1. payment methods

Banking Services Cecabank stands out from the competition thanks to its high level of profes-sionalism and specialist knowledge in the fields of regulatory consultancy and advice, financial reporting, and training, stemming from over 80 years of service to the financial community.

1. Payment Methods Card fraud detection and prevention services.Comprehensive payment method support, with access to multiple networks and support across all stages of the value chain:

Connectivity, exchange and preferential negotiation with multiple

business intelligence networks in payment methods

Management solutions for purchasing, issuing, and e-commerce

Fraud prevention and response

Mobility solutions

Loyalty schemes

Technological consultancy

Activity during the year2016 was characterised by the exploration of opportunities to collaborate with other world regions, specifically in Europe and Latin America, with the aim of increasing product and customer diversification and innovation, supported by our active membership to the Latin American Payment Methods Networks (ATEFI) since July 2015.

As in previous years, we continue to achieve excellent results in the fight against fraud. Once again, the entities in the EURO 6000 system are the Spa-nish leaders in the detection and prevention of fraud in transactions conducted with cards. This is thanks to the efficiency of the bank’s teams supported by the Espía system, operated by Cecabank.

VISA and MasterCard recognised Cecabank’s full compliance with the se-curity requirements established in the PCI DSS standard. This compliance was verified in accordance with the PCI Security Standards Council by an external auditor certified by the organisation to conduct the corresponding auditing procedures.

The major efforts made to rationalise computing activity resources and costs in previous years have produced a significant improvement in efficiency, which enabled us to reduce our customers’ fees over the course of 2016, and those reduced prices have now become a constant target for the future.

We also worked on new models of support services for companies in the develo-pment of their business, and on designing a new multipurpose payment model based on mobile devices for P2P.

We provide business process support services as well as specialist IT services for payments, channels, and business intelligence.

TRANSACTIONS PROCESSED:

620 million

DAILY TOTAL AVERAGE AMOUNT SETTLED:

120 million euros

NETWORK PROCESSOR FOR

Euro 6000 TOTAL NUMBER OF CARDS PROCESSED PER YEAR:

More than 10 million cards

WE ARE A MEMBER OF THE

Latin American Payment Methods Networks

Cecabank 2016 Annual Report Page 69

05 OUR BUSINESS MODEL5.1. Economic and regulatory context | Economic framework and state of the markets |

Agenda | Overview 2013-20165.2. Lines of Business | Securities Services | Treasury Management | Banking Services

2. Business intelligence and new channelsWe have developed our own payment platform, under the brand name EALIA, with a focus on facilitating P2P payments via mobile phones.We provide remote channel services to financial institutions, collective invest-ment managers and insurance companies (platforms and services such as pro-perty portals, branch websites, online banking, and mobile, among others).

We also offer business intelligence services by processing operational data to produce balanced scorecards and reports relating to different business areas.

In this vein, with the market moving towards mobile payments we have de-veloped the technical infrastructure and our own HCE mobile payments so-lution, as well as a module for the Masterpass service, with two different offe-rings available to companies:

integrated in a multipurpose payment app developed by Cecabank, and fully customisable for each entity

to do independently, such as embeddable modules or components for the company’s own app

We have also been able to continue exporting our technological consultancy services in EMV, contactless, and HCE to the Latin American market.

Our commitment is to keep researching the market and developing solutions that bring value to our customer companies and help each one of them to grow.

ONLINE BANKINGIN 2016 WE PROCESSED

888,162,585 significant transactions

from 2,086,521 monthly users

AVAILABILITY

99.83%measured according to actual traffic at any time

MOBILE TERMINALS

252,530,697Operations carried out

+44%compared with the previous year

SECURITIES TRADES

112,307operations processed via Banca Internet, Banca Telefónica, Banca Móvil and our own Terminal de Oficina

IMMIGRANT REMITTANCES

9,617sent, following the downward trend of recent years

VIRTUAL POS TERMINALS

10,817,927Operations carried out

ELECTRONIC INVOICES

4,783,073processed

PANEUROPEAN DEBITS

5,085,693.31euros processed

Cecabank 2016 Annual ReportPage 70



Activity during the yearIn the field of online banking, over the year the mobile banking service Caja Almendralejo was added and an overhaul of EBN Banco online banking was initiated. Companies such as Triodos Bank and Banco Ceissas have been added to the service to generate remittance notebooks which has become an industry standard. To comply with PSD2 regulations, expected to come into force in 2018, an api-fication platform has been developed, available to companies, which will allow connection with the back-end of any company, obtaining information from the same or allowing payments to be carried out on behalf of third parties when the customer gives their authorisation.

