Obligation Banco Santander 6.25% ( XS1107291541 ) en EUR

Banco Santander

100.13 % ⇌

Espagne

XS1107291541 ( en EUR )

6.25% par an ( paiement trimestriel )

Perpétuelle - Obligation échue

Prospectus brochure de l'obligation Banco Santander XS1107291541 en EUR 6.25%, échue

100 000 EUR

1 500 000 000 EUR

L'Obligation émise par Banco Santander ( Espagne ) , en EUR, avec le code ISIN XS1107291541, paye un coupon de 6.25% par an.
Le paiement des coupons est trimestriel et la maturité de l'Obligation est le Perpétuelle

Offering Circular dated 3 September 2014

BANCO SANTANDER, S.A.
(incorporated with limited liability under the laws of Spain)
1,500,000,000 Non-Step-Up Non-Cumulative Contingent Convertible
Perpetual Preferred Tier 1 Securities
Issue Price: 100 per cent.
The 1,500,000,000 Non-Step-Up Non-Cumulative Contingent Convertible Perpetual Preferred Tier 1 Securities of 100,000
liquidation preference each (the "Preferred Securities") are being issued by Banco Santander, S.A. (the "Bank", the "Issuer" or
"Banco Santander") on 11 September 2014 (the "Closing Date"). The Bank and its consolidated subsidiaries are referred to herein
as the "Group" or as the "Santander Group".
The Preferred Securities will accrue non-cumulative cash distributions ("Distributions") (i) in respect of the period from (and
including) the Closing Date to (but excluding) 11 September 2021 (the "First Reset Date") at the rate of 6.25 per cent. per annum,
and (ii) in respect of each period from (and including) the First Reset Date and every fifth anniversary thereof (each a "Reset Date")
to (but excluding) the next succeeding Reset Date (each such period, a "Reset Period"), at the rate per annum equal to the aggregate
of 5.64 per cent. per annum (the "Initial Margin") and the 5-year Mid-Swap Rate for the relevant Reset Period. Subject as
provided in the terms and conditions of the Preferred Securities (the "Conditions"), such Distributions will be payable quarterly in
arrear on 11 March, 11 June, 11 September and 11 December in each year (each a "Distribution Payment Date").
All, and not some only, of the Preferred Securities may be redeemed at the option of the Bank on the First Reset Date and on any
Distribution Payment Date falling after the First Reset Date, at the liquidation preference of 100,000 per Preferred Security plus
any accrued and unpaid Distributions for the then current Distribution Period to (but excluding) the date fixed for redemption (the
"Redemption Price"), subject to the prior consent of the Regulator and otherwise in accordance with Applicable Banking
Regulations then in force. The Preferred Securities are also redeemable on or after the Closing Date at the option of the Bank in
whole but not in part, at any time, at the Redemption Price if there is a Capital Event or a Tax Event, subject to the prior consent of
the Regulator and otherwise in accordance with Applicable Banking Regulations then in force.
In the event of the occurrence of the Trigger Event, the Preferred Securities are mandatorily and irrevocably convertible into newly
issued ordinary shares in the capital of the Bank ("Common Shares") at the Conversion Price. In the event of the liquidation of the
Bank, prior to the occurrence of a Trigger Event, Holders will be entitled to receive (subject to the limitations described in the
Conditions), in respect of each Preferred Security, their respective liquidation preference of 100,000 plus any accrued and unpaid
Distributions for the then current Distribution Period to the date of payment of the liquidation distribution.
The Preferred Securities will be issued in bearer form and will be represented by a global Preferred Security deposited on or about
the Closing Date with a common depositary for Euroclear Bank S.A./N.V. ("Euroclear") and Clearstream Banking, société
anonyme ("Clearstream, Luxembourg").
The Preferred Securities are expected to be rated Ba1 by Moody's Investors Service Limited ("Moody's"). The Issuer's long-term
senior debt is currently rated investment grade by the major rating agencies--Baa1 by Moody's Investors Service España, S.A.,
BBB+ by Standard & Poor's Ratings Services ("Standard & Poor's") and A- by Fitch Ratings Ltd ("Fitch") all of which with
stable outlook.
Each of Standard & Poor's, Moody's and Fitch is established in the European Union and is registered under Regulation (EC) No.
1060/2009 (as amended) (the "CRA Regulation"). As such each of Standard & Poor's, Moody's and Fitch is included in the list of
credit rating agencies published by the European Securities and Markets Authority on its website in accordance with the CRA
Regulation. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or
withdrawal at any time by the assigning rating organisation.
An investment in the Preferred Securities involves certain risks. For a discussion of these risks see "Risk Factors" beginning
on page 9.
This Offering Circular does not comprise a prospectus for the purposes of article 5.3 of Directive 2003/71/EC as amended (which
includes the amendments made by Directive 2010/73/EU to the extent that such amendments have been implemented in a relevant
Member State of the European Economic Area) (the "Prospectus Directive"). Application has been made to the Irish Stock
Exchange plc (the "Irish Stock Exchange") for the Preferred Securities to be admitted to the Official List and trading on the Global
Exchange Market of the Irish Stock Exchange. This Offering Circular constitutes listing particulars for the purpose of such
application and has been approved by the Irish Stock Exchange.
The Preferred Securities must not be offered, distributed or sold in Spain nor to Spanish Residents. No publicity of any kind
shall be made in Spain.
The Preferred Securities and any Common Shares to be issued and delivered in the event of the occurrence of a Trigger Event have
not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act") and are
subject to United States tax law requirements. The Preferred Securities are being offered outside the United States in accordance
with Regulation S under the Securities Act ("Regulation S"), and may not be offered, sold or delivered within the United States or
to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
Capitalised terms used but not defined in this cover page will have the meanings set out in the Conditions.
The Preferred Securities are not intended to be sold and should not be sold to "retail clients" (as defined under the Markets
in Financial Instruments Directive 2004/39/EC ("MiFID") ) and/or under the UK FCA Conduct of Business Sourcebook
(("COBS")) as amended from time to time other than where the limited exemptions as defined under COBS 4.14.2 apply.
By making or accepting an offer to purchase any Preferred Securities from the Issuer or the Joint Bookrunners and Joint
Lead Managers, each prospective investor will be deemed to have represented, warranted, and undertaken to the Issuer and
each of the Joint Bookrunners and Joint Lead Managers that (i) it is not a retail client (as described above) other than a

