BENEFICIOS DE LA PROPUESTA

AND OTHER INFORMATION

a) Introduction

Banco Santander, 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 on the website of the Bank

(www.santander.com) and at its registered office at Paseo de Pereda 9-12, Santander.

In addition to the operations carried on directly by it, the Bank is the head of a group of subsidiaries that engage in various business activities and which compose, together with it, the Santander Group (“the Group” or “the Santander Group”). Therefore, the Bank is obliged to prepare, in addition to its own individual financial statements, the Group's consolidated financial statements, which also include the interests in joint ventures and investments in associates.

The Group's consolidated financial statements for 2005 were approved by the shareholders at the Bank's Annual General Meeting on 17 June 2006. The Group's consolidated financial statements for 2006 were approved by the shareholders at the Bank's Annual General Meeting on 23 June 2007. The 2007 consolidated financial statements of the Group and the 2006 financial statements of the Bank and of substantially all the Group companies have not yet been approved by their shareholders at the respective Annual General Meetings. However, the Bank's Board of Directors considers that the aforementioned financial statements will be approved without any changes.

b) Basis of presentation of the consolidated financial statements

Under Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of 19 July 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 1 January 2005 in conformity with the International Financial Reporting Standards (“IFRSs”) previously adopted by the European Union.

In order to adapt the accounting system of Spanish credit institutions to the new standards, the Bank of Spain issued Circular 4/2004, of 22 December, on Public and Confidential Financial Reporting Rules and Formats.

The Group’s consolidated financial statements for 2007 were prepared by the Bank’s directors (at the Board Meeting on 24 March 2008) in accordance with International Financial Reporting Standards as adopted by the European Union and with Bank of Spain Circular 4/2004, using the basis of consolidation, accounting policies and measurement bases set forth in Note 2 and,

accordingly, they present fairly the Group’s equity and financial position at 31 December 2007, and the consolidated results of its operations, the changes in consolidated recognised income and expense and the consolidated cash flows in 2007. These consolidated financial statements were prepared from the individual accounting records of the Bank and of each of the companies composing the Group, and include the adjustments and reclassifications required to unify the accounting policies and measurement bases applied by the Group.

The notes to the consolidated financial statements contain supplementary information to that presented in the consolidated balance sheet, consolidated income statement, consolidated statement of recognised income and expense and consolidated cash flow statement, and provide, in a clear, relevant, reliable and comparable manner, narrative descriptions and breakdowns of these financial statements.

All accounting policies and measurement bases with a material effect on the consolidated financial statements were applied in their preparation.

i. Adoption of new standards and interpretations

Standards and interpretations in force in 2007

In 2007 the Group adopted IFRS 7 Financial Instruments: Disclosure, which entered into force on 1 January 2007 for years beginning on or after that date, and the amendments to IAS 1 Presentation of Financial Statements in relation to capital disclosures.

Additionally, four IFRIC Interpretations became effective for the first time this year: IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies; IFRIC 8 Scope of IFRS 2; IFRIC 9 Reassessment of Embedded Derivatives; and IFRIC 10 Interim Financial Reporting and

Impairment. The adoption of these interpretations did not have an impact on the consolidated financial statements.

Standards and interpretations issued but not in force

At the date of preparation of these consolidated financial statements, the following standards and interpretations had been published by the IASB but had not yet entered into force, either because their effective date is subsequent to the date of the consolidated financial statements or because they had not yet been adopted by the European Union. The entry into force of these standards and interpretations will not have a material effect on the consolidated financial statements.

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Translation of consolidated financial statements originally issued in Spanish and prepared in accordance with IFRSs as adopted by the European Union (Notes 1-b and 57). In the event of a discrepancy, the Spanish-language version prevails.

IFRS 8 Operating Segments

This standard replaces IAS 14. It requires an entity to disclose information on the financial performance of its business segments on the basis of the information used internally by management to assess the profit or loss of these segments.

Revision of IAS 23 Borrowing Costs

The option of the immediate recognition as an expense of the borrowing costs relating to assets that take a substantial period of time to get ready for use or sale is eliminated.

