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BankiaArbitration for preferred securities

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Arbitration for preferred

This past 15 July 2016 there expired the time limit for submission of applications for arbitration by retail customers holding hybrid instruments, such as preferred participating securities and subordinated debt issued by the former 'cajas de ahorros' (quasi-public savings banks).

Arbitration was only available to individuals and to non-profit legal entities in their capacity as retail customers. It was free of charge and did not require the engagement of legal counsel or court agents (procuradores), and was an alternative to going before the courts. The arbitration was also not available to collective suits, as each claim had to be handled and studied on an individualised basis, having regard to the particularities of each specific case, and in all cases provided they were based on defects in the marketing of the aforesaid products or services with the former cajas de ahorros.

The bank managed, from its offices, all applications submitted by customers, and forwarded them to an independent manager (in this case, KPMG), in order for the latter to prepare a report setting out the maximum amount refundable to the customers, pursuant to the criteria approved by the Commission created by Royal Decree Law 6/2013 of 22 March 2013. The Bankia office would then contact the customer to inform him or her of the result of said report, in order for the customer to decide whether or not he or she wished to continue with the arbitration procedure.

If the customer, after being informed of the resolution issued in the KPMG independent report, chose not to continue with the arbitration procedure, her or she had the option of waiving arbitration, without this decision affecting other remedies such as the courts. Conversely, if the customer was in agreement with the report, an “arbitration agreement” would be signed by both parties in which the customer undertook to accept the arbitration award and waive the pursuit of court action. After the agreement was signed, an arbitration by the National Arbitration Board (Junta Arbitral Nacional) would begin. The arbitration concluded with notification of the arbitration decision to both parties: the customer and Bankia.

In those cases where the decision was favourable to the customer, the bank paid the amount stipulated in the award, according to the payment formula set out in the arbitration agreement.

The bank welcomed the Government's announcement that it intended to organise an arbitration procedure for the bank's customers who had acquired preferred participating securities and subordinated debt sold by the cajas de ahorros that were merged to form the Group. During this process the bank has maintained a position of utmost collaboration and respect for the criteria laid down by the European and Spanish authorities, as set out in the Memorandum of Understanding and in Law 9/2012 of 14 November 2012 on restructuring and resolution of credit institutions, with the ultimate goal of providing its customers with a simple process for resolving this dispute.

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