retail client falling within the exceptions in section 4.14.2 of the COBS; and (ii) it will not take any action which would result
in a breach by the Issuer, the Joint Bookrunners and Joint Lead Managers or any other person of the COBS. References to
the COBS in this paragraph shall be deemed to include the amendments to the COBS as contemplated by the Temporary
Marketing Restriction (Contingent Convertible Securities) Instrument 2014 as if this instrument, which will come into force
on 1 October 2014, was currently in force. Potential investors should read the whole of this document, in particular the
"Risk Factors" set out on pages 9 to 43 and "Restrictions on Sales and Resales to Retail Investors" set out on page 2.
Joint Bookrunners and Joint Lead Managers

Banco Santander, S.A.
Credit Suisse
HSBC
J.P. Morgan
Société Générale Corporate &
UBS Investment Bank
Investment Banking

- ii -

CONTENTS

Page
IMPORTANT NOTICES ............................................................................................................................. 1
INFORMATION INCORPORATED BY REFERENCE ............................................................................. 3
OVERVIEW OF THE OFFERING .............................................................................................................. 5
RISK FACTORS .......................................................................................................................................... 9
CONDITIONS OF THE PREFERRED SECURITIES .............................................................................. 44
USE OF PROCEEDS ................................................................................................................................. 76
DESCRIPTION OF THE ISSUER ............................................................................................................. 77
MARKET INFORMATION ..................................................................................................................... 115
DESCRIPTION OF THE SHARES ......................................................................................................... 118
TAXATION .............................................................................................................................................. 128
SUBSCRIPTION, SALE AND TRANSFER ........................................................................................... 146
GENERAL INFORMATION ................................................................................................................... 149

