20-F

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
		OR
		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2004 OR
		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		for the transition period from                    to Commission file number 001-12518

BANCO SANTANDER CENTRAL HISPANO, S.A.

(Exact name of Registrant as specified in its charter)
Kingdom of Spain
(Jurisdiction of incorporation)
Ciudad Grupo Santander
28660 Boadilla del Monte (Madrid), Spain
(address of principal executive offices)

Securities registered or to be registered, pursuant to Section 12(b) of the Act

		Name of each exchange
	Title of each class	on which registered
	American Depositary Shares, each representing the right to receive one Share of Capital Stock of Banco Santander Central Hispano, S.A., par value Euro 0.50 each	New York Stock Exchange
	Shares of Capital Stock of Banco Santander Central Hispano, S.A., par value Euro 0.50 each	New York Stock Exchange
	Non-cumulative Guaranteed Preferred Stock of BSCH Finance Limited, Series Q	New York Stock Exchange
	Non-cumulative Guaranteed Preferred Stock of BCH Capital Limited, Series B	New York Stock Exchange
	Non-cumulative Guaranteed Preferred Stock of Santander Finance Preferred, S.A. Unipersonal, Series 1	New York Stock Exchange
	Guarantee of Non-cumulative Preferred Stock of BCH Capital Limited
	Guarantee of Non-cumulative Guaranteed Preferred Stock of Santander Finance Preferred, S.A. Unipersonal
*	Banco Santander Central Hispano Shares are not listed for trading, but only in connection with the registration of the American Depositary Shares, pursuant to requirements of the New York Stock Exchange.

Securities registered or to be registered pursuant to Section 12(g) of the Act.
None.
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act
None.
(Title of Class)
The number of outstanding shares of each class of Stock of Banco Santander Central Hispano, S.A. at
December 31, 2004 was:
Shares par value Euro 0.50 each: 6,254,296,579

The number of outstanding shares of each class of stock of BSCH Finance Limited benefiting from a guarantee of Banco Santander Central Hispano, S.A., at December 31, 2004 was:

Non-cumulative Preferred Stock, Series Q 12,000,000

The number of outstanding shares of each class of stock of BCH Capital Limited benefiting from a guarantee of Banco Santander Central Hispano, S.A., at December 31, 2004 was:

Non-cumulative Preferred Stock, Series B 9,200,000

The number of outstanding shares of each class of stock of Santander Finance Preferred, S.A. Unipersonal benefiting from a guarantee of Banco Santander Central Hispano, S.A. at December 31, 2004 was:

Non-cumulative Preferred Securities, Series 1 7,600,000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  No 

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  Item 18 

BANCO SANTANDER CENTRAL HISPANO, S.A.

TABLE OF CONTENTS

		Page
Presentation of Financial and Other Information		3
Cautionary Statement Regarding Forward-Looking Statements		4
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3.	KEY INFORMATION	6
	A. Selected financial data	6
	B. Capitalization and indebtedness	11
	C. Reasons for the offer and use of proceeds	11
	D. Risk factors	11
ITEM 4.	INFORMATION ON THE COMPANY	16
	A. History and development of the company	16
	B. Business overview	19
	C. Organizational structure	64
	D. Property, plants and equipment	64
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	65
	A. Operating results	70
	B. Liquidity and capital resources	80
	C. Research and development, patents and licenses, etc.	82
	D. Trend information	82
	E. Off-balance sheet arrangements	86
	F. Tabular disclosure of contractual obligations	86
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	87
	A. Directors and senior management	87
	B. Compensation	92
	C. Board practices	100
	D. Employees	106
	E. Share ownership	108
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	108
	A. Major shareholders	108
	B. Related party transactions	109
	C. Interests of experts and counsel	110
ITEM 8.	FINANCIAL INFORMATION	111
	A. Consolidated statements and other financial information	111
	B. Significant changes	117

1

ITEM 9.	THE OFFER AND LISTING	117
	A. Offer and listing details	117
	B. Plan of distribution	119
	C. Markets	119
	D. Selling shareholders	123
	E. Dilution	123
	F. Expense of the issue	123
ITEM 10.	ADDITIONAL INFORMATION	123
	A. Share capital	123
	B. Memorandum and articles of association	123
	C. Material contracts	130
	D. Exchange controls	130
	E. Taxation	130
	F. Dividends and paying agents	134
	G. Statement by experts	134
	H. Documents on display	134
	I. Subsidiary information	134
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	135
	Introduction	135
	Part 1. Organization of risk management	135
	Part 2. Global risk analysis profile	137
	Part 3. Credit risk	138
	Part 4. Operational risk	156
	Part 5. Reputational risk	159
	Part 6. Market risk	161
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	177
	A. Debt securities	177
	B. Warrants and rights	177
	C. Other securities	177
	D. American Depositary Shares	177
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	178
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
	AND USE OF PROCEEDS	178
	E. Use of proceeds	178
ITEM 15.	CONTROLS AND PROCEDURES	178
ITEM 16.	A. Audit committee financial expert	178
	B. Code of ethics	178
	C. Principal accountant fees and services	179
	D. Exemptions from the listing standards for audit commitees	179
	E. Purchases of equity securities by the issuer and affiliated purchasers	180
PART III
ITEM 17.	FINANCIAL STATEMENTS	181
ITEM 18.	FINANCIAL STATEMENTS	181
ITEM 19.	EXHIBITS	181

2

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Conversion to Euros

Effective January 1, 1999, Spain adopted the euro as its official currency. Our financial statements for fiscal years ending prior to December 31, 2000, which were prepared in Spanish pesetas, have been restated in euros using the fixed conversion rate of €1.00 to Pta.166.386. Our financial statements reported in euros reflect the same trends as if we had continued to present our financial statements in pesetas.

Accounting Principles

Except where we note otherwise, we prepared the financial information contained in this report according to Bank of Spain Circular 4/91, as amended (Spanish GAAP). As disclosed in note 28 to our consolidated financial statements, Spanish GAAP differs in some significant respects from U.S. GAAP.

We have formatted our financial information according to the classification format for banks used in Spain. We have not reclassified the line items to comply with Article 9 of Regulation S-X. Article 9 is a regulation of the U.S. Securities and Exchange Commission that contains formatting requirements for bank holding company financial statements. We have, however, included summary financial information that reflects the required reclassifications in note 28 to our consolidated financial statements.

Our auditors, Deloitte, S.L., have audited our consolidated financial statements in respect of the three years ended December 31, 2004 in accordance with Spanish GAAP and without qualification. The auditor’s report for December 31, 2004 does, however, include a reference relating to certain differences in our financial statements for the year ended December 31, 2004 as compared to the year ended December 31, 2003. These differences stem from the different accounting treatment accorded to pension commitments arising from early retirements in 2003 versus 2004. During 2003, with the express authorization of the Bank of Spain, the commitments arising from early retirements by the Bank and by other companies of the Group were charged against reserves. In 2004, the Bank of Spain did not grant such authorization to credit entities, including us, and subsequently the Bank charged such obligations against its income.

See page F-1 to our consolidated financial statements for the 2004 report prepared by our independent registered public accounting firm.

Acquisition of Abbey National plc.

In November 2004, we acquired 100% of the capital of Abbey National plc (“Abbey”). Under Spanish GAAP, our acquisition of Abbey has been reflected on our financial statements as if the acquisition had occurred on December 31, 2004. Accordingly, Abbey’s assets and liabilities were consolidated into our balance sheet as of December 31, 2004, but Abbey’s results of operations had no impact on our income statement for the year ended December 31, 2004.

Balance sheet and average balance sheet information in this Annual Report for the year ended December 31, 2004 includes the consolidation of Abbey line by line as of December 31, 2004 and renders such balances and average balances incompatible to the comparable data for the year ended December 31, 2003. In order to facilitate comparison of balances and average balances for these periods, we have provided in this report pro forma balance sheet and average balance sheet information for the year ended December 31, 2004 without consolidating Abbey. As a result, in the pro forma balance sheet, we are accounting for our investment in Abbey as if we did not have control over Abbey.

General Information

Our consolidated financial statements are in Euros, which are denoted “euro”, “euros”, EUR or “€” throughout this annual report. Also, throughout this annual report, when we refer to:

• “dollars”, US$ or “$”, we mean United States dollars; and

• “one billion”, we mean 1,000 million.

When we refer to average balances for a particular period, we mean the average of the month-end balances for that period, unless otherwise noted. We do not believe that monthly averages present trends that are materially different from trends that daily averages would show. We included in interest income any interest payments we received on non-accruing loans if they were received in the period when due. We have not reflected consolidation adjustments in any financial information about our subsidiaries or other units.

When we refer to loans, we mean loans, leases, discounted bills and accounts receivable, unless otherwise noted.

3

When we refer to non-performing assets, we mean non-performing loans, securities and other assets to collect.

When we refer to the allowances for credit-losses, we mean the statistical allowance for credit losses, the specific allowances for credit losses, and unless otherwise noted, the general allowance for credit losses including any allowances for country-risk. See “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Classified Assets—Bank of Spain Allowance for Credit-Losses and Country-Risk Requirements”.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains statements that constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include information regarding:

• exposure to various types of market risks;

• management strategy;

• capital expenditures;

• earnings and other targets; and

• asset portfolios.

Forward-looking statements may be identified by words such as “expect,” “project,” “anticipate,” “should,” “intend,” “probability,” “risk,” “VaR,” “DCaR,” “ACaR,” “RORAC,” “target,” “goal,” “objective,” “estimate,” “future” and similar expressions. We include forward-looking statements in the “Operating and Financial Review Prospects,” “Information on the Company” and “Qualitative and Quantitative Disclosures About Market Risk” sections. Forward-looking statements are not guarantees of future performance and involve risks and uncertainities, and actual results may differ materially from those in the forward-looking statements.

You should understand that adverse changes in the following important factors, in addition to those discussed in “Risk Factors”, “Operating and Financial Review and Prospects,” “Information on the Company” and elsewhere in this Annual Report, could affect our future results and could cause those results or other outcomes to differ materially from those anticipated in any forward-looking statement:

	Economic and Industry Conditions	•	changes in demographics, consumer spending or saving habits; and
•	exposure to various types of market risks, principally including interest rate risk, foreign exchange rate risk and equity price risk;	•	changes in competition and pricing environments as a result of the progressive adoption of the internet for conducting financial services and/or other factors.
•	general economic or industry conditions in Spain, the United Kingdom, other European countries, Latin America and the other areas in which we have significant business activities or investments;		Political and Governmental Factors
		•	political stability in Spain, the United Kingdom, other European countries and Latin America; and
•	the effects of a decline in real estate prices, particularly in Spain and the UK;
		•	changes in Spanish, UK, EU or foreign laws, regulations or taxes.
•	monetary and interest rate policies of the European Central Bank and various central banks;
			Transaction and Commercial Factors
•	inflation or deflation;
		•	our ability to integrate successfully our acquisitions, including Abbey, and the challenges inherent in diverting management’s focus and resources from other strategic opportunities and from operational matters while we integrate these acquisitions; and
•	the effects of non-linear market behavior that cannot be captured by linear statistical models, such as the VaR/DCaR/ACaR model we use;
•	changes in competition and pricing environments;
		•	the outcome of our negotiations with business partners and governments.
•	the inability to hedge some risks economically;
•	the adequacy of loss reserves;
•	acquisitions, including our recent acquisition of Abbey, or restructurings;

4

	Operating Factors
•	technical difficulties and the development and use of new technologies by us and our competitors;
•	the impact of changes in the composition of our balance sheet on future net interest income;

• potential losses associated with an increase in the level of substandard loans or non-performance by counterparties to other types of financial instruments; and

• the success of our e-business strategy, including our ability to form desirable strategic partnerships and to transform to a web-based business model.

The forward-looking statements contained in this annual report speak only as of the date of this annual report. We do not undertake to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

5

	PART I
Item 1.  Identity of Directors, Senior Management and Advisers
A.	Directors and Senior Management.
	Not applicable.
B.	Advisers.
	Not applicable.
C.	Auditors.
	Not applicable.
Item 2.  Offer Statistics and Expected Timetable
A.	Offer Statistics.
	Not applicable.
B.	Method and Expected Timetable.
	Not applicable.
Item 3.  Key Information
A.	Selected financial data.

Selected Consolidated Financial Information

We have selected the following financial information from our consolidated financial statements. You should read this information in connection with, and it is qualified in its entirety by reference to, our consolidated financial statements.

We prepare our consolidated financial statements according to Spanish GAAP. Spanish GAAP differs in some significant respects from U.S. GAAP. In addition, our financial information is presented in Spanish format.

In the F-pages of this Form 20-F, audited financial statements for the years 2004, 2003 and 2002 are presented. Audited financial statements for the years 2001 and 2000 are not included in this document, but they can be found in our previous annual reports on Form 20-F.

In November 2004, we acquired 100% of the capital of Abbey National plc. Under Spanish GAAP, our acquisition of Abbey has been reflected on our financial statements as if the acquisition had occurred on December 31, 2004. Accordingly, Abbey’s assets and liabilities were consolidated into our balance sheet as of December 31, 2004, but Abbey’s results of operations had no impact on our income statement for the year ended December 31, 2004.

Balance sheet information in this Annual Report for the year ended December 31, 2004 includes the consolidation of Abbey line by line as of December 31, 2004 and renders such balances incompatible to the comparable data for the year ended December 31, 2003. In order to facilitate comparison of balances for these periods, we have provided in this report pro forma balance sheet information for the year ended December 31, 2004 without consolidating Abbey. As a result, in the pro forma balance sheet, we are accounting for our investment in Abbey as if we did not have control over Abbey. Our investment in Abbey is reflected in the pro forma balance sheet information under the item “Investments in Group and non-Group companies”.

6

	Year Ended December 31,
	2000	2001	2002	2003	2004
Consolidated Income Statement Data	(thousands of euros, except percentages and per share data)
Interest income and income from common stocks and other equity securities (1)	29,290,547		28,241,493		22,831,399		17,335,727		18,385,784
Income from equity-accounted holdings (2)	293,372		423,671		353,111		309,506		365,497
Interest expenses	(21,294,358	)	(18,408,400	)	(13,825,855	)	(9,686,896	)	(10,115,569	)
Net interest income	8,289,561		10,256,764		9,358,655		7,958,337		8,635,712
Net fees and commissions	4,012,994		4,621,735		4,289,284		4,170,562		4,609,289
Gains (losses) on financial transactions	702,102		685,142		356,250		998,813		952,666
Gross operating income	13,004,657		15,563,641		14,004,189		13,127,712		14,197,667
Net other operating income (3)	(119,583	)	(230,885	)	(226,482	)	(166,530	)	(182,314	)
General administrative expenses:
a) Personnel expenses	(4,450,957	)	(5,258,297	)	(4,521,718	)	(4,049,372	)	(4,135,315	)
b) Other administrative expenses	(2,845,408	)	(3,142,686	)	(2,800,333	)	(2,428,325	)	(2,599,878	)
Total	(7,296,365	)	(8,400,983	)	(7,322,051	)	(6,477,697	)	(6,735,193	)
Depreciation, amortization and writedown of property and equipment and intangible assets	(900,148	)	(987,319	)	(889,832	)	(762,794	)	(734,967	)
Net operating income	4,688,561		5,944,454		5,565,824		5,720,691		6,545,193
Net income from companies accounted for by the equity method	1,047,643		945,549		633,009		716,769		905,883
Less: value adjustments due to collection of dividends	(293,372	)	(423,671	)	(353,111	)	(309,506	)	(365,497	)
Amortization of consolidation goodwill	(598,548	)	(1,872,952	)	(1,358,616	)	(2,241,688	)	(618,935	)
Net gains on Group transactions	384,846		1,169,449		1,008,940		955,563		466,217
Write-offs and credit loss provisions (net) (4)	(1,048,345	)	(1,586,017	)	(1,648,192	)	(1,495,687	)	(1,647,651	)
Writedowns of long-term financial
investmets (net)	(613	)	(751	)	(272	)	687		(257	)
Provisions to general banking risk allowance	—		—		—		85,945		—
Extraordinary results (5)	(406,176	)	61,244		(338,833	)	668,666		(850,335	)
Income before taxes	3,773,996		4,237,305		3,508,749		4,101,440		4,434,618
Provision for income tax (6)	(714,868	)	(910,396	)	(723,109	)	(869,434	)	(766,761	)
Consolidated net income for the year	3,059,128		3,326,909		2,785,640		3,232,006		3,667,857
Net income attributed to minority interests	800,987		840,606		538,463		621,187		532,299
Net income attributted to the Group	2,258,141		2,486,303		2,247,177		2,610,819		3,135,558
Per Share Information:
Average number of shares (thousands) (7)	4,205,787		4,564,546		4,728,372		4,768,403		4,971,394
Per average Share:
Net Attributable Income	0.54		0.54		0.48		0.55		0.63
Dividends in euros	0.30		0.29		0.29		0.30		0.37
Dividends in US$	0.28		0.26		0.30		0.38		0.50

7

	Year Ended December 31,
											2004
											(pro forma
											without
											consolidating
	2000		2001		2002		2003		2004		Abbey)
Consolidated Balance Sheet Data:	(thousands of euros, except percentages and per share data)
Total assets	348,927,965		358,137,513		324,208,085		351,790,532		575,397,879		379,250,844
Due from credit institutions	36,764,090		42,989,290		40,256,390		37,617,837		49,569,947		36,788,564
Loans and credits (net)	169,384,197		173,822,046		162,972,957		172,504,013		335,207,727		198,510,718
Investment Securities	75,765,521		74,807,196		64,941,406		85,449,040		112,125,928		75,669,638
Investments in Group and non-Group companies	8,875,669		7,889,156		5,899,131		5,334,196		7,743,075		16,195,522
Liabilities
Due to credit institutions	68,010,963		53,929,789		50,820,719		75,580,312		84,813,805		59,040,575
Customer deposits	169,554,476		181,527,292		167,815,756		159,335,572		293,845,697		173,842,193
Marketable debt securities	34,165,910		41,609,096		31,289,107		44,441,205		84,007,189		53,432,682
Capitalization
Guaranteed Subordinated debt	7,069,038		9,188,555		9,363,994		8,212,158		9,369,939		9,369,939
Secured Subordinated debt	743,686		785,204		659,865		547,901		508,039		508,039
Other Subordinated debt	2,917,217		3,022,232		2,426,369		2,461,029		10,316,150		2,997,703
Minority interest (including net income of the period)	9,132,710		8,273,936		6,575,173		6,060,704		9,071,486		6,505,201
Stockholders' equity (8)	18,140,592		19,772,504		18,242,063		19,068,990		32,584,251		32,598,624
Total capitalization	37,660,553		40,398,349		36,619,638		36,350,782		61,849,865		51,979,506
Stockholders’ Equity per Share (8)	4.23		4.19		3.72		4.00		6.55		6.56
Other managed funds
Mutual funds	65,011,930		68,535,047		68,139,520		80,502,023		94,125,246		92,778,914
Pension funds	16,397,317		18,841,893		17,513,488		19,494,823		34,854,266		21,678,522
Managed portfolio	7,238,915		7,869,579		7,684,879		8,906,116		10,996,523		10,996,523
Total other managed funds	88,648,162		95,246,519		93,337,887		108,902,962		139,976,035		125,453,959
Consolidated Ratios
Profitability Ratios:
Net Yield (9)	2.97	%	3.32	%	3.11	%	2.66	%	2.58	%	2.69	%
Cost to Income (10)	56.11	%	53.98	%	52.28	%	49.34	%	47.44	%	47.44	%
Return on average total assets (ROA)	0.99	%	0.94	%	0.81	%	0.95	%	0.98	%	1.02	%
Return on average stockholders' equity (ROE)	17.59	%	13.86	%	12.42	%	14.48	%	15.98	%	15.98	%
Capital Ratio:
Average stockholders' equity to average total assets	4.14	%	5.08	%	5.24	%	5.32	%	5.25	%	5.47	%
Ratio of earnings to fixed charges (11)
Excluding interest on deposits	1.39		1.41		1.56		1.87		1.85		1.85
Including interest on deposits	1.11		1.16		1.20		1.33		1.35		1.35
Ratio of earnings to combined fixed charges and preferred stock dividends (11)(12)
Excluding interest on deposits	1.29		1.32		1.44		1.72		1.76		1.76
Including interest on deposits	1.08		1.13		1.17		1.29		1.32		1.32
Credit Quality Data (excluding country-risk)
Allowances for non-performing assets (excluding country-risk)	5,570,366		5,583,018		5,144,855		5,323,127		7,289,325		6,275,963
Allowances for non-performing assets as a percentage of total loans	3.18	%	3.11	%	3.06	%	2.99	%	2.13	%	3.06	%
Non-performing assets (13)	4,527,454		3,895,514		3,676,467		3,222,504		3,948,446		3,017,824
Non-performing assets as a percentage of total loans	2.59	%	2.17	%	2.19	%	1.81	%	1.15	%	1.47	%
Allowances for non-performing assets as a percentage of non-performing assets	123.04	%	143.32	%	139.94	%	165.19	%	184.61	%	207.96	%
Net loan charge-offs as a percentage of total loans	1.12	%	0.88	%	0.72	%	0.46	%	0.18	%	0.30	%

8

(1)	Includes dividends on equity securities (other than dividends from companies accounted for by the equity-method) of €130.8 million, €124.7 million, €120.1 million, €132.0 million and €281.9 million for the years ended December 31, 2000, 2001, 2002, 2003 and 2004.
(2)	Equals the sum of “Income from Equity Securities: Investments in non-Group companies” and “Income from Equity Securities: Investments in Group Companies” as stated in our consolidated financial statements.
(3)	Equals the sum of “Other Operating Revenues” and “Other Operating Expenses” as stated in our consolidated financial statements.
(4)	This figure consists of gross provisions for credit-losses, provisions for country-risk, less recoveries of loans previously charged-off.
(5)	Equals the sum of “Extraordinary Income” and “Extraordinary Loss” as shown in our consolidated financial statements.
(6)	Equals the sum of “Corporate Income Tax” and “Other Taxes” as stated in our consolidated financial statements.
(7)	Average number of shares and per share data have been calculated on the basis of the weighted average number of shares outstanding in the relevant year, including treasury stock.
(8)	At the end of each year. We have deducted the book value of treasury stock from stockholders’ equity. The number of outstanding shares utilized to calculate stockholders’ equity per share for both 2004 and 2004 pro forma (without consolidating Abbey) includes those shares issued in connection with the Abbey acquisition.
(9)	Net yield is the total of net interest income (including dividends on equity securities) divided by average earning assets. See “Item 4 Information on the Company—B. Business Overview—Selected Statistical Information—Earnings Assets—Yield Spread”.
(10)	Cost to income ratio or efficiency ratio equals general administrative expenses divided by gross operating income.
(11)	For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income before taxation, minority interests and extraordinary items (U.S. GAAP definition of extraordinary items), plus fixed charges and after deduction of the unremitted pre-tax income of companies accounted for by the equity method. Fixed charges consist of total interest expense, including or excluding interest on deposits as appropriate, and the proportion of rental expense deemed representative of the interest factor.
(12)	For the purpose of calculating the ratio of earnings to combined fixed charges and preferred stock dividends, earnings consist of income before taxation, minority interest and extraordinary items (U.S. GAAP definition of extraordinary items), plus fixed charges and after deduction of the unremitted pre-tax income of companies accounted for by the equity method. Fixed charges consist of total interest expense, including or excluding interest on deposits as appropriate, preferred stock dividend requirements (corresponding to minority interest participation and, accordingly, not eliminated in consolidation), and the proportion of rental expense deemed representative of the interest factor. Preferred stock dividends for any year represent the amount of pre-tax earnings required to pay dividends on preferred stock outstanding during such year.
(13)	Non-performing assets reflect Bank of Spain classifications. Such classifications differ from the classifications applied by U.S. banks in reporting loans as non-accrual, past due, restructured and potential problem loans. See “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Classified Assets—Bank of Spain Classification Requirement,” and “Assets—Bank of Spain Classification Requirement—Non-performing Assets”. The amount of non-performing assets reflected in this table consists, in the case of certain non-performing assets, of the aggregate amount of past due payment of principal and interest on such loans, and not the entire unpaid principal amount of such loans unless and until such principal amount is classified as non-performing. See “Item 4. Information on the Company— B. Business Overview—Selected Statistical Information—Classified Assets—Bank of Spain Classification Requirement,” and “Assets—Bank of Spain Classification Requirement—Non-performing Assets”. We estimate that had such entire unpaid principal amount been included, the amount of non-performing assets would have been €5,228.2 million, €4,150.6 million, €4,486.0 million, €3,823.4 million and €4,804.3 million at December 31, 2000, 2001, 2002, 2003 and 2004.

9

The following table shows net income, stockholders’ equity, total assets and certain ratios on a U.S. GAAP basis.

		Year Ended December 31,
US GAAP	2000	2001	2002	2003	2004
	(In thousands of euros, except ratios and per share data)
Net income (1)	2,009,485	2,176,711	2,286,959	2,264,332	3,940,866
Stockholders' equity (1)(2)	30,929,034	29,944,012	23,114,475	25,093,234	38,671,623
Total assets	361,871,582	367,264,418	321,804,691	350,662,064	604,084,270
Net Income per share (3)	0.48	0.48	0.48	0.47	0.80
Stockholders' equity per share (2)(3)	7.35	6.56	4.89	5.26	7.78
Ratio of earnings to fixed charges: (4)
Excluding interest on deposits	1.38	1.26	1.61	1.79	1.86
Including interest on deposits	1.10	1.10	1.22	1.30	1.36
Ratio of earnings to combined fixed charges and preferred stock dividends: (5)
Excluding interest on deposits	1.28	1.18	1.49	1.64	1.77
Including interest on deposits	1.08	1.07	1.18	1.26	1.33

(1)	For information concerning reconciliation between Spanish GAAP and U.S. GAAP and a discussion of the principal U.S. GAAP adjustments to net income and stockholders’ equity, see note 28 to our consolidated financial statements.
(2)	As of the end of each period. The book value of our treasury stock has been deducted from stockholders’ equity. See note 1 to our consolidated financial statements.
(3)	Per share data have been calculated on the basis of the weighted average number of our shares outstanding in the relevant year, including treasury stock.
(4)	For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income before taxation, minority interests and extraordinary items, plus fixed charges and after deduction of the unremitted pre-tax income of companies accounted for by the equity method. Fixed charges consist of total interest expense, including or excluding interest on deposits as appropriate, and the proportion of rental expense deemed representative of the interest factor.
(5)	For the purpose of calculating the ratio of earnings to combined fixed charges and preferred stock dividends, earnings consist of income before taxation, minority interest and extraordinary items, plus fixed charges and after deduction of the unremitted pre-tax income of companies accounted for by the equity method. Fixed charges consist of total interest expense, including or excluding interest on deposits as appropriate, preferred stock dividend requirements (corresponding to minority interest participation and, accordingly, not eliminated in consolidation), and the proportion of rental expense deemed representative of the interest factor. Preferred stock dividends for any year represent the amount of pre-tax earnings required to pay dividends on preferred stock outstanding during such year.

Exchange Rates

Fluctuations in the exchange rate between euros and dollars have affected the dollar equivalent of the share prices on Spanish Stock Exchanges and, as a result, are likely to affect the dollar market price of our American Depositary Shares, or ADSs, in the United States. In addition, dividends paid to the depositary of the ADSs are denominated in euros and fluctuations in the exchange rate affect the dollar conversion by the depositary of cash dividends paid on the shares to the holders of the ADSs. Fluctuations in the exchange rate of euros against other currencies may also affect the euro value of non-euro denominated assets, liabilities, earnings and expenses of Banco Santander Central Hispano.

Beginning January 1, 2002, most of the participating European Union member states, such as Spain, issued new euro-denominated bills and coins for use in cash transactions and withdrew the bills and coins denominated in their respective currencies.

10

The following tables set forth, for the periods and dates indicated, certain information concerning the exchange rate for euros and dollars (expressed in dollars per euro), based on the Noon Buying Rate as announced by the Federal Reserve Bank of New York for the dates and periods indicated.

	Rate During Period
	Period End	Average Rate(1)
Calendar Period	($)	($)
2000	0.9388	0.9207
2001	0.8901	0.8909
2002	1.0485	0.9495
2003	1.2597	1.411
2004	1.3538	1.2478

(1) The average of the Noon Buying Rates for euros on the last day of each month during the period.

	Rate During Period
Last six months	High $	Low $
2004
December	1.3625	1.3224
2005
January	1.3476	1.2954
February	1.3274	1.2773
March	1.3465	1.2877
April	1.3093	1.2819
May	1.2936	1.2349
June (through June 24, 2005)	1.2320	1.2035

On June 24, 2005, the exchange rate for euros and dollars (expressed in dollars per euro), based on the Noon Buying Rate, was $1.2088.

For a discussion of the accounting principles used in translation of foreign currency-denominated assets and liabilities to euros, see Note 2(b) of our Consolidated Financial Statements.

B. Capitalization and indebtedness.

Not Applicable.

C. Reasons for the offer and use of proceeds.

Not Applicable.

D. Risk factors.

Risks Relating to Our Operations

Since our loan portfolio is concentrated in Continental Europe, the United Kingdom and Latin America, adverse changes affecting the Continental European, the United Kingdom or certain Latin American economies could adversely affect our financial condition.

Our loan portfolio is mainly concentrated in Continental Europe (in particular, Spain), the United Kingdom and Latin America. At December 31, 2004, Continental Europe accounted for approximately 49% of our total loan portfolio, while the United Kingdom and Latin America accounted for 40% and 10%, respectively. Therefore, adverse changes affecting the economies of Continental Europe (in particular Spain), the United Kingdom or the Latin American countries where we operate would likely have a significant adverse impact on our loan portfolio and, as a result, on our financial condition, cash flows and results of operations. See “Item 4. Information on the Company—B. Business Overview.”

Some of our business is cyclical and our income may decrease when demand for certain products or services is in a down cycle.

The level of income we derive from certain of our products and services depends on the strength of the economies in the regions where we operate and certain market trends prevailing in those areas. While we attempt to diversify our businesses, negative cycles may adversely affect our income in the future.

11

Since our principal source of funds is short term deposits, a sudden shortage of these funds could increase our cost of funding.

Historically, our principal source of funds has been customer deposits (savings, demand and time deposits). At December 31, 2004 (including Abbey), 20.8% of these customer deposits are time deposits in amounts greater than $100,000. Time deposits have represented 59.5% and 51.7% of total customer deposits at the end of 2002 and 2003, respectively, and 49.4% at the end of 2004 (including Abbey). Large-denomination time deposits may be a less stable source of deposits than savings and demand deposits. In addition, since we rely heavily on short-term deposits for our funding, there can be no assurance that we will be able to maintain our levels of funding without incurring higher funding costs or liquidating certain assets.

A substantial percentage of our customer base is particularly sensitive to adverse developments in the economy.

Medium- and small-size companies and middle and lower-middle income individuals can be more adversely affected by adverse developments in the economy than large companies and high income individuals. As a result, our substantial lending to these segments of our existing and targeted customer base causes us to assume a relatively higher degree of risk than if we focused more heavily on the other, more economically stable groups.

Risks concerning borrower credit quality and general economic conditions are inherent in our business.

Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent in a wide range of our businesses. Adverse changes in the credit quality of our borrowers and counterparties or a general deterioration in Spanish, UK, Latin American or global economic conditions, or arising from systemic risks in the financial systems, could reduce the recoverability and value of our assets and require an increase in our level of provisions for credit losses. Deterioration in the economies in which we operate could reduce the profit margins for our banking and financial services businesses.

Increased exposure to real estate makes us more vulnerable to developments in this market.

The decrease in interest rates globally has caused an increase in the demand of mortgage loans in the last few years. This has had repercussions in housing prices, which have also risen significantly. As real estate mortgages are one of our main assets, comprising 50.9% of our loan portfolio at December 31, 2004 (including Abbey), we are currently highly exposed to developments in real estate markets. A strong increase in interest rates might have a significant negative impact in mortgage payment delinquency rates. An increase in such delinquency rates could have an adverse effect on our business, financial condition and results of operations.

The Group may generate lower revenues from brokerage and other commission- and fee-based businesses.

Market downturns are likely to lead to declines in the volume of transactions that the Group executes for its customers and, therefore, to declines in the Group’s non-interest revenues. In addition, because the fees that the Group charges for managing its clients’ portfolios are in many cases based on the value or performance of those portfolios, a market downturn that reduces the value of the Group’s clients’ portfolios or increases the amount of withdrawals would reduce the revenues the Group receives from its asset management and private banking and custody businesses.

Even the absence of a market downturn, below-market performance by the Group’s mutual funds may result in increased withdrawals and reduced inflows, which would reduce the revenue the Group receives from its asset management business.

Market risks associated with fluctuations in bond and equity prices and other market factors are inherent in the Group’s business. Protracted market declines can reduce liquidity in the markets, making it harder to sell assets and leading to material losses.

The performance of financial markets may cause changes in the value of the Group’s investment and trading portfolios. In some of the Group’s business, protracted adverse market movements, particularly asset price decline, can reduce the level of activity in the market or reduce market liquidity. These developments can lead to material losses if the Group cannot close out deteriorating positions in a timely way. This may especially be the case for assets of the Group for which there are not very liquid markets to begin with. Assets that are not traded on stock exchanges or other public trading markets, such as derivative contracts between banks, may have values that the Group calculates using models other than publicly quoted prices. Monitoring the deterioration of prices of assets like these is difficult and could lead to losses that the Group did not anticipate.

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Despite the Group’s risk management policies, procedures and methods, the Group may nonetheless be exposed to unidentified or unanticipated risks.

The Group has devoted significant resources to developing its risk management policies, procedures and assessment methods and intends to continue to do so in the future. Nonetheless, the Group’s risk management techniques and strategies may not be fully effective in mitigating the Group’s risk exposure in all economic market environments or against all types of risk, including risks that the Group fails to identify or anticipate. Some of the Group’s qualitative tools and metrics for managing risk are based upon the Group’s use of observed historical market behavior. The Group applies statistical and other tools to these observations to arrive at quantifications of its risk exposures. These tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors the Group did not anticipate or correctly evaluate in its statistical models. This would limit the Group’s ability to manage its risks. The Group’s losses thus could be significantly greater than the historical measures indicate. In addition, the Group’s quantified modeling does not take all risks into account. The Group’s more qualitative approach to managing those risks could prove insufficient, exposing it to material unanticipated losses. If existing or potential customers believe the Group’s risk management is inadequate, they could take their business elsewhere. This could harm the Group’s reputation as well as its revenues and profits.

Our recent acquisition of Abbey, and any future acquisitions may not be succesful and may be disruptive to our business.

We have acquired controlling interests in various companies, and more recently, we completed the acquisition of Abbey. Although we expect to realize strategic, operational and financial benefits as a result of the Abbey acquisition, we cannot predict whether and to what extent such benefits will be achieved. In particular, the success of the Abbey acquisition will depend, in part, on our ability to realize the anticipated cost savings from assuming the control of Abbey’s business. In addition, we will face certain challenges as we work to integrate Abbey’s operations into our businesses. Moreover, the Abbey acquisition increased our total assets by 51.7% as of December 31, 2004, thereby presenting us with significant challenges as we work to manage the increases in scale resulting from the acquisition. Our failure to successfully integrate and operate Abbey, and to realize the anticipated benefits of the acquisition, could adversely affect our operating, performing and financial results. See “Item 4. Information on the Company”. History and development of the company.” Additionally, we may consider other strategic acquisitions and partnerships from time to time. There can be no assurances that we will be successful in our plans regarding the operation of past or future acquisitions and strategic partnerships.

We can give you no assurance that our acquisition and partnership activities will perform in accordance with our expectations. Despite our due diligence efforts, we must necessarily base any assessment of potential acquisitions and partnerships on inexact and incomplete information and assumptions with respect to operations, profitability and other matters that may prove to be incorrect. We can give no assurance that our expectations with regards to integration and synergies will materialize.

Increased competition in the countries where we operate may adversely affect our growth prospects and operations.

Most of the financial systems in which we operate are highly competitive. Recent financial sector reforms in the markets in which we operate have increased competition among both local and foreign financial institutions, and we believe that this trend will continue. In particular, price competition in Europe and Latin America has increased recently. Our success in the European and Latin American markets will depend on our ability to remain competitive with other financial institutions. In addition, there has been a trend towards consolidation in the banking industry, which has created larger and stronger banks with which we must now compete. There can be no assurance that this increased competition will not adversely affect our growth prospects, and therefore our operations. We also face competition from non-bank competitors, such as brokerage companies, department stores (for some credit products), leasing companies and factoring companies, mutual fund and pension fund management companies and insurance companies.

Volatility in interest rates may negatively affect our net interest income and increase our non-performing loan portfolio.

Changes in market interest rates could affect the interest rates charged on interest-earning assets differently than the interest rates paid on interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income leading to a reduction in our net interest income. Income from treasury operations is particularly vulnerable to interest rate volatility. Since the majority of our loan portfolio reprices in less than one year, rising interest rates may also bring about an increasing non-performing loan portfolio. Interest rates are highly sensitive to many factors beyond our control, including deregulation of the financial sector, monetary policies, domestic and international economic and political conditions and other factors.

Foreign exchange rate fluctuations may negatively affect our earnings and the value of our assets and shares.

Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar equivalent of the price of our securities on the stock exchanges in which our shares and ADRs are traded. These fluctuations will also affect the conversion to U.S. dollars of cash dividends paid in euros on our shares.

In the ordinary course of our business, we have a percentage of our assets and liabilities denominated in currencies other than the euro. Fluctuations in the value of the euro against other currencies may adversely affect our profitability. For example, the appreciation of the euro against some Latin American currencies and the U.S. dollar will depress earnings from our Latin American operations, and the appreciation of the euro against the sterling will depress earnings from our UK operations. Additionally, while most of the governments of the countries in which we operate have not imposed prohibitions on the repatriation of dividends, capital investment or other distributions, no assurance can be given that these governments will not institute restrictive exchange control policies in the future. Moreover, fluctuations among the currencies in which our shares and ADRs trade could reduce the value of your investment.

13

Changes in the regulatory framework in the jurisdictions where we operate could adversely affect our business.

A number of banking regulations designed to maintain the safety and soundness of banks and limit their exposure to risk apply in the different jurisdictions in which our subsidiaries operate. Changes in regulations, which are beyond our control, may have a material effect on our business and operations. As some of the banking laws and regulations have been recently adopted, the manner in which those laws and related regulations are applied to the operations of financial institutions is still evolving. Moreover, no assurance can be given generally that laws or regulations will be adopted, enforced or interpreted in a manner that will not have an adverse affect on our business.

Operational risks are inherent in our business.

Our businesses depend on the ability to process a large number of transactions efficiently and accurately. Losses can result from inadequate personnel, inadequate or failed internal control processes and systems, or from external events that interrupt normal business operations.

Different disclosure and accounting principles between Spain and the U.S. may provide you with different or less information about us than you expect.

There may be less publicly available information about us than is regularly published about companies in the United States. While we are subject to the periodic reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), the disclosure required from foreign issuers under the Exchange Act is more limited than the disclosure required from U.S. issuers. Additionally, we present our financial statements under Spanish GAAP which differs from US GAAP. See note 28 to our consolidated financial statements.

In 2005, the Group will adopt International Financial Reporting Standards (“IFRS”), which will affect the financial results as IFRS differ in significant respects from Spanish GAAP.

Until December 31, 2004, the Group prepared its financial statements in accordance with Spanish GAAP. In June 2002, the Council of Ministers of the EU adopted new regulations requiring all listed EU companies, including Banco Santander, to apply IFRS (previously known as “International Accounting Standards” or “IAS”) in preparing their consolidated financial statements from January 1, 2005. Because IFRS emphasizes the measure of the fair value of certain assets and liabilities, applying these standards to our financial statements may have a considerable impact on a number of important areas, including, among others, goodwill and intangible assets, employee benefits and financial instruments, accounting for share-based payments, long-term assets and business combinations. Because our financial statements prepared in accordance with IFRS will differ from our financial statements prepared in accordance with Spanish GAAP, the me th ods used by the financial community to assess our financial performance and value our publicly-traded securities could be affected.

If we are not able to adequately implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and are the subject of sanctions or investigation, our results of operations and our ability to provide timely and reliable financial information may be adversely affected.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related regulations implemented by the SEC are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. We will be evaluating our internal control over financial reporting to allow management to report on, and our registered independent public accounting firm to attest to, our internal controls over financial reporting. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, which we are required to comply with in our annual report which we will file in 2007 for our 2006 fiscal year. As a result, we expect to incur substantial additional expenses and diversion of management’s time. While we anticipate being able to fully implement the requirements relating to internal controls and all other aspects of Section 404 by our deadline, we cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations since there is presently no precedent available by which to measure compliance adequacy. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by regulatory authorities such as the SEC. Any such action could adversely affect our financial results or investors’ confidence in our company and could cause the price of our securities to fall. In addition, if we fail to develop and maintain effective controls and procedures, we may be unable to provide the financial information in a timely and reliable manner.

14

Risks Relating to Latin America

Our Latin American subsidiaries’ growth, asset quality and profitability may be adversely affected by volatile macroeconomic conditions.

The economy of the 10 Latin American countries where we operate has experienced significant volatility in recent decades, characterized, in some cases, by slow or regressive growth, declining investment and hyperinflation. This volatility has resulted in fluctuations in the levels of deposits and in the relative economic strength of various segments of the economies to which we lend. Latin American banking activities (including Retail Banking, Asset Management and Private Banking and Global Wholesale Banking) accounted for €1,284.8 million of our net attributable income for the year ended December 31, 2004 (a decrease of 2.6% from €1,318.5 million for the year ended December 31, 2003). (This figure does not include goodwill amortization of €342.5 million and €1,979.8 million and financing costs of €517.0 million and €542.3 million -taking into account the euro long-term interest rate, net of taxes- at December 31, 2004 and 2003, respectively). Negative and fluctuating economic conditions, such as a changing interest rate environment, impact our profitability by causing lending margins to decrease and leading to decreased demand for higher margin products and services.

Additionally, the recent economic and political crisis in Argentina which led to the conversion by the Argentine government of all the U.S. dollar-denominated debt which was subject to Argentine laws and jurisdictions into Argentine peso-denominated debt had a negative impact on the Group’s Argentine banking subsidiaries. The negative effects on the Group’s operations in Argentina included losses generated by this forced conversion of U.S. dollar-denominated debt to Argentine pesos at below market rates, lower lending and deposit-making activities, increased restrictions on the transferability of funds and a larger number of defaults by Argentine customers. Although Argentina’s economy continued to recover in 2004, and the results of operations of the Group’s Argentine banking subsidiaries have also improved, it is possible that, despite its recent economic growth, Argentina could return to a period of economic and political instability. If this were to occur, the financial condition and results of operations of the Group’s Argentine subsidiaries could be materially and adversely affected.

Significant competition in some Latin American countries could intensify price competition and limit our ability to increase our market share in those markets.

Because some of the Latin American countries in which we operate (i) only raise limited regulatory barriers to market entry, (ii) generally do not make any differentiation between locally or foreign-owned banks, (iii) have permitted consolidation of their banks, and (iv) do not restrict capital movements, we face significant competition in Latin America from both domestic and foreign commercial and investment banks.

Latin American economies can be directly and negatively affected by adverse developments in other countries.

Financial and securities markets in Latin American countries where we operate are, to varying degrees, influenced by economic and market conditions in other countries in Latin America and beyond. Negative developments in the economy or securities markets in one country, particularly in an emerging market, may have a negative impact on other emerging market economies. These developments may adversely affect the business, financial condition and operating results of our subsidiaries in Latin America.

15

Item 4. Information on the Company

A. History and development of the company.

Introduction

Banco Santander Central Hispano, S.A. is the parent bank of the Santander Group. It was established on March 21, 1857 and incorporated in its present form by a public deed executed in Santander, Spain, on January 14, 1875.

On January 15, 1999, the boards of directors of Banco Santander, S.A. and Banco Central Hispanoamericano, S.A. agreed to merge Banco Central Hispanoamericano into Banco Santander, and to change Banco Santander’s name to Banco Santander Central Hispano, S.A. The shareholders of Banco Santander and Banco Central Hispanoamericano approved the merger on March 6, 1999, at their respective general meetings. The merger and the name change were registered with the Mercantile Registry of Santander, Spain, by the filing of a merger deed. Effective April 17, 1999, Banco Central Hispanoamericano shares were extinguished by operation of law and Banco Central Hispanoamericano shareholders received new Banco Santander shares at a ratio of three shares of Banco Santander for every five shares of Banco Central Hispanoamericano formerly held. On the same day, Banco Santander changed its legal name to Banco Santander Central Hispano, S.A.

We are incorporated under, and governed by the laws of the Kingdom of Spain. We conduct business under the commercial name “Grupo Santander”. Our corporate offices are located in Ciudad Grupo Santander, Avda. de Cantabria s/n, 28660 Boadilla del Monte (Madrid), Spain. Telephone: (011) 34-91-259-6520.

Principal Capital Expenditures and Divestitures

Acquisitions, Dispositions, Reorganizations

The principal holdings acquired by us in 2002, 2003 and 2004 and other significant corporate transactions were as follows:

Abbey National plc (“Abbey”). On July 25, 2004, our board of directors and the board of directors of Abbey announced that they had reached an agreement on the terms of a recommended acquisition by us of the total ordinary shares of Abbey by means of a scheme of arrangement under the United Kingdom Companies Act.

After the approval of shareholders at the respective shareholders’ meetings of both companies, held in October 2004, and once all conditions of the transaction were met, on November 12, 2004, the acquisition was completed through the delivery of one new share of Banco Santander for every Abbey share. The capital increase amounted to €12,540.9 million, representing 1,485,893,636 new shares of €0.50 par value each and a share premium of €7.94 each.

Polskie Towarzystwo Finansowe (“PTF”). In 2004, we acquired all the shares of PTF, a Polish consumer finance company (including the credit portfolio managed by it) for €524 million, of which €460 million represented the nominal value of the credit portfolio. This transaction generated goodwill of €70 million.

ELCON Finance AS (“Elcon”). In September 2004, we acquired 100% of the capital stock of Elcon, a leading Norwegian vehicle finance company, for 3.44 billion Norwegian Kroners (approximately €400 million). Subsequently, we agreed to sell Elcon´s equipment leasing and factoring businesses for approximately €160 million. This transaction generated goodwill of €131 million.

Abfin BV (“Abfin”). In September 2004, we acquired Abfin, a Dutch vehicle finance company, for €22 million. This transaction generated goodwill of €3 million.

Finconsumo Banca SpA (“Finconsumo”). In 2003, we resolved to acquire the remaining 50% of the capital stock of Finconsumo that we did not own and acquired 20% of such capital stock for €60 million. In January 2004, we acquired the remaining 30% for €80 million, generating goodwill of €58 million.

Santander Central Hispano Previsión, S.A., de Seguros y Reaseguros (“Previsión”). In 2003, we reached an agreement for the sale of our entire investment in the capital stock of Previsión. Once all regulatory approvals were obtained, we completed the transaction in June 2004 for €162 million.

Orígenes AFJP, S.A. (“Orígenes”). In 2003, we increased our ownership interest in Orígenes from 39.2% to 59.2%, in accordance with the agreements reached with Bank of Boston in 2000, for a total price of $141 million. The goodwill generated (€102 million) was fully amortized against the provisions as of December 31, 2002.

16

Banco Santander Portugal, S.A. (“Banco Santander Portugal”). In 2003, we acquired a 12.74% ownership interest in the capital stock of Banco Santander Portugal for €106 million, thus increasing our holding to 97.95%.

Banco Español de Crédito, S.A. (“Banesto”). In 2002, Banesto carried out a monetary capital increase through the issuance of 81,670,694 new shares, carrying preemptive rights, at a ratio of 2 new shares issued at par for every 15 old shares. We sold the preemptive rights we received in this transaction (arising from our 99.04% holding in the capital stock of Banesto) for €443 million and reduced our ownership interest in Banesto to 88.57%. As of December 31, 2004, we had an 88.65% holding in the capital stock of Banesto.

Grupo Financiero Santander Serfin (“Serfin”) and Banco Santander Mexicano, S.A. In December 2002, we reached an agreement with Bank of America Corporation whereby the latter acquired 24.9% of Serfin for $1,600 million, for which we recognized in 2003 capital gains of €681 million. Under this agreement, Bank of America Corporation must maintain its share holding in Serfin for at least three years, and after this period it may use, if it deems it appropriate, several liquidity mechanisms to reduce its share holding, including the listing of its Serfín shares on the stock exchange and the right to sell its Serfin shares to us, at one time, at its book value at the time of the sale, calculated in accordance with international accounting standards.

The sale of the 24.9% stake was completed in the first quarter of 2003. As of December 31, 2003, we had a 74.0% holding in the capital stock of Serfin.

In June 2004, the shareholders of Serfin increased its capital by €163.4 million, of which we subscribed €122.5 million.

The shareholders, at the General Shareholders’ Meetings of Banco Santander Mexicano, S.A. (a 100% owned subsidiary of Serfin), Banca Serfin, S.A. (a 100% owned subsidiary of Serfin), Factoring Santander Serfin, S.A. de C.V. (a 98.8% owned subsidiary of Serfin) and Fonlyser, S.A. de C.V. (a 99.9% owned subsidiary of Serfin), held on November 29, 2004, agreed to the merger of these entities, with Banco Santander Mexicano, S.A. being the surviving entity. For accounting purposes, the merger was effective as of December 31, 2004. Banco Santander Mexicano, S.A. subsequently changed its legal name to Banco Santander Serfin, S.A.

AKB Holding (“AKB”). In 2001, we reached an agreement with the Werhahn Group for the acquisition of AKB (a German group specializing in consumer finance). In May 2002, we issued 109,040,444 new shares of €0.5 par value each and share premium of €9.588 each for an effective amount of €1,100 million, which were paid in full through the contribution of shares representing all the capital stock of AKB, in accordance with the resolutions adopted at the Bank’s Extraordinary Shareholders’ Meeting held on February 9, 2002. In 2002, AKB merged with CC-Bank Ag., which is 100% owned by us.

Banco Santiago. Under the agreements between us and the Central Bank of Chile (as the second largest shareholder of Banco Santiago), on April 17, 2002, we acquired 35.45% of the Central Bank of Chile’s holding in the capital stock of Banco Santiago for $685 million (approximately €772 million). On August 1, 2002, Banco Santiago merged into Banco Santander Chile, with retroactive effect as of January 1, 2002, after the required resolutions were passed at their respective Shareholders’ Meetings and approval by the Chilean regulatory authorities. The name of the post-merger entity is Banco Santander Chile.

Banco Río de la Plata, S.A. (“Banco Río”). As of December 31, 2001, we had an 80.3% controlling interest in Banco Río. Additionally, we had call options and were obliged by put options of a third party on the capital stock of Banco Río which affected 18.54% of Banco Rio’s capital stock (23% of the voting rights). In January 2002, we settled the exercise of the put option by its holder through the delivery of the Bank’s ordinary shares. The estimated cost of the investment was €395.0 million. As of December 31, 2002, we had a 98.9% holding in the capital stock of Banco Río and, as of December 31, 2003, a 99.1% holding following the conversion by us in 2003 of the subordinated debt of Banco Río held by us into equity.

Banco Santander Colombia. As a result of a capital increase and of certain agreements reached in prior years, in 2002, we increased our holding in the capital stock of Banco Santander Colombia by 34.32% and paid €303 million. As of December 31, 2004, we held 97.64% of Banco Santander Colombia.

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Patagon Group. In 2002, we restructured our internet banking business, selling our holding in Patagon America, the Latin American financial portal, to the other shareholders for $9.84 million (approximately €10.7 million) and using the allowances recorded for the full amount of the investment that included €617 million of goodwill.

Banco de Venezuela. On August 17, 2002, Banco de Venezuela and Banco de Caracas merged into the new Banco de Venezuela.

Compañía Española de Petróleos, S.A. (“Cepsa”). In 2003, we launched a tender offer for up to 42,811,991 Cepsa shares. The offer was accepted by 32,461,948 shares, representing an investment by us of €909 million.

For a description of certain legal proceedings relating to the Cepsa tender offer, see “Item 8. Financial Information—A . Consolidated statements and other financial information—Legal Proceedings”.

The Royal Bank of Scotland Group, plc. (“RBS”). In 2002 we made a net divestment of 3% of our holding in RBS, giving rise to gains of approximately €806 million. As of December 31, 2002, our ownership interest was 5.04% in RBS.

As of December 31, 2003, following several purchases and sales made during the year, our holding in RBS was 5.05%. The sales gave rise to gains of €217 million.

In May 2004, we subscribed to a capital increase for sterling 150 million, in order to prevent dilution of our holding. This transaction generated goodwill of €25 million.

In September 2004, we sold 79 million of our RBS shares, representing 2.51% of our holding, at a capital gain of approximately €472 million. As of December 31, 2004, our ownership interest in RBS was 2.54%.

In January 2005, we sold our entire holding in RBS at a capital gain of approximately €717 million.

Unión Eléctrica Fenosa, S.A. (“Unión Fenosa”). In 2002, we acquired several holdings in the capital stock of Unión Fenosa for a total amount of €465 million. In 2004, we sold 1% of our holding that as of December 31, 2004, was 22.02%.

Grupo Financiero Bital. In 2002, we subscribed to a capital increase and converted bonds into Grupo Financiero Bital shares for approximately €99 million, thus increasing our holding to 25.4% of the economic rights and 29.1% of the voting rights of Grupo Financiero Bital. Subsequently, we accepted the tender offer launched by Hong Kong and Shanghai Bank Corporation for the shares of Grupo Financiero Bital, realizing capital gains of approximately €113 million.

Dragados y Construcciones, S.A. In 2002, we divested our 23.5% holding in Dragados y Construcciones, S.A. at a capital gain of approximately €521 million.

Grupo Sacyr-Vallehermoso, S.A. (“Sacyr-Vallehermoso”). In 2002, we divested 24.5% of our holding in Sacyr-Vallehermoso at a capital gain of approximately €301 million.

In 2004, we sold our entire holding in Sacyr-Vallehermoso for €92 million at a capital gain of €47 million.

San Paolo IMI, S.p.A. (“San Paolo IMI”). In 2003, we increased our holding in San Paolo IMI, from 5.2% as of December 31, 2002, to 8.6% as of December 31, 2003 and 2004, with a net investment of €525 million in 2003.

Vodafone Airtouch plc (“Vodafone”). During 2002, we reduced our stake in Vodafone from 1.53% to 0.97%, realizing capital gains of €274 million. In 2003, we sold 0.67% of our holding, realizing capital gains of €369 million. In 2004, we sold the remainder of our holding in Vodafone, realizing capital gains of €242 million.

Auna Operadores de Telecomunicaciones, S.A. (“Auna”). In 2002, we acquired a 12.62% stake in Auna for €939 million, thus increasing to 23.49% our total holding in this company. This stake was increased by an additional 2.5% in 2004, for approximately €217 million. Furthermore, during 2004, we made purchases for an additional 1.5% stake in Auna for approximately €120 million. As of December 31, 2004, we had a 27.34% holding in the capital stock of Auna, with an investment of €2,031 million.

In January 2005, we acquired an additional 4.74% stake in Auna, thus increasing to 32.08% our total holding in this company.

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Shinsei Bank (“Shinsei”). In 2003, we increased our holding in the capital stock of the Japanese bank Shinsei from 6.5% as of December 31, 2002, to 11.4% as of December 31, 2003. The total cost of the investment at that date was approximately €144 million. Subsequently, in the first quarter of 2004, we sold 4.0% of our holding at a capital gain of approximately €118 million. After this transaction, we held 7.4% of the capital stock of Shinsei.

In addition to expanding our existing operations, we continually review possible acquisitions of, and investments in, businesses in markets in which we believe we have particular advantages.

Capital Increases

As of December 31, 2001, our capital stock consisted of 4,659,362,499 fully subscribed and paid shares of €0.5 par value each.

As of December 31, 2002, our capital had increased by 109,040,444 shares, or 2.34% of our total capital as of December 31, 2001, to 4,768,402,943 shares through the following transaction:

AKB Holding Acquisition

• Capital increase of 109,040,444 new shares of €0.5 par value each and share premium of €9.588 each for an effective amount of €1,100 million, which were paid in full through the contribution of shares representing all the capital stock of AKB, in accordance with the resolutions adopted at our Extraordinary Shareholders’ Meeting held on February 9, 2002. These shares were issued on May 14, 2002.

As of December 31, 2002 and 2003, our capital stock consisted of 4,768,402,943 fully subscribed and paid shares of €0.5 par value each.

As of December 31, 2004, our capital had increased by 1,485,893,636 shares, or 31.16% of our total capital as of December 31, 2003, to 6,254,296,579 shares through the following transaction:

Abbey Acquisition

• Capital increase of 1,485,893,636 new shares of €0.5 par value each and share premium of €7.94 each for an effective amount of €12,540.9 million, which were paid in full through the contribution of shares representing all the capital stock of Abbey, in accordance with the resolutions adopted at our Extraordinary Shareholders’ Meeting held on October 21, 2004. These shares were issued on November 12, 2004.

Recent Events

In May 2005, after the tender offer launched in March 2005, we acquired 100% of the capital stock of Bankia (a Norwegian bank) for a price of approximately €56 million.

In April 2005, we, together with the other strategic partners of Auna, decided to open an orderly and competitive process for the sale of our holdings in Auna, or, as the case might be, its assets, submitting this option to the governance bodies of this telecommunications group.

B. Business overview.

We are a financial group operating principally in Spain, the United Kingdom, other European countries and Latin America, offering a wide range of financial products. At December 31, 2004, we were one of the ten largest banking groups in the world by market capitalization and the largest banking group in the euro zone with a stock market capitalization of €57.1 billion, stockholders’ equity of €32.1 billion and total assets of €575.4 billion. We had an additional €140.0 billion in mutual funds, pension funds and other assets under management at that date. We also had 33,353 employees and 4,384 branch offices in Spain and 93,135 employees and 5,589 branches outside Spain at December 31, 2004.

Our principal operations are in Spain, the United Kingdom, Portugal, Germany, Italy and Latin America. We also have significant operations in New York and Paris as well as financial investments in San Paolo-IMI and Attijariwafa Bank (formerly, Banque Commerciale du Maroc). In Latin America, we have majority shareholdings in banks in Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, Puerto Rico, Uruguay and Venezuela.

Recent Reorganization of Business Areas

As a result of the entry into force of the IFRS in 2005, we have redefined our business areas for financial reporting purposes. The new areas reflect the incorporation of Abbey, following our consolidation of its balance sheet at the end of 2004.

In accordance with the criteria established by the IFRS, the structure of the operating business areas has been segmented into two levels:

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Principal level (or geographic). The activity of our operating units is segmented by geographical areas. This coincides with our first level of management and reflects our positioning in the world’s three main currency areas. The reported segments are:

•	Continental Europe. This covers all retail banking business (including Banif, our specialized private bank), asset management and insurance and wholesale banking conducted in Europe, with the exception of Abbey. This segment includes the following units: Santander Central Hispano Network, Banesto, Portugal and Santander Consumer.
	In addition, small units outside the three geographic areas, whose relative importance to our total business is not significant and which are extensions of the main areas, are included in Continental Europe.
•	United Kingdom (Abbey). This covers only Abbey’s business, mainly focused on retail banking and insurance in the UK.
•	Latin America. This embraces all the financial activities conducted via our subsidiary banks and other subsidiaries. It also includes the specialized units in International Private Banking, as an independent globally managed unit.

Secondary level (or business). This segments the activity of our operating units by type of business. The reported segments are:

• Retail Banking. This covers all customer banking businesses (except those of Corporate Banking, which are managed globally throughout the world). Because of the importance of this business relative to our total activity, details are provided by both geographic area (Continental Europe, United Kingdom- Abbey and Latin America) as well as by main country.

• Asset Management and Insurance. This includes our units that design and manage mutual and pension funds and insurance.

• Global Wholesale Banking. This business reflects the returns from Global Corporate Banking, Investment Banking and Markets worldwide, including all treasuries with global management, as well as our equities business.

In addition to these operating units, which cover everything by geographic area and business, we continue to maintain a separate Financial Management and Equity Stakes area. This area incorporates the centralized activities relating to equity stakes in industrial and financial companies, financial management of the structural exchange rate position and of the parent bank’s structural interest rate risk, as well as management of liquidity and of shareholders’ equity through issues and securitizations. As the Group’s holding entity, it manages all capital and reserves and allocations of capital and liquidity.

Business Areas in 2004

In 2004, our business was divided into five principal areas:

• European Retail Banking;

• Retail Banking Latin America;

• Asset Management and Private Banking;

• Global Wholesale Banking; and

• Financial Management and Equity Stakes.

As noted above, in November 2004, we acquired 100% of the capital of Abbey National plc. Under Spanish GAAP, our acquisition of Abbey has been reflected on our financial statements as if the acquisition had occurred on December 31, 2004. Accordingly, Abbey’s assets and liabilities were consolidated into our balance sheet as of December 31, 2004, but Abbey’s results of operations had no impact on our income statement for the year ended December 31, 2004.

Abbey is a significant financial services provider in the United Kingdom, being the second largest residential mortgage lender, third largest savings brand, and operates across the full range of personal financial services serving approximately 18 million customers.

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Prior to the reorganization of Abbey’s structure following the completion of the acquisition, Abbey had two main business divisions: “Personal Financial Services” and the “Portfolio Business Unit”.

“Personal Financial Services” includes the following business areas:

(i) Banking and Savings: in addition to being the second largest provider of residential mortgages in the UK, Abbey also provides a wide range of retail savings accounts and offers a range of personal banking services including current accounts, unsecured loans and credit cards;

(ii) Investment and Protection: Abbey offers life and health protection, investment and pensions products primarily through its subsidiaries Abbey National Life, Scottish Mutual Assurance and Scottish Provident;

(iii) General Insurance: the range of non-life insurance products sold by Abbey includes buildings and contents insurance and payment protection insurance; and

(iv) Financial Markets: Abbey Financial Markets is responsible for the liquidity and capital management activities of the bank and it also incorporates derivatives and structured products and short term markets businesses.

The “Portfolio Business Unit” originally comprised a number of businesses, assets and portfolios that were deemed inconsistent with Abbey’s UK Personal Financial Services strategy. Accordingly, Abbey has reduced or exited these businesses and the remaining portfolio mainly corresponds to finance leases, operating leases (principally Porterbrook), Motor Financing and Litigation Funding.

Following the completion of the acquisition of Abbey, a new organizational structure has been created. Three new divisions were established by: (i) restructuring Abbey’s retail banking division, which integrates the former divisions of sales and marketing; (ii) restructuring Abbey’s insurance and asset management, which integrates both businesses and in doing so underscores the importance of these markets for Abbey and (iii) the creation of a new manufacturing division as a result of the merger of the former divisions of technology and operations with customers, which will be responsible for global management of costs and the bank’s operational efficiency.

Abbey is now organized as follows:

• Business divisions: Sales and Marketing; Insurance and Asset Management, and Finance and Markets.

• Support divisions: Human Resources; Manufacturing; and Risk.

The Business and Support divisions are supported by five central units – Compliance, Communications, Legal, Secretariat and Tax, and Strategy and Planning.

European Retail Banking

This area covers the banking activities of the different networks and specialized units in Europe, principally with individual clients and small and medium sized companies (“SMEs”), as well as private and public institutions. During 2004 there were four units within this area: Santander Central Hispano Retail Banking, Banesto, Santander Consumer and Portugal.

Retail Banking Latin America

This area covers the banking activities in Latin America conducted through our subsidiary banks and finance companies.

Asset Management and Private Banking

Asset management includes pension and mutual funds and bancassurance. Private banking includes the activity carried out with clients via the specialized units in Spain and abroad.

Global Wholesale Banking

This area covers our corporate banking activities in Spain, the rest of Europe and New York, treasury activities in Madrid and New York, as well as investment banking businesses throughout the world.

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Financial Management and Equity Stakes

This area is responsible for the centralized activities relating to strategic or temporary equity stakes in industrial and financial companies, financial management related to the structural exchange rate position, the Group’s asset and liability portfolio and management of liquidity and capital through securities issuances and securitizations. It also manages all capital and reserves and allocations of capital and liquidity to the different business areas. The area also includes, on a temporary basis, businesses that are being wound down or closed in order not to distort the rest of the businesses. In exceptional circumstances, this area sometimes manages the launch of an activity of a strategic nature.

European Retail Banking

Our European retail banking activities include deposit taking, personal loans and consumer finance, mortgage lending, bill discounting, leasing, factoring, distribution of mutual and pension funds, life and non-life insurance distribution, credit and debit card operations, remote banking services, automobile financing and money transfers.

European Retail Banking is the largest business area of the Santander Group. At the end of 2004, it accounted for 56.4% of total customer deposits excluding Abbey (33.3%, including Abbey), 72.7% of loans excluding Abbey (43.0%, including Abbey) and 55% of net attributable income of the Group’s main business areas (excluding Abbey).

The area had 5,180 branches and 40,703 employees (direct and assigned) at the end of 2004.

The area experienced a 17.7% increase in net operating income, primarily due to increased revenue from commissions, lower operating costs, improved efficiency and growth in net interest income.

The efficiency ratio improved by 3.2 percentage points in 2004 from 45.7% in 2003 to 42.5%. Net attributable income increased 20.4% to €2,120.3 million. ROE in 2004 was 19.5%, the same as in 2003.

Santander Central Hispano Retail Banking

This activity is carried out through the branch network of Banco Santander Central Hispano, with support from an increasing number of automated cash dispensers, savings books updaters, telephone banking services, electronic and internet banking.

At the end of 2004, we had 2,571 branches and a total of 19,371 employees (direct and assigned) of which 791 employees were temporary, dedicated to retail banking in Spain. Compared to 2003, there was a net increase of 23 branches and a net reduction of 1,376 employees.

In 2004, Santander Central Hispano Retail Banking experienced growth of approximately 11.4% in lending, 12.2% in net operating income and 12.4% in net attributable income, an improved efficiency ratio from 45.4% in 2003 to 43.0% in 2004 and continued high standards of quality in credit risk.

Gross operating income from Santander Central Hispano Retail Banking was €3,639.3 million in 2004, as compared to €3,431.7 million in 2003.

In 2004, net attributable income from Santander Central Hispano Retail Banking was €1,041.4 million, 12.4% higher than net attributable income in 2003, while the ROE reached 20.8% (22.4% in 2003) and the efficiency ratio improved to 43.0% (45.4% in 2003).

The 11.4% growth in lending in 2004 versus 2003 came from both mortgages (+23%, mainly for individual customers) as well as other loans and credits (+13%), leasing and renting (+30%) and commercial bills (+9%).

Customer deposits increased slightly by 0.5%, while mutual and pension funds increased by 11.2% and 10.0%, respectively.

Banesto

At the end of 2004, Banesto had 1,683 branches and 9,801 employees (direct and assigned) (compared with 9,954 employees at the end of 2003), of which 612 employees were temporary.

In 2004, Banesto experienced growth of approximately 26.5% in lending, 8.2% in customer deposits and 11.6% in off-balance sheet customer funds.

In 2004, gross operating income from Banesto was €1,719.6 million, as compared to €1,578.4 million in 2003. Net attributable income from Banesto was €470.1 million, 23.7% higher than in 2003, while the ROE reached 16.8% (15.6% in 2003) and the efficiency ratio improved to 45.6% (48.5% in 2003).

Santander Consumer

Our consumer financing activities are conducted through our subsidiary Santander Consumer. Most of the activity is in auto financing, personal loans and credit cards. These consumer financing activities are mainly focused on Spain, Portugal, Germany and Italy (through Finconsumo). We are also present in Austria, Hungary, the Czech Republic, the Netherlands, Norway, Poland and Sweden.

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At the end of 2004, this unit had 256 branches (compared with 183 at the end of 2003) and 5,234 employees (direct and assigned) (compared with 3,991 employees at the end of 2003), of which 177 employees were temporary.

In 2004, this unit generated gross operating income of €1,306.8 million, 27.5% higher than in 2003. Net attributable income was €359.0 million, 44.9% higher than in 2003, while the ROE reached 22.0% (21.2% in 2003) and the efficiency ratio improved to 35.5% (39.9% in 2003).

Santander Consumer´s new lending amounted to €15,300 million, 30% more than in 2003 (including the new loans, acquired through our acquisitions of PTF, Elcon and Abfin). Excluding these acquisitions, growth would have been 23%. Total managed assets amounted to €26,800 milllion. Of note was the 24% organic growth in auto financing and the 36% increase in consumer finance and credit cards. The main traditional markets registered high lending growth: Spain and Portugal, 25%; Italy, 36% and Germany, 19%.

Portugal

Our Portuguese retail operations are conducted by Banco Santander Totta, and our Portuguese investment banking operations by Banco Santander de Negocios Portugal.

At the end of 2004, Retail Banking in Portugal operated 670 branches and had 6,297 employees (direct and assigned) (compared with 6,900 employees at the end of 2003), of which 32 employees were temporary.

In 2004, gross operating income from our Retail Banking activities in Portugal was €910.0 million, as compared to €852.3 million in 2003. Net attributable income was €249.9 million, 17.2% higher than in 2003, while the ROE reached 17.4% (16.9% in 2003) and the efficiency ratio improved to 44.4% (48.4% in 2003).

In 2004, net attributable income from our Group in Portugal (including Retail Banking, Asset Management and Global Wholesale Banking) was €289.5 million, 15.3% higher than in 2003.

Retail Banking Latin America

At December 31, 2004, we had 3,874 offices and 52,107 employees (direct and assigned) in Retail Banking Latin America (compared with 3,894 offices and 52,229 employees, respectively, at December 31, 2003), of which 563 were temporary employees. Net attributable income from Retail Banking Latin America was €1,038.6 million, 2.4% lower than in 2003, while the ROE reached 26.9% (29.0% in 2003) and the efficiency ratio increased to 55.3% (54.9% in 2003). Our total Latin American activities (including Retail Banking, Asset Management and Global Wholesale Banking) accounted for €1,284.8 million of our net attributable income for the year ended December 31, 2004. Our Latin American banking business is principally conducted by the following banking subsidiaries:

	Percentage Held		Percentage Held
	at December 31, 2004		at December 31, 2004
Banco Río de la Plata (Argentina)	99.09	Banco Santander Colombia	97.64
Banco Santa Cruz, S.A. (Bolivia)	96.33	Banco Santander Mexicano	74.92
Banco Santander Brasil, S.A. (Brazil)	97.62	Banco Santander Puerto Rico	88.64
Banco Santander Meridional (Brazil)	96.91	Banco Santander, S.A. (Uruguay)	100.00
Banespa (Brazil)	98.02	Banco de Venezuela, S.A.C.A.	98.41
Banco Santander Chile	83.94

We engage in a full range of retail banking activities in Latin America, although the range of our activities varies from country to country. We seek to take advantage of whatever particular business opportunities local conditions present. We engage in a wide array of deposit taking activities throughout Latin America, and other retail banking activities in Argentina, Brazil, Chile and Mexico. Our primary lending operations are in Chile, Mexico, Brazil and Puerto Rico. Our principal mutual fund operations are in Brazil, Mexico, Chile and Puerto Rico, and our main pension fund operations are in Chile, Mexico, Argentina, Peru and Colombia.

Our significant position in Latin America is attributable to our financial strength, high degree of diversification (by countries, businesses, products, etc), and breadth and depth of our franchise.

Detailed below are the performance highlights of the main Latin American countries in which we operate:

Brazil. Santander Banespa is one of the main financial franchises in Brazil. It has more than 1,800 branches and over 7,300 cash dispensers.

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In 2004, Santander Banespa focused on increasing customer business volumes, particularly loans development, capitalizing on the large number of clients after customer segmentation. This focus helped to increase total lending by 37% in line with the increase in loans to individual customers (credit cards, auto financing, consumer credit, etc.). Deposits plus mutual and pension funds increased by 17%.

Total net attributable income from Brazil in 2004 was €684.9 million, 2.3% lower than in 2003 (+2.6% excluding the exchange rate impact). The efficiency ratio was 48.0%, ROE was 38.8%, the ratio of non-performing loans (“NPL”) was 2.6% at the end of 2004 and the NPL coverage was 175%.

Mexico. Santander Mexicano is one of the leading financial services companies in Mexico. It is the third largest banking group in Mexico in terms of business volume and first in terms of profitability and credit risk quality. It has a network of 1,020 branches and 2,299 cash dispensers.

Net attributable income from Mexico declined 18.4% (-5.5% after eliminating the exchange rate impact) to €331.7 million. The year-on-year comparison was affected by the €17 million impact from the sale of 24.9% of Santander Serfin to Bank of America (February 28, 2003), the release of €51 million of loan-loss provisions in the first quarter of 2003 and the rise in the tax charge between the two periods. Net operating income, not affected by any of these factors, rose 29.4% after eliminating the exchange rate impact. The efficiency ratio was 45.6%, ROE was 24.2%, the ratio of non-performing loans was 0.7% at the end of 2004 and the NPL coverage was 401%.

Chile. Santander Santiago has the largest financial franchise in the country with substantial business in loans, deposits, mutual funds and pension funds. It has 346 branches and 1,191 cash dispensers.

In 2004, lending rose 19% and the total of deposits, mutual funds and pension funds increased 19%.

Net attributable income from Chile increased 11.3% to €271.0 million (+8.5% eliminating the exchange rate impact). The efficiency ratio stood at 41.5%, ROE was 23.2%, the ratio of non-performing loans was 3.3% and the NPL coverage was 116%.

Puerto Rico. Santander Puerto Rico is one of the largest financial entities in Puerto Rico. We have 71 branches and 149 cash dispensers in Puerto Rico.

In 2004, Santander Puerto Rico focused on growth in residential mortgages and loans to medium-sized companies, which produced an increase of 8% in lending in local currency. Deposits and mutual funds rose 19% in dollars.

Net attributable income from Puerto Rico was €45.7 million, 62.4% higher than in 2003 (78.4% excluding the exchange rate impact). The efficiency ratio was 58.8%, ROE was 11.0%, the ratio of non-performing loans stood at 2.3% and the NPL coverage was 131%.

Venezuela. Banco de Venezuela is one of the country’s largest banks. It has 242 branches and 656 cash dispensers.

The main focus of management in 2004 was growth in net basic revenue and the profitability of business, with selective growth in lending, a rise in transactional deposits, a very flexible pricing policy for loans and funds and the development of businesses that generate commissions.

Net attributable income from Venezuela grew 6.7% to €115.1 million (+33.6% excluding the exchange rate impact). The efficiency ratio was 43.6%, ROE stood at 39.6%, the ratio of non-performing loans was 2.2% and the NPL coverage was 346%.

Colombia. Colombia consolidated its economic recovery in 2004. The Group´s business model in Colombia is focused on selective growth and efficient management of costs, with excellent credit quality levels (the ratio of non-performing loans was 0.4% and coverage more than 1,000%).

Net attributable income from Colombia was €39.3 million, 58.2% higher than in 2003.

Other countries

Argentina made a positive contribution to Group earnings in 2004 (net attributable income was €38.9 million, compared to zero contribution in 2003). Growth in deposits was consolidated and lending began to slowly recover. Fees and commissions also increased.

Uruguay improved notably, generating net attributable income of €17.2 million in 2004 compared to a loss of €37.1 million in 2003.

Bolivia’s net attributable income was €8.0 million in 2004 (€8.9 million in 2003). Peru, where the Group focuses on pension funds, generated net attributable income of €17.8 million in 2004 (€19.3 million in 2003).

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Asset Management and Private Banking

This area comprises all of our companies whose activity is the management of mutual and pension funds, private banking and bancassurance. At the end of 2004, this area had 171 branches and 6,735 employees (direct and assigned) (6,606 employees at the end of 2003), of which 16 employees were temporary.

In 2004, this area generated gross operating income of €871.0 million, as compared to €798.7 million in 2003. Net attributable income was €351.1 million, 9.9% higher than in 2003.

Asset Management: Assets managed in Spain increased 14.5% to €77,909 million. We manage €61,925 million in mutual funds (of which €2,484 million relates to real estate funds) and we manage €6,330 million in individual pension funds.

In Latin America, we managed €28,000 million of mutual and pension funds, 18% more than in 2003 (excluding the exchange rate impact). All group companies in Latin America increased their balances of mutual and pension funds in local currency. Of note was the growth of more than 30% in mutual funds in Mexico, Chile and Puerto Rico, as well as in pension funds in all countries (with an increase of approximately 15%, without the effect of exchange rates, with the exception of Argentina which had an increase of 9%).

Insurance: In Spain, Santander Seguros continued to grow strongly in its targets areas. Individual life-risk premium income increased by 70%, multi-risk home insurance grew by 29% and unemployment insurance tripled.

In Latin America, the Group continued to focus on growth in the distribution of insurance via its banking network. Brazil, Mexico and Chile had an aggregate growth of 34% in premium income, excluding the exchange rate impact.

Private Banking: Banco Banif, our specialized Private Banking subsidiary, attained 22% growth in its target customers and a 25% increase in net operating income, with €22,000 million of managed customer funds.

International Private Banking registered 20% growth in euros in net operating income and 35% in net attributable income. Average managed funds rose 25% in dollars terms.

Global Wholesale Banking

This area covers our corporate banking activities in Spain, the rest of Europe and New York, treasury activities in Madrid and New York, as well as investment banking throughout the world.

Net attributable income was €331.1 million, 46.8% more than in 2003.

At the end of 2004, we had 18 branches and 2,223 employees (direct and assigned) (2,288 employees at the end of 2003), of which 9 were temporary.

Global Corporate Banking

Our Group serves our large corporate, financial institutions and governments clients' needs from our headquarters in Spain, our banking subsidiaries in Belgium, Portugal and Latin America, and our branches in London, Frankfurt, Paris and New York and our agency in Miami. The corporate banking unit provides a full range of banking services, including among others, bill discounting, global cash management, treasury management services, risk mitigation products, trade finance and correspondent banking.

Global Investment Banking

Our investment banking operations include brokerage, corporate finance, structured and project finance, and custody services. The corporate finance and structured finance units help our clients in their special financing needs such as, gaining access to the capital markets, acquisition and project finance advice and mergers & acquisition advice. The brokerage unit provides securities execution, dealing and research services. In addition, we provide custody, settlement, and other value added securities related services and engage in underwriting and dealing activities, mainly with equity and fixed income securities and instruments in Spain, Portugal, our branch in New York and Latin America.

Global Investment Banking increased revenues in 2004 24% over 2003. Revenues from our equities business increased 22%, consolidating our leadership in brokerage in Spain, Portugal and in ordinary Latin American shares.

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Treasury

Our treasury operations manage money, foreign exchange and fixed-income trading in Spain and abroad (Portugal, New York and Latin America), using conventional instruments and derivatives, for our own account and for the account of customers and for participating in fixed income capital market activities.

Financial Management and Equity Stakes

This area acts as the Group’s holding company, managing all capital and reserves, and assigning capital and liquidity to the rest of the Group’s businesses. It also incorporates centrally managed businesses, which can be divided into three sub areas:

•     Equity Stakes: This area centralizes the management of equity stakes in financial and industrial companies.

•     Financial management: Manages the structural exchange rate position, the Assets and Liabilities Committee (ALCO) portfolio of the parent bank and the issues and securitizations that meet the Group’s liquidity and equity needs. It also manages the costs related to hedging capital in Latin America and manages all capital and reserves, the allocation of capital to each business unit, and the financing cost of investments. In addition, there are certain specific allocations of a centralized nature (the parent bank’s pension), country-risk and early amortization of goodwill.

•     Projects underway/wound down: Also included, on a temporary basis, are businesses in the process of being wound down or closed in order not to distort the rest of our businesses. In exceptional circumstances, this area may manage the launch of a business of a strategic nature on a temporary basis. In 2004, this area managed the development of the Partenón project.

Gross operating income from Financial Management and Equity Stakes was €157.1 million in 2004, 35.2% higher than in 2003. Net attributable loss was €705.6 million in 2004 compared with a net attributable loss of €760.5 million in 2003.

At the end of 2004, this area had 359 employees (direct and assigned) (271 employees at the end of 2003), of which 173 were temporary.

Equity Stakes

Alliances and Financial Investments

We have financial investments in a number of banking companies, principally in Europe. The following summarizes our most important financial investments:

Commerzbank. At December 31, 2004, we owned 3.4% of Commerzbank.

San Paolo-IMI. At December 31, 2004, we owned 8.5% of the capital stock of San Paolo-IMI, one of the largest banking groups in Italy in terms of assets. San Paolo-IMI controls Intereuropa Bank, a Hungarian bank in which we own a 10% stake.

Attijariwafa Bank (Morocco) (formerly, Banque Commerciale du Maroc). At December 31, 2004, we had a 14.5% interest in Attijariwafa Bank, which engages mainly in trade finance and foreign investment activities. Together with Attijariwafa Bank we have a 50% joint venture in Attijari International Bank, which specializes in trade finance in Tangier’s free trade zone.

Industrial Portfolio

The majority of our industrial holdings portfolio consists of investments in strategic sectors related to the growth of the Spanish economy. Through our investments in these areas, we aim to be present in these sectors as a long-term investor. Our investments in non-financial companies focus on areas we believe to be long-term growth sectors, such as telecommunications.

The following table summarizes our main industrial holdings at December 31, 2004:

		Percentage Held
Company	Business	At December 31, 2004
AUNA	Telecommunications	27.34
ONO-Cableuropa	Cable	18.93
Unión Fenosa, S.A.	Electric Utility	22.02
Cepsa, S.A.	Oil and Petrochemicals	32.27
Inmobiliaria Urbis, S.A.	Real Estate	45.67
Antena 3 de Televisión, S.A.	Mass Media	10.00

26

In 2004, we continued our strategy of balancing the negative contribution from companies being developed with the positive contribution of companies generating income and distributing dividends. We realize capital gains from the sale of stakes when the circumstances are optimal do to so.

As of December 31, 2004, our unrealized capital gains in industrial stakes were estimated at €2,400 million.

Total Revenues by Activity and Geographic Location

For a breakdown of our total revenues by category of activity and geographic market please see note 28 of our Consolidated Financial Statements.

Selected Statistical Information

The following tables show our selected statistical information.

Average Balance Sheets and Interest Rates

The following tables show, by domicile of customer, our average balances and interest rates for each of the past three years.

You should read the following tables and the tables included under “Changes in Net Interest Income—Volume and Rate Analysis” and “Earning Assets—Yield Spread” in light of the following observations:

• We have included interest received on non-accruing assets in interest income only if we received such interest during the period in which it was due;

• We have included loan fees in interest income;

• We have not recalculated tax-exempt income on a tax-equivalent basis because the effect of doing so would not be significant;

• We have included income and expenses from interest-rate hedging transactions as a separate line item under interest income and expenses if these transactions qualify for hedge accounting under Spanish GAAP. If these transactions did not qualify for such treatment, we included income and expenses on these transactions elsewhere in our income statement;

• We have stated average balance on a gross basis, before netting our allowances for credit losses, except for the total average asset figures, which reflect such netting. See Note 2(l) to our consolidated financial statements for a discussion of our accounting policies for hedging activities; and

• All average data have been calculated using month-end balances.

As stated above under “Item 4. Information on the Company – A. History and development of the company –Principal Capital Expenditures and Divestitures – Acquisitions, Dispositions and Divestitures”, on November 12, 2004, we completed the acquisition of Abbey. For consolidation purposes, Abbey´s assets and liabilities were consolidated into our balance sheet as of December 31, 2004, but Abbey’s results of operations had no impact on our income statement for 2004.

Average balance sheet information set forth in the following tables for the year ended December 31, 2004 includes the consolidation of Abbey line by line as of December 31, 2004 and renders such average balances incompatible to the comparable data for the year ended December 31, 2003. In order to facilitate comparison of average balances for these periods, we have provided in this report pro forma average balance sheet information for the year ended December 31, 2004 without consolidating Abbey. However, amounts reflecting the interplay of average balances with revenues or expenses including Abbey may be distorted because such revenues and expense amounts do not reflect any contribution from Abbey during the reported period.

As noted above, in order to calculate average balance sheet information, we have utilized month-end balances. Because Abbey’s assets and liabilities were consolidated into our balance sheet as of December 31, 2004, the average balances including Abbey only reflect the impact of Abbey’s balances on one of the thirteen-month period ends used in calculating such averages. Accordingly, average balances including Abbey do not reflect the impact that Abbey’s assets will have on such balances following a full year of consolidation.

27

Average Balance Sheet - Assets and Interest Income		Year Ended December 31,
		2002			2003
		Average		Average	Average
	ASSETS	Balance	Interest	Rate	Balance	Interest	Average Rate
		(in thousands of euros, except percentages)
Cash and due from central banks
	Domestic	2,411,612	52,804	2.19%	3,075,228	37,266	1.21%
	International	5,889,151	282,763	4.80%	4,596,131	258,840	5.63%
		8,300,763	335,567	4.04%	7,671,359	296,106	3.86%
Due from credit institutions (1)
	Domestic	10,476,057	361,949	3.46%	12,760,763	315,720	2.47%
	International	30,529,359	1,647,977	5.40%	25,886,472	1,062,087	4.10%
		41,005,416	2,009,926	4.90%	38,647,235	1,377,807	3.57%
Government debt securities
	Domestic	24,090,992	1,185,679	4.92%	29,809,839	1,228,723	4.12%
	International	—	—	—	—	—	—
		24,090,992	1,185,679	4.92%	29,809,839	1,228,723	4.12%
Debentures and other fixed-income securities
	Domestic	2,460,418	95,873	3.90%	3,404,886	100,830	2.96%
	International	35,767,099	3,799,572	10.62%	32,132,708	2,084,048	6.49%
		38,227,517	3,895,445	10.19%	35,537,594	2,184,878	6.15%
Loans and credits (1)
	Domestic	89,369,388	4,793,146	5.36%	100,009,531	4,551,898	4.55%
	International	84,570,422	8,117,866	9.60%	72,349,184	5,785,164	8.00%
		173,939,810	12,911,012	7.42%	172,358,715	10,337,062	6.00%
Income from hedging operations (2)
	Domestic		594,701			437,209
	International		1,779,008			1,341,955
			2,373,709			1,779,164
Total interest-earning assets
	Domestic	128,808,467	7,084,152	5.50%	149,060,247	6,671,646	4.48%
	International	156,756,031	15,627,186	9.97%	134,964,495	10,532,094	7.80%
		285,564,498	22,711,338	7.95%	284,024,742	17,203,740	6.06%
Equity securities (3)
	Domestic	5,991,506	278,564	4.65%	7,085,648	310,074	4.38%
	International	9,260,868	194,608	2.10%	7,730,451	131,419	1.70%
		15,252,374	473,172	3.10%	14,816,099	441,493	2.98%
Total earning assets
	Domestic	134,799,973	7,362,716	5.46%	156,145,895	6,981,720	4.47%
	International	166,016,899	15,821,794	9.53%	142,694,946	10,663,513	7.47%
		300,816,872	23,184,510	7.71%	298,840,841	17,645,233	5.90%
Allowance for credit-losses		(5,461,576)			(5,019,135)
Premises and equipment		5,623,939			4,583,335
Other assets		44,517,050			40,596,589
Total average assets		345,496,285	23,184,510	6.71%	339,001,630	17,645,233	5.21%

(1)	Includes securites purchased under agreements to resell.
(2)	Includes income from instruments to hedge interest-rate transactions.
(3)	Includes both portfolio investments in equity securities and investments in Group and non-Group companies. Amounts shown as "interest" consist of dividends received. Includes dividends from companies accounted for by the equity method of €353,111 and €309,506 thousands for 2002 and 2003, respectively. See notes 1 and 2 to the table under "Selected Consolidated Financial information”.

28

Average Balance Sheet - Liabilities and Interest Expense		Year Ended December 31,
		2002			2003
		Average		Average	Average		Average
LIABILITY AND STOCKHOLDERS’ EQUITY		Balance	Interest	Rate	Balance	Interest	Rate
		(in thousands of euros, except percentages)
Due to credit institutions (1)
	Domestic	13,330,719	515,280	3.87%	20,123,870	451,448	2.24%
	International	39,131,519	2,108,169	5.39%	41,598,221	1,516,954	3.65%
		52,462,238	2,623,449	5.00%	61,722,091	1,968,402	3.19%
Customers deposits (1)
	Domestic	86,394,424	1,831,733	2.12%	90,777,806	1,522,022	1.68%
	International	86,720,080	4,376,851	5.05%	72,815,172	2,793,579	3.84%
		173,114,504	6,208,584	3.59%	163,592,978	4,315,601	2.64%
Marketable debt securities
	Domestic	6,377,473	359,069	5.63%	12,825,157	541,583	4.22%
	International	30,858,198	1,284,196	4.16%	24,062,569	799,861	3.32%
		37,235,671	1,643,265	4.41%	36,887,726	1,341,444	3.64%
Subordinated debt
	Domestic	1,565,835	69,766	4.46%	1,361,897	51,351	3.77%
	International	11,634,141	666,598	5.73%	10,505,451	627,469	5.97%
		13,199,976	736,364	5.58%	11,867,348	678,820	5.72%
Expenses from hedging operations (2)
	Domestic		228,471			—
	International		1,206,456			663,903
			1,434,927			663,903
Total interest-bearing liabilities
	Domestic	107,668,451	3,004,319	2.79%	125,088,730	2,566,404	2.05%
	International	168,343,938	9,642,270	5.73%	148,981,413	6,401,766	4.30%
		276,012,389	12,646,589	4.58%	274,070,143	8,968,170	3.27%
Other liabilities (3)		42,331,983	1,179,266		38,749,780	718,726
Minority interest		7,139,799			6,602,448
Stockholders' Equity (4)		20,012,114			19,579,259
Total average Liabilities and Stockholders´ Equity		345,496,285	13,825,855	4.00%	339,001,630	9,686,896	2.86%

(1)	Includes securites sold under agreements to repurchase.
(2)	Includes expenses from instruments to hedge interest-rate transactions.
(3)	Includes interest allocated to Santander Group pension plans.
(4)	For calculation of the ROE ratio and the average stockholders' equity as a percentage of average total assets ratio, the amount of average stockholders' equity considered was €18,097,996 thousand and €18,035,039 thousand for the years 2002 and 2003, respectively. The main difference is the effect of net attributable income on average stockholders' equity.

29

Average Balance Sheet - Assets and Interest Income
	Year Ended December 31,
	2004 pro forma (without consolidating Abbey)			2004
			Average	Average
ASSETS	Average Balance	Interest	Rate	Balance	Interest	Average Rate
	(in thousands of euros, except percentages)
Cash and due from central banks
Domestic	3,175,170	35,957	1.13%	3,175,170	35,957	1.13%
International	4,869,259	200,573	4.12%	4,921,583	200,573	4.08%
	8,044,429	236,530	2.94%	8,096,753	236,530	2.92%
Due from credit institutions (1)
Domestic	10,036,215	285,646	2.85%	10,036,215	285,646	2.85%
International	27,293,580	802,234	2.94%	28,276,763	802,234	2.84%
	37,329,795	1,087,880	2.91%	38,312,978	1,087,880	2.84%
Government debt securities
Domestic	21,431,620	802,710	3.75%	21,470,684	802,710	3.74%
International	—	—	—	—	—	—
	21,431,620	802,710	3.75%	21,470,684	802,710	3.74%
Debentures and other fixed-income securities
Domestic	6,301,330	161,282	2.56%	6,301,330	161,282	2.56%
International	39,881,802	2,692,647	6.75%	42,518,847	2,692,647	6.33%
	46,183,132	2,853,929	6.18%	48,820,177	2,853,929	5.85%
Loans and credits (1)
Domestic	118,107,245	4,693,142	3.97%	118,107,245	4,693,142	3.97%
International	73,816,529	5,951,140	8.06%	84,409,634	5,951,140	7.05%
	191,923,774	10,644,282	5.55%	202,516,879	10,644,282	5.26%
Income from hedging operations (2)
Domestic		421,085			421,085
International		2,057,419			2,057,419
		2,478,504			2,478,504
Total interest-earning assets
Domestic	159,051,580	6,399,822	4.02%	159,090,644	6,399,822	4.02%
International	145,861,170	11,704,013	8.02%	160,126,827	11,704,013	7.31%
	304,912,750	18,103,835	5.94%	319,217,471	18,103,835	5.67%
Equity securities (3)
Domestic	8,131,926	456,645	5.62%	8,131,926	456,645	5.62%
International	8,517,192	190,801	2.24%	7,995,224	190,801	2.39%
	16,649,118	647,446	3.89%	16,127,150	647,446	4.01%
Total earning assets
Domestic	167,183,506	6,856,467	4.10%	167,222,570	6,856,467	4.10%
International	154,378,362	11,894,814	7.70%	168,122,051	11,894,814	7.08%
	321,561,868	18,751,281	5.83%	335,344,621	18,751,281	5.59%
Allowance for credit-losses	(5,316,444)			(5,394,395)
Premises and equipment	4,617,844			4,884,258
Other assets	38,149,028			39,266,043
Total average assets	359,012,296	18,751,281	5.22%	374,100,527	18,751,281	5.01

(1)	Includes securites purchased under agreements to resell.
(2)	Includes income from instruments to hedge interest-rate transactions.
(3)	Includes both portfolio investments in equity securities and investments in Group and non-Group companies. Amounts shown as "interest" consist of dividends received. Includes dividends from companies accounted for by the equity method of €365,497 thousands for 2004 . See notes 1 and 2 to the table under "Selected Consolidated Financial information”.

30

Average Balance Sheet - Liabilities and Interest Expense
	Year Ended December 31,
	2004 pro forma (without consolidating Abbey)				2004
	Average			Average	Average			Average
LIABILITY AND STOCKHOLDERS’ EQUITY	Balance	Interest		Rate	Balance	Interest		Rate
	(in thousands of euros, except percentages)
Due to credit institutions (1)
Domestic	19,573,355	446,093		2.28%	19,573,355	446,093		2.28%
International	45,385,388	1,723,629		3.80%	47,367,944	1,723,629		3.64%
	64,958,743	2,169,722		3.34%	66,941,299	2,169,722		3.24%
Customers deposits (1)
Domestic	93,505,004	1,379,671		1.48%	93,505,004	1,379,671		1.48%
International	75,340,017	2,370,827		3.15%	84,571,056	2,370,827		2.80%
	168,845,021	3,750,498		2.22%	178,076,060	3,750,498		2.11%
Marketable debt securities
Domestic	25,840,973	897,073		3.47%	25,840,973	897,073		3.47%
International	21,801,330	859,499		3.94%	24,153,215	859,499		3.56%
	47,642,303	1,756,572		3.69%	49,994,188	1,756,572		3.51%
Subordinated debt
Domestic	1,949,950	113,490		5.82%	1,949,950	113,490		5.82%
International	9,932,809	572,253		5.76%	10,495,767	572,253		5.45%
	11,882,759	685,743		5.77%	12,445,717	685,743		5.51%
Expenses from hedging operations (2)
Domestic		(407,910	)			(407,910	)
International		1,414,837				1,414,837
		1,006,927				1,006,927
Total interest-bearing liabilities
Domestic	140,869,282	2,428,417		1.72%	140,869,282	2,428,417		1.72%
International	152,459,544	6,941,045		4.55%	166,587,982	6,941,045		4.17%
	293,328,826	9,369,462		3.19%	307,457,264	9,369,462		3.05%
Other liabilities (3)	32,733,978	746,107			33,496,364	746,107
Minority interest	5,864,700				6,062,107
Stockholders' Equity (4)	27,084,792				27,084,792
Total average Liabilities and Stockholders´ Equity	359,012,296	10,115,569		2.82%	374,100,527	10,115,569		2.70%

(1)	Includes securites sold under agreements to repurchase.
(2)	Includes expenses from instruments to hedge interest-rate transactions.
(3)	Includes interest allocated to Santander Group pension plans.
(4)	For calculation of the ROE ratio and the average stockholders' equity as a percentage of average total assets ratio, the amount of average stockholders' equity considered was €19,627,482 thousand for the year 2004. The main difference is the effect of net attributable income on average stockholders' equity.

31

Changes in Net Interest Income—Volume and Rate Analysis

The following tables allocate, by domicile of customer, changes in our net interest income between changes in average volume and changes in average rate for 2003 compared to 2002 and 2004 compared to 2003. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in the preceding sub-section entitled “Average Balance Sheets and Interest Rates”, and the footnotes thereto.

							2004 (pro forma without
	2003/2002						consolidating Abbey)/2003						2004/2003
	Increase (Decrease) due to changes in						Increase (Decrease) due to changes in						Increase (Decrease) due to changes in
	Volume		Rate		Net change		Volume		Rate		Net change		Volume		Rate		Net change
Interest income (1)	(in thousands of euros)
Cash and due from central banks
Domestic	8,096		(23,634	)	(15,538	)	1,151		(2,460	)	(1,309	)	1,151		(2,460	)	(1,309	)
International	(72,803	)	48,880		(23,923	)	11,135		(69,402	)	(58,267	)	12,973		(71,240	)	(58,267	)
	(64,707	)	25,246		(39,461	)	12,286		(71,862	)	(59,576	)	14,124		(73,700	)	(59,576	)
Due from credit institutions
Domestic	57,484		(103,713)		(46,229)		(78,565)		48,491		(30,074)		(78,565)		48,491		(30,074)
International	(189,008	)	(396,882	)	(585,890	)	40,430		(300,283	)	(259,853	)	66,317		(326,170	)	(259,853	)
	(131,524	)	(500,595	)	(632,119	)	(38,135	)	(251,792)	)	(289,927	)	(12,248	)	(277,679	)	(289,927	)
Government debt securities
Domestic	235,772		(192,728	)	43,044		(315,717	)	(110,296	)	(426,013	)	(312,736	)	(113,277	)	(426,013	)
International	—		—		—		—		—		—		—		—		—
	235,772		(192,728	)	43,044		(315,717	)	(110,296	)	(426,013	)	(312,736	)	(113,277	)	(426,013	)
Debentures and other fixed-income securities
Domestic	28,085		(23,128	)	4,957		74,072		(13,620	)	60,452		74,072		(13,620	)	60,452
International	(238,343	)	(1,477,181	)	(1,715,524	)	525,054		83,545		608,599		660,011		(51,412)		608,599
	(210,258	)	(1,500,309	)	(1,710,567	)	599,126		69,925		669,051		734,083		(65,032	)	669,051
Loans and credits (1)
Domestic	482,644		(723,892)		(241,248	)	721,299		(580,055	)	141,244		721,299		(580,055	)	141,244
International	(979,575	)	(1,353,127	)	(2,332,702	)	122,566		43,410		165,976		853,293		(687,317	)	165,976
	(496,931	)	(2,077,019	)	(2,573,950	)	843,8		(536,645	)	307,220		1,574,592		(1,267,372	)	307,220
Total interest-earning assets
Domestic	812,081		(1,067,095	)	(255,014	)	402,240		(657,940	)	(255,700	)	405,221		(660,921	)	(255,700	)
International	(1,479,729	)	(3,178,310	)	(4,658,039	)	699,185		(242,730	)	456,455		1,592,594		(1,136,139	)	456,455
	(667,648	)	(4,245,405	)	(4,913,053	)	1,101,425		(900,670	)	200,755		1,997,815		(1,797,060	)	200,755
Equity securities
Domestic	47,687		(16,177	)	31,510		58,709		87,862		146,571		58,709		87,862		146,571
International	(26,146)		(37,043	)	(63,189	)	17,638		41,744		59,382		6,042		53,340		59,382
	21,541		(53,220	)	(31,679	)	76,347		129,606		205,953		64,751		141,202		205,953
Total earning assets
Domestic	859,768		(1,083,272	)	(223,504	)	460,949		(570,078	)	(109,129	)	463,930		(573,059	)	(109,129	)
International	(1,505,875	)	(3,215,353	)	(4,721,228	)	716,823		(200,986	)	515,837		1,598,636		(1,082,799	)	515,837
	(646,107	)	(4,298,625	)	(4,944,732	)	1,177,772		(771,064	)	406,708		2,062,566		(1,655,858	)	406,708

(1) Without interest income or interest expense from interest-rate hedging transactions.

32

	2003/2002						2004 (pro forma without consolidating Abbey)/2003						2004/2003
	Increase (Decrease) due to changes in						Increase (Decrease) due to changes in						Increase (Decrease) due to changes in
	Volume		Rate		Net change		Volume		Rate		Net change		Volume		Rate		Net change
	(in thousands of euros)
Interest expenses (1)
Due to credit institutions
Domestic	153,459		(217,291	)	(63,832	)	(13,405	)	8,050		(5,355	)	(13,405	)	8,050		(5,355	)
International	89,673		(680,888	)	(591,215	)	144,278		62,397		206,675		210,835		(4,160	)	206,675
	243,132		(898,179	)	(655,047	)	130,873		70,447		201,320		197,430		3,890		201,320
Customers deposits
Domestic	70,424		(380,135	)	(309,711		39,205		(181,556	)	(142,351	)	39,205		(181,556	)	(142,351	)
International	(533,959)		(1,049,313	)	(1,583,272	)	79,673		(502,425	)	(422,752	)	334,526		(757,278	)	(422,752	)
	(463,535	)	(1,429,448	)	(1,892,983	)	118,878		(683,981	)	(565,103	)	373,731		(938,834	)	(565,103	)
Marketable debt securities
Domestic	272,436		(89,922	)	182,514		451,679		(96,189	)	355,490		451,679		(96,189	)	355,490
International	(225,126	)	(259,209	)	(484,335	)	(89,550	)	149,188		59,638		1,888		57,750		59,638
	47,310		(349,131	)	(301,821	)	362,129		52,999		415,128		453,567		(38,439	)	415,128
Subordinated debt
Domestic	(7,611	)	(10,804	)	(18,415	)	34,220		27,919		62,139		34,220		27,919		62,139
International	(67,051	)	27,922		(39,129	)	(33,155	)	(22,061	)	(55,216	)	(588	)	(54,628	)	(55,216	)
	(74,662	)	17,118		(57,544	)	1,065		5,858		6,923		33,632		(26,709	)	6,923
Total interest-bearing liabilities
Domestic	488,708		(698,152	)	(209,444	)	511,699		(241,776	)	269,923		511,699		(241,776	)	269,923
International	(736,463	)	(1,961,488	)	(2,697,951	)	101,246		(312,901	)	(211,655	)	546,661		(758,316	)	(211,655	)
	(247,755	)	(2,659,640	)	(2,907,395	)	612,945		(554,677	)	58,268		1,058,360		(1,000,092	)	58,268

(1) Without interest income or interest expense from interest-rate hedging transactions.

33

Assets

     Earning Assets—Yield Spread

The following table analyzes, by domicile of customer, our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the years indicated. You should read this table and the footnotes thereto in light of our observations noted in the preceding subsection entitled “Average Balance Sheets and Interest Rates”, and the footnotes thereto.

	Year Ended December 31,
					2004 pro forma
					(without
					consolidating
	2002		2003		Abbey)		2004
	(in thousands of euros except percentages)
Average earning assets
Domestic	134,799,973		156,145,895		167,183,506		167,222,570
International	166,016,899		142,694,946		154,378,362		168,122,051
	300,816,872		298,840,841		321,561,868		335,344,621
Interest and dividends on equity securities (1)
Domestic	7,362,716		6,981,720		6,856,467		6,856,467
International	15,821,794		10,663,513		11,894,814		11,894,814
	23,184,510		17,645,233		18,751,281		18,751,281
Net interest income
Domestic	4,001,233		3,985,021		4,028,794		4,028,794
International	5,357,422		3,973,316		4,606,918		4,606,918
	9,358,655		7,958,337		8,635,712		8,635,712
Gross yield (2)
Domestic	5.46	%	4.47	%	4.10	%	4.10	%
International	9.53	%	7.47	%	7.70	%	7.08	%
	7.71	%	5.90	%	5.83	%	5.59	%
Net yield (3)
Domestic	2.97	%	2.55	%	2.41	%	2.41	%
International	3.23	%	2.78	%	2.98	%	2.74	%
	3.11	%	2.66	%	2.69	%	2.58	%
Yield spread (4)
Domestic	2.67	%	2.42	%	2.38	%	2.38	%
International	3.80	%	3.17	%	3.15	%	2.91	%
	3.13	%	2.63	%	2.64	%	2.54	%
Net interest margin (3)
Domestic	2.89	%	2.47	%	2.25	%	2.25	%
International	3.29	%	2.85	%	3.03	%	2.76	%
	3.11	%	2.65	%	2.62	%	2.50	%

(1)	Dividends on equity securities include dividends from companies accounted for by the equity method. See note 1 to the table under “Selected Consolidated Financial Information”.
(2)	Gross yield is the quotient of interest and dividends on equity securities divided by average earning assets.
(3)	Net yield is the quotient of net interest income (that includes dividends on equity securities) divided by average earning assets. Net interest margin is calculated in the same way as net yield but excludes dividends from income and equity securities from average earning assets.
(4)	Yield spread is the difference between gross yield on earning assets and the average cost of interest-bearing liabilities. For a discussion of the changes in yield spread over the periods presented, see “Item 5. Operating and Financial Review and Prospects – Net Interest Income”.

34

Return on Equity and Assets

The following table presents our selected financial ratios (excluding the effects of the Abbey acquisition, except where indicated) for the years indicated.

	Year Ended December 31,
	2002		2003		2004
Return on average total assets	0.81	%	0.95	%	1.02	%
Return on average stockholders’ equity (1)	12.42	%	14.48	%	15.98	%
Dividends per average share as a percentage of net attributable income per average share (1)	61.21	%	55.32	%	58.59	%
Average stockholders’ equity as a percentage of average total assets (1)	5.24	%	5.32	%	5.47	%

(1) Calculated including the capital increase made as a result of the Abbey acquisition.

Interest-Earning Assets

The following table shows, by domicile of customer, the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in the preceding sub-section entitled “Average Balance Sheets and Interest Rates”, and the footnotes thereto.

	Year Ended December 31,
					2004 pro forma
					(without
					consolidating
	2002		2003		Abbey)		2004
Cash and due from Central Banks
Domestic	0.83	%	1.09	%	1.04	%	1.00	%
International	2.06	%	1.62	%	1.60	%	1.54	%
	2.89	%	2.71	%	2.64	%	2.54	%
Due from credit institutions
Domestic	3.67	%	4.49	%	3.29	%	3.14	%
International	10.69	%	9.11	%	8.95	%	8.86	%
	14.36	%	13.60	%	12.24	%	12.00	%
Government debt securities
Domestic	8.44	%	10.50	%	7.03	%	6.73	%
International	—		—		—		—
	8.44	%	10.50	%	7.03	%	6.73	%
Debentures and other fixed-income securities
Domestic	0.86	%	1.20	%	2.07	%	1.97	%
International	12.53	%	11.31	%	13.08	%	13.32	%
	13.39	%	12.51	%	15.15	%	15.29	%
Loans and credits
Domestic	31.30	%	35.21	%	38.73	%	37.00	%
International	29.62	%	25.47	%	24.21	%	26.44	%
	60.92	%	60.68	%	62.94	%	63.44	%
Total interest-earning assets
Domestic	45.10	%	52.49	%	52.16	%	49.84	%
International	54.90	%	47.51	%	47.84	%	50.16	%
	100.00	%	100.00	%	100.00	%	100.00	%

35

Due from Credit Institutions

The following table shows our short-term funds deposited with other banks at each of the dates indicated.

					At December 31,
	2000		2001		2002		2003		2004 (2)
Demand deposits-	(in thousands of euros)
Current accounts	164,292		215,667		105,816		103,734		117,752
Other accounts	5,422,830		5,396,981		3,043,095		1,599,804		1,587,547
	5,587,122		5,612,648		3,148,911		1,703,538		1,705,299
Other deposits-
Deposits in credit institutions	20,540,358		20,992,205		15,865,145		14,635,787		16,872,007
Securities purchased under agreements to resell	10,916,015		16,491,544		21,332,856		21,390,247		31,041,948
	31,456,373		37,483,749		37,198,001		36,026,034		47,913,955
Less- Allowance for credit losses (1)	(279,405	)	(107,107	)	(90,522	)	(111,735	)	(49,307	)
	36,764,090		42,989,290		40,256,390		37,617,837		49,569,947

(1)	The purpose of this allowance for credit losses is to recognize the loss related to the collectibility of these balances due to transfer risk and credit risk.
	This allowance is determined, in accordance with Bank of Spain requirements, based on debt servicing, on debtor credit rating, and on the outstanding settlement and transfer risks of the country in which the debtor is located.
	The allowance for credit losses reduces the fair value of the balances included in Due from Credit Institutions after evaluating their collectibility. All estimated losses considered in the calculation of this allowance are related to claims due from non-OECD financial institutions.
(2)	Includes the effects of the Abbey acquisition.

Investment Securities

At December 31, 2004, the book value of our investment securities, including Abbey, was €112.1 billion (representing 19.5% of our total assets). These investment securities had a yield of 5.11% in 2004, compared with a yield of 4.81% earned during 2003. €16.1 billion, or 14.4%, of our investment securities consisted of Spanish Government and government agency securities, 18.5% of which consisted of Spanish Treasury bills that had a yield of 2.2% in 2004. For a discussion of how we value our investment securities, see note 2(d) to our consolidated financial statements.

36

The following table shows the book values of our investment securities by type and domicile of counterparty at each of the dates indicated.

	At December 31,
	2000		2001		2002		2003		2004 (1)
Debt securities
Domestic-	(in thousands of euros)
Spanish Government	22,758,627		24,705,072		24,988,526		31,118,523		16,123,313
Other domestic issuer:
Public authorities	215,836		89,845		216,012		275,146		200,016
Other domestic issuer	2,088,577		2,297,014		2,802,959		5,327,211		7,995,374
Total domestic	25,063,040		27,091,931		28,007,497		36,720,880		24,318,703
International-
United States:
U.S. Treasury and other U.S.
Government agencies	533,530		290,878		596,589		1,140,134		1,382,532
States and political subdivisions	2,750,093		2,095,609		2,145,256		98,306		690,969
Other securities	2,233,223		2,451,210		781,884		696,328		6,159,562
Total United States	5,516,846		4,837,697		3,523,729		1,934,768		8,233,063
Other:
Governments	28,885,159		27,750,580		19,896,934		26,542,838		27,850,778
Other securities	10,367,218		7,816,487		5,980,499		10,434,092		38,818,494
Total Other	39,252,377		35,567,067		25,877,433		36,976,930		66,669,272
Total International	44,769,223		40,404,764		29,401,162		38,911,698		74,902,335
Less- Allowance for credit losses	(198,881	)	(188,453	)	(135,552	)	(185,978	)	(180,748	)
Less- Security price fluctuation
allowance	(316,775	)	(308,957	)	(198,453	)	(61,682	)	(78,385	)
Total Debt Securities	69,316,607		66,999,285		57,074,654		75,384,918		98,961,905
Equity securities
Domestic	2,525,795		3,057,091		3,849,006		4,766,673		6,184,081
International-
United States	299,466		299,532		57,359		346,003		282,051
Other	4,242,059		4,973,928		4,530,102		5,900,207		7,397,661
Total international	4,541,525		5,273,460		4,587,461		6,246,210		7,679,712
Less-Security price fluctuation allowance	(618,406	)	(522,640	)	(569,715	)	(948,761	)	(699,770	)
Total Equity Securities	6,448,914		7,807,911		7,866,752		10,064,122		13,164,023
Total Investment Securities	75,765,521		74,807,196		64,941,406		85,449,040		112,125,928

(1) Includes the effects of the Abbey acquisition.

The following table analyzes the aggregate book value and aggregate market value of the securities of single issuers, other than the Government of the United States, that exceeded 10% of our stockholders’ equity as of December 31, 2004 (including Abbey).

	Aggregate as of December 31, 2004
	Book value	Market value
Debt securities:	(in millions of euros)
— Spanish Government	16,123.3	16,442.2
— Mexican Government	12,830.1	12,830.1
— Brazilian Government	5,319.5	5,317.7

37

The following table analyzes the maturities and weighted average yields of our debt investment securities (before allowances for credit losses and allowances for security price fluctuations) at December 31, 2004 (including Abbey). Yields on tax-exempt obligations have not been calculated on a tax-equivalent basis because we do not believe the effect of such a calculation would be material.

	At December 31, 2004
			Maturing		Maturing
	Maturing		Between		Between		Maturing
	Within		1 and		5 and		After
	1 Year		5 Years		10 Years		10 Years		Total
Debt securities	(in thousands of euros)
Domestic:
Spanish Government	6,634,243		5,652,517		3,458,559		377,994		16,123,313
Other domestic issuer:
Public authorities	78,406		102,545		14,170		4,895		200,016
Other domestic issuer	63,860		601,313		419,434		6,910,767		7,995,374
Total domestic	6,776,509		6,356,375		3,892,163		7,293,656		24,318,703
International:
United States:
U.S. Treasury and other U.S.	224,563		799,960		267,581		90,428		1,382,532
Government agencies States and political subdivisions	6,767		63,505		347,815		272,882		690,969
Other securities	2,940,807		2,213,724		294,882		710,149		6,159,562
Total United States	3,172,137		3,077,189		910,278		1,073,459		8,233,063
Other:
Governments	7,515,643		12,487,280		4,421,848		3,426,007		27,850,778
Other securities	20,281,942		6,150,788		3,197,005		9,188,759		38,818,494
Total Other	27,797,585		18,638,068		7,618,853		12,614,766		66,669,272
Total International	30,969,722		21,715,257		8,529,131		13,688,225		74,902,335
Total debt investment securities	37,746,231		28,071,632		12,421,294		20,981,881		99,221,038
Yield	4.32	%	4.97	%	5.24	%	4.36	%	4.63	%

Loan Portfolio

At December 31, 2004, our total loans and credits, including Abbey, equaled €342.2 billion (59.5% of our total assets). Net of allowances for credit losses, loans and credits equaled €335.2 billion (58.3% of our total assets). In addition to loans, we had outstanding at December 31, 2000, 2001, 2002 and 2003 and with respect to 2004 (including Abbey), €54.3 billion, €49.6 billion, €49.1 billion, €48.6 billion and €64.3 billion, respectively, of undrawn balances available to third parties.

38

Loans by Geographic Area and Type of Customer

The following table analyzes our customer loans and credits (including securities purchased under agreement to resell), by domicile and type of customer, at each of the dates indicated.

	At December 31,
	2000		2001		2002		2003		2004 (2)
Borrowers in Spain:	(in thousands of euros)
Spanish Government	4,148,853		4,249,672		4,897,118		5,487,358		4,206,564
Commercial, financial, agricultural and industrial	38,287,915		36,024,192		37,407,850		40,082,919		46,960,284
Real estate-construction	3,362,909		3,655,286		3,537,343		4,048,386		5,852,344
Real estate-mortgage	22,060,053		26,999,828		30,940,525		41,091,269		50,825,456
Installment loans to individuals	11,354,820		10,560,897		10,579,255		8,894,956		11,232,901
Lease financing	4,222,038		4,326,669		4,441,411		5,198,113		6,140,251
Other	2,389,834		3,154,829		1,969,754		4,199,954		2,749,687
Total	85,826,422		88,971,373		93,773,256		109,002,955		127,967,487
Borrowers outside Spain:
Governments	14,244,071		14,180,623		10,303,475		5,824,432		5,681,898
Banks and other Financial Institutions	1,798,427		2,526,301		726,373		1,398,685		16,619,241
Commercial and industrial	41,781,051		38,927,471		28,371,091		37,915,142		53,002,907
Other (1)	30,906,410		34,503,592		34,736,966		23,479,482		138,905,457
Total	88,729,959		90,137,987		74,137,905		68,617,741		214,209,503
Total loans and credits, gross	174,556,381		179,109,360		167,911,161		177,620,696		342,176,990
Allowance for credit losses	(5,172,184	)	(5,287,314	)	(4,938,204	)	(5,116,683	)	(6,969,263	)
Loans and credits, net of allowances	169,384,197		173,822,046		162,972,957		172,504,013		335,207,727

(1)	Of which €16.4 billion, €16.9 billion, €14.9 billion, €11.9 billion and €123.3 billion (of which €110.9 million relate to Abbey), respectively, at December 31, 2000, 2001, 2002, 2003 and 2004, are real-estate mortgages. The remaining corresponds to other types of customers, with no “loan concentration” as defined by Item III-C of Industry Guide 3.
(2)	Includes the effects of the Abbey acquisition.

At December 31, 2004, our loans and credits to unconsolidated subsidiaries and associated companies, including Abbey, amounted to €1,579.5 million (See “Item 7 —Major Shareholders and Related Party Transactions —B. Related Party Transactions”). Excluding government-related loans and credits, the largest outstanding exposure at December 31, 2004, including Abbey, was €1.4 billion (0.4% of total loans and credits, including government-related loans), and the five next largest exposures totaled €5.2 billion (1.6% of total loans, including government-related loans).

39

Maturity

The following table sets forth an analysis by maturity of our loans and credits by domicile and type of customer at December 31, 2004, (including Abbey).

	Maturity
	Less than			One to five			Over five
	one year			years			Years			Total
	Balance	% of Total		Balance	% of Total		Balance	% of Total		Balance	% of Total
	(in thousands of euros except percentages)
Loans to borrowers in Spain:
Spanish Government	2,760,346	2.82	%	557,738	0.80	%	888,480	0.51	%	4,206,564	1.23	%
Commercial, financial, agricultural and industrial	26,673,616	27.27	%	12,186,295	17.51	%	8,100,373	4.64	%	46,960,284	13.72	%
Real estate:
Construction	199,850	0.20	%	677,766	0.97	%	4,974,728	2.85	%	5,852,344	1.71	%
Mortgage	1,823,714	1.86	%	3,885,819	5.58	%	45,115,923	25.82	%	50,825,456	14.85	%
Installment loans to individuals	4,319,092	4.42	%	4,421,577	6.35	%	2,492,232	1.43	%	11,232,901	3.28	%
Lease financing	1,990,396	2.03	%	3,262,396	4.69	%	887,459	0.51	%	6,140,251	1.79	%
Other	1,815,678	1.86	%	807,212	1.16	%	126,797	0.07	%	2,749,687	0.80	%
Total borrowers in Spain	39,582,692	40.47	%	25,798,803	37.06	%	62,585,992	35.81	%	127,967,487	37.40	%
Loans to borrowers outside Spain
Governments	724,346	0.74	%	3,150,495	4.53	%	1,807,057	1.03	%	5,681,898	1.66	%
Banks and Other Financial Institutions	16,415,319	16.78	%	161,851	0.23	%	42,071	0.02	%	16,619,241	4.86	%
Commercial and Industrial	26,387,872	26.98	%	19,992,510	28.72	%	6,622,525	3.79	%	53,002,907	15.49	%
Other	14,701,475	15.03	%	20,502,187	29.45	%	103,701,795	59.34	%	138,905,457	40.59	%
Total loans to borrowers outside Spain	58,229,012	59.53	%	43,807,043	62.94	%	112,173,448	64.19	%	214,209,503	62.60	%
Total loans and credits, gross	97,811,704	100.00	%	69,605,846	100.00	%	174,759,440	100.00	%	342,176,990	100.00	%

Fixed and Variable Rate Loans

The following table sets forth a breakdown of our fixed and variable rate loans having a maturity of more than one year at December 31, 2004 (including Abbey).

	Loans having a maturity of more than one year
	Domestic	International	Total
	(in thousands of euros)
Fixed rate	13,013,550	61,394,346	74,407,896
Variable rate	75,371,245	94,586,145	169,957,390
Total	88,384,795	155,980,491	244,365,286

40

     Cross-Border Outstandings

The following table sets forth, as of the end of the years indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked) where outstandings in the borrower’s country exceeded 0.75% of our total assets. Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the vast majority of the loans by Abbey or our Latin American subsidiaries.

	2002			2003			2004 (4)
	(in thousands of euros except percentages)
		% of			% of			% of
		total			total			total
		assets			assets			assets
Cross-Border Outstandings
OECD Countries: (1)
United States	10,802,705	3.33	%	8,646,986	2.46	%	12,021,223	2.09	%
Ireland	657,024	0.20	%	2,012,356	0.57	%	7,989,843	1.39	%
United Kingdom	9,265,837	2.86	%	6,734,066	1.91	%	5,411,129	0.94	%
Germany	3,554,893	1.10	%	8,025,373	2.28	%	2,449,377	0.43	%
France	2,003,996	0.62	%	4,604,918	1.31	%	1,982,782	0.34	%
Belgium	2,952,469	0.91	%	2,325,858	0.66	%	1,441,845	0.25	%
Italy	1,956,552	0.60	%	2,769,619	0.79	%	1,171,670	0.20	%
Other OECD Countries (2)	4,821,475	1.49	%	4,415,739	1.26	%	1,838,019	0.32	%
Total OECD	36,014,951	11.11	%	39,534,915	11.24	%	34,305,888	5.96	%
Non-OECD Countries
Latin American Countries (2) (3)	5,136,842	1.58	%	5,803,880	1.65	%	4,310,301	0.75	%
Other (2)	4,295,150	1.32	%	3,815,278	1.08	%	3,982,155	0.69	%
Total Non-OECD	9,431,992	2.91	%	9,619,158	2.73	%	8,292,456	1.44	%
Total	45,446,943	14.02	%	49,154,073	13.97	%	42,598,344	7.40	%

(1)	The Organization for Economic Cooperation and Development.
(2)	Aggregate outstandings in any single country in this category do not exceed 0.75% of our total assets.
(3)	With regards to these cross-border outstandings, at December 31, 2002, 2003 and 2004, we had allowances for country-risk equal to €337.5 million, €404.9 million and €265.1 million, respectively. Such allowances for country-risk exceeded the Bank of Spain’s minimum requirements at such dates.
(4)	Includes the effects of the Abbey acquisition.

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The following table sets forth the amounts of our cross-border outstandings as of December 31 of each year by type of borrower where outstandings in the borrower’s country exceeded 0.75% of total assets.

	Governments	Banks and other Financial Institutions	Commercial and Industrial	Total
	(in thousands of euros)
2002
United States	2,749,923	3,235,826	4,816,956	10,802,705
United Kingdom	6,409	8,922,551	336,877	9,265,837
Germany	123,401	3,197,076	234,416	3,554,893
Belgium	3,382	2,895,588	53,500	2,952,469
Total	2,883,115	18,251,041	5,441,749	26,575,904
2003
United States	349,739	4,407,801	3,889,446	8,646,986
Germany	4,820,845	2,868,810	335,718	8,025,373
United Kingdom	14,751	5,191,399	1,527,916	6,734,066
France	2,612,000	1,619,706	373,212	4,604,918
Italy	2,245,866	345,008	178,745	2,769,619
Total	10,043,201	14,432,724	6,305,037	30,780,962
2004 (including Abbey)
United States	26,902	11,481,187	513,134	12,021,223
Ireland	—	30,915	7,958,928	7,989,843
United Kingdom	12,558	4,990,900	407,671	5,411,129
Total	39,460	16,503,002	8,879,733	25,422,195

Classified Assets

In the following pages, we describe Bank of Spain requirements for classification of non-performing assets and credit loss recognition. Unlike under U.S. GAAP, Spanish GAAP establishes a credit loss recognition process that is independent of the process for balance sheet classification and removal of impaired loans from the balance sheet. In Note 28 to our consolidated financial statements, we include a summary of significant valuation and income recognition differences under Spanish and U.S. GAAP and a net income and stockholders’ equity reconciliation.

The description below sets forth the minimum requirements that are followed and applied by all of our Group’s subsidiaries. Nevertheless, if the regulatory authority of the country where a particular subsidiary is located imposes stricter or more conservative requirements, the more strict or conservative requirements are followed.

     Bank of Spain Classification Requirements

Non-Performing Assets

Non-Performing Past-Due Assets. The Bank of Spain requires Spanish banks to classify as non-performing certain amounts of any loan, fixed-income security, guarantee and certain other extensions of credit on which any payment of principal or interest is 90 days or more past due (“non-performing past-due assets”). Banks must classify as non-performing the portion of any principal of or accrued interest on such asset that is 90 days or more past due until (1) this amount is more than 25% of the outstanding balance of the asset or (2) any installment of principal or interest is 12 months or more past due (6 months in case of loans to individuals not for purposes of financing business activities). When either of these conditions is met, banks must classify the entire outstanding principal of and accrued interest on the asset as non-performing. Accordingly, prior to the time that one of these conditions is met, a loan may be classified as non-performing with respect to a portion of its outstanding principal and interest, but performing with respect to the remainder of its principal and interest.

In relation to the aggregate risk exposure (including off-balance sheet risks) to a single obligor, if the amount of non-performing balances exceeds 25% of the total outstanding risks (excluding non-accrued interest on loans to such borrower), then the bank must classify all outstanding risks to such borrower as non-performing.

Once any portion of a loan is classified as non-performing, the entire loan is placed on a non-accrual status. Accordingly, even the portion of any such a loan which may still be identified as performing will be recorded on non-accrual status.

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Other Non-Performing Assets. The Bank of Spain requires Spanish banks to classify any loan, fixed-income security, guarantee and certain other extensions of credit as non-performing if it has a reasonable doubt that the extension of credit will be collected (“other non-performing assets”), even if any past due payments have been outstanding for less than 90 days or the asset is otherwise performing. When a bank classifies an asset as non-performing on this basis, it must classify the entire principal amount of the asset as non-performing. The Bank of Spain also requires Spanish banks to classify as non-performing the entire outstanding principal of and accrued interest on any extension of credit to category 5 (very doubtful) countries or residents of category 5 countries to the extent it is not otherwise classified as non-performing. See “Country - -Risk Outstandings”.

Once any of such assets is classified as non-performing, it is placed on a non-accrual status.

These classification criteria differ from U.S. GAAP requirements. For an estimation of the amounts to be classified as non-performing under U.S. GAAP, see Note 13 to the Selected Consolidated Financial Information table in this report.

Country-Risk Outstandings

The Bank of Spain requires Spanish banks to classify as country-risk outstandings all loans, fixed-income securities and other outstandings to any countries, or residents of countries, that the Bank of Spain has identified as being subject to transfer risk or sovereign risk and the remaining risks derived from the international financial activity. The Bank of Spain has established six categories for classifying such countries, as shown in the following table:

Country-Risk Categories	Description
1	Countries in which risks are negotiable in primary or secondary markets
2	Countries included in no other category
3	Countries with transitory difficulties
4	Doubtful countries
5	Very doubtful countries
6	Bankrupt countries

The Bank of Spain allows each bank to decide how to classify the listed countries within this classification scheme, subject to the Bank of Spain’s oversight. The classification is made based on criteria such as the risk global assessment according to the evolution of the balance of payments, the level of the outstanding debt and of the charges for debt services, the debt quotations in the international secondary markets and other indicators and factors of each country as well as all the criteria indicated by the Bank of Spain. It excludes from country-risk outstandings:

• any interbank obligations of branches of foreign banks in the European Economic Space and of the Spanish branches of foreign banks;

• any trade credits established by letter of credit or documentary credit with a due date of one year or less after the drawdown date;

• some cases where securities are denominated in local currency;

• risks with residents in a country regardless of the currency of denomination registered in subsidiary companies or multigroup companies in the country of residence of the holder;

• shares and stakes in companies;

• private sector risks in countries included in the monetary zone of a currency issued by a country classified in category 1; and

• negotiable financial assets purchased at market prices for placement with third parties within the framework of a portfolio separately managed for that purpose, held for less than six months by the company.

With certain requirements, it treats guaranteed outstandings as outstandings to the guarantor.

The Bank of Spain requires Spanish banks to classify outstandings to countries or residents of countries in categories 1, 2, 3 and 4 on the basis of the criteria described below under “Item 4. Information on the Company—B. Business Overview—Bank of Spain Allowances for Credit Losses and Country-Risk Requirements—Specific Provisions for Credit Losses”. The Bank of Spain requires Spanish banks to classify as non-performing any loan in category 5, and to write-off the entire outstanding principal of and accrued interest on any outstandings to countries or residents of countries in category 6 (see the subsection below in this Item 4 entitled “Bank of Spain Charge-Off Requirements”).

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     Bank of Spain Non-Accrual of Interest Requirements

The Bank of Spain requires Spanish banks to stop accruing interest on the entire principal amount of any asset that is classified as non-performing, even if only a portion of the asset is classified as non-performing, and on category 3 (transitory difficulties) and category 4 (doubtful) country-risk outstandings, whether or not they are non-performing. The banks must account for such collected interest on a cash basis, recording interest payments of the current year as interest income and interest payments of previous years as extraordinary income or recoveries of written-off assets, as appropriate.

The following table shows the amount of interest owed on non-accruing assets and the amount of such interest that was received when due and when past due:

	Year ended December 31,
	2004(2)	2003	2002
Interest owed on non-accruing assets	(in thousands of euros)
Domestic	34,941	43,909	55,611
International	182,452	204,258	288,332
Total	217,393	248,167	343,943
Interest received on non-accruing assets
Domestic	83,535	70,648	64,696
International	105,273	101,768	129,938
Total (1)	188,808	172,416	194,634

(1)	Includes interest received when due of €80.7, €80.3 and €118.8 million and interest received when past due of €108.1, €92.0 and €75.8 million for the years ended December 31, 2004, 2003 and 2002, respectively.
(2)	Excludes Abbey due to the fact that Abbey had no impact on the Group’s results of operations in 2004.

     Bank of Spain Allowances for Credit Losses and Country-Risk Requirements

Specific Allowances for Credit Losses

The specific allowance is calculated based on the loan recovery expectations and, at a minimum, by application of the coefficients stipulated in the following tables.

Non-Performing Past-Due Assets. Except for fully secured past-due mortgage assets and financial leases on certain types of properties, the Bank of Spain requires Spanish banks to set aside specific allowances for non-performing past-due assets. The amount of the required allowance is the product of the amount of the asset treated as non-performing (see “Bank of Spain Classification Requirements—Non-Performing Assets” above) times the percentages set forth in the following table. The allowance must be maintained for so long as the non-performing portion of the asset is carried as an asset on the banks’ balance sheets.

Period Overdue	Allowance
3-6 months	10	%
6-12 months	25	%
12-18 months	50	%
18-21 months	75	%
More than 21 months	100	%

Fully-Secured Non-Performing Past-Due Mortgage Assets and financial leases on certain types of properties. If a non-performing asset is a fully secured non-performing past-due mortgage or a financial lease and certain conditions are met, the amount of the required allowance is the product of the amount of such asset times the percentages set forth in the following table instead of the preceding table. Such asset must satisfy three conditions: first, the asset is secured by a mortgage or a right of ownership (in case of a financial lease) on a finished residential property; second, such mortgage or right of ownership was placed on the property at the time the extension of credit was made; and third, the outstanding risk does not exceed 80% of the appraisal value of such mortgaged or leased property.

Period Overdue	Allowance
3-4 years	25	%
4-5 years	50	%
5-6 years	75	%
More than 6 years	100	%

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The only exception to these requirements is that when a bank treats otherwise performing assets to a single borrower as non-performing because non-performing assets exceed 25% of the bank´s total exposure to the borrower as set forth in “Bank of Spain Classification Requirements—Non-Performing Past Due Assets” above, the Bank of Spain does not require the bank to carry an allowance against any asset that has no overdue principal or interest payments.

Other Non-Performing Assets. If a non-performing asset is an other non-performing asset, see “Item 4. Information on the Company—B. Business Overview—Bank of Spain Classification Requirements—Non-Performing Assets—Other Non-Performing Assets”, the amount of the required allowance will be at least 25% and up to 100% of the amounts treated as non-performing, depending on management´s opinion of the loan recovery expectations. When the treatment of such asset as a non-performing asset is due to, in management’s opinion, an inadequate financial or economical condition of the borrower, and the amount estimated as non-collectible is less than 25% of the outstanding debt, the amount of the required allowance will be at least 10% of the outstanding debt.

Exceptions. The foregoing allowance requirements do not apply to any non-performing asset (non-performing past-due assets and other non-performing assets) that is:

•      made to, or guaranteed by, any European Union country or certain other specified public entities or instrumentalities of the countries classified in category 1 of the country-risk categories;

•      an advance payment for pensions or payrolls for the following month, when paid by any European Union country and deposited at Banco Santander Central Hispano;

•      guaranteed by companies directly or indirectly majority-owned by any European Union country whose principal activity is to provide guarantees;

•      personally, jointly and unconditionally secured by a bank from any European Union country or mutual guaranty company, claimable on first demand;

•      secured under the name of the Fondo de Garantía de Depósitos; or

•      collateralized by cash or by money market and treasury funds or securities issued by the central administrations or credit entities of the countries listed in this paragraph, when the outstanding risk is 90% or less than the recovery value of the money market and treasury funds and of the market value of the securities given as collateral.

General Allowance

In addition to the Bank of Spain specific allowance requirements, the Bank of Spain requires Spanish banks to set aside a general allowance equal to the sum of:

•       1% of the sum of loans (other than certain fully secured mortgage loans, certain financial leases and certain securitized mortgage bonds) and guarantees, private sector fixed-income securities other than those included in the trading portfolio, contingent liabilities and non-performing assets exempted from the specific allowances requirements described above of resident and non-resident sectors, except Spanish public authorities and credit entities; and

•       0.5% of the sum of fully secured mortgage loans, financial leases and securitized mortgage bonds when the following conditions are met:

• first, the asset is secured by a mortgage or a ownership right on a finished residential property;

• second, such mortgage or ownership right was placed on the property at the time the extension of credit was made; and

• third, at the time the relevant portion of the asset first became non-performing, the outstanding principal of and accrued interest on the asset do not exceed 80% of the appraisal value of such mortgaged or leased property.

When calculating the general allowance for credit losses on those investments in a bond fund that ranks behind unsubordinated securities on a winding up of the fund, the bank must include an amount equal to the coverage that the bank itself would have if the bank had a direct pro-rata interest in the underlying bond portfolio. If such provision is made, the bank is not required to make any other general allowance for securities issued by the bond fund.

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Allowance for the Statistical Coverage of Credit Losses

Since July 1, 2000, the Bank of Spain has required Spanish banks to create an allowance for the statistical coverage of credit losses based on an estimation of future credit losses in the credit portfolio. This new allowance is in addition to the other allowances described above.

Spanish banks may estimate the provisions to be made to create this allowance using models based on their own credit loss experience and management’s estimation of future credit losses. In devising these models, which form a required part of a sound risk measurement and management system, management must take into consideration the quality of counterparties, the existence of guarantees or collateral, the term of the transactions and the expected evolution of the credit risk depending on medium and long term changes in the economic cycle. Furthermore, the models must use historical data covering at least a whole economic cycle and must be validated by the Bank of Spain.

As an alternative to the internal model referred to above (or as an alternative for some types of credit risk) Spanish banks may calculate the provisions to be made to create the allowance by applying to the amount of computable credit risk (loans, fixed income securities not included in the trading portfolio, contingent liabilities and non-performing assets exempted from the requirements for a specific allowance for insolvency or country-risk, and excluding risks with Spanish government entities and risks with credit institutions) in each of the categories set forth below the following coefficients:

		a)	No Risk	0%
	Assets in this category include risks described in paragraph “Exceptions” above.
		b)	Low Risk	0.1%
	Assets in this category include:
	•	assets rated “A” or better by a qualified rating agency;
	•	fully-secured mortgages and financial leases on finished residential properties when outstanding risk is less than 80% of the appraisal value of such property;
	•	securities denominated in local currency and issued by government entities in countries other than those exempted from allowance requirements, when such securities are registered in the books of the bank’s branch located in the issuer country; and
	•	assets qualified as a guaranty for monetary policy transactions in the European System of Central Banks, except those exempted from the statistical allowance requirement.
		c)	Medium-Low Risk	0.40%
Assets in this category include financial leases and mortgages and pledges on tangible assets that are not included in other categories, provided that the estimated value of the financial leases and the collateral totally covers the outstanding risk.
		d)	Medium Risk	0.60%
Assets in this category include assets on Spanish residents or residents of countries classified in categories 1 or 2, provided that such assets are not included in other categories.
		e)	Medium-High Risk	1.0%
Assets in this category include loans to individuals for the acquisition of durable consumption goods or other goods or current services not for professional use, except those registered in the “Registro de Ventas de Bienes Muebles”; and risks with residents of countries classified in categories 3 to 6, to the extent not covered by country-risk allowances.
		f)	High Risk	1.50%
Assets in this category include credit card balances; current account overdrafts and excesses in credit accounts (except those included in categories (a) and (b)), and doubtful assets not subject to a mandatory allowance not included in letter “a”).

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Contingent liabilities will be weighted using the percentages set forth in the capital regulations of the Bank of Spain.

Provisions made to meet the statistical allowance requirements are charged quarterly against income in the amount of the positive difference between one fourth of the amount of the required statistical allowance and the amount of net provisions for the other allowances for credit losses in that quarter. If the difference is negative, the amount is credited to income with a charge to the allowance, but only to the extent of the existing balance of that allowance.

Net provisions in the income statement include the provisions for the specific coverage of credit losses, plus provisions for the general and statistical coverage of credit losses, plus write-offs, less the recoveries of the specific allowance and foreclosed assets.

The amount of the allowance for the statistical coverage of credit losses, may be, at a maximum, three times the sum of the products of the amount of credit risk in each category multiplied by the risk coefficient of each such category.

Allowances for Country-Risk

The Bank of Spain requires Spanish banks to set aside an allowance for country-risk on all country-risk outstandings. See the above sub-section entitled “Bank of Spain Classification Requirements—Country-Risk Outstandings”. The amount of the required provision is the product of the amount of the outstanding loans and credits times the percentages set forth in the following table.

		Minimum percentage of coverage	Banco Santander Central Hispano’s level of coverage
		(percentage of outstanding loans within category)
Categories:
1.	Countries in which risks are negotiable in primary or secondary markets (1)	0%	0%
2.	Countries included in no other category	0%	0%
3.	Countries with transitory difficulties (2)	15%	15%
4.	Doubtful countries (2)	20%-35%	35%
5.	Very doubtful countries (2)	50%-90%	90%
6.	Bankrupt countries	written-off	written-off

(1)	This category of risk is assessed in accordance with the guidelines set forth in the September 19, 1997 EC Communication to Member States regarding credit insurance policy for short-term export (97/C/281/03).
(2)	Circular 4/1991 of the Bank of Spain provides that 50% of the coverage established for categories 3 and 4 shall be applied towards interbank credits having terms not exceeding three months, provided that the country included within such categories has fulfilled its credit related obligations, without recourse to refinancings or extensions.

Under the recent Bank of Spain guidelines, as a result of relatively recent international economic crises, and the increasing presence of Spanish banks in Latin America and Southeast Asia, we are subject to more stringent information requirements. Banks that have risks in countries that do not fall within category 1, or banks that have subsidiaries abroad, or banks in which risks or liabilities with non-residents in Spain equal at least €5 million, must now complete new information statements when presenting their accounts.

     Guarantees

The Bank of Spain requires some guarantees to be classified as non-performing in the following amounts:

•      in cases involving past-due guaranteed debt: (i) for non-financial guarantees, the amount demanded by the beneficiary and outstanding under the guarantee; and (ii) for financial guarantees, at least the amount classified as non-performing of the guaranteed risk; and

•     in all other cases, the entire amount of the guaranteed debt when the debtor has declared bankruptcy or has demonstrated serious solvency problems, even if the guaranteed beneficiary has not reclaimed payment.

