations and individual entrepreneurs (non financial business)	16,802	1,459	18,261	20,644	1,109	21,753
Real estate construction and development (including land)	75	4	79	94	2	96
Civil engineering	1,371	112	1,483	1,692	82	1,774
Other	15,356	1,343	16,699	18,858	1,025	19,883
Large corporates	3,685	37	3,722	4,612	44	4,656
SMEs and individual entrepreneurs	11,671	1,306	12,977	14,246	981	15,227
TOTAL	16,809	1,459	18,268	20,653	1,109	21,762
Of which: from the business combination with Bankia, S.A. (Note 7)				8,700

Breakdown of government guaranteed loans (2)

(Millions of euros)

	31-12-2020
	Spain (ICO)	Portugal	Total
Public administrations	6		6
Non-financial corporations and individual entrepreneurs (non financial business)	12,634	551	13,185
Real estate construction and development (including land)	41	1	42
Civil engineering	974	36	1,010
Other	11,619	514	12,133
Large corporates	2,686	26	2,712
SMEs and individual entrepreneurs	8,933	488	9,421
TOTAL	12,640	551	13,191
Of which: from the business combination with Bankia, S.A. (Note 7)

34% of the total amount of loans granted with government guaranteed loans has been repaid; of the remaining amount, 98% is repaying principal at 31 December 2022. 4.2% of government guaranteed loans are classified in Stage 3. The outstanding balance in Stage 3 includes subjective non-performing, i.e. impaired for reasons other than default > 90 days over the total amount of loans granted and loans and advances drawn

3.4.2 Actuarial risk

Overview

The European regulatory framework of reference for insurance companies, known as Solvency II, is transposed into to the Spanish legal system through Act 20/2015 and Royal Decree 1060/2015, which are known, respectively, as LOSSEAR and ROSSEAR. This framework is supplemented by the technical standards approved by the European Commission (ITS), which are directly applicable, and guidelines published by EIOPA (European Insurance and Occupational Pensions Authority), which have been adopted by the Directorate General for Insurance and Pension Funds (DGSFP) as their own.

In line with the European Solvency II Directive, actuarial risk is defined in the Corporate Risk Catalogue as the risk of loss or adverse modification of the value of commitments taken on via insurance contracts or pensions with customers or employees, derived from the divergence between the estimate for actuarial variables employed in pricing and reserves and their real evolution.

Actuarial risk is inherent to the activity relating to the subscription of insurance products which, within CaixaBank Group, is centralised in the subgroup of companies headed by VidaCaixa. Through VidaCaixa, the Group is exposed to actuarial risk due to unfavourable movements of the risk factors of mortality, longevity, disability and morbidity, catastrophe, falls and expenses.

Besides the subscription activity, actuarial risk also derives from the defined benefit pension commitments of Group companies with their employees. At CaixaBank, the risks inherent to these agreements are transferred for management by the VidaCaixa Group through the formalising of insurance contracts, whereas in the defined benefit commitments for Banco BPI employees they are implemented through a Pension Fund managed by BPI Vida e Pensões, a VidaCaixa Group company.

This risk management seeks to uphold the payment capacity of commitments to borrowers, optimise the technical margin and preserve the economic value of the balance sheet, within the limits laid down in the RAF.

Actuarial risk cycle

Actuarial risk monitoring and measurement

Actuarial risk assumed as a result of the life insurance contract subscription activity are managed in conjunction with the inherent risks arising from the financial assets acquired for hedging.

In order to ensure an adequate risk management, the Group has a Corporate Financial-Actuarial Risk Management Policy in place, which sets out the general principles, governance framework, control framework and information reporting framework applicable to all the Group companies exposed to these risks. Furthermore, the VidaCaixa Group companies have management policies and frameworks for proprietary financial-actuarial risks that serve to implement that Corporate Policy.

Actuarial risk management established in these policies seeks the long-term stability of the actuarial factors that affect the technical evolution of subscribed insurance products. The actuarial risk factors notably feature mortality and longevity risk in the field of life insurance, where VidaCaixa includes in its management a partial internal model, according to methodology laid down in the Solvency II Directive, that is submitted annually to the regulatory body. The model is based on data from historical experience that provides a more adapted vision of the risk profile of the insured group.

On this note, and for each line of business, the VidaCaixa policy of underwriting and provision of reserves identifies various parameters for risk approval, measurement, rate-setting and, lastly, to calculate and set aside reserves covering underwritten policies. Additionally, general operating procedures are set to control the underwriting process.

Systems for measuring actuarial risk, from which the sufficiency of the technical provisions are quantified and assessed policy-by-policy, are integrated into the management of the insurance business. In this sense, production operations, irrespective of the channel, are recorded in the systems using the various contracting, benefits management and provision calculation applications (e.g. TAV for individual and ACO or Avanti for group insurance). Investment management software is used to manage and control the investments backing the company's insurance activity. All of the applications are accounted for automatically in the accounting support software.

There is a series of applications that perform management support tasks within these integrated and automated systems. It is worth noting applications for data processing that are used for the preparation of reporting information and risk management. There is also a solvency and risk datamart, which serves as a support tool for compliance with all the requirements of the Solvency II Directive.

In relation to interest rate risk, the Group -through its insurance company VidaCaixa- limits its exposure using financial immunisation techniques envisaged in the provisions of the DGSFP.

For credit and liquidity risk incurred in the insurance business, the Group has risk management frameworks that establish minimum credit quality and diversification levels (see the risk structure of the insurance business in these fields, presented in a segmented way in Note 3.4.1).

Mitigation of actuarial risk

One of the Group's elements used to mitigate the assumed actuarial risk consists of transferring part of the risk to other companies, through reinsurance contracts. To do so, the Group -and specifically its insurance company- has a Reinsurance Policy which is updated at least annually, which identifies the extent to which risk is passed on, taking into account the risk profile of direct insurance contracts, and the type, suitability and effectiveness of the various reinsurance agreements.

By doing so, an insurance company can reduce risk, stabilise solvency levels, use available capital more efficiently and expand its underwriting capacity. However, regardless of the reinsurance taken out, the insurance company is contractually liable for the settlement of all claims with policyholders.

Through VidaCaixa Group, CaixaBank Group establishes the following via this Reinsurance Policy:

•	The general strategy and principles that must govern reinsurance management.
•	The governance, management, control and information frameworks of reinsurance.

In that regard, the VidaCaixa Group establishes tolerance limits on the basis of the criteria that must govern the selection of reinsurers and the maximum retained risk.

3.4.3 Risks in the banking book

Interest rate risk in the banking book

Risk defined as the negative impact on the economic value of balance sheet items or on financial income due to changes in the temporary structure of interest rates and their impact on asset and liability instruments and those off the Group's balance sheet not recognised in the trading book.

The management of this risk by the Group seeks to i) optimise the net interest margin and ii) maintain the economic value of the balance sheet, while at all times taking into account the metrics and thresholds of the risk appetite framework in terms of volatility of the financial margin and value sensitivity.

This risk is analysed considering a broad set of market-type scenarios, including the potential impact of all possible sources of interest rate risk in the banking book, i.e. GAP risk (with its risk repricing risk and curve risk components), basis risk and optionality risk. Optionality risk considers automatic optionality related to the behaviour of interest rates and the optionality of customer behaviour, which is not only dependent on interest rates.

The Group applies best practices in the market and the recommendations of regulators in measuring interest rate risk. It sets risk thresholds based on these metrics related to net interest income and the economic value of its balance sheet and considering the complexity of the balance sheet.

It uses both static and dynamic measurements:

Static measurements:static measurements are those that are not designed based on assumptions of new business and refer to a specific point in time.

•	Static gap: it shows the contractual distribution of maturities and interest rate reviews for applicable balance sheet or off-balance aggregates at a particular date. GAP analysis is based on comparing the values of the assets and liabilities reviewed or that mature in a particular period.
•	Balance sheet economic value: it is calculated as the sum of i) the fair value of net interest-rate sensitive assets and liabilities on the balance sheet; ii) the fair value of off-balance sheet products (derivatives); and iii) the net carrying amounts of non-interest-rate sensitive asset and liability items.
•	Economic value sensitivity: the economic value of sensitive balances on and off the balance sheet is reassessed under the various stress scenarios considered by the Group. The difference between this value and the economic value calculated at current market rates gives us a numeric representation of the sensitivity of economic value to the various scenarios employed. The Group then uses this sensitivity measurement to define operating risk thresholds for economic value for particular interest rate scenarios.
•	VaR: the value at risk of the FVOCI portfolio is calculated, with a 10-year history, a time horizon of 1 month and a confidence level of 99%, considering interest rate risk and credit spread risk. Dynamic measurements: these are based on the balance sheet position at a given date and also take into account the new business. Therefore, in addition to considering the current on- and off-balance sheet positions, growth forecasts from the Group's budget are included.
•	Net interest income projections: The Group projects future net interest income (1, 2 and 3 years ahead) under various interest rate scenarios. The objective is to project net interest income based on current market curves, the outlook for the business and wholesale issuances and portfolio purchases and sales, and to predict how it will vary under stressed interest rates scenarios. Forecasts of net interest income depend on assumptions and events other than just the future interest rate curve: they also consider factors such as customer behaviour (early cancellation of loans and early redemption of fixed-term deposits), the maturity of on-demand accounts and the future performance of the Group's business.
•	Net interest income volatility: The difference between these net interest income figures (the differences resulting from an increase, decrease, or changes compared to the baseline scenario) compared to the baseline scenario give us a measure of the sensitivity, or volatility, of net interest income. The Group then uses this sensitivity measurement to define operating risk thresholds for net interest income for particular interest rate scenarios. The tables below show, using a static gap, the breakdown interest rate revaluations and maturities of sensitive items on the Group's balance sheet, without taking into account, where applicable, the value adjustments or value corrections at the year-end:

Matrix of maturities and revaluations of the balance sheet sensitive to interest rates (1)

(Millions of euros)

	=+ 1 Year	1-2 years	2-3 Years	3-4 Years	4-5 Years	+ 5 Years
ASSETS
Interbank and Central Banks	28,621	680		227	250	250
Loans and advances to customers	255,471	28,190	15,720	9,811	7,857	35,134
Fixed income portfolio	26,172	4,083	6,670	7,334	5,794	35,994
TOTAL ASSETS	310,264	32,953	22,390	17,372	13,901	71,378
LIABILITIES
Interbank and Central Banks	38,454	883	87	40	170	43
Customer deposits	209,466	59,262	12,079	7,402	7,404	91,432
Issuances	11,930	7,497	13,245	6,239	6,252	10,824
TOTAL LIABILITIES	259,850	67,642	25,411	13,681	13,826	102,299
ASSETS LESS LIABILITIES	50,414	-34,689	-3,021	3,691	75	-30,921
Hedges	-65,462	10,698	25,855	4,508	19,099	5,570
TOTAL DIFFERENCE	-15,048	-23,991	22,834	8,199	19,174	-25,351

Matrix of maturities and revaluations of the balance sheet sensitive to interest rates (2)

(Millions of euros)

	Total
ASSETS
Interbank and Central Banks	30,028
Loans and advances to customers	352,183
Fixed income portfolio	86,046
TOTAL ASSETS	468,257
LIABILITIES
Interbank and Central Banks	39,676
Customer deposits	387,045
Issuances	55,987
TOTAL LIABILITIES	482,708
ASSETS LESS LIABILITIES	-14,451
Hedges	270
TOTAL DIFFERENCE	-14,183

Below is the sensitivity of the net interest income and economic value to sensitive balance sheet assets and liabilities for a scenario of rising and falling interest rates of 100 basis points:

Interest rate sensitivity

(incremental % with respect to the market baseline scenario / implicit rates)

	+100 BP	-100 BP
Net interest income (1)	4.44%	-4.22%
Economic value of equity for sensitive balance sheet aggregates (2)	-0.3%	-0.61%

(1) Sensitivity of the 1-year NII of sensitive balance sheet aggregates.

(2) Sensitivity of economic value for sensitive balance sheet aggregates on Tier 1.

With regard to measurement tools and systems, information is obtained at the transaction level of the Group's sensitive balance sheet transactions from each computer application used to manage the various products. This information is used to produce databases with a certain amount of aggregation in order to speed up the calculations without impairing the quality or reliability of the information.

The assets and liabilities management application is parameterised in order to include the financial specifics of the products on the balance sheet, using behavioural customer models based on historical information (e.g. pre-payment models). Growth data budgeted in the financial planning (volumes, products and margins) and information on the various market scenarios (interest and exchange rate curves) is also fed into this tool, in order to perform a reasonable estimate of the risks involved. It measures the Group's static gaps, net interest income and economic value.

To mitigate the structural interest rate risk, the Group actively manages risk by arranging additional hedging transactions on financial markets to supplement the natural hedges generated on its own balance sheet as a result of the complementarity between the sensitivity to fluctuations in interest rates on deposits and on lending transactions arranged with customers or other counterparties. At 31 December 2022, CaixaBank uses hedges as a strategy for mitigating its exposure and preserving the economic value of the balance sheet. The most important hedges on the bank's balance sheet are loan hedges, issue hedges, demand account hedges and at BIS term deposit hedges. The most relevant are issue hedges that are structured as macro fair value hedges.

The interest rate risk in the banking book assumed by the Group is substantially below levels considered significant under current regulations.

Exchange rate risk in the banking book

Exchange rate risk in the banking book corresponds to the potential risk in the assets affected by adverse movements in exchange rates.

The Group has foreign currency assets and liabilities in its balance sheet as a result of its commercial activity and its shares in foreign currencies, in addition to the foreign currency assets and liabilities deriving from the Group's measures to mitigate exchange rate risk.

The equivalent euro value of all foreign currency assets and liabilities in the Group's balance sheet is as follows:

Foreign currency positions

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Cash and cash balances at central banks and other demand deposits	662	542	538
Financial assets held for trading	1,964	4,806	391
Financial assets with changes in other comprehensive income	2,666	353	393
Financial assets measured at amortised cost	22,803	18,351	13,494
Equity Investments	150	124	87
Other assets	-3,983	1,103	115
TOTAL FOREIGN CURRENCY ASSETS	24,262	25,279	15,018
Financial liabilities at amortised cost	14,114	10,716	8,729
Deposits	11,028	8,885	7,773
Central banks	660	918	652
Credit institutions	4,864	1,894	1,807
Customers	5,504	6,073	5,314
Debt securities issued	2,462	1,718	867
Other financial liabilities	624	113	89
Other liabilities	1,770	4,976	-244
TOTAL FOREIGN CURRENCY LIABILITIES	15,884	15,692	8,485

The Group hedges its foreign currency risk by arranging cash transactions of financial derivatives, which mitigate the risk of asset and liability positions on the balance sheet. However, the nominal amount of these instruments is not reflected directly on the balance sheet but rather as memorandum items for financial derivatives. This risk is managed by seeking to minimise the level of exchange rate risk assumed in commercial activity, which explains why the Group's exposure to this market risk is low.

The remaining minor foreign currency positions in the banking book and of the treasury activity are chiefly held with credit institutions in major currencies. The methods for quantifying these positions, which are the same, are applied alongside the risk measurements used for the treasury activity as a whole.

The breakdown by currency of the main headings of the balance sheet are set out below:

Breakdown of the main balance sheet items by currency - 31-12-2022

(Millions of euros)

	Cash ^*	FA held for trading	FA with changes in OCI	FA at amortised cost	FL at amortised cost	Other liabilities
USD	258	1,153	2,251	16,041	10,516	477
JPY	127	3		194	324	9
GBP	34	719	3	3,273	1,926	597
PLN (Polish Zloty)	115	10		1,042	392	627
CHF	15	1		203	253	-2
CAD	14	139		1,167	104	90
Other	99	-61	412	883	599	-28
TOTAL	662	1,964	2,666	22,803	14,114	1,770

FA: Financial assets; FL: Financial liabilities

( ^*) Cash and cash balances at central banks and other demand deposits

Given the reduced exposure to exchange rate risk and considering the existing hedges, the sensitivity of the balance sheet's economic value is not significant.

IBOR reform

Global financial regulators have driven the gradual abandonment of IBORs and their replacement with new risk-free rates in recent years. This has led to the need for a transition from the old LIBORs to the new rates recommended by the task forces established in the various jurisdictions.

Since the regulators' first announcements, the Group has taken an active position both externally-participating in the working group on Risk Free Rates (RFR) for the eurozone- and internally, where it has laid down an index transition project with a robust governance structure to meet the regulatory, financial, commercial and technical needs of index transition.

The index transition project featured an internal task force to manage the various risks to which the Group is exposed as a result of this transition:

•	risk of litigation on contracts, services and contracts indexed to rates that will disappear,
•	operational risks arising from the need for technological changes, operational processes and controls,
•	legal risks when remedying existing contracts or other documentation,
•	financial and accounting risks from the use and change to new rates in accounting and assessment methodologies and instruments,
•	reputational risks of conduct in the transfer of the reform and its impacts on stakeholders and in particular on customers.

The Group has a high exposure to the Euribor index that is not affected by the transition, while this index, following a reform of its methodology -conducted during phase-in in the second half of 2019- has received the backing of supervisors and regulators and fully complies with the index regulation.

The Group uses Euribor for mortgages, loans, deposits and debt issuances, as well as in a broad range of derivative instruments. However, the eurozone working group and the European authorities recommend that all contracts indexed to Euribor include replacement clauses in the event of a possible future termination of the Euribor based on the new RFR indices for the euro, i.e. in temporary structures of €STR. Thus, the group is adding such fallbacks in all the contracts indexed Euribor.

Lastly, with regard to the LIBOR indices, the Group's exposure can be considered non-material given the low volume of assets and liabilities indexed to in these indices. However, it should be noted that the transition of LIBOR GDP, CHF, JPY and EUR was fully completed at the beginning of 2022. When it comes to the LIBOR USD, the most representative in terms of exposure, the 1M, 3M, 6M and 12M terms are expected to be discontinued in June 2023. Currently, the new production indexed in USD, GBP, JPY and CHF is already conducted in connection with the various structures of the respective risk-free-rates of each currency (SONIA, TONA and SARON).

The carrying amount of financial instruments referenced to the indices subject to the IBOR Reform is shown below:

Breakdown of financial instruments indexed to the IBOR reform - 31-12-2021

(Millions of euros)

	Loans and advances	Debt securities	Deposits	Debt securities issued	Derivatives -Assets	Derivatives -Liabilities
Indexed to LIBOR
USD	10,059	6		913	1,230	995
TOTAL	10,059	6		913	1,230	995

The nominal amount of the hedging instruments referenced to indices subject to the IBOR Reform is shown below:

Breakdown of hedging instruments indexed to the IBOR reform - 31-12-2022

(Millions of euros)

	Libor USD	Other
Fair value hedges	719
Cash flow hedges	1,224
TOTAL	1,943

3.4.4 Liquidity and funding risk

Overview

Liquidity and financing risk refers to insufficient liquid assets or limited access to market financing to meet contractual maturities of liabilities, regulatory requirements, or the investment needs of the Group.

The Group manages this risk in order to ensure liquidity is maintained at levels that allow it to comfortably meet all its payment obligations and to prevent its investment activities from being affected by a lack of lendable funds, operating at all times within the RAF. The strategic principles to achieve the liquidity management objectives are as follows:

•	A decentralised liquidity management system across three units (the CaixaBank subgroup, the BPI subgroup and CaixaBank Wealth Management Luxembourg, S.A.), which includes a segregation of duties to ensure optimal management, control and monitoring of risks.
•	Maintaining an efficient level of liquid funds in order to meet obligations assumed, fund business plans and comply with regulatory requirements.
•	Active management of liquidity through ongoing monitoring of liquid assets and the balance sheet structure.
•	Sustainability and stability as principles of the funding source strategy, which is based on i) the customer deposit-based funding structure and ii) capital market funding, complementing the funding structure. The liquidity risk strategy and appetite for liquidity and financing risk involves:
•	Identifying material liquidity risks for the Group and its liquidity management units;
•	Formulating the strategic principles the Group must observe in managing each of these risks;
•	Establishing the relevant metrics for each of these risks;
•	Setting appetite, tolerance, compliance / benchmark and, where applicable, recovery thresholds within the RAF.
•	Setting up management and control procedures for each of the risks, including mechanisms for internal and external systematic monitoring;
•	Defining a stress testing framework and a Liquidity Contingency Plan to ensure liquidity risk can be appropriately managed in moderate and severe crisis situations, and
•	A Recovery Planning framework, in which scenarios and measures are devised for stress conditions. In particular, the Group holds specific strategies with regard to: i) management of intraday liquidity risk; ii) management of the short-term liquidity; iii) management of sources of financing/concentrations; iv) management of liquid assets; and v) management of collateralised assets. Similarly, the Group has procedures to minimise liquidity risks in stress conditions through i) the early detection of the circumstances through which it can be generated; ii) minimising negative impacts; and iii) sound management to overcome a potential crisis situation.

Mitigation techniques for liquidity risk

On the basis of the principles mentioned in the previous section, a Contingency Plan has been drawn up defining an action plan for each of the established crisis scenarios. This sets out measures to be taken on the commercial, institutional and disclosure level to deal with this kind of situation, including the possibility of using the liquidity reserves or extraordinary sources of finance. In the event of a situation of stress, the liquid asset buffer will be managed with the objective of minimising liquidity risk.

The measures in place for liquidity risk management and anticipatory measures feature:

•	Delegation of the Annual General Meeting or, where applicable, of the Board of Directors for issuance, depending on nature of the type of instrument.
•	Availability of several facilities open with i) the ICO, under credit facilities - mediation, ii) the European Investment Bank (EIB) and iii) the Council of Europe Development Bank (CEB). In addition, there are financing instruments with the ECB for which guarantees have been posted to ensure that liquidity can be obtained immediately:

Available in ECB facility

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Value of guarantees delivered as collateral	77,674	89,345	72,139
CaixaBank	71,550	83,424	66,498
BPI	6,124	5,921	5,641
Drawn down	-15,620	-80,752	-49,725
TLTRO III - CaixaBank ^*	-15,178	-75,890	-45,305
TLTRO III - BPI ^*	-442	-4,862	-4,420
Interest on drawn guarantees	230	951	122
Interest on drawn guarantees - CaixaBank	240	951	122
Interest on drawn guarantees - BPI	-10
TOTAL AVAILABLE BALANCE IN ECB FACILITY	62,283	9,544	22,536

( ^*) Interest accrued from the borrowing from TLTRO III on 31 December 2022, 2021 and 2020 amounts to EUR 402 million, EUR 746 million and EUR 288 million, respectively. The value "interest on drawn guarantees" is the calculation carried out by the Bank of Spain / Bank of Portugal to assess the guarantees drawn in the facility. In the calculation of the balance available in the facility at 31 December 2020 and 2021, Bank of Portugal did not calculate the interest on guarantees drawn

CaixaBank Group repaid a TLTRO III balance of EUR 65,132 million in 2022, of which EUR 13,495 million corresponded to ordinary repayments and EUR 51,637 million to early repayments, with outstanding financing of EUR 15,620 million at year-end.

In TLTRO III fixed-term monetary policy financing operations, there are preferential financing interest rates on condition of fulfilling variations in the admissible credit during certain periods.

It should be noted that both CaixaBank and BPI have seen positive net growth in eligible credit in the period October 2020 - December 2021, allowing both institutions to extend the application of a preferential rate to the TLTRO taken to the period June 2021 - June 2022 (deposit facility rate minus 50 basis points).

•	Maintaining issuance programmes aimed at expediting formalisation of securities issuances in the market.

Debt issuance capacity - 31-12-2022

(Million euros / Million dollars)

	Currency	Total issuance capacity	Total issued
CaixaBank fixed-income programme (CNMV 21-07-2022)	EUR	20,000
CaixaBank EMTN ("Euro Medium Term Note") programme (Ireland 20-04-2022)	EUR	30,000	23,044
BPI EMTN ("Euro Medium Term Note") programme (Luxembourg 17-11-2022)	EUR	7,000	1,850
CaixaBank US MTN ("U.S. Medium Term Note") programme (Ireland 28-02-2022)	USD	5,000
CaixaBank ECP ("Euro Commercial Paper") programme (Ireland 02-12-2022)	EUR	3,000	330
BPI mortgage covered bonds programme (CMVM Portugal 25-11-2021) ( ^*)	EUR	9,000	7,300
BPI public sector covered bonds programme (CMVM Portugal 16-11-2021) ( ^*)	EUR	2,000	600

( ^*) Programmes undergoing renewal.

•	Capacity to issue backed bonds

Covered bond issuance capacity - 31-12-2022

(Millions of euros)

	Issuance capacity ^*	Total issued
Mortgage covered bonds	43,075	59,571
Public sector covered bonds	11,584	4,500

( ^*) The liquidity buffer is included in the calculation of the issuance capacity. Issuance capacity not accounting for the liquidity buffer of 42,322 for mortgage covered bods and 11,584 for regional public sector covered bonds

Following the entry into force of the new regulatory framework, RDL 24/2021, in July 2022 and the consequent reduction of the minimum overcollateralisation to be maintained, the issuance capacity in the year has increased by EUR 28,454 million and a liquid asset buffer has been segregated for EUR 790 million (non-existing requirement at the end 2021).

•

To facilitate access to short-term markets, CaixaBank currently maintains the following:

•	Interbank facilities with a significant number of (domestic and foreign) banks, as well as central banks.
•	Repo facilities with a number of domestic and foreign counterparties.
•	Access to central counterparty clearing houses for repo business (LCH SA - Paris, Meffclear and EUREX - Frankfurt).

•

The Contingency Plan and Recovery Plan contain a wide range of measures that allow for liquidity to be generated in a wide range of crisis situations. These include potential issuances of secured and unsecured debt, use of the repo market, and so on. For all these, viability is assessed under different crisis scenarios and descriptions are provided of the steps necessary for their execution and the expected period of execution.

Liquidity situation

The following table presents a breakdown of the Group's liquid assets based on the criteria established for determining high-quality liquid assets to calculate the LCR (HQLA) and assets available in facility not considered HQLAs:

Liquid assets ^*

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Market value	Applicable weighted amount	Market value	Applicable weighted amount	Market value	Applicable weighted amount
Level 1 assets	93,888	93,850	166,473	166,466	94,315	94,280
Level 2A assets	363	308	182	155	344	292
Level 2B assets	1,664	905	1,338	669	1,590	795
TOTAL HIGH QUALITY LIQUID ASSETS (HQLAS)	95,915	95,063	167,993	167,290	96,249	95,367
Assets available in facility not considered HQLAs		43,947		1,059		19,084
TOTAL LIQUID ASSETS		139,010		168,349		114,451

( ^*) Assets under the calculation of the LCR (Liquidity Coverage Ratio). It corresponds to high-quality liquid assets available to meet liquidity needs for a 30 calendar day stress scenario.

The Group's liquidity and financing ratios are set out below:

LCR and NSFR

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
High-quality liquid assets - HQLAs (numerator)	95,063	167,290	95,367
Total net cash outflows (denominator)	48,911	49,743	34,576
Cash outflows	60,823	62,248	42,496
Cash inflows	11,912	12,505	7,920
LCR (LIQUIDITY COVERAGE RATIO) (%) (1)	194%	336%	276%
NSFR (NET STABLE FUNDING RATIO) (%) (2)	142%	154%	145%

(1) LCR: regulatory ratio whose objective is to maintain an adequate level of high-quality assets available to cover liquidity needs with a 30-day horizon, under a stress scenario that considers a combined crisis of the financial system and reputation. According to Commission Delegated Regulation (EU) 2015/61 of 10 October 2014 (as amended by Commission Delegated Regulation (EU) 2018/1620 of 13 July 2018) and Commission Delegated Regulation 2022/876 (EU) of 10 February 2022 to supplement Regulation (EU) No 575/2013 of the European Parliament and of the Council as regards the liquidity coverage requirement for credit institutions. The established regulatory minimum for the LCR is 100%.

(2) NSFR - regulatory balance sheet structure ratio that measures the ratio between the quantity of available stable funding (ASF) and the quantity of required stable funding (RSF). Available stable funding is defined as the proportion of own funds and customer funds that are expected to be stable in the time horizon of one year. The amount of stable funding required by an institution is defined in accordance with its liquidity and the residual maturities of its assets and its balance sheet positions.Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 entered into force in June 2021 and sets the regulatory minimum for the NSFR ratio at 100%.

Key credit ratings are displayed below:

CaixaBank credit ratings (1)

(Millions of euros)

	Issuer rating
	Long-term debt	Short-term debt	Outlook
S and P Global	A-	A-2	Stable
Fitch Ratings	BBB+	F2	Stable
Moody's	Baa1	P-2	Stable
DBRS	A	R-1(low)	Stable

CaixaBank credit ratings (2)

(Millions of euros)

	Preferred senior debt	Assessment date	Rating of mortgage covered bonds	Last review date of mortgage covered bonds
S and P Global	A-	25-04-2022	AA+	26-01-2023
Fitch Ratings	A-	30-06-2022
Moody's	Baa1	16-02-2022	Aa1	04-11-2022
DBRS	A	29-03-2022	AAA	13-01-2023

In the event of a downgrade of the current credit rating, additional collateral must be delivered to certain counterparties, or there are early redemption clauses. The breakdown of the impact on liquidity deriving from 1, 2 and 3-notch downgrading is shown below:

Sensitivity of liquidity to variations in the credit rating

(Millions of euros)

	1-notch downgrade	2-notch downgrade	3-notch downgrade
Trading in derivatives / repos (CSA / GMRA / GMSLA agreements) ^*	4	11	25
Deposits taken with credit institutions ^*			712

( ^*) The balances presented are accumulated for each rating reduction.

Asset encumbrance - assets received and delivered under guarantee

Assets securing certain financing transactions and unencumbered assets are as follows:

Assets securing financing operations and unencumbered assets

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Carrying amount of committed assets	Carrying amount of non committed assets	Carrying amount of committed assets	Carrying amount of non committed assets	Carrying amount of committed assets	Carrying amount of non committed assets
Equity instruments		1,710		1,998		1,849
Debt securities ^*	22,514	67,002	37,644	45,744	8,040	35,377
Of which: covered bonds			7	1	6	3
Of which: asset-backed securities	10	68	57	59		70
Of which: issued by public administrations	21,330	59,979	35,030	41,485	6,801	31,152
Of which: issued by financial corporations	913	3,867	2,128	1,582	910	1,451
Of which: issued by non-financial corporations	262	3,088	422	2,617	323	2,701
Other assets ^**	81,650	360,264	125,793	396,082	90,339	249,081
Of which: loans and receivables	81,650	301,075	125,793	327,427	84,841	207,968
TOTAL	104,164	428,976	163,437	443,824	98,379	286,307

( ^*) Mainly corresponds to assets provided in repurchase agreements and ECB financing transactions.

( ^**) Mainly corresponds to assets pledged for securitisation bonds, mortgage-covered bonds and public-sector covered bonds. These issuances are chiefly used in operations of issuances to market and as a guarantee in ECB funding operations.

The following table presents the assets received under guarantee, segregating those unencumbered from those that are pledged guaranteeing funding operations:

Assets securing financing operations and unencumbered assets

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	FV of committed assets	FV of non committed assets	FV of committed assets	FV of non committed assets	FV of committed assets	FV of non committed assets
Collateral received ^*	3,892	23,365	8,820	22,576	2,631	13,573
Equity instruments
Debt securities	3,885	20,401	8,816	19,990	2,627	12,240
Other guarantees received	7	2,964	4	2,586	5	1,333
Own debt securities other than covered bonds or own asset-backed securities ^**		250		333		249
Issued and unpledged covered bonds and own asset-backed securities ^***		58,152		18,075		25,815
TOTAL	3,892	81,767	8,820	40,984	2,631	39,637

( ^*) Mainly corresponds to assets provided in reverse repurchase agreements, securities lending transactions and guarantees received through derivatives.

( ^**) Senior debt treasury shares.

( ^***) Corresponds to treasury shares issued in the form of securitisations and covered bonds (mortgage / public sector).FV: Fair value

The asset encumbrance ratio is as follows:

Asset encumbrance ratio

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Encumbered assets and collateral received (numerator)	108,056	172,257	101,010
Equity instruments
Debt securities	26,399	46,459	10,667
Loans and receivables	81,650	125,793	84,846
Other assets	7	5	5,497
Total assets + Total assets received (denominator)	560,398	638,656	400,891
Equity instruments	1,710	1,998	1,849
Debt securities	113,802	112,193	58,285
Loan portfolio	382,725	453,220	292,814
Other assets	62,161	71,245	47,943
ASSET ENCUMBRANCE RATIO	19.28%	26.97%	25.20%

During 2022, the asset encumbrance ratio has declined with respect to the 2021 ratio, down by 7.69 percentage points, mainly due to the lower balance of TLTRO III withdrawn.

Secured liabilities and the assets securing them are as follows

Secured liabilities

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Liabilities hedged, contingent liabilities or securities ceded	Assets, guarantees received and treasury instruments issued ^*	Liabilities hedged, contingent liabilities or securities ceded	Assets, guarantees received and treasury instruments issued ^*	Liabilities hedged, contingent liabilities or securities ceded	Assets, guarantees received and treasury instruments issued ^*
Financial liabilities	70,951	99,335	145,829	167,307	81,018	96,135
Derivatives	11,650	12,246	7,576	8,236	6,216	6,491
Deposits	39,175	54,772	113,567	131,141	58,621	70,457
Issuances	20,126	32,317	24,686	27,930	16,181	19,187
Other sources of charges	4,992	8,721	4,277	4,950	4,379	4,875
TOTAL	75,943	108,056	150,106	172,257	85,397	101,010

( ^*) Excluding encumbered covered bonds and asset-backed securities

Residual maturity periods

The breakdown by term to maturity of the balances of certain items on the balance sheets, without taking into account, where applicable, the value adjustments or value corrections, in a scenario of normal market conditions, is as follows

Residual maturity periods - 31-12-2022

(Millions of euros)

	Demand	+3 months	3-12 months	1 - 5 years	+ 5 years	Total
Interbank assets		25,500	3,105	1,173	250	30,028
Loans and advances - Customers	1,095	30,573	63,846	139,896	110,483	345,893
Debt securities		4,060	12,954	32,883	36,150	86,046
FA under the insurance business - Debt securities		652	1,542	11,127	35,389	48,710
TOTAL ASSETS	1,095	60,133	79,905	173,952	146,883	461,967
Interbank liabilities	1	13,103	14,402	12,048	123	39,676
FL - Customer deposits	128,790	17,340	63,336	86,147	91,432	387,045
FL - Debt securities issued	8	3,203	5,924	35,718	11,134	55,987
Liabilities under the insurance business	509	1,053	4,327	16,304	43,461	65,654
TOTAL LIABILITIES	128,799	33,646	83,662	133,913	102,689	482,708
Of which are wholesale issues net of treasury shares and multi-issuers		3,750	2,625	25,676	21,131	53,182
Of which are other financial liabilities for operating lease		5	27	138	1,438	1,608
Drawable by third parties		5,366	14,948	46,550	45,936	112,800

FA: Financial assets; FL: Financial liabilities

Note: pre-payments are included

The transaction maturities are projected according to their contractual and residual maturity, considering the assumption that the assets or liabilities will be renewed. In the case of demand accounts, with no defined contractual maturity, the Group's internal behaviour models are applied. In order to assess the negative gap in the short term, the following aspects must be considered:

•	The Group has high and stable retail financing with probable renewal.
•	Additional guarantees are available at the European Central Bank, and there is the capacity to generate new deposits through asset securitisation and the issuance of mortgage- or public sector-covered bonds.

The calculation does not consider growth assumptions, and consequently disregards internal strategies for raising net liquidity, which are especially important in the retail market. The monetisation of available liquid assets is also not included.

As regards issuances, the Group's policies take into account a balanced distribution of maturities, preventing concentrations and diversifying financing instruments.

In addition, its reliance on wholesale markets is limited.

3.4.5 Market risk

Overview

The Group identifies market risk as the loss of value, impacting on performance or solvency, of a portfolio (set of assets and liabilities), due to unfavourable movements in prices or market rates. Market risk quantifies possible loss in the trading portfolio that may be due to fluctuations in interest rates, exchange rates, credit spread, external factors or prices on the markets where trading is conducted.

Market risk encompasses almost all the Group's trading portfolio, as well as the deposits and repos arranged by trading desks for management.

Risk factors are managed according to the return-risk ratio determined by market conditions and expectations, the limits structure and the authorised operating framework.

Market risk cycle

Monitoring and measurement of market risk

On a daily basis, the Group monitors the operations traded, calculating how market changes will affect the profit and loss of positions held, quantifying the market risk undertaken, and monitoring compliance with limits. With the results obtained from these activities, a daily report is produced on positions, risk quantification and the utilisation of risk thresholds, which is distributed to Senior Management, the officers in charge of managing them, to Model Validation and Risk and to the Internal Audit division.

As a general rule, there are two types of measurements which constitute a common denominator and market standard for the measurement of market risk:

Sensitivity

Sensitivity represents risk as the impact a slight change in risk factors has on the value of positions, without providing any assumptions about the probability of such a change.

Value-at-risk (VaR)

The benchmark market risk measurement is VaR at 99% with a one-day time horizon for which the RAF defines a limit for trading activities of EUR 20 million (excluding the economic hedging CDS for the CVA, recognised for accounting purposes in the held-for-trading portfolio). Daily VaR is defined as the highest of the following three calculations:

•	Parametric VaR with a covariance matrix deriving from a 75-day window of history, giving more weight to recent observations. The parametric VaR technique is based on volatilities and matching fluctuations in the prices and interest and exchange rates of the assets comprising the portfolio.
•	Parametric VaR with a covariance matrix arising from historical performance over one year and equal weightings.
•	The historical VaR technique: which calculates the impact on the value of the current portfolio of historical changes in risk factors. Daily changes observed over the last year are taken into account, with a confidence interval of 99%. Historical VaR is an extremely useful system for completing the estimates obtained by the parametric VaR technique, since it does not include any assumptions on the statistical behaviour of risk factors. The parametric VaR technique assumes fluctuations or returns that can be modelled using normal statistical distribution. Historical VaR is also an especially suitable technique since it includes non-linear relationships between the risk factors.

Moreover, since a downgrade in the credit rating of asset issuers can also give rise to adverse changes in market prices, quantification of risk is completed with an estimate of the losses arising from changes in the volatility of the credit spread on private fixed-income and credit derivative positions (spread VaR), which constitutes an estimate of the specific risk attributable to the security issuers. This calculation is made using a historical method while taking into account the potentially lower liquidity of these assets, with a confidence interval of 99%, and assuming absolute weekly variations in the simulation of credit spreads.

Total VaR results from the aggregation of VaR arising from fluctuations in interest rates, exchange rates (and the volatility of both) and from the Spread VaR, which are aggregated on a conservative basis, assuming zero correlation between the two groups of risk factors, and the addition of VaR of the equities portfolio and VaR of the commodities portfolio (currently with no position), assuming in both cases a correlation of one with the other risk factor groups.

Additional measures to VaR

As an analysis measurement, the Group completes the VaR measurements with the following risk metrics, updated weekly:

•	Stressed VaR indicates the maximum loss on adverse movements in market prices based on a stressed historical period of one year, with a 99% confidence level and a daily time horizon (subsequently extrapolated to the regulatory horizon of 10 market days, multiplying by the root of 10). The stressed VaR calculation is leveraged by the same methodology and infrastructure as the historical VaR, with the only significant difference being the historical window selected.
•	The incremental default and migration risk reflects the risk related to changes in credit ratings or breach of positions in fixed-income instruments and credit derivatives in the trading portfolio, with a confidence level of 99.9%, one-year time horizon, and a quarterly liquidity horizon, which is justified by the high liquidity of portfolio issuances. The estimate is made using Monte Carlo simulation of possible future states of external rating of the issuer and the issuance, based on transition matrices published by the main ratings agencies, where dependence between credit quality variations between the different issuers is modelled using Student's t-distribution.
•	The maximum, minimum and average values of these measurements in this year, as well as their value at the close of the period of reference, are shown in the following table.

Summary of risk measurements - 2022

(Millions of euros)

	Maximum	Minimum	Average	Latest
1-day VaR	3.8	0.8	1.8	1.8
1-day Stressed VaR	25.6	1.8	3.8	2.8
Incremental risk	29.9	5.4	13.0	5.4

Backtest

To confirm the suitability of the estimates of the internal model, daily results are compared against the losses estimated under the VaR technique, which is what is referred to as backtesting. The risk estimate model is checked in two ways:

―	Through net or hypothetical backtesting, which relates the portion of the daily marked-to-market result of open positions at the close of the previous session to estimated VaR over a one-day time horizon, calculated on the basis of the open positions at the close of the previous session. This backtesting is the most appropriate means of performing a self-assessment of the methodology.
―	Gross (or actual) backtesting, which compares the total result obtained during the day (including intraday transactions) to VaR for a time horizon of one day, calculated on the basis of the open positions at the close of the previous session. This provides an assessment of the importance of intraday transactions in generating profit and estimating the risk.

The daily result used in both backtesting exercises does not include mark-ups, reserves, fees or commissions. No significant incidents have been detected in the 2022.

Stress test

Two stress testing techniques are used on the value of the trading positions to calculate the possible losses on the portfolio in situations of extreme stress:

Systematic stress: this technique calculates the change in value of the portfolio in the event of a specific series of extreme changes in the main risk factors. It considers parallel interest rate shifts (rising and falling); changes at various points of the slope of the interest rate curve (steepening and flattening); variation of the spread between the instruments subject to credit risk and public debt securities (bond-swap spread); shifts in the EUR/USD curve differential; higher and lower volatility of interest rates; variation of the euro with respect to the USD, JPY and GBP; and variation in exchange rate volatility, share prices; and higher and lower volatility of shares and commodities.this technique calculates the change in value of the portfolio in the event of a specific series of extreme changes in the main risk factors. It considers parallel interest rate shifts (rising and falling); changes at various points of the slope of the interest rate curve (steepening and flattening); variation of the spread between the instruments subject to credit risk and public debt securities (bond-swap spread); shifts in the EUR/USD curve differential; higher and lower volatility of interest rates; variation of the euro with respect to the USD, JPY and GBP; and variation in exchange rate volatility, share prices; and higher and lower volatility of shares and commodities.

Historical scenarios: this technique addresses the potential impact of actual past situations on the value of the positions held.

Review stress test: a technique that assumes a high-vulnerability scenario given the portfolio's composition and determines what variations in the risk factors lead to this situation.

Based on the set of measures described above, the management of market risk on trading positions in markets is in accordance with the methodological and monitoring guidelines.

Mitigation of market risk

As part of the required monitoring and control of the market risks taken, there is a structure of overall VaR limits complemented by the definition sublimits, stressed VaR and incremental default and migration risk, Stress Test and Stop Loss results and sensitivities for the various management units that could assume market risk.

The risk factors are managed using economic hedges on the basis of the return/risk ratio determined by market conditions and expectations, always within the assigned limits.

Beyond the trading portfolio, fair-value hedge accounting is used, which eliminates potential accounting mismatches between the balance sheet and statement of profit or loss caused by the different treatment of hedged instruments and their hedges at market values. In the area of market risk, limits for each hedge are established and monitored, in this case expressed as ratios between total risk and the risk of the hedged items.

3.5 OPERATIONAL RISK

Overview

Operational risk is defined as the possibility of incurring losses due to the failure or unsuitability of processes, people, internal systems and external events. Given the heterogeneity of the nature of operational events, CaixaBank does not record operational risk as a single element in the Corporate Risk Catalogue, but rather it has included the following risks of an operational nature: conduct and compliance, legal and regulatory, technology, model and other operational risks. For each of these risks in the Catalogue, the Group upholds the corresponding specific management frameworks, without prejudice to the additional existence of an operational corporate risk management policy.

CaixaBank integrates operational risk into its management processes in order to deal with the financial sector's complex regulatory and legal environment. The overall objective of managing this risk is to improve the quality of business management, supplying relevant information to allow decisions to be made that ensure the organisation's long-term continuity, optimisation of its processes and the quality of both internal and external customer service. This objective comprises a number of specific objectives that form the basis for the organisation and working methodology for managing operational risk. These objectives are:

•	To identify and anticipate existing or emerging operational risks.
•	To adopt measures to sustainably mitigate and reduce operational losses.
•	To promote the establishment of systems for the ongoing improvement of the operating process and of the control structure.
•	To exploit operational risk management synergies.
•	To promote an operational risk management culture.
•	To comply with the current regulatory framework and requirements for the applicability of the management and calculation models chosen.

Operational risk management cycle

Identification and measurement of operational risk

Identification:

The internal operational risk database is the information structure housing data on the Group's operational losses. Operational risks are structured into four categories or hierarchical tiers, from the most generic to the most specific and detailed:

•

Tiers 1 and 2 of the regulations: Tier 1 comprises 7 subcategories (Internal Fraud; External fraud; Employment practices and security in workplace; Customers; Products and business practices; Damages to physical assets; Business interruptions and system faults, Execution and Delivery and process management) and Tier 2 comprises 20 subcategories.

•

Tier 3 Group internal: represents the combined individual risk of all the business areas and Group companies.

•

Tier 4 individual risks: represents the materialisation of particular Tier 3 risks in a process or activity.

The technological environment of the operational risk system provides all the functionality required and is fully integrated into the bank's transactional and information systems.

Measurement:

Operational risk is measured with the following aspects:

•

Quantitative measurement

The database of internal operational loss events is one of the foundations for managing operational risk and the future calculation of regulatory capital for operational risk, and it is also the core pillar used for the calculation of economic capital.

An operational event is the implementation of an identified operational risk, an event that causes an operational loss. It is the concept around which the entire data model revolves in the Internal Database. Loss events are defined as each individual economic impact related to an operational loss or recovery.