- iii -

IMPORTANT NOTICES
The Issuer accepts responsibility for the information contained in this Offering Circular and declares that,
having made all reasonable enquires and having taken all reasonable care to ensure that such is the case,
the information contained in this Offering Circular is, to the best of its knowledge, in accordance with the
facts and contains no omission likely to affect its import.
This Offering Circular should be read and construed together with any documents incorporated by
reference herein.
The Issuer has confirmed to Banco Santander, S.A., Credit Suisse Securities (Europe) Limited, HSBC
Bank plc, J.P. Morgan Securities plc, Société Générale and UBS Limited (together, the "Joint Lead
Managers") that this Offering Circular contains all information which is (in the context of the issue,
offering and sale of the Preferred Securities) material; that such information is true and accurate in all
material respects and is not misleading in any material respect; that any opinions, predictions or intentions
expressed herein are honestly held or made and are not misleading in any material respect; that this
Offering Circular does not omit to state any material fact necessary to make such information, opinions,
predictions or intentions (in such context) not misleading in any material respect; and that all proper
enquiries have been made to ascertain and to verify the foregoing.
The Issuer has not authorised the making or provision of any representation or information regarding the
Issuer or the Preferred Securities other than as contained in this Offering Circular or as approved for such
purpose by the Issuer. Any such representation or information should not be relied upon as having been
authorised by the Issuer or the Joint Lead Managers.
Neither the Joint Lead Managers nor any of their respective affiliates have authorised the whole or any
part of this Offering Circular and none of them makes any representation or warranty or accepts any
responsibility as to the accuracy or completeness of the information contained in this Offering Circular.
Neither the delivery of this Offering Circular nor the offering, sale or delivery of any Preferred Security
shall in any circumstances create any implication that there has been no change in the affairs of the Issuer,
or any event reasonably likely to involve any adverse change in the condition (financial or otherwise) of
the Issuer, since the date of this Offering Circular or that any other information supplied in connection
with the Preferred Securities is correct as of any time subsequent to the date on which it is supplied or, if
different, the date indicated in the document containing the same.
The Joint Lead Managers have not separately verified the information contained or incorporated by
reference in this Offering Circular. None of the Joint Lead Managers makes any representation, express
or implied, or accepts any responsibility, with respect to the accuracy or completeness of any of the
information contained or incorporated by reference in this Offering Circular or any other information
supplied by the Issuer in connection with the Preferred Securities. Neither this Offering Circular nor any
such information or financial statements of the Issuer are intended to provide the basis of any credit or
other evaluation and should not be considered as a recommendation by the Issuer or the Joint Lead
Managers that any recipient of this Offering Circular or such information or financial statements should
purchase the Preferred Securities. Each potential purchaser of Preferred Securities should determine for
itself the relevance of the information contained or incorporated by reference in this Offering Circular and
its purchase of Preferred Securities should be based upon such investigation as it deems necessary. None
of the Joint Lead Managers undertakes to review the financial condition or affairs of the Issuer during the
life of the arrangements contemplated by this Offering Circular nor to advise any investor or potential
investor in the Preferred Securities of any information coming to the attention of any of the Joint Lead
Managers.
This Offering Circular does not constitute an offer of, or an invitation to subscribe for or purchase, any
Preferred Securities.
The distribution of this Offering Circular and the offering, sale and delivery of Preferred Securities in
certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular come
are required by the Issuer and the Joint Lead Managers to inform themselves about and to observe any
such restrictions.
In particular, the Preferred Securities and the Common Shares have not been and will not be registered
under the Securities Act and are subject to United States tax law requirements. Subject to certain

