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Rating Action:

Moody's downgrades hybrid securities ratings in Spain

23 Feb 2010

Approximately EUR32 billion of securities affected

Madrid, February 23, 2010 -- Moody's Investors Service today downgraded its ratings on Spanish hybrid securities, in line with its revised Guidelines for Rating Bank Hybrids and Subordinated Debt, published in November 2009. This concludes the review for possible downgrade on these ratings initiated on 18 November 2009. A full list of the individual securities affected can be accessed through this link:

http://v3.moodys.com/page/viewresearchdoc.aspx?docid=PBS_SF194702

Prior to the global financial crisis, Moody's had incorporated into its ratings an assumption that support provided by national governments and central banks to shore up a troubled bank would, to a large extent, benefit the subordinated debt holders as well as the senior creditors. However, during the crisis, systemic support for these instruments has not been forthcoming in many cases. The revised methodology has therefore largely removed previous assumptions regarding systemic support, resulting in today's rating action. In addition, the revised methodology generally widens the notching on a hybrid's rating that is based on the instrument's features.

RATING ACTION IN DETAIL

The starting point in Moody's revised approach to rating hybrid securities is the Adjusted Baseline Credit Assessment (Adjusted BCA). The Adjusted BCA reflects a bank's standalone credit strength, including parental and/or cooperative support, if applicable. The Adjusted BCA excludes any expectation of systemic support.

The characteristics of rated Spanish junior subordinated debt instruments and non-cumulative preference shares are fairly standardised:

• The loss absorption for rated junior subordinated debt while the issuer remains a going concern stems from the permanent principal write-down feature and the cumulative deferral nature of its coupon. These instruments have a junior subordinated claim in liquidation. Coupon deferral is optional if the profit and loss account does not show a profit and although the permanent principal write down clause implies that there could be losses on principal outside liquidation, this can only happen after the unlikely event that shareholder's equity has been reduced to zero and reserves are exhausted. This means that, unless stated otherwise, these instruments are rated one notch below the Adjusted BCA.

Moody's notes that it does not rate any junior subordinated debt issued under the new features approved for these instruments in Circular 3/2008 of Bank of Spain.

• The loss absorption for non-cumulative preferred securities while the issuer remains a going concern stems from the permanent principal write-down feature and the non-cumulative deferral nature of their coupon. Coupon skip is mandatory if the issuer does not have sufficient net profits or is below minimum regulatory capital requirements and although the permanent principal write down clause implies that there could be losses on principal outside liquidation, this can only happen after the unlikely event that shareholder's equity has been reduced to zero and reserves are exhausted. Together with their deeply subordinated claim in liquidation, this means that, unless stated otherwise, these instruments are rated four notches below the Adjusted BCA.

The rating actions on each Spanish bank are detailed below:

1) Banco Santander, S.A.

The Adjusted BCA for Banco Santander is A1, which is the same level as its unadjusted BCA.

The following securities issued by Banco Santander's subsidiaries were affected by this rating action:

• Junior subordinated debt (Upper Tier 2): Downgraded to A2 from A1. These instruments were issued by Santander Central Hispano Fin. Serv. Ltd and Santander Perpetual, S.A. Unipersonal, subsidiaries of Banco Santander, guaranteed by Banco Santander.

• Non-cumulative preferred securities: Downgraded to Baa2 from A2. These instruments were issued by Santander Finance Capital, S.A. Unipersonal, Santander Finance Preferred, S.A. Unipersonal and Santander International Preferred, S.A. Unipersonal, subsidiaries of Banco Santander, guaranteed by Banco Santander.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Banco Santander's B- BFSR and corresponding A1 BCA.

2) Banco Bilbao Vizcaya Argentaria, S.A. ("BBVA")

The Adjusted BCA for BBVA is A1, which is the same level as its unadjusted BCA.

The following securities issued by BBVA's subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Baa2 from A2. These instruments were issued by BBVA Capital Finance, S.A Unipersonal, BBVA International Limited and BBVA International Preferred S.A. Unipersonal, subsidiaries of BBVA, guaranteed by BBVA.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on BBVA's B- BFSR and corresponding A1 BCA.

3) Caja de Ahorros y Pensiones de Barcelona ("La Caixa")

The Adjusted BCA for La Caixa is A1, which is the same level as its unadjusted BCA as it is not affected by group support from the savings banks.

The following securities issued by La Caixa and subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Baa2 from A2. These instruments were issued by La Caixa and Caixa Preference Limited, a subsidiary of La Caixa, guaranteed by La Caixa.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on La Caixa's B- BFSR and corresponding A1 BCA.