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     Bank of Spain Foreclosed Assets Requirements

The Bank of Spain requires Spanish banks to carry assets acquired on foreclosure at their net value (defined as the lower of (i) the face value of the loan secured (net of any related provision for non-performing asset) and (ii) the appraised market value of the foreclosed asset), reduced by allowances (expressed as a percentage of net value), as follows: if the asset is held between three and four years —25%; between four and five years —50%; more than five years —75%. In any event, net asset value can never exceed the market value of the asset. Bank of Spain regulations allow a release of allowances to the extent that the independently appraised value of the assets acquired upon foreclosure (appraised each year subsequent to the first date on which a provision would be required) exceeds the net value of such assets, but requires that a minimum allowance be maintained at all times equal to 25% of the outstanding principal of t he underlying loan at the time of foreclosure and 100% of the outstanding interest at that time. Provisions made to this allowance are set forth as extraordinary losses in our consolidated financial statements.

     Bank of Spain Charge-off Requirements

Spanish GAAP does not permit non-performing assets to be partially charged-off.

The Bank of Spain requires Spanish banks to charge-off immediately those non-performing assets that management believes will never be repaid or that were made to category 6 (“bankrupt”) countries or residents of such category 6 countries. See the above sub-section entitled “Item 4. Information on the Company—B. Business Overview—Bank of Spain Classification Requirements—Country-Risk Outstandings”. Otherwise, the Bank of Spain requires Spanish banks to charge-off non-performing assets three years after they were classified as non-performing. Spanish banks may carry fully secured past-due mortgage loans beyond this three-year deadline for up to six years if there are objective factors that indicate an improved likelihood of recovery. Accordingly, even if allowances have been established equal to 100% of a non-performing asset (in accordance with the Bank of Spain criteria discussed above), the Spanish bank ma y maintain that non-performing asset, fully provisioned, on its balance sheet for the full three or six-year period if management believes based on objective factors that there is some possibility of recoverability of that asset. (See Note 28.1 to our consolidated financial statements for differences between Spanish and U.S. GAAP).

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     Movements in Allowances for Credit Losses

The following table analyzes movements in our allowances for credit losses and movements, by domicile of customer, for the years indicated. See “Presentation of Information”. For further discussion of movements in the allowances for credit losses, see “Item 5. Operating and Financial Review and Prospects—A.Operating Results—Net Provisions for Credit Losses”.

	Year Ended December 31,
	2000		2001		2002		2003		2004 (3)
Allowance for credit losses at beginning of year	(in thousands of euros)
Borrowers in Spain	1,204,464		1,360,253		1,771,321		1,725,606		1,681,017
Borrowers outside Spain	2,625,035		4,290,217		3,811,553		3,438,672		3,733,379
Total	3,829,499		5,650,470		5,582,874		5,164,278		5,414,396
Inclusion of acquired companies' credit loss allowances
Borrowers in Spain	(13,450	)	-		-		-		3,704
Borrowers outside Spain	2,004,393		108		9,034		-		1,076,327
Total	1,990,943		108		9,034		-		1,080,031
Loans charged-off against income (1)
Borrowers in Spain	(15,145	)	(13,258	)	(14,921	)	(12,729	)	(13,565	)
Borrowers outside Spain	(39,547	)	(40,040	)	(117,474	)	(91,110	)	(47,624	)
Total	(54,692	)	(53,298	)	(132,395	)	(103,839	)	(61,189	)
Recoveries of loans previously charged-off (1)
Borrowers in Spain	191,278		151,845		141,850		108,722		146,743
Borrowers outside Spain	186,777		341,760		251,804		248,765		261,832
Total	378,055		493,605		393,654		357,487		408,575
Net provisions for credit losses (1)
Borrowers in Spain	182,221		499,982		318,656		681,234		884,980
Borrowers outside Spain	866,124		1,086,035		1,329,536		814,453		762,671
Total	1,048,345		1,586,017		1,648,192		1,495,687		1,647,651
Charge-offs against credit loss allowance
Borrowers in Spain	(175,375	)	(205,498	)	(249,757	)	(259,366	)	(323,687	)
Borrowers outside Spain	(1,342,661	)	(1,821,549	)	(1,223,617	)	(811,719	)	(640,092	)
Total	(1,518,036	)	(2,027,047	)	(1,473,374	)	(1,071,085	)	(963,779	)
Other movements (2)	(23,644	)	(66,981	)	(863,707	)	(428,132	)	(326,367	)
Allowance for credit losses at end of year
Borrowers in Spain	1,360,253		1,771,321		1,725,606		1,681,017		3,131,433
Borrowers outside Spain	4,290,217		3,811,553		3,438,672		3,733,379		4,067,885
Total	5,650,470		5,582,874		5,164,278		5,414,396		7,199,318

(1)	We have included separate line items for charge-offs of loans not previously provided for (loans charged-off against income) and recoveries of loans previously charged-off in order to satisfy the SEC’s requirement to show all charge-offs and recoveries in this table. We have increased provisions for credit losses for purposes of this table by the amount of charge-offs of loans not previously provided for and decreased it by the amount of recoveries of loans previously provided for to produce the line item “net provisions for credit losses” in this table. This has also allowed the figures for net provisions for credit losses in this table to match the amounts recorded under “Write-offs and credit loss provisions (net)” in our Consolidated Income Statement.
(2)	The shift in “Other Movements” from 2000 to 2001, to 2002, to 2003 and to 2004 principally reflects foreign exchange differences.
(3)	Includes the effects of the Abbey acquisition.

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The table below shows a breakdown of charge-offs against income, recoveries, net provisions and charge-offs against credit loss allowance by type and domicile of borrower for the years indicated.

	Year Ended December 31,
	2000		2001		2002		2003		2004 (1)
Loans charged off against income-	(in thousands of euros)
Borrowers in Spain:
Commercial, financial, agricultural, industrial.	(6,815	)	(1,655	)	(685	)	(2,917	)	(2,147	)
Real estate-construction	(6	)	(6	)	(4	)	(3	)	(8	)
Real estate-mortgage	(337	)	(347	)	(465	)	(1,042	)	(210	)
Installment loans to individuals	(6,497	)	(222	)	(10,927	)	(7,763	)	(9,115	)
Lease finance	(1,472	)	(3,409	)	(2,491	)	(992	)	(2,085	)
Other	(18	)	(7,619	)	(349	)	(12	)	-
Total Borrowers in Spain	(15,145	)	(13,258	)	(14,921	)	(12,729	)	(13,565	)
Borrowers outside Spain
Government and official institutions	-		-		-		-		(6	)
Bank and other financial institutions	-		-		-		(2,762	)	(2	)
Commercial and industrial	(34,389	)	(36,664	)	(71,433	)	(15,384	)	(10,308	)
Other	(5,158	)	(3,376	)	(46,041	)	(72,964	)	(37,308	)
Total borrowers outside Spain	(39,547	)	(40,040	)	(117,474	)	(91,110	)	(47,624	)
Total	(54,692	)	(53,298	)	(132,395	)	(103,839	)	(61,189	)
Recoveries of loans previously charged off-
Domestic:
Commercial, financial, agricultural, industrial	69,501		23,662		58,131		47,069		60,589
Real estate-construction	9,941		2,163		478		425		2,508
Real estate-mortgage	27,184		36,695		24,847		15,164		24,995
Installment loans to individuals	61,970		33,387		38,117		35,389		44,691
Lease finance	4,243		3,884		3,981		1,644		4,082
Other	18,439		52,054		16,296		9,031		9,878
Total Borrowers in Spain	191,278		151,845		141,850		108,722		146,743
Borrowers outside Spain
Government and official institutions	-		-		-		1,766		1,973
Bank and other financial institutions	4,061		4,428		3,097		13,485		10,455
Commercial and industrial	103,356		137,396		121,316		109,577		142,442
Other	79,360		199,936		127,391		123,937		106,962
Borrowers outside Spain	186,777		341,760		251,804		248,765		261,832
Total	378,055		493,605		393,654		357,487		408,575
Net provisions for credit losses-
Domestic:
Commercial, financial, agricultural, industrial	96,385		99,362		119,155		318,538		337,044
Real estate- construction	8,600		(481	)	1,139		759		(625	)
Real estate-mortgage	39,060		4,455		17,632		18,973		46,312
Installment loans to individuals	73,702		113,771		93,545		91,799		131,000
Lease finance	12,104		28,367		19,007		36,267		25,138
Other	(47,630	)	254,508		68,178		214,898		346,111
Total Borrowers in Spain	182,221		499,982		318,656		681,234		884,980
Borrowers outside Spain
Government and official institutions	1,456		(9,628	)	(1,966	)	(3,350	)	(5,107	)
Bank and other financial institutions	20,486		(42,656	)	69,459		(19,983	)	46,262
Commercial and industrial	422,537		454,555		892,446		434,725		483,838
Other	421,645		683,764		369,597		403,061		237,678
Borrowers outside Spain	866,124		1,086,035		1,329,536		814,453		762,671
Total	1,048,345		1,586,017		1,648,192		1,495,687		1,647,651
Charge offs against credit loss allowance
Domestic:
Commercial, financial, agricultural, industrial.....	(77,177	)	(34,957	)	(112,943	)	(154,360	)	(148,734	)
Real estate-construction	(187	)	(43	)	(197	)	(811	)	(627	)
Real estate-mortgage	(7,273	)	(10,795	)	(11,506	)	(19,109	)	(34,073	)
Installment loans to individuals	(37,362	)	(32,341	)	(61,131	)	(59,334	)	(106,819	)
Lease finance	(938	)	(1,153	)	(1,085	)	(1,885	)	(2,114	)
Other	(52,438	)	(126,209	)	(62,895	)	(23,867	)	(31,320	)
Total Borrowers in Spain	(175,375	)	(205,498	)	(249,757	)	(259,366	)	(323,687	)
Borrowers outside Spain
Government and official institutions	-		-		-		(451	)	(1,603	)
Bank and other financial institutions	(24,972	)	(6,208	)	(665	)	(196,662	)	(80,208	)
Commercial and industrial	(421,661	)	(747,772	)	(384,373	)	(288,151	)	(518,629	)
Other	(896,028	)	(1,067,569	)	(838,579	)	(326,455	)	(39,652	)
Borrowers outside Spain	(1,342,661	)	(1,821,549	)	(1,223,617	)	(811,719	)	(640,092	)
Total	(1,518,036	)	(2,027,047	)	(1,473,374	)	(1,071,085	)	(963,779	)

(1) Excludes Abbey due to the fact that Abbey had no impact on Group’s results of operations for 2004.

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Allowances for Credit Losses	At December 31,
	2003	2004 (1)
	(in thousands of euros)
Borrowers in Spain:
Commercial, financial, agricultural,industrial	738,291	1,537,727
Real estate-construction.	5,673	8,158
Real estate-mortgage	187,635	212,418
Installment loans to individuals	250,750	505,884
Lease finance	57,686	108,133
Other	440,982	546,085
Total Borrowers in Spain	1,681,017	2,918,405
Borrowers outside Spain
Government and official institutions	23,688	55,523
Bank and other financial institutions	152,958	181,196
Commercial and industrial	3,131,665	3,654,409
Other	425,068	389,785
Total borrowers outside Spain	3,733,379	4,280,913
Total	5,414,396	7,199,318

(1) Includes the effects of the Abbey acquisition.

Non-Performing Assets

The following table shows our non-performing assets, excluding country-risk. We do not keep records classifying assets as non-accrual, past due, restructured or potential problem loans, as those terms are defined by the SEC. However, we have estimated the amount of our assets that would have been so classified, to the extent possible, below.

	At December 31,
	2000		2001		2002		2003		2004 (4)
Non-performing assets	(in thousands ofeuros exceptpercentages)
Past-due and other non-performing assets: (1)(2)(3)
Domestic	868,787		1,011,023		1,003,851		931,583		868,976
International	3,658,667		2,884,491		2,672,616		2,290,921		3,079,470
Total	4,527,454		3,895,514		3,676,467		3,222,504		3,948,446
Non-performing assets as a percentage of total loans	2.59	%	2.17	%	2.19	%	1.81	%	1.15	%
Net loan charge-offs as a percentage of total loans	1.12	%	0.88	%	0.72	%	0.46	%	0.18	%

(1)	The figures in this table do not reflect the entire principal amount of loans having payments 90 days or more past due unless the entire principal amount of the loan is classified as non-performing under Bank of Spain regulations as described above under “Bank of Spain Classification Requirements”. We estimate that the entire principal amount of such loans would have been €5,228.2 million, €4,150.6 million, €4,486.0 million, €3,823.4 million and €4,804.3 million at December 31, 2000, 2001, 2002, 2003 and 2004 (including Abbey with respect to 2004).
(2)	We estimate that at December 31, 2000, 2001, 2002, 2003 and 2004, (i) the total amount of our non-performing past-due assets was €3,110.8 million, €2,737.3 million, €2,208.8 million, €2,327.3 million and €3,352.2 million, respectively (including Abbey with respect to 2004), and (ii) the total amount of our other non-performing assets was €1,416.6 million, €1,158.2 million, €1,467.6 million, €895.2 million and €596.2 million, respectively (including Abbey with respect to 2004).
(3)	We estimate that the total amount of our non-performing assets fully provisioned under Spanish GAAP and which under U.S. GAAP would have been charged-off from the balance sheet was €341.8 million and €302.9 million at December 31, 2003 and 2004, respectively (including Abbey with respect to 2004).
(4)	Includes the effects of the Abbey acquisition.

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We do not believe that there is a material amount of assets not included in the foregoing table where known information about possible credit risk at December 31, 2004 (not related to transfer risk inherent in cross-border lending activities) gave rise to serious doubts as to the ability of the borrowers to comply with the loan repayment terms at such date.

   Evolution of Non-Performing Assets

The following table shows the movement in our non-performing assets (excluding country-risk, see “Country-Risk Outstandings”) from December 31, 2002 until December 31, 2004.

	Year ended December 31,				Quarter ended
	Dec-02		Dec-03		Mar-04		Jun-04		Sep-04		Dec-04 (1)
	(in thousands of euros)
Opening balance	3,895,514		3,676,467		3,222,504		2,857,904		2,871,826		2,928,346
Net additions	1,356,366		720,500		65,532		262,918		293,105		1,129,353
Write-offs	(1,575,413	)	(1,174,463	)	(430,132	)	(248,996	)	(236,585	)	(109,253	)
Closing balance	3,676,467		3,222,504		2,857,904		2,871,826		2,928,346		3,948,446

(1) Includes the effects of the Abbey acquisition.

   Non-Performing Asset Ratios

The following table shows the ratio of our non-performing assets to total computable credit risk and our coverage ratio at December 31, 2002, 2003 and 2004.

	Year Ended December 31,
	2002		2003		2004 (4)
	(in thousands of euros except percentages)
Computable credit risk (1)	194,917,391		207,979,474		375,932,747
Non-performing assets
Mortgage loans	361,076		510,265		1,273,911
Other	3,315,391		2,712,239		2,674,535
Total non performing assets	3,676,467		3,222,504		3,948,446
Allowances for non-performing assets (2)	5,144,855		5,323,127		7,289,325
Ratios
Non-performing assets to computable credit risk	1.89	%	1.55	%	1.05	%
Coverage ratio (3)	139.94	%	165.19	%	184.61	%

(1)	Computable credit risk is the sum of the face amounts of loans and credits, guarantees and documentary credits (including non-performing assets and excluding country-risk).
(2)	Including allowances for credit losses and allowances for off-balance sheet credit-risk and excluding country-risk.
(3)	Allowances for non-performing assets as a percentage of non-performing assets.
(4)	Includes the effects of the Abbey acquisition.

   Country-Risk Outstandings

The following table sets forth our country-risk outstandings with third parties for the years shown.

	Year ended December 31,
	2002		2003		2004 (1)
	(in millions of euros)
Risk (gross)	409.5		497.0		921.3
Allowances	(337.5	)	(406.0	)	(301.1	)
Risk (net)	72.0		91.0		620.2

(1) Includes the effects of the Abbey acquisition.

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     Other Non-Accruing Assets

As described above under “Item 4. Information on the Company—B. Business Overview—Bank of Spain Classification Requirements—Non-Performing Assets” and “Country-Risk Outstandings”, we do not classify our loans to borrowers in countries with transitory difficulties (category 3) and doubtful countries (category 4) as non-performing. However, as described above under “Item 4. Information on the Company — B. Business Overview —Bank of Spain Allowances for Credit Losses and Country-Risk Requirements—Allowances for Country-Risk” and “Bank of Spain Non-Accrual of Interest Requirements”, the Bank of Spain requires us to account for such loans on a cash basis (non-accruing) and to set aside certain allowances for such loans. We treat category 5 (very doubtful) country-risk outstandings as both non-accruing and non-performing. Total other non-accruing assets at December 31, 2000, 2001, 20 02, 2003 and 2004 were, €1,313.7 million, €1,172.2 million, €259.5 million, €249.7 million and €717.5 million, respectively (including Abbey, with respect to 2004).

Summary of non-accrual assets		Year ended December 31,
	2000	2001	2002	2003	2004 (1)
	(in millions of euros)
Assets classified as non-performing assets	4,527.5	3,895.5	3,676.5	3,222.5	3,948.4
Remaining balances of loans partially classified as non-performing	700.7	255.1	809.5	600.9	855.9
Other assets on non-accrual status due to country risk	1,313.7	1,172.2	259.5	249.7	717.5
Total non-accrual assets	6,541.9	5,322.8	4,745.5	4,073.1	5,521.8

(1) Includes the effects of the Abbey acquisition.

We do not have any loans past-due 90 days or more that are accruing interest, in accordance with the Bank of Spain’s requirements.

As of December 31, 2002, 2003 and 2004, the amounts of “restructured loans”, none of which were classified as non-performing, were €61.4 million, €147.6 million and €193.2 million, respectively (including Abbey, with respect to 2004).

     Foreclosed Assets

The table below sets forth movements in our foreclosed assets for the periods shown.

Movement of foreclosed assets
	Year ended Dec 31,						Quarterly movements						Total Year
	Dec-02		Dec-03		Mar-04		Jun-04		Sep-04		Dec-04 (1)		Dec-04 (1)
	(in thousands of euros, except percentages)
Opening balance	998,876		679,543		553,266		543,208		546,707		538,498		553,266
Foreclosures	174,720		256,979		75,185		73,432		47,110		132,401		328,128
Sales and other movements	(494,053	)	(383,257	)	(85,243	)	(69,933	)	(55,319	)	(125,400	)	(335,895	)
Gross foreclosed assets	679,543		553,265		543,208		546,707		538,498		545,499		545,499
Allowances established	395,406		316,164		318,803		318,766		316,726		293,128		293,128
Allowance as a percentage of foreclosed assets	58.19	%	57.15	%	58.69	%	58.31	%	58.82	%	53.74	%	53.74	%
Closing balance (net)	284,137		237,101		224,405		227,941		221,772		252,371		252,371

(1) Includes the effects of the Abbey acquisition.

Liabilities

     Deposits

The principal components of our deposits are customer demand, savings and time deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, savings and time deposits. For an analysis, by domicile of customer, of average domestic and international deposits by type for 2002, 2003 and 2004, see “Average Balance Sheets and Interest Rates—Liabilities and Interest Expense”.

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We compete actively with other commercial banks and with savings banks for domestic demand and savings deposits. Our share of customer deposits in the Spanish banking system (including Cajas de Ahorros) was 15.3% at December 31, 2004, according to figures published by the Spanish Banking Association (AEB) and the Confederación Española de Cajas de Ahorros (“CECA”). See “Item 4. Information on the Company—B. Business Overview—Competition”.

The following tables analyze our year-end deposits.

Deposits (Due to Credit institutions and Customer deposits) by type of deposits

		December 31,
	2002	2003	2004 (1)
Due to credit institutions-		(in thousands of euros)
Demand deposits	3,949,531	1,760,401	3,571,776
Other-
Securities sold under agreements to resell	18,113,588	43,404,015	33,788,503
Time deposits	28,757,600	30,415,896	47,453,526
Total to credit institutions	50,820,719	75,580,312	84,813,805
Customer deposits-
Saving deposits
Demand	67,644,766	76,613,017	145,000,185
Time	52,286,346	46,973,305	70,367,960
Other
Demand	408,544	309,402	3,820,858
Securities sold under agreement to repurchase	37,352,574	26,587,985	45,569,412
Other	10,123,526	8,851,863	29,087,282
Total to customers	167,815,756	159,335,572	293,845,697
Total deposits	218,636,475	234,915,884	378,659,502

(1) Includes the effects of the Abbey acquisition.

Deposits (Due to credit institutions and Customer deposits) by location of office

		December 31,
	2002	2003	2004 (2)
Due to credit institutions		(in thousands of euros)
Offices in Spain	27,449,380	55,918,657	30,869,222
Offices outside Spain:
Other EU countries	9,018,133	7,140,474	10,190,058
United States	4,700,903	3,660,371	2,522,883
Other OECD countries (1)	8,474	14,913	25,951,637
Central and South America (1)	9,261,477	8,572,270	14,986,738
Other	382,352	273,627	293,267
Total offices outside Spain	23,371,339	19,661,655	53,944,583
Total	50,820,719	75,580,312	84,813,805
Customer deposits
Offices in Spain	96,602,048	91,799,908	99,782,623
Offices outside Spain:
Other EU countries	23,990,299	25,040,806	147,356,167
United States	7,530,507	6,342,920	6,563,982
Other OECD countries (1)	353,469	255,490	174,730
Central and South America (1)	37,915,080	34,618,654	38,733,800
Other	1,424,353	1,277,794	1,234,395
Total offices outside Spain	71,213,708	67,535,664	194,063,074
Total	167,815,756	159,335,572	293,845,697
Total deposits	218,636,475	234,915,884	378,659,502

(1)	On this table, Mexico is classified under "Central and South America".
(2)	Includes the effects of the Abbey acquisition.

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The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of $100,000 or more for the year ended December 31, 2004 (including Abbey). Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.

	December 31, 2004
	Domestic	International	Total
	(in thousands of euros)
Under 3 months	10,337,870	24,692,795	35,030,665
3 to 6 months	2,330,611	3,255,160	5,585,771
6 to 12 months	3,559,850	2,859,482	6,419,332
Over 12 months	2,051,505	12,065,708	14,117,213
Total	18,279,836	42,873,145	61,152,981

The aggregate amount of deposits held by non-resident depositors (banks and customers) in our domestic branch network was €19.7 million, €31.9 million and €17.8 million at December 31, 2002, 2003 and 2004, respectively.

Short-term Borrowings

The following table analyzes our short-term borrowings as of December 31, 2002, 2003 and 2004.

				December 31,
	2002			2003			2004 (1)
		Avg.			Avg.			Avg.
	Amount	Rate		Amount	Rate		Amount	Rate
		(in thousands of euros except percentages)
Securities sold under agreements to repurchase
(principally Spanish Treasury notes and bills):
At December 31	55,466,162	4.37	%	69,992,000	2.85	%	76,357,915	1.51	%
Average during year	53,758,288	4.68	%	64,299,341	3.13	%	63,527,706	3.21	%
Maximum month-end balance	59,845,176	—		72,291,382	—		76,357,915	—
Other short-term borrowings:
At December 31	10,796,940	2.11	%	15,602,313	1.78	%	26,067,117	2.19	%
Average during year	17,049,689	2.46	%	13,758,824	2.04	%	15,100,092	2.24	%
Maximum month-end balance	28,359,117	—		15,745,228	—		26,067,117	—
Total short term borrowings at year-end	66,263,102	4.00	%	85,594,313	2.66	%	102,425,032	1.68	%

(1) Includes the effects of the Abbey acquisition.

Competition

We face strong competition in all of our principal areas of operation from other banks, savings banks, credit cooperatives, brokerage houses, insurance companies and other financial services firms.

Banks

Two Spanish banking groups dominate the retail banking sector in Spain. These two groups are headed by Banco Bilbao Vizcaya Argentaria, S.A. and Banco Santander Central Hispano, S.A.

At the end of December 2004, these two Spanish banking groups accounted for approximately 62.1% of loans and 63.5% of deposits of all Spanish banks, which in turn represented 30.7% of loans and 28.3% of deposits of the financial system, according to figures published by the Spanish Banking Association (AEB) and the Confederación Española de Cajas de Ahorro (“CECA”). These banking groups also hold significant investments in Spanish industry.

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Foreign banks also have a presence in the Spanish banking system as a result of liberalization measures adopted by the Bank of Spain since 1978. At December 31, 2004, there were 61 foreign banks (of which 53 were from European Union countries) with branches in Spain. In addition, there were 23 Spanish subsidiary banks of foreign banks (of which 17 were from European Union countries).

Spanish law provides that any financial institution organized and licensed in another member state of the European Union may conduct business in Spain from an office outside Spain. They do not need prior authorization from Spanish authorities to do so. Once the Bank of Spain receives notice from the institution’s home country supervisory authority about the institution’s proposed activities in Spain, the institution is automatically registered and the proposed activities are automatically authorized.

The opening of a branch of any financial institution authorized in another member state of the European Union does not need prior authorization or specific allocation of resources. The opening is subject to the reception by the Bank of Spain of a notice from the institution's home country supervisory authority containing, at least, the following information:

• Program of activities detailing the transactions to be made and the corporate structure of the branch.

• Address in Spain of the branch.

• Name and curriculum vitae of the branch's managers.

• Stockholders’ equity and liquidity ratio of the financial institution and its consolidated group.

• Detailed information about any deposit guarantee scheme that assures the protection of the branch's depositors.

Once the Bank of Spain receives the notice, it notifies the financial institution, thereby permitting the branch to be registered in the Mercantile Register and, then, in the Special Register of the Bank of Spain.

Spanish law requires prior approval by the Bank of Spain for a Spanish bank to acquire shares of a bank organized outside the European Union, create a new bank outside the European Union or open a branch outside the European Union. Spanish banks must provide prior notice to the Bank of Spain to conduct any other business outside the European Union.

When a new bank is created, the following information has to be provided to the Bank of Spain:

• amount of the investment,

• percentage of the share capital and of the total voting rights,

• name of the companies through which the investment will be made,

• draft of the by-laws,

• program of activities,

• list of partners with significant holdings; and

• detailed description of the banking, tax and money laundering regulations of the State where it will be located.

The opening of branches outside Spain requires prior application to the Bank of Spain, including information about the State where the branch will be located, the address, program of activities and names of the branch's managers. The opening of representative offices requires prior notice to the Bank of Spain detailing the activities to perform.

In addition, we face strong competition outside Spain, particularly in Argentina, Brazil, Chile, Mexico, Portugal and the United Kingdom.

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Savings Banks

Spanish savings banks (“Cajas de Ahorros”) are mutual organizations which engage in the same activities as banks, but primarily take deposits and make loans, principally to individual customers and small to medium-sized companies. The savings banks are influenced by regional and local governments. The Spanish savings banks provide strong competition for the demand and savings deposits which form an important part of our deposit base. Spanish savings banks, which traditionally were regional institutions, are permitted to open branches and offices throughout Spain. In the last few years, mergers among savings banks increased. The Spanish savings banks’ share of domestic deposits and loans were 58.8% and 50.7%, at December 31, 2004.

Credit Co-operatives

Credit co-operatives are active principally in rural areas. They provide savings and loan services including financing of agricultural machinery and supplies.

Brokerage Services

We face competition in our brokerage activities in Spain from brokerage houses of other financial institutions.

Spanish law provides that any investment services company authorized to operate in another member state of the European Union may conduct business in Spain from an office outside Spain, once the Securities National Commission (Comisión Nacional del Mercado de Valores – “CNMV”) receives notice from the institution’s home country supervisory authority about the institution’s proposed activities in Spain.

However, Spanish law provides that credit entities have access, as members, to the Spanish stock exchanges, in accordance with the provisions established by the Investment Services Directive.

We also face strong competition in our mutual funds, pension funds and insurance activities from other banks, savings banks, insurance companies and other financial services firms.

Supervision and Regulation

Bank of Spain and the European Central Bank

The Bank of Spain, which operates as Spain’s autonomous central bank, supervises all Spanish financial institutions, including us. Until January 1, 1999, the Bank of Spain was also the entity responsible for implementing Spanish monetary policy. As of that date, the start of Stage III of the European Monetary Union, the European System of Central Banks and the European Central Bank became jointly responsible for Spain’s monetary policy. The European System of Central Banks consists of the national central banks of the twenty five member states belonging to the European Union, whether they have adopted the euro or not, and the European Central Bank. The “Eurosystem” is the term used to refer to the European Central Bank and the national central banks of the member states which have adopted the euro. The European Central Bank is responsible for the monetary policy of the European Union. The Bank of Spain, as a member of the Eu ro pean System of Central Banks, takes part in the development of the European System of Central Banks’ powers including the design of the European Union’s monetary policy.

The European System of Central Banks is made up of three decision-making bodies:

•      the Governing Council, comprised of the members of the Executive Board of the European Central Bank and the governors of the national central banks of the 12 Member States which have adopted the euro;

•      the Executive Board, comprised of the President, Vice-President and four other members; and

•      the General Council of the European Central Bank, comprised of the President and Vice-President of the European Central Bank and the governors of the national central banks of the 25 European Union member states.

The Governing Council is the body in charge of formulating monetary policy for the euro area and adopting the guidelines and decisions necessary to perform the Eurosystem’s tasks. The Executive Board is the body in charge of implementing the monetary policy for the euro area laid out by the Governing Council and providing the instructions necessary to carry out monetary policy to the euro area national central banks.

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The European Central Bank has delegated the authority to issue the euro to the central banks of each country participating in Stage III. These central banks will also be in charge of executing the European Union’s monetary policy in their respective countries. The countries that have not adopted the euro will have a seat in the European System of Central Banks, but will not have a say in the monetary policy or instructions laid out by the governing council to the national central banks.

Notwithstanding the European Monetary Union, the Bank of Spain continues to be responsible for:

• maintaining, administering and managing the foreign exchange and precious metal reserves;

• promoting the stability and performance of the financial payment systems;

• rendering treasury services to the Spanish Treasury and to the regional governments, although the granting of loans or overdrafts in favor of the State, the regional governments or other bodies referred to in Section 104 of the European Union Treaty, is generally prohibited;

• rendering services related to public debt to the State and regional governments; and

• advising the government and drawing up statistics and reports on matters related to the Bank of Spain’s areas of responsibility.

The Bank of Spain has the following supervisory powers over Spanish banks, subject to applicable laws, rules and regulations issued by the Spanish Government and the Ministry of Economy and Finance:

• to conduct periodic inspections of Spanish banks to test compliance with current regulations concerning, among other matters, preparation of financial statements, account structure, credit policies and provisions and capital adequacy;

• to advise a bank’s board of directors and management when its dividend policy is deemed inconsistent with the bank’s financial results;

• to undertake extraordinary inspections of banks concerning any matters relating to their banking activities;

• to participate with, as the case may be, other authorities in appropriate cases in the imposition of penalties to banks for infringement or violation of applicable regulations; and

• to take control of credit entities and to replace directors of credit entities when a Spanish credit entity faces an exceptional situation that poses a risk to the financial status of the relevant entity.

Liquidity Ratio

European Central Bank regulations require credit institutions in each member state that participates in the European Monetary Union, like us, to place a specific percentage of their “Qualifying Liabilities” with their respective central banks in the form of interest bearing deposits as specified below (the “Liquidity Ratio”).

The European Central Bank requires the maintenance of a minimum liquidity ratio at all credit institutions established in the member states of the European Monetary Union. Branches located in the euro zone of institutions not registered in this area are also subject to this ratio, while the branches located outside the euro zone of institutions registered in the euro zone are not subject to this ratio.

“Qualifying Liabilities” are broadly defined as deposits and debt securities issued. The Liquidity Ratio is 2% over Qualifying Liabilities except in relation to deposits with stated maturity greater than two years, deposits redeemable at notice after two years, repos and debt securities with a stated maturity greater than two years, for which the ratio is 0%.

Liabilities of institutions subject to the Liquidity Ratio and liabilities of the European Central Bank and national central banks of a participating member state of the European Monetary Union are not included in the base of "Qualifying Liabilities".

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Investment Ratio

The Spanish Government has the power to require credit institutions to invest a portion of certain “Qualifying Liabilities” in certain kinds of public sector debt or public-interest financing (the “investment ratio”), and has exercised this power in the past. Although the investment ratio has been 0% since December 31, 1992, the law which authorizes it has not been abolished, and the Spanish Government could reimpose the ratio, subject to EU requirements.

Capital Adequacy Requirements

The Bank and its Spanish bank subsidiaries are subject to Spanish capital adequacy requirements that implement the European Union Capital Adequacy Directive.

The Spanish capital adequacy requirements distinguish between “basic” and “complementary” capital and require certain ratios of basic and total capital to risk-weighted assets. Basic capital generally includes ordinary shares, non-cumulative preferred securities, most reserves and generic credit allowances less holdings in other financial institutions exceeding certain thresholds, treasury stock and financing for the acquisition (by persons other than the issuer’s employees) of the issuer’s shares. Complementary capital generally includes cumulative preferred securities, revaluation and similar reserves and dated and perpetual subordinated debt.

The computation of both basic and complementary capital is subject to provisions limiting the type of stockholding and the level of control which these stockholdings grant to a banking group. The level of dated subordinated debt taken into account for the calculation of complementary capital may not exceed 50% of basic capital, the level of non-cumulative preferred securities may not exceed 30% of basic capital and the total amount of complementary capital admissible for computing total capital may not exceed the total amount of basic capital.

The consolidated total capital of a banking group calculated in the manner described above may not be less than 8% of the group’s risk-weighted assets net of specified provisions and amortizations. The calculation of total risk-weighted assets applies minimum multipliers of 0%, 10%, 20%, 50% and 100% to the group’s assets.

• The following loans receive a 0% weighting:

• loans to the Spanish Government and the Bank of Spain, the Organization for Economic Cooperation and Development and European Union countries’ governments or central banks;

• loans to governments or central banks of countries that have entered into certain special loan agreements with the International Monetary Fund (provided such countries had not renegotiated their external debt within the five years preceding the loan);

• credits against the European Union;

• credits against Spanish autonomous governmental bodies, the Spanish social security fund and certain Spanish governmental public entities, or credits expressly guaranteed by certain entities mentioned above;

• certain securitized debt related to the Spanish nuclear moratorium;

• debt securities of Spanish autonomous communities (provided such securities have been approved by the Spanish Government); and

• credits given in the debtors’ local currency against, or guaranteed by governments or central banks of such other countries not mentioned above subject to certain exceptions.

• 10% weighting is requested to mortgage securities and territorial bonds issued by credit institutions and to fixed income securities issued by credit institutions authorized in the European Union to which their home country supervisory authorities apply a 10% weighting.

• Loans to Spanish autonomous communities and local councils, to the Organization for Economic Cooperation and Development regional and local governments, to banks, savings banks and brokerage firms and to the European Investment Bank and multilateral development banks receive at least a 20% weighting.

• Residential mortgage loans receive at least a 50% weighting.

• All other loans are weighted at 100%; however, such weighting may be lower if the loan is guaranteed or secured. Off-balance-sheet assets are also included in the calculation of risk-weighted assets.

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Spanish regulations provide that, if certain requirements are met, Spanish banks may include the net credit exposure arising from certain interest rate -and foreign exchange- related derivative contracts (rather than the entire notional amount of such contracts) in their total risk-adjusted assets for purposes of calculating their capital adequacy ratios.

At December 31, 2004, our eligible capital, including Abbey, exceeded the minimum required by the Bank of Spain by approximately €11.1 billion. Our Spanish subsidiary banks were, at December 31, 2004, each in compliance with these capital adequacy requirements, and all our foreign subsidiary banks were in compliance with their local regulation.

Banks or consolidated banking groups should communicate immediately to the Bank of Spain if they fail to satisfy minimum capital requirements, and within the next month should present a plan to recover the solvency. This plan could be modified by the Bank of Spain. While the deficit persists, the payment of dividends by any of the entities of the banking group must be approved by Bank of Spain, and will be limited to a maximum of 50% of net attributable income. Payment of dividends could be forbidden if the deficit of capital is greater than 20% of the minimum capital requirements. See “Item 4. Information on the Company-B. Business Overview-Restrictions on Dividends”.

The Basel Committee on Banking Regulations and Supervisory Practices, which includes the supervisory authorities of twelve major industrial countries, has adopted an international framework (the “Basel Accord”) for capital measurement and capital standards of banking institutions. The framework provides:

• definitions for “Tier 1” capital and “Tier 2” capital;

• a system for weighting assets and off-balance sheet items according to credit risk; and

• a requirement that banks engaged in international operations maintain Tier 1 capital of at least 4% of risk- weighted assets and “total” capital (Tier 1 capital plus up to an equal amount of Tier 2 capital) of at least 8% of risk-weighted assets.

As described above, the capital adequacy of Spanish banks is regulated by European Union directives applicable to the Spanish banking system as well as to the banking systems of other European Union member states. Certain European Union member states are parties to the Basel Accord. Spain joined the Accord on February 1, 2001. Each national authority which is a party to the Basel Accord has implemented the Accord in a significantly different fashion. The capital requirements imposed by the Basel Accord are in many respects similar to those imposed by European Union directives, Spanish law and the Bank of Spain. Based purely on the capital framework itself, and making assumptions that we consider appropriate (but without including in Tier 2 capital any revaluation reserves), we estimate that, at December 31, 2004, we had (1) a total capital to risk-weighted assets ratio of 13.01%, and (2) a Tier 1 capital to risk-weighted assets ratio of 7.16%.

After continuing consultation, the Basel Committee has developed a new framework to replace the 1988 Capital Accord, which the European Union has adopted and issued as Capital Adequacy Directive Three. It is currently expected that the new Capital Accord will be implemented during 2007 and 2008, although implementation in the European Union will be dependent on the adoption of a directive amending the Banking Consolidation Directive and the Capital Adequacy Directives.

The New Accord introduces more emphasis on risk sensitivity, supervisory review and market discipline (through more extensive disclosures). The impact of the new regulation is not expected to increase the capital requirements, but will increase its volatility.

Concentration of Risk

Spanish banks may not have exposure to a single person or group in excess of 25% (20% in the case of an affiliate) of the bank’s or group’s consolidated equity. Any exposure to a person or group exceeding 10% of a bank’s or group’s consolidated equity is deemed a concentration and the total amount of exposure represented by all of such concentrations must not exceed 800% of such equity.

Legal Reserve And Other Reserves

Spanish banks are subject to legal and other restricted reserves requirements. In addition, we must allocate profits to certain other reserves as described under Note 21 to our consolidated financial statements.

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Allowances For Credit Losses And Country-Risk

For a discussion of Bank of Spain regulations relating to allowances for credit losses and country-risk, see “Item 4. Information on the Company—B.Business Overview—Selected Statistical Information—Classified Assets—Bank of Spain Classification Requirements—Non-Performing Assets” and “Country-risk Outstandings”.

Employee Pension Plans

The Bank of Spain requires Spanish banks’ pension funds to be fully funded. At December 31, 2004, our pension plans were all fully funded according to Bank of Spain requirements. See Note 2(j) to our consolidated financial statements.

Restrictions on Dividends

We may only pay dividends (including interim dividends) if such payment is in compliance with the Bank of Spain’s minimum capital requirement (described under “Item 4. Information on the Company—B. Business Overview —Capital Adequacy Requirements”) and other requirements or, as described below, under certain circumstances when we have capital that is 20% or less below the Bank of Spain’s minimum capital requirements.

If a banking group meets this capital requirement, it may dedicate all of its net profits to the payment of dividends, although in practice Spanish banks nomally consult with the Bank of Spain before declaring a dividend. Even if a banking group meets the capital requirement as a group, any consolidated Spanish credit entity that is a subsidiary that does not meet the capital requirement on its own will be subject to the limitations on dividends described below. If a banking group or any Spanish credit entity subsidiary of the group has capital that is 20% or less below the Bank of Spain’s minimum capital requirement, it must devote an amount of net profits (at least 50%) determined by the Bank of Spain to reserves, and dividends may be paid out of the remainder only with the prior approval of the Bank of Spain. If the capital is 20% or more below the minimum requirement, it may not pay any dividends and must allocate all profits to rese rv es. In the case of a banking group failing to meet the capital requirement, however, consolidated subsidiaries in the group may pay dividends without restriction, so long as they are at least 90% owned by group companies and, if they are credit entities, independently comply with the capital requirement.

If a bank has no net profits, its board of directors may propose at the general meeting of shareholders that a dividend be declared out of retained earnings. However, once the board of directors has proposed the dividend to be paid, it must submit the proposal to the Minister of Economy and Finance who, in consultation with the Bank of Spain, may in his discretion authorize or reject the proposal of the board.

Compliance with such requirements notwithstanding, the Bank of Spain is empowered to advise a bank against the payment of dividends on security and soundness grounds. If such advice is not followed, the Bank of Spain may require that notice of such advice be included in the bank’s annual report registered before the Mercantile Register. In no event may dividends be paid from certain legal reserves.

Interim dividends of any given year may not exceed the net profits for the period from the closing of the previous fiscal year to the date on which interim dividends are declared. In addition, the Bank of Spain recommends that interim dividends not exceed an amount equal to one-half of all net income from the beginning of the corresponding fiscal year. Although banks are not legally required to seek prior approval from the Bank of Spain before declaring interim dividends, the Bank of Spain has asked that banks consult with it on a voluntary basis before declaring interim dividends.

Limitations On Types Of Business

Spanish banks generally are not subject to any prohibitions on the types of businesses that they may conduct, although they are subject to certain limitations on the types of businesses they may conduct directly.

The activities that credit institutions authorized in another member state of the European Union may conduct and which benefit from the mutual recognition within the European Union are detailed in article 52 of Law 26/1988 (July 29, 1988).

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Deposit Guarantee Fund

The Deposit Guarantee Fund on Credit Institutions (“Fondo de Garantía de Depósitos”, or the “FGD”), which operates under the guidance of the Bank of Spain, guarantees in the case of our Spanish banking subsidiaries: (i) bank deposits up to €20,000 per depositor; and (ii) securities and financial instruments which have been relied to a credit institution for its deposit, register or for such other service, up to €20,000 per investor. Pursuant to regulations affecting the FGD, the FGD may purchase non-performing loans or may acquire, recapitalize and sell banks which experience difficulties.

The FGD is funded by annual contributions from member banks. The amount of such bank’s contributions is currently 0.6 per thousand (0.4 per thousand for savings banks and 0.8 per thousand for credit cooperatives) of the year-end amount of deposits to which the guarantee extends. For that purpose, the calculation basis will take into consideration the bank deposits, plus 5% of the market quotation (or nominal value or redemption value in case the securities are not traded in any secondary market) of the guaranteed securities at the end of the financial year. Nevertheless, the Minister of Economy and Finance may reduce the member bank contributions once the capital of the FGD resources exceeds its requirements, and suspend further contributions when the FGD’s funds exceed the requirement by 1% or more of the calculation basis.

At December 31, 2004, the Bank and its domestic bank subsidiaries were members of the FGD and thus were obligated to make annual contributions to it.

Data Protection

Law 15/1999, dated December 13, 1999, establishes the requirements relating to the treatment of customers’ personal data by credit entities. This law requires credit entities to notify the Spanish Data Protection Agency prior to creating files with a customer’s personal information. Furthermore, this law requires the credit entity to identify the persons who will be responsible for the files and the measures that will be taken to preserve the security of those files. The files must then be recorded in the Data Protection General Registry, once compliance with the relevant requirements has been confirmed. Credit entities that breach this law may be subject to claims by the interested parties before the Data Protection Agency. The Agency, which has investigatory and sanctioning capabilities, is the Spanish Authority responsible for the control and supervision of the enforcement of this law.

Recent Legislation

Law 44/2002 (November 22, 2002) on reform measures of the financial system, amended, among others, the Credit Entities Discipline and Intermediation Law, the Private Insurance law and the Securities Market Law. See “Item 9. The Offer and Listing – C. Markets – Spanish Securities Market – Securities Market Legislation”.

On July 4, 2003, Law 19/2003 was approved. This law is an update to Spanish exchange control and money laundering prevention provisions. See “Item 10. Additional Information – D. Exchange Controls – Restrictions on Foreign Investments”. This law also introduces an additional rule to Law 13/1985 on requirements for the issuance of preferred securities.

On July 9, 2003, Law 22/2003 was approved, which implements certain reforms to the insolvency process, compiling all the material and formal aspects of the insolvency process into a single legal instrument.

Law 26/2003 (July 17, 2003) amended the Securities Market Law 24/1988 and the Corporations Law in order to reinforce the transparency of listed companies. See “Item 9. The Offer and Listing – C. Markets – Spanish Securities Market – Securities Market Legislation”.

Law 58/2003 (December 17, 2003), the General Tax Law, became effective on July 1, 2004 and superseded existing laws regulating this matter.

Royal Legislative Decree 3/2004, consolidated all the existing legislation regarding personal income tax into a single law and abolished existing law on the subject, including Law 40/1998 which was the primary source of regulation.

Royal Legislative Decree 4/2004, consolidated all the existing legislation regarding corporate income tax into a single law and abolished existing law on the subject, including Law 43/1995 which was the primary source of regulation.

Royal Legislative Decree 5/2004, consolidated all the existing legislation regarding taxation of non-resident individuals and entities into a single law and abolished existing law on the subject, including Law 41/1998 which was the primary source of regulation.

Royal Decree 1777/2004 which further developed Royal Decree Law 4/2004 relating to corporate income tax.

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On July 30, 2004, Royal Decree 1778/2004 was approved, introducing reporting obligations for (i) preferred participations and other debt instruments and (ii) certain income generated by individuals in the European Union.

Royal Legislative Decree 6/2004, consolidated the existing legislation regarding the regulation and supervision of private insurance.

Circular 4/2004 (December 22, 2004) of the Bank of Spain to financial institutions sets standards on public and restricted information and official forms for financial statements.

Law 3/2004 (December 29, 2004) establishes measures against non-performance of commercial transactions.

Royal Decree 54/2005 modifies the regulations on prevention of money laundering, to adapt to Law 19/2003, approved by Royal Decree 925/1995, and other standards to regulate the banking, finance and insurance systems.

Royal Decree Law 5/2005 (i) amends the Securities Market Law 24/1988 in order to implement the Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading; and (ii) implements the Directive 2002/47/EC of the European Parliament and of the Council on financial collateral arrangements. See “Item 9. The Offer and Listing – C. Markets – Spanish Securities Market – Securities Market Legislation”.

Circular 1/2005 of the CNMV, which amends the official forms used to report periodic public information of the companies whose securities are traded on Spanish Stock Exchanges.

Law 6/2005 (April 22) on solvency and liquidation of credit entities.

Law 5/2005 (April 22) on supervision of financial conglomerates, amending other laws applicable to the financial sector.

Also, please see our above discussion of the New Basel Capital Accord under “Capital Adequacy Requirements”.

United Kingdom Regulation

General

By virtue of our acquisition of Abbey as well as the operation of our branch in the United Kingdom, we are subject to regulation by the Financial Services Authority in the United Kingdom. The Financial Services Authority is the single statutory regulator responsible for regulating deposit taking, mortgages, insurance and investment business pursuant to the Financial Services and Markets Act 2000. It is a criminal offense for any person to carry on any of the activities regulated under this Act in the United Kingdom by way of business unless that person is authorized by the Financial Services Authority or falls under an exemption.

The Financial Services Authority has authorized Abbey, as well as some of its subsidiaries, to carry on certain regulated activities. The regulated activities they are authorized to engage in depends upon permissions granted by the Financial Services Authority. The main permitted activities of Abbey and its subsidiaries are listed below.

Mortgages

Lending secured on land at least 40% of which is used as a dwelling by an individual borrower or relative has been regulated by the Financial Services Authority since October 31, 2004. Abbey is authorized to enter into, advise and arrange regulated mortgage contracts.

Banking

Deposit taking is a regulated activity that requires a firm to be authorized and supervised by the Financial Services Authority. Abbey has permission to carry on deposit taking as do several of its subsidiaries, including Abbey National Treasury Services plc, Cater Allen Limited and Cater Allen Premier Banking Limited.

Insurance

United Kingdom banking groups may provide insurance services through other group companies. Insurance business in the United Kingdom is divided between two main categories: long-term assurance (whole life, endowments, life insurance investment bonds) and general insurance (building and contents cover and motor insurance). Under the Financial Services and Markets Act, effecting or carrying out any contract of insurance, whether general or long-term, is a regulated activity requiring authorization. Life insurance mediation has been subject to regulation for many years. Brokering of long-term insurance (for example, critical illness) became regulated on October 31, 2004. General insurance mediation has been subject to regulation by the Financial Services Authority since January 14, 2005.

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Abbey has a number of subsidiaries which are authorized by the Financial Services Authority to effect contracts of insurance. Abbey also acts as a broker, receiving commissions for the policies arranged.

     Investment business

Investment business such as dealing in, arranging deals in, managing and giving investment advice in respect of most types of securities and other investments, including options, futures and contracts for differences (which would include interest rate and currency swaps) and long-term assurance contracts are all regulated activities under the Financial Services and Markets Act and require authorization by the Financial Services Authority.

Abbey and a number of its subsidiaries have permission to engage in a wide range of wholesale and retail investment businesses including selling certain life assurance and pension products, unit trust products and Individual Savings Accounts (tax exempt saving products) and providing certain retail equity products and services.

United States Regulation

By virtue of the operation of our branch in New York City, our agency in Miami and Banesto’s branch in New York City, as well as our ownership of a bank in Puerto Rico, we are subject to the U.S. Bank Holding Company Act of 1956, as amended, and the U.S. International Banking Act of 1978, as amended. These statutes impose limitations on the types of business conducted by us in the United States and on the location and expansion of our banking business in the United States. We are subject to supervision and regulation by the Board of Governors of the Federal Reserve System.

Monetary Policy and Exchange Controls

The decisions of the European System of Central Banks influence conditions in the money and credit markets, thereby affecting interest rates, the growth in lending, the distribution of lending among various industry sectors and the growth of deposits. Monetary policy has had a significant effect on the operations and profitability of Spanish banks in the past and this effect is expected to continue in the future. Similarly, the monetary policies of governments in other countries in which we have operations, particularly in Latin America and, following the acquisition of Abbey, in the United Kingdom, affect our operations and profitability in those countries. We cannot predict the effect which any changes in such policies may have upon our operations in the future, but we do not expect it to be material.

The European Monetary Union has had a significant effect upon foreign exchange and bond markets and has involved modification of the internal operations and systems of banks and of inter-bank payments systems. Since January 1, 1999, the start of Stage III, see “Item 4. Information on the Company—B. Business Overview —Supervision and Regulation—Bank of Spain and the European Central Bank,” Spanish monetary policy has been affected in several ways. The euro has become the national currency of the twelve participating countries and the exchange rates between the currencies of these countries were fixed to the euro. Additionally, the European System of Central Banks became the entity in charge of the European Union’s monetary policy.

C. Organizational structure.

Banco Santander Central Hispano, S.A. (“the Bank”) is the parent company of the Group which was comprised at December 31, 2004 of 582 companies that consolidate by the global integration method and 185 companies that are accounted for by the equity method.

     See Exhibits I, II and III to our consolidated financial statements included in this Form 20-F, for details on our consolidated and non-consolidated companies.

D. Property, plant and equipment.

During 2004, the Bank and its bank subsidiaries either leased or owned premises in Spain and abroad, which at December 31, 2004 included 4,384 branch offices in Spain and 5,589 abroad. See Note 13 to our consolidated financial statements.

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Item 5. Operating and Financial Review and Prospects

Critical Accounting Policies

Our primary financial statements are prepared in accordance with Spanish GAAP. Notes 1 and 2 to our Consolidated Financial Statements contain a summary of our significant accounting policies. Certain of these policies require management to make difficult, complex or subjective judgments that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of income and expenses during the reporting period. Following our accounting procedures, these judgments are submitted to our Audit and Compliance Committee and/or to our regulatory authorities and are disclosed in the notes to our financial statements.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

Management´s ability to make subjective decisions is more limited under Spanish GAAP than under U.S. GAAP. For example, U.S. GAAP requires financial instruments to be valued at fair value, which requires some subjective decisions to be made when there is not a readily available market for such instruments, while under Spanish GAAP, such instruments are valued at cost which can be determined objectively. For a summary of significant valuation and income recognition differences under Spanish and U.S. GAAP, see Note 28.1 to our Consolidated Financial Statements.

We believe that of our significant accounting policies, the following may involve a high degree of judgment:

      Allowances for credit losses

Spanish GAAP requires the level of the allowance for credit losses (general, specific and statistical) to be determined in part on the basis of specific rules rather than the subjective judgment involved under the U.S. GAAP impairment process.

The general allowance is calculated by applying a coefficient to the outstanding sum of loans and other risks.

The specific allowance is calculated based on the minimum requirements (coefficients) established by the Bank of Spain. Additional allowances are provisioned when management estimates probable losses with respect to specific exposures.

Since July 1, 2000, the Bank of Spain has required Spanish banks to create an allowance for the statistical coverage of credit losses based on an estimation of future credit losses in the credit portfolio. This allowance is in addition to the other allowances described above.

Spanish banks may estimate the provisions to be made to create this allowance using models based on their own credit loss experience and management’s estimation of future credit losses. In devising these models, which form a required part of a sound risk measurement and management system, management must take into consideration the quality of counterparties, the existence of guarantees or collateral, the term of the transactions and the expected evolution of the credit risk depending on medium and long term changes in the economic cycle. Furthermore, the models must use historical data covering at least a whole economic cycle and must be validated by the Bank of Spain.

As an alternative to the internal model referred to above (or as an alternative for some types of credit risk) Spanish banks may calculate the provisions to be made to create the allowance by applying a vector of coefficients (ranging from 0% to 1.5%) to each of the six categories in which the amount of computable credit risk is divided.

      Amortization of goodwill

The book value of goodwill is stated at cost less accumulated amortization. We amortize goodwill on a straight-line basis over the period in which we estimate the investment would be recovered (maximum 20 years). Nevertheless, if management estimates that the investment may not be recovered during the foreseen period, goodwill is amortized on an accelerated basis, recognizing an impairment loss in that year. In 2002 and 2003, goodwill from our investment in Banespa of €400.6 million and €1,703.8 million, respectively, was amortized on an accelerated basis. Also, in 2002, goodwill from our investment in Banco Santander Colombia of €240.0 million was partially amortized on an accelerated basis and in 2003, goodwill of €775.7 million with respect to our operations in Argentina was fully written off with a charge to the allowances recorded in prior years for this purpose. Finally, in 2004 we amortized, on an accelerated basis, goodwill of €153.8 million (mainly related to our investments in Venezuela and Colombia, which had been adjusted in prior years for U.S. GAAP reconciliation purposes). These decisions were coordinated with our regulatory authorities (see Note 12 to our Consolidated Financial Statements).

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Management tests goodwill impairment against market quotations for listed investments, while unlisted investments are tested for impairment based on in-house valuations, according to the FAS 142 step one test criteria. In cases where events triggering the step two test occur, management supports impairment of goodwill with independent valuations or appraisals, in accordance with FAS 142.

      Investment securities

Debt securities are classified as trading, available-for-sale investment or held-to-maturity securities, depending on the intent of the investment. Equity investments in listed companies owned less than 3% and non-listed companies owned less than 20% are classified as trading, available-for-sale investment or permanent investment securities, depending on the intent of the investment.

Trading securities are stated at market value, and differences between market value and book value are reported in the statement of income.

Held-to-maturity and permanent investment securities are stated at adjusted acquisition price.

Available-for-sale investment securities are measured either at lower of:

• cost adjusted for any premium or discount generated when the security was purchased (adjusted acquisition price), or

• market price.

Unrealized losses are reported in an accrual account if deemed to be temporary or provisioned in the statement of income if deemed to be permanent creating a specific allowance. Releases from this allowance arise when unrealized losses disappear. Unrealized gains are not reported.

Under Spanish GAAP there are no general rules regarding the methodologies and factors that must be used or the period of time needed to consider an unrealized loss as “temporary” or “other than temporary”. Our management considers that an unrealized loss is “temporary” under Spanish GAAP if it believes that it will collect or recover all of the unrealized loss or when due to market conditions (volatility, interest rate evolution or macroeconomic variables) or future expectations, management considers that all or part of an unrealized loss will be recovered. Our management considers that an unrealized loss is “other than temporary” if it believes that it will not collect or recover all the unrealized loss (credit risk), or when due to market conditions (volatility, interest rate evolution, macroeconomic variables) or future expectations, management considers that all or part of an unrealized loss will not be recovered (market risk). Based on the foregoing factors, our management will conclude that an unrealized loss is “other than temporary” when a demonstrable recovery in the fair value of the security is not expected in the near future (one year). Our management performs this analysis at the end of each reporting period.

As described above, if an unrealized loss is classified as “other-than-temporary” we are required by Bank of Spain regulations to take a charge to our Consolidated Statement of Income.

If management’s assumptions and estimates concerning the probability that we will recover all or part of unrealized losses prove to be inaccurate, or if such assumptions and estimates are modified in light of the evolution of the factors described above, we may be required to change the classification of certain unrealized losses from “temporary” to “other than temporary” and, accordingly, take a corresponding charge to our Consolidated Statement of Income.

Additionally, for U.S. GAAP reconciliation purposes, an additional charge to income is recorded every time a “temporary loss” for a given security has been existing for the 6 months prior to the date of the financial statements.

After preparation of the primary financial statements as of December 31, 2004, during the first half of 2005 and Following IFRS 1 (first time adoption), management decided to discontinue classification of securities Held to Maturity in its IFRS financial statements as of December 31, 2003 and 2004. Accordingly, all securities Held to Maturity have been considered as reclassified to Available for Sale as of December 31, 2004 in its U.S. GAAP reconciliation and required disclosures (see Notes 28.2.e, 28.4 and 28.5.c).

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       Significant equity investments

These investments are accounted for by the equity method if our holdings in the relevant entity represent more than 20% of the voting rights in such entity (3% of the voting rights if such entity is listed on a stock exchange) and if management considers that there is a lasting relationship between the Group and such entity and if such entity is intended to contribute to the Group’s business activities and over which the Group exercises significant influence. Otherwise, these investments are accounted for at the lower of cost or market. For this reason the Group always discloses its intentions with respect to each significant equity holding, designating them as “financial” or “permanent”.

As of December 31, 2003, we decided not to consider as “permanent” some of our equity holdings, among others, those of San Paolo-IMI and Commerzbank.

       Derivative financial instruments

We use derivative financial instruments for both trading and non-trading activities. The principal types of derivatives used are: interest rate swaps, future rate agreements, interest rate options and futures, foreign exchange forwards, foreign exchange futures, foreign exchange options, foreign exchange swaps, cross currency swaps, equity index futures and equity options.

      Macro hedges:

These transactions are carried out for hedging and overall management of the financial risks to which we are exposed and are aimed at eliminating or significantly reducing currency, interest rate or price risks on asset and liability positions. Similarly, we also treat as hedging transactions certain transactions which, although not specifically assigned to a specific hedged item, form part of global hedges or macro hedges used to reduce the risk to which we are exposed as a consequence of overall management of our assets, liabilities and other transactions. For this reason, the gains or losses arising from these hedging transactions are recorded symmetrically with the revenues and costs of the hedged items, and the collections or payments made in settlement of such hedging transactions are recorded with a balancing item under the “Other Liabilities” and “Other Assets” captions in the Consolidated Balance Sheets.

       Non-hedging transactions valuation:

Non-hedging transactions, which are also known as trading transactions, are valued in accordance with Bank of Spain regulations based on the market on which they are traded:

• Transactions arranged in organized markets, such as financial futures or options, are valued at quoted market prices and the gains or losses arising as a result of market price fluctuations are recorded in full in our Consolidated Statement of Income.

• For over the counter (OTC) derivative financial instruments (interest rate & currency swaps, forwards, options, credit derivatives, etc) theoretical closing prices are assessed at least every month and allowances are recorded with a charge to income for the potential net losses, if any, in each risk category (interest rate risk, currency risk and equity risk) and currency arising from such valuations. Potential gains are not recognized in income until they are settled. This procedure is also applied to currency options traded outside organized markets. For most of derivatives, such as forward rate agreements, interest rate swaps or currency swaps, the fair values are estimated based on the discounted future cash flows related to the interest rates to be collected or paid, using for this purpose the yield curve prevailing at each valuation period and the valuation methods approved in our Group. Others, like options or credit derivatives have specific valuation models.

Although Bank of Spain’s rules provide guidance regarding valuation of OTC derivative financial instruments, we are required to make estimates and assumptions, such as with respect to the futures quotations and its volatility, maturities and the effects of market risks.

Theoretical closings are the most reliable measure of fair value for derivative financial instruments. The determination of fair value requires us to make estimates and certain assumptions. If quoted market prices are not available, we have to calculate the fair value from commonly used pricing models that consider contractual prices for the underlying financial instruments, yield curves and other relevant factors. Our use of different estimates or assumptions in these pricing models could lead to materially different amounts being recorded in our Consolidated Financial Statements.

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Pension commitments

We participate directly and indirectly in defined benefit pension schemes for part of our employees. The pension cost for these schemes is assessed in accordance with the advice of a qualified external actuary. This cost is annually charged to the income statement. In determining this cost the actuarial value of the assets and liabilities of the scheme is calculated. This involves modeling their future growth and requires management and the external actuary to make assumptions as to factors such as:

• assumed interest rates;

• mortality tables;

• annual social security pension revision rate;

• price inflation;

• annual salary growth rate, and

• the method used to calculate vested commitments to current employees.

There is an acceptable range established by management and the external actuary in which these estimates can validly fall. If different estimates within that range had been selected the cost recognized in the income statement could be significantly altered.

Significant accounting policies with respect to our reconciliation from Spanish to U.S. GAAP

We include a reconciliation of net income and shareholders' equity between Spanish GAAP and U.S. GAAP within Note 28 to the Consolidated Financial Statements. The preparation of this reconciliation requires management to consider accounting policies under U.S. GAAP to determine whether or not a difference in GAAP exists, and to quantify the amount of that difference where appropriate. These policies may also be based on difficult or subjective judgments, estimates based on past experience and assumptions determined to be reasonable and realistic based on the related circumstances.

Unless indicated otherwise, all of the significant accounting policies identified above, are equally critical to preparation of the U.S. GAAP reconciliation, and involve similar judgment and assumptions by management.

Business combinations and goodwill

Goodwill and intangible assets include the cost of acquired subsidiaries in excess of the fair value of the tangible net assets recorded in connection with acquisitions. Acquired intangible assets include core deposit, customer list, brand and asset under management. Accounting for goodwill and acquired intangible assets requires management's estimate regarding: (1) the fair value of the acquired intangible assets and the initial amount of goodwill to be recorded, (2) the amortization period and (3) the recoverability of the carrying value of acquired intangible assets.

To determine the initial amount of goodwill to be recorded upon acquisition, we have to determine the consideration and the fair value of the net assets acquired. We use independent appraisers and our internal analysis, generally based on discounted cash flow techniques, to determine the fair value of the net assets acquired and non-cash components of the consideration paid. The actual fair value of net assets acquired could differ from the fair value determined, resulting in an under- or over-statement of goodwill.

We test goodwill for impairment at the reporting unit level. We determine our reporting units one level below our business segment, based on our management structure. We keep those reporting units unchanged unless business segment reorganization occurs.

The useful lives of acquired intangible assets are estimated based on the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the acquired entity.

The amortization period under U.S. GAAP is reviewed annually in light of the above factors for acquired intangible assets. In making these assumptions, we consider historical results, adjusted to reflect current and anticipated operating conditions. Because a change in these assumptions can result in a significant change in the recorded amount of acquired intangible assets, we believe the accounting for business combination is one of our critical accounting estimates.

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In the 2003 goodwill impairment test relating to our investment in Brazil, the valuation of this reporting unit was lower than its carrying value, triggering the need to perform the step two impairment test as required by FAS 142. As the purchase of this investment was done prior to the adoption of FAS 142, its intangible assets were not identified and recognized on acquisition. The step two impairment test led to the identification of intangibles that were in process of being valued when the 2003 form 20-F was filed. The identification of these intangibles had the effect of increasing the goodwill impairment.

The investment related to Brazil had a book value under U.S. GAAP of €4,427 million, of which €2,247 million was its net worth and €2,180 million goodwill. Management estimated intangibles in the customer portfolio between €1,000 and €1,500 million. An external appraisal valued this reporting unit in a range between €4,147 and €2,931 million, without identifying the value of any intangible asset. The methodology applied in the valuation was basically discounted cash-flows, multiple comparison, adjusted liquid stockholders’ equity and core results. For the impairment test, the Bank used the more conservative approach assuming the lower value of the valuation range of the reporting unit and that the value of non-registered intangible assets was, at minimum, €680 million. Based on these assumptions it registered a goodwill impairment charge of €2,180 million (€1,719 million in its primary financial statements plus €461 million in the reconciliation to U.S. GAAP). In order to complete the impairment test as required by FAS 142, the Bank demanded an appraisal from an external independent expert, to identify and value the intangibles not registered (see note 28.2.g). Such appraisal resulted in a report, dated November 2004, which identified intangibles that had a fair value of €1,350 million. Because such amount was above minimum management expectations as of the 2003 form 20F filing date (€680 million), once the Brazil reporting unit goodwill impairment test process was concluded, no additional impact has been recorded in the 2004 U.S. GAAP reconciliation. The valuation method used was the present value of future cash flows projected.

In 2004, we acquired Abbey. As a result of this transaction a significant amount of goodwill was registered (see Notes 12, 28.2.g and 28.5.o to our financial statements). As the business combination was performed close to the end of the year and because of the complexity of the process, the determination of goodwill for U.S. GAAP purposes as well as the identification and recognition of intangible assets is not yet concluded. Management has required independent appraisal for the intangible assets identification and valuation.

Investment Securities

In the reconciliation to U.S. GAAP, the Group adjusts its investments and trading securities at fair value if they are considered to be available-for-sale or trading securities. For a substantial majority of the Group´s investments and trading account assets and liabilities, fair values are determined based upon quoted prices or validated models. Changes in values of available-for-sale securities are recognized in a component of stockholders' equity net of taxes, unless the value is impaired and the impairment is considered to be other than temporary. Impairment losses that are not considered temporary are recognized in earnings. The Group conducts reviews to assess whether other-than-temporary impairment exists. These reviews consist (i) on the identification of the securities that maintain impairments during the last six months, and (ii) on the determination of the value of the impairment that is not expected to be easily recovered. Changing global and regional conditions and conditions related to specific issuers or industries, could adversely affect these values. Changes in the fair values of trading securities are recognized in earnings.

In 2005, the Group is adopting IFRS (International Financial Reporting Standards). Among other decisions permitted in the rules of adoption of IFRS, the Company has decided to reclassify all its held to maturity portfolio to the available for sale portfolio. Consequently, even though the decision is taken in 2005 and statements under IFRS are not yet the Company’s primary financial statements, the Company has included this accounting change in its reconciliation to U.S. GAAP with effect on December 31, 2004 (see Note 28.2.e).

Variable Interest Entities

FIN 46-R defines and identifies “Variable Interest Entity” (VIE) if it has (1) equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties (2) equity investor that cannot make significant decisions about the entity’s operations, or that do not absorb the expected losses or receive the expected returns of the entity or (3) equity investors that have voting rights that are not proportionate to their economic interests and substantially all the activities of the entity involved, or are conducted on behalf of, an investor with a disproportionately small voting interest. A VIE is consolidated by its primary beneficiary, which is the party involved with the VIE that has a majority of the expected losses or a majority of the expected residual returns or both. Adopting FIN 46-R required evaluating many Special Purposed Vehicles and in some cases to made s ome judgments. Note 28.1 shows differences between Spanish GAAP and U.S. GAAP consolidation procedures, the impact of the adoption of FIN 46-R is shown in notes 28.2.a and 28.4.

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A. Operating results.

We have based the following discussion on our consolidated financial statements. You should read it along with these financial statements, and it is qualified in its entirety by reference to them. We prepared our financial statements according to Spanish GAAP. We have identified the significant differences between Spanish GAAP and U.S. GAAP in note 28 to our consolidated financial statements included in this report on Form 20-F. Note 28 also includes reconciliations to U.S. GAAP of net income and stockholders’ equity as reported in the consolidated financial statements. Note 28.5 (J) to our consolidated financial statements includes financial information for our main business segments.

In November 2004, we acquired 100% of the capital of Abbey National plc. Under Spanish GAAP, our acquisition of Abbey has been reflected on our financial statements as if the acquisition had occurred on December 31, 2004. Accordingly, Abbey’s assets and liabilities were consolidated into our balance sheet as of December 31, 2004, but Abbey’s results of operations had no impact on our income statement for the year ended December 31, 2004. As a result, the following discussion of our operating results does not reflect the results of Abbey.

In a number of places in this report, in order to analyze changes in our business from period to period, we have isolated the effects of foreign exchange rates on our results of operations and financial condition. In particular, we have isolated the effects of depreciation of local currencies against the euro because we believe that doing so is useful to understand the evolution of our business. For these purposes, we calculate the effect of movements in the exchange rates by multiplying the previous period balances in local currencies by the difference between the exchange rate to the euro of the current and the previous period.

General

We are a financial group whose main business focus is retail banking, complemented by asset management and global wholesale banking businesses.

Our main source of income is the interest that we earn from our lending activities, by borrowing funds from customers and money markets at a rate and lending them to other customers at different rates. We also make money from the interest and dividends that we receive from our investments in fixed/variable income and equity securities and from our trading activities with such securities and derivatives, by buying and selling them to take advantage of current and/or expected differences between purchase and sale prices.

Another source of income is the commissions that we earn from the different banking and other financial services that we provide (credit and debit cards, insurance, account management, bill discounting, guarantees and other contingent liabilities, advisory and custody services, etc.) and from our mutual and pension funds management services.

In addition, an occasional source of income comes from the capital gains we can make from the selling of our holdings in Group´s companies and from the sale of treasury stock.

2004 Overview

We believe that the following factors had a significant impact on our results of operations and financial condition as of and for the year ended December 31, 2004.

First, we conducted our business in an environment in which the global economy continued its expansion. This expansion was present in many countries throughout the world, but in the United States and Asia, in particular.

The U.S. economy experienced a 4.4% growth in GDP in 2004. The Latin American economies were more buoyant; the region, as a whole, experienced economic growth of 5.8%. In the Euro zone, GDP growth slowed significantly in the second half of 2004, due to higher oil prices and the strengthening of the euro, leading to growth of 1.7% for the region during 2004. Spain´s economy experienced greater growth than the Euro zone as a whole (2.7% vs. 1.7% ), spurred by consumption, construction and recovery in investment in equipment.

Second, the year-on-year impact of exchange rates (mainly, the dollar’s fall against the euro and the depreciation of certain Latin American currencies against the euro) caused a decrease in net income and total assets by 4.4 percentage points and 1.5 percentage points, respectively.

In this environment, our strategy has been to increase income by strengthening our business with customers, while maintaining control of costs and improvement of credit quality. The result of this strategy was a strong increase in income and volume of business and the improvement in profitability, efficiency and credit quality ratios.

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Results of Operations

     Summary

Net attributable income as reported in our consolidated financial statements for the year ended December 31, 2004 was €3,135.6 million, an increase of 20.1% from €2,610.8 million which was an increase of 16.2% from €2,247.2 million in 2002. The 2004 increase reflected mainly increases in net interest income, net fees and commissions and net income from companies accounted for by the equity method and decrease in goodwill amortization, all of which were partially offset by increases in net extraordinary losses, net provisions for credit losses and operating expenses, and decreased net gains on group transactions.

     Net Interest Income

Net interest income was €8,635.7 million in 2004, a 8.5% or €677.4 increase from €7,958.3 million in 2003, which was a 15.0% or €1,400.3 million decrease from €9,358.7 million in 2002. Excluding dividends from companies accounted for by the equity method, net interest income was €8,270.2 million in 2004, a 8.1% or €621.4 million increase from €7,648.8 million in 2003, which was a 15.1% or €1,356.8 decrease from €9,005.6 million in 2002.

2004 Compared to 2003

The €677.4 million increase in net interest income is mainly due to the increased business volumes both in Spain and abroad and the steps taken by our business units to defend customer spreads that offset the fall in interest rates experienced in some countries. There was also an increase in the dividends received from our holdings of equity securities.

Average total earning assets (excluding Abbey) were €321,561.9 million for the year ended December 31, 2004, a 7.6% or €22,721.1 million increase from €298,840.8 million for the same period in 2003. This increase was mainly due to an increase of €11,037.6 million in the average balances of our domestic total earning assets (mainly due to an increase of €18,097.7 million in the average balances of our domestic loans and credits portfolio, partially offset by a decrease of €8,378.2 million in the average balances of our government debt securities portfolio) and an increase of €11,683.4 million in the average balance of our international total earning assets (mainly due to an increase of €7,749.1 million in the average balances of our debentures and other fixed income securities portfolio). Our loans and credits balance grew in Spain because of increased secured loans (mainly mortgage lending) and lo ans to companies resulting in part from continued low interest rates.

Our overall yield spread increased slightly from 2.63% in 2003 to 2.64% in 2004. Domestic yield spread decreased from 2.42% in 2003 to 2.38% in 2004. This change reflected continued pressure on margins in Spain which was offset by adjustments to our domestic asset mix. The margin pressure in Spain was due to continued low domestic interest rates as well as the continued effects of competition. Expanded volumes in our domestic loans and credits portfolio, which yielded relatively higher returns, improved our domestic asset mix. International yield spreads decreased from 3.17% in 2003 to 3.15% in 2004 due primarily to decreases in interest rates in some countries (Brazil, Chile and Venezuela).

2003 Compared to 2002

Net interest income comparison with 2002 is still greatly affected by the performance of exchange rates. Eliminating the impact of exchange rates (€1,284.3 million), net interest income only declined 1.2%. Another negative factor was the decrease in interest rates in Europe and Latin America. These negative factors were partly offset by the greater volume of business in Spain and by the steps taken by the Group’s different units to defend customer spreads. The overall decline in net interest income in 2003 mainly reflected a decrease in the average balance of earning assets as well as a decline in overall yield spreads.

Average total earning assets were €298,840.8 million for the year ended December 31, 2003, an 0.7% or €1,976.1 million decrease from €300,816.9 million for the same period in 2002. This decrease was mainly due to a decrease of €23,321.9 million in the average balances of our international total earning assets (mainly because of the effect of the weakening of nearly all the Latin American currencies against the euro, and particularly the effect of this on our international loans and credits portfolio), partially offset by an increase of €21,345.9 million in the average balance of our domestic total earning assets (mainly due to an increase of €10,640.1 million and €6,663.3 million in the average balances of our domestic loans and credits portfolio and debt securities portfolio, respectively). Our loans and credits balance grew in Spain because of increased secured loans (mainly mortgage lending) resulting in part from continuing low and declining domestic interest rates.

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The decrease in net interest income also resulted from the decline in overall yield spread from 3.13% in 2002 to 2.63% in 2003 (which mainly reflected a decline in international yield spread). Domestic yield spread decreased from 2.67% in 2002 to 2.42% in 2003. This change reflected continued pressure on margins in Spain but was offset by adjustments to our domestic asset mix. The margin pressure in Spain was due to continued low and declining domestic interest rates as well as the continued effects of competition. Expanded volumes in our domestic loans and credits portfolio, which yielded relatively higher returns, improved our domestic asset mix given existing conditions. International yield spreads declined because of a decrease in interest rates in Portugal and in some Latin America countries (Mexico, Brazil and Chile).

     Net Fees and Commissions

Net fees and commissions were €4,609.3 million in 2004, a 10.5% or €438.7 million increase from €4,170.6 million in 2003, which was a 2.8% or €118.7 million decrease from €4,289.3 million in 2002.

2004 Compared to 2003

Net fees and commissions for 2004 and 2003 were as follows:

			Amount		%
	2004	2003	Change		Change
	(in millions of euros except percentages)
Commissions for services	2,512.6	2,288.6	224.1		9.8
Credit and debit cards	559.6	484.8	74.8		15.4
Insurance	515.0	350.7	164.3		46.8
Account management	446.3	422.6	23.7		5.6
Bill discounting	300.9	406.7	(105.9	)	(26.0	)
Contingent liabilities	218.5	201.9	16.6		8.2
Other operations	472.3	421.8	50.5		12.0
Mutual and pension funds	1,587.1	1,297.0	290.1		22.4
Securities services	509.6	585.0	(75.4	)	(12.9	)
Total net fees and commissions	4,609.3	4,170.6	438.7		10.5

The €438.7 million increase in 2004 primarily resulted from a €290.1 million or 22.4% increase in fees from mutual and pension funds due to higher volumes, a €164.3 million or 46.8% increase in fees from insurance due to increased activity and a €74.8 million or 15.4% increase in fees from credit and debit cards also due to increased activity, partially offset by a €105.9 million or 26.0% decrease in fees from bill discounting and a €75.4 million or 12.9% decrease in fees from securities services (due to lower fees from underwriting and placement).

Average balances of mutual funds under management in Spain rose 17.0% from €56.6 billion in 2003 to €66.2 billion in 2004. Average balances of mutual funds abroad (excluding Abbey) increased by 29.8% from €17.1 billion in 2003 to €22.2 billion in 2004 mainly due to increased activity in Mexico, Brazil and Chile.

Average balances of pension funds in Spain increased by 11.5% from €6.1 billion in 2003 to €6.8 billion in 2004, mainly due to increased activity in individual pension funds. Average balances of pension funds abroad (excluding Abbey) increased by 11.3% from €12.4 billion in 2003 to €13.8 billion in 2004 mainly due to increased activity in Chile, Colombia, Peru and Mexico.

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2003 Compared to 2002

Net fees and commissions for 2003 and 2002 were as follows:

			Amount		%
	2003	2002	Change		Change
	(in millions of euros except percentages)
Commissions for services	2,288.6	2,449.1	(160.5	)	(6.6	)
Bill discounting	406.7	503.9	(97.2	)	(19.3	)
Credit and debit cards	484.8	477.2	7.7		1.6
Account management	422.6	458.4	(35.7	)	(7.8	)
Insurance	350.7	257.1	93.6		36.4
Contingent liabilities	201.9	192.7	9.3		4.8
Other operations	421.8	559.9	(138.1	)	(24.7	)
Mutual and pension funds	1,297.0	1,282.5	14.5		1.1
Securities services	585.0	557.7	27.3		4.9
Total net fees and commissions	4,170.6	4,289.3	(118.7	)	(2.8	)

Excluding the impact of foreign exchange rates (€427.1 million), net fees and commissions in 2003 increased by 7.2%.

The €118.7 million decrease in 2003 primarily resulted from a €138.1 million or 24.7% decrease in fees from other operations and a €97.2 million or 19.3% decrease in fees from bill discounting, partially offset by a €93.6 million or 36.4% increase in fees from insurance (due to our marketing efforts, principally in Spain) and a €27.3 million or 4.9% increase in fees from securities services (due to commissions from underwriting and placement as those fees earned from the purchase and sale of securities continued to register moderate growth).

Fees from mutual and pension funds remained relatively flat, increasing €14.5 million or 1.1%.

Average mutual funds under management in Spain rose 11.6% from €50.7 billion in 2002 to €56.6 billion in 2003 due to our marketing efforts. Average mutual funds abroad decreased by 4.5% from €17.9 billion in 2002 to €17.1 billion in 2003 mainly due to the negative impact of exchange rates in our Latin American fund management companies, partially offset by an increase of average mutual funds in Portugal.

Average pension funds balances in Spain increased by 10.9% from €5.5 billion in 2002 to €6.1 billion in 2003, mainly due to increased activity in individual pension funds. Average pension funds abroad increased slightly by 0.8% from €12.3 billion in 2002 to €12.4 billion in 2003 mainly due to the increase of average mutual funds in our Latin American pension fund companies due to our marketing efforts, partially offset by the negative impact of exchange rates.

     Gains (Losses) on Financial Transactions

Net gains on financial transactions were €952.7 million in 2004, a 4.6% or €46.1 million decrease from €998.8 million in 2003, which was a 180.4% or €642.6 million increase from €356.3 million in 2002. Gains (losses) on financial transactions include gains and losses arising from the following: marking to market our trading portfolio and derivative instruments, including spot market foreign exchange transactions, and sales of investment securities and liquidation of our corresponding hedge or other derivative positions. See note 25(b) to our consolidated financial statements.

2004 Compared to 2003

The €46.1 million decrease in 2004 primarily reflects a lower contribution by our Latin American subsidiaries to our gains on financial transactions due to the negative impact of increasing interest rates on the trading portfolios of those subsidiaries, especially those in Mexico.

Net gains on financial transactions in 2004 includes net gains of €525.1 million on fixed-income securities (net gains of €392.1 million in 2003); net gains of €474.7 million on equity securities (net gains of €432.0 million in 2003); net gains of €282.9 million on exchange differences (net gains of €166.2 million in 2003) and net losses of €330.0 million in derivatives (net gains of €8.5 million in 2003). In the case of hedging transactions entered into to reduce market risk exposure, any gains and losses on exchange differences and derivatives are generally symmetrical to the gains (losses) recorded on fixed-income securities and equity securities.

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2003 Compared to 2002

The €642.6 million increase in 2003 was mainly due to positive trading results and ALCO positions (due to interest rates and exchange rates), in clear contrast with the losses arising from the portfolio sales in Brazil (in order to reduce risk positions) during the second and third quarters of 2002 which made last year’s figure much lower than the Group’s average.

Net gains on financial transactions in 2003 includes net gains of €392.1 million on fixed-income securities (net losses of €340.6 million in 2002); net gains of €432.0 million on equity securities (net losses of €150.9 million in 2002); net gains of €166.2 million on exchange differences (net gains of €417.0 million in 2002) and net gains of €8.5 million in derivatives (net gains of €430.8 million in 2002). In the case of hedging transactions entered into to reduce market risk exposure, any gains and losses on exchange differences and derivatives are generally symmetrical to the gains (losses) recorded on Spanish and foreign fixed-income securities and equity securities.

     Net Other Operating Income

Net other operating results generated a loss of €182.3 million in 2004, a 9.5% or €15.8 million increase from €166.5 million in 2003, which was a 26.5% or €60.0 million decrease from €226.5 million in 2002. Net other operating income consists mainly of other operating income and other operating expenses generated by our consolidated financial and non-financial consolidated subsidiaries and contributions we make to the Spanish Deposit Guarantee Fund and similar deposit guarantee programs abroad.

2004 Compared to 2003

The €15.8 million increase in 2004 was mainly due to an increase in the contributions to the deposit guarantee programs (mainly in Latin America) of €6.6 million and an increase in net other operating losses generated by our consolidated subsidiaries of €9.2 million.

2003 Compared to 2002

The €60.0 million decrease in 2003 was mainly due to a decrease in the contributions to the deposit guarantee programs (mainly in Latin America) of €32.0 million and a decrease in net other operating losses generated by our consolidated subsidiaries of €27.9 million.

     General Administrative Expenses

General administrative expenses were €6,735.2 million in 2004, a 4.0% or €257.5 million increase from €6,477.7 million in 2003, which was a 11.5% or €844.4 million decrease from €7,322.1 million in 2002.

2004 Compared to 2003

General administrative expenses for 2004 and 2003 were as follows:

			Amount		%
	2004	2003	Change		Change
	(in millions of euros except percentages)
Personnel expenses	4,135.3	4,049.4	85.9		2.1
Other administrative expenses	2,599.9	2,428.3	171.6		7.1
Information technology	460.6	454.7	5.9		1.3
Communications	240.5	230.3	10.2		4.4
Advertising	289.4	211.4	78.0		36.9
Building and premises	442.4	437.4	5.0		1.1
Printed and office material	80.3	74.0	6.3		8.5
Taxes (other than income tax)	120.0	146.8	(26.8	)	(18.3	)
Other expenses	966.6	873.6	93.0		10.7
Total general administrative expenses	6,735.2	6,477.7	257.5		4.0

The 4.0% increase in general administrative expenses in 2004 reflected a 2.1% increase in personnel expenses and a 7.1% increase in other administrative expenses. This increase in other administrative expenses is mainly related to the re-launching of business in some countries and the development of corporate projects (Partenón, Altair, regional projects in Latin America). There was also a small increase in the amount of general administrative expenses resulting from Santander Consumer´s acquisitions of PTF, Elcon and Abfin (for more information, see “Item 4. Information on the Company—A. History and development of the company—Principal Capital Expenditures and Divestitures—Acquisitions, Dispositions, Reorganizations”).

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The performance of revenues and cost control improved the efficiency ratio, measured by dividing general administrative expenses by gross operating income, to 47.4%, 1.9 percentage points better than in 2003.

2003 Compared to 2002

General administrative expenses for 2003 and 2002 were as follows:

			Amount		%
	2003	2002	Change		Change
	(in millions of euros except percentages)
Personnel expenses	4,049.4	4,521.7	(472.3	)	(10.5	)
Other administrative expenses	2,428.3	2,800.3	(372.0	)	(13.3	)
Information technology	454.7	520.9	(66.2	)	(12.7	)
Communications	230.3	316.2	(85.9	)	(27.2	)
Advertising	211.4	266.0	(54.6	)	(20.5	)
Building and premises	437.4	483.5	(46.1	)	(9.5	)
Printed and office material	74.0	93.3	(19.3	)	(20.7	)
Taxes (other than income tax)	146.8	199.8	(53.0	)	(26.5	)
Other expenses	873.6	920.6	(47.0	)	(5.1	)
Total general administrative expenses	6,477.7	7,322.1	(844.4	)	(11.5	)

The 11.5% decrease in general administrative expenses in 2003 reflected a 10.5% decline in personnel expenses and a 13.3% decline in other administrative expenses. These costs, like the rest of the income statement, were significantly impacted by changes in exchange rates. Eliminating the impact of exchange rates (€793.4 million), general administrative expenses declined 0.7%, with personnel expenses down 0.9% and other administrative expenses down 0.3%.

The reduction in personnel expenses reflects the effort made in 2002 to reduce the number of employees in Spain, Portugal and Latin America.

The Group’s purchasing and optimization of costs area continued to adopt measures to cut spending, while the organization and IT areas continued to improve processes in order to boost efficiency and productivity throughout the Group.

The performance of revenues and cost control improved the efficiency ratio, measured by dividing general administrative expenses by gross operating income, to 49.3%, 2.9 percentage points better than in 2002.

     Depreciation and Amortization

Depreciation and amortization was €735.0 million in 2004, a 3.6% or €27.8 million decrease from €762.8 million in 2003, which was a 14.3% or €127.0 million decrease from €889.8 million in 2002.

2004 Compared to 2003

The €27.8 million decrease in 2004 was largely due to the effect of exchange rate fluctuations.

2003 Compared to 2002

The €127.0 million decrease in 2003 was largely due to the effect of exchange rate fluctuations.

     Net Income from Companies Accounted for by the Equity Method

Excluding dividends from companies accounted for by the equity method which are reflected under net interest income, net income from companies accounted for by the equity method was €540.4 million in 2004, a 32.7% or €133.1 million increase from €407.3 million in 2003, which was a 45.5% or €127.4 million increase from €279.9 million in 2002. Including dividends from companies accounted for by the equity method, net income from companies accounted for by the equity method was €905.9 million in 2004, a 26.4% or €189.1 million increase from €716.8 million in 2003, which was a 13.2% or €83.8 million increase from €633.0 million in 2002.

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2004 Compared to 2003

The €133.1 million increase in 2004 excluding dividends from companies accounted for by the equity method and the €189.1 million including dividends, is mainly due to the higher contributions of Royal Bank of Scotland, Cepsa, Inmobiliaria Urbis, Unión Fenosa and insurance companies.

The entities providing the largest portions of the contributions in 2004 include the following:

	Percent Owned	Contributions to Net Income (1)
Investment	2004	2004
	(in millions of euros)
Royal Bank of Scotland (2)	2.5	303.2
Cepsa	32.3	275.7
Inmobiliaria Urbis	45.7	90.6
Unión Fenosa	22.0	88.1
Santander Seguros y Reaseguros	100.0	45.1

(1)	Contributions to income from companies accounted for by the equity method include dividends from investments in Group and non-Group companies.
(2)	As of December 31, 2003, our holding in RBS was 5.05%. In September 2004, we sold 2.51% of our holding.

2003 Compared to 2002

The €127.4 million increase in 2003 excluding dividends from companies accounted for by the equity method and the €83.9 million including dividends, is mainly due to the higher contributions of Cepsa, Sanpaolo IMI, Unión Fenosa, Urbis and insurance companies that was offset by the lower contributions from Royal Bank of Scotland, Dragados and Vallehermoso we received as a result of our divestments in these holdings.

The entities providing a large portion of the contributions in 2003 include the following:

	Percent Owned	Contributions to Net Income (1)
Investment	2003	2003
	(in millions of euros)
Cepsa	32.3	225.0
Royal Bank of Scotland	5.1	165.7
San Paolo IMI	8.6	86.5
Unión Fenosa	23.0	84.7
Inmobiliaria Urbis	45.9	69.9

(1) Contributions to income from companies accounted for by the equity method include dividends from investments in Group and non-Group companies.

     Amortization of Consolidation Goodwill

Amortization of consolidation goodwill was €618.9 million in 2004, a 72.4% or €1,622.8 million decrease from €2,241.7 million in 2003, which was a 65.0% or €883.1 million increase from €1,358.6 million in 2002.

2004 Compared to 2003

The €1,622.8 million decrease in 2004 is mainly due to less early amortization of goodwill. In 2003, early amortization of goodwill amounted to €1,719.2 million (mainly related to our investment in Banespa), while in 2004 early amortization of goodwill amounted to €153.8 million (of which €92.6 million related to our investment in Banco de Venezuela and €57.5 million related to our investments in Colombia).

Ordinary amortization of goodwill was €465.2 million in 2004, a 11.0% or €57.3 million decrease from €522.5 million in 2003.

2003 Compared to 2002

The €883.1 million increase in 2003 is mainly due to the early amortization of €1,719.2 million (€1,016.3 million more than in 2002), relating mainly to Banespa (€1,703.8 million), whose goodwill was reduced to zero.

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For further information on the variations in the balances of “Consolidation Goodwill” see Note 12 of the Consolidated Financial Statements.

     Gains (Losses) on Group Transactions

     Gains on Group transactions were €466.2 million in 2004, a 51.2% or €489.4 million decrease from €955.6 million in 2003, which was a 5.3% or €53.4 million decrease from €1,008.9 million in 2002.

2004 Compared to 2003

The €466.2 million gain in 2004 relates primarily to the gains generated from the sale of our 2.5% holding in Royal Bank of Scotland (€472.2 million) partially offset from losses in trading and in other purchases and sales of treasury stock (€31.9 million).

2003 Compared to 2002

The €955.6 million gain in 2003 relates primarily to the gains generated in the first quarter of 2003 (€680.6 million) from the sale of 24.9% of Santander Serfin to Bank of America, and €216.9 million in the fourth quarter of 2003 from the sale of shares in Royal Bank of Scotland.

     Net Provisions for Credit Losses

Our net provisions for credit losses were €1,647.7 million in 2004, a 10.2% or €152.0 million increase from €1,495.7 million in 2003, which was a 9.3% or €152.5 million decrease from €1,648.2 million in 2002.

2004 Compared to 2003

The €152.0 million increase in net provisions for credit losses reflected a €209.0 million increase in gross provisions for credit losses (gross provisions for credit losses were €1,929.2 million in 2004 compared to €1,720.2 million in 2003), a €6.0 million decrease in provisions for country-risk (provisions for country-risk were €127.0 million in 2004 compared to €133.0 million in 2003), and a €51.1 million increase in recoveries of loans previously charged-off (recoveries totaled €408.6 million in 2004 compared to €357.5 million in 2003).

The €209.0 million increase in gross provisions for credit losses is mainly due to increased statistical credit loss provisions (€600.9 million allocated in 2004 compared to €328.8 million allocated in 2003) while specific and generic provisions decreased by €63.1 million. (See “Item 4. Information on the Company—B. Business Overview—Classified Assets—Bank of Spain Classification Requirements—Allowance for the Statistical Coverage of Credit Losses”).

The €6.0 million decrease in provisions for country-risk is mainly due to non-recurrence in 2004 of the increase in 2003 of the amount of coverage required by the Bank of Spain for country-risk in Argentina. Our total country-risk exposure with third parties, net of allowances, in accordance with Bank of Spain criteria increased by €529.2 million to €620.2 million at December 31, 2004, compared to €91.0 million at December 31, 2003. This increase was largely due to the reclassification of certain trade finance transactions longer than 1 year in Brazil.

Excluding Abbey, our total allowances for credit losses increased by €771.6 million to €6,186.0 million at December 31, 2004, from €5,414.4 million at December 31, 2003. Including Abbey, our total allowances for credit losses increased by €1,784.9 million to €7,199.3 million at December 31, 2004, from €5,414.4 million at December 31, 2003.

Excluding country-risk and Abbey, non-performing assets decreased by €204.7 million to €3,017.8 million at December 31, 2004, compared to €3,222.5 million at December 31, 2003. Domestic non-performing assets decreased by €62.6 million to €869.0 million at December 31, 2004 from €931.6 million at December 31, 2003, while international non-performing assets decreased by €142.1 million to €2,148.8 million at December 31, 2004 from €2,290.9 million at December 31, 2003, due to our strong efforts to reduce our non-performing assets in Latin America. This trend may not continue and may even reverse in the future. Including Abbey (€930.6 million), non-performing assets were €3,948.4 million at December 31, 2004.

Our coverage ratio (excluding country-risk and Abbey) was 208.0% at December 31, 2004, and 165.2% at December 31, 2003. Including Abbey (excluding country-risk), our coverage ratio was 184.6% at December 31, 2004. See “Selected Statistical Information—Non-Performing Asset Ratios”.

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2003 Compared to 2002

The €152.5 million decrease in net provisions for credit losses reflected a €341.7 million decrease in gross provisions for credit losses (gross provisions for credit losses were €1,720.2 million in 2003 compared to €2,061.9 million in 2002), a €153.0 million increase in provisions for country-risk (provisions for country-risk were €133.0 million in 2003 compared to release of provisions for country-risk of €20.0 million in 2002), and a €36.2 million decrease in recoveries of loans previously charged-off (recoveries totaled €357.5 million in 2003 compared to €393.7 million in 2002).

The €341.7 million decrease in gross provisions for credit losses is mainly due to the positive effect of exchange rates, reduced provisions for loans to borrowers in Argentina, in accordance with Argentine local criteria, and lower needs for the rest of Latin America, offset by increased provisions for Spain, mainly because of increased statistical credit loss provisions (€328.8 million allocated in 2003 vs. a release €39.2 million in 2002) and generic provisions (from increased business). (See “Item 4. Information on the Company—B. Business Overview—Classified Assets—Bank of Spain Classification Requirements—Allowance for the Statistical Coverage of Credit Losses”).

The €153.0 million increase in provisions for country-risk is mainly due to the increase this year of the amount of coverage required by the Bank of Spain for country-risk in Argentina. Our total country-risk exposure with third parties, net of allowances, in accordance with Bank of Spain criteria increased by €19.0 million to €91.0 million at December 31, 2003, compared to €72.0 million at December 31, 2002. This increase was largely due to the application of stricter classification criteria in December 2003 to operations with political risk coverage by private agencies.

Our total allowances for credit losses increased by €250.1 million to €5,414.4 million at December 31, 2003, from €5,164.3 million at December 31, 2002.

Excluding country-risk, non-performing assets decreased by €454.0 million to €3,222.5 million at December 31, 2003, compared to €3,676.5 million at December 31, 2002. Domestic non-performing assets decreased by €72.3 million to €931.6 million at December 31, 2003 from €1,003.9 million at December 31, 2002, while international non-performing assets decreased by €381.7 million to €2,290.9 million at December 31, 2003 from €2,672.6 million at December 31, 2002, due to our strong efforts to reduce our non-performing assets in Latin America and our conservative lending policy. This trend may not continue and may even reverse in the future.

Our coverage ratio (excluding country risk) was 165.2% at December 31, 2003, and 139.9% at December 31, 2002. See “Selected Statistical Information—Non-Performing Asset Ratios”.

     Extraordinary Results

We had an extraordinary net loss of €850.3 million in 2004, compared to an extraordinary net income of €668.7 million in 2003 and an extraordinary net loss of €338.8 million in 2002.

The net debit balance of €850.3 million in 2004 includes the gains or losses on disposal of property and equipment and long-term investments (gains of €550 million –that include the €242 million and €118 million of capital gains from the divestment of our holdings in Vodafone and Shinsei Bank, respectively- and losses of €83 million); the collection of interest on doubtful and nonperforming loans earned in prior years (€108 million); monetary adjustment (net gain of €2.8 million) (see note 2-b to our consolidated financial statements); provisions to pension allowances which increased mainly due to early retirements (€979.8 million) (see note 2-j to our consolidated financial statements); and other net losses of €448 million, relating mainly to writedowns made by different Group companies that include €155 million of non-recurring expenses related to t he Abbey acquisition (principally advisory fees).

The net credit balance of €668.7 million in 2003 includes the gains or losses on disposal of property and equipment and long-term investments (gains of €696 million and losses of €93 million); the collection of interest on doubtful and nonperforming loans earned in prior years (€92 million); monetary adjustment (€9.1 million) (see note 2-b to our consolidated financial statements); provisions to pension allowances (€120.1 million) (see note 2-j to our consolidated financial statements); and other net income of €103 million.

The net debit balance of €338.8 million in 2002 includes the gains or losses on disposal of property and equipment and long-term financial investments (gains of €443 million and losses of €122 million); the collection of interest on doubtful and nonperforming loans earned in prior years (€76 million); losses from monetary adjustments (€69.5 million) (see note 2-b to our consolidated financial statements); provisions to pension allowances of €350.8 million (see note 2-j to our consolidated financial statements) and other net losses of €315 million, resulting mainly from the impact of writedowns of technological companies and other companies and businesses located outside Spain (including, those relating to the specific allowance recorded for Argentina).

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     Provision for Income Taxes

The provision for corporate income and other taxes was €766.8 million in 2004, an 11.8% or €102.7 million decrease from €869.4 million in 2003, which was a 20.2% or €146.3 million increase from €723.1 million in 2002. The effective tax rate was 17.3% in 2004, 21.2% in 2003 and 20.6% in 2002. For information about factors affecting effective tax rates, see note 22 to our consolidated financial statements.

     Minority Interests

Minority interests were €532.3 million in 2004, a 14.3% or €88.9 million decrease from €621.2 million in 2003, which was a 15.4% or €82.7 million increase from €538.5 million in 2002.

2004 Compared to 2003

The €88.9 million decrease in 2004 reflected mainly a €19.2 million increase in net income attributable to minority shareholders, principally related to increased minority interests of our subsidiaries in Chile and Mexico, and a €108.1 million decrease in dividends on preference shares of subsidiaries principally as a result of the early amortizations made during 2004 of six issues of preferred shares amounting to a total of €1,931.8 million and $850 million of nominal value.

2003 Compared to 2002

The €82.7 million increase in 2003 reflected mainly a €168.9 million increase in net income attributable to minority shareholders, principally related to increased minority interests in Banesto and Santander Serfín, and a €86.2 million decrease in dividends on preference shares of subsidiaries principally as a result of the early amortizations made during 2003 and the dollar’s slide against the euro.

     Net Income Information on U.S. GAAP Basis

Our consolidated financial statements have been prepared in accordance with Spanish GAAP. Spanish GAAP differs in certain significant respects from U.S. GAAP. For a summary of the most significant adjustments required to arrive at net income on U.S. GAAP basis, see note 28 to our consolidated financial statements.

		Year ended December 31,
		2004	2003	2002
As Reported		(in thousands of euros, except per share data)
	Net attributable income	3,135,558	2,610,819	2,247,177
	Net attributable income per average share (1)	0.63	0.55	0.48
U.S. GAAP
	Net income	3,940,866	2,264,332	2,286,959
	Net income per average share (1)	0.80	0.47	0.48
(1)	Based on the average number of shares outstanding in the relevant year, including those held by our consolidated subsidiaries.

Financial Condition

     Assets and Liabilities

Excluding Abbey, our total assets were €379,250.8 million at December 31, 2004, a 7.8% or €27,460.3 million increase from total assets of €351,790.5 million at December 31, 2003, which was an 8.5% or €27,582.4 million increase from total assets of €324,208.1 million at December 31, 2002. Excluding Abbey, our gross loans and credits to corporate clients, individual clients and government and public entities which include securities purchased from such clients under agreements to resell, increased by 15.1% to €204,466.6 million at December 31, 2004 from €177,620.7 million at December 31, 2003, mainly due to increased business in Spain, Germany, Norway (as a result of the acquisition of Elcon) and Latin America (mainly in Brazil, Puerto Rico, Chile and Mexico). Excluding Abbey, customer liabilities, which are principally deposits from clients and securities sold to clients und er agreements to repurchase, increased by 9.1% from €159.335.6 million at December 31, 2003, to €173,842.2 million at December 31, 2004, mainly due to increased volumes in Spain, Germany and Latin America (mainly in Brazil and Chile). Excluding Abbey, other managed funds, including mutual funds, pension funds and other managed portfolios, increased by 15.2% from €108,903.0 million at December 31, 2003, to €125,454.0 million at December 31, 2004, mainly due to increased volumes of mutual funds, pension funds and managed portfolios both in Spain and abroad.

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Including Abbey, at December 31, 2004, our total assets were €575,397.9 million; our gross loans and credits were €342,177.0 million; our customer deposits were €293,845.7 million and our total managed funds were €139,994.7 million.

     Capital

Stockholders’ equity, net of treasury stock, at December 31, 2004, was €32,584.3 million, an increase of €13,515.3 million or 70.9% from €19,069.0 million at December 31, 2003, mainly due to the capital increase of €12,540.9 related to the acquisition of Abbey.

At December 31, 2004, our eligible capital, including Abbey, exceeded the minimum required by the Bank of Spain by approximately €11.1 billion. See “Item 4. Information on the Company—B. Business Overview—Supervision and Regulation—Capital Adequacy Requirements.”

Including Abbey, we estimate that our Tier 1 capital ratios, calculated in accordance with Basel Committee guidelines, and our total capital ratios, which include Tier 1 and Tier 2 capital, at December 31, 2004 and 2003 were as set forth:

	December 31,
	2004		2003
Tier 1 Capital Ratio	7.16	%	8.26	%
Total Capital Ratio — Tier 1 and Tier 2	13.01	%	12.43	%

     B. Liquidity and capital resources

Management of liquidity

For information about our liquidity risk management process, see Item 11. “Quantitative and Qualitative Disclosures About Market Risks — Part.6 Market Risk — Statistical Tools for Measuring and Managing Market Risk — Non Trading Activity — Liquidity Risk” and “—Quantitative analysis — C. Financial management —Management of structural liquidity”.

Sources of funding

As a financial group, our main source of liquidity is our customer deposits which consist primarily of demand, savings and time deposits. In addition, we complement our customer deposits through the access to the interbank market (overnight and time deposits) and to the domestic and international capital markets. For this purpose, we have in place a series of domestic and international programs for the issuance of commercial paper and medium and long term debt. We also maintain a diversified portfolio of liquid assets and securitized assets throughout the year. In addition, another source of liquidity is the generation of cash flow.

We have raised significant funds in the domestic and international capital markets in order to finance our activities. Under the 2004 Issues and Securitization Plan, we obtained (excluding Abbey) €35.0 billion from the capital markets, 71% of which was obtained through medium and long-term issues, including preference shares and subordinated debt. Securitization of medium and long-term assets amounted to €11.0 billion in 2004.

At December 31, 2004, including Abbey, we had outstanding €84.0 billion of senior debt, of which €17.5 billion were mortgage bonds and €26.1 billion promissory notes, as well as €20.2 billion in subordinated debt and €7.2 billion in preferred stock.

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The following table shows the average balances during the years 2004 (including Abbey) and 2003 of our principal sources of funds:

	2004	2003
	(In thousands of euros)
Due to credit institutions	66,941,299	61,722,091
Customer deposits	178,076,060	163,592,978
Marketable debt securities	49,994,188	36,887,726
Subordinated debt	12,445,717	11,867,348
Total	307,457,264	274,070,143

The average maturity of our outstanding debt as of December 31, 2004 is the following:

•	Senior debt	3.9 years
•	Mortgage debt	6.0 years
•	Subordinated debt	9.3 years

Exhibits V and VI to our consolidated financial statements included herein show a detail of our senior and subordinated long-term debt, including their maturities.

The cost and availability of debt financing are influenced by our credit ratings. A reduction in these ratings could increase the cost of, and reduce our market access to debt financing. Our credit ratings are as follows:

	Long-Term	Short-Term	Financial Strength
Moody´s	Aa3	P1	B
Standard & Poor´s	A+	A1
Fitch	AA-	F1+	B

Including Abbey, our total customer funds (customer deposits, excluding assets sold under repurchase agreements, marketable debt securities and subordinated debt) totaled €355.5 billion at December 31, 2004. Including Abbey and assets sold under repurchase agreements, customer funds totaled €398.0 billion at December 31, 2004. Including Abbey, loans and credits (gross) totaled €342.2 billion at the same date.

We remain well placed to access various wholesale funding sources from a wide range of counterparties and markets, and the changing mix evident between customer deposits and repos, deposits by banks and debt securities in issue primarily reflects comparative pricing, maturity considerations and investor counterparty demand rather than any material perceived trend.

We use our liquidity to funding our lending and investment securities activities, for the payment of interest expense, for dividends paid to shareholders and the repayment of debt.

We, the Santander Group, are a European and Latin American financial group. Although, at this moment, except for Argentina and Venezuela, we are not aware of any legal or economic restrictions on the ability of our subsidiaries to transfer funds to the Bank (the parent company) in the form of cash dividends, loans or advances, capital repatriation and other forms, there is no assurance that in the future such restrictions will not be adopted or how they would affect our business. Nevertheless, the geographic diversification of our businesses limits the effect of any restrictions that could be adopted in any given country.

In prevailing economic conditions and with interest rates at relatively low historical levels in Spain, UK and the rest of Europe, it is anticipated that the growth in demand for further borrowing by customers may, in the medium term, continue to exceed customer deposits received, thus increasing net customer lending further and increasing gradually over time our dependence on the wholesale market for funding.

We believe that our working capital is sufficient for our present requirements and to pursue our planned business strategies.

As of December 31, 2004 and to the present date, we did not, and presently do not, have any material commitments for capital expenditures, except as disclosed in Item 4. “Information on the Company — Recent Events”.

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Other contingent liabilities and commitments

As of December 31, 2004 (including Abbey) and December 31, 2003, we had outstanding the following contingent liabilities and commitments:

	2004	2003
	(in thousands of euros)
Contingent liabilities:
Rediscounts, endorsements and acceptances	206,042	26,720
Assets assigned to sundry obligations	24	81,160
Guarantees and other sureties	30,915,447	27,273,863
Other contingent liabilities	3,073,870	3,372,446
	34,195,383	30,754,189
Commitments:
Sales with repurchase option	40,310	512,698
Balances drawable by third parties:
Credit institutions	1,700,214	943,456
Public authorities	2,288,834	2,569,614
Other sectors	60,315,083	45,099,247
Other commitments	6,975,543	5,385,641
	71,319,984	54,510,656
	105,515,367	85,264,845

Relationship with unconsolidated companies

We have significant holdings in companies whose business activity is not directly related to that of the Bank. According to Spanish GAAP, these holdings are not consolidated. (See a detail of these companies in Exhibit II to our Consolidated Financial Statements).

Transactions with these companies are made at market conditions and are closely monitored by our regulatory authorities. See Note 24 to our Consolidated Financial Statements for disclosure of the effect of these transactions on our income statement and balance sheet.

Also, we use special purpose vehicles (“fondos de titulización”) in our securitization activity. These vehicles are independent entities and are not consolidated in the Group´s financial statements. We are not required to repurchase assets or contribute additional assets to any of these special purpose vehicles. We do, however, provide in the ordinary course of business certain loans (amounting to €232.5 million to “fondos de titulización” in Spain) to some of these special purpose vehicles, which are provisioned in accordance with the risks involved. In 2004, the Group (excluding Abbey) securitized €11.0 billion of medium and long-term assets.

In the ordinary course of business, Abbey enters into securitization transactions using special purpose securitization companies which are consolidated and included in Abbey´s financial statements as quasi-subsidiaries. Except for some mortgage indemnity guarantees assigned to some transactions made before January 1, 2002, Abbey is under no obligation to support any losses that may be incurred by the securitization companies or the holders of the securities, and has no right or obligation to repurchase any securitized loan. Abbey has made some interest bearing subordinated loans to these securitization companies.

We do not have transactions with un-consolidated entities other than the aforementioned ones.

     C. Research and development, patents and licenses, etc.

We do not currently conduct any significant research and development activities.

     D. Trend information

The European financial services sector is likely to remain competitive with an increasing number of financial service providers and alternative distribution channels. Further, consolidation in the sector (through mergers, acquisitions or alliances) is likely to occur as the other major banks look to increase their market share or combine with complementary businesses. It is foreseeable that regulatory changes will take place in the future that will diminish barriers in the markets.

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The following are the most important trends, uncertainties and events that are reasonably likely to have a material adverse effect on the Bank or that would cause the disclosed financial information not to be indicative of our future operating results or our financial condition:

• a downturn in real estate markets, and a corresponding increase in mortgage defaults;

• the recent interest rate hikes in the United States;

• uncertainties relating to economic growth expectations, especially in the United States, Spain, the United Kingdom, other European countries and Latin America, and the impact they may have over interest and exchange rates;

• the effect that economic slowdown may have over Latin America and fluctuations in interest and exchange rates;

• the chance that changes in the macroeconomic environment will deteriorate the quality of our customers` credit;

• a possible downturn in capital markets;

• a drop in the value of the euro relative to the US dollar, the Sterling pound or Latin American currencies;

• inflationary pressures, because of the effect they may have in relation to increases of interest rates and decreases of growth;

• increased consolidation of the European financial services sector; and

• although it is foreseeable that entry barriers to domestic markets in Europe will be lowered, our possible plans of expansion into other markets could be affected by regulatory requirements of the national authorities of these countries.

International Financial Reporting Standards (“IFRS”)

Under Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002, all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after January 1, 2005 in conformity with the International Financial Reporting Standards (“IFRSs”) which have been previously ratified by the European Union. Therefore, we are required to prepare our consolidated financial statements for the year ending December 31, 2005 in conformity with the IFRSs.

Under IFRS 1, First-Time Adoption of International Financial Reporting Standards, our consolidated financial statements for 2005 must necessarily include, for comparison purposes, a consolidated balance sheet as of December 31, 2004, and a consolidated statement of income for the year then ended prepared in accordance with the methods established by the IFRSs in force as of December 31, 2005.

In order to adapt the accounting system of Spanish credit institutions to the new standards, on December 22, 2004, the Bank of Spain issued Circular 4/2004 on Public and Restricted Financial Reporting Standards and Model Financial Statements. We are completing a plan for transition to IFRSs which includes, inter alia, an analysis of the accounting criteria differences, the selection of the accounting criteria to be applied when alternative treatments are permitted and an assessment of the changes in reporting procedures and systems.

The approval of the IFRSs introduces changes in the financial statements by modifying general accounting principles, as well as changes in reporting (income statement and balance sheet). In addition, it regulates specific aspects of the business areas, such as their definition and disclosure levels, and introduces the mandatory auditing of the same.

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The following tables provide a detail of our unaudited consolidated income statement and balance sheet as of December 31, 2004, restated in accordance with new IFRSs criteria:

Consolidated Income Statement
(In millions of euros)	2004
Net interest income (without dividends)	7,372.3
Dividends	389.0
Net interest income	7,761.3
Income from companies accounted for by the equity method	449.0
Net fees	4,582.8
Insurance activity	161.4
Commercial revenue	12,954.5
Gains (losses) on financial transactions	1,100.7
Gross operating income	14,055.2
Income from non-financial services	347.8
Non-financial expenses	(145.2	)
Other operating income	(62.9	)
Operating costs	(7,533.5	)
General administrative expenses	(6,694.7	)
Personnel	(4,236.0	)
Other administrative expenses	(2,458.7	)
Depreciation and amortization	(838.7	)
Net operating income	6,661.6
Impairment loss on assets	(1,843.4	)
Net loan loss provisions	(1,572.8	)
Goodwill	(138.2	)
Other assets	(132.4	)
Other income	(236.9	)
Income befote taxes (ordinary)	4,581.3
Corporate income tax	(596.8	)
Net income from ordinary activities	3,984.5
Net income from discontinued operations	11.7
Net consolidated income (ordinary)	3,996.2
Minority interests	390.4
Attributable income to the Group (ordinary)	3,605.9
Net extraordinary gains and writedowns	—
Attributable income to the Group	3,605.9

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Balance Sheet	December 31, 2004
(In millions of euros)	Without Abbey		With Abbey
Assets
Cash on hand and deposits at central banks	8,121		8,801
Trading portfolio	31,222		83,032
Debt securities	22,380		56,736
Equities	2,803		4,470
Other	6,038		21,826
Other financial assets at fair value	96		96
Available-for-sale financial assets	54,114		75,141
Debt securities	46,380		58,397
Equities	7,734		16,744
Loans	246,044		420,886
Deposits at credit institutions	37,443		55,289
Loans and credits	201,906		358,524
Other	6,695		7,072
Investments	16,253		3,748
Intangible assets and property and equipment	5,834		10,980
Goodwill	4,827		15,090
Insurance and reinsurance assets	2,648		5,208
Other	22,627		38,129
Total assets	391,785		661,113
Liabilities and shareholders’ equity
Trading portfolio	11,983		33,795
Financial liabilities at amortized cost	307,917		509,259
Due to central banks and credit institutions	57,763		84,301
Customer deposits	176,820		290,173
Marketable debt securities	54,582		106,916
Subordinated debt	13,471		22,178
Other financial liabilities	5,281		5,691
Insurance liabilities	7,101		41,568
Provisions	13,690		15,660
Other liabilities accounts	9,750		16,708
Preferred securities	4,830		7,623
Minority interest	2,085		2,085
Equity adjustments by valuation	1,792		1,778
Capital stock	3,127		3,127
Reserves	27,215		27,215
Net income attributable to the Group	3,606		3,606
Less: dividends	(1,311	)	(1,311	)
Total liabilities and shareholders’ equity	391,785		661,113
Off-balance-sheet managed funds	125,454		139,995
Total managed funds	517,239		801,108

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     E. Off-balance sheet arrangements

We have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

     F. Tabular disclosure of contractual obligations

The following table summarizes our contractual obligations by remaining maturity at December 31, 2004 (including Abbey):

		More than	More than
		1 year but	3 years but
Contractual obligations	Less than	less than	less than	More than
(in millions of euros)	1 year	3 years	5 years	5 years	Total
Marketable debt securities	33,381	29,201	5,658	15,767	84,007
Subordinated debt	1,490	1,674	1,569	15,461	20,194
Capital lease obligations	170	329	278	1,333	2,110
Purchase obligations	252	211	91	—	554
Other long-term liabilities	48	—	—	5,024	5,072
Total	35,341	31,415	7,596	37,585	111,937

The maturity of deposits from credit institutions and from customer deposits, neither of which is reflected in the above table, is given in Notes 14 and 15 of the consolidated financial statements, respectively.

For a description of our futures transactions, which are not reflected in the above table, see Note 23 to our consolidated financial statements.

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Item 6. Directors, Senior Management and Employees

A.Directors and senior management.

We are managed by our board of directors which currently consists of 19 members. In accordance with our Bylaws (Estatutos), the board shall consist of at least 14 and not more than 30 members. Each member of the board is elected to a three-year term by our stockholders at a general meeting, with approximately one-third of the members being elected each year, but they can be re-elected.

Our board of directors meets approximately nine times per year. In 2004, it met 13 times. Our board of directors elects our Chairman and Vice Chairmen from among its members, as well as the Chief Executive Officer. Between board meetings, lending and other board powers reside with the Executive Committee (Comisión Ejecutiva) and with the Risk Committee (Comisión Delegada de Riesgos). The Chairman is the Bank’s most senior officer and, as a result, has delegated to him all such powers as may be delegated under Spanish Law, our By-laws and the Regulations of the Board. The Chairman leads the Bank’s management team, in accordance with the decisions made and the criteria set by our shareholders at the General Shareholders’ Meeting and by the Board.

The Chief Executive Officer by delegation and under the direction of the Board and of the Chairman (as the Bank’s most senior officer) leads the business and assumes the Bank’s highest executive functions.

Our board holds ultimate lending authority and it delegates such authority to the Risk Committee, which generally meets twice a week. Members of our senior management are appointed and removed by the board.

The current members of our board of directors are:

Name	Position with Banco Santander Central Hispano	Director Since
Emilio Botín (1)	Chairman	1960
Fernando de Asúa	First Vice Chairman	1999
Alfredo Sáenz	Second Vice Chairman and Chief Executive Officer	1994
Matías R. Inciarte	Third Vice Chairman	1988
Manuel Soto	Fourth Vice Chairman	1999
Assicurazioni Generali, S.p.A.	Director	1999
Antonio Basagoiti	Director	1999
Ana P. Botín (1)	Director	1989
Emilio Botín O. (1)	Director	1989
Javier Botín (1)	Director	2004
Lord Burns	Director	2004
Guillermo de la Dehesa	Director	2002
Rodrigo Echenique	Director	1988
Antonio Escámez	Director	1999
Francisco Luzón	Director	1997
Abel Matutes	Director	2002
Mutua Madrileña Automovilista	Director	2004
Luis Ángel Rojo	Director	2005
Luis Alberto Salazar-Simpson	Director	1999

(1) Ana P. Botín, Emilio Botín O. and Javier Botín are daughter and sons, respectively, of Emilio Botín.

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Our current Executive Officers are:

Name	Position with Banco Santander Central Hispano
Emilio Botín	Chairman of the Board of Directors and of the Executive Committee
Alfredo Sáenz	Second Vice Chairman of the Board of Directors and Chief Executive Officer
Matías R. Inciarte (1)	Third Vice Chairman of the Board of Directors and Chairman of the RiskCommittee
Ana P. Botín	Chairwoman, Banesto
Francisco Luzón	Director, Executive Vice President, America
José A. Alvarez	Executive Vice President, Financial Management
David Arce	Executive Vice President, Internal Auditing
Ignacio Benjumea	Executive Vice President, General Secretariat and of the Board
Teodoro Bragado	Executive Vice President, Risk
Juan Manuel Cendoya	Executive Vice President, Communication and Research
José María Espí	Executive Vice President, Risk
Enrique G. Candelas	Executive Vice President, Retail Banking
Francisco G. Roldán	Chief Executive Officer, Abbey
Joan-David Grimà	Executive Vice President, Industrial Portfolio
Juan Guitard	Executive Vice President, General Secretariat and of the Board
Gonzalo de las Heras	Executive Vice President, Global Wholesale Banking
Antonio H. Osorio	Executive Vice President, Portugal
Adolfo Lagos	Executive Vice President, Global Wholesale Banking
Jorge Maortua	Executive Vice President, Global Wholesale Banking
Francisco Martín	Executive Vice President, Global Wholesale Banking
Pedro Mateache	Executive Vice President, Resources and Costs
Serafín Méndez	Executive Vice President, Resources and Costs
Jorge Morán	Executive Vice President, Asset Management and Insurance
Javier Peralta	Executive Vice President, Risk
Marcial Portela	Executive Vice President, America
Juan R. Inciarte (1)	Executive Vice President, Europe and Consumer Lending
José Manuel Tejón	Executive Vice President, Financial Accounting
Jesús Mª Zabalza	Executive Vice President, America

(1) Matías and Juan R. Inciarte are brothers.

Following is a summary description of the relevant business experience and principal business activities of our current Directors and executive officers performed both within and outside Banco Santander Central Hispano, S.A.:

Emilio Botín (Chairman of the Board of Directors and of the Executive Committee)

Born in 1934. He joined Banco Santander in 1958 and in 1986 he was appointed Chairman of the Board. He is also a Director of Shinsei Bank.

Fernando de Asúa (First Vice Chairman of the Board of Directors and Chairman of the Appointments and Remuneration Committee)

Born in 1932. Former Vice Chairman of Banco Central Hispanoamericano from 1991 to 1999. He was appointed Director in April 1999 and First Vice Chairman in July 2004. He is an Honorary Chairman of IBM España, S.A. and a Director of Cepsa, Técnicas Reunidas, S.A., Air Liquide España, S.A. and Constructora Inmobiliaria Urbanizadora Vasco-Aragonesa, S.A.

Alfredo Sáenz (Second Vice Chairman of the Board of Directors and Chief Executive Officer)

Born in 1942. Former Vice Chairman of Banco Bilbao Vizcaya and Chairman of Banca Catalana until 1993. In 1994, he was appointed Chairman of Banesto and in February 2002, Second Vice Chairman and Chief Executive Officer of Banco Santander Central Hispano. He is also Vice Chairman of Cepsa and a Director of San Paolo IMI SpA and Auna Operadores de Telecomunicaciones, S.A.

Matías R. Inciarte (Third Vice Chairman of the Board of Directors and Chairman of the Risk Committee)

Born in 1948. He joined Banco Santander in 1984 and was appointed Executive Vice President and Chief Financial Officer in 1986. In 1988 he was appointed Director and in 1994 Second Vice Chairman. He is also Chairman of Unión de Crédito Inmobiliario, S.A. and Director of Banesto, S.A., Financiera Ponferrada, S.A., Grupo Corporativo Ono, S.A. and Operador del Mercado Ibérico de Energía Polo Español, S.A. He was Minister of the Presidency of the Spanish Government (1981-1982).

Manuel Soto (Fourth Vice Chairman of the Board of Directors and Chairman of the Audit and Compliance Committee)

Born in 1940. He was appointed Director in April 1999. He is Vice Chairman of Indra Sistemas, S.A. and a Director of Inversiones Inmobiliarias Lar, S.A., Cortefiel, S.A. and Corporación Financiera Alba, S.A.

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Assicurazioni Generali, S.p.A. (“Assicurazioni”)

An Italian insurance company represented by its Chairman, Mr. Antoine Bernheim, who was born in 1924. Assicurazioni is a former Director of Banco Central Hispanoamericano from 1994 to 1999. Assicurazioni was appointed Director in April 1999.

Antonio Basagoiti

Born in 1942. Former Executive Vice President of Banco Central Hispanoamericano. He was appointed Director in July 1999. He is Chairman of Unión Fenosa, S.A., Vice Chairman of Golf La Moraleja, S.A. and of Faes Farma, S.A. and a Director of Pescanova, S.A. and Cepsa.

Ana P. Botín

Born in 1960. Former Executive Vice President of Banco Santander, S.A. and former Chief Executive Officer of Banco Santander de Negocios from 1994 to 1999. In February 2002, she was appointed Chairwoman of Banesto. She is also a Director of Inmobiliaria Urbis, S.A., Assicurazioni Generali, SpA. and Grupo Televisa, S.A.

Emilio Botín O.

Born in 1964. Former Executive Vice President of Banco Santander, S.A. He is the sole Administrator of Puente San Miguel, S.A. and Chairman of Swissrisk.

Javier Botín

Born in 1973. He was appointed Director in July 2004. He is also an executive Director of M&B Capital Advisers, Sociedad de Valores, S.A.

Lord Burns

Born in 1944. He was appointed Director in December 2004. He is also Chairman of Abbey and Glas Cymru (Welsh Water) and a non-executive Director of Pearson Group plc and British Land plc. He has been appointed as a non-executive director and deputy chairman of Marks and Spencer Group plc, which takes effect October 1, 2005. He was formerly Permanent Secretary to the UK Treasury and chaired the UK Parliamentary Financial Services and Markets Bill Joint Committee.

Guillermo de la Dehesa

Born in 1941. Former Secretary of State of Economy and Secretary General of Commerce of the Spanish Government and Chief Executive Officer of Banco Pastor. He was appointed Director in June 2002. He is Chairman of AVIVA Vida y Pensiones, S.A. and a Director of Campofrío Alimentación, S.A., Unión Fenosa, S.A., Tele Pizza, S.A., Goldman Sachs Europe Ltd. and AVIVA plc. He is also Chairman of the Centre for Economic Policy Research (CEPR) in London, member of the Group of Thirty of Washington, and Chairman of the Board of Trustees of the Instituto de Empresa.

Rodrigo Echenique

Born in 1946. Former Director and Chief Executive Officer of Banco Santander, S.A. from 1988 to 1994. He is Chairman of the Social Economic Council of the Carlos III University (Madrid) and a Director of Inversiones Inmobiliarias Lar, S.A.

Antonio Escámez

Born in 1951. Former Director and Executive Vice President of Banco Central Hispanoamericano from 1988 to 1999. He was appointed Director in April 1999. He is also Chairman of Santander Consumer, Patagon and Arena Communications España, S.A., and Vice Chairman of Attijariwafa Bank.

Francisco Luzón

Born in 1948. He joined Banco Santander in 1996 as Executive Vice President, Adjoint to the Chairman. Former Chairman of Banco Exterior de España (from 1988 to 1996), Caja Postal (from 1991 to 1996), Corporación Bancaria de España (from 1991 to 1996) and of Argentaria (1996). He is also a Director of Industria de Diseño Textil, S.A. and Chairman of the Social Council of the University of Castilla-La Mancha.

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Abel Matutes

Born in 1941. Former Foreign Minister of the Spanish Government and EU Commissioner (from 1989 to 1993). He is also a Director of Assicurazione Internazionale di Providenza, FCC Construcción, S.A. and Instituto Sectorial de Promoción y Gestión de Empresas, S.A.

Mutua Madrileña Automovilista

Spanish car insurance company represented on our board by Mr. Luis Rodríguez, who was born in 1941. Mr. Rodríguez is a Director of Mutua Madrileña Automovilista and Chairman of Mutuactivos SAU SGIIC.

Luis Ángel Rojo

Born in 1934. Former Head of Economics, Statistics and Research Department, Deputy Governor and Governor of the Bank of Spain. He has been a member of the Governing Council of the European Central Bank, Vice-Chairman of the European Monetary Institute, member of United Nations’ Development Planning Committee and Treasurer of the International Association of Economy. He is Professor of Economic Theory of the Complutense University of Madrid, Member of the Group of Wise Men appointed by the ECOFIN Council for the study of integration of the European financial markets, member of the Royal Academy of Moral and Political Sciences and of the Royal Academy of the Spanish Language.

Luis Alberto Salazar-Simpson

Born in 1940. He is Chairman of Auna Operadores de Telecomunicaciones, S.A. and Constructora Inmobiliaria Urbanizadora Vasco-Aragonesa, S.A., Joint Administrador of Auna Operadores de Telecomunicaciones, S.A. and Retevisión Móvil, S.A., a Director of Mutua Madrileña Automovilista and Saint Gobain Cristalería, S.A.

José A. Alvarez

Born in 1960. He joined the Bank in 2002. In 2004, he was appointed Executive Vice President, Financial Management.

David Arce

Born in 1943. He joined Banco Santander in 1964. In 1994, he was appointed Executive Vice President, Internal Auditing of Banco Santander and Banesto. He is also a Director of Banesto.

Ignacio Benjumea

Born in 1952. He joined Banco Santander in 1987 as General Secretary of Banco Santander de Negocios. In 1994 he was appointed General Secretary and Secretary of the Board of Banco Santander. In 1999, he was appointed Executive Vice President, Secretary General and of the Board of Banco Santander Central Hispano. He is also a Director of Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A., Sociedad Rectora de la Bolsa de Madrid, S.A. and La Unión Resinera Española, S.A.

Teodoro Bragado

Born in 1944. He joined the Bank in 1985. He was appointed Executive Vice President, Risk, in March 2003. He is also a Vice Chairman of Compañía Española de Seguros de Crédito a la Exportación (“CESCE”) and a Director of Compañía Española de Financiación del Desarrollo, S.A., Consorcio Mexicano de Aseguradores de Crédito, S.A. and Consorcio Internacional de Aseguradores de Crédito, S.A.

Juan Manuel Cendoya

Born in 1967. Former Manager of the Legal and Tax Departament of Bankinter, S.A. from 1999 to 2001. He joined the Bank on July 23, 2001 as Executive Vice President, Communications and Research.

José María Espí

Born in 1944. He joined the Bank in 1985 and, in 1988, was appointed Executive Vice President, Human Resources. In 1999 he was appointed Executive Vice President, Risk. He is also Chairman of Unión de Crédito Inmobiliario, S.A., E.F.C. and Director of Unión de Crédito Inmobiliario, S.A.

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Enrique G. Candelas

Born in 1953. He joined Banco Santander in 1975 and was appointed Senior Vice President in 1993. He was appointed Executive Vice President, Retail Banking in January 1999. He is also a Director of Mobipay España, S.A.

Francisco G. Roldán

Born in 1953. Former Chief Executive Officer of Grupo Argentaria, Caja Postal and Banco Hipotecario from 1996 to June 2000, and of Banesto from June 2000 until March 2002. In March 2002, he was appointed Executive Vice President, Finance, of Banco Santander Central Hispano, S.A. and in October 2004, Chief Executive Officer of Abbey National plc. He is also a Director of Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. and AC Hoteles, S.A.

Joan-David Grimà

Born in 1953. He joined Banco Central Hispanoamericano in 1993. He was appointed Executive Vice President, Industrial Portfolio in June 2001. He is also Vice Chairman and Chief Executive Officer of Auna Operadores de Telecomunicaciones, S.A, and a Director of Antena 3 de Televisión, S.A., Teka Industrial, S.A. and ACS Actividades de Construcción y Servicios, S.A.

Juan Guitard

Born in 1960. Former General Secretary of the Board of Banco Santander de Negocios (from 1994 to 1999) and Manager of the Investment Banking Department of the Bank (from 1999 to 2000). He rejoined the Bank in 2002, being appointed Executive Vice President, Vice-Secretary General of the Board.

Gonzalo de las Heras

Born in 1940. He joined the Bank in 1990. He was appointed Executive Vice President in 1991 and supervises the North American business of the Group.

Antonio H. Osorio

Born in 1964. He joined Banco Santander in 1997 and was appointed Executive Vice President, Portugal, in June 2001. He is Chairman of Banco Santander Totta and Chairman of the Executive Committee of Banco Santander de Negocios Portugal.

Adolfo Lagos

Born in 1948. Former Chief Executive Officer of Grupo Financiero Serfin since 1996. He was appointed Executive Vice President, America, in October 2002 and Executive Vice President, Global Wholesale Banking, in April 2003.

Jorge Maortua

Born in 1961. Former Executive Vice President of Banesto since 2001, he joined the Bank in 2003 as Head of Global Treasury and was appointed Executive Vice President, Global Wholesale Banking, in 2004.

Francisco Martín

Born in 1955. He joined the Bank in 1985 and in 1992 was appointed Executive Vice President, Head of the International Division. In 2002, he became Executive Vice President, Head of Global Corporate Banking.

Pedro Mateache

Born in 1959. Former partner-manager of McKinsey & Co. He was appointed Executive Vice President, Resources and Costs in 2003.

Serafín Méndez

Born in 1947. He joined the Bank in 1964. He is the Manager of the Premises and Security Area and was appointed Executive Vice President, Resources and Costs in 2004.

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Jorge Morán

Born in 1964. He joined the Bank in 2002. He was appointed Executive Vice President, Asset Management and Insurance in 2004.

Javier Peralta

Born in 1950. He joined the Bank in 1989 and in 1993 was appointed Executive Vice President. In 2002, he was appointed Executive Vice President, Risk.

Marcial Portela

Born in 1945. He joined the Bank in 1998 as Executive Vice President in charge of operations, human resources and costs. In 1999, he was appointed Executive Vice President, America. He is also Vice Chairman of Comunitel Global, S.A. and Director of Best Global, S.A. and Unión Fenosa, S.A.

Juan R. Inciarte

Born in 1952. He joined Banco Santander in 1985 as Director and Executive Vice President of Banco Santander de Negocios. In 1989 he was appointed Executive Vice President and in 1991 Director of Banco Santander. He is also a Director of Cepsa, S.A.and Finanzauto, S.A.

José Tejón

Born in 1951. He joined the Bank in 1989. In 2002 he was appointed Executive Vice President, Financial Accounting.

Jesús Mª Zabalza

Born in 1958. Former Executive Vice President of La Caixa (from 1996 to 2002). He joined the Bank in 2002, being appointed Executive Vice President, America.

The following is a description of arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person referred to above was appointed.

There are two Directors that are or represent international financial institutions that have a holding in the Bank: Assicurazioni Generali S.p.A. (represented by Mr. Antoine Bernheim), and Mutua Madrileña Automovilista (represented by Mr. Luis Rodríguez).

      B. Compensation.

      Directors’ compensation

      By-law stipulated fees

Article 38 of the Bank’s by-laws provides that the members of our board of directors (together with our Executive Vice Presidents) may receive an amount up to 5% of the Bank’s net income for any fiscal year, for performing their duties as Directors.

The Board of Directors, making use of the powers conferred on it, applied 0.169% of the Bank’s income for 2004 (as compared to 0.196% for 2003 and 0.191% for 2002), as compensation for itself.

Consequently, the gross amount received by each Director as compensation in 2004 was €71,000 (€65,000 in 2003 and 2002). Additionally, the Executive Committee members received additional compensation, the gross amount of which was €155,000 in 2004 (€141,000 in 2003 and 2002).

Finally, the members of the Audit and Compliance Committee received additional compensation in 2004, the gross amount of which was €36,000 (€32,000 in 2003 and 2002).

      Salary compensation

As provided by our by-laws, the members of the Board and of the Executive Committee are entitled to be remunerated for discharging duties within the Bank other than those duties performed in their capacity as a Director.

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Consequently, the Bank’s executive Directors (who as of December 31, 2004, 2003 and 2002 are Mr. Emilio Botín, Mr. Alfredo Sáenz, Mr. Matías R. Inciarte, Ms. Ana P. Botín, and Mr. Francisco Luzón) received the following salary compensation:

	Thousands of Euros
	2004	2003	2002
Total aggregate salary compensation	16,179	14,784	13,438
Of which: Variable compensation	9,395	8,373	7,103

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The remuneration and other compensation granted to the Directors in 2004 is as follows:

	Thousands of Euros
	2004										2003	2002
	Bylaw-Stipulated Fees			Attendance Fees		Salary Compensation to Executive Directors
Directors	Board	Executive Committee	Audit Committe	Board	Other Fees	Fixed	Variable	Total	Other Compensation	Total	Total	Total
Emilio Botín	71	155	—	23	4	1,022	1,473	2,495	1	2,749	2,591	2,477
Fernando de Asúa Álvarez	71	155	36	23	122	—	—	—	—	407	378	693
Alfredo Sáenz	71	155	—	23	3	2,575	3,101	5,676	324	6,252	5,756	4,848
Matías R. Inciarte	71	155	—	23	104	1,300	1,748	3,048	144	3,545	3,456	3,241
Manuel Soto	71	—	36	21	22	—	—	—	—	150	136	131
Assicurazioni Generali, Spa.	71	—	—	5	—	—	—	—	—	76	73	68
Antonio Basagoiti	71	68	—	23	88	—	—	—	29	279	207	178
Ana Patricia Botín	71	155	—	23	2	850	1,150	2,000	1	2,252	1,980	1,646
Emilio Botín O.	71	—	—	21	2	—	—	—	—	94	85	102
Javier Botín	31	—	—	11	—	—	—	—	—	42	—	—
Lord Burns	2	—	—	2	—	—	—	—	—	4	—	—
Guillermo de la Dehesa	71	155	—	23	9	—	—	—	—	258	233	120
Rodrigo Echenique	71	155	36	23	109	—	—	—	719	1,113	992	1,027
Antonio Escámez	71	155	—	23	100	—	—	—	739	1,088	1,192	1,109
Francisco Luzón	71	155	—	23	2	1,037	1,923	2,960	327	3,538	3,202	2,873
Elías Masaveu (†)	71	—	—	6	4	—	—	—	—	81	85	87
Abel Matutes	71	—	36	23	14	—	—	—	—	144	130	65
Mutua Madrileña Automovilista	49	—	—	13	—	—	—	—	—	62	—	—
Luis Alberto Salazar-Simpson	71	—	36	21	15	—	—	—	—	143	129	124
Jaime Botín (*)	40	—	—	8	—	—	—	—	—	48	78	88
Juan Abelló (*)	68	—	34	13	6	—	—	—	—	121	126	63
José Manuel Arburúa (*)	22	—	—	6	91	—	—	—	1	120	181	176
Sir George Ross Mathewson (*)	62	—	—	7	—	—	—	—	—	69	81	78
Antonio de Sommer (*)	25	—	—	—	—	—	—	—	—	25	67	65
Other directors (1)	—	—	—	—	—	—	—	—	—	—	—	292
Total 2004	1,435	1,463	214	387	697	6,784	9,395	16,179	2,285	22,660	—	—
Total 2003	1,365	1,269	192	349	679	6,411	8,373	14,784	2,520	—	21,158	—
Total 2002	1,272	1,173	177	210	747	6,335	7,103	13,438	2,534	—	—	19,551

(*)	Directors who served on the Board of Directors for part of 2004 but who resigned prior to December 31, 2004.
(‡)	Directors who served on the Board of Directors for part of 2002 but who resigned prior to December 31, 2002. €289 thousand of the total amount relates to Mr. Ángel Corcóstegui Guraya.
(†)	Died on May 22, 2005.

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Compensation to the Board Members as representatives of the Bank and to Senior Management

Representation on other boards

By resolution of the Executive Committee, all the compensation received by the Bank’s Directors who represent the Bank on the Boards of Directors of listed companies in which the Bank has a stake (at the expense of those companies) relating to appointments made after March 18, 2002, will accrue to the Group. The compensation received in 2004 in connection with representation duties of this kind, relating to appointments made after March 18, 2002, was as follows:

		Thousands
	Company	of Euros
Emilio Botín	Royal Bank of Scotland	31.5
Emilio Botín	Shinsei Bank	77.0
Fernando de Asúa	Cepsa	140.6
		249.1

Additionally, other Directors received a total amount of €84,100 during 2004 for sitting on the boards of companies belonging to the Group.

Senior management

Additionally, below are the details of the aggregate compensation paid to the Bank’s Executive Officers (*) in 2004, 2003 and 2002:

		Thousands of Euros
	Number	Salary Compensation
	of				Other
Year	People	Fixed	Variable	Total	Compensation	Total
2002	19	10,215	12,437	22,652	3,945	26,597
2003	20	12,924	16,664	29,588	4,703	34,291
2004	23	15,156	24,399	39,555	1,727	41,282

(*) Excluding executive Directors’ compensation, which is detailed above.

Pension commitments, other insurance and other items

The total balance of supplementary pension obligations assumed by the Group over the years for its current and retired employees, which amounted to €19,109 million (covered mostly by in-house allowances) as of December 31, 2004, includes the obligations to those who have been Directors of the Bank during the year and who discharge (or have discharged) executive functions during the year. The total pension commitments for these Directors, together with the total sum insured under life insurance policies at that date and other items, amounted to €178 million as of December 31, 2004 (€162 million as of December 31, 2003 and €256 million as of December 31, 2002, of which €108 million related to the settlement of the pension rights referred to below).

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The following table provides information on the obligations undertaken and covered by the Group relating to pension commitments and other insurance for the Bank’s executive Directors:

	Thousands of euros
	2004		2003		2002
	Total Accrued		Total Accrued		Total Accrued
	Pension	Other	Pension	Other	Pension	Other
	Obligations	Insurance	Obligations	Insurance	Obligations	Insurance
Emilio Botín	10,700	—	10,028	—	9,420	—
Alfredo Sáenz	46,061	7,724	52,807	7,573	55,138	3,877
Matías R. Inciarte	27,752	3,900	27,442	3,900	25,522	3,823
Ana P. Botín	9,742	1,258	7,736	1,258	6,656	1,258
Francisco Luzón	35,703	6,224	19,448	4,886	18,452	4,698
Total	129,958	19,106	117,461	17,617	115,188	13,656

Additionally, other Directors benefit from life insurance policies at the Group’s expense, the related insured sum being €3 million as of December 31, 2004, 2003 and 2002.