Gross losses by regulatory category (Tier 1) risk are broken down as follows:

The Group uses the standardised method to calculate regulatory capital consumption requirements for operational risk (see Note 4), however, the Group's operational risk measurement and management is based on policies, processes, tools and methodologies that are risk-sensitive, in line with market practices.

Therefore, the measurement of minimum capital requirements provided by the standard regulatory methodology (percentages applied to gross margin items) is used for supervisory reporting and compliance with minimum capital adequacy levels. In addition, the Group has aligned itself with international practices and has developed a model for calculating economic capital requirements, which covers all the risks in the Corporate Catalogue included in the range of operational risks.

•

Qualitative measurement

Operational risks are subjected to self-assessments on an annual basis, which make it possible to: i) obtain greater knowledge of the operational risk profile and the new critical risk; and ii) maintain a standardised update process for the taxonomy of operational risks, which is the foundation upon which this risk's management is defined.

Expert annual workshops and meetings are also held to generate extreme operational loss scenarios. The purpose is for these scenarios to be used to detect areas of improvement in the management and to supplement the available external and internal historical data on operational losses.

There are also Operational Risk Indicators (KRIs), which allow: i) enables us to anticipate the development of operational risks, taking a forward-looking approach to their management and ii) provide information on development of the operational risk profile and the reasons for this. A KRI is a metric that detects and anticipates changes in said risk, and its monitoring and management is integrated in the operational risk corporate management tool. KRIs are not by nature a direct result of risk exposure. They are metrics that can be used to identify and actively manage operational risk.

Monitoring and mitigation of operational risk

With the aim of contributing to the sustainable and recurring reduction of operational risks, an annual forecast of operational losses is carried out, covering the entire scope of management and enabling monthly monitoring to analyse and, where applicable, correct any possible deviations. The degree of compliance with the forecast is monitored periodically by the Operational Risk Committee, where the main deviations are analysed taking account of the nature of the operational losses and the most and least effective mitigating actions.

The generation of action and mitigation plans is one of the links in the Group's operational risk management chain. The action and mitigation plans may originate from any of the operational risk management tools or other sources: self-assessments, extreme scenarios, external sources (ORX, specialised press), KRIs, losses due to operational events, internal audits and internal validation reports.

Therefore, with the aim of monitoring and mitigating the operational risk, the following have been defined: action plans that entail appointing a centre to be in charge, setting out the actions to be undertaken to mitigate the risk covered by the plan, the percentage or degree of progress, which is updated regularly, and the final commitment date. This allows mitigation by i) decreasing the frequency at which the events occur, as well as their impact; ii) holding a solid structure of sustained control in policies, methodologies, processes and systems and iii) integrating -into the everyday management of the Group- the information provided by operational risk management levers.

In addition, the corporate insurance programme for dealing with operational risk is designed to cover certain risks, and it is updated annually. Risk transfer depends on risk exposure, tolerance and appetite at any given time.

Risk of an operational nature

The Corporate Risk Catalogue risks that are identified in the regulatory framework as operational risk, are described below.

3.5.1 Conduct and compliance risk

Insofar as operational risk is concerned, according to the regulatory definition, conduct and compliance risk is defined as the Group's risk arising from the application of conduct criteria that run contrary to the interests of its customers and stakeholders, or acts or omissions that are not compliant with the legal or regulatory framework, or with internal codes and rules, or with codes of conduct and ethical and good practice standards. The objective of the Group is: i) to minimise the probability of this risk occurring and ii) if it does, to detect, report and address the weaknesses promptly.

The management of compliance and conduct risk is not limited to any specific area, but rather the entire Group. All employees must ensure compliance with prevailing regulations, applying procedures that capture regulations in their activity.

In order to manage conduct and compliance risk, the Group drives the awareness-raising and promotion of the values and principles set out in the Code of Business Conduct and Ethics, and its employees and other members of its governing bodies must ensure that they are compliant as a core criterion guiding their day-to-day activities. Therefore, as the first line of defence, the areas whose business is subject to conduct and compliance risk implement and manage first-level indicators or controls to detect potential sources of risk and act effectively to mitigate them.

3.5.2 Legal and regulatory risk

Legal and regulatory risk is defined as the potential loss or decrease in the profitability of the Group as a result of changes in the legislation, of the incorrect implementation of this legislation in the Group's processes, of the inappropriate interpretation of the same in various operations, of the incorrect management of court or administrative injunctions, or of the claims or complaints received.

It is managed according to certain operational principles, with a view to ensure that the appetite and risk tolerance limits defined in the Group's RAF are respected.

In this regard, the Group conducts actions to constantly monitor and track regulatory changes, in pursuit of better legal security and legitimate interests, chiefly those described in Note 3.1 in relation to the regulatory environment. As regards the latter, the activities are coordinated in the Regulation Committee, the body responsible for defining the Group's strategic stance in financial-regulation-related matters, driving the representation of the Group's interests and coordinating the regular assessment of the regulatory initiatives and proposals that may affect the Group.

Additionally, it appropriately implements standards and conducts monitoring -in each of the bank's initiatives- of its adaptation to consumer protection and privacy standards. This is coordinated by the Transparency Committee, the body responsible for ensuring transparency in the marketing of financial products and services. This Committee, through the Product Committee, is tasked with approving any new product or service, applying transparency and consumer protection regulations. In addition, the Privacy Committee constantly monitors compliance with aspects related to privacy and the protection of customers' personal data.

In order to ensure the correct interpretation of the standards, in addition to work on the study of jurisprudence, and decisions of the statutory authorities, in order to adjust the bank's activity to such criteria, it also enquires as to when it is necessary for the relevant administrative authorities.

In relation to the claims filed with the Customer Service Office, as well as the sustained flow of existing litigiousness, the Group has policies, criteria, analysis and monitoring procedures for these judicial claims and processes. These enable the Group to gain better knowledge of the activities that it develops, to identify and establish ongoing improvement in contracts and processes, to implement measures to raise awareness on regulations and early restoration of customers' rights in the event of any incidents, through agreements and establishing the appropriate accounting coverages, in the form of provisions, in order to cover hypothetical financial damages whenever they are deemed to be likely to occur.

3.5.3 Technology risk

Also within the framework of operational risk, technology risk in the Corporate Risk Catalogue is defined as the risk of losses due to the inadequacy or failures of the hardware or software of technological infrastructure, due to cyber attacks or other circumstances that may compromise the availability, integrity, accessibility and security of infrastructure and data. The risk is broken down into 5 categories that affect ICT (Information and Communications Technology): i) availability; ii) information security; iii) operation and management of change; iv) data integrity; and v) governance and strategy.

Its current measurement is incorporated into a RAF recurring follow-up indicator, calculated on the basis of individual indicators and controls linked to the different areas comprising technology risk. Regular reviews are carried out by sampling, which make it possible to check the quality of the information and the methodology used in creating the indicators reviewed.

The internal governance frameworks associated with different fields of technology risk have been designed according to renowned international standards and/or they are aligned with the guidelines published by different supervisors:

•	IT governance, designed and developed under the ISO 38500 standard.
•	Information security, designed and developed under the ISO 27002 standard, and certification of the Information Security Management System based on the ISO 27001 standard.
•	Information Technology contingency, designed and developed under the ISO 27031 standard.
•	Information governance and data quality, designed and developed under the standard BCBS 239. With the different frameworks of governance and management systems, CaixaBank seeks to guarantee:
•	Compliance with recommendations issued by regulators: Bank of Spain, European Central Bank, etc.
•	Maximum security in its operations, both in regular processes and in one-off situations. And it also demonstrates to its customers, investors, and other stakeholders:
•	Its commitment to the governance of information technologies, and business security and continuity.
•	The implementation of management systems according to most renowned international standards.
•	The existence of different cyclical processes based on ongoing improvement.

Similarly, CaixaBank has been designated a critical infrastructure operator by virtue of the provisions of Act 8/2011 and is under the supervision of the National Centre for the Protection of Critical Infrastructures dependent on the State Secretary of Home Office Security.

Furthermore, CaixaBank holds a general emergency plan and various internal regulations on security measures, which include priority aspects such as: i) cybersecurity strategy; ii) the fight against customer fraud and internal fraud; iii) data protection; iv) security governance and disclosure; and v) supplier security.

CaixaBank's second line of defence has developed a control framework for this risk, based on international standards, which assesses the effectiveness of the control environment and measures the level of residual risk, establishing mitigation plans where necessary.

•	Compliance with recommendations issued by regulators: Bank of Spain, European Central Bank, etc.
•	Maximum security in its operations, both in regular processes and in one-off situations.

And it also demonstrates to its customers, investors, and other stakeholders:

•	Its commitment to the governance of information technologies, and business security and continuity; and
•	The implementation of management systems according to most renowned international standards; and
•	The existence of different cyclical processes based on ongoing improvement.

Similarly, CaixaBank has been designated a critical infrastructure operator by virtue of the provisions of Act 8/2011 and is under the supervision of the National Centre for the Protection of Critical Infrastructures dependent on the State Secretary of Home Office Security.

Furthermore, CaixaBank holds a general emergency plan and various internal regulations on security measures, which include priority aspects such as: i) cybersecurity strategy; ii) the fight against customer fraud and internal fraud; iii) data protection; iv) security governance and disclosure; and v) supplier security.

Information Reliability Risk

During 2020, Non-Financial Information Reliability Risk has been added to the Corporate Risk Catalogue. In consequence, the current Financial Information Reliability Risk is now known as Information Reliability Risk, therefore accommodating financial and non-financial information reliability risk management.

Information Reliability Risk is defined in the Corporate Risk Catalogue as the risk stemming from possible deficiencies in the accuracy, integrity and approach to compiling the data and information needed to evaluate the financial position and assets of CaixaBank Group, as well as information provided to stakeholders and published to market that offers a holistic view of the stance in terms of environment sustainability and that is directly related to environmental, social and governance (ESG principles) aspects.

The Entity has Corporate Policies approved by the CaixaBank Board of Directors that establish the risk management and control framework, notably including:

3.5.4 Model risk

In the Corporate Risk Catalogue, model risk is defined as the possible adverse consequences for the Group that may arise from decisions founded chiefly on the results of internal models, due to errors in their construction, application or use.

In particular, the subrisks identified under model risk that are subject to management and control are as follows:

•	Quality risk: the potential detrimental impact due to unpredictable models, either due to defects under construction or for not having being updated over time.
•	Governance risk: the potential detrimental impact due to the inadequate governance of Model Risk (e.g. models not formalised by committees, relevant models with no opinion on second line of defence, incorrectly inventoried models).
•	Control environment risk: the potential detrimental impact due to weaknesses in the control environment of models, (e.g. models with expired recommendations, and breached mitigation plans).

The general model risk strategy is based on the following pillars:

•

Identification of the model risk, using the Corporate Inventory of Models as a key element to set the scope of the models. In order to be able to manage model risk, it is necessary to identify the existing models, their quality and how they are used in the Group. For this reason, CaixaBank Group has this Inventory where the models have been identified and for which a corporate model has been defined and a homogenous taxonomy has been used that includes, among other attributes, their relevance and valuation.

•

Model governance, addressing key aspects including, but not limited to:

•	Identifying the most relevant phases of a model's life cycle, defining the minimum functions and standards to carry out these activities.
•	The concept of tiering-based management, in other words, the way in which the control and reporting framework of models can be modulated according to the relevance of the model, generally speaking. This attribute conditions the model's control environment, such as the type and frequency of validation, the type and frequency of monitoring, the body that must approve its use, as well as the level of internal supervision and the level of involvement of senior management.
•	Governing and processing changes to models from a cross perspective, offering the various owners of models the necessary flexibility and agility to modify the affected models, in line with the most suitable governance in each case.
•	Laying down Internal Validation standards that guarantee the suitable application of controls for an independent unit to assess a model.

•

Monitoring, using a control framework with a preemptive approach to Model Risk, which makes it possible to keep the risk within parameters laid down in the Group's RAF, by regularly calculating appetite metrics and other indicators specific to model risk.

Major milestones include the framework for model risk management and control developed in 2021, with the involvement of related areas (model developers and validation units). Similarly, the reporting framework was implemented, which enables the most relevant models in the Entity to be made known, as well as the significant aspects of risk management. The progressive deployment of the function in major subsidiaries was continued.

In 2022, the Group further consolidated the development of the function, emphasising the effective implementation of the governance framework for non-regulatory models, the evolution of the model risk monitoring framework, the effective deployment of tier-based management, the design of a new model risk quantification metric and the advancement of corporate deployment of the function.

In 2023, we plan to evolve the risk management tools available, study the extension of the scope of the inventory in terms of subsidiary models and the incorporation of new types of models, and continue to make progress in the deployment of management in significant subsidiaries, among others.

3.5.5 Other operational risks

In the Corporate Risk Catalogue, this means losses or damages caused by errors or faults in processes, due to external events, or actions of third parties outside the Group, whether accidentally or intentionally. It includes, among others, risk factors related to outsourcing, operational continuity or external fraud.

All of the Group's areas and companies are responsible for the set of other operational risks that arise within their respective remits. This means identifying, assessing, managing, controlling and reporting the operational risks of their activity and helping CaixaBank's Non-Financial Risk Control Division to implement the management model throughout the Group.

CaixaBank's second line of defence has developed control frameworks for outsourcing and external fraud risks, similar to those used in technology risk, to assess the effectiveness of the control environment and measure the level of residual risk, establishing mitigation plans where necessary. These reports are presented to management and governing bodies, as required.

4. CAPITAL ADEQUACY MANAGEMENT

The composition of the Group's eligible own funds is as follows:

Eligible own funds

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Amount	In %	Amount	In %	Amount	In %
Net equity	34,262		35,425		25,278
Shareholders' equity	36,639		37,013		27,118
Capital (Note 24)	7,502		8,061		5,981
Profit/(loss)	3,145		5,226		1,381
Reserves and other	25,992		23,726		19,756
Minority interests and OCI	-2,377		-1,588		-1,840
Other CET1 instruments	-800		-601		268
Adjustments applied to the eligibility of minority interests	466		63		-107
Other adjustments (1)	-1,266		-664		375
CET1 Instruments	33,462		34,824		25,546
Deductions from CET1	-5,968		-6,487		-5,892
Intangible assets	-3,463		-3,856		-3,873
Deferred tax assets	-1,901		-2,074		-1,789
Other deductions from CET1	-604		-557		-230
CET1	27,494	12.8%	28,337	13.1%	19,654	13.6%
AT1 instruments (2)	4,238		4,985		2,984
AT1 Deductions
TIER 1	31,732	14.8%	33,322	15.5%	22,638	15.7%
T2 instruments (3)	5,575		5,192		3,407
T2 Deductions
TIER 2	5,575	2.6%	5,192	2.4%	3,407	2.4%
TOTAL CAPITAL	37,307	17.3%	38,514	17.9%	26,045	18.1%
Other eligible subordinated instruments MREL	11,048		10,628		6,664
MREL, SUBORDINATED (4)	48,355	22.5%	49,142	22.8%	32,709	22.7%
Other eligible instruments. MREL	7,448		6,382		5,111
MREL (4)	55,803	25.9%	55,524	25.7%	37,820	26.3%
RISK WEIGHTED ASSETS (RWA)	215,103		215,651		144,073
Individual CaixaBank ratios:
CET1		12.9%		13.9%		15.1%
TIER 1		15.0%		16.4%		17.4%
Total capital		17.8%		19.0%		20.0%
RWAs	199,250		200,755		132,806

(1) Mainly includes the forecast for dividends, and IFRS 9 transitional adjustment.

(2) In the second quarter of 2022 an issue of EUR 750 million was no longer included, as it was amortised in July of 2022 (see Note 22).

(3) A Tier 2 issue for EUR 750 million was completed in the fourth quarter (see Note 22). Another issue for GBP 500 million was completed in January 2023 (see Note 1.9)

(4) See Note 22 to see the senior preferred and senior non-preferred issuances conducted during the year. One issuance of senior non-preferred debt was also carried out for USD 1,250 million in January 2023 (see Note 1.9)

The following chart sets out a summary of the minimum requirements of eligible own funds:

Minimum requirements

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Amount	In %	Amount	In %	Amount	In %
BIS III minimum requirements
CET1 ( ^*)	17,929	8.34%	17,651	8.19%	11,670	8.10%
Tier 1	21,822	10.15%	21,553	9.99%	14,236	9.88%
Total capital	27,010	12.56%	26,756	12.41	17,658	12.28%

( ^*) Includes the minimum Pillar 1 requirement of 4.5%; the Pillar 2 requirement (supervisory review process) of 0.93%; the capital conservation buffer of 2.5%, the countercyclical buffer of 0.03% and the OEIS (Other Systemically Important Entity) buffer of 0.375%

The following chart provides a breakdown of the leverage ratio:

Leverage ratio

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Exposure	563,692	631,351	403,659
Leverage ratio (Tier 1/Exposure)	5.6%	5.3%	5.6%

The changes in eligible own funds are as follows:

Changes in eligible own funds

(Millions of euros)

	31-12-2022		31-12-2021
	Amount	In %	Amount	In %
CET1 AT THE START OF THE YEAR	28,337	13.1%	19,654	13.6%
Changes in CET1 instruments	-1,362		9,279
Capital	-559		2,079
Benefit	3,145		5,226
Expected dividends	-1,730		-1,179
Reserves	-1,781		2,807
Valuation adjustments and other (1)	119		346
Changes in deductions from CET1	519		-596
Intangible assets	393		17
Deferred tax assets	173		-285
Other deductions from CET1	-47		-328
CET1 AT THE END OF THE YEAR	27,494	12.8%	28,337	13.1%
ADDITIONAL TIER 1 AT THE START OF THE YEAR	4,985	2.3%	2,985	2.1%
Changes in AT1 instruments (2)	-747		2,000
Preference issues			2,000
Redemption of issuances	-750
Other	3
ADDITIONAL TIER 1 AT THE END OF THE YEAR	4,238	2.0%	4,985	2.3%
TIER 2 AT THE START OF THE YEAR	5,192	2.4%	3,407	2.4%
Changes in Tier 2 instruments (2)	383		1,785
Subordinated issuances	750		2,675
Redemption of issuances	-500		-1,175
Other	133		285
TIER 2 AT THE END OF THE YEAR	5,575	2.6%	5,192	2.4%

(1) Includes IFRS 9 transitional adjustment

(2) See Note 22 for Tier 1 and Tier 2 instruments issued and redeemed in the year.

The causative details of the main aspects of the financial year that have influenced the CET1 ratio are set out below:

The Common Equity Tier 1 (CET1) ratio stands at 12.8% (12.5% without applying the IFRS 9 transitional adjustments), following the extraordinary impact from the share buy-back programme "SBB" (-83 basis points, EUR 1,800 million, see Note 24).

The organic change in the year was +113 basis points, -90 basis points caused by the forecast of dividends and AT1 coupon payment and +26 basis points by the performance of the markets and other factors. The impact from phasing in IFRS 9 is +30 basis points.

The Group's current level of capital adequacy confirms that the applicable requirements would not lead to any automatic restrictions according to the capital adequacy regulations, regarding the distribution of dividends, variable remuneration, and the interests of holders of Additional Tier 1 capital securities. At 31 December, CaixaBank has a margin of 445 basis points, equating to EUR 9,565 million, until the Group's MDA trigger.

Information on capital requirements by risk calculation method is presented below:

Breakdown of risk weighted assets by method

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Amount	%	Amount	%	Amount	%
Credit risk ^*	175,185	81.4%	172,795	80.2%	111,827	77.6%
Standardised approach	80,919	37.6%	83,706	38.9%	63,832	44.3%
IRB approach	94,266	43.8%	89,089	41.3%	47,995	33.3%
Shareholder risk	19,978	9.3%	22,729	10.5%	16,729	11.6%
PD/LGD method	2,890	1.3%	4,837	2.2%	4,056	2.8%
Simple method	17,088	7.9%	17,892	8.3%	12,673	8.8%
Market risk	1,130	0.5%	1,755	0.8%	2,267	1.6%
Standardised approach	12	0.0%	568	0.3%	1,158	0.8%
Internal models (IMM)	1,118	0.5%	1,187	0.6%	1,109	0.8%
Operational risk	18,810	8.7%	18,371	8.5%	13,250	9.2%
Standardised approach	18,810	8.7%	18,371	8.5%	13,250	9.2%
TOTAL	215,103	100.0%	215,650	100.0%	144,073	100.0%

( ^*) Includes credit valuation adjustments (CVA), deferred tax assets (DTAs) and securitisations.

5. APPROPRIATION OF PROFIT/(LOSS)

The appropriation of profits of CaixaBank, S.A. from the 2022 financial year, which the Board of Directors agrees to propose to the General Shareholders' Meeting for approval, based on the information available to elaborate these financial statements, is presented below:

Appropriation of profits of CaixaBank, S.A.

(Millions of euros)

	Amount	Euros per share
Basis of appropriation
Profit/(loss) for the year	2,413
Distribution
To dividends (1)	1,730	0.2306
To reserves (2)	683
To legal reserve (3)
To voluntary reserve (2) (4)	683
NET PROFIT FOR THE YEAR	2,413

(1) Estimated amount corresponding to payment of the dividend of EUR cents 23.06 per share, to be paid in cash. This amount is equivalent to 55% of consolidated net profit, in line with the dividend policy currently in force. The amount of EUR 1,730 million will be reduced in accordance with the number of treasury shares held by CaixaBank at the time of payment of the dividend, as in accordance with the Spanish Corporate Enterprises Act no dividend can be received on treasury stock.

(2) Estimated amount allocated to the voluntary reserve. This amount will be increased by the same quantity as the reduction in the amount earmarked for payment of the dividend (see note -1 above).

(3) It is not necessary to transfer part of the 2022 profit to the legal reserve. The legal reserve of the Company amounts to EUR 1,612 million, equivalent to 20% of the share capital required by article 274 of the Corporate Enterprises Act, before the capital reduction of EUR 559 million,through the amortisation of 558,515,414 shares acquired as part of the share buyback programme implemented by the Company during the 2022 financial year. Following the capital reduction, which was formalised in a public deed executed on 9 January 2023 and registered in the Commercial Register on 13 January 2023, the amount of EUR 1.5 billion, equivalent to 20% of the current share capital, will be considered a legal reserve. The surplus of 20% of the share capital, i.e., EUR 112 million, will be considered an available reserve.

(4) Remuneration of AT1 capital instruments corresponding to 2022, totalling EUR 261 million, will be deemed to have been paid, with this amount charged to voluntary reserves.

6. SHAREHOLDER REMUNERATION AND EARNINGS PER SHARE

6.1. SHAREHOLDER REMUNERATION

On 20 April 2022, the Entity paid its shareholders an ordinary dividend of EUR 0.1463 per share charged to 2021 profits, following approval by CaixaBank's Annual General Meeting held on 8 April. This dividend distribution amounts to EUR 1,179 million, and is equivalent to 50% of the consolidated net profit of 2021 adjusted by the extraordinary impacts from the merger with Bankia.

Similarly, on 27 January 2022, the Board of Directors approved the Dividend Policy for FY 2022, consisting of a cash distribution of 50 - 60% of the consolidated net profit, payable in a single payment in April 2023, subject to final approval at the Annual General Meeting.

The Board of Directors proposed at the Annual General Meeting held on 2 February 2023 to pay a dividend of EUR 23.06 per share charged to 2022 profits, which represents a payout of 55%, in the second quarter of 2023. In the same meeting the Board of Directors approved the Dividend Policy for the 2023 fiscal year, consisting of a cash distribution of 50% and 60% of consolidated net profit, to be paid in a single payment in April 2024, subject to final approval at the Annual General Shareholders Meeting.

The following dividends were distributed in recent years:

Dividends paid

(Millions of euros)

	Euros per share	Amount paid in cash	Date of announcement	Payment date
2022
2021 dividend	0.1463	1,179	27-01-2022	20-04-2022
2021
2020 dividend	0.0268	216	29-01-2021	24-05-2021
2020
2019 dividend	0.07	418	26-03-2020	15-04-2020

6.2. EARNINGS PER SHARE

Basic and diluted earnings per share of the Group are as follows:

Calculation of basic and diluted earnings per share

(Millions of euros)

	2022	2021	2020
Numerator	2,884	4,982	1,238
Profit attributable to the Parent	3,145	5,226	1,381
Less: Preference share coupon amount (AT1)	-261	-244	-143
Denominator (thousands of shares)	7,819	7,575	5,977
Average number of shares outstanding (1)	7,819	7,575	5,977
Adjusted number of shares (basic earnings per share)	7,819	7,575	5,977
Basic earnings per share (in euros) (2)	0.37	0.66	0.21
Diluted earnings per share (euro) (3)	0.37	0.66	0.21

(1) Number of shares outstanding at the beginning of the year, excluding average number of treasury shares held during the period. Includes the retrospective adjustments set out in IAS 33.

(2) If the profit/loss of CaixaBank (non-consolidated basis) in 2022, 2021 and 2020 had been considered, the basic profit would be EUR 0.27, EUR 0.53 and EUR 0.09 per share, respectively.

(3) Preference shares did not have any impact on the calculation of diluted earnings per share, since their capacity to be convertible was unlikely. Additionally, equity instruments associated with remuneration components were not significant.

7. BUSINESS COMBINATIONS, ACQUISITION AND DISPOSAL OF OWNERSHIP INTERESTS IN SUBSIDIARIES

Business combinations - 2022

Sa Nostra, Compañía de Seguros de Vida, S.A. (Sa Nostra Vida)

On 27 June 2022, CaixaBank reached an agreement with Caja de Seguros Reunidos, Compañía de Seguros y Reaseguros, S.A. (Caser) to have its subsidiary VidaCaixa, S.A.U. de Seguros y Reaseguros (VidaCaixa) buy its 81.31% interest in the share capital of Sa Nostra Vida, a company that provides life insurance and pension plans that operates in the Balearic Islands. The operation was completed in November of 2022, after obtaining the approvals of the Comisión Nacional de Mercados y Competencia and the Dirección General de Seguros y Fondos de Pensiones (the Spanish Markets and Competition Commission and the Spanish Directorate General for Insurance and Pension Funds, respectively).

The consideration that VidaCaixa paid CASER was EUR 262 million and had been agreed by the parties based on the premises set out in the shareholder agreement of Sa Nostra Vida.

Furthermore, a negative impact for EUR 29 million was recorded in the income statement due to the penalty included in the price for terminating the partnership with Caser in Sa Nostra Vida. The acquisition did not have any other significant impacts on the Group's income statement or solvency.

In November of 2022, CaixaBank transferred the remaining 18.69% stake in Sa Nostra Vida to VidaCaixa, such that the latter wholly owns Sa Nostra Vida.

After these operations were complete, the reorganisation of Bankia's insurance businesses was finalised. The accounting and operational integration of Sa Nostra Vida into VidaCaixa will be accomplished in 2023.

Provisional accounting of the business combination

The business combination is provisionally recognised in these financial statements. The acquisition date for accounting purposes was 31 December 2022. The impact on equity and profit or loss of the difference between the acquisition date and the date control was effectively obtained is not significant.

The value of the consideration for 100% comes to EUR 272 million on a net value of the assets and liabilities at fair value of EUR 155 million. As a result of the acquisition, a first-time consolidation difference of EUR 127 million has emerged which, on a preliminary basis for the year-end 2022, has been allocated as EUR 116 million to "Intangible assets - Goodwill" and EUR 11 million to "Intangible assets - Other intangible assets" corresponding to the customer portfolio.

The net profit attributed to the Group and the gross margin from this business at 31 December 2022, if the business combination had been carried out on 1 January 2022, would be increased by EUR 10 million and EUR 15 million, respectively. The costs directly associated with the transaction are not relevant, and have been recorded in the statement of profit or loss for the period in which they materialise.

Business combinations - 2021

Bankia Group

On 17 September 2020, the Board of Directors of CaixaBank and Bankia entered a Shared Merger Project involving the takeover merger of Bankia (absorbed company) by CaixaBank (absorbent company).

The Joint Merger Plan was deposited in the Commercial Register of Valencia and approved at the General Shareholders' Meetings of CaixaBank and Bankia, which were held in early December 2020. Effective control was set for 23 March 2021, once all conditions precedent were met.

In the first quarter of 2021, the Group recorded a positive amount equivalent to the negative difference arising on consolidation of EUR 4,300 million under "Negative goodwill recognised in profit or loss" in the accompanying condensed interim consolidated statement of profit or loss (before and after tax). On 31 March 2022, the interim period for evaluating the PPA concluded, with no changes to the initial estimate.

Bankia Vida, S.A.

On 29 December 2021, after obtaining the relevant regulatory authorisations, CaixaBank formalised the purchase from Grupo Mapfre of 51% of the share capital of Bankia Vida, S.A. de Seguros y Reaseguros. Thus, the Group has acquired the entire share capital, acquiring full control over that company. The acquisition date for accounting purposes was 31 December 2021.

The price for this transaction, materialised in cash, amounted to EUR 324 million and includes the termination costs foreseen under the agreements with Mapfre (10% of the value determined by the independent expert, weighted by the percentage of capital acquired from Mapfre, equivalent to EUR 29 million).

The price for the purchase of 51% of BV is consistent with the value of EUR 577 million as determined by the independent expert chosen between the parties for the total share capital of BV (excluding the costs of the split).

Mapfre and CaixaBank agreed to submit to arbitration whether CaixaBank is obliged, under the aforementioned banking-insurance agreements, to pay Mapfre an additional amount of EUR 29 million, corresponding to an additional 10% of the value of the EUR 577 million as determined by the independent expert, for the total of the share capital of BV, weighted by the percentage of acquired capital of BV (51%). Arbitration is underway and the decision is expected in the first or second quarter of 2023 (see Note 20).

Accounting of the business combination

As a result of the acquisition, a first consolidation difference of EUR 399 million has been highlighted which has been recorded (retroactively to the date of the business combination).

The Group has conducted a fair value allocation process consistent with IFRS 3, in collaboration with an independent expert. Consequently, customer portfolios (Life, Non-Life and Unit Linked) that meet the criteria of identifiability and separability laid down in IAS 38 were identified for an amount of EUR 492 million gross and recorded under "Intangible assets - Other intangible assets", together with the corresponding deferred tax liability arising from the temporary difference between the carrying amount and the tax cost of this asset.

In the provisional recording of the business combination as at 31 December 2021, EUR 404 million was recorded under "Intangible assets - Goodwill".

As part of its plan to rearrange the Group's insurance business, in March 2022, CaixaBank sold 100% of the share capital of BV to VidaCaixa. This had no impact on the Group's equity, on a consolidated level. In November 2022 BV merged for accounting and operational purposes into VidaCaixa.

8. SEGMENT INFORMATION

The objective of business segment reporting is to allow internal supervision and management of the Group's activity and profits. The information is broken down into several lines of business according to the Group's organisation and structure. The segments are defined and segregated taking into account the inherent risks and management characteristics of each one, based on the basic business units which have accounting and management figures.

The following is applied to create them: i) the same presentation principles are applied as those used in Group management information, and ii) the same accounting principles and policies as those used to prepare the financial statements.

In 2022, the business segments have been reconfigured and the 2021 and 2020 information has been restated to facilitate comparisons. As a result, the Group is made up of the following business segments:

―

Banking and insurance business: shows earnings from the Group's banking, insurance, asset management, real estate and ALCO's activity mainly in Spain.

Most of the activity and results generated by Bankia are included in this business. The recognition date take of the merger for accounting purposes is 31 March 2021, the date on which the financial statements included Bankia's assets and liabilities at fair value. As of the second quarter of 2021, the generated results are included in the various lines of the income statement.

―

BPI: covers the income from the BPI's domestic banking business, essentially in Portugal. The income statement shows the reversal of the fair value adjustments of the assets and liabilities resulting from the business combination.

―

Corporate centre: includes the investees allocated to the equity investments business in the segmentation effective until 2021, that is, Telefónica, BFA, BCI, Coral Homes and Gramina Homes, as well as Erste Group Bank until its divestment in the fourth quarter of 2021. This line of business shows earnings from the stakes net of funding expenses.

In addition, the Group's excess capital is allocated to the corporate centre, which is calculated as the difference between the Group's total shareholders' equity and the capital assigned to the Banking and Insurance business, BPI and the investees allocated to the corporate centre. Specifically, the allocation of capital to these businesses and investees takes into account the 11.5% capital consumption for risk-weighted assets, as well as any applicable deductions. Liquidity is the counterpart of the excess capital allocated to the corporate centre.

The operating expenses of these business segments include both direct and indirect costs, which are assigned according to internal distribution methods. Specifically, the corporate expenses at Group level are assigned to the corporate centre.

The performance of the Group by business segment is shown below:

Consolidated statement of profit or loss of CaixaBank Group - By business segment (1)

(Millions of euros)

	Banking and insurance
	2022		2021		2020
		Of which insurance ^*		Of which insurance		Of which insurance
NET INTEREST INCOME	6,366	408	5,552	325	4,528	342
Dividend income and share of profit/(loss) of entities accounted for using the equity method ^*	211	200	266	209	250	200
Net fee and commission income	3,714	-84	3,417	-6	2,331	-62
Gains/(losses) on financial assets and liabilities and others	299	21	193	7	249	5
Income and expenses under insurance and reinsurance contracts	866	863	650	653	598	598
Other operating income and expense	-918	-1	-862	-2	-338	136
GROSS INCOME	10,538	1,408	9,216	1,186	7,618	1,239
Administration expenses, depreciation and	-5,555	-260	-7,542	-149	-4,089	-127
PRE-IMPAIRMENT INCOME	4,983	1,148	1,674	1,037	3,529	1,112
Impairment losses on financial assets and other provisions	-1,072	0	-1,238		-2,124
NET OPERATING INCOME/(LOSS)	3,911	1,148	436	1,037	1,405	1,112
Gains/(losses) on disposal of assets and others	-70	0	4,360		-199
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS	3,842	1,148	4,796	1,037	1,206	1,112
Income tax	-1,089	-278	-54	-243	-193	-224
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS	2,752	870	4,742	794	1,013	888
Profit/(loss) attributable to minority interests	2	0	1		0
PROFIT/(LOSS) ATTRIBUTABLE TO THE GROUP	2,751	870	4,741	794	1,013	888
Total assets	548,045	73,745	632,423	81,649	407,733	80,667
Of which: positions in sovereign debt	140,953	45,853	150,141	60,103	106,492	58,845

Consolidated statement of profit or loss of CaixaBank Group - By business segment (2)

(Millions of euros)

	BPI			Corporate centre
	2022	2021	2020	2022	2021	2020
NET INTEREST INCOME	544	448	447	6	-25	-75
Dividend income and share of profit/(loss) of entities accounted for using the equity method ^*	29	25	18	187	326	186
Net fee and commission income	296	288	245	0
Gains/(losses) on financial assets and liabilities and others	27	11	-2	12	17	-9
Income and expenses under insurance and reinsurance contracts	0			0		0
Other operating income and expense	-38	-24	-15	-7	-8	-3
GROSS INCOME	858	748	693	198	310	99
Administration expenses, depreciation and	-455	-445	-439	-60	-62	-51
PRE-IMPAIRMENT INCOME	403	303	254	138	248	48
Impairment losses on financial assets and other provisions	-28	-77	-40	-9
NET OPERATING INCOME/(LOSS)	375	226	214	129	248	48
Gains/(losses) on disposal of assets and others	0	-6	28	-19	51	104
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS	374	220	242	110	299	152
Income tax	-102	-53	-65	12	19	39
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS	273	167	177	122	318	191
Profit/(loss) attributable to minority interests	0			0
PROFIT/(LOSS) ATTRIBUTABLE TO THE GROUP	272	167	177	122	318	191
Total assets	38,795	41,308	37,726	5,394	6,305	6,061
Of which: positions in sovereign debt	6,519	6,627	6,141

( ^*) VidaCaixa's results include in 2022 the income generated by Bankia Vida (100% after the acquisition of 51% from Mapfre on December 2021 and merged with VidaCaixa in the fourth quarter of 2022) and Bankia Pensiones (100% following the merger with VidaCaixa in the last quarter of 2021). Following the merger of Bankia Vida and Bankia Pensiones, the VidaCaixa Group acquired 100% of the stake in Sa Nostra Vida (81.3% acquired from Caser and the remaining 18.7% corresponds to the stake held directly following the merger) in the last quarter of 2022. The results corresponding to the 18.7% recognised in Share of profit/(loss) of entities accounted for using the equity method were attributed in 2022. The income from Sa Nostra Vida and Bankia Mediación (subsidiary insurer also 100% from Bankia) and of VidaCaixa totals EUR 874 million in 2022.

The banking and insurance businesses have an integrated Banking-Insurance management model. Under a regulatory framework with similar accounting and supervision objectives, sales and risks are managed jointly, as the model is integrated. The results of the Banking-Insurance business are presented as a single business segment in the segment reporting because of this integrated Banking-Insurance management model.

The income of the Group by segment, geographical area and distribution of ordinary income is as follows:

Distribution of interest and similar income by geographical area

(Millions of euros)

	CaixaBank			CaixaBank Group
	2022	2021	2020	2022	2021	2020
Domestic market	6,277	5,151	3,932	8,333	7,309	6,211
International market	253	80	69	900	583	553
European Union	247	74	63	883	577	547
Eurozone	104	41	27	740	544	511
Non-eurozone	143	33	36	143	33	36
Other countries	6	6	6	17	6	6
TOTAL	6,530	5,231	4,001	9,233	7,892	6,764

Distribution of ordinary income ^* (1)

(Millions of euros)

	Ordinary income from customers			Ordinary income between segments
	2022	2021	2020	2022	2021	2020
Banking and insurance	15,326	13,338	11,245	106	62	100
Spain	14,826	13,074	11,041	106	62	100
Other countries	500	264	204
BPI	958	819	750	76	53	47
Portugal/Spain	951	811	742	76	53	47
Other countries	7	8	8
Corporate centre	205	342	177	78	14	11
Spain	59	85	62	61	12	9
Other countries	146	257	115	17	2	2
Ordinary adjustments and eliminations between segments				-260	-129	-158
TOTAL	16,489	14,499	12,172	0	0	0

Distribution of ordinary income ^* (2)

(Millions of euros)

	Total ordinary income
	2022	2021	2020
Banking and insurance	15,432	13,400	11,345
Spain	14,932	13,136	11,141
Other countries	500	264	204
BPI	1,034	872	797
Portugal/Spain	1,027	864	789
Other countries	7	8	8
Corporate centre	283	356	188
Spain	120	97	71
Other countries	163	259	117
Ordinary adjustments and eliminations between segments	-260	-129	-158
TOTAL	16,489	14,499	12,172

( ^*) Corresponding to the following items in the Group's public statement of profit or loss:

1. Interest income

2. Dividend income

3. Share of profit/(loss) of entities accounted for using the equity method

4. Fee and commission income

5. Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net

6. Gains/(losses) on financial assets and liabilities held for trading, net

7. Gains/(losses) on assets not designated for trading compulsorily measured at fair value through profit or loss, net

8. Gains/(losses) on financial assets and liabilities designated at fair value through profit or loss, net

9. Gains/(losses) from hedge accounting, net

10. Other operating income

11. Income from assets under insurance and reinsurance contracts

9. REMUNERATION OF "KEY MANAGEMENT PERSONNEL"

9.1. REMUNERATION OF THE BOARD OF DIRECTORS

At the Ordinary Annual General Meeting of CaixaBank held on 8 April 2022, the amendment to the remuneration policy for the Board of Directors was approved for 2022-2024, in accordance with the remuneration scheme set out in the Articles of Association and in the Regulations of the Board of Directors, as well as the provisions of the Corporate Enterprises Act and Act 10/2014, of 26 June, on the organisation, supervision and capital adequacy of credit institutions.

Article 34 of CaixaBank's By-laws stipulates that the position of Director shall be remunerated and that this remuneration shall consist of a fixed annual sum with a maximum amount determined by the Annual General Meeting and which shall remain in force until the General Meeting agrees to modify it. This maximum amount shall be used to remunerate all the Directors in their condition as such and shall be distributed as deemed appropriate by the Board of Directors, following the proposal of the Remuneration Committee, both in terms of remuneration to members, which receives additional fixed remuneration for carrying out his duties, and according to the duties and position of each member and to the positions they hold in the various Committees. Likewise, in conformance with the agreement and subject to the limits determined by the Annual General Meeting, Directors may be remunerated with Company shares or shares in another publicly traded Group company, options or other share-based instruments or of remuneration referenced to the value of the shares.

Non-executive Directors maintain an organic relationship with CaixaBank and consequently do not have contracts established with the Company for exercising their functions or do not have any type of recognized payment for the termination of the Director position; it only consists of fixed components.

Executive Directors carrying out executive duties are entitled to receive remuneration for these duties, which may be either a fixed amount, a complementary variable amount, incentive schemes, and benefits, which may include pension plans and insurance and, where appropriate, social security payments. In the event of departure not caused by a breach of their functions, directors may be entitled to compensation.

In addition, given the enormous practical issues involving an individual policy, Executive Directors are covered by the civil liability policy for Directors and executives of the Group to cover any third-party liabilities they may incur when carrying out their duties.

Details of remuneration and other benefits received by the members of the Board of Directors of CaixaBank for their membership in that body in those years are as follows:

Remuneration of the Board of Directors (1)

(Thousands of euros)

		Fixed components
	Position	Salary	Remuneration for being on the Board	Remuneration for being on Board committees	Remuneration for positions held in Group companies ^*	Remuneration for being on Boards outside the Group (5)
Goirigolzarri, Jose Ignacio (2)	Chairman	1,48	90	60		15
Gual, Jordi (2)
Muniesa, Tomás	Deputy Chairman		90	100	435	13
Gortazar, Gonzalo ^** (6)	CEO	2,061	90	50	60
Reed, John S.	Lead Director		128	36
Armenter, Marcelino (1)
Ayuso, Joaquín (2)	Director		90	80
Bassons, Maria Teresa (2)
Campo, Francisco Javier (2)	Director		90	80
Castillo, Eva (2)	Director		90	80
Fisas, M. Verónica	Director		90	100
Fundación CajaCanarias, repres. by Natalia Aznarez (2)
García-Bragado, Alejandro (2)
Garmendia, Cristina	Director		90	110
Garralda, Ignacio (2)
Moraleda, María Amparo	Director		90	142
Sanchiz, Eduardo Javier	Director		90	140
Santero, Teresa (2)	Director		90	50
Serna, José	Director		90	80
Ulrich, Fernando María (2) (3)	Director		90	80	750
Usarraga, Koro	Director		90	160
Vives, Francesc Xavier (1)
TOTAL		3,54	1,388	1,348	1,245	28

Remuneration of the Board of Directors (2)

(Thousands of euros)

	Variable components (7)
	Variable remuneration in cash	Share-based remuneration schemes	Long term savings system	Other items (4)	Total 2022
Goirigolzarri, Jose Ignacio (2)	146	237		103	2,136
Gual, Jordi (2)
Muniesa, Tomás					638
Gortazar, Gonzalo ^** (6)	413	674	514	78	3,940
Reed, John S.					164
Armenter, Marcelino (1)
Ayuso, Joaquín (2)					170
Bassons, Maria Teresa (2)
Campo, Francisco Javier (2)					170
Castillo, Eva (2)					170
Fisas, M. Verónica					190
Fundación CajaCanarias, repres. by Natalia Aznarez (2)
García-Bragado, Alejandro (2)
Garmendia, Cristina					200
Garralda, Ignacio (2)
Moraleda, María Amparo					232
Sanchiz, Eduardo Javier					230
Santero, Teresa (2)					140
Serna, José					170
Ulrich, Fernando María (2) (3)					920
Usarraga, Koro					250
Vives, Francesc Xavier (1)
TOTAL	559	911	514	181	9,720

Remuneration of the Board of Directors (3)

(Thousands of euros)

	Total 2021	Total 2020
Goirigolzarri, Jose Ignacio (2)	1,693
Gual, Jordi (2)	331	1,382
Muniesa, Tomás	636	620
Gortazar, Gonzalo ^** (6)	3,896	2,836
Reed, John S.	164	149
Armenter, Marcelino (1)		31
Ayuso, Joaquín (2)	129
Bassons, Maria Teresa (2)	28	120
Campo, Francisco Javier (2)	129
Castillo, Eva (2)	129
Fisas, M. Verónica	190	183
Fundación CajaCanarias, repres. by Natalia Aznarez (2)	33	140
García-Bragado, Alejandro (2)	28	120
Garmendia, Cristina	200	169
Garralda, Ignacio (2)	21	90
Moraleda, María Amparo	206	206
Sanchiz, Eduardo Javier	230	218
Santero, Teresa (2)	107
Serna, José	163	140
Ulrich, Fernando María (2) (3)	879
Usarraga, Koro	250	231
Vives, Francesc Xavier (1)		81
TOTAL	9,442	6,716

( ^*) Registered in the income statement of the respective companies.

( ^**) Jose Ignacio Goirigolzarri and Gonzalo Gortazar have practiced executive duties in 2022 and 2021 (Gonzalo Gortazar alone in 2020).

(1) Marcelino Armenter stood down from his position on 2 April 2020 and Francesc Xavier Vives was not reappointed as Coordinating Director in 2020, after his mandate ended.

(2) The following were appointed in 2021: José Ignacio Goirigolzarri as chairman, Joaquín Ayuso, Francisco Javier Campo and Eva Castillo as independent directors, Fernando Ulrigh as an external director, and Teresa Santero as proprietary director at the proposal of the FROB (in view of the stake that she holds in CaixaBank through BFA Tenedora de Acciones, SAU). Furthermore, Jordi Gual, Maria Teresa Bassons, Alejandro García-Bragado, Ignacio Garralda and the CajaCanarias Foundation stood down in 2021.

(3) The positions held at BPI are not on behalf of CaixaBank Group.