4) Bankinter, S.A.

The Adjusted BCA for Bankinter is A3, which is the same level as its unadjusted BCA.

The following securities issued by Bankinter's subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Ba1 from Baa1. These instruments were issued by Bankinter Emisiones, S.A. Unipersonal, a subsidiary of Bankinter, guaranteed by Bankinter, S.A.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Bankinter's C BFSR and corresponding A3 BCA.

5) Banco Popular Español, S.A.

The Adjusted BCA for Banco Popular is Baa1, which is the same level as its unadjusted BCA.

The following securities issued by Banco Popular's subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Ba2 from Baa2. These instruments were issued by Popular Capital, S.A. and Popular Preference (Cayman) Limited, subsidiaries of Banco Popular, guaranteed by Banco Popular, S.A.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Banco Popular's C- BFSR and corresponding Baa1 BCA.

6) Banco Español de Crédito, S.A. ("Banesto")

The Adjusted BCA for Banesto is A3, which is two notches higher than its unadjusted BCA of Baa2, due to parental support from Banco Santander, which is rated Aa2 for long-term deposits, and with a BFSR of B- corresponding to a BCA of A1.

The following securities issued by Banesto and subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Ba1 from Baa1. These instruments were issued by Banesto and by Banesto Preferentes, S.A. and Banesto Holdings, Ltd., subsidiaries of Banesto, guaranteed by Banesto.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Banesto's C- BFSR and corresponding Baa2 BCA.

7) Banco Sabadell

The Adjusted BCA for Banco Sabadell is Baa2, which is the same level as its unadjusted BCA.

The following securities issued by Banco Sabadell were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Ba3 from Baa3.

• Mandatory subordinated convertible bonds: Downgraded to Ba3 from Baa3. This instrument mandatorily converts into a fixed number of common shares the earlier of the maturity date or in liquidation. In addition, holders have the right to convert the instrument on each anniversary of the issue or when a coupon payment is skipped. Coupons will be cancelled if the issuer does not have sufficient net profits or is below minimum regulatory capital requirements, or if the issuer elects not to pay. Any unpaid coupons are non-cumulative. This instrument is deeply subordinated as it ranks junior to all liabilities of the issuer, including preferred securities. In rating this instrument Moody's considers the ability of the bank to make coupon payments and honour the conversion to common equity and therefore it is rated four notches below the Adjusted BCA. The rating does not take into consideration the value of common equity at the time of conversion.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Banco Sabadell's C- BFSR and corresponding Baa2 BCA.

8) Ibercaja

The Adjusted BCA for Ibercaja is Baa2, which is the same level as its unadjusted BCA as it is not affected by group support from the savings banks.

The following securities issued by Ibercaja were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Ba3 from Baa3.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Ibercaja's C- BFSR and corresponding Baa2 BCA.

9) Caja de Ahorros y Monte Piedad de Madrid ("Caja Madrid")

The Adjusted BCA for Caja Madrid is Ba1, which is the same level as its unadjusted BCA as it is not affected by group support from the savings banks.

The following securities issued by Caja Madrid's subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to B2 from Ba2. These instruments were issued by Caja Madrid Finance Preferred, S.A., a subsidiary of Caja Madrid, guaranteed by Caja Madrid.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Caja Madrid's D+ BFSR and corresponding Ba1 BCA.

10) Caja Duero

The Adjusted BCA for Caja Duero is Ba1, which is the same level as its unadjusted BCA as it is not affected by group support from the savings banks.

The following securities issued by Caja Duero and subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to B2 from Ba2. This instrument was issued by Caja Duero Capital SA Unipersonal, a subsidiary of Caja Duero, guaranteed by Caja Duero.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Caja Duero's D+ BFSR and corresponding Ba1 BCA.

11) Caixa Galicia

The Adjusted BCA for Caixa Galicia is Ba1, which is one notch higher than its unadjusted BCA of Ba2, due to group support from the savings banks.

The following securities issued by Caixa Galicia and subsidiaries were affected by this rating action:

• Junior subordinated debt (Upper Tier 2): Downgraded to Ba2 from Baa3.

• Non-cumulative preferred securities: Downgraded to B2 from Ba3. These instruments were issued by Caixa Galicia Preferentes S.A, a subsidiary of Caixa Galicia, guaranteed by Caixa Galicia.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Caixa Galicia's D BFSR and corresponding Ba2 BCA.

12) Banco Pastor, S.A.

