36. Interest income and expense and similar items

36.1 Interest and similar income

The breakdown of the interest and similar income recognized in the accompanying consolidated income statement is as follows:

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	Millions of euros
Interest and Similar Income. Breakdown by Origin.	2015	2014	2013
Central Banks	140	132	262
Loans and advances to credit institutions	260	235	356
Loans and advances to customers	19,200	17,565	18,092
Government and other government agency	550	693	842
Resident sector	3,360	3,754	4,491
Non resident sector	15,290	13,118	12,758
Debt securities	3,792	3,486	3,465
Held for trading	981	1,134	980
Available-for-sale financial assets	2,810	2,352	2,484
Adjustments of income as a result of hedging transactions	(382)	(321)	(292)
Insurance activity	1,152	1,199	1,137
Other income	621	542	492
Total	24,783	22,838	23,512

The amounts recognized in consolidated equity in connection with hedging derivatives and the amounts derecognized from consolidated equity and taken to the consolidated income statement during both periods are given in the accompanying “Consolidated statements of recognized income and expenses”.

The following table shows the adjustments in income resulting from hedge accounting, broken down by type of hedge:

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	Millions of euros
Adjustments in Income Resulting from Hedge Accounting	2015	2014	2013
Cash flow hedging	47	6	51
Fair value hedging	(429)	(327)	(343)
Total	(382)	(321)	(292)

36.2 Interest and similar expenses

The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:

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	Millions of euros
Interest and Similar Expenses. Breakdown by Origin	2015	2014	2013
Bank of Spain and other central banks	138	62	161
Deposits from credit institutions	1,186	1,012	1,165
Customers deposits	4,340	4,246	4,516
Debt certificates	2,040	2,062	3,067
Subordinated liabilities	508	484	516
Adjustments of expenses as a result of hedging transactions	(859)	(930)	(1,182)
Cost attributable to pension funds (Note 24)	108	172	199
Insurance activity	816	912	855
Other charges	484	436	315
Total	8,761	8,456	9,612

The following table shows the adjustments in expenses resulting from hedge accounting, broken down by type of hedge:

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	Millions of euros
Adjustments in Expenses Resulting from Hedge Accounting	2015	2014	2013
Cash flow hedging	(16)	(18)	1
Fair value hedging	(844)	(912)	(1,183)
Total	(859)	(930)	(1,182)

36.3 Average return on investments and average borrowing cost

The detail of the average return on investments in the years ended December 31, 2015, 2014 and 2013 is as follows:

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	Millions of euros
	2015			2014			2013
Asset	Average Balances	Interest and Similar Income	Average Interest Rates (%)	Average Balances	Interest and Similar Income	Average Interest Rates (%)	Average Balances	Interest and Similar Income	Average Interest Rates (%)
Cash and balances with central banks	32,206	140	0.43	25,049	132	0.53	26,463	262	0.99
Securities portfolio and derivatives	202,335	4,673	2.31	176,497	4,505	2.55	166,013	4,385	2.64
Loans and advances to credit institutions	30,511	273	0.89	24,727	238	0.96	25,998	411	1.58
Loans and advances to customers	382,125	19,471	5.10	328,183	17,803	5.42	335,248	18,325	5.47
Euros	196,987	4,301	2.18	186,965	4,843	2.59	204,124	5,835	2.86
Foreign currency	185,139	15,170	8.19	141,218	12,960	9.18	131,125	12,489	9.52
Other finance income	-	-	-	-	-	-	-	-	-
Other assets	58,381	226	0.39	45,951	159	0.35	45,982	128	0.28
Total	705,559	24,783	3.51	600,407	22,838	3.80	599,705	23,512	3.92

The average borrowing cost in the years ended December 31, 2015, 2014 and 2013 is as follows:

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	Millions of euros
	2015			2014			2013
Liabilities	Average Balances	Interest and Similar Income	Average Interest Rates (%)	Average Balances	Interest and Similar Income	Average Interest Rates (%)	Average Balances	Interest and Similar Income	Average Interest Rates (%)
Deposits from central banks and credit institutions	99,289	1,559	1.57	81,860	1,292	1.58	86,600	1,551	1.79
Customer deposits	365,965	4,390	1.20	307,482	4,555	1.48	290,105	4,366	1.51
Euros	187,677	1,024	0.55	160,930	1,945	1.21	153,634	1,734	1.13
Foreign currency	178,289	3,366	1.89	146,552	2,610	1.78	136,470	2,632	1.93
Debt certificates and subordinated liabilities	89,956	1,875	2.08	80,355	1,611	2.00	94,130	2,812	2.99
Other finance expenses	-	-	-	-	-	-	-	-	-
Other liabilities	96,049	936	0.97	83,620	998	1.19	82,257	883	1.07
Equity	54,300	-	-	47,091	-	-	46,614	-	-
Total	705,559	8,761	1.24	600,407	8,456	1.41	599,705	9,612	1.60

The change in the balance under the headings “Interest and similar income” and “Interest and similar expenses” in the accompanying consolidated income statements is the result of exchange rate effect, changing prices (price effect) and changing volume of activity (volume effect), as can be seen below:

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	Millions of euros
	2015 / 2014			2014 / 2013
Interest Income and Expense and Similar Items. Change in the Balance	Volume Effect (1)	Price Effect (2)	Total Effect	Volume Effect (1)	Price Effect (2)	Total Effect
Cash and balances with central banks	38	(30)	8	(14)	(116)	(130)
Securities portfolio and derivatives	660	(492)	168	277	(157)	120
Loans and advances to credit institutions	56	(21)	35	(20)	(153)	(173)
Loans and advances to customers	2,926	(1,258)	1,668	(386)	(135)	(521)
In Euros	260	(801)	(542)	(491)	(502)	(992)
In other currencies	4,031	(1,821)	2,210	961	(490)	471
Other assets	43	24	67	-	31	31
Interest and similar incomes			1,945			(674)
Deposits from central banks and credit institutions	275	(8)	267	(85)	(174)	(259)
Customer deposits	866	(1,031)	(165)	262	(73)	189
In Euros	323	(1,245)	(922)	82	129	211
In other currencies	565	192	757	205	(315)	(111)
Debt certificates and subordinated liabilities	192	71	264	(411)	(789)	(1,201)
Other liabilities	148	(210)	(62)	15	100	115
Interest and similar expenses			305			1,156
Net Interest Income			1,641			482

(1) The volume effect is calculated as the result of the interest rate of the initial period multiplied by the difference between the average balances of both periods. (2) The price effect is calculated as the result of the average balance of the last period multiplied by the difference between the interest rates of both periods.