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(1) GENERAL INFORMATION
a) Nature of the dominant Entity
Caja de Ahorros y Monte de Piedad de Gipuzkoa y San Sebastián
(hereinafter kutxa, or the dominant Entity), parent of the Kutxa
Group, is a financial institution of a social nature, incorporated on
the 1st of December 1990, by means of a merge between Caja de
Ahorros y Monte de Piedad Municipal de San Sebastián - Donoskiako
Aurrezki Kutxa Munizipala, and Caja de Ahorros Provincial
de Guipúzcoa. The merge was approved by Extraordinary General
Meetings of both banks, held on 23rd June, 1990.
As a result of the merge capital gains of 211,742 thousand
euros became evident, 182,485 thousand euros of which correspond
to assets from the dominant Entity and 29,257 thousand euros
from Social Work properties. These capital gains enjoyed the
tax benefits provided under the Law 76/1980. Furthermore, an
allowance fund of 180,304 thousand euros was set up for the new
company.
The kutxa is a non-for-profit, social oriented financial
entity, incorporated under the policy of not distributing profits
or dividends. The Diputación Foral of Gipuzkoa and the Townhall
of Donostia-San Sebastian are the founding entities of the
bank whose legal address is C/Garibay nº 15, Donostia-San Sebastian.
The dominant Entity is the parent of a group of companies,
information and details of which are provided in Appendix I. In
compliance with current rules, the Officers of the dominant Entity
have submitted, on this date, the annual accounts of kutxa,
which have also been submitted to an independent audit. In Appendix
II a summary of the balance sheet, the profit and loss account,
the changes to net worth and the cash flow statements for
the years 2007 and 2007 have been included.
b) Activity of the dominant Entity
The purposes of the kutxa, as specified in its Corporate Statutes,
are to promote and develop savings and prevention, as well as to
receive public funds as returnable deposits, the granting of loans
and the undertaking of all operations authorised to this type of entity. Likewise, and according to its nature, kutxa aims at creating
and maintaining social, charity and cultural operations, either on its own account or in collaboration with others, as well as the
maintenance of the Monte de Piedad.
To undertake its commercial activity, kutxa has, at 31st
December 2007, a network of 325 branches, of which 189 were
located outside of Gipuzkoa. A year earlier these figures were
294 and 166 respectively. In 2007, kutxa has continued to develop
an expansion process outside of Gipuzkoa, where 23 new
branches have been opened. At the end of 2007 kutxa had 5
branches in France (2006: 5 branches).
As kutxa is a social savings bank, it is subject to certain legal
rules, which regulate amongst others, aspects such as:
 Keeping a minimum percentage of deposited funds in a
national central bank of any country member of the single currency
system (euro), to cover the minimum bank reserves ratio
that was 2% of applicable liabilities at 31st December 2007 and
2006.
Distribution of the net capital surplus to Reserves and
the Social Work Fund.
Maintenance of a minimum equity level. In summary, the
regulation establishes the obligation to maintain sufficient net
worth to cover the trigger of all risks undertaken. The compliance
with this equity coefficient is carried out at a consolidated level.
Annual contribution to the Deposit Protection Fund as
an additional guarantee to the one provided by the entity’s net
worth to its creditors, whose purpose is to guarantee up to
20,000 euros of clients’ deposits as stipulated under the Royal
Decree 2606/1996 of 20th December on deposit protection
funds of financial entities as specified under the Real Decree
948/2001 of 3rd August and the Bank of Spain Report 4/2004 of
22nd December. |
These consolidated annual accounts have been formulated
by kutxa’s Board of Directors in its meeting on the 21st of February
2008, and they have been signed by the Directors, whose
signature can be seen at the bottom of them, and which are pending
approval by the General Meeting. It is estimated they will be
approved with no significant changes in the meeting that will take
place on the 31st of March 2008. The consolidated annual accounts
for the Kutxa Group for the fiscal year 2006 have been
approved by kutxa’s General Meeting on the 30th of March
2007.
c) Minimum Equity Requirements
Law no. 13/1992 law, dated 1 June 1992, and Bank of Spain Circular
no. 5/1993, of 26 March 1993, and their successive amendments,
regulate the minimum equity levels that must be maintained
by Spanish credit entities - an individual entity as well as a
group - and the form in which these equity levels are to be determined.
The strategic objectives set out by the Management of
the Entity in relation to the way it manages its equity are as follows:
to comply at all times, at both individual and group level,
with the standards that are applicable to minimum equity levels.
to aim for maximum efficiency in equity management, so
that, together with other profitability and risk variables, the use
of equity is considered as a basic variable in analyses associated
with decision-making on investment by the Group. |
In order to comply with these objectives, the Entity has a
series of policies and processes available for equity management,
the main guidelines being:
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The Entity has monitoring and control units available,
reporting to its Planning and Control Department,
to analyze the level of compliance with the Bank of
Spain’s standards on equity management at all
times, with warning mechanisms that ensure compliance
with applicable regulations at all times. To this
end, contingency plans are in place to ensure compliance
with the limits set out in the applicable standards.
In the strategic and commercial planning of the Entity, as
well as in the analysis and monitoring of its operations, a key factor
in the decision-making process is considered to be their impact on
the calculated equity of the Group and the relationship between its
use, profitability and risk. To this end, the Entity has manuals available
in which the parameters for taking decisions in the Entity with
respect to minimum equity requirements are set out.
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Bank of Spain Circular no. 5/1993, of 23 March 1993, establishes
the items that should be considered as equity, in order
to comply with the minimum requirements set out in the standard.
For the purposes of the standard, equity is classified as basic
and second-level equity and is different from equity calculated
in accordance with its definition in IFRS-EU, since they are considered
as defined items and include the requirement to deduct others
that are not considered in IFRS-EU. Furthermore, and in accordance
with the standards in force, the methods applied for the
consolidation and valuation of participating companies for the
purposes of calculating the minimum equity levels of the Group
are different from those applied in the preparation of these consolidated
annual accounts, which also leads to differences in the
calculation of equity under one or other standard.
The manner in which the Group manages its equity is in line,
as far as conceptual definitions are concerned, with the conditions
stated in Circular 5/1993 of the Bank of Spain. The Group
thus considers equity as calculated according to standard no. 8 in
Circular 5/1993 of the Bank of Spain.
The minimum equity level requirements set out by the
above-mentioned Circular are calculated in relation to the
Group’s exposure to credit risk (in relation to the assets, commitments
and other accounts that manifest this risk), in relation
to exchange risk and trading portfolio risk. The Group is also
subject to compliance with the limits of risk concentration and fixed
assets set out in the above-mentioned Circular. With a view
to guaranteeing compliance with the above objectives, the Group
adopts an integrated approach to managing these risks, in accordance
with the above policies.
At 31 December 2007 and 2006, equity calculated for the
Group and for the Entity as a whole exceeded the level required
by the standard.
d) Consolidated Group
The Kutxa Group (hereinafter the Group) is made up by a number
of financial and quasi-financial companies, that together with
other companies, form a Group whose purpose is to diversify
and specialise the self designed products and services offered to
clients.
At 31st December 2007 and 2006, the fully consolidated
entities composing the Consolidated Group (Note 2.c.) are the
following:
The information relating to subsidiary companies, multigroup
and associate companies is included in Annex I.
Kutxa is the parent company of the Group and represents
approximately 95% of the total Group assets to the 31st of December
2007 and 92% to the 31st of December 2006, as well as
100% of the profits generated in both fiscal years 2007 and 2006.
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