The Adjusted BCA for Banco Pastor is Ba2, which is the same level as its unadjusted BCA.

The following securities issued by Banco Pastor and subsidiaries were affected by this rating action:

• Junior subordinated debt (Upper Tier 2): Downgraded to Ba3 from Baa3

• Non-cumulative preferred securities: Downgraded to B3 from Ba3. These instruments were issued by Pastor Participaciones Preferentes SA Unipersonal, a subsidiary of Banco Pastor, guaranteed by Banco Pastor.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Banco Pastor's D BFSR and corresponding Ba2 BCA.

13) Caixa d'Estalvis de Terrassa

The Adjusted BCA for Caixa d'Estalvis de Terrassa is Ba1, which is one notch higher than its unadjusted BCA of Ba2, due to group support from the savings banks.

The following security issued by Caixa d'Estalvis de Terrassa was affected by this rating action:

• Junior subordinated debt (Upper Tier 2): Confirmed at Ba2.

The outlook on the rating of the affected instrument is negative, in line with the negative outlook on Caixa d'Estalvis de Terrassa's D BFSR and corresponding Ba2 BCA.

14) Banco de Valencia, S.A.

The Adjusted BCA for Banco de Valencia is Ba3, which is the same level as its unadjusted BCA.

The following securities issued by Banco de Valencia's subsidiary were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to Caa1 from B1. This instrument was issued by BVA Preferentes S.A., a subsidiary of Banco de Valencia, guaranteed by Banco de Valencia.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Banco de Valencia's D- BFSR and corresponding Ba3 BCA.

15) Caja de Ahorros de Valencia, Castellón y Alicante ("Bancaja")

The Adjusted BCA for Bancaja is Ba2, which is one notch higher than its unadjusted BCA of Ba3, due to group support from the savings banks.

The following securities issued by Bancaja and subsidiaries were affected by this rating action:

• Junior subordinated debt (Upper Tier 2): Downgraded to Ba3 from Baa3. These instruments were issued by Bancaja and Bancaja Emisiones, S.A. Unipersonal, a subsidiary of Bancaja, guaranteed by Bancaja.

• Non-cumulative preferred securities: Downgraded to B3 from B1. This instrument was issued by Bancaja Capital, S.A. Unipersonal, a subsidiary of Bancaja, guaranteed by Bancaja.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Bancaja's D- BFSR and corresponding Ba3 BCA.

16) Caixa Catalunya

The Adjusted BCA for Caixa Catalunya is Ba2, which is one notch higher than its unadjusted BCA of Ba3, due to group support from the savings banks.

The following securities issued by Caixa Catalunya and subsidiaries were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to B3 from B1. These instruments were issued by Caixa Catalunya Preferential Issuance Limited, a subsidiary of Caixa Catalunya, guaranteed by Caixa Catalunya.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Caixa Catalunya's D- BFSR and corresponding Ba3 BCA.

17) Caja de Ahorros de Santander y Cantabria

The Adjusted BCA for Caja de Ahorros de Santander y Cantabria is Ba2, which is one notch higher than its unadjusted BCA of Ba3, due to group support from the savings banks.

The following securities issued by Caja de Ahorros de Santander y Cantabria were affected by this rating action:

• Non-cumulative preferred securities: Downgraded to B3 from B1. These instruments were issued by Caja de Ahorros de Santander y Cantabria and Cantabria Preferentes, S.A., a subsidiary of Caja de Ahorros de Santander y Cantabria, guaranteed by Caja de Ahorros de Santander y Cantabria.

The outlook on the ratings of all the affected instruments is negative, in line with the negative outlook on Caja de Ahorros de Santander y Cantabria's D- BFSR and corresponding Ba3 BCA.

18) Caja de Insular de Ahorros de Canarias

The Adjusted BCA for Caja de Insular de Ahorros de Canarias is Ba2, which is one notch higher than its unadjusted BCA of Ba3, due to group support from the savings banks.

The following security issued by Caja Insular de Ahorros de Canarias was affected by this rating action:

• Junior subordinated debt (Upper Tier 2): Downgraded to Ba3 from Ba1

The outlook on the ratings of the affected instrument is negative, in line with the negative outlook on Caja Insular de Ahorros de Canarias's D- BFSR and corresponding Ba3 BCA.

The principal methodology used in these rating actions was Moody's Guidelines for Rating Hybrid Securities and Subordinated Debt, published in November 2009.

The last rating action on Banco Santander was on 18 November 2009, when the bank's junior subordinated debt rating and preference shares rating were placed on review for possible downgrade.