In addition, the total pension commitments, together with the total sum insured under life insurance policies for the Bank’s Executive Officers (excluding executive Directors), amounted to €159 million as of December 31, 2004.

Pension settlement

Following the decision of Mr. Ángel Corcóstegui to resign, for personal reasons, in February 2002 from his position as First Vice Chairman of the Bank and Director (which entailed his corresponding resignation as Chief Executive Officer of the Bank and as member of the various Board Committees on which he sat), and in settlement for the pension commitments to him, the Bank paid on his resignation a gross amount of €108 million for his pension rights. This amount had been fully provided for as of that date. Upon payment, a withholding of 48% was made, and the amount withheld was paid into the Spanish Treasury. Accordingly, the net amount paid to Mr. Corcóstegui in this connection was €56 million. For more information, see “Legal Proceedings”.

Stock option plan

Our by-laws provide that Directors may also receive compensation in the form of shares of the Bank or options over the shares, or other remuneration linked to the share value following a resolution adopted by the shareholders at the General Shareholders’ Meeting (conducted in accordance with our by-laws and applicable Spanish legislation).

The details of the Bank’s stock options granted to the Board members as of December 31, 2004, are as follows:

			Options Granted		Exercised Options
	Options at 01/01/04	Average Exercise Price	Number	Exercise Price	Number	Exercise Price	Market Price Applied	Options at December 31, 2004	Average Exercise Price	Date of Commence - ment of Exercise Period	Date of Expiration of Exercise Period
Managers Plan 2000:
Emilio Botín	150,000	10.545	—	—	—	—	—	150,000	10.545	12/30/03	12/29/05
Alfredo Sáenz	100,000	10.545	—	—	—	—	—	100,000	10.545	12/30/03	12/29/05
Matías R. Inciarte	125,000	10.545	—	—	—	—	—	125,000	10.545	12/30/03	12/29/05
Antonio Escámez	100,000	10.545	—	—	—	—	—	100,000	10.545	12/30/03	12/29/05
Francisco Luzón	100,000	10.545	—	—	—	—	—	100,000	10.545	12/30/03	12/29/05
	575,000	10.545	—	—	—	—	—	575,000	10.545
Long-term ncentive plan (I-06):
Emilio Botín	—	—	541,400	9.07	—	—	—	541,400	9.07	01/15/08	01/15/09
Alfredo Sáenz	—	—	1,209,100	9.07	—	—	—	1,209,100	9.07	01/15/08	01/15/09
Matías R. Inciarte	—	—	665,200	9.07	—	—	—	665,200	9.07	01/15/08	01/15/09
Francisco Luzón	—	—	639,400	9.07	—	—	—	639,400	9.07	01/15/08	01/15/09
	—	—	3,055,100	9.07	—	—	—	3,055,100	9.07

The rights belonging to Ana P. Botín as beneficiary of the plan I-06 will be the ones that, by proposal of the Board of Directors of Banesto, the shareholders consent to at the Shareholders’ Meeting.

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Description of Stock Option and Compensation Plans

In recent years, the Bank has put in place compensation systems for its managers and employees linked to the market performance of the Bank’s shares based on the achievement of certain objectives. Below is a summary of the different stock option and compensation plans in effect as of January 1, 2004:

     Plan Four

Five of our officers participate in an option plan known as “Plan Four”. Each option received under this plan grants its holder the right to receive one share of Banco Santander Central Hispano ordinary common stock, par value €0.50. The exercise price of the shares subject to this plan is €7.84, and plan participants may exercise these options until December 30, 2005. Plan participants must hold the shares acquired through this plan for a period of twelve months following the date of exercise of the options. During 2004, 36,000 options were exercised and as of December 31, 2004, the balance of outstanding options under this plan was 228,000.

     Managers Plan 1999

As of January 1, 2004, 243 of our officers participated in an option plan known as the “Managers Plan 1999”. Each option received under this plan granted its holder the right to receive one share of Banco Santander Central Hispano ordinary common stock, par value €0.50. The exercise price of the shares subject to this plan was €2.29, and plan participants could exercise these options from December 31, 2001 until December 30, 2004. Plan participants must hold the shares acquired through this plan for a period of twelve months following the date of exercise of the options. During 2004, 1,139,488 options were exercised.

     Additional Managers Plan 1999

As of January 1, 2004, 14 of our officers participated in an option plan known as the “Additional Managers Plan 1999”. Each option received under this plan granted its holder the right to receive one share of Banco Santander Central Hispano ordinary common stock, par value €0.50. The exercise price of the shares subject to this plan was €2.41, and plan participants could exercise these options from April 1, 2002 until December 30, 2004. Plan participants must hold the shares acquired through this plan for a period of nine months following the date of exercise of the options. During 2004, 55,668 options were exercised.

     Investment Banking Plan

56 of our officers from the Global Wholesale Banking Division participate in an equity incentive plan known as the “Investment Banking Plan”. The number of options received by plan participants under this plan is based on the extent to which certain business objectives are achieved. Each option received under this plan grants its holder the right to receive one share of Banco Santander Central Hispano ordinary common stock, par value €0.50. The exercise price of the shares subject to this plan is €10.25, and plan participants may exercise the first 50% of the options granted from June 16, 2003, and the remaining 50% from June 16, 2004. The exercise period ended in both cases on June 15, 2005. During 2004, no options were exercised and as of December 31, 2004, the balance of outstanding options under this plan was 4,503,750.

     Young Executives Plan

111 of our officers participate in an option plan known as the “Young Executives Plan”. Each option received under this plan grants its holder the right to receive one share of Banco Santander Central Hispano ordinary common stock, par value €0.50. The exercise price of the shares subject to this plan is €2.29, and plan participants may have exercized the first 50% of the options granted from July 1, 2003 until June 30, 2005 and the remaining 50% from July 1, 2004 until June 30, 2005. Plan participants must hold the shares acquired through this plan for a period of twelve months following the date of exercise of the options. During 2004, 562,250 options were exercised and as of December 31, 2004, the balance of outstanding options under this plan was 364,000.

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     Managers Plan 2000

970 of our officers participate in an option plan known as the “Managers Plan 2000”. Each option received under this plan grants its holder the right to receive one share of Banco Santander Central Hispano ordinary common stock, par value €0.50. The exercise price of the options subject to this plan is €10.55, and plan participants may exercise these options from December 30, 2003 until December 29, 2005. Plan participants must hold the shares acquired through this plan for a period of twelve months following the date of exercise of the options. As of December 31, 2004, the balance of outstanding options under this plan was 13,341,000.

     European Branches Plan

27 of our officers participate in an incentive plan known as the “European Branches Plan”. Subject to the achievement of certain objectives, the beneficiaries of this plan will receive a payment in cash or in shares of Banco Santander Central Hispano. For purposes of the calculation of the number of shares to be delivered, the share price is calculated at the average quoted price of the month previous to the incorporation to the branch and plan participants could exercise 1,615,000 of the options granted from July 1, 2004 until July 15, 2004, and may exercise the remaining options granted from July 1, 2005 until July 15, 2005. During 2004, 140,000 options were exercised and as of December 31, 2004, the balance of outstanding shares to be delivered under this plan was 2,690,000.

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Stock Option and Compensation Plans

	Number of Shares		Euros		Year Granted	Qualifying Group	Number of People	Date of Commencement of Exercise Period	Date of Expiration of Exercise Period
			Exercise Price
Plans in force at January 1, 2002	36,025,123		8.64
Options granted	2,895,000		9.41
Of which:
European branches plan	2,895,000		9.41
Options exercised	(4,637,240	)	4.15
Of which:
Plan Four	(1,558,100	)	7.84
Managers Plan 1999	(3,000,700	)	2.29
Additional Managers Plan 1999	(78,440	)	2.41
Options canceled or not exercised	(6,974,580	)	—
Plans in force at December 31, 2002	27,308,303		9.32
Options granted	1,410,000		6.55
Of which:
European branches plan	1,410,000		6.55
Options exercised	(965,087	)	2.29
Of which:
Managers Plan 99	(678,325	)	2.29
Young Executives Plan	(262,250	)	2.29
Additional Managers Plan 99	(24,512	)	2.41
Options canceled or not exercised	(2,013,250	)	—
Plans in force at December 31, 2003	25,739,966		9.38
Options exercised	(1,933,406	)	(2.83	)
Of which:
Plan Four	(36,000	)	7.84
Managers Plan 99	(1,139,488	)	2.29
Additional Managers Plan 99	(55,668	)	2.41
Young Executives Plan	(562,250	)	2.29
European branches plan	(140,000	)	8.23
Options canceled or not exercised	(2,679,810	)	—
Plans in force at December 31, 2004	21,126,750		9.94
Of which:
Plan Four	228,000		7.84		1998	Managers	5	01/09/03	12/30/05
Investment Bank Plan	4,503,750		10.25		2000	Managers	56	06/16/03	06/15/05
Young Executives Plan	364,000		2.29		2000	Managers	111	07/01/03	06/30/05
Managers Plan 2000	13,341,000		10.55		2000	Managers	970	12/30/03	12/29/05
European branches plan	2,690,000		7.60	(*)	2002 and 2003	Managers	27	07/01/05	07/15/05

(*)    The average exercise price ranges from €5.65 to €10.15 per share.

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The option plans on shares of the Bank originally granted by management of Abbey to its employees (on Abbey shares) are as follows:

Plans in Force at December 31, 2004	Number of Shares	Average Exercise Price		Qualifying Group	Date of Commencement of Exercise Period	Date of Expiration of Exercise Period
		Pounds	Euros (*)
Executive options	358,844	4.16	5.90	Managers	03/25/99	04/04/14
Employee options	56,550	5.90	8.37	Employees	09/09/99	09/08/06
Sharesave	17,260,173	3.56	5.05	Employees	04/01/04	10/01/11
	17,675,567	3.58	5.08

(*)    The euro/pound sterling exchange rate was €1.4183 per pound as of December 31, 2004.

Lastly, on December 20, 2004, the Board of Directors decided to implement, pursuant to the approval of shareholders at our General Shareholders’ Meeting held on June 18, 2005, a new long-term incentive plan (I-06) in the form of stock options tied to the achievement of two objectives: a revaluation of the Bank’s share price and growth in earnings per share, in both cases above a sample of comparable banks. 2,750 officers are covered by this plan with a total of up to 103,050,000 options of Bank shares already granted at an exercise price of €9.07. The exercise period is from January 15, 2008 to January 15, 2009.

C. Board practices.

Date of expiration of the current term of office of the directors and the period during which the directors have served in that office:

The period during which the Directors have served in their office is shown in the table under Section A of this Item 6.

The date of expiration of the current term of office is shown in the table below:

Name	Date of expiration
Emilio Botín	1st half 2008
Fernando de Asúa	1st half 2007
Alfredo Sáenz	1st half 2006
Matías R. Inciarte	1st half 2008
Manuel Soto	1st half 2008
Assicurazioni Generali, S.p.A	1st half 2007
Antonio Basagoiti	1st half 2007
Ana P. Botín	1st half 2006
Emilio Botín O	1st half 2006
Javier Botín	1st half 2008
Lord Burns	1st half 2006
Guillermo de la Dehesa	1st half 2008
Rodrigo Echenique	1st half 2006
Antonio Escámez	1st half 2007
Francisco Luzón	1st half 2007
Abel Matutes	1st half 2008
Mutua Madrileña Automovilista	1st half 2007
Luis Ángel Rojo	1st half 2008
Luis Alberto Salazar-Simpson	1st half 2007

The terms and conditions of the contracts which, following a report from the Appointments and Remuneration Committee and approval by the Board, have been entered into by the Bank with its executive Directors Alfredo Sáenz, Matías R. Inciarte, Ana P. Botín and Francisco Luzón, can be summarized (notwithstanding certain specific provisions for each of the Directors in question) as follows:

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(i) Exclusivity and non-competition

Executive Directors may not enter into other service contracts with other companies or institutions, unless prior authorization is obtained from the Board of Directors, an obligation of non-competition being established with respect to companies and activities of a nature similar to that of the Bank and its consolidated Group.

(ii) Code of Conduct

Mention is made of the obligation to strictly observe the provisions of the Grupo Santander’s General Code and Code of Conduct in Securities Markets, specifically with respect to rules of confidentiality, professional ethics and conflict of interests.

(iii) Remuneration

The remuneration for undertaking their executive responsibilities consists basically of a fixed amount, to be reviewed yearly, and a variable amount in terms of the criteria established by the Bank from time to time.

In addition, executive Directors are entitled to receive a pension supplement in the event of early retirement or retirement, which may be externalized by the Bank. The Bank may request executive Directors to take early retire, provided they have reached the age of 50 and have served more than 10 years in the Bank and/or other Group companies, although the Bank may order an extension of their professional duties for 6 months in order to arrange for another Director to take over their responsibilities. Likewise, executive Directors may to take early retirement at their own request if they are over 55 and have served the Bank and/or other Group companies for 10 years. In any event, any decision regarding retirement or early retirement should be presented with 60 days’ notice.

The right to a pension supplement is also applicable (with certain differences between some contracts and others) if the Director’s services are terminated due to the coincidence of different objective circumstances such as those affecting the functional and organic status of the executive Director.

Pension rights are also recognized in favor of the spouse (widow) and children (orphans) in cases of death and permanent disability of the executive Director.

Generally, the amount of such pension supplement consists of the amount necessary to reach an annual gross amount equivalent to 100% of the fixed salary received by the Director in question at the time when he or she actually ceased working, plus 30% of the average of the last three variable remuneration amounts received. In certain cases, if the early retirement occurs at the request of the Director, the amount resulting after applying the above criterion would be reduced by percentages ranging from 20% to 4% in terms of the Director’s age on early retirement.

Receipt of pension supplements will be incompatible with the rendering of services to competitors of the Bank or its Group, unless the Bank’s express authorization is received.

Remuneration for undertaking executive responsibilities is compatible with the receipt of amounts specified by the By-laws (participation in earnings) and an attendance fees applicable to them merely in their capacity as members of the Board of Directors, as expressly established by the By-laws and the Regulations of the Bank’s Board of Directors.

(iv) Termination

The duration of such contracts is indefinite. However, if a contract is terminated owing to breach of an executive Director’s responsibilities or of his or her own free will, he or she will not be entitled to any financial compensation.

Whenever termination is attributable to the Bank or due to objective circumstances, the Director will be entitled to receive the following items of remuneration: a) the pension supplements which in each case are recognized in his or her favor on changing to early retired or retired status; or b) in certain cases, indemnities which, for an amount up to 5 years’ fixed annual salary, are established in his or her contract depending on the date on which termination occurs.

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(v) Insurance

The Bank provides life and accident insurance to its executive Directors, with coverage varying in each case depending on the policy established by the Bank for its senior management, as well as health insurance consisting of reimbursement.

(vi) Confidentiality and return of documents

A strict confidentiality obligation is established throughout the duration of the Director’s relationship with the Bank and also following termination of such relationship, consisting of the obligation to return to the Bank all documents and objects in possession of the executive Director relating to his or her activity.

     Compliance with NYSE Listing Standards on Corporate Governance

On November 4, 2003, the SEC approved new rules proposed by the New York Stock Exchange (NYSE) intended to strengthen corporate governance standards for listed companies. In compliance therewith, the following is a summary of the significant differences between our corporate governance practices and those applicable to domestic issuers under the NYSE listing standards.

Independence of the Directors on the Board of Directors

Under the NYSE corporate governance rules, a majority of the Board of Directors must be composed of independent directors, the independence of whom is determined in accordance with highly detailed rules promulgated by the NYSE. Spanish law does not contain any such requirements. The Board of Directors of Banco Santander Central Hispano has six independent directors (out of nineteen Directors total), as defined in Article 5 of the Regulations of the Board of Directors. We have not determined whether or not the directors on the Banco Santander Central Hispano Board would be considered independent under the NYSE rules. Article 5 of the Regulations of the Board of Directors defines the concept of an independent director as follows:

“Independent directors shall be deemed to be those external or non-executive Directors who: (i) are not, and do not represent, shareholders who have the power to influence the control of the Company; (ii) have not held executive positions therein in the last three years; (iii) are not connected to executive Directors by a family or professional bond; or (iv) do not maintain and have not maintained any relations with the Company or the Group which may impair their independence.”

Independence of the Directors on the Audit and Compliance Committee

Under the NYSE corporate governance rules, a majority of the audit committee must be composed of independent directors and by July 31, 2005, all members of the audit committee must be independent. Independence is determined in accordance with highly detailed rules promulgated by the NYSE.

The Audit and Compliance Committee of the Board of Directors of Banco Santander Central Hispano is composed of six Directors, five of whom are independent in accordance with the standards set forth in the previously mentioned Article 5 of the Regulations of the Board. These independence standards may not necessarily be consistent with, or as stringent as, the director independence standards established by the NYSE. Under Spanish law, a majority of the members and the chairman of the audit committee must be non-executive. All members of our Audit and Compliance Committee are non-executive Directors and its Chairman is independent in accordance with the standards set forth by the Regulations of the Board. The composition of the Audit and Compliance Committee is described under “Item 6. Directors, Senior Management and Employees—C. Board Practices—Audit and Compliance Committee and Appointments and Remuneration Committee”.

Independence of the Directors on the Appointments and Remuneration Committee

In accordance with the NYSE corporate governance rules, all U.S. companies listed on the NYSE must have a compensation committee and a nominations committee and all members of such committees must be independent in accordance with highly detailed rules promulgated by the NYSE. Under Spanish law, these committees are not required, though there is a non-binding recommendation for listed companies in Spain to have these committees and for them to be composed of non-executive directors. Banco Santander Central Hispano satisfies this non-binding recommendation. The composition of the Appointments and Remuneration Committee is described under “Item 6. Directors, Senior Management and Employees—C. Board Practices—Audit and Compliance Committee and Appointments and Remuneration Committee”.

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Separate Meetings for Non-Management Directors

In accordance with the NYSE corporate governance rules, non-management directors must meet periodically outside of the presence of management. Under Spanish law, this practice is not contemplated and as such, the non-management Directors on the Board of Directors of Banco Santander Central Hispano do not meet outside of the presence of the Directors who also serve in a management capacity.

Code of Ethics

Under the NYSE corporate governance rules, all U.S. companies listed on the NYSE must adopt a Code of Business Conduct and Ethics which contains certain required topics. In March 2000, Banco Santander Central Hispano adopted a “General Code of Conduct”, which applies to all members of the boards of the companies of the Group, to all employees subject to the Code of Conduct in the Securities Market, including the Bank’s Chairman, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, and to all those employees designated by the Human Resources Division that have been specifically informed of their subjection to this General Code of Conduct. On July 28, 2003, the Board approved amendments to the General Code of Conduct to conform it to the requirements of Law 44/2002 (November 2, 2002) on reform measures of the financial system (see above ‘‘Recent Legislation’ 6; ). The new Code entered into force on August 1, 2003 and replaced the previous one. The General Code of Conduct establishes the principles that guide the actions of officers and Directors including ethical conduct, professional standards and confidentiality. It also establishes the limitations and defines the conflicts of interests arising from their status as senior executives or Directors.

As of December 31, 2004, no waivers with respect to the General Code of Conduct had been applied for or granted.

In addition, the Group abides by a Code of Conduct in the Securities Market, which was also updated on July 28, 2003. This code establishes standards and obligations in relation to securities trading, conflicts of interest and the treatment of price sensitive information.

Both Codes are available to the public on our website, which does not form part of this annual report on Form 20-F, at www.gruposantander.com under the heading “Corporate Governance – Internal Code of Conduct”.

Audit and Compliance Committee and Appointments and Remuneration Committee

An Audit and Compliance Committee and an Appointments and Remuneration Committee operate as part of the Board of Directors. The Audit and Compliance Committee consists exclusively of 6 external Directors (5 of whom are independent in accordance with the principles set forth in Article 5 of the Regulations of the Board). The Appointments and Remuneration Committee consists of 5 external Directors (4 of whom are independent in accordance with the principles set forth in Article 5 of the Regulations of the Board). These independence standards may not necessarily be consistent with, or as stringent as, the director independence standards established by the NYSE.

The Audit and Compliance Committee:

The Audit and Compliance Committee was created to provide support and specialization in the tasks of controlling and reviewing the accounts and compliance. Its mission, which has been defined and approved by the Board, is established in the by-laws and in the Regulations of the Board. Only non-executive Directors can be members of this Committee with independent Directors (as defined in the Regulations of the Board) having a majority representation. Its Chairman must always be an independent Director (as defined in the Regulations of the Board) and someone who has the necessary knowledge and experience of accounting techniques and principles. Currently, the Chairman of the Audit and Compliance Committee is Mr. Manuel Soto, the Fourth Vice-Chairman of the Board of Directors.

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Functions of the Audit and Compliance Committee:

• Have its Chairman and/or Secretary report to the General Shareholders’ Meeting with respect to matters raised therein by shareholders regarding its powers.

• Propose the appointment of the Auditor, as well as the conditions in which such Auditor will be hired, the scope of its professional duties and, if applicable, the revocation or non-renewal of its appointment.

• Review the accounts of the Bank and the Group, monitor compliance with legal requirements and the proper application of generally accepted accounting principles, and report on the proposals for alterations to the accounting principles and standards suggested by management.

• Supervise the internal audit services.

• Know the process for gathering financial information and the internal control systems.

• Serve as a channel of communication between the Board and the Auditor, assess the results of each audit and the response of the management team to its recommendations, and act as a mediator in the event of disagreement between the Board and the Auditor regarding the principles and standards to be applied in the preparation of the financial statements. Specifically, it shall endeavor to ensure that the statements ultimately drawn up by the Board are submitted to the General Shareholders’ Meeting without any qualifications or reservations in the Auditor’s report.

• Supervise the fulfillment of the audit contract, endeavoring to ensure that the opinion on the annual financial statements and the main contents of the Auditor’s report are set forth in a clear and accurate fashion.

• Watch over the independence of the Auditor, by taking notice of those circumstances or issues that might risk such independence and any others related to the development of the auditing procedure, as well as receive information and maintain such communication with the Auditor as is provided for in legislation regarding the auditing of financial statements and in technical auditing regulations. And, specifically, verify the percentage represented by the fees paid for any and all reasons of the total income of the audit firm, and the length of service of the partner who leads the audit team in the provision of such services to the Company. The annual report registered before the Mercantile Register shall set forth the fees paid to the audit firm, including information relating to fees paid for professional services other than audit work.

• Review, before dissemination thereof, all periodical financial information which, in addition to the annual information, is provided to the markets and the supervising authorities thereof, and supervise that such information is prepared in accordance with the same principles and practices applicable to the annual financial statements.

• Supervise the observance of the Code of Conduct of the Group in the Securities Markets, the Manuals and procedures for the prevention of money laundering and, in general, the rules of governance and compliance in effect in the Company, and make such proposals as are deemed necessary for the improvement thereof. In particular, the Committee shall have the duty to receive information and, if applicable, issue a report on disciplinary penalties to be imposed upon members of the Senior Management.

• Review compliance with such courses of action and measures as result from the reports issued or the inspection proceedings carried out by the administrative authorities having functions of supervision and control.

• Know and, if applicable, respond to the initiatives, suggestions or complaints put forward or raised by the shareholders regarding the area of authority of this Committee and which are submitted to it by the Office of the General Secretary of the Company.

• Report on any proposed amendments to the Regulations of the Board prior to the approval thereof by the Board of Directors.

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The Audit and Compliance Committee has issued a report which was distributed together with the Group’s 2004 Annual Report and which comprised a detailed account of the following points:

• Composition, function and procedures of the Committee.

• Activity during 2004, grouped according to the different basic functions of the Committee:

— Financial Information

— The Auditor

— Internal Group control systems

— Internal Auditing

— Compliance and Prevention of Money-Laundering

— Corporate Governance

— Measures proposed by the Supervisory Authorities

— Information provided to the Board and to the shareholders at the General Shareholders Meeting, and evaluation of efficiency and compliance with the rules and procedures of governance of the Bank.

• Evaluation by the Committee of the fulfilment of its duties in 2004.

The Group’s 2004 Audit and Compliance Committee report is available on the Group’s website, which does not form part of this annual report on Form 20-F, at www.gruposantander.comunder the heading “Information for Shareholders and Investors – Corporate Governance – Commitees Report”.

The following are the current members of the Audit and Compliance Committee:

Name	Position
Manuel Soto	Chairman
Fernando de Asúa	Member
Rodrigo Echenique	Member
Abel Matutes	Member
Luis Angel Rojo	Member
Luis Alberto Salazar-Simpson	Member

Ignacio Benjumea also acts as Secretary to the Audit and Compliance Committee but is classified as a non-member.

The Appointments and Remuneration Committee:

The Regulations of the Board state that the members of this Committee must all be non-executive Directors with independent Directors (as defined in the Regulations of the Board) having a majority representation and an independent Director as Chairman (as defined in the Regulations of the Board).

Currently, the Chairman of the Appointments and Remuneration Committee is Fernando de Asúa, the First Vice Chairman of the Board of Directors.

Functions of the Appointments and Remuneration Committee

• Establish and review the standards to be followed in order to determine the composition of the Board and select those persons who will be proposed to serve as Directors.

• Prepare, by following standards of objectiveness and conformance to the corporate interests, the proposals for appointment, re-election and ratification of Directors provided for in Article 19, section 2 of the Regulations of the Board, as well as the proposals for appointment of the members of each of the Committees of the Board of Directors.

• Propose to the Board the form and amount of, and the procedures relating to, the annual compensation of the Directors – both for their performance as such and for their performance in the Bank of duties other than those of a Director – and of the Executive Vice Presidents, and periodically review the compensation programs, assessing the appropriateness and yield thereof and endeavoring to ensure that the compensation of Directors shall conform to standards of moderation and correspondence to the earnings of the Bank.

• Watch over the transparency of such compensation and the inclusion in the annual report registered before the Mercantile Register and in the annual corporate governance report of information regarding the compensation of Directors and, for such purposes, submit to the Board any and all information that may be appropriate.

• Watch over compliance by the Directors with the duties prescribed in Article 27 of the Regulations of the Board, prepare the reports provided for therein and receive information, and, if applicable, prepare a report on the measures to be adopted with respect to the Directors in the event of non-compliance with the above- mentioned duties or with the Code of Conduct of the Group in the Securities Markets.

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The Appointments and Remuneration Committee issued a report which was distributed together with the Group’s 2004 Annual Report and which comprised a detailed account of the following points:

• Composition

• Functions

• Activity during 2004, grouped according to the different functions of the Committee

— Appointments and resignations of Directors

— Remuneration

— Compliance and obligations of the Directors

The Group’s 2004 Appointments and Remuneration Committee report is available on the Group’s website, which does not form part of this annual report on Form 20-F, at www.gruposantander.com under the heading “Information for Shareholders and Investors – Corporate Governance – Commitees Report”.

The following are the members of the Appointments and Remuneration Committee:

Name	Position
Fernando de Asúa	Chairman
Manuel Soto	Member
Guillermo de la Dehesa	Member
Rodrigo Echenique	Member
Luis Angel Rojo	Member

Ignacio Benjumea also acts as Secretary to the Appointments and Remuneration Committee but is classified as a non-member.

     D. Employees.

At December 31, 2004, we had 126,488 employees (103,038 employees in 2003 and 104,178 in 2002) of which 33,353 were employed in Spain (34,956 in 2003 and 35,887 in 2002) and 93,135 were employed outside Spain (68,082 in 2003 and 68,291 in 2002), of which 24,361 were from Abbey. The terms and conditions of employment in the private sector banks in Spain are negotiated on an industry-wide basis with the trade unions. This process has historically produced collective agreements binding upon all the private banks and their employees. A new agreement was signed on May 11, 2005 and expires on December 31, 2006.

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The table below shows our employees by geographic area:

	Number of employees
	2004	2003	2002
SPAIN	33,353	34,956	35,887
LATIN AMERICA	57.135	57,048	56,670
Argentina	5,789	5,342	4,940
Bolivia	323	319	333
Brazil	20,903	21,841	20,691
Chile	9,085	8,970	9,701
Colombia	1,729	1,808	2,049
Mexico	12,525	11,852	11,376
Paraguay	—	—	62
Peru	521	472	461
Puerto Rico	1,622	1,621	1,572
Uruguay	250	250	291
Venezuela	4,388	4,573	5,194
EUROPE	10,914	10,287	10,943
Czech Republic	275	229	—
Germany	1,824	2,081	2,753
Belgium	58	59	71
France	28	30	39
Hungary	72	67
Ireland	8	7	11
Italy	622	511	480
Norway	496	—	—
Poland	801	50	—
Portugal	6,438	7,035	7,340
Switzerland	173	149	165
The Netherlands	57	—	—
United Kingdom (excluding Abbey, see below)	62	69	84
USA	623	653	535
ASIA	10	11	59
Philippines	—	—	48
Hong Kong	6	5	5
Japan	4	6	6
OTHERS	92	83	84
Bahamas	70	64	64
Others	22	19	20
Subtotal	102,127	103,038	104,178
Abbey National plc	24,361	—	—
Total	126,488	103,038	104,178

As of December 31, 2004, we had 2,739 temporary employees (2,172 at December 31, 2003 and 1,622 at December 31, 2002).

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     E. Share ownership.

As of June 15, 2005, the direct, indirect and represented holdings of our current directors were as follows:

	Direct	Indirect stake		% of
Directors	Stake	and represented	Total shares	Capital stock
Emilio Botín (1)	1,488,712	98,609,696	100,098,408	2.028
Fernando de Asúa	24,488	22,400	46,888	0.001
Alfredo Sáenz	336,125	1,290,962	1,627,087	0.026
Matías R. Inciarte	540,947	120,944	661,891	0.011
Manuel Soto	—	200,000	200,000	0.003
Assicurazioni Generali S.p.A	12,276,056	38,835,343	51,111,399	0.817
Antonio Basagoiti	512,000	—	512,000	0.008
Ana P. Botín (1)	4,977,323	4,024,646	9,001,969	0.001
Emilio Botín O. (1)	9,041,480	1,567,724	10,609,204	0.025
Javier Botín (1)	8,793,481	2,000,000	10,793,481	0.032
Lord Burns (Terence)	27,101	—	27,101	0.000
Guillermo de la Dehesa	100	—	100	0.000
Rodrigo Echenique	651,598	7,344	658,942	0.011
Antonio Escámez	556,899	—	556,899	0.009
Francisco Luzón	1,214,883	723	1,215,606	0.019
Abel Matutes	52,788	86,150	138,938	0.002
Mutua Madrileña Automovilista	65,068,029	—	65,068,029	1.040
Luis Angel Rojo	1	—	1	0.000
Luis Alberto Salazar-Simpson	32,865	4,464	37,329	0.001
	105,594,876	146,770,396	252,365,272	4.035

(1) Emilio Botín has voting rights of 76,514,628 shares owned by Marcelino Botín Foundation (1.22% of share capital), of 8,096,742 shares the ownership of which corresponds to Jaime Botín, of 8,916,751 shares the ownership of which corresponds to Ana P. Botín, of 9,036,292 shares the ownership of which corresponds to Emilio Botín O., and of 8,793,481 shares the ownership of which corresponds to Javier Botín. Therefore, the table contains the number of shares of direct and indirect participation of each of the last three cited above who are Directors of the Board. However, under the column of percentage over the share capital, the participation of these three Directors is accounted together with the shares owned by Emilio Botín or for which he has proxy rights.

The options granted to the Bank´s Directors, managers and employees are described in the table under “Section B. Compensation” above.

Banco Santander Central Hispano’s capital is comprised of only one class of shares, all of which are ordinary and have the same rights.

As of June 15, 2005 our current Executive Officers (not Directors) referred to above under Section A of this Item 6 as a group beneficially owned, directly or indirectly, 2,523,727 ordinary shares, or 0.04% of our issued and outstanding share capital as of that date. Together with the options granted, no individual executive officer beneficially owns, directly or indirectly, one percent or more of the outstanding share capital as of that date.

Item 7. Major Shareholders and Related Party Transactions

     A. Major shareholders.

As of December 31, 2004, to our knowledge no person beneficially owned, directly or indirectly, 5% or more of our shares.

At December 31, 2004 a total of 520,145,919 shares, or 8.32% of our share capital, were held by 794 registered holders with registered addresses in the United States and Puerto Rico, including JPMorgan Chase, as depositary of our American Depositary Share Program. These shares were held by 654 record holders. Since certain of such shares and ADRs are held by nominees, the foregoing figures are not representative of the number of beneficial holders. Our directors and executive officers did not own any ADRs as of December 31, 2004.

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To our knowledge, we are not controlled directly or indirectly, by any other corporation, government or any other natural or legal person. We do not know of any arrangements which would result in a change of our control.

     B. Related party transactions.

Loans made to members of our Board of Directors and to our Executive Officers

Our direct or indirect risk exposure to the Bank’s Directors as of December 31, 2004, amounted to €10.8 million (€10.1 and €14.4 million as of December 31, 2003 and 2002, respectively) of loans and credits to such directors and €0.2 million (€0.4 and €1.2 million as of December 31, 2003 and 2002, respectively) of guarantees provided to them. These loans and credits and guarantees were granted at market rates in all cases.

The detail by director as of December 31, 2004, is as follows:

	Thousands of Euros
	Loans and
	Credits	Guarantees	Total
Emilio Botín	2,768	—	2,768
Antonio Basagoiti	211	1	212
Ana P. Botín	26	—	26
Javier Botín	336	—	336
Rodrigo Echenique	95	121	216
Antonio Escámez	273	—	273
Francisco Luzón	1,169	—	1,169
Abel Matutes	5,861	—	5,861
Mutua Madrileña Automovilista	6	47	53
Luis Alberto Salazar-Simpson	36	—	36
	10,781	169	10,950

Additionally, the total amount of loans and credits and guarantees made by us to our Executive Officers who are not Directors, as of December 31, 2004, amounted to €6.8 million.

Loans extended to related parties were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectibility or present other unfavorable features.

Loans made to other Related Parties

The companies of the Group engage, on a regular and routine basis, in a number of customary transactions among Group members, including:

• overnight call deposits;

• foreign exchange purchases and sales;

• derivative transactions, such as forward purchases and sales;

• money market fund transfers;

• letters of credit for imports and exports;

and others within the scope of the ordinary course of the banking business, such as loans and other banking services to our shareholders, to employees of all levels, and the associates and the members of the families of all the above-mentioned, as well as those other businesses conducted by the companies of the Group. All these transactions are made:

• in the ordinary course of business;

• on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other persons; and

• did not involve more than the normal risk of collectibility or present other unfavorable features.

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As of December 31, 2004, an aggregate of €1,579.5 million in loans and credits to non-consolidable and associated companies was outstanding (€1,445.5 and €1,364.5 million as of December 31, 2003 and 2002, respectively). These loans and credits represented 0.5% of our total net loans and credits and 4.9% of our total stockholders´ equity at December 31, 2004 (0.8% and 7.6%, respectively, at December 31, 2003, and 0.8% and 7.5%, respectively, at December 31, 2002).

For more information, see Notes 3 and 24 to our Consolidated Financial Statements.

     C. Interests of experts and counsel.

Not Applicable

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Item 8. Financial Information

A. Consolidated statements and other financial information.

Financial Statements

See Item 18 for our Consolidated Financial Statements.

(a) Index to Consolidated Financial Statements of Banco Santander Central Hispano, S.A.

Page
Report of Deloitte, S.L.	F-1
Consolidated Balance Sheets as of December 31, 2004, 2003 and 2002	F-2
Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002	F-4
Notes to the Consolidated Financial Statements	F-5

Legal Proceedings

Banco Santander Central Hispano

The resolutions adopted at the Bank’s general shareholders’ meetings held on January 18, 2000 and on March 4, 2000, approving the capital increases agreed in connection with the exchange offer made by The Royal Bank of Scotland Group plc. with National Westminster Bank plc., and in connection with the Bank’s acquisitions of the Portuguese banks Banco Totta & Açores and Crédito Predial Portugués and the resolution adopted the Bank’s general shareholders’ meeting held on March 4, 2000 approving the capital increase necessary to carry out the exchange offers for shares of Banco Rio de la Plata, have been challenged under Spanish law. One plaintiff shareholder, in the case of the resolutions adopted in the first meeting and two plaintiff shareholders, in the case of the resolutions adopted in the second meeting, have challenged these resolutions on the grounds that, among other things, they were provided with insufficient information in connection with the vote on these resolutions and that the resolutions excluding the preemptive rights of shareholders were not validly adopted. In the proceedings, the plaintiffs have requested the court to declare that the above resolutions (and other ones adopted in the same meetings) are null and void. The first claim was rejected by the court in April 2001, and the plaintiff appealed the court’s rejection of his claim. The plaintiff´s appeal was then rejected by the court on December 2, 2002. The plaintiff has appealed for redress and the Bank has asked the court not to admit such appeal. The second claim was rejected by the courts of the city of Santander on November 29, 2002 and the plaintiffs appealed. Such appeal was subsequently rejected by the court on July 5, 2004. The plaintiffs responded and the court admitted the response of one of the plaintiffs and dismissed the other. The Bank has requested that the appeals not be admitted. The Bank cannot anticipate the outcome of these claims. Under Spanish law, if the claims were to prevail, the capital increase resolutions adopted on January 18, 2000, and on March 4, 2000, could be declared null and void. The effect under Spanish law of the declaration of nullity of a listed company’s share capital increase is highly uncertain and the Bank is unable to anticipate what the outcome for it and its shareholders would be if these claims were to prevail.

The resolutions adopted at the Bank’s shareholders’ meeting held on March 10, 2001, have been challenged under Spanish law by three shareholders who filed their claim before the courts of the city of Santander. These shareholders claim that the Bank did not comply with certain provisions of Spanish corporate law with respect to the resolutions adopted in said shareholders’ meeting. The challenged resolutions include the approval of the Bank’s annual accounts, the approval of a capital increase in exchange of cash, the approval of a capital increase in exchange of shares of Banco Rio de la Plata and BRS Investments and the approval of various issuances of bonds. In their complaints, the plaintiff shareholders asked the Court to declare the resolutions null and void and that the registration of the resolutions in the Commercial Registry also be annulled. The claim was rejected by the court in March 2002. The plaintiff shareholders appealed such rejection and, although the court allowed the admission of new evidence, the claim was again rejected on April 13, 2004. One of the plaintiffs has appealed for redress and the Bank has asked the court that this appeal not be admitted.

The resolutions adopted at the Bank’s shareholders’ meeting held on February 9, 2002, have been challenged under Spanish law by one shareholder who has filed his claim before the courts of the city of Santander. The challenged resolutions include the approval of the payment of an interim dividend, the re-election of Arthur Andersen y Cía, S. Com. as the external auditor of the Bank, the approval of a capital increase in exchange of shares of the German Company AKB Holding Gmbh and the approval of various issuances of bonds. Among other things, the plaintiff alleges the infringement of the shareholders’ rights of participation during the meeting and of receipt of information regarding the different issues to be voted on in the meeting; and that the resolutions excluding the preemptive rights of shareholders were not validly adopted. The plaintiff shareholder asked the Court to declare the above resolutions (and others adopted in the same meeting) null and void and that the registration of the resolutions in the Commercial Registry also be annulled. On September 9, 2002 the Court rejected the claim. The plaintiff appealed the rejection but the court rejected the appeal on January 14, 2004. The plaintiff has appealed for redress and the Bank has asked the Court not to admit such appeal.

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The resolutions adopted at the Bank’s shareholders’ meeting held on June 24, 2002 have been challenged under Spanish law by one shareholder who filed his claim before the courts of the city of Santander. The challenged resolutions include the approval of the Bank’s annual accounts and the rejection by the shareholders meeting of the proposals made by the plaintiff shareholder and another shareholder to file a claim requesting the declaration of the Directors’ liability in connection with the investments made by the Bank in Argentina, as well as the proposal made by another shareholder for the dismissal of one of the Directors. The Bank responded to the claim on October 5, 2002. During the term to respond to this claim, the Bank was required to respond to another claim, filed by a different shareholder, challenging some of the resolutions adopted at the same meeting. The claim was admitted by the same court of the city of Sant an der that is in charge of the first proceeding and has been joined to this proceeding, so both proceedings will be carried out jointly. The Bank responded to this second claim on October 25, 2002. The hearing took place on April 21, 22, and 24, and the court dismissed the claim on May 29, 2003. The plaintiffs have appealed such decision and the Bank has already answered the appeal. On May 23, 2005, the court decided not to admit a new piece of evidence requested by one of the plaintiffs. Such plaintiff has requested the court’s decision to be redressed.

Since fiscal year 1992, the Madrid Central Pre-Trial Investigation Court No. 3 has maintained pre-trial investigative proceedings – now Summary Proceedings – in order to determine liabilities of the Bank, its Chairman and three of its Officers with respect to certain credit assignment transactions (operaciones de cesión de crédito) carried out by Banco Santander, S.A. between fiscal years 1987 and 1989. In the opinion of the Bank and its internal and external advisors, the final result of this litigation will be favourable to the Bank, its Chairman and three of its Officers, and does not require a specific additional reserve. On July 16, 1996, the Madrid Central Pre-Trial Investigation Court No. 3, pursuant to a request made to such effect by the Attorney General after having consulted the Spanish Tax Authority, dismissed certain but not all the claims against the Bank, its Chairman and three of its Officers. Thereafter, the Attorney General – representative of the Tax Authority – and the Office of the Public Prosecutor repeatedly requested the dismissal of the remaining claims and the removal of the case from the docket. However, on June 27, 2002, the court changed the cited proceedings into a Summary Proceeding. Such decision was appealed by the Office of the Public Prosecutor, the Bank, its Chairman and three of its Officers. On June 23, 2003, the Panel Two of the Criminal Division of the National Criminal and Administrative Court (Audiencia Nacional) admitted partially such appeals, explicitly acknowledging that the marketing of the credit assignment transactions with clients had been legal, and reducing the number of transactions under scrutiny – and with respect to which the Bank’s possible involvement is still being alleged – from 138 to 38, with respect to the remaining 38 transactions under scrutiny, the Attorney General and the Office of the Public Prosecutor have generally requested the dismissal of claims and their removal from the docket on the grounds that no crime had been committed. Following the conclusion of the indictment proceedings – with repeated requests by the the Office of the Public Prosecutor and the Attorney General for the dismissal of the proceedings and their removal from the docket, – and based on the complaint filed by the citizen complainant, Asociación para la Defensa de Inversores y Clientes (Investor and Customer Defense Association), the Court, in an order dated October 6, 2004, decreed the commencement of oral evidentiary proceedings against the Chairman of the Bank and three of its Officers for one continuing crime of falsification of an official document, three continuing crimes of falsification of a commercial document, and thirty crimes against the public finance, ordering that a bond be jointly posted for €67.8 million, which amount was later reduced to €40.1 million, as a fine and for costs. The order designated Panel One of the Criminal Division of the National Criminal and Administrative Court as the competent court to hear the oral evidentiary proceedings.

In December 1995, the Spanish tax authorities issued an ‘‘Acta’’ (writ) requiring Banco Santander, S.A. to pay €26.2 million in back withholding taxes, interest and penalties relating to the Bank’s alleged failure to comply with a purported obligation to withhold income tax on payments to clients with respect to certain credit assignment transactions held by such clients. Although a similar case in an amount of €3.8 million was successfully appealed by the Bank in June 2003 (and then appealed in turn by the Regional tax authorities), the Bank’s appeal against this writ was rejected. The Bank filed a second appeal which was partially admitted by the court on October 30, 2003. Both the Bank and the Attorney General have appealed such decision before the Supreme Court and are awaiting the Court’s decision with respect to the appeals.

The resolutions adopted at the Bank’s shareholders’ meeting held on June 21, 2003 have been challenged under Spanish law by three shareholders who filed their claims before the courts of the city of Santander. The three plaintiff shareholders challenged the resolution approving the annual accounts and the management of the Bank and of the Group for 2002. In addition, two out of the three plaintiff shareholders challenged the resolutions approving the profit allocation for 2002 and the Procedural Rules of the Bank’s Shareholders’ Meetings. On October 10, 2003, the Bank answered the claims. The preliminary hearing took place on January 21, 2004. On February 11, 2004 the Court decided to suspend the proceedings until the preliminary proceedings 352/2002 being carried out by the Madrid Central Court number 3 (referred to hereinbelow) are finalized. On September 29, 2004, the Bank also responded to a separate claim filed by another shareholder challenging the resolutions adopted at the same meeting. The preliminary hearing for this claim took place on January 19, 2005. The Court decided to carry out jointly all the proceedings related to the same meeting and to apply to all such proceedings the suspension ordered by the Court on February 11, 2004.

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The resolutions adopted at the Bank’s shareholders’ meeting held on June 19, 2004 have been challenged under Spanish law by three shareholders who filed their claims before the courts of Santander. The challenged resolutions include the approval of the Bank’s annual accounts, the profit allocation and the approval of the Procedural Rules of the Bank’s Shareholders’ Meetings. The Bank has already responded to the three claims and requested that all such claims be joined into one single proceeding. The Court granted the Bank’s request to carry out all the three proceedings jointly. The preliminary hearing took place on February 7, 2005 and the hearing occurred on May 9 and 10, 2005. The court’s decision is awaited.

Lanetro, S.A. filed a suit against the Bank, carried out before the Court of 1st Instance no. 34 of Madrid, Complaint of Plenary Suit no. 558/2002, principally alleging that the Bank breached its alleged obligation to subscribe to the increase in capital stock of the plaintiff in the amount of €30,050,605.22. The court rejected the claim on December 16, 2003, but the plaintiff has appealed. The Bank has answered the appeal and is presently awaiting the Court’s decision with respect to the appeal.

For informational purposes, it is also mentioned that several persons, who allegedly have funds deposited in Banco Río de la Plata, S.A., filed an application for conciliation before the courts of the city of Madrid against the Bank, the persons who were members of the Board during 2001 and 2002 and others. According to Spanish Law, this application did not start proper judicial proceedings against the Bank. The claimants only intended that the defendants acknowledge the facts alleged in their application, regarding the Bank and its Directors’ claimed obligation to reimburse the funds deposited by the claimants in Banco Río de la Plata, S.A. The conciliation hearing was held on July 16, 2002. The Bank and the members of the Board refused to accept the facts and allegations of the application. This meant the termination of the conciliation. In January 2004, there was a preliminary hearing in connection with a similar case, in which a person who allegedly deposited funds in Banco Río de la Plata, S.A. is claiming $8,365.71. The Court has not determined the date for the next hearing yet.

For the same informational purposes, it is mentioned that the Madrid Central Court number 3 is carrying forward preliminary proceedings 352/2002 in connection with complaints filed by two shareholders against the Chairman of the Bank, regarding the economic terms of the retirement in August 2001 of the former co-chairman, Mr. José María Amusátegui and the economic terms of the resignation in February 2002 of the former first vice-chairman and chief executive officer, Mr. Angel Corcóstegui. The prosecutor and the defendants requested the dismissal of the case, which was opposed by the plaintiff shareholders. On October 16, 2003 the Court decided to change the cited proceedings to a summary proceeding. The Office of the Public Prosecutor and the Chairman of the Bank and the other two accused appealed the decision. The hearing of the appeals took place on February 9, 2004, and on February 18, 2004 the Court decided not to admit such appeals without entering into the merits of the matter. The Chairman of the Bank then appealed to the Constitutional Court. The Office of the Public Prosecutor again requested the dismissal of the case. On April 26, 2004, the Madrid Central Court number 3 decided to commence oral evidentiary proceedings. On May 10, 2004, with two dissenting votes, and in spite of the favourable report of the Office of the Public Prosecutor, the Constitutional Court decided not to admit the appeal. At the oral hearing, the Office of the Public Prosecutor requested the acquittal of those accused on the grounds that the facts do not amount to a criminal offense. On April 13, 2005, the Court decided to acquit those accused since the facts do not amount to a criminal offense. A cassation appeal against such decision has been filed by the plaintiffs.

On September 25, 2003, the Bank announced that it would launch a public offering in Spain for the acquisition of up to 16% of the share capital of Compañía Española de Petróleos, S.A. (“Cepsa”), a Spanish oil and petrochemical company. On October 21, 2003, the Spanish National Securities Commission authorized the Bank to launch the offering. The acceptance term of the offering expired on November 24, 2003. The bid was accepted by shares representing 12.13% of Cepsa’s share capital.

The Bank decided to launch the bid for Cepsa once the agreements with the French group Total (“Total”), an oil and petrochemical group and major shareholder of Cepsa, to act in concert with respect to the parties’ investments in Cepsa had become ineffective after the enactment of Law 26/2003 of July 17, 2003 (“Ley de Transparencia”). These agreements included those related to the company Somaen Dos, S.L. (“Somaen Dos”), a holding company in which the Bank, Total and Unión Fenosa, S.A. (“Unión Fenosa”) have participations of approximately 60%, 25% and 15%, respectively. Somaen Dos owns shares representing 33.23% of Cepsa’s share capital, of which 19.92% belong to the Bank, 8.31% to Total and 5.00% to Unión Fenosa.

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After the Bank’s announcement to launch the public offering, Total requested a summary arbitral proceeding with the Netherlands Arbitration Institute seeking the adoption of certain injunctive measures. On November 25, 2003, that arbitration institute made public a ruling that, among other measures, imposed a temporary prohibition of the sale or encumbrance of the Cepsa shares owned by Somaen Dos as well as the Cepsa shares that the Bank had acquired in the bid. Furthermore, the ruling instructed both the Bank and Total to presently respect the supermajority rules contained in the agreements to act in concert in Cepsa and the rules, also established in those agreements, governing the right to appoint Directors of the boards of Cepsa and Somaen Dos.

Additionally, on October 20, 2003, the Total group filed a request for an arbitral proceeding with the Netherlands Arbitration Institute seeking a determination on the merits of its claim. The Bank responded that it was opposed to such request.

Currently, that arbitral proceeding remains open. In such proceeding, Elf and Odival (hereinafter, “Elf”) have requested the Netherlands Arbitration Institute inter alia to instruct the Bank: to return to the market the Cepsa shares that the Bank acquired in the bid, to declare that the conditions for Elf to exercise a call option for 4.35% of Cepsa’s share capital have been fulfilled, and to pay various indemnities, some of which have to be quantified during the course of the proceeding.

On October 15, 2004, the Bank answered the claim made by Elf. The Bank requested: (i) the dismissal of all the requests made by Elf in its claim, except for those related to the admission of Elf’s right to the restoration of its economic participation in Cepsa that Elf owns through Somaen, and to the Bank’s abstention from actions that could lead to the transfer or encumbrance of such participation, as these two requests have been repeatedly accepted by the Bank; (ii) the suspension of the presently existing injunctive measures described above; (iii) the declaration of ineffectiveness of the agreements signed by the Bank and Elf to act in concert with respect to their investments in Cepsa; (iv) the express declaration that irreconcible differences between the parties (“disputa insuperable”), within the meaning of the signed agreements, has not occurred between the Bank and Elf; (v) the impositio n to Elf of the obligation to negotiate in bona fide with the Bank the most favourable way for both parties and for Unión Fenosa to separate their economic participations in Cepsa and those that are owned by Somaen; and (vi) the sentence of Elf to indemnify the Bank for damages caused to the latter by the dispute between both parties and for damages derived from the adoption of the injunctive measures.

On November 30, 2004, Total answered the Bank’s pleadings and the Bank responded on January 21, 2005. After the hearings held by the Netherlands Arbitration Institute, the proceedings continue with a simultaneous submission of two conclusion filings by each party. As of May 31, 2005, both the Bank and Total submitted the first of such filings. The second filing must be submitted before June 30, 2005. Once these second conclusion filings are submitted, the proceedings will conclude with the issuance by the Institute of its ruling.

The decision to be adopted in this proceeding will not be conditioned by the above-mentioned injunctive ruling which is temporary and which does not constitute a pre-judgment on the merits.

In May 2004, Chadia Limited, S.A. filed a suit against the Bank, carried out before the Court of 1st Instance number 48 of Madrid, proceeding number 420/2004, alleging that the Bank breached an alleged agreement for the sale to the plaintiff of certain buildings and seeking damages in the amount of €133 million. The Court rejected the claim, Chadia Limited, S.A. appealed, and the Bank has already responded that is was opposed to such appeal.

Banesto

In 1995 and 1996, the former directors of Banesto, who had been replaced by decision of the Bank of Spain’s Executive Council on December 28, 1993, filed claims challenging certain corporate resolutions adopted by the shareholders’ meetings held on March 26, and August 22, 1994 and February 15, 1995 approving, among other things, Banesto’s financial reorganization plan and the 1993 and 1994 financial statements of Banesto and the Banesto Group. In 2000, Madrid Appellate Court decisions rejected all the appeals filed by the plaintiffs in connection with the claim filed challenging the legality of the corporate resolutions approving the financial restructuring plan; the plaintiffs subsequently filed a cassation appeal against these decisions and Banesto has answered such cassation appeal. On March 5, 2002 the courts decided not to admit the cassation appeal against the Madrid Appellate Court’s decision rejecting the claims of some of the plaintiffs regarding the invalidity of the constitution of the shareholders’ meeting held on March 26, 1994. On July 22, 2003, the court admitted the cassation appeal filed by the remaining plaintiffs. Banesto filed its answer on September 20, 2003. On March 31, 2005, the parties were informed of a request made by some of the plaintiffs to bring the case to the European Court of Justice. Banesto has already opposed such request, and awaits the response of the Office of the Public Prosecutor. The claim filed against the resolutions adopted by the shareholders’ meeting held on August 22, 1994 approving the 1993 financial statements of Banesto was rejected by the Court of First Instance and the plaintiffs subsequently filed an appeal before the Madrid Appellate Court. The appeal was rejected in 2001 and the plaintiff has appealed in cassation. The claim filed against the approval by the shareholders’ meeting held on February 15, 1995 of the 1994 financial statements of Banesto was also rejected in 2000 by the Court of First Instance and was subsequently appealed by the plaintiffs. The appeal was dismissed by judgment of the Court of Appeals of Madrid, rendered on May 20, 2003. In September 2003, the plaintiffs’ appeal of this judgment was also dismissed. The plaintiffs have since appealed to the Supreme Court.

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Banesto’s directors and legal advisers do not believe that these claims will have any effect on the financial statements of Banesto or its Group. The plaintiffs seek that the resolutions be declared null and void, not damages. It is very difficult to assess what the practical consequences of an adverse judgment would be.

Abbey National Treasury Services plc

Abbey National Treasury Services plc has received a demand from the French Tax Authority relating to the repayment of certain tax credits and related charges. Following certain modifications to the demand its nominal amount now stands at 101 million Pounds sterling as compared with the original demand of 113 million Pounds sterling. As of December 31, 2004, additional interest in relation to the demand could amount to 16 million Pounds sterling. The amount of additional interest has been reduced from the amount disclosed by Abbey National plc as of December 31, 2003 of 36 million Pounds sterling due to certain modifications to the basis on which additional interest might be due. Abbey National Treasury Services plc has received legal advice that it has strong grounds to challenge the validity of the demand and accordingly no specific provision has been made.

Banco do Estado de Sao Paulo (Banespa)

Pursuant to the Brazilian labor regulations applicable to Banespa, this bank had recorded as of December 31, 2000, the pension allowances arising from the commitments to certain employees, which amounted to approximately 4,000 million Brazilian reais. Since 1987, the Directors of Banespa, as advised by their tax advisers, treated these expenses as deductible expenses in calculating the Brazilian corporate income tax. However, in September 1999, the ‘‘Secretaria de Receita Federal’’ issued a decision according to which these expenses, in an amount of approximately Brazilian reais 2,867 million would not be tax deductible. In October 1999, the Board of Directors of Banespa filed an appeal challenging this decision together with an ‘‘acción cautelar’’ regarding fiscal years 1999 and 2000, posted a deposit of Brazilian reais 1,297 million and recorded a provision of Brazil ia n reais 2,600 million for this contingency. Such provision was recorded in 1999 with a charge to income, after recording the related deferred tax asset of Brazilian reais 1,200 million.

In this respect, the Board of Directors of Banespa has decided to accept the Medida Provisória nº 66 of the Secretaría da Receita Federal dated August 29, 2002 and to pay Brazilian reais 2,110 million in order to settle the proceedings. The company disputes any liability with respect to an additional amount of Brazilian reais 103 million relating to costs and surcharges imposed in connection with the dispute relating to the principal amount. The company has asked for a cautionary judicial action posting a deposit for an equivalent amount.

Santander Brasil DTVM, Ltda. and Banco Santander Brasil, S.A.

On May 19, 2003, the Secretaria de Receita Federal issued an “Auto de Infração” requiring from our Brazilian affiliate Santander Brasil DTVM, Ltda. the payment of Brazilian reais 290 million in taxes allegedly incurred in connection with certain cash management services rendered by such company to its clients which the company had treated during 2000, 2001 and the two first months of 2002 as exempt from the Tax on Financial Transactions, following the advice of its tax advisers. The Board of Directors of Santander Brasil DTVM, Ltda. appealed this decision in June 2003. The Tax Authorities confirmed the “Auto de Infrançao” and the Board of Directors appealed to “Conselho de Contribuintes” (final administrative court). The Court decision is pending. On December 31, 2004, the amount involved in the action was equivalent to reais 306 million.

Also on May 29, 2003, the Secretaria de Receita Federal issued another “Auto de Infração” requiring from our Brazilian affiliate Banco Santander Brasil, S.A. the payment of Brazilian reais 290 million in taxes allegedly incurred in connection with certain clearing services rendered by such company to Santander Brasil DTVM, Ltda. pursuant to an agreement between these two companies. Following the advice of its tax advisers, Banco Santander Brasil, S.A. had treated during 2000, 2001 and the two first months of 2002 such services as exempt from the Tax on Financial Transactions. The Board of Directors of Banco Santander Brasil, S.A. appealed this decision in June 2003. The Tax Authorities confirmed the “Auto de Infrançao” and the Board of Directors appealed to “Conselho de Contribuintes” (final administrative court). The Court decision is pending. On December 31, 2004, the amount involved in the action was equivalent to reais 306 million.

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Casa de Bolsa Santander Serfín, S.A. de C.V. (Grupo Financiero Santander Serfín)

An individual has filed an ordinary mercantile proceeding against Casa de Bolsa, Santander Serfin, S.A. de C.V. (Grupo Financiero Santander Serfín) in the thirty first court on civil law of the Federal District of Mexico in order to determine the liabilities of Casa de Bolsa, Santander Serfin, S.A. de C.V. (Grupo Financiero Santander Serfín) with respect to the alleged existence of irregular withdrawals at such entity made by a representative of the plaintiff and which were not carried out in accordance with various security brokerage agreements subscribed to by the parties. The plaintiff claims the restoration at market value of 2,401,588 shares of the company Mexico 1, of 11,219,730 shares of the company Mexico 4, and the payment of 15,025,730 Mexican Pesos in addition to the payment of interests calculated applying the CCP rate multiplied by four.

On July 6, 1999 the judgment against Casa de Bolsa became firm, and subsequently on November 5, 2004, the court rendered an execution ruling which quantified the amount of interests at 37,646.8 million Mexican Pesos ($3,408.4 million), and condemned Casa de Bolsa to deliver the claimed shares. Casa de Bolsa appealed, and on January 20, 2005, the court decided not to admit such appeal. Against this decision Casa de Bolsa asked for reddress and the court admitted its request and suspended the November 5, 2004 ruling temporarily first and subsequently granted a final suspension of such ruling which annulled it. The decision which turned into the annulment of the November 5, 2004 ruling has been, on its turn, appealed by the plaintiff and Casa de Bolsa. We are presently awaiting the court’s decision.

Other Litigation

In addition to the above described matters, the Bank and its subsidiaries are from time to time subject to certain claims and parties to certain legal proceedings incidental to the normal course of our business, including in connection with the Group’s lending activities, relationships with the Group’s employees and other commercial or tax matters. In view of the inherent difficulty of predicting the outcome of legal matters, particularly where the claimants seek very large or indeterminate damages, or where the cases present novel legal theories, involve a large number of parties or are in early stages of discovery, the Bank cannot state with confidence what the eventual outcome of these pending matters will be, what the timing of the ultimate resolution of these matters will be or what the eventual loss, fines or penalties related to each pending matter may be. The Bank believes that it has made adequate reserves related to the co sts anticipated to be incurred in connection with these various claims and legal proceedings and believes that liabilities related to such claims and proceedings should not have, in the aggregate, a material adverse effect on the Group’s business, financial condition, or results of operations. However, in light of the uncertainties involved in such claims and proceedings, there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves currently accrued by the Bank; as a result, the outcome of a particular matter may be material to the Bank’s operating results for a particular period, depending upon, among other factors, the size of the loss or liability imposed and the level of the Bank’s income for that period.

Dividend Policy

We have normally paid an annual dividend in quarterly installments. The table below sets forth the historical per share and per ADS (each of which represents the right to receive one of our shares) amounts of interim and total dividends in respect of each fiscal year indicated.

	Euro per Share Interim					Dollars per ADS Interim
	First	Second	Third	Fourth	Total	First	Second	Third	Fourth	Total
2000	0.0661	0.0661	0.0661	0.0752	0.2735	0.0614	0.0561	0.0608	0.0662	0.2445
2001	0.07513	0.07513	0.07513	0.06311	0.2885	0.0656	0.0673	0.0661	0.0568	0.2558
2002	0.0775	0.07513	0.07513	0.06073	0.2885	0.0754	0.0612	0.0804	0.0680	0.2850
2003	0.0775	0.0775	0.0775	0.0704	0.3029	0.08602	0.0899	0.0842	0.08801	0.36235
2004	0.0830	0.0830	0.0830	0.0842	0.3332	0.08484	0.08971	0.09175	0.09191	0.35821

On August 1, 2005, we will pay the first dividend on account of the earnings for the financial year to December 31, 2005 for a gross amount of €0.09296 per share.

For a discussion of regulatory and legal restrictions on our payments of dividends, see “Item 4. Information on the Company—B.Business Overview—Supervision and Regulation—Restrictions on Dividends”.

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For a discussion of Spanish taxation of dividends, see “Item 10. Additional information—E.Taxation—Spanish Taxation of Dividends”.

The dividends paid on the guaranteed non-cumulative preference stock of certain of our subsidiaries are limited by our Distributable Profits in the fiscal year preceding a dividend payment. “Distributable Profits” with respect to any year means our reported net profits after tax and extraordinary items for such year as derived from the parent Bank’s non-consolidated audited profit and loss account prepared in accordance with Bank of Spain requirements and guidelines in effect at the time of such preparation. Such requirements and guidelines may be expected to reflect the Bank of Spain regulatory policies applicable to us, including without limitation those relating to the maintenance of minimum levels of capital. See “Item 4. Information on the Company—B. Business Overview—Supervision and Regulation—Capital Adequacy Requirements” and “Item 4. Information on the Company&# 15 1;B. Business Overview—Restrictions on Dividends”. According to our interpretation of the relevant Bank of Spain requirements and guidelines, Distributable Profits during the preceding five years were:

Year Ended December 31,
2000	2001	2002	2003	2004
(in thousands of euros)
1,241,388	1,329,931	1,376,178	1,445,033	1,837,424

The portion of our net income attributable to our subsidiaries has increased steadily in recent years as our subsidiaries have grown and we have acquired new subsidiaries. Such profits are available to us only in the form of dividends from our subsidiaries and we are dependent to a certain extent upon such dividends in order to have Distributable Profits sufficient to allow payment of dividends on our guaranteed preference stock of our subsidiaries as well as dividends on our shares (although the payment of dividends on the shares is limited in the event of the non-payment of preference share dividends). We generally control a sufficient proportion of our consolidated subsidiaries’ voting capital to enable us to require such subsidiaries to pay dividends to the extent permitted under the applicable law. As a result of our growth, the Bank, as the holding entity of the shares of our various companies, has added i nvestments in our subsidiaries, the financial costs of which are borne by us.

     B. Significant Changes.

For significant changes that have occurred since December 31, 2004, see our Form 6-K relating to our first quarter 2005 results filed with the Securities and Exchange Commission on May 12, 2005.

Item 9. The Offer and Listing.

     A. Offer and listing details.

Market Price and Volume Information

Banco Santander Central Hispano’s Shares

During the last year, our shares were the shares with the second highest trading volume on the Spanish stock exchanges. At December 31, 2004, our shares represented 16.65% of the IBEX 35 Stock Exchange Index, the second highest percentage among all Spanish issuers and the first among all Spanish banks represented in this index. Our market capitalization of €57,101.7 million at 2004 year-end was the second largest of any Spanish company and the first of any Spanish bank, according to information published by the Sociedad de Bolsas.

At December 31, 2004, we had 2,685,317 registered holders of our shares and, as of such date, a total of 520,145,919 of our shares or 8.32% were held by 794 registered holders with registered addresses in the United States and Puerto Rico, including JP Morgan Chase, as depositary of our American Depositary Share program.

Our shares are traded on Spain’s automated “continuous market”, the national, centralized market which integrates by computer quotations originating in the four Spanish stock exchanges (Madrid, Barcelona, Valencia and Bilbao) (the “Automated Quotation Systems”). Our shares also are listed on the New York (in the form of American Depositary Shares), Milan, Lisbon and Buenos Aires Stock Exchanges. In 2001, we delisted our shares from the Tokyo Stock Exchange and in 2003 we delisted our shares from the London, Paris, Frankfurt and Swiss Exchanges. At December 31, 2004, 60.5% of our shares were held of record by non-residents of Spain. Following the acquisition of Abbey, we are currently in the process of obtaining a secondary listing of our ordinary shares on the London Stock Exchange.

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The table below sets forth the high, low and last daily sales prices in euros for our shares on the continuous market for the periods indicated.

		Euros per Share
	High	Low	Last
2000 Annual	12.69	9.82	11.40
2001 Annual	12.38	6.93	9.41
2002 Annual	10.47	4.99	6.54
2003 Annual	9.44	5.01	9.39
First Quarter	7.10	5.01	5.85
Second Quarter	7.63	5.97	7.63
Third Quarter	8.17	7.15	7.28
Fourth Quarter	9.44	7.25	9.39
2004 Annual	9.77	7.70	9.13
First Quarter	9.77	8.36	8.85
Second Quarter	9.57	8.17	8.53
Third Quarter	8.70	7.70	7.90
Fourth Quarter	9.27	7.83	9.13
Last six months
2004
December	9.20	8.86	9.13
2005
January	9.27	8.94	9.11
February	9.83	9.04	9.36
March	9.67	9.32	9.39
April	9.50	9.01	9.04
May	9.37	9.05	9.27
June (through June 24, 2005)	9.60	9.33	9.50

On June 24, 2005, the reported last sale price of our shares on the continous market was €9.50.

     American Depository Shares (ADSs)

Our ADSs have been listed and traded on the New York Stock Exchange since July 30, 1987. Each ADS represents one of our shares and is evidenced by an American Depositary Receipt, or ADR. The deposit agreement, pursuant to which ADRs have been issued, is among us, JP Morgan Chase, as depositary, and the holders from time to time of ADRs. At December 31, 2004, a total of 111,932,873 of our ADSs were held by 654 registered holders. Since certain of such of our shares and our ADSs are held by nominees, the number of record holders may not be representative of the number of beneficial owners.

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The table below sets forth the reported high, low and last sale prices for our ADSs on the New York Stock Exchange for the periods indicated.

		Dollars Per ADS
	High	Low	Last
2000 Annual	11.69	8.38	10.56
2001 Annual	11.94	6.40	7.54
2002 Annual	9.49	4.75	7.05
2003
Annual	12.01	5.68	12.01
First Quarter	7.58	5.68	6.36
Second Quarter	9.50	6.53	8.82
Third Quarter	9.34	8.35	8.51
Fourth Quarter	12.01	8.56	12.01
2004
Annual	12.47	9.43	12.37
First Quarter	12.40	10.18	10.98
Second Quarter	11.49	9.86	10.50
Third Quarter	10.65	9.43	9.78
Fourth Quarter	12.47	9.95	12.37
Last six months
2004
December	12.47	11.82	12.37
2005
January	12.35	11.68	11.83
February	12.65	11.83	12.30
March	12.80	12.16	12.16
April	12.30	11.53	11.60
May	12.11	11.42	11.47
June (through June 24, 2005)	11.74	11.37	11.44

On June 24, 2005, the reported last sale price of our ADSs on the New York Stock Exchange was $11.44.

     B. Plan of distribution.

Not Applicable

     C. Markets.

General

Spanish Securities Market

The Spanish securities market for equity securities (the “Spanish Stock Exchanges”) consists of the four stock exchanges located in Madrid, Barcelona, Bilbao and Valencia (the “local exchanges”). The majority of the transactions conducted on them are done through the Automated Quotation System (Sistema Interbancario Bursátil Español or “S.I.B.E.”). During the year ended December 31, 2004, the Automated Quotation System accounted for the majority of the total trading volume of equity securities on the Spanish Stock Exchanges. According to statistics of the CNMV, the shares of Spanish banks are among the most heavily-traded securities on the Spanish Stock Exchanges.

     Automated Quotation System

The Automated Quotation System was introduced in 1989 and links the four local exchanges, providing those securities listed on it with a uniform continuous market that eliminates most of the differences among the local exchanges. The principal feature of the system is the computerized matching of buy and sell orders at the time of entry of the order. Each order is executed as soon as a matching order is entered, but can be modified or canceled until executed. The activity of the market can be continuously monitored by investors and brokers. The Automated Quotation System is operated and regulated by the Sociedad de Bolsas, S.A. (the “Sociedad de Bolsas”), a corporation owned by the companies that manage the local exchanges. All trades on the Automated Quotation System must be placed through a bank, brokerage firm, an official stock broker or a dealer firm member of a Spanish stock exchange directly.

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There is a pre-opening session held from 8:30 a.m. to 9:00 a.m. each trading day on which orders are placed at that time. The computerized trading hours are from 9:00 a.m. to 5:30 p.m. Each session will end with a 5 minute auction, between 5:30 and 5:35 p.m., with a random closedown of 30 seconds. The price resulting from each auction will be the closing price of the session.

From May 14, 2001, new rules came into effect regarding the maximum price fluctuations in the price of stocks. Under the new rules, each stock in the continuous market is assigned a static and a dynamic range within which the price of stocks can fluctuate. The price of a stock may rise or fall by its static range (which is published once a month and is calculated according to the stock’s average historic price volatility) above or below its opening price (which shall be the closing price of the previous session). When the stock trades outside of this range, the trading of the stock is suspended for 5 minutes, during which an auction takes place. After this auction, the price of the stock can once again rise or fall by its static range above or below its last auction price (which will be considered as the new static price before triggering another auction). Furthermore, the price of a stock cannot rise or fall by more than its dynamic pri ce range (which is fixed and published once a month and is calculated according to the stock´s average intra-day volatility), from the last price at which it has traded. If the price variation exceeds the stock’s dynamic range a five minutes auction is triggered.

Between 5:30 p.m. and 8:00 p.m., trades may occur outside the computerized matching system without prior authorization of the Sociedad de Bolsas, at a price within the range of 5% above the higher of the average price and closing price for the day and 5% below the lower of the average price and closing price for the day, if there are no outstanding bids or offers, as the case may be, on the system matching or bettering the terms of the proposed off-system transaction, and if the trade involves more than €300,000 and more than 20% of the average daily trading volume of the stock during the preceding quarter. At any time before 8:00 p.m., trades may take place (with the prior authorization of the Sociedad de Bolsas) at any price if:

• the trade involves more than €1.5 million and more than 40% of average daily trading volume of the stock during the preceding quarter;

• relates to a merger or spin-off of a listed company;

• relates to the reorganization of a business group;

• the transaction is executed for the purposes of settling litigation;

• involves certain types of contracts or complex transactions; or

• the Sociedad de Bolsas finds other justifiable cause.

Information with respect to computerized trades between 9:00 a.m. and 5:30 p.m. is made public immediately, and information with respect to trades outside the computerized matching system is reported to the Sociedad de Bolsas and published in the Boletín de Cotización and in the computer system by the next trading day.

During 1998, the Block Market (“el mercado de bloques”) was implemented, allowing for block trades between buyers and sellers. Under certain conditions, this market allows cross-transactions of trades at prices different than at normal market sessions. Trading in the Block Market is subject to certain limits with regard to stocks and volumes.

     Clearance and Settlement System

Until April 1, 2003, transactions carried out on the regional Spanish stock exchanges and the continuous market were cleared and settled through the Servicio de Compensación y Liquidación de Valores, S.A. (the “SCL”). Since April 1, 2003, the settlement and clearance of all trades on the Spanish stock exchanges, the Public Debt Market (Mercado de Deuda Pública), the AIAF Fixed Income Market (“Mercado AIAF de Renta Fija”) and Latibex - the Latin American stock - exchange denominated in euros, are made through the Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores (“Iberclear”), which was formed as a result of a merger between SCL and Central de Anotaciones del Mercado de Deuda Pública (CADE), which was managed by the Bank of Spain.

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     Book-Entry System

Ownership of shares listed on any Spanish stock exchange is required to be represented by entries in a register maintained by Iberclear, and transfers or changes in ownership are effected by entries in such register. Iberclear is responsible for maintaining the register of securities, held in book-entry form, of all trades from the Spanish stock exchanges, the Public Debt Market, the AIAF Fixed Income Market and Latibex.

     Securities Market Legislation

The Spanish Securities Markets Act, which came into effect in 1989, among other things:

• established an independent regulatory authority, the National Securities Market Commission (“Comisión Nacional del Mercado de Valores”, or “CNMV”), to supervise the securities markets;

• established a framework for the regulation of trading practices, tender offers and insider trading;

• required stock exchange members to be corporate entities;

• required companies listed on a Spanish stock exchange to file annual audited financial statements and to make public quarterly financial information;

• established a framework for integrating quotations on the four Spanish stock exchanges by computer;

• exempted the sale of securities from transfer and value added taxes;

• deregulated brokerage commissions as of 1992; and

• provided for transfer of shares by book-entry or by delivery of evidence of title.

The Securities Markets Act was amended by Law 37/1998, which implemented two European Union directives into Spanish law. The first is Directive 93/22/CE, relating to investment services within securities, later amended by Directive 95/26/CE of European Parliament and Council. The second is Directive 97/9/CE of European Parliament and Council, relating to indemnity systems.

Law 37/1998 introduced some innovations to the Securities Markets Act. The first was the recognition that both Spanish and other European Union Member State companies authorized to provide investment services have full access to the official secondary markets, with full capacity to operate, thereby enabling the direct admission of banking entities into the stock exchange area. The second innovation was that the scope of the Securities Markets Act was enlarged to include a list of financial instruments, such as financial exchange contracts, or installment financial contracts, which expanded the category of securities.

Other modifications under Law 37/1998 include:

• revocation of the Sociedades and Agencias de Valores’ monopoly in keeping the book entry records for the securities not admitted for trading on official markets. The issuer is now allowed to freely appoint the entity in charge of these book entry records, from among the investment services companies and the credit entities authorized to carry out these activities. The issuer is also permitted to appoint Iberclear to serve in this capacity.

• consideration of the secondary official markets as regulated markets, and amendments to the requirements for admission and exclusion of securities for trading on official secondary markets;

• amendment of the rules granting access to the capital stock of Governing Companies of Stock Exchanges (“Sociedades Rectoras de las Bolsas de Valores”);

• new regulation of several aspects of the Spanish Public Debt Market (“Mercado de Deuda Pública”);

• redefinition of investment companies to mean those entities whose main activity consists of rendering investment services to third parties in a professional manner, and a delimitation of their functions and conditions to operate in the markets;

• incorporation of the Investment Guarantee Funds in order to indemnify investors in cases of insolvency and bankruptcy proceedings of investment services companies that may cause the unavailability of cash or securities conferred to them by an investor;

• increase of CNMV inspection, sanctioning and supervisory powers; and

• several amendments to different laws such as the Stock Companies Act, the Companies Tax Act and the Collective Investment Institutions Act (“Ley de Instituciones de Inversión Colectiva”).

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The Securities Markets Act has been further amended by Law 44/2002 (November 22, 2002) on reform measures of the financial system, which introduced certain modifications to the laws governing financial markets and corporations, generally, including:

• provisions regarding market transparency such as: requiring listed companies to establish an audit committee, redefining the reporting requirements for relevant events, rules relating to the treatment of confidential and insider information and related party transactions, and prevention of manipulative and fraudulent practices with respect to market prices;

• the establishment of Iberclear; and

• the authorization to the Minister of Economy to regulate the financial services electronic contracts.

On July 17, 2003, the Securities Market law was amended by Law 26/2003 in order to reinforce the transparency of listed companies. It introduces:

• information and transparency obligations including detailed requirements of the contents of the corporate website of listed companies and the obligation to file with the CNMV an annual corporate governance report; and

• the obligation to implement a series of corporate governance rules including, among others, regulations regarding the boards of directors and the general shareholders’ meeting.

On March 11, 2005 Royal Decree Law 5/2005 was approved, modifying the Securities Market Law in order to implement the Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading. The Directive: (i) harmonizes the requirements for the process of approval of the prospectuses in order to grant to the issuer a single passport for such document, valid throughout the European Community; (ii) it incorporates the application of the country of origin principle by which the prospectus will be approved by the member states of the European Union where the issuer has its registered office but it also introduces as a new matter the possibility that in certain circumstances, such as issues with high minimum denominations (EUR 1,000 or more), the issuer may designate the relevant European Union competent authority for prospectus approval.

Finally, on April 22, 2005, the Securities Market Law was amended by Law 5/2005 on supervision of financial conglomerates in order to make the sectoral rules applicable to investment firms more consistent with other sectoral rules applicable to other groups with similar financial activities, such as credit institutions and insurance undertakings.

Trading by Banco Santander Central Hispano’s Subsidiaries in the Shares

Some of our subsidiaries, in accordance with customary practice in Spain, and as permitted under Spanish law, have regularly purchased and sold our shares both for their own account and for the accounts of customers. Our subsidiaries have intervened in the market for our shares primarily in connection with customer transactions and, occasionally, in connection with transactions by non-customers that are undertaken for commercial purposes or to supply liquidity to the market when it is reasonable to do so. Such trading activity also has provided a mechanism for accumulating shares that were used to meet conversions into our shares of bonds issued by us and other affiliated companies and to make offerings of shares. We expect that our subsidiaries may continue to purchase and sell our shares from time to time.

Our trading activities in our shares are limited to those set forth above. No affiliated company acts as a “market maker” as that term is understood in the United States securities markets. The continuous market is driven by orders, which are matched by the market’s computer system according to price and time entered. Banco Santander Central Hispano’s and Banesto’s broker subsidiaries, Santander Central Hispano Bolsa, Sociedad de Valores, S.A., (“Santander Central Hispano-SVB”) and Banesto, Bolsa, S.A., S.V.B., and the other brokers authorized to trade on the continuous market (“Member Firms”) are not required to and do not serve as market makers maintaining independently established bid and ask prices. Rather, Member Firms place orders for their customers, or for their own account, into the market’s computer system. If an adequate counterparty order is not available on the continuous market at that time, the Member Firm may solicit counterparty orders from among its own clients and/or may accommodate the client by filling the client’s order as principal.

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Under the Companies Law of Spain, a company and its subsidiaries are prohibited from purchasing shares of the company in the primary market. However, purchase of the shares is permitted in the secondary market provided that: (1) the aggregate of such purchases (referred to as “treasury stock” or “autocartera”) and the shares previously held by the company and its subsidiaries does not exceed 5% of the total capital stock of the company, (2) the purchases are authorized at a meeting of the shareholders of the acquiring company and the acquiring company’s parent, if any and (3) the acquiring company and its parent, if any, create reserves equal to the book value of the treasury stock included in its assets.

The law requires that the “Comisión Nacional del Mercado de Valores” (CNMV) be notified each time the acquisitions of treasury stock made since the last notification reaches 1% of the outstanding capital stock, regardless of any other preceding sales. Prior to adoption of the Companies Law in 1989, treasury stock shares were considered to be outstanding for all purposes under Spanish law (except for calculating capital ratios pursuant to Bank of Spain requirements). The Companies Law establishes, in relation to the treasury stock shares (held by us and our affiliates), that the exercise of the right to vote and other non-financial rights attached to them shall be suspended. Financial rights arising from treasury stock held directly by us, with the exception of the right to allotment of new bonus shares, shall be attributed proportionately to the rest of the shares.

The portion of trading volume in the shares represented by purchases by our subsidiaries has varied widely from day to day and from month to month and may be expected to do so in the future. In 2004, 14% of the volume traded of the shares was effected not as a principal by Santander Central Hispano-SVB and 7% was effected not as a principal by Banesto Bolsa, S.A., S.V.B. The portion of trading volume in the shares allocable to purchases and sales as principal by our companies was approximately 12.8% in the same period. The monthly average percentage of outstanding shares held by our consolidated subsidiaries ranged from 0.381% to 1.395% in 2004. Our consolidated subsidiaries held 12,725,159 of our shares (0.20% of our total capital stock) at December 31, 2004.

     D. Selling shareholders.

Not Applicable

     E. Dilution.

Not Applicable

     F. Expense of the issue.

Not Applicable

Item 10. Additional Information.

     A. Share capital.

Not Applicable

     B. Memorandum and articles of association.

The following summary of the material terms of our by-laws is not meant to be complete and is qualified by reference to our by-laws. Because this is a summary, it does not contain all the information that may be important to you. You should read our by-laws carefully before you decide to invest. Copies of our by-laws are incorporated by reference.

General

As of December 31, 2004, the Bank’s share capital was €3,127,148,289.50, represented by a single class of 6,254,296,579 book-entry Banco Santander Central Hispano shares with a nominal value of €0.50 each. Since that date, our share capital has not changed. All of our shares are fully paid and non-assessable. Spanish law requires that bank-listed equity securities be issued in book-entry form only.

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Register

Banco Santander Central Hispano is registered with the Commercial Registry of Santander (Finance Section). The Bank is also recorded in the Special Registry of Banks and Bankers with registration number 0049, and its fiscal identification number is A-39000013.

Corporate Object and Purpose

Article 12 of our by-laws states that the corporate objective and purpose of Banco Santander Central Hispano consist of carrying-out all types of activities, operations and services specific to the banking business in general and which are permitted under current legislation and the acquisition, holding and disposal of all types of securities.

Certain Provisions Regarding Shareholder Rights

As of the date of the filing of this report, Banco Santander Central Hispano’s capital is comprised of only one class of shares, all of which are ordinary shares and have the same rights.

Our by-laws do not contain any provisions relating to sinking funds.

Our by-laws do not specify what actions or quorums are required to change the rights of holders of our stock. Under Spanish law, the rights of holders of stock may only be changed by an amendment to the by-laws of the company that complies with the requirements explained below under “Meetings and Voting Rights.”

Meetings and Voting Rights

We hold our annual general shareholders meeting during the first six months of each fiscal year on a date fixed by the board of directors. Extraordinary meetings may be called from time to time by the board of directors whenever the Board considers it advisable in corporate interests, and whenever so requested by stockholders representing at least 5% of the outstanding share capital of Banco Santander Central Hispano. Notices of all meetings are published in the Official Gazette of the Mercantile Register and in one of the local newspapers having the largest circulation in the province where the registered office of Banco Santander Central Hispano, S.A. is located. In addition, under Spanish law, the agenda of the meeting must be sent to the CNMV and the Spanish Stock Exchanges and published on the company’s website. Our last ordinary general meeting of shareholders was held on June 18, 2005 and our last extraordinary general meeting of shareholders was held on October 21, 2004.

Each Banco Santander Central Hispano share entitles the holder to one vote. Registered holders of any number of shares who are current in the payment of capital calls will be entitled to attend shareholders’ meetings. Our by-laws do not contain provisions regarding cumulative voting.

Any Banco Santander Central Hispano share may be voted by proxy. Subject to the limitations imposed by Spanish law, proxies may be given only to shareholders who are entitled to attend the shareholders’ meeting and are acting in their individual capacity, must be in writing or by remote means of communication and are valid only for a single meeting.

In accordance with the Procedural Rules of the General Shareholders’ Meeting, the Group’s website includes from the date when the call of the General Shareholders’ Meeting is published, the details regarding the manner and procedures for shareholders to follow to confer representation on any other shareholder who is eligible to attend the General Shareholders’ Meeting in his own right and to vote by proxy. The manner and procedures for electronic delegation and voting via the Internet are also indicated.

At both General Shareholders’ Meetings held in 2004 (the Annual General Meeting of June 19, 2004 and the Extraordinary General Meeting of October 21, 2004) our shareholders could exercise their voting and representation rights prior to the meetings by electronic means (via the Internet). In addition, at the Extraordinary General Shareholders’ Meeting of October 21, 2004, our shareholders could vote by mail and in the Annual General Meeting held on June 18, 2005, our shareholders, besides exercising their voting and representation rights prior to the meeting by mail or via the Internet, were able to attend (besides attending and voting in person) via the Internet and were also able to vote in real time on the Internet on the resolutions considered at the meeting.

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Only registered holders of Banco Santander Central Hispano shares of record at least five days prior to the day on which a meeting is scheduled to be held may attend and vote at such meeting. As a registered shareholder, the depositary will be entitled to vote the Banco Santander Central Hispano shares underlying the Banco Santander Central Hispano ADSs. The deposit agreement requires the depositary to accept voting instructions from holders of Banco Santander Central Hispano ADSs and to execute such instructions to the extent permitted by law.

In general, resolutions passed by a general meeting are binding upon all shareholders. In certain circumstances, Spanish law gives dissenting or absent shareholders the right to have their Banco Santander Central Hispano shares redeemed by us at prices determined in accordance with established formulae or criteria. Banco Santander Central Hispano shares held by the Bank or its affiliates are counted for purposes of determining quorums but may not be voted by the Bank or by its affiliates.

Resolutions at general meetings are passed provided that, regarding the voting capital present or represented at the meeting, the number of votes in favor is higher than the number of votes against or in blank and abstentions.

In accordance with Spanish law, a quorum on first call for a duly constituted ordinary or extraordinary general meeting of shareholders requires the presence in person or by proxy of shareholders representing 25% of our subscribed voting capital. On second call there is no quorum requirement. Notwithstanding the above, a quorum of 50% of our subscribed voting capital is required on the first call to approve any of the following actions:

(i)	issuance of bonds;
(ii)	increase or reduction of share capital;
(iii)	transformation of Banco Santander Central Hispano (change in corporate nature);
(iv)	merger, split or spin-off;
(v)	any other amendment of our by-laws; and
(vi)	dissolution.

A quorum of 25% of the subscribed voting capital is required to vote on such actions on the second call. A two-third majority of our present or represented voting capital is required to approve all of the above listed actions when the shareholders’ meeting is held on second call and less than 50% of our subscribed voting capital is present.

For purposes of determining the quorum, those shareholders who vote by mail or through the Internet are counted as being present at the meeting, as provided by the Procedural Rules of the Bank’s General Shareholders’ Meetings.

Changes in Capital

Any increase or reduction in share capital must be approved at the general meeting in accordance with the procedures explained above in the section entitled “Meetings and Voting Rights.”

Dividends

We normally pay a yearly dividend in advance in quarterly installments in July, October and January and a complementary dividend that is generally paid in April of the following year. We and our domestic banking subsidiaries are subject to certain restrictions on dividend payments, as prescribed by the Ministry of Economy and the Bank of Spain. See “Item 4. Information on the Company—B. Business Overview—Supervision and Regulation—Restrictions on Dividends”.

Our by-laws establish that any available profits shall be distributed in the following order: first, the legally required amounts are placed into the compulsory reserves. Next, our board of directors will assign such amounts it considers appropriate to voluntary reserves and ”fondos de previsión” (general allowances). After separating the amount which should be carried forward, if the board deems it advisable, the remaining amount will be divided equally amongst our shareholders under the limitations imposed by Spanish law.

Our by-laws also dictate that non-voting shares shall receive a minimum annual dividend of 5% of the capital paid out in respect of each such share in accordance with the “Ley de Sociedades Anónimas” (“Companies Law”).

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The amount, time and form of payment of the dividends, to be distributed amongst the shareholders in proportion to their paid-in capital will be established by resolutions adopted at the general meeting. The Board of Directors is entitled to distribute sums on account of future dividends; said distributions must be eventually approved by the general meeting.

A shareholder’s dividend entitlement lapses five (5) years after the dividend payment date.

Preemptive Rights

In the event of a capital increase, or the issuance of convertible debt, each shareholder has a preferential right by operation of law to subscribe for shares in proportion to its shareholding in each new issue of Banco Santander Central Hispano shares. However, this right may be excluded under certain circumstances by specific approval at the shareholders’ meeting and this right is deemed excluded in the relevant capital increase when the shareholders approve:

• capital increases following conversion of convertible bonds into Banco Santander Central Hispano shares; or

• capital increases due to the absorption of another company or of part of the spun-off assets of another company, when the new shares are issued in exchange for the new assets received.

If capital is increased by the issuance of new shares in return for capital from certain reserves, the resulting new Banco Santander Central Hispano shares will be distributed pro rata to existing shareholders.

Redemption

Our by-laws do not contain any provisions relating to redemption of shares. Nevertheless, pursuant to Spanish law, redemption rights may be created at a duly held general shareholders’ meeting. Such meeting will establish the specific terms of any redemption rights created.

Registration and Transfers

The Banco Santander Central Hispano shares are in book-entry form. We maintain a registry of shareholders. We do not recognize, at any given time, more than one person as the person entitled to vote each share in the shareholders meeting.

Under Spanish law and regulations, transfers of shares quoted on a stock exchange are normally made through a “Sociedad y Agencia de Valores”, credit entities and investment services companies, that are members of the Spanish stock exchange.

Transfers executed through stock exchange systems are implemented pursuant to the stock exchange clearing and settlement procedures of Iberclear. Transfers executed “over the counter” are implemented pursuant to the general legal regime for book entry transfer, including registration by Iberclear.

Liquidation Rights

Upon a liquidation of Banco Santander Central Hispano, our shareholders would be entitled to receive pro rata any assets remaining after the payment of our debts, taxes and expenses of the liquidation. Holders of non-voting shares, if any, are entitled to receive reimbursement of the amount paid before any amount is distributed to the holders of voting shares.

Change of Control

Our by-laws do not contain any provisions that would have an effect of delaying, deferring or preventing a change in control of the company and that would operate only with respect to a merger, acquisition or corporate restructuring involving Banco Santander Central Hispano or any of our subsidiaries. Nonetheless, certain aspects of Spanish law described in the following section may delay, defer or prevent a change of control of the Bank or any of our subsidiaries in the event of a merger, acquisition or corporate restructuring.

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Legal Restrictions on Acquisitions of Shares in Spanish Banks

Certain provisions of Spanish law require notice to the Bank of Spain prior to the acquisition by any individual or corporation of a substantial number of shares of a Spanish bank.

Any individual or corporation that wishes to acquire, directly or indirectly, a significant participation (participación significativa) in a Spanish bank must give advance notice to the Bank of Spain describing the size of such participation, its terms and conditions, and the anticipated closing date of the acquisition. “Significant participation” is defined as 5% of the outstanding share capital or voting rights of the bank or any lesser participation that gives the acquirer effective influence or control over the target bank.

In addition, advance notice must be given to the Bank of Spain of any increase, direct or indirect, in any significant participation at each of the following levels of ownership: 10%; 15%; 20%; 25%; 33%; 40%; 50%; 66% and 75%. Notice to the Bank of Spain is also required from anyone who, as a result of the contemplated acquisition, may attain sufficient power to control the credit entity.

Any acquisition mentioned in the preceding sentence to which the required notice was not given or even if given, a three month period after receipt of notice has not yet elapsed, or that is opposed by the Bank of Spain will have the following effects: (1) the acquired shares will have no voting rights, (2) the Bank of Spain may seize control of the bank or replace its board of directors, and (3) a fine may be levied on the acquirer.

The Bank of Spain has three months after the receipt of notice to object to a proposed transaction. Such objection may be based on finding the acquirer unsuitable on the basis, inter alia, of its commercial or professional reputation, its solvency or the transparency of its corporate structure. If three months elapse without any word from the Bank of Spain, its authorization is deemed granted. However, absent objection by the Bank of Spain, it may extend the period for closing the proposed transaction.

Any individual or institution that plans to sell its significant participation, or reduce it to one of the above-mentioned levels of ownership, or because of any sale will lose control of the entity, must provide advance notice to the Bank of Spain indicating the amount of the transaction and its anticipated closing date. Failure to comply with these requirements may subject the offending party to penalties.

Credit entities must notify the Bank of Spain as soon as they become aware of any acquisition or transfer of significant shares of its stock capital that exceeds the above-mentioned percentages. In addition, credit entities are required to provide periodic reports to the Bank of Spain describing the composition of and significant alterations to the ownership of the capital stock of the credit entity. This information must also provide, the level of ownership, regardless of the amount, of any other financial entities in the capital stock of the credit entity.

If the Bank of Spain determines at any time that the influence of a person who owns a significant participation of a bank may adversely affect that bank’s financial situation, it may request that the Ministry of Economy and Finance: (1) suspend the voting rights of such person’s shares for a period not exceeding 3 years; (2) seize control of the bank or replace its board of directors; or (3) revoke the bank’s license.

The Bank of Spain also requires each bank to publish a list, dated on the last day of each quarter and during April, July, October and January of all its shareholders that are financial institutions and all other shareholders that own at least 0.25% of the bank’s total equity. Furthermore, banks are required to inform the Bank of Spain as soon as they become aware, and in any case not later than in 15 days after, of each acquisition by a person or a group of at least 1% of such a bank’s total equity.

Tender Offers

Royal Decree 432/2003 of April 11, 2003 (“RD 432/2003”) modified previous regulations on tender offers set forth by Royal Decree 1197/1991 of July 26, 1991 (“RD 1197/1991”) reinforcing the protection of minority shareholders and introducing certain changes intended to make the tender offer regime more flexible.

RD 432/2003 introduces additional scenarios which impose the mandatory launching of a tender offer. A person or entity must first launch a tender offer if it proposes to acquire a significant shareholding (25% or more) in the voting stock of the target company’s shares (or certain other equivalent securities that may directly or indirectly give the right to subscribe for shares) of a publicly-traded Spanish company. The tender offer must be for shares representing, at least, 10% and up to 100% of the target’s company capital, contingent on the final percentage of the capital of such target company to be acquired (basically, 25% or more or 50% or more). Also, the launching of a tender offer is mandatory for the acquisition of shares representing 6% or more of the capital of the target company during any twelve-month period when the offeror holds a stake between 25% and 50% of the target’s company capital.

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Tender offers are mandatory also, even without reaching the stake thresholds mentioned above, if such person or entity intends to appoint more than one third but less than half plus one of the target company’s board or more than half of the directors of the target company’s board.

These new cases also require the mandatory launching of a tender offer if, within two years from the date of the acquisition, the offeror nominates and appoints more than one third but less than half plus one of the target company’s board or more than one half of the target company’s board.

Finally, RD 432/2003 modifies the exceptions to the mandatory launching of a tender offer; it allows for conditional tender offers upon certain requirements being met and it substantially modifies the regime of competing tender offers.

Reporting Requirements

The acquisitions or transfers of shares of any company listed on a Spanish Stock Exchange where, following the transaction, the acquiror’s ownership participation reaches 5% or any multiple of 5% of the capital stock of such company, or the seller’s participation is reduced from one of the above mentioned levels of ownership, must be reported, within 7 business days after such acquisition or transfer. The reporting must be made to the company that issued the traded shares, to the Governing Companies (Sociedades Rectoras) of the Spanish stock exchanges on which such company is listed, and to the CNMV. This threshold percentage will be 1%, or any multiple of 1%, whenever the acquirer, or the person who acts on his/her behalf, is a resident of a tax haven as defined in accordance with Royal Decree 1080/1991, or of a country or territory where there is no authority entrusted with the supervision of the securities markets, or when the designated authority declines to exchange information with the CNMV. The Minister of Finance is required to specify countries and territories in such cases, as proposed by the CNMV.

In addition, any company listed on a Spanish stock exchange must report any acquisition by such company (or a subsidiary) of the company’s own shares if the acquisition, together with any acquisitions since the date of the last report, causes the company’s ownership of its own shares to exceed 1% of its capital stock. See “Item 9. The Offer and Listing—Banco Santander Central Hispano Shares—Trading by Banco Santander Central Hispano’s Subsidiaries in the Shares.”

The directors of any company listed on a Spanish stock exchange must report to the CNMV to the Governing Companies (Sociedades Rectoras) of the Stock Exchanges on which the company is listed, and to the company itself, the amount of shares or option rights over the company’s shares that they hold at the time of their appointment (or, if applicable, report that they own no shares or options) directly, through companies they control or any other intemediary, regardless of the amount, and must report all acquisitions or transmissions of shares in the company, regardless of the amount that they carry out by themselves or by means of either the companies they control or an intermediary. The directors must also report the acquisition or transfer of option rights over the company’s shares.

In addition, managers of any listed company must report to the CNMV the acquisition of shares and option rights over shares as a result of a compensation plan related to the shares’ price. Any change of the aforesaid plans must be also reported.

Board of Directors

Our Board of Directors may be made up of a minimum of 14 and a maximum of 30 members, appointed by the general meeting of shareholders. Members of the Board of Directors are elected for an initial term of three years but can be re-elected. One third of the members of the Board are elected each year. Although there is no provision in Spanish law regarding the composition of a board of directors, the Regulation of the Board, following best corporate governance practices in Spain, provide that in exercising its powers to make proposals at the General Shareholders’ Meeting and to designate Directors by interim appointment to fill vacancies, the Board shall endeavour to ensure that the external or non-executive Directors represent a majority over the executive Directors and that the former include a reasonable number of independent Directors.

These independence standards may not necessarily be consistent with, or as stringent as, the director independence standards established by the NYSE. See “Item 6. Directors, Senior Management and Employees — C. Board Practices —Independence of the Directors on the Board of Directors”. The Bank currently complies with this requirement.

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Certain Powers of the Board of Directors

The actions of the members of the board are limited by Spanish law and certain general provisions contained in our by-laws. For instance, Article 32 of our by-laws states that the Directors will be liable to Banco Santander Central Hispano, to our shareholders and to our corporate creditors for any damages that they may cause by acts or omissions which are contrary to law or to the by-laws or by acts or omissions contrary to the duties inherent in the exercise of their office.

A Director’s power to vote on a proposal, arrangement or contract in which such Director is materially interested is not regulated by our by-laws. Conflicts of interest are regulated by Article 27 of the Regulations of the Board. Under Article 27, a Director is obliged to inform the Board of any direct or indirect conflict of interest which may exist with the Bank. If such a conflict relates to a particular transaction, then the Director (i) may not undertake the transaction without the Board’s authorization (such authorization can only be granted following a report of the Appointments and Remuneration Committee); and (ii) the Director may not take part in the discussion or voting regarding the transaction to which the conflict relates.

Our by-laws provide that the Directors may, by resolution of the Board, direct the subscription, acquisition, purchase, exchange, pledge and sale of public securities, shares, debentures, bonds and warrants. The Board is empowered to exercise borrowing powers without restriction as to limit or otherwise on behalf of the Bank, subject only to the power to authorize the issue of bonds, which is vested in the shareholders.

The board of directors may pass resolutions in order to establish the amount of each payment of any capital call with respect to partially paid-in shares. The board will also establish the period within which the payments must be made and other details, all of which must be published in the “Boletín Oficial del Registro Mercantil” (the Official Gazette of the Mercantile Register). Any delays in the payment of capital calls will bear interest starting from the day when the payment is due and without the need for any judicial or extra-judicial summons. We will also be able to take any action authorized by law to collect such sums.

Our by-laws provide that the members of the Board, and, if applicable, the Executive Committee (Comisión Ejecutiva) and the Bank’s Executive Vice Presidents, shall receive as a joint participation in the Bank’s annual results for performing their duties an aggregate amount equal to 5% of the Bank’s annual results, provided, however, that the Board may resolve that such percentage be reduced in those years in which the Board deems it justified. In practice, the amount so distributed is lower than the 5% limit mentioned above. In addition, the Board shall distribute the resulting payment among the participants in such manner and amount as may resolved annually by the Board with respect to each of them.

In order to set the specific amount corresponding to such participation, the percentage decided by the Board shall be applied to the year’s results.

In any event, before any payments in respect of the Directors’ participation can be made, the Bank must have made all allocations that have priority to such participation pursuant to applicable legislation.

Regardless of the foregoing, the members of the Board and of the Executive Committee are entitled to receive attendance fees, as well as such remuneration as may be applicable for the performance of their duties within the Bank other than their duties as a Director. These amounts are approved by the Board of Directors with the prior proposal from the Appointments and Remuneration Committee.

Directors may also receive compensation in the form of shares of the Bank or options over the shares, or other remuneration linked to share value following a resolution adopted by the shareholders at the General Shareholders’ Meeting (conducted in accordance with our by-laws and applicable Spanish legislation).

Board of Director Qualification

There are no mandatory retirement provisions due to age for board members in our by-laws or in the regulations of our board of directors. These regulations contain provisions relating to the cessation of directorship for other reasons.

Subject to legal limitations, any person will be eligible to serve as a Director of Banco Santander Central Hispano, S.A. without having to be a shareholder of the Bank.

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     C. Material contracts.

During the past two years, the Bank was not a party to any contract outside its ordinary course of business that was material to the Group as a whole.

     D. Exchange controls.

Restrictions on Foreign Investments

Under present regulations, foreign investors may transfer invested capital, capital gains and dividends out of Spain without limitation on the amount other than applicable taxes. See “Taxation”. On July 4, 2003, Law 19/2003 was approved which updates Spanish exchange control and money laundering prevention provisions, by recognizing the principle of freedom of the movement of capital between Spanish residents and non residents. The law establishes procedures for the declaration of capital movements for purposes of administrative or statistical information and authorizes the Spanish Government to take measures which are justified on grounds of public policy or public security. It also provides the mechanism to take exceptional measures with regard to third countries if such measures have been approved by the European Union or by an international organization to which Spain is a party. The Spanish stock exchanges and securities markets are open to foreign investors. Royal Decree 664/1999, on Foreign Investments (April 23, 1999), established a new framework for the regulation of foreign investments in Spain which, on a general basis, will no longer require any prior consents or authorizations from authorities in Spain (without prejudice to specific regulations for several specific sectors, such as television, radio, mining, telecommunications, etc.). Royal Decree 664/1999 requires notification of all foreign investments in Spain and liquidations of such investments upon completion of such investments to the Investments Registry of the Ministry of Economy, strictly for administrative statistical and economical purposes. Only investments from “tax haven” countries (as they are defined in Royal Decree 1080/1991), shall require notice before and after performance of the investment, except that no prior notice shall be required for: (1) investments in securities or participations in funds of the investment that are registered with the CNMV, and (2) investments that do not increase the foreign ownership of the capital stock of a Spanish company to over 50%. In specific instances, the Counsel of Ministers may agree to suspend, all or part of, Royal Decree 664/1999 following a proposal of the Minister of Economy, or, in some cases, a proposal by the head of the government department with authority for such matters and a report of the Foreign Investment Body. These specific instances include a determination that the investments, due to their nature, form or condition, affect activities, or may potentially affect activities relating to the exercise of public powers, national security or public health. Royal Decree 664/1999 is currently suspended for investments relating to national defense. Whenever Royal Decree 664/1999 is suspended, the affected investor must obtain prior administrative authorization in order to carry out the investment.

     E. Taxation.

The following is a discussion of the material Spanish and U.S. federal income tax consequences to you of the acquisition, ownership and disposition of the ADSs or shares.

The discussion of Spanish tax consequences below applies to you only if you are a non-resident of Spain and ownership of ADSs or shares is not effectively connected with a permanent establishment or fiscal base in Spain and only to U.S. residents entitled to the benefits of the Convention Between the United States and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the “Treaty”).

You should consult your own tax adviser as to the particular tax consequences to you of owning the shares or ADSs including your eligibility for the benefits of any treaty between Spain and the country of your residence for the avoidance of double taxation, the applicability or effect of any special rules to which you may be subject, and the applicability and effect of state, local, foreign and other tax laws and possible changes in tax law.

Spanish tax considerations

The following is a summary of material Spanish tax matters and is not exhaustive of all the possible tax consequences to you of the acquisition, ownership and disposition of ADSs or shares. This discussion is based upon the tax laws of Spain and regulations thereunder, which are subject to change, possibly with retroactive effect.

     Taxation of dividends

Under Spanish law, dividends paid by a Spanish resident company to a holder of ordinary shares or ADSs not residing in Spain for tax purposes and not operating through a permanent establishment in Spain are subject to Spanish Non-Resident Income Tax at a 15% rate, which is also the rate to which you may be entitled to under the Treaty.

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We will levy the withholding tax on the gross amount of dividends at a 15% tax rate, following the procedures set forth by the Order of April 13, 2000.

     Taxation of capital gains

Under Spanish law, any capital gains derived from securities issued by persons residing in Spain for tax purposes are considered to be Spanish source income and, therefore, are taxable in Spain. For Spanish tax purposes, income obtained by you if you are a U.S. resident from the sale of ADSs or shares will be treated as capital gains. Spanish non-resident income tax is currently levied at a 35% tax rate on capital gains obtained by persons not residing in Spain for tax purposes who are not entitled to the benefit of any applicable treaty for the avoidance of double taxation.

Notwithstanding the above, capital gains derived from the transfer of shares on an official Spanish secondary stock market by any holder who is a resident at a country that has entered into a treaty for the avoidance of double taxation with Spain containing an “exchange of information” clause will be exempt from taxation in Spain. In addition, under the Treaty, capital gains realized by you upon the disposition of ADSs or shares will not be taxed in Spain provided you have not held, directly or indirectly, 25% of our stock during the twelve months preceding the disposition of the stock. You are required to establish that you are entitled to this exemption by providing to the relevant Spanish tax authorities an IRS certificate of residence in the United States, together with the appropriate Spanish tax form, not later than 30 days after the capital gain was realized.

     Spanish wealth tax

Individuals not residing in Spain who hold shares or ADSs located in Spain are subject to the Spanish wealth tax (Spanish Law 19/1991), which imposes a tax on property located in Spain on the last day of any year. The Spanish tax authorities may take the view that all shares of Spanish corporations and all ADSs representing such shares are located in Spain for Spanish tax purposes. If such a view were to prevail, non-residents of Spain who held shares or ADSs on the last day of any year would be subject to the Spanish wealth tax for such year at marginal rates varying between 0.2% and 2.5% of the average market value of such shares or ADSs during the last quarter of such year.

     Spanish inheritance and gift taxes

Transfers of shares or ADSs upon death or by gift are subject to Spanish inheritance and gift taxes (Spanish Law 29/1987) if the transferee is a resident in Spain for tax purposes, or if the shares or ADSs are located in Spain at the time of gift or death, or the rights attached thereto could be exercised or have to be fulfilled in the Spanish territory, regardless of the residence of the beneficiary. In this regard, the Spanish tax authorities may determine that all shares of Spanish corporations and all ADSs representing such shares are located in Spain for Spanish tax purposes. The applicable tax rate, after applying all relevant factors, ranges between 0 and 81.6% for individuals.

Gifts granted to corporations non-resident in Spain are subject to Spanish Non-Resident Income Tax at a 35% tax rate on the fair market value of the shares as a capital gain. If the donee is a United States corporation, the exclusions available under the Treaty described in the section “Taxation of capital gains” above will be applicable.

     Expenses of transfer

Transfers of ADSs or shares will be exempt from any transfer tax or value-added tax. Additionally, no stamp tax will be levied on such transfers.

U.S. Tax Considerations

The following summary describes the material United States federal income tax consequences of the acquisition, ownership and disposition of ADSs or shares, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to acquire such securities. The summary applies only to U.S. Holders (as defined below) that hold ADSs or shares as capital assets for tax purposes and does not address special classes of holders, such as:

• certain financial institutions;

• insurance companies;

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• dealers and traders in securities or foreign currencies;

• holders holding ADSs or shares as part of a hedge, straddle, conversion transaction or other integrated transaction;

• holders whose “functional currency” is not the U.S. dollar;

• holders liable for alternative minimum tax;

• tax exempt organizations;

• partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

• holders that own 10% or more of our voting shares; or

• persons who acquired our ADSs or shares pursuant to the exercise of any employee stock option or otherwise as compensation.

The summary is based upon tax laws of the United States including the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which may affect the tax consequences described herein possibly with retroactive effect. In addition, the summary is based on the Treaty and is based in part on representations of the Depositary and assumes that each obligation provided for in or otherwise contemplated by the Deposit Agreement or any other related document will be performed in accordance with its terms. Prospective purchasers of the ADSs or shares are urged to consult their own tax advisers as to the United States, Spanish or other tax consequences of the acquisition, ownership and disposition of ADSs or shares in their particular circumstances, including the effect of any U.S. state or local tax laws.

As used herein, a “U.S. Holder” is a beneficial owner of ADSs or shares that is, for United States federal income tax purposes:

• a citizen or resident of the United States;

• a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or of any political subdivision thereof; or

• an estate or trust the income of which is subject to United States federal income taxation regardless of its source.

In general, for United States federal income tax purposes, U.S. Holders of ADSs will be treated as the holders of the underlying shares represented by those ADSs. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying shares represented by those ADSs.

The U.S. Treasury has expressed concerns that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the creditability of Spanish taxes and the availability of the reduced tax rate for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by parties to whom the ADSs are pre-released.

Taxation of Distributions

Subject to the discussion of the passive foreign investment company rules below, to the extent paid out of our current or accumulated earnings and profits (as determined in accordance with United States federal income tax principles), distributions, including any Spanish withholding tax, made with respect to ADSs or shares (other than certain pro rata distributions of our capital stock or rights to subscribe for shares of our capital stock) will be includible in the income of a U.S. Holder as foreign source ordinary dividend income. Such dividends will not be eligible for the “dividends received deduction” generally allowed to corporations receiving dividends from domestic corporations under the Code. The amount of the distribution will equal the U.S. dollar value of the euros received, calculated by reference to the exchange rate in effect on the date such distribution is received (which, for U.S. Holders of ADSs, will be the date such distribution is received by the Depositary), whether or not the Depositary or U.S. Holder in fact converts any euros received into U.S. dollars at that time. Any gains or losses resulting from the conversion of euros into U.S. dollars will be treated as ordinary income or loss, as the case may be, of the U.S. Holder and will be U.S. source.

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Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid to a non-corporate U.S. holder paid before January 1, 2009 will be taxed at a maximum rate of 15%. Non-corporate holders should consult their own tax advisers to determine the implications of the rules regarding this favorable rate in their particular circumstances.

Subject to certain generally applicable limitations that may vary depending upon your circumstances and subject to the discussion above regarding concerns expressed by the U.S. Treasury, a U.S. Holder will be entitled to a credit against its U.S. federal income tax liability for Spanish withholding taxes. The limitation on foreign taxes eligible for credit is calculated separately with regard to specific classes of income. Instead of claiming a credit, a U.S. Holder may, at its election, deduct such otherwise creditable Spanish taxes in computing taxable income, subject to generally applicable limitations under U.S. law.

A U.S. Holder must satisfy minimum holding period requirements in order to be eligible to claim a foreign tax credit for foreign taxes withheld on dividends. The rules governing foreign tax credits are complex and, therefore, U.S. Holders are urged to consult their own tax advisers to determine whether they are subject to any special rules that limit their ability to make effective use of foreign tax credits.

Sale and Other Disposition of ADSs or Shares

Subject to the discussion of the passive foreign investment company rules below, gain or loss realized by a U.S. Holder on the sale or exchange of ADSs or shares will be subject to United States federal income tax as capital gain or loss (and will be long-term capital gain or loss if the U.S. Holder held the shares or ADSs for more than one year) in an amount equal to the difference between the U.S. Holder’s tax basis in the ADSs or shares and the amount realized on the disposition. Gain or loss, if any, will be U.S. source for foreign tax credit purposes. The deductibility of capital losses is subject to limitations. Long-term capital gain of a non-corporate U.S. holder is generally taxed at a preferential rate.

Passive Foreign Investment Company Rules

We believe that we are not a “passive foreign investment company”, or “PFIC”, for United States federal income tax purposes for the taxable year 2004. However, since our PFIC status depends upon the composition of our income and assets and the market value of our assets (including, among others, less than 25 percent owned equity investments) from time to time, and based upon certain proposed Treasury Regulations that are not yet in effect but are generally proposed to become effective for taxable years after December 31, 1994, there can be no assurance that we will not be considered a PFIC for any taxable year.

If we are treated as a PFIC for any taxable year, gain recognized by a U.S. Holder on a sale or other disposition of ADSs or ordinary shares would be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares. The amounts allocated to the taxable year of the sale or other exchange and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on the amount allocated to such taxable year. Further, any distribution in respect of ADSs or ordinary shares in excess of 125 percent of the average of the annual distributions on ADSs or ordinary shares received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is shorter, would be subject to taxation as described above. Certain elections may be available (including a mark to market election) to United States persons that may mitigate the adverse consequences resulting from PFIC status.

In addition, if we were to be treated as a PFIC in a taxable year in which we pay a dividend or the prior taxable year, the 15% dividend rate discussed above with respect to dividends paid to non-corporate holders would not apply.

Information Reporting and Backup Withholding

Payment of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding unless (i) you are a corporation or other exempt recipient or (ii) in the case of backup withholding, you provide a correct taxpayer identification number and certify that you are not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is furnished to the Internal Revenue Service.

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     F. Dividends and paying agents.

Not Applicable

     G. Statement by experts.

Not Applicable

    H. Documents on display.

We are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the SEC. Reports and other information filed or furnished by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC’s regional offices at 233 Broadway, New York, New York 10279 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may also be inspected at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which our ADSs are listed. In addition, the SEC maintains a website that contains information filed electronically with the SEC, which can be accessed over the internet at http://www.sec.gov.

     I. Subsidiary information.

Not Applicable

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Item 11. Quantitative and Qualitative Disclosures About Market Risks

Introduction

Our risk management activities involve the integrated qualification and quantification of the different types of risk (credit risk, operational risk, reputational risk and market risk) which are assumed by our business units in their activities.

We have divided this section, according to the primary risks faced by the Group, in the following six parts:

• Organization of Risk Management;

• Global Risk Analysis Profile,

• Credit Risk;

• Operational Risk;

• Reputational Risk; and

• Market Risk

Part 1. Organization of Risk Management

Financial institutions need efficient risk management to generate value on a sustained basis. We use advanced techniques that make efficient risk management possible and, as a result, our risk management is in line with the principles of the New Basel Capital Accord (BIS II).

Our Risk Division reports directly to the third Vice-Chairman and Chairman of the Risk Committee.

This committee:

• Sets our risk policies, in accordance with the Board's Executive Committee.

• Ensures that the levels of risk assumed at the individual and global level meet the targets set.

• Resolves operations beyond the powers delegated to bodies immediately below.

• Empowers other committees lower down the hierarchy to deal with risks.

• Receives information on the significant issues that it must know about and decide upon.

• Regularly reviews the exposures to main clients, economic sectors, geographic areas and risk categories.

• Supervises the fulfilment of risk objectives, the tools used to manage risk, the measures being taken to improve risk management, project performance and any other actions undertaken in this area.

• Receives, evaluates and monitors the observations and recommendations which, for varying reasons, are made by the supervisory authorities.

• Ensures that our measures are consistent with the level of risks previously agreed-upon.

The committee deals with all types of risk, including: credit, market, operational and reputational.

Other principles that guide our risk management are:

• Independent function, with a shared hierarchy. While the objectives and methodologies are established by the Risk Division, the organizational structure is adapted to business needs and proximity to the customer (while maintaining risk quality criteria).

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• Executive capacity supported by knowledge and closeness to the customer, in coordination with the business manager, as well as collective decisions via the corresponding Risk Committees.

• Global scope (different types of risk) and single treatment of the customer (non-admission of risks from different units), without detriment to specialization by risk type and customer segment.

• Collective decisions (including at the branch level) which ensure both different opinions and that results are not dependent on decisions by individuals.

• Medium-low risk profile as a target, which requires a culture of consistency in a series of policies and procedures, among which are the following:

– Strong emphasis on monitoring of risks in order to have sufficient warning of possible problems.

– Risk diversification limiting our relative exposure to the overall risk of customers in the credit system.

– Avoid exposure to companies with ratings deemed to be below par, even when the risk premium available is proportionate to the level of internal rating.

The Board's members and its subsidiary bodies have the necessary skills and independence to supervise development of the general strategy, as well as the decisions taken by senior management which, in turn, sets the business plans, supervises the daily decisions and ensures they are in line with the objectives and policies set by the Board.

The bodies for risk matters are the committees that have been assigned powers for making decisions, controlling and monitoring risks. The table below describes these committees by order of importance.

Sphere	Level in the hierarchy	Name
Centralised	Executive	Executive Committee
		Risks Committee of the Board
	Risk Division	Risks Management Committee
		Global Committee of General
		Directorate of Risks
	Areas and Departments reporting to the Risks Division	Global Committee of Risks of Wholesale Banking (Coporate and Financial Entities) Global Committee of risks of Company Banking Global Committee of Standardised Risks Global Committee of Financial Risks (Market)
Decentralised	Committee of Units	Risks Committee in Banks of the Group/Countries
		Risks Committee in Branches Abroad
		Risks Committee in Branches in regional areas or in business units
		Other Committees

The Group has been using a series of techniques and tools for many years, which are mentioned in other parts of this section. They include:

• Internal ratings, with valuation of the different components which, by client and facility (collaterals, maturities, etc), enable the probabilities of failure to be estimated (allowing us to calculate the expected loss on the basis of historical data).

• Return on Risk Adjusted Capital (RORAC), used for pricing operations (bottom up) to analysis of portfolios and units (top down).

• Economic capital estimated by valuating all types of risk (credit, business, etc.), both as a reference of the management by different building blocks and the return obtained, as well as in admission processes and reference limit of the global classifications of large clients.

• Value at risk as an element of control and for setting the market risk limits of the different trading portfolios.

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• Stress testing to complement the analysis of market and credit risk, in order to value the impact of alternative scenarios, including on provisions and capital.

The goal of the Risk Division is to establish, for the Group, a single and integrated risks function with a global mandate and multi-local execution which covers the different geographic areas where we operate. This division's mission is to provide an agile, effective and efficient service to clients, always maintaining the quality of risks.

The division is divided in two General Directorates:

• General Directorate of Risk; and

• General Directorate of Integrated Management and Internal Risk Control.

The General Directorate of Risk is responsible for the executive functions of credit and market risk management and it is adapted to the structure of business, by type of client:

•	Corporate Banking Risks;
•	Risks of Financial Institutions and Structured Products;
•	Company Banking Risks; and
•	Standardized Risks;
as well as by activity and geographic area (global view / local view):
•	Financial Risk Control and Consolidation;
•	Wholesale Risk Control and Consolidation; and
•	Credit Risk Control and Consolidation.

This structure strengthens the capacity to anticipate changes in the financial conditions of a client or a market, maintaining the quality and standards of the Group's risk and promoting dynamic and integrated management. In addition, under this General Directorate, there is an area that monitors use of the best practices in measurement and tools in order to be able to offer a large range of complex products, better analysis of risks and, in short, more efficient use of capital.

The General Directorate of Integral Management and Internal Control of Risk meets the requirements of organic independence established in the New Basel Capital Accord (BIS II). Its functions are to contribute a global view, measure risk, provide quality analysis and consistent methodologies for different risk exposures, as well as to provide adequate control and internal validation that ensure consistent and homogeneous processes and tools, via the following organisational structure:

• RORAC Methodologies, Creation of Value and Economic Capital;

• Global Analysis;

• Operational Risk;

• Validation of Internal Models;

• Informational Systems; and

• BIS II Project Coordination.

Both directorates report directly to the head of the Risk Division and third Vice-Chairman, thereby ensuring adequate co-ordination mechanisms.

Part 2. Global Risk Analysis Profile

Our risk profile at December 31, 2004 by types of risk and business units, is shown below (excluding Abbey):

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Distribution of economic capital
by types of risk
Credit	48%
Equity Stakes	23%
Rest of Market	9%
Business	8%
Structural Interest	7%
Operational	5%

Distribution of economic capital
by business units
Latin America	31%
Equity Investments	22%
Spain Retail	14%
Banesto	9%
Corporate Centre	8%
Global Wholesale	7%
Portugal	4%
Europe Consumer	4%
Asset Management and Priv. Bank	1%

By types of risk, credit continues to be the main source of our risk (48% of the global economic capital). The market risk of equity stakes was the second largest (23%). The balance of the risks (including structural interest or business) accounted for 29% of the capital.

The Integral Framework of Risks (MIR), developed in 2003, is the tool that we use to quantify, aggregate and assign economic capital and measure our risk adjusted return and that of our main business units. In accordance with this model, our diversification (the result of the multinational and multibusiness nature of its activity) results in a profit of 18%. In other words, our global risk, measured in terms of economic capital, is 18% less than the sum of the risk of our business units considered on their own. If Abbey were to be included in the calculations, we estimate this number would increase to 22%.

Our economic capital is calculated under the premise of supporting the risk of activity with a confidence level of 99.97%, equivalent to a rating of AA. Comparing economic capital figures with the capital funds available at December 2004, shows that the Group was sufficiently capitalised for an AA rating before and after the acquisition of Abbey.

The MIR results show a risk adjusted return for us in 2004 of 15.5%, which, with a cost of capital of 10.5%, means a high capacity to generate shareholder value.

This model was used to set, in the 2005 budget, the risk adjusted return objectives for our main business units, taking into account not only the return on the activity but also the risk incurred to achieve it and the return required by our shareholders.

We believe that this model will enable us to meet the new Basel regulatory requirements, specifically with respect to Pillar II.

Part 3. Credit Risk

Credit risk is the possibility of financial loss resulting from the failure of our clients or our counterparties to meet their obligations with us.

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Credit risk is our main source of risk (48% of the aggregate economic capital), and so identifying, measuring and managing such risk is vital in order to generate value on a sustained basis.

Our credit risk management not only identifies and measures the risk but also seeks the integration, control and mitigation of the different exposures and calculates the risk adjusted return.

The organization of the risks function is based on common principles and criteria shared by the different units. In order to develop it properly, we have a series of policies, procedures and management tools which, based on a common basic model, are adapted to the features of local markets and businesses.

The table below sets out our global credit risk exposure at December 31, 2004 (excluding Abbey):

Group Santander — Gross Exposure to Credit Risk

					Fixed income		Credit		Credit
	Clients		Clients		(trading		Entities		Entites
	outstanding		available		excluding		Outstanding		available		Derivatives		Total		%
Spain	155,186		35,723		23,366		6,471		730		9,472		230,949		62.5	%
Parent bank	91,248		22,589		17,220		2,110		382		6,547		14,097		37.9	%
Banesto	47,709		8,209		6,092		2,316		324		1,958		66,608		18.0	%
Others	16,229		4,925		53		2,045		24		968		24,244		6.6	%
Rest of Europe	37,477		7,611		9,096		4,343		729		1,393		60,649		16.4	%
Germany	10,801		1,717		318		101		0		86		13,023		3.5	%
Portugal	17,599		3,473		8,676		1,435		0		1,232		32,415		8.8	%
Others	9,078		2,421		102		2,807		729		74		15,211		4.1	%
Latin America	36,881		8,485		12,699		3,194		209		2,231		63,700		17.2	%
Brazil	6,747		1,667		4,226		326		0		281		13,246		3.6	%
Chile	10,719		241		1,151		223		209		772		13,315		3.6	%
Mexico	9,920		4,819		3,556		1,807		0		817		20,920		5.7	%
Puerto Rico	5,389		739		1,688		361		0		290		8,466		2.3	%
Venezuela	1,497		686		1,024		289		0		0		3,496		0.9	%
Others	2,608		334		1,053		189		0		71		4,256		1.2	%
Rest of world	2,422		6,743		770		3,108		31		1,235		14,310		3.9	%
Total Group	231,966		58,564		45,930		17,116		1,700		14,331		369,607		100	%
% of Total	62.8	%	15.8	%	12.4	%	4.6	%	0.5	%	3.9	%	100.0	%
Date at 12/31/04 Derivatives in credit risk equivalent, including Repos, excluding doubtful loans.

Regarding the geographic distribution of credit exposure, Abbey's acquisition has significantly increased Europe's relative share in the Group to 85%. Spain, with 44%, still represents the largest credit risk exposure, followed by the UK (30%). Latin America's share has dropped to 12%, while that of non-investment grade countries is only 4% of the total.

The charts below show the distribution of the exposure (EaD), according to the equivalent external rating of the main groupings of credit risk and the expected loss for each tranche:

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The rating distribution in the portfolio of clients is a typical profile in retail banking. Most of the ratings below BBB are the portfolios of small and medium sized companies (“SMEs”), consumer loans and part of our mortgage portfolios. They have a high degree of fragmentation, lower proportional consumption of capital and levels of expected loss comfortably covered by the spread on the operations.

The table below shows the distribution of the Group´s exposure by type of customer:

Distribution of exposure by customer
Segments at December 31, 2004
		Average
	% of exposure	expected loss (EL)
Public sector	2.6	0.49
Corporate	23.2	0.27
SMEs	33.8	0.73
Mortgages (individuals)	23.6	0.29
Rest of individuals	16.7	1.58
Rest of segments	0.1	1.87
Total	100.0	0.66
Data at 12/31/04
Exposure at default . Source MIR. Excluding Abbey

3.1. Customer segmentation for credit risk management

Credit risk management is conducted according to customer segments and the features of products.

The Corporate Banking Risk Area treats customers on a global basis (large companies and multinational financial groups). For large companies, there is a pre-classification model (setting of a maximum internal limit on risk), based on a system of measurement and monitoring of risk capital. In addition, financial institutions have a specialized treatment and the technical monitoring and follow-up of structured finance has been optimized.

The Company Risk Area has strengthened the identification of business opportunities in order to improve business issues by setting common business-risk goals. Meanwhile, the underwriting process has been made more efficient by establishing pre-classifications under a more streamlined model and aimed at those companies which meet certain requirements (high knowledge, rating, etc.).

For its part, the Standardized Risk Area deals with retail clients (small companies, businesses and individuals). These risks are managed on a decentralized basis, following policies and measures that are designed centrally, and is supported by automatic systems for valuation and decision-making that produce effective risk management which is also efficient in terms of resources.

At the end of 2004, we published the Corporate Framework of Standardized Risk Management which aims to homogenize the main principles for managing this type of risk from the perspective of planning the credit cycle, the quality of decision-making models and control of management indicators.

3.2. Rating tools

We have been using internal ratings to assess and track risk for more than 10 years. The aim is to measure the degree of risk of a client or transaction. Each rating corresponds to a certain probability of default or non-payment, based on historical data and past experience.

In the case of corporate and company risks, the process for assigning ratings varies according to the segment. The weight of the view of the analyst is greater in the case of large clients, which involve more complex analysis, while the rating of clients and operations in retail segments is based more on pre-established rules of valuation where a more automatic treatment can be used. The process of assessment can differ depending on the business sector (financial entities, public institutions, industrial companies, real estate development, etc.).

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The table below shows our valuation tools:

Valuation tools
	Management	Valuation tool	Analysis citration
Governments, financial Institutions and global corporates	Centralised Group	Rating	10% view of analyst
Local corporations	Centralised entity	Rating	100% view of analyst
Companies	Decentralised	Scoring	Automatic valuation
			(quantitative areas)+
			analyst view
Micro companies and businesses	Decentralised	Scoring	Automatic valuation
Individuals	Decentralised	Scoring	Automatic valuation

During the tracking phase the ratings are regularly reviewed, at least once a year, and new financial information and the experience in the development of the banking relation are taken into account. The regularity of the reviews increases in the case of clients who reach certain levels in the automatic warning systems and in those classified as special watch.

The system for assessing companies is used for other of our subsidiaries both in Spain and abroad, including our banks in Portugal and Latin America. The depth of historical data available enables us to determine the probability of default associated with each rating. The tools to assign ratings used by the units abroad were improved during 2004 by introducing valuation models based on statistical models created with empirical data.

The table below on the left shows the distribution of the number of companies with outstanding risk by rating for Banco Santander Central Hispano, Spain. The table below on the right shows the distribution of outstanding risk balances by rating for Banco Santander Central Hispano, Spain.

In the case of standardized risks (retail), different automatic valuation systems are applied on the basis of the segment, product and channel (for example, mortgages via branches, consumer loans via agents, loans to businesses, etc). These admission systems are complemented by performance models on the basis of the available information in the Group in monitoring processes and pre-granting of risks.

Each of the yield curves of the charts below reflects the non-performing loans of operations with individuals granted in Spain every year (“vintages”) until maturity. The age of this base enables us to simulate future performances.

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3.3. Master scale or ratings

We have a Master Scale (see table below), whose purpose is to make comparable, at the same rate of anticipated default, the different ratings which are used in the various homogeneous segments of risk.

This scale is based on comparing the internally estimated probabilities of default for the Bank's portfolio with the history of defaults associated with each level of external rating, according to the publications of the rating agencies.

For purposes of comparison, the definition of default used for internal measurements for the purposes of the master scale is based on legal claim situations and not on 90 days of non payment. For the purposes of BIS II or statistical provisions, the probabilities of default are based on 90 days of non payment.

Master scale or ratings
External rating	Probability of default	Standard & Poor's	Moody's
9.3	0.014%	AAA	Aaa
9.2	0.016%	AA+	Aa1
9.0	0.019%	AA	Aa2
8.5	0.03%	AA-	Aa3
8.0	0.05%	A+	A1
7.5	0.08%	A/ A-	A2/A3
7.0	0.13%	A-/BBB+	A3/Baa1
6.5	0.21%	BBB+/BBB	Baa1/Baa2
6.0	0.33%	BBB	Baa2
5.5	0.53%	BBB-	Baa3
5.0	0.85%	BB+	Ba1
4.5	1.37%	BB	Ba2
4.0	2.19%	BB-	Ba3
3.5	3.52%	B+	B1
3.0	5.65%	B+/B	B1/B2
2.5	9.08%	B	B2
2.0	14.58%	B-	B3
1.5	23.42%	CCC	Caa1
1.0	37.60%	CC	Ca

3.4. Concept of expected loss

As well as assessing the client, the analysis of transactions includes aspects such as the maturity, the type of product and the collaterals that exist, which is done through adjusting the initial rating. As a result, not only is the probability of default (PD) taken into account, but also the exposure at default (EaD) and the loss given default (LGD).

By estimating these three factors, the expected loss of each operation can be calculated. Its correct calculation is very important as it ensures that the price adequately reflects the resulting risk premium, and the expected loss is reflected as one of the costs of the activity.

The following charts, reflecting data on non-performing loans in Spain, include the distribution of defaulted consumer and mortgage loans since 1995, according to the percentage of recoveries, after deducting all costs -- including financial and opportunity-- incurred in recovery.

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In the international sphere, the proposal of the Basel Committee to reform the 1988 Capital Accord is also based on the concept of expected loss in order to determine the minimum levels of regulatory capital in the most advanced frameworks based on internal ratings.

3.5. Measurements of expected loss

Our expected credit risk loss (excluding Abbey), at the end of 2004, was €1,755 million (0.52% of the exposure, equivalent to 0.48% of the gross exposure and 0.76% of the risk balance of clients). The distribution of the expected loss by areas is as follows:

Group Santander

Expected loss

(% of EaD)

Santander Central Hispano
Expected loss and ecnomic capital by customer segments
	Oustanding	Expected	Expected	Economic
Portfolio	risk	loss (%)	loss	Capital (%)
Corporate	16.975	0,13	23	2,18
Business	29.905	0,33	99	4,55
Institutions	7.418	0,21	15	3,10
Micro-businesses	13.705	0,83	114	7,41
Individuals	38.735	0,41	159	2,68
Individuals Mortgage	32.742	0,23	75	1,72
Individuals other	5.993	1,41	84	7,93
Total	106.739	0,38	410	3,76
Data of 21/31/2004. Amounts in millions of euros. Including securtized balances. Economic capital excludes concentration effect.

The provisional estimate of the expected loss of the whole Group, including Abbey, is €2,014 million (0.37% of exposure). The estimated expected loss of Abbey is 0.10%.

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While the estimates of expected losses at the units in Spain are the bottom-up result of internal measurement models, the estimates for other units - with some exceptions – are generally the result of top--down approximations, in so far as the measurements of the internal models in these units are consolidated.

3.6. Test of reasonableness in expected loss of the parent bank

To test the calculation model for expected loss, the following table compares specific provisions, net of recoveries, that were actually allocated for the portfolio of Banco Santander Central Hispano over the last few years with the estimated expected loss.

Net loan loss provisions and expected loss Parent bank-Spain (% of a average risk)
											Average
										95-04	adjusted to	Expected
1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	average	the cycle	loss
0.90	0.53	0.40	0.12	0.07	0.11	0.21	0.27	0.19	0.16	0.30	0.37	0.38

The allocations fell substantially during 1995-99, grew again in the subsequent years as a result of the slowdown in the Spanish economy, thereby reflecting their cyclical nature, and declined again in 2003 and 2004.

The average losses must be adjusted to the effect of the economic cycle. The average of 0.37% adjusted in terms of the cycle is close to the 0.38% envisaged in the model.

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3.7. Measurements of cost of credit (observed loss)

The following charts show the cost of credit risk at Grupo Santander (excluding Abbey) and our main business areas during 2004 and in comparison with previous years, measured through different approaches:

The cost of credit has been falling over the years, both in the Group as well as in our main units, particularly in Latin America.

3.8. Quantifying the risk premium

Our risk policy focuses on maintaining a medium-low risk profile, both in credit risk as well as market risk.

In credit risk, this qualitative objective can be quantified in terms of expected loss. The expected loss target for business in Spain must not exceed 0.40% of the outstanding balance of risk, while for the Group as a whole it should not be more than 1.00%.

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3.9. Concept of economic capital. RORAC methodology

Credit losses can surpass the level of expected loss for various reasons (economic cycle, concentration of exposure, errors in the model). The volatility of losses or unexpected loss is the real credit risk. While provisions are in response to the expected losses, institutions endow themselves with capital to cover the contingency of higher than expected credit losses. Just as the provisions, or the margin of operations, must be sufficient to cover the expected loss, the economic capital must be adequate to cover the unexpected losses, ensuring the continuity of business.

Conceptually, economic capital cannot cover with 100% probability all the losses that eventually could occur. The maximum loss, in credit risk, will be produced if all the assets are in default at the same time and nothing is recovered. Such an event, highly unlikely, is not fully covered by the economic capital, which nevertheless is allocated to cover very high losses (which are very unlikely but if they occur can threaten continued activity).

The Bank decides the level of losses it wants to cover with economic capital (the level of confidence with which it wants to ensure the continuation of its business). In our case, this confidence level is 99.97%, above the 99.90% assumed by the regulatory capital formulas proposed in the New Basel Capital Accord. The difference between both levels means assuming a default probability for the Group of 0.03% instead of 0.1%, three times lower than the proposal of BIS II.

In terms of external rating, a confidence level of 99.97% requires having sufficient capital to be rated AA, while 99.90% would only allow a rating of A-, given the higher probability of default associated.

Traditionally, the concept of economic capital has been contrasted with that of regulatory capital, as regulatory capital is required for the regulation of solvency and which, until its next reform, suffers from an insufficient sensitivity to risk. However, the reform of the 1988 Capital Accord is intended to bring both concepts closer together.

If one looks at each operation, the economic capital calculation is based on the same variables needed to calculate the expected loss (i.e., the client's rating, the maturity and the collaterals of the operation). By aggregation, the economic capital of the rest of the operations of this client can be calculated and, bearing in mind the appropriate factors of diversification/correlation of a portfolio of clients, of a business unit and of the bank as a whole.

For its part, the margin of operations must not only cover costs, including the expected loss or the risk cost, but also be sufficient to achieve an adequate return on the economic capital consumed.

The RORAC methodology enables an analysis of whether the return on a transaction covers the risk cost -- the expected loss -- and the cost of capital invested by an institution in the transaction.

Determining the cost of capital is closely linked to calculating the RORAC target, which means a minimum return threshold for risk operations. If an operation does not reach the RORAC target, it could be covering costs, but not making a return on the capital at the level required by us.

The Bank regularly reviews the RORAC target to ensure that the authorized operations generate shareholder value. It is calculated on the basis of two components, the return required by shareholders plus that needed to cover operating costs.

The return required by shareholders or the cost of capital (also called the hurdle rate) is calculated by adding up the free rate of long-term risk and the premium required for shareholders in order for them to invest in Santander shares. The cost of capital calculated at the end of 2004 was 10.5%.

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The chart below shows Banco Santander Central Hispano’s expected loss and RORAC by segments:

The target RORAC is 29%, slightly higher than the sum of the cost of capital plus operating costs and this is because we want to achieve an adequate return on our operations, higher than the minimum required by the average shareholder.

RORAC methodology enables the return on operations, clients, portfolios and businesses to be made on a homogeneous basis, identifying those that obtain a risk adjusted return higher than the cost of our capital, and so aligning risk and business management with the overall objective of creating value.

We have been using RORAC methodology in our credit risk management since 1993, with the following purposes:

• To analyze and set prices during the decision-making process for operations (admission) and clients (monitoring).

• To estimate the capital consumption of each client, portfolio or business segment, in order to facilitate the optimal allocation of economic capital.

• To calculate the level of provisions that correspond to average expected losses.

3.10. Internal systems of risks

One of the main objectives of the New Basel Accord is to adopt rigorous risk management practices in line with the most advanced financial institutions.

One of our hallmarks is to be at the forefront of these practices. For example, when the Bank of Spain introduced in 1999 statistical or anti-cyclical provisions which anticipated the rules and discipline of BIS II, we were the pioneer among large Spanish banks in requesting and obtaining recognition of our internal credit models in line with the norms and disciplines included in Basel II.

The results have been positive for the following reasons:

• The validation process by the supervisors helps to improve and perfect the initial model.

• The internal controls required strengthen the climate of security and implementation of the model, and involve other areas.

• It serves to contrast methodologies used and their performance, encouraging the skills to conduct the ratings in a coherent, accredited and valid way.

• It helps to clarify the drawing up of rules and protocols with which the information has to be treated in the systems and ensure their reliability.

• It introduces the need for recurring qualitative analysis of data or developments observed, trends and sensitivity, as well as comparisons with external sources and identification of differences that could give rise to proposals.

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• It enables us to anticipate with a high degree of accuracy and security what will be the internal models of BIS II, facilitating and ensuring a transition that, in other circumstances, might be very difficult and complex.

Experience in this field has confirmed the usefulness and necessity of independent functions of integrated management and risk, as is required by the New Basel Accord and which we have put into effect with the new organizational structure of the Risk Division.

As a continuation of this policy, we have requested recognition from the Bank of Spain of its new internal model for calculating coverage as referred to in Circular 4/2004.

3.11. Revised framework of international convergence of capital measures and capital standards

We are committed to the principles behind the Revised Framework of International Convergence of Capital Measurement and Capital Standards (Basel II). For this reason, we are actively involved in different forums on the issue, both Spanish and international. We have also stepped up contacts with the regulatory and supervisory authorities in different countries, contributing constructively to improving those technical aspects that could be asymmetric, unfavorable or far from the main objectives of the Basel II agreement.

We aspire for formal recognition, when the time comes, of our internal risk models, in accordance with the requirements of BIS II.

With this in mind, we developed an internal project that enabled our own calculation methods to be approved, under Bank of Spain Circular 9/99. In 2002, with the same goal, we launched our Master Plan to develop internal Basel II models.

The development of the Master Plan gave rise to a series of actions, many of which have been implemented, including:

• Adjustments to the Master Plan to the needs of countries and specific units.