(4) Includes remuneration in kind (health and life insurance premiums paid in favour of Executive Directors), interest accrued on deferred variable remuneration in cash, other insurance premiums paid and other benefits.

(5) Remuneration received for representing the Company on Boards of Directors of listed companies and others in which the Company has a presence, outside of the consolidated group and which are recorded in the statements of profit or loss of the respective companies.

(6) The Chief Executive Officer decided to voluntarily waive his variable remuneration corresponding to 2020, both as regards the yearly bonus as well as participation in the yearly Long-Term Incentives Plan corresponding to 2020.

(7) Includes EUR 529 thousand of variable remuneration subject to multi-annual factors.

CaixaBank does not have any pension obligations with former or current members of the Board of Directors in their capacity as such.

9.2. REMUNERATION OF SENIOR MANAGEMENT

The breakdown and details of remuneration received by Senior Management of the Group are as follows:

Remuneration of Senior Management

(Thousands of euros)

	31-12-2022	31-12-2021	31-12-2020
Salary (1)	11,545	11,927	7,267
Post-employment benefits (2)	1,594	1,739	1,820
Other long-term provisions (3)	65	431	251
Other positions in Group companies	1,024	1,011	1,010
TOTAL	14,228	15,108	10,348
Remuneration received for representing the Company on Boards of Directors of listed companies and others in which the Company has a presence, outside of the consolidated group (4)	124	180	156
TOTAL REMUNERATION	14,352	15,288	10,504
Number of members of the Senior Management	13	13	11

(1) This amount includes fixed remuneration, remuneration in kind and total variable remuneration received by members of the Senior Management. Variable remuneration corresponds to the variable remuneration scheme with multi-year metrics accruing in cash and shares for the year, which includes the deferred portion subject to the multi-year adjustment. Termination benefits not included.In April 2020, Senior Management announced its withdrawal from variable remuneration for 2020, both with respect to the annual bonus and its participation in the second cycle of the 2020 long-term incentives plan.

(2) Includes insurance premiums and discretionary pension benefits.

(3) This item corresponds to the amount of the risk policy whose increase or decrease does not correspond to the remuneration management, but rather to the performance of the technical variables that determine the premiums.

(4) Registered in the income statement of the respective companies.

All the contracts of Senior Management members, the Chairman and the Chief Executive Officer have post-contractual non-competition commitments of one annual payment of their fixed components (payable in 12 monthly payments) and indemnity clauses equivalent to one annual payment of the fixed components, or the amount payable by law, whichever is higher.

The Chairman and the Chief Executive Officer have an indemnity clause of 1 annual payment of the fixed remuneration components. There are currently three committee members for whom the indemnity to which they are legally entitled remain less than one year of their salary.

The value of obligations accrued as defined contribution post-employment commitments with Executive Directors and Senior Management are as follows:

Post-employment commitments with Executive Directors and Senior Management

(Thousands of euros)

	31-12-2022	31-12-2021	31-12-2020
Post-employment commitments	18,792	19,533	16,523

9.3. OTHER DISCLOSURES RELATING TO THE BOARD OF DIRECTORS

Article 30 of the Regulations of the Board of Directors of CaixaBank governs the situations of conflict applicable to all directors, establishing that the director must avoid situations that could entail a conflict of interest between the Company and the Director or its related persons, adopting the measures necessary in this regard.

Directors bear certain obligations in their duty to avoid situations of conflicts of interest, such as: i) directly or indirectly carrying out transactions with CaixaBank unless they are ordinary operations, carried out under standard conditions for all customers and of little significance; ii) using the Company name or relying on their status as director of the Company to unduly influence private transactions; iii) making use of the Company's assets or availing themselves of their position at the Company to obtain an economic advantage or for any private purposes; iv) taking advantage of the company's business opportunities; v) obtaining advantages or remuneration from third parties other than the Company and its group in association with the performance of their duties, with the exception of mere courtesies; and vi) performing activities on their own behalf or via third parties that constitute direct, actual or potential competition with the company or which, by any other means, put them in a position of permanent conflict with the interests of CaixaBank.

The aforementioned obligations may be waived in one-off cases, in some cases require the approval by the General Meeting.

The Regulations of the Board of Directors are publicly available on the CaixaBank website (www.caixabank.com).

In any case, the advisers must notify the CaixaBank Board of Directors of any situation of conflict -direct or indirect, that the directors or persons related to them may be involved in- with the interests of the Group, which will be subject to reporting in the financial statements, as established in article 229.3 of the Corporate Enterprises Act.

During 2022, no director has notified any situation that places them in a conflict of interest with the Group. However, on the following occasions, directors abstained from intervening and voting in the deliberation of issues in sessions of the Board of Directors:

Conflicts of interest

Director	Conflict or interest
José Ignacio Goirigolzarri (Chairman)	- Abstention from the deliberation and voting on the resolution regarding variable remuneration corresponding to 2021.
	- Abstention from the deliberation and voting on the resolution regarding remuneration conditions corresponding to 2022.
Tomás Muniesa (Deputy Chairman)	- Abstention from the deliberation and voting on the resolution regarding his appointment as member of the Executive Committee of the Board of Directors.
	- Abstention from the deliberation and voting on the resolution regarding the sale of properties to a subsidiary of Criteria Caixa, S.A.U.
	- Abstention from the deliberation and voting on the resolution regarding the amendment of certain terms and conditions of various real estate lease contracts for use other than housing, entered into with the Caixa d'Estalvis i Pensions de Barcelona Banking Foundation, "la Caixa" and other group companies.
Gonzalo Gortazar (CEO)	- Abstention from the deliberation and voting on the resolution regarding variable remuneration corresponding to 2021.
	- Abstention from the deliberation and voting on the resolution regarding remuneration conditions corresponding to 2022.
John S. Reed (Lead Director)	- Abstention in the deliberation on the proposal to agree to review the remuneration package of the Chairs of the Board of Directors' Committees.
Verónica Fisas (Director)	- Abstention from deliberation and voting on a motion regarding a financing arrangement intended for a related party.
María Amparo Moraleda (Director)	- Abstention from the deliberation and voting on the resolution regarding appointment as member of the Board of Director's Appointments and Sustainability Committee.
	- Abstention in the deliberation on the proposal to agree to review the remuneration package of the Chairs of the Board of Directors' Committees.
	- Abstention from deliberation and voting on motions regarding financing arrangements intended for related parties.
Eduardo Javier Sanchiz (Director)	- Abstention in the deliberation on the proposal to agree to review the remuneration package of the Chairs of the Board of Directors' Committees.
Teresa Santero (Director)	- Abstention from deliberations and voting on the resolution regarding the sale of the stake in the SAREB to the FROB
	- Abstention from the deliberation and voting on the resolution regarding the purchase of foreclosed real estate assets belonging to BFA Tenedora de Acciones, S.A.U.
José Serna (Director)	- Abstention from the deliberation and voting on the resolution regarding the sale of a property to a subsidiary of Criteria Caixa, S.A.U.
	- Abstention from the deliberation and voting on the resolution regarding the amendment of certain terms and conditions of various real estate lease contracts for use other than housing, entered into with the Caixa d'Estalvis i Pensions de Barcelona Banking Foundation, "la Caixa" and other group companies.
Usarraga, Koro (Director)	- Abstention in the deliberation on the proposal to agree to review the remuneration package of the Chairs of the Board of Directors' Committees.
	- Abstention from deliberation and voting on a motion regarding a financing arrangement intended for a related party.

The other directors with appointments in force during 2022 (in other words, Joaquín Ayuso, Francisco Javier Campo, Eva Castillo, Fernando Maria Costa Duarte and Cristina Garmendia) have declared that they have had no situation of conflict with the Company's interests, be it direct or indirect, proprietary interests, or the interests of the people linked to them, during the period of their mandate in 2022.

The Internal Rules of Conduct on Matters relating to the Stock Market regulates conflicts of interest, establishing the obligation to inform Regulatory Compliance of any conflict of interest affecting the director of his or her related parties.

There is no family relationship between the members of the CaixaBank Board of Directors and the group of key personnel comprising CaixaBank's Senior Management.

Prohibition of competition

Specifically, article 229.1f) of the Corporate Enterprises Act establishes that Board members may not carry out for their own account or the account of other activities which actually or potentially constitute effective competition with those carried out by the Company or which, in any other way, permanently conflict with the Company's interests. Article 230 of the Corporate Enterprises Act stipulates that this prohibition can be lifted if the Company is not expected to incur damages or it is expected that it will be indemnified for an amount equal to the benefits expected to be obtained from the exemption. Express and separate approval of the exemption must be obtained from shareholders at the Annual General Meeting. The provisions contained in the mentioned articles also apply to cases where the beneficiary of any such actions or activities is a person related to the director.

The company has not been informed of any activity or circumstance that might represent effective, current or potential competition of the directors or persons associated with them, with CaixaBank Group or that, in any other way, places them in permanent conflict with the interests of the Entity.

9.4. VOTING RIGHTS HELD BY "KEY MANAGEMENT PERSONNEL"

At year-end, the (direct and indirect) voting rights held by "key management personnel" are specified in section "Participation of the Board (A.3)" of the Annual Corporate Governance Report, attached to the Management Report.

10. CASH AND CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS

The breakdown of this heading is as follows:

Breakdown of cash and cash balances at central banks

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Cash	2,560	3,044	2,339
Cash balance in central banks (Note 3.4.4)	16,384	99,574	48,535
Other demand deposits	1,578	1,598	737
TOTAL	20,522	104,216	51,611

Cash balances at central banks includes balances held to comply with the mandatory minimum reserves requirement in the central bank based on eligible liabilities. The mandatory reserves earn interest at the rate applicable to all major Eurosystem financing operations.

11. FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING

11.1. TRADING DERIVATIVES

The breakdown of this heading is as follows:

Breakdown of trading derivatives (product and counterparty)

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
Unmatured foreign currency purchases and sales	976	823	488	465	336	341
Purchases of foreign currencies against euros	350	482	365	64	48	309
Purchases of foreign currencies against foreign currencies	90	87	87	86	17	18
Sales of foreign currencies against euros	536	254	36	315	271	14
Share options	333	299	440	388	264	247
Bought	333		440		264
Issued		299		388		247
Interest rate options	347	229	123	150	103	108
Bought	347		123		103
Issued		229		150		108
Foreign currency options	76	35	48	58	57	7
Bought	76		48		57
Issued		35		58		7
Other share, interest rate and inflation transactions	4,875	2,382	9,018	3,695	4,387	-556
Share swaps	105	16	138	108	157	132
Interest-rate and inflation-linked swaps	4,631	2,212	8,880	3,587	4,230	-688
Commodity derivatives and other risks	356	203	202	82	154	4
Swaps	339	183	199	80	153	4
Purchased options	17	20	3	2	1
Sold options
TOTAL	6,963	3,971	10,319	4,838	5,301	151
Of which: contracted in organised markets	37	36	35	43	35	51
Of which: contracted in non-organised markets	6,926	3,935	10,284	4,795	5,266	100
NOTIONAL	519,553		567,059		439,674

For the most part, the Group hedges the market risk related to derivatives arranged with customers individually by arranging symmetric derivatives on the market, recognising both in the trading portfolio. In this way, the market risk arising from these operations is not significant.

11.2. EQUITY INSTRUMENTS

The breakdown of this heading is as follows:

Breakdown of equity instruments

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Shares in Spanish companies	233	186	195
Shares in foreign companies		1	60
TOTAL	233	187	255

11.3. DEBT SECURITIES

The breakdown of this heading is as follows:

Breakdown of debt securities ^**

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Spanish government debt securities ^*	23	128	442
Foreign government debt securities ^*	4	118	174
Issued by credit institutions	14	28	40
Other Spanish issuers	128	113	92
Other foreign issuers	17	32	53
TOTAL	186	419	801

( ^*) See Note 3.4.1., section "Concentration according to sovereign risk"

( ^**) See ratings classification in Note 3.4.1, section "Concentration according to credit quality".

11.4. SHORT POSITIONS ON SECURITIES

The breakdown of this heading is as follows:

Breakdown of short positions

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
On securities lending agreements
Equity instruments
On overdrafts on repurchase agreements	59	280	273
Debt securities - public ^*	38	239	249
Debt securities - other issuers	21	41	24
TOTAL	59	280	273

( ^*) See Note 3.4.1., section "Concentration according to sovereign risk"

Overdrafts on repurchase agreements of debt securities are short-term transactions arranged to offset off-balance sheet positions that have been sold or are subject to a repurchase agreement.

12. FINANCIAL ASSETS NOT DESIGNATED FOR TRADING COMPULSORILY MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS

The breakdown of this heading is as follows:

Breakdown of financial assets not designated for trading compulsorily measured at fair value through profit or loss

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Equity instruments	127	165	180
Debt securities	6	5	52
Loans and advances	50	67	85
Customers	50	67	85
TOTAL	183	237	317

The changes in the valuation of these financial assets as a result of variations of credit risk are not significant, because of their credit quality (Note 3.4.1).

13. FINANCIAL ASSETS AT FAIR VALUE WITH CHANGES IN OTHER COMPREHENSIVE INCOME

The breakdown of this heading is as follows:

Breakdown of Financial assets at fair value with changes in other comprehensive income

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Equity instruments	1,351	1,646	1,414
Shares in listed companies	684	1,002	843
Shares in non-listed companies	667	644	571
Debt securities ^*	11,591	14,757	17,895
Spanish government debt securities	6,644	11,817	13,966
Foreign government debt securities	3,721	1,377	2,206
Issued by credit institutions	389	565	581
Other Spanish issuers	13	55	42
Other foreign issuers	824	943	1,100
TOTAL	12,942	16,403	19,309
Equity instruments
Of which: gross unrealised gains	91	128	109
Of which: gross unrealised losses	-1,260	-1,590	-1,877
Debt securities
Of which: gross unrealised gains	27	394	596
Of which: gross unrealised losses	-528	-1

^*) See ratings classification in Note 3.4.1, "Concentration according to credit quality" and the breakdown by country of government debt in Note 3.4.1, section "Concentration according to sovereign risk".

13.1. EQUITY INSTRUMENTS

The breakdown of this heading is as follows:

Changes in equity instruments - 2022 (1)

(Millions of euros)

	31-12-2021
Telefónica, SA ^*	1,000
Banco Fomento de Angola (BFA)	321
Other	325
TOTAL	1,646

Changes in equity instruments - 2022 (2)

(Millions of euros)

	Acquisitions and capital increases	Disposals and capital decreases	Gains (-) /losses (+) transferred to reserves	Adjustments to market value and exchange differences	Transfers and other	31-12-2022
Telefónica, SA ^*		-602	302	-17		683
Banco Fomento de Angola (BFA)				89		410
Other	2	-23	-39		-7	258
TOTAL	2	-625	263	72	-7	1,351

( ^*) The ownership interest in Telefónica, S.A. is 3.50% at 31 December 2022. On 4 October 2022, CaixaBank's fair value hedge (on 1.95% of the share capital of Telefónica) was partially settled through the delivery of 1%.

Changes in equity instruments - 2021 (1)

(Millions of euros)

	31-12-2020	Additions due to business comb.(Note 7)
Telefónica, SA ^*	843
Banco Fomento de Angola ^**	334
Other	237	149
TOTAL	1,414	149

Changes in equity instruments - 2021 (2)

(Millions of euros)

	Acquisitions and capital increases	Disposals and capital decreases	Gains (-) /losses (+) transferred to reserves	Adjustments to market value and exchange differences	Transfers and other	31-12-2021
Telefónica, SA ^*				157		1,000
Banco Fomento de Angola ^**				18	-31	321
Other	4	-24	-10	12	-43	325
TOTAL	4	-24	-10	187	-74	1,646

( ^*) On 31 December 2021, the stake in Telefónica, SA was 4.49% due to the dilutive effect of the scrip dividend (4.87% at 31 December 2020).

( ^**) The total payout approved by BFA net of the tax effect totalled EUR 119 million (of which EUR 79 million were extraordinary dividends charged to its reserves). Out of the total dividend, gross, EUR 98 million was recognised as income in the income statement and the rest was recognised as the cost of the investment (as a result reducing the value of losses on the investment recognised in other comprehensive income), considering them as reserves generated prior to classifying the investment as "Financial assets at fair value with changes in other comprehensive income".

Changes in equity instruments - 2020 (1)

(Millions of euros)

	31-12-2019
Telefónica ^*	1,617
Banco Fomento de Angola	414
Other ^**	376
TOTAL	2,407

Changes in equity instruments - 2020 (2)

(Millions of euros)

	Acquisitions and capital increases	Disposals and capital decreases	Gains (-) /losses (+) transferred to reserves	Adjustments to market value and exchange differences	Transfers and other	31-12-2020
Telefónica ^*				-774		843
Banco Fomento de Angola				-80		334
Other ^**	3	-153	-61	72		237
TOTAL	3	-153	-61	-782		1,414

( ^*) In March 2020, the fair value hedge on 1% of this stake was cancelled (arranged through an equity swap), recording a capital gain of EUR 177 million under the heading "Other accumulated comprehensive income" in equity. On 31 December 2020, the stake in Telefónica, SA was 4.9% due to the dilutive effect of the scrip dividend (5.0% on 31 December 2019).

( ^**) Dated 25 June 2020, CaixaBank Group sold its direct and indirect stake of 11.51% in Caser, after receiving the pertinent administrative authorisations, for the price of EUR 139 million. The operation did not have a significant material impact for the Group.

The estimate of the fair value of Banco de Fomento de Angola (BFA) is based on a dividend discount model (DDM), subsequently compared to comparison multiple methodologies. The main assumptions used in the dividend discount model are set out below:

Assumptions used

(Percentage)

	Banco Fomento de Angola
	31-12-2022	31-12-2021	31-12-2020
Forecast periods	5 years	5 years	5 years
Discount rate ( ^*)	21.6%	17.5%	19.3%
Objective capital ratio	20.0%	15.0%	15.0%

( ^*) This is calculated using the interest rate of the US treasury bond plus a country risk premium and another market risk premium.

For the stake in Banco de Fomento de Angola, the exercise to determine the fair value considers the sensitivity with respect to the discount rate [-1.0%; +1.0%] with no significant variations concluded in the estimated fair value in the baseline scenario.

The relevant financial information of the most relevant equity instruments classified in this section is as follows:

Financial information on key investments

(Millions of euros)

Corporate name	Registered address	% shareholding	% voting rights	Equity	Latest published profit/(loss)
Telefónica (1) (3)	Madrid - Spain	3.50%	3.50%	32,622	1,486
Sociedad de gestión de Activos Procedentes de la Reestructuración Bancaria (Sareb) (2)	Madrid - Spain	12.24%	12.24%	-10,861	-715
Banco de Fomento Angola (BFA) (2)	Angola	48.09%	48.09%	921	139

(1) Listed company. The information on equity and the last published profit/(loss) is at 30-09-2022.

(2) Non-listed companies. The information on equity and the last published profit/(loss) is at 30-06-2022.

(3) At 31 December 2022, 0.952% of the share capital of Telefónica, S.A. was subject to a hedging contract.

13.2. DEBT SECURITIES

The breakdown of this heading is as follows:

Changes in debt securities (1)

(Millions of euros)

	2022			2021
	Stage 1	Stage 2	Stage 3	Stage 1	Stage 2	Stage 3
Opening balance	14,749		8	17,895
Plus:
Additions due to business combinations (Note 7)				9,645		8
Transfers between stage		8	-8
Acquisitions	4,528			320
Interest	203			-16
Gains/(losses) recognised with adjustments to equity (Note 24.2)	-783	1		-203
Less:
Sales and redemptions	-7,102			-12,857
Implicit accrued interest				-8
Reclassifications and transfers
Amounts transferred to income statement (Note 32) ^*	-13			-26
Impairment losses (Note 36)
Exchange differences and other				-1
CLOSING BALANCE	11,582	9		14,749		8

Changes in debt securities (2)

(Millions of euros)

	2020
	Stage 1	Stage 2	Stage 3
Opening balance	15,964
Plus:
Additions due to business combinations (Note 7)
Transfers between stage
Acquisitions	8,657
Interest	-116
Gains/(losses) recognised with adjustments to equity (Note 24.2)	98
Less:
Sales and redemptions	-6,735
Implicit accrued interest	-10
Reclassifications and transfers
Amounts transferred to income statement (Note 32) ^*	115
Impairment losses (Note 36)
Exchange differences and other	-78
CLOSING BALANCE	17,895

( ^*) The profit/(loss) of fixed-income portfolio sales is recorded under the heading "Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net".

14. FINANCIAL ASSETS MEASURED AT AMORTISED COST

The breakdown of this heading is as follows:

Breakdown of financial assets at amortised cost - 31-12-2022

(Millions of euros)

		Value adjustments
	Gross balance	Impairment allowances	Accrued interest	Fee and com.	Other	Balance sheet
Debt securities	77,396	-16	353			77,73
Loans and advances	370,971	-7,401	786	-427	1,092	365,021
Central banks
Credit institutions	12,139	-8	56			12,187
Customers	358,832	-7,393	730	-427	1,092	352,834
TOTAL	448,367	-7,417	1,139	-427	1,092	442,754

Breakdown of financial assets at amortised cost - 31-12-2021

(Millions of euros)

		Value adjustments
	Gross balance	Impairment allowances	Accrued interest	Fee and com.	Other	Balance sheet
Debt securities	67,945	-14	275			68,206
Loans and advances	359,771	-8,260	475	-436	843	352,393
Central banks	63					63
Credit institutions	7,817	-8	-3			7,806
Customers	351,891	-8,252	478	-436	843	344,524
TOTAL	427,716	-8,274	750	-436	843	420,599

Breakdown of financial assets at amortised cost - 31-12-2020

(Millions of euros)

		Value adjustments
	Gross balance	Impairment allowances	Accrued interest	Fee and com.	Other	Balance sheet
Debt securities	24,559	-11	122			24,670
Loans and advances	247,799	-5,609	464	-357	542	242,839
Central banks	4					4
Credit institutions	5,845		2			5,847
Customers	241,950	-5,609	462	-357	542	236,988
TOTAL	272,358	-5,620	586	-357	542	267,509

14.1. DEBT SECURITIES

The breakdown of the net balances under this heading is as follows:

Debt securities ^*

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Spanish government debt securities	58,236	55,623	18,579
Of which: SAREB	17,502	19,160	1,237
Other Spanish issuers	174	125
Other foreign issuers	19,323	12,458	6,091
TOTAL	77,733	68,206	24,670

( ^*) See Note 3.4.1, section 'Concentration according to sovereign risk'.

The breakdown of changes in the gross carrying amount (amount on balance sheet without considering allowances for impairment of assets) of debt securities at amortised cost is as follows

Changes in debt securities (1)

(Millions of euros)

	2022
	Stage 1	Stage 2	Stage 3	Total
Opening balance	68,100	108	12	68,220
Additions due to business combinations (Note 7)
Transfers	-3	3
From stage 1:	-3	3
From stage 2:
From stage 3:
New financial assets	36,464	453	27	36,944
Financial asset disposals (other than write-offs) ^**	-26,566	-515	-27	-27,108
Changes in interest accrual	-245			-245
Write-offs
Exchange differences and	-62			-62
CLOSING BALANCE	77,688	49	12	77,749
Impairment allowances ^*	-4	-2	-10	-16

Changes in debt securities (2)

(Millions of euros)

	2021
	Stage 1	Stage 2	Stage 3	Total
Opening balance	24,565	103	13	24,681
Additions due to business combinations (Note 7)	37,005			37,005
Transfers
From stage 1:	-3	3
From stage 2:	4	-4
From stage 3:
New financial assets	25,663	322	23	26,008
Financial asset disposals (other than write-offs) ^**	-18,924	-317	-23	-19,264
Changes in interest accrual	-166			-166
Write-offs			-1	-1
Exchange differences and	-43			-43
CLOSING BALANCE	68,100	108	12	68,220
Impairment allowances ^*	-5	-5	-4	-14

Changes in debt securities (3)

(Millions of euros)

	2020
	Stage 1	Stage 2	Stage 3	Total
Opening balance	17,375	6	14	17,395
Additions due to business combinations (Note 7)
Transfers
From stage 1:
From stage 2:
From stage 3:
New financial assets	13,822	103	12	13,937
Financial asset disposals (other than write-offs) ^**	-6,645	-6	-13	-6,664
Changes in interest accrual	11			11
Write-offs
Exchange differences and	2			2
CLOSING BALANCE	24,565	103	13	24,681
Impairment allowances ^*	-2	-5	-4	-11

( ^*) There were no significant changes in the period

( ^**) Gains on sales of fixed income portfolio are recorded under "Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net", with no impact on the business model.

14.2. LOANS AND ADVANCES

Loans and advances - Credit institutions

Breakdown of loans and advances to credit institutions by type

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Demand	7,988	5,122	3,748
Other accounts	7,988	5,122	3,748
Term	4,151	2,695	2,097
Deposits with agreed maturity	4,145	2,693	2,097
Deposits with agreed maturity in stage 3	6	2
TOTAL	12,139	7,817	5,845

Loans and advances - Loans and advances to customers

The breakdown of impairment of the portfolio of loans and advances to customers is as follows:

Breakdown of Loans and advances to customers (1)

(Millions of euros)

	31-12-2022
				POCI ^*
	Stage 1	Stage 2	Stage 3	Not impaired	Impaired
Gross carrying amount	321,576	28,562	9,621	3	465
Impairment allowances	-1,344	-1,368	-4,459		-222
TOTAL	320,232	27,194	5,162	3	243

Breakdown of Loans and advances to customers (2)

(Millions of euros)

	31-12-2021
				POCI ^*
	Stage 1	Stage 2	Stage 3	Not impaired	Impaired
Gross carrying amount	308,369	31,439	12,279	1	688
Impairment allowances	-967	-1,632	-5,571		-82
TOTAL	307,402	29,807	6,708	1	606

Breakdown of Loans and advances to customers (3)

(Millions of euros)

	31-12-2020
	Stage 1	Stage 2	Stage 3
Gross carrying amount	214,275	20,066	8,256
Impairment allowances	-920	-1,064	-3,625
TOTAL	213,355	19,002	4,631

( ^*) POCIs arising from the business combination with Bankia (initially EUR 770 million).

The breakdown of changes in the gross carrying amount (amount on balance sheet without considering allowances for impairment of assets) of loans and advances to customers is as follows:

Changes in loans and advances to customers (1)

(Millions of euros)

	2022
	Stage 1	Stage 2	Stage 3	Total
Opening balance	308,369	31,439	12,279	352,087
Additions due to business combinations
Transfers	-1,717	1,121	596
From stage 1:	-14,296	13,484	812
From stage 2:	12,480	-14,126	1,646
From stage 3:	99	1,763	-1,862
New financial assets	76,964	2,096	688	79,748
Financial asset disposals (other than write-offs)	-62,040	-6,094	-1,956	-70,090
Write-offs			-1,986	-1,986
CLOSING BALANCE	321,576	28,562	9,621	359,759

Changes in loans and advances to customers (2)

(Millions of euros)

	2021
	Stage 1	Stage 2	Stage 3	Total
Opening balance	214,275	20,066	8,256	242,597
Additions due to business combinations	103,992	13,120	4,193	121,305
Transfers	-4,342	2,214	2,128
From stage 1:	-14,552	13,736	816
From stage 2:	10,058	-12,090	2,032
From stage 3:	152	568	-720
New financial assets	66,377	2,295	898	69,570
Financial asset disposals (other than write-offs)	-71,933	-6,256	-1,369	-79,558
Write-offs			-1,827	-1,827
CLOSING BALANCE	308,369	31,439	12,279	352,087

Changes in loans and advances to customers (3)

(Millions of euros)

	2020
	Stage 1	Stage 2	Stage 3	Total
Opening balance	202,924	15,541	8,387	226,852
Additions due to business combinations
Transfers	-4,549	3,461	1,088
From stage 1:	-9,624	9,097	527
From stage 2:	5,040	-6,045	1,005
From stage 3:	35	409	-444
New financial assets	65,815	4,822	818	71,455
Financial asset disposals (other than write-offs)	-49,915	-3,758	-1,017	-54,690
Write-offs			-1,020	-1,020
CLOSING BALANCE	214,275	20,066	8,256	242,597

The changes of provisions of "Financial assets at amortised cost - Loans and advances to customers" is as follows:

Changes in impairment allowances of loans and advances to customers (1)

(Millions of euros)

	2022
	Stage 1	Stage 2	Stage 3	Total
Opening balance	967	1,632	5,571	8,170
Additions due to business combinations
Net allowances	377	-264	326	439
From stage 1:	232	-356	259	135
From stage 2:	-19	-117	-899	-1,035
From stage 3:	-8	134	1,067	1,193
New financial assets	192	97	273	562
Disposals	-20	-22	-374	-416
Amounts used			-1,458	-1,458
Transfers and			20	20
CLOSING BALANCE	1,344	1,368	4,459	7,171

Changes in impairment allowances of loans and advances to customers (2)

(Millions of euros)

	2021
	Stage 1	Stage 2	Stage 3	Total
Opening balance	920	1,064	3,625	5,609
Additions due to business combinations	545	897	1,920	3,362
Net allowances	-518	-343	1,590	729
From stage 1:	-191	127	-36	-100
From stage 2:	-4	-47	788	737
From stage 3:	49	-85	957	921
New financial assets	178	95	357	630
Disposals	-550	-433	-476	-1,459
Amounts used			-1,383	-1,383
Transfers and	20	14	-181	-147
CLOSING BALANCE	967	1,632	5,571	8,170

Changes in impairment allowances of loans and advances to customers (3)

(Millions of euros)

	2020
	Stage 1	Stage 2	Stage 3	Total
Opening balance	574	408	3,416	4,698
Additions due to business combinations
Net allowances	328	423	942	1,693
From stage 1:	216	472	238	926
From stage 2:	-16	-89	469	364
From stage 3:	-4	-35	61	22
New financial assets	165	133	328	626
Disposals	-33	-58	-154	-245
Amounts used			-670	-670
Transfers and	18	-67	-63	-112
CLOSING BALANCE	920	1,064	3,625	5,609

15. DERIVATIVES - HEDGE ACCOUNTING (ASSETS AND LIABILITIES)

The breakdown of the balances of these headings is as follows:

Breakdown of hedging derivatives (product and counterparty)

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
Interest rates	252	70	1,007	64	312	121
Equity instruments	38		12
Currencies and gold	8	7	6	3		11
Other		98	10	53	1
TOTAL FAIR VALUE HEDGES	298	175	1,035	120	313	132
Interest rates		1		17		1
Currencies and gold	351	127		116	159	4
Other		1,068	3	707	43	100
TOTAL CASH FLOW HEDGES	351	1,196	3	840	202	105
TOTAL	649	1,371	1,038	960	515	237
Memorandum items
Of which: OTC - credit institutions	649	1,371	1,038	958	515	237
Of which: OTC - other financial corporations				2
Of which: OTC - other

The detail of the schedule of the nominal amount of interest rate hedging items and their average interest rate are as follows:

Maturity schedule of hedging items and average interest rate - 2022 (1)

(Millions of euros)

	Hedged item value
	- 1 Month	1 - 3 Months	3 - 12 Months	1 - 5 Years	+ 5 Years	Total
Asset interest-rate hedges	18	25	631	2,769	9,834	13,277
Liability interest-rate hedges	1,515	3,087	6,079	52,161	10,434	73,276
TOTAL FAIR VALUE HEDGES	1,533	3,112	6,710	54,930	20,268	86,553
Asset interest-rate hedges	1,492	4,243	3,531	31,005	5,049	45,320
TOTAL CASH FLOW HEDGES	1,492	4,243	3,531	31,005	5,049	45,320

Maturity schedule of hedging items and average interest rate - 2022 (2)

(M illions of euros)

	Average interest rate
Asset interest-rate hedges	-0.18 %
Liability interest-rate hedges	0.19 %
TOTAL FAIR VALUE HEDGES
Asset interest-rate hedges	2.13 %
TOTAL CASH FLOW HEDGES

Hedging items - Fair value hedges (1)

(Millions of euros)

			31-12-2022		2022
			Value of hedging instrument
Hedged item	Risk covered	Hedging instrument used	Assets	Liabilities	Change in FV used to calculate the ineffectiveness of the hedge (Note 32)	Ineffectiveness taken to profit/(loss) (Note 32)
Macrohedges
Issuances	Transformation from fixed to floating	Interest-rate swaps and options	190	37	-4,764	4
Fixed-rate loans	Transformation from fixed to floating	Interest-rate swaps and options	66	21	1,645	7
Demand accounts	Transformation from fixed to floating	Interest-rate swaps			-1,885
Deposits with agreed maturity	Transformation from fixed to floating	Interest-rate swaps and options	-4	18	-103	7
TOTAL			252	76	-5,107	18
Microhedges
Public debt OCI portfolio	Transformation from fixed to floating	Interest-rate swaps			9
Public debt OCI portfolio	Transformation of inflation-linked debt to fixed-rate to floating-rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options		94	17
Currency loan	Transformation from fixed rate in foreign currency to floating rate in euro	Currency swaps	8	1	-3
Debt securities issued	Debt transformation from inflation-linked fixed to floating rate	Inflation-linked swaps and inflation-linked options			-8
Amortised cost fixed income portfolio debt	Debt transformation from inflation-linked fixed to floating rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options		4	1
Public Debt amortised cost portfolio	Value of hedged fixed income assets	Forward			-32
Equity instruments OCI	Market risk	Equity swaps	38		38
Other
TOTAL			46	99	22

Hedging items - Fair value hedges (2)

(Millions of euros)

			31-12-2021		31-12-2020
			Value of hedging instrument		Value of hedging instrument
Hedged item	Risk covered	Hedging instrument used	Assets	Liabilities	Assets	Liabilities
Macrohedges
Issuances	Transformation from fixed to floating	Interest-rate swaps and options	913	2	265	9
Fixed-rate loans	Transformation from fixed to floating	Interest-rate swaps and options	34	64	47	80
Demand accounts	Transformation from fixed to floating	Interest-rate swaps and options
Deposits with agreed maturity	Transformation from fixed to floating	Interest-rate swaps and options	26			42
TOTAL			973	66	312	131
Microhedges
Public debt OCI portfolio	Transformation from fixed to floating	Interest-rate swaps
Public debt OCI portfolio	Transformation of inflation-linked debt to fixed-rate to floating-rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options		47	1
Currency loan	Transformation from fixed rate in foreign currency to floating rate in euro	Currency swaps	9			1
Debt securities issued	Debt transformation from inflation-linked fixed to floating rate	Inflation-linked swaps and inflation-linked options	9
Amortised cost fixed income portfolio debt	Debt transformation from inflation-linked fixed to floating rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options		5
Public Debt amortised cost portfolio	Value of hedged fixed income assets	Forward	32
Equity instruments OCI	Market risk	Equity swaps	12
Other				2
TOTAL			62	54	1	1

Hedged items - Fair value hedges (1)

(Millions of euros)

			31-12-2022
			Hedged instrument		Accumulated fair value adjustments in the hedged item
Hedged item	Risk covered	Hedging instrument used	Assets	Liabilities	Assets	Liabilities
Macrohedges
Issuances	Transformation from fixed to floating	Interest-rate swaps and options		48,620		-3,799
Fixed-rate loans	Transformation from fixed to floating	Interest-rate swaps and options	12,548		-1,758
Demand accounts	Transformation from fixed to floating	Interest-rate swaps		20,000		-1,886
Deposits with agreed maturity	Transformation from fixed to floating	Interest-rate swaps and options		4,656		-117
TOTAL			12,548	73,276	-1,758	-5,802
Microhedges
Public debt OCI portfolio	Transformation from fixed to floating	Interest-rate swaps	58		N/A	N/A
Public debt OCI portfolio	Transformation of inflation-linked debt to fixed-rate to floating-rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options	477		N/A	N/A
Currency loan	Transformation from fixed rate in foreign currency to floating rate in euro	Currency swaps	151		-6
Debt securities issued	Debt transformation from inflation-linked fixed to floating rate	Inflation-linked swaps and inflation-linked options
Amortised cost fixed income portfolio debt	Debt transformation from inflation-linked fixed to floating rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options	40		2
Public Debt amortised cost portfolio	Value of hedged fixed income assets	Forward
Equity instruments OCI	Market risk	Equity swaps	459		N/A	N/A
Other			3
TOTAL			1,188		-4

Hedged items - Fair value hedges (2)

(Millions of euros)

			2022
Hedged item	Risk covered	Hedging instrument used	Accumulated amount of FV hedging adjustments of the hedged items	Change in the value used to calculate the ineffectiveness of the hedge (Note 32)	Line on the balance sheet with the hedged item
Macrohedges
Issuances	Transformation from fixed to floating	Interest-rate swaps and options	66	4,737	Financial liabilities at amortised cost
Fixed-rate loans	Transformation from fixed to floating	Interest-rate swaps and options	1,005	-1,629	Financial assets measured at
Demand accounts	Transformation from fixed to floating	Interest-rate swaps		1,885	Financial liabilities at amortised cost
Deposits with agreed maturity	Transformation from fixed to floating	Interest-rate swaps and options		96	Financial liabilities at amortised cost
TOTAL			1,071	5,089
Microhedges
Public debt OCI portfolio	Transformation from fixed to floating	Interest-rate swaps		-9	Financial assets at fair value ^*
Public debt OCI portfolio	Transformation of inflation-linked debt to fixed-rate to floating-rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options		-17	Financial assets at fair value ^*
Currency loan	Transformation from fixed rate in foreign currency to floating rate in euro	Currency swaps		3	Financial assets measured at amortised cost
Debt securities issued	Debt transformation from inflation-linked fixed to floating rate	Inflation-linked swaps and inflation-linked options		8	Financial liabilities at amortised cost
Amortised cost fixed income portfolio debt	Debt transformation from inflation-linked fixed to floating rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options		-1	Financial assets at fair value ^*
Public Debt amortised cost portfolio	Value of hedged fixed income assets	Forward	-30	32	Financial assets measured at amortised cost
Equity instruments OCI	Market risk	Equity swaps		-38	Financial assets at fair value ^*
Other			7
TOTAL			-23	-22

Hedged items - Fair value hedges (3)

(Millions of euros)

			31-12-2021		31-12-2020
			Hedged instrument		Hedged instrument
Hedged item	Risk covered	Hedging instrument used	Assets	Liabilities	Assets	Liabilities
Macrohedges
Issuances	Transformation from fixed to floating	Interest-rate swaps and options		44,453		30,327
Fixed-rate loans	Transformation from fixed to floating	Interest-rate swaps and options	12,591		12,673
Demand accounts	Transformation from fixed to floating	Interest-rate swaps		3,000
Deposits with agreed maturity	Transformation from fixed to floating	Interest-rate swaps and options		5,094		5,233
TOTAL			12,591	52,547	12,673	35,560
Microhedges
Public debt OCI portfolio	Transformation from fixed to floating	Interest-rate swaps	68		70
Public debt OCI portfolio	Transformation of inflation-linked debt to fixed-rate to floating-rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options	498		471
Currency loan	Transformation from fixed rate in foreign currency to floating rate in euro	Currency swaps	142		131
Debt securities issued	Debt transformation from inflation-linked fixed to floating rate	Inflation-linked swaps and inflation-linked options		31
Amortised cost fixed income portfolio debt	Debt transformation from inflation-linked fixed to floating rate	Interest-rate swaps, inflation-linked swaps and inflation-linked options	37
Public Debt amortised cost portfolio	Value of hedged fixed income assets	Forward	2,032
Equity instruments OCI	Market risk	Equity swaps
Other			232		4
TOTAL			3,009	31	676

( ^*) with changes in other comprehensive income

Hedging items - cash flow hedges (1)

(Millions of euros)

			31-12-2022
			Value of hedging instrument
Hedged item	Risk covered	Hedging instrument used	Assets	Liabilities	Amount reclassified from equity to profit or loss	Ineffectiveness taken to profit/(loss)
Macrohedges
Mortgage Euribor loans	Mortgage Euribor transformation to fixed rate	Interest-rate swaps			12
Floating-rate currency loans	Transformation from floating rate in foreign currency to floating rate in	Currency swaps	345	95	-140
Fixed-rate term deposits	Transformation from fixed to floating	Interest-rate swaps			1
TOTAL			345	95	-128
Microhedges
Inflation-linked public debt	Transformation from inflation-linked floating to fixed rate	Inflation-linked swaps and inflation-linked options		288	-124
Public debt at amortised cost in foreign currency	Transformation from fixed rate in foreign currency to fixed rate in euros	Currency swaps	6	33	1
Inflation-linked public debt at amortised cost	Transformation from floating to fixed	Interest-rate and inflation-linked swaps		780	-291
Other
TOTAL			6	1,101	-414

Hedging items - cash flow hedges (2)

(Millions of euros)

			31-12-2021		31-12-2020
			Value of hedging instrument		Value of hedging instrument
Hedged item	Risk covered	Hedging instrument used	Assets	Liabilities	Assets	Liabilities
Macrohedges
Mortgage Euribor loans	Mortgage Euribor transformation to fixed rate	Interest-rate swaps
Floating-rate currency loans	Transformation from floating rate in foreign currency to floating rate in	Currency swaps		114	158	3
Fixed-rate term deposits	Transformation from fixed to floating	Interest-rate swaps
TOTAL				114	158	3
Microhedges
Inflation-linked public debt	Transformation from inflation-linked floating to fixed rate	Inflation-linked swaps and inflation-linked options		165		84
Public debt at amortised cost in foreign currency	Transformation from fixed rate in foreign currency to fixed rate in euros	Currency swaps	3	2
Inflation-linked public debt at amortised cost	Transformation from floating to fixed	Interest-rate and inflation-linked swaps		542	44	18
Other				17
TOTAL			3	726	44	102

Hedged items - cash flow hedges (1)

(Millions of euros)

			31-12-2022
Hedged item	Risk covered	Hedging instrument used	Reserve of cash flow hedges	Pending amount in reserve of cash flow hedges of hedging relationships for which recognising hedges no longer applies	Line on the balance sheet including the hedged item
Macrohedges
Mortgage Euribor loans	Mortgage Euribor transformation to fixed rate	Interest-rate swaps	-557
Floating-rate currency loans	Transformation from floating rate in foreign currency to floating rate in euros	Currency swaps	-16		Financial assets measured at amortised cost
Fixed-rate term deposits	Transformation from fixed to floating	Interest-rate swaps		22	Financial liabilities at amortised cost
TOTAL			-573	22
Microhedges
Inflation-linked public debt	Transformation from inflation-linked floating to fixed rate	Inflation-linked swaps and inflation-linked options	-36		Financial assets at fair value ^*
Public debt at amortised cost in foreign currency	Transformation from fixed rate in foreign currency to fixed rate in euros	Currency swaps	-81		Financial assets measured at amortised cost
Inflation-linked public debt at amortised cost	Transformation from floating to fixed	Interest-rate and inflation-linked swaps	-46		Financial assets measured at amortised cost
TOTAL

Hedged items - cash flow hedges (2)

(Millions of euros)

			31-12-2021		31-12-2020
Hedged item	Risk covered	Hedging instrument used	Reserve of cash flow hedges	Pending amount in reserve of cash flow hedges of hedging relationships for which recognising hedges no longer applies	Reserve of cash flow hedges	Pending amount in reserve of cash flow hedges of hedging relationships for which recognising hedges no longer applies
Macrohedges
Mortgage Euribor loans	Mortgage Euribor transformation to fixed rate	Interest-rate swaps	7		93
Floating-rate currency loans	Transformation from floating rate in foreign currency to floating rate in euros	Currency swaps	-20		-3
Fixed-rate term deposits	Transformation from fixed to floating	Interest-rate swaps		23
TOTAL			-13	23	90
Microhedges
Inflation-linked public debt	Transformation from inflation-linked floating to fixed rate	Inflation-linked swaps and inflation-linked options	-43		15
Public debt at amortised cost in foreign currency	Transformation from fixed rate in foreign currency to fixed rate in euros	Currency swaps	-4
Inflation-linked public debt at amortised cost	Transformation from floating to fixed	Interest-rate and inflation-linked swaps	-97		-25
TOTAL			-144		-10

( ^*) with changes in other comprehensive income

16. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

The breakdown of the changes of the balance under this heading is as follows:

Changes in investments - 2022 (1)

(Millions of euros)

	31-12-2021
	Carrying amount	% Stake	Acquisitions and capital increases	Disposals and capital decreases	Accounted for using the equity method	Transfers and other ^*
UNDERLYING CUR. AMOUNT	2,153				-2	-479
Coral Homes	632	20.00%			-10	-127
SegurCaixa Adeslas ( ^**)	893	49.92%			12	-294
Other	628				-4	-58
GOODWILL	381			-6		-1
SegurCaixa Adeslas	300
Other	81			-6		-1
IMPAIRMENT ALLOWANCES	-44			6		-18
Coral Homes						-14
Other	-44			6		-4
TOTAL ASSOCIATES	2,490				-2	-498
UNDERLYING CUR. AMOUNT	44
Other	44
IMPAIRMENT ALLOWANCES
TOTAL JOINT VENTURES	44

Changes in investments - 2022 (2)

(Millions of euros)

	31-12-2022
	Carrying amount	% Stake
UNDERLYING CUR. AMOUNT	1,672
Coral Homes	495	20.00%
SegurCaixa Adeslas ( ^**)	611	49.92%
Other	566
GOODWILL	374
SegurCaixa Adeslas	300
Other	74
IMPAIRMENT ALLOWANCES	-56
Coral Homes	-14
Other	-42
TOTAL ASSOCIATES	1,990
UNDERLYING CUR. AMOUNT	44
Other	44
IMPAIRMENT ALLOWANCES
TOTAL JOINT VENTURES	44

( ^*) Transfers and other mainly includes the distribution of reserves and dividends deducted from cost of investment. The impairment allowance

includes impairments made during the year, which are recognised under "Impairment or reversal of impairment of investments in joint ventures or

associates" in the statement of profit or loss.

