Causas de exoneración.

Financial instruments are classified for the purposes of management and measurement into one of the following categories: “Held-for-trading portfolio”, “Other financial assets and liabilities at fair value through profit and loss”, “Loans and receivables”, “Held-to-maturity investments”, “Available-for-sale financial assets” and “Financial liabilities at amortized cost”. Any other financial assets and liabilities not included in these categories are recognized under one of the following consolidated balance sheet headings: “Cash and balances with central banks”, “Hedging derivatives” and “Investments”.

Held-for-trading portfolio: This heading mainly comprises financial assets or liabilities acquired or issued for the purpose of selling in the short term or which are part of a portfolio of identified financial instruments that the Group manages together and for which there is evidence of a recent pattern of short-term profit- taking. The held-for-trading portfolio also covers short positions arising from sales of assets acquired temporarily under a non-optional reverse repurchase agreement or borrowed securities. Also included are derivative asset and liabilities that do meet the definition of a financial guarantee contract and have not been designated as hedging instruments.

Other financial assets and liabilities at fair value through profit and loss:This category includes financial

instruments designated by the Group upon initial recognition, e.g. hybrid financial assets or liabilities mandatorily measured at fair value and financial assets managed as a group with “Liabilities under insurance contracts” measured at fair value, or with financial derivatives, the purpose of which is to mitigate the exposure to changes in fair value, or managed as a group with financial liabilities and derivatives to mitigate the overall exposure to interest rate risk and, in general, all financial assets when such designation eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatches) that would otherwise arise. Financial instruments in this category must be subject at all times to an integrated and consistent measurement system, risk management and control of risks and returns permitting verification that risk has effectively been mitigated.

Held-to-maturity investments: These are debt instruments traded in an active market with fixed or

determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity.

Loans and receivables:This heading includes financing granted to third parties through ordinary lending and

credit activities carried out by the consolidated entities, receivables from purchasers of goods and services rendered, and for debt instruments not quoted or quoted in markets that are not sufficiently active.

Available-for-sale financial assets:These assets include debt and equity instruments not classified under any

of the preceding categories.

Financial liabilities at amortized cost: This heading includes financial liabilities not classified as financial

liabilities in the held-for-trading portfolio or as other financial liabilities at fair value through profit or loss. The balances recognized in this item, irrespective of the substances of the contractual arrangement and maturity of such liabilities, arise from the ordinary deposit-taking activities of credit institutions.

Financial assets and liabilities are measured in accordance with prevailing IFRSs.

2.3. Derivatives and hedges

The ”la Caixa” Group uses financial derivatives to manage its exposure to financial risks (see Note 3). When these transactions meet certain requirements, they qualify for hedge accounting.

When the Group designates a transaction as a hedge, it does so at inception of the transactions or of the instruments included in the hedge and formally documents the hedging relationship as appropriate in accordance with the regulations in force. The hedge accounting documentation duly identifies the hedging instrument or instruments, and the hedged item or forecast transaction, the nature of the risk being hedged and how the Group will assess the hedging instrument’s effectiveness over its entire life taking into account the risk intended to be hedged.

The Group considers that hedges are those transactions that are highly effective. A hedge is regarded as highly effective if it is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated.

To measure the effectiveness of hedges, the Group analyzes whether from inception of the hedge and in subsequent periods the hedge is expected, prospectively, to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated, and retrospectively, whether the results of the hedge are within a range of 80% to 125% of the results of the hedged item.

Hedging transactions performed by the Group are classified in two categories:

• Fair value hedges, which hedge the exposure to changes in fair value of financial assets and liabilities or unrecognized firm commitments, or an identified portion of such assets, liabilities or firm commitments, that is attributable to a particular risk and could affect profit or loss.

• Cash flow hedges, which hedge exposure to variability in cash flows that is attributable to a particular risk associated with a recognized financial asset or liability or with a highly probable forecast transaction and could affect profit or loss.

The Group also hedges a certain amount of financial assets or liabilities which form part of the portfolio of instruments, but are not identified as specific instruments, for interest-rate risk. These hedges, known as macro- hedges, can be fair value hedges or cash flow hedges (see Note 3.2.2). As indicated in Note 14, virtually all the Group’s hedges at December 31, 2011 and December 31, 2010 are fair value macro-hedges.

Derivatives embedded in other financial instruments or in other contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the instrument or host contract, provided a reliable fair value can be attributed to the embedded derivative taken separately.

2.4. Foreign currency transactions

The ”la Caixa” Group’s functional and presentation currency is the euro. Therefore, all balances and transactions denominated in currencies other than the euro are deemed to be denominated in foreign currency. The functional currency is the currency of the primary economic environment in which the Group operates. The functional currency may be one other than the euro, depending on the country in which the subsidiaries are based.

Foreign currency assets and liabilities, including unmatured foreign currency purchase and sale contracts considered as hedges, are translated to euros using the average exchange rate prevailing on the spot currency market at the end of 2011 and 2010, except for non-monetary items measured at historical cost, which are translated to euros at the exchange rate ruling at the date of acquisition, and non-monetary items measured at fair value, which are translated to euros using the exchange rates ruling at the date on which the fair value was determined.

Unmatured forward foreign exchange purchase and sale transactions not considered as hedges are translated to euros at the year-end exchange rates on the forward currency market.

The exchange rates used by the Group in translating the foreign currency balances to euros were those published by the European Central Bank at December 31, 2011 and 2010.

The exchange differences arising on the translation of foreign currency balances and transactions to the functional currency of the consolidated entities are generally recognized under “Exchange differences (net)” in the consolidated income statement. However, exchange differences arising on changes in the value of non- monetary items are recognized under “Equity – Valuation adjustments – Exchange differences” in the consolidated balance sheet until they are realized, and exchange differences arising on financial instruments classified as at fair value through profit or loss are recognized in the consolidated income statement with no distinction made from other changes in fair value.