- 1 -

exceptions, Preferred Securities may not be offered, sold or delivered within the United States or to U.S.
persons.
In this Offering Circular, unless otherwise specified, references to a "Member State" are references to a
Member State of the European Economic Area, references to "U.S.$" are to United States dollars and
references to "", "EUR" or "euro" are to the currency introduced at the start of the third stage of
European economic and monetary union, and as defined in article 2 of Council Regulation (EC) No
974/98 of 3 May 1998 on the introduction of the euro, as amended.
Certain figures included in this Offering Circular have been subject to rounding adjustments; accordingly,
figures shown for the same category presented in different tables may vary slightly and figures shown as
totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
Prior to making an investment decision, potential investors should consider carefully, in light of their own
financial circumstances and investment objectives, all the information contained in this Offering Circular
or incorporated by reference herein.
In connection with the issue of the Preferred Securities, UBS Limited (the "Stabilising Manager") (or
any person acting on behalf of the Stabilising Manager) may over-allot Preferred Securities or effect
transactions with a view to supporting the market price of the Preferred Securities at a level higher than
that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or any
person acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation
action may begin on or after the date on which adequate public disclosure of the terms of the offer of the
Preferred Securities is made and, if begun, may be ended at any time, but it must end no later than the
earlier of 30 days after the issue date of the Preferred Securities and 60 days after the date of the allotment
of the Preferred Securities. Any stabilisation action or over-allotment must be conducted by the
Stabilising Manager (or any person acting on behalf of the Stabilising Manager) in accordance with all
applicable laws and rules.
Restrictions on Sales and Resales to Retail Investors
The Preferred Securities are complex financial instruments and are not a suitable investment for all
investors. In some jurisdictions, regulatory authorities have adopted or published laws, regulations or
guidance with respect to the offer or sale of securities such as the Preferred Securities to retail investors.
In particular, the UK Financial Conduct Authority ("FCA") has adopted temporary product intervention
rules (the "Temporary FCA Rules") that prohibit a firm regulated by the FCA selling such securities to a
retail client in the EEA or doing anything that would or might result in a retail client in the EEA buying or
holding a beneficial interest in such securities (in each case within the meaning of the Temporary FCA
Rules), except in the circumstances permitted by the Temporary FCA Rules. The Temporary FCA Rules
come into force on 1 October 2014 and are available at http://fshandbook.info/FS/.
Potential investors should inform themselves of and comply with any applicable laws, regulations or
regulatory guidance with respect to any resale of the Preferred Securities, including the Temporary FCA
Rules.
In addition, by making an offer to buy or buying any of the Preferred Securities from any of the Joint
Bookrunners and Joint Lead Managers, an investor is deemed to represent to and agree with each of the
Joint Bookrunners and Joint Lead Managers that it is not a retail client in the EEA (as defined in the rules
set out in the Temporary Marketing Restriction (Contingent Convertible Securities) Instrument 2014) and
it has not sold and will not sell the Preferred Securities to a retail client in the EEA and has not done and
will not do anything (including the distribution of this document) that would or might result in a retail
client in the EEA buying or holding a beneficial interest in any Preferred Securities (in each case within
the meaning of the Temporary FCA Rules), except in circumstances that do not give rise to a
contravention of the Temporary FCA Rules by any of the Joint Bookrunners and Joint Lead Managers (or
that would not give rise to such a contravention if those rules were already in force) and that it has
complied and will comply with all applicable laws, regulations and regulatory guidance relating to sales of
securities such as the Preferred Securities and the appropriateness and/or suitability of any investment in
the Preferred Securities for any buyer.

- 2 -

INFORMATION INCORPORATED BY REFERENCE
The information set out in the table below shall be deemed to be incorporated in, and to form part of, this
Offering Circular provided however that any statement contained in any document incorporated by
reference in, and forming part of, this Offering Circular shall be deemed to be modified or superseded for
the purpose of this Offering Circular to the extent that a statement contained herein modifies or
supersedes such statement. Any documents themselves incorporated by reference in the documents
incorporated by reference in this Offering Circular shall not form part of this Offering Circular.
The documents incorporated by reference hereto will be made available, free of charge, during usual
business hours at the specified offices of the Principal Paying and Conversion Agent, and may be viewed
on the Issuer's corporate website (www.santander.com).
For ease of reference, the tables below set out the relevant page references for the consolidated annual
accounts, the notes to the consolidated financial statements and the Auditors' reports for the years ended
31 December 2013, 2012 and 2011 for the Issuer, as set out in the respective auditors' reports and the
relevant page references for the interim condensed consolidated financial statements, the notes to the
interim condensed consolidated financial statements and the Auditors' report for the six months ended 30
June 2014 for the Issuer, as set out in the respective auditor's report, prepared in each case in accordance
with International Financial Reporting Standards as adopted by the European Union (except for the Form
20-F which are prepared in accordance with International Financial Reporting Standards as issued by the
IASB). Any information not listed in the cross-reference tables but included in the documents
incorporated by reference is either not relevant for prospective investors in the Preferred Securities or the
relevant information is included elsewhere in this Offering Circular.
Issuer Annual Financial Information and Form 20-F
The tables below set out the relevant page references in the English language translations of the audit and
annual accounts reports (Informe de Auditoría y Cuentas Anuales) of the Issuer for the years ended 31
December 2013, 31 December 2012 and 31 December 2011 (the "2013 Audit Report", the "2012 Audit
Report", the "2011 Audit Report", respectively) where the following information incorporated by
reference in this Offering Circular can be found in the Bank's audit reports:
2013 Audit Report
Information Incorporated by Reference in this Offering Circular
Page Reference
1.
Auditor's report on Consolidated Financial Statements for the year ended 31 December 2013 .....
4
2.
Audited Consolidated Balance Sheets for the year ended 31 December 2013 and the
comparative consolidated financial information of the Issuer for the years ended 31
December 2012 and 31 December 2011 ....................................................................................
8-9
3.
Audited Consolidated Statements of Income for the year ended 31 December 2013 and the
comparative consolidated financial information of the Issuer for the years ended 31
December 2012 and 31 December 2011 ....................................................................................
10
4.
Audited Consolidated Statements of recognised income and expense for the year ended 31
December 2013 and the comparative consolidated cash flow statement of the Issuer for the
years ended 31 December 2012 and 31 December 2011 ............................................................
11
5.
Audited Consolidated Statements of changes in equity for the year ended 31 December 2013
and the comparative consolidated cash flow statement of the Issuer for the year ended 31
December 2012 and 31 December 2011 ....................................................................................
12-13
6.
Audited Consolidated Cash Flow Statements for the year ended 31 December 2013 and the
comparative consolidated cash flow statement of the Issuer for the years ended 31 December
2012 and 31 December 2011......................................................................................................
14
7.
Notes to the Consolidated Financial Statements for the year ended 31 December 2013 ................
15-225