( ^**) The change in Other corresponds to the partial elimination of the transaction for the amount of EUR 325 million, between the Group and

SegurCaixa Adeslas (49.9%) of the attributable part linked to the deferred consideration set out in Note 20.

Changes in investments - 2021 (1)

(Millions of euros)

	31-12-2020
	Carrying amount	% Stake
UNDERLYING CUR. AMOUNT	3,366
Erste Group Bank	1,514	9.92%
Coral Homes	802	20.00%
SegurCaixa Adeslas	685	49.92%
Bankia Vida
Other	365
GOODWILL	367
SegurCaixa Adeslas	300
Bankia Vida
Other	67
IMPAIRMENT ALLOWANCES	-332
Erste Group Bank	-311
Other	-21
TOTAL ASSOCIATES	3,401
UNDERLYING CUR. AMOUNT	42
Other	42
IMPAIRMENT ALLOWANCES
TOTAL JOINT VENTURES	42

Changes in investments - 2021 (2)

(Millions of euros)

	Additions due to business comb. (Note 7)	Acq. and capital increases	Disposals and capital decreases	Accounted for using the equity method	Transfers and other ^*
UNDERLYING CUR. AMOUNT	485	50	-2	336	-2,082
Erste Group Bank				112	-1,626
Coral Homes				-16	-154
SegurCaixa Adeslas				210	-2
Bankia Vida	325			-14	-311
Other	160	50	-2	44	11
GOODWILL	173				-159
SegurCaixa Adeslas
Bankia Vida	164				-164
Other	9				5
IMPAIRMENT ALLOWANCES	-10				298
Erste Group Bank					311
Other	-10				-13
TOTAL ASSOCIATES	648	50	-2	336	-1,943
UNDERLYING CUR. AMOUNT				2
Other				2
IMPAIRMENT ALLOWANCES
TOTAL JOINT VENTURES				2

Changes in investments - 2021 (3)

(Millions of euros)

	31-12-2021
	Carrying amount	% Stake
UNDERLYING CUR. AMOUNT	2,153
Erste Group Bank
Coral Homes	632	20.00%
SegurCaixa Adeslas	893	49.92%
Bankia Vida
Other	628
GOODWILL	381
SegurCaixa Adeslas	300
Bankia Vida
Other	81
IMPAIRMENT ALLOWANCES	-44
Erste Group Bank
Other	-44
TOTAL ASSOCIATES	2,490
UNDERLYING CUR. AMOUNT	44
Other	44
IMPAIRMENT ALLOWANCES
TOTAL JOINT VENTURES	44

( ^*) Transfers and other mainly includes the distribution of reserves and dividends deducted from cost of investment

Changes in investments - 2020 (1)

(Millions of euros)

	31-12-2019
	Carrying amount	% Stake
UNDERLYING CUR. AMOUNT	3,429
Erste Group Bank ^*	1,470	9.92%
Coral Homes ^**	948	20.00%
SegurCaixa Adeslas	695	49.92%
Associates BPI subgroup	200
Comercia Global Payments
Other	116
GOODWILL	362
SegurCaixa Adeslas	300
Associates BPI subgroup	43
Other	19
IMPAIRMENT ALLOWANCES	-16
Erste Group Bank
Other	-16
TOTAL ASSOCIATES	3,775
UNDERLYING CUR. AMOUNT	167
Comercia Global Payments	122	49.00%
Joint ventures BPI subgroup	37
Other	8
GOODWILL
Other
IMPAIRMENT ALLOWANCES	-1
Other	-1
TOTAL JOINT VENTURES	166

Changes in investments - 2020 (2)

(Millions of euros)

	Acq. and capital increases	Disposals and capital decreases	Accounted for using the equity method	Impairm.	Transfers and other ^*
UNDERLYING CUR. AMOUNT			-21		-42
Erste Group Bank ^*			48		-4
Coral Homes ^**			-41		-105
SegurCaixa Adeslas			11		-21
Associates BPI subgroup			-9		-3
Comercia Global Payments			2		49
Other			-32		42
GOODWILL					5
SegurCaixa Adeslas
Associates BPI subgroup
Other					5
IMPAIRMENT ALLOWANCES				-316
Erste Group Bank				-311
Other				-5
TOTAL ASSOCIATES			-21	-316	-37
UNDERLYING CUR. AMOUNT			11		-136
Comercia Global Payments			14		-136
Joint ventures BPI subgroup
Other			-3
GOODWILL
Other
IMPAIRMENT ALLOWANCES					1
Other					1
TOTAL JOINT VENTURES			11		-135

Changes in investments - 2020 (3)

(Millions of euros)

	31-12-2020
	Carrying amount ^**	% Stake
UNDERLYING CUR. AMOUNT	3,366
Erste Group Bank ^*	1,514	9.92%
Coral Homes ^**	802	20.00%
SegurCaixa Adeslas	685	49.92%
Associates BPI subgroup	188
Comercia Global Payments	51	20.00%
Other	126
GOODWILL	367
SegurCaixa Adeslas	300
Associates BPI subgroup	43
Other	24
IMPAIRMENT ALLOWANCES	-332
Erste Group Bank	-311
Other	-21
TOTAL ASSOCIATES	3,401
UNDERLYING CUR. AMOUNT	42
Comercia Global Payments
Joint ventures BPI subgroup	37
Other	5
GOODWILL
Other
IMPAIRMENT ALLOWANCES
Other
TOTAL JOINT VENTURES	42

( ^*) Transfers and other mainly includes the distribution of reserves and dividends deducted from cost of investment.

( ^**) Includes EUR 7 million in intangible assets generated at the time of the purchase, which are being repaid in the corresponding term.

At year-end, there were no agreements to provide additional financial support or any other contractual commitment made by the parent company or subsidiaries with associates and joint ventures of the Group not recognised in the financial statements. Likewise, there are no contingent liabilities related to these investments.

Erste

On 5 November 2021, CaixaBank transferred all of its 9.92% stake in Erste Group Bank AG (Erste) as follows: The amount of the transmission was EUR 1,503 million with a positive impact on the statement of profit or loss of EUR 54 million gross, and is recognised under the heading "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (net)" of the statement of profit or loss (see Note 39), being reclassified in October 2021 under "Non-current assets and disposal groups classified as held for sale".

Comercia Global Payments

On 1 October 2020, 29% of the stake in Comercia Global Payments, Entidad de Pago, S.L. was sold to Comercia Global Payments for EUR 493 million (on 30 September 2020, this 29% was reclassified under "Non-current assets and disposal groups classified as held for sale" upon showing signs of sale). As a result of this operation, the Group maintains its presence and a significant degree of influence in the acquisition business with Company businesses, and it also generated gains of approximately EUR 420 million, net of tax, that was recorded under the heading "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (net)" of the statement of profit or loss (see Note 39).

Impairment of the portfolio of investments

For the purpose of assessing the recoverable amount of investments in associates and joint ventures, the Group regularly monitors the impairment indicators related to its investees. Particularly, the following items are considered, among others: i) business performance; ii) share prices throughout the period; and iii) the target prices published by renowned independent analysts.

A summary of the ranges of assumptions used and the ranges of contrasting sensitivity are provided below:

Assumptions used and sensitivity scenarios

(Percentage)

	SegurCaixa Adeslas (2)			Coral Homes (3)
	31-12-2022	31-12-2021	31-12-2020	31-12-2022	31-12-2021	31-12-2020
Forecast periods	5 years	5 years	5 years	4 years	4 years	4 years
Discount rate (after tax)	9.48%	7.68%	8.24%	6.65%	6.21%	7.00%
Growth rate (1)	2%	2%	2%
Target capital/solvency ratio	100%	100%	100%

(1) Corresponds to the normalised growth rate used to calculate the fair value

(2) The exercise to determine the fair value considers the sensitivity with respect to the discount rate of [-0.5%; +0.5%] and the growth rate of [-0.5%; +0.5%].

(3) Similarly, the individual valuation exercise of the real estate assets of Coral Homes, conducted by an independent third-party consultant on 31 December 2022, has highlighted the existence of material unrealised gains that are expected to be able to materialise throughout the coming years.

Financial information of associates

Below, selected information is displayed on significant investments in entities accounted for using the equity method, which is additional to the information presented in Appendix 3:

Selected information of associates

(Percentage)

	SegurCaixa Adeslas	Coral Homes
Nature of the company's activities	Strategic alliance with Mutua Madrileña for the development, marketing and distribution of the general non-life insurance cover.	Purchasing, holding, managing, administrating, swapping, leasing and selling all kinds of real estate assets, with their associated or accompanying furnishing elements, as well as promoting and carrying out all kinds of real estate developments.
Country of incorporation and countries of operation	Spain	Spain
Restrictions on dividend payments	Constraints on the allocation of dividends based on solvency level of the company, in order to ensure that the existing regulatory and contractual requirements are met.

17. ASSETS AND LIABILITIES UNDER THE INSURANCE BUSINESS

The breakdown of the changes of the balance under this heading is as follows:

Assets and liabilities under the insurance business

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
Financial assets under the insurance business ^*	68,534		83,464		77,241
Financial assets held for trading	26		111		545
Equity instruments
Debt securities	26		111		545
Financial assets designated at fair value through profit or loss ^**	19,108		20,557		14,705
Equity instruments	11,086		13,159		9,301
Debt securities	7,985		7,316		5,297
Loans and advances - Credit institutions	37		82		107
Available-for-sale financial assets	48,794		62,480		61,643
Equity instruments	84		171
Debt securities	48,710		62,309		61,643
Loans and receivables	474		196		218
Debt securities	264		133		189
Loans and advances - Credit institutions	210		63		29
Assets under insurance and reinsurance contracts	132		120		130
Liabilities under the insurance business		65,654		79,834		75,129
Contracts designated at fair value through profit or loss		18,311		19,365		14,608
Liabilities under insurance contracts		47,343		60,469		60,521
Unearned premiums		12		9		2
Mathematical provisions		45,935		59,024		59,533
Claims		1,340		1,357		899
Bonuses and rebates		56		79		87

( ^*) The Group's insurance companies (VidaCaixa, BPI Vida e Pensões and Bankia Vida) have decided to make use of the temporary exemption from IFRS 9, which is why its financial instruments are presented in accordance with IAS 39 under the heading "Assets under the insurance business" of the accompanying balance sheet (see Note 1).

( ^**) Includes i) the investments linked to the operations of life insurance products when the risk of the investment is assumed by the policyholder, called unit-linked, as well as ii) The investments under the product Immediate Flexible Life Annuity, in which part of the commitments with the policyholders are calculated by referencing the fair value of the affected assets, the nature of which is similar to unit-linked operations.

17.1. AVAILABLE-FOR-SALE FINANCIAL ASSETS

The breakdown of the balances of this section is as follows:

Breakdown of available for sale financial assets

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Equity instruments	84	171
Shares in listed companies	84	171
Debt securities	48,710	62,309	61,643
Spanish government debt securities	39,842	52,943	51,613
Foreign government debt securities	5,987	7,049	6,708
Issued by credit institutions	2,881	2,317	2,917
Other foreign issuers			405
TOTAL	48,794	62,480	61,643
Debt securities
Of which: gross unrealised gains ^*	11,968	11,336	15,769
Of which: gross unrealised losses ^*	-14,724

( ^*) The Group applies the accounting option provided for in IFRS 4, called "shadow accounting" (see Note 2.22), which allows it to record capital gains as a higher amount of "liabilities to the insurance business".

The breakdown of the changes under this section is as follows:

Changes in debt securities

(Millions of euros)

	2022	2021	2020
Opening balance	62,480	61,643	58,763
Plus:
Additions due to business combinations (Note 7)	693	5,892
Acquisitions	15,575	11,520	5,894
Gains/(losses) recognised with adjustments to equity	-9,984	-3,112	1,709
Less:
Sales and redemptions	-18,550	-13,649	-4,461
Implicit accrued interest	-1,421	186	-262
Reclassifications and transfers	1
CLOSING BALANCE	48,794	62,480	61,643

17.2. ASSETS UNDER INSURANCE AND REINSURANCE CONTRACTS

The breakdown of the changes under this section is as follows:

Changes in assets under insurance and reinsurance contracts

(Millions of euros)

	2022	2021	2020
Opening balance	120	130	174
Additions due to business combinations (Note 7)		2
Provision	132	118	130
Use	-120	-130	-174
FINAL BALANCE	132	120	130

This balance sheet heading mainly covers mathematical provisions relating to Berkshire Hathaway Life Insurance Company of Nebraska, assumed as a result of the reinsurance agreement signed in 2012 by VidaCaixa to mitigate longevity risk associated with its life annuities savings portfolio.

17.3. LIABILITIES UNDER THE INSURANCE BUSINESS

The breakdown of the changes under this section is as follows:

Changes in liabilities under insurance contracts

(Millions of euros)

	2022	2021	2020
Opening balance	79,834	75,129	70,807
Additions due to business combinations (Note 7)		5,214
Provision	65,654	74,620	75,129
Use	-79,834	-75,129	-70,807
FINAL BALANCE	65,654	79,834	75,129
Of which: Unearned premiums and unexpired risks	12	8	2
Of which: Life insurance - risk	1,055	439	487
Of which: Life insurance - saving	44,846	58,549	59,047
Of which: Life insurance - other	18,310	19,365	14,607
Of which: Claims	1,375	1,394	899
Of which: Provisions for bonuses and rebates	56	79	87
Of which: Technical provisions

The following table shows the key cases at the close of the financial year for calculating the mathematical provisions of insurance in Spain and Portugal

Actuarial assumptions for measuring provisions

(Millions of euros)

Product	Biometric tables	Average technical interest rate
Life annuities - PVI	According to the different types, the tables GR-80, GR-80 less two years, GR-95 and GK-95 are used. From 21/12/2012, according to the type, the tables PASEM 2010 Unisex (sector mix), GR-95 Unisex (company mix, savings portfolio), PER2000P Unisex (company mix, savings portfolio) or PER2000P Women (from 70 years) are used. From 01/01/2021, the tables PASEM2020 VIDACAIXA NOT RELATED (UNISEX) or PER2020 Individual 1st order (unisex) are used according to type.	1.97%
Life annuities - Pension 2000	GR-80, GK-80, gr-95 and GK-95. From 21/12/2012 the GR-95 Unisex (company mix, savings portfolio) tables are used. From 01/01/2021 the tables PER2020 Individual 1st order (unisex) are used.	6.78%
GBPs/ISPs	According to the types, the tables GR-80 less two years, GR-95 and GK-95 are used. For the new production from 21/12/2012 the tables PASEM 2010 Unisex (sector mix) are used. From 01/01/2021 the tables PASEM2020 VIDACAIXA NO RELACIONADOS (unisex) are used.	0.10%
Group insurance	According to different types, the tables GR-80, GR-80 less two, GR-70, GR-95 and PER2000P are used. From 21/12/2012, the tables PER2000P Unisex or PASEM2010 Unisex are used, according to type. From 01/01/2021 the tables PER2020 Groups 1st order (differentiating between sex) are used and, according to the type, PER2020 Groups 1st order (unisex).	Variable
Unit link	According to different types, the tables GK-80, GK-95 and INE 2005 are used. From 21/12/2012 the PASEM 2010 Unisex (sector mix) tables are used. From 01/01/2021 the tables PASEM2020 VIDACAIXA NO RELACIONADOS (unisex and with age criterion reduction) are used.	-
PPA	According to the types, the tables GR-80 less two years, GR-95 and GK-95 are used. For the new production from 21/12/2012 the tables PASEM 2010 Unisex (sector mix) are used.	2.22%

17.4. SELECTED INFORMATION ON FINANCIAL ASSETS UNDER THE INSURANCE BUSINESS

In addition to applying the temporary exemption from IFRS 9 to insurance companies controlled by the Group, the disclosure requirements of which are shown below, and in Notes 3 and 40.1, the aforementioned deferral has also been applied to SegurCaixa Adeslas (affiliated company of the Group). The impact on the value of financial instruments associated with the application of IFRS 9 in this company is not deemed significant, due to the low credit risk of the counterparties of its financial instruments.

The following table shows the fair value at the end of the year, differentiating between assets with cash flows that would solely represent payments of principal and interest (SPPI) in accordance with IFRS 9, and those managed by their fair value (non-SPPI):

Compliance with SPPI test - 2022

(Millions of euros)

	SPPI ^*	Non-SPPI	Total
Financial assets not held for trading and not managed by their fair value	48,794		48,794

Amount of the change in fair value during 2022

(Millions of euros)

	SPPI ^*	Non-SPPI	Total
Financial assets not held for trading and not managed by their fair value	-13,686		-13,686

( ^*) The insurance companies use a combination of financial instruments in the financial immunisation strategies to cover the risks to which their activities are exposed. For these purposes, in the investment operations of the Group's insurance business, different fixed-income securities include financial swaps which, in accordance with the sector practice and the applicable monitoring criteria, are recognised jointly, whether it is in "Available for-sale financial assets" or in the amortised cost portfolio, and the fair value is shown in the top table.These financial swaps individually assessed only taking into account their legal form will not pass the SPPI test considered in IFRS 9. Following on from this, within the framework of the project to implement IFRS 9 which is ongoing in the insurance companies, the Group has analysed the different accounting alternatives considered in the regulatory framework (including hedge accounting) jointly with the main changes that will be introduced by IFRS 17 Insurance Contracts in the assessment of technical provisions; the ultimate aim of all the foregoing is to avoid asymmetries in the incomestatement and assets of the Group.As regards the fixed-income instruments, the insurance companies have not estimated as 'material' the expected loss which, in the first adoption of IFRS 9, would be recorded under reserves.

18. TANGIBLE ASSETS

The breakdown of the changes of the balance under this heading is as follows:

Changes in tangible assets (1)

(Millions of euros)

	2022			2021
	Land and buildings	Instal. furniture and others	Rights of use ^*	Land and buildings	Instal. furniture and others	Rights of use ^*
Cost
Opening balance	3,764	6,219	2,215	2,513	4,673	1,693
Additions due to BC (Note 7)	2			1,576	2,706	615
Additions	38	393	123	44	314	160
Disposals	-6	-597	-249	-4	-412	-62
Transfers ^**	-415	-34	1	-365	-1,062	-191
CLOSING BALANCE	3,383	5,980	2,090	3,764	6,219	2,215
Accumulated depreciation
Opening balance	-932	-4,428	-386	-523	-3,137	-246
Additions due to BC (Note 7)				-393	-2,465	-187
Additions	-48	-236	-186	-57	-206	-161
Disposals	4	516	45	-8	339	21
Transfers ^**	151	3	2	49	1,041	187
CLOSING BALANCE	-825	-4,145	-525	-932	-4,428	-386
Impairment allowances
Opening balance	-52	-2		-14	-9
Additions due to BC (Note 7)				-21
Allowances (Note 37)	-3			-16
Provisions (Note 37)	2	1
Transfers ^**	13	2			8
Amounts used				-1	-1
CLOSING BALANCE	-40	1		-52	-2
OWN USE, NET	2,518	1,836	1,565	2,780	1,789	1,829
Cost
Opening balance	2,811	93		2,980	101
Additions due to BC (Note 7)				599
Additions	9			55	-4
Disposals	-156	-4		-831	-7
Transfers ^**	-172	-1		8	3
CLOSING BALANCE	2,492	88		2,811	93
Accumulated depreciation
Opening balance	-217	-43		-209	-41
Additions due to BC (Note 7)				-42
Additions	-31	-8		-37	-8
Disposals	16	2		60	3
Transfers ^**	-8	2		11	3
CLOSING BALANCE	-240	-47		-217	-43
Impairment allowances
Opening balance	-779			-824
Additions due to BC (Note 7)				-153
Allowances (Note 37)	-108			-57
Provisions (Note 37)	103			82
Transfers ^**	88			72
Disposals				168
Amounts used				-67
CLOSING BALANCE	-696			-779
INVESTMENT PROPERTY	1,556	41		1,815	50

Changes in tangible assets (2)

(Millions of euros)

	2020
	Land and buildings	Instal. furniture and others	Rights of use ^*
Cost
Opening balance	2,594	4,484	1,625
Additions due to BC (Note 7)
Additions	65	337	123
Disposals	-5	-170	-61
Transfers ^**	-141	22	6
CLOSING BALANCE	2,513	4,673	1,693
Accumulated depreciation
Opening balance	-547	-3,081	-130
Additions due to BC (Note 7)
Additions	-10	-191	-134
Disposals	6	134	18
Transfers ^**	28	1
CLOSING BALANCE	-523	-3,137	-246
Impairment allowances
Opening balance	-18	-12
Additions due to BC (Note 7)
Allowances (Note 37)
Provisions (Note 37)	4	1
Transfers ^**		2
Amounts used
CLOSING BALANCE	-14	-9
OWN USE, NET	1,976	1,527	1,447
Cost
Opening balance	3,314	104
Additions due to BC (Note 7)
Additions	13	2
Disposals	-239	-5
Transfers ^**	-108
CLOSING BALANCE	2,980	101
Accumulated depreciation
Opening balance	-192	-35
Additions due to BC (Note 7)
Additions	-37	-8
Disposals	17	2
Transfers ^**	3
CLOSING BALANCE	-209	-41
Impairment allowances
Opening balance	-824
Additions due to BC (Note 7)
Allowances (Note 37)	-145
Provisions (Note 37)	65
Transfers ^**	23
Disposals
Amounts used	57
CLOSING BALANCE	-824
INVESTMENT PROPERTY	1,947	60

BC: business combination; INSTAL.: Installations

( ^*) Corresponds to the rights of use of land and buildings. With respect to rights of use assets, the item "Other financial liabilities - Liabilities associated with rights of use assets" (see Note 22.4) shows the current value of future lease payments during the contract's mandatory term.

( ^**) They mainly include the value of property from other balance sheet headings: from "Own use" when a branch is closed or from "Non-current assets and disposal groups classified as held for sale" when the asset is put up for rent (see Note 21).

Property, plant and equipment for own use

Property, plant and equipment for own use are allocated to the Banking Business cash-generating unit (CGU) and at year-end they do not present any indication of impairment (see Note 19). In addition, the Group carries out regular individualised valuations of certain property for own use classified as "Land and buildings". At year-end, the available valuations do not indicate the existence of any material impairment.

Selected information about property, plant and equipment of own use is presented below:

Other information on property, plant and equipment for own use

(Millions of euros)

	31-12-2022
Fully amortised assets still in use	3,182
Commitments to acquire tangible assets ^*	Insignificant
Assets with ownership restrictions	Insignificant
Assets covered by an insurance policy ^**	100 %

( ^*) Sales made in previous years with sale and leaseback agreements include buy options that may be exercised by the Group on termination of the lease agreement at the market value of the offices at that date, to be determined where appropriate by independent experts.

( ^**) Some of the insurance policies have an excess. CaixaBank is the holder of a corporate policy subscribed with a third party that covers material damage to the Group's material asset.

19. INTANGIBLE ASSETS

19.1. GOODWILL

The breakdown of this heading is as follows:

Breakdown of goodwill

(Millions of euros)

	CGU	31-12-2022	31-12-2021	31-12-2020
Acquisition of Banca Cívica	Banking	2,020	2,020	2,020
Acquisition of Banca Cívica Vida y Pensiones	Insur. Prod.	137	137	137
Acquisition of Cajasol Vida y Pensiones	Insur. Prod.	50	50	50
Acquisition of Cajacanarias Vida y Pensiones	Insur. Prod.	62	62	62
Acquisition of Banca Cívica Gestión de Activos	Banking	9	9	9
Acquisition of the Morgan Stanley business in Spain	Banking/Insurance ^*	402	402	402
Acquisition of Bankpime	Banking	40	40	40
Acquisition of CaiFor	Insur. Prod.	331	331	331
Acquisition of Bankia Vida ^**	Insur. Prod.		404
Acquisition of Sa Nostra Vida ^***	Insur. Prod.	116
TOTAL		3,167	3,455	3,051

( ^*) Of which EUR 3.7 million are allocated to the Insurance CGU and the remainder to the Banking CGU.

( ^**) See Note 7.

( ^***) The accounting standard allows the acquirer to report provisional amounts for the assets acquired and liabilities assumed for no more than one year, the allocation to goodwill being provisional (see Note 7).

19.2. OTHER INTANGIBLE ASSETS

The breakdown of this heading is as follows:

Breakdown of other intangible assets ^*

(Millions of euros)

	Useful life	CGU	Resulting useful life	31-12-2022	31-12-2021	31-12-2020
Software and other	4 to 15		1 to 15 years	1,108	914	797
Banca Cívica - customer portfolio	10 years	Banking	Less than one	1	10	20
Barclays Bank SAU - core deposits						8
Barclays Bank SAU - customer portfolio	10 years	Banking	Less than one	1	2	3
BPI - core deposits						11
BPI - insurance portfolio	10 years	Insur.	5 years	11	14	17
BPI - depositary		Banking			4	7
BPI - asset management	6-10 years	Banking	1-4 years	7	9	10
BPI - brand	Indefinite	Banking	Indefinite	20	20	20
BPI - PF and unit link		Banking			3	5
Bankia - asset management	13 years	Banking	11 years	90	98
Bankia - Asset management (IF and SICAV's)	13 years	Banking	11 years	57	62
Bankia - Asset management (PF)	15 years	Banking	13 years	86	92
Bankia - Asset management (third-party)	13 years	Banking	11 years	11	12
Bankia - Cards business	7 years	Banking	5 years	116	136
Bankia - Insurance brokerage	5-14 years	Insur.	3-12 years	88	102
Bankia Vida - customer portfolio ^**	8-10 years	Insur.	7-9 years	445
Sa Nostra Vida - customer portfolio ^**	8-10 years	Insur.	8-10 years	11
TOTAL				2,052	1,478	898

( ^*) Beyond the provisions of Note 41 on the "la Caixa" brand, the Group's activities are not dependent on or significantly influenced by patents or licences, industrial contracts, new manufacturing processes or special commercial or financial contracts.

( ^**) See Note 7.

The breakdown of the changes of the balance under this heading is as follows:

Changes in other intangible assets

(Millions of euros)

	2022		2021		2020
	Software	Other assets	Software	Other assets	Software	Other assets
Gross cost
Opening balance	1,563	829	1,464	336	1,518	375
Additions due to business combinations (Note 7)		11		554
Additions	346	121	266	54	255	32
Transfers and other	18	381	34	-53	19	-37
Write-downs (Note 37)	-23		-194	-62	-327	-34
Other disposals	-9		-7		-1
SUBTOTAL	1,893	1,341	1,563	829	1,464	336
Accumulated depreciation
Opening balance	-678	-224	-687	-210	-891	-209
Additions due to business combinations (Note 7)					1
Additions	-175	-123	-149	-77	-125	-35
Transfers and other	17		-1	12	12	1
Write-downs (Note 37)	14		152	51	314	33
Other disposals	8		7		2
SUBTOTAL	-813	-347	-678	-224	-687	-210
Impairment allowances
Opening balance		-12		-5		-5
Additions due to business combinations (Note 7)
Allowances (Note 37)		-5		-5
Recoveries (Note 37)
Transfers and other		-6		-2
Amounts used
CLOSING BALANCE		-22		-12		-5
TOTAL	1,080	972	885	593	777	121

Selected information related to other intangible assets is set out below:

Other information on other intangible assets

(Millions of euros)

	31-12-2022
Fully amortised assets still in use	2,711
Commitments to acquire intangible assets	Insignificant
Assets with ownership restrictions	Insignificant

Impairment test of the banking CGU

For the purpose of analysing the recoverable amount of the Banking Business CGU, the Group performs a regular allocation of the Group's capital based on internal regulatory capital models, which take into account the risks assumed by each of the businesses. The amount to be recovered from the CGU is compared to its recoverable amount to determine any potential impairment.

The recoverable amount is based on value in use, which was determined by discounting the estimated dividends over the medium term obtained from the projection of the budget with a time horizon of 6 years. In addition, the projected cash flows are updated every six months to factor in any potential deviations to the model.

The projections are determined using assumptions based on the macroeconomic data applicable to the Group's activity, contrasted by means of renowned external sources and the entities' internal information. A summary of the ranges of assumptions used and the ranges of contrasting sensitivity are provided below:

Assumptions used and banking business CGU sensitivity scenarios

(Percentage)

	31-12-2022	31-12-2021	31-12-2020	Sensitivity range
Discount rate (after taxes) ^*	9.0%	7.6%	8.2%	[-0.5%; + 2.5%]
Growth rate ^**	1.0%	1.0%	1.0%	[-0.5%; + 1.0%]
Net interest income over average total assets (NII) ^***	[0.92% - 1.29%]	[0.92% - 1.28%]	[1.15% - 1.30%]	[-0.05%; + 0.05%]
Cost of risk (CoR)	[0.27% - 0.39%]	[0.24% - 0.39%]	[0.82% - 0.39%]	[-0.1%; + 0.1%]

( ^*) Calculated on the yield for the German 10-year bond, plus a risk premium. The pre-tax discount rate on 31 December 2022, 2021 and 2020 was 12.9%, 10.9% and 11.7%, respectively.

( ^**) Corresponds to the normalised growth rate used to calculate the residual value.

( ^***) Net interest income on average total assets.

At the close of the financial year, it has been confirmed that the projections used in the previous impairment test and actual figures would not have affected the conclusions of that test.

Taking into account the excess of the recoverable value over the carrying amount, the Group does not consider that any reasonably possible change in any of the assumptions could, in isolation, cause the carrying amount to exceed the recoverable value.

The judgements and estimates on the basis of which the key assumptions have been determined are those which the Group considers to be the most plausible and which, therefore, best reflect the value of the banking business.

Impairment test of the Insurance CGU

The methodology for estimating the value of the insurance CGU in use is the same as the methodology for the banking CGU, and the results obtained have not highlighted any indications of impairment at the close of the financial year.

A summary of the ranges of assumptions used and the ranges of contrasting sensitivity are provided below:

Assumptions used and insurance business CGU sensitivity scenarios

(Percentage)

	31-12-2022	31-12-2021	31-12-2020	Sensitivity
Discount rate (after tax)	10.50 %	8.71 %	8.81%	[-0.5%; + 0.5%]
Growth rate ^*	1.5%	1.5%	1.5%	[-0.5%; + 0.5%]

^*) Corresponds to the normalised growth rate used to calculate the residual value.

20. OTHER ASSETS AND LIABILITIES

The breakdown of these items in the balance sheet is as follows:

Details of other assets

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Inventories	101	96	75
Other assets	2,268	2,041	1,127
Prepayments and accrued income	894	1,035	669
Net pension plan assets (Note 23.1)	408	362
Ongoing transactions	543	349	284
Dividends on equity securities accrued and receivable	173	62	3
Other	250	233	171
TOTAL OTHER ASSETS	2,369	2,137	1,202

Breakdown of other liabilities

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Prepayments and accrued income	1,580	1,410	1,132
Ongoing transactions	962	478	702
Other	218	227	161
TOTAL OTHER LIABILITIES	2,760	2,115	1,995

Agreement with Mutua Madrileña

In January 2022, CaixaBank reached an agreement with Mutua Madrileña and SegurCaixa Adeslas for the payment of compensation in the amount of EUR 650 million for the increase in Bankia's network in the current distribution arrangement. The income is accrued over a period of 10 years in line with the accrual of the expense of part of the severance payment for the termination of the non-life agreements with Mapfre (see section "Breakdown of distribution agreements with Mapfre for non-life insurance").

Breakdown of distribution agreements with Mapfre for non-life insurance

On 29 December 2021, the Group reached an agreement with Mapfre for the termination of the agency contract signed between Mapfre and Bankia Mediación Operador de Banca de Seguros Vinculado, SAU (Bankia Mediación) for the distribution of non-life insurance for which compensation amounting to EUR 247 million was agreed and paid in cash, corresponding to 110% of the value of the new production (excluding the existing portfolio) of the non-life insurance business, as determined by the independent expert designated by the parties. The amount was paid by CaixaBank through its subsidiary company Bankia Mediación.

Of the total amount of the compensation, a total of EUR 106 million was used from the header "Provisions - Other provisions" of the balance sheet linked to the amount recognised in the PPA exercise (see Note 7). The remainder was recorded as an advance expense in the "Other Assets" heading of the balance sheet as this is an amount that the Group had to assume to be able to provide access to a greater network of branches free of any agreement in which non-life insurance products that are currently being marketed will be distributed. The Group's directors estimate that the anticipated expense will be recovered with the agreement arranged (see section "Agreement with Mutua Madrileña") with SegurCaixa Adeslas/Mutua Madrileña.

Mapfre and CaixaBank agreed to refer to arbitration (see Note 23.3) in order to determine whether the latter is obliged, under the aforementioned banking-insurance agreements, to pay the former an additional amount of EUR 23 million, corresponding to 10% of the value of the non-life business as determined by the independent expert.

The breakdown of the changes of the balance under "Inventories" is as follows:

Changes in inventories

(Millions of euros)

	2022		2021		2020
	Foreclosed assets	Other assets	Foreclosed assets	Other assets	Foreclosed assets	Other assets
Gross cost, inventories
Opening balance	76	54	80	31	53	35
Plus:
Acquisitions	3	220	8	201	14	125
Transfers and other	9			1	18
Less:
Sales	-8	-185	-10	-176	-5	-129
Transfers and other ^*	-11	-22	-2	-3
CLOSING BALANCE	69	67	76	54	80	31
Impairment allowances
Opening balance	-31	-3	-35	-1	-33	-1
Plus:
Net allowances (Note 37)	-3		-3	-1	-2
Transfers and other	-1	-2	2	-1
Less:
Amounts used	4		5
Transfers ^*	1
CLOSING BALANCE	-30	-5	-31	-3	-35	-1
INVENTORIES	39	62	45	51	45	30

( ^*) They mainly include the value of the constructions/land fields reclassified from other balance sheet headings: from "Investment property" or "Non-current assets and disposal groups classified as held for sale" (see Notes 18 and 21).

21. NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE

The breakdown of the changes of the balance under this heading is as follows:

Changes in non-current assets for sale (1)

(Millions of euros)

	2022			2021
	Foreclosed assets			Foreclosed assets
	Foreclosure rights (1)	Other	Other assets (2)	Foreclosure rights (1)	Other	Other assets (2)
Gross cost
Opening balance	225	3,217	806	133	1,351	273
Additions due to business comb. (Note 7)				130	1,702	326
Additions	88	135	138	82	102	215
Transfers and other	-133	458	76	-120	716	1,782
Disposals for the		-1,028	-400		-654	-1,790
CLOSING BALANCE	180	2,782	620	225	3,217	806
Impairment
Opening balance	-47	-980	-183	-35	-458	-66
Additions due to business comb.				-17	-504	-68
Allowances (Note 39)		-264	-82		-228	-1
Recoveries (Note 39)		76	41	1	104	1
Transfers and other	9	-99	4	4	-82	-82
Amounts used		341	28		188	33
CLOSING BALANCE	-38	-926	-192	-47	-980	-183
TOTAL	142	1,856	428	178	2,237	623

Changes in non-current assets for sale (2)

(Millions of euros)

	2020
	Foreclosed assets
	Foreclosure rights (1)	Other	Other assets (2)
Gross cost
Opening balance	183	1,333	314
Additions due to business comb. (Note 7)
Additions	33	75	86
Transfers and other	-83	205	73
Disposals for the		-262	-200
CLOSING BALANCE	133	1,351	273
Impairment
Opening balance	-41	-390	-45
Additions due to business comb.
Allowances (Note 39)		-159	-43
Recoveries (Note 39)		87	8
Transfers and other	6	-70	1
Amounts used		74	13
CLOSING BALANCE	-35	-458	-66
TOTAL	98	893	207

(1) Foreclosure rights are measured initially at the carrying amount at which the asset will be recognised when the definitive foreclosure occurs.

(2) Mainly includes: investments reclassified as non-current assets held for sale, assets deriving from the termination of operating lease agreements

(3) Mainly includes reclassifications of foreclosure rights to "Other foreclosed assets" or "Investment property" when the property is put up for lease,

(4) Includes provisions recognised to cover against the risk of insolvency on credit operations of CaixaBank cancelled through the acquisition of real

Sale of the property at Castellana 51

In November 2022, CaixaBank sold the property it owns at Paseo de la Castellana, 51, Madrid. CaixaBank's Board of Directors agreed the sale of the latter to Inmo Criteria Patrimonio, S.L.U. (a wholly-owned subsidiary of Criteria Caixa, S.A.U.), which submitted the best offer.

The sale price of this property was EUR 238.5 million. The sale has resulted in the recording of a positive impact on the statement of profit or loss of EUR 101 million (EUR 71 million net of tax effect), under the heading "Profit/(loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (net)" in 2022 (see Note 39).

The breakdown, by age, of foreclosed assets, excluding impairment allowances, determined on the basis of the foreclosure date, is as follows:

Age of foreclosure assets

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	No. of assets	Gross amount	No. of assets	Gross amount	No. of assets	Gross amount
Up to 1 year	1,605	166	4,510	362	1,519	157
Between 1 and 2 years	2,081	188	2,683	230	3,266	320
Between 2 and 5 years	9,213	738	12,451	1,054	5,850	591
More than 5 years	20,433	1,870	19,462	1,796	4,917	416
TOTAL	33,332	2,962	39,106	3,442	15,552	1,484

22. FINANCIAL LIABILITIES

The breakdown of this heading is as follows:

Breakdown of financial liabilities at amortised cost - 31-12-2022

(Millions of euros)

		Value adjustments
	Gross balance	Accrued interest	Microhedges	Transaction costs	Premiums and discounts	Bal. sheet amount
Deposits	421,531	-19		-9	367	421,870
Central banks	16,278	-242				16,036
Credit institutions	12,704	70				12,774
Customers	392,549	153		-9	367	393,060
Debt securities issued	50,926	605		-10	1,087	52,608
Other financial liabilities	8,023					8,023
TOTAL	480,480	586		-19	1,454	482,501

Breakdown of financial liabilities at amortised cost - 31-12-2021

(Millions of euros)

		Value adjustments
	Gross balance	Accrued interest	Microhedges	Transaction costs	Premiums and discounts	Bal. sheet amount
Deposits	487,093	-1,032		-10	478	486,529
Central banks	81,671	-1,224				80,447
Credit institutions	13,590	13				13,603
Customers	391,832	179		-10	478	392,479
Debt securities issued	51,720	582		-11	1,393	53,684
Other financial liabilities	6,812					6,812
TOTAL	545,625	450		-21	1,871	547,025

Breakdown of financial liabilities at amortised cost - 31-12-2020

(Millions of euros)

		Value adjustments
	Gross balance	Accrued interest	Microhedges	Transaction costs	Premiums and discounts	Bal. sheet amount
Deposits	301,001	-160		-12	-306	300,523
Central banks	50,377	-287				50,090
Credit institutions	5,268	-2				5,266
Customers	245,356	129		-12	-306	245,167
Debt securities issued	35,542	420		-8	-141	35,813
Other financial liabilities	6,067					6,067
TOTAL	342,610	260		-20	-447	342,403

22.1. DEPOSITS FROM CREDIT INSTITUTIONS

The breakdown of the gross balances of this heading is as follows:

Breakdown of deposits from credit institutions

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Demand	2,339	2,444	1,138
Other accounts	2,339	2,444	1,131
Term or at notice	10,365	11,146	4,130
Deposits with agreed maturity	4,041	3,918	3,371
Repurchase agreement	6,324	7,228	759
TOTAL	12,704	13,590	5,268

22.2. CUSTOMER DEPOSITS

The breakdown of the gross balances of this heading is as follows:

Breakdown of customer deposits

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
By type	392,549	391,832	245,356
Current accounts and other demand deposits	265,323	260,810	143,020
Savings accounts	94,573	89,639	77,305
Deposits with agreed maturity	29,952	37,914	22,729
Hybrid financial liabilities	124	193	298
Repurchase agreements	2,577	3,276	2,004
By sector	392,549	391,832	245,356
Public administrations	16,978	19,853	13,136
Private sector	375,571	371,979	232,220

22.3. DEBT SECURITIES ISSUED

The breakdown of the gross balances of this heading is as follows:

Breakdown of debt securities issued

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Mortgage covered bonds	17,178	20,854	14,497
Plain vanilla bonds ^*	21,784	17,104	11,729
Securitised bonds	1,175	1,627	1,077
Structured notes	1,309	1,384	1,436
Promissory notes	330	591	653
Preference shares	4,250	5,000	3,000
Subordinated debt	4,900	5,160	3,150
TOTAL	50,926	51,720	35,542

( ^*) Includes plain vanilla bonds or ordinary bonds and non-preference plain vanilla bonds or ordinary bonds

The changes in the balances of each type of securities issued is as follows:

Changes in debt securities issued (1)

(Millions of euros)

	Mortgage covered bonds	Public sector covered bonds	Plain vanilla bonds	Securitised bonds	Structured notes	Subordinated debt
Gross balance
Opening balance 2020	54,260	5,900	8,771	31,907	1,782	3,459
Issuances			3,000	425
Depreciation and amortisation	-1,244	-1,500	-40	-14	-193
Exchange differences and other
CLOSING BALANCE 2020	53,016	4,400	11,731	32,318	1,589	3,459
Repo securities
Opening balance 2020	-38,721	-5,900	-41	-30,520	-163	-309
Buy-backs
Repayments and other	202	1,500	39	-721	10
CLOSING BALANCE 2020	-38,519	-4,400	-2	-31,241	-153	-309
CLOSING NET BALANCE 2020	14,497		11,729	1,077	1,436	3,150
Gross balance
Opening balance 2021	53,016	4,400	11,731	32,318	1,589	3,459
Additions due to business combinations (Note 7)	17,671		2,599	6,518		1,675
Issuances	6,064	1,000	2,787	2,302		1,000
Depreciation and amortisation	-7,424			-5,719		-665
Exchange differences and other
CLOSING BALANCE 2021	69,327	5,400	17,117	35,419	1,589	5,469
Repo securities
Opening balance 2021	-38,519	-4,400	-2	-31,241	-153	-309
Additions due to business combinations (Note 7)	-8,892			-1,063
Buy-backs	-6,529	-1,000	-11	-2,302	-52
Repayments and other	5,467			814
CLOSING BALANCE 2021	-48,473	-5,400	-13	-33,792	-205	-309
CLOSING NET BALANCE 2021	20,854		17,104	1,627	1,384	5,160
Gross balance
Opening balance 2022	69,327	5,400	17,117	35,419	1,589	5,469
Issuances	6,553	2,000	4,791			1,175
Depreciation and amortisation	-13,640	-2,300	-70	-7,447	-170	-1,310
Exchange differences and other
CLOSING BALANCE 2022	62,240	5,100	21,838	27,972	1,419	5,334
Repo securities
Opening balance 2022	-48,473	-5,400	-13	-33,792	-205	-309
Buy-backs	-6,579	2,300	-41			-425
Repayments and other	9,990	-2,000		6,995	95	300
CLOSING BALANCE 2022	-45,062	-5,100	-54	-26,797	-110	-434
CLOSING NET BALANCE 2022	17,178		21,784	1,175	1,309	4,900

Changes in debt securities issued (2)

(Millions of euros)

	Preference shares
Gross balance
Opening balance 2020	2,525
Issuances	750
Depreciation and amortisation
Exchange differences and other
CLOSING BALANCE 2020	3,275
Repo securities
Opening balance 2020	-275
Buy-backs
Repayments and other
CLOSING BALANCE 2020	-275
CLOSING NET BALANCE 2020	3,000
Gross balance
Opening balance 2021	3,275
Additions due to business combinations (Note 7)	1,250
Issuances	750
Depreciation and amortisation
Exchange differences and other
CLOSING BALANCE 2021	5,275
Repo securities
Opening balance 2021	-275
Additions due to business combinations (Note 7)
Buy-backs
Repayments and other
CLOSING BALANCE 2021	-275
CLOSING NET BALANCE 2021	5,000
Gross balance
Opening balance 2022	5,275
Issuances
Depreciation and amortisation	-750
Exchange differences and other
CLOSING BALANCE 2022	4,525
Repo securities
Opening balance 2022	-275
Buy-backs
Repayments and other
CLOSING BALANCE 2022	-275
CLOSING NET BALANCE 2022	4,250

The breakdown of preference share issues are as follows:

Breakdown of preference share issues

(Millions of euros)

				Outstanding amount
Issue date	Maturity	Nominal amount	Nominal interest rate	31-12-2022	31-12-2021	31-12-2020
June 2017 ^*	Perpetual	1,000	6.750%	1,000	1,000	1,000
July 2017 ^**	Perpetual	750	6.000%		750
March 2018 ^*	Perpetual	1,250	5.250%	1,250	1,250	1,250
September 2018 ^**	Perpetual	500	6.375%	500	500
September 2019 ^*	Perpetual	275	6.500%		275	275
October 2020 ^*	Perpetual	750	5.875%	750	750	750
September 2021 ^*	Perpetual	750	3.625%	750	750
PREFERENCE SHARES				4,250	5,275	3,275
Own securities purchased					-275	-275
TOTAL				4,250	5,000	3,000

( ^*) They are perpetual Additional Tier 1 Instruments, although they may be (partially or totally) redeemed under specific circumstances at the option of CaixaBank (once at least five years have elapsed from their issue date according to the specific conditions of each of them, and with the prior consent of the corresponding competent authority) and, in all cases, are convertible into ordinary newly-issued shares of the entity if CaixaBank or CaixaBank Group has a Common Equity Tier 1 ratio (CET1) of less than 5.125%, calculated in accordance with European Regulation 575/2013, of 26 June, of the European Parliament and Council, on prudential requirements of credit institutions and investment firms ("CRR"). The conversion price of the preference shares shall be the highest of i) the volume-weighted daily average price of CaixaBank's shares in the five trading days prior to the day the corresponding conversion is announced, ii) the Conversion Floor Price and iii) the nominal value of CaixaBank's shares at the time of conversion.