• Adjustments and updates focused on Basel II in admission tools, which have been used for some years.

• Creation of teams of local risk controllers in each country and unit, in full coordination with local organizations.

• Identification of information requirements in applications and systems, both current and future.

• Availability of a recurring supply of necessary information.

• Creation of teams of operational risk coordinators in each unit or country.

For some time now, the measures needed in the Group regarding the Revised Framework have been channelled and developed via a Basel II Corporate Project, whose objective is to lead, coordinate, support and supervise the activities of our different areas affected by the new requirements, in order to adapt to them in the form and time required.

On the basis of the measures taken so far, as well as the estimates made for the whole Group in the quantitative impact studies, we can conclude that the impact on capital of the new agreement will be slightly favourable in its current state, even after incorporating the new requirements for operational risk.

The unit's management (General Directorate of Integral Management and Internal Control of Risk) which, in the sphere of the Risk Division, is responsible for developing and coordinating the necessary works for Basel, provides the necessary coverage which enables the principles of the New Agreement to be met, including:

• Collaboration in the internal process of capital evaluation and in the setting of capital objectives that are in line with our risk profile and control environment, via the necessary methodologies.

• Coordination of the necessary systems to monitor at the global level the composition and quality of the different risk portfolios.

• Integral evaluation with the inclusion in the capital estimation process of all the risks facing the Group.

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• Active and independent participation in the development, selection, application and validation of the rating models. Also, examination of the rating criteria, analysis and documentation of the changes, and verification that the definitions of the ratings are applied coherently in the different units and in the various geographic areas. Lastly, assuming responsibility for drawing up and analyzing reports on the systems, historic data, migration and trends.

• The internal control structure, essential for evaluating capital, guarantees the existence of a consistent and coherent process for measuring various risks, the system for relating risk to the level of capital and observation of internal policies.

• Prior evaluation of internal models, and their internal validation prior to that by the supervisor, thereby ensuring that the models function in accordance with their design.

• In methodologies, it can be used to demonstrate to the supervisor that all the initial and successive requirements are met, so that the systems and processes for estimating risks provide a significant evaluation, with different risk indicators and reasonably precise and coherent quantitative results, as well as ensuring these processes are consistent in their internal use.

3.12. New Bank of Spain Circular

On December 22, 2004 the Bank of Spain published Circular 4/2004 on Credit Entities, which includes on Appendix IX the Analysis and Coverage of Credit Risk.

The most noteworthy aspect of this Circular was the toughening of the criterion for doubtful loans which will mean an increase in the balance of doubtful loans. However, this more conservative criterion for the recognition of doubtful loans is in line with our internal policy of risks and does not entail a need to change the internal risk management procedures, which are always focused on active and rapid management of risk as of its entry into a past due situation, and even before, via risk monitoring procedures.

3.13. Control and monitoring systems

Control is paramount in order to ensure adequate management of credit risk and maintain a risk profile within the parameters set by the Board and by senior management.

This function is carried out by various mechanisms inside and outside the Risk Division.

Within the Division, and independent of the business areas that characterize the Division, decision-making in the admission phase is subject to a system of powers delegated for risk authorization and management by the Risk Committee of the Board of Directors. The decisions in the admission phase are predominantly collective.

The 2005 Limits Plan was implemented against this background at the end of 2004 which, in synthesis, constitutes the formalization of a document that enables the balance sheet and the inherent risks to be fully managed, establishing the acceptable level of risk of the different factors measured.

The goals of this plan are to:

• Facilitate an integrated view and management of risk.

• Establish a framework of coherent action for all risks assumed.

• Determine the acceptable risk level and, in consequence, the limits available to reach the objectives.

• Act as a framework of activity, subject to review when necessary.

The Risk Area has the specific function of monitoring risks for which resources and responsible persons are identified. This function is based on permanent attention in order to ensure there is a punctual reimbursement of operations and anticipation of circumstances that could affect normal development.

We have a system called Companies in Special Watch (FEVE) which has four levels, categorized on the basis of the degree of concern arising from negative circumstances (track, reduce, secure, extinguish). The inclusion in these levels means automatically reducing delegated powers. Clients in FEVE are reviewed at least every six months, and every quarter for the most serious cases. A company can end up in special watch as a result of monitoring, a change in the rating assigned, a review conducted by internal auditing or automatic warnings.

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Ratings are reviewed at least every year, but if weaknesses are detected or on the basis of the rating, a review is done more regularly.

The table below shows our ratings of risk balances according to the FEVE monitoring system:

Ratings of risk balances according to the FEVE monitoring system
December’04	Extinguish	Secure	Reduce	Track	Total Feve
Spain- parent bank	391	86	1,697	6,5636	8,710
Portugal	257	72	257	1,102	1,683
Latin America	505	22	632	2,059	3,218

The units of control, analysis and consolidation also conduct control and monitoring tasks. The main functions are to obtain a global view of risk, analyze possible future scenarios and global treatment of information for management, as well as to promote and to follow-up on the common risk policies and to analyze their impact on the Group, ensuring fulfilment of local and Spanish legislation.

The General Directorate of Integral Management and Internal Control of Risk, under the principles of organic and functional independence from management of risk admission and monitoring as required by the New Basel Accord, performs specific tasks relating to control of credit risk internal models such as:

• Control of methodologies and procedures.

• Regular control of effectiveness and the predicting ability of rating and scoring tools (backtesting).

• Control of operational risk, taking into account the interrelation between this and credit risk management.

• Periodic global review of loan portfolios, losses registered in credit risk and of our risk positioning by analyzing the portfolio and risk profiles.

• Contacts with the internal auditing unit, the external auditing firm, the inspection services of the Bank of Spain and other supervisory bodies.

The recognition by the regulatory authorities of internal credit risk management models is a further guarantee of the degree of internal control because it is a requirement for the validation of these models.

3.14. Performance of the main magnitudes in 2004 (excluding Abbey)

Our ratio of non-performing loans (“NPLs”) was 1.27% at the end of 2004, 28 basis points lower than the 1.55% ratio at the end of 2003. NPL coverage rose by 43 points during the year to 208.0%. The specific provisions in 2004, net of recovered write off, dropped 11.2% to €693.6 million.

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The graphs below show our NPL ratio and coverage:

Our NPL ratio in Spain remained at a low and ended the year at 0.65%, 22 basis points lower than at the end of 2003. Coverage reached 329%, 105 points higher than in 2003.

In Portugal, where economic growth is weaker, the NPL ratio was 3.1% at the end of 2004, higher than the 2.3% recorded in December 2003. The high level of securitization activity had some bearing on this increase (taking secured balances into account, the ratio would be 2.3%.) Coverage was 111%, 14 points lower than at the end of 2003.

The NPL ratio of Santander Consumer, including Hispamer in Spain, CC Bank in Germany and Finconsumo in Italy, and the finance companies acquired in 2004 (PTF, Elcon and Abfin), rose to 2.2%, due to a rise in doubtful balances in Germany in a still unfavourable economic environment. Coverage increased to 153%, four points higher than in 2003.

Latin America's NPL ratio at the end of 2004 was 2.6%, 1.3 points lower than in 2003. Almost all countries reduced their NPL ratios. Coverage reached 162%, 37 points more than in 2003. Mexico, Chile and Puerto Rico, which are all rated investment grade countries by international agencies, account for 68% of the exposure with customers.

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The table below shows Latin America’s amount of risk, NPL and coverage ratios as of December 31, 2004 and 2003:

Latin America Risk, NPL Ratio and Coverage EUR millions
	Risk		NPL ratio (%)		Coverage (%)
	dec-04	dec-03	dec-04	dec-03	dec-04	dec-03
Argentina	1,889	2,073	10.47	15.39	121.7	65.2
Brazil	7,103	5,145	2.59	2.68	175.1	189.6
Colombia	877	449	0.39	0.98	1,170.2	776.5
Chile	11,477	10,006	3.32	4.70	116.0	103.1
Mexico	10,479	9,295	0.72	1.33	401.3	284.3
Puerto Rico	4,257	4,307	2.25	2.66	130.9	95.8
Veneuela	1,533	995	2.16	5.72	346.2	152.6
Other countries	823	334	4.77	11.66	122.2	122.8
Total	38,439	32,604	2.63	3.89	162.0	125.2

Specific credit-loss provisions in Latin America, net of recovered write-offs, were 39% lower than in 2003 at €156.4 million. The cost against the average risk was 0.43% (0.75% in 2003).

The table below shows Latin America’s net specific credit-loss provisions as of December 31, 2004:

Latin America Net Specific loan-loss provisions, 2004
EUR millions
	Specific		Write-offs	Net		% of
	provisions		recoveries	provisions		portfolio
Argentina	(4.9	)	33.3	(38.2	)	(1.97	)
Bolivia	(11.1	)	1.3	(12.4	)	(6.24	)
Brazil	176.7		37.2	139.6		2.27
Chile	111.8		63.3	48.5		0.45
Colombia	(4.1	)	2.8	(6.9	)	(1.26	)
Mexico	63.3		31.9	31.4		0.31
Panama	0.0		0.0	0.0
Paraguay	(0.0	)	0.0	(0.0	)	(1.01	)
Peru	0.0		0.0	0.0		0.00
Puerto Rico	31.1		10.5	20.5		0.39
Uruguay	(13.1	)	12.2	(25.3	)	(16.05	)
Venezuela	7.5		8.3	(0.8	)	(0.07	)
Total	357.3		200.9	156.4		0.43

Our risk management in Latin America shares the common corporate culture. The principles that are the hallmark of the parent bank are applied in the region. The organization of the risks function in each Latin American bank is the same as the one in Spain, with the necessary adjustments made for the local markets.

Progress continued to be made in establishing the GARRA (our new common risk information system in Latin America) management models in Mexico and Chile. Furthermore, there was an increased use of the model for admission of companies in Puerto Rico. Our bank in Argentina became the first in Latin America to establish the existing risk information systems in the GARRA environment.

An initial study was also conducted in 2004 to establish GARRA in Venezuela and use the companies’ module during 2005. Of note in Brazil was the technology merger of the two networks which will enable GARRA to be fully established in Banespa.

3.15. Risk concentration

We continuously track the degree of concentration of its credit risk portfolios using various criteria: geographic areas and countries, economic sectors, products and groups of clients.

The Risk Committee of the Board of Directors establishes the policies and reviews the appropriate exposure limits for adequate management of the degree of concentration of credit risk portfolios.

The recent acquisition of Abbey has helped to diversify our risk by geographic area as it has reduced the relative share of Spain and Latin America.

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No sector accounts for more than 10% of the total exposure (excluding Abbey).

The table below shows the distribution by economic sector of total risk (expressed in percentages and excluding Abbey):

Contribution by sector to total risk
	Spain	Portugal	Latam	Rest	Total
Agriculture	1.2	0.0	0.0	0.0	1.3
Manufacturing	8.8	0.8	2.7	0.8	13.1
Energy	2.1	0.4	0.8	0.1	3.4
Construction	6.2	0.7	0.8	0.1	7.8
Distribution	5.4	0.7	0.4	0.1	6.6
Hotels and restaurants	1.3	0.1	0.1	0.0	1.5
Transports	1.9	0.6	0.2	0.0	2.8
Telecommunications	1.3	0.3	0.2	0.4	2.2
Financial intermediaries	2.2	0.6	0.6	0.7	4.1
Insurance	0.2	0.0	0.0	0.1	0.3
Real estate	8.8	0.3	0.4	0.0	9.5
Services	5.0	0.7	1.4	0.0	7.1
Individuals, public sector and other	21.9	2.5	8.4	7.5	40.3
Total	66.2	7.7	16.2	9.9	100.0
% of total outstanding risk (lending + guarantees)
Data at December 2004
Note: manufacturing includes 8 individual sectors

We are subject to Bank of Spain regulation on “large exposures” (those that exceed 10% of eligible shareholders’ equity). In accordance with Circular 5/93, no individual exposure, including all types of credit risks and equities, can exceed 25% of our shareholders’ equity. Also, the total of “large exposures” cannot be greater than eight times equity. At the end of 2004, the group with the largest risk was a Spanish telecom company and it accounted for 11.0% of eligible equity (well below the maximum legal limit). Only three groups were classified as “large risk” as they each slightly exceeded 10% of eligible equity.

At the end of 2004, the 20 largest economic and financial groups, excluding public entities and lending entities, represented 9.9% of the outstanding credit risk of our clients (9.7% in 2003), a low degree of risk concentration.

Within the framework of the MIR model for the measurement and aggregation of economic capital, particular importance is attached to the risk of concentration by wholesale portfolios (large companies, sovereign risks and counterparty). For this purpose we use as an additional reference the portfolio model of Moody’s-KMV, which is widely used by other banks.

Our Risk Division works closely with the Financial Division to actively manage credit portfolios. Its activities include reducing the concentration of exposures through various techniques such as using credit derivatives and securitization in order to optimize the risk-return relation of the whole portfolio.

3.16. Country-risk

Country-risk is a credit risk component in all cross-border credit operations. Its main elements are sovereign risk and transfer risk and, as a result of the last exchange-rate crises, the very strong risk of fluctuation of local currencies as it could produce a collective credit risk in economies with a high degree of foreign currency debt.

Country-risk management, part of the Risk Area, includes the analysis and assignment of country ratings, control of risk positions and the setting of limits, in accordance with the risk policies established.

A country rating is assigned on the basis of parameters of qualitative and quantitative valuation, which determine a country’s capacity to meet its external obligations. The country-risk limits are established on the basis of the credit quality or rating of the country and of the business opportunities, differentiating between different products and maturities.

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The degree of risk perception of emerging countries by markets continued to improve during 2004.

Our country-risk with third parties requiring provisions, in accordance with the Bank of Spain’s criteria, amounted to $1,254.9 million, 99% more than in 2003, of which 33% was covered by provisions.

The change in country-risk exposure was largely due to reclassification, following a criterion of maximum prudence in foreign trade operations of more than one year in Brazil (“pre-payments” of exports) as regulatory risk. This meant an increase of €421.5 million (67% of the overall rise).

There were also increases of €31.8 million and €25.2 million in Colombia and Venezuela, respectively, due to the larger demand produced by the area’s economic upturn and a reduction of €32.2 million in Argentina, partly due to the amortization of Argentine debt.

The reduction in provisions was due to the redistribution of the exposure towards countries of lower relative risk.

The principles of country-risk management continued to follow prudent criteria; country-risk is assumed very selectively in operations that are clearly profitable for the Bank and which enhance the global relationship with customers.

3.17. Environmental risk

Analysis of the environmental risk of credit operations is part of the Strategic Plan of Corporate Social Responsibility.

We have a standardized procedure for the validation of environmental risk. We believe that socially responsible investment is a concept that will continue to evolve and has to be taken into account both from the standpoint of the contingency of risks as well as business opportunities.

Since the beginning of 2004, we have been using an Environmental Risks Valuation System (VIDA), developed in collaboration with the Spanish Export Credit Insurance Company (CESCE) and Garrigues Medioambiental. It evaluates the environmental risk inherent in each company, whether they are current or future clients.

The operational and analysis focus of VIDA reflects the following:

1º)	Analyze the portfolio of customers and assign an initial level of basic risk (high, low, etc.). This level is established on the basis of activity data and size after examining all the necessary information.
2º)	Once the loan portfolio map is established, companies whose inherent risk/Group exposure binomial suggests the need for more detailed analysis are identified. For this purpose, additional information related to environmental factors is used, allowing a more thorough evaluation of the companies analyzed.
3º)	In those cases where, because of the risk level, a more thorough valuation is required, an analysis is made on the basis of electronic questionnaires by sectors.

The final result provides a rating scale (from 1 to 9), and the more thorough the valuation the more significant the rating.

This environmental rating will be gradually incorporated into our rating system. The rating serves, however, from the outset as an additional reference for making decisions.

3.18 Counterparty risk

Counterparty risk is a variant of credit risk. This includes all types of exposure with credit entities as well as the risk of solvency assumed in treasury operations (bonds and derivatives) with other types of clients.

Control is carried out in real time through an integrated system which provides information on the available credit line of any counterparty, in any product and maturity and at any of our branches.

Risk is measured by its current as well as potential value (the value of the risk positions taking into account the future variation of the underlying market factors in contracts).

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The Net Replacement Value (NRV) of the portfolios of OTC derivative products that we maintained with our counterparties at December 31, 2004 (excluding Abbey) amounted to $4,658.6 million, 0.71% of the nominal value of these contracts compared with 0.68% in 2003.

The table below sets forth our notional value of derivatives by maturity and their net replacement value:

Grupo Santander (excluding Abbey)
Notional value of derivatives by maturity (at 12/31/04)
US$ million
								Net replacement value
	< 1year	1-5 years	5-10 years	> 10 years	Total	Trading	Hedging	Total	Trading	Hedging
IRS	138,657	185,571	81,600	23,904	429,732	335,170	94,561	3,024	948	2,076
FRAs	29,062	0	0	0	29,062	29,055	7	8	8	0
Interest rate options	15,652	31,480	9,193	1,605	57,930	57,699	231	325	319	6
Asset Swaps	0	1,564	0	0	1,564	1,485	79	0	0	0
OTC interest subtotal	183,371	218,615	90,793	25,509	518,288	423,409	94,879	3,356	1,275	2,081
Currency forwards	63,476	6,397	351	0	70,223	10,519	59,705	(262)	109	(371)
Currency swaps	3,835	7,628	8,419	1,634	21,516	3,945	17,571	(80)	(16)	(64)
Currency options	6,898	557	0	0	7,455	676	6,779	171	22	149
OTC foreign exchange subtotal	74,208	14,581	8,770	1,634	99,194	15,140	84,054	(171)	115	(286)
Structured fixed income	0	0	0	0	0	0	0	0	0	0
Debt options	1,205	0	0	0	1,205	1,194	12	7	7	0
OTC debt options subtotal	1,205	0	0	0	1,205	1,194	12	7	7	0
Equity derivatives	10,502	19,511	610	0	30,623	2,247	28,376	1,466	95	1,371
OTC equity derivatives subtotal	10,502	19,511	610	0	30,623	2,247	28,376	1,466	95	1,371
Total derivatives	269,287	252,707	100,173	27,143	649,310	441,990	207,321	4,659	1,492	3,167

The Equivalent Credit Risk (that is, the sum of the NRV and the maximum potential value of these contracts in the future) was 22.2% less than in 2003 at $18,529.3 million. This reduction was mainly due to two factors: 1) the signing of new collateral agreements with the main financial institutions with risk and 2) a fine-tuning of the methodology for the valuation of credit derivatives and for calculating the potential risk in derivatives operations.

The table below sets forth our derivatives equivalent risk and average life as of December 31, 2004 (excluding Abbey).

Grupo Santander (excluding Abbey)
Equivalent risk and average life
(at 12/31/04)
	Equivalent risk				Av.
	(US$ million)			Cover	Life
	Total	Trading	Hedging	(%)	(months)
IRS	11,020	6,762	4,257	2.6	64
FRAs	15	15	0	0.1	3
Interest rate options	828	811	17	1.4	38
Asset Swaps	335	293	42	21.5	30
OTC interest subtotal	12,198	7,881	4,316	2.4	62
Forex	4,603	656	3,947	6.6	4
Currency swaps	1,477	222	1,254	6.9	63
Currency options	537	121	417	7.2	9
OTC foreign exchange derivatives subtotal	6,617	999	5,618	6.7	18
Structured fixed income	0	0	0	0.0	0
Debt options	15	15	0	1.3	1
OTC debt options subtotal	15	15	0	1.3	1
Equity derivatives	3,143	4	3,140	10.3	20
OTC equity derivatives subtotal	3,143	4	3,140	10.3	20
Credit default swap (protection purchased)	206	0	206		82
Credit default swap (protection sold)	13	0	13		59
CD Subyacente	(2,164)	0	(2,164)
Subtotal OTC credit derivatives	(1,945)	0	(1,945)		80
Guarantees for OTC operations	(1,499)	0	(1,499)
Total derivatives	18,529	8,899	9,630	2.9	51

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Our activity in credit derivatives continued to gain importance during 2004, both from the standpoint of trading as well as structural coverage of its credit positions.

Derivatives transactions continued to be carried out with counterparties that enjoy excellent credit quality, so that 91% of counterparty risk is at a rating equal to or superior to A-.

In terms of geographic distribution, the main changes over 2003 were the rise in Spanish risk (chiefly as a result of Santander Global Connect), a reduction in European Union risk, and a slight reduction in North American risk.

Lastly, the distribution of risk by type of counterparty shows 92.5 % in OECD banks, 6.4 % in companies and 1.1 % in non-OECD banks.

The tables below set forth our risk distribution by type of counterparty and by geographic areas (excluding Abbey):

Grupo Santander (excluding Abbey)
Distribution of risk by type of counterparty
Rating	%
AAA	3.8
AA	71.0
A	16.9
BBB	5.54
Without rating	2.74
Total	100.00

Grupo Santander (excluding Abbey)
Risk distribution by geographic areas
	European Union	35%
	Spain	24%
	North America	28%
	Europe	9%
	Latin America	3%
	Others	1%

Part 4.  Operational Risk

4.1 Definition and objectives

We define operational risk as “the risk of losses from defects or failures in its internal processes, employees or systems, or those arising from unforeseen circumstances”. They are purely operational events, which makes them different from market or credit risks.

The objective is to identify, mitigate, manage and quantify this risk.

Our greatest need, therefore, is to identify and eliminate sources of risk, regardless of whether they produce losses or not. Measurement also helps management as it enables priorities to be established and a hierarchy to be created for making decisions.

We use the standard method for calculating operational risk under BIS II, but we do not rule out using an internal model in the future. We use the following valuations:

1.	Priority given to mitigating operational risk in the daily management of tasks.
2.	Most of the basic foundations of an internal model are already incorporated to the standard model and to our management of operational risk.

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4.2. Management model

The main principles of the organizational structure are:

– The Risk Division is responsible for evaluating and controlling this risk category.

– The Central Unit that supervises operational risks reports to the Risk Division and is responsible for the global corporate programme.

– The management structure of operational risk is based on the knowledge and experience of executives and experts in the different areas and units, with particular importance attached to the role of coordinators, who are the key figures.

This framework satisfies the qualitative criteria contained in the New Basel Capital Accord, both for standard methods and advanced measurement, as well as in the “Advance Notice of Proposed Rulemaking” of the U.S. Federal Reserve, regarding the independence of the global management unit, which is responsible for, among other things, designing and implementing policies, procedures and strategies, and information systems. Internal Auditing also keeps its independence with regard to management of operational risk, without detriment to its ability to review the management structure in this area.

We have adopted the following framework for representing the phases of the process for management of operational risk:

The main advantages of our management structure are:

• Integral and effective management of operational risk (identification, evaluation, monitoring, control/mitigation and report).

• Improved knowledge of existing operational risks and the responsibility for them by managers of the business lines.

• Drawing up of data on losses, which enable operational risk to be quantified for calculating both the economic and the regulatory capital.

• Operational risk information helps to improve the processes and controls, reduce losses and the volatility of revenues.

4.3. Implementing the model: global initiatives and results

The independent management and control unit of operational risk, part of the Risk Division, has been operating since 2001. Its main functions, developed activities and global initiatives include:

• Presentations to senior management and development of the internal rules.

• Designation of coordinators and the creation of operational risk departments.

• Training - the coordinators receive direct training in Madrid, where in addition to discussing different focuses and methodologies they exchange experiences and reaffirm concepts.

• Designing and putting into effect qualitative and quantitative operational risk tools.

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• Reconcile data bases of losses – accounting.

• Developing tools for the automatic capturing of events through accounting systems.

• Spearheading mitigation plans and the communication of best practices – exchange between our banks and countries on mitigation plans, corrective measures and development projects established.

• Development of the corporate operational risk tool on the Intranet (our internal communications network).

• Collaboration with the Purchases Area regarding its function in managing banking insurance related to operational risk (BBB policies, damage, civil responsibility and life). Savings were achieved in 2004 in the renewal of premium income for such policies for Latin America.

• Capital calculation using the standard method and progress in the methodology for the internal model.

The project began to be installed in our different units in 2002. Almost all of our units have been incorporated to the project with a high degree of uniformity. Nonetheless, due to different paces of installation, stages, schedules and the historical depth of the relevant data bases, the degree of implementation varies from country to country.

On a general basis:
–	Data bases of losses classified by errors and operational types are received every month. Our data base shows 476,168 events (202,042, provisional figure for 2004), without exclusions for reasons of amount, with both the accounting impact (including positive effects) as well as the non-accounting impact.
–	Operational risk indicators are available, regularly defined and updated by the main management units.
–	There are always a sufficient number of coordinators in the business and back-up areas.
–	The main events are identified and analyzed, and mitigation measures taken which, in significant cases, are disseminated to our other units as a Best Practices guide.
–	Processes to reconcile data bases with accounting.
By consolidating the total information received, our operational risk “image” is reflected in the following chart:

Self-evaluation questionnaires are received and analyzed from nearly all of our units.

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4.4. BIS II Project – corporate operational risk tool

Within the general framework of the BIS II Project, our Operational Risk Department is working, together with Technology, on designing and establishing a corporate operational risk tool which, in an Internet environment, integrates the different management instruments used to date, via local applications, in the different units managing operational risk.

This tool is being developed in various phases and modules, beginning, from the onset, in satisfying the basic management requirements and, then, adding other more advanced functions.

The main modules are as follows:

The basic features of each model are as follows:

Data Base of Events. This is the model whose development is the most advanced. It is already installed in some of our entities. It enables the accounting systems to automatically capture operational risk events (SGO, for entities in the Partenón environment) as well as manual capturing of such risk events. It will also enable entities with non-Partenón environment common access via the website.

Self-Assessment Questionnaire. This model includes both general and specific questionnaires, as well as different types of qualitative and quantitative questions for evaluating present and future operational risk.

Risk Indicators. This model captures, via automatic or manual feeding, activity and control indicators (all of them managed under a common format) both for the present situation as well as for future expectations.

Mitigation. Its main use is centralized and integrated management of corrective measures. Questions, indicators or events/types of event are captured on the data base which exceed a certain threshold (scores or limits).

Financial Information Management Model. This allows dynamic management of the information model by selecting information, weightings, scenarios and impact of corrective measures.

Insurance. This incorporates basic information linked to insurance contracted by each unit, linking it to the data base of events.

Part 5. Reputational Risk

We regard, in all of our areas, the reputational risk function of its activities as being of the utmost importance. The management of this risk is conducted by:

5.1. Global Committee of New Products

All new products or services that any of our entities wants to market must be submitted to this committee for approval.

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The committee held 11 meetings in 2004 at which 70 products or families of products were analyzed.

A Local Committee of New Products is established in each country where we are present. Once a new product or service is ready, this committee must request permission for it to be marketed from the Global Committee. In Spain, the Local Committee falls within the Global Committee.

The areas that participate in the Global Committee are: Tax Advice, Legal Advice, Customer Attention, Internal Auditing, Retail Banking, Global Corporate Banking, International Private Banking, Auditing, Financial Operations and Markets, Operations and Services, Organization, Prevention of Money-laundering, Global Wholesale Banking Risk, Credit Risk, Financial Risk, Operational Risk, Technology, Global Treasury and, lastly, the unit proposing the new product or the Local Committee of New Products.

Before a new product or service is launched, these areas, as well as, where applicable, other independent experts considered necessary in order to correctly evaluate the risks incurred, exhaustively analyze the aspects that could affect the process, stating their opinion on each product or service.

The Global Committee, in the light of the documentation received, and after checking that all the requirements for approving the new product or service have been met and bearing in mind the risk guidelines set by the Board's Risk Committee approves, rejects or sets conditions for the new product or service.

The Global Committee gives particular consideration to the suitability of the new product or service to the area or segment where it is going to be marketed. Importance is attached to ensuring that:

– Each product or service is sold by those who know how to sell it.

– The client knows what he is investing in and the risk of each product or service and this can be supported with documents.

– Each product or service is sold where it can be sold, not only for legal or tax reasons (i.e., it fits into the legal and tax regime of each country), but also on the basis of the financial culture.

– When a product or service is approved a maximum limit is set for the amount that can be sold in each country.

5.2. Manual of Procedures for the Marketing of Financial Products

This manual is used by Banco Santander Central Hispano for the retail marketing of financial products in Spain.

The objective is to improve the quality of information made available to investors and ensure they understand the features, return and risk of the products.

The manual segments customers into three categories, which initially coincide with those of Private Banking, Personal Banking and Banking for Individuals. Products are also segmented into three categories: green, yellow and red, on the basis of their complexity and the guarantees they provide for recovering capital and obtaining a certain return.

The manual covers financial products sold to retail individuals, such as participations in mutual funds and shares in public placements. The Global Committee of New Products can include others in the sphere of the manual.

In 2004, 47 products covered by the manual were presented for approval. Most of them were mutual funds, but there were other categories such as warrants, hedging products, preferred shares and public offerings and/or subscriptions to securities.

Of the 47 products, 12 were new ones submitted to the Global Committee and 35 were not new and were submitted to the Office of the Manual (which was created to ensure enforcement of the Manual and is included in the Compliance Management Area). The 47 products were categorized as follows: 27 were green (57.5%), 11 yellow (23.5%) and 9 red (19%). The office reported on all the products approved to the National Securities Market Commission.

Implementing the manual requires: (1) rigorous use of business documentation and contracts, and (ii) paying attention to the segment to which the customer belongs before offering the product.

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5.3 The Board's Risk Committee

The Risk Committee, the ultimate body responsible for global risk management and all kinds of banking operations, evaluates reputational risk as part of its activities.

Part 6. Market Risk

Generally

We are exposed to market risk mainly as a result of the following activities:
•	Trading in financial instruments, which involves interest rate, foreign exchange rate and equity price risks.
•	Engaging in retail banking activities, which involves interest rate risk since a change in interest rates affects interest income, interest expense and customer behavior. This interest rate risk arises from the gap (maturity and re-pricing) between assets and liabilities.
•	Investing in assets (including subsidiaries) whose returns or accounts are denominated in currencies other than the Euro, which involves foreign exchange rate risk between the Euro and such other currencies.
•	Investing in subsidiaries and other companies, which subject us to equity price risk.
•	Liquidity risk is embedded in all activities, trading and non-trading.

Primary Market Risks and How They Arise

The primary market risks to which we are exposed are interest rate risk, foreign exchange rate risk, equity price risk and liquidity risk. We are exposed to interest rate risk whenever there is a mismatch between interest rate sensitive assets and liabilities, subject to any hedging with interest rate swaps or other off-balance sheet derivative instruments. Interest rate risk arises in connection with both our trading and non-trading activities.

We are exposed to foreign exchange rate risk as a result of mismatches between assets and liabilities, and off-balance sheet items denominated in different currencies, either as a result of trading or in the normal course of business. We maintain non-trading open currency positions arising from our investments in overseas subsidiaries, affiliates and their currency funding. The principal non-trading currency exposures are the euro to the US dollar and the euro to the main Latin American currencies. Trading foreign exchange rate open risk is not material compared to non-trading foreign exchange risk.

We are exposed to equity price risk in connection with both our trading and non-trading investments in equity securities.

We are also exposed to liquidity risk. Market depth is the main liquidity driver in our trading portfolio, even though our policy is to trade the most liquid assets. Our liquidity risk also arises in non-trading activity due to the maturity gap between assets and liabilities in the retail banking business.

We use derivatives for both trading and non-trading activities. Trading derivatives are used to eliminate, to reduce or to modify risk in trading portfolios (interest rate, foreign exchange and equity), and to provide financial services to clients. Our principal counterparties for this activity are financial institutions. The principal types of derivatives used are: interest rate swaps, future rate agreements, interest rate options and futures, foreign exchange forwards, foreign exchange futures, foreign exchange options, foreign exchange swaps, cross currency swaps, equity index futures and equity options.

Derivatives are also used in non-trading activity in order to manage the interest rate risk and foreign exchange risk arising from asset and liability management activity. Interest rate and foreign exchange non-optional derivatives are used in non-trading activity.

Procedures for Measuring and Managing Market Risk

Our board, through its Risk Committee, is responsible for establishing our policies, procedures and limits with respect to market risks, including which businesses to enter and maintain. The Committee also monitors our overall performance in light of the risks assumed. Together with the local and global Assets and Liabilities Committees (“ALCO”), each Market Risk Unit measures and monitors our market risks, and provides figures to ALCO to use in managing such risks, including liquidity risk.

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Our market risk policy is to maintain a medium to low risk profile in business units. The risk activity is regulated and controlled through certain policies, documented in our Market Risk Management Policies Manual (as described below), and through a limit structure on our exposure to these market risks which includes global limits for the entire Group (total risk limit unit) to specific portfolio limits; in addition, authorized products are listed and reviewed periodically.

These policies, procedures and limits on market risk are applicable to all units, businesses or portfolios susceptible to market risk.

1. Market Risk Management Policies Manual

The Market Risk Management Policies Manual is a compilation of policies that describe the control framework used by our Group to identify, measure and manage market risk exposures inherent to our activities in the financial markets. The Manual is employed for market risk management purposes at all involved levels in the Group and subsidiaries, providing a general and global action framework and establishing risk rules for all levels.

The Manual’s main objective is to describe and report all risk policies and controls that our Board of Directors has established as well as its risk predisposition.

All Group managers must ensure that each business activity is performed in accordance with the policies established in the Manual. The Manual is applied to all business units and activities, directly or indirectly, related to market risk decision-making.

2. Market Risk Management Procedures

All the functions developed by a risk manager are documented and regulated by different procedures, including measurement, control and reporting responsibilities. Internal and external auditors audit the compliance with this internal regulation control in order to ensure that our market risk policies are being followed.

3. Market Risk Limit Structure

The market risk limit structure can be defined as the Board of Directors risk “appetite” and is managed by the Global Market Risk Function that accounts for all Group business units.

Its main functions are to:

• Constrain all market risk within the business management and defined risk strategy.

• Quantify and inform all business units of the risk levels and profiles defined by the Board of Directors in order to avoid non-desired levels or types of risk.

• Maintain risks levels over all businesses in accordance with market and business strategy changes, and which are consistent with the Board of Directors’ positions.

• Allow business units reasonable but sufficient risk-taking flexibility in order to meet established business objectives.

The Global Market Risk Function defines the limit structure while the Risk Committee reviews and approves it. Business managers then administer their activities within these limits. The limit structure covers both our trading and non-trading portfolios and it includes limits on fixed income instruments, equity securities, foreign exchange and other derivative instruments.

Limits considered to be global limits refer to the business unit level. Local business managers set lower level limits, such as portfolio or trader limits. To date, system restrictions prevent intra-day limits.

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Business units must always comply with approved limits. Potential excesses will require a range of actions carried out by the Global Market Risk Function unit including:

• Providing risk reducing levels suggestions and controls. These actions are the result of breaking “alarm” limits.

• Taking executive actions that require risk takers to close out positions to reduce risk levels.

Statistical Tools for Measuring and Managing Market Risk

     1. Trading activity

The Trading Portfolio is defined as proprietary positions in financial instruments held for resale and/or bought to take advantage of current and/or expected differences between purchase and sale prices. These portfolios also include positions in financial instruments deriving from market-making, sale and brokering activity.

As a result of trading fixed income securities, equity securities and foreign exchange, we are exposed to interest rate, equity price and foreign exchange rate risks. We are also exposed to volatility when derivatives (options) are used.

Market risk arising from proprietary trading and market-making activities is actively managed through the use of cash and derivative financial instruments traded in OTC and organized markets.

Interest rate risk derived from market-making is typically hedged by buying or selling very liquid cash securities such as government bonds, or futures contracts listed in organized markets like Liffe, Eurex, Meff and CBOT.

Foreign exchange rate risk is managed through spot transactions executed in the global foreign exchange inter-bank market, as well as through forward foreign exchange, cross currency swaps and foreign exchange options.

Equity price risk is hedged by buying or selling the underlying individual stocks in the organized equity markets in which they are traded or futures contracts on individual stocks listed in organized markets like Meff and Liffe.

In the case of equity indexes such as S&P 500, Euro STOXX, or IBEX-35, the hedging is done through futures contracts listed in the aforementioned organized markets.

Volatility risk arising from market-making in options and option-related products is hedged by, either buying and selling option contracts listed in organized markets like Eurex, Meff, and CBOT, or entering risk reversal transactions in the inter-bank OTC market.

We use VaR to measure our market risk associated with all our trading activity.

     1.1 VaR Model

We use a variety of mathematical and statistical models, including value at risk (“VaR”) models, historical simulations, stress testing and evaluations of Return on Risk Adjusted Capital (“RORAC”) to measure, monitor, report and manage market risk. We call our VaR figures daily or annual “capital at risk” figures (“DCaR” or “ACaR”), depending on their time horizon, since we use them to allocate economic capital to various activities in order to evaluate the RORAC of such activities.

As calculated by us, DCaR is an estimate of the expected maximum loss in the market value of a given portfolio over a one-day time horizon at a 99% confidence interval. It is the maximum one-day loss that we estimate we would suffer on a given portfolio 99% of the time, subject to certain assumptions and limitations discussed below. Conversely, it is the figure that we would expect to exceed only 1% of the time, or approximately three days per year. DCaR provides a single estimate of market risk that is comparable from one market risk to the other.

The standard methodology used in the majority of the business units is based on historical simulation (520 days). In order to capture recent market volatility in the model, our DCaR figure is the maximum between the 1% percentile and the 1% weighted percentile of the simulated profit and loss distribution.

We use DCaR estimates to alert senior management whenever the statistically estimated losses in our portfolios exceed prudent levels. Limits on DCaR are used to control exposure on a portfolio-by-portfolio basis. DCaR is also used to calculate the RORAC for a particular activity in order to make risk-adjusted performance evaluations.

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     1.2 Assumptions and Limitations

Our DCaR and VaR methodology should be interpreted in light of the limitations of our model, which include:

• A one-day time horizon may not fully capture the market risk of positions that cannot be liquidated or hedged within one day.

• At present, we compute DCaR at the close of business and trading positions may change substantially during the course of the trading day.

     1.3 Scenario Analysis and Calibration Measures

Because of these limitations in DCaR and VaR methodology, in addition to historical simulation, we use stress testing to analyze the impact of extreme market movements and to adopt policies and procedures in an effort to protect our capital and results of operation against such contingencies.

In order to calibrate our VaR model, we use back testing processes. Back testing is a comparative analysis between Value at Risk (VaR) estimates and the daily results actually generated. The purpose of these tests is to verify and measure the precision of the models used to calculate VaR.

The analyses of our back testing comply, at a minimum, with the BIS recommendations regarding the verification of the internal systems used to measure and manage market risks.

     2. Non Trading activity

     2.1 Foreign Exchange Risk and Equity Price Risk

Due to its nature, changes in strategic positions have to be approved by local/global functions in ALCO committee. Position limits with respect to these investments are established, although they will be measured under VaR and other methods, which attempt to implement immediate action plans if a particular loss level is reached.

Our foreign exchange rate risk with respect to our non-trading activity can be either permanent or temporary. The permanent risk reflects the book value of investments net of the initial goodwill, while the temporary risk basically stems from purchase/sale operations made to hedge the exchange rate risk derived from dividend flows and expected results. The exchange rate differences generated for each position are recorded in reserves and in profit and loss account respectively.

In order to manage the exchange rate risk of the book value of permanent investments, our general policy is to finance the investment in local currency, provided there is a deep market which allows it and that the cost of doing so is justified by the expected depreciation. If local markets are not deep enough, our investments in foreign currency will be financed in euros and therefore will generate an exchange-rate risk. Certain one-off hedges of permanent investments are made when it is believed that a local currency could weaken against the euro more quickly than the market is discounting. In addition, operations are carried out to hedge the currency risk of the Group’s results and dividends in Latin America.

Our equity price risk arises from our portfolio of investments in industrial and strategic shareholdings. Our strategic holdings in the industrial and financial equity portfolios are steady. Fluctuations in the market value of the shares in such portfolios do not have an effect on our operational results (as most of them are accounted for by the equity method) and their book value is much lower than their market value.

     2.2 Interest Rate Risk

We analyze the sensitivity of net interest revenue and net worth to changes in interest rates. This sensitivity arises from gaps in maturity dates and review of interest rates in the different asset and liability accounts. Certain re-pricing hypotheses are used for products without explicit contractual maturities based on the economic environment (financial and commercial).

We manage investments by determining a target range for each sensitivity and providing the appropriate hedge (mainly with government debt, interest rate swaps and interest rate options) in order to maintain these sensitivities within that range.

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The measures used to control interest rate risk are the interest rate gap and the sensitivity of net interest revenue and net worth to changes in interest rates, VaR and analysis of scenarios.

a) Interest rate gap of assets and liabilities

The interest rate gap is based on the analysis of the gaps between the maturities of the asset, liability and off-balance sheet items. Gap analysis provides a basic representation of the balance sheet structure and enables concentrations of interest rate risk by maturity to be identified. It is also a useful tool for estimating the possible impact of eventual interest rate movements on net interest revenue and net worth.

b) Net interest revenue sensitivity (NIR)

The sensitivity of net interest revenue measures the change in the short/medium term in the accruals expected over a particular period (12 months), in response to a parallel shift in the yield curve.

c) Net worth sensitivity (MVE)

Net worth sensitivity measures in the long term (the whole life of the operation) the interest risk implicit in net worth (equity) on the basis of the effect that a change in interest rates has on the current values of financial assets and liabilities.

d) Value at Risk (VaR)

The Value at Risk for balance sheet activity is calculated with the same standard as for trading: historic simulation with a confidence level of 99% and a time frame of one day.

e) Analysis of scenarios

Two scenarios for the performance of interest rates are established: maximum volatility and sudden crisis. These scenarios are applied to the balance sheet, obtaining the impact on net worth as well as the projections of net interest revenue for the year.

     2.3 Liquidity Risk

Liquidity risk is associated with our capacity to finance our commitments, at reasonable market prices, as well as to carry out our business plans with stable sources of funding. We permanently monitor maximum gap profiles.

We have a diversified portfolio of assets that are liquid or can be made so in the short term. We also have an active presence in a wide and diversified series of financing and securitization markets, limiting our dependence on specific markets and keeping open the capacity of recourse to alternative markets.

The measures used to control liquidity risk are the liquidity gap, liquidity ratio, stress scenarios and contingency plans.

a) Liquidity gap

The liquidity gap provides information on contractual and expected cash inflows and outflows for a certain period of time, for each of the currencies in which we operate. The gap measures the net need or excess of funds at a particular date, and reflects the level of liquidity maintained under normal market conditions.

b) Liquidity ratios

The liquidity coefficient compares liquid assets available for sale (after applying the relevant discounts and adjustments) with total liabilities to be settled, including contingencies. This coefficient shows, for currencies that cannot be consolidated, the level of immediate response of the entity to firm commitments.

c) Analysis of scenarios/Contingency Plan

Our liquidity management focuses on preventing a crisis. Liquidity crises, and their immediate causes, cannot always be predicted. Consequently, our Contingency Plan concentrates on creating models of potential crises by analyzing different scenarios, identifying crisis types, internal and external communications and individual responsibilities.

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The Contingency Plan covers the activity of a local unit and of central headquarters. Each local unit must prepare a Plan of Contingency Financing, indicating the amount it would potentially require as aid or financing from headquarters during a crisis. Each unit must inform headquarters (Madrid) of its plan at least every six months so that it can be reviewed and updated. These plans, however, must be updated more frequently if market circumstances make it advisable.

Control system

The process of setting limits is the instrument we use to establish the level of equity that each activity has available. Setting the limits is conceived as a dynamic process which responds to senior management’s risk acceptance level.

Quantitative analysis

     A. Trading activity

Quantitative analysis of daily VaR in 2004

Our risk performance with regard to trading activity in financial markets during 2004 (excluding Abbey), measured by daily VaR, is shown in the following graph.

As the above graph shows, we have a medium to low risk profile, which was actively managed throughout the year. This level of management allows for changes of strategy to take advantage of opportunities in an environment of uncertainty and high volatility.

The maximum risk level was reached on August 12 ($22.5 million in VaR terms) and the minimum on March 23 ($15.6 million), due to the reduction of interest rate positions and currency risk in Brazil, Mexico and Spain. The levels of volatility in markets moved depending on the geopolitical situation and on the expectations of a slower than expected economic recovery. The average risk in 2004 was $19.2 million in terms of VaR.

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The risk histogram below shows the distribution of frequencies of average risk in terms of daily VaR during 2004 (excluding Abbey). The maximum risk levels were reached at specific moments and never surpassed $22.5 million.

Risk Histogram

VaR in Millions of Dollars

Risk by product

The minimum, maximum, average and year-end 2004 values (excluding Abbey) in VaR terms were as follows:

VaR statistics by product		Minimum		Average		Maximum		Year-End
				(in millions of dollars)
Total Trading
	Total VaR	15.6		19.2		22.5		20.5
	Diversification effect	(3.1	)	(8.9	)	(15.0	)	(8.7	)
	Fixed-Income VaR	8.6		15.6		20.2		16.7
	Equity VaR	1.2		2.3		5.0		2.1
	FX VaR	8.9		10.2		12.3		10.3
Latin America
	Total VaR	14.7		18.4		22.2		19.6
	Diversification effect	(2.1	)	(7.7	)	(14.6	)	(7.8	)
	Fixed-Income VaR	7.9		14.9		20.0		15.8
	Equity VaR	0.2		1.2		4.7		1.3
	FX VaR	8.7		10.0		12.2		10.2
U.S.
	Total VaR	1.1		3.0		6.3		5.3
	Diversification effect	0.0		(1.2	)	(4.5	)	(0.6	)
	Fixed-Income VaR	1.0		2.8		5.7		4.8
	Equity VaR	0.0		0.1		0.3		0.0
	FX VaR	0.1		1.3		4.9		1.1
Europe
	Total VaR	3.0		4.3		7.9		3.3
	Diversification effect	(0.7	)	(2.4	)	(7.4	)	(2.2	)
	Fixed-Income VaR	2.5		3.4		7.2		2.8
	Equity VaR	0.9		1.8		3.4		1.7
	FX VaR	0.4		1.5		4.7		1.0

The average risk in Latin America in terms of VaR was $18.4 million, ending the year with a VaR of $19.6 million. Our risks were concentrated in fixed income and currencies (average daily VaR of $15.6 million and $10.2 million, respectively, and were located in Latin America, Europe and North America).

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Historic VaR by product

Distribution of risks and results

•      Geographic distribution

During 2004, excluding Abbey, Latin America’s contribution to the Group’s average total VaR was 71% and Europe’s contribution was 16.9%, meanwhile the contribution of Latin America to income (trading) was 51% and Europe’s was 40%. European treasury activities are more focused on client facilitation than other business units in the Group. The geographic contribution, in percentage terms, both in risks as well as in results over our total VaR and annual gross operating income from trading activity, is shown in the graph below.

The minimum, average, maximum and year-end risk values in daily VaR terms, by geographic area (excluding Abbey), are shown in the following table.

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Risk statistics in 2004

US$ million

	Minimum	Average	Maximum	Year-end
Total	15.6	19.2	22.5	20.5
Europe	3.0	4.3	7.9	3.3
US	1.1	3.0	6.3	5.3
Latin America	14.7	18.4	22.2	19.6

Distribution by period

The table below shows the performance of risk versus monthly results for our trading activity, excluding Abbey.

Histogram of the frequency of daily marked-to-market results

The histogram below details the distribution of the frequency of daily Marked-to-Market (“MtM”) results on the basis of size. The most common yield interval was $0-$2.4 million, which occurred on 73 days of the year (27% of the days of the year) (excluding Abbey). During 67% of the days of the year, the interval was between ($2.4) and $4.9 million (excluding Abbey).

Histogram of the frecuency of daily results (MtM)

Daily results in millions of dollars

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Risk management of structured derivatives

Our structured derivatives activity (non-organized markets) is mainly focused on designing investment products and risk hedges for clients. These transactions include options on equities, fixed-income and currencies.

The units where this activity takes place are: Madrid, Portugal, Brazil and Mexico, and to some extent Chile, where we are beginning to develop this market.

Excluding Abbey, the average VaR was $1.9 million, the maximum $3.6 million and the minimum $1.0 million.

Stress Test

Different stress test scenarios were analyzed during 2004. Scenarios of maximum volatility, applying six standard deviations to different market factors, as of December 31, 2004, are provided below (excluding Abbey).

Maximum volatility scenario

The table below shows, at December 31, 2004, the maximum losses of value of each product (fixed-income, equities and currencies), in a scenario in which volatility equivalent to six standard deviations in a normal distribution is applied (decrease in prices, increases in local and external rates, devaluations of currencies against the U.S. dollar) (excluding Abbey).

Maximum volatility Stress

	Fixed income		Equities		Exchange rate		Total
			(in millions of dollars)
Total	(41.8	)	(8.9	)	16.5		(31.5	)
Europe	9.1		(4.5	)	1.2		7.0
Latin America	(30.0	)	(4.4	)	16.4		(17.2	)
US	(21.0	)	(0.1	)	(1.1	)	(21.4	)

The stress test shows that we would suffer an economic loss of $31.5 million, if this scenario materialized in the market.

B. Asset and liability management in Latin America

Quantitative analysis of interest rate risk in 2004

The graph on the evolution of balance sheet management risk shows that the level of interest rate risk in Latin America, measured by the sensitivity of net worth and net interest revenue to a parallel movement of 100 basis points, moved in a narrow band in 2004.

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At the end of December of 2004, risk consumption by region, measured by the sensitivity of net worth to 100 basis points, was $495 million, and measured by the sensitivity of net interest revenue at one year to 100 basis points, was $95 million. This risk profile corresponds to a gradual taking of positions in order to guarantee the hedging of the margin in the face of possible cuts in interest rates, particularly in Mexico during the second quarter of 2004 and Chile in the last half of 2004.

Interest rate risk profile

The gap tables below show the distribution by maturity of the risk in Latin America at December 31, 2004.

Gaps in local currency	Total		0-6 months		6-12 months		1-3 years		> 3 years	Not sensitive
					(in millions of dollars)
Assets	96,544		61,137		4,169		8,362		13,333	9,543
Liabilities	96,824		67,916		2,899		6,662		5,935	13,412
Off-balance sheet	(366	)	(3,062	)	(7,979	)	8,252		2,419	4
Gap	(648	)	(9,841	)	(6,709	)	9,952		9,817	(3,867	)
Gaps in dollars	Total		0-6 months		6-12 months		1-3 years		> 3 years	Not sensitive
					(in millions of dollars)
Assets	29,542		17,247		2,450		3,673		4,830	1,342
Liabilities	28,582		15,968		2,155		4,336		4,290	1,835
Off-balance sheet	366		(60	)	(215	)	267		276	98
Gap	648		625		45		(405	)	817	(434	)

Net interest revenue sensitivity

For the whole of Latin America, the consumption at December 2004 was $95 million (sensitivity to 100 basis points). The geographic distribution is shown below.

Net interest revenue sensitivity by countries
	Mexico	31	%
	Brazil	28	%
	Puerto Rico	11	%
	Chile	10	%
	Argentina	9	%
	Venezuela	8	%
	Others	3	%

Brazil and Mexico accounted for more than 50% of the risk. The year 2004 was characterized by an increase in the net interest revenue risk, mainly due to the portfolio purchases in Mexico and Chile.

The positioning graph on the next page, obtained from the sensitivity of net interest revenue to a parallel movement of 100 basis points in the yield curve, shows the positioning of countries with regard to NIR sensitivity. Business units shown on the right side of the graph are exposed to losses in NIR in scenarios of local and U.S. interest rate reductions. Business units shown on the left side of the graph are exposed to losses in NIR in scenarios of local and U.S. interest rate increases. The size of the circles represents the total sensitivity of the unit.

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Net worth sensitivity

Consumption for all Latin America in 2004 amounted to $495 million (sensitivity to 100 basis points). The geographic distribution is shown below.

MVE sensitivity by countries
	Mexico	30%
	Chile	30%
	Brazil	14%
	Puerto Rico	11%
	Argentina	10%
	Venezuela	4%
	Others	1%

Approximately 75% of net equity risk is concentrated in Mexico, Chile and Brazil. The year was characterized by an increase in the net equity risk in two of the region´s main countries, Mexico and Chile, as positions were gradually taken to cover possible future losses in net interest revenue.

The net worth sensitivity positioning graph on the next page, obtained from the sensitivity of net worth to a parallel movement of 100 basis points in the yield curve, shows the positioning of countries with regard to MVE sensitivity. Business units shown on the right side of the graph are exposed to losses in MVE in scenarios of local and U.S. interest rate reductions. Business units shown on the left side of the graph are exposed to losses in MVE in scenarios of local and U.S. interest rate increases. The size of the circles represents the total sensitivity of the unit.

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C. Financial management

We actively manage the market risks inherent in retail banking, which is the core of our business. Management covers the structural risks of interest rates, liquidity, exchange rates and capital.

The purpose of financial management is to make net interest revenue from our commercial activities more stable and recurrent, maintaining adequate levels of liquidity and solvency.

The Financial Management Area manages structural risk on a centralized basis. This allows the use of homogenous methodologies, adapted to each local market where we operate.

In the euro-dollar area, the Financial Management Area directly manages the risks of the parent bank and coordinates management of the rest of the units that operate in convertible currencies. There are local teams in our banks in Latin America that manage balance sheet risks under the same frameworks, in coordination with the global area of Financial Management of the parent bank.

The Asset and Liability Committees (ALCOs) of each country and, where necessary, the Markets Committee of the parent bank are responsible for these risk management decisions.

Management of structural liquidity

The purpose of structural liquidity management is to finance the Group's recurrent business in optimum conditions in terms of maturities and costs, preventing the assumption of unwanted liquidity risks.

We have a diversified portfolio of assets that are liquid or can be made so in the short term, adjusted to its positions. It also has an active presence in a wide and diversified series of financing markets or securitization of its assets, limiting its dependence on specific markets and keeping open the capacity of recourse to markets. Management of structural liquidity involves planning the funding needs, structuring the sources of financing (optimizing diversification by maturities, instruments and markets) and drawing up contingency plans.

An annual liquidity plan is drawn up, based on the financing needs arising from the business budgets. On the basis of these needs and taking into account the limits of recourse to the short-term markets, an issuance and securitization plan is drawn up for the year. The real situation of financing needs is closely tracked during the year, resulting in changes to the plan when necessary.

The volume of convertible currencies captured under the financing plan during 2004 (excluding Abbey) amounted to €35.0 billion in the wholesale markets, 71% of which were medium- and long-term issues including preferred shares and subordinated debt which are included in the Group's eligible equity.

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Securitization of medium- and long-term assets amounted to €11.0 billion. Short-term recourse at the end of 2004 remained at the same levels as a year earlier.

Our banks in Latin America are autonomous in terms of liquidity, and do not resort to the lines of the parent bank for financing their activity. Each bank has its own liquidity and contingency plans without calling on the Group's financing. The cross-border and reputation risks arising from external financing are limited and authorized by the parent bank.

Unlike what generally happens in the euro-dollar area, the business activity of the Latin American banks has a surplus of funds and does not require structural financing from the markets.

Interest rate risk

The Financial Management Area analyzes structural interest rate risk derived from mismatches in maturity and revision dates for assets and liabilities in each of the currencies in which we operate. For each currency, the risk measured is the interest gap, the sensitivity of net interest revenue, the economic value and the duration of equity.

Depending on the position of the interest rates of the balance sheet and taking into account the market’s prospects, the necessary financial measures are adopted to adjust the position to that desired by the Bank. These measures include the taking of positions in markets to defining the interest rate features of products.

There are two spheres of management: convertible currencies (mainly the euro and the US dollar) and non-convertible currencies (largely Latin American). The Markets Committee, through the Financial Management Area, directly manages convertible currencies and coordinates management of the local ALCOs of the banks in Latin America.

This activity is particularly important in scenarios of low interest rates as is currently the case, when commercial banking margins are pressured down.

In these scenarios, adequate management of structural interest rate risk protects revenues via net interest revenue without exposing assets and liabilities to purely speculative positions.

Exchange rate risk

Structural exchange rate risk is largely derived from our currency operations, which mainly include our permanent financial investments, the collection of earnings and dividends from these investments and the purchases and sales of other assets.

In order to manage the exchange rate risk of the book value of permanent investments, our general policy is to finance it in local currency provided there is a deep market which allows it and the cost of doing so is justified by the expected depreciation. Also, certain one-off hedges of permanent investments are made when it is believed that a local currency could weaken against the euro more quickly than the market is discounting.

At December 2004, the only material open position in Latin America was our investment in Brazil, of approximately €2,100 million.

In addition, we manage the currency risk of our results and dividends in Latin America. The local units manage the exchange rate risk between their local currencies and the US dollar, which is the currency of the budget for this area. Financial Management, at the parent bank, is responsible for the management of the exchange rate risk between the US dollar and the euro.

Portfolio of industrial and strategic shareholdings

In the first semester of 2004, we reduced the risk of our industrial and strategic equity portfolios. The main stock positions remained with no significant changes until early June 2004, when stakes in Vodafone and Endesa Italia were sold to the market.

In the second half of the year, the main factors that explain the decrease of the risk of this portfolio were the significant changes in positions, with reductions and sales of large holdings such as Sacyr-Vallehermoso, Repsol and Royal Bank of Scotland.

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The average daily VaR for the year 2004 (excluding Abbey), was $549.8 million, with a minimum of $414.2 million and a maximum of $666.3 million.

Capital management

Capital management aims to optimize its structure and cost from the regulatory and economic perspectives. In order to ensure our solvency, we use different instruments and policies: capital increases and issues eligible for equity (preferred shares and subordinated debt), retained earnings, dividend policy and securitizations.

From a regulatory standpoint (BIS criteria), in 2004, including Abbey, we increased our eligible equity by €18,839 million. The BIS ratio rose from 12.43% to 13.01% and the excess of stockholders` equity over the regulatory minimum requirements increased from €9,101 million to €17,084 million.

In addition to managing the regulatory capital, we manage and try to optimize return on the economic capital. We assign economic capital to the business units in order to measure, on a homogeneous basis, the return of each unit and thus its contribution to the Group’s value.

We are progressively incorporating the creation of value as a tool to (i) measure the contribution of the different units that are part of the portfolio of business and (ii) assess the management of each unit.

     D. Market Risk: VaR Consolidated Analysis

Our total daily VaR at December 31, 2003 and December 31, 2004 (excluding Abbey), broken down by trading and non-trading (structural) portfolios, were as follows at the dates below:

	At December 31,
	2003				At December 31, 2004
			Low		Average		High		Period End
			(in millions of dollars)
Trading	21.7		15.6		19.2		22.5		20.5
Non-Trading	636.1		413.9		549.5		665.9		453.4
Diversification Effect	(21.1	)	(15.4	)	(18.8	)	(22.1	)	(20.1	)
Total	636.7		414.1		549.9		666.3		453.8

Our daily VaR estimates of interest rate risk, foreign exchange rate risk and equity price risk, broken down by trading and structural (non-trading) portfolios, were as follows at the dates below (excluding Abbey):

Interest Rate Risk

	At December 31,
	2003				At December 31, 2004
			Low		Average		High		Period End
			(in millions of dollars)
Trading	16.8		11.7		15.6		20.2		16.7
Non-Trading	101.5		107.6		135.2		181.5		115.3
Diversification Effect	(15.4	)	(11.1	)	(14.7	)	(19.1	)	(15.5	)
Total	102.9		108.2		136.1		182.6		116.5

Foreign Exchange Rate Risk

	At December 31,
	2003				At December 31, 2004
			Low		Average		High		Period End
			(in millions of dollars)
Trading	11.2		8.9		10.2		12.3		10.3
Non-Trading	83.8		69.2		78.8		95.3		94.0
Diversification Effect	(10.4	)	(8.4	)	(9.6	)	(11.5	)	(9.8	)
Total	84.6		69.7		79.4		96.1		94.5

175

Equity Price Risk

	At December 31,
	2003				At December 31, 2004
			Low		Average		High		Period End
			(in millions of dollars)
Trading	4.7		1.2		2.3		5.0		2.1
Non-Trading	573.2		354.9		497.7		648.3		402.8
Diversification Effect	(4.7	)	(1.2	)	(2.3	)	(5.0	)	(2.1	)
Total	573.2		354.9		497.7		648.3		402.8

Our daily VaR estimates by activity were as follows at the dates below (excluding Abbey):

Trading	At December 31,
	2003				At December 31, 2004
			Low		Average		High		Period End
			(in millions of dollars)
Interest Rate	16.8		11.7		15.6		20.2		16.7
Exchange Rate	11.2		8.9		10.2		12.3		10.3
Equity	4.7		1.2		2.3		5.0		2.1
Diversification Effect	(11.0	)	(6.2	)	(8.9	)	(15.0	)	(8.6	)
Total	21.7		15.6		19.2		22.5		20.5

Non-Trading	At December 31,
	2003				At December 31, 2004
			Low		Average		High		Period End
			(in millions of dollars)
Interest Rate	101.5		107.6		135.2		181.5		115.3
Exchange Rate	83.8		69.2		78.8		95.3		94.0
Equity	573.2		354.9		497.7		648.3		402.8
Diversification Effect	(122.4	)	(117.8	)	(162.2	)	(259.2	)	(158.7	)
Total	636.1		413.9		549.5		665.9		453.4

Total	At December 31,
	2003				At December 31, 2004
			Low		Average		High		Period End
			(in millions of dollars)
Interest Rate	102.9		108.3		136.1		182.6		116.5
Exchange Rate	84.6		69.8		79.4		96.1		94.6
Equity	573.2		354.9		497.7		648.3		402.8
Diversification Effect	(124.0	)	(118.9	)	(163.3	)	(260.7	)	(160.1	)
Total	636.7		414.1		549.9		666.3		453.8

The following tables show our daily VaR estimates of our trading portfolios (by region and by product), including Abbey, for the three months ended March 31, 2005

Trading protfolios: VaR by region First quarter				Trading portfolios: Var by product First quarter
Million euros				Million euros
	2005		2004
	Avg	Latest	Avg		Min		Avg		Max		Latest
				Total trading
				Total Var	17.4		18.4		19.5		18.0
Total	18.4	18.0	14.6	Diversification effect	(1.9	)	(6.0	)	(11.7	)	(9.4	)
Europe	10.5	11.2	4.1	Fixed income VaR	7.7		10.5		14.2		13.0
USA	2.7	2.0	2.4	Equity VaR	3.6		4.7		5.8		5.4
Latin America	14.7	14.0	13.8	Currency VaR	7.9		9.2		11.2		9.1

176

Item 12. Description of Securities Other than Equity Securities.

A. Debt Securities.

Not Applicable

B. Warrants and Rights.

Not Applicable

C. Other Securities.

Not Applicable

D. American Depositary Shares.

Not Applicable

177

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

Not Applicable

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.

E. Use of proceeds.

Not Applicable

Item 15. Controls and Procedures

(a)  Evaluation of disclosure controls and procedures. Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have concluded that as of December 31, 2004, our disclosure controls and procedures were adequate and effective and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.

(b)   Changes in internal controls over financial reporting. There was no change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16. [Reserved]

Item 16A. Audit committee financial expert

The Audit and Compliance Committee has six members, all of whom are non-executive and five of whom are independent Directors (as defined by Article 5 of the Regulations of the Board). Our Regulations of the Board provide that the chairman of the Audit and Compliance Committee must be an independent director (as defined by Article 5 of the Regulations of the Board) and someone who has the necessary knowledge and experience of accounting techniques and principles. Currently, the chairman of the Audit and Compliance Committee is Mr. Manuel Soto, the Fourth Vice-Chairman of the Board of Directors. Our standards for director independence may not necessarily be consistent with, or as stringent as, the standards for director independence established by the NYSE.

Our Board of Directors has determined that Mr. Manuel Soto, the Chairman of the Audit and Compliance Committee, is an “Audit Committee Financial Expert” in accordance with SEC rules and regulations.

Item 16B. Code of Ethics

We have adopted a code of ethics (the “General Code of Conduct”) that is applicable to all members of the boards of the companies of the Group, to all employees subject to the Code of Conduct of the Securities Market, including the Bank’s Chairman, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, and to all those employees designated by the Human Resources Division that have been specifically informed of their subjection to this General Code of Conduct. This Code establishes the principles that guide these officers’ and directors’ respective actions: ethical conduct, professional standards and confidentiality. It also establishes the limitations and defines the conflicts of interest arising from their status as senior executives or Directors.

This Code is available on our website, which does not form part of this Annual Report on Form 20-F, at www.gruposantander.com under the heading “Corporate Governance – Internal Code of Conduct”.

178

Item 16C. Principal Accountant Fees and Services

Amounts paid to the firms belonging to the Deloitte worldwide organization, the Group’s principal auditor, for statutory audit and other services were as follows:

			2004
	2002	2003	(excluding Abbey)	2004
	(in millions of euros)
Audit Fees (1)	9.1	8.9	9.4	15.2
Audit Related Fees (2)	2.9	2.2	2.6	5.6
Tax Fees (3)	1.1	1.5	1.2	1.3
All Other Fees (4)	4.3	3.2	1.6	5.9
Total	17.4	15.8	14.8	28.0

(1)     Fees for annual company audits of the Group.

(2)     Fees for other reports required by legal regulations emanating from different national supervisory organizations in the countries in which the Group operates (i.e.: review of regulatory reports mainly in USA, Brazil, Mexico and Venezuela).

(3)     Fees for professional services rendered for tax compliance, tax advice, and tax planning in the countries in which the Group operates.

(4)     Fees for other services provided. These fees were mainly for financial advisory, due diligence services and systems reviews.

The Audit and Compliance Committee proposes to the Board the fees to be paid to the external auditor and the scope of its professional mandate.

The Audit and Compliance Committee is required to pre-approve the main audit contract of the Bank or of any other company of the Group with its principal auditing firm. This main contract sets forth the scope of the audit services and audit-related services to be provided by the auditing firm, the term (typically, three years), the fees to be paid and the Group companies to which it will be applied. Once the term of the first contract expires, it can be rolled over by subsequent periods of one year upon approval by the Audit and Compliance Committee.

If a new Group company is required to engage an auditing firm for audit and audit-related services, those services have to be pre-approved by the Audit and Compliance Committee.

All non-audit services provided by the Group’s principal auditing firm or other auditing firms in 2004 (i.e.: tax services and all other services) were approved by the Audit and Compliance Committee, and all such non-audit services to be provided in the future will also require approval from the Audit and Compliance Committee.

The Audit and Compliance Committee is regularly informed of all fees paid to the auditing firms by the Group companies.

Item 16D. Exemption from the Listing Standards for Audit Companies

Not applicable.

179

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

The following table shows the repurchases of shares made by the Bank or any of its Affiliated Purchasers during 2004:

				(d) Maximum number (or
2004	(a) Total number of	(b) Average	(c) Total number of shares (or	approximate dollar value) of shares
	shares (or units)	price paid per	units) purchased as part of publicly	(or units) that may yet be purchased
	purchased	share (or unit)	announced plans or programs	under the plans or programs (2)
January	70,730,728	€9.30	—	—
February	110,026,672	€9.29	—	—
March	67,543,318	€8.77	—	—
April	151,964,832	€9.24	—	—
May	94,530,714	€10.18	—	—
June	47,118,437	€8.82	—	—
July	87,031,766	€8.20	19,755,560	172,321,984 shares (3)
August	41,942,343	€7.87	24,867,766	157,378,540 shares (4)
September	34,483,486	€8.07	31,402,158	168,017,929 shares (5)
October	38,416,617	€8.51	10,800,830	190,000,000 shares (6)
November	39,391,852	€8.86	6,382,921	183,955,181 shares (7)
December	56,450,204	€9.00	6,000,000	177,955,181 shares (8)
Total	839,630,969 (1)	€9.00	99,209,235	177,955,181 shares

(1)      Of this amount, we purchased 740,421,734 shares during 2004 other than through the publicly announced program described below. The shares were purchased in open-market transactions.

(2)      The figures set forth in this column reflect the number of shares that could have been purchased at the end of the relevant month. However, as described below, the repurchase program expired on March 31, 2005.

Share repurchase program

At a General Shareholders’ Meeting held on June 19, 2004, the Bank was authorized to purchase its shares substantially on the same terms as those authorized in the previous shareholders’ meetings.

Since the date when the Bank announced its offer to acquire Abbey on July 26, 2004, the Bank purchased its shares under the authorization described above through a repurchase program which was authorized by the Board aimed at reducing the Bank’s share capital by the net amount of the purchases and sales made under such program. The Repurchase Program was carried out according to the following terms:

(i)	the maximum number of shares which could be held was 190 million shares;
(ii)	the maximum acquisition price was €9.77 per share; and
(iii)	the Repurchase Program expired on March 31, 2005.

The transactions undertaken under the Repurchase Program up to March 31, 2005 are summarized in the following table:

			Weighted
			average price
	Number of Shares		(Euros)
Purchases	99,209,235		8.15
Sales	(87,164,416	)	8.12
Balance as at December 31, 2004	12,044,819
Purchases	1,200,000		9.33
Sales	(13,244,819	)	9.47
Balance as at March 31, 2005	0

(3)	Purchases	19,755,560		(6)	Previous Balance	21,982,071
	Sales	(2,077,544	)		Purchases	10,800,830
	Balance at month-end	17,678,016			Sales	(32,782,901	)
					Balance at month-end	0
(4)	Previous Balance	17,678,016		(7)	Previous Balance	0
	Purchases	24,867,766			Purchases	6,382,921
	Sales	(9,924,322	)		Sales	(338,102	)
	Balance at month-end	32,621,460			Balance at month-end	6,044,819
(5)	Previous Balance	32,621,460			Previous Balance	6,044,819
	Purchases	31,402,158			Purchases	6,000,000
	Sales	(42,041,547	)		Sales	0
	Balance at month-end	21,982,071			Balance at month-end	12,044,819

180

PART III

Item 17. Financial Statements.

We have responded to Item 18 in lieu of this item.

Item 18. Financial Statements.

Reference is made to Item 19 for a list of all financial statements filed as part of this Form 20-F.

Item 19. Exhibits.

(a) Index to Financial Statements	Page
Report of Deloitte, S.L.	F-1
Consolidated Balance Sheets as of December 31, 2004, 2003 and 2002.	F-2
Consolidated Statements of Income for the Years Ended December 31, 2004, 2003, and 2002.	F-4
Notes to the Consolidated Financial Statements	F-5

(b) List of Exhibits.

Exhibit
Number	Description
1.1	By-laws (Estatutos) of Banco Santander Central Hispano, S.A., as amended
1.2	By-laws (Estatutos) of Banco Santander Central Hispano, S.A., as amended (English translation).
8.1	List of Subsidiaries (incorporated by reference as Exhibits I, II and III of our Financial Pages filed with this Form 20-F).
12.1	Section 302 Certification by the Chief Executive Officer
12.2	Section 302 Certification by the Chief Financial Officer
13.1	Section 906 Certification
15.1	Consent of Deloitte, S.L.

We will furnish to the Securities and Exchange Commission, upon request, copies of any unfiled instruments that define the rights of holders of long-term debt of Banco Santander Central Hispano, S.A.

181

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

BANCO SANTANDER CENTRAL HISPANO, S.A.

By: /s/ José Antonio Álvarez

Name: José Antonio Álvarez

Title: Chief Financial Officer

Date: June 30, 2005

INDEX TO FINANCIAL STATEMENTS

(a) Index to Financial Statements

Page
Report of Deloitte, S.L.	F-1
Consolidated Balance Sheets as of December 31, 2004, 2003 and 2002	F-2
Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002	F-4
Notes to the Consolidated Financial Statements	F-5

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Banco Santander Central Hispano, S.A.:

We have audited the accompanying consolidated balance sheets of Banco Santander Central Hispano, S.A. (the “Bank”) and Companies composing, together with the Bank, the Santander Group (the “Group” – Notes 1 and 3), as of December 31, 2004, 2003 and 2002, and the related consolidated statement of income for the years then ended. These consolidated financial statements are the responsibility of the controlling Company’s directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Bank is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Banco Santander Central Hispano, S.A. and Companies composing the Santander Group as of December 31, 2004, 2003 and 2002, and the results of its operations and of the funds obtained and applied by them for the years then ended in conformity with accounting principles generally accepted in Spain.

As indicated in Notes 1 and 2-j to the consolidated financial statements referred to above, in 2003 and 2002, the Bank and other Group entities entered into early retirement agreements with certain employees and recorded these commitments, after receiving the related authorizations from the Bank of Spain pursuant to Rule 13 of Bank of Spain Circular 4/1991, with a charge to Reserves and simultaneously recorded the related deferred tax asset (€336 million and €181 million, respectively, in 2003, and €856 million and €461 million, respectively, in 2002). In 2004, the Bank of Spain did not grant such authorization to credit institutions and, accordingly, also in accordance with Rule 13 of Bank of Spain Circular 4/1991, the Bank and other Group entities recorded net provisions of €527 million with a charge to the consolidated statement of income to meet their commitments to the employees who took early retirement in that year (€810 million were charged to the "Extraordinary Loss" caption in the 2004 consolidated statement of income referred to above, and simultaneously the related deferred tax asset was recorded for €283 million).

Accounting principles generally accepted in Spain vary in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the three years in the period ended December 31, 2004, 2003 and 2002 and the determination of stockholders’ equity and financial position as of December 31, 2004, 2003 and 2002, to the extent summarized in Note 28.

/s/ Deloitte, S.L.
Deloitte, S.L.

Madrid-Spain, March 29, 2005, except for Notes 27 and 28 as to which the date is June 30, 2005

F- 1

Banco Santander Central Hispano, SA and Companies Composing the Santander Group
Consolidated Balance Sheets as of December 31, 2004, 2003 and 2002 (Notes 1,2,3 and 4)

	(Thousands of Euros)
ASSETS	2004	2003	2002
CASH ON HAND AND ON DEPOSIT AT CENTRAL BANKS:
Cash on hand	2,269,877	1,639,608	1,808,417
Cash at Bank of Spain	1,750,825	3,589,618	775,206
Cash at other central banks	4,765,844	3,678,214	3,657,955
	8,786,546	8,907,440	6,241,578
GOVERNMENT DEBT SECURITIES (Note 5)	16,123,313	31,107,864	24,988,493
DUE FROM CREDIT INSTITUTIONS (Note 6):
Demand deposits	1,705,299	1,703,538	3,148,911
Other	47,864,648	35,914,299	37,107,479
	49,569,947	37,617,837	40,256,390
LOANS AND CREDITS (Note 7)	335,207,727	172,504,013	162,972,957
DEBENTURES AND OTHER FIXED-INCOME SECURITIES (Note 8)
Public-sector issuers	31,873,002	27,339,738	22,854,792
Other issuers	50,965,590	16,937,316	9,231,369
	82,838,592	44,277,054	32,086,161
COMMON STOCKS AND OTHER EQUITY SECURITIES (Note 9)	13,164,023	10,064,122	7,866,752
INVESTMENTS IN NON-GROUP COMPANIES (Note 10)	2,697,128	4,266,425	4,769,738
INVESTMENTS IN GROUP COMPANIES (Note 11)	5,045,947	1,067,771	1,129,393
INTANGIBLE ASSETS:
Incorporation and start-up expenses	176	901	7,675
Other deferred charges	462,593	473,395	635,373
	462,769	474,296	643,048
GOODWILL IN CONSOLIDATION (Note 12):
Fully consolidated companies	16,099,163	6,065,632	8,970,164
Companies accounted for by the equity method	865,038	1,319,592	984,571
	16,964,201	7,385,224	9,954,735
PROPERTY AND EQUIPMENT (Note 13):
Land and buildings for own use	2,723,047	2,723,142	3,000,385
Other property	369,642	286,981	280,711
Furniture, fixtures and other	5,120,445	1,573,846	1,659,463
	8,213,134	4,583,969	4,940,559
TREASURY STOCK	104,180	10,155	14,746
OTHER ASSETS (Note 22)	23,755,320	17,983,170	17,554,670
ACCRUAL ACCOUNTS	7,758,288	6,919,377	6,353,686
ACCUMULATED LOSSES AT CONSOLIDATED COMPANIES (Note 21)	4,706,764	4,621,815	4,435,179
TOTAL ASSETS	575,397,879	351,790,532	324,208,085
MEMORANDUM ACCOUNTS (Note 23)	105,515,367	85,264,845	82,480,069

The accompanying Notes 1 to 28 and Exhibits I to VIII are an integral part of the consolidated balance sheets as of December 31, 2004, 2003 and 2002.

F-2

Banco Santander Central Hispano, SA and Companies Composing the Santander Group
Consolidated Balance Sheets as of December 31, 2004, 2003 and 2002 (Notes 1,2,3 and 4)

	(Thousands of Euros)
LIABILITIES AND EQUITY	2004	2003	2002
DUE TO CREDIT INSTITUTIONS (Note 14)	84,813,805	75,580,312	50,820,719
CUSTOMER DEPOSITS (Note 15):
Savings deposits-
Demand	145,000,185	76,613,017	67,644,766
Time	70,367,960	46,973,305	52,286,346
Other deposits-
Demand	3,820,858	309,402	408,544
Time	74,656,694	35,439,848	47,476,100
	293,845,697	159,335,572	167,815,756
MARKETABLE DEBT SECURITIES (Note 16):
Bonds and debentures outstanding	57,940,072	28,838,892	20,497,329
Promissory notes and other securities	26,067,117	15,602,313	10,791,778
	84,007,189	44,441,205	31,289,107
OTHER LIABILITIES (Note 22)	18,576,809	10,429,976	10,811,902
ACCRUAL ACCOUNTS	10,826,948	7,539,896	7,029,998
PROVISIONS FOR CONTINGENCIES AND EXPENSES (Note 17):
Pension allowance	10,652,752	8,935,148	8,839,081
Other provisions	4,692,293	3,792,529	5,008,669
	15,345,045	12,727,677	13,847,750
GENERAL RISK ALLOWANCE	—	—	132,223
NEGATIVE DIFFERENCE IN CONSOLIDATION	10,916	14,040	15,459
CONSOLIDATED NET INCOME FOR THE YEAR:
Group	3,135,558	2,610,819	2,247,177
Minority interests (Note 19)	532,299	621,187	538,463
	3,667,857	3,232,006	2,785,640
SUBORDINATED DEBT (Note 18)	20,194,128	11,221,088	12,450,228
MINORITY INTERESTS (Note 19)	8,539,187	5,439,517	6,036,710
CAPITAL STOCK (Note 20)	3,127,148	2,384,201	2,384,201
ADDITIONAL PAID-IN CAPITAL (Note 21)	20,370,128	8,720,722	8,979,735
RESERVES (Note 21)	5,680,854	5,510,846	5,573,390
REVALUATION RESERVES (Note 21)	42,666	42,666	42,666
RESERVES AT CONSOLIDATED COMPANIES (NOTE 21)	6,349,502	5,170,808	4,192,601
TOTAL LIABILITIES AND EQUITY	575,397,879	351,790,532	324,208,085

The accompanying Notes 1 to 28 and Exhibits I to VIII are an integral part of the consolidated balance sheets as of December 31, 2004, 2003 and 2002.

F-3

Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002 (Notes 1,2,3 and 4)

	(Thousands of Euros)
	(Debit) Credit
STATEMENT OF INCOME	2004		2003		2002
INTEREST INCOME (Note 25)	18,103,835		17,203,740		22,711,338
Of which: Fixed-income securities	3,656,639		3,413,601		5,081,124
INTEREST EXPENSE (Note 25)	(10,115,569	)	(9,686,896	)	(13,825,855	)
INCOME FROM EQUITY SECURITIES: (Note 25)
Common stocks and other equity securities	281,949		131,987		120,061
Investments in non-Group companies	294,715		279,705		311,863
Investments in Group companies	70,782		29,801		41,248
	647,446		441,493		473,172
NET INTEREST INCOME	8,635,712		7,958,337		9,358,655
FEES COLLECTED (Note 25)	5,776,639		5,098,879		5,147,086
FEES PAID (Note 25)	(1,167,350	)	(928,317	)	(857,802	)
GAINS (LOSSES) ON FINANCIAL TRANSACTIONS (Note 25)	952,666		998,813		356,250
GROSS OPERATING INCOME	14,197,667		13,127,712		14,004,189
OTHER OPERATING INCOME	89,909		75,460		128,431
GENERAL ADMINISTRATIVE EXPENSES:
Personnel expenses (Note 25)	(4,135,315	)	(4,049,372	)	(4,521,718	)
Of which:
Wages and salaries	(3,011,955	)	(2,959,515	)	(3,208,776	)
Employee welfare expenses	(654,412	)	(643,144	)	(739,448	)
Of which: Pensions	(102,861	)	(96,603	)	(130,054	)
Other administrative expenses (Note 25)	(2,599,878	)	(2,428,325	)	(2,800,333	)
	(6,735,193	)	(6,477,697	)	(7,322,051	)
DEPRECIATION, AMORTIZATION AND WRITE-DOWNS OF PROPERTY
AND EQUIPMENT AND INTANGIBLE ASSETS (Note 13)	(734,967	)	(762,794	)	(889,832	)
OTHER OPERATING EXPENSES	(272,223	)	(241,990	)	(354,913	)
NET OPERATING INCOME	6,545,193		5,720,691		5,565,824
NET INCOME FROM COMPANIES ACCOUNTED FOR BY THE EQUITY METHOD (Notes 10 and 11):
Share in income of companies accounted for by the equity method	946,821		781,243		706,214
Share in losses of companies accounted for by the equity method	(40,938	)	(64,474	)	(73,205	)
Value adjustments due to collection of dividends	(365,497	)	(309,506	)	(353,111	)
	540,386		407,263		279,898
AMORTIZATION OF CONSOLIDATION GOODWILL (Note 12)	(618,935	)	(2,241,688	)	(1,358,616	)
GAINS ON GROUP TRANSACTIONS:
Gains on disposal of holdings in fully consolidated Companies (Note 3)	14,165		702,113		10,092
Gains on disposal of holdings accounted for by the equity method (Note 3)	489,521		241,341		1,859,277
Gains on transactions involving parent company shares and Group  financial          liabilities	5,164		35,841		702
	508,850		979,295		1,870,071
LOSSES ON GROUP TRANSACTIONS:
Losses on disposal of holdings in companies consolidated by global integration method (Notes 3 and 12)	(5,528	)	(13,502	)	(808,498	)
Losses on disposal of holdings carried by the equity method	(2,956	)	(4,255	)	(35,089	)
Losses on transactions involving controlling company shares and Group financial          liabilities	(34,149	)	(5,975	)	(17,544	)
	(42,633	)	(23,732	)	(861,131	)
WRITE-OFFS AND CREDIT LOSS PROVISIONS (Net) (Note 7)	(1,647,651	)	(1,495,687	)	(1,648,192	)
WRITE-DOWN OF LONG-TERM INVESTMENTS (Net)	(257	)	687		(272	)
PROVISIONS TO GENERAL BANKING RISK ALLOWANCE	—		85,945		—
EXTRAORDINARY INCOME (Note 25)	1,027,150		1,337,064		1,270,092
EXTRAORDINARY LOSS (Note 25)	(1,877,485	)	(668,398	)	(1,608,925	)
INCOME BEFORE TAXES	4,434,618		4,101,440		3,508,749
CORPORATE INCOME TAX (Note 22)	(311,244	)	(341,007	)	(314,979	)
OTHER TAXES (Note 22)	(455,517	)	(528,427	)	(408,130	)
CONSOLIDATED NET INCOME FOR THE YEAR	3,667,857		3,232,006		2,785,640
NET INCOME ATTRIBUTED TO MINORITY INTERESTS (Note 19)	532,299		621,187		538,463
NET INCOME ATTRIBUTED TO THE GROUP	3,135,558		2,610,819		2,247,177

The accompanying Notes 1 to 28 and Exhibits I to VIII are an integral part of the consolidated statements of income for the years ended December 31, 2004, 2003 and 2002.

F-4

	Banco Santander Central Hispano, S.A. and Companies composing the Santander Group
	Notes to Consolidated Financial Statements for the year ended December 31, 2004
1.	Description of the Bank, basis of presentation of the consolidated financial statements and other information
	Description of the Bank
	Banco Santander Central Hispano, S.A. (“the Bank” or “Banco Santander”) is a private-law entity subject to the rules and regulations applicable to banks operating in Spain. The bylaws and other public information on the Bank can be consulted in the web page of the Bank (www.gruposantander.com) and in its registered office at Paseo de Pereda 9-12, Santander.
	Basis of presentation of the consolidated financial statements
	The consolidated financial statements of the Bank and of the companies which, together with it, compose the Santander Group ("the Group") are presented in the formats stipulated by Bank of Spain Circular 4/1991 and subsequent amendments, and, accordingly, they give a true and fair view of the consolidated net worth, financial position and results of the Group. These consolidated financial statements, which were prepared by the Bank’s directors from the accounting records of the Bank and of each of the companies composing the Group, include the adjustments and reclassifications required to conform the accounting principles and presentation criteria followed by certain subsidiaries -mainly those abroad- with those applied by the Bank (Note 2).
	In view of the business activity carried on by the companies composing the Group, it does not have any environmental liability, expenses, assets, provisions or contingencies that might be material with respect to its consolidated net worth, financial position or results. Therefore, no specific disclosures relating to environmental issues are included in these notes to consolidated financial statements.
	The 2003 and 2002 consolidated financial statements were approved by the Shareholders’ Meetings of the Bank on June 19, 2004 and June 21, 2003, respectively.
	The 2004 consolidated financial statements of the Group and the financial statements of the Bank and of almost all the consolidated companies have not yet been approved by the respective Shareholders' Meetings. However, the Bank's Board of Directors considers that they will be approved without material changes.
	Abbey National plc (Abbey)
	On July 25, 2004, the respective Boards of Directors of the Bank and Abbey approved the terms on which the Board of Directors of Abbey recommended to its shareholders the tender offer launched by Banco Santander for all the common capital stock of Abbey under a Scheme of Arrangement subject to the British Companies Act.
	After the related Shareholders’ Meetings of Abbey and the Bank were held in October 2004, and the other conditions of the transaction were met, on November 12, 2004, the acquisition was completed through the delivery of one new Banco Santander share for every Abbey common share. The capital increase performed to cater for the purchase amounted to €12,541 million (Notes 20 and 21), equal to 1,485,893,636 new shares of €0.5 par value, with additional paid-in capital of €7.94 each.
	Information on Abbey
	Abbey is a major financial services group in the United Kingdom, where it is the second-largest provider of residential mortgages. It is the sixth-largest bank in the UK in terms of assets, ranking sixteenth in Europe and thirtieth worldwide. Abbey has over 24,000 employees, approximately 730 branches and 18 million customers.
	Its consolidated assets and consolidated shareholders’ equity, calculated in accordance with U.K. accounting principles, amounted to £170,000 million and £4,300 million, respectively, as of December 31, 2004, the date of first-time consolidation of Abbey in the Santander Group. Accordingly, the consolidated balance sheet includes the effect of the acquisition, whereas the consolidated statement of income does not include the results obtained by Abbey from the date of completion of the acquisition, which were not material. The goodwill arising from the acquisition (Note 12) included the adjustments and valuations required for it to be presented in conformity with the accounting principles and valuation methods described in Note 2.

F-5

Share repurchase program

On June 19, 2004, the Shareholders’ Meeting of Banco Santander authorized the Bank to purchase Banco Santander shares on terms substantially the same as those authorized at previous years’ Shareholders’ meetings.

Since the date on which the tender offer for Abbey shares was announced, Banco Santander acquired treasury stock under a share repurchase program authorized by the Board of Directors of Banco Santander for the purpose of reducing the Bank’s capital stock for the net amount of the purchases and sales carried out under such program, whose terms and conditions are as follows:

1.	The maximum number of Banco Santander shares which the Bank may hold will be 190,000,000 shares;
2.	The maximum acquisition price will be €9.77 per share;
3.	The program will be in force through March 31, 2005, and the Bank has announced its decision not to extend the term of the program.

The summary of the transactions performed under this program through December 31, 2004, is as follows:

Transaction	Securities		Euros
			Weighted Average Price
Purchases	99,209,235		8.15
Sales	(87,164,416	)	8.12
	12,044,819

Objections to corporate resolutions

The directors of the Bank and their legal advisers consider that the objection to certain resolutions adopted by the Bank’s Shareholders’ Meetings on January 18, 2000, March 4, 2000, March 10, 2001, February 9, 2002, June 24, 2002, June 21, 2003 and June 19, 2004, will have no effect on the financial statements of the Bank and the Group.

On April 25, 2001, the Santander Court of First Instance number 1 rejected in full a claim contesting resolutions adopted at the Shareholders’ Meeting on January 18, 2000. The plaintiff filed an appeal against the judgment. On December 2, 2002, the Cantabria Provincial Appellate Court dismissed the appeal. A cassation appeal has been filed against the judgment of the Cantabria Provincial Appellate Court.

On November 29, 2002, the Santander Court of First Instance number 2 rejected in full the claims contesting resolutions adopted at the Shareholders’ Meeting on March 4, 2000. The plaintiffs filed an appeal against the judgment. On July 5, 2004, the Cantabria Provincial Appellate Court dismissed the appeal. One of the appellants has prepared and filed an extraordinary appeal on grounds of procedural infringements and a cassation appeal against the judgment.

On March 12, 2002, the Santander Court of First Instance number 4 rejected in full the claims contesting resolutions adopted at the Shareholders’ Meeting on March 10, 2001. The plaintiffs filed an appeal against the judgment. On April 13, 2004, the Cantabria Provincial Appellate Court dismissed the appeals. One of the appellants has prepared and filed an extraordinary appeal on grounds of procedural infringements and a cassation appeal against the judgment.

On September 9, 2002, the Santander Court of First Instance number 5 rejected in full the claim contesting resolutions adopted at the Shareholders’ Meeting on February 9, 2002. The plaintiff filed an appeal against the judgment. On January 14, 2004, the Cantabria Provincial Appellate Court dismissed the appeal. The appellant has prepared and filed an extraordinary appeal on grounds of procedural infringements and a cassation appeal against the judgment.

On May 29, 2003, the Santander Court of First Instance number 6 rejected in full the claim contesting the resolutions adopted at the Shareholders’ Meeting on June 24, 2002. An appeal has been filed against the judgment.

F-6

Despite the amount of time elapsed, the Santander Court of First Instance number 7 has yet to hand down its judgment on the objection to the resolutions adopted at the Shareholders’ Meeting on June 21, 2003, since it was agreed that the proceedings should be stayed on grounds of the need for an interlocutory decision in the criminal jurisdiction derived from the preliminary proceedings conducted at Central Examining Court number 3, which are currently being handled by the Criminal Chamber of the National Appellate Court, in respect of the amounts paid when Mr. Amusátegui and Mr. Corcóstegui retired from the Bank. A new claim has also been filed with the Santander Court of First Instance number 7 to contest the resolutions adopted at the same Shareholders’ Meeting on June 21. This proceeding has been joined with the foregoing proceeding, which means that it is subject to the effects of the stay on grounds of the need for an interl oc utory decision in the criminal jurisdiction.

The claims contesting the resolutions adopted at the Shareholders’ Meeting on June 19, 2004, are currently being processed before the Santander Court of First Instance number 8.

Accounting policies

The consolidated financial statements of the Group were prepared in accordance with the accounting principles and valuation methods described in Note 2, which coincide with those established by Bank of Spain Circular 4/1991 and subsequent amendments thereto. All obligatory accounting principles and valuation methods with a material effect on the consolidated financial statements were applied in preparing them.

Consolidation principles

The companies whose business activity is directly related to that of the Bank and which are directly or indirectly 50% or more owned by the Bank or, if less than 50% owned, are effectively controlled by the Bank and constitute, together with the Bank, a single decision-making unit, were fully consolidated.

All significant accounts and transactions between consolidated companies were eliminated in consolidation. The equity of third parties in the Group is presented under the "Minority Interests" caption and in the "Consolidated Net Income for the Year - Minority Interests" account in the consolidated balance sheets (Note 19).

The investments in companies controlled by the Bank and not consolidable because their business activity is not directly related to that of the Bank (Note 11) and the investments in companies which have a lasting relationship with the Group, which are intended to contribute to the Group’s business activities, in which the Group’s ownership interests are generally equal to or exceed 20% –3% if listed–, and over which the Group exercises significant influence –as evidenced by its representation in the associated company’s governing body, significant transactions between the other Group companies and the investee, or the exchange of management personnel, among others (“associated companies” - Note 10)–, are carried at the fraction of the investees' net worth corresponding to such investments, net of the dividends collected from them and other net worth eliminations (equity method).

The income or loss generated by companies acquired in each year is consolidated by taking into account only the income or loss relating to the period between the acquisition date and the related year-end.

Determination of net worth

In evaluating the Group's net worth, the balances of the following captions in the accompanying consolidated balance sheets should be taken into consideration:

F-7

	Thousands of Euros
	2004		2003		2002
Capital stock (Note 20)	3,127,148		2,384,201		2,384,201
Reserves (Note 21):
Additional paid-in capital	20,370,128		8,720,722		8,979,735
Reserves	5,680,854		5,510,846		5,573,390
Revaluation reserves	42,666		42,666		42,666
	26,093,648		14,274,234		14,595,791
Reserves at consolidated companies	6,349,502		5,170,808		4,192,601
Accumulated losses at consolidated companies	(4,706,764	)	(4,621,815	)	(4,435,179	)
Total reserves	27,736,386		14,823,227		14,353,213
Add- Consolidated net income for the year-Group	3,135,558		2,610,819		2,247,177
Less-
Interim dividend paid (Note 4)	(791,555	)	(739,102	)	(727,782	)
Third interim dividend payable (Note 4)	(519,106	)	—		—
Treasury stock	(104,180	)	(10,155	)	(14,746	)
	(1,414,841	)	(749,257	)	(742,528	)
Net worth per books at year-end	32,584,251		19,068,990		18,242,063
Less-
Third interim dividend	—		(369,551	)	(358,231	)
Fourth interim dividend (Note 4)	(526,612	)	(335,734	)	(289,595	)
Net worth, after the distribution of income for the year	32,057,639		18,363,705		17,594,237

Capital adequacy requirements

The entry into force of Law 13/1992 and Bank of Spain Circular 5/1993 and subsequent amendments introduced new regulations governing minimum capital requirements for credit institutions at both individual and consolidated group levels.

As of December 31, 2004, 2003 and 2002, the Group’s eligible capital exceeded the minimum requirements stipulated by the aforementioned regulations by approximately €11,100 million, €5,700 million and €5,500 million, respectively.

Detail of risk provisions and coverage

In accordance with the Bank of Spain regulations, the risk provisions and coverage are presented as assigned to the related assets and/or in specific accounts. The detail of the aggregate risk provisions, coverage and guarantees, disregarding their accounting classification is as follows:

F-8

	Thousands of Euros
	2004	2003	2002
Credit loss allowance:
Due from credit institutions (Note 6)	49,307	111,735	90,522
Of which: Country-risk	23,173	26,923	8,537
Loans and credits (Note 7)	6,969,263	5,116,683	4,938,204
Of which: Country-risk	219,246	362,604	309,674
Debentures and other fixed-income securities (Note 8)	180,748	185,978	135,552
Of which: Country-risk	14,616	9,831	257
	7,199,318	5,414,396	5,164,278
Security price fluctuation allowance:
Government debt securities (Note 5)	—	10,659	33
Debentures and other fixed-income securities (Note 8)	78,385	51,023	198,420
Common stocks and other equity securities (Note 9)	699,770	948,761	569,715
	778,155	1,010,443	768,168
Pension allowance (Note 2-j):
At Spanish companies	8,077,574	7,627,149	7,448,941
At foreign companies	2,575,178	1,307,999	1,390,140
	10,652,752	8,935,148	8,839,081
General risk allowance	—	—	132,223
Property and equipment allowance:
Foreclosed assets (Note 13)	293,128	316,165	395,406
Other assets	52,499	60,819	104,837
	345,627	376,984	500,243
Other asset allowances	126,153	154,954	207,750
Other provisions for contingencies and expenses
(Note 17)	4,692,293	3,792,529	5,008,669
Total	23,794,298	19,684,454	20,620,412

Comparative information - early retirements

As indicated in Note 2-j, in 2003 and 2002, the Bank and other Group entities entered into early retirement agreements with certain employees and recorded these commitments, after receiving the related authorizations from the Bank of Spain pursuant to Rule 13 of Bank of Spain Circular 4/1991, with a charge to unrestricted reserves and simultaneously recorded the related deferred tax asset (€336 million and €181 million, respectively, in 2003 and €856 million and €461 million, respectively, in 2002). In 2004, the Bank of Spain did not grant such authorization to credit institutions and, accordingly, also in accordance with Rule 13 of Bank of Spain Circular 4/1991, the Bank and other Group entities recorded net provisions of €527 million with a charge to the consolidated statement of income to meet their commitments to the employees who took early retirement in that year (€810 million were charged to the "Extraordinary Loss" c ap tion in the accompanying 2004 consolidated statement of income, and simultaneously the related deferred tax asset was recorded for €283 million).

Transition to International Financial Reporting Standards

Under Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002, all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after January 1, 2005 in conformity with the International Financial Reporting Standards (IFRSs) previously ratified by the European Union. Therefore, the Group is required to prepare its consolidated financial statements for the year ending December 31, 2005 in conformity with the IFRSs ratified by the European Union at that date.

Under IFRS 1, First-Time Adoption of International Financial Reporting Standards, the Group’s consolidated financial statements for 2005 must necessarily include, for comparison purposes, a consolidated balance sheet as of December 31, 2004, and a consolidated statement of income for the year then ended prepared in accordance with the methods established by the IFRSs in force as of December 31, 2005.

In order to adapt the accounting system of Spanish credit institutions to the new standards, on December 22 the Bank of Spain issued Circular 4/2004 on Public and Restricted Financial Reporting Standards and Model Financial Statements. However, although the Group is completing a plan for transition to IFRSs which includes, inter alia, an analysis of the accounting method differences, the selection of the accounting methods to be applied when alternative treatments are permitted and an assessment of the changes in reporting procedures and systems, sufficient information is not yet available to estimate with reasonable objectivity the extent to which the accompanying consolidated balance sheet and consolidated statement of income for 2004 will differ from those to be prepared in the future in accordance with the accounting methods contained in the IFRSs in force as of December 31, 2005.

F-9

2.	Accounting principles and valuation methods
	The accounting principles and valuation methods applied in preparing the consolidated financial statements were as follows:
	a)	Recognition of revenues and expenses
		Revenues and expenses are generally recognized for accounting purposes on an accrual basis, the interest method being applied for transactions whose settlement periods exceed 12 months. However, in accordance with the principle of prudence and with Bank of Spain regulations, the interest earned on nonperforming, disputed or doubtful loans, including interest subject to country-risk in countries classified as experiencing temporary difficulties and as doubtful or very doubtful, is not recognized as a revenue until it is collected.
	b)	Foreign currency transactions
		Translation methods
		Balances denominated in foreign currencies, including those of the financial statements of the consolidated companies and branches in non-EMU countries, were translated to euros at the year-end average official exchange rates in the Spanish spot foreign currency market, except for:
		1.	The balances funded in euros relating to the capital amounts assigned to branches in non-EMU countries and to the reserves and undistributed earnings of companies and branches in non-EMU countries, which were translated at historical exchange rates.
		2.	The revenue and expense accounts of the consolidated companies and branches in non-EMU countries, which were translated at the average exchange rates in each year.
		3.	The balances arising from non-hedging forward foreign currency/foreign currency and foreign currency/euro purchase and sale transactions, which were translated to euros at the year-end exchange rates prevailing in the forward foreign currency market.
		Accounting for exchange differences
		The exchange differences arising from application of the above-mentioned translation methods are recorded as follows:
		1.	The net debit or credit differences arising in the consolidation process are recorded under the "Accumulated Losses at Consolidated Companies" or "Reserves at Consolidated Companies" captions, respectively, in the consolidated balance sheets, net of the portion of these differences relating to minority interests (Note 21).
		2.	The remaining exchange differences are recorded under the “Gains (Losses) on Financial Transactions” caption in the consolidated statements of income (Note 25), with a balancing entry, in the case of non-hedging forward transactions, under the “Other Assets” or “Other Liabilities” caption in the consolidated balance sheets.
		Certain of the companies located in countries with specific accounting regulations on the recording of adjustments for inflation (basically Chile, Mexico, Uruguay, Bolivia and Peru) record debits and credits in their income statements to adjust their assets and liabilities for inflation. These debits and credits are recorded under the “Extraordinary Loss” and “Extraordinary Income” captions in the consolidated statements of income (Note 25). The detail of these items is as follows:

	Thousands of Euros
	2004		2003		2002
Extraordinary income:
Other revenues	24,874		13,164		36,542
Extraordinary loss:
Other expenses	(22,111	)	(22,293	)	(106,079	)
	2,763		(9,129	)	(69,537	)

F-10

c)	Credit loss allowance
	The credit loss allowances, which are recorded as a reduction of the “Due from Credit Institutions”, “Loans and Credits” and “Debentures and Other Fixed-Income Securities” captions on the asset side of the consolidated balance sheets, are intended to cover possible losses in the full recovery of all types of risk transactions, except off-balance-sheet risks, arranged by the consolidated companies in the course of their business activity.
	The credit loss allowances were calculated as follows:
	1.	Allowance for risks in Spain and abroad, excluding country-risk:
		a.	Specific allowances: on a case-by-case basis, based on the loan recovery expectations and, as a minimum, by application of the coefficients stipulated in Bank of Spain regulations. The credit loss allowance is increased by provisions from period income and is decreased by charge-offs of debts deemed to be uncollectible or which have been nonperforming for more than three years (six years in the case of mortgage loans with effective coverage) and by releases, where appropriate, of the provisions recorded for debts subsequently recovered (Note 7).
		b.	General-purpose allowance: additionally, in accordance with Bank of Spain regulations, an additional general-purpose allowance, equal to 1% of the loans and credits, private-sector fixed-income securities, contingent liabilities and doubtful assets for which provision is not mandatory (0.5% for certain mortgage loans) has been recorded for losses not specifically identified at year-end.
	2.	Country-risk allowance: on the basis of the estimated classification of the degree of debt-servicing difficulty being experienced by each country (Note 7).
	3.	Allowance for the statistical coverage of credit losses: additionally, the Group is required to record an allowance for the statistical coverage of the unrealized credit losses on the various homogeneous loan portfolios, by charging each quarter to the “Write-offs and Credit Loss Provisions” caption in the consolidated statement of income for each of the consolidated companies, the positive difference resulting from subtracting the net specific provisions for credit losses recorded in the quarter from one-fourth of the statistical estimate of the overall unrealized loan losses on the various homogeneous loan portfolios (estimated either using calculation methods based on the Group’s statistical expectations, approved by the Bank of Spain, or calculating the credit risk of each portfolio multiplied by certain coefficients which range from 0% to 1.5%). If the resulting difference were negative, the amount would be credited to the consolidated statement of income with a charge to the allowance recorded in this connection (to the extent of the available balance).
	The provisions recorded to cover the losses which may be incurred by the Group as a result of the off-balance-sheet risks maintained by the consolidated companies are included under the “Provisions for Contingencies and Expenses - Other Provisions” caption in the consolidated balance sheets (Note 17).
	The credit loss allowances recorded by the Group comply with Bank of Spain regulations.
d)	Government debt securities, debentures and other fixed-income securities
	The securities composing the Group’s fixed-income securities portfolio were classified as follows:
	1.	The securities assigned to the trading portfolio, which consists of securities held for the purpose of operating in the market, are stated at their year-end market price. The net differences arising from price fluctuations are recorded (ex-coupon) under the “Gains (Losses) on Financial Transactions” caption in the consolidated statements of income (Note 25).
	2.	The securities assigned to the held-to-maturity portfolio, which consists of securities which the Group has decided to hold until final maturity basically because it has the financial capacity to do so or because it has related financing available, are stated at acquisition cost, adjusted by the amount resulting from accruing by the interest method the positive or negative difference between the redemption value and the acquisition cost over the residual life of the security.
	3.	The securities assigned to the available-for-sale portfolio, which consists of the securities not assigned to either of the two portfolios described above, are stated at their adjusted acquisition cost, as defined in paragraph 2 above. The adjusted acquisition cost and the market value of these securities are compared. The market value of listed securities in this portfolio is deemed to be the market price on the last day of trading of each year and that of unlisted securities to be the current value at the market interest rates prevailing on that date. A security price fluctuation allowance is recorded, if required, with a charge to asset accrual accounts or to income.

F-11

		In the fixed-income securities assigned to the available-for-sale portfolio, the net difference (additional to the security price fluctuation allowance recorded with a charge to income) by which the adjusted acquisition cost exceeded their market value amounted to €45 million as of December 31, 2004 (Notes 5 and 8) (€2 million and €272 million as of December 31, 2003 and 2002, respectively). This amount is not reflected in the consolidated balance sheets since the security price fluctuation allowance recorded for this amount and the asset accrual account against which the allowance was recorded offset each other. This accrual account is taken into account in calculating the Group’s capital ratio.
		In the event of disposal of these securities, the losses with respect to the adjusted acquisition cost are recorded with a charge to income. Gains (if they exceed the losses charged to income in the year) are credited to income only for the portion, if any, exceeding the security price fluctuation allowance required at year-end and charged to accrual accounts.
e)	Equity securities
	Equity securities held in the trading portfolio are valued at their market price at year-end. The net differences arising from price fluctuations are recorded under the “Gains (Losses) on Financial Transactions” caption in the consolidated statements of income.
	The investments in non-consolidable Group companies and in associated entities (Note 1) are accounted for by the equity method.
	Equity securities other than those described above are recorded in the consolidated balance sheets at the lower of cost or market. The market value of these securities is determined as follows:
	1.	Listed securities: lower of average market price in the last quarter of the year or market price on the last day of trading in the year.
	2.	Unlisted securities: underlying book value of the investment per the latest available financial statements of the investees adjusted by the unrealized gains existing at the time of acquisition and still existing at year-end. The difference between acquisition cost and the amount calculated as indicated in the preceding paragraph which may be absorbed by the annual increase in the underlying book values of the investees over a maximum period of 20 years need not be written down.
	The security price fluctuation allowance recorded to recognize the unrealized losses is presented as a reduction of the balance of the related captions in the consolidated balance sheets (Note 9).
f)	Intangible assets
	Capital increase expenses, new business launch expenses, expenditures for the acquisition and preparation of computer systems and programs which will be useful over several years, and similar items are generally recorded at cost, net of accumulated amortization. These expenses are amortized with a charge to income over a maximum period of five years.
	€241 million, €274 million and €286 million of amortization of these expenses were charged to the consolidated statements of income in 2004, 2003 and 2002, respectively, and these amounts are recorded under the "Depreciation and Amortization and Write-down of Property and Equipment and Intangible Assets" caption.
g)	Consolidation goodwill and negative difference in consolidation
	Consolidation goodwill
	The positive differences between:
	(i)	the cost of the investments in consolidated companies (both those fully consolidated and those accounted for by the equity method), and
	(ii)	as required by the Bank of Spain, the market value of the investments in other companies contributed by third parties in capital increases carried out at the Bank in accordance with the provisions of Article 159.1.c of the revised Spanish Corporations Law (Note 20)

F-12

	and the respective underlying book values adjusted at the date of first-time consolidation are allocated as follows:
	1.	If the difference is allocable to specific assets or liabilities of these companies, it is recorded by increasing the value of the assets (or reducing the value of the liabilities) whose market values were higher (lower) than the net book values per these companies’ balance sheets and whose accounting treatment is similar to that of analogous assets (liabilities) of the Group (amortization, accrual, etc.).
	2.	The remainder is recorded as consolidation goodwill. These differences are being amortized from the acquisition date over the period in which it is considered that the investments will contribute to the obtainment of income for the Group, which will not exceed 20 years (Note 12).
		The goodwill amortization charges are recorded under the “Amortization of Consolidation Goodwill” caption in the consolidated statements of income.
	Negative difference in consolidation
	The negative differences in consolidation, which are recorded in the consolidated balance sheets as deferred revenues, can be credited to consolidated income when the investments in the capital stock of the related investee companies are totally or partially disposed of.
h)	Property and equipment
	Operating property and equipment
	Property and equipment are carried at cost revalued pursuant to the applicable enabling allowances, net of the related accumulated depreciation.
	Depreciation is provided by the straight-line method at rates based on the years of estimated average useful life of the related assets. The annual depreciation expense is calculated basically at the following rates:

	Percentages
Buildings for own use	2
Furniture	7.5 to 10
Fixtures	6 to 10
Office and automation equipment	10 to 25

	Upkeep and maintenance expenses are expensed currently.
	Property and equipment acquired through foreclosure
	These property and equipment items are stated at the lower of the book value of the assets used to acquire them or the appraised value of the asset acquired.
	If these assets are not disposed of or added to the Group’s operating property and equipment, an allowance is recorded on the basis of the time elapsed since their acquisition, the nature of the asset and/or the characteristics of the appraisal.
	The allowance recorded with a charge to the "Extraordinary Loss" caption in the consolidated statements of income is presented as a reduction of the balance of the "Property and Equipment - Other Property" caption (Note 13).
i)	Treasury stock
	The balance of the "Treasury Stock" caption relates to Bank shares acquired and held by consolidated companies. These shares are reflected at cost, net of the required provision, if any, which is determined on the basis of the lower of the Group’s underlying book value or market price. The aforementioned provision is recorded with a charge to the “Losses on Group Transactions” caption in the consolidated statements of income.
	The total Bank shares owned by consolidated companies represented 0.20% of the capital stock issued by the Bank as of December 31, 2004. At that date, the non-consolidable subsidiaries held 0.04% of the Bank’s capital stock (0.05% and 0.04%, respectively, as of December 31, 2003 and 0.08% and 0.02%, respectively, as of December 31, 2002).

F-13

	In 2004, the Group companies (fully consolidated or accounted for by the equity method) acquired and disposed of 840 million and 829 million Bank shares, respectively, including the purchases and sales discussed in Note 1.
j)	Pension commitments
	Companies in Spain
	Under the current collective labor agreements, certain Spanish consolidated entities have undertaken to supplement the social security benefits accruing to certain employees, or to their beneficiary rightholders, for retirement, permanent disability, death of spouse or death of parent. These commitments, which amounted to €10,298 million, €9,996 million and €9,975 million as of December 31, 2004, 2003 and 2002, respectively, were covered by in-house allowances and external funds at those dates.

1.	Applicable regulations
	In-house allowances-
	Accrued pension commitments and contingencies must be valued and covered using objective criteria. These criteria include an assumed annual interest rate not exceeding 4% and the use of properly adjusted life expectancy, mortality and disability tables relating to domestic or foreign past experience (if other than those relating to the past experience of the group of employees concerned, properly checked).
	The actuarial studies performed as of December 31, 2004, 2003 and 2002, to determine these commitments were conducted on an individual basis by independent actuaries, basically using the following assumptions:
	a.	Assumed annual interest rate: 4%.
	b.	Mortality tables: GRM/F-95 (PERM/F-2000P in the case of Banesto for 2004)
	c.	Annual social security pension revision rate: 1.5%.
	d.	Cumulative annual CPI: 1.5%.
	e.	Annual salary growth rate: 2.5%.
	f.	Method used to calculate the commitments to serving employees: straight-line distribution of the estimated cost per employee based on the ratio of each employee's years of past service to his or her estimated total expected years of service (projected unit credit method).
		The Group recorded the difference between the recorded allowances as of December 31, 1999, and the allowances calculated by applying the new valuation methods, with a balancing entry in a debit-balance account (which is presented in the consolidated balance sheets offsetting the pension allowances) which is reduced each year with a charge to the consolidated statement of income by at least one-tenth of the beginning balance. The “Extraordinary Loss” caption in the 2004, 2003 and 2002 consolidated statements of income (Note 25) includes €125 million, €125 million and €126 million, respectively, relating to the annual charge recorded in this connection.
		The pension commitments covered by insurance contracts (determined as the amount of the net level premium reserves to be recorded by the insurer) are recorded under the “Provisions for Contingencies and Expenses – Pension Allowance” caption, with a charge to the “Other Assets” caption in the consolidated balance sheet. As of December 31, 2004, the amount of the aforementioned insured commitments was €3,195 million (€3,209 million and €3,192 million as of December 31, 2003 and 2002, respectively - Note 17).
		Additionally, the valuation differences arising exclusively from the fact that the investments relating to the insurance contracts are at interest rates exceeding those applied in calculating the commitments to employees (4% annually) are recorded as an in-house pension allowance, with a balancing entry in a debit-balance account (which is recorded in the consolidated balance sheets offsetting the pension allowance), which is reduced (with a charge to the “Interest Expense” caption in the consolidated statement of income – Note 25) at the appropriate rate so that, taken together with the allocable cost resulting from the increase in the recorded in-house pension allowance arising from the rate of return used to calculate it, it is equal to the increase in value of the assets added (recorded with a credit to the “Interest Income” caption in the consolidated statement of income - Note 25), thus neutralizing the effect on income. As of December 31, 2004, 2003 and 2002, the aforementioned valuation differences amounted to €941 million, €1,019 million and €1,091 million, respectively.

F-14

	External funds-
	In the case of commitments which must be treated as external funds, the differences which arose from the application of the new valuation methods with respect to the in-house allowance as of December 31, 1999, are recorded with a charge to income over a maximum period of 9 years if the commitment is instrumented in an insurance contract (14 years if instrumented in a pension plan). The “Extraordinary Loss” caption in the 2004, 2003 and 2002 consolidated statements of income (Note 25) includes €14 million, €14 million and €15 million, respectively, relating to the annual charge recorded in this connection.
	In 2002 the Group took out insurance contracts to externalize the commitments undertaken subsequent to May 1996, and to employees hired after November 1999. The related funds are deemed to be external funds and, accordingly, they are not recorded in the consolidated balance sheets.
	Other funds-
	Certain labor obligations (“Other Commitments”) are recorded under the “Provisions for Contingencies and Expenses – Pension Allowance” caption (Note 17), with a charge to “Extraordinary Loss” (Note 25), over a maximum period of five years from when the obligation arose, in conformity with the applicable regulations.
2.	Funded accrued commitments
	Following are the main amounts disclosed in the aforementioned actuarial studies and the amounts assumed by insurance companies as external funds:

	Thousands of Euros
Discounted Present Value	2004	2003	2002
Accrued pensions of serving employees	1,161,328	1,159,683	1,234,819
Commitments arising from employees retired early	4,064,242	3,607,263	3,382,436
Vested pensions of retired employees (*)	5,024,296	5,186,573	5,328,055
Other commitments	48,244	42,096	29,897
Total accrued commitments	10,298,110	9,995,615	9,975,207

(*) Including pensions to employees who took early retirement.

F-15

These commitments were funded as follows:

	Thousands of Euros
	2004	2003	2002
Uninsured in-house allowance	4,882,201	4,418,205	4,257,428
Insured in-house allowance –
Net level premium reserves at Group insurance companies (*)	904,721	824,960	764,896
Insurance policies taken out with other insurance companies (*)	2,290,652	2,383,984	2,426,617
	3,195,373	3,208,944	3,191,513
Pension allowance (Note 1)	8,077,574	7,627,149	7,448,941
Difference pursuant to the funding schedule stipulated by Bank of Spain Circular 5/2000 (**)	625,612	750,847	876,884
Differences in insurance contracts assigned to pension commitments (**)	940,884	1,018,525	1,091,367
In-house allowance	9,644,070	9,396,521	9,417,192
External funds	658,971	607,521	567,287
Of which:
Insured provisions	609,064	543,979	489,959
Difference pursuant to the funding schedule stipulated by Bank of    Spain Circular 5/2000	49,907	63,542	77,328
Total amount	10,303,041	10,004,042	9,984,479

(*)	These amounts have been recorded under the “Provisions for Contingencies and Expenses - Pension Allowance" caption in the consolidated balance sheets with a charge to the “Other Assets” caption.
(**)	These amounts are recorded under the “Provisions for Contingencies and Expenses - Pension Allowance” caption in the consolidated balance sheets and are offset, in the same amounts, by the debit-balance accounts against which the allowance was initially recorded.

3.	Plans for early retirement
	In 2004, 2003 and 2002, the Bank, Banco Español de Crédito, S.A. (Banesto) and Santander Consumer Finance, S.A. offered certain employees the possibility of taking early retirement. Accordingly, in those years allowances were recorded to cover the supplementary liabilities to employees taking early retirement and the salary and other benefit commitments to these employees from the time of early retirement to the date of effective retirement.
	Pursuant to Rule 13 of Bank of Spain Circular 4/1991, and after obtaining, where appropriate, authorization from the Bank of Spain, these allowances were recorded as follows:

	Thousands of Euros
	2004	2003	2002
With a charge to unrestricted reserves (Note 21)	—	335,820	856,431
Of which:
Banco Santander Central Hispano, S.A.	—	259,014	705,845
Banesto	—	74,360	144,430
Santander Consumer Finance, S.A.	—	2,446	6,156
With a charge to extraordinary income (*)	809,973	26,215	55,071
Of which:
Banco Santander Central Hispano, S.A.	693,344	15,869	45,801
Banesto	107,692	10,346	6,300
Santander Consumer Finance, S.A.	8,937	—	2,970
With a charge to deferred tax assets (Note 22) (**)	—	188,427	484,101
Of which:
Banco Santander Central Hispano, S.A.	—	143,449	399,624
Banesto	—	43,661	81,162
Santander Consumer Finance, S.A.	—	1,317	3,315
Total allowances recorded (Note 17)	809,973	550,462	1,395,603

(*)	Also, the prepaid taxes arising as a result of this charge were recorded in 2004 (Note 22).
(**)	€180,826 thousand and €461,159 thousand of this amount arose from the charge to reserves in 2003 and 2002, respectively.

F-16

Abbey

Abbey’s pension commitments to its employees amounted to €5,232 million as of December 31, 2004. These commitments were calculated and recorded under U.K. regulations using U.K. financial and actuarial assumptions. The allowances covering these commitments were externalized and instrumented in various defined-benefit plans. Pursuant to U.K. regulations, there is a difference which is written down over the average lives of the beneficiaries of the plans. Additional internal allowances amounting to €1,207 million were recognized in the process of standardization of accounting and valuation methods (Note 1).

Other companies abroad

In addition to the matters discussed above, other Group financial institutions abroad have assumed commitments with their employees which are similar to pensions.

The technical assumptions used by these entities (interest rates, mortality tables, cumulative annual CPI, etc.) are consistent with the socio-economic conditions prevailing in these countries.

As of December 31, 2004, 2003 and 2002, the total commitments covered by these companies amounted to €3,579 million, €3,301 million and €3,002 million, respectively. Of these amounts, €1,368 million, €1,308 million and €1,390 million, respectively, were covered by in-house pension allowances recorded under the “Provisions for Contingencies and Expenses – Pension Allowance” caption in the consolidated balance sheets. The remaining amount was covered by policies taken out with insurance companies.

Accrued cost and payments

The accrued pension cost at the Group and the payments for these commitments were as follows:

	Thousands of Euros
	2004		2003		2002
Accrued cost (Note 25)	1,485,398		550,401		836,168
Of which are recorded under:
General administrative expenses - Personnel expenses	102,861		96,603		130,054
Extraordinary loss	979,834		120,119		350,832
Interest expense	601,015		554,012		597,211
Interest income	(198,312	)	(220,333	)	(241,929	)
Payments	1,182,269		1,122,682		1,125,565
Of which have been refunded by insurance entities	376,235		363,215		350,663

k)	Assets and liabilities acquired or issued at a discount
	Assets and liabilities acquired or issued at a discount, except for marketable securities, are recorded at their redemption value. The difference between this value and the amounts paid or received are recorded under the liability and asset “Accrual Accounts” captions in the consolidated balance sheets.
l)	Futures transactions
	Futures transactions are recorded in memorandum accounts based on either the future rights and commitments which might have an effect on net worth, or on the balances required to reflect the transactions, regardless of whether or not they affect the Group’s net worth. Accordingly, these instruments’ notional amount (theoretical value of the contracts) does not reflect the total credit or market risk assumed by the Group.
	Transactions whose purpose and effect was to eliminate or significantly reduce market risks and which are performed to reduce the risk to which the Group is exposed in its management of correlated assets, liabilities and futures transactions, were treated as hedging transactions. The gains or losses arising from hedging transactions were taken to income symmetrically to the revenues or expenses arising from the hedged items, with a balancing entry under “Other Assets” or “Other Liabilities” in the consolidated balance sheets.

F-17

Non-hedging transactions (also called trading transactions) arranged on organized markets were valued at market price, and market price fluctuations were recorded in full under the “Gains (Losses) on Financial Transactions” caption in the consolidated statements of income.

The gains or losses arising from trading transactions arranged outside organized markets are not recognized in income until they are effectively settled. However, provisions were recorded with a charge to income for potential net foreign exchange losses, if any, on each type of risk disclosed by the valuations of positions at the end of each year. The types of risks considered for these purposes are interest rate, share price and currency risks.

m)	Severance costs
	Under current Spanish law, Spanish consolidated companies are required to pay severance to employees terminated without just cause. There is no staff reduction plan making it necessary to record a provision in this connection.
n)	Corporate income tax and other taxes
	These captions in the consolidated statements of income include all the debits or credits arising from Spanish corporate income tax and those taxes of a similar nature applicable to companies abroad, including both the amounts relating to the expense accrued in the year and those arising from adjustments to the amounts recorded in prior years (Note 22).
	The expense for corporate income tax of each year is calculated on the basis of book income before taxes, increased or decreased, as appropriate, by the permanent differences from income for tax purposes. Permanent differences are defined as those arising between the taxable income and the book income before taxes which do not reverse in subsequent periods, considering the income obtained by Group companies as a whole.
	In this connection, certain timing differences which have a specific reversal period of fewer than ten years are recorded for accounting purposes; all other differences are treated for all purposes as permanent differences.
	Tax relief and tax credits are treated as a reduction of the corporate income tax for the year in which they are taken (Note 22). Entitlement to these tax credits is conditional upon compliance with the requirements of current regulations.
3.	Santander Group
	Banco Santander Central Hispano, S.A.
	The growth of the Group in the last decade has led the Bank to also act, in practice, as a holding entity of the shares of the various companies in its Group, and its results are becoming progressively less representative of the performance and earnings of the Group. Therefore, each year the Bank determines the amount of dividends to be distributed to its shareholders on the basis of the consolidated net income, while maintaining the Group’s traditionally high level of capitalization and taking into account that the transactions of the Bank and of the rest of the Group are managed on a consolidated basis (notwithstanding the allocation to each company of the related net worth effect).
	The Exhibits provide relevant data on the consolidated Group companies (Exhibit I and III) and on the companies accounted for by the equity method (Exhibit II).
	International Group structure
	At international level, the various banks and other subsidiary and associated companies belonging to the Group are integrated in a corporate structure comprising various holding companies which are the ultimate shareholders of the banks and subsidiaries abroad.
	The purpose of this structure, all of which is controlled by the Bank, is to optimize the international organization from the strategic, economic, financial and tax standpoints, since it makes it possible to define the most appropriate units to be entrusted with acquiring, selling or holding stakes in other international entities, the most appropriate financing method for these transactions and the most appropriate means of remitting the income obtained by the Group’s various operating units to Spain.

F-18

Purchases and sales

The principal equity investments acquired and sold by the Group in 2002, 2003 and 2004, in addition to the acquisition of the capital stock of Abbey indicated in Note 1, and other significant corporate transactions were as follows:

ELCON Finance AS (Elcon)

In September 2004 the Group acquired all the shares of Elcon (a leading Norwegian vehicle financing company) for NKr 3,440 million (approximately €400 million). Subsequently, the Group resolved to sell Elcon’s leasing and factoring businesses for approximately €160 million. The resulting goodwill amounted to €131 million (Note 12).

Polskie Towarzystwo Finansowe, S.A. (PTF)

In February 2004 Santander Consumer Finance, S.A. announced the acquisition of all the shares of the Polish consumer finance company Polskie Towarzystwo Finansowe, S.A., together with the loan portfolio managed by it, for a cash amount of €524 million, of which €460 million relate to the nominal amount of the loan portfolio acquired. The transaction as a whole gave rise to goodwill totaling €70 million (Note 12).

Finconsumo Banca SpA (Finconsumo)

In 2003 the Group resolved to acquire the 50% holding in the capital stock of Finconsumo that it did not own and acquired 20% for €60 million in that year. In January 2004 it acquired the remaining 30% for €80 million, giving rise to goodwill of €58 million (Note 12).

Santander Central Hispano Previsión S.A. de Seguros y Reaseguros

In 2003 the Group reached an agreement to divest in full its holding in this company. Once the required authorizations had been obtained, the transaction was performed in June 2004 for a price of €162 million.

Abfin BV

In September 2004 the Group acquired the Dutch company Abfin BV, which engages mainly in vehicle financing, for €22 million. The goodwill arising on this acquisition amounted to €3 million.

Orígenes AFJP, S.A. (Orígenes AFJP)

In accordance with the commitments acquired in prior years, in 2003 the Group acquired a 20% holding in the capital stock of Orígenes AFJP for €141 million. The goodwill which arose from this acquisition (Note 12) was amortized using the provisions recorded under the “Provisions for Contingencies and Expenses — Other Provisions” caption as of December 31, 2002 (Note 17).

Banco Santander Portugal, S.A. (Banco Santander Portugal)

In 2003 the Group acquired a 12.74% ownership interest in the capital stock of Banco Santander Portugal for €106 million, thus increasing its holding to 97.95%.

Shinsei Bank

In 2003, the Group increased its holding in the capital stock of the Japanese bank Shinsei Bank from 6.5% as of December 31, 2002, to 11.4% as of December 31, 2003. The total cost of the investment at that date was approximately €144 million. In February 2004, the shareholders of Shinsei Bank, which was 11.4% owned by the Group, resolved to float on the stock exchange 35% of the bank shares, which gave rise to the sale of a 4% holding by the Santander Group, at a gain of €118 million. Subsequent to the sale the Group’s holding in this bank was reduced to 7.4%.

Banco Español de Crédito, S.A. (Banesto)

In 2002 Banesto carried out a monetary capital increase through the issuance of 81,670,694 new shares, carrying preemptive rights, at a ratio of 2 new shares issued at par for every 15 old shares. The Group sold its preemptive rights (arising from its 99.04% holding in the capital stock of Banesto) for €443 million in 2002 (Note 21). As of December 31, 2004, the Group had an 88.65% holding in the capital stock of Banesto.

F-19

Grupo Financiero Santander Serfin, S.A. de C.V. (Grupo Financiero Santander Serfin) and Banco Santander Mexicano, S.A.

In December 2002, the Group reached an agreement with Bank of America Corporation whereby the latter acquired 24.9% of Grupo Financiero Santander Serfin for US$ 1,600 million (€1,457 million), which gave rise to gains of €681 million. These gains were recorded under the “Gains on Disposal of Investments in Fully Consolidated Companies” caption in the consolidated statement of income for the year ended December 31, 2003. Under this agreement, Bank of America Corporation will keep its holding for at least three years, and after this period it may, if it deems it appropriate, use several liquidity mechanisms, including the listing of its holding on the stock exchange and the right to sell this holding to the Group, at one time, at its book value at the time of the sale, calculated in accordance with international accounting standards.

After this sale, the Group’s holding in the capital stock of Grupo Financiero Santander Serfin stood at 73.98%.

In June 2004, Grupo Financiero Santander Serfin increased capital by €163.4 million, of which the Group subscribed €122.5 million.

On November 29, 2004, the Shareholders’ Meetings of Banco Santander Mexicano, S.A., Banca Serfin, S.A., Factoring Santander Serfin, S.A. de C.V. and Fonlyser, S.A. de C.V. resolved to merge the last three entities into Banco Santander Mexicano, S.A.. This merger was effective for accounting purposes from December 31, 2004.

AKB Holding (AKB)

In 2001 the Group reached an agreement with the Werhahn Group for the acquisition of AKB (a German group specializing in consumer finance). In 2002 the Bank issued 109,040,444 new shares of €0.5 par value each and additional paid-in capital of €9.588 each for an effective amount of €1,100 million, which were paid in full through the contribution of shares representing all the capital stock of AKB, in accordance with the resolutions adopted by the Bank’s Special Shareholders’ Meeting on February 9, 2002. AKB merged with CC-bank Ag. in 2002 (see Note 20).

Banco Santiago

Under the agreements between the Group and the Central Bank of Chile (as the second largest shareholder of Banco Santiago), on April 17, 2002, the Group acquired 35.45% of the Central Bank of Chile’s holding in the capital stock of Banco Santiago for US$ 685 million. On August 1, 2002, the merger of Banco Santiago and Banco Santander Chile was effectively executed, with retroactive effect to January 1, 2002, after the required resolutions of their respective Shareholders’ Meetings and approval by the Chilean regulatory authorities. The name of the post-merger entity is Banco Santander Chile.

Banco Río de la Plata, S.A. (Banco Río)

As of December 31, 2004, the Group had a 99.1% interest in Banco Río (99.1% and 98.9% as of December 31, 2003 and 2002, respectively) following the tender offer launched in 2000 to acquire the capital stock of Banco Río owned by minority shareholders, which was accepted by 94% of the minority shareholders, the acquisition in 2002 (by virtue of the commitments assumed in prior years) of 18.54% of the capital stock (23% of the voting rights) for €395 million and the conversion into equity in 2003 of the subordinated debt owned by the Group as of December 31, 2002.

Banco Santander Colombia, S.A. (Banco Santander Colombia)

As a result of a capital increase and of certain agreements reached in prior years, in 2002 the Group increased its holding in the capital stock of Banco Santander Colombia by 34.32%, for which it paid €303 million. As of December 31, 2004, the Group held a 97.64% of the capital of Banco Santander Colombia.

Patagon Group

In July 2000, the Group acquired a 97.62% holding in the capital stock of the Patagon Group (a financial portal) for approximately US$ 607 million.

In 2002 the Group restructured its Internet banking business, sold its holding in the financial portal to the other shareholders and released the provisions recorded for the full amount of the investment.

F-20

Other investments

Compañía Española de Petróleos, S.A. (Cepsa)

In 2003 the Bank launched a tender offer for up to 42,811,991 Cepsa shares, and the offer was accepted for 32,461,948 shares, representing an investment of €909 million (Notes 10 and 12).

Total, S.A. considered that the tender offer constituted a breach of historical side agreements between it and the Bank in relation to Cepsa (agreements which had, however, been rendered ineffective automatically by Law 26/2003) and, accordingly, filed a request for arbitration seeking injunctive measures at the Netherlands Court of Arbitration. The award rendered in this injunctive arbitration proceeding, which does not constitute a preliminary ruling on, or consider the merits of, the matters raised since they must be resolved in an arbitration on the merits already in progress, established injunctive measures that can be summarized as follows:

1.	Requirement for the Bank and Total, S.A. to act in concert with respect to the shares of Cepsa held by them directly or indirectly.
2.	Prohibition against the sale or charging of the direct or indirect holdings of the Bank in Somaen Dos, S.L. (Somaen), a company through which it owned its holding in Cepsa prior to the tender offer.
3.	Prohibition against the sale or charging of the Cepsa shares acquired by Santander in the tender offer.

The arbitration proceeding to resolve on the merits of the case is currently underway. The decision to be adopted in this proceeding will not be conditioned by the award rendered in the injunctive proceeding described above, which is provisional and does not constitute a preliminary ruling on the merits.

Royal Bank of Scotland Group, plc. (Royal Bank of Scotland)

In 2002 the Group made a net divestment of 3% of its holding in Royal Bank of Scotland, giving rise to gains of approximately €806 million. As of December 31, 2002, the ownership interest was 5.04%.

As of December 31, 2003, following several purchases and sales made during the year, the Group’s holding was 5.05%. The sales gave rise to gains of €217 million.

In May 2004 the Group subscribed to the capital increase at Royal Bank of Scotland, with a total disbursement of £150 million, in order to maintain undiluted its ownership interest in this company. The transaction gave rise to goodwill amounting to €25 million (Note 12).

In September 2004, the Group sold 79 million shares of Royal Bank of Scotland, representing 2.51% of its capital stock, giving rise to a gain of approximately €472 million. As of December 31, 2004, the Group’s holding amounted to 2.54% and was recorded under the “Common Stocks and Other Equity Securities” caption (Note 9).

In January 2005, the Group sold all the ownership interest held by it in the capital stock of Royal Bank of Scotland as of December 31, 2004, giving rise to a gain of €717 million which, in accordance with accounting principles, will be recorded in 2005.

Unión Fenosa

In 2002 several purchases of shares of Unión Fenosa were made for a total amount of €465 million. In 2004 the Group sold 1% of its holding in Unión Fenosa, leaving an ownership interest of 22.02% as of December 31, 2004.

Société Générale

As of December 31, 2001 the Group had a 1.5% holding in the capital stock of Societé Générale. This holding was divested in 2002 at a gain of €94 million.

Grupo Financiero Bital

In 2002 the Group subscribed to a capital increase and converted bonds into Grupo Financiero Bital shares for approximately €99 million, thus increasing its holding to 25.4% of the dividend rights and 29.1% of the voting rights. Subsequently, the Group accepted the tender offer launched by Hong Kong and Shanghai Bank Corporation (“HSBC”) on Grupo Financiero Bital, which gave rise to gains of approximately €113 million.

Dragados y Construcciones, S.A.

In 2002 the Group divested its holding in Dragados y Construcciones, S.A. (as of December 31, 2001, the holding was 20.19% of capital stock) at a gain of approximately €521 million (Note 9).

F-21

	Grupo Sacyr-Vallehermoso, S.A. (Sacyr-Vallehermoso)
	In 2002 the Group sold 24.5% of its holding in Sacyr-Vallehermoso (as of December 31, 2001, the holding was 25.14% of capital stock) at a gain of approximately €301 million (Note 9).
	San Paolo IMI, S.p.A. (San Paolo IMI)
	In 2003 the Group increased its holding in San Paolo IMI, from 5.2% as of December 31, 2002 to 8.6% as of December 31, 2004, with a net investment of €525 million in 2003. As of December 31, 2004 and 2003, this holding was recorded under the “Common Stocks and Other Equity Securities” caption (Note 9).
* * * * *
	The cost, total assets and gross revenues of the other consolidated companies acquired and sold in 2004, 2003 and 2002 were not material with respect to the related consolidated totals.
	Off-shore entities
	At year-end, the Group’s off-shore entities (excluding Abbey’s subsidiaries) performed the following business activities:
		–	Banking and financial activities such as treasury, financing, foreign trade, international private banking, trading, etc.
		–	Obtaining financing from third parties, including issues of preferred shares and debt.
		–	Ownership of shareholdings.
	The revenues of these off-shore entities (excluding issuers) represented less than 2% of the consolidated Group’s total revenues.
	Exhibits I and III provide data on the off-shore companies, other than Abbey subsidiaries, and their aggregate net income, excluding preferred security issuers (since their income relates mainly to the holders of preferred securities), is not material with respect to the Group’s consolidated net income.
	Abbey’s off-shore subsidiaries perform activities similar to those detailed above and also perform insurance and service activities. Exhibit I provides information on these subsidiaries.
	The Group has established the proper procedures and controls (risk management, supervision, verification and review plans and periodic reports) to prevent reputational and legal risk arising at these entities. Also, the Group continued with its policy, also implemented in recent years, to reduce the number of off-shore units. The off-shore units’ financial statements are audited by independent auditors.
4.	Distribution of the Bank’s income and directors’ compensation
	Distribution of the Bank’s income
	The Board of Directors will submit for approval by the Shareholders' Meeting the following proposal for distribution of the Bank’s 2004 net income:

	Thousands
	of Euros
Dividends:
Interim (Note 1)	1,837,273
Of which:
Distributed as of December 31, 2004 (*)	791,555
Third interim dividend (*)	519,106
Fourth interim dividend	526,612
Voluntary reserves	151
Net income for the year	1,837,424

(*) Recorded under the “Other Assets” caption.

F-22

The accounting statements formulated pursuant to legal requirements disclosing the existence of sufficient funds for the distribution of the interim dividends were as follows:

	Thousands of Euros
	12/31/03 (*)		06/30/04	09/30/04		11/30/04		12/31/04
Income after taxes	1,445,033		813,585	1,192,911		1,537,679		1,837,424
Dividends paid	(1,108,653	)	—	(395,777	)	(791,555	)	(1,310,661	)
	336,380		813,585	797,134		746,124		526,763
Interim dividends	335,734		395,777	395,778		519,106		526,612
Accumulated interim dividends	1,444,387		395,777	791,555		1,310,661		1,837,273
Gross dividend per share (euros)	0.07040		0.083	0.083		0.083		0.0842

(*) Fourth 2003 interim dividend.

Compensation and other benefits of the Bank’s directors and senior management

Directors’ compensation

Emoluments per the bylaws

Article 38 of the Bank’s bylaws provides that the share in the Bank’s income for the year to be received by members of the Board of Directors for discharging their duties will be equal to up to 5% of such income.

The Board of Directors, making use of the powers conferred on it, set the related amount at 0.169% of the Bank’s income for 2004 (0.196% for 2003 and 0.191% for 2002).

Consequently, the gross amount to be received by each director in this connection in 2004 amounted to €71 thousand (€65 thousand in 2003, the same amount as in 2002). Additionally, there is an annual emolument in this connection for the Executive Committee members, the gross amount of which was €155 thousand in 2004 (a gross amount of €141 thousand in 2003, the same amount as in 2002).

Lastly, the members of the Audit and Compliance Committee have been assigned an annual gross emolument of €36 thousand for 2004 (€32 thousand (gross) in 2003 and 2002).

Salary compensation

The detail of the salary compensation received by the Bank’s Board members with executive duties, who as of December 31, 2004, 2003 and 2002, were Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos, Mr. Alfredo Sáenz Abad, Mr. Matías Rodríguez Inciarte, Ms. Ana Patricia Botín-Sanz de Sautuola y O’Shea and Mr. Francisco Luzón López, is as follows:

	Thousands of Euros
	2004	2003	2002
Total salary compensation	16,179	14,784	13,438
Of which: Variable compensation	9,395	8,373	7,103

F-23

Detail by director

The detail by director of the compensation earned by the Bank’s directors in 2004 is as follows:

	Thousands of Euros
	2004										2003	2002
	Bylaw-Stipulated Fees			Attendance Fees		Salary Compensation to Executive Directors
Directors	Board	Executive Committee	Audit Committee	Board	Other Fees	Fixed	Variable	Total	Other Compen- sation	Total	Total	Total
Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos	71	155	—	23	4	1,022	1,473	2,495	1	2,749	2,591	2,477
Mr. Fernando de Asúa Álvarez	71	155	36	23	122	—	—	—	—	407	378	693
Mr. Alfredo Sáenz Abad	71	155	—	23	3	2,575	3,101	5,676	324	6,252	5,756	4,848
Mr. Matías Rodríguez Inciarte	71	155	—	23	104	1,300	1,748	3,048	144	3,545	3,456	3,241
Mr. Manuel Soto Serrano	71	—	36	21	22	—	—	—	—	150	136	131
Assicurazioni Generali, Spa.	71	—	—	5	—	—	—	—	—	76	73	68
Mr. Antonio Basagoiti García-Tuñón	71	68	—	23	88	—	—	—	29	279	207	178
Ms. Ana Patricia Botín-Sanz de Sautuola y O’Shea	71	155	—	23	2	850	1,150	2,000	1	2,252	1,980	1,646
Ms. Emilio Botín-Sanz de Sautuola y O’Shea	71	—	—	21	2	—	—	—	—	94	85	102
Mr. Javier Botín Sanz de Sautuola y O’Shea	31	—	—	11	—	—	—	—	—	42	—	—
Lord Terence Burns	2	—	—	2	—	—	—	—	—	4	—	—
Mr. Guillermo de la Dehesa Romero	71	155	—	23	9	—	—	—	—	258	233	120
Mr. Rodrigo Echenique Gordillo	71	155	36	23	109	—	—	—	719	1,113	992	1,027
Mr. Antonio Escámez Torres	71	155	—	23	100	—	—	—	739	1,088	1,192	1,109
Mr. Francisco Luzón López	71	155	—	23	2	1,037	1,923	2,960	327	3,538	3,202	2,873
Mr. Elías Masaveu Alonso del Campo	71	—	—	6	4	—	—	—	—	81	85	87
Mr. Abel Matutes Juan	71	—	36	23	14	—	—	—	—	144	130	65
Mutua Madrileña Automovilista	49	—	—	13	—	—	—	—	—	62	—	—
Mr. Luis Alberto Salazar-Simpson Bos	71	—	36	21	15	—	—	—	—	143	129	124
Mr. Jaime Botín-Sanz de Sautuola y García de los Ríos (*)	40	—	—	8	—	—	—	—	—	48	78	88
Mr. Juan Abelló Gallo (*)	68	—	34	13	6	—	—	—	—	121	126	63
Mr. José Manuel Arburúa Aspiunza (*)	22	—	—	6	91	—	—	—	1	120	181	176
Sir George Ross Mathewson (*)	62	—	—	7	—	—	—	—	—	69	81	78
Mr. Antonio de Sommer Champalimaud (*)	25	—	—	—	—	—	—	—	—	25	67	65
Other directors (1)	—	—	—	—	—	—	—	—	—	—	—	292
Total 2004	1,435	1,463	214	387	697	6,784	9,395	16,179	2,285	22,660	—	—
Total 2003	1,365	1,269	192	349	679	6,411	8,373	14,784	2,520	—	21,158	—
Total 2002	1,272	1,173	177	210	747	6,335	7,103	13,438	2,534	—	—	19,551

(*)	Directors who, having discharged Board duties as such for some months in 2004, ceased to discharge them prior to December 31, 2004.
(1)	Directors who, having discharged Board duties as such for some months in 2002, ceased to discharge them prior to December 31, 2002. €289 thousand of the total amount relate to Mr. Ángel Corcóstegui Guraya.