2012 Audit Report
Information Incorporated by Reference in this Offering Circular
Page Reference
1.
Auditor's report on Consolidated Financial Statements for the year ended 31 December 2012 ....
9
2.
Audited Consolidated Balance Sheets at 31 December 2012, 2011 and 2010 ..............................
14-15
3.
Audited Consolidated Income Statements for the years ended 31 December 2012, 2011 and
2010 ..........................................................................................................................................
16
4.
Audited Consolidated Statements of recognised income and expense for the years ended 31
December 2012, 2011 and 2010 ................................................................................................
17
5.
Audited Consolidated Statements of changes in total equity for the years ended 31 December
2012, 2011 and 2010 .................................................................................................................
18-19
6.
Audited Consolidated Statements Cash Flows for the years ended 31 December 2012, 2011 and
2010 ..........................................................................................................................................
20
7.
Notes to the Consolidated Financial Statements for the year ended 31 December 2012 ...............
21-221

- 3 -

2011 Audit Report
Information Incorporated by Reference in this Offering Circular
Page Reference
1.
Auditor's report on Consolidated Financial Statements for the year ended 31 December 2011 ....
7
2.
Audited Consolidated Balance Sheets at 31 December 2011, 2010 and 2009 ..............................
10-11
3.
Audited Consolidated Income Statements for the years ended 31 December 2011, 2010 and
2009 ..........................................................................................................................................
12
4.
Audited Consolidated Statements of recognised income and expense for the years ended 31
December 2011, 2010 and 2009 ................................................................................................
13
5.
Audited Consolidated Statements of changes in total equity for the years ended 31 December
2011, 2010 and 2009 .................................................................................................................
14-15
6.
Audited Consolidated Statements of Cash Flows for the years ended 31 December 2011, 2010
and 2009....................................................................................................................................
16
7.
Notes to the Consolidated Financial Statements for the year ended 31 December 2011 ...............
17-172

The table below sets out the relevant page references in the English language translations of the interim
condensed consolidated financial statements for the six-month period ended 30 June 2014 where the
following information incorporated by reference in this Offering Circular can be found (the "2014
January-June interim condensed consolidated financial statements"):
2014 January-June
interim condensed
consolidated
Information Incorporated by Reference in this Offering Circular
financial statements
1.
Auditor's report on the 2014 January-June interim condensed consolidated financial statements .
Pages 2-3 of the pdf
2.
Condensed consolidated Balance Sheets at 30 June 2014 and 31 December 2013 ........................
Page 5 of the pdf
3.
Condensed consolidated Income Statements for the six-month periods ended 30 June 2014 and
2013...........................................................................................................................................
Page 6 of the pdf
4.
Notes to the 2014 January-June interim condensed consolidated financial statements .................
Pages 11-57 of the pdf