( ^**) From the business combination with Bankia (see Note 7).

The breakdown of subordinated debt issues is as follows:

Breakdown of subordinated debt issues

(Millions of euros)

				Outstanding amount
Issue date	Maturity	Nominal amount	Nominal interest rate	31-12-2022	31-12-2021	31-12-2020
February 2017	15-02-2027	1,000	3.500%		510	1,000
March 2017 ^*	17.7.2028	500	3.375%		500
July 2017	07-07-2042	150	4.000%	150	150	150
July 2017	14-07-2028	1,000	2.750%	1,000	1,000	1,000
April 2018	17-04-2030	1,000	2.250%	1,000	1,000	1,000
February 2019 ^*	15-02-2029	1,000	3.750%	1,000	1,000
March 2021	18-06-2031	1,000	1.250%	1,000	1,000
November 2022	23-02-2033	750	6.250%	750
SUBORDINATED DEBT				4,900	5,160	3,150
Own securities purchased
TOTAL				4,900	5,160	3,150

( ^*) From the business combination with Bankia (see Note 7).

22.4. OTHER FINANCIAL LIABILITIES

The detail of the balance of this heading in the balance sheet is as follows:

Breakdown of other financial liabilities

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Payment obligations	1,282	1,313	1,215
Guarantees received	59	24	24
Clearing houses	1,178	1,314	1,169
Tax collection accounts	1,785	1,461	1,271
Special accounts	1,716	368	426
Liabilities associated with right-of-use assets (Note 18)	1,608	1,864	1,468
Other items	395	468	494
TOTAL	8,023	6,812	6,067

The heading 'Other financial liabilities - Liabilities associated with right-of-use assets' (see Note 18) presents the current value of future lease payments during the mandatory period of the contract. The movement corresponding to the financial year is as follows:

Future payments on operating leases (1)

(Millions of euros)

	01-01-2020	Net add.	Finance update	Paym.	31-12-2020
Soinmob Inmobiliaria contract ^*	590	12	11	-60	553
Other	919	66	8	-78	915
TOTAL	1,509	78	19	-138	1,468
Discount rate applied (according to the term) ^**
Spain	[0.10%-1.66%]				[0.10%-1.66%]
Portugal	[0.20%-0.90%]				[0.20%-0.90%]

Future payments on operating leases (2)

(Millions of euros)

	Add.for BC	Net add.	Finance update	Paym.	31-12-2021
Soinmob Inmobiliaria contract ^*		78	10	-62	579
Other	456	7	8	-101	1,285
TOTAL	456		18	-163	1,864
Discount rate applied (according to the term) ^**
Spain					[0.00%-1.66%]
Portugal					[0.20%-0.90%]

Future payments on operating leases (3)

(Millions of euros)

	Net add.	Finance update	Paym.	31-12-2022
Soinmob Inmobiliaria contract ^*	30	9	-40	578
Other	94	1	-162	1,030
TOTAL	-64	10	-202	1,608
Discount rate applied (according to the term) ^**
Spain				[0.00%-1.66%]
Portugal				[0.20%-0.90%]

Financ. update: Financial update; BC: Business combination (see Note 7)

( ^*) Sale and leaseback agreement.

( ^**) The difference in the discount rate applied for businesses in Spain and Portugal is mainly due to the term of the lease agreements in each of them

22.5. SHORT-TERM FUNDING

The breakdown of short-term funding is as follows:

Breakdown of short-term funding

(Millions of euros)

	2022		2021		2020
	Amount	Average rate	Amount	Average rate	Amount	Average rate
Repurchase agreement
Closing balance	8,901	1.66%	10,504	-0.14%	2,763	-0.34%
Annual average	41,707	0.21%	22,518	-0.40%	8,957	-0.12%
Maximum in the period	52,058	-0.47%	34,968	-0.43%	12,164	0.23%
Promissory notes
Closing balance	330	1.09%	591	-0.51%	653	-0.24%
Annual average	432	-0.20%	564	-0.41%	804	-0.22%
Maximum in the period	576	-0.53%	692	-0.51%	1,054	-0.21%

23. PROVISIONS

The breakdown of the changes of the balance under this heading is as follows:

Changes in provisions (1)

(Millions of euros)

			Pending legal issues and tax litigation		Commitments and guarantees given
	Pensions and other post employment defined benefit obligations	Other long term employee benefits	Legal contingencies	Provisions for taxes	Contingent risks	Contingent commitments
BALANCE AT 31-12-2019	521	1,710	394	282	158	62
With a charge to the statement of profit or loss	5	138	81	-19	-30	-2
Provision		146	117	20	2	67
Reversal		-10	-36	-39	-32	-69
Interest cost / (income)	5	2
Personnel expenses
Actuarial (gains)/losses	133
Amounts used	-24	-423	-145	-46
Transfers and other	-55	-27	2	7	6	-1
BALANCE AT 31-12-2020	580	1,398	332	224	134	59
Additions due to business	626	105	314	197	258	85
With a charge to the statement of profit or loss	-390	2,296	190	35	-50	3
Provision		33	359	42	-21	88
Reversal		-9	-169	-7	-29	-85
Interest cost / (income)	4
Personnel expenses ^*	-394	2,272
Actuarial (gains)/losses	-38
Amounts used	-45	-348	-212	-24
Transfers and other	73	1	150	-39	18	-46
BALANCE AT 31-12-2021	806	3,452	774	393	360	101
With a charge to the statement of profit or loss	5	-62	147	-50	94	-15
Provision		24	271	16	153	74
Reversal		-45	-124	-66	-59	-89
Interest cost / (income)	5	2
Personnel expenses		-43
Actuarial (gains)/losses	-182
Amounts used	-50	-595	-276	-18
Transfers and other		-181	9	-8	6	1
BALANCE AT 31-12-2022	579	2,614	654	317	460	87

Changes in provisions (2)

(Millions of euros)

	Other provisions
BALANCE AT 31-12-2019	497
With a charge to the statement of profit or loss	55
Provision	115
Reversal	-60
Interest cost / (income)
Personnel expenses
Actuarial (gains)/losses
Amounts used	-113
Transfers and other	29
BALANCE AT 31-12-2020	468
Additions due to business	262
With a charge to the statement of profit or loss	216
Provision	389
Reversal	-173
Interest cost / (income)
Personnel expenses ^*
Actuarial (gains)/losses
Amounts used	-76
Transfers and other	-221
BALANCE AT 31-12-2021	649
With a charge to the statement of profit or loss	72
Provision	353
Reversal	-281
Interest cost / (income)
Personnel expenses
Actuarial (gains)/losses
Amounts used	-154
Transfers and other	-15
BALANCE AT 31-12-2022	552

( ^*) At 1 January 2022, the amendments resulting from the new Labour Agreement signed on 7 July 2021 entered into force. As regards the complementary social provision, it was agreed to set a fixed annual growth of 0.35% in the future of benefits caused to replace the various criteria established, chiefly based on the CPI (applicable thus far). This remeasurement is applicable to all current and future defined benefit plans, both those implemented through the CaixaBank Employment Pension Plan and those outside it. At the time of the agreement (2021), this resulted in the settlement of the obligations amounting to EUR 394 million.

23.1. PENSIONS AND OTHER POST-EMPLOYMENT DEFINED OBLIGATIONS

Provisions for pensions and similar obligations - Defined benefit post-employment plans

The Group's defined benefit post-employment benefit obligations are as follows:

•	Part of the commitments with employees and former employees of CaixaBank are covered using insurance policies with Group or non-Group insurance companies, mainly from merger processes. In this case, CaixaBank is the insurance policyholder, and the contracts are managed by each insurance company, which also assumes the risks.
•	The rest of the obligations vested on the business in Spain arise from the CaixaBank Employment Pension Plan, which features various subplans. These subplans are integrated into two pension funds, namely the fund Pensions Caixa 30, a pension fund that which combines a greater number of holders and beneficiaries. The pension funds insure their defined benefit commitments through different insurance contracts, the policyholder of which is the Pension Plan Control Committee, the majority of which are with VidaCaixa. CaixaBank does not control the Pension funds into which these subplans are integrated, although it holds a minority representation on the Control Committees established in each of them.
•	Since most of the defined benefit commitments are covered through the pension funds or through insurance policies taken out directly by CaixaBank -the purpose of which is to ensure the provisions payable by the beneficiaries are equivalent to the provisions insured under the policies taken out- the Group is not exposed to market volatilities and unusual market movements. At different closures, the fair value of the policies taken out directly with VidaCaixa or other companies, and that of pension fund assets (mainly covered through insurance policies), is calculated with a uniform assessment methodology, as laid down in the accounting standard.

If an insurance policy is a CaixaBank Employment Pension Plan asset and its flows exactly match the amount and timing of the benefits payable under the plan, the fair value of these insurance policies is deemed to be the present value of the related obligations. There will only be a defined benefit net liability when certain commitments are not insured by CaixaBank or the pension fund, for example, longevity queues for which the insurers have not been able to find financial instruments with a sufficiently long duration that replicate the guaranteed payments. Otherwise an asset would be produced as a net position.

Whilst the insurance policies taken out with insurers external to the Group and the value of the assets held through the Pension Funds are presented in net form on the balance sheet, given that they are eligible assets of the plan and are used to settle the obligations assumed, the fair value of the other policies taken out directly by CaixaBank with VidaCaixa is eliminated in the consolidation process, with the integration of the financial investments of VidaCaixa under the policies in the various heading of the consolidated balance sheet.

Meanwhile, BPI has assumed all the obligations externalised in the "Fundo de Pensões Banco BPI" pension fund, and recognises the present value of the obligations, net of the fair value of plan assets.

The breakdown of the changes of the balance under this heading is as follows:

Changes in provisions for pensions and similar obligations (1)

(Millions of euros)

	Related entity ^*
	Defined benefit obligations			Fair value of plan assets
	2022	2021	2020	2022	2021	2020
OPENING BALANCE	-806	-489	-473	804	490	473
Interest cost (income)	-5	-3	-4	6	3	4
Past service cost		-1
COMPONENTS OF COST OF DEFINED BENEFIT RECOGNISED IN PROFIT OR LOSS	-5	-4	-4	6	3	4
Actuarial gains/(Losses) arising from experience assumptions	12	17	-10
Actuarial gains/(Losses) arising from financial assumptions	170	21	-27	-183	-30	39
COMPONENTS OF COST OF DEFINED BENEFIT RECOGNISED IN EQUITY	182	38	-37	-183	-30	39
Plan contributions				1	-93	-1
Plan payments	50	45	25	-50	-45	-25
Settlements		84	2			-1
Additions due to business combinations (Note 7)		-626			478
Transactions		146	-2		1	1
OTHER	50	-351	25	-49	341	-26
CLOSING BALANCE	-579	-806	-489	578	804	490
Recognised in:
"Other assets - Net pension plan assets" (Note 20)
"Provisions - Pensions and other post employment defined benefit obligations" (Note 23)	-579	-806	-489
Type of obligation
Vested obligations	-578	-804	-487
Non-vested obligations	-1	-2	-2
Type of investment
Implemented through insurance policies				578	804	490
Investments in real estate assets
Investments in equity instruments
Investments in debt instruments
Investments in other assets

Changes in provisions for pensions and similar obligations (2)

(Millions of euros)

	Non-related entity ^**
	Defined benefit obligations (A)			Fair value of assets (B)
	2022	2021	2020	2022	2021	2020
OPENING BALANCE	-3,355	-3,674	-3,568	3,717	3,583	3,530
Interest cost (income)	-10	-5	-15	-201	110	41
Past service cost	-33	-17	-21
COMPONENTS OF COST OF DEFINED BENEFIT RECOGNISED IN PROFIT OR LOSS	-43	-22	-36	-201	110	41
Actuarial gains/(Losses) arising from experience assumptions	371	36	-112
Actuarial gains/(Losses) arising from financial assumptions	312	33	-87	-268	-106	104
COMPONENTS OF COST OF DEFINED BENEFIT RECOGNISED IN EQUITY	683	69	-199	-268	-106	104
Plan contributions	-4	-4	-4		19	20
Plan payments	165	167	152	-167	-168	-156
Settlements		310	35	-108		-19
Additions due to business combinations (Note 7)	6	-131			137
Transactions	-30	-70	-54	13	142	63
OTHER	137	272	129	-262	130	-92
CLOSING BALANCE	-2,578	-3,355	-3,674	2,986	3,717	3,583
Recognised in:
"Other assets - Net pension plan assets" (Note 20)
"Provisions - Pensions and other post employment defined benefit obligations" (Note 23)
Type of obligation
Vested obligations	-2,578	-2,699	-2,946
Non-vested obligations		-656	-728
Type of investment
Implemented through insurance policies				2,986	1,771	1,701
Investments in real estate assets					395	392
Investments in equity instruments					260	235
Investments in debt instruments					1,250	1,182
Investments in other assets					41	73

Changes in provisions for pensions and similar obligations (3)

(Millions of euros)

	Non-related entity ^**
	Net asset/(liability) for long-term commitments
	2022	2021	2020
OPENING BALANCE	362	-91	-38
Interest cost (income)	-211	105	26
Past service cost	-33	-17	-21
COMPONENTS OF COST OF DEFINED BENEFIT RECOGNISED IN PROFIT OR LOSS	-244	88	5
Actuarial gains/(Losses) arising from experience assumptions	371	36	-112
Actuarial gains/(Losses) arising from financial assumptions	44	-73	17
COMPONENTS OF COST OF DEFINED BENEFIT RECOGNISED IN EQUITY	415	-37	-95
Plan contributions	-4	15	16
Plan payments	-2	-1	-4
Settlements	-108	310	16
Additions due to business combinations (Note 7)	6	6
Transactions	-17	72	9
OTHER	-125	402	37
CLOSING BALANCE	408	362	-91
Recognised in:
"Other assets - Net pension plan assets" (Note 20)	408	362
"Provisions - Pensions and other post employment defined benefit obligations" (Note 23)			-91
Type of obligation
Vested obligations
Non-vested obligations
Type of investment
Implemented through insurance policies
Investments in real estate assets
Investments in equity instruments
Investments in debt instruments
Investments in other assets

( ^*) The obligations are insured with a related company, the Group being the policyholder.

( ^**) The obligations are insured with a third party or the Group is not the policyholder.

The present value of defined benefit obligations was calculated using the following criteria:

•	The "projected unit credit" accrual method has been used, which considers each year of service as giving rise to one additional unit of benefit entitlement and measures each unit separately.
•	The estimated retirement age of each employee is the first age at which the employee has the right to retire or the age determined in the agreements, as applicable.
•	The actuarial and financial assumptions used in the measurement are unbiased and mutually compatible.

The assumptions used in the calculations regarding business in Spain are as follows:

Actuarial and financial assumptions in Spain

	31-12-2022	31-12-2021	31-12-2020
Discount rate of post-employment benefits (1)	3.62 %	0.84%	0.39%
Long-term benefit discount rate (1)	3.2 %	0.01%	-0.26%
Mortality tables (2)	PERM-F/2000 - P	PERM-F/2000 - P	PERM-F/2000 - P
Annual pension review rate (3)	0.35 %	0.35 %	0% - 2%
Annual cumulative CPI (4)	2.93 %	2.56%	1.81%
Annual salary increase rate	1.0% 2023; CPI + 0.5% 2024 and onwards	0.75% 2022; 1% 2023; CPI + 0.5% 2024 and onwards	0% 2021; 0.75% 2022; 1% 2023; CPI + 0.5% 2024 and onwards

(1) Using a rate curve based on high-rated corporate bonds, with the same currency and terms as the commitments assumed. Rate informed on the basis of the weighted average term of these commitments.

(2) It has been decided to maintain the PERM-F/2000-P tables as the best estimate of the survival pattern, based on historical experience.

(3) Depending on each obligation. Based on the Agreement to Amend Employment Conditions signed on 1 July 2021, a fixed rate of 0.35% has been considered as a future revaluation for pension commitments arising from collective systems, covenants and/or agreements.

(4) Using the Spanish zero coupon inflation curve. Rate informed on the basis of the weighted average term of the commitments.

The assumptions used in the calculations regarding BPI's business in Portugal are as follows:

Actuarial and financial assumptions in Portugal

	31-12-2022	31-12-2021	31-12-2020
Discount rate ^*	3.8 %	1.26%	1.01%
Mortality tables for males	TV 88/90	TV 88/90	TV 88/90
Mortality tables for females	TV 90/01 - 2 years	TV 90/01 - 2 years	TV 88/90 - 3 years
Annual pension review rate	4.00% 2023; 3.00% 2024; 0.75% and onwards	0.4%	0.4%
Annual salary increase rate	[4.50 - 5.50] % 2023; [3.50 - 4.50] % 2024; [1.25 - 2.25] % and onwards	[0.9 - 1.9]%	[0.9 - 1.9]%

( ^*) Rate resulting from using a rate curve based on high-rated corporate bonds, with the same currency and terms as the commitments assumed.

Actuarial valuation of the pension commitments attributed to businesses in Spain and Portugal is carried out by qualified actuaries independent of the Group.

Additionally, in order to preserve the governance of the valuation and the management of the risks inherent to the acceptance in these commitments, CaixaBank has established an activity framework where the ALCO manages hedging proposals for these risks and the Global Risk Committee approves any changes to the criteria to measure the liabilities reflected in these commitments for businesses in Spain.

Below follows a sensitivity analysis of the value of obligations based on the main assumptions used in the actuarial valuation. To determine this sensitivity, the calculation of the value of the obligations is replicated, changing the specific variable and maintaining the remaining actuarial and financial assumptions unchanged. One drawback of this method is that it is unlikely that a change will occur in one variable alone as some of the variables may be correlated:

Analysis of sensitivity of the obligations

(Millions of euros)

	Spain		Portugal
	Zahlformatprüfen+50 bp	-50 bp	+50 bp	-50 bp
Discount rate	-26	28	-97	108
Annual pension review rate ^*	0	0	101	-94

( ^*) According to Labour Agreement signed on 7 July 202, fixed annual growth for Spain is 0.35%.

The estimate of the fair value of insurance contracts linked to pensions taken out directly by CaixaBank with VidaCaixa or other companies and of the value of the pension fund assets (also mainly insurance policies) takes into account the value of future guaranteed payments discounted from the same rate curve used for the obligations. Therefore, since the expected flows of payments are matched with those deriving from the policies, the possible fair changes -at the close of the financial year- in the discount rate would have a similar effect on the value of the Group's gross obligations and on the fair value of insurance contracts linked to pensions and the fair value of assets held through pension funds.

Consistent with the provision of Note 2.12, the sensitivity of the obligations has only been calculated when certain commitments are not insured by CaixaBank or the pension fund, for example, certain aforementioned longevity queues for business in Spain.

The estimated payment of the provisions planned for the next 10 years is stated below:

Analysis of sensitivity of the obligations

(Millions of euros)

	2023	2024	2025	2026	2027	2028-2032
Spain ^*	49	47	46	45	43	192
Portugal	73	70	68	66	64	295

( ^*) Excluding insured provisions to be paid directly by VidaCaixa to the Pension Funds.

23.2. PROVISIONS FOR OTHER EMPLOYEE BENEFITS

The Group has funds to cover the commitments of its discontinuation programmes, both in terms of salaries and other social costs, from the moment of termination until reaching the age established in the agreements. Funds are also in place covering length of service bonuses and other obligations with existing personnel. The main training programmes for which funds are kept are as follows:

Severance schemes

(Millions of euros)

	Year recognised	Number of people	Initial provision
Labour agreement 17-07-2014	2014	434	182
Labour agreement for Barclays Bank personnel restructuring 2015	2015	968	187
Labour agreement 29-06-2015 (territorial reorganisation of the workforce)	2015	700	284
Paid early retirements and resignations 16-04-2016	2016	371	160
Labour agreement 29-07-2016	2016	401	121
Paid early retirements and resignations 10-01-2017	2017	350	152
Labour agreement 27-04-2017 - BPI	2017	613	107
Labour agreement 28-04-2017 - Disassociations 2017	2017	630	311
Labour agreement 28-04-2017 - Disassociations 2018	2018	151	67
Labour agreement 08-05-2019	2019	2,023	978
Labour agreement 31-01-2020 - Disassociations 2020	2020	226	109
Labour agreement for restructuring 1-07-2021	2021	6,452	1,884

The breakdown of the changes of the balance under this heading is as follows:

Reconciliation of balances of other long term employee benefits

(Millions of euros)

	Obligations
	2022	2021	2020
OPENING BALANCE	3,452	1,398	1,710
Service cost for the current year	3	-1	4
Past service cost	96	2,279	98
Interest net cost (income)	2	1	2
Revaluations (Gains)/Losses	-163	17	34
COMPONENTS OF COST OF DEFINED BENEFIT RECOGNISED IN PROFIT OR LOSS	-62	2,296	138
Other
Additions due to business combinations (Note 7)		105
Plan payments	-595	-348	-423
Transactions	-181	1	-27
TOTAL OTHER	-776	-242	-450
CLOSING BALANCE	2,614	3,452	1,398
Of which: With pre-retired personnel	119	232	299
Of which: Termination benefits	2,427	3,144	753
Of which: Supplementary guarantees and special agreements			238
Of which: Length of service bonuses and other	65	64	61
Of which: Other commitments deriving from Barclays Bank	3	12	47

23.3. PROVISIONS FOR PENDING LEGAL ISSUES AND TAX LITIGATION

Litigiousness in the field of banking and financial products is subject to comprehensive monitoring and control to identify risks that may lead to the outflow of funds from the entity, making the necessary allocations and taking the appropriate measures in terms of adaptation and improving procedures, products and services. FY 2020 was marked by some highly irregular flows that were conditioned by the effect that the health crisis and State of Alarm caused on the normal operation of the justice system, though its operation could be deemed to have returned to normal in 2021 and 2022.

The dynamic nature of litigiousness and the high disparity of judicial criteria frequently drive changes in scenarios, without prejudice to which the Group has established monitoring mechanisms to control the progress of claims, actions and different judicial sensitivities on the contentious matters that make it possible to identify, define and estimate risks, based on the best information available at any given time.

In the case of disputes under general conditions, generally linked to the granting of mortgage loans to consumers (e.g. floor clauses, multi-currency clauses, mortgage expenses, advance maturity, etc.), the necessary provisions are held and the Group maintains ongoing dialogue with customers in order to explore agreements on a case-by-case basis. Similarly, CaixaBank leads the adherence to extrajudicial dispute resolution systems promoted by certain judicial bodies that resolve these matters, in order to promote amicable solutions that avoid litigating with customers and help alleviate the judicial burden.

In the same way, the Group has adapted its provisions to the risk of ongoing actions arising from claims for the amounts of payments on account for the purchase of off-plan housing, banking, financial and investment products, excessive and abnormal price of interest rates, right to reputation or statements of subsidiary civil liability arising from the potential conduct of persons with employment links.

Lastly, a criterion of prudence is adopted for constituting provisions for possible punishable administrative procedures, for which hedging is allocated in accordance with the economic criteria that may be laid down by the specific administration regarding the procedure, without prejudice to the full exercise of the right of defence in instances, where applicable, in order to reduce or annul the potential sanction.

The content of the main sections of this heading is set out below. The expected timing of outflows of funds embodying economic benefits, should they arise, is uncertain.

IRPH (Mortgage Loan Reference Index)

In relation to the official reference rate for mortgages in Spain (IRPH), the judgment issued by the Court of Justice of the European Union (CJEU) on 3 March 2020, and the set of judgments issued by the First Chamber of the Spanish High Court on 6 and 12 November 2020 provide clarity to the prosecution of claims that question the lack of transparency in the marketing of mortgage loans that include such an index.

The chief legal conclusion of the current judicial framework and without prejudice to its eventual change, is the validity of mortgage loans that include such an index.

On the one hand, in mortgage loans where the IRPH had been included in the context of Public Agreements in order to facilitate access to social housing, the Spanish High Court deems that there was transparency in the procurement; The core elements relating to the calculation of the variable interest laid down in the contract were easily accessible, the consumer adhered to a financing system established and regulated by a regulatory rule, regularly reviewed by successive Councils of Ministers, the clause expressly referred to this regulation and these agreements and both the former and the latter enjoy publicity arising from their publication in the Official State Gazette (BOE).

In cases not covered by the abovementioned scenario, pre-contractual and contractual information provided to consumers of mortgage loans including such an index should be examined on a case-by-case basis, in order to determine whether or not they suffer from lack of transparency, since there are no assessed means of testing material transparency. In any case, the important thing is that any declaration of lack of transparency requires the Spanish High Court -according to repeated legal principle of the CJEU- to make a judgment of abuse, and such abuse -due to the existence of bad faith and major imbalance- has no place in such cases. In the opinion of the Spanish High Court, on the one hand, good faith is not infringed when offering an official index, recommended by the Bank of Spain since the end of 1993 as one of the rates that could be used for mortgage lending operations and when the central Government and several autonomous governments -through various regulatory provisions- had established the IRPH index as a reference for financing (borrowing) for the purchase of social housing. On the other hand, there is also no significant imbalance at the time of procurement, since the subsequent evolution is irrelevant and it cannot be ignored that hypothetically, by replacing the Savings Banks IRPH or Banks IRPH with the index proposed by the CJEU as a replacement in case of abuse and lack of agreement, the Entities IRPH would be applied as the supplementary legal index, which presents virtually no differences with the Savings Banks IRPH or Banks IRPH.

This criterion of the SC has been endorsed by the Court of Justice of the European Union in an order on 17 November 2021, ruling on a second question referred for a preliminary ruling by the 38th Court of First Instance of Barcelona (Case C-655/20). Despite the clarity of the decisions of the CJEU and the consistent criteria of the SC with the postulates of those decisions, a court of first instance in Palma de Mallorca, disagreeing with the rulings of the SC, has raised other new questions for a preliminary ruling.

In conclusion, we consider that the full validity of the contract and the absence of risk of a possible outflow of resources as a result of a possible declaration of lack of transparency have been clarified, in accordance with the current state of the case law.

The Group, in accordance with the current legal basis and reasonableness of the foregoing, as well as the best available information to date, does not hold provisions for this item.

On 31 December 2022, the total amount of mortgages up to date with payments indexed to the IRPH (mortgage base rate) with individuals is approximately EUR 4,825 million (the majority of which are with consumers).

Litigation linked to consumer credit contracts ("revolving" cards) through the application of the Usury

Repression Act of 1908, as a result of the Spanish Supreme Court Judgment dated 4 March 2020.

The Spanish High Court gave a sector-relevant judgment on the contracts of revolving cards and/or deferred-payment cards. The resolution determines i) that revolving cards are market-specific within credit facilities, ii) that the Bank of Spain publishes a specific benchmark interest rate for this product in its Statistical Bulletin, which is the one that must be used as a reference to determine which is the 'normal interest rate', iii) that 'the average interest rate of credit transactions on credit and revolving cards from the Bank of Spain statistics (...) was somewhat higher than 20%' and iv) that an APR like that analysed in the specific case, between 26.82% and 27.24%, is 'notably disproportionate', which entails the contract becoming null and void and the interests paid being refunded. This judgment, unlike the previous one on this subject matter where the supra duplum rule was used to define the disproportionate price -i.e. exceeding twice the ordinary average interest- does not, on this occasion, provide specific criteria or accuracy to determine with legal certainty the amount of excess or difference between the "normal nterest rate" that can entail the invalidity of the contract. This circumstance has led to significant litigation and a series of highly disparate judicial criteria that have made it difficult to apply a uniform criterion. The matter is subject to specific monitoring and management. Recently, on 4 May 2022, the Supreme Court issued a ruling confirming that a determination of usury requires comparing the agreed rate with the average rate expected for the specific product type. The ruling upholds the assessment made by the Provincial Court that deemed a rate of 24.5% not to be usury, since the record showed that on the contract date, rates similar to the one agreed were usual. Another Supreme Court ruling of 4 October 2022: which examines the rate agreed on a revolving card issued at a time when there were no statistical data published by the Bank of Spain for this type of product. It finds that in the decade 1999/2009 rates of between 23-26% were common, and deems a rate within this threshold to be valid.

Additionally, CaixaBank and its card-issuing subsidiary, CaixaBank Payments and Consumer, received a class action brought by an Association of Consumers and Users (ASUFIN), which was partially dismissed by Valencia Commercial Court No. 4 on 30 December 2020. Firstly, the process was reduced to an action of eventual cessation of general conditions; the possibility of claiming refunds of amounts was rejected for the ASUFIN and in favour of CaixaBank. Subsequently, the judgment reaffirms this situation, fully dismisses the claim against CaixaBank and solely requests CaixaBank Payments and Consumer to discontinue the advance maturity clause, disregarding all other requests regarding lack of transparency in the operation of cards, interest calculation methods, the right to compensation for debt and the change of conditions under contracts of an indefinite duration. After both parties appealed the judgment, the 9th Section of the Valencia Provincial Court issued ruling no. 1152/2021 of 3 October 2021, by virtue of which it dismissed ASUFIN's appeal and upheld CaixaBank Payments and Consumer's appeal, and consequently dismissed the claim in its entirety, partially overturning the first instance judgment. This ruling is not final.

Based on the best information available to date, the heading "Other Provisions" includes the estimate of present obligations that could arise from legal proceedings, including those relating to revolving and/or deferred payment cards or, to a lesser extent, from personal loans at the interest rate subject to judicial review under these jurisprudential considerations, the occurrence of which has been considered probable.

In any case, any disbursements that may ultimately be necessary will depend on the specific terms of the judgments which the Company must face, and/or the number of claims that are brought, among others. Given nature of these obligations, the expected timing of the outflow of financial resources is uncertain, and, in accordance with the best available information today, the Group also deems that any responsibility arising from these proceedings will not, as a whole, have a material adverse effect on the Group's businesses, financial position or the results of its operations.

Coral Homes

On 28 June 2018, CaixaBank, S.A., the Company and Coral Homes Holdco, S.L.U., a company belonging to the Lone Star group, executed an investment agreement for the purpose of establishing the terms on which the Company and Coral Homes Holdco, S.L.U. would be -through a newly created company called Coral Homes, S.L.- the owners and managers of the business consisting of a specific group of real estate assets owned by the Company and 100% of the share capital of Servihabitat Servicios Inmobiliarios, S.L., a company dedicated to the provision of real estate management services. As part of the operation, Servihabitat Servicios Inmobiliarios, S.L. will go on servicing the Group's property assets during a period of 5 years under a new contract concluded on market terms.

The sale entered into with Lone Star contemplated a representations and warranties clause in relation to, among other matters, the ownership of the real estate assets transferred to Coral Homes, S.L. which, under specific circumstances, could give rise to claims against the Company until June 2020.

In July 2020, Coral Homes Holdco, S.L.U. brought arbitration proceedings before the International Court of Arbitration of the International Chamber of Commerce in order to unwind the contribution of a small group of real estate assets included in the business transferred to Coral Homes, S.L. and to claim certain alleged damages.

The arbitration proceedings that are currently underway and their resolution, after certain vicissitudes that have led to their prolongation, are expected in mid-2023. In the event that the arbitration is not successful, it is not expected to have a material impact on equity not included in the financial statements as at 31 December 2022.

Sareb Bonds

Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria, S.A. (Sareb) requests the Court to declare "that the Senior Bonds issued by Sareb from the 2017-3 and 2018-1 and successive Issues, may generate negative yields, as well as to oblige the defendant Financial Institutions to comply with said declaration".

The Group deems that this dispute has already been finally and bindingly resolved in law by the Decision, favourable to the Entities, rendered on 30 October 2018 by the College of Arbitrators (the "Decision"), and therefore the matter is res judicata. This and other arguments well-founded in law that have been raised by the defendant entities in their defence and the absolute reasonableness of the arbitrators' conclusions (the bonds cannot generate interest in favour of Sareb), lead the Group to consider the risk of this claim being upheld to be remote. In the proceedings, following the preliminary hearing, the parties were given notice to file their conclusions, and it is foreseeable that a judgment will be delivered in the early months of 2023.

Mapfre, proceedings after termination of insurance banking alliance with Bankia

There are two proceedings related to the termination of Mapfre's insurance banking alliance with Bankia.

The first is an arbitration in which Mapfre and CaixaBank agreed to submit the issue of whether CaixaBank was obliged, under the bancassurance agreements between Bankia and Mapfre, to pay Mapfre an additional amount equivalent to 10% of the valuations of the life and non-life business as determined by the independent expert chosen by both parties (Oliver Wyman). The total amount is 52 million euros (29 million euros for the life business and 23 million euros for the non-life business). The Group has not set up a provision in this respect as it considers that its position should prevail in the arbitration.

The second process consists of a lawsuit filed by Mapfre against Oliver Wyman and CaixaBank because the former disagrees with the valuation of the BV shares (life business) carried out by Oliver Wyman. Mapfre requests the Court to declare the breach by Oliver Wyman of the order received to carry out the valuation of the BV shares and to replace such valuation with a higher valuation to be established in court, condemning CaixaBank to pay the difference between the price already paid for 51% of the BV shares and the price resulting from the new valuation established in court. The Group considers that Oliver Wyman complied with the assignment received and has solid arguments to oppose this claim, for which reason no provision has been made.

Judicial proceedings relating to the 2011 Bankia rights offering

Civil proceedings in respect of the nullity of the subscription of shares

Claims are currently still being processed, although in a small number, requesting both the cancellation of share purchases in the rights offering made in 2011 on the occasion of the listing of Bankia and those relating to subsequent purchases, in relation to the latter scenario, however, they are residual claims.

On 19 July 2016, Bankia was notified of a collective claim filed by ADICAE; the processing of the proceedings is currently suspended.

In a judgment of 3 June 2021, the Court of Justice of the European Union resolved a preliminary question raised by the Spanish Supreme Court, clarifying that in cases of issuances intended both for retail investors and to qualified investors, the latter may bring an action for damages based on inaccuracies of the prospectus, although the national court will have to take into account whether such investor had or should have knowledge of the economic situation of the issuer of the public offer of subscription of shares and besides the prospectus. Applying this criterion in the proceedings that gave rise to this question, the Supreme Court considered that, in the specific case in question, it was not proven whether the plaintiff had access to information other than the prospectus, which is why it upheld the claim. Since then, there have been rulings both favourable and unfavourable to CaixaBank, with the Supreme Court finding in the former that the decision to subscribe the shares was not based on the information in the prospectus. The circumstances of each case must therefore be taken into account.

The Group maintains provisions to cover the risk arising from this litigation.

Abridged proceedings 1/2018 (originating in previous proceedings No. 59/2012) followed before the Criminal Chamber of the National Court due to the Bankia stock market flotation.

Criminal procedure whereby the Court agreed to admit the claim filed by Unión Progreso y Democracia against Bankia, BFA Tenedora de acciones, S.A.U. and the former members of their respective Boards of Directors. Other complaints have subsequently been added to this proceeding concerning persons alleging damages for the listing of Bankia (private prosecution on the indictment) and persons who do not have such status (private prosecution by a person unaffected by the alleged offence). Through the listing, in July 2011 Bankia acquired EUR 3,092 million, of which EUR 1,237 million corresponded to institutional investors and EUR 1,855 million to retail investors. Since the retail investors were practically returned all of the amounts invested in the listing, through the civil procedures or the voluntary payment process opened by Bankia itself, it is considered that the contingency opened with these has been virtually resolved.

On 29 September 2020, the Criminal Chamber, section four of the National Court, delivered a judgment (no. 13/2020), acquitting -with all kinds of favourable pronouncement- all the accused of all charges.

Only two accusations -an association and a legal person- formalised the corresponding appeal for cassation before the Criminal Chamber of the Spanish High Court against that judgment of 29 September 2020. The Supreme Court dismissed these appeals in a ruling delivered on 24 October 2022, and on 16 November 2022 issued an order declaring the acquittal of the National Court of 29 September 2020 to be final. The Group therefore regards this contingency as definitively and favourably terminated.

Ongoing investigation in Central Investigation Office No. 2 (PD 16/18)

In April 2018, the Anti-Corruption Prosecutor's Office started legal proceedings against CaixaBank, the Entity's former head of Regulatory Compliance and 11 employees, for events that could be deemed to constitute a money laundering offence, primarily due to the activity carried out in 10 branches of CaixaBank by alleged members of certain organisations formed of Chinese nationals, who allegedly conducted fraud against the Spanish Treasury between 2011 and 2015. The judge has asked the Public Prosecutor's Office to instigate the next steps. In addition, as of today, the filing of proceedings has already been agreed for four employees. Neither CaixaBank nor its legal advisers consider the risk associated with these criminal proceedings as being likely to arise. The potential impact of these events is not currently considered material, although CaixaBank is exposed to reputational risk due to these ongoing proceedings.

Ongoing investigation in Central Investigation Office No. 6 (PD 96/17) Separate records No. 21

In July 2021, the Court decided to summon as subject to investigation the legal person, calling for them to be heard in order to obtain knowledge on the measures implemented in its compliance programmes to prevent crimes or significantly reduce the risk of them being committed. The investigation concerns facts that may eventually be considered as constituting an offence of bribery and disclosure of secrets, if a public official has been deemed to have been fraudulently contracted for alleged private security activities. It resulted in the first procedural appointment as the investigated party, from which CaixaBank may provide explanations and evidence on the procedures, rules and controls of corporate criminal prevention.

On 29 July 2021 a court decision was announced that agreed to file the cause pursued against the bank, in accordance with the evidence provided until that date. On 7 February 2022, this decision was revoked by the Criminal Chamber of the National Court, which understood that the decision to close the case was premature and that further proceedings are necessary to clarify the facts. Evidence was presented along the lines suggested by the Court, including CaixaBank's Audit and Regulatory Compliance procedures.

In light of the actions taken, on 2 June 2022 the Court again agreed to dismiss the case against the Company. This decision was appealed and the National Court dismissed the appeal and declared the case closed with respect to CaixaBank and its chairman at the time of the events under investigation.

Bandenia Proceedings Preliminary Diligences 115/2015, Central Investigation Office No. 5 of Madrid

The offences under investigation are criminal organisation, continued falsification of commercial documents, continued fraud, money laundering, punishable insolvency and tax fraud, all committed through the conglomerate of the Bandenia group of companies. These companies allegedly conducted currency movements under the guise of lawful activities and opened accounts in various Spanish financial institutions.

In 2019, an order was issued ordering the opening of the separate piece called "Bandenia Laundering" to investigate the actions of CaixaBank and two other financial institutions in relation to the banking transactions made by the companies of the Bandenia Group, in case it could constitute a money laundering offence.

CaixaBank provided extensive documentation that was requested by the National Court, both in relation to Bandenia's operations and to the Regulatory Compliance programme that the Bank had in place at the time of the events under investigation (2013-2015). Two employees were summoned to testify as investigators, however, the investigation court closed the case. The Chamber, which upheld the appeal against the closure of the case, found that further evidence should be gathered before reaching a conclusion, and the case was reopened for further proceedings. To this effect, the National Court recently agreed the declaration of the legal representative of CaixaBank (in January 2023) and of the representatives of the other two banks. It is considered that, following further proceedings, the National Court will agree to dismiss the case, without there being any impact on or materialisation of a financial risk associated with these criminal proceedings, aside from the reputational damage that the public monitoring of an investigation of this nature may entail.

Banco de Valencia shareholders

Claim filed by the Small Shareholders Association of Banco de Valencia "Apabankval": In 2012, Apabankval filed a claim for corporate crimes against members of the Board of Directors of Banco de Valencia and the external auditor. No amount of civil liability has been determined. The claim by Apabankval has resulted in previous proceedings 65/2013-10 of the Central Investigation Office no. 1 of the National Court.

Subsequently, a second claim filed by several individuals ("Banco de Valencia") is included. Following on from this, by Order of 6 June 2016, the Central Investigation Office no. 1 of the National Court has admitted -to be included in previous proceedings 65/2013-10- a new claim filed by shareholders of Banco de Valencia against various directors of Banco de Valencia, the external auditor and Bankia, S.A. ("as a substitute for Bancaja"), for a corporate crime of falsification of accounts set out in article 290 of the Criminal Code.

On 13 March 2017, the Criminal Chamber, section 3 of the National Court, issued an order confirming that i) Bankia cannot be held liable for criminal acts and, ii) Bankia must be continue to be the secondary civilly liable party.

On 13 December 2017, Central Investigation Office no. 1 issued an Order agreeing to bring BFA, Tenedora de Acciones, S.A.U. and the Bancaja Foundation to the proceedings as secondary civilly liable parties.

On 2 December 2019, the Central Investigation Office no. 1 issued the conversion order agreeing to the continuation of these previous proceedings through the abridged procedures for the alleged participation in an ongoing corporate crime of falsehood in the annual accounts of Banco de Valencia for the fiscal years 2009-2010, punishable under art. 290 paragraphs 1 and 2 and art. 74 of the Criminal Code, against the members of the board of directors of Banco de Valencia and against various companies as secondary civilly liable parties, which include: BFA, Bankia, Bankia Hábitat S.L. y Valenciana de Inversiones Mobiliarias, S.L. Following the presentation by the prosecution of their provisional pleadings, on 31 October 2022, an order was issued to open the oral hearing, confirming the subsidiary civil liability of the former companies. The defence pleadings have been filed and the proceedings are now pending the oral hearing.

The National Court has had CaixaBank as the successor in Bankia's position as a consequence of the merger of Bankia (acquired company) with CaixaBank (acquiring company).

The Group has treated this contingency as a contingent liability which, despite its final result, is uncertain at this date.

Provisions for taxes

The detail of the balance of this heading in the balance sheet is as follows:

Provisions for taxes

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Income Tax assessments	16	20	31
Tax on deposits	22	40	18
Other	279	333	175
TOTAL	317	393	224

The main tax procedures ongoing at 2022 year-end are as follows:

•

In 2020 the activities to verify financial years 2013 to 2015 were finalised, and due provisions were provided for their impacts. Disputed Corporation Tax assessments and disputed Value-Added Tax assessments are pending resolution by the Central Economic-Administrative Court.

•

In 2017, the review actions for 2010 to 2012 were completed with no significant impact. The non-conformity assessments for Corporation Tax have been the subject of a partially upheld ruling by the National Court, which is pending enforcement by the Tax Agency. The non-conformity assessments for value added tax have been the subject of a dismissed ruling by the Central Economic-Administrative Court and are pending enforcement by the Tax Agency.

In addition, during the current year, the Bankia inspection process for fiscal years 2011 to 2013 was completed with the signing of the conformity assessment and the lawsuit for the Deposit Tax in the Canary Islands, releasing the unused provision.

The Group has allocated provisions to cover the maximum contingencies that may arise in relation to Corporation Tax and VAT assessments signed under protest.

23.4. PROVISION FOR COMMITMENTS AND GUARANTEES GIVEN

This heading includes the provisions for credit risk of the guarantees and contingent commitments given (Note 26).

23.5. OTHER PROVISIONS

The content of the main sections of this heading is set out below. The expected timing of outflows of funds embodying economic benefits, should they arise, is uncertain.

Class action brought by the ADICAE association (floor clauses)

The legal case through which a class-action suit was brought by the Asociación de Usuarios de Bancos, Cajas y Seguros (ADICAE) due to the application of the minimum interest rate clause that is present in some of the Group's mortgages, is currently being appealed on procedural grounds to the Supreme Court. A ruling dated 29 June 2022 agreed to raise several issues for preliminary rulings in which the Supreme Court considers if, as part of a class-action suit as complex as this one, it is possible to analyse separately the transparency of how minimum-rate clauses are marketed, keeping in mind the need to evaluate any concurrent circumstances at the time the mortgage is signed, as well as other parameters, such as the evolution of the average consumer. The Group does not anticipate any changes to the risk in this matter, nor an adverse material impact, as a result of asking for these preliminary rulings.

With the available information, the risk derived from the disbursements that could arise due to these litigation proceedings is reasonably covered by the corresponding provisions.

Procedures of the Portuguese Resolution Fund (PRF)

On 3 August 2014, the Bank of Portugal applied a resolution procedure to Banco Espírito Santo, SA (BES) through the transfer of its net assets and under the management of Novo Banco, SA (Novo Banco). Within the framework of this procedure, the PRF completed a capital increase in Novo Banco for an amount of EUR 4,900 million, becoming the sole shareholder. The increase was financed through loans to the PRF for an amount of EUR 4,600 million, EUR 3,900 million of which was granted by the Portuguese State and EUR 700 million granted by a banking syndicate through the Portuguese financial institutions, including BPI with EUR 116 million.

On 19 December 2015, the Bank of Portugal initiated a procedure to put Banco Internacional do Funchal (Banif) into resolution, which came to a head with i) the partial sale of its assets for EUR 150 million to Banco Santander Totta, S.A.; and ii) the contribution of the rest of its assets that were not sold to Oitante, SA. The resolution was financed through the issuance of EUR 746 million of debt, guaranteed by the PRF and the Portuguese State as a counter-guarantee. The operation also included the ultimate guarantee of the Portuguese State amounting to EUR 2,255 million intended to cover future contingencies.

For the reimbursement of the PRF obligations with the Portuguese State (in the form of loans and guarantees) in relation to resolution measures adopted, the PRF has contributed ordinary instruments through the various contributions of the banking sector. Along these lines, the conditions of the loans with the PRF have been amended to bring them in line with the collection of the aforementioned contributions; there is no foreseen need to turn to additional contributions from the banking sector.

In 2017, the Bank of Portugal chose Lone Star to conclude the sale of Novo Banco, after which the PRF would hold 25% of the share capital and certain contingent capital mechanisms would be established by the shareholders. To cover the contingent risk, the PRF has the financial means of the Portuguese State, the reimbursement of which - where applicable- would have repercussions on the contributory efforts of the banking sector.