Review of IAS 1 Presentation of Financial Statements

This review affects mainly the presentation and disclosure requirements.

Revision of IFRS 3 Business Combinations and Amendment to IAS 27 Consolidated and Separate Financial Statements

The revised IFRS 3 and the amendments to IAS 27 give rise to significant changes in several matters relating to the accounting for business combinations, which generally place more emphasis on the use of fair value. Since the changes are significant, set forth below are certain of these changes, merely for illustration

purposes: acquisition costs, which will be expensed rather than be considered as an increase in the cost of the business combination as per the current accounting treatment; step acquisitions, in which the acquirer revalues the investment at fair value on the date on which control is obtained; or the option to measure at fair value the minority interests of the acquiree rather than measure them as the proportional part of the fair value of the net assets acquired as per the current accounting treatment. Since the standard will be applied prospectively, the business combinations already effected will not have any impact.

Amendment to IFRS 2 Share-based Payment

The objective of the amendment is to clarify the concepts of vesting conditions and cancellations in share-based payments.

IFRIC 11 IFRS 2 Group and Treasure Share Transactions

Treasury or group share-based payment transactions will be accounted for as equity-settled, regardless of how the equity instruments needed are obtained.

IFRIC 12 Service Concession Arrangements and IFRIC 13 Customer Loyalty Programmes

Given the nature of these interpretations, their entry into force will not have any impact on the consolidated financial statements.

IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

IFRIC 14 provides general guidance on how to assess the limit in IAS 19 Employee Benefits on the amount of the surplus that can be recognised as an asset. It also explains how pension assets or liabilities can be affected when there is a statutory or contractual minimum funding requirement and establishes that the entity needs to recognise an additional liability if it has a contractual obligation to make additional contributions to the plan and its capacity to recover them is restricted. The interpretation will standardise the practice and ensure that the entities recognise an asset in relation to a surplus on a consistent basis.

c) Use of estimates

The consolidated results and the determination of consolidated equity are sensitive to the accounting policies, measurement bases and estimates used by the directors of the Bank in preparing the consolidated financial statements. The main accounting policies and measurement bases are set forth in Note 2.

In the consolidated financial statements estimates were occasionally made by the senior executives of the Bank and of the consolidated entities in order to quantify certain of the assets, liabilities, income, expenses and commitments reported herein. These estimates, which were made on the basis of the best information available, relate basically to the following:

173 Obligatory Application

in the Years

Standards Beginning on or after:

IFRS 8 Operating Segments 1 January 2009

Revision of IAS 23 (*) Borrowing Costs 1 January 2009 Revision of IAS 1 (*) Presentation of Financial Statements 1 January 2009 Revision of IFRS 3 (*) Business Combinations 1 July 2009 Amendment to IAS 27 (*) Consolidated and Separate Financial Statements 1 July 2009 Amendment to IFRS 2 (*) Share-based Payments 1 January 2009 IFRIC 11 IFRS 2-Group and Treasure Share Transactions 1 March 2007 IFRIC 12 (*) Service Concession Arrangements 1 January 2008 IFRIC 13 (*) Customer Loyalty Programmes 1 July 2009 IFRIC 14 (*) IAS 19 - Defined Benefit Asset 1 January 2008 (*) Standards and interpretations not adopted by the European Union at the date of preparation of these consolidated financial statements.

- The impairment losses on certain assets (Notes 6, 7, 8, 10, 12, 13, 16 and 17);

- The assumptions used in the actuarial calculation of the post- employment benefit liabilities and commitments and other obligations (Note 25);

- The useful life of the tangible and intangible assets (Notes 16 and 17);

- The measurement of goodwill arising on consolidation (Note 17); and

- The fair value of certain unquoted assets (Notes 8, 9 and 11).

d) Other matters

i. Disputed corporate resolutions

The directors of the Bank and their legal advisers consider that the objection to certain resolutions adopted by the Bank's shareholders at the General Meetings on 18 January 2000, 4 March 2000, 10 March 2001, 9 February 2002, 24 June 2002, 21 June 2003, 19 June 2004 and 18 June 2005 will have no effect on the financial statements of the Bank and the Group.