F-24

Compensation to the Board members as representatives of the Bank and to senior management

Representation

By resolution of the Executive Committee, all the compensation received by the Bank’s directors who represent the Bank on the Boards of Directors of listed companies in which the Bank has a stake (at the expense of those companies) and which relates to appointments made after March 18, 2002, will accrue to the Group. The compensation received in 2004 in connection with representation duties of this kind, relating to appointments agreed upon before March 18, 2002, was as follows:

		Thousands
	Company	of Euros
Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos	Royal Bank of Scotland	31.5
Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos	Shinsei Bank	77.0
Mr. Fernando de Asúa Álvarez	Cepsa	140.6
		249.1

Additionally, other directors of the Bank earned a total of €84.1 thousand in 2004 as members of the Boards of Directors of Group companies.

Senior management

Additionally, in accordance with the recommendation of the Special Commission to Foster Transparency and Security in the Markets and Listed Companies (“Aldama Commission”), following is a detail of the compensation paid to the Bank’s General Managers (*) in 2004, 2003 and 2002:

		Thousands of Euros
		Salary Compensation			Other Compensation	Total
Year	Number	Fixed	Variable	Total
2002	19	10,215	12,437	22,652	3,945	26,597
2003	20	12,924	16,664	29,588	4,703	34,291
2004	23	15,156	24,399	39,555	1,727	41,282

(*) Excluding Executive Directors’ compensation, which is detailed above.

Pension commitments, other insurance and other items

The total balance of supplementary pension obligations assumed by the Group over the years for its serving and retired employees, which amounted to €19,109 million (covered mostly by in-house allowances) as of December 31, 2004, includes the obligations to those who have been directors of the Bank during the year and who discharge (or have discharged) executive functions during the year. The total pension commitments for these directors, together with the total sum insured under life insurance policies at that date and other items, amounted to €178 million as of December 31, 2004 (€162 million as of December 31, 2003 and €256 million as of December 31, 2002, of which €108 million related to the settlement of the pension rights referred to in the following section of this Note).

The following table provides information on the obligations undertaken and covered by the Group relating to pension commitments to and other insurance for the Bank’s Executive Directors:

F- 25

	Thousands of Euros
	2004		2003		2002
	Accrued		Accrued		Accrued
	Pension	Other	Pension	Other	Pension	Other
	Obligations	Insurance	Obligations	Insurance	Obligations	Insurance
Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos	10,700	—	10,028	—	9,420	—
Mr. Alfredo Sáenz Abad	46,061	7,724	52,807	7,573	55,138	3,877
Mr. Matías Rodríguez Inciarte	27,752	3,900	27,442	3,900	25,522	3,823
Ms. Ana Patricia Botín-Sanz de Sautuola y O’Shea	9,742	1,258	7,736	1,258	6,656	1,258
Mr. Francisco Luzón López	35,703	6,224	19,448	4,886	18,452	4,698
Total	129,958	19,106	117,461	17,617	115,188	13,656

Additionally, other directors benefit from life insurance policies at the Group’s expense, the related insured sum being €3 million as of December 31, 2004, 2003 and 2002.

Pension settlement

Following the decision of Mr. Ángel Corcóstegui Guraya to resign, for personal reasons, in February 2002 from his position as First Deputy Chairman of the Bank and Board member (which entailed his corresponding resignation as Managing Director of the Bank and as member of the various Board Committees on which he sat), and in settlement for the pension commitments to him, the Bank paid on his resignation a gross amount of €108 million for his pension rights. This amount had been fully provided for as of that date. Upon payment, a withholding of 48% was made, and the amount withheld was paid into the Spanish Treasury. Accordingly, the net amount paid to Mr. Corcóstegui in this connection was €56 million.

F-26

Stock option plan

The detail of the Bank’s stock options granted to the Board members as of December 31, 2004, is as follows:

			Options Granted		Exercised Options
	Options at 01/01/04	Average Exercise Price	Number	Exercise Price	Number	Exercise Price	Market Price Applied	Options at December 31, 2004	Average Exercise Price	Date of Commence-ment of Exercise Period	Date of Expiration of Exercise Period
Managers Plan 2000:
Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos	150,000	10.545	—		—	—	—	150,000	10.545	12/30/03	12/29/05
Mr. Alfredo Sáenz Abad	100,000	10.545	—		—	—	—	100,000	10.545	12/30/03	12/29/05
Mr. Matías Rodríguez Inciarte	125,000	10.545	—		—	—	—	125,000	10.545	12/30/03	12/29/05
Mr. Antonio Escámez Torres	100,000	10.545	—		—	—	—	100,000	10.545	12/30/03	12/29/05
Mr. Francisco Luzón López	100,000	10.545	—		—	—	—	100,000	10.545	12/30/03	12/29/05
	575,000	10.545	—		—	—	—	575,000	10.545
Long-term incentive plan (*) (I-06) (Note 25):
Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos	—	—	541,400	9.07	—	—	—	541,400	9.07	01/15/08	01/15/09
Mr. Alfredo Sáenz Abad	—	—	1,209,100	9.07	—	—	—	1,209,100	9.07	01/15/08	01/15/09
Mr. Matías Rodríguez Inciarte	—	—	665,200	9.07	—	—	—	665,200	9.07	01/15/08	01/15/09
Mr. Francisco Luzón López	—	—	639,400	9.07	—	—	—	639,400	9.07	01/15/08	01/15/09
	—	—	3,055,100	9.07	—	—	—	3,055,100	9.07

(*)	To be submitted for the approval of the next Shareholders’ Meeting.
	Ms. Ana Patricia Botín-Sanz de Sautuola y O’Shea’s rights as a beneficiary of the I-06 Plan will be those proposed by the Board of Directors to its Shareholders’ Meeting and approved by it.

F- 27

Loans

The Group’s direct or indirect risk exposure to the Bank’s directors as of December 31, 2004, amounted to €10.8 million (€10.1 million and €14.4 million as of December 31, 2003 and 2002, respectively) of loans and credits and €0.2 million (€0.4 million and €1.2 million as of December 31, 2003 and 2002, respectively) of guarantees provided. These loans and guarantees were granted at market rates in all cases.

The detail by director as of December 31, 2004, is as follows:

	Thousands of Euros
		Loans and Credits	Guarantees	Total
Mr. Emilio Botín-Sanz de Sautuola y García de los Ríos		2,768	—	2,768
Mr. Antonio Basagoiti García-Tuñón		211	1	212
Ms. Ana Patricia Botín-Sanz de Sautuola y O’Shea		26	—	26
Mr. Javier Botín-Sanz de Sautuola y O’Shea		336	—	336
Mr. Rodrigo Echenique Gordillo		95	121	216
Mr. Antonio Escámez Torres		273	—	273
Mr. Francisco Luzón López		1,169	—	1,169
Mr. Abel Matutes Juan		5,861	—	5,861
Mutua Madrileña Automovilista		6	47	53
Mr. Luís Alberto Salazar-Simpson Bos		36	—	36
		10,781	169	10,950

Detail of directors’ investments in companies with similar business activities and performance by directors, as independent professionals or as employees, of similar activities

In accordance with the requirements of Article 127 ter.4 of the Spanish Corporations Law, in order to enhance the transparency of listed corporations, following is a detail of the directors’ investments in the capital stock of non-Group entities engaging in: (i) banking, financing or lending; (ii) insurance; (iii) management of Collective Investment Institutions; or (iv) securities brokerage; and of the management or governing functions, if any, that the directors discharge therein:

			Number
Director	Investee	Line of Business	of Shares	Functions
Mr. Emilio Botín-Sanz de Sautuola y	Bankinter, S.A.	Banking	847,777	Director (1) (2)
García de los Ríos	Shinsei Bank, Limited	Banking	—	Director (1)
	Bank of America Corporation	Banking	280	—
	Royal Bank of Scotland Group plc	Banking	—	Director (1) (2)
Mr. Fernando de Asúa Álvarez	Société Générale	Banking	480	—
	BNP Paribas	Banking	1,507	—
	San Paolo IMI, S.p.A.	Banking	11,000	—
	Royal Bank of Scotland	Banking	4,185	—
	Commerzbank, A.G.	Banking	2,000	—
	Banco Popular Español, S.A.	Banking	1,000	—
	Deutsche Bank, A.G.	Banking	250	—
	Centro Asegurador, S.A.	Insurance	200	Representative (3)
	Allianz	Insurance	381	—
	American International Group	Insurance	1,000	—
	Banco Bilbao Vizcaya Argentaria, S.A.	Banking	6,000	—
	Bankinter, S.A.	Banking	4,000	—
	ING	Banking	3,000	—
	Merrill Lynch	Banking	625	—
	Citigroup	Banking	800	—
	AEGON	Insurance	5,000	—
	Munich Re	Insurance	400	—
Mr. Alfredo Sáenz Abad	Banco Bilbao Vizcaya Argentaria, S.A.	Banking	25,000	—
	HSBC Holdings	Banking	8,298	—
	Lloyds TSB	Banking	218	—
	San Paolo IMI SpA	Banking	—	Director (1)
Mr. Matías Rodríguez Inciarte	Banesto	Banking	18,700	Director
Mr. Manuel Soto Serrano	Lloyds TSB	Banking	91,000	—
	Banesto	Banking	55,000	—
Assicurazioni Generali S.p.A (4)	Banca Nazionale del Lavoro S.p.A.	Banking	261,889,244	—
	Banca Intesa S.p.A.	Banking	364,445,773	—
	Commerzbank, AG	Banking	54,120,386	—

F- 28

Director	Investee	Line of Business	Number of Shares	Functions
	Banca d’Italia	Banking	19,000	—
	San Paolo IMI SpA	Banking	29,178,049	—
	Banca Monte dei Paschi di Siena SpA	Banking	16,432,492	—
	UniCredito Italiano SpA	Banking	36,165,513	—
	Bank Leumi le-Israel B.M.	Banking	19,450,774	—
	Société Générale	Banking	1,318,875	—
	Banesto	Banking	750,000	—
Ms. Ana Patricia Botín-Sanz de	Assicurazioni Generali, SpA	Insurance	—	Director (1)
Sautuola y O’Shea	Banesto	Banking	6,048	Chairman
Mr. Emilio Botín-Sanz de Sautuola y	Banesto	Banking	532	—
O’Shea	Bankinter	Banking	1,070	—
Mr. Javier Botín–Sanz de Sautuola y	M & B Capital Advisers Holding, S.A.	Securities brokerage	1,765	—
O’Shea	M & B Capital Advisers, S.V., S.A.	Securities brokerage	—	Executive Director
Mr. Guillermo de la Dehesa Romero	AVIVA Vida y Pensiones, S.A.	Insurance	—	Chairman (1)
	Goldman Sachs & Co.	Banking	12,888	—
	Goldman Sachs Europe Ltd.	Banking	—	Director (1)
	AVIVA plc.	Insurance	144	Director (1)
Mr. Rodrigo Echenique Gordillo	Banco Comercial Portugués	Banking	8,865	—
	Banco Popular Español, S.A.	Banking	1,000	—
	Crédit Agricole	Banking	1,150	—
	Credit Suisse Group	Banking	975	—
	Deutsche Bank, A.G.	Banking	220	—
	Royal Bank of Scotland	Banking	590	—
	Wells Fargo	Banking	375	—
	Citigroup	Banking	340	—
	ING	Banking	830	—
	UBS	Banking	395	—
Mr. Antonio Escámez Torres	Attijariwafa Bank (5)	Banking	10	Deputy Chairman (1)
	Banco de Valencia, S.A.	Banking	349	—
Mr. Elías Masaveu y Alonso del Campo	Bankinter, S.A.	Banking	4,321,679	Director (1)
	Banco Bilbao Vizcaya Argentaria, S.A.	Banking	164,821	—
	Espirito Santo	Banking	368,950	—
	Banco Popular Español, S.A.	Banking	1,950	—
	Banco de Galicia, S.A.	Banking	449,500	—
	Royal Bank of Scotland	Banking	315,688	—
	Allianz	Insurance	1,210	—
Mr. Abel Matutes Juan	Assicurazione Internazionale di	Insurance	—	Executive Director
	Providenza	Banking	142,689	Director (1) (2)
	San Paolo IMI SpA
Mutua Madrileña Automovilista, s.s.p.f. (4)	Mutuactivos SAU S.V.	Securities brokerage	1,000,000	—
	Mutuactivos SAU SGIIC	Fund management	1,000,000	Chairman (6)
	Autofondo SAU EGFP	Fund management	20,000	—
Mr. Luís Alberto Salazar-Simpson Bos	Centro Asegurador, S.A.	Insurance	—	Representative (7)
	Mutua Madrileña Automovilista	Insurance	—	Director
	Bankinter, S.A.	Banking	2,000	—
Mr. Juan Abelló Gallo (8)	Banco Popular Español, S.A.	Banking	17,626	—
	Banco Bilbao Vizcaya Argentaria, S.A.	Banking	18,603	—
	Barclays	Banking	66,000	—
	Lloyds TSB	Banking	105,700	—
	BNP	Banking	20,146	—
	AXA	Insurance	55,000	—
	American International Group	Insurance	11,600	—
	Citigroup	Banking	24,400	—
	Wells Fargo	Banking	6,500	—
	Crédit Agricole	Banking	33,000	—
	Catalana Occidente	Insurance	27,808	—
Mr. Jaime Botín-Sanz de Sautuola y	Bankinter, S.A.	Banking	6,047,199	Adviser to the
García de los Ríos (8)	Línea Directa Aseguradora, S.A.	Insurance	—	Board Chairman (1)
Sir George Mathewson (8)	The Royal Bank of Scotland plc	Banking	250,816	Chairman
	National Westminster Bank plc	Banking	—	Chairman
	The Royal Bank of Scotland plc	Banking	—	Chairman
	The Scottish Investment Trust plc	Fund management	—	Director (1)

F-29

(1)	Non-executive
(2)	He ceased to be non-executive director during the period.
(3)	He ceased to be the representative of the non-executive director Faa e Inversiones, S.A. on the Board of Centro Asegurador during the period.
(4)	Further relevant information on the investments of Assicurazioni Generali Sp.A and Mutua Madrileña Automovilista s.s.p.f. can be found in these companies’ financial statements or in their web pages (www.generali.it and www.mutua-mad.es, respectively).
(5)	Formerly Banque Commerciale du Maroc, S.A.
(6)	The representative of Mutua Madrileña on the Board of the Bank, Mr. Luís Rodríguez Durón, is the Chairman of Mutua SAU SGiiC.
(7)	He ceased to be representative of the non-executive director Connstructora Inmobiliaria Urbanizadora Vasco Aragonesa, S.A. on the Board of Centro Asegurador, S.A. during the period.
(8)	Directors for some months in 2004 who ceased to discharge this function before December 31, 2004.

	The Annual Corporate Governance Report discloses information on the Bank’s directors ownership interests in and seats on the Board of Group companies.
	None of the Board members perform, as independent professionals or as employees, any activities similar to those included in the foregoing table. Additionally, as required by Article 114.2 of the Securities Market Law, it is hereby stated that in 2004 the Bank’s directors did not perform, either directly or indirectly, any transaction with the Bank or with other Group companies other than in the ordinary course of operations or on an arm’s-length basis.
5.	Government debt securities
	Breakdown
	The detail of the balances of this caption is as follows:

	Thousands of Euros
		2004		2003			2002
		Book	Market	Book		Market	Book		Market
		Value	Value	Value		Value	Value		Value
Fixed-income securities:
Trading portfolio:
Treasury bills		2,977,951	2,977,951	1,705,321		1,705,321	—		—
Other listed book-entry debt securities		1,914,757	1,914,757	2,709,900		2,709,900	2,025,794		2,025,794
		4,892,708	4,892,708	4,415,221		4,415,221	2,025,794		2,025,794
Available-for-sale portfolio:
Treasury bills		1,665	1,669	177,237		177,419	3,677,314		3,695,356
Other listed book-entry debt securities		6,020,387	6,101,580	20,655,201		20,776,008	13,252,332		13,715,738
Other listed securities		166,628	166,689	—		—	—		—
		6,188,680	6,269,938	20,832,438		20,953,427	16,929,646		17,411,094
Held-to-maturity portfolio:
Other listed book-entry debt securities		5,041,925	5,279,509	5,870,864		6,062,924	6,033,086		6,453,700
		16,123,313	16,442,155	31,118,523		31,431,572	24,988,526		25,890,588
Less- Security price fluctuation allowance		—	—	(10,659	)	—	(33	)	—
		16,123,313	16,442,155	31,107,864		31,431,572	24,988,493		25,890,588

Term to maturity

The breakdown of the balances of this caption, by term to maturity, disregarding the security price fluctuation allowance, is as follows:

		Millions of Euros
Term to Maturity	2004	2003	2002
Up to 3 months	2,956	151	574
3 months to 1 year	3,679	9,341	4,228
1 to 5 years	5,652	16,843	15,986
Over 5 years	3,836	4,784	4,201
	16,123	31,119	24,989

F-30

Other information

Of the assets included in the “Government Debt Securities – Fixed-Income Securities” and “Debentures and Other Fixed-Income Securities” captions (Note 8) and of the assets acquired under resale agreement, recorded under the “Due from Credit Institutions” (Note 6) and “Loans and Credits” (Note 7) captions, as of December 31, 2004, the Group had sold under repurchase agreement €76,358 million to the Bank of Spain, to other financial intermediaries and to customers (public authorities, other resident sectors and nonresidents), and these amounts are recorded under the “Due to Credit institutions – Time or Notification Deposits” (Note 14) and “Customer Deposits” (Note 15) captions in the consolidated balance sheets (€69,992 million and €55,466 million as of December 31, 2003 and 2002, respectively).

The average annual interest rate on Treasury bills in 2004 was 2.18% (2.14% in 2003 and 3.67% in 2002).

The "Other Listed Book-Entry Debt Securities" account includes debentures, bonds and government debt securities with an average annual interest rate of 3.80% in 2004 (4.10% in 2003 and 5.05% in 2002).

As of December 31, 2004, the nominal amount of government debt securities pledged to certain commitments of Group companies and third parties amounted to €62 million (€267 and €600 million as of December 31, 2003 and 2002, respectively).

Security price fluctuation allowance

The variations in the balances of the "Security Price Fluctuation Allowance" account were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	10,659		33		10,182
Net provision for the year:
Period provision recorded	—		10,659		—
Allowance released	(10,659	)	(33	)	(10,143	)
	(10,659	)	10,626		(10,143	)
Amount used in sales, write-downs and other variations	—		—		(6	)
Balances at year-end	—		10,659		33

6.	Due from credit institutions
	The breakdown of the balances of this caption, by type and term to maturity, is as follows:

	Thousands of Euros
By Type and Term to Maturity		2004		2003		2002
Demand deposits:
Current accounts		117,752		103,734		105,816
Other accounts		1,587,547		1,599,804		3,043,095
		1,705,299		1,703,538		3,148,911
Other:
Deposits and other accounts at credit and financial institutions-
Up to 3 months		13,529,132		10,937,055		11,019,178
3 months to 1 year		2,694,813		2,888,295		3,881,831
1 to 5 years		452,761		554,824		509,223
Over 5 years		195,301		255,613		454,913
		16,872,007		14,635,787		15,865,145
Assets acquired under resale agreement (Note 5)-
Up to 3 months		29,491,694		20,111,660		19,922,699
3 months to 1 year		1,550,254		1,278,587		1,410,157
		31,041,948		21,390,247		21,332,856
		47,913,955		36,026,034		37,198,001
Less- Credit loss allowance (Note 1)		(49,307	)	(111,735	)	(90,522	)
		47,864,648		35,914,299		37,107,479
		49,569,947		37,617,837		40,256,390
Of which: Euros		23,934,083		25,978,021		26,552,350

F-31

7.	Loans and credits
	Breakdown
	The detail, by borrower sector, of the balances of this caption is as follows:

	Thousand of Euros
	2004		2003		2002
Public authorities	4,206,564		5,487,358		4,897,118
Other resident borrowers	123,760,923		103,515,597		88,876,138
Nonresident borrowers:
European Union (except Spain)	160,003,799		31,474,111		30,152,730
USA and Puerto Rico	14,566,536		4,580,092		5,133,573
Other OECD countries	3,011,607		808,212		1,645,739
Latin America	34,521,766		30,732,555		35,856,602
Other countries	2,105,795		1,022,771		1,349,261
	214,209,503		68,617,741		74,137,905
	342,176,990		177,620,696		167,911,161
Less- Credit loss allowance (Note 1)	(6,969,263	)	(5,116,683	)	(4,938,204	)
	335,207,727		172,504,013		162,972,957
Of which: Euros	157,288,042		136,488,788		120,882,376

Term to maturity, loan type and status

The detail, by term to maturity and loan type and status, of the balances of this caption, disregarding the "Credit Loss Allowance" account balance, is as follows:

	Thousands of Euros
	2004	2003	2002
By term to maturity:
Up to 3 months	59,975	34,132	34,871
3 months to 1 year	37,837	29,683	28,749
1 to 5 years	69,606	45,835	43,299
Over 5 years	174,759	67,971	60,992
	342,177	177,621	167,911
By loan type and status:
Financial bills	819	794	1,204
Secured loans	191,717	66,285	56,687
Spanish commercial bills	9,397	9,691	8,186
Other term loans	96,767	80,899	81,641
Assets acquired under resale agreement (Note 5)	20,927	2,913	3,091
Demand and other loans	7,162	6,180	6,733
Financial leases	11,342	7,582	6,669
Doubtful assets	4,046	3,277	3,700
	342,177	177,621	167,911

Credit loss allowance

The variations in the balances of the "Credit Loss Allowance" account which, as indicated in Note 2-c, covers nonperforming and doubtful loans and country-risk of the “Due from Credit institutions” (Note 6), “Loans and Credits” and “Debentures and Other Fixed-Income Securities” captions (Note 8), were as follows:

F-32

<<<<<<<

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	5,414,396		5,164,278		5,582,874
Inclusion of companies in the Group	1,080,031		—		9,034
Net provision of the year:
Period provision recorded	2,665,148		2,440,209		2,883,132
Allowance released	(670,111	)	(690,874	)	(973,681	)
	1,995,037		1,749,335		1,909,451
Nonperforming loans charged off against allowance	(963,779	)	(1,071,085	)	(1,473,374	)
Exchange differences and other variations	(173,839	)	(427,935	)	(1,153,128	)
Write-offs and transfers between allowances	(152,528	)	(197	)	289,421
Balances at year-end (Note 1)	7,199,318		5,414,396		5,164,278
Of which:
Allowance for specific risks	3,513,431		2,648,260		2,970,725
General-purpose allowance	2,073,566		1,596,603		1,417,681
Country-risk allowance	257,035		399,358		318,468
Allowance for statistical coverage	1,355,286		770,175		457,404

The €409 million of written-off assets recovered in 2004 are presented as a reduction of the balance of the "Write-offs and Credit Loss Provisions" caption in the consolidated statement of income. This caption also includes the direct Write-offs of loans classified as bad debts, which amounted to €61 million in 2004. Written-off assets recovered in 2003 and 2002 amounted to €357 million and €394 million, respectively, and direct Write-offs of loans classified as bad debts to €104 million and €132 million, respectively.

Country-risk

The allowance for possible losses that might arise in the realization of loans and credits, deposits placed with financial institutions (Note 6), fixed-income securities (Note 8) and guarantees provided, relating to public- and private-sector entities in problem debtor countries experiencing differing degrees of debt-servicing difficulty exceeded the minimum provision requirements under Bank of Spain regulations (Note 2-c).

As of December 31, 2004, the Group’s positions exposed to country-risk (disregarding intercompany balances) amounted to approximately €920 million (€500 million and €400 million as of December 31, 2003 and 2002, respectively).

8.	Debentures and other fixed-income securities
	Breakdown
	The breakdown, by listing status and classification, of the balances of this caption is as follows:

	Thousands of Euros
	2004		2003		2002
By listing status:
Listed	80,288,268		42,375,577		28,212,876
Unlisted	2,809,457		2,138,478		4,207,257
	83,097,725		44,514,055		32,420,133
By classification:
Trading portfolio	47,589,954		9,532,252		10,915,650
Available-for-sale portfolio	30,496,680		31,065,394		16,522,447
Held-to-maturity portfolio	5,011,091		3,916,409		4,982,036
	83,097,725		44,514,055		32,420,133
Less-
Credit loss allowance (Note 7)	(180,748	)	(185,978	)	(135,552	)
Security price fluctuation allowance (Note 1)	(78,385	)	(51,023	)	(198,420	)
	82,838,592		44,277,054		32,086,161
Of which: Euros	30,629,376		22,948,058		8,234,974

F-33

Other information

As of December 31, 2004, 2003 and 2002, the market value of the available-for-sale and held-to-maturity portfolios did not differ materially from the acquisition cost, adjusted as indicated in Note 2-d).

The weighted average annual interest rate on the fixed-income securities portfolio as of December 31, 2004, was 6.2% (6.2% and 10.2% as of December 2003 and 2002, respectively). The effect of discounting by the interest method the fixed-income securities whose interest rates are lower than the average cost of the Group’s borrowed funds is not material.

The balance as of December 31, 2004, of the "Public-Sector Issuers" account in the consolidated balance sheet includes €31,673 million relating to securities issued by nonresident public-sector entities (€27,065 million and €22,639 million as of December 2003 and 2002, respectively).

€31,112 million of the Group's total fixed-income securities portfolio as of December 31, 2004, mature in 2005.

Security price fluctuation allowance

The variations in the balances of the "Security Price Fluctuation Allowance" account were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	51,023		198,420		298,775
Net inclusion of companies in the Group	44,604		—		(3,832	)
Net release in the year	(12,891	)	(15,416	)	(88,061	)
Amount used in sales, write-downs, exchange differences and other variations	(4,351	)	(131,981	)	(8,462	)
Balances at year-end	78,385		51,023		198,420

9.	Common stocks and other equity securities
	This caption includes basically the shares and securities representing holdings of less than 20% (less than 3% if listed) in the capital stock of companies which have no lasting relationship with the Group and over which no significant influence is exercised (Note 2-e), and units in mutual funds.
	Breakdown
	The detail, by classification and listing status, of the balances of this caption is as follows:

	Thousands of Euros
	2004		2003		2002
By classification:
Trading portfolio	5,024,322		2,420,864		1,316,080
Available-for-sale portfolio	8,139,701		7,643,258		6,550,672
	13,164,023		10,064,122		7,866,752
By listing status:
Listed	10,406,089		6,336,825		3,403,268
Unlisted	3,457,704		4,676,058		5,033,199
	13,863,793		11,012,883		8,436,467
Less- Security price fluctuation allowance (Note 1)	(699,770	)	(948,761	)	(569,715	)
	13,164,023		10,064,122		7,866,752
Of which: Euros	9,433,560		8,227,350		5,866,594

F-34

Variations

The variations in the balances of this caption, disregarding the security price fluctuation allowance, were as follows:

	Thousands of Euros
	2004		2003	2002
Balances at the beginning of the year	11,012,883		8,436,467	8,330,551
Inclusion of companies in the Group	1,666,861		—	—
Net additions (retirements)	(367,253	)	461,736	846,200
Transfers from (to) “Investments in non-Group Companies” (Note 10)	1,139,678		1,358,560	(136	)
Of which:
Royal Bank of Scotland (Note 3)	1,166,722		—	—
San Paolo IMI (*)	—		953,912	—
Commerzbank, Ag. (*)	—		333,138	—
Transfers of goodwill from “Investments in non-Group Companies”	204,698		518,784	—
(Note 12)
Of which:
Royal Bank of Scotland	204,698		—	—
San Paolo IMI	—		439,571	—
Commerzbank, Ag.	—		72,375	—
Transfers from (to) “Investments in Group Companies”) (Note 11)	(1,138	)	—	2,630
Exchange differences and other variations	208,064		237,336	(742,778	)
Balances at year-end	13,863,793		11,012,883	8,436,467

(*) Following the issuance of the First-Time Application Standard of International Accounting Standards in 2003, as of December 31, 2003, after recording the period goodwill amortization charge, the Group transferred the holdings (Note 10) of less than 20% which are not intended to be held at long term. The transfer was made at the cost previously recorded in the “Investments in non-Group Companies” caption plus the related goodwill. The required security price fluctuation allowance was recorded if the market value after the transfer was lower than net cost.

Security price fluctuation allowance

The variations in the balances of the "Security Price Fluctuation Allowance" account were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	948,761		569,715		522,640
Net inclusion of companies in the Group	100		(1,026	)	(1,866	)
Net provision in the year	7,007		309,192		206,499
Amount used in sales, write-downs, transfers and other variations	(256,098	)	70,880		(157,558	)
Balances at year-end	699,770		948,761		569,715

F-35

	Other information
	Vodafone Airtouch, plc. (Vodafone)
	In 2004 the Group sold all of its investment in the capital stock of Vodafone, giving rise to gains of €242 million.
	Auna Operadores de Telecomunicaciones, S.A. (Auna)
	In January 2004, the Bank exercised certain agreements in connection with this company, thereby increasing its holding by 2.5%, and subsequently made several acquisitions representing a further 1.5% holding. The holding in Auna was 27.34% as of December 31, 2004, representing an investment of €2,031 million (Note 27).
	Shinsei Bank, Ltd. (Shinsei Bank)
	In February 2004, the shareholders of Shinsei Bank, which was 11.4% owned by the Group, resolved to float on the stock exchange 35% of the bank shares, which gave rise to the sale of a 4% holding by the Santander Group, at a gain of €118 million. Subsequent to the sale the Group’s holding in this bank was reduced to 7.4%.
	Sacyr-Vallehermoso
	In 2004 the Group sold all of its holding in Sacyr-Vallehermoso for €92 million. The gain on this transaction amounted to €47 million.
	Notifications on share acquisitions
	The notifications on share acquisitions and sales by the Bank in compliance with Article 86 of the Spanish Corporations Law and Article 53 of Securities Market Law 24/1998 are listed in Exhibit IV.
10.	Investments in non-Group companies
	This caption reflects the ownership rights in the capital of associated companies, i.e. companies which, although not forming part of the Group, have a lasting relationship with the Group and are intended to contribute to its activity, and over which significant influence is exercised (Exhibit II).
	Breakdown
	The breakdown, by company, of the balances of this caption (Note 3) is as follows:

	Thousands of Euros
	2004	2003	2002
Cepsa	1,479,104	1,324,117	833,135
Unión Fenosa	757,068	772,618	692,929
Attijariwafa Bank Société Anonyme	149,437	110,129	121,394
Abbey Group	35,439	—	—
Royal Bank of Scotland	—	1,850,889	1,883,328
San Paolo IMI (*)	—	—	540,631
Commerzbank A.G. (*)	—	—	326,540
Sacyr-Vallehermoso (*)	—	—	58,569
Grupo Financiero Galicia, S.A.	—	—	30,142
Other companies	276,080	208,672	283,070
	2,697,128	4,266,425	4,769,738
Of which:
Euros	2,460,034	2,284,370	2,704,751
Listed	2,236,172	3,947,624	4,393,742

(*) Transferred to the “Common Stocks and Other Equity Securities” caption as indicated in Note 9.

F-36

Variations

The variations in the balances of this caption were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	4,266,425		4,769,738		6,661,805
Inclusion of companies in the Group	35,439		—		—
Purchases and capital increases (Note 3)	259,635		1,112,430		528,105
Of which:
San Paolo IMI	—		368,182		—
Cepsa	—		347,790		—
Royal Bank of Scotland	246,746		364,197		—
Sales and capital reductions (Note 3)	(1,126,712	)	(394,051	)	(2,153,580	)
Transfers from /(to) “Common Stocks and Other Equity Securities” (Note 9)	(1,139,678	)	(1,358,560	)	136
Transfers to “Investments in Group Companies” (Note 11)	(2,884	)	—		—
Effect of equity method accounting	436,420		298,629		243,625
Change of consolidation method	(11,897	)	—		(2,104	)
Exchange differences and other variations	(19,620	)	(161,761	)	(508,249	)
Of which: Variations in reserves at associated companies (Note 21)	(18,745	)	(1,837	)	(243,289	)
Balances at year-end	2,697,128		4,266,425		4,769,738

11.	Investments in Group companies
	Breakdown
	This caption reflects the investments in Group companies which were not consolidated (Exhibit II) because their business activities are not directly related with those of the Group. The breakdown, by company, of the balances of this caption is as follows:

	Thousands of Euros
	2004	2003	2002
Abbey Group (insurance companies)	4,053,056	—	—
Inmobiliaria Urbis, S.A.	378,464	335,028	302,687
Santander Seguros y Reaseguros, Compañía Aseguradora, S.A.	124,254	98,933	62,460
Compañía Aseguradora Banesto Seguros, S.A.	60,679	56,580	50,729
La Unión Resinera Española, S.A.	48,156	46,477	53,963
Santander Seguros, S.A. (Brazil)	41,425	46,468	40,086
Altavida Santander Seguros de Vida, S.A. (Chile)	35,411	23,522	13,851
Seguros Santander Serfin, S.A. de C.V.	32,156	45,846	33,445
Santander Central Hispano Previsión, S.A. de Seguros y Reaseguros	—	159,087	143,702
Totta Urbe, S.A.	—	—	104,577
B to B Factory Ventures, S.A.	—	—	40,000
Editel, S.L.	—	—	27,601
Other companies	272,346	255,830	256,292
	5,045,947	1,067,771	1,129,393
Of which:
Euros	839,439	921,351	993,485
Listed	426,620	384,179	359,218

F-37

Variations

The variations in the balances of this caption were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	1,067,771		1,129,393		1,227,351
Inclusion of companies in the Group	4,053,056		—		12,928
Purchases and capital increases	25,186		117,582		137,633
Sales and capital reductions (Note 3)	(168,480	)	(41,602	)	(165,693	)
Transfers from “Investments in non-Group Companies” (Note 10)	2,884		—		—
Transfers (to) / from “Common Stocks and Other Equity Securities” (Note 9)	1,138		—		(2,630	)
Effect of equity method accounting	103,966		108,634		36,273
Change of consolidation method	18,732		(132,577	)	(23,939	)
Exchange differences and other variations	(58,306	)	(113,659	)	(92,530	)
Balances at year-end	5,045,947		1,067,771		1,129,393
		`

	Other information
	As of December 31, 2004, there were no significant capital increases in progress at any non-consolidable subsidiary.
12.	Consolidation goodwill
	Breakdown
	The breakdown, by company, of the balances of the “Consolidation Goodwill” caption (Note 3) is as follows:

	Thousands of Euros
	2004	2003	2002
Fully consolidated companies:
Abbey Group (U.K. - Note 1)	10,263,893	—	—
Totta Group (Portugal)	1,473,666	1,560,638	1,656,487
Banco Santander Chile (Note 3)	912,493	973,066	1,033,638
Grupo Financiero Santander Serfin (Mexico)	789,585	840,899	1,191,867
AKB (Germany - Note 3)	778,679	824,483	870,286
Meridional Group (Brazil)	667,641	710,985	754,395
Banesto Group	338,808	366,311	400,589
Banco de Venezuela	202,426	313,316	332,052
Elcon (Norway - Note 3)	128,762	—	—
Finconsumo (Italy)	102,867	50,576	5,094
PTF (Poland - Note 3)	66,450	—	—
Banespa (Brazil)	—	—	1,770,590
Banco Río (Argentina)	—	—	508,261
Other companies	373,893	425,358	446,905
	16,099,163	6,065,632	8,970,164
Companies accounted for by the equity method:
Cepsa	616,690	650,949	92,486
Unión Fenosa	235,971	261,632	280,557
Royal Bank of Scotland (Notes 9 and 10)	—	395,100	173,475
San Paolo IMI (Notes 9 and 10)	—	—	299,704
Commerzbank Ag. (Notes 9 and 10)	—	—	77,375
Grupo Financiero Galicia, S.A. (Argentina)	—	—	37,992
Other companies	12,377	11,911	22,982
	865,038	1,319,592	984,571
	16,964,201	7,385,224	9,954,735

As of December 31, 2002, the Group had recorded provisions to cover the potential loss of value of certain of these assets. The goodwill of the Group units located in Argentina was written off in 2003 with a charge to the provisions previously recorded.

Based on the estimates, projections and assessments available to the Bank’s directors, the forecasted revenues attributable to the Group from these companies are at least equal to the amounts of the respective goodwill balances yet to be amortized in the related periods.

F-38

Variations

The variations in the balances of the “Consolidation Goodwill” caption were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	7,385,224		9,954,735		9,868,697
Additions (Notes 1 and 3)	10,611,619		1,367,919		2,420,892
Of which:
Abbey Group	10,263,893		—		—
Elcon	131,498		—		—
PTF	69,947		—		—
Finconsumo	57,839		46,583		—
Royal Bank of Scotland	24,795		308,002		21,875
Banco Santander Portugal	2,723		69,102		—
Cepsa	—		569,037		—
San Paolo IMI	—		160,715		104,630
Orígenes AFJP	—		101,819		—
AKB	—		—		916,091
Banco Santiago (Banco Santander Chile)	—		—		595,806
Banco Río	—		—		263,280
Banco Santander Colombia	—		—		240,114
Unión Fenosa	—		—		195,446
Retirements due to sale	(209,009	)	(401,231	)	(976,238	)
Of which:
Royal Bank of Scotland	(197,574	)	(69,446	)	(103,876	)
Patagon Group	—		—		(617,503	)
Grupo Financiero Santander Serfin	—		(318,023	)	—
Société Générale	—		—		(95,126	)
Amortization charged to specific allowances (Note 17)	—		(775,727	)	—
Transfers from “Investments in non-Group Companies” to
“Common Stocks and Other Equity Securities” (Note 9)	(204,698	)	(518,784	)	—
Amortization charged to income	(618,935	)	(2,241,688	)	(1,358,616	)
Of which: Additional to that calculated on a straight-line basis	(153,754	)	(1,719,164	)	(702,885	)
Of which:
Banco de Venezuela	(92,612	)	—		—
Administradora de Fondos de Pensiones y Cesantías
Santander, S.A. (Colombia)	(55,315	)	—		—
Banespa	—		(1,703,835	)	(400,571	)
Banco Santander Colombia	—		(786	)	(240,008	)
Balances at year-end	16,964,201		7,385,224		9,954,735

F-39

13 .	Property and equipment
	Variations
	The variations in the "Property and Equipment" accounts and in the related accumulated depreciation were as follows:

			Thousands of Euros
	Land and				Furniture,
	Buildings for		Other		Fixtures
	Own Use		Property		and Other		Total
Revalued cost:
Balances at January 1, 2002	4,695,070		530,549		4,679,606		9,905,225
Additions and retirements (net) due to change in scope of   consolidation	(73,130	)	(34,739	)	(4,556	)	(112,425	)
Additions/Retirements (net)	(228,384	)	(128,834	)	130,517		(226,701	)
Exchange differences	(683,374	)	(78,103	)	(257,521	)	(1,018,998	)
Balances at December 31, 2002	3,710,182		288,873		4,548,046		8,547,101
Additions and retirements (net) due to change in scope of   consolidation	(13,044	)	(380	)	198		(13,226	)
Additions/Retirements (net)	(135,026	)	18,614		(192,150	)	(308,562	)
Transfers	—		18,785		(18,785	)	—
Exchange differences	(146,074	)	(13,854	)	(100,476	)	(260,404	)
Balances at December 31, 2003	3,416,038		312,038		4,236,833		7,964,909
Additions and retirements (net) due to change in scope of   consolidation	54,654		24,205		5,532,909		5,611,768
Additions/Retirements (net)	25,356		42,711		318,583		386,650
Transfers	2,790		15,630		(18,420	)	—
Exchange differences	(49,220	)	(1,054	)	(30,529	)	(80,803	)
Balances at December 31, 2004	3,449,618		393,530		10,039,376		13,882,524
Accumulated depreciation:
Balances at January 1, 2002	(936,286	)	(11,912	)	(2,603,097	)	(3,551,295	)
Additions and retirements (net) due to change in scope of   consolidation	21,161		—		8,994		30,155
Retirements	108,297		4,205		83,842		196,344
Provisions	(82,440	)	(1,244	)	(520,575	)	(604,259	)
Exchange differences	179,471		789		142,253		322,513
Balances at December 31, 2002	(709,797	)	(8,162	)	(2,888,583	)	(3,606,542	)
Additions and retirements (net) due to change in scope of   consolidation	8,750		1,211		(617	)	9,344
Retirements	41,678		1,554		559,694		602,926
Transfers	—		(18,785	)	18,785		—
Provisions	(66,285	)	(875	)	(422,122	)	(489,282	)
Exchange differences	32,758		—		69,856		102,614
Balances at December 31, 2003	(692,896	)	(25,057	)	(2,662,987	)	(3,380,940	)
Additions due to new inclusions in the Group	(11,150	)	—		(2,151,736	)	(2,162,886	)
Retirements	32,518		3,603		295,695		331,816
Transfers	(1,700	)	(1,596	)	3,296		—
Exchange differences	11,692		—		24,721		36,413
Provisions	(65,035	)	(838	)	(427,920	)	(493,793	)
Balances at December 31, 2004	(726,571	)	(23,888	)	(4,918,931	)	(5,669,390	)
Property and equipment, net (*):
Balances at December 31, 2002	3,000,385		280,711		1,659,463		4,940,559
Balances at December 31, 2003	2,723,142		286,981		1,573,846		4,583,969
Balances at December 31, 2004	2,723,047		369,642		5,120,445		8,213,134

(*) Of the total balances, approximately €5,210 million, €1,613 million and €2,602 million related to property and equipment abroad as of December 31, 2004, 2003 and 2002, respectively.

F-40

	Other property
	The “Other Property” and “Furniture, Fixtures and Other” accounts include, among other items, the assets acquired through foreclosure on non-recovered loans. These assets are recorded at foreclosure cost which in no case exceeds the book value of the loan, net of the allowance recorded as a result of comparison with their market value. The allowance amounted to €293 million as of December 31, 2004, and represented 54% of the recorded value (€316 million and €395 million and 57% and 58% as of December 31, 2003 and 2002, respectively).
14.	Due to credit institutions
	Breakdown
	The breakdown, by type and term to maturity, of the balances of this caption is as follows:

		Thousands of Euros
By Type and Term to Maturity	2004	2003	2002
Demand deposits:
Current accounts	39,162	12,821	28,712
Other accounts	3,532,614	1,747,580	3,920,819
	3,571,776	1,760,401	3,949,531
Time or notification deposits:
Bank of Spain credit account drawdowns-Up to 3 months	—	915,473	1,000,022
Time deposits-
Up to 3 months	34,535,552	14,517,822	15,257,124
3 months to 1 year	6,262,438	6,361,743	6,689,929
1 to 5 years	3,785,615	6,612,704	3,053,691
Over 5 years	2,869,921	2,008,154	2,756,834
	47,453,526	29,500,423	27,757,578
Assets sold under repurchase agreement (Note 5)-
Up to 3 months	27,435,936	34,046,432	15,164,776
3 months to 1 year	5,127,997	8,862,729	1,770,672
1 to 5 years	1,077,738	494,854	1,178,140
Over 5 years	146,832	—	—
	33,788,503	43,404,015	18,113,588
	81,242,029	73,819,911	46,871,188
	84,813,805	75,580,312	50,820,719
Of which: Euros	33,703,535	57,387,612	30,530,819

As of December 31, 2004, the limit set by the Bank of Spain for the Bank and for the Banesto Group in the system of loans guaranteed by public-sector debt securities amounted to €1,996 million and €817 million, respectively (€1,988 million and €1,017 million, and €1,209 million and €1,214 million as of December 31, 2003 and 2002 for the Bank and for the Banesto Group, respectively).

F-41

15.	Customer deposits
	Breakdown
	The breakdown, by geographical area and depositor sector, of the balances of this caption is as follows:

	Thousands of Euros
	2004	2003	2002
By geographical area:
Spain	99,782,623	91,799,908	96,602,048
Other EU countries	147,356,167	25,040,806	23,990,299
USA and Puerto Rico	6,563,982	6,342,920	7,530,507
Other OECD countries	174,730	255,490	353,469
Latin America	38,733,800	34,618,654	37,915,080
Other	1,234,395	1,277,794	1,424,353
	293,845,697	159,335,572	167,815,756
By sector:
Public authorities	13,966,167	9,225,949	12,126,084
Of which: Assets sold under repurchase agreement (Note 5)	7,702,543	3,934,274	9,829,694
Other residents-
Demand deposits	25,700,206	25,089,234	21,743,570
Savings deposits	18,602,253	17,823,421	16,057,659
Time deposits	19,474,400	18,640,052	21,326,541
Assets sold under repurchase agreement (Note 5)	17,766,883	16,348,466	19,194,664
Other deposits	626,266	17,734	109,686
	82,170,008	77,918,907	78,432,120
Nonresidents	197,709,522	72,190,716	77,257,552
	293,845,697	159,335,572	167,815,756
Of which: Euros	121,236,400	110,265,674	114,055,256

Term to maturity

The detail, by term to maturity, of the balances of the "Savings Deposits - Time" and "Other Deposits - Time" captions in the consolidated balance sheets is as follows:

	Thousands of Euros
	2004	2003	2002
Savings deposits - Time:
Up to 3 months	51,041	23,477	27,174
3 months to 1 year	12,341	10,982	14,740
1 to 5 years	5,782	10,321	9,657
Over 5 years	1,204	2,193	715
	70,368	46,973	52,286
Other deposits - Time:
Up to 3 months	61,880	32,157	44,047
3 months to 1 year	6,410	2,362	1,681
1 to 5 years	3,726	763	1,687
Over 5 years	2,641	158	61
	74,657	35,440	47,476

F-42

16 .	Marketable debt securities
	Bonds and debentures outstanding
	The breakdown, by currency and interest rate, of the balances of this caption is as follows:

	Thousands of Euros			December 31, 2004
				Outstanding
				Amount in	Annual
				Currency	Interest
Issue Currency	2004	2003	2002	(Millions)	Rate (%)
Euros:
Fixed interest	22,786,515	13,869,207	7,364,425	—	4.19	%
Floating interest	21,413,095	9,184,697	5,145,509	—	3.13	%
U.S. dollars:
Fixed interest	1,044,965	444,324	1,429,024	1,423	2.64	%
Floating interest	3,455,299	1,071,447	1,419,888	4,706	3.98	%
Pounds sterling:
Fixed interest	2,015,786	326,334	661,029	1,421	3.35	%
Floating interest	2,871,639	1,274,121	1,380,477	2,025	4.58	%
Chilean pesos:
Fixed interest	1,461,946	2,016,908	2,442,948	1,110,657	6.43	%
Other currencies	2,890,827	651,854	654,029
Balances at year-end	57,940,072	28,838,892	20,497,329

None of the securities outstanding at December 31, 2004, 2003 and 2002, are convertible into Bank’s shares or grant any privileges or rights that could make them contingently convertible into Bank’s shares.

F-43

Variations

The variations in “Bonds and Debentures Outstanding” accounts were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	28,838,892		20,497,329		21,229,154
Net inclusion of companies in the Group	17,659,366		—		(319,342	)
Issues	17,201,370		13,025,505		6,698,032
Of which:
Banco Santander Central Hispano, S.A.:
Nonconvertible bonds February and December – Floating	3,500,000		—		—
Mortgage bonds March and July – Fixed	2,000,000		—		—
Mortgage bonds March, August and December – Fixed	—		5,000,000		—
Territorial bonds June – Fixed	—		2,000,000		—
Mortgage bonds October – Fixed	—		—		3,000,000
Banesto:
Mortgage bonds February and September – Fixed	3,750,000		—		—
Bonds June and October – Floating	3,000,000		—		—
Mortgage bonds May – Fixed	—		1,500,000		—
Bonds October – Floating	—		2,000,000		—
Mortgage bonds March – Fixed	—		—		1,000,000
Santander Central Hispano International Ltd.:
February – Floating	—		—		500,000
Santander Internacional Debt, S.A.:
Bonds December – Floating	3,891,293		—		—
Redemptions	(5,489,822	)	(4,227,694	)	(4,620,244	)
Of which:
Santander Central Hispano International Ltd.:
April 2001	(500,000	)	—		—
August 2000	(425,653	)	—		—
April 2000	(422,815	)	—		—
February 2001	(395,883	)	—		—
January 2003	—		(476,781	)	—
August 2003	—		(500,000	)	—
June 2003	—		(600,000	)	—
October 2002	—		—		(500,000	)
August 2002	—		—		(645,943	)
March 2002	—		—		(1,000,000	)
Banesto:
February 2001	(600,000	)	—		—
February 2002	(400,000	)	—		—
Finconsumo:
June 2002	(300,000	)	—		—
Banco Rio:
2002 Global Program (*)	—		(796,366	)	—
Exchange differences	(269,734	)	(456,248	)	(2,490,271	)
Balances at year-end	57,940,072		28,838,892		20,497,329

(*) In accordance with the long-term debt restructuring program.

F-44

Maturity

The detail, by maturity, of the balance of this caption as of December 31, 2004, is as follows:

	Millions
Maturity	of Euros
2005	9,247
2006	13,825
2007	8,858
2008	5,133
2009	5,658
Subsequent years	15,219
	57,940

Promissory notes and other securities

The detail, by term to maturity, of the balances of the “Promissory Notes and Other Securities” caption, relating to instruments issued basically by Banco Santander Central Hispano, S.A.; Santander Central Hispano International Ltd.; Santander Central Hispano Finance (Delaware), Inc.; Santander Consumer Finance, S.A.; Banca Serfin S.A.; Banco Santander Mexicano S.A.; Banco Totta & Açores, S.A., Santander International Debt, Abbey and the Bank’s branch in London, is as follows:

	Thousands of Euros
Term to Maturity		2004	2003	2002
Up to 3 months		15,636,870	9,160,396	6,887,054
3 months to 1 year		8,497,129	4,626,705	1,591,281
1 to 5 years		1,384,966	1,815,212	2,313,443
Over 5 years		548,152	—	—
		26,067,117	15,602,313	10,791,778
Of which: Euros		6,599,077	9,242,409	6,010,792

17.	Provisions for contingencies and expenses
	Variations
	The detail of the balances of this caption is as follows:`

	Thousands of Euros
	2004	2003	2002
Pension allowance	10,652,752	8,935,148	8,839,081
Other provisions	4,692,293	3,792,529	5,008,669
Provisions for contingencies and expenses	15,345,045	12,727,677	13,847,750

F-45

Variations

The detail of the variations in the balances of the "Provisions for Contingencies and Expenses" caption is as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	12,727,677		13,847,750		16,917,289
Net inclusion of companies in the Group	2,130,064		10,239		(1,129	)
Provision charged to income	1,619,717		574,286		1,392,143
Provision charged to reserves and prepaid taxes (Note 2-j)	—		524,247		1,340,532
Insured in-house pension allowances - Companies in Spain (Note 2-j)-
Premiums paid to insurance companies	46,404		58,683		63,620
Variation in net level premium reserves of insurance companies	198,313		221,476		244,904
Externalized insurance policies and other variations	(22,927	)	(5,260	)	(90,843	)
Payments to pensioners by insurance companies	(235,361	)	(257,469	)	(266,405	)
	(13,571	)	17,430		(48,724	)
Payments to pensioners and to employees who took early retirement
with a charge to in-house allowances (Note 2-j)	(806,034	)	(759,492	)	(774,902	)
Insurance premiums paid (Note 2-j)	(46,404	)	(58,683	)	(63,620	)
In-house pension allowances externalized and other variations	(22,197	)	(29,830	)	(316,243	)
Allowance used	(573,323	)	(1,069,332	)	(1,300,820	)
Of which: Goodwill (Note 12)	—		(775,727	)	—
Transfers	345,466		(217,349	)	(285,973	)
Exchange differences and other variations	(16,350	)	(111,589	)	(3,010,803	)
Balances at year-end	15,345,045		12,727,677		13,847,750

Other provisions

The balances of the "Provisions for Contingencies and Expenses - Other Provisions" caption included the following items:

	Thousands of Euros
	2004	2003	2002
Credit loss allowance for off-balance-sheet risks	351,305	313,657	317,009
Of which: Country-risk	8,096	5,568	17,964
Allowance for losses on financial futures transactions	558,690	498,789	520,446
Allowance for contingencies and commitments at operating units:
Recorded at Spanish companies	1,153,122	1,133,276	2,138,895
Of which: Relating to investments made in Argentina (Note 12)	198,653	436,893	1,356,278
Recorded at other companies	2,629,176	1,846,807	2,032,319
Of which:
Banespa	713,076	722,322	944,286
Abbey	919,236	—	—
	4,692,293	3,792,529	5,008,669

18.	Subordinated debt
	The detail, by currency and interest rate, of the balances of this caption is as follows:

	Thousands of Euros			December 31, 2004
				Outstanding	Annual
				Amounts	Interest
				in Currency	Rate
Issue Currency	2004	2003	2002	(Millions)	(%)
Euros:
Fixed interest	5,321,557	2,116,071	2,650,248	—	5.43	%
Floating interest	4,145,205	3,232,588	2,838,370	—	4.22	%
U.S. dollars:
Fixed interest	5,752,787	3,671,249	4,399,523	7,836	7.23	%
Floating interest	1,283,007	1,403,800	1,690,664	1,748	3.08	%
Pounds sterling:
Fixed interest	3,044,018	283,769	307,447	2,146	8.15	%
Floating interest	283,665	283,769	307,447	200	7.63	%
Other currencies	363,889	229,842	256,529	—	—
Balances at year-end	20,194,128	11,221,088	12,450,228

F-46

Variations

The variations in the balances of this caption were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	11,221,088		12,450,228		12,995,991
Inclusion of companies in the Group	7,318,447		—		100,213
Issues	2,489,381		500,000		1,095,356
Of which:
Santander Central Hispano Issuances, Ltd.-
September 2019	500,000		—		—
September 2014	500,000		—		—
May 2012 – Floating	—		—		95,356
April 2012 – Floating	—		—		1,000,000
Banesto-
September 2013 – Floating	—		500,000		—
March 2016 – Floating	500,000		—		—
Santander Perpetual, S.A. Unipersonal-
Perpetual	750,000		—		—
Redemptions	(465,323	)	(589,619	)	(433,359	)
Of which:
Santander Central Hispano Issuances, Ltd.-
December 1994	—		—		(215,505	)
June 1994 – Fixed and Floating	(192,956	)	—		—
Santander Central Hispano Finance, B.V.	—		(300,378	)	—
Exchange differences	(369,465	)	(1,139,521	)	(1,307,973	)
Balances at year-end	20,194,128		11,221,088		12,450,228

Other information

These issues are subordinated debt and, therefore, for credit seniority purposes they are junior to the claims of all general creditors of the issuers. The issues of Santander Central Hispano Issuances, Ltd. and Santander Perpetual, S.A. Unipersonal are guaranteed by the Bank or are secured by restricted deposits at the Bank.

As of December 31, 2004, none of these issues was convertible into Bank shares, and they do not grant privileges or rights that might, as a result of contingency, make them convertible into shares. Abbey has a subordinated debt issue of £200 million which can be converted, at Abbey’s option, into preferred shares of Abbey at a price of £1 per share.

Maturity

The detail, by maturity, of the balance of this caption as of December 31, 2004, is as follows:

	Millions
Maturity	of Euros
2005	1,490
2006	994
2007	492
2008	188
2009	1,569
Subsequent years	15,461
	20,194

The interest on subordinated debt amounted to €686 million in 2004 (€679 million in 2003 and €736 million in 2002).

F-47

19.	Minority interests
	Breakdown
	The detail, by Group company, of the balances of the "Minority Interests" caption is as follows:

	Thousands of Euros
	2004	2003		2002
Preferred shares issued by:
Abbey Group	2,566,285	—		—
Santander Finance Capital, S.A.	2,280,000	445,690		—
BSCH Finance Ltd.	725,894	2,793,776		4,030,006
Santander Finance Preferred, S.A.	639,491	—		—
Banesto	325,000	—		—
Pinto Totta International Finance, Ltd.	183,540	197,950		238,400
BCH Capital, Ltd.	168,857	182,107		219,319
Banesto Preferentes, S.A.	131,144	131,145		—
Totta & Açores Financing Limited	110,124	118,770		143,040
Banesto Holdings, Ltd.	56,748	61,200		76,285
BCH Eurocapital, Ltd	—	554,236		667,493
BCH Internacional Puerto Rico Inc. and Banco
Santander Puerto Rico	—	—		62,220
	7,187,083	4,484,874		5,436,763
Dividends paid (*)	—	(314,461	)	(400,665	)
	7,187,083	4,170,413		5,036,098
Equity of minority interests:
Grupo Financiero Santander Serfin, S.A. de C.V.	415,592	375,249		25,933
Somaen Dos, S.L.	351,633	300,170		275,665
Banesto Group	303,612	277,793		295,636
Banco Santander Chile	129,217	133,856		103,325
Brazil Group	31,721	37,080		36,207
Santander Bank Corp	29,372	32,130		45,295
Orígenes AFJP, S.A.	13,730	11,653		23,193
Banco Santander Portugal	496	2,835		35,458
Cartera Mobiliaria, S.A., S.I.M.	—	63,207		27,957
Other companies	76,731	35,131		131,943
	1,352,104	1,269,104		1,000,612
	8,539,187	5,439,517		6,036,710

(*) From January 1, 2004, accrued dividends are recorded for accounting purposes under the “Other Assets” caption.

Preferred shares

These are non-cumulative non-voting shares. They were subscribed by third parties outside the Group and are fully or partially redeemable after five years, at the issuer’s discretion. Prior to any redemption, the Group should receive the approval of the Bank of Spain and communicate such redemption to the local financial supervisor. There is no obligation that requires the Group to redeem them.

Additional information is disclosed in Note 28.5.k and Exhibit III.

F-48

Variations

The variations in the balances of this caption were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	6,060,704		6,575,173		8,273,936
Preferred shares:
Net inclusion of companies in the Group	2,566,285		(9,025	)	1,211
Issue	2,806,665		581,145		—
Of which:
Santander Finance Capital, S.A.	1,830,000		450,000		—
Santander Finance Preferred, S.A.	661,665		—		—
Banesto	325,000		—		—
Banesto Preferentes, S.A.	—		131,145		—
Redemption	(2,624,283	)	(1,151,246	)	(890,220	)
Of which:
BSCH Finance Ltd.	(2,057,390	)	(1,096,844	)	(694,680	)
Dividends paid			(314,461	)	(400,665	)
Exchange differences and other variations	(46,437	)	(381,849	)	(552,014	)
Variation in percentages of ownership (Note 3)	(63,045	)	379,934		(60,178	)
Dividends paid to minority interests	(144,411	)	(112,597	)	(181,551	)
Variations in capital	23,229		(22,717	)	29,850
Exchange differences and other variations	(39,520	)	(104,840	)	(183,659	)
Balances at year-end	8,539,187		5,439,517		6,036,710
Net income for the year attributed to minority interests	532,299		621,187		538,463
	9,071,486		6,060,704		6,575,173

20.	Capital stock
	As of December 31, 2001, the Bank’s capital stock consisted of 4,659,362,499 fully subscribed and paid shares of €0.5 par value each.
	Capital increase for acquisition of AKB shares
	On May 14, 2002, the Group made one capital increase, issuing 109,040,444 new ordinary shares (2.3% of the Bank’s capital) of €0.50 nominal value each and an issue premium of €9.588 per share, which were fully subscribed and disbursed through shares representing all the capital of AKB, in accordance with the resolutions adopted by the Bank’s Extraordinary Shareholders’ Meeting on February 9, 2002 (Notes 3 and 21).
	After this operation and as of December 31, 2002 and 2003, the Bank’s capital stock consisted of 4,768,402,943 fully subscribed and paid shares of €0.50 par value each.
	Capital increase for acquisition of Abbey
	To complete the acquisition of Abbey, and after being approved in the Shareholders’ Meeting held in October 2004, the Bank increased, on November 12, 2004, its capital base by the issuance of 1,485,893,636 new shares of €0.5 par value, with additional paid-in capital of €7.94 each.
	As of December 31, 2004, the additional capital stock authorized by the Shareholders’ Meeting of the Bank amounted to €1,492 million.

F-49

The variations in the Bank’s capital stock are summarized as follows:
	Capital Stock
	Number	Par Value
	of Shares	(Euros)
Number of shares and par value of the capital stock as of December 31, 2002 and 2003	4,768,402,943	2,384,201,472
Capital increases
Acquisition of Abbey shares (Note 1)	1,485,893,636	742,946,818
Number of shares and par value of the capital stock as of December 31, 2004	6,254,296,579	3,127,148,290

The Bank’s shares are listed on the computerized trading system of the Spanish stock exchanges and on the New York, Milan, Lisbon and Buenos Aires stock exchanges and all of them have the same features and rights. As of December 31, 2004, the only shareholders with an ownership interest in the Bank’s capital stock of over 3% were E.C. Nominees Limited (with a 7.76% holding) and Chase Nominees Limited (with a 6.23% holding).

Other considerations

As of December 31, 2004, the additional capital stock authorized by the Shareholders’ Meeting of the Bank amounted to €1,492 million.

On June 19, 2004, the Shareholders’ Meeting resolved to increase capital by €300 million, and fully empowered the Board of Directors, for a period of one year, to set and establish the terms and conditions for this capital increase in all matters not already provided for by the Shareholders’ Meeting. In exercising these powers, the Board of Directors must determine whether the capital increase is to be performed through the issuance of new shares or by increasing the par value of the shares outstanding.

On June 19, 2004, the Shareholders’ Meeting set the maximum number of Bank shares that the Bank and/or any Group subsidiary may acquire at 5% of the capital stock, fully paid, the minimum price per share being the par value and the maximum price being up to 10% more than the market price on the Spanish stock exchanges on the acquisition date.

Also, the aforementioned Shareholders’ Meeting authorized the Bank’s Board of Directors to issue fixed-income securities for up to a maximum amount of €20,000 million or the equivalent amount in another currency, by any lawful means. On June 21, 2003, the Shareholders’ Meeting authorized the Bank’s Board of Directors to issue fixed-income securities convertible into new shares and/or exchangeable for outstanding shares for up to €4,000 million over a five-year period, and empowered the Board of Directors to increase capital by the required amount to cater for the requests for conversion.

As of December 31, 2004, the shares of the following companies were listed on official stock markets: Banco Río de la Plata, S.A.; Banco de Venezuela, S.A.; Banco Santander Colombia, S.A.; Santander BankCorp (Puerto Rico); Grupo Financiero Santander Serfin, S.A. de C.V.; Banco Santander Chile; Cartera Mobiliaria, S.A., S.I.M.; Santander Chile Holding, S.A.; Inmuebles B de V 1985 C.A.; Banco do Estado de Sao Paulo, S.A.; Banesto; Portada, S.A. and Capital Variable S.I.C.A.V., S.A.

As of December 31, 2004, the capital increases in progress at Group companies and the additional capital authorized by their Shareholders’ Meetings were not material at Group level.

F-50

21.	Reserves
	Variations
	The variations in the overall balances of reserves at the Group (see composition in Note 1) were as follows:

	Thousands of Euros
	2004		2003		2002
Balances at the beginning of the year	14,823,227		14,353,213		15,663,278
Prior year’s attributed income	2,610,819		2,247,177		2,486,303
Dividends paid on prior year’s income	(1,444,387	)	(1,375,608	)	(1,329,462	)
Capital increases (Notes 1 and 20)	11,797,995		—		1,045,480
Charge for early retirement of employees (Note 2-j) (*)	—		(327,342	)	(839,923	)
Sale of preemptive rights on Banesto shares (Note 3) (**)	—		—		271,805
Exchange differences	(30,127	)	(8,584	)	(2,666,942	)
Variation in reserves at associated companies (Note 10)	(18,745	)	(1,837	)	(243,289	)
Other variations, net	(2,396	)	(63,792	)	(34,037	)
Balances at year-end (Note 1)	27,736,386		14,823,227		14,353,213

(*)	Based on the Group’s ownership interest in Banesto as of December 31, 2003 and 2002 (88.60% and 88.57%, respectively).
(**)	As a result of the sale of the preemptive rights on Banesto shares (Note 3), the additional paid-in capital which was applied proportionally to the amortization of the goodwill that arose subsequent to the tender offer launched by the Bank in 1998 was rerecorded under the “Reserves” caption in the consolidated balance sheet as of December 31, 2002.

Additional paid-in capital, reserves and revaluation reserves

The breakdown of the balances of these captions, relating in full to the Bank, is as follows:

	Thousands of Euros
	2004	2003	2002
Restricted reserves:
Legal reserve	625,430	476,841	476,841
Reserves for treasury stock	229,672	139,271	132,462
Revaluation reserves Royal Decree-Law 7/1996	42,666	42,666	42,666
Unrestricted reserves:
Additional paid-in capital	20,370,128	8,720,722	8,979,735
Voluntary reserves and consolidation reserves attributed to the Bank	4,825,752	4,894,734	4,964,087
Of which: Voluntary reserves recorded early	2,126,931	2,318,175	3,284,856
Group reserves attributed to the Bank	26,093,648	14,274,234	14,595,791
Of which: Reserves recorded at the Bank	25,976,836	14,178,195	14,436,631

Legal reserve

Under the revised Corporations Law, 10% of Spanish companies' net income for each year must be transferred to the legal reserve. These transfers must be made until the balance of this reserve reaches 20% of capital stock. The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased capital stock amount.

Reserves for treasury stock

Under the revised Corporations Law, a restricted reserve was recorded for an amount equal to the book value of the Bank shares owned by subsidiaries. This reserve will become unrestricted when the circumstances which gave rise to its mandatory recording cease to exist. Additionally, this reserve includes the outstanding balance of the loans granted by the Group that are secured by Bank shares.

Revaluation reserves Royal Decree-Law 7/1996

The balance of this account can be used, free of tax charges, to increase capital. From January 1, 2007, the balance of this account can be taken to unrestricted reserves, provided that the monetary surplus has been realized. The surplus will be deemed to have been realized in respect of the portion on which depreciation has been taken for accounting purposes or when the revalued assets have been transferred or retired from the accounting records.

F-51

If this balance were used in a manner other than as provided for in Royal Decree-Law 7/1996, it would be subject to tax.

Additional paid-in capital

The revised Corporations Law expressly permits the use of the additional paid-in capital balance to increase capital of the entities at which it is recorded and establishes no specific restrictions as to its use.

Early recording of voluntary reserves

As required by the Bank of Spain, the “Reserves” caption in the consolidated balance sheet as of December 31, 2004, includes “Voluntary Reserves Recorded Early”, of which approximately €2,125 million (€2,314 million and €3,277 million as of December 31, 2003 and 2002, respectively) relate to the difference between the amount at which certain Bank shares were issued – in accordance with Article 159.1.c of the revised Spanish Corporations Law – for the acquisition of investments in the capital stock of other entities and the market value of the shares received in exchange, net of the equivalent reduction in the goodwill arising in the acquisitions. This amount increased initially the acquisition cost of the investments acquired.

Reserves and accumulated losses at consolidated companies

The breakdown, by company, of the balances of these captions, based on each company’s contribution to the Group (after considering the effect of consolidation adjustments), is as follows:

F-52

	Thousands of Euros
	2004	2003	2002
RESERVES AT CONSOLIDATED COMPANIES:
Fully consolidated companies:
Grupo Financiero Mexicano (Consolidated Group)	1,297,222	937,895	712,570
Banco Español de Crédito (Consolidated Group)	967,735	584,003	461,160
Banespa	852,824	864,274	474,164
Banco Santander Chile (Consolidated Group)	391,654	344,981	539,054
Banco Totta & Açores, S.A.	272,244	183,736	120,319
Santander Central Hispano Investment, S.A.	203,256	219,908	217,947
Banco Santander Puerto Rico	201,892	228,591	263,573
Banco de Venezuela, S.A. (Consolidated Group)	157,861	95,905	127,723
Santander Consumer Finance, S.A.	84,194	—	—
Santander Central Hispano Gestión, S.A., S.G.I.I.C.	52,940	49,241	79,046
Other companies	511,944	487,802	22,294
	4,993,766	3,996,336	3,017,850
Companies accounted for by the equity method:
Royal Bank of Scotland	658,741	607,443	534,672
Cepsa	249,378	161,823	110,013
Unión Fenosa	151,090	123,895	71,150
San Paolo IMI (Notes 9 and 10)	—	—	106,076
Sacyr-Vallehermoso (Note 10)	—	—	76,739
Other companies	296,527	281,311	276,101
	1,355,736	1,174,472	1,174,751
Total reserves at consolidated companies	6,349,502	5,170,808	4,192,601
Of which: Restricted reserves	375,828	354,249	307,899
ACCUMULATED LOSSES AT CONSOLIDATED COMPANIES:
Fully consolidated companies:
Santander Investment Securities Inc.	191,181	179,864	159,671
Santander Investment Bank, Ltd.	107,535	116,537	104,274
Patagon Bank, S.A.	125,337	129,173	123,099
Patagon Euro, S.L.	102,828	101,904	157,135
Banco Santander Colombia (Consolidated Group)	86,546	98,832	68,914
Gessinest Consulting, S.A.	85,776	75,188	30,629
Santander Merchant Bank, Ltd.	78,668	69,753	41,764
Capital Riesgo Global, S.C.R., S.A.	17,543	44,874	24,898
Santander Financial Products, Ltd.	2,237	12,204	31,203
Santander Consumer Finance, S.A.	—	19,284	78,995
Other companies	426,688	379,038	226,009
	1,224,339	1,226,651	1,046,591
Companies accounted for by the equity method	197,997	140,863	142,871
Translation differences	3,284,428	3,254,301	3,245,717
Of which:
Depreciation of the Brazilian real	1,544,123	1,563,456	1,602,789
Devaluation in Argentina	991,383	974,828	981,597
Total accumulated losses at consolidated companies	4,706,764	4,621,815	4,435,179
Net balance	1,642,738	548,993	(242,578	)

F-53

22 .	Tax matters
	Consolidated Tax Group
	In accordance with current regulations, the Consolidated Tax Group includes Banco Santander Central Hispano, S.A. (as the parent company) and the Spanish subsidiaries that meet the requirements stipulated in the regulations on taxation of the consolidated net income of corporate groups (as the controlled companies).
	The other Group banks and companies file individual tax returns in accordance with the tax regulations applicable in the respective countries.
	Years open for tax audit
	The years open for tax audit in the Consolidated Tax Group as of December 31, 2004, were 2001, 2002, 2003 and 2004 for the main taxes applicable to it.
	The other Spanish consolidated entities generally have the last four years open for review by the tax inspection authorities with respect to the main taxes applicable to them, except in the case of those companies for which the statute of limitations has been interrupted due to tax audits.
	In 2004 there were no significant developments in the matters being contested at the different instances of the tax disputes pending resolution as of December 31, 2003.
	In 2002 tax assessments were received relating to 1996, 1997 and 1998 for a total amount of €48 million, of which €39 million were contested. In 2003 and 2004 tax assessments were received relating to 1998, 1999 and 2000, and were partially contested. The amount of the resulting tax charge is not material for the Group.
	The Bank’s directors consider that the liabilities, if any, which might arise as a result of these claims would not have a material effect on the 2004 consolidated statement of income.
	Because of the possible different interpretations which can be made of the tax regulations, the outcome of future reviews of the open years by the tax authorities might give rise to contingent tax liabilities which cannot be objectively quantified. However, the Bank’s tax advisers consider it unlikely that such contingent liabilities or the contingent liabilities relating to the inspectors' assessments referred to above will become actual liabilities, and that in any event the tax charge which might arise therefrom would not materially affect the consolidated financial statements of the Group.
	Since 1992 the Madrid Central Court number 3 has kept open preliminary court proceedings, now an “abbreviated” proceeding, to determine the liabilities related to certain credit assignment transactions carried out by Banco Santander, S.A. from 1987 to 1989. The Bank and its internal and external advisers consider that the final outcome of this litigation will be favorable and that no additional specific provision is required.
	The Court handed down an order on July 16, 1996, following a request to this effect from the Government Lawyer and after having consulted the State Tax Agency, to dismiss the actions against the Bank and its executives in respect of the income derived from the aforementioned transactions. Subsequently, the Government Lawyer, as the representative of the Public Treasury, and the Public Prosecutor’s Office have repeatedly applied to have the case against the Bank and its management dismissed and struck out. However, a decision was rendered on June 27, 2002 to turn the aforementioned preliminary court proceedings into an “abbreviated” proceeding. The Public Prosecutor’s Office, the Bank and its executives have appealed against this decision.
	On June 23, 2003, Panel Two of the Criminal Chamber of the National Appellate Court partially upheld these appeals, and explicitly recognized that the assignments of naked credit ownership were lawfully marketed and reduced the proceedings from 138 to 38 customer transactions (it should be noted that the government lawyer and the Public Prosecutor’s Office have also requested dismissal and removal of the case on grounds that no offense had been committed) with respect to which the Bank’s possible involvement is still being alleged.
	Following the submissions phase, in which the Public Prosecutor’s Office and the Government Lawyer reiterated their petition to have the proceedings dismissed and struck out, based on the class accusation filed by the Association for the Defense of Investors and Consumers, on October 6, 2004 the Court ordered commencement of a trial for cumulative offenses of misrepresentation and forgery of official documents, three cumulative offenses of misrepresentation and forgery of commercial documents and thirty offenses against the Public Treasury, against the Chairman of the Bank and three executives and ordered that they post a bond to cover fines and costs, on a joint and several basis, for €67.8 million which has been subsequently reduced to €40.1 million. Pursuant to the order, Section One of the Criminal Chamber of the National Appellate Court has been designated as the body with jurisdiction to conduct the trial.

F-54

In any event, following its traditional prudent criteria, the Group has recorded reasonable provisions to cover any contingencies which might arise from the above-mentioned situations.

Reconciliation

The reconciliation of the corporate income tax expense calculated at the standard rate to the recorded corporate income tax expense is as follows:

	Thousands of Euros
	2004		2003		2002
Corporate income tax at the standard rate of 35%	1,552,116		1,435,504		1,228,062
Permanent differences:
Amounts arising from consolidation (*)	(771,215	)	(558,748	)	(499,646	)
Tax credits and elimination of double taxation of dividends	(52,711	)	(34,678	)	(18,830	)
Effect of allocation of the Group’s share in income of      companies accounted for by the equity method	38,571		27,356		13,523
	(785,355	)	(566,070	)	(504,953	)
“Corporate Income Tax” and “Other Taxes”, per      consolidated statements of income	766,761		869,434		723,109

(*) Including the net tax effect of all the consolidation adjustments treated as permanent differences by the Group, which relate mainly to write-downs, and the differences arising from the different tax rates in Spain and in other countries.

The Bank and certain of the other Spanish consolidated companies have availed themselves of the tax credits available under corporate income tax legislation. Although the 2004 corporate income tax return has not yet been filed, the provision for 2004 corporate income tax shown in the consolidated balance sheet as of December 31, 2004, and the consolidated statement of income for the year then ended is net of the related investment, dividend double taxation and international double taxation tax credits recorded in the balance of “Permanent Differences” in the foregoing reconciliation.

Other assets and other liabilities

The balance of the “Other Assets” caption in the consolidated balance sheets includes debit balances with the tax authorities relating to deferred tax assets. The balance of the “Other Liabilities” caption includes the liability for the various deferred taxes of the Group and the tax collection accounts.

The detail of the two balances is as follows:

	Thousands of Euros
	2004	2003	2002
Other assets – Deferred tax assets	5,891,958	3,995,055	4,418,761
Of which:
Banespa	1,228,440	1,132,264	1,200,239
Abbey	1,004,494	—	—
Early retirements in 1999	168,679	213,282	258,591
Early retirements in 2000	127,274	171,720	205,676
Early retirements in 2001	155,415	187,210	216,205
Early retirements in 2002 (Note 2-j)	367,561	427,629	484,101
Early retirements in 2003 (Note 2-j)	172,056	188,427	—
Early retirements in 2004 (Note 2-j)	283,491	—	—
Other liabilities - Tax collection accounts and       deferred tax liabilities	3,374,321	2,259,705	2,587,226
Of which:
Abbey	798,232	—	—
Tax collection accounts	1,549,874	1,387,294	1,959,378

F-55

23.	Memorandum accounts, futures transactions and off-balance-sheet funds under management
	Memorandum accounts
	The “Memorandum Accounts” caption includes the following commitments and contingent liabilities of the Group that arose in the normal course of its operations:

	Thousands of Euros
	2004	2003	2002
Contingent liabilities:
Rediscounts, endorsements and acceptances	206,042	26,720	45,087
Assets assigned to sundry obligations	24	81,160	185,620
Guarantees and other sureties	30,915,447	27,273,863	23,862,776
Other contingent liabilities	3,073,870	3,372,446	3,609,177
	34,195,383	30,754,189	27,702,660
Commitments:
Sales with repurchase option	40,310	512,698	466,644
Balances drawable by third parties
Credit institutions	1,700,214	943,456	1,047,363
Public authorities	2,288,834	2,569,614	2,246,066
Other sectors	60,315,083	45,099,247	45,810,366
Other commitments	6,975,543	5,385,641	5,206,970
	71,319,984	54,510,656	54,777,409
	105,515,367	85,264,845	82,480,069

Futures transactions

The detail, by term to maturity, of the notional and/or contractual amounts of each type of futures transactions arranged by the Group as of December 31, 2004, is as follows:

	Thousands of Euros
	Up to	1 to 5	5 to 10	Over
	1 Year	Years	Years	10 Years	Total
Unmatured foreign currency purchase and sale transactions:
Purchases of foreign currencies against euros	18,534	9,671	2,542	240	30,987
Purchases of foreign currencies against foreign currencies	32,773	9,627	21,304	5,257	68,961
Sales of foreign currencies against euros	16,711	6,766	2,501	437	26,415
Financial asset purchase and sale transactions (*):
Purchases	3,120	150	85	305	3,660
Sales	2,614	113	355	32	3,114
Securities and interest rate futures (*):
Purchased	68,936	19,523	97	—	88,556
Sold	33,250	54,855	1	—	88,106
Options on securities (*):
Purchased	11,262	9,569	87	10	20,928
Written	26,452	34,368	4,599	7,837	73,256
Options on interest rates (*):
Purchased	16,032	18,304	4,457	1,497	40,290
Written	38,751	43,950	29,355	2,967	115,023
Options on foreign currencies:
Purchased	5,692	367	—	11	6,070
Written	6,090	404	—	11	6,505
Other interest rate transactions:
Forward rate agreements (FRAs)	25,320	—	14	2	25,336
Interest rate swaps (IRSs)	230,078	423,525	200,900	105,282	959,785
Other	307	1,962	731	1,197	4,197
Commodity futures transactions	1	4	—	—	5
Total	535,923	633,158	267,028	125,085	1,561,194

(*) Based on the term of the underlying asset.

F-56

Other information

The aforementioned notional and/or contractual amounts of futures transactions do not necessarily reflect the actual risk assumed by the Group, since the net position in these financial instruments is the result of offset and/or combination thereof. This net position is used by the Group basically to hedge the interest rate risk, the price of the underlying asset or the currency risk, the resulting gains or losses on which are included under the “Gains (Losses) on Financial Transactions” caption in the consolidated statements of income and, where appropriate, as an increase in, or offset of, the results on the investments for which these hedging contracts were arranged (Note 25).

Off-balance-sheet funds under management

The detail of the off-balance-sheet funds under management by the Group is as follows:

		Thousands of Euros
		2004	2003	2002
	Mutual funds	94,125	80,502	68,140
	Pension funds	34,854	19,495	17,513
	Assets under management	10,997	8,906	7,685
		139,976	108,903	93,338
24.	Transactions with non-consolidable Group companies and with associated companies
	The detail of the Group’s main balances with non-consolidable companies controlled by it and with associated companies as of December 31 of each year, and of the impact of the transactions with them on the statements of income, is as follows:

	Thousands of Euros
	2004	2003	2002
ASSETS:
Due from credit institutions	621,376	103,734	54,982
Debentures and other fixed-income securities	—	—	18,794
Loans and credits	1,579,464	1,445,472	1,364,470
	2,200,840	1,549,206	1,438,246
LIABILITIES:
Due to credit institutions	20,391	123,039	414,493
Customer deposits	3,770,735	960,830	1,266,467
Debt securities	4,904	—	—
	3,796,030	1,083,869	1,680,960
STATEMENT OF INCOME:
Debit-
Interest expense	26,782	26,305	45,221
Fees paid	375	2,211	904
	27,157	28,516	46,125
Credit-
Interest income	40,096	48,138	47,750
Gains on financial transactions	9,745	16,610	8,262
Fees collected	197,827	115,632	62,422
	247,668	180,380	118,434
MEMORANDUM ACCOUNTS:
Contingent liabilities	342,940	1,017,854	369,891
Commitments	1,029,795	551,395	454,270
See “Consolidation Principles” in Note 1 to find accounting criteria, Note 28.2.A to see the impact on net income and total assets and find a list of non-consolidable companies in Exhibit II.

F-57

25.	Statement of income disclosures
	Following is certain relevant information in connection with the consolidated statements of income:
	a)	Geographical breakdown
		The geographical breakdown of the balances of the main captions composing the Group’s revenues, by country of location of the Group companies giving rise to them, is as follows:

	Thousands of Euros
	2004	2003	2002
Interest income:
Spain	7,158,621	7,293,968	7,827,262
Other European countries	2,842,692	2,993,831	3,206,615
America	8,102,470	6,915,914	11,668,863
Other	52	27	8,598
	18,103,835	17,203,740	22,711,338
Income from equity securities:
Spain	548,615	367,779	405,248
Other European countries	49,851	39,566	33,669
America	48,980	34,148	34,248
Other	—	—	7
	647,446	441,493	473,172
Fees collected:
Spain	2,937,689	2,596,745	2,356,885
Other European countries	728,759	666,170	676,782
America	2,109,362	1,835,435	2,112,809
Other	829	529	610
	5,776,639	5,098,879	5,147,086
Gains (Losses) on financial transactions:
Spain	604,016	435,145	314,166
Other European countries	77,688	85,499	61,568
America	270,962	478,147	(20,627	)
Other	—	22	1,143
	952,666	998,813	356,250
Other operating income:
Spain	53,800	47,613	89,960
Other European countries	11,896	2,734	4,388
America	24,212	25,113	34,082
Other	1	—	1
	89,909	75,460	128,431

F-58

b)	Breakdown by type of transaction
	The detail, by type of transaction, of certain captions in the consolidated statements of income is as follows:

	Thousands of Euros
	2004		2003	2002
	Interest income:
	Bank of Spain and other central banks	236,530		296,106	335,567
	Due from credit institutions	1,087,880		1,377,807	2,009,926
	Fixed-income securities	3,656,639		3,413,601	5,081,124
	Loans and credits	10,644,282		10,337,062	12,911,012
	Revenues related to insurance contracts (Note 2-j)	198,312		220,333	241,929
	Other revenues	2,280,192		1,558,831	2,131,780
		18,103,835		17,203,740	22,711,338
	Interest expense:
	Bank of Spain	246,066		188,026	441,151
	Due to credit institutions	1,923,656		1,780,376	2,182,298
	Deposits	3,750,498		4,315,601	6,208,584
	Debt securities and subordinated debt	2,442,315		2,020,264	2,379,629
	Cost allocable to the recorded pension allowance (Note 2-j)	601,015		554,012	597,211
	Other interest	1,152,019		828,617	2,016,982
		10,115,569		9,686,896	13,825,855
	Fees collected:
	Contingent liabilities	247,116		226,988	212,346
	Collection and payment services	2,024,054		1,974,861	2,100,042
	Securities services	2,136,041		1,899,780	1,852,472
	Other transactions	1,369,428		997,250	982,226
		5,776,639		5,098,879	5,147,086
	Fees paid:
	Asset and liability transactions	122,571		220,785	161,691
	Fees assigned	770,281		456,258	460,540
	Other fees	274,498		251,274	235,571
		1,167,350		928,317	857,802
	Gains (Losses) on financial transactions (*):
	Fixed-income securities	525,098		392,101	(340,647	)
	Equity securities	474,685		432,008	(150,908	)
	Exchange differences	282,905		166,194	417,017
	Derivatives	(330,022	)	8,510	430,788
		952,666		998,813	356,250
(*)	The balance of these captions in the consolidated statements of income includes the net gains (losses) on trading transactions (Notes 2-d, 2-e and 2-l). To properly interpret these amounts, it must be borne in mind that, in the case of hedging transactions, gains or losses arising from exchange differences and derivatives are symmetrical to those recorded under the “Gains (Losses) on Financial Transactions - Fixed-Income Securities” and “Gains (Losses) on Financial Transactions - Equity Securities” captions in the foregoing detail.

F-59

c)	General administrative expenses
	The detail of the balances of this caption in the consolidated statements of income is as follows:

	Thousands of Euros
	2004	2003	2002
Personnel expenses	4,135,315	4,049,372	4,521,718
Other administrative expenses	2,599,878	2,428,325	2,800,333
General administrative expenses	6,735,193	6,477,697	7,322,051

Personnel expenses

The detail of the balances of this caption in the consolidated statements of income is as follows:

	Thousands of Euros
	2004	2003	2002
Wages and salaries	3,011,955	2,959,515	3,208,776
Social security costs	551,551	546,541	609,394
Period provision to in-house pension allowances (Note 2-j)	46,585	49,227	91,025
Contributions to external pension funds (Note 2-j)	56,276	47,376	39,029
	102,861	96,603	130,054
Other expenses	468,948	446,713	573,494
	4,135,315	4,049,372	4,521,718

The number of employees at the Group, by professional category, was as follows:

	Number of Employees
	2004	2003	2002
The Bank and other Spanish companies:
Top executives (*)	99	117	123
Other line personnel	25,693	26,383	26,230
Clerical staff	7,483	8,379	9,433
General services	78	89	101
	33,353	34,968	35,887
Abbey	24,361	—	—
Other banks and companies abroad	68,774	68,070	68,291
Other Spanish and foreign non-banking companies	939	920	982
	127,427	103,958	105,160

(*)	Categories of assistant deputy manager and above, including senior management.
	Compensation systems based on the delivery of Bank shares
	In recent years, the Bank has put in place compensation systems linked to the market performance of the Bank’s shares based on the achievement of certain objectives as shown below:

F-60

Stock option plans

			Euros					Date of	Date of
								Commencement	Expiration
	Number		Exercise		Year	Qualifying	Number	of Exercise	of Exercise
	of Shares		Price		Granted	Group	of People	Period	Period
Plans in force at January 01, 2002	36,025,123		8.64
Options granted	2,895,000		9.41
Of which:
European branches plan	2,895,000		9.41
Options exercised	(4,637,240	)	4.15
Of which:
Plan Four	(1,558,100	)	7.84
Managers Plan 1999	(3,000,700	)	2.29
Additional Managers Plan 1999	(78,440	)	2.41
Options canceled or not exercised	(6,974,580	)	—
Plans in force at December 31, 2002	27,308,303		9.32
Options granted	1,410,000		6.55
Of which:
European branches plan	1,410,000		6.55
Options exercised	(965,087	)	2.29
Of which:
Managers Plan 99	(678,325	)	2.29
Young Executives Plan	(262,250	)	2.29
Additional Managers Plan 99	(24,512	)	2.41
Options canceled or not exercised	(2,013,250	)	—
Plans in force at December 31, 2003	25,739,966		9.38
Options exercised	(1,933,406	)	(2.83	)
Of which:
Plan Four	(36,000	)	7.84
Managers Plan 99	(1,139,488	)	2.29
Additional Managers Plan 99	(55,668	)	2.41
Young Executives Plan	(562,250	)	2.29
European branches plan	(140,000	)	8.23
Options canceled or not exercised	(2,679,810	)	—
Plans in force at December 31, 2004	21,126,750		9.94
Of which:
Plan Four	228,000		7.84		1998	Managers	5	01/09/03	12/30/05
Investment Bank Plan	4,503,750		10.25		2000	Managers	56	06/16/03	06/15/05
Young Executives Plan	364,000		2.29		2000	Managers	111	07/01/03	06/30/05
Managers Plan 2000	13,341,000		10.55		2000	Managers	970	12/30/03	12/29/05
European branches plan	2,690,000		7.60	(*)	2002 and	Managers	27	07/01/05	07/15/05
					2003

(*) The average exercise price ranges from €5.65 to €10.15 per share.

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The option plans on shares of the Bank originally granted by management of Abbey to its employees (on Abbey shares) are as follows:

					Date of	Date of
		Average Exercise Price			Commencement	Expiration
Plans in Force at	Number			Qualifying	of Exercise	of Exercise
December 31, 2004	of Shares	Pounds	Euros (*)	Group	Period	Period
Executive options	358,844	4.16	5.90	Managers	03/25/99	04/04/14
Employee options	56,550	5.90	8.37	Employees	09/09/99	09/08/06
Sharesave	17,260,173	3.56	5.05	Employees	04/01/04	10/01/11
	17,675,567	3.58	5.08

(*)	The euro/pound sterling exchange rate was €1.4183 per pound as of December 31, 2004.
Lastly, in 2004 a new long-term incentive plan was designed (I-06) in the form of stock options tied to the achievement of two objectives: a revaluation of the Bank’s share price and growth in earnings per share above a sample of comparable banks, in both cases. 2,750 executives are covered by this plan with a total of up to 103,050,000 options on Bank shares at an exercise price of €9.07. The exercise period is from January 15, 2008 to January 15, 2009. This plan will be submitted for the approval of the next Shareholders’ Meeting.
The difference between the market value of the shares and the exercise price of the options is recorded as an expense under the “General Administrative Expenses – Personnel Expenses” caption in the period from the grant date to the date of commencement of the exercise period.
Other administrative expenses
The detail of the balances of this caption in the consolidated statements of income is as follows:

	Thousands of Euros
	2004	2003	2002
Technology and systems	460,580	454,717	520,893
Communications	240,516	230,345	316,230
Advertising	289,406	211,446	266,002
Buildings, fixtures and office supplies	522,755	511,438	576,879
Taxes other than income tax	119,999	146,782	199,762
Experts’ reports	187,771	178,389	190,202
Per diems and travel expenses	153,858	136,573	146,080
Surveillance and cash courier services	137,944	135,440	162,001
Insurance premiums	27,053	29,786	36,908
Other expenses	459,996	393,409	385,376
	2,599,878	2,428,325	2,800,333

Included in the “Experts’ Reports” balance are the audit fees paid by the Group companies (see Exhibits I, II and III) to their respective auditors, the detail being as follows:

	Thousands of Euros
	2004	2003	2002
Annual audits performed by firms belonging to the Deloitte worldwide organization	9.4	8.9	9.1
Other reports required by legal and tax regulations emanating from different national supervisory agencies in the countries in which the Group operates and examined by firms in the Deloitte worldwide organization	2.6	2.2	2.9
Fees for audits performed by other firms	0.6	0.8	1.1
	12.6	11.9	13.1

Also, in 2004 the various Group companies engaged other services, the detail being as follows:
1.	Services provided by firms in the Deloitte worldwide organization: €2.8 million (€4.7 million and €5.4 million in 2003 and 2002, respectively).

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		The services from our auditors meet the independence requirements stipulated by Law 44/2002 on Financial System Reform Measures and by the Sarbanes – Oxley Act of 2002 adopted by the Securities and Exchange Commission (SEC); accordingly, they do not include the provision of services which are incompatible with the audit function.
	2.	Services provided by other audit firms: €5.6 million (€4.4 million and €5.7 million in 2003 and 2002, respectively).
d) Extraordinary income / Extraordinary loss
	The net debit balance (€850 million) of these captions in the consolidated statement of income for the year ended December 31, 2004, includes the gains or losses on disposal of property and equipment and long-term investments (net income of €550 million and net loss of €83 million); the collection of interest on doubtful and nonperforming loans earned in prior years (€108 million); monetary adjustments (Note 2-b); provisions to pension allowances (Note 2-j); and other net extraordinary losses (€448 million) arising from write-downs at various Group subsidiaries, the most noteworthy being the expenses of €155 million incurred in the acquisition of Abbey (including €5.4 million of nonrecurring fees paid to the Deloitte worldwide organization for work required under Spanish and U.K. regulations in the acquisition of Abbey).
	The net credit balance (€669 million) of these captions in the consolidated statement of income for the year ended December 31, 2003, includes the gains or losses on disposal of property and equipment and long-term investments (net income of €696 million and net loss of €93 million); the collection of interest on doubtful and nonperforming loans earned in prior years (€92 million); monetary adjustments (Note 2-b); provisions to pension allowances (Note 2-j); and other net income of €103 million.
	The net debit balance (€339 million) of these captions in the consolidated statement of income for the year ended December 31, 2002, includes the gains or losses on disposal of property and equipment and long-term investments (net income of €443 million and net loss of €122 million); the collection of interest on doubtful and nonperforming loans earned in prior years (€76 million); monetary adjustments (Note 2-b); provisions to pension allowances (Note 2-j); and other net losses of €315 million, resulting mainly from the impact of write-downs of technology and other companies and of businesses located outside Spain.

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26.   Statements of changes in financial position
	The consolidated statements of changes in financial position are as follows:

	Thousands of Euros
	2004		2003		2002
SOURCE OF FUNDS:
From operations-
Income for the year	3,667,857		3,232,006		2,785,640
Depreciation and amortization expense	1,353,902		3,004,482		2,248,448
Net provisions to allowances for diminution in asset value and to other allowances	3,609,764		2,542,276		3,428,511
Income of companies accounted for by the equity method, net of dividends	(540,386	)	(407,263	)	(279,898	)
Direct Write-down of assets	61,189		103,839		132,395
Losses on the sale of treasury stock, equity investments and fixed assets	124,677		115,723		973,395
Gains on the sale of treasury stock, equity investments and fixed assets	(698,935	)	(1,300,209	)	(2,302,236	)
	7,578,068		7,290,854		6,986,255
Capital increase with additional paid-in capital	12,540,943		—		1,100,000
Net sale of treasury stock	—		34,457		—
Subordinated debt securities issued	9,807,828		500,000		1,195,569
Lending less financing at Bank of Spain and credit institutions	—		24,084,458		2,520,369
Loans and credits (*)	—		—		9,087,650
Fixed-income securities (*)	—		—		10,022,835
Customer deposits (**)	134,510,125		—		—
Bond and debenture	34,860,737		13,025,505		6,698,032
Promissory notes and other securities	10,195,070		4,354,287		—
Preferred share issues	5,372,950		581,145		—
Sale of investments in Group and associated companies	1,999,403		1,761,549		4,884,437
Sale of property and equipment and intangible assets	1,068,325		845,411		1,754,111
Other asset items less liability items	5,679,936		—		—
Total funds obtained	223,613,385		52,477,666		44,249,258
APPLICATION OF FUNDS:
Dividends	791,555		739,102		727,782
Subordinated debt securities redeemed	834,788		1,729,140		1,741,332
Lending less financing at Bank of Spain and credit institutions	3,303,008		—		—
Net purchase of treasury stock	123,010		—		10,210
Loans and credits (**)	170,113,012		17,806,128		—
Fixed-income securities	18,726,066		11,757,298		—
Short-term equity securities	1,729,533		748,781		262,846
Customer deposits (*)	—		8,480,184		13,711,536
Redemption of bonds and debentures	5,489,823		4,227,694		4,939,586
Promissory notes and other securities	—		—		12,078,435
Purchase of investments in Group and associated companies	14,926,892		2,219,770		3,079,360
Purchase of property and equipment and intangible assets	4,681,231		980,416		985,510
Other minority interests	270,184		557,078		1,285,958
Redemption of preferred shares	2,624,283		1,151,246		890,220
Other asset items less liability items (*)	—		2,080,829		4,536,483
Total funds applied	223,613,385		52,477,666		44,249,258

(*)	In 2002 these items were significantly affected by the net worth impact arising from the depreciation of certain Latin-American currencies.
(**)	In 2004 these items were significantly affected by the acquisition of Abbey.

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27.   Subsequent events
	Auna
	In January 2005 the Group acquired an additional 4.74% holding in the capital stock of Auna. During the second quarter of 2005, the Group gave a mandate to an investment bank to open a competitive bid process to sell its stake in Auna.
	Casa de Bolsa Santander Serfin, S.A. de C.V. (Casa de Bolsa)
	In 1997, Casa de Bolsa Santander Serfin, S.A. de C.V. was sued for an alleged breach of various stock brokerage contracts. On July 6, 1999, Civil Court number Thirty-one of the Federal District handed down a judgment ordering Casa de Bolsa to indemnify the plaintiff for certain shares, cash and interest.
	Casa de Bolsa filed a cassation appeal against the judgment. On January 20, 2005, the Court handed down a decision, upholding the judgment in all respects. Casa de Bolsa has filed an appeal for protection of constitutional rights against that decision requesting that the judgment be stayed.
	Casa de Bolsa Management and their legal advisers consider that the final resolution of the judgment will not have a material impact on the company’s financial statements.
	Bankia Bank ASA (Bankia)
	The Santander Group has reached an agreement to launch a tender offer for all the shares of the Norwegian bank Bankia. The Board of Directors of Bankia recommended that its shareholders accept the Group’s tender offer for NOK 65.18 per share (€7.90). In May 2005, the Group acquired 100% of the capital stock of Bankia at a price of approximately €53 million.
	Other matters
	Subsequent to year-end, a trial was held in connection with the proceedings brought before the National Appellate Court with respect to the compensation paid to Mr. José María Amusátegui and Mr. Ángel Corcóstegui when they retired from the Bank, information on which was provided by the Group in the Management Report for 2003. On April 13, 2005, the Court decided to acquit those accused, and a cassation appeal against such decision was subsequently filed by the plaintiffs.

F-65

28.	Significant differences between Spanish and U.S. generally accepted accounting principles
	As described in Note 1, the Consolidated Financial Statements of the Santander Group are presented in accordance with accounting principles generally accepted in Spain (“Spanish GAAP”) which vary in certain respects from those generally accepted in the United States (“U.S. GAAP”). This Note includes relevant information about valuation differences, differences in Financial Statements presentation and different disclosure requirements.
	The information included is classified as follows:
	•	Significant valuation and income recognition principles under Spanish and U.S. GAAP	Note 28.1
	•	Net Income and Stockholders’ Equity reconciliations between Spanish and U.S. GAAP	Note 28.2
	•	Significant presentation differences between Spanish and U.S. GAAP	Note 28.3
	•	Consolidated financial statements	Note 28.4
	•	Additional disclosures required by U.S. GAAP, Note 28.5, which includes:

28.5.A. Statement of Cash Flows	28.5.I.	Fair value of Financial Instruments
28.5.B. Earnings per Share	28.5.J.	Geographic and Business Segment
28.5.C. Investment Securities		Disclosures
28.5.D. Allowance for Credit losses	28.5.K.	Minority Interest
28.5.E. Investment in Affiliated Companies	28.5.L.	Stock Options Plans
28.5.F. Short Term Borrowings	28.5.M.	Guarantees
28.5.G. Pension Liabilities	28.5.N.	Accounting for the Transfer and
28.5.H. Derivative Financial Instruments		Servicing of Financial Assets and
		Extinguishment of Liabilities
	28.5.O.	Acquisition of Abbey

28.1.	Significant valuation and income recognition principles under Spanish and U.S. GAAP-
	Following is a description of the most significant valuation and income recognition principles under Spanish and U.S. GAAP applicable to the financial statements of the Santander Group:

SPANISH GAAP	U.S. GAAP
Consolidation procedures
(See Note 1 and Note 28.2.a)
Consolidation includes all the companies that are directly or indirectly 50% owned by the Bank or, if less than 50% owned, are effectively controlled by the Bank, whose business activities do not differ from those of the Bank, and which constitute, together with it, a single decision-making unit.	Generally, consolidation is required for, and limited to, all investments of greater than 50% of the outstanding voting rights, except when control does not rest with the majority owner. To determine whether certain entities should be included or not in the company’s Consolidated Financial Statements, U.S. GAAP defines in FIN 46-R “Variable Interest Entity” (VIE). A VIE is an entity which fulfills one of the following criteria:
	(1)	It has equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties.
	(2)	The equity investor cannot make significant decisions about the entity’s operations, or although he could, he doesn’t absorb the expected losses or receives the expected returns of the entity.
	(3)	The equity investors have voting rights that are not proportionate to their economic interests and substantially all the activities of the entity involved are conducted on behalf of an investor with a disproportionately small voting interest.
Investments in subsidiaries whose business activity differ from those of the Parent Company are accounted for by the equity method.	A VIE is consolidated by its primary beneficiary, which is the party involved with the VIE that has a majority of the expected losses or a majority of the expected residual returns or both.
Spanish GAAP allows two different methods of consolidation: Global Integration method and Proportional Integration Method.	Subsidiaries whose business activities differ from those of the parent company are indeed consolidated.
The Global Integration method fully consolidates the financial statements of companies controlled by the parent company after eliminating all intercompany transactions and recognizing minority interest.	U.S. GAAP considers only one method of consolidation, which fully consolidates the financial statements of companies controlled by the parent company after eliminating all intercompany transactions and recognizing minority interest.
(continue on following page)	(continue on following page)

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SPANISH GAAP	U.S. GAAP
The Proportional consolidation method is used when a company is managed jointly by two or more different business groups (joint ventures). In this method of consolidation the financial statements of a subsidiary are added to those of the rest of the Group in proportion to the participation on its capital.	The Proportional consolidation method is not allowed under U.S. GAAP
The Equity valuation method is used to account for certain equity investments when the investor has significant influence over the investee (generally an investment of between 20% —3% if listed— and 50% in the outstanding voting rights) but does not control the investee. Under the equity method, an investor adjusts the carrying amount of an investment for its share of the earnings or losses of the investee subsequent to the date of investment and reports the recognized earnings or losses in income. Dividends received from an investee reduce the carrying amount of the investment.	The Equity valuation method is used to account for certain equity investments when the investor has significant influence over the investee (generally an investment of between 20% and 50% in the outstanding voting rights) but does not control the investee. Under the equity method, an investor adjusts the carrying amount of an investment for its share of the earnings or losses of the investee subsequent to the date of investment and reports the recognized earnings or losses in income. Dividends received from an investee reduce the carrying amount of the investment.
Foreign currency translation
(See Note 2.b and Note 28.2.b)
A functional currency approach is used in identifying the consolidated impact of foreign currency transactions. The functional currency is generally the reporting currency of the operating unit. Transactions of individual reporting units in currencies other than the identified functional currency are first translated into the functional currency with resulting net gains or losses reported as a component of current period earnings.	A functional currency approach is used in identifying the consolidated impact of foreign currency transactions. The functional currency is generally the reporting currency of the operating unit. Transactions of individual reporting units in currencies other than the identified functional currency are first translated into the functional currency with resulting net gains or losses reported as a component of current period earnings.
For purpose of translating assets and liabilities, the exchange rate at the balance sheet date is used. Revenues, expenses, gains, and losses are translated using a monthly average exchange rate for the period. Gains and losses offset by qualifying hedge transactions are reported consistently with the underlying currency transaction.	For purpose of translating assets and liabilities, the exchange rate at the balance sheet date is used. Revenues, expenses, gains, and losses are translated using a weighted average exchange rate for the period. Gains and losses offset by qualifying hedge transactions are reported at market value.
For purpose of consolidation, net translation gains and losses resulting from translation of the financial statements of operating units with functional currencies different from that of the parent, are recorded as a component of reserves.	For purpose of consolidation net translation gains and losses resulting from translation of the financial statements of operating units with functional currencies different from that of the parent, are recorded as a component of accumulated other comprehensive income.
	The financial statements of operating units in a highly inflationary economy are remeasured as if the functional currency of the operating unit were the same as that of the parent reporting currency. For the purposes of this requirement, a highly inflationary economy is one that has cumulative inflation of approximately 100 percent or more over a 3-year period.
Adjustments to income statement allowed under local accounting regulations in high-inflation countries are accepted under Spanish GAAP and registered as extraordinary results.	In filings to Securities and Exchange Commission, an accommodation to foreign registrants permits the inclusion of comprehensive price-level adjusted financial statements where local (Spanish) GAAP allows it.
Investments in affiliated companies
(See Note 1, Note 2.e and Note 28.2.d)
Investments in listed affiliated companies owned over 3% and in unlisted affiliated companies owned over 20% are generally accounted for by the equity method.	Investments in affiliated companies over 20% but less than 50% are accounted for by the equity method.

F-67

SPANISH GAAP		U.S. GAAP
Stock options plans
(See Note 28.2.b and Note 28.5.l)
Compensation cost in stock option plans should be recognized as an expense in the periods in which an employee performs the services considered under the plan.		Compensation cost in stock option plans should be recognized as an expense in the periods in which an employee performs the services considered under the plan.
There are no standard valuation and accruing criteria defined. It depends on the strategy an entity elects to provide the stock considered under the plan: issuance of new stock, purchase of it, purchase of equity swaps, etc.	There are two alternatives to evaluate this expense:
	1.	Under the fair value based method (SFAS 123), compensation cost is measured at the grant date based on the value of the award. The fair value of a stock option granted by a public entity shall be estimated using an option-pricing model that takes into account, as of the grant date, the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the expected term of the option
	2.	Under the intrinsic value based method (APB 25), compensation cost is the excess, if any, of the quoted market price of the stock at measurement date over the amount an employee must pay to acquire the stock. The measurement date is the first date on which are known both:
			a.	The number of shares that an individual employee is entitled to receive and
			b.	The option or purchase price, if any.
Premises and equipment
(See Note 2.h and Note 28.2.h)
Premises and equipment are stated at revalued cost, net of the related accumulated depreciation. Revaluation is permitted only pursuant to relevant legislation. Depreciation is computed on the restated value using the straight-line method over the estimated useful life of the asset. The amount of depreciation and amortization charged to income is deductible for corporate income tax purposes. In addition, gains or losses on sales of the asset are determined as the difference between the selling price and the net restated value. Fixed assets acquired and certain of those leased from both related and third parties through 1985, following the provisions of Spanish Royal Decree-Law 2/1985, were depreciated on an accelerated useful life basis.	Premises and equipment are stated at cost after subtracting accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the asset. No revaluation is permitted. Long-lived assets and certain identifiable intangibles held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, future cash flows from the use of the asset and its eventual disposition are estimated. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Income taxes
(See Note 2.n and Note 28.2.o)
The tax expense for corporate income tax is calculated on thebasis of book income before taxes, increased or decreased by permanent differences.	Income tax expense is comprised of two components: current tax payable or refundable, and deferred tax expenses or benefits.
Deferred tax assets and liabilities are recorded in respect of timing differences that are expected to result in a taxation asset or liability in the foreseeable future.	Income taxes currently payable for a particular year usually include the tax consequences of most events that are recognized in the financial statements for that year. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains, and losses, differences arise between:
	a.	The amount of taxable income and pretax financial income for a year
	b.	The tax bases of assets or liabilities and their reported amounts in financial statements.
	With limited exceptions, deferred tax assets and liabilities must be recognized regardless of when the timing difference is likely to reverse. A valuation allowance is recorded against deferred tax assets when it is more likely than not that the future tax benefit will not be realized.

F-68

SPANISH GAAP	U.S. GAAP
Business combinations and goodwill
(See Note 2.g and Note 28.2.g)
There are no specific guidelines in accounting for business combinations.	Up to June 30, 2001, there were two mutually exclusive methods of accounting for business combinations:
It should be accounted as pooling of interest when a deep managerial and economical reorganization is implied, and when the difference in net value of both entities is not significant. Otherwise, it should be recorded as an acquisition.		1.	Purchase accounting: the valuation was based on fair values of the net assets as of the time of the acquisition. The differences between the fair value of the net assets and the consideration paid represent goodwill. Income of the acquired company was reflected only from the acquisition date onwards.
Generally, valuation of acquisitions is based on the book value of the net assets acquired. The difference between net assets and consideration paid is assigned, where appropriate, to those assets and liabilities whose fair value differs from their book value. Any difference remaining after this imputation is classified as goodwill. Income of the acquired company is reflected only from the acquisition date onwards.
		2.	Pooling of interests: the accounting was done by combining historical accounts of the parties both retroactively and prospectively. No fair value adjustments were made. There were 12 restrictive conditions to be met.
Positive goodwill is amortized over the period estimated to be benefited not exceeding 20 years (reasons for periods in excess of five years should be explained in Notes to the financial statements).	Positive goodwill arising in business combinations was amortized to income over the period in which they were estimated to be benefited.
	From July 1, 2001, as stated in SFAS 141 all business combinations must be accounted for using the purchase method. Intangible Assets must be identified and recognized as assets apart from goodwill.
Under special circumstances, and with the authorization of the Bank of Spain, goodwill may be charged-off against reserves.
According to SFAS 142 Goodwill and Intangible Assets with indefinite useful lives will no longer be amortized, instead they will be subject to an impairment test at least annually.
	From July 1, 2001 to December 31, 2001, goodwill of past purchases was subject to amortization.
Treasury stock
(See Note 2.i and Note Note 28.2.i)
Gains or losses on transactions with Bank shares owned by dependent companies are accounted for as extraordinary results. Loans granted to shareholders, employees and other third parties for the acquisition of treasury stock are recorded in the consolidated balance sheets under Loans and Credits.	The results of transactions in parent company shares (treasury stock) are accounted for in Stockholders’ equity and have no effect on the income statement. Loans granted to shareholders, employees and other third parties for the acquisition of parent company stock are recorded as a reduction of Stockholders’ Equity.
Deferred charges – Intangible assets
(See Note 2.f and Note 28.2.f)
Capital increase expenses, new business launch expenses and start-up expenses are classified as intangible assets and are deferred and amortized to net income over 5 years.	Capital increase expenses are classified as a reduction of Stockholders’ Equity when incurred.
	Start-up activity expenses are accounted for as non-interest expenses as incurred.
Preference share issuance expenses are amortized with a charge to net income over a maximum period of five years.	Preference share issuance expenses are netted against the capital raised.
Refurbishment of rented office premises needed to start operations is classified under intangible assets and amortized with a charge to net income during the shorter of the useful life of the assets (maximum of five years) or the remaining life of the lease contract.	Refurbishment of rented office premises is considered leasehold improvement and classified in the premises and equipment caption on the balance sheet and are amortized over the shorter of the life of the improvement of the lease.
	Intangible assets should be recorded at its fair value. A recognized intangible asset shall be amortized over its useful life to the reporting entity unless that life is determined to be indefinite.
Expenditures for the acquisition and preparation of computer systems and programs that will be useful over several years do not include expenses incurred in changing, adapting or modifying the existing systems and programs. The capitalized expenses are amortized with a charge to net income over a period of time not exceeding 3 years. It is forbidden to maintain other intangible assets on the balance sheet.
	Intangible asset shall be reviewed for impairment; an impairment loss shall be recognized if the carrying amount of an intangible asset is not recoverable and it exceeds its fair value. Subsequent reversal of a previously recognized impairment loss is prohibited. If it has an indefinite life the impairment test should be carried annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

F-69

SPANISH GAAP			U.S. GAAP
General risk allowance
(See Note 28.2.k)
Only with the approval of the Bank of Spain can General Allowances for Non-specific Risks be provisioned and released.			General risk allowances for unspecified contingencies are not permitted.
Pension plan and early retirements
(See Note 2.j, Note 28.2.l and Note 28.2.j and 28.5.g)
Pension costs are accounted for using actuarial computations of current salaries, taking into account the return achieved by the pension fund in excess of the actuarial interest rate. Actuarial gains or losses are reflected in full in the income statement for the year in which they occur.			U.S. Financial Accounting Standard No. 87 provides detailed guidance regarding the accounting for pension liability and cost. This guidance requires the recording of the excess of a defined actuarial valuation of the present value of post retirement benefits over the adjusted fair value of plan assets maintained in an external fund. Actual changes in pension liability or asset values different from actuarial estimates are treated as actuarial gains and losses. Such gains and losses may be amortized, by the straight-line method over a period not exceeding the average remaining service period of active employees, or by charges to income in the period incurred. Amounts recognized as expense may differ from amounts funded in the same year. The accrual of pension expense is intended to effectively match the full cost of the expected pension benefits to the period of employee service.
Commitments covered by insurance policies or separate funds are accounted for in the Group’s financial statements as an asset (the amount covered) and as a liability (included in the pension allowance). The remaining commitments are recorded as a liability (pension allowance) in the Group’s financial statement.
Exceptionally and, when the Bank of Spain deems it appropriate, pension and early retirement costs may be provided for with a charge to reserves.			A liability and a loss in net income are registered for early retirement plans when the employees accept the offer and the amount can be reasonably estimated.
Investment securities
(See Note 2.d, Note 2.e and Note 28.2.e and 28.5.c)
Debt securities are classified as trading, available-for-sale investment or held-to-maturity securities, depending on the intent of the investment.			Debt securities are classified as trading, available-for-sale or held-to-maturity securities, depending on the intent of the investment.
Equity investments in listed companies owned less than 3% and non-listed companies owned less than 20% are classified as trading, available-for-sale investment or permanent investment securities, depending on the intent of the investment.			Equity investments in companies owned less than 20% with readily determinable fair values are classified as trading or available-for-sale, depending on the intent of the investment.
			Trading securities are stated at market value, and differences between market value and book value are reported in the statement of income.
Trading securities are stated at market value, and differences between market value and book value are reported in the statement of income.
			Available-for-sale securities are measured at fair value and unrealized gains and losses are reported as a net amount within Accumulated Other Comprehensive Income (Note 28.2.p).
Available-for-sale investment securities are measured either at lower of:
	•	Cost adjusted for any premium or discount generated when the  security was purchased (adjusted acquisition price) or
	•	Market price.	A loss in value of an investment which is other than a temporary decline should be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earning capacity which would justify the carrying amount of the investment. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. However, a decline in the quoted market price below the carrying amount or the existence of operating losses is not necessarily indicative of a loss in value that is other than temporary. All are factors to be evaluated.
Unrealized losses are reported in an accrual account or provisioned in the statement of income if deemed to be permanent creating a specific allowance. Releases from this allowance arise when unrealized losses disappear. Unrealized gains are not reported. Held-to-maturity and permanent investment securities are stated at adjusted acquisition price.
			Held-to-maturity securities are stated at amortized cost.
			Non-marketable equity investments of 20% or less are accounted for under the cost method. Carrying values of individual non-marketable equity securities are reduced through write-downs to reflect other-than-temporary impairments in value.

F-70

SPANISH GAAP			U.S. GAAP
Loans and Leases:
Impairment, allowances and Financial statement presentation
(See Note 2.c and Note 28.2.c and 28.5.d)
Loans are identified as impaired and placed on a non-accrual basis when any interest or principal is past due for 90 days or more or when it is determined that the payment of interest or principal is doubtfully collectible. It is doubtfully collectible when the borrower is incurring continued losses, frequent delays in payments, cannot obtain new financing, is reducing its stockholders’ equity, or other reasons based on available information.			A loan is impaired when, based on available information and facts, it is probable that a creditor will be unable to collect all the amounts due according to the contractual terms of the loan agreement.
			The total amount of loans identified as impaired is classified as non-performing and placed on a non-accrual basis.
A loan could be on non-accrual status even if it is classified in part as a performing loan.
The same loan could be partially classified as non-performing and as performing.
Primarily only the amounts past due for 90 days or more are classified as non-performing. The entire loan is classified as non-performing if one of the following conditions is met:
	•	Amounts classified as non-performing exceed 25% of the outstanding balance.
	•	Any principal is past due more than 6 months for personal loans or 1 year for other loans.
	•	The loan is deemed uncollectible.
Partial write-offs are not permitted. Credit losses are charged to earnings through provisions to credit allowances.
Banks are required to record a specific allowance for credit losses, which is not less than the prescribed reserve ratios applied against defined stratification of the loan portfolio. Based on judgmental assessments of credit issues banks may record successive increases to this minimum allowance. Pursuant to Bank of Spain regulations, an allowance must be recorded based on the time elapsed since a loan is past due and for those loans for which collection is considered to be doubtful.			The allowance for credit losses represents a reserve that is adequate to cover reasonably estimated probable loan losses incurred as of a reporting date but which is not excessive.
			The reserve estimation process is judgmental and includes consideration of identified losses as well as losses reasonably expected to exist based on judgmental assessment of historical trends, credit concentrations and other factors.
A generic allowance covering 1% of total loans, guarantees, private sector debt securities and contingent liabilities must also be made. This allowance is limited to 0.5% for fully secured mortgage loans.
			For loans identified as impaired and evaluated individually for impairment the allowance must at a minimum be such that the net carrying amount of the loan is one of the following:
Additionally, a Country-risk allowance must be recorded to cover the transfer risk arising from outstanding loans to borrowers in countries falling into certain risk categories established, including intercompany transactions.
				•	The present value of the expected future cash flows, discounted at the loan’s effective interest rate considering accrued commissions,
				•	The loan’s observable market price, or
				•	The fair value of the collateral if the loan is collateral dependent.
Finally, the Bank of Spain requires an allowance for the statistical coverage of credit losses. The amount of this allowance depends on calculations made using different coefficients for each category of the loan portfolio and on the net charges to income statement related to other credit losses.
			The allowance for credit losses of loans collectively reviewed for impairment is based on representative historical losses updated to reflect current trends and conditions.
On the balance sheet, loans are always presented net of their credit loss allowances.			On the balance sheet, loans are always presented net of their credit loss allowances.
The entire loan balance and its credit allowance are maintained on the balance sheet until any portion of it has been classified as non-performing for 3 years, or up to 6 years for some secured mortgage loans. After that period the loan balance and its 100% specific allowance are removed from the balance sheet and recorded in off-balance sheet accounts, with no resulting impact on net income at that time.			Actual credit losses, which may be for all or part of a particular loan, are deducted from the allowance and the related loan balance is charged off in the period in which the loan or a portion thereof is deemed uncollectible.
Only under unusual circumstances (bankruptcy, insolvency proceedings, etc.) the credit loss could be directly recognized through write-offs.
More detailed information can be found in Item 4. Information on the Company- B. Business Overview- Classified Assets.

F-71

SPANISH GAAP		U.S. GAAP
Derivative instruments and hedging activities (See Note 2.l , Note 28.2.m and Note 28.5.h)
These instruments are registered in off-balance sheet accounts. Their gains and losses are recognized in the income statement depending on their designation as speculative or as part of a hedging relationship.	All derivatives are recognized either as assets or liabilities on the balance sheet and measured at their fair value.
	The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation.
Transactions aimed at eliminating or significantly reducing market risks and which are performed to reduce the risk to which the Group is exposed in its management of correlated assets, liabilities and futures transactions, are designated as hedging transactions. The gains or losses arising from hedging transactions are accrued symmetrically to the revenues or expenses arising from the hedged items, with a balancing entry under “Other Assets” or “Other Liabilities” in the consolidated balance sheets.	For a derivative to be designed as a hedging instrument some explicit conditions must be met, among others the hedge should be documented, identifying the risk to hedge and how effectiveness is being assessed. Also there are some specific elements that could not be eligible to be part of an accounting hedging relationship.
	For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change.
	A hedging derivative may be specifically designated as:
Non-hedging transactions arranged on organized markets are 1. valued at market price, and market price fluctuations are recorded in full in the consolidated statements of income.	1.	A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. Its gains or losses are recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged.
The gains or losses arising from trading transactions arranged outside organized markets are not recognized in income until they are effectively settled. However, provisions are recorded with a charge to income for unrealized net losses. These provisions are calculated independently for each risk (interest rate, equity price and currency), by grouping them by currency, then netting unrealized profits and losses for each group, and then adding only the net losses of each group.	2.	A hedge of the exposure to variable cash flows of a forecasted transaction. In this case the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately.
	3.	A hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The gain or loss of these derivatives is reported in other comprehensive income (outside earnings) as part of the cumulative translation adjustment and are recognized in earnings if and when the cumulative translation adjustment, or part thereof, is recognized in earnings.
For balance sheet financial instruments that include stipulations that could change the value or cash flows in a similar way as a derivative, an “implicit derivative” is recorded in off-balance sheet accounts.	Embedded derivative instruments—implicit or explicit terms that affect some or all of the cash flows or the value of other exchanges required by the contract in a manner similar to a derivative instrument—need to be bifurcated from the host contract and accounted for as a derivative instrument.

F-72

SPANISH GAAP			U.S. GAAP
Guarantees, Contingent liabilities and Commitments. See Notes 23 and 28.5.m
All of the following are recorded under memorandum accounts for the maximum amount committed by the Group.			In accordance with FIN 45, at the inception of a guarantee, the guarantor shall recognize in its statement of financial position a liability for the fair value of the guarantee.
Additionally, for all guarantees representing potential risks for the Group a provision is recognized following the same provisioning criteria of fair value or potential loss as applied to other relevant risks.			When a guarantee is issued as part of a transaction with multiple elements with an unrelated party, the liability recognized at the inception of the guarantee should be an estimate of the guarantee’s fair value, amounting to the greater of:
			1.	The fair value amount, as:
			a.		The premium that would be required by the guarantor to issue the same guarantee in a stand alone arm’s-length transaction with an unrelated party, or
			b.		In the absence of observable transactions for identical or similar guarantees, expected present value (the sum of the probability-weighted present values in a range of estimated cash flows, all discounted using the same interest rate convention, according to FASB Concepts Statement No.7), or
			c.		For contributions to unrelated parties at fair value consistent with par. 18 of SFAS 116 criteria.
			2.	The contingent liability amount required by paragraph 8 of SFAS 5.
1.	Contingent liabilities:
a.		Rediscounts, endorsements and acceptances Consist of rediscounts of bill receivables, in which the Group supports certain risk, and the full amounts of the bills are recorded, except for rediscounts of Spanish Government securities.	When a guarantee is issued in a stand alone arm’s-length transaction with an unrelated party, the liability recognized at the inception of the guarantee should be the premium received or receivable by the guarantor.
b.		Assets assigned to sundry obligations Bank of Spain regulations request the pledge of certain assets, mainly debt securities, to allow banks to operate in several kind of transactions (taking deposits from the public, deal in certain markets, etc.) These assets are accounted for under “Debentures and other fixed income securities” caption of the asset side of the balance sheet, and valued as any other securities. The amount disclosed under memorandum accounts represents their net carrying value.	The loss contingency for this item refers to unasserted claims or assessment, but there has been no manifestation by the potential claimant (Bank of Spain) of an awareness of a possible claim or assessment, and it is not considered probable neither. Hence this item is out of scope of FIN 45 accounting provisions.
2.	Guarantees and other sureties
a.		Guaranties promises Amounts irrevocably committed to be formalized and guaranteed in the future.	Out of scope of FIN 45, but subject to disclosure
b.		Commercial guarantees Amounts committed to guaranteed parties in connection with the completion of commitments undertaken by the usual business of a client (for example, the guarantees of completion of government contracts, or performance guarantees).	Out of scope of FIN 45, but subject to disclosure
c.		Financial guarantees Commitments by which the bank undertakes a contingent obligation to make future payments if specified triggering events or conditions occur. Fair value, taken as the premium received upon issuance of the guarantee, is recorded as a liability and accrued to income over the life of the guarantee. Additionally, this balance is subject to provision (see Note 28.5.m).	See general criteria above
d.		Doubtful guarantees Collects the amount of both commercial and financial guarantees, which the Group expects that will be exercised either due to occurrence of triggering events or other reasons. A provision is recorded accordingly.	See general criteria above
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F-73

SPANISH GAAP			U.S. GAAP
e.		Credit default swaps Sales of credit default swaps; the maximum committed amount is recorded under memorandum accounts. Premium received is accounted for as a liability and the swap is marked to market. Several of these swaps are matched to identical swaps acquired; the remaining are valued at the lowest of net carrying amount or fair value, recording any necessary provisions under “Allowance for losses on futures transactions”.	Out of scope of FIN 45, but subject to disclosure. Falls within SFAS 133 scope.
3.	Other contingent liabilities
a.		Documentary credits Commitments undertaken by which the Group stands ready to perform over the delivery of documents, including commercial letters of credit, stand-by letters of credit and financial letters of credit. The premium received is recognized as a liability, and additionally, the balance of risk bearing transactions is subject to provisioning.	Commercial letters of credit and other loan commitments (guarantees of funding) are not included in the scope of FIN 45. Financial letters of credit are subject to FIN 45 provisions.
b.		Other contingent liabilities
c.		Doubtful contingent liabilities Analogous to item 2.d above.
4.	Commitments
a.		Sales with repurchase agreements The amount of the commitments to repurchase assets previously sold is recorded as a liability for the full amount the bank committed to purchase them.	Subject to disclosure requirements

Sale of financial instruments (see Note 28.5.n)
To be accounted for as a sale, any transfer of financial assets should meet the following conditions:		A transfer of financial assets (or all or a portion of a financial asset) in which the transferor surrenders control over those financial assets shall be accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange.
•	It should be documented in a written contract.
•	The transfer should include all the remaining life of the financial instrument.
•	The transfer to the transferee should include all the rights, including management or legal defense.	The transferor has surrendered control over transferred assets if and only if all of the following conditions are met:
•	The transfer conditions should not limit the transferee right to manage, pledge or transfer the financial asset.	•	The transferred assets have been isolated from the transferor—put beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership.
•	The transferor cannot issue guarantees or repurchase agreements to the transferee. The transferor should not keep any credit risk responsibility over the financial asset.	•	Each transferee has the right to pledge or exchange the assets (or beneficial interests) it received, and no conditions both constrains the transferee (or holder) from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor.
•	Later modifications of the conditions of the financial assets should not affect the transferor.
•	Before the debtor pays the transferor should not accept the commitment of paying in advance to the transferee. That means the transferee should not be financed by the seller.	•	The transferor does not maintain effective control over the transferred assets through either (1) an agreement that both entitles and obligates the transferor to repurchase or redeem them before their maturity or (2) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.
•	The agreement in which the transferee puts the transferor in charge of the management and legal defense of transferred financial asset should be done under revocable contract.
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F-74

SPANISH GAAP			U.S. GAAP
The transaction that satisfies the requirements described above should be considered as a sale if:			Upon completion of a transfer of assets that satisfies the conditions to be accounted for as a sale, the transferor shall:
	•	All assets transferred should be derecognized		•	Derecognize all assets sold.
	•	All assets obtained and liabilities incurred should be recognized at fair value.		•	Recognize all assets obtained and liabilities incurred in consideration as proceeds of the sale, including cash, put or call options held or written (for example, guarantee or recourse obligations), forward commitments (for example, commitments to deliver additional receivables during the revolving periods of some securitizations), swaps (for example, provisions that convert interest rates from fixed to variable), and servicing liabilities, if applicable.
	•	Any gain or loss should be recognized in earning.
Otherwise, such transaction would be considered secured borrowing and the gain or loss obtained would be deferred and amortized to income
				•	Initially measure at fair value assets obtained and liabilities incurred in a sale or, if it is not practicable to estimate the fair value of an asset or a liability, apply alternative measures.
				•	Recognize in earnings any gain or loss on the sale.
			If a transfer of financial assets in exchange for cash or other consideration (other than beneficial interests in the transferred assets) above, the transferor and transferee shall account for the transfer as a secured borrowing with pledge of collateral.
Securitizations that meet the criteria described above should be accounted for as a sale and therefore:			Securitizations that meet the three criteria described above are accounted for as a sale.
	•	All financial assets sold should be derecognized.
			All financial assets obtained or retained and liabilities incurred by the transferor in a securitization that qualifies as a sale shall be recognized and measured as provided at fair value.
	•	All financial assets obtained and liabilities incurred by the transferor should be recognized at fair value.
Spanish GAAP does not consider Qualifying Special Purpose Entities as contemplated by SFAS 140.			Qualifying Special Purpose Entities are not consolidated into the financial statements of the transferor or its affiliates.

F-75

28.2	Net income and Stockholders’ Equity reconciliations between Spanish and U.S. GAAP-
	Following is a summary of the adjustments to consolidated net income and to consolidated Stockholders’ Equity which would be required if U.S. GAAP had been applied to the accompanying consolidated financial statements. These adjustments are explained in following Notes a – o.
	After the reconciliation, the Comprehensive Income reporting required by SFAS 130 is added. More information about it can be found in Note p.
	Finally, in Note q information about U.S. GAAP recent pronouncements is included.

NET INCOME			Thousands of Euros
			Increase (decrease)
			2004		2003		2002
As reported in the annual report to stockholders			3,135,558		2,610,819		2,247,177
Adjustments to conform to U.S. GAAP:
•	Pension plan	(j)	—		(55,227	)	(18,397	)
•	Elimination of depreciation related to revaluation of premises and equipment	(h)	(151,993	)	82,724		59,836
•	Differences in equity investments in affiliated companies	(d)	217,483		(299,360	)	896
•	Amortization / Impairment of goodwill	(g)	618,897		(34,759	)	526,715
•	Negative goodwill	(g)	(3,124	)	(1,419	)	15,459
•	Differences in allowances for credit losses	(c)	330,990		323,505		(126,908	)
•	(Gains) and losses in parent company shares transactions	(i)	28,985		(29,866	)	16,842
•	Early retirements	(l)	—		(327,342	)	(839,761	)
•	Valuation of investment securities	(e)	(607,524	)	(33,871	)	(38,166	)
•	Deferred charges	(f)	39,971		30,889		41,751
•	Effect of Purchase (U.S. GAAP) vs. Pooling (Spanish GAAP) accounting in the BS-BCH merger	(g)	—		—		—
•	Valuation of derivative instruments	(m)	(486,022	)	165,130		226,382
•	Sale of preemptive rights on Banesto shares	(n)	—		—		271,805
•	General Risk Allowance	(k)	—		(132,223	)	—
•	Effect of following SFAS 109 in the accounting for income taxes for each year	(o)	4,760		4,760		4,760
•	Cumulative tax effect of adjustments	(o)	812,885		(39,428	)	(101,432	)
Total adjustments:			805,308		(346,487	)	39,782
Net income in accordance with U.S. GAAP			3,940,866		2,264,332		2,286,959
The accompanying Notes are an integral part of the consolidated net income and stockholders’ equity reconciliation to U.S. GAAP as of December 31, 2004, 2003 and 2002.

F-76

STOCKHOLDERS’ EQUITY			Thousands of Euros
			Increase (decrease)
			2004		2003
As reported in the annual report to stockholders			32,584,251		19,068,990
Adjustments to conform to U.S. GAAP:
•	Pension plan	(j)	—		—
•	Reversal of the net effect of the revaluation of premises and equipment	(h)	(297,687	)	(142,680	)
•	Differences in equity investments in affiliated companies	(d)	(290,962	)	(494,600	)
•	Amortization / impairment of goodwill	(g)	647,197		887,851
•	Negative goodwill	(g)	10,916		14,040
•	Differences in allowances for credit losses	(c)	1,127,589		796,599
•	Reduction for employee and other third parties loans granted to purchase parent company shares	(i)	(148,940	)	(145,119	)
•	Valuation of investment securities	(e)	3,253,963		3,682,335
•	Deferred charges	(f)	(30,723	)	(70,241	)
•	General Risk Allowance	(k)	—		—
•	Effect of Purchase (U.S. GAAP) vs. Pooling (Spanish GAAP) accounting in the BS-BCH merger	(g)	1,983,009		1,983,009
•	Valuation of derivative instruments	(m)	35,618		143,366
•	Effect of following SFAS 109 in the accounting for income taxes for each year	(o)	26,973		22,213
•	Cumulative tax effect of adjustments	(o)	(229,581	)	(652,529	)
Total adjustments:			6,087,372		6,024,244
Stockholders’ Equity in accordance with U.S. GAAP			38,671,623		25,093,234
The accompanying Notes are an integral part of the consolidated net income and stockholders’ equity reconciliation to U.S. GAAP as of December 31, 2004 and 2003.

F-77

After reconciliation to U.S. GAAP, the consolidated statement of changes in stockholders’ equity would be as follows:

Thousand of Euros	2004		2003		2002
CAPITAL STOCK
Balance at beginning of the year	2,384,201		2,384,201		2,329,681
Capital increases:
For acquisition of shares of AKB (May 2002, Notes 3 and 20)	—		—		54,520
For acquisition of shares ABBEY National Plc
(Nov 2004, Notes 1 and 20)	742,947		—		—
Balance at year-end	3,127,148		2,384,201		2,384,201
RETAINED EARNINGS AND OTHER RESERVES
Balance at beginning of the year US GAAP	22,709,033		20,730,274		27,614,331
Net income for the year under U.S. GAAP	3,940,866		2,264,332		2,286,959
Dividends	(2,015,947	)	(1,386,928	)	(1,371,864	)
Decrease/(increase) in Treasury stock	(94,025	)	4,591		6,632
Paid-in surplus and early recording of voluntary reserves from capital increases	11,797,995		—		1,045,480
Changes in adjustments to reconcile to U.S. GAAP:
(Gains) and losses in parent company shares transactions	(28,985	)	29,866		(16,842	)
Deferred charges reconciliation adjustment	(453	)	(2,220	)	(5,001	)
Deduction for employee and other third parties loans granted to purchase parent company shares	(3,821	)	(24,466	)	4,315
Amortization / impairment of goodwill	(859,551	)	(5,332	)	(2,741,988	)
Differences in equity investments in affiliated companies	(13,845	)	(62,235	)	368,683
Reversal of the effect of the revaluation of premises and equipment	(3,014	)	(7,186	)	(20,436	)
Valuation of investment securities	179,152		1,408,845		(4,151,627	)
Valuation of derivative instruments	378,274		(53,213	)	(266,189	)
Cumulative tax effect of reconciliation adjustments	(389,937	)	(113,082	)	922,251
Exchange differences	(30,127	)	(8,584	)	(2,666,942	)
Other variations, net	(21,140	)	(65,629	)	(277,488	)
Balance at year-end	35,544,475		22,709,033		20,730,274
Stockholders’ Equity balance at year-end	38,671,623		25,093,234		23,114,475

The accompanying Notes are an integral part of the consolidated net income and stockholders’ equity reconciliation to U.S.
GAAP as of December 31, 2004, 2003 and 2002.

F-78

Considering the adjustments included in the reconciliation, the Other Comprehensive Income information required in SFAS 130 is summarized in the table below:

				Thousands of Euros
CHANGES IN EQUITY FROM NON-OWNER SOURCES				Increase (decrease)
				2004		2003		2002
Accumulated Other Comprehensive Income, net of tax:
	•	Unrealized gains (losses) on securities		2,037,390		2,606,980		1,528,600
	•	Net gains (losses) on derivative instruments		339,066		(14,146	)	(126,706	)
	•	Foreign currency translation adjustment		(7,358,272	)	(7,236,740	)	(7,053,833	)
Total Accumulated Other comprehensive income				(4,981,816	)	(4,643,906	)	(5,651,939	)
COMPREHENSIVE INCOME
Net income in accordance with U.S. GAAP				3,940,866		2,264,332		2,286,959
Other comprehensive income, net of tax:
	•	Unrealized gains (losses) on securities		(569,590	)	1,078,380		(3,273,253	)
	•	Net gains (losses) on derivative instruments		353,212		112,560		(104,837	)
	•	Foreign currency translation adjustment		(121,532	)	(182,907	)	(5,733,884	)
Other comprehensive income			(p)	(337,910	)	1,008,033		(9,111,974	)
Comprehensive Income in accordance with U.S. GAAP				3,602,956		3,272,365		(6,825,015	)

The accompanying Notes are an integral part of the consolidated net income and stockholders’ equity reconciliation to U.S.
GAAP as of December 31, 2004, 2003 and 2002.

F-79

NOTES TO THE NET INCOME AND TO THE STOCKHOLDERS’ RECONCILIATION

Following are some explanations of the reconciliation items. Most of them come from recurrent differences.

a) Consolidation procedures

There is a number of companies which are more than 50% owned by the Bank, whose business activities differ from those of the Bank and, following Spanish GAAP (see “Consolidation Principles” in Note 1) are accounted for by the equity method (basically insurance and real estate companies, see a list of them in Exhibit II). Under U.S. GAAP, these companies should be consolidated using the global integration method. The effect of using one method instead of the other would have no impact on the consolidated Stockholders’ Equity or on the consolidated net income.

Also, as stated in note 28.4, the adoption of FIN 46-R had no effect on stockholders’ equity or net income, but changed the consolidation perimeter under U.S. GAAP, requiring the consolidation of some entities that previously were not consolidated (such as some securitization vehicles) and excluding others that previously were consolidated.

Taking into consideration these two differences, the total consolidated assets and liabilities would be increased by, approximately, € 51,179, €12,085, and €11,948 million in 2004, 2003 and 2002, respectively (9%, 3% and 4% of total assets respectively). Identified differences between Spanish GAAP and U.S. GAAP in these non-consolidated entities are included in this reconciliation.

b) Foreign Currency Translation and Stock Option Plans

There is no adjustment related to the accounting treatment of highly inflationary environments since a Securities and Exchange Commission accommodation to foreign registrants permits the inclusion of comprehensive price-level adjusted financial statements as long as local GAAP requires them and Spanish GAAP allows it.

Other differences between Spanish and U.S. GAAP with respect to translation of foreign currency financial statements would only impact reclassification in stockholders’ equity, but not the total.

The accounting differences between Spanish and U.S. GAAP on the few stock option plans issued gives rise to no significant adjustment (see Note 28.5.L).

c) Allowances for credit losses

Under Spanish GAAP, credit losses are generally recognized through provisions to allowances for credit losses, well before the removal from the balance sheet. Under certain unusual circumstances (for example bankruptcy, insolvency, etc), the loss could be directly recognized through write-offs.

Provisions to specific allowances come from the impairment process. Loans are identified as impaired and placed on a non-accrual basis when it is determined that collection of the payment of interest or principal is doubtful or when the interest or principal has been past due for 90 days or more, except when the loan is well secured and in the process of collection.