Cecabank continued to develop its EALIA digital payments platform in 2016. There are currently 15 companies signed up to the service. The most signifi-cant milestones of the year have been the following:

Integration of the person to person payment service on the inter-bank Bizum platform for immediate payments, with entities processed by Ce-cabank accounting for 40% of the volume.

The development of new payment schemes available to companies to en-courage customers to use a multipurpose payment app. Some of these new payment schemes are: paying by HCE card, paying by Masterpass wallet, paying with a virtual card online, transferring money to ATMs, and others being developed for the future. All of these advances have the latest securi-ty measures in place, such as digital fingerprints to access apps and autho-rise payments. In this way EALIA offers banks a full catalogue of services they can customise and integrate with different service models.

3. Discounting, Clearing and Payment SystemsThe certifications we have been awarded are testament to our culture of continuous improvement and service excellence.Services provided to credit institutions and corporate clients for the integra-ted management of bank collections and payments, discount operations, payment confirmations, and technical coverage of connectivity to SWIFT.

The strengths of our service:

Personalised Customer Service

We are flexible and adapt to our customers’ needs

Confidentiality

Activity during the yearIn 2016 we adapted to the new versions of SEPA payment “Rulebooks”, in transfers and direct debits, with both customers and represented companies. Considerable adjustments were also made in relation to the new information service for offices, squares, and national holidays, known as SIO+ under the SNCE framework.

CROSS-BORDER EXCHANGE OF CHEQUES / CURRENCY EXCHANGE

123,960 Cheques processed

SWIFT MESSAGES EXCHANGED

1,336,977Transactions processedwith Cecabank BIC

1,070,589Transactions processedwith other BICs




NON-SEPA FUND TRANSFERS (TARGET / EBA)

189,810 Transactions processed

1,833,133Nominal value (in million of euros)

SEPA TRANSACTIONS EXCHANGE (EBA AND SNCE)

630,505,046Transactions processed

395,097Nominal value (in million of euros)

TRADITIONAL TRANSACTIONS EXCHANGEIN THE SNCE FIELD

20,033,773OPERATIONS MANAGED


ACCOUNTS PAYABLE AND RECEIVABLE PORTFOLIO

3,533,922Notes entering


228,391Notes deposited

696 Nominal value (in million of euros)

Efforts have continued in facilitating operations of collective investment and pension fund managers in the depositary field in terms of the management of current accounts, the management of payments and collections, and ca-rrying out exchange and settlements of transfers, as well as for new securi-ties companies which have started providing services following the securities market reform.

Part of Cecabank’s activity as a provider of central operational services that particularly stands out, is its joint management of the Social Security Tre-asury Department accounts to give services to customers. Likewise, it con-tinued to provide services for the Temporary Business Union (UTE), started by different Spanish financial institutions and Cecabank itself to manage the treasury of Loterías y Apuestas del Estado (LAE), with thousands of LAE ac-counts open, where Cecabank is the only manager.

Cecabank worked very hard to maintain the AENOR UNE EN ISO 9001 qua-lity certification for exchange, clearing and settlement of collection and pay-ment transaction services (transfers, direct debits, fund transfers and advance credit payments), and to obtain UNE-ISO/IEC 27001 certification for the in-formation security management system for SEPA operations. These certifica-tions form part of the culture of continual improvement and quality of service which Cecabank believes in and which is reflected in its Strategic Plan.

In 2016 a new company was added as a customer in the representation service in the SNCE. Six new companies have been included in services for channelling international SWIFT payments.

Also of note in 2016 was the addition of 9 companies in Swift connectivity to the “Target 2 Securities platform” service through Cecabank.

In the field of payment and collection services to different types of companies, a new customised solution has been developed to manage confirmations of current account holders and SEPA transfers for the Deposit Guarantee Fund. This solution makes it possible to streamline transfers in favour of current accounts and verify the holders of the same prior to making a payment. The fact that Cecabank was granted the UNE ISO 9001 Quality Management certificate and ISO 27001 confirms the company’s outstanding position in providing payment and collection services to credit entities and corporates, based on a model geared towards constant innovation, maximum efficiency, and generating added value.