The tables below set out the relevant page references in Form 20-F of the Issuer for the year ended 31
December 2013 ("2013 Form 20-F") and Form 20-F of the Issuer for the year ended 31 December 2012
("2012 Form 20-F") where the following information incorporated by reference in this Offering Circular
can be found:
2013 Form 20-F Page
Information Incorporated by Reference in this Offering Circular
Reference
Report of Deloitte, S.L ..................................................................................................................................
F-1
Consolidated Balance Sheets at 31 December 2013, 2012 and 2011 ............................................................
F-2
Consolidated Income Statements for the years ended 31 December 2013, 2012 and 2011 ...........................
F-3
Consolidated Statements of recognised income and expense for the years ended 31 December 2013, 2012
and 2011 ....................................................................................................................................................
F-4
Consolidated Statements of Changes in Total Equity for the years ended 31 December 2013, 2012 and
2011...........................................................................................................................................................
F-5 to F-7
Consolidated Statements of Cash Flows for the years ended 31 December 2013, 2012 and 2011 ................
F-8
Notes to the Consolidated Financial Statements for the year ended 31 December 2013 ...............................
F-9 to F-349

2012 Form 20-F Page
Information Incorporated by Reference in this Offering Circular
Reference
Report of Deloitte, S.L ..................................................................................................................................
F-1
Consolidated Balance Sheets at 31 December 2012, 2011 and 2010 ............................................................
F-2
Consolidated Income Statements for the years ended 31 December 2012, 2011 and 2010 ...........................
F-3
Consolidated Statements of recognised income and expense for the years ended 31 December 2012, 2011
and 2010 ....................................................................................................................................................
F-4
Consolidated Statements of Changes in Total Equity for the years ended 31 December 2012, 2011 and
2010...........................................................................................................................................................
F-5 to F-7
Consolidated Statements of Cash Flows for the years ended 31 December 2012, 2011 and 2010 ................
F-8
Notes to the Consolidated Financial Statements for the year ended 31 December 2012 ...............................
F-9 to F-337

- 4 -

OVERVIEW OF THE OFFERING
This overview must be read as an introduction to this Offering Circular and any decision to invest in the
Preferred Securities should be based on a consideration of this Offering Circular as a whole, including the
documents incorporated by reference. This overview is indicative only, does not purport to be complete
and is qualified in its entirety by the more detailed information appearing elsewhere in this Offering
Circular. See, in particular, the Conditions in "Conditions of the Preferred Securities".
Words and expressions defined in the Conditions shall have the same meanings in this overview.
Issuer:
Banco Santander, S.A.

Risk Factors:
See "Risk Factors"

Issue size:
1,500,000,000

Issue details:
1,500,000,000 Non-Step-Up Non-Cumulative Contingent
Convertible Perpetual Preferred Tier 1 Securities of
100,000 Liquidation Preference each.

The Issuer has requested that the Preferred Securities qualify
as Tier 1 Capital of the Bank and the Group pursuant to
Applicable Banking Regulations.
Liquidation Preference:
100,000 per Preferred Security

Use of Proceeds:
Banco Santander intends to use the net proceeds from the
issue of the Preferred Securities for its general corporate
purposes.
Distributions:
Distributions will accrue (i) in respect of the period from
(and including) the Closing Date to (but excluding) the First
Reset Date at the rate of 6.25 per cent. per annum, and (ii) in
respect of each Reset Period, at the rate per annum,
converted to a quarterly rate in accordance with market
convention, equal to the aggregate of the Initial Margin (5.64
per cent. per annum) and the 5-year Mid-Swap Rate for such
Reset Period. Subject as provided in the Conditions (see
"Limitations on Distributions" below), such Distributions
will be payable quarterly in arrear on each Distribution
Payment Date.

For further information, see Condition 3.

Limitations on Distribution:
The Bank may elect, in its sole and absolute discretion, to
cancel the payment of any Distribution in whole or in part at
any time that it deems necessary or desirable and for any
reason. Payments of Distributions in any financial year of
the Bank shall be made only out of Available Distributable
Items.

To the extent that:

(i)
the Bank has insufficient Available Distributable
Items to make Distributions on the Preferred
Securities scheduled for payment in the then current
financial year and any equivalent payments
scheduled to be made in the then current financial
year in respect of any other Parity Securities then
outstanding, in each case excluding any portion of
such payments already accounted for in determining

- 5 -

the Available Distributable Items; and/or

(ii)
the Regulator, in accordance with Applicable
Banking Regulations, requires the Bank to cancel
the relevant Distribution in whole or in part,

then the Bank will, without prejudice to the right above to
cancel the payment of all such Distributions on the Preferred
Securities, make partial or, as the case may be, no payment
of the relevant Distribution on the Preferred Securities.