On 31 May 2021, the PRF signed a credit facility with a group of Portuguese financial institutions amounting to EUR 475 million, in which BPI participated with the amount of EUR 87.4 million. On 4 June 2021, the PRF made a provision of EUR 317 million to comply with Novo Banco's capital quota mechanism, of which EUR 58.3 million corresponded to BPI. On 23 December, the PRF made an additional payment of EUR 112 million that was pending following a favourable external opinion on the payment associated with the non-application of hedge accounting for interest rate risk management, of which EUR 20.6 million was made to BPI.

At this time, it is not possible to estimate the possible effects for the Resolution Funds deriving from: i) the sale of the shareholding in Novo Bank; ii) the application of the principle that none of the creditors of a credit institution under resolution may assume a loss greater than that which it would have assumed if that entity had gone into liquidation; iii) the guarantee granted to the bonds issued by Oitante and iv) other liabilities that - it is concluded - must be assumed by PRF.

Notwithstanding the possibility considered in the applicable law for the collection of special contributions, given the renegotiation of the terms of the loans granted to the PRF, which include BPI, and the public statement made by the PRF and the Office of the Minister of Finance of Portugal, declaring that this possibility will not be used, the consolidated financial statements of 2022 reflect the expectation of the Administrators that the Bank will not have to make special contributions or any other type of extraordinary contributions to finance the resolution measures applied to BES and Banif or any other contingent liability or liabilities assumed by the PRF.

Any change in this regard may have material implications for the financial statements of the Group.

24. EQUITY

24.1. SHAREHOLDERS' EQUITY

Share capital

Selected information on the figures and type of share capital figures is presented below:

Information about share capital

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Number of fully subscribed and paid up shares (units) (1)	7,502,131,619	8,060,647,033	5,981,438,031
Par value per share (euros)	1	1	1
Closing price at year-end (euros)	3.672	2.414	2.101
Market cap at year-end, excluding treasury shares (millions of euros) (2)	25,870	19,441	12,558

(1) All shares have been recognised by book entries and provide the same rights.

(2) CaixaBank's shares are traded on the continuous electronic trading system, forming part of the Ibex-35.

The breakdown of the changes of the balance under this heading is as follows:

Changes in capital

(Millions of euros)

	Number of shares	Date of first listing	Nominal amount
BALANCE AT 31-12-2019	5,981,438,031		5,981
BALANCE AT 31-12-2020	5,981,438,031		5,981
Merger with Bankia (Note 7)	2,079,209,002	29-03-2021	2.079
BALANCE AT 31-12-2021	8,060,647,033		8,061
Capital reduction	-558,515,414		-559
BALANCE AT 31-12-2022	7,502,131,619		7,502

Capital reduction

On 22 December 2022, the CaixaBank Board of Directors resolved to reduce the Company's share capital by redeeming all the treasury shares acquired in the buy-back programme. The implementation of the capital reduction has been approved pursuant to the resolution adopted by the Annual General Meeting on 8 April 2022, under agenda item 9, after obtaining the relevant regulatory approvals.

CaixaBank's share capital has been reduced by EUR 558,515,414 after redeeming 558,515,414 treasury shares each at a nominal value of one euro, the resulting share capital amounting to EUR 7,502,131,619.

The capital reduction was charged to "Share premium", by means of the allocation of a restricted capital redemption reserve for an amount equal to the total nominal value of the shares being redeemed (i.e. EUR 558,515,414, which may only be drawn down on the same conditions as those required for the reduction of share capital, pursuant to article 335 c) of the Spanish Corporate Enterprises Act. Accordingly, the Company's creditors will not have the right to oppose the capital reduction referred to in Article 334 of the Spanish Corporate Enterprises Act. Nor is the consent of the syndicates of bondholders of outstanding debenture and bond issues required, under article 411 of the Corporate Enterprises Act, by application of the provisions of the First Additional Provision of Law 10/2014, of 26 June, on the regulation, supervision and solvency of credit institutions.

The public deed for the reduction of the share capital was registered in the Commercial Register of Valencia on 13 January 2023.

Capital authorisations

On 22 May 2020, the Company's General Meeting approved authorisation of the Board of Directors to increase share capital one or more times and at any moment, over the course of five years starting from that date, by a maximum amount of EUR 2,990,719,015 (equivalent to 50% of the share capital at the time of authorisation), through the issue of new shares -with or without a premium and with or without a vote-, the equivalent value of new shares to be issued consisting in cash contributions, and with the ability to establish the terms and conditions of the capital increase. This authorisation replaces and renders ineffective (in the unused part) the previous delegation approved at the General Meeting held on 23 April 2015.

The authorisation in force includes delegating to the Board of Directors the power to exclude, in whole or in part, pre-emptive subscription rights. However, in this case, the capital increases will be limited, in general, to a maximum amount of EUR 1,196,287,606 (equivalent to 20% of the share capital at the time of authorisation). This limit will not apply to the capital increases that the Board can approve, suppressing the preferential subscription rights, to facilitate the conversion of securities issued pursuant to the agreement adopted by the Board under authorisation of the General Meeting, with the general limit of EUR 2,990,719,015 applicable to these capital increases.

Accordingly, on 14 May 2021 the General Meeting resolved to authorise the Board of Directors to issue convertible securities for the purpose of meeting regulatory requirements for eligibility as additional Tier 1 regulatory capital instruments, up to a maximum aggregate amount of EUR 3,500 million and for a period of three years, with the power to exclude pre-emptive subscription rights if this is in the Company's best interest. The breakdown of instruments issued under this agreement is presented in Note 22.3.

Share premium

The breakdown of the changes of the balance under this heading is as follows:

Changes in share premium

(Millions of euros)

	Carrying amount
BALANCE AT 31-12-2019	12,033
BALANCE AT 31-12-2020	12,033
Merger with Bankia (Note 7)	3,235
BALANCE AT 31-12-2021	15,268
Capital reduction	-1,798
BALANCE AT 31-12-2022	13,470

Retained earnings, revaluation reserves and other reserves

The breakdown of the balances of these headings is as follows:

Breakdown of reserves

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Reserves attributable to the parent company of CaixaBank Group	16,976	13,658	12,648
Legal reserve (1)	1,612	1,612	1,196
Restricted reserves for financing the acquisition of treasury shares	2	6	2
Unrestricted reserve for depreciated capital (2)	559
Other restricted reserves (3)			509
Unrestricted reserves	5,207	2,773	2,620
Other consolidation reserves assigned to the parent	9,596	9,267	8,321
Reserves of fully-consolidated subsidiaries	-5,046	-5,527	-5,522
Reserves of companies accounted for using the equity method	571	307	584
TOTAL	12,501	8,438	7,710

(1) At 2022 year-end, the legal reserve has reached the minimum amount required by the Spanish Corporate Enterprises Act.

(2) See section "Capital reduction".

(3) The other restricted reserves were provisioned through goodwill from Morgan Stanley, Bankpime and Banca Cívica. The Annual General Meeting

Other equity instruments

The value of shares included in variable share-based remuneration plans (see Note 34) not delivered is as follows:

Breakdown of other equity instruments

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Value of shares not delivered	46	39	25

Treasury shares

The breakdown of the changes of the balance under this heading is as follows:

Changes in treasury shares (1)

(Millions of euros / Number of shares)

	2022			2021
	No. of treasury shares	% Share capital ^*	Cost/Sales	No. of treasury shares	% Share capital ^*	Cost/Sales
OPENING BALANCE	7,218,511	0.090%	19	4,053,994	0.068%	12
Acquisitions and other	564,323,848	0.000%	1,818	6,356,541	0.079%	15
Disposals and other ^**	-563,866,083	0.000%	-1,812	-3,192,024	-0.040%	-8
CLOSING BALANCE	7,676,276	0.090%	25	7,218,511	0.090%	19

Changes in treasury shares (2)

(Millions of euros / Number of shares)

	2020
	No. of treasury shares	% Share capital ^*	Cost/Sales
OPENING BALANCE	3,121,578	0.052%	10
Acquisitions and other	3,037,319	0.051%	8
Disposals and other ^**	-2,104,903	-0.035%	-6
CLOSING BALANCE	4,053,994	0.068%	12

( ^*) Percentage calculated on the basis of the total number of CaixaBank shares at the end of the respective years.

( ^**) In 2022, 2021 and 2020, the results of treasury share transactions generated were not significant, being recognised under "Other reserves".

( ^***) At 31 December 2022, 2021 and 2020, does not include 7,515 VidaCaixa shares associated with unit-links, registered under the heading "Financial assets designated at fair value through profit or loss".

Additionally, the number of treasury shares accepted as financial guarantees given by the Group and treasury shares owned by third parties and managed by a Group company were as follows:

Treasury shares accepted as financial guarantees and owned by third parties

(Millions of shares / Millions of euros)

	Treasury shares accepted as financial guarantees			Treasury shares owned by third parties managed by the Group
	31-12-2022	31-12-2021	31-12-2020	31-12-2022	31-12-2021	31-12-2020
Number of treasury shares	18	17	12	19	18	13
% of share capital	0.237%	0.215%	0.207%	0.249%	0.225%	0.225%
Nominal amount	18	17	12	19	18	13

24.2. ACCUMULATED OTHER COMPREHENSIVE INCOME

Changes under this heading are contained in the statement of recognised income and expenses.

24.3. MINORITY INTERESTS

The following table shows the Group subsidiaries in which certain non-controlling interests held a stake of 10% or more:

Subsidiaries with minority shareholders with stakes greater than 10%

(Percentage)

	Subsidiary	Minority shareholders	Non-controlling interests
		31-12-2022	31-12-2021	31-12-2020
Inversiones Inmobiliarias Teguise Resort	Metrópolis Inmobiliarias y Restauraciones	40%	40%	40%
Coia Financiera Naval	Construcciones Navales P. Freire	21%	21%	21%
El Abra Financiera Naval	Astilleros Zamakona	21%	21%	21%
Arrendadora de Equipamientos Ferroviarios	CAF Investment Projects, S.A.	15%	15%	15%
Telefonica Consumer Finance	Telefónica	50%	50%	50%

25. TAX MATTERS

25.1. TAX CONSOLIDATION

The consolidated tax group for Corporation Tax includes CaixaBank, as the parent, and subsidiaries include Spanish companies in the commercial group that comply with the requirements for inclusion under regulations, including the "la Caixa" Banking Foundation and CriteriaCaixa.

The other companies in the commercial group file taxes in accordance with applicable tax legislation.

Similarly, CaixaBank and some of its subsidiaries have belonged to a consolidated tax group for value added tax (VAT) since 2008, the parent company of which is CaixaBank.

25.2. YEARS OPEN FOR REVIEW

In 2020, an inspection for the main taxes applicable to the Company for the years 2013 to 2015, inclusive, was concluded with no major impact. The assessments signed under protest are duly provisioned.

Furthermore, Bankia and certain entities of the Tax Group maintained an inspection procedure in relation to Corporation Tax and withholdings on movable and real estate capital corresponding to financial years 2011 to 2013, which has ended in the current financial year, with no material impact. The assessments have been signed accordingly.

CaixaBank has 2016 and subsequent years open for review for Corporation Tax and the last four years for other taxes applicable to it, and BPI has 2018 and subsequent years open for the main taxes applicable to it. Furthermore, as the successor of Bankia, the Entity has the years 2014 and thereafter open for review for Corporation Tax and the last four years for the remaining taxes applicable to it.

The various interpretations that can be drawn from the tax regulations governing transactions carried out by financial institutions may give rise to certain contingent tax liabilities that cannot be objectively quantified. The Group's management considers that the provision under "Provisions - Pending legal issues and tax litigation" in the balance sheet is sufficient to cover these contingent liabilities

25.3. RECONCILIATION OF THE ACCOUNTING PROFIT TO THE TAXABLE PROFIT

The Group's reconciliation of accounting profit to taxable profit is presented below:

Reconciliation of accounting profit to taxable profit

(Millions of euros)

	2022	2021	2020
Profit/(loss) before tax (A)	4,326	5,315	1,600
Adjustments to profit/(loss)	-417	-4,904	-451
Return on equity instruments (1)	-153	-179	-144
Share of profit/(loss) of entities accounted for using the equity method (1)	-264	-425	-307
Negative goodwill recognised in profit or loss		-4,300
Taxable income/(tax loss)	3,909	411	1,149
Tax payable (taxable income ^* tax rate)	-1,173	-123	-345
Adjustments:	-6	39	115
Changes in taxation of sales and gains/(losses) of portfolio assets	-5	16	172
Changes in portfolio provisions excluding tax effect and other non-deductible	-6	-6	-93
Cancellation of deferred tax assets and liabilities	3
Recognition of deferred tax assets and liabilities	-13
Effect on tax expense of jurisdictions with different tax rates (2)	6	16	5
Tax effect of issues	78	54	43
Other non-deductible expenses	-64	-22	-22
Withholdings from foreign dividends and other	-5	-19	10
Income tax (B)	-1,179	-88	-219
Income tax for the year (revenue/(expense))	-1,178	-84	-230
Tax rate (3)	30.1%	20.3%	20.0%
Income tax adjustments (2021/2020/2019)	-1	-4	11
PROFIT/(LOSS) AFTER TAX FROM CONTINUING OPERATIONS (A) + (B)	3,147	5,227	1,381

(1) Income to a large extent exempt from tax due to already having been taxed at source.

(2) Practically all of CaixaBank's income and expense is taxed at the general Corporation Tax rate of 30% in the case of the businesses in Spain, however other jurisdictions are taxed at a different tax rate with a very low impact.

(3) The effective tax rate is calculated by dividing income tax for the year by taxable income.

25.4. DEFERRED TAX ASSETS AND LIABILITIES

The changes in the balance of these headings is as follows:

Changes in deferred tax assets (1)

(Millions of euros)

	31-12-2019	Regularisations	Additions	Disposals
Pension plan contributions	575	32	13
Allowances for credit losses	4,114	-70		-15
Allowances for credit losses (IFRS 9)	53			-53
Early retirement obligations	10			-6
Provision for foreclosed property	942	-96		-3
Credit investment fees	5			-1
Unused tax credits	910	-165
Tax loss carryforwards	1,648	-18
Assets measured at fair value through equity	96			-9
Others from business combinations	92			-32
Other ^*	1,391	37	494	-150
TOTAL	9,836	-280	507	-269
Of which: monetisable	5,641

Changes in deferred tax assets (2)

(Millions of euros)

	31-12-2020	Additions due to business combinations (Note 7)	Regularisations	Additions	Disposals
Pension plan contributions	620	281	1	2	-24
Allowances for credit losses	4,029	5,323	39		-37
Allowances for credit losses (IFRS 9)
Early retirement obligations	4				-1
Provision for foreclosed property	843	1,823	2
Credit investment fees	4		-1
Unused tax credits	745	85	-12	4
Tax loss carryforwards	1,630	309	46	60
Assets measured at fair value through equity	87	9		34
Others from business combinations	60	1,038			-439
Other ^*	1,772	512	-64	709
TOTAL	9,794	9,380	11	809	-501
Of which: monetisable	5,496

Changes in deferred tax assets (3)

(Millions of euros)

	31-12-2021	Regularisations	Additions	Disposals	31-12-2022
Pension plan contributions	880	1		-9	872
Allowances for credit losses	9,354	1		-107	9,248
Allowances for credit losses (IFRS 9)
Early retirement obligations	3			-2	1
Provision for foreclosed property	2,668			-27	2,641
Credit investment fees	3	-1			2
Unused tax credits	822	4		-87	739
Tax loss carryforwards	2,045	90		-158	1,977
Assets measured at fair value through equity	130		369		499
Others from business combinations	659	-227		-124	308
Other ^*	2,929	163	146	-1,228	2,010
TOTAL	19,493	31	515	-1,742	18,297
Of which: monetisable	12,905	2		-145	12,762

( ^*) Includes, inter alia, eliminations from intra-group operations and those corresponding to different provisions, and other adjustments due to differences between accounting and tax rules.

Changes in deferred tax liabilities (1)

(Millions of euros)

	31-12-2019	Regularisations	Additions	Disposals
Revaluation of property on first time adoption of IFRS	202	-2		-5
Assets measured at fair value through equity	212		-45
Intangible assets from business combinations	13			-3
Mathematical provisions	204		3
Others from business combinations	201			-46
Other ^*	226		4	-45
TOTAL	1,058	-2	52	-99

Changes in deferred tax liabilities (2)

(Millions of euros)

	31-12-2020	Additions due to business combinations (Note 7)	Regularisations	Additions	Disposals
Revaluation of property on first time adoption of IFRS	195	131			-153
Assets measured at fair value through equity	257	29			-136
Intangible assets from business combinations	10	166			-80
Mathematical provisions	207			3
Others from business combinations	155	494			-403
Other ^*	185	248		840
TOTAL	1,009	1,068	0	843	-772

Changes in deferred tax liabilities (3)

(Millions of euros)

	31-12-2021	Regularisations	Additions	Disposals	31-12-2022
Revaluation of property on first time adoption of IFRS	173	126		-10	289
Assets measured at fair value through equity	150			-148	2
Intangible assets from business combinations	96		118		214
Mathematical provisions	210		2		212
Others from business combinations	246			-65	181
Other ^*	1,273	-151		-364	758
TOTAL	2,148	-25	120	-587	1,656

( ^*) Includes, inter alia, eliminations from intra-group operations and those corresponding to different provisions, and other adjustments due to differences between accounting and tax rules.

At 31 December 2022, the Group has a total of EUR 3,091 million of tax assets deferred by unregistered tax credits, of which EUR 2,853 million correspond to tax loss carryforwards and EUR 238 million to deductions.

Twice per year, in collaboration with an independent expert, the Group assesses the recoverable amount of its recognised deferred tax assets in the balance sheet, on the basis of a budget consisting in a 6-year horizon with the forecasted results used to estimate the recoverable value of the banking CGU (see Note 19) and forecast, subsequently, applying a sustainable net interest income (NII) to the average total assets and a normalised cost of risk (CoR) of 1.30% and 0.39%, respectively.

The type of deferred tax assets segregated by jurisdiction of origin are set out below:

Type of deferred tax assets recognised in the balance sheet - 31-12-2022

(Millions of euros)

	Temporary differences	Of which: Monetisable ^*	Tax loss carryforwards	Unused tax credits
Spain	15,384	12,729	1,974	739
Portugal	197	33	3
TOTAL	15,581	12,762	1,977	739

( ^*) These correspond to monetisable timing differences with the right to conversion into a credit with the Treasury.

In keeping with the projections and the assessment exercise, the maximum timeline for recovering the tax assets in their entirety remains below 15 years.

The Group carries out sensitivity analyses on the key flow projection assumptions of the recovery model (see Note 19) with no significant variations concluded in the estimated term in the baseline scenario.

The exercises to evaluate the recoverability of tax assets, which have been carried out since 2014, are strengthened by backtesting exercises, which show stable behaviour.

In light of the existing risk factors (see Note 3.1) and the reduced deviation with respect to the estimates used to elaborate the budgets, the Administrators consider that, despite the limitations for applying different monetisable timing differences, tax loss carryforwards and unused tax credits, the recovery of all activated tax credits is still probable with future tax benefits.

25.5. OTHER

Under the provisions of Law 38/2022 of 28 December to establish, inter alia, temporary levies on the banking sector, CaixaBank and certain Group companies are subject to this tax, which will be accrued on 1 January 2023 for 2023 (and on 1 January 2024) for 2024 under the heading "Other operating expenses" in the income statement.

The Group is working towards estimating the impact of this 4.8% levy on net interest income and net fee and commission income on the statement of profit or loss for 2023, although in the absence of a final calculation it is estimated that the impact will be around EUR 400 million.

26. GUARANTEES AND CONTINGENT COMMITMENTS GIVEN

The breakdown of "Guarantees and contingent commitments given" included as memorandum items is set out below:

Breakdown of exposure and hedging on guarantees and contingent commitments - 31-12-2022

(Millions of euros)

	Off balance sheet exposure			Provision
	Stage 1	Stage 2	Stage 3	Stage 1	Stage 2	Stage 3
Financial guarantees given	10,067	668	189	-22	-41	-173
Loan commitments given	108,527	3,920	353	-57	-12	-18
Other commitments given	36,705	1,333	403	-16	-17	-191

Breakdown of exposure and hedging on guarantees and contingent commitments - 31-12-2021

(Millions of euros)

	Off balance sheet exposure			Provision
	Stage 1	Stage 2	Stage 3	Stage 1	Stage 2	Stage 3
Financial guarantees given	7,788	800	247	-7	-11	-57
Loan commitments given	97,870	3,696	353	-75	-17	-9
Other commitments given	32,207	1,050	406	-13	-27	-245

Breakdown of exposure and hedging on guarantees and contingent commitments - 31-12-2020

(Millions of euros)

	Off balance sheet exposure			Provision
	Stage 1	Stage 2	Stage 3	Stage 1	Stage 2	Stage 3
Financial guarantees given	5,902	294	164	-7	-9	-64
Loan commitments given	75,400	2,772	327	-43	-11	-5
Other commitments given	19,486	553	168	-7	-10	-37

The Group only needs to pay the amount of contingent liabilities if the guaranteed counterparty breaches its obligations. It believes that most of these risks will reach maturity without being settled.

With respect to contingent commitments, the Group has an undertaking to facilitate funds to customers through drawables on lines of credit and other commitments, whenever it receives a request and subject to compliance with certain conditions by the counterparties. It believes that a large portion of them will fall due prior to drawdown, either because they will not be requested by customers or because the drawdown conditions will not be met.

The breakdown of "Loan commitments given" included as memorandum items in the balance sheet, is set out below:

Loan commitments given

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Available	Limits	Available	Limits	Available	Limits
Drawable by third parties
Credit institutions	85	362	126	300	103	943
Public administrations	4,755	5,609	5,669	6,289	4,390	6,890
Other sectors	107,960	127,364	96,124	122,895	74,006	103,697
TOTAL	112,800	133,335	101,919	129,484	78,499	111,530
Of which: conditionally drawable	6,313		5,002		3,839

27. OTHER SIGNIFICANT DISCLOSURES

27.1. OPERATIONS ON BEHALF OF THIRD PARTIES

The breakdown of off-balance sheet funds managed on behalf of third parties is as follows:

Breakdown of customer funds

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Assets under management	144,831	158,019	106,643
Mutual funds, portfolios and SICAVs	101,519	110,089	71,315
Pension funds	43,312	47,930	35,328
Other ^*	8,186	6,983	5,115
TOTAL	153,017	165,002	111,758

( ^*) Includes temporary funds associated with transfers and collections, in addition to other funds distributed by CaixaBank and Banco BPI.

27.2. TRANSFERRED FINANCIAL ASSETS

The Group converted a portion of their homogeneous loan and credits into fixed-income securities by transferring the assets to various securitisation special purpose vehicles set up for this purpose. In accordance with current regulations, securitisations in which substantially all the risk is retained may not be derecognised.

The balances classified in "Financial assets at amortised cost" corresponding to the outstanding amounts of securitised loans on the balance sheet are as follows:

Breakdown of securitised assets

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Securitised mortgage loans	22,987	26,449	21,929
Other securitised loans	4,761	7,896	10,151
Loans to companies	2,995	4,771	5,372
Leasing arrangements	408	666	1,045
Consumer financing	1,134	2,211	3,733
Other	224	248	1
TOTAL	27,748	34,345	32,080

The breakdown of securitisations arranged, with the amounts outstanding and the amounts corresponding to credit enhancements granted to the securitisation funds is provided below:

Loan securitisation - issues on on-balance-sheet securitised loans (1)

(Millions of euros)

				Asset securitised
	Issue date	Acquired by:	Initial exposure securitised	2022	2021	2020
July	2003	AyT Génova Hipotecario III, FTH	800	0	0	75
March	2004	AyT Génova Hipotecario IV, FTH	800	0	72	87
November	2004	TDA 22 Mixto, FTH	388	23	28	25
April	2005	Bancaja 8 FTA ^*	1,650	171	204
June	2005	AyT Hipotecario Mixto IV, FTA	200	0	19	23
June	2005	AyT Génova Hipotecario VI, FTH	700	72	89	104
November	2005	AyT Génova Hipotecario VII, FTH	1,400	178	213	250
December	2005	Valencia Hipotecario 2, FTH	940	0	98	114
February	2006	Bancaja 9 FTA ^*	2,000	294	339
April	2006	MBS Bancaja 3 FTA ^*	800	87	105
June	2006	AyT Génova Hipotecario VIII,	2,100	255	308	365
July	2006	AyT Hipotecario Mixto V, FTA	873	74	88	55
October	2006	Caixa Penedés 1 TDA ^*	23	2	2
November	2006	Valencia Hipotecario 3, FTA	901	129	151	176
November	2006	AyT Génova Hipotecario IX, FTH	1,000	177	208	242
November	2006	Madrid RMBS I, FTA ^*	2,000	491	571
November	2006	AYT Caja Murcia Hipotecario II FTA ^*	315	0	31
December	2006	Madrid RMBS II, FTA ^*	1,800	427	459
December	2006	TDA 27, FTA ^*	290	34	40
January	2007	Bancaja 10, FTA ^*	2,600	591	671
April	2007	MBS Bancaja 4 FTA ^*	1,850	264	309
June	2007	AyT Génova Hipotecario X, FTH	1,050	198	235	270
June	2007	AyT Caja Granada Hipotecario I	400	68	76
June	2007	Caixa Penedés Pymes 1 TDA ^*	48	3	4
July	2007	Madrid RMBS III, FTA ^*	3,000	914	1,008
July	2007	Bancaja 11, FTA ^*	2,000	547	607
September	2007	Caixa Penedés 2 TDA ^*	24	0	1
November	2007	FonCaixa FTGENCAT 5, FTA	1,000	111	134	158
December	2007	AyT Génova Hipotecario XI, FTH	1,200	244	288	330
December	2007	Madrid RMBS IV, FTA ^*	2,400	678	749
July	2008	FonCaixa FTGENCAT 6, FTA	750	82	100	117
July	2008	AyT Génova Hipotecario XII, FTH	800	180	214	243
August	2008	Caixa Penedés FTGENCAT1 TDA ^*	6	2	3
December	2008	Madrid RMBS Residencial I, FTA ^*	805	296	334
December	2008	Bancaja 13, FTA ^*	2,895	1,119	1,261
June	2010	Madrid RMBS Residencial II,FTA ^*	600	278	309
December	2010	AyT Goya Hipotecario III, FTA	4,000	1,224	1,428	1,608
April	2011	AyT Goya Hipotecario IV, FTA	1,300	396	465	526
December	2011	AyT Goya Hipotecario V, FTA	1,400	433	515	578
February	2016	CaixaBank RMBS 1, FT	14,200	8,160	9,212	10,126
June	2016	CaixaBank Consumo 2, FT	1,300	136	170	228
November	2016	CaixaBank Pymes 8, FT	2,250	363	488	656
March	2017	CaixaBank RMBS 2, FT	2,720	1,691	1,891	2,088
July	2017	CaixaBank Consumo 3, FT	2,450	265	401	609
November	2017	CaixaBank Pymes 9, FT	1,850	270	447	675
December	2017	CaixaBank RMBS 3, FT	2,550	1,530	1,743	1,946
May	2018	CaixaBank Consumo 4, FT	1,700	109	260	483
November	2018	CaixaBank Pymes 10, FT	3,325	822	1,188	1,682
June	2019	CaixaBank Leasings 3, FT	1,830	408	666	1,045
November	2019	CaixaBank Pymes 11, FT	2,450	962	1,334	1,793
June	2020	CaixaBank Consumo 5, FT	3,550	997	1,825	2,920
November	2020	CaixaBank Pymes 12, FT	2,550	1,301	1,834	2,483
September	2021	Caixabank Corporates 1 FT	2,302	692	1,150
TOTAL			92,135	27,748	34,345	32,080

Loan securitisation - issues on on-balance-sheet securitised loans (2)

(Millions of euros)

		Repo securitisation bonds
	Issue date	2022	2021	2020
July	2003	0	0	29
M arch	2004	0	13	15
November	2004	9	11	12
April	2005	58	73
June	2005	0	8	11
June	2005	45	55	66
November	2005	73	86	101
December	2005	0	34	35
February	2006	165	188
April	2006	46	228
June	2006	143	170	198
July	2006	37	45	39
October	2006	0	0
November	2006	52	63	62
November	2006	73	84	93
November	2006	375	411
November	2006	0	21
December	2006	337	373
December	2006	14	14
January	2007	546	602
April	2007	193	220
June	2007	201	236	272
June	2007	58	65
June	2007	0	0
July	2007	840	918
July	2007	515	522
September	2007	0	0
November	2007	38	38	38
December	2007	252	293	335
December	2007	628	691
July	2008	23	23	23
July	2008	183	214	243
August	2008	0	0
December	2008	140	155
December	2008	1,107	1,201
June	2010	142	158
December	2010	1,233	1,423	1,605
April	2011	417	479	539
December	2011	461	528	599
February	2016	8,240	9,208	10,121
June	2016	139	0	239
November	2016	382	512	700
March	2017	1,734	1,923	2,121
July	2017	265	397	613
November	2017	272	455	690
December	2017	1,540	1,744	1,950
May	2018	133	293	546
November	2018	892	1,283	1,826
June	2019	424	688	1,078
November	2019	1,045	1,442	1,919
June	2020	1,155	2,068	3,550
November	2020	1,339	1,879	2,550
September	2021	833	2,301
TOTAL		26,797	33,836	32,218

Loan securitisation - issues on on-balance-sheet securitised loans (3)

(Millions of euros)

		Credit enhancements
	Issue date	2022	2021	2020
July	2003	0	0	8
March	2004	0	8	8
November	2004	2	2	2
April	2005	28	28
June	2005	0	1	1
June	2005	5	5	5
November	2005	8	8	8
December	2005	0	5	5
February	2006	25	25
April	2006	0	0
June	2006	9	9	9
July	2006	4	4	2
October	2006	0	0
November	2006	5	5	5
November	2006	5	5	5
November	2006	71	71
November	2006	0	2
December	2006	69	69
December	2006	6	6
January	2007	35	35
April	2007	1	1
June	2007	8	10	10
June	2007	5	5
June	2007	0	0
July	2007	129	129
July	2007	28	28
September	2007	0	0
November	2007	27	27	27
December	2007	30	31	34
December	2007	242	242
July	2008	19	19	19
July	2008	30	30	30
August	2008	0	0
December	2008	202	225
December	2008	179	179
June	2010	169	184
December	2010	124	142	160
April	2011	44	55	62
December	2011	49	59	63
February	2016	568	568	568
June	2016	52	52	52
November	2016	71	71	71
March	2017	107	118	129
July	2017	12	18	27
November	2017	12	20	31
December	2017	64	72	80
May	2018	7	14	25
November	2018	39	56	79
June	2019	23	39	59
November	2019	53	74	116
June	2020	68	117	178
November	2020	73	103	128
September	2021	115	117
TOTAL		2,822	3,093	2,006

( ^*) Securitisations from the business combination with Bankia (see Note 7).

The amounts outstanding of derecognised securitisation transactions were not significant.

Securitisation bonds placed in the market are recognised under "Financial liabilities at amortised cost - Debt securities issued" in the accompanying balance sheets, and they are the difference between the carrying amount of securitised bonds and the carrying amount of repo bonds.

Furthermore, the Group maintains the following synthetic securitisation transactions, by means of which it partially transfers the credit risk of a group of borrowers classified under the heading "Financial assets at amortised cost - Loans and advances" of the balance sheet:

Synthetic securitisation transactions

(Millions of euros)

				Carrying amount securitised
Issue date		Fund	Initial exposure securitised	31/12/2022	31/12/2021	31/12/2020
February	2016	Gaudí I	2,025		43	65
August	2018	Gaudí II	2,025	367	805	1,509
April	2019	Gaudí III	1,282	544	899	1,277
June	2022	Gaudí IV	1,500	1,317
TOTAL			6,832	2,228	1,747	2,851

The transfer of credit risk takes the form of a financial guarantee and it is not considered a substantial transfer of risk and profit. Therefore, the underlying exposure is maintained on the balance sheet.

27.3. SECURITIES DEPOSITS AND INVESTMENT SERVICES

The breakdown, by type, of the securities deposited by customers with the Group and third parties is as follows:

Securities deposited by third parties

(Millions of euros)

	31-12-2022	31-12-2021	31-12-2020
Book entries	138,161	140,158	178,841
Securities recorded in the market's central book-entry office	104,224	102,496	150,013
Equity instruments. Quoted	74,203	74,462	59,211
Equity instruments. Unquoted	4,265	4,055	3,289
Debt securities. Quoted	25,526	23,866	87,468
Debt securities. Unquoted	230	113	45
Securities registered at the Entity	610	767
Equity instruments. Unquoted	610	767
Securities entrusted to other depositories	33,327	36,895	28,828
Equity instruments. Quoted	663	931	652
Equity instruments. Unquoted	17,895	22,066	14,581
Debt securities. Quoted	12,518	12,141	12,306
Debt securities. Unquoted	2,251	1,757	1,289
Securities	5,914	5,910	5,349
Held by the Entity	5,507	5,565	5,025
Equity instruments	5,490	5,548	5,008
Debt securities	17	17	17
Entrusted to other entities	407	345	324
Equity instruments	407	345	324
Other financial instruments	66,855	73,355	69,350
TOTAL	210,930	219,423	253,540

27.4. FINANCIAL ASSETS DERECOGNISED DUE TO IMPAIRMENT

Changes in the items derecognised from the balance sheet because recovery was deemed remote are summarised below. These financial assets are recognised under "Suspended assets" in the memorandum accounts supplementing the balance sheet:

Changes in written-off assets

(Millions of euros)

	2022	2021	2020
OPENING BALANCE	18,534	13,469	13,911
Additions:	2,189	6,361	1,307
Of which due to business combinations (Note 7)		4,223
Disposals:	2,447	1,296	1,749
Cash recovery of principal (Note 36)	382	454	450
Disposal of written-off assets ^**	1,037	564	967
Due to expiry of the statute-of-limitations period, forgiveness or any other	1,028	278	332
CLOSING BALANCE	18,276	18,534	13,469
Of which: interest accrued on the non-performing loans ^*	6,425	6,342	4,222

( ^*) Primarily includes interest on financial assets at the time of derecognition from the consolidated balance sheet.

( ^**) Corresponds to the sale of non-performing and written-off assets and includes interest related to these portfolios.

28. INTEREST INCOME

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of interest income

(Millions of euros)

	2022	2021	2020
Central banks	358
Credit institutions	115	20	35
Debt securities	2,300	1,906	1,950
Financial assets held for trading	7	1
Financial assets compulsorily measured at fair value through profit or loss		1	2
Financial assets at fair value with changes in other comprehensive income	1,751	1,742	1,812
Financial assets measured at amortised cost	542	162	136
Loans and advances to customers and other financial income	6,541	5,332	4,534
Public administrations	128	80	65
Trade credits and bills	312	195	150
Mortgage loans	2,477	2,059	1,778
Loans secured by personal guarantee	3,371	2,830	2,432
Other	253	168	109
Adjustments to income due to hedging transactions	-679	-254	-129
Interest income - liabilities	598	888	374
TOTAL	9,233	7,892	6,764
Of which: interest on exposures in stage 3	227	205	152

The average effective interest rate of the various financial assets categories calculated on average net balances (excluding rectifications) are as follows:

Average return on assets

(Percentage)

	2022	2021	2020
Deposits at central banks	0.30%	0.00%	0.00%
Financial assets held for trading - debt securities	1.04%	0.10%	0.02%
Financial assets compulsorily measured at fair value through profit or loss - Debt securities	3.14%	5.07%	6.23%
Financial assets measured at fair value with changes in other comprehensive income / Available-for-sale financial assets - Debt securities	2.58%	2.33%	2.33%
Financial assets measured at amortised cost
Loans and advances to credit institutions	1.53%	0.49%	0.78%
Loans and advances to customers	1.93%	1.72%	2.02%
Debt securities	0.73%	0.29%	0.56%

29. INTEREST EXPENSE

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of interest expense

(Millions of euros)

	2022	2021	2020
Central banks	-19	-2	-15
Credit institutions	-275	-24	-49
Money market transactions through counterparties	-51
Customer deposits and other finance costs	-251	-184	-262
Debt securities issued (excluding subordinated liabilities) ^*	-538	-501	-571
Adjustments to expenses as a consequence of hedging transactions	196	448	471
Finance cost of insurance products	-1,020	-1,240	-1,280
Asset interest expense	-342	-391	-133
Lease liability interest (Note 22.4)	-10	-18	-19
Other	-7	-5	-6
TOTAL	-2,317	-1,917	-1,864

( ^*) Excluding interest from preference shares accountable as Additional Tier 1 capital (recognised in shareholders' equity)

The average effective interest rate of the various financial liabilities categories calculated on average net balances (excluding rectifications) is set out below:

Average return on liabilities

(Percentage)

	2022	2021	2020
Deposits from central banks	0.02%	0.00%	0.04%
Deposits from credit institutions	0.99%	0.11%	0.37%
Customer deposits	0.07%	0.05%	0.10%
Debt securities issued (excluding subordinated liabilities)	1.02%	1.08%	1.62%
Subordinated liabilities	1.03%	0.77%	1.71%

30. DIVIDEND INCOME

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Dividend income

(Millions of euros)

	2022	2021	2020
Telefónica	69	90	100
Banco Fomento de Angola	87	98	40
Other	7	4	7
TOTAL	163	192	147

31. FEE AND COMMISSION INCOME

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of fee and commission income

(Millions of euros)

	2022	2021	2020
Contingent liabilities	251	215	161
Credit facility drawdowns	116	105	70
Exchange of foreign currencies and banknotes	172	135	99
Collection and payment services	1,412	1,355	934
Of which: credit and debit cards	616	573	423
Securities services	115	118	102
Marketing of non-banking financial products	1,773	1,698	1,164
Other fees and commissions	567	503	381
TOTAL	4,406	4,129	2,911

Breakdown of fee and commission expense

(Millions of euros)

	2022	2021	2020
Assigned to other entities and correspondents	-136	-166	-105
Of which: transactions with cards and ATMs	-112	-144	-89
Securities transactions	-29	-31	-25
Other fees and commissions	-231	-227	-205
TOTAL	-396	-424	-335

32. GAINS/(LOSSES) ON FINANCIAL ASSETS AND LIABILITIES

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of gains/(losses) on financial assets and liabilities

(Millions of euros)

	2022	2021	2020
Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net	41	37	187
Financial assets measured at amortised cost	1	4	114
Debt securities		4	114
Financial liabilities at amortised cost	6	-1
Financial assets at fair value with changes in other comprehensive income	34	34	73
Debt securities	34	34	73
Gains/(losses) on financial assets and liabilities held for trading (net)	476	97	127
Equity instruments	18	7	-79
Debt securities	3		7
Financial derivatives	455	90	199
Gains/(losses) on financial assets not designated for trading compulsorily measured at fair value through profit or loss (net)	9	3	24
Equity instruments	-9	-9	-14
Debt securities		7	-5
Loans and advances		-1	-5
Gains/(losses) from hedge accounting, net	-18	51	-3
Ineffective portions of fair value hedges	-18	1	-3
Valuation of hedging derivatives (Note 15)	-5,123	-933	4
Valuation of hedged items (Note 15)	5,105	934	-7
Other		50
TOTAL	490	182	287

33. OTHER OPERATING INCOME AND EXPENSES AND ASSETS AND LIABILITIES UNDER INSURANCE OR REINSURANCE CONTRACTS

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of other operating income

(Millions of euros)

	2022	2021	2020
Income from investment property and other income	94	98	92
Sales and income from provision of non-financial services	349	311	261
Other income	161	142	296
TOTAL	604	551	649

Breakdown of other operating expense

(Millions of euros)

	2022	2021	2020
Contribution to the Deposit Guarantee Fund / National Resolution Fund ^*	-566	-596	-355
Operating expenses from investment properties and other ^**	-167	-118	-114
Changes in inventories and other expenses of non-financial activities	-291	-268	-233
Expenses associated with regulators and supervisors	-26	-25	-14
Equity provision associated with monetisable DTAs	-149	-124	-55
Other items	-368	-314	-234
TOTAL	-1,567	-1,445	-1,005

( ^*) The primary aim of the Single Resolution Mechanism (SRM) is to ensure the rapid and consistent resolution of failing banks in Europe with minimum costs. Its regulation establishes uniform rules and a standard procedure for the resolution of credit institutions and certain investment firms, and a Single Resolution Fund (SRF). This establishes a centralised decision-making power vested in the Single Resolution Board (SRB) and national resolution authorities. Law 11/2015 and Royal Decree 1012/2015 established the requirements that banks would make at least one annual contribution to the National Resolution Fund (NRF) in addition to the annual contribution that will be made to the Deposits Guarantee Fund (DGF) by member institutions. The total amount of the contributions that must be made to the NRF by all Spanish banking entities must be equal to 1% of the total amount of all deposits guaranteed by the DGF before 31 December 2024. The NRF was merged with the other national funds of the member States of the EU into the SRF in January 2016. By virtue of the provisions set forth in the SRM Regulation, the SRB replaced the national resolution authorities and assumed the administration of the SRF and the calculation of the banking contributions, which will be adjusted to the risk profile of each institution according to the criteria established in Royal Decree 1012/2015 and Commission Delegated Regulation 2015/63. The aim of the SRF is to reach a total amount of EUR 55 billion in 2024.In addition to the foregoing, the FROB can request extraordinary contributions. Law 11/2015 also established and additional rate which will be used to finance the activities of the FROB as a resolution authority and which is the equivalent of 2.5% of the annual contribution that will be made to the National Resolution Fund.

( ^**) Includes expenses related to leased investment property.

Breakdown of income from assets under the insurance or reinsurance business

(Millions of euros)

	2022	2021	2020
Insurance and reinsurance premium income ^*	1,268	1,075	1,058
Reinsurance income	61	53	49
TOTAL	1,329	1,128	1,107

( ^*) Net of the portion relating to financial expenses.

Breakdown of expense from liabilities under the insurance or reinsurance business

(Millions of euros)

	2022	2021	2020
Paid provisions and other expenses related to insurance activity ^*	-429	-427	-411
Net technical provisions ^*	26	10	-40
Insurance and reinsurance premiums paid	-60	-61	-58
TOTAL	-463	-478	-509

( ^*) Net of the portion relating to financial expenses.

34. PERSONNEL EXPENSES

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of personnel expenses

(Millions of euros)

	2022	2021	2020
Wages and salaries	-2,707	-2,790	-2,088
Social security contributions	-641	-654	-504
Contributions to pension plans (savings and risk) ^*	-173	-142	-156
Transfers to defined benefit plans	3	404	2
of which: 2021 labour agreement (Note 23)		394
Other personnel expenses	-102	-2,406	-95
of which: 2021 labour agreement (Note 23)		-2,272
TOTAL	-3,620	-5,588	-2,841

( ^*) Includes premiums paid

The expense recognised in 'Contributions to defined pension plans' includes mainly mandatory contributions stipulated which are made to cover retirement, disability and death obligations of serving employees.

"Other personnel expenses" includes, inter alia, training expenses, education grants and indemnities and other short term benefits. This heading also records the cost of the capital-instrument-based remuneration plans, recorded with a balancing entry under 'Shareholders' equity - Other equity items' of the accompanying balance sheet, net of the corresponding tax effect.

Share-based remuneration plans are specified in the Annual Corporate Governance Report - Remuneration.

The average number of employees, by professional category and gender, is set out below:

Average number of employees ^* (1)

(Number of employees)

	2022			2021
	Male	Female	Of which: with a disability ≥ 33%	Male	Female	Of which: with a disability ≥ 33%
Directors	3,544	2,300	36	4,624	2,858	39
Middle	3,907	4,103	63	3,783	4,095	66
Advisers	12,284	19,128	479	13,202	19,658	483
TOTAL	19,735	25,531	578	21,609	26,611	588

Average number of employees ^* (2)

(Number of employees)

	2020
	Male	Female	Of which: with a disability ≥ 33%
Directors	3,321	2,113	24
Middle	3,317	3,637	43
Advisers	9,565	13,664	295
TOTAL	16,203	19,414	362

( ^*) The distribution, by professional category and gender, at any given time is not significantly different from that of the average number of employees

35. OTHER ADMINISTRATION EXPENSES

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of other administration expenses

(Millions of euros)

	2022	2021	2020
IT and systems	-489	-706	-444
Advertising and publicity ^*	-169	-173	-168
Property and fixtures	-151	-158	-113
Rent ^**	-26	-59	-37
Communications	-69	-79	-72
Outsourced administrative services	-142	-97	-57
Tax contributions	-69	-60	-38
Surveillance and security carriage services	-44	-41	-31
Representation and travel expenses	-52	-33	-24
Printing and office materials	-15	-20	-20
Technical reports	-67	-88	-58
Legal and judicial	-11	-16	-15
Governing and control bodies	-9	-9	-10
Other expenses	-330	-227	-111
TOTAL	-1,643	-1,766	-1,198

( ^*) Includes advertising in media, sponsorships, promotions and other commercial expenses.

( ^**) The short-term amount of rental expenses in which IFRS 16 has not been applied is immaterial.