OUTSTANDING GUARANTEES GRANTED

16Transactions processed

15.30 Nominal value (in million of euros)


5.1. Economic and regulatory context | Economic framework and state of the markets | Agenda | Overview 2013-2016

5.2. Lines of Business | Securities Services | Treasury Management | Banking Services

05 NUESTRO MODELO DE NEGOCIO

4. Financial ReportingPyramid is Cecabank’s response to increased pressure from regulators requesting new financial information.Pyramid gives our clients full and comprehensive coverage of the reporting cycle; it includes all aspects, from regulatory analysis stemming from the pu-blication of a reporting requirement through to the physical sending of files, once all the information requested has been collated and approved.

CONSULTANCY SERVICE

Regular publications (regulatory outlook, monthly editions, and specials)

Database of financial and interbank regulations

2016 CONSULTANCY SERVICE

Corporate Governance Project FINREP Project to adapt to the CRS model (Common Reporting Standard)

Intermediation when presenting

information

Analysis: regulatory, standards

and functional

Technological platform

Lobby

5. Regulatory ConsultancyIn recent years Cecabank has positioned itself as a leading light in financial regulation consultancy and advisory services.Our skill in anticipating new regulations, our team’s high level of expertise, the support of our own tools such as our financial regulations website, com-bined with Cecabank’s specialist experience and knowledge are just some of the factors that define our service.

The main lines of the Consulting and Advisory Service are:

Access to the financial regulations website (for subscribed users) which includes daily updated versions of all the regulations applicable to credit institutions and regulation projects (Spanish, European Union, and in-ternational) as well as interbank regulation (interbank procedures and standards, etc.).

Daily news service by email of alerts and notices with new national and international regulations, classified into published regulations and non-regulatory projects.

Monthly publication of reports summarising the effects of the main standards and projects published.

Publication of reports describing regulations of special importance and their impact on companies. This reports are written when the regulation is published and are issued before the publication of the monthly outlook.

Some of the most noteworthy projects developed in 2016 were:

Corporate governance project. Identifying and bringing together all the corporate governance and remunerations regulatory demands and best practices.

FINREP Project. Project to support companies in interpreting new FIN-REP financial statements and identifying changes and updates of the new Annex IX.

Project for adapting to MIFID 2/MIFIR, PRIIPS regulation. A project spanning several years to identify the impacts and measures banks need to take to fulfil the new requirements related to investor protection, trans-parency, and communication of operations, stemming from the MIFID and PRIIPS regulations for related retail investment products and insur-ance based investment products.




6. International BusinessOur presence in the main European financial markets.

Overseas officesOur two representation offices in Paris and Frankfurt cover the heart of the European financial system allowing us to establish regular contact with Eu-ropean official bodies to support CECA’s international lobbying activities.

Both branches have over 50 years of experience in managing global rela-tionships with pension-paying banks and developing remittance processes to Spain. Strong local expertise built up over the course of the years means we can advance in our search for new opportunities to promote our services and make them more efficient.

In 2016 the two offices were established as commercial antenna for other services Cecabank could develop, at the same time as stepping up marke-ting activities with international financial companies to raise the profile of our bank and promote the services we offer, highlighting the indisputable advantages we bring as a international financial partner.

Our overseas network has a support team in Madrid which deals with the operational handling of payment methods in foreign trade and international guarantees, pension agreements, and immigrant remittances, as well as a Customer Service specialising in resolving problems and providing advice for pensioners, beneficiary entities in Spain, senders’ correspondent banks, and payer entities.

SubsidiariesThe Hong Kong subsidiary centralises all the foreign trade operations in Asia for bank customers for whom it provides the service and ensures and gua-rantees this type of transaction, as a result of its long experience, and offers economic advantages which are on a par with local banks. The network has a support team in Madrid that deals with the operational handling of pensions agreements and immigrants remittances, as well as a specialist call centre to resolve problems and to provide an advice service for pensioners, beneficiary institutions in Spain, senders’ correspondent banks, and payer entities.

