BBVA CAPITAL FUNDING LTD. (incorporated with limited liability in the Cayman Islands) 60,000,000 Fixed Rate Notes due 10 October 2011

Transcription

1 LISTING PARTICULARS dated 23 June 2008 BBVA CAPITAL FUNDING LTD. (incorporated with limited liability in the Cayman Islands) 60,000,000 Fixed Rate Notes due 10 October 2011 unconditionally and irrevocably guaranteed by BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (incorporated with limited liability in Spain) These Listing Particulars relate to an application to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the UK Listing Authority) for the 60,000,000 Fixed Rate Notes due 10 October 2011 (the Notes) issued by BBVA Capital Funding Ltd. (the Issuer) unconditionally and irrevocably guaranteed by Banco Bilbao Vizcaya Argentaria, S.A. (the Guarantor or the Bank) to be admitted to the Official List of the UK Listing Authority. The Issuer has also applied to the London Stock Exchange plc (the London Stock Exchange) for the Notes to be admitted to trading on the London Stock Exchange's Professional Securities Market. The London Stock Exchange's Professional Securities Market is not a regulated market for the purposes of Directive 2004/39/EC (the Markets in Financial Instruments Directive). The Notes were issued under a 20,000,000,000 Euro Medium Term Note Programme established by BBVA Global Finance Ltd. and BBVA Capital Funding Ltd. and guaranteed by Banco Bilbao Vizcaya Argentaria, S.A (the Programme). The terms and conditions of the Notes comprise (i) the terms and conditions set out in the Offering Circular dated 26 April 2001 relating to the Programme (the Conditions) as supplemented by (ii) a Pricing Supplement relating to the Notes dated 10 October 2001 (the Pricing Supplement), each as set out in Annex 1 and Annex 2, respectively, to these Listing Particulars. The Notes bear interest at the rate of per cent. annum and were issued on 10 October 2001.

2 This document comprises listing particulars for the purposes of section 79(2) of the Financial Services and Markets Act 2000 (FSMA). The Issuer and the Guarantor (the Responsible Persons) accept responsibility for the information contained in these Listing Particulars. To the best of the knowledge of the Issuer and the Guarantor (each having taken all reasonable care to ensure that such is the case) the information contained in these Listing Particulars is in accordance with the facts and does not omit anything likely to affect the import of such information. These Listing Particulars are to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see "Documents Incorporated by Reference"). These Listing Particulars should be read and construed on the basis that such documents are incorporated and form part of these Listing Particulars. All references in this document to U.S. dollars, U.S.$ and $ refer to the currency of the United States of America and to euro and refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended. All references in this document to Group are to the Guarantor and its subsidiaries, taken as a whole, and all references to the Deed of Covenant, the Subordinated Guarantee and the Agency Agreement have the meanings given to them in the Conditions. CONTENTS Summary of the Notes...3 Risk Factors...5 Documents Incorporated by Reference...8 Use of Proceeds...9 Description of the Issuer...10 Description of the Guarantor...11 General Information...12 The Conditions...14 Annexes 1. The Conditions The Pricing Supplement...45 Page 2

3 SUMMARY OF THE NOTES This summary must be read as an introduction to these Listing Particulars and any decision to invest in the Notes should be based on a consideration of these Listing Particulars as a whole, including the documents incorporated by reference. Following the implementation of the relevant provisions of Directive 2003/71/EC (the Prospectus Directive) in each Member State of the European Economic Area no civil liability will attach to the Responsible Persons in any such Member State in respect of this Summary, including any translation hereof, unless it is misleading, inaccurate or inconsistent when read together with the other parts of these Listing Particulars. Where a claim relating to information contained in these Listing Particulars is brought before a court in a Member State of the European Economic Area, the plaintiff may, under the national legislation of the Member State where the claim is brought, be required to bear the costs of translating the Listing Particulars before the legal proceedings are initiated. Words and expressions defined in the Conditions and the Pricing Supplement shall have the same meaning in this summary. The Issuer The Issuer is a directly wholly-owned subsidiary of the Guarantor and was incorporated on 18 February 1994 for an unlimited duration with limited liability as an exempt company (registration number 25287/E/83) in the Cayman Islands under the Companies Law of the Cayman Islands. The Issuer is an overseas finance vehicle for the Guarantor and has no subsidiaries of its own. The Guarantor The Guarantor is a highly diversified international financial group, with strengths in the traditional banking businesses of retail banking, asset management, private banking and wholesale banking. It also has a portfolio of investments in some of Spain s leading companies. The Guarantor was incorporated for an unlimited term on 28 January It was formed as the result of a merger by absorption of Argentaria into BBV, which was registered on 28 January The Guarantor s organisational structure is divided into the following business areas: Spain and Portugal. Global Business. Mexico and the United States. South America. Corporate Activities. Summary Financial Information As at 31 December 2007 the Guarantor s consolidated total assets were 502,204 million and its consolidated net operating income for the year then ended was 10,544 million. Risk Factors The Issuer is a finance vehicle established by the Guarantor for the purpose of issuing notes and on-lending the proceeds within the Group. The Issuer s ability to fulfil its obligations under the Notes issued by it is therefore dependant upon the Guarantor and other Group companies performing their obligations under the 3