Globally managed clients, corporate, sovereign and other large balance loans are evaluated on an individual basis based on the borrower’s overall financial condition, resources, guarantees and payment record. Impairment is determined when there are doubts about collection, or when interest or principal is past due for 90 days or more.

Consumer mortgage, installment, revolving credit and other consumer loans are evaluated collectively, and their impairment is established when interest or principal is past due for 90 days or more.

According to Bank of Spain requirements non-performing loans must be 100% provisioned when they are more than 21 months overdue (more than 6 years in secured mortgage loans).

An additional allowance for credit losses attributed to the remaining portfolio is established via a process that considers the potential loss inherent in the portfolio. Also, an allowance is recorded for those exposures where the transfer risk adds some doubts as to the collection of debts (the Country-risk Allowance). Finally, an additional Statistical Allowance is also created to recognize future losses in the current loan portfolio (the Statistical Coverage of Credit losses).

The entire loan balance is kept on the balance sheet until any portion of it has been classified as non-performing for 3 years, or up to 6 years for some secured mortgage loans. After that period the loan balance and its 100% specific allowance are removed from the balance sheet and recorded in off-balance sheet accounts, with no resulting impact on net income at that time.

Under Spanish GAAP, partial write-offs of impaired loans are not permitted. The credit loss recognition process is independent of the process for the removal of impaired loans from the balance sheet.

When a loan is deemed partially uncollectible, the credit loss is charged against earnings through provisions to credit allowances instead of through partial write-offs of the loan. If a loan becomes entirely uncollectible, its allowance is increased until it reaches 100% of the loan balance. Generally, credit loss recognition under Spanish GAAP is similar in amounts and in time to credit loss recognition under U.S. GAAP.

F-80

Under Spanish GAAP, an uncollectible loan always has a 100% allowance, but may be maintained on the balance sheet until it reaches the three or six year maximum period established in Bank of Spain regulations, depending on our management’s view as to the recoverability of the loan. Under U.S. GAAP, this loan would be removed from the balance sheet earlier.

Given that loans are presented on the balance sheet net of their credit allowances, there is no difference in the amounts disclosed on the balance sheet under Spanish or U.S. GAAP. However, our non-performing loans under Spanish GAAP include balances that would have been removed from the balance sheet under U.S. GAAP. This difference is precisely the specific allowance for credit losses, which does not exist under U.S. GAAP.

Loan loss and commission recognition under Spanish GAAP differ from losses that would have been recognized under U.S. GAAP mainly in the valuation of transfer risk of intercompany transactions and for the compensatory effects of the Allowance for Statistical Coverage.

The reconciliation adjustment includes allowance for country-risk intra-group transactions, statistical coverage and commissions as follows:

Thousands of Euros	2004	2003	2002
Balance at the beginning of the year (1)	796,599	473,094	600,002
Balance at Year-end (2)	1,127,589	796,599	473,094
Net change in the year (3)=(2)-(1)	330,990	323,505	(126,908	)
Net income adjustment	330,990	323,505	(126,908	)
Stockholders' Equity adjustment	1,127,589	796,599	473,094

d)	Investments in affiliated companies
	Some investments in listed affiliated companies in which the Group holds an ownership interest of more than 3% and less than 20% are accounted for by the equity method according to Spanish GAAP (see Exhibit II). Under U.S. GAAP, the Group’s investments in these companies should be accounted for as indicated by SFAS No. 115. In this adjustment we change the valuation of these holdings from the equity accounting method to lower of cost or market (available for sale securities under Spanish GAAP classification). Afterwards the final adjustment to meet SFAS 115 is done, together with all other securities, in the Investment Securities adjustment described in the following Note e). If the holdings were sold in the year, the adjustment corrects the gains or loss on sale.
	During 2003 and 2004 the Group reclassified some significant investments that were previously accounted for by the equity method to available for sale equity portfolio, as it was changing its investment policy to adapt to the European upcoming accounting change. This reclassification has no effect on U.S. GAAP reconciliation as these investments already were accounted for under U.S. GAAP under FAS 115 (see Notes 9 and 10).
	The adjustment to net income eliminates profits and losses recorded following the equity method (gains from affiliated companies of €641,257, €323,859 and €1,378,285 thousand, and goodwill amortization of €38, €16,969 and €36,059 thousand) and includes the results that would have been recorded if considered available for sale portfolio (gains from investment securities of €858,698, €7,530 and €1,343,122 thousand in 2004, 2003 and 2002 respectively).
	In stockholders’ equity the adjustment also includes the negative net effect on reserves (equity) of €508,445, €195,240 and €133,901 thousand in 2004, 2003 and 2002 respectively.
	Adjustment amounts of 2004 were strongly influenced by the sale of 2.51% of the capital of our holding in Royal Bank of Scotland. This investment has been accounted for by the equity method under Spanish GAAP for many years while under U.S. GAAP it was accounted for following FAS 115. As a result, the profit on sale of this holding was adjusted by the different value, increasing the profit in €384,397 thousand.
e)	Investment securities, available for sale portfolio
	After having adjusted the different criteria in equity holdings described in Note d) above, the valuation adjustment of the investment securities was made in two steps:

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• First, all the effects of the Spanish GAAP security price fluctuation allowance are reversed against net income (changes in unrealized losses from those of previous year) and reserves (unrealized losses arisen in past years), and

• Second, unrealized gains and losses are recorded against reserves (Accumulated Other Comprehensive Income).

	In the calculations of the amounts to be adjusted we include the effect of investment portfolios of subsidiaries not consolidated under Spanish GAAP, but that should be consolidated under U.S. GAAP.
	The net income reconciliation item reverses the net provisions made to the security price fluctuation allowance in the year, and recognizes the loss on sale of securities that were charged against net income under Spanish GAAP in previous years (amounting €222,375, €35,847 and €146,461 thousand in 2004, 2003 and 2002 respectively). Valuation differences considered to be other than-temporary impairment losses are charged to net income. Net provisions of €385,149, €1,976 and €108,295 thousand were reported in 2004, 2003 and 2002.
	The Stockholders’ Equity reconciliation item amounting to €3,253,963 and €3,682,335 thousand in 2004 and 2003, includes the reversion of the effect of the security price fluctuation allowance and the unrealized gains of debt and equity securities included in the available for sale portfolio and in the equity securities mentioned in the previous Note d), the related deferred tax liability is recorded under the “Other liabilities” caption (See Note p other comprehensive income) for information about realized and unrealized gains on securities.
	Although the Bank has not changed the criteria in its primary financial statements, in the first adoption of IFRS that the Bank is performing in 2005, management has decided to reclassify its Held to Maturity debt securities to the Available for Sale portfolio. In this reconciliation to US GAAP this accounting change has been included in 2004 statements. The book value reclassified was €10,053,016 thousand. The effect of this change has increased the stockholders’ equity in €641,007 thousand (€416,655 net of taxes, included in Accumulated Other Comprehensive Income) as the book value was adjusted to the fair value according to FAS 115.
f)	Deferred charges
	Certain expenses concerning basically capital increases are amortized over a five-year period according to Spanish GAAP. The U.S. GAAP criterion is to reflect them as a decrease in Stockholders’ Equity. This adjustment also includes as an expense the cost of start-up activities, which under Spanish GAAP are capitalized and depreciated on a straight-line basis.
g)	Goodwill, Intangibles and business combinations
	As described in Note 2.g, under Spanish GAAP the Group generally amortizes goodwill arising on investments over a maximum period of twenty years. A description of the principal equity investments acquired and sold in 2004, 2003 and 2002 is disclosed in Note 3.
	As the Spanish GAAP statements continue to include an amortization expense the reconciliation adjustment will always have the positive effect of eliminating this expense. An additional effect (positive or negative) could arise from the fact that two different impairment tests are conducted (under Spanish and under U.S. GAAP) over different goodwill balances.
	In connection with business combinations accounted for as purchases after June 30, 2003, the Bank has isolated and recognized intangible assets apart from goodwill, but these intangible assets were insignificant.
	The 2004 and 2003 negative goodwill net income reconciliation item comes from the application of SFAS 141 which states that negative goodwill should be recognized as income in the year it is adopted (2002).
	The net income 2004 reconciling adjustments of €618,897 thousands is detailed in the following table:

	Effect on Net Income
Description					Comments
		Amortization		Others
Amortization of goodwill under Spanish GAAP (1)		618,935		—	To eliminate this expense in U.S. GAAP net income.
Amount previously adjusted in   D) “Investment in affiliated companies”		(38	)	—	To avoid eliminating it twice.
Other adjustment of U.S. GAAP goodwill (1)		—		—	No impairment charge was registered under U.S. GAAP this year.
Total		618,897		—

(1) Spanish GAAP goodwill amortization includes additional charges due to Spanish GAAP impairment of goodwill from Venezuela and Colombia. Under U.S. GAAP losses from these impaired goodwills were recognized in previous years. U.S. GAAP impairment process is different from Spanish GAAP.

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The net income 2003 reconciling adjustment of €34,759 thousands is detailed in the following table:

	Effect on Net Income
Description					Comments
		Amortization		Others
Amortization of goodwill under Spanish GAAP (1)		2,241,688				To eliminate this expense in U.S. GAAP net income.
Amount previously adjusted in   D) “Investment in affiliated companies”		(16,969	)			To avoid eliminating it twice.
Other adjustment of U.S. GAAP goodwill (1)				(2,259,478	)	Mainly related with impairment of Brazil (€2,179,758)
Total		2,224,719		(2,259,478	)	Net Effect: (34,759)

(1) Spanish GAAP goodwill amortization included additional charges due to impairment of goodwill from Banespa. U.S. GAAP impairment process is different and the charge to net income should be recorded only when the 2 step of FAS 142 impairment process requires it.

The components of intangible assets other than goodwill under Spanish GAAP were as follows:

	Net Carrying	Additions and		Amortization		Net Carrying
	amount	other changes,		to net income		amount
Intangible Asset	2003	net, 2004 (3)		2004		2004
Start-up expenses (1)	901	(10,558	)	(9,833	)	176
Capital increase expenses (1)	70,301	38		39,366		30,973
Preference share issuance expenses(2)	2,504	14,612		2,028		15,088
Computer software	349,630	221,337		190,029		380,938
Refurbishment in leased offices(2)	—	—		—		—
Others	50,960	4,219		19,585		35,594
Total amortizing	474,296	229,648		241,175		462,769
Indefinite-lived	—	—		—		—
Total	474,296	229,648		241,175		462,769

(1)	These items are eliminated in the U.S. GAAP reconciliation, see previous Note f)
(2)	See Note 28.3 “Significant presentation differences between Spanish and U.S. GAAP.
(3)	Includes additions, reductions due to sale of entities, exchange differences, etc.

Additionally, the following Intangible Assets (most of them arising from the Abbey’s goodwill analysis, see note 28.5.o) have been considered in reconciliation to U.S. GAAP:

	Thousand of
	Euros
Present Value of future Profits	642,308
Trademarks & tradenames	566,000
Core deposits	1,451,000
Credit card relationship	33,000
Distribution chanels	25,692
Intangible assets in addition to Spanish GAAP:	2,718,000

For reconciliation to U.S. GAAP purposes, additions of goodwill from small business combinations are calculated using Spanish GAAP criteria to avoid expensive and laborious double bookkeeping. The effect on net income and on Stockholders’ equity is not significant since the other reconciliation adjustments correct the impact. For large business combinations a specific analysis is performed.

In the purchase of Abbey the Goodwill has been calculated following FAS 141. We have requested studies from independent experts to make some valuations. The calculations are not yet concluded and the goodwill and intangible assets identified may change its value.

As described in Note 1, Banco Santander purchased Abbey through a tender offer. The acquisition was accomplished through the exchange of shares. Goodwill arising from this acquisition under Spanish GAAP (Note 12) includes the adjustments and valuations required for it to be presented in conformity with the accounting principles and valuation methods described in Note 2. US GAAP have different valuation methods, and as a result the goodwill calculated for reconciliation to US GAAP is different. Main differences come from:

• Different criteria to establish acquisition price in business combinations made through exchange of shares. Spanish GAAP uses the value of shares on the day before the Shareholders meeting that approve the capital increase (October) while U.S. GAAP uses the value of the shares on the days before and after the announcement of the offer (July).

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	•	Differences in the allocation process.
The acquisition of 100% of Abbey has generated goodwill under Spanish GAAP of €10,263,893 thousand. The goodwill initially calculated under U.S. GAAP was €1,437,078 thousand lower than the Spanish GAAP calculation. After this initial calculation, some intangibles assets were valued and identified reducing the Goodwill in €1,332,500 thousand. These include trademarks & trademanes, core deposits and present value of future profits on insurance business among others. The U.S. GAAP goodwill after the allocation process is €7,494,315 thousand. For further details required by FAS 141 see note 28.5.o.
Changes in Goodwill during 2004 were as follows:

			Spanish GAAP		Spanish GAAP		U.S. GAAP
Changes in Goodwill	Spanish GAAP		Equity method		Goodwill in		Goodwill in
Thousands of Euros	Total goodwill		goodwill		consolidation		consolidation
Acquisitions (1)	10,611,619		26,555		10,585,064		9,147,986
Sales & reclassifications (2)	(413,707	)	(413,317	)	(390	)	(1,332,890	)
Exchange differences	—		—		—		(91,405	)
Amortization to net income (3) (4)	(465,181	)	(67,792	)	(397,389	)	—
Impairment & other charges (4)	(153,754	)	—		(153,754	)	—

		Goodwill is presented separately for equity investments under Spanish GAAP, while it is presented as higher cost under U.S. GAAP
		(1)	The main difference in acquisitions between Spanish and U.S. GAAP arises from the different criteria in accounting of Abbey purchase (made through exchange of shares).
		(2)	Under Spanish GAAP goodwill of investments previously accounted for by the equity method, amounting to €204,698, were reclassified as these holdings were accounted for as part of the available for sale portfolio. Under U.S. GAAP €1,332,500 thousand were allocated as intangible assets as part of the process to fix goodwill.
		(3)	Of this amount €38 thousand are adjusted in the “Investments in affiliated companies” item of the reconciliation, see previous Note d).
		(4)	In this table, normal amortization expense under Spanish GAAP is presented separately from Spanish GAAP accelerated amortization of goodwill (see Note 12).
The main differences in goodwill between Spanish GAAP and U.S. GAAP in our Group are:
	•	The different criteria in equity accounting of investments in affiliated companies (for example investments in Unión Fenosa). These differences between Spanish and U.S. GAAP on this goodwill are adjusted in the “Differences in equity investments in affiliated companies” adjustment (see Note d above).
	•	The charge-off of goodwill against reserves under special circumstances (for example the goodwill from the acquisition of Banesto, this fact is important to understand the adjustment on the sale of preemptive rights on Banesto shares, explained in Note n).
	•	The Goodwill amortized early in 1997 under Spanish GAAP (mostly from Latin-American purchases).
	•	The different criteria in Business Combinations accounting (for example the merger in 1999 of Banco Santander and Banco Central Hispano was accounted for as a purchase under U.S. GAAP, while under Spanish GAAP the accounting was similar but not equal to the pooling of interest method).
	•	The different criteria to value acquisition price in business combinations that includes exchange of shares (for example Abbey acquisition).
	•	The differences arising from the amortization/impairment test under Spanish GAAP and the U.S. GAAP impairment test.
For reconciliation to U.S. GAAP purposes, the Group conducted a goodwill impairment test according to SFAS 142. The procedure followed to calculate it is:
	•	First, reporting units are determined.
	•	Second, goodwill is allocated to the reporting units. This criteria is different from the allocation criteria followed in the business segment information presented in Note 28.5.j, where all the goodwill is allocated to the non-operating segment (Financial Management and Equity Stakes). Impairment test is not possible without this goodwill allocation.
	•	Third, the Group follows the two step process stated in SFAS 142 to identify and measure any impairment loss.
To determine fair values we used quoted market prices where possible. Other valuation techniques used were external appraisal and present value of future cash flows. To value our Mexican reporting unit we use the value of the agreement reached with Bank of America Corporation (see Note 3).
As a result of the impairment test and other adjustments in 2003, losses of €2,259,478 thousand euros were recognized under U.S. GAAP. Significant amounts come from:

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	•	Brazil: impairment losses of €2,179,758 thousand were recognized. The method used to determine its fair value was an independent appraisal.
	•	Other reporting units: €79,720 thousand losses. These losses come from different adjustments made to net income, such as: those related to the sale of 24.9% of Serfin to Bank of America, and different impairment charges from goodwill of our Uruguayan investments.
2003 Brazil impairment:
The value (as per the appraisal performed by an independent expert appraiser) of the Group Brazilian subsidiaries considers, in its lower tranche, the changes in growth expectations of the Brazilian economy during 2003. As a consequence of these expectations the operating results and cash flows forecasted for the following years were revised downwards with respect to the ones considered in the valuation of the reporting unit that was used for the year 2002 closing. Such uncertainties are managed by the business plans that the Group has adopted or will adopt in order to mitigate their impacts, in consistency with what the higher tranche of the valuation itself considers, which, notwithstanding the above, falls below the carrying amount of the Brazil reporting unit, plus the corresponding goodwill, hence triggering the need to perform the step two impairment test according to FAS 142.
As of the acquisition dates of the Brazilian subsidiaries composing the Brazil reporting unit (prior to FAS 142 effective date, so APB 16 was followed) no identification and record of intangibles was implemented as it would have been necessary if FAS 142 had been in place. Accordingly, as at December 31, 2003, when performing step two impairment test, the identification of intangibles led to the corresponding additional impairment of goodwill; hence Brazil impairment losses recognized in the reconciliation to US GAAP for the year 2003 after performing the step two impairment test described above are basically due to intangibles’ identification.
The methodology applied in the valuation is basically discounted cash-flows, but also using for comparison purposes alternative methodologies such as UEC ("Union Europeenne des Experts Contables Economiqueset Financiers"), adjusted liquid stockholder's equity, and core results. Further, quoted market prices for Banespa shares (only a portion of the Brazilian reporting unit) are consistent with the valuation range determined as per the independent appraisal.
The main hypotheses used by the independent appraiser are the following:
	•	a time horizon of nine years,
	•	an annual increase of cash-flows of 2,5%, and
	•	a discount rate of 15,55%, consistent with Brazilian economy
In 2004, the result of the impairment test has not caused any charge in the net income.
h) Revaluation of premises and equipment
Under special circumstances and pursuant to relevant legislation revaluation is permitted under Spanish GAAP. In addition, the premises and equipment of certain foreign companies have been restated pursuant to legislation enacted in their respective countries.
Following Spanish GAAP, the depreciation of these fixed assets is calculated on the restated value. This new valuation is also considered when calculating profits on sale of fixed assets.
The adjustment to net income reflects the reversal of the additional depreciation on the revalued premises and equipment, corrections to profits on sale and, if necessary, corrections to the value of the premises. The related deferred tax asset is being recorded in income in the years in which the relevant deductions are allowed for income tax purposes. The adjustment to Stockholders’ Equity also reflects the reversal of all unamortized revaluation surpluses.
i) Results on transactions with parent company shares and employee and other third party loans
Gains and losses from treasury stock have been reclassified from Net income to Other Stockholders’ Equity for U.S. GAAP purposes. Loans granted to the stockholders, employees and other third parties for the acquisition of the Bank shares have also been recorded as a reduction of Stockholders’ Equity.
j) Pension plan
In 1991, the Group recalculated its actuarial liability for past service by changing certain assumptions. Gains and losses derived from this recalculation were covered with charges to reserves under Spanish GAAP. Under U.S.GAAP the net loss arising from this change in actuarial assumptions should be amortized by the straight-line method, with charges to income, for a period not to exceed the average remaining service period of active employees or the average remaining life expectancy of retired employees.
Year 2003 charge finalizes the amortization as affected employees were retired early (see Note 28.2.l). Prior year’s adjustment to net income relate primarily to the amortization of such gains and losses and the recognition of prepaid income taxes derived from pension plan liabilities.
The Group (which opted to maintain the majority of its pension allowances in-house, in accordance with the applicable regulations) has no significant post-retirement benefit obligations to its employees other than the pension commitments. See Notes 2.j and 28.5.g.

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k) General risk allowance

In past years, the Group recorded allowances amounting to €132,223 thousand to cover non-specific banking risks. Under U.S. GAAP, such allowances are not permitted. Therefore, the allowance was reversed with an adjustment to Stockholders’ Equity.

In 2003, after Bank of Spain authorization, the allowance was released to net income and net income reconciliation adjustment reversed the release of the allowance. In 2004 there are no such allowances.

l) Early retirements

In 2004, 2003 and 2002, the Bank, Banesto and Santander Consumer Finance, S.A. (formerly HBF Banco Financiero, S.A.) offered certain employees the possibility of taking early retirement before the age stipulated in the current collective labor agreement.

In 2003 and 2002 the specific allowance for these special termination benefits was created with charge to reserves, in accordance with Rule 13.13 of Bank of Spain’s Circular 4/1991 and with the authorization from the Bank of Spain. The specific allowance needed was usually registered in December, after being approved by the Bank of Spain, with charge to reserves and deferred tax assets.

Under U.S. GAAP, these costs incurred for early retirements should have been recognized in net income. Also U.S. GAAP requires that this liability and this loss should have been recognized when the employee accepted the offer and it could be reasonably estimated. Therefore in 2003 and 2002, the Group made the corresponding adjustment in net income reconciliation. In 2004, the Group recognized this expense in net income on its primary financial statements, hence there is no need to make any adjustment.

m) Valuation of derivative instruments

The Group uses derivative financial instruments for trading purposes and to hedge asset and liability exposures. Derivatives accounted for as hedging operations include instruments that meet specific criteria required by Bank of Spain regulations. Derivatives accounted for as trading operations include instruments held for trading purposes and those that do not meet Bank of Spain hedging requirements. A full description of the principles applied by the Group in accounting for derivative financial instruments is disclosed in the Note 2.l. to the financial statements. Spanish GAAP and U.S. GAAP differ in the accounting treatment of these transactions. See Note 28.1 for a summary of the accounting criteria.

In the Group, the use of derivatives for trading purposes is subject to limits clearly defined (at all levels: trader, entity, business segment, country, etc.) and controlled using Value at Risk (VaR) methodology. Derivatives are also used for hedging purposes when a reduction of risk is desired. However risk reduction is not enough to qualify for hedge accounting.

We have procedures in place that ensure that the requirements with respect to the designation as hedge or speculative, transaction documentation, identification of hedged items and hedging instrument, and the assessment and testing of hedge effectiveness are met.

Accordingly, the Group’s policies require performing an effectiveness test for each hedge position at inception and on a monthly basis. Only if the hedge effectiveness percentage is between 80% - 120% the hedge is considered effective. If the calculated percentage is outside this range the hedge is not considered to be effective and hedge accounting is discontinued (the hedging instrument is accounted for as a speculative derivative).

Additionally, there are differences in designation requirements and hedge accounting between Spanish and U.S. GAAP. Many hedge accounted transactions existing under Spanish GAAP are reversed for U.S. GAAP purposes and designated as speculative transactions, especially macro hedging transactions and hedging of equity instruments issued by the Bank. For purposes of the U.S. GAAP reconciliation, those transactions are accounted for as speculative transactions.

For all the transactions that are considered as hedging both under Spanish and U.S. GAAP, additional information is collected to adapt to the accounting treatment required. Accordingly, for U.S. GAAP reconciliation purposes, only those transactions which fully comply with SFAS 133 requirements are considered to be hedge transactions.

To calculate the net income reconciliation item to U.S. GAAP (of €-486,022, €165,130 and €226,832 thousands for the periods ended December 31, 2004, 2003 and 2002, respectively), the following adjustments were made:

•	Some transactions that qualify as hedging relationships under Spanish GAAP are adjusted to speculative accounting under U.S. GAAP. This applies especially to macro-hedge operations that are permitted under Spanish GAAP (under strict procedure requirements) and which cannot be accounted for as hedge operations under U.S.GAAP.
•	For hedging operations under Spanish GAAP that also qualify as such under U.S. GAAP, the adjustments are made accordingly to the hedge accounting to reflect cash flow, fair value or net investment in foreign operation under SFAS 133.
•	The derivative instruments designated as trading operations both under Spanish and U.S. GAAP are adjusted in its valuation to recognize in net income the net unrealized gains (Spanish GAAP doesn’t allow them to be recognized until they are effectively settled).
For more information about derivatives, see Notes 23 and 28.5.H.

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n) Sale of preemptive rights on Banesto shares

In 1998 the Bank launched a tender offer to purchase shares of Banesto. To finance that purchase it made a capital increase. The Bank, with authorization of Bank of Spain, immediately netted the goodwill arising in the purchase from the additional paid-in capital resulting from the capital increase. The authorization of Bank of Spain was conditioned to restore the reserves used if the Bank sells its stake in Banesto.

Under U.S. GAAP this goodwill wasn’t netted. Instead it was amortized with charge to net income by €127 millions a year, until SFAS No. 142 became effective (see Note g) above).

In November 2002 Banesto made a capital increase which was not subscribed by the Bank. Instead the Bank sold its preemptive rights to the new shareholders, making a profit. Following the agreement with Bank of Spain, the Bank restored reserves by €271,805 thousand that were not included in Net Income.

The 2002 reconciling adjustment to U.S. GAAP recognizes the profit in Net Income.

Spanish and U.S. GAAP profit on the sale of the preemptive rights were different. See in Note g) above for the related goodwill adjustment.

o) Income taxes (SFAS No. 109)

The previous adjustments to net income and Stockholders’ Equity do not include their related effects on corporate income tax, except for the adjustment mentioned in l), which are disclosed under “Cumulative tax effect of adjustments” item on the reconciliation statements.

As described in Note 2.n, under Spanish GAAP, only the timing differences which have a specific reversal period of less than 10 years have been recorded. All other timing differences are deemed to be permanent differences for all purposes.

As a result of application of SFAS No. 109, the Group has recorded deferred tax assets of €532,312, €24,583 and €34,619 thousand in 2004, 2003 and 2002, and deferred tax liabilities of €1,836,231, €677,112 and €488,360 thousand in 2004, 2003 and 2002 arising from various adjustments in Spanish to U.S. GAAP reconciliation. Additionally, as under Spanish GAAP, a valuation allowance is provided when it is more likely than not, based on future profit forecasts, that some portion of the deferred tax assets will not be realized. A reconciliation of the Group’s effective income tax expense to the Spanish statutory income tax expense has been disclosed in Note 22.

Following is a summary of the deferred tax assets and liabilities that should be recorded under SFAS No. 109, in addition to timing differences recorded under Spanish GAAP:

	Thousands of Euros
	2004		2003
	Deferred	Deferred	Deferred	Deferred
	Tax	Tax	Tax	Tax
	Assets	Liabilities	Assets	Liabilities
Tax effect of Spanish to U.S. GAAP reconciliation adjustments:
Legal restatements	44,982	11,168	—	28,953
Effect of net unrealized gains on investment securities	—	652,618	—	597,980
Effect of net unrealized gains on derivative instruments	—	12,466	—	50,179
Other items	401,689	—	24,583
Total	446,671	676,252	24,583	677,112

Additionally, €85,641 and €1,159,979 thousand have been recorded as deferred tax assets and deferred tax liabilities arising from Abbey’s acquisition with no impact on reconciliation adjustments (see Note 28.5.O).

p) Other comprehensive income (SFAS 130)

SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The objective of the statement is to report a measure of all changes in Stockholders’ Equity that result from transactions and other economic events of the period from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

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The accumulated balances of other comprehensive income for the years ended December 31, 2004, 2003 and 2002 were as follows:

Thousands of Euros			Net Gains		Unrealized
	Foreign		(losses) on		Gains		Other
	Currency		Derivative		(losses) on		Comprehensive
	Items		Instruments		Securities		Income (loss)
Balance as of December 31, 2001	(1,319,949	)	(21,869	)	4,801,853		3,460,035
Changes in 2002	(5,733,884	)	(104,837	)	(3,273,253	)	(9,111,974	)
Balance as of December 31, 2002	(7,053,833	)	(126,706	)	1,528,600		(5,651,939	)
Changes in 2003	(182,907	)	112,560		1,078,380		1,008,033
Balance as of December 31, 2003	(7,236,740	)	(14,146	)	2,606,980		(4,643,906	)
Changes in 2004	(121,532	)	353,212		(569,590	)	(337,910	)
Balance as of December 31, 2004	(7,358,272	)	339,066		2,037,390		(4,981,816	)
The main reason for the reduction in year 2002 was the devaluation of Brazilian real and the reduction in unrealized gains on securities due to the market downturn and divestments.
Taxes allocated to each component of other comprehensive income in 2004, 2003 and 2002 were as follows:

	Thousands of Euros
	2004						2003						2002
			Tax						Tax						Tax
	Before Tax		expense or		Net of tax		Before Tax		expense		Net of tax		Before Tax		expense	Net of tax
	amount		benefit		amount		amount		or benefit		amount		amount		or benefit	amount
Foreign currency translation
adjustments	(121,532	)	—		(121,532	)	(182,907	)	—		(182,907	)	(5,733,884	)	—	(5,733,884	)
Net Gains on Derivatives	543,403		(190,191	)	353,212		173,169		(60,609	)	112,560		(161,288	)	56,451	(104,837	)
Unrealized gains on securities:
Total holding gains arising during the
period	1,175,894		(684,630	)	491,264		1,799,054		(289,998	)	1,509,056		(2,637,391	)	288,877	(2,348,514	)
Less: reclassification adjustment for
gains included in net income	(1,632,083	)	571,229		(1,060,854	)	(662,578	)	231,902		(430,676	)	(1,422,676	)	497,937	(924,739	)
Net unrealized gains	(456,189	)	(113,401	)	(569,590	)	1,136,476		(58,096	)	1,078,380		(4,060,067	)	786,814	(3,273,253	)
Other Comprehensive Income (loss)	(34,318	)	(303,592	)	(337,910	)	1,126,738		(118,705	)	1,008,033		(9,955,239	)	843,265	(9,111,974	)
Foreign currency translation adjustment includes in 2002 the effect of the devaluation of the Brazilian real. Since 2002 the Group reduced significantly its exposure to currency changes through the payment of dividends from operating entities and the hedging with derivatives products.
Unrealized gains on securities:
In 2004 the Group sold 2.51% of Royal Bank of Scotland and 4% of Shinsei Bank. Also the Bank has reclassified, under U.S. GAAP, its holding in Auna Operadores de Telecomunicaciones S.A. as we have given a mandate to an investment bank to open a competitive process to sale it.
Under U.S. GAAP, the main reason of changes in 2003 was that the Group positioned its investments to benefit from the upturn of stock markets.
In 2002 the Group made some important divestments: 3% of Royal Bank of Scotland, 25.4% of Grupo Financiero Bital, 24.5% of Vallehermoso and 1.5% of Société Générale. The reduction in unrealized gains also comes from the downturn of stock markets. The most important effect on the reduction of positive other comprehensive income comes form our holding in Vodafone which lost 41% of its market value (37% due to stock price and the rest due to the devaluation of the Pound Sterling against Euro).
q) Recent Pronouncements

1. In April, 2004, SEC (the Securities and Exchange Commission) issued final rule 33-8567 related to First-Time Application of International Financial Reporting Standards (“IFRS”). The Commission is adopting amendments to Form 20-F to provide a onetime accommodation relating to financial statements prepared under International Financial Reporting Standards (“IFRS”) for foreign private issuers registered with the SEC. This accommodation applies to foreign private issuers that adopt IFRS prior to or for the first financial year starting on or after January 1, 2007. The accommodation permits eligible foreign private issuers for their first year of reporting under IFRS to file two years rather than three years of statements of income, changes in shareholders' equity and cash flows prepared in accordance with IFRS, with appropriate related disclosure. The accommodation retains current requirements regarding the reconciliation of financial statement items to generally accepted accounting principles as used in the United States (“U.S. GAAP”). In addition, the Commission is amending Form 20-F to require certain disclosures of all foreign private issuers that change their basis of accounting to IFRS. In 2005 the Santander Group will present its financial information in accordance to IFRS and will be subject to the requirements of this proposed rule.

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2.	In March 2004, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 105, “Application of Accounting Principles to Loan Commitments”. SAB 105 requires that the fair value measurement of loan commitments, which are derivatives, exclude any expected future cash flows related to the customer relationship or servicing rights. The guidance in SAB 105 must be applied to loan commitments entered into after March 31, 2004. The adoption of SAB 105 did not have a material impact on Santander’s financial statements.
3.	In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based Payment" (SFAS 123-R), which replaces the existing SFAS 123 and supersedes APB 25 "Accounting for Stock Issued to Employees". This statement eliminates the option to apply the intrinsic value measurement provisions of APB No. 25, to stock compensation awards issued to employees. SFAS 123-R requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award the requisite service period (usually the vesting period). SFAS 123-R is effective for interim and annual reporting periods beginning after June 15, 2005, however early adoption is permitted. SFAS 123-R establishes 2 methods for the accounting change: the Modified Prospective Application and the Modified Retrospective Application. The Company will adopt SFAS 123-R on January 1, 2005 by using the modified prospective approach, which requires recognizing expense for options granted prior to the adoption date equal to the fair value at the grant date of the unvested amounts over their remaining vesting period. See Note 28.5.L.
4.	In December 2004, the FASB issued SFAS No.153, "Exchanges of Non-monetary Assets – an amendment of APB Opinion No. 29", which amends Accounting Principles Board Opinion No. 29 "Accounting for Non-monetary Transactions". This amendment is based on the idea that exchange transactions should be valued in accordance with the value of the exchanged assets. The exception made for similar non-monetary productive assets is eliminated and substituted by a more extensive exception related to non-monetary assets with a non-commercial consideration. APB No. 29 stated that the exchange transaction of a productive asset for a similar one should be recorded at the book value of the exchanged asset. This statement will be applicable for non-monetary asset exchange transactions occurring in fiscal periods beginning after June 15, 2005. The Company does not anticipate that the adoption of SFAS No. 153 will have a material impact on its consolidated financial statements.
5.	In March 2005, the SEC released a Staff Accounting Bulletin (SAB) relating to the FASB accounting standard for stock options and other share-based payments. The interpretations in SAB No. 107, "Share-Based Payment" express views of the SEC Staff regarding the application of SFAS No. 123 (revised 2004), "Share-Based Payment "(Statement 123R). Among other things, SAB 107 provides interpretive guidance related to the interaction between Statement 123 R and certain SEC rules and regulations, as well as provides the Staff's views regarding the valuation of share-based payment arrangements for public companies. The Company does not anticipate that adoption of SAB 107 will have a material impact on its consolidated financial statements.
6.	In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" which replaces Accounting Principles Board Opinions No. 20 "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements–An Amendment of APB Opinion No. 28". This statement provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Bank will apply these requirements to any accounting changes after the implementation date.

28.3.	Significant presentation differences between Spanish and U.S. GAAP
	In addition to the differences in valuation and income recognition principles disclosed in Note 28.1, other differences relating to the financial statements presentation exist between Spanish and U.S. GAAP presentation following the formatting guidelines in Regulation S-X of the Securities and Exchange Commission of the United States. Although these differences do not cause differences between Spanish and U.S. GAAP reported net income and/or Stockholders’ Equity, it may be useful to understand them to better interpret the Group’s financial statements presented in accordance with U.S. GAAP. Following is a summary of the significant classification differences that pertain to the basic financial statements.
	BALANCE SHEET-
	a.	Under Spanish GAAP, the investment in medium- and long-term Bank of Spain certificates (see Note 5) was presented under the caption “Government Debt Securities” in the balance sheet.
		Under U.S. GAAP, these certificates are presented under the caption “Interest-earning deposits in other banks”.
	b.	The captions “Due from credit institutions” and “Loans and credits” (see Notes 6 and 7) include securities purchased under agreements to resell to financial institutions and other customers, respectively.
		Under U.S. GAAP, securities purchased under agreements to resell are presented as a separate item.

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c.	Investments in debt securities issued by the Spanish Government, other public and private issuers and investments in equity securities (other than investments in affiliated companies) are presented as separate items in the balance sheet.
	Under U.S. GAAP, investments in debt and equity securities (other than investments in affiliated companies) are presented under the caption “Investment securities”. Its value includes the related accrual accounts that under Spanish GAAP are presented in the “Accrual accounts” caption.
d.	Under Spanish GAAP some securities issued and purchased by the Group under regulated specific circumstances are classified as fixed-income securities, while under U.S. GAAP these securities are reported as a reduction of “Long-Term Debt” caption.
e.	Investments in affiliated companies are presented under “Investments in non-Group companies” and “Investments in Group companies” (see Notes 10 and 11).
	Under U.S. GAAP, such investments are presented under “Investments in affiliated companies”, and it includes the goodwill arisen in the investment.
f.	Assets acquired through foreclosure and awaiting disposition, net of the related allowances, are included under “Property and Equipment” in the balance sheet (see Note 13).
	Under U.S. GAAP, such assets are presented under “Other assets”.
g.	Refurbishment cost in leased offices needed to start operations is included as “Intangible assets” in Spanish GAAP balance sheet.
	Under U.S. GAAP it is considered Leasehold improvements and classified in “Premises and Equipment”.
h.	Preference share issuance expenses are included in “Intangible assets” in Spanish GAAP balance sheet, while in the U.S. GAAP balance sheet they are recorded as a reduction in the amount issued in “Minority interest” or reported as debt issue costs in other assets if the preference shares are recorded as long-term debt.
i.	Treasury stock and prior years’ losses in consolidated companies are presented as separate asset items in the balance sheet. The interim dividends are presented under the "Other Assets" caption.
	Under U.S. GAAP, such items are reported as reductions of “Stockholders’ Equity”.
j.	The “Total other assets” caption on the asset side of the U.S. GAAP balance sheet includes the followings Spanish GAAP captions: “Intangible assets”, “Goodwill in consolidation” (excluding goodwill from equity method accounted investments), “Other assets” and “Accrual accounts”.
k.	Deposits from credit institutions (see Note 14) and from customers (see Note 15), both including securities sold under agreements to repurchase and other short-term borrowings, are presented as separate items in the balance sheet.
	Under U.S. GAAP, such funds are presented under “Deposits” classified by nature, except securities sold under agreements to repurchase and other short-term borrowings, which are presented under the caption “Short term debt”.
l.	The captions “Marketable debt securities” and “Subordinated debt” disclosed in the balance sheet under Spanish GAAP (Notes 16 and 18 respectively) are presented under the caption “Long term debt” under U.S. GAAP, except the item “Promissory Notes” which is included under the “Short term debt” caption.
m.	The following captions in the liability side in the Spanish GAAP balance sheet are presented under the caption “Total other liabilities” in the U.S. GAAP balance sheet: “Other liabilities”, “Accrual accounts”, “Provision for contingencies and expenses” and “General risk allowance”. Net income attributed to minority interest is included in the caption “Minority interest” under U.S. GAAP.
n.	The following captions in the Spanish GAAP balance sheet are presented under the item “Retained earnings and other reserves” in the U.S. GAAP balance sheet: “Consolidated net income for the year”, “Additional paid-in capital”, “Reserves”, “Revaluation reserves” and “Reserves at consolidated companies”.
o.	The caption “Pension allowance” in the U.S. GAAP balance sheet is reported net of the amounts of pension commitments covered by contracts taken out with insurance companies; these amounts are presented in the Spanish GAAP balance sheet under the caption “Other Assets”.

F-90

	STATEMENT OF INCOME-
	a.	The breakdown of interest income and interest expense under Spanish and U.S. GAAP is determined by the classification of the assets and liabilities that generate such income and expenses. However, net interest income under Spanish GAAP includes dividends from common stocks and affiliated companies and the interest cost assigned to the pension plan, which are classified as a part of “Gains (losses) from investment securities”, “Gains (losses) from affiliated companies” and “Salaries and employee benefits” in the U.S. GAAP statement of income, respectively.
	b.	Commissions and fees received and paid by the Group are presented as separate items in the statement of income for Spanish GAAP purposes.
		Under U.S. GAAP, such commissions and fees are presented net and detailed by activity.
	c.	“Gains (losses) on financial transactions” includes results from investment securities and results from foreign exchange and derivatives.
		Under U.S. GAAP, such gains and losses are disclosed separately under “Gains (losses) from investment securities” and “Gains (losses) from foreign exchange and derivatives and other, net”.
	d.	“Other operating income” and “Other operating expenses” items are included as amounts under “Other expenses” in the U.S. GAAP statements of income.
	e.	Occupancy and maintenance expenses of premises and equipment are included under the caption “Other administrative expenses”.
		Under U.S. GAAP, such expenses are included as a part of “Occupancy expenses of premises, depreciation and maintenance, net”.
	f.	Amortization of intangible assets is included as a part of “Depreciation, amortization and write-down of property and equipment and intangible assets”.
		Under U.S. GAAP, such amortization is included under “Other expenses”.
	g.	The following Spanish GAAP captions relating to operations with affiliated companies “Net income from companies carried by the equity method”, “Gains on Group transactions” and “Losses on Group transactions” are included under “Gains (losses) from affiliated companies’ securities” in the U.S. GAAP statement of income, except the results of transactions involving controlling company shares which are included under the “Other income” caption.
	h.	U.S. GAAP description of Extraordinary Income is more restrictive than the Spanish GAAP description (non-banking results). For this reason “Extraordinary income” and “Extraordinary Loss” in the Spanish GAAP captions are presented under the “Other income” and “Other expenses” captions, respectively, for U.S. GAAP purposes.
28.4.	Consolidated financial statements
	Following are the consolidated balance sheets and consolidated statements of income of the Group under Spanish GAAP reformatted to conform to the presentation guidelines for bank holding companies set forth in Regulation S-X of the Securities and Exchange Commission of the United States of America.
	The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts and allocations of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates but any differences should not be material.
	In addition to the presentation differences explained above, the application of FIN 46-R has resulted in some other differences.
	FIN 46-R defines and identifies “Variable Interest Entity” (VIE) if it has (1) equity that is insufficient to permit the entity to finance its activities without additional subordinated financial support from other parties (2) equity investor that cannot make significant decisions about the entity’s operations, or that do not absorb the expected losses or receive the expected returns of the entity or (3) equity investors that have voting rights that are not proportionate to their economic interests and substantially all the activities of the entity involved, or are conducted on behalf of, an investor with a disproportionately small voting interest. A VIE is consolidated by its primary beneficiary, which is the party involved with the VIE that has a majority of the expected losses or a majority of the expected residual returns or both. As stated in note 28.1 Spanish GAAP and U.S. GAAP differ in consolidated procedures, the impact on the adoption of FIN 46-R in shown in notes 28.2.a) and 28.4.
	The application of FIN 46-R has resulted in the deconsolidation of some special purpose entities that are used to issue securities and that are designated variable interest entities (VIEs). As a result some issuances of preferences shares were classified as long term debt (€6,055,663 thousand and €581,144 thousand in 2004 and 2003 respectively) and its share of net income considered as interest expense (€203,486 thousand and €3,144 thousand in 2004 and 2003 respectively).
	The effect on 2003 financial statements considers only issues made after January 31, 2003 and therefore subject to FIN 46-R: Santander Central Hispano Finance, S.A. (Unipersonal) and Banesto Preferentes, S.A, while the effect on 2004 financial statements considers all preference shares issued though VIEs (see note 28.5.k for a detail of issues). Management considers that the 2004 criteria represent more clearly the financial situation of the Bank. Had the Bank followed the 2003 criteria (considering issues after January 31, 2003), the amount reclassified in the 2004 balance sheet would have been 3,020,114 lower, and 151,910 lower in the 2004 profit and loss statement.

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In the application of FIN 46-R, also, some securitization vehicles that were not consolidated previously have been included in the consolidation perimeter, and as a result some loans that were previously removed from balance sheet have been recognized through the accounting of a secured borrowing transaction instead of a loan sale (amounting € 5,403,471 thousand).

The Bank revised its consolidation scope; especially the Special Purpose Vehicles (SPV) to evaluate whether they should or not be consolidated.

The adoption of FIN 46-R has had no significant impact on 2003 and 2004 net attributable income or stockholders’ equity. The preference shares issuance vehicles activity is designed to make a profit enough to pay the preference shares fixed dividend and pay the related expenses, there is no other profit. As a result, the net income of the preference shares issuance vehicles deconsolidated is attributable to the holders of preference shares and there is no effect on stockholders’ net income. The Bank at all times appropriated the profits of the securitization vehicles that were consolidated as a result of FIN 46-R adoption, so its consolidation doesn’t change it.

F-92

CONSOLIDATED BALANCE SHEET
	Thousands of Euros
	2004		2003
ASSETS
Cash and due from banks	10,374,223		10,507,254
Interest earning deposits in other banks	21,169,241		14,627,776
Securities purchased under agreements to resell	51,969,048		24,303,361
Trading portfolio	57,506,984		16,368,337
Available for sale	54,869,798		59,286,023
Held to maturity portfolio	-		9,787,273
Investment securities (1 & 2)	112,376,782		85,441,633
Loans and leases, net of unearned income	345,227,694		174,618,476
Less-Allowance for credit losses	(6,976,516	)	(5,116,683	)
Net Loans and leases	338,251,178		169,501,793
Premises and equipment, net	7,038,719		3,670,227
Investment in affiliated companies	8,608,113		6,653,788
Intangible assets	447,681		471,792
Goodwill in consolidation	16,099,163		6,065,632
Accrual accounts	8,213,567		6,893,037
Others	20,450,596		15,008,214
Total other assets	45,211,007		29,758,267
Total assets	594,998,311		343,144,507
LIABILITIES
Deposits
Non-interest deposits	8,918,933		3,463,179
Interest bearing:
Demand deposits	108,552,578		52,638,099
Savings deposits	36,486,769		23,987,739
Time deposits	140,544,801		80,657,921
Certificates of deposit	10,163,627		5,627,781
Total deposits	304,666,708		166,374,719
Short-term debt (Note 28.5.f)	124,423,929		85,594,313
Long-term debt (Detailed in Exhibits V and VI)	90,134,706		40,607,380
Taxes payable	2,142,783		872,411
Accounts payable	2,646,589		1,907,084
Accrual accounts	11,075,191		7,453,016
Pension allowance	8,033,084		6,413,511
Other Provisions	4,692,293		3,792,529
Others	11,598,042		5,583,498
Total other liabilities	40,187,982		26,022,049
Total liabilities	559,413,325		318,017,317
Minority interest	3,000,735		5,477,056
STOCKHOLDERS' EQUITY
Capital stock	3,127,148		2,384,201
Additional paid-in capital	20,370,128		8,720,722
Other additional capital	(895,734	)	(749,257	)
Retained earnings	8,816,412		8,121,665
Other reserves	1,166,297		591,659
Total stockholders' equity	32,584,251		19,068,990
Total liabilities and Stockholders' equity	594,998,311		343,144,507

(1)	As of December 31, 2004 and 2003, the investment securities pledged to retain commitments amounted to €62 million and €202 million, respectively.
(2)	In 2005 the Bank has decided to reclassify its Held to maturity portfolio to Available for Sale portfolio. The effect of this accounting change is already included in our 2004 reconciliation to U.S.GAAP. See Note 28.2.

F-93

	Thousands of euros
	2004		2003		2002
Interest income:
Interest and fees on loans and leases	10,795,674		10,266,025		12,887,453
Interest on deposits in other banks	2,086,677		2,231,800		2,953,679
Interest on securities purchased under agreements to resell	760,075		897,878		872,090
Interest on investment securities	4,371,198		3,627,113		5,832,050
Dividends	647,446		441,493		473,172
Total interest income	18,661,070		17,464,309		23,018,444
Interest expenses:
Interest on deposits	(5,552,043	)	(5,630,143	)	(8,461,857	)
Interest on short-term borrowings	(2,376,698	)	(2,291,783	)	(2,933,646	)
Interest on long-term debt	(1,789,299	)	(1,214,102	)	(1,833,141	)
Total interest expense	(9,718,040	)	(9,136,028	)	(13,228,644	)
Net interest income	8,943,030		8,328,281		9,789,800
Provision for credit losses	(1,647,651	)	(1,495,687	)	(1,648,192	)
Net interest income after provision for credit losses	7,295,379		6,832,594		8,141,608
Non-interest income:
Commissions and fees from fiduciary activities	1,587,089		1,296,987		1,282,536
Commissions and fees from securities activities, net	509,559		585,004		557,699
Fees and commissions from insurance activities	515,007		350,721		257,096
Other Fees and commissions, net	1,997,634		1,937,850		2,191,953
Gains (losses) from:
Affiliated companies' securities	1,035,331		1,333,647		1,305,408
Investment securities	1,358,645		1,197,904		(499,884	)
Foreign exchange, derivatives and other, net	(47,117	)	174,704		847,805
Sale of premises	108,041		228,923		319,901
Other income	177,997		318,807		514,872
Total noninterest income	7,242,186		7,424,547		6,777,386
Non interest expense:
Salaries and employee benefits	(5,400,060	)	(4,481,371	)	(5,202,701	)
Occupancy expense of premises, depreciation and maintenance, net	(950,039	)	(939,611	)	(1,102,812	)
General and administrative expenses	(2,293,381	)	(1,977,996	)	(2,301,780	)
Amortization of goodwill	(618,935	)	(2,241,688	)	(1,358,616	)
Amortization of intangible assets	(241,175	)	(273,512	)	(285,573	)
Provisions for specific allowances	(327,685	)	54,960		(451,840	)
Payments to Deposit Guarantee Fund	(141,617	)	(135,063	)	(167,098	)
Other expenses	(333,541	)	(164,564	)	(539,825	)
Total non-interest expense	(10,306,433	)	(10,158,845	)	(11,410,245	)
Income before income taxes	4,231,132		4,098,296		3,508,749
Income tax expense	(766,761	)	(869,434	)	(723,109	)
Net consolidated income for the year	3,464,371		3,228,862		2,785,640
Net income attributed to minority interest	328,813		618,043		538,463
NET INCOME ATTRIBUTED TO THE GROUP	3,135,558		2,610,819		2,247,177

F-94

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (NOTES 1, 20 AND 21)
	Thousand of shares
NUMBER OF REGISTERED SHARES	2004	2003	2002
Balance at beginning of the year	4,768,402	4,768,402	4,659,362
Capital increases for:
For acquisition of shares of AKB (May 2002, Note 3)		—	109,040
For acquisition of shares ABBEY National PLC (November 2004, Note 1)	1,485,894	—	—
Balance at end of the year	6,254,296	4,768,402	4,768,402
Par value per share at year-end (Euro) :	0.50	0.50	0.50

CHANGES IN STOCKHOLDERS’ EQUITY
	Thousands of Euros
	2004		2003		2002
Capital stock
Balance at beginning of the year	2,384,201		2,384,201		2,329,681
Capital increases:
For acquisition of shares of AKB (May 2002, Notes 3)	—		—		54,520
For acquisition of shares ABBEY National PLC (November 2004, Note 1)	742,947		—		—
Balance at year-end	3,127,148		2,384,201		2,384,201
Retained earnings and other reserves
Balance at beginning of the year	16,684,789		15,857,862		17,442,823
Net income for the year	3,135,558		2,610,819		2,247,177
Net charge for early retirement of:
Bank employees	—		(259,014	)	(705,845	)
Banesto employees	—		(65,882	)	(127,760	)
Santander Consumer Finance, S.A employees	—		(2,446	)	(6,318	)
Dividends	(2,015,947	)	(1,386,928	)	(1,371,864	)
Decrease/ (increase) in Treasury stock	(94,025	)	4,591		6,632
Paid-in capital and Earlyrecording of voluntary reserves from capital increases	11,797,995		—		1,045,480
Sale of preemptive rights on Banesto shares (Notes 3 and 21) (**)	—		—		271,805
Other variations, net (*)	(51,267	)	(74,213	)	(2,944,268	)
Balance at year-end	29,457,103		16,684,789		15,857,862
Stockholders’ Equity balance at year-end	32,584,251		19,068,990		18,242,063

(*)	Includes negative exchange differences in 2004, 2003 and 2002 of €30,127; €8,584; €2,666,942 and respectively. Exchange differences of year 2002 are related to the devaluation on Brazilian Real.
(**)	Under U.S. GAAP this figure is recorded as an additional income instead of additional reserves, the effect in Stockholders’ equity is nil (see reconciliation in Note 28.2).

F-95

28 .5.	Additional disclosures required by U.S. GAAP
	A)	STATEMENT OF CASH FLOWS
	The following consolidated statements of cash flows are presented in accordance with SFAS No. 95:

		Thousands of Euros
		2004		2003		2002
Cash Flows from Operating Activities (a):
Net income in accordance with U.S. GAAP		3,940,866		2,264,332		2,286,959
Adjustments to reconcile net income to net cash provided by operating activities:
•	Amortization and depreciation	850,143		648,580		770,697
•	Goodwill impairment / amortization	—		2,259,478		795,842
•	Provision for credit losses	1,745,163		1,529,669		2,168,754
•	Provision to special allowances, net	1,631,270		1,011,808		2,285,593
•	Gains on sales of premises and equipment	(108,041	)	(228,923	)	(319,901	)
•	Write downs and gains on sale of investment securities and
	affiliated companies’ securities	(1,480,307	)	(1,468,999	)	(686,016	)
•	Net increase in trading and hedging instruments	488,211		(167,319	)	(211,428	)
•	Minority interests	306,663		613,775		508,928
•	Net increase (decrease) in interest receivable and payable
	and other accrued income and expense	2,561,681		(99,487	)	270,877
•	Decrease in taxes payable	(1,353,675	)	829,946		(1,381,051	)
Net cash provided by operating activities		8,581,974		7,192,860		6,489,254
Cash Flows from Investing Activities:
•	Net decrease (increase) in deposits in other banks	(4,960,907	)	1,271,713		5,135,399
•	Net increase in securities purchased under agreements to resell	(2,626,180	)	120,866		(5,203,024	)
•	Purchase of investment securities	(4,537,259	)	(194,470,339	)	(195,554,571	)
•	Proceeds from sales of investment securities	23,688,371		183,178,290		196,494,135
•	Net increase in loans and leases	(50,511,799	)	(22,111,793	)	(3,491,753	)
•	Purchase of premises and equipment	(997,119	)	(871,378	)	(1,501,955	)
•	Proceeds from sales of premises and equipment	435,371		809,621		1,859,480
•	Purchase of affiliated companies’ securities	(278,037	)	(1,230,012	)	(887,847	)
•	Proceeds from sales of affiliated companies’ securities	11,070		1,144,409		322,080
•	Purchase of Group companies, net of cash equivalents acquired	(10,292,716	)	(1,453,292	)	(2,475,357	)
•	Proceeds from sales of Group companies’ securities	209,009		866,538		965,500
•	Other investing activities	(3,317,455	)	(1,078,702	)	5,979,894
Net cash used in investing activities		(53,177,651	)	(33,824,079	)	1,641,981
Cash Flows from Financing Activities:
•	Net increase (decrease) in non-interest deposits	(1,406,752	)	(2,893,663	)	(889,920	)
•	Net increase (decrease) in demand deposits	2,414,503		8,691,583		320,886
•	Net increase (decrease) in saving deposits	672,118		1,756,657		978,968
•	Net increase (decrease) in time deposits	6,522,143		(3,760,614	)	8,788,079
•	Net increase (decrease) in short term borrowings	5,082,688		19,331,211		(14,998,834	)
•	Proceeds from issuance of long-term debt	32,222,745		14,108,122		7,795,723
•	Repayment of long term debt	(8,579,428	)	(4,817,313	)	(5,053,603	)
•	Proceeds from issuance of common stock	12,540,943		—		1,100,000
•	Redemption of preference shares	—		(1,151,246	)	(890,220	)
•	Dividends paid	(1,496,840	)	(1,386,928	)	(1,371,864	)
•	Other financing activities	(5,118,283	)	(2,181,034	)	(9,116,220	)
Net cash provided by financing activities		42,853,837		27,696,775		(13,337,005	)
Effect of exchange rate changes on cash and cash equivalents		(1,608,809	)	(157,016	)	688,746
Net increase in cash and cash equivalents		(133,031	)	1,222,572		(5,894,516	)
Cash and Cash equivalents at beginning of the Year (b)		10,507,254		9,284,628		15,179,198
Cash and Cash Equivalent at End of the Year		10,374,223		10,507,254		9,284,682
(a)	Interest and income taxes paid by the Group during 2004, 2003 and 2002 were as follows (thousand Euro):
Interest paid		14,155,608		10,123,291		11,315,914
Income Taxes paid		536,030		(795,278	)	1,477,723
(b)	Cash and cash equivalents consist of cash and due from banks

F-96

The most important non-cash transaction made by the Group during 2004 was the Abbey acquisition, valued at €12,540,943 thousand (see Note 28.5.o). Transfer of loans to assets acquired through foreclosure during the year amounted €303,923 thousand.
The most important non-cash transaction made by the Group during 2003 was the transfer of loans to assets acquired through foreclosure amounting €256,979 thousand.
In 2002 the Group made one important non-cash transaction: the acquisition of the AKB Group through the issuance of 109,040,444 shares. The transaction was valued €1,100,000 thousand and is fully described in Note 3.
The assets acquired through foreclosure during the 2002 amounted to €174,720 thousand.
B)	EARNINGS PER SHARE
Effective December 31, 1997, the Group adopted SFAS No. 128, Earnings per share, which specifies the computation, presentation and disclosure requirements for earnings per share (EPS).
Basic EPS is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator), which may include contingently issuable shares where all necessary conditions for issuance have been satisfied.
Diluted EPS includes the determinants of basic EPS and, in addition, gives effect to the potential dilution that could occur if securities or other contract to issue common stock (including stock options) were exercised or converted into common stock and then shared in the earnings of the entity.
In August and September 1998, the Group issued 6.4 million convertible subordinated bonds (Note 18 and Exhibit VI) with a unitary face value of 50 Euro and which pay annual interest of 2.0%. These bonds were convertible into Banco Santander Central Hispano ordinary shares at a conversion rate of approximately 3.02 shares for every bond. These convertible subordinated bonds were redeemed in September 2003. The dilution effect of these bonds was considered in previous years’ EPS calculations.
At December 31, 2004, the stock options plans to employees could result in the issuance of 21,126,750 shares, as it is explained in Note 25 and 28.5.l. The effect of these stock options plans is included in EPS calculation.
This EPS calculation was made taking into consideration the deconsolidation of some special purpose entities that are used to issue securities and that are designated variable interest entities (VIEs) (see Note 28.4).

F-97

The computation of basic and diluted EPS for the years ended December 31 is presented in the following table.
	Thousands of Euros except per share data
	2004		2003		2002
NUMERATOR FOR BASIC AND DILUTED CALCULATION:
Spanish GAAP
Net consolidated income for the year	3,667,857		3,232,006		2,785,640
Less: preferred stock dividends	(206,355	)	(314,461	)	(400,665	)
Less: net income attributed to minority interest	(325,944	)	(306,726	)	(137,798	)
Net income for basic calculation	3,135,558		2,610,819		2,247,177
Plus: interest of convertible bonds	—		3,130		4,173
Net income for diluted calculation	3,135,558		2,613,949		2,251,350
U.S. GAAP
Net income for basic calculation	3,940,866		2,264,332		2,286,959
Plus: interest of convertible bonds	—		3,130		4,173
Income for diluted calculation	3,940,866		2,267,462		2,291,132
Basic calculation weighted-average shares	4,950,497,709		4,768,402,943		4,728,371,657
Plus: effect of convertible bonds	—		19,419,238		19,419,238
Plus: effect of stock options plans	8,602,181		2,185,509		2,170,435
Weighted-average shares for diluted calculation	4,959,099,890		4,790,007,690		4,749,961,330
EARNINGS PER SHARE RATIOS:
Spanish GAAP (Euro per share)
Basic earnings per share	0.63		0.55		0.48
Diluted earnings per share	0.63		0.55		0.47
U.S. GAAP (Euro per share)
Basic earnings per share	0.80		0.47		0.48
Diluted earnings per share	0.79		0.47		0.48

C) INVESTMENT SECURITIES

The following table reflects the book and fair value of the investment securities portfolio by accounting categories including the allocation of Security Price Fluctuation Allowance or the allowance for credit losses:

	Thousands of Euros
Investment Securities	2004		2003
Classified by type of portfolio	Book	Fair	Book	Fair
	Value (2)	Value (1)	Value (2)	Value (1)
Debt securities:
Trading portfolio	52,482,662	52,482,662	13,947,473	13,947,473
Available for sale portfolio	46,730,097	47,901,569	51,642,765	52,214,605
Held to maturity portfolio (3)	—	—	9,787,273	10,046,584
	99,212,759	100,384,231	75,377,511	76,208,662
Equity securities:
Trading portfolio	5,024,322	5,024,322	2,420,864	2,420,864
Available for sale portfolio	8,139,701	10,127,033	7,643,258	9,163,221
	13,164,023	15,151,355	10,064,122	11,584,085
	112,376,782	115,535,586	85,441,633	87,792,747

(1)	Fair values are determined based on year-end quoted market prices for listed securities and on management’s estimate for unlisted securities.
(2)	Carrying values do not match with information of Note 5 “Government Debt Securities” and Note 8 “Debentures and Other Fixed-income Securities”. The difference is explained in Note 28.3 (the inclusion of accrual accounts in the carrying value and the classification of some securities as a reduction of Long-Term Debt caption). This is a presentation difference.
(3)	As explained in note Note 28.2.e. the Bank has decided to reclassify its Held to maturity portfolio to Available for Sale portfolio. The effect of this accounting change is included in our 2004 reconciliation to U.S.GAAP.

F-98

Gross gains of €5,163,240, €6,033,318 and €6,152,621 thousand and gross losses of €3,804,595, €4,835,414 and €6,582,568 thousand have been realized during 2004, 2003 and 2002 on:
(i)	the sales of trading and available for sale investment securities and
(ii)	the revaluation at year-end of securities included in the trading portfolio, which are included, net, under “Gains (losses) from Investment Securities” in the consolidated statement of income.
The following table shows a disclosure of the book value, gross unrealized gains and losses, and fair value of available for sale fixed maturity securities and equity securities for 2004 and 2003:

INVESTMENT SECURITIES
(US GAAP presentation)
	2004						2003
			Gross	Gross					Gross	Gross
	Book		unrealized	unrealized			Book		unrealized	unrealized
Thousands of euros	Value		gains	losses		Fair Value	Value		gains	losses		Fair Value
Fixed maturity securities available-for-sale
Debt securities:
United States-
US Treasury and other US    Government Agencies	1,382,532		18,912	3,849		1,397,595	499,769		—	3,627		496,142
States and political subdivisions	308,530		432			308,962	23,925		169	3		24,091
Mortgage-backed securities	274,154		—	5,330		268,824	352,741		—	6,430		346,311
Corporate debt securities	125,669		1	111		125,559	18,261		22	—		18,283
Other securities	296,489		69	404		296,154	208,542		1,831	—		210,373
Spanish Government	11,541,996		318,842	—		11,860,838	20,834,664		131,648	10,659		20,955,653
Other Spanish public authorities	199,950		1,398			201,348	247,970		1,311	66		249,215
Securities of other foreign Governments	12,194,107		581,363	63,983		12,711,487	16,299,345		228,298	921		16,526,722
Other Corporate debt securities	2,863,255		9,122	3,733		2,868,644	2,504,114		3,117	22,971		2,484,260
Other Mortgage-backed securities	9,532,738		1,444	3		9,534,179	7,642,881		8,475	48		7,651,308
Other debt securities	8,269,810		59,947	1,778		8,327,979	3,258,213		10,991	16,957		3,252,247
	46,989,230		991,530	79,191		47,901,569	51,890,425		385,862	61,682		52,214,605
Less-Allowance for credit losses	(180,748	)		(180,748	)	—	(185,978	)		(185,978	)	—
Less-Security price fluctuation allowance	(78,385	)		(78,385	)	—	(61,682	)		(61,682	)	—
	46,730,097		991,530	(179,942	)	47,901,569	51,642,765		385,862	(185,978	)	52,214,605
Fixed maturity securities held to maturity
Debt securities:
United States-
US Treasury and other US      Government Agencies	—		—	—		—	640,365		40,942	13		681,294
States and political subdivisions	—		—	—		—	56,301		4,596	—		60,897
Mortgage-backed securities	—		—	—			11,876		—	—		11,876
Corporate debt securities	—		—	—		—	—		—	—		—
Other securities	—		—	—		—	—		—	—		—
Spanish Government	—		—	—		—	5,870,864		192,060	—		6,062,924
Other Spanish public authorities	—		—	—		—	13,678		122	—		13,800
Securities of other foreign Governments	—		—	—		—	2,856,839		18,972	—		2,875,811
Other Corporate debt securities			—	—		—	2,847		—	—		2,847
Other Mortgage-backed securities	—		—	—		—	44,869		1,992	—		46,861
Other debt securities	—		—	—		—	289,634		642	2		290,274
	—		—	—		—	9,787,273		259,326	15		10,046,584
Avalilable for sale equity securities
Spanish securities	3,352,296		495,107	487,352		3,360,051	3,024,815		1,369,443	323,580		4,070,678
International securities	5,487,175		1,492,225	212,418		6,766,982	5,567,204		150,520	625,181		5,092,543
of which: United States:	26,838		9,188	—		36,026	29,061		—	13,820		15,241
	8,839,471		1,987,332	699,770		10,127,033	8,592,019		1,519,963	948,761		9,163,221
Less-Security price fluctuation allowance	(699,770	)	—	(699,770	)	—	(948,761	)	—	(948,761	)	—
	8,139,701		1,987,332	—		10,127,033	7,643,258		1,519,963	—		9,163,221

F-99

The following table includes the detail of the available for sale and held to maturity portfolios excluding the allocation of security price fluctuation allowance and the allowance for credit losses:
	Thousands of Euros
AVAILABLE FOR SALE	2004
Classification by maturity			Book	Fair
	Yield		Value	Value
Debt securities:
Due in one year or less	8.11	%	8,348,250	8,696,899
Due after one year through five years	4.61	%	11,000,791	11,258,259
Due after five years through ten years	4.38	%	8,209,541	8,323,467
Due after ten years	4.42	%	19,430,648	19,622,944
	5.10	%	46,989,230	47,901,569

The details of the trading portfolio by type of security are set out below:
TRADING PORTFOLIO
(U.S. GAAP presentation)
Thousands of Euros	2004	2003
Trading Portfolio Debt Securities:	Book Value	Book Value
United States:
U.S. Treasury and other U.S. Government agencies
States and Political subdivisions	382,439	18,079
Mortgage-backed securities	—	108
Corporate debt securities	—	27,737
Other Securities	5,463,250	77,064
Spanish Government	4,892,708	4,415,221
Other Spanish Public authorities	66	13,498
Securities of other foreign Governments	15,612,122	7,384,425
Other Corporate debt securities	33,091	58,068
Other Mortgage-backed securities	18,268	36,659
Other debt securities	26,080,718	1,916,614
Total debt securities	52,482,662	13,947,473
Trading Equity Securities
Spanish Securities	2,831,785	1,741,858
International Securities	2,192,537	679,006
Of which United States	255,213	316,942
Total equity securities	5,024,322	2,420,864

The following table includes the detail of the debt securities trading portfolios:
	Thousands of Euros
TRADING PORTFOLIO
	2004
Classification by maturity			Book	Fair
	Yield		Value	Value
Debt securities:
Due in one year or less	3.29	%	29,664,823	29,664,823
Due after one year through five years	5.20	%	17,070,841	17,070,841
Due after five years through ten years	6.92	%	4,211,753	4,211,753
Due after ten years	3.62	%	1,535,245	1,535,245
	5.57	%	52,482,662	52,482,662

F-100

D)	ALLOWANCE FOR CREDIT LOSSES
	The balances of the recorded investment in impaired loans and of the related valuation allowance as of December 31, 2004, 2003 and 2002 is as follows:

	Thousands of Euros
	2004	2003	2002
Impaired loans requiring no reserve	1,469,601	1,293,219	1,055,809
Impaired loans requiring valuation allowance	3,457,128	2,648,260	2,970,725
Total impaired loans	4,926,729	3,941,479	4,026,534
Valuation allowance on impaired loans	3,513,431	2,648,260	2,970,725

Spanish GAAP doesn’t require classifying the entire loan as non-performing, but only the amount unpaid. For this reason, the total allowance exceeds the amount of non-performing loans.

The roll-forward of allowances (under Spanish GAAP) is shown in Note 7. The reconciliation item to U.S. GAAP is in Note 28.2.c.

Non-performing loans are carried out by the cash basis method. An estimate of the effect of non-performing loans – net of charge-off – on interest revenue is presented in the following table:

	Thousands of Euros
	2004		2003		2002
Interest revenue that would have been recorded if accrued	217,393		248,167		343,943
Net interest revenue recorded:
Related to current year	80,707		80,371		118,771
Related to prior years	108,101		92,045		75,863
Positive (negative) impact of non-performing loans on interest
revenue	(28,585	)	(75,751	)	(149,309	)

	Interest that would have been recorded if accruing represents thousands of €34,941, €43,909 and €55,611, from borrowers in Spain and €217,393, €204,258 and €288,332, from borrowers outside Spain in 2004, 2003 and 2002 respectively.
	For the twelve months ended December 31, 2004, 2003, and 2002, the average recorded investments in non-performing loans were thousands of €880,123, €965,031 and €1,037,525 from borrowers in Spain, and €2,263,669, €2,553,229, and €3,003,459, from borrowers outside Spain.
E)	INVESTMENTS IN AFFILIATED COMPANIES
	A summary of significant investments in affiliated companies, together with percentage of ownership and relevant financial information is shown in Exhibit II. Aggregated summarized financial information with respect to significant affiliated companies for the year ended December 31, 2004 and as of such date is presented below:

	Thousands of Euros
Percentage of ownership:	50 % or more		Between 20% and 50%
	Insurance
Key information	Companies	Others	All sectors
Net revenues	1,158,567	117,483	8,521,937
Net income	202,117	31,349	1,218,561
Stockholders’ Equity	5,107,315	266,097	7,642,895
Non-current assets	48,782,946	3,309,244	18,021,999
Non-current liabilities	47,399,323	3,126,781	11,324,878
Net working capital	3,723,692	83,634	945,774

F-101

F)	SHORT TERM BORROWINGS
	Following is an analysis of the components of the “Short-term borrowings” caption for 2004 and 2003:

	2004				2003
Thousands of Euros			Average			Average
		Amount	Rate		Amount	Rate
Securities sold under agreements to repurchase:
At December 31		76,357,915	1.51	%	69,992,000	2.85	%
Average during year		63,527,706	3.21	%	64,299,341	3.13	%
Maximum month-end balance		76,357,915			72,291,382
Other short-term borrowings:
At December 31		26,067,117	2.19	%	15,602,313	1.78	%
Average during year		15,100,092	2.24	%	13,758,824	2.04	%
Maximum month-end balance		26,067,117			15,745,228
Total short-term borrowings at year-end		102,425,032	1.68	%	85,594,313	2.66	%

	This short-term indebtedness is denominated in different currencies, mostly Euro, US$ and Latin-American currencies. Interest rates of these currencies have not followed the same trend.
G)	PENSION LIABILITIES
	Spanish GAAP pension allowance includes some liabilities that under U.S. GAAP are presented separately. This different balance sheet classification does not generate a net income or stockholders’ equity variation.
	Spanish GAAP “Total Accrued Commitments” differ from its U.S. GAAP equivalent “Projected Benefit Obligation” (“PBO”) (as defined according to SFAS 87) because it includes other commitments such as those arising from employees early retired or annuity contracts. Spanish GAAP “Plan assets” also include annuity contracts which are not permitted to be included in SFAS 87 calculations. Total Accrued Commitments should be funded both under Spanish or U.S. GAAP, and the only difference is the classification as one liability under Spanish GAAP and various liabilities under U.S. GAAP.
	The information herein included is presented to fulfill SFAS 132-R disclosure requirements. See Note 2.j to find the total commitment obligations under Spanish GAAP classification and how they are funded.
	The need for pension liabilities arises because certain personnel employed in Spain are entitled to pension benefits, in addition to the Social Security pension provided by the State. The benefits under the plans are based primarily on years of service and a final payment formula.
	Benefits for retired employees are subject to annual adjustments (see Note 2.j). Non-consolidated insurance companies administer most of the plans. The funding policy of the plan is consistent with the requirements in Spain.
	Under SFAS No. 87, the actuarial assumptions considered in 2004, 2003 and 2002 for U.S. GAAP disclosure purposes are the following:

	2004		2003		2002
Discount rate	4	%	4	%	4	%
Life expectancy table (*)	GRM/F95		GRM/F95		GRM/F95
Salary increase rate	2.5	%	2.5	%	2.5	%
Inflation rate	1.5	%	1.5	%	1.5	%
Rate of increase in Social Security contribution ceilings	1.5	%	1.5	%	1.5	%
Rate of increase in overall maximum Social Security benefits	1.5	%	1.5	%	1.5	%
Expected rate of return on plan assets (**)	4.5%-10.5	%	6.27	%	9	%

(*)	Banesto has used in 2004 the PERMF2000P life expectancy table.
(**)	Banesto considers the expected return on plan assets basing on the discount rate, which is 4% for the three years.

F-102

Following is a disclosure of the aggregate amount of the estimated funded status for U.S. GAAP purposes of the plans of the Bank and the Banesto Group as of December 31, 2004, 2003 and 2002 as required by SFAS 132-R.

Thousands of Euros	2004		2003		2002
CHANGE IN BENEFIT OBLIGATION
Accumulated benefit obligation (ABO) at the beginning of the year	5,165,783		5,316,961		5,124,126
Interest cost	206,631		212,679		204,966
Service cost	32,010		35,523		37,618
Benefits paid	237,363		257,570		232,633
Curtailments	(73,414	)	(68,284	)	(108,955	)
Actuarial (gains) losses	(9,881	)	(73,526	)	291,839
ABO at year-end (1)	5,083,766		5,165,783		5,316,961
Projected benefit obligation (PBO) at the beginning of the year	5,501,455		5,699,598		5,555,432
Interest cost	219,272		227,240		217,632
Service cost	49,697		43,842		48,757
Benefits paid	237,363		257,570		232,633
Curtailments	(102,834	)	(198,586	)	(136,391	)
Actuarial (gains) losses	(23,423	)	(13,069	)	246,802
PBO for service rendered to date at year-end	5,406,804		5,501,455		5,699,599
CHANGE IN PLAN ASSETS
Plan assets at fair value at the beginning of the year	3,183,176		3,017,390		2,441,549
Benefits paid	178,482		213,672		168,265
Company contribution...(4)	140,763		186,889		423,564
Return on Plan assets	180,852		192,569		320,542
Plan assets at fair value at year-end (2)	3,326,309		3,183,176		3,017,390
FUNDED STATUS
Benefit obligation in excess of plan assets..(3)	2,080,495		2,318,279		2,682,208

(1)	Substantially all accumulated benefit obligations are vested.
(2)	This amount is recorded in non-consolidated insurance subsidiaries (see Note 2.j) based on contracts which cannot be considered as annuity contracts.
(3)	As it’s described in Note 2.j the Group keeps an adequate funding which covers the total accrued commitments. Spanish GAAP “Total Accrued Commitments” differs from its U.S. GAAP equivalent “Projected Benefit Obligation” (“PBO”) (as defined according to SFAS 87) because the former includes other commitments such as those arising from employees early retired or annuity contracts which are not included in the “PBO” (as defined by SFAS 87); in the same manner, Spanish GAAP “Plan assets” also include annuity contracts which are not included in “Plan assets” as calculated under SFAS 87. Accordingly, total Accrued Commitments are funded both under Spanish and U.S. GAAP, and the only difference is the balance sheet classification. Hence, there’s no need of an additional liability as of December 31, 2004, 2003 and 2002.
(4)	Expected Contributions for 2005 are similar in amount to 2004 contribution of €140,763 thousands.
The following table shows the differences between the Total Accrued Commitments registered by Spanish companies and the Projected Benefit Obligation (PBO) under U.S. GAAP of the plans of the Bank and the Banesto Group as of December 31, 2004, 2003 and 2002.

Thousands of Euro	2004		2003		2002
Total Accrued Commitments (Note 2.j)	10,298,110		9,995,615		9,975,207
Commitments arising from employees retired early (Note 2.j) (*)	(4,064,242	)	(3,607,263	)	(3,382,436	)
Other commitments (Note 2.j)	(48,244	)	(42,096	)	(29,897	)
Annuity contracts, total accrued commitments in other Spanish
companies and other (**)	(778,820	)	(844,802	)	(863.275	)
Projected Benefit Obligation under U.S. GAAP	5,406,804		5,501,454		5,699,599

(*)	These are special termination benefits which are classified, as per Spanish GAAP, under “Provisions for Contingencies and Expenses – Pension Allowance” caption of the balance sheet.
(**)	Of which annuity contracts amounted to €713,820, €809,373 and 856,048 thousands as of December 31, 2004, 2003 and 2002.

F-103

In addition to Spanish entities, certain Group finance entities abroad have commitments to their employees that are similar to pensions.

The technical assumptions used by these entities (interest rates, mortality tables, cumulative annual CPI, etc.) are consistent with the economic conditions prevailing in those countries.

As of December 31, 2004, 2003 and 2002, the Total Accrued Commitments registered by these foreign companies amounted to €8,811, €3,301 and €3,002 million, respectively (of the 2004 figure, €5,232 are related to Abbey). Of these amounts, €2,575, €1,308 and €1,390 million respectively, were covered by in-house pension allowances recorded under the “Provisions for Contingencies and Expenses – Pension Allowance” caption in the consolidated balance sheets (of the 2004 figure, €1,207 are related to Abbey). The remaining amount was covered by policies taken out with insurance companies.

Abbey and Banespa are among the foreign entities those with the biggest pension commitments. Their pension allowances amount €2,370 of the total €2.575 thousand allowances of foreign entities.

Banespa’s pension plans have been funded since the inclusion of Banespa in the Group (the acquisition in November 2000 of 33% of Capital Stock representing 66.5% of voting rights). In April 2001, the Bank acquired through a tender offer 67% of its Capital Stock, obtaining 98.3% of its voting rights. Then a previously planned voluntary redundancy program was launched and Banespa reduced its employee base by approximately a third. In the process, assets allocated to plan assets were clearly defined. Banespa has 5 different pension plans, some of them contributory plans, which are presented separately since they are different in nature. Some of the data on these plans are:

ACTUARIAL ASSUMPTIONS IN BANESPA	2004	2003	2002
Discount rate	10%-12%	10%-12%	10%-12%
	UP-84 rated 1 year for	UP-84 rated 1 year for	UP-84 rated 1 year for
Life expectancy table	males and females	males and females	males and females
Salary increase rate	0%	0%	0%
Inflation rate	5%	5%	5%
Expected rate of return on plan assets	12%	12%	12%

F-104

Thousands of Euros	2004	2003		2002
CHANGE IN BENEFIT OBLIGATION
Accumulated benefit obligation (ABO) at the beginning of the year	1,602,397	1,473,790		2,788,444
Interest cost	259,798	182,399		181,005
Service cost	6,316	5,929		11,436
Benefits paid	206,291	197,059		177,756
Curtailments	—	(118,113	)	(76,972	)
Actuarial and exchange (gains) losses	44,019	255,451		(1,252,367	)
ABO at year-end	1,706,239	1,602,397		1,473,790
Vested benefit obligation (VBO) at year-end	1,575,371	1,490,650		1,358,564
Projected benefit obligation (PBO) at the beginning of the year	1,602,397	1,473,790		2,788,444
Interest cost	259,798	182,399		181,005
Service cost	6,316	5,929		11,436
Benefits paid	206,291	197,059		177,756
Curtailments	—	(118,113	)	(76,972	)
Actuarial and exchange (gains) losses	44,019	255,451		(1,252,367	)
PBO for service rendered to date at year-end	1,706,239	1,602,397		1,473,790
CHANGE IN PLAN ASSETS
Plan assets at fair value at the beginning of the year	653,739	496,707		764,872
Benefits paid	206,291	197,059		177,756
Member and company contributions....(2)	169,853	174,863		168,762
Return on Plan assets	203,651	172,749		133,809
Exchange differences	8,468	6,479		(392,980	)
Plan assets at fair value at year-end	829,420	653,739		496,707
FUNDED STATUS
Projected benefit obligation in excess of plan assets (1)	876,819	948,658		977,083

(1)

As it’s described in Note 2.j the Group keeps an adequate funding which covers the total accrued commitments. Spanish GAAP “Total Accrued Commitments” differs from its U.S. GAAP equivalent “Projected Benefit Obligation” (“PBO”) (as defined according to SFAS 87) because the former includes other commitments such as those arising from employees early retired or annuity contracts which are not included in the “PBO” (as defined by SFAS 87); in the same manner, Spanish GAAP “Plan assets” also include annuity contracts which are not included in “Plan assets” as calculated under SFAS 87. Accordingly, total Accrued Commitments are funded both under Spanish and U.S. GAAP, and the only difference is the balance sheet classification. As of December 31, 2004, 2003 and 2002 the in-house pension allowance balances of €2.575, €1,308 and €1,390 millions include €1,163, €1,110 and €1,122 millions covering Banespa’s Net Accrued Pension cost and other commitments related to employee special termination benefits.

(2)

Company expected Contributions for 2005 are comparable in amount to 2004 company contribution of €161,377 thousands.

F-105

For the purposes of US GAAP, Abbey adopts the provisions of SFAS 87, Employers Accounting for Pensions, as amended by SFAS 132, Employers’ Disclosures about Pensions and Other Post-retirement Benefits, in respect of its principal pension plans, The Abbey National Amalgamated Pension Fund, the Scottish Mutual Assurance plc Staff Pension Scheme, the National and Provincial Pension Fund, the Abbey National Group Pension Scheme, the Scottish Provident Institution Staff Pension Fund and the Abbey National Associated Bodies Pension Fund.

The actuarial assumptions used to calculate the projected benefit obligations for the principal pension plans and the disclosures required were as follows:

	2004
Discount rate	5.4%
Life expectancy table	“92” Series
Rate of pension increase	2.8%
Salary increase rate	4.3%
Expected rate of return on plan assets	6.25%

	2004
CHANGE IN BENEFIT OBLIGATION
Projected benefit obligation (PBO) at the beginning of the year (2)	4,763,103
Service cost	175,878
Interest cost	258,529
Members' contributions	19,264
Special termination benefits	33,625
Settlements and curtailments	(63,230	)
Actuarial loss	228,700
Benefits Paid	(124,888	)
Proyected Benefit obligation at year-end	5,290,981
CHANGE IN PLAN ASSETS
Plan assets at fair value at the beginning of the year	3,127,689
Return on plan assets	344,693
Settlements	(57,414	)
Employer contributions	221,279
Employee contributions	19,264
Benefits paid	(124,888	)
Plan assets at fair value at year-end	3,530,623
Projected benefit obligation in excess of plan assets (1)	1,760,358

(1)

As it’s described in Note 2.j the Group keeps an adequate funding which covers the total accrued commitments. Spanish GAAP “Total Accrued Commitments” differs from its U.S. GAAP equivalent “Projected Benefit Obligation” (“PBO”) (as defined according to SFAS 87) because the former includes other commitments such as those arising from employees early retired or annuity contracts which are not included in the “PBO” (as defined by SFAS 87); in the same manner, Spanish GAAP “Plan assets” also include annuity contracts which are not included in “Plan assets” as calculated under SFAS 87. Accordingly, total Accrued Commitments are funded both under Spanish and U.S. GAAP, and the only difference is the balance sheet classification. As of December 31, 2004 the in-house pension allowance balances of €2.575 millions for foreign entities commitments include €1.207 millions co vering Abbey’s Net Accrued Pension cost and other commitments related to employee special termination benefits.

(2)

The estimated accumulated benefit obligation at 31 December 2004 amounted to €4,383 millions (2003: €3,795 millions).

Abbey’s pension scheme did not hold any equity securities of Abbey or any of its related parties at 31 December 2004. In addition, Abbey does not hold insurance policies over the plans, nor has Abbey entered into any significant transactions with the plans. Abbey’s regular contribution to defined contribution plans in 2004 was €170 millions (2003: €136 millions). Expected Contributions for 2005 are €155 millions.

Banco Santander Central Hispano, Banesto, Abbey and Banespa jointly account for more than 95% of the pension allowances in the consolidated statements.

F-106

The following table presents the components of the combined net periodic pension costs for the Bank, the Banesto Group and Banespa:

	Thousands of Euros
NET PENSION COST	2004		2003		2002
Service cost	54,520		50,078		54,610
Interest cost	429,226		479,963		397,682
Excepted return on plan assets	(294,070	)	(270,549	)	(270,002	)
Net amortization and deferral	25,354		26,820		32,100
Amount of curtailment (gain)/loss recognized	5,722		6,778		32,940
Participant contributions	(8,776	)	(9,754	)	(9,868	)
Net pension cost	211,976		283,336		237,462

The Group has no significant post-retirement benefits obligations to its employees other than the pension commitments.

Pension liabilities requirements under Spanish GAAP are more conservative than the minimum requirements under FAS 87. The Group keeps an adequate funding according to Spanish GAAP; therefore, there is no need for additional liabilities under US GAAP. The differences between both regulations in terms of how to present the information are reconciliated in the following table that summarizes the 2004 funded status of pension liabilities:

	Thousands of Euros
Internal funds Spanish GAAP net	10,652,752
Valuation differences and transitional account	1,566,496
Registered liability under Spanish GAAP	12,219,248
Funds from employees retired early	(4,064,242	)
Annuity contracts	(713,820	)
Other commitments	(62,857	)
External funds	658,971
Assets plegded	4,360,043
Plan Assets	(7,722,348	)
Liability under US GAAP	4,674,995

			Minimum
	ABO	Plan Assets	Liability
Santander Central Hispano	3,791,794	2,407,828	1,383,966
Banesto	1,291,972	918,481	373,491
Banespa	1,706,239	829,420	876,819
Abbey	4,383,173	3,530,623	852,550
Other	260,486	35,996	224,490
TOTAL	11,433,664	7,722,348	3,711,316
Registered liability in excess over Minimum Liability as per FAS 87			963,679

Investment policies and asset allocations

The benefit obligations of most of the employees from the former Banco Central Hispanoamericano and Banesto are funded through insurance policies. The pension liabilities of employees from the former Banco Santander are covered by internal fund, since the Bank used to allocate a fixed-income portfolio for its pension commitments.

In Banesto and the Bank itself, the current policy carried out for the pensions which are covered by insurance companies is to demand the legal coverage required, limit the assets in which the insurance company can invest and to demand a minimum yield.

F-107

For the pension commitments which are covered by internal funds, the allocated assets are managed independently and the funds are invested in low-risk assets. With respect to these pension funds settled in Spain, they are invested in Spanish Government debt securities.

The Bank has calculated the expected return on plan assets based on the interest rates guaranteed by the insurance polices, according to their maturity dates, which range from 4.5% to 10.5%.

In the case of Banesto, the expected return on plan assets was calculated based only on the discount rate assumption, which is 4%, because Banesto does not invest in equities and all their investments are in non-participating insurance policies, for which the investment return is guaranteed by the insurance company and was originally based on fixed-interest type investments made by the insurance company.

When we acquired Banespa, its pension commitments were not provisioned. The strategy the Group followed was to fully recognize this liability and to allocate assets to cover it.

Banespa has calculated the overall expected long-term rate of return-on-assets taking into account the own features of each portfolio. In the case of the debt securities, around 80% of the securities are long-term notes linked to the IGPM/IPCA index plus a medium premium of 10.4%. The rest of the debt securities are linked to the CDI with a projected rate of 15% (which already considers the inflation). For the equity investment’s portfolio, Banespa has estimated a return rate of 110% of the CDI, and in the case of the real state’s portfolio, the expected return rate is based on the experience.

The trustees of the Abbey National Pension schemes are required under the U.K. Pensions Act 1995 to prepare a statement of principles governing investment decisions. The principal duty of the trustees is to act in the best interest of the members of the pension schemes. Its investment policies and strategies limit the risk of the assets failing to meet the liabilities, ensure appropriate liquidity and maximize the return on the assets whilst having regard to the previous objectives.

Abbey has calculated the overall expected return on assets as a weighted average of expected returns from individual asset classes, weighted by the percentage of plan assets in each class at the accounting date.

The following table shows the percentages of the asset allocation by each type of investment in 2004 and 2003.

Plan assets allocation (%)	2004								2003
	Santander		Banesto		Banespa		Abbey		Santander		Banesto		Banespa
Debt securities	43.81	%	—		76.0	%	43	%	46.45	%	—		45.8	%
Equity investments and Mutual Funds	—		—		19.8	%	51	%	—		—		50.9	%
Real State	—		—		0.7	%	—		—		—		0.6	%
Insurance	56.19	%	100	%	—		—		53.55	%	100	%	—
Others	—		—		3.5	%	6	%	—		—		2.7	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Estimated future benefit payments

The following table presents the projected benefit payments expected to be paid as of December 31, 2004 for the following years:

Thousands of Euros	Santander	Banesto	Banespa	Abbey
2005	203,685	43,648	194,976	125,523
2006	205,776	46,660	204,894	135,168
2007	209,580	50,697	209,170	145,663
2008	210,918	54,633	218,066	157,010
2009	212,376	58,266	227,067	169,350
From 2010 to 2014	1,077,210	326,733	1,298,756	1,065,882

F-108

H)	DERIVATIVE FINANCIAL INSTRUMENTS
	We use derivatives for both trading and non-trading activities.
	The Group uses derivatives to eliminate, reduce or modify risk in trading portfolios (interest rate, foreign exchange and equity prices), and to provide financial services to clients. Our principal counterparties for this activity are financial institutions. The principal types of derivatives used are: interest rate swaps, future rate agreements, interest rate options and futures, foreign exchange forwards, foreign exchange futures, foreign exchange options, foreign exchange swaps, cross currency swaps, equity index futures and equity options.
	Derivatives are also used in non-trading activity in order to manage the interest rate risk and foreign exchange risk arising from asset and liability management activity. Interest rate and foreign exchange non-optional derivatives are used in non-trading activity. Some of these non-trading transactions could be accounted for as accounting hedges if they meet specific criteria.
	The Group has established policies, procedures and limits in relation to market risk. These limits are defined as a structure which considers different levels from business segment or legal entity levels to portfolio or trader levels. Market risk is monitored by risk committees together with Assets and Liabilities Committees both at the local and global levels.
	More detailed information about market risks and control over them could be found in Item 11. “Quantitative and Qualitative Disclosures about Market Risks”.
	Accounting principles-
	The Group uses derivative financial instruments for trading purposes and to hedge asset and liability exposures. Derivatives accounted for as hedging operations include instruments that meet specific criteria required by Bank of Spain regulations. Derivatives accounted for as trading operations include instruments held for trading purposes and those that do not meet Bank of Spain requirements. A full description of the principles applied by the Group in accounting for derivative financial instruments is disclosed in Note 2.l. Spanish GAAP and U.S. GAAP differ in the accounting treatment of these transactions. See Note in 28.1 for a summary of the accounting criteria, and Note 28.2.m for the impact on the reconciliation of net income and stockholders’ equity from Spanish GAAP to U.S. GAAP.
	The Bank of Spain regulations consider hedging transactions those that meet the following criteria:
	a.	Transactions aimed at eliminating or significantly reducing the foreign exchange rate risk, the interest rate risk or price risk of balance sheet items or other items provided that, in each case, the hedged item and the hedging transactions are explicitly identified at inception of the hedge.
	b.	Transactions aimed at reducing the global risk of correlated groups of assets, liabilities and other transactions, if they are managed through an integrated risk measurement and management control system that allow for the follow-up and explicit identification of the transactions. This system requires a favorable opinion of the external auditor to be issued and reported to the Bank of Spain on an annual basis. Such report specifically addresses the reasonableness, quality, and consistency of the integrated risk measurement and management control system (including compliance with specific documentation requirements) as well as the effectiveness of macro-hedges (80% - 120% range) through the performance of independent stress tests of all macro-hedges in place.
	In the hedges that meet criteria a), gains or losses of the derivatives are accrued and/or recognized symmetrically to the revenues or expenses arising from the hedged items. This is to say that whatever impact the hedged item has on net income is offset by the impact recorded in the same line item in the statement of operations under Spanish GAAP for the hedge instrument.
	In the hedges that meet criteria a) and b) (macro-hedges), all the transactions involved are either accrued or marked to market, as is determined and documented at inception of the transaction.
	It is important to note that both types of hedges (a and b) are managed by the same integrated risk measurement and management control system at each operating unit.
	We have procedures in place that ensure that the requirements with respect to the designation as hedge or speculative, transaction documentation, identification of hedged items and hedging instrument, and the assessment and testing of hedge effectiveness are met.
	The Group enters into thousands of derivative transactions, most of which are aimed at eliminating or reducing risks, but only a limited amount of these transactions receive hedge accounting treatment under Spanish GAAP due to the strict qualifying requirements of Bank of Spain regulations. Given that US GAAP does not allow certain types of hedges, derivative transactions accounted for as hedges under U.S. GAAP are only a portion of the hedge transactions under Spanish GAAP.

F-109

Each type of derivatives accounted for as a hedge under Spanish GAAP is related to a specific type of hedge as classified under U.S. GAAP (fair value, cash flow and net investment) as follows:
	Spanish GAAP classification	US GAAP classification
	Hedges on available-for-sale fixed rate debt securities	Fair value hedge
	Hedges on held-to-maturity securities	Trading
	Hedges on long term fixed rate debt issued	Fair value hedge
	Hedges of the foreign currency of a net investment in a foreign subsidiary	Hedges of the foreign currency of a net investment in a foreign operation
	Hedges on available for sale equity securities (non-group investments)	Fair value hedge
	Hedges on fixed rate loans	Fair Value hedge
	Hedges of designated assets financed by designated liabilities	Cash Flow Hedge
	Macro-hedge	Trading

As there are differences in designation requirements and hedge accounting between Spanish and U.S. GAAP, many transactions accounted for as hedge under Spanish GAAP are reversed for U.S. GAAP purposes and designated as speculative transactions.

Some of the hedges admitted under Spanish GAAP that are not permitted under U.S.GAAP are macro hedging or the hedging of equity instruments issued by the Bank or hedges over held to maturity portfolios. For purposes of the U.S. GAAP reconciliation, those transactions are accounted for as speculative transactions, and the gain or loss on these derivatives is recognized through earnings.

For all the transactions that are considered as hedging both under Spanish and U.S. GAAP, additional information is collected to adapt to the accounting treatment required. The adjustments are made accordingly to the hedge designation to reflect cash flow, fair value or net investment in foreign operation under SFAS 133. Only those transactions which fully comply with SFAS 133 requirements are considered to be hedge transactions.

The vast majority of our hedges are simple hedges: the notional value of the hedging instruments is the same as the face value of the hedged item; the hedging instrument is tailored solely to the hedged risk (either benchmark rate of interest or foreign currency); the settlement methods are standard ones, with settlement periods similar to those for the item to be hedged; there are no prepayable amounts on the item to be hedged or premiums on the hedging instrument, nor are there any options in the hedged items unless such options are completely offset with an opposite option in the hedging instruments.

Among these transactions that are designated hedges under both Spanish and U.S. GAAP, the Group includes derivatives that hedge the foreign currency exposure of a net investment in a foreign subsidiary. The currency of these hedging derivatives is the same currency of the country in which the foreign subsidiary is located, and the amounts to be hedged are closely watched by our risk committee. Since 2003 we have hedged, using foreign exchange non-optional derivatives, almost all of the book value of our investments in Mexico, Chile and partially Brazil.

Under Spanish GAAP, hedging exchange differences on net investments in a foreign subsidiary are recorded with a charge to reserves (in Other Comprehensive Income) to offset the differences arising in the translation of the subsidiary financial statements. These operations are qualified as a hedge of the foreign currency exposure of a net investment in a foreign subsidiary under US GAAP. Therefore, there is no reconciliation adjustment for these hedges.

Finally, the accounting of derivatives designated as trading transactions both under Spanish and U.S. GAAP is also adjusted to U.S. GAAP valuation criteria. Spanish GAAP does not allow recognizing unrealized gains until they are effectively settled (except for derivatives arranged in organized markets). The adjustment considered in the US GAAP reconciliation consists of recognizing the unrealized gains not recognized for Spanish GAAP.

Our Group’s companies enter into intercompany derivative transactions for purposes of managing their own risks.

Usually, in each country in which our Group operates, there is a subsidiary (an individual entity) that acts as the treasury services provider or center for the Group’s financial activities in that country. The remaining subsidiaries operating in that country usually hedge their own risks through transactions entered into with that treasury services provider. In addition, some of our subsidiaries could enter into intercompany derivative transactions with subsidiaries located in other countries.

For accounting purposes, these transactions are recorded as intercompany derivatives on the individual books and records of each company entering into such transactions, but are eliminated in the consolidation process.

Fair value methods-

The following methods and assumptions were used by the Group in estimating its fair value disclosures for derivative financial instruments for which it is practicable to estimate such value.

F-110

Forward purchases/sales of foreign currency

Estimated fair value of these financial instruments is based on quoted market prices.

Forward purchase/sale of government debt securities

Estimated fair value of these financial instruments is based on quoted market prices since they are mostly traded in organized markets. On the other hand, the maturity of these operations is generally under fifteen days. Accordingly, no material unrecognized gains or losses can be found at closing.

Options and financial futures

Derivatives traded in organized markets are valued using the mark to market method so the fair value is based on quoted market prices.

For options and futures traded in OTC markets (mainly currency options), the fair value is estimated based on theoretical year-end closing prices. These year-end closing prices are calculated estimating the amounts the Group would receive or pay based upon the yield curve prevailing at year-end or prices.

As indicated above, the possible losses arising from the valuation of unhedged transactions are recognized by the Group and are recorded against income.

Forward rate agreements and interest rate swaps

Fair values of these contracts are estimated based on the discounted future cash flows related to the interest rates to be collected or paid, using for this purpose the yield curve prevailing at year-end.

The potential losses are recorded following the same procedure established for other OTC derivatives, which were described above.

The disclosure of the notional amounts of the derivatives of the Group by its designation as trading or hedging operations under Spanish GAAP is as follows:

	Thousands of Euros
	2004	2003
Trading
Interest risk contracts:
Forward rate agreements	25,332,323	18,263,832
Interest rate swaps	849,037,095	231,433,404
Options and futures	281,660,974	132,424,311
Foreign exchange contracts:
Forward purchase/sale of foreign currency	31,005,396	10,842,930
Currency options	12,556,290	4,287,391
Currency swaps	16,017,634	6,931,173
Derivatives on securities and commodities (1)	50,584,410	20,611,582
	1,266,194,122	424,794,623
Hedging derivatives
Interest risk contracts:
Forward rate agreements	3,390	8,503
Interest rate swaps	110,748,376	54,593,956
Options and futures	50,998,525	92,940,689
Foreign exchange contracts:
Forward purchase/sale of foreign currency	30,893,505	34,296,030
Currency options	20,350	3,457,135
Currency swaps	48,445,869	4,270,146
Derivatives on securities and commodities (1)	53,890,125	38,855,508
	295,000,140	228,421,967
Total derivatives notional amount	1,561,194,262	653,216,590
(1)   Future commodity transactions amounted to €5, €1 and €1 millions as of December 31, 2004, 2003 and 2002, respectively.

F-111

The credit exposure in derivative operations is closely controlled. The Group has netting agreements with major counterparties and receives collateral as guarantee of net positions. The aggregate credit exposure of each category of derivative financial instruments held by the Group is shown below:

	Thousands of Euros
	2004		2003
OTC Interest Rate Derivatives:
Interest rate swaps	8,336,393		9,572,447
Forward rate agreements	11,012		6,334
Options	607,885		775,930
	8,955,290		10,354,711
OTC Foreign Exchange Derivatives:
Foreign currency forwards	3,379,341		3,513,064
Foreign currency swaps	1,084,355		1,073,634
Options	394,244		265,241
	4,857,940		4,851,939
Derivatives on securities and commodities	(209,970	)	3,653,207
Total:	13,603,260		18,859,857

The following table shows for each type of instrument in the trading derivative portfolio the year-end notional value and the fair value for the years 2004 and 2003:

	Thousands of Euros
	2004			2003
	Notional			Notional
	Value	Fair Value		Value	Fair Value
Trading Derivative Portfolio
Interest risk contracts:
Forward rate agreements	25,332,323	5,095		18,263,832	2,517
Interest rate swaps	849,037,095	(520,671	)	231,433,404	(42,756	)
Options and futures	281,660,974	51,888		132,424,311	95,046
Foreign exchange contracts:
Forward purchase/sale of foreign currency	31,005,396	(161,140	)	10,842,930	(71,398	)
Currency options	12,556,290	(371,421	)	4,287,391	661
Currency swaps	16,017,634	1,249		6,931,173	8,538
Derivatives on securities and commodities	50,584,410	(1,755,018	)	20,611,582	(46,940	)
	1,266,194,122	(2,750,018	)	424,794,623	(54,332	)

F-112

The following is a detail of our consolidated trading and hedging transactions broken down into notional amounts and their fair value in accordance with U.S. GAAP at the dates indicated:

(In millions of euros)
		December 31,			December 31,			December 31,
		2004			2003			2002
		Notional			Notional			Notional
		Amount	Fair Value		Amount	Fair Value		Amount	Fair Value
•	Trading	1,462,950.7	(2,116.9	)	437,978.1	(91.1	)	683,758.6	261.8
•	Hedging	98,243.6	1,712.2		215,238.5	637.8		103,864.5	1,023.9
	Fair Value Hedges	35,806.4	1,369.2		211,730.0	539.3		94,966.4	715.8
	Cash Flow Hedges	61,502.0	59.6		1,204.4	65.2		—	—
	Hedges of the foreign currency of a net investment in a foreign subsidiary	935.2	283.4		2,304.1	33.3		8,898.1	308.1
		1,561,194.3	(404.7	)	653,216.6	546.7		787,623.1	1,285.7

For informational and comparison purposes, the following is a detail of our consolidated trading and hedging transactions broken down into notional amounts and their fair value in accordance with Spanish GAAP at the dates indicated:

(In millions of euros)
		December 31,			December 31,			December 31,
		2004			2003			2002
		Notional			Notional			Notional
		Amount	Fair Value		Amount	Fair Value		Amount	Fair Value
•	Trading	1,266,194.2	(2,750.0	)	424,794.6	(54.3	)	663,867.1	171.5
•	Hedging	295,000.1	2,345.4		228,422.0	601.0		123,756.0	1,114.2
		1,561,194.3	(404.7	)	653,216.6	546.7		787,623.1	1,285.7

The notional amounts of hedging transactions under U.S. GAAP are less than those under Spanish GAAP due to the fact that Spanish GAAP allows certain hedge accounting that is not permitted under U.S. GAAP (principally the hedging of preferred stock issued and the held-to-maturity portfolio, as well as macro-hedge accounting).

The Group manages its exposures to market movements by modifying the asset and liability mix, either directly or through the use of derivative financial products including interest rate swaps, equity swaps, futures, forwards, purchased option positions (interest rate caps, floors, and collars) and foreign exchange contracts.

The transition impact of SFAS 133 was a credit of €60.2 million on Accumulated Other Comprehensive Income and an increase of net income of €132.4 million (an increase of €192.6 million in Stockholder’s equity). The positive effect on net income was reduced to €68.2 millions for the whole year 2001, and to a debit of €21.9 million on Accumulated Other Comprehensive Income (a net increase of €46.3 million in Stockholder’s equity).

I) FAIR VALUE OF FINANCIAL INSTRUMENTS

As required by SFAS No. 107, “Disclosures about Fair Value of Financial Instruments”, the Group has estimated and disclosed the fair value information about financial instruments for which it is practicable to estimate that value. Fair value of a financial instrument is the amount for which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value is best determined by values quoted through active trading markets. Active trading markets are characterized by numerous transactions of similar financial instruments between willing buyers and willing sellers. Because no active trading market exists for various types of financial instruments, many of the fair values disclosed were derived using present value estimates or other valuation techniques. Therefore, the Group's ability to actually realize these derived values cannot be assured.

The estimated fair values disclosed under SFAS No. 107 may vary significantly between institutions based on the estimates and assumptions used in the various valuations methods. Additionally SFAS No. 107 disclosures exclude goodwill, non-financial assets such as real estate as well as certain financial instruments such as leases. Accordingly, the aggregate estimated fair values presented in the following tables do not represent the market value of the whole Group.

F-113

The following table presents the carrying value and fair value of the Group's financial instruments on Spanish GAAP Balance sheet as of December 31, 2004 and 2003:

				Thousands of Euros
		2004				2003
		Carrying		Fair		Carrying		Fair
		Amount (*)		Value		Amount (*)		Value
	Assets:
Cash and due from banks		10,374,223		10,374,223		10,507,254		10,507,254
Interest-earning deposits		21,169,241		21,133,172		14,627,776		14,690,562
Securities purchased under agreements to resell		51,969,048		51,969,048		24,303,361		24,303,361
Investment securities		112,376,782		115,535,586		85,441,633		87,792,747
	Loans and leases, net of unearned income	345,227,694		345,762,329		174,618,476		174,567,222
	Less- Allowance for loans losses	(6,976,516	)	(6,976,516	)	(5,116,683	)	(5,116,683	)
Net loans		338,251,178		338,785,813		169,501,793		169,450,539
	Liabilities:
Deposits:
	Non-interest	8,918,933		8,918,933		3,463,179		3,463,179
	Demand	108,552,578		108,552,578		52,638,099		52,638,099
	Savings	36,486,769		36,307,209		23,987,739		23,903,926
	Time	150,708,428		151,224,032		86,285,702		85,890,681
Short-term borrowings		124,423,929		124,378,944		85,594,313		85,577,017
Long-term debt		90,134,706		93,602,855		40,607,380		41,712,307
Minority interest / Preferred securities		3,000,735		3,532,038		5,477,056		6,437,465

(*) Carrying amount is presented according to U.S. GAAP criterion but following Spanish GAAP valuation principles. Significant differences in valuation criteria come mainly from SFAS 115 ”Accounting for Certain Investments in Debt and Equity Securities” and SFAS 133 “Accounting for Derivative Instruments and Hedging Activities”. Following US valuation criteria Assets and Liabilities hedged would be valued at market prices.

Unused credit facilities granted to third parties are indexed to market interest rates at the moment of disposal, or to fixed interest rates well above the market (mostly credit cards). The positive fair value of them is not material.

The Group has used the following methods and assumptions in estimating its fair value disclosures for financial instruments for which it is practicable to estimate such value:

Cash and due from banks

For this short-term instrument, the carrying amount is a reasonable estimate of fair value.

Interest-earning deposits in other banks and securities purchased under agreement to resell-

For assets maturing within three months, the carrying amount is a reasonable estimate of fair value. The fair value of the remaining assets maturing in over three months is estimated by discounting the expected future cash flows using rates currently offered for deposits of similar remaining maturities.

Investment securities

Debt securities:

Listed securities: fair values are based on year-end quoted market prices.

Unlisted securities: fair values are estimated on the basis of quoted market prices of other listed debt securities of similar interest rate, credit risk and maturity. If no similar listed debt securities can be identified, the fair value is estimated by discounting future cash-flows using year-end rates based on market rates available on securities with similar credit and maturity characteristics.

Equity securities:

Listed securities with less than 3% ownership: fair values are based on year-end quoted market price.

Unlisted securities: fair values are determined based on the underlying book value of the investment considering latest investee’s financial statements (in some cases unaudited) and other information available.

Loans and leases

The fair values of the loan and lease portfolio have been estimated as follows:

F-114

	1.	The estimate of the provision for possible credit losses includes consideration of risk premiums applicable to various types of loans based on factors such as the current situation of the economic sector in which each borrower operates, the economic situation of each borrower and guarantees obtained. Accordingly, the allowance for possible loan losses is considered a reasonable estimate of the discount required to reflect the impact of credit risk.
	2.	For short term fixed and floating-rate loans for which the interest rates are similar to the average rates currently offered for each type of loan (such as commercial or mortgage loans), the carrying amount, net of the related allowance for possible loan losses, is considered a reasonable estimate of fair value.
	3.	The fair values of the remaining loans, which the Group determined that are at rates different to those currently offered, are estimated as the present value of future cash flows, discounted at the year-end interest rates at which similar loans are being granted to borrowers with similar credit ratings and remaining maturities.
Deposits and short-term borrowings
For financial instruments maturing within three months, the carrying amount is a reasonable estimate of fair value. For financial instruments maturing in over three months, the fair value is estimated by discounting the expected future cash flows using rates currently offered for deposits or short-term borrowings of similar remaining maturities.
Long-term debt
Listed debentures: Fair values are based on year-end quoted market prices.
Unlisted debentures: Fair value is estimated by discounting the future cash flows over the remaining term to maturity of such debt. Discount rates are determined based on market rates available at year-end on securities with similar credit and maturity characteristics.

J) GEOGRAPHIC AND BUSINESS SEGMENT DISCLOSURES

Certain geographic disclosures required by SFAS 131 are included in Note 25. Segment disclosures are the following:

• European Retail Banking

• Retail Banking Latin America

• Asset Management and Private Banking

• Global Wholesale Banking

• Financial Management and Equity Stakes

These segments are defined by management, and reflect the way business is conducted. Each business segment has an executive manager responsible for its performance. All financial information related to business segments is presented under Spanish GAAP.

The segregation of each of these areas is based on the financial statements of the different legally incorporated units. In all cases, the financial statements are adapted to Spanish regulations, reflecting both the adjustments for homogenization and/or the applicable consolidation adjustments.

The goodwill originated from all different investments made by the Group, as well as its amortization, is allocated to Financial Management and Equity Stakes. The decisions related to acquisitions and prices offered in these purchases are taken in a centralized way. The other business segments present its net income without any charge derived from goodwill and its performance is evaluated by management without any goodwill allocation.

All the business segments have been assigned the minimum regulatory capital for risk assets, except for two: Corporate Banking in Europe and Retail Banking in Latin America. Experience has shown that economic risk in Corporate Banking in Europe is lower than its regulatory risk weighting and it consumes less capital than assigned, while in Latin America it is higher. Management considers that it is therefore advisable to weight the regulatory capital for Corporate Banking in Europe downward (50%) and upward (50%) in Latin America. The Group’s institutional costs have been distributed among all businesses. The rest of costs attributed to support and control services continue to be distributed in accordance with the Group’s traditional criteria.

Santander Group maintained in 2004 the presentation criteria applied in 2003 and in order to facilitate year-on-year comparison, the previous business segments have also been kept, without incorporating Abbey into the operating business segments. Abbey’s information is in a separate section.

The business segment’s definition and content are as follows:

• European Retail Banking: This segment covers the banking activities of the different networks and specialized units in Europe, principally with individual clients and small and medium companies (“SMEs”), as well as private and public institutions. During 2004, this segment was made up of four units: Santander Central Hispano Retail Banking, Banesto, Portugal and Santander Consumer. There have been made some adjustments, of little significance in the 2002 figures of Santander Consumer, due to the change of dependency of some business units.

F-115

•	Retail Banking Latin America: This segment covers the banking activities in Latin America through our subsidiary banks and finance companies. It does not include, unless there are distribution agreements, the results of investment banking or asset management channeled through specialized business units. In accordance with the principles already stated, the entities in these countries adopt Spanish accounting regulations. As stated above, amortization of goodwill, which is considered a cost unrelated to the management of business, and country-risk provisions are recorded in Financial Management and Equity Stakes.
•	Asset Management and Private Banking: Asset management includes pension and mutual funds and bancassurance. Private banking includes the activity carried out with clients via the specialized units in Spain and abroad. In both cases, the agreements for distribution with the Group’s networks throughout the world remain in force for remuneration of distribution and customer attention.
•	Global Wholesale Banking: This segment covers our corporate banking in Spain, the rest of Europe and New York, the treasury activities in Madrid and New York as well as investment banking throughout the world.
•	Financial Management and Equity Stakes: This segment is responsible for the centralized activities relating to strategic or temporary equity stakes in industrial and financial companies, financial management related to the structural exchange rate position, the Group’s asset and liability portfolio and management of issues and securitizations. It also controls all capital and reserves and allocations of capital and liquidity to the different business segments. Lastly, the segment also covers, on a temporary basis, businesses that are being wound down or closed. In exceptional circumstances, it is responsible for the launch of an activity of a strategic nature.
Financial ratios
Financial information related to business segments includes some financial ratios widely used to measure the performance of Spanish financial entities. Those ratios shouldn’t be considered “non-GAAP financial measure” as defined by the SEC. In addition to ROE which is widely known, the following ratios are included:
•	Efficiency ratio: This is a cost to income ratio, measures the expenses incurred to generate income. It is calculated by adding personnel and general administrative expenses and dividing it by “gross operating income”.
•	NPL Ratio: “Non- Performing Loans” Ratio. Measures the percentage of non-performing loans (as defined under Spanish GAAP, see Item 4. Information on the company-B. Business Overview – Selected Statistical Information –Classified Assets- Bank of Spain Classification Requirement “) in relation to total loans.
•	NPL Coverage: Specific allowances for “Non-Performing Loans” (as defined under Spanish GAAP) as a percentage of “Non-Performing Loans”.
The following charts summarize key financial data of each business segment:

Euro million	Net Attributable Income						Variation %				ROE (%)
	2004		2003		2002		04/03		03/02		2004	2003	2002
European Retail Banking	2,120.3		1,761.6		1,565.7		20.4		12.5		19.50	19.51	19.03
Retail Banking Latin America	1,038.6		1,064.5		1,098.5		(2.4	)	(3.1	)	26.87	29.03	22.97
Asset Management & Private Banking	351.1		319.6		327.0		9.9		(2.3	)	63.67	59.38	66.08
Global Wholesale Banking	331.1		225.6		176.3		46.8		27.9		20.87	13.32	9.34
Financial Management and Equity Stakes	(705.6	)	(760.5	)	(920.4	)	—		—		—	—	—
Total	3,135.6		2,610.8		2,247.2		20.1		7.9		15.98	14.48	12.42

Euro million	Net Operating Income						Variation %				Efficiency (%)
	2004		2003		2002		04/03		03/02		2004	2003	2002
European Retail Banking	3,918.7		3,329.5		2,810.2		17.7		18.5		42.46	45.75	50.04
Retail Banking Latin America	1,741.2		1,653.6		2,204.5		5.3		(25	)	55.26	54.86	54.01
Asset Management & Private Banking	479.1		416.6		476.4		15.0		(12.6	)	42.33	43.99	41.94
Global Wholesale Banking	412.7		383.2		344.9		7.7		11.1		46.03	47.54	51.49
Financial Management and Equity Stakes	(6.5	)	(62.3	)	(270.2	)	(89.5	)	(77.0	)	—	—	—
Total	6,545.2		5,720.7		5,565.8		14.4		2.8		47.44	49.34	52.28

F-116

Euro million	Net Interest Income						Variation %
	2004		2003		2002		04/03	03/02
European Retail Banking	4,952.0		4,633.1		4,474.3		6.9	3.6
Retail Banking Latin America	3,369.7		2,965.3		4,589.3		13.6	(35.4	)
Asset Management & Private Banking	123.1		93.6		114.3		31.5	(18.1	)
Global Wholesale Banking	401.5		379.0		455.1		5.9	(16.7	)
Financial Management and Equity Stakes	(210.5	)	(112.7	)	(274.3	)	86.7	(58.9	)
Total	8,635.7		7,958.3		9,358.7		8.5	(14.7	)
The following are the reconciliation of reportable segment revenues to the Group’s consolidated totals:

Income statement,			Retail		Asset				Financial
By business segment	European		Banking		Management		Global		Management
January-December 2004	Retail		Latin		and Private		Wholesale		and Equity
Amounts in millions of Euro	Banking		America		Banking		Banking		Stakes		Total Group
Net interest income	4,952.0		3,369.7		123.1		401.5		(210.5	)	8,635.7
Net fees and commissions	2,347.0		1,201.3		725.9		335.7		(0.6	)	4,609.3
Basic revenue	7,298.9		4,571.0		849.0		737.2		(211.1	)	13,245.0
Net gains on financial transactions	276.7		204.5		22.1		81.2		368.2		952.7
Gross operating income	7,575.6		4,775.5		871.0		818.3		157.1		14,197.7
Personnel and general expenses	(3,216.9	)	(2,638.8	)	(368.7	)	(376.7	)	(134.2	)	(6,735.2	)
a) Direct	(2,754.5	)	(2,504.2	)	(349.4	)	(292.8	)	(128.0	)	(6,028.9	)
Personnel expenses	(1,996.1	)	(1,330.3	)	(222.3	)	(188.6	)	(30.5	)	(3,767.8	)
General expenses	(758.3	)	(1,173.9	)	(127.1	)	(104.2	)	(97.5	)	(2,261.0	)
b) Assigned	(462.4	)	(134.6	)	(19.3	)	(83.9	)	(6.2	)	(706.4	)
Depreciation	(366.1	)	(282.7	)	(23.3	)	(27.0	)	(35.9	)	(735.0	)
Other operating costs	(74.0	)	(112.8	)	—		(1.9	)	6.4		(182.3	)
Net operating income	3,918.7		1,741.2		479.1		412.7		(6.5	)	6,545.2
Net income from equity - accounted holdings	113.1		3.7		56.0		—		367.6		540.4
Net provisions for credit - losses	(1,040.0	)	(286.7	)	(9.2	)	21.5		(333.3	)	(1,647.7	)
Other income	67.5		(182.6	)	(9.1	)	3.6		(263.6	)	(384.4	)
Goodwill amortization	—		—		—		—		(618.9	)	(618.9	)
Income before taxes	3,059.2		1,275.6		516.7		437.8		(854.7	)	4,434.6
Net consolidated income	2,225.4		1,200.1		361.9		333.4		(452.9	)	3,667.9
Net attributable income	2,120.3		1,038.6		351.1		331.1		(705.6	)	3,135.6

F-117

The total assets reconciliation from business segments to consolidated figures is presented in the table below:
Total Assets	Euro Millions
	December 2004
European Retail Banking	203,128.2
Retail Banking Latin America	86,326.1
Asset Management & Private Banking	8,793.1
Global Wholesale Banking	74,190.2
Financial Management and Equity Stakes	104,440.5
Total assets for reportable segments	476,878.1
Balances between entities of different business segment	(60,196.7	)
Liquidity lent between segments	(24,052.1	)
Capital allocated to segments	(20,452.0	)
Assets netted from liabilities in business segment balance sheet presentation (1)	4,810.9
Abbey National plc (2)	198,409.7
Consolidated Total Assets	575,397.9

(1)	Essentially "Treasury Stock" and "Accumulated losses at consolidated companies" items in the consolidated balance sheet.
(2)	Abbey was not considered in the breakdown of the business segments.

F-118

European Retail Banking

Income statement. January-December
Millions of Euros							Change %
	2004		2003		2002		04/03		03/02
Net interest income	4,952.0		4,633.1		4,474.3		6.9		3.6
Net fees and commissions	2,347.0		2,115.4		1,964.2		11.0		7.7
Basic revenue	7,298.9		6,748.4		6,438.5		8.2		4.8
Net gains on financial transactions	276.7		175.7		95.9		57.5		83.1
Gross operating income	7,575.6		6,924.1		6,534.4		9.4		6.0
Personnel and general expenses	(3,216.9	)	(3,168.0	)	(3,269.7	)	1.5		(3.1	)
a) Personnel expenses	(1,996.1	)	(1,992.1	)	(2,025.8	)	0.2		(1.7	)
b) General expenses	(758.3	)	(740.1	)	(769.2	)	2.5		(3.8	)
c) Allocated expenses	(462.4	)	(435.7	)	(474.6	)	6.1		(8.2	)
Depreciation	(366.1	)	(365.7	)	(396.4	)	0.1		(7.7	)
Other operating costs	(74.0	)	(61.0	)	(58.2	)	21.3		4.7
Net operating income	3,918.7		3,329.5		2,810.2		17.7		18.5
Income from equity - acc. holdings	113.1		87.9		72.2		28.7		21.9
Other income	67.5		57.3		(44.5	)	17.8		—
Net provisions for credit - losses	(1,040.0	)	(895.0	)	(640.4	)	16.2		39.8
Goodwill amortization	—		—		—		—		—
Income before taxes	3,059.2		2,579.7		2,197.4		18.6		17.4
Net consolidated income	2,225.4		1,862.7		1,636.6		19.5		13.8
Net attributable income	2,120.3		1,761.6		1,565.7		20.4		12.5
Balance sheet. December
Loans and credits	144,273.9		125,137.2		109,207.8		15.3		14.6
Government debt securities	4,315.7		4,009.4		4,029.5		7.6		(0.5	)
Due from credit institutions	29,858.2		31,512.5		22,203.5		(5.3	)	41.9
Investment securities	13,664.0		9,636.3		6,911.7		41.8		39.4
Tangible and intangible assets	3,037.1		2,979.6		3,180.2		1.9		(6.3	)
Other assets	7,979.3		7,466.7		7,960.4		6.9		(6.2	)
Total Assets / Liabilities	203,128.2		180,741.7		153,493.0		12.4		17.8
Customer deposits	98,011.7		93,282.1		90,254.8		5.1		3.4
Debt securities	20,398.1		13,035.9		7,401.3		56.5		76.1
Subordinated debt	1,662.0		1,211.5		1,017.7		37.2		19.0
Due to credit institutions	42,624.1		39,501.3		32,954.0		7.9		19.9
Other liabilities	28,387.8		23,874.2		13,445.6		18.9		77.6
Capital assigned	12,044.6		9,836.9		8,419.5		22.4		16.8
Other managed funds (off - balance sheet)	68,863.6		61,716.8		53,224.9		11.6		16.0
Mutual funds	58,788.6		53,066.9		45,855.6		10.8		15.7
Pension funds	7,540.4		6,842.4		6,094.0		10.2		12.3
Managed portfolios	2,534.6		1,807.5		1,275.2		40.2		41.7
Customer funds	188,935.3		169,246.3		151,898.7		11.6		11.4
Total managed funds	271,991.7		242,458.6		206,717.9		12.2		17.2
Ratios (%)
ROE	19.50		19.51		19.03
Efficiency Ratio	42.46		45.75		50.04
NPL Ratio	1.06		1.09		1.41
NPL coverage	235.33		209.82		161.99

F-119

Santander Central Hispano Retail Banking
Income statement. January-December
Millions of Euros
	2004		2003		2002
Net interest income	2,005.5		2,064.8		2,064.8
Net fees and commissions	1,487.2		1,316.0		1,144.4
Basic revenue	3,492.6		3,380.9		3,209.1
Net gains on financial transactions	146.7		50.8		40.8
Gross operating income	3,639.3		3,431.7		3,249.9
Personnel and general expenses	(1,565.5	)	(1,559.2	)	(1,625.1	)
a) Personnel expenses	(975.2	)	(987.0	)	(999.4	)
b) General expenses	(189.7	)	(199.3	)	(200.2	)
c) Allocated expenses	(400.6	)	(373.0	)	(425.5	)
Depreciation	(174.3	)	(178.1	)	(184.7	)
Other operating costs	(39.9	)	(36.9	)	(56.6	)
Net operating income	1,859.6		1,657.5		1,383.6
Income from equity - acc. holdings	—		—		0.0
Other income	(425.7	)	3.6		(5.0	)
Net provisions for credit — losses	14.1		(371.7	)	(284.8	)
Goodwill amortization	—		—		—
Income before taxes	1,448.0		1,289.4		1,093.8
Net consolidated income	1,041.4		927.7		787.2
Net attributable income	1,041.4		926.5		786.0
Balance sheet. December
Loans and credits	66,837.3		60,012.4		49,646.5
Government debt securities	—		—		—
Due from credit institutions	91.7		21.5		29.9
Investment securities	1.0		1.1		1.3
Tangible and intangible assets	1,599.4		1,612.2		1,719.4
Other assets	784.8		866.8		994.6
Total Assets / Liabilities	69,314.1		62,513.9		52,391.7
Customer deposits	42,652.9		42,426.9		42,606.9
Debt securities	2,248.6		387.5		553.4
Subordinated debt	—		—		0.0
Due to credit institutions	14.5		332.6		553.2
Other liabilities	18,844.3		14,724.4		4,774.9
Capital assigned	5,553.8		4,642.5		3,903.4
Other managed funds (off - balance sheet)	47,384.8		42,654.8		37,267.4
Mutual funds	42,141.5		37,888.7		33,047.3
Pension funds	5,243.3		4,766.2		4,220.1
Managed portfolios	—		—		—
Customer funds	92,286.3		85,469.2		80,427.7
Total managed funds	116,698.9		105,168.8		89,659.1
Ratios (%)
ROE	20.78		22.40		21.34
Efficiency Ratio	43.02		45.44		50.00
NPL Ratio	0.55		0.73		1.08
NPL coverage	399.41		262.87		170.14

F-120

Banesto
Income statement. January-December
Millions of Euros
	2004		2003		2002
Net interest income	1,142.8		1,058.9		1,002.7
Net fees and commissions	502.4		462.4		432.1
Basic revenue	1,645.1		1,521.2		1,434.8
Net gains on financial transactions	74.5		57.1		47.0
Gross operating income	1,719.6		1,578.4		1,481.8
Personnel and general expenses	(783.9	)	(764.8	)	(762.3	)
a) Personnel expenses	(557.7	)	(545.2	)	(543.5	)
b) General expenses	(198.0	)	(193.4	)	(194.9	)
c) Allocated expenses	(28.2	)	(26.2	)	(23.9	)
Depreciation	(97.7	)	(101.1	)	(96.4	)
Other operating costs	(22.1	)	(19.9	)	(14.0	)
Net operating income	815.9		692.6		609.1
Income from equity - acc. holdings	91.0		74.4		56.1
Other income	54.4		27.1		15.4
Net provisions for credit - losses	(199.9	)	(171.4	)	(118.3	)
Goodwill amortization	—		—		—
Income before taxes	761.5		622.7		562.3
Net consolidated income	533.6		436.4		434.1
Net attributable income	470.1		379.9		414.2
Balance sheet. December
Loans and credits	39,540.1		31,250.3		26,701.7
Government debt securities	4,315.7		4,009.4		4,029.5
Due from credit institutions	13,364.2		12,627.5		8,265.9
Investment securities	3,869.0		4,243.2		4,632.1
Tangible and intangible assets	783.5		785.8		890.4
Other assets	4,610.5		4,479.4		4,591.6
Total Assets / Liabilities	66,483.1		57,395.7		49,111.1
Customer deposits	30,994.3		28.637.0		25,501.2
Debt securities	11,400.8		5,658.3		2,601.6
Subordinated debt	1,243.0		762.1		468.1
Due to credit institutions	13,076.8		13,873.0		12,085.6
Other liabilities	6,749.1		5,858.1		6,216.1
Capital assigned	3,019.1		2,607.2		2,238.5
Other managed funds (off - balance sheet)	13,108.2		11,745.7		9,996.7
Mutual funds	11,398.9		10,330.5		8,743.0
Pension funds	1,326.6		1,190.4		1,046.0
Managed portfolios	382.6		224.8		207.7
Customer funds	56,746.3		46,803.1		38,567.6
Total managed funds	79,591.3		69,141.3		59,107.8
Ratios (%)
ROE	16.79		15.57		17.28
Efficiency Ratio	45.59		48.46		51.44
NPL Ratio	0.55		0.66		0.78
NPL coverage	391.76		339.32		274.57

F-121

Portugal (retail banking)
Income statement. January-December
Millions of Euros
	2004		2003		2002
Net interest income	640.0		613.2		649.1
Net fees and commissions	260.2		232.0		185.2
Basic revenue	900.2		845.2		834.3
Net gains on financial transactions	9.8		7.1		16.9
Gross operating income	910.0		852.3		851.2
Personnel and general expenses	(403.6	)	(412.7	)	(420.3	)
a) Personnel expenses	(253.5	)	(255.9	)	(261.2	)
b) General expenses	(134.5	)	(142.3	)	(145.2	)
c) Allocated expenses	(15.6	)	(14.5	)	(13.8	)
Depreciation	(59.4	)	(56.1	)	(61.1	)
Other operating costs	(10.7	)	(3.5	)	(3.9	)
Net operating income	436.4		380.1		366.0
Income from equity – acc. holdings	–		–		4.0
Other income	9.9		19.7		(47.0	)
Net provisions for credit – losses	(113.8	)	(107.7	)	(50.6	)
Goodwill amortization	–		–		–
Income before taxes	332.4		292.0		272.4
Net consolidated income	291.0		248.9		235.7
Net attributable income	249.9		213.2		191.2
Ratios (%)
ROE	17.42		16.88		15.49
Efficiency Ratio (personnel & gen. expenses / net op. revenue)	44.35		48.42		49.38
NPL Ratio	3.14		2.30		2.27
NPL coverage	111.35		125.44		110.77

Santander Consumer
Income statement. January-December
Millions of Euros
	2004		2003		2002
Net interest income	1,163.7		878.2		696.9
Net fees and commissions	97.3		86.4		164.3
Basic revenue	1,261.0		964.6		861.2
Net gains on financial transactions	45.8		60.7		(9.0	)
Gross operating income	1,306.8		1,025.3		852.2
Personnel and general expenses	(463.8	)	(409.0	)	(396.5	)
a) Personnel expenses	(209.7	)	(194.2	)	(199.3	)
b) General expenses	(236.1	)	(194.0	)	(187.2	)
c) Allocated expenses	(18.0	)	(20.8	)	(10.0	)
Depreciation	(34.8	)	(29.0	)	(48.6	)
Other operating costs	(1.3	)	(0.8	)	16.3
Net operating income	806.8		586.6		423.4
Income from equity - acc. holdings	22.1		13.5		12.0
Net provisions for credit - losses	(300.6	)	(227.0	)	(157.7	)
Other income	(10.9	)	9.9		5.8
Income before taxes	517.4		382.9		283.5
Net consolidated income	359.4		255.4		199.4
Net attributable income	359.0		247.8		194.0
Ratios (%)
ROE	22.02		21.19		25.91
Efficiency Ratio	35.50		39.89		46.53
NPL Ratio	2.22		2.12		2.90
NPL coverage	153.48		149.70		142.25

F-122

Retail Banking Latin America

Income statement. January-December
							Change %
Millions of Euros	2004		2003		2002		04/03		03/02
Net interest income	3,369.7		2,965.3		4,589.3		13.6		(35.4	)
Net fees and commissions	1,201.3		1,036.0		1,267.9		16.0		(18.3	)
Basic revenue	4,571.0		4,001.3		5,857.2		14.2		(31.7	)
Net gains on financial transactions	204.5		501.3		103.6		(59.2	)	384.1
Gross operating income	4,775.5		4,502.6		5,960.8		6.1		(24.5	)
Personnel and general expenses	(2,638.8	)	(2,470.0	)	(3,219.3	)	6.8		(23.3	)
a) Personnel expenses	(1,330.3	)	(1,270.4	)	(1,643.0	)	4.7		(22.7	)
b) General expenses	(1,173.9	)	(1,068.6	)	(1,439.4	)	9.9		(25.8	)
c) Allocated expenses	(134.6	)	(131.0	)	(136.9	)	2.8		(4.3	)
Depreciation	(282.7	)	(280.9	)	(336.8	)	0.6		(16.6	)
Other operating costs	(112.8	)	(98.0	)	(200.2	)	15.1		(51.0	)
Net operating income	1,741.2		1,653.6		2,204.5		5.3		(25.0	)
Income from equity - acc. holdings	3.7		(4.8	)	(1.6	)	–		209.2
Other income	(182.6	)	74.3		145.4		–		(48.9	)
Net provisions for credit - losses	(286.7	)	(340.6	)	(1,054.2	)	(15.8	)	(67.7	)
Goodwill amortization	–		–		–		–		–
Income before taxes	1,275.6		1,382.5		1,294.2		(7.7	)	6.8
Net consolidated income	1,200.1		1,197.4		1,172.7		0.2		2.1
Net attributable income	1,038.6		1,064.5		1,098.5		(2.4	)	(3.1	)
Balance sheet: December							Change %
Millions of Euros	2004		2003		2002		04/03		03/02
Loans and credits	33,691.5		28,234.7		32,567.4		19.3		(13.3	)
Due from credit institutions	15,347.7		16,480.6		16,623.7		(6.9	)	(0.9	)
Investment securities	25,773.3		20,896.3		22,620.9		23.3		(7.6	)
Tangible and intangible assets	1,384.6		1,435.7		1,590.6		(3.6	)	(9.7	)
Other assets	10,129.1		9,567.1		10,507.4		5.9		(9.0	)
Total Assets / Liabilities	86,326.1		76,614.3		83,909.8		12.7		(8.7	)
Customer deposits	39,698.9		35,851.3		39,739.7		10.7		(9.8	)
Debt securities	5,117.8		4,397.9		5,374.4		16.4		(18.1	)
Subordinated debt	725.2		531.8		604.0		36.4		(12.0	)
Due to credit institutions	29,764.1		25,414.3		27,753.9		17.1		(8.4	)
Other liabilities	7,087.3		6,785.1		6,810.1		4.5		(0.4	)
Capital assigned	3,932.9		3,633.9		3,627.8		8.2		0.2
Other managed funds (off - balance sheet)	31,736.3		27,765.0		24,626.8		14.3		12.7
Mutual funds	14,385.3		12,258.3		10,288.7		17.4		19.1
Pension funds	13,356.7		11,972.5		10,858.5		11.6		10.3
Managed portfolios	3,994.3		3,534.2		3,479.6		13.0		1.6
Customer funds	77,278.1		68,545.9		70,344.9		12.7		(2.6	)
Total managed funds	118,062.4		104,379.2		108,536.6		13.1		(3.8	)
Ratios (%)
ROE	26.87		29.03		22.97
Efficiency Ratio	55.26		54.86		54.01
NPL Ratio	2.58		3.90		4.08
NPL coverage	163.53		125.08		113.66

F-123

2004 Key magnitudes by country
		Customer
		funds on
	Loans and	Balance	Mutual	Pension
Millions of Euros	credits	Sheet	funds	funds
Brazil	6,026.7	7,089.7	6,973.4	–
Mexico	10,055.1	16,556.4	4,071.6	2,591.0
Chile	10,325.0	11,501.7	1,920.7	5,091.0
Puerto Rico	4,105.6	3,836.4	1,006.1	–
Subtotal	30,512.4	38,984.2	13,971.8	7,682.0
Venezuela	1,408.9	3,172.7	3.3	–
Colombia	840.3	557.9	72.7	1,166.1
Other countries	2,417.3	2,827.0	337.4	4,508.6
Total	35,179.0	45,541.8	14,385.3	13,356.7

F-124

Asset Management and Private Banking

Income statement. January-December							Change %
Millions of Euros	2004		2003		2002		04/03		03/02
Net interest income	123.1		93.6		114.3		31.5		(18.1	)
Net fees and commissions	725.9		677.1		721.3		7.2		(6.1	)
Basic revenue	849.0		770.7		835.6		10.2		(7.8	)
Net gains on financial transactions	22.1		28.1		34.2		(21.4	)	(18.0	)
Gross operating income	871.0		798.7		869.8		9.1		(8.2	)
Personnel and general expenses	(368.7	)	(351.4	)	(364.8	)	4.9		(3.7	)
a) Personnel expenses	(222.3	)	(211.7	)	(209.8	)	5.0		0.9
b) General expenses	(127.1	)	(122.1	)	(134.5	)	4.1		(9.2	)
c) Allocated expenses	(19.3	)	(17.6	)	(20.5	)	9.7		(13.9	)
Depreciation	(23.3	)	(29.4	)	(28.0	)	(20.8	)	5.2
Other operating costs	0.0		(1.3	)	(0.6	)	—		103.6
Net operating income	479.1		416.6		476.4		15.0		(12.6	)
Income from equity - acc. holdings	56.0		69.5		48.7		(19.4	)	42.7
Other income	(9.1	)	(6.3	)	(38.7	)	44.4		(83.6	)
Net provisions for credit - losses	(9.2	)	(4.1	)	(4.2	)	124.4		(1.5	)
Goodwill amortization	—		—		—		—		—
Income before taxes	516.7		475.6		482.2		8.6		(1.4	)
Net consolidated income	361.9		336.8		331.3		7.5		1.7
Net attributable income	351.1		319.6		327.0		9.9		(2.3	)
Balance sheet. December							Change %
Millions of Euros	2004		2003		2002		04/03		03/02
Loans and credits	2,154.0		1,548.7		1,448.8		39.1		6.9
Government debt securities	4.4		4.5		11.0		(2.2	)	(59.1	)
Due from credit institutions	5,058.8		6,036.1		6,732.2		(16.2	)	(10.3	)
Investment securities	1,185.2		845.3		701.7		40.2		20.5
Other assets	390.7		521.5		571.9		(25.1	)	(8.8	)
Total Assets / Liabilities	8,793.1		8,956.0		9,465.6		(1.8	)	(5.4	)
Customer deposits	5,859.7		6,136.2		7,216.8		(4.5	)	(15.0	)
Debt securities	—		—		0.0		—		—
Subordinated debt	—		—		0.0		—		—
Due to credit institutions	1,636.5		1,405.6		893.7		16.4		57.3
Other liabilities	776.6		821.2		835.4		(5.4	)	(1.7	)
Capital assigned	520.3		593.0		519.7		(12.3	)	14.1
Other managed funds (off - balance sheet)	23,767.8		18,387.1		14,583.9		29.3		26.1
Mutual funds	19,166.5		14,735.2		11,603.9		30.1		27.0
Pension funds	134.0		104.3		72.2		28.5		44.5
Managed portfolios	4,467.2		3,547.7		2,907.8		25.9		22.0
Customer funds	29,627.5		24.523.4		21,800.7		20.8		12.5
Total managed funds	32,560.9		27.343.2		24,049.5		19.1		13.7
Ratios (%)
ROE	63.67		59.38		66.08
Efficiency Ratio	42.33		43.99		41.94
NPL Ratio	0.71		0.19		0.24
NPL coverage	217.09		—		n.m.