International BusinessCecabank has an up-to-date and extensive worldwide network of correspon-dents, essential for carrying out all the transactions and payments which enable it to offer the services we offer at Cecabank, and the coverage it needs to give it great international projection, as shown by the over 6 million pay-ments and collections executed in 2016.

The solid alliances and collaboration agreements we hold with a large num-ber of international financial entities enable us to create new synergies lea-ding to an expansion of services and innovation in new products.




TRAINING IN 2016

ONLINE

+15,000Students

2,400Hours of training

IN-COMPANY

+600Hours of training given,distributed among diffe-rent training actions

2016/2017 EditionExpert Programme onInsurance Group A

FACE-TO-FACE

6events

+330 Participants

7. Banking Training schoolThe mission of the Bank Training School (BTS) is to train professionals from the financial sector capable of adapting their entities to the new economic and financial environment.

Training in regulation and

legislation Financial training

Training management (skills, leadership, languages.)

The School organises courses aimed at perfecting and developing organisa-tions’ management teams. It places value on the knowledge and talent of professionals in the sector, seeking excellence and bringing them up to Euro-pean standards.

News

Professional certification for Financial Advisers adapted to changes and updates introduced in MiFID II

Training programmes incorporating the latest technology

Agreements with prestigious Spanish universities to promote training programme quality

Training programmes in Cybersecurity and Digitalisation for the banking sector.

Collaboration agreementsContinue with the collaboration agreements signed in previous years at an international level with the aim of expanding the School’s activities: the co-llaboration agreements with the Chambers of Commerce in Frankfurt being of particular note.

From the School we also continue to collaborate with the Directorate General for the Spanish Police Force to develop financial investigation and economic delinquency programmes.

Our collaboration agreement with Madrid’s Universidad Carlos III for the cer-tification of professionals from the financial sector has been expanded.

Quality trainingIn 2016, the BTS organised 6 events, with more than 330 participants more interested in the quality of these events than in the number of them. Throughout the year over 15,000 students were trained, with a total of 2,400 hours of training in the 3 fields of knowledge: regulatory, financial, and management.

As in previous years, the agreements to pass on contents to train company’s employees through its own platform continued. Notable among the pro-grammes developed in 2016 was the 5th edition of the Expert Programme on Internal Auditing for credit institutions.

Cecabank 2016 Annual Report 5



Training for Consultants and Senior ExecutivesIn 2016 the BTS ran several general and specialist training programmes ai-med at these groups at national and international financial institutions.

Sector certificationsA novelty in this type of programme was the Programme for Financial Advi-sors MiFID II developed by Cecabank professionals in collaboration with pro-fessors from Madrid’s Universidad Carlos III.

Another highlight was the Insurance Certifications aiming to position the School as a benchmark in training for the insurance sector.

8. Currency Exchange Office Cecabank’s Exchange Office buys and sells foreign banknotes to the public. It has some 40 currencies immediately available in all kinds of denominations and amounts, offers top quality banknotes at competitive prices, and has long opening hours.

CURRENCIES

40availableimmediately




How has the digital world of payments Cecabank offers to its custo-mers evolved?In terms of digital payments 2016 has been a very active year, with almost the whole of the financial system launching mobile applications to promote payments between people for their customers. At Cecabank we have helped some fifteen companies implement the application for their customers and facilitate the interbank processing the transactions require.

What is Ealia and what added value does it bring to the platforms already out there?In 2015 under the Ealia framework we developed a platform of services fa-cilitating both person to person payments and business payments. For pay-ments between people the solution is really simple. Using a mobile applica-tion, customers can select a person from their contacts and make a payment to them without having to know any of their financial details. The system is a way of bypassing that problem.

There are other functionalities too, such as the ability to make multiple pay-ments or collections - something we would call a collection, for example for birthdays, lottery, dinners with friends - and you can also add photos and messages to the payment.

We continue to work in traditional payment systems too, with regular IBAN payments, or beneficiaries being able to withdraw payments throughout the ATM network.

Will new features be added to Ealia in 2017?We are living a period of digital transformation. This transformation is under-pinned by three key factors:

The first factor: developing systems and processes that are becoming increa-singly quick, secure, and pretty much instantaneous.

The second factor is use. We need to ensure the customer experience is beco-ming easier, simpler, quicker, and more intuitive.