4 on-loans made to them. The Issuer is further indirectly affected by the other risks faced by the Guarantor and other Group companies. There are a number of factors that may affect the Guarantor s ability to fulfil its obligations under the Guarantee. These include the Guarantor s exposure to adverse changes in the Spanish economy and real estate market and risks relating to the lack of availability of funding, volatility in interest rates and increased competition. There are also risks faced by the Guarantor in its Southern and North American businesses. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. Principal Terms of the Notes Aggregate Nominal Amount: 60,000,000. Interest Basis: Fixed Rate: per cent. per annum. Issue Date: 10 October Maturity Date: Interest Payment Date(s): Form of the Notes: Status: 10 October 2011, subject to adjustment in accordance with the Following Business Day Convention and there shall be no resulting adjustment to the accrual. Interest payment dates shall be annually on 10 October in each year from and including 10 October 2002 to and including the Maturity Date, subject to adjustment in accordance with the Following Business Day Convention and there shall be no resulting adjustment to the accrual. Temporary Global Note exchangeable for a permanent Global Note which is exchangeable for definitive Bearer Notes only in certain limited circumstances set out in it. Subordinated. 4

5 RISK FACTORS Each of the Issuer and the Guarantor believes that the following factors may affect its ability to fulfil its obligations under the Notes. Most of these factors are contingencies which may or may not occur and neither the Issuer nor the Guarantor is in a position to express a view on the likelihood of any such contingency occurring. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are described below. Each of the Issuer and the Guarantor believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer or the Guarantor to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons which may not be considered significant risks by the Issuer and the Guarantor based on information currently available to them or which they may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in these Listing Particulars and reach their own views prior to making any investment decision. Factors that may affect the Issuer's ability to fulfil its obligations under the Notes Dependence on other Group members The Issuer is a finance vehicle established by the Guarantor for the purpose of issuing Notes and on-lending the proceeds within the Group. The Issuer is therefore dependent upon other members of the Group paying interest on and repaying their loans in a timely fashion. Should any Group member fail to pay interest on or repay any loan in a timely fashion this could have a material adverse effect on the ability of the Issuer to fulfil its obligations under the Notes. By virtue of this dependence on other Group members, each of the risks described below that affect the Guarantor will also indirectly affect the Issuer. Factors that may affect the Guarantor's ability to fulfil its obligations under the Guarantee Factors that may affect the Guarantor's ability to fulfil its obligations under the Guarantee are set out in the Offering Circular for BBVA Senior Finance, S.A. Unipersonal, BBVA Subordinated Capital, S.A. Unipersonal and BBVA U.S. Senior, S.A. Unipersonal's 40,000,000,000 Global Medium Term Note Programme dated 9 June 2008 (the Base Offering Circular) in the section entitled "Risk Factors Factors that may affect the Guarantor's ability to fulfil its obligations under the Guarantee", such risk factors being incorporated by reference herein, see "Documents Incorporated by Reference". Factors which are material for the purpose of assessing the market risks associated with the Notes The Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in these Listing Particulars; 5

6 (ii) (iii) (iv) (v) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio; have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor's currency; understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. The Issuer's obligations under the Notes are subordinated The Issuer's obligations under the Notes are unsecured and subordinated to all unsecured and unsubordinated obligations of the Issuer as provided in Condition 2(a)(ii). The payment of principal and interest in respect of the Notes and any relative Coupons and all amounts due under the Deed of Covenant in respect of the Notes and any relative Coupons has been unconditionally and irrevocably guaranteed by the Guarantor pursuant to the Subordinated Guarantee. The Guarantor's payment obligations under the Subordinated Guarantee are direct, unsecured and subordinated obligations of the Guarantor as provided in Condition 2(b)(ii). Although the Notes may pay a higher rate of interest than comparable notes which are not subordinated, there is a real risk that an investor in the Notes will lose all or some of his investment should the Issuer and the Guarantor become insolvent. Risks related to the Notes generally Set out below is a brief description of certain risks relating to the Notes generally: Meetings of Noteholders The conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. Change of law The Conditions (except for Conditions 2(a)(ii), 2(b)(ii) and 3(b)) of the Notes are based on English law in effect as at the date of these Listing Particulars. Condition 2(a)(ii) is governed by Cayman Islands law and Conditions 2(b)(iii) and 3(b) are governed by Spanish law. No assurance can be given as to the impact of any possible judicial decision or change to English, Cayman Islands or Spanish law or administrative practice after the date of these Listing Particulars. Risks related to the market generally Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk: 6