Banco Santander is headquartered in Madrid, Spain. At 31 December 2009, it had total assets of EUR1,111 billion (unaudited).

The last rating action on BBVA was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

BBVA is headquartered in Bilbao, Spain. At 31 December 2009, it had total assets of EUR535 billion (unaudited).

The last rating action on La Caixa was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

La Caixa is headquartered in Barcelona, Spain. At 31 December 2009, it had total assets of EUR272 billion (unaudited).

The last rating action on Bankinter was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

Bankinter is headquartered in Madrid, Spain. At 31 December 2009, it had total assets of EUR54 billion (unaudited).

The last rating action on Banco Popular was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

Banco Popular is headquartered in Madrid, Spain. At 31 December 2009, it had total assets of EUR129 billion (unaudited).

The last rating action on Banesto was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

Banesto is headquartered in Madrid, Spain. At 31 December 2009, it had total assets of EUR122 billion (unaudited).

The last rating action on Banco Sabadell was on 18 November 2009, when the bank's preference shares rating and mandatory subordinated convertible bonds rating were placed on review for possible downgrade.

Banco Sabadell is headquartered in Sabadell, Spain. At 31 December 2009, it had total assets of EUR82.8 billion (unaudited).

The last rating action on Ibercaja was on 18 November 2009, when the preference shares rating were placed on review for possible downgrade.

Ibercaja is headquartered in Zaragoza, Spain. At 30 September 2009, it had total assets of EUR45.6 billion (unaudited).

The last rating action on Caja Madrid was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

Caja Madrid is headquartered in Madrid, Spain. At 31 December 2009, it had total assets of EUR192 billion (unaudited).

The last rating action on Caja Duero was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

Caja Duero is headquartered in Salamanca, Spain. At 30 September 2009, it had total assets of EUR20.5 billion (unaudited).

The last rating action on Caixa Galicia was on 18 November 2009, when the junior subordinated debt rating and preference shares rating were placed on review for possible downgrade.

Caixa Galicia is headquartered in La Coruna, Spain. At 30 September 2009, it had total assets of EUR45.1 billion (unaudited).

The last rating action on Banco Pastor was on 18 November 2009, when the bank's junior subordinated debt rating and preference shares rating were placed on review for possible downgrade.

Banco Pastor is headquartered in La Coruña, Spain. At 30 September 2009, it had total assets of EUR29.2 billion (unaudited).

The last rating action on Caixa d'Estalvis de Terrassa was on 18 November 2009, when the bank's junior subordinated debt rating was placed on review for possible downgrade.

Caixa d'Estalvis de Terrassa is headquartered in Terrassa (Catalonia), Spain. At 30 September 2009, it had total assets of EUR12.5 billion (unaudited).

The last rating action on Banco de Valencia was on 18 November 2009, when the preference shares rating were placed on review for possible downgrade.

Banco de Valencia is headquartered in Valencia, Spain. At 31 December 2009, it had total assets of EUR22.8 billion (unaudited).

The last rating action on Caja de Ahorros de Valencia, Castellón y Alicante ("Bancaja") was on 18 November 2009, when the junior subordinated debt rating and preference shares rating were placed on review for possible downgrade.

Bancaja is headquartered in Valencia, Spain. At 31 December 2009, it had total assets of EUR111.5 billion (unaudited).

The last rating action on Caixa Catalunya was on 18 November 2009, when the bank's preference shares rating was placed on review for possible downgrade.

Caixa Catalunya is headquartered in Barcelona, Spain. At 30 September 2009, it had total assets of EUR64.4 billion (unaudited).

The last rating action on Caja de Ahorros de Santander y Cantabria was on 18 November 2009, when the preference shares rating were placed on review for possible downgrade.

Caja de Ahorros de Santander y Cantabria is headquartered in Santander, Spain. At 30 September 2009, it had total assets of EUR10.4 billion (unaudited).

The last rating action on Caja Insular de Ahorros de Canarias was on 18 November 2009, when the bank's junior subordinated debt rating was placed on review for possible downgrade.

Caja Insular de Ahorros de Canarias is headquartered in Las Palmas de Gran Canaria (Canary Islands), Spain. At 30 September 2009, it had total assets of EUR9.5 billion (unaudited).

Please visit www.moodys.com to access the following documents for additional information:

Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt -- November 17, 2009

Frequently Asked Questions: Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt -- November 17, 2009

London
Johannes Wassenberg
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Madrid
Maria Cabanyes
Senior Vice President
Financial Institutions Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades hybrid securities ratings in Spain
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Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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