REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE

2020

In compliance with Recommendation 6 of the Good Governance Code of Listed Companies, this report includes information on auditor independence, the operation of the committee and related party transactions.

C O N T E NT S

A. REGULATION OF THE AUDIT AND COMPLIANCE COMMITTEE ....................................... 2

B. COMPOSITION ........................................................................................................................ 3

C. FUNCTIONS ............................................................................................................................. 6

D. MEETINGS HELD AND NUMBER IN ATTENDANCE .......................................................... 19

E. NUMBER OF MEETINGS HELD WITH THE INTERNAL AUDITOR AND THE EXTERNAL

AUDITOR ............................................................................................................................... 23

F. SIGNIFICANT ACTIVITIES DURING THE PERIOD .............................................................. 23

1. FINANCIAL AND NON-FINANCIAL REPORTING AND MECHANISMS ASSOCIATED

WITH INTERNAL CONTROL .............................................................................................. 24

2. REGULATORY COMPLIANCE ........................................................................................... 26

  • 3. CORPORATE GOVERNANCE ........................................................................................... 29

  • 4. TRANSACTIONS WITH RELATED PARTIES .................................................................... 31

  • 5. RISK CONTROL AND MANAGEMENT .............................................................................. 33

  • 6. INTERNAL AUDIT ............................................................................................................... 34

  • 7. EXTERNAL AUDITOR ......................................................................................................... 37

  • 8. MONITORING OF THE COMMITTEE'S ACTION PLANS .................................................. 39

  • 9. NATURE AND SCOPE OF COMMUNICATIONS, IF ANY, WITH REGULATORS ............ 40

  • 10. OTHER ACTIVITIES ............................................................................................................ 40

  • 11. THE JOINT MERGER PLAN BETWEEN BANKIA, S.A. AND CAIXABANK, S.A ............... 43

  • 12. TRAINING ............................................................................................................................ 44

  • G. EVALUATION OF THE FUNCTIONING AND PERFORMANCE OF THE COMMITTEE ..... 45

  • H. OPINION OF THE COMMITTEE REGARDING THE INDEPENDENCE OF THE STATUTORY

    AUDITOR ............................................................................................................................... 45

I. INFORMATION ON THE PRACTICAL GUIDES THAT ARE BEING FOLLOWED ............... 45

J. CONCLUSIONS ...................................................................................................................... 46

K. DATE OF PREPARATION OF THE REPORT AND DATE OF APPROVAL BY THE BOARD

OF DIRECTORS .................................................................................................................... 47

A. REGULATION OF THE AUDIT AND COMPLIANCE COMMITTEE

Article 529 terdecies of the Spanish Corporations Act (Ley de Sociedades de Capital) provides that public listed companies must create, at minimum, an Audit Committee, the composition, operation and responsibilities of which are regulated in Article 529 quaterdecies.

The Audit and Compliance Committee of Bankia, S.A. (Hereinafter, "Bankia", the "Company" or the "Entity") was formed on 16 June 2011 by resolution of the Company's Board of Directors, and its rules of composition, procedure and responsibilities are regulated in article 46 of the Bylaws, as developed in article 14 of the Board of Directors Regulations.

In June 2017, the National Securities Market Commission (Comisión Nacional del Mercado de Valores, or "CNMV") published Technical Guide 3/2017, on Audit Committees of Public-Interest Entities, which contains the basic action principles and a set of criteria and best practices for such committees. The CNMV's Technical Guide recommends that audit committees should have their own regulations approved by the Board of Directors.

In order to comply with this recommendation, on April 26, 2018 the Company's Board of Directors approved the regulations of the Audit and Compliance Committee which include, among others, the following areas: composition, requirements for the appointment of members, rules of operation, responsibilities and functions, means at its disposal, rules governing the Committee's interaction with the Board of Directors and the shareholders, rules regarding communications with the auditor of accounts and the internal auditor, assessments and reports to be published.

In section 79 of the Technical Guide 3/2017 of the CNMV it is indicated that the content of the audit committee report, which is to be published on the website sufficiently in advance of holding the ordinary general meeting of shareholders, must allow the shareholders and other interested parties to understand the activities undertaken by the committee in each year, for that purpose establishing the content of the report to be published.

In June 2020 the Board of the CNMV approved the revision of the Code of Good Governance of listed companies in order to, among other questions, strengthen the powers of audit committees in respect of the oversight and assessment of the preparation and integrity of financial and non-financial information and systems for the monitoring and management of the company's financial and non-financial risks, and, where appropriate, those of the group -including operational, technological, legal, social, environmental, political and reputational risks and those related with corruption; ensuring that the activities of the audit committees are focused principally on the relevant risks, including reputational ones; increase the number of persons who can exercise their rights through

the Confidential Whistleblower Channel and in general ensure that internal control policies and systems are effectively applied in practice.

As a result of the modification of the Code of Good Governance, the Board of Directors of the Company, at a meeting held on 23 December 2020, resolved to amend the Regulations of the Audit and Compliance Committee, to expressly include the new recommendations, thereby making these regulations of mandatory compliance for the Company.

This report on the functioning and activities of the Audit and Compliance Committee of Bankia has been prepared in accordance with the provisions of Technical Guide 3/2017 of the CNMV, based on best corporate governance practices.

B. COMPOSITION

In accordance with the provisions of the Bylaws, the Regulations of the Board of Directors and the Regulations of the Audit and Compliance Committee, the Audit and Compliance Committee of Bankia will be formed exclusively by non-executive directors, the majority independent, with a minimum of 3 and a maximum of 5 directors, all of the foregoing without prejudice to attendance, when so expressly resolved by the members of the Committee and with prior invitation by the Chairman, of other directors, including executive directors, senior managers and any employee. In any event, the number of members of the Committee will be determined directly by express resolution, or indirectly by the filling of vacancies or appointment of new members within the established maximum.

The members of the Audit and Compliance Committee are appointed by the Board of Directors taking into account knowledge, abilities and experience in accounting, auditing and the management of financial and non-financial risks and the responsibilities of the Committee. The members of the committee, as a whole, must possess the relevant technical knowledge of the banking sector and the Committee will be chaired by an independent director who, moreover, must have knowledge, abilities and experience in accounting, auditing and the management of financial and non-financial risks.

In accordance with the provisions of the Regulations of the Audit and Compliance Committee, a member of the Committee is deemed to have knowledge and experience in accounting, auditing or both when they possess:

  • a) Knowledge of accounting regulations, auditing or both.

  • b) The ability to evaluate and interpret the application of accounting regulations.

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Bankia SA published this content on 23 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 February 2021 13:41:04 UTC.