7 The secondary market generally The Notes may have no established trading market. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. Exchange rate risks and exchange controls The Issuer will pay principal and interest on the Notes and the Guarantor will make any payments under the Guarantee in euro (the Specified Currency). This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the Investor's Currency) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would decrease (1) the Investor's Currency-equivalent yield on the Notes, (2) the Investor's Currency-equivalent value of the principal payable on the Notes and (3) the Investor's Currency-equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal. Interest rate risks Investment in the Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of them. Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to law or review or regulation by certain authorities. Each potential investor should determine for itself, on the basis of professional advice where appropriate, whether and to what extent (1) the Notes are lawful investments for it, (2) the Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of the Notes. Financial institutions should consult their legal advisors or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules. 7

8 DOCUMENTS INCORPORATED BY REFERENCE The following documents which have previously been published and have been filed with the Financial Services Authority shall be incorporated in, and form part of, these Listing Particulars: (a) the Issuer's audited annual financial statements for each of the two years ended 31 December 2006 and 31 December 2007; (b) (c) (d) the Guarantor's annual report on Form 20-F for the fiscal year ended 31 December 2007 filed with the U.S. Securities and Exchange Commission (the SEC) on 31 March 2008 (which includes, on pages F-1 to F-172 thereof, the published annual audited consolidated financial statements of the Guarantor as at and for each of the years ending 31 December 2007, 31 December 2006 and 31 December 2005 provided that Exhibits 1.1, 4.1 and 4.2 to the Form 20-F, which are incorporated by reference therein, shall not be incorporated in, or form part of, these Listing Particulars); the published interim financial statements of the Guarantor (on a consolidated basis) for the three month period ending 31 March 2008; and the sections entitled "Risk Factors Factors that may affect the Guarantor's ability to fulfil its obligations under the Guarantee", "Description of Banco Bilbao Vizcaya Argentaria, S.A." and "Directors and Senior Management" in the Base Offering Circular. Copies of documents incorporated by reference in these Listing Particulars can be obtained from the Issuer and the Guarantor at Paseo de la Castellana, 81, Madrid and at the principal office in England of the Paying Agent at Winchester House, 1 Great Winchester Street, London EC2N 2DB for the Notes admitted to the Official List. Any documents themselves incorporated by reference in the documents incorporated by reference in these Listing Particulars shall not form part of these Listing Particulars. 8

9 USE OF PROCEEDS The net proceeds of the issue of the Notes were used by the Issuer for its general corporate purposes. 9

10 DESCRIPTION OF THE ISSUER The Issuer is a directly wholly-owned subsidiary of the Guarantor and was incorporated on 18 February 1994 for an unlimited duration with limited liability as an exempt company (registration number 25287/E/83) in the Cayman Islands under the Companies Law of the Cayman Islands. The Issuer is an overseas finance vehicle for the Guarantor and has no subsidiaries of its own. The Directors of the Issuer at the date of this Prospectus are: Name Position at the Issuer Present Principal Occupation outside the Issuer Pedro Mª Urresti Laca Director/President Deputy Chief Financial Officer of the Guarantor Ana Fernández Manrique Director Director of Capital Management and Funding of the Guarantor The business address of the Directors of the Issuer is Paseo de la Castellana, 81, Madrid. There are no conflicts of interest between any duties of the Directors named above to the Issuer and their private interests or other duties. 10

11 DESCRIPTION OF THE GUARANTOR The Description of the Guarantor is set out in the Base Offering Circular in the sections entitled "Description of Banco Bilbao Vizcaya Argentaria, S.A." and "Directors and Senior Management", such descriptions being incorporated by reference herein, see "Documents Incorporated by Reference". 11