F-125

Global Wholesale Banking

Income statement. January-December
Millions of Euros							Change %
	2004		2003		2002		04/03		03/02
Net interest income	401.5		379.0		455.1		5.9		(16.7	)
Net fees and commissions	335.7		330.8		326.0		1.5		1.5
Basic revenue	737.2		709.8		781.0		3.9		(9.1	)
Net gains on financial transactions	81.2		76.3		(6.0	)	6.4		—
Gross operating income	818.3		786.1		775.1		4.1		1.4
Personnel and general expenses	(376.7	)	(373.7	)	(399.1	)	0.8		(6.4	)
a) Personnel expenses	(188.6	)	(197.2	)	(218.2	)	(4.4	)	(9.6	)
b) General expenses	(104.2	)	(97.7	)	(96.7	)	6.7		1.1
c) Allocated expenses	(83.9	)	(78.7	)	(84.2	)	6.6		(6.5	)
Depreciation	(27.0	)	(27.3	)	(29.8	)	(1.3	)	(8.2	)
Other operating costs	(1.9	)	(1.8	)	(1.3	)	5.6		38.3
Net operating income	412.7		383.2		344.9		7.7		11.1
Income from equity - acc. holdings	—		(4.0	)	(1.7	)	(100.0	)	130.5
Other income	3.6		(30.3	)	(18.9	)	—		60.3
Net provisions for credit - losses	21.5		(43.3	)	(65.4	)	—		(33.8	)
Goodwill amortization	—		—		—		—		—
Income before taxes	437.8		305.7		258.9		43.2		18.0
Net consolidated income	333.4		229.0		176.9		45.6		29.4
Net attributable income	331.1		225.6		176.3		46.8		27.9

Balance sheet. December
Millions of Euros				Change %
	2004	2003	2002	04/03		03/02
Loans and credits	17,639.8	16,356.9	19,350.7	7.8		(15.5	)
Government debt securities	4,335.9	4,869.6	6,142.9	(11.0	)	(20.7	)
Due from credit institutions	37,621.5	26,244.8	33,160.0	43.4		(20.9	)
Investment securities	6,238.2	6,406.4	5,615.0	(2.6	)	14.1
Other assets	8,354.6	8,209.6	5,504.5	1.8		49.1
Total Assets / Liabilities	74,190.2	62,087.3	69,773.1	19.5		(11.0	)
Customer deposits	28,428.5	20,430.2	24,542.3	39.2		(16.8	)
Debt securities	1,850.0	508.5	1,227.5	263.8		(58.6	)
Subordinated debt	—	32.4	32.4	(100.0	)	—
Due to credit institutions	25,556.4	20,477.1	22,050.2	24.8		(7.1	)
Other liabilities	16,663.8	19,073.5	20,153.2	(12.6	)	(5.4	)
Capital assigned	1,691.5	1,565.7	1,767.4	8.0		(11.4	)
Other managed funds (off - balance sheet)	1,067.7	1,034.0	902.4	3.3		14.6
Mutual funds	438.5	441.7	391.4	(0.7	)	12.9
Pension funds	628.8	575.6	488.7	9.2		17.8
Managed portfolios	0.4	16.8	22.3	(97.6	)	(24.6	)
Customer funds	31,346.2	22,005.1	26,704.6	42.5		(17.6	)
Total managed funds	75,257.9	63,121.3	70,675.4	19.2		(10.7	)
Ratios (%)
ROE	20.87	13.32	9.34
Efficiency Ratio	46.03	47.54	51.49
NPL Ratio	0.39	0.70	1.21
NPL coverage	430.15	308.38	196.37

F-126

Financial Management and Equity Stakes

Income statement. January-December
Millions of Euros							Change %
	2004		2003		2002		04/03		03/02
Net interest income	(210.5	)	(112.7	)	(274.3	)	86.8		(58.9	)
Net fees and commissions	(0.6	)	11.4		9.9		—		15.0
Basic revenue	(211.1	)	(101.3	)	(264.4	)	108.4		(61.7	)
Net gains on financial transactions	368.2		217.6		128.5		69.3		69.3
Gross operating income	157.1		116.2		(135.9	)	35.2		—
Personnel and general expenses	(134.2	)	(114.6	)	(69.2	)	17.1		65.5
a) Personnel expenses	(30.5	)	(16.8	)	(19.7	)	81.1		(14.7	)
b) General expenses	(97.5	)	(92.1	)	(43.4	)	5.9		112.0
c) Allocated expenses	(6.2	)	(5.7	)	(6.1	)	9.6		(6.7	)
Depreciation	(35.9	)	(59.4	)	(99.0	)	(39.7	)	(39.9	)
Other operating costs	6.4		(4.5	)	33.9		—		—
Net operating income	(6.5	)	(62.3	)	(270.2	)	(89.5	)	(77.0	)
Income from equity - acc. holdings	367.6		258.7		162.4		42.1		59.3
Other income	(263.6	)	1,615.8		626.6		—		157.9
Net provisions for credit - losses	(333.3	)	(212.7	)	115.9		56.7		—
Goodwill amortization	(618.9	)	(2,241.7	)	(1,358.6	)	(72.4	)	65.0
Income before taxes	(854.7	)	(642.2	)	(724.0	)	33.1		11.3
Net consolidated income	(452.9	)	(393.9	)	(531.9	)	15.0		25.9
Net attributable income	(705.6	)	(760.5	)	(920.4	)	(7.2	)	17.4
Balance sheet. December
Government debt securities	6,959.4		22,224.4		14,805.1		(68.7	)	50.1
Investment securities	16,848.0		21,891.1		10,002.8		(23.0	)	118.9
Goodwill	16,951.8		7,379.5		9,950.1		129.7		(25.8	)
Liquidity lent to other business segments	24,052.1		23,986.1		17,847.1		0.3		34.4
Capital assigned to other business segments	20,452.0		15,629.5		14,334.4		30.9		9.0
Other assets	19,177.1		13,991.6		12,600.1		37.1		11.0
Total Assets / Liabilities	104,440.5		105,102.1		79,539.6		(0.6	)	32.1
REPOs	698.4		23,393.2		13,438.4		(97.0	)	74.1
Debt securities	26,066.9		26,499.0		17,285.9		(1.6	)	53.3
Subordinated debt	10,488.5		9,445.4		10,796.1		11.0		(12.5	)
Preferred stock	3,814.2		3,984.4		4,916.8		(4.3	)	(19.0	)
Other liabilities	32,613.2		24,582.8		16,379.7		32.7		50.1
Group capital and reserves	30,759.4		17,197.3		16,722.7		78.9		2.8
Other managed funds (off - balance sheet)	—		—		—		—		—
Mutual funds	—		—		—		—		—
Pension funds	—		—		—		—		—
Managed portfolios	—		—		—		—		—
Customer funds	38,398.8		39,580.2		34,144.1		(3.0	)	15.9
Total managed funds	104,440.5		105,102.1		79,539.6		(0.6	)	32.1

F-127

Industrial Equity stakes
Income statement. January-December
Millions of Euros							Change %
	2004		2003		2002		04/03		03/02
Contribution to results (*)	402.2		356.9		271.4		12.7		31.5
Financing costs	(83.6	)	(85.5	)	(135.6	)	(2.3	)	(36.9	)
Revenue	318.6		271.3		135.8		17.4		99.8
Operating costs	(15.8	)	(17.9	)	(17.5	)	(11.8	)	2.1
Realized capital gains and other	248.2		196.7		713.9		26.2		(72.4	)
Income before taxes	551.1		450.2		832.1		22.4		(45.9	)
Net attributable income	459.9		378.5		716.2		21.5		(47.1	)
(*) Dividends and income from equity-accounted holding included.

Financial stakes
Income statement. January-December
Millions of Euros							Change %
	2004		2003		2002		04/03	03/02
Contribution to results (*)	377.0		242.3		285.8		55.6	(15.2	)
Financing costs	(86.4	)	(82.5	)	(146.6	)	4.7	(43.7	)
Revenue	290.6		159.9		139.3		81.8	14.8
Operating costs	(3.1	)	(2.3	)	(2.3	)	34.8	(1.6	)
Realized capital gains and other	464.4		125.2		979.2		270.9	(87.2	)
Income before taxes	751.9		282.7		1,116.2		166.0	(74.7	)
Net attributable income	779.0		331.7		980.2		134.9	(66.2	)
(*) Dividends and income from equity-accounted holding included.

K) MINORITY INTEREST

Minority interest reflected in the consolidated balance sheet as of December 31, 2004, includes non-cumulative preferred non-voting shares issued by BSCH Finance Limited, BCH Capital Limited, Santander Finance Capital, S.A., and Santander Finance Preferred, S.A., guaranteed by the Bank. It also includes non-cumulative preferred non-voting shares issued by Banesto Holdings, Ltd., Totta & Açores Financing Limited, Pinto Totta International Finance, Ltd., Banesto Preferentes, S.A., Banco Español de Crédito, S.A., and Abbey Group.

All of these are perpetual securities and there is no obligation that requires the Group to redeem them. None of these are mandatorily redeemable as defined in SFAS No. 150. All securities have been fully subscribed by third parties outside the Group (see Note 19 and Exhibit III), and are described in the table below:

F-128

		Outstanding at December 31, 2004
			Amount in
Issuer/Date of issue	Currency		currency (million)	Interest rate
BSCH Finance Limited (**)
Series L (may-98) (*)	Euro		255.65	6.250%
Series M (aug-98) (*)	Euro		250	6.150%
Series Q (oct-00) (*)	US$		300	8.625%
BCH Capital Limited (**)
1995	US$		230	9.43%
Banesto Holdings, Ltd. (**)
1992	US$		77.3	10.50%
Totta & Açores Financing Limited (**)
1996	US$		150	Var.
Pinto Totta International Finance, Ltd. (**)
1997	US$		250	Var.
Banesto Preferentes, S.A. (**)
2003	Euro		131.14	Euribor (3M) + 0.2%
Banco Español de Crédito, S.A.
2004 (october)	Euro		125	Fixed to 6% until October 29, 2005, and from this date, Eur CMS 10 + 0.125%
2004 (november)	Euro		200	5.5%
Santander Finance Capital, S.A. (**)
Serie I (oct-03)	Euro		450	Fixed to 3% until April 7, 2004, and from this date, Euribor (3M) + 0.1%
Serie II (feb-04)	Euro		400	Fixed to 3% until August 18, 2004, and from this date, Euribor (3M) + 0.1%
Serie III (july-04)	Euro		750	Fixed to 3% until January 30, 2005, and fromthis date, Euribor (3M) + 0.1%
Serie IV (sept-04)	Euro		680	Fixed to 3% until March 30, 2005, and fromthis date, Euribor (3M) + 0.1%
Santander Finance Preferred, S.A. (**)
Series 1 (march-04)	US$		190	6.41%
Series 2 (sept-04)	Euro		300	Eur CMS 10 +0.05% subject to a maximumdistribution of 8% per annum
Series 3 (oct-04)	Euro		200	5.75%
Abbey Group
Abbey National Capital Trust I – 2000 (**)	US$		1,000	Fixed to 8.963% until June 30, 2030, and from this date, 2.825% + Libor USD (3M)
Abbey National plc – 1995	GBP		100	10.375%
Abbey National plc – 1996	GBP		100	10.375%
Abbey National plc – 1997	GBP		125	8.625%
Abbey National plc – 2001	US$		450	7.375%
Abbey National plc – 2001 (**)(***)	GBP		300	7.037%
Abbey National plc – 2002 (**)	GBP		175	Fixed to 6.984% until February 9, 2018, and thereafter, at a rate reset semi-annually of 1.86% per annum + Libor GBP (6M)
Abbey National plc – 2002 (**)	US$		500	7.375%

(*)	On February 15, 2005, BSCH Finance Limited redeemed the SERIES L and SERIES M, in whole, at a redemption price of €25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
(**)	These entities have been designated “Variable Interest Entities” (VIEs) and they are considered non-consolidated. Therefore, their issues have been excluded of the consolidated financial statements of the Group. From this moment, the Group has recognized the subordinated deposits, related to these issues, and their interests. See Note 28.4, where these issues have been classified as “Long Term Debt” and their dividends, as “Interest on Long-Term Debt”, respectively. Refer to Note 28.1 for more information.
(***)	From February 14, 2026, this issue will bear interest at a rate, reset every five years, of 3.75% per annum above the gross redemption yield on a five-year specified United Kingdom government security.

F-129

BSCH FINANCE LIMITED

   BSCH Finance Limited was incorporated under the laws of the Cayman Islands on September 29, 1993.

   The common stock of the company is wholly owned by Banco Santander Central Hispano, S.A.

   Presented below are the condensed balance sheet, condensed statements of income and statements of changes in retained earnings for BSCH Finance Limited, prepared in conformity with U.S. GAAP.

   Balance sheets

	Thousands of Euros
BSCH FINANCE LIMITED	2004		2003
Assets:
Cash	25,411		16,451
Deposits with Parent	767,396		2,856,889
Accrued interest receivable from Parent	1,393		13,348
Total Assets	794,200		2,886,688
Liabilities and stockholders' equity:
LIABILITIES:
Other Liabilities	6		12
Dividends payable	—		3,994
Total Liabilities:	6		4,006
STOCKHOLDERS’ EQUITY:
Non-cumulative guaranteed preference shares	828,538		2,861,394
Common Stock – Class A, U.S.$1 par value; 2 shares authorized, issued and outstanding	1		1
Common Stock – Class B, U.S.$1 par value; 500,000,000 shares authorized, 96,411,000 and 125,411,000 issued and outstanding as of December 31, 2004 and 2003, respectively	74,698		97,168
Retained earnings	(109,043	)	(75,881	)
Total Stockholders’ Equity	794,194		2,882,682
Total liabilities and stockholders’ equity	794,200		2,886,688

   Statement of income

	Thousands of Euros
BSCH FINANCE LIMITED	2004		2003
Interest income from deposits with Parent	103,705		242,347
Administrative expenses	(140	)	(269	)
Foreign exchange rate losses	(32,501	)	(159,337	)
Net income / (loss)	71,064		82,741

F-130

	Statement of changes in retained earnings
Thousands of Euros
		Common Stocks (1)				Non-cumulative
						Guaranteed				Total
						Preference		Retained		Stockholders'
	Changes in Stockholders’ Equity	Shares		Amount		Shares (2)		Earnings		Equity
	Balance at December 31, 2002	204,537,233		158,475		3,932,568		99,818		4,190,861
	Redemption of Class B common stock	(79,126,231	)	(61,306	)	—		6,911		(54,395	)
	Redemption of Preference Shares
	F, G, H, J and R					(1,071,174	)	(34,856	)	(1,106,030	)
	Dividends declared	—		—		—		(230,495	)	(230,495	)
	Net income	—		—		—		82,741		82,741
	Balance at December 31, 2003	125,411,002		97,169		2,861,394		(75,881	)	2,882,682
	Redemption of Class B common stock	(29,000,000	)	(22,470	)	—		—		(22,470	)
	Redemption of Preference Shares
	K, N, O and P	—		—		(2,032,856	)	—		(2,032,856	)
	Dividends declared	—		—		—		(104,226	)	(104,226	)
	Net income	—		—		—		71,064		71,064
	Balance at December 31, 2004	96,411,002		74,699		828,538		(109,043	)	794,194

(1)	On March 31, 2003 and September 30, 2003, BSCH Finance Limited redeemed 12,204,000 and 66,922,231 Class B ordinary shares for an amount of 61,306 thousands of Euros. On February 16, 2004, BSCH Finance Limited redeemed 29,000,000 Class B Ordinary Shares for an amount of 22,470 thousands of Euros.
(2)	BSCH Finance Limited redeemed Series F, Series G, Series H, Series J, Series K, Series N, Series O, Series P and Series R as follows:
	•	Under the terms of issue of the Series F Shares (as more particularly set out in the Company’s Prospectus dated January 10, 1997, and January 30, 1997 relating thereto), the Company exercised the right to redeem the Series F Shares, in whole, at a redemption price of US$25.8125 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	Under the terms of issue of the Series G Shares (as more particularly set out in the Company’s Prospectus dated May 1, 1997 relating thereto), the Company exercised the right to redeem the Series G Shares, in whole, at a redemption price of US$25.8125 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	Under the terms of issue of the Series H Shares (as more particularly set out in the Company’s Prospectus dated June 12, 1997 relating thereto), the Company exercised the right to redeem the Series H Shares, in whole, at a redemption price of US$25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	Under the terms of issue of the Series J Shares (as more particularly set out in the Company’s Prospectus dated December 15, 1997 relating thereto), the Company exercised the right to redeem the Series J Shares, in whole, at a redemption price of US$25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	On February 13, 2003 the resolution of the Board of Directors approved the redemption of the Series R Shares, in whole, at a redemption price of US$25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	Under the terms of issue of the Series K Shares (as more particularly set out in the Company’s Offering Circular dated May 18, 1998 relating thereto), the Company exercised the right to redeem the Series K Shares, in whole, at a redemption price of US$25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	Under the terms of issue of the Series N Shares (as more particularly set out in the Company’s prospectus dated November 27, 1998 relating thereto), the Company exercised the right to redeem the Series N Shares, in whole, at a redemption price of Euro 25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	Under the terms of issue of the Series O Shares (as more particularly set out in the Company’s Offering Circular registered with the Comision Nacional del Mercado de Valores on April 30, 1999 relating thereto), the Company exercised the right to redeem the Series O Shares, in whole, at a redemption price of Euro 25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
	•	Under the terms of issue of the Series P Shares (as more particularly set out in the Company’s Offering Circular registered with the Comisión Nacional del Mercado de Valores on dated May 13, 1998 relating thereto), the Company exercised the right to redeem the Series P Shares, in whole, at a redemption price of Euro 25.00 per share, plus accrued and unpaid dividends for the then current quarterly dividend period.
The Bank of Spain has consented to the redemption of the Shares.

F-131

As of December 31, 2003, BSCH Finance Limited was the main issuer of preference shares with a total exchange value of 2,794 millions of Euros. After the Company redeemed four issues of preference shares, for an amount of more than 2,000 millions of Euros, and Santander Finance Capital, S.A. launched three issues in 2004, for an amount of 1,830 millions of Euros, as of December 31, 2004, Santander Finance Capital, S.A. became the main issuer with a total amount of 2,280 millions of Euros.

   SANTANDER FINANCE CAPITAL, S.A.–

Santander Finance Capital, S.A. was established in Spain on July 8, 2003.

The common stock of the company is wholly owned by Banco Santander Central Hispano, S.A.

Presented below are the condensed balance sheet, condensed statements of income and statements of changes in the stockholders’ equity for Santander Finance Capital, S.A., prepared in conformity with Spanish GAAP.

Balance sheets

		Thousands of Euros
	SANTANDER FINANCE CAPITAL, S.A.	2004		2003
Assets:
Cash		6,947		120
Deposits with Parent Bank		2,235,269		443,100
Start-up expenses		38,793		6,548
Accrual accounts		8,551		3,465
	Total Assets	2,289,560		453,233
Liabilities and stockholders' equity:
LIABILITIES:
SHORT-TERM DEBT
Public entities		2,099		—
Accrual accounts		7,495		3,144
Non-commercial debts		—		15
	Total Short-term Liabilities:	9,594		3,159
LONG-TERM DEBT
Debts with Group companies		5		—
Provisions for taxes		—		5
Preference shares		2,280,000		450,000
	Total Long-term Liabilities	2,280,005		450,005
	Total Liabilities:	2,289,599		453,164
STOCKHOLDERS’ EQUITY:
	Capital stock	60		60
	Retained earnings	9		—
	Net income	(108	)	9
	Total Stockholders’ Equity	(39	)	69
	Total liabilities and stockholders’ equity	2,289,560		453,233

F-132

Statement of income

		Thousands of Euros
SANTANDER FINANCE CAPITAL, S.A.		2004		2003
	Interest income	39,726		3,465
	Interest expenses	(35,001	)	(3,144	)
	Operating expenses	(4,833	)	(307	)
	Corporate income tax	—		(5	)
Net income / (loss)		(108	)	9

Statement of changes in stockholders’ equity

Thousands of Euros

						Total
			Retained			Stockholders'
	Capital stock-		Earnings	Net income		Equity
	Common
Changes in Stockholders’ Equity	Shares	Amount
Balance at January 1, 2004	602	60	—	9		69
2003 Income allocation	—	—	9	(9	)	—
Net income 2004	—	—	—	(108	)	(108	)
Balance at December 31, 2004	602	60	9	(108	)	(39	)

Preference shares

			Thousands
		Issue Date	of Euros
	Serie I	10/3/2003	450,000
	Serie II	02/18/2004	400,000
	Serie III	07/30/2004	750,000
	Serie IV	09/30/2004	680,000
Total			2,280,000

On October 3, 2003, Santander Finance Capital, S.A. issued 18,000,000 of preference shares, at €25 par value.

On February 18, 2004, Santander Finance Capital, S.A. issued 16,000,000 of preference shares, at €25 par value.

On July 30, 2004, Santander Finance Capital, S.A. issued 30,000,000 of preference shares, at €25 par value.

On September 30, 2004, Santander Finance Capital, S.A issued 27,200,000 of preference shares, at €25 par value.

These issues are perpetual and can be redeemable at the option of the issuer, subject to the consent of the Bank of Spain, in whole or in part, at any time after five years of the issue date.

All the issues of Santander Finance Capital, S.A. are guaranteed by Banco Santander Central Hispano, S.A.

F-133

L)	STOCK OPTION PLANS
	Accounting Policy:
	The Bank accounts for stock-based awards to employees using the intrinsic value method prescribed in APB 25, “Accounting for Stock Issued to Employees”. Compensation cost for stock options granted to employees is measured as the excess of the quoted market price of the Bank’s stock on the measurement date over the amount an employee must pay to acquire the stock (the “intrinsic value”), and is recognized over the vesting period. The intrinsic value of the options for which the measurement date has not been reached is measured based on the current market value of the Bank’s stock at the end of each period.
	Stock Compensation Plans
	The objectives of these plans include attracting and retaining personnel and promoting the success of the Bank by providing managers the opportunity to acquire common stock. These stock options gives the right to purchase the shares of Santander Central Hispano at the price disclosed as “Exercise Price”, in the period of time from the date signaled as “Initial Exercising Date” to the date presented as “Expiration date” in the tables below:
	The Company issued a few stock option plans to managers of the company. The plans in force in 2004, 2003 and 2002 are summarized in the first table below.
	Abbey had its own stock options plans when it was acquired on 12 November 2004. These were cancelled, executed or changed into Santander Central Hispano stock options following this exchange offer: After 12 November 2004 all share options relate to shares in Banco Santander Central Hispano, S.A. On 12 November 2004 all holders of options in ordinary shares of Abbey National plc were given the option to exercise their options, to cancel their shares in return for a cash payment or to transfer their options to options in shares of Banco Santander Central Hispano, S.A.
	Stock options coming from Abbey plans are detailed in the second table below.

F-134

Stock options originally granted by Banco Santander Central Hispano:

			Exercise				Initial
	Number of		Price	Year		Number of	Exercising	Expiration
	Shares		(Euro)	Granted	Group	People	Date	date
Plans in force at January 1, 2002
- Plan Four	4,454,680		7.84	1998	Managers	737	1/1/01	12/31/02
- Managers Plan 1999	4,993,024		2.29	1999	Managers	1,055	12/31/01	12/30/04
- Additional Managers Plan 1999	162,919		2.41	2000	Managers	45	4/1/02	12/30/04
- Investment Banking Plan	6,610,000		10.25	2000	Managers	65	6/16/03	6/15/05
- Young Executives Plan 2000	1,265,500		2.29	2000	Managers	597	7/1/03	6/30/05
- Managers Plan 2000	14,739,000		10.55	2000	Managers	1,038	12/30/03	12/29/05
- Latin America Plan	3,800,000		10.14	2002	Managers	193	2/1/02	2/1/03
	36,025,123		8.64
Options granted in 2002:
- European branches plan	2,895,000		9.41
Options exercised in 2002:
- Plan Four	(1,588,100	)	7.84
- Managers Plan 1999	(3,000,700	)	2.29
- Additional Managers Plan   1999	(78,440	)	2.41
	(4,637,240	)	4.15
Options canceled in 2002:
- Plan Four	(2,632,580	)	7.84
- Investment Banking Plan	(170,000	)	10.55
- Managers Plan 2000	(372,000	)	10.25
- Latin America Plan	(3,800,000	)	10.14
	(6,974,580	)	9.28
Plans in force at December 31, 2002	27,308,303		9.32
Options granted in 2003:
- European branches plan	1,410,000		6.55
Options exercised in 2003:
- Managers Plan 1999	(678,325	)	2.29
- Young Executives Plan 2000	(262,250	)	2.29
- Additional Managers Plan 1999	(24,512	)	2.41
	(965,087	)	2.29
Options canceled in 2003:
- Investment Banking Plan	(1,936,250	)	10.25
- Young Executives Plan 2000	(77,000	)	2.29
	(2,013,250	)	9.95
Plans in force at December 31, 2003	25,739,966		9.38
Options exercised in 2004
- Plan Four	(36,000	)	7.84
- Managers Plan 1999	(1,139,488	)	2.29
- Additional Managers Plan 1999	(55,668	)	2.41
- Young Executives Plan 2000	(562,250	)	2.29
- European branches plan	(140,000	)	8.23
	(1,933,406	)	2.83
Options canceled in 2004
- Managers Plan 1999	(174,511	)	2.29
- Additional managers Plan 1999	(4,299	)	2.41
- Managers Plan 2000	(1,026,000	)	10.55
- European branches plan	(1,475,000	)	8.51
	(2,679,810	)	8.88
Plans in force at December 31, 2004
- Plan Four	228,000		7.84	1998	Managers	5	1/9/2003	12/30/2005
- Investment Banking Plan	4,503,750		10.25	2000	Managers	56	6/16/2003	6/15/2005
- Young Executives Plan 2000	364,000		2.29	2000	Managers	111	7/1/2003	6/30/2005
- Managers Plan 2000	13,341,000		10.55	2000	Managers	970	12/30/2003	12/29/2005
- European branches plan	2,690,000		7.60	2002	Managers	27	07/01/2004	7/15/2005
				and			and
				2003			07/01/2005
	21,126,750		9.94

F-135

In 2004, the Bank granted no option plans. The weighted average fair value of options granted during the years ended December 31, 2003 and 2002 was approximately €1.52 and €1.61 per share, respectively. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2003 and 2002:
	Risk-free interest rates ranging from 2.28% to 4.48%; expected lives ranging from 2 to 2.5 years; expected dividend yield of 4.14% and 3.64%; and expected volatility ranging from 27.87% to 44.08%. No forfeiture rate was considered since the Group issued stock-options plans very recently (1997), and since then few plans have reached the end of the exercise period. The past records cannot be used to estimate a forfeiture rate.
Had compensation cost for these stock options plans been determined consistent with Statement of FAS No. 123, “Accounting for Stock-Based Compensation,” the Bank’s net income would have been reduced by approximately €1,595, €12,572 and €11,791 thousand for the twelve months ended December 31, 2004, 2003 and 2002 respectively. There would have been no significant impact on earnings per share:

Euros Thousand except per share data	2004		2003		2002
U.S. GAAP reported net income	3,940,866		2,264,332		2,286,959
Add: APB 25 Expense	985		7,557		9,553
Subtract: FAS 123 Expense	(2,580	)	(20,129	)	(21,344	)
Adjusted net income	3,939,271		2,251,760		2,275,168
Reported basic earnings per share	0.80		0.47		0.48
Change in net income	0.00		0.00		0.00
Adjusted basic earnings per share	0.80		0.47		0.48
Reported diluted earnings per share	0.79		0.47		0.48
Change in net income	0.00		0.00		0.00
Adjusted diluted earnings per share	0.79		0.47		0.48

Stock options originally granted by Abbey:

All of the shares options prior to 12 November 2004 relate to shares in Abbey National plc. As mentioned before these were cancelled, executed or changed into Santander Central Hispano stock options.

Abbey granted share options to executive officers and employees principally under the Executive Share Option scheme, Sharesave scheme and the Employee Share Option scheme. Options granted under the Executive Share Option scheme are generally exercisable between the third and tenth anniversaries of the grant date, provided that certain performance criteria are met. Under the Sharesave scheme, eligible employees could elect to exercise their options either three, five or seven years after the grant date. See note 25 to the Consolidated Financial Statements for a description of the options granted under this scheme. The number of options authorized to be granted was limited to 10% of the total number of shares issued since conversion.

The option plans on shares of the Bank originally granted by management of Abbey to its employees (on Abbey shares) are as follows:

					Date of	Date of
		Average Exercise Price			Commencement	Expiration
Plans in Force at	Number			Qualifying	of Exercise	of Exercise
December 31, 2004	of Shares	Pounds	Euros (*)	Group	Period	Period
Executive options	358.844	4.16	5.90	Managers	03-25-1999	04-04-2014
Employee options	56.550	5.90	8.37	Employees	09-09-1999	09-08-2006
Sharesave	17.260.173	3.56	5.05	Employees	01-04-2004	10-01-2011
	17.675.567	3.58	5.08

(*)	The euro/pound sterling exchange rate was €1.4183 per pound as of December 31, 2004.
The weighted average fair value of options granted during the years ended December 31, 2004, 2003 and 2002 was approximately €1.39, € 0.59 and € 2.70 per share, respectively. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used:
	Risk-free interest rates ranging from 3.7% to 7.9%; expected lives ranging from 3 to 7 years; expected dividend yield of 14% and expected volatility ranging from 22.7% to 42.3%.
As these plans were incorporated in the acquisition of Abbey, there is no impact on the Bank’s profit and loss.

F-136

M)	GUARANTEES
The Group provides a variety of guarantees to its customers to improve their credit standing and allow them to compete. The following table summarizes at December 31, 2004 and 2003 all of the guarantees.
As required, the “maximum potential amount of future payments” represents the notional amounts that could be lost if there were a total default by the guaranteed parties, without consideration of possible recoveries from collateral held or pledged, or recoveries under recourse provisions. There is no relationship between these amounts and probable losses on these guarantees. In fact, maximum potential amount of future payments significantly exceeds expected losses.

	Maximum potential amount of future
Guarantees disclosures	payments
Thousands of Euros	2004	2003
Contingent liabilities:
Rediscounts. endorsements and acceptances	206,042	26,720
Assets assigned to sundry obligations	24	81,160
Guarantees and other sureties	30,915,447	27,273,863
Guaranties promises	84,857	66,431
Performance guarantees	21,355,886	20,778,894
Financial standby letters of credit	6,715,452	5,081,249
Doubtful guarantees	83,632	101,203
Credit Default Swaps	2,484,746	803,956
Non-consolidable Group companies (*)	190,874	442,130
Other contingent liabilities	3,073,870	3,372,446
Documentary Credits	3,021,954	3,240,322
Other contingent liabilities	51,352	131,516
Doubtful contingent liabilities	564	608
Total contingent liabilities	34,195,383	30,754,189
Commitments
Sales with repurchase option	40,310	512,698
Loan commitments drawable by third parties	64,304,131	48,612,317
Other commitments	6,975,543	5,385,641
Securities placement commitments	9,358	9,077
Securities subscribed and pending payment	122,308	7,040
Compensation room delivered bills	6,843,877	5,369,524
Total Commitments	71,319,984	54,510,656

(*) These amounts represent guarantees granted to entities of the Group that are not consolidated because their activity differs from that of the Bank and Spanish GAAP does not allow consolidating them (see consolidation principles in Note 1 and Note 28.2.a). These entities are presented in Exhibit II, and for the most part are insurance companies.

Performance guarantees are issued to guarantee customers obligations such as to make contractually specified investments, to supply specified products, commodities, or maintenance or warranty services to a third party, completion of projects in accordance with contract terms, etc. Financial standby letters of credit include guarantees of payment of loans, credit facilities, promissory notes and trade acceptances. The Group always requires collateral to grant this kind of financial guarantees. In Documentary Credits the Group acts as a payment mediator between trading companies located in different countries (import-export transactions). Under a documentary credit transaction, the parties involved deal with the documents rather than the commodities to which the documents may relate. Usually the traded commodities are used as collateral to the transaction and the Bank may provide some credit facilities. Loan commitments drawable by third parties include mostly credit card lines and commercial commitments. Credit card lines are unconditionally cancelable by the issuer. Commercial commitments are mostly 1 year facilities subject to information requirements to be provided by our customers.

Additionally it is normal in the U.K. to issue cheque guarantee cards to current account customers holding chequebooks, as retailers do not generally accept cheques without such form of guarantee. The guarantee is not automatic but depends on the retailer having sight of the cheque guarantee card at the time the purchase is made. Abbey is liable to honour these cheques even where the customer doesn't have sufficient funds in his account. Abbey’s guarantee liability is in theory the number of cheques in issue multiplied by the amount guaranteed per cheque, which can be between £50 and £250. In practice most customers will only write cheques when they have funds in their account to meet the cheque, and cheques are frequently presented without the benefit of the cheque guarantee. On this basis management have assessed the risk with respect to this guarantee as highly remote and consider the risk of loss as part of the provisioning requirement on bank accounts. The maximum potential amount of future payments is €5,646 million and there is no stated maturity.

F-137

Also, Abbey, as is normal in such activity, gives representations and warranties on the sale of subsidiaries. The maximum potential amount of any claims made against these is significantly higher than actual settlements. The maximum potential amount of future payments is €3,266 million. Appropriate provision is made with respect to management's best estimate of the likely outcome, either at the time of sale, or subsequently if additional information becomes available.
The risk criteria followed to issue all kinds of guarantees, financial standby letters of credit, documentary credits and any risks of signature are in general the same as those used for other products of credit risk, and therefore subject to the same admission and tracking standards. The guarantees granted on behalf of our customers are subject to the same credit quality review process as any other risk product. On a regular basis, at least once a year, the solvency of the mentioned customers is checked as well as the probability of those guarantees to be executed. In case that any doubt on the customer’s solvency may arise we create allowances with charge to net income, by the amount of the expected losses even if there is no claim to us.
As of December 31, 2004 and 2003, the Group had allowances to cover expected losses on guarantees of €351,305 and €313,657 thousands.
According to FIN 45, a guarantee that is accounted for as a derivative instrument at fair value under Statement 133 is not subject to the initial recognition and initial measurement provisions of this Interpretation but is subject to its disclosure requirements, see Note 23 and Note 28.5.H for the required disclosures.
N)	ACCOUNTING FOR THE TRANSFER AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES
In September 2000, the Financial Accounting Standards Board issued Statement No. 140 (SFAS 140), Accounting for the transfers and servicing of financial assets and extinguishments of Liabilities, which replaces SFAS 125. SFAS 140 revises certain standards in the accounting for securitizations and other transfers of financial assets and collateral, and requires some disclosures relating to securitization transactions and collateral, but it carries over most of SFAS 125’s provisions. As explained in note 28.1 the accounting of transfer of Financial Assets under Spanish GAAP does not present significant differences with respect to US GAAP.
Mortgage backed securities issued pursuant to the Mortgage Market law amounts as a maximum 90% of the amount of the mortgage loans assigned as guarantee of them. As of December 31, 2004 and 2003, the minimum amount of mortgage loans allocated as guarantee of those securities was €18,056 and €11,667 millions.
As of December 31, 2004 and 2003, the investment securities pledged to retain commitments amounted to €62 million and €267 million, respectively (Note 5).
Under Spanish GAAP securitizations are accounted for following the “transfer of financial assets” rules. During 2004 the Group transferred loans to securitization funds.
Securitization funds (the vehicle where securitized loans are transferred) are independent entities.
These funds, which are managed by the “Sociedad Gestora” (Managing Society), are registered and regulated by the Comisión Nacional del Mercado de Valores (CNMV). “Sociedad Gestora” is responsible for the management of the transferred loans by gathering a fixed fee.
Securitizations fund may only hold:
–	Financial assets transferred to it that are passive in nature (loans)
–	Passive derivative financial instruments that pertain to beneficial interests (other than another derivative financial instrument) issued or sold to parties other than the transferor, its affiliates, or its agents.
–	Financial assets (for example, guarantees or rights to collateral) that would reimburse it if others were to fail to adequately service financial assets transferred to it or to timely pay obligations due to it and that it entered into when it was established, when assets were transferred to it, or when beneficial interests (other than derivative financial instruments) were issued by the SPE. All the guarantees relating to the transferred loans are transferred to the securitization funds.
–	Servicing rights related to financial assets that it holds.
–	Temporarily, non-financial assets obtained in connection with the collection of financial assets that it holds.
–	Cash collected from assets that it holds and investments purchased with that cash pending distribution to holders of beneficial interests that are appropriate for that purpose (that is, money-market or other relatively risk-free instruments without options and with maturities no later than the expected distribution date).
No gains or losses were registered in earnings for all securitizations because the selling price was equal to the book value of transferred loans. Therefore no adjustment was made in reconciliation to US GAAP.
The outstanding balance of the transferred loans of the Group in Spain as of December 31, 2004, 2003 and 2002 amounts to €20,642,934, €14,502,199 and €10,794,186 thousands.
As of December 31, 2004 the outstanding balance of the transferred loans of the Group in Italy and Germany amounts to €1,281,034 and €655,116 thousands, respectively, of which €916,889 and €440,884 were accounted for as sale.

F-138

Abbey Group

Loans and advances to customers include portfolios of residential mortgage loans which are subject to non-recourse finance arrangements. These loans have been purchased by, or assigned to, special purpose securitization companies (“Securitization Companies”), and have been funded primarily through the issue of mortgage-backed securities (“Securities”). No gain or loss has been recognised as a result of these sales. These Securitization Companies are consolidated and included in the Group financial statements as quasi-subsidiaries. Abbey National plc and its subsidiaries are under no obligation to support any losses that may be incurred by the Securitization Companies or holders of the Securities except as described below, and do not intend to provide such further support. Carfax Insurance Limited, a wholly owned subsidiary of Abbey National plc, provides mortgage indemnity guarantee insurance to Abbey National plc. Abbey National plc has assigned its interest under each mortgage indemnity guarantee policy to the Securitization Companies, to the extent that it relates to loans comprised in the current portfolio. Since 1 January 2002 Abbey National plc has not taken out mortgage indemnity guarantee insurance in relation to new mortgage loans. Holders of the Securities are only entitled to obtain payment of principal and interest to the extent that the resources of the Securitization Companies are sufficient to support such payments, and the holders of the Securities have agreed in writing not to seek recourse in any other form.

Abbey National plc receives payments from the Securitization Companies in respect of fees for administering the loans, and payment of deferred consideration for the sale of the loans. In addition, Abbey National plc has made interest bearing subordinated loans to Holmes Financing (No.1) plc, Holmes Financing (No.2) plc, Holmes Financing (No.3) plc, Holmes Financing (No.4) plc, Holmes Financing (No.5) plc, Holmes Financing (No.6) plc, Holmes Financing (No.7) plc and Holmes Financing (No.8) plc. Abbey National plc does not guarantee the liabilities of the subsidiary which provides mortgage indemnity guarantee insurance. Abbey National plc is contingently liable to pay to the subsidiary any unpaid amounts in respect of share capital. At a Group level, a separate presentation of assets and liabilities is adopted to the extent of the amount of insurance cover provided by the subsidiary.

Abbey National Treasury Services plc has entered into an interest rate swap with Holmes Funding Limited. This swap in effect converts a proportion of the fixed and variable interest flows receivable from customers into LIBOR based flows to match the interest payable on the Securities.

Abbey National plc has no right or obligation to repurchase the benefit of any securitised loan, except if certain representations and warranties given by Abbey National plc at the time of transfer are breached. In April 2004 Holmes Funding Limited acquired, at book value, a beneficial interest in the trust property vested in Holmes Trustees Limited. This further beneficial interest of €5.6bn was acquired through borrowing from Holmes Financing (No.8) plc, which funded its advance to Holmes Funding Limited, principally through the issue of mortgage backed securities. The remaining share of the beneficial interest in residential mortgage loans held by Holmes Trustees Limited belongs to Abbey National plc, and amounts to €22.4bn at 31 December 2004.

The balances of assets securitised and non-recourse finance at 31 December 2004 were as follows:

			Non-	Subordinated
	Date of	Gross assets	recourse	loans made by
Securitization company	securitization	Securitised	finance	the Group
Holmes Financing (No.1) plc	19 July 2000	* 2,156	2,180	6
Holmes Financing (No.2) plc	29 November 2000	* 929	1,214	6
Holmes Financing (No.3) plc	23 May 2001	* 756	1,875	9
Holmes Financing (No.4) plc	5 July 2001	* 2,193	2,540	4
Holmes Financing (No.5) plc	8 November 2001	* 1,278	1,407	3
Holmes Financing (No.6) plc	7 November 2002	* 3,835	4,082	3
Holmes Financing (No.7) plc	20 March 2003	* 2,184	2,604	1
Holmes Financing (No.8) plc	1 April 2004	5,346	5,512	17
Retained interest in Holmes
Trustees Limited		** 22,421	–	–
		41,098	21,414	49

*	Represents the interest in the trust property at book value held by Holmes Funding Limited related to the debt issued by these securitization companies.
**	As part of the master structure trust agreement, a certain proportion of funds is required to be retained in the trust.
O)	ABBEY ACQUISITION
•	On July 26, 2004, the boards of Banco Santander and Abbey announced that they had reached an agreement on the terms of a recommended acquisition by Banco Santander of Abbey, which was implemented by means of a scheme of arrangement under section 425 of the U.K. Companies Act.
	The acquisition terms stated that Abbey’s shareholders would receive 1 new Banco Santander share for every 1 Abbey share; additionally, Abbey would pay a special dividend of 25 pence plus 6 pence for a dividend differential, totaling 31 pence in cash per Abbey share to Abbey’s shareholders.

F-139

	A scheme of arrangement is a U.K. legal arrangement between a company and its shareholders. It requires approval of the shareholders both at a Court Meeting and at a separate Extraordinary General Meeting (EGM). Shareholders vote on whether to approve the Scheme at the Court Meeting and then on certain resolutions required to implement it at the EGM. Once approved by shareholders, the Scheme will only become effective if sanctioned by the Court. A scheme of arrangement is a normal process for dealing with acquisitions of public companies in the UK, particularly when they involve a large number of retail shareholders (approximately 1.8 million in Abbey’s case). A scheme of arrangement only becomes effective if (a) a majority in number of the shareholders present and voting at the Court Meeting (in person or by proxy) vote in favor and (b) such majority holds 75 per cent or more in value of the shares present and voting at the Court Meeting (in person or by proxy). In determining (a) all shareholders count equally regardless of how many shares they hold. In addition it is also necessary for the resolution at the EGM to be approved by shareholders holding not less than 75 per cent of the votes cast at the meeting (whether in person or by proxy). If the resolutions are passed by the requisite majorities and the Scheme is sanctioned by the Court and the acquisition completed, the Scheme will be binding on all shareholders, including those who voted against the Scheme. If the resolutions are not passed by the requisite majorities, then the Scheme and the acquisition will not go ahead.
•	On September 15, 2004 the European Commission granted clearance, under the Merger Regulation, to the acquisition of UK bank Abbey National Plc by Banco Santander Central Hispano S.A, as the acquisition raised no competition concerns since the two banks operate mostly in different countries.
•	On October 15, 2004, the Board of Abbey announced that Abbey’s shareholders had voted to approve the Scheme to implement the recommended Acquisition of Abbey by Banco Santander at the Court Meeting and the Abbey EGM held on October 14, 2004.
•	On October 21, 2004, Banco Santander Extraordinary General Shareholders’ Meeting approved the capital increase needed to carry out the deal.
•	On November 5, 2004 The Bank of Spain and the UK's Financial Services Authority approved the acquisition.
•	On November 8, 2004 the Court sanctioned the Scheme.
•	On November 11, 2004 the Court confirmed the reduction of capital of Abbey associated with the Scheme.
•	On November 12, 2004 the Scheme was implemented and Abbey became a subsidiary of Santander. Banco Santander issued 1,485,893,636 new shares of €0.5 par value, with additional paid-in capital of €7.94 each, increasing its stockholders equity in €12,540,942 thousand (see Notes 1, 20 and 21).
•	On December 14, 2004, Abbey paid a special dividend to all shareholders who were on its share register at 4.30pm on November 12, 2004. The special dividend was 25 pence per share plus 6 pence for dividend differential, totaling 31 pence in cash for each Abbey share held.
There are no contingent payments, options, or commitments specified in the scheme of arrangement. No research and development assets were included in the Financial Statements of Abbey at acquisition.
Abbey is one of the most important financial services group in the U.K. It has over 24,000 employees and approximately, 730 branches and 18 million customers. It is one of the two-largest providers of residential mortgages in U.K., where it is the sixth-largest bank in terms of assets.
The Santander Group Board believed that a combination of Abbey with Santander would create a premier international banking franchise and would leverage Santander’s retail banking skills which had been developed in multiple geographies to improve Abbey’s banking business in the UK.
We believed that the acquisition of Abbey would create a well diversified, international retail bank with a well diversified earnings mix coming from high growth and mature, stable economies. The Board considered Abbey to be an attractive platform through which to penetrate the UK market and believed that it could grow the franchise through improved efficiency and greater leverage of Abbey’s customer relationships.
Santander believed that the transaction would create benefits for Abbey’s customers and create value for both Santander and Abbey shareholders through improvements in Abbey’s customer offering and implementation of technology-based efficiency programmes that the Group had successfully executed in other countries. The Board believed that the combination of Santander and Abbey would create substantial value through both cost reduction and revenue benefits.
Santander Group Board believed that it could deliver, through the application of Santander’s skills and technology, additional efficiency cost savings.
The cost savings that are expected to start to materialize from 2007 onwards would be based primarily on a thorough re-engineering of Abbey’s core systems and processes through the implementation of Santander’s core banking system, and would imply significant reductions in the size of middle and back office processing areas, improved productivity in branches and improved use of IT infrastructure.
In order to implement Santander’s plans for Abbey and achieve the stated run-rate cost savings, the Group envisaged a reduction in the overall number of jobs at Abbey. Santander Group would, however, make every effort to achieve the reduction in jobs through natural attrition, avoiding where possible compulsory redundancies and, hence, in practice would hope to incur lower redundancy costs. Representatives of Abbey’s recognised trade union would be consulted in relation to proposed redundancies. These reductions were part of strategic guidelines not yet materialized in specific plans.
Santander Group expected to generate substantial revenue synergies by accelerating the development of Abbey’s underleveraged franchise. Santander management believed that the volume of Abbey products per customer was well below many of its UK peers and that it could generate significant incremental revenue by increasing its branch-based sales volumes and by developing the consumer lending and small-to-medium enterprises (‘‘SME’’) from Abbey’s portfolio of mortgage customers.

F-140

Santander believed it could introduce more competitive products in terms of design and value for customers. Santander Group would endeavour to develop direct marketing campaigns that focus on specific products related to Abbey’s core mortgage lending operation. Santander intended to retrain staff to permit a switch of headcount from the back to the front office where appropriate and to change the balance of staff remuneration to include a higher variable element. In addition, Santander intended to introduce superior IT systems that allow faster loan decisions and more sophisticated customer targeting, based on predictive analysis of the propensity to buy additional products.
The acquisition of 100% of Abbey generated goodwill under Spanish GAAP of €10,263,893 thousand of the Santander Group’s total goodwill at 2004 year-end of €16,964,201 thousand (Note 12). The goodwill arising from the acquisition included the adjustments and valuations required for it to be presented in conformity with the accounting principles and valuation methods described in Note 2. December 31, 2004, is the date of first-time consolidation of Abbey in the Santander Group. Accordingly, the consolidated balance sheet includes the effect of the acquisition, whereas the consolidated statement of income does not include the results obtained by Abbey from the date of completion of the acquisition, which were not material.
Goodwill initially calculated under U.S. GAAP was €1,411,386 thousand lower than the Spanish GAAP calculation. The main differences arise from:
•	The acquisition price: The purchase was made through exchange of shares. To accomplish it the Bank issued 1,485,893,636 new ordinary shares. Under Spanish GAAP the value of the each of the shares issued was €8.44 (the quotation on October 20, 2004), while under U.S. GAAP the value was €8.03 (the quotation in days around the announcement of the offer, mid July), the difference amounting €609,216 thousand.
•	The value of assets and liabilities: US GAAP requires valuation at fair value while Spanish GAAP uses the lower between book values and fair values.
After this initial calculation, some intangibles assets were valued and identified reducing the Goodwill in €1,358,192 thousand. These include trademarks & tradenames, core deposits and present value of future profits on insurance business among others. Total intangible assets identified and allocated are shown in the following table:

	Thousand of
	Euros
Trademarks & tradenames	566,000
Core deposits	1,451,000
Credit card relationship	33,000
Distribution chanels	25,692
Deferred tax liability	(717,500)
Intangible assets in addition to Spanish GAAP:	1,358,192

Deferred tax liability includes, basically, temporary differences arising from different accounting and tax values of assets allocated in the acquisition.

Present value of future profits (PVFP) refers to acquired insurance bussines. Establishing PVFP is an inherently uncertain process involving complex judgments and estimates, and currently established PVFP may not be fully realized. Amounts registered (€642,308 thousand) are under evaluation and will not be definitively established until the goodwill is settled. If the present value of future net cash flows became insufficient to recover PVFP, the difference would be charged to the statement of income as an additional PVFP write-off.

Additional €194,307 thousand have been identified and allocated to fair value of financial instruments, though the evaluation process is not finalized yet.

Trademarks and tradenames, has been estimated following the income approach method by discounting the interest spread that customers are willing to pay in its operations with a well-know entity, after been corrected by the expenses needed to support the trademark.

Core deposits are those deposits that are expected to remain with a savings institution for a relatively long period of time. Such deposits are attracted by the convenience and service offered by the institution rather than by interest rates paid. Its value has been estimated using the income approach, calculating the present value of the differential between the cost of the core deposits and the cost of alternative financing. It will be amortized in 10 years.

Credit card relationship value was calcutated using profits to be colleted in the next 14-16 years. However, the Company is evaluating the possibility of amortizing it in a shorter period.

Distribution channels were already registered in the Abbey’s books, after been impaired as required by FAS 142.

The U.S. GAAP goodwill after the allocation process is €7,300,008 thousand. To calculate goodwill the Bank required evaluations from independent experts, which have not yet finished its work. Due to this reason and to the complexity of the analysis, the goodwill and its allocation process can not be considered definitive, and may change with further work.

The allocation was made on the basis of the preliminary conclusions drawn from the related valuation performed by independent appraisers. However, once the process of allocating the acquisition price to all the assets and liabilities of the companies acquired has been completed at the end of 2005, the amounts of the goodwill recorded could be modified in the form of reclassifications to other balance sheet captions, although it is considered that such reclassifications would not be material.

The following is a Balance Sheet at the first-time consolidation date:

F-141

Abbey Group Balance Sheet	Thousands of euros
Thousands of euros	2004
Assets
Cash and due from banks	2,825,359
Interest earning deposits in other banks	5,791,725
Securities purchased under agreements to resell	25,039,507
Investment securities	36,764,492
Loans and leases, net of unearned income	140,428,769
Less-Allowance for credit losses	(1,016,314	)
Net Loans and leases	139,412,455
Premises and equipment, net	3,439,183
Investment in affiliated companies	4,088,495
Other assets	4,770,939
Total assets	222,132,155
Liabilities
Deposits
Non interest deposits	5,031,938
Interest bearing
Demand deposits	52,446,326
Savings deposits	11,475,781
Time deposits	57,114,682
Total deposits	126,068,727
Short-term debt	55,387,384
Long-term debt	27,353,346
Taxes Payable	1,116,568
Accounts Payable	120,867
Accrual Accounts	3,592,055
Pension Allowance	1,206,704
Other Provisions	919,236
Others	3,239,197
Other liabilities	10,194,627
Total liabilities	219,004,084
Minority interest	791,334
Stockholders' equity
Capital stock	211,317
Other reserves	2,125,420
Total stockholders' equity	2,336,737
Total liabilities and Stockholders' equity	222,132,155

The following table shows the unaudited effect on earnings per share as if the purchase had occurred on January 1, 2004.

Euros Thousand except per share data	2004
U.S. GAAP reported net income	3,940,866
Adjustment to include Abbey net income	(96,447	)
Adjusted net income	3,844,419
Reported basic earnings per share	0.80
Change in net income	(0.02	)
Adjusted basic earnings per share	0.78
Reported diluted earnings per share	0.79
Change in net income	(0.01	)
Adjusted diluted earnings per share	0.78

F-142

Exhibit I

Consolidated companies composing the Santander Group (2)

Company	Location	% of Ownership by the Bank		Line of Business (*)	Millions of Euros
					Capital Stock (a)	Reserves (a)		Net Income (Loss) (a)
		Direct	Indirect							Cost (a)
A N (123) plc	United Kingdom	—	100.00%	PORTFOLIO COMPANY	1,200	315		30		1,450
A S (Nominees) Limited	United Kingdom	—	100.00%	SECURITIES COMPANY	—	—		—		—
A.G. Activos y Participaciones, S.A.	Spain	—	88.54%	SECURITIES INVESTMENT	5	166		5		73
Abbey Business Services (India) Private Limited	India	—	100.00%	PORTFOLIO COMPANY	—	—		—		—
Abbey National (America) Holdings Inc.	United States	—	100.00%	PORTFOLIO COMPANY	—	—		—		—
Abbey National (America) Holdings Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	33	—		—		33
Abbey National (Gibraltar) Limited	Gibraltar	—	100.00%	SECURITIES COMPANY	6	—		—		6
Abbey National (Holdings) Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	23	4		—		23
Abbey National AESOP Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—		—		—
Abbey National Alpha Investments (**)	United Kingdom	—	100.00%	FINANCE	64	—		1		64
Abbey National American Investments Limited	United Kingdom	—	100.00%	FINANCE	359	6		11		359
Abbey National Asset Managers Limited	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	18	(5	)	(4	)	12
Abbey National Baker Street Investments	United Kingdom	—	100.00%	FINANCE	175	—		—		175
Abbey National Belfast Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Abbey National Beta Investments Limited	United Kingdom	—	100.00%	FINANCE	120	41		5		120
Abbey National Business Asset Leasing Limited	United Kingdom	—	100.00%	LEASING	—	6		2		—
Abbey National Business Cashflow Finance Limited	United Kingdom	—	100.00%	FACTORING	6	5		2		12
Abbey National Business Commercial Lending Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Abbey National Business Equipment Leasing Limited	United Kingdom	—	100.00%	LEASING	—	(5	)	—		22
Abbey National Business Factors Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	3	—		—		3
Abbey National Business Finance Services Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Abbey National Business Leasing (Holdings) Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	2	12		—		5
Abbey National Business Leasing Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	(9	)	—		—
Abbey National Business Office Equipment Leasing Limited	United Kingdom	—	100.00%	LEASING	—	6		—		—
Abbey National Business Sales Aid Leasing Limited	United Kingdom	—	100.00%	LEASING	—	5		—		—
Abbey National Business Vendor Plan Leasing Limited	United Kingdom	—	100.00%	LEASING	—	6		2		—
Abbey National Capital LPI	United States	—	(b)	FINANCE	—	—		—		—
Abbey National Cahoot Limited	United Kingdom	—	100.00%	FINANCIAL SERVICES	—	—		—		—
Abbey National Cardiff and the Vales Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Abbey National Charitable Trust Limited	United Kingdom	—	(b)	CHARITY SERVICES	—	—		—		—
Abbey National Computer Services Limited	United Kingdom	—	100.00%	LEASING	21	—		—		—
Abbey National Continental Investments	United Kingdom	—	100.00%	FINANCE	—	—		—		—
Abbey National Corporate Services Limited	United Kingdom	—	100.00%	LEASING	—	—		—		—
Abbey National Credit and Payment Services Limited	United Kingdom	—	51.00%	SERVICES	—	—		—		—
Abbey National December Leasing (1) Limited	United Kingdom	—	100.00%	LEASING	—	6		—		—
Abbey National December Leasing (4) Limited	United Kingdom	—	100.00%	LEASING	—	—		1		—
Abbey National December Leasing (7) Limited	United Kingdom	—	100.00%	LEASING	—	—		—		—
Abbey National Ealing Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Abbey National Employees' Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—		—		—
Abbey National Employment Services Inc.	United States	—	100.00%	EMPLOYMENT SERVICES	—	—		—		—

F-143

					Millions of Euros
		% of Ownership						Net
		by the Bank			Capital			Income
					Stock	Reserves		(Loss)	Cost
Company	Location	Direct	Indirect	Line of Business(*)	(a)	(a)		(a)	(a)
Abbey National Financial and Investment Services (Far East) Limited	Hong Kong	—	100.00%	FUND AND PORTFOLIO MANAGER	—	—		—	—
Abbey National Financial and Investment Services (Hong Kong) Limited	Hong Kong	—	100.00%	FUND AND PORTFOLIO MANAGER	—	—		—	—
Abbey National Financial and Investment Services (Jersey) Limited	Jersey	—	100.00%	PORTFOLIO COMPANY	—	—		—	—
Abbey National Financial and Investment Services Ireland Holdings	Ireland	—	100.00%	PORTFOLIO COMPANY	2	—		—	2
Abbey National Financial and Investment Services Ireland plc	Ireland	—	100.00%	FUND AND PORTFOLIO MANAGER	2	—		—	1
Abbey National Financial and Investment Services Isle of Man Limited	Isle of Man	—	100.00%	FUND AND PORTFOLIO MANAGER	—	—		1	—
Abbey National Financial and Investment Services PLC	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	7	16		6	7
Abbey National Financial Investments 3 B.V.	Netherlands	—	100.00%	FINANCE	1	—		—	1
Abbey National Financial Investments 4 B.V.	Netherlands	—	100.00%	FINANCE	355	—		—	355
Abbey National Financial Investments No.2 Limited	Jersey	—	100.00%	FINANCE	—	—		—	—
Abbey National First Capital B.V.	Netherlands	—	100.00%	FINANCE	—	4		—	—
Abbey National Funded Unapproved Retirement Benefits Scheme Trustees Limited (**)	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—		—	—
Abbey National Funding (Jersey) Limited	Jersey	—	100.00%	PORTFOLIO COMPANY	—	—		—	—
Abbey National Funding plc	United Kingdom	—	100.00%	FINANCE	—	—		—	—
Abbey National General Insurance Services Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	24	(78	)	—	24
Abbey National Gibraltar (1986) Limited	United Kingdom	—	100.00%	FINANCE	7	1		—	7
Abbey National Global Investments	United Kingdom	—	100.00%	FINANCE	—	—		—	—
Abbey National GP (Jersey) Limited	Jersey	—	100.00%	FINANCE	—	—		—	—
Abbey National Graphics Services Limited	United Kingdom	—	100.00%	MARKETING	—	—		—	—
Abbey National Group Pension Schemes Trustees Limited (**)	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—		—	—
Abbey National Growth Investments	United Kingdom	—	100.00%	FINANCE	—	—		—	—
Abbey National Healthcare Limited	United Kingdom	—	100.00%	INSURANCE	15	—		1	14
Abbey National Homes Limited	United Kingdom	—	100.00%	FINANCE	—	(51	)	—	—
Abbey National Independent Financial Consultants Ltd	United Kingdom	—	100.00%	FINANCE	—	—		—	1
Abbey National Independent Investments (**)	United Kingdom	—	100.00%	FINANCE	—	—		—	—
Abbey National International Limited	Jersey	—	100.00%	BANKING	212	33		20	212
Abbey National Investments	United Kingdom	—	100.00%	FINANCE	151	—		—	151
Abbey National Investments Holdings Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	—	24		57	—
Abbey National Jersey International Limited	Jersey	—	100.00%	FINANCE	262	31		2	262
Abbey National June Leasing (4) Limited (***)	United Kingdom	—	100.00%	LEASING	—	1		—	—
Abbey National June Leasing (5) Limited (*)	United Kingdom	—	100.00%	LEASING	—	1		—	—
Abbey National March Leasing (4) Limited (**)	United Kingdom	—	100.00%	LEASING	—	1		4	—
Abbey National Mortgage Finance plc	United Kingdom	—	100.00%	MORTGAGE LOAN COMPANY	—	—		—	—
Abbey National Newcastle Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—	—
Abbey National Nominees (Jersey) Limited	Jersey	—	100.00%	SECURITIES COMPANY	—	—		—	—
Abbey National Nominees Limited	United Kingdom	—	100.00%	SECURITIES COMPANY	—	—		—	—
Abbey National North America Corporation	United States	—	100.00%	FINANCE	—	2		—	—
Abbey National North America Holdings Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	—	—		—	—
Abbey National North America LLC	United States	—	100.00%	FINANCE	—	—		—	—
Abbey National Offshore Holdings Limited	Jersey	—	100.00%	PORTFOLIO COMPANY	245	21		—	258
Abbey National Pension Funds (Holdings) Limited (**)	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—		—	—
Abbey National Pension Funds Trustee Company Limited (**)	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—		—	—
Abbey National PEP & ISA Managers Limited	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	52	10		7	52
Abbey National Personal Finance Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—	—

F-144

						Millions of Euros
		% of Ownership							Net
		by the Bank							Income
						Capital	Reserves		(Loss)		Cost
Company	Location	Direct	Indirect		Line of Business (*)	Stock (a)	(a)		(a)		(a)
Abbey National Personal Pensions Trustee Limited.	United Kingdom	—	100.00	%	ASSET MANAGEMENT	—	—		—		—
Abbey National plc	United Kingdom	100.00%	—		BANKING	3,741	2,044		(327	)	12,462
Abbey National PLP (UK) Limited	United Kingdom	—	100.00	%	FINANCE	—	—		—		—
Abbey National Properties (1) Limited	United Kingdom	—	100.00	%	SERVICES	—	—		—		—
Abbey National Properties (2) Limited	United Kingdom	—	100.00	%	LEASING	—	(3	)	—		—
Abbey National Property Developments Limited	United Kingdom	—	100.00	%	REAL ESTATE	—	—		—		—
Abbey National Property Investments	United Kingdom	—	100.00	%	FINANCE	196	24		9		196
Abbey National Property Services Limited	United Kingdom	—	100.00	%	REAL ESTATE	—	(18	)	—		—
Abbey National Second Capital B.V.	Netherlands	—	100.00	%	FINANCE	—	4		—		—
Abbey National Secretariat Services (Jersey) Limited	Jersey	—	100.00	%	FUND AND PORTFOLIO MANAGER	—	—		—		—
Abbey National Secretariat Services Limited	United Kingdom	—	100.00	%	FUND AND PORTFOLIO MANAGER	—	—		—		—
Abbey National Securities Inc.	United States	—	100.00	%	SECURITIES COMPANY	—	30		—		—
Abbey National September Leasing (3) Limited	United Kingdom	—	100.00	%	LEASING	—	(7	)	1		—
Abbey National September Leasing (5) Limited (*****)	United Kingdom	—	100.00	%	LEASING	—	4		2		—
Abbey National September Leasing (7) Limited (*)	United Kingdom	—	100.00	%	LEASING	—	—		—		—
Abbey National Share Participation Scheme Trustee Company Limited	United Kingdom	—	100.00	%	ASSET MANAGEMENT	—	—		—		—
Abbey National Shelf Co. (4) Limited	United Kingdom	—	100.00	%	INSURANCE	—	—		—		—
Abbey National SMA Holdings Limited	United Kingdom	—	100.00	%	PORTFOLIO COMPANY	4,775	(380	)	(410	)	4,507
Abbey National Sterling Capital plc	United Kingdom	—	100.00	%	FINANCE	—	4		—		—
Abbey National Treasury International (IOM) Limited	Isle of Man	—	100.00	%	BANKING	7	3		—		9
Abbey National Treasury Investments	United Kingdom	—	100.00	%	FINANCE	687	16		31		687
Abbey National Treasury Services (Australia) Holdings Limited	United Kingdom	—	100.00	%	PORTFOLIO COMPANY	—	—		—		—
Abbey National Treasury Services (Property) Limited	United Kingdom	—	100.00	%	FINANCE	—	—		—		—
Abbey National Treasury Services (Trains Holdings) Limited	United Kingdom	—	100.00	%	PORTFOLIO COMPANY	213	(37	)	(8	)	213
Abbey National Treasury Services (Transport Holdings) Limited	United Kingdom	—	100.00	%	PORTFOLIO COMPANY	11	(17	)	3		11
Abbey National Treasury Services Investments Limited	United Kingdom	—	100.00	%	FINANCE	355	5		11		355
Abbey National Treasury Services Overseas Holdings	United Kingdom	—	100.00	%	PORTFOLIO COMPANY	1,302	(140	)	65		1,302
Abbey National Treasury Services plc	United Kingdom	—	100.00	%	BANKING	3,615	(113	)	501		3,342
Abbey National UK Investments	United Kingdom	—	100.00	%	FINANCE	860	282		39		860
Abbey National Unit Trust Managers Limited	United Kingdom	—	100.00	%	FUND AND PORTFOLIO MANAGER	21	23		19		21
Abbey National Wrap Managers Limited	United Kingdom	—	100.00	%	FUND AND PORTFOLIO MANAGER	18	(9	)	(7	)	18
Abbey Stockbrokers (Nominees) Limited	United Kingdom	—	100.00	%	SECURITIES COMPANY	—	—		—		—
Abbey Stockbrokers Limited	United Kingdom	—	100.00	%	SECURITIES COMPANY	21	(12	)	—		9
Abbnat BV	Netherlands	—	100.00	%	FINANCE	—	1		—		—
Abfin B.V.	Netherlands	—	100.00	%	FINANCE	2	25		3		30
Administración de Bancos Latinoamericanos Santander, S.L.	Spain	24.11%	75.89	%	HOLDING COMPANY	395	(51	)	9		688
Administradora de Fondos de Pensiones y Cesantías Santander, S.A.	Colombia	—	100.00	%	PENSION FUND MANAGER	5	17		7		94
Afinidad AFAP, S.A.	Uruguay	—	100.00	%	FUND MANAGER	1	—		1		10
Afisa, S.A.	Chile	—	99.98	%	FUND MANAGER	3	3		—		2
AFP Summa Bansander S.A.	Chile	—	99.44	%	PENSION FUND MANAGER	23	38		14		72
AFP Unión Vida, S.A.	Peru	—	99.94	%	PENSION FUND MANAGER	6	6		15		15
Agecroft Properties (No.2) Limited	United Kingdom	—	100.00	%	LEASING	—	2		—		—
Agrícola Los Juncales, S.A.	Spain	—	88.65	%	REAL ESTATE	1	12		2		9
AKB Marketing Services Sp. Z.o.o.	Poland	—	100.00	%	MARKETING	1	(1	)	—		—

F-145

							Millions of Euros
		% of Ownership								Net
		by the Bank					Capital			Income
							Stock	Reserves		(Loss)		Cost
Company	Location	Direct		Indirect		Line of Business (*)	(a)	(a)		(a)		(a)
Alce Tenedora Inversiones, S.L.	Spain	—		100.00	%	HOLDING COMPANY	—	—		—		—
Aljarafe Golf, S.A.	Spain	—		70.55	%	REAL ESTATE	17	(5	)	—		—
Aljardi SGPS, Lda.	Portugal	—		100.00	%	HOLDING COMPANY	1,159	(10	)	—		1,159
Allfunds Bank, S.A.	Spain	—		50.00	%	BANKING	27	(2	)	5		14
Altec, S.A.	Chile	—		100.00	%	IT SERVICES	20	(15	)	(1	)	19
América Latina Tecnología de México, S.A. De C.V.	Mexico	99.99	%	—		IT SERVICES	52	(3	)	(8	)	40
Amicus UK Limited	United Kingdom	—		100.00	%	FINANCE	1	(1	)	—		—
AN Structured Issues Limited	Jersey	—		100.00	%	FINANCE	—	—		—		—
Andaluza de Inversiones, S.A.	Spain	—		100.00	%	SECURITIES INVESTMENT	30	(3	)	—		27
ANDSH Limited.	United Kingdom	—		100.00	%	FINANCE	3	4		—		3
ANFP (US) LLC	United States	—		100.00	%	FINANCE	—	—		—		—
ANIFA Limited	United Kingdom	—		100.00	%	FINANCE	—	3		—		3
ANITCO Limited	United Kingdom	—		100.00	%	PORTFOLIO COMPANY	—	—		—		—
Argenline, S.A.	Uruguay	—		100.00	%	FINANCE	—	—		—		—
Asesora de Titulización, S.A., S.G.F.T.	Spain	70.00	%	30.00	%	SECURITIZATION	1	—		1		2
Aurum, S.A.	Chile	1.00	%	99.00	%	HOLDING COMPANY	62	(67	)	(6	)	58
Ausant Holding GMBH	Austria	—		99.95	%	HOLDING COMPANY	11	171		—		160
Ausant Merchant Participations GMBH	Austria	—		99.79	%	HOLDING COMPANY	—	424		1		106
B.R.S. Investment S.A.	Argentina	—		100.00	%	FINANCE	31	9		—		237
Baker Street Risk and Insurance (Guernsey) Limited (***)	Guernsey	—		100.00	%	INSURANCE	3	9		3		3
Banca Serfin, S.A.	Mexico	—		74.92	%	BANKING	201	600		249		660
Banco Alicantino de Comercio, S.A.	Spain	—		88.65	%	BANKING	9	—		—		8
Banco Banif, S.A.	Spain	100.00	%	—		BANKING	39	96		23		84
Banco Caracas, Holding N.V.	Netherlands Antilles	—		75.42	%	BANKING	—	—		—		—
Banco Caracas, N.V.	Netherlands Antilles	—		100.00	%	BANKING	9	(2	)	(3	)	9
Banco de Albacete, S.A.	Spain	100.00	%	—		BANKING	9	2		1		9
Banco de Asunción, S.A.	Paraguay	—		99.33	%	BANKING	1	2		(1	)	34
Banco de Venezuela, S.A., Banco Universal (1)	Venezuela	96.78	%	1.63	%	BANKING	16	211		147		411
Banco do Estado de Sao Paulo, S.A.	Brazil	—		98.02	%	BANKING	701	388		484		749
Banco Español de Crédito, S.A.	Spain	87.34	%	1.31	%	BANKING	1,028	1,439		409		1,689
Banco Madesant - Sociedade Unipessoal, S.A.	Portugal	—		100.00	%	BANKING	624	606		59		1,148
Banco Río de la Plata S.A.	Argentina	20.18	%	78.91	%	BANKING	109	86		9		1,386
Banco Santa Cruz, S.A.	Bolivia	96.18	%	0.15	%	BANKING	31	7		3		13
Banco Santander (Guernsey), Ltd.	Guernsey	—		99.96	%	BANKING	10	—		3		10
Banco Santander (Panamá), S.A.	Panama	—		100.00	%	BANKING	3	7		—		59
Banco Santander (Suisse), S.A.	Switzerland	—		99.96	%	BANKING	19	59		33		15
Banco Santander Bahamas International, Ltd.	Bahamas	—		100.00	%	BANKING	5	808		1		785
Banco Santander Brasil, S.A.	Brazil	—		97.62	%	BANKING	345	64		24		498
Banco Santander Chile	Chile	—		83.94	%	BANKING	948	149		262		1,399
Banco Santander Colombia, S.A.	Colombia	—		97.64	%	BANKING	62	24		33		441
Banco Santander de Negocios Portugal, S.A.	Portugal	—		99.79	%	BANKING	26	120		26		29
Banco Santander International	United States	94.80	%	5.20	%	BANKING	5	102		13		64
Banco Santander Meridional, S.A.	Brazil	—		96.91	%	BANKING	413	43		(11	)	735
Banco Santander Mexicano, S.A.	Mexico	—		74.92	%	BANKING	296	566		135		521

F-146

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)		Net Income (Loss) (a)		Cost (a)
Banco Santander Puerto Rico	Puerto Rico	—	88.64%	BANKING	78	268		56		323
Banco Santander Totta, S.A.	Portugal	—	99.62%	BANKING	590	907		49		2,204
Banco Santander, S.A.	Uruguay	89.91%	10.09%	BANKING	29	4		(11	)	45
Banco Santander, S.A.	Brazil	—	99.89%	BANKING	928	126		475		1,850
Banco Totta de Angola, SARL	Angola	—	99.78%	BANKING	7	9		8		19
Banespa, S.A Serviços Técnicos, Administrativos e de Corretagem de Seguros	Brazil	—	98.02%	SERVICES	4	(5	)	22		26
Banespa, S.A. Corretora de Cambio e Titulos	Brazil	—	98.02%	SECURITIES COMPANY	6	(9	)	15		7
Banesto Banca Privada Gestión, S.A. S.G.I.I.C.	Spain	—	88.65%	FUND MANAGER	2	—		—		2
Banesto Banco de Emisiones, S.A.	Spain	—	88.65%	BANKING	30	67		—		86
Banesto Bolsa, S.A., Sdad. Valores y Bolsa	Spain	—	88.65%	SECURITIES COMPANY	5	68		6		31
Banesto Delaware, Ltd.	United States	—	88.65%	FINANCE	—	—		—		—
Banesto e-Business, S.A.	Spain	—	88.65%	SECURITIES INVESTMENT	6	(6	)	(1	)	—
Banesto Factoring, S.A. Establecimiento Financiero de Crédito	Spain	—	88.65%	FACTORING	5	13		(1	)	12
Banesto Finance, Ltd.	Cayman Islands	—	88.65%	FINANCE	—	—		—		—
Banesto Financial Products, Plc.	Ireland	—	88.64%	FINANCE	—	—		—		—
Banesto Issuances, Ltd.	Cayman Islands	—	88.65%	FINANCE	—	—		—		—
Banesto Renting, S.A.	Spain	—	88.65%	FINANCE	1	2		3		2
Banesto Securities, Inc.	United States	—	88.65%	SECURITIES COMPANY	—	—		—		—
Banesto Servicios y Tecnología Aplicada, S.A.	Spain	—	88.65%	SERVICES	4	—		—		4
Banif Gestión, S.A., S.G.I.I.C.	Spain	—	97.73%	FUND MANAGER	1	5		1		2
Bansa Santander, S.A.	Chile	—	99.99%	REAL ESTATE	19	(17	)	(1	)	17
Bansalease, S.A., E.F.C.	Spain	100.00%	—	LEASING	54	12		7		57
Bansaleasing Colombia, S.A., Compañía de Financiamiento Comercial	Colombia	—	100.00%	LEASING	5	1		1		6
Bansamex, S.A.	Spain	50.00%	—	CARDS	—	1		—		1
Bansander de Financiaciones, S.A., EFC.	Spain	—	100.00%	FINANCE	5	26		19		4
Bansander Leasing, Corp.	Puerto Rico	—	100.00%	LEASING	—	4		—		—
Bansander, S.A.	Spain	100.00%	—	SECURITIES INVESTMENT	—	—		—		—
Bee Ess Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Birrell Smith Underwriting Agencies Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Bitalbond, B.V.	Netherlands	100.00%	—	HOLDING COMPANY	—	17		—		—
Brettwood Limited	Jersey	—	100.00%	ADVISORY SERVICES	—	—		—		—
Bridford Financial Services Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	1	—		—		—
Bridford Life and Pensions Ltd	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—		—		—
Bridford Pension Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—		—		—
Briswiss, Ltd.	Virgin Islands	—	99.88%	HOLDING COMPANY	687	296		24		940
Buhal Leasing, Ltd.	United Kingdom	100.00%	—	LEASING	7	(5	)	—		2
Business OutSourcing Services Limited	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	—	—		—		—
CA Premier Banking Limited	United Kingdom	—	100.00%	BANKING	6	—		—		6
Cabel, S.A. (in liquidation)	Belgium	86.99%	9.99%	HOLDING COMPANY	—	—		—		—
Cambios Sol, S.A.	Spain	—	62.06%	FOREIGN CURRENCY PURCHASE AND SALE	2	2		—		13
Canfy, S.L.	Spain	89.00%	11.00%	HOLDING COMPANY	51	28		4		81
Cántabra de Inversiones, S.A.	Spain	100.00%	—	SECURITIES INVESTMENT	187	56		200		187
Cántabro Catalana de Inversiones, S.A.	Spain	100.00%	—	SECURITIES INVESTMENT	154	11		(14	)	141
Capital Grupo Santander, S.A., S.G.E.C.R.	Spain	90.00%	9.98%	VENTURE CAPITAL COMPANY	2	2		—		4

F-147

<<<<<<

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
Capital Riesgo Global, SCR, S.A.	Spain	68.84%	31.16%	VENTURE CAPITAL COMPANY	29	955	—	884
Carfax Insurance Limited	Guernsey	—	100.00%	INSURANCE	29	86	110	29
Cartera Mobiliaria, S.A., SIM	Spain	—	85.00%	SECURITIES INVESTMENT	31	467	33	213
Carvasa Inversiones, S.L.	Spain	—	100.00%	HOLDING COMPANY	7	49	2	100
Casa de Bolsa Santander Serfín, S.A. De C.V.	Mexico	—	74.89%	SECURITIES COMPANY	31	3	9	30
Cater Allen (US) Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	—	—	—	—
Cater Allen Asset Management (Jersey) Limited	Jersey	—	100.00%	ADVISORY SERVICES	—	—	—	—
Cater Allen Futures Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	2	—	—	2
Cater Allen Holdings Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	126	9	1	122
Cater Allen International Limited	United Kingdom	—	100.00%	SECURITIES COMPANY	171	175	27	167
Cater Allen Investment Management Limited	United Kingdom	—	100.00%	LEASING	—	—	—	—
Cater Allen Limited	United Kingdom	—	100.00%	BANKING	146	64	7	162
Cater Allen Lloyd's Holdings Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	15	(28)	—	—
Cater Allen Nominees (Jersey) Limited	Jersey	—	100.00%	SECURITIES COMPANY	—	—	—	—
Cater Allen Nominees Limited	United Kingdom	—	100.00%	SECURITIES COMPANY	—	—	—	—
Cater Allen Offshore Nominees Limited	Jersey	—	100.00%	SECURITIES COMPANY	—	—	—	—
Cater Allen Pensions Limited	United Kingdom	—	100.00%	PENSION FUND MANAGER	—	—	—	—
Cater Allen Registrars Limited	Jersey	—	100.00%	SECURITIES COMPANY	—	—	—	—
Cater Allen Syndicate Management Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	2	2	—	1
Cater Allen Trust Company ( International ) Limited	Liberia	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Cater Allen Trust Company (Jersey) Limited	Jersey	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Cater Tyndall Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	14	4	—	67
CC autoboerse.de AG	Germany	—	100.00%	INTERNET	1	—	1	1
CC Credit Rt.	Hungary	—	100.00%	FINANCE	4	4	1	4
CCB Finance, a.s.	Czech Republic	—	100.00%	LEASING	35	(1)	(4)	33
CC—Bank Aktiengesellschaft	Germany	—	100.00%	BANKING	30	432	272	474
CC—Debit GmbH	Germany	—	100.00%	INSURANCE	—	—	9	—
CC—Holding GmbH	Germany	—	100.00%	HOLDING COMPANY	49	1,019	125	1,357
CC—ITS GmbH	Germany	—	100.00%	SERVICES	—	—	2	—
CC—Leasing Austria Gesellschaft m.b.h.	Austria	—	100.00%	LEASING	—	—	—	—
CC—Leasing GmbH	Germany	—	100.00%	LEASING	1	3	17	4
Centro de Equipamientos Zona Oeste, S.A.	Spain	25.35%	74.65%	REAL ESTATE	52	(19)	(25)	11
Centro Deportivo Santander, S.A.	Spain	—	100.00%	ADVISORY SERVICES	—	—	—	—
Charterfield Finance Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Ciudad Financiera, S.A.	Spain	99.94%	0.06%	REAL ESTATE	1	—	—	1
Colchester Management Company Limited	United Kingdom	—	100.00%	REAL ESTATE	—	—	—	—
Comercial Española de Valores, S.A.	Spain	69.03%	30.97%	SECURITIES INVESTMENT	8	23	(3)	27
Compass Trust Company Limited	Jersey	—	100.00%	ASSET MANAGEMENT	—	2	—	—
Consultoría Tributaria, Financiera y Contable, S.A.	Spain	100.00%	—	ADVISORY SERVICES	—	—	—	—
Corpoban, S.A.	Spain	—	88.65%	SECURITIES INVESTMENT	36	29	3	60
Corporación Industrial y Financiera de Banesto, S.A.	Spain	—	88.55%	HOLDING COMPANY	134	244	3	355
Corredora de Seguros Santander, Ltda.	Chile	—	83.94%	INSURANCE BROKER	1	8	6	1
Cota de las Estrellas, S.A.	Spain	—	44.94%	REAL ESTATE	1	—	—	6
Covista Integrated Business Infrastructure Limited	United Kingdom	—	100.00%	REAL ESTATE	—	—	—	—

F-148

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
Credisol, S.A.	Uruguay	—	100.00%	CARDS	—	—	—	7
Crefisa, Inc.	Puerto Rico	100.00%	—	FINANCE	—	32	—	18
Crossley & Partners Ltd	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Debt Management and Recovery Services Limited	United Kingdom	—	100.00%	COLLECTION AND PAYMENT SERVICES	—	—	—	—
Deutsche Porterbrook GmbH	Germany	—	100.00%	LEASING	—	—	—	—
DF 123 Limited	United Kingdom	—	100.00%	LEASING	—	2	1	—
Digital Procurement Holdings, N.V.	Netherlands	88.11%	—	ELECTRONIC SERVICES	15	—	—	2
Diners Club Spain, S.A.	Spain	90.00%	—	CARDS	2	5	2	7
Duchess Parade Investments Limited	United Kingdom	—	100.00%	LEASING	1	1	—	1
Dudebasa, S.A.	Spain	—	88.65%	FINANCE	1	33	7	22
Duncan Lawrie Pension Consultants Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	2	(1)	—	1
Efectividad en Medios de Pago, S.A. de C.V.	Mexico	98.59%	1.41%	FINANCE	22	—	—	11
Efla 2003, S.L.	Spain	—	88.65%	SECURITIES INVESTMENT	—	—	—	—
Elcon Finance A.S.	Norway	—	100.00%	FINANCE	145	24	18	287
Elerco, S.A.	Spain	—	88.55%	RENTAL	—	38	1	35
Factoring Santander Serfín, S.A. De C.V.	Mexico	—	73.99%	FACTORING	51	(32)	—	6
FC Factor S.R.L.	Italy	—	100.00%	FINANCE	1	1	—	1
FFB — Participaçoes e Serviços, Sociedade Unipessoal, S.A.	Portugal	—	100.00%	HOLDING COMPANY	1,020	2,312	71	1,020
Fideicomiso 100740 SLPT	Mexico	—	74.89%	FINANCE	3	—	—	2
Fideicomiso GFSSLPT Banca Serfín, S.A.	Mexico	—	74.91%	FINANCE	21	—	—	14
Finconsumo Banca SPA	Italy	—	100.00%	FINANCE	22	59	28	162
First National Litigation Funding plc	United Kingdom	—	100.00%	FINANCE	—	(50)	(29)	—
First National Motor Business Limited	United Kingdom	—	100.00%	LEASING	—	—	—	—
First National Motor Contracts Limited	United Kingdom	—	100.00%	LEASING	—	(1)	(3)	—
First National Motor Facilities Limited	United Kingdom	—	100.00%	LEASING	—	—	—	—
First National Motor Finance Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
First National Motor Leasing Limited	United Kingdom	—	100.00%	LEASING	—	—	—	1
First National Motor No. 1 plc	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
First National Motor plc	United Kingdom	—	100.00%	LEASING	—	(77)	(8)	—
Foggia, S.G.P.S., S.A.	Portugal	—	99.85%	HOLDING COMPANY	138	2,446	7	2,250
Fomento Cultural Santander Mexicano, A.C.	Mexico	—	74.92%	SERVICES	—	1	—	—
Fomento e Inversiones, S.A.	Spain	100.00%	—	SECURITIES INVESTMENT	1	3	19	17
Fondo Inverpro, S.A. De C.V.	Mexico	—	74.90%	FUND MANAGER	2	(1)	—	—
Fondos Santander, S.A. Administradora de Fondos de Inversión	Uruguay	—	100.00%	FUND MANAGER	—	—	—	1
Fonlyser, S.A. De C.V.	Mexico	—	74.91%	FINANCE	32	(5)	—	16
Formación Integral, S.A.	Spain	—	88.65%	TRAINING	1	—	—	1
Fortensky Trading, Ltd.	Ireland	—	100.00%	FINANCE	—	—	—	—
GB Trustees Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Gedinver e Inmuebles, S.A.	Spain	—	88.65%	FINANCE	3	5	1	9
Geoban, S.A.	Spain	—	88.65%	SERVICES	—	1	(1)	—
Gescoban Soluciones, S.A.	Spain	—	88.65%	FINANCE	—	—	—	1
Gessinest Consulting, S.A.	Spain	99.88%	0.12%	HOLDING COMPANY	9	(54)	(31)	—
Gestión de Actividades Tecnológicas, S.A.	Spain	99.98%	0.02%	SERVICES	—	—	(8)	—
Gestión Industrial Hispamer, S.A.	Spain	100.00%	—	BUSINESS PROMOTION	—	—	—	—

F-149

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
Gestión Santander México, S.A. De C.V.	Mexico	—	74.92%	FINANCE	2	—	7	1
Get Motoring PLC	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
GMBC Financial Services Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Golf Santander, S.A.	Spain	99.99%	0.01%	HOLDING COMPANY	2	—	—	2
Grupo Empresarial Santander, S.L.	Spain	99.10%	0.90%	HOLDING COMPANY	2,843	3	487	4,005
Grupo Financiero Santander Serfín, S.A. De C.V.	Mexico	74.68%	0.24%	HOLDING COMPANY	1,784	(2)	395	1,809
Grupo Inmobiliario La Corporación Banesto, S.A.	Spain	—	88.54%	SECURITIES INVESTMENT	1	7	—	22
Grupo Santander Perú, S.A.	Peru	—	100.00%	HOLDING COMPANY	19	4	12	299
Guest Barnes (Underwriting Agencies) Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Harris & Dixon (Underwriting Agencies) Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Harvestime Limited	Jersey	—	100.00%	BANKING	—	—	—	—
Hedge End Park No.3 Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Hedge End Park No.4 Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Hipotebansa EFC, S.A.	Spain	100.00%	—	MORTGAGE LOANS	36	8	12	36
Hispamer Servicios Financieros EFC, S.A.	Spain	—	100.00%	FINANCE	83	36	46	98
HMC Mortgage Notes 102 PLC	United Kingdom	—	100.00%	MORTGAGE LOAN COMPANY	—	—	—	—
Holbah II, Ltd.	Bahamas	—	100.00%	HOLDING COMPANY	—	881	4	1,142
Holbah, Ltd.	Bahamas	—	100.00%	HOLDING COMPANY	—	(150)	1	123
Holneth Merchant, B.V.	Netherlands	—	100.00%	HOLDING COMPANY	—	(2)	—	—
Holneth, B.V.	Netherlands	—	100.00%	HOLDING COMPANY	9	34	64	10
Holsant, B.V.	Netherlands	—	100.00%	HOLDING COMPANY	—	11	—	—
Homesave Company	United Kingdom	—	100.00%	LEASING	4	1	—	4
Hualle, S.A.	Spain	—	88.65%	SECURITIES INVESTMENT	5	—	—	4
Ibergement Assesments S.L.	Spain	99.67%	—	HOLDING COMPANY	—	(3)	(10)	—
IEM (Holland) Aircraft Lease B.V.	Netherlands	—	100.00%	LEASING	—	2	(1)	—
IEM 757 Leasing I B.V.	Netherlands	—	100.00%	LEASING	—	(6)	(3)	—
IEM Airfinance B.V.	Netherlands	—	100.00%	LEASING	6	(29)	(4)	29
IEM Lease Aircraft B.V.	Netherlands	—	100.00%	LEASING	3	(113)	(45)	3
Ingeniería de Software Bancario, S.L.	Spain	49.00%	45.21%	IT SERVICES	61	(10)	(6)	24
Inmobiliaria Laukariz S.A.	Spain	—	88.65%	REAL ESTATE	—	14	—	9
Inmobiliaria Lerma y Amazonas, S.A. De C.V.	Mexico	—	74.87%	REAL ESTATE MANAGEMENT	7	10	—	12
Inmobiliaria Santander México, S.A de C.V.	Mexico	—	99.99%	REAL ESTATE MANAGEMENT	7	(8)	—	6
Inmuebles B de V 1985 C.A.	Venezuela	—	35.11%	RENTAL OF PREMISES	—	1	—	—
Inscape Investments Limited	United Kingdom	—	100.00%	FINANCE	128	(101)	2	27
Integrated Securities Services, S.A.	Spain	—	60.00%	HOLDING COMPANY	1	—	—	—
Integritas (Canada) Trustee Corporation Ltd.	Canada	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Integritas New Zealand Ltd.	New Zealand	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Integritas Trust, S.A.	Switzerland	—	100.00%	HOLDING COMPANY	—	—	—	—
Inversiones Estratégicas, S.A. De C.V.	Mexico	—	48.20%	FINANCE	—	—	—	—
ISBAN Portugal	Portugal	—	97.00%	IT SERVICES	1	—	—	—
Isban UK., Ltd.	United Kingdom	—	94.21%	IT SERVICES	—	—	—	—
Itasant Sociedade Gestora de Participaçoes Sociais Sociedade Unipessoal, Lda.	Portugal	—	100.00%	HOLDING COMPANY	—	337	(10)	92
J.R.H. Limited	United Kingdom	—	100.00%	FINANCE	—	—	—	—
James Hay Administration Company Limited	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	—	(11)	(11)	—

F-150

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
James Hay Holdings Limited	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	28	(13)	1	—
James Hay Insurance Company Limited	Jersey	—	100.00%	FUND AND PORTFOLIO MANAGER	21	3	1	21
James Hay Investment Services Limited	United Kingdom	—	100.00%	FINANCE	—	1	—	1
James Hay Pension Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	1	4	(1)	21
Key Investments Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	2	1	—	3
Kontax Pensions (Midlands) Ltd	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Kontax Pensions Limited	United Kingdom	—	100.00%	FINANCE	—	—	—	—
Larix Limited	Isle of Man	—	88.65%	REAL ESTATE	—	1	—	1
Leasing Equipment Limited	United Kingdom	—	100.00%	LEASING	—	—	—	—
Life OnLine Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Lion Consulting, S.A.	Argentina	—	94.93%	ADVISORY SERVICES	—	—	—	—
Lodares Inversiones, S.L.	Spain	100.00%	—	HOLDING COMPANY	12	224	20	236
LOF Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
LOL Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	7	(1)	—	7
MAC No. 1 Limited (****)	United Kingdom	—	100.00%	MORTGAGE LOAN COMPANY	—	—	—	—
Macame, S.A.	Spain	90.09%	9.91%	HOLDING COMPANY	1	39	—	10
Madeisisa — SGPS Sociedade Unipessoal, Lda.	Portugal	—	99.80%	HOLDING COMPANY	3	1	28	3
Mercado de Dinero, S.A.	Spain	—	88.65%	SECURITIES INVESTMENT	—	—	—	—
Mosiler, S.A.	Uruguay	—	100.00%	SERVICES	—	—	—	—
N&P (B.E.S.) Loans Limited	United Kingdom	—	100.00%	LEASING	154	1	—	138
N&P Syndicated Loans Limited	United Kingdom	—	100.00%	FINANCE	—	—	—	1
N&P Trustees Ltd	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
New Investment for Trains 1 PLC	United Kingdom	—	100.00%	FINANCE	—	—	—	—
Nordin, S.A.	Spain	—	88.65%	REAL ESTATE	—	1	—	—
Novachance Limited	United Kingdom	—	100.00%	REAL ESTATE	—	—	—	—
Oil—Dor, S.A.	Spain	—	88.54%	FINANCE	60	77	3	108
Omega Gesellschaft für Vertriebsentwicklung mbh	Germany	—	100.00%	HOLDING COMPANY	—	—	—	—
Operadora de Derivados Serfin, S.A. De C.V.	Mexico	—	74.91%	FINANCE	—	—	—	—
Optimal Investment Services, S.A.	Switzerland	—	100.00%	FUND MANAGER	5	2	5	5
Orígenes AFJP, S.A.	Argentina	—	59.20%	PENSION FUND MANAGER	32	13	(13)	173
Pacale, S.A. De C.V.	Mexico	—	74.88%	FINANCE	7	10	—	12
Pan American Bank, Ltd.	Bahamas	—	100.00%	BANKING	1	2	—	24
Parasant, S.A.	Switzerland	100.00%	—	HOLDING COMPANY	1,167	31	—	1,167
Patagon Bank, S.A.	Spain	—	100.00%	BANKING	39	(9)	2	47
Patagon Euro, S.L.	Spain	100.00%	—	HOLDING COMPANY	229	74	(1)	587
Peninsular, S.A.	France	100.00%	—	HOLDING COMPANY	—	—	—	9
Pereda Gestión, S.A.	Spain	99.99%	0.01%	HOLDING COMPANY	3	—	—	4
Polskie Towarzystwo Finansowe S.A.	Poland	—	100.00%	FINANCE	1	(1)	2	34
Portada, S.A.	Chile	—	96.16%	FINANCE	4	1	—	5
Porterbrook International Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	—	—	—	—
Porterbrook Leasing Company Limited	United Kingdom	—	100.00%	LEASING	—	932	(15)	744
Porterbrook Leasing Company MEBO Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	106	95	4	706
Porterbrook Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	391	—	—	424
Porterbrook Maintenance Limited	United Kingdom	—	100.00%	MAINTENANCE SERVICES	—	154	7	—

F-151

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
Premises, B.V.	Netherlands	100.00%	—	FINANCE	—	—	—	—
Préstamos de Consumo, S.A.	Argentina	—	99.97%	FINANCE	17	(17)	—	8
Prolific Holdings Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	32	30	2	32
Prolific Property Development (Kent) Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	—	(1)	—	—
Promoción de Servicios Integrales, S.A. De C.V.	Mexico	—	99.99%	SERVICES	—	—	—	—
Promociones y Desarrollo Bansa, S.A. De C.V.	Mexico	—	99.99%	FINANCE	—	1	—	—
Promotora AFR de Venezuela, S.A.	Venezuela	—	98.40%	ADVISORY SERVICES	4	(3)	(1)	4
PTF Bank Spólka Akcyjna	Poland	—	100.00%	BANKING	12	51	1	60
R D Robertson Underwriting Agency Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Ravensbank (Plot 2) Limited	Jersey	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Rea Brothers Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Rental Collections Limited	United Kingdom	—	100.00%	LEASING	—	—	—	—
Riobank International (Uruguay) SAIFE	Uruguay	—	100.00%	BANKING	15	5	—	17
Riyal, S.L.	Spain	60.20%	39.80%	HOLDING COMPANY	17	386	51	426
Roger Cunliffe Investments Limited	United Kingdom	—	100.00%	FINANCE	—	—	—	—
Rolling Stock Finance 1 PLC	United Kingdom	—	100.00%	FINANCE	—	—	—	—
Rolling Stock Finance 2 PLC	United Kingdom	—	100.00%	FINANCE	—	—	—	—
Ryders Discount Company Limited	United Kingdom	—	100.00%	FACTORING	—	—	—	—
S C Servicios y Cobranzas S.A.	Colombia	—	97.76%	COLLECTION AND PAYMENT SERVICES	—	1	—	1
Saninv Gestao e Investimentos, S.A.	Portugal	—	100.00%	FINANCE	100	—	(27)	75
Santana Credit E.F.C., S.A.	Spain	—	50.00%	FINANCE	4	1	1	1
Santander Activos Inmobiliarios, S.G.I.I.C., S.A.	Spain	—	99.09%	FUND MANAGER	1	12	13	6
Santander Asset Management Ireland, Ltd.	Ireland	—	100.00%	FUND MANAGER	—	15	(1)	—
Santander Asset Management, Ltda.	Brazil	—	97.62%	SECURITIES INVESTMENT	18	(2)	3	16
Santander Asset Management, S.L.	Spain	100.00%	—	FUND AND PORTFOLIO MANAGER	29	67	25	6
Santander Banespa Administradora de Consorcios, Ltda.	Brazil	—	97.62%	FINANCE	1	—	—	1
Santander Banespa, Cia. de Arrendamiento Mercantil	Brazil	—	98.02%	LEASING	97	6	13	106
Santander Bank and Trust, Ltd.	Bahamas	—	100.00%	BANKING	1	1,324	2	1,166
Santander BankCorp	Puerto Rico	—	88.64%	HOLDING COMPANY	93	383	62	186
Santander Benelux, S.A., N.V.	Belgium	100.00%	—	BANKING	40	1	1	25
Santander Brasil Arrendamento Mercantil, S.A.	Brazil	—	97.62%	LEASING	11	3	6	10
Santander Brasil Investimentos e Serviços, S.A.	Brazil	—	100.00%	SERVICES	7	13	2	22
Santander Brasil Participaçoes e Emprendimentos, S.A.	Brazil	—	97.62%	SERVICES	53	2	2	70
Santander Brasil S.A., Corretora de Cambio e Valores Mobiliarios	Brazil	—	97.62%	SECURITIES COMPANY	10	13	2	14
Santander Capital Desarrollo, SGECR, S.A.	Spain	100.00%	—	VENTURE CAPITAL COMPANY	—	—	—	—
Santander Capitalizaçao, S.A.	Brazil	—	98.98%	FUND MANAGER	4	—	9	4
Santander Carteras, S.G.C., S.A.	Spain	—	100.00%	FUND MANAGER	1	5	1	1
Santander Central Hispano Asset Management Bahamas Inc.	Bahamas	—	100.00%	FUND MANAGER	—	17	1	—
Santander Central Hispano Asset Management Luxembourg, S.A.	Luxembourg	—	97.73%	FUND MANAGER	—	—	—	—
Santander Central Hispano Bolsa, S.V., S.A.	Spain	—	100.00%	SECURITIES COMPANY	25	71	30	104
Santander Central Hispano Finance (Delaware), Inc.	United States	100.00%	—	FINANCE	—	1	—	—
Santander Central Hispano Finance, B.V.	Netherlands	100.00%	—	FINANCE	—	1	—	—
Santander Central Hispano Financial Services, Ltd.	Cayman Islands	100.00%	—	FINANCE	—	1	—	—
Santander Central Hispano International Ltd.	Cayman Islands	100.00%	—	FINANCE	—	3	—	—

F-152

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
Santander Central Hispano Issuances, Ltd.	Cayman Islands	100.00%	—	FINANCE	—	3	—	—
Santander Chile Holding, S.A.	Chile	22.11%	77.33%	HOLDING COMPANY	415	78	84	271
Santander Commercial Paper, S.A.	Spain	100.00%	—	HOLDING COMPANY	—	—	—	—
Santander Companhia Securitizadora de Créditos Financeiros	Brazil	—	97.62%	COLLECTION MANAGEMENT	74	(29)	6	56
Santander Consumer Finance, Germany GmbH	Germany	—	100.00%	HOLDING COMPANY	—	2,316	(48)	2,316
Santander Consumer Finance, S.A.	Spain	63.19%	36.81%	BANKING	173	1,372	300	1,517
Santander de Leasing, S.A., E.F.C.	Spain	70.00%	30.00%	LEASING	27	4	1	27
Santander de Titulización S.G.F.T., S.A.	Spain	81.00%	19.00%	SECURITIZATION	1	—	3	1
Santander Distribuidora de Títulos e Valores Mobiliarios, Ltda.	Brazil	—	97.62%	SECURITIES COMPANY	2	1	—	4
Santander Factoring y Confirming, S.A., E.F.C.	Spain	100.00%	—	FACTORING	59	22	15	76
Santander Factoring, S.A.	Chile	—	99.44%	FACTORING	5	12	1	6
Santander Financial Products, Ltd.	Ireland	—	100.00%	FINANCE	—	149	19	162
Santander Gestao de Activos — Sociedade Gestora de Fundos de Investimento Mobiliario, S.A.	Portugal	—	99.79%	FUND MANAGER	5	10	8	7
Santander Gestâo de Activos, SGPS, S.A.	Portugal	—	99.79%	FUND MANAGER	4	21	—	7
Santander Gestión de Activos, S.A., S.G.I.I.C.	Spain	28.30%	69.43%	FUND MANAGER	23	37	8	33
Santander Gestión de Recaudación y Cobranzas, Ltda.	Chile	—	98.90%	FINANCE	1	—	(1)	2
Santander Global Services, S.A.	Uruguay	—	100.00%	SERVICES	—	—	—	—
Santander Holanda B.V.	Netherlands	100.00%	—	HOLDING COMPANY	12	1	(3)	—
Santander Holding Gestión, S.L.	Spain	—	100.00%	HOLDING COMPANY	1	1	(140)	—
Santander Holding Internacional, S.A.	Spain	99.95%	0.05%	HOLDING COMPANY	23	10	299	23
Santander Insurance Agency, Inc.	Puerto Rico	—	88.64%	SECURITIES INVESTMENT	14	(6)	1	3
Santander International Debt, S.A.	Spain	100.00%	—	HOLDING COMPANY	—	—	—	—
Santander Inversiones, S.A.	Chile	—	99.99%	HOLDING COMPANY	322	(24)	(3)	315
Santander Investment Bank, Ltd.	Bahamas	—	100.00%	BANKING	7	50	6	376
Santander Investment Chile, Ltda.	Chile	—	99.99%	FINANCE	46	66	14	52
Santander Investment Colombia S.A.	Colombia	—	99.86%	FINANCE	9	(2)	—	45
Santander Investment Gerente FCI, S.A.	Argentina	—	99.14%	FUND MANAGER	—	5	1	—
Santander Investment I, S.A.	Spain	100.00%	—	HOLDING COMPANY	308	(1,851)	(58)	327
Santander Investment Inmobiliaria Colombia, Ltda.	Colombia	—	99.86%	REAL ESTATE MANAGEMENT	7	(3)	—	—
Santander Investment Limited	Bahamas	—	100.00%	SECURITIES COMPANY	—	9	(5)	—
Santander Investment Securities, Inc.	United States	—	100.00%	SECURITIES COMPANY	213	(153)	(9)	295
Santander Investment Services, S.A.	Spain	100.00%	—	BANKING	21	129	107	14
Santander Investment Sociedad Agente de Bolsa, S.A.	Peru	—	100.00%	SECURITIES COMPANY	2	—	(1)	9
Santander Investment Trust Colombia S.A., Sociedad Fiduciaria	Colombia	—	100.00%	FUND MANAGER	2	7	—	16
Santander Investment Valores Colombia S.A., Comisionista de Bolsa Comercial	Colombia	—	97.76%	SECURITIES COMPANY	—	1	1	1
Santander Investment, S.A., Corredores de Bolsa	Chile	—	99.99%	SECURITIES COMPANY	12	18	3	12
Santander Issuances, S.A.	Spain	100.00%	—	HOLDING COMPANY	—	—	—	—
Santander Management Gesellschaft für Abrechnungssyisteme mbh	Germany	—	100.00%	FINANCE	—	—	—	—
Santander Management Latinoamérica, B.V.	Netherlands	—	100.00%	HOLDING COMPANY	—	—	—	—
Santander Merchant Bank, Ltd.	Bahamas	—	100.00%	BANKING	4	61	4	134
Santander Merchant, S.A.	Argentina	—	99.97%	FINANCE	9	(9)	—	18
Santander Mexicano S.A. De C.V. Afore	Mexico	—	74.92%	PENSION FUND MANAGER	30	5	39	2
Santander Multimedios, S.A.	Chile	—	99.99%	INTERNET	1	—	—	1
Santander Overseas Bank, Inc.	Puerto Rico	—	100.00%	BANKING	81	252	7	203

F-153

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
Santander Pensiones, S.A., E.G.F.P.	Spain	21.20%	76.54%	PENSION FUND MANAGER	39	12	7	50
Santander Pensôes — Sociedade Gestora de Fundos de Pensôes, S.A.	Portugal	—	99.79%	PENSION FUND MANAGER	1	2	1	1
Santander Perpetual S.A. Unipersonal	Spain	100.00%	—	HOLDING COMPANY	—	—	—	—
Santander Private Advisors, Ltd.	United States	100.00%	—	HOLDING COMPANY	—	—	—	—
Santander S.A. Agente de Valores	Chile	—	84.09%	SECURITIES COMPANY	41	88	27	21
Santander Securities Corporation	Puerto Rico	—	88.64%	SECURITIES COMPANY	18	3	7	16
Santander Sociedad de Bolsa, S.A.	Argentina	—	99.14%	SECURITIES COMPANY	3	1	1	3
Santander Totta, SGPS.	Portugal	—	99.80%	HOLDING COMPANY	1,509	—	—	2,554
Santander Trade Services, Ltd.	Hong Kong	—	100.00%	ADVISORY SERVICES	32	(31)	2	32
Santander Venezuela Sociedad Administradora de Entidades de Inversión Colectiva, C.A.	Venezuela	—	90.00%	FUND MANAGER	—	—	—	—
Santander, S.A., Administradora General de Fondos	Chile	—	83.95%	FUND MANAGER	12	30	17	8
Santander, S.A., Sociedad Securitizadora	Chile	—	84.00%	SECURITIZATION	1	—	—	1
Santiago Corredores de Bolsa, Ltda.	Chile	—	83.94%	SECURITIES COMPANY	7	3	1	8
Santiago Leasing, S.A.	Chile	—	84.02%	LEASING	27	10	(5)	51
Santusa Holding, S.L.	Spain	69.64%	30.36%	HOLDING COMPANY	4,857	5,522	74	9,179
Sarum Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Scotprov Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	213	(89)	(7)	124
Scottish Mutual International Fund Managers (South Africa) Limited	South Africa	—	100.00%	SERVICES	—	—	—	—
Scottish Mutual International Fund Managers Limited	Ireland	—	100.00%	FINANCE	1	—	2	1
Scottish Mutual International Holdings	Ireland	—	100.00%	PORTFOLIO COMPANY	371	(122)	(41)	249
Scottish Mutual International Investment Fund plc (******)	Ireland	—	100.00%	FUND MANAGER	—	—	—	—
Scottish Mutual Investment Managers Limited	United Kingdom	—	100.00%	FINANCE	1	4	(4)	1
Scottish Mutual Nominees Limited	United Kingdom	—	100.00%	SECURITIES COMPANY	—	—	—	—
Scottish Mutual Pension Funds Investment Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	1	1	—	1
Scottish Mutual PEP and ISA Managers Limited	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	43	3	1	43
Scottish Provident (Holdings) Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	97	(35)	2	62
Scottish Provident Institution	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Scottish Provident Pension Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Scottish Provident Trustees Limited	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—	—	—
Sercopyme, S.A.	Spain	—	88.65%	SERVICES	17	2	(1)	17
Serfin International Bank and Trust	Cayman Islands	—	99.80%	BANKING	37	(11)	28	24
Serfin VII, Ltd.	Cayman Islands	—	100.00%	FUND MANAGER	—	1	—	8
Servicio de Alarmas Controladas por Ordenador, S.A.	Spain	100.00%	—	SECURITY	1	—	—	1
Servicios Administrados, S.A.	Uruguay	—	100.00%	FINANCE	—	—	—	2
Servicios de Cobranza, Recuperación y Seguimiento, S.A. De C.V.	Mexico	—	100.00%	SERVICES	1	—	—	3
Sheppards Moneybrokers Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	20	4	—	20
Sinvest Inversiones y Asesorías Limitada	Chile	—	99.99%	FINANCE	1	33	5	2
Sistema 4B, S.A.	Spain	46.02%	11.50%	CARDS	3	13	2	10
SMA (81/103 Kings Road) Limited	United Kingdom	—	100.00%	REAL ESTATE	—	—	—	—
Sociedad Integral de Valoraciones Automatizadas, S.A.	Spain	—	100.00%	APPRAISAL	1	—	2	1
Societe de Gestion de Leopard Fund, S.A.	Luxembourg	—	100.00%	FUND MANAGER	—	—	—	—
Sodepro, S.A.	Spain	—	88.65%	FINANCE	3	1	—	2
Soince, S.A.	Chile	0.01%	99.80%	HOLDING COMPANY	—	8	—	8
Solarlaser Limited	United Kingdom	—	100.00%	REAL ESTATE	56	30	3	56

F-154

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
Somaen Dos, S.L.	Spain	—	59.96%	HOLDING COMPANY	26	634	84	402
Sotrón, S.L.	Spain	—	100.00%	HOLDING COMPANY	5	81	12	86
South Glasgow Retail Park Limited	United Kingdom	—	100.00%	REAL ESTATE	35	(21)	—	2
SPI Finance Plc	United Kingdom	—	100.00%	FINANCE	—	—	—	—
SPILA Marketing Services (Pty) Limited	South Africa	—	100.00%	MARKETING	—	—	—	—
SPL (Holdings 1) Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	2,464	(556)	(455)	1,908
SPL (Holdings 2) Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	25	(6)	(5)	19
SPL (Holdings) Limited	United Kingdom	—	100.00%	PORTFOLIO COMPANY	3,068	(1,143)	(460)	1,925
Suleyado 2003, S.L.	Spain	—	100.00%	HOLDING COMPANY	7	—	—	7
Swesant Merchant S.A.	Switzerland	—	100.00%	HOLDING COMPANY	2	—	—	383
Swesant, S.A.	Switzerland	—	100.00%	HOLDING COMPANY	—	81	336	—
Symbios Capital, B.V.	Netherlands	—	100.00%	VENTURE CAPITAL COMPANY	21	—	1	22
Symbios Capital, S.L.	Spain	98.00%	2.00%	HOLDING COMPANY	—	—	—	—
Talorcan plc	United Kingdom	—	100.00%	FINANCE	2	—	—	2
Taxagest Sociedade Gestora de Participaçoes Sociais, S.A.	Portugal	—	99.79%	HOLDING COMPANY	42	37	5	42
Teatinos Siglo XXI, S.A.	Chile	50.00%	50.00%	HOLDING COMPANY	70	(17)	43	384
Teylada, S.A.	Spain	11.11%	88.89%	SECURITIES INVESTMENT	—	—	—	—
The Compass Group Limited	Jersey	—	100.00%	PORTFOLIO COMPANY	—	—	—	—
The Inscape Investment Fund (Jersey) Limited	Jersey	—	100.00%	FINANCE	—	—	—	—
The National & Provincial Building Society Custodian Trustee Limited (**)	United Kingdom	—	(b)	ASSET MANAGEMENT	—	—	—	—
The National & Provincial Building Society Pension Fund Trustees Limited (**)	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—	—	—
The Scottish Mutual Assurance Society	United Kingdom	—	100.00%	INSURANCE	—	—	—	—
The WF Company Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	1	—	—
Three Quays Underwriting Management Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Timac Properties Limited	Jersey	—	100.00%	SECURITIES COMPANY	—	—	—	—
Títulos de Renta Fija, S.A.	Spain	100.00%	—	SECURITIES INVESTMENT	—	—	—	—
Tornquist Asesores de Seguros , S.A.	Argentina	—	99.83%	ADVISORY SERVICES	—	—	—	—
Totta & Açores Ct. Inc. – Naugatuck	United States	—	99.80%	BANKING	—	—	—	—
Totta & Açores Finance Ireland, Limited	Ireland	—	99.15%	FINANCE	57	—	2	57
Totta & Açores Inc. Newark	United States	—	99.80%	BANKING	—	—	—	—
Totta (Ireland), PLC	Ireland	—	99.80%	FINANCE	286	1	11	285
Totta Crédito Especializado, Instituiçao Financeira de Crédito, S.A. (IFIC)	Portugal	—	99.71%	LEASING	35	50	14	42
Totta Urbe — Empresa de Administraçâo e Construçôes, S.A.	Portugal	—	99.80%	REAL ESTATE	100	6	—	148
Tyndall Nominees ( Isle of Man ) Limited	Isle of Man	—	100.00%	SECURITIES COMPANY	—	—	—	—
Universia Holding, S.A.	Spain	50.00%	50.00%	INTERNET	—	—	—	—
Valores Santander Casa de Bolsa, C.A.	Venezuela	—	90.00%	SECURITIES COMPANY	2	4	2	7
Vendcare Finance Limited	United Kingdom	—	100.00%	LEASING	—	—	—	—
Vista Capital de Expansión, S.A. SGECR	Spain	—	50.00%	VENTURE CAPITAL MANAGEMENT	—	—	—	—
Vista Desarrollo, S.A. SCR	Spain	100.00%	—	VENTURE CAPITAL COMPANY	48	31	2	33
W.N.P.H. Gestao e Investimentos Sociedade Unipessoal, S.A.	Portugal	—	100.00%	SECURITIES INVESTMENT	—	31	1	—
Wallcesa, S.A.	Spain	100.00%	—	SECURITIES INVESTMENT	2	12	(4)	10
Wassens Onroerend Goed, B.V.	Netherlands	—	100.00%	HOLDING COMPANY	—	—	—	—
Wex Point Finance, S.L.	Spain	—	88.65%	SERVICES	1	3	(1)	3
WF (Management) Limited	United Kingdom	—	100.00%	FUND AND PORTFOLIO MANAGER	—	—	—	—

F-155

		% of Ownership by the Bank			Millions of Euros
Company	Location	Direct	Indirect	Line of Business (*)	Capital Stock (a)	Reserves (a)	Net Income (Loss) (a)	Cost (a)
WF (Trustees) Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
WF Systems Ltd	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Whitefoord & Foden Limited	United Kingdom	—	100.00%	ADVISORY SERVICES	—	—	—	—
Whiting Pension Services Ltd	United Kingdom	—	100.00%	ASSET MANAGEMENT	—	—	—	—

(a)	Amount per books of each company as of December 31, 2004. The cost per books (net of allowance) is the figure per the books of each holding company on the basis of the Group’s percentage of ownership, disregarding amortization of consolidation goodwill. The data on companies abroad were translated to euros at the year-end exchange rates.
(b)	Companies over which effective control is held.
(*)	Data from the latest approved financial statements as of March 10, 2004.
(**)	Data from the latest approved financial statements as of March 31, 2004.
(***)	Data from the latest approved financial statements as of June 30, 2004.
(****)	Data from the latest approved financial statements as of August 31, 2004.
(*****)	Data from the latest approved financial statements as of September 30, 2004.
(******)	Data the latest approved financial statements as of October 31, 2004.
(1)	Data expressed on a comparable basis with those for calendar 2004.
(2)	The preferred share and security issuer companies are detailed in Exhibit III, together with other relevant information.

F-156

Exhibit II

Non-consolidable companies in which the Santander Group has holdings of more than 3% (20% if unlisted)

		% of Ownership						Millions of Euros
		by the Bank
									Capital			Net Income
Company	Location		Direct		Indirect		Line of Business (*)		Stock (*)	Reserves (*)		(Loss) (*)
Abbey National Life plc	United Kingdom		—		100.00	%	INSURANCE		211	299		37
ABSLine Multimedia, S.L.	Spain		–		47.50	%	INTERNET		–	–		–
Accordfin España, E.F.C., S.A.	Spain		–		49.00	%	FINANCE		11	–		2
Adherbal Global, S.L.	Spain		–		50.00	%	HOLDING COMPANY		42	–		(3	)
Administradora de Tarjetas de Crédito	Bolivia		–		24.08	%	CARDS		1	–		–
Agrícola Tabaibal, S.A.	Spain		–		65.78	%	AGRICULTURE AND LIVESTOCK		–	–		–
Agropecuaria Tapirapé, S.A.	Brazil		–		97.05	%	AGRICULTURE AND LIVESTOCK		2	(1	)	–
Aguas de Fuensanta, S.A.	Spain		–		39.29	%	FOOD		3	5		–
Alcaidesa Holding, S.A.	Spain		–		44.26	%	REAL ESTATE		13	51		9
Alcaidesa Inmobiliaria, S.A.	Spain		–		44.26	%	REAL ESTATE		34	29		23
Alcaidesa Servicios, S.A.	Spain		–		44.26	%	SERVICES		–	–		–
Almacenadora Serfin, S.A. De C.V.	Mexico		–		73.90	%	STORAGE		15	(14	)	–
Almacenadora Somex, S.A. De C.V.	Mexico		–		72.85	%	STORAGE		1	4		–
Altavida Santander Seguros de Vida, S.A.	Chile		–		100.00	%	INSURANCE		9	16		12
Antena 3 de Televisión, S.A. (consolidated) (**)	Spain		0.51	%	9.49	%	MEDIA		167	291		(207	)
Aparcamientos y Construcciones, S.A.	Spain		–		88.65	%	REAL ESTATE		3	(1	)	–
Arena Communications Network, S.L. (**)	Spain		20.00	%	–		ADVERTISING		–	3		–
Asajanet Servicios Agropecuarios, S.L.	Spain		30.00	%	–		INTERNET		–	1		–
Attijari Factoring Maroc, S.A. (**)	Morocco		–		25.00	%	FACTORING		3	1		–
Attijari International Bank Société Anonyme (**)	Morocco		50.00	%	–		BANKING		2	1		–
Attijariwafa Bank Société Anonyme (**)	Morocco		–		14.48	%	BANKING		124	387		39
Auna Operadores de Telecomunicaciones, S.A. (consolidated) (**)	Spain		12.28	%	15.06	%	TELECOMMUNICATIONS		2,198	110		(55	)
Banco Internacional da Guiné-Bissau, S.A.	Guinea Bissau		–		48.82	%	BANKING		1	(32	)	(1	)
Banesto B2C Escaparate, S.L.	Spain		–		88.65	%	TECHNOLOGY		2	(3	)	–
Banestur, S.A.	Spain		–		88.65	%	TOURISM		–	–		–
Benim — Sociedade Imobiliária, S.A.	Portugal		–		24.95	%	REAL ESTATE		1	7		–
Bozano, Simonsen Centros Comerciais, S.A. (**)	Brazil		–		96.90	%	SHOPPING MALL MANAGEMENT		55	31		8
BPI SGPS,S.A. (**)	Portugal		–		5.29	%	BANKING		760	303		164
Canela Foods, S.A.	Spain		16.08	%	8.07	%	HOSPITALITY SERVICES		–	11		(5	)
Cantabria Capital, SGECR, S.A.	Spain		50.00	%	–		VENTURE CAPITAL MANAGER		–	–		–
Capital Variable SIMCAV, S.A.	Spain		–		78.77	%	S.I.M.C.A.V.		6	1		–
Carpe Diem Salud, S.L.	Spain		100.00	%	–		HEALTH CARE SERVICES		–	–		–
Carpe Diem Servicios Sanitarios, S.L.	Spain		61.29	%	–		MARKETING AND DISTRIBUTION OF HEALTHCARE		–	–		(1	)
							PRODUCTS
Cartera del Norte, S.A.	Spain		–		31.99	%	FINANCE		1	–		–
Catmoll, S.L.	Spain		100.00	%	–		CONCESSION-HOLDER		7	–		–
CBE Service SPRL (**)	Belgium		–		20.00	%	SERVICES		–	–		–
Centradia Group, Ltd. (**)	United Kingdom		29.03	%	–		ADVISORY SERVICES		39	(22	)	(2	)
Centro de Compensación Automatizado, S.A.	Chile		–		27.70	%	PAYMENT SYSTEMS		–	–		–
Centro Desarrollo Invest. Apli. Nuevas Tecnologías	Spain		–		43.44	%	TECHNOLOGY		–	1		–
Certidesa, S.L.	Spain		–		100.00	%	AIRCRAFT LEASE		22	(5	)	(4	)
Clínica Sear, S.A.	Spain		–		44.79	%	HEALTH CARE		1	6		–
Club Zaudin Golf, S.A.	Spain		–		67.08	%	SERVICES		–	15		–
Commerzbank, A.G. (consolidated) (**)	Germany		–		3.38	%	BANKING		1,545	9,866		(2,320	)
Compañía Aseguradora Banesto Seguros, S.A.	Spain		–		88.65	%	INSURANCE		19	35		12
Compañía Concesionaria del Túnel de Soller, S.A.	Spain		–		28.99	%	CONSTRUCTION		17	–		–

F-157

		% of Ownership						Millions of Euros
		by the Bank
									Capital			Net Income
Company	Location		Direct		Indirect		Line of Business (*)		Stock (*)	Reserves (*)		(Loss) (*)
Compañía Española de Petróleos, S.A. (consolidated) (**)	Spain		12.35	%	19.92	%	OIL REFINING		268	2,019		612
Consorcio Credicard, C.A.	Venezuela		–		32.80	%	CARDS		–	2		5
Consorcio Internacional de Aseguradores de Crédito, S.A.	Spain		20.25	%	–		CREDIT INSURANCE		21	–		(1	)
Consorcio Mexicano de Aseguradores de Crédito, S.A	Spain		40.25	%	–		CREDIT INSURANCE		4	–		–
Corporación Suiche 7B, C.A.	Venezuela		–		31.75	%	CARDS		–	1		1
Corporate Director Dos, S.L.	Spain		66.67	%	–		HOLDING COMPANY		–	–		–
Corporate Director Uno, S.L.	Spain		33.33	%	–		HOLDING COMPANY		–	–		–
Costa Canaria de Veneguera, S.A.	Spain		–		65.78	%	REAL ESTATE		22	(6	)	–
Crinaria, S.A.	Spain		–		88.65	%	HOSPITALITY		2	5		–
Depósitos Portuarios, S.A.	Spain		–		88.56	%	SERVICES		–	–		–
Deposoltenegolf, S.A.	Spain		–		88.65	%	SPORTS		1	21		–
Dinsa Customer Services, S.A.	Spain		–		88.65	%	IT		2	3		(4	)
Diseño e Integración de Soluciones, S.A.	Spain		–		88.65	%	IT		1	3		(3	)
EDS Credit Services Limited (****)	United Kingdom		–		25.02	%	IT SERVICES		–	(6	)	(6	)
Efearvi, S.A.	Spain		–		88.64	%	REAL ESTATE		1	(1	)	–
Empresa de Tarjetas Inteligentes, S.A.	Chile		–		22.66	%	CARDS		2	(1	)	(1	)
Estrella Servi-Rent, S.A.	Spain		–		49.00	%	AUTOMOTIVE INDUSTRY		–	–		–
Europartners Holding, S.A. (**)	Luxembourg		50.00	%	–		HOLDING COMPANY		–	1		1
Gire, S.A. (**)	Argentina		–		57.80	%	PAYMENT INSTRUMENTS		–	3		1
Grupo Alimentario de Exclusivas, S.A.	Spain		–		35.87	%	FOOD		–	–		–
Grupo Eurociber, S.A.	Spain		–		88.65	%	SERVICES		1	–		–
Grupo Financiero Galicia, S.A. (consolidated) (**)	Argentina		–		6.70	%	BANKING		293	158		(58	)
Grupo Golf del Sur, S.A.	Spain		–		88.65	%	REAL ESTATE		–	9		–
Grupo Konecta Net, S.L.	Spain		–		35.39	%	HOLDING COMPANY		3	3		3
Grupo Taper, S.A. (**)	Spain		27.77	%	–		DISTRIBUTION OF MEDICAL EQUIPMENT		4	19		1
Guaranty Car, S.A.	Spain		–		100.00	%	AUTOMOTIVE INDUSTRY		1	–		–
H.B.F. Aluguer e Comercio de Viaturas, S.A.	Portugal		–		100.00	%	RENTING		–	–		–
H.B.F. Auto-Renting, S.A.	Spain		–		100.00	%	RENTING		1	4		3
Hispamer Renting, S.A.	Spain		–		100.00	%	RENTING		–	2		5
HLC – Centrais de Cogeraçao, S.A. (**)	Portugal		–		24.44	%	ENERGY OPERATION		2	(4	)	(2	)
Ibérica de Compras Corporativas, S.L.	Spain		53.17	%	2.94	%	E-COMMERCE		2	3		(2	)
Infotel, Información y Telecomunicaciones, S.A.	Spain		–		29.45	%	TELECOMMUNICATIONS		1	1		1
Inmobiliaria Sitio de Baldeazores, S.A.	Spain		–		44.27	%	REAL ESTATE		–	–		–
Inmobiliaria Urbis, S.A.	Spain		–		45.67	%	REAL ESTATE		152	516		124
Inoinversora, S.A. SICAV	Spain		–		11.04	%	S.I.C.A.V.		4	–		–
Instituto Serfin, A.C.	Mexico		–		74.34	%	NOT-FOR-PROFIT INSTITUTE		1	1		–
Intereuropa Bank, R.T. (consolidated) (**)	Hungary		–		10.00	%	BANKING		27	17		8
Internacional Compañía Seguros de Vida, S.A.	Argentina		–		59.20	%	INSURANCE		1	9		5
Inversiones Marítimas del Mediterráneo, S.A.	Spain		100.00	%	–		HOLDING COMPANY		–	3		3
Inversiones Turísticas, S.A.	Spain		–		88.65	%	HOSPITALITY		5	27		1
Kassadesing 2005, S.L.	Spain		–		44.33	%	REAL ESTATE		8	–		–
Konecta BTO Contactcenter, S.A.	Spain		–		35.39	%	MARKETING		–	2		1
Konecta Canarias, S.A.	Spain		–		35.39	%	MARKETING		–	1		1
Konecta Centro Especial de Empleo Madrid, S.L.	Spain		–		35.39	%	TELEMARKETING		–	–		–
Konecta Centro Especial de Empleo Sevilla, S.L.	Spain		–		35.39	%	TELEMARKETING		–	–		–
Konecta Centro Especial de Empleo, S.A.	Spain		–		35.39	%	MARKET STUDIES		–	–		–
Konecta Comercialización, S.L.	Spain		–		35.37	%	MARKETING		–	–		–
Konecta Field Marketing, S.A.U.	Spain		–		35.39	%	HOLDING COMPANY		–	–		–
Konecta Net Empleo, E.T.T., S.A.	Spain		–		35.39	%	TEMPORARY EMPLOYMENT AGENCY		–	–		–
Konecta Portugal, Lda.	Portugal		–		35.39	%	MARKETING		–	–		–
Konecta Servicios de Empleo ETT, S.A.	Spain		–		35.39	%	TEMPORARY EMPLOYMENT AGENCY		–	–		–

F-158

		% of Ownership						Millions of Euros
		by the Bank
									Capital			Net Income
Company	Location		Direct		Indirect		Line of Business (*)		Stock (*)	Reserves (*)		(Loss) (*)
Konecta Servicios de Formación, S.L.	Spain		–		35.39	%	TRAINING		–	–		–
Konecta The One to One Agency, S.L.	Spain		–		35.39	%	HOLDING COMPANY		–	–		–
Konectanet Eventos, S.L.	Spain		–		21.24	%	EVENT ORGANIZATION		–	–		–
La Unión Resinera Española, S.A. (consolidated)	Spain		74.87	%	24.11	%	CHEMICALS		4	46		–
Laparanza, S.A. (**)	Spain		61.59	%	–		AGRICULTURE AND LIVESTOCK		4	22		–
Larix Chile Inversiones Limitada	Chile		–		88.65	%	REAL ESTATE		–	–		–
Layna Auto, S.L.	Spain		–		49.00	%	AUTOMOTIVE INDUSTRY		5	–		–
Layna Inversiones Galicia , S.L.	Spain		–		49.00	%	HOLDING COMPANY		8	–		–
Layna Inversiones, S.A.	Spain		–		49.00	%	HOLDING COMPANY		23	–		1
Layna Patrimonial, S.L.	Spain		–		49.00	%	REAL ESTATE		3	3		–
Linvest, S.A.	Argentina		–		99.93	%	FINANCIAL SERVICES		–	–		–
Luresa Inmobiliaria, S.A.	Spain		–		98.98	%	REAL ESTATE		9	9		–
Marismas de Astillero, S.A.	Spain		49.83	%	12.52	%	SERVICES		–	–		–
Masías de Betera, S.L.	Spain		–		22.47	%	REAL ESTATE		1	–		–
Merciver, S.L.	Spain		–		88.65	%	HOTEL OPERATION		–	(2	)	–
Meter Fit (North East) Limited (*****)	United Kingdom		–		50.00	%	LEASING		–	(5	)	(3	)
Meter Fit (North West) Limited (*****)	United Kingdom		–		50.00	%	LEASING		–	(5	)	(4	)
Meter Serve (North East) Limited (*****)	United Kingdom		–		50.00	%	PORTFOLIO COMPANY		–	–		–
Meter Serve (North West) Limited (*****)	United Kingdom		–		50.00	%	PORTFOLIO COMPANY		–	–		–
Modelo Continente SGPS, S.A. (**)	Portugal		5.17	%	21.30	%	FOOD		1,100	(843	)	75
Moneda y Crédito, S.L.	Spain		50.00	%	–		ADVERTISING		–	–		–
Multimedia de Cable, S.A. (**)	Spain		37.45	%	–		HOLDING COMPANY		12	(12	)	(1	)
Naviera Mirambel, S.L.	Spain		–		100.00	%	FINANCE		–	–		–
Nisa Santander, S.A.	Spain		99.99	%	0.01	%	INACTIVE		1	–		–
Norchem Holdings é Negocios, S.A.	Brazil		–		21.23	%	HOLDING COMPANY		1	13		1
Norchem Participaçoes e Consultoría, S.A.	Brazil		–		48.81	%	CONSULTING		2	5		1
Nova Bostwick (Portugal) Fabrica de Portas Metalicas, Ltd.	Portugal		–		99.62	%	DOOR MANUFACTURING		–	–		–
NW Services CO.	United States		–		86.97	%	E-COMMERCE		4	–		–
Operadora de Activos Alfa, S.A. De C.V.	Mexico		–		49.80	%	SERVICES		12	(11	)	–
Operadora de Activos Beta, S.A. de C.V.	Mexico		–		49.90	%	SERVICES		5	–		–
Orígenes Seguros de Retiro, S.A.	Argentina		–		59.20	%	INSURANCE		1	27		–
Polígono Industrial Gerona, S.A.	Spain		–		26.56	%	REAL ESTATE		2	2		1
Portal Universia Argentina, S.A.	Argentina		99.79	%	0.21	%	INTERNET		2	(1	)	(1	)
Portal Universia Portugal, Prestaçao de Serviços de Informática, S.A.	Portugal		98.54	%	1.44	%	INTERNET		3	(2	)	(1	)
Portal Universia, S.A.	Spain		79.39	%	1.11	%	INTERNET		37	(18	)	(6	)
Procura Digital Chile, S.A.	Chile		–		86.97	%	E-COMMERCE		–	1		–
Procura Digital de Venezuela, S.A.	Venezuela		–		86.97	%	E-COMMERCE		2	(2	)	–
Procura Digital Ltda.	Brazil		–		86.97	%	E-COMMERCE		–	(1	)	–
Procura Digital SRL de C.V.	Mexico		–		86.97	%	E-COMMERCE		1	–		–
Programa Hogar Montigalá, S.A.	Spain		–		88.55	%	REAL ESTATE		–	6		1
Programa Multi Sponsor PMS, S.A. (**)	Spain		24.75	%	24.75	%	ADVERTISING		3	2		1
Promotora Herlosacantos, S.A. (**)	Spain		–		50.00	%	REAL ESTATE		–	–		–
Proyecto Europa, S.A.	Spain		–		88.65	%	ADVISORY SERVICES		–	–		–
PSA Finance PLC	United Kingdom		–		50.00	%	LEASING		57	10		9
Quisqueya 12, Inc.	Puerto Rico		–		50.00	%	REAL ESTATE		–	2		–
R. Benet, S.A.	Spain		–		49.00	%	AUTOMOTIVE SERVICES		2	3		2
Redbanc, S.A.	Chile		–		27.70	%	CARDS		4	–		1
Reintegra, S.A.	Spain		–		45.00	%	HOLDING COMPANY		2	–		1
Retiro Inmuebles, S.L.	Spain		–		22.47	%	REAL ESTATE		1	–		–
Retos Cartera, S.A.	Spain		–		25.33	%	SECURITIES INVESTMENT		13	–		–
Río Compañía de Seguros, S.A.	Argentina		–		99.89	%	INSURANCE		4	1		1

F-159

		% of Ownership						Millions of Euros
		by the Bank
									Capital			Net Income
Company	Location		Direct		Indirect		Line of Business (*)		Stock (*)	Reserves (*)		(Loss) (*)
San Paolo IMI, S.p.A. (consolidated) (**)	Italy		–		8.48	%	BANKING		5,144	4,879		972
Santander Banespa Seguros, S.A.	Brazil		–		98.97	%	INSURANCE		2	–		–
Santander Consumer Finance Correduría de Seguros, S.A.	Spain		–		100.00	%	ADVISORY SERVICES		–	–		1
Santander de Desarrollos Inmobiliarios, S.A.	Spain		98.39	%	1.61	%	REAL ESTATE		–	–		–
Santander de Renting, S.A.	Spain		100.00	%	–		RENTING		6	13		7
Santander Seguros y Reaseguros, Compañía Aseguradora, S.A.	Spain		100.00	%	–		INSURANCE		26	74		24
Santander Seguros, S.A.	Brazil		–		98.98	%	INSURANCE		33	24		12
Santander Seguros, S.A.	Uruguay		–		100.00	%	INSURANCE		1	2		–
Scottish Mutual Assurance plc	United States		–		100.00	%	INSURANCE		2,294	(351	)	107
Scottish Mutual International plc	Ireland		–		100.00	%	INSURANCE		363	(195	)	22
Scottish Mutual Pensions Limited	United States		–		100.00	%	INSURANCE		187	(54	)	15
Scottish Provident International Life Assurance Limited	Isle of Man		–		100.00	%	INSURANCE		78	(57	)	1
Scottish Provident Limited	United States		–		100.00	%	INSURANCE		2,503	(599	)	(38	)
Seguros Santander Serfin, S.A. De C.V.	Mexico		–		74.92	%	INSURANCE		33	(1	)	–
Servicios Corporativos Seguros Serfin, S.A. De C.V.	Mexico		–		73.42	%	INSURANCE		–	–		–
Servicios Corporativos Serfin, S.A. De C.V.	Mexico		–		74.91	%	FINANCIAL SERVICES		–	–		–
Servicios Universia Venezuela S.U.V., S.A.	Venezuela		79.97	%	0.24	%	INTERNET		1	(1	)	(1	)
Shinsei Bank, Ltd. (consolidated) (***)	Japan		–		7.40	%	BANKING		3,381	1,590		497
Sociedad Interbancaria de Depósitos de Valores, S.A.	Chile		–		24.34	%	SECURITIES DEPOSIT		1	–		–
Sociedad Mexicana de Arrendamiento Puro, S.A. De C.V.	Mexico		–		99.98	%	RENTING		–	–		–
Star Capital Partners, Ltd. – Group (**)	United Kingdom		19.96	%	–		FUND MANAGER		–	2		6
Técnicas Reunidas, S.A. (consolidated) (**)	Spain		–		38.02	%	ENGINEERING		6	79		36
Tenedora de Acciones de Redesur, S.A. (**)	Spain		25.00	%	–		HOLDING COMPANY		17	(2	)	(2	)
Top-30, S.L.(**)	Spain		–		21.52	%	CONSTRUCTION		–	–		–
Totta Seguros, Companhia de Seguros de Vida, S.A.	Portugal		–		99.80	%	INSURANCE		23	11		7
Transbank, S.A.	Chile		–		27.70	%	CARDS		6	–		1
Transolver Finance EFC, S.A.	Spain		–		50.00	%	LEASING		9	14		2
U.C.I., S.A.	Spain		–		50.00	%	MORTGAGE LOANS		48	52		28
Unión Eléctrica Fenosa, S.A. (consolidated) (**)	Spain		8.21	%	13.81	%	ENERGY OPERATION		914	1,775		373
Universia Brasil, S.A.	Brazil		100.00	%	–		INTERNET		5	(2	)	(2	)
Universia Chile, S.A.	Chile		99.81	%	0.19	%	INTERNET		4	(2	)	(1	)
Universia Colombia, S.A.	Colombia		94.49	%	5.31	%	INTERNET		3	(1	)	(1	)
Universia México, S.A. De C.V.	Mexico		100.00	%	–		INTERNET		3	(2	)	(1	)
Universia Perú, S.A.	Peru		99.69	%	0.31	%	INTERNET		3	(2	)	(1	)
Universia Puerto Rico, Inc.	Puerto Rico		100.00	%	–		INTERNET		3	(2	)	(1	)
Urbiespar, S.A.	Spain		–		22.47	%	REAL ESTATE		–	–		–
Virtual Payments, S.L.	Spain		–		88.65	%	TECHNOLOGY		1	–		–
Wex Point España, S.L.	Spain		–		88.65	%	SERVICES		6	(1	)	(3	)

(*)	Amounts per the books of each company generally as of December 31, 2004, unless otherwise stated, since the financial statements have not yet been formally prepared. The data on companies abroad were translated to euros at the year-end exchange rates.
(**)	Data as of December 31, 2003, the date of the latest approved financial statements.
(***)	Data as of March 31, 2004, this company’s year end.
(****)	Data from the latest approved financial statements as of December 31, 2002.
(*****)	Data from the latest approved financial statements as of March 31, 2004.

F-160

Exhibit III

Consolidated Preferred Share and Security Issuer Companies in the Santander Group

					Millions of Euros
		% of Ownership
		by the Bank							Preferred
				Line of	Capital	Reserves		Net Income	Dividend	Income
Company	Location	Direct	Indirect	Business	Stock (*)	(*)		(*)	(*)	Balance (*)	Cost
Abbey National Capital Trust I	United States	—	(a)	FINANCE	—	—		66	66	—	—
Banesto Holdings, Ltd.	Guernsey	—	88.65%	FINANCE	57	(112	)	6	6	—	—
Banesto Preferentes, S.A.	Spain	—	88.65%	FINANCE	131	—		3	3	—	—
BCH Capital, Ltd. Cayman	Islands	100.00%	—	FINANCE	—	—		16	16	—	—
BCH Eurocapital, Ltd.	Cayman Islands	100.00%	—	FINANCE	—	1		4	4	—	—
BSCH Finance, Ltd.	Cayman Islands	100.00%	—	FINANCE	71	(8	)	95	95	—	68
Pinto Totta International Finance, Limited	Cayman Islands	—	49.90%	FINANCE	—	—		14	14	—	—
Santander Finance Capital, S.A.	Spain	100.00%	—	FINANCE	—	—		35	35	—	—
Santander Finance Preferred, S.A.	Spain	100.00%	—	FINANCE	—	—		14	14	—	—
Totta & Açores Financing, Limited	Cayman Islands	—	99.80%	FINANCE	—	—		10	10	—	—

(*)	Amounts per the books of each company as of December 31, 2004, translated to euros (in the case companies abroad) at the year-end exchange rates.
(a)	Company over which effective control is exercised.

F- 161

Exhibit IV

Notifications of Acquisitions and Sales of Investments in 2004

(Art. 86 of the revised Corporations Law and Art. 53 of Securities Market Law 24/1998)

	Date of
Investee	Notification
Ibermilenium, S.I.C.A.V., S.A.	04/06/04
Zubayda Gestión Diversificada, S.I.C.A.V., S.A.	04/23/04
Majadas Altas Inversiones, S.I.C.A.V., S.A.	04/29/04
Capital Riesgo Global S.C.R., S.A.	12/10/04
Cartera Mobiliaria, S.A., S.I.M.	12/29/04

F-162

Exhibit V

List of Bonds and Debentures outstanding as of December 31, 2004, 2003 and 2002.