On 25 April 2002, the Santander Court of First Instance number 1 dismissed in full the claim contesting the resolutions adopted by the shareholders at the General Meeting on 18 January 2000. The plaintiff filed an appeal against the judgment. On 2 December 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 29 November 2002, the Santander Court of First Instance number 2 dismissed in full the claims contesting the resolutions adopted at the General Meeting on 4 March 2000. The plaintiffs filed an appeal against the judgment. On 5 July 2004, the Cantabria Provincial Appellate Court dismissed the appeal. One of the appellants prepared and filed an extraordinary appeal on grounds of procedural infringements and a cassation appeal against the judgment, which were not given leave to proceed by order of the Supreme Court of 31 July 2007.

On 12 March 2002, the Santander Court of First Instance number 4 dismissed in full the claims contesting the resolutions adopted at the General Meeting on 10 March 2001. The plaintiffs filed an appeal against the judgment. On 13 April 2004, the Cantabria Provincial Appellate Court dismissed the appeals. One of the appellants prepared and filed an extraordinary appeal on grounds of procedural infringements and a cassation appeal against the judgment, which were not given leave to proceed by order of the Supreme Court of 6 November 2007.

On 9 September 2002, the Santander Court of First Instance number 5 dismissed in full the claim contesting the resolutions adopted at the General Meeting on 9 February 2002. The plaintiff filed an appeal against the judgment. On 14 January 2004, the Cantabria Provincial Appellate Court dismissed the appeal. The appellant prepared and filed an extraordinary appeal on grounds of procedural infringements and a cassation appeal against the

judgment, which were not given leave to proceed by order of the Supreme Court of 8 May 2007.

On 29 May 2003, the Santander Court of First Instance number 6 dismissed in full the claim contesting the resolutions adopted at the General Meeting on 24 June 2002. The plaintiffs filed an appeal against the judgment. On 15 November 2005, the Cantabria Provincial Appellate Court dismissed the appeal in full. The appellants have prepared and filed an extraordinary appeal on grounds of procedural infringements and a cassation appeal against the judgment.

On 23 November 2007, the Santander Court of First Instance number 7 dismissed in full the claims contesting the resolutions adopted at the General Meeting on 21 June 2003. An appeal has been filed against the judgment. The Court has been notified of the recent death of one of the appellants and the appeals are currently being held in abeyance until his heirs have been identified.

On 28 October 2005, the Santander Court of First Instance number 8 dismissed in full the claims contesting the resolutions adopted at the General Meeting on 19 June 2004. The plaintiffs filed an appeal against the judgment, but the appeal was dismissed in full by the Cantabria Provincial Appellate Court. Against this judgment the plaintiffs have prepared and filed a cassation appeal and an extraordinary appeal on the grounds of procedural infringements. The cassation and extraordinary appeals for procedural infringement filed by one of the appellants were not given leave to proceed due to the death of the appellant and then non-appearance of his heirs. However, this decision has been appealed against by the legal representative of the late appellant.

On 13 July 2007, the Santander Court of First Instance number 10 dismissed in full the claims contesting the resolutions adopted at the General Meeting on 18 June 2005. An appeal has been filed against the judgment.

ii. Credit assignment transactions

Following the investigations carried out since 1992 by the Madrid Central Examining Court number 3, and despite the fact that 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 executives dismissed and struck out, a decision was rendered on 27 June 2002 to turn the preliminary court proceedings into an

“abbreviated” proceeding. The Public Prosecutor’s Office, the Bank and its executives have appealed against this decision.

On 23 June 2003, Panel Two of the Criminal Chamber of the National Appellate Court partially upheld these appeals, and explicitly recognised 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 had also requested dismissal and strike-out of the case on grounds that no offence had been committed) with respect to which the Bank’s possible involvement continued to be 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 Defence of Investors and Customers, on 6 October 2004 the Court ordered commencement of a trial against the Chairman of the Bank and three executives.