12 GENERAL INFORMATION Authorisation The issue of the Notes was duly authorised by resolutions of the Board of Directors of the Issuer passed on 26 April 2000 and 18 April The giving of the Guarantee was duly authorised by a resolution of the Board of Directors of the Guarantor passed on 21 March Listing The admission of the Notes to the Official List will be expressed as a percentage of their nominal amount (excluding accrued interest). It is expected that the listing of the Notes will be granted on or about 27 June Application has been made to the UK Listing Authority for the Notes to be admitted to the Official List and to the London Stock Exchange for such Notes to be admitted to trading on the London Stock Exchange's Professional Securities Market. Clearing Systems The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN for this issue is XS and the Common Code is The address of Euroclear is Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B-1210 Brusssels and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg. No significant change There has been no significant change in the financial or trading position and no material adverse change in the prospects of the Issuer since 31 December There has been no significant change in the financial or trading position of the Group since 31 March 2008 and there has been no material adverse change in the prospects of the Guarantor since 31 December Litigation Neither the Issuer nor the Guarantor nor any other member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer or the Guarantor are aware) in the 12 months preceding the date of this document which may have or have in such period had a significant effect on the financial position or profitability of the Issuer, the Guarantor or the Group. Auditors The auditors of the Issuer are Deloitte, S.L. (registered as auditors on the Registro Oficial de Auditores de Cuentas) who have audited the Issuer's accounts, without qualification, in accordance with International Financial Reporting Standards (IFRS) for each of the two financial years ended on 31 December 2006 and 31 December The auditors of the Issuer have no material interest in the Issuer. The auditors of the Guarantor are Deloitte, S.L. (registered as auditors on the Registro Oficial de Auditores de cuentas), who have audited the Guarantor's accounts for each of the two financial years ended 31 December 2006 and 31 December 2007, which have been prepared in accordance with International Financial Reporting Standards adopted by the European Union (the EU-IFRS) as required to be applied by 12

13 Circular 4/2004 of the Bank of Spain. The auditors of the Guarantor have no material interest in the Guarantor. Documents Available For so long as the Notes remain outstanding, copies of the following documents will be available for inspection from the registered office of the Issuer or the Guarantor and from the specified office of the Paying Agent in London: (a) the constitutional documents (in English) of the Issuer and the Guarantor; (b) the annual accounts of the Issuer in respect of the financial years ended 31 December 2006 and 2007, in each case together with the audit reports prepared in connection therewith; (c) (d) (e) (f) (g) the consolidated and non-consolidated financial statements of the Guarantor in respect of the financial years ended 31 December 2006 and 2007 (with an English translation thereof), in each case together with the audit reports prepared in connection therewith; the most recently published annual report and accounts of the Issuer (interim financial statements are not published by the Issuer) and the most recently published annual report and accounts and unaudited quarterly interim financial statements (in English translation) of the Guarantor and of the Guarantor and its consolidated subsidiaries taken as a whole, from time to time; the Agency Agreement, the Deed of Covenant and the Subordinated Guarantee; a copy of these Listing Particulars; and a copy of the Base Offering Circular. Post-issuance information The Issuer does not intend to provide any post-issuance information in relation to the issue of Notes. 13

14 ANNEX 1 THE CONDITIONS The following are the Terms and Conditions of the Notes (sometimes referred to herein as Terms and Conditions) which will be incorporated by reference into each global Note, each definitive Bearer Note and each Registered Note, but in the case of definitive Bearer Notes and Registered Notes only if permitted by the relevant stock exchange (if any) and agreed by the relevant Issuer and the relevant Purchaser(s) at the time of issue but, if not so permitted and agreed, such definitive Bearer Note or Registered Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Pricing Supplement in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. The applicable Pricing Supplement (or the relevant provisions thereof) will be endorsed upon, or attached to, each temporary global Note, permanent global Note, definitive Bearer Note and Registered Note. This Note is one of a Series of Euro Medium Term Notes issued by the Issuer (the Issuer) named in the applicable Pricing Supplement (as defined below) pursuant to an amended and restated Agency Agreement (the Agency Agreement) dated 26 April 2001 made between BBVA Global Finance Ltd., BBVA Capital Funding Ltd., Banco Bilbao Vizcaya Argentaria, S.A. (the Guarantor) and Deutsche Bank AG London, as issuing and principal paying agent (the Agent, which expression shall include any successor agent) and the registrar and other paying agents named therein (together with the Agent, the Paying Agents, which expression shall include any additional or successor paying agents). If this is a Registered Note, in relation to this Note Registrar means Deutsche Bank Luxembourg S.A. or such other entity specified as registrar in the applicable Pricing Supplement. References herein to the Notes shall be references to the Notes of this Series and shall mean: i(i) (ii) (iii) (iv) n relation to any Bearer Notes (as defined below) represented by a global Note, units of the lowest Specified Denomination in the Specified Currency; definitive Bearer Notes issued in exchange for a global Note; any global Note; and any Registered Note (as defined below). As used herein, Tranche means Notes which are identical in all respects (including as to listing) and Series means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and forming a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Price. Interest bearing definitive Bearer Notes (unless otherwise indicated in the applicable Pricing Supplement) have interest coupons (Coupons) and, if indicated in the applicable Pricing Supplement, talons for further Coupons (Talons) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Definitive Bearer Notes repayable in instalments have receipts (Receipts) for the payment of the instalments of principal (other than the final instalment) attached on issue. Global Notes and Registered Notes do not have Receipts, Coupons or Talons attached on issue. The Pricing Supplement for this Note (or the relevant provisions thereof) is attached hereto or endorsed hereon and supplements these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or 14