	Euro thousand					Outstanding amount in million
										Annual
Issuer		2004	2003	2002	Currency		2004	2003	2002	Interest rate	Maturity Date
Banco Santander Central Hispano, S.A.-
Debentures-October 1993		117,798	117,798	117,798	Euro		—	—	—	8.75%	October 2008
Debentures- November 1993		180,304	99,686	233,818	Euro		—	—	—	8.0 and 8.25	December 2003 and December 2008
Debentures- November 1993		—	—	307,456	Pounds Sterling		—	—	200	7.15%	November 2010
Debentures- March 1994		60,251	161,221	161,221	Euro		—	—	—	7.63%	From September 2004 to September 2009
Territorial Bonds- July 2003		2,000,000	2,000,000	—	Euro		—	—	—	4.00%	July 2013
Territorial Bonds- December 2003		1,000,000	1,000,000	—	Euro		—	—	—	Floating	June 2005
Territorial Bonds- February 2004		1,500,000	—	—	Euro		—	—	—	Floating	February 2006
Territorial Bonds- March 2004		1,000,000	—	—	Euro		—	—	—	Floating	March 2009
Territorial Bonds- April 2004		1,000,000	—	—	Euro		—	—	—	Floating	April 2007
Mortgage backed securities- October 2002		3,000,000	3,000,000	3,000,000	Euro		—	—	—	4.00%	October 2007
Mortgage backed securities- March 2003		1,500,000	1,500,000	—	Euro		—	—	—	2.75	March 2006
Mortgage backed securities- September 2003		2,000,000	2,000,000	—	Euro		—	—	—	4.00%	September 2010
Mortgage backed securities- December 2003		1,500,000	1,500,000	—	Euro		—	—	—	3.75%	December 2008
Mortgage backed securities- March 2004		500,000	—	—	Euro		—	—	—	3.25%	March 2009
Mortgage backed securities- July 2004		1,500,000	—	—	Euro		—	—	—	4.50%	July 2016
Santander Central Hispano International, Ltd.
Dollars-
Issued in January 1998		—	—	476,781	U.S. dollars		—	—	500	5.88%	January 2003
Issued June 2000		367,080	395,883	476,781	U.S. dollars		500	500	500	Floating	June 2005
Issued February 2001		—	395,883	476,781	U.S. dollars		500	500	500	Floating	February 2004
Issued November 2001		—	—	8,534	U.S. dollars		—	—	8.95	Indexed to S&P 500	November 2003
Issued June 2002		58,733	63,341	76,313	U.S. dollars		80	80	80	Floating	June 2005
Yen-
Issued in 1994		—	22,214	24,118	Yen		—	3000	3,000	4,70%	December 2004
April 2000		322,234	333,210	361,765	Yen			45,000	45,000	1.42%	April 2005
Subtotal carried forward		17,606,400	12,589,236	5,721,366

F-163

	Euro thousand					Outstanding amount in million
										Annual
Issuer		2004	2003	2002	Currency		2004	2003	2002	Interest rate	Maturity Date
Subtotal brought forward		17,606,400	12,589,236	5,721,366
May 2002		—	207,479	225,259	Yen		—	28,020	28,020	0.16%	December 2004
Euro-
January 1998		10,325	10,325	10,325	Euro		—	—	—	Floating	January 2005
April 1998		206,508	206,508	206,508	Euro		—	—	—	Floating	April 2008
June 1998		18,072	18,072	18,072	Euro		—	—	—	Fixed to Floating	June 2013
Issued in August 1997		153,390	153,390	153,390	Euro		—	—	—	Floating	August 2007
March 1998		255,647	255,647	255,647	Euro		—	—	—	5.38%	February 2008
Bonds- June 1998		—	—	600,000	Euro		—	—	—	Floating	June 2003
February 2000		—	—	25,000	Euro		—	—	—	Floating	February 2003
July 2000		—	—	14,500	Euro		—	—	—	Floating	February 2003
August 2000		—	—	500,000	Euro		—	—	—	Floating	August 2003
April 2001		—	500,000	500,000	Euro		—	—	—	Floating	April 2004
April 1998		255,647	255,647	255,647	Euro		—	—	—	5.00%	April 2005
February 1998		181,512	181,512	181,512	Euro		—	—	—	5.38%	February 2008
From October 1994 to May 1998		1,006,164	1,311,062	1,311,062	Euro		—	—	—	Fixed from 5% to 8.38% and Floating	From October 2004 to February 2009
February 2002		31,700	31,700	35,000	Euro		—	—	—	Floating	January 2007
February 2002		500,000	500,000	500,000	Euro		—	—	—	Floating	February 2005
July 2002		—	150,000	150,000	Euro		—	—	—	Floating	July 2004
February 2003		—	75,000	—	Euro		—	—	—	Floating	August 2004
April 2003		—	200,000	—	Euro		—	—	—	Floating	October 2004
Swiss Francs- issued from             April 1998 to May 1998		32,407	32,094	34,426	Swiss Francs		50	50	50	3.51% y 3.54%	From April 2008 to May 2008
Pounds Sterling
March 1994		326,215	326,334	353,574	Pounds Sterling		230	230	230	7,90%	March 2019
April 2000		—	422,898	458,109	Pounds Sterling		—	298	298	Floating	April 2004
August 2000		—	425,653	461,211	Pounds Sterling		—	300	300	Floating	April 2004
January 2001		—	141,884	153,728	Pounds Sterling		—	100	100	Floating	January 2004
May 2001		—	141,884	153,728	Pounds Sterling		—	100	100	Floating	November 2004
July 2002		—	141,884	153,728	Pounds Sterling		—	100	100	Floating	July 2004
Banesto Group
USD		—	—	48,963	U.S. dollars		—	—	50	Floating	April 2003
Euro		—	—	51,128	Euro		—	—	—	Floating	April 2003
Euro		—	602,000	933,000	Euro		—	—	—	Floating	February and March 2004
Subtotal carried forward		20,583,987	18,880,209	13,464,883

F-164

	Euro thousand					Outstanding amount in million
										Annual
Issuer		2004	2003	2002	Currency		2004	2003	2002	Interest rate	Maturity Date
Subtotal brought forward		20,583,987	18,880,209	13,464,883
Euro		25,000	25,000	25,000	Euro		—	—	—	4.48%	October 2006
Euro		7,200	412,702	424,874	Euro		—	—	—	Floating	From April 2004 to August 2012
Euro		118,635	118,635	118,635	Euro		—	—	—	From 4.55% to 5.15%	From March 2005 to August 2007
Euro		2,000,000	2,000,000	—	Euro		—	—	—	Floating	October 2005
Mortgage backed securities		1,000,000	1,000,000	1,000,000	Euro		—	—	—	5.75%	March 2017
Mortgage backed securities		1,500,000	1,500,000	—	Euro		—	—	—	4.00%	May 2010
Euro		1,000,000	—	—	Euro		—	—	—	Floating	June 2009
Euro		2,000,000	—	—	Euro		—	—	—	Floating	October 2006
Mortgage backed securities		2,000,000	—	—	Euro		—	—	—	3.75%	February 2011
Mortgage backed securities		1,750,000	—	—	Euro		—	—	—	4%	September 2014
Banco Santander Chile-(merged with
B.Santiago)
Bonds		166,028	253,969	839,635	Chilean Pesos		197.78	207.505	634.2	From 5.5% to 6.5%	Various maturities
Bonds		1,295,918	1,677,749	1,500,500	Chilean Pesos		1,014.85	1,274.539	1,133.367	From 5,5% to 6,5%	Various maturities
Bonds December 2004		293,132	—	—	U.S. dollars		399.28	—	—	Floating	December 2009
Banco Santander Puerto Rico
Debentures- August 1994		—	39,588	47,678	U.S. dollars		—	50	50	6.82%	August 2004
Debentures- March 1995		—	—	61,947	U.S. dollars		—	—	65	6.89%	July 2003
Debentures- March 1995		—	—	33,356	U.S. dollars		—	—	35	Floating	July 2003
Debentures- May 1998		—	—	38,142	U.S. dollars		—	—	40	Floating	June 2003
Debentures- June 1998		—	16,643	29,572	U.S. dollars		—	21	31.9	6.20%	June 2018
Debentures- October 1998		—	—	20,597	U.S. dollars		—	—	21.6	Floating	October 2003
Debentures- December 1999		—	6,811	14,649	U.S. dollars		—	8.6	15.8	6.5%	December 2019
Debentures- December 2000		—	—	24,098	U.S. dollars		—	—	26	Floating	December 2020
Debentures- August 2001		—	19,275	23,147	U.S. dollars		—	24.3	24.3	6.15%	December 2021
Debentures- February 2004		22,025	—	—	U.S. dollars		30	—	—	3.43%	January 2010
Debentures- May 2004		4,722	—	—	U.S. dollars		6.4	—	—	0.25%	May 2011
Banco Santander de Negocios Portugal							—
Debentures- 1996		—	—	14,460	Euro		—	—	—	Floating	February 2003
Debentures- 1997		799	799	793	Euro		—	—	—	Floating	September 2005
Debentures- 2000		—	—	2,302	Euro		—	—	—	Floating	May 2003
Debentures- 2001		—	1,083	7,386	Euro		—	—	—	Floating	January 2004
Subtotal carried forward		33,767,446	25,952,463	17,691,654

F-165

	Euro thousand					Outstanding amount in million
										Annual
Issuer		2004	2003	2002	Currency		2004	2003	2002	Interest rate	Maturity Date
Subtotal brought forward		33,767,446	25,952,463	17,691,654
Banco Santander Totta
(former Banco Santander Portugal)							—	—	—
Debentures- from June 1998 to October 1998		6,568	6,818	9,705	Euro		—	—	—	4948%	July 2008
Debentures 99		3,610	10,882	28,224	Euro		—	—	—	Floating	February 2004 to February 2009
Debentures and mortgage bonds 2000		—	14,024	68,802	Euro		—	—	—	Floating	March 2004
Debentures and mortgage bonds 2001		—	50,378	85,620	Euro		—	—	—	Floating	From February to December 2004
Debentures 02		90,647	142,803	144,728	Euro		—	—	—	Floating	From April 2004 to May 2009
Debentures 03		107,893	111,096	—	Euro		—	—	—	Floating	From February 2004 to December 2008
Debentures 04		93,186	—	—	Euro		—	—	—	Floating	From January 2009 to November 2009
Banco Río de la Plata
Debentures- December 1993		—	—	238,390	U.S. dollars		—	—	250	8.75%	December 2003
Global Program 2000		20,091	55,270	291	U.S. dollars		27.37	69.8	0.31	Floating	August 2010
Global Program 2001		15,302	29,520	47,678	U.S. dollars		20.84	37.3	50	Floating	August 2005
Global Program 2002		—	—	362,592	U.S. dollars		—	—	380.3	From 1.82% to 2.8%	From February to May 2003
Global Program 2002		—	—	168,402	U.S. dollars		—	—	176.6	Floating	June 2003
Debentures – January 2003		96,812	111,909	—	U.S. dollars		131.87	141.3	—	4.0%	December 2009
Debentures – June 2003		72,039	152,204	—	U.S. dollars		98.12	192.2	—	2.55%	December 2009
Debentures – June 2003		—	131,549	—	U.S. dollars		—	166.2	—	Floating	June 2004
Debentures – June 2003		—	1,864	—	Argentine Pesos		—	7	—	Floating	June 2004
Global Program 2004		115,911	—	—	U.S. dollars		157.88	—	—	2.26%	June 2005
Global Program 2004		7,645	—	—	U.S. dollars		10.41	—	—	2% and 4%	May 2005
Santiago Leasing
Bonds		—	85,190	102,812	Chilean Pesos		—	63,755	77,657	From 5.5% to 5.91%	From March 2004 to January 2019
Origenes AFJP S.A.
Bonds		—	—	6,613	U.S. dollars		—	—	6.96	6.83%	January 2003
Banco Santander Totta
(former Banco Totta & Açores)
Debentures 2000		—	74,987	351,091	Euro		—	—	—	Floating	May 2004
Debentures 2001		—	30,063	106,900	Euro		—	—	—	Floating	May 2004
Debentures 2001		—	9,796	83,557	Euro		—	—	—	From 3,0% to 4,71%	January 2004
Debentures 2002		165,676	195,362	201,805	Euro		—	—	—	Floating	From April 2004 to January 2006
Debentures 2003		305,682	310,800	—	Euro		—	—	—	Floating	From January 2006 to December 2008
Debentures 2004		314,855	—	—	Euro		—	—	—	Floating	From April 2006 to October 2014
Subtotal carried forward		35,183,363	27,476,978	19,698,864

F-166

	Euro thousand					Outstanding amount in million
										Annual
Issuer		2004	2003	2002	Currency		2004	2003	2002	Interest rate	Maturity Date
Subtotal brought forward		35,183,363	27,476,978	19,698,864
Banco Santander Totta
(former Companhia Geral Crédito Predial)
Bonds		—	24	24	Euro		—	—	—	Floating	June 2005
Debentures		—	—	2,300	Euro		—	—	—	5.72%	May 2003
Debentures 2000		—	23,238	113,854	Euro		—	—	—	Floating	March 2004
Debentures 2001		—	—	29,442	Euro		—	—	—	4.25%	May 2003
Debentures 2001		—	12,193	49,449	Euro		—	—	—	Floating	November 2004
Debentures 2002		—	19,577	82,486	Euro		—	—	—	From 3.0% to 5.3%	From March 2004 to May 2009
Debentures 2002		58,127	77,600	79,911	Euro		—	—	—	Floating	From April 2004 to January 2006
Debentures 2003		199,741	193,981	—	Euro		—	—	—	Floating	From April 2006 to December 2008
Debentures 2004		9,854	—	—	Euro		—	—	—	5%	February 2012
Debentures 2004		79,307	—	—	Euro		—	—	—	Floating	From November 2007 to November 2009
Totta-crédito especializado instituiçâo
financeira de crédito, sa (IFIC)
Debentures 1997 and 1998		9,976	9,977	9,977	Euro		—	—	—	Floating	From July 2004 to October 2005
Banco Standard Totta de Mozambique (SOLD)
Obrigaçoes		—	—	4,138	Mozambican Metical		—	—	100	Floating	October 2003
Banco Santander Brasil
Mortgage Bills		—	—	4,375	Brazilian Real		—	—	16.2	10,00%	February 2003
Eurobonds1999		—	5,903	2,681	U.S. dollars		—	7.46	2.81	9,73%	December 2004
Eurobonds 2001		—	—	75,235	U.S. dollars		—	—	78.9	6,92%	June 2003
Banco Santander,S.A. (Brasil)
Eurobonds 1996		—	48,079	56,624	U.S. dollars		—	60.7	59.5	10.67%	May 2004,
Eurobonds 1996		—	716	31,738	U.S. dollars		—	0.9	33.4	10.38%	September 2004
Eurobonds 1997		32,910	49,098	1,378	U.S. dollars		44.83	62.0	1.6	9,34%	March 2005
Eurobonds 1997		255,690	239,427	254,880	Euro		—	—	—	8,26%	November 2005
Finconsumo Banca S.P.A.
Debentures		—	300,000	—	Euro		—	—	—	Floating	July 2004
Debentures		169,598	172,500	—	Euro		—	—	—	Floating	January to July 2006
Debentures		12,000	12,000	—	Euro		—	—	—	From 3.0 to 10.10	April 2006 and February 2007
Santander Bankcorp
Debentures		8,810	49,089	—	U.S. dollars		12	62	—	1% and 2%	June 2004 and March 2005
Debentures June 2004		46,024	—	—	U.S. dollars		62.69	—	—	Floating	July 2005
Subtotal carried forward		36,065,400	28,690,380	20,497,329

F-167

	Euro thousand					Outstanding amount in million
										Annual
Issuer		2004	2003	2002	Currency		2004	2003	2002	Interest rate	Maturity Date
Subtotal brought forward		36,065,400	28,690,380	20,497,329
CC-Bank
Bonds		141,000	148,512	—	Euro		—	—	—	From 2% to 5%	From May 04 to September 06
Banespa
Eurobonds		109,520	—	—	U.S. dollars		149.18	—	—	4.50%	July 2005
Debentures 2004		73,416	—	—	U.S. dollars		102.54	—	—	From 1.5% to 4.05%	From July 2004 to July 2006
Santander International Debt
											December 2006 and
Senior Debt		3,500,000	—	—	Euro		—	—	—	Floating	December 2007
Senior Debt		36,708	—	—	U.S. dollars		50	—	—	Floating	December 2006
Senior Debt		354,585	—	—	Pounds Sterling		250	—	—	Floating	December 2007
Abbey National plc
US Dollars-
											From January 2005 to
Issued from 1995 to 2001		58,907	—	—	U.S. dollars		80.24	—	—	From 0% to 2.36%	November 2007
Issued from 1995 to 2001		172,770	—	—	U.S. dollars		235.33	—	—	Floating	From January 2005 to October 2006
Issued 2002		32,791	—	—	U.S. dollars		44.66	—	—	From 0% to 4.9%	From February 2005 to June 2007
Issued 2002		18,354	—	—	U.S. dollars		25	—	—	Floating	From February 2007 to May 2012
Issued 2003		267,833	—	—	U.S. dollars		364.82	—	—	From 0% to 3.5%	From February 2005 to September 2008
Issued 2003		308,433	—	—	U.S. dollars		420.12	—	—	Floating	From November 2005 to November 2013
Issued 2004		213,663	—	—	U.S. dollars		291.03	—	—	From 0% to 3.49%	From July 2005 to October 2007
Issued 2004		2,046,633	—	—	U.S. dollars		2,787.72	—	—	Floating	From January 2005 to December 2016
Yens-
Issued from 1995 to 2001		114,572	—	—	Yens		16.000	—	—	From 3% to 5%	From September 2005 toApril 2007
Issued from 1995 to 2001		169,710	—	—	Yens		23.700	—	—	Floating	From January 2006 to December 2031
Issued 2002		157,536	—	—	Yens		22.000	—	—	From 0% to 0.2%	From June 2005 to December 2006
Issued 2002		53,706	—	—	Yens		7.500	—	—	Floating	From September 2014 to October 2032
Issued 2003		330,827	—	—	Yens		46,200	—	—	Floating	From November 2005 to September 2033
Issued 2004		3,580	—	—	Yens		500	—	—	Floating	July 2034
Pounds sterling-
Issued from 1993 to 2001		1,441,753	—	—	Pounds Sterling		1,016.51	—	—	From 0% to 9.13%	From May 2005 to June 2038
Issued from 1993 to 2001		194,801	—	—	Pounds Sterling		137.34	—	—	Floating	From January 2005 to May 2011
Issued 2002		3,622	—	—	Pounds Sterling		2.55	—	—	From 0% to 9.13%	From April 2008 to June 2012
Issued 2002		46,763	—	—	Pounds Sterling		32.97	—	—	Floating	From November 2006 to June 2007
Subtotal carried forward		45,916,883	28,838,961	20,497,329

F-168

	Euro thousand					Outstanding amount in million
										Annual
Issuer		2004	2003	2002	Currency		2004	2003	2002	Interest rate	Maturity Date
Subtotal brought forward		45,916,883	28,838,961	20,497,329
Issued 2003		115,268	—	—	Pounds Sterling		81.27	—	—	From 0% to 9.13%	From January 2005 to June 2012
Issued 2003		1,312,862	—	—	Pounds Sterling		925.63	—	—	Floating	From January 2005 toDecember 2009
Issued 2004		128,927	—	—	Pounds Sterling		90.90	—	—	From 4.13% to 9.13%	From January 2005 to June 2012
Issued 2004		962,629	—	—	Pounds Sterling		678.70	—	—	Floating	From March 2005 to November 2010
Euros-
Issued from 1996 to 2001		1,481,166	—	—	Euros		—	—	—	From 0% to 6.75%	From January 2005 to February 2038
Issued from 1996 to 2001		1,168,427	—	—	Euros		—	—	—	Floating	From January 2005 to November 2041
Issued 2002		168,420	—	—	Euros		—	—	—	From 0% to 5.45%	From March 2005 to May 2007
Issued 2002		183,670	—	—	Euros		—	—	—	Floating	From May 2007 to February 2042
Issued 2003		172,800	—	—	Euros		—	—	—	From 0% to 2.43%	From March 2005 to June 2007
Issued 2003		2,658,095	—	—	Euros		—	—	—	Floating	From January 2005 to October 2033
Issued 2004		59,880	—	—	Euros		—	—	—	From 0% to 2%	From March 2005 to June 2007
Issued 2004		1,904,714	—	—	Euros		—	—	—	Floating	From January 2005 to February 2016
Hong Kong Dollars-
Issued from 1998 to 2004		336,494	—	—	Hong Kong Dollars		3,562	—	—	From 0% to 8.4%	From January 2005 to June 2009
Issued from 1998 to 2004		110,501	—	—	Hong Kong Dollars		1,170	—	—	Floating	From May 2006 to October 2011
Swiss Francs-
Issued from 1998 to 2004		521,097	—	—	Swiss Francs		804	—	—	From 2.25% to 2.38%	From April 2005 to December 2009
Issued from 1998 to 2004		35,863	—	—	Swiss Francs		55.33	—	—	Floating	From January 2005 to February 2008
Canadian Dollar-
Issued in 2003 and 2004		35,331	—	—	Canadian dollar		58	—	—	From 3.38% to 4%	From December 2005 to January 2009
Issued in 2003 and 2004		472,100	—	—	Canadian dollar		775	—	—	Floating	From January 2006 to June 2007
Argentinean Pesos-
Issued 2004		28,614	—	—	Argentinean Pesos		50	—	—	Floating	January 2009
Norwegian Crown-
Issued 2002		121,411	—	—	Norwegian Crown		1,000	—	—	6.52%	September 2012
Singapur Dollar-
Issued 1999		44,920	—	—	Singapur Dollar		100	—	—	5,00%	October 2009
TOTAL		57,940,072	28,838,892	20,497,329

F-169

Exhibit VI

List of Subordinated Debt outstanding as of December 31, 2004, 2003 and 2002.

Issuer	Euro thousand			Currency	Outstanding	Annual Interest Rate	Maturity Date
					Amount in
	2004	2003	2002		Currency
					(Million)
Banco Santander Central Hispano, S.A.:
May 1991	298,895	298,895	298,895	Euro		Floating (1)	May 2011
December 1993	–	–	36,061	Euro		9%	December 2003
December 1993	–	–	30,051	Euro		Floating	December 2003
October 1994	–	74,820	74,820	Euro		Floating	October 2004
April 1995	51,122	51,122	51,122	Euro		Floating	April 2005
June 1995	60,101	60,101	60,101	Euro		12.70%	December 2010
December 1995	80,235	80,235	80,235	Euro		10.75%	December 2010
March 1997	60,101	60,101	60,101	Euro		7.38%	December 2012
June 1997	60,101	60,101	60,101	Euro		7.65%	December 2015
September 1998 (convertible)	–	–	20,800	Euro		2.00%	October 2003
Santander Central Hispano Issuances, Ltd. :
April 1990	146,832	158,353	190,712	U.S. dollars	200	Floating	Perpetual
July 1990	293,664	316,706	381,425	U.S. dollars	400	Floating	Perpetual
October 1990	67,543	72,842	87,728	U.S. dollars	92	Floating	Perpetual
April 1994	28,121	28,121	28,121	Euro		Floating	April 2009
June 1994	–	14,809	16,087	Japanese yen	2,000	Floating	June 2004
June 1994	–	178,147	214,551	U.S. dollars	225	8.25%	June 2004
February 1995	–	118,765	143,034	U.S. dollars	150	Floating	September 2004
April 1995	220,248	237,530	286,068	U.S. dollars	300	7.88%	April 2005
May 1995	110,124	118,765	143,034	U.S. dollars	150	7.75%	May 2005
June 1995	73,416	79,177	95,356	U.S. dollars	100	7.50%	June 2005
July 1995	146,832	158,353	190,712	U.S. dollars	200	6.80%	July 2005
August 1995	110,124	118,765	143,034	U.S. dollars	150	Floating	August 2005
Nov ember 1995	146,832	158,353	190,712	U.S. dollars	200	7.25%	November 2015
February 1996	146,832	158,353	190,712	U.S. dollars	200	6.50%	February 2006
February 1996	220,248	237,530	286,068	U.S. dollars	300	6.38%	February 2011
April 1996	183,540	197,941	238,390	U.S. dollars	250	7.00%	April 2006
May 1996	146,832	158,353	190,712	U.S. dollars	200	7.25%	May 2006
July 1996	165,186	178,147	214,551	U.S. dollars	225	7.70%	July 2006
October 1996	110,124	118,765	143,034	U.S. dollars	150	Floating	October 2006
February 1997	110,124	118,765	143,034	U.S. dollars	150	Floating	February 2007
June 1998	153,390	153,390	153,390	Euro		5.25%	June 2008
July 1999	500,000	500,000	500,000	Euro		5.13%	July 2009
November 1999	458,850	494,854	595,976	U.S. dollars	625	7.63%	November 2009
March 2000	500,000	500,000	500,000	Euro		6.38%	July 2010
June 2000	67,380	69,930	82,422	Singapore dollars	150	5.15%	June 2010
September 2000	734,160	791,766	953,503	U.S. dollars	1,000	7.63%	September 2010
November 2000	283,663	283,768	307,447	Pounds sterling	200	6.8%	November 2010
March 2001	500,000	500,000	500,000	Euro		6.00%	March 2011
March 2001	500,000	500,000	500,000	Euro		Floating	March 2011
September 2001	500,000	500,000	500,000	Euro		From fixed to floating (2)	September 2011
April 2002	350,000	350,000	350,000	Euro		Floating	April 2012
April 2002	650,000	650,000	650,000	Euro		From fixed to floating (3)	April 2012
May 2002	36,708	39,588	47,678	U.S. dollars	50	Floating	May 2012
May 2002	36,708	39,588	47,678	U.S. dollars	50	Floating	May 2012
Santander Central Hispano Finance B.V.:
August 1998 (convertible)	–	–	300,380	Euro		2.00%	August 2003
CC-Bank AG (merged with AKB):
Sundry issues	115,548	133,445	157,989	Euro		From 4.96% to 8.82% (4)	From January 2005 to August 2010
Banco Santander Totta
(former BS Portugal) :
February 1994	–	10,067	10,067	Euro		Floating	February 2004
May 1994	–	948	948	Euro		Floating	May 2004
February 2001	27,627	27,627	27,641	Euro		Floating	Perpetual
BS Chile: (merged with B. Santiago)
October 1996	42,153	44,800	55,722	Chilean pesos	32,024	Floating	October 2016
November 1998	147,380	161,906	190,712	U.S. dollars	200	6.50%	November 2005
January 1992	6,674	9,276	12,272	Chilean pesos	5,071	7.50%	January 2007
December 1995	25,585	27,149	25,930	Chilean pesos	19,438	7.00%	December 2015
March 1996	19,333	20,646	19,469	Chilean pesos	14,688	6.90%	March 2016
March 1996	23,608	24,720	24,528	Chilean pesos	17,935	6.90%	March 2011
July 1997	57,293	243,310	275,373	U.S. dollars	78	7.00%	July 2007
January 2003	163,777	–	–	U.S. dollars	222	8.29% (5)	July 2012
December 2004	221,070	–	–	U.S. dollars	300	5.67%	December 2014
BSN Portugal:
Sundry issues	–	32,382	32,382	Euro		From 8.81% to 9.84%	From February 2004 to October 2004
Subtotal carried forward	9,158,084	9,721,075	11,110,869

F-170

Issuer	Thousand of Euro			Currency	Outstanding	Annual Interest Rate	Maturity Date
					Amount in
					Currency
	2004	2003	2002		(Million)
Subtotal brought forward	9,158,084	9,721,075	11,110,869
Banco Santander Totta
(former Banco Totta & Açores):
July 1993	–	–	49,878	Euro		Floating	August 2003
May 1995	41,151	41,151	41,151	Euro		Floating	May 2005
July 1996	74,820	74,820	74,820	Euro		Floating	July 2006
January 1998	28,290	29,233	29,233	Euro		Floating	Perpetual
September 1987	3,596	3,672	3,672	Euro		Floating	September 2007
April 2001	16,312	16,312	16,336	Euro		5.00%	April 2009
December 2000	13,797	13,623	13,852	Euro		Floating	Perpetual
Banco Santander Totta
(former Crédito Predial Portugués):
January 1998	12,721	10,641	10,697	Euro		Floating	Perpetual
December 1998	12,791	24,940	24,940	Euro		Floating	December 2008
December 1999	22,122	24,001	37,498	Euro		Floating	November 2009
February 2001	1,243	3,549	3,861	Euro		Floating	Perpetual
April 2001	19,402	20,000	20,000	Euro		5.00%	April 2009
May 2001	9,498	10,366	5,299	Euro		Floating	May 2006
December 2002	15,050	–	–	Euro		Floating	December 2008
Totta-Credito Especializado, IFIC, S.A
(formerly McLeasing Sdad. Loc.Fin).:
June 1997	4,988	4,988	4,988	Euro		Floating	June 2007
Finconsumo:
December 2000	–	–	16,798	Euro		Floating	December 2010
Banesto Group:
October 1990	132,883	143,310	172,597	U.S. dollars	181	Floating (6)	Perpetual
July 1992	–	–	–	U.S. dollars	150	8.25%	July 2002
March 1997	110,125	118,764	143,034	U.S. dollars	150	7.5%	March 2007
June 1998	–	–	152,447	Euro		5.25%	June 2008
September 2003	500,000	500,000	–	Euro		Floating	September 2013
March 2004	500,000	–	–	Euro		From Fixed to Floating (8)	March 2016
Santander Central Hispano Financial Services Ltd.:
February 1990	146,832	158,353	190,712	U.S. dollars	200	Floating	Perpetual
November 1994	–	18,512	20,099	Japanese yen	2,500	5.40%	November 2004
June 2001	283,665	283,778	307,447	Sterling Pounds	200	From fixed to Floating (7)	Perpetual
Santander Issuances, S.A. Unipersonal
September 2004	500,000	–	–	Euro		From Fixed to Floating (9)	September 2019
September 2004	500,000	–	–	Euro		Floating (10)	September 2014
Banca Serfin
November 2004	18,311	–	–	U.S. dollars	25	Floating (11)	November 2014
Santander Perpetual, S.A. Unipersonal
December 2004	750,000	–	–	Euro		From Fixed to Floating (12)	Perpetual
Abbey Group
December 1991	211,483	–	–	Sterling Pounds	150	11.5%	January 2017
June 1992	142,193	–	–	Sterling Pounds	100	10.75%	December 2006
February 1993	211,949	–	–	Sterling Pounds	150	10,125%	January 2023
September 1994	107,494	–	–	Japanese yen	15,000	5.56%	Perpetual
February 1995	35,831	–	–	Japanese yen	5,000	5.5%	Perpetual
October 1995	550,566	–	–	U.S. dollars	750	6.69%	October 2005
October 1995	283,451	–	–	Sterling Pounds	200	10.0625%(13)	Perpetual
October 1996	366,586	–	–	U.S. dollars	500	7.35%	Perpetual
December 1996	35,831	–	–	Japanese yen	5,000	From Fixed to Floating (14)	Perpetual
June 1998	365,877	–	–	U.S. dollars	500	6.7%	Perpetual
December 1998	509,986	–	–	Euro		5%	January 2009
February 1999	498,982	–	–	Euro		4.625%	February 2011
April 1999	99,440	–	–	Euro		5.75%	Perpetual
October 1999	210,854	–	–	Sterling Pounds	150	6.5%	October 2030
October 1999	726,808	–	–	U.S. dollars	1,000	7.95%	October 2029
September 2000	456,202	–	–	Sterling Pounds	325	7.5%	Perpetual
September 2000	603,402	–	–	Sterling Pounds	425	7.5%	Perpetual
September 2000	245,565	–	–	Sterling Pounds	175	7.125%	Perpetual
September 2000	395,254	–	–	Sterling Pounds	275	7.125%	Perpetual
September 2000	397,961	–	–			From Fixed to Floating (15)	Perpetual
August 2001	290,205	–	–	U.S. dollars	400	7.25%	Perpetual
May 2002	36,578	–	–	U.S. dollars	50	Floating	May 2012
May 2002	36,576	–	–	U.S. dollars	50	Floating	May 2012
June 2002	499,373	–	–			Floating	June 2012
Balances at year-end	20,194,128	11,221,088	12,450,228

F-171

These are subordinated issues and, therefore, for debt seniority purposes they are junior to all general creditors of the issuers. The issues of Santander Central Hispano Issuances, Ltd. and Santander Perpetual S.A.U., Ltd. are guaranteed by the Bank on a subordinated basis or are secured by restricted deposits at the Bank.

(1)  Interest on the May 1991 issue of the Bank is revised annually, being tied to MIBOR less two percentage points, with a maximum of 14% per annum and a minimum of 10%. These securities are redeemable at par in 2011, but the holders can redeem them early at 6, 12 and 18 years from the issue date.

(2)  This issuance has a fixed interest rate for the first 5 years of 5.250% and from September 2006 it is Euribor (3M) plus 1.22%.

(3)  This issuance has a fixed interest rate for the first 5 years of 5.750% and from April 2007 it is Euribor (3M) plus 1.24%.

(4)  AKB Bank merged into CC-Bank (see Note 3).

(5)  This security was early-redeemed in January 2003 in exchange of a cash payment and the issuance of a new security with maturity on 2012, the new amount issued was USD 222 millions.

(6)  The perpetual issuance of Banesto Group has an interest rate tied to Libor plus a spread which is 0.5% for the first year, then 0.875% until October 2000, then 1% until October 2010 and 1.4% from that date.

(7)  This issuance has a fixed interest rate of 7.5% until December 2011, and from this date the interest is Libor (3M) plus 285 b.p.

(8)  This issue has a fixed interest rate of 4% for the first seven years, and from March 2011, the interest rate is Euribor(3M) plus 0.95%.

(9)  This issue has a fixed rate of 4.5% until September 2014, and from this date, the interest is Euribor (3M) plus 0.86%.

(10)  This issue has a floating rate of Euribor (3M) plus 0.25% for the first five years, and from this date, the interest is Euribor (3M) plus 0.75%.

(11)  This issue has a floating rate of Libor (6M) plus 1.1% for the first five years, and from this date, the interest is Libor (6M)plus 2.2%.

(12)  This issue has a fixed rate of 4.375% for the first ten years, and from December 2014, the interest is Euribor (3M) plus 1.6%.

(13)  This issue can be exchangeable, at the option of Abbey, for fully paid 10 ¾ per cent non-cumulative sterling preference shares of 1 sterling pound nominal value each of Abbey National at the rate of one new sterling preference share for every 1 sterling pound principal amount of the issue.

(14)  This issue has a fixed rate of 4% until December 2016, and from this date, it is Libor (3M) plus 1.5%.

(15)  This issue has a fixed rate of 7.125% until September 2010, and from this date, the interest is Euribor (3M) plus 2.3%.

.

F-172

Exhibit VII

Selected Financial Information of main Banks of the Group.

Banks in Spain
Thousands of Euros									Santander Investment
	Santander Central Hispano				Banif				Services
	2004		2003		2004		2003		2004		2003
Income Statement
Net interest income	2,837,769		4,169,660		20,967		19,779		54,379		32,911
Net fees and commissions	1,547,055		1,301,821		83,596		71,704		121,280		141,901
Basic revenue	4,384,824		5,471,481		104,563		91,483		175,659		174,812
Net gains on financial transactions	690,285		(1,487,126	)	4,034		3,907		3,631		1,559
Gross operating income	5,075,109		3,984,355		108,597		95,39		179,290		176,371
Personnel and general expenses	(2,178,282	)	(2,133,773	)	(56,814	)	(51,379	)	(40,980	)	(38,088	)
a) Personal expenses	(1,447,807	)	(1,436,841	)	(35,174	)	(33,233	)	(24,104	)	(23,541	)
b) General expenses	(730,475	)	(696,932	)	(21,640	)	(18,146	)	(16,876	)	(14,547	)
Depreciation	(230,092	)	(253,308	)	(6,524	)	(6,352	)	(1,158	)	(1,59	)
Other operating cost	(115,861	)	(117,565	)	(257	)	(315	)	(215	)	(283	)
Net operating income	2,550,874		1,479,709		45,002		37,344		136,937		136,410
Income from equity-accounted holdings	—		—		—		—		—		—
Other income	(24,136	)	542,703		1,348		(4,687	)	(851	)	—
Net provisions	(689,294	)	(575,212	)	(8,158	)	(3,018	)	539		752
Goodwill amortization	—		—		—		2,88		—		(2,26	)
Income before taxes	1,837,444		1,447,200		38,192		32,519		136,625		134,902
Net income	1,837,424		1,445,033		22,716		22,217		106,777		97,234
Minority interests	—		—		—		—		—		—
Net attributable income	1,837,424		1,445,033		22,716		22,217		106,777		97,234
Balance sheet, December 31
Loans and credits	87,487,787		81,896,844		1,106,576		618,67		1,668,121		1,748,337
Due from credit institutions	44,790,816		58,241,650		2,012,975		2,273,266		5,389,844		2,788,616
Investment securities	52,225,478		40,448,822		48,605		38,416		136,718		153,051
Tangible and intangible assets	1,337,022		1,500,405		21,124		21,327		1,264		1,73
Other assets	17,366,246		16,577,696		87,225		133,564		668,276		359,957
Total assets/liabilities	203,207,349		198,665,417		3,276,505		3,085,243		7,864,223		5,051,691
Customer deposits	82,804,580		82,792,758		2,367,662		2,213,021		2,570,238		2,206,014
Debt securities	18,668,056		11,932,465		—		—		2,499,000		—
Subordinated debt	14,142,545		13,280,712		—		—		—		—
Due to credit institutions	36,182,296		54,999,537		628,483		526,514		2,078,593		2,057,183
Other liabilities	20,468,463		17,652,516		123,038		206,32		459,148		549,727
Group capital and reserves(*)	30,941,409		18,007,429		157,322		139,388		257,244		238,767
Off-balance sheet managed funds	—		—		3,694,857		3,246,427		—		—
Mutual funds	—		—		2,300,056		2,032,568		—		—
Pension funds	—		—		—		—		—		—
Portfolios Managed	—		—		1,394,801		1,213,859		—		—
Total customer funds managed	115,615,181		108,005,935		6,062,519		5,459,448		5,069,238		2,206,014
Total managed funds	203,207,349		198,665,417		6,971,362		6,331,670		7,864,223		5,051,691
(*) Includes income for the year

F-173

Banks in Spain and Europe
Thousands of Euros	Santander Consumer Group (1)				Santander Totta
	2004		2003		2004		2003
Income statement
Net interest income	1,092,585		866,111		622,582		603,914
Net fees and commissions	97,373		102,043		274,064		237,555
Basic revenue	1,189,958		968,154		896,646		841,469
Net gains on financial transactions	33,720		46,523		26,306		26,949
Gross operating income	1,223,678		1,014,677		922,952		868,418
Personnel and general expenses	(443,071	)	(382,345	)	(407,202	)	(402,970	)
a) Personal expenses	(207,649	)	(196,013	)	(261,862	)	(261,882	)
b) General expenses	(235,422	)	(186,332	)	(145,340	)	(141,088	)
Depreciation	(33,762	)	(27,995	)	(60,564	)	(56,712	)
Other operating cost	(1,392	)	583		19,912		23,555
Net operating income	745,453		604,92		475,098		432,291
Income from equity-accounted holdings	22,184		13,757		7,440		4,273
Other income	(19,740	)	14,046		(8,323	)	(42,695	)
Net provisions	(305,425	)	(240,932	)	(99,383	)	(73,665	)
Goodwill amortization	(58,153	)	(63,886	)	—		—
Income before taxes	384,319		327,905		374,832		320,204
Net income	230,488		202,56		314,667		269,472
Minority interests	485		7,621		25,855		28,449
Net attributable income	230,003		194,939		288,812		241,223
Balance sheet, December 31
Loans and credits	23,682,974		16,554,053		15,943,060		17,758,038
Due from credit institutions	2,019,897		1,711,654		1,562,949		3,813,232
Investment securities	319,555		72,065		9,842,499		5,508,740
Tangible and intangible assets	140,565		101,87		467,665		436,250
Other assets	767,374		980,845		1,439,858		1,307,377
Total assets/liabilities	26,930,365		19,420,487		29,256,031		28,823,637
Customer deposits	11,596,486		9,429,827		13,848,624		13,535,395
Debt securities	3,568,667		2,991,064		5,574,741		5,491,499
Subordinated debt	328,442		312,027		549,749		671,270
Due to credit institutions	8,219,470		4,521,848		6,056,787		5,933,055
Other liabilities	2,449,241		1,430,657		1,184,327		1,415,537
Group capital and reserves(*)	768,059		735,064		2,041,803		1,776,881
Off-balance sheet managed funds	—		—		—		—
Mutual funds	—		—		—		—
Pension funds	—		—		—		—
Portfolios Managed	—		—		—		—
Total customer funds managed	15,493,595		12,732,918		19,973,114		19,698,164
Total managed funds	26,930,365		19,420,487		29,256,031		28,823,637

(1) Pro-forma data: includes together figures of CC-Bank and AKB Group (the last one was bought in mid 2002).
This pro-forma data is presented only for comparison purposes.
(*) Includes income for the year

F-174

Banks in Latin America
					Grupo Financiero
	Banespa				Santander Serfin
	2004		2003		2004		2003
	Brazilian reais
	thousand				Mexican peso million
Income statement
Net interest income	3,157,363		2,650,502		11,836,450		9,574,252
Net fees and commissions	1,239,531		882,098		6,012,430		4,926,038
Basic revenue	4,396,895		3,532,600		17,848,880		14,500,290
Net gains on financial transactions	205,326		30,227		368,753		940,941
Gross operating income	4,602,220		3,562,827		18,217,633		15,441,231
Personnel and general expenses	(2,227,967	)	(1,790,833	)	(8,055,694	)	(7,557,738	)
a) Personal expenses	(1,284,030	)	(1,154,428	)	(4,273,383	)	(3,895,852	)
b) General expenses	(943,937	)	(636,405	)	(3,782,311	)	(3,661,886	)
Depreciation	(268,140	)	(184,43	)	(738,416	)	(642,179	)
Other operating cost	(97,450	)	(48,457	)	(462,073	)	314,119
Net operating income	2,008,663		1,539,107		8,961,450		7,555,433
Income from equity-accounted holdings	—		—		(1,498	)	112,883
Other income	196,455		684,851		(1,669,372	)	(751,592	)
Net provisions	(272,255	)	(251,854	)	(137,222	)	(126,474	)
Goodwill amortization	—		—		—		—
Income before taxes	1,932,863		1,972,104		7,153,358		6,790,250
Net income	1,757,331		1,780,070		6,009,095		6,176,471
Balance sheet, December 31
Loans and credits	7,954,313		5,667,102		121,583,497		94,579,020
Due from credit institutions	9,173,722		8,775,404		58,390,191		49,623,819
Investment securities	11,385,535		10,286,265		109,097,425		82,363,673
Tangible and intangible assets	1,380,250		1,224,363		4,856,240		5,115,310
Other assets	6,061,987		4,746,857		18,695,800		14,054,399
Total assets/liabilities	35,955,807		30,699,991		312,623,153		245,736,221
Customer deposits	11,683,152		11,461,014		74,015,963		69,921,493
Debt securities	675,909		—		128,325,847		101,202,057
Subordinated debt	—		—		1,118,647		—
Due to credit institutions	8,395,565		5,902,878		50,572,882		22,524,031
Other liabilities	9,508,978		8,131,437		25,430,032		25,332,423
Group capital and reserves(*)	5,692,203		5,204,662		33,159,782		26,756,217
(*) Includes income for the year
Exchange rate (currency per Euro)
Fixing	3.6177		3.6646		15.2279		14.1772
Year average exchange rate	3.6325		3.4593		14.0120		12.1770

F-175

Banks in Latin America
	Banco Santander				Banco Santander
	Chile				Puerto Rico				Banco de Venezuela
	2004		2003		2004		2003		2004		2003
									Venezuelan bolivares
	Chilean pesos million				US$ Thousand				million
Income statements
Net interest income	447,718		425,632		190,638		171,121		611,924		530,146
Net fees and commissions	95,782		93,079		29,292		25,182		200,855		132,575
Basic revenue	543,500		518,711		219,930		196,303		812,779		662,721
Net gains on financial transactions	27,942		31,018		7,709		22,185		112,031		39,512
Gross operating income	571,442		549,729		227,639		218,488		924,810		702,233
Personnel and general expenses	(250,279	)	(223,832	)	(143,588	)	(142,546	)	(383,256	)	(295,225	)
a) Personal expenses	(128,297	)	(121,173	)	(72,486	)	(69,960	)	(166,263	)	(127,479	)
b) General expenses	(121,982	)	(102,659	)	(71,102	)	(72,586	)	(216,993	)	(167,746	)
Depreciation	(34,333	)	(34,684	)	(12,392	)	(17,301	)	(42,289	)	(42,326	)
Other operating cost	(3,780	)	(3,667	)	32,798		19,582		(30,730	)	(19,263	)
Net operating income	283,050		287,546		104,457		78,223		468,535		345,419
Income from equity-accounted holdings	—		—		—		—		—		—
Other income	27,769		22,545		(8,054	)	3,717		(77,415	)	(49,605	)
Net provisions	(74,892	)	(65,617	)	(26,660	)	(49,745	)	(30,071	)	(19,628	)
Goodwill amortization	—		—		(6	)	(2,694	)	—		—
Income before taxes	235,927		244,474		69,737		29,501		361,049		276,186
Net income	198,002		207,043		69,737		29,501		343,904		259,513
Balance sheet, December 31
Loans and credits	7,500,888		6,504,270		5,234,686		3,926,481		3,553,144		1,776,037
Due from credit institutions	682,590		663,914		646,336		561,822		2,525,496		2,295,883
Investment securities	1,674,977		1,595,941		2,067,766		1,700,784		2,713,964		1,319,351
Tangible and intangible assets	280,638		278,554		84,577		92,208		294,199		289,323
Other assets	787,820		791,167		190,138		191,223		296,081		140,293
Total assets/liabilities	10,926,913		9,833,846		8,223,503		6,472,518		9,382,884		5,820,887
Customer deposits	6,838,404		5,756,630		4,562,790		3,893,312		7,983,103		4,903,229
Debt securities	1,500,677		1,581,406		660,381		358,87		—		—
Subordinated debt	537,019		401,651		—		—		—		—
Due to credit institutions	844,584		917,702		2,251,094		1,550,166		44,918		22,877
Other liabilities	174,475		158,997		201,141		187,81		378,504		172,168
Group capital and reserves(*)	1,031,754		1,017,460		548,097		482,36		976,359		722,613
(*) Includes income for the year
Exchange rate, (currency per Euro)
Fixing	759.7110		748.3910		1.3621		1.2630		2,611.9630		2.018,2857
Year average exchange rate	756.6815		778.6707		1.2410		1.1293		2,336.1757		1.814,0590

F-176

Exhibit VIII

	Year end December 31,
	2004				2003				2002				2001				2000
Spanish GAAP:	Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits
FIXED CHARGES:
Fixed charges	9,514,554		3,962,511		9,132,884		3,502,741		13,228,644		4,766,787		17,694,470		7,032,065		21,016,149		5,640,997
Preferred dividends	206,355		206,355		314,461		314,461		400,665		400,665		500,258		500,258		442,495		442,495
Total fixed charges + preferred dividends	9,720,909		4,168,866		9,447,345		3,817,202		13,629,309		5,167,452		18,194,728		7,532,323		21,458,644		6,083,493
EARNINGS:
Income from continuing operations before taxes, minority interest and extraordinary items	3,902,319		3,902,319		3,459,668		3,459,668		2,970,286		2,970,286		3,396,699		3,396,699		2,973,009		2,973,009
Distributed earnings from companies carried by the equity method	(540,386	)	(540,386	)	(407,263	)	(407,263	)	(279,898	)	(279,898	)	(521,878	)	(521,878	)	(754,270	)	(754,270	)
Fixed charges	9,514,554		3,962,511		9,132,884		3,502,741		13,228,644		4,766,787		17,694,470		7,032,065		21,016,149		5,640,997
Total earnings for ratio calculation	12,876,487		7,324,444		12,185,289		6,555,146		15,919,032		7,457,175		20,569,291		9,906,886		23,234,888		7,859,736
Ratio of earnings to fixed charges	1.35		1.85		1.33		1.87		1.20		1.56		1.16		1.41		1.11		1.39
Ratio of earnings to combined fixed charges and preferred stock dividends	1.32		1.76		1.29		1.72		1.17		1.44		1.13		1.32		1.08		1.29
	Year end December 31,
	2004				2003				2002				2001				2000
U.S. GAAP:	Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits		Including interest on deposits		Excluding interest on deposits
FIXED CHARGES:
Fixed charges	9,514,554		3,962,511		9,136,028		3,505,885		13,228,644		4,766,787		17,694,470		7,032,065		21,016,149		5,640,997
Preferred dividends	206.355		206,355		311,317		311,317		400,665		400,665		500,258		500,258		442,495		442,495
Total fixed charges + preferred dividends	9,720,909		4,168,866		9,447,345		3,817,202		13,629,309		5,167,452		18,194,728		7,532,323		21,458,644		6,083,493
EARNINGS:
Income from continuing operations before taxes, minority interest and extraordinary items	3,940,866		3,940,866		3,140,200		3,140,200		3,106,740		3,106,740		3,096,733		3,096,733		2,804,256		2,804,256
Distributed earnings from associated companies	(540,386	)	(540,386	)	(380,922	)	(380,922	)	(189,020	)	(189,020	)	(1,240,158	)	(1,240,158	)	(668,121	)	(668,121	)
Fixed charges	9,514,554		3,962,511		9,136,028		3,505,885		13,228,644		4,766,787		17,694,470		7,032,065		21,016,149		5,640,997
Total earnings for ratio calculation	12,915,034		7,362,991		11,895,306		4,422,493		16,146,364		7,684,507		19,551,044		8,888,639		23,152,284		7,777,133
Ratio of earnings to fixed charges	1.36		1.86		1.30		1.79		1.22		1.61		1.10		1.26		1.10		1.38
Ratio of earnings to combined fixed charges and preferred stock dividends	1.33		1.77		1.26		1.64		1.18		1.49		1.07		1.18		1.08		1.28

F-177

EXHIBIT INDEX
Exhibit Number	Description
1.1	By-laws (Estatutos) of Banco Santander Central Hispano, S.A., as amended
1.2	By-laws (Estatutos) of Banco Santander Central Hispano, S.A., as amended (English translation).
8.1	List of Subsidiaries (incorporated by reference as Exhibits I, II and III of our Financial Pages filed with this Form 20-F).
12.1	Section 302 Certification by the Chief Executive Officer
12.2	Section 302 Certification by the Chief Financial Officer
13.1	Section 906 Certification
15.1	Consent of Deloitte, S.L.
We will furnish to the Securities and Exchange Commission, upon request, copies of any unfiled instruments that define the rights of holders of long-term debt of Banco Santander Central Hispano, S.A.

EX-1.1

Exhibit 1.1

E S T A T U T O S

D E

B A N C O  S A N T A N D E R

C E N T R A L  H I S P A N O, S. A.

Sociedad Anónima fundada en 1.857

S A N T A N D E R

Título  I
DENOMINACIÓN, DOMICILIO Y DURACIÓN DE LA SOCIEDAD

                    Artículo 1.-  La Sociedad se denomina “BANCO SANTANDER CENTRAL HISPANO, S.A.”.

                    Esta Sociedad Anónima fue fundada en la ciudad de su nombre mediante escritura pública otorgada el tres de marzo de 1856 ante el Escribano don José Dou Martínez, ratificada y parcialmente modificada por otra de fecha veintiuno de marzo del siguiente año 1857 ante el Escribano de la misma capital don José María Olarán, habiendo iniciado sus operaciones el día veinte de agosto de 1857.

                    Al promulgarse en fecha diecinueve de marzo de 1.874 el Decreto-Ley en cuya virtud se estableció en España la circulación fiduciaria única, caducando entonces en su consecuencia el privilegio de emitir papel moneda que tuvo y que ejercitó desde la fecha en que había iniciado sus operaciones, el Banco se transformó en Sociedad Anónima de Crédito con arreglo a lo dispuesto en la Ley de 19 de octubre de 1869, la cual se hizo cargo del Activo y Pasivo del que hasta entonces había sido Banco de emisión, todo lo cual quedó solemnizado mediante escritura pública otorgada el 14 de enero de 1875 ante el Notario de Santander don Ignacio Pérez, la cual quedó inscrita en el Libro de Registro de Comercio de la Sección de Fomento del Gobierno de la Provincia de Santander.

                    Desde la última mencionada fecha el Banco ha continuado sus actividades sin interrupción a través de diferentes modificaciones estatutarias, inscritas todas ellas en el Registro Mercantil de Santander, siendo de resaltar como acontecimiento especialmente relevante su fusión con Banco Central Hispanoamericano, S.A., acordada por las Juntas Generales de ambas entidades el día seis de marzo de 1999, rigiéndose en lo sucesivo por los presentes Estatutos, por la Ley de Sociedades Anónimas y demás disposiciones legales concordantes o complementarias que en cada momento le fueran aplicables.

                    Artículo 2.-  El Banco tiene su domicilio social en la ciudad de Santander, Paseo de Pereda, números 9 al 12, el cual podrá ser cambiado dentro de la misma población por simple acuerdo del Consejo de Administración.

                    Artículo 3.-  La duración de la Sociedad será por tiempo indefinido.

Título II
CAPITAL SOCIAL

                    Artículo 4.-  El capital social es de 3.127.148.289,5 euros, representado por 6.254.296.579 acciones, de cincuenta céntimos de euro de valor nominal cada una, todas las cuales son de la misma clase y serie y están emitidas y totalmente desembolsadas.

                    En los términos establecidos en la Ley de Sociedades Anónimas, y salvo en los casos en ella previstos, el accionista tendrá, como mínimo, los siguientes derechos:

a)	El de participar en el reparto de las ganancias sociales y en el patrimonio resultante de la liquidación.
b)	El de suscripción preferente en la emisión de nuevas acciones o de obligaciones convertibles en acciones.
c)	El de asistir y votar en las Juntas generales y el de impugnar los acuerdos sociales.
d)	El de información.

                    La Sociedad, en la forma que regulen las disposiciones legales y administrativas, no reconocerá el ejercicio de los derechos políticos derivados de su participación a aquéllos que, infringiendo normas jurídicas imperativas, del tipo y grado que sean, adquieran acciones de ella. De igual modo, la Sociedad hará publica, en la forma que se determine por normas de tal índole, la participación de los socios en su capital, cuando se den las circunstancias exigibles para ello.

                    En cuanto a las acciones sin voto que puedan llegar a emitirse, se regirán además y específicamente por lo dispuesto en los artículos 90 y siguientes de la Ley de Sociedades Anónimas.

                    En los casos de reducción del Capital se podrá utilizar el procedimiento previsto en el artículo 170.3 de la Ley de Sociedades Anónimas.

                    Artículo 5.-  Los dividendos pasivos de las acciones parcialmente desembolsadas se harán efectivos en virtud de acuerdos del Consejo de Administración, que fijará a tales fines el importe de cada desembolso, el plazo para efectuarlo y demás pormenores, todo lo cual habrá de anunciarse en el Boletín Oficial del Registro Mercantil.

                    Artículo 6.-  Sin perjuicio de los efectos de la mora legalmente previstos, todo retraso en el pago de los dividendos pasivos devengará a favor del Banco el interés legal de demora a contar desde el día del vencimiento y sin necesidad de interpelación judicial o extrajudicial, pudiendo aquél, además, ejercitar las acciones que las leyes autoricen para este supuesto.

                    Artículo 7.-  Las acciones están representadas por medio de anotaciones en cuenta, que se rigen por la Ley 24/1988, de 28 de julio, del Mercado de Valores, el R.D. 116/1992, de 14 de febrero, y demás disposiciones que les sean aplicables.

                    Artículo 8.-  Las acciones están inscritas en el registro central de anotaciones en cuenta a cargo de la Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. (Iberclear).

                    Iberclear comunicará al Banco las operaciones relativas a las acciones y el Banco llevará su propio registro con la identidad de los accionistas.

                    Artículo 9.-  La propiedad y posesión de las acciones se transmitirá por alguno de los modos que reconoce el Derecho.

                    La transmisión de las acciones tendrá lugar por transferencia contable.

                    La inscripción de la transmisión a favor del adquirente producirá los mismos efectos que la tradición de los títulos.

                    La constitución de derechos reales limitados u otra clase de gravámenes sobre las acciones deberá inscribirse en la cuenta correspondiente del registro contable.

                    La inscripción de la prenda equivale al desplazamiento posesorio del título.

                    Artículo 10.-  La persona que aparezca legitimada en los asientos del registro contable se presumirá titular legítimo y, en consecuencia, podrá exigir del Banco que realice a su favor las prestaciones a que dé derecho la acción.

                    En los casos de copropiedad y en los demás supuestos de cotitularidad de derechos sobre las acciones, así como en los de usufructo, prenda y embargo de acciones, se estará a lo dispuesto en la Ley de Sociedades Anónimas.

                    El ejercicio del derecho de voto podrá ser cedido por el accionista a un tercero en los casos y en las condiciones que la Ley admita.

                    En el caso de comodato de acciones, los derechos inherentes a la condición de socio corresponderán al comodante, excepto los de asistencia a Junta general y voto que corresponderán al comodatario al que se hayan otorgado tales facultades, siendo de aplicación para el ejercicio de estos derechos por el comodatario lo previsto para la representación en el artículo 106 de la Ley de Sociedades Anónimas.

                    Las acciones en copropiedad se inscribirán en el correspondiente registro contable a nombre de todos los cotitulares.

                    Cuando se considere necesario, la legitimación para la transmisión y para el ejercicio de los derechos derivados de las acciones, o de los derechos reales limitados o gravámenes constituidos sobre las mismas, podrá acreditarse mediante certificado expedido a dicho fin.

                    Para el supuesto de que la condición formal de accionista corresponda a personas o Entidades que ejerzan dicha condición en concepto de fiducia, fideicomiso o cualquier otro título análogo, el Banco podrá requerir de las mismas que le faciliten los datos correspondientes de los titulares reales de las acciones, así como de los actos de transmisión y gravamen de éstas.

                    Artículo 11.-  La propiedad de una o más acciones implica la sumisión a los Estatutos del Banco y a los acuerdos que la Junta general de accionistas y el Consejo de Administración adopten legalmente, pero quedando siempre a salvo las acciones de impugnación legalmente establecidas.

Título  III
OBJETO SOCIAL

                    Artículo 12.-     1.  Constituye el objeto social:

                    a)  La realización de toda clase de actividades, operaciones y servicios propios del negocio de Banca en general y que le estén permitidas por la legislación vigente.

                    b)  La adquisición, tenencia, disfrute y enajenación de toda clase de valores mobiliarios.

                    2. Las actividades que integran el objeto social podrán ser desarrolladas total o parcialmente de modo indirecto, en cualquiera de las formas admitidas en Derecho y, en particular, a través de la titularidad de acciones o de participación en Sociedades cuyo objeto sea idéntico o análogo, accesorio o complementario de tales actividades.

Título  IV

ÓRGANOS DE LA SOCIEDAD

                    Artículo 13.-  Son órganos sociales la Junta general de accionistas y el Consejo de Administración, que tienen las facultades que, respectivamente, se les asignan en los presentes Estatutos y que podrán ser objeto de delegación en la forma y con la amplitud que en los mismos se determinan.

CAPITULO 1º

JUNTA GENERAL DE ACCIONISTAS

                    Artículo 14.-  Los accionistas, constituidos en Junta general debidamente convocada, decidirán por mayoría, salvo disposición legal o estatutaria contraria, en los asuntos propios de la competencia de la Junta, y los acuerdos de ésta obligarán a la totalidad de los accionistas, incluso a los ausentes y disidentes, sin perjuicio de los derechos y acciones de toda clase que la Ley les reconoce.

                    Artículo 15.- Tendrán derecho de asistencia a las Juntas generales los titulares de cualquier número de acciones inscritas a su nombre en el correspondiente registro contable con cinco días de antelación a aquel en que haya de celebrarse la Junta y que se hallen al corriente en el pago de los dividendos pasivos.

                    En el caso de desmembración del dominio de las acciones, corresponderá su representación al titular del dominio directo o nudopropietario.

                    Los miembros del Consejo de Administración deberán asistir a las Juntas generales.

                    El Presidente de la Junta general podrá autorizar la asistencia de cualquier persona que juzgue conveniente. La Junta, no obstante, podrá revocar dicha autorización.

                    Artículo 16.- El derecho de asistencia a las Juntas generales será delegable a favor de otro accionista que lo tenga por sí.

                    Las personas físicas accionistas que no se hallen en pleno goce de sus derechos civiles y las personas jurídicas accionistas podrán ser representadas por quienes ejerzan su representación legal, debidamente acreditada. Tanto en estos casos como en el supuesto de que el accionista delegue su derecho de asistencia, no se podrá tener en la Junta más que un representante.

                    No será válida ni eficaz la representación conferida a quien no pueda ostentarla con arreglo a la Ley.

                    La representación es siempre revocable. La asistencia a la Junta del representado, ya sea físicamente o por haber emitido el voto a distancia, supone la revocación de cualquier delegación, sea cual sea la fecha de aquélla. La representación quedará igualmente sin efecto por la enajenación de las acciones de que tenga conocimiento la Sociedad.

                    Sin perjuicio de lo previsto en el artículo 108 de la Ley de Sociedades Anónimas, la representación se conferirá de conformidad con lo dispuesto en el artículo 106.2 del mismo cuerpo legal.

                    Cuando la representación se confiera mediante medios de comunicación a distancia, sólo se reputará válida si se realiza:

                    a) mediante entrega o correspondencia postal, haciendo llegar a la Sociedad la tarjeta de asistencia y delegación debidamente firmada, u otro medio escrito que, a juicio del Consejo de

Administración en acuerdo adoptado al efecto, permita verificar debidamente la identidad del accionista que confiere su representación y la del delegado que designa, o

                    b) mediante correspondencia o comunicación electrónica con la Sociedad, a la que se acompañará copia en formato electrónico de la tarjeta de asistencia y delegación, en la que se detalle la representación atribuida y la identidad del representado, y que incorpore la firma electrónica u otra clase de identificación del accionista representado, en los términos que fije el Consejo de Administración en acuerdo adoptado al efecto para dotar a este sistema de representación de las adecuadas garantías de autenticidad y de identificación del accionista representado.

                    Para su validez, la representación conferida por cualquiera de los citados medios de comunicación a distancia habrá de recibirse por la Sociedad antes de las veinticuatro horas del tercer día anterior al previsto para la celebración de la Junta en primera convocatoria. En el acuerdo de convocatoria de la Junta de que se trate, el Consejo de Administración podrá reducir esa antelación exigida, dándole la misma publicidad que se dé al anuncio de convocatoria. Asimismo, el Consejo podrá desarrollar las previsiones anteriores referidas a la representación otorgada a través de medios de comunicación a distancia, de conformidad con lo previsto en el artículo 24.4 siguiente.

                    La representación podrá incluir aquellos puntos que, aun no estando previstos en el orden del día de la convocatoria, puedan ser tratados en la Junta por permitirlo la Ley.

                    Artículo 17.-  Los asistentes a la Junta general tendrán un voto por cada acción que posean o representen.

                    Las acciones sin voto tendrán este derecho en los supuestos específicos de la Ley de Sociedades Anónimas.

                    Artículo 18.- Para concurrir a la Junta general será indispensable obtener la correspondiente tarjeta nominativa de asistencia, que se expedirá por la Secretaría del Banco con referencia a la lista de accionistas que tengan aquel derecho. Esta lista se formará y cerrará definitivamente con una antelación de cinco días al señalado en la convocatoria para la celebración de la Junta general.

                    Artículo 19.-  Las Juntas generales podrán ser ordinarias o extraordinarias y habrán de ser convocadas por el Consejo de Administración.

                    La Junta general ordinaria, previamente convocada al efecto, se reunirá necesariamente dentro de los seis primeros meses de cada ejercicio, para censurar la gestión social, aprobar, en su caso, las cuentas del ejercicio anterior y resolver sobre la aplicación del resultado, así como para aprobar, en su caso, las cuentas consolidadas, sin perjuicio de su competencia para tratar y acordar cualquier otro asunto que figure en el Orden del Día.

                    Toda Junta que no sea la prevista en el párrafo anterior tendrá la consideración de Junta general extraordinaria y será convocada por el Consejo de Administración, además de cuando lo estime conveniente para los intereses sociales, cuando lo soliciten accionistas que sean titulares de, al menos, un cinco por ciento del Capital social, expresando en la solicitud los asuntos a tratar en la Junta.

                    Si la Junta general ordinaria no fuere convocada dentro del plazo legal, podrá serlo, a petición de los socios y con la audiencia de los Administradores, por el Juez de 1ª Instancia del domicilio social, quien además designará la persona que habrá de presidirla.

                    Esta misma convocatoria habrá de realizarse respecto de la Junta general extraordinaria, cuando lo hayan solicitado socios que sean titulares de, al menos, el cinco por ciento del Capital social.

                    Artículo 20.-  La convocatoria de toda clase de Juntas se hará mediante anuncio publicado en el “Boletín Oficial del Registro Mercantil” y en uno de los periódicos locales de mayor circulación en la provincia del domicilio social, por lo menos quince días antes de la fecha fijada para su celebración.

                    Artículo 21.-  Las Juntas generales, tanto ordinarias como extraordinarias, se celebrarán en la localidad donde la Sociedad tenga su domicilio, el día señalado en la convocatoria, y sus acuerdos tendrán plena validez a todos los efectos, cuando a ellas concurra, como mínimo, el número de acciones que para cada caso exija la Ley.

                    Artículo 22.- Las Juntas generales de accionistas serán presididas por el Presidente del Consejo de Administración o, en su defecto, por el Vicepresidente que lo sustituya según el artículo 33,

y a falta de Presidente y Vicepresidente, por el Vocal que designe el Consejo de Administración, y actuará de Secretario el Secretario General de la Sociedad, siendo sustituido, en los casos de ausencia, imposibilidad o vacante, por el Vicesecretario, y a falta de éste, por el Vocal que designe asimismo el Consejo de Administración.

                    Corresponde a la presidencia declarar la Junta válidamente constituida, dirigir las deliberaciones, resolver las dudas que se susciten en el orden del día, poner término a los debates cuando estime suficientemente discutido el asunto, y en general, todas las facultades que sean necesarias para la mejor organización y funcionamiento de la Junta general.

                    Artículo 23.- Constituida la Mesa y antes de entrar en el Orden del Día, se formará la lista de asistentes, expresando el carácter o representación de cada uno y el número de acciones propias o ajenas con que concurra. A efectos de “quórum”, las acciones sin voto solo se computarán en los supuestos específicos establecidos en la Ley de Sociedades Anónimas. Al final de la lista se determinará el número de accionistas presentes, indicando separadamente los que hayan emitido su voto a distancia conforme a lo previsto en el artículo 24, y representados así como el importe del Capital del que sean titulares, especificando el que corresponde a los accionistas con derecho a voto, y posteriormente se someterán a deliberación los asuntos comprendidos en el Orden del Día, únicos que podrán ser objeto de examen y acuerdo, salvo las expresas excepciones legales.

                    La lista de asistentes podrá ser consultada en el acto de la Junta por cualquier accionista con derecho de asistencia, sin que su pretensión al respecto obligue a demorar o aplazar el normal desarrollo del acto, una vez que el Presidente haya declarado la Junta legalmente constituida, y sin que venga obligado a leer la referida lista o facilitar copia de la misma.

                    Artículo 24.- 1. Los accionistas con derecho de asistencia podrán emitir su voto sobre las propuestas relativas a puntos comprendidos en el Orden del Día de cualquier Junta general mediante:

                    a) entrega o correspondencia postal, haciendo llegar a la Sociedad la tarjeta de asistencia y voto debidamente firmada (en su caso junto con el formulario de voto que al efecto disponga la Sociedad), u otro medio escrito que, a juicio del Consejo de Administración en acuerdo adoptado al efecto, permita verificar debidamente la identidad del accionista que ejerce su derecho al voto, o

                    b) correspondencia o comunicación electrónica con la Sociedad, a la que se acompañará copia en formato electrónico de la tarjeta de asistencia y voto (en su caso junto con el formulario de voto que al efecto disponga la Sociedad) y en la que figurará la firma electrónica u otra clase de identificación del accionista, en los términos que fije el Consejo de Administración en acuerdo adoptado al efecto para dotar a este sistema de emisión del voto de las adecuadas garantías de autenticidad y de identificación del accionista que ejercita su voto.

                    Para su validez, el voto emitido por cualquiera de los citados medios habrá de recibirse por la Sociedad antes de las veinticuatro horas del tercer día anterior al previsto para la celebración de la Junta en primera convocatoria. En el acuerdo de convocatoria de la Junta de que se trate, el Consejo de Administración podrá reducir esa antelación exigida, dándole la misma publicidad que se dé al anuncio de convocatoria.

                    2. Los accionistas que emitan su voto a distancia en los términos indicados en este artículo serán considerados como presentes a los efectos de la constitución de la Junta de que se trate. En consecuencia, las delegaciones realizadas con anterioridad a la emisión de ese voto se entenderán revocadas y las conferidas con posterioridad se tendrán por no efectuadas.

                    3. El voto emitido a distancia a que se refiere este artículo quedará sin efecto por la asistencia física a la reunión del accionista que lo hubiera emitido o por la enajenación de las acciones de que tenga conocimiento la Sociedad.

                    4. El Consejo de Administración podrá desarrollar las previsiones anteriores estableciendo las instrucciones, reglas, medios y procedimientos para instrumentar la emisión del voto y el otorgamiento de la representación por medios de comunicación a distancia, con adecuación al estado de la técnica y ajustándose en su caso a las normas que se dicten al efecto y a lo previsto en estos Estatutos. Las reglas de desarrollo que adopte el Consejo al amparo de lo aquí previsto se publicarán en la página web de la Sociedad.

                    Asimismo, el Consejo de Administración, para evitar posibles duplicidades, podrá adoptar las medidas precisas para asegurar que quien ha emitido el voto a distancia o delegado la representación está debidamente legitimado para ello con arreglo a lo dispuesto en estos Estatutos.

                    5. La asistencia remota a la Junta por vía telemática y simultánea y la emisión del voto electrónico a distancia durante la celebración de la Junta podrán admitirse si así lo establece el Reglamento de la Junta General, sujeto a los requisitos allí previstos.

                    En tal supuesto, el Reglamento de la Junta General podrá atribuir al Consejo de Administración la facultad de determinar cuándo el estado de la técnica permite, con las adecuadas garantías, la asistencia remota a la Junta por vía telemática y simultánea y la emisión del voto electrónico a distancia durante la celebración de la reunión. Asimismo, el Reglamento de la Junta General podrá atribuir al Consejo de Administración la regulación, con respeto a la Ley, los Estatutos y el Reglamento de la Junta, de todos los aspectos procedimentales necesarios, incluyendo, entre otras cuestiones, la antelación mínima con la que se deberá realizar la conexión para considerar al accionista presente, el procedimiento y reglas aplicables para que los accionistas que asistan a distancia puedan ejercitar sus derechos, los requisitos de identificación exigibles para los asistentes a distancia y su influencia en el sistema de formación de la lista de asistentes.

                    Artículo 25.-  Los acuerdos que se tomen en las Juntas generales serán válidos y, desde luego, ejecutivos y obligatorios para todos los accionistas a partir de la fecha de la aprobación del acta en que aquéllos se recojan, aprobación que se efectuará del modo y forma que prevenga la legislación vigente; todo ello sin perjuicio de los derechos y acciones que para su impugnación se reconozcan a las personas legitimadas al efecto por las disposiciones legales.

                    Las votaciones serán públicas y los acuerdos se adoptarán por mayoría del Capital con derecho a voto presente o representado en la Junta, salvo disposición legal o estatutaria en contrario.

                    Artículo 26.- Los accionistas gozarán de derecho de información en los términos previstos en la Ley. Los Administradores estarán obligados a facilitar, en la forma y dentro de los plazos previstos por la Ley, la información que, con arreglo a lo allí previsto, los accionistas soliciten, salvo en los casos en que resulte legalmente improcedente y, en particular, cuando, a juicio del Presidente, la publicidad de esa información perjudique los intereses sociales. Esta última excepción no procederá cuando la solicitud esté apoyada por accionistas que representen, al menos, la cuarta parte del Capital.

                    En el caso de Junta general ordinaria y en los demás casos establecidos por la Ley, el anuncio de convocatoria indicará lo que proceda respecto del derecho a examinar en el domicilio social y a obtener, de forma inmediata y gratuita, los documentos que han de ser sometidos a la aprobación de la Junta y, en su caso, el informe o informes determinados por la Ley.

                    Artículo 27.-  El acta de la Junta podrá ser aprobada por la propia Junta a continuación de haberse celebrado ésta o, en su defecto y dentro del plazo de quince días, por el Presidente y dos Interventores, uno en representación de la mayoría y otro de la minoría.

                    Las actas, una vez aprobadas, se harán constar en el correspondiente libro y serán firmadas por el Secretario de la sesión, con el visto bueno de quien hubiera actuado en ella como Presidente.

                    El Consejo de Administración podrá requerir la presencia de Notario que levante Acta de la Junta y estará obligado a hacerlo siempre que con cinco días de antelación al previsto para la celebración de la Junta lo soliciten accionistas que representen, al menos, el uno por ciento del Capital. En ambos casos, el acta notarial tendrá la consideración de acta de la Junta.

                    La facultad de expedir las certificaciones de las actas y acuerdos de las Juntas corresponde al Secretario y, en su caso, al Vicesecretario, con el visto bueno del Presidente o, en su caso, del Vicepresidente.

                    Artículo 28.-  La Junta general se halla facultada para adoptar toda clase de acuerdos referentes a la Sociedad, estándole reservadas, peculiarmente, las atribuciones siguientes:

I.	Aprobar un Reglamento de la Junta que, con sujeción a lo establecido en la Ley y en estos Estatutos, regule la convocatoria, preparación, información, concurrencia y desarrollo de la Junta General, así como el ejercicio de los derechos políticos con ocasión de su convocatoria y celebración.
II.	Nombrar y separar los Vocales del Consejo de Administración, así como ratificar o revocar los nombramientos provisionales de tales Vocales efectuados por el propio Consejo, y examinar y aprobar su gestión.
III.	Nombrar los Auditores de Cuentas.

IV.	Aprobar, en su caso, las cuentas anuales y resolver sobre la aplicación del resultado, así como aprobar, también en su caso, las cuentas anuales consolidadas.
V.	Acordar la emisión de obligaciones, el aumento o reducción de Capital, la transformación, fusión, escisión o disolución de la Sociedad y, en general, cualquier modificación de los Estatutos sociales.
VI.	Autorizar al Consejo de Administración para aumentar el Capital social, conforme a lo previsto en el artículo 153,1.b de la Ley de Sociedades Anónimas.
VII.	Otorgar al Consejo de Administración las facultades que para casos no previstos estime oportunas.
VIII.	Decidir sobre los asuntos que le sean sometidos por acuerdo del Consejo de Administración.
IX.	Decidir acerca de la aplicación de sistemas de retribución consistentes en la entrega de acciones o de derechos sobre ellas, así como de cualquier otro sistema de retribución que esté referenciado al valor de las acciones, con independencia de quién resulte ser beneficiario de tales sistemas de retribución.
X.	Decidir lo procedente sobre todas aquellas cuestiones que no se determinen especialmente en estos Estatutos, y no sean de la exclusiva competencia del Consejo de Administración.

CAPITULO 2º

CONSEJO DE ADMINISTRACIÓN

                    Artículo 29.-  Al Consejo de Administración le corresponde la gestión, administración y representación de la Sociedad en todos los actos comprendidos en el objeto social con las facultades que le atribuyen la Ley y los presentes Estatutos.

                    Artículo 30.-  El Consejo de Administración se compondrá de catorce miembros como mínimo y treinta como máximo, nombrados por la Junta general.

                    Los cargos se renovarán anualmente por terceras partes, siguiéndose para ello el turno determinado por la antigüedad en aquéllos, según la fecha y orden del respectivo nombramiento. Es decir, la duración del cargo de Consejero será de tres años. Los Consejeros cesantes podrán ser reelegidos.

                    Todas las vacantes de Consejeros que por cualquier causa se produzcan durante el plazo para el que fueron nombrados podrán ser cubiertas con accionistas y de modo provisional por el Consejo de Administración, hasta que la Junta general, en la primera reunión que celebre, confirme aquel nombramiento o lo revoque. En el primer supuesto, el Consejero así designado cesará en la fecha en que lo habría hecho su antecesor.

                    Artículo 31.-     Sujeto a las limitaciones legalmente establecidas, cualquier persona es elegible para el cargo de Consejero de la Sociedad, sin necesidad de que tenga la condición de accionista.

                    El cargo de Consejero es compatible con cualquier otro cargo o función en la Sociedad.

                    Artículo 32.-    1. Los Administradores responderán frente a la Sociedad, frente a los accionistas y frente a los acreedores sociales del daño que causen por actos u omisiones contrarios a la Ley o a los Estatutos o por los realizados incumpliendo los deberes inherentes al desempeño del cargo.

                    2. Responderán solidariamente todos los miembros del Consejo de Administración que realizó el acto o adoptó el acuerdo lesivo, menos los que prueben que, no habiendo intervenido en su adopción y ejecución, desconocían su existencia o, conociéndola, hicieron todo lo conveniente para evitar el daño o, al menos, se opusieron expresamente a aquél.

                    3. En ningún caso exonerará de responsabilidad la circunstancia de que el acto o acuerdo lesivo haya sido adoptado, autorizado o ratificado por la Junta general.

                    Artículo 33.-     El Consejo de Administración designará de entre sus miembros un Presidente y, también, uno o varios Vicepresidentes, los cuales, en este último supuesto, serán correlativamente numerados. La designación de Presidente y de Vicepresidente o Vicepresidentes se hará por tiempo indefinido y, para el caso del Presidente, requerirá el voto favorable de las dos terceras partes de los componentes del Consejo.

                    A falta de Presidente y Vicepresidentes, desempeñará las funciones de aquél el Vocal a quien corresponda por orden de numeración, que el mismo Consejo acordará.

                    Artículo 34.-  El Presidente del Consejo de Administración será considerado como superior jerárquico de la Sociedad, investido de las atribuciones necesarias para el ejercicio de esta autoridad, incumbiéndole, aparte de otras consignadas en estos Estatutos, las siguientes:

PRIMERA:	Velar porque se cumplan los Estatutos sociales en toda su integridad y se ejecute fielmente los acuerdos de la Junta general y del Consejo de Administración.
SEGUNDA:	Ejercer la alta inspección del Banco y de todos sus servicios.
TERCERA:	Despachar con el Consejero Delegado y con la Dirección General para informarse de la marcha de los negocios.

                    Artículo 35.-  El Consejo de Administración se reunirá siempre que su Presidente así lo decida, bien por iniciativa propia o a petición de tres Administradores, por lo menos.

                    Podrá asistir a las reuniones del Consejo de Administración cualquiera persona invitada por el Presidente.

                    Artículo 36.-  La convocatoria de las sesiones del Consejo se hará por el Secretario o, en su caso, el Vicesecretario, en cumplimiento de las órdenes que reciba del Presidente.

                    El Consejo de Administración celebrará sus sesiones en el lugar que se indique en la convocatoria. Excepcionalmente, si ningún consejero se opone a ello, podrá celebrarse el Consejo en varias salas o lugares conectados mediante videoconferencia o conexión telefónica múltiple, considerándose como asistentes a la sesión a todos los consejeros que, presentes o por representación, participen en la videoconferencia o conexión telefónica. También podrá celebrarse el Consejo sin sesión y por escrito, si ningún Consejero se opone a ello.

                    Para que el Consejo quede válidamente constituido será necesaria la asistencia, presentes o representados, de más de la mitad de sus miembros. A tal fin, éstos podrán delegar para cada sesión y por escrito en cualquier otro Consejero para que les represente en aquélla a todos los efectos, pudiendo un mismo Consejero ostentar varias delegaciones.

                    Los acuerdos se adoptarán por mayoría absoluta de Consejeros concurrentes a la sesión, salvo que la Ley o estos Estatutos exijan una superior. El Reglamento del Consejo podrá incrementar para asuntos determinados la mayoría legal o estatutariamente establecida. El Presidente tendrá voto de calidad para decidir los empates.

                    El Consejo de Administración, con independencia de lo establecido en estos Estatutos respecto de la Comisión Ejecutiva, podrá delegar facultades en uno o varios de sus miembros, dándoles o no la denominación de Consejeros Delegados o cualquier otra que estime oportuna, con los requisitos y salvo las limitaciones establecidas por la Ley.

                    Los acuerdos que adopte el Consejo se consignarán en actas, extendidas en un libro especial, autorizadas por la firma del Presidente y Secretario, incumbiendo a éste o, en su defecto, al Vicesecretario, expedir, con el “visto bueno” del Presidente o, en su caso, del Vicepresidente, las certificaciones que se emitan con referencia a dicho libro.

                    La función de Secretario será ejercida por el Secretario General de la Sociedad, pudiendo ser sustituido por el Vicesecretario, sin que para desempeñar tales cargos se requiera la cualidad de Consejero, y siendo en su caso sustituidos por el Vocal que, entre los asistentes a la respectiva sesión, designe el propio Consejo, el cual también podrá decidir que tal sustituto accidental sea cualquier empleado de la Sociedad.

                    Estarán facultados permanentemente, de manera solidaria e indistinta, para elevar a documento público los acuerdos del Consejo de Administración, de la Comisión Ejecutiva, o de cualquiera otra que pudiera crearse, el Presidente; el o los Vicepresidentes; el o los Consejeros Delegados; y el Secretario de dichos Órganos colegiados, todo ello sin perjuicio de la autorización expresa de que trata el artículo 108 del Reglamento del Registro Mercantil.

                    Artículo 37.-  Excepción hecha de las facultades que en los presentes Estatutos se confieren a la Junta general de accionistas, el Consejo de Administración tiene las más amplias atribuciones de gestión, administración y representación de la Sociedad. En su consecuencia, podrá adoptar toda clase de acuerdos y celebrar cuantos actos y contratos estime convenientes para el cumplimiento de los fines sociales, siempre con sujeción a la legalidad vigente.

                    Además, específicamente, le corresponderán las siguientes facultades:

I.	Formar y, en su caso, aprobar y modificar los reglamentos que fuesen necesarios para la aplicación de estos Estatutos y el régimen interior del Banco, salvo aquellos que sean competencia de la propia Junta general según lo previsto en la Ley o en estos Estatutos. En concreto, corresponde al Consejo la aprobación de su propio Reglamento, en el que podrán incluirse, en su caso, las reglas básicas de su organización y funcionamiento, así como las normas de conducta y actuación de sus integrantes, especificando, si el Consejo lo estima oportuno, reglas relativas al cese por edad, incompatibilidades adicionales a las previstas legalmente, el régimen de obligaciones del Consejero o cualesquiera otras cuestiones que se consideren convenientes.
II.	Resolver acerca de todas las proposiciones que hayan de formularse para subastar empréstitos, cobranzas y hacerse cargo de empresas.
III.	Acordar libremente la inversión de los fondos propios del Banco en la forma que se considere conveniente.
IV.	Acordar el establecimiento, la supresión o el traslado de Sucursales, Agencias, Servicios, Delegaciones y Oficinas de Representación del Banco, tanto en territorio nacional como en el extranjero.
V.	Determinar las condiciones generales y particulares de los descuentos, préstamos, depósitos, prestaciones de fianzas y avales y toda clase de operaciones, según las normas legales vigentes.
VI.	Decidir sobre la concesión de préstamos y sobre la apertura y cierre de cuentas corrientes de crédito, así como acerca de la admisión y devolución de toda clase de garantías.
VII.	Ordenar la suscripción, adquisición, compra, permuta, pignoración y venta de efectos públicos, acciones, obligaciones, bonos y cédulas.
VIII.	Adquirir, enajenar y dar y tomar en arrendamiento, mediante cualquiera de las modalidades permitidas por la Ley, toda clase de bienes muebles e inmuebles.
IX.	Construir edificios y locales para el Banco, hacer declaraciones de obra nueva, agrupaciones y segregaciones de fincas, ejercitar los derechos de tanteo y retracto.
X.	Constituir, modificar, aceptar y cancelar derechos personales y reales, sin limitación, incluso, por tanto, el de hipoteca, así como distribuir responsabilidades entre los inmuebles hipotecados.
XI.	Acordar, en las condiciones previstas en la Ley, pagos a cuenta del dividendo activo en razón de beneficios realmente obtenidos y a resultas de lo que en su día se acuerde sobre la fijación y pago de éste por la Junta general.
XII.	Formular las Cuentas anuales, el informe de gestión y la propuesta de aplicación del resultado, así como, en su caso, las cuentas y el informe de gestión consolidados, y proponer a la Junta general el nombramiento de los Auditores de Cuentas.
XIII.	Acordar la convocatoria de las Juntas generales ordinarias y extraordinarias de accionistas.
XIV.	Fijar los gastos de administración.
XV.	Admitir las dimisiones de los Consejeros, a reserva de dar cuenta de ellas a la Junta general de accionistas y de los acuerdos que ésta adopte en definitiva sobre la aceptación de la renuncia y provisión, en su caso, de la vacante producida, que podrá ser cubierta, interinamente, por nombramientos del mismo Consejo.
XVI.	Constituir toda clase de sociedades civiles y mercantiles.
XVII.	Conceder participaciones u opciones en operaciones financieras o industriales en curso o venideras, sin limitación de plazo.
XVIII.	Nombrar y separar, sin distinción de jerarquías y sin excepción alguna, a todos los jefes y empleados del Banco, señalando sus respectivas atribuciones, facultades, deberes, sueldos y obvenciones. En su consecuencia y al amparo de la presente facultad, el Consejo podrá designar uno o varios Directores Generales, así como el Secretario General y Vicesecretario de la Sociedad.
XIX.	Designar a las personas a las que encomiende la comparecencia ante los Tribunales de Justicia a los fines y a efectos de prestar confesión judicial en los procedimientos civiles, laborales, administrativos, contenciosos-administrativos o ante cualquier otra jurisdicción.
XX.	Otorgar poderes a favor de Procuradores u otras personas para que comparezcan en nombre del Banco ante cualquier autoridad nacional o extranjera, Juzgados y Tribunales de todas clases -incluso los de jurisdicciones especiales de cualquier naturaleza-, corporaciones de derecho público, sociedades y particulares, ejercitando las acciones, excepciones, reclamaciones y recursos de toda clase que le asistan, y representándole en los expedientes,

	juicios y procedimientos que al mismo interesen, con facultades de desistir, transigir, allanarse y percibir las cantidades que se determinen en sentencia firme o en su ejecución, así como ratificarse en toda clase de escritos, incluso aunque fuera preciso efectuarlo personalmente.
XXI.	Para el mejor y más rápido despacho de los asuntos podrá crear una Comisión Ejecutiva, atribuyendo y fijando a la misma sus facultades, obligaciones y funcionamiento. El Presidente del Consejo de Administración será siempre uno de los miembros de dicha Comisión Ejecutiva, la cual presidirá. Los restantes miembros de la misma serán elegidos o relevados por el Consejo de Administración entre sus componentes.
	Asimismo, podrá crear otras Comisiones de carácter técnico, fijando sus facultades, obligaciones y funcionamiento.
XXII.	Delegar, con arreglo a lo establecido en el artículo 36, todas o partes de las facultades que le son propias y que sean subrogables por su naturaleza en favor de la Comisión Ejecutiva, si ya existiera, o de uno o varios Consejeros Delegados.
	Con independencia de estas delegaciones, podrá el Consejo de Administración conferir cuantas facultades o poderes crea convenientes, ya sean de carácter mancomunado o solidario, a otros Consejeros, accionistas, empleados del Banco o, incluso, a personas ajenas al mismo, otorgando a este efecto las correspondientes escrituras públicas.
XXIII.	Transigir sobre bienes y derechos, así como someter a la decisión de árbitros o de amigables componedores cuantas cuestiones y diferencias afecten a la Sociedad.
XXIV.	Resolver en los casos de duda sobre la interpretación de los presentes Estatutos y suplir omisiones.

                    La enumeración comprendida en el presente artículo no tiene carácter limitativo, pues serán facultades propias del Consejo de Administración todas las no reservadas específicamente en la Ley o en estos Estatutos a la Junta general de accionistas.

                    Artículo 38.-  El Consejo de Administración y, en su caso, la Comisión Ejecutiva y la Dirección General del Banco, percibirán por el desempeño de sus funciones, en concepto de participación conjunta en el beneficio de cada ejercicio, una cantidad equivalente al cinco por ciento del importe de aquél, si bien el propio Consejo podrá acordar reducir dicho porcentaje de participación en los años en que así lo estime justificado. Igualmente, le incumbirá distribuir entre los partícipes el importe resultante en la forma y cuantía que acuerde anualmente respecto a cada uno de ellos.

                    A los fines de determinar la cantidad concreta a que asciende dicha participación, el porcentaje que se decida deberá aplicarse sobre el resultado del ejercicio.

                    En cualquier caso, para que esta participación del Consejo pueda ser detraída será necesario que se hallen cubiertas las atenciones prioritarias establecidas por la legislación en vigor.

                    Con independencia de lo anterior, los miembros del Consejo de Administración y de la Comisión Ejecutiva tendrán derecho a percibir dietas de asistencia, así como las remuneraciones que procedan por el desempeño en la propia Sociedad de otras funciones distintas a la de Consejero.

                    Previo acuerdo de la Junta General de accionistas en los términos legalmente establecidos, los Consejeros podrán también ser retribuidos mediante la entrega de acciones o de derechos de opción sobre las mismas o mediante cualquier otro sistema de remuneración que esté referenciado al valor de las acciones.

                    Artículo 39.-  Una Comisión Ejecutiva, compuesta por cinco miembros, como mínimo, y doce miembros como máximo, todos ellos pertenecientes al Consejo de Administración, ejercerá, sin perjuicio de las funciones de supervisión y control de la gestión social propias de éste, las facultades que le delegue el propio Consejo, pudiendo aquélla, a su vez, conferir los poderes necesarios a tal efecto.

                    La Comisión Ejecutiva se reunirá cuantas veces sea convocada por su Presidente o Vicepresidente que le sustituya, pudiendo asistir a sus sesiones, para ser oída, cualquier persona, sea o no extraña a la sociedad, que sea convocada al efecto, por acuerdo de la propia Comisión o del Presidente de la misma, a los efectos que se determinen, en razón de la finalidad del asunto de que se trate.

                    Será Secretario de la Comisión la persona que designe el Consejo de Administración, sea o no Consejero, determinándose también por aquél la persona que deba sustituirle en caso de ausencia, enfermedad o imposibilidad, mientras dure la circunstancia impeditiva.

                    La Comisión Ejecutiva quedará válidamente constituida con la asistencia, presentes o representados, de, al menos, la mitad de sus miembros; y adoptará sus acuerdos por mayoría de los

asistentes, presentes o representados, siendo de calidad el voto de su Presidente. Los miembros de la Comisión podrán delegar su representación en otro de ellos, pero ninguno podrá asumir más de dos representaciones, además de la propia.

                    Los acuerdos de la Comisión se llevarán en un libro de actas, que será firmado, para cada una de ellas, por el Presidente y el Secretario o, en su caso, por quienes hayan desempeñado estas funciones, en la sesión de que se trate, en virtud de disposición de estos Estatutos.

                    Artículo 40.-  En el seno del Consejo de Administración se constituirá una Comisión de Auditoría y Cumplimiento. Esta Comisión de  Auditoría y Cumplimiento estará formada por un mínimo de cuatro y un máximo de siete Consejeros nombrados por el Consejo de Administración. La mayoría de los integrantes de la Comisión de Auditoría y Cumplimiento deben ser Consejeros no ejecutivos, entendiéndose como tales los administradores que no desempeñen responsabilidades de gestión dentro de la Sociedad o del Grupo y limiten su actividad a las funciones de supervisión y decisión colegiada propias de los Consejeros.

                    El Presidente de la Comisión de Auditoría y Cumplimiento será elegido por el Consejo de Administración de entre los Consejeros no ejecutivos a los que se refiere el párrafo anterior y deberá ser sustituido cada cuatro años, pudiendo ser reelegido una vez transcurrido el plazo de un año desde su cese. La Comisión de Auditoría y Cumplimiento contará asimismo con un Secretario, cargo que ostentará el Secretario General de la Sociedad, el cual, si no es Consejero, tendrá voz, pero no voto, en la Comisión de Auditoría y Cumplimiento.

                    Las competencias de la Comisión de Auditoría y Cumplimiento serán, como mínimo:

I.	Informar, a través de su Presidente y/o su Secretario, en la Junta general de accionistas sobre las cuestiones que en ella planteen los accionistas en materias de su competencia.
II.	Proponer al Consejo de Administración, para su sometimiento a la Junta general, la designación del Auditor de Cuentas al que se refiere el artículo 204 de la Ley de Sociedades Anónimas.
III.	Supervisar los servicios de auditoría interna.
IV.	Conocer el proceso de información financiera y de los sistemas internos de control.
V.	Mantener las relaciones con el Auditor de Cuentas para recibir información sobre aquellas cuestiones que puedan poner en riesgo la independencia de éste, y cualesquiera otras relacionadas con el proceso de desarrollo de la auditoría de cuentas, así como mantener con el Auditor de Cuentas aquellas otras comunicaciones previstas en la legislación de auditoría de cuentas y en las normas técnicas de auditoría.

                    La Comisión de Auditoría y Cumplimiento se reunirá cuantas veces sea convocada por acuerdo de la propia Comisión o de su Presidente y, al menos, cuatro veces al año, estando obligado a asistir a sus reuniones y a prestarle su colaboración y acceso a la información de que disponga cualquier miembro del equipo directivo o del personal de la Sociedad que sea requerido a tal fin, y pudiendo requerir también la asistencia del Auditor de Cuentas. Una de sus reuniones estará destinada necesariamente a evaluar la eficiencia y el cumplimiento de las reglas y procedimientos de gobierno de la Sociedad y a preparar la información que el Consejo ha de aprobar e incluir dentro de la documentación pública anual.

                    La Comisión de Auditoría y Cumplimiento quedará válidamente constituida con la asistencia, presentes o representados, de, al menos, la mitad de sus miembros; y adoptará sus acuerdos por mayoría de los asistentes, presentes o representados, siendo de calidad el voto de su Presidente. Los miembros de la Comisión podrán delegar su representación en otro de ellos, pero ninguno podrá asumir más de dos representaciones, además de la propia. Los acuerdos de la Comisión de Auditoría y Cumplimiento se llevarán en un libro de actas, que será firmado, para cada una de ellas, por el Presidente y el Secretario.

                    A través de su Presidente, la Comisión de Auditoría y Cumplimiento informará al Consejo de Administración, al menos, dos veces al año.

                    La Comisión de Auditoría y Cumplimiento podrá asimismo recabar asesoramientos externos.

                    El Consejo de Administración es competente para desarrollar, ampliar y completar las reglas relativas a la composición, funcionamiento y competencias de la Comisión de Auditoría y Cumplimiento en todo lo no especificado en estos Estatutos, respetando lo previsto en éstos y en la Ley.

Titulo V

EJERCICIO SOCIAL Y CUENTAS ANUALES

                    Artículo 41.-  El ejercicio social corresponderá al año natural, comenzando el primero de enero y terminando en treinta y uno de diciembre.

                    En el plazo máximo de tres meses, contados a partir del cierre de cada Ejercicio social, el Consejo deberá formular las cuentas anuales, que incluyen el Balance, la Cuenta de Pérdidas y Ganancias y la Memoria, el informe de gestión y la propuesta de aplicación del resultado, así como, en su caso, las cuentas y el informe de gestión consolidados.

                    Estos documentos serán sometidos a la revisión de Auditores de Cuentas.

Título VI

RESULTADOS Y SU APLICACIÓN

                    Artículo 42.-  Los productos anuales tendrán como aplicación primordial cubrir los gastos generales, amortizaciones de todo género, saneamiento prudencial de créditos dudosos, intereses y cualquier otro concepto que venga a disminuir el activo social.

                    El remanente de beneficios que resulte una vez efectuadas las aplicaciones a que se refiere el párrafo precedente y la deducción de la cantidad necesaria para atender los correspondientes impuestos, constituye el resultado del ejercicio, que se distribuirá en la forma siguiente:

1º)	La suma necesaria para dotar las Reservas obligatorias en la cuantía legalmente exigible.
2º)	El importe que el Consejo estime conveniente destinar a la dotación de Reservas Voluntarias y Fondos de Previsión.
3º)	Después de separada la cantidad que deba pasar a cuenta nueva, si el Consejo estima aconsejable llevar alguna, el remanente se repartirá entre las acciones con las limitaciones que la Ley imponga. Las acciones sin voto tendrán el régimen de retribución previsto para ellas en la Ley de Sociedades Anónimas y percibirán un dividendo anual mínimo del 5 (cinco) por ciento del Capital desembolsado por cada una de dichas acciones.

                    Artículo 43.-  La Junta general acordará la cuantía, momento y forma de pago de los dividendos, que se distribuirán a los accionistas en proporción al Capital que hayan desembolsado.

                    La Junta general y el Consejo de Administración podrán acordar la distribución de cantidades a cuenta de dividendos, con las limitaciones y cumpliendo con los requisitos establecidos por la Ley.

Título VII

DISOLUCIÓN Y LIQUIDACIÓN DEL BANCO

                    Artículo 44.-  La Sociedad se disolverá en los casos y con los requisitos que establece la vigente Ley de Sociedades Anónimas y demás disposiciones legales concordantes y complementarias. Una vez disuelta la Sociedad y salvo en los supuestos de fusión, escisión total o cualquier otro de cesión global del Activo y el Pasivo, se observarán las reglas de liquidación previstas en la misma Ley de Sociedades Anónimas y demás preceptos que sean aplicables.

Título VIII

DISPOSICIONES GENERALES

                    Artículo 45.-  Los accionistas, al igual que la Sociedad, con renuncia de su fuero propio, quedan expresa y terminantemente sometidos al fuero judicial del domicilio del Banco.

                    Artículo 46.- Sin perjuicio de lo establecido en estos Estatutos respecto de la delegación de voto, el voto a distancia y la asistencia telemática simultánea a la Junta, los actos de comunicación e información, preceptivos o voluntarios, entre la Sociedad, los accionistas y los administradores, cualquiera que sea el emisor y el destinatario de los mismos, se podrán realizar por medios electrónicos y telemáticos, salvo en los casos expresamente exceptuados por la ley y respetando, en todo caso, las garantías de seguridad y los derechos de los accionistas, a cuyo fin el Consejo de Administración podrá establecer los mecanismos técnicos y procedimientos oportunos, a los que dará publicidad a través de la página web.

                    Artículo 47.-  Los presentes Estatutos sólo podrán modificarse en Junta general, en los términos legal y estatutariamente previstos.

EX-1.2

Exhibit 1.2

BYLAWS

OF

BANCO SANTANDER

CENTRAL HISPANO, S.A.

A Corporation Founded in 1857

S A N T A N D E R

Title I
NAME, REGISTERED OFFICE AND DURATION
OF THE COMPANY

                    Article 1.- The Company is named “BANCO SANTANDER CENTRAL HISPANO, S.A.”

                    This Company was founded in the city for which it was named, by means of a public instrument executed on March 3, 1856 before Notary Public José Dou Martínez; such public instrument was ratified and partially amended by another one dated March 21, 1857 and executed before Notary Public José María Olarán, of the above-mentioned capital city. The Company commenced operations on August 20, 1857.

                    As a result of the enactment of the Decree-Law dated March 19, 1874, whereby the circulation of a single paper currency was established in Spain, the privilege of issuing paper money which the Bank had and which it had exercised from the date it commenced operations expired. Thus, the Bank became a Credit Company [“Sociedad Anónima de Crédito”] pursuant to the provisions of the Law dated October 19, 1869. Such Credit Company took over the Assets and Liabilities of what had been, until that time, an issuing Bank. All of the foregoing was formalized by public instrument executed on January 14, 1875 before Notary Public Ignacio Pérez, of the City of Santander, which public instrument was recorded with the Commercial Registry of the Trade Promotion Section of the Government of the Province of Santander.

                    Since the last-mentioned date, the Bank has carried on its business activities without interruption by means of various amendments to its Bylaws, each of which were recorded with the Commercial Registry of Santander. Especially noteworthy is the merger of the Bank with Banco Central Hispanoamericano, S.A., which was approved by resolution of the shareholders at the General Shareholders’ Meetings of both entities on March 6, 1999. Since the above-mentioned date, the Bank has been governed by these Bylaws, the Companies Law [“Ley de Sociedades Anónimas”], and such other related or supplemental legal provisions as may be applicable at anytime.

                    Article 2.- The registered office of the Bank is located in the city of Santander, Paseo de Pereda, numbers 9-12, and may be changed within the same city by simple resolution of the Board of Directors.

                    Article 3.- The duration of the Company is indefinite.

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Title II

SHARE CAPITAL

                    Article 4.- The share capital is 3,127,148,289.50 euros, represented by 6,254,296,579 shares having a nominal value of fifty euro cents each, all of which belong to the same class and series and are issued and fully paid up.

                    Under the provisions of the Companies Law, and with the exception of such cases as are therein contemplated, shareholders shall have at least the following rights:

                    a) The right to share in the distribution of corporate earnings and in the net assets resulting from liquidation.

                    b) The pre-emptive right to subscribe to the issuance of new shares or debentures convertible into shares.

                    c) The right to attend and vote at the General Shareholders’ Meetings and to challenge corporate resolutions.
                    d) The right to receive information.

                    In such manner as is set forth in legal and administrative provisions, the Company shall not acknowledge the exercise of voting rights arising from interests in Company held by persons who acquire shares thereof in violation of mandatory legal rules of any type or rank. Likewise, the Company shall make public, in such manner as determined by the above-mentioned regulations, the interest held by the shareholders in the capital of the Company, whenever the circumstances requiring such publication arise.

                    Any non-voting shares which may be issued shall also be regulated, specifically governed by the provisions of Article 90 et seq. of the Companies Law.

                    In cases of reduction of capital, the procedure contemplated in Article 170.3 of the Companies Law may be used.

                    Article 5.- Unpaid subscription amounts on partially paid-up shares shall be paid as provided by resolutions adopted by the Board of Directors. For such purposes, the Board of Directors shall establish the amount of each payment, the period within which it is to be made and other details, all of which shall be published in the Official Bulletin of the Commercial Registry [“Boletín Oficial del Registro Mercantil”].

                    Article 6.- Without prejudice to the effects of default as set forth by law, any late payment of unpaid subscription amounts shall bear, for the benefit of the Bank, such interest as is provided by law in respect of delays, starting from the day when payment is due and without any judicial or extra-judicial demand being required. In addition, the Bank shall be entitled to bring such legal actions as may be permitted by law in these cases.

                    Article 7.- The shares are represented in book-entry form, which book entries are governed by Law 24/1988 of July 28, on the Securities Market, Royal Decree 116/1992 of February 14, and such other provisions as may be applicable.

3

                    Article 8.- The shares are recorded in the central book-entry registry kept by the Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A. (Iberclear) [the Securities Registration, Clearing and Settlement Service].

                    Iberclear shall advise the Bank of transactions involving the shares and the Bank will keep its own registry including the identity of the shareholders.

                    Article 9.- Ownership and possession of the shares may be transferred in any of the manners provided for by Law.

                    All transfers of shares shall be made by means of book entries.

                    The registration of the transfer in favor of the transferee shall have the same effect as the delivery of the securities.

                    The creation of limited in rem rights or any other type of lien on the shares shall be recorded in the respective account in the registry.

                    Registration of a pledge is equivalent to the transfer of possession of the security.

                    Article 10.- The person whose name appears as the holder in the entries of the registry shall be deemed the legitimate holder thereof, and therefore, such person may require the Bank to provide the services which the shares entitle them to.

                    In the case of co-ownership and other instances of co-ownerships of rights to the shares, as well as in the case of usufruct, pledge and attachment of shares, the provisions of the Companies Law shall apply.

                    The exercise of voting rights may be assigned by the shareholder to a third party in such cases and under such conditions as permitted by Law.

                    In the event of a gratuitous loan (comodato) of shares, the rights inherent to the status of shareholder shall belong to the lender of the shares, except for the right to attend the General Shareholders’ Meeting and voting rights, which shall belong to the borrower to whom such rights shall have been granted. The exercise of such rights by the borrower shall be governed by the provisions on proxies contained in Article 106 of the Companies Law.

                    Shares which are jointly owned shall be registered in the stock ledger in the name of all the co-owners.

                    Whenever it is so deemed necessary, the legal standing to transfer and to exercise the rights arising from the shares or the limited in rem rights or liens created thereon may be evidenced by means of a certificate issued for such purpose.

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                    In the event of persons or Entities formally acting as shareholders under a fiduciary agreement, trust, or any other similar title, the Bank may require such persons to provide the particulars of the beneficial owners of the shares, as well as information regarding all acts entailing the transfer of such shares or the creation of liens thereon.

                    Article 11.- The ownership of one or more shares entails compliance with the Bylaws of the Bank and the resolutions legally adopted by the shareholders acting at the General Shareholders’ Meeting and by the Board of Directors, without prejudice to the right to bring such actions as are legally provided for the purpose of challenging such resolutions.

Title III

CORPORATE PURPOSE

                    Article 12.- 1. The corporate purpose consists of:

a)	The conduct of activities and operations and the provision of services of any kind which are typical of the Banking business in general and which are permitted under current law.
b)	The acquisition, possession, enjoyment and disposition of all types of securities.

                    2. The activities that make up the corporate purpose may be carried out totally or partially in an indirect manner, in any of the manners permitted by Law and, in particular, through the ownership of shares or the holding of interests in Companies whose purpose is identical, similar, incidental or supplemental to such activities.

Title IV

CORPORATE DECISION-MAKING BODIES

                    Article 13.- The corporate decision-making bodies are the shareholders acting at a General Shareholders’ Meeting and the Board of Directors, which shall have such powers as are respectively assigned thereto in these Bylaws. Such powers may be delegated in such manner and to such extent as set forth herein.

CHAPTER 1

GENERAL SHAREHOLDERS’ MEETING

                    Article 14.- Unless otherwise provided by Law or the Bylaws, all matters within the powers of the shareholders shall be decided by majority of the shareholders acting at a duly called General Shareholders’ Meeting, and the resolutions adopted at such General Shareholders’ Meeting shall be binding on all shareholders, including absentee and dissenting shareholders, without prejudice to the rights and remedies of any kind granted to them by Law.

                    Article 15.- The holders of any number of shares registered in their name in the respective stock ledger five days prior to the date on which the

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General Shareholders’ Meeting is to be held and who are current in the payment of capital calls shall be entitled to attend General Shareholders’ Meetings.

                    In the event of the division of ownership of the shares, the shares shall be represented by the shareholder having direct ownership of the shares or the bare owner thereof.

                    The members of the Board of Directors must attend the General Shareholders’ Meetings.

                    The Chair of the General Shareholders’ Meeting may authorize the attendance of any person that the Chair deems appropriate. However, the Shareholders acting at the Meeting may revoke such authorization.

                    Article 16.- The right to attend General Shareholders’ Meetings may be delegated to another shareholder eligible to attend in his own right.

                    Individual shareholders not enjoying full rights under civil law, and legal entities holding shares, may be represented by their duly authorized legal representatives. In such cases, as well as in the event a shareholder delegates his right to attend, no shareholder may have more than one representative at the General Shareholders’ Meeting.

                    Proxy representation conferred upon one who is legally ineligible to hold such proxy shall be null and void.

                    A proxy is always revocable.  Attendance at the Shareholders’ Meeting, whether physically or by casting a distance vote, shall be equivalent to the revocation of such proxy, regardless of the date thereof. A proxy shall also be rendered void by any transfer of shares of which the Company becomes aware.

                    Notwithstanding the provisions of Article 108 of the Companies Law, proxies shall be granted pursuant to the provisions of Article 106.2 of said Law.

                    When a proxy is granted by remote means of communication, it shall only be deemed valid if the grant is made:

                    a) by hand-delivery or postal correspondence, sending the Company the duly signed attendance card and proxy, or by other written means that, in the judgment of the Board of Directors recorded in a resolution adopted for such purpose, allows for due confirmation of the identity of the shareholder granting the proxy and of the representative being appointed, or

                    b) by electronic correspondence or communication with the Company, including an electronic copy of the attendance card and the proxy; such electronic copy shall specify the representation being granted and the identity of the party represented, and shall include the digital signature or other form of identification of the shareholder being represented, in accordance with the conditions set by the Board of Directors recorded in a resolution adopted for such purpose, to ensure that this system of

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representation includes adequate assurances regarding authenticity and the identity of the shareholder represented.

                    In order to be valid, a proxy granted by any of the foregoing means of remote communication must be received by the Company before midnight of the third day prior to the date the Shareholders’ Meeting is to be held on first call. In the resolution approving the call to the Shareholders’ Meeting in question, the Board of Directors may reduce the required notice period, disseminating this information in the same manner as it disseminates the announcement of the call to meeting. Pursuant to the provisions of Article 24.4 below, the Board may also expand upon the foregoing provisions regarding proxies granted by remote means of communication.

                    The proxy may include such items not included in the agenda which may be discussed in the Shareholders’ Meeting pursuant to the Law.

                    Article 17.- The attendees at the General Shareholders’ Meeting shall have one vote for each share which they hold or represent.

                    Shares to which no voting rights attach shall have this right in the specific cases set forth in the Companies Law.

                    Article 18.- In order to attend the General Shareholders’ Meeting, one must obtain the corresponding registered attendance card to be issued by the Office of the Secretary of the Bank with reference to the list of shareholders having the right to attend. This list shall be prepared and definitively closed five days prior to the date indicated in the call to the General Shareholders’ Meeting.

                    Article 19.- The General Shareholders’ Meetings may be Ordinary or Extraordinary and must be called by the Board of Directors.

                    The Ordinary General Shareholders’ Meeting, which shall be previously called for such purpose, must be held within the first six months of each fiscal year in order for the shareholders to review corporate management, approve financial statements from the prior fiscal year, if appropriate, and resolve upon the allocation of profits or losses from such fiscal year, as well as to approve, if appropriate, the consolidated financial statements, without prejudice to their power to debate and decide any other matter included in the agenda.

                    Any General Shareholders’ Meeting not provided for in the foregoing paragraph shall be deemed an Extraordinary General Shareholders’ Meeting and shall be called by the Board of Directors. In addition to those cases in which the Board of Directors deems it advisable in the best interest of the Company, an Extraordinary General Shareholders’ Meeting shall be called by the Board of Directors when shareholders holding at least five percent of the share capital so request, and such request sets forth the matters to be addressed at the Meeting.

                    If the General Shareholders’ Meeting is not called within the legal time limit, it may be called, at the request of the shareholders, and upon notice thereof being given to the Directors, by a Judge of the Court of First

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Instance of the city where the registered office is located, who shall also designate the person who is to preside over such Meeting.

                    An Extraordinary General Shareholders’ Meeting shall also be called as provided above when it is so requested by shareholders holding at least five per cent of the share capital.

                    Article 20.- Notice of all types of Meetings shall be given by means of a public announcement in the “Official Bulletin of the Commercial Registry” and in one of the local newspapers having the largest circulation in the province where the registered office is located, at least fifteen days prior to the date set for the Meeting.

                    Article 21.- General Shareholders’ Meetings, both ordinary and extraordinary, shall be held at the place where the Company has its registered office on the date stated in the notice of the call to meeting, and all resolutions made therein shall be fully valid for all purposes when the minimum number of shares required by Law in each case is present.

                    Article 22.- The Chairman of the Board of Directors or, in his absence, the Vice Chairman serving in his stead per Article 33, and in the absence of both the Chairman and the Vice Chairman, the Director designated by the Board of Directors, shall preside over General Shareholders’ Meetings, and the General Secretary of the Company shall serve as Secretary. In the absence, incapacity, or vacancy of the Secretary, the Assistant Secretary shall serve in his stead, and in the absence of the Assistant Secretary, the Director designated by the Board of Directors.

                    The Chair shall declare the existence of a valid quorum for the Shareholders’ Meeting, direct debate, resolve any questions that may arise in connection with the agenda, end the debate when he deems that an issue has been sufficiently discussed, and in general, exercise all powers necessary for the proper organization and functioning of the General Shareholders’ Meeting.

                    Article 23.- Once the Presiding Committee is established and before taking up the Agenda, a list of attendees shall be drawn up, stating the nature or representation of each attendee and the number of their own or third party shares they represent. For purposes of a quorum, non-voting shares shall be counted only in the specific cases established in the Companies Law. At the end of the list, the number of shareholders present in person and by proxy shall be determined, indicating separately those who have voted from a distance pursuant to the provisions of Article 24, as well as the amount of capital stock they hold, specifying the capital represented by shareholders with voting rights. Thereafter, the items of the agenda shall be submitted to debate. Only such items as are included in the Agenda may be discussed and resolved upon, unless otherwise expressly provided by law.

                    During the Meeting, any shareholder entitled to attend the Shareholders’ Meeting may consult the list of attendees, but such request shall not require delaying or postponing the Meeting once the Chairman has

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called it to order, and the Chairman is not obligated to read the list or provide copies of thereof.

                    Article 24.-. 1. Shareholders entitled to attend may cast their vote on proposals relating to items on the Agenda for any General Shareholders’ Meeting by the following means:

                    a)          by hand-delivery or postal correspondence, sending the Company the duly signed attendance card and voting card (together with the ballot form provided by the Company, if any), or other written means that, in the judgment of the Board of Directors recorded in a resolution adopted for such purpose, allows for the due verification of the identity of the shareholder exercising his voting rights, or

                    b)          by electronic correspondence or communication with the Company, which shall include an electronic copy of the attendance card and voting card (together with the ballot form provided by the Company, if any); such electronic copy shall include the shareholder’s digital signature or other form of identification of the shareholder, in accordance with the conditions set by the Board of Directors recorded in a resolution adopted for such purpose to ensure that this system of voting includes adequate assurances regarding the authenticity and identity of the shareholder exercising his vote.

                    In order to be valid, a vote cast by any of the aforementioned means must be received by the Company before midnight on the third day prior to the date the Shareholders’ Meeting is to be held on first call. In the resolution issuing the call to the Shareholders’ Meeting in question, the Board of Directors may reduce the required notice period, disseminating this information in the same manner as it disseminates the announcement of the call to meeting.

                    2.          Shareholders casting their vote from a distance pursuant to the provisions of this Article shall be deemed present for the purposes of constituting a quorum for the Shareholders’ Meeting in question. Therefore, any proxies granted prior to the casting of such vote shall be deemed revoked and any such proxies thereafter granted shall be deemed invalid.

                    3.          Any vote cast from a distance as set forth in this Article shall be rendered void by physical attendance at the Meeting by the shareholder who cast such vote or by a transfer of shares of which the Company becomes aware.

                    4.          The Board of Directors may expand upon the foregoing provisions, establishing such instructions, rules, means and procedures to document the casting of votes and grant of proxies by remote means of communication as may be appropriate to the state of the technology, and conforming to any regulations issued in this regard and to the provisions of these Bylaws. Any implementing rules adopted by the Board of Directors pursuant to the provisions hereof shall be published on the Company’s website.

                    Furthermore, in order to prevent potential deception, the Board of Directors may take any measures required to ensure that anyone who has cast a distance vote or granted a proxy is duly empowered to do so pursuant to the provisions of these Bylaws.

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                    5.          Remote attendance at the Shareholders’ Meeting via simultaneous teleconference and the casting of a remote, electronic vote while the Shareholders’ Meeting is in session may be allowed if the Regulations for the General Shareholders’ Meeting so provides, subject to the requirements set forth therein.

                    In such case, the Regulations for the General Shareholders’ Meeting may confer upon the Board of Directors the power to determine when the state of the technology permits, with the adequate assurances, remote attendance at the Shareholders’ Meeting via simultaneous teleconference and the casting of a remote, electronic vote while the Shareholders’ Meeting is being held. Furthermore, the Regulations for the General Shareholders’ Meeting may give the Board of Directors the power to set regulations regarding all required procedural aspects thereof, including, among other issues, how early a shareholder must connect in order to be deemed present, the procedure and rules applicable for shareholders attending remotely to exercise their rights, the identification that may be required of remote attendees and their impact on how the list of attendees is compiled; such regulations shall maintain due regard for the law, the Bylaws and the Regulations for the General Shareholders’ Meeting.

                    Article 25.- All resolutions made at the General Shareholders’ Meetings shall be valid and, of course, executive and binding upon all shareholders from the date of the approval of the minutes in which such resolutions are recorded, which approval shall be given in such manner as required by current legislation. All of the foregoing shall be without prejudice to the rights and remedies which may accrue to the persons having legal standing to challenge any such resolutions under applicable law.

                    Voting shall be public, and all resolutions shall be adopted by a majority of capital having the right to vote whose holders are present at the Meeting in person or by proxy, unless otherwise provided by law or these Bylaws.

                    Article 26.- The shareholders shall be entitled to information as provided by law. The Directors shall be required to provide such information as requested by the shareholders in the form and by the deadlines provided by law, except in cases in which this would be legally inappropriate and particularly when, in the judgment of the Chairman, publication of this information would be prejudicial to the Company’s interests. This last exception shall not apply when such request is supported by shareholders who represent at least one-fourth of the Company’s share capital.

                    In the case of the ordinary General Shareholders’ Meeting and such other cases as established by law, the notice of the call to meeting shall indicate appropriate information with respect to the right to examine the documents to be submitted for the approval of the shareholders acting at the Meeting and any reports required by law at the Bank’s registered office, and to obtain them immediately and free of charge.

                    Article 27.- The minutes of the Meeting may be approved by the shareholders themselves at the end of the Meeting or, absent such approval,

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by the Chairman and two Inspectors, one representing the majority and the other, the minority, within a period of fifteen days thereafter.

                    Once the minutes have been approved, they shall be entered in the corresponding book and shall be signed by the Secretary to the Meeting, with the approval being set forth therein by the person acting as Chairman.

                    The Board of Directors may require the presence of a Notary to draw up the minutes of the Meeting and shall be required to do so whenever, upon five days’ notice prior to the date when the Meeting is to be held, it is so requested by shareholders representing at least one per cent of the share capital. In both cases, the notarial certificate shall serve as the minutes of the Meeting.

                    The Secretary, and if applicable, the Assistant Secretary, with the approval of the Chairman, or if applicable, of the Vice Chairman, shall have the power to issue certifications of the minutes and resolutions of the Meetings.

                    Article 28.- The shareholders acting at the General Shareholders’ Meeting may adopt all kinds of resolutions relating to the Company, with the following powers being specifically reserved to them:

I.	Approval of Regulations for the General Shareholders’ Meeting that, subject to the provisions of Law and the Bylaws, shall govern the call, organization, information about, attendance at and holding of the General Shareholders’ Meeting, as well as the exercise of voting rights on the occasion of the call and holding of such Meetings.
II.	Appointment and removal of Members of the Board of Directors, as well as ratification or revocation of interim appointments of such Directors by the Board itself, and examination and approval of their performance.
III.	Appointment of the Auditors.
IV.	Approval, if appropriate, of the annual financial statements and resolutions on the allocation of earnings, as well as approval, also if appropriate, of the consolidated annual financial statements.
V.	Resolutions on the issuance of debentures, any capital increase or decrease, the transformation, merger, split-off or dissolution of the Company and, in general, any amendment to the Bylaws.
VI.	Authorizing the Board of Directors to increase the capital stock, pursuant to the provisions of Article 153.1.b of the Companies Law.
VII.	Conferral upon the Board of Directors of such powers as they deem advisable for unforeseen events .
VIII.	Deciding upon matters submitted to the shareholders at the General Shareholders’ Meeting by resolution of the Board of Directors.

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IX.	Deciding on the application of consistent compensation systems for the delivery of shares or rights thereto, as well as any other compensation system referencing the value of the shares, regardless of who the beneficiary of such compensation systems may be.
X.	Deciding, if appropriate, on all matters not specifically set forth in the Bylaws that are not within the exclusive competence of the Board of Directors.

CHAPTER 2

BOARD OF DIRECTORS

                    Article 29.- The Board of Directors is responsible for the management, administration and representation of the Company in all activities included in the corporate purpose, and has the powers conferred upon it by Law and these Bylaws.

                    Article 30.- The Board of Directors shall be composed of a minimum or fourteen Directors and a maximum of thirty, to be appointed by the shareholders at the General Shareholders’ Meeting.

                    One-third of the positions on the Board shall be renewed annually, for which purpose the length of service on such positions, on the basis of the date and order of the respective appointment, shall be observed. In other words, a Director shall be in office for three years. Directors who cease to hold office may be re-elected.

                    All vacancies on the Board of Directors which occur for whatever reason during the period of time for which the Directors were appointed may be filled by shareholders on an interim basis, upon resolution made by the Board of Directors, until the shareholders acting at the next General Shareholders’ confirm or revoke such appointment. In the first-mentioned case, the Director so designated shall cease to hold office on the date on which his predecessor would have done so.

                    Article 31.- Subject to such limitations as may be established bylaw, any person is eligible to hold office as a Director of the Company, without the need that such person be a shareholder.

                    A Director holding office as such may hold any other position or perform any other duties in the Company.

                    Article 32.- 1. The Directors shall be liable to the Company, to the shareholders, and to the Company’s creditors for any damages they may cause by acts or omissions contrary to Law or to the Bylaws or by any acts or omissions contrary to the duties inherent in the exercise of their office.

                    2.  All the members of the Board of Directors who carried out such act or adopted the prejudicial resolution shall be jointly and severally liable, except for those members who can prove that, not having participated in the adoption and execution of such act or resolution, they were unaware of its

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existence, or, if aware of it, did all that was appropriate to avoid the damage caused, or at least expressly opposed it.

                    3.  Under no circumstance shall the fact that the prejudicial act or resolution was approved, authorized or ratified by the shareholders at the General Shareholders’ Meeting be considered grounds for a release from liability.

                    Article 33.- The Board of Directors shall appoint from among its members a Chairman and also one or more Vice Chairmen; any such Vice Chairmen shall be consecutively numbered. The Chairman and the Vice Chairman or Vice Chairmen shall be appointed to hold office for an indefinite period. The appointment of the Chairman shall require the favorable vote of two-thirds of the Directors.

                    In the absence of a Chairman and Vice Chairmen, the duties of the Chairman shall be performed by the corresponding Director in numerical sequence, upon resolution made by the Board of Directors.

                    Article 34.- The Chairman of the Board of Directors shall be considered as the highest executive in the Company, and shall be vested with such powers as are required to hold office in such capacity. Among other powers and duties set forth in these Bylaws, the Chairman of the Board of Directors shall have the following:

ONE:	To ensure that the Bylaws are fully complied with and that the resolutions adopted at the General Shareholders’ Meeting and by the Board of Directors are duly carried out.
TWO:	To be responsible for the overall control of the Bank and all services thereof.
THREE:	To hold discussions with the Managing Director and the General Managers in order to inform himself of the progress of the business.

                    Article 35.- The Board of Directors shall meet whenever the Chairman so decides, either on his own initiative or at the request of a minimum of three Directors.

                    Meetings of the Board of Directors may be attended by any person invited by the Chairman.

                    Article 36.- Meetings of the Board of Directors shall be called by the Secretary, or if applicable, by the Assistant Secretary, in compliance with the instructions received from the Chairman.

                    The Board of Directors shall hold its meetings at the place indicated in the call to meeting. On an exceptional basis, if no Director is opposed, the Board Meeting may be held in several rooms or at several sites connected by videoconferencing or teleconferencing. All Directors present or represented who participate in the videoconference or teleconference shall be

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deemed to have attended the Meeting. The Board may also act without a meeting, in writing, provided no Director is opposed to doing so.

                    In order for there to be a valid quorum of the Board of Directors, more than half the Directors must be present or represented. To this end, the Directors may grant a proxy for each meeting, in writing, to any other Director to represent them therein for all purposes, and one Director may hold several proxies.

                    Resolutions shall be adopted by the absolute majority of Directors present at the Meeting, unless the law or these Bylaws require a supermajority. The Regulations of the Board of Directors may require a majority greater than the majority required by law or these Bylaws for certain matters. The Chairman shall have the tie-breaking vote.

                    Regardless of the provisions herein contained regarding the Executive Committee, the Board of Directors may delegate powers to one or more of its members, whom the Board of Directors may or may not call Managing Directors or in any other manner that it deems appropriate, subject to the requirements and except for the limitations established by Law.

                    All resolutions adopted by the Board of Directors shall be recorded in minutes contained in a special book, authorized under the signature of the Chairman and the Secretary. The Secretary, or in his absence, the Assistant Secretary, shall issue, with the approval of the Chairman or, if applicable, of the Vice Chairman, all certificates to be issued with respect to such book.

                    The duties of Secretary shall be performed by the General Secretary of the Company, who may be replaced by the Assistant Secretary, and who need not be Directors to perform such duties. Where applicable, they shall be replaced by such Director as the Board may appoint from among those in attendance at the corresponding meeting. The Board of Directors may also decide that any employee of the Company serve as a substitute on an interim basis.

                    Any and all of the Chairman, the Vice Chairman or Vice Chairmen, the Managing Director(s) and the Secretary of such collective decision-making bodies shall be permanently authorized, on a joint and several basis, to record as public instruments the resolutions adopted by the Board of Directors, the Executive Committee or any other committee that may be created, the foregoing being without prejudice to the express authorization prescribed in Article 108 of the Regulations of the Commercial Registry.

                    Article 37.- With the exception of such powers as are granted by these Bylaws to the shareholders acting at the General Shareholders’ Meeting, the Board of Directors has the broadest powers with regard to the management, administration and representation of the Company. Consequently, it may adopt resolutions of any kind and carry out and enter into whatever acts and contracts it deems appropriate in order to accomplish the corporate purpose, subject always to the provisions of applicable law.

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                    Furthermore, the Board of Directors shall have the following specific powers:

I.	To prepare and, if applicable, approve and modify such regulations as are required for the application of these Bylaws and the internal governance of the Bank, except for those which fall within the powers of the shareholders at the General Shareholders’ Meeting as provided by Law or these Bylaws. Specifically, the Board of Directors shall be responsible for approving its own Regulations, which may include, where applicable, the basic rules for the organization and operation thereof, as well as the rules of conduct of its members. The Board of Directors may, if it deems it appropriate, specify rules concerning withdrawal from office due to age reasons, incompatibilities additional to those prescribed by law, duties of Directors or any other issues that the Board deems fit.
II.	To decide on all proposals to be made for tendering debt, collections and for taking over companies.
III.	To freely resolve upon the investment of the Bank’s own funds in such manner as the Board deems appropriate.
IV.	To issue resolutions regarding the establishment, termination or transfer of Branches, Agencies, Services, Delegations and Representative Offices of the Bank, both within the country and abroad.
V.	To establish the general and special conditions applicable to discounts, loans, deposits, guarantees and bonds and transactions of any kind whatsoever, pursuant to the applicable legal provisions.
VI.	To decide on the granting of loans and the opening and closing of checking accounts, as well as the acceptance and return of every type of guarantee.
VII.	To direct the subscription, acquisition, purchase, exchange, pledge and sale of public securities, shares, debentures, bonds and warrants.
VIII.	To acquire, dispose of, lease as lessor or lessee, in any manner permitted by Law, personal and real property of any kind whatsoever.
IX.	To construct buildings and premises for the Bank, make declarations regarding new constructions, group together and divide real property, and exercise the rights of first refusal and redemption.
X.	To constitute, modify, accept and cancel in personam and in rem rights without any limitation whatsoever, including the right to create mortgages and distribute liabilities among the mortgaged property.
XI.	To make resolutions, under such conditions as set forth by Law, on payments on account of dividends in respect of earnings actually obtained, subject to the resolution regarding the declaration and payment of such dividends to be made in due course at the General Shareholders’ Meeting.
XII.	To prepare the annual Financial Statements, the management report and the proposed allocation of profits or losses, and, if applicable, the

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	consolidated financial statements and management report, and to submit a proposal to the shareholders at the General Shareholders’ Meeting regarding the appointment of the Auditors.
XIII.	To resolve upon the call of ordinary and extraordinary General Shareholders’ Meetings.
XIV.	To set management fees.
XV.	To accept the resignation of the Directors, subject to the duty to report thereon to the shareholders at the General Shareholders’ Meeting and subject also to the definitive resolutions that the shareholders may adopt regarding the acceptance of the resignation and the coverage, should such be the case, of the vacancy that has occurred, which may be filled, on an interim basis, by such person as may be appointed by the Board of Directors itself.
XVI.	To incorporate civil and commercial companies, partnerships and corporations of any kind.
XVII.	To grant interests in or options on financial or commercial transactions, be they already under way or to be made in the future, without limitations as to time.
XVIII.	To appoint and remove, without distinction as to rank and without any exception whatsoever, all officers and employees of the Bank, and to establish their respective sphere of competence, powers, duties, salaries and bonuses. Consequently, the Board may, under this authority, appoint one or more General Managers, as well as the General Secretary and the Assistant Secretary of the Company.
XIX.	To appoint those persons whom the Board shall direct to appear before Courts of Law in order to make depositions in all civil, labor, administrative and administrative litigation proceedings or before any other kind of authority.
XX.	To grant powers of attorney to Lawyers or other persons in order that they may appear on the Bank’s behalf before any domestic or foreign authority, Courts and Tribunals of all kinds – including those having special jurisdiction of  any kind whatsoever -, corporations governed by public law, companies and individuals, by filing legal actions, defenses, claims and appeals of any kind that the Bank may avail itself of and by representing the latter in any and all actions, lawsuits or proceedings in which the Bank may have an interest, with the attorneys so appointed having the authority to make waivers, settlements and admissions to claims, and to receive such amounts as are determined by final and conclusive judgments or in the course of the execution thereof, as well as to ratify any and all written documents, even if it should be necessary to do so personally.
XXI.	In order to deal with the matters within its competence more efficiently and rapidly, the Board of Directors may create an Executive Committee and establish the powers, obligations and functions that such Executive Committee shall have. The Chairman of the Board of Directors must necessarily be one of the members of such

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	Executive Committee, which he shall preside over. The other members of the Committee shall be elected or chosen by the Board of Directors from among its members.
	In addition, the Board of Directors may create other Committees of a technical nature, providing for their powers, obligations and operation.
XXII.	To delegate, pursuant to the provisions of Article 36, all or any of its powers that by their nature may be delegated to the Executive Committee, if such Committee exists, or to one or more Managing Directors.
	Regardless of such delegations, the Board of Directors may grant such powers as it may deem advisable, to be exercised jointly or individually, to other Directors, shareholders, Bank employees, and even to third parties, recording such powers in the pertinent public instruments.
XXIII.	To enter into settlements with regard to property and rights, as well as submit any issues or disputes that may affect the Company to the decision of arbitrators or amiable compositeurs.
XXIV.	To resolve any questions regarding the interpretation of these Bylaws and to correct any omissions.

                    The list of powers included in this article is not restrictive, for the powers of the Board of Directors shall include all those which are not specifically reserved by Law or these Bylaws to the shareholders acting at the General Shareholders’ Meeting.

                    Article 38.- The Board of Directors, and, if applicable, the Executive Committee and the General Management of the Bank, shall receive, in consideration for the performance of their duties and as a joint share in the income for each fiscal year, an amount equal to five percent thereof, provided, however, that the Board may resolve that such percentage be reduced in those years in which it so deems it justified. In addition, the Board of Directors shall distribute the resulting payment among the recipients in such manner and amount as may be resolved annually with respect to each of them.

                    In order to determine the specific amount corresponding to such share, the percentage decided upon shall be applied to the earnings for the fiscal year.

                    In any event, in order for this share of the Board of Directors to be deducted, all priorities established by current legislation must be satisfied.

                    Regardless of the foregoing, the members of the Board of Directors and the Executive Committee shall be entitled to collect attendance fees, as well as such compensation as may be applicable to the performance of their duties within the Company other than those of a Director.

                    Following a resolution adopted by the shareholders at the General Shareholders’ Meeting in such manner as provided by law, the Directors may

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also receive compensation in the form of shares or options thereon, or by any other compensation system which references share value.

                    Article 39.- An Executive Committee, composed of a minimum of five members and a maximum of twelve, all of them belonging to the Board of Directors, shall exercise the powers delegated to it by the latter, without prejudice to the supervisory and corporate management control functions of the Board of Directors. The Executive Committee may, in turn, delegate such powers as may be necessary for such purpose.

                    The Executive Committee shall meet whenever called by its Chairman or the Vice Chairman acting in his place, and any person from inside or outside the Company may attend its meetings in order to be heard by the Executive Committee when such person is called by resolution of the Committee itself or its Chairman for such purposes as may be determined in relation to any particular issue.

                    The Secretary shall be designated by the Board of Directors, and may or may not be a Director. The Board shall also decide on the person who shall replace the Secretary in the event of absence, sickness or inability thereof for as long as such circumstances prevail.

                    The Executive Committee shall be considered duly established upon the presence, in person or by proxy, of at least one-half of its members. The Executive Committee shall adopt its resolutions by the majority vote of the members present in person or by proxy, and the Chairman shall have the tie-breaking vote. The members of the Committee may grant a proxy to another member; however, no member may represent more than two persons, in addition to himself.

                    The resolutions of the Committee shall be recorded in a minute book, and each resolution shall be signed by the Chairman and the Secretary, or if applicable, by such persons as may have acted in such capacity at the relevant meeting, pursuant to the provisions of these Bylaws.

                    Article 40.- An Audit and Compliance Committee shall be established within the Board of Directors. Such Audit and Compliance Committee shall be composed of a minimum of four Directors and a maximum of seven, who shall be appointed by the Board of Directors. The majority of the members of the Audit and Compliance Committee shall be non-executive Directors, such being understood to be those directors who do not hold management responsibilities within the Company or the Group and whose activity is confined to the supervisory and collective decision-making functions which are inherent in the position of Director.

                    The Chairman of the Audit and Compliance Committee shall be elected by the Board of Directors from among the non-executive Directors mentioned in the preceding paragraph and shall be replaced every four years. The Chairman may be re-elected after one year has elapsed since he ceased to hold office. The Audit and Compliance Committee shall also have a Secretary, which office shall be held by the General Secretary of the Company, who, if not a Director, may participate but not vote at meetings of the Audit and Compliance Committee.

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                    The Audit and Compliance Committee shall have at least the following powers and duties:

I.	To report, through its Chairman and/or Secretary, to the shareholders at the General Shareholders’ Meeting on issues raised therein by the shareholders regarding matters within their powers.
II.	To propose to the Board of Directors, for submission to the shareholders at the General Shareholders’ Meeting, the designation of the Auditor referred to in Article 204 of the Companies Law.
III.	To supervise the internal audit services.
IV.	To be aware of the financial reporting procedure and the internal control systems.
V.	To maintain a relationship with the Auditor in order to receive information on any issues that might risk the independence thereof and any other issues relating to the development of the audit procedure, and maintain with the Auditor all other communications contemplated in the legislation governing audits and in technical audit standards.

                    The Audit and Compliance Committee shall meet as many times as it is called by resolution of the Committee itself or its Chairman and at least four times per year. Any member of the Company’s management team or personnel required to do so must attend meetings of the Committee and offer their cooperation and access to all information in their possession. The Auditor may also be required to attend such meetings. One of the meetings of the Audit and Compliance Committee must be devoted to assessing the efficiency of, and compliance by the Company with, the rules and procedures of governance, and to preparing the information to be approved by the Board of Directors and to be included as part of the annual public documents.

                    A quorum for the Audit and Compliance Committee shall be validly established upon the presence, in person or by proxy, of at least one-half of its members, and shall adopt its resolutions by the majority vote of those present in person or by proxy. The Chairman shall have the tie-breaking vote. Members of the Committee may grant a proxy to another member, but no member may represent more than two persons, in addition to himself. The resolutions of the Audit and Compliance Committee shall be recorded in a minute book, and each resolution shall be signed by the Chairman and the Secretary.

                    Acting through its Chairman, the Audit and Compliance Committee shall report to the Board of Directors at least twice a year.

                    The Audit and Compliance Committee may also seek external advice.

                    The Board of Directors shall have the power to develop, enlarge upon and complete the regulations governing the composition, operation and scope of action of the Audit and Compliance Committee with respect to all matters not specifically provided for in these Bylaws, with due observance of the provisions hereof and the Law.

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Title V

FISCAL YEAR AND ANNUAL FINANCIAL STATEMENTS

                    Article 41.- The Company’s fiscal year shall coincide with the calendar year, commencing on the first of January and ending on the thirty-first of December.

                    Within a maximum period of three months from the closing date of each fiscal year, the Board of Directors shall prepare the annual financial statements, which shall include the Balance Sheet, the Profit and Loss Statement and the Annual Report, as well as the management report and proposed allocation of profits or losses, and, if applicable, the consolidated financial statements and management report.

                    These documents shall be submitted to the Auditors for review.

Title VI

EARNINGS AND ALLOCATION THEREOF

                    Article 42.- The earnings for the year shall be primarily allocated to covering general expenses, repayments of all kinds, reasonable write-downs of doubtful receivables, interest, and any other items which involve a reduction in corporate assets.

                    Once the allocations referred to in the preceding paragraph have been carried out and the required amount has been deducted to pay all applicable taxes, the remaining amount shall constitute the earnings for the fiscal year, which shall be distributed as follows:

1)	The sum needed to furnish the compulsory Reserves with the legally-required amounts.
2)	The amount which the Board considers appropriate to assign to Voluntary Reserves and Pension Funds.
3)	After setting aside the amount which should be carried forward, if the Board considers it advisable to do so, the remaining amount will be distributed among the shareholders subject to the limitations established by Law. With respect to shares without voting rights, the compensation system provided for in the Companies Law shall apply, and they shall receive a minimum annual dividend equal to five (5) percent of paid-up capital for each of such shares.

                    Article 43.- The shareholders acting at the General Shareholders’ Meeting shall make resolutions regarding the amount, time and form of payment of the dividends, which shall be distributed among the shareholders in proportion to their paid-up capital.

                    The shareholders at the General Shareholders’ Meeting and the Board of Directors may make resolutions as to the distribution of dividends on

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account, subject to such limitations and in compliance with such requirements as are established by Law.

Title VII

DISSOLUTION AND LIQUIDATION OF THE BANK

                    Article 44.- The Company shall be dissolved in such circumstances and subject to such requirements as are set forth in the current Companies Law and related and supplemental legal provisions. Once the Company has been dissolved and except in the event of merger, total split-off or any other kind of general assignment of Assets and Liabilities, the rules of liquidation established by the Companies Law and other applicable legal provisions shall be observed.

Title VIII

GENERAL PROVISIONS

                    Article 45.- The shareholders, as well as the Company, hereby waive the jurisdiction otherwise applicable to them and expressly and irrevocably subject themselves to the jurisdiction of the courts sitting in the place of the registered office of the Bank.

                    Article 46.- Without prejudice to the provisions of these Bylaws with respect to voting by proxy, distance voting, and attendance at Shareholders’ Meetings via teleconference, any required or voluntary communications and information among the Company, its shareholders, and its Directors, regardless of the party issuing or receiving them, may be effected by electronic or data-transmission means, except in the cases expressly excluded by law and respecting at all times the guarantees of security and the rights of shareholders, to which end the Board of Directors may establish appropriate technical mechanisms and procedures, which it shall publish on the Company’s website.

                    Article 47.- These Bylaws may only be amended at the General Shareholders’ Meeting pursuant to such provisions as are established by law and these Bylaws.

********

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EX-12.1

Exhibit 12.1

Section 302 Certification

I, Alfredo Sáenz, certify that:

1.	I have reviewed this annual report on Form 20-F of Banco Santander Central Hispano, S.A.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	[Reserved] [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]
	c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the company’s internal control over financial reporting that ocurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  June 30, 2005

	/s/ ALFREDO SÁENZ
Name:	Alfredo Sáenz
Title:	Second Vice Chairman and Chief Executive Officer

EX-12.2

Exhibit 12.2

Section 302 Certification

I, José Antonio Alvarez, certify that:
1.	I have reviewed this annual report on Form 20-F of Banco Santander Central Hispano, S.A.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	[Reserved] [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]
	c)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the company’s internal control over financial reporting that ocurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:  June 30, 2005

	/s/ JOSÉ ANTONIO ALVAREZ
Name:	José Antonio Alvarez
Title:	Chief Financial Officer

EX-13.1

Exhibit 13.1

Section 906 Certification

          The certification set forth below is being submitted in connection with the Annual Report on Form 20-F for the year ended December 31, 2004 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

          Alfredo Sáenz, the Second Vice Chairman and Chief Executive Officer and José Antonio Alvarez, the Chief Financial Officer of Banco Santander Central Hispano, S.A., each certifies that, to the best of his knowledge:

1.	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Banco Santander Central Hispano, S.A.

Date:  June 30, 2005

	/s/ ALFREDO SÁENZ
Name:	Alfredo Sáenz
Title:	Second Vice Chairman and Chief Executive Officer
	/s/ JOSÉ ANTONIO ALVAREZ
Name:	José Antonio Alvarez
Title:	Chief Financial Officer

EX-15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement No. 333-12416 on Form F-3 of our report dated March 29, 2005 (except for Notes 27 and 28 as to which the date is June 30, 2005) (which report expresses an unqualified opinion and includes explanatory paragraphs relating to the effect of the provisions for early retirement agreements charged to net income in 2004 and to retained earnings in 2002 and 2003, and the differences between accounting principles generally accepted in Spain and in the United States of America), relating to the financial statements of Banco Santander Central Hispano, S.A. appearing in this Annual report on Form 20-F of Banco Santander Central Hispano, S.A. for the year ended December 31, 2004.

/s/ Deloitte, S.L.
Deloitte, S.L.

Madrid, Spain
June 30, 2005