Once the trial had commenced at Panel One of the Criminal Chamber of the National Appellate Court and after the debate on preliminary issues was held at the end of November 2006, without the appearance of the Government Lawyer, in which the Public Prosecutor's Office reiterated its appeal to set aside the trial and interrupt the proceedings, on 20 December 2006, the Criminal Chamber of the National Appellate Court ordered the dismissal of the proceedings, as requested by the Public Prosecutor’s Office and the private prosecution.

A cassation appeal was filed against the aforementioned order by the Association for the Defence of Investors and Customers and “Iniciativa per Catalunya Verds” and, following the opposition by the Public Prosecutor's Office, the Government Lawyer and the remaining appearing parties, it was dismissed by a Supreme Court Decision handed down on 17 December 2007.

A decision has not yet been handed down by the Supreme Court on the ancillary suit for nullity of proceedings filed by the Association for the Defence of Investors and Customers.

e) Information relating to 2006 and 2005

The information relating to 2006 and 2005 contained in these notes to the consolidated financial statements is presented with the information relating to 2007 for comparison purposes only and, accordingly, it does not constitute the Group's statutory consolidated financial statements for 2006 and 2005.

f) Capital management

The Group’s capital management is performed at regulatory and economic levels.

Regulatory capital management is based on the analysis of the capital base and the capital ratios (core capital, TIER 1, etc.) using Basel (“BIS”) and Bank of Spain criteria. The aim is to achieve a capital structure that is as efficient as possible in terms of both cost and compliance with the requirements of regulators, ratings agencies and investors. Active capital management includes securitisations, sales of assets, and preference and subordinated issues of equity securities and hybrid instruments.

From an economic standpoint, capital management seeks to optimise value creation at the Group and at its different business units. To this end, the economic capital, RORAC and value creation data for each business unit are generated, analysed and reported to the Management Committee on a quarterly basis.

In order to adequately manage the Group’s capital, it is essential to estimate and analyse future needs, in anticipation of the various phases of the business cycle. Projections of regulatory and economic capital are made based on reference to the

budgetary information (balance sheet, income statement, etc.) and

on macroeconomic scenarios defined by the Economic Research Service. These estimates are used by the Group as a reference to plan the management actions (issues, securitisations, etc.) required to achieve its capital targets.

In addition, certain stress scenarios are simulated in order to assess the availability of capital in adverse situations. These scenarios are based on sharp fluctuations in macroeconomic variables, GDP, interest rates, stock market indexes, etc. that mirror historical crises that could happen again.

It should be noted that the regulations governing compliance with minimum capital requirements for credit institutions, both as individual entities and as consolidated groups, came into force through the publication of Law 13/1992, of 1 June, and of Bank of Spain Circular 5/1993 and subsequent amendments thereto.

At 31 December 2007, the Group’s eligible capital exceeded the minimum requirements by EUR 14,517 million (31 December 2006: EUR 11,172 million; 31 December 2005: EUR 10,384 million).

Royal Decree 216/2008, of 15 February, on the capital of financial institutions was published on 16 February 2008. Also, a series of amendments were introduced to Law 13/1985, of 25 May, on investment ratios, capital and reporting requirements of financial intermediaries. The main purpose of these new

regulations is to transpose into Spanish law Directive 2006/48/EC and Directive 2006/49/EC which, in turn, transpose into

Community law the New Basel Capital Accord (“Basel II”- BIS II). Accordingly, in 2008 the Bank and its Group must calculate their capital requirements in accordance with the aforementioned regulations, which change the way entities must calculate their minimum capital, including new risks that require the use of capital, such as operational risk, and introduce new calculation methodologies and models to be applied by the entities, and new requirements in terms of validation mechanisms and public information to be disclosed to the market.

The new regulations permit the use of internal parameters for the calculation of minimum capital requirements, which will become effective from 30 June 2008.