Expert Corporate Governance Service (ECGS)
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Bankia, March 22 2019

In item 4, the Board asks the authorization to increase the share capital and in item 5 to issue convertible securities. The aggregate authorization to increase the share capital may not exceed 50% of the existing share capital, with the authority to exclude pre-emptive rights in connection with up to 20% of the issued share capital. The proposals exceed the ECGS guidelines limit of 10% for general capital increases without pre-emptive rights. Although we understand the flexibility required by the Board, we consider that the proposed amount risks to excessively dilute existing shareholders' rights. In our opinion, a lower authorization on general increases would be more adequate, submitting to the shareholders' approval any significant increases that might be required by specific corporate needs. Hence, we recommend opposition.

We also recommend opposing the authorization to decrease the share capital (item 6) and the authorization to repurchase shares (item 7). Despite the reasonable amount of the requested authorizations, ECGS is in this case against repurchase and cancellation of shares (which decreases regulatory capital) because Bankia has issued € 1.25 billion of dilutive CoCos in the last 2 years, and additional CoCos might be issued according to the authority asked in item 5.

In item 9, the Board proposes to approve a new remuneration policy for the 2019-2021 period (binding vote). The overall remuneration amounts are reasonable (€ 500'000 for the executives' base salary and aggregate variable remuneration capped at € 300'000), due to the fact that Bankia received financial support from the State and it is still controlled by the Government. Severance payments are capped at 2 years of fixed remuneration, in line with best practices in Spain. Although the annual bonus represents 62.5% of the aggregate variable remuneration, the overall structure of variable remuneration components is adequate to align the interests of executives and shareholders in the long term: the payment of 50% of the bonus is deferred for 3 years, and 50% is deferred for an additional 2 years, subject to malus conditions. Also taking into account the good quality of disclosure, we recommend approval.

Bankia SA


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