The third factor is our relationship with our customers. The way banks are communicating with their customers has to change because our environ-ment is dictating that we need to. We need to have closer relationships, more tailored to customers’ needs and to do that we need services or solutions related to the world of big data - this will provide a lot of information to banks so they can get closer to customers and approach them.

All in all there is a lot to do, a lot to innovate, and develop, and at Cecabank we will certainly be ready to support all companies in this exciting process of digital transformation.

InterviewBusiness intelligence and new channels

“We are living in a period ofdigital transformation.”

Mercedes LeónBusiness intelligence and new channels




What does Cecabank’s overseas network consist of and what services does it provide?Cecabank’s international business has two levers for growth: its correspon-dents network and its overseas branch network

The correspondents network covers all countries across the world, with more than 2000 banks, and the overseas branch network includes an operational branch in London and two representative offices in Paris and Frankfurt. These three centres are key to the development of our Strategic Plan because they are in places where major institutions are located, such as the EBA in London, the ESBG in Brussels, ESMA in Paris, and the ECB in Frankfurt.

As well as institutional representation work we also promote all of Cecabank’s business areas from our overseas network - the transactional elements and financial services

What would you say were the highlights of 2016?In 2016 our London branch was consolidated as a driver for the bank’s interna-tional business as a whole, based fundamentally on the transactional side on payments in currencies, but also boosting our company’s financial business.

As you know, Brexit happened in 2016, and at Cecabank we saw it as an opportunity to channel more international business towards Spain.

Over the course of the year we have bolstered our relationships with cham-bers of commerce and have put on industry events with participation from all branches. We have also consolidated our relationships with pension-paying organisations, which attract a vast flow of payments to our company.

Our branches also serve as commercial antenna and for cross-selling all the services our company offers.

Interview

“From our overseas network we will promote all areas of Cecabank’s business - both the transactional elements and financial services”

Idoya AramendiOverseas Network




“We will strive to give international visibility to our bank’s products and services.”

José Luis Somoano Frankfurt representative office

What does representative work consist of in Germany and Switzerland?From our representative office in Frankfurt we have covered the German and Swiss markets for more than forty years.

Our most significant milestones for 2016 were:

in the field of pension payments from overseas to Spain, managing rela-tionships with our correspondent banks,

supporting our sector’s international lobbying - the ECB, sparkassen, and overseas banks with a presence in Germany,

consolidating the flow of currencies towards Spain in Switzerland

playing an active role in business forums - both Hispanic-Swiss and His-panic-German and on the Board of Directors for the Spanish Chamber of Commerce in Germany

2017 ObjectivesIn 2017 we will strive to give international visibility to our bank’s products and services.

“We cover four markets from our Paris branch; France, Belgium, Holland and Luxembourg.”

María Recalde Representative Office for France & Benelux countries.

What does your representative work consist of in Paris?“We cover four markets from our Paris branch; France, Belgium, Holland, and Luxembourg. We carry out representative work at local institutions and in in-dustry, financial, and social circles with the aim of giving important visibility to Cecabank in these countries and promoting the bank’s products and services.

It is important for Cecabank to have local representation in institutions such as the European Savings and Retail Banking Group in Brussels or the ESMA in Paris. We are also on the Board of Directors of the Spanish Chamber of Com-merce in France and the Spanish Chamber of Commerce for Belux.

What does your work in London consist of?Cecabank’s London branch operates under the European passport. This means we can promote all the activities that Cecabank is authorised to do in Spain, in the United Kingdom. We are directly supervised by the Bank of Spain and indirectly by the Bank of England.

Having a branch in London, even through the market is already very mature, allows us to be very close to a lot of financial institutions. As members of the Association of Foreign Banks we have access to more than two hundred banks, and the fact that we are physically there allows us to maintain a close dialogue with a lot of fund managers, insurance companies, and pension managers.

What would the highlights of our work in recent years be?Over the last few years branch activity has centred around our correspondent services. Right now we are making serious efforts to bring added value in ter-ms of geographical diversification and diversification of the client base, in line with Cecabank’s strategic plan for the next four years.

“Having a branch in London, even through the market is already very mature, allows us to be very close to a lot of financial institutions”

Rafael LindeLondon Branch




1. payment methods

Documents