In order to combine the individual financial statements of foreign branches whose functional currency is not the euro in the Group’s consolidated financial statements, the Group applies the following policies:

• Translate the financial statements of the foreign branches to the Group’s presentation currency. Translate the financial statements at the exchange rates used by the Group in translating foreign currency balances, expect for income and expenses, which are translated at the closing exchange rate of each month. • Recognize any differences under “Equity – Valuation adjustments – Exchange differences” on the

consolidated balance sheet until the related item is derecognized, with a charge or credit to profit or loss.

2.5. Recognition of income and expenses

The main policies applied by the Group to recognize revenue and expenses are as follows:

Interest income, interest expenses, dividends and similar items

Interest income, interest expenses and similar items are generally recognized on an accrual basis, using the effective interest method, regardless of when the resulting monetary or financial flow arises. Interest accrued on doubtful loans, including loans exposed to country risk, is credited to profit or loss upon collection, which is an exception to the general rule. Dividends received from other companies are recognized as income when the consolidated entities’ right to receive payment is established. This is when the dividend is officially declared by the company’s relevant body.

Fees and commissions

Fee and commission income and expenses are recognized in the consolidated income statement using criteria that vary according to their nature.

Financial fees and commissions, such as loan and credit origination fees, are part of the effective income or cost of the financial transaction and are recognized under the same heading as finance income or costs; i.e. “Interest and similar income” and “Interest expense and similar charges”. These fees and commissions are collected in advance and taken to profit or loss over the life of the transaction, except when they are used to offset directly related costs.

Fees and commission offsetting directly related costs, understood to be those which would not have arisen if the transaction had not been arranged, are recognized under “Other operating income” as the loan is taken out. Individually, these fees and commissions do not exceed 0.4% of the principal of the financial instrument, subject to a maximum limit of €400; any excess is recognized on the income statement over the life of the transaction. If the total sum of financial fees and commissions does not exceed €90, it is recognized immediately in profit or loss. In any event, directly related costs identified individually can be recognized directly on the income statement upon inception of the transaction, provided they do not exceed the fee or commission collected (see Note 32).

Non-financial fees and commissions arising from the provision of services are recognized under “Fee and commission income” and “Fee and commission expense” over the life of the service, except for those relating to services provided in a single act, which are accrued when the single act is carried out.

Non-financial income and expense

Non-financial income and expenses are recognized for accounting purposes on an accrual basis.

Deferred receipts and payments

Deferred receipts and payment are recognized for accounting purposes at the amount resulting from discounting the expected cash flows to net present value at market rates.

2.6. Transfers of financial assets

As provided for in Bank of Spain Circular 4/2004, which adapts Spanish accounting principles to international accounting standards, loans and credits transferred for which the Group retains substantially all the risks and rewards associated with the asset may not be derecognized from the balance sheet, and a financial liability associated with the financial asset transferred is recognized. This is the case of the loans and receivables securitized by ”la Caixa” under the terms of the transfer agreements.

However, in accordance with Transitional Provision One of the Circular, the above accounting treatment is only applicable to transactions carried out on or after January 1, 2004, but not to transactions taking place prior to this date. Accordingly, at December 31, 2011 and 2010, the consolidated balance sheet in the financial statements does not include the assets derecognized pursuant to the repealed accounting legislation, which under current legislation should have been retained on the balance sheet.

Note 28.2 describes the most significant details of the asset securitizations carried out until 2011 year-end, irrespective of whether they led to the derecognition of the related assets from the consolidated balance sheet.

2.7. Impairment of financial assets

A financial asset is considered to be impaired when there is objective evidence of an adverse impact on the future cash flows that were estimated at the transaction date, or when the asset’s carrying amount may not be fully recovered. A decline in fair value below acquisition cost is not necessarily evidence of impairment. As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to the consolidated income statement for the year in which the impairment becomes evident. The reversal, if any, of previously recognized impairment losses is recognized in the consolidated income statement for the year in which the impairment no longer exists or has decreased.

When the recovery of any recognized amount is considered unlikely, the amount is written off, without prejudice to any actions that the consolidated entities may initiate to seek collection until their contractual rights are extinguished definitively by expiry of the statute-of-limitations period, forgiveness or any other cause.

Debt instruments measured at amortized cost

The amount of an impairment loss incurred on a debt instrument carried at amortized cost is generally equal to the difference between its carrying amount and the present value of its estimated future cash flows.

Specifically, as regards impairment losses resulting from materialization of the insolvency risk of the obligors (credit risk), a debt instrument is impaired due to insolvency when there is evidence of a deterioration of the obligor’s ability to pay, because of either the default situation or other reasons, or when country risk materializes, considered to be as the risk associated with debtors resident in a given country due to circumstances other than normal commercial risk.

These assets are assessed for impairment as follows:

• Individually: for all significant debt instruments and for instruments which, although not material individually, are not susceptible to being classified in homogeneous groups of instruments with similar characteristics: instrument type, debtor’s industry and geographical location of activity, type of guarantee or collateral, age of past-due amounts, etc.

• The Group classifies transactions on the basis of the time elapsed since the maturity of the first payment or age of the past-due payment, and sets impairment losses (“identified losses”) for each of these risk groups, which it recognizes in the financial statements.

As of September 30, 2010, when the aforementioned Bank of Spain Circular 3/2012 came into effect, for the purposes of estimating hedging against the impairment of financial assets considered doubtful, the value of the real rights received as security is deducted from the outstanding risk of transactions with mortgage collateral, provided these are first call and duly constituted in favor of CaixaBank. The following percentages are applied to the value of the guarantee by type of assets covered by the real rights: