The BBVA Group maintains an express policy on activities in entities permanently registered in offshore financial centers, which includes a plan for reducing the number of offshore financial centers in which the Group is present.
As a result of the measures derived from this plan, 44 permanent establishments have been removed from its start date in 2007 and up to December 31, 2011. In addition, another 2 companies ceased all business activity as a preliminary step to this process. The latter have securities issues among their liabilities, and the time of the repurchase and/or amortization of these assets will depend on the time of the companies’ complete liquidation.
It should be noted that starting in April 2009 the OECD introduced changes in its classification of tax havens. As a result, the Dutch Antilles and Panama were dropped from the OECD list in September 2009 and July 2011, respectively.
- Dutch Antilles
The Kingdom of the Netherlands, on behalf of the Dutch Antilles, signed a tax information Exchange Agreement with Spain on June 10, 2008 which came into force on January 27, 2010. From that date the Dutch Antilles have no longer been considered a tax haven under Spanish law.
- Panama
It is important to highlight that, according to information published by the OECD, since July 2011 Panama is no longer considered a tax haven by this organization, and on October 7, 2010 it also signed an Agreement with Spain for avoiding double taxation regarding income tax and capital tax and preventing tax evasion.
As of December 31, 2011, the BBVA Group’s permanent establishments registered in offshore financial centers considered tax havens by the OECD are as follows:
1. Branches of the BBVA Group’s banks in the Cayman Islands.
2. Issuers of securities in the Cayman Islands: BBVA International, Ltd., BBVA Global Finance, Ltd. and Continental DPR Finance Company.
11.1 Branches of the BBVA Group’s banks in the Cayman Islands
As of December 31, 2011 the BBVA Group had two banking subsidiaries registered in the Cayman Islands engaging in Corporate Banking activities. The activities and business of these branches (which do not include the provision of private banking services) are pursued under the strictest compliance with applicable laws, both in the jurisdictions in which they are domiciled and in those where their operations are effectively managed (United States).
The main figures of the balance sheets of these branches as of December 31, 2011 and 2010 are as follows:
| BBVA Group Branches at Off-Shore Entities | Millions of Euros | |||
|---|---|---|---|---|
| BBVA (Spain) Branch | BBVA Compass Bank (USA) Branch | |||
| 2011 | 2010 | 2011 | 2010 | |
| Total assets | 3,804 | 4,423 | 3,373 | 2,800 |
| Total liabilities | 3,559 | 3,918 | 3,384 | 2,814 |
| Total equity | 245 | 505 | (12) | (14) |
11.2 Issuers of securities
In 2011, BBVA Capital Funding, LTD and BCL International Finance, LTD are wound up. As of December 31, 2011 only three issuers registered in Grand Cayman remain, and the processes for the repurchase and/or amortization of the securities issued will depend on the time of their liquidation.
The accompanying table presents a comparative list of the issues outstanding as of December 31, 2011 and 2010:
| Issuing Entity | Country | Millions of Euros | |||||
|---|---|---|---|---|---|---|---|
| Preferred Securities (1) | Subordinated Debts(1) | Other Debt Securities | |||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||
| BBVA International LTD | Cayman Islands | 9 | 500 | - | - | - | - |
| BBVA Global Finance LTD | Cayman Islands | - | - | 528 | 576 | 29 | 63 |
| Continental DPR Finance Company (2) | Cayman Islands | - | - | - | - | 309 | 337 |
| TOTAL |
|
9 | 500 | 528 | 576 | 338 | 400 |
The significant reduction in the issues of preferred shares by BBVA International LTD corresponds to the exchange for convertible bonds mentioned in Note 23.4 of the consolidated Financial Statements.
11.3 Supervision and control of the permanent establishments of the BBVA Group in offshore financial centers
The BBVA Group applies risk management criteria and policies to all its permanent establishments in offshore financial centers that are identical to those for the rest of the companies making up the Group.
During the reviews carried out annually on each and every one of its permanent establishments in offshore financial centers, BBVA’s Internal Audit department checks the following: that their activities match the definition of their corporate purpose, that they comply with corporate policies and procedures in matters relating to knowledge of the customers and prevention of money laundering, that the information submitted to the parent company is true, and that they comply with tax obligations. In addition, every year a special review is performed of Spanish legislation applicable to the transfer of funds between the Group’s banks in Spain and its companies established in offshore centers.
Furthermore, in 2011 BBVA’s Compliance Department supervised the action plans deriving from the Audit Reports on each one of the establishments. On an annual basis, conclusions deriving from these are submitted for consideration to the Audit and Compliance Committee, which in turn submits the corresponding report to the BBVA Board of Directors.
As far as external audits are concerned, one of the functions of the Audit and Compliance Committee is to select an external auditor for the Consolidated Group and for all the companies in it. The selection criterion is to designate the same auditing firm for all the BBVA Group’s permanent establishments in offshore financial centers, unless the Committee determines this is not possible or advisable. For 2011, all of the BBVA Group’s permanent establishments registered in offshore financial centers have the same external auditor (Deloitte).