15 modify these Terms and Conditions for the purposes of this Note. References herein to the applicable Pricing Supplement are to the Pricing Supplement (or the relevant provisions thereof) attached hereto or endorsed hereon. The holders of the Notes (the Noteholders, which expression shall, in relation to any Notes represented by a global Note, be construed as provided below), the holders of any Receipts (the Receiptholders) and any holders of any Coupons (the Couponholders, which expression shall, unless the context otherwise requires, include the holders of any Talons) are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency Agreement and the applicable Pricing Supplement, which are binding on them. The Noteholders, any Receiptholders and any Couponholders are entitled to the benefit of the deed of covenant (the Deed of Covenant) dated 26 April 2001 and made by the Issuer. The holders of Senior Notes are entitled to the benefit of the senior deed of guarantee (the Senior Guarantee) dated 26 April 2001 and made by the Guarantor. The holders of Subordinated Notes are entitled to the benefit of the subordinated deed of guarantee (the Subordinated Guarantee) dated 26 April 2001 and made by the Guarantor. The original of the Deed of Covenant is held by a common depositary for Euroclear Bank S.A./N.V., as operator of the Euroclear System (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg) and the originals of the Senior Guarantee and the Subordinated Guarantee are held by the Agent at its specified office for the time being and copies thereof may be obtained upon request during normal business hours from the specified offices of each of the Agent, the Registrar and the other Paying Agents. Copies of the Agency Agreement and the applicable Pricing Supplement are available for inspection at (and copies of the applicable Pricing Supplement may be obtained free of charge from) the specified offices of each of the Agent, the Registrar, in the case of Registered Notes, and the other Paying Agents, in the case of Bearer Notes, save that, if this Note is unlisted, the applicable Pricing Supplement will only be available for inspection (and a copy may only be obtained) by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the relevant Paying Agent as to identity. Words and expressions defined in the Agency Agreement or used in the applicable Pricing Supplement shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated. 2. FORM AND TRANSFER The Notes are either in bearer form (Bearer Notes) or in registered form (Registered Notes), as specified in the applicable Pricing Supplement, and, in the case of definitive Notes, serially numbered, each in the Specified Currency and the Specified Denomination(s). Bearer Notes of one Specified Denomination may not be exchanged for Bearer Notes of another Specified Denomination and Bearer Notes may not be exchanged for Registered Notes and vice versa. This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, any other type of Note, or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Pricing Supplement. This Note is an Index Linked Redemption Note, an Instalment Note, a Dual Currency Note, a Partly Paid Note, any other type of Note or a combination of any of the foregoing, depending on the Redemption/Payment Basis shown in the applicable Pricing Supplement. This Note is a Senior Note or a Subordinated Note as shown in the applicable Pricing Supplement. Bearer Notes in definitive form are issued with Coupons attached, unless they are Zero Coupon Notes, in which case references to interest, Coupons and Couponholders in these Terms and Conditions are not applicable. 15

16 Subject as set out below, title to the Bearer Notes, Receipts and Coupons will pass by delivery and title to the Registered Notes will pass upon the registration of transfers in accordance with the provisions of the Agency Agreement. A Registered Note may be transferred in whole or in part (in the Specified Denomination or any integral multiple of the Specified Denomination) by the transferor or a person duly authorised on behalf of the transferor depositing the Registered Note for registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the specified office of the Registrar, with the form of transfer endorsed thereon duly completed and signed by or on behalf of the transferor and upon the Registrar after due and careful enquiry being satisfied with the documents of title and the identity of the person making the request and subject to the regulations set out in Schedule 6 to the Agency Agreement, the Registrar should enter the name of the transferee in the Register for the Notes as the holder of the Note or part thereof specified in the form of transfer. Subject as provided above, the Registrar will, within five London Business Days of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations), deliver at its specified office to the transferee or (at the risk of the transferee) send by regular uninsured mail to such address as the transferee may request a new Registered Note of a like aggregate nominal amount to the Registered Note (or the relevant part of the Registered Note) transferred. In the case of a transfer of part only of a Registered Note, a new Registered Note in respect of the balance of the Registered Note not transferred will be so delivered or (at the risk of the transferor) sent to the transferor. For the purposes of this paragraph, the expression London Business Day means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in London. In the event of a partial redemption of Notes under Condition 6(c), the Issuer shall not be required: (a) (b) to register the transfer of Registered Notes (or parts of Registered Notes) during the period beginning on the 65th day before the date of the partial redemption and ending on the day on which notice is given specifying the serial numbers of Notes called (in whole or in part) for redemption (both inclusive); or to register the transfer of any Registered Note, or part of a Registered Note, called for redemption. Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration or exchange in the Cayman Islands or Spain or the United Kingdom or in any other jurisdiction where the Registrar's specified office is located. Subject as set out below, the Issuer, the Guarantor, any Paying Agent may deem and treat the bearer of any Bearer Note, Receipt or Coupon and the registered holder of any Registered Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any global Note, without prejudice to the provisions set out in the next succeeding paragraph. For so long as any of the Bearer Notes is represented by a global Note held on behalf of Euroclear and/or Clearstream, Luxembourg, each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear and/or of Clearstream, Luxembourg as the holder of a particular nominal amount of Bearer Notes (in which regard any certificate and/or other document issued by Euroclear and/or Clearstream, Luxembourg as to the nominal amount of Bearer Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantor and any Paying Agent as the holder of such nominal amount of Bearer Notes for all purposes other than with respect to the 16

17 payment of principal or interest on the Bearer Notes, for which purpose the bearer of the relevant global Note shall be treated by the Issuer, the Guarantor and any Paying Agent as the holder of such Bearer Notes in accordance with and subject to the terms of the relevant global Note (and the expressions Noteholder and holder of Notes and related expressions shall be construed accordingly). Notes which are represented by a global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear or of Clearstream, Luxembourg, as the case may be. Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearance system approved by the Issuer, the Guarantor and the Agent. 3. STATUS OF THE NOTES, OF THE SENIOR GUARANTEE AND OF THE SUBORDINATED GUARANTEE (a) (i) Status of the Senior Notes This Condition 2(a)(i) applies only to Senior Notes and references to Notes shall be construed accordingly. The Notes and any relative Coupons and Receipts will be direct, unconditional and (subject to the provisions of Condition 4(a)) unsecured obligations of the Issuer and (subject as aforesaid) rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors' rights. (ii) Status of the Subordinated Notes This Condition 2(a)(ii) applies only to Subordinated Notes and references to Notes shall be construed accordingly. The Notes and any relative Coupons and Receipts will be direct and (subject to the provisions of Condition 3(b)) unsecured obligations of the Issuer and subordinated to all unsecured and unsubordinated obligations of the Issuer. Accordingly, in the event of the bankruptcy, dissolution or winding up of the Issuer, the rights of the holders of the Notes to receive payment from any assets of the Issuer shall rank in right of payment after the unsecured and unsubordinated creditors of the Issuer but at least pari passu with all other, if any, subordinated creditors of the Issuer (other than those expressed to rank behind the rights of the holders of the Notes), and in priority to the holders of subordinated obligations which are expressed to rank behind the rights of the holders of the Notes, and the rights and claims of shareholders and creditors of the Issuer which are characterised as holders of equity. (b) (i) Status of the Senior Guarantee This Condition 2(b)(i) applies only to Senior Notes and references to Notes shall be construed accordingly. The payment of principal and interest in respect of the Notes and any relative Coupons and Receipts and all amounts due under the Deed of Covenant in respect of the Notes and any relative Coupons 17

18 and Receipts has been unconditionally (save as provided below) and irrevocably guaranteed by the Guarantor pursuant to the Senior Guarantee. The obligations of the Guarantor under the Senior Guarantee constitute direct, unconditional and (subject to the provisions of Condition 3(a)) unsecured obligations of the Guarantor and (subject as aforesaid) rank and will rank, subject to any obligations notarised or recorded in a Public Deed (as defined below) which will be preferred by law or other applicable statutory exceptions, pari passu with all other unsecured and unsubordinated indebtedness and monetary obligations of the Guarantor, present or future, including those in respect of deposits. Public Deed means a document which has been notarised as an escritura pública or recorded before a Corredor Colegiado de Comercio and thus the rights evidenced thereby obtain the status described in paragraph 4 of Article 913 of the Spanish Commercial Code (Código de Comercio) or a document that by similar processes has substantially the same status under Spanish law as a document so notarised or recorded. (ii) Status of the Subordinated Guarantee This Condition 2(b)(ii) applies only to Subordinated Notes and references to Notes shall apply accordingly. The payment of principal and interest in respect of the Notes and any relative Coupons and Receipts and all amounts due under the Deed of Covenant in respect of the Notes and any relative Coupons and Receipts has been unconditionally and irrevocably guaranteed by the Guarantor pursuant to the Subordinated Guarantee. The payment obligations of the Guarantor under the Subordinated Guarantee constitute direct, unsecured and subordinated obligations of the Guarantor. Accordingly, subject to Condition 4(b) below, in the event of proceedings relating to the bankruptcy, dissolution or winding up of the Guarantor or any other proceeding that requires the application of the priorities provided by the Spanish Commercial Code (Código de Comercio), the Spanish Civil Code (Código Civil) and/or any other applicable Spanish laws (collectively, Procedimientos Concursales), and assuming compliance by the Guarantor with the undertaking contained in Condition 4(b) below, the rights and claims of the holders of the Notes under the Subordinated Guarantee shall rank in right of payment, in accordance with Law 13/1985 and Law 13/1992, Royal Decree 1343/1992 (as amended) and Banco de España Circular 5/1993 (as amended): (a) (b) (c) after the rights and claims of all the unsecured and unsubordinated creditors (Acreedores Comunes) of the Guarantor; to the extent permitted by Spanish law, at least pari passu with the rights and claims of the holders of all other present and future Subordinated Indebtedness (as defined below) of the Guarantor (if any); and in priority to the rights and claims of shareholders and creditors of the Guarantor who are characterised as holders of equity (otros acreedores a título asimilado a la aportación de capital) with respect to their claims as such holders. Subordinated Indebtedness means all indebtedness, contingent or otherwise, of the Guarantor which by its terms or their terms is or are, or is or are expressed to be, subordinated upon bankruptcy, dissolution or winding up in right of payment to, or the repayment or payment in respect of which is expressed to be conditional in any of such circumstances upon the complete payment of the claims of all unsubordinated creditors of the Guarantor. 18

19 4. NEGATIVE PLEDGES (a) This Condition 4(a) shall apply only to Senior Notes and references to Notes shall be construed accordingly. So long as any of the Notes remains outstanding (as defined in the Agency Agreement): (1) the Issuer will not create or have outstanding any mortgage, charge, lien, pledge or other security interest (each a Security Interest) upon, or with respect to, any of its present or future business, undertaking, assets or revenues (including any uncalled capital) to secure any Indebtedness for Borrowed Money (as defined below) or any guarantee of any Indebtedness for Borrowed Money, unless the Issuer shall, in the case of the creation of a Security Interest, before or at the same time, and in any other case, promptly, take any and all action necessary to ensure that: (A) (B) all amounts payable by it under the Notes and any relative Coupons and Receipts and under the Deed of Covenant in respect of the Notes and any relative Coupons and Receipts are secured equally and rateably with the Indebtedness for Borrowed Money or guarantee, as the case may be, by such Security Interest; or such other Security Interest or other arrangement (whether or not it includes the giving of a Security Interest) is provided as shall be approved by an Extraordinary Resolution of the Noteholders; and (2) the Guarantor will not, so long as any of the Notes remains outstanding, grant any preference or priority (whether by means of a notarisation or recording an obligation in a Public Deed) (other than by operation of law) to, or create or have outstanding any mortgage, lien, pledge or other charge upon the whole or any part of its assets or revenues, present or future, (each a security) to secure any External Indebtedness (as defined below) or any guarantee of any External Indebtedness unless: (C) (D) the same preference, priority or security shall forthwith be extended equally and rateably to the Senior Guarantee; or such other security as shall be approved by an Extraordinary Resolution of the Noteholders shall previously have been or shall forthwith be extended equally and rateably to the Notes and any relative Coupons and Receipts and to the Deed of Covenant in respect of the Notes and any relative Coupons and Receipts, provided always that the foregoing provisions shall not apply to any preference or priority granted, or security created or arising, (a) in the course of carrying on a banking business (as defined below), (b) in respect of the Guarantor's obligations under issues under the provisions of and in accordance with Spanish Law 2/1981 and applicable related legislation or (c) in respect of the Guarantor's obligations to Banco de España (or its successor for the time being carrying on the functions of the central bank in Spain). (b) This Condition 4(b) shall apply only to Subordinated Notes and references to Notes shall be construed accordingly. The Subordinated Guarantee provides that all rights of priority which would otherwise be provided to the holder of this Note, any relative Receipt or Coupon under Spanish law by virtue of the Subordinated Guarantee relating to this Note being raised to the status of a Public Deed are expressly and unconditionally waived by such holder by his acceptance of this Note, Receipt and/or Coupon and the Subordinated Guarantee (the acceptance of the Subordinated Guarantee being given by the 19

20 acceptance of this Note and any such Receipt and/or Coupon). The Guarantor has undertaken to obtain from the holders of any Subordinated Indebtedness incurred on or after 26 April 2001 a legally effective waiver of rights of priority substantially similar in content and effect to that described in the previous sentence. The Guarantor has undertaken in the Subordinated Guarantee not to raise any document evidencing Subordinated Indebtedness incurred on or after 26 April 2001 to a level at which it would, under Spanish law, have the benefits of a Public Deed unless, (a) such Subordinated Indebtedness is, at the time it is incurred, required under Spanish law to be so raised or (b) at the expense of the Guarantor, the obligations of the Guarantor under the Subordinated Guarantee are raised to a level at which it would, under Spanish law, have the benefits of a Public Deed. The Guarantee is only given on the basis that the rights of priority of the Noteholders with respect to any other Subordinated Indebtedness not expressed to be junior to the Guarantee are deemed to be waived. Accordingly, the Guarantee contains a statement to such effect. The Spanish Commercial Code does not include any reference to the notarisation or recording of subordinated indebtedness. Article of the Spanish Commercial Code provides that, solely in the event of bankruptcy, the rights and claims of the holders of indebtedness which has been notarised or recorded in a Public Deed will generally rank prior to those of holders of indebtedness that has not been so notarised or recorded. However, Spanish counsel to the Guarantor has advised the Guarantor that, in their opinion, although to the best of their knowledge there are no judicial precedents directly on the point, under current Spanish law Subordinated Indebtedness containing a statement of waiver of the holder's rights of priority with respect to other Subordinated Indebtedness not expressed to be junior to such Subordinated Indebtedness will rank equally with such other Subordinated Indebtedness (such as the Subordinated Guarantee) containing a similar waiver (irrespective of the date of issue of any such Subordinated Indebtedness or whether it has been notarised or recorded in a Public Deed). At the date of this Offering, the Guarantor does not have outstanding any Subordinated Indebtedness raised to the status of a Public Deed that does not contain such a statement of waiver. (c) As used herein: External Indebtedness means any present or future Indebtedness for Borrowed Money in the form of, or represented by, bonds, notes, debentures, loan capital, certificates of deposit, loan stock or other like instruments or in relation to which or in respect of which any one or more notes or other like instruments are issued (whether or not initially distributed by means of a private placing) and in any such case (x) which is or are intended to be, or is or are capable of being, quoted, listed or ordinarily dealt in on any stock exchange, over the counter or other established securities market (for which purpose any such indebtedness shall be deemed not to be capable of being so quoted, listed or ordinarily dealt in if the terms of issue thereof expressly so provide), and (y): (i) (ii) (iii) is not governed by Spanish law; and is not registered at the Spanish CNMV or listed on any Spanish securities exchange; and more than 50% of which is initially placed with investors resident outside Spain, but shall not include any Indebtedness for Borrowed Money arising in the course of carrying on a banking business; Indebtedness for Borrowed Money means any moneys borrowed, liabilities in respect of any acceptance credit, note or bill discounting facility, liabilities under any bonds, notes, debentures, 20

21 loan stock, securities or other indebtedness by way of loan capital and which, for the purposes of Condition 2(c)(i)(2) only, have a stated maturity of or which by their terms are capable of being extended for a period of more than one year; banking business means in relation to any company (A) banking business as ordinarily carried on or permitted to be carried on at the relevant time by banking institutions in the country in which such company is incorporated or carries on business; or (B) the seeking or obtaining from members of the public of moneys by way of deposit; or (C) any other part of the business of such company which an expert (which expression shall for this purpose include any officer of the Guarantor) nominated in good faith for such purpose by the Guarantor or such company shall certify to be part of, or permitted to be part of, such company's banking business. For the purposes of these Terms and Conditions any reference to an obligation being guaranteed shall include a reference to an indemnity being given in respect of the obligation. 5. INTEREST (a) Interest on Fixed Rate Notes Each Fixed Rate Note bears interest on its nominal amount (or, if it is a Partly Paid Note, the amount paid up) from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest so specified payable in arrear on the Interest Payment Date(s) in each year so specified and on the Maturity Date so specified if that does not fall on an Interest Payment Date. Except as provided in the applicable Pricing Supplement, the amount of interest payable on each Interest Payment Date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Pricing Supplement, amount to the Broken Amount so specified. If interest is required to be calculated for a period ending other than on an Interest Payment Date, such interest shall be calculated by applying the Rate of Interest to each Specified Denomination, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 5(a): (i) if "Actual/Actual (ISMA)" is specified in the applicable Pricing Supplement: 21