No distribution will be made on the Preferred Securities
(whether by way of a repayment of the Liquidation
Preference, the payment of any Distribution or otherwise) if
and to the extent that such payment would cause the
Maximum Distributable Amount (if any) then applicable to
the Bank and/or the Group to be exceeded.
Status of the Preferred
Unless previously converted into Common Shares pursuant
Securities:
to Condition 5, the Preferred Securities are unsecured and
subordinated obligations of the Bank and rank (a) junior to
(i) all liabilities of the Bank including subordinated liabilities
other than Parity Securities and (ii) instruments issued or
guaranteed by the Bank ranking senior to the Preferred
Securities, (b) pari passu with each other and with any Parity
Securities and (c) senior to the Common Shares or any other
instruments issued or guaranteed by the Bank ranking junior
to the Preferred Securities.
Optional Redemption:
All, and not some only, of the Preferred Securities may be
redeemed at the option of the Bank, subject to (i) the prior
consent of the Regulator and (ii) Condition 6.9, on the First
Reset Date and on any Distribution Payment Date falling
after the First Reset Date, at the Redemption Price (and
otherwise in accordance with Applicable Banking
Regulations then in force).

Upon the occurrence of a Capital Event, the Preferred
Securities are also redeemable on or after the Closing Date at
the option of the Bank in whole but not in part, subject to the
prior consent of the Regulator and otherwise in accordance
with Applicable Banking Regulations then in force, at any
time, at the Redemption Price.

Upon the occurrence of a Tax Event, the Preferred Securities
may further be redeemed on or after the Closing Date at the
option of the Bank, in whole but not in part, subject to the
prior consent of the Regulator and otherwise in accordance
with Applicable Banking Regulations then in force, at any
time, at the Redemption Price per Preferred Security.

For further information, see Condition 6.

Conversion:
In the event of the occurrence of the Trigger Event, the
Preferred Securities are mandatorily and irrevocably
convertible into newly issued Common Shares at the
Conversion Price.
Conversion Price:
If the Common Shares are (a) then admitted to trading on a
Relevant Stock Exchange, the Conversion Price will be the
higher of: (i) the Current Market Price of a Common Share,

- 6-

(ii) the Floor Price and (iii) the nominal value of a Common
Share at the time of conversion (being 0.50 on the Closing
Date) or (b) not then admitted to trading on a Relevant Stock
Exchange, the conversion price will be the higher of (ii) and
(iii) above.

The Floor Price is subject to adjustment in accordance with
Condition 5.3.
Liquidation Distribution
Subject as provided below, in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the
Bank, the Preferred Securities (unless previously converted
into Common Shares pursuant to Condition 5) will confer an
entitlement to receive out of the assets of the Bank available
for distribution to Holders, the Liquidation Distribution.

If, before such liquidation, dissolution or winding-up of the
Bank described above, the Trigger Event occurs but the
relevant conversion of the Preferred Securities into Common
Shares pursuant to the Conditions is still to take place, the
entitlement conferred by the Preferred Securities for the
above purposes, will be an entitlement to receive out of the
relevant assets of the Bank a monetary amount equal to that
which holders of such Preferred Securities would have
received on any distribution of the assets of the Bank if such
conversion had taken place immediately prior to such
liquidation, dissolution or winding-up.
Purchases
The Bank or any member of the Group, may purchase or
otherwise acquire any of the outstanding Preferred Securities
at any price in the open market or otherwise in accordance
with Applicable Banking Regulations in force at the relevant
time, and subject to the prior consent of the Regulator, if
required.
Pre-emptive rights:
The Preferred Securities do not grant Holders preferential
subscription rights in respect of any possible future issues of
preferred securities or any other securities by the Bank or
any Subsidiary.
Voting Rights:
The Preferred Securities shall not confer any entitlement to
receive notice of or attend or vote at any meeting of the
shareholders of the Bank. Notwithstanding the above, the
Holders will have the right, under certain circumstances, to
participate in the adoption of certain decisions in the General
Meetings of Holders.

For further information, see Condition 9.

Withholding Tax and
Subject as provided in Condition 10.2, all payments of
Additional Amounts:
Distributions and other amounts payable in respect of the
Preferred Securities by the Bank will be made free and clear
of and without withholding or deduction for or on account of
any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied
by or on behalf of Spain (as defined in Condition 10.1),
unless the withholding or deduction of such taxes, duties,
assessments or governmental charges is required by law. In
that event, the Bank shall pay such additional amounts as
will result in Holders receiving such amounts as they would
have received had no such withholding or deduction been

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