Information on the average payment period to suppliers

The following tables provide a breakdown of the required information relating to payments made and pending at the balance sheet date:

Payments made and outstanding at the reporting date - 2022

(Millions of euros)

	Amount	Percentage	Number of invoices	Percentage
Total payments made	3,732		1,553,434
Of which: paid within the legal period ^*	3,374	90.4 %	1,507,339	97.0 %
Total payments pending	53		19,456
TOTAL PAYMENTS IN THE YEAR	3,785		1,572,890

Average supplier payment period and ratios - 2022

(Day)

	2022
Average payment period to suppliers	16,8
Ratio of transactions paid	16,6
Ratio of transactions pending payment	28,3

External auditor fees

"Technical reports" relates to fees and expenses, excluding the related VAT, paid to the auditor, broken down as follows:

Breakdown of external auditor fees ^*

(Thousands of euros)

	2022	2021	2020
Auditor of the Group (PwC ^**)
Audit	6,227	6,637	4,026
Statutory or voluntary audit	6,227	6,598	3,546
Audit of merger balance sheet + proposed change to distribution of profits		39	480
Audit-related services	2,822	2,661	1,837
Review services prescribed by statutory or supervisory regulation to an auditor	1,875	1,858	1,293
Limited review	936	915	719
Customer asset protection reports	138	187	122
Review of pro forma financial information		45	70
Review of TLTRO III forms / other Eurosystem eligibility reports	180	145	28
Review of forms of indicators to calculate the contribution to the SRF	31	39	18
Report on the financial status and capital adequacy	428	445	214
Report on agreed procedures involving impairment of BPI credit portfolio	113	82	122
Other reports on agreed procedures in BPI	49
Other audit-related services	947	803	544
Comfort letters for issues	469	427	277
Non-Financial Information Review Report	162	75	45
Report on the Internal Control System for Financial Information	24	124	75
Reports on social discount assurance and carbon footprint	63	69	22
Other assurance services	229	108	125
Other services	241	29	2
TOTAL	9,290	9,327	5,865

( ^*) The services contracted with our auditors comply with the Spanish Auditing Act's requirements of independence, and none of the work performed is incompatible with auditing duties.

( ^**) CaixaBank's separate and consolidated financial statements for 2020, 2021 and 2022 were audited by PricewaterhouseCoopers Auditores, S.L., with registered address at Paseo de la Castellana 259 B, Torre PWC, 28046 Madrid. The financial statements have been filed in the corresponding public registers of the CNMV. A resolution was carried at the Annual General Meeting (AGM) held on 6 April 2017 to ratify the appointment of PricewaterhouseCoopers Auditores, S.L. as financial auditor of CaixaBank and the Group for 2018 through to 2020, following the reasoned recommendation and preference issued by the Audit and Control Committee, after completing the selection process carried out in accordance with the criteria set out in Regulation (EU) 537/2014 of 16 April on specific requirements regarding statutory audit of public-interest entities. On 22 May 2020 and 14 May 2021, the AGM approved the extension of the current auditor's appointment to 2021 and 2022, respectively. Similarly, the AGM of 8 April 2022 approved the current auditor's reappointment for 2023.

PricewaterhouseCoopers Auditors, S.L. did not resign nor was it removed from its duties as auditor of CaixaBank during 2020, 2021 or 2022, or up to the reporting date of these financial statements.

Note : The regulatory ratio, calculated as the sum of "Audit related services - Other audit-related services'' and "Other services'' over the average audit fees for the past 3 financial years overdue amounts to 26%. Pursuant to current regulations, CaixaBank has only excluded from the numerator the review services prescribed by legal regulations for the auditor, under the terms of Regulation (EU) No. 537/2014 of the European Parliament and of the Council in article 4 (2).

36. IMPAIRMENT ON FINANCIAL ASSETS NOT MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of impairment or reversal of impairment on financial assets not measured at fair value through profit or loss

(Millions of euros)

	2022	2021	2020
Financial assets measured at amortised cost	-883	-897	-1,942
Loans and advances	-883	-897	-1,942
Net allowances (Note 14)	-574	-878	-1,694
Of which - Credit institutions	5	-7	-1
Of which - Customers	-579	-871	-1,693
Of which POCIs	-140	-142
Write-downs	-691	-473	-698
Recovery of loans written off (Note 27.4)	382	454	450
Financial assets at fair value with changes in other comprehensive income	1		-1
TOTAL	-882	-897	-1,943

37. IMPAIRMENT OR REVERSAL OF IMPAIRMENT OF NON-FINANCIAL ASSETS

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of the impairment/(reversal) of impairment on non-financial assets

(Millions of euros)

	2022	2021	2020
Tangible assets (Note 18)	-86	-62	-110
Property, plant and equipment for own use	-81	-87	-30
Provisions	-3	-16
Releases	3		5
Write-downs	-81	-71	-35
Investment property	-5	25	-80
Provisions	-108	-57	-145
Releases	103	82	65
Intangible assets (Note 19)	-14	-58	-14
Provisions	-5	-5
Write-downs	-9	-53	-14
Other (Note 20)	-2	-38	12
Inventories	-3	-4	-2
Provisions	-5	-6	-4
Releases	2	2	2
Other	1	-34	14
TOTAL	-102	-158	-112

38. GAINS/(LOSSES) ON DERECOGNITION OF NON-FINANCIAL ASSETS

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of gains/(losses) on derecognition of non-financial assets (1)

(Millions of euros)

	2022			2021
	Gains	Losses	Net profit/(loss)	Gains	Losses	Net profit/(loss)
On disposals of tangible assets	33	-14	19	46	-24	22
On disposals of investments		-1	-1	1		1
On disposals of other assets	24	-1	23	273	-1	272
Of which: Sale of businesses from Bankia (Note 41)				266		266
TOTAL	57	-16	41	320	-25	295

Breakdown of gains/(losses) on derecognition of non-financial assets (2)

(Millions of euros)

	2020
	Gains	Losses	Net profit/(loss)
On disposals of tangible assets	44	-26	18
On disposals of investments	7	-1	6
On disposals of other assets	3		3
Of which: Sale of businesses from Bankia (Note 41)
TOTAL	54	-27	27

39. PROFIT/(LOSS) FROM NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE NOT QUALIFYING AS DISCONTINUED OPERATIONS

The breakdown of this item in the accompanying statement of profit or loss is as follows:

Breakdown of profit/(loss) from non-current assets classified as held for sale

(Millions of euros)

	2022	2021	2020
Impairment losses on non-current assets held for sale (Note 21)	-229	-123	-107
Impairment losses on non-current investments held for sale (Note 21)	-1
Gain on disposal of investments (Note 16)	4	55	428
Of which: Erste Bank		54
Of which: Comercia Global Payments			420
Profit/(loss) on disposal of non-current assets held for sale	216	55	13
Of which: Gain on the sale of the property at Paseo Castellana 51 (Note 21)	101
TOTAL	-10	-13	334

40. INFORMATION ON THE FAIR VALUE

The Group's process for determining fair value ensures that the assets and liabilities are measured according to applicable criteria. In that regard, the measurement techniques used to estimate fair value comply with the following aspects:

•	The most consistent and appropriate financial and economic methods are used, which have proven to provide the most realistic estimate of the price of the financial instrument and are commonly used by the market.
•	They maximise the use of available information, both in terms of observable data and recent transactions of a similar nature, and limit -to the extent possible- the use of unobservable data and estimates.
•	They are widely and sufficiently documented, including the reasons for their choice compared to other alternatives.
•	The measurement methods chosen are respected over time, provided that there are no reasons to change the reasons for their choice.
•	The validity of measurement models is regularly assessed using recent transactions and current market data.

Assets and liabilities are classified into one of the following levels using the following method to obtain their fair value:

•

Level 1: assets and liabilities measured using the price that would be paid for them on an organised, transparent and deep market ("quoted price" or "market price"). In general, the following are included at this level:

•

Quoted debt securities. The following are mainly classified at this level:

•	Spanish and foreign public debt bonds, as well as other debt instruments issued by Spanish and foreign issuers.
•	Spanish and foreign public debt bonds under the insurance business.
•	Own securities issued by the Group, mainly vanilla bonds and mortgage bonds.

•

Quoted equity instruments. Investments in quoted shares and investments in collective investment institutions are mainly classified at this level.

•

Derivatives traded in organised markets.

•

Level 2: assets and liabilities in which the relevant data used in measurement are directly or indirectly observable on the market, such as quoted prices for similar assets or liabilities in the active markets, interest rate curves or credit differentials. In general, the following are included at this level:

•	Debt securities of quoted debt with a low volume and level of market activity. Public debt bonds of Spanish autonomous communities, as well as other private debt instruments, are mainly classified at this level.
•	Over-the-counter hedging and trading derivatives. Interest-rate swaps, as well as financial swaps on goods and other risks, are mainly classified at this level.
•	Real estate assets corresponding to real estate investments, inventories, as well as assets arising from credit regularisations.

•

Level 3: assets and liabilities for which the relevant data used for measurement are not observable market data, for the measurement of which alternative techniques are used, including price requests submitted to the issuer or the use of market parameters corresponding to instruments with a risk profile that can be equated to that of the instrument being measured. In general, the following are included at this level:

•	Unquoted debt securities. Unquoted debt bonds are mainly classified at this level.
•	Loans and receivables.
•	Deposits.
•	Unquoted equity instruments.

40.1. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Fair value of financial assets (FA) measured at fair value (FV) (1)

(Millions of euros)

	31-12-2022
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FA held for trading (Note 11)	7,382	7,382	452	6,872	58
Derivatives	6,963	6,963	37	6,872	54
Equity instruments	233	233	233
Debt securities	186	186	182		4
FA not designated for trading compulsorily measured at FV through profit or loss (Note 12)	183	183	44	4	135
Equity instruments	127	127	44	4	79
Debt securities	6	6			6
Loans and advances	50	50			50
FA designated at FV through profit or loss
Equity instruments
Debt securities
Loans and advances
FA at FV with changes in other comprehensive income	12,942	12,942	12,275		667
Equity instruments	1,351	1,351	684		667
Debt securities	11,591	11,591	11,591
Derivatives - Hedge accounting (Note 15)	649	649		649
Assets under the insurance business (Note 17)	67,928	67,928	67,796	40	92
Financial assets held for trading	26	26	26
Debt securities	26	26	26
Financial assets designated at FV through profit or loss	19,108	19,108	19,053	5	50
Equity instruments	11,086	11,086	11,086
Debt securities	7,985	7,985	7,930	5	50
Loans and advances - Credit institutions	37	37	37
Available-for-sale financial assets	48,794	48,794	48,717	35	42
Equity instruments	84	84	49	35
Debt securities	48,710	48,710	48,668		42

Fair value of financial assets (FA) measured at fair value (FV) (2)

(Millions of euros)

	31-12-2021
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FA held for trading (Note 11)	10,925	10,925	637	10,259	29
Derivatives	10,319	10,319	35	10,259	25
Equity instruments	187	187	187
Debt securities	419	419	415		4
FA not designated for trading compulsorily measured at FV through profit or loss (Note 12)	237	237	47	5	185
Equity instruments	165	165	47	5	113
Debt securities	5	5			5
Loans and advances	67	67			67
FA designated at FV through profit or loss
Equity instruments
Debt securities
Loans and advances
FA at FV with changes in other comprehensive income	16,403	16,403	15,630	129	644
Equity instruments	1,646	1,646	1,002		644
Debt securities	14,757	14,757	14,628	129
Derivatives - Hedge accounting (Note 15)	1,038	1,038		1,038
Assets under the insurance business (Note 17)	83,148	83,148	82,969	34	145
Financial assets held for trading	111	111	111
Debt securities	111	111	111
Financial assets designated at FV through profit or loss	20,557	20,557	20,423	34	100
Equity instruments	13,159	13,159	13,159
Debt securities	7,316	7,316	7,252	34	30
Loans and advances - Credit institutions	82	82	12		70
Available-for-sale financial assets	62,480	62,480	62,435		45
Equity instruments	171	171	171
Debt securities	62,309	62,309	62,264		45

Fair value of financial assets (FA) measured at fair value (FV) (3)

(Millions of euros)

	31-12-2020
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FA held for trading (Note 11)	6,357	6,357	1,084	5,233	40
Derivatives	5,301	5,301	35	5,231	35
Equity instruments	255	255	255
Debt securities	801	801	794	2	5
FA not designated for trading compulsorily measured at FV through profit or loss (Note 12)	317	317	50	3	264
Equity instruments	180	180	50	3	127
Debt securities	52	52			52
Loans and advances	85	85			85
FA designated at FV through profit or loss
Equity instruments
Debt securities
Loans and advances
FA at FV with changes in other comprehensive income	19,309	19,309	18,693	44	572
Equity instruments	1,414	1,414	842		572
Debt securities	17,895	17,895	17,851	44
Derivatives - Hedge accounting (Note 15)	515	515		515
Assets under the insurance business (Note 17)	76,893	76,893	76,715	130	48
Financial assets held for trading	545	545	545
Debt securities	545	545	545
Financial assets designated at FV through profit or loss	14,705	14,705	14,575	130
Equity instruments	9,301	9,301	9,301
Debt securities	5,297	5,297	5,167	130
Loans and advances - Credit institutions	107	107	107
Available-for-sale financial assets	61,643	61,643	61,595		48
Equity instruments
Debt securities	61,643	61,643	61,595		48

Fair value of financial liabilities (FL) measured at fair value (FV) (1)

(Millions of euros)

	31-12-2022
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FL held for trading (Note 11)	4,030	4,030	95	3,882	53
Derivatives	3,971	3,971	36	3,882	53
Short positions	59	59	59
Derivatives - Hedge accounting (Note 15)	1,371	1,371		1,371
Liabilities under the insurance business (Note 17)	18,311	18,311	18,311
Contracts designated at FV through profit or loss	18,311	18,311	18,311

Fair value of financial liabilities (FL) measured at fair value (FV) (2)

(Millions of euros)

	31-12-2021
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FL held for trading (Note 11)	5,118	5,118	323	4,773	22
Derivatives	4,838	4,838	43	4,773	22
Short positions	280	280	280
Derivatives - Hedge accounting (Note 15)	960	960		960
Liabilities under the insurance business (Note 17)	19,365	19,365	19,365
Contracts designated at FV through profit or loss	19,365	19,365	19,365

Fair value of financial liabilities (FL) measured at fair value (FV) (3)

(Millions of euros)

	31-12-2020
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FL held for trading (Note 11)	424	424	324	70	30
Derivatives	151	151	51	70	30
Short positions	273	273	273
Derivatives - Hedge accounting (Note 15)	237	237		237
Liabilities under the insurance business (Note 17)	14,608	14,608	14,608
Contracts designated at FV through profit or loss	14,608	14,608	14,608

The main valuation techniques, assumptions and inputs used in fair value estimation for levels 2 and 3 by type of financial instruments are as follows:

Instrument type		Assesment techniques	Observable inputs	Non-observable inputs
Derivatives	Swaps	Present value method	Interest rate curves and probability of default for the calculation of CVA and DVA
Derivatives	Exchange rate options	Black-Scholes model, Stochastic local volatility model and Vanna-Volga model	Interest rate curves, quoted option price and probability of default for the calculation of CVA and DVA
Derivatives	Interest rate options	Present value method and normal Black model	Interest rate curves, quoted option price and probability of default for the calculation of CVA and DVA
Derivatives	Index and equity options	Black-Scholes model and Local volatiliy	Quoted option prices, correlations, dividends and probability of default for the calculation of CVA and DVA
Derivatives	Inflation rate options	Normal Black model	Interest rate curves, credit default swap curves and probability of default for the calculation of CVS and DVA
Derivatives	Loans and advances	Present value method and intensity of default	Interest rate curves, credit default swap curves and probability of default for the calculation of CVS and DVA
Equity instruments		DCF (Discount Cash Flow), ECF (Equity Cash Flow), DDM (Dividend Discount Method) and Underlying carrying amount	Macroeconomic inputs, risk premia and market premia, market peers	Business planes, perpetual growth (g) and net equity
Debt securities		Present value method	Interest rate curves, risk premia, market peers and observable market prices	Risk premia
Loans and receivables		Present value method	Interest rate curves and early cancellation ratios	Credit loss ratios (internal models)

(1) Present value method (net present value): this model uses the cash flows of each instrument, which are established in the different contracts, and deducts them to calculate the present value.

(2) Market peers (similar asset prices): market peer instrument prices, reference indices or benchmarks are employed to calculate the performance as of the entry price or its current valuation, making subsequent adjustments to take into account the differences between the measured asset and the one taken as reference. It can also be assumed that the price of an instrument is equivalent to another one.

(3) Black and Scholes model: this model applies a log-normal distribution of the securities prices in such a way that, under a neutral risk, the return expected is the risk-free interest rate. Under this assumption, the price of vanilla options can be calculated analytically, in such a way that the volatility of the price process can be obtained by inverting the BS formula for a premium quoted on the market.

(4) Normal Black model: when interest rates approach zero (or become negative), the Black and Scholes model is unable to model interest rate options. With the same assumptions as this model, but on the assumption that forward interest rates follow a normal distribution, we obtain the Normal Black Model, which is used to measure these interest rate options.

(5) Local stochastic volatility model: in this model volatility follows a stochastic process in time according to the degree of moneyness, reproducing the volatility smiles observed in the market. These models are appropriate for long-term exotic options using Monte Carlo simulation or the resolution of differential equations for valuation purposes.

(6) Vanna-Volga model: this model is based on building the local replica portfolio whose hedging costs of second derivatives, vanna (premium derivative with respect to the volatility and the underlying) and volga (premium's second derivative with respect to the volatility), are added to the corresponding Black-Scholes prices in order to reproduce the volatility smiles.

(7) Default intensity model: a model that extracts the instant probability of default from the market Credit Default Swaps quote of a given issuer/contract. The survival function of the issuer with which credit swaps are measured is obtained using these default intensities.

(8) DCF (Discounted cash flow): This method analyses and estimates future flows for shareholders and creditors, and then updates them, discounting at a weighted average rate cost of capital (WACC).

(9) DDM (Dividend Discount Method): future dividend flows are estimated, and then updated, discounting at the cost of equity (ke). A method widely used in regulated entities with limitations, therefore, to the distribution of dividends since they must keep minimum own funds (e.g. Banking)

(10) ECF (Equity cash flow): This method analyses and estimates future flows for shareholders, and then updates them, discounting at the cost of equity (ke).

(11) Underlying carrying amount: Equity according to annual accounts. A method used for holdings for which assets are considered to be measured at or near fair value.

The measurements obtained using internal models may differ if other techniques were applied or assumptions used regarding interest rates, credit risk spreads, market risk, exchange rate risk, or the related correlations and volatilities. Nevertheless, the Group's directors consider that the models and techniques applied appropriately reflect the fair values of the financial assets and financial liabilities recognised in the balance sheet, and the gains and losses on these financial instruments.

The main measurement methods used by the Group to determine recurring fair value have not been changed during the year (the main measurement methods were not changed during the years 2021 and 2020).

Significant inputs used for financial instruments measured at fair value classified at Level 2

•	Dividends: future equity dividends in index and stock options are derived from estimated future dividends and dividend futures quotes.
•	Correlations: they are used as input in the measurement of share basket options and are extracted using the historical closing prices of the various components of each basket.
•	Probability of default for the calculation of CVA and DVA: Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments (DVA) are added to the valuation of Over The Counter (OTC) derivatives due to the risk associated with the counterparty's and own credit risk exposure, respectively. In addition, Funding Valuation Adjustment (FVA) is a valuation adjustment of derivatives of customer transactions that are not perfectly collateralised that includes the funding costs related to the liquidity necessary to perform the transaction.

The CVA is calculated bearing in mind the expected exposure with each counterparty in each future maturity. The CVA for an individual counterparty is equal to the sum of the CVA for all maturities. Adjustments are calculating by estimating exposure at default (EAD), the probability of default (PD) and loss given default (LGD) for all derivatives on any underlying at the level of the legal entity with which CaixaBank Group has exposure. Similarly, DVA is calculated by multiplying the expected negative exposure given the probabilities of default by the Group's LGD.

The data necessary to calculate PD and LGD come from the credit market prices (Credit Default Swaps). Counterparty data are applied where available. Where the information is not available, the Group performs an exercise that considers, among other factors, the counterparty's sector and rating to assign the PD and the LGD, calibrated directly to market or with market adjustment factors for the probability of default and the historical expected loss. With FVA, the adjustment shares part of the CVA/DVA approaches, since it is also based on the future credit exposure of the derivatives, but in this case the exposures are not netted by counterparty, but rather at aggregate level in order to recognise the joint management of the liquidity. The data necessary to calculate funding cost are also based on prices taken from its issuance and credit derivatives markets.

The change in the value of the CVA/FVA and DVA/FVA adjustments are recognised in "Gains/(losses) on financial assets and liabilities held for trading, net" in the statement of profit or loss.

The table below shows the changes to these adjustments:

Changes in CVA/FVA AND DVA/FVA

(Millions of euros)

	2022		2021		2020
	CVA/FVA	DVA/DFVA	CVA/FVA	DVA/DFVA	CVA/FVA	DVA/DFVA
OPENING BALANCE	-113	26	-104	22	-86	19
Additions due to business combinations (Note 7)			-80	8
Additions/changes in derivatives	69	51	72	-4	-17	3
Cancellation or maturity of derivatives			-1		-1
CLOSING BALANCE	-44	77	-113	26	-104	22

Significant inputs used for financial instruments measured at fair value classified at Level 3

Taking into account the Group's risk profile, exposure to level 3 assets and liabilities is reduced, chiefly focusing on equity instruments with a fair value based on multiple measurement models. The inputs used for estimating fair value take into account observable variables (macroeconomic inputs, risk and market premiums and comparable market variables) and unobservable variables (business plans, growth rates (g) according to estimates of institutions with recognised experience and net book equity according to the annual accounts of the measured company).

Transfers between levels

The transfers between levels of the instruments recorded at fair value are specified below:

Transfers between levels - 2022

(Millions of euros)

FROM	LEVEL 1		LEVEL 2		LEVEL 3
TO	LEVEL 2	LEVEL 3	LEVEL 1	LEVEL 3	LEVEL 1	LEVEL 2
ASSETS
Financial assets at fair value with changes in other comprehensive income			101
Debt securities			101
Financial assets measured at amortised		3	480
Debt securities		3	480
TOTAL		3	581

Transfers between asset and liability levels are made primarily when there is:

•	A significant increase or decrease in the liquidity of the asset in the market in which it is traded.
•	A significant increase or decrease in market activity related to an observable input or
•	A significant increase or decrease in the relevance of unobservable inputs, classified as Level 3 if an unobservable input is considered significant.

There were no material transfers among levels in 2021 and 2020.

Given the Group's risk profile regarding its portfolio of debt securities measured at fair value (see Note 3.4.1), the change in fair value attributable to credit risk is not expected to be significant.

Changes and transfers of financial instruments in Level 3

The change brought about in the Level 3 balance, on instruments registered at fair value, is detailed below:

Changes in Level 3 financial instruments ^** - 31-12-2022

(Millions of euros)

	FA not designated for trading ^*		FA at fair view w/changes in other comprehensive		Assets under the insurance business
	Debt sec.	Equity instruments	Debt sec.	Equity instruments	Available for sale FA Debt sec.
OPENING BALANCE	5	113		644	45
Reclassifications to other levels				-7
Total gains/(losses)		-1		50	-3
To reserves				-38
In the statement of profit or loss		-1			-3
To equity valuation adjustments				88
Acquisitions		1		2
Settlements and other		-34		-22
BALANCE AT 31-12-2022	5	79	0	667	42

FA: Financial assets; Debt sec.: Debt securities; FV: Fair value

( ^*) Compulsorily measured at fair value through profit or loss

( ^**) No significant impacts have materialised as a result of the sensitivity analyses carried out on the level 3 financial instruments

There are no significant movements in financial instruments at Level-3 fair value in 2021 and 2020.

40.2. FAIR VALUE OF ASSETS AND LIABILITIES MEASURED AT AMORTISED COST

The methodology for estimating the fair value of financial instruments at amortised cost recurrently is consistent with the provisions of Note 40.1. It is worth highlighting that the fair value presented for certain instruments may not correspond to their realisable value in a sales or settlement scenario, since it was not determined for that purpose; in particular:

•

Loans and advances: Includes investments the typical lending activity. Fair value is estimated using the present value method based on expected cash flows established in the various contracts and subsequently discounted using:

•	Market interest rate curves as of the appraisal date.
•	Early write-off ratios based on available internal historical information.
•	Credit loss ratios based on IFRS 9 expected loss estimates based on internal models.

•

Deposits: Includes the attracted deposits central banks, financial institutions and customers. Fair value is obtained using the present value method based on expected cash flows established in the various contracts and subsequently discounted using:

•	Market interest rate curves as of the appraisal date.
•	Internal model for estimating current account maturities and other demand deposits calibrated based on available internal historical information. This model takes the sensitivity of its remuneration at market interest rates and the level of permanence of account balances on the balance sheet.
•	The credit differential is added to the risk-free curve based on the generic loss probabilities of credit ratings.

•

Debt securities issued: Includes Group debt issuances. Instruments classified in Level 3: fair value is obtained using the present value method based on expected cash flows established in the various issuances and subsequently discounted using:

•	Market interest rate curves as of the appraisal date.
•	Own credit risk
•	Other financial liabilities: It chiefly includes amounts for tax collection accounts, clearing houses, and liabilities associated with right-of-use assets. The fair value has been assimilated to carrying amount, as these are mainly short-term balances. In the case of liabilities associated with right-of-use assets, the present value of future lease payments during the mandatory period of the contract is presented.

For further information on the abovementioned financial assets and liabilities valued at amortised cost, see Notes 14 and 22.

The fair value of the financial instruments at amortised cost recognised in the balance sheet, broken down by associated carrying amount and level is as follows:

Fair value of financial assets (FA) measured at amortised cost (1)

(Millions of euros)

	31-12-2022
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FA at amortised cost (Note 14)	442,754	441,390	42,579	19,570	379,241
Debt securities	77,733	70,998	41,968	18,751	10,279
Loans and advances	365,021	370,392	611	819	368,962
Assets under the insurance business (Note 17)	474	474	264	210
Loans and receivables	474	474	264	210
Debt securities	264	264	264
Loans and advances - Credit institutions	210	210		210

Fair value of financial assets (FA) measured at amortised cost (2)

(Millions of euros)

	31-12-2021
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FA at amortised cost (Note 14)	420,599	443,797	37,734	22,390	383,673
Debt securities	68,206	68,460	37,195	21,354	9,911
Loans and advances	352,393	375,337	539	1,036	373,762
Assets under the insurance business (Note 17)	196	196	1	96	99
Loans and receivables	196	196	1	96	99
Debt securities	133	133	1	96	36
Loans and advances - Credit institutions	63	63			63

Fair value of financial assets (FA) measured at amortised cost (3)

(Millions of euros)

	31-12-2020
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FA at amortised cost (Note 14)	267,509	289,064	17,490	3,224	268,350
Debt securities	24,670	25,334	17,278	1,545	6,511
Loans and advances	242,839	263,730	212	1,679	261,839
Assets under the insurance business (Note 17)	218	218	1	15	202
Loans and receivables	218	218	1	15	202
Debt securities	189	189	1	15	173
Loans and advances - Credit institutions	29	29			29

FA: Financial assets

Fair value of financial liabilities (FL) measured at amortised cost (1)

(Millions of euros)

	31-12-2022
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FL at amortised cost (Note 22)	482,501	454,489	44,103	3,036	407,350
Deposits	421,870	397,834	391	419	397,024
Debt securities issued	52,608	48,745	43,325	2,617	2,803
Other financial liabilities	8,023	7,910	387		7,523

Fair value of financial liabilities (FL) measured at amortised cost (2)

(Millions of euros)

	31-12-2021
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FL at amortised cost (Note 22)	547,025	542,816	58,337	2,026	482,453
Deposits	486,529	481,046	6,433		474,613
Debt securities issued	53,684	55,200	51,904	2,026	1,270
Other financial liabilities	6,812	6,570			6,570

Fair value of financial liabilities (FL) measured at amortised cost (3)

(Millions of euros)

	31-12-2020
		Fair value
	Carrying amount	Total	Level 1	Level 2	Level 3
FL at amortised cost (Note 22)	342,403	346,835	37,210	4,291	305,334
Deposits	300,523	303,431	857	4,291	298,283
Debt securities issued	35,813	37,554	36,321		1,233
Other financial liabilities	6,067	5,850	32		5,818

FL: Financial liabilities

40.3. FAIR VALUE OF PROPERTY

In the particular case of real estate assets, their fair value is obtained by requesting the appraisal value from external appraisal agencies. These agencies maximise the use of observable market data and other factors that market participants would consider when pricing, limiting the use of subjective considerations and unobservable or contrasted data. Along these lines, its fair value, based on the fair value hierarchy, is classified as Level 2.

The Group has a corporate policy that guarantees the professional competence and independence and objectivity of external valuation agencies, under which these agencies must comply with neutrality and credibility requirements so that use of their estimates does not undermine the reliability of their valuations. This policy stipulates that all valuation agencies and appraisers used by the Group in Spain must be included in the Bank of Spain's Official Registry and that their valuations be performed in accordance with the methodology set out in Ministerial Order ECO/805/2003, of 27 March. In 2022, the main appraisers and valuation agencies with which the Group worked are as follows: Tasaciones Inmobiliarias, SA, , Gloval Valuation, S.A.U., Gesvalt, SA, UVE Valoraciones, S.A., CBRE Valuation Advisory, S.A. and Sociedad de Tasación, SA, among others.

The Group has established the following criteria to obtain the appraisal values of real estate assets.

•

Statistical appraisals are used for real estate with a fair value of less than EUR 300 thousand.

•

For foreclosed real estate with a fair value of EUR 300 thousand or more, appraisals have been requested in accordance with the criteria established by Order ECO/805/2003:

•	Appraisals under 2 years old are used for real estate investments, using the rental update method.
•	Appraisals under one year old are used for stock, using the cost method application.
•	Appraisals under one year old are used for properties from credit regularisations, using the comparison method application.

For the specific case of properties from credit regularisations (foreclosed assets) classified as non-current assets for sale, the Group has developed an internal methodology that determines the discount to be applied: to the appraisal value (obtained from companies and appraisal agencies), based on recent experience in sales of Group assets over the past 3 years; while for sales costs, to asset sales over the past 12 months. This methodology is chiefly based on the following drivers:

•	Type of property: The model categorises the type of property, differentiating between residential, commercial, land and ongoing.
•	Location. The model categorises property by zones, according to the commercial interest of their geographical location.
•	The time that the property has been on the market. The model categorises property based on the time from the date of ownership of the property to the date of sale.

According to the drivers described above, for each sale made the Group calculates the ratio between the difference between the amount of the last current updated appraisal and the sale price, in the numerator, and the amount of the last current updated appraisal, in the denominator. Thus, it determines the adjustment to be made to the measurement value in order to obtain fair value. The updating of the data used to calculate the adjustment based on appraisal values is conducted on a three-year basis.

In order to determine sale costs, the Group calculates the ratio between the assumed marketing costs and the total volume of sales of realised assets.

Furthermore, the Group has established a backtesting analysis between the adjustment calculated by the model and the price for which the properties were finally sold. This exercise is conducted on a biannual basis.

The measurement methods used by the Group to determine non-recurring fair value have not been changed during the year (measurement methods were not changed during the years 2021 and 2020).

The fair value of real estate assets by asset type along with their associated carrying amount is set out below:

Fair value of real estate assets by type of property

(Millions of euros)

	31-12-2022		31-12-2021		31-12-2020
	Carrying amount	Fair value	Carrying amount	Fair value	Carrying amount	Fair value
Tangible assets - Investment property	1,556	2,217	1,815	2,206	1,947	2,464
Homes, land and other	1,211	1,836	1,613	1,984	1,779	2,265
Industrial buildings	26	39	18	26	30	38
Offices and commercial premises	319	342	184	199	138	161
Other assets - Inventories	39	44	45	45	45	45
Homes, land and other	39	44	44	44	44	44
Industrial buildings			1	1
Offices and commercial premises					1	1
Non-current assets held for sale and disposal groups classified as held for sale	1,998	2,545	2,415	2,616	991	1,146
Homes, land and other	1,719	2,210	2,041	2,213	854	974
Industrial buildings	100	123	32	43	38	50
Offices and commercial premises	179	212	342	360	99	122
TOTAL	3,593	4,806	4,275	4,867	2,983	3,655

41. RELATED-PARTY TRANSACTIONS

Pursuant to the provisions of the rules of procedure of the Board of Directors, the Board of Directors, after the report of the Audit and Control Committee, will approve the operations conducted by the Entity or its subsidiaries with directors, with shareholders holding 10% or more of the voting rights or represented on the Board of Directors of the Entity, or with any other related party as outlined in IAS 24 "Information to be disclosed on related parties", unless by law the competence of the Annual General Meeting is applicable.

For these purposes, the following will not be deemed related party transactions: i) transactions conducted between the Company and its wholly-owned subsidiaries, directly or indirectly; ii) transactions between the Company and its subsidiaries or investee companies provided that no other party related to the Company has an interest in such subsidiaries or investee companies; iii) execution by the Company and any executive director or member of senior management, of the contract regulating the terms and conditions of the executive functions they are to perform, including determining the specific amounts or remuneration to be paid under that contract, to be approved in accordance with the provisions of this Regulation; iv) transactions carried out based on measures to safeguard the stability of the Company, taken by the competent authority responsible for its prudential supervision.

The Regulation establishes that the Board of Directors will be able to delegate the approval of: i) transactions between Group companies that are made in the field of the normal process and under market conditions; ii) transactions arranged under contracts whose standard terms and conditions are applicable to a large number of customers, that are signed at generally set rates or prices by whomever acting as the goods or service provider in question, and where the amount of the transaction does not exceed 0.5% of the annual net income of the Entity.

The granting by the Entity of credits, loans and other forms of financing and guarantees to Directors, or to persons associated with them, will be pursuant to -besides the provisions of this article- the regulations governing the organisation and discipline of credit institutions and the supervisory guidelines in this field. The breakdown of financing granted to "key management personnel and executives" is as follows:

Outstanding financing granted to key management personnel - Directors and senior management

(Thousands of euros)

	2022	2021	2020
Outstanding financing	9,721	9,036	6,854
Average maturity (years)	19	19	20
Average interest rate (%)	0.58%	0.41%	0.31%
Financing granted in the year	3,375	1,363	1,764
Average maturity (years)	9	22	23
Average interest rate (%)	0.92%	0.93%	0.79%

Loan and deposit transactions or financial services arranged by CaixaBank with 'key management personnel', in addition to related party transactions, were approved under normal market conditions. Moreover, none of those transactions involved a significant amount of money. Likewise, there was no evidence of impairment to the value of the financial assets or to the guarantees or contingent commitments held with 'key management personnel'.

The Spanish state constitutes a related party pursuant to the regulations in force through its indirect participation in excess of 10% of CaixaBank's shares through the FROB and BFA. In that regard, according to the exemption in paragraph 25 of IAS 24, the balances with Spanish Public Administration as a related party are not presented, although significant balances and transactions with them have been conveniently disclosed in the various notes in the report.

There are no Related-party Transactions, as defined in Article 529s of the CCA that have exceeded, either individually or aggregated, the established disclosure thresholds. However, in order to prepare the annual accounts, the most significant transactions that have taken place during the year have been disclosed in detail.

The most significant balances between the Group and its related parties are set out below, complementing the other balances in the notes to this report.

Related party balances and operations (1)

(Millions of euros)

	Significant shareholder (1) (2)			Associates and joint ventures
	2022	2021	2020	2022	2021	2020
ASSETS
Loans and advances to credit institutions
Loans and advances	17	36	22	878	582	426
Mortgage loans	16	18	21		3
Other	1	18	1	849	579	426
Of which: valuation adjustments				-2	-2	-1
Equity instruments				1	1
Debt securities	17,503	19,161	12
TOTAL	17,520	19,197	34	879	583	426
LIABILITIES
Customer deposits	486	307	210	825	1,069	659
TOTAL	486	307	210	825	1,069	659
PROFIT OR LOSS
Interest income			1	20	16	11
Interest expense					-1
Fee and commission income	1			323	169	239
Fee and commission expenses				-2	-17	-13
TOTAL	1		1	341	167	237
OTHER
Contingent liabilities	16	1		43	40	26
Contingent commitments		1		555	773	475
Assets under management (AUMs) and assets under custody (5)	27,169	23,623	12,842	1,632	1,489	1,648
TOTAL	27,185	23,625	12,842	2,230	2,302	2,149

Related party balances and operations (2)

(Millions of euros)

	Directors and senior management (3)			Other related parties (4)
	2022	2021	2020	2022	2021	2020
ASSETS
Loans and advances to credit institutions
Loans and advances	10	9	7	25	25	20
Mortgage loans	10	9	7	11	11	9
Other				14	14	11
Of which: valuation adjustments
Equity instruments
Debt securities				5
TOTAL	10	9	7	30	25	20
LIABILITIES
Customer deposits	20	13	26	15	18	48
TOTAL	20	13	26	15	18	48
PROFIT OR LOSS
Interest income
Interest expense
Fee and commission income
Fee and commission expenses
TOTAL
OTHER
Contingent liabilities
Contingent commitments	1	3	3	4	1	3
Assets under management (AUMs) and assets under custody (5)	30	28	192	20	21	336
TOTAL	31	31	195	24	22	339

Related party balances and operations (3)

(Millions of euros)

	Employee pension plan
	2022	2021	2020
ASSETS
Loans and advances to credit institutions
Loans and advances
Mortgage loans
Other
Of which: valuation adjustments
Equity instruments
Debt securities
TOTAL
LIABILITIES
Customer deposits	533		66
TOTAL	533		66
PROFIT OR LOSS
Interest income
Interest expense
Fee and commission income
Fee and commission expenses
TOTAL
OTHER
Contingent liabilities
Contingent commitments
Assets under management (AUMs) and assets under custody (5)	3,218	3,394	3,055
TOTAL	3,218	3,394	3,055

(1) They refer to balances and operations carried out with the "Fundación la Caixa" Banking Foundation, CriteriaCaixa, BFA Tenedora de Acciones, SAU, the FROB and its dependent companies. At 31 December 2022, 2021 and 2020 the stake of CriteriaCaixa in CaixaBank is 30.01% and at 31 December 2022 and 2021, the stake of BFA Tenedora de Acciones, SAU in CaixaBank is 16.12%. The shareholdings at 31 December 2022 are shown not considering the effects of the capital reduction (see Note 24). The stake of BFA Tenedora de Acciones, SAU in CaixaBank derives from the merger with Bankia in 2021 (see Note 7).

(2) As regards the cost of lawsuits relating to preferential shares and subordinate obligations of the former Bankia, pursuant to the agreement with BFA to distribute costs in this field, Bankia already assumed a maximum loss of EUR 246 million resulting from the costs related to the execution of the sentences in which it was convicted in the various proceedings against Bankia (now CaixaBank) due to the aforementioned issues. The potential contingency arising from current and future claims including interest and costs would be, where applicable, paid by BFA under the said agreement.

(3) Directors and Senior Management of CaixaBank.

(4) Family members and entities related to members of the Board of Directors and Senior Management of CaixaBank.

(5) Includes collective investment institutions, insurance contracts, pension funds and securities depositary.

The table below shows the main subsidiaries, joint ventures and associates, and their type of link.

Transactions between Group companies form part of the normal course of business and are carried out at arm's length.

The most significant operations carried out in 2022, 2021 and 2020 between group companies, in addition or complementary to those mentioned in the above notes in this report, are as follows:

2022

•	In March 2022 CaixaBank sold its stake in Bankia Vida to VidaCaixa SAU de Seguros y Reaseguros. The transaction has no equity impact for the Group.
•	In April 2022, the stakes in Redsys (4.2%), Servired (19.2%), Bizum (1.1%), Sistema de tarjetas y medios de pago (2.5%), Euro 6000 (10.3%) and Visa (15,141 class C shares) owned by CaixaBank, from the business combination with Bankia in 2021, were transferred to CaixaBank Payments and Consumer through a contribution from shareholders, with an approximate valuation of EUR 30 million. This transaction has no equity impact for the Group.
•	In November 2022 CaixaBank transferred its stake in Sa Nostra Vida to VidaCaixa SAU de Seguros y Reaseguros. The transaction has no equity impact for the Group (see Note 7).

2021

•

Sale of businesses from Bankia: In October 2021, CaixaBank sold certain lines of business directly pursued by Bankia to the following investees:

•	Sale of the acquiring business (POS) to Comercia Global Payments EP, SL (CGP) for EUR 260 million. Global Payments Inc and CaixaBank hold an 80% and 20% stake, respectively, in CGP.
•	Sale of the prepaid card business to Global Payments MoneytoPay, EDE, SL (MTP) for EUR 17 million. Global Payments Inc and CaixaBank hold a 51% and 49% stake, respectively, in MTP.

The result of the transactions referred to above was a consolidated net gain of EUR 266 million in the income statement, recorded under the heading "Gains/(losses) on derecognition of non-financial assets, net" in the statement of profit or loss.

•

CaixaBank Payments and Consumer (CPC): In November 2021, it was agreed to sell to CaixaBank Payments and Consumer the card business from the business combination with Bankia to CaixaBank Payments and Consumer for EUR 414 million, determined based on generally accepted methods of measurement and reviewed by an independent expert. The operation did not have an impact on equity for the Group.

•

BuildingCenter: In November 2021, a number of operations were conducted to reorganise the Group's real estate activities following the merger with Bankia, with a view to concentrating these activities through BuildingCenter. These operations did not have a material impact on equity for the Group.

The most relevant operations of 2022, 2021 and 2020 with the significant shareholder, in addition to those mentioned in the previous notes of this report, are as follows:

•	In December 2022, CaixaBank sold the property it owns (see Note 21) at Paseo de la Castellana 51 in Madrid to Inmo Criteria Patrimonio, S.L.U. (a wholly-owned subsidiary of Criteria Caixa, S.A.U.), which submitted the best offer.
•	On 31 December 2022, 2021 and 2020, CriteriaCaixa held derivatives with CaixaBank to cover the interest rates of bilateral banking loans, for a nominal value of EUR 50, 250 and 202 million, respectively. The fair value of this derivative at 31 December 2022, 2021 and 2020 was EUR -3, 3 and 2 million, respectively.

Description of the relations with CriteriaCaixa and the 'la Caixa' Banking Foundation

The 'la Caixa' Banking Foundation (FBLC), CriteriaCaixa and CaixaBank have an Internal Protocol on Relations available on the CaixaBank website, last updated in 2021, which governs the mechanisms and criteria of relations between CaixaBank and FBLC and CriteriaCaixa, particularly in the following areas: i) management of related-party transactions, establishing mechanisms to avoid conflicts of interest; and ii) regulation of the information flows needed to fulfil reporting obligations in terms of trading and supervision.

The latest amendment to the Internal Protocol on Relations was made to adapt it to the entry into force of Act 5/2021, of 12 April, which amends the revised text of the Corporate Enterprises Act, among other matters, with respect to the regime governing related-party transactions carried out by listed companies. This affects transactions between CaixaBank and CaixaBank Group companies, on the one hand, and the "la Caixa" Banking Foundation and "la Caixa" Banking Foundation Group companies, such as Criteria, on the other.

CaixaBank (as licensee) has a license agreement in effect with FBLC (as licensor) governing the use of certain trade names and the assignment of Internet domain names. The trade names licensed out under that agreement include the "la Caixa" brand and the star logo. The trade name license was granted in 2014 with an indefinite nature. However, it may be terminated by withdrawal or complaint by the licensor after 15 years have passed from signing, or in the event the stake held by FBLC in CaixaBank is less than 30 per cent of the share capital and voting rights of CaixaBank, or in the event there is a shareholder with a bigger stake in CaixaBank. The Company pays FBLC a fee for this licence that can be reviewed annually.

FBLC assigned to CaixaBank and CaixaBank Group companies, free of charge, the trademarks corresponding to their corporate names and the trademarks related to banking, financial, investment and insurance products and services, except for those that contain the "Miró Star" (Estrella de Miró) graphic design or the "la Caixa" denominative sign, which are covered by the licence. It also assigned the domain names used relating to the same company names.

Beyond the provisions of the above paragraphs, the Group's activities are not dependent on or significantly influenced by patents or licences, industrial contracts, new manufacturing processes or special commercial or financial contracts.

42. OTHER DISCLOSURE REQUIREMENTS

42.1. THE ENVIRONMENT

There is no significant environmental risk due to the activity of the Group, and therefore, it is not necessary to include any specific breakdown on environmental information in the document (Order of the Ministry of Justice JUS/616/2022, of 30 June). Furthermore, no significant tangible asset items at the Group are affected by environmental issues of any type.

The Group is committed to carrying out its business, projects, products and services in the most environmentally-friendly way possible, and its activities do not have a direct impact on the environment (see the corresponding section in the accompanying Management Report).

In 2022, the Group did not receive any relevant fines or sanctions related to compliance with environmental regulations.

No significant tangible asset items at the Group are affected by environmental issues of any type.

42.2. CUSTOMER SERVICE

CaixaBank has a Customer Service Office charged with handling and resolving customer complaints and claims. This office has no connections with commercial services and performs its duties with independent judgment and according to the protection rules for financial services customers.

The average resolution time in 2022 is 11 calendar days, whereas in 2021 and 2020 it was 21 and 23 calendar days, respectively.

Complaints received

(Number of complaints)

	2022	2021	2020
HANDLED BY THE CUSTOMER SERVICE OFFICE (CSO)	306,548	239,347	119,361
Customer Care Service (CCS)	306,548	239,347	119,361
FILED WITH THE SUPERVISORS' CLAIMS SERVICES	6,875	3,720	1,598
Bank of Spain	6,381	3,363	1,350
Comisión Nacional del Mercado de Valores (Spanish securities market regulator)	265	183	82
Directorate-General of Insurance and Pension Plans	229	174	166

The number of reports or resolutions issued by Customer Services and the Supervisors' Claims Services was as follows:

Reports issued by customer services supervisors' claim services (1)

	CCS			Bank of Spain
Type of resolution	2022	2021	2020	2022	2021	2020
Resolved in favour of the claimant	145,409	109,270	54,791	954	518	179
Resolved in favour of the entity	108,470	90,166	35,085	627	483	160
Acceptance				1,507	1,158	232
Other (rejected/unresolved)	57,220	36,398	19,963	2,611	547
TOTAL	311,099	235,834	109,839	5,699	2,706	571

Reports issued by customer services supervisors' claim services (2)

	CNMV			DGS (Direccion General de Seguros)
Type of resolution	2022	2021	2020	2022	2021	2020
Resolved in favour of the claimant	64	65	22	57	7	15
Resolved in favour of the entity	64	65	19	56	3	13
Acceptance	91	37	6	18	1
Other (rejected/unresolved)	1			29	7
TOTAL	220	167	47	160	18	28

42.3. OFFICES

The branches of the Group are specified below:

BRANCHES OF THE GROUP

(No. of branches)

	2022	2021	2020
Spain	4,081	4,970	3,786
Abroad	331	355	432
TOTAL	4,412	5,325	4,218

43. STATEMENT OF CASH FLOWS

The main cash flow variations corresponding to the financial year are set out below by type:

•	Operating activities (EUR 79,875 million): mainly due to the decrease in central bank deposits under financial liabilities at amortised cost as a result of the amortisation of TLTRO-lll (EUR 65,132 million) and the increase in financial assets at amortised cost (EUR 24,385 million).
•	Investment activities (EUR 164 million): flows from the sale of the building at Castellana 51 (EUR 239 million), the purchase of 81.31% of Sa Nostra Vida (EUR 250 million), along with sales of financial assets classified as non¬current assets held for sale by Group companies (EUR 1,182 million) and flows from purchases and sales of tangible and intangible assets (EUR 763 million).
•	Financing activities (EUR 3,984 million): stems from cash flows from debt issuance and maturities (EUR 1,001 million) and the share buyback programme (EUR 1,818 million), together with dividends paid (EUR 1,178 million) in the year.

APPENDIX 1 - CAIXABANK'S INVESTMENTS IN SUBSIDIARIES

(Thousands of euros)

			% shareholding
Corporate name	Business activity	Registered address	Direct	Total	Share capital	Reserves
Abside Capital SICAV S.A. ( ^*)	SICAVs	Madrid-Spain	91.00	91.00	2,404	-811
Alicante Capital SICAV S.A. ( ^*)	SICAVs	Madrid-Spain	100.00	100.00	2,555	-798
Aris Rosen, S.A.U.	Services	Barcelona-Spain	100.00	100.00	60	342
Arquitrabe Activos, S.L.	Holding company	Barcelona-Spain	100.00	100.00	98,431	5,800
Arrendadora de Equipamientos Ferroviarios, S.A.	Lessor of trains	Barcelona-Spain	85.00	85.00	12,720	5,906
BPI (Suisse), S.A. (1)	Asset management	Switzerland	-	100.00	3	4,874
BPI Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliário, SA	Management of collective investment institutions	Portugal	-	100.00	2,5	15,323
BPI Vida e Pensões - Companhia de Seguros, SA	Life insurance and pension fund management	Portugal	-	100.00	76	74,634
Banco BPI, S.A.	Banking	Portugal	100.00	100.00	1,293,063	2,339,932
Bankia Habitat, S.L.U.	Holding company	Madrid-Spain	-	100.00	755,56	-30,952
Bankia Mediación, Operador de Banca de Seguros Vinculado, S.A.U.	Insurance agency	Madrid-Spain	100.00	100.00	269	77,217
BuildingCenter, S.A.U.	Holder of real estate assets	Madrid-Spain	100.00	100.00	2,000,060	-282,803
Caixa Capital Biomed S.C.R. S.A.	Venture capital company	Barcelona-Spain	91.00	91.00	1,200	-189
Caixa Capital Fondos Sociedad De Capital Riesgo S.A.	Venture capital company	Madrid-Spain	100.00	100.00	1,200	6,656
Caixa Capital Micro SCR S.A.	Venture capital company	Madrid-Spain	100.00	100.00	1,200	233
Caixa Capital Tic S.C.R. S.A.	Venture capital company	Barcelona-Spain	81.00	81.00	1,209	-5,466
Caixa Corp, S.A.	Holding company	Barcelona-Spain	100.00	100.00	361	351
Caixa Emprendedor XXI, S.A.U.	Promotion of business and entrepreneurial initiatives	Barcelona-Spain	100.00	100.00	1,007	18,246
CaixaBank Asset Management, SGIIC, S.A.U.	Management of collective investment institutions	Madrid-Spain	100.00	100.00	86,310	109,975
CaixaBank Brasil Escritório de Representaçao Ltda. (2)	Representative office	Brazil	100.00	100.00	1,214	2,981
CaixaBank Equipment Finance, S.A.U.	Vehicle and equipment leasing	Madrid-Spain	-	100.00	10,518	40,124
CaixaBank Facilities Management, S.A.	Project management, maintenance, logistics and procure	Barcelona-Spain	100.00	100.00	1,803	1,871
CaixaBank Notas Minoristas, S.A.U.	Finance	Madrid-Spain	100.00	100.00	60	1,751
CaixaBank Titulizacion S.G.F.T., S.A.U.	Securitisation fund management	Madrid-Spain	100.00	100.00	1,503	1,283
CaixaBank Wealth Management Luxembourg, S.A.	Banking	Luxembourg	100.00	100.00	12,076	10,132
Caixabank Asset Management Luxembourg, S.A.	Management of collective investment institutions	Luxembourg	-	100.00	150	3,948
CaixaBank Business Intelligence, SAU	Development of digital projects	Barcelona-Spain	100.00	100.00	100	1,199
Caixabank Operational Services, S.A.	Specialised services for back office administration	Barcelona-Spain	100.00	100.00	1,803	19,541
Caixabank Payments and Consumer, E.F.C., E.P., S.A.	Consumer finance	Madrid-Spain	100.00	100.00	135,156	1,487,941
Caixabank Tech, S.L.	Provision of IT services	Barcelona-Spain	100.00	100.00	15,003	100,968
Centro de Servicios Operativos e Ingeniería de Procesos, S.L.U.	Specialised services for back office administration	Madrid-Spain	100.00	100.00	500	14,690
Coia Financiera Naval, S.L.	Provision of financial services and intermediation in the shipbuilding sector	Madrid-Spain	76.00	76.00	3	57
Corporación Hipotecaria Mutual, E.F.C., S.A.	Mortgage lending	Madrid-Spain	100.00	100.00	5	70,123
El Abra Financiera Naval, S.L.	Provision of financial services and intermediation in the shipbuilding sector	Madrid-Spain	76.00	76.00	3	25
Estugest, S.A.	Administrative activities and services	Barcelona-Spain	100.00	100.00	661	184
Gestión y Recaudación Local, S.L.	Management of collection in city councils	Granada-Spain	-	100.00	900	1,032
Gestión y Representación Global, S.L.U.	Instrument	Madrid-Spain	100.00	100.00	12	2,705
Grupo Aluminios de Precisión, S.L.U. ( ^*)	Aluminium smelting in sand moulds	Burgos-Spain	100.00	100.00	7,500	21,242
HipoteCaixa 2, S.L.	Mortgage loan management company	Barcelona-Spain	100.00	100.00	3	46,621
Hiscan Patrimonio II, S.A.U.	Holding company	Madrid-Spain	100.00	100.00	241,927	-10,392
Hiscan Patrimonio, S.A.	Holding company	Barcelona-Spain	100.00	100.00	46,867	70,969
Imaginersgen, S.A.	Digital business	Barcelona-Spain	100.00	100.00	60	2,496
Inter Caixa, S.A.	Services	Barcelona-Spain	100.00	100.00	60	17
Inversiones Coridith SICAV S.A. ( ^*)	SICAVs	Madrid-Spain	100.00	100.00	2,515	-757
Inversiones Corporativas Digitales, S.L.	Holding company	Barcelona-Spain	-	100.00	3	-3,050
Inversiones Inmobiliarias Teguise Resort, S.L.	Hotels and similar accommodation	Las Palmas-Spain	60.00	60.00	7,898	12,131
Inversiones y Desarrollos 2069 Madrid, S.L.U., in liquidation (L)	Real estate services	Madrid-Spain	100.00	100.00	6,711	-3,851
Livingcenter Activos Inmobiliarios, S.A.U.	Real estate development	Barcelona-Spain	-	100.00	137,331	1,479,755
Líderes de Empresa Siglo XXI, S.L.	Private security for goods and people	Barcelona-Spain	100.00	100.00	378	1,316
Naviera Cata, S.A.	Shipowner	Las Palmas de Gran Canaria-Spain	100.00	100.00	60	28
Negocio de Finanzas e Inversiones II, S.L.	Finance	Barcelona-Spain	100.00	100.00	6	438
Nuevo Micro Bank, S.A.U.	Financing of microloans and other loans with a social impact	Madrid-Spain	100.00	100.00	90,186	287,146
OpenWealth, S.A.	Other financial services, with the exception of n.c.o.p insurance and pension plans.	Barcelona-Spain	100.00	100.00	120	922
Participaciones y Cartera de Inversión, S.L.	Instrument	Madrid-Spain	-	100.00	1,205	303
PremiaT Comunidad Online, S.L.	Marketing of cashless platform	Barcelona-Spain	-	100.00	100	467
Puertas de Lorca Desarrollos Empresariales, S.L.U., in liquidation (L)	Real estate services	Madrid-Spain	100.00	100.00	10,747	-6,450
Puerto Triana, S.A.U.	Real estate developer specialised in shopping centres	Seville-Spain	100.00	100.00	124,290	-3,171
Sa Nostra Compañia de Seguros de Vida, S.A.	Life insurance	Balearic Islands-Spain	-	100.00	14,399	148,765
Sercapgu, S.L.	Holding company	Barcelona-Spain	100.00	100.00	4,230	-240
Silc Immobles, S.A.	Real-estate administration, management and operation	Madrid-Spain	-	100.00	40,070	96,752
Telefónica Consumer Finance E.F.C., S.A.	Consumer finance	Madrid-Spain	-	50.00	5	28,781
Tenedora Fintech Venture, S.A.U.	Holding company	Madrid-Spain	100.00	100.00	60	1,140
Unión de Crédito para la Financiación Mobiliaria e Inmobiliaria, E.F.C., S.A.U.	Mortgage loans	Madrid-Spain	100.00	100.00	53,383	4,023
Valenciana de Inversiones Mobiliarias, S.L.U.	Holding company	Valencia-Spain	100.00	100.00	4,330	109,194
VidaCaixa Mediació, Sociedad de Agencia de Seguros Vinculada, S.A.U.	Insurance agency	Madrid-Spain	-	100.00	60	3,696
VidaCaixa, S.A. de Seguros y Reaseguros Sociedad Unipersonal	Direct life insurance, reinsurance and pension fund management	Madrid-Spain	100.00	100.00	1,347,462	474,51
Wivai Selectplace, S.A.U.	Product marketing	Barcelona-Spain	-	100.00	60	1,894

Corporate name	Business activity	Registered address	Profit/(loss)	Cost of direct holding (net)
Abside Capital SICAV S.A. ( ^*)	SICAVs	Madrid-Spain	-	1,200
Alicante Capital SICAV S.A. ( ^*)	SICAVs	Madrid-Spain	-	1,278
Aris Rosen, S.A.U.	Services	Barcelona-Spain	-57	105
Arquitrabe Activos, S.L.	Holding company	Barcelona-Spain	2,392	104,734
Arrendadora de Equipamientos Ferroviarios, S.A.	Lessor of trains	Barcelona-Spain	1,893	14,300
BPI (Suisse), S.A. (1)	Asset management	Switzerland	1,83	-
BPI Gestão de Activos - Sociedade Gestora de Fundos de Investimento Mobiliário, SA	Management of collective investment institutions	Portugal	8,131	-
BPI Vida e Pensões - Companhia de Seguros, SA	Life insurance and pension fund management	Portugal	12,391	-
Banco BPI, S.A.	Banking	Portugal	334,084	2,060,366
Bankia Habitat, S.L.U.	Holding company	Madrid-Spain	-8,42	-
Bankia Mediación, Operador de Banca de Seguros Vinculado, S.A.U.	Insurance agency	Madrid-Spain	2,797	75,042
BuildingCenter, S.A.U.	Holder of real estate assets	Madrid-Spain	-163,244	1,950,551
Caixa Capital Biomed S.C.R. S.A.	Venture capital company	Barcelona-Spain	1,524	894
Caixa Capital Fondos Sociedad De Capital Riesgo S.A.	Venture capital company	Madrid-Spain	306	3,234
Caixa Capital Micro SCR S.A.	Venture capital company	Madrid-Spain	-7	1,254
Caixa Capital Tic S.C.R. S.A.	Venture capital company	Barcelona-Spain	9,153	3,954
Caixa Corp, S.A.	Holding company	Barcelona-Spain	-	585
Caixa Emprendedor XXI, S.A.U.	Promotion of business and entrepreneurial initiatives	Barcelona-Spain	432	17,954
CaixaBank Asset Management, SGIIC, S.A.U.	Management of collective investment institutions	Madrid-Spain	142,942	177,016
CaixaBank Brasil Escritório de Representaçao Ltda. (2)	Representative office	Brazil	274	345
CaixaBank Equipment Finance, S.A.U.	Vehicle and equipment leasing	Madrid-Spain	14,257	-
CaixaBank Facilities Management, S.A.	Project management, maintenance, logistics and procure	Barcelona-Spain	97	2,053
CaixaBank Notas Minoristas, S.A.U.	Finance	Madrid-Spain	2,319	4,229
CaixaBank Titulizacion S.G.F.T., S.A.U.	Securitisation fund management	Madrid-Spain	2,380	6,423
CaixaBank Wealth Management Luxembourg, S.A.	Banking	Luxembourg	-4,690	40,725
Caixabank Asset Management Luxembourg, S.A.	Management of collective investment institutions	Luxembourg	250	-
CaixaBank Business Intelligence, SAU	Development of digital projects	Barcelona-Spain	444	1,200
Caixabank Operational Services, S.A.	Specialised services for back office administration	Barcelona-Spain	3,596	9,579
Caixabank Payments and Consumer, E.F.C., E.P., S.A.	Consumer finance	Madrid-Spain	378,647	1,602,028
Caixabank Tech, S.L.	Provision of IT services	Barcelona-Spain	2,635	172,32
Centro de Servicios Operativos e Ingeniería de Procesos, S.L.U.	Specialised services for back office administration	Madrid-Spain	333	17,886
Coia Financiera Naval, S.L.	Provision of financial services and intermediation in the shipbuilding sector	Madrid-Spain	-18	2
Corporación Hipotecaria Mutual, E.F.C., S.A.	Mortgage lending	Madrid-Spain	-10,396	63,987
El Abra Financiera Naval, S.L.	Provision of financial services and intermediation in the shipbuilding sector	Madrid-Spain	-15	2
Estugest, S.A.	Administrative activities and services	Barcelona-Spain	11	781
Gestión y Recaudación Local, S.L.	Management of collection in city councils	Granada-Spain	234	-
Gestión y Representación Global, S.L.U.	Instrument	Madrid-Spain	-1	2,715
Grupo Aluminios de Precisión, S.L.U. ( ^*)	Aluminium smelting in sand moulds	Burgos-Spain	1,489	3,360
HipoteCaixa 2, S.L.	Mortgage loan management company	Barcelona-Spain	420	46,797
Hiscan Patrimonio II, S.A.U.	Holding company	Madrid-Spain	-410	222,962
Hiscan Patrimonio, S.A.	Holding company	Barcelona-Spain	-88	116,797
Imaginersgen, S.A.	Digital business	Barcelona-Spain	2,371	1,858
Inter Caixa, S.A.	Services	Barcelona-Spain	-5	92
Inversiones Coridith SICAV S.A. ( ^*)	SICAVs	Madrid-Spain	-	1,257
Inversiones Corporativas Digitales, S.L.	Holding company	Barcelona-Spain	8	-
Inversiones Inmobiliarias Teguise Resort, S.L.	Hotels and similar accommodation	Las Palmas-Spain	2,772	8,618
Inversiones y Desarrollos 2069 Madrid, S.L.U., in liquidation (L)	Real estate services	Madrid-Spain	-3,747	115
Livingcenter Activos Inmobiliarios, S.A.U.	Real estate development	Barcelona-Spain	-134,045	-
Líderes de Empresa Siglo XXI, S.L.	Private security for goods and people	Barcelona-Spain	58	753
Naviera Cata, S.A.	Shipowner	Las Palmas de Gran Canaria-Spain	-16	118
Negocio de Finanzas e Inversiones II, S.L.	Finance	Barcelona-Spain	-1	445
Nuevo Micro Bank, S.A.U.	Financing of microloans and other loans with a social impact	Madrid-Spain	25,061	90,186
OpenWealth, S.A.	Other financial services, with the exception of n.c.o.p insurance and pension plans.	Barcelona-Spain	-333	1,044
Participaciones y Cartera de Inversión, S.L.	Instrument	Madrid-Spain	-6	-
PremiaT Comunidad Online, S.L.	Marketing of cashless platform	Barcelona-Spain	-432	-
Puertas de Lorca Desarrollos Empresariales, S.L.U., in liquidation (L)	Real estate services	Madrid-Spain	115	-
Puerto Triana, S.A.U.	Real estate developer specialised in shopping centres	Seville-Spain	-170	120,339
Sa Nostra Compañia de Seguros de Vida, S.A.	Life insurance	Balearic Islands-Spain	8,416	-
Sercapgu, S.L.	Holding company	Barcelona-Spain	-12	632
Silc Immobles, S.A.	Real-estate administration, management and operation	Madrid-Spain	-2,052	-
Telefónica Consumer Finance E.F.C., S.A.	Consumer finance	Madrid-Spain	4,364	-
Tenedora Fintech Venture, S.A.U.	Holding company	Madrid-Spain	236	369
Unión de Crédito para la Financiación Mobiliaria e Inmobiliaria, E.F.C., S.A.U.	Mortgage loans	Madrid-Spain	-38,420	14,250
Valenciana de Inversiones Mobiliarias, S.L.U.	Holding company	Valencia-Spain	-136	113,784
VidaCaixa Mediació, Sociedad de Agencia de Seguros Vinculada, S.A.U.	Insurance agency	Madrid-Spain	203	-
VidaCaixa, S.A. de Seguros y Reaseguros Sociedad Unipersonal	Direct life insurance, reinsurance and pension fund management	Madrid-Spain	758,593	2,534,688
Wivai Selectplace, S.A.U.	Product marketing	Barcelona-Spain	36,547	-

(L) Companies in liquidation.

( ^*) Companies classified as non-current assets held for sale.

(1) All data except cost are in local currency: Swiss franc (thousands)

(2) All data except cost are in local currency: Brazilian real (thousands).

Note: The information corresponding to non-listed companies is based on the most recent data available (actual or estimated) at the time of preparation of the notes to these financial statements.

Note: Besides the companies set out in the details of the Appendix, the Group holds a 100% share of the share capital of the following companies that are inactive: Cestainmob, S.L.U.; GDS Grupo de Servicios I, S.A.; Tot Caixa, S.A.; Web Gestión 1, S.A.; Web Gestión 2, S.A.; Web Gestión 3, S.A.; Web Gestión 4, S.A.; Cartera de Participaciones SVN, S.L.; Web Gestión 7, S.A.; Gestión Global de Participaciones, S.L.U.; Inmogestión y Patrimonios, S.A., Valoración y Control, S.L. and Telefónica Renting, S.A. Similarly, the following companies of which the Group wholly owns the share capital, are currently in liquidation: Inmobiliaria Piedras Bolas, S.A. de C.V.; Playa Paraíso Maya, S.A. de C.V.; Inmacor Desarrollos, S.A. de C.V.; Proyectos y Desarrollos Hispanomexicanos, S.A. de C.V.; Grand Coral Property and Facility Management, S.A., de CV; Tubespa, S.A., Costa Eboris, S.L.U. and Encina de los Monteros, S.L.U. The Company also has as a subsidiary the investee Habitat Dos Mil Dieciocho, S.L., which is currently in liquidation. Lastly, CaixaBank as well as other investee companies of CaixaBank Group are joint entities participating in the Joint Prevention Service of "la Caixa" Group.

APPENDIX 2 - CAIXABANK'S INVESTMENTS IN AGREEMENTS AND JOINT VENTURES OF CAIXABANK GROUP

(Thousands of euros)

			% shareholding
Corporate name	Business activity	Registered address	Direct	Total	Assets	Liabilities
Cosec - Companhia de Seguros de Crédito, S.A.	Credit insurance	Portugal	-	50.00	143,391	93,551
Inversiones Alaris, S.L. In liquidation (L)	Securities holding	Barcelona-Spain	33.00	67	7,695	2,369
Payment Innovation HUB, S.A.	Payment methods	Barcelona-Spain	-	50	1,629	88

Corporate name	Business activity	Registered address	Ordinary income	Share capital	Reserves	Profit / Loss
Cosec - Companhia de Seguros de Crédito, S.A.	Credit insurance	Portugal	21,737	7,500	37,980	7,936
Inversiones Alaris, S.L. In liquidation (L)	Securities holding	Barcelona-Spain	-	11,879	-6,607	55
Payment Innovation HUB, S.A.	Payment methods	Barcelona-Spain	1,721	60	1,233	248

Corporate name	Business activity	Registered address	Total comprehensive income	Cost of direct holding	Dividends accrued on total ownership interest
Cosec - Companhia de Seguros de Crédito, S.A.	Credit insurance	Portugal	7,936	-	-
Inversiones Alaris, S.L. In liquidation (L)	Securities holding	Barcelona-Spain	55	-	-
Payment Innovation HUB, S.A.	Payment methods	Barcelona-Spain	248	-	-

(L) Companies in liquidation.

( ^*) Companies classified as non-current assets held for sale.

Note: The information corresponding to non-listed companies is based on the most recent data available (actual or estimated) at the time of preparation of the notes to these financial statements.

Note: The Company also has significant influence in the investee Royactura, en liquidación, S.L., which is currently in liquidation.

APPENDIX 3 - CAIXABANK'S INVESTMENTS IN THE GROUP'S ASSOCIATES

(Thousands of euros)

			% shareholding
Corporate name	Business activity	Registered address	Direct	Total	Assets	Liabilities
Ape Software Components S.L.	Computer programming activities	Barcelona-Spain	-	25.00	3,423	3,310
Arrendadora Ferroviaria, S.A.	Lessor of trains	Barcelona-Spain	54.00	54.00	191,495	192,013
BIP and Drive, S.A. ( ^*)	Teletoll systems	M adrid-Spain	-	25.00	23,731	6,404
Banco Comercial de Investimento, S.A.R.L. (1)	Banking	Mozambiqu e	-	36.00	193,190,402	167,112,959
Bizum, S.L.	Payment entity	Madrid-Spain	-	24.00	15,325	9,243
Brilliance-Bea Auto Finance Co., L.T.D. (2)	Automotive sector financing	China	-	23.00	2,769,057	1,040,803
Comercia Global Payments, Entidad de Pago, S.L.	Payment entity	Madrid-Spain	-	20.00	843,05	395,893
Companhia de Seguros Allianz Portugal, S.A.	Insur. Prod.	Portugal	-	35.00	1,367,774	1,244,748
Concessia, Cartera y Gestión de Infraestructuras, S.A.	Infrastructure construction and operations	Madrid-Spain	24.00	32.00	14,48	92
Coral Homes, S.L.	Real estate services	Madrid-Spain	-	20.00	2,612,631	100,784
Drembul, S.L.	Real estate development	Logroño-Spain	22.00	47.00	36,925	6,77
Girona, S.A.	Holding company	Girona-Spain	34.00	34.00	5,642	110
Global Payments Moneytopay, EDE, S.L.	Payment entity	Madrid-Spain	-	49.00	175,574	143,534
Global Payments - Caixa Acquisition Corporation S.A.R.L.	Payment methods	Luxembourg	-	45.00	42,81	38
Gramina Homes, S.L.	Real estate services	Madrid-Spain	-	20.00	385,659	16,545
Guadapelayo, S.L., in liquidation (L)	Real estate development	Madrid-Spain	-	40.00	312	5,102
IT Now, S.A.	Services for IT technology projects	Barcelona-Spain	39.00	49.00	133,218	124,625
Ircio Inversiones, S.L., in liquidation (L)	Real estate development	Burgos-Spain	35.00	35.00	6	-
Justinmind, S.L.	Development of IT systems	BarcelonaSpain	-	17.00	889	690
Murcia Emprende Sociedad de Capital Riesgo, S.A.	Venture capital company	Murcia-Spain	29.00	29.00	3,945	57
Parque Científico y Tecnológico de Córdoba, S.L.	Science park operation and management	Córdoba-Spain	16.00	36.00	28,164	20,342
Portic Barcelona, S.A.	Other services related to information technology and telecommunications	Barcelona-Spain	26.00	26.00	2,440	294
Redsys Servicios de Procesamiento, S.L.	Payment methods	Madrid-Spain	-	25.00	121,131	41,919
SegurCaixa Adeslas, S.A. de Seguros y Reaseguros	Non-life insurance	Madrid-Spain	-	50.00	6,078,151	4,188,263
Servired, Sociedad Española de Medios de Pago, S.A.	Payment methods	Madrid-Spain	-	41.00	80,994	52,956
Sistema de Tarjetas y Medios de Pago, S.A.	Payment methods	Madrid-Spain	-	21.00	376,593	369,202
Sociedad Española de Sistemas de Pago, S.A.	Payment entity	Madrid-Spain	27.00	27.00	13,187	3,083
Societat Catalana per a la Mobilitat, S.A.	Development and imp. of the T-mobilitat project	Barcelona-Spain	17.00	17.00	141,577	123,009
TFP, S.A.C. (5)	Factoring	Peru	16.00	16.00	23,021	2,863
Telefonica Factoring España, S.A.	Factoring	Madrid-Spain	20.00	20.00	79,732	62,627
Telefonica Factoring do Brasil, Ltda. (4)	Factoring	Brazil	20.00	20.00	309,389	273,731
Telefónica Factoring Colombia (3)	Factoring	Colombia	16.00	16.00	411,551,875	398,158,982
Unicre - Institução Financeira de Crédito, S.A.	Card issuance	Portugal	-	21.00	452,219	312,655
Zone2Boost, S.L.	Holding company for business acquisition	Barcelona-Spain	-	40.00	2,786	39

Corporate name	Business activity	Registered address	Ordinary income	Share capital	Reserves	Profit / Loss
Ape Software Components S.L.	Computer programming activities	Barcelona-Spain	2,833	12	373	-271
Arrendadora Ferroviaria, S.A.	Lessor of trains	Barcelona-Spain	72,820	60	-592	13
BIP and Drive, S.A. ( ^*)	Teletoll systems	Madrid-Spain	16,006	4,613	9,002	3,712
Banco Comercial de Investimento, S.A.R.L. (1)	Banking	Mozambiqu e	2,817,146	10,000,000	10,289,535	6,128,215
Bizum, S.L.	Payment entity	Madrid-Spain	43,835	2,346	1,659	2,077
Brilliance-Bea Auto Finance Co., L.T.D. (2)	Automotive sector financing	China	157,729	1,600,000	128,234	20
Comercia Global Payments, Entidad de Pago, S.L.	Payment entity	Madrid-Spain	520,819	4,625	358,225	84,307
Companhia de Seguros Allianz Portugal, S.A.	Insur. Prod.	Portugal	477,547	39,545	90,938	34,358
Concessia, Cartera y Gestión de Infraestructuras, S.A.	Infrastructure construction and operations	Madrid-Spain	-	17,249	-748	-2,112
Coral Homes, S.L.	Real estate services	Madrid-Spain	668,500	270,774	2,288,484	-47,41
Drembul, S.L.	Real estate development	Logroño-Spain	3,506	30	24,244	-1,322
Girona, S.A.	Holding company	Girona-Spain	697	1,2	4,306	26
Global Payments Moneytopay, EDE, S.L.	Payment entity	Madrid-Spain	16,473	1,367	25,629	5,043
Global Payments - Caixa Acquisition Corporation S.A.R.L.	Payment methods	Luxembourg	-	14	42,804	-45
Gramina Homes, S.L.	Real estate services	Madrid-Spain	46,164	27,626	343,827	-2,339
Guadapelayo, S.L., in liquidation (L)	Real estate development	Madrid-Spain	-	1,981	-6,718	-53
IT Now, S.A.	Services for IT technology projects	Barcelona-Spain	257,09	3,382	3,429	1,782
Ircio Inversiones, S.L., in liquidation (L)	Real estate development	Burgos-Spain	1,367	10,896	-9,77	-1,121
Justinmind, S.L.	Development of IT systems	BarcelonaSpain	558	5	464	-280
Murcia Emprende Sociedad de Capital Riesgo, S.A.	Venture capital company	Murcia-Spain	-	2,557	-602	1,925
Parque Científico y Tecnológico de Córdoba, S.L.	Science park operation and management	Córdoba-Spain	788	23,422	-18,133	-1,301
Portic Barcelona, S.A.	Other services related to information technology and telecommunications	Barcelona-Spain	2,202	291	1,813	42
Redsys Servicios de Procesamiento, S.L.	Payment methods	Madrid-Spain	148,414	5,815	67,374	6,022
SegurCaixa Adeslas, S.A. de Seguros y Reaseguros	Non-life insurance	Madrid-Spain	3,966	469,67	1,020,118	400,8
Servired, Sociedad Española de Medios de Pago, S.A.	Payment methods	Madrid-Spain	3,181	16,372	9,999	1,667
Sistema de Tarjetas y Medios de Pago, S.A.	Payment methods	Madrid-Spain	8,901	240	4,647	2,504
Sociedad Española de Sistemas de Pago, S.A.	Payment entity	Madrid-Spain	10,804	512	7,449	2,142
Societat Catalana per a la Mobilitat, S.A.	Development and imp. of the T-mobilitat project	Barcelona-Spain	13,059	13,823	-847	223
TFP, S.A.C. (5)	Factoring	Peru	9,733	6	8,828	5,33
Telefonica Factoring España, S.A.	Factoring	Madrid-Spain	12,696	5,109	1,74	10,257
Telefonica Factoring do Brasil, Ltda. (4)	Factoring	Brazil	50,273	5	-90	30,748
Telefónica Factoring Colombia (3)	Factoring	Colombia	13,176,079	4,000,000	2,125,218	7,267,675
Unicre - Institução Financeira de Crédito, S.A.	Card issuance	Portugal	198,949	10	97,239	26,631
Zone2Boost, S.L.	Holding company for business acquisition	Barcelona-Spain	130	3	3,272	-528

Corporate name	Business activity	Registered address	Total comprehensive income	Cost of direct holding	Dividends accrued on total ownership interest
Ape Software Components S.L.	Computer programming activities	Barcelona-Spain	-271	-	-
Arrendadora Ferroviaria, S.A.	Lessor of trains	Barcelona-Spain	13	-	-
BIP and Drive, S.A. ( ^*)	Teletoll systems	Madrid-Spain	3,712	-	-
Banco Comercial de Investimento, S.A.R.L. (1)	Banking	Mozambiqu e	6,128,215	-	-
Bizum, S.L.	Payment entity	Madrid-Spain	2,077	-	-
Brilliance-Bea Auto Finance Co., L.T.D. (2)	Automotive sector financing	China	20	-	-
Comercia Global Payments, Entidad de Pago, S.L.	Payment entity	Madrid-Spain	84,307	-	20,24
Companhia de Seguros Allianz Portugal, S.A.	Insur. Prod.	Portugal	34,358	-	-
Concessia, Cartera y Gestión de Infraestructuras, S.A.	Infrastructure construction and operations	Madrid-Spain	-2,112	878	-
Coral Homes, S.L.	Real estate services	Madrid-Spain	-47,41	-	-
Drembul, S.L.	Real estate development	Logroño-Spain	-1,322	3,179	-
Girona, S.A.	Holding company	Girona-Spain	26	1,642	-
Global Payments Moneytopay, EDE, S.L.	Payment entity	Madrid-Spain	5,043	-	1,526
Global Payments - Caixa Acquisition Corporation S.A.R.L.	Payment methods	Luxembourg	-45	-	-
Gramina Homes, S.L.	Real estate services	Madrid-Spain	-2,339	-	-
Guadapelayo, S.L., in liquidation (L)	Real estate development	Madrid-Spain	-53	-	-
IT Now, S.A.	Services for IT technology projects	Barcelona-Spain	1,782	1,323	-
Ircio Inversiones, S.L., in liquidation (L)	Real estate development	Burgos-Spain	-1,121	49	-
Justinmind, S.L.	Development of IT systems	BarcelonaSpain	-280	-	-
Murcia Emprende Sociedad de Capital Riesgo, S.A.	Venture capital company	Murcia-Spain	1,925	600	-
Parque Científico y Tecnológico de Córdoba, S.L.	Science park operation and management	Córdoba-Spain	-1,301	-	-
Portic Barcelona, S.A.	Other services related to information technology and telecommunications	Barcelona-Spain	42	105	-
Redsys Servicios de Procesamiento, S.L.	Payment methods	Madrid-Spain	6,022	-	-
SegurCaixa Adeslas, S.A. de Seguros y Reaseguros	Non-life insurance	Madrid-Spain	345,392	-	136,924
Servired, Sociedad Española de Medios de Pago, S.A.	Payment methods	Madrid-Spain	1,667	-	-
Sistema de Tarjetas y Medios de Pago, S.A.	Payment methods	Madrid-Spain	2,504	-	-
Sociedad Española de Sistemas de Pago, S.A.	Payment entity	Madrid-Spain	2,142	2,012	269
Societat Catalana per a la Mobilitat, S.A.	Development and imp. of the T-mobilitat project	Barcelona-Spain	223	1,846	-
TFP, S.A.C. (5)	Factoring	Peru	5,33	920	352
Telefonica Factoring España, S.A.	Factoring	Madrid-Spain	10,257	2,525	1,733
Telefonica Factoring do Brasil, Ltda. (4)	Factoring	Brazil	30,748	2,029	1,328
Telefónica Factoring Colombia (3)	Factoring	Colombia	7,267,675	543	333
Unicre - Institução Financeira de Crédito, S.A.	Card issuance	Portugal	26,631	-	-
Zone2Boost, S.L.	Holding company for business acquisition	Barcelona-Spain	-528	-	-

(L) Companies in liquidation.

( ^*) Companies classified as non-current assets held for sale.

(1) All data except cost are in local currency: New Mozambique metical (thousands).

(2) All data except cost are in local currency: Renmimbi (thousands).

(3) All data except cost are in local currency: Colombian pesos (thousands).

(4) All data except cost are in local currency: Brazilian real.

(5) All data except the cost are in local currency: Peruvian sol (thousands).

Note: The information corresponding to non-listed companies is based on the most recent data available (actual or estimated) at the time of preparation of the notes to these financial statements.

Note: Furthermore, the Company has significant influence over the investee company Chimparra, A.I.E. which is currently in liquidation.

APPENDIX 4 - DISCLOSURE ON THE ACQUISITION AND DISPOSAL OF OWNERSHIP INTERESTS IN SUBSIDIARIES IN 2022

(Article 155 of the Corporate Enterprises Act and Article 125 of the restated text of Spanish Securities Market Law).

On 27 June 2022, CaixaBank, S.A. filed a notice with the Spanish National Securities Market Commission (CNMV) informing it of the purchase agreement reached with Caja de Seguros Reunidos, Compañía de Seguros y Reaseguros, SA(CASER) for CaixaBank's subsidiary VidaCaixa, SAU de Seguros y Reaseguros (VidaCaixa) to acquire 81.31% of the share capital of Sa Nostra, Compañía de Seguros de Vida, SA (Sa Nostra Vida) for EUR 262 million.

On 30 September 2022, CaixaBank filed a communication with the CNMV stating that, in the context of an existing equity swap on 1,952% of its 4.495% stake in Telefónica SA ("TEF"), it had decided to partially settle this swap by handing over 1%, with a settlement date of 4 October 2022. The stake in TEF was therefore reduced to 3.495%.

APPENDIX 5 - ANNUAL BANKING REPORT

In accordance with Article 87 of Act 10/2014, of 26 June, on the regulation, supervision and solvency of credit institutions, credit institutions are required to publish the following information on a consolidated basis for the last financial year ended, broken down by country where the credit institutions are established. Pursuant to the above, the information required is provided hereon:

•

Name, nature and geographic location of activity

In Note 1.1 to CaixaBank Group's consolidated financial statements the name, nature and geographical location of the activity is specified.

Appendices 1, 2 and 3 of CaixaBank Group's consolidated financial statements detail the subsidiaries, joint ventures and associates that make up CaixaBank Group.

Appendix 5 discloses notices on the acquisition and disposal of ownership interests in 2022, in accordance with Article 155 of the Corporate Enterprises Act and Article 125 of the revised text of the Securities Market Law.

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Business volume

CaixaBank, SA is established in Spain, and has 7 foreign subsidiaries (10 branches), specifically in Poland, Morocco (3 branches), the UK, Germany, France, Portugal (2 branches) and Italy.

CaixaBank also has 17 representative offices which do not carry out banking activities but provide information on the Company's services in the following 16 jurisdictions: Algeria, Australia, Brazil, China (3), Chile, Colombia, Egypt, the United Arab Emirates, the United States of North America, India, Turkey, Peru, Singapore, South Africa and Canada.

Banco BPI has 323 branches in Portugal and 1 branch in Switzerland.

Business volume by country on a consolidated basis is as follows:

Geographic information: Distribution of ordinary income from customers ^* (1)

(Millions of euros)

	Banking and insurance			BPI
	2022	2021	2020	2022	2021	2020
Spain	14,826	13,074	11,041
Portugal	167	124	110	951	811	742
Poland	93	19	20
Morocco	14	11	9
United Kingdom	77	30	30
Germany	66	32	17
France	62	28	18
Angola
Share of profit/(loss) acc. for using equity method ^*
Other	21	20		7	8	8
TOTAL ORDINARY INCOME	15,326	13,338	11,245	958	819	750

Geographic information: Distribution of ordinary income from customers ^* (2)

(Millions of euros)

	Corporate centre			Total CaixaBank Group
	2022	2021	2020	2022	2021	2020
Spain	59	85	62	14,885	13,159	11,103
Portugal				1,118	935	852
Poland				93	19	20
Morocco				14	11	9
United Kingdom				77	30	30
Germany				66	32	17
France				62	28	18
Angola	103	112	31	103	112	31
Share of profit/(loss) acc. for using equity method ^*	43	145	84	43	145	84
Other				28	28	8
TOTAL ORDINARY INCOME	205	342	177	16,489	14,499	12,172

( ^*) Correspond to the following headings of CaixaBank Group's public statement of profit or loss calculated pursuant to Bank of Spain Circular 5/2014:

1. Interest income

2. Dividend income

3. Share of profit/(loss) of entities accounted for using the equity method

4. Fee and commission income

5. Gains/(losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net

6. Gains/(losses) on financial assets and liabilities held for trading, net

7. Gains/(losses) on assets not designated for trading compulsorily measured at fair value through profit or loss, net

8. Gains/(losses) on financial assets and liabilities designated at fair value through profit or loss, net

9. Gains/(losses) from hedge accounting, net

10. Other operating income

11. Income from assets under insurance and reinsurance contracts

( ^**) of international associates and others. Mainly corresponds to the share of profit/(loss) of international associates accounted for using the equity method, primarily Erste Group Bank (Austria, until November 2021) and Banco Comercial e de Investimento (Mozambique).

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Full-time workforce by country

The full-time workforce by country is as follows:

Full-time workforce by country

	31-12-2022	31-12-2021	31-12-2020
Spain	39,825	44,912	30,421
Portugal	4,570	4,649	4,783
Poland	21	21	20
Morocco	29	28	27
United Kingdom	25	18	16
Germany	18	14	12
France	23	14	11
Switzerland	17	16	19
Other countries - Representative offices	97	90	77
TOTAL FULL-TIME WORKFORCE	44,625	49,762	35,386

•

Gross profit/(loss) before tax

Gross profit before tax on a consolidated basis in 2022 amounted to EUR 4,326 million (EUR 5,315 million and EUR 1,600 million in 2021 and 2020, respectively), and includes ordinary income from the branches detailed in b) above.

•

Income tax

The net income tax expense recognised on consolidated profit in 2022 amounted to EUR 1,179 million (EUR 88 million and EUR 219 million in 2021 and 2020, respectively), as shown in the consolidated statement of profit or loss.

Payments of income tax made during 2022 have reached EUR 395 million, of which EUR 355 million have been paid in Spain, EUR 15 million in Portugal, EUR 8 million in the United Kingdom, EUR 7 million in France, EUR 4 million in Germany, EUR 3 million in Poland, EUR 2 million in Morocco, EUR 0.5 million in Switzerland and EUR 0.4 million in Luxembourg.

Income taxes actually paid in the fiscal year in each jurisdiction include the final settlements derived from the payments on account and withholdings paid, which are reduced in turn in the income tax rebates in the current year. The result of the settlements deriving from tax assessments during that year is also included.

All ordinary income generated by CaixaBank Group is taxable.

The amount of the corporation tax payments do not correspond to the amount of the income tax expense recorded in the consolidated statement of profit or loss. The main cause of this divergence lies in the different timing of recognition of the items that make up the accrual and cash criteria in relation to income tax.

•

Grants and public aid received

In 2022, the Group received the following grants and public aid:

•	A grant from the Ministry of Industry, Energy and Tourism, through the department of shipbuilding, for EUR 3.4 million in aid for shipbuilding.
•	A grant from the State Foundation for Training in Employment (FEFE) for meeting certain conditions required in employee training courses, for an amount of EUR 3,7 million.
•	Subsidy from the Government of Valencia for the installation of ATMs in certain areas, amounting to EUR 1 million.

•

Indicators and ratios

•

The relevant indicators and ratios are shown under the heading "08 Shareholders and Investors - Changes in profit/(loss)" of the 2022 Management Report. The return on assets in 2022, calculated as net profit (adjusted to reflect the amount of the Additional Tier 1 coupon, after tax, reported in equity) divided by average total assets over the last twelve months, was 0.4%, 0.8% (0.3% not considering the extraordinary assets of the merger) in 2021 and 0.3% in 2020.

¹ It is worth noting that these goals are not only displayed through risk tolerance levels but the RAF also considers minimum risk appetite statements, such as the tax risk monitoring under legal risk covered in the Corporate Risk Catalogue.
² The different monitoring rating categories are:
Insignificant risk: all customer transactions are performing correctly and there are no indications that call the repayment capacity into question.
Low risk: the payment capacity is adequate, although the customer or one or more of their transactions shows some minor indication of weakness.
Medium risk: there are indications of customer impairment, nonetheless, these weaknesses do not currently put at risk the debt repayment capacity.
Medium-high risk: the customer's credit quality has been seriously weakened. If the customer impairment continues, the customer may not have the capacity to repay the debt.
Doubtful: there is evidence of sustained impairment or non-performance as regards the customer capacity to meet their obligations.
No rating: there is insufficient information to assign a monitoring rating.
³ In addition to these borrowers, an individual assessment of the credit loss will be required for operations with a low credit risk, qualified as such as a result of having no appreciable risk, that are nevertheless in a doubtful situation. Applying materiality criteria, the individual estimate of expected losses will be performed whenever a borrower represents an exposure of more than EUR 1 million and more than 20% of that exposure is considered doubtful.
⁴ See Note 2.7, in reference to the fact that sales of exposures with a significant increase in credit risk do not compromise the business model of holding assets to receive contractual cash flows.
⁵ See Note 27.4, detailing the sales of the non-performing and defaulted loan portfolio.
⁶ See Note 2.7.
⁷ Unless, for exposures with individually significant borrowers, the individual analysis determines that there has not been any SICR.
⁸ Regulatory or through-the-cycle PD: probability of default estimated as the average PD expected through-the-cycle, in accordance with the CRR requirements for its use for the effect of calculating risk-weighted assets under the internal-ratings-based (IRB) approach.
⁹ The Master Scale is a table of correlation between probability of default (PD) ranges and a scale between 0 and 9.5, 0 being the score associated with the best PDs and 9.5 being the score associated with the highest PDs of the performing portfolio. The use of this Master Scale is linked to the use in management of probabilities of default, since elements such as cut-off points or levels of power are expressed in terms of Master Scale score instead of PD.
¹⁰ The existence of the collateral, particularly for the individual analysis, is not used to assess the credit quality of borrowers, however, for activities that are closely related to the collateral, such as real estate developments, the reduced value of said collateral is analysed to assess the increase or reduction of the borrower's risk level.
As indicated in the collective analysis, the automatic rating is generated using a combination of i) a risk-model rating and ii) an alert-based rating. Considering that the Entity's policy in relation to granting asset operations follows the criterion of customer repayment, and not recovery via the allocation of guarantees, the collective analysis is focused on assessing the credit quality of borrowers and not the assessment of collateral provided. In this regard, the main guarantees (or collateral) of the Group are mortgage-related, with no significant value fluctuations that could be considered evidence of a significant risk of credit risk in mortgages.
¹¹ As indicated in the Single Names portfolio analysis is carried out individually in its totality, determining the stage in an expert manner for each of the instruments analysed, on the basis of the knowledge of the borrowers and experience. When required, the coverage calculation also uses this individualised approach.
The credit loss of the instruments of the portfolio that are monitored individually, and which are classified individually in Stage 1, is calculated collectively on the basis of the knowledge of the borrowers and experience. This way of estimating expected losses would not have led to material differences in their totality, compared with an estimate using individual estimates. This is due to the fact that, in general, the information to be considered in performing the collective calculation would have been equivalent to